<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 11, 1999.
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
------------------------------
SPECTRUM BANCORPORATION, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
IOWA 551111 42-0867112
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of
Incorporation or organization) Classification Code Number) Identification
No.)
</TABLE>
10834 OLD MILL ROAD, SUITE ONE, OMAHA, NE 68154-2648 -- (402) 333-8330
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
SPECTRUM CAPITAL TRUST I
(Exact name of coregistrant as specified in its charter)
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<S> <C> <C>
DELAWARE 551112 APPLIED FOR
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of
Incorporation or organization) Classification Code Number) Identification
No.)
</TABLE>
10834 OLD MILL ROAD, SUITE ONE, OMAHA, NE 68154-2648 -- (402) 333-8330
(Address, including zip code, and telephone number, including area code, of
coregistrant's principal executive offices)
DERYL F. HAMANN
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
SPECTRUM BANCORPORATION, INC.
10834 OLD MILL ROAD, SUITE ONE, OMAHA, NE 68154-2648 -- (402) 333-8330
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------------
COPIES OF COMMUNICATIONS TO:
John S. Zeilinger, Esq. Matthew C. Boba, Esq.
Baird, Holm, McEachen, Chapman and Cutler
Pedersen, Hamann & Strasheim 111 West Monroe, Chicago, Illinois
1500 Woodmen Tower, Omaha, Nebraska 60603
68102-2068 (312) 845-3000
(402) 636-8258
------------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. /X/
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED PER UNIT(1) OFFERING PRICE(1) REGISTRATION FEE
<S> <C> <C> <C> <C>
___% Cumulative Preferred Securities of
Spectrum Capital Trust I.................. 2,300,000(2) $10.00 $23,000,000 $6,394
___% Junior Subordinated Debentures of
Spectrum Bancorporation, Inc.............. (3) -- -- --
Guarantee of Spectrum Bancorporation, Inc.
with respect to the ___% Cumulative
Preferred Securities...................... (4) -- -- --
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c).
(2) Includes 300,000 ____% Cumulative Preferred Securities (the "Preferred
Securities") issuable upon exercise of the underwriters' over-allotment
option.
(3) The ____% Junior Subordinated Debentures (the "Junior Subordinated
Debentures") will be purchased by Spectrum Capital Trust I with the proceeds
of the sale of the Preferred Securities. The Junior Subordinated Debentures
may later be distributed for no additional consideration to the holders of
the Preferred Securities upon Spectrum Capital Trust I's dissolution and the
distribution of its assets.
(4) This Registration Statement is deemed to cover the Junior Subordinated
Debentures of Spectrum Bancorporation, Inc., the rights of holders of the
Junior Subordinated Debentures of Spectrum Bancorporation, Inc. under the
Indenture, the rights of holders of the Preferred Securities under the Trust
Agreement, the Guarantee, the Expense Agreement entered into by Spectrum
Bancorporation, Inc. and certain backup undertakings as described herein. No
separate consideration will be received for the Guarantee or such backup
undertakings.
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.
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<PAGE>
SUBJECT TO COMPLETION, DATED JUNE 11, 1999
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE>
2,000,000 PREFERRED SECURITIES
SPECTRUM CAPITAL TRUST I
% CUMULATIVE PREFERRED SECURITIES
(LIQUIDATION AMOUNT $10 PER PREFERRED SECURITY)
FULLY, IRREVOCABLY AND UNCONDITIONALLY GUARANTEED
ON A SUBORDINATED BASIS AS DESCRIBED IN THIS PROSPECTUS BY
[LOGO] SPECTRUM BANCORPORATION, INC.
The preferred securities of Spectrum Capital Trust I offered by this
prospectus generally consist of an indirect interest in % junior subordinated
debentures of Spectrum Bancorporation, Inc. The junior subordinated debentures
of Spectrum have the same payment terms as the preferred securities and will be
purchased and held by Spectrum Capital Trust I using proceeds of this offering.
A brief description of the preferred securities can be found under "Prospectus
Summary -- The Offering" in this prospectus.
Spectrum Capital Trust I plans to list the preferred securities for trading
on the American Stock Exchange under the trading symbol .Pr.A. The preferred
securities are expected to begin trading on the American Stock Exchange when
they are issued.
YOU SHOULD CONSIDER THE "RISK FACTORS" BEGINNING ON PAGE 6 BEFORE INVESTING
IN THE PREFERRED SECURITIES.
The preferred securities are not savings accounts or deposits and are not
insured by the Federal Deposit Insurance Corporation or any other governmental
agency.
<TABLE>
<CAPTION>
PER PREFERRED
SECURITY TOTAL
----------------- -------------
<S> <C> <C>
Price to Investors.................................... $ 10 $ 20,000,000
Proceeds to Spectrum Capital Trust I.................. $ 10 $ 20,000,000
</TABLE>
Underwriting commissions of $ per preferred security, or a total of $
will be paid by Spectrum for arranging the investment in the junior subordinated
debentures. The underwriters may purchase up to an additional 300,000 preferred
securities to cover over-allotments.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IF TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
HOWE BARNES INVESTMENTS, INC.
, 1999
<PAGE>
[MAP]
[INSIDE FRONT COVER]
<PAGE>
PROSPECTUS SUMMARY
THIS SUMMARY PROVIDES AN OVERVIEW OF SELECTED INFORMATION CONTAINED
ELSEWHERE IN THIS PROSPECTUS AND DOES NOT CONTAIN ALL THE INFORMATION YOU SHOULD
CONSIDER. YOU SHOULD ALSO READ THE MORE DETAILED INFORMATION SET FORTH IN THIS
PROSPECTUS, THE CONSOLIDATED FINANCIAL STATEMENTS OF SPECTRUM AND RELATED NOTES.
UNLESS OTHERWISE INDICATED, ALL INFORMATION IN THIS PROSPECTUS ASSUMES THAT THE
UNDERWRITERS' OVER-ALLOTMENT OPTION IS NOT EXERCISED.
SPECTRUM AND SPECTRUM CAPITAL TRUST I
Spectrum is a multibank holding company, offering full service community
banking through two banks with 17 banking locations in South Dakota, one bank
with seven banking locations in southern Iowa and one bank with two banking
locations in northern Missouri. Spectrum's operating strategy is to provide high
quality community banking services to its customers and increase market share
through solicitation of new business and repeat business and referrals from
customers. Spectrum's external expansion strategy is the acquisition of existing
community banks in or near its primary market areas, or in strategic markets
primarily within the Midwest and the establishment of new branches in these
markets.
At March 31, 1999, Spectrum had total assets of $593,937,000, total deposits
of $489,544,000, total loans, net of unearned fees, of $435,549,000 and total
stockholders' equity of $36,387,000. For the fiscal years ended June 30, 1998
and 1997, Spectrum had net income of $5,835,000 and $5,133,000. For the
nine-month periods ended March 31, 1999 and March 31, 1998 Spectrum had net
income of $5,048,000 and $4,317,000. On an annualized basis, for the nine-month
period ended March 31, 1999, Spectrum's return on average assets equaled 1.17%
and return on average equity was 19.71%.
On May 31, 1999, Decatur Corporation became the surviving corporation in a
merger of its affiliated bank holding companies, Spectrum Bancorporation, Inc.
and Rushmore Financial Services, Inc. Decatur then changed its name to Spectrum
Bancorporation, Inc. but retained its Iowa charter to facilitate acquisitions
within the state. The merger is not expected to have a material effect on the
business or earnings of Spectrum. The merger has been accounted for at
historical cost in a manner similar to a pooling-of-interests combination and,
accordingly, the consolidated financial statements prior to the combination have
been restated to include the accounts and results of operations of Spectrum. The
restated financial statements are included in this prospectus.
Spectrum's principal executive office is located at 10834 Old Mill Road,
Suite One, Omaha, Nebraska 68154-2648. Its telephone number is (402) 333-8330.
Spectrum Capital Trust I is a Delaware business trust created in 1999 for
the purpose of offering its preferred securities and purchasing the junior
subordinated debentures of Spectrum. Spectrum Capital Trust I will have a term
of 30 years, but may dissolve earlier as provided in its trust agreement.
Spectrum Capital Trust I's principal executive office and telephone number are
the same as Spectrum's.
THE OFFERING
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<S> <C>
Preferred Securities
Issuer..................... Spectrum Capital Trust I
Securities Offered........... Spectrum Capital Trust I is offering 2,000,000 of its
preferred securities, which generally represent an indirect
interest in junior subordinated debentures issued by
Spectrum and held by Spectrum Capital Trust I. Spectrum
believes that the preferred securities provide access to
30-year financing on more favorable terms to Spectrum than
other financing alternatives.
</TABLE>
1
<PAGE>
<TABLE>
<S> <C>
Spectrum Capital Trust I will sell its preferred securities
to the public and its common securities to Spectrum.
Together, the preferred securities and the common securities
are called the trust securities in this prospectus. Spectrum
Capital Trust I will use the proceeds from the sale of the
trust securities to buy a series of % junior subordinated
debentures due , 2029 from Spectrum with the same
payment terms as the preferred securities.
Quarterly Distributions Are
Payable to You on the
Preferred Securities....... The distributions payable on each preferred security will:
- be fixed and accumulate at a rate per year of %;
- accrue from the date of issuance of the preferred
securities; and
- be payable after each calendar quarter on the 15(th) day
of January, April, July, and October of each year that the
preferred securities are outstanding, beginning on October
15, 1999.
Spectrum and Spectrum Capital
Trust I Have Rights to
Defer Distributions to You
on the Preferred
Securities................. Spectrum Capital Trust I will defer distributions on the
preferred securities if Spectrum defers interest payments on
the junior subordinated debentures. Spectrum generally has
the right, if not in default under the trust indenture, to
defer interest payments on the junior subordinated
debentures at one or more times for up to 20 consecutive
quarters. During any deferral period, you will still accrue
unpaid distributions at the annual rate of %, plus you
will earn interest at the annual rate of %, compounded
quarterly, on any unpaid distributions.
You Will Still Be Taxed Even
If Distributions on the
Preferred Securities Are
Deferred................... If distributions on the preferred securities are deferred,
you will also be required to accrue interest income and
include it in your gross income for United States federal
income tax purposes for as long as the junior subordinated
debentures remain outstanding, even if you are a cash basis
taxpayer. For further information on deferrals and their tax
consequences, see "Risk Factors -- Distributions on the
preferred securities may be deferred; you may have to
include interest in your taxable income before you receive
cash," "Description of Junior Subordinated Debentures --
Option to Extend Interest Payment Period" and "Material
Federal Income Tax Consequences -- Interest Income and
Original Issue Discount."
</TABLE>
2
<PAGE>
<TABLE>
<S> <C>
You Will Be Required to Sell
Your Preferred Securities
to Spectrum Capital Trust I
When the Junior
Subordinated Debentures
Mature or If They Are
Prepaid.................... The junior subordinated debentures will mature on
, 2029. You will be required to sell your
preferred securities to Spectrum Capital Trust I upon the
stated maturity date of the junior subordinated debentures
or earlier if they are prepaid. In the case of prepayment of
the junior subordinated debentures, Spectrum Capital Trust I
will redeem your preferred securities on the date of payment
of the junior subordinated debentures.
If the Junior Subordinated
Debentures Are Prepaid,
Your Preferred Securities
Will Be Redeemed........... If Spectrum obtains any required regulatory approval,
Spectrum may prepay:
- all or some of the junior subordinated debentures on or
after , 2004; or
- all of the junior subordinated debentures at any time upon
events occurring which may have a significant adverse effect
on Spectrum's benefits of having the preferred securities
outstanding.
Upon any prepayment of the junior subordinated debentures,
your preferred securities will be redeemed at the
liquidation amount of $10 per preferred security plus any
accrued and unpaid distributions to the date of redemption.
For further information on redemptions, see "Description of
the Preferred Securities -- Redemption -- Mandatory and
Optional Rights of Spectrum" and "Description of Junior
Subordinated Debentures -- Redemption."
At Its Option, Spectrum May
Require You to Exchange
Your Preferred Securities
for its Junior Subordinated
Debentures................. Spectrum has the right at any time to dissolve or liquidate
Spectrum Capital Trust I and distribute the junior
subordinated debentures to you in exchange for your
preferred securities. However, Spectrum must receive prior
approval of the Federal Reserve and pay the creditors of
Spectrum Capital Trust I. Upon a dissolution or liquidation
of Spectrum Capital Trust I, you will receive junior
subordinated debentures in exchange for the same principal
amount of your holdings in preferred securities. For further
information concerning distribution of the junior
subordinated debentures, see "Description of the Preferred
Securities -- Distribution of Junior Subordinated
Debentures." If the junior subordinated debentures are
distributed, Spectrum will use its best efforts to list them
on the American Stock Exchange or the Nasdaq National Market
in place of the preferred securities.
</TABLE>
3
<PAGE>
<TABLE>
<S> <C>
Your Preferred Securities Are
Fully and Unconditionally
Guaranteed by Spectrum on a
Subordinated Basis......... Spectrum will fully, irrevocably and unconditionally
guarantee Spectrum Capital Trust I's obligations under the
preferred securities on a subordinated basis.
If Spectrum does not make a payment on the junior
subordinated debentures, Spectrum Capital Trust I will not
have sufficient funds to make payments on the preferred
securities. The preferred securities guarantee does not
cover payments when Spectrum Capital Trust I does not have
sufficient funds.
For further information concerning the preferred securities
guarantee of Spectrum, see "Description of Preferred
Securities Guarantee."
Your Preferred Securities
Rank Lower in Payment
Compared to Other
Obligations of Spectrum.... Spectrum's obligations under its preferred securities
guarantee, the junior subordinated debentures and other
governing documents described in this prospectus are
unsecured and rank junior in right of payment to all current
and future senior and subordinated debt of Spectrum. In
addition, because Spectrum is a multibank holding company,
all existing and future liabilities of Spectrum's
subsidiaries will rank prior to all obligations of Spectrum
relating to the preferred securities and the junior
subordinated debentures. There is no limit on the amount of
other preferred securities or other junior subordinated
debentures of Spectrum that may be issued in the future.
Future issuances of this type will rank equally with
Spectrum's obligations under the junior subordinated
debentures and its preferred securities guarantee described
in this prospectus. The preferred securities will generally
rank equally and payments on them will be made
proportionately, with the common securities of Spectrum
Capital Trust I, which will be held by Spectrum.
You Will Have Limited Voting
Rights..................... As a holder of preferred securities, you have limited voting
rights. These rights relate only to the dissolution or
termination of Spectrum Capital Trust I and removal of the
property trustee and the indenture trustee of Spectrum
Capital Trust I upon selected events described in this
prospectus. See "Description of the Preferred Securities --
Voting Rights; Amendment of the Trust Agreement."
The Preferred Securities Will
Be in Book Entry Form
Only....................... You will not receive a certificate for your preferred
securities. Instead, the preferred securities will be
represented by a global security that will be deposited with
and registered in the name of The Depository Trust Company
or its nominee.
American Stock Exchange
Listing.................... Spectrum Capital Trust I plans to list the preferred
securities for trading on the American Stock Exchange under
the trading symbol .Pr.A.
</TABLE>
4
<PAGE>
<TABLE>
<S> <C>
Use of Proceeds of Sale of
the Preferred Securities... The proceeds of the sale of the preferred securities will be
invested by Spectrum Capital Trust I in the junior
subordinated debentures. The net proceeds to Spectrum from
the sale of junior subordinated debentures will be used to
repay all of its outstanding holding company debt which was
$11,695,000 as of May 31, 1999, with the remainder to be
used for general corporate purposes. Pending their
application, the net proceeds may be invested in
certificates of deposit or short-term, marketable,
investment grade interest-bearing securities. See "Use of
Proceeds."
Spectrum expects approximately $12,404,000 of the preferred
securities to qualify as its primary regulatory capital,
also known as its core capital, under the capital guidelines
of the Federal Reserve. The remaining $7,596,000 not
qualifying as this type of capital will be included in total
capital of Spectrum. See "Use of Proceeds" and
"Capitalization." See also "Supervision and Regulation --
Spectrum -- Capital Adequacy" for a definition of core
capital.
</TABLE>
5
<PAGE>
RISK FACTORS
You should carefully read the following risk factors and other sections of
this prospectus before purchasing any preferred securities.
RISK FACTORS RELATING TO THE PREFERRED SECURITIES
IF SPECTRUM DOES NOT MAKE PAYMENTS UNDER THE JUNIOR SUBORDINATED DEBENTURES,
SPECTRUM CAPITAL TRUST I WILL BE UNABLE TO PAY DISTRIBUTIONS AND LIQUIDATION
AMOUNTS AND THE PREFERRED SECURITIES GUARANTEE WILL NOT APPLY. The ability of
Spectrum Capital Trust I to pay distributions and the liquidation amount of $10
per preferred security is solely dependent upon the ability of Spectrum to make
the related payments on the junior subordinated debentures when due. If Spectrum
defaults on its obligation to pay principal of or interest on the junior
subordinated debentures, Spectrum Capital Trust I will not have sufficient funds
to pay distributions or the liquidation amount. In that case, you will not be
able to rely upon the preferred securities guarantee for payment of these
amounts because the preferred securities guarantee only applies if Spectrum
makes a payment of principal or interest on the junior subordinated debentures.
For more information on Spectrum's obligations under the preferred securities
guarantee and the junior subordinated debentures, see "Description of Junior
Subordinated Debentures -- Subordination of Junior Subordinated Debentures to
Senior and Subordinated Debt of Spectrum" and "Description of Preferred
Securities Guarantee -- Status of Preferred Securities Guarantee."
INTEREST PAYMENTS BY SPECTRUM ON THE JUNIOR SUBORDINATED DEBENTURES ARE
DEPENDENT ON THE RECEIPT OF DIVIDENDS FROM ITS SUBSIDIARY BANKS. Substantially
all of Spectrum's assets consist of its investments in its subsidiary banks.
Thus, Spectrum's ability to pay interest and principal on the junior
subordinated debentures to Spectrum Capital Trust I depends upon the cash
dividends Spectrum receives from its banks. Dividend payments from the banks to
Spectrum are subject to, among other things:
- regulatory limitations, generally based on current and retained earnings
and capital maintenance requirements, imposed by various bank regulatory
agencies;
- profitability, financial condition and capital expenditures and other cash
flow requirements of the banks; and
- prior claims of creditors of the banks.
If the banks are unable to pay sufficient dividends to Spectrum, then
Spectrum will likely be unable to make payments on the junior subordinated
debentures thereby leaving insufficient funds for Spectrum Capital Trust I to
make payments to you on the preferred securities.
DISTRIBUTIONS ON THE PREFERRED SECURITIES MAY BE DEFERRED; YOU MAY HAVE TO
INCLUDE INTEREST IN YOUR TAXABLE INCOME BEFORE YOU RECEIVE CASH. It is possible
that you will not receive cash distributions on your preferred securities for
one or more periods of up to five years. If this occurs, you will still be
required to include accrued interest in your income for United States federal
income tax purposes before you actually receive the cash distributions.
Spectrum has the right, at one or more times, to defer interest payments on
the junior subordinated debentures for up to 20 consecutive quarters, but not
beyond the maturity date of the junior subordinated debentures. This right
exists only if no event of default under the junior subordinated debentures has
occurred and is continuing. If Spectrum exercises this right, Spectrum Capital
Trust I would defer distributions on the preferred securities during any
deferral period. However, you would still accrue the right to unpaid
distributions at the annual rate of % of the liquidation amount of $10 per
preferred security, plus you will earn interest at the annual rate of %,
compounded quarterly, on any unpaid distributions. During a deferral period, the
preferred securities may trade at a price that does not fully reflect the value
of accrued but unpaid distributions.
During a deferral period and for as long thereafter as the junior
subordinated debentures remain outstanding, you will be required to accrue
interest income, as original issue discount, for United States
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<PAGE>
federal income tax purposes in respect of your pro rata share of the junior
subordinated debentures held by Spectrum Capital Trust I. As a result, you must
include the accrued interest in your gross income for United States federal
income tax purposes prior to your receiving cash. You will also not receive the
cash distributions related to any accrued and unpaid interest from Spectrum
Capital Trust I if you sell the preferred securities before the end of any
deferral period. While Spectrum will take the position that original issue
discount will not arise before any first deferral period, it is possible that
all interest on the junior subordinated debentures would be required to be
accounted for as original issue discount. In these circumstances, stated
interest would not separately be reported as taxable income. See "Material
Federal Income Tax Consequences" for more information regarding the tax
consequences of the preferred securities.
Spectrum has no current intention of exercising its right to defer interest
payments on the junior subordinated debentures. However, if Spectrum exercises
its right in the future, the market price of the preferred securities is likely
to be adversely affected. If you sell the preferred securities during an
interest deferral period, you may not receive the same return on your investment
as someone else who continues to hold the preferred securities.
YOU ARE SUBJECT TO PREPAYMENT RISK OF YOUR PREFERRED SECURITIES DUE TO TAX
OR REGULATORY EVENTS THAT MAY TRIGGER THE REDEMPTION OF THE JUNIOR SUBORDINATED
DEBENTURES BY SPECTRUM AND PREPAYMENT OF THE PREFERRED SECURITIES PRIOR TO THE
STATED MATURITY DATE. You are subject to prepayment risk of your preferred
securities. Although the junior subordinated debentures have a stated maturity
date of , 2029, they may be redeemed by Spectrum prior to maturity
which would cause an early redemption of the preferred securities, as follows:
- In whole or in part, beginning on , 2004, at the option of
Spectrum.
- In whole upon a change in the federal tax laws or a change in the
interpretation of the tax laws by the courts or the IRS, which would
result in a risk that (1) Spectrum Capital Trust I may be subject to
federal income tax, (2) interest paid by Spectrum on the junior
subordinated debentures will not be deductible by Spectrum for federal
income tax purposes, or (3) Spectrum Capital Trust I is or will be subject
to more than a minimal amount of other taxes or governmental charges.
- In whole upon a change in the laws or regulations to the effect that
Spectrum Capital Trust I is or will be considered to be an investment
company that is required to be registered under the Investment Company Act
of 1940.
- In whole upon a change in the laws or regulations if there is a risk that
Spectrum will not be able to treat all or a substantial portion of the
preferred securities as core capital for purposes of capital adequacy
guidelines of the Federal Reserve.
The exercise of these redemption rights is subject to Spectrum having
received prior approval of the Federal Reserve, if required. For further
information concerning tax or regulatory events that may trigger redemption of
the junior subordinated debentures and prepayment of the preferred securities,
see "Description of the Preferred Securities -- Redemption -- Mandatory and
Optional Rights of Spectrum."
YOU ARE SUBJECT TO PREPAYMENT RISK BECAUSE POSSIBLE TAX LAW CHANGES COULD
RESULT IN A REDEMPTION OF THE PREFERRED SECURITIES. Future legislation may be
proposed or enacted that may prohibit Spectrum from deducting its interest
payments on the junior subordinated debentures for federal income tax purposes,
making redemption of the junior subordinated debentures likely and resulting in
a redemption of the preferred securities.
From time to time, the Clinton Administration has proposed tax law changes
that would, among other things, generally deny interest deductions to a
corporate issuer if the debt instrument has a term exceeding 15 years and if the
debt instrument is not reflected as indebtedness on the issuer's consolidated
balance sheet. Other proposed tax law changes would have denied interest
deductions if the debt instrument had a term exceeding 20 years. Although it is
impossible to predict future
7
<PAGE>
proposals, if a future proposal of this sort were to become effective in a form
applicable to already issued and outstanding securities, Spectrum could be
precluded from deducting interest on the junior subordinated debentures.
Enactment of any such proposal might in turn give rise to a tax event as
described under "Description of the Preferred Securities -- Redemption --
Mandatory and Optional Rights of Spectrum." For further information, see
"Material Federal Income Tax Consequences."
SPECTRUM'S OBLIGATIONS UNDER THE PREFERRED SECURITIES GUARANTEE AND THE
JUNIOR SUBORDINATED DEBENTURES RANK LOWER TO OTHER SPECTRUM
OBLIGATIONS. Spectrum's obligations under the junior subordinated debentures
are unsecured and will rank junior in priority of payment to Spectrum's senior
and subordinated debt, which generally includes indebtedness, liabilities or
obligations of Spectrum, contingent or otherwise. At March 31, 1999, the
aggregate amount of Spectrum's senior and subordinated debt was $59,621,000.
Spectrum's obligations under the junior subordinated debentures will also be
effectively subordinated to all existing and future liabilities and obligations
of its subsidiaries, including its subsidiary banks.
The preferred securities, the junior subordinated debentures and the
preferred securities guarantee do not limit the ability of Spectrum or any of
its subsidiaries to incur unlimited future indebtedness, liabilities and
obligations, which may rank senior to the junior subordinated debentures and the
preferred securities guarantee.
For more information on Spectrum's obligations under the preferred
securities guarantee and the junior subordinated debentures, see "Description of
Junior Subordinated Debentures -- Subordination of Junior Subordinated
Debentures to Senior and Subordinated Debt of Spectrum" and "Description of
Preferred Securities Guarantee -- Status of Preferred Securities Guarantee."
DISTRIBUTION OF JUNIOR SUBORDINATED DEBENTURES TO HOLDERS OF PREFERRED
SECURITIES MAY HAVE AN ADVERSE EFFECT ON THE MARKET PRICE OF THE PREFERRED
SECURITIES. Your investment in the preferred securities may decrease in value
if the junior subordinated debentures are distributed to you. Spectrum cannot
predict the liquidity or market prices for the junior subordinated debentures
that may be distributed. Accordingly, the junior subordinated debentures that
you receive upon a distribution, or the preferred securities you hold pending
such a distribution, may trade at a discount to the price that you paid to
purchase the preferred securities.
Because you may receive junior subordinated debentures, you must also make
an investment decision with regard to the junior subordinated debentures. You
should carefully review all the information regarding the junior subordinated
debentures contained in this prospectus. If the junior subordinated debentures
are distributed, Spectrum will use its best efforts to list them on the American
Stock Exchange or the Nasdaq National Market in place of the preferred
securities.
Under "Material Federal Income Tax Consequences -- Distribution of Junior
Subordinated Debentures to Holders of Preferred Securities" there is information
regarding United States federal income tax consequences of a distribution of the
junior subordinated debentures.
YOU MUST RELY ON THE PROPERTY TRUSTEE OF SPECTRUM CAPITAL TRUST I TO ENFORCE
YOUR RIGHTS UNDER JUNIOR SUBORDINATED DEBENTURES EVENTS OF DEFAULT. You may not
be able to directly enforce rights against Spectrum if an event of default
occurs. If an event of default under the junior subordinated debentures occurs
and is continuing, this event will also be an event of default under the
preferred securities. In that case, the holders of the preferred securities
would rely on the enforcement by the property trustee of its rights as holder of
the junior subordinated debentures against Spectrum. The holders of a majority
in liquidation amount of the preferred securities will have the right to direct
the property trustee to enforce its rights. If the property trustee does not
enforce its rights any record holder may take action directly against Spectrum
to enforce the property trustee's rights. If a default under the preferred
securities occurs that is attributable to Spectrum's failure to pay interest or
principal on the junior subordinated debentures, a record holder of the
preferred securities may proceed directly against Spectrum. The holders of
preferred securities will not be able to exercise directly any other remedies
available to the holders of the junior subordinated debentures unless the
property trustee fails to do so. See "Description of the Preferred Securities --
Events of Default;
8
<PAGE>
Notice" and "Description of Junior Subordinated Debentures -- Indenture Events
of Default" for more information on your rights if an event of default occurs.
LIMITED COVENANTS RELATING TO THE PREFERRED SECURITIES AND THE JUNIOR
SUBORDINATED DEBENTURES DO NOT PROTECT YOU. The covenants in the governing
documents relating to the preferred securities and the junior subordinated
debentures are limited. As a result, the governing documents do not protect you
in the event of an adverse change in Spectrum's financial condition or results
of operations. Nor do the governing instruments limit the ability of Spectrum or
any of its subsidiaries to incur additional debt. You should not consider the
terms of the governing documents to be a significant factor in evaluating
whether Spectrum will be able to comply with its obligations under the junior
subordinated debentures or the preferred securities guarantee.
AS A HOLDER OF PREFERRED SECURITIES YOU WILL HAVE LIMITED VOTING
RIGHTS. These rights relate only to the modification of the preferred
securities and removal of the property and indenture trustees of Spectrum
Capital Trust I upon a limited number of events. You will not have any voting
rights regarding Spectrum or the administrative trustees. See "Description of
the Preferred Securities -- Voting Rights; Amendment of the Trust Agreement" for
more information on your limited voting rights.
TRADING CHARACTERISTICS OF THE PREFERRED SECURITIES MAY CREATE ADVERSE TAX
CONSEQUENCES FOR YOU. The preferred securities may trade at a price that does
not reflect the value of accrued but unpaid interest on the underlying junior
subordinated debentures. If you dispose of your preferred securities between
record dates for payments on the preferred securities, you may have adverse tax
consequences. Under these circumstances, you will be required to include accrued
but unpaid interest on the junior subordinated debentures allocable to the
preferred securities through the date of disposition in your income as ordinary
income. If interest on the junior subordinated debentures is included in income
under the original issue discount provisions, you would add this amount to your
adjusted tax basis in your share of the underlying junior subordinated
debentures deemed disposed. If your selling price is less than your adjusted tax
basis, which will include all accrued but unpaid original issue discount
interest included in your income, you could recognize a capital loss which
cannot be applied to offset ordinary income for federal income tax purposes,
subject to exceptions. See "Material Federal Income Tax Consequences -- Interest
Income and Original Issue Discount" and "-- Sales or Redemption of Preferred
Securities" for more information on possible adverse tax consequences to you.
THE PRICE OF YOUR PREFERRED SECURITIES COULD BE ADVERSELY AFFECTED BY A
POSSIBLE LIMITED PUBLIC MARKET. Although Spectrum plans to make application for
listing of the preferred securities on the American Stock Exchange, there can be
no assurance that the application will be approved or that an active and liquid
trading market for the preferred securities will develop or be sustained due to
a possible limited number of owners of the preferred securities or lack of
interest by persons who may want to trade the preferred securities. The denial
of the application or an inactive or illiquid trading market could adversely
affect the price of your preferred securities.
RISK FACTORS RELATING TO SPECTRUM
IF SPECTRUM'S ALLOWANCE FOR LOAN LOSSES IS NOT ADEQUATE TO COVER ACTUAL
LOSSES, SPECTRUM'S EARNINGS COULD BE ADVERSELY AFFECTED. The inability of
borrowers to repay loans can erode earnings and capital of banks. Like all
financial institutions, Spectrum maintains an allowance for loan losses to
provide for loan defaults and nonperformance. Spectrum's allowance for loan
losses may not be adequate to cover actual losses, and future provisions for
loan losses could materially and adversely affect results of operations of
Spectrum. The loan losses allowance is based on prior experience with loan
losses, as well as an evaluation of the risks in the current portfolio, and is
maintained at a level considered adequate by management to absorb anticipated
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 management's control, and these losses may exceed current estimates.
9
<PAGE>
State and federal regulatory agencies, as an integral part of their
examination process, review Spectrum's loans and its allowance for loan losses.
Management believes that Spectrum's allowance for loan losses is adequate to
cover anticipated losses. There can be no assurance, however, that management
will not determine a need to further increase the allowance for loan losses or
that regulators, when reviewing Spectrum's loan portfolios in the future, will
not require Spectrum to increase this allowance, either of which could adversely
affect Spectrum's earnings. Further, there can be no assurance that Spectrum's
actual loan losses will not exceed its allowance for loan losses. For further
information on loan allowances, see "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
IF ECONOMIC CONDITIONS IN GENERAL AND IN SPECTRUM'S PRIMARY MARKET AREA
DETERIORATE, SPECTRUM'S REVENUES COULD DECREASE. Spectrum's financial results
may be adversely affected by changes in prevailing economic conditions,
including declines in real estate values, rapid changes in interest rates,
adverse employment conditions and the monetary and fiscal policies of the
federal government. At March 31, 1999, Spectrum had $276,533,000 of commercial
and agricultural loans representing 64.4% of total loans. Changes in any of the
prevailing economic conditions mentioned above could adversely affect borrowers'
abilities to repay commercial and agricultural loans. At March 31, 1999,
Spectrum had $88,732,000 of loans secured by real estate. Declines in real
estate values could adversely affect the amount realized by Spectrum in the
event of a loan default and subsequent foreclosure. In addition, substantially
all of the loans of Spectrum are to individuals and businesses in
non-metropolitan areas. Any decline in the economy in South Dakota, southern
Iowa and northern Missouri could have an adverse impact on Spectrum. There can
be no assurance that positive trends or developments discussed in this
prospectus will continue or that negative trends or developments will not have a
significant adverse effect on Spectrum.
A DECREASE IN INTEREST RATE SPREADS MAY DECREASE SPECTRUM'S
PROFITS. Spectrum's profitability is in part a function of the spread between
the interest rates earned on assets and the interest rates paid on deposits and
other interest-bearing liabilities. A decrease in interest rate spreads would
have a negative effect on the net interest income and profitability of Spectrum,
and there can be no assurance that a decrease will not occur. Although
management believes that the maturities of Spectrum's assets are moderately
balanced in relation to maturities of liabilities, this balance involves
estimates as to how changes in the general level of interest rates will impact
the yields earned on assets and the rates paid on liabilities. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Results of Operations -- Net Interest Income" and "-- Liquidity --
Asset/Liability Management" for further discussion of the impact of interest
rates on Spectrum.
THE FUTURE GROWTH OF SPECTRUM WILL DEPEND IN PART ON ITS ABILITY TO ACQUIRE
COMMUNITY BANKS AT FAVORABLE PRICES, TERMS AND CONDITIONS, TO ESTABLISH NEW
BRANCHES AND TO PROPERLY MANAGE AND INTEGRATE THEIR OPERATIONS. Spectrum's
external expansion strategy is primarily the acquisition of existing community
banks and branches in or near its primary market areas, or in strategic markets
primarily in the Midwest, and establishment of new branches in such markets
where permitted by law. Spectrum's ability to expand successfully through such
acquisitions depends upon many factors, including the successful identification
and acquisition of financial institutions and management's ability to
effectively integrate the acquired businesses. Acquisitions entail risks that
business judgment will prove inaccurate with respect to anticipated market
growth, projected revenue enhancements, and expected operating expense savings.
Acquisitions also entail the risks of the diversion of management's attention
and the conversion of operations and assimilation of personnel of the acquired
banks, each of which could adversely affect Spectrum's operating results. In
addition, the success of any acquisition will depend in part upon Spectrum's
ability to effectively integrate the acquired banks into Spectrum's operations
and implement its business style and philosophy.
Spectrum's expansion strategy also includes the establishment of new
branches. The success of this strategy will depend primarily on generating an
increasing level of loans and deposits at acceptable rate levels without
corresponding increases in non-interest expenses. There can be no assurance that
10
<PAGE>
Spectrum will be successful in this growth strategy due to delays and other
impediments resulting from regulatory oversight, unavailability of branch sites
or poor site selections.
Spectrum has financed its recent acquisitions and branch expansion primarily
through borrowings and retention of earnings. If, following the use of the
proceeds of this offering, Spectrum pursues additional acquisitions, it is
likely to finance them through a combination of borrowings and public and/or
private offerings of securities. There can be no assurance that Spectrum would
be able to obtain financing on terms satisfactory to it or at all.
THE BANKING BUSINESS IN SPECTRUM'S MARKET AREAS IS HIGHLY
COMPETITIVE. Spectrum competes for loans and deposits with other local,
regional and national commercial banks, savings banks, savings and loan
associations, finance companies, money market funds, brokerage houses, credit
unions and nonfinancial institutions, many of which have substantially greater
financial resources than Spectrum. In addition, interstate banking is permitted
in South Dakota, Iowa and Missouri. As a result, management believes that
Spectrum may experience greater competition in its market areas.
IF THE COMPUTER SYSTEMS OF SPECTRUM OR ITS SUPPLIERS AND CUSTOMERS DO NOT
TIMELY BECOME YEAR 2000 COMPLIANT, SPECTRUM MAY BE ADVERSELY AFFECTED. Spectrum
faces a significant business issue regarding how existing application software
programs and operating systems can accommodate the date value for the year 2000.
Many existing software application products, including software application
products used by Spectrum and its suppliers and customers, were designed to
accommodate only a two-digit date value, which represents the year. Such
products may recognize a date using "00" as the year 1900 rather than 2000. This
faulty recognition could result in a system failure, disruption of operations,
or inaccurate information or calculations. The interruption to Spectrum's
business could be substantial if its current computer service provider fails in
efforts to assist Spectrum in becoming year 2000 compliant. In addition, failure
by suppliers and customers of Spectrum to modify and convert their own computer
systems could have a significant adverse effect on the suppliers' or customers'
operations and profitability, thus inhibiting their ability to provide services
or repay loans to Spectrum. As a practical matter, Spectrum will unlikely be
able to accumulate information on its suppliers' and customers' year 2000
programs to assess the impact on Spectrum. For further information, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Year 2000 Compliance."
ANY CHANGE IN CONTROL OF SPECTRUM IS AT THE SOLE DISCRETION OF SPECTRUM'S
PRINCIPAL STOCKHOLDERS. All of the voting common stock of Spectrum is owned by
Deryl F. Hamann, Spectrum's Chairman and CEO, individually or as trustee of
trusts for family members, or by his children as trustees of trusts for family
members or by their spouses. As a result, the Hamanns are able to elect all
members of Spectrum's board of directors and direct its policies and decisions.
Currently, there is one nonfamily board member. Therefore, a change of control
of Spectrum by a third party is not possible without the Hamanns' approval.
MANAGEMENT WILL HAVE BROAD DISCRETION IN SPECTRUM'S USE OF THE PROCEEDS IT
RECEIVES. Spectrum will receive $18,900,000 in net proceeds from the sale of
its junior subordinated debentures, after deducting estimated underwriting
commissions and expenses payable by Spectrum. Spectrum's management will have
broad discretion to allocate these net proceeds to uses it believes are
appropriate. See "Use of Proceeds" for the application of proceeds. The amount
and timing of the allocations will depend on a number of factors, including
Spectrum's and its subsidiary banks' capital requirements, and may affect
Spectrum's earnings.
GOVERNMENT REGULATION MAY RESULT IN HIGHER OPERATING COSTS FOR
SPECTRUM. Spectrum and its banks are subject to extensive federal and state
legislation, regulation and supervision which is intended primarily to protect
depositors and the Federal Deposit Insurance Corporation's Bank Insurance Fund,
rather than investors. Although some of the legislative and regulatory changes
may benefit Spectrum and its banks, others may increase their costs of doing
business or otherwise adversely affect them and create competitive advantages
for non-bank competitors. For further information concerning regulation of
Spectrum, see "Supervision and Regulation."
11
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following table presents selected consolidated financial data for
Spectrum for each of the years in the five-year period ended June 30, 1998 and
for the nine-month periods ended March 31, 1999 and 1998. The data set forth
below as of, and for the nine-month periods ended March 31, 1999 and 1998 is
unaudited and, in the opinion of management of Spectrum, reflects all
adjustments considered necessary for a fair presentation of the results for such
interim periods. The interim results are not necessarily indicative of results
which may be expected for future periods, including the year ending June 30,
1999. The data set forth below includes the accounts of American Federal Bank,
fsb, Madison, South Dakota from May 31, 1996, the date of acquisition of
American Federal, and the accounts of First Savings and Loan Association of
South Dakota, Aberdeen, South Dakota, from March 27, 1998, the date of
acquisition of First Savings. The completed acquisitions were accounted for
under the purchase method of accounting. The following table should be read in
conjunction with the consolidated financial statements of Spectrum and the notes
thereto appearing elsewhere in this prospectus and the information contained in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
The merger of Spectrum and its affiliated entities on May 31, 1999 has been
accounted for at historical cost in a manner similar to a pooling-of-interests
combination and, accordingly, the consolidated financial statements prior to the
combination have been restated to include the accounts and results of operations
of Spectrum. The Selected Consolidated Financial Data below takes into account
this restatement.
<TABLE>
<CAPTION>
AT OR FOR THE NINE
MONTHS ENDED
MARCH 31, AT OR FOR THE YEAR ENDED JUNE 30,
-------------------- -----------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
--------- --------- --------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER COMMON SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF INCOME:
Interest income.................................... $ 33,768 $ 31,187 $ 41,905 $ 37,144 $ 29,197 $ 25,080 $ 20,037
Interest expense................................... 17,406 16,098 21,760 18,531 14,196 11,983 8,255
Net interest income................................ 16,362 15,089 20,145 18,613 15,001 13,097 11,782
Provision for loan losses.......................... 882 1,105 1,374 1,233 2,541 667 461
Other income....................................... 4,753 2,863 4,574 3,582 2,945 2,258 1,976
Other expenses..................................... 11,936 10,031 14,074 13,302 10,635 9,778 9,050
Income taxes....................................... 2,985 2,266 3,124 2,266 1,691 1,725 1,429
Minority interest in earnings of subsidiaries...... 264 233 312 261 248 182 199
Net income......................................... 5,048 4,317 5,835 5,133 2,831 3,003 2,619
PER COMMON SHARE DATA:
Earnings per share................................. $ 68.79 $ 58.52 $ 79.15 $ 69.34 $ 36.81 $ 39.20 $ 33.85
Cash dividends..................................... 1.05 0 0 0 0 0 0
Tangible book value per share(1)................... 445.13 354.59 376.67 315.30 237.17 204.05 156.72
CONSOLIDATED BALANCE SHEET:
Assets............................................. 593,937 541,277 548,077 487,619 423,539 339,391 297,549
Loans, net of unearned fees(2)..................... 435,549 390,557 408,470 360,904 296,168 231,911 194,511
Allowance for loan losses.......................... 5,970 5,357 5,599 5,404 4,790 2,599 2,132
Deposits........................................... 489,544 446,519 450,790 399,178 357,489 301,883 262,481
Nonperforming assets............................... 7,392 7,535 8,109 7,068 2,934 1,996 595
Stockholders' equity............................... 36,387 30,119 31,548 26,242 20,803 19,084 15,871
KEY RATIOS(3):
Net interest margin(4)............................. 4.12% 4.27% 4.22% 4.49% 4.55% 4.47% 4.67%
Return on average assets........................... 1.17 1.12 1.12 1.14 0.79 0.94 0.95
Return on average stockholders' equity............. 19.71 20.66 20.40 22.76 14.33 17.10 17.80
Nonperforming loans to total loans................. 1.67 1.88 1.96 1.92 0.85 0.83 0.25
Loan charge-offs to average loans.................. 0.16 0.60 0.45 0.19 0.26 0.10 0.13
Allowance for loan losses to total loans........... 1.37 1.37 1.37 1.50 1.62 1.12 1.10
Allowance for loan losses to nonperforming loans... 81.89 72.95 69.93 77.84 189.55 135.72 431.58
Core risk-based capital............................ 8.03 7.58 7.55 7.30 6.74 5.88 7.68
Total risk-based capital........................... 9.28 8.83 8.80 8.55 7.99 6.75 8.80
Leverage ratio..................................... 6.01 5.43 5.58 5.40 5.24 5.58 5.30
Stockholders' equity to assets..................... 6.13 5.56 5.76 5.38 4.91 5.62 5.33
RATIO OF EARNINGS TO FIXED CHARGES(5)
Including interest on deposits..................... 1.46x 1.41x 1.41x 1.40x 1.31x 1.38x 1.47x
Excluding interest on deposits..................... 3.99x 3.35x 3.37x 3.70x 3.42x 4.97x 6.49x
</TABLE>
- -----------------
(1) Stockholders equity less preferred stock less cost in excess of net assets
acquired, divided by period end shares outstanding of common stock.
(2) Before allowance for loan losses.
(3) The ratios for the nine months ended March 31, 1999 and 1998 have been
annualized and are not necessarily indicative of the results for the entire
year.
(4) On a tax equivalent basis.
(5) The ratio of earnings to fixed charges is computed by dividing (x) the sum
of income before income taxes and fixed charges by (y) fixed charges. Fixed
charges consist of interest on borrowings, amortization of debt expense,
implicit interest on leases and dividends on Spectrum's series 1 and 2
preferred stock.
12
<PAGE>
CAUTIONARY STATEMENTS
Statements which are not historical facts contained or incorporated by
reference in this prospectus are forward-looking statements that involve risks
and uncertainties that could cause actual results to differ from projected
results. Factors that could cause actual results to differ materially include
the factors discussed in "Risk Factors" as well as continued success of
Spectrum's expansion strategy, general economic conditions, economic conditions
in Spectrum's market area, the monetary policy of the Federal Reserve, changes
in interest rates, inflation, and changes in the state and federal regulatory
regime applicable to Spectrum's and its banks' operations.
Information included and incorporated by reference in this prospectus
includes forward looking statements, which can be identified by the use of
forward-looking terminology such as may, will, expect, anticipate, believe,
estimate, or continue, or the negative thereof or other variations thereon or
comparable terminology. The statements in "Risk Factors" and other statements
and disclaimers in this prospectus constitute cautionary statements identifying
important factors, including risks and uncertainties, relating to the
forward-looking statements that could cause actual results to differ materially
from those reflected in the forward-looking statements.
USE OF PROCEEDS
All of the proceeds from the sale of preferred securities will be invested
by Spectrum Capital Trust I in the junior subordinated debentures of Spectrum.
The net proceeds to Spectrum from the sale of the junior subordinated
debentures, after deducting estimated underwriting commissions and offering
expenses, will be $18,900,000 or $21,788,000 if the underwriters' over-allotment
option is exercised in full. Spectrum intends to use its net proceeds to repay
all of its outstanding holding company debt which was $11,695,000 as of May 31,
1999, with the remainder to be used for general corporate purposes. These
purposes may include possible future acquisitions, purchase and construction of
future branch bank locations and additional capital contributions to Spectrum's
banks. Although Spectrum engages from time to time in acquisition negotiations,
it currently has no agreement in principle to make any acquisition. Pending
their application, the net proceeds may be invested in certificates of deposit,
loan participations, or short-term, marketable, investment grade
interest-bearing securities.
Spectrum is required by the Federal Reserve to maintain defined levels of
capital for bank regulatory purposes. In 1996, the Federal Reserve announced
that qualifying amounts of securities having the characteristics of the
preferred securities could be included as core capital for bank holding
companies subject to limited exceptions. See "Capitalization." This capital
treatment, together with Spectrum's ability to deduct, for federal income tax
purposes, interest payable on the junior subordinated debentures, will provide
Spectrum with a cost-effective means of obtaining capital for bank regulatory
purposes.
13
<PAGE>
ACCOUNTING TREATMENT
For financial reporting purposes, Spectrum Capital Trust I will be treated
as a subsidiary of Spectrum and, accordingly, the accounts of Spectrum Capital
Trust I will be included in the Consolidated Financial Statements of Spectrum.
The preferred securities will be presented as a separate line item in the
consolidated balance sheets of Spectrum under the caption "Company Obligated
Mandatorily Redeemable Preferred Securities of Subsidiary Trust Holding Solely
Junior Subordinated Debentures," and appropriate disclosures about the preferred
securities, the preferred securities guarantee of Spectrum and the junior
subordinated debentures will be included in the Notes to Consolidated Financial
Statements. For financial reporting purposes, Spectrum will record distributions
payable on the preferred securities as interest expense in the consolidated
statements of income.
Future reports of Spectrum filed under the Securities Exchange Act of 1934,
as amended will include a footnote to the consolidated financial statements
stating that:
- Spectrum Capital Trust I is wholly-owned;
- the sole assets of Spectrum Capital Trust I are the junior subordinated
debentures and specifying the principal amount, interest rate and maturity
date of the junior subordinated debentures; and
- the obligations of Spectrum described in this prospectus, in the
aggregate, constitute a full, irrevocable and unconditional guarantee on a
subordinated basis by Spectrum of the obligations of Spectrum Capital
Trust I under the preferred securities. Spectrum Capital Trust I will not
provide separate reports under the Securities Exchange Act.
No separate financial statements of Spectrum Capital Trust I have been
included in this prospectus. Spectrum and Spectrum Capital Trust I do not
consider that financial statements of Spectrum Capital Trust I would be material
to holders of the preferred securities because Spectrum Capital Trust I is a
newly formed special purpose entity, has no operating history or independent
operations and is not engaged in and does not propose to engage in any activity
other than holding as assets the junior subordinated debentures of Spectrum and
issuing the preferred securities. For more information, see "Description of the
Preferred Securities," "Description of Junior Subordinated Debentures" and
"Description of Preferred Securities Guarantee."
14
<PAGE>
CAPITALIZATION
The following table sets forth the unaudited consolidated capitalization of
Spectrum as of March 31, 1999 and as adjusted to give effect to the issuance of
the preferred securities by Spectrum Capital Trust I in this offering and the
use of net proceeds as described in "Use of Proceeds."
<TABLE>
<CAPTION>
MARCH 31, 1999
---------------------------
ACTUAL AS ADJUSTED
------------ -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Borrowings:
Securities sold under agreements to repurchase...................... $ 19,301 $ 19,301
Federal Home Loan Bank borrowings................................... 28,500 28,500
Notes payable....................................................... $ 11,820(1) 0
------------ -----------
Total borrowings................................................ $ 59,621 $ 47,801
------------ -----------
------------ -----------
Company obligated mandatorily redeemable preferred securities at
subsidiary trust holding solely junior subordinated debentures(2)... $ 0 $ 20,000
------------ -----------
------------ -----------
Stockholders' equity:
Preferred stock, $100.00 par value; 500,000 shares authorized serial
preferred stock -- 9,000 shares of Series 1 8% non-voting
cumulative preferred; 8,000 shares of Series 2 10% non-voting
non-cumulative preferred; issued and outstanding.................. $ 1,700 $ 1,700
Common stock, $1.00 par value; 1,000,000 shares authorized; 71,727
shares issued and outstanding..................................... 72 72
Additional paid-in capital.......................................... 1,659 1,659
Retained earnings................................................... 32,609 32,609
Accumulated other comprehensive income.............................. 347 347
------------ -----------
Total stockholders' equity...................................... $ 36,387 $ 36,387
------------ -----------
------------ -----------
Capital ratios(3):
Leverage ratio(4)................................................... 6.01% 7.96%
Core capital to risk-weighted assets(5)............................. 8.03 10.64
Total risk-based capital to risk-weighted assets.................... 9.28 13.57
</TABLE>
- -------------
(1) The notes payable were $11,695,000 as of May 31, 1999. The notes will be
paid in their entirety with proceeds of this offering.
(2) The subsidiary trust is Spectrum Capital Trust I, a wholly-owned subsidiary
of Spectrum that will hold, as its sole assets, $20,618,000 principal amount
of junior subordinated debentures, of which $20,000,000 will be purchased
with the proceeds of the preferred securities issued by Spectrum Capital
Trust I. The remaining $618,000 of junior subordinated debentures will be
purchased with the proceeds of the common securities issued by Spectrum
Capital Trust I. Spectrum will own all of the common securities. See
"Description of Junior Subordinated Debentures" and "Description of the
Preferred Securities." The junior subordinated debentures will mature on
, 2029, which date may be shortened to a date not earlier than
, 2004 upon meeting conditions in the indenture relating to the
junior subordinated debentures. The preferred securities are subject to
mandatory redemption upon repayment of the junior subordinated debentures at
maturity or their earlier redemption in an amount equal to the amount of
junior subordinated debentures maturing or being redeemed at a redemption
price equal to the aggregate liquidation amount of the preferred securities,
plus accumulated and unpaid distributions thereon to the date of redemption.
See "Description of the Preferred Securities -- Redemption -- Mandatory and
Optional Rights of Spectrum" and "Description of Junior Subordinated
Debentures -- Redemption."
(3) The capital ratios, as adjusted, are computed including the estimated net
proceeds from the sale of the preferred securities, in a manner consistent
with Federal Reserve guidelines.
(4) The leverage ratio is core capital divided by average quarterly assets,
after deducting intangible assets and net deferred tax assets in excess of
regulatory maximum limits.
(5) Federal Reserve guidelines for calculation of core capital to risk-weighted
assets limit the amount of cumulative preferred stock which can be included
in core capital to 25% of total core capital. A portion of the preferred
securities offered hereby, $12,404,000, will be included as core capital for
Spectrum, and the remaining $7,596,000 will be included as total capital for
Spectrum. Spectrum's series 1 cumulative preferred stock of $900,000 also
will be included in total capital.
15
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
BUSINESS ENVIRONMENT AND RISK FACTORS
The following discussion should be read in conjunction with the consolidated
financial statements and related notes included elsewhere in this prospectus.
Spectrum's future operating results may be affected by various trends and
factors which are beyond Spectrum's control. These include the factors set forth
in "Risk Factors" and "Cautionary Statements." Accordingly, past results and
trends may not be reliable indicators of future results or trends. With the
exception of historical information, the matters discussed below include
forward-looking statements that involve risks and uncertainties. Spectrum
cautions readers that a number of important factors discussed below could affect
Spectrum's actual results and cause actual results to differ materially from
those in the forward-looking statements.
THE MERGER
On May 31, 1999, Decatur Corporation became the surviving corporation in a
merger of its affiliated bank holding companies, Spectrum Bancorporation, Inc.
and Rushmore Financial Services, Inc. Decatur then changed its name to Spectrum
Bancorporation, Inc. but retained its Iowa charter to facilitate acquisitions
within that state. The merger is not expected to have a material effect on the
business or earnings of Spectrum. The merger has been accounted for at
historical cost in a manner similar to a pooling-of-interests combination and,
accordingly, the consolidated financial statements prior to the combination have
been restated to include the accounts and results of operations of Spectrum.
Prior to the combination, Decatur's fiscal year ended December 31 and the
fiscal year of Spectrum Bancorporation, Inc. and its wholly-owned subsidiary,
Rushmore Financial Services, Inc., ended June 30. In recording the combination,
the related financial statements for the twelve months ended June 30, 1998 were
combined with Spectrum Bancorporation, Inc.'s financial statements for the same
period. For previous periods, Decatur's fiscal years ended December 31, 1997,
1996, 1995 and 1994 were combined with Spectrum Bancorporation, Inc.'s fiscal
years ended June 30, 1997, 1996, 1995 and 1994. An adjustment has been made to
stockholders' equity as of June 30, 1998, to eliminate the effect of including
Decatur's results of operations for the six months ended December 31, 1997, in
both the years ended June 30, 1998 and 1997. Spectrum's fiscal year ends June
30. References in this prospectus to the first nine months ended March 31 refer
to the nine-month period from July 1 to March 31 of the following calendar year.
RECENT ACQUISITIONS
Effective March 27, 1998, Spectrum acquired all of the outstanding shares of
First Savings & Loan Association of South Dakota, Inc., Aberdeen, South Dakota.
First Savings was merged into F&M Bank, a subsidiary bank of Spectrum. Assets of
$16,999,000, loans, net of unearned fees, of $14,016,000, and deposits of
$14,085,000 were acquired in connection with the merger.
On May 31, 1996, Spectrum acquired all of the outstanding shares of Am-First
Financial Corporation. Am-First owned 100% of the outstanding stock of American
Federal Bank, fsb, Madison, South Dakota. American Federal was merged into F&M
Bank. Assets of $56,429,000, loans, net of unearned fees, of $29,338,000, and
deposits of $45,206,000 were acquired in connection with the merger.
RESULTS OF OPERATIONS
GENERAL
Net income for the nine-month period ended March 31, 1999, was $5,048,000
compared to net income of $4,317,000 for the nine-month period ended March 31,
1998. Net income for the year ended June 30, 1998, was $5,835,000 compared to
net income of $5,133,000 for the year ended June 30, 1997,
16
<PAGE>
and compared to net income of $2,831,000 for the year ended June 30, 1996. The
net income for the year ended June 30, 1996, was negatively impacted by a high
provision for loan losses of $2,541,000 primarily associated with the bankruptcy
reorganization of an entity which serviced loans and leases for three of
Spectrum's subsidiary banks.
During the nine-month period ended March 31, 1999, on an annualized basis,
Spectrum's return on average assets was 1.17% compared to 1.12% for March 31,
1998. For the years ended June 30, 1998, 1997 and 1996, the return on average
assets was 1.12%, 1.14% and 0.79%. During the nine-month period ended March 31,
1999, on an annualized basis, Spectrum's return on average stockholders equity
was 19.71%, compared to 20.66% for March 31, 1998. For the years ended June 30,
1998, 1997 and 1996, the return on average stockholders' equity was 20.40%,
22.76% and 14.33%.
NET INTEREST INCOME
Net interest income represents the amount by which interest income on
interest-earning assets, including loans and securities, exceeds interest paid
on interest-bearing liabilities, including deposits and other borrowed funds.
Net interest income is the principal source of Spectrum's earnings. Interest
rate fluctuations, as well as changes in the amount and type of interest-earning
assets and interest-bearing liabilities, combine to affect net interest income.
The following tables present the average balances of Spectrum for the
nine-month periods ended March 31, 1999 and 1998 and indicate the interest
earned or paid on each major category of interest-earning assets and
interest-bearing liabilities on a fully taxable-equivalent basis assuming a 34%
tax rate, and the average rates earned or paid on each major category. This
analysis details the contribution of interest-earning assets and the overall
impact of the cost of funds on net interest income.
17
<PAGE>
<TABLE>
<CAPTION>
NINE-MONTH PERIOD ENDED MARCH 31,
--------------------------------------------------------------------
1999 1998
--------------------------------- ---------------------------------
INTEREST INTEREST
AVERAGE INCOME/ AVERAGE INCOME/
BALANCE EXPENSE YIELD/ RATE BALANCE EXPENSE YIELD/ RATE
--------- --------- ----- --------- --------- -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
INTEREST-EARNING ASSETS:
Loans, net of unearned fees(1)................. $ 418,435 $ 28,094 8.95% $ 373,995 $ 26,339 9.39%
Investment securities:
Taxable...................................... 84,343 4,009 6.34 70,514 3,422 6.47
Tax exempt (tax equivalent).................. 11,618 711 8.16 11,416 714 8.34
Federal funds sold............................. 23,494 1,196 6.79 23,011 955 5.53
--------- --------- --------- ---------
Total interest-earning assets.............. $ 537,890 $ 34,010 8.43% $ 478,936 $ 31,430 8.75%
--------- ---------
--------- ---------
INTEREST-BEARING LIABILITIES:
Demand, savings and money market deposits...... $ 145,818 $ 2,952 2.70% $ 120,017 $ 2,664 2.96%
Time deposits.................................. 277,903 11,913 5.72 249,960 10,783 5.75
--------- --------- --------- ---------
Total interest-bearing deposits............ 423,721 14,865 4.68% 369,977 13,447 4.85%
Federal Home Loan Bank borrowings, Federal
funds purchased and securities sold under
agreements to repurchase..................... 45,657 1,868 5.46 45,339 1,949 5.73
Notes payable.................................. 12,591 673 7.13 13,119 702 7.13
--------- --------- --------- ---------
Total interest-bearing liabilities......... $ 481,969 $ 17,406 4.82% $ 428,435 $ 16,098 5.01%
--------- --------- --------- ---------
--------- ---------
Net interest income............................ $ 16,604 $ 15,332
--------- ---------
--------- ---------
Interest rate spread(2)........................ 3.61% 3.74%
Net interest margin(3)......................... 4.12% 4.27%
Ratio of average interest-bearing liabilities to
average interest-earning assets................ 89.60% 89.46%
</TABLE>
- -------------
(1) Nonaccrual loans are included in the Average Balance columns, and income
recognized on these loans, if any, is included in the Interest
Income/Expense columns. Interest income on loans includes fees on loans,
which are not material in amount.
(2) The interest rate spread is the difference between the average yield on
interest-earning assets and the average cost of interest-bearing
liabilities.
(3) The net interest margin is equal to net interest income divided by average
interest-earning assets, on an annualized basis.
Net interest income on a tax-equivalent basis for the nine months ended
March 31, 1999 was $16,604,000, an increase of $1,272,000 or 8.30% from net
interest income of $15,332,000 for the first nine months of 1998. Interest
income for the first nine months of 1999 was $34,010,000, an increase of
$2,580,000, or 8.20% from interest income of $31,430,000 for the first nine
months of 1998. The interest income increase is primarily due to higher average
balances of interest-earning assets, some of which were a result of the
acquisition of First Savings. Average interest-earning assets for the first nine
months of 1999 were $537,890,000, an increase of $58,954,000 or 12.31% from
average interest-earning assets of $478,936,000 for the first nine months of
1998. The average yield on interest-earning assets decreased to 8.43% for the
nine months ended March 31, 1999 from 8.75% for the comparable period in 1998.
The primary reason for the decrease in the net interest margin during 1999 is
that Spectrum's loans are repricing at lower rates as they mature. For the nine
months ended March 31, 1999, average loan rates dropped to 8.95% from 9.39% for
the nine months ended March 31, 1998.
Net interest expense for the nine months ended March 31, 1999 was
$17,406,000, an increase of $1,308,000, or 8.13% from net interest expense of
$16,098,000 for the first nine months of 1998. The increase in average balances
of certificates of deposit to $277,903,000 for the nine months ended
18
<PAGE>
March 31, 1999 from $249,960,000 for the comparable period in 1998 was due
primarily to core growth at Spectrum's subsidiary banks and made up much of the
increased interest expense.
The cost of interest-bearing liabilities for the nine months ended March 31,
1999 was 4.82% compared to 5.01% for the same period ended March 31, 1998, and,
when combined with noninterest-bearing deposits, the cost of funds for the nine
months ended March 31, 1999 was 4.37% compared to 4.48% for March 31, 1998.
While the overall cost of interest-bearing liabilities was lower, it could
not compensate for the decline in the average yield on earning assets. As a
result of these factors, net interest margin, on a tax-equivalent basis,
decreased to 4.12% from 4.27%.
The following table presents the average balances of Spectrum for each of
the last three fiscal years and indicates the interest earned or paid on each
major category of interest-earning assets and interest-bearing liabilities on a
fully taxable-equivalent basis, assuming a 34% tax rate, and the average rates
earned or paid on each major category. This analysis details the contribution of
interest-earning assets and the overall impact of the cost of funds on net
interest income.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
---------------------------------------------------------
1998 1997
--------------------------- ---------------------------
INTEREST INTEREST
AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/
BALANCE EXPENSE RATE BALANCE EXPENSE RATE
-------- --------- ------ -------- --------- ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
INTEREST-EARNING ASSETS:
Loans, net of unearned fees(1)(2).......... $380,681 $35,414 9.30% $324,076 $30,839 9.52%
Investment securities:
Taxable.................................. 73,250 4,542 6.20% 76,290 4,961 6.50%
Tax exempt (tax Equivalent).............. 11,720 964 8.23% 10,408 936 8.99%
Federal funds sold......................... 19,604 1,313 6.70% 10,661 726 6.81%
-------- --------- -------- ---------
Total interest-earning assets.......... $485,255 $42,233 8.70% $421,435 $37,462 8.89%
-------- --------
-------- --------
INTEREST-BEARING LIABILITIES:
Demand, savings and money market
Deposits................................. $122,747 $ 3,622 2.95% $105,482 $ 3,137 2.97%
Time deposits.............................. 253,690 14,548 5.73% 223,980 12,854 5.74%
-------- --------- -------- ---------
Total interest-bearing deposits........ 376,437 18,170 4.83% 329,462 15,991 4.85%
Federal Home Loan Bank borrowings, federal
funds purchased and securities sold under
agreements to repurchase................. 45,509 2,591 5.69% 30,991 1,682 5.43%
Notes payable.............................. 12,681 999 7.88% 12,979 858 6.61%
-------- --------- -------- ---------
Total interest-bearing Liabilities..... $434,627 $21,760 5.01% $373,432 $18,531 4.96%
-------- --------- -------- ---------
-------- --------
Net interest income........................ $20,473 $18,931
--------- ---------
--------- ---------
Interest rate spread(3).................... 3.69% 3.93%
Net interest margin(4)..................... 4.22% 4.49%
Ratio of average interest-bearing liabilities
to average interest-earning assets......... 89.57% 88.61%
<CAPTION>
1996
---------------------------
INTEREST
AVERAGE INCOME/ YIELD/
BALANCE EXPENSE RATE
-------- --------- ------
<S> <C> <C> <C>
INTEREST-EARNING ASSETS:
Loans, net of unearned fees(1)(2).......... $248,637 $23,861 9.60%
Investment securities:
Taxable.................................. 68,450 4,108 6.00%
Tax exempt (tax Equivalent).............. 8,333 700 8.40%
Federal funds sold......................... 9,193 766 8.33%
-------- ---------
Total interest-earning assets.......... $334,613 $29,435 8.80%
--------
--------
INTEREST-BEARING LIABILITIES:
Demand, savings and money market
Deposits................................. $ 95,977 $ 3,140 3.27%
Time deposits.............................. 170,399 9,497 5.57%
-------- ---------
Total interest-bearing deposits........ 266,376 12,637 4.74%
Federal Home Loan Bank borrowings, federal
funds purchased and securities sold under
agreements to repurchase................. 15,295 890 5.82%
Notes payable.............................. 10,720 669 6.24%
-------- ---------
Total interest-bearing Liabilities..... $292,391 $14,196 4.86%
-------- ---------
--------
Net interest income........................ $15,239
---------
---------
Interest rate spread(3).................... 3.94%
Net interest margin(4)..................... 4.55%
Ratio of average interest-bearing liabilities
to average interest-earning assets......... 87.38%
</TABLE>
- ---------------
(1) The data includes the accounts of American Federal from May 31, 1996, the
date of acquisition of American Federal, and those of First Savings from
March 27, 1998, the date of acquisition of First Savings. The completed
acquisitions were accounted for under the purchase method of accounting.
(2) Nonaccrual loans are included in the Average Balance columns and income
recognized on these loans, if any, is included in the Interest
Income/Expense columns. Interest income on loans includes fees on loans,
which are not material in amount.
(3) The interest rate spread is the difference between the average yield on
interest-earning assets and the average cost of interest-bearing
liabilities.
(4) The net interest margin is equal to net interest income divided by average
interest-earning assets.
19
<PAGE>
Net interest income, on a tax-equivalent basis, was $20,473,000 for the year
ended June 30, 1998, an increase of $1,542,000 from $18,931,000 in 1997. This
increase resulted primarily from an increase of $63,820,000 in average
interest-earning assets to $485,255,000 for the year ended June 30, 1998 from
$421,435,000 in 1997. The majority of the asset growth was due to growth in the
loan portfolio. Average loans increased $56,605,000 to $380,681,000 for the year
ended June 30, 1998 from $324,076,000 in 1997.
Interest expense increased $3,229,000 to $21,760,000 for the year ended June
30, 1998 from $18,531,000 in 1997. The cost of interest-bearing liabilities for
the year ended June 30, 1998 was 5.01% compared to 4.96% in 1997. When combined
with noninterest-bearing deposits, the cost of funds was 4.26% for the year
ended June 30, 1998 compared to 4.22% in 1997. The average balance of Federal
Home Loan Bank borrowings, federal funds purchased, and securities sold under
agreements to repurchase increased to $45,509,000 in 1998, an increase of
$14,518,000 from $30,991,000 in 1997. This source was used to supplement core
deposits in funding the loan growth.
As a result of these factors, net interest margin, on a tax-equivalent
basis, decreased to 4.22% for the year ended June 30, 1998 compared to 4.49% for
the year ended June 30, 1997.
Net interest income, on a tax-equivalent basis, was $18,931,000 for the year
ended June 30, 1997, an increase of $3,692,000 from $15,239,000 in 1996. This
increase resulted primarily from an increase of $86,822,000 in average
interest-earning assets to $421,435,000 for the year ended June 30, 1997 from
$334,613,000 in 1996. The majority of the asset growth was due to growth in the
loan portfolio. Average loans increased $75,439,000 to $324,076,000 for the year
ended June 30, 1997 from $248,637,000 in 1996.
Interest expense increased $4,335,000 to $18,531,000 for the year ended June
30, 1997 from $14,196,000 in 1996. The cost of interest-bearing liabilities for
the year ended June 30, 1997 was 4.96% compared to 4.86% in 1996. When combined
with non-interest-bearing deposits, the cost of funds was 4.07% for the year
ended June 30, 1996. The average balances of Federal Home Loan Bank borrowings,
federal funds purchased, and securities sold under agreements to repurchase
increased to $30,991,000 in 1997, an increase of $15,696,000 from $15,295,000 in
1996. This source also was used to supplement core deposits in funding loan
growth.
Net interest margin, on a tax-equivalent basis, decreased to 4.49% for the
year ended June 30, 1997 compared to 4.55% for the year ended June 30, 1996.
20
<PAGE>
The following table presents the changes in the components of net interest
income and identifies the portion of each change due to differences in the
average volume of interest-earning assets and interest-bearing liabilities and
the portion of each change due to the average rate on those assets and
liabilities. The changes in interest due to both volume and rate changes in the
table have been allocated to volume or rate change in proportion to the absolute
dollar amounts of the change in each.
<TABLE>
<CAPTION>
NINE-MONTH PERIOD ENDED MARCH
31, 1999 VS. 1998 1998 VS. 1997
------------------------------ ------------------------------
INCREASE (DECREASE) INCREASE (DECREASE)
DUE TO CHANGES IN: DUE TO CHANGES IN:
------------------------------ ------------------------------
VOLUME RATE TOTAL VOLUME RATE TOTAL
--------- -------- ------- --------- -------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans, net of unearned fees................ $ 3,025 $ (1,270) $ 1,755 $ 5,273 $ (698) $ 4,575
Investment Securities:
Taxable.................................... 657 (70) 587 (195) (224) (419)
Tax exempt (tax equivalent)................ 13 (16) (3) 112 (84) 28
Federal funds sold........................... 21 220 241 599 (12) 587
--------- -------- ------- --------- -------- -------
Total interest income.................... 3,716 (1,136) 2,580 5,789 (1,018) 4,771
--------- -------- ------- --------- -------- -------
Interest-bearing liabilities:
Demand, savings and money market
deposits................................. 534 (246) 288 509 (24) 485
Time deposits.............................. 1,207 (77) 1,130 1,704 (10) 1,694
--------- -------- ------- --------- -------- -------
Total interest-bearing deposit expense... 1,741 (323) 1,418 2,213 (34) 2,179
Federal Home Loan Bank borrowings, federal
funds purchased and securities sold under
agreements to repurchase................... 7 (88) (81) 823 86 909
Notes payable................................ (20) (9) (29) (20) 161 141
--------- -------- ------- --------- -------- -------
Total interest expense................... 1,728 (420) 1,308 3,016 213 3,229
--------- -------- ------- --------- -------- -------
Increase (decrease) in net interest income... $ 1,988 $ (716) $ 1,272 $ 2,773 $ (1,231) $ 1,542
--------- -------- ------- --------- -------- -------
--------- -------- ------- --------- -------- -------
<CAPTION>
1997 VS. 1996
----------------------------
INCREASE (DECREASE)
DUE TO CHANGES IN:
----------------------------
VOLUME RATE TOTAL
--------- ------ -------
<S> <C> <C> <C>
Interest-earning assets:
Loans, net of unearned fees................ $ 7,181 $ (203) $ 6,978
Investment Securities:
Taxable.................................... 495 358 853
Tax exempt (tax equivalent)................ 184 52 236
Federal funds sold........................... 112 (152) (40)
--------- ------ -------
Total interest income.................... 7,972 55 8,027
--------- ------ -------
Interest-bearing liabilities:
Demand, savings and money market
deposits................................. 36 (39) (3)
Time deposits.............................. 3,013 344 3,357
--------- ------ -------
Total interest-bearing deposit expense... 3,049 305 3,354
Federal Home Loan Bank borrowings, federal
funds purchased and securities sold under
agreements to repurchase................... 854 (62) 792
Notes payable................................ 148 41 189
--------- ------ -------
Total interest expense................... 4,051 284 4,335
--------- ------ -------
Increase (decrease) in net interest income... $ 3,921 $ (229) $ 3,692
--------- ------ -------
--------- ------ -------
</TABLE>
PROVISION FOR LOAN LOSSES
The amount of the provision for loan losses is based on a quarterly or a
more frequent evaluation of the loan portfolio, especially nonperforming and
other potential problem loans. During these evaluations, consideration is given
to such factors as: management's evaluation of specific loans; the level and
composition of nonperforming loans; historical loss experience; results of
examinations by regulatory agencies; expectations of future economic conditions
and their impact on particular industries and individual borrowers; the market
value of collateral; the strength of available guarantees; concentrations of
credits; and other judgmental factors. In addition, an unaffiliated company
selected by Spectrum performs loan review services on an annual basis.
The provision for loan losses for the nine-month period ended March 31,
1999, was $882,000 compared to $1,105,000 for the nine-month period ended March
31, 1998. This represents a decrease of $223,000, or 20.18%. The provision for
loan losses for the year ended June 30, 1998, was $1,374,000, compared to
$1,233,000 for the previous year. The provision in 1997 represented a decrease
of $1,308,000, or 51.48%, from the 1996 provision. This decrease was primarily
due to an extraordinarily large provision in 1996 which resulted from the
bankruptcy of an unaffiliated company which originated and serviced pools of
purchased leases for three of Spectrum's subsidiary banks, and many other
non-affiliated purchasers.
21
<PAGE>
OTHER INCOME
The following table presents Spectrum's other income for the indicated
periods.
<TABLE>
<CAPTION>
NINE-MONTH PERIOD
ENDED MARCH 31, YEAR ENDED JUNE 30,
-------------------- -------------------------------
1999 1998 1998 1997 1996
--------- --------- --------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Service charges and other fees................................... $ 1,804 $ 1,580 $ 2,126 $ 1,919 $ 1,667
Net gains from sale of loans..................................... 1,674 135 803 303 314
Gain (loss) on securities, net................................... (15) 179 179 259 239
Other income..................................................... 1,290 969 1,466 1,101 725
--------- --------- --------- --------- ---------
Total other income............................................. $ 4,753 $ 2,863 $ 4,574 $ 3,582 $ 2,945
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
During the nine-month period ended March 31, 1999, total other income
increased to $4,753,000 from $2,863,000 for the nine months ended March 31, 1998
due primarily to increases in mortgage loan originations and sales and fees for
customer services. Net gains from the sale of loans arise when the subsidiary
banks originate loans and sell them in the secondary market with servicing
released. For this they receive a fee that is realized immediately into income.
Other income for the year ended June 30, 1998 increased to $4,574,000 compared
to $3,582,000 in 1997, an increase of $992,000 due primarily to increased income
from mortgage loan origination and increased other operating income including
fees from the sales of credit life insurance. Spectrum's experience is that the
volume of mortgage loan originations increases as interest rates decrease.
Management does not expect this level of increase in net gains from sale of
loans to continue. Other income for the year ended June 30, 1997 compared to
1996 increased by $637,000, primarily due to increases in service charges and
other fees.
OTHER EXPENSES
The following table presents Spectrum's other expenses for the indicated
periods.
<TABLE>
<CAPTION>
NINE-MONTH
PERIOD ENDED
MARCH 31, YEAR ENDED JUNE 30,
-------------------- -------------------------------
1999 1998 1998 1997 1996
--------- --------- --------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Salaries and employee benefits............................. $ 6,150 $ 5,664 $ 7,854 $ 7,157 $ 5,610
Occupancy expense, net..................................... 755 655 804 992 688
Data processing............................................ 611 635 717 795 691
Other expenses............................................. 4,420 3,077 4,699 4,358 3,646
--------- --------- --------- --------- ---------
Total other expense.................................... $ 11,936 $ 10,031 $ 14,074 $ 13,302 $ 10,635
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
Other expenses increased $1,905,000, or 18.99%, to $11,936,000 during the
first nine months of 1999 from $10,031,000 during the first nine months of 1998,
primarily as a result of costs associated with establishing an in-house data
center which is located at F&M Bank in Watertown, South Dakota. Other expenses
increased $771,000, or 5.80%, to $14,074,000 in 1998 from $13,302,000 in 1997,
primarily due to increases in salaries and benefits. Other expenses increased
$2,667,000, or 25.08%, in 1997 from $10,635,000 in 1996, primarily due to
increases in salaries and benefits.
Salaries and employee benefits rose $485,000, or 8.56%, to $6,150,000 for
the nine-month period ended March 31, 1999, from $5,664,000 for the
corresponding period of 1998. Salaries and benefits rose $697,000, or 9.74%, to
$7,854,000 in 1998 from $7,157,000 in 1997. Salaries and employee benefits
increased $1,547,000, or 27.58%, to $7,157,000 in 1997 from $5,610,000 in 1996.
The increases in salaries were due to Spectrum's continuing growth and the
entering of new markets with it's existing subsidiary banks through branching as
well through acquisitions in 1996 and 1998.
22
<PAGE>
Net occupancy expense increased $100,000, or 15.27%, to $755,000 for the
nine-month period ended March 31, 1999 from $655,000 for the nine-month period
ending March 31, 1998. Net occupancy expense decreased $188,000, or 18.95%, to
$804,000 in 1998 from $992,000 in 1997. Net occupancy expense increased
$304,000, or 44.19%, to $992,000 in 1997 from $688,000 in 1996. Net occupancy
expenses increased in the nine-month period ended March 31, 1999 due to the
acquisition of First Savings, Aberdeen, South Dakota and costs associated with
the construction of a new facility in Leon, Iowa. Net occupancy costs decreased
in 1998 as efficiencies were realized from the prior year's acquisition of
American Federal in Madison, South Dakota. Net occupancy costs increased in 1997
due to the acquisition of American Federal.
Data processing costs decreased $24,000, or 3.78% to $611,000 for the
nine-month period ended March 31, 1999, from $635,000 during the first nine
months of 1998. Data processing expense decreased $78,000, or 9.8%, to $717,000
from $795,000 in 1997. Data processing expense increased $104,000, or 15.05%, to
$795,000 in 1997 from $691,000 in 1996. Data center costs increased minimally in
the nine-month period ended March 31, 1999 even though an in-house data center
was created which services all of Spectrum's subsidiary banks. Cost changes in
prior fiscal years are a reflection of normal processing costs along with one
time shares related to conversions of acquired institutions in 1996 and 1998.
Other operating expenses include, among many other items, equipment expense,
postage, due from bank account charges, armored car and courier fees, travel and
entertainment, advertising, regulatory examination fees, directors' fees, dues
and subscriptions, and FDIC insurance premiums. These expenses increased
$1,343,000, or 43.65%, to $4,420,000 for the first nine months of 1999 from
$3,077,000 for the first nine months of 1998. These expenses increased $341,000,
or 7.82%, to $4,699,000 during 1998 from $4,358,000 during 1997. Other operating
expenses increased $712,000, or 19.53% to $4,358,000 in 1997 from $3,646,000 in
1996. Other operating expenses increased for the nine-month period ended March
31, 1999 due to a number of factors. Even though data processing expense did not
increase substantially, costs associated with the start up of the data center
impacted other operating expenses as well. Communication expense increased
substantially from the prior nine-month period as Spectrum's implemented a frame
relay system. Also for retrieval purposes Spectrum kept the prior data
processing system online until December 31, 1998 causing a duplication of
certain expenses including telephone expense. In addition, Citizens Bank, Mt.
Ayr began construction of an 8,265 square foot facility in Leon, Iowa in this
period.
FEDERAL INCOME TAX
Spectrum's consolidated income tax rate varies from statutory rates
principally due to interest income from tax-exempt securities. The provision for
income taxes increased by $719,000 to $2,985,000 for the nine months ended March
31, 1999 from $2,266,000 for the nine months ended March 31, 1998, reflecting
the increase of income before taxes for the period. Spectrum's recorded income
tax expenses totaled $3,124,000 in 1998 and $2,266,000 in 1997, and $1,691,000
in 1996.
ANALYSIS OF FINANCIAL CONDITION
LOAN PORTFOLIO
Total loans, net of unearned fees, increased $27,079,000, or 6.63%, to
$435,549,000 at March 31, 1999, from $408,470,000 at June 30, 1998. Total loans,
net of unearned fees, increased $47,566,000, or 13.18%, at June 30, 1998, from
$360,904,000 at June 30, 1997.
Spectrum's subsidiary banks primarily make installment loans to individuals
and commercial loans to small to medium-sized businesses and professionals. The
subsidiary banks offer a variety of commercial lending products including
revolving lines of credit, letters of credit, working capital loans and loans to
finance accounts receivable, inventory and equipment. See "Business -- Loans."
Typically, the subsidiary banks' commercial loans have floating rates of
interest, are for varying terms, generally
23
<PAGE>
not exceeding five years, are personally guaranteed by the borrower and are
collateralized by accounts receivable, inventory or other business assets.
The following tables present Spectrum's loan balances at the dates indicated
separated by loan type:
<TABLE>
<CAPTION>
MARCH 31, 1999 JUNE 30, 1998 JUNE 30, 1997
--------------------- --------------------- ---------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Loans to individuals............................ $ 68,541 16.0% $ 58,205 14.4% $ 54,982 15.5%
Real estate loans............................... 88,732 20.6 129,761 32.2 144,463 40.6
Commercial and agricultural..................... 276,533 64.4 209,387 52.0 152,906 43.0
Other loans..................................... 2,191 0.5 11,531 2.9 8,825 2.5
---------- --------- ---------- --------- ---------- ---------
Total face amount of loans.................. 435,997 101.5 408,884 101.5 361,176 101.6
Unearned loan fees.............................. (448) (0.1) (414) (0.1) (272) (0.1)
---------- --------- ---------- --------- ---------- ---------
Loans........................................... 435,549 101.4% 408,470 101.4% 360,904 101.5%
Less allowance for loan losses.................. (5,970) (1.4) (5,599) (1.4) (5,404) (1.5)
---------- --------- ---------- --------- ---------- ---------
Net loans....................................... $ 429,579 100.0% $ 402,871 100.0% $ 355,500 100.0%
---------- --------- ---------- --------- ---------- ---------
---------- --------- ---------- --------- ---------- ---------
<CAPTION>
JUNE 30, 1996 JUNE 30, 1995 JUNE 30, 1994
--------------------- --------------------- ---------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Loans to individuals............................ $ 61,478 21.1% $ 55,077 24.0% $ 38,706 20.1%
Real estate loans............................... 107,939 37.0 71,152 31.0 57,806 30.0
Commercial and agricultural..................... 117,758 40.5 96,424 42.1 83,625 43.6
Other loans..................................... 9,065 3.1 9,349 4.1 14,506 7.5
---------- --------- ---------- --------- ---------- ---------
Total face amount of loans.................. 296,240 101.7 232,002 101.2 194,643 101.2
Unearned loan fees.............................. (72) (0.1) (91) (0.1) (132) (0.1)
---------- --------- ---------- --------- ---------- ---------
Loans........................................... 296,168 101.6% 231,911 101.1% 194,511 101.1%
Less allowance for loan losses.................. (4,790) (1.6) (2,599) (1.1) (2,132) (1.1)
---------- --------- ---------- --------- ---------- ---------
Net loans....................................... $ 291,378 100.0% $ 229,312 100.0% $ 192,379 100.0%
---------- --------- ---------- --------- ---------- ---------
---------- --------- ---------- --------- ---------- ---------
</TABLE>
As of March 31, 1999, loans, net of unearned fees, were $435,549,000, or
$27,079,000 greater than loans of $408,470,000 at June 30, 1998. Spectrum's
primary category of loans, commercial and agricultural loans, constituting
almost two-thirds of loans as of March 31, 1999, trended upward as indicated at
the stated dates. At March 31, 1999, agricultural loans totaled $57,403,000. Of
this amount, $23,666,000 comprised loans primarily secured by agricultural real
estate, and $33,737,000 comprised loans primarily secured by agricultural
operating assets. At June 30, 1998, agricultural loans totaled $57,913,000. Of
this amount, $21,034,000 comprised loans primarily secured by agricultural real
estate, and $36,879,000 comprised loans primarily secured by agricultural
operating assets. At June 30, 1997, agricultural loans totaled $50,490,000. Of
this amount, $17,646,000 comprised loans primarily secured by agricultural real
estate, and $32,844,000 comprised loans primarily secured by agricultural
operating assets. Commercial and agricultural loans were $276,533,000 as of
March 31, 1999, an increase of $67,146,000 over the $209,387,000 balance as of
June 30, 1998.
In the first quarter of fiscal year 1999, Spectrum converted to a new data
processing system at which time over $50,000,000 in commercial real estate loans
were reclassified from real estate to commercial loans. The conversion allowed
Spectrum to examine the consistency of classifications among its subsidiary
banks. This examination led to the reclassification of certain loans at F&M
Bank. Primarily as a result of this reclassification, real estate loans were
$88,732,000 on March 31, 1999, $41,029,000 less than the June 30, 1998 balance
of $129,761,000. Loans as of June 30, 1998 increased by $47,566,000 compared to
June 30, 1997, due to greater amounts of commercial loans.
Loan concentrations are considered to exist when there are amounts loaned to
a multiple number of borrowers engaged in similar activities that would cause
them to be similarly impacted by economic
24
<PAGE>
or other conditions. Spectrum had no concentrations of loans at March 31, 1999,
except for those set forth in the above table. Spectrum had no loans outstanding
to foreign countries or borrowers headquartered in foreign countries at March
31, 1999.
Management of Spectrum's subsidiary banks may renew loans at maturity, when
requested by a customer whose financial strength appears to support such renewal
or when such renewal appears to be in Spectrum's best interest. Spectrum
requires payment of accrued interest in such instances and may adjust the rate
of interest, require a principal reduction or modify other terms of the loan at
the time of renewal.
Although the risk of non-payment exists for a variety of reasons relating to
all loans, other more specific risks are associated with each type of loan.
Risks associated with real estate mortgage loans include the borrower's
inability to pay and deterioration in value of real estate held as collateral.
Several risks are present in construction loans, including economic conditions
in the building industry, fluctuating land values, failure of the contractor to
complete work and the borrower's inability to repay. Risks associated with
commercial and agricultural loans are the quality of the borrower's management
and the impact of local economic factors as well as prices received for
products. Loans to individuals face the additional risk of a borrower's
unemployment as a result of deteriorating economic conditions as well as the
personal circumstances of the borrower. Management believes that risk levels
associated with the various types of loans are dependent upon the existence of
the risks at any particular time, for example, economic conditions in the
building industry.
LOAN MATURITIES
The following tables present, at March 31, 1999 and June 30, 1998, loans,
net of unearned fees, by maturity in each major category of Spectrum's portfolio
based on contractual repricing schedules. Actual maturities may differ from the
contractual repricing maturities shown below as a result of renewals and
prepayments. Loan renewals are evaluated by Spectrum in the same manner as new
credit applications. If loans are not repaid upon maturity, these loans are
subject to the same credit evaluation and other underwriting criteria as new
loan applications, and are subject to new terms and conditions as deemed
appropriate by Spectrum's lending personnel.
<TABLE>
<CAPTION>
AT MARCH 31, 1999
------------------------------------------------------------------------
OVER ONE YEAR THROUGH
FIVE YEARS OVER FIVE YEARS
---------------------- ------------------------
ONE YEAR FLOATING FLOATING
OR LESS FIXED RATE RATE FIXED RATE RATE TOTAL
---------- ----------- --------- ----------- ----------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Loans to individuals........................ $ 12,747 $ 43,558 $ 4,329 $ 7,907 $ 0 $ 68,541
Real estate loans........................... 43,244 27,772 1,304 16,303 0 88,623
Commercial and agricultural................. 120,889 83,802 47,089 19,214 5,200 276,194
Other loans................................. 394 1,347 134 316 0 2,191
---------- ----------- --------- ----------- ----------- ----------
Total Loans............................. $ 177,274 $ 156,479 $ 52,856 $ 43,740 $ 5,200 $ 435,549
---------- ----------- --------- ----------- ----------- ----------
---------- ----------- --------- ----------- ----------- ----------
<CAPTION>
AT JUNE 30, 1998
------------------------------------------------------------------------
OVER ONE YEAR THROUGH
FIVE YEARS OVER FIVE YEARS
---------------------- ------------------------
ONE YEAR FLOATING FLOATING
OR LESS FIXED RATE RATE FIXED RATE RATE TOTAL
---------- ----------- --------- ----------- ----------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Loans to individuals........................ $ 15,890 $ 33,893 $ 1,150 $ 7,272 $ 0 $ 58,205
Real estate loans........................... 59,439 41,763 8,081 20,319 0 129,602
Commercial and agricultural................. 110,768 52,822 20,052 20,264 5,226 209,132
Other loans................................. 3,254 6,942 236 1,099 0 11,531
---------- ----------- --------- ----------- ----------- ----------
Total loans............................. $ 189,351 $ 135,420 $ 29,519 $ 48,954 $ 5,226 $ 408,470
---------- ----------- --------- ----------- ----------- ----------
---------- ----------- --------- ----------- ----------- ----------
</TABLE>
25
<PAGE>
LOAN REVIEW PROCESS
Spectrum's subsidiary banks follow both internal and external loan review
programs to evaluate the credit risk in their loan portfolios and assess the
adequacy of the allowance for loan losses.
Internally, each bank maintains a classified loan list that, along with the
list of non-performing loans discussed below, helps Spectrum management assess
the overall quality of the loan portfolio and the adequacy of the allowance for
loan losses. The classification categories of substandard, doubtful and loss
correspond with those of state and FDIC examiners. Loans classified as
"substandard" are those loans with clear and defined weaknesses such as highly
leveraged positions, unfavorable financial ratios, uncertain repayment sources
or poor financial condition, which may jeopardize repayment. Loans classified as
"doubtful" are those loans that have characteristics similar to substandard
loans, but also have an increased risk of loss or would require a partial
write-off in a liquidation. Although loans classified as substandard do not
duplicate loans classified as doubtful, both substandard and doubtful loans may
include some loans that are past due at least 90 days, are on nonaccrual status
or have been restructured. Loans classified as "loss" are those loans that are
in the process of being charged off.
In addition to the internally classified loans, the subsidiary banks also
have a "watch list" of loans that further assists their monitoring of their loan
portfolios. A loan is included on the watch list if it demonstrates one or more
deficiencies requiring attention in the near term or if the loan's ratios have
weakened to a point where more frequent monitoring is warranted. These loans do
not have all the characteristics of a classified loan (substandard, doubtful or
loss), but do have weakened elements as compared with those of a satisfactory
credit. Management of the subsidiary banks reviews these loans to assist in
assessing the adequacy of the allowance for loan losses. Substantially all of
the loans on the watch list at March 31, 1999, and June 30, 1998, were current
and paying in accordance with loan terms.
Spectrum's external loan review process consists of an intensive, annual
on-site review of more than 50% of loans at each subsidiary bank. This review is
performed by a non-affiliated regional consulting firm with the assistance of
loan officers of Spectrum's affiliate banks, under the supervision of President
Daniel A. Hamann. The report of the consulting firm is presented to each bank's
management and board of directors for review. The external review is used to
supplement and provide a check on the internal review conducted by subsidiary
bank management.
NONPERFORMING LOANS
Nonperforming loans consist of nonaccrual, past due and restructured loans.
A past due loan is an accruing loan that is contractually past due 90 days or
more as to principal and/or interest payments. Loans on which management does
not expect to collect interest in the normal course of business are placed on
nonaccrual or are restructured. When a loan is placed on nonaccrual, any
interest previously accrued but not yet collected is reversed against current
income unless, in the opinion of management, the outstanding interest remains
collectible. Thereafter, interest is included in income only to the extent of
cash received. A loan is restored to accrual status when all interest and
principal payments are current and the borrower has demonstrated to management
the ability to make payments of principal and interest as scheduled.
A restructured loan is one upon which interest accrues at a below market
rate or upon which certain principal has been forgiven so as to aid the borrower
in the final repayment of the loan, with any interest previously accrued, but
not yet collected, being reversed against current income. Interest is accrued
based upon the new loan terms.
Nonperforming loans are fully or substantially collateralized by assets,
with any excess of loan balances over collateral values allocated in the
allowance. Assets acquired through foreclosure are carried at the lower of cost
or estimated fair value, net of estimated costs of disposal, if any. See
"Analysis of Financial Condition -- Other Real Estate and Other Repossessed
Assets" below.
26
<PAGE>
The following table lists nonaccrual, past due and restructured loans and
other real estate and other repossessed assets at March 31, 1999, and at
year-end for each of the past five years.
<TABLE>
<CAPTION>
JUNE 30,
MARCH 31, -----------------------------------------------------
1999 1998 1997 1996 1995 1994
----------- --------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Nonaccrual loans...................................... $ 1,897 $ 2,337 $ 1,971 $ 1,936 $ 1,060 $ 314
Accruing loans past due over 90 days.................. 1,207 1,484 543 340 495 180
Restructured loans.................................... 4,186 4,186 4,428 251 360 0
----------- --------- --------- --------- --------- ---------
Total nonperforming loans............................. 7,290 8,007 6,942 2,527 1,915 494
Other real estate and other repossessed assets........ 102 102 126 407 81 101
----------- --------- --------- --------- --------- ---------
Total nonperforming assets............................ $ 7,392 $ 8,109 $ 7,068 $ 2,934 $ 1,996 $ 595
----------- --------- --------- --------- --------- ---------
----------- --------- --------- --------- --------- ---------
Ratio of total nonperforming loans to total loans..... 1.67% 1.96% 1.92% 0.85% 0.83% 0.25%
Ratio of total nonperforming assets to total loans
plus other real estate and other repossessed
assets.............................................. 1.70 1.98 1.96 0.99 0.86 0.31
Ratio of nonperforming assets to total assets......... 1.24 1.48 1.45 0.69 0.59 0.20
</TABLE>
Restructured loans were $4,186,000, $4,186,000 and $4,428,000 at March 31,
1999, June 30, 1998, and June 30, 1997. Included in the category are loans for
which the increased provision was taken in 1996. These loans were primarily
serviced by a single servicer that declared bankruptcy in 1996. A settlement was
reached with the bankruptcy trustee that resulted in a partial charge-off of
amounts owing to Spectrum's subsidiary banks, with the remaining balances of
$4,186,000 carried at a below-market rate of interest for an eight-year period.
These loans begin a two-year principal amortization in 2002 and are scheduled to
be completely repaid in 2004. Payments of interest are being received monthly
and have been received according to the terms of the settlement since its
inception. Payments are current on these loans.
A potential problem loan is defined as a loan where information about
possible credit problems of the borrower is known, causing management to have
serious doubts as to the ability of the borrower to comply with the present loan
repayment terms and which may result in the inclusion of such loan in one of the
nonperforming asset categories. Spectrum does not believe it has any potential
problem loans other than those reported in the above table.
ALLOWANCE FOR LOAN LOSSES
Implicit in Spectrum's lending activities is the fact that loan losses will
be incurred and that the risk of loss will vary with the type of loan being made
and the creditworthiness of the borrower over the term of the loan. To reflect
the currently perceived risk of loss associated with Spectrum's loan portfolio,
additions are made to the allowance for possible loan losses. The allowance is
created by direct charges of the provision against income and the allowance is
available to absorb realized loan losses.
27
<PAGE>
The following table presents the provisions, loans charged off and
recoveries of loans previously charged off, the amount of the allowance, average
loans outstanding and certain pertinent ratios for the nine-month period ended
March 31, 1999, and for each of the last five years.
<TABLE>
<CAPTION>
MARCH JUNE 30,
31, --------------------------------------------------------
1999 1998 1997 1996 1995 1994
-------- ----------- ----------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Average loans outstanding(1)................. $418,435 $ 380,681 $324,076 $248,637 $201,849 $169,397
-------- ----------- ----------- -------- -------- --------
-------- ----------- ----------- -------- -------- --------
Total loans at end of period(1)........ $435,549 $ 408,470 $360,904 $296,168 $231,911 $194,511
-------- ----------- ----------- -------- -------- --------
-------- ----------- ----------- -------- -------- --------
Allowance at beginning of period............. $ 5,599 $ 5,803(2) $ 4,790 $ 2,599 $ 2,132 $ 1,890
Loans charged off:
Loans to individuals....................... 157 481 203 550 107 54
Real estate loans.......................... 46 15 23 18 16 5
Commercial and agricultural loans.......... 438 1,013 379 510 214 265
Other loans................................ 17 422 421 451 0 0
-------- ----------- ----------- -------- -------- --------
Total charge-offs...................... 658 1,931 1,026 1,529 337 324
-------- ----------- ----------- -------- -------- --------
Recoveries of loans previously charged off:
Loans to individuals....................... 57 60 55 414 57 33
Real estate loans.......................... 4 2 2 5 30 11
Commercial and agricultural loans.......... 86 162 350 45 50 61
Other loans................................ 0 00 422 0 0
-------- ----------- ----------- -------- -------- --------
Total recoveries....................... 147 224 407 886 137 105
-------- ----------- ----------- -------- -------- --------
Net loans charged off.................... 511 1,707 619 643 200 219
Provision for loan losses.................. 882 1,374 1,233 2,541 667 461
Business acquisition....................... 0 129 0 293 0 0
-------- ----------- ----------- -------- -------- --------
Allowance at end of period................... $ 5,970 $ 5,599 $ 5,404(2) $ 4,790 $ 2,599 $ 2,132
-------- ----------- ----------- -------- -------- --------
-------- ----------- ----------- -------- -------- --------
Net loan charge-offs to average loans........ 0.16% 0.45% 0.19% 0.26% 0.10% 0.13%
Allowance to total loans, at end of period... 1.37% 1.37% 1.50% 1.62% 1.12% 1.10%
</TABLE>
- ------------
(1) Net of unearned fees.
(2) Restated balance at end of 1997 does not equal the 1998 beginning balance
due to a change in reporting periods. See "-- The Merger."
The amount of the allowance equals the cumulative total of the provisions
made from time to time, reduced by loan charge-offs and increased by recoveries
of loans previously charged off. Spectrum's allowance was $5,970,000, or 1.37%,
of loans, net of unearned fees, at March 31, 1999. Spectrum's allowance was
$5,599,000, or 1.37% of loans, net of unearned fees, at June 30, 1998, compared
to $5,404,000, or 1.50% of loans, net of unearned fees, at June 30, 1997, and
$4,790,000, or 1.62% of loans, net of unearned fees, at June 30, 1996. See
"Provision for Loan Losses."
Credit and loan decisions are made by management and the board of directors
of the subsidiary banks in conformity with loan policies established by their
boards of directors. The subsidiary banks' practice is to charge off any loan or
portion of a loan when the loan is determined by management to be uncollectable
due to the borrower's failure to meet repayment terms, the borrower's
deteriorating or deteriorated financial condition, the depreciation of the
underlying collateral, the loan's classification as a loss by regulatory
examiners or for other reasons. Spectrum charged off $658,000 during the nine
months ended March 31, 1999. Recoveries during the first nine months of 1999
were $147,000.
28
<PAGE>
Foreclosures on defaulted loans result in Spectrum acquiring other real
estate and other repossessed assets. Accordingly, Spectrum incurs other
expenses, specifically net costs applicable to other real estate and other
repossessed assets, in maintaining, insuring and selling such assets. Spectrum's
subsidiary banks attempt to convert nonperforming loans into interest-earning
assets, usually loans are at a lower dollar amount than the face value of such
loans, either through liquidation of the collateral securing the loan or through
intensified collection efforts.
The amount of the allowance is established by bank management based upon
estimated risks inherent in the existing loan portfolio. Management reviews the
loan portfolio on a continuing basis to evaluate potential problems. This review
encompasses management's estimate of current economic conditions and the
potential impact on various industries, prior loan loss experience and financial
conditions of individual borrowers. Loans that have been specifically identified
as problem or nonperforming loans are reviewed on at least a quarterly basis,
and management critically evaluates the prospect of ultimate losses arising from
such loans, based on the borrower's financial condition and the value of
available collateral. When a risk can be specifically quantified for a loan,
that amount is specifically allocated in the allowance. In addition, Spectrum
allocates the allowance based upon the historical loan loss experience of the
different types of loans. Despite such allocation, the entire allowance is
available for charge-offs of all loans.
The following table shows the allocations in the allowance and the
respective percentages of each loan category to total loans at March 31, 1999,
and at year-end for each of the past five years. Portions of the allowance have
been allocated to categories based on an analysis of the status of particular
loans and homogenous pools of loans. The allocation table should not be
interpreted as an indication of the specific amounts, by loan classification, to
be charged to the allowance. Management believes that the table may be a useful
device for assessing the adequacy of the allowance as a whole. The table has
been derived in part by applying historical loan loss ratios to both internally
classified loans and the portfolio as a whole in determining the allocation of
the loan losses attributable to each category of loans.
<TABLE>
<CAPTION>
AT MARCH 31, 1999 AT JUNE 30, 1998 AT JUNE 30, 1997
------------------------ ------------------------ ------------------------
PERCENT OF PERCENT OF PERCENT OF
LOANS BY LOANS BY LOANS BY
AMOUNT OF CATEGORY TO AMOUNT OF CATEGORY TO AMOUNT OF CATEGORY TO
ALLOWANCE LOANS ALLOWANCE LOANS ALLOWANCE LOANS
----------- ----------- ----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Loans to individuals........................ $ 728 15.7% $ 625 14.2% $ 691 15.2%
Real estate loans........................... 503 20.4 912 31.7 850 40.0
Commercial and agricultural loans........... 4,034 63.4 3,460 51.3 3,248 42.4
Other loans................................. 705 0.5 602 2.8 615 2.4
----------- ----- ----------- ----- ----------- -----
Total allowance for loan losses......... $ 5,970 100.0% $ 5,599 100.0% $ 5,404 100.0%
----------- ----- ----------- ----- ----------- -----
----------- ----- ----------- ----- ----------- -----
</TABLE>
<TABLE>
<CAPTION>
AT JUNE 30, 1996 AT JUNE 30, 1995 AT JUNE 30, 1994
------------------------ ------------------------ ------------------------
PERCENT OF PERCENT OF PERCENT OF
LOANS BY LOANS BY LOANS BY
AMOUNT OF CATEGORY TO AMOUNT OF CATEGORY TO AMOUNT OF CATEGORY TO
ALLOWANCE LOANS ALLOWANCE LOANS ALLOWANCE LOANS
----------- ----------- ----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Loans to individuals........................ $ 635 20.8% $ 452 23.7% $ 295 19.9%
Real estate loans........................... 730 36.4 159 30.7 175 29.6
Commercial and agricultural loans........... 3,372 39.7 1,988 41.6 1,662 43.0
Other loans................................. 53 3.1 0 4.0 0 7.5
----------- ----- ----------- ----- ----------- -----
Total allowance for loan losses......... $ 4,790 100.0% $ 2,599 100.0% $ 2,132 100.0%
----------- ----- ----------- ----- ----------- -----
----------- ----- ----------- ----- ----------- -----
</TABLE>
29
<PAGE>
SECURITIES
Securities, all of which are classified as available-for-sale and carried at
fair value, increased $15,756,000, or 19.82%, to $95,267,000 at March 31, 1999,
from $79,511,000 at June 30, 1998. Securities available-for-sale increased
$30,000, or 0.04% from $79,481,000 at June 30, 1997.
The board of directors of each subsidiary bank reviews all securities
transactions monthly and the securities portfolio periodically. Spectrum's
current investment policy provides for the purchase of U.S. Treasury securities
and federal agency securities having maturities of five years or less. For
state, county, municipal and other securities, Spectrum's investment policy
allows for the purchase of securities with maturities in excess of ten years. As
of March 31, 1999, 86.38% of Spectrum's securities with defined maturities
mature in less than ten years.
As of March 31, 1999, 97.92% of Spectrum's investment portfolio had defined
maturities. The investment portfolio with defined maturities were concentrated
in the following categories: mortgage backed securities totaled $56,692,000, or
59.51% of the portfolio and other securities totaled $12,048,000, or 12.65% of
the portfolio. Approximately 50% of the other category is composed of corporate
securities. The remaining 2.08% of Spectrum's investment portfolio is in equity
securities which primarily is stock in the Federal Home Loan Bank of Des Moines.
Certain of Spectrum's securities are pledged to secure public and trust fund
deposits and for other purposes required or permitted by law. At March 31, 1999,
the book value of U.S. Government and other securities so pledged amounted to
$56,216,000, or 59.00% of the total securities portfolio.
The following table provides the maturity distribution and weighted average
interest rates of Spectrum's securities portfolio at March 31, 1999. The yield
has been computed by relating the forward income stream on the securities, plus
or minus the anticipated amortization of premium or accretion of discount, to
the book value of the securities. The book value of available-for-sale
securities is their fair value. All securities are held available for sale. The
restatement of the yields on tax-exempt securities to a fully taxable-equivalent
basis has been computed assuming a tax rate of 34%. The equity securities are
primarily composed of stock in the Federal Home Loan Bank of Des Moines. The
yield is set
30
<PAGE>
quarterly by the Federal Home Loan Bank's board of directors. For the quarter
ended March 31, 1999, the yield was 6.25%.
<TABLE>
<CAPTION>
AT MARCH 31, 1999
------------------------------------------------
WEIGHTED
PRINCIPAL AMORTIZED ESTIMATED AVERAGE
TYPE AND MATURITY AMOUNT COST FAIR VALUE YIELD
- --------------------------------------------------------------------- --------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
U.S. Treasury securities:
Within one year.................................................... $ 5,100 $ 5,100 $ 5,117 5.68%
After one but within five years.................................... 4,900 4,895 4,944 5.59
--------- ----------- -----------
Total U.S. Treasury securities............................... 10,000 9,995 10,061 5.63
--------- ----------- -----------
Obligations of other U.S. Government agencies and corporations:
Within one year.................................................... 1,032 1,032 998 4.82%
After one but within five years.................................... 3,200 3,199 3,229 5.95
--------- ----------- -----------
Total obligations of U.S. Government agencies and
corporations............................................... 4,232 4,231 4,227 5.68
--------- ----------- -----------
Mortgage-backed securities........................................... 56,327 56,304 56,692 6.44
--------- ----------- -----------
Obligations of states and political subdivisions:
Within one year.................................................... 395 585 913 7.00%
After one but within five years.................................... 835 1,040 1,069 7.34
After five but within ten years.................................... 4,087 4,090 4,214 7.96
After ten years.................................................... 3,495 4,063 4,062 7.04
--------- ----------- -----------
Total obligations of states and political subdivisions....... 8,812 9,778 10,258 7.55
--------- ----------- -----------
Other securities:
Within one year.................................................... 210 705 706 6.35%
After one but within five years.................................... 0 198 198 5.95
After five but within ten years.................................... 1,771 2,408 2,501 5.98
After ten years.................................................... 8,700 8,635 8,643 6.56
--------- ----------- -----------
Total other securities....................................... 10,681 11,946 12,048 6.42
--------- ----------- -----------
Total securities with defined maturities..................... 90,052 92,254 93,286 6.42
Equity securities.................................................... 1,981 1,981 1,981 6.25
--------- ----------- -----------
Total securities............................................. $ 92,033 $ 94,235 $ 95,267 6.42%
--------- ----------- -----------
--------- ----------- -----------
</TABLE>
DEPOSITS
Total deposits increased $38,754,000, or 8.60%, to $489,544,000 at March 31,
1999, from $450,790,000 at June 30, 1998. The increase in total deposits of
$51,612,000, or 12.93%, at June 30, 1998, from $399,178,000 at June 30, 1997, is
partly attributable to the purchase of First Savings in March, 1998, which had
$14,085,000 in total deposits at the date of acquisition. Total deposits
increased $41,689,000, or 11.66%, at June 30, 1997, from $357,489,000 at June
30, 1996.
31
<PAGE>
The following table presents the average amounts and the average rate paid
on deposits of Spectrum for the nine-month period ended March 31, 1999, and for
each of the last three years:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
NINE-MONTH -------------------------------------------------------------------------
PERIOD ENDED
MARCH 31, 1999 1998 1997 1996
----------------------- ----------------------- ----------------------- -----------------------
AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE
AMOUNT RATE AMOUNT RATE AMOUNT RATE AMOUNT RATE
---------- ----------- ---------- ----------- ---------- ----------- ---------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-bearing demand, savings
and money market deposits..... $ 145,818 2.70% $ 122,747 2.95% $ 105,482 2.97% $ 95,977 3.27%
Time deposits of less than
$100,000...................... 218,054 5.89 202,977 6.29 182,826 6.08 146,671 5.79
Time deposits of $100,000 or
more.......................... 59,849 5.06 50,713 3.55 41,154 4.19 23,728 4.51
---------- ---------- ---------- ----------
Total interest-bearing
deposits...................... 423,721 4.68 376,437 4.83 329,462 4.85 266,376 4.74
Noninterest-bearing demand
deposits...................... 49,259 0.00 50,165 0.00 49,405 0.00 43,831 0.00
---------- ---------- ---------- ----------
Total deposits................ $ 472,980 4.19% $ 426,602 4.26% $ 378,867 4.22% $ 310,207 4.07%
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
The maturity distribution of time deposits of $100,000 or more at March 31,
1999 is presented below:
<TABLE>
<CAPTION>
MARCH 31, 1999
--------------------
(DOLLARS IN
THOUSANDS)
<S> <C>
3 months or less.................................................................. $ 16,120
Over 3 through 6 months........................................................... 39,629
Over 6 through 12 months.......................................................... 9,459
Over 12 months.................................................................... 2,211
-------
Total time deposits of $100,000 or more....................................... $ 67,419
-------
-------
</TABLE>
The subsidiary banks rely to a limited extent on time deposits of $100,000
or more. Time deposits of $100,000 or more are a more volatile funding source
than other deposits and are most likely to affect Spectrum's future earnings
because of interest rate sensitivity.
FEDERAL HOME LOAN BANK BORROWINGS
All of the subsidiary banks are members of the Federal Home Loan Bank. Due
to the competitive rates available, each subsidiary bank has utilized Federal
Home Loan Bank advances as a source of funding. At March 31, 1999, the
subsidiary banks had $28,500,000 in Federal Home Loan Bank advances compared to
$24,500,000 at June 30, 1998 and $25,900,000 at June 30, 1997. At March 31,
1999, based on its Federal Home Loan Bank stockholdings, the aggregate unused
borrowing capacity of Spectrum was $15,931,000.
A variety of borrowing terms and maturities can be chosen from the Federal
Home Loan Bank. Maturities available range generally from one day to 10 years.
Interest rates can be either fixed or variable and prepayment options are
available if desired. The Federal Home Loan Bank offers both amortizing and
non-amortizing advances. Historically, Federal Home Loan Bank stock has been
redeemable at the preset price of $100 per share, its current carrying value,
but there can be no assurance that this policy will continue.
32
<PAGE>
LIQUIDITY
SOURCES OF LIQUIDITY
Liquidity with respect to a financial institution is the ability to meet its
short-term needs for cash without suffering an unfavorable impact on its
on-going operations. The need for the subsidiary banks to maintain funds on hand
arises principally from maturities of short-term borrowings, deposit
withdrawals, customers' borrowing needs and the maintenance of reserve
requirements. Liquidity with respect to a financial institution can be met from
either assets or liabilities. On the asset side of the balance sheet, the
primary sources of liquidity are cash and due from banks, federal funds sold,
maturities of securities and scheduled repayments and maturities of loans. The
subsidiary banks maintain adequate levels of cash and near-cash investments to
meet its day-to-day needs. Cash and due from banks averaged $17,194,000 and
$17,928,000 during the nine months March 31, 1999 and 1998, respectively. These
amounts comprised 2.99% and 3.49% of average total assets during the nine months
ended March 31, 1999 and 1998 respectively. The average level of securities and
federal funds sold was $119,455,000 and $104,941,000 during the nine months
March 31, 1999 and 1998 respectively.
At March 31, 1999, $7,734,000, or 21.13%, of Spectrum's securities
portfolio, excluding mortgage-backed securities and equity securities, matured
within one year and $9,440,000, or 25.80%, excluding mortgage-backed securities,
matured after one but within five years. The subsidiary banks' commercial
lending activities are concentrated in loans with maturities of less than five
years and with both fixed and adjustable interest rates. Its installment lending
activities are concentrated in loans with maturities of three to six years and
with generally fixed interest rates. At March 31, 1999, approximately
$177,274,000, or 40.70%, of Spectrum's loans, net of unearned fees, matured
within one year. See "Loan Maturities."
On the liability side of the balance sheet, the principal sources of
liquidity are deposits, borrowed funds and the accessibility to money and
capital markets. Spectrum attracts its deposits primarily from individuals and
businesses located within the market areas served by the subsidiary banks.
Borrowed funds come primarily from two sources, Federal Home Loan Bank
borrowings and Spectrum's notes payable at US Bank, N.A. Spectrum has loan
agreements with US Bank, N.A. Interest on the balance, $11,695,000 at May 31,
1999, is due quarterly at either the lender's reference rate, the CD rate plus
2% per annum or the Eurodollar rate plus 2% per annum, at the option of
Spectrum. Proceeds from this offering will be used to pay this balance in full.
See "Use of Proceeds."
ASSET/LIABILITY MANAGEMENT
Interest rate risk arises when an interest-earning asset matures or when
such asset's rate of interest changes in a time frame different from that of the
supporting interest-bearing liability. Spectrum seeks to reduce the risk of
significant adverse effects on Spectrum's net interest income caused by interest
rate changes.
Spectrum does not attempt to match each interest-earning asset with a
specific interest-bearing liability. Instead, as shown in the table below, it
aggregates all of its interest-earning assets and interest-bearing liabilities
to determine the difference between the two in specific time frames. This
difference is known as the rate-sensitivity gap. A positive gap indicates that
more interest-earning assets than interest-bearing liabilities mature in a time
frame, and a negative gap indicates the opposite. Maintaining a balanced
position will reduce the risk associated with interest rate changes, but it will
not guarantee a stable interest rate spread since various rates within a
particular time frame may change by differing amounts and in different
directions. Management regularly monitors the interest sensitivity position and
considers this position in its decisions with regards to interest rates and
maturities for interest-earning assets acquired and interest-bearing liabilities
accepted.
33
<PAGE>
The following tables show the cumulative gap ratio to be (20.84%) at the
less than three-month interval, (32.16%) at the three month to less than one
year interval and (4.14%) at the one to five year interval at March 31, 1999.
Currently, Spectrum is in a liability-sensitive position. Spectrum had
$155,572,000 of interest-bearing demand, savings and money market deposits at
March 31, 1999, that are somewhat less rate-sensitive. Excluding these deposits,
Spectrum's interest-sensitive ratio would have been 5.36% at the less than
three-month interval, (5.97%) at the three month to less than one year interval
and 22.06% at the one to five year interval at March 31, 1999. The interest
sensitivity position is presented as of a point in time and can be modified to
some extent by management as changing conditions dictate.
The following table shows the interest rate sensitivity position of Spectrum
at March 31, 1999:
ESTIMATED MATURITY OR REPRICING AT MARCH 31, 1999
<TABLE>
<CAPTION>
THREE
LESS THAN MONTHS TO
THREE LESS THAN ONE TO FIVE OVER FIVE
MONTHS ONE YEAR YEARS YEARS TOTAL
--------- --------- ----------- ---------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans, net of unearned fees................ $ 88,043 $ 89,231 $ 209,335 $48,940 $435,549
Investment securities: --
Taxable.................................. 8,435 6,370 36,392 33,260 84,457
Tax exempt............................... 335 250 1,040 8,153 9,778
Federal Funds sold......................... 29,981 -- -- -- 29,981
--------- --------- ----------- ---------- --------
Total interest bearing assets............ 126,794 95,851 246,767 90,353 559,765
Interest-bearing liabilities:
Deposits:
Demand, savings and money market
deposits............................... 155,572 -- -- -- 155,572
Time deposits............................ 58,850 161,140 65,798 -- 285,788
Federal Home Loan Bank borrowings, Federal
funds purchased and securities sold under
agreements to repurchase................... 24,301 2,000 14,500 7,000 47,801
Notes payable................................ 11,820 -- -- -- 11,820
--------- --------- ----------- ---------- --------
Total interest-bearing liabilities........... $ 250,543 $ 163,140 $ 80,298 7,000 $500,981
--------- --------- ----------- ---------- --------
Interest rate gap............................ $(123,749) $ (67,289) $ 166,469 $83,353 $ 58,784
--------- --------- ----------- ---------- --------
--------- --------- ----------- ---------- --------
Cumulative interest rate gap at March 31,
1999....................................... $(123,749) $(191,038) $ (24,569) $58,784
--------- --------- ----------- ----------
--------- --------- ----------- ----------
Cumulative interest rate gap to total
assets..................................... (20.84)% (32.16)% (4.14)% 9.90%
--------- --------- ----------- ----------
--------- --------- ----------- ----------
</TABLE>
The following table indicates that at March 31, 1999, if there had been a
sudden and sustained increase in prevailing market interest rates, Spectrum's
1999 interest income would be expected to decrease, while a decrease in rates
would indicate an increase in income.
<TABLE>
<CAPTION>
NET
INTEREST (DECREASE)
INCOME INCREASE PERCENT CHANGE
----------- ----------- ---------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Changes in Interest Rates
200 basis point rise.................................................... $ 20,540 $ (1,849) (8.26)%
100 basis point rise.................................................... 21,296 (1,093) (4.88)
Base rate scenario...................................................... 22,389 -- 0.00
100 basis point decline................................................. 23,147 758 3.39
200 basis point decline................................................. 23,567 1,178 5.26
</TABLE>
34
<PAGE>
CAPITAL RESOURCES
Spectrum monitors compliance with bank and bank holding company regulatory
capital requirements, focusing primarily on risk-based capital guidelines. As
indicated in the table immediately below, at March 31, 1999, Spectrum was above
the total capital minimum requirements. Under the risk-based capital method of
capital measurement, the ratio computed is dependent upon the amount and
composition of assets recorded on the balance sheet, and the amount and
composition of off-balance sheet items, in addition to the level of capital.
Included in the risk-based capital method are two measures of capital adequacy,
core capital and total capital, which consists of core and supplementary
capital. See "Supervision and Regulation -- Spectrum -- Capital Adequacy."
The following tables present Spectrum's capital ratios as of the indicated
dates.
<TABLE>
<CAPTION>
RISK-BASED CAPITAL RATIOS
--------------------------------------------
MARCH 31, JUNE 30,
1999 1998
--------------------- ---------------------
AMOUNT RATIO AMOUNT RATIO
---------- --------- ---------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Core capital............................................................ $ 35,353 8.03% $ 30,323 7.55%
Core capital minimum requirement........................................ 17,611 4.00 16,059 4.00
---------- --------- ---------- ---------
Excess.................................................................. $ 17,742 4.03% $ 14,264 3.55%
---------- --------- ---------- ---------
---------- --------- ---------- ---------
Total capital........................................................... $ 40,857 9.28% $ 35,431 8.80%
Total capital minimum requirement....................................... 35,223 8.00 32,118 8.00
---------- --------- ---------- ---------
Excess.................................................................. $ 5,634 1.28% $ 3,313 0.80%
---------- --------- ---------- ---------
---------- --------- ---------- ---------
Total risk adjusted assets.............................................. $ 440,283 $ 401,471
---------- ----------
---------- ----------
</TABLE>
<TABLE>
<CAPTION>
LEVERAGE RATIO
--------------------------------------------
MARCH 31, JUNE 30,
1999 1998
--------------------- ---------------------
AMOUNT RATIO AMOUNT RATIO
---------- --------- ---------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Core capital............................................................ $ 35,353 6.01% $ 30,323 5.58%
Minimum requirement..................................................... 23,533 4.00 21,731 4.00
--------- ---------- ---------
Excess.................................................................. $ 11,820 2.01% $ 8,592 1.58%
---------- --------- ---------- ---------
---------- --------- ---------- ---------
Average total assets.................................................... $ 588,319 $ 543,263
---------- ----------
---------- ----------
</TABLE>
IMPACT OF INFLATION
The effects of inflation on the local economy and on Spectrum's operating
results have been relatively modest for the past several years. Because
substantially all of Spectrum's assets and liabilities are monetary in nature,
such as cash, securities, loans and deposits, their values are less sensitive to
the effects of inflation than to changing interest rates, which do not
necessarily change in accordance with inflation rates. Spectrum attempts to
control the impact of interest rate fluctuations by managing the relationship
between its interest rate sensitive assets and liabilities. See "-- Interest
Rate Sensitivity" above.
YEAR 2000 COMPLIANCE
Spectrum faces a significant business issue regarding the potential
inability of computers, software and other equipment utilizing microprocessors
to recognize and properly process data fields containing a four digit year. As
the year 2000 approaches, such systems may be unable to accurately process
certain date-based information.
35
<PAGE>
Spectrum believes it has identified all significant systems that will
require modification to ensure Year 2000 compliance. Internal and external
resources are being used to make the required modifications and test Year 2000
compliance. The modification process of all significant systems by outside
hardware and software suppliers is substantially complete. Spectrum replaced
this hardware, as well as the software used for its main operating system and
major banking applications, during this same time period.
In addition, Spectrum has had formal communications with other vendors with
which it does significant business to determine their Year 2000 readiness and
the extent to which Spectrum appears vulnerable to any third party Year 2000
issues. There can be no assurance, however, that the systems of other companies
will be timely converted, or that a failure to convert by another company, or a
conversion that is incompatible with Spectrum's systems, would not have a
material adverse effect on Spectrum.
As a result of the timing of the replacement and upgrade of Spectrum's
hardware and software, the total cost to Spectrum for Year 2000 compliance
activities has not been and is not anticipated to be material to Spectrum's
financial position or results of operations in any given year. Management
estimates that Spectrum has spent approximately $140,000 on year 2000 compliance
through March 31, 1999 and will spend approximately an additional $70,000
through December 31, 1999. Year 2000 compliance costs and the date on which
Spectrum plans to complete the Year 2000 modifications and testing processes are
based on management's best estimates, which were derived utilizing numerous
assumptions of future events, including the continued availability of certain
resources, third party modification plans and other factors. There can be no
assurance, however, that these estimates will be achieved and actual results
could differ from those plans.
Spectrum has prepared a contingency plan for Year 2000 should Spectrum's
data processing systems or other third-party systems fail to perform. Spectrum
believes that this plan will allow Spectrum to carry on normal daily business
for at least a short period of time.
RECENT ACCOUNTING PRONOUNCEMENT
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income." This
statement establishes standards for reporting and display of comprehensive
income and its components (revenues, expenses, gains and losses) in a full set
of general purpose financial statements. This statement requires that all items
that are required to be recognized under accounting standards as components of
comprehensive income be reported in a financial statement that is displayed with
the same prominence as other financial statements. Spectrum adopted this
statement beginning January 1, 1998.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities." This statement establishes accounting and reporting
standards for derivative instruments, including certain derivative instruments
embedded in other contracts, and for hedging activities. It requires that all
derivatives be recognized as either assets or liabilities in the statement of
financial position and that those instruments be measured at fair value.
Spectrum adopted this statement beginning July 1, 1998.
Management does not believe that the adoption of this pronouncement will
have a material impact on the financial statements of Spectrum.
36
<PAGE>
BUSINESS
OVERVIEW
Spectrum, a multi-bank holding company, offers full service community
banking through 17 banking locations in South Dakota, seven banking locations in
southern Iowa and two banking locations in northern Missouri. Spectrum was
acquired by its Chairman, Deryl F. Hamann, in 1971. At that time it had a single
location in Leon, Iowa. In 1974 Mr. Hamann acquired the parent company of F&M
Bank, Watertown, South Dakota. The parent was merged into Spectrum on May 31,
1999. Acquisitions of other banks and savings institutions had been made by both
holding companies in the years preceding the merger on both strategic and
opportunistic bases. Expansion also occurred through acquisition of offices of
failed financial institutions and de novo branching.
Spectrum has four direct subsidiaries: F&M Bank, Watertown, South Dakota;
Rushmore Bank & Trust, Rapid City, South Dakota; Citizens Bank, Mount Ayr, Iowa;
and Citizens Bank of Princeton, Princeton, Missouri. Each subsidiary bank is
chartered by the state banking authorities of the state in which its
headquarters is located. See "Supervision and Regulation." The following table
sets forth information regarding Spectrum's banks as of March 31, 1999:
<TABLE>
<CAPTION>
COMMON STOCK
OWNERSHIP ASSETS NET LOANS NET DEPOSITS
--------------- ---------- ---------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
F&M Bank................................................... 97.9% $ 293,336 $ 203,474 $ 236,308
Rushmore Bank & Trust...................................... 90.0% 173,000 137,141 144,070
Citizens Bank, Mount Ayr................................... 100.0% 91,507 63,036 78,938
Citizens Bank of Princeton................................. 100.0% 34,569 25,928 30,228
</TABLE>
The subsidiary banks own 89% of Spectrum Banc Service Corporation which
provides data processing services to its bank owners. The remaining 11% is owned
by an affiliated bank of Spectrum. See "Related Party Transactions."
STRATEGIES
GROWTH. Spectrum intends to grow within its existing markets, to branch
into or acquire financial institutions in existing markets, and to branch into
or acquire financial institutions in other markets consistent with its capital
requirements and management abilities.
Spectrum seeks opportunities to acquire banks at acceptable prices.
Spectrum's operating strategy is to provide high quality community banking
services to its customers and increase market share through solicitation of new
business, repeat business and referrals from customers, and continuation of
selected promotional strategies.
BRANCH EXPANSION. F&M Bank has purchased property for further expansion in
Sioux Falls, South Dakota. Rushmore Bank & Trust has two recently opened grocery
store branches in Rapid City, South Dakota. Should Spectrum be unable to acquire
existing banks or other financial institutions at acceptable prices, it will
continue to seek expansion through new branches or possibly by chartering new
banks.
LOANS
Spectrum has the ability to provide a broad range of commercial and retail
lending services. Rushmore Bank & Trust does not offer agricultural loans. The
other banking subsidiaries offer agricultural loans as well as other commercial,
retail and real estate loans. The two South Dakota banks have credit policies
tailored to their respective markets. Spectrum's Iowa and Missouri banks have
substantially uniform credit policies. All of the credit policies contain
underwriting and loan administration criteria, including levels of loan
commitment, loan types, credit criteria, concentration limits, loan
administration, loan review and grading and related matters.
37
<PAGE>
Prior to 1998, Spectrum provided loan review services through loan officers
of the various banks under the supervision of President Daniel A. Hamann. The
growth in the banks' loan portfolios and the geographic expansion of their
locations consumed too much loan officer time and would have required additional
personnel at the holding company level to continue the scope of review.
Accordingly, since late 1998, loan review is being outsourced to an independent
entity. Spectrum is able to facilitate substantial credit requests, or augment
loan demand, through the purchase and sale of participations among its
subsidiary banks, as well as other affiliated and unaffiliated banks or other
financial institutions. See "Related Party Transactions." As of March 31, 1999,
approximately 90% of all loans were to customers within Spectrum's market area.
REAL ESTATE MORTGAGE LOANS. These loans include various types of loans for
which Spectrum holds real property as collateral. As a result of a computer
conversion in the third quarter of calendar 1998, approximately $50,000,000 of
loans which were previously categorized as real estate mortgage loans were
reclassified as commercial loans secured by real estate. See "Management's
Discussion and Analysis of Financial Condition and Results of Operation --
Analysis of Financial Condition -- Loan Portfolio." These loans were generally
made for commercial operating purposes, for which the primary collateral
consists of assets other than real estate. Such loans often mature in one year
or less and typically have adjustable interest rates. However, Spectrum is
experiencing increasing demand for fixed rate loans for terms longer than one
year. The primary risks of real estate mortgage loans include the borrower's
inability to pay and deterioration in value of real estate that is held as
collateral.
Real estate mortgage loans include commercial and residential real estate
construction loans. Real estate construction loans are principally made to
builders to construct business buildings or single and multi-family residences.
These loans typically have maturities of 6 to 12 months and adjustable interest
rates, and are subject to origination fees. Terms may vary depending upon many
factors, including location, type of project and financial condition of the
builder.
COMMERCIAL AND AGRICULTURAL LOANS. These loans consist primarily of loans
to businesses for various purposes, including revolving lines of credit and
equipment financing. The loans secured by collateral other than real estate or
equipment generally mature within one year, have adjustable interest rates, and
are secured by inventory, accounts receivable, livestock, crops, machinery and
other commercial or agricultural project assets. Revolving lines of credit
generally are for business purposes and generally mature annually.
LOANS TO INDIVIDUALS. Loans to individuals, which are not secured by real
estate, generally have terms of two to six years and bear interest at fixed
rates. These loans usually are secured by motor vehicles, investment securities,
or other personal assets, and in some instances are unsecured.
Citizens Bank, Mount Ayr and Citizens Bank of Princeton have weekly joint
loan committee meetings with an affiliated bank. Rushmore Bank & Trust's loan
committee meets weekly. F&M Bank has three regional loan committees which meet
weekly.
Interest rates charged on loans vary with the degree of risk, maturity,
underwriting and servicing costs, loan amount and extent of other banking
relationships maintained with customers and are further subject to competitive
pressures, money market rates, availability of funds and government regulations.
In the ordinary course of business, Spectrum's banks issue letters of
credit. See Note 16 to Consolidated Financial Statements. Spectrum's banks apply
the same credit standards to those commitments as they use in direct lending
activities and have included these commitments in its lending risk evaluations.
Spectrum's exposure to credit loss under letters of credit is represented by the
amount of those commitments.
Under applicable federal and state law, permissible loans to one borrower
after March 31, 1999, were limited to $3,650,000 for F&M Bank, $2,408,000 for
Rushmore Bank & Trust, $1,282,000 for Citizens Bank, Mount Ayr, and $1,127,000
for Citizens Bank of Princeton. Certain exceptions,
38
<PAGE>
depending on the laws of the three respective states in which the Banks operate,
increase the loan limit to one borrower for certain purposes.
COMPETITION
The banking and financial services industry is highly competitive and
undergoing rapid consolidation. Within the market area of Spectrum's banks,
numerous commercial banks, savings and loan associations, mortgage brokers,
finance companies, credit unions, investment firms and private lenders compete
with the banks for deposits and loans. Many of these competitors have
significantly greater resources than Spectrum, including higher lending limits
and a wider range of financial, technical and marketing resources.
REGULATION
Spectrum and its banks are highly regulated. Spectrum is subject to
regulation by the Federal Reserve and the Iowa Division of Banking. All of the
bank subsidiaries are subject to regulation by the FDIC and by the regulatory
agencies of the state in which they are chartered. See "Supervision and
Regulation."
PROPERTIES
The offices of Spectrum are located in a leased one-story building at 10834
Old Mill Road, Suite One, Omaha, Nebraska 68154. The table below presents
property information concerning the main office and branches of Spectrum's
subsidiary banks.
<TABLE>
<CAPTION>
APPROXIMATE
SQUARE
FOOTAGE OF
NAME OF BANK AND ADDRESS OF BRANCH YEAR OPENED TYPE OF INTEREST FACILITY
- ---------------------------------------- ----------- ------------------------------------------------ -------------
<S> <C> <C> <C>
F&M Bank Main Office ................... 1935 Land and building owned by F&M Bank 10,078
35 1(st) Ave. NE
Watertown, SD 57201
F&M Bank Watertown Branch .............. 1980 Land and building owned by F&M Bank 3,000
Hwys. 212 & 81
Watertown, SD 57201
F&M Bank Garden City Branch ............ 1946 Land and building owned by F&M Bank 1,250
Main Street
Garden City, SD 57236
F&M Bank Rosholt Branch ................ 1984 Land and building owned by F&M Bank 3,500
Main Street
Rosholt, SD 57260
F&M Bank McIntosh Branch ............... 1978 Land and building owned by F&M Bank 1,800
217 Main St.
McIntosh, SD 57641
F&M Bank Morristown Branch ............. 1978 Land and building owned by F&M Bank 1,250
302 Main St.
Morristown, SD 57645
F&M Bank Madison Branch ................ 1996 Land and building owned by F&M Bank 2,500
301 N. Egan Ave
Madison, SD 57042
F&M Bank Aberdeen Branch ............... 1996 Land and building owned by F&M Bank 4,200
517 So. Lincoln St.
Aberdeen, SD 57402
</TABLE>
39
<PAGE>
<TABLE>
<CAPTION>
APPROXIMATE
SQUARE
FOOTAGE OF
NAME OF BANK AND ADDRESS OF BRANCH YEAR OPENED TYPE OF INTEREST FACILITY
- ---------------------------------------- ----------- ------------------------------------------------ -------------
<S> <C> <C> <C>
F&M Bank Sioux Falls Branch ............ 1996 Land and building owned by F&M Bank 2,500
1901 W. 41(st) St.
Sioux Falls, SD 57105
F&M Bank Webster Branch ................ 1996 Land and building owned by F&M Bank 1,800
1301 Main St.
Webster, SD 57274
F&M Bank Chamberlain Branch ............ 1996 Leased 1,250
111 W. Lawler
Chamberlain, SD 57325
F&M Bank Gettysburg Branch ............. 1996 Land and building owned by F&M Bank 1,250
108 S. Exene
Gettysburg, SD 57442
Rushmore Bank & Trust .................. 1952 Land and building owned by Rushmore Bank & Trust 12,419
Main Office
14 St. Joseph St.
Rapid City, SD 57701
Rushmore Bank & Trust .................. 1974 Land and building owned by Rushmore Bank & Trust 3,798
South Canyon Branch
3510 Sturgis Rd.
Rapid City, SD 57702
Rushmore Bank & Trust .................. 1994 Land and building owned by Rushmore Bank & Trust 3,890
Spearfish Branch(1)
522 Main St.
Spearfish, SD 57785
Rushmore Bank & Trust .................. 1999 Land and building owned by Rushmore Bank 3,720
Spearfish Branch PO Building
526 N. Main St.
Spearfish, SD 57785
Rushmore Bank & Trust .................. 1997 Leased 500
FTC West Branch (grocery store)
751 Mountain View Rd.
Rapid City, SD 57702
Rushmore Bank & Trust .................. 1999 Leased 500
FTC East Branch (grocery store)
1516 E. St. Patrick St.
Rapid City, SD 57701
Citizens Bank, Mount Ayr ............... 1998 Land and building owned by Spectrum 2,500
Main Office
100 E. South
Mount Ayr, IA 50174
Citizens Bank, Mount Ayr ............... 1999 Land and building owned by Spectrum 8,265
Leon Branch
111 No. Main
Leon, IA 50144
</TABLE>
40
<PAGE>
<TABLE>
<CAPTION>
APPROXIMATE
SQUARE
FOOTAGE OF
NAME OF BANK AND ADDRESS OF BRANCH YEAR OPENED TYPE OF INTEREST FACILITY
- ---------------------------------------- ----------- ------------------------------------------------ -------------
<S> <C> <C> <C>
Citizens Bank, Mount Ayr ............... 1977 Land and building owned by Spectrum 1,200
Leon Drive-in Branch
1008 W. First
Leon, IA 50144
Citizens Bank, Mount Ayr ............... 1937 Land and building owned by Spectrum 960
Grand River Branch
126 Broadway
Grand River, IA 50108
Citizens Bank, Mount Ayr ............... 1993 Land and building owned by Spectrum 2,500
Hamburg Branch
1220 Main
Hamburg, IA 51640
Citizens Bank, Mount Ayr ............... 1993 Land and building owned by Spectrum 1,200
Riverton Branch
186 Summer St.
Riverton, IA 51650
Citizens Bank, Mount Ayr ............... 1994 Land and building owned by Spectrum 2,500
Osceola Branch
610 W. McLane
Osceola, IA 50313
Citizens Bank of Princeton ............. 1988 Land and building owned by Citizens Bank of 4,708
Main Office Princeton
US Highway 136 & 65
Princeton, MO 64673
Citizens Bank of Princeton ............. 1994 Land and building owned by Citizens Bank of 1,450
Milan Branch Princeton
825 N. Pearl
Milan, MO 63556
</TABLE>
- ------------
(1) To be closed upon remodeling of 526 N. Main St. branch
All of the leased properties are leased from unaffiliated third parties. The
grocery store leases are for five year terms. The Chamberlain branch is a
month-to-month lease with a sixty-day termination clause.
LEGAL PROCEEDINGS
Spectrum and its subsidiaries are from time to time parties to various legal
actions arising in the normal course of business. Management believes that there
is no proceeding threatened or pending against Spectrum or any of its
subsidiaries which, if determined adversely, would have a material adverse
effect on the financial condition or results of operations of Spectrum.
EMPLOYEES
As of March 31, 1999, Spectrum had approximately 223 full-time equivalent
employees. Management considers its relationship with its employees to be very
good.
41
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of Spectrum and their respective ages
and positions as of the date of this prospectus are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH SPECTRUM POSITION WITH SUBSIDIARY
- -------------------------- --- --------------------------------------- ---------------------------------------
<S> <C> <C> <C>
Deryl F. Hamann........... 66 Chairman of the Board, CEO and Director Chairman and Director of F&M Bank and
Rushmore Bank & Trust
Daniel A. Hamann.......... 40 President and Director Chairman and Director of Citizens Bank,
Mount Ayr, and Citizens Bank of
Princeton; Vice Chairman and Director
of F&M Bank; Vice Chairman and
Director of Rushmore Bank & Trust;
Chairman and Director of Spectrum
Banc Service Corporation
Thomas B. Fischer......... 52 Senior Vice President and Director None
Daniel J. Brabec.......... 40 Vice President and Director Director and Executive Vice President
of Rushmore Bank & Trust
W. Eric Bunderson......... 42 Vice President, Assistant Secretary and None
Director
John L. Kopecky........... 45 Vice President, Chief Financial None
Officer, Secretary and Treasurer
</TABLE>
Deryl F. Hamann is the father of Daniel A. Hamann and the father-in-law of
Daniel J. Brabec and W. Eric Bunderson. All directors of Spectrum hold office
until the next meeting of stockholders or until their successors are elected and
qualified.
DERYL F. HAMANN. Mr. Hamann has been Chairman or President and CEO of
Spectrum since 1971. He has been President and Director of Farmers & Merchants
Investment Co. since 1974, which merged into an acquired company, changing its
name to Spectrum Bancorporation, Inc. in 1996, and merged into Spectrum on May
31, 1999. He also serves as Chairman or President of two affiliated bank holding
companies, Great Western Securities, Inc. and Citizens Corporation, and as
Chairman of the Executive Committee of Great Western Bank, Omaha, Nebraska. He
is Chairman and President of the affiliated Spectrum Life Insurance Company, an
Arizona reinsurance company. He is Chairman of the affiliated Spectrum Financial
Services, Inc. He is a partner in the Omaha, Nebraska law firm of Baird, Holm,
McEachen, Pedersen, Hamann & Strasheim.
DANIEL A. HAMANN. Mr. Daniel Hamann has been President of Spectrum since
1996 and was its Vice President previously. He is Chairman and Director of
Citizens Bank, Mount Ayr and Citizens Bank of Princeton and Vice Chairman of F&M
Bank and Rushmore Bank & Trust. He is Vice President and Director of the
affiliated Spectrum Life Insurance Company. He is Chairman and Director of the
affiliated Citizens Bank, Chariton, Iowa and of Spectrum's banks' subsidiary,
Spectrum Banc Service Corporation.
THOMAS B. FISCHER. Mr. Fischer is President of Spectrum Financial Services,
Inc. an affiliate of Spectrum. He has held this position since May of 1996. In
1997, he was elected Senior Vice President and Director of Spectrum. From 1992
to 1996, Mr. Fischer was Vice President, General Counsel, and
42
<PAGE>
Secretary of FirsTier Financial, Inc., a multi-bank holding company
headquartered in Omaha, Nebraska.
DANIEL J. BRABEC. Mr. Brabec has served as Executive Vice President and
Director of Rushmore Bank & Trust since 1993 where he manages lending and
operations.
W. ERIC BUNDERSON. Mr. Bunderson has served since 1994 as a Commercial Real
Estate Loan Officer and since 1999 as Assistant Vice President at Great Western
Bank, an affiliate of Spectrum.
JOHN L. KOPECKY. Mr. Kopecky became Vice President-Chief Financial Officer
of Spectrum in September 1998. Mr. Kopecky was Executive Vice President-Chief
Financial Officer for the Thompson Banks in Kansas City from 1990 to 1998. Mr.
Kopecky is a Certified Public Accountant.
EXECUTIVE COMPENSATION
The following table presents the cash compensation paid by Spectrum and its
subsidiaries to its Chief Executive Officer, the only named executive officer,
for the years 1996 through 1998. No other executive officer of Spectrum received
compensation from Spectrum exceeding $100,000 for these years.
<TABLE>
<CAPTION>
ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY COMPENSATION(1)
- -------------------------------------------------------- --------- ---------- -----------------
<S> <C> <C> <C>
Deryl F. Hamann, Chairman and
Chief Executive Officer............................... 1998 $ 292,750 $ 5,434
1997 335,450 4,913
1996 330,618 4,928
</TABLE>
- ------------
(1) Amounts represent 401(k) Plan employer contributions.
Spectrum does not have any compensatory stock option plan for its executive
officers and directors. None of the directors or officers of Spectrum have any
options, warrants or other similar rights to purchase securities of Spectrum.
Spectrum has no board committees at the holding company level.
INDEMNIFICATION
The articles of incorporation of Spectrum provide that the board of
directors is authorized to indemnify, in the manner and to the extent provided
by the Iowa Business Corporation Act, any person entitled to indemnification
thereunder. Generally under Iowa law, any individual who is made a party to a
proceeding because the individual is or was a director may be indemnified if the
individual acted in good faith and had reasonable basis to believe that: (1) in
the case of conduct in the individual's official capacity with the corporation,
that the individual's conduct was in the corporation's best interests; and (2)
in all other cases, that the individual's conduct was at least not opposed to
the corporation's best interest; and regarding any criminal proceedings, the
individual had no reasonable cause to believe the individual's conduct was
unlawful. Iowa law also extends such indemnification to officers, employees, and
agents of the corporation and further provides that an Iowa corporation may
advance expenses to a director, officer, employee, or agent of the corporation.
Iowa law also provides that an Iowa corporation may purchase and maintain
insurance on behalf of an individual who is or was a director, officer,
employee, or agent of the corporation, or who, while a director, officer,
employee, or agent of the corporation, is or was serving at the request of the
corporation as a director, officer, partner, trustee, employee, or agent of
another foreign or domestic corporation, partnership, joint venture, trust,
employee benefit plan, or other enterprise, against liability asserted against
or incurred by that individual in that capacity or arising from the individual's
status as a director, officer, employee, or agent.
43
<PAGE>
The indemnification and advancement of expenses provided by Iowa law are not
exclusive of any other rights to which persons seeking indemnification or
advancement of expenses are entitled under a provision in the articles of
incorporation or bylaws, agreements, vote of stockholders or disinterested
directors, or otherwise, both as to action in a person's official capacity and
as to action in another capacity while holding office. However, such provisions,
agreements, votes or other actions shall not provide indemnification for a
breach of a director's duty of loyalty to the corporation or its stockholders,
for acts or omissions not in good faith or which involve intentional misconduct
or knowing violation of the law, for a transaction from which the person seeking
indemnification derives an improper personal benefit, or for liability for
unlawful distributions.
Iowa law provides that a director is not liable for any action taken as a
director, or any failure to take any action, as long as the director discharged
his or her duties (1) in good faith, (2) with the care of an ordinarily prudent
person in a like position would exercise under similar circumstances, and (3) in
a manner the director reasonably believes to be in the best interests of the
corporation.
There is no pending litigation or proceeding involving a director, officer,
employee or other agent of Spectrum as to which indemnification is being sought.
Spectrum is not aware of any other threatened litigation that may result in
claims for indemnification by any director, officer, employee or other agent.
PHANTOM STOCK AGREEMENTS
Spectrum's subsidiary banks have phantom stock agreements with four senior
bank officers, including Daniel A. Hamann, Chairman of Citizens Bank, Mount Ayr.
Cash amounts are accumulated for the officers based on their bank's performance,
50% by achieving certain annual growth rates in net income and 50% by achieving
certain annual rates of return on assets. Accumulated amounts are payable to the
officers over ten years beginning at age 65 or prior death or permanent
disability.
44
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table presents information regarding beneficial ownership of
common stock of Spectrum as of June 1, 1999, by (1) each shareholder known by
Spectrum to be the beneficial owner of more than 5% of its outstanding common
stock and (2) each director of Spectrum and each named executive officer and (3)
all directors and executive officers as a group. Based on information furnished
by the owners, management believes that the stockholders listed below have sole
investment and voting power regarding their shares, except that cotrustees share
investment and voting power.
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY PERCENTAGE
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED OF CLASS
- --------------------------------------------------------------------- ----------- -------------
<S> <C> <C>
Deryl F. Hamann...................................................... 44,023(1) 61.5%
1500 Woodmen Tower
Omaha, NE 68102
Daniel A. Hamann..................................................... 20,780(2) 29.0%
10834 Old Mill Road, Suite One
Omaha, NE 68154
Esther Hamann Brabec................................................. 22,696(3) 31.7%
14 East St. Joseph St.
Rapid City, SD 57709
Daniel J. Brabec..................................................... 389(4) *
14 East St. Joseph St.
Rapid City, SD 57709
Julie Hamann Bunderson............................................... 24,668(5) 34.4%
6015 Northwest Radial Highway
Omaha, NE 68104
W. Eric Bunderson.................................................... 423(6) *
6015 Northwest Radial Highway
Omaha, NE 68104
Thomas B. Fischer.................................................... -- --
10834 Old Mill Road, Suite One
Omaha, NE 68154
John L. Kopecky...................................................... -- --
10834 Old Mill Road, Suite One
Omaha, NE 68154
All executive officers and directors as a group (six persons)........ 64,803 90.5%
</TABLE>
- ------------
(1) Of this amount, an aggregate of 13,048 shares are held by four separate
trusts for which Mr. Hamann serves as trustee for the benefit of his
children, Daniel A. Hamann, Esther Hamann Brabec, Julie Hamann Bunderson,
and Karl E. Hamann.
(2) Of this amount, 325 shares are owned by his revocable trust for which he
serves as sole trustee, 175 shares are owned by his spouse, and an aggregate
of 20,280 shares are held by various Hamann family trusts for which he
serves as co-trustee with Esther Hamann Brabec and Julie Hamann Bunderson.
(3) Of this amount, 199 shares are owned by her revocable trust for which she
serves as sole trustee, 389 shares are owned by her spouse, an aggregate of
20,280 shares are held by various Hamann family trusts for which she serves
as co-trustee with Daniel A. Hamann and Julie Hamann Bunderson, and 1,828
shares are owned by her as trustee for Julie Hamann Bunderson's issue.
45
<PAGE>
(4) Does not include shares beneficially owned by his spouse. Mr. Brabec
disclaims beneficial ownership of such shares.
(5) Of this amount, 263 shares are owned by her revocable trust for which she
serves as sole trustee, 423 shares are owned by her spouse, an aggregate of
20,280 shares are held by various Hamann family trusts for which she serves
as co-trustee with Daniel A. Hamann and Esther Hamann Brabec, 2,217 shares
are owned by her as trustee for Esther Hamann Brabec's issue and 1,485
shares are owned by her as trustee for Daniel A. Hamann's issue.
(6) Does not include shares beneficially owned by his spouse. Mr. Bunderson
disclaims beneficial ownership of such shares.
RELATED PARTY TRANSACTIONS
Spectrum's subsidiary banks purchase loan participations from, and sell loan
participations to, Spectrum's affiliated banks, Great Western Bank, Omaha,
Nebraska, and Citizens Bank, Chariton, Iowa, in the ordinary course of business.
The participations are made on terms similar to those with unaffiliated parties.
Approximate loan principal balances outstanding under the participations are
summarized as follows:
<TABLE>
<CAPTION>
AT JUNE 30,
AFFILIATE LOAN PARTICIPATIONS AT MARCH 31, 1999 1998
- ---------------------------------------------------------- ----------------- ---------------
<S> <C> <C>
Purchased by Spectrum's banks............................. $ 17,633,000 $ 19,150,000
Sold by Spectrum's banks.................................. 4,050,000 3,978,000
</TABLE>
Deryl F. Hamann, Chairman, CEO and controlling stockholder of Spectrum, owns
as trustee for the benefit of his children 50% of the common stock of Great
Western Securities, Inc., a bank holding company for Great Western Bank, Omaha,
Nebraska. An unrelated individual owns the remaining 50% common stock interest.
Great Western Bank has ten banking locations in the Omaha, Nebraska metropolitan
area. At March 31, 1999, it had total assets of $541,361,000, total deposits of
$457,940,000 and total loans net of unearned fees of $379,655,000. Daniel A.
Hamann, Esther Hamann Brabec and Julie Hamann Bunderson individually and Deryl
F. Hamann as trustee for another of his children own all of the common stock of
Citizens Corporation, a bank holding company for Citizens Bank, Chariton, Iowa.
At March 31, 1999, it had total assets of $67,621,000, total deposits of
$60,832,000 and total loans net of unearned fees of $45,999,000. Citizens Bank,
Chariton has seven banking offices in Wayne and Lucas counties in southern Iowa.
Those counties are adjacent to Decatur and Clarke counties in Iowa where
Spectrum's subsidiary bank, Citizens Bank, Mount Ayr, has four banking offices.
Wayne County, Iowa is adjacent to Mercer County, Missouri where Spectrum's
subsidiary Citizens Bank of Princeton has a banking office.
Spectrum Life Insurance Company and Spectrum Financial Services, Inc. are
affiliates of Spectrum. They are owned, directly or indirectly, by Deryl F.
Hamann, individually or as trustee for the benefit of his children. Spectrum
Life Insurance Company reinsures certain credit life, accident, health and
unemployment insurance policies sold by Spectrum's subsidiary banks, its
affiliated banks and unaffiliated banks as agents for an unaffiliated insurance
company. Spectrum Life Insurance Company reinsures certain of the mortality and
morbidity risks under such policies in accordance with separate treaties with
the unaffiliated insurance company, and received compensation from such
insurance company of $134,078 during Spectrum's fiscal year ended June 30, 1998
and $152,853 for the nine-month period ended March 31, 1999 for assuming such
reinsurance risks with respect to credit insurance originated by Spectrum's
subsidiary banks. Spectrum's subsidiary banks receive a commission on such sales
of credit insurance as permitted by applicable state law.
In addition, Spectrum Financial Services receives a commission as general
agent from the unaffiliated insurance company on such sales of credit insurance
where permitted by law. Such commissions on credit insurance originated by
Spectrum's subsidiary banks was $33,173 during the fiscal year ended June 30,
1998 and $49,464 during the nine-month period ended March 31, 1999. Spectrum
46
<PAGE>
believes that the foregoing arrangements are on terms similar to those which
would be obtained with an unaffiliated party.
A subsidiary of Spectrum Financial Services places investment centers in
banks, including Spectrum's subsidiary banks, its affiliated banks and
unaffiliated banks. The investment centers engage in the sale of life insurance,
annuities, mutual funds and certain other securities on the premises of the
banks under lease arrangements and with joint or common employees. The
subsidiary of Spectrum Financial Services pays Spectrum's subsidiary banks lease
rentals based on commissions generated. Gross commissions originated from
Spectrum's subsidiary banks were $159,289 during Spectrum's fiscal year ended
June 30, 1998 and $198,949 during the nine-month period ended March 31, 1999.
Each Spectrum bank received approximately 25% of the amount of gross commissions
generated from its leased space as rental. Spectrum believes that these
arrangements are on terms similar to those that would be obtained with an
unaffiliated party.
Prior to May of 1998, another subsidiary of Spectrum Financial Services
provided investment management services to Spectrum's subsidiary banks, its
affiliated banks and others. Spectrum's banks paid this subsidiary approximately
$68,000 during Spectrum's fiscal year ended June 30, 1998 for such services.
Spectrum believes that these arrangements were on terms similar to those that
would have been obtained from an unaffiliated party.
Spectrum's banks and its affiliate, Citizens Bank, Chariton, Iowa own all of
the stock of Spectrum Banc Service Corporation. It provides data processing
services and certain related services to the five banks on a break even basis.
Spectrum believes that these arrangements are on terms similar to those that
would be obtained with an unaffiliated party.
On May 31, 1999, Spectrum, which was then named Decatur Corporation, became
the surviving corporation in a merger with two affiliated bank holding
companies, Spectrum Bancorporation, Inc. and Rushmore Financial Services, Inc.,
which owned F & M Bank, Watertown, South Dakota, and Rushmore Bank & Trust,
Rapid City, South Dakota. The Hamann family or their interests owned
beneficially all of the stock of all parties to the merger. In the merger, the
Hamann family or their interests received a total of 61,063 shares of common
stock of Spectrum and 8,000 shares of 10% nonvoting, noncumulative perpetual
preferred stock of Spectrum.
In 1995 Spectrum entered into a split dollar insurance agreement with Deryl
F. Hamann under which it pays an annual premium of $60,000 to purchase a policy
on Mr. Hamann's life in the face amount of $1,000,000. Mr. Hamann is taxed on
the economic benefit in accordance with Internal Revenue Service rules. The
policy is owned by three of Mr. Hamann's children, Daniel A. Hamann, Esther
Hamann Brabec, and Julie Hamann Bunderson, who have the right to designate
beneficiaries, borrow on the security of the policy and to surrender the policy.
They have assigned the death benefit under the policy to Spectrum as security
for repayment of the amounts which Spectrum contributes toward the payment of
the premiums due on the policy.
Deryl F. Hamann is a partner in the law firm of Baird, Holm, McEachen,
Pedersen, Hamann & Strasheim, Omaha, Nebraska, counsel to Spectrum. See "Legal
Matters."
47
<PAGE>
SUPERVISION AND REGULATION
GOVERNMENT REGULATIONS
Spectrum and its subsidiary banks are extensively regulated under federal
and state laws. These laws and regulations are primarily intended to protect
depositors and the deposit insurance fund of the Federal Deposit Insurance
Corporation, not stockholders of Spectrum. The following information is
qualified in its entirety by reference to the particular statutory and
regulatory provisions. Any change in applicable laws, regulations or regulatory
policies may have a material effect on the business, operations and prospects of
Spectrum and its banks. Spectrum is unable to predict the nature or extent of
the effects that fiscal or monetary policies, economic controls or new federal
or state legislation may have on its business and earnings in the future.
SPECTRUM
GENERAL. Spectrum is a bank holding company registered under the Bank
Holding Company Act of 1956 and is subject to regulation, supervision and
examination by the Federal Reserve. Spectrum is required to file an annual
report and the other reports as the Federal Reserve now requires or may require.
ACQUISITIONS. As a bank holding company, Spectrum is required to obtain the
prior approval of the Federal Reserve before acquiring direct or indirect
ownership or control of more than 5% of the voting shares of a bank or bank
holding company. The Federal Reserve will not approve any acquisition, merger or
consolidation that would have a substantial anti-competitive result, unless the
anti-competitive effects of the proposed transaction are outweighed by a greater
public interest in meeting the needs and convenience of the public. The Federal
Reserve also considers managerial, capital and other financial factors in acting
on acquisition or merger applications.
PERMISSIBLE ACTIVITIES. Subject to limited exceptions, a bank holding
company may not engage in, or acquire direct or indirect control of more than 5%
of the voting shares of any company engaged in a non-banking activity, unless
this activity has been determined by the Federal Reserve to be closely related
to banking or managing banks. The Federal Reserve has identified specific
non-banking activities in which a bank holding company may engage with notice
to, or prior approval by, the Federal Reserve.
CAPITAL ADEQUACY. The Federal Reserve monitors the regulatory capital
adequacy of bank holding companies. As discussed below, Spectrum's banks are
also subject to the regulatory capital adequacy requirements of the Federal
Deposit Insurance Corporation and South Dakota, Iowa and Missouri regulations,
as applicable. The Federal Reserve uses a combination of risk-based guidelines
and leverage ratios to evaluate the regulatory capital adequacy of Spectrum.
The Federal Reserve has adopted a system using risk-based capital adequacy
guidelines to evaluate the regulatory capital adequacy of bank holding companies
on a consolidated basis. Under the risk-based capital guidelines, different
categories of assets are assigned different risk weights, based generally on the
perceived credit risk of the asset. These risk weights are multiplied by
corresponding asset balances to determine a risk-weighted asset base. Some off
balance sheet items, such as loan commitments in excess of one year, mortgage
loans sold with recourse and letters of credit, are added to the risk-weighted
asset base by converting them to a balance sheet equivalent and assigning to
them the appropriate risk weight. For purposes of the regulatory risk-based
capital guidelines, total capital is defined as the sum of core and
supplementary capital elements, with supplementary capital being limited to 100%
of core capital. For bank holding companies, core capital, also known as Tier I
capital, generally includes common stockholders' equity, perpetual preferred
stock and minority interests in consolidated subsidiaries less the unamortized
balance of intangible assets. No more than 25% of core capital may be comprised
of cumulative preferred stock. Supplementary capital, also known as Tier 2
capital, generally includes certain forms of perpetual preferred stock, as well
as maturing capital instruments and the allowance for loan losses, limited to
1.25% of risk-weighted assets. The regulatory
48
<PAGE>
guidelines require a minimum ratio of total capital to risk-weighted assets of
8% to be adequately capitalized, of which at least 4% should be in the form of
core capital.
At March 31, 1999, Spectrum's core capital was $35,353,000.
In addition to the risk-based capital guidelines, the Federal Reserve and
the Federal Deposit lnsurance Corporation use a leverage ratio as an additional
tool to evaluate the capital adequacy of banks and bank holding companies. The
leverage ratio is defined to be a company's core capital divided by its average
tangible assets. Based upon the current capital status of Spectrum, the
applicable minimum required leverage ratio is 4%.
The table below presents ratios of (1) total capital to risk-weighted
assets, (2) core capital to risk-weighted assets and (3) core capital to
tangible assets, at March 31, 1999:
<TABLE>
<CAPTION>
AT MARCH 31, 1999
--------------------------
MINIMUM
RATIO ACTUAL REQUIRED
- ------------------------------------------------------------------------------------ ----------- -------------
<S> <C> <C>
Total Capital to Risk-Weighted Assets............................................... 9.28% 4.00%
Core Capital to Risk-Weighted Assets................................................ 8.03% 8.00%
Core Capital to Average Assets...................................................... 6.01% 4.00%
</TABLE>
Failure to meet the regulatory capital guidelines may result in the
initiation by the Federal Reserve of appropriate supervisory or enforcement
actions. All three of Spectrum's capital ratios were above the minimum required
as of March 31, 1999.
THE BANKS
GENERAL. Spectrum owns four banks: F & M Bank, Watertown, South Dakota, a
South Dakota banking corporation with 12 banking locations; Rushmore Bank &
Trust Co., Rapid City, South Dakota, a South Dakota banking corporation, with
five banking locations; Citizens Bank, Mount Ayr, Iowa, an Iowa banking
corporation, with seven banking locations; and Citizens Bank of Princeton,
Princeton, Missouri, a Missouri banking corporation, with two banking locations.
The deposits of Spectrum's banks are insured by the Federal Deposit Insurance
Corporation, and the banks are subject to supervision and regulation by the
Federal Deposit Insurance Corporation. In addition, the South Dakota banks are
regulated by the South Dakota Division of Banking, the Iowa bank is regulated by
the Iowa Division of Banking, and the Missouri bank is regulated by the Missouri
Division of Finance.
PERMISSIBLE ACTIVITIES. No state bank may engage in any activity not
permitted for national banks, unless the institution complies with applicable
capital requirements and the Federal Deposit Insurance Corporation determines
that the activity poses no significant risk to the Bank Insurance Fund. None of
Spectrum's banks is presently involved in the types of transactions covered by
this limitation.
COMMUNITY REINVESTMENT ACT. Enacted in 1977, the federal Community
Reinvestment Act has become important to financial institutions, including their
holding companies. The Community Reinvestment Act currently allows regulators to
turn down an applicant seeking to make an acquisition or establish a branch
unless it has performed satisfactorily under the Community Reinvestment Act.
Satisfactory performance means meeting adequately the credit needs of the
communities the applicant serves. The applicable federal regulators regularly
conduct Community Reinvestment Act examinations to assess the performance of
financial institutions. During their last examinations, ratings of satisfactory
or outstanding were received by each of Spectrum's banks. As a result,
management believes that the banks' performance under the Community Reinvestment
Act will not impede regulatory approvals of any proposed acquisitions or
branching opportunities.
DIVIDEND RESTRICTIONS. Dividends paid by Spectrum's banks provide
substantially all of the operating and investing cash flow of Spectrum.
Spectrum's banks are subject to legal limitations on the frequency and amount of
dividends that may be paid to Spectrum. Under South Dakota law, the
49
<PAGE>
approval of the principal regulator is required prior to the declaration of any
dividend by a bank if the total of all dividends declared in any calendar year
exceeds the total of its net profits of that year to date combined with its
retained net profits for the preceding two years. Under Iowa law, a bank may
declare and pay dividends only out of undivided profits and only if not
restricted by the principal regulator. The Iowa principal regulator requires
that Iowa state banks maintain an adjusted equity capital ratio of not less than
6.5% of adjusted assets plus a fully funded allowance for loan losses unless a
lower ratio is approved by the principal regulator. An Iowa state bank operating
below the minimum requirement would be subject to immediate dividend
restriction, a request for immediate capital injection and/or a possible cease
and desist order. Under Missouri law, a bank may not pay dividends which would
impair capital. The Missouri principal regulator generally requires that
Missouri state banks maintain equity capital of not less than 6% of assets. In
addition, either the applicable state banking regulator or the Federal Deposit
Insurance Corporation has the power to prohibit Spectrum's banks from paying
dividends if such payments would constitute unsafe or unsound banking practices
or cause the bank to be undercapitalized. See "Risk Factors -- Interest Payment
by Spectrum on the Junior Subordinated Debentures -- Dependent on Dividends From
Its Subsidiary Banks."
EXAMINATIONS. Spectrum's banks are examined from time to time by the
Federal Deposit Insurance Corporation. Based upon an evaluation, the examining
regulator may revalue the assets of an insured institution and require that it
establish specific reserves to compensate for the difference between the value
determined by the regulator and the book value of Spectrum's assets. The state
bank regulators also conduct examinations of state-chartered banks. State bank
regulators may accept the results of a federal examination in lieu of conducting
an independent examination. South Dakota, Iowa and Missouri regulators have the
authority to revalue the assets of a state-chartered institution and require it
to establish reserves.
CAPITAL ADEQUACY. The Federal Deposit Insurance Corporation has adopted
regulations establishing minimum requirements for the capital adequacy of
insured institutions. The requirements address both risk-based capital and
leverage capital, with risk-based assets and core and supplementary capital
being determined in basically the same manner as described above for bank
holding companies. The Federal Deposit Insurance Corporation may establish
higher minimum requirements if, for example, a bank has previously received
special attention or has a high susceptibility to interest rate risk.
The Federal Deposit Insurance Corporation risk-based capital guidelines
require state non-member banks to have a ratio of core capital to total
risk-weighted assets of 4% and a ratio of total capital to total risk-weighted
assets of 8%.
The Federal Deposit Insurance Corporation leverage guidelines require that
state banks maintain core capital of no less than 3% and up to 5% of total
tangible assets. The applicable guideline for Spectrum's banks is estimated to
be 4%. Banks with regulatory capital ratios below the required minimum are
subject to administrative actions, including the termination of deposit
insurance upon notice and hearing, or a temporary suspension of insurance
without a hearing in the event the institution has no tangible capital.
The table below presents the regulatory capital ratios of the Spectrum
subsidiary banks at March 31, 1999:
<TABLE>
<CAPTION>
AT MARCH 31, 1999
-----------------------------------------------------------------------
CITIZENS CITIZENS
RUSHMORE BANK, BANK OF MINIMUM
RATIO F&M BANK BANK & TRUST MOUNT AYR PRINCETON REQUIRED
- --------------------------------------------------- ------------- --------------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Total capital to risk-weighted assets.............. 12.06% 10.74% 11.57% 16.10% 8.00%
Core capital to risk-weighted...................... 10.83% 9.53% 10.55% 14.84% 4.00%
Core capital to average assets..................... 7.77% 8.02% 7.53% 11.04% 4.00%
</TABLE>
50
<PAGE>
Banking regulators have adopted regulations that define five capital levels:
well capitalized, adequately capitalized, undercapitalized, severely
undercapitalized and critically undercapitalized. An institution is critically
undercapitalized if it has a tangible equity to total assets ratio that is equal
to or less than 2%. An institution is well capitalized if it has a total
risk-based capital ratio of 10% or greater, core risk-based capital ratio of 6%
or greater, and a core capital leverage ratio of 5% or greater, and the
institution is not subject to an order, written agreement, capital directive, or
prompt corrective action directive to meet and maintain a specific capital level
for any capital measure. An institution is adequately capitalized if it has a
total risk-based capital ratio of not less than 8%, a core risk-based capital
ratio not less than 4% and a leverage ratio of not less than 4%. Under these
regulations, as of March 31, 1999, the Spectrum banks were well capitalized.
The Federal Deposit Insurance Corporation Improvement Act requires the
federal banking regulators to take prompt corrective action to resolve the
problems of depository institutions, including capital-deficient institutions.
In addition to requiring the submission of a capital restoration plan, Federal
Deposit Insurance Corporation Improvement Act contains broad restrictions on
activities of institutions which are less than adequately capitalized, involving
asset growth, acquisitions, branch establishment, and expansion into new lines
of business. With limited exceptions, an insured depository institution is
prohibited from making capital distributions, including dividends, and is
prohibited from paying management fees to control persons if the institution
would be undercapitalized after any distribution or payment.
As an institution's capital decreases, the powers of the federal regulators
become greater. A significantly undercapitalized institution is subject to
mandated capital raising activities, restrictions on interest rates paid and
transactions with affiliates, removal of management, and other restrictions. The
regulators have limited discretion in dealing with a critically undercapitalized
institution and are virtually required to appoint a receiver or conservator if
the capital deficiency is not corrected promptly.
REAL ESTATE LENDING EVALUATIONS. The federal regulators have adopted
uniform standards for evaluations of loans secured by real estate or made to
finance improvements to real estate. Banks are required to establish and
maintain written internal real estate lending policies consistent with safe and
sound banking practices and appropriate to the size of the institution and the
nature and scope of its operations. The regulations establish loan to value
ratio limitations on real estate loans, which generally are equal to or less
than the loan to value limitations established by Spectrum's banks.
DEPOSIT INSURANCE PREMIUMS. The assessment schedule for banks ranges from 0
to 27 cents per $100 of deposits subject to Bank Insurance Fund assessments,
based on each institution's risk classification. The subsidiary banks' insured
deposits are subject to assessment payable to Bank Insurance Fund. An
institution's risk classification is based on an assignment of the institution
by the Federal Deposit Insurance Corporation to one of three capital groups and
to one of three supervisory subgroups. The capital groups are well capitalized,
adequately capitalized and undercapitalized. The three supervisory subgroups are
Group A, for financially solid institutions with only a few minor weaknesses,
Group B, for those institutions with weaknesses which, if uncorrected could
cause substantial deterioration of the institution and increase the risk to the
deposit insurance fund, and Group C, for those institutions with a substantial
probability of loss to the fund absent effective corrective action. All four
Spectrum subsidiary banks are rated "one" (well capitalized) and "Group A"
(financially solid institutions with only a few minor weaknesses) for these
purposes.
INTERSTATE BANKING LEGISLATION. The Riegle-Neal Interstate Banking and
Branching Efficiency Act of 1994, which became effective September 1995, has
eliminated many of the historical barriers to the acquisition of banks by
out-of-state bank holding companies. This law facilitates the interstate
expansion and consolidation of banking organizations by permitting: (1) bank
holding companies that are adequately capitalized and managed to acquire banks
located in states outside their home states regardless of whether acquisitions
are authorized under the laws of the host state; (2) the interstate merger of
banks after June 1, 1997, subject to the right of individual states either to
pass legislation
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providing for earlier effectiveness of mergers or to opt out of this authority
prior to that date; (3) banks to establish new branches on an interstate basis
provided that this action is specifically authorized by the law of the host
state; (4) foreign banks to establish, with approval of the appropriate
regulators in the United States, branches outside their home states to the same
extent that national or state banks located in that state would be authorized to
do so; and (5) banks to receive deposits, renew time deposits, close loans,
service loans and receive payments on loans and other obligations as agent for
any bank or thrift affiliate, whether the affiliate is located in the same or
different state. Spectrum's subsidiary banks do not currently have any plans to
take any actions permitted by this law.
CHANGING REGULATORY STRUCTURE
The laws and regulations affecting banks and bank holding companies are in a
state of flux. The rules and the regulatory agencies in this area have changed
significantly over recent years, and there is reason to expect that similar
changes will continue in the future. It is not possible to predict the outcome
of these changes.
One of the major additional burdens imposed on the banking industry is the
increased authority of federal agencies to regulate the activities of federal
and state banks and their holding companies. The Federal Reserve, the
Comptroller of the Currency and the Federal Deposit Insurance Corporation have
extensive authority to police unsafe or unsound practices and violations of
applicable laws and regulations by depository institutions and their holding
companies. These agencies can assess civil money penalties and other laws have
expanded the agencies' authority in recent years, and the agencies have not yet
fully tested the limits of their powers. In addition, the South Dakota Division
of Banking, Iowa Division of Banking and Missouri Division of Finance possess
broad enforcement powers to address violations of their banking laws by banks
chartered in their respective state.
EFFECT ON ECONOMIC ENVIRONMENT
The policies of regulatory authorities, including the monetary policy of the
Federal Reserve, have a significant effect on the operating results of bank
holding companies and their subsidiaries. Among the means available to the
Federal Reserve to affect the money supply are open market operations in U.S.
Government securities, changes in the discount rate on member bank borrowings,
and changes in reserve requirements against member bank deposits. These means
are used in varying combinations to influence overall growth and distribution of
bank loans, investments and deposits, and their use may affect interest rates
charged on loans or paid on deposits.
The Federal Reserve's monetary policies have materially affected the
operating results of commercial banks in the past and are expected to continue
to do so in the future. The nature of future monetary policies and the effect of
these policies on the business and earnings of Spectrum and its subsidiaries
cannot be predicted.
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DESCRIPTION OF THE PREFERRED SECURITIES
The preferred securities and the common securities will be issued under the
terms of the trust agreement of Spectrum Capital Trust I. The trust agreement
will be qualified as an indenture under the Trust Indenture Act. Initially,
Wilmington Trust Company will be the property trustee and will act as trustee
for the purpose of complying with the Trust Indenture Act. The terms of the
preferred securities will include those stated in the trust agreement of
Spectrum Capital Trust I and those made part of the trust agreement by the Trust
lndenture Act. The following is a summary of the material terms and provisions
of the preferred securities and the trust agreement. Prospective investors of
preferred securities are urged to read all the provisions of the trust
agreement, including the definitions in the trust agreement, and the Trust
Indenture Act. The form of the trust agreement has been filed as an exhibit to
the Registration Statement of which this prospectus forms a part.
GENERAL OVERVIEW
Under the terms of the trust agreement of Spectrum Capital Trust I, the
administrative trustees will issue the preferred securities and the common
securities, collectively, the trust securities. The preferred securities will
represent preferred undivided beneficial interests in the assets of Spectrum
Capital Trust I and the holders of the preferred securities will be entitled to
a preference in most circumstances regarding distributions and amounts payable
on redemption or liquidation over the common securities of Spectrum Capital
Trust I, as well as other benefits as described in the trust agreement.
The preferred securities will rank pari passu, and payments will be made
thereon pro rata, with the common securities of Spectrum Capital Trust I except
as described under "Subordination of Common Securities of Spectrum Capital Trust
I Held by Spectrum" below.
Legal title to the junior subordinated debentures will be held by the
property trustee in trust for the benefit of the holders of the trust
securities. The preferred securities guarantee executed by Spectrum for the
benefit of the holders of the preferred securities will be a guarantee on a
subordinated basis and will not guarantee payment of distributions or amounts
payable on redemption of the preferred securities or on liquidation of the
preferred securities if Spectrum Capital Trust I does not have funds on hand
available to make the payments. See "Description of Preferred Securities
Guarantee." If an event of default under the indenture has occurred and is
continuing and the default is attributable to Spectrum's failure to pay interest
or principal on the junior subordinated debentures on the due date, a holder of
preferred securities may institute a legal proceeding directly against Spectrum
for payment of principal and interest on the junior subordinated debentures
having a principal amount equal to the aggregate liquidation amount of the
preferred securities of the holder. This action is referred to in this
discussion as a direct action. See "Description of Junior Subordinated
Debentures -- Enforcement of Rights by Holders of Preferred Securities" and
"Relationship Among the Preferred Securities, the Junior Subordinated Debentures
and the Preferred Securities Guarantee."
QUARTERLY DISTRIBUTION PAYMENTS AND EXTENSIONS ON DISTRIBUTION PAYMENTS
PAYMENT OF DISTRIBUTIONS. Distributions on the preferred securities will be
payable at the annual rate of % of the stated liquidation amount of $10,
payable quarterly after each calendar quarter on the 15th day of January, April,
July and October in each year, beginning October 15,1999. The amount of each
distribution due will include amounts accrued through the date the distribution
is due. Distributions on the preferred securities will be payable to the holders
as they appear on the register of Spectrum Capital Trust I on the relevant
record date. Until the preferred securities do not remain in book-entry form,
the relevant record date will be one business day prior to the relevant
distribution date and, in the event the preferred securities are not in
book-entry form, the relevant record date will be the first day of the month in
which the relevant distribution date occurs. Distributions will accumulate from
the date of original issuance of the preferred securities.
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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 payment
date is not a business day, the distribution will be made on the next business
day, and without any interest or other payment regarding any delay, except that,
if the business day is in the next succeeding calendar year, payment of the
distribution will be made on the immediately preceding business day. As used in
this prospectus, a business day means any day other than a Saturday or a Sunday,
or a day on which banking institutions in South Dakota 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 indenture trustee is
closed for business.
The funds of Spectrum Capital Trust I available for distribution to its
preferred securities holders will be limited to payments by Spectrum under the
junior subordinated debentures. See "Description of Junior Subordinated
Debentures." If Spectrum does not make interest payments on the junior
subordinated debentures, the property trustee will not have funds available to
pay distributions on the preferred securities. The payment of distributions, if
and to the extent Spectrum Capital Trust I has legally available funds and cash
sufficient to make payments, is guaranteed by Spectrum. For further information,
see "Description of Preferred Securities Guarantee."
EXTENSION PERIOD. Until a debenture event of default has occurred and is
continuing, Spectrum has the right under the indenture to defer interest
payments on the junior subordinated debentures at any time for a period not
exceeding 20 consecutive quarters regarding each extension period. However, no
extension period may extend beyond the stated maturity of the junior
subordinated debentures. As a consequence of any extension election by Spectrum,
quarterly distributions on the preferred securities will be deferred by Spectrum
Capital Trust I during any extension period. Distributions to which holders of
preferred securities are entitled will accumulate additional amounts at the rate
per year of % thereof, compounded quarterly from the relevant distribution
date. The term "distributions" as used in this prospectus includes any
additional accumulated amounts.
During any extension period, Spectrum may not (1) declare or pay any
dividends or distributions on, or redeem, purchase, acquire, or make a
liquidation, payment regarding, any of its capital stock which includes common
and preferred stock, or (2) make any payment of principal, interest or premium,
if any, on or repay, repurchase or redeem any debt securities of Spectrum that
rank pari passu with or junior in interest to the junior subordinated debentures
or make any preferred securities guarantee payments regarding any preferred
securities guarantee by Spectrum of the debt securities of any subsidiary of
Spectrum if the preferred securities guarantee ranks pari passu with or junior
in interest to the junior subordinated debentures. These restrictions do not
apply to: (a) dividends or distributions in common stock of Spectrum, (b) any
declaration of a dividend in connection with the implementation of a
stockholders' rights plan, or the issuance of stock under any plan of this type
in the future, or the redemption or repurchase of any rights pursuant to this
type of plan, (c) payments under the preferred securities guarantee of Spectrum,
and (d) purchases of common stock for issuance under any future benefit plans
for its directors, officers or employees. Prior to the termination of any
extension period, Spectrum may further extend the extension period, provided
that the extension does not cause the extension period to exceed 20 consecutive
quarters or extend beyond the stated maturity of the junior subordinated
debentures. Upon the termination of any extension period and the payment of all
amounts then due, and subject to the above limitations, Spectrum may elect to
begin a new extension period. There is no limitation on the number of times that
Spectrum may elect to begin an extension period.
Spectrum has no current intention of exercising its right to defer payments
of interest by extending the interest payment period on the junior subordinated
debentures.
REDEMPTION -- MANDATORY AND OPTIONAL RIGHTS OF SPECTRUM
MANDATORY REDEMPTION OF PREFERRED SECURITIES. Upon the repayment or
redemption at any time, in whole or in part, of any junior subordinated
debentures, the proceeds from the repayment or redemption will be applied by the
property trustee to redeem a like amount of the trust securities at
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the redemption price, as defined below. For more information, see "Description
of Junior Subordinated Debentures -- Redemption." If less than all of the junior
subordinated debentures are to be repaid or redeemed on a redemption date, then
the proceeds will be allocated to the redemption of the trust securities pro
rata.
OPTIONAL REDEMPTION OF JUNIOR SUBORDINATED DEBENTURES. Spectrum will have
the right to redeem the junior subordinated debentures (1) beginning on
, 2004, in whole at any time or in part from time to time at a
redemption price equal to the accrued and unpaid interest on the junior
subordinated debentures redeemed to the date fixed for redemption, plus 100% of
the principal amount of the junior subordinated debentures, or (2) at any time,
in whole, but not in part, upon a tax event, an investment company event or a
capital treatment event as defined in the following paragraph. The redemption
price will be equal to the accrued and unpaid interest on the redeemed junior
subordinated debentures, plus 100% of the principal amount. These payments will
be subject to receipt of prior approval by the Federal Reserve if then required
under applicable capital guidelines or policies of the Federal Reserve. See
"Description of Junior Subordinated Debentures -- Redemption."
TAX EVENT REDEMPTION, INVESTMENT COMPANY EVENT REDEMPTION, CAPITAL TREATMENT
EVENT REDEMPTION OR DISTRIBUTION OF JUNIOR SUBORDINATED DEBENTURES. If a tax
event, an investment company event or a capital treatment event occurs after
original issuance of the preferred securities and is continuing, Spectrum has
the right to redeem the junior subordinated debentures in whole. If a redemption
of the junior subordinated debentures occurs, Spectrum would also cause a
mandatory redemption of the trust securities in whole at the redemption price,
as defined below, within 90 days following the occurrence of these events. In
each case the redemption would be subject to receipt of prior approval by the
Federal Reserve if then required under its applicable capital guidelines or
policies. If any of these events has occurred and is continuing, and Spectrum
does not elect to redeem the junior subordinated debentures and cause a
mandatory redemption of the trust securities or to liquidate Spectrum Capital
Trust I and cause the junior subordinated debentures to be distributed to
holders of the trust securities in liquidation of Spectrum Capital Trust I, the
trust securities will remain outstanding. Also, additional sums, as defined
below, may be payable on the junior subordinated debentures.
A tax event requires the receipt by Spectrum and Spectrum Capital Trust I of
a legal opinion. The legal opinion must state that, as a result of any amendment
to, including any announced prospective change, in the laws, or any regulations,
of the United States or any political subdivision or taxing authority of the
United States, or as a result of any official administrative pronouncement or
judicial decision interpreting or applying the tax laws or regulations, there is
more than an insubstantial risk that:
- Spectrum Capital Trust I is, or will be within 90 days of the date of the
opinion, subject to United States federal income tax regarding income
received or accrued on the junior subordinated debentures;
- interest payable by Spectrum on the junior subordinated debentures is not,
or within 90 days of the opinion, will not be, deductible by Spectrum, in
whole or in part, for United States federal income tax purposes; or
- Spectrum Capital Trust I is, or will be within 90 days of the date of the
opinion, subject to more than a de minimis amount of other taxes, duties
or other governmental charges.
An investment company event requires the receipt by Spectrum and Spectrum
Capital Trust I of a legal opinion. The legal opinion must state that, as a
result of any change in law or regulation or a change in interpretation or
application of law or regulation by any legislative body, court, governmental
agency or regulatory authority, Spectrum Capital Trust I is or will be
considered an investment company required to be registered under the Investment
Company Act.
A capital treatment event means the reasonable determination by Spectrum
that, as a result of any amendment to, including any proposed change in, the
laws or regulations of the United States or any
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of its political subdivisions, or as a result of any official action or judicial
decision interpreting the laws or regulations, there is more than an
insubstantial risk that Spectrum's ability to treat the preferred securities as
core capital or its equivalent for purposes of the Federal Reserve capital
adequacy guidelines, is impaired.
Additional sums means the additional amounts as may be necessary to be paid
by Spectrum on the junior subordinated debentures in order that the amount of
distributions payable by Spectrum Capital Trust I on the outstanding trust
securities will not be reduced as a result of any additional taxes, duties and
other governmental charges to which Spectrum Capital Trust I has become subject.
Like amount means (1) regarding a redemption of trust securities, trust
securities having a liquidation amount, as defined below, equal to that portion
of the principal amount of junior subordinated debentures to be
contemporaneously redeemed in accordance with the indenture, allocated to the
common securities and to the preferred securities based upon the relative
liquidation amounts of these classes and the proceeds of which will be used to
pay the redemption price of the trust securities, and (2) regarding a
distribution of junior subordinated debentures to holders of trust securities in
connection with a dissolution or liquidation of Spectrum Capital Trust I, junior
subordinated debentures having a principal amount equal to the liquidation
amount of the trust securities of the holder to whom the junior subordinated
debentures are distributed.
Liquidation amount means the stated amount of $10 per trust security.
Redemption price means, regarding any trust security, the liquidation amount
of the trust security, plus accumulated and unpaid distributions to the
redemption date, allocated on a pro rata basis, based on liquidation amounts,
among the trust securities.
DISTRIBUTION OF JUNIOR SUBORDINATED DEBENTURES
Subject to Spectrum having received prior approval of the Federal Reserve,
Spectrum will have the right at any time to liquidate Spectrum Capital Trust I
and, after satisfaction of the liabilities of creditors of Spectrum Capital
Trust I as provided by applicable law, cause the junior subordinated debentures
to be distributed to the holders of trust securities in liquidation of Spectrum
Capital Trust I. After the liquidation date fixed for any distribution of junior
subordinated debentures for preferred securities:
- the preferred securities will no longer be deemed to be outstanding;
- the depositary or its nominee, as the record holder of the preferred
securities, will receive a registered global certificate or certificates
representing the junior subordinated debentures to be delivered upon the
distribution; and
- any certificates representing preferred securities not held by the
depositary or its nominee will be deemed to represent the junior
subordinated debentures having a principal amount equal to the liquidation
amount of the preferred securities, and bearing interest equal to the
accrued and unpaid distributions on the preferred securities, until the
certificates are presented to the administrative trustees or their agent
for reissuance.
There can be no assurance as to the market prices for the preferred
securities or the junior subordinated debentures that may be distributed in
exchange for the preferred securities if a dissolution and liquidation of
Spectrum Capital Trust I were to occur. Accordingly, the preferred securities
that an investor may purchase, or the junior subordinated debentures that the
investor may receive on dissolution and liquidation of Spectrum Capital Trust I,
may trade at a discount to the price that the investor paid to purchase the
preferred securities. If the junior subordinated debentures are distributed,
Spectrum will use its best efforts to list them on the American Stock Exchange
or the Nasdaq National Market in place of the preferred securities.
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REDEMPTION PROCEDURES
Preferred securities redeemed on each redemption date will be redeemed at
the redemption price with the proceeds from the contemporaneous redemption of
the junior subordinated debentures. Redemptions of the preferred securities will
be made and the redemption price will be payable on each redemption date only to
the extent that Spectrum Capital Trust I has funds on hand available for the
payment of the redemption price. See "Subordination of Common Securities of
Spectrum Capital Trust I Held by Spectrum" and "Description of Preferred
Securities Guarantee."
Notice of any redemption will be mailed at least 30 days but not more than
60 days before the redemption date to each holder of trust securities at the
holder's registered address. Unless Spectrum Capital Trust I defaults in payment
of the applicable redemption price, on and after the redemption date,
distributions will cease to accrue on the preferred securities called for
redemption.
If Spectrum Capital Trust I gives a notice of redemption regarding the
preferred securities, then, by 12:00 noon, central time, on the redemption date,
the property trustee will pay the redemption price to the depositary, as the
record holder of the preferred securities. The depositary thereafter will credit
the redemption price to the participants for whom it holds the preferred
securities. See "Book-Entry Issuance." If the 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 the preferred securities funds sufficient
to pay the aggregate redemption price. The property trustee will give the paying
agent irrevocable instructions and authority to pay the redemption price upon
surrender of certificates evidencing the preferred securities. Notwithstanding
the foregoing, distributions payable on or prior to the redemption date will be
payable to the holders of the preferred 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 the deposit, all rights of
the holders of the preferred securities will cease, except the right of the
holders of the preferred securities to receive the redemption price, but without
interest on the redemption price, and the preferred securities will cease to be
outstanding. In the event that any date fixed for redemption of the preferred
securities is not a business day, then payment of the redemption price payable
on the date will be made on the next business day and without any interest or
other payment for any the delay. If, however, the business day falls in the next
calendar year, the payment will be made on the immediately preceding business
day. In the event that payment of the redemption price in respect of preferred
securities called for redemption is improperly withheld or refused and not paid
either by Spectrum Capital Trust I or by Spectrum under the preferred securities
guarantee, distributions on the preferred securities will continue to accrue at
the then applicable rate, from the redemption date originally established by
Spectrum Capital Trust I for the preferred securities to the date the redemption
price is actually paid. In this case the actual payment date will be the date
fixed for redemption for purposes of calculating the redemption price. See
"Description of Preferred Securities Guarantee."
Subject to applicable law, including, without limitation, federal securities
laws, Spectrum may at any time and from time to time purchase outstanding
preferred securities by tender, in the open market or by private agreement.
Payment of the redemption price on the preferred securities and any
distribution of junior subordinated debentures to holders of preferred
securities will be made to the applicable record holders as they appear on the
register of the preferred securities on the relevant record date, which date
will be one business day prior to the relevant redemption date; provided,
however, that in the event that any preferred securities are not in book-entry
form, the relevant record date for them will be a date at least 15 days prior to
the redemption date. In the case of a liquidation, the record date will be
established by the property trustee and be no more than 45 days before the
liquidation date.
If less than all of the trust securities are to be redeemed on a redemption
date, then the aggregate redemption price for the trust securities to be
redeemed will be allocated pro rata to the preferred securities and common
securities based upon the relative liquidation amounts of these classes. The
particular outstanding preferred securities to be redeemed will be selected by
any method as the
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property trustee deems fair and appropriate. This method may provide for the
selection for redemption of portions equal to $10 or an integral multiple of $10
of the liquidation amount of preferred securities. The property trustee will
promptly notify the trust securities registrar in writing of the preferred
securities selected for redemption and, in the case of any preferred securities
selected for partial redemption, the liquidation amount thereof to be redeemed.
For all purposes of the trust agreement, unless the context otherwise requires,
all provisions relating to the redemption of preferred securities will relate to
the portion of the aggregate liquidation amount of preferred securities which
has been or is to be redeemed.
SUBORDINATION OF COMMON SECURITIES OF SPECTRUM CAPITAL TRUST I HELD BY SPECTRUM
Payment of distributions on, and the redemption price of, the preferred
securities and common securities will be made pro rata based on the liquidation
amounts of these securities. However, if on any distribution date or redemption
date a debenture event of default has occurred and is continuing, no
distributions on or redemption of the common securities will be made. Further,
no other payment on account of the redemption, liquidation or other acquisition
of the common securities, will be made unless payment in full in cash of all
distributions payable on all of the outstanding preferred securities are made,
or in the case of redemption the full redemption price on all of the outstanding
preferred securities then called for redemption, has been made or provided for.
All funds available to the property trustee will first be applied to the payment
in full in cash of all distributions on, or redemption price of, the preferred
securities then due and payable.
In the case of any event of default under the trust agreement resulting from
a debenture event of default, Spectrum as holder of the common securities will
be deemed to have waived any right to act regarding any event of default until
the effects of all events of default have been cured, waived or otherwise
eliminated. Until any events of default have been so cured, waived or otherwise
eliminated, the property trustee will act solely on behalf of the holders of the
preferred securities and not on behalf of Spectrum as holder of the common
securities, and only the holders of the preferred securities will have the right
to direct the property trustee to act on their behalf.
LIQUIDATION DISTRIBUTION UPON TERMINATION
Spectrum will have the right at any time to terminate Spectrum Capital Trust
I and cause the junior subordinated debentures to be distributed to the holders
of the preferred securities. This right is subject to Spectrum having received
prior approval of the Federal Reserve if then required under applicable capital
guidelines or policies of the Federal Reserve. See "Distribution of Junior
Subordinated Debentures" above.
In addition, under the trust agreement, Spectrum Capital Trust I will
automatically terminate upon expiration of its term and will earlier terminate
on the first to occur of: (I) events of bankruptcy, dissolution or liquidation
of Spectrum; (2) delivery by Spectrum of written direction to the property
trustee to terminate Spectrum Capital Trust I, which direction is optional and
wholly within the discretion of Spectrum; (3) redemption of all of the preferred
securities as described under "Redemption -- Mandatory and Optional Rights of
Spectrum" above; and (4) the entry of an order for the dissolution of Spectrum
Capital Trust I by a court of competent jurisdiction.
If an early termination occurs as described in clause (1), (2) or (4) above
or upon the expiration of the term of Spectrum Capital Trust I, it will be
liquidated by the trustees as expeditiously as the trustees determine to be
possible. The liquidation will be made after satisfaction of liabilities to
creditors of Spectrum Capital Trust I as provided by applicable law. In the
liquidation, holders of the trust securities will receive a like amount of the
junior subordinated debentures, unless this distribution is determined by the
property trustee not to be practical. If the property trustee determines that a
distribution of the junior subordinated debentures is not practical, then the
holders of preferred securities will be entitled to receive an amount equal to
the liquidation amount of $10 per trust security plus accrued and unpaid
distributions thereon to the date of payment. This amount, payable out of the
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assets of Spectrum Capital Trust I available for distribution, is referred to as
the liquidation distribution. If the liquidation distribution can be paid only
in part because Spectrum Capital Trust I has insufficient assets available to
pay the full aggregate liquidation distribution, then the amounts payable
directly by Spectrum Capital Trust I on the preferred securities will be paid on
a pro rata basis. The holders of the common securities will be entitled to
receive distributions upon a liquidation pro rata with the holders of the
preferred securities, except that if a debenture event of default has occurred
and is continuing, the preferred securities will have a priority over the common
securities.
Under current United States federal income tax law and interpretations and
assuming, as expected, Spectrum Capital Trust I is treated as a grantor trust, a
distribution of the junior subordinated debentures should not be a taxable event
to holders of the 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 preferred securities.
See "Material Federal Income Tax Consequences." If Spectrum elects neither to
redeem the junior subordinated debentures prior to maturity nor to liquidate
Spectrum Capital Trust I and distribute the junior subordinated debentures to
holders of the preferred securities, the preferred securities will remain
outstanding until the repayment of the junior subordinated debentures.
If Spectrum elects to liquidate Spectrum Capital Trust I and cause the
junior subordinated debentures to be distributed to holders of the preferred
securities in liquidation of Spectrum Capital Trust I, Spectrum will continue to
have the right to shorten the maturity of the junior subordinated debentures
under most circumstances. See "Description of Junior Subordinated Debentures --
General Overview."
EVENTS OF DEFAULT; NOTICE
Any one of the following events that has occurred and is continuing
constitutes an event of default under the trust agreement:
- the occurrence of a debenture event of default under the indenture, see
"Description of Junior Subordinated Debentures -- Indenture Events of
Default"; or
- default by Spectrum Capital Trust I in the payment of any distribution
when it becomes due and payable, and continuation of the default for a
period of 30 days; or
- default by Spectrum Capital Trust I in the payment of any redemption price
of any trust security when it becomes due and payable; or
- default in the performance, or breach, in any material respect, of any
covenant or warranty of the property trustee in the trust agreement, other
than a default or breach in the performance of a covenant or warranty
which is addressed in the previous points above, and continuation of the
default or breach, for a period of 60 days after there has been given, by
registered or certified mail, to the property trustee by the holders of at
least 25% in aggregate liquidation amount of the outstanding preferred
securities, a written notice specifying the default or breach and
requiring it to be remedied and stating that the notice is a "Notice of
Default" under the trust agreement; or
- the occurrence of events of bankruptcy or insolvency regarding the
property trustee and the failure by Spectrum to appoint a successor
property trustee within 60 days thereof.
Within five business days after the occurrence of any event of default
actually known to the property trustee, the property trustee is required to
transmit notice of the event of default to the holders of the preferred
securities, the administrative trustees and Spectrum, unless the event of
default has been cured or waived. Spectrum and the administrative trustees are
required to file annually with the property trustee a certificate as to whether
they are in compliance with all the conditions and covenants applicable to them
under the trust agreement.
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If a debenture event of default has occurred and is continuing, the
preferred securities will have a preference over the common securities upon
termination of Spectrum Capital Trust I as described above. See "Liquidation
Distribution Upon Termination." Upon a debenture event of default, unless the
principal of all the junior subordinated debentures has already become due and
payable, either the property trustee or the holders of not less than 25% in
aggregate principal amount of outstanding junior subordinated debentures may
declare all of the junior subordinated debentures to be due and payable
immediately. Written notice must be given to Spectrum, and to the property
trustee, if given by holders of the junior subordinated debentures. If the
property trustee or the holders of the junior subordinated debentures fail to
declare the principal of all of the junior subordinated debentures due and
payable upon a debenture event of default, the holders of at least 25% in
liquidation amount of the preferred securities then outstanding will have the
right to declare the junior subordinated debentures immediately due and payable.
In either event, payment of principal and interest on the junior subordinated
debentures will remain subordinated to the extent provided in the indenture. In
addition, holders of the preferred securities have to bring a direct action as
discussed below. See "Description of Junior Subordinated Debentures --
Enforcement of Rights by Holders of Preferred Securities."
REMOVAL OF 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 of
Spectrum Capital Trust I. If a debenture event of default has occurred and is
continuing, the property trustee may be removed by the holders of a majority in
liquidation amount of the outstanding preferred securities. In no event will the
holders of the preferred securities have the right to vote to appoint, remove or
replace the administrative trustees, which voting rights are vested exclusively
in Spectrum 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, at any time, for
the purpose of meeting the legal requirements of the Trust Indenture Act or of
any jurisdiction in which any part of trust property may at the time be located,
the holders of the common securities and the administrative trustees have power
to appoint one or more persons either to act as (1) a co-trustee, jointly with
the property trustee, of all or any part of the trust property, or (2) to act as
separate trustee of any such property. In either case these trustees will have
the powers which may be provided in the instrument of appointment, and will have
vested in them 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 the appointment.
MERGER OR CONSOLIDATION OF TRUSTEES
Generally, any person or successor to any of the trustees of Spectrum
Capital Trust I may be a successor trustee to any of the trustees, including a
successor resulting from a merger or consolidation. However, any successor
trustee must meet all of the qualifications and eligibility standards to act as
a trustee to Spectrum Capital Trust I.
MERGERS, CONSOLIDATIONS, AMALGAMATIONS OR REPLACEMENTS OF SPECTRUM CAPITAL TRUST
I
Spectrum Capital Trust I 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. Spectrum Capital Trust I may, at the request of Spectrum,
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with the consent of the administrative trustees and without the consent of the
holders of the preferred securities or the property trustee, undertake the
transactions described above; provided, that:
- the successor entity either (a) expressly assumes all of the obligations
of Spectrum Capital Trust I regarding the preferred securities or (b)
substitutes for the preferred securities other securities having
substantially the same terms as the preferred securities, or the successor
securities, if the successor securities rank the same as the preferred
securities rank in priority regarding distributions and payments upon
liquidation, redemption and otherwise;
- Spectrum expressly appoints a trustee of the successor entity possessing
the same powers and duties as the property trustee as the holder of the
junior subordinated debentures;
- any transaction of this kind does not adversely affect the rights,
preferences and privileges of the holders of the preferred securities,
including any successor securities, in any material respect;
- the successor entity has a purpose identical to that of Spectrum Capital
Trust I;
- the successor securities will be listed or traded on any national
securities exchange or other organization on which the preferred
securities may then be listed;
- prior to the transaction, Spectrum has received an opinion from
independent counsel to Spectrum Capital Trust I stating that (a) the
transaction does not adversely affect the rights, preferences and
privileges of the holders of the preferred securities, including any
successor securities, in any material respect, and (b) following any
transaction of this kind, neither Spectrum Capital Trust I nor the
successor entity will be required to register as an investment company
under the Investment Company Act; and
- Spectrum or any permitted successor or designee owns all of the common
securities of the successor entity and guarantees the obligations of the
successor entity under the successor securities at least to the extent
provided by the preferred securities guarantee. Notwithstanding the
foregoing, Spectrum Capital Trust I will not, except with the consent of
holders of 100% in liquidation amount of the preferred securities, enter
into any transaction of this kind, or permit any other entity to
consolidate, amalgamate, merge with or into, or replace it, if the
transaction would cause Spectrum Capital Trust I or the successor entity
to be classified as other than a grantor trust for United States federal
income tax purposes.
VOTING RIGHTS; AMENDMENT OF THE TRUST AGREEMENT
Except as provided below and under "Description of Preferred Securities
Guarantee -- Amendments and Assignment" and as otherwise required by law and the
trust agreement, the holders of the preferred securities will have no voting
rights.
The trust agreement may be amended from time to time by Spectrum and the
trustees, without the consent of the holders of the trust securities:
- to cure any ambiguity, correct or supplement any provisions in the trust
agreement that may be inconsistent with any other provision, or to make
any other provisions regarding matters or questions arising under the
trust agreement, which are not inconsistent with the other provisions of
the trust agreement; or
- to modify, eliminate or add to any provisions of the trust agreement to
the extent that is necessary to ensure that Spectrum Capital Trust I 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 Spectrum Capital Trust I will not be required to register as an
investment company under the Investment Company Act.
Provided, however, that in the case of the first point above, this action
will not adversely affect in any material respect the interests of any holder of
trust securities, and any amendments of the trust agreement will become
effective when notice is given to the holders of the trust securities.
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The trust agreement may be amended by the trustees and Spectrum (1) with the
consent of holders representing not less than a majority of the aggregate
liquidation amount of the outstanding trust securities, and (2) upon receipt by
the trustees of an opinion of counsel to the effect that the amendment or the
exercise of any power granted to the trustees in accordance with the amendment
will not affect Spectrum Capital Trust I's status as a grantor trust for United
States federal income tax purposes or Spectrum Capital Trust I's exemption from
status as an investment company under the Investment Company Act. However,
without the consent of each holder of trust securities, the trust agreement may
not be amended to (1) 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
(2) restrict the right of a holder of trust securities to institute suit for the
enforcement of any payment of distributions afterwards.
For the time that any junior subordinated debentures are held by the
property trustee, the trustees will not:
- direct the time, method and place of conducting any proceeding for any
remedy available to the indenture trustee, or executing any trust or power
conferred on the indenture trustee regarding the junior subordinated
debentures;
- waive any past default that is waivable under the indenture;
- exercise any right to rescind or annul a declaration that the principal of
all the junior subordinated debentures will be due and payable; or
- consent to any amendment, modification or termination of the indenture or
the junior subordinated debentures, where this consent is required,
without, in each case, obtaining the prior approval of the holders of a
majority in aggregate liquidation amount of all outstanding preferred
securities. However, where a consent under the indenture would require the
consent of each affected holder of junior subordinated debentures, this
consent may be given by the property trustee without the prior consent of
each holder of the preferred securities. The trustees will not revoke any
action previously authorized or approved by a vote of the holders of the
preferred securities except by subsequent vote of the holders of the
preferred securities. The property trustee will notify each holder of the
preferred securities of any notice of default regarding the junior
subordinated debentures. In addition to obtaining these approvals of the
holders of the preferred securities, prior to taking any of the above
actions, the trustees will obtain an opinion of counsel stating that
Spectrum Capital Trust I will not be classified as an association taxable
as a corporation for United States federal income tax purposes on account
of the action.
Any required approval of holders of the preferred securities may be given at
a meeting of holders of preferred securities convened for this purpose or under
written consent. The property trustee will cause a notice of any meeting at
which holders of the preferred securities are entitled to vote, or of any matter
upon which action by written consent of the holders is to be taken, to be given
to each holder of record of the preferred securities in the manner set forth in
the trust agreement.
No vote or consent of the holders of the preferred securities will be
required for Spectrum Capital Trust I to redeem and cancel the preferred
securities in accordance with the trust agreement.
Any of the preferred securities that are owned by Spectrum, the trustees or
any affiliate of Spectrum or any trustees, will, for purposes of the vote or
consent, be treated as if they were not outstanding.
GLOBAL PREFERRED SECURITIES
The preferred securities will be represented by one or more global
certificates registered in the name of the depositary or its nominee. Beneficial
interests in the preferred securities will be shown on, and transfers will be
effected only through, records maintained by participants in the depositary.
Except
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as described below, preferred securities in certificated form will not be issued
in exchange for the global certificates. See "Book-Entry Issuance."
A global security will be exchangeable for preferred securities registered
in the names of persons other than the depositary or its nominee only if:
- the depositary notifies Spectrum that it is unwilling or unable to
continue as a depositary for the global security and no successor
depositary has been appointed, or if at any time the depositary ceases to
be a clearing agency registered under the Securities Exchange Act of 1934,
at a time when the depositary is required to be so registered to act as a
depositary;
- Spectrum in its sole discretion determines that the global security will
be so exchangeable; or
- there has occurred and is continuing an event of default under the
indenture. Any global security that is exchangeable under the preceding
sentence will be exchangeable for definitive certificates registered in
the names which the depositary directs. It is expected that the
instructions will be based upon directions received by the depositary
regarding ownership of beneficial interests in the global security. In the
event that preferred securities are issued in definitive form, they will
be in denominations of $10 or integral multiples of $10 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
preferred securities, the global preferred security may not be transferred
except (1) as a whole by the depositary to a nominee of the depositary or by a
nominee of the depositary to the depositary or (2) another nominee of the
depositary or (3) by the depositary or any nominee to a successor depositary or
any nominee of the successor.
Payments on preferred securities represented by a global security will be
made to the depositary, as the depositary for the preferred securities. In the
event the preferred securities are issued in definitive form, distributions will
be payable, the transfer of the preferred securities will be registrable, and
preferred securities will be exchangeable for 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. However, payment of any distribution
may be made at the option of the administrative trustees by check mailed to the
address of the persons entitled to payments or by wire transfer. In addition, if
the preferred securities are issued in certificated form, the record dates for
payment of distributions will be the first day of the month in which the
relevant distribution date occurs. For a description of the terms of the
depositary arrangements relating to payments, transfers, voting rights,
redemptions and other notices and other matters, see "Book-Entry Issuance."
Upon the issuance of a global preferred security, and the deposit of the
global preferred security with or on behalf of the depositary, the depositary
will credit, on its book-entry registration and transfer system, the respective
aggregate liquidation amounts of the individual preferred securities represented
by the global preferred security to persons that have accounts with the
depositary. The accounts will be designated by the dealers, underwriters or
agents regarding the preferred securities. Ownership of beneficial interests in
a global preferred security will be limited to participants or persons that may
hold interests through participants. Ownership of beneficial interests in the
global preferred security will be shown on, and the transfer of that ownership
will be effected only through, records maintained by the depositary or its
nominee and the records of participants regarding interests of persons who hold
through participants. The laws of some states require that some purchasers of
securities in those states take physical delivery of the securities in
definitive form. The limits, under these laws, may impair the ability to
transfer beneficial interests in a global preferred security.
For the time that the depositary for a global preferred security, or its
nominee, is the registered owner of the global preferred security, this
registered owner will be considered the sole owner or holder of the preferred
securities represented by the global preferred security for all purposes under
the trust agreement of Spectrum Capital Trust I. Except as provided below,
owners of beneficial
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interests in a global preferred security will not be entitled to have any of the
individual preferred securities represented by the global preferred security
registered in their names, will not receive or be entitled to receive physical
delivery of any the preferred securities in definitive form and will not be
considered the owners or holders thereof.
None of Spectrum, the property trustee, any paying agent, or the securities
registrar for the 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 preferred security or for
maintaining, supervising or reviewing any records relating to the beneficial
ownership interests.
Spectrum expects that the depositary, upon receipt of any payment of the
liquidation amount or distributions in respect of a permanent global preferred
security, immediately will credit participants' accounts with payments in
amounts proportionate to their respective beneficial interest in the aggregate
liquidation amount of the global preferred security as shown on the records of
the depositary or its nominee. Spectrum also expects that payments by
participants to owners of beneficial interests in the global preferred security
held through the participants will be governed by standing instructions and
customary practices, as is now the case with securities held for the accounts of
customers in bearer form or registered in street name. The payments will be the
responsibility of the participants.
If the depositary for the preferred securities is at any time unwilling,
unable or ineligible to continue as depositary and a successor depositary is not
appointed by Spectrum within 90 days, Spectrum Capital Trust I will issue
individual preferred securities in exchange for the global preferred security.
In addition, Spectrum Capital Trust I may at any time in its sole discretion,
subject to any limitations described in this prospectus relating to the
preferred securities, determine not to have any preferred securities represented
by one or more global preferred securities. In this event, Spectrum will issue
individual preferred securities in exchange for the global preferred security or
securities representing the preferred securities. Further, if Spectrum Capital
Trust I specifies, an owner of a beneficial interest in a global preferred
security representing preferred securities may receive individual preferred
securities in exchange for the beneficial interests, subject to any limitations
described in this prospectus. In any such instance, a beneficial interest owner
in a global preferred security will be entitled to physical delivery of
individual preferred securities represented by the global preferred security
equal in liquidation amount to the beneficial interest, and to have the
preferred securities registered in its name. Individual preferred securities
issued will be issued in denominations, unless otherwise specified by Spectrum
Capital Trust I, of $10 and integral multiples of $10.
PAYMENT AND PAYING AGENCY
Payments in respect of the preferred securities will be made to the
depositary, which will credit the relevant accounts at the depositary on the
applicable distribution dates. However, if any of the preferred securities are
not held by the depositary, the payments will be made by check mailed to the
address of the holder as the address appears on the register. The paying agent
will initially be the property trustee and any co-paying agent chosen by the
property trustee and acceptable to the administrative trustees and Spectrum. The
paying agent will be permitted to resign as paying agent upon 30 days' written
notice to the property trustee and Spectrum. In the event that the property
trustee is no longer the paying agent, the administrative trustees will appoint
a successor paying agent, which will be a bank or trust company acceptable to
the administrative trustees and Spectrum.
REGISTRAR AND TRANSFER AGENT
The property trustee will act as registrar and transfer agent for the
preferred securities. Registration of transfers of the preferred securities will
be effected without charge by or on behalf of Spectrum Capital Trust I, but upon
payment of any tax or other governmental charges that may be imposed in
connection with any transfer or exchange. Spectrum Capital Trust I will not be
required to register or cause to be registered the transfer of the preferred
securities after the preferred securities have been called for redemption.
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INFORMATION CONCERNING THE PROPERTY TRUSTEE
The property trustee, other than upon the occurrence and during the
continuance of an event of default, undertakes to perform only the duties which
are specifically set forth in the trust agreement. After an event of default,
the property trustee must exercise the same degree of care and skill as a
prudent person would exercise or use in the conduct of his or her own affairs.
Subject to this provision, the property trustee is under no obligation to
exercise any of the powers vested in it by the trust agreement at the request of
any holder of preferred securities unless it is offered reasonable indemnity
against the costs, expenses and liabilities that might be incurred. If no event
of default has occurred and is continuing and the property trustee is required
to decide between alternative causes of action, construe ambiguous provisions in
the trust agreement or is unsure of the application of any provision of the
trust agreement, and the matter is not one on which holders of the preferred
securities are entitled under the trust agreement to vote, then the property
trustee will take action as directed by Spectrum. If the property trustee is not
so directed, it will take action as it deems advisable and in the best interests
of the holders of the trust securities and will have no liability under the
trust agreement 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 Spectrum Capital Trust I in such a way that Spectrum
Capital Trust I will not be deemed to be an "investment company" required to be
registered under the Investment Company Act or classified as an association
taxable as a corporation for United States federal income tax purposes and so
that the junior subordinated debentures will be treated as indebtedness of
Spectrum for United States federal income tax purposes. In this regard, Spectrum
and the administrative trustees are authorized to take any lawful action not
inconsistent with the certificate of trust of Spectrum Capital Trust I or the
trust agreement, that they determine in their discretion to be necessary or
desirable for these purposes, as long as the action does not materially
adversely affect the interests of the holders of the related preferred
securities. Holders of the preferred securities have no preemptive or similar
rights.
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DESCRIPTION OF JUNIOR SUBORDINATED DEBENTURES
The junior subordinated debentures will be issued under a subordinated
indenture, dated as of , 1999, between Spectrum and Wilmington Trust
Company, as the indenture trustee. The following is a summary of the material
terms and provisions of the junior subordinated debentures and the indenture.
Prospective investors are urged to read the indenture, which has been filed as
an exhibit to the Registration Statement of which this prospectus forms a part.
The indenture is qualified under the Trust Indenture Act.
Concurrently with the issuance of the preferred securities, Spectrum Capital
Trust I will invest the proceeds from the sale of the preferred securities,
together with the consideration paid by Spectrum for the common securities, in
junior subordinated debentures issued by Spectrum. The junior subordinated
debentures will be issued as unsecured debt under the indenture.
GENERAL OVERVIEW
The junior subordinated debentures will bear interest at the rate of % per
year of their principal amount, payable quarterly after each calendar quarter on
the 15th day of January, April, July and October of each year, beginning October
15, 1999, to the person in whose name each junior subordinated debenture is
registered, subject to minor exceptions, at the close of business on the
business day next preceding the interest payment date. Notwithstanding the
above, in the event that either (1) the junior subordinated debentures are held
by the property trustee and the preferred securities are no longer in book-entry
only form or (2) the junior subordinated debentures are not represented by a
global subordinated debenture, the record date for the interest payment will be
the first day of the month in which the payment is made. The amount of each
interest payment due regarding the junior subordinated debentures will include
amounts accrued through the interest payment date. It is anticipated that, until
the liquidation, if any, of Spectrum Capital Trust I, each junior subordinated
debenture will be held in the name of the property trustee in trust for the
benefit of the holders of the preferred securities. The amount of interest
payable for any period will be computed on the basis of a 360-day year of twelve
30-day months. In the event that any date on which interest is payable on the
junior subordinated debentures is not a business day, then payment of the
interest payable on that date will be made on the next business day, except
that, if the business day is in the next succeeding calendar year, the payment
will be made on the immediately preceding business day. Accrued interest that is
not paid on the applicable interest payment date will bear additional interest
at the rate per year of % compounded quarterly. The term "interest" as used in
this prospectus includes quarterly interest payments, interest on quarterly
interest payments not paid on the applicable interest payment date and
additional sums, as defined below, as applicable.
The junior subordinated debentures will mature on , 2029. This date,
as it may be shortened as described below, is the stated maturity. This date may
be shortened once at any time by Spectrum to any date not earlier than ,
2004, subject to Spectrum having received prior approval of the Federal Reserve
if then required under applicable capital guidelines or policies of the Federal
Reserve. In the event that Spectrum elects to shorten the stated maturity of the
junior subordinated debentures, it will give at least 90 days prior notice to
the registered holders of the junior subordinated debentures, the property
trustee and the indenture trustee. The property trustee must give notice to the
holders of the trust securities of the shortening of the stated maturity.
The junior subordinated debentures will be unsecured and will rank junior
and be subordinate in right of payment to all senior and subordinated debt of
Spectrum. Because Spectrum is a holding company, the right of Spectrum to
participate in any distribution of assets of any subsidiaries, including its
banks, upon any of its subsidiaries' liquidation or reorganization or otherwise,
and thus the ability of holders of the preferred securities to benefit
indirectly from the distribution, is subject to the prior claims of creditors of
that subsidiary, except to the extent that Spectrum may itself be recognized as
a creditor of that subsidiary. Accordingly, the junior subordinated debentures
will be effectively subordinated to all existing and future liabilities of
Spectrum's subsidiaries, and holders of junior
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subordinated debentures should look only to the assets of Spectrum for payments
on the junior subordinated debentures. The indenture does not limit the
incurrence or issuance of other secured or unsecured debt of Spectrum, including
senior and subordinated debt, whether under the indenture or any existing or
other indenture that Spectrum may enter into in the future or otherwise. See
"Subordination" below.
OPTION TO EXTEND INTEREST PAYMENT PERIOD
If no debenture event of default has occurred and is continuing, Spectrum
has the right under the indenture at any time during the term of the junior
subordinated debentures to defer interest payments at any time for a period not
exceeding 20 consecutive quarters. However, no extension period may extend
beyond the stated maturity of the junior subordinated debentures. At the end of
an extension period, Spectrum must pay all interest then accrued and unpaid,
together with interest at the rate of % per year, compounded quarterly. During
an extension period, interest will continue to accrue and holders of junior
subordinated debentures will be required to accrue interest income for United
States federal income tax purposes. See "Material Federal Income Tax
Consequences -- Interest Income and Original Issue Discount."
During any extension period, Spectrum may not (1) declare or pay any
dividends or distributions on, or redeem, purchase, or make a liquidation
payment regarding, any of Spectrum's capital stock or (2) make any payment of
principal, interest or premium, if any, on or repay, repurchase or redeem any
debt securities of Spectrum, including other junior subordinated debentures,
that rank pari passu with or junior in interest to the junior subordinated
debentures or make any preferred securities guarantee payments regarding any
preferred securities guarantee by Spectrum of the debt securities of any
subsidiary of Spectrum if the preferred securities guarantee ranks pari passu
with or junior in interest to the junior subordinated debentures. These
restrictions do not apply to:
- dividends or distributions in common stock of Spectrum;
- any declaration of a dividend in connection with the implementation of a
stockholders' rights plan, or the issuance of stock under any plan in the
future, or the redemption or repurchase of any rights pursuant to this
type of plan;
- payments under the preferred securities guarantee; or
- purchases of common stock related to rights under any of Spectrum's
benefit plans for its directors, officers or employees.
Prior to the termination of any extension period, Spectrum may further extend
the extension period, provided that the extension does not cause the extension
period to exceed 20 consecutive quarters or extend beyond the stated maturity of
the junior subordinated debentures. Upon the termination of any extension period
and the payment of all amounts then due on any interest payment date, Spectrum
may elect to begin a new extension period subject to the above requirements. No
interest will be due and payable during an extension period, except at the end
of the extension period.
If the property trustee is the only registered holder of the junior
subordinated debentures, Spectrum must give the property trustee, the
administrative trustees and the indenture trustee notice of its election of any
extension period at least one business day prior to the earlier of (1) the date
the distributions on the preferred securities would have been payable except for
the election to begin or extend the extension period or (2) the date the
administrative trustees are required to give notice to the holders of the
preferred securities of the record date or the date the distributions are
payable, but in any event not less than one business day prior to the record
date. The indenture trustee will give notice of Spectrum's election to begin or
extend a new extension period to the administrative trustees who, in turn, will
give notice to the holders of the preferred securities. There is no limitation
on the number of times that Spectrum may elect to begin an extension period.
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If Spectrum Capital Trust I is required to pay any additional taxes, duties
or other governmental charges as a result of a tax event, Spectrum will pay as
additional amounts on the junior subordinated debentures any amounts which will
be required so that the distributions payable by Spectrum Capital Trust I will
not be reduced as a result of any additional taxes, duties or other governmental
charges. See "Description of the Preferred Securities -- Redemption -- Mandatory
and Optional Rights of Spectrum" for a definition of tax event.
REDEMPTION
Subject to Spectrum having received prior approval of the Federal Reserve,
if then required under applicable capital guidelines or policies of the Federal
Reserve, the junior subordinated debentures are redeemable prior to maturity at
the option of Spectrum (1) beginning , 2004, in whole at any time or in
part from time to time, or (2) at any time in whole, but not in part, upon the
occurrence and during the continuance of a tax event, an investment company
event or a capital treatment event, in each case at a redemption price equal to
the accrued and unpaid interest on the junior subordinated debentures redeemed
to the date fixed for redemption, plus 100% of the principal amount of the
junior subordinated debentures. See "Description of the Preferred Securities --
Redemption -- Mandatory and Optional Rights of Spectrum" for a definitions of
tax event, investment company event and capital treatment 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 junior subordinated
debentures to be redeemed at the holder's registered address. Unless Spectrum
defaults in payment of the redemption price, on and after the redemption date
interest will cease to accrue on the junior subordinated debentures or portions
of the junior subordinated debentures called for redemption.
The junior subordinated debentures will not be subject to any sinking fund.
DISTRIBUTION UPON LIQUIDATION
As described under "Description of the Preferred Securities -- Liquidation
Distribution Upon Termination," under circumstances involving the termination of
Spectrum Capital Trust I, the junior subordinated debentures may be distributed
to the holders of the preferred securities and common securities in liquidation
of Spectrum Capital Trust I after satisfaction of liabilities to creditors of
Spectrum Capital Trust I. If distributed to holders of the preferred securities
in liquidation, the junior subordinated debentures will initially be issued in
the form of one or more global securities and the depositary, or any successor
depositary for the preferred securities, will act as depositary for the junior
subordinated debentures. It is anticipated that the depositary arrangements for
the junior subordinated debentures would be substantially identical to those in
effect for the preferred securities. If the junior subordinated debentures are
distributed to the holders of preferred securities upon the liquidation of
Spectrum Capital Trust I, there can be no assurance as to the market price of
any junior subordinated debentures that may be distributed to the holders of
preferred securities. If the junior subordinated debentures are distributed,
Spectrum will use its best efforts to list them on the American Stock Exchange
or the Nasdaq National Market in place of the preferred securities.
RESTRICTIONS ON PAYMENTS
Spectrum has restrictions on paying dividends or making payments regarding
pari passu or junior debt if
- there has occurred any event of which Spectrum has actual knowledge that
(a) with the giving of notice or the lapse of time, or both, would
constitute a debenture event of default and (b) in respect of which
Spectrum has taken reasonable steps to cure;
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- Spectrum has given notice of its election of an extension period as
provided in the indenture regarding the junior subordinated debentures and
has not rescinded the notice, or the extension period, or any extension
thereof, is continuing; or
- while the junior subordinated debentures are held by Spectrum Capital
Trust I, Spectrum is in default regarding its payment of any obligation
under the preferred securities guarantee.
If any of the events above have occurred, Spectrum will not:
- declare or pay any dividends or distributions on, or redeem, purchase,
acquire, or make a liquidation payment regarding, any of Spectrum's
capital stock; or
- make any payment of principal, interest or premium, if any, on or repay,
repurchase or redeem any debt securities of Spectrum, including other
junior subordinated debt, that rank pari passu with or junior in interest
to the junior subordinated debentures or make any preferred securities
guarantee payments regarding any preferred securities guarantee by
Spectrum of the debt securities of any subsidiary of Spectrum if the
preferred securities guarantee ranks pari passu or junior in interest to
the junior subordinated debentures.
Provided, however, Spectrum may (a) declare and pay dividends or
distributions in common stock, (b) make any declaration of a dividend in
connection with the implementation of a stockholders' rights plan, or the
issuance of stock under this type of plan in the future or the redemption or
repurchase of any rights under such plan, (c) make payments under the preferred
securities guarantee and (d) make purchases of common stock related to rights
under any of Spectrum's benefit plans for its directors, officers or employees.
SUBORDINATION OF JUNIOR SUBORDINATED DEBENTURES TO SENIOR AND SUBORDINATED DEBT
OF SPECTRUM
In the indenture, Spectrum has agreed that any junior subordinated
debentures will be subordinate and junior in right of payment to all senior and
subordinated debt to the extent provided in the indenture. Upon any payment or
distribution of assets to creditors upon any liquidation, dissolution, winding
up, or any bankruptcy, or similar proceedings in connection with any insolvency
or bankruptcy proceeding of Spectrum, the holders of senior and subordinated
debt will first be entitled to receive payment in full of principal, interest
and premium, if any, on the senior and subordinated debt before the holders of
junior subordinated debentures will be entitled to receive principal or interest
payments on the junior subordinated debentures.
In the event of the acceleration of the maturity of any junior subordinated
debentures, the holders of all senior and subordinated debt outstanding upon
acceleration will first be entitled to receive payment in full of all amounts
due to them, including any amounts due upon acceleration, before the holders of
junior subordinated debentures will be entitled to receive any principal or
interest payments on the junior subordinated debentures. However, holders of
subordinated debt will not be entitled to receive payment of any of these
amounts to the extent that the subordinated debt is by its terms subordinated to
trade creditors.
No principal or interest payments on the junior subordinated debentures may
be made if there has occurred and is continuing a default in any payment
regarding senior and subordinated debt or an event of default regarding any
senior and subordinated debt resulting in the acceleration of the maturity of
senior and subordinated debt, or if any judicial proceeding is pending regarding
any of this type of default.
Debt as used in this discussion means regarding any person, whether recourse
is to all or a portion of the assets of the person and whether or not
contingent:
- every obligation of the person for money borrowed;
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- every obligation of the person evidenced by bonds, debentures, notes or
other similar instruments, including obligations incurred in connection
with the acquisition of property, assets or businesses;
- every reimbursement obligation of the person regarding letters of credit,
bankers' acceptances or similar facilities issued for the account of the
person;
- every obligation of the person issued or assumed as the deferred purchase
price of property or services, but excluding trade accounts payable or
accrued liabilities arising in the ordinary course of business;
- every capital lease obligation of the person; and
- every obligation of the type referred to in all of the points immediately
above of another person and all dividends of another person the payment of
which, in either case, the person has guaranteed or is responsible or
liable, directly or indirectly, as obligor or otherwise.
Senior and subordinated debt means the principal of and premium, if any, and
interest, if any on debt, including interest accruing at the time of the filing
of any petition in bankruptcy or for reorganization relating to Spectrum,
whether incurred on or prior to the date of the indenture or thereafter
incurred, unless, in the instrument creating or evidencing the debt or under
which the debt is outstanding, it is provided that the obligations are not
superior in right of payment to the junior subordinated debentures or to other
debt which is pari passu with, or subordinated to, the junior subordinated
debentures.
However, senior and subordinated debt will not be deemed to include:
- any debt of Spectrum which when incurred and without respect to any
election under section 1111(b) of the United States Bankruptcy Code was
without recourse to Spectrum;
- any debt of Spectrum to any of its subsidiaries;
- any debt to any employee of Spectrum;
- 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 the debt by the holders of the
junior 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 the holders to pay amounts over to the
obligees on the trade accounts payable or accrued liabilities arising in
the ordinary course of business as a result of subordination provisions to
which the debt is subject;
- the preferred securities guarantee; and
- any other debt securities issued under the indenture.
The indenture places no limitation on the amount of additional senior and
subordinated debt that may be incurred by Spectrum. Spectrum expects from time
to time to incur additional indebtedness constituting senior and subordinated
debt.
DENOMINATIONS, REGISTRATION AND TRANSFER
The junior subordinated debentures will be represented by global
certificates registered in the name of the depositary or its nominee. Beneficial
interests in the junior subordinated debentures will be shown on, and transfers
thereof will be effected only through, records maintained by the depositary.
Except as described below, junior subordinated debentures in certificated form
will not be issued in exchange for the global certificates. See "Book-Entry
Issuance."
Unless and until a global subordinated debenture is exchanged in whole or in
part for the individual junior subordinated debentures, it may not be
transferred except (1) as a whole by the
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depositary for the global subordinated debenture to a nominee of the depositary
or (2) by a nominee of the depositary to the depositary or another nominee of
the depositary or (3) by the depositary or any nominee to a successor depositary
or any nominee of the successor.
A global security will be exchangeable for junior subordinated debentures
registered in the names of persons other than the depositary or its nominee only
if (1) the depositary notifies Spectrum that it is unwilling or unable to
continue as a depositary for the global security and no successor depositary has
been appointed, or if at any time the depositary ceases to be a clearing agency
registered under the Securities Exchange Act of 1934 at a time when the
depositary is required to be so registered to act as a depositary or (2)
Spectrum in its sole discretion determines that the global security will be so
exchangeable. Any global security that is exchangeable under the preceding
sentence will be exchangeable for definitive certificates registered in the
names which the depositary directs. It is expected that the instructions will be
based upon directions received by the depositary from its participants regarding
ownership of beneficial interests in the global security. In the event that
junior subordinated debentures are issued in definitive form, the junior
subordinated debentures will be in denominations of $10 and integral multiples
of $10 and may be transferred or exchanged at the offices described below.
Payments on junior subordinated debentures represented by a global security
will be made to the depositary, as the depositary for the junior subordinated
debentures. In the event junior subordinated debentures are issued in definitive
form, principal and interest will be payable, the transfer of the junior
subordinated debentures will be registrable, and junior subordinated debentures
will be exchangeable for junior subordinated debentures of other denominations
of a like aggregate principal amount, at the corporate office of the indenture
trustee, or at the offices of any paying agent or transfer agent appointed by
Spectrum. However, interest payments may be made at the option of Spectrum by
check mailed to the address of the persons entitled to payments or by wire
transfer. In addition, if the junior subordinated debentures are issued in
certificated form, the record dates for interest payments will be the first day
of the month in which the payment is to be made. For a description of the
depositary and the terms of the depositary arrangements relating to payments,
transfers, voting rights, redemptions and other notices and other matters, see
"Book-Entry Issuance."
Spectrum will appoint the indenture trustee as securities registrar under
the indenture. Junior subordinated debentures may be presented for exchange as
provided above, and may be presented for registration of transfer with the form
of transfer endorsed, or a satisfactory written instrument of transfer, duly
executed, at the office of the securities registrar. Spectrum may at any time
rescind the designation of any registrar or approve a change in the location
through which any registrar acts, provided that Spectrum maintains a registrar
in the place of payment. Spectrum may at any time designate additional
registrars regarding the junior subordinated debentures.
In the event of any redemption of the junior subordinated debentures,
neither Spectrum nor the indenture trustee will be required to issue or register
the transfer of junior subordinated debentures during a period beginning at the
opening of business 15 days before the day of selection for redemption of junior
subordinated debentures and ending at the close of business on the day of
mailing of the relevant notice of redemption.
GLOBAL SUBORDINATED DEBENTURE
Upon the issuance of the global subordinated debenture, and the deposit of
the global subordinated debenture with or on behalf of the depositary, the
depositary or its nominee will credit, on its book-entry registration and
transfer system, the respective principal amounts of the individual junior
subordinated debentures represented by the global subordinated debenture to
participants. Ownership of beneficial interests in a global subordinated
debenture will be limited to participants or persons that may hold interests
through participants. Ownership of beneficial interests in the global
subordinated debenture will be shown on, and the transfer of that ownership will
be effected only through, records maintained by the applicable depositary or its
nominee, regarding interests of
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participants, and the records of participants, regarding interests of persons
who hold through participants. The laws of some states require that some
purchasers of securities in those states take physical delivery of the
securities in definitive form. The limits and the laws may impair the ability to
transfer beneficial interests in a global subordinated debenture.
During the time that the depositary for a global subordinated debenture, or
its nominee, is the registered owner of the global subordinated debenture, this
registered owner will be considered the sole owner or holder of the junior
subordinated debentures represented by the global subordinated debenture for all
purposes under the indenture. Except as provided below, owners of beneficial
interests in a global subordinated debenture will not be entitled to have any of
the individual junior subordinated debentures represented by the global
subordinated debenture registered in their names, will not receive or be
entitled to receive physical delivery of any such junior subordinated debentures
in definitive form and will not be considered the owners or holders thereof.
Payments of principal of and interest on individual junior subordinated
debentures represented by a global subordinated debenture registered in the name
of the depositary or its nominee will be made to the depositary or its nominee,
as the case may be, as the registered owner of the global subordinated debenture
representing the junior subordinated debentures. None of Spectrum, the indenture
trustee, any paying agent, or the securities registrar will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests of the global
subordinated debenture or for maintaining, supervising or reviewing any records
relating to the beneficial ownership interests.
Spectrum expects that the depositary, upon receipt of any payment of
principal or interest in respect of the global subordinated debenture,
immediately will credit participants' accounts with payments in amounts
proportionate to their respective beneficial interest in the principal amount of
the global subordinated debenture as shown on the records of the depositary or
its nominee. Spectrum also expects that payments by participants to owners of
beneficial interests in the global subordinated debenture held through the
participants will be governed by standing instructions and customary practices,
as is now the case with securities held for the accounts of customers in bearer
form or registered in "street name." These payments will be the responsibility
of the participants.
If the depositary is at any time unwilling, unable or ineligible to continue
as depositary and a successor depositary is not appointed by Spectrum within 90
days, Spectrum will issue individual junior subordinated debentures in exchange
for the global subordinated debenture. In addition, Spectrum may at any time in
its sole discretion, determine not to have the junior subordinated debentures
represented by one or more global subordinated debentures. In this event,
Spectrum will issue individual junior subordinated debentures in exchange for
the global subordinated debenture. Further, if Spectrum specifies, an owner of a
beneficial interest in a global subordinated debenture may receive individual
junior subordinated debentures in exchange for the beneficial interests. In this
instance, an owner of a beneficial interest in a global subordinated debenture
will be entitled to physical delivery of individual junior subordinated
debentures equal in principal amount to the beneficial interest and to have the
junior subordinated debentures registered in its name. Individual junior
subordinated debentures so issued will be issued in denominations, unless
otherwise specified by Spectrum, of $10 and integral multiples of $10.
PAYMENT AND PAYING AGENTS
Payment of principal of and any interest on the junior subordinated
debentures will be made at the office of the indenture trustee, except that at
the option of Spectrum payment of any interest may be made, except in the case
of a global subordinated debenture, by check mailed to the address of the person
entitled to payment as the person's address appears in the securities register.
Payment of any interest on junior subordinated debentures will be made to the
person in whose name the junior subordinated debenture is registered at the
close of business on the regular record date for the interest. Spectrum may at
any time designate additional paying agents or rescind the designation of any
paying
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agent; however, Spectrum will at all times be required to maintain a paying
agent in each place of payment for the junior subordinated debentures.
Any moneys deposited with the indenture trustee or any paying agent, or then
held by Spectrum in trust, for the payment of the principal of or interest on
the junior subordinated debentures and remaining unclaimed for two years after
the principal or interest has become due and payable will, at the request of
Spectrum, be repaid to Spectrum. Thereafter, the holder of the junior
subordinated debenture will look, as a general unsecured creditor, only to
Spectrum for payment.
MODIFICATION OF INDENTURE
From time to time Spectrum and the indenture trustee may, without the
consent of the holders of the junior subordinated debentures, amend, waive or
supplement the indenture for specified purposes. These purposes may include,
among other things, curing ambiguities, defects or inconsistencies, provided
that this action does not materially adversely affect the interests of the
holders of the junior subordinated debentures or the preferred securities while
they remain outstanding, and qualifying, or maintaining the qualification of,
the indenture under the Trust Indenture Act. The indenture contains provisions
permitting Spectrum and the indenture trustee, with the consent of the holders
of not less than a majority in principal amount of the outstanding junior
subordinated debentures, to modify the indenture in a manner affecting the
rights of the holders of the junior subordinated debentures; provided, that, the
modification may not, without the consent of the holder of each outstanding
junior subordinated debenture:
- change the stated maturity of the junior subordinated debentures or extend
the time of payment of interest on them, except as described under
"Description of Junior Subordinated Debentures -- General Overview" and --
Option to Extend Interest Payment Period," or reduce the principal amount
thereof or the rate of interest thereon; or
- reduce the percentage of principal amount of junior subordinated
debentures, the holders of which are required to consent to any such
modification of the indenture. However, while any of the preferred
securities remain outstanding, (1) no modification may be made that
adversely affects the holders of the preferred securities in any material
respect, (2) no termination of the indenture may occur, and (3) no waiver
of any debenture event of default or compliance with any covenant under
the indenture may be effective, without the prior consent of the holders
of at least a majority of the aggregate liquidation amount of the
preferred securities, until the principal and interest of the junior
subordinated debentures have been paid in full and other conditions are
satisfied.
INDENTURE EVENTS OF DEFAULT
The indenture provides that any one or more of the following described
events regarding the junior subordinated debentures that has occurred and is
continuing constitutes a debenture event of default:
- failure for 30 days to pay any interest on the junior subordinated
debentures, when due, subject to the deferral of any due date in the case
of an extension period;
- failure to pay any principal on the junior subordinated debentures when
due whether at maturity, upon redemption by declaration or otherwise;
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- failure by Spectrum to observe or perform in any material respect a number
of other covenants contained in the indenture for 90 days after written
notice to Spectrum from the indenture trustee or to Spectrum and the
indenture trustee by the holders of at least 25% in aggregate outstanding
principal amount of the junior subordinated debentures; or events in
bankruptcy, insolvency or reorganization of Spectrum, including the
voluntary commencement of bankruptcy proceedings, entry of an order for
relief against Spectrum in a bankruptcy proceeding, appointment of a
custodian over substantially all of Spectrum's property, a general
assignment for the benefit of creditors, or a court order for liquidation
of Spectrum.
The holders of a majority in aggregate outstanding principal amount of the
junior subordinated debentures have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the indenture
trustee. The indenture trustee or the holders of not less than 25% in aggregate
outstanding principal amount of the junior subordinated debentures may declare
the principal due and payable immediately upon a debenture event of default. The
holders of a majority in aggregate outstanding principal amount of the junior
subordinated debentures may annul the declaration and waive the default if the
default, other than the non-payment of the principal of the junior subordinated
debentures which has become due solely by the 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 indenture trustee.
Should the holders of the junior subordinated debentures fail to annul the
declaration and waive the default, the holders of a majority in aggregate
liquidation amount of the preferred securities will have the right to do so. In
case a debenture event of default occurs and is continuing, the property trustee
will have the right to declare the principal of and the interest on the junior
subordinated debentures, and any other amounts payable under the indenture, to
be due and payable and to enforce its other rights as a creditor.
Spectrum is required to file annually with the indenture trustee a
certificate as to whether Spectrum is in compliance with all the conditions and
covenants applicable to it under the indenture.
ENFORCEMENT OF RIGHTS BY HOLDERS OF PREFERRED SECURITIES
If an event of default under the indenture has occurred and is continuing
and the default is attributable to Spectrum's failure to pay interest or
principal on the junior subordinated debentures on the due date, a holder of
preferred securities may institute a legal proceeding directly against Spectrum
for payment of principal and interest on the junior subordinated debentures
having a principal amount equal to the aggregate liquidation amount of the
preferred securities of the holder. This action is referred to in this
discussion as a direct action. If the right to bring a direct action is removed,
Spectrum Capital Trust I may become subject to the reporting obligations under
the Securities Exchange Act of 1934. Spectrum will have the right under the
indenture to set-off any payment made to the holder of preferred securities by
Spectrum in connection with a direct action.
The holders of the preferred securities would not be able to exercise
directly any remedies other than those set forth in the preceding paragraph
available to the holders of the junior subordinated debentures unless there has
been an event of default under the trust agreement. See "Description of the
Preferred Securities -- Events of Default; Notice."
CONSOLIDATION, MERGER, SALE OF ASSETS AND OTHER TRANSACTIONS
The indenture provides that Spectrum will not consolidate with or merge into
any other person or convey, transfer or lease its properties and assets
substantially as an entirety to any person, and no person will consolidate with
or merge into Spectrum or convey, transfer or lease its properties and assets
substantially as an entirety to Spectrum, unless:
- in case Spectrum 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 the
successor
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person expressly assumes Spectrum's obligations on the junior subordinated
debentures issued under the indenture;
- immediately after giving effect to this type of transaction, no debenture
event of default, and no event which, after notice or lapse of time or
both, would become a debenture event of default, has occurred and is
continuing; and
- other conditions as prescribed in the indenture are met.
The provisions of the indenture do not afford holders of the junior
subordinated debentures protection in the event of a highly leveraged or other
transaction involving Spectrum that may adversely affect holders of the junior
subordinated debentures.
Under the indenture, Spectrum will have satisfied and discharged the
indenture when all junior subordinated debentures not previously delivered to
the indenture trustee for cancellation (1) have become due and payable or (2)
will become due and payable at their stated maturity within one year, and
Spectrum deposits in trust with the indenture trustee sufficient funds to pay
and discharge the entire indebtedness on the junior subordinated debentures to
the deposit date or to the stated maturity, as the case may be. This
satisfaction and discharge will not apply to Spectrum's obligations to pay all
other sums due under the indenture and to provide the officers' certificates and
opinions of counsel described in the indenture.
GOVERNING LAW
The indenture and the junior subordinated debentures will be governed by and
construed in accordance with the laws of the State of Iowa.
INFORMATION CONCERNING THE INDENTURE TRUSTEE
The indenture trustee will have and be subject to all the duties and
responsibilities specified for an indenture trustee under the Trust Indenture
Act. Subject to these provisions, the indenture trustee is under no obligation
to exercise any of the powers vested in it by the indenture at the request of
any holder of junior subordinated debentures, unless offered reasonable
indemnity by the holder against the costs, expenses and liabilities which might
be incurred. The indenture 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 indenture trustee reasonably believes that repayment or adequate
indemnity is not reasonably assured to it.
COVENANTS OF SPECTRUM
Spectrum will covenant in the indenture, as to the junior subordinated
debentures, that during the time that (1) Spectrum Capital Trust I is the holder
of all junior subordinated debentures, (2) a tax event in respect of Spectrum
Capital Trust I has occurred and is continuing and (3) Spectrum has elected, and
has not revoked the election, to pay additional sums, as defined under
"Description of the Preferred Securities -- Redemption -- Mandatory and Optional
Rights of Spectrum," in respect of the preferred securities, Spectrum will pay
to Spectrum Capital Trust I these additional sums. Spectrum will also covenant,
as to the junior subordinated debentures:
- to maintain directly or indirectly 100% ownership of the common securities
of Spectrum Capital Trust I to which junior subordinated debentures have
been issued, provided that successors which are permitted under the
indenture may succeed to Spectrum's ownership of the common securities;
- to use its reasonable efforts to cause Spectrum Capital Trust I (a) to
remain a business trust, except in connection with a distribution of
junior subordinated debentures to the holders of the preferred securities
in liquidation of Spectrum Capital Trust I, (b) the redemption of all of
the
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trust securities or (c) in connection with mergers, consolidations, or
amalgamations permitted by the trust agreement; and
- to use its reasonable efforts to cause each Holder of trust securities to
be treated as owning an individual beneficial interest in the junior
subordinated debentures.
BOOK-ENTRY ISSUANCE
The depositary will act as securities depositary for all of the preferred
securities and the junior subordinated debentures. The preferred securities and
the junior subordinated debentures will be issued only as fully-registered
securities registered in the name of Cede & Co., the depositary's nominee. One
or more fully-registered global certificates will be issued for the preferred
securities and the junior subordinated debentures and will be deposited with the
depositary.
The depositary is a limited purpose trust company organized under the New
York Banking Law, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York Uniform Commercial Code, and a "clearing
agency" registered under the provisions of Section 17A of the Securities
Exchange Act of 1934. The depositary holds securities that its participants
deposit with the depositary. The depositary also facilitates the settlement
among participants of securities transactions, such as transfers and pledges, in
deposited securities through electronic computerized book-entry changes in
participants' accounts, thereby eliminating the need for physical movement of
securities certificates. Direct participants include securities brokers and
dealers, banks, trust companies, clearing corporations and other organizations.
The depositary is owned by a number of its direct participants and by the New
York Stock Exchange, Inc., the American Stock Exchange, Inc. and the National
Association of Securities Dealers, Inc. Access to the depositary system is also
available to others such as securities brokers and dealers, banks and trust
companies that clear through or maintain custodial relationships with direct
participants, either directly or indirectly. The rules applicable to the
depositary and its participants are on file with the Securities and Exchange
Commission.
Purchases of preferred securities or junior subordinated debentures within
the depositary system must be made by or through direct participants, which will
receive a credit for the preferred securities or junior subordinated debentures
on the depositary's records. The ownership interest of each actual purchaser of
each preferred security and each junior subordinated debenture is in turn to be
recorded on the direct and indirect participants' records. Beneficial owners
will not receive written confirmation from the depositary of their purchases,
but 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 preferred securities or junior subordinated debentures. Transfers of
ownership interests in the preferred securities or junior subordinated
debentures are to be accomplished by entries made on the books of participants
acting on behalf of beneficial owners. Beneficial owners will not receive
certificates representing their ownership interests in preferred securities or
junior subordinated debentures, except in the event that use of the book-entry
system for the or junior subordinated debentures is discontinued.
The depositary has no knowledge of the actual beneficial owners of the
preferred securities or the junior subordinated debentures. The depositary's
records reflect only the identity of the direct participants to whose accounts
the preferred securities or junior subordinated debentures are credited, which
may or may not be the beneficial owners. The participants will remain
responsible for keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by the depositary to direct
participants, by direct participants to indirect participants, and by direct
participants and indirect participants to beneficial owners and the voting
rights of direct participants, indirect participants and beneficial owners will
be governed by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time.
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Redemption notices will be sent to Cede & Co. as the registered holder of
the preferred securities or junior subordinated debentures. If less than all of
the preferred securities or the junior subordinated debentures are being
redeemed, the depositary will determine by lot or pro rata the amount of the
preferred securities of each direct participant to be redeemed.
Although voting regarding the preferred securities and the junior
subordinated debentures is limited to the holders of record of the preferred
securities and the junior subordinated debentures, in those instances in which a
vote is required, neither the depositary nor Cede & Co. will itself consent or
vote regarding preferred securities or the junior subordinated debentures. Under
its usual procedures, the depositary would mail an omnibus proxy to the relevant
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 the preferred securities or junior subordinated debentures are credited
on the record date and which are used and identified in a listing attached to
the omnibus proxy.
Distribution payments on the preferred securities or the junior subordinated
debentures will be made by the relevant trustee to the depositary. The
depositary's practice is to credit direct participants' accounts on the relevant
payment date in accordance with their respective holdings shown on the
depositary's records unless the depositary has reason to believe that it will
not receive payments on the payment date. Payments by participants to beneficial
owners will be governed by standing instructions and customary practices.
Payments will be the responsibility of the participant and not of the
depositary, the relevant trustee, Spectrum Capital Trust I or Spectrum, subject
to any statutory or regulatory requirements as may be in effect from time to
time. Payment of distributions to the depositary is the responsibility of the
relevant trustee, disbursement of the payments to direct participants is the
responsibility of the depositary, and disbursements of the payments to the
beneficial owners is the responsibility of direct and indirect participants.
The depositary may discontinue providing its services as securities
depositary regarding any of the preferred securities or the junior subordinated
debentures at any time by giving reasonable notice to the relevant trustee and
Spectrum. In the event that a successor securities depositary is not obtained,
definitive preferred securities or subordinated debenture certificates
representing the preferred securities or junior subordinated debentures are
required to be printed and delivered. Spectrum, at its option, may decide to
discontinue use of the system of book-entry transfers through the depositary, or
a successor depositary. After a debenture event of default, the holders of a
majority in liquidation preference of preferred securities or aggregate
principal amount of junior subordinated debentures may determine to discontinue
the system of book-entry transfers through the depositary. In this event,
definitive certificates for the preferred securities or junior subordinated
debentures will be printed and delivered.
The information in this section concerning the depositary and the
depositary's book-entry system has been obtained from sources that Spectrum
Capital Trust I and Spectrum believe to be accurate, but Spectrum Capital Trust
I and Spectrum assume no responsibility for the accuracy thereof. Neither
Spectrum Capital Trust I nor Spectrum has any responsibility for the performance
by the depositary or its participants of their respective obligations as
described in this prospectus or under the rules and procedures governing their
respective operations.
DESCRIPTION OF PREFERRED SECURITIES GUARANTEE
The preferred securities guarantee agreement will be executed and delivered
by Spectrum concurrently with the issuance of the preferred securities. The
preferred securities guarantee will be for the benefit of the holders of the
preferred securities. Wilmington Trust Company will act as trustee under the
preferred securities guarantee for the purposes of compliance with the Trust
Indenture Act, and the preferred securities guarantee will be qualified under
the Trust Indenture Act. The following is a summary of the material provisions
of the preferred securities guarantee. Prospective investors are urged to read
the form of the preferred securities guarantee which has been filed as an
exhibit to the
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registration statement of which this prospectus forms a part. The guarantee
trustee will hold the preferred securities guarantee for the benefit of the
holders of the preferred securities.
GENERAL OVERVIEW
The preferred securities guarantee is an irrevocable guarantee on a
subordinated basis of all of Spectrum Capital Trust I's obligations to make
payments under the preferred securities, but will apply only to the extent that
Spectrum Capital Trust I has funds sufficient to make the payments, and is not a
guarantee of collection.
Spectrum will irrevocably agree to pay in full on a subordinated basis, to
the extent set forth in this prospectus, the preferred securities guarantee
payments, as defined below, to the holders of the preferred securities, as and
when due, regardless of any defense, right of set-off or counterclaim that
Spectrum Capital Trust I may have or assert other than the defense of payment.
The following payments regarding the preferred securities, to the extent not
paid by or on behalf of Spectrum Capital Trust I, will be subject to the
preferred securities guarantee of Spectrum:
- any accumulated and unpaid distributions required to be paid on the
preferred securities, to the extent that Spectrum Capital Trust I has
available funds on hand at the time;
- the redemption price regarding any preferred securities called for
redemption to the extent that Spectrum Capital Trust I has available funds
on hand at the time; and
- upon a voluntary or involuntary dissolution, winding up or liquidation of
Spectrum Capital Trust I, unless the junior subordinated debentures are
distributed to holders of the preferred securities.
The amount of the preferred securities guarantee will be the lesser of (a)
the liquidation distribution and (b) the amount of assets of Spectrum Capital
Trust I remaining available for distribution to holders of preferred securities.
Spectrum's obligation to make a preferred securities guarantee payment may be
satisfied by direct payment of the required amounts by Spectrum to the holders
of the preferred securities or by causing Spectrum Capital Trust I to pay these
amounts to the holders.
If Spectrum does not make interest payments on the junior subordinated
debentures held by Spectrum Capital Trust I, Spectrum Capital Trust I will not
be able to pay distributions on the preferred securities and will not have funds
legally available to pay distributions. The preferred securities guarantee will
rank subordinate and junior in right of payment to all senior and subordinated
debt of Spectrum. See "Status of the Preferred Securities Guarantee" below.
Because Spectrum is a holding company, the right of Spectrum to participate in
any distribution of assets of any subsidiary upon the subsidiary's liquidation
or reorganization or otherwise, is subject to the prior claims of creditors of
that subsidiary, except to the extent Spectrum may itself be recognized as a
creditor of that subsidiary. Accordingly, Spectrum's obligations under the
preferred securities guarantee will be effectively subordinated to all existing
and future liabilities of Spectrum's subsidiaries, and claimants should look
only to the assets of Spectrum for payments thereunder. Except as otherwise
described in this prospectus, the preferred securities guarantee does not limit
the incurrence or issuance of other secured or unsecured debt of Spectrum,
including senior and subordinated debt whether under the indenture, any other
indenture that Spectrum may enter into in the future, or otherwise.
Spectrum has, through the preferred securities guarantee, the trust
agreement, the junior subordinated debentures, the indenture and the expense
agreement relating to Spectrum Capital Trust I, taken together, fully,
irrevocably and unconditionally guaranteed on a subordinated basis all of
Spectrum Capital Trust I's obligations under the preferred securities. No single
document standing alone or operating in conjunction with fewer than all of the
other documents constitutes this preferred securities guarantee. It is only the
combined operation of these documents that has the effect of providing a full,
irrevocable and unconditional guarantee on a subordinated basis of all Spectrum
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Capital Trust I's obligations under the preferred securities. See "Relationship
Among the Preferred Securities, the Junior Subordinated Debentures and the
Preferred Securities Guarantee."
STATUS OF THE PREFERRED SECURITIES GUARANTEE
The preferred securities guarantee will constitute an unsecured obligation
of Spectrum and will rank subordinate and junior in right of payment to all
senior and subordinated debt in the same manner as the junior subordinated
debentures.
The preferred securities guarantee will constitute a guarantee of payment
and not of collection. The guaranteed party may institute a legal proceeding
directly against Spectrum to enforce its rights under the preferred securities
guarantee without first instituting a legal proceeding against any other person
or entity. The preferred securities guarantee will be held for the benefit of
the holders of the preferred securities. The preferred securities guarantee does
not place a limitation on the amount of additional senior and subordinated debt
that may be incurred by Spectrum. Spectrum expects from time to time to incur
additional indebtedness constituting senior and subordinated debt.
AMENDMENT AND ASSIGNMENT
Except regarding any changes which do not adversely affect the rights of
holders of the preferred securities in a material manner, in which case no vote
will be required, the preferred securities 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 preferred securities. See "Description of
the Preferred Securities -- Voting Rights; Amendment of the Trust Agreement."
All guarantees and agreements contained in the preferred securities guarantee
will bind the successors, assigns, receivers, trustees and representatives of
Spectrum and will inure to the benefit of the holders of the preferred
securities then outstanding.
EVENTS OF DEFAULT
An event of default under the preferred securities guarantee will occur upon
the failure of Spectrum to perform any of its payment or other obligations under
the preferred securities guarantee. The holders of not less than a majority in
aggregate liquidation amount of the preferred securities have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the guarantee trustee regarding the preferred securities guarantee
or to direct the exercise of any trust or power conferred upon the guarantee
trustee under the preferred securities guarantee.
Any holder of preferred securities may institute a legal proceeding directly
against Spectrum to enforce the holder's rights under the preferred securities
guarantee without first instituting a legal proceeding against Spectrum Capital
Trust I, the guarantee trustee or any other person or entity.
Spectrum, as guarantor, is required to file annually with the guarantee
trustee a certificate as to whether Spectrum is in compliance with all the
conditions and covenants applicable to it under the preferred securities
guarantee.
INFORMATION CONCERNING THE GUARANTEE TRUSTEE
The guarantee trustee, other than during the occurrence and continuance of a
default by Spectrum in performance of the preferred securities guarantee,
undertakes to perform only the duties which are specifically set forth in the
preferred securities guarantee. After default regarding the preferred securities
guarantee, the guarantee trustee must exercise the same degree of care and skill
as a prudent person would exercise or use in the conduct of his or her own
affairs. Subject to this provision, the guarantee trustee is under no obligation
to exercise any of the powers vested in it by the preferred securities guarantee
at the request of any holder of the preferred securities unless it is offered
reasonable indemnity against the costs, expenses and liabilities that might be
incurred.
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TERMINATION OF THE PREFERRED SECURITIES GUARANTEE
The preferred securities guarantee will terminate and be of no further force
and effect upon full payment of the redemption price of the preferred
securities, upon full payment of the amounts payable upon liquidation of
Spectrum Capital Trust I or upon distribution of junior subordinated debentures
to the holders of the preferred securities. The preferred securities guarantee
will continue to be effective or will be reinstated, as the case may be, if at
any time any holder of the preferred securities must restore payment of any sums
paid under the preferred securities or the preferred securities guarantee.
GOVERNING LAW
The preferred securities guarantee will be governed by and construed in
accordance with the laws of the State of Iowa.
THE EXPENSE AGREEMENT
Under the agreement as to expenses and liabilities entered into by Spectrum
under the trust agreement, Spectrum will irrevocably and unconditionally
guarantee to each person or entity to whom Spectrum Capital Trust I becomes
indebted or liable, the full payment of any costs, expenses or liabilities of
Spectrum Capital Trust I, other than obligations of Spectrum Capital Trust I to
pay to the holders of the preferred securities or other similar interests in
Spectrum Capital Trust I of the amounts due the holders under the terms of the
preferred securities or the other similar interests, as the case may be.
RELATIONSHIP AMONG THE PREFERRED SECURITIES, THE JUNIOR
SUBORDINATED DEBENTURES AND THE PREFERRED SECURITIES GUARANTEE
FULL AND UNCONDITIONAL PREFERRED SECURITIES GUARANTEE ON A SUBORDINATED BASIS
Payments of distributions and other amounts due on the preferred securities,
to the extent Spectrum Capital Trust I has funds available for the payment of
the distributions, are irrevocably guaranteed by Spectrum as and to the extent
set forth under "Description of Preferred Securities Guarantee." Taken together,
Spectrum's obligations under the junior subordinated debentures, the indenture,
the trust agreement, the expense agreement and the preferred securities
guarantee provide, in the aggregate, a full, irrevocable and unconditional
guarantee on a subordinated basis of payments of distributions and other amounts
due on the preferred securities. No single document standing alone or operating
in conjunction with fewer than all of the other documents constitutes the
preferred securities guarantee. It is only the combined operation of those
documents that has the effect of providing a full, irrevocable and unconditional
guarantee on a subordinated basis of Spectrum Capital Trust I's obligations
under the preferred securities. If and to the extent that Spectrum does not make
payments on the junior subordinated debentures, Spectrum Capital Trust I will
not pay distributions or other amounts due on the preferred securities. The
preferred securities guarantee does not cover payment of distributions when
Spectrum Capital Trust I does not have sufficient funds to pay the
distributions. In this event, the remedy of a holder of the preferred securities
is to institute a legal proceeding directly against Spectrum for enforcement of
payment of the distributions to the holder. The obligations of Spectrum under
the preferred securities guarantee are subordinate and junior in right of
payment to all senior and subordinated debt.
SUFFICIENCY OF PAYMENTS
As long as payments of interest and other payments are made when due on the
junior subordinated debentures, the payments will be sufficient to cover
distributions and other payments due on the preferred securities, primarily
because: (1) the aggregate principal amount of the junior subordinated
debentures will be equal to the sum of the aggregate liquidation amount of the
preferred securities and common securities; (2) the interest rate and interest
and other payment dates on the junior subordinated debentures will match the
distribution rate and distribution and other payment
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dates for the preferred securities; (3) Spectrum will pay for all and any costs,
expenses and liabilities of Spectrum Capital Trust I except Spectrum Capital
Trust I's obligations to holders of preferred securities; and (4) the trust
agreement further provides that Spectrum Capital Trust I will not engage in any
activity that is not consistent with the limited purposes of Spectrum Capital
Trust I.
Notwithstanding anything to the contrary in the indenture, Spectrum has the
right to set-off any payment it is otherwise required to make under the
indenture to the extent Spectrum has made payments, or is concurrently on the
date of the payment making, a payment under the preferred securities guarantee.
ENFORCEMENT RIGHTS OF HOLDERS OF THE PREFERRED SECURITIES UNDER THE PREFERRED
SECURITIES GUARANTEE
A holder of any the preferred securities may institute a legal proceeding
directly against Spectrum to enforce its rights under the preferred securities
guarantee without first instituting a legal proceeding against the guarantee
trustee, Spectrum Capital Trust I or any other person or entity.
A default or event of default under any senior and subordinated debt would
not constitute an event of default. However, in the event of payment defaults
under, or acceleration of, senior and subordinated debt, the subordination
provisions of the indenture provide that no payments may be made in respect of
the junior subordinated debentures until the senior and subordinated debt has
been paid in full or any payment default thereunder has been cured or waived.
Failure to make required payments on junior subordinated debentures would
constitute an event of default.
LIMITED PURPOSE OF SPECTRUM CAPITAL TRUST I
The preferred securities evidence a beneficial interest in Spectrum Capital
Trust I, and Spectrum Capital Trust I exists for the sole purpose of issuing the
trust securities and investing the proceeds from the sale of the trust
securities in the junior subordinated debentures. A principal difference between
the rights of a holder of the preferred securities and a holder of a junior
subordinated debenture is that a holder of a junior subordinated debenture is
entitled to receive from Spectrum the principal amount of and interest accrued
on junior subordinated debentures held, while a holder of the preferred
securities is entitled to receive distributions from Spectrum Capital Trust I,
or from Spectrum under the preferred securities guarantee, if and to the extent
Spectrum Capital Trust I has funds available for the payment of the
distributions.
RIGHTS UPON TERMINATION
Upon any voluntary or involuntary termination, winding-up or liquidation of
Spectrum Capital Trust I involving the liquidation of the junior subordinated
debentures, the holders of preferred securities will be entitled to receive, out
of assets held by Spectrum Capital Trust I, the liquidation distribution in
cash. See "Description of the Preferred Securities -- Liquidation Distribution
Upon Termination." Upon any voluntary or involuntary liquidation or bankruptcy
of Spectrum, the property trustee, as holder of the junior subordinated
debentures, would be a subordinated creditor of Spectrum, subordinated in right
of payment to all senior and subordinated debt as set forth in the indenture,
but entitled to receive payment in full of principal and interest, before any
stockholders of Spectrum receive payments or distributions. Since Spectrum is
the guarantor under the preferred securities guarantee and has agreed to pay for
all costs, expenses and liabilities of Spectrum Capital Trust I, other than
Spectrum Capital Trust I's obligations to the holders of its preferred
securities, the positions of a holder of the preferred securities and a holder
of junior subordinated debentures relative to other creditors and to
stockholders of Spectrum in the event of liquidation or bankruptcy of Spectrum
are expected to be substantially the same.
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MATERIAL FEDERAL INCOME TAX CONSEQUENCES
In the opinion of Baird, Holm, McEachen, Pedersen, Hamann & Strasheim,
counsel to Spectrum, the following are the material United States federal income
tax consequences to the purchase, ownership and disposition of preferred
securities. Unless otherwise stated, this discussion deals only with preferred
securities held as capital assets by United States persons, defined below, who
purchase the preferred securities upon original issuance at the first price at
which a substantial amount of preferred securities were sold. As used in this
prospectus, a "United States person" means a person that is (1) a citizen or
resident of the United States, (2) a corporation, partnership or other entity
created or organized in or under the laws of the United States or any political
subdivision thereof, (3) an estate the income of which is subject to United
States federal income taxation regardless of its source, or (4) any trust if a
court within the United States is able to exercise primary supervision over the
administration of Spectrum Capital Trust I and one or more United States persons
have the authority to control all substantial decisions of Spectrum Capital
Trust I. The tax treatment of holders may vary depending on their particular
situation. This discussion does not address all the tax consequences that may be
relevant to a particular holder or to holders who may be subject to special tax
treatment, such as banks, real estate investment trusts, regulated investment
companies, insurance companies, dealers in securities or currencies, tax-exempt
investors, foreign investors, persons that will hold the preferred securities as
part of a position in a "straddle" or as part of a "hedging" or other integrated
transaction, or persons whose functional currency is not the United States
dollar, or the consequences to shareholders, partners or beneficiaries of a
holder. In addition, this discussion does not include any description of any
alternative minimum tax consequences or other collateral tax consequences under
United States federal income tax laws, or the tax laws of any state, local or
foreign government that may be applicable to a holder of preferred securities.
This discussion is based on the Internal Revenue Code of 1986, as amended, the
Treasury regulations promulgated thereunder and administrative and judicial
interpretations thereof, as of the date hereof, all of which are subject to
change, possibly on a retroactive basis. Any change of this nature could cause
the tax consequences to vary substantially from the consequences described
below, possibly adversely affecting an owner of preferred securities.
The following discussion does not discuss the tax consequences that might be
relevant to persons that are not United States persons. Non-United States
persons should consult their own tax advisors as to the specific United States
federal income tax consequences of the purchase, ownership and disposition of
preferred securities.
The authorities on which this discussion is based are subject to various
interpretations and the opinions of counsel are not binding on the IRS or the
courts, either of which could take a contrary position. Moreover, no rulings
have been or will be sought from the IRS regarding the transactions described in
this prospectus. Accordingly, there can be no assurance that the IRS will not
challenge the opinions expressed in this discussion or that a court would not
sustain this type of challenge. It is therefore possible that the federal income
tax treatment of the purchase, ownership and disposition of preferred securities
may differ from the treatment described below.
SECURITYHOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS REGARDING THE
PARTICULAR PERSONAL TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND
DISPOSITION OF THE 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. FOR A DISCUSSION OF THE POSSIBLE
REDEMPTION OF THE PREFERRED SECURITIES IF A TAX EVENT OCCURS, SEE "DESCRIPTION
OF THE PREFERRED SECURITIES -- REDEMPTION -- MANDATORY AND OPTIONAL RIGHTS OF
SPECTRUM."
CLASSIFICATION OF SPECTRUM CAPITAL TRUST I
In connection with the issuance of the preferred securities, counsel is of
the opinion that, under current law and assuming full compliance with the terms
of the trust agreement, and based on the facts and assumptions contained in the
opinion, Spectrum Capital Trust I will be classified as a grantor trust
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and not as an association taxable as a corporation for United States federal
income tax purposes. As a result, each beneficial owner of the preferred
securities, a securityholder, will be treated as owning an undivided beneficial
interest in the junior subordinated debentures. Accordingly, each securityholder
will be required to include in its gross income its pro rata share of the
interest income or original issue discount that is paid or accrued on the junior
subordinated debentures. See "Interest Income and Original Issue Discount." No
amount included in income regarding the preferred securities will be eligible
for the dividends received deduction.
CLASSIFICATION OF THE JUNIOR SUBORDINATED DEBENTURES
Counsel is of the opinion that the junior subordinated debentures will be
classified for United States federal income tax purposes as indebtedness of
Spectrum under current law, and, by acceptance of a preferred security, each
holder covenants to treat the junior subordinated debentures as indebtedness and
the preferred securities as evidence of an indirect beneficial ownership
interest in the junior subordinated debentures. No assurance can be given,
however, that this classification will not be challenged by the IRS or, if
challenged, that such a challenge will not be successful. The remainder of this
discussion assumes that the junior subordinated debentures will be classified
for United States federal income tax purposes as indebtedness of Spectrum. See
"Risk Factors -- You are subject to prepayment risk because possible tax law
changes could result in a redemption of the preferred securities."
INTEREST INCOME AND ORIGINAL ISSUE DISCOUNT
Except as set forth below, stated interest on the junior subordinated
debentures generally will be included in income by a securityholder at the time
the interest income is paid or accrued in accordance with the securityholder's
regular method of tax accounting.
If Spectrum exercises its right to defer payments of interest on the junior
subordinated debentures, the junior subordinated debentures will become original
issue discount instruments, and the amount of original issue discount would be
equal to the aggregate of all future payments of interest on the junior
subordinated debentures. In this event, all securityholders would be required to
include the original issue discount on the junior subordinated debentures in
income on a daily economic accrual basis during the extension period, even
though Spectrum would not pay the interest until the end of the extension
period, and even though some securityholders may use the cash method of tax
accounting. Moreover, thereafter the junior subordinated debentures would be
taxed as original issue discount instruments for as long as they remained
outstanding. Thus, even after the end of the extension period, all
securityholders would be required to continue to include the original issue
discount on the junior subordinated debentures in income on a daily economic
accrual basis, regardless of their method of tax accounting and in advance of
receipt of the cash attributable to this interest income. In this event, actual
cash payments of interest on the junior subordinated debentures would not be
reported separately as taxable income.
In addition, Spectrum's option to defer the payment of interest on the
junior subordinated debentures during an extension period might cause the junior
subordinated debentures to be considered initially issued with original issue
discount. Spectrum believes, and will take the position, that this result will
not arise because of an exception in the Treasury regulations that applies when
there is only a remote likelihood that a contingency, such as election to defer,
will occur. Assuming that the likelihood of an extension period is, in fact,
deemed remote, counsel believes that this position is correct. However, the
Treasury regulations described above have not yet been addressed in any rulings
or other definitive interpretations by the IRS. Therefore, there is not a
sufficient basis for counsel to express an opinion regarding whether or not an
election to defer will be deemed a remote contingency. It is possible that the
IRS could take a contrary position. If the IRS were to assert successfully that
the junior subordinated debentures were issued with original issue discount
regardless of whether Spectrum exercises its right to defer payments of interest
on the debentures, all securityholders would be required to include the stated
interest thereon in income on a daily economic accrual basis as described above.
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Spectrum does not anticipate that additional sums, as defined in the
indenture, will be paid. However, if additional sums are paid, they will be
taxable to the securityholder as ordinary income, generally as interest income.
DISTRIBUTION OF JUNIOR SUBORDINATED DEBENTURES TO HOLDERS OF PREFERRED
SECURITIES
Under current law, a distribution by Spectrum Capital Trust I of the junior
subordinated debentures as described under the caption "Description of the
Preferred Securities -- Liquidation and Distribution Upon Termination" will be
non-taxable and will result in the securityholder receiving directly its pro
rata share of the junior subordinated debentures previously held indirectly
through Spectrum Capital Trust I, with a holding period and aggregate tax basis
equal to the holding period and aggregate tax basis the securityholder had in
its preferred securities before the distribution. If, however, the liquidation
of Spectrum Capital Trust I were to occur because Spectrum Capital Trust I is
subject to United States federal income tax regarding income accrued or received
on the junior subordinated debentures as a result of a tax event or otherwise,
the distribution of junior subordinated debentures to securityholders by
Spectrum Capital Trust I would be a taxable event to Spectrum Capital Trust I
and each securityholder, and a securityholder would recognize gain or loss as if
the securityholder had sold or exchanged its preferred securities for the junior
subordinated debentures it received upon the liquidation of Spectrum Capital
Trust I. See -- "Sales or Redemption of Preferred Securities." A securityholder
would recognize interest income in respect of junior subordinated debentures
received from Spectrum Capital Trust I in the manner described above under
"Interest Income and Original Issue Discount."
SALES OR REDEMPTION OF PREFERRED SECURITIES
Gain or loss will be recognized by a securityholder on a sale of preferred
securities, including a redemption for cash, in an amount equal to the
difference between the amount realized, which for this purpose will exclude
amounts attributable to accrued interest or original issue discount not
previously included in income, and the securityholder's adjusted tax basis in
the preferred securities sold or so redeemed. A securityholder's adjusted tax
basis will be its initial purchase price, increased by any accrued original
issue discount previously included in the securityholder's gross income to the
date of disposition, and decreased by payments, other than stated interest on
the junior subordinated debentures that does not constitute original issue
discount, received on the preferred securities. Any gain or loss on the sale,
exchange or retirement of the preferred securities generally will be treated as
capital gain or loss. In general, amounts attributable to accrued interest
regarding a securityholder's pro rata share of the junior subordinated
debentures not previously included in income and which are excluded from the
amount realized on a sale of preferred securities and therefore not part of the
calculation of gain or loss, will be taxable as ordinary income. However,
because there is conflicting authority regarding whether or not a cash basis
taxpayer is required to include in income accrued interest in the event the
preferred securities are sold for less than their principal amount, counsel
expresses no opinion regarding the need for inclusion in income of accrued
interest for a cash basis taxpayer in such an event. The Internal Revenue
Service Restructuring and Reform Act of 1998 provides that for taxpayers other
than corporations, net capital gain, which is defined as net long-term capital
gain over net short-term capital loss for the taxable year, realized from
property, with limited exceptions, is subject to a maximum marginal stated tax
rate of 20%, or 10% in the case of taxpayers in the lowest tax bracket. Capital
gain or loss is long-term if the holding period for the asset is more than one
year, and is short-term if the holding period for the asset is one year or less.
Capital gains realized from assets held for one year or less are taxed at the
same rates as ordinary income. Subject to limited exceptions, capital losses
cannot be applied to offset ordinary income for United States federal income tax
purposes.
Should Spectrum exercise its option to defer any payment of interest on the
junior subordinated debentures, the preferred securities may trade at a price
that does not fully reflect the value of accrued but unpaid interest on the
underlying junior subordinated debentures. In the event of a deferral under
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the option, a securityholder that disposes of its preferred securities between
record dates for payments of distributions, and consequently does not receive a
distribution from Spectrum Capital Trust I for the period prior to the
disposition, will nevertheless be required to include in income accrued original
issue discount on the junior subordinated debentures through the date of
disposition and will add this amount to its adjusted tax basis in its preferred
securities. The securityholder will recognize a capital loss on the disposition
of its preferred securities to the extent the selling price, which may not fully
reflect the value of accrued but unpaid original issue discount, is less than
the securityholder's adjusted tax basis in the preferred securities, which will
include accrued but unpaid original issue discount that has been included in
income. As stated previously, subject to limited exceptions, capital losses
cannot be applied to offset ordinary income for United States federal income tax
purposes.
BACKUP WITHHOLDING TAX AND INFORMATION REPORTING
The amount of interest paid or original issue discount accrued, if any, on
the junior subordinated debentures, beneficial ownership of which is reflected
in the preferred securities held of record by United States persons, other than
corporations and other exempt securityholders, will be reported to the Service.
Generally, income on the preferred securities will be reported to
securityholders on Form 1099, which form should be mailed to securityholders by
January 31 following each calendar year. Proposed regulations, if adopted. could
alter the information reporting requirements which must be made to both the IRS
and the securityholders. Backup withholding at a rate of 31% will apply to
payments of interest to non-exempt United States persons unless the
securityholder furnishes its taxpayer identification number in the manner
prescribed in applicable Treasury regulations, certifies that the number is
correct, certifies as to no loss of exemption from backup withholding and meets
other conditions. Any amounts withheld from a securityholder under the backup
withholding rules will be allowed as a refund or a credit against the
securityholder's United States federal income tax liability, provided the
required information is furnished to the Service. Payment of the proceeds from
the disposition of preferred securities to or through the United States office
of a broker is subject to information reporting and backup withholding unless
the securityholder or beneficial owner establishes an exemption from information
reporting and backup withholding.
POSSIBLE TAX LAW CHANGES AFFECTING PREFERRED SECURITIES
Legislative proposals were made in 1996 and 1997, which if enacted, could
have adversely affected the ability of Spectrum to deduct interest paid on the
junior subordinated debentures. Although these proposals were not enacted, there
can be no assurance that future legislative proposals or final legislation will
not affect the ability of Spectrum to deduct interest on the junior subordinated
debentures or otherwise adversely affect the tax treatment of the transactions
described in this prospectus. A change of this nature could give rise to a tax
event, which may permit Spectrum to cause a redemption of the trust preferred
securities. Prospective investors should also be aware that a petition was
recently filed in the United States Tax Court as a result of a challenge by the
IRS of a taxpayer's treatment as indebtedness of a security issued with
characteristics similar to the junior subordinated debentures. If this matter is
litigated to a conclusion and the IRS's position on this matter is sustained,
such a judicial determination could constitute a tax event which could result in
an early redemption of the preferred securities. See "Risk Factors -- You are
subject to prepayment risk because possible tax law changes could result in a
redemption of the preferred securities," "Description of the Preferred
Securities -- Redemption -- Mandatory and Optional Rights of Spectrum" and
"Description of Junior Subordinated Debentures -- Redemption."
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, generally
may purchase preferred securities subject to the investing fiduciary's
determination that the investment in preferred securities satisfies ERISA's
fiduciary standards and other requirements applicable to investments by the
Plan.
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However, Spectrum and any of its affiliates may be considered a party in
interest, within the meaning of Section 3(14) of ERISA, or a disqualified
person, within the meaning of Section 4975 of the Code, regarding plans
maintained or sponsored by, or contributed to by, Spectrum or an affiliate, or
regarding which Spectrum or an affiliate is a fiduciary, or plans for which
Spectrum or an affiliate provide services. The acquisition and ownership of
preferred securities by an individual retirement arrangement or other Plan
described in Section 4975(e) (1) of the Code, regarding which Spectrum 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, which could give rise to the imposition of substantial taxes unless
the preferred securities are acquired under and in accordance with an applicable
exemption.
As a result, plans regarding which Spectrum and/or any of its affiliates is
a party in interest or a disqualified person should not acquire preferred
securities unless the preferred securities are acquired under and in accordance
with an applicable exemption. Any plans or entities whose assets include Plan
assets subject to ERISA or Section 4975 of the Code proposing to acquire
preferred securities should consult with their own counsel.
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UNDERWRITING
Subject to the terms and conditions of the underwriting agreement among
Spectrum, Spectrum Capital Trust I and the underwriters listed on the table
below for whom Howe Barnes Investments, Inc. is acting as representative, the
underwriters have severally agreed to purchase from Spectrum Capital Trust I an
aggregate of 2,000,000 preferred securities in the amounts set forth below
opposite their respective names.
<TABLE>
<CAPTION>
NUMBER OF
PREFERRED
UNDERWRITERS SECURITIES
- -------------------------------------------------------------------------- ------------------
<S> <C>
Howe Barnes Investments, Inc.
Total................................................................... 2,000,000
----------
----------
</TABLE>
Under the terms and conditions of the underwriting agreement, the
underwriters are committed to accept and pay for all of the preferred
securities, if any are taken.
Spectrum Capital Trust I has granted to the underwriters an option,
exercisable within 30 days after the date of this prospectus, to purchase up to
an additional 300,000 preferred securities at the same price per preferred
security to be paid by the underwriters for the other preferred securities
offered hereby. If the underwriters purchase any of the additional preferred
securities under this option, each underwriter will be committed to purchase the
additional shares in approximately the same proportion as set forth in the table
above. The underwriters may exercise the option only for the purpose of covering
over-allotments, if any, made in connection with the distribution of the
preferred securities offered hereby.
The table below shows the price and proceeds on a per security and aggregate
basis. The proceeds to be received by Spectrum Capital Trust I as shown in the
table below do not reflect estimated expenses of $ payable by Spectrum.
<TABLE>
<CAPTION>
PER PREFERRED SECURITY TOTAL
----------------------- -------------
<S> <C> <C>
Price to Investors....................................... $ 10 $ 20,000,000
Proceeds to Spectrum Capital Trust I..................... $ 10 $ 20,000,000
</TABLE>
All of the proceeds to Spectrum Capital Trust I will be used to purchase the
junior subordinated debentures from Spectrum. Spectrum has agreed to pay the
underwriters $ per preferred security, or a total of $ , as
compensation for arranging the investment in the junior subordinated debentures.
Should the underwriters exercise the over-allotment option, an aggregate of
$ will be paid to the underwriters for arranging the investment in the
junior subordinated debentures.
The underwriters propose to offer the preferred securities in part directly
to the public at the initial public offering price set forth on the cover page
of this prospectus, and in part to securities dealers at this price less a
concession not in excess of $ per preferred security. The underwriters
may allow, and the dealers may reallow, a concession not in excess of $
per preferred security to brokers and dealers. After the preferred securities
are released for sale to the public, the offering price and other selling terms
may from time to time be varied by the underwriters.
Spectrum and Spectrum Capital Trust I have agreed to indemnify the several
underwriters against several liabilities, including liabilities under the
Securities Act of 1933.
In connection with the offering, the underwriters may purchase and sell the
preferred securities in the open market. These transactions may include
over-allotment and stabilizing transactions and purchases to cover syndicate
short positions created in connection with the offering. Stabilizing
87
<PAGE>
transactions consist of bids or purchases for the purpose of preventing or
retarding a decline in the market price of the preferred securities; and
syndicate short positions involve the sale by the underwriters of a greater
number of securities than they are required to purchase from Spectrum in the
offering. The underwriters also may impose a penalty bid, whereby selling
concessions allowed to syndicate members or other broker-dealers in respect of
the securities sold in the offering for their account may be reclaimed by the
syndicate if the preferred securities are repurchased by the syndicate in
stabilizing or covering transactions. These activities may stabilize, maintain
or otherwise affect the market price of the Securities, which may be higher than
the price that might otherwise prevail in the open market. These activities, if
commenced, may be discontinued at any time. These transactions may be effected
in the over-the-counter market or otherwise.
The underwriters have advised Spectrum Capital Trust I that they do not
intend to confirm any sales of preferred securities to any discretionary
accounts. In connection with the offer and sale of the preferred securities, the
underwriters will comply with Rule 2810 under the NASD Conduct Rules.
REPORTS OF SPECTRUM
Spectrum intends to file with the Securities and Exchange Commission annual
reports containing its audited consolidated financial statements and quarterly
reports for the first three quarters of each fiscal year containing unaudited
financial information. Prior to this offering, Spectrum has not been a reporting
company with the Securities and Exchange Commission.
AVAILABLE INFORMATION
Spectrum and Spectrum Capital Trust I have filed electronically with the
Commission through EDGAR a registration statement on Form S-1 in accordance with
the requirements of the Securities Act of 1933 registering the preferred
securities. This prospectus does not contain all of the information set forth in
the registration statement and in the exhibits attached. Some items were omitted
in accordance with the rules and regulations of the Commission. Anyone may
inspect the registration statement without charge at the public reference
facilities of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549 and
may obtain copies of all or any part of it from the Commission upon payment of
the required fees. Statements contained in this prospectus which refer to a
document filed as an exhibit to the registration statement are qualified in
their entirety by reference to the copy of that document. The registration
statement may also be reviewed on the Commission's Web Site at
http://www.sec.gov.
LEGAL MATTERS
Certain matters of Delaware law relating to the validity of the preferred
securities, the enforceability of the trust agreement and the formation of
Spectrum Capital Trust I will be passed upon by Richards, Layton & Finger, P.A.,
Wilmington, Delaware, special Delaware counsel to Spectrum and Spectrum Capital
Trust I. The validity of the preferred securities guarantee and the junior
subordinated debentures will be passed upon for Spectrum by Baird, Holm,
McEachen, Pedersen, Hamann & Strasheim, Omaha, Nebraska, counsel to Spectrum.
Certain legal matters in connection with this offering will be passed upon for
the underwriters by Chapman and Cutler, Chicago, Illinois. Chapman and Cutler
and Baird, Holm, McEachen, Pedersen, Hamann & Strasheim will rely on the
opinions of Richards, Layton & Finger, P.A. as to matters of Delaware law.
Certain matters relating to United States federal income tax consequences will
be passed upon for Spectrum by Baird, Holm, McEachen, Pedersen, Hamann &
Strasheim.
Deryl F. Hamann, Chairman, CEO and controlling stockholder of Spectrum, is a
partner in the law firm of Baird, Holm, McEachen, Pedersen, Hamann & Strasheim.
88
<PAGE>
EXPERTS
The consolidated financial statements of Spectrum, except the 1996 financial
statements of Decatur Corporation, as of June 30, 1998 and 1997 and for each of
the three years in the period ended June 30, 1998, included in this prospectus
have been audited by McGladrey & Pullen, LLP as stated in their report appearing
herein. The 1996 financial statements of Decatur Corporation (consolidated with
those of Spectrum) not presented separately herein have been audited by Deloitte
& Touche LLP as stated in their report included herein. McGladrey & Pullen, LLP
has relied on the report of Deloitte & Touche LLP in issuing its report included
in this prospectus. Such consolidated financial statements of Spectrum are
included herein in reliance upon the respective reports of such firms given upon
their authority as experts in accounting and auditing. Both of the foregoing
firms are independent auditors.
89
<PAGE>
CONTENTS
<TABLE>
<S> <C>
INDEPENDENT AUDITORS' REPORTS............................................. F-2 and F-3
CONSOLIDATED FINANCIAL STATEMENTS
Balance Sheets at March 31, 1999, June 30, 1998 and 1997................ F-4
Statements of Income for the nine months ended March 31, 1999 and 1998
and years ended June 30, 1998, 1997 and 1996.......................... F-5
Statements of Stockholders' Equity for the nine months ended March 31,
1999 and years ended June 30, 1998, 1997 and 1996..................... F-6
Statements of Cash Flows for the nine months ended March 31, 1999 and
1998 and years ended June 30, 1998, 1997 and 1996..................... F-7 and F-8
F-9 through
Notes to Consolidated Financial Statements.............................. F-32
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
SPECTRUM BANCORPORATION, INC.
Omaha, Nebraska
We have audited the accompanying consolidated balance sheets of SPECTRUM
BANCORPORATION, INC. AND SUBSIDIARIES as of June 30, 1998 and 1997, and the
related consolidated statements of income, stockholders' equity and cash flows
for each of the three years in the period ended June 30, 1998. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits. We did not audit the 1996 financial statements of Decatur
Corporation which statements are included in the restated 1996 financial
statements as explained in Note 14 and reflect interest income constituting 30%
of the related consolidated total. Those statements were audited by other
auditors whose report has been furnished to us and our opinion for 1996, insofar
as it relates to the amounts included for Decatur Corporation, is based solely
on the report of other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, based upon our audits and the report of other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the financial position of SPECTRUM BANCORPORATION, INC. AND
SUBSIDIARIES as of June 30, 1998 and 1997, and the results of their operations
and their cash flows for each of the three years in the period ended June 30,
1998 in conformity with generally accepted accounting principles.
McGLADREY & PULLEN, LLP
Sioux Falls, South Dakota
June 1, 1999
F-2
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
Decatur Corporation and Subsidiaries:
We have audited statements of income, stockholders' equity and cash flows of
Decatur Corporation and Subsidiaries for the year ended December 31, 1996 (none
of which are presented herein). These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the results of operations and cash flows of Decatur
Corporation and Subsidiaries for the year ended December 31, 1996, in conformity
with generally accepted accounting principles.
Deloitte & Touche, LLP
February 7, 1997
F-3
<PAGE>
SPECTRUM BANCORPORATION, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1999, JUNE 30, 1998 AND 1997
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
MARCH 31, JUNE 30, JUNE 30,
1999 1998 1997
----------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Cash and due from banks (Notes 3 and 16)..................... $ 14,240 $ 19,019 $ 17,458
Federal funds sold (Note 16)................................. 28,990 21,785 13,865
----------- --------- ---------
TOTAL CASH AND CASH EQUIVALENTS........................ 43,230 40,804 31,323
Certificates of deposit...................................... 991 2,008 297
Securities available for sale (Notes 4, 8 and 9)............. 95,267 79,511 79,481
Loans receivable, net (Notes 5, 9, and 17)................... 429,579 402,871 355,500
Premises and equipment, net (Note 6)......................... 13,117 10,313 8,414
Accrued interest receivable.................................. 4,959 5,323 4,882
Cost in excess of net assets acquired........................ 2,759 2,830 1,894
Other assets (Note 10)....................................... 4,035 4,417 5,828
----------- --------- ---------
$ 593,937 $ 548,077 $ 487,619
----------- --------- ---------
----------- --------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Deposits (Note 7):
Non interest bearing..................................... $ 48,184 $ 47,315 $ 46,799
Interest bearing......................................... 441,360 403,475 352,379
----------- --------- ---------
TOTAL DEPOSITS......................................... 489,544 450,790 399,178
Federal funds purchased and securities sold under
agreements to repurchase (Note 8)........................ 19,301 18,788 17,583
Notes payable (Note 9)..................................... 40,320 39,302 38,490
Accrued interest and other liabilities (Note 11)........... 6,313 5,677 4,706
----------- --------- ---------
555,478 514,557 459,957
----------- --------- ---------
Minority interest in subsidiaries (Note 2)................... 2,072 1,972 1,420
----------- --------- ---------
Commitments and contingencies (Notes 15 and 16)
Stockholders' equity (Notes 9 and 13)
Preferred stock, $100 par value; 500,000 shares authorized;
issued and outstanding -- 9,000 shares of 8% cumulative,
nonvoting; 8,000 shares of 10% noncumulative,
nonvoting................................................ 1,700 1,700 1,700
Common stock, $1 par value, authorized 1,000,000 shares,
issued and outstanding: 1999 and 1998 71,727 shares; 1997
71,830 shares............................................ 72 72 72
Additional paid-in capital................................. 1,659 1,659 1,663
Retained earnings.......................................... 32,609 27,750 22,657
Accumulated other comprehensive income (Note 4)............ 347 367 150
----------- --------- ---------
36,387 31,548 26,242
----------- --------- ---------
$ 593,937 $ 548,077 $ 487,619
----------- --------- ---------
----------- --------- ---------
</TABLE>
See Notes to Consolidated Financial Statements.
F-4
<PAGE>
SPECTRUM BANCORPORATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
NINE MONTHS ENDED MARCH 31, 1999 AND 1998 AND
YEARS ENDED JUNE 30, 1998, 1997 AND 1996
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
MARCH 31, JUNE 30,
-------------------- -------------------------------
1999 1998 1998 1997 1996
--------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Interest income on:
Loans receivable........................................... $ 28,094 $ 26,339 $ 35,414 $ 30,839 $ 23,861
Taxable securities......................................... 3,929 3,224 4,308 4,771 4,011
Nontaxable securities...................................... 469 471 636 618 462
Dividends on securities.................................... 80 198 234 190 97
Federal funds sold and other............................... 1,196 955 1,313 726 766
--------- --------- --------- --------- ---------
33,768 31,187 41,905 37,144 29,197
--------- --------- --------- --------- ---------
Interest expense on:
Deposits................................................... 14,865 13,447 18,170 15,991 12,637
Federal funds purchased and securities sold under
agreements to repurchase................................. 507 564 934 846 565
Notes payable.............................................. 2,034 2,087 2,656 1,694 994
--------- --------- --------- --------- ---------
17,406 16,098 21,760 18,531 14,196
--------- --------- --------- --------- ---------
NET INTEREST INCOME.................................... 16,362 15,089 20,145 18,613 15,001
Provision for loan losses (Note 5)........................... 882 1,105 1,374 1,233 2,541
--------- --------- --------- --------- ---------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES.... 15,480 13,984 18,771 17,380 12,460
--------- --------- --------- --------- ---------
Other income:
Service charges and other fees............................. 1,804 1,580 2,126 1,919 1,667
Net gains from sale of loans............................... 1,674 135 803 303 314
Gain (loss) on securities, net (Note 4).................... (15) 179 179 259 239
Trust department income.................................... 170 117 165 139 121
Other...................................................... 1,120 852 1,301 962 604
--------- --------- --------- --------- ---------
4,753 2,863 4,574 3,582 2,945
--------- --------- --------- --------- ---------
Other expenses:
Salaries and employee benefits (Notes 11 and 12)........... 6,150 5,664 7,854 7,157 5,610
Occupancy expenses, net.................................... 755 655 804 992 688
Data processing............................................ 611 635 717 795 691
Equipment expenses......................................... 346 278 566 378 314
Advertising................................................ 634 694 708 614 428
Other operating expenses................................... 3,440 2,105 3,425 3,366 2,904
--------- --------- --------- --------- ---------
11,936 10,031 14,074 13,302 10,635
--------- --------- --------- --------- ---------
INCOME BEFORE INCOME TAXES AND MINORITY INTEREST IN NET
INCOME OF SUBSIDIARIES............................... 8,297 6,816 9,271 7,660 4,770
Income taxes (Note 10)....................................... 2,985 2,266 3,124 2,266 1,691
--------- --------- --------- --------- ---------
INCOME BEFORE MINORITY INTEREST IN NET INCOME OF
SUBSIDIARIES......................................... 5,312 4,550 6,147 5,394 3,079
Minority interest in net income of subsidiaries.............. 264 233 312 261 248
--------- --------- --------- --------- ---------
NET INCOME............................................. $ 5,048 $ 4,317 $ 5,835 $ 5,133 $ 2,831
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Basic earnings per common share.............................. $ 68.79 $ 58.52 $ 79.15 $ 69.34 $ 36.81
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Weighted average shares outstanding.......................... 71,727 71,817 71,798 71,830 71,830
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
See Notes to Consolidated Financial Statements.
F-5
<PAGE>
SPECTRUM BANCORPORATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
NINE MONTHS ENDED MARCH 31, 1999 AND YEARS ENDED JUNE 30, 1998, 1997 AND 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
ACCUMULATED OTHER
COMPRE- ADDITIONAL COMPRE-
HENSIVE PREFERRED PAID-IN RETAINED HENSIVE INCOME
INCOME STOCK COMMON STOCK CAPITAL EARNINGS (LOSS)
----------- ----------- ------------- ----------- ----------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Balance, June 30, 1995.................... $ 2,000 $ 72 $ 1,663 $ 15,032 $ 317
Comprehensive income:
Net income............................ $ 2,831 -- -- -- 2,831 --
Other comprehensive income, net of
tax:
Net change in unrealized gain (loss)
on securities available for sale
(Note 4).......................... (625) -- -- -- -- (625)
-----------
Comprehensive income.............. $ 2,206
-----------
-----------
Cash dividends paid on preferred
stock................................. (187) --
Redeem stock............................ (300) -- -- -- --
----------- --- ----------- ----------- -----
Balance, June 30, 1996.................... 1,700 72 1,663 17,676 (308)
Comprehensive income:
Net income............................ $ 5,133 -- -- -- 5,133 --
Other comprehensive income, net of
tax:
Net change in unrealized gain (loss)
on securities available for sale
(Note 4).......................... 458 -- -- -- -- 458
-----------
Comprehensive income.............. $ 5,591
-----------
-----------
Cash dividends paid on preferred
stock................................. -- -- -- (152) --
----------- --- ----------- ----------- -----
Balance, June 30, 1997.................... 1,700 72 1,663 22,657 150
Comprehensive income:
Net income............................ $ 5,835 -- -- -- 5,835 --
Other comprehensive income, net of
tax:
Net change in unrealized gain (loss)
on securities available for sale
(Note 4).......................... 233 -- -- -- -- 233
-----------
Comprehensive income.............. $ 6,068
-----------
-----------
Cash dividends paid on preferred
stock................................. -- -- -- (152) --
Redeem stock............................ -- -- (4) (51) --
Adjustment to conform year ends (Note
14)................................... -- -- -- (539) (16)
----------- --- ----------- ----------- -----
Balance, June 30, 1998.................... 1,700 72 1,659 27,750 367
Comprehensive income (unaudited):
Net income............................ $ 5,048 -- -- -- 5,048 --
Other comprehensive income, net of
tax:
Net change in unrealized gain (loss)
on securities available for sale
(Note 4).......................... (20) -- -- -- -- (20)
-----------
Comprehensive income.............. $ 5,028
-----------
-----------
Cash dividends paid (unaudited):
Preferred stock....................... -- -- -- (114) --
Common stock.......................... -- -- -- (75) --
----------- --- ----------- ----------- -----
Balance, March 31, 1999 (unaudited)....... $ 1,700 $ 72 $ 1,659 $ 32,609 $ 347
----------- --- ----------- ----------- -----
----------- --- ----------- ----------- -----
<CAPTION>
TOTAL
---------
<S> <C>
Balance, June 30, 1995.................... $ 19,084
Comprehensive income:
Net income............................ 2,831
Other comprehensive income, net of
tax:
Net change in unrealized gain (loss)
on securities available for sale
(Note 4).......................... (625)
Comprehensive income..............
Cash dividends paid on preferred
stock................................. (187)
Redeem stock............................ (300)
---------
Balance, June 30, 1996.................... 20,803
Comprehensive income:
Net income............................ 5,133
Other comprehensive income, net of
tax:
Net change in unrealized gain (loss)
on securities available for sale
(Note 4).......................... 458
Comprehensive income..............
Cash dividends paid on preferred
stock................................. (152)
---------
Balance, June 30, 1997.................... 26,242
Comprehensive income:
Net income............................ 5,835
Other comprehensive income, net of
tax:
Net change in unrealized gain (loss)
on securities available for sale
(Note 4).......................... 233
Comprehensive income..............
Cash dividends paid on preferred
stock................................. (152)
Redeem stock............................ (55)
Adjustment to conform year ends (Note
14)................................... (555)
---------
Balance, June 30, 1998.................... 31,548
Comprehensive income (unaudited):
Net income............................ 5,048
Other comprehensive income, net of
tax:
Net change in unrealized gain (loss)
on securities available for sale
(Note 4).......................... (20)
Comprehensive income..............
Cash dividends paid (unaudited):
Preferred stock....................... (114)
Common stock.......................... (75)
---------
Balance, March 31, 1999 (unaudited)....... $ 36,387
---------
---------
</TABLE>
See Notes to Consolidated Financial Statements.
F-6
<PAGE>
SPECTRUM BANCORPORATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED MARCH 31, 1999 AND 1998 AND YEARS ENDED JUNE 30, 1998, 1997
AND 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
MARCH 31, YEARS ENDED JUNE 30,
-------------------- ---------------------------------
1999 1998 1998 1997 1996
--------- --------- --------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash Flows from Operating Activities
Net income............................................. $ 5,048 $ 4,317 $ 5,835 $ 5,133 $ 2,831
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization........................ 921 899 1,344 1,041 953
(Gain) loss on sale of securities.................... 15 (179) (179) (259) (239)
(Gain) loss on sale of other real estate owned and
other.............................................. -- -- 37 (45) --
Provision for loan losses............................ 882 1,105 1,374 1,233 2,541
Provision for deferred income taxes.................. (110) 86 (146) (257) (662)
Minority interest in net income of subsidiaries...... 264 233 312 261 248
Loans originated for resale.......................... (47,951) (30,191) (40,255) (19,994) (17,038)
Proceeds from sale of loans originated for sale...... 52,061 27,643 36,858 19,750 17,352
(Increase) in accrued interest receivable............ 364 93 (442) (514) (293)
(Increase) decrease in other assets.................. 910 (660) (257) (791) 464
Increase (decrease) in accrued interest and other
liabilities........................................ 636 641 769 332 (23)
--------- --------- --------- ---------- ----------
NET CASH PROVIDED BY OPERATING ACTIVITIES.......... 13,040 3,987 5,250 5,890 6,134
--------- --------- --------- ---------- ----------
Cash Flows from Investing Activities
Proceeds from maturity of securities held to
maturity............................................. -- -- -- -- 285
Purchase of certificates of deposit.................... -- -- (2,438) (1,000) --
Proceeds from maturities of certificates of deposit.... 1,017 297 1,721 2,260 288
Proceeds from sales and maturities of securities
available for sale................................... 37,116 30,987 41,316 48,490 42,299
Purchase of securities available for sale.............. (52,773) (24,921) (32,105) (41,196) (42,467)
Net increase in loans.................................. (31,730) (18,072) (35,176) (65,498) (35,842)
Purchase of premises and equipment..................... (3,378) (1,669) (2,764) (1,178) (538)
Purchase of other assets............................... (848) (1,469) (1,692) (1,731) (1,144)
Proceeds from sale of premises and equipment........... -- -- 186 215 --
Proceeds from sale of other real estate owned.......... 50 -- 73 619 16
Business acquisitions (Note 2)......................... -- (1,141) (1,141) -- (2,991)
--------- --------- --------- ---------- ----------
NET CASH (USED IN) INVESTING ACTIVITIES............ (50,546) (15,988) (32,020) (59,019) (40,094)
--------- --------- --------- ---------- ----------
</TABLE>
(CONTINUED)
F-7
<PAGE>
SPECTRUM BANCORPORATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED MARCH 31, 1999 AND 1998 AND YEARS ENDED JUNE 30, 1998, 1997
AND 1996
(IN THOUSANDS) (CONTINUED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
MARCH 31, YEARS ENDED JUNE 30,
-------------------- ---------------------------------
1999 1998 1998 1997 1996
--------- --------- --------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash Flows From Financing Activities
Net increase in deposits............................... $ 38,754 $ 34,284 $ 38,555 $ 41,689 $ 10,188
Net increase (decrease) in federal funds purchased and
securities sold under agreements to repurchase....... 513 3,232 703 (478) 16,349
Proceeds from notes payable............................ 4,000 5,484 11,488 17,995 18,140
Principal payments on notes payable.................... (2,982) (7,781) (10,375) (1,015) (10,550)
Purchase of minority interest in subsidiaries.......... (152) -- -- -- (419)
Proceeds from sale of minority interest in
subsidiary........................................... -- 290 290 198 --
Purchase of common stock for retirement................ -- (30) (55) -- --
Dividends paid, including $12, $60, $52, $18 and $68
paid to minority interest, respectively.............. (201) (174) (204) (170) (255)
--------- --------- --------- ---------- ----------
NET CASH PROVIDED BY FINANCING ACTIVITIES.......... 39,932 35,305 40,402 58,219 33,453
--------- --------- --------- ---------- ----------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS...................................... 2,426 23,304 13,632 5,090 (507)
Cash and cash equivalents:
Beginning.............................................. 40,804 27,172 27,172 26,233 26,740
--------- --------- --------- ---------- ----------
Ending................................................. $ 43,230 $ 50,476 $ 40,804 $ 31,323 $ 26,233
--------- --------- --------- ---------- ----------
--------- --------- --------- ---------- ----------
Supplemental Disclosures of Cash Flow
Cash payments for:
Interest............................................. $ 16,023 $ 15,733 $ 20,978 $ 18,118 $ 14,278
Income taxes......................................... 2,706 2,380 3,173 2,642 2,166
Supplemental Schedules of Noncash Investing and Financing
Activities
Reclassification of securities from held to maturity to
available for sale................................... -- -- -- -- 30,257
Note payable incurred for purchase of minority
interest............................................. -- -- -- -- 49
Redemption of preferred stock in settlement of note
receivable........................................... -- -- -- -- 300
Net change in unrealized gain/loss on securities
available for sale................................... (21) 392 391 728 (721)
Other real estate acquired in settlement of loans...... 30 -- 13 387 288
</TABLE>
See Notes to Consolidated Financial Statements.
F-8
<PAGE>
SPECTRUM BANCORPORATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION WITH RESPECT TO MARCH 31, 1999 AND THE
NINE MONTHS ENDED MARCH 31, 1999 AND 1998 IS UNAUDITED)
NOTE 1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS:
The Company is a multi-bank holding company organized under the laws of Iowa
whose primary business is providing the traditional functions of trust,
commercial, consumer, and mortgage banking services through its South Dakota,
Missouri and Iowa based subsidiary banks. Substantially all of the Company's
income is generated from banking operations.
The accompanying consolidated financial statements reflect the merger of
Decatur Corporation and Spectrum Bancorporation, Inc. (See Note 14).
BASIS OF FINANCIAL STATEMENT PRESENTATION AND ACCOUNTING ESTIMATES:
The accounting and reporting policies of the Company conform to generally
accepted accounting principles. In preparing the accompanying financial
statements, management is required to make estimates and assumptions that affect
the reported amounts of assets and liabilities as of the date of the financial
statements and the reported amounts of revenues and expenses for the period.
Actual results could differ from those estimates. A material estimate that is
particularly susceptible to significant change in the near term relates to the
determination of the allowance for loan losses. Management believes that the
allowance for loan losses is adequate. While management uses available
information to recognize possible losses, future additions to the allowance may
be necessary based on changes in economic conditions.
Financial Accounting Standards Board Statement (FASB) No. 130, "Reporting
Comprehensive Income" requires an entity to include a statement of comprehensive
income in its full set of general-purpose financial statements. Comprehensive
income consists of the net income or loss of the entity plus or minus the change
in equity of the entity during the period from transactions, other events, and
circumstances resulting from nonowner sources. The Company's items of other
comprehensive income consist of the net unrealized gains and losses on available
for sale securities. The accompanying financial statements have been
reclassified to conform to the requirements of Statement No. 130.
PRINCIPLES OF CONSOLIDATION:
The consolidated financial statements include the accounts of the Company
and its subsidiaries. All material intercompany accounts and transactions with
subsidiaries are eliminated in consolidation.
The consolidated subsidiaries are as follows: Citizens Bank (100% owned),
which is chartered in Mount Ayr, Iowa; Citizens Bank of Princeton (100% owned),
which is chartered in Princeton, Missouri; F&M Bank (97.9%, 97.2% and 97.42%
owned at March 31, 1999, June 30, 1998 and 1997, respectively), which is
chartered in Watertown, South Dakota; Rushmore Bank & Trust (90% owned), which
is chartered in Rapid City, South Dakota; and Spectrum Banc Service Corporation
(89% owned), a data processing organization formed during 1998. Also at March
31, 1999, Rushmore Bank & Trust owns 99% of Ameriloan, LLC, a loan origination
company, which is currently inactive.
CASH AND CASH EQUIVALENTS AND CASH FLOWS:
For purposes of reporting cash flows, cash and cash equivalents include cash
on hand, amounts due from banks (including cash items in process of clearing)
and federal funds sold. Cash flows from
F-9
<PAGE>
SPECTRUM BANCORPORATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION WITH RESPECT TO MARCH 31, 1999 AND THE
NINE MONTHS ENDED MARCH 31, 1999 AND 1998 IS UNAUDITED)
NOTE 1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
loans (other than those originated for resale), deposits, federal funds
purchased and securities sold under agreements to repurchase are reported net.
TRUST ASSETS:
Assets of the trust departments of the Company's subsidiaries, other than
trust cash on deposit at that bank, are not included in these financial
statements because they are not assets of the Company.
SECURITIES AVAILABLE FOR SALE:
Securities classified as available for sale are those securities that the
Company intends to hold for an indefinite period of time, but not necessarily to
maturity. Any decision to sell a security classified as available for sale would
be based on various factors, including significant movements in interest rates,
changes in the maturity mix of the Company's assets and liabilities, liquidity
needs, regulatory capital considerations, and other similar factors. Securities
available for sale are reported at fair value with unrealized gains or losses
reported as a separate component of stockholders' equity, net of the related
deferred tax effect. The amortization of premiums and accretion of discounts,
computed by the interest method over their contractual lives, are recognized in
interest income. Realized gains or losses, determined on the basis of the
amortized cost of specific securities sold, are included in earnings. Declines
in the fair value of individual securities classified as available for sale
below their amortized cost that are determined to be other than temporary result
in write-downs of the individual securities to their fair value with the
resulting write-downs included in current earnings as realized losses.
LOANS RECEIVABLE:
Loans receivable that management has the intent and ability to hold for the
foreseeable future or until maturity or pay-off are stated at the amount of
unpaid principal, reduced by unearned discount and fees and an allowance for
loan losses.
The Company grants real estate, commercial, and consumer loans to customers
primarily in South Dakota, Missouri and Iowa and has purchased loans primarily
originated in surrounding states. The amount of collateral obtained, if deemed
necessary, is based on management's credit evaluation of the borrower.
Collateral held varies, but includes accounts receivable, inventory, property
and equipment, residential real estate, income-producing commercial properties
and government guarantees.
Loans sold on the secondary market are sold on a prearranged basis. Loans
held for sale are included in loans receivable and are stated at the lower of
cost or market. Loans held for sale totaled $8,055,000, $12,165,000 and
$2,775,000 as of March 31, 1999, June 30, 1998 and 1997.
The allowance for loan losses is established through a provision for loan
losses charged to expense. Loans receivable are charged against the allowance
for loan losses when management believes that collectibility of the principal is
unlikely. The allowance is an amount that management believes will be adequate
to absorb estimated losses on existing loans, based on an evaluation of the
collectibility and prior loss experience. The evaluation also takes into
consideration such factors as changes in the nature and volume of the loan
portfolio, overall portfolio quality, review of specific problem loans, and
current economic conditions that may affect the borrower's ability to pay. While
management uses the best information available to make its evaluation, future
adjustments to the allowance may be necessary if there are significant changes
in economic conditions. In addition, regulatory agencies, as an integral
F-10
<PAGE>
SPECTRUM BANCORPORATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION WITH RESPECT TO MARCH 31, 1999 AND THE
NINE MONTHS ENDED MARCH 31, 1999 AND 1998 IS UNAUDITED)
NOTE 1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
part of their examination process, periodically review the allowance for loan
losses, and may require the Company to make additions to the allowance based on
their judgment about information available to them at the time of their
examinations.
Impaired loans are measured based on the present value of expected future
cash flows discounted at the loan's effective interest rate or, as a practical
expedient, at the loan's observable market price or the fair value of the
collateral if the loan is collateral dependent. A loan is impaired when it is
probable the creditor will be unable to collect all contractual principal and
interest payments due in accordance with the terms of the loan agreement. The
amount of impairment, if any, and any subsequent changes are included in the
provision for loan losses.
Interest on loans is accrued daily on the outstanding balances. For impaired
loans, accrual of interest is discontinued when management believes, after
considering collection efforts and other factors, that the borrower's financial
condition is such that collection of interest is doubtful. Cash collections on
impaired loans are credited to the loan receivable balance, and interest income
is generally not recognized on those loans until the principal balance has been
collected.
A substantial portion of loan fees charged or received on the origination of
mortgage loans are related to loans sold on the secondary market with servicing
released and are recognized as income when received. Certain other loan fees,
net of certain direct loan origination costs, are deferred and the net amount
amortized as an adjustment of the related loan's yield. The Company is generally
amortizing these amounts over the contractual life of the loan. Commitment fees
based upon the amount of a customer's line of credit and fees related to letters
of credit are not significant and are recognized in income when received.
OTHER REAL ESTATE OWNED:
Other real estate owned (OREO) represents properties acquired through
foreclosure or other proceedings and is initially recorded at fair value at the
date of foreclosure, which establishes cost. After foreclosure, OREO is held for
sale and is carried at the lower of cost or fair value less estimated costs of
disposal. Any write-down to fair value at the time of transfer to OREO is
charged to the allowance for loan losses. Property is evaluated regularly to
ensure the recorded amount is supported by its current fair value, and valuation
allowances to reduce the carrying amount to fair value less estimated costs to
dispose are recorded if necessary. OREO is included in other assets in the
accompanying consolidated balance sheets.
PREMISES AND EQUIPMENT:
Premises and equipment are stated at cost less accumulated depreciation.
Depreciation is computed principally by the straight-line method over the
following estimated useful lives:
<TABLE>
<CAPTION>
YEARS
-----
<S> <C>
Buildings and building improvements.................................................... 3-50
Furniture and equipment................................................................ 5-15
</TABLE>
F-11
<PAGE>
SPECTRUM BANCORPORATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION WITH RESPECT TO MARCH 31, 1999 AND THE
NINE MONTHS ENDED MARCH 31, 1999 AND 1998 IS UNAUDITED)
NOTE 1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
COST IN EXCESS OF NET ASSETS ACQUIRED:
Cost in excess of net assets acquired represents the excess of the
acquisition cost over the fair value of the net assets acquired in the purchase
of subsidiaries and branches and is being amortized over periods of eleven to
forty years using the straight-line method. Costs in excess of net assets
acquired is net of accumulated amortization of $2,207,376, $2,136,066 and
$1,793,985 at March 31, 1999, June 30, 1998 and 1997, respectively.
Approximately 23% of the unamortized balance relates to a 1992 acquisition which
is being amortized over 40 years. In connection with the filing of a
registration statement to offer preferred securities, management has decided to
change, on a prospective basis, the amortization of the amount related to that
acquisition to a remaining 19 year period. The affect of this change will be to
increase amortization expense by approximately $12,000 per year.
LONG-LIVED ASSETS:
Long-lived assets, including intangibles, are reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount of
an asset is not recoverable.
INCOME TAXES:
Deferred taxes are provided on a liability method whereby deferred tax
assets are recognized for deductible temporary differences and deferred tax
liabilities are recognized for taxable temporary differences. Temporary
differences are the differences between the reported amounts of assets and
liabilities and their tax bases. Deferred tax assets are reduced by a valuation
allowance when, in the opinion of management, it is more likely than not that
some portion or all of the deferred tax assets will not be realized. Deferred
tax assets and liabilities are adjusted for the effects of changes in tax laws
and rates on the date of enactment.
EARNINGS PER COMMON SHARE:
Earnings per common share has been computed on the basis of the
weighted-average number of common shares outstanding during each period
presented. Dividends accumulated or declared on cumulative and noncumulative
preferred stock, which totaled $114,000 in each of the nine month periods ended
March 31, 1999 and 1998, and totaled $152,000, $152,000 and $187,000 in the
years ended June 30, 1998, 1997 and 1996, respectively, reduced the earnings
available to common stockholders in the computation.
OPERATING SEGMENTS:
The Company has adopted Financial Accounting Standards Board Statement No.
131, "Disclosures About Segments of an Enterprise and Related Information" (SFAS
No. 131). This statement establishes standards for reporting information about
segments in annual and interim financial statements. SFAS No. 131 introduces a
new model for segment reporting called "management approach". The management
approach is based on the way the chief operating decision-maker organizes
segments within a company for making operating decisions and assessing
performance. Reportable segments are based on products and services, geography,
legal structure, management structure and any other in which management
disaggregates a company. Based on the "management approach" model, the
F-12
<PAGE>
SPECTRUM BANCORPORATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION WITH RESPECT TO MARCH 31, 1999 AND THE
NINE MONTHS ENDED MARCH 31, 1999 AND 1998 IS UNAUDITED)
NOTE 1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Company has determined that its business is comprised of a single operating
segment and that SFAS No. 131 therefore has no impact on its consolidated
financial statements.
INTERIM FINANCIAL STATEMENTS:
The consolidated financial statements as of March 31, 1999 and 1998 are
unaudited, but in the opinion of management, reflect all adjustments, consisting
only of a normal and recurring nature, necessary for a fair presentation. These
interim financial statements are condensed, and do not include all disclosures
required by generally accepted accounting principles.
FAIR VALUE OF FINANCIAL INSTRUMENTS:
The following methods and assumptions were used by the Company in estimating
the fair value of its financial instruments as presented in Note 18:
CARRYING AMOUNTS APPROXIMATE FAIR VALUES for the following instruments:
Cash and due from banks
Federal funds sold
Certificates of deposit
Securities available for sale
Variable rate loans that reprice frequently where no significant change in
credit risk has occurred
Accrued interest receivable
Variable rate money market deposit accounts and deposits payable on demand
Federal funds purchased and securities sold under agreements to repurchase
Notes payable with a variable interest rate
Accrued interest payable
DISCOUNTED CASH FLOWS using interest rates currently being offered on
instruments with similar terms and with similar credit quality:
All loans except variable rate loans described above
Fixed rate time certificates
Notes payable with a fixed interest rate
FEES CURRENTLY BEING CHARGED for similar instruments, taking into account
the remaining terms of the agreements and the counterparties' credit standing:
Off-balance sheet instruments:
Letters of credit
Commitments to extend credit
EMERGING ACCOUNTING STANDARDS:
The FASB has issued Statement No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS
AND HEDGING ACTIVITIES. This Statement establishes accounting and reporting
standards for derivative instruments and for hedging activities. It requires
that an entity recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair value.
This Statement is effective for fiscal years beginning after June 15, 1999.
Management does not believe the application of
F-13
<PAGE>
SPECTRUM BANCORPORATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION WITH RESPECT TO MARCH 31, 1999 AND THE
NINE MONTHS ENDED MARCH 31, 1999 AND 1998 IS UNAUDITED)
NOTE 1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
this Statement to transactions of the Company and its banking subsidiaries that
have been typical in the past will materially affect the Company's financial
position and results of operations.
NOTE 2. CHANGES IN MINORITY INTEREST AND BUSINESS COMBINATIONS
In May 1996, the Company acquired 341 shares (4.8%) of the common stock of
F&M Bank from minority shareholders for $418,832 in cash and a note payable of
$49,436. The transactions were accounted for as purchases.
In November 1996, the Company sold 106 shares (1.15%) of the common stock of
F&M Bank to a key employee for $197,914 in cash, and in March, 1998, sold an
additional 46 shares (.5%) to this same employee for $113,425 in cash.
On May 31, 1996, the Company acquired all of the outstanding shares of
Am-First Financial Corporation (Am-First) for $7,750,000 cash. Am-First owned
100% of the outstanding stock of American Federal Bank, F.S.B. The excess of the
acquisition cost over the fair value of the net assets acquired of $650,445 is
being amortized over eleven years using the straight-line method. The
acquisition has been accounted for as a purchase and results of operations of
Am-First since the date of acquisition are included in the consolidated
financial statements. Concurrent with the purchase, American Federal Bank,
F.S.B. was merged into the Company's subsidiary, F&M Bank.
On March 27, 1998, the Company acquired all of the outstanding shares of
First Savings & Loan Association of South Dakota, Inc. (First Savings & Loan)
for $2,287,254 in cash and incurred other acquisition costs of $35,408. The
excess of the acquisition cost over the fair value of the net assets acquired of
$327,184 is being amortized over eleven years using the straight-line method.
The acquisition has been accounted for as a purchase and results of operations
of First Savings & Loan since the date of acquisition are included in the
consolidated financial statements. Concurrent with the purchase, First Savings &
Loan was merged into the Company's subsidiary, F&M Bank.
A summary of the fair value of net assets acquired and net cash and cash
equivalents paid (in thousands) is as follows:
<TABLE>
<CAPTION>
FIRST SAVINGS
& LOAN AM-FIRST
MARCH 27, 1998 MAY 31, 1996
-------------- ------------
<S> <C> <C>
Assets acquired.......................................................... $ 16,999 $ 56,429
Liabilities assumed...................................................... 14,676 48,679
------- ------------
Net assets acquired.................................................. $ 2,323 $ 7,750
------- ------------
------- ------------
Cost of net assets acquired.............................................. $ 2,323 $ 7,750
Less cash and cash equivalents acquired.................................. 1,182 4,759
------- ------------
Net cash and cash equivalents paid for cash flow purposes............ $ 1,141 $ 2,991
------- ------------
------- ------------
</TABLE>
F-14
<PAGE>
SPECTRUM BANCORPORATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION WITH RESPECT TO MARCH 31, 1999 AND THE
NINE MONTHS ENDED MARCH 31, 1999 AND 1998 IS UNAUDITED)
NOTE 2. CHANGES IN MINORITY INTEREST AND BUSINESS COMBINATIONS (CONTINUED)
Unaudited proforma consolidated results of operations for the years ended
June 30, 1998 and 1997 as though First Savings & Loan had been acquired as of
July 1, 1996 (in thousands, except per share amounts) follows:
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30,
--------------------
1998 1997
--------- ---------
<S> <C> <C>
Interest income................................................................... $ 43,154 $ 38,545
Net income........................................................................ 5,906 5,179
Basic earnings per common share................................................... 80.14 69.98
</TABLE>
NOTE 3. RESTRICTIONS ON CASH AND DUE FROM BANKS
The Company's banking subsidiaries are required to maintain reserve balances
in cash and on deposit with the Federal Reserve Bank based on a percentage of
deposits. The total requirement was approximately $3,253,000 and $3,129,000 at
June 30, 1998 and 1997, respectively.
NOTE 4. SECURITIES AVAILABLE FOR SALE
Amortized cost and fair value of investments in securities, all of which are
classified as available for sale according to management's intent, are
summarized as follows:
<TABLE>
<CAPTION>
MARCH 31, 1999
------------------------
AMORTIZED
COST FAIR VALUE
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
U.S. Treasury securities......................................................... $ 9,995 $ 10,061
U.S. Government agencies and corporations, including mortgage-backed
securities..................................................................... 60,535 60,919
States and political subdivision securities...................................... 9,778 10,258
Corporate debt securities and other.............................................. 11,946 12,048
Stock in Federal Home Loan Bank.................................................. 1,981 1,981
----------- -----------
$ 94,235 $ 95,267
----------- -----------
----------- -----------
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 1998
--------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
----------- ------------- ----------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
U.S. Treasury securities........................................... $ 12,175 $ 50 $ (1) $ 12,224
U.S. Government agencies and corporations, including
mortgage-backed securities....................................... 52,470 516 (96) 52,890
States and political subdivision securities........................ 12,592 186 (81) 12,697
Corporate debt securities.......................................... 94 -- -- 94
Stock in Federal Home Loan Bank.................................... 1,606 -- -- 1,606
----------- ----- ----- ---------
$ 78,937 $ 752 $ (178) $ 79,511
----------- ----- ----- ---------
----------- ----- ----- ---------
</TABLE>
F-15
<PAGE>
SPECTRUM BANCORPORATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION WITH RESPECT TO MARCH 31, 1999 AND THE
NINE MONTHS ENDED MARCH 31, 1999 AND 1998 IS UNAUDITED)
NOTE 4. SECURITIES AVAILABLE FOR SALE (CONTINUED)
<TABLE>
<CAPTION>
JUNE 30, 1997
--------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
----------- ------------- ----------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
U.S. Treasury securities........................................... $ 17,648 $ 50 $ (3) $ 17,695
U.S. Government agencies and corporations, including
mortgage-backed securities....................................... 45,288 251 (106) 45,433
States and political subdivision securities........................ 11,950 192 (130) 12,012
Corporate debt securities.......................................... 993 -- (10) 983
Stock in Federal Home Loan Bank.................................... 3,271 -- -- 3,271
Other.............................................................. 88 -- (1) 87
----------- ----- ----- ---------
$ 79,238 $ 493 $ (250) $ 79,481
----------- ----- ----- ---------
----------- ----- ----- ---------
</TABLE>
No ready market exists for the Federal Home Loan Bank stock, and it has no
quoted market value. For disclosure purposes, such stock is assumed to have a
fair value which is equal to cost.
The amortized cost and fair value of debt securities available for sale (in
thousands) as of June 30, 1998, by contractual maturity, are shown below.
Maturities may differ from contractual maturities in mortgage-backed securities
because the mortgages underlying the securities may be called or repaid without
any penalties. Therefore, these securities are not included in the maturity
categories in the following maturity summary.
<TABLE>
<CAPTION>
AMORTIZED
COST FAIR VALUE
----------- -----------
<S> <C> <C>
Due in one year or less.......................................................... $ 8,476 $ 8,502
Due after one year through five years............................................ 15,726 15,920
Due after five years through ten years........................................... 5,856 5,862
Due after ten years.............................................................. 4,080 4,084
Mortgage-backed securities....................................................... 43,193 43,537
----------- -----------
$ 77,331 $ 77,905
----------- -----------
----------- -----------
</TABLE>
Proceeds from sales of securities available for sale were $11,385,932,
$25,772,903 and $15,846,463 for the years ended June 30, 1998, 1997, and 1996
respectively. Gross gains of $194,849, $262,788 and $241,726 and gross losses of
$15,698, $3,858 and $3,102 were realized on those sales for the years ended June
30, 1998, 1997, and 1996 respectively.
Securities with an amortized cost of approximately $56,421,000 and
$54,870,000 at June 30, 1998 and 1997, respectively, were pledged as collateral
on public deposits, securities sold under agreements to repurchase, notes
payable to Federal Home Loan Bank and for other purposes as required or
permitted by law.
F-16
<PAGE>
SPECTRUM BANCORPORATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION WITH RESPECT TO MARCH 31, 1999 AND THE
NINE MONTHS ENDED MARCH 31, 1999 AND 1998 IS UNAUDITED)
NOTE 4. SECURITIES AVAILABLE FOR SALE (CONTINUED)
The components of other comprehensive income -- net unrealized gain (loss)
on securities available for sale (in thousands) are as follows:
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30,
-------------------------------
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Unrealized holding gain (loss) arising during the period...................... $ 547 $ 987 $ (737)
Less reclassification adjustment for net gains realized in net income......... (179) (259) (239)
--------- --------- ---------
Net unrealized gain (loss) before income taxes............................ 368 728 (976)
Income (taxes) benefit........................................................ (126) (263) 333
Minority interest in unrealized gains......................................... (9) (7) 18
--------- --------- ---------
Other comprehensive income -- net unrealized gain (loss) on securities.... $ 233 $ 458 $ (625)
--------- --------- ---------
--------- --------- ---------
</TABLE>
NOTE 5. LOANS RECEIVABLE
The composition of net loans receivable (in thousands) is as follows:
<TABLE>
<CAPTION>
MARCH 31, JUNE 30,
---------- ----------------------
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Commercial and agricultural........................................ $ 276,533 $ 209,387 $ 152,906
Real estate loans.................................................. 88,732 129,761 144,463
Loans to individuals............................................... 68,541 58,205 54,982
Other loans........................................................ 2,191 11,531 8,825
---------- ---------- ----------
435,997 408,884 361,176
---------- ---------- ----------
Deduct:
Allowance for loan losses........................................ 5,970 5,599 5,404
Unearned net loan fees........................................... 448 414 272
---------- ---------- ----------
6,418 6,013 5,676
---------- ---------- ----------
$ 429,579 $ 402,871 $ 355,500
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
Loans guaranteed by agencies of the U.S. government totaled $19,868,098 and
$18,567,367 at June 30, 1998 and 1997, respectively.
Certain real estate mortgage loans are sold on the secondary market on a
prearranged basis. The loans are sold without recourse, except for limited
recourse during the first four months after the sale. The Company has
experienced no losses on these recourse sales during 1999, 1998 or 1997.
F-17
<PAGE>
SPECTRUM BANCORPORATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION WITH RESPECT TO MARCH 31, 1999 AND THE
NINE MONTHS ENDED MARCH 31, 1999 AND 1998 IS UNAUDITED)
NOTE 5. LOANS RECEIVABLE (CONTINUED)
Information about impaired loans (in thousands) is as follows:
<TABLE>
<CAPTION>
AS OF AND FOR THE
YEAR ENDED JUNE 30,
--------------------
1998 1997
--------- ---------
<S> <C> <C>
Loans receivable for which there is a related allowance for loan losses.............. $ 2,104 $ 3,032
Other impaired loans................................................................. -- --
--------- ---------
Total impaired loans............................................................. $ 2,104 $ 3,032
Related allowance for loan losses.................................................... $ 164 $ 867
Average monthly balance of impaired loans (based on month-end balances).............. 2,670 2,203
Interest income recognized on impaired loans......................................... 127 107
</TABLE>
Past due and nonaccrual and restructured loans (in thousands) are as
follows:
<TABLE>
<CAPTION>
MARCH 31, JUNE 30,
------------- --------------------
1999 1998 1997
------------- --------- ---------
<S> <C> <C> <C>
Outstanding principal balance of accruing loans having payment
delinquent by more than ninety days.................................. $ 1,207 $ 1,484 $ 543
Loans on which the accrual of interest has been discontinued or
reduced.............................................................. 6,083 6,523 6,399
</TABLE>
Changes in the allowance for loan losses (in thousands) are as follows:
<TABLE>
<CAPTION>
NINE MONTHS
ENDED MARCH
31, YEARS ENDED JUNE 30,
----------- -------------------------------
1999 1998 1997 1996
----------- --------- --------- ---------
<S> <C> <C> <C> <C>
Balance, beginning.......................................... $ 5,599 $ 5,803 $ 4,790 2,599
Provision charged to operating expense.................... 882 1,374 1,233 2,541
Business acquisition (Note 2)............................. -- 129 -- 293
Recoveries of amounts charged off......................... 147 224 407 886
----------- --------- --------- ---------
6,628 7,530 6,430 6,319
Amounts charged off....................................... (658) (1,931) (1,026) (1,529)
----------- --------- --------- ---------
Balance, ending............................................. $ 5,970 $ 5,599 $ 5,404 $ 4,790
----------- --------- --------- ---------
----------- --------- --------- ---------
</TABLE>
F-18
<PAGE>
SPECTRUM BANCORPORATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION WITH RESPECT TO MARCH 31, 1999 AND THE
NINE MONTHS ENDED MARCH 31, 1999 AND 1998 IS UNAUDITED)
NOTE 6. PREMISES AND EQUIPMENT
The major classes of premises and equipment and the total amount of
accumulated depreciation (in thousands) are as follows:
<TABLE>
<CAPTION>
JUNE 30,
--------------------
1998 1997
--------- ---------
<S> <C> <C>
Land.............................................................................. $ 2,491 $ 1,816
Buildings and building improvements............................................... 7,686 7,093
Furniture and equipment........................................................... 5,757 5,142
--------- ---------
15,934 14,051
Less accumulated depreciation..................................................... 5,621 5,637
--------- ---------
$ 10,313 $ 8,414
--------- ---------
--------- ---------
</TABLE>
NOTE 7. DEPOSITS
The composition of deposits (in thousands) is as follows:
<TABLE>
<CAPTION>
MARCH 31, JUNE 30,
---------- ----------------------
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Demand............................................................. $ 48,184 $ 47,315 $ 46,799
NOW accounts, money market and savings............................. 155,572 133,626 115,870
Time certificates, $100,000 or more................................ 67,419 57,883 45,715
Other time certificates............................................ 218,369 211,966 190,794
---------- ---------- ----------
$ 489,544 $ 450,790 $ 399,178
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
At June 30, 1998, the scheduled maturities of time certificates (in
thousands) are as follows:
<TABLE>
<S> <C>
Year ending June 30,
1999...................................................................... $ 188,144
2000...................................................................... 62,122
2001...................................................................... 13,125
2002...................................................................... 4,964
2003 and thereafter....................................................... 1,494
---------
$ 269,849
---------
---------
</TABLE>
NOTE 8. SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE
Securities sold under agreements to repurchase, which generally mature
within one to four days from the transaction date, totaled $18,787,531,
$17,582,854 and $15,350,466 at June 30, 1998, 1997 and 1996, respectively. The
mortgage-backed securities underlying the agreements had an amortized cost of
approximately $21,857,000, $21,296,000 and $20,843,000 and fair value of
approximately $22,037,000, $21,320,000 and $20,607,000 at June 30, 1998, 1997
and 1996, respectively. The securities are held by the Company. The maximum
month-end balance of the agreements was $22,278,990, $20,145,289 and
F-19
<PAGE>
SPECTRUM BANCORPORATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION WITH RESPECT TO MARCH 31, 1999 AND THE
NINE MONTHS ENDED MARCH 31, 1999 AND 1998 IS UNAUDITED)
NOTE 8. SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE (CONTINUED)
$17,363,774, they had an average balance of $19,197,839, $17,783,026 and
$11,565,018 and an average interest rate of 4.8%, 4.7% and 4.9% for the years
ended June 30, 1998, 1997 and 1996, respectively.
NOTE 9. NOTES PAYABLE
Notes payable consist of the following (in thousands):
<TABLE>
<CAPTION>
MARCH 31, JUNE 30,
----------- --------------------
1999 1998 1997
----------- --------- ---------
<S> <C> <C> <C>
Notes payable to bank(a).............................................. $ 11,820 $ 12,957 $ 11,520
Notes payable to Federal Home Loan Bank, interest rates from 5.2% to
6.9% and maturity dates from September 1998 to January 2003, secured
by real estate loans and Federal Home Loan Bank stock............... 28,500 24,500 25,900
Note payable to Federal Reserve Bank, consisting of treasury, tax and
loan deposits, due on demand........................................ -- 1,800 1,000
Other................................................................. -- 45 70
----------- --------- ---------
$ 40,320 $ 39,302 $ 38,490
----------- --------- ---------
----------- --------- ---------
</TABLE>
- ------------
(a) The Company has loan agreements with US Bank, N.A. The balances are due in
annual principal payments totaling $675,000 through July, 2000 with the
balance due July 31, 2001. Interest on the balance is due quarterly at
either the lender's reference rate, the CD rate plus 2% per annum (7.67% at
June 30, 1998), or the Eurodollar rate plus 2% per annum, at the option of
the Company. The loans are secured by stock in the subsidiary banks. The
majority stockholder of the Company has guaranteed the loans. The loan
agreements require the Company and its banking subsidiaries, among other
provisions, to maintain certain capital ratios.
As of June 30, 1998, notes payable are due or callable (whichever is
earlier) as follows (in thousands):
<TABLE>
<S> <C>
Year ending June 30,
1999....................................................................... $ 8,748
2000....................................................................... 5,699
2001....................................................................... 11,875
2002....................................................................... 8,033
2003....................................................................... 4,528
Thereafter................................................................. 419
---------
$ 39,302
---------
---------
</TABLE>
F-20
<PAGE>
SPECTRUM BANCORPORATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION WITH RESPECT TO MARCH 31, 1999 AND THE
NINE MONTHS ENDED MARCH 31, 1999 AND 1998 IS UNAUDITED)
NOTE 10. INCOME TAX MATTERS
The provision for income taxes charged to operations consists of the
following (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30,
-------------------------------
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Currently paid or payable:
Federal.................................................................. $ 2,816 $ 2,178 $ 2,036
State.................................................................... 454 345 317
Deferred (benefit)......................................................... (146) (257) (662)
--------- --------- ---------
$ 3,124 $ 2,266 $ 1,691
--------- --------- ---------
--------- --------- ---------
</TABLE>
The income tax provision differs from the amount of income tax determined by
applying the U.S. federal income tax rate to pretax income due to the following
(in thousands):
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30,
-------------------------------
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Computed "expected" tax expense............................................ $ 3,245 $ 2,681 $ 1,670
Increase (decrease) in income taxes resulting from:
Benefit of income taxed at lower rates................................... (93) (76) (48)
Tax exempt interest income............................................... (297) (276) (180)
State income tax, net of federal benefit................................. 300 264 212
Tax law change on pre-1988 allowance for loan losses of converted savings
bank................................................................... -- (368) --
Other.................................................................... (31) 41 37
--------- --------- ---------
$ 3,124 $ 2,266 $ 1,691
--------- --------- ---------
--------- --------- ---------
</TABLE>
Net deferred tax assets (liabilities) (in thousands) consist of the
following components:
<TABLE>
<CAPTION>
JUNE 30,
--------------------
1998 1997
--------- ---------
<S> <C> <C>
Deferred tax liabilities:
Premises and equipment........................................................... $ (1,200) $ (1,012)
Securities available for sale.................................................... (279) (153)
Other............................................................................ (153) (53)
--------- ---------
(1,632) (1,218)
--------- ---------
--------- ---------
Deferred tax assets:
Allowance for loan losses........................................................ 1,424 1,223
Deferred compensation............................................................ 130 96
Accrued expenses................................................................. 58 72
Other............................................................................ 102 12
--------- ---------
1,714 1,403
--------- ---------
$ 82 $ 185
--------- ---------
--------- ---------
</TABLE>
F-21
<PAGE>
SPECTRUM BANCORPORATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION WITH RESPECT TO MARCH 31, 1999 AND THE
NINE MONTHS ENDED MARCH 31, 1999 AND 1998 IS UNAUDITED)
NOTE 10. INCOME TAX MATTERS (CONTINUED)
In the accompanying consolidated balance sheets, net deferred tax assets are
included in other assets. The deferred tax asset amounts above include no
valuation allowance.
Retained earnings at June 30, 1998 includes approximately $1,107,000 related
to the pre-1988 allowance for loan losses of an acquired savings bank for which
no deferred income tax liability has been recognized. If the Company no longer
qualifies as a bank or in the event of a liquidation of the Company, income
would be created, for tax purposes only, which would be subject to the then
current corporate income tax rate. The unrecorded deferred income tax liability
on the above amount for financial statement purposes was $376,000 at June 30,
1998.
NOTE 11. DEFERRED COMPENSATION
The Company has entered into deferred compensation agreements with certain
officers, directors and employees which provide for payments to the employees or
their beneficiaries over a period of ten years beginning at age 65 or prior
death or disability. The level of payments is dependent upon the Company's
earnings during employment. The net present value of the payments is being
accrued over the respective employees' expected employment service period.
Deferred compensation charged to expense during the years ended June 30, 1998,
1997 and 1996 was $61,884, $40,112 and $52,058, respectively, with a total
amount accrued as of June 30, 1998 and 1997 of $342,849 and $313,379,
respectively.
NOTE 12. PROFIT-SHARING PLAN
The Company participates in a multiple employer 401(k) profit sharing plan
(the Plan). All employees are eligible to participate beginning with the first
eligibility date following the completion of one year of service and having
reached the age of 21. In addition to employee contributions, the Company may
contribute discretionary amounts for eligible participants. Contribution rates
for participating employers must be equal. For the years ended June 30, 1998 and
1997, contributions were 4.25% of all eligible employees' gross pay, plus 100%
of each employee's contribution for the year up to 2.5% of such employee's gross
pay. The Company contributed $245,854, $247,081 and $178,976 to the Plan for the
years ended June 30, 1998, 1997 and 1996, respectively.
NOTE 13. REGULATORY RESTRICTIONS
The Company and its banking subsidiaries are subject to certain restrictions
on the amount of dividends which may be declared without prior regulatory
approval and are subject to various regulatory capital requirements administered
by the federal banking agencies. Failure to meet minimum capital requirements
can initiate certain mandatory, and possibly additional discretionary, actions
by regulators that, if undertaken, could have a direct material effect on the
Company's financial statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, the Company and its bank
subsidiaries must meet specific capital guidelines that involve quantitative
measures of assets, liabilities, and certain off-balance-sheet items as
calculated under regulatory accounting practices. Capital amounts and
classification are also subject to qualitative judgments by the regulators about
components, risk weightings, and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Company and its bank subsidiaries to maintain minimum amounts and
ratios (set forth in the table below) of
F-22
<PAGE>
SPECTRUM BANCORPORATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION WITH RESPECT TO MARCH 31, 1999 AND THE
NINE MONTHS ENDED MARCH 31, 1999 AND 1998 IS UNAUDITED)
NOTE 13. REGULATORY RESTRICTIONS (CONTINUED)
total and Tier I capital to risk-weighted assets, and of Tier I capital to
average assets (all as defined in the regulations). Management believes the
Company and its bank subsidiaries meet all capital adequacy requirements to
which they are subject as of June 30, 1998.
The most recent notifications from the regulatory agencies categorize each
of the Company's bank subsidiaries as well capitalized under the regulatory
framework for prompt corrective action. To be categorized as well capitalized
the banks must maintain minimum total risk-based, Tier I risk-based, and Tier I
leverage ratios as set forth in the table. There are no conditions or events
since those notifications that management believes have changed the category.
Actual capital amounts and ratios are also presented in the following tables
(amounts in thousands).
<TABLE>
<CAPTION>
TO BE WELL CAPITALIZED
FOR CAPITAL ADEQUACY UNDER PROMPT
CORRECTIVE ACTION
ACTUAL PURPOSES(a) PROVISIONS(a)
---------------------- ---------------------- ----------------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
--------- ----------- --------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
As of March 31, 1999:
Total capital (to risk-weighted assets):
Consolidated.................................... $ 40,857 9.3% $ 35,223 8.0% $ N/A N/A
Citizens Bank, Mount Ayr........................ 7,465 11.6 5,161 8.0 6,452 10.0%
Citizens Bank of Princeton...................... 4,201 16.1 2,088 8.0 2,609 10.0
F&M Bank........................................ 24,886 12.1 16,502 8.0 20,628 10.0
Rushmore Bank & Trust........................... 15,262 10.7 11,373 8.0 14,217 10.0
Tier I capital (to risk-weighted assets:)
Consolidated.................................... 35,353 8.0 17,611 4.0 N/A N/A
Citizens Bank, Mount Ayr........................ 6,807 10.5 2,581 4.0 3,871 6.0
Citizens Bank of Princeton...................... 3,871 14.8 1,044 4.0 1,565 6.0
F&M Bank........................................ 22,332 10.8 8,251 4.0 12,377 6.0
Rushmore Bank & Trust........................... 13,555 9.5 5,686 4.0 8,530 6.0
Tier I capital (to average assets):
Consolidated.................................... 35,353 6.0 23,533 4.0 N/A N/A
Citizens Bank, Mount Ayr........................ 6,807 7.5 3,616 4.0 4,520 5.0
Citizens Bank of Princeton...................... 3,871 11.0 1,403 4.0 1,753 5.0
F&M Bank........................................ 22,332 7.8 11,498 4.0 14,373 5.0
Rushmore Bank & Trust........................... 13,555 8.0 6,753 4.0 8,441 5.0
</TABLE>
F-23
<PAGE>
SPECTRUM BANCORPORATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION WITH RESPECT TO MARCH 31, 1999 AND THE
NINE MONTHS ENDED MARCH 31, 1999 AND 1998 IS UNAUDITED)
NOTE 13. REGULATORY RESTRICTIONS (CONTINUED)
<TABLE>
<CAPTION>
TO BE WELL CAPITALIZED
FOR CAPITAL ADEQUACY UNDER PROMPT
CORRECTIVE ACTION
ACTUAL PURPOSES(a) PROVISIONS(a)
---------------------- ---------------------- ----------------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
--------- ----------- --------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
As of June 30, 1998:
Total capital (to risk-weighted assets):
Consolidated.................................... $ 35,341 8.8% $ 32,118 8.0% N/A N/A
Citizens Bank, Mount Ayr........................ 7,324 12.4 4,740 8.0 $ 5,926 10.0%
Citizens Bank of Princeton...................... 3,974 16.1 1,976 8.0 2,470 10.0
F&M Bank........................................ 21,537 11.0 15,663 8.0 19,579 10.0
Rushmore Bank & Trust........................... 13,226 10.8 9,797 8.0 12,246 10.0
Tier I capital (to risk-weighted assets:)
Consolidated.................................... 30,323 7.6 16,059 4.0 N/A N/A
Citizens Bank, Mount Ayr........................ 6,664 11.2 2,372 4.0 3,557 6.0
Citizens Bank of Princeton...................... 3,662 14.8 988 4.0 1,482 6.0
F&M Bank........................................ 20,267 10.4 7,826 4.0 11,739 6.0
Rushmore Bank & Trust........................... 11,840 9.6 4,912 4.0 7,369 6.0
Tier I capital (to average assets):
Consolidated.................................... 30,323 5.6 21,731 4.0 N/A N/A
Citizens Bank, Mount Ayr........................ 6,664 8.0 3,353 4.0 4,191 5.0
Citizens Bank of Princeton...................... 3,662 10.3 1,426 4.0 1,783 5.0
F&M Bank........................................ 20,267 8.2 9,953 4.0 12,441 5.0
Rushmore Bank & Trust........................... 11,840 7.6 6,232 4.0 7,790 5.0
</TABLE>
F-24
<PAGE>
SPECTRUM BANCORPORATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION WITH RESPECT TO MARCH 31, 1999 AND THE
NINE MONTHS ENDED MARCH 31, 1999 AND 1998 IS UNAUDITED)
NOTE 13. REGULATORY RESTRICTIONS (CONTINUED)
<TABLE>
<CAPTION>
TO BE WELL CAPITALIZED
FOR CAPITAL ADEQUACY UNDER PROMPT
CORRECTIVE ACTION
ACTUAL PURPOSES(a) PROVISIONS(a)
---------------------- ---------------------- ----------------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
--------- ----------- --------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
As of June 30, 1997:
Total capital (to risk-weighted assets):
Consolidated.................................... $ 30,003 8.6% $ 28,062 8.0% N/A N/A
Citizens Bank, Mount Ayr........................ 7,259 12.6 4,597 8.0 $ 5,746 10.0%
Citizens Bank of Princeton...................... 3,794 15.9 1,907 8.0 2,384 10.0
F&M Bank........................................ 18,033 10.6 13,609 8.0 17,100 10.0
Rushmore Bank & Trust........................... 11,064 11.2 7,896 8.0 9,870 10.0
Tier I capital (to risk-weighted assets:)
Consolidated.................................... 25,618 7.3 14,031 4.0 N/A N/A
Citizens Bank, Mount Ayr........................ 6,541 11.4 2,298 4.0 3,448 6.0
Citizens Bank of Princeton...................... 3,489 14.6 953 4.0 1,430 6.0
F&M Bank........................................ 15,887 9.3 6,805 4.0 10,207 6.0
Rushmore Bank & Trust........................... 9,829 9.9 3,948 4.0 5,922 6.0
Tier I capital (to average assets):
Consolidated.................................... 25,618 5.4 18,993 4.0 N/A N/A
Citizens Bank, Mount Ayr........................ 6,541 7.9 3,322 4.0 4,153 5.0
Citizens Bank of Princeton...................... 3,489 9.9 1,412 4.0 1,765 5.0
F&M Bank........................................ 15,887 6.9 9,233 4.0 11,541 5.0
Rushmore Bank & Trust........................... 9,829 7.2 5,441 4.0 6,801 5.0
</TABLE>
- ------------
(a) The amounts and ratios are minimums under the regulations. Prompt corrective
action provisions only apply to the bank subsidiaries.
NOTE 14. MERGER OF DECATUR CORPORATION AND SPECTRUM BANCORPORATION, INC.
On May 31, 1999, Decatur Corporation (Decatur) issued 61,063 shares of its
common stock in exchange for all outstanding common stock of Spectrum
Bancorporation, Inc. (Spectrum). Decatur simultaneously changed its name to
Spectrum Bancorporation, Inc. Since the entities were under common control, the
merger has been accounted for at historical cost in a manner similar to a
pooling-of-interests and, accordingly, the consolidated financial statements for
periods prior to the combination have been restated to include the accounts and
results of both entities.
F-25
<PAGE>
SPECTRUM BANCORPORATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION WITH RESPECT TO MARCH 31, 1999 AND THE
NINE MONTHS ENDED MARCH 31, 1999 AND 1998 IS UNAUDITED)
NOTE 14. MERGER OF DECATUR CORPORATION AND SPECTRUM BANCORPORATION, INC.
(CONTINUED)
The results of operations previously reported by the separate entities and
the combined amounts presented in the accompanying consolidated financial
statements (in thousands) are summarized below.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
MARCH 31, YEARS ENDED JUNE 30,
-------------------- -------------------------------
1999 1998 1998 1997 1996
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Interest income:
Decatur Corporation and Subsidiaries..................... $ 6,953 $ 6,827 $ 9,103 $ 9,293 $ 8,825
Spectrum Bancorporation, Inc. and Subsidiaries........... 26,815 24,360 32,802 27,851 20,372
--------- --------- --------- --------- ---------
Combined............................................... $ 33,768 $ 31,187 $ 41,905 $ 37,144 $ 29,197
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Net income:
Decatur Corporation and Subsidiaries..................... $ 936 $ 892 $ 1,198 $ 1,328 $ 235
Spectrum Bancorporation, Inc. and Subsidiaries........... 4,187 3,500 4,737 3,905 2,696
Intercompany dividend income............................. (75) (75) (100) (100) (100)
--------- --------- --------- --------- ---------
Combined............................................... $ 5,048 $ 4,317 $ 5,835 $ 5,133 $ 2,831
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
Prior to the combination, Decatur's fiscal year ended December 31. In
recording the combination, Decatur's financial statements for the twelve months
ended June 30, 1998 were combined with Spectrum's financial statements for the
same period. For previous periods, financial statements for Decatur's fiscal
years ended December 31, 1997 and 1996 were combined with Spectrum's fiscal
years ended June 30, 1997 and 1996, respectively. Decatur's unaudited results of
operations for the six months ended December 31, 1997 included interest income
of $4,513,000, net income of $575,032, dividends paid of $36,000, and other
comprehensive loss of $16,000. An adjustment has been made to stockholders'
equity as of June 30, 1998 to eliminate the effect of including Decatur's
results of operations for the six months ended December 31, 1997 in both the
years ended June 30, 1998 and 1997.
NOTE 15. STOCK PURCHASE AND REDEMPTION AGREEMENT
The Company has entered into a stock purchase agreement with one of the
stockholders of F&M Bank under which the Company has the right of first refusal
to purchase 152 shares of common stock of F&M Bank offered for sale by the
stockholder at a specified price. In addition, the Company has agreed to
purchase the shares upon the death or termination of employment of the
shareholder, and obligates the estate or shareholder to sell such shares. If the
purchase occurred on June 30, 1998, the total purchase price would be
approximately $375,000. This redemption price exceeds the recorded amount of
minority interest in subsidiaries by $56,000.
NOTE 16. COMMITMENTS AND CONTINGENCIES
FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK:
The Company is party to financial instruments with off-balance-sheet risk in
the normal course of business to meet the financing needs of its customers.
These financial instruments include commitments to extend credit and letters of
credit. They involve, to varying degrees, elements of credit risk in excess of
the amount recognized in the balance sheets. The Company's exposure to credit
loss in the event of
F-26
<PAGE>
SPECTRUM BANCORPORATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION WITH RESPECT TO MARCH 31, 1999 AND THE
NINE MONTHS ENDED MARCH 31, 1999 AND 1998 IS UNAUDITED)
NOTE 16. COMMITMENTS AND CONTINGENCIES (CONTINUED)
nonperformance by the other party to the financial instrument for commitments to
extend credit and letters of credit is represented by the contractual amount of
those instruments. A summary of the Company's commitments (in thousands) is as
follows:
<TABLE>
<CAPTION>
MARCH 31, JUNE 30,
----------- --------------------
1999 1998 1997
----------- --------- ---------
<S> <C> <C> <C>
Commitments to extend credit.......................................... $ 84,824 $ 70,640 $ 67,976
Letters of credit..................................................... 934 1,051 593
</TABLE>
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract. Since many
of the commitments are expected to expire without being drawn upon, the total
commitment amounts do not necessarily represent future cash requirements.
Letters of credit are conditional commitments issued by the Company to guarantee
the performance of a customer to a third party. Those guarantees are primarily
issued to support public and private borrowing arrangements. The credit risk
involved in issuing letters of credit is essentially the same as that involved
in extending loans to customers. The Company evaluates each customer's credit
worthiness on a case-by-case basis. The credit and collateral policy for
commitments and letters of credit is comparable to that for granting loans.
CONTINGENCIES:
In the normal course of business, the Company is involved in various legal
proceedings. In the opinion of management, any liability resulting from such
proceedings would not have a material adverse effect on the Company's financial
statements.
FINANCIAL INSTRUMENTS WITH CONCENTRATION OF CREDIT RISK:
CONCENTRATION BY GEOGRAPHIC LOCATION:
A substantial portion of the Company's customers' abilities to honor their
contracts is dependent on the economy in northern Missouri, southern Iowa and
South Dakota. Although the Company's loan portfolio is diversified, there is a
relationship in these regions between the agricultural economy and the economic
performance of loans made to nonagricultural customers. The concentration of
credit in the regional agricultural economy is taken into consideration by
management in determining the allowance for loan losses.
F-27
<PAGE>
SPECTRUM BANCORPORATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION WITH RESPECT TO MARCH 31, 1999 AND THE
NINE MONTHS ENDED MARCH 31, 1999 AND 1998 IS UNAUDITED)
NOTE 16. COMMITMENTS AND CONTINGENCIES (CONTINUED)
CONCENTRATION BY INSTITUTION:
The Company has a concentration of funds on deposit (in thousands) as
follows:
<TABLE>
<CAPTION>
JUNE 30,
--------------------
1998 1997
--------- ---------
<S> <C> <C>
First USA Bank
Federal funds sold................................................................. $ 7,500 $ --
--------- ---------
--------- ---------
US Bank, N.A.
Noninterest-bearing accounts....................................................... $ 17 $ 14
Federal funds sold................................................................. 1,285 7,040
--------- ---------
$ 1,302 $ 7,054
--------- ---------
--------- ---------
</TABLE>
NOTE 17. TRANSACTIONS WITH RELATED PARTIES
The Company has had, and may be expected to have in the future, banking
transactions in the ordinary course of business with stockholders, directors,
principal officers, their immediate families and affiliated companies in which
they are principal stockholders (commonly referred to as related parties). Total
loans to related parties were approximately $5,540,000 and $4,655,000 at June
30, 1998 and 1997, respectively. The Company had participation loans sold of
approximately $3,978,000 and $3,033,000 and participations loans purchased of
approximately $19,150,000 and $18,541,000 at June 30, 1998 and 1997,
respectively, with other banks partially owned by a stockholder of the Company.
These transactions have been, in the opinion of management, on the same terms,
including interest rates and collateral, as those prevailing at the time for
comparable transactions with others.
F-28
<PAGE>
SPECTRUM BANCORPORATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION WITH RESPECT TO MARCH 31, 1999 AND THE
NINE MONTHS ENDED MARCH 31, 1999 AND 1998 IS UNAUDITED)
NOTE 18. FAIR VALUE OF FINANCIAL INSTRUMENTS AND INTEREST RATE RISK
The estimated fair values of the Company's financial instruments are (in
thousands) as follows:
<TABLE>
<CAPTION>
JUNE 30,
------------------------------------------
1998 1997
-------------------- --------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Financial Assets
Cash and due from banks................... $ 19,019 $ 19,019 $ 17,458 $ 17,458
Federal funds sold........................ 21,785 21,785 13,865 13,865
Certificates of deposit................... 2,008 2,008 297 297
Securities................................ 79,511 79,511 79,481 79,481
Loans receivable.......................... 402,871 403,976 355,500 359,390
Accrued interest receivable............... 5,323 5,323 4,882 4,882
Financial Liabilities
Deposits.................................. 450,790 452,233 399,177 400,154
Securities sold under agreements to
repurchase.............................. 18,788 18,788 17,583 17,583
Notes payable............................. 39,302 39,323 38,490 38,499
Accrued interest payable.................. 4,031 4,031 3,230 3,230
</TABLE>
The estimated fair value of commitments to extend credit and letters of
credit at June 30, 1998 and 1997 is insignificant. Loan commitments on which the
committed interest rate is less than the current market rate are also
insignificant at June 30, 1998 and 1997.
The Company assumes interest rate risk (the risk that general interest rate
levels will change) as a result of its normal operations. As a result, fair
values of the Company's financial instruments will change when interest rate
levels change and that change may be either favorable or unfavorable to the
Company. Management attempts to match maturities of assets and liabilities to
the extent believed necessary to minimize interest rate risk. However, borrowers
with fixed rate obligations are less likely to prepay in a rising rate
environment and more likely to repay in a falling rate environment. Conversely,
depositors who are receiving fixed rates are more likely to withdraw funds
before maturity in a rising rate environment and less likely to do so in a
falling rate environment. Management monitors rates and maturities of assets and
liabilities and attempts to minimize interest rate risk by adjusting terms of
new loans and deposits and by investing in securities with terms that mitigate
the Company's overall interest rate risk.
F-29
<PAGE>
SPECTRUM BANCORPORATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION WITH RESPECT TO MARCH 31, 1999 AND THE
NINE MONTHS ENDED MARCH 31, 1999 AND 1998 IS UNAUDITED)
NOTE 19. CONDENSED FINANCIAL STATEMENTS--PARENT COMPANY ONLY
The following presents condensed parent company only financial statements
for Spectrum Bancorporation, Inc. (in thousands).
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, JUNE 30,
----------- --------------------
1999 1998 1997
----------- --------- ---------
<S> <C> <C> <C>
Assets
Cash and due from banks....................................................... $ 88 $ 223 $ 164
Investment in subsidiaries.................................................... 46,200 42,292 35,558
Other assets.................................................................. 2,620 2,284 2,596
----------- --------- ---------
Total assets................................................................ $ 48,908 $ 44,799 $ 38,318
----------- --------- ---------
----------- --------- ---------
Liabilities
Note payable.................................................................. $ 11,956 $ 12,958 $ 11,545
Accounts payable and accrued liabilities...................................... 565 293 531
----------- --------- ---------
Total liabilities........................................................... 12,521 13,251 12,076
----------- --------- ---------
Stockholders' Equity
Preferred stock............................................................... 1,700 1,700 1,700
Common stock.................................................................. 72 72 72
Additional paid-in capital.................................................... 1,659 1,659 1,663
Retained earnings............................................................. 32,609 27,750 22,657
Accumulated other comprehensive income........................................ 347 367 150
----------- --------- ---------
Total stockholders' equity.................................................. 36,387 31,548 26,242
----------- --------- ---------
Total liabilities and stockholders' equity.................................. $ 48,908 $ 44,799 $ 38,318
----------- --------- ---------
----------- --------- ---------
</TABLE>
F-30
<PAGE>
SPECTRUM BANCORPORATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION WITH RESPECT TO MARCH 31, 1999 AND THE
NINE MONTHS ENDED MARCH 31, 1999 AND 1998 IS UNAUDITED)
NOTE 19. CONDENSED FINANCIAL STATEMENTS--PARENT COMPANY ONLY (CONTINUED)
CONDENSED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
NINE MONTHS ENDED
MARCH 31, YEARS ENDED JUNE 30,
-------------------- -------------------------------
1999 1998 1998 1997 1996
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Income:
Dividends received from subsidiaries........................... $ 1,828 $ 1,592 $ 2,087 $ 993 $ 1,679
Other.......................................................... 90 87 111 145 221
Interest....................................................... 6 6 11 13 30
--------- --------- --------- --------- ---------
Total income................................................. 1,924 1,685 2,209 1,151 1,930
--------- --------- --------- --------- ---------
Expense:
Salaries and employee benefits................................. 48 71 81 104 111
Interest....................................................... 691 697 951 921 619
Other.......................................................... 176 187 232 192 179
--------- --------- --------- --------- ---------
Total expenses............................................... 915 955 1,264 1,217 909
--------- --------- --------- --------- ---------
Income (loss) before income tax (benefit) and equity in
undistributed income of subsidiaries......................... 1,009 730 945 (66) 1,021
Income tax (benefit)............................................. (263) (274) (362) (349) (223)
--------- --------- --------- --------- ---------
Income before equity in undistributed income of subsidiaries... 1,272 1,004 1,307 283 1,244
Equity in undistributed income of subsidiaries................... 3,776 3,313 4,528 4,850 1,587
--------- --------- --------- --------- ---------
Net income....................................................... $ 5,048 $ 4,317 $ 5,835 $ 5,133 $ 2,831
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
F-31
<PAGE>
SPECTRUM BANCORPORATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION WITH RESPECT TO MARCH 31, 1999 AND THE
NINE MONTHS ENDED MARCH 31, 1999 AND 1998 IS UNAUDITED)
NOTE 19. CONDENSED FINANCIAL STATEMENTS--PARENT COMPANY ONLY (CONTINUED)
CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
MARCH 31, YEARS ENDED JUNE 30,
-------------------- --------------------------------
1999 1998 1998 1997 1996
--------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income............................................... $ 5,048 $ 4,317 $ 5,835 $ 5,133 $ 2,831
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and other................................. 38 35 43 23 61
Equity in undistributed income of subsidiaries......... (3,776) (3,313) (4,528) (4,850) (1,587)
Changes in deferrals and accruals:
Other assets........................................... (400) 544 (104) (207) (349)
Accounts payable and accrued liabilities............... 297 (462) 120 133 270
--------- --------- --------- --------- ----------
Net cash provided by operating activities............ 1,207 1,121 1,366 232 1,226
--------- --------- --------- --------- ----------
Cash flows from investing activities:
Investment in subsidiary................................. -- -- -- -- (1,200)
Other.................................................... -- -- -- (52) (138)
Business acquisitions.................................... -- (2,321) (2,321) -- (3,924)
--------- --------- --------- --------- ----------
Net cash (used in) investing activities.............. -- (2,321) (2,321) (52) (5,262)
--------- --------- --------- --------- ----------
Cash flows from financing activities:
Proceeds from note payable............................... 46 2,188 2,188 -- 15,990
Payments on note payable................................. (1,047) (915) (1,065) (1,015) (10,550)
Proceeds from sale (purchase) of minority interest....... (152) 113 113 198 (419)
Dividends paid........................................... (189) (114) (152) (152) (187)
Stock purchased for retirement........................... -- (30) (55) -- --
--------- --------- --------- --------- ----------
Net cash provided by (used in) financing
activities......................................... (1,342) 1,242 1,029 (969) 4,834
--------- --------- --------- --------- ----------
Net increase (decrease) in cash............................ (135) 42 74 (789) 798
Cash at beginning of period................................ 223 149 149 953 155
--------- --------- --------- --------- ----------
Cash at end of period...................................... $ 88 $ 191 $ 223 $ 164 $ 953
--------- --------- --------- --------- ----------
--------- --------- --------- --------- ----------
</TABLE>
F-32
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
WE HAVE NOT AUTHORIZED ANY DEALER, SALESPERSON OR ANY OTHER PERSON TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS AUTHORIZED BY US AND REFERRED TO IN THIS PROSPECTUS, AND, IF
GIVEN OR MADE, YOU MUST NOT RELY UPON SUCH INFORMATION AND REPRESENTATIONS. THIS
PROPOSAL DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY ANY SECURITIES IN ANY STATE TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE AN
OFFER. WE DO NOT INTEND THE DELIVERY OF THIS PROSPECTUS OR ANY SALE MADE TO
CREATE THE IMPLICATION THAT THERE HAS BEEN NO CHANGE IN OUR AFFAIRS SINCE THE
DATE OF THE INFORMATION PROVIDED IN THIS PROSPECTUS. HOWEVER, IF THERE IS ANY
MATERIAL CHANGE IN OUR AFFAIRS DURING THE TIME WHEN A COPY OF THIS PROSPECTUS IS
REQUIRED TO BE DELIVERED, WE WILL AMEND OR SUPPLEMENT THIS PROSPECTUS TO REFLECT
THE CHANGE.
---------------------
TABLE OF CONTENTS
<TABLE>
<S> <C>
Prospectus Summary........................................................ 1
Risk Factors.............................................................. 6
Selected Consolidated Financial Data...................................... 12
Cautionary Statements..................................................... 13
Use of Proceeds........................................................... 13
Accounting Treatment...................................................... 14
Capitalization............................................................ 15
Management's Discussion and Analysis of Financial Condition and Results of
Operation............................................................... 16
Business.................................................................. 37
Management................................................................ 42
Principal Stockholders.................................................... 45
Related Party Transactions................................................ 46
Supervision and Regulation................................................ 48
Description of the Preferred Securities................................... 53
Description of Junior Subordinated Debentures............................. 66
Book-Entry Issuance....................................................... 76
Description of Preferred Securities Guarantee............................. 77
Relationship Among the Preferred Securities, the Junior Subordinated
Debentures and the Preferred Securities Guarantee....................... 80
Material Federal Income Tax Consequences.................................. 82
ERISA Considerations...................................................... 85
Underwriting.............................................................. 87
Reports of Spectrum....................................................... 88
Available Information..................................................... 88
Legal Matters............................................................. 88
Experts................................................................... 89
Index to Financial Statements............................................. F-1
</TABLE>
DEALER PROSPECTUS DELIVERY OBLIGATIONS. UNTIL , 1999, ALL DEALERS
THAT EFFECT TRANSACTIONS IN THE PREFERRED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATIONS OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND REGARDING THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
2,000,000 PREFERRED SECURITIES
SPECTRUM CAPITAL TRUST I
% CUMULATIVE
PREFERRED SECURITIES
(LIQUIDATION AMOUNT $10
PER PREFERRED SECURITY)
FULLY, IRREVOCABLY AND UNCONDITIONALLY
GUARANTEED ON A SUBORDINATED BASIS,
AS DESCRIBED IN THIS PROSPECTUS, BY
SPECTRUM BANCORPORATION, INC.
---------------------
P R O S P E C T U S
---------------------
HOWE BARNES INVESTMENTS, INC.
, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
<TABLE>
<CAPTION>
<S> <C>
Securities and Exchange Commission registration fee............................... $ 6,394
NASD fee.......................................................................... 2,800
American Stock Exchange fee....................................................... 15,000
Trustees' fees and expenses....................................................... 25,000
Legal fees and expenses........................................................... 125,000
Accounting fees and expenses...................................................... 80,000
Printing expenses................................................................. 85,000
Miscellaneous expenses............................................................ 10,806
----------
Total........................................................................... $ 350,000
----------
----------
</TABLE>
All of the above items except the SEC registration fee and the NASD fee are
estimated.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Directors, officers, employees, trustees and agents of Spectrum and the
Trust may be entitled to benefit from the indemnification provisions contained
in the Iowa Business Corporation Act and Spectrum's Articles of Incorporation.
In addition, certain provisions in the Articles of Incorporation limit the
liability of directors of Spectrum. The general effect of these provisions is
summarized below:
The articles of incorporation of Spectrum provide that the board of
directors is authorized to indemnify, in the manner and to the extent provided
by the Iowa Business Corporation Act, any person entitled to indemnification
thereunder. Generally under Iowa law, any individual who is made a party to a
proceeding because the individual is or was a director may be indemnified if the
individual acted in good faith and had reasonable basis to believe that (1) in
the case of conduct in the individual's official capacity with the corporation,
that the individual's conduct was in the corporation's best interests; and (2)
in all other cases, that the individual's conduct was at least not opposed to
the corporation's best interest; and regarding any criminal proceedings, the
individual had no reasonable cause to believe the individual's conduct was
unlawful. Iowa law also extends such indemnification to officers, employees, and
agents of the corporation and further provides that an Iowa corporation may
advance expenses to a director, officer, employee, or agent of the corporation.
Iowa law also provides that an Iowa corporation may purchase and maintain
insurance on behalf of an individual who is or was a director, officer,
employee, or agent of the corporation, or who, while a director, officer,
employee, or agent of the corporation, is or was serving at the request of the
corporation as a director, officer, partner, trustee, employee, or agent of
another foreign or domestic corporation, partnership, joint venture, trust,
employee benefit plan, or other enterprise, against liability asserted against
or incurred by that individual in that capacity or arising from the individual's
status as a director, officer, employee, or agent.
The indemnification and advancement of expenses provided by Iowa law are not
exclusive of any other rights to which persons seeking indemnification or
advancement of expenses are entitled under a provision in the articles of
incorporation or bylaws, agreements, vote of stockholders or disinterested
directors, or otherwise, both as to action in a person's official capacity and
as to action in another capacity while holding office. However, such provisions,
agreements, votes or other actions shall not provide indemnification for a
breach of a director's duty of loyalty to the corporation or its stockholders,
for acts or omissions not in good faith or which involve intentional misconduct
or knowing violation of the law, for a transaction from which the person seeking
indemnification derives an improper personal benefit, or for liability for
unlawful distributions.
II-1
<PAGE>
Iowa law provides that a director is not liable for any action taken as a
director, or any failure to take any action, as long as the director discharged
his or her duties (1) in good faith, (2) with the care of an ordinarily prudent
person in a like position would exercise under similar circumstances, and (3) in
a manner the director reasonably believes to be in the best interests of the
corporation.
There is no pending litigation or proceeding involving a director, officer,
employee or other agent of Spectrum as to which indemnification is being sought.
Spectrum is not aware of any other threatened litigation that may result in
claims for indemnification by any director, officer, employee or other agent.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
On May 31, 1999, the Registrant issued 61,063 shares of its common stock and
8,000 shares of its 10% non-voting non-cumulative perpetual preferred stock in
the merger of Spectrum Bancorporation, Inc. and Rushmore Financial Services,
Inc., into the Registrant. Shares of common stock were issued to Deryl F.
Hamann, individually and as trustee of separate trusts for the benefit of his
four children and to three of his children as cotrustees of the Deryl F. Hamann
Irrevocable Qualified Marital Trust. Shares of preferred stock were issued to
Spectrum Financial Services, Inc., which is owned by Deryl F. Hamann
individually or as trustee for the benefit of his children. No underwriters were
involved in the transaction and the issuance was made in a transaction exempt
from the requirements of Section 5 of the Securities Act of 1933 pursuant to
Section 4(2) thereof.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ------------- -----------------------------------------------------------------------------------------------------
<C> <S>
1.1 Form of Underwriting Agreement(1).
2.1 Agreement and Plan of Merger dated March 31, 1999, between Spectrum Bancorporation, Inc., Decatur
Corporation and Rushmore Financial Services, Inc.(1).
3.1 Articles of Amendment to Articles of Incorporation of Spectrum Bancorporation, Inc.(1).
3.2 Bylaws of Spectrum Bancorporation, Inc.(1).
4.1 Form of Subordinated Indenture dated , 1999 to be entered into between the Registrant and
Wilmington Trust Company, as Indenture Trustee(1).
4.2 Form of Junior Subordinated Debenture(1).
4.3 Certificate of Trust of Spectrum Capital I(1).
4.4 Trust Agreement of Spectrum Capital I dated as of , 1999(1).
4.5 Form of Amended and Restated Trust Agreement of Spectrum Capital I, dated , 1999(1).
4.6 Form of Preferred Security Certificate of Capital I(1).
4.7 Form of Preferred Securities Guarantee Agreement(1).
4.8 Form of Agreement as to Expenses and Liabilities(1).
5.1 Opinion of Baird, Holm, McEachen, Pedersen, Hamann & Strasheim(1).
5.2 Form of Opinion and Consent of Richards, Layton & Finger, P.A.(2).
8.1 Form of Opinion of Baird, Holm, McEachen, Pedersen, Hamann & Strasheim, as to certain federal income
tax matters(1).
10.1 Amendment to Credit Agreement dated January 31, 1998, between Spectrum Bancorporation, Inc., as
borrower, and First Bank National Association(1).
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ------------- -----------------------------------------------------------------------------------------------------
<C> <S>
10.2 Amendment No. 5 to Credit Agreement dated December 16, 1996, between Decatur Corporation, as
borrower, and First Bank National Association(1).
10.3 Agreement for Advances, Pledge and Security Agreement dated September 11, 1995 between Federal Home
Loan Bank of Des Moines and Rushmore Bank & Trust(1). (Registrant's other subsidiary banks have
identical agreements.)
10.4 Form of CMS-TM- Agency Agreement (reverse repurchase agreement) between F&M Bank and its
customers(1).
10.5 Phantom Stock Long-Term Incentive Plan dated January 16, 1998 between Daniel A. Hamann and Citizens
Bank(1).
10.6 License Agreement dated September 5, 1997 between Jack Henry & Associates, Inc. and Spectrum Banc
Service Corporation(1).
10.7 Split-Dollar Agreement dated July 12, 1995 among Decatur Corporation and Daniel A. Hamann, Esther
Hamann Brabec and Julie Hamann Bunderson(1).
12.1 Statement re Computation of Ratios(1).
21 Subsidiaries of Registrant(1).
23.1 Consent of McGladrey & Pullen, LLP(1).
23.2 Consent of Deloitte & Touche LLP(1).
23.3 Consent of Baird, Holm, McEachen, Pedersen, Hamann & Strasheim(1).
23.4 Form of Consent of Richards, Layton & Finger, P.A. (included in Exhibit 5.2 above).
24.1 The power of attorney is set forth on the signature page of this Registration Statement.
25.1 Form T-1 Statement of Eligibility of Wilmington Trust Company to act as trustee under the
Subordinated Indenture(1).
25.2 Form T-1 Statement of Eligibility of Wilmington Trust Company to act as trustee under the Amended and
Restated Trust Agreement(1).
25.3 Form T-1 Statement of Eligibility of Wilmington Trust Company to act as Trustee under the Preferred
Securities Guarantee Agreement(1).
27 Financial Data Schedule(1).
</TABLE>
- ------------
(1) Filed herewith.
(2) To be filed by amendment.
ITEM 28. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions or otherwise, each Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by each Registrant of expenses incurred
or paid by a director, officer or controlling person of each Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
directors, officer or controlling person in connection with the securities being
registered, each Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
II-3
<PAGE>
Each Registrant hereby undertakes 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 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.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Omaha, State of Nebraska
on this 11th day of June, 1999.
<TABLE>
<S> <C>
Spectrum Capital Trust I Spectrum Bancorporation, Inc.
By: /s/ DANIEL A. HAMANN By: /s/ DERYL F. HAMANN
-------------------------------------- -----------------------------------------
Daniel A. Hamann Deryl F. Hamann
Administrative Trustee Chairman of the Board and CEO
</TABLE>
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS, that each person whose signature appears below
hereby constitutes and appoints Deryl F. Hamann, Daniel A. Hamann and Thomas B.
Fischer, and each of them, his true and lawful attorneys-in-fact and agents,
with full power of substitution and resubstitution for him in his name, place
and stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement and to file the same,
with all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting upon said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite or necessary to be done in and about the premises,
as fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents or either of
them, or their or his substitute or substitutes, may lawfully do or cause to be
done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities of Spectrum Bancorporation, Inc. on the 11th day of June, 1999.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY
- ------------------------------------------------------ ------------------------------------------------------
<C> <S>
/s/ DERYL F. HAMANN
------------------------------------------- Chairman and Chief Executive Officer
Deryl F. Hamann (Principal Executive Officer) and Director
/s/ DANIEL F. HAMANN
------------------------------------------- President and Director
Daniel F. Hamann
/s/ JOHN L. KOPECKY
------------------------------------------- Vice President and Chief Financial Officer
John L. Kopecky (Principal Financial and Accounting Officer)
/s/ THOMAS B. FISCHER
------------------------------------------- Senior Vice President and Director
Thomas B. Fischer
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE CAPACITY
- ------------------------------------------------------ ------------------------------------------------------
<C> <S>
/s/ DANIEL J. BRABEC
------------------------------------------- Vice President and Director
Daniel J. Brabec
/s/ W. ERIC BUNDERSON
------------------------------------------- Vice President and Director
W. Eric Bunderson
</TABLE>
II-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ------------- -----------------------------------------------------------------------------------------------------
<C> <S>
1.1 Form of Underwriting Agreement(1).
2.1 Agreement and Plan of Merger dated March 31, 1999, between Spectrum Bancorporation, Inc., Decatur
Corporation and Rushmore Financial Services, Inc.(1).
3.1 Articles of Amendment to Articles of Incorporation of Spectrum Bancorporation, Inc.(1).
3.2 Bylaws of Spectrum Bancorporation, Inc.(1).
4.1 Form of Subordinated Indenture dated , 1999 to be entered into between the Registrant and
Wilmington Trust Company, as Indenture Trustee(1).
4.2 Form of Junior Subordinated Debenture(1).
4.3 Certificate of Trust of Spectrum Capital I(1).
4.4 Trust Agreement of Spectrum Capital I dated as of , 1999(1).
4.5 Form of Amended and Restated Trust Agreement of Spectrum Capital I, dated , 1999(1).
4.6 Form of Preferred Security Certificate of Capital I(1).
4.7 Form of Preferred Securities Guarantee Agreement(1).
4.8 Form of Agreement as to Expenses and Liabilities(1).
5.1 Opinion of Baird, Holm, McEachen, Pedersen, Hamann & Strasheim(1).
5.2 Form of Opinion and Consent of Richards, Layton & Finger, P.A.(2).
8.1 Form of Opinion of Baird, Holm, McEachen, Pedersen, Hamann & Strasheim, as to certain federal income
tax matters(1).
10.1 Amendment to Credit Agreement dated January 31, 1998, between Spectrum Bancorporation, Inc., as
borrower, and First Bank National Association(1).
10.2 Amendment No. 5 to Credit Agreement dated December 16, 1996, between Decatur Corporation, as
borrower, and First Bank National Association(1).
10.3 Agreement for Advances, Pledge and Security Agreement dated September 11, 1995 between Federal Home
Loan Bank of Des Moines and Rushmore Bank & Trust(1). (Registrant's other subsidiary banks have
identical agreements.)
10.4 Form of CMS-TM- Agency Agreement (reverse repurchase agreement) between F&M Bank and its
customers(1).
10.5 Phantom Stock Long-Term Incentive Plan dated January 16, 1998 between Daniel A. Hamann and Citizens
Bank(1).
10.6 License Agreement dated September 5, 1997 between Jack Henry & Associates, Inc. and Spectrum Banc
Service Corporation(1).
10.7 Split-Dollar Agreement dated July 12, 1995 among Decatur Corporation and Daniel A. Hamann, Esther
Hamann Brabec and Julie Hamann Bunderson(1).
12.1 Statement re Computation of Ratios(1).
21 Subsidiaries of Registrant(1).
23.1 Consent of McGladrey & Pullen, LLP(1).
23.2 Consent of Deloitte & Touche LLP(1).
23.3 Consent of Baird, Holm, McEachen, Pedersen, Hamann & Strasheim(1).
23.4 Form of Consent of Richards, Layton & Finger, P.A. (included in Exhibit 5.2 above).
</TABLE>
II-7
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ------------- -----------------------------------------------------------------------------------------------------
<C> <S>
24.1 The power of attorney is set forth on the signature page of this Registration Statement.
25.1 Form T-1 Statement of Eligibility of Wilmington Trust Company to act as trustee under the
Subordinated Indenture(1).
25.2 Form T-1 Statement of Eligibility of Wilmington Trust Company to act as trustee under the Amended and
Restated Trust Agreement(1).
25.3 Form T-1 Statement of Eligibility of Wilmington Trust Company to act as Trustee under the Preferred
Securities Guarantee Agreement(1).
27 Financial Data Schedule(1).
</TABLE>
- ------------
(1) Filed herewith.
(2) To be filed by amendment.
II-8
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
EXHIBITS
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
SPECTRUM BANCORPORATION, INC.
AND
SPECTRUM CAPITAL TRUST I
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
CHAPMAN AND CUTLER
DRAFT OF JUNE 11, 1999
$20,000,000 PREFERRED SECURITIES*
SPECTRUM CAPITAL TRUST I
____% CUMULATIVE TRUST PREFERRED SECURITIES
(LIQUIDATION PREFERENCE OF $10 PER TRUST PREFERRED SECURITY)
UNDERWRITING AGREEMENT
August __, 1999
Howe Barnes Investments, Inc.
As Representative of the several Underwriters
named in Schedule A
135 South LaSalle Street
Chicago, Illinois 60603
Ladies and Gentlemen:
Spectrum Bancorporation, Inc., an Iowa corporation (the "COMPANY"), and
its subsidiary, Spectrum Capital Trust I, a statutory business trust organized
under the Delaware Business Trust Act (the "DELAWARE ACT") (the "TRUST" and,
together with the Company, the "OFFERORS"), propose, subject to the terms and
conditions stated herein, to issue and sell to you (the "UNDERWRITERS"), an
aggregate of $20,000,000, representing 2,000,000 securities of the Trust's ____%
Cumulative Trust Preferred Securities, with a liquidation preference of $10.00
per preferred security (the "FIRM PREFERRED SECURITIES"). In addition, the
Offerors propose to grant to the Underwriters an option to purchase up to
$3,000,000, representing 300,000 securities, of the Trust's ____% Cumulative
Trust Preferred Securities, with a liquidation preference of $10.00 per
preferred security (the "OPTION PREFERRED SECURITIES") as provided in Section 2
hereof. The Firm Preferred Securities and the Option Preferred Securities are
hereinafter collectively referred to as the "PREFERRED SECURITIES." The
Offerors propose that the Trust issue the Preferred Securities pursuant to a
Trust Agreement, as amended and restated, among Wilmington Trust Company, as
Property Trustee and Delaware Trustee, the administrative trustees named therein
(the "ADMINISTRATIVE TRUSTEES") and the Company (the "TRUST AGREEMENT"). The
Preferred Securities will be guaranteed by the Company with respect to
distributions and payments upon liquidation, redemption and otherwise (the
"GUARANTEE") pursuant to a Guarantee Agreement (the "GUARANTEE AGREEMENT"), to
be dated August __, 1999, between the Company and Wilmington Trust Company, as
trustee (the "GUARANTEE TRUSTEE"), and entitled to the benefits of certain
backup undertakings described in the Prospectus (as defined herein) with respect
to the
- ------------------
* The Offerors have granted to the Underwriters an option to purchase up to
$3,000,000, representing 300,000 Trust Preferred Securities.
<PAGE>
Company's agreement pursuant to the Expense Agreement (as defined herein) to pay
all expenses relating to administration of the Trust.
The proceeds of the sale of the Preferred Securities will be used to
purchase junior subordinated deferrable interest debentures (the "JUNIOR
SUBORDINATED DEBENTURES") issued by the Company pursuant to an Indenture, to be
dated August __, 1999, between the Company and Wilmington Trust Company, as
trustee (the "INDENTURE").
The Offerors have filed with the Securities and Exchange Commission (the
"COMMISSION") a registration statement on Form S-1 (File Nos. 333-_____ and
333-_____) and a related preliminary prospectus for the registration of the
Preferred Securities, the Guarantee and the Junior Subordinated Debentures,
under the Securities Act of 1933, as amended (the "ACT") and the Trust Indenture
Act of 1939, as amended (the "TRUST INDENTURE ACT") and the rules and
regulations thereunder. The registration statement, as amended, at the time it
was declared effective, including the information (if any) deemed to be part
thereof pursuant to Rule 430A under the Act, is herein referred to as the
"REGISTRATION STATEMENT." The form of prospectus first filed by the Offerors
with the Commission pursuant to Rules 424(b) and 430A under the Act is referred
to herein as the "PROSPECTUS." Each preliminary prospectus included in the
Registration Statement prior to the time it becomes effective or filed with the
Commission pursuant to Rule 424(a) under the Act is referred to herein as a
"PRELIMINARY PROSPECTUS." The Securities Exchange Act of 1934, as amended, is
referred to herein as the "EXCHANGE ACT." Copies of the Registration Statement,
including all exhibits and schedules thereto, any amendments thereto and all
Preliminary Prospectuses have been delivered to you.
The Offerors hereby confirm their agreement with respect to the purchase
of the Preferred Securities by the Underwriters as follows:
1. REPRESENTATIONS AND WARRANTIES OF THE OFFERORS. (a) The Offerors
jointly and severally represent and warrant to, and agree with, each of the
Underwriters that:
(i) The Registration Statement has been declared effective
under the Act, and no post-effective amendment to the Registration
Statement has been filed with the Commission as of the date of this
Agreement. No stop order suspending the effectiveness of the
Registration Statement has been issued and no proceeding for that
purpose has been instituted or threatened by the Commission.
(ii) No order preventing or suspending the use of any
Preliminary Prospectus has been issued by the Commission, and each
Preliminary Prospectus, at the time of filing thereof, conformed in all
material respects to the requirements of the Act and the Trust Indenture
Act and the rules and regulations of the Commission promulgated
thereunder, and did not contain an untrue statement of a material fact
or omit to state a material fact required to be
<PAGE>
stated therein or necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading;
PROVIDED, HOWEVER, that the Offerors make no representation or
warranty as to information contained in or omitted in reliance upon,
and in conformity with, written information furnished to the Offerors
by or on behalf of any Underwriter, expressly for use in the
preparation thereof.
(iii) The Registration Statement conforms, and the Prospectus
and any amendments or supplements thereto will conform, in all material
respects to the requirements of the Act and the Trust Indenture Act and
the rules and regulations thereunder. Neither the Registration
Statement nor any amendment thereto, and neither the Prospectus nor any
supplement thereto, contains or will contain, as the case may be, any
untrue statement of a material fact or omits or will omit to state any
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading; PROVIDED, HOWEVER, that the Offerors make no
representation or warranty as to (i) information contained in or omitted
from the Registration Statement or the Prospectus, or any such amendment
or supplement, in reliance upon, and in conformity with, written
information furnished to the Offerors by or on behalf of any
Underwriter, expressly for use in the preparation thereof or
(ii) information in those parts of the Registration Statement which
constitute the Statement of Eligibility and Qualification ("FORM T-1")
under the Trust Indenture Act.
(iv) The Trust has been duly created and is validly existing
in good standing as a business trust under the Delaware Act with full
trust power and authority to own property and to conduct its business as
described in the Registration Statement and Prospectus and is authorized
to do business in each jurisdiction in which such qualification is
required, except where the failure to so qualify would not have a
material adverse effect on the Trust's condition (financial or
otherwise), earnings, business, prospects, assets, results of operations
or properties taken as a whole; the Trust has conducted and will conduct
no business other than the transactions contemplated by the Trust
Agreement and described in the Prospectus; the Trust is not a party to
or otherwise bound by any agreement other than those described in the
Prospectus; the Trust is and will be classified for United States
federal income tax purposes as a grantor trust and not as an association
taxable as a corporation; and the Trust is and will be treated as a
consolidated subsidiary of the Company pursuant to generally accepted
accounting principles.
(v) The Company has been duly organized and is validly
existing as a corporation in good standing under the laws of the State
of Iowa and is duly registered as a bank holding company under the Bank
Holding Company Act of 1956, as amended (the "BHC ACT"), supervised by
the Board of Governors of the Federal Reserve System (the "FED").
Except as set forth in Schedule B attached hereto, the Company does not
directly or indirectly own any stock or other equity
<PAGE>
interest in any corporation, partnership, joint venture,
unincorporated association or other entity other than F&M Bank,
Watertown, South Dakota ("F&M"), Rushmore State Bank & Trust, Rapid
City, South Dakota ("RUSHMORE"), Citizens Bank, Mt. Ayr, Iowa
("CITIZENS") and Citizens Bank of Princeton, Princeton, Missouri
("PRINCETON," and collectively, the "BANKS") and Spectrum Banc Service
Corp. The Banks and any other entities owned by the Company being
collectively referred to herein as the "SUBSIDIARIES." Each
Subsidiary has been duly incorporated, is validly existing as a
corporation in good standing under the laws of the jurisdiction of its
incorporation, has the corporate power and authority to own or lease
its properties and conduct its business as described in the
Prospectus, and is duly qualified to transact business in all
jurisdictions in which the conduct of its business or its ownership or
leasing or property requires such qualification and the failure so to
qualify would have a material adverse effect on the business or
condition, financial or otherwise, of the Company and the
Subsidiaries, taken as a whole. All outstanding shares of capital
stock of each of the Subsidiaries have been duly authorized and
validly issued, are fully paid and non-assessable, and are owned,
directly or indirectly, by the Company free and clear of all liens,
encumbrances and security interests, except as set forth in the
Prospectus. No options, warrants or other rights to purchase,
agreements or other obligations to issue, or other rights to convert
any obligations into, shares of capital stock or ownership interests
in any of the Subsidiaries are outstanding.
(vi) All of the issued and outstanding shares of capital
stock of the Company are duly authorized, validly issued, fully paid and
nonassessable, were offered and sold in compliance with all federal and
state securities laws, and were not issued in violation of or subject to
any preemptive rights or other rights to subscribe for or purchase
securities. Except as otherwise stated in the Registration Statement
and Prospectus, there are no preemptive rights or other rights to
subscribe for or to purchase, or any restriction upon the voting or
transfer of, the Junior Subordinated Debentures, the common securities
of the Trust held by the Company (the "COMMON SECURITIES") or the
Preferred Securities. Neither the filing of the Registration Statement
nor the registration of the Preferred Securities, the Guarantee or the
Junior Subordinated Debentures gives rise to any rights for or relating
to the registration of any capital stock or other securities of the
Company or the Trust. The Company has an authorized and outstanding
capitalization as set forth in the Registration Statement and the
Prospectus.
(vii) Each of this Agreement, the Indenture, the Trust
Agreement, the Guarantee Agreement and the Agreement as to Expenses and
Liabilities (the "EXPENSE AGREEMENT") has been duly authorized, executed
and delivered by the Company and/or the Trust, as the case may be, and
constitutes a valid, legal and binding obligation of the Company and/or
the Trust, as the case may be, enforceable in accordance with its terms,
except as rights to indemnity hereunder may be limited by federal or
state securities laws and except as such enforceability may be limited
by bankruptcy, insolvency, reorganization or similar
<PAGE>
laws affecting the rights of creditors generally and subject to
general principles of equity and, with respect to Section 7 hereof, by
the public policy underlying the federal or state securities laws.
The execution, delivery and performance of this Agreement, the
Indenture, the Trust Agreement, the Guarantee Agreement and the
Expense Agreement and the consummation of the transactions herein or
therein contemplated will not result in a breach or violation of any
of the terms and provisions of, or constitute a default under, any
statute, any indenture, mortgage, deed of trust, loan agreement,
lease, franchise, license or other agreement or instrument to which
the Trust, the Company or any of the Subsidiaries is a party or by
which the Trust, the Company or any of the Subsidiaries is bound or to
which any property or assets of the Trust, the Company or any of the
Subsidiaries is subject, the Company's or any Subsidiary's charter or
bylaws, the Trust Agreement or the Trust's certificate of trust filed
with the State of Delaware on __________, 1999 (the "CERTIFICATE OF
TRUST") or any order, rule, regulation or decree of any court or
governmental agency or body having jurisdiction over the Company, any
Subsidiary or the Trust or having jurisdiction over any of the
properties of the Company, any Subsidiary or the Trust. No consent,
approval, authorization or order of, or filing with, any court or
governmental agency or body is required for the execution, delivery
and performance of this Agreement, the Indenture, the Trust Agreement,
the Guarantee Agreement and the Expense Agreement or for the
consummation of the transactions contemplated hereby or thereby,
including the issuance or sale of the Junior Subordinated Debentures
by the Company and the Common Securities and the Preferred Securities
by the Trust, except such as may be required under the Act, all of
which have been obtained or made, and under state securities or blue
sky laws. Each of the Company and the Trust, as the case may be, has
full power and authority to enter into this Agreement, the Indenture,
the Trust Agreement, the Guarantee Agreement and the Expense
Agreement, as the case may be, and to authorize, issue and sell the
Junior Subordinated Debentures or the Common Securities and the
Preferred Securities, as the case may be, as contemplated by this
Agreement; and each of the Indenture, the Trust Agreement and the
Guarantee Agreement has been duly qualified under the Trust Indenture
Act and will conform in all material respects to the statements
relating thereto in the Registration Statement and the Prospectus.
(viii) The Junior Subordinated Debentures have been duly
authorized by the Company and at the Closing Date will have been duly
executed by the Company and, when authenticated in the manner provided
for in the Indenture and delivered against payment therefor as described
in the Prospectus, will constitute valid and binding obligations of the
Company, enforceable against the Company in accordance with their terms,
except to the extent that enforcement thereof may be limited by
bankruptcy, insolvency, reorganization or similar laws affecting the
rights of creditors generally and subject to general principles of
equity, will be in the form contemplated by, and entitled to the
benefits of, the Indenture, will conform to the statements relating
thereto in the Prospectus, and
<PAGE>
will be owned by the Trust free and clear of any security interest,
pledge, lien, encumbrance, claim or equity.
(ix) The Common Securities have been duly authorized by the
Trust Agreement and, when issued and delivered by the Trust to the
Company against payment therefor as described in the Prospectus, will be
validly issued and (subject to the terms of the Trust Agreement) fully
paid and nonassessable undivided beneficial interests in the assets of
the Trust and will conform to all statements relating thereto contained
in the Prospectus; and at the Closing Date all of the issued and
outstanding Common Securities of the Trust will be directly owned by the
Company free and clear of any security interest, pledge, lien,
encumbrance, claim or equity.
(x) The Preferred Securities have been duly authorized by
the Trust Agreement and, when issued and delivered pursuant to this
Agreement against payment of the consideration set forth herein, will be
validly issued and fully paid and non-assessable undivided beneficial
interests in the Trust, will be entitled to the benefits of the Trust
Agreement and will conform to the statements relating thereto contained
in the Prospectus; and holders of Preferred Securities will be entitled
to the same limitation of personal liability under Delaware law as
extended to stockholders of private corporations for profit.
(xi) The Indenture, the Trust Agreement, the Guarantee
Agreement and the Expense Agreement are in substantially the respective
forms filed as exhibits to the Registration Statement.
(xii) The Company's obligations under the Guarantee Agreement
are subordinated and junior in right of payment to all Senior and
Subordinated Debt (as defined in the Indenture) of the Company.
(xiii) The Junior Subordinated Debentures are subordinate and
junior in right of payment to all Senior and Subordinated Debt of the
Company.
(xiv) Each of the Administrative Trustees of the Trust is an
officer of the Company and has been duly authorized by the Company to
execute and deliver the Trust Agreement.
(xv) The financial statements, together with the related
notes and schedules, contained in the Registration Statement and
Prospectus present fairly the consolidated financial position, results
of operations, shareholders' equity and cash flows of the Company and
its consolidated Subsidiaries on the basis stated therein at the
indicated dates and for the indicated periods. Such financial
statements have been prepared in accordance with generally accepted
accounting principles consistently applied throughout the periods
involved, and all adjustments necessary for a fair presentation of
results for such periods have been made, except as otherwise stated
therein. The selected financial and
<PAGE>
statistical data included in the Registration Statement present fairly
the information shown therein on the basis stated in the Registration
Statement and have been compiled on a basis consistent with the
financial statements presented therein.
(xvi) There is no action or proceeding pending or, to the
knowledge of the Trust or the Company, threatened or contemplated
against any of the Trust, the Company or any Subsidiary before any court
or administrative or regulatory agency which, if determined adversely to
the Trust, the Company or such Subsidiary would, individually or in the
aggregate, result in a material adverse change in the business or
condition (financial or otherwise), results of operations, shareholders'
equity or prospects of the Trust, the Company or such Subsidiary, taken
as a whole, except as set forth in the Registration Statement.
(xvii) There are no contracts or documents of the Trust or the
Company or any Subsidiary that are required by the Act or by the rules
and regulations thereunder to be filed as exhibits to the Registration
Statement which contracts or documents have not been so filed.
(xviii) The Company and the Subsidiaries have good and
marketable title to all properties and assets reflected as owned in the
financial statements hereinabove described (or as described as owned in
the Prospectus), in each case free and clear of all liens, encumbrances
and defects, except such as are described in the Prospectus or do not
substantially affect the value of such properties and assets and do not
materially interfere with the use made and proposed to be made of such
properties and assets by the Company and the Subsidiaries; and any real
property and buildings held under lease by the Company and the
Subsidiaries are held by them under valid, subsisting and enforceable
leases with such exceptions as are not material and do not interfere
with the use made and proposed to be made of such property and buildings
by the Company and the Subsidiaries.
(xix) Since the respective dates as of which information is
given in the Registration Statement, as it may be amended or
supplemented, (A) there has not been any material adverse change, or any
development involving a prospective material adverse change, in or
affecting the condition, financial or otherwise, of the Trust, the
Company and the subsidiaries taken as a whole, or the business affairs,
management, financial position, shareholders' equity or results of
operations of the Trust, the Company and the Subsidiaries, taken as a
whole, whether or not occurring in the ordinary course of business,
including, without limitation, any material increase in the amount or
number of classified assets of the Banks, any decrease in net interest
margin for any month to a level below ____%, or any material decrease in
the volume of loan originations, the amount of deposits or the amount of
loans, (B) there has not been any transaction not in the ordinary course
of business entered into by the Trust, the Company or any of the
Subsidiaries which is material to the Trust, the Company
<PAGE>
and the Subsidiaries, taken as a whole, other than transactions
described or contemplated in the Registration Statement, (C) the
Trust, the Company and the Subsidiaries have not incurred any material
liabilities or obligations, which are not in the ordinary course of
business or which could result in a material reduction in the future
earnings of the Trust, the Company and the Subsidiaries, (D) the
Trust, the Company and the Subsidiaries have not sustained any
material loss or interference with their respective businesses or
properties from fire, flood, windstorm, accident or other calamity,
whether or not covered by insurance, (E) since May 31, 1999, there has
not been any change in the capital stock of the Company or the
Subsidiaries (other than upon the exercise of options and warrants
described in the Registration Statement), or any material increase in
the short-term or long-term debt (including capitalized lease
obligations) of the Company and the Subsidiaries, taken as a whole,
and (F) since March 31, 1999, there has not been any declaration or
payment of any dividends or any distributions of any kind with respect
to the capital stock of the Company or the Subsidiaries other than any
dividends or distributions described or contemplated in the
Registration Statement.
(xx) Neither the Company nor any of the Subsidiaries is in
violation of its respective charter or Bylaws; the Trust is not in
violation of the Trust Agreement or its Certificate of Trust; and none
of the Trust, the Company, or the Subsidiaries is in violation of or
otherwise in default under any statute, or any rule, regulation, order,
judgment, decree or authorization of any court or governmental or
administrative agency or body having jurisdiction over the Trust, the
Company or any of the Subsidiaries or any of their properties, or any
indenture, mortgage, deed of trust, loan agreement, lease, franchise,
license or other agreement or instrument to which the Trust, the Company
or any of the Subsidiaries is a party or by which any of them are bound
or to which any property or assets of the Trust, the Company or any of
the Subsidiaries is subject, which violation or default would have a
material adverse effect on the business, condition (financial or
otherwise), results of operations, shareholders' equity or prospects of
the Trust, the Company and the Subsidiaries, taken as a whole.
(xxi) The Administrative Trustees on behalf of the Trust, the
Company and each of the Subsidiaries holds and is operating in
compliance with all licenses, approvals, certificates and permits from
governmental and regulatory authorities, foreign and domestic, which are
necessary to the conduct of its business as described in the Prospectus.
Without limiting the generality of the foregoing, the Company has all
necessary approvals of the Fed to own the stock of the Subsidiaries.
None of the Trust, the Company or any Subsidiary has received notice of
or has knowledge of any basis for any proceeding or action relating
specifically to the Trust, the Company or the Subsidiaries for the
revocation or suspension of any such consent, authorization, approval,
order, license, certificate or permit or any other action or proposed
action by any regulatory authority having jurisdiction over the Trust,
the Company or the
<PAGE>
Subsidiaries that would have a material adverse effect on the Trust,
the Company or any Subsidiary.
(xxii) To the best of the Offerors' knowledge, McGladrey &
Pullen, LLP which has certified certain of the financial statements
filed with the Commission as part of the Registration Statement, are
independent public accountants as required by the Act and the rules and
regulations thereunder.
(xxiii) The Offerors have not taken and will not take, directly
or indirectly, any action designed to, or which has constituted, or
which might reasonably be expected to cause or result in, stabilization
or manipulation of the price of the Preferred Securities.
(xxiv) The Offerors' registration statement pursuant to
Section 12(g) of the Exchange Act with respect to the Preferred
Securities, has been declared effective by the Commission; the Preferred
Securities have been approved for quotation and trading, upon notice of
issuance, on the American Stock Exchange under the symbol "_________."
(xxv) The Offerors have not distributed and will not
distribute any prospectus or other offering material in connection with
the offering and sale of the Preferred Securities other than any
Preliminary Prospectus or the Prospectus or other materials permitted by
the Act to be distributed by the Company.
(xxvi) The deposit accounts of the Banks are insured by the
Federal Deposit Insurance Corporation (the "FDIC") to the fullest extent
provided by law. No proceeding for the termination of such insurance is
pending or is threatened. Neither the Company nor any Subsidiary has
received or is subject to any directive or order from the Fed, the FDIC,
the South Dakota Department of Banking and Finance, the Missouri
Division of Finance, the Iowa Division of Banking, or any other
regulatory authority to make any material change in the method of
conducting their respective businesses that has not been complied with
in all material respects.
(xxvii) Neither the Offerors nor any of their affiliates does
any business, directly or indirectly, with the government of Cuba or
with any person or entity located in Cuba.
(xxviii) The Trust, the Company and the Subsidiaries, to the
best of their knowledge, have filed all federal, state, local and
foreign tax returns or reports required to be filed, and have paid in
full all taxes indicated by said returns or reports and all assessments
received by it or any of them to the extent that such taxes have become
due and payable, except where the Trust, the Company and the
Subsidiaries are contesting in good faith such taxes and assessments.
The Company and the Subsidiaries have also filed all required
applications, reports, returns and other documents and information with
all state and federal banking
<PAGE>
authorities and agencies.
(xxix) The Trust, the Company and each of the Subsidiaries, to
the best of their knowledge, owns or licenses all patents, patent
applications, trademarks, service marks, tradenames, trademark
registrations, service mark registrations, copyrights, licenses,
inventions, trade secrets and other similar rights necessary for the
conduct of their businesses as described in the Prospectus. Neither the
Trust, the Company nor any of the Subsidiaries has any knowledge of any
infringement by them of any patents, patent applications, trademarks,
service marks, tradenames, trademark registrations, service mark
registrations, copyrights, licenses, inventions, trade secrets or other
similar rights of others, and none of the Trust, the Company or any of
the Subsidiaries has received any notice or claim of conflict with the
asserted rights of others with respect to any of the foregoing.
(xxx) None of the Trust, the Company or any of the
Subsidiaries is an "investment company" or a company "controlled" by an
"investment company" within the meaning of the Investment Company Act of
1940, as amended, or an "investment adviser" within the meaning of the
Investment Advisers Act of 1940, as amended.
(xxxi) The Company and its Subsidiaries maintain, and the
Trust will maintain, a system of internal accounting controls sufficient
to provide reasonable assurances that (A) transactions are executed in
accordance with management's general or specific authorization;
(B) transactions are recorded as necessary to permit preparation of
financial statements in conformity with generally accepted accounting
principles and to maintain accountability for assets; (C) access to
records is permitted only in accordance with management's general or
specific authorization; and (D) the recorded accountability for assets
is compared with existing assets at reasonable intervals and appropriate
action is taken with respect to any differences.
(xxxii) Other than as contemplated by this Agreement and as
disclosed in the Registration Statement, the Company has not incurred
any liability for any finder's or broker's fee or agent's commission in
connection with the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby.
(xxxiii) No report or application filed by the Company or any of
its subsidiaries with the Fed, the FDIC, the South Dakota Division of
Banking and Finance, the Missouri Division of Finance or the Iowa
Division of Banking, as of the date it was filed, contained an untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading when made or failed to comply with the applicable
requirements of the Fed, the FDIC, the South Dakota Division of Banking
and Finance, the Missouri Division of Finance or the Iowa Division of
<PAGE>
Banking, as the case may be.
(xxxiv) The proceeds from the sale of the Preferred Securities
will constitute "Tier 1" capital (as defined in 12 C.F.R. Part 325),
subject to applicable regulatory restrictions on the amount thereof that
can be included in Tier 1 capital.
(b) Any certificate signed by or on behalf of the Trust or the
Company and delivered to the Underwriters or counsel to the Underwriters shall
be deemed to be a representation and warranty of the Trust or the Company to
each Underwriter as to the matters covered thereby.
2. PURCHASE, SALE AND DELIVERY OF PREFERRED SECURITIES. On the
basis of the representations, warranties and agreements herein contained, but
subject to the terms and conditions herein set forth, the Trust agrees to issue
and sell to each Underwriter, and each of the Underwriters agrees, severally and
not jointly, to purchase from the Trust, at a purchase price per Preferred
Security of $10.00, the number of Firm Preferred Securities set forth opposite
the name of such Underwriter in Schedule A hereto. As compensation to the
Underwriters for their commitments hereunder and in view of the fact that the
proceeds of the sale of the Preferred Securities (together with the entire
proceeds from the sale by the Trust to the Company of the Common Securities)
will be used to purchase the Junior Subordinated Debentures, the Company hereby
agrees to pay at the Closing Date to the Representative a commission of $0.375
per Preferred Security sold by the Trust hereunder.
The Firm Preferred Securities will be delivered by the Company to the
Representative against payment of the purchase price therefor at the offices of
Baird, Holm, McEachen, Pedersen, Hamann & Strasheim, Omaha, Nebraska, or such
other location as may be mutually acceptable, at 9:00 a.m. Central time on
August __, 1999, or such other time and date as the Representative and the
Company may agree upon in writing, such time and date of delivery being herein
referred to as the "FIRST CLOSING DATE." The purchase price shall be payable by
wire transfer of immediately available funds to an account, such account to be
designated by the Trust at least two business days preceding the First Closing
Date. The Underwriters' commission shall be payable by wire transfer of
immediately available funds to an account, such account to be designated by the
Underwriters at least two business days preceding the First Closing Date.
Delivery of the Firm Preferred Securities may be made by credit through full
fast transfer to the accounts at The Depository Trust Company designated by you.
Certificates representing the Firm Preferred Securities, in definitive form and
in such denominations and registered in such names as you may request upon at
least two business days' prior notice to the Company shall be prepared and will
be made available for checking and packaging, not later than 10:30 a.m., Central
time, on the business day next preceding the First Closing Date at the offices
of Howe Barnes Investments, Inc., 135 South LaSalle Street, Chicago, Illinois
60603, or such other location as may be mutually acceptable.
<PAGE>
In addition, on the basis of the representations, warranties and
agreements herein contained, but subject to the terms and conditions herein set
forth, the Company hereby grants an option to the several Underwriters to
purchase, severally and not jointly, up to an aggregate of 300,000 Option
Preferred Securities, at the same purchase price per share to be paid for the
Firm Preferred Securities, for use solely in covering any overallotments made by
the Underwriters in the sale and distribution of the Firm Preferred Securities.
The option granted hereunder may be exercised at any time (but not more than
once) within 30 days after the date of the initial public offering upon notice
by you to the Company setting forth the aggregate number of Option Preferred
Securities as to which the Underwriters are exercising the option, the names and
denominations in which the certificates for such shares are to be registered and
the time and place at which such certificates will be delivered. Such time of
delivery (which may not be earlier than the First Closing Date), being herein
referred to as the "SECOND CLOSING DATE," shall be determined by you, but if at
any time other than the First Closing Date, shall not be earlier than three nor
later than 10 full business days after delivery of such notice of exercise. The
number of Option Preferred Securities to be purchased by each Underwriter shall
be determined by multiplying the number of Option Preferred Securities to be
sold by the Company pursuant to such notice of exercise by a fraction, the
numerator of which is the number of Firm Preferred Securities to be purchased by
such Underwriter as set forth opposite its name in Schedule A and the
denominator of which is the total number of Firm Preferred Securities (subject
to such adjustments to eliminate any fractional share purchases as you in your
absolute discretion may make). Certificates for the Option Preferred Securities
will be made available at the Company's expense for checking and packaging at
10:30 a.m., Chicago Time, on the business day preceding the Second Closing Date.
The manner of payment for and delivery of the Option Preferred Securities shall
be the same as for the Firm Preferred Securities as specified in the preceding
paragraph.
It is understood that any Underwriter may (but shall not be obligated
to) make payment to the Company on behalf of the other Underwriter for the
Preferred Securities to be purchased by such Underwriter. Any such payment
shall not relieve such other Underwriter of any of its obligations hereunder.
Nothing herein contained shall constitute the Underwriters an unincorporated
association or partner with either or both Offerors.
3. OFFERING BY UNDERWRITERS. It is understood that the several
Underwriters propose to make a public offering of the Preferred Securities as
soon as the Underwriters deem it advisable to do so. The Preferred Securities
are to be initially offered to the public at the initial public offering price
set forth in the Prospectus. The Underwriters may from time to time thereafter
change the public offering price and other selling terms.
4. COVENANTS OF THE OFFERORS. The Offerors jointly and severally
covenant and agree with the several Underwriters that:
<PAGE>
(a) The Company and the Administrative Trustees on behalf of
the Trust will prepare and timely file with the Commission under
Rule 424(b) under the Act a Prospectus containing information previously
omitted at the time of effectiveness of the Registration Statement in
reliance on Rule 430A under the Act, and will not file any amendment to
the Registration Statement or supplement to the Prospectus of which the
Underwriters shall not previously have been advised and furnished with a
copy and as to which the Underwriters shall have reasonably objected in
writing promptly after reasonable notice thereof or which is not in
compliance with the Act or the rules and regulations thereunder.
(b) The Offerors will advise the Underwriters promptly of any
request of the Commission for amendment of the Registration Statement or
for supplement to the Prospectus or for any additional information, or
of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or the use of the
Prospectus, of the suspension of the qualification of the Preferred
Securities for offering or sale in any jurisdiction, or of the
institution or threatening of any proceedings for that purpose, and the
Offerors will use their best efforts to prevent the issuance of any such
stop order preventing or suspending the use of the Prospectus or
suspending such qualification and to obtain as soon as possible the
lifting thereof, if issued.
(c) The Offerors will cooperate with you and your counsel in
order to qualify the Preferred Securities for sale under the securities
laws of such jurisdictions as the Underwriters may reasonably have
designated in writing and to continue such qualifications in effect for
so long as the Underwriters may reasonably request for distribution of
the Preferred Securities (or obtain exemptions from the application of
such laws), PROVIDED that neither Offeror shall be required to qualify
as a foreign corporation or to file a general consent to service of
process in any jurisdiction where it is not now so qualified or required
to file such a consent. The Offerors will, from time to time, prepare
and file such statements, reports and other documents as may be
requested by the Underwriters for that purpose.
(d) The Offerors will furnish the Underwriters with as many
copies of any Preliminary Prospectus as the Underwriters may reasonably
request and, during the period when delivery of a prospectus is required
under the Act, the Offerors will furnish the Underwriters with as many
copies of the Prospectus in final form, or as thereafter amended or
supplemented, as the Underwriters may, from time to time, reasonably
request. The Offerors will deliver to the Underwriters, at or before
the Closing Date, two signed copies of the Registration Statement and
all amendments thereto including all exhibits filed therewith, and will
deliver to the Underwriters such number of conformed copies of the
Registration Statement, without exhibits, and of all amendments thereto,
as the Underwriters may reasonably request.
<PAGE>
(e) If, during the period in which a prospectus is required
by law to be delivered by an Underwriter or dealer, any event shall
occur as a result of which the Prospectus as then amended or
supplemented would include an untrue statement of a material fact or
omit to state any material fact necessary in order to make the
statements therein, in light of the circumstances existing at the time
the Prospectus is delivered to a purchaser, not misleading, or if for
any other reason it shall be necessary at any time to amend or
supplement the Prospectus to comply with any law, the Offerors promptly
will prepare and file with the Commission an appropriate amendment to
the Registration Statement or supplement to the Prospectus so that the
Prospectus as so amended or supplemented will not include an untrue
statement of a material fact or omit to state any material fact
necessary in order to make the statements therein in light of the
circumstances when it is so delivered, not misleading, or so that the
Prospectus will comply with law.
(f) The Offerors will make generally available to their
security holders, as soon as it is practicable to do so, but in any
event not later than 18 months after the effective date of the
Registration Statement, an earnings statement (which need not be
audited) in reasonable detail, covering a period of at least 12
consecutive months beginning after the effective date of the
Registration Statement, which earnings statement shall satisfy the
requirements of Section 11(a) of the Act and Rule 158 thereunder and
will advise you in writing when such statement has been so made
available.
(g) The Company will, for five years from the First Closing
Date, deliver to each Underwriter, as soon as they are available, copies
of its annual report and copies of all other documents, reports and
information furnished by the Company to its security holders or filed
with any securities exchange pursuant to the requirements of such
exchange or with the Commission pursuant to the Act or the Exchange Act.
The Company will deliver to each Underwriter similar reports with
respect to significant subsidiaries, as that term is defined in the
rules and regulations under the Act, which are not consolidated in the
Company's financial statements.
(h) The Offerors will apply the net proceeds from the sale of
the Junior Subordinated Debentures and the Preferred Securities
substantially in accordance with the purposes set forth under "Use of
Proceeds" in the Prospectus.
(i) The Offerors will comply with all registration, filing
and reporting requirements of the Exchange Act and the American Stock
Exchange.
5. COSTS AND EXPENSES. (a) The Offerors will pay (directly or by
reimbursement) all costs, expenses and fees incident to the performance of the
obligations of the Offerors under this Agreement, including, without limiting
the
<PAGE>
generality of the foregoing, the following: accounting fees of the
Offerors; the fees and disbursements of counsel for the Offerors; the cost of
preparing, printing and filing of the Registration Statement, Preliminary
Prospectuses and the Prospectus and any amendments and supplements thereto and
the printing, mailing and delivery to the Underwriters and dealers of copies
thereof and of this Agreement, the Selected Dealers Agreement, the Blue Sky
Memorandum, if deemed necessary by the Underwriters, after consultation with the
Offerors, and any supplements or amendments thereto (excluding, except as
provided below, fees and expenses of counsel to the Underwriters); the filing
fees of the Commission; the filing fees and expenses (including legal fees and
disbursements of counsel for the Underwriters) incident to securing any required
review by the National Association of Securities Dealers, Inc. (the "NASD") of
the terms of the sale of the Preferred Securities; the fees and expenses of the
Indenture Trustee, including the fees and disbursements of counsel for the
Indenture Trustee in connection with the Indenture and Junior Subordinated
Debentures; the fees and expenses of the Property Trustee and the Delaware
Trustee, including the fees and disbursements of counsel for the Property
Trustee and the Delaware Trustee in connection with the Trust Agreement and the
Certificate of Trust; the fees and expenses of the Guarantee Trustee, including
the fees and disbursements of counsel for the Guarantee Trustee in connection
with the Guarantee and Guarantee Agreement; listing fees, if any, transfer taxes
and the expenses, including the fees and disbursements of counsel for the
Underwriters, incurred in connection with the qualification of the Preferred
Securities under state securities or Blue Sky laws; the fees and expenses
incurred in connection with the designation of the Preferred Securities on the
American Stock Exchange; the costs of preparing certificates representing Junior
Subordinated Debentures or Preferred Securities; the costs and fees of any
registrar or transfer agent and all other costs and expenses incident to the
performance of its obligations hereunder which are not otherwise specifically
provided for in this Section 5. In addition, the Offerors will pay all travel
and lodging expenses incurred by management of the Offerors in connection with
any informational "road show" meetings held in connection with the offering and
will also pay for the preparation of all materials used in connection with such
meetings. The Offerors shall not be required to pay for any of the
Underwriters' expenses (other than those related to qualification of the
Preferred Securities under state securities or Blue Sky laws and those incident
to securing any required review by the NASD of the terms of the sale of the
Preferred Securities which shall be paid by the Offerors as provided above)
except that, if this Agreement shall not be consummated because the conditions
in Section 6 hereof are not satisfied, or because this Agreement is terminated
by the Underwriters pursuant to Sections 9(a) or 9(b) hereof, or by reason of
any failure, refusal or inability on the part of the Offerors to perform any
undertaking or satisfy any condition of this Agreement or to comply with any of
the terms hereof on either of their parts to be performed, unless such failure
to satisfy said condition or to comply with said terms shall be due to the
default or omission of any Underwriter, then the Offerors promptly upon request
by the Underwriters shall reimburse the several Underwriters for all actual,
accountable out-of-pocket expenses, including fees and disbursements of counsel
reasonably incurred in connection with investigating, marketing and proposing to
market the Preferred Securities or in contemplation of performing their
obligations hereunder, up to $25,000; but the Offerors shall not in any
<PAGE>
event be liable to any of the several Underwriters for damages on account of
loss of anticipated profits from the sale by them of the Preferred Securities.
(b) Upon successful completion of the offering contemplated by this
Agreement, the Offerors will pay all reasonable and customary costs, expenses
and fees incident to tombstone advertisements of the offering and incurred with
the approval of the Company.
6. CONDITIONS OF OBLIGATIONS OF THE UNDERWRITERS. The several
obligations of the Underwriters to purchase the Firm Preferred Securities on the
First Closing Date and the Option Preferred Securities on the Second Closing
Date are subject to the condition that all representations and warranties of the
Offerors contained herein are true and correct, at and as of the First Closing
Date or the Second Closing Date, as the case may be, and the condition that each
Offeror shall have performed all of its covenants and obligations hereunder and
to the following additional conditions:
(a) The Prospectus shall have been filed with the Commission
pursuant to Rule 424(b) within the applicable time period prescribed for
such filing by the rules and regulations under the Act and in accordance
with Section 4(a) hereof; no stop order suspending the effectiveness of
the Registration Statement, as amended from time to time, or any part
thereof shall have been issued and no proceedings for that purpose shall
have been initiated or threatened by the Commission; and all requests
for additional information on the part of the Commission shall have been
complied with to the reasonable satisfaction of the Underwriters.
(b) The Underwriters shall have received on the First Closing
Date or the Second Closing Date, as the case may be, the opinion of
Baird, Holm, McEachen, Pedersen, Hamann & Strascheim, counsel for the
Offerors, dated the Closing Date, addressed to the Underwriters, to the
effect that:
(i) The Company has been duly incorporated and is
validly existing as a corporation in good standing under the
laws of the jurisdiction of its incorporation, with corporate
power and authority to own or lease its properties and conduct
its business as described in the Prospectus. All of the
issued and outstanding shares of the capital stock of the
Company have been duly authorized and validly issued and are
fully paid and nonassessable. The holders of the Company's
outstanding securities are not entitled to any preemptive or
other rights to subscribe for the Junior Subordinated
Debentures or the Preferred Securities under the Company's
Articles of Incorporation or Bylaws and, to the knowledge of
such counsel, no such rights exist under any other agreement
or arrangement. The Company has authorized and outstanding
capital stock as described in the Prospectus.
(ii) Each Subsidiary of the Company has been duly
<PAGE>
incorporated and is validly existing as a corporation in good
standing under the laws of the jurisdiction of its
incorporation, with corporate power and authority to own or
lease its properties and conduct its business as described in
the Prospectus. The outstanding capital stock of each such
Subsidiary has been duly authorized and validly issued, is
fully paid and nonassessable and is owned, directly or
indirectly, by the Company, free and clear of all liens,
encumbrances and security interests, other than security
interests specifically disclosed in the Prospectus. To the
knowledge of such counsel, no options, warrants or other
rights to purchase, agreements or other obligations to issue
or other rights to convert any obligations into capital stock
or ownership interests in any Subsidiary are outstanding.
(iii) All of the issued and outstanding Common
Securities of the Trust are owned by the Company free and
clear of any security interest, mortgage, pledge, lien,
encumbrance, claim or equitable right.
(iv) The Trust Agreement, the Indenture, the
Guarantee, the Form T-1 Statement of Eligibility of Wilmington
Trust Company to act as trustee under the Indenture, the Form
T-1 Statement of Eligibility of Wilmington Trust Company to
act as trustee under the Trust Agreement, and the Form T-1
Statement of Eligibility of Wilmington Trust Company to act as
trustee under the Guarantee Agreement have been duly qualified
under the Trust Indenture Act.
(v) The Junior Subordinated Debentures are in the
form contemplated by the Indenture, have been duly authorized,
executed and delivered by the Company and, when authenticated
by the Indenture Trustee in the manner provided for in the
Indenture and delivered against payment therefor, will
constitute valid and binding obligations of the Company,
enforceable against the Company in accordance with their
terms, except to the extent that enforcement thereof may be
limited by bankruptcy, insolvency, reorganization or similar
laws affecting the rights of creditors generally and subject
to general principles of equity.
(vi) The Junior Subordinated Debentures are
subordinate and junior in right of payment to all "Senior and
Subordinated Debt" (as defined in the Indenture) of the
Company.
(vii) Under current law, the Trust will be classified
for United States federal income tax purposes as a grantor
trust and not as an association taxable as a corporation;
accordingly, for United States federal income tax purposes
each beneficial owner of Preferred Securities will be treated
as owning an undivided beneficial interest in the Junior
Subordinated Debentures, and stated interest on the Junior
Subordinated Debentures generally will be included in income
by a holder of Preferred Securities
<PAGE>
at the time such interest income is paid or accrued in
accordance with such holder's regular method of tax accounting.
(viii) For federal income tax purposes, (a) the Junior
Subordinated Debentures will constitute indebtedness of the
Company and (b) the interest on the Junior Subordinated
Debentures will be deductible by the Company on an economic
accrual basis in accordance with Section 163(e) of the
Internal Revenue Code of 1986, as amended, and Treasury
Regulation Section 1.163-7.
(ix) To the best of such counsel's knowledge and
information after due inquiry, the Trust is not required to be
authorized to do business in any other jurisdiction, except
where the failure to be so authorized would not have a
material adverse effect on the Trust's condition (financial or
otherwise), earnings, business, prospects, assets, results of
operations or properties taken as a whole and the Trust is not
a party to or otherwise bound by any material agreement other
than those described in the Prospectus.
(x) The Trust Agreement has been duly executed and
delivered by the Administrative Trustees.
(xi) To the best of such counsel's knowledge and
information after due inquiry, the Offerors are not in default
in the performance or observance of any material obligation,
agreement, covenant or condition contained in any contract,
indenture, mortgage, loan agreement, note, lease or any other
instrument of which either of them is a party or by which
either of them may be bound, or to which any of the property
or assets of the Offerors is subject.
(xii) The Company has full corporate power and
authority and the Trust has full trust power and authority to
enter into this Agreement, the Indenture, the Trust Agreement,
the Guarantee Agreement and the Expense Agreement, as
applicable, and to issue the Junior Subordinated Debentures or
the Common Securities and Preferred Securities, as the case
may be, and to effect the transactions contemplated by this
Agreement, the Indenture, the Trust Agreement, the Guarantee
Agreement and the Expense Agreement, as applicable, and each
of this Agreement, the Indenture, the Trust Agreement, the
Guarantee Agreement and the Expense Agreement have been duly
authorized, executed and delivered by the Company and the
Trust, as applicable, and constitutes a valid, legal and
binding obligation of the Company and the Trust, as
applicable, enforceable in accordance with its terms (except
as rights to indemnity hereunder may be limited by federal or
state securities laws and except as such enforceability may be
limited by bankruptcy, insolvency, reorganization or similar
laws affecting the rights of creditors
<PAGE>
generally and subject to general principles of equity). The
execution, delivery and performance of this Agreement, the
Indenture, the Trust Agreement, the Guarantee Agreement, the
Preferred Securities, the Common Securities, the Junior
Subordinated Debentures and the Expense Agreement and the
consummation of the transactions herein or therein
contemplated will not result in a breach or violation of any
of the terms and provisions of, or constitute a default under,
any statute, rule or regulation (except that such counsel need
express no opinion regarding any Blue Sky or state securities
laws), any lease, contract, indenture, mortgage, loan
agreement or other agreement or instrument known to such
counsel to which the Company, the Trust or any Subsidiary is a
party or by which it is bound or to which any of its property
is subject, the Company's or any Subsidiary's charter or
bylaws, or the Trust's Certificate or any permit, judgment,
order or decree known to such counsel of any court or
governmental agency or body having jurisdiction over the
Company, the Trust or any Subsidiary or any of their
respective properties, except for any breach, violation or
default which would not have a material adverse effect on the
Company or the Trust; and no consent, approval, authorization,
order of, designation, declaration or filing by or with, any
court or any regulatory, administrative or governmental agency
or body is required for the execution, delivery and
performance of this Agreement, the Indenture, the Trust
Agreement, the Guarantee Agreement, the Expense Agreement, the
Common Securities, the Preferred Securities, or the Junior
Subordinated Debentures, or for the consummation of the
transactions contemplated hereby or thereby (other than as may
be required by federal or state laws governing banks or bank
holding companies, the NASD, or by state securities and blue
sky laws, as to which such counsel need express no opinion),
including the issuance or sale of the Junior Subordinated
Debentures by the Company and the Common Securities and
Preferred Securities by the Trust, except (a) such as may be
required under the Act, which have been obtained or made, or
under state securities or blue sky laws, (b) such agreements,
instruments or obligations with respect to which valid
consents or waivers have been obtained by the Trust, the
Company or any of the Subsidiaries, and (c) the qualification
of the Trust Agreement, the Guarantee Agreement and the
Indenture under the Trust Indenture Act and the regulations
thereunder, all of which have been effected. The filing of
the Registration Statement and the registration of the Junior
Subordinated Debentures, the Guarantee and the Preferred
Securities under the Act does not give rise to any rights for
or relating to the registration of any shares of capital stock
or other securities of the Company.
(xiii) The Registration Statement has become effective
under the Act and, to the knowledge of such counsel, no stop
order proceedings with respect thereto have been instituted or
are pending or threatened by the Commission.
<PAGE>
(xiv) The Registration Statement, the Prospectus and
each amendment or supplement, thereto comply as to form in all
material respects with the requirements of the Act and the
rules and regulations thereunder (except that such counsel
need express no opinion as to the financial statements and
related financial schedules contained in the financial
statements, Registration Statement, the Prospectus and each
amendment or supplement thereto).
(xv) The statements (A) in the Prospectus under the
caption "Material Federal Income Tax Consequences" and (B) in
the Registration Statement in Item 24, insofar as such
statements constitute a summary of matters of law, are
accurate summaries and fairly present the information called
for with respect to such matters.
(xvi) Such counsel does not know of any contracts,
agreements, documents or instruments required to be filed as
exhibits to the Registration Statement or described in the
Registration Statement or the Prospectus which are not so
filed or described as required; and insofar as any statements
in the Registration Statement or the Prospectus constitute
summaries of any contract, agreement, document or instrument
to which the Trust, the Company or any Subsidiary is a party,
such statements are accurate summaries and fairly present the
information called for with respect to such matters.
(xvii) Such counsel knows of no legal or governmental
proceeding, pending or threatened, before any court or
administrative body or regulatory agency, to which the Trust,
the Company or any of the Subsidiaries is a party or to which
any of the properties of the Trust, the Company or any of the
Subsidiaries is subject that are required to be described in
the Registration Statement or Prospectus and are not so
described, or statutes or regulations that are required to be
described in the Registration Statement or the Prospectus that
are not so described (other than any banking laws (as defined
below), as to which counsel need express no opinion).
(xviii) Neither the Company nor the Trust is, and
immediately upon completion of the sale of Preferred
Securities contemplated hereby, neither the Company nor the
Trust will be, an "investment company" or a company
"controlled" by an investment company under the Investment
Company Act of 1940, as amended.
(xix) To the best of such counsel's knowledge, neither
the Company nor any of the Subsidiaries is in violation of its
respective charter or bylaws.
<PAGE>
Such counsel shall also state that on the basis of such counsel's review
and participation in conferences in connection with the preparation of the
Registration Statement and the Prospectus, such counsel has no reason to believe
that, as of its effective date, the Registration Statement or any further
amendment thereto made by the Offerors prior to the First Closing Date or the
Second Closing Date, as the case may be (other than the financial statements and
related schedules therein, as to which such counsel need express no opinion)
contained an untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading or that, as of its date, the Prospectus or any further amendment
or supplement thereto made by the Offerors prior to the First Closing Date or
the Second Closing Date, as the case may be, (other than the financial
statements and related schedules therein, as to which such counsel need express
no opinion) contained an untrue statement of a material fact or omitted to state
a material fact necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading or that, as of the First
Closing Date or the Second Closing Date, as the case may be, either the
Registration Statement or the Prospectus or any further amendment or supplement
thereto made by the Offerors prior to the First Closing Date or the Second
Closing Date, as the case may be, (other than the financial statements and
related schedules therein, as to which such counsel need express no opinion)
contains an untrue statement of a material fact or omits to state a material
fact necessary to make the statements therein, in light of the circumstances in
which they were made, not misleading.
In rendering the above opinions, counsel may rely (i) as to matters of
law other than Iowa and federal law, upon the opinion or opinions of local
counsel PROVIDED that the extent of such reliance is specified in such opinion
and that such counsel shall state that such opinion or opinions of local counsel
are satisfactory to them and they believe they and you are justified in relying
thereon and (ii) as to matters of fact, upon the representations of the Trust
and the Company contained in this Agreement and upon certificates of trustees or
officers of the Trust, the Company and of public officials.
(c) The Underwriters shall have received on the Closing Date the
opinion of Baird, Holm, McEachen, Pedersen, Hamann & Strasheim banking counsel
for the Company, dated the First Closing Date or the Second Closing Date, as the
case may be, addressed to the Underwriters, to the effect that:
(i) The Banks have been duly chartered to conduct the
business of banking in their state of domicile and the Company has all
necessary power and authority to own the Banks. The Company and the
Banks have all necessary consents and approvals under applicable federal
and state laws and regulations relating to banks and bank holding
companies ("BANKING LAWS") to own their respective assets and carry on
their respective businesses as currently conducted.
(ii) The statements in the Prospectus under the captions
["Risk Factors
<PAGE>
-- Dependence on Dividends from Subsidiary Banks, --Competitive
Banking Environment and -- Government Regulation and Recent
Legislation,"] insofar as such statements constitute a summary of
banking laws, are accurate summaries and fairly present the
information called for with respect to such matters.
(iii) Such counsel knows of no legal or governmental
proceeding, pending or threatened, before any court or administrative
body or regulatory agency, to which the Company or any of the
Subsidiaries is a party or to which any of the properties of the Company
or any of the Subsidiaries is subject that are required to be described
in the Registration Statement or Prospectus and are not so described, or
statutes or regulations that are required to be described in the
Registration Statement or the Prospectus that are not so described.
(iv) The execution and delivery of this Agreement, the
Indenture, the Trust Agreement, the Guarantee Agreement and the Expense
Agreement and the consummation of the transactions herein and therein
contemplated do not and will not conflict with or result in a violation
of or default under any banking laws, or any permit, judgment, decree or
order known to such counsel, or any lease, contract, indenture,
mortgage, loan agreement or other agreement or other instrument or
obligation known to such counsel to which the Company or the Banks are a
party or by which the Company or the Banks or any of their respective
properties is bound.
(v) No approval, consent, order, authorization, designation,
declaration or filing by or with any regulatory, administrative or other
governmental body under banking laws is necessary in connection with the
execution and delivery of this Agreement, the Indenture, the Trust
Agreement, the Guarantee Agreement and the Expense Agreement and the
consummation of the transactions herein and therein contemplated, except
such as have been obtained or made, specifying the same.
(vi) The proceeds from the sale of the Preferred Securities
will constitute "Tier 1" capital (as defined in 12 C.F.R. Part 325),
subject to applicable regulatory limitations on the amount thereof that
can be included in Tier 1 capital.
(d) The Underwriters shall have received on the Closing Date
the opinion of Richards, Layton & Finger, P.A. counsel to Wilmington
Trust Company, as Property Trustee under the Trust Agreement, Indenture
Trustee under the Indenture, and Guarantee Trustee under the Guarantee
Agreement, dated the First Closing Date or the Second Closing Date, as
the case may be, addressed to the Underwriters, to the effect that:
(i) Wilmington Trust Company is duly incorporated and is
validly existing in good standing as a banking corporation under the
laws of the State of Delaware.
<PAGE>
(ii) Wilmington Trust Company has the power and authority to
execute, deliver and perform its obligations under the Trust Agreement,
the Indenture and the Guarantee Agreement.
(iii) Each of the Trust Agreement, the Indenture and the
Guarantee Agreement has been duly authorized, executed and delivered by
Wilmington Trust Company and constitutes a legal, valid and binding
obligation of Wilmington Trust Company, enforceable against Wilmington
Trust Company, in accordance with its terms.
(iv) The execution, delivery and performance by Wilmington
Trust Company of the Trust Agreement, the Indenture and the Guarantee
Agreement do not conflict with or constitute a breach of the charter or
by-laws of Wilmington Trust Company.
(v) No consent, approval or authorization of, or registration
with or notice to, any governmental authority or agency of the State of
Delaware or the United States of America governing the banking or trust
powers of Wilmington Trust Company is required for the execution,
delivery or performance by Wilmington Trust Company of the Trust
Agreement, the Indenture and the Guarantee Agreement.
(e) The underwriters shall have received on the First Closing
Date or the Second Closing Date, as the case may be, the opinion of
Richards, Layton & Finger, P.A., as special counsel for the Offerors
that:
(i) The Trust has been duly created and is validly existing
in good standing as a business trust under the Delaware Act, and all
filings required as of the date hereof under the Delaware Act with
respect to the creation and valid existence of the Trust as a business
trust have been made.
(ii) Under the Trust Agreement and the Delaware Act, the Trust
has the trust power and authority to own property and to conduct its
business, all as described in the Prospectus.
(iii) The Trust Agreement constitutes a valid and binding
obligation of the Company, the Property Trustee and each of the
Administrative Trustees, and is enforceable against the Company, the
Property Trustee and each of the Administrative Trustees in accordance
with its terms.
(iv) Under the Trust Agreement and the Delaware Act, the Trust
has the trust power and authority (i) to execute and deliver, and to
perform its obligations under, this Agreement, and (ii) to issue, and to
perform its obligations under, the Preferred Securities and the Common
Securities.
<PAGE>
(v) Under the Trust Agreement and the Delaware Act, the
execution and delivery by the Trust of this Agreement, and the
performance by the Trust of its obligations under this Agreement, have
been duly authorized by all necessary trust action on the part of the
Trust.
(vi) Under the Delaware Act, the certificate attached to the
Trust Agreement as Exhibit [E] is an appropriate form of certificate to
evidence ownership of the Preferred Securities. The Preferred
Securities and the Common Securities have been duly authorized by the
Trust Agreement and are duly and validly issued and, subject to the
qualifications hereinafter expressed in this paragraph (vi), fully paid
and non-assessable undivided beneficial interests in the assets of the
Trust. The respective holders of the Preferred Securities and the
Common Securities, as beneficial owners of the Trust, will be entitled
to the same limitation of personal liability extended to stockholders of
private corporations for profit organized under the General Corporation
Law of the State of Delaware. Such counsel may note that the respective
holders of the Preferred Securities and the Common Securities may be
obligated, pursuant to the Trust Agreement, to make certain payments
under the Trust Agreement.
(vii) Under the Trust Agreement and the Delaware Act, the
issuance of the Preferred Securities and the Common Securities is not
subject to preemptive or similar rights.
(viii) The issuance and sale by the Trust of the Preferred
Securities and the Common Securities, the purchase by the Trust of the
Junior Subordinated Debentures, the execution, delivery and performance
by the Trust of this Agreement and the Guarantee Agreement, the
consummation by the Trust of the transactions contemplated by this
Agreement and compliance by the Trust with its obligations under this
Agreement do not violate (a) any of the provisions of the Certificate of
Trust or the Trust Agreement or (b) any applicable Delaware law or
Delaware administrative regulations.
(f) The Underwriters shall have received from Chapman and Cutler,
Chicago, Illinois, counsel for the Underwriters, an opinion dated the First
Closing Date or the Second Closing Date, as the case may be, with respect to the
formation of the Trust, the validity of the Preferred Securities, the Indenture,
the Trust Agreement, the Guarantee Agreement, the Expense Agreement, this
Agreement, the Registration Statement, the Prospectus, and other related matters
as the Underwriters may reasonably request, and such counsel shall have received
such papers and information as they may reasonably request to enable them to
pass upon such matters.
(g) The Underwriters shall have received on each of the date hereof,
the First Closing Date and any Second Closing Date a signed letter, dated as of
the date hereof, the First Closing Date or any Second Closing Date,
respectively, in form and substance satisfactory to the Underwriters, from
McGladrey & Pullen, LLP to the effect that they
<PAGE>
are independent public accountants with respect to the Trust, the Company and
the Subsidiaries within the meaning of the Act and the related rules and
regulations and containing statements and information of the type ordinarily
included in accountants' "comfort letters" to underwriters with respect to
the financial statements and certain financial information contained in the
Registration Statement and the Prospectus.
(h) Subsequent to the execution and delivery of this Agreement and
prior to the First Closing Date or the Second Closing Date, as the case may be,
there shall not have been any change or any development involving a reasonably
foreseeable change, in or affecting the general affairs, management, financial
position, shareholders' equity or results of operations of the Offerors
otherwise than as set forth or contemplated in the Prospectus, the effect of
which, in your reasonable judgment, is material and adverse to the Offerors and
makes it impracticable or inadvisable to proceed with the public offering or the
delivery of the Preferred Securities being delivered at the First Closing Date
or the Second Closing Date, as the case may be, on the terms and in the manner
contemplated in the Prospectus.
(i) The Underwriters shall have received on the First Closing Date
and the Second Closing Date, as the case may be, a certificate or certificates
of the chief executive officer and the principal financial officer of the
Company, to the effect that, as of such Closing Date each of them severally
represents as follows:
(i) The Prospectus was filed with the Commission pursuant to
Rule 424(b) within the applicable period prescribed for such filing by
the rules and regulations under the Act and in accordance with Section 4
of this Agreement; no stop order suspending the effectiveness of the
Registration Statement has been issued, and no proceedings for such
purpose have been initiated or are, to his knowledge, threatened by the
Commission.
(ii) The representations and warranties of the Company set
forth in Section 1 of this Agreement are true and correct at and as of
the First Closing Date and the Second Closing Date, as the case may be,
and the Company has performed all of its obligations under this
Agreement to be performed at or prior to the First Closing Date and the
Second Closing Date, as the case may be.
(j) The Underwriters shall have received on the First Closing Date
and the Second Closing Date, as the case may be, a certificate or certificates
of the Administrative Trustees, to the effect that, as of such Closing Date each
of them severally represents as follows:
(i) The Prospectus was filed with the Commission pursuant to
Rule 424(b) within the applicable period prescribed for such filing by
the rules and regulations under the Act and in accordance with Section 4
of this Agreement; no stop order suspending the effectiveness of the
Registration Statement has been issued, and no proceedings for such
purpose have been initiated or are, to his knowledge, threatened by the
Commission.
<PAGE>
(ii) The representations and warranties of the Trust set forth
in Section 1 of this Agreement are true and correct at and as of the
First Closing Date and the Second Closing Date, as the case may be, and
the Trust has performed all of its obligations under this Agreement to
be performed at or prior to the First Closing Date and the Second
Closing Date, as the case may be.
(k) The Offerors shall have furnished to the Underwriters such
further certificates and documents as the Underwriters may reasonably have
requested.
The opinions and certificates mentioned in this Agreement shall be
deemed to be in compliance with the provisions hereof only if they are in all
material respects reasonably satisfactory to the Underwriters and to Chapman and
Cutler, counsel for the Underwriters.
If any of the conditions hereinabove provided for in this Section 6
shall not have been fulfilled when and as required by this Agreement to be
fulfilled, the obligations of the Underwriters hereunder may be terminated by
the Underwriters by notifying the Trust of such termination in writing or by
telegram at or prior to the First Closing Date. In such event, the Trust and
the Underwriters shall not be under any obligation to each other (except to the
extent provided in Sections 5 and 7 hereof).
SECTION 7. INDEMNIFICATION. (a) The Offerors jointly and severally
agree to indemnify and hold harmless each Underwriter, each officer and
director thereof, and each person, if any, who controls any Underwriter within
the meaning of the Act, against any losses, claims, damages or liabilities to
which such Underwriter or such persons may became subject under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) arise out of or are based upon (i) any untrue
statement or alleged untrue statement of any material fact contained in the
Registration Statement, any Preliminary Prospectus or the Prospectus, including
any amendments or supplements thereto, (ii) the omission or alleged omission to
state therein a material fact required to be stated therein, or necessary to
make the statements therein not misleading in light of the circumstances under
which they were made, or (iii) any act or failure to act or any alleged act or
failure to act by any Underwriter in connection with, or relating in any manner
to, the Preferred Securities or the offering contemplated hereby, and which is
included as part of or referred to in any losses, claims, damages or liabilities
(or actions or proceedings in respect thereof) arising out of or based upon
matters covered by clause (i) or (ii) above, and will reimburse each Underwriter
and each such controlling person for any legal or other expenses reasonably
incurred by such Underwriter or such controlling person in connection with
investigating or defending any such action or claim as such expenses are
incurred; PROVIDED, HOWEVER, that the Offerors shall not be liable (1) in any
such case to the extent that any such loss, claim, damage or liability arises
out of or is based upon an untrue statement or alleged untrue statement, or
omission or alleged omission, made in the Registration Statement, any
Preliminary Prospectus or the Prospectus, including any amendments or
supplements thereto, in reliance upon and in conformity
<PAGE>
with written information furnished to the Offerors by any Underwriter
specifically for use therein or (2) in the case of any matter covered by
clause (iii) above to the extent that it is determined in a final judgment by
a court of competent jurisdiction that such losses, claims, damages or
liabilities resulted directly from any such acts or failures to act
undertaken or omitted to be taken by such Underwriter through its gross
negligence, recklessness or willful misconduct.
(b) Each Underwriter severally agrees to indemnify and hold harmless
the Offerors and the trustees and directors and officers who have signed the
Registration Statement, and each person, if any, who controls the Offerors
within the meaning of the Act, against any losses, claims, damages or
liabilities to which the Offerors or any such person may become subject under
the Act or otherwise, insofar as such losses, claims, damages or liabilities (or
actions or proceedings in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
the Registration Statement, any Preliminary Prospectus, the Prospectus or any
amendment or supplement thereto, or arise out of or are based upon the omission
or the alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading in the light
of the circumstances under which they were made, and will reimburse any legal or
other expenses reasonably incurred by the Offerors or any such person in
connection with investigating or defending any such action or claim as such
expenses are incurred; PROVIDED, HOWEVER, that each Underwriter will be liable
in each case to the extent, but only to the extent, that such untrue statement
or alleged untrue statement or omission or alleged omission has been made in the
Registration Statement, any Preliminary Prospectus, the Prospectus or any such
amendment or supplement in reliance upon and in conformity with written
information furnished to the Trust or the Company by or through the Underwriters
specifically for use therein. The obligations of the Underwriters under this
Section 7(b) are several in proportion to their respective underwriting
obligations and not joint.
(c) The Company agrees to indemnify the Trust against all loss,
liability, claim damage and expense whatsoever, which may become due from the
Trust under subsection (a).
(d) In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which indemnity or
contribution may be sought pursuant to this Section 7, such person (the
"INDEMNIFIED PARTY") shall promptly notify the person against whom such
indemnity may be sought (the "INDEMNIFYING PARTY") in writing. No
indemnification provided for in Section 7(a) or (b) or contribution provided for
in Section 7(e) shall be available with respect to a proceeding to any party who
shall fail to give notice of such proceeding as provided in this Section 7(d) if
the party to whom notice was not given was unaware of the proceeding to which
such notice would have related and was prejudiced by the failure to give such
notice, but the failure to give such notice shall not relieve the indemnifying
party or parties from any liability which it or they may have to the indemnified
party otherwise than on account of the provisions of Section 7(a) or (b). In
case any such proceeding shall be brought
<PAGE>
against any indemnified party and it shall notify the indemnifying party of
the commencement thereof, the indemnifying party shall be entitled to
participate therein and, to the extent that it shall wish, jointly with any
other indemnifying party similarly notified, to assume the defense thereof,
with counsel reasonably satisfactory to such indemnified party and shall pay
as incurred the fees and disbursements of such counsel related to such
proceeding. In any such proceeding, any indemnified party shall have the
right to retain its own counsel at its own expense. Notwithstanding the
foregoing, the indemnifying party shall pay promptly as incurred the
reasonable fees and expenses of the counsel retained by the indemnified party
in the event (i) the indemnifying party and the indemnified party shall have
mutually agreed to the retention of such counsel or (ii) the named parties to
any such proceeding (including any impleaded parties) include both the
indemnifying party and the indemnified party and the indemnified party shall
have reasonably concluded that there may be a conflict between the positions
of the indemnifying party and the indemnified party in conducting the defense
of any such action or that there may be legal defenses available to it or
other indemnified parties which are different from or additional to those
available to the indemnifying party. It is understood that the indemnifying
party shall not, in connection with any proceeding or related proceedings in
the same jurisdiction, be liable for the fees and expenses of more than one
separate firm at any time for all such indemnified parties. Such firm shall
be designated in writing by the Underwriters and shall be reasonably
satisfactory to the Offerors in the case of parties indemnified pursuant to
Section 7(a) and shall be designated in writing by the Offerors and shall be
reasonably satisfactory to the Underwriters in the case of parties
indemnified pursuant to Section 7(b). The indemnifying party shall not be
liable for any settlement of any proceeding effected without its written
consent but if settled with such consent or if there be a final judgment for
the plaintiff, the indemnifying party agrees to indemnify the indemnified
party from and against any loss or liability by reason of such settlement or
judgment.
(e) If the indemnification provided for in this Section 7 is
unavailable or insufficient to hold harmless an indemnified party under Section
7(a) or (b) above in respect of any losses, claims, damages or liabilities (or
actions or proceedings in respect thereof) referred to therein, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or liabilities (or
actions or proceedings in respect thereof) in such proportion as is appropriate
to reflect the relative benefits received by the Offerors on the one hand and
the Underwriters on the other from the offering of the Preferred Securities.
If, however, the allocation provided by the immediately preceding sentence is
not permitted by applicable law, then each indemnifying party shall contribute
to such amount paid or payable by such indemnified party in such proportion as
is appropriate to reflect not only such relative benefits but also the relative
fault of the Offerors on the one hand and the Underwriters on the other in
connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities (or actions or proceedings in respect thereof),
as well as any other relevant equitable considerations. The relative benefits
received by the Offerors on the one hand and the Underwriters on the other shall
be deemed to be in the same proportion as the total net proceeds from
<PAGE>
the offering (before deducting expenses) received by the Offerors bears to
the total underwriting discounts and commissions received by the
underwriters, in each case as set forth on the cover page of the prospectus.
The relative fault shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Offerors on the one hand or the Underwriters on the other and
the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The Offerors
and the Underwriters agree that it would not be just and equitable if
contributions pursuant to this Section 7(e) were determined by pro rata
allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of
the equitable considerations referred to above in this Section 7(e). The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages or liabilities (or actions or proceedings in respect thereto)
referred to above in this Section 7(e) shall be deemed to include any legal
or other expenses reasonably incurred by such indemnified party in connection
with investigating or defending any such action or claim. Notwithstanding
the provisions of this Section 7(e), no Underwriter shall be required to
contribute any amount in excess of the underwriting discounts and commissions
applicable to the Preferred Securities purchased by such Underwriter; and no
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation. The Underwriters'
obligations in this Section 7(e) to contribute are several in proportion to
their respective underwriting obligations and not joint.
(f) The obligations of the Offerors under this Section 7 shall be in
addition to any liability which the Offerors may otherwise have, and the
obligations of the Underwriters under this Section 7 shall be in addition to any
liability which the Underwriters may otherwise have.
SECTION 8. NOTICES. All communications hereunder shall be in
writing and, except as otherwise provided herein, will be mailed, delivered or
telegraphed and confirmed as follows: if to the Underwriters, to them c/o Howe
Barnes Investments, Inc., 135 South LaSalle Street, Suite 1500, Chicago,
Illinois 60603, Attention: Daniel E. Coughlin, Senior Vice President and
Director of Corporate Finance; if to the Company, to Spectrum Bancorporation,
Inc., 10834 Old Mill Road, Suite One, Omaha, Nebraska 68154, Attention:
Daniel A. Hamann; and if to the Trust, to it at c/o Spectrum Bancorporation,
Inc., 10834 Old Mill Road, Suite One, Omaha, Nebraska 68154, Attention:
Daniel A. Hamann. All notices given by telegram shall be promptly confirmed by
letter. Any notice to the Trust shall also be copied to the Company at the
address previously stated. Any party may change its address for notice purposes
by written notice to the other parties.
SECTION 9. TERMINATION. This Agreement may be terminated by you by
notice to the Offerors as follows:
<PAGE>
(a) At any time prior to the time this Agreement shall become
effective as to all its provisions, and any such termination shall be
without liability on the part of the Offerors to the Underwriters
(except for the expenses to be paid or reimbursed pursuant to Section 5
and except to the extent provided in Section 7 hereof) or of any
Underwriter to the Offerors;
(b) At any time prior to the First Closing Date if any of the
following has occurred: (i) since the respective dates as of which
information is given in the Registration Statement and the Prospectus,
any material adverse change in or affecting the condition, financial or
otherwise, of the Trust, the Company and the Subsidiaries taken as a
whole or the business affairs, management, financial position,
shareholders' equity or results of operations of the Trust, the Company
and the Subsidiaries taken as a whole, whether or not arising in the
ordinary course of business, (ii) any outbreak or escalation of
hostilities or declaration of war or national emergency after the date
hereof or other national or international calamity or crisis or change
in economic or political conditions if the effect of such outbreak,
escalation, declaration, emergency, calamity, crisis or change on the
financial markets of the United States would, in your judgment, make the
offering or delivery of the Preferred Securities impracticable or
inadvisable, (iii) suspension of trading in securities on the New York
Stock Exchange or the American Stock Exchange or limitation on prices
(other than limitations on hours or numbers of days of trading) for
securities on either such Exchange, or a halt or suspension of trading
in securities generally which are quoted on the American Stock Exchange
or (iv) declaration of a banking moratorium by either federal
authorities or New York or Iowa or South Dakota or Missouri state
authorities; or
(c) As provided in Section 6 of this Agreement.
SECTION 10. WRITTEN INFORMATION. For all purposes under this
Agreement (including, without limitation, Section 1, Section 3 and Section 7
hereof), the Offerors understand and agree with each of the Underwriters that
the only written information furnished to the Offerors by the Underwriters
specifically for use in preparation of the Registration Statement, any
Preliminary Prospectus, the Prospectus, or any amendment or supplement thereto
is under the caption "Underwriting" in the Preliminary Prospectus and the
Prospectus.
SECTION 11. SUCCESSORS. This Agreement has been and is made solely
for the benefit of and shall be binding upon the Underwriters, the Trust and the
Company and their respective successors, executors, administrators, heirs and
assigns, and the trustees and controlling persons and the officers and directors
of any such controlling person referred to herein, and no other person will have
any right or obligation hereunder. The term "successors" shall not include any
purchaser of the Preferred Securities merely because of such purchase.
<PAGE>
SECTION 12. MISCELLANEOUS. The reimbursement, indemnification and
contribution agreements contained in this Agreement and the representations,
warranties and covenants in this Agreement shall remain in full force and effect
regardless of (a) any termination of this Agreement, (b) any investigation made
by or on behalf of any Underwriter or controlling person thereof, or by or on
behalf of the Offerors or controlling persons thereof and (c) delivery of and
payment for the Preferred Securities under this Agreement.
Each provision of this Agreement shall be interpreted in such a manner
to be effective and valid under applicable law, but if any provision of this
Agreement is held to be invalid, illegal or unenforceable under any applicable
law or rule in any jurisdiction, such provision will be ineffective only to the
extent of such invalidity, illegality or unenforceability in such jurisdiction
or any provision hereof in any other jurisdiction.
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
This Agreement shall be governed by, and construed in accordance with,
the laws of the State of Illinois.
<PAGE>
If the foregoing letter is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicates hereof,
whereupon it will become a binding agreement among the Offerors and the
Underwriters in accordance with its terms.
Very truly yours,
SPECTRUM CAPITAL TRUST I, a Delaware
business trust
By
Daniel A. Hamann
Administrative Trustee
SPECTRUM BANCORPORATION, INC.
By
Deryl F. Hamann
Chairman
The foregoing Underwriting Agreement
is hereby confirmed and accepted as of the
date first above written.
HOWE BARNES INVESTMENTS, INC.
As Representative of the several Underwriters
named in Schedule A
By
Daniel E. Coughlin
Senior Vice President
<PAGE>
SCHEDULE A
SCHEDULE OF UNDERWRITERS
<TABLE>
<CAPTION>
NUMBER OF
PREFERRED SECURITIES
UNDERWRITER TO BE PURCHASED
----------- --------------------
<S> <C>
Howe Barnes Investments, Inc
TOTAL: 2,000,000
---------
---------
</TABLE>
<PAGE>
EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER ("Agreement") dated as of March 31, 1999, by
and between Spectrum Bancorporation, Inc. ("Spectrum"), a Delaware corporation;
Decatur Corporation ("Decatur"), an Iowa corporation; and Rushmore Financial
Services, Inc. ("Rushmore"), a Nebraska corporation.
The boards of directors of the respective corporations deem it desirable
and in the best interests of their respective corporations and shareholders that
Spectrum and Rushmore merge into Decatur (the "Merger"), upon the terms and
subject to the conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants, undertakings,
representations and warranties contained herein, the parties agree as follows:
I. THE MERGER
1.01 THE MERGER. Subject to the terms and conditions of this Agreement:
(a) Spectrum shall be merged with and into Decatur in accordance with
Section 252 of the General Corporation Act of the State of Delaware (the
"GCA") and in accordance with Sections 490.1101 and 490.1107 of the Iowa
Business Corporation Act, with Decatur being the surviving corporation
(sometimes referred to hereinafter as the "Surviving Corporation"), and the
separate existence of Spectrum shall cease. The Merger shall become
effective when a properly executed Certificate of Merger (together with any
other documents required by law to effectuate the Merger) shall be filed
and recorded in the office of the Secretary of State of Delaware and the
Secretary of State of Iowa, which filings and recordings shall be made as
soon as possible after the closing of the transactions contemplated by this
Agreement. When used in this Agreement, the term "Effective Time" shall
mean 10:00 o'clock p.m. Des Moines, Iowa, time on May 31, 1999.
(b) Rushmore, a wholly owned subsidiary of Spectrum, shall be merged
into Decatur in accordance with Sections 490.1101 and 490.1107 of the Iowa
Business Corporation Act and in accordance with Sections 21-20,128 and
21-20,134 of the Nebraska Business Corporation Act, with Decatur being the
surviving corporation (sometimes referred to hereafter as the "Surviving
Corporation"), and the separate existence of Rushmore shall cease. The
Merger shall become effective when a properly executed Certificate of
Merger (together with any other documents required by law to effectuate the
Merger) shall be filed and recorded in the office of the Secretary of State
of Nebraska and the Secretary of State of Iowa, which filings and
recordings shall be made as soon as possible after the closing of the
transactions contemplated by this Agreement. When used in this Agreement,
the term "Effective Time" shall mean 10:00 o'clock p.m. Des Moines, Iowa,
time on May 31, 1999.
<PAGE>
(c) Pursuant to Section 490.1106 of the Iowa Business Corporation
Act, the title to all real estate and other property owned by Spectrum,
Rushmore and Decatur shall be vested in the Surviving Corporation without
reversion or impairment and the Surviving Corporation shall have all
liabilities of each corporation party to the merger.
(d) The Articles of Incorporation of Decatur is hereby amended to
become effective immediately after the Effective Time of the Merger so that
the Articles of Incorporation of the Surviving Corporation, until
thereafter amended in accordance with law, shall be in the form of Exhibit
A attached hereto and incorporated herein by this reference. At the
Effective Time of the Merger, the name of the Surviving Corporation will
thereby change to Spectrum Bancorporation, Inc.
(e) The By-Laws of the Surviving Corporation immediately after the
Effective Time shall be in the form of Exhibit B attached hereto and
incorporated herein by this reference, until thereafter amended in
accordance with law.
(f) The Surviving Corporation, Decatur Corporation, hereby agrees
that it may be served with process in the State of Delaware in any
proceeding for enforcement of any obligation of any constituent corporation
of the State of Delaware, as well as for enforcement of any obligation of
the Surviving Corporation resulting from the merger, including any suit or
other proceeding to enforce the right of any stockholders as determined in
appraisal proceedings pursuant to Section 262 of the General Corporation
Law of the State of Delaware, and further hereby irrevocably appoints the
Secretary of State of the State of Delaware as its agent to accept service
of process in any such suit or other proceedings. The address to which a
copy of such process shall be mailed by the Secretary of State is:
Spectrum Bancorporation, Inc., 1500 Woodmen Tower, Omaha, Nebraska 68102,
Attention: Deryl F. Hamann, Chairman.
1.02 CONVERSION OF SHARES OF SPECTRUM STOCK. As of the Effective Time, by
virtue of the Merger without any action on the part of the holders thereof:
(a) Each share of Common Stock of Spectrum that is issued and
outstanding immediately prior to the Effective Time shall thereupon and
without any further action be converted into 12.2126 shares of fully paid
and nonassessable Common Stock, $1.00 par value per share, of the Surviving
Corporation.
(b) Each share of the 8% Non-Voting Cumulative Perpetual Preferred
stock of Decatur, $100 per value per share that is issued and outstanding
immediately prior to the Effective Time shall thereupon, without any
further action, be designated "Series 1" without further action.
(c) Each of the 8,000 shares of 10% Non Voting, Non Cumulative
Perpetual Preferred Stock (the "Preferred Stock") of Spectrum, $.01 par
value per share, that are issued and outstanding immediately prior to the
Effective Time and owned other than by Decatur Corporation shall thereupon
and without any further
2
<PAGE>
action be converted into one share of fully paid and nonassessable Series 2
Non Voting, Non Cumulative Perpetual Preferred Stock, $100 par value and
$100 redemption value per share, of the Surviving Corporation, with $10
per share dividends.
(d) Each of the 10,000 shares of Preferred Stock of Spectrum that are
issued and outstanding immediately prior to the Effective Time and owned by
Decatur Corporation shall thereupon and without any further action be
cancelled and cease to exist.
1.03 EXCHANGE OF SHARE CERTIFICATES.
(a) As soon as practicable after the Effective Time, the Surviving
Corporation shall deliver to each holder of record of a certificate or
certificates which immediately prior to the Effective Time represented
outstanding shares of Common Stock of Spectrum or Preferred Stock of
Spectrum (collectively, the "Spectrum Certificates") against delivery of
such Spectrum Certificates, duly executed for transfer in form satisfactory
to the Surviving Corporation, certificates representing that number of
shares of Common Stock or Series 2 Preferred Stock, as the case may be, of
Surviving Corporation into which the shares represented by the Spectrum
Certificates so surrendered shall have been converted pursuant to the
provisions of this Article I, and the Spectrum Certificates so surrendered
shall forthwith be cancelled.
(b) No dividends or other distributions declared with respect to
Common Stock or Preferred Stock of the Surviving Corporation issuable to
former holders of Common Stock or Preferred Stock of Spectrum pursuant to
the Merger and payable to the holders thereof after the Effective Date
shall be paid to any such holder unless and until such holder shall have
surrendered such holder's Spectrum Certificates and received in exchange
therefor certificates representing shares of Common Stock or Preferred
Stock, as the case may be, of the Surviving Corporation. After the
surrender and exchange of a Spectrum Certificate, the holder of
certificates for shares of Common Stock or Preferred Stock of the Surviving
Corporation into which the shares represented by the Spectrum Certificates
shall have been converted shall be entitled to receive any dividends or
other distributions, without any interest thereon, which theretofore became
payable with respect to the shares represented by such Spectrum
Certificates.
(c) After the Effective Time, there shall be no further registration
of transfers on the stock transfer books of the Surviving Corporation of
the shares represented by the Spectrum Certificates which were outstanding
immediately prior to the Effective Time. If, after the Effective Time,
Spectrum Certificates are presented to the Surviving Corporation for
registration or transfer, they shall be cancelled and exchanged for
certificates representing shares of Common Stock or
3
<PAGE>
Preferred Stock, as the case may be, of the Surviving Corporation, as
provided in this Article I.
1.04 BOARD OF DIRECTORS AND OFFICERS. At the Effective Time, the directors
and officers of Decatur immediately prior to the Effective Time shall become the
directors and officers, respectively, of the Surviving Corporation and shall
hold office in accordance with the Surviving Corporation's By-Laws and
applicable law.
1.05 SHARE CERTIFICATES OF RUSHMORE TO BE CANCELLED. At the Effective
Time, Spectrum shall surrender to the Surviving Corporation the certificate or
certificates representing the outstanding shares of Rushmore (the "Rushmore
Certificates"), duly executed in blank, and the Rushmore Certificates shall
forthwith be cancelled.
II. CONDITIONS, TERMINATION, AMENDMENT AND WAIVER
2.01 CONDITIONS. Consummation of the Merger and the transactions
contemplated hereby shall be subject to:
(a) Receipt of all regulatory approvals required by law and
expiration of all waiting periods imposed by law or order;
(b) Receipt of requisite approval of the shareholders of the parties
hereto; and
2.02 TERMINATION. This Agreement may be terminated at any time prior to
the Effective Time:
(a) By mutual consent of the Boards of Directors of the parties
hereto; or
(b) By any party hereto if any event shall have occurred which
renders the conditions set forth in Section 2.01 of this Agreement
incapable of fulfillment.
2.03 EFFECT OF TERMINATION. In the event of termination of this Agreement
as provided in Section 2.02 above, this Agreement shall forthwith become void
and there shall be no liability on the part of any party hereto or their
respective officers, directors or shareholders.
2.04 AMENDMENT. This Agreement may be amended by the parties hereto by
action taken by their respective Boards of Directors at any time, by an
instrument in writing signed on behalf of each of the parties hereto.
2.05 WAIVER. Any term or provision of this Agreement (other than
requirements for regulatory approvals) may be waived in writing at any time by
the party which is, or whose shareholders are, entitled to the benefits thereof.
2.06 This Agreement and Plan of Merger between the parties to the merger
has been approved, adopted, certified, executed and acknowledged by each of the
constituent corporations.
4
<PAGE>
III. GENERAL PROVISIONS
3.01 CLOSING. Unless this Agreement shall have been terminated and the
Merger herein contemplated shall have been abandoned, a closing (the "Closing")
will be held as soon as practicable after receipt of all regulatory approvals
and expiration of all waiting periods, at a location to be agreed upon by the
parties hereto. As soon as practicable after the Closing, the Certificate of
Merger will be filed for recording with the Secretary of State.
3.02 BINDING AGREEMENT. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and assigns.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be signed by its duly authorized officers, as of the date first above written.
SPECTRUM BANCORPORATION, INC.
By:
--------------------------------
Deryl F. Hamann, President
Attest:
- -----------------------------------
Secretary
DECATUR CORPORATION
By:
--------------------------------
Daniel A. Hamann, President
Attest:
- -----------------------------------
Secretary
RUSHMORE FINANCIAL SERVICES, INC.
By:
--------------------------------
Deryl F. Hamann, Chairman
Attest:
- -----------------------------------
Secretary
5
<PAGE>
SECRETARY'S CERTIFICATE
I, John L. Kopecky, Secretary of Spectrum Bancorporation, Inc., a
corporation organized and existing under the laws of the State of Delaware (the
"Corporation"), do hereby certify that the Agreement and Plan of Merger to which
this Certificate is attached, after having been duly approved by resolution of
the Board of Directors, was then submitted to the shareholders and adopted and
approved by the unanimous written consent of the shareholders by an affirmative
vote as follows:
<TABLE>
<CAPTION>
Shares Votes
Designation of Group Outstanding Entitled to be Cast
-------------------- ----------- -------------------
<S> <C> <C>
Holders of Common Stock 5,000 5,000
Holders of Preferred Stock 18,000 18,000
</TABLE>
The total number of votes cast for and against the plan by each voting
group entitled to vote separately on the plan is as follows:
<TABLE>
<CAPTION>
Voting Group Votes For Votes Against
------------ --------- -------------
<S> <C> <C>
Holders of Preferred Stock 5,000 0
Holders of Common Stock 18,000 0
</TABLE>
whereupon said Agreement and Plan of Merger was declared adopted as the act of
the Corporation.
---------------------------------------
John L. Kopecky, Secretary
STATE OF NEBRASKA )
) ss.
COUNTY OF DOUGLAS )
I, the undersigned, a Notary Public in and for said County and said State,
do hereby certify that John L. Kopecky, whose name as Secretary of Spectrum
Bancorporation, Inc., is signed to the foregoing certificate, appeared before me
this date and executed the above certificate in his capacity as such officer
with full authority, and acknowledged such to be his voluntary act and deed as
such officer and the voluntary act and deed of the said Corporation and that the
facts stated herein are true.
WITNESS my hand and seal this ____ day of May 1999.
--------------------------------------
Notary Public
My Commission Expires:
---------------
6
<PAGE>
EXHIBIT 3.1
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
OF
DECATUR CORPORATION
TO THE SECRETARY OF STATE OF THE STATE OF IOWA:
Pursuant to Section 490.1106(1)(e) of the Iowa Business Corporation Act,
the Articles of Incorporation of Decatur Corporation, an Iowa corporation, are
hereby amended in their entirety to read as follows, effective immediately after
the effective time of the merger (the "Merger") of Spectrum Bancorporation,
Inc., a Delaware corporation; and Rushmore Financial Services, Inc., a Nebraska
corporation, into Decatur Corporation.
ARTICLE I
NAME
The name of the corporation is Spectrum Bancorporation, Inc. (herein the
"Corporation"), an Iowa corporation, formerly known as Decatur Corporation.
ARTICLE II
REGISTERED OFFICE
The address of the Corporation's registered office in the State of Iowa is
111 North Main, Leon, Iowa 50144-1447. The name of the registered agent is
Terry Geiger.
ARTICLE III
POWERS
The purpose for which the Corporation is organized is to act as a bank
holding company and to transact all other lawful business for which corporations
may be incorporated pursuant to the laws of the State of Iowa. The Corporation
shall have all the powers of a corporation organized under said laws.
ARTICLE IV
TERM
The Corporation is to have perpetual existence.
<PAGE>
ARTICLE V
INCORPORATOR
The name and mailing address of the incorporator was as follows:
<TABLE>
<CAPTION>
Name Mailing Address
---- ---------------
<S> <C>
Roy W. Meadows RFD 2
Grimes, Iowa 50111
</TABLE>
ARTICLE VI
CAPITAL STOCK
The aggregate number of shares of all classes of capital stock which the
Corporation has authority to issue is 1,500,000, of which 1,000,000 are to be
shares of common stock, $1.00 par value per share, and of which 500,000 are to
be shares of serial preferred stock, $100.00 par value per share. The shares
may be issued by the Corporation without the approval of stockholders.
A description of the different classes and series of the Corporation's
capital stock, and a statement of the relative powers, designations, preferences
and rights of the shares of each class and series of capital stock, and the
qualifications, limitations or restrictions thereof, are as follows:
A. COMMON STOCK. Except as provided in these Articles of Amendment, the
holders of the common stock shall exclusively possess all voting power. Each
holder of shares of common stock shall be entitled to one vote for each share
held by such holder.
Whenever there shall have been paid, or declared and set aside for payment,
to the holders of the outstanding shares of any class of stock having preference
over the common stock as to the payment of dividends, the full amount of
dividends and sinking fund or retirement fund or other retirement payments, if
any, to which such holders are respectively entitled in preference to the common
stock, then dividends may be paid on the common stock, and on any class or
series of stock entitled to participate therewith as to dividends, out of any
assets legally available for the payment of dividends, but only when and as
declared by the board of directors of the Corporation.
In the event of any liquidation, dissolution or winding up of the
Corporation, after there shall have been paid, or declared and set aside for
payment, to the holders of the outstanding shares of any class having preference
over the common stock in any event, the full preferential amounts to which they
are respectively entitled, the holders of the common stock and of any class or
series of stock entitled to participate therewith, in whole or in part, as to
distribution of assets shall be entitled, after payment or provision for
2
<PAGE>
payment of all debts and liabilities of the Corporation, to receive the
remaining assets of the Corporation available for distribution, in cash or in
kind.
Each share of common stock shall have the same relative powers, preferences
and rights as, and shall be identical in all respects with, all the other shares
of common stock of the Corporation.
B. SERIAL PREFERRED STOCK. Except as provided in these Articles of
Amendment, the board of directors of the Corporation is authorized, by
resolution or resolutions from time to time adopted, to provide for the issuance
of serial preferred stock in series and to fix and state the powers,
designations, preferences and relative, participating, optional or other special
rights of the shares of such series, and the qualifications, limitations or
restrictions thereof, including, but not limited to determination of any of the
following:
1. the distinctive serial designation and the number of shares of such
series; and
2. the dividend rates or the amount of dividends to be paid on the shares
of such series, whether dividends shall be cumulative and, if so, from which
date or dates, the payment date or dates for dividends, and the participating or
other special rights, if any, with respect to dividends; and
3. the voting powers, full or limited, if any, of the shares of such
series; and
4. whether the shares of such series shall be redeemable and, if so, the
price or prices at which, and the terms and conditions upon which such shares
may be redeemed; and
5. the amount or amounts payable upon the shares of such series in the
event of voluntary or involuntary liquidation, dissolution or winding up of the
Corporation; and
6. whether the shares of such series shall be entitled to the benefits of
a sinking or retirement funds to be applied to the purchase or redemption of
such shares, and, if so entitled, the amount of such fund and the manner of its
application, including the price or prices at which such shares may be redeemed
or purchased through the application of such funds; and
7. whether the shares of such series shall be convertible into, or
exchangeable for, shares of any other class or classes or any other series of
the same or any other class or classes of stock of the Corporation and, if so
convertible or exchangeable, the conversion price or prices, or the rate or
rates of exchange, and the adjustments thereof, if any, at which such conversion
or exchange may be made, and any other terms and conditions of such conversion
or exchange; and
3
<PAGE>
8. the subscription or purchase price and form of consideration for which
the shares of such series shall be issued; and
9. whether the shares of such series which are redeemed or converted
shall have the status of authorized but unissued shares of serial preferred
stock and whether such shares may be reissued as shares of the same or any other
series of serial preferred stock.
Each share of each series of serial preferred stock shall have the same
relative powers, preferences and rights as, and shall be identical in all
respects with, all the other shares of the Corporation of the same series.
C. SERIES 1 NONVOTING, CUMULATIVE PERPETUAL PREFERRED STOCK. At the
effective time of the Merger, each of the 9,000 shares of 8% Nonvoting,
Cumulative Perpetual Preferred Stock of the Corporation, $100.00 par value per
share, shall be converted into one share of fully paid and nonassessable serial
preferred stock, resulting in a total of 9,000 such shares which are hereby
designated the Series 1 Nonvoting, Cumulative Perpetual Preferred Stock, $100.00
par value per share, of the Corporation (the "Series 1 Preferred Stock"), which
shall have the following powers, designations, preferences, rights,
qualifications, limitations and restrictions:
Shares of Series 1 Preferred Stock shall be nonvoting except as otherwise
required by law.
No dividends shall be paid or set apart for payment on common stock during
any fiscal year of the Corporation unless a dividend, as set forth hereinafter,
for the then current fiscal year has been paid on the Series 1 Preferred Stock.
Holders of shares of Series 1 Preferred Stock shall be entitled to receive, but
only as and when declared by the Board of Directors of the Corporation, out of
funds of the Corporation legally available for such purposes, annual dividends
of Eight Dollars ($8.00) per share. The right to such dividends on Series 1
Preferred Stock shall be cumulative, so that if in any fiscal year or years,
dividends in whole or in part are not paid upon the Series 1 Preferred Stock,
unpaid dividends shall accumulate as against the holders of common stock, so
that such sums in any later years shall be paid to the holders of the Series 1
Preferred Stock with respect to any prior year or years when dividends were not
paid. The determination of the Board of Directors of the Corporation at any
time as to the amount of funds of the Corporation legally available for payment
of dividends shall be binding and conclusive on the holders of all of the issued
and outstanding shares of stock of the Corporation.
In the event of any liquidation or dissolution or winding up, whether
voluntary or involuntary, of the Corporation, holders of each series (all of
which shall rank pari passu unless a series is specifically designated as
subordinate) of Preferred Stock shall be entitled to be paid in full the sum of
One Hundred Dollars ($100.00) per share, together with any accrued but unpaid
dividends accrued thereon, and after such payments the remaining assets, if any,
of the Corporation shall be distributed, first, among the holders of
4
<PAGE>
any other shares of preferred stock in accordance with the terms of such
preferred stock and, second, among the holders of common stock according to
their respective shares.
D. SERIES 2 NONVOTING, NONCUMULATIVE PERPETUAL PREFERRED STOCK. At the
effective time of the Merger, each of the 8,000 shares of 10% Nonvoting,
Noncumulative Perpetual Preferred Stock of Spectrum Bancorporation, Inc., a
Delaware corporation, $.01 par value per share ("Spectrum Preferred Stock")
owned other than by Decatur Corporation, shall be converted into one share of
fully paid and nonassessable serial preferred stock, resulting in a total of
8,000 such shares which are hereby designated the Series 2 Nonvoting,
Noncumulative Perpetual Preferred Stock, $100.00 par value per share, of the
Corporation (the "Series 2 Preferred Stock"), which shall have the following
powers, designations, preferences, rights, qualifications, limitations and
restrictions:
Shares of Series 2 Preferred Stock shall be nonvoting except as otherwise
required by law.
No dividends shall be paid or set apart for payment on common stock during
any fiscal year of the Corporation unless a dividend, as set forth hereinafter,
for the then current fiscal year has been paid on the Series 2 Preferred Stock.
Holders of shares of Series 2 Preferred Stock shall be entitled to receive, but
only as and when declared by the Board of Directors of the Corporation, out of
funds of the Corporation legally available for such purposes, annual dividends
of Ten Dollars ($10.00) per share. The right to such dividends on Series 2
Preferred Stock shall not be cumulative, so that if in any fiscal year or years,
dividends in whole or in part are not paid upon the Series 2 Preferred Stock,
unpaid dividends shall not accumulate as against the holders of common stock, so
that no sums in any later years shall be paid to the holders of the Series 2
Preferred Stock with respect to any prior year or years when dividends were not
paid, and so that in no event shall the holders of the Series 2 Preferred Stock
receive dividends of more than Ten Dollars ($10.00) per share in any fiscal
year. The determination of the Board of Directors of the Corporation at any
time as to the amount of funds of the Corporation legally available for payment
of dividends shall be binding and conclusive on the holders of all of the issued
and outstanding shares of stock of the Corporation.
In the event of any liquidation or dissolution or winding up, whether
voluntary or involuntary, of the Corporation, holders of each series (all of
which shall rank pari passu as between series unless a series is specifically
designated as subordinate) of Preferred Stock shall be entitled to be paid in
full the sum of One Hundred Dollars ($100.00) per share, together with any
declared but unpaid dividends accrued thereon, and after such payments the
remaining assets, if any, of the Corporation shall be distributed, first, among
the holders of any other shares of preferred stock in accordance with the terms
of such preferred stock and, second, among the holders of common stock according
to their respective shares.
5
<PAGE>
Each of the 10,000 shares of Spectrum Preferred Stock that are issued and
outstanding immediately prior to the Effective Time and owned by Decatur
Corporation shall thereupon and without any further action be cancelled and
cease to exist.
ARTICLE VII
NO PREEMPTIVE RIGHTS
No holder of any of the shares of any class or series of stock or of
options, warrants or other rights to purchase shares of any class or series of
stock or of other securities of the Corporation shall have any preemptive right
to purchase or subscribe for any unissued stock of any class or series, or any
unissued bonds, certificates of indebtedness, debentures or other securities
convertible into or exchangeable for stock of any class or series or carrying
any right to purchase stock of any class or series; but any such unissued stock,
bonds, certificates of indebtedness, debentures or other securities convertible
into or exchangeable for stock or carrying any right to purchase stock may be
issued pursuant to resolution of the board of directors of the Corporation to
such persons, firms, corporations or associations, whether or not holders
thereof, and upon such terms as may be deemed advisable by the board of
directors in the exercise of its sole discretion.
ARTICLE VIII
REPURCHASE OF SHARES
The Corporation may from time to time, pursuant to authorization by the
board of directors of the Corporation and without action by the stockholders,
purchase or otherwise acquire shares of any class, bonds, debentures, notes,
scrip, warrants, obligations, evidences of indebtedness, or other securities of
the Corporation in such manner, upon such terms, and in such amounts as the
board of directors shall determine; subject, however, to such limitations or
restrictions, if any, as are contained in the express terms of any class of
shares of the Corporation outstanding at the time of the purchase or acquisition
in question or as are imposed by law or regulation.
ARTICLE IX
ELIMINATION OF DIRECTORS' LIABILITY
Directors of the Corporation shall have no liability to the Corporation or
its stockholders for monetary damages for breach of fiduciary duty as a
director, provided that this Article IX shall not eliminate liability of a
director (i) for any breach of the director's duty of loyalty to the Corporation
or its stockholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii) under
section 833 of the Iowa Business Corporation Act, or (iv) for any transaction
from which a director derives an improper personal benefit. If the Iowa
Business Corporation Act is amended after the effective date of this Certificate
to further eliminate or limit the personal liability of
6
<PAGE>
directors, then the liability of a director of the Corporation shall be
eliminated or limited to the fullest extent permitted by the Iowa Business
Corporation Act, as so amended.
Any repeal or modification of the foregoing paragraph by the stockholders
of the Corporation shall not adversely affect any right or protection of a
director of the Corporation existing at the time of such repeal or modification.
ARTICLE X
INDEMNIFICATION
A. INDEMNITY. The Corporation shall indemnify, in the manner and to the
extent provided in the Iowa Business Corporation Act as in effect on the
effective date of the Merger, any person entitled to indemnification thereunder.
B. ADVANCE PAYMENT. The Corporation may pay in advance or reimburse any
expenses (including attorneys' fees) which may become subject to indemnification
under paragraph A if the person receiving the payment or reimbursement
undertakes in writing to repay the same if it is ultimately determined that he
is not entitled to indemnification by the Corporation under paragraph A.
C. NONEXCLUSIVE. The indemnification and advancement of expenses
provided by paragraphs A and B or otherwise granted pursuant to Iowa law shall
not be exclusive of any other rights to which a person may be entitled by law,
bylaw, agreement, vote of stockholders or disinterested directors, or otherwise.
D. CONTINUATION. The indemnification and advance payment provided by
paragraphs A and B shall continue as to a person who has ceased to hold a
position referred to in paragraph A and shall inure to his heirs, executors and
administrators.
E. INSURANCE. The Corporation may purchase and maintain insurance on
behalf of any person who holds or who has held any position referred to in
paragraph A, against any liability asserted against him and incurred by him in
any such position referred to in paragraph A, against any liability asserted
against him and incurred by him in any such position, or arising out of his
status as such, whether or not the Corporation would have power to indemnify him
against such liability under paragraphs A and B of this Article X.
F. SAVINGS CLAUSE. If this Article X or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
Corporation shall nevertheless indemnify each director, officer, employee, and
agent of the Corporation as to costs, charges, and expenses (including
attorneys' fees), judgments, fines, and amounts paid in settlement with respect
to any action, suit or proceeding, whether civil, criminal, administrative, or
investigative, including an action by or in the right of the Corporation to
7
<PAGE>
the full extent permitted by any applicable portion of this Article X that
shall not have been invalidated and to the full extent permitted by
applicable law.
G. AMENDMENT. If Iowa law is amended to permit further indemnification
of the directors, officers, employees and agents of the Corporation, then the
Corporation shall indemnify such persons to the fullest extent permitted by the
Iowa law, as so amended. Any repeal or modification of this Article X by the
stockholders of the Corporation shall not adversely affect any right or
protection of a director, officer, employee or agent existing at the time of
such repeal or modification.
ARTICLE XI
AMENDMENT OF BYLAWS
In furtherance and not in limitation of the powers conferred by statute,
the board of directors of the Corporation is expressly authorized to make,
repeal, alter, amend and rescind the Bylaws of the Corporation.
ARTICLE XII
AMENDMENT OF ARTICLES OF AMENDMENT
The Corporation reserves the right to repeal, alter, amend, or rescind any
provision contained in these Articles of Amendment in the manner now or
hereafter prescribed by law, and all rights conferred on stockholders herein are
granted subject to this reservation.
8
<PAGE>
EXHIBIT 3.2
BYLAWS
OF
SPECTRUM BANCORPORATION, INC.
ARTICLE I
OFFICES
The principal office of the corporation shall be located at 10834 Old
Mill Road, Suite One, Omaha, Nebraska 68154-2648. The corporation may have
such other offices, either within or without the State of Iowa, as the Board
of Directors may designate or as the business of the corporation may require
from time to time.
The registered office of the corporation required by the Iowa Business
Corporation Act to be maintained in the State of Iowa may be, but need not
be, identical with the principal office in the State of Iowa, and the address
of the registered office may be changed from time to time by the Board of
Directors.
ARTICLE II
SHAREHOLDERS
SECTION 1. ANNUAL MEETING. The annual meeting of the shareholders
shall be held on the first Monday in the month of February in each year,
beginning with the year 2000, at the hour of 9:30 a.m., for the purpose of
electing directors and for the transaction of such other business as may come
before the meeting. If the day fixed for the annual meeting shall be a
legal holiday in the State of Iowa, such meeting shall be held on the next
succeeding business day. If the election of directors shall not be held on
the day designated herein for any annual meeting of the shareholders, or at
any adjournment thereof, the Board of Directors shall cause the election to
be held at a special meeting of the shareholders as soon thereafter as
conveniently may be.
SECTION 2. SPECIAL MEETINGS. Special meetings of the shareholders, for
any purpose or purposes, unless otherwise prescribed by statute, may be
called by the President or by the Board of Directors, and shall be called by
the President at the request of the holders of not less than one-tenth of all
the outstanding shares of the corporation entitled to vote at the meeting.
SECTION 3. PLACE OF SHAREHOLDERS' MEETING. The Board of Directors may
designate any place, either within or without the State of Iowa, as the place
of meeting for any annual meeting or for any special meeting called by the
Board of Directors. A waiver of notice signed by all shareholders entitled
to vote at a meeting may designate any place, either within or without the
State of Iowa, as the
<PAGE>
place for holding of such meeting. If no designation is made, or if a
special meeting be otherwise called, the place of meeting shall be the
registered office of the corporation in the State of Iowa.
SECTION 4. NOTICE OF MEETING. Written notice or printed notice stating
the place, day, and hour of the meeting and, in case of a special meeting,
the purpose or purposes for which the meeting is called, shall be delivered
not less than ten (10) nor more than sixty (60) days before the date of the
meeting, either personally or by mail, to each shareholder of record entitled
to vote at such meeting. If mailed, such notice shall be deemed to be
delivered when deposited in the United States mail, addressed to the
shareholder at his address as it appears on the stock transfer books of the
corporation, with postage thereon prepaid.
SECTION 5. CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE. For the
purpose of determining shareholders entitled to notice of or to vote at any
meeting of shareholders or any adjournment thereof, or shareholders entitled
to receive payment of any dividend, or in order to make a determination of
shareholders for any other proper purpose, the Board of Directors of the
corporation may provide that the stock transfer books shall be closed for a
stated period but not to exceed, in any case, sixty (60) days. If the stock
transfer books shall be closed for the purpose of determining shareholders
entitled to notice of or to vote at a meeting of shareholders, such books
shall be closed for at least ten (10) days immediately preceding such
meeting. In lieu of closing the stock transfer books, the Board of Directors
may fix in advance a date as the record date for any such determination of
shareholders, such date in any case to be not more than seventy (70) days
prior to the date on which the particular action requiring such determination
of shareholders is to be taken. If the stock transfer books are not closed
and no record date is fixed for the determination of shareholders entitled to
notice of or to vote at a meeting of shareholders, or shareholders entitled
to receive payment of a dividend, the date on which notice of the meeting is
mailed or the date on which the resolution of the Board of Directors
declaring such dividend is adopted, as the case may be, shall be the record
date for such determination of shareholders. When a determination of
shareholders entitled to vote at any meeting of shareholders has been made as
provided in this section, such determination shall apply to any adjournment
thereof.
SECTION 6. VOTING LISTS. After fixing a record date for a meeting, the
officer or agent having charge of the stock transfer books for shares of the
corporation shall make a complete list of the shareholders entitled to vote
at such meeting or any adjournment thereof, arranged by voting group in
alphabetical order. Within each voting group, the list must be arranged by
class or series of shares and must show the address of and the number of
shares held by each shareholder. The shareholders' list must be available for
inspection by any shareholder beginning two business days after notice of the
meeting is given for which the list was prepared and continuing through the
meeting, at the corporation's principal office or at a place identified in
the meeting notice in the city where the meeting will be held. A shareholder,
or a shareholder's agent or attorney, is entitled on written demand to
inspect and, subject to the requirements of section 490.1602(3) of the Iowa
Business Corporation Act, to copy the list, during regular business hours and
at the person's expense, during the period it is available for inspection.
The
2
<PAGE>
corporation shall make the shareholders' list available at the meeting, and
any shareholder, or a shareholder's agent or attorney, is entitled to inspect
the list at any time during the meeting or any adjournment.
SECTION 7. QUORUM. A majority of the outstanding shares of the
corporation entitled to vote, represented in person or by proxy, shall
constitute a quorum at a meeting of shareholders. If less than a majority of
the outstanding shares are represented at a meeting, a majority of the shares
so represented may adjourn the meeting from time to time without further
notice. At such adjourned meeting at which a quorum shall be present or
represented, any business may be transacted which might have been transacted
at the meeting as originally notified. The shareholders present at the duly
organized meeting may continue to transact business until adjournment,
notwithstanding the withdrawal of enough shareholders to leave less than a
quorum.
SECTION 8. PROXIES. At all meetings of shareholders, a shareholder may
vote by proxy executed in writing by the shareholder or by his duly
authorized attorney in fact. An appointment of proxy is effective when
received by the Secretary of the corporation or other officer or agent
authorized to tabulate votes. No proxy shall be valid after eleven months
from the date of its election, unless otherwise provided in the proxy.
SECTION 9. VOTING OF SHARES. Each outstanding share entitled to vote
shall be entitled to one vote upon each matter submitted to a vote at a
meeting of shareholders.
Voting on any matter, including the election of directors need not be by
ballot; PROVIDED, voting on any matter shall be by ballot if so requested by
any person entitled to vote on that matter.
SECTION 10. VOTING OF SHARES BY CERTAIN HOLDERS. Shares standing in
the name of another corporation may be voted by such officer, agent, or proxy
as the Bylaws of such corporation may prescribe or, in the absence of such
provision, as the Board of Directors of such corporation may determine.
Shares held by an administrator, executor, guardian, or conservator may
be voted by him, either in person or by proxy, without, a transfer of such
shares into his name. Shares standing in the name of a trustee may be voted
by him, either in person or by proxy, but no Trustee shall be entitled to
vote shares held by him without a transfer of such shares into his name.
SECTION 11. INFORMAL ACTION BY SHAREHOLDERS. Any action required to be
taken at a meeting of the shareholders or any other action which may be taken
at a meeting of the shareholders, may be taken without a meeting if a consent
in writing setting forth the action so taken shall be signed by the holders
of outstanding shares having not less than ninety percent (90%) of the votes
entitled to be cast at a meeting at which all shares entitled to vote on the
action were present and voted.
3
<PAGE>
ARTICLE III
BOARD OF DIRECTORS
SECTION 1. GENERAL POWERS. The business and affairs of the corporation
shall be managed by its Board of Directors.
SECTION 2. NUMBER, TENURE, AND QUALIFICATIONS. The number of directors
of the corporation shall be not less than three (3). Each director shall hold
office until the next annual meeting of shareholders and until his successor
shall have been elected and qualified. Directors need not be residents of the
State of Iowa or shareholders of the corporation.
SECTION 3. REGULAR MEETINGS. A regular meeting of the Board of
Directors shall be held without other notice than this Bylaw immediately
after, and at the same place as, the annual meeting of shareholders. The
Board of Directors may provide, by resolution, the time and place, either
within or without the State of Iowa, for the holding of additional regular
meetings without other notice than such resolution.
SECTION 4. SPECIAL MEETINGS. Special meetings of the Board of
Directors may be called by or at the request of the President or any
director. The person or persons authorized to call special meetings of the
Board of Directors may fix any place, either within or without the State of
Iowa, as the place for holding any special meeting of the Board of Directors
called by them.
SECTION 5. NOTICE. Notice of any special meeting shall be given at
least two (2) days previously thereto by written notice delivered personally
or mailed to each director at his business address or by telegram or
electronic facsimile transmission. If mailed, such notice shall be deemed to
be delivered when deposited in the United States mail so addressed with
postage thereon prepaid. If notice be given by telegram, such notice shall be
deemed to be delivered when the telegram is delivered to the telegraph
company. If notice is given by electronic facsimile transmission, such notice
shall be deemed to be delivered when transmitted and received by the director
at his principal place of business. Any director may waive notice of any
meeting. The attendance of a director at a meeting shall constitute a waiver
of notice of such meeting, unless the director at the beginning of the
meeting or promptly upon the director's arrival objects to holding the
meeting or transacting business at the meeting and does not thereafter vote
for or assent to action taken at the meeting. Neither the business to be
transacted at, nor the purpose of, any regular or special meeting of the
Board of Directors need be specified in the notice or waiver of notice of
such meeting.
SECTION 6. QUORUM. A majority of the number of directors fixed by
Section 2 of this Article III shall constitute a quorum for the transaction
of business at any meeting of the Board of Directors, but if less than such
majority is present at a meeting, a majority of the directors present may
adjourn the meeting from time to time without further notice.
SECTION 7. MANNER OF ACTING. The act of the majority of the directors
4
<PAGE>
present at a meeting at which a quorum is present shall be the act of the
Board of Directors.
SECTION 8. VACANCIES. If a vacancy occurs on the Board of Directors,
including a vacancy resulting from an increase in the number of directors,
the vacancy may be filled by the shareholders or the Board of Directors. Any
vacancy occurring in the Board of Directors may be filled by the affirmative
vote of a majority of the remaining directors though less than a quorum of
the Board of Directors. If the vacant office was held by a director elected
by a voting group of shareholders, only the holders of shares of that voting
group are entitled to vote to fill the vacancy if it is filled by the
shareholders. A vacancy that will occur at a specific later date, by reason
of a resignation effective at a later date may be filled before the vacancy
occurs but the new director shall not take office until the vacancy occurs.
The term of a director elected to fill a vacancy expires at the next
shareholders' meeting at which directors are elected. Despite the expiration
of a director's term, the director continues to serve until a successor for
that director is elected and qualifies or until there is a decrease in the
number of directors.
SECTION 9. COMPENSATION. By resolution of the Board of Directors, the
directors may be paid their expenses, if any of attendance at each meeting of
the Board of Directors, and may be paid a fixed sum for attendance at each
meeting of the Board of Directors or a stated salary as director, or both. No
such payment shall preclude any director from serving the corporation in any
other capacity and receiving compensation therefor.
SECTION 10. PRESUMPTION OF ASSENT. A director of the corporation who
is present at a meeting of the Board of Directors at which action on any
corporate matter is taken shall be presumed to have assented to the action
taken unless his dissent or abstention from such action shall be entered in
the minutes of the meeting or unless he shall deliver written notice of his
abstention or dissent to the presiding officer of the meeting before the
adjournment thereof or to the corporation immediately after the adjournment
of the meeting. Such right of dissent or abstention shall not apply to a
director who voted in favor of such action.
SECTION 11. INFORMAL ACTION BY DIRECTORS. Any action required to be
taken at a meeting of Directors, or any action which may be taken at a
meeting of Directors or of a committee of Directors, may be taken without a
meeting if a consent or consents in writing setting forth the action so
taken, shall be signed by all of the Directors or all of the members of the
committee of Directors, as the case may be, and included in the minutes or
filed with the corporate records reflecting the action taken. Action taken
under this section is effective when the last director signs the consent,
unless the consent specifies a different effective date.
SECTION 12. COMMITTEES. The Board of Directors from time to time by
Resolution adopted by a majority of the full Board of Directors may appoint
from its members a committee or committees, temporary or permanent, and, to
the extent permitted by law and these bylaws, may designate the duties,
powers, and authorities of such committee.
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ARTICLE IV
OFFICERS
SECTION 1. NUMBER. The officers of the corporation shall be a
President, a Vice President, a Secretary and a Treasurer, each of whom shall
be elected by the Board of Directors. Such other officers and assistant
officers as may be deemed necessary may be elected or appointed by the Board
of Directors or appointed by the President. Any two or more offices may be
held by the same person.
SECTION 2. ELECTION AND TERM OF OFFICE. The officers of the
corporation to be elected by the Board of Directors shall be elected annually
by the Board of Directors at the first meeting of the Board of Directors held
after each annual meeting of the shareholders. If the election of officers
shall not be held at such meeting, such election shall be held as soon
thereafter as conveniently may be. Each officer shall hold office until his
successor shall have been duly elected and shall have qualified or until his
death or until he shall resign or shall have been removed in the manner
hereinafter provided.
SECTION 3. REMOVAL. Any officer or agent elected or appointed by the
Board of Directors may be removed by the Board of Directors whenever in its
judgment the best interests of the corporation would be served thereby, but
such removal shall be without prejudice to the contract rights, if any, of
the person so removed. Election or appointment of an officer or an agent
shall not of itself create contract rights.
SECTION 4. VACANCIES. A vacancy in an office because of death,
resignation, removal, disqualification or otherwise, may be filled by the
Board of Directors for the unexpired portion of the term.
SECTION 5. PRESIDENT. The President shall be the principal executive
officer of the corporation and, subject to the control of the Board of
Directors, shall in general supervise and control all of the business and
affairs of the corporation. He shall, when present, preside at all meetings
of the shareholders and of the Board of Directors. He may sign, with the
Secretary and any other proper officer of the corporation thereunto
authorized by the Board of Directors, certificates for shares of the
corporation, any deeds, mortgages, bonds, contracts or other instruments
which the Board of Directors has authorized to be executed, except in cases
where the signing and execution thereof shall be expressly delegated by the
Board of Directors or by these Bylaws to some other officer or agent of the
corporation, or shall be required by law to be otherwise signed or executed;
and in general shall perform all duties incident to the office of President
and such other duties as may be prescribed by the Board of Directors from
time to time. He may vote shares of stock of any other corporation which are
held by the corporation, and may execute proxies to any other person or
persons to vote such stock.
SECTION 6. THE VICE PRESIDENT. In the absence of the President or in
the event of his death, inability or refusal to act, the Vice President shall
perform the duties of the President, and when so acting, shall have all the
powers of and be subject to all the restrictions upon the President. The Vice
President may sign, with the Secretary or an Assistant Secretary,
certificates for shares of the
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corporation; and shall perform such other duties as from time to time may be
assigned to him by the President or by the Board of Directors.
SECTION 7. THE SECRETARY. The Secretary shall: (a) keep the minutes of
the shareholders and of the Board of Directors' meetings in one or more books
provided for that purpose; (b) see that all notices are duly given in
accordance with the provisions of these Bylaws, or as required by law; (c) be
custodian of the corporate records and of the seal of the corporation and see
that the seal of the corporation is affixed to all documents, the execution
of which on behalf of the corporation under its seal is duly authorized; (d)
keep a register of the post office address of each shareholder which shall be
furnished to the Secretary by such shareholder; (e) sign with the President,
or the Vice President, certificates for shares of the corporation, the
issuance of which shall have been authorized by resolution of the Board of
Directors; (f) have general charge of the stock transfer books of the
corporation; and (g) in general perform all duties incident to the office of
Secretary and such other duties as from time to time may be assigned to him
by the President or by the Board of Directors.
SECTION 8. THE TREASURER. If required by the Board of Directors, the
Treasurer shall give a bond for the faithful discharge of his duties in such
sum and with such surety or sureties as the Board of Directors shall
determine. He shall: (a) have charge of and custody of and be responsible for
all funds and securities of the corporation; receive and give receipts for
moneys due and payable to the corporation from any source whatsoever, and
deposit all such moneys in the name of the corporation in such banks, trust
companies or other depositaries as shall be selected in accordance with
provisions of Article V of these Bylaws; and (b) in general perform all of
the duties incident to the office of Treasurer and such other duties as from
time to time may be assigned to him by the President or by the Board of
Directors.
SECTION 9. ASSISTANT SECRETARIES AND ASSISTANT TREASURERS. The
Assistant Secretaries, when authorized by the Board of Directors, may sign
with the President or a Vice President certificates for shares of the
corporation, the issuance of which shall have been authorized by a resolution
of the Board of Directors. The Assistant Treasurers shall respectively, if
required by the Board of Directors, give bonds for the faithful discharge of
their duties in such sums and with such sureties as the Board of Directors
shall determine. The Assistant Secretaries and Assistant Treasurers, in
general, shall perform such duties as shall be assigned to them by the
Secretary or the Treasurer respectively, or by the President or the Board of
Directors.
SECTION 10. OTHER ASSISTANTS AND ACTING OFFICERS. The Board of
Directors shall have the power to appoint any person to act as assistant to
any officer, or to perform the duties of such officer whenever for any reason
it is impracticable for such officer to act personally, and such assistant or
acting officer so appointed by the Board of Directors shall have the power to
perform all the duties of the office to which he is so appointed to be
assistant, or as to which he is so appointed to act, except as such power may
be otherwise defined or restricted by the Board of Directors.
SECTION 11. SALARIES. The salaries of the officers shall be fixed from
time to time by the Board of Directors and no officer shall be prevented from
receiving
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such salary by reason of the fact that he is also a director of the
corporation.
SECTION 12. ORDER OF BUSINESS. The order of business at all meetings
of shareholders and directors shall be: (a) reading of the minutes of the
previous meeting; (b) reports of officers; (c) consideration of financial
statements and reports; (d) consideration of unfinished business; (e)
consideration of new and miscellaneous business; (f) determination of the
number of directors to be elected for the ensuing year, if that be an item of
business and (g) election of directors or officers, if that be an item of
business.
SECTION 13. RULES OF ORDER. Except as otherwise provided in the
Articles of Incorporation or these Bylaws, the latest edition of ROBERT'S
RULES OF ORDER shall determine procedure in all meetings of the shareholders
and the Board of Directors.
ARTICLE V
EXECUTIVE COMMITTEE
SECTION 1. APPOINTMENT. The Board of Directors by resolution adopted
by a majority of the full Board, may designate two or more of its members to
constitute an executive committee. The designation of such committee and the
delegation thereto of authority shall not operate to relieve the Board of
Directors, or any member thereof, of any responsibility imposed by law.
SECTION 2. AUTHORITY. The executive committee, when the Board of
Directors is not in session, shall have and may exercise all of the authority
of the Board of Directors except to the extent, if any, that such authority
shall be limited by the resolution appointing the executive committee and
except also that the executive committee shall not have the authority of the
Board of Directors in reference to: (1) amending the Articles of
Incorporation pursuant to Section 490.1002 of the Iowa Business Corporation
Act; (2) approving a plan of merger not requiring shareholder approval; (3)
amending the bylaws of the corporation; (4) authorizing distributions; (5)
approving or proposing to shareholders action that requires shareholder
approval; (6) filling vacancies on the Board of Directors or on any of its
committees; (7) authorizing or approving a reacquisition of shares, except
according to a formula or method prescribed by the Board of Directors; and
(8) authorizing or approving the issuance, sale or contract for sale of
shares, or determining the designation and relative rights, preferences and
limitations of a class or series of shares, except as authorized by the Board
of Directors within specifically prescribed limits.
SECTION 3. TENURE AND QUALIFICATIONS. Subject to the provisions of
Section 8 of this Article, each member of the executive committee shall hold
office until the next regular annual meeting of the Board of Directors
following his designation.
SECTION 4. MEETINGS, ACTION WITHOUT MEETINGS, NOTICE, WAIVER OF NOTICE,
QUORUM AND VOTING REQUIREMENTS. Those provisions of Article III of these
Bylaws which govern meetings, action without meetings, notice, waiver of
notice, quorum and voting requirements of the Board of Directors, apply with
equal force to all committees, including the executive committee, and their
members.
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SECTION 5. VACANCIES. Any vacancy in the executive committee may be
filled by a resolution adopted by a majority of the full Board of Directors.
SECTION 6. RESIGNATIONS AND REMOVAL. Any member of the executive
committee may be removed at any time with or without cause by resolution
adopted by a majority of the full Board of Directors. Any member of the
executive committee may resign from the executive committee at any time by
giving written notice to the President or Secretary of the corporation, and
unless otherwise specified therein, the acceptance of such resignation shall
not be necessary to make it effective.
SECTION 7. PROCEDURE. The executive committee shall elect a presiding
officer from its members and may fix its own rules of procedure which shall
not be inconsistent with these Bylaws. It shall keep regular minutes of its
proceedings and report the same to the Board of Directors for its information
at the meeting thereof held next after the proceedings shall have been taken.
ARTICLE VI
CONTRACTS, LOANS, CHECKS AND DEPOSITS
SECTION 1. CONTRACTS. The Board of Directors may authorize any officer
or officers, agent or agents to enter into any contract or execute and
deliver any instrument in the name of and on behalf of the corporation, and
such authority may be general or confined to specific instances.
SECTION 2. LOANS. No loans shall be contracted on behalf of the
corporation and no evidences of the indebtedness shall be issued in its name
unless authorized by a resolution of a the Board of Directors. Such
authority may be general or confined to specific instances.
SECTION 3. CHECKS, DRAFTS, ORDERS FOR PAYMENT. All checks, drafts or
other orders for the payment of money, notes or other evidences of
indebtedness issued in the name of the corporation, shall be signed by such
officer or officers, agent or agents of the corporation and in such manner as
shall from time to time be determined by resolution of the Board of Directors.
SECTION 4. DEPOSITS. All funds of the corporation not otherwise
employed shall be deposited from time to time to the credit of the
corporation in such banks, trust companies or other depositaries as the Board
of Directors may select.
ARTICLE VII
CERTIFICATES FOR SHARES AND THEIR TRANSFER
SECTION 1. CERTIFICATES FOR SHARES. Shares issued by the corporation
may, but need not be, represented by certificates. Certificates representing
shares of the corporation shall be in such form as shall be determined by the
Board of Directors. Such certificates shall be signed either manually or in
facsimile by the President or Vice President and by the Secretary or an
Assistant Secretary.
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At a minimum, each share certificate must state on its face the name of
the corporation and that it is organized under the laws of Iowa, the name of
the person to whom issued, and the number and class of shares and the
designation of the series, if any, which the certificate represents. If the
corporation is authorized to issue different classes of shares or different
series within a class, the designations, relative rights, preferences, and
limitations applicable to each class, the variations in rights, preferences,
and limitations determined for each series, and the authority of the Board of
Directors to determine variations for future series must be summarized on the
front or back of each certificate. Alternatively, each certificate may state
conspicuously on its front or back that the corporation will furnish the
shareholder this information on request in writing and without charge. All
certificates surrendered to the corporation for transfer shall be cancelled
and no new certificates shall be issued until the former certificate for a
like number of shares shall have been surrendered and cancelled, except that
in case of a lost, destroyed or mutilated certificate a new one may be issued
therefor upon such terms and indemnity to the corporation as the Board of
Directors may prescribe.
SECTION 2. SHARES WITHOUT CERTIFICATES. The Board of Directors may
authorize the issue of some or all of its shares of any or all of its classes
or series without certificates. Within a reasonable time after the issue or
transfer of shares without certificates, the corporation shall send the
shareholder a written statement of the information required on certificates
by Article VII, Section 1, of these bylaws and, if applicable, Section
490.627 of the Iowa Business Corporation Act.
SECTION 3. TRANSFER OF SHARES. Transfer of shares of the corporation
shall be made only on the stock transfer books of the corporation by the
holder of record thereof or by his legal representative, who shall furnish
proper evidence of authority to transfer, or by his attorney thereunto
authorized by power of attorney duly executed and filed with the Secretary of
the corporation, and on surrender for cancellation of the certificate for
such shares.
ARTICLE VIII
DIVIDENDS
The Board of Directors may from time to time declare, and the
corporation may pay, dividends on its outstanding shares in the manner and
upon the terms and conditions provided by law and its Articles of
Incorporation.
ARTICLE IX
SEAL
The Board of Directors shall provide a corporate seal which shall be
circular in form and shall have inscribed thereon the name of the corporation
and the state of incorporation and the words "Corporate Seal."
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ARTICLE X
WAIVER OF NOTICE
Whenever any notice is required to be given to any shareholder or
director of the corporation under the provisions of the Bylaws or under the
provisions of the Articles of Incorporation or under the provisions of the
Iowa Business Corporation Act, waiver thereof in writing, signed by the
person or persons entitled to such notice, whether before or after the time
stated therein, shall be deemed equivalent to the giving of such notice. Such
waiver shall be filed with shareholders' or directors' minutes, as the case
may be, or the corporate records.
ARTICLE XI
AMENDMENTS
These Bylaws may be altered, amended or repealed and new Bylaws may be
adopted by the shareholders or the Board of Directors at any regular or
special meeting.
Effective: June 1, 1999
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EXHIBIT 4.1
SPECTRUM BANCORPORATION, INC.
AS ISSUER
TO
WILMINGTON TRUST COMPANY,
AS TRUSTEE
SUBORDINATED INDENTURE
DATED AS OF __________, 1999
_____% Junior Subordinated Debentures
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE I
DEFINITIONS 3
ARTICLE II
DESCRIPTION, TERMS, CONDITIONS, REGISTRATION AND EXCHANGE OF
THE JUNIOR SUBORDINATED DEBENTURES 11
2.1 Designation and Principal Amount 11
2.2 Maturity 11
2.3 Form and Payment 11
2.4 Global Subordinated Debenture 12
2.5 Interest 13
2.6 Execution, Authentication, Delivery and Dating 14
2.7 Registration and Transfer 15
2.8 Mutilated, Destroyed, Lost and Stolen Junior Subordinated
Debentures 16
ARTICLE III
REDEMPTION OF JUNIOR SUBORDINATED DEBENTURES 16
3.1 Redemption 17
3.2 Special Event Redemption 17
3.3 Optional Redemption by Company 17
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3.4 Notice of Redemption 18
3.5 Payment upon Redemption 19
3.6 No Sinking Fund 20
ARTICLE IV
EXTENSION OF INTEREST PAYMENT PERIOD 20
4.1 Extension of Interest Payment Period 20
4.2 Notice of Extension 20
4.3 Limitation of Transactions During Extension 21
ARTICLE V
PARTICULAR COVENANTS OF THE COMPANY 21
5.1 Payment of Principal and Interest 21
5.2 Maintenance of Agency 21
5.3 Paying Agents 22
5.4 Appointment to Fill Vacancy in Office of Trustee 23
5.5 Compliance with Consolidation Provisions 23
5.6 Restrictions on Certain Payments 23
5.7 Covenants as to the Trust 23
ARTICLE VI
SECURITYHOLDERS' LISTS AND REPORTS 24
6.1 Company to Furnish Trustee Names and Addresses of
Securityholders 24
6.2 Preservation of Information; Communications with
Securityholders 24
6.3 Reports by the Company 25
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6.4 Reports by the Trustee 25
ARTICLE VII
REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS ON EVENT OF
DEFAULT 26
7.1 Events of Default 26
7.2 Collection of Indebtedness and Suits for Enforcement by
Trustee 27
7.3 Application of Moneys Collected 29
7.4 Limitation on Suits 29
7.5 Rights and Remedies Cumulative; Delay or Omission Not Waiver 30
7.6 Control by Securityholders 30
7.7 Undertaking to Pay Costs 31
ARTICLE VIII
FORM OF JUNIOR SUBORDINATED DEBENTURE AND ORIGINAL ISSUE 32
8.1 Form of Junior Subordinated Debenture 32
8.2 Original Issue of Junior Subordinated Debentures 32
ARTICLE IX
CONCERNING THE TRUSTEE 32
9.1 Certain Duties and Responsibilities of the Trustee 32
9.2 Certain Rights of Trustee 33
9.3 Trustee Not Responsible for Recitals or Issuance of the Junior
Subordinated Debentures 34
9.4 May Hold Junior Subordinated Debentures 35
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9.5 Moneys Held in Trust 35
9.6 Compensation and Reimbursement 35
9.7 Reliance on Officers' Certificate 35
9.8 Disqualification; Conflicting Interests 36
9.9 Corporate Trustee Required; Eligibility 36
9.10 Resignation and Removal; Appointment of Successor 36
9.11 Acceptance of Appointment by Successor 37
9.12 Merger, Conversion, Consolidation or Succession to Business 38
9.13 Preferential Collection of Claims Against the Company 38
9.14 Appointment of Authenticating Agent 38
ARTICLE X
CONCERNING THE SECURITYHOLDERS 40
10.1 Evidence of Action by Securityholders 40
10.2 Proof of Execution by Securityholders 41
10.3 Who May Be Deemed Owners 41
10.4 Certain Junior Subordinated Debentures Owned by Company
Disregarded 41
10.5 Actions Binding on Future Securityholders 42
ARTICLE XI
SUPPLEMENTAL INDENTURES 42
11.1 Supplemental Indentures Without the Consent of Securityholders 42
11.2 Supplemental Indentures with Consent of Securityholders 43
11.3 Effect of Supplemental Indentures 44
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11.4 Junior Subordinated Debentures Affected by Supplemental
Indentures 44
11.5 Execution of Supplemental Indentures 44
ARTICLE XII
SUCCESSOR CORPORATION 45
12.1 Company May Consolidate, Etc. 45
12.2 Successor Substituted 45
12.3 Evidence of Consolidation, Etc., to Trustee 45
ARTICLE XIII
SATISFACTION AND DISCHARGE 46
13.1 Satisfaction and Discharge of Indenture 46
13.2 Discharge of Obligations 46
13.3 Deposited Moneys to Be Held in Trust 47
13.4 Payment of Monies Held by Paying Agents 47
13.5 Repayment to Company 47
ARTICLE XIV
IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND
DIRECTORS 47
14.1 No Recourse 47
ARTICLE XV
MISCELLANEOUS PROVISIONS 48
15.1 Effect on Successors and Assigns 48
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15.2 Actions by Successor 48
15.3 Surrender of Company Powers 48
15.4 Notices 48
15.5 Governing Law 49
15.6 Treatment of Junior Subordinated Debentures as Debt 49
15.7 Compliance Certificates and Opinions 49
15.8 Payments on Business Days 49
15.9 Conflict with Trust Indenture Act 49
15.10 Counterparts 50
15.11 Separability 50
15.12 Assignment 50
15.13 Acknowledgment of Rights 50
ARTICLE XVI
SUBORDINATION OF JUNIOR SUBORDINATED DEBENTURES 51
16.1 Agreement to Subordinate 51
16.2 Default on Senior and Subordinated Debt 51
16.3 Liquidation; Dissolution; Bankruptcy 51
16.4 Subrogation 53
16.5 Trustee to Effectuate Subordination 54
16.6 Notice by the Company 54
16.7 Rights of the Trustee; Holders of Senior and Subordinated Debt 55
16.8 Subordination May Not Be Impaired 55
</TABLE>
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<PAGE>
SPECTRUM BANCORPORATION, INC.
RECONCILIATION AND TIE BETWEEN TRUST INDENTURE ACT OF 1939, AS AMENDED,
AND SUBORDINATED INDENTURE, DATED AS OF __________, 1999
<TABLE>
<CAPTION>
Trust Indenture Act Section Subordinated Indenture Section
- ------------------------------------- ------------------------------------------
<S> <C>
Section 310 15.9
Section 310(b) 9.8
Section 311 15.9
Section 311(a) 9.13
Section 311(b) 9.13
Section 312 5.9
Section 312(b) 6.2
Section 313 15.9
Section 313(a) 6.4
Section 313(b) 6.4
Section 313(c) 6.4
Section 314 15.9
Section 315 15.9
Section 316 15.9
Section 317 15.9
</TABLE>
NOTE: This reconciliation and tie shall not, for any purpose, be deemed to
be a part of the Subordinated Indenture.
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<PAGE>
SUBORDINATED INDENTURE (the "Indenture"), dated as of ______________,
1999, between Spectrum Bancorporation, Inc., an Iowa corporation (the
"Company") and Wilmington Trust Company, a Delaware banking corporation, as
trustee (the "Trustee");
WHEREAS, for its lawful corporate purposes, the Company has duly
authorized the execution and delivery of this Indenture to provide for the
issuance of its securities to be known as its _____% Junior Subordinated
Debentures due __________, 2029 (hereinafter referred to as the "Junior
Subordinated Debentures"), the form and substance of such Junior Subordinated
Debentures and the terms, provisions and conditions thereof to be set forth
as provided in this Indenture; and
WHEREAS, Spectrum Capital Trust I, a Delaware statutory business trust
(the "Trust"), has offered to the public $20,000,000, and a possible
additional amount of up to $3,000,000 pursuant to the Underwriters'
Over-Allotment Option, for a total of up to $23,000,000 aggregate liquidation
amount of its _____% Cumulative Preferred Securities (the "Preferred
Securities"), representing undivided beneficial interests in the assets of
the Trust and proposes to invest the proceeds from such offering, together
with the proceeds of the issuance and sale by the Trust to the Company of
$618,560, and a possible additional amount of up to $92,790 related to the
Underwriters' Over-Allotment Option with respect to the Preferred Securities,
for a total of up to $711,350 aggregate liquidation amount of its _____%
Common Securities, for a total of up to $23,711,350 aggregate principal
amount of the Junior Subordinated Debentures; and
WHEREAS, the Company has requested that the Trustee execute and
deliver this Indenture and all requirements necessary to make this Indenture
a valid instrument
<PAGE>
in accordance with its terms, and to make the Junior Subordinated Debentures,
when executed by the Company and authenticated and delivered by the Trustee,
the valid obligations of the Company; and
WHEREAS, to provide the terms and conditions upon which the Junior
Subordinated Debentures are to be authenticated, issued and delivered, the
Company has duly authorized the execution and delivery of this Indenture; and
WHEREAS, all things necessary to make this Indenture a valid agreement
of the Company, in accordance with its terms, have been done.
NOW, THEREFORE, in consideration of the premises and the purchase of
the Junior Subordinated Debentures by the holders thereof, it is mutually
covenanted and agreed as follows for the equal and ratable benefit of the
holders of Junior Subordinated Debentures:
2
<PAGE>
ARTICLE I
DEFINITIONS
The terms defined in this Section (except as in this Indenture
otherwise expressly provided or unless the context otherwise requires) for
all purposes of this Indenture and of any indenture supplemental hereto shall
have the respective meanings specified in this Section and shall include the
plural as well as the singular. All other terms used in this Indenture that
are defined in the Trust Indenture Act of 1939, as amended, or that are by
reference in said Trust Indenture Act defined in the Securities Act of 1933,
as amended (except as herein otherwise expressly provided or unless the
context otherwise requires), shall have the meanings assigned to such terms
in said Trust Indenture Act and in said Securities Act as in force at the
date of the execution of this Indenture.
"Accelerated Maturity Date" means, if the Company elects to accelerate
the Maturity Date in accordance with Section 2.2, the date selected by the
Company which is prior to the Scheduled Maturity Date, but is on or
after__________, 2004.
"Additional Sums" shall have the meaning set forth in Section 2.5(c).
"Administrative Trustees" has the meaning set forth in the Trust
Agreement.
"Affiliate" means, with respect to a specified Person, (a) any Person
directly or indirectly owning, controlling or holding with power to vote 10%
or more of the outstanding voting securities or other ownership interests of
the specified Person, (b) any Person 10% or more of whose outstanding voting
securities or other ownership interests are directly or indirectly owned,
controlled or held with power to vote by the specified Person, (c) any Person
directly or indirectly controlling, controlled by, or under common control
with the specified Person, (d) a partnership in which the specified Person is
a general partner, (e) any officer or director of the specified Person, and
(f) if the specified Person is an individual, any entity of which the
specified Person is an officer, director or general partner.
"Authenticating Agent" means an authenticating agent with respect to
the Junior Subordinated Debentures appointed by the Trustee pursuant to
Section 9.14.
"Bankruptcy Law" means Title 11, U.S. Code, or any similar federal or
state law for the relief of debtors.
"Board of Directors" means the Board of Directors of the Company or
any duly authorized committee of such Board.
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<PAGE>
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly adopted
by the Board of Directors and to be in full force and effect on the date of
such certification.
"Business Day" means any day other than a day on which federal or
state banking institutions in the State of Iowa are authorized or obligated
by law, executive order or regulation to close or a day on which the Trustee
is closed.
"Capital Treatment Event" means the reasonable determination by the
Company that, as a result of any amendment to, or change (including any
proposed change) in, the laws (or any regulations thereunder) of the United
States or any political subdivision thereof or therein, or as a result of any
official or administrative pronouncement or action or judicial decision
interpreting or applying such laws or regulations, which amendment or change
is effective or such proposed change, pronouncement or decision is announced
on or after the date of issuance of the Preferred Securities under the Trust
Agreement, there is more than an insubstantial risk of impairment of the
Company's ability to treat the Preferred Securities (or any substantial
portion thereof) as "Tier I 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.
"Certificate" means a certificate signed by the principal executive
officer, the principal financial officer or the principal accounting officer
of the Company. The Certificate need not comply with the provisions of
Section 15.7.
"Commission" means the Securities and Exchange Commission, as from
time to time constituted, created under the Exchange Act, or, if at any time
after the execution of this Indenture such Commission is not existing and
performing the duties now assigned to it under the Trust Indenture Act, then
the body performing such duties at such time.
"Common Securities" means undivided beneficial interests in the assets
of the Trust which rank pari passu with Preferred Securities issued by them
Trust; provided, however, that upon the occurrence of an Event of Default,
the rights of holders of Common Securities to payment in respect of
Distributions and payments upon liquidation, redemption and otherwise are
subordinated to the rights of holders of Preferred Securities.
"Company" means Spectrum Bancorporation, Inc., a corporation duly
organized and existing under the laws of the State of Iowa, and, subject to,
the provisions of Article Twelve, shall also include its successors and,
assigns.
"Compounded Interest" shall have the meaning set forth in Section 4.1.
"Corporate Trust Office" means the office of the Trustee at which, at
any particular time, its corporate trust business shall be principally
administered, which
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office at the date hereof is located at Rodney Square North, 1100 North
Market Street, Wilmington, Delaware 19890-0001, Attention: Corporate Trust
Administration.
"Coupon Rate" shall have the meaning set forth in Section 2.5(a).
"Custodian" means any receiver, trustee, assignee, liquidator, or
similar official under any Bankruptcy Law.
"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) 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 for which such Person is responsible or liable, directly or
indirectly, as obligor or otherwise.
"Default" means any event, act or condition that with notice or lapse
of time, or both, would constitute an Event of Default.
"Deferred Interest" shall have the meaning set forth in Section 4.1.
"Depositary" means, with respect to Junior Subordinated Debentures
issued as a Global Subordinated Debenture, The Depository Trust Company, New
York, New York, another clearing agency, or any successor registered as a
clearing agency under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), or other applicable statute or regulation, which, in each
case, shall be designated by the Company pursuant to either Section 2.1 or
2.4.
"Dissolution Event" means that as a result of the occurrence and
continuation of a Special Event, the Trust is to be dissolved in accordance
with the Trust Agreement and the Junior Subordinated Debentures held by the
Property Trustee are to be distributed to the holders of the Trust Securities
issued by the Trust pro rata in accordance with the Trust Agreement.
"Distributions" shall have the meaning set forth in the Trust
Agreement.
"Event of Default" means any event specified in Section 7.1, continued
for the period of time, if any, therein designated.
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"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Extended Interest Payment Period" shall have the meaning set forth in
Section 4.1.
"Federal Reserve" means the Board of Governors of the Federal Reserve
System.
"Global Subordinated Debenture" means a Junior Subordinated Debenture
executed by the Company and delivered by the Trustee to the Depositary or
pursuant to the Depositary's instruction, all in accordance with this
Indenture, which shall be registered in the name of the Depositary or its
nominee.
"Governmental Obligations" means securities that are (i) direct
obligations of the United States of America for the payment of which its full
faith and credit is pledged or (ii) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States
of America, the payment of which is unconditionally guaranteed as a full
faith and credit obligation by the United States of America that, in either
case, are not callable or redeemable at the option of the issuer thereof, and
shall also include a depositary receipt issued by a bank (as defined in
Section 3(a)(2) of the Securities Act of 1933, as amended) as custodian with
respect to any such Governmental Obligation or a specific payment of
principal of or interest on any such Governmental Obligation held by such
custodian for the account of the holder of such depositary receipt; provided,
however, that (except as required by law) such custodian is not authorized to
make any deduction from the amount payable to the holder of such depositary
receipt from any amount received by the custodian in respect of the
Governmental Obligation or the specific payment of principal of or interest
on the Governmental Obligation evidenced by such depositary receipt.
"Herein," "hereof," and "hereunder," and other words of similar
import, refer to this Indenture as a whole and not to any particular Article,
Section or other subdivision.
"Indenture" means this instrument as originally executed or as it may
from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into in accordance with the terms hereof.
"Interest Payment Date," when used with respect to any installment of
interest on the Junior Subordinated Debentures, means the date specified in
the Junior Subordinated Debenture as the fixed date on which an installment
of interest with respect to the Junior Subordinated Debentures is due and
payable.
"Investment Company Act" means the Investment Company Act of 1940, as
amended.
"Investment Company Event" means the receipt by the Company and the
Trust of an Opinion of Counsel experienced in such matters to the effect
that, as a result of
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the occurrence of a change in law or regulation or a change in interpretation
or application of law or regulation by any legislative body, court,
governmental agency or regulatory authority (a "Change in Investment Company
Act Law"), the Trust is or will be considered an "investment company" that is
required to be registered under the Investment Company Act, which Change in
Investment Company Act Law becomes effective on or after the date of original
issuance of the Preferred Securities under the Trust Agreement.
"Junior Subordinated Debentures" means the _____% Junior Subordinated
Debentures due 2029 authenticated and delivered under this Indenture.
"Liquidation Amount" means the stated amount of $10 per Trust Security.
"Maturity Date" shall have the meaning set forth in Section 2.2.
"Non Book-Entry Preferred Securities" shall have the meaning set forth
in Section 2.4(a).
"Officers' Certificate" means a certificate signed by the Vice
Chairman, the President or a Vice President and by the Chief Accounting
Officer or the Controller or an Assistant Controller or the Secretary or an
Assistant Secretary of the Company that is delivered to the Trustee in
accordance with the terms hereof. Each such certificate shall include the
statements provided for in Section 15.7, if and to the extent required by the
provisions thereof.
"Opinion of Counsel" means an opinion in writing of legal counsel, who
may be an employee of or counsel for the Company, that is delivered to the
Trustee in accordance with the terms hereof. Each such opinion shall include
the statements provided for in Section 15.7, if and to the extent required by
the provisions thereof.
"Outstanding," when used with reference to Junior Subordinated
Debentures means, subject to the provisions of Section 10.4, as of any
particular time, all Junior Subordinated Debentures theretofore authenticated
and delivered by the Trustee under this Indenture, except (a) Junior
Subordinated Debentures theretofore canceled by the Trustee or any paying
agent, or delivered to the Trustee or any paying agent for cancellation or
that have previously been canceled; (b) Junior Subordinated Debentures or
portions thereof for the payment or redemption of which moneys or
Governmental Obligations in the necessary amount shall have been deposited in
trust with the Trustee or with any paying agent (other than the Company) or
shall have been set aside and segregated in trust by the Company (if the
Company shall act as its own paying agent); provided, however, that if such
Junior Subordinated Debentures or portions of such Junior Subordinated
Debentures are to be redeemed prior to the maturity thereof, notice of such
redemption shall have been given as provided in Article Three, or provision
satisfactory to the Trustee shall have been made for giving such notice; and
(c) Junior Subordinated Debentures in lieu of or in substitution for which
other Junior
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Subordinated Debentures shall have been authenticated and delivered pursuant
to the terms of Section 2.8.
"Person" means any individual, corporation, partnership, joint
venture, joint-stock company, unincorporated organization or government or
any agency or political subdivision thereof.
"Predecessor Junior Subordinated Debenture" means every previous
Junior Subordinated Debenture evidencing all or a portion of the same debt as
that evidenced by such particular Junior Subordinated Debenture; and, for the
purposes of this definition, any Junior Subordinated Debenture authenticated
and delivered under Section 2.8 in lieu of a lost, destroyed or stolen Junior
Subordinated Debenture shall be deemed to evidence the same debt as the lost,
destroyed or stolen Junior Subordinated Debenture.
"Preferred Securities" means undivided beneficial interests in the
assets of the Trust which rank pari passu with Common Securities issued by
the Trust; provided, however, that upon the occurrence of an Event of
Default, the rights of holders of Common Securities to payment in respect of
Distributions and payments upon liquidation, redemption and otherwise are
subordinated to the rights of holders of Preferred Securities.
"Preferred Securities Certificate" has the meaning set forth in the
Trust Agreement.
"Preferred Securities Guarantee" means any guarantee that the Company
may enter into with the Property Trustee or other Persons that operates
directly or indirectly for the benefit of holders of Preferred Securities of
the Trust.
"Property Trustee" has the meaning set forth in the Trust Agreement.
"Redemption Price" means the amount equal to 100% of the principal
amount of Junior Subordinated Debentures to be redeemed plus any accrued and
unpaid interest thereon to the date of the redemption of such Junior
Subordinated Debentures.
"Responsible Officer" when used with respect to the Trustee means the
Chairman of the Board of Directors, the President, any Vice President, the
Secretary, the Treasurer, any trust officer, any corporate trust officer or
any other officer or assistant officer of the Trustee customarily performing
functions similar to those performed by the Persons who at the time shall be
such officers, respectively, or to whom any corporate trust matter is
referred because of his or her knowledge of and familiarity with the
particular subject.
"Scheduled Maturity Date" means __________, 2029.
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"Securities Register" and "Securities Registrar" have the respective
meanings specified in Section 2.7.
"Securityholder," "Holder," "Registered Holder," or other similar
term, means the Person or Persons in whose name or names particular Junior
Subordinated Debentures shall be registered in the Securities Register.
"Senior and Subordinated Debt" means the principal of (and premium, if
any) and interest, if any (including interest accruing on or after the filing
of any petition in bankruptcy or for reorganization relating to the Company
whether or not such claim for post-petition interest is allowed in such
proceeding), on Debt of the Company, whether incurred on or prior to the date
of this Indenture or thereafter incurred, unless, in the instrument creating
or evidencing the same or pursuant to which the same is outstanding, it is
provided that such obligations are not superior in right of payment to the
Junior Subordinated Debentures or to other Debt which is pari passu with, or
subordinated to, the Junior Subordinated Debentures; provided, however, that
Senior and Subordinated Debt shall not be deemed to include (i) any Debt of
the Company which when incurred and without respect to any election under
section 1111(b) of the United States Bankruptcy Code of 1978, as amended, was
without recourse to the Company, (ii) any Debt of the Company to any of its
Subsidiaries, (iii) any Debt to any employee of the Company, (iv) any Debt
which by its terms is subordinated to any 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 Junior
Subordinated Debentures as a result of the subordination provisions of this
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) the Preferred Securities Guarantee, and (vi) any other debt
securities issued pursuant to this Indenture.
"Special Event" means a Tax Event, an Investment Company Event or a
Capital Treatment Event.
"Subsidiary" means, with respect to any Person, (i) any corporation at
least a majority of whose outstanding Voting Stock shall at the time be
owned, directly or indirectly, by such Person, or by one or more of its
Subsidiaries, or by such Person and one or more of its Subsidiaries, (ii) any
general partnership, joint venture or similar entity, at least a majority of
whose outstanding partnership or similar interests shall at the time be owned
by such Person, or by one or more of its Subsidiaries, or by such Person and
one or more of its Subsidiaries, and (iii) any limited partnership of which
such Person or any of its Subsidiaries is a general partner.
"Tax Event" means the receipt by the Company and the Trust of an
Opinion of Counsel experienced in such matters to the effect that, as a
result of any amendment to, or change (including any announced prospective
change) in, the laws (or any regulations thereunder) of the United States or
any political subdivision or taxing
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authority thereof or therein, or as a result of any official administrative
pronouncement or judicial decision interpreting or applying such laws or
regulations, which amendment or change is effective or which pronouncement or
decision is announced on or after the date of issuance of the Junior
Subordinated Debentures there is more than an insubstantial risk that (i)
interest payable by the Company on the Junior Subordinated Debentures is not,
or within 90 days after the date of such Opinion of Counsel will not be,
deductible by the Company, in whole or in part, for United States federal
income tax purposes, (ii) the 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 Junior Subordinated
Debentures, or (iii) the 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.
"Trust" means Spectrum Capital Trust I, a Delaware statutory business
trust created for the purpose of issuing Trust Securities in connection with
the issuance of Junior Subordinated Debentures under this Indenture.
"Trust Agreement" means the Amended and Restated Trust Agreement,
dated as of __________, 1999, of the Trust.
"Trustee" means Wilmington Trust Company and, subject to the
provisions of Article Nine, shall also include its successors and assigns,
and, if at any time there is more than one Person acting in such capacity
hereunder, "Trustee" shall mean each such Person.
"Trust Indenture Act," means the Trust Indenture Act of 1939 as in
force at the date of execution of this Indenture; provided, however, that in
the event the Trust Indenture Act of 1939 is amended after such date, "Trust
Indenture Act" means, to the extent required by any such amendment, the Trust
Indenture Act of 1939 as so amended.
"Trust Securities" means Common Securities and Preferred Securities of
the Trust.
"Underwriters' Over-Allotment Option" means the option, exercisable
within 30 days after the date of the prospectus, granted to the underwriters
in the offering to the public of Preferred Securities, to purchase up to
$3,000,000 additional Preferred Securities at the same price per Preferred
Security as paid for the other Preferred Securities issued pursuant to the
prospectus.
"Voting Stock," as applied to stock of any Person, means shares,
interests, participations or other equivalents in the equity interest
(however designated) in such Person having ordinary voting power for the
election of a majority of the directors (or the equivalent) of such Person,
other than shares, interests, participations or other equivalents having such
power only by reason of the occurrence of a contingency.
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ARTICLE II
DESCRIPTION, TERMS, CONDITIONS, REGISTRATION AND
EXCHANGE OF THE JUNIOR SUBORDINATED DEBENTURES
2.1 DESIGNATION AND PRINCIPAL AMOUNT. There is hereby authorized a
series of Securities designated the "_____% Junior Subordinated Debentures
due 2029," limited in aggregate principal amount to $20,618,560, and a
possible additional amount of up to $3,092,790 related to the Underwriters'
Over-Allotment Option with respect to the Preferred Securities, for a total
of up to $23,711,350 aggregate principal amount, which amount shall be as set
forth in any written order of the Company for the authentication and delivery
of Junior Subordinated Debentures pursuant to Section 8.2 of this Indenture.
2.2 MATURITY.
(a) The Maturity Date will be either:
(i) the Scheduled Maturity Date; or
(ii) if the Company elects to accelerate the Maturity Date to be a
date prior to the Scheduled Maturity Date in accordance with
Section 2.2(b), the Accelerated Maturity Date.
(b) The Company may, at any time before the day which is 90 days
before the Scheduled Maturity Date, elect to shorten the Maturity Date only
once to the Accelerated Maturity Date, provided that the Company has received
the prior approval of the Federal Reserve if then required under applicable
capital guidelines or policies of the Federal Reserve.
(c) If the Company elects to accelerate the Maturity Date in
accordance with Section 2.2(b), the Company shall give notice to the
Registered Holders of the Junior Subordinated Debentures, the Property
Trustee and the Trustee of the acceleration of the Maturity Date and the
Accelerated Maturity Date at least 90 days before the Accelerated Maturity
Date.
2.3 FORM AND PAYMENT. Except as provided in Section 2.4, the
Junior Subordinated Debentures shall be issued in fully registered
certificated form without interest coupons. Principal and interest on the
Junior Subordinated Debentures issued in certificated form will be payable,
the transfer of such Junior Subordinated Debentures will be registrable and
such Junior Subordinated Debentures will be exchangeable for Junior
Subordinated Debentures bearing identical terms and provisions at the office
or agency of the Trustee; provided, however, that payment of interest may be
made at the option of the Company by check mailed to the Holder at such
address as shall appear in the Securities Register. Notwithstanding the
foregoing, so long as the Holder of any
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Junior Subordinated Debentures is the Property Trustee, the payment of the
principal of and interest (including Compounded Interest and Additional Sums,
if any) on such Junior Subordinated Debentures held by the Property Trustee
will be made at such place and to such account as may be designated by the
Property Trustee.
2.4 GLOBAL SUBORDINATED DEBENTURE.
(a) In connection with a Dissolution Event,
(i) the Junior Subordinated Debentures in certificated form may be
presented to the Trustee by the Property Trustee in exchange for a Global
Subordinated Debenture in an aggregate principal amount equal to the
aggregate principal amount of all outstanding Junior Subordinated Debentures
(a "Global Subordinated Debenture"), to be registered in the name of the
Depositary, or its nominee, and delivered by the Trustee to the Depositary
for crediting to the accounts of its participants pursuant to the
instructions of the Administrative Trustees. The Company upon any such
presentation shall execute a Global Subordinated Debenture in such aggregate
principal amount and deliver the same to the Trustee for authentication and
delivery in accordance with this Indenture. Payments on the Junior
Subordinated Debentures issued as a Global Subordinated Debenture will be
made to the Depositary; and
(ii) if any Preferred Securities are held in non book-entry
certificated form, the Junior Subordinated Debentures in certificated form
may be presented to the Trustee by the Property Trustee and any Preferred
Securities Certificate which represents Preferred Securities other than
Preferred Securities held by the Depositary or its nominee ("Non Book-Entry
Preferred Securities") will be deemed to represent beneficial interests in
Junior Subordinated Debentures presented to the Trustee by the Property
Trustee having an aggregate principal amount equal to the aggregate
Liquidation Amount of the Non Book-Entry Preferred Securities until such
Preferred Securities Certificates are presented to the Securities Registrar
for transfer or reissuance at which time such Preferred Securities
Certificates will be canceled and a Junior Subordinated Debenture, registered
in the name of the holder of the Preferred Securities Certificate or the
transferee of the holder of such Preferred Securities Certificate, as the
case may be, with an aggregate principal amount equal to the aggregate
Liquidation Amount of the Preferred Securities Certificate canceled, will be
executed by the Company and delivered to the Trustee for authentication and
delivery in accordance with this Indenture. On issue of such Junior
Subordinated Debentures, Junior Subordinated Debentures with an equivalent
aggregate principal amount that were presented by the Property Trustee to the
Trustee will be deemed to have been canceled.
(b) A Global Subordinated Debenture may be transferred, in whole
but not in part, only to another nominee of the Depositary, or to a successor
Depositary selected or approved by the Company or to a nominee of such
successor Depositary.
(c) If at any time the Depositary notifies the Company that it is
unwilling or unable to continue as Depositary or if at any time the
Depositary for such series shall no
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longer be registered or in good standing under the Exchange Act or other
applicable statute or regulation, and a successor Depositary for such series
is not appointed by the Company within 90 days after the Company receives
such notice or becomes aware of such condition, as the case may be, the
Company will execute, and the Trustee, upon written notice from the Company,
will authenticate and deliver the Junior Subordinated Debentures in
definitive registered form without coupons, in authorized denominations, and
in an aggregate principal amount equal to the principal amount of the Global
Subordinated Debenture in exchange for such Global Subordinated Debenture.
In addition, the Company may at any time determine that the Junior
Subordinated Debentures shall no longer be represented by a Global
Subordinated Debenture. In such event the Company will execute, and the
Trustee, upon receipt of an Officers' Certificate evidencing such
determination by the Company, will authenticate and deliver the Junior
Subordinated Debentures in definitive registered form without coupons, in
authorized denominations, and in an aggregate principal amount equal to the
principal amount of the Global Subordinated Debenture in exchange for such
Global Subordinated Debenture. Upon the exchange of the Global Subordinated
Debenture for such Junior Subordinated Debentures in definitive registered
form without coupons, in authorized denominations, the Global Subordinated
Debenture shall be canceled by the Trustee. Such Junior Subordinated
Debentures in definitive registered form issued in exchange for the Global
Subordinated Debenture shall be registered in such names and in such
authorized denominations as the Depositary, pursuant to instructions from its
direct or indirect participants or otherwise, shall instruct the Trustee .
The Trustee shall deliver such Junior Subordinaed Debentures to the
Depositary for delivery to the Persons in whose names such Junior
Subordinated Debentures are so registered.
2.5 INTEREST.
(a) Each Junior Subordinated Debenture will bear interest at the
rate of _____% per annum (the "Coupon Rate") from the original date of
issuance until the principal thereof becomes due and payable, and on any
overdue principal and (to the extent that payment of such interest is
enforceable under applicable law) on any overdue installment of interest at
the Coupon Rate, compounded quarterly, payable (subject to the provisions of
Article Four) quarterly in arrears on the 15th day of January, April, July
and October in each year (each, an "Interest Payment Date"), commencing on
October 15, 1999, to the Person in whose name such Junior Subordinated
Debenture or any Predecessor Junior Subordinated Debenture is registered at
the close of business on the regular record date for such interest
installment, which, in respect of (i) Junior Subordinated Debentures of which
the Property Trustee is the Holder and the Preferred Securities are in
book-entry only form or (ii) a Global Subordinated Debenture, shall be the
close of business on the Business Day next preceding that Interest Payment
Date. Notwithstanding the foregoing sentence, if (i) the Junior Subordinated
Debentures are held by the Property Trustee and the Preferred Securities are
no longer in book-entry only form or (ii) the Junior Subordinated Debentures
are not represented by a Global Subordinated Debenture, the record date for
such interest installment shall be the first day of the month in which such
payment is to be made.
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The amount of each interest payment due with respect to the Junior
Subordinated Debentures will include amounts accrued through the date the
interest payment is due.
(b) The amount of interest payable for any period will be computed
on the basis of a 360-day year of twelve 30-day months. Except as provided
in the following sentence, the amount of interest payable for any period
shorter than a full quarterly period for which interest is computed will be
computed on the basis of the actual number of days elapsed in such a
quarterly period. In the event that any date on which interest is payable on
the Junior Subordinated Debentures is not a Business Day, then payment of
interest payable on such date will be made on the next succeeding day which
is a Business Day (and without any interest or other payment in respect of
any such delay), except that, if such Business Day is in the next succeeding
calendar year, such payment shall be made on the immediately preceding
Business Day, in each case with the same force and effect as if made on such
date.
(c) If, at any time while the Property Trustee is the Holder of any
Junior Subordinated Debentures, the Trust or the Property Trustee is required
to pay any taxes, duties, assessments or governmental charges of whatever
nature (other than withholding taxes) imposed by the United States, or any
other taxing authority, then, in any case, the Company will pay as additional
interest ("Additional Sums") on the Junior Subordinated Debentures held by
the Property Trustee such additional amounts as shall be required so that the
net amounts received and retained by the Trust and the Property Trustee after
paying such taxes, duties, assessments or other governmental charges will be
equal to the amounts the Trust and the Property Trustee would have received
had no such taxes, duties, assessments or other government charges been
imposed.
2.6 EXECUTION, AUTHENTICATION, DELIVERY AND DATING. The Junior
Subordinated Debentures shall be executed on behalf of the Company by its
Vice Chairman, its President or any Vice President and attested by its
Secretary or Assistant Secretary. The signature of any of these officers on
the Junior Subordinated Debentures may be manual or facsimile. Junior
Subordinated Debentures bearing the manual or facsimile signatures of
individuals who were at any time the proper officers of the Company shall
bind the Company, notwithstanding that such individuals or any of them have
ceased to hold such offices prior to the authentication and delivery of such
Junior Subordinated Debentures or did not hold such offices at the date of
such Junior Subordinated Debentures.
At any time and from time to time after the execution and delivery of
this Indenture, the Company may deliver Junior Subordinated Debentures
executed by the Company to the Trustee for authentication, together with a
Company order for the authentication and delivery of such Junior Subordinated
Debentures. The Trustee in accordance with such Company order shall
authenticate and deliver such Junior Subordinated Debentures as in this
Indenture provided and not otherwise.
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Upon the initial issuance, each Junior Subordinated Debenture shall be
dated __________, 1999, and thereafter Junior Subordinated Debentures issued
hereunder shall be dated the date of their authentication.
No Junior Subordinated Debenture shall be entitled to any benefit
under this Indenture or be valid or obligatory for any purpose unless there
appears on such Junior Subordinated Debenture a certificate of authentication
substantially in the form provided for herein executed by the Trustee by
manual signature, and such certificate upon any Junior Subordinated Debenture
shall be conclusive evidence, and the only evidence, that such Junior
Subordinated Debenture has been duly authenticated and delivered hereunder
and is entitled to the benefits of this Indenture.
2.7 REGISTRATION AND TRANSFER. The Company shall cause to be kept
at the Corporate Trust Office of the Trustee a register (the register
maintained in such office or any other office or agency pursuant to Section
5.2 being herein sometimes referred to as the "Securities Register") in
which, subject to such reasonable regulations as it may prescribe, the
Company shall provide for the registration of the Junior Subordinated
Debentures and transfers of the Junior Subordinated Debentures. The Trustee
is hereby appointed "Securities Registrar" for the purpose of registering the
Junior Subordinated Debentures and transfers of the Junior Subordinated
Debentures as herein provided.
Upon surrender for registration of transfer of any Junior Subordinated
Debenture at an office or agency of the Company designated pursuant to
Section 5.2 for such purpose, the Company shall execute, and the Trustee
shall authenticate and deliver, in the name of the designated transferee or
transferees, a new Junior Subordinated Debenture of the authorized
denomination.
All Junior Subordinated Debentures issued upon any registration of
transfer of Junior Subordinated Debentures shall be valid obligations of the
Company, evidencing the same debt and entitled to the same benefits under
this Indenture as the Junior Subordinated Debentures surrendered upon such
registration of transfer.
Every Junior Subordinated Debenture presented or surrendered for
registration of transfer shall be duly endorsed for transfer (if so required
by the Company or the Trustee), or shall be accompanied by a written
instrument of transfer in form satisfactory to the Company and the Securities
Registrar duly executed by the Holder thereof or such Holder's attorney duly
authorized in writing.
No service charge shall be made for any registration of transfer of
Junior Subordinated Debentures, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed
in connection with any registration of transfer of Junior Subordinated
Debentures.
The Company shall not be required to issue or register the transfer of
any Junior Subordinated Debenture during a period beginning at the opening of
business 15 days
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before the day of the mailing of a notice of redemption of Junior
Subordinated Debentures selected for redemption pursuant to Article Three and
ending at the close of business on the day of such mailing.
2.8 MUTILATED, DESTROYED, LOST AND STOLEN JUNIOR SUBORDINATED
DEBENTURES. If any mutilated Junior Subordinated Debenture is surrendered to
the Trustee, the Company shall execute and the Trustee shall authenticate and
deliver in exchange therefor a new Junior Subordinated Debenture of like
tenor and principal amount and bearing a number not contemporaneously
outstanding.
If there shall be delivered to the Company and the Trustee (i)
evidence to their satisfaction of the destruction, loss or theft of any
Junior Subordinated Debenture and (ii) such security or indemnity as may be
required by them to save each of them harmless, then, in the absence of
notice to the Company or the Trustee that such Junior Subordinated Debenture
has been acquired by a bona fide purchaser, the Company shall execute and
upon its request the Trustee shall authenticate and deliver, in lieu of any
such destroyed, lost or stolen Junior Subordinated Debenture, a new Junior
Subordinated Debenture of like tenor and principal amount and bearing a
number not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Junior
Subordinated Debenture has become or is about to become due and payable, the
Company in its discretion may, instead of issuing a new Junior Subordinated
Debenture, pay such Junior Subordinated Debenture.
Upon the issuance of any new Junior Subordinated Debenture under this
Section, the Company may require the payment of a sum sufficient to cover any
tax or other governmental charge that may be imposed in relation thereto and
any other expenses (including the fees and expenses of the Trustee) connected
therewith.
Every new Junior Subordinated Debenture issued pursuant to this
Section in lieu of any destroyed, lost or stolen Junior Subordinated
Debenture shall constitute an original additional contractual obligation of
the Company, whether or not the destroyed, lost or stolen Junior Subordinated
Debenture shall be at any time enforceable by anyone, and shall be entitled
to all of the benefits of this Indenture.
The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the
replacement or payment of mutilated, destroyed, lost or stolen Junior
Subordinated Debentures.
ARTICLE III
REDEMPTION OF JUNIOR SUBORDINATED DEBENTURES
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3.1 REDEMPTION. Subject to the Company having received prior
approval of the Federal Reserve, if then required under the applicable
capital guidelines or policies of the Federal Reserve, the Company may redeem
the Junior Subordinated Debentures in accordance with this Article Three.
3.2 SPECIAL EVENT REDEMPTION. Subject to the Company having
received the prior approval of the Federal Reserve, if then required under
the applicable capital guidelines or policies of the Federal Reserve, if a
Special Event has occurred and is continuing, then, notwithstanding Section
3.3, the Company shall have the right upon not less than 30 days nor more
than 60 days notice to the Holders of the Junior Subordinated Debentures to
redeem the Junior Subordinated Debentures, in whole but not in part, for cash
within 90 days following the occurrence of such Special Event (the "90-Day
Period") at the Redemption Price, provided that if at the time there is
available to the Company the opportunity to eliminate, within the 90-Day
Period, the Tax Event by taking some ministerial action ("Ministerial
Action"), such as filing a form or making an election, or pursuing some
other similar reasonable measure which has no adverse effect on the Company,
the Trust or the Holders of the Trust Securities issued by the Trust, the
Company shall pursue such Ministerial Action in lieu of redemption, and,
provided, further, that the Company shall have no right to redeem the Junior
Subordinated Debentures while the Trust is pursuing any Ministerial Action to
eliminate the Tax Event. The Redemption Price shall be paid prior to 2:00
p.m., Wilmington, Delaware time, on the date of such redemption or such
earlier time as the Company determines, provided that the Company shall
deposit with the Trustee an amount sufficient to pay the Redemption Price by
12:00 noon, Wilmington, Delaware time, on the date such Redemption Price is
to be paid.
3.3 OPTIONAL REDEMPTION BY COMPANY.
(a) Except as otherwise may be specified in this Indenture, the
Company shall have the right to redeem the Junior Subordinated Debentures, in
whole or in part, from time to time, on or after __________, 2004, at the
Redemption Price. Any redemption pursuant to this Section 3.3 will be made
upon not less than 30 days nor more than 60 days notice to the Holders of the
Junior Subordinated Debentures, at the Redemption Price. If the Junior
Subordinated Debentures are only partially redeemed pursuant to this Section
3.3, the Junior Subordinated Debentures will be redeemed pro rata or by lot
or by any other method utilized by the Trustee; provided, that if at the time
of redemption the Junior Subordinated Debentures are registered as a Global
Subordinated Debenture, the Depositary shall determine, in accordance with
its procedures, the principal amount of such Junior Subordinated Debentures
held by each Holder of Junior Subordinated Debentures to be redeemed. The
Redemption Price shall be paid prior to 2:00 p.m., Wilmington, Delaware time,
on the date of such redemption or at such earlier time as the Company
determines provided that the Company shall deposit with the Trustee an amount
sufficient to pay the Redemption Price by 12:00 noon, Wilmington, Delaware
time, on the date such Redemption Price is to be paid.
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(b) If a partial redemption of the Junior Subordinated Debentures
would result in the delisting of the Preferred Securities issued by the Trust
from the American Stock Exchange or any other national securities exchange,
quotation system or other organization on which the Preferred Securities may
then be listed, if any, the Company shall not be permitted to effect such
partial redemption and may only redeem the Junior Subordinated Debentures in
whole or in part to such extent as would not cause such delisting.
3.4 NOTICE OF REDEMPTION.
(a) In case the Company shall desire to exercise such right to
redeem all or, as the case may be, a portion of the Junior Subordinated
Debentures in accordance with the right reserved so to do, the Company shall,
or shall cause the Trustee to, give notice of such redemption to Holders of
the Junior Subordinated Debentures to be redeemed by mailing, first class
postage prepaid, a notice of such redemption not less than 30 days and not
more than 60 days before the date fixed for redemption to such Holders at
their last addresses as they shall appear upon the Securities Register. Any
notice that is mailed in the manner herein provided shall be conclusively
presumed to have been duly given, whether or not the Registered Holder
receives the notice. In any case, failure duly to give such notice to the
Holder of any Junior Subordinated Debenture designated for redemption in
whole or in part, or any defect in the notice, shall not affect the validity
of the proceedings for the redemption of any other Junior Subordinated
Debentures. In the case of any redemption of Junior Subordinated Debentures
prior to the expiration of any restriction on such redemption provided
elsewhere in this Indenture, the Company shall furnish the Trustee with an
Officers' Certificate evidencing compliance with any such restriction.
Each such notice of redemption shall specify the date fixed for
redemption and the Redemption Price, and shall state that payment of the
Redemption Price of such Junior Subordinated Debentures to be redeemed will
be made at the office or agency of the Company in Omaha, Nebraska, upon
presentation and surrender of such Junior Subordinated Debentures, that
interest accrued to the date fixed for redemption will be paid as specified
in said notice, that from and after said date interest will cease to accrue.
If less than all the Junior Subordinated Debentures are to be redeemed, the
notice to the Holders of Junior Subordinated Debentures to be redeemed in
whole or in part shall specify the particular Junior Subordinated Debentures
to be so redeemed. In case any Junior Subordinated Debenture is to be
redeemed in part only, the notice that relates to such Junior Subordinated
Debenture shall state the portion of the principal amount thereof to be
redeemed, and shall state that on and after the redemption date, upon
surrender of such Junior Subordinated Debenture, a new Junior Subordinated
Debenture or Junior Subordinated Debentures in principal amount equal to the
unredeemed portion thereof shall be issued to the Holder.
(b) If less than all the Junior Subordinated Debentures are to be
redeemed, the Company shall give the Trustee at least 45 days' notice in
advance of the date fixed for redemption as to the aggregate principal amount
of Junior Subordinated Debentures
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to be redeemed, and thereupon the Trustee shall select, by lot or in such
other manner as it shall deem appropriate and fair in its discretion and that
may provide for the selection of a portion or portions (equal to ten U.S.
dollars ($10) or any integral multiple thereof), the Junior Subordinated
Debentures to be redeemed and shall thereafter promptly notify the Company in
writing of the numbers of the Junior Subordinated Debentures to be redeemed,
in whole or in part.
The Company may, if and whenever it shall so elect, by delivery of
instructions signed on its behalf by its Chairman, its President or any Vice
President, instruct the Trustee or any paying agent to call all or any part
of the Junior Subordinated Debentures for redemption and to give notice of
redemption in the manner set forth in this Section, such notice to be in the
name of the Company or in the name of the Trustee or the paying agent, as the
Trustee or such paying agent may deem advisable. In any case in which notice
of redemption is to be given by the Trustee or any such paying agent, the
Company shall deliver or cause to be delivered to, or permit to remain with,
the Trustee or such paying agent, as the case may be, such Securities
Register, transfer books or other records, or suitable copies or extracts
therefrom, sufficient to enable the Trustee or such paying agent to give any
notice by mail that may be required under the provisions of this Section.
3.5 PAYMENT UPON REDEMPTION.
(a) If the giving of notice of redemption shall have been completed
as above provided, the Junior Subordinated Debentures or portions of Junior
Subordinated Debentures to be redeemed specified in such notice shall become
due and payable on the date and at the place stated in such notice at the
Redemption Price (which includes interest accrued to the date fixed for
redemption) and interest on such Junior Subordinated Debentures or portions
of Junior Subordinated Debentures shall cease to accrue on and after the date
fixed for redemption, unless the Company shall default in the payment of such
Redemption Price with respect to any such Junior Subordinated Debentures or
portions thereof. On presentation and surrender of such Junior Subordinated
Debentures on or after the date fixed for redemption at the place of payment
specified in the notice, such Junior Subordinated Debentures shall be paid
and redeemed at the Redemption Price (which includes the interest accrued
thereon to the date fixed for redemption) (but if the date fixed for
redemption is an Interest Payment Date, the interest installment payable on
such date shall be payable to the Registered Holder at the close of business
on the applicable record date pursuant to Section 2.5(a)).
(b) Upon presentation of any Junior Subordinated Debenture that is
to be redeemed in part only, the Company shall execute and the Trustee shall
authenticate and the office or agency where the Junior Subordinated Debenture
is presented shall deliver to the Holder thereof, at the expense of the
Company, a new Junior Subordinated Debenture or Junior Subordinated
Debentures of authorized denominations in principal amount equal to the
unredeemed portion of the Junior Subordinated Debenture so presented.
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3.6 NO SINKING FUND. The Junior Subordinated Debentures are not
entitled to the benefit of any sinking fund.
ARTICLE IV
EXTENSION OF INTEREST PAYMENT PERIOD
4.1 EXTENSION OF INTEREST PAYMENT PERIOD. So long as no Event of
Default has occurred and is continuing, the Company shall have the right, at
any time and from time to time during the term of the Junior Subordinated
Debentures, to defer payments of interest by extending the interest payment
period of such Junior Subordinated Debentures for a period not exceeding 20
consecutive quarters (the "Extended Interest Payment Period"), during which
Extended Interest Payment Period no interest shall be due and payable;
provided that no Extended Interest Payment Period may extend beyond the
Maturity Date. To the extent permitted by applicable law, interest, the
payment of which has been deferred because of the extension of the interest
payment period pursuant to this Section 4.1, will bear interest thereon at
the rate of ____% per year, compounded quarterly for each quarter of the
Extended Interest Payment Period ("Compounded Interest"). At the end of the
Extended Interest Payment Period, the Company shall pay all interest accrued
and unpaid on the Junior Subordinated Debentures, including any Additional
Sums and Compounded Interest (together, "Deferred Interest") that shall be
payable to the Holders of the Junior Subordinated Debentures in whose names
the Junior Subordinated Debentures are registered in the Securities Register
on the record date for the Interest Payment Date coinciding with the end of
the Extended Interest Payment Period. Before the termination of any Extended
Interest Payment Period, the Company may further extend such period, provided
that such period together with all such further extensions thereof shall not
exceed 20 consecutive quarters, or extend beyond the Maturity Date. Upon the
termination of any Extended Interest Payment Period and upon the payment of
all Deferred Interest then due, the Company may commence a new Extended
Interest Payment Period, subject to the foregoing requirements. No interest
shall be due and payable during an Extended Interest Payment Period, except
at the end thereof, but he Company may prepay at any time all or any portion
of the interest accrued during an Extended Interest Payment Period.
4.2 NOTICE OF EXTENSION.
(a) If the Property Trustee is the only Registered Holder of the
Junior Subordinated Debentures at the time the Company selects an Extended
Interest Payment Period, the Company shall give written notice to the
Administrative Trustees, the Property Trustee and the Trustee of its
selection of such Extended Interest Payment Period one Business Day before
the earlier of (i) the date the Distributions on the Preferred Securities
would have been payable except for the election to begin or extend the
Extended Interest Payment Period, or (ii) the date the Trust is required to
give notice of the record date, or the date such Distributions are payable,
to the Preferred
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Securities holders or to the American Stock Exchange or other applicable self
regulatory organization, if any, but in any event at least one Business Day
before such record date.
(b) If the Property Trustee is not the only Holder of the Junior
Subordinated Debentures at the time the Company selects an Extended Interest
Payment Period, the Company shall give the Holders of the Junior Subordinated
Debentures and the Trustee written notice of its selection of such Extended
Interest Payment Period at least one Business Day before the earlier of (i)
the next succeeding Interest Payment Date, or (ii) the date the Company is
required to give notice of the record or payment date of such interest
payment to the Holders of the Junior Subordinated Debentures or to the
American Stock Exchange or other applicable self regulatory organization, if
any.
(c) The quarter in which any notice is given pursuant to paragraph
(a) or paragraph (b) of this Section 4.2 shall be counted as one of the 20
quarters permitted in the maximum Extended Interest Payment Period permitted
under Section 4.1.
4.3 LIMITATION OF TRANSACTIONS DURING EXTENSION. If: (i) the
Company shall exercise its right to defer payment of interest as provided in
Section 4.1; or (ii) there shall have occurred any Event of Default, then the
Company shall be subject to the restrictions on payments set forth under
Section 5.6.
ARTICLE V
PARTICULAR COVENANTS OF THE COMPANY
5.1 PAYMENT OF PRINCIPAL AND INTEREST. The Company will duly and
punctually pay or cause to be paid the principal of and interest on the
Junior Subordinated Debentures at the time and place and in the manner
provided herein and established with respect to such Junior Subordinated
Debentures.
5.2 MAINTENANCE OF AGENCY. So long as any Junior Subordinated
Debentures remain Outstanding, the Company agrees to maintain an office or
agency in Omaha, Nebraska, or at such other location or locations as may be
designated as provided in this Section 5.2, where (i) Junior Subordinated
Debentures may be presented for payment, (ii) Junior Subordinated Debentures
may be presented as hereinabove authorized for registration of transfer and
exchange, and (iii) notices and demands to or upon the Company in respect of
the Junior Subordinated Debentures and this Indenture may be given or served,
such designation to continue with respect to such office or agency until the
Company shall, by written notice signed by its Chairman, its President or a
Vice President and delivered to the Trustee, designate some other office or
agency for such purposes or any of them. If at any time the Company shall
fail to maintain any such required office or agency or shall fail to furnish
the Trustee with the address thereof, such presentations, notices and demands
may be made or served at the Corporate Trust Office of the Trustee, and the
Company hereby appoints the Trustee as its agent to receive all such
presentations, notices and demands.
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5.3 PAYING AGENTS.
(a) If the Company shall appoint one or more paying agents for the
Junior Subordinated Debentures, other than the Trustee, the Company will
cause each such paying agent to execute and deliver to the Trustee an
instrument in which such agent shall agree with the Trustee, subject to the
provisions of this Section:
(i) that it will hold all sums held by it as such agent for the
payment of the principal of or interest on the Junior Subordinated Debentures
(whether such sums have been paid to it by the Company or by any other
obligor) in trust for the benefit of the Persons entitled thereto;
(ii) that it will give the Trustee notice of any failure by the
Company (or by any other obligor) to make any payment of the principal of or
interest on the Junior Subordinated Debentures when the same shall be due and
payable;
(iii) that it will, at any time during the continuance of any failure
referred to in the preceding paragraph (a)(ii) above, upon the written
request of the Trustee, forthwith pay to the Trustee all sums so held in
trust by such paying agent; and
(iv) that it will perform all other duties of paying agent as set
forth in this Indenture.
(b) If the Company shall act as its own paying agent with respect
to the Junior Subordinated Debentures, it will on or before each due date of
the principal of or interest on Junior Subordinated Debentures, set aside,
segregate and hold in trust for the benefit of the Persons entitled thereto a
sum sufficient to pay such principal or interest so becoming due until such
sums shall be paid to such Persons or otherwise disposed of as herein
provided and will promptly notify the Trustee of such action, or any failure
(by it or any other obligor) to take such action. Whenever the Company shall
have one or more paying agents for the Junior Subordinated Debentures, it
will, prior to each due date of the principal of or interest on the Junior
Subordinated Debentures, deposit with the paying agent a sum sufficient to
pay the principal or interest so becoming due, such sum to be held in trust
for the benefit of the Persons entitled to such principal or interest, and
(unless such paying agent is the Trustee) the Company will promptly notify
the Trustee of this action or failure so to act.
(c) Notwithstanding anything in this Section to the contrary, (i)
the agreement to hold sums in trust as provided in this Section is subject to
the provisions of Section 13.5, and (ii) the Company may at any time, for the
purpose of obtaining the satisfaction and discharge of this Indenture or for
any other purpose, pay, or direct any paying agent to pay, to the Trustee all
sums held in trust by the Company or such paying agent, such sums to be held
by the Trustee upon the same terms and conditions as those upon which such
sums were held by the Company or such paying agent; and, upon such payment
by any paying agent to the Trustee, such paying agent shall be released from
all further liability with respect to such money.
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5.4 APPOINTMENT TO FILL VACANCY IN OFFICE OF TRUSTEE. The
Company, whenever necessary to avoid or fill a vacancy in the office of
Trustee, will appoint, in the manner provided in Section 9.10, a Trustee, so
that there shall at all times be a Trustee hereunder.
5.5 COMPLIANCE WITH CONSOLIDATION PROVISIONS. The Company will
not, while any of the Junior Subordinated Debentures remain Outstanding,
consolidate with, or merge into, or merge into itself, or sell or convey all
or substantially all of its property to any other company unless the
provisions of Article Twelve hereof are complied with.
5.6 RESTRICTIONS ON CERTAIN PAYMENTS. If at any time (i) there
shall have occurred any event of which the Company has actual knowledge that
(a) with the giving of notice or the lapse of time, or both, would constitute
an Event of Default and (b) in respect to which the Company shall not have
taken reasonable steps to cure, or (ii) the Company shall have given notice
of its election of an Extended Interest Payment Period as provided herein
with respect to the Junior Subordinated Debentures and shall not have
rescinded such notice, or such Extended Interest Payment Period, or any
extension thereof, shall be continuing; or (iii) while the Junior
Subordinated Debentures are held by the Trust, the Company shall be in
default with respect to its payment of any obligation under the Preferred
Securities Guarantee, then 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 or
(2) make any payment of principal, interest or premium, if any, on or repay,
repurchase or redeem any debt securities of the Company (including the Junior
Subordinated Debentures) that rank pari passu with or junior in interest to
the Junior Subordinated Debentures or make any guarantee payments with
respect to any guarantee by the Company of the debt securities of any
Subsidiary of the Company if such guarantee ranks pari passu or junior in
interest to the Junior Subordinated Debentures (other than (a) dividends or
distributions in common stock, (b) any declaration of a dividend in
connection with the implementation of a shareholders' rights plan, or the
issuance of stock under any such plan in the future or the redemption or
repurchase of any such rights pursuant thereto, (c) payments under the
Preferred Securities Guarantee and (d) purchases of common stock related to
the issuance of common stock or rights under any of the Company's benefit
plans for its directors, officers or employees).
5.7 COVENANTS AS TO THE TRUST. For so long as the Trust Securities
of the Trust remain outstanding, the Company will (i) maintain 100% direct or
indirect ownership of the Common Securities of the Trust; provided, however,
that any permitted successor of the Company under this Indenture may succeed
to the Company's ownership of the Common Securities, (ii) use its reasonable
efforts to cause the Trust (a) to remain a business trust, except in
connection with a distribution of Junior Subordinated Debentures, the
redemption of all of the Trust Securities of the Trust or certain mergers,
consolidations or amalgamations, each as permitted by the Trust Agreement,
and (b) to otherwise continue not to be treated as an association taxable
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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 Junior Subordinated Debentures.
If the Junior Subordinated Debentures are to be issued as a Global
Subordinated Debenture in connection with the distribution of the Junior
Subordinated Debentures to the holders of the Preferred Securities issued by
the Trust upon a Dissolution Event, the Company will use its best efforts to
list such Junior Subordinated Debentures on the American Stock Exchange or on
such other exchange or quotation system as the Preferred Securities may then
be listed.
ARTICLE VI
SECURITYHOLDERS' LISTS AND REPORTS
BY THE COMPANY AND THE TRUSTEE
6.1 COMPANY TO FURNISH TRUSTEE NAMES AND ADDRESSES OF
SECURITYHOLDERS. The Company will furnish or cause to be furnished to the
Trustee (a) on each regular record date (as defined in Section 2.5(a)) a
list, in such form as the Trustee may reasonably require, of the names and
addresses of the Holders as of such regular record date, provided that the
Company shall not be obligated to furnish or cause to furnish such list at
any time that the list shall not differ in any respect from the most recent
list furnished to the Trustee by the Company and (b) at such other times as
the Trustee may request in writing within 30 days after the receipt by the
Company of any such request, a list of similar form and content as of a date
not more than 15 days prior to the time such list is furnished; provided,
however, that, in either case, no such list need be furnished if the Trustee
shall be the Securities Registrar.
6.2 PRESERVATION OF INFORMATION; COMMUNICATIONS WITH SECURITYHOLDERS.
(a) The Trustee shall preserve, in as current a form as is
reasonably practicable, all information as to the names and addresses of the
Holders contained in the most recent list furnished to it as provided in
Section 6.1 and as to the names and addresses of Holders received by the
Trustee in its capacity as Securities Registrar (if acting in such capacity).
(b) The Trustee may destroy any list furnished to it as provided in
Section 6.1 upon receipt of a new list so furnished.
(c) Securityholders may communicate as provided in Section 312(b)
of the Trust Indenture Act with other Securityholders with respect to their
rights under this Indenture or under the Junior Subordinated Debentures.
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6.3 REPORTS BY THE COMPANY.
(a) The Company covenants and agrees to file with the Trustee,
within 15 days after the Company is required to file the same with the
Commission, copies of the annual reports and of the information, documents
and other reports (or copies of such portions of any of the foregoing as the
Commission may from time to time by rules and regulations prescribe) that the
Company may be required to file with the Commission pursuant to Section 13 or
Section 15(d) of the Exchange Act; or, if the Company is not required to file
information, documents or reports pursuant to either of such sections, then
to file with the Trustee and the Commission, in accordance with the rules and
regulations prescribed from time to time by the Commission, such of the
supplementary and periodic information, documents and reports that may be
required pursuant to any applicable rules and regulations of the Commission.
(b) The Company covenants and agrees to file with the Trustee and
the Commission, in accordance with the rules and regulations prescribed from
to time by the Commission, such additional information, documents and reports
with respect to compliance by the Company with the conditions and covenants
provided for in this Indenture as may be required from time to time by such
rules and regulations.
(c) The Company covenants and agrees to transmit by mail,
first-class postage prepaid, or reputable over-night delivery service that
provides for evidence of receipt, to the Securityholders, as their names and
addresses appear upon the Securities Register, within 30 days after the
filing thereof with the Trustee, such summaries of any information, documents
and reports required to be filed by the Company pursuant to subsections (a)
and (b) of this Section as may be required by rules and regulations
prescribed from time to time by the Commission.
6.4 REPORTS BY THE TRUSTEE.
(a) Beginning January 31, 2000, on or before January 31 in each
year in which any of the Junior Subordinated Debentures are Outstanding, the
Trustee shall transmit by mail, first class postage prepaid, to the
Securityholders, as their names and addresses appear upon the Securities
Register, a brief report dated as of the preceding December 31, if and to the
extent required under Section 313(a) of the Trust Indenture Act.
(b) The Trustee shall comply with Section 313(b) and 313(c) of the
Trust Indenture Act.
(c) A copy of each such report shall, at the time of such
transmission to Securityholders, be filed by the Trustee with the Company,
and also with the Commission.
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ARTICLE VII
REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS ON EVENT OF DEFAULT
7.1 EVENTS OF DEFAULT.
(a) Whenever used herein, "Event of Default" means any one or more
of the following events that has occurred and is continuing: (i) the Company
defaults in the payment of any installment of interest upon any of the Junior
Subordinated Debentures, as and when the same shall become due and payable,
and continuance of such default for a period of 30 days; provided, however,
that a valid extension of an interest payment period by the Company in
accordance with the terms of this Indenture shall not constitute a default in
the payment of interest for this purpose; (ii) the Company defaults in the
payment of the principal of any of the Junior Subordinated Debentures as and
when the same shall become due and payable whether at maturity, upon
redemption, by declaration or otherwise; (iii) the Company fails to observe
or perform any other of its covenants or agreements hereunder with respect to
the Junior Subordinated Debentures for a period of 90 days after the date on
which written notice of such failure, requiring the same to be remedied and
stating that such notice is a "Notice of Default" hereunder, shall have been
given to the Company by the Trustee, by registered or certified mail, or to
the Company and the Trustee by the Holders of at least 25% in principal
amount of the Junior Subordinated Debentures at the time Outstanding; (iv)
the Company pursuant to or within the meaning of any Bankruptcy Law (1)
commences a voluntary case, (2) consents to the entry of an order for relief
against it in an involuntary case, (3) consents to the appointment of a
custodian of it or for all or substantially all of its property or (4) makes
a general assignment for the benefit of its creditors; (v) a court of
competent jurisdiction enters an order under any Bankruptcy Law that (1) is
for relief against the Company in an involuntary case, (2) appoints a
custodian of the Company for all or substantially all of its property, or (3)
orders the liquidation of the Company, and the order or decree remains
unstayed and in effect for 90 days; or (vi) in the event Junior Subordinated
Debentures are issued to the Trust or a trustee of the Trust in connection
with the issuance of Trust Securities by the Trust, the Trust shall have
voluntarily or involuntarily dissolved, wound-up its business or otherwise
terminated its existence, except in connection with (1) the distribution of
Junior Subordinated Debentures to holders of Trust Securities in liquidation
of their interests in the Trust, (2) the redemption of all of the outstanding
Trust Securities of the Trust or (3) certain mergers, consolidations or
amalgamations, each as permitted by the Trust Agreement.
(b) In each and every such case, unless the principal of all the
Junior Subordinated Debentures shall have already become due and payable,
either the Trustee or the Holders of not less than 25% in aggregate principal
amount of the Junior Subordinated Debentures then Outstanding hereunder, by
notice in writing to the Company (and to the Trustee if given by such
Securityholders) may declare the principal of all the Junior Subordinated
Debentures to be due and payable immediately, and upon any such declaration
the same shall become and shall be immediately due
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and payable, notwithstanding anything contained in this Indenture or in the
Junior Subordinated Debentures to the contrary.
(c) At any time after the principal of the Junior Subordinated
Debentures shall have been so declared due and payable, and before any
judgment or decree for the payment of the moneys due shall have been obtained
or entered as hereinafter provided, the Holders of a majority in aggregate
principal amount of the Junior Subordinated Debentures then Outstanding, by
written notice to the Company and the Trustee, may rescind and annul such
declaration and its consequences if: (i) the Company has paid or deposited
with the Trustee a sum sufficient to pay all matured installments of interest
upon all the Junior Subordinated Debentures and the principal of any and all
Junior Subordinated Debentures that shall have become due otherwise than by
acceleration (with interest upon such principal and, to the extent that such
payment is enforceable under applicable law, upon overdue installments of
interest, at the rate per annum expressed in the Junior Subordinated
Debentures to the date of such payment or deposit) and the amount payable to
the Trustee under Section 9.6, and (ii) any and all Events of Default under
this Indenture, other than the nonpayment of principal on Junior Subordinated
Debentures that shall not have become due by their terms, shall have been
remedied or waived as provided in Section 7.6. Should the Holders fail to
annul such declaration and waive such default, then the holders of a majority
in aggregate Liquidation Amount of the Preferred Securities shall have such
right.
No such rescission and annulment shall extend to or shall affect any
subsequent default or impair any right consequent thereon.
(d) In case the Trustee shall have proceeded to enforce any right
with respect to Junior Subordinated Debentures under this Indenture and such
proceedings shall have been discontinued or abandoned because of such
rescission or annulment or for any other reason or shall have been determined
adversely to the Trustee, then and in every such case the Company and the
Trustee shall be restored respectively to their former positions and rights
hereunder, and all rights, remedies and powers of the Company and the Trustee
shall continue as though no such proceedings had been taken.
7.2 COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY TRUSTEE.
(a) The Company covenants that (i) in case it shall default in the
payment of any installment of interest on any of the Junior Subordinated
Debentures as and when the same shall have become due and payable, and such
default shall have continued for a period of 90 Business Days, or (ii) in
case it shall default in the payment of the principal of any of the Junior
Subordinated Debentures when the same shall have become due and payable,
whether upon maturity of the Junior Subordinated Debentures or upon
redemption or upon declaration or otherwise, then, upon demand of the
Trustee, the Company will pay to the Trustee, for the benefit of the Holders
of the
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Junior Subordinated Debentures, the whole amount that then shall have become
due and payable on all such Junior Subordinated Debentures for principal or
interest, or both, as the case may be, with interest upon the overdue
principal and (to the extent that payment of such interest is enforceable
under applicable law and, if the Junior Subordinated Debentures are held by
the Trust or a trustee of the Trust, without duplication of any other
amounts paid by the Trust or trustee in respect thereof) upon overdue
installments of interest at the rate per annum expressed in the Junior
Subordinated Debentures; and, in addition thereto, such further amount as
shall be sufficient to cover the costs and expenses of collection, and the
amount payable to the Trustee under Section 9.6.
(b) If the Company shall fail to pay such amounts forthwith upon
such demand, the Trustee, in its own name and as trustee of an express trust,
shall be entitled and empowered to institute any action or proceedings at law
or in equity for the collection of the sums so due and unpaid, and may
prosecute any such action or proceeding to judgment or final decree, and may
enforce any such judgment or final decree against the Company or other
obligor upon the Junior Subordinated Debentures and collect the moneys
adjudged or decreed to be payable in the manner provided by law out of the
property of the Company or other obligor upon the Junior Subordinated
Debentures, wherever situated.
(c) In case of any receivership, insolvency, liquidation,
bankruptcy, reorganization, readjustment, arrangement, composition or
judicial proceedings affecting the Company or the creditors or property of
either, the Trustee shall have power to intervene in such proceedings and
take any action therein that may be permitted by the court and shall (except
as may be otherwise provided by law) be entitled to file such proofs of claim
and other papers and documents as may be necessary or advisable in order to
have the claims of the Trustee and of the Holders of Junior Subordinated
Debentures allowed for the entire amount due and payable by the Company under
this Indenture at the date of institution of such proceedings and for any
additional amount that may become due and payable by the Company after such
date, and to collect and receive any moneys or other property payable or
deliverable on any such claim, and to distribute the same after the deduction
of the amount payable to the Trustee under Section 9.6; and any receiver,
assignee or trustee in bankruptcy or reorganization is hereby authorized by
each of the Holders to make such payments to the Trustee, and, in the event
that the Trustee shall consent to the making of such payments directly to
such Securityholders, to pay to the Trustee any amount due it under Section
9.6.
(d) All rights of action and of asserting claims under this
Indenture may be enforced by the Trustee without the possession of any of the
Junior Subordinated Debentures, or the production thereof at any trial or
other proceeding relative thereto, and any such suit or proceeding instituted
by the Trustee shall be brought in its own name as trustee of an express
trust, and any recovery of judgment shall, after provision for payment to the
Trustee of any amounts due under Section 9.6, be for the ratable benefit of
the Holders of the Junior Subordinated Debentures.
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In case of an Event of Default hereunder, the Trustee may in its
discretion proceed to protect and enforce the rights vested in it by this
Indenture by such appropriate judicial proceedings as the Trustee shall deem
most effectual to protect and enforce any of such rights, either at law or
inequity or in bankruptcy or otherwise, whether for the specific enforcement
of any covenant or agreement contained in this Indenture or in aid of the
exercise of any power granted in this Indenture, or to enforce any other
legal or equitable right vested in the Trustee by this Indenture or by law.
Nothing contained herein shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Securityholder
any plan of reorganization, arrangement, adjustment or composition affecting
the Junior Subordinated Debentures or the rights of any Holder thereof or to
authorize the Trustee to vote in respect of the claim of any Securityholder
in any such proceeding.
7.3 APPLICATION OF MONEYS COLLECTED. Any moneys collected by the
Trustee pursuant to this Article with respect to the Junior Subordinated
Debentures shall be applied in the following order, at the date or dates
fixed by the Trustee and, in case of the distribution of such moneys on
account of principal or interest, upon presentation of the Junior
Subordinated Debentures, and notation thereon the payment, if only partially
paid, and upon surrender thereof if fully paid:
FIRST: To the payment of costs and expenses of collection and of all
amounts payable to the Trustee under Section 9.6;
SECOND: To the payment of all Senior and Subordinated Debt of the
Company if and to the extent required by Article Sixteen; and
THIRD: To the payment of the amounts then due and unpaid upon Junior
Subordinated Debentures for principal and interest, in respect of which or
for the benefit of which such money has been collected, ratably, without
preference or priority of any kind, according to the amounts due and payable
on such Junior Subordinated Debentures for principal and interest,
respectively.
7.4 LIMITATION ON SUITS. No Holder shall have any right by virtue
of or by availing any provision of this Indenture to institute any suit,
action or proceeding in equity or at law upon or under or with respect to
this Indenture or for the appointment of a receiver or trustee, or for any
other remedy hereunder, unless (i) such Holder previously shall have given to
the Trustee written notice of an Event of Default and of the continuance
thereof; (ii) the Holders of not less than 25% in aggregate principal amount
of the Junior Subordinated Debentures then Outstanding shall have made
written request upon the Trustee to institute such action, suit or proceeding
in its own name as trustee hereunder; (iii) such Holder or Holders shall have
offered to the Trustee such reasonable indemnity as it may require against
the costs, expenses and liabilities to be incurred therein or thereby; and
(iv) the Trustee for 60 days after its receipt of such notice, request and
offer of indemnity shall have failed to institute any
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such action, suit or proceeding; and (v) during such 60 day period, the
Holders of a majority in principal amount of the Junior Subordinated
Debentures do not give the Trustee a direction inconsistent with the request.
Notwithstanding any other provisions of this Indenture to the
contrary, the right of any Holder to receive payment of the principal of and
interest on the Junior Subordinated Debentures on or after the respective due
dates (or in the case of redemption, on the redemption date), or to institute
suit for the enforcement of any such payment on or after such respective
dates or redemption date, shall not be impaired or affected without the
consent of such Holder; and by accepting a Junior Subordinated Debenture
hereunder it is expressly understood, intended and covenanted by the Holder
thereof with every other such Holder and the Trustee, that no one or more
Holders shall have any right in any manner whatsoever by virtue of or by
availing any provision of this Indenture to affect, disturb or prejudice the
rights of any other Holders, or to obtain or seek to obtain priority over or
preference to any such other Holders, or to enforce any right under this
Indenture, except in the manner herein provide and for the equal, ratable and
common benefit of all Holders of Junior Subordinated Debentures. For the
protection and enforcement of the provisions of this Section, each and every
Securityholder and the Trustee shall be entitled to such relief as can be
given either at law or in equity.
7.5 RIGHTS AND REMEDIES CUMULATIVE; DELAY OR OMISSION NOT WAIVER.
(a) Except as otherwise provided in Section 7.2, all powers and
remedies given by this Article to the Trustee or to the Securityholders
shall, to the extent permitted by law, be deemed cumulative and not exclusive
of any other powers and remedies available to the Trustee or the Holders of
the Junior Subordinated Debentures, by judicial proceedings or otherwise, to
enforce the performance or observance of the covenants and agreements
contained in this Indenture or otherwise established with respect to such
Junior Subordinated Debentures.
(b) No delay or omission of the Trustee or of any Holder of any of
the Junior Subordinated Debentures to exercise any right or power accruing
upon any Event of Default occurring and continuing as aforesaid shall impair
any such right or power, or shall be construed to be a waiver of any such
default or on acquiescence therein; and, subject to the provisions of Section
7.4, every power and remedy given by this Article or by law to the Trustee or
the Securityholders may be exercised from time to time, and as often as shall
be deemed expedient, by the Trustee or by the Securityholders.
7.6 CONTROL BY SECURITYHOLDERS. The Holders of a majority in
aggregate principal amount of the Junior Subordinated Debentures at the time
Outstanding, determined in accordance with Section 10.4, shall have the right
to direct the time, method and place of conducting any proceeding for any
remedy available to the Trustee, or exercising any trust or power conferred
on the Trustee; provided, however, that such direction shall not be in
conflict with any rule of law or with this
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Indenture. Subject to the provisions of Section 9.1, the Trustee shall have
the right to decline to follow any such direction if the Trustee in good
faith shall, by a Responsible Officer or Officers of the Trustee, determine
that the proceeding so directed would involve the Trustee in personal
liability. The Holders of a majority in aggregate principal amount of the
Junior Subordinated Debentures at the time Outstanding affected thereby,
determined in accordance with Section 10.4, may on behalf of the Holders of
all of the Junior Subordinated Debentures waive any past default in the
performance of any of the covenants contained herein and its consequences,
except (i) a default in the payment of the principal of or interest on any of
the Junior Subordinated Debentures as and when the same shall become due by
its terms otherwise than by acceleration (unless such default has been cured
and a sum sufficient to pay all matured installments of interest and
principal has been deposited with the Trustee in accordance with Section
7.1(c)), (ii) a default in the covenants contained in Section 5.6 or (iii) in
respect of a covenant or provision hereof which under Article Eleven cannot
be modified or amended without the consent of the Holder of each Outstanding
Junior Subordinated Debenture affected; provided, however, that if the Junior
Subordinated Debentures are held by the Trust or a Trustee of the Trust, such
waiver or modification to such waiver shall not be effective until the
Holders of a majority in Liquidation Amount of Trust Securities of the Trust
shall have consented to such waiver or modification to such waiver; provided
further, that if the consent of the Holder of each Outstanding Junior
Subordinated Debenture is required, such waiver shall not be effective until
each Holder of the Trust Securities of the Trust shall have consented to such
waiver. Upon any such waiver, the default covered thereby shall be deemed to
be cured for all purposes of this Indenture and the Company, the Trustee and
the Holders of the Junior Subordinated Debentures shall be restored to their
former positions and rights hereunder, respectively; but no such waiver shall
extend to any subsequent or other default or impair any right consequent
thereon.
7.7 UNDERTAKING TO PAY COSTS. All parties to this Indenture agree,
and each Holder of any Junior Subordinated Debentures by such Holder's
acceptance thereof shall be deemed to have agreed, that any court may in its
discretion require, in any suit for the enforcement of any right or remedy
under this Indenture, or in any suit against the Trustee for any action taken
or omitted by it as Trustee, the filing by any party litigant in such suit of
an undertaking to pay the costs of such suit, and that such court may in its
discretion assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in such suit, having due regard to the merits and
good faith of the claims or defenses made by such party litigant; but the
provisions of this Section shall not apply to any suit instituted by the
Trustee, to any suit instituted by any Securityholder, or group of
Securityholders, holding more than 10% in aggregate principal amount of the
Outstanding Junior Subordinated Debentures, or to any suit instituted by any
Securityholder for the enforcement of the payment of the principal of or
interest on the Junior Subordinated Debentures on or after the due dates
thereof.
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ARTICLE VIII
FORM OF JUNIOR SUBORDINATED DEBENTURE AND ORIGINAL ISSUE
8.1 FORM OF JUNIOR SUBORDINATED DEBENTURE. The Junior Subordinated
Debenture and the Trustee's Certificate of Authentication to be endorsed
thereon are to be substantially in the forms contained as Exhibit A to this
Indenture, attached hereto and incorporated herein by reference.
8.2 ORIGINAL ISSUE OF JUNIOR SUBORDINATED DEBENTURES. Junior
Subordinated Debentures in the aggregate principal amount of $20,618,560 may,
upon execution of this Indenture, and a possible additional amount of up to
$3,092,790 related to the Underwriters' Over-Allotment Option with respect to
the Preferred Securities may, upon exercise of the Underwriters'
Over-Allotment Option, be executed by the Company and delivered to the
Trustee for authentication, and the Trustee shall thereupon authenticate and
deliver the Junior Subordinated Debentures to or upon the written order of
the Company, signed by its Chairman, its President or any Vice President,
without any further action by the Company.
ARTICLE IX
CONCERNING THE TRUSTEE
9.1 CERTAIN DUTIES AND RESPONSIBILITIES OF THE TRUSTEE.
(a) The Trustee, prior to the occurrence of an Event of Default and
after the curing of all Events of Default that may have occurred, shall
undertake to perform with respect to the Junior Subordinated Debentures such
duties and only such duties as are specifically set forth in this Indenture,
and no implied covenants shall be read into this Indenture against the
Trustee. In case an Event of Default has occurred (that has not been cured or
waived), the Trustee shall exercise such of the rights and powers vested in
it by this Indenture, and use the same degree of care and skill in their
exercise as a prudent man would exercise or use under the circumstances in
the conduct of his own affairs.
(b) No provision of this Indenture shall be construed to relieve
the Trustee from liability for its own negligent action, its own negligent
failure to act, or its own willful misconduct, except that:
(i) prior to the occurrence of an Event of Default and after the
curing or waiving of all such Events of Default that may have occurred: (1)
the duties and obligations of the Trustee shall be determined solely by the
express provisions of this Indenture, and the Trustee shall not be liable
except for the performance of such duties and obligations as are specifically
set forth in this Indenture, and no implied covenants or obligations shall be
read into this Indenture against the Trustee; and (2) in the absence of bad
faith on the part of the Trustee, the Trustee may conclusively rely, as to
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the truth of the statements and the correctness of the opinions expressed
therein, upon any certificates or opinions furnished to the Trustee and
conforming to the requirements of this Indenture; but in the case of any such
certificates or opinions that by any provision hereof are specifically
required to be furnished to the Trustee, the Trustee shall be under a duty to
examine the same to determine whether or not they conform to the requirement
of this Indenture;
(ii) the Trustee shall not be liable for any error of judgment made
in good faith by a Responsible Officer or Responsible Officers of the
Trustee, unless it shall be proved that the Trustee was negligent in
ascertaining the pertinent facts;
(iii) the Trustee shall not be liable with respect to any action
taken or omitted to be taken by it in good faith in accordance with the
direction of the Holders of not less than a majority in principal amount of
the Junior Subordinated Debentures at the time Outstanding relating to the
time, method and place of conducting any proceeding for any remedy available
to the Trustee, or exercising any trust or power conferred upon the Trustee
under this Indenture; and
(iv) none of the provisions contained in this Indenture shall
require the Trustee to expend or risk its own funds or otherwise incur
personal financial liability in the performance of any of its duties or in
the exercise of any of its rights or powers, if there is reasonable ground
for believing that the repayment of such funds or liability is not reasonably
assured to it under the terms of this Indenture or adequate indemnity against
such risk is not reasonably assured to it.
9.2 CERTAIN RIGHTS OF TRUSTEE. Except as otherwise provided in
Section 9.1:
(a) The Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, approval, bond,
security or other paper or document believed by it to be genuine and to have
been signed or presented by the proper party or parties;
(b) Any request, direction, order or demand of the Company
mentioned herein shall be sufficiently evidenced by a Board Resolution or an
instrument signed in the name of the Company by the Chairman, the President
or any Vice President and by the Secretary or an Assistant Secretary or the
Chief Financial Officer thereof (unless other evidence in respect thereof is
specifically prescribed herein);
(c) The Trustee may consult with counsel and the written advice of
such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken or suffered or
omitted hereunder in good faith and in reliance thereon;
(d) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request, order or
direction of any of the
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Securityholders, pursuant to the provisions of this Indenture, unless such
Securityholders shall have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities that may be incurred
therein or thereby; nothing contained herein shall, however, relieve the
Trustee of the obligation, upon the occurrence of an Event of Default (that
has not been cured or waived) to exercise such of the rights and powers
vested in it by this Indenture, and to use the same degree of care and skill
in their exercise as a prudent man would exercise or use under the
circumstances in the conduct of his own affairs;
(e) The Trustee shall not be liable for any action taken or omitted
to be taken by it in good faith and believed by it to be authorized or within
the discretion or rights or powers conferred upon it by this Indenture;
(f) The Trustee shall not be bound to make any investigation into
the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, approval, bond,
security, or other papers or documents, unless requested in writing so to do
by the Holders of not less than a majority in principal amount of the
Outstanding Junior Subordinated Debentures (determined as provided in Section
10.4); provided, however, that if the payment within a reasonable time to the
Trustee of the costs, expenses or liabilities likely to be incurred by it in
the making of such investigation is, in the opinion of the Trustee, not
reasonably assured to the Trustee by the security afforded to it by the terms
of this Indenture, the Trustee may require reasonable indemnity against such
costs, expenses or liabilities as a condition to so proceeding. The
reasonable expense of every such examination shall be paid by the Company or,
if paid by the Trustee, shall be repaid by the Company upon demand; and
(g) The Trustee may execute any of the trusts or powers hereunder
or perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by it
hereunder.
9.3 TRUSTEE NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF THE JUNIOR
SUBORDINATED DEBENTURES.
(a) The recitals contained herein and in the Junior Subordinated
Debentures shall be taken as the statements of the Company and the Trustee
assumes no responsibility for the correctness of the same.
(b) The Trustee makes no representations as to the validity or
sufficiency of this Indenture or of the Junior Subordinated Debentures.
(c) The Trustee shall not be accountable for the use or application
by the Company of any of the Junior Subordinated Debentures or of the
proceeds of such Junior Subordinated Debentures, or for the use or
application of any moneys paid over
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by the Trustee in accordance with any provision of this Indenture, or for the
use or application of any moneys received by any paying agent other than the
Trustee.
9.4 MAY HOLD JUNIOR SUBORDINATED DEBENTURES. The Trustee or any
paying agent or Securities Registrar, in its individual or any other
capacity, may become the owner or pledgee of Junior Subordinated Debentures
with the same rights it would have if it were not Trustee, paying agent or
Securities Registrar.
9.5 MONEYS HELD IN TRUST. Subject to the provisions of Section
13.5, all moneys received by the Trustee shall, until used or applied as
herein provided, be held in trust for the purposes for which they were
received, but need not be segregated from other funds except to the extent
required by law. The Trustee shall be under no liability for interest on any
moneys received by it hereunder except such as it may agree with the Company
to pay thereon.
9.6 COMPENSATION AND REIMBURSEMENT.
(a) The Company covenants and agrees to pay to the Trustee, and the
Trustee shall be entitled to, such reasonable compensation (which shall not
be limited by any provision of law in regard to the compensation of a trustee
of an express trust), as the Company and the Trustee may from time to time
agree in writing, for all services rendered by it in the execution of the
trusts hereby created and in the exercise and performance of any of the
powers and duties hereunder of the Trustee, and, except as otherwise
expressly provided herein, the Company will pay or reimburse the Trustee upon
its request for all reasonable expenses, disbursements and advances incurred
or made by the Trustee in accordance with any of the provisions of this
Indenture (including the reasonable compensation and the expenses and
disbursements of its counsel and of all Persons not regularly in its employ)
except any such expense, disbursement or advance as may arise from its
negligence or bad faith. The Company also covenants to indemnify the Trustee
(and its officers, agents, directors and employees) for, and to hold it
harmless against, any loss, liability or expense incurred without negligence
or bad faith on the part of the Trustee and arising out of or in connection
with the acceptance or administration of this trust, including the costs and
expenses of defending itself against any claim of liability in the premises.
(b) The obligations of the Company under this Section to compensate
and indemnify the Trustee and to pay or reimburse the Trustee for expenses,
disbursements and advances shall constitute additional indebtedness
hereunder. Such additional indebtedness shall be secured by a lien prior to
that of the Junior Subordinated Debentures upon all property and funds held
or collected by the Trustee as such, except funds held in trust for the
benefit of the Holders of the Junior Subordinated Debentures.
9.7 RELIANCE ON OFFICERS' CERTIFICATE. Except as otherwise
provided in Section 9.1, whenever in the administration of the provisions of
this Indenture the Trustee shall deem it necessary or desirable that a matter
be proved or
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established prior to taking or suffering or omitting to take any action
hereunder, such matter (unless other evidence in respect thereof be herein
specifically prescribed) may, in the absence of negligence or bad faith on
the part of the Trustee, be deemed to be conclusively proved and established
by an Officers' Certificate delivered to the Trustee and such certificate, in
the absence of negligence or bad faith on the part of the Trustee, shall be
full warrant to the Trustee for any action taken, suffered or omitted to be
taken by it under the provisions of this Indenture upon the faith thereof.
9.8 DISQUALIFICATION; CONFLICTING INTERESTS. If the Trustee has
or shall acquire any "conflicting interest" within the meaning of Section
310(b) of the Trust Indenture Act, the Trustee and the Company shall in all
respects comply with the provisions of Section 310(b) of the Trust Indenture
Act.
9.9 CORPORATE TRUSTEE REQUIRED; ELIGIBILITY. There shall at all
times be a Trustee with respect to the Junior Subordinated Debentures issued
hereunder which shall at all times be a corporation organized and doing
business under the laws of the United States of America or any state or
territory thereof or of the District of Columbia, or a corporation or other
Person permitted to act as trustee by the Commission, authorized under such
laws to exercise corporate trust powers, having a combined capital and
surplus of at least $50,000,000, and subject to supervision or examination by
federal, state, territorial, or District of Columbia authority. If such
corporation publishes reports of condition at least annually, pursuant to law
or to the requirements of the aforesaid supervising or examining authority,
then for the purposes of this Section, the combined capital and surplus of
such corporation shall be deemed to be its combined capital and surplus as
set forth in its most recent report of condition so published. The Company
may not, nor may any Person directly or indirectly controlling, controlled
by, or under common control with the Company, serve as Trustee. In case at
any time the Trustee shall cease to be eligible in accordance with the
provisions of this Section, the Trustee shall resign immediately in the
manner and with the effect specified in Section 9.10.
9.10 RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR.
(a) The Trustee, or any successor hereafter appointed, may at any
time resign by giving written notice thereof to the Company and by
transmitting notice of resignation by mail, first-class postage prepaid, to
the Securityholders, as their names and addresses appear upon the Securities
Register. Upon receiving such notice of resignation, the Company shall
promptly appoint a successor trustee by written instrument, in duplicate,
executed by order of the Board of Directors, one copy of which instrument
shall be delivered to the resigning Trustee and one copy to the successor
trustee. If no successor trustee shall have been so appointed and have
accepted appointment within 30 days after the mailing of such notice of
resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor trustee, or any
Securityholder who has been a bona fide Holder of Junior Subordinated
Debentures for at least six months may, subject to the provisions of Section
7.7, on behalf of such Securityholder and all other Holders, petition any
such
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court for the appointment of a successor trustee. Such court may thereupon,
after such notice, if any, as it may deem proper and prescribe, appoint a
successor trustee.
(b) In case at any time any one of the following shall occur: (i)
the Trustee shall fail to comply with the provisions of Section 9.8 after
written request therefor by the Company or by any Securityholder who has been
a bona fide Holder of Junior Subordinated Debentures for at least six months;
or (ii) the Trustee shall cease to be eligible in accordance with the
provisions of Section 9.9 and shall fail to resign after written request
therefor by the Company or by any such Securityholder; or (iii) the Trustee
shall become incapable of acting, or shall be adjudged a bankrupt or
insolvent, or commence a voluntary bankruptcy proceeding, or a receiver of
the Trustee or of its property shall be appointed or consented to, or any
public officer shall take charge or control of the Trustee or of its property
or affairs for the purpose of rehabilitation, conservation or liquidation,
then, in any such case, the Company may remove the Trustee and appoint a
successor trustee by written instrument, in duplicate, executed by order of
the Board of Directors, one copy of which instrument shall be delivered to
the Trustee so removed and one copy to the successor trustee, or, subject to
the provisions of Section 7.7, unless the Trustee's duty to resign is stayed
as provided herein, any Securityholder who has been a bona fide Holder of
Junior Subordinated Debentures for at least six months may, on behalf of that
Holder and all other Holders, petition any court of competent jurisdiction
for the removal of the Trustee and the appointment of a successor trustee.
Such court may thereupon after such notice, if any, as it may deem proper and
prescribe, remove the Trustee and appoint a successor trustee.
(c) The Holders of a majority in aggregate principal amount of the
Junior Subordinated Debentures at the time Outstanding may at any time remove
the Trustee by so notifying the Trustee and the Company and may appoint a
successor Trustee with the consent of the Company.
(d) Any resignation or removal of the Trustee and appointment of a
successor trustee pursuant to any of the provisions of this Section shall
become effective upon acceptance of appointment by the successor trustee as
provided in Section 9.11.
9.11 ACCEPTANCE OF APPOINTMENT BY SUCCESSOR.
(a) In case of the appointment hereunder of a successor trustee,
every such successor trustee so appointed shall execute, acknowledge and
deliver to the Company and to the retiring Trustee an instrument accepting
such appointment, and thereupon the resignation or removal of the retiring
Trustee shall become effective and such successor trustee, without any
further act, deed or conveyance, shall become vested with all the rights,
powers, trusts and duties of the retiring Trustee; but, on the request of the
Company or the successor trustee, such retiring Trustee shall, upon payment
of its charges, execute and deliver an instrument transferring to such
successor trustee all the rights, powers, and trusts of the retiring Trustee
and shall duly assign, transfer and deliver to such successor trustee all
property and money held by such retiring Trustee hereunder.
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(b) Upon request of any such successor trustee, the Company shall
execute any and all instruments for more fully and certainly vesting in and
confirming to such successor trustee all such rights, powers and trusts
referred to in paragraph (a) of this Section.
(c) No successor trustee shall accept its appointment unless at the
time of such acceptance such successor trustee shall be qualified and
eligible under this Article.
(d) Upon acceptance of appointment by a successor trustee as
provided in this Section, the Company shall transmit notice of the succession
of such trustee hereunder by mail, first-class postage prepaid, to the
Securityholders, as their names and addresses appear upon the Securities
Register. If the Company fails to transmit such notice within ten days after
acceptance of appointment by the successor trustee, the successor trustee
shall cause such notice to be transmitted at the expense of the Company.
9.12 MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS.
Any corporation into which the Trustee may be merged or converted or with
which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to the corporate trust business of the Trustee, shall
be the successor of the Trustee hereunder, provided that such corporation
shall be qualified and eligible under the provisions of this Article Nine,
without the execution or filing of any paper or any further act on the part
of any of the parties hereto, anything herein to the contrary
notwithstanding. In case any Junior Subordinated Debentures shall have been
authenticated, but not delivered, by the Trustee then in office, any
successor by merger, conversion or consolidation to such authenticating
Trustee may adopt such authentication and deliver the Junior Subordinated
Debentures so authenticated with the same effect as if such successor Trustee
had itself authenticated such Junior Subordinated Debentures.
9.13 PREFERENTIAL COLLECTION OF CLAIMS AGAINST THE COMPANY. The
Trustee shall comply with Section 311(a) of the Trust Indenture Act,
excluding any creditor relationship described in Section 311(b) of the Trust
Indenture Act. A Trustee who has resigned or been removed shall be subject
to Section 311(a) of the Trust Indenture Act to the extent included therein.
9.14 APPOINTMENT OF AUTHENTICATING AGENT. At any time when any of
the Junior Subordinated Debentures remain Outstanding, the Trustee may
appoint an Authenticating Agent or Agents which shall be authorized to act on
behalf of the Trustee to authenticate Junior Subordinated Debentures issued
upon original issuance, exchange, registration of transfer or partial
redemption thereof or pursuant to Section 2.8, and Junior Subordinated
Debentures so authenticated shall be entitled to the benefits of this
Indenture and shall be valid and obligatory for all purposes as if
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authenticated by the Trustee hereunder. Wherever reference is made in this
Indenture to the authentication and delivery of Junior Subordinated
Debentures by the Trustee or the Trustee's certificate of authentication,
such reference shall be deemed to include authentication and delivery on
behalf of the Trustee by an Authenticating Agent and a certificate of
authentication executed on behalf of the Trustee by an Authenticating Agent.
Each Authenticating Agent shall be acceptable to the Company and shall at all
times be a corporation organized and doing business under the laws of the
United States of America, any state thereof or the District of Columbia,
authorized under such laws to act as Authenticating Agent, having a combined
capital and surplus of not less than $10,000,000 and subject to supervision
or examination by federal or state authority. If such Authenticating Agent
publishes reports of condition at least annually, pursuant to law or to the
requirements of such supervision or examining authority, for the purposes of
this Section, the combined capital and surplus of such Authenticating Agent
shall be deemed to be its combined capital and surplus as set forth in its
most recent report of condition so published. If at any time an
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, such Authenticating Agent shall resign
immediately in the manner and with the effect specified in this Section.
Any corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which such Authenticating
Agent shall be a party, or any corporation succeeding to the corporate agency
or corporate trust business of Authenticating Agent, shall continue to be an
Authenticating Agent, provided such corporation shall be otherwise eligible
under this Section, without the execution or filing of any paper or any
further act on the part of the Trustee or the Authenticating Agent.
An Authenticating Agent may resign at any time by giving written
notice thereof to the Trustee and to the Company. The Trustee may at any
time terminate the agency of an Authenticating Agent by giving written notice
thereof to such Authenticating Agent and to the Company. Upon receiving such
notice of resignation or upon such termination, or in case at any time such
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, the Trustee may appoint a successor
Authenticating Agent which shall be acceptable to the Company and shall mail
written notice of such appointment by first-class mail, postage prepaid, to
all Securityholders as their names and addresses appear in the Securities
Register. Any successor Authenticating Agent upon acceptance of its
appointment hereunder shall become vested with all the rights, powers and
duties of its predecessor hereunder, with the like effect as if originally
named as an Authenticating Agent herein. No successor Authenticating Agent
shall be appointed unless eligible under the provisions of this Section.
The Trustee agrees to pay to each Authenticating Agent from time to
time reasonable compensation for its services under this Section, and the
Trustee shall be entitled to be reimbursed for such payments, subject to the
provisions of Section 9.6.
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If an appointment is made pursuant to this Section, the Junior
Subordinated Debentures may have endorsed thereon, in lieu of the form of
certificate of authentication set forth in Section 8.1, a certificate of
authentication in the following form:
"This is one of the Junior Subordinated Debentures described in the within
mentioned Indenture."
------------------------------
As Trustee
By:
---------------------------
As Authenticating Agent
By:
---------------------------
Authorized Signature
ARTICLE X
CONCERNING THE SECURITYHOLDERS
10.1 EVIDENCE OF ACTION BY SECURITYHOLDERS. Whenever in this
Indenture it is provided that the Holders of a majority or specified
percentage in aggregate principal amount of the Junior Subordinated
Debentures may take any action (including the making of any demand or
request, the giving of any notice, consent or waiver or the taking of any
other action), the fact that at the time of taking any such action the
Holders of such majority or specified percentage have joined therein may be
evidenced by any instrument or any number of instruments of similar tenor
executed by such Holders in Person or by agent or proxy appointed in writing.
If the Company shall solicit from the Securityholders any request,
demand, authorization, direction, notice, consent, waiver or other action,
the Company may, at its option, as evidenced by an Officers' Certificate, fix
in advance a record date for the determination of Securityholders entitled to
give such request, demand, authorization,
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direction, notice, consent, waiver or other action, but the Company shall
have no obligation to do so. If such a record date is fixed, such request,
demand, authorization, direction, notice, consent, waiver or other action may
be given before or after the record date, but only the Securityholders of
record at the close of business on the record date shall be deemed to be
Securityholders for the purposes of determining whether Securityholders of
the requisite proportion of Outstanding Junior Subordinated Debentures have
authorized or agreed or consented to such request, demand, authorization,
direction, notice, consent, waiver or other action, and for that purpose the
Outstanding Junior Subordinated Debentures shall be computed as of the record
date; provided, however, that no such authorization, agreement or consent by
such Securityholders on the record date shall be deemed effective unless it
shall become effective pursuant to the provisions of this Indenture not later
than six months after the record date.
10.2 PROOF OF EXECUTION BY SECURITYHOLDERS. Subject to the
provisions of Section 6.1, proof of the execution of any instrument by a
Securityholder (such proof will not require notarization) or his agent or
proxy and proof of the holding by any Person of any of the Junior
Subordinated Debentures shall be sufficient if made in the following manner:
(a) The fact and date of the execution by any such Person of any
instrument may be proved in any reasonable manner acceptable to the Trustee.
(b) The ownership of Junior Subordinated Debentures shall be proved
by the Securities Register or by a certificate of the Securities Registrar
thereof.
(c) The Trustee may require such additional proof of any matter
referred to in this Section as it shall deem necessary.
10.3 WHO MAY BE DEEMED OWNERS. Prior to the due presentment for
registration of transfer of any Junior Subordinated Debenture, the Company,
the Trustee, any paying agent and any Securities Registrar may deem and treat
the Person in whose name such Junior Subordinated Debenture shall be
registered upon the books of the Company as the absolute owner of such Junior
Subordinated Debenture (whether or not such Junior Subordinated Debenture
shall be overdue and notwithstanding any notice of ownership or writing
thereon made by anyone other than the Securities Registrar) for the purpose
of receiving payment of or on account of the principal of and (subject to
Section 2.3) interest on such Junior Subordinated Debenture and for all other
purposes; and neither the Company nor the Trustee nor any paying agent nor
any Securities Registrar shall be affected by any notice to the contrary.
10.4 CERTAIN JUNIOR SUBORDINATED DEBENTURES OWNED BY COMPANY
DISREGARDED. In determining whether the Holders of the requisite aggregate
principal amount of Junior Subordinated Debentures have concurred in any
direction, consent or waiver under this Indenture, the Junior Subordinated
Debentures that are owned by the Company or any other obligor on the Junior
Subordinated
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Debentures or by any Person directly or indirectly controlling or controlled
by or under common control with the Company or any other obligor on the
Junior Subordinated Debentures shall be disregarded and deemed not to be
Outstanding for the purpose of any such determination, except that for the
purpose of determining whether the Trustee shall be protected in relying on
any such direction, consent or waiver, only Junior Subordinated Debentures
that the Trustee actually knows are so owned shall be so disregarded. The
Junior Subordinated Debentures so owned that have been pledged in good faith
may be regarded as Outstanding for the purposes of this Section, if the
pledgee shall establish to the satisfaction of the Trustee the pledgee's
right with respect to such Junior Subordinated Debentures and that the
pledgee is not a Person directly or indirectly controlling or controlled by
or under direct or indirect common control with the Company or any such other
obligor. In case of a dispute as to such right, any decision by the Trustee
taken upon the advice of counsel shall be full protection to the Trustee.
10.5 ACTIONS BINDING ON FUTURE SECURITYHOLDERS. At any time prior
to (but not after) the evidencing to the Trustee, as provided in Section
10.1, of the taking of any action by the Holders of the majority or
percentage in aggregate principal amount of the Junior Subordinated
Debentures specified in this Indenture in connection with such action, any
Holder who is shown by the evidence to have consented to such action may, by
filing written notice with the Trustee, and upon proof of holding as provided
in Section 10.2, revoke such action so far as concerns such Holder's Junior
Subordinated Debentures. Except as aforesaid any such action taken by the
Holder shall be conclusive and Holder's Junior Subordinated Debentures, and
of any Junior Subordinated Debentures issued in exchange therefor, on
registration of transfer thereof or in place thereof, irrespective of whether
or not any notation in regard thereto is made upon such Junior Subordinated
Debentures. Any action taken by the Holders of the majority or percentage in
aggregate principal amount of the Junior Subordinated Debentures specified in
this Indenture in connection with such action shall be conclusively binding
upon the Company, the Trustee and the Holders of all the Junior Subordinated
Debentures.
ARTICLE XI
SUPPLEMENTAL INDENTURES
11.1 SUPPLEMENTAL INDENTURES WITHOUT THE CONSENT OF SECURITYHOLDERS.
In addition to any supplemental indenture otherwise authorized by this
Indenture, the Company and the Trustee may from time to time and at any time
enter into an indenture or indentures supplemental hereto (which shall
conform to the provisions of the Trust Indenture Act as then in effect),
without the consent of the Securityholders, for one or more of the following
purposes:
(a) to cure any ambiguity, defect, or inconsistency herein, or in
the Junior Subordinated Debentures, provided that any such action does not
materially adversely affect the interests of the Holders or the holders of
the Preferred Securities so long as they remain outstanding;
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(b) to comply with Article Twelve;
(c) to provide for uncertificated Junior Subordinated Debentures in
addition to or in place of certificated Junior Subordinated Debentures;
(d) to add to the covenants of the Company for the benefit of the
Holders or to surrender any right or power herein conferred upon the Company;
(e) to add to, delete from, or revise the conditions, limitations,
and restrictions on the authorized amount, terms, or purposes of issue,
authentication, and delivery of Junior Subordinated Debentures, as herein set
forth;
(f) to make any change that does not adversely affect the rights of
any Securityholder in any material respect; or
(g) to establish the form of any certifications required to be
furnished pursuant to the terms of this Indenture or to add to the rights of
the Holders.
The Trustee is hereby authorized to join with the Company in the
execution of any such supplemental indenture, and to make any further
appropriate agreements and stipulations that may be therein contained, but
the Trustee shall not be obligated to enter into any such supplemental
indenture that affects the Trustee's own rights, duties or immunities under
this Indenture or otherwise.
Any supplemental indenture authorized by the provisions of this
Section may be executed by the Company and the Trustee without the consent of
the Holders of any of the Junior Subordinated Debentures at the time
Outstanding, notwithstanding any of the provisions of Section 11.2.
11.2 SUPPLEMENTAL INDENTURES WITH CONSENT OF SECURITYHOLDERS. With
the consent (evidenced as provided in Section 10.1) of the Holders of not
less than a majority in aggregate principal amount of the Junior Subordinated
Debentures at the time Outstanding, the Company, when authorized by Board
Resolutions, and the Trustee may from time to time and at any time enter into
an indenture or indentures supplemental hereto (which shall conform to the
provisions of the Trust Indenture Act as then in effect) for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions of this Indenture or of any supplemental indenture or of modifying
in any manner not covered by Section 11.1 the rights of the Holders of the
Junior Subordinated Debentures under this Indenture; provided, however, that
no such supplemental indenture shall without the consent of the Holders of
each Junior Subordinated Debenture then Outstanding, (i) change (except as
expressly provided herein pursuant to Section 2.2) the stated maturity of
the Junior Subordinated Debentures or reduce the principal amount thereof;
or reduce the rate or extend (except as expressly provided herein pursuant
to Section 4.1) the time of payment of interest thereon; or (ii) reduce the
percentage of principal amount of Junior
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Subordinated Debentures, the Holders of which are required to consent to any
such supplemental indenture; provided, further, that if the Junior
Subordinated Debentures are held by the Trust or a trustee of the Trust,
such supplemental indenture shall not be effective until the holders of a
majority in aggregate Liquidation Amount of Preferred Securities shall have
consented to such supplemental indenture; provided further, that if the
consent of the Holder of each Outstanding Junior Subordinated Debenture is
required, such supplemental indenture shall not be effective until each
Holder of the Trust Securities shall have consented to such supplemental
indenture.
It shall not be necessary for the consent of the Securityholders to
approve the particular form of any proposed supplemental indenture, but it
shall be sufficient if such consent shall approve the substance thereof.
11.3 EFFECT OF SUPPLEMENTAL INDENTURES. Upon the execution of any
supplemental indenture pursuant to the provisions of this Article or of
Section 12.1, this Indenture shall be deemed to be modified and amended in
accordance therewith.
11.4 JUNIOR SUBORDINATED DEBENTURES AFFECTED BY SUPPLEMENTAL
INDENTURES. Junior Subordinated Debentures, affected by a supplemental
indenture, authenticated and delivered after the execution of such
supplemental indenture pursuant to the provisions of this Article or of
Section 12.1, may bear a notation in form approved by the Company, as to any
matter provided for in such supplemental indenture. If the Company shall so
determine, new Junior Subordinated Debentures so modified as to conform, in
the opinion of the Board of Directors, to any modification of this Indenture
contained in any such supplemental indenture may be prepared by the Company,
authenticated by the Trustee and delivered in exchange for the Junior
Subordinated Debentures then Outstanding.
11.5 EXECUTION OF SUPPLEMENTAL INDENTURES. Upon the request of the
Company, accompanied by Board Resolutions authorizing the execution of any
such supplemental indenture, and upon the filing with the Trustee of evidence
of the consent of Securityholders required to consent thereto as aforesaid,
the Trustee shall join with the Company in the execution of such supplemental
indenture unless such supplemental indenture affects the Trustee's own
rights, duties or immunities under this Indenture or otherwise, in which case
the Trustee may in its discretion but shall not be obligated to enter into
such supplemental indenture. The Trustee, subject to the provisions of
Section 9.1, may receive an Opinion of Counsel as conclusive evidence that
any supplemental indenture executed pursuant to this Article is authorized or
permitted by, and conforms to, the terms of this Article and that it is
proper for the Trustee under the provisions of this Article to join in the
execution thereof.
Promptly after the execution by the Company and the Trustee of any
supplemental indenture pursuant to the provisions of this Section, the
Trustee shall transmit by mail, first-class postage prepaid, a notice,
setting forth in general terms the substance of such supplemental indenture,
to the Securityholders as their names and addresses appear upon the
Securities Register. Any failure of the Trustee to mail such
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notice, or any defect therein, shall not, however, in any way impair or
affect the validity of any such supplemental indenture.
ARTICLE XII
SUCCESSOR CORPORATION
12.1 COMPANY MAY CONSOLIDATE, ETC. The Company shall not
consolidate with or merge into any other Person or convey, transfer or lease
its properties and assets substantially as an entirety to any Person, and no
Person shall consolidate with or merge into the Company or convey, transfer
or lease its properties and assets substantially as an entirety to the
Company, unless (i) in case the Company consolidates with or merges into
another Person or conveys or transfers its properties and assets
substantially as an entirety to any Person, the successor Person is organized
under the laws of the United States or any state or the District of Columbia,
and such successor Person expressly assumes the Company's obligations on the
Junior Subordinated Debentures issued under this Indenture; (ii) immediately
after giving effect thereto, no Event of Default, and no event which, after
notice or lapse of time or both, would become an Event of Default, shall have
occurred and be continuing; and (iii) such successor Person expressly assumes
the due and punctual performance and observance of all the covenants and
conditions of this Indenture to be kept and performed by the Company by
executing and delivering a supplemental indenture in form and substance
satisfactory to the Trustee.
12.2 SUCCESSOR SUBSTITUTED.
(a) In case of any such consolidation, merger, sale, conveyance,
transfer or other disposition and upon the assumption by the successor Person
by supplemental indenture, executed and delivered to the Trustee and
satisfactory in form to the Trustee, of the due and punctual payment of the
principal of and interest on all of the Junior Subordinated Debentures
Outstanding and the due and punctual performance of all of the covenants and
conditions of this Indenture to be performed by the Company, such successor
Person shall succeed to and be substituted for the Company, with the same
effect as if it had been named as the Company herein, and thereupon the
predecessor corporation shall be relieved of all obligations and covenants
under this Indenture and the Junior Subordinated Debentures.
(b) In case of any such consolidation, merger, sale, conveyance,
transfer or other disposition such changes in phraseology and form (but not
in substance) may be made in the Junior Subordinated Debentures thereafter to
be issued as may be appropriate.
12.3 EVIDENCE OF CONSOLIDATION, ETC., TO TRUSTEE. The Trustee,
subject to the provisions of Section 9.1, may receive an Opinion of Counsel
as conclusive evidence that any such consolidation, merger, sale, conveyance,
transfer or other disposition, and any such assumption, comply with the
provisions of this Article.
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ARTICLE XIII
SATISFACTION AND DISCHARGE
13.1 SATISFACTION AND DISCHARGE OF INDENTURE. If at any time: (a)
the Company shall have delivered to the Trustee for cancellation all Junior
Subordinated Debentures theretofore authenticated (other than any Junior
Subordinated Debentures that shall have been destroyed, lost or stolen and
that shall have been replaced or paid as provided in Section 2.8) and Junior
Subordinated Debentures for whose payment money or Governmental Obligations
have theretofore been deposited in trust or segregated and held in trust by
the Company (and thereupon repaid to the Company or discharged from such
trust, as provided in Section 13.5); or (b) all such Junior Subordinated
Debentures not theretofore delivered to the Trustee for cancellation shall
have become due and payable, or are by their terms to become due and payable
within one year or are to be called for redemption within one year under
arrangements satisfactory to the Trustee for the giving of notice of
redemption, and the Company shall deposit or cause to be deposited with the
Trustee as trust funds the entire amount in moneys or Governmental
Obligations sufficient or a combination thereof sufficient, in the opinion of
a nationally recognized firm of independent public accountants expressed in a
written certification thereof delivered to the Trustee, to pay at maturity or
upon redemption all Junior Subordinated Debentures not theretofore delivered
to the Trustee for cancellation, including principal and interest due or to
become due to such date of maturity or date fixed for redemption, as the case
may be, and if the Company shall also pay or cause to be paid all other sums
payable hereunder by the Company; then this Indenture shall thereupon cease
to be of further effect except for the provisions of Sections 2.2, 2.3, 2.4,
2.5, 4.1, 4.2, 4.3 and 9.10, that shall survive until the date of maturity or
redemption date, as the case may be, and Sections 9.6 and 13.5, that shall
survive to such date and thereafter, and the Trustee, on demand of the Company
and at the cost and expense of the Company, shall execute proper instruments
acknowledging satisfaction of and discharging this Indenture.
13.2 DISCHARGE OF OBLIGATIONS. If at any time all such Junior
Subordinated Debentures not theretofore delivered to the Trustee for
cancellation or that have not become due and payable as described in Section
13.1 shall have been paid by the Company by depositing irrevocably with the
Trustee, as trust funds, moneys or an amount of Governmental Obligations
sufficient to pay at maturity or upon redemption all such Junior Subordinated
Debentures not theretofore delivered to the Trustee for cancellation,
including principal and interest due or to become due to such date of
maturity or date fixed for redemption, as the case may be, and if the Company
shall also pay or cause to be paid all other sums payable hereunder by the
Company, then after the date such moneys or Governmental Obligations, as the
case may be, are deposited with the Trustee the obligations of the Company
under this Indenture shall cease to be of further effect except for the
provisions of Sections 2.2, 2.3, 2.4, 2.5, 4.1,
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4.2, 4.3, 9.6, 9.10 and 13.5 hereof that shall survive until such Junior
Subordinated Debentures shall mature and be paid. Thereafter, Sections 9.6
and 13.5 shall survive.
13.3 DEPOSITED MONEYS TO BE HELD IN TRUST. All monies or
Governmental Obligations deposited with the Trustee pursuant to Sections 13.1
or 13.2 shall be held in trust and shall be available for payment as due,
either directly or through any paying agent (including the Company acting as
its own paying agent), to the Holders of the Junior Subordinated Debentures
for the payment or redemption of which such moneys or Governmental
Obligations have been deposited with the Trustee.
13.4 PAYMENT OF MONIES HELD BY PAYING AGENTS. In connection with
the satisfaction and discharge of this Indenture all moneys or Governmental
Obligations then held by any paying agent under the provisions of this
Indenture shall, upon demand of the Company, be paid to the Trustee and
thereupon such paying agent shall be released from all further liability with
respect to such moneys or Governmental Obligations.
13.5 REPAYMENT TO COMPANY. Any monies or Governmental Obligations
deposited with any paying agent or the Trustee, or then held by the Company
in trust for payment of principal of or interest on the Junior Subordinated
Debentures that are not applied but remain unclaimed by the Holders of such
Junior Subordinated Debentures for at least two years after the date upon
which the principal of or interest on such Junior Subordinated Debentures
shall have respectively become due and payable, shall be repaid to the
Company on _________ of each year or (if then held by the Company) shall be
discharged from such trust; and thereupon the paying agent and the Trustee
shall be released from all further liability with respect to such moneys or
Governmental Obligations, and the Holder of any of the Junior Subordinated
Debentures entitled to receive such payment shall thereafter, as an unsecured
general creditor, look only to the Company for the payment thereof.
ARTICLE XIV
IMMUNITY OF INCORPORATORS,
STOCKHOLDERS, OFFICERS AND DIRECTORS
14.1 NO RECOURSE. No recourse under or upon any obligation,
covenant or agreement of this Indenture, or of any Junior Subordinated
Debenture, or for any claim based thereon or otherwise in respect thereof,
shall be had against any incorporator, stockholder, officer or director as
such, past, present or future, of the Company or of any predecessor or
successor corporation, either directly or through the Company or any such
predecessor or successor corporation, whether by virtue of any constitution,
statute or rule of law, or by the enforcement of any assessment or penalty or
otherwise; it being expressly understood that this Indenture and the
obligations issued hereunder are solely corporate obligations, and that no
such personal liability whatever shall attach to, or is or shall be incurred
by, the incorporators, stockholders, officers or
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directors as such, of the Company or of any predecessor or successor
corporation, or any of them, because of the creation of the indebtedness
hereby authorized, or under or by reason of the obligations, covenants or
agreements contained in this Indenture or in any of the Junior Subordinated
Debentures or implied therefrom; and that any and all such personal liability
of every name and nature, either at common law or in equity or by
constitution or statute, of, and any and all such rights and claims against,
every such incorporator, stockholder, officer or director as such, because of
the creation of the indebtedness hereby authorized, or under or by reason of
the obligations, covenants or agreements contained in this Indenture or in
any of the Junior Subordinated Debentures or implied therefrom, are hereby
expressly waived and released as a condition of, and as a consideration for,
the execution of this Indenture and the issuance of such Junior Subordinated
Debentures.
ARTICLE XV
MISCELLANEOUS PROVISIONS
15.1 EFFECT ON SUCCESSORS AND ASSIGNS. All the covenants,
stipulations, promises and agreements in this Indenture contained by or on
behalf of the Company or the Trustee shall bind their respective successors
and assigns, whether so expressed or not.
15.2 ACTIONS BY SUCCESSOR. Any act or proceeding by any provision
of this Indenture authorized or required to be done or performed by any
board, committee or officer of the Company shall and may be done and
performed with like force and effect by the corresponding board, committee or
officer of any corporation that shall at the time be the lawful sole
successor of the Company.
15.3 SURRENDER OF COMPANY POWERS. The Company by instrument in
writing executed by authority of 2/3 (two-thirds) of its Board of Directors
and delivered to the Trustee may surrender any of the powers reserved to the
Company, and thereupon such power so surrendered shall terminate both as to
the Company and as to any successor corporation.
15.4 NOTICES. Except as otherwise expressly provided herein any
notice or demand that by any provision of this Indenture is required or
permitted to be given or served by the Trustee or by the Holders of Junior
Subordinated Debentures to or on the Company may be given or served by being
deposited first-class postage prepaid in a post-office letterbox addressed
(until another address is filed in writing by the Company with the Trustee),
as follows: c/o Spectrum Bancorporation, Inc., 10834 Old Mill Road, Suite
One, Omaha, Nebraska 68154-2648 Attention: President. Any notice, election,
request or demand by the Company or any Securityholder to or upon the Trustee
shall be deemed to have been sufficiently given or made, for all purposes, if
given or made in writing at the Corporate Trust Office of the Trustee.
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15.5 GOVERNING LAW. This Indenture and each Junior Subordinated
Debenture shall be deemed to be a contract made under the internal laws of
the State of Iowa and for all purposes shall be construed in accordance with
the laws of said state, provided that the immunities and the standard of care
of the Trustee shall be governed by Delaware law.
15.6 TREATMENT OF JUNIOR SUBORDINATED DEBENTURES AS DEBT. It is
intended that the Junior Subordinated Debentures will be treated as
indebtedness and not as equity for federal income tax purposes. The
provisions of this Indenture shall be interpreted to further this intention.
15.7 COMPLIANCE CERTIFICATES AND OPINIONS.
(a) Upon any application or demand by the Company to the Trustee to
take any action under any of the provisions of this Indenture, the Company
shall furnish to the Trustee an Officers' Certificate stating that all
conditions precedent provided for in this Indenture relating to the proposed
action have been complied with and an Opinion of Counsel stating that in the
opinion of such counsel all such conditions precedent have been complied
with, except that in the case of any such application or demand as to which
the furnishing of such documents is specifically required by any provision of
this Indenture relating to such particular application or demand, no
additional certificate or opinion need be furnished.
(b) Every certificate or opinion delivered to the Trustee with
respect to compliance with a condition or covenant in this Indenture shall
include (1) a statement that the Person making such certificate or opinion
has read such covenant or condition; (2) a brief statement as to the nature
and scope of the examination or investigation upon which the statements or
opinions contained in such certificate or opinion are based; (3) a statement
that, in the opinion of such Person, such Person has made such examination or
investigation as is necessary to enable such Person to express an informed
opinion as to whether or not such covenant or condition has been complied
with; and (4) a statement as to whether or not, in the opinion of such
Person, such condition or covenant has been complied with.
15.8 PAYMENTS ON BUSINESS DAYS. In any case where the date of
maturity of interest or principal of the Junior Subordinated Debentures or
the date of redemption of the Junior Subordinated Debentures shall not be a
Business Day, then payment of interest or principal will be made on the next
succeeding Business Day (without any additional interest or other payment in
respect of any such delay), except that, if such Business Day is in the next
succeeding calendar year, such payment shall be made on the immediately
preceding Business Day, in each case with the same force and effect as if
made on the date such payment was originally payable.
15.9 CONFLICT WITH TRUST INDENTURE ACT. If and to the extent that
any provision of this Indenture limits, qualifies or conflicts with the
duties imposed by
49
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Sections 310 to 317, inclusive, of the Trust Indenture Act, such imposed
duties shall control.
15.10 COUNTERPARTS. This Indenture may be executed in any number of
counterparts, each of which shall be an original, but such counterparts shall
together constitute but one and the same instrument.
15.11 SEPARABILITY. In case any one or more of the provisions
contained in this Indenture or in the Junior Subordinated Debentures shall
for any reason be held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect any
other provisions of this Indenture or of the Junior Subordinated Debentures,
but this Indenture and the Junior Subordinated Debentures shall be construed
as if such invalid or illegal or unenforceable provision had never been
contained herein or therein.
15.12 ASSIGNMENT. The Company will have the right at all times to
assign any of its respective rights or obligations under this Indenture to a
direct or indirect wholly-owned Subsidiary of the Company, provided that, in
the event of any such assignment, the Company will remain liable for all such
obligations. Subject to the foregoing, this Indenture is binding upon and
inures to the benefit of the parties thereto and their respective successors
and assigns. This Indenture may not otherwise be assigned by the parties
hereto.
15.13 ACKNOWLEDGMENT OF RIGHTS. The Company acknowledges that, with
respect to any Junior Subordinated Debentures held by the Trust or a trustee
of the Trust, if the Property Trustee of the Trust fails to enforce its
rights under this Indenture as the Holder of the Junior Subordinated
Debentures held as the assets of the Trust, any holder of Preferred
Securities may institute legal proceedings directly against the Company to
enforce such Property Trustee's rights under this Indenture without first
instituting any legal proceedings against such Property Trustee or any other
Person or entity. Notwithstanding the foregoing, if an Event of Default has
occurred and is continuing and such event is attributable to the failure of
the Company to pay interest or principal on the Junior Subordinated
Debentures on the date such interest or principal is otherwise payable (or in
the case of redemption, on the redemption date), the Company acknowledges
that a holder of Preferred Securities may directly institute a proceeding for
enforcement of payment to such holder of the principal of or interest on the
Junior Subordinated Debentures having a principal amount equal to the
aggregate Liquidation Amount of the Preferred Securities of such holder on or
after the respective due date specified in the Junior Subordinated
Debentures. This Section 15.13 may not be amended without the prior written
consent of the holders of all of the Preferred Securities.
50
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ARTICLE XVI
SUBORDINATION OF JUNIOR SUBORDINATED DEBENTURES
16.1 AGREEMENT TO SUBORDINATE. The Company covenants and agrees,
and each Holder of Junior Subordinated Debentures issued hereunder by such
Holder's acceptance thereof likewise covenants and agrees, that all Junior
Subordinated Debentures shall be issued subject to the provisions of this
Article Sixteen; and each Holder, whether upon original issue or upon
transfer or assignment thereof, accepts and agrees to be bound by such
provisions.
The payment by the Company of the principal of and interest on all
Junior Subordinated Debentures issued hereunder shall, to the extent and in
the manner hereinafter set forth, be subordinated and junior in right of
payment to the prior payment in full of all Senior and Subordinated Debt,
whether outstanding at the date of this Indenture or thereafter incurred.
No provision of this Article Sixteen shall prevent the occurrence of
any default or Event of Default hereunder.
16.2 DEFAULT ON SENIOR AND SUBORDINATED DEBT. In the event and
during the continuation of any default by the Company in the payment of
principal, premium, interest or any other payment due on any Senior and
Subordinated Debt of the Company or in the event that the maturity of any
Senior and Subordinated Debt of the Company has been accelerated because of a
default, then, in either case, no payment shall be made by the Company with
respect to the principal of or interest on the Junior Subordinated Debentures.
In the event that, notwithstanding the foregoing, any payment shall be
received by the Trustee when such payment is prohibited by the preceding
paragraph of this Section 16.2, such payment shall be held in trust for the
benefit of, and shall be paid over or delivered to, the holders of Senior and
Subordinated Debt or their respective representatives, or to the trustee or
trustees under any indenture pursuant to which any of such Senior and
Subordinated Debt may have been issued, as their respective interests may
appear, but only to the extent that the holders of the Senior and
Subordinated Debt (or their representative or representatives or a trustee)
notify the Trustee in writing within 90 days of such payment of the amounts
then due and owing on the Senior and Subordinated Debt and only the amounts
specified in such notice to the Trustee shall be paid to the holders of
Senior and Subordinated Debt.
16.3 LIQUIDATION; DISSOLUTION; BANKRUPTCY. Upon any payment by the
Company or distribution of assets of the Company of any kind or character,
whether in cash, property or securities, to creditors upon any dissolution or
winding-up or liquidation or reorganization of the Company, whether voluntary
or involuntary or in bankruptcy, insolvency, receivership or other
proceedings, all amounts due upon all Senior and Subordinated Debt of the
Company shall first be paid in full, or payment
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<PAGE>
thereof provided for in money in accordance with its terms, before any
payment is made by the Company on account of the principal or interest on the
Junior Subordinated Debentures; and upon any such dissolution or winding-up
or liquidation or reorganization, any payment by the Company, or distribution
of assets of the Company of any kind or character, whether in cash, property
or securities, to which the Holders or the Trustee would be entitled to
receive from the Company, except for the provisions of this Article Sixteen,
shall be paid by the Company or by any receiver, trustee in bankruptcy,
liquidating trustee, agent or other Person making such payment or
distribution, or by the Holders or by the Trustee under the Indenture if
received by them or it, directly to the holders of Senior and Subordinated
Debt of the Company (pro rata to such holders on the basis of the respective
amounts of Senior and Subordinated Debt held by such holders, as calculated
by the Company) or their representative or representatives, or to the trustee
or trustees under any indenture pursuant to which any instruments evidencing
such Senior and Subordinated Debt may have been issued, as their respective
interests may appear, to the extent necessary to pay such Senior and
Subordinated Debt in full, in money or money's worth, after giving effect to
any concurrent payment or distribution to or for the holders of such Senior
and Subordinated Debt, before any payment or distribution is made to the
Holders or to the Trustee.
In the event that, notwithstanding the foregoing, any payment or
distribution of assets of the Company of any kind or character, whether in
cash, property or securities, prohibited by the foregoing, shall be received
by the Trustee before all Senior and Subordinated Debt of the Company is paid
in full, or provision is made for such payment in money in accordance with
its terms, such payment or distribution shall be held in trust for the
benefit of and shall be paid over or delivered to the holders of such Senior
and Subordinated Debt or their representative or representatives, or to the
trustee or trustees under any indenture pursuant to which any instruments
evidencing such Senior and Subordinated Debt may have been issued, and their
respective interests may appear, as calculated by the Company, for
application to the payment of all Senior and Subordinated Debt of the
Company, as the case may be, remaining unpaid to the extent necessary to pay
such Senior and Subordinated Debt in full in money in accordance with its
terms, after giving effect to any concurrent payment or distribution to or
for the benefit of the holders of such Senior and Subordinated Debt.
For purposes of this Article Sixteen, the words "cash, property or
securities" shall not be deemed to include shares of stock of the Company as
reorganized or readjusted, or securities of the Company or any other
corporation provided for by a plan of reorganization or readjustment, the
payment of which is subordinated at least to the extent provided in this
Article Sixteen with respect to the Junior Subordinated Debentures to the
payment of all Senior and Subordinated Debt of the Company, as the case may
be, that may at the time be outstanding, provided that (i) such Senior and
Subordinated Debt is assumed by the new corporation, if any, resulting from
any such reorganization or readjustment, and (ii) the rights of the holders
of such Senior and Subordinated Debt are not, without the consent of such
holders, altered by such reorganization or readjustment. The consolidation
of the Company with, or the merger
52
<PAGE>
of the Company into, another corporation or the liquidation or dissolution
of the Company following the conveyance or transfer of its property as an
entirety, or substantially as an entirety, to another corporation upon the
terms and conditions provided for in Article Twelve of this Indenture shall
not be deemed a dissolution, winding-up, liquidation or reorganization for
the purposes of this Section 16.3 if such other corporation shall, as a part
of such consolidation, merger, conveyance or transfer, comply with the
conditions stated in Article Twelve of this Indenture. Nothing in Section
16.2 or in this Section 16.3 shall apply to claims of, or payments to, the
Trustee under or pursuant to Section 9.6 of this Indenture.
16.4 SUBROGATION. Subject to the payment in full of all Senior and
Subordinated Debt of the Company, the rights of the Holders of the Junior
Subordinated Debentures shall be subrogated to the rights of the holders of
such Senior and Subordinated Debt to receive payments or distributions of
cash, property or securities of the Company, as the case may be, applicable
to such Senior and Subordinated Debt until the principal of and interest on
the Junior Subordinated Debentures shall be paid in full; and, for the
purposes of such subrogation, no payments or distributions to the holders of
such Senior and Subordinated Debt of any cash, property or securities to
which the Holders of the Junior Subordinated Debentures or the Trustee would
be entitled except for the provisions of this Article Sixteen, and no payment
over pursuant to the provisions of this Article Sixteen to or for the benefit
of the holders of such Senior and Subordinated Debt by Holders of the Junior
Subordinated Debentures or the Trustee, shall, as between the Company, its
creditors other than holders of Senior and Subordinated Debt of the Company,
and the Holders of the Junior Subordinated Debentures, be deemed to be a
payment by the Company to or on account of such Senior and Subordinated Debt.
It is understood that the provisions of this Article Sixteen are and are
intended solely for the purposes of defining the relative rights of the
Holders of the Junior Subordinated Debentures, on the one hand, and the
holders of such Senior and Subordinated Debt on the other hand.
Nothing contained in this Article Sixteen or elsewhere in this
Indenture or in the Junior Subordinated Debentures is intended to or shall
impair, as between the Company, its creditors other than the holders of
Senior and Subordinated Debt of the Company, and the Holders of the Junior
Subordinated Debentures, the obligation of the Company, which is absolute and
unconditional, to pay to the Holders of the Junior Subordinated Debentures
the principal of and interest on the Junior Subordinated Debentures as and
when the same shall become due and payable in accordance with their terms, or
is intended to or shall affect the relative rights of the Holders of the
Junior Subordinated Debentures and creditors of the Company, other than the
holders of Senior and Subordinated Debt of the Company, nor shall anything
herein or therein prevent the Trustee or the Holder of any Junior
Subordinated Debenture from exercising all remedies otherwise permitted by
applicable law upon default under this Indenture, subject to the rights, if
any, under this Article Sixteen of the holders of such Senior and
Subordinated Debt in respect of cash, property or securities of the Company,
as the case may be, received upon the exercise of any such remedy.
53
<PAGE>
Upon any payment or distribution of assets of the Company referred to
in this Article Sixteen, the Trustee, subject to the provisions of Section
9.1, and the Holders of the Junior Subordinated Debentures shall be entitled
to conclusively rely upon any order or decree made by any court of competent
jurisdiction in which such dissolution, winding-up, liquidation or
reorganization proceedings are pending, or a certificate of the receiver,
trustee in bankruptcy, liquidation trustee, agent or other Person making such
payment or distribution, delivered to the Trustee or to the Holders of the
Junior Subordinated Debentures, for the purposes of ascertaining the Persons
entitled to participate in such distribution, the holders of Senior and
Subordinated Debt and other indebtedness of the Company, as the case may be,
the amount thereof or payable thereon, the amount or amounts paid or
distributed thereon and all other facts pertinent thereto or to this Article
Sixteen.
16.5 TRUSTEE TO EFFECTUATE SUBORDINATION. Each Holder of Junior
Subordinated Debentures by such Holder's acceptance thereof authorizes and
directs the Trustee on such Holder's behalf to take such action as may be
necessary or appropriate to effectuate the subordination provided in this
Article Sixteen and appoints the Trustee such Holder's attorney-in-fact for
any and all such purposes.
16.6 NOTICE BY THE COMPANY. The Company shall give prompt written
notice to a Responsible Officer of the Trustee of any fact known to the
Company that would prohibit the making of any payment of monies to or by the
Trustee in respect of the Junior Subordinated Debentures pursuant to the
provisions of this Article Sixteen. Notwithstanding the provisions of this
Article Sixteen or any other provision of this Indenture, the Trustee shall
not be charged with knowledge of the existence of any facts that would
prohibit the making of any payment of monies to or by the Trustee in respect
of the Junior Subordinated Debentures pursuant to the provisions of this
Article Sixteen, unless and until a Responsible Officer of the Trustee shall
have received written notice thereof from the Company or a holder or holders
of Senior and Subordinated Debt or from any trustee therefor; and before the
receipt of any such written notice, the Trustee, subject to the provisions of
Section 9.1, shall be entitled in all respects to assume that no such facts
exist; provided, however, that if the Trustee shall not have received the
notice provided for in this Section 16.6 at least two Business Days prior to
the date upon which by the terms hereof any money may become payable for any
purpose (including, without limitation, the payment of the principal of or
interest on any Junior Subordinated Debenture), then, anything herein
contained to the contrary notwithstanding, the Trustee shall have full power
and authority to receive such money and to apply the same to the purposes for
which they were received, and shall not be affected by any notice to the
contrary that may be received by it within two Business Days prior to such
date.
The Trustee, subject to the provisions of Section 9.1, shall be
entitled to conclusively rely on the delivery to it of a written notice by a
Person representing himself to be a holder of Senior and Subordinated Debt of
the Company (or a trustee on behalf of such holder), to establish that such
notice has been given by a holder of such Senior and Subordinated Debt or a
trustee on behalf of any such holder or
54
<PAGE>
holders. In the event that the Trustee determines in good faith that
further evidence is required with respect to the right of any Person as a
holder of such Senior and Subordinated Debt to participate in any payment or
distribution pursuant to this Article Sixteen, the Trustee may request such
Person to furnish evidence to the reasonable satisfaction of the Trustee as
to the amount of such Senior and Subordinated Debt held by such Person, the
extent to which such Person is entitled to participate in such payment or
distribution and any other facts pertinent to the rights of such Person
under this Article Sixteen, and, if such evidence is not furnished, the
Trustee may defer any payment to such Person pending judicial determination
as to the right of such Person to receive such payment.
16.7 RIGHTS OF THE TRUSTEE; HOLDERS OF SENIOR AND SUBORDINATED
DEBT. The Trustee in its individual capacity shall be entitled to all the
rights set forth in this Article Sixteen in respect of any Senior and
Subordinated Debt at any time held by it, to the same extent as any other
holder of Senior and Subordinated Debt, and nothing in this Indenture shall
deprive the Trustee of any of its rights as such holder.
With respect to the holders of Senior and Subordinated Debt of the
Company, the Trustee undertakes to perform or to observe only such of its
covenants and obligations as are specifically set forth in this Article
Sixteen, and no implied covenants or obligations with respect to the holders
of such Senior and Subordinated Debt shall be read into this Indenture
against the Trustee. The Trustee shall not be deemed to owe any fiduciary
duty to the holders of such Senior and Subordinated Debt and, subject to the
provisions of Section 9.1, the Trustee shall not be liable to any holder of
such Senior and Subordinated Debt if it shall pay over or deliver to Holders
of Junior Subordinated Debentures, the Company or any other Person money or
assets to which any holder of such Senior and Subordinated Debt shall be
entitled by virtue of this Article Sixteen or otherwise.
16.8 SUBORDINATION MAY NOT BE IMPAIRED. No right of any present or
future holder of any Senior and Subordinated Debt of the Company to enforce
subordination as herein provided shall at any time in any way be prejudiced
or impaired by any act or failure to act on the part of the Company or by any
act or failure to act, in good faith, by any such holder, or by any
noncompliance by the Company with the terms, provisions and covenants of this
Indenture, regardless of any knowledge thereof that any such holder may have
or otherwise be charged with. Without in any way limiting the generality of
the foregoing paragraph, the holders of Senior and Subordinated Debt of the
Company may, at any time and from time to time, without the consent of or
notice to the Trustee or the Holders of the Junior Subordinated Debentures,
without incurring responsibility to the Holders of the Junior Subordinated
Debentures and without impairing or releasing the subordination provided in
this Article Sixteen or the obligations hereunder of the Holders of the
Junior Subordinated Debentures to the holders of such Senior and
Subordinated Debt, do any one or more of the following: (i) change the
manner, place or terms of payment or extend the time of payment of, or renew
or alter, such Senior and Subordinated Debt, or otherwise
55
<PAGE>
amend or supplement in any manner such Senior and Subordinated Debt or any
instrument evidencing the same or any agreement under which such Senior and
Subordinated Debt is outstanding; (ii) sell, exchange, release or otherwise
deal with any property pledged, mortgaged or otherwise securing such Senior
and Subordinated Debt; (iii) release any Person liable in any manner for the
collection of such Senior and Subordinated Debt; and (iv) exercise or
refrain from exercising any rights against the Company and any other Person.
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed as of the day and year first above written.
SPECTRUM BANCORPORATION, INC.
By:
- -----------------------------------------
Deryl F. Hamann, Chairman and Chief Executive Officer
WILMINGTON TRUST COMPANY, AS TRUSTEE
By:
- -----------------------------------------
Name:
- ---------------------------------------
Title:
- --------------------------------------
STATE OF NEBRASKA )
)
) ss
)
COUNTY OF DOUGLAS )
56
<PAGE>
On the _______ day of ____________, 1999, before me personally came
Deryl F. Hamann, to me known, who, being by me duly sworn, did depose and say
that he is the Chairman and Chief Executive Officer of SPECTRUM
BANCORPORATION, INC., one of the corporations described in and which executed
the above instrument; and that he signed his name thereto on behalf of said
corporation by authority of the Board of Directors of said corporation.
Witness my hand and official seal:
- ---------------------------------------------
Notary Public
My Commission Expires:
- -----------------------
STATE OF DELAWARE )
)
) ss
)
COUNTY OF ____________ )
On the _______ day of___________, 1999, before me personally came
______________________, to me known, who, being by me duly sworn, did depose
and say that he/she is the _______________________ of WILMINGTON TRUST
COMPANY, one of the corporations described in and which executed the above
instrument; and that he/she signed his/her name thereto on behalf of said
corporation by authority of the Board of Directors of said corporation.
Witness my hand and official seal:
- ---------------------------------------------
Notary Public
My Commission Expires:
- -----------------------
57
<PAGE>
EXHIBIT A
(FORM OF FACE OF JUNIOR SUBORDINATED DEBENTURE)
This Junior Subordinated Debenture is a Global Subordinated Debenture
within the meaning of the Indenture hereinafter referred to and is registered
in the name of a Depositary or a nominee of a Depositary. This Junior
Subordinated Debenture is exchangeable for Junior Subordinated Debentures
registered in the name of a person other than the Depositary or its nominee
only in the limited circumstances described in the Indenture, and no transfer
of this Junior Subordinated Debenture (other than a transfer of this Junior
Subordinated Debenture as a whole by the Depositary to a nominee of the
Depositary or by a nominee of the Depositary to the Depositary or another
nominee of the Depositary) may be registered except in such limited
circumstances.
Unless this Junior Subordinated Debenture is presented by an
authorized representative of Wilmington Trust Company (Rodney Square North,
1100 North Market Street, Wilmington, Delaware 19890-0001) to the issuer or
its agent for registration of transfer, exchange or payment, and any Junior
Subordinated Debenture issued is registered in the name of Cede & Co. or such
other name as requested by an authorized representative of Wilmington Trust
Company (and any payment hereon is made to Cede & Co. or to such other entity
as is requested by an authorized representative of Wilmington Trust
Company), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY
OR TO ANY PERSON IS WRONGFUL inasmuch the registered owner hereof, Cede &
Co., has an interest herein.
Certificate No. Registered Principal Amount
_____________ $20,618,560
CUSIP No. __________
SPECTRUM BANCORPORATION, INC.
_____% JUNIOR SUBORDINATED DEBENTURE
DUE __________, 2029
A - 1
<PAGE>
Spectrum Bancorporation, Inc., an Iowa corporation (the "Company",
which term includes any successor corporation under the Indenture hereinafter
referred to), for value received, hereby promises to pay to Wilmington Trust
Company or registered assigns, the principal sum of Twenty Million Six
Hundred Eighteen Thousand Five Hundred and Sixty Dollars ($20,618,560) on
__________, 2029 (which date may be shortened as provided in the Indenture,
the "Stated Maturity"), and to pay interest on said principal sum from
__________, 1999, or from the most recent interest payment date (each such
date, an "Interest Payment Date") to which interest has been paid or duly
provided for, quarterly (subject to deferral as set forth herein) in arrears
on the 15th day of January, April, July and October in each year commencing
October 15, 1999, at the rate of _____% per annum until the principal hereof
shall have become due and payable, and on any overdue principal and (without
duplication and to the extent that payment of such interest is enforceable
under applicable law) on any overdue installment of interest at the same rate
per annum compounded quarterly. The amount of each interest payment due with
respect to the Junior Subordinated Debentures will include amounts accrued
through the date the interest payment is due. The amount of interest payable
on any Interest Payment Date shall be computed on the basis of a 360-day year
of twelve 30-day months. In the event that any date on which interest is
payable on this Junior Subordinated Debenture is not a Business Day (as
defined in the Indenture), then payment of interest payable on such date will
be made on the next succeeding day that is a Business Day (and without any
interest or other payment in respect of any such delay), except that, if such
Business Day is in the next succeeding calendar year, such payment shall be
made on the immediately preceding Business Day, in each case with the same
force and effect as if made on such date. The interest installment so
payable, and punctually paid or duly provided for, on any Interest Payment
Date will, as provided in the Indenture, be paid to the person in whose
name this Junior Subordinated Debenture (or one or more Predecessor Junior
Subordinated Debentures, as defined in the Indenture) is registered at the
close of business on the regular record date for such interest installment,
which shall be the close of business on the business day next preceding such
Interest Payment Date unless otherwise provided in the Indenture. The
principal of and the interest on this Junior Subordinated Debenture shall be
payable at the office or agency of the Trustee (as defined in the Indenture)
maintained for that purpose in any coin or currency of the United States of
America that at the time of payment is legal tender for payment of public and
private debts; provided, however, that payment of interest may be made at
the option of the Company by check mailed to the Registered Holder (as
defined in the Indenture) at such address as shall appear in the Securities
Register (as defined in the Indenture). Notwithstanding the foregoing, so
long as the Holder of this Junior Subordinated Debenture is the Property
Trustee (as defined in the Indenture), the payment of the principal of and
interest on this Junior Subordinated Debenture will be made at such place
and to such account as may be designated by the Property Trustee.
The Stated Maturity may be shortened at any time by the Company to any
date not earlier than __________, 2004, subject to the Company having
received prior
A - 2
<PAGE>
approval of the Federal Reserve (as defined in the Indenture) if then
required under applicable capital guidelines or policies of the Federal
Reserve.
The indebtedness evidenced by this Junior Subordinated Debenture is,
to the extent provided in the Indenture, subordinate and junior in right of
payment to the prior payment in full of all Senior and Subordinated Debt (as
defined in the Indenture), and this Junior Subordinated Debenture is issued
subject to the provisions of the Indenture with respect thereto. Each Holder
of this Junior Subordinated Debenture, by accepting the same, (a) agrees to
and shall be bound by such provisions, (b) authorizes and directs the Trustee
on his or her behalf to take such action as may be necessary or appropriate
to acknowledge or effectuate the subordination so provided and (c) appoints
the Trustee his or her attorney-in-fact for any and all such purposes. Each
Holder hereof, by his or her acceptance hereof, hereby waives all notice of
the acceptance of the subordination provisions contained herein and in the
Indenture by each holder of Senior and Subordinated Debt, whether now
outstanding or hereafter incurred, and waives reliance by each such holder
upon said provisions.
This Junior Subordinated Debenture shall not be entitled to any
benefit under the Indenture, be valid or become obligatory for any purpose
until the Certificate of Authentication hereon shall have been signed by or
on behalf of the Trustee.
The provisions of this Junior Subordinated Debenture are continued on
the reverse side hereof and such continued provisions shall for all purposes
have the same effect as though fully set forth at this place.
IN WITNESS WHEREOF, the Company has caused this instrument to be
executed.
Dated: __________, 1999 SPECTRUM BANCORPORATION, INC.
By:
- -------------------------------
Name: Deryl F. Hamann
Title: Chairman and Chief Executive Officer
ATTEST:
By:
---------------------------------
A - 3
<PAGE>
Name:
- --------------------------------
Title: Secretary
FORM OF CERTIFICATE OF AUTHENTICATION
CERTIFICATE OF AUTHENTICATION
This is one of the Junior Subordinated Debentures described in the
within-mentioned Indenture.
Dated: WILMINGTON TRUST COMPANY, as Trustee
- ---------------------------
By:
- -------------------------------
Authorized Signature
FORM OF REVERSE OF JUNIOR SUBORDINATED DEBENTURE
_____% JUNIOR SUBORDINATED DEBENTURE
(CONTINUED)
This Junior Subordinated Debenture is one of the junior subordinated
debentures of the Company (herein sometimes referred to as the "Junior
Subordinated Debentures"), specified in the Indenture, all issued under and
pursuant to a Subordinated Indenture dated as of __________, 1999 (the
"Indenture") duly executed and delivered between the Company and Wilmington
Trust Company, as Trustee (the "Trustee"), to which Indenture reference is
hereby made for a description of the rights, limitations of rights,
obligations, duties and immunities thereunder of the Trustee, the Company and
the Holders of the Junior Subordinated Debentures. The Junior Subordinated
Debentures are limited in aggregate principal amount as specified in the
Indenture.
A - 4
<PAGE>
Because of the occurrence and continuation of a Special Event (as
defined in the Indenture), in certain circumstances, this Junior Subordinated
Debenture may become due and payable at the option of the Company at the
principal amount together with any interest accrued thereon (the "Redemption
Price"). The Redemption Price shall be paid prior to 2:00 p.m., Wilmington,
Delaware time, on the date of such redemption or at such earlier time as the
Company determines.
The Company shall have the right to redeem this Junior Subordinated
Debenture at the option of the Company, in whole or in part, from time to
time, on or after __________, 2004, at a redemption price equal to 100% of
the principal amount to be redeemed plus any accrued but unpaid interest
thereon to the date of such redemption. Any redemption pursuant to this
paragraph will be made upon not less than 30 days nor more than 60 days
notice. If the Junior Subordinated Debentures are only partially redeemed by
the Company pursuant to this paragraph, the Junior Subordinated Debentures
will be redeemed pro rata or by lot or by any other method utilized by the
Trustee; provided that if, at the time of redemption, the Junior Subordinated
Debentures are registered as a Global Subordinated Debenture (as defined in
the Indenture), the Depositary (as defined in the Indenture) shall determine
the principal amount of such Junior Subordinated Debentures held by each
Junior Subordinated Debenture Holder to be redeemed in accordance with its
procedures.
In the event of redemption of this Junior Subordinated Debenture in
part only, a new Junior Subordinated Debenture for the unredeemed portion
hereof will be issued in the name of the Holder hereof upon the cancellation
hereof.
In case an Event of Default (as defined in the Indenture), shall have
occurred and be continuing, the principal of all of the Junior Subordinated
Debentures may be declared, and upon such declaration shall become, due and
payable, in the manner, with the effect and subject to the conditions
provided in the Indenture.
The Indenture contains provisions permitting the Company and the
Trustee, with the consent of the Holders of not less than a majority in
aggregate principal amount of the Junior Subordinated Debentures at the time
Outstanding, as defined in the Indenture, to execute supplemental indentures
for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of the Indenture or of any supplemental
indenture or of modifying in any manner the rights of the Holders of the
Junior Subordinated Debentures; provided, however, that no such supplemental
indenture shall (i) change the stated maturity of the Junior Subordinated
Debentures except as provided in the Indenture, or reduce the principal
amount thereof, or reduce the rate or extend the time of payment of interest
thereon, without the consent of the Holder of each Junior Subordinated
Debenture so affected, or (ii) reduce the aforesaid percentage of Junior
Subordinated Debentures, the Holders of which are required to consent to any
such supplemental indenture, without the consent of the Holders of each
Junior Subordinated Debenture then Outstanding and affected thereby. The
Indenture also contains provisions permitting the Holders of a majority in
aggregate
A - 5
<PAGE>
principal amount of the Junior Subordinated Debentures at the time
Outstanding, on behalf of all of the Holders of the Junior Subordinated
Debentures, to waive any past default in the performance of any of the
covenants contained in the Indenture, or established pursuant to the
Indenture, and its consequences, except a default in the payment of the
principal of or interest on any of the Junior Subordinated Debentures. Any
such consent or waiver by the registered Holder of this Junior Subordinated
Debenture (unless revoked as provided in the Indenture) shall be conclusive
and binding upon such Holder and upon all future Holders and owners of this
Junior Subordinated Debenture and of any Junior Subordinated Debenture
issued in exchange herefor or in place hreof (whether by registration of
transfer or otherwise), irrespective of whether or not any notation of such
consent or waiver is made upon this Junior Subordinated Debenture.
No reference herein to the Indenture and no provision of this Junior
Subordinated Debenture or of the Indenture shall alter or impair the
obligation of the Company, which is absolute and unconditional, to pay the
principal of and interest on this Junior Subordinated Debenture at the time
and place and at the rate and in the money herein prescribed.
The Company shall have the right at any time during the term of the
Junior Subordinated Debentures and from time to time to extend the interest
payment period of such Junior Subordinated Debentures for up to 20
consecutive quarters (an "Extended Interest Payment Period"), at the end of
which period the Company shall pay all interest then accrued and unpaid
(together with interest thereon at the rate specified for the Junior
Subordinated Debentures to the extent that payment of such interest is
enforceable under applicable law). Before the termination of any such
Extended Interest Payment Period, the Company may further extend such
Extended Interest Payment Period, provided that such Extended Interest
Payment Period together with all such further extensions thereof shall not
exceed 20 consecutive quarters or extend beyond the Stated Maturity. At the
termination of any such Extended Interest Payment Period and upon the payment
of all accrued and unpaid interest and any additional amounts then due, the
Company may commence a new Extended Interest Payment Period.
The Company has agreed that if at any time (i) there shall have
occurred any event of which the Company has actual knowledge that (a) with
the giving of notice or the lapse of time, or both, would constitute an Event
of Default and (b) in respect to which the Company shall not have taken
reasonable steps to cure, or (ii) the Company shall have given notice of its
election of an Extended Interest Payment Period as provided herein and shall
not have rescinded such notice, or such Extended Interest Payment Period, or
any extension thereof, shall be continuing; or (iii) while the Junior
Subordinated Debentures are held by the Trust, the Company shall be in
default with respect to its payment of any obligation under the Preferred
Securities Guarantee, then 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 or
(2) make any payment of principal, interest or premium, if
A - 6
<PAGE>
any, on or repay, repurchase or redeem any debt securities of the Company
(including the Junior Subordinated Debentures) that rank pari passu with or
junior in interest to the Junior Subordinated Debentures or make any
guarantee payments with respect to any guarantee by the Company of the debt
securities of any subsidiary of the Company if such guarantee ranks pari
passu or junior in interest to the Junior Subordinated Debentures (other than
(a) dividends or distributions in common stock, (b) any declaration of a
dividend in connection with the implementation of a shareholders' rights
plan, or the issuance of stock under any such plan in the future or the
redemption or repurchase of any such rights pursuant thereto, (c) payments
under the Preferred Securities Guarantee and (d) purchases of common stock
related to the issuance of common stock or rights under any of the Company's
benefit plans for its directors, officers or employees).
As provided in the Indenture and subject to certain limitations
therein set forth, this Junior Subordinated Debenture is transferable by the
registered Holder hereof on the Securities Register of the Company, upon
surrender of this Junior Subordinated Debenture for registration of transfer
at the office or agency of the Trustee accompanied by a written instrument
or instruments of transfer in form satisfactory to the Company or the
Trustee duly executed by the registered Holder hereof or such Holder's
attorney duly authorized in writing, and thereupon one or more new Junior
Subordinated Debentures of authorized denominations and for the same
aggregate principal amount will be issued to the designated transferee or
transferees. No service charge will be made for any such transfer, but the
Company may require payment of a sum sufficient to cover any tax or other
governmental charge payable in relation thereto.
Prior to due presentment for registration of transfer of this Junior
Subordinated Debenture, the Company, the Trustee, any paying agent and the
Securities Registrar (as defined in the Indenture) may deem and treat the
Registered Holder hereof as the absolute owner hereof (whether or not this
Junior Subordinated Debenture shall be overdue and notwithstanding any notice
of ownership or writing hereon made by anyone other than the Securities
Registrar) for the purpose of receiving payment of or on account of the
principal hereof and interest due hereon and for all other purposes, and
neither the Company nor the Trustee nor any paying agent nor any Securities
Registrar shall be affected by any notice to the contrary.
No recourse shall be had for the payment of the principal of or the
interest on this Junior Subordinated Debenture, or for any claim based
hereon, or otherwise in respect hereof, or based on or in respect of the
Indenture, against any incorporator, stockholder, officer or director, past,
present or future, as such, of the Company or of any predecessor or successor
corporation, whether by virtue of any constitution, statute or rule of law,
or by the enforcement of any assessment or penalty or otherwise, all such
liability being, by the acceptance hereof and as part of the consideration
for the issuance hereof, expressly waived and released.
The Junior Subordinated Debentures are issuable only in registered
form without coupons in denominations of $10 and any integral multiple
thereof. This Global
A - 7
<PAGE>
Subordinated Debenture is exchangeable for Junior Subordinated Debentures in
definitive form only under certain limited circumstances set forth in the
Indenture. Junior Subordinated Debentures so issued are issuable only in
registered form without coupons in denominations of $10 and any integral
multiple thereof.
All terms used in this Junior Subordinated Debenture that are defined
in the Indenture shall have the meanings assigned to them in the Indenture.
A - 8
<PAGE>
EXHIBIT 4.2
FORM OF FACE OF JUNIOR SUBORDINATED DEBENTURE
This Junior Subordinated Debenture is a Global Subordinated Debenture
within the meaning of the Indenture hereinafter referred to and is registered
in the name of a Depositary or a nominee of a Depositary. This Junior
Subordinated Debenture is exchangeable for Junior Subordinated Debentures
registered in the name of a person other than the Depositary or its nominee
only in the limited circumstances described in the Indenture, and no transfer
of this Junior Subordinated Debenture (other than a transfer of this Junior
Subordinated Debenture as a whole by the Depositary to a nominee of the
Depositary or by a nominee of the Depositary to the Depositary or another
nominee of the Depositary) may be registered except in such limited
circumstances.
Unless this Junior Subordinated Debenture is presented by an authorized
representative of Wilmington Trust Company (Rodney Square North, 1100 North
Market Street, Wilmington, Delaware 19890-0001) to the issuer or its agent
for registration of transfer, exchange or payment, and any Junior
Subordinated Debenture issued is registered in the name of Cede & Co. or such
other name as requested by an authorized representative of Wilmington Trust
Company (and any payment hereon is made to Cede & Co. or to such other entity
as is requested by an authorized representative of Wilmington Trust
Company), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY
OR TO ANY PERSON IS WRONGFUL inasmuch the registered owner hereof, Cede &
Co., has an interest herein.
Certificate No. Registered Principal Amount
_____________ $20,618,560
CUSIP No. __________
SPECTRUM BANCORPORATION, INC.
_____% JUNIOR SUBORDINATED DEBENTURE
DUE __________, 2029
<PAGE>
Spectrum Bancorporation, Inc., an Iowa corporation (the "Company",
which term includes any successor corporation under the Indenture hereinafter
referred to), for value received, hereby promises to pay to Wilmington Trust
Company or registered assigns, the principal sum of Twenty Million Six
Hundred Eighteen Thousand Five Hundred and Sixty Dollars ($20,618,560) on
__________, 2029 (which date may be shortened as provided in the Indenture,
the "Stated Maturity"), and to pay interest on said principal sum from
__________, 1999, or from the most recent interest payment date (each such
date, an "Interest Payment Date") to which interest has been paid or duly
provided for, quarterly (subject to deferral as set forth herein) in arrears
on the 15th day of January, April, July and October in each year commencing
October 15, 1999, at the rate of _____% per annum until the principal hereof
shall have become due and payable, and on any overdue principal and (without
duplication and to the extent that payment of such interest is enforceable
under applicable law) on any overdue installment of interest at the same rate
per annum compounded quarterly. The amount of each interest payment due with
respect to the Junior Subordinated Debentures will include amounts accrued
through the date the interest payment is due. The amount of interest payable
on any Interest Payment Date shall be computed on the basis of a 360-day year
of twelve 30-day months. In the event that any date on which interest is
payable on this Junior Subordinated Debenture is not a Business Day (as
defined in the Indenture), then payment of interest payable on such date will
be made on the next succeeding day that is a Business Day (and without any
interest or other payment in respect of any such delay), except that, if such
Business Day is in the next succeeding calendar year, such payment shall be
made on the immediately preceding Business Day, in each case with the same
force and effect as if made on such date. The interest installment so
payable, and punctually paid or duly provided for, on any Interest Payment
Date will, as provided in the Indenture, be paid to the person in whose
name this Junior Subordinated Debenture (or one or more Predecessor Junior
Subordinated Debentures, as defined in the Indenture) is registered at the
close of business on the regular record date for such interest installment,
which shall be the close of business on the business day next preceding such
Interest Payment Date unless otherwise provided in the Indenture. The
principal of and the interest on this Junior Subordinated Debenture shall be
payable at the office or agency of the Trustee (as defined in the Indenture)
maintained for that purpose in any coin or currency of the United States of
America that at the time of payment is legal tender for payment of public and
private debts; provided, however, that payment of interest may be made at
the option of the Company by check mailed to the Registered Holder (as
defined in the Indenture) at such address as shall appear in the Securities
Register (as defined in the Indenture). Notwithstanding the foregoing, so
long as the Holder of this Junior Subordinated Debenture is the Property
Trustee (as defined in the Indenture), the payment of the principal of and
interest on this Junior Subordinated Debenture will be made at such place
and to such account as may be designated by the Property Trustee.
The Stated Maturity may be shortened at any time by the Company to any
date not earlier than __________, 2004, subject to the Company having
received prior
2
<PAGE>
approval of the Federal Reserve (as defined in the Indenture) if then
required under applicable capital guidelines or policies of the Federal
Reserve.
The indebtedness evidenced by this Junior Subordinated Debenture is, to
the extent provided in the Indenture, subordinate and junior in right of
payment to the prior payment in full of all Senior and Subordinated Debt (as
defined in the Indenture), and this Junior Subordinated Debenture is issued
subject to the provisions of the Indenture with respect thereto. Each Holder
of this Junior Subordinated Debenture, by accepting the same, (a) agrees to
and shall be bound by such provisions, (b) authorizes and directs the
Trustee on his or her behalf to take such action as may be necessary or
appropriate to acknowledge or effectuate the subordination so provided and
(c) appoints the Trustee his or her attorney-in-fact for any and all such
purposes. Each Holder hereof, by his or her acceptance hereof, hereby
waives all notice of the acceptance of the subordination provisions
contained herein and in the Indenture by each holder of Senior and
Subordinated Debt, whether now outstanding or hereafter incurred, and waives
reliance by each such holder upon said provisions.
This Junior Subordinated Debenture shall not be entitled to any benefit
under the Indenture, be valid or become obligatory for any purpose until the
Certificate of Authentication hereon shall have been signed by or on behalf
of the Trustee.
The provisions of this Junior Subordinated Debenture are continued on
the reverse side hereof and such continued provisions shall for all purposes
have the same effect as though fully set forth at this place.
IN WITNESS WHEREOF, the Company has caused this instrument to be executed.
Dated: __________, 1999 SPECTRUM BANCORPORATION, INC.
By:
-------------------------------
Name: Deryl F. Hamann
Title: Chairman and Chief Executive Officer
ATTEST:
By:
---------------------------------
3
<PAGE>
Name:
- --------------------------------
Title: Secretary
FORM OF CERTIFICATE OF AUTHENTICATION
CERTIFICATE OF AUTHENTICATION
This is one of the Junior Subordinated Debentures described in the
within-mentioned Indenture.
Dated: WILMINGTON TRUST COMPANY, as Trustee
- ---------------------------
By:
-------------------------------
Authorized Signature
FORM OF REVERSE OF JUNIOR SUBORDINATED DEBENTURE
_____% JUNIOR SUBORDINATED DEBENTURE
(CONTINUED)
This Junior Subordinated Debenture is one of the junior subordinated
debentures of the Company (herein sometimes referred to as the "Junior
Subordinated Debentures"), specified in the Indenture, all issued under and
pursuant to a Subordinated Indenture dated as of __________, 1999 (the
"Indenture") duly executed and delivered between the Company and Wilmington
Trust Company, as Trustee (the "Trustee"), to which Indenture reference is
hereby made for a description of the rights, limitations of rights,
obligations, duties and immunities thereunder of the Trustee, the Company and
the Holders of the Junior Subordinated Debentures. The Junior
4
<PAGE>
Subordinated Debentures are limited in aggregate principal amount as
specified in the Indenture.
Because of the occurrence and continuation of a Special Event (as
defined in the Indenture), in certain circumstances, this Junior Subordinated
Debenture may become due and payable at the option of the Company at the
principal amount together with any interest accrued thereon (the "Redemption
Price"). The Redemption Price shall be paid prior to 2:00 p.m., Wilmington,
Delaware time, on the date of such redemption or at such earlier time as the
Company determines.
The Company shall have the right to redeem this Junior Subordinated
Debenture at the option of the Company, in whole or in part, from time to
time, on or after __________, 2004, at a redemption price equal to 100% of
the principal amount to be redeemed plus any accrued but unpaid interest
thereon to the date of such redemption. Any redemption pursuant to this
paragraph will be made upon not less than 30 days nor more than 60 days
notice. If the Junior Subordinated Debentures are only partially redeemed by
the Company pursuant to this paragraph, the Junior Subordinated Debentures
will be redeemed pro rata or by lot or by any other method utilized by the
Trustee; provided that if, at the time of redemption, the Junior Subordinated
Debentures are registered as a Global Subordinated Debenture (as defined in
the Indenture), the Depositary (as defined in the Indenture) shall determine
the principal amount of such Junior Subordinated Debentures held by each
Junior Subordinated Debenture Holder to be redeemed in accordance with its
procedures.
In the event of redemption of this Junior Subordinated Debenture in
part only, a new Junior Subordinated Debenture for the unredeemed portion
hereof will be issued in the name of the Holder hereof upon the cancellation
hereof.
In case an Event of Default (as defined in the Indenture), shall have
occurred and be continuing, the principal of all of the Junior Subordinated
Debentures may be declared, and upon such declaration shall become, due and
payable, in the manner, with the effect and subject to the conditions
provided in the Indenture.
The Indenture contains provisions permitting the Company and the
Trustee, with the consent of the Holders of not less than a majority in
aggregate principal amount of the Junior Subordinated Debentures at the time
Outstanding, as defined in the Indenture, to execute supplemental indentures
for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of the Indenture or of any supplemental
indenture or of modifying in any manner the rights of the Holders of the
Junior Subordinated Debentures; provided, however, that no such supplemental
indenture shall (i) change the stated maturity of the Junior Subordinated
Debentures except as provided in the Indenture, or reduce the principal
amount thereof, or reduce the rate or extend the time of payment of interest
thereon, without the consent of the Holder of each Junior Subordinated
Debenture so affected, or (ii) reduce the aforesaid percentage of Junior
Subordinated Debentures, the Holders of which are required to
5
<PAGE>
consent to any such supplemental indenture, without the consent of the
Holders of each Junior Subordinated Debenture then Outstanding and affected
thereby. The Indenture also contains provisions permitting the Holders of a
majority in aggregate principal amount of the Junior Subordinated Debentures
at the time Outstanding, on behalf of all of the Holders of the Junior
Subordinated Debentures, to waive any past default in the performance of any
of the covenants contained in the Indenture, or established pursuant to the
Indenture, and its consequences, except a default in the payment of the
principal of or interest on any of the Junior Subordinated Debentures. Any
such consent or waiver by the registered Holder of this Junior Subordinated
Debenture (unless revoked as provided in the Indenture) shall be conclusive
and binding upon such Holder and upon all future Holders and owners of this
Junior Subordinated Debenture and of any Junior Subordinated Debenture
issued in exchange herefor or in place hereof (whether by registration of
transfer or otherwise), irrespective of whether or not any notation of such
consent or waiver is made upon this Junior Subordinated Debenture.
No reference herein to the Indenture and no provision of this Junior
Subordinated Debenture or of the Indenture shall alter or impair the
obligation of the Company, which is absolute and unconditional, to pay the
principal of and interest on this Junior Subordinated Debenture at the time
and place and at the rate and in the money herein prescribed.
The Company shall have the right at any time during the term of the
Junior Subordinated Debentures and from time to time to extend the interest
payment period of such Junior Subordinated Debentures for up to 20
consecutive quarters (an "Extended Interest Payment Period"), at the end of
which period the Company shall pay all interest then accrued and unpaid
(together with interest thereon at the rate specified for the Junior
Subordinated Debentures to the extent that payment of such interest is
enforceable under applicable law). Before the termination of any such
Extended Interest Payment Period, the Company may further extend such
Extended Interest Payment Period, provided that such Extended Interest
Payment Period together with all such further extensions thereof shall not
exceed 20 consecutive quarters or extend beyond the Stated Maturity. At the
termination of any such Extended Interest Payment Period and upon the payment
of all accrued and unpaid interest and any additional amounts then due, the
Company may commence a new Extended Interest Payment Period.
The Company has agreed that if at any time (i) there shall have
occurred any event of which the Company has actual knowledge that (a) with
the giving of notice or the lapse of time, or both, would constitute an Event
of Default and (b) in respect to which the Company shall not have taken
reasonable steps to cure, or (ii) the Company shall have given notice of its
election of an Extended Interest Payment Period as provided herein and shall
not have rescinded such notice, or such Extended Interest Payment Period, or
any extension thereof, shall be continuing; or (iii) while the Junior
Subordinated Debentures are held by the Trust, the Company shall be in
default with
6
<PAGE>
respect to its payment of any obligation under the Preferred Securities
Guarantee, then 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 or (2) make any payment
of principal, interest or premium, if any, on or repay, repurchase or redeem
any debt securities of the Company (including the Junior Subordinated
Debentures) that rank pari passu with or junior in interest to the Junior
Subordinated Debentures or make any guarantee payments with respect to any
guarantee by the Company of the debt securities of any subsidiary of the
Company if such guarantee ranks pari passu or junior in interest to the
Junior Subordinated Debentures (other than (a) dividends or distributions in
common stock, (b) any declaration of a dividend in connection with the
implementation of a shareholders' rights plan, or the issuance of stock under
any such plan in the future or the redemption or repurchase of any such
rights pursuant thereto, (c) payments under the Preferred Securities
Guarantee and (d) purchases of common stock related to the issuance of common
stock or rights under any of the Company's benefit plans for its directors,
officers or employees).
As provided in the Indenture and subject to certain limitations therein
set forth, this Junior Subordinated Debenture is transferable by the
registered Holder hereof on the Securities Register of the Company, upon
surrender of this Junior Subordinated Debenture for registration of transfer
at the office or agency of the Trustee accompanied by a written instrument
or instruments of transfer in form satisfactory to the Company or the
Trustee duly executed by the registered Holder hereof or such Holder's
attorney duly authorized in writing, and thereupon one or more new Junior
Subordinated Debentures of authorized denominations and for the same
aggregate principal amount will be issued to the designated transferee or
transferees. No service charge will be made for any such transfer, but the
Company may require payment of a sum sufficient to cover any tax or other
governmental charge payable in relation thereto.
Prior to due presentment for registration of transfer of this Junior
Subordinated Debenture, the Company, the Trustee, any paying agent and the
Securities Registrar (as defined in the Indenture) may deem and treat the
Registered Holder hereof as the absolute owner hereof (whether or not this
Junior Subordinated Debenture shall be overdue and notwithstanding any notice
of ownership or writing hereon made by anyone other than the Securities
Registrar) for the purpose of receiving payment of or on account of the
principal hereof and interest due hereon and for all other purposes, and
neither the Company nor the Trustee nor any paying agent nor any Securities
Registrar shall be affected by any notice to the contrary.
No recourse shall be had for the payment of the principal of or the
interest on this Junior Subordinated Debenture, or for any claim based
hereon, or otherwise in respect hereof, or based on or in respect of the
Indenture, against any incorporator, stockholder, officer or director, past,
present or future, as such, of the Company or of any predecessor or successor
corporation, whether by virtue of any constitution, statute or rule of law,
or by the enforcement of any assessment or penalty or otherwise, all
7
<PAGE>
such liability being, by the acceptance hereof and as part of the
consideration for the issuance hereof, expressly waived and released.
The Junior Subordinated Debentures are issuable only in registered form
without coupons in denominations of $10 and any integral multiple thereof.
This Global Subordinated Debenture is exchangeable for Junior Subordinated
Debentures in definitive form only under certain limited circumstances set
forth in the Indenture. Junior Subordinated Debentures so issued are
issuable only in registered form without coupons in denominations of $10 and
any integral multiple thereof.
All terms used in this Junior Subordinated Debenture that are defined
in the Indenture shall have the meanings assigned to them in the Indenture.
8
<PAGE>
EXHIBIT 4.3
CERTIFICATE OF TRUST
OF
SPECTRUM CAPITAL TRUST I
This Certificate of Trust of Spectrum Capital Trust I (the "Trust") is being
duly executed and filed by Wilmington Trust Company, a Delaware banking
corporation, as trustee, to form a business trust under the Delaware Business
Trust Act (12 Del. C. Section 3801 et seq.) (the "Act").
1. NAME. The name of the business trust formed hereby is Spectrum Capital
Trust I.
2. DELAWARE TRUSTEE. The name and business address of the trustee of the
Trust in the State of Delaware is Wilmington Trust Company, Rodney Square
North, 1100 North Market Street, Wilmington, Delaware 19890-0001, Attn:
Corporate Trust Administration.
3. EFFECTIVE DATE. This Certificate of Trust shall be effective upon
its filing.
IN WITNESS WHEREOF, the undersigned has executed this Certificate of Trust in
accordance with Section 3811 of the Act.
WILMINGTON TRUST COMPANY,
as Trustee
By: /s/
-------------------------
Name:
---------------------
Title:
---------------------
<PAGE>
EXHIBIT 4.4
TRUST AGREEMENT
TRUST AGREEMENT, dated as of _______, 1999 by and between Spectrum
Bancorporation, Inc., an Iowa corporation, as "Depositor," and Wilmington
Trust Company, a Delaware banking corporation, as "Trustee."
Section 1. The Trust. The trust created hereby shall be known as Spectrum
Capital Trust I (the "Trust"), in which name the Trustee, or the Depositor to
the extent provided herein, may conduct the business of the Trust, make and
execute contracts, and sue and be sued.
Section 2. The Trust Estate. The Depositor hereby assigns, transfers,
conveys and sets over to the Trustee the sum of $10.00. The Trustee hereby
acknowledges receipt of such amount in trust from the Depositor, which amount
shall constitute the initial trust estate. The Trustee hereby declares that
it will hold the trust estate in trust for the Depositor. It is the
intention of the parties hereto that the Trust created hereby constitute a
business trust under Chapter 38 of Title 12 of the Delaware Code, 12 Del. C.
Section 3801, et seq. (the "Business Trust Act"), and that this document
constitute the governing instrument of the Trust. The Trustee is hereby
authorized and directed to execute and file a certificate of trust with the
Delaware Secretary of State in accordance with the provisions of the Business
Trust Act.
Section 3. Amended and Restated Trust Agreement. The Depositor, the Trustee
and certain other parties will enter into an amended and restated Trust
Agreement, satisfactory to each such party and substantially in the form to
be included as an exhibit to the 1933 Act Registration Statement (as defined
below), to provide for the contemplated operation of the Trust created hereby
and the issuance of the Preferred Securities (as defined below) and common
securities of the Trust to be referred to therein. Prior to the execution
and delivery of such amended and restated Trust Agreement, the Trustee shall
not have any duty or obligation hereunder or with respect to the trust
estate, except as otherwise required by applicable law or as may be necessary
to obtain prior to such execution and delivery any licenses, consents or
approvals required by applicable law or otherwise.
Section 4. Certain Authorizations. The Depositor and the Trustee hereby
authorize and direct the Depositor, as the sponsor of the Trust, (i) to file
with the Securities and Exchange Commission (the "Commission") and execute,
in each case on behalf of the Trust, (a) the Registration Statement on Form
S-1 (the "1933 Act Registration Statement"), including any pre-effective or
post-effective amendments to such 1933 Act Registration Statement (including
the prospectus and exhibits contained therein), relating to the registration
under the Securities Act of 1933, as amended, of the preferred securities of
the Trust (the "Preferred Securities") and certain other securities of the
Depositor and (b) a Registration Statement on Form 8-A (including all
pre-
<PAGE>
effective and post-effective amendments thereto) relating to the registration
of the Preferred Securities of the Trust under the Securities Exchange Act of
1934, as amended; (ii) to file with the American Stock Exchange, Inc. and
execute on behalf of the Trust a listing application or applications and all
other applications, statements, certificates, agreements and other
instruments as shall be necessary or desirable to cause the Preferred
Securities to be listed on the American Stock Exchange; (iii) to file and
execute on behalf of the Trust such applications, reports, surety bonds,
irrevocable consents, appointments of attorney for service of process and
other papers and documents as the Depositor, on behalf of the Trust, may deem
necessary or desirable to register the Preferred Securities under the
securities or "Blue Sky" laws; and (iv) to execute on behalf of the Trust
such Underwriting Agreements with one or more underwriters relating to the
offering of the Preferred Securities as the Depositor, on behalf of the
Trust, may deem necessary or desirable. In the event that any filing referred
to in clauses (i), (ii) and (iii) above is required by the rules and
regulations of the Commission, the American Stock Exchange or state
securities or "Blue Sky" laws to be executed on behalf of the Trust by a
Trustee, the Depositor and any Trustee appointed pursuant to Section 6 hereof
are hereby authorized to join in any such filing and to execute on behalf of
the Trust any and all of the foregoing.
Section 5. Counterparts. This Trust Agreement may be executed in one or
more counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
Section 6. Trustee. The number of Trustees initially shall be one and
thereafter the number of Trustees shall be such number as shall be fixed from
time to time by a written instrument signed by the Depositor, which may
increase or decrease the number of Trustees; provided, however, that to the
extent required by the Business Trust Act, one Trustee shall be either a
natural person who is a resident of the State of Delaware or, if not a
natural person, an entity which has its principal place of business in the
State of Delaware and otherwise meets the requirements of applicable Delaware
law. Subject to the foregoing, the Depositor is entitled to appoint or remove
without cause any Trustee at any time. The Trustee may resign upon thirty
days' prior notice to the Depositor.
Section 7. Governing Law. This Trust Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware (without
regard to conflicts of law of principles).
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Trust Agreement to be
duly executed as of the day and year first above written.
SPECTRUM BANCORPORATION, INC.
as Depositor
By: /s/____________________
Name: __________________
Title: __________________
WILMINGTON TRUST COMPANY,
as Trustee
By: /s/____________________
Name: __________________
Title: __________________
<PAGE>
EXHIBIT 4.5
SPECTRUM CAPITAL TRUST I
AMENDED AND RESTATED
TRUST AGREEMENT
AMONG
SPECTRUM BANCORPORATION, INC., AS DEPOSITOR
WILMINGTON TRUST COMPANY, AS PROPERTY TRUSTEE
WILMINGTON TRUST COMPANY, AS DELAWARE TRUSTEE
AND
THE ADMINISTRATIVE TRUSTEES NAMED HEREIN
DATED AS OF _________________, 1999
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I.
DEFINED TERMS 2
SECTION 101. DEFINITIONS 2
ARTICLE II.
ESTABLISHMENT OF THE TRUST 10
SECTION 201. NAME 10
SECTION 202. OFFICE OF THE DELAWARE TRUSTEE; PRINCIPAL
PLACE OF BUSINESS 11
SECTION 203. INITIAL CONTRIBUTION OF TRUST PROPERTY;
ORGANIZATIONAL EXPENSES 11
SECTION 204. ISSUANCE OF THE PREFERRED SECURITIES 11
SECTION 205. ISSUANCE OF THE COMMON SECURITIES; SUBSCRIPTION
AND PURCHASE OF JUNIOR SUBORDINATED DEBENTURES 11
SECTION 206. DECLARATION OF TRUST 12
SECTION 207. AUTHORIZATION TO ENTER INTO CERTAIN
TRANSACTIONS 12
SECTION 208. ASSETS OF TRUST 16
SECTION 209. TITLE TO TRUST PROPERTY 16
ARTICLE III.
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PAYMENT ACCOUNT 16
SECTION 301. PAYMENT ACCOUNT 16
ARTICLE IV.
DISTRIBUTIONS; REDEMPTION 17
SECTION 401. DISTRIBUTIONS 17
SECTION 402. REDEMPTION 18
SECTION 403. SUBORDINATION OF COMMON SECURITIES 20
SECTION 404. PAYMENT PROCEDURES 20
SECTION 405. TAX RETURNS AND REPORTS 21
SECTION 406. PAYMENT OF TAXES, DUTIES, ETC. OF THE TRUST 21
SECTION 407. PAYMENTS UNDER INDENTURE 21
ARTICLE V.
TRUST SECURITIES CERTIFICATES 21
SECTION 501. INITIAL OWNERSHIP 21
SECTION 502. THE TRUST SECURITIES CERTIFICATES 21
SECTION 503. EXECUTION AND DELIVERY OF TRUST SECURITIES
CERTIFICATES 22
SECTION 504. REGISTRATION OF TRANSFER AND EXCHANGE OF CAPITAL
SECURITIES CERTIFICATES 22
SECTION 505. MUTILATED, DESTROYED, LOST OR STOLEN TRUST
SECURITIES CERTIFICATES 23
SECTION 506. PERSONS DEEMED SECURITYHOLDERS 23
SECTION 507. ACCESS TO LIST OF SECURITYHOLDERS' NAMES AND
ADDRESSES 23
ii
<PAGE>
SECTION 508. MAINTENANCE OF OFFICE OR AGENCY 24
SECTION 509. APPOINTMENT OF PAYING AGENT 24
SECTION 510. OWNERSHIP OF COMMON SECURITIES BY DEPOSITOR 25
SECTION 511. BOOK-ENTRY PREFERRED SECURITIES CERTIFICATES;
COMMON SECURITIES CERTIFICATE 25
SECTION 512. NOTICES TO CLEARING AGENCY 26
SECTION 513. DEFINITIVE PREFERRED SECURITIES CERTIFICATES 26
SECTION 514. RIGHTS OF SECURITY HOLDERS 27
ARTICLE VI.
ACTS OF SECURITY HOLDERS; MEETINGS; VOTING 28
SECTION 601. LIMITATIONS ON VOTING RIGHTS 28
SECTION 602. NOTICE OF MEETINGS 29
SECTION 603. MEETINGS OF HOLDERS OF PREFERRED SECURITIES 29
SECTION 604. VOTING RIGHTS 30
SECTION 605. PROXIES, ETC. 30
SECTION 606. SECURITYHOLDER ACTION BY WRITTEN CONSENT 30
SECTION 607. RECORD DATE FOR VOTING AND OTHER PURPOSES 30
SECTION 608. ACTS OF SECURITY HOLDERS 30
SECTION 609. INSPECTION OF RECORDS 31
ARTICLE VII.
REPRESENTATIONS AND WARRANTIES 31
SECTION 701. REPRESENTATIONS AND WARRANTIES OF THE BANK
AND THE PROPERTY TRUSTEE 31
iii
<PAGE>
SECTION 702. REPRESENTATIONS AND WARRANTIES OF THE
DELAWARE BANK AND THE DELAWARE TRUSTEE 33
SECTION 703. REPRESENTATIONS AND WARRANTIES OF DEPOSITOR 34
ARTICLE VIII.
THE TRUSTEES 34
SECTION 801. CERTAIN DUTIES AND RESPONSIBILITIES 34
SECTION 802. CERTAIN NOTICES 36
SECTION 803. CERTAIN RIGHTS OF PROPERTY TRUSTEE 36
SECTION 804. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF
SECURITIES 38
SECTION 805. MAY HOLD SECURITIES 38
SECTION 806. COMPENSATION; INDEMNITY; FEES 38
SECTION 807. CORPORATE PROPERTY TRUSTEE REQUIRED; ELIGIBILITY
OF TRUSTEES 39
SECTION 808. CONFLICTING INTERESTS 40
SECTION 809. CO-TRUSTEES AND SEPARATE TRUSTEE 40
SECTION 810. RESIGNATION AND REMOVAL; APPOINTMENT OF
SUCCESSOR 41
SECTION 811. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR 43
SECTION 812. MERGER, CONVERSION, CONSOLIDATION OR
SUCCESSION TO BUSINESS 43
SECTION 813. PREFERENTIAL COLLECTION OF CLAIMS AGAINST
DEPOSITOR OR TRUST 43
SECTION 814. REPORTS BY PROPERTY TRUSTEE 44
SECTION 815. REPORTS TO THE PROPERTY TRUSTEE 44
SECTION 816. EVIDENCE OF COMPLIANCE WITH CONDITIONS
iv
<PAGE>
PRECEDENT 44
SECTION 817. NUMBER OF TRUSTEES 44
SECTION 818. DELEGATION OF POWER 45
SECTION 819. VOTING 45
ARTICLE IX.
TERMINATION, LIQUIDATION AND MERGER 45
SECTION 901. TERMINATION UPON EXPIRATION DATE 45
SECTION 902. EARLY TERMINATION 45
SECTION 903. TERMINATION 46
SECTION 904. LIQUIDATION 46
SECTION 905. MERGERS, CONSOLIDATIONS, AMALGAMATIONS OR
REPLACEMENTS OF THE TRUST 48
ARTICLE X.
MISCELLANEOUS PROVISIONS 49
SECTION 1001. LIMITATION OF RIGHTS OF SECURITY HOLDERS 49
SECTION 1002. AMENDMENT 49
SECTION 1003. SEPARABILITY 50
SECTION 1004. GOVERNING LAW 50
SECTION 1005. PAYMENTS DUE ON NON-BUSINESS DAY 50
SECTION 1006. SUCCESSORS 51
SECTION 1007. HEADINGS 51
SECTION 1008. REPORTS, NOTICES AND DEMANDS 51
SECTION 1009. AGREEMENT NOT TO PETITION 51
v
<PAGE>
SECTION 1010. TRUST INDENTURE ACT; CONFLICT WITH TRUST
INDENTURE ACT 52
SECTION 1011. ACCEPTANCE OF TERMS OF TRUST AGREEMENT,
GUARANTEE AND INDENTURE 52
Exhibit A Certificate of Trust
Exhibit B Form of Certificate Depository Agreement
Exhibit C Form of Common Securities Certificate
Exhibit D Form of Expense Agreement
Exhibit E Form of Preferred Securities Certificate
vi
<PAGE>
AMENDED AND RESTATED TRUST AGREEMENT, dated as of __________________,
1999, among (i) Spectrum Bancorporation, Inc. an Iowa corporation (including
any successors or assigns, the "Depositor"), (ii) Wilmington Trust Company, a
Delaware banking corporation duly organized and existing under the laws of
the State of Delaware, as property trustee (the "Property Trustee" and, in
its separate corporate capacity and not in its capacity as Property Trustee,
the "Bank"), (iii) Wilmington Trust Company, a Delaware banking corporation
duly organized and existing under the laws of the State of Delaware, as
Delaware trustee (the "Delaware Trustee," and, in its separate corporate
capacity and not in its capacity as Delaware Trustee, the "Delaware Bank"),
(iv) Daniel A. Hamann, an individual, Thomas B. Fischer, an individual, and
John L. Kopecky, an individual, each of whose address is c/o Spectrum
Bancorporation, Inc., 10834 Old Mill Road, Suite One, Omaha, Nebraska
68154-2648 (each an "Administrative Trustee" and collectively the
"Administrative Trustees") (the Property Trustee, the Delaware Trustee and
the Administrative Trustees referred to collectively as the "Trustees") and
(v) the several Holders, as hereinafter defined.
WITNESSETH:
WHEREAS, the Depositor and the Delaware Trustee have heretofore duly
declared and established Spectrum Capital Trust I, a business trust (the
"Trust"), pursuant to the Delaware Business Trust Act by the entering into of
that certain Trust Agreement, dated as of _______________, 1999 (the
"Original Trust Agreement"), and by the execution and filing by the Delaware
Trustee with the Secretary of State of the State of Delaware of the
Certificate of Trust, filed on ________________, 1999, the form of which is
attached as EXHIBIT A; and
WHEREAS, the Depositor, as provided by the Original Trust Agreement,
has appointed each of the above-named Administrative Trustees to be an
Administrative Trustee of the Trust; and
WHEREAS, the Depositor and the Delaware Trustee desire to amend and
restate the Original Trust Agreement in its entirety as set forth herein to
provide for, among other things, (i) the issuance of the Common Securities
(as defined below) by the Trust to the Depositor, (ii) the issuance and sale
of the Preferred Securities (as defined below) by the Trust pursuant to the
Underwriting Agreement (as defined below), (iii) the acquisition by the Trust
from the Depositor of all of the right, title and interest in the Junior
Subordinated Debentures (as defined below), (iv) the appointment of the
Property Trustee, and (v) making the Administrative Trustees parties hereto;
NOW THEREFORE, in consideration of the agreements and obligations set
forth herein and for other good and valuable consideration, the sufficiency
of which is hereby acknowledged, each party, for the benefit of the other
parties and for the benefit of the Security holders (as defined below),
hereby amends and restates the Original Trust Agreement in its entirety and
agrees as follows:
<PAGE>
ARTICLE I.
DEFINED TERMS
SECTION 101. DEFINITIONS. For all purposes of this Trust Agreement,
except as otherwise expressly provided or unless the context otherwise
requires:
(a) the terms defined in this Article have the meanings assigned to
them in this Article and include the plural as well as the singular;
(b) all other terms used herein that are defined in the Trust Indenture
Act, either directly or by reference therein, have the meanings assigned to
them therein;
(c) unless the context otherwise requires, any reference to an
"Article" or a "Section" refers to an Article or a Section, as the case may
be, of this Trust Agreement; and
(d) the words "herein", "hereof" and "hereunder" and other words of
similar import refer to this Trust Agreement as a whole and not to any
particular Article, Section or other subdivision.
"Accelerated Maturity Date" has the meaning set forth in Section 2.2 of
the Indenture.
"Act" has the meaning specified in Section 608.
"Additional Amount" means, with respect to Trust Securities of a given
Liquidation Amount and/or a given period, the amount of additional interest
accrued on interest in arrears and paid by the Depositor on a Like Amount of
Junior Subordinated Debentures for such period.
"Additional Sums" has the meaning specified in Section 2.5 of the
Indenture.
"Administrative Trustee" means each of Daniel A. Hamann, Thomas B.
Fischer and John L. Kopecky, solely in such person's capacity as
Administrative Trustee of the Trust formed and continued hereunder and not in
such person's individual capacity, or such Administrative Trustee's successor
in interest in such capacity, or any successor Administrative Trustee
appointed as herein provided.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or
2
<PAGE>
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Bank" has the meaning specified in the preamble to this Trust Agreement.
"Bankruptcy Event" means, with respect to any Person:
(a) the entry of a decree or order by a court having jurisdiction in
the premises adjudging such Person a bankrupt or insolvent, or approving as
properly filed a petition seeking liquidation or reorganization of or in
respect of such Person under the Federal Bankruptcy Code or any other similar
applicable federal or state law, and the continuance of any such decree or
order unvacated and unstayed for a period of 90 days; or the commencement of
an involuntary case under the Federal Bankruptcy Code in respect of such
Person, which shall continue undismissed for a period of 90 days or entry of
an order for relief in such case; or the entry of a decree or order of a
court having jurisdiction in the premises for the appointment on the ground
of insolvency or bankruptcy of a receiver, custodian, liquidator, trustee or
assignee in bankruptcy or insolvency of such Person or of its property, or
for the winding up or liquidation of its affairs, and such decree or order
shall have remained in force unvacated and unstayed for a period of 90 days;
or
(b) the institution by such Person of proceedings to be adjudicated a
voluntary bankrupt, or the consent by such Person to the filing of a
bankruptcy proceeding against it, or the filing by such Person of a petition
or answer or consent seeking liquidation or reorganization under the Federal
Bankruptcy Code or other similar applicable federal or state law, or the
consent by such Person to the filing of any such petition or to the
appointment on the ground of insolvency or bankruptcy of a receiver or
custodian or liquidator or trustee or assignee in bankruptcy or insolvency of
such Person or of its property, or such Person shall make a general
assignment for the benefit of creditors.
"Bankruptcy Laws" has the meaning specified in Section 1009.
"Book-Entry Preferred Securities Certificates" means certificates
representing Preferred Securities issued in global, fully registered form to
the Clearing Agency as described in Section 511.
"Business Day" means a day other than (a) a Saturday or Sunday, (b) a
day on which banking institutions in the State of South Dakota are authorized
or required by law or executive order to remain closed, or (c) a day on which
the Property Trustee's Corporate Trust Office or the Corporate Trust Office
of the Debenture Trustee is closed for business.
"Certificate Depository Agreement" means the agreement among the Trust,
the Depositor and The Depository Trust Company, as the initial Clearing
Agency, dated as of the Closing Date, relating to the Trust Securities
Certificates, substantially in the form attached as EXHIBIT B, as the same
may be amended and supplemented from time to time.
3
<PAGE>
"Certificate of Trust" means, as stated in the recitals to this Trust
Agreement, the certificate of trust filed with the Secretary of State of the
State of Delaware with respect to the Trust, in the form attached as EXHIBIT
A, as the same may be amended or restated from time to time.
"Clearing Agency" means an organization registered as a "clearing
agency" pursuant to Section 17A of the Securities Exchange Act of 1934, as
amended. The Depositary Trust Company will be the initial Clearing Agency.
"Clearing Agency Participant" means a broker, dealer, bank, other
financial institution or other Person for whom from time to time a Clearing
Agency effects book-entry transfers and pledges of securities deposited with
the Clearing Agency.
"Closing Date" means the date of execution and delivery of this Trust
Agreement.
"Commission" means the Securities and Exchange Commission, as from time
to time constituted, created under the Securities Exchange Act of 1934, as
amended, or, if at any time after the execution of this Trust Agreement such
Commission is not existing and performing the duties now assigned to it under
the Trust Indenture Act, then the body performing such duties at such time.
"Common Security" means a common undivided beneficial interest in the
assets of the Trust, having a Liquidation Amount of $10 and having the rights
provided therefor in this Trust Agreement, including the right to receive
Distributions and a Liquidation Distribution as provided herein.
"Common Securities Certificate" means a certificate evidencing ownership
of Common Securities, substantially in the form attached as EXHIBIT C.
"Corporate Trust Office" means the principal corporate trust office of
the Property Trustee located at Rodney Square North, 1100 North Market
Street, Wilmington, Delaware, 19890-0001, Attn: Corporate Trust
Administration.
"Debenture Event of Default" means an "Event of Default" as defined in
the Indenture.
"Debenture Redemption Date" means, with respect to any Junior
Subordinated Debentures to be redeemed under the Indenture, the date fixed
for redemption under the Indenture.
"Debenture Trustee" means Wilmington Trust Company, a Delaware banking
corporation organized under the laws of the State of Delaware and any
successor thereto, as trustee under the Indenture.
4
<PAGE>
"Definitive Preferred Securities Certificates" means either or both (as
the context requires) of (a) Preferred Securities Certificates issued as
Book-Entry Preferred Securities Certificates as provided in Section 511(a),
and (b) Preferred Securities Certificates issued in certificated, fully
registered form as provided in Section 513.
"Delaware Bank" has the meaning specified in the preamble to this Trust
Agreement.
"Delaware Business Trust Act" means Chapter 38 of Title 12 of the
Delaware Code, 12 Delaware Code Sections 3801 et. seq. as it may be amended
from time to time.
"Delaware Trustee" means the commercial bank or trust company identified
as the "Delaware Trustee" in the preamble to this Trust Agreement solely in
its capacity as Delaware Trustee of the Trust formed and continued hereunder
and not in its individual capacity, or its successor in interest in such
capacity, or any successor Delaware Trustee appointed as herein provided.
"Depositor" has the meaning specified in the preamble to this Trust
Agreement.
"Distribution Date" has the meaning specified in Section 401(a).
"Distributions" means amounts payable in respect of the Trust Securities
as provided in Section 401.
"Event of Default" means any one of the following events that shall have
occurred and be continuing (whatever the reason for such Event of Default and
whether it shall be voluntary or involuntary or be effected by operation of
law or pursuant to any judgment, decree or order of any court or any order,
rule or regulation of any administrative or governmental body):
(a) the occurrence of a Debenture Event of Default; or
(b) default by the Trust in the payment of any Distribution when it
becomes due and payable, and continuation of such default for a period of 30
days; or
(c) default by the Trust in the payment of any Redemption Price of any
Trust Security when it becomes due and payable; or
(d) default in the performance, or breach, in any material respect, of
any covenant or warranty of the Property Trustee in this Trust Agreement
(other than a covenant or warranty, a default in the performance of which or
the breach of which is dealt with in clause (b) or (c), above) and
continuation of such default or breach for a period of 60 days after there
has been given, by registered or certified mail, to the defaulting Property
Trustee by the Holders of at least 25% in aggregate Liquidation Amount of the
Outstanding Preferred Securities a written notice specifying such default or
breach and
5
<PAGE>
requiring it to be remedied and stating that such notice is a "Notice of
Default" hereunder; or
(e) the occurrence of a Bankruptcy Event with respect to the Property
Trustee and the failure by the Depositor to appoint a successor Property
Trustee within 60 days thereof.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Expense Agreement" means the Agreement as to Expenses and Liabilities
between the Depositor and the Trust, substantially in the form attached as
EXHIBIT D, as amended from time to time.
"Expiration Date" has the meaning specified in Section 901.
"Extension Period" means the "Extended Interest Payment Period" as
defined in the Indenture.
"Global Subordinated Debenture" has the meaning specified in the
Indenture.
"Guarantee" means the Preferred Securities Guarantee Agreement executed
and delivered by the Depositor and Wilmington Trust Company as trustee,
contemporaneously with the execution and delivery of this Trust Agreement,
for the benefit of the Holders of the Preferred Securities, as amended from
time to time.
"Holder" means a Securityholder.
"Indenture" means the Subordinated Indenture, dated as of
______________, 1999, between the Depositor and the Debenture Trustee, as
trustee, as amended or supplemented from time to time.
"Investment Company Act" means the Investment Company Act of 1940, as
amended.
"Junior Subordinated Debentures" means the $ 20,618,560 and a possible
additional amount of up to $711,350 related to the Underwriters'
Over-Allotment Option with respect to the Preferred Securities, for a total
of up to $23,711,350 aggregate principal amount of the Depositor's _____%
Junior Subordinated Debentures due 2029, issued pursuant to the Indenture.
"Lien" means any lien, pledge, charge, encumbrance, mortgage, deed of
trust, adverse ownership interest, hypothecation, assignment, security
interest or preference, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever.
6
<PAGE>
"Like Amount" means (a) with respect to a redemption of Trust
Securities, Trust Securities having a Liquidation Amount equal to the
principal amount of Junior Subordinated Debentures to be contemporaneously
redeemed in accordance with the Indenture and the proceeds of which will be
used to pay the Redemption Price of such Trust Securities and (b) with
respect to a distribution of Junior Subordinated Debentures to Holders of
Trust Securities in connection with a termination or liquidation of the
Trust, Junior Subordinated Debentures having a principal amount equal to the
Liquidation Amount of the Trust Securities of the Holder to whom such Junior
Subordinated Debentures are distributed.
"Liquidation Amount" means the stated amount of $10 per Trust Security.
"Liquidation Date" means the date on which Junior Subordinated
Debentures are to be distributed to Holders of Trust Securities in connection
with a termination and liquidation of the Trust pursuant to Section 904(a).
"Liquidation Distribution" has the meaning specified in Section 904(d).
"Maturity Date" has the meaning set forth in Section 2.2 of the Indenture.
"Officers' Certificate" means a certificate signed by the Chairman, the
President or a Vice President and by the Chief Financial Officer or the
Controller or an Assistant Controller or the Secretary or an Assistant
Secretary, of the Depositor, and delivered to the appropriate Trustee. One
of the officers signing an Officers' Certificate given pursuant to Section
816 shall be the principal executive, financial or accounting officer of the
Depositor. Any Officers' Certificate delivered with respect to compliance
with a condition or covenant provided for in this Trust Agreement shall
include:
(a) a statement that each officer signing the Officers' Certificate has
read the covenant or condition and the definitions relating thereto;
(b) a brief statement of the nature and scope of the examination or
investigation undertaken by each officer in rendering the Officers'
Certificate;
(c) a statement that each such officer has made such examination or
investigation as, in such officer's opinion, is necessary to enable such
officer to express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(d) a statement as to whether, in the opinion of each such officer,
such condition or covenant has been complied with.
"Opinion of Counsel" means a written opinion of counsel, who may be
counsel for the Trust, the Property Trustee, the Delaware Trustee or the
Depositor, but not an employee of any thereof, and who shall be reasonably
acceptable to the Property Trustee.
7
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"Original Trust Agreement" has the meaning specified in the recitals to
this Trust Agreement.
"Outstanding," when used with respect to Preferred Securities, means, as
of the date of determination, all Preferred Securities theretofore executed
and delivered under this Trust Agreement, except:
(a) Preferred Securities theretofore canceled by the Property Trustee
or delivered to the Property Trustee for cancellation;
(b) Preferred Securities for whose payment or redemption money in the
necessary amount has been theretofore deposited with the Property Trustee or
any Paying Agent for the Holders of such Preferred Securities; provided that,
if such Preferred Securities are to be redeemed, notice of such redemption
has been duly given pursuant to this Trust Agreement; and
(c) Preferred Securities which have been paid or in exchange for or in
lieu of which other Preferred Securities have been executed and delivered
pursuant to Sections 504, 505, 511 and 513; provided, however, that in
determining whether the Holders of the requisite Liquidation Amount of the
Outstanding Preferred Securities have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, Preferred
Securities owned by the Depositor, any Trustee or any Affiliate of the
Depositor or any Trustee shall be disregarded and deemed not to be
Outstanding, except that (i) in determining whether any Trustee shall be
protected in relying upon any such request, demand, authorization, direction,
notice, consent or waiver, only Preferred Securities that such Trustee knows
to be so owned shall be so disregarded and (ii) the foregoing shall not apply
at any time when all of the Outstanding Preferred Securities are owned by the
Depositor, one or more of the Trustees and/or any such Affiliate. Preferred
Securities so owned which have been pledged in good faith may be regarded as
Outstanding if the pledgee establishes to the satisfaction of the
Administrative Trustees the pledgee's right as to such Preferred Securities
so owned.
"Owner" means each Person who is the beneficial owner of a Book-Entry
Preferred Securities Certificate as reflected in the records of the Clearing
Agency or, if a Clearing Agency Participant is not the Owner, then as
reflected in the records of a Person maintaining an account with such
Clearing Agency (directly or indirectly, in accordance with the rules of such
Clearing Agency).
"Paying Agent" means any paying agent or co-paying agent appointed
pursuant to Section 509 and shall initially be the Bank.
"Payment Account" means a segregated non-interest-bearing corporate
trust account maintained by the Property Trustee with the Bank in its trust
department for the benefit of the Security holders in which all amounts paid
in respect of the Junior Subordinated Debentures will be held and from which
the Property Trustee shall make payments to the Security holders in
accordance with Sections 401 and 402.
8
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"Person" means any individual, corporation, partnership, joint venture,
trust, limited liability company or corporation, unincorporated organization
or government or any agency or political subdivision thereof.
"Preferred Security" means an undivided beneficial interest in the
assets of the Trust, designated "_____% Cumulative Preferred Securities,"
having a Liquidation Amount of $10 and having the rights provided therefor in
this Trust Agreement, including the right to receive Distributions and a
Liquidation Distribution as provided herein.
"Preferred Securities Certificate" means a certificate evidencing
ownership of Preferred Securities, substantially in the form attached as
EXHIBIT E.
"Property Trustee" means the commercial bank or trust company identified
as the "Property Trustee" in the preamble to this Trust Agreement solely in
its capacity as Property Trustee of the Trust heretofore formed and continued
hereunder and not in its individual capacity, or its successor in interest in
such capacity, or any successor Property Trustee appointed as herein provided.
"Redemption Date" means, with respect to any Trust Security to be
redeemed, the date fixed for such redemption by or pursuant to this Trust
Agreement; provided that each Debenture Redemption Date and the Maturity Date
of the Junior Subordinated Debentures shall be a Redemption Date for a Like
Amount of Trust Securities.
"Redemption Price" means, with respect to any Trust Security to be
redeemed, the Liquidation Amount of such Trust Security, plus accumulated and
unpaid Distributions to the Redemption Date allocated on a pro rata basis
(based on Liquidation Amounts) among the Trust Securities to be redeemed.
"Relevant Trustee" shall have the meaning specified in Section 810.
"Securities Register" and "Securities Registrar" have the respective
meanings specified in Section 504.
"Securityholder" means a Person in whose name a Trust Security or
Securities is registered in the Securities Register; any such Person is a
beneficial owner within the meaning of the Delaware Business Trust Act.
"Trust" means Spectrum Capital Trust I, the Delaware business trust
continued hereby and which was created as stated in the recitals to this
Trust Agreement.
"Trust Agreement" means this Amended and Restated Trust Agreement, as
the same may be modified, amended or supplemented in accordance with the
applicable provisions hereof, including all exhibits hereto, including, for
all purposes of this Trust Agreement and any such modification, amendment or
supplement, the provisions of the
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Trust Indenture Act that are deemed to be a part of and govern this Trust
Agreement and any such modification, amendment or supplement, respectively.
"Trust Indenture Act" means the Trust Indenture Act of 1939 as in force
at the date as of which this Trust Agreement was executed; provided, however,
that in the event the Trust Indenture Act of 1939 is amended after such date,
"Trust Indenture Act" means, to the extent required by any such amendment,
the Trust Indenture Act of 1939 as so amended.
"Trust Property" means (a) the Junior Subordinated Debentures, (b) the
rights of the Property Trustee under the Guarantee, (c) any cash on deposit
in, or owing to, the Payment Account and (d) all proceeds and rights in
respect of the foregoing and any other property and assets for the time being
held or deemed to be held by the Property Trustee pursuant to the trusts of
this Trust Agreement.
"Trust Security" means any one of the Common Securities or the Preferred
Securities.
"Trust Securities Certificate" means any one of the Common Securities
Certificates or the Preferred Securities Certificates.
"Trustee" or "Trustees" means, individually or collectively, any of the
Property Trustee, the Delaware Trustee and the Administrative Trustees.
"Underwriting Agreement" means the Underwriting Agreement dated as of
_______________, 1999, among the Trust, the Depositor and the underwriter
named therein.
"Underwriters' Over-Allotment Option" means the option, exercisable
within 30 days after the date of the prospectus, granted to the underwriters
in the offering to the public of Preferred Securities, to purchase up to
$3,000,000 in Liquidation Amount of additional Preferred Securities at the
same price per Preferred Security as paid for the other Preferred Securities
issued pursuant to the prospectus.
ARTICLE II.
ESTABLISHMENT OF THE TRUST
SECTION 201. NAME. The Trust created pursuant to the Certificate of
Trust and continued hereby shall continue to be known as "Spectrum Capital
Trust I," as such name may be modified from time to time by the
Administrative Trustees following written notice to the Holders of Trust
Securities and the other Trustees, in which name the Trustees may engage in
the transactions contemplated hereby, make and execute contracts and other
instruments on behalf of the Trust and sue and be sued.
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SECTION 202. OFFICE OF THE DELAWARE TRUSTEE; PRINCIPAL PLACE OF
BUSINESS. The address of the Delaware Trustee in the State of Delaware is c/o
Wilmington Trust Company, 1100 North Market Street, Wilmington, Delaware
19890, Attention: Corporate Trust Administration, or such other address in
the State of Delaware as the Delaware Trustee may designate by written notice
to the Security holders and the Depositor. The principal executive office of
the Trust is c/o Spectrum Bancorporation, Inc., 10834 Old Mill Road, Suite
One, Omaha, Nebraska 68154-2648.
SECTION 203. INITIAL CONTRIBUTION OF TRUST PROPERTY; ORGANIZATIONAL
EXPENSES. The Trustees acknowledge receipt in trust from the Depositor in
connection with the Original Trust Agreement of the sum of $10, which
constituted the initial Trust Property. The Depositor shall pay
organizational expenses of the Trust as they arise or shall, upon request of
any Trustee, promptly reimburse such Trustee for any such expenses paid by
such Trustee. The Depositor shall make no claim upon the Trust Property for
the payment of such expenses.
SECTION 204. ISSUANCE OF THE PREFERRED SECURITIES. On
________________, 1999, the Depositor and an Administrative Trustee, on
behalf of the Trust and pursuant to the Original Trust Agreement, executed
and delivered the Underwriting Agreement. Contemporaneously with the
execution and delivery of this Trust Agreement, an Administrative Trustee, on
behalf of the Trust, shall execute in accordance with Section 502 and
deliver, in accordance with the Underwriting Agreement, a Preferred
Securities Certificate, registered in the name of the nominee of the initial
Clearing Agency, in an aggregate amount of Preferred Securities having an
aggregate Liquidation Amount of $20,000,000 against receipt of the aggregate
purchase price of such Preferred Securities of $20,000,000, which amount such
Administrative Trustee shall promptly deliver to the Property Trustee.
Contemporaneously with the exercise of the Underwriter's Over-Allotment
Option, an Administrative Trustee, on behalf of the Trust, shall execute in
accordance with Section 502 and deliver, in accordance with the Underwriting
Agreement, a Preferred Securities Certificate, registered in the name of the
nominee of the initial Clearing Agency, in an aggregate amount of Preferred
Securities having an aggregate Liquidation Amount of $10 for each Preferred
Security as to which the option is being exercised, up to $3,000,000, against
receipt of the aggregate purchase price of such Preferred Securities in such
Liquidation Amount, which amount such Administrative Trustee shall promptly
deliver to the Property Trustee.
SECTION 205. ISSUANCE OF THE COMMON SECURITIES; SUBSCRIPTION AND
PURCHASE OF JUNIOR SUBORDINATED DEBENTURES. Contemporaneously with the
execution and delivery of this Trust Agreement, an Administrative Trustee, on
behalf of the Trust, shall execute in accordance with Section 502 and deliver
to the Depositor a Common Securities Certificate, registered in the name of
the Depositor, in an aggregate amount of Common Securities having an
aggregate Liquidation Amount of $618,560 against payment by the Depositor of
such amount. Contemporaneously therewith, an Administrative Trustee, on
behalf of the Trust, shall subscribe to and
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purchase from the Depositor Junior Subordinated Debentures, registered in the
name of the Property Trustee on behalf of the Trust and having an aggregate
principal amount equal to $20,618,560 and, in satisfaction of the purchase
price for such Junior Subordinated Debentures, the Property Trustee, on
behalf of the Trust, shall deliver to the Depositor the sum of $20,618,560.
Contemporaneously with the exercise of the Underwriter's Over-Allotment
Option, an Administrative Trustee, on behalf of the Trust, shall execute in
accordance with Section 502 and deliver to the Depositor a Common Securities
Certificate, registered in the name of the Depositor, in an aggregate amount
of Common Securities having an aggregate Liquidation Amount equal to quotient
of the Liquidation Amount of Preferred Securities purchased upon exercise of
the option divided by 32.33, rounded up to the nearest $10, up to $92,790 in
such Liquidation Amount, against payment by the Depositor of such amount.
Contemporaneously therewith, an Administrative Trustee, on behalf of the
Trust, shall subscribe to and purchase from the Depositor Junior Subordinated
Debentures, registered in the name of the Property Trustee on behalf of the
Trust and having an aggregate principal amount equal to the sum of the
Liquidation Amount of the Common Securities determined in accordance with the
foregoing sentence and the Liquidation Amount of the Preferred Securities
purchased upon exercise of the Underwriters' Over-Allotment Option, and, in
satisfaction of the purchase price for such Junior Subordinated Debentures,
the Property Trustee, on behalf of the Trust, shall deliver to the Depositor
such sum.
SECTION 206. DECLARATION OF TRUST. The exclusive purposes and
functions of the Trust are (a) to issue and sell Trust Securities and use the
proceeds from such sale to acquire the Junior Subordinated Debentures, and
(b) to engage in those activities necessary, convenient or incidental
thereto. The Depositor hereby appoints the Trustees as trustees of the
Trust, to have all the rights, powers and duties to the extent set forth
herein, and the Trustees hereby accept such appointment. The Property
Trustee hereby declares that it will hold the Trust Property in trust upon
and subject to the conditions set forth herein for the benefit of the
Security holders. The Administrative Trustees shall have all rights, powers
and duties set forth herein and in accordance with applicable law with
respect to accomplishing the purposes of the Trust. The Delaware Trustee
shall not be entitled to exercise any powers, nor shall the Delaware Trustee
have any of the duties and responsibilities, of the Property Trustee or the
Administrative Trustees set forth herein. The Delaware Trustee shall be one
of the Trustees of the Trust for the sole and limited purpose of fulfilling
the requirements of Section 3807 of the Delaware Business Trust Act.
SECTION 207. AUTHORIZATION TO ENTER INTO CERTAIN TRANSACTIONS.
(a) The Trustees shall conduct the affairs of the Trust in accordance
with the terms of this Trust Agreement. Subject to the limitations set forth
in paragraph (b) of this Section and Article VIII, and in accordance with the
following provisions (i) and (ii), the Administrative Trustees shall have the
authority to enter into all transactions and agreements determined by the
Administrative Trustees to be appropriate in exercising the
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authority, express or implied, otherwise granted to the Administrative
Trustees under this Trust Agreement, and to perform all acts in furtherance
thereof, including without limitation, the following:
(i) As among the Trustees, each Administrative Trustee, singly or
jointly, shall have the power and authority to act on of the Trust with
respect to the following matters:
(A) the issuance and sale of the Trust Securities;
(B) to cause the Trust to enter into, and to execute, deliver
and perform on behalf of the Trust, the Expense Agreement and the
Certificate Depository Agreement and such other agreements or
documents as may be necessary or desirable in connection with the
purposes and function of the Trust;
(C) assisting in the registration of the Preferred Securities
under the Securities Act of 1933, as amended, and under state
securities or blue sky laws, and the qualification of this Trust
Agreement as a trust indenture under the Trust Indenture Act;
(D) assisting in the listing of the Preferred Securities upon
the American Stock Exchange or such securities exchange, or
exchanges or quotation systems as shall be determined by the
Depositor and, if required, the registration of the Preferred
Securities under the Securities Exchange Act of 1934, as amended,
and the preparation and filing of all periodic and other reports
and other documents pursuant to the foregoing;
(E) the sending of notices (other than notices of default) and
other information regarding the Trust Securities and the Junior
Subordinated Debentures to the Security holders in accordance with
this Trust Agreement;
(F) the appointment of a Paying Agent, authenticating agent
and Securities Registrar in accordance with this Trust Agreement;
(G) to the extent provided in this Trust Agreement, the
winding up of the affairs of and liquidation of the Trust and the
preparation, execution and filing of the certificate of
cancellation with the Secretary of State of the State of Delaware;
(H) to take all action that may be necessary or appropriate
for the preservation and the continuation of the Trust's valid
existence, rights, franchises and privileges as a statutory
business trust under the laws of the State of Delaware and of each
other jurisdiction in which such existence is necessary to protect
the limited liability of the Holders of the Preferred
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Securities or to enable the Trust to effect the purposes for which
the Trust was created; and
(I) the taking of any action incidental to the foregoing as
the Administrative Trustees may from time to time determine is
necessary or advisable to give effect to the terms of this Trust
Agreement for the benefit of the Security holders (without
consideration of the effect of any such action on any particular
Securityholder).
(ii) As among the Trustees, the Property Trustee shall have the
power, duty and authority to act on behalf of the Trust with
respect to the following matters:
(A) the establishment of the Payment Account;
(B) the receipt of the Junior Subordinated Debentures;
(C) the collection of interest, principal and any other
payments made in respect of the Junior Subordinated Debentures in
the Payment Account;
(D) the distribution of amounts owed to the Security holders
in respect of the Trust Securities in accordance with the terms of
this Trust Agreement;
(E) the exercise of all of the rights, powers and privileges
of a holder of the Junior Subordinated Debentures;
(F) the sending of notices of default and other information
regarding the Trust Securities and the Junior Subordinated
Debentures to the Security holders in accordance with this Trust
Agreement;
(G) the distribution of the Trust Property in accordance with
the terms of this Trust Agreement;
(H) to the extent provided in this Trust Agreement, the
winding up of the affairs of and liquidation of the Trust;
(I) after an Event of Default the taking of any action
incidental to the foregoing as the Property Trustee may from time
to time determine is necessary or advisable to give effect to the
terms of this Trust Agreement and protect and conserve the Trust
Property for the benefit of the Security holders (without
consideration of the effect of any such action on any particular
Securityholder);
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(J) so long as the Property Trustee is the Securities
Registrar, registering transfers of the Trust Securities in
accordance with this Trust Agreement; and
(K) except as otherwise provided in this Section 207(a)(ii),
the Property Trustee shall have none of the duties, liabilities,
powers or the authority of the Administrative Trustees set forth in
Section 207(a)(i).
(b) So long as this Trust Agreement remains in effect, the Trust (or
the Trustees acting on behalf of the Trust) shall not undertake any business,
activities or transaction except as expressly provided herein or contemplated
hereby. In particular, the Trustees shall not (i) acquire any investments or
engage in any activities not authorized by this Trust Agreement, (ii) sell,
assign, transfer, exchange, mortgage, pledge, set-off or otherwise dispose of
any of the Trust Property or interests therein, including to Security
holders, except as expressly provided herein, (iii) take any action that
would cause the Trust to fail or cease to qualify as a "grantor trust" for
United States federal income tax purposes, (iv) incur any indebtedness for
borrowed money or issue any other debt or (v) take or consent to any action
that would result in the placement of a Lien on any of the Trust Property.
The Administrative Trustees shall defend all claims and demands of all
Persons at any time claiming any Lien on any of the Trust Property adverse to
the interest of the Trust or the Security holders in their capacity as
Security holders.
(c) In connection with the issue and sale of the Preferred Securities,
the Depositor shall have the right and responsibility to assist the Trust
with respect to, or effect on behalf of the Trust, the following (and any
actions taken by the Depositor in furtherance of the following prior to the
date of this Trust Agreement are hereby ratified and confirmed in all
respects):
(i) preparation and filing by the Trust with the and the
execution on behalf of the Trust of a registration statement on the
appropriate form in relation to the Preferred Securities and the Junior
Subordinated Debentures, including any amendments thereto;
(ii) the determination of the states in which to take appropriate
action to qualify or register for sale all or part of the Preferred
Securities and to do any and all such acts, other than actions which
must be taken by or on behalf of the Trust, and advise the Trustees of
actions they must take on behalf of the Trust, and prepare for execution
and filing any documents to be executed and filed by the Trust or on
behalf of the Trust, as the Depositor deems necessary or advisable in
order to comply with the applicable laws of any such states;
(iii) the preparation for filing by the Trust and execution on
behalf of the Trust of an application to the American Stock Exchange or
other national stock exchange or other organizations for listing upon
notice of issuance of any Preferred Securities and to file or cause an
Administrative Trustee to file thereafter with such
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exchange or organization such notifications and documents as may be
necessary from time to time;
(iv) if required, the preparation for filing by the Trust with the
Commission and the execution on behalf of the Trust of a registration
statement on Form 8-A relating to the registration of the Preferred
Securities under Section 12(b) or 12(g) of the Exchange Act, including
any amendments thereto;
(v) the negotiation of the terms of, and the execution and
delivery of, the Underwriting Agreement providing for the sale of the
Preferred Securities; and
(vi) the taking of any other actions necessary or desirable to
carry out any of the foregoing activities.
(d) Notwithstanding anything herein to the contrary, the Administrative
Trustees are authorized and directed to conduct the affairs of the Trust and
to operate the Trust so that the Trust will not be deemed to be an
"investment company" required to be registered under the Investment Company
Act, will be classified as a "grantor trust" and not as an association
taxable as a corporation for United States federal income tax purposes and so
that the Junior Subordinated Debentures will be treated as indebtedness of
the Depositor for United States federal income tax purposes. In this
connection, subject to Section 1002, the Depositor and the Administrative
Trustees are authorized to take any action, not inconsistent with applicable
law or this Trust Agreement, that each of the Depositor and the
Administrative Trustees determines in their discretion to be necessary or
desirable for such purposes.
SECTION 208. ASSETS OF TRUST. The assets of the Trust shall consist of
the Trust Property.
SECTION 209. TITLE TO TRUST PROPERTY. Legal title to all Trust
Property shall be vested at all times in the Property Trustee (in its
capacity as such) and shall be held and administered by the Property Trustee
for the benefit of the Security holders in accordance with this Trust
Agreement.
ARTICLE III.
PAYMENT ACCOUNT
SECTION 301. PAYMENT ACCOUNT.
(a) On or prior to the Closing Date, the Property Trustee shall
establish the Payment Account. The Property Trustee and any agent of the
Property Trustee shall have exclusive control and sole right of withdrawal
with respect to the Payment Account for the purpose of making deposits and
withdrawals from the Payment Account in accordance with this Trust Agreement.
All monies and other property deposited or held from time to
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time in the Payment Account shall be held by the Property Trustee in the
Payment Account for the exclusive benefit of the Security holders and for
distribution as herein provided, including (and subject to) any priority of
payments provided for herein.
(b) The Property Trustee shall deposit in the Payment Account, promptly
upon receipt, all payments of principal of or interest on, and any other
payments or proceeds with respect to, the Junior Subordinated Debentures.
Amounts held in the Payment Account shall not be invested by the Property
Trustee pending distribution thereof.
ARTICLE IV.
DISTRIBUTIONS; REDEMPTION
SECTION 401. DISTRIBUTIONS.
(a) Distributions on the Trust Securities shall be cumulative, and will
accumulate whether or not there are funds of the Trust available for the
payment of Distributions. Distributions shall accumulate from ___________,
1999, and, except during any Extension Period with respect to the Junior
Subordinated Debentures, shall be payable quarterly in arrears on the 15th
day of January, April, July, and October in each year, commencing October 15,
1999. The amount of each Distribution due with respect to the Trust
Securities will include amounts accrued through the date the Distribution
payment is due. If any date on which a Distribution is otherwise payable on
the Trust Securities is not a Business Day, then the payment of such
Distribution shall be made on the next succeeding day that is a Business Day
(and without any interest or other payment in respect of any such delay)
except that, if such Business Day is in the next succeeding calendar year,
payment of such Distribution shall be made on the immediately preceding
Business Day, in each case with the same force and effect as if made on such
date (each date on which Distributions are payable in accordance with this
Section 401(a) is a "Distribution Date").
(b) The Trust Securities represent undivided beneficial interests in
the Trust Property, and, as a practical matter, the Distributions on the
Trust Securities shall be payable at a rate of _____% per annum of the
Liquidation Amount of the Trust Securities. The amount of Distributions
payable for any full period shall be computed on the basis of a 360-day year
of twelve 30-day months. The amount of Distributions for any partial period
shall be computed on the basis of the number of days elapsed in a 360-day
year of twelve 30-day months. During any Extension Period with respect to
the Junior Subordinated Debentures, Distributions on the Preferred Securities
will be deferred for a period equal to the Extension Period. The amount of
Distributions payable for any period shall include the Additional Amounts, if
any.
(c) Distributions on the Trust Securities shall be made by the Property
Trustee solely from the Payment Account and shall be payable on each
Distribution Date only to the extent that the Trust has funds then on hand
and immediately available in the Payment Account for the payment of such
Distributions.
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(d) Distributions on the Trust Securities with respect to a
Distribution Date shall be payable to the Holders thereof as they appear on
the Securities Register for the Trust Securities on the relevant record date,
which shall be one Business Day prior to such Distribution Date; provided,
however, that in the event that the Preferred Securities do not remain in
book-entry-only form, the relevant record date shall be the 1st day of the
month in which the relevant Distribution Date occurs.
SECTION 402. REDEMPTION.
(a) On each Debenture Redemption Date and on the Maturity Date of the
Junior Subordinated Debentures, the Trust will be required to redeem a Like
Amount of Trust Securities at the Redemption Price.
(b) Notice of redemption shall be given by the Property Trustee by
first-class mail, postage prepaid, mailed not less than 30 nor more than 60
days prior to the Redemption Date to each Holder of Trust Securities to be
redeemed, at such Holder's address appearing in the Securities Register. The
Property Trustee shall have no responsibility for the accuracy of any CUSIP
number contained in such notice. All notices of redemption shall state:
(i) the Redemption Date;
(ii) the Redemption Price;
(iii) the CUSIP number;
(iv) if less than all the Outstanding Trust Securities are to be
redeemed, the identification and the aggregate Liquidation Amount of the
particular Trust Securities to be redeemed; and
(v) that on the Redemption Date the Redemption Price will become
due and payable upon each such Trust Security to be redeemed and that
Distributions thereon will cease to accumulate on and after said date.
(c) The Trust Securities redeemed on each Redemption Date shall be
redeemed at the Redemption Price with the proceeds from the contemporaneous
redemption of Junior Subordinated Debentures. Redemptions of the Trust
Securities shall be made and the Redemption Price shall be payable on each
Redemption Date only to the extent that the Trust has immediately available
funds then on hand and available in the Payment Account for the payment of
such Redemption Price.
(d) If the Property Trustee gives a notice of redemption in respect of
any Preferred Securities, then, by 12:00 noon, Wilmington, Delaware time, on
the Redemption Date, subject to Section 402(c), the Property Trustee will, so
long as the Preferred Securities are in book-entry-only form, deposit with
the Clearing Agency for the Preferred
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Securities funds sufficient to pay the applicable Redemption Price and will
give such Clearing Agency irrevocable instructions and authority to pay the
Redemption Price to the Holders thereof. If the Preferred Securities are no
longer in book-entry-only form, the Property Trustee, subject to Section
402(c), will deposit with the Paying Agent funds sufficient to pay the
applicable Redemption Price and will give the Paying Agent irrevocable
instructions and authority to pay the Redemption Price to the Holders thereof
upon surrender of their Preferred Securities Certificates. Notwithstanding
the foregoing, Distributions payable on or prior to the Redemption Date for
any Trust Securities called for redemption shall be payable to the Holders of
such Trust Securities as they appear on the Securities Register for the Trust
Securities on the relevant record dates for the related Distribution Dates.
If notice of redemption shall have been given and funds deposited as
required, then upon the date of such deposit, all rights of Security holders
holding Trust Securities so called for redemption will cease, except the
right of such Security holders to receive the Redemption Price, but without
interest on such Redemption Price, and such Securities will cease to be
Outstanding. In the event that any date on which any Redemption Price is
payable is not a Business Day, then payment of the Redemption Price payable
on such date 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 falls in the next calendar year, such
payment will be made on the immediately preceding Business Day, in each case,
with the same force and effect as if made on such date. In the event that
payment of the Redemption Price in respect of any Trust Securities called for
redemption is improperly withheld or refused and not paid either by the Trust
or by the Depositor pursuant to the Guarantee, Distributions on such Trust
Securities will continue to accumulate, at the then applicable rate, from the
Redemption Date originally established by the Trust for such Trust Securities
to the date such Redemption Price is actually paid, in which case the actual
payment date will be the date fixed for redemption for purposes of calculating
the Redemption Price.
(e) Payment of the Redemption Price on the Trust Securities shall be
made to the record Holders thereof as they appear on the Securities Register
for the Trust Securities on the relevant record date, which shall be one
Business Day prior to the relevant Redemption Date; provided, however, that
in the event that the Preferred Securities do not remain in book-entry-only
form, the relevant record date shall be the date fifteen days prior to the
relevant Redemption Date. In the case of a liquidation, the record date will
be established by the Property Trustee and be no more than forty-five days
prior to the liquidation date.
(f) Subject to Section 403(a), if less than all the Outstanding Trust
Securities are to be redeemed on a Redemption Date, then the aggregate
Liquidation Amount of Trust Securities to be redeemed shall be allocated on a
pro rata basis (based on Liquidation Amounts) among the Common Securities and
the Preferred Securities. The particular Preferred Securities to be redeemed
shall be selected not more than 60 days prior to the Redemption Date by the
Property Trustee from the outstanding Preferred Securities not previously
called for redemption, by such method (including, without limitation, by lot)
as the Property Trustee shall deem fair and appropriate and which may provide
for the selection for redemption of portions (equal to $10 or an integral
multiple of
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$10 in excess thereof) of the Liquidation Amount of Preferred Securities of a
denomination larger than $10. The Property Trustee shall promptly notify the
Securities Registrar in writing of the Preferred Securities selected for
redemption and, in the case of any Preferred Securities selected for partial
redemption, the Liquidation Amount thereof to be redeemed. For all purposes
of this Trust Agreement, unless the context otherwise requires, all
provisions relating to the redemption of Preferred Securities shall relate,
in the case of any Preferred Securities redeemed or to be redeemed only in
part, to the portion of the Liquidation Amount of Preferred Securities which
has been or is to be redeemed.
SECTION 403. SUBORDINATION OF COMMON SECURITIES.
(a) Payment of Distributions (including Additional Amounts, if
applicable) on, and the Redemption Price of, the Trust Securities, as
applicable, shall be made, subject to Section 402(f), pro rata among the
Common Securities and the Preferred Securities based on the Liquidation
Amount of the Trust Securities; provided, however, that if on any
Distribution Date or Redemption Date any Event of Default resulting from a
Debenture Event of Default shall have occurred and be continuing, no payment
of any Distribution (including Additional Amounts, if applicable) on, or
Redemption Price of, any Common Security, and no other payment on account of
the redemption, liquidation or other acquisition of Common Securities, shall
be made unless payment in full in cash of all accumulated and unpaid
Distributions (including Additional Amounts, if applicable) on all
Outstanding Preferred Securities for all Distribution periods terminating on
or prior thereto, or in the case of payment of the Redemption Price the full
amount of such Redemption Price on all Outstanding Preferred Securities then
called for redemption, shall have been made or provided for, and all funds
immediately available to the Property Trustee shall first be applied to the
payment in full in cash of all Distributions (including Additional Amounts,
if applicable) on, or the Redemption Price of, Preferred Securities then due
and payable.
(b) In the case of the occurrence of any Event of Default resulting
from a Debenture Event of Default, the Holder of Common Securities will be
deemed to have waived any right to act with respect to any such Event of
Default under this Trust Agreement until the effect of all such Events of
Default with respect to the Preferred Securities shall have been cured,
waived or otherwise eliminated. Until any such Event of Default under this
Trust Agreement with respect to the Preferred Securities shall have been so
cured, waived or otherwise eliminated, the Property Trustee shall act solely
on behalf of the Holders of the Preferred Securities and not the Holder of
the Common Securities, and only the Holders of the Preferred Securities will
have the right to direct the Property Trustee to act on their behalf.
SECTION 404. PAYMENT PROCEDURES. Payments of Distributions (including
Additional Amounts, if applicable) in respect of the Preferred Securities
shall be made by check mailed to the address of the Person entitled thereto
as such address shall appear on the Securities Register or, if the Preferred
Securities are held by a Clearing Agency, such Distributions shall be made to
the Clearing Agency in immediately available funds, which shall credit the
relevant Persons' accounts at such Clearing Agency on the applicable
Distribution Dates. Payments in respect of the Common Securities shall be
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made in such manner as shall be mutually agreed between the Property Trustee
and the Holder of the Common Securities.
SECTION 405. TAX RETURNS AND REPORTS. The Administrative Trustees
shall prepare (or cause to be prepared), at the Depositor's expense, and file
all United States federal, state and local tax and information returns and
reports required to be filed by or in respect of the Trust. In this regard,
the Administrative Trustees shall (a) prepare and file (or cause to be
prepared and filed) the appropriate Internal Revenue Service Form required to
be filed in respect of the Trust in each taxable year of the Trust and (b)
prepare and furnish (or cause to be prepared and furnished) to each
Securityholder the appropriate Internal Revenue Service form required to be
furnished to such Securityholder or the information required to be provided
on such form. The Administrative Trustees shall provide the Depositor with a
copy of all such returns and reports promptly after such filing or
furnishing. The Property Trustee shall comply with United States federal
withholding and backup withholding tax laws and information reporting
requirements with respect to any payments to Security holders under the Trust
Securities.
SECTION 406. PAYMENT OF TAXES, DUTIES, ETC. OF THE TRUST. Upon receipt
under the Junior Subordinated Debentures of Additional Sums, the Property
Trustee, at the direction of an Administrative Trustee or the Depositor,
shall promptly pay any taxes, duties or governmental charges of whatsoever
nature (other than withholding taxes) imposed on the Trust by the United
States or any other taxing authority.
SECTION 407. PAYMENTS UNDER INDENTURE. Any amount payable hereunder to
any Holder of Preferred Securities shall be reduced by the amount of any
corresponding payment such Holder has directly received under the Indenture
pursuant to Section 514(b) or (c) hereof.
ARTICLE V.
TRUST SECURITIES CERTIFICATES
SECTION 501. INITIAL OWNERSHIP. Upon the creation of the Trust and the
contribution by the Depositor pursuant to Section 203 and until the issuance
of the Trust Securities, and at any time during which no Trust Securities are
outstanding, the Depositor shall be the sole beneficial owner of the Trust.
SECTION 502. THE TRUST SECURITIES CERTIFICATES. The Preferred
Securities Certificates shall be issued in minimum denominations of $10
Liquidation Amount and integral multiples of $10 in excess thereof, and the
Common Securities Certificates shall be issued in denominations of $10
Liquidation Amount and integral multiples of $10 in excess thereof. The
Trust Securities Certificates shall be executed on behalf of the Trust by
manual signature of at least one Administrative Trustee. Trust Securities
Certificates bearing the manual signatures of individuals who were, at the
time when such signatures shall have been affixed, authorized to sign on
behalf of the Trust,
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shall be validly issued and entitled to the benefits of this Trust Agreement,
notwithstanding that such individuals or any of them shall have ceased to be
so authorized prior to the delivery of such Trust Securities Certificates or
did not hold such offices at the date of delivery of such Trust Securities
Certificates. A transferee of a Trust Securities Certificate shall become a
Securityholder, and shall be entitled to the rights and subject to the
obligations of a Securityholder hereunder, upon due registration of such
Trust Securities Certificate in such transferee's name pursuant to Sections
504, 511 and 513.
SECTION 503. EXECUTION AND DELIVERY OF TRUST SECURITIES CERTIFICATES.
On the Closing Date, the Administrative Trustees shall cause Trust Securities
Certificates, in an aggregate Liquidation Amount as provided in Sections 204
and 205, to be executed on behalf of the Trust by at least one of the
Administrative Trustees and delivered to or upon the written order of the
Depositor, signed by its Vice Chairman, its President, or any Vice President
without further corporate action by the Depositor, in authorized
denominations.
SECTION 504. REGISTRATION OF TRANSFER AND EXCHANGE OF PREFERRED
SECURITIES CERTIFICATES. The Depositor shall keep or cause to be kept, at
the office or agency maintained pursuant to Section 508, a register or
registers for the purpose of registering Trust Securities Certificates and
transfers and exchanges of Preferred Securities Certificates (herein referred
to as the "Securities Register") in which the registrar designated by the
Depositor (the "Securities Registrar"), subject to such reasonable
regulations as it may prescribe, shall provide for the registration of
Preferred Securities Certificates and Common Securities Certificates (subject
to Section 510 in the case of the Common Securities Certificates) and
registration of transfers and exchanges of Preferred Securities Certificates
as herein provided. The Property Trustee shall be the initial Securities
Registrar.
Upon surrender for registration of transfer of any Preferred Securities
Certificate at the office or agency maintained pursuant to Section 508, the
Administrative Trustees or any one of them shall execute and deliver, in the
name of the designated transferee or transferees, one or more new Preferred
Securities Certificates in authorized denominations of a like aggregate
Liquidation Amount dated the date of execution by such Administrative Trustee
or Trustees. The Securities Registrar shall not be required to register the
transfer of any Preferred Securities that have been called for redemption.
At the option of a Holder, Preferred Securities Certificates may be exchanged
for other Preferred Securities Certificates in authorized denominations of
the same class and of a like aggregate Liquidation Amount upon surrender of
the Preferred Securities Certificates to be exchanged at the office or agency
maintained pursuant to Section 508.
Every Preferred Securities Certificate presented or surrendered for
registration of transfer or exchange shall be accompanied by a written
instrument of transfer in form satisfactory to the Property Trustee and the
Securities Registrar duly executed by the Holder or such Holder's attorney
duly authorized in writing. Each Preferred Securities Certificate
surrendered for registration of transfer or exchange shall be canceled and
subsequently disposed of by the Property Trustee in accordance with its
customary
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practice. The Trust shall not be required to (i) issue, register the
transfer of, or exchange any Preferred Securities during a period beginning
at the opening of business 15 calendar days before the date of mailing of a
notice of redemption of any Preferred Securities called for redemption and
ending at the close of business on the day of such mailing or (ii) register
the transfer of or exchange any Preferred Securities so selected for
redemption, in whole or in part, except the unredeemed portion of any such
Preferred Securities being redeemed in part.
No service charge shall be made for any registration of transfer or
exchange of Preferred Securities Certificates, but the Securities Registrar
may require payment of a sum sufficient to cover any tax or governmental
charge that may be imposed in connection with any transfer or exchange of
Preferred Securities Certificates.
SECTION 505. MUTILATED, DESTROYED, LOST OR STOLEN TRUST SECURITIES
CERTIFICATES. If (a) any mutilated Trust Securities Certificate shall be
surrendered to the Securities Registrar, or if the Securities Registrar shall
receive evidence to its satisfaction of the destruction, loss or theft of any
Trust Securities Certificate and (b) there shall be delivered to the
Securities Registrar and the Administrative Trustees such security or
indemnity as may be required by them to save each of them harmless, then in
the absence of notice that such Trust Securities Certificate shall have been
acquired by a bona fide purchaser, the Administrative Trustees, or any one of
them, on behalf of the Trust shall execute and make available for delivery,
in exchange for or in lieu of any such mutilated, destroyed, lost or stolen
Trust Securities Certificate, a new Trust Securities Certificate of like
class, tenor and denomination. In connection with the issuance of any new
Trust Securities Certificate under this Section, the Administrative Trustees
or the Securities Registrar may require the payment of a sum sufficient to
cover any tax or other governmental charge that may be imposed in connection
therewith. Any duplicate Trust Securities Certificate issued pursuant to
this Section shall constitute conclusive evidence of an undivided beneficial
interest in the assets of the Trust, as if originally issued, whether or not
the lost, stolen or destroyed Trust Securities Certificate shall be found at
any time.
SECTION 506. PERSONS DEEMED SECURITY HOLDERS. The Trustees, the Paying
Agent and the Securities Registrar shall treat the Person in whose name any
Trust Securities Certificate shall be registered in the Securities Register
as the owner of such Trust Securities Certificate for the purpose of
receiving Distributions and for all other purposes whatsoever, and neither
the Trustees nor the Securities Registrar shall be bound by any notice to the
contrary.
SECTION 507. ACCESS TO LIST OF SECURITY HOLDERS' NAMES AND ADDRESSES.
At any time when the Property Trustee is not also acting as the Securities
Registrar, the Administrative Trustees or the Depositor shall furnish or
cause to be furnished to the Property Trustee (a) semi-annually on or before
January 15 and July 15 in each year, a list, in such form as the Property
Trustee may reasonably require, of the names and addresses of the Security
holders as of the most recent regular record date (as provided in Section
401(d)) and (b) promptly after receipt by any Administrative Trustee or
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the Depositor of a request therefor from the Property Trustee, such other
information as the Property Trustee may reasonably require in order to enable
the Property Trustee to discharge its obligations under this Trust Agreement,
in each case to the extent such information is in the possession or control
of the Administrative Trustees or the Depositor and is not identical to a
previously supplied list or has not otherwise been received by the Property
Trustee in its capacity as Securities Registrar. The rights of Security
holders to communicate with other Security holders with respect to their
rights under this Trust Agreement or under the Trust Securities, and the
corresponding rights of the Trustee shall be as provided in the Trust
Indenture Act. Each Holder, by receiving and holding a Trust Securities
Certificate, and each Owner shall be deemed to have agreed not to hold the
Depositor, the Property Trustee or the Administrative Trustees accountable by
reason of the disclosure of its name and address, regardless of the source
from which such information was derived.
SECTION 508. MAINTENANCE OF OFFICE OR AGENCY. The Administrative
Trustees shall maintain an office or offices or agency or agencies where
Preferred Securities Certificates may be surrendered for registration of
transfer or exchange and where notices and demands to or upon the Trustees in
respect of the Trust Securities Certificates may be served. The
Administrative Trustees initially designate the principal corporate trust
office of the Property Trustee, Rodney Square North, 1100 North Market
Street, Wilmington, Delaware 19890-0001, Attn: Corporate Trust
Administration, as the principal corporate trust office for such purposes.
The Administrative Trustees shall give prompt written notice to the Depositor
and to the Security holders of any change in the location of the Securities
Register or any such office or agency.
SECTION 509. APPOINTMENT OF PAYING AGENT. The Paying Agent shall make
Distributions to Security holders from the Payment Account and shall report
the amounts of such Distributions to the Property Trustee and the
Administrative Trustees. Any Paying Agent shall have the revocable power to
withdraw funds from the Payment Account for the purpose of making the
Distributions referred to above. The Administrative Trustees may revoke such
power and remove the Paying Agent if such Trustees determine in their sole
discretion that the Paying Agent shall have failed to perform its obligations
under this Trust Agreement in any material respect. The Paying Agent shall
initially be the Property Trustee, and any co-paying agent chosen by the
Property Trustee, and acceptable to the Administrative Trustees and the
Depositor. Any Person acting as Paying Agent shall be permitted to resign as
Paying Agent upon 30 days' written notice to the Administrative Trustees, the
Property Trustee and the Depositor. In the event that the Property Trustee
shall no longer be the Paying Agent or a successor Paying Agent shall resign
or its authority to act be revoked, the Administrative Trustees shall appoint
a successor that is acceptable to the Property Trustee and the Depositor to
act as Paying Agent (which shall be a bank or trust company). The
Administrative Trustees shall cause such successor Paying Agent or any
additional Paying Agent appointed by the Administrative Trustees to execute
and deliver to the Trustees an instrument in which such successor Paying
Agent or additional Paying Agent shall agree with the Trustees that as Paying
Agent, such successor Paying Agent or additional Paying Agent will hold all
sums, if any, held by it for payment to the Security holders in trust for the
benefit of the Security
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holders entitled thereto until such sums shall be paid to such Security
holders. The Paying Agent shall return all unclaimed funds to the Property
Trustee and upon removal of a Paying Agent such Paying Agent shall also
return all funds in its possession to the Property Trustee. The provisions
of Sections 801, 803 and 806 shall apply to the Property Trustee also in its
role as Paying Agent, for so long as the Property Trustee shall act as Paying
Agent and, to the extent applicable, to any other Paying Agent appointed
hereunder. Any reference in this Agreement to the Paying Agent shall include
any co-paying agent unless the context requires otherwise.
SECTION 510. OWNERSHIP OF COMMON SECURITIES BY DEPOSITOR. On the
Closing Date, the Depositor shall acquire and retain beneficial and record
ownership of the Common Securities. To the fullest extent permitted by law,
any attempted transfer of the Common Securities (other than a transfer in
connection with a merger or consolidation of the Depositor into another
corporation pursuant to Section 12.1 of the Indenture) shall be void. The
Administrative Trustees shall cause each Common Securities Certificate issued
to the Depositor to contain a legend stating "THIS CERTIFICATE IS NOT
TRANSFERABLE".
SECTION 511. BOOK-ENTRY PREFERRED SECURITIES CERTIFICATES; COMMON
SECURITIES CERTIFICATE.
(a) The Preferred Securities Certificates, upon original
issuance, will be issued in the form of a typewritten Preferred
Securities Certificate or Certificates representing Book-Entry Preferred
Securities Certificates, to be delivered to or held on behalf of The
Depository Trust Company, the initial Clearing Agency, by, or on behalf
of, the Trust. Such Book-Entry Preferred Securities Certificate or
Certificates shall initially be registered on the Securities Register in
the name of Cede & Co., the nominee of the initial Clearing Agency, and
no beneficial owner will receive a Definitive Preferred Securities
Certificate representing such beneficial owner's interest in such
Preferred Securities, except as provided in Section 513. Unless and
until Definitive Preferred Securities Certificates have been issued to
beneficial owners pursuant to Section 513:
(i) the provisions of this Section 511(a) shall be in
full force and effect;
(ii) the Securities Registrar, the Paying Agent and the
Trustees shall be entitled to deal with the Clearing Agency for all
purposes of this Trust Agreement relating to the Book-Entry
Preferred Securities Certificates (including the payment of the
Liquidation Amount of and Distributions on the Book-Entry Preferred
Securities) as the sole Holder of Book-Entry Preferred Securities
and shall have no obligations to the Owners thereof;
(iii) to the extent that the provisions of this Section
511 conflict with any other provisions of this Trust Agreement, the
provisions of this Section 511 shall control; and
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(iv) the rights of the Owners of the Book-Entry Preferred
Securities Certificates shall be exercised only through the
Clearing Agency and shall be limited to those established by law
and agreements between such Owners and the Clearing Agency and/or
the Clearing Agency Participants. Pursuant to the Certificate
Depository Agreement, unless and until Definitive Preferred
Securities Certificates are issued pursuant to Section 513, the
initial Clearing Agency will make book-entry transfers among the
Clearing Agency Participants and will receive and transmit payments
on the Preferred Securities to such Clearing Agency Participants.
Any Clearing Agency designated pursuant hereto will not be deemed
an agent of the Trustees for any purpose.
(b) Upon the execution and delivery of this Trust Agreement, a single
Common Securities Certificate representing the Common Securities shall be
issued to the Depositor in the form of a definitive Common Securities
Certificate. Upon exercise of the Underwriters' Over-Allotment Option, an
additional, single Common Securities Certificate representing the Common
Securities shall be issued to the Depositor in the form of a definitive
Common Securities Certificate.
SECTION 512. NOTICES TO CLEARING AGENCY. To the extent that a notice
or other communication to the Owners is required under this Trust Agreement,
unless and until Definitive Preferred Securities Certificates shall have been
issued to Owners pursuant to Section 513, the Trustees shall give all such
notices and communications specified herein to be given to Owners to the
Clearing Agency, and shall have no obligations to the Owners.
SECTION 513. DEFINITIVE PREFERRED SECURITIES CERTIFICATES. If (a) the
Depositor advises the Trustees in writing that the Clearing Agency is no
longer willing or able to properly discharge its responsibilities with
respect to the Preferred Securities Certificates, and the Depositor is unable
to locate a qualified successor, (b) the Depositor at its option advises the
Trustees in writing that it elects to terminate the book-entry system through
the Clearing Agency, or (c) after the occurrence of a Debenture Event of
Default, Owners of Preferred Securities Certificates representing beneficial
interests aggregating at least a majority of the Liquidation Amount advise
the Property Trustee in writing that the continuation of a book-entry system
through the Clearing Agency is no longer in the best interests of the Owners
of Preferred Securities Certificates, then the Property Trustee shall notify
the Clearing Agency, and the Clearing Agency shall notify all Owners of
Preferred Securities Certificates, of the occurrence of any such event and of
the availability of the Definitive Preferred Securities Certificates to
Owners of such class or classes, as applicable, requesting the same. Upon
surrender to the Property Trustee of the typewritten Preferred Securities
Certificate or Certificates representing the Book-Entry Preferred Securities
Certificates by the Clearing Agency, accompanied by registration
instructions, the Administrative Trustees, or any one of them, shall execute
the Definitive Preferred Securities Certificates in accordance with the
instructions of the Clearing Agency. Neither the Securities Registrar nor
the Trustees shall be liable for any delay in
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delivery of such instructions and may conclusively rely on, and shall be
protected in relying on, such instructions. Upon the issuance of Definitive
Preferred Securities Certificates, the Trustees shall recognize the Holders
of the Definitive Preferred Securities Certificates as Security holders. The
Definitive Preferred Securities Certificates shall be printed, lithographed
or engraved or may be produced in any other manner as is reasonably
acceptable to the Administrative Trustees, as evidenced by the execution
thereof by the Administrative Trustees or any one of them.
SECTION 514. RIGHTS OF SECURITY HOLDERS.
(a) The legal title to the Trust Property is vested exclusively in the
Property Trustee (in its capacity as such) in accordance with Section 209,
and the Security holders shall not have any right or title therein other than
the undivided beneficial interest in the assets of the Trust conferred by
their Trust Securities and they shall have no right to call for any partition
or division of property, profits or rights of the Trust except as described
below. The Trust Securities shall be personal property giving only the rights
specifically set forth therein and in this Trust Agreement. The Trust
Securities shall have no preemptive or similar rights. When issued and
delivered to Holders of the Preferred Securities against payment of the
purchase price therefor, the Preferred Securities will be fully paid and
nonassessable interests in the Trust. The Holders of the Preferred
Securities, in their capacities as such, shall be entitled to the same
limitation of personal liability extended to stockholders of private
corporations for profit organized under the General Corporation Law of the
State of Delaware.
(b) For so long as any Preferred Securities remain Outstanding, if,
upon a Debenture Event of Default, the Debenture Trustee fails or the holders
of not less than 25% in principal amount of the outstanding Junior
Subordinated Debentures fail to declare the principal of all of the Junior
Subordinated Debentures to be immediately due and payable, the Holders of at
least 25% in Liquidation Amount of the Preferred Securities then Outstanding
shall have such right by a notice in writing to the Depositor and the
Debenture Trustee; and upon any such declaration such principal amount of and
the accrued interest on all of the Junior Subordinated Debentures shall
become immediately due and payable, provided that the payment of principal
and interest on such Junior Subordinated Debentures shall remain subordinated
to the extent provided in the Indenture. If, as a result of a Debenture
Event of Default, the Debenture Trustee or the holders of not less than 25%
in aggregate outstanding principal amount of the Junior Subordinated
Debentures have declared the Junior Subordinated Debentures due and payable
and if such default has been cured and a sum sufficient to pay all matured
installments due (otherwise than by acceleration) under the Junior
Subordinated Debentures has been deposited with the Debenture Trustee, then
(if the holders of not less than a majority in aggregate outstanding
principal amount of Junior Subordinated Debentures have not annulled such
declaration and waived such default) the Holders of a majority in aggregate
Liquidation Amount of the Preferred Securities may annul such declaration and
waive such default.
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(c) For so long as any Preferred Securities remain outstanding, upon a
Debenture Event of Default arising from the failure to pay interest or
principal on the Junior Subordinated Debentures, the Holders of any Preferred
Securities then Outstanding shall, to the fullest extent permitted by law,
have the right to directly institute proceedings for enforcement of payment
to such Holders of principal of or interest on the Junior Subordinated
Debentures having a principal amount equal to the Liquidation Amount of the
Preferred Securities of such Holders.
ARTICLE VI.
ACTS OF SECURITY HOLDERS; MEETINGS; VOTING
SECTION 601. LIMITATIONS ON VOTING RIGHTS.
(a) Except as provided in this Section, in Sections 514, 810 and 1002
and in the Indenture and as otherwise required by law, no Holder of Preferred
Securities shall have any right to vote or in any manner otherwise control
the administration, operation and management of the Trust or the obligations
of the parties hereto, nor shall anything herein set forth, or contained in
the terms of the Trust Securities Certificates, be construed so as to
constitute the Security holders from time to time as partners or members of
an association.
(b) So long as any Junior Subordinated Debentures are held by the
Property Trustee, the Trustees shall not (i) direct the time, method and
place of conducting any proceeding for any remedy available to the Debenture
Trustee, or executing any trust or power conferred on the Debenture Trustee
with respect to such Junior Subordinated Debentures, (ii) waive any past
default which is waivable under Article Seven of the Indenture, (iii)
exercise any right to rescind or annul a declaration that the principal of
all the Junior Subordinated Debentures shall be due and payable or (iv)
consent to any amendment, modification or termination of the Indenture or the
Junior Subordinated Debentures, where such consent shall be required,
without, in each case, obtaining the prior approval of the Holders of at
least a majority in Liquidation Amount of all Outstanding Preferred
Securities; provided, however, that where a consent under the Indenture would
require the consent of each holder of outstanding Junior Subordinated
Debentures affected thereby, no such consent shall be given by the Property
Trustee without the prior written consent of each Holder of Preferred
Securities. The Trustees shall not revoke any action previously authorized
or approved by a vote of the Holders of the Outstanding Preferred Securities,
except by a subsequent vote of the Holders of the Outstanding Preferred
Securities. The Property Trustee shall notify each Holder of the Outstanding
Preferred Securities of any notice of default received from the Debenture
Trustee with respect to the Junior Subordinated Debentures. In addition to
obtaining the foregoing approvals of the Holders of the Preferred Securities,
prior to taking any of the foregoing actions, the Trustees shall, at the
expense of the Depositor, obtain an Opinion of Counsel experienced in such
matters to the effect that the Trust will continue to be classified as a
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grantor trust and not as an association taxable as a corporation for United
States federal income tax purposes on account of such action.
(c) If any proposed amendment to the Trust Agreement provides for, or
the Trustees otherwise propose to effect, (i) any action that would adversely
affect in any material respect the powers, preferences or special rights of
the Preferred Securities, whether by way of amendment to the Trust Agreement
or otherwise, or (ii) the dissolution, winding-up or termination of the
Trust, other than pursuant to the terms of this Trust Agreement, then the
Holders of Outstanding Preferred Securities as a class will be entitled to
vote on such amendment or proposal and such amendment or proposal shall not
be effective except with the approval of the Holders of at least a majority
in Liquidation Amount of the Outstanding Preferred Securities. No amendment
to this Trust Agreement may be made if, as a result of such amendment, the
Trust would cease to be classified as a grantor trust or would be classified
as an association taxable as a corporation for United States federal income
tax purposes.
SECTION 602. NOTICE OF MEETINGS. Notice of all meetings of the Holders
of Preferred Securities, stating the time, place and purpose of the meeting,
shall be given by the Property Trustee pursuant to Section 1008 to each
Holder of Preferred Securities of record, at such Securityholder's registered
address, at least 15 days and not more than 90 days before the meeting. At
any such meeting, any business properly before the meeting may be so
considered whether or not stated in the notice of the meeting. Any adjourned
meeting may be held as adjourned without further notice.
SECTION 603. MEETINGS OF HOLDERS OF PREFERRED SECURITIES. No annual
meeting of Security holders is required to be held. The Administrative
Trustees, however, shall call a meeting of Security holders to vote on any
matter upon the written request of the Holders of 25% of the Outstanding
Preferred Securities (based upon their aggregate Liquidation Amount) and the
Administrative Trustees or the Property Trustee may, at any time in their
discretion, call a meeting of Holders of the Preferred Securities to vote on
any matters as to which the Holders of the Preferred Securities are entitled
to vote.
Holders of at least 50% of the Outstanding Preferred Securities (based
upon their aggregate Liquidation Amount), present in person or by proxy,
shall constitute a quorum at any meeting of such Security holders.
If a quorum is present at a meeting, an affirmative vote by the Holders
of record present, in person or by proxy, holding more than a majority of the
Preferred Securities (based upon their aggregate Liquidation Amount) held by
the Holders of Preferred Securities of record present, either in person or by
proxy, at such meeting shall constitute the action of the Holders of the
Preferred Securities, unless this Trust Agreement requires a greater number
of affirmative votes.
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SECTION 604. VOTING RIGHTS. Security holders shall be entitled to one
vote for each $10 of Liquidation Amount represented by their Trust Securities
in respect of any matter as to which such Security holders are entitled to
vote.
SECTION 605. PROXIES, ETC. At any meeting of Security holders, any
Securityholder entitled to vote thereat may vote by proxy, provided that no
proxy shall be voted at any meeting unless it shall have been placed on file
with the Administrative Trustees, or with such other officer or agent of the
Trust as the Administrative Trustees may direct, for verification prior to
the time at which such vote shall be taken. When Trust Securities are held
jointly by several persons, any one of them may vote at any meeting in person
or by proxy in respect of such Trust Securities, but if more than one of them
shall be present at such meeting in person or by proxy, and such joint owners
or their proxies so present disagree as to any vote to be cast, such vote
shall not be received in respect of such Trust Securities. A proxy purporting
to be executed by or on behalf of a Securityholder shall be deemed valid
unless challenged at or prior to its exercise, and, the burden of proving
invalidity shall rest on the challenger. No proxy shall be valid more than
three years after its date of execution.
SECTION 606. SECURITYHOLDER ACTION BY WRITTEN CONSENT. Any action
which may be taken by Security holders at a meeting may be taken without a
meeting if Security holders holding more than a majority of all Outstanding
Trust Securities (based upon their aggregate Liquidation Amount) entitled to
vote in respect of such action (or such larger proportion thereof as shall be
required by any express provision of this Trust Agreement) shall consent to
the action in writing (based upon their aggregate Liquidation Amount).
SECTION 607. RECORD DATE FOR VOTING AND OTHER PURPOSES. For the
purposes of determining the Security holders who are entitled to notice of
and to vote at any meeting or by written consent, or to participate in any
distribution on the Trust Securities in respect of which a record date is not
otherwise provided for in this Trust Agreement, or for the purpose of any
other action, the Administrative Trustees may from time to time fix a date,
not more than 90 days prior to the date of any meeting of Security holders or
the payment of any distribution or other action, as the case may be, as a
record date for the determination of the identity of the Security holders of
record for such purposes.
SECTION 608. ACTS OF SECURITY HOLDERS. Any request, demand,
authorization, direction, notice, consent, waiver or other action provided or
permitted by this Trust Agreement to be given, made or taken by Security
holders or Owners may be embodied in and evidenced by one or more instruments
of substantially similar tenor signed by such Security holders or Owners in
person or by an agent duly appointed in writing; and, except as otherwise
expressly provided herein, such action shall become effective when such
instrument or instruments are delivered to an Administrative Trustee. Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Security
holders or Owners signing such instrument or instruments. Proof of execution
of any such instrument or of a writing
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appointing any such agent shall be sufficient for any purpose of this Trust
Agreement and (subject to Section 801) conclusive in favor of the Trustees,
if made in the manner provided in this Section.
The fact and date of the execution by any Person of any such instrument
or writing may be proved by the affidavit of a witness of such execution or
by a certificate of a notary public or other officer authorized by law to
take acknowledgments of deeds, certifying that the individual signing such
instrument or writing acknowledged to him or her the execution thereof.
Where such execution is by a signer acting in a capacity other than such
signer's individual capacity, such certificate or affidavit shall also
constitute sufficient proof of such signer's authority. The fact and date of
the execution of any such instrument or writing, or the authority of the
Person executing the same, may also be proved in any other manner which any
Trustee receiving the same deems sufficient.
The ownership of Preferred Securities shall be proved by the Securities
Register.
Any request, demand, authorization, direction, notice, consent, waiver
or other Act of the Securityholder of any Trust Security shall bind every
future Securityholder of the same Trust Security and the Securityholder of
every Trust Security issued upon the registration of transfer thereof or in
exchange therefor or in lieu thereof in respect of anything done, omitted or
suffered to be done by the Trustees or the Trust in reliance thereon, whether
or not notation of such action is made upon such Trust Security.
Without limiting the foregoing, a Securityholder entitled hereunder to
take any action hereunder with regard to any particular Trust Security may do
so with regard to all or any part of the Liquidation Amount of such Trust
Security or by one or more duly appointed agents each of which may do so
pursuant to such appointment with regard to all or any part of such
Liquidation Amount.
A Holder of Preferred Securities may institute a legal proceeding
directly against the Depositor under the Guarantee to enforce its rights
under the Guarantee without first instituting a legal proceeding against the
Guarantee Trustee (as defined in the Guarantee), the Trust or any Person.
SECTION 609. INSPECTION OF RECORDS. Upon reasonable notice to the
Administrative Trustees and the Property Trustee, the records of the Trust
shall be open to inspection by Security holders during normal business hours
for any purpose reasonably related to such Securityholder's interest as a
Securityholder.
ARTICLE VII.
REPRESENTATIONS AND WARRANTIES
SECTION 701. REPRESENTATIONS AND WARRANTIES OF THE BANK AND THE
PROPERTY TRUSTEE. The Bank, in its separate corporate capacity and as
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Property Trustee, as of the date hereof, and each successor Property Trustee
at the time of the successor Property Trustee's acceptance of its appointment
as Property Trustee hereunder (the term "Bank" being used hereafter in this
Article VII to refer to such successor Property Trustee in its separate
corporate capacity and as Property Trustee), hereby represents and warrants
(as applicable) for the benefit of the Depositor and the Security holders
that:
(a) the Bank is a Delaware banking corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware;
(b) the Bank has full corporate power, authority and legal right to
execute, deliver and perform its obligations under this Trust Agreement and
has taken all necessary action to authorize the execution, delivery and
performance by it of this Trust Agreement;
(c) this Trust Agreement has been duly authorized, executed and
delivered by the Bank and constitutes the valid and legally binding agreement
of the Bank enforceable against it in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors'
rights and to general equity principles;
(d) the execution, delivery and performance by the Bank of this Trust
Agreement has been duly authorized by all necessary corporate or other action
on the part of the Bank and does not require any approval of the stockholders
of the Bank and such execution, delivery and performance will not (i) violate
the Bank's charter or by-laws, (ii) violate any provision of, or constitute,
with or without notice or lapse of time, a default under, or result in the
creation or imposition of, any Lien on any properties included in the Trust
Property pursuant to the provisions of, any indenture, mortgage, credit
agreement, license or other agreement or instrument to which the Bank is a
party or by which it is bound, or (iii) violate any law, governmental rule or
regulation of the United States or the State of Delaware, as the case may be,
governing the banking or trust powers of the Bank, or any order, judgment or
decree applicable to the Bank;
(e) neither the authorization, execution or delivery by the Bank of
this Trust Agreement nor the consummation of any of the transactions by the
Bank contemplated herein or therein requires the consent or approval of, the
giving of notice to, the registration with or the taking of any other action
with respect to, any governmental authority or agency under any existing law
of the State of Delaware governing the banking or trust powers of the Bank;
and
(f) there are no proceedings pending or, to the best of the Bank's
knowledge, threatened against or affecting the Bank in any court or before
any governmental authority, agency or arbitration board or tribunal which,
individually or in the aggregate, would materially and adversely affect the
Trust or would question the right, power and authority of the Bank to enter
into or perform its obligations as one of the Trustees under this Trust
Agreement.
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SECTION 702. REPRESENTATIONS AND WARRANTIES OF THE DELAWARE BANK AND THE
DELAWARE TRUSTEE. The Delaware Bank in its corporate capacity and as
Delaware Trustee, as of the date hereof, and each successor Delaware Trustee
at the time of the successor Delaware Trustee's acceptance of its appointment
as Delaware Trustee hereunder (the term "Delaware Bank" being used hereafter
in this Article VIII to refer to such successor Delaware Trustee in its
separate corporate capacity and as Delaware Trustee), hereby represents and
warrants (as applicable) for the benefit of the Depositor and the Security
holders that:
(a) the Delaware Bank is a Delaware banking corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware;
(b) the Delaware Bank has full corporate power, authority and legal
right to execute, deliver and perform its obligations under this Trust
Agreement and has taken all necessary action to authorize the execution,
delivery and performance by it of this Trust Agreement;
(c) this Trust Agreement has been duly authorized, executed and
delivered by the Delaware Bank and constitutes the valid and legally binding
agreement of the Delaware Bank enforceable against it in accordance with its
terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability relating
to or affecting creditors' rights and to general equity principles;
(d) the execution, delivery and performance by the Delaware Bank of
this Trust Agreement has been duly authorized by all necessary corporate or
other action on the part of the Delaware Bank and does not require any
approval of the stockholders of the Delaware Bank and such execution,
delivery and performance will not (i) violate the Delaware Bank's charter or
by-laws, (ii) violate any provision of, or constitute, with or without notice
or lapse of time, a default under, or result in the creation or imposition
of, any Lien on any properties included in the Trust Property pursuant to the
provisions of, any indenture, mortgage, credit agreement, license or other
agreement or instrument to which the Delaware Bank is a party or by which it
is bound, or (iii) violate any law, governmental rule or regulation of the
United States or the State of Delaware, as the case may be, governing the
banking or trust powers of the Delaware Bank, or any order, judgment or
decree applicable to the Delaware Bank;
(e) neither the authorization, execution or delivery by the Delaware
Bank of this Trust Agreement nor the consummation of any of the transactions
by the Delaware Bank contemplated herein or therein requires the consent or
approval of, the giving of notice to, the registration with or the taking of
any other action with respect to, any governmental authority or agency under
any existing law of the State of Delaware governing the banking or trust
powers of the Delaware Bank; and
(f) there are no proceedings pending or, to the best of the Delaware
Bank's knowledge, threatened against or affecting the Delaware Bank in any
court or before any governmental authority, agency or arbitration board or
tribunal which, individually or in the
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aggregate, would materially and adversely affect the Trust or would question
the right, power and authority of the Delaware Bank to enter into or perform
its obligations as one of the Trustees under this Trust Agreement.
SECTION 703. REPRESENTATIONS AND WARRANTIES OF DEPOSITOR. The
Depositor hereby represents and warrants for the benefit of the Security
holders that:
(a) the Trust Securities Certificates issued on the Closing Date on
behalf of the Trust have been duly authorized and will have been duly and
validly executed, issued and delivered by the Administrative Trustees
pursuant to the terms and provisions of, and in accordance with the
requirements of, this Trust Agreement and the Security holders will be, as of
such date, entitled to the benefits of this Trust Agreement; and
(b) there are no taxes, fees or other governmental charges payable by
the Trust (or the Trustees on behalf of the Trust) under the laws of the
State of Delaware or any political subdivision thereof in connection with the
execution, delivery and performance by the Bank, the Property Trustee, the
Delaware Bank or the Delaware Trustee, as the case may be, of this Trust
Agreement.
ARTICLE VIII.
THE TRUSTEES
SECTION 801. CERTAIN DUTIES AND RESPONSIBILITIES.
(a) The duties and responsibilities of the Trustees shall be as
provided by this Trust Agreement and, in the case of the Property Trustee, by
the Trust Indenture Act. Notwithstanding the foregoing, no provision of this
Trust Agreement shall require the Trustees to expend or risk their own funds
or otherwise incur any financial liability in the performance of any of their
duties hereunder, or in the exercise of any of their rights or powers, if
they shall have reasonable grounds for believing that repayment of such funds
or adequate indemnity against such risk or liability is not reasonably
assured to it. No Administrative Trustee nor the Delaware Trustee shall be
liable for such Trustee's acts or omissions hereunder except as a result of
such Trustee's own gross negligence or willful misconduct. The Property
Trustee's liability shall be determined under the Trust Indenture Act.
Whether or not therein expressly so provided, every provision of this Trust
Agreement relating to the conduct or affecting the liability of or affording
protection to the Trustees shall be subject to the provisions of this
Section. To the extent that, at law or in equity, the Delaware Trustee or an
Administrative Trustee has duties (including fiduciary duties) and
liabilities relating thereto to the Trust or to the Security holders, the
Delaware Trustee or such Administrative Trustee shall not be liable to the
Trust or to any Securityholder for such Trustee's good faith reliance on the
provisions of this Trust Agreement. The provisions of this Trust Agreement,
to the extent that they restrict the duties and liabilities of the Delaware
Trustee or the Administrative Trustees otherwise existing at law or in
equity, are agreed by the Depositor and the Security holders to
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replace such other duties and liabilities of the Delaware Trustee and the
Administrative Trustees.
(b) All payments made by the Property Trustee or a Paying Agent in
respect of the Trust Securities shall be made only from the revenue and
proceeds from the Trust Property and only to the extent that there shall be
sufficient revenue or proceeds from the Trust Property to enable the Property
Trustee or a Paying Agent to make payments in accordance with the terms
hereof. Each Securityholder, by such Securityholder's acceptance of a Trust
Security, agrees that such Securityholder will look solely to the revenue and
proceeds from the Trust Property to the extent legally available for
distribution to such Securityholder as herein provided and that the Trustees
are not personally liable to such Securityholder for any amount distributable
in respect of any Trust Security or for any other liability in respect of any
Trust Security. This Section 801(b) does not limit the liability of the
Trustees expressly set forth elsewhere in this Trust Agreement or, in the
case of the Property Trustee, in the Trust Indenture Act.
(c) No provision of this Trust Agreement shall be construed to relieve
the Property Trustee from liability for its own negligent action, its own
negligent failure to act, or its own willful misconduct, except that:
(i) the Property Trustee shall not be liable for any error of
judgment made in good faith by an authorized officer of the Property
Trustee, unless it shall be proved that the Property Trustee was
negligent in ascertaining the pertinent facts;
(ii) the Property Trustee shall not be liable with respect to any
action taken or omitted to be taken by it in good faith in accordance
with the direction of the Holders of not less than a majority in
Liquidation Amount of the Trust Securities relating to the time, method
and place of conducting any proceeding for any remedy available to the
Property Trustee, or exercising any trust or power conferred upon the
Property Trustee under this Trust Agreement;
(iii) the Property Trustee's sole duty with respect to the custody,
safe keeping and physical preservation of the Junior Subordinated
Debentures and the Payment Account shall be to deal with such Property
in a similar manner as the Property Trustee deals with similar property
for its own account, subject to the protections and limitations on
liability afforded to the Property Trustee under this Trust Agreement
and the Trust Indenture Act;
(iv) the Property Trustee shall not be liable for any interest on
any money received by it except as it may otherwise agree with the
Depositor and money held by the Property Trustee need not be segregated
from other funds held by it except in relation to the Payment Account
maintained by the Property Trustee pursuant to Section 301 and except to
the extent otherwise required by law; and
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(v) the Property Trustee shall not be responsible for monitoring
the compliance by the Administrative Trustees or the Depositor with
their respective duties under this Trust Agreement, nor shall the
Property Trustee be liable for the negligence, default or misconduct of
the Administrative Trustees or the Depositor.
SECTION 802. CERTAIN NOTICES.
(a) Within five Business Days after the occurrence of any Event of Default
actually known to the Property Trustee, the Property Trustee shall transmit, in
the manner and to the extent provided in Section 1008, notice of such Event of
Default to the Security holders, the Administrative Trustees and the Depositor,
unless such Event of Default shall have been cured or waived. For purposes of
this Section the term "Event of Default" means any event that is, or after
notice or lapse of time or both would become, an Event of Default.
(b) The Administrative Trustees shall transmit, to the Security holders in
the manner and to the extent provided in Section 1008, notice of the Depositor's
election to begin or further extend an Extension Period on the Junior
Subordinated Debentures (unless such election shall have been revoked) within
the time specified for transmitting such notice to the holders of the Junior
Subordinated Debentures pursuant to the Indenture as originally executed.
(c) In the event the Depositor elects to accelerate the Maturity Date in
accordance with Section 2.2 of the Indenture, the Property Trustee shall give
notice to each Holder of Trust Securities of the acceleration of the Maturity
Date and the Accelerated Maturity Date not later than five Business Days after
the Property Trustee receives the notice provided in Section 2.2(c) of the
Indenture.
SECTION 803. CERTAIN RIGHTS OF PROPERTY TRUSTEE. Subject to the
provisions of Section 801:
(a) the Property Trustee may rely and shall be protected in acting or
refraining from acting in good faith upon any resolution, Opinion of Counsel,
certificate, written representation of a Holder or transferee, certificate of
auditors or any other certificate, statement, instrument, opinion, report,
notice, request, consent, order, appraisal, bond, debenture, note, other
evidence of indebtedness or other paper or document believed by it to be
genuine and to have been signed or presented by the proper party or parties;
(b) if (i) in performing its duties under this Trust Agreement the
Property Trustee is required to decide between alternative courses of action
or (ii) in construing any of the provisions of this Trust Agreement the
Property Trustee finds the same ambiguous or inconsistent with other
provisions contained herein or (iii) the Property Trustee is unsure of the
application of any provision of this Trust Agreement, then, except as to any
matter as to which the Holders of the Preferred Securities are entitled to
vote under the terms of this Trust Agreement, the Property Trustee shall
deliver a notice to the Depositor requesting written instructions of the
Depositor as to the course of action to be taken and the Property
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Trustee shall take such action, or refrain from taking such action, as the
Property Trustee shall be instructed in writing to take, or to refrain from
taking, by the Depositor; provided, however, that if the Property Trustee
does not receive such instructions of the Depositor within 10 Business Days
after it has delivered such notice, or such reasonably shorter period of time
set forth in such notice (which to the extent practicable shall not be less
than two Business Days), it may, but shall be under no duty to, take or
refrain from taking such action not inconsistent with this Trust Agreement as
it shall deem advisable and in the best interests of the Security holders, in
which event the Property Trustee shall have no liability except for its own
bad faith, negligence or willful misconduct;
(c) any direction or act of the Depositor or the Administrative
Trustees contemplated by this Trust Agreement shall be sufficiently evidenced
by an Officers' Certificate;
(d) whenever in the administration of this Trust Agreement, the
Property Trustee shall deem it desirable that a matter be established before
undertaking, suffering or omitting any action hereunder, the Property Trustee
(unless other evidence is herein specifically prescribed) may, in the absence
of bad faith on its part, request and conclusively rely upon an Officers'
Certificate which, upon receipt of such request, shall be promptly delivered
by the Depositor or the Administrative Trustees;
(e) the Property Trustee shall have no duty to see to any recording,
filing or registration of any instrument (including any financing or
continuation statement or any filing under tax or securities laws) or any
rerecording, refiling or reregistration thereof;
(f) the Property Trustee may consult with counsel of its choice and the
advice of such counsel shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted by it
hereunder in good faith and in reliance thereon and in accordance with such
advice (such counsel may be counsel to the Depositor or any of its
Affiliates, and may include any of its employees); the Property Trustee shall
have the right at any time to seek instructions concerning the administration
of this Trust Agreement from any court of competent jurisdiction;
(g) the Property Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Trust Agreement at the request
or direction of any of the Security holders pursuant to this Trust Agreement,
unless such Security holders shall have offered to the Property Trustee
reasonable security or indemnity against the costs, expenses and liabilities
which might be incurred by it in compliance with such request or direction;
(h) the Property Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, approval, bond,
debenture, note or other evidence of indebtedness or other paper or document,
unless requested in writing to do so by one or more Security holders, but the
Property Trustee may make such further inquiry or investigation into such
facts or matters as it may see fit;
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(i) the Property Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through
its agents or attorneys, provided that the Property Trustee shall be
responsible for its own negligence or recklessness with respect to selection
of any agent or attorney appointed by it hereunder;
(j) whenever in the administration of this Trust Agreement the Property
Trustee shall deem it desirable to receive instructions with respect to
enforcing any remedy or right or taking any other action hereunder, the
Property Trustee (i) may request instructions from the Holders of the Trust
Securities which instructions may only be given by the Holders of the same
proportion in Liquidation Amount of the Trust Securities as would be entitled
to direct the Property Trustee under the terms of the Trust Securities in
respect of such remedy, right or action, (ii) may refrain from enforcing such
remedy or right or taking such other action until such instructions are
received, and (iii) shall be protected in acting in accordance with such
instructions; and
(k) except as otherwise expressly provided by this Trust Agreement, the
Property Trustee shall not be under any obligation to take any action that is
discretionary under the provisions of this Trust Agreement. No provision of
this Trust Agreement shall be deemed to impose any duty or obligation on the
Property Trustee to perform any act or acts or exercise any right, power,
duty or obligation conferred or imposed on it, in any jurisdiction in which
it shall be illegal, or in which the Property Trustee shall be unqualified or
incompetent in accordance with applicable law, to perform any such act or
acts, or to exercise any such right, power, duty or obligation. No
permissive power or authority available to the Property Trustee shall be
construed to be a duty.
SECTION 804. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF SECURITIES.
The recitals contained herein and in the Trust Securities Certificates shall
be taken as the statements of the Trust, and the Trustees do not assume any
responsibility for their correctness. The Trustees (as such) shall not be
accountable for the use or application by the Depositor of the proceeds of
the Junior Subordinated Debentures.
SECTION 805. MAY HOLD SECURITIES. Any Trustee or any other agent of
any Trustee or the Trust, in its individual or any other capacity, may become
the owner or pledgee of Trust Securities and, subject to Sections 808 and 813
and except as provided in the definition of the term "Outstanding" in Article
I, may otherwise deal with the Trust with the same rights it would have if it
were not a Trustee or such other agent.
SECTION 806. COMPENSATION; INDEMNITY; FEES. The Depositor agrees:
(a) to pay to the Trustees from time to time reasonable compensation
for all services rendered by them hereunder (which compensation shall not be
limited by any provision of law in regard to the compensation of a trustee of
an express trust);
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(b) except as otherwise expressly provided herein, to reimburse the
Trustees upon request for all reasonable expenses, disbursements and advances
incurred or made by the Trustees in accordance with any provision of this
Trust Agreement (including the reasonable compensation and the expenses and
disbursements of its agents and counsel), except any such expense,
disbursement or advance as may be attributable to such Trustee's negligence,
bad faith or willful misconduct (or, in the case of the Administrative
Trustees or the Delaware Trustee, any such expense, disbursement or advance
as may be attributable to its, his or her gross negligence, bad faith or
willful misconduct); and
(c) to indemnify each of the Trustees or any predecessor Trustee for,
and to hold the Trustees harmless against, any loss, damage, claim,
liability, penalty or expense incurred without negligence or bad faith on its
part, arising out of or in connection with the acceptance or administration
of this Trust Agreement, including the costs and expenses of defending itself
against any claim or liability in connection with the exercise or performance
of any of its powers or duties hereunder, except any such cost or expense as
may be attributable to such Trustee's negligence, bad faith or willful
misconduct (or, in the case of the Administrative Trustees or the Delaware
Trustee, any such cost or expense as may be attributable to its, his or her
gross negligence, bad faith or willful misconduct).
No Trustee may claim any Lien on any Trust Property as a result of any
amount due pursuant to this Section 806.
SECTION 807. CORPORATE PROPERTY TRUSTEE REQUIRED; ELIGIBILITY OF
TRUSTEES.
(a) There shall at all times be a Property Trustee hereunder with
respect to the Trust Securities. The Property Trustee shall be a Person that
is eligible pursuant to the Trust Indenture Act to act as such and has a
combined capital and surplus of at least $50,000,000. If any such Person
publishes reports of condition at least annually, pursuant to law or to the
requirements of its supervising or examining authority, then for the purposes
of this Section, the combined capital and surplus of such Person shall be
deemed to be its combined capital and surplus as set forth in its most recent
report of condition so published. If at any time the Property Trustee with
respect to the Trust Securities shall cease to be eligible in accordance with
the provisions of this Section, it shall resign immediately in the manner and
with the effect hereinafter specified in this Article.
(b) There shall at all times be one or more Administrative Trustees
hereunder with respect to the Trust Securities. Each Administrative Trustee
shall be either a natural person who is at least 21 years of age or a legal
entity that shall act through one or more persons authorized to bind that
entity.
(c) There shall at all times be a Delaware Trustee with respect to the
Trust Securities. The Delaware Trustee shall either be (i) a natural person
who is at least 21 years of age and a resident of the State of Delaware or
(ii) a legal entity with its principal
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place of business in the State of Delaware and that otherwise meets the
requirements of applicable Delaware law that shall act through one or more
persons authorized to bind such entity.
SECTION 808. CONFLICTING INTERESTS. If the Property Trustee has or
shall acquire a conflicting interest within the meaning of the Trust
Indenture Act, the Property Trustee shall either eliminate such interest or
resign, to the extent and in the manner provided by, and subject to the
provisions of, the Trust Indenture Act and this Trust Agreement.
SECTION 809. CO-TRUSTEES AND SEPARATE TRUSTEE. Unless an Event of
Default shall have occurred and be continuing, at any time or times, for the
purpose of meeting the legal requirements of the Trust Indenture Act or of
any jurisdiction in which any part of the Trust Property may at the time be
located, the Depositor and the Administrative Trustees shall have power to
appoint, and upon the written request of the Property Trustee, the Depositor
and the Administrative Trustees shall for such purpose join with the Property
Trustee in the execution, delivery, and performance of all instruments and
agreements necessary or proper to appoint, one or more Persons approved by
the Property Trustee either to act as co-trustee, jointly with the Property
Trustee, of all or any part of such Trust Property, or to the extent required
by law to act as separate trustee of any such property, in either case with
such powers as may be provided in the instrument of appointment, and to vest
in such Person or Persons in the capacity aforesaid, any property, title,
right or power deemed necessary or desirable, subject to the other provisions
of this Section. In case a Debenture Event of Default has occurred and is
continuing, the Property Trustee alone shall have power to make such
appointment. Any co-trustee or separate trustee appointed pursuant to this
Section shall either be (i) a natural person who is at least 21 years of age
and a resident of the United States or (ii) a legal entity with its principal
place of business in the United States that shall act through one or more
persons authorized to bind such entity.
Should any written instrument from the Depositor be required by any
co-trustee or separate trustee so appointed for more fully confirming to such
co-trustee or separate trustee such property, title, right, or power, any and
all such instruments shall, on request, be executed, acknowledged, and
delivered by the Depositor.
Every co-trustee or separate trustee shall, to the extent permitted by
law, but to such extent only, be appointed subject to the following terms,
namely:
(a) The Trust Securities shall be executed and delivered and all
rights, powers, duties and obligations hereunder in respect of the custody of
securities, cash and other personal property held by, or required to be
deposited or pledged with, the Trustees specified hereunder, shall be
exercised, solely by such Trustees and not by such co-trustee or separate
trustee.
(b) The rights, powers, duties and obligations hereby conferred or
imposed upon the Property Trustee in respect of any property covered by such
appointment shall be
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conferred or imposed upon and exercised or performed by the Property Trustee
or by the Property Trustee and such co-trustee or separate trustee jointly,
as shall be provided in the instrument appointing such co-trustee or separate
trustee, except to the extent that under any law of any jurisdiction in which
any particular act is to be performed, the Property Trustee shall be
incompetent or unqualified to perform such act, in which event such rights,
powers, duties and obligations shall be exercised and performed by such
co-trustee or separate trustee.
(c) The Property Trustee at any time, by an instrument in writing
executed by it, with the written concurrence of the Depositor, may accept the
resignation of or remove any co-trustee or separate trustee appointed under
this Section, and, in case a Debenture Event of Default has occurred and is
continuing, the Property Trustee shall have power to accept the resignation
of, or remove, any such co-trustee or separate trustee without the
concurrence of the Depositor. Upon the written request of the Property
Trustee, the Depositor shall join with the Property Trustee in the execution,
delivery and performance of all instruments and agreements necessary or
proper to effectuate such resignation or removal. A successor to any
co-trustee or separate trustee so resigned or removed may be appointed in the
manner provided in this Section 809.
(d) No co-trustee or separate trustee hereunder shall be personally
liable by reason of any act or omission of the Property Trustee or any other
trustee hereunder.
(e) The Property Trustee shall not be liable by reason of any act of a
co-trustee or separate trustee.
(f) Any Act of Holders delivered to the Property Trustee shall be deemed
to have been delivered to each such co-trustee and separate trustee.
SECTION 810. RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR. No
resignation or removal of any Trustee (the "Relevant Trustee") and no
appointment of a successor Trustee pursuant to this Article shall become
effective until the acceptance of appointment by the successor Trustee in
accordance with the applicable requirements of Section 811.
Subject to the immediately preceding paragraph, the Relevant Trustee may
resign at any time with respect to the Trust Securities by giving written
notice thereof to the Security holders. If the instrument of acceptance by
the successor Trustee required by Section 811 shall not have been delivered
to the Relevant Trustee within 30 days after the giving of such notice of
resignation, the Relevant Trustee may petition, at the expense of the
Depositor, any court of competent jurisdiction for the appointment of a
successor Trustee with respect to the Trust Securities.
Unless a Debenture Event of Default shall have occurred and be
continuing, any Trustee may be removed at any time by Act of the Holder of
the Common Securities. If a Debenture Event of Default shall have occurred
and be continuing, the Property Trustee or the Delaware Trustee, or both of
them, may be removed at such time by Act of the Holders
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of a majority in Liquidation Amount of the Preferred Securities, delivered to
such Relevant Trustee (in its individual capacity and on behalf of the
Trust). An Administrative Trustee may be removed by the Holder of the Common
Securities at any time. In no event will the Holders of the Preferred
Securities have the right to vote to appoint, remove or replace the
Administrative Trustees.
If the Relevant Trustee shall resign, be removed or become incapable of
acting as Trustee, or if a vacancy shall occur in the office of such Relevant
Trustee for any cause, at a time when no Debenture Event of Default shall
have occurred and be continuing, the Holder of the Common Securities, by Act
of the Holder of the Common Securities delivered to the retiring Relevant
Trustee, shall promptly appoint a successor Trustee or Trustees with respect
to the Trust Securities and the Trust, and the successor Trustee shall comply
with the applicable requirements of Section 811. If the Property Trustee or
the Delaware Trustee shall resign, be removed or become incapable of
continuing to act as the Property Trustee or the Delaware Trustee, as the
case may be, at a time when a Debenture Event of Default shall have occurred
and is continuing, the Holders of the Preferred Securities by Act of the
Holders of a majority in Liquidation Amount of the Preferred Securities then
Outstanding delivered to the retiring Relevant Trustee, shall promptly
appoint a successor Trustee or Trustees with respect to the Trust Securities
and the Trust, and such successor Trustee shall comply with the applicable
requirements of Section 811. If an Administrative Trustee shall resign, be
removed or become incapable of acting as Administrative Trustee, at a time
when a Debenture Event of Default shall have occurred and be continuing, the
Holder of the Common Securities, by Act of the Holder of the Common
Securities delivered to an Administrative Trustee, shall promptly appoint a
successor Administrative Trustee or Administrative Trustees with respect to
the Trust Securities and the Trust, and such successor Administrative Trustee
or Administrative Trustees shall comply with the applicable requirements of
Section 811. If no successor Trustee with respect to the Trust Securities
shall have been so appointed by the Holder of the Common Securities or the
Holders of the Preferred Securities and accepted appointment in the manner
required by Section 811, any Securityholder who has been a Securityholder for
at least six months may, on behalf of such Securityholder and all others
similarly situated, petition a court of competent jurisdiction for the
appointment of a successor Trustee with respect to the Trust Securities.
The Property Trustee shall give notice of each resignation and each
removal of a Relevant Trustee and each appointment of a successor Trustee to
all Security holders in the manner provided in Section 1008 and shall give
notice to the Depositor. Each notice shall include the name of the successor
Trustee and the address of its Corporate Trust office if it is the Property
Trustee.
Subject to the foregoing or any other provision of this Trust Agreement,
in the event any Administrative Trustee or a Delaware Trustee who is a
natural person dies or becomes, in the opinion of the Depositor, incompetent
or incapacitated, the vacancy created by such death, incompetence or
incapacity may be filled by (a) the unanimous act of remaining Administrative
Trustees if there are at least two of them or (b) otherwise by the Depositor
(with the successor in each case being a Person who satisfies the eligibility
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requirement for Administrative Trustees or the Delaware Trustee, as the case
may be, set forth in Section 807).
SECTION 811. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR. In case of the
appointment hereunder of a successor Trustee with respect to the Trust
Securities and the Trust, the retiring Relevant Trustee and each successor
Trustee with respect to the Trust Securities shall execute and deliver an
instrument hereto wherein each successor Trustee shall accept such
appointment and which shall contain such provisions as shall be necessary or
desirable to transfer and confirm to, and to vest in, each successor Trustee
all the rights, powers, trusts and duties of the retiring Relevant Trustee
with respect to the Trust Securities and the Trust, and upon the execution
and delivery of such instrument, the resignation or removal of the retiring
Relevant Trustee shall become effective to the extent provided therein and
each such successor Trustee, without any further act, deed or conveyance,
shall become vested with all the rights, powers, trusts and duties of the
retiring Relevant Trustee with respect to the Trust Securities and the Trust;
but, on request of the Trust or any successor Trustee such retiring Relevant
Trustee shall duly assign, transfer and deliver to such successor Trustee all
Trust Property, all proceeds thereof and money held by such retiring Relevant
Trustee hereunder with respect to the Trust Securities and the Trust.
Upon request of any such successor Trustee, the Trust shall execute any
and all instruments for more fully and certainly vesting in and confirming to
such successor Trustee all such rights, powers and trusts referred to in the
immediately preceding paragraph, as the case may be.
No successor Trustee shall accept its appointment unless at the time of
such acceptance such successor Trustee shall be qualified and eligible under
this Article.
SECTION 812. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO
BUSINESS. 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 Relevant Trustee shall
be a party, or any corporation succeeding to all or substantially all the
corporate trust business of such Relevant Trustee, shall be the successor of
such Relevant Trustee hereunder, provided such Person shall be otherwise
qualified and eligible under this Article, without the execution or filing of
any paper or any further act on the part of any of the parties hereto.
SECTION 813. PREFERENTIAL COLLECTION OF CLAIMS AGAINST DEPOSITOR OR
TRUST. If and when the Property Trustee or the Delaware Trustee shall be or
become a creditor of the Depositor or the Trust (or any other obligor upon
the Junior Subordinated Debentures or the Trust Securities), the Property
Trustee or the Delaware Trustee, as the case may be, shall be subject to and
shall take all actions necessary in order to comply with the provisions of
the Trust Indenture Act regarding the collection of claims against the
Depositor or Trust (or any such other obligor).
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SECTION 814. REPORTS BY PROPERTY TRUSTEE.
(a) Not later than January 31 of each year commencing with January 31,
2000, the Property Trustee shall transmit to all Security holders in
accordance with Section 1008, and to the Depositor, a brief report dated as
of the preceding December 31 with respect to:
(i) its eligibility under Section 807 or, in lieu thereof, if to
the best of its knowledge it has continued to be eligible under said
Section, a written statement to such effect; and
(ii) any change in the property and funds in its possession as
Property Trustee since the date of its last report and any action taken
by the Property Trustee in the performance of its duties hereunder which
it has not previously reported and which in its opinion materially
affects the Trust Securities.
(b) In addition the Property Trustee shall transmit to Security holders
such reports concerning the Property Trustee and its actions under this Trust
Agreement as may be required pursuant to the Trust Indenture Act at the times
and in the manner provided pursuant thereto.
(c) A copy of each such report shall, at the time of such transmission
to Holders, be filed by the Property Trustee with each national securities
exchange or other organization upon which the Trust Securities may be listed,
with the Commission and with the Depositor.
SECTION 815. REPORTS TO THE PROPERTY TRUSTEE. The Depositor and the
Administrative Trustees on behalf of the Trust shall provide to the Property
Trustee such documents, reports and information as required by Section 314 of
the Trust Indenture Act (if any) and the compliance certificate required by
Section 314(a) of the Trust Indenture Act in the form, in the manner and at
the times required by Section 314 of the Trust Indenture Act.
SECTION 816 . EVIDENCE OF COMPLIANCE WITH CONDITIONS PRECEDENT. Each
of the Depositor and the Administrative Trustees on behalf of the Trust shall
provide to the Property Trustee such evidence of compliance with the
conditions precedent, if any, provided for in this Trust Agreement that
relate to any of the matters set forth in Section 314(c) of the Trust
Indenture Act. Any certificate or opinion required to be given by an officer
pursuant to Section 314(c)(1) of the Trust Indenture Act shall be given in
the form of an Officers' Certificate.
SECTION 817. NUMBER OF TRUSTEES.
(a) The number of Trustees shall be five, provided that the Holder of
the Common Securities by written instrument may increase or decrease the
number of Administrative Trustees. The Property Trustee and the Delaware
Trustee may be the same Person.
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(b) If a Trustee ceases to hold office for any reason and the number of
Administrative Trustees is not reduced pursuant to Section 817(a), or if the
number of Trustees is increased pursuant to Section 817(a), a vacancy shall
occur. The vacancy shall be filled with a Trustee appointed in accordance
with Section 810.
(c) The death, resignation, retirement, removal, bankruptcy,
incompetence or incapacity to perform the duties of a Trustee shall not
operate to annul the Trust. Whenever a vacancy in the number of
Administrative Trustees shall occur, until such vacancy is filled by the
appointment of an Administrative Trustee in accordance with Section 810, the
Administrative Trustees in office, regardless of their number (and
notwithstanding any other provision of this Agreement), shall have all the
powers granted to the Administrative Trustees and shall discharge all the
duties imposed upon the Administrative Trustees by this Trust Agreement.
SECTION 818. DELEGATION OF POWER.
(a) Any Administrative Trustee may, by power of attorney consistent
with applicable law, delegate to any other natural person over the age of 21
his or her power for the purpose of executing any documents contemplated in
Section 207(a)(i); and
(b) The Administrative Trustees shall have power to delegate from time
to time to such of their number or to the Depositor the doing of such things
and the execution of such instruments either in the name of the Trust or the
names of the Administrative Trustees or otherwise as the Administrative
Trustees may deem expedient, to the extent such delegation is not prohibited
by applicable law or contrary to the provisions of the Trust, as set forth
herein.
SECTION 819. VOTING. Except as otherwise provided in this Trust
Agreement, the consent or approval of the Administrative Trustees shall
require consent or approval by not less than a majority of the Administrative
Trustees, unless there are only two, in which case both must consent.
ARTICLE IX.
TERMINATION, LIQUIDATION AND MERGER
SECTION 901. TERMINATION UPON EXPIRATION DATE. Unless earlier
dissolved, the Trust shall automatically dissolve on __________ __, 2029 (the
"Expiration Date") subject to distribution of the Trust Property in
accordance with Section 904.
SECTION 902. EARLY TERMINATION. The first to occur of any of the
following events is an "Early Termination Event":
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(a) the occurrence of a Bankruptcy Event in respect of, or the
dissolution or liquidation of, the Depositor;
(b) delivery of written direction to the Property Trustee by the
Depositor at any time (which direction is wholly optional and within the
discretion of the Depositor) to dissolve the Trust and distribute the Junior
Subordinated Debentures to Security holders in exchange for the Preferred
Securities in accordance with Section 904;
(c) the redemption of all of the Preferred Securities in connection
with the redemption of all of the Junior Subordinated Debentures; and
(d) an order for dissolution of the Trust shall have been entered by a
court of competent jurisdiction.
SECTION 903. TERMINATION. The respective obligations and
responsibilities of the Trustees and the Trust created and continued hereby
shall terminate upon the latest to occur of the following: (a) the
distribution by the Property Trustee to Security holders upon the liquidation
of the Trust pursuant to Section 904, or upon the redemption of all of the
Trust Securities pursuant to Section 402, of all amounts required to be
distributed hereunder upon the final payment of the Trust Securities; (b) the
payment of any expenses owed by the Trust; (c) the discharge of all
administrative duties of the Administrative Trustees, including the
performance of any tax reporting obligations with respect to the Trust or the
Security holders, and (d) the filing of a certificate of cancellation by the
Administrative Trustee under the Delaware Business Trust Act.
SECTION 904. LIQUIDATION.
(a) If an Early Termination Event specified in clause (a), (b), or (d)
of Section 902 occurs or upon the Expiration Date, the Trust shall be
liquidated by the Trustees as expeditiously as the Trustees determine to be
possible by distributing, after satisfaction of liabilities to creditors of
the Trust as provided by applicable law, to each Securityholder a Like Amount
of Junior Subordinated Debentures, subject to Section 904(d). Notice of
liquidation shall be given by the Property Trustee by first-class mail,
postage prepaid, mailed not later than 30 nor more than 60 days prior to the
Liquidation Date to each Holder of Trust Securities at such Holder's address
appearing in the Securities Register. All notices of liquidation shall:
(i) state the Liquidation Date;
(ii) state that from and after the Liquidation Date, the Trust
Securities will no longer be deemed to be Outstanding and any Trust
Securities Certificates not surrendered for exchange will be deemed to
represent a Like Amount of Junior Subordinated Debentures; and
(iii) provide such information with respect to the mechanics by which
Holders may exchange Trust Securities certificates for Junior Subordinated
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Debentures, or if Section 904(d) applies receive a Liquidation
Distribution, as the Administrative Trustees or the Property Trustee shall
deem appropriate.
(b) Except where Section 902(c) or 904(d) applies, in order to effect
the liquidation of the Trust and distribution of the Junior Subordinated
Debentures to Security holders, the Property Trustee shall establish a record
date for such distribution (which shall be not more than 45 days prior to the
Liquidation Date) and, either itself acting as exchange agent or through the
appointment of a separate exchange agent, shall establish such procedures as
it shall deem appropriate to effect the distribution of Junior Subordinated
Debentures in exchange for the Outstanding Trust Securities Certificates.
(c) Except where Section 902(c) or 904(d) applies, after the
Liquidation Date, (i) the Trust Securities will no longer be deemed to be
Outstanding, (ii) certificates (or, at the election of the Depositor a Global
Subordinated Debenture, subject to the provisions of the Indenture)
representing a Like Amount of Junior Subordinated Debentures will be issued
to Holders of Trust Securities Certificates upon surrender of such
certificates to the Administrative Trustees or their agent for exchange,
(iii) the Depositor shall use its reasonable efforts to have the Junior
Subordinated Debentures listed on the American Stock Exchange or on such
other securities exchange, quotation system or other organization as the
Preferred Securities may then be listed or traded, (iv) any Trust Securities
Certificates not so surrendered for exchange will be deemed to represent a
Like Amount of Junior Subordinated Debentures, accruing interest at the rate
provided for in the Junior Subordinated Debentures from the last Distribution
Date on which a Distribution was made on such Trust Securities Certificates
until such certificates are so surrendered (and until such certificates are
so surrendered, no payments of interest or principal will be made to Holders
of Trust Securities Certificates with respect to such Junior Subordinated
Debentures) and (v) all rights of Security holders holding Trust Securities
will cease, except the right of such Security holders to receive Junior
Subordinated Debentures upon surrender of Trust Securities Certificates.
(d) In the event that, notwithstanding the other provisions of this
Section 904, whether because of an order for dissolution entered by a court
of competent jurisdiction or otherwise, distribution of the Junior
Subordinated Debentures in the manner provided herein is determined by the
Property Trustee not to be practical, the Trust Property shall be liquidated,
and the Trust shall be dissolved, wound-up or terminated, by the Property
Trustee in such manner as the Property Trustee determines. In such event, on
the date of the dissolution, winding-up or other termination of the Trust,
Security holders will be entitled to receive out of the assets of the Trust
available for distribution to Security holders, after satisfaction of
liabilities to creditors of the Trust as provided by applicable law, an
amount equal to the Liquidation Amount per Trust Security plus accumulated
and unpaid Distributions thereon to the date of payment (such amount being
the "Liquidation Distribution"). If, upon any such dissolution, winding-up
or termination, the Liquidation Distribution can be paid only in part because
the Trust has insufficient assets available to pay in full the aggregate
Liquidation Distribution, then, subject to the next succeeding sentence, the
amounts payable by the Trust on the Trust Securities shall be paid on a pro
rata basis (based upon Liquidation Amounts). The Holder of the Common
Securities will
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be entitled to receive Liquidation Distributions upon any such dissolution,
winding-up or termination pro rata (determined as aforesaid) with Holders of
Preferred Securities, except that, if a Debenture Event of Default has
occurred and is continuing, the Preferred Securities shall have a priority
over the Common Securities.
SECTION 905. MERGERS, CONSOLIDATIONS, AMALGAMATIONS OR REPLACEMENTS OF
THE TRUST. The Trust may not merge with or into, consolidate, amalgamate, or
be replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to any corporation or other Person, except
pursuant to this Section 905. At the request of the Depositor, with the
consent of the Administrative Trustees and without the consent of the Holders
of the Preferred Securities, the Property Trustee or the Delaware Trustee,
the Trust may merge with or into, consolidate, amalgamate, be replaced by or
convey, transfer or lease its properties and assets substantially as an
entirety to a trust organized as such under the laws of any state; provided,
that (i) such successor entity either (a) expressly assumes all of the
obligations of the Trust with respect to the Preferred Securities or (b)
substitutes for the Preferred Securities other securities having
substantially the same terms as the Preferred Securities (the "Successor
Securities") so long as the Successor Securities rank the same as the
Preferred Securities rank in priority with respect to distributions and
payments upon liquidation, redemption and otherwise, (ii) the Depositor
expressly appoints a trustee of such successor entity possessing
substantially the same powers and duties as the Property Trustee as the
holder of the Junior Subordinated Debentures, (iii) such merger,
consolidation, amalgamation, replacement, conveyance, transfer or lease does
not adversely affect the rights, preferences and privileges of the Holders of
the Preferred Securities (including any Successor Securities) in any material
respect, (iv) such successor entity has a purpose identical to that of the
Trust, (v) the Successor Securities will be listed or traded on any national
securities exchange or other organization on which the Preferred Securities
may then be listed, (vi) prior to such merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease, the Depositor has received an
Opinion of Counsel experienced in such matters to the effect that (a) such
merger, consolidation, amalgamation, replacement, conveyance, transfer or
lease does not adversely affect the rights, preferences and privileges of the
Holders of the Preferred Securities (including any Successor Securities) in
any material respect, and (b) following such merger, consolidation,
amalgamation, replacement, conveyance, transfer or lease, neither the Trust
nor such successor entity will be required to register as an "investment
company" under the Investment Company Act and (vii) the Depositor or any
permitted successor or designee owns all of the Common Securities of the
successor entity and guarantees the obligations of the successor entity under
the Successor Securities at least to the extent provided by the Guarantee.
Notwithstanding the foregoing, the Trust shall not, except with the
consent of Holders of 100% in Liquidation Amount of the Preferred Securities,
consolidate, amalgamate, merge with or into, or be replaced by or convey,
transfer or lease its properties and assets substantially as an entirety to
any other Person or permit any other Person to consolidate, amalgamate, merge
with or into, or replace it, if such consolidation,
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amalgamation, merger or replacement would cause the Trust or the successor
entity to be classified as other than a grantor trust for United States
federal income tax purposes.
ARTICLE X.
MISCELLANEOUS PROVISIONS
SECTION 1001. LIMITATION OF RIGHTS OF SECURITY HOLDERS. The death or
incapacity of any Person having an interest, beneficial or otherwise, in
Trust Securities shall not operate to terminate this Trust Agreement, nor
entitle the legal representatives or heirs of such Person, to claim an
accounting, take any action or bring any proceeding in any court for a
partition or winding-up of the arrangements contemplated hereby, nor
otherwise affect the rights, obligations and liabilities of the parties
hereto or any of them.
SECTION 1002. AMENDMENT.
(a) This Trust Agreement may be amended from time to time by the
Trustees and the Depositor, without the consent of any Security holders, (i)
as provided in Section 811 with respect to acceptance of appointment by a
successor Trustee, (ii) to cure any ambiguity, correct or supplement any
provision herein or therein which may be inconsistent with any other
provision herein or therein, or to make any other provisions with respect to
matters or questions arising under this Trust Agreement, that shall not be
inconsistent with the other provisions of this Trust Agreement, or (iii) to
modify, eliminate or add to any provisions of this Trust Agreement to such
extent as shall be necessary to ensure that the Trust will be classified for
United States federal income tax purposes as a grantor trust at all times
that any Trust Securities are Outstanding or to ensure that the Trust will
not be required to register as an "investment company" under the Investment
Company Act; provided, however, that in the case of clause (ii), such action
shall not adversely affect in any material respect the interests of any
Securityholder, and any amendments of this Trust Agreement shall become
effective when notice thereof is given to the Security holders.
(b) Except as provided in Section 601(c) or Section 1002(c) hereof, any
provision of this Trust Agreement may be amended by the Trustees and the
Depositor (i) with the consent of Security holders representing not less than
a majority (based upon Liquidation Amounts) of the Trust Securities then
Outstanding and (ii) upon receipt by the Trustees of an Opinion of Counsel to
the effect that such amendment or the exercise of any power granted to the
Trustees in accordance with such amendment will not affect the Trust's status
as a grantor trust for United States federal income tax purposes or the
Trust's exemption from status of an "investment company" under the Investment
Company Act.
(c) In addition to and notwithstanding any other provision in this
Trust Agreement, without the consent of each affected Securityholder (such
consent being obtained in accordance with Section 603 or 606 hereof), this
Trust Agreement may not be
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amended to (i) change the amount or timing of any distribution on the Trust
Securities or otherwise adversely affect the amount of any distribution
required to be made in respect of the Trust Securities as of a specified date
or (ii) restrict the right of a Securityholder to institute suit for the
enforcement of any such payment on or after such date; notwithstanding any
other provision herein, without the unanimous consent of the Security holders
(such consent being obtained in accordance with Section 603 or 606 hereof),
this paragraph (c) of this Section 1002 may not be amended.
(d) Notwithstanding any other provisions of this Trust Agreement, no
Trustee shall enter into or consent to any amendment to this Trust Agreement
which would cause the Trust to fail or cease to qualify for the exemption
from status of an "investment company" under the Investment Company Act or to
fail or cease to be classified as a grantor trust for United States federal
income tax purposes.
(e) Notwithstanding anything in this Trust Agreement to the contrary,
without the consent of the Depositor, this Trust Agreement may not be amended
in a manner which imposes any additional obligation on the Depositor.
(f) In the event that any amendment to this Trust Agreement is made,
the Administrative Trustees shall promptly provide to the Depositor a copy of
such amendment.
(g) Neither the Property Trustee nor the Delaware Trustee shall be
required to enter into any amendment to this Trust Agreement which affects
its own rights, duties or immunities under this Trust Agreement. The
Property Trustee shall be entitled to receive an Opinion of Counsel and an
Officers' Certificate stating that any amendment to this Trust Agreement is
in compliance with this Trust Agreement.
SECTION 1003. SEPARABILITY. In case any provision in this Trust
Agreement or in the Trust Securities Certificates shall be invalid, illegal
or unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
SECTION 1004. GOVERNING LAW. THIS TRUST AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF EACH OF THE SECURITY HOLDERS, THE TRUST AND THE TRUSTEES WITH
RESPECT TO THIS TRUST AGREEMENT AND THE TRUST SECURITIES SHALL BE CONSTRUED
IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF DELAWARE (WITHOUT
REGARD TO CONFLICT OF LAWS PRINCIPLES).
SECTION 1005. PAYMENTS DUE ON NON-BUSINESS DAY. If the date fixed for
any payment on any Trust Security shall be a day that is not a Business Day,
then such payment need not be made on such date but may be made on the next
succeeding day which is a Business Day (except as otherwise provided in
Sections 401(a) and 402(d)), with the same force and effect as though made on
the date fixed for such payment, and no Distribution shall accumulate thereon
for the period after such date.
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SECTION 1006. SUCCESSORS. This Trust Agreement shall be binding upon
and shall inure to the benefit of any successor to the Depositor, the Trust
or the Relevant Trustee(s), including any successor by operation of law.
Except in connection with a consolidation, merger or sale involving the
Depositor that is permitted under Article Twelve of the Indenture and
pursuant to which the assignee agrees in writing to perform the Depositor's
obligations hereunder, the Depositor shall not assign its obligations
hereunder.
SECTION 1007. HEADINGS. The Article and Section headings are for
convenience only and shall not affect the construction of this Trust
Agreement.
SECTION 1008. REPORTS, NOTICES AND DEMANDS. Any report, notice, demand
or other communication which by any provision of this Trust Agreement is
required or permitted to be given or served to or upon any Securityholder or
the Depositor may be given or served in writing by deposit thereof,
first-class postage prepaid, in the United States mail, hand delivery or
facsimile transmission, in each case, addressed, (a) in the case of a Holder
of Preferred Securities, to such Securityholder as such Securityholder's name
and address may appear on the Securities Register; and (b) in the case of the
Holder of the Common Securities or the Depositor, to Spectrum Bancorporation,
Inc., 10834 Old Mill Road, Suite One, Omaha, Nebraska 68154-2648, Attention:
President; Facsimile No.: (402) 333-8339. Any notice to the Holders of the
Preferred Securities shall also be given to such Owners as have, within two
years preceding the giving of such notice, filed their names and addresses
with the Property Trustee for that purpose. Such notice, demand or other
communication to or upon a Securityholder shall be deemed to have been
sufficiently given or made, for all purposes, upon hand delivery, mailing or
transmission.
Any notice, demand or other communication which by any provision of this
Trust Agreement is required or permitted to be given or served to or upon the
Trust, the Property Trustee or the Administrative Trustees shall be given in
writing addressed (until another address is published by the Trust) as
follows: (a) with respect to the Property Trustee to Wilmington Trust
Company, Rodney Square North, 1100 North Market Street, Wilmington, Delaware
19890-0001, Attention: Corporate Trust Administration; (b) with respect to
the Delaware Trustee, to Wilmington Trust Company, Rodney Square North, 1100
North Market Street, Wilmington, Delaware 19890-0001, Attention: Corporate
Trust Administration; and (c) with respect to the Administrative Trustees, to
them at the address above for notices to the Depositor, marked "Attention:
Administrative Trustees of Spectrum Capital Trust I." Such notice, demand or
other communication to or upon the Trust or the Property Trustee shall be
deemed to have been sufficiently given or made only upon actual receipt of
the writing by the Trust or the Property Trustee.
SECTION 1009. AGREEMENT NOT TO PETITION. Each of the Trustees and the
Depositor agree for the benefit of the Security holders that, until at least
one year and one day after the Trust has been terminated in accordance with
Article IX, they shall not file, or join in the filing of, a petition against
the Trust under any bankruptcy, insolvency, reorganization or other similar
law (including, without limitation, the United States
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Bankruptcy Code) (collectively, "Bankruptcy Laws") or otherwise join in the
commencement of any proceeding against the Trust under any Bankruptcy Law. In
the event the Depositor takes action in violation of this Section 1009, the
Property Trustee agrees, for the benefit of Security holders, that at the
expense of the Depositor (which expense shall be paid prior to the filing),
it shall file an answer with the bankruptcy court or otherwise properly
contest the filing of such petition by the Depositor against the Trust or the
commencement of such action and raise the defense that the Depositor has
agreed in writing not to take such action and should be stopped and precluded
therefrom. The provisions of this Section 1009 shall survive the termination
of this Trust Agreement.
SECTION 1010. TRUST INDENTURE ACT; CONFLICT WITH TRUST INDENTURE ACT.
(a) This Trust Agreement is subject to the provisions of the Trust
Indenture Act that are required to be part of this Trust Agreement and shall,
to the extent applicable, be governed by such provisions.
(b) The Property Trustee shall be the only Trustee which is a trustee
for the purposes of the Trust Indenture Act.
(c) If any provision hereof limits, qualifies or conflicts with another
provision hereof which is required to be included in this Trust Agreement by
any of the provisions of the Trust Indenture Act, such required provision
shall control. If any provision of this Trust Agreement modifies or excludes
any provision of the Trust Indenture Act which may be so modified or
excluded, the latter provision shall be deemed to apply to this Trust
Agreement as so modified or to be excluded, as the case may be.
(d) The application of the Trust Indenture Act to this Trust Agreement
shall not affect the nature of the Trust Securities as equity securities
representing undivided beneficial interests in the assets of the Trust.
SECTION 1011. ACCEPTANCE OF TERMS OF TRUST AGREEMENT, GUARANTEE AND
INDENTURE.
THE RECEIPT AND ACCEPTANCE OF A TRUST SECURITY OR ANY INTEREST THEREIN
BY OR ON BEHALF OF A SECURITYHOLDER OR ANY BENEFICIAL OWNER, WITHOUT ANY
SIGNATURE OR FURTHER MANIFESTATION OF ASSENT, SHALL CONSTITUTE THE
UNCONDITIONAL ACCEPTANCE BY THE SECURITYHOLDER AND ALL OTHERS HAVING A
BENEFICIAL INTEREST IN SUCH TRUST SECURITY OF ALL THE TERMS AND PROVISIONS OF
THIS TRUST AGREEMENT AND AGREEMENT TO THE SUBORDINATION PROVISIONS AND OTHER
TERMS OF THE GUARANTEE AND THE INDENTURE, AND SHALL CONSTITUTE THE AGREEMENT
OF THE TRUST, SUCH SECURITYHOLDER AND SUCH OTHERS THAT THE TERMS AND
PROVISIONS OF THIS TRUST AGREEMENT SHALL BE BINDING, OPERATIVE AND EFFECTIVE
AS BETWEEN THE TRUST AND SUCH SECURITYHOLDER AND SUCH OTHERS.
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SPECTRUM BANCORPORATION, INC.,
as Depositor
By:
------------------------------------------
Deryl F. Hamann, Chairman and Chief Executive Officer
WILMINGTON TRUST COMPANY,
as Property Trustee
By:
------------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
WILMINGTON TRUST COMPANY,
as Delaware Trustee
By:
------------------------------------------
Name:
----------------------------------------
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Title:
----------------------------------------
---------------------------------------------
Daniel A. Hamann, as Administrative Trustee
---------------------------------------------
Thomas B. Fischer, as Administrative Trustee
---------------------------------------------
John L. Kopecky, as Administrative Trustee
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EXHIBIT A
CERTIFICATE OF TRUST
OF
SPECTRUM CAPITAL TRUST I
This Certificate of Trust of Spectrum Capital Trust I (the "Trust"), dated
__________, 1999, is being duly executed and filed by Wilmington Trust
Company, a Delaware banking corporation, as trustee, to form a business trust
under the Delaware Business Trust Act (12 Del. C. Section 3801 et seq.).
1. NAME. The name of the business trust formed hereby is Spectrum
Capital Trust I.
2. DELAWARE TRUSTEE. The name and business address of the trustee of
the Trust in the State of Delaware is Wilmington Trust Company, Rodney Square
North, 1100 North Market Street, Wilmington, Delaware 19890-0001, Attn:
Corporate Trust Administration.
3. EFFECTIVE DATE. This Certificate of Trust shall be effective
upon its filing.
IN WITNESS WHEREOF, the undersigned, being the trustee of the Trust, has
executed this Certificate of Trust as of the date first above written.
WILMINGTON TRUST COMPANY,
as Trustee
By: /s/_______________________
Name: ___________________
Title: ___________________
<PAGE>
EXHIBIT C
THIS CERTIFICATE IS NOT TRANSFERABLE
CERTIFICATE NUMBER NUMBER OF SECURITIES
**1** 61,856
CERTIFICATE EVIDENCING COMMON SECURITIES
OF
SPECTRUM CAPITAL TRUST I
_____% Common Securities
(liquidation amount $10 per Common Security)
SPECTRUM CAPITAL TRUST I, a statutory business trust created under the
laws of the State of Delaware (the "Trust"), hereby certifies that Spectrum
Bancorporation, Inc. (the "Holder") is the registered owner of Sixty-One
Thousand Eight Hundred Fifty-Six (61,856) securities of the Trust
representing undivided beneficial interests in the assets of the Trust and
designated the _____% Common Securities (liquidation amount $10 per Common
Security) (the "Common Securities"). In accordance with Section 510 of the
Trust Agreement (as defined below), the Common Securities are not
transferable and any attempted transfer hereof shall be void. The
designations, rights, privileges, restrictions, preferences, and other terms
and provisions of the Common Securities are set forth in, and this
certificate and the Common Securities represented hereby are issued and shall
in all respects be subject to the terms and provisions of, the Amended and
Restated Trust Agreement of the Trust dated as of __________ __, 1999, as the
same may be amended from time to time (the "Trust Agreement"), including the
designation of the terms of Common Securities as set forth therein. The
Trust will furnish a copy of the Trust
C - 1
<PAGE>
Agreement to the Holder without charge upon written request to the Trust at
its principal place of business or registered office. Upon receipt of this
certificate, the Holder is bound by the Trust Agreement and is entitled to
the benefits thereunder.
IN WITNESS WHEREOF, one of the Administrative Trustees of the Trust has
executed this certificate this ____ day of __________, 1999
SPECTRUM CAPITAL TRUST I
By:
---------------------------------
Daniel A. Hamann
Administrative Trustee
C - 2
<PAGE>
EXHIBIT D
AGREEMENT AS TO EXPENSES AND LIABILITIES
AGREEMENT dated as of __________ __, 1999, between Spectrum
Bancorporation, Inc., an Iowa corporation (the "Company"), and Spectrum
Capital Trust I, a Delaware business trust (the "Trust").
WHEREAS, the Trust intends to issue its Common Securities (the "Common
Securities") to, and receive _____% Junior Subordinated Debentures due 2029
(the "Junior Subordinated Debentures") from, the Company and to issue and
sell _____% Cumulative Preferred Securities (the "Preferred Securities") with
such powers, preferences and special rights and restrictions as are set forth
in the Amended and Restated Trust Agreement of the Trust dated as of
__________ __, 1999, as the same may be amended from time to time (the "Trust
Agreement"); and
WHEREAS, the Company will directly or indirectly own all of the Common
Securities of the Trust and will issue the Junior Subordinated Debentures.
NOW, THEREFORE, in consideration of the purchase by each holder of the
Preferred Securities, which purchase the Company hereby agrees shall benefit
the Company and which purchase the Company acknowledges will be made in
reliance upon the execution and delivery of this Agreement, the Company,
including in its capacity as holder of the Common Securities, and the Trust
hereby agree as follows:
ARTICLE I
SECTION 1.1. GUARANTEE BY THE COMPANY. Subject to the terms and
conditions hereof, the Company, including in its capacity as holder of the
Common Securities, hereby irrevocably and unconditionally guarantees to each
person or entity to whom the Trust is now or hereafter becomes indebted or
liable (the "Beneficiaries") the full payment, when and as due, of any and
all Obligations (as hereinafter defined) to such Beneficiaries. As used
herein, "Obligations" means any costs, expenses or liabilities of the Trust
other than obligations of the Trust to pay to holders of any Preferred
Securities or other similar interests in the Trust the amounts due such
holders pursuant to the terms of the Preferred Securities or such other
similar interests, as the case may be. This Agreement is intended to be for
the benefit of, and to be enforceable by, all such Beneficiaries, whether or
not such Beneficiaries have received notice hereof.
D - 1
<PAGE>
SECTION 1.2. TERM OF AGREEMENT. This Agreement shall terminate and
be of no further force and effect upon the later of (a) the date on which
full payment has been made of all amounts payable to all holders of all the
Preferred Securities (whether upon redemption, liquidation, exchange or
otherwise) and (b) the date on which there are no Beneficiaries remaining;
provided, however, that this Agreement shall continue to be effective or
shall be reinstated, as the case may be, if at any time any holder of
Preferred Securities or any Beneficiary must restore payment of any sums paid
under the Preferred Securities, under any Obligation, under the Preferred
Securities Guarantee Agreement dated the date hereof by the Company and
Wilmington Trust Company as guarantee trustee or under this Agreement, for
any reason whatsoever. This Agreement is continuing, irrevocable,
unconditional and absolute.
SECTION 1.3. WAIVER OF NOTICE. The Company hereby waives notice of
acceptance of this Agreement and of any Obligation to which it applies or may
apply, and the Company hereby waives presentment, demand for payment,
protest, notice of nonpayment, notice of dishonor, notice of redemption and
all other notices and demands.
SECTION 1.4. NO IMPAIRMENT. The obligations, covenants, agreements
and duties of the Company under this Agreement shall in no way be affected or
impaired by reason of the happening from time to time of any of the following:
(a) the extension of time for the payment by the Trust of all or
any portion of the Obligations or for the performance of any other obligation
under, arising out of, or in connection with, the Obligations;
(b) any failure, omission, delay or lack of diligence on the
part of the Beneficiaries to enforce, assert or exercise any right,
privilege, power or remedy conferred on the Beneficiaries with respect to the
Obligations or any action on the part of the Trust granting indulgence or
extension of any kind; or
(c) the voluntary or involuntary liquidation, dissolution, sale
of any collateral, receivership, insolvency, bankruptcy, assignment for the
benefit of creditors, reorganization, arrangement, composition or
readjustment of debt of, or other similar proceedings affecting, the Trust or
any of the assets of the Trust.
The Beneficiaries shall not be obligated to give notice to, or
obtain the consent of, the Company with respect to the happening of any of
the foregoing.
SECTION 1.5. ENFORCEMENT. A Beneficiary may enforce this Agreement
directly against the Company, and the Company waives any right or remedy
torequire that any action be brought against the Trust or any other person or
entity before proceeding against the Company.
D - 2
<PAGE>
ARTICLE II
SECTION 2.1. BINDING EFFECT. All guarantees and agreements
contained in this Agreement shall bind the successors, assigns, receivers,
trustees and representatives of the Company and shall inure to the benefit of
the Beneficiaries.
SECTION 2.2. AMENDMENT. So long as there remains any Beneficiary
or any Preferred Securities are outstanding, this Agreement shall not be
modified or amended in any manner adverse to such Beneficiary or to the
holders of the Preferred Securities.
SECTION 2.3. NOTICES. Any notice, request or other communication
required or permitted to be given hereunder shall be given in writing by
delivering the same by facsimile transmission (confirmed by mail), telex, or
by registered or certified mail, addressed as follows (and if so given, shall
be deemed given when mailed or upon receipt of an answer back, if sent by
telex):
Spectrum Capital Trust I
c/o Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, DE 19890-0001
Facsimile No.: (302) 651-1576
Attention: Corporate Trust Administration
Spectrum Bancorporation, Inc.
10834 Old Mill Road, Suite One
Omaha, Nebraska 68154-2648
Facsimile No.: (402) 333-8339
Attention: President
SECTION 2.4. GOVERNING LAW. This Agreement shall be governed by and
construed and interpreted in accordance with the laws of the State of
Delaware (without regard to conflict of laws principles).
D - 3
<PAGE>
THIS AGREEMENT is executed as of the day and year first above written.
SPECTRUM BANCORPORATION, INC.,
By:
------------------------------------------
Deryl F. Hamann, Chairman and Chief Executive Officer
SPECTRUM CAPITAL TRUST I
By:
------------------------------------------
Daniel A. Hamann, Administrative Trustee
D - 4
<PAGE>
EXHIBIT E
This Preferred Security is a Book-Entry Preferred Securities
Certificate within the meaning of the Trust Agreement hereinafter referred to
and is registered in the name of The Depository Trust Company, a New York
corporation (the "Depositary") or a nominee of the Depositary. This Preferred
Security is exchangeable for Preferred Securities registered in the name of a
person other than the Depositary or its nominee only in the limited
circumstances described in the Trust Agreement (as defined below) and no
transfer of this Preferred Security (other than a transfer of this Preferred
Security as a whole by the Depositary to a nominee of the Depositary or by a
nominee of the Depositary to the Depositary or another nominee of the
Depositary) may be registered except in limited circumstances.
Unless this Preferred Security is presented by an authorized
representative of the Depositary to Spectrum Capital Trust I or its agent for
registration of transfer, exchange or payment, and any Preferred Security
issued is registered in the name of Cede & Co., or such other name as
requested by an authorized representative of the Depositary (and any payment
hereon is made to Cede & Co. or to such other entity as is requested by an
authorized representative of the Depositary), ANY TRANSFER, PLEDGE, OR OTHER
USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as
the registered owner hereof, Cede & Co. has an interest herein.
Certificate Number Number of Preferred Securities
**1** 2,000,000
CUSIP NO. __________
Certificate Evidencing Preferred Securities
of
Spectrum Capital Trust I
_____% Cumulative Preferred Securities
(liquidation amount $10 per Preferred Security)
E - 1
<PAGE>
SPECTRUM CAPITAL TRUST I, a statutory business trust created under the
laws of the State of Delaware (the "Trust"), hereby certifies that Cede & Co.
(the "Holder") is the registered owner of Two Million (2,000,000) preferred
securities of the Trust representing undivided beneficial interests in the
assets of the Trust and designated the _____% Cumulative Preferred Securities
(liquidation amount $10 per Preferred Security) (the "Preferred Securities").
The Preferred Securities are transferable on the books and records of the
Trust, in person or by a duly authorized attorney, upon surrender of this
certificate duly endorsed and in proper form for transfer as provided in
Section 504 of the Trust Agreement (as defined below). The designations,
rights, privileges, restrictions, preferences, and other terms and provisions
of the Preferred Securities are set forth in, and this certificate and the
Preferred Securities represented hereby are issued and shall in all respects
be subject to the terms and provisions of, the Amended and Restated Trust
Agreement of the Trust dated as of ______________, 1999, as the same may be
amended from time to time (the "Trust Agreement"), including the designation
of the terms of Preferred Securities as set forth therein. The Holder is
entitled to the benefits of the Preferred Securities Guarantee Agreement
entered into by Spectrum Bancorporation, Inc., an Iowa corporation, and
Wilmington Trust Company, as guarantee trustee, dated as of _____________,
1999 (the "Guarantee"), to the extent provided therein. The Trust will
furnish a copy of the Trust Agreement and the Guarantee to the Holder without
charge upon written request to the Trust at its principal place of business
or registered office. Upon receipt of this certificate, the Holder is bound
by the Trust Agreement and is entitled to the benefits thereunder.
IN WITNESS WHEREOF, one of the Administrative Trustees of the Trust
has executed this certificate this ___ day of __________, 1999.
SPECTRUM CAPITAL TRUST I
By:
-------------------------------------------
Daniel A. Hamann, Administrative Trustee
E - 2
<PAGE>
EXHIBIT 4.6
This Preferred Security is a Book-Entry Preferred Securities Certificate
within the meaning of the Trust Agreement hereinafter referred to and is
registered in the name of The Depository Trust Company, a New York
corporation (the "Depositary") or a nominee of the Depositary. This Preferred
Security is exchangeable for Preferred Securities registered in the name of a
person other than the Depositary or its nominee only in the limited
circumstances described in the Trust Agreement (as defined below) and no
transfer of this Preferred Security (other than a transfer of this Preferred
Security as a whole by the Depositary to a nominee of the Depositary or by a
nominee of the Depositary to the Depositary or another nominee of the
Depositary) may be registered except in limited circumstances.
Unless this Preferred Security is presented by an authorized
representative of the Depositary to Spectrum Capital Trust I or its agent for
registration of transfer, exchange or payment, and any Preferred Security
issued is registered in the name of Cede & Co., or such other name as
requested by an authorized representative of the Depositary (and any payment
hereon is made to Cede & Co. or to such other entity as is requested by an
authorized representative of the Depositary), ANY TRANSFER, PLEDGE, OR OTHER
USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as
the registered owner hereof, Cede & Co. has an interest herein.
<TABLE>
<S> <C>
Certificate Number Number of Preferred Securities
**1** 2,000,000
</TABLE>
CUSIP NO. ___________
Certificate Evidencing Preferred Securities
of
Spectrum Capital Trust I
____% Cumulative Preferred Securities
(liquidation amount $10 per Preferred Security)
<PAGE>
SPECTRUM CAPITAL TRUST I, a statutory business trust created under the
laws of the State of Delaware (the "Trust"), hereby certifies that Cede & Co.
(the "Holder") is the registered owner of Two Million (2,000,000) preferred
securities of the Trust representing undivided beneficial interests in the
assets of the Trust and designated the ____% Cumulative Preferred Securities
(liquidation amount $10 per Preferred Security) (the "Preferred Securities").
The Preferred Securities are transferable on the books and records of the
Trust, in person or by a duly authorized attorney, upon surrender of this
certificate duly endorsed and in proper form for transfer as provided in
Section 504 of the Trust Agreement (as defined below). The designations,
rights, privileges, restrictions, preferences, and other terms and provisions
of the Preferred Securities are set forth in, and this certificate and the
Preferred Securities represented hereby are issued and shall in all respects
be subject to the terms and provisions of, the Amended and Restated Trust
Agreement of the Trust dated as of ______________, 1999, as the same may be
amended from time to time (the "Trust Agreement"), including the designation
of the terms of Preferred Securities as set forth therein. The Holder is
entitled to the benefits of the Preferred Securities Guarantee Agreement
entered into by Spectrum Bancorporation, Inc., an Iowa corporation, and
Wilmington Trust Company, as guarantee trustee, dated as of ______________,
1999 (the "Guarantee"), to the extent provided therein. The Trust will
furnish a copy of the Trust Agreement and the Guarantee to the Holder without
charge upon written request to the Trust at its principal place of business
or registered office. Upon receipt of this certificate, the Holder is bound
by the Trust Agreement and is entitled to the benefits thereunder.
IN WITNESS WHEREOF, one of the Administrative Trustees of the Trust has
executed this certificate this __ day of ______________, 1999.
SPECTRUM CAPITAL TRUST I
By:
----------------------------------------
Daniel A. Hamann, Administrative Trustee
<PAGE>
EXHIBIT 4.7
PREFERRED SECURITIES GUARANTEE AGREEMENT
SPECTRUM BANCORPORATION, INC.
AND
WILMINGTON TRUST COMPANY
DATED: ___________, 1999
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I DEFINITIONS AND INTERPRETATION 1
SECTION 1.1 Definitions and Interpretation 1
ARTICLE II TRUST INDENTURE ACT 5
SECTION 2.1 Trust Indenture Act; Application 5
SECTION 2.2 Lists of Holders of Securities 5
SECTION 2.3 Reports by the Preferred Guarantee Trustee 6
SECTION 2.4 Periodic Reports to Preferred Guarantee Trustee 6
SECTION 2.5 Evidence of Compliance with Conditions Precedent 6
SECTION 2.6 Events of Default; Waiver 6
SECTION 2.7 Event of Default; Notice 6
SECTION 2.8 Conflicting Interests 7
ARTICLE III POWER, DUTIES AND RIGHTS OF
PREFERRED GUARANTEE TRUSTEE 7
SECTION 3.1 Powers and Duties of the Preferred
Guarantee Trustee 7
SECTION 3.2 Certain Rights of Preferred Guarantee
Trustee 9
SECTION 3.3 Not Responsible for Recitals or Issuance
of Guarantee 11
ARTICLE IV PREFERRED GUARANTEE TRUSTEE 11
SECTION 4.1 Preferred Guarantee Trustee; Eligibility 11
i
<PAGE>
SECTION 4.2 Appointment, Removal and Resignation
of Preferred Guarantee Trustees 12
ARTICLE V GUARANTEE 13
SECTION 5.1 Guarantee 13
SECTION 5.2 Waiver of Notice and Demand 13
SECTION 5.3 Obligations Not Affected 13
SECTION 5.4 Rights of Holders 14
SECTION 5.5 Guarantee of Payment 14
SECTION 5.6 Subrogation 14
SECTION 5.7 Independent Obligations 14
ARTICLE VI LIMITATION OF TRANSACTIONS;
SUBORDINATION 15
SECTION 6.1 Limitation of Transactions 15
SECTION 6.2 Ranking 15
ARTICLE VII TERMINATION 15
SECTION 7.1 Termination 15
ARTICLE VIII INDEMNIFICATION 16
Section 8.1 Exculpation 16
Section 8.2 Indemnification 16
ARTICLE IX MISCELLANEOUS 16
Section 9.1 Successors and Assigns 16
Section 9.2 Amendments 16
Section 9.3 Notices 17
Section 9.4 Benefit 17
Section 9.5 Governing Law 17
ii
<PAGE>
CROSS REFERENCE TABLE
Section of Trust Section of
Indenture Act of Guarantee
1939, as Amended Agreement
----------
310(a) 4.1(a)
310(b) 4.1(c), 2.8
310(c) Inapplicable
311(a) 2.2(b)
311(b) 2.2(b)
311(c) Inapplicable
312(a) 2.2(a)
312(b) 2.2(b)
313 2.3
314(a) 2.4
314(b) Inapplicable
314(c) 2.5
314(d) Inapplicable
314(e) 1.1, 2.5, 3.2
314(f) 2.1, 3.2
315(a) 3.1(d)
315(b) 2.7
315(c) 3.1
315(d) 3.1(d)
316(a) 1.1, 3.6, 5.4
316(b) 5.3
316(c) 8.2
317(a) Inapplicable
317(b) Inapplicable
318(a) 2.1(b)
318(b) 2.1
318(c) 2.1(a)
iii
<PAGE>
PREFERRED SECURITIES GUARANTEE AGREEMENT
This GUARANTEE AGREEMENT (the "Preferred Securities Guarantee"), dated as of
_______________, 1999 is executed and delivered by Spectrum Bancorporation,
Inc., an Iowa corporation (the "Guarantor"), and Wilmington Trust Company, as
trustee (the "Preferred Guarantee Trustee"), for the benefit of the Holders (as
defined herein) from time to time of the Preferred Securities (as defined
herein) of Spectrum Capital Trust I, a Delaware statutory business trust
("Spectrum Capital").
WHEREAS, pursuant to an Amended and Restated Trust Agreement (the "Trust
Agreement") dated as of ______________, 1999 among the trustees of Spectrum
Capital named therein, the Guarantor, as sponsor, and the holders from time to
time of undivided beneficial interests in the assets of Spectrum Captial,
Spectrum Capital is issuing on the date hereof 2,000,000 preferred securities,
and within 30 days after the date of the prospectus relating to the public
offering of the preferred securities, a possible additional amount of up to
300,000 preferred securities pursuant to an underwriters' over-allotment option,
having an aggregate liquidation amount of $20,000,000 to $23,000,000, designated
the _____% Cumulative Preferred Securities (the "Preferred Securities"); and
WHEREAS, as incentive for the Holders to purchase the Preferred Securities, the
Guarantor desires irrevocably and unconditionally to agree, to the extent set
forth in this Preferred Securities Guarantee, to pay to the Holders of the
Preferred Securities the Guarantee Payments (as defined herein) and to make
certain other payments on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the purchase by each Holder of Preferred
Securities, which purchase the Guarantor hereby agrees shall benefit the
Guarantor, the Guarantor executes and delivers this Preferred Securities
Guarantee for the benefit of the Holders.
ARTICLE I
DEFINITIONS AND INTERPRETATION
SECTION 1.1 DEFINITIONS AND INTERPRETATION. In this Preferred Securities
Guarantee, unless the context otherwise requires:
(a) capitalized terms used in this Preferred Securities Guarantee but
not defined in the preamble above have the respective meanings assigned to
them in this Section 1.1;
(b) a term defined anywhere in this Preferred Securities Guarantee
has the same meaning throughout;
1
<PAGE>
(c) all references to "the Preferred Securities Guarantee" or "this
Preferred Securities Guarantee" are to this Preferred Securities Guarantee
as modified, supplemented or amended from time to time;
(d) all references in this Preferred Securities Guarantee to Articles
and Sections are to Articles and Sections of this Preferred Securities
Guarantee, unless otherwise specified;
(e) a term defined in the Trust Indenture Act has the same meaning
when used in this Preferred Securities Guarantee, unless otherwise defined
in this Preferred Securities Guarantee or unless the context otherwise
requires; and
(f) a reference to the singular includes the plural and vice versa.
"Affiliate" has the same meaning as given to that term in Rule 405 of the
Securities Act of 1933, as amended, or any successor rule thereunder.
"Business Day" means any day other than (a) a Saturday or Sunday, (b) a day on
which banking institutions in the State of Iowa are authorized or required by
law or executive order to remain closed, or (c) a day on which the Preferred
Guarantee Trustee's Corporate Trust Office is closed for business.
"Corporate Trust Office" means the office of the Preferred Guarantee Trustee at
which the corporate trust business of the Preferred Guarantee Trustee shall, at
any particular time, be principally administered, which office at the date of
execution of this Agreement is located at Rodney Square North, 1100 North Market
Street, Wilmington, Delaware 19890-0001, Attn: Corporate Trust Administration.
"Covered Person" means any Holder or beneficial owner of Preferred Securities.
"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) 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 for which such person is responsible or liable,
directly or indirectly, as obligor or otherwise.
2
<PAGE>
"Event of Default" means a default by the Guarantor on any of its payment or
other obligations under this Preferred Securities Guarantee.
"Guarantee Payments" means the following payments or distributions, without
duplication, with respect to the Preferred Securities, to the extent not paid or
made by Spectrum Capital: (i) any accrued and unpaid Distributions (as defined
in the Trust Agreement) that are required to be paid on such Preferred
Securities to the extent Spectrum Capital shall have funds available therefor,
(ii) the redemption price, including all accrued and unpaid Distributions to the
date of redemption (the "Redemption Price") to the extent Spectrum Capital has
funds available therefor, with respect to any Preferred Securities called for
redemption by Spectrum Capital, and (iii) upon a voluntary or involuntary
dissolution, winding-up or termination of Spectrum Capital (other than in
connection with the distribution of Junior Subordinated Debentures to the
Holders in exchange for Preferred Securities as provided in the Trust
Agreement), the lesser of (a) the aggregate of the liquidation amount and all
accrued and unpaid Distributions on the Preferred Securities to the date of
payment, to the extent Spectrum Capital shall have funds available therefor, and
(b) the amount of assets of Spectrum Capital remaining available for
distribution to Holders in liquidation of Spectrum Capital (in either case, the
"Liquidation Distribution").
"Holder" shall mean any holder, as registered on the books and records of
Spectrum Capital of any Preferred Securities; provided, however, that, in
determining whether the holders of the requisite percentage of Preferred
Securities have given any request, notice, consent or waiver hereunder, "Holder"
shall not include the Guarantor or any Affiliate of the Guarantor.
"Indemnified Person" means the Preferred Guarantee Trustee, any Affiliate of the
Preferred Guarantee Trustee, or any officers, directors, shareholders, members,
partners, employees, representatives, nominees, custodians or agents of the
Preferred Guarantee Trustee.
"Indenture" means the Subordinated Indenture dated as of ___________, 1999,
among the Guarantor (the "Debenture Issuer") and Wilmington Trust Company, as
trustee, and any indenture supplemental thereto pursuant to which the Junior
Subordinated Debentures are to be issued to the Property Trustee (as defined in
the Trust Agreement) of Spectrum Capital.
"Junior Subordinated Debentures" means the series of junior subordinated
deferrable interest debt securities of the Guarantor designated the _____%
Junior Subordinated Debentures due 2029 held by the Property Trustee of Spectrum
Capital.
"Majority in liquidation amount of the Preferred Securities" means, except as
provided by the Trust Indenture Act, a vote by Holders of Preferred Securities,
voting separately as a class, of more than 50% of the liquidation amount
(including the stated amount that would be paid on redemption, liquidation or
otherwise, plus accrued and unpaid Distributions to the date upon which the
voting percentages are determined) of all Preferred Securities.
3
<PAGE>
"Officers' Certificate" means, with respect to any Person, a certificate signed
by two Authorized Officers of such Person. Any Officers' Certificate delivered
with respect to compliance with a condition or covenant provided for in this
Preferred Securities Guarantee shall include:
(a) a statement that each officer signing the Officers' Certificate
has read the covenant or condition and the definition relating thereto;
(b) a brief statement of the nature and scope of the examination or
investigation undertaken by each officer in rendering the Officers'
Certificate;
(c) a statement that each such officer has made such examination or
investigation as, in such officer's opinion, is necessary to enable such
officer to express an informed opinion as to whether or not such covenant
or condition has been complied with; and
(d) a statement as to whether, in the opinion of each such officer,
such condition or covenant has been complied with.
"Person" means a legal person, including any individual, corporation, estate,
partnership, joint venture, association, joint stock company, limited liability
company, trust, unincorporated association, or government or any agency or
political subdivision thereof, or any other entity of whatever nature.
"Preferred Guarantee Trustee" means Wilmington Trust Company, until a Successor
Preferred Guarantee Trustee has been appointed and has accepted such appointment
pursuant to the terms of this Preferred Securities Guarantee and thereafter
means each such Successor Preferred Guarantee Trustee.
"Responsible Officer" means, with respect to the Preferred Guarantee Trustee,
any officer within the Corporate Trust Office of the Preferred Guarantee
Trustee, including any vice-president, any assistant vice-president, any
assistant secretary, the treasurer, any assistant treasurer or other officer of
the Corporate Trust Office of the Preferred Guarantee Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of that officer's
knowledge of and familiarity with the particular subject.
"Successor Preferred Guarantee Trustee" means a successor Preferred Guarantee
Trustee possessing the qualifications to act as Preferred Guarantee Trustee
under Section 4.1.
"Senior and Subordinated Debt" means the principal of (and premium, if any) and
interest, if any (including interest accruing on or after the filing of any
petition in bankruptcy or for reorganization relating to the Guarantor whether
or not such claim for post-petition interest is allowed in such proceeding), on
Debt of the Guarantor, whether
4
<PAGE>
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 Preferred Securities Guarantee or to
other Debt which is pari passu with, or subordinated to, the Preferred
Securities Guarantee; provided, however, that Senior and Subordinated Debt
shall not be deemed to include (i) any Debt of the Guarantor 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 Guarantor, (ii) any Debt of the Guarantor to any of its subsidiaries,
(iii) any Debt to any employee of the Guarantor, (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 Junior 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 the subordination provisions to which such Debt is subject, (v)
the Junior Subordinated Debentures, and (vi) any other debt securities issued
pursuant to the Indenture.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as amended.
ARTICLE II
TRUST INDENTURE ACT
SECTION 2.1 TRUST INDENTURE ACT; APPLICATION.
(a) This Preferred Securities Guarantee is subject to the provisions
of the Trust Indenture Act that are required to be part of this Preferred
Securities Guarantee and shall, to the extent applicable, be governed by
such provisions; and
(b) If and to the extent that any provision of this Preferred
Securities Guarantee limits, qualifies or conflicts with the duties imposed
by Sections 310 to 317, inclusive, of the Trust Indenture Act, such imposed
duties shall control.
SECTION 2.2 LISTS OF HOLDERS OF SECURITIES.
(a) The Guarantor shall provide the Preferred Guarantee Trustee with
a list, in such form as the Preferred Guarantee Trustee may reasonably
require, of the names and addresses of the Holders of the Preferred
Securities ("List of Holders") (i) on or before January 15 and July 15 of
each year, and (ii) at any other time within 30 days of receipt by the
Guarantor of a written request for a List of Holders, as of a date no more
than 14 days before such List of Holders is given to the Preferred
Guarantee Trustee provided, that the Guarantor shall not be obligated to
provide such List of Holders at any time the List of Holders does not
differ from the most recent List of Holders given to the Preferred
Guarantee Trustee by the Guarantor. The Preferred Guarantee Trustee may
5
<PAGE>
destroy any List of Holders previously given to it on receipt of a new List
of Holders.
(b) The Preferred Guarantee Trustee shall comply with its obligations
under Sections 311(a), 311(b) and Section 312(b) of the Trust Indenture
Act.
SECTION 2.3 REPORTS BY THE PREFERRED GUARANTEE TRUSTEE. On or before July 15
of each year, the Preferred Guarantee Trustee shall provide to the Holders of
the Preferred Securities such reports as are required by Section 313 of the
Trust Indenture Act, if any, in the form and in the manner provided by Section
313 of the Trust Indenture Act. The Preferred Guarantee Trustee shall also
comply with the requirements of Section 313(d) of the Trust Indenture Act.
SECTION 2.4 PERIODIC REPORTS TO PREFERRED GUARANTEE TRUSTEE. The Guarantor
shall provide to the Preferred Guarantee Trustee such documents, reports and
information as required by Section 314 of the Trust Indenture Act, if any, and
the compliance certificate required by Section 314 of the Trust Indenture Act in
the form, in the manner and at the times required by Section 314 of the Trust
Indenture Act.
SECTION 2.5 EVIDENCE OF COMPLIANCE WITH CONDITIONS PRECEDENT. The Guarantor
shall provide to the Preferred Guarantee Trustee such evidence of compliance
with the conditions precedent, if any, provided for in this Preferred Securities
Guarantee that relate to any of the matters set forth in Section 314(c) of the
Trust Indenture Act. Any certificate or opinion required to be given by an
officer pursuant to Section 314(c)(1) may be given in the form of an Officers'
Certificate.
SECTION 2.6 EVENTS OF DEFAULT; WAIVER. The Holders of a Majority in
liquidation amount of Preferred Securities may, by vote, on behalf of the
Holders of all of the Preferred Securities, waive any past Event of Default and
its consequences. Upon such waiver, any such Event of Default shall cease to
exist, and any Event of Default arising therefrom shall be deemed to have been
cured, for every purpose of this Preferred Securities Guarantee, but no such
waiver shall extend to any subsequent or other default or Event of Default or
impair any right consequent thereon.
SECTION 2.7 EVENT OF DEFAULT; NOTICE.
(a) The Preferred Guarantee Trustee shall, within 90 days after the
occurrence of an Event of Default, transmit by mail, first class postage
prepaid, to the Holders of the Preferred Securities, notices of all Events
of Default actually known to a Responsible Officer of the Preferred
Guarantee Trustee, unless such defaults have been cured before the giving
of such notice, provided, that, the Preferred Guarantee Trustee shall be
protected in withholding such notice if and so long as a Responsible
Officer of the Preferred Guarantee Trustee in good faith determines that
the withholding of such notice is in the interests of the Holders of the
Preferred Securities.
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(b) The Preferred Guarantee Trustee shall not be deemed to have
knowledge of any Event of Default unless the Preferred Guarantee Trustee
shall have received a properly addressed written notice, or of which a
Responsible Officer of the Preferred Guarantee Trustee charged with the
administration of the Trust Agreement shall have obtained actual
knowledge.
SECTION 2.8 CONFLICTING INTERESTS. The Trust Agreement shall be deemed to be
specifically described in this Preferred Securities Guarantee for the purposes
of clause (i) of the first proviso contained in Section 310(b) of the Trust
Indenture Act.
ARTICLE III
POWERS, DUTIES AND RIGHTS OF
PREFERRED GUARANTEE TRUSTEE
SECTION 3.1 POWERS AND DUTIES OF THE PREFERRED GUARANTEE TRUSTEE.
(a) This Preferred Securities Guarantee shall be held by the
Preferred Guarantee Trustee for the benefit of the Holders of the Preferred
Securities, and the Preferred Guarantee Trustee shall not transfer this
Preferred Securities Guarantee to any Person except a Holder of Preferred
Securities exercising such Holder's rights pursuant to Section 5.4(b) or to
a Successor Preferred Guarantee Trustee on acceptance by such Successor
Preferred Guarantee Trustee of its appointment to act as Successor
Preferred Guarantee Trustee. The right, title and interest of the Preferred
Guarantee Trustee shall automatically vest in any Successor Preferred
Guarantee Trustee, and such vesting and cessation of title shall be
effective whether or not conveyancing documents have been executed and
delivered pursuant to the appointment of such Successor Preferred Guarantee
Trustee.
(b) If an Event of Default actually known to a Responsible Officer of
the Preferred Guarantee Trustee has occurred and is continuing, the
Preferred Guarantee Trustee shall enforce this Preferred Securities
Guarantee for the benefit of the Holders of the Preferred Securities.
(c) The Preferred Guarantee Trustee, before the occurrence of any
Event of Default and after the curing of all Events of Default that may
have occurred, shall undertake to perform only such duties as are
specifically set forth in this Preferred Securities Guarantee, and no
implied covenants shall be read into this Preferred Securities Guarantee
against the Preferred Guarantee Trustee. In case an Event of Default has
occurred (that has not been cured or waived pursuant to Section 2.6) and is
actually known to a Responsible Officer of the Preferred Guarantee Trustee,
the Preferred Guarantee Trustee shall exercise such of the rights and
powers vested in it by this Preferred Securities Guarantee, and use the
same degree of care and skill in its exercise thereof, as a prudent person
would exercise or use under the circumstances in the conduct of such
person's own affairs.
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(d) No provision of this Preferred Securities Guarantee shall be
construed to relieve the Preferred Guarantee Trustee from liability for its
own negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(i) prior to the occurrence of any Event of Default and after
the curing or waiving of all such Events of Default that may have
occurred:
(A) the duties and obligations of the Preferred Guarantee
Trustee shall be determined solely by the express provisions of
this Preferred Securities Guarantee, and the Preferred Guarantee
Trustee shall not be liable except for the performance of such
duties and obligations as are specifically set forth in this
Preferred Securities Guarantee, and no implied covenants or
obligations shall be read into this Preferred Securities Guarantee
against the Preferred Guarantee Trustee; and
(B) in the absence of bad faith on the part of the Preferred
Guarantee Trustee, the Preferred Guarantee Trustee may conclusively
rely, as to the truth of the statements and the correctness of the
opinions expressed therein, upon any certificates or opinions
furnished to the Preferred Guarantee Trustee and conforming to the
requirements of this Preferred Securities Guarantee; but in the
case of any such certificates or opinions that by any provision
hereof are specifically required to be furnished to the Preferred
Guarantee Trustee, the Preferred Guarantee Trustee shall be under a
duty to examine the same to determine whether or not they conform
to the requirements of this Preferred Securities Guarantee;
(ii) the Preferred Guarantee Trustee shall not be liable for
any error of judgment made in good faith by a Responsible Officer
of the Preferred Guarantee Trustee, unless it shall be proved that
the Preferred Guarantee Trustee was negligent in ascertaining the
pertinent facts upon which such judgment was made;
(iii) the Preferred Guarantee Trustee shall not be liable with
respect to any action taken or omitted to be taken by it in good
faith in accordance with the direction of the Holders of not less
than a Majority in liquidation amount of the Preferred Securities
relating to the time, method and place of conducting any proceeding
for any remedy available to the Preferred Guarantee Trustee, or
exercising any trust or power conferred upon the Preferred
Guarantee Trustee under this Preferred Securities Guarantee; and
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(iv) no provision of this Preferred Securities Guarantee shall
require the Preferred Guarantee Trustee to expend or risk its own
funds or otherwise incur personal financial liability in the
performance of any of its duties or in the exercise of any of its
rights or powers if the Preferred Guarantee Trustee shall have
reasonable grounds for believing that the repayment of such funds
or liability is not reasonably assured to it under the terms of
this Preferred Securities Guarantee or indemnity, reasonably
satisfactory to the Preferred Guarantee Trustee, against such risk
or liability is not reasonably assured to it.
SECTION 3.2 CERTAIN RIGHTS OF PREFERRED GUARANTEE TRUSTEE.
(a) Subject to the provisions of Section 3.1:
(i) The Preferred Guarantee Trustee may conclusively rely
upon, and shall be fully protected in acting or refraining from
acting upon, any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond,
debenture, note, other evidence of indebtedness or other paper or
document believed by it to be genuine and to have been signed, sent
or presented by the proper party or parties.
(ii) Any direction or act of the Guarantor contemplated by
this Preferred Securities Guarantee shall be sufficiently evidenced
by an Officers' Certificate.
(iii) Whenever, in the administration of this Preferred
Securities Guarantee, the Preferred Guarantee Trustee shall deem it
desirable that a matter be proved or established before taking,
suffering or omitting any action hereunder, the Preferred Guarantee
Trustee (unless other evidence is herein specifically prescribed)
may, in the absence of bad faith on its part, request and
conclusively rely upon an Officers' Certificate which, upon receipt
of such request, shall be promptly delivered by the Guarantor.
(iv) The Preferred Guarantee Trustee shall have no duty to see
to any recording, filing or registration of any instrument (or any
rerecording, refiling or registration thereof).
(v) The Preferred Guarantee Trustee may consult with counsel,
and the written advice or opinion of such counsel with respect to
legal matters shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted by
it hereunder in good faith and in accordance with such advice or
opinion. Such counsel may be counsel to the Guarantor or any of its
Affiliates and may include any of its employees. The Preferred
Guarantee Trustee shall have the right at any time to seek
instructions concerning the administration of this Preferred
Securities Guarantee from any court of competent jurisdiction.
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(vi) The Preferred Guarantee Trustee shall be under no
obligation to exercise any of the rights or powers vested in it by
this Preferred Securities Guarantee at the request or direction of
any Holder, unless such Holder shall have provided to the Preferred
Guarantee Trustee such security and indemnity, reasonably
satisfactory to the Preferred Guarantee Trustee, against the costs,
expenses (including attorneys' fees and expenses and the expenses
of the Preferred Guarantee Trustee's agents, nominees or
custodians) and liabilities that might be incurred by it in
complying with such request or direction, including such reasonable
advances as may be requested by the Preferred Guarantee Trustee;
provided that, nothing contained in this Section 3.2(a)(vi) shall
be taken to relieve the Preferred Guarantee Trustee, upon the
occurrence of an Event of Default, of its obligation to exercise
the rights and powers vested in it by this Preferred Securities
Guarantee.
(vii) The Preferred Guarantee Trustee shall not be bound to
make any investigation into the facts or matters stated in any
resolution, certificate, statement, instrument, opinion, report,
notice, request, direction, consent, order, bond, debenture, note,
other evidence of indebtedness or other paper or document, but the
Preferred Guarantee Trustee, in its discretion, may make such
further inquiry or investigation into such facts or matters as it
may see fit.
(viii) The Preferred Guarantee Trustee may execute any of the
trusts or powers hereunder or perform any duties hereunder either
directly or by or through agents, nominees, custodians or
attorneys, and the Preferred Guarantee Trustee shall not be
responsible for any misconduct or negligence on the part of any
agent or attorney appointed with due care by it hereunder.
(ix) Any action taken by the Preferred Guarantee Trustee or
its agents hereunder shall bind the Holders of the Preferred
Securities, and the signature of the Preferred Guarantee Trustee or
its agents alone shall be sufficient and effective to perform any
such action. No third party shall be required to inquire as to the
authority of the Preferred Guarantee Trustee to so act or as to its
compliance with any of the terms and provisions of this Preferred
Securities Guarantee, both of which shall be conclusively evidenced
by the Preferred Guarantee Trustee's or its agent's taking such
action.
(x) Whenever in the administration of this Preferred
Securities Guarantee the Preferred Guarantee Trustee shall deem it
desirable to receive instructions with respect to enforcing any
remedy or right or taking any other action hereunder, the Preferred
Guarantee Trustee (i) may request instructions from the Holders of
a Majority in liquidation amount of the Preferred Securities, (ii)
may refrain from enforcing such remedy or right or taking such
other action until such instructions are received, and (iii) shall
be protected in conclusively relying on or acting in accordance
with such instructions.
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(b) No provision of this Preferred Securities Guarantee shall be
deemed to impose any duty or obligation on the Preferred Guarantee Trustee
to perform any act or acts or exercise any right, power, duty or obligation
conferred or imposed on it in any jurisdiction in which it shall be
illegal, or in which the Preferred Guarantee Trustee shall be unqualified
or incompetent in accordance with applicable law, to perform any such act
or acts or to exercise any such right, power, duty or obligation. No
permissive power or authority available to the Preferred Guarantee Trustee
shall be construed to be a duty.
SECTION 3.3 NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF GUARANTEE. The recitals
contained in this Preferred Securities Guarantee shall be taken as the
statements of the Guarantor, and the Preferred Guarantee Trustee does not assume
any responsibility for their correctness. The Preferred Guarantee Trustee makes
no representation as to the validity or sufficiency of this Preferred Securities
Guarantee.
ARTICLE IV
PREFERRED GUARANTEE TRUSTEE
SECTION 4.1 PREFERRED GUARANTEE TRUSTEE; ELIGIBILITY.
(a) There shall at all times be a Preferred Guarantee Trustee which
shall:
(i) not be an Affiliate of the Guarantor; and
(ii) be a corporation organized and doing business under the laws
of the United States of America or any state or territory thereof or
of the District of Columbia, or a corporation or Person permitted by
the Securities and Exchange Commission to act as an institutional
trustee under the Trust Indenture Act, authorized under such laws to
exercise corporate trust powers, having a combined capital and surplus
of at least $50,000,000, and subject to supervision or examination by
federal, state, territorial or District of Columbia authority. If such
corporation publishes reports of condition at least annually, pursuant
to law or to the requirements of the supervising or examining
authority referred to above, then, for the purposes of this Section
4.1(a)(ii), the combined capital and surplus of such corporation shall
be deemed to be its combined capital and surplus as set forth in its
most recent report of condition so published.
(b) If at any time the Preferred Guarantee Trustee shall cease to be
eligible to so act under Section 4.1(a), the Preferred Guarantee Trustee
shall immediately resign in the manner and with the effect set out in
Section 4.2(c).
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(c) If the Preferred Guarantee Trustee has or shall acquire any
"conflicting interest" within the meaning of Section 310(b) of the Trust
Indenture Act, the Preferred Guarantee Trustee and Guarantor shall in all
respects comply with the provisions of Section 310(b) of the Trust
Indenture Act.
SECTION 4.2 APPOINTMENT, REMOVAL AND RESIGNATION OF PREFERRED
GUARANTEE TRUSTEES.
(a) Subject to Section 4.2(b), the Preferred Guarantee Trustee may be
appointed or removed without cause at any time by the Guarantor.
(b) The Preferred Guarantee Trustee shall not be removed in
accordance with Section 4.2(a) until a Successor Preferred Guarantee
Trustee has been appointed and has accepted such appointment by written
instrument executed by such Successor Preferred Guarantee Trustee and
delivered to the Guarantor.
(c) The Preferred Guarantee Trustee appointed to office shall hold
office until a Successor Preferred Guarantee Trustee shall have been
appointed or until its removal or resignation. The Preferred Guarantee
Trustee may resign from office (without need for prior or subsequent
accounting) by an instrument in writing executed by the Preferred Guarantee
Trustee and delivered to the Guarantor, which resignation shall not take
effect until a Successor Preferred Guarantee Trustee has been appointed and
has accepted such appointment by instrument in writing executed by such
Successor Preferred Guarantee Trustee and delivered to the Guarantor and
the resigning Preferred Guarantee Trustee.
(d) If no Successor Preferred Guarantee Trustee shall have been
appointed and accepted appointment as provided in this Section 4.2 within
60 days after delivery to the Guarantor of an instrument of resignation,
the resigning Preferred Guarantee Trustee may petition any court of
competent jurisdiction for appointment of a Successor Preferred Guarantee
Trustee. Such court may thereupon, after prescribing such notice, if any,
as it may deem proper, appoint a Successor Preferred Guarantee Trustee.
(e) No Preferred Guarantee Trustee shall be liable for the acts or
omissions to act of any Successor Preferred Guarantee Trustee.
(f) Upon termination of this Preferred Securities Guarantee or
removal or resignation of the Preferred Guarantee Trustee pursuant to this
Section 4.2, the Guarantor shall pay to the Preferred Guarantee Trustee all
amounts accrued to the date of such termination, removal or resignation.
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ARTICLE V
GUARANTEE
SECTION 5.1 GUARANTEE. The Guarantor irrevocably and unconditionally agrees to
pay in full to the Holders the Guarantee Payments (without duplication of
amounts theretofore paid by Spectrum Capital), as and when due, regardless of
any defense, right of set-off or counterclaim that Spectrum Capital may have or
assert. The Guarantor's obligation to make a Guarantee Payment may be satisfied
by direct payment of the required amounts by the Guarantor to the Holders or by
causing Spectrum Capital to pay such amounts to the Holders.
SECTION 5.2 WAIVER OF NOTICE AND DEMAND. The Guarantor hereby waives notice of
acceptance of this Preferred Securities Guarantee and of any liability to which
it applies or may apply, presentment, demand for payment, any right to require a
proceeding first against Spectrum Capital or any other Person before proceeding
against the Guarantor, protest, notice of nonpayment, notice of dishonor, notice
of redemption and all other notices and demands.
SECTION 5.3 OBLIGATIONS NOT AFFECTED. The obligations, covenants, agreements
and duties of the Guarantor under this Preferred Securities Guarantee shall in
no way be affected or impaired by reason of the happening from time to time of
any of the following:
(a) the release or waiver, by operation of law or otherwise, of the
performance or observance by Spectrum Capital of any express or implied
agreement, covenant, term or condition relating to the Preferred Securities
to be performed or observed by Spectrum Capital;
(b) the extension of time for the payment by Spectrum Capital of all
or any portion of the Distributions, Redemption Price, Liquidation
Distribution or any other sums payable under the terms of the Preferred
Securities or the extension of time for the performance of any other
obligation under, arising out of, or in connection with, the Preferred
Securities (other than an extension of time for payment of Distributions,
Redemption Price, Liquidation Distribution or other sum payable that
results from the extension of any interest payment period on the Junior
Subordinated Debentures or any extension of the maturity date of the Junior
Subordinated Debentures permitted by the Indenture);
(c) any failure, omission, delay or lack of diligence on the part of
the Holders to enforce, assert or exercise any right, privilege, power or
remedy conferred on the Holders pursuant to the terms of the Preferred
Securities, or any action on the part of Spectrum Capital granting
indulgence or extension of any kind;
(d) the voluntary or involuntary liquidation, dissolution, sale of
any collateral, receivership, insolvency, bankruptcy, assignment for the
benefit of creditors, reorganization, arrangement, composition or
readjustment of debt of,
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or other similar proceedings affecting, Spectrum Capital or any of the
assets of Spectrum Capital;
(e) any invalidity of, or defect or deficiency in, the Preferred
Securities;
(f) the settlement or compromise of any obligation guarantied hereby
or hereby incurred; or
(g) any other circumstance whatsoever that might otherwise constitute
a legal or equitable discharge or defense of a guarantor, it being the
intent of this Section 5.3 that the obligations of the Guarantor hereunder
shall be absolute and unconditional under any and all circumstances.
There shall be no obligation of the Holders to give notice to, or obtain consent
of, the Guarantor with respect to the happening of any of the foregoing.
SECTION 5.4 RIGHTS OF HOLDERS.
(a) The Holders of a Majority in liquidation amount of the Preferred
Securities have the right to direct the time, method and place of
conducting of any proceeding for any remedy available to the Preferred
Guarantee Trustee in respect of this Preferred Securities Guarantee or
exercising any trust or power conferred upon the Preferred Guarantee
Trustee under this Preferred Securities Guarantee.
(b) Any Holder of Preferred Securities may institute a legal
proceeding directly against the Guarantor to enforce its rights under this
Preferred Securities Guarantee, without first instituting a legal
proceeding against Spectrum Capital, the Preferred Guarantee Trustee or any
other Person.
SECTION 5.5 GUARANTEE OF PAYMENT. This Preferred Securities Guarantee creates
a Guarantee of payment and not of collection.
SECTION 5.6 SUBROGATION. The Guarantor shall be subrogated to all (if any)
rights of the Holders of Preferred Securities against Spectrum Capital in
respect of any amounts paid to such Holders by the Guarantor under this
Preferred Securities Guarantee; provided, however, that the Guarantor shall not
(except to the extent required by mandatory provisions of law) be entitled to
enforce or exercise any right that it may acquire by way of subrogation or any
indemnity, reimbursement or other agreement, in all cases as a result of payment
under this Preferred Securities Guarantee, if, at the time of any such payment,
any amounts are due and unpaid under this Preferred Securities Guarantee. If
any amount shall be paid to the Guarantor in violation of the preceding
sentence, the Guarantor agrees to hold such amount in trust for the Holders and
to pay over such amount to the Holders.
SECTION 5.7 INDEPENDENT OBLIGATIONS. The Guarantor acknowledges that its
obligations hereunder are independent of the obligations of Spectrum Capital
with
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respect to the Preferred Securities, and that the Guarantor shall be liable
as principal and as debtor hereunder to make Guarantee Payments pursuant to
the terms of this Preferred Securities Guarantee notwithstanding the
occurrence of any event referred to in subsections (a) through (g),
inclusive, of Section 5.3.
ARTICLE VI
LIMITATION OF TRANSACTIONS; SUBORDINATION
SECTION 6.1 LIMITATION OF TRANSACTIONS. So long as any Preferred Securities
remain outstanding, if there shall have occurred and be continuing an Event of
Default or an event of default under the Trust Agreement, then (a) the Guarantor
shall not declare or pay any dividend or distributions on, or redeem, purchase,
acquire, or make a liquidation payment with respect to, any of its capital
stock, (b) the Guarantor shall not make any payment of interest, principal or
premium, if any, on or repay, repurchase or redeem any debt securities issued by
the Guarantor (including other Junior Subordinated Debentures) which rank pari
passu with or junior in interest to the Junior Subordinated Debentures or (c)
the Guarantor shall not make any guarantee payments with respect to any
guarantee by the guarantor of the debt securities of any subsidiary of the
Guarantor if such guarantee ranks pari passu or junior in interest to the Junior
Subordinated Debentures (other than (a) dividends or distributions in common
stock, (b) any declaration of a dividend in connection with the implementation
of a shareholders' rights plan, or the issuance of stock under any such plan in
the future or the redemption or repurchase of any such rights pursuant thereto,
(c) payments under this Preferred Securities Guarantee and (d) purchases of
common stock related to the issuances of common stock or rights under any of the
Guarantor's benefit plans for its directors, officers or employees).
SECTION 6.2 RANKING. This Preferred Securities Guarantee will constitute an
unsecured obligation of the Guarantor and will rank subordinate and junior in
right of payment to all Senior and Subordinated Debt of the Guarantor.
ARTICLE VII
TERMINATION
SECTION 7.1 TERMINATION. This Preferred Securities Guarantee shall terminate
upon (i) full payment of the Redemption Price of all Preferred Securities, (ii)
upon full payment of the amounts payable in accordance with the Trust Agreement
upon liquidation of Spectrum Capital or (iii) upon distribution of the Junior
Subordinated Debentures to the Holders of the Preferred Securities.
Notwithstanding the foregoing, this Preferred Securities Guarantee will continue
to be effective or will be reinstated, as the case may be, if at any time any
Holder of Preferred Securities must restore payment of any sums paid under the
Preferred Securities or under this Preferred Securities Guarantee.
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ARTICLE VIII
INDEMNIFICATION
SECTION 8.1 EXCULPATION.
(a) No Indemnified Person shall be liable, responsible or accountable
in damages or otherwise to the Guarantor or any Covered Person for any
loss, damage or claim incurred by reason of any act or omission performed
or omitted by such Indemnified Person in good faith in accordance with this
Preferred Securities Guarantee and in a manner that such Indemnified Person
reasonably believed to be within the scope of the authority conferred on
such Indemnified Person by this Preferred Securities Guarantee or by law,
except that an Indemnified Person shall be liable for any such loss, damage
or claim incurred by reason of such Indemnified Person's negligence or
willful misconduct with respect to such acts or omissions.
(b) An Indemnified Person shall be fully protected in relying in good
faith upon the records of the Guarantor and upon such information,
opinions, reports or statements presented to the Guarantor by any Person as
to matters the Indemnified Person reasonably believes are within such other
Person's professional or expert competence and who has been selected with
reasonable care by or on behalf of the Guarantor, including information,
opinions, reports or statements as to the value and amount of the assets,
liabilities, profits, losses, or any other facts pertinent to the existence
and amount of assets from which Distributions to Holders of Preferred
Securities might properly be paid.
SECTION 8.2 INDEMNIFICATION. The Guarantor agrees to indemnify each
Indemnified Person for, and to hold each Indemnified Person harmless against,
any loss, liability or expense incurred without negligence or bad faith on its
part, arising out of or in connection with the acceptance or administration of
the trust or trusts hereunder, including the costs and expenses (including
reasonable legal fees and expenses) of defending itself against, or
investigating, any claim or liability in connection with the exercise or
performance of any of its powers or duties hereunder. The obligation to
indemnify as set forth in this Section 8.2 shall survive the termination of this
Preferred Securities Guarantee.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1 SUCCESSORS AND ASSIGNS. All guaranties and agreements contained in
this Preferred Securities Guarantee shall bind the successors, assigns,
receivers, trustees and representatives of the Guarantor and shall inure to the
benefit of
the Holders of the Preferred Securities then outstanding.
SECTION 9.2 AMENDMENTS. Except with respect to any changes that do not
materially adversely affect the rights of Holders (in which case no consent of
Holders will be required), this Preferred Securities Guarantee may only be
amended with the
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prior approval of the Holders of at least a Majority in liquidation amount of
the Preferred Securities. The provisions of Article VI of the Trust
Agreement with respect to meetings of Holders of the Securities apply to the
giving of such approval.
SECTION 9.3 NOTICES. All notices provided for in this Preferred Securities
Guarantee shall be in writing, duly signed by the party giving such notice, and
shall be delivered, telecopied or mailed by registered or certified mail, as
follows:
(a) If given to the Preferred Guarantee Trustee, at the Preferred
Guarantee Trustee's mailing address set forth below (or such other address
as the Preferred Guarantee Trustee may give notice of to the Holders of the
Preferred Securities):
Wilmington Trust Company
Rodney Square North 1100 North Market Street
Wilmington, DE 19890-0001
Attention: Corporate Trust Administration
(b) If given to the Guarantor, at the Guarantor's mailing address set
forth below (or such other address as the Guarantor may give notice of to
the Holders of the Preferred Securities):
Spectrum Bancorporation, Inc.
10834 Old Mill Road, Suite One
Omaha, Nebraska, 68154-2648
Attention: President
(c) If given to any Holder of Preferred Securities, at the address
set forth on the books and records of Spectrum Capital.
All such notices shall be deemed to have been given when received in person,
telecopied with receipt confirmed, or mailed by first class mail, postage
prepaid except that if a notice or other document is refused delivery or cannot
be delivered because of a changed address of which no notice was given, such
notice or other document shall be deemed to have been delivered on the date of
such refusal or inability to deliver.
SECTION 9.4 BENEFIT. This Preferred Securities Guarantee is solely for the
benefit of the Holders of the Preferred Securities and, subject to Section
3.1(a), is not separately transferable from the Preferred Securities.
SECTION 9.5. GOVERNING LAW. THIS PREFERRED SECURITIES GUARANTEE SHALL BE
GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF IOWA; PROVIDED THAT THE IMMUNITIES AND THE STANDARD OF CARE OF THE
TRUSTEE SHALL BE GOVERNED BY DELAWARE LAW.
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THIS PREFERRED SECURITIES GUARANTEE is executed as of the day and year first
above written.
SPECTRUM BANCORPORATION, INC.,
as Guarantor
By:
Name:
Title:
WILMINGTON TRUST COMPANY,
As Preferred Guarantee Trustee
By:
Name:
Title:
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EXHIBIT 4.8
AGREEMENT AS TO EXPENSES AND LIABILITIES
AGREEMENT dated as of __________ __, 1999, between Spectrum Bancorporation,
Inc., an Iowa corporation (the "Company"), and Spectrum Capital Trust I, a
Delaware business trust (the "Trust").
WHEREAS, the Trust intends to issue its Common Securities (the "Common
Securities") to, and receive _____% Junior Subordinated Debentures due 2029 (the
"Junior Subordinated Debentures") from, the Company and to issue and sell _____%
Cumulative Preferred Securities (the "Preferred Securities") with such powers,
preferences and special rights and restrictions as are set forth in the Amended
and Restated Trust Agreement of the Trust dated as of __________ __, 1999, as
the same may be amended from time to time (the "Trust Agreement"); and
WHEREAS, the Company will directly or indirectly own all of the Common
Securities of the Trust and will issue the Junior Subordinated Debentures.
NOW, THEREFORE, in consideration of the purchase by each holder of the
Preferred Securities, which purchase the Company hereby agrees shall benefit the
Company and which purchase the Company acknowledges will be made in reliance
upon the execution and delivery of this Agreement, the Company, including in its
capacity as holder of the Common Securities, and the Trust hereby agree as
follows:
ARTICLE I
SECTION 1.1. GUARANTEE BY THE COMPANY. Subject to the terms and
conditions hereof, the Company, including in its capacity as holder of the
Common Securities, hereby irrevocably and unconditionally guarantees to each
person or entity to whom the Trust is now or hereafter becomes indebted or
liable (the "Beneficiaries") the full payment, when and as due, of any and all
Obligations (as hereinafter defined) to such Beneficiaries. As used herein,
"Obligations" means any costs, expenses or liabilities of the Trust other than
obligations of the Trust to pay to holders of any Preferred Securities or other
similar interests in the Trust the amounts due such holders pursuant to the
terms of the Preferred Securities or such other similar interests, as the case
may be. This Agreement is intended to be for the benefit of, and to be
enforceable by, all such Beneficiaries, whether or not such Beneficiaries have
received notice hereof.
SECTION 1.2. TERM OF AGREEMENT. This Agreement shall terminate and be
of no further force and effect upon the later of (a) the date on which full
payment has been made of all amounts payable to all holders of all the Preferred
Securities (whether upon redemption, liquidation, exchange or otherwise) and
(b)the date on which there
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are no Beneficiaries remaining; provided, however, that this Agreement shall
continue to be effective or shall be reinstated, as the case may be, if at
any time any holder of Preferred Securities or any Beneficiary must restore
payment of any sums paid under the Preferred Securities, under any
Obligation, under the Preferred Securities Guarantee Agreement dated the date
hereof by the Company and Wilmington Trust Company as guarantee trustee or
under this Agreement, for any reason whatsoever. This Agreement is
continuing, irrevocable, unconditional and absolute.
SECTION 1.3. WAIVER OF NOTICE. The Company hereby waives notice of
acceptance of this Agreement and of any Obligation to which it applies or may
apply, and the Company hereby waives presentment, demand for payment, protest,
notice of nonpayment, notice of dishonor, notice of redemption and all other
notices and demands.
SECTION 1.4. NO IMPAIRMENT. The obligations, covenants, agreements
and duties of the Company under this Agreement shall in no way be affected or
impaired by reason of the happening from time to time of any of the following:
(a) the extension of time for the payment by the Trust of all or
any portion of the Obligations or for the performance of any other obligation
under, arising out of, or in connection with, the Obligations;
(b) any failure, omission, delay or lack of diligence on the part of
the Beneficiaries to enforce, assert or exercise any right, privilege, power or
remedy conferred on the Beneficiaries with respect to the Obligations or any
action on the part of the Trust granting indulgence or extension of any kind; or
(c) the voluntary or involuntary liquidation, dissolution, sale
of any collateral, receivership, insolvency, bankruptcy, assignment for the
benefit of creditors, reorganization, arrangement, composition or readjustment
of debt of, or other similar proceedings affecting, the Trust or any of the
assets of the Trust.
The Beneficiaries shall not be obligated to give notice to, or obtain
the consent of, the Company with respect to the happening of any of the
foregoing.
SECTION 1.5. ENFORCEMENT. A Beneficiary may enforce this Agreement
directly against the Company, and the Company waives any right or remedy
torequire that any action be brought against the Trust or any other person or
entity before proceeding against the Company.
<PAGE>
ARTICLE II
SECTION 2.1. BINDING EFFECT. All guarantees and agreements contained
in this Agreement shall bind the successors, assigns, receivers, trustees and
representatives of the Company and shall inure to the benefit of the
Beneficiaries.
SECTION 2.2. AMENDMENT. So long as there remains any Beneficiary or
any Preferred Securities are outstanding, this Agreement shall not be modified
or amended in any manner adverse to such Beneficiary or to the holders of the
Preferred Securities.
SECTION 2.3. NOTICES. Any notice, request or other communication
required or permitted to be given hereunder shall be given in writing by
delivering the same by facsimile transmission (confirmed by mail), telex, or by
registered or certified mail, addressed as follows (and if so given, shall be
deemed given when mailed or upon receipt of an answer back, if sent by telex):
Spectrum Capital Trust I
c/o Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, DE 19890-0001
Facsimile No.: (302) 651-1576
Attention: Corporate Trust Administration
Spectrum Bancorporation, Inc.
10834 Old Mill Road, Suite One
Omaha, Nebraska 68154-2648
Facsimile No.: (402) 333-8339
Attention: President
SECTION 2.4. GOVERNING LAW. This Agreement shall be governed by and
construed and interpreted in accordance with the laws of the State of Delaware
(without regard to conflict of laws principles).
<PAGE>
THIS AGREEMENT is executed as of the day and year first above written.
SPECTRUM BANCORPORATION, INC.,
By:
------------------------------------------
Deryl F. Hamann, Chairman and Chief
Executive Officer
SPECTRUM CAPITAL TRUST I
By:
------------------------------------------
Daniel A. Hamann, Administrative Trustee
<PAGE>
EXHIBIT 5.1
[BAIRD HOLM LETTERHEAD]
June 10, 1999
Spectrum Bancorporation, Inc.
10834 Old Mill Road, Suite One
Omaha, Nebraska 68154-2648
Re: Registration Statement on Form S-1
Ladies and Gentlemen:
In connection with the Registration Statement on Form S-1 filed by Spectrum
Bancorporation, Inc. (the "Company") and Spectrum Capital Trust I ("Spectrum
Capital") with the Securities and Exchange Commission on or about June 11,
1999 relating to a public offering by Spectrum Capital of up to $_____________
and _____% Cumulative Preferred Securities (the "Preferred Securities"), please
be advised that as counsel to the Company, upon examination of such corporate
documents and records as we have deemed necessary or advisable for the purposes
of this opinion, it is our opinion that:
1. The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Iowa.
2. The Guarantee, when executed and delivered as contemplated by the
Registration Statement, and the Junior Subordinated Debentures, when issued and
paid for as contemplated by the Registration Statement, will be validly issued
obligations of the Company enforceable in accordance with their terms except as
such enforceability may be limited by bankruptcy, insolvency, reorganization or
similar laws affecting the rights of creditors generally and subject to general
principles of equity.
Capitalized terms used herein shall have the definitions given to such terms in
the Registration Statement. We hereby consent to the filing of this opinion as
an exhibit to the Registration Statement, and to the reference to our firm under
the headings "Material Federal Income Tax Consequences" and "Legal Matters" in
the Prospectus comprising a part of the Registration Statement.
Respectfully Submitted,
BAIRD, HOLM, McEACHEN,
PEDERSEN, HAMANN & STRASHEIM
<PAGE>
EXHIBIT 8.1
[BAIRD HOLM LETTERHEAD]
_______________, 1999
Spectrum Bancorporation, Inc. Spectrum Capital Trust I
10834 Old Mill Road, Suite One c/o Spectrum Bancorporation, Inc.
Omaha, Nebraska 68154-2648 10834 Old Mill Road, Suite One
Omaha, Nebraska 68154-2648
Re: Opinion of Counsel Related to the Material Federal Income Tax
Consequences of the Purchase and Ownership of Preferred Securities
Issued by Spectrum Capital Trust I
Ladies and Gentlemen:
We have acted as counsel to Spectrum Bancorporation, Inc. (the "Company") in
connection with the preparation and filing with the Securities and Exchange
Commission under the Securities Act of 1933, as amended (the "Act"), of a Form
S-1 Registration Statement, dated on or about __________, 1999 (the
"Registration Statement"). The Registration Statement relates to the offer for
sale of up to 2,000,000 ___% Cumulative Preferred Securities (the "Preferred
Securities") of Spectrum Capital Trust I, a statutory business trust formed by
the Company under the laws of the State of Delaware, and the Junior Subordinated
Debentures to be issued by the Company to Spectrum Capital Trust I in connection
with the sale of the Preferred Securities.
This opinion letter is governed by, and shall be interpreted in accordance with,
the Legal Opinion Accord (the "Accord") of the ABA Section of Business Law
(1991). As a consequence, it is subject to a number of qualifications,
exceptions, definitions, limitations on coverage and other limitations, all as
more particularly described in the Accord, and this letter should be read in
conjunction therewith.
This opinion letter relates to the material federal income tax consequences of
the purchase and ownership of the Preferred Securities by investors. All
capitalized terms used in this opinion letter and not otherwise defined herein
are used as described in the Registration Statement. The consequences described
herein are not applicable to investors who may be subject to special tax
treatment, such as banks, real estate investment trusts, regulated investment
companies, insurance companies, dealers in securities or currencies, tax-exempt
investors, non-United States Persons or persons that will hold the Preferred
Securities as part of a position in a "straddle" or as part of a "hedging" or
other integrated transaction or persons whose functional currency is not United
States dollars, or the consequences to shareholders, partners, or beneficiaries
of
<PAGE>
Spectrum Bancorporation, Inc.
Spectrum Capital Trust I
__________ , 1999
Page -2-
a holder. In addition, this opinion does not include any description of any
alternative minimum tax consequences or the tax laws of any state, local or
foreign government that may be applicable to an investor.
We have examined the Registration Statement and such other documents as we have
deemed necessary to render our opinion expressed below. In our examination of
such material, we have relied upon the current and continued accuracy of the
factual matters we have considered, and we have assumed the genuineness of all
signatures, the authenticity of all documents submitted to us as originals and
the conformity to original documents of all copies of documents submitted to us.
In addition, we also have assumed that the transactions related to the issuance
of the Junior Subordinated Debentures and the Preferred Securities will be
consummated in accordance with the terms and forms of the documents. As to any
facts material to the opinions expressed herein which were not independently
established or verified, we have relied upon oral or written statements and
representations of officers, trustees, and other representatives of the Company,
Spectrum Capital Trust I and others. Should any of the above facts,
circumstances, or assumptions be subsequently determined incorrect or
inaccurate, our conclusions may vary from those set forth below and such
variance could be material.
Based on the foregoing, and assuming that Spectrum Capital Trust I was formed
and will be maintained in compliance with the terms of the Trust Agreement it is
our opinion that:
(1) Spectrum Capital Trust I will be classified for United States federal
income tax purposes as a grantor trust and not as an association taxable as
a corporation for United States federal income tax purposes, and as a
result, each beneficial owner of Preferred Securities will be treated as
owning an undivided beneficial interest in the Junior Subordinated
Debentures.
(2) Stated interest on the Junior Subordinated Debentures generally will
be included in income by a Securityholder at the time such interest income
is paid or accrued in accordance with the Securityholder's regular method
of tax accounting.
(3) Gain or loss generally will be recognized by a Securityholder on a
sale of Preferred Securities (including a redemption for cash) in an amount
equal to the difference between the amount realized (which for this
purpose, will exclude amounts attributable to accrued interest or original
issue discount not previously included in income) and the Securityholder's
adjusted tax basis in the Preferred Securities sold or so redeemed. Gain or
loss recognized by the Securityholder on Preferred Securities will
generally be taxable as capital gain or loss. Amounts attributable to
accrued interest will be taxable as ordinary income. However, there is
conflicting authority regarding the need for inclusion of interest income
(and the corresponding exclusion of such interest from the
<PAGE>
Spectrum Bancorporation, Inc.
Spectrum Capital Trust I
__________ , 1999
Page -3-
amount realized) for a cash basis Securityholder if the Preferred
Securities are sold for less than their principal amount.
(4) The summary contained in the portion of the Registration Statement
titled "Material Federal Income Tax Consequences" accurately describes
material United States federal income tax consequences that may be relevant
to the purchase and ownership of the Preferred Securities.
This opinion is based upon the Internal Revenue Code of 1986, as amended, the
Treasury regulations promulgated thereunder and other relevant authorities and
law, all as in effect on the date hereof. All of the above are subject to change
or modification, possibly retroactively, by subsequent legislative, regulatory,
administrative or judicial decisions which could adversely affect our opinions.
Consequently, future changes in the law, or administrative or judicial
interpretations thereof, may cause the tax treatment of the transactions
referred to herein to be materially different from that described above.
Other than the specific tax opinions set forth in this letter, no other opinion
is rendered by us with respect to the tax treatment of the proposed issuance and
sale of the Junior Subordinated Debentures or the Preferred Securities,
including, but not limited to, the tax treatment of the proposed transactions
under other provisions of the Code and the regulations, the tax treatment of any
conditions existing at the time of, or effects resulting from, the proposed
transactions that are not specifically covered by the above opinions, or the tax
treatment of the proposed transactions under state, local, foreign or any other
tax laws.
We hereby consent to the filing of this letter as an exhibit to the Registration
Statement and the use of our name in the Registration Statement under the
captions "Material Federal Income Tax Consequences" and "Legal Matters."
Respectfully Submitted,
BAIRD, HOLM, McEACHEN,
PEDERSEN, HAMANN & STRASHEIM
<PAGE>
EXHIBIT 10.1
AMENDMENT TO CREDIT AGREEMENT
THIS AMENDMENT is entered into as of January 31, 1998 by and between
Spectrum Bancorporation, Inc., a Delaware corporation (the "Borrower"), and
First Bank National Association (the "Bank"). In consideration of the mutual
agreements set forth herein, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged by the parties, the
Borrower and the Bank agree as follows:
1. Upon the execution of this Amendment:
a. The Bank shall lend the Borrower the sum of $1,805,000.00 (the
"New Loan"); and
b. The Borrower shall use all proceeds of the New Loan solely to
acquire all of the shares of stock of First Savings & Loan Association of South
Dakota, Inc. (the "Association") that are not already owned by the Borrower,
such acquisition to be made through a reverse subsidiary merger of Transitory
Subsidiary, Inc. into the Association pursuant to an Agreement and Plan of
Merger dated as of November 19, 1997; and
c. The Borrower shall cause the Association to be merged into F&M
Bank, Watertown, South Dakota ("F&M Bank") pursuant to an Agreement and Plan of
Merger dated as of November 24, 1997; and
d. The Borrower shall pledge and deliver to the Bank all of the
certificates for all shares of stock of F&M Bank thereby acquired by the
Borrower and executed stock powers for such certificates, all in form and
substance acceptable to the Bank, pursuant to the Borrower's Pledge Agreement
dated October 17, 1997 in favor of the Bank; and
e. The Borrower shall deliver to the Bank the executed Amended and
Restated Term Note (as defined herein), and the executed Consent and Agreement
of Deryl F. Hamann, Deryl F. Hamann, as Trustee, Rushmore Financial Services,
Inc., Spectrum Financial Services, Inc., Daniel A. Hamann, Esther Brabec, and
Julie R. Bunderson, all in form and substance acceptable to the Bank; and
f. The Borrower shall pay the Bank a loan fee of $4,500.00 for the
New Loan; and
g. The Borrower shall deliver to the Bank an executed legal opinion
in form and substance acceptable to the Bank.
<PAGE>
2. The Bank consents to such acquisition and mergers, provided that the
Borrower takes all actions required by Section 1.
3. The Borrower's obligation to repay the New Loan and to pay interest
and other charges, fees and expenses thereon, and to pay the unpaid balance of
the Borrower's $650,000.00 Term Note dated October 17, 1997 in favor of the
Bank, as amended, is evidenced by the Borrower's $2,455,000.00 Amended and
Restated Term Note dated the date hereof in favor of the Bank (the "Amended and
Restated Term Note"), which supersedes and replaces such amended Term Note. The
Amended and Restated Term Note is guaranteed by the Guaranty of Deryl F. Hamann,
and is secured by the Pledge Agreement of the Borrower, the Third Party Pledge
Agreement of Deryl F. Hamann, the Third Party Pledge Agreement of Deryl F.
Hamann, Trustee of the Ada Geis Trusts for the Children of Deryl F. Hamann, the
Third Party Pledge Agreement of Rushmore Financial Services, Inc., and the Third
Party Pledge Agreement of Spectrum Financial Services, Inc., all dated
October 17, 1997 in favor of the Bank, and by assignments of life insurance
previously executed by Daniel A. Hamann, Esther Brabec and Julie H. Bunderson in
favor of the Bank.
4. The Borrower represents and warrants to the Bank that:
a. All required regulatory approvals of the New Loan and such
pledge, consent and agreement, acquisition, and mergers have been obtained, and
the Borrower, the Association, F&M Bank and Transitory Subsidiary, Inc. have all
requisite power and authority to enter into such transactions; and
b. This Amendment, the Amended and Restated Term Note, such stock
powers, and such consent and agreement (collectively called the "Amendment
Documents"), when executed and delivered, will constitute the legal, valid and
binding obligations of the parties executing the same (other than the Bank),
subject to bankruptcy, insolvency and similar laws, statutes of limitation and
principles of equity;
c. All of the Borrower's representations and warranties to the
Bank stated in Section 3 of the Credit Agreement (as defined herein), as amended
herein, are true as of the date of this Amendment.
5. The Credit Agreement dated October 17, 1997 between the Borrower and
the Bank (the "Credit Agreement") is amended as follows:
a. The reference to $650,000.00 is changed to $2,455,000.00 in the
first paragraph of the Credit Agreement.
b. Section 1.1 of the Credit Agreement is amended to read as
follows:
1.1 TERM NOTE. The Borrower's $2,455,000.00 Amended and Restated
Term Note dated January 31, 1998 in favor of First Bank (together with any
extensions, renewals, substitutions, modifications and changes thereof, the
"Term Note") appropriately completed and duly
2
<PAGE>
executed by the Borrower.
c. Section 1.9 of the Credit Agreement is amended to read as
follows:
1.9 LOAN FEE. A loan fee in the amount of $6,125.00.
d. The last sentence in Section 3.1 of the Credit Agreement is
amended to read as follows:
F&M Bank is a state bank duly organized and chartered and validly
existing and in good standing under the laws of the State of South
Dakota.
e. All references to the Association are changed to F&M Bank in
Sections 3.3, 3.4, 3.5, 3.6, 3.8, 4.1(b), 4.1(c), 4.2, 4.3, 4.4, 4.5, 4.6, 4.7,
5, 5.2, 5.3, 5.5, 6.1(f), 6.1(g), and 7.7 of the Credit Agreement.
f. Section 6.1(h) of the Credit Agreement is amended to read as
follows:
(h) STOCK OWNERSHIP. The Borrower shall at any time own less
than 97% of the issued and outstanding shares of any class of stock of
F&M Bank.
6. Except as amended herein or herewith, all provisions of the Credit
Agreement and all acknowledgments of the parties remain in fill force and
effect. No provision of this Amendment can be amended, modified, waived or
terminated, except by a writing executed by the Borrower and the Bank. The
Borrower shall pay to the Bank on demand all of the Banks costs and expenses,
including but not limited to reasonable attorneys' fees and legal expenses, in
connection with this Amendment, the writings executed herewith, and the
transactions described herein and therein. This Amendment shall bind and
benefit the parties and their respective successors and assigns; provided, the
Borrower shall not assign any of its rights or obligations under the Credit
Agreement or this Amendment without the prior written consent of the Bank, and
any assignment in violation of this sentence shall be null and void. This
Amendment shall be governed by and construed in accordance with the internal
laws of the State of Minnesota (excluding conflict of law rules).
3
<PAGE>
Executed as of the date first above written.
SPECTRUM BANCORPORATION, INC.
By ______________________________
Title ___________________________
FIRST BANK NATIONAL ASSOCIATION
By ______________________________
Title ___________________________
4
<PAGE>
EXHIBIT 10.2
AMENDMENT NO. 5 TO CREDIT AGREEMENT
THIS AMENDMENT NO. 5 TO CREDIT AGREEMENT ("Amendment No. 5") is entered
into as of the 16th day of December, 1996, by and between DECATUR CORPORATION,
an Iowa corporation ("Company") and FIRST BANK NATIONAL ASSOCIATION, a national
banking association ("Bank").
RECITALS
FIRST: The Company is indebted to the Bank pursuant to the terms of a
Credit Agreement dated July 3, 1991, as amended by an Amendment No. 1 to Credit
Agreement dated December 31, 1992, and as further amended by Amendment No. 2 to
Credit Agreement dated as of May 10, 1995, and as further amended by Amendment
No. 3 dated as of March 22, 1996, and as further amended by Amendment No. 4
dated as of April 29, 1996 (collectively, the "Credit Agreement") as evidenced
by a Substitute Term Note dated April 29, 1996, in the original principal amount
of Six Million Six Hundred Seventy-five Thousand and No/100 Dollars ($6,675,000)
(the "Note") which is secured by a Pledge Agreement dated July 8,1991, executed
by the Company in favor of the Bank (the "Pledge Agreement").
SECOND: The indebtedness of the Company to the Bank is guaranteed by
Deryl F. Hamann pursuant to a Guaranty dated July 8,1991 (the "Guaranty").
THIRD: The Company and the Bank have agreed to amend certain provisions of
the Credit Agreement, as more particularly set forth herein.
NOW, THEREFORE, for and in consideration of the mutual promises, covenants, and
agreements contained herein, and other good and valuable consideration, the
receipt and sufficient of which are hereby acknowledged, the Company and the
Bank agree as follows:
1. DEFINED TERMS. All capitalized terms used in this Amendment No. 5
which are not otherwise-defined herein shall have the meanings ascribed to them
in the Credit Agreement.
2. AMENDMENTS. The Credit Agreement is hereby amended as follows:
(a) SECTION 5.17 CAPITAL EXPENDITURES and SECTION 5.18 RENTAL
PAYMENTS are hereby deleted and intentionally left blank
(b) SECTION 5.21 is hereby amended to read in its entirety as
follows:
Section 5.21 RETURN ON ASSETS. The Company shall not permit, as of
the end of any fiscal quarter, the average after-tax net income on
average total assets for the four preceding fiscal quarters of Leon to
be less than 0.75%. Princeton shall not be required to report a
return on assets for its 1996 fiscal year. For the 1997 fiscal year
of Princeton, the Company shall not permit, as of the end of any
fiscal quarter, the average after-tax net income on average total
assets (calculated on a year-to-date basis) to be less than 0.50%. For
each fiscal year of Princeton thereafter, the
<PAGE>
Company shall not permit, as of the end of any fiscal quarter, the
average after-tax net income on its average total assets for the
four preceding fiscal quarters of Princeton to be less than 0.65%.
(c) The form of Covenant Compliance Certificate attached to the
Credit Agreement as EXHIBIT F is hereby amended and superseded by the form
of Covenant Compliance Certificate attached hereto as EXHIBIT F.
3. Construction. All references in the Credit Agreement to "this
Agreement", "herein" and similar references shall be deemed to refer to the
Credit Agreement as amended by this Amendment No. 5.
4. REPRESENTATIONS AND WARRANTIES. To induce the Bank to enter into this
Amendment No. 5, the Company hereby warrants and represents to the Bank that it
is duly authorized to execute and deliver this Amendment No. 5, and to perform
its obligations under the Credit Agreement as amended hereby, and that this
Amendment No. 5 constitutes the legal, valid and binding obligations of the
Company, enforceable in accordance with its terms. The Credit Agreement, as
amended hereby, shall continue to be secured by the Pledge Agreement without
loss of lien or priority.
5. Effective Date. This Amendment No. 5 shall become effective on the
date first set forth-above, subject to the satisfaction of each of the following
conditions precedent:
(a) WARRANTIES. Before and after giving effect to this Amendment
No. 5, the representations and warranties in ARTICLE IV of the Credit
Agreement shall be true and correct as though made on the date hereof,
except for changes that are permitted by the terms of the Credit Agreement.
The execution by the Company of this Amendment No. 5 shall be deemed a
representation that the Company has complied with the foregoing condition.
(b) DEFAULTS. After giving effect to this Amendment No. 5, no Event
of Default and no event which, with the giving of notice, the passage of
time, or both, would constitute an Event of Default, shall have occurred
and be continuing under the Credit Agreement. The execution by the Company
of this Amendment No. 5 shall be deemed a representation that the Company
has complied with the foregoing condition.
(c) DOCUMENTS. The following shall have been delivered to the Bank,
each in form and substance satisfactory to the Bank:
(i) AMENDMENT NO. 5. This Amendment No. 5 appropriately
completed and duly executed by the Company;
(ii) ACKNOWLEDGEMENT OF GUARANTOR. An Acknowledgement of
Guarantor appropriately completed and duly executed by the
Guarantor.
(iii) RESOLUTIONS. Certified copies of resolutions of the
Board of Directors of the Company authorizing or ratifying the
execution,
2
<PAGE>
delivery and performance of this Amendment No. 5.
(iv) PAYMENT OF LEGAL FEES. Payment to the Bank, in
immediately available funds,. of the fees and expenses of counsel
for the Bank incurred in connection with the negotiation,
preparation and execution of this Amendment No. 5 and any other
documents executed in connection herewith.
6. EXPENSES. The Company agrees to reimburse the Bank upon demand for
all reasonable expenses (including reasonable attorneys' fees and legal
expenses) incurred by the Bank in the preparation, negotiation and execution of
this Amendment No. 5 and any other document required to be furnished herewith,
and in enforcing the obligations of the Company hereunder, which obligations of
the Company shall survive any termination of the Credit Agreement.
7. COUNTERPARTS. This Amendment No. 5 may be executed in as many
counterparts as may be deemed necessary or convenient, and by the different
parties hereto on separate counterparts, each of which, when so executed, shall
be deemed an original but all such counterparts shall constitute but one and the
same instrument.
8. Any provision of this Amendment No. 5 which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining portions hereof or affecting the validity or enforceability of such
provisions in any other jurisdiction.
9. SUCCESSORS: ENFORCEABILITY. This Amendment No. 5 shall be binding
upon the borrower and the Bank and their respective successors and assigns, and
shall inure to the benefit of the Company and the Bank and the successors and
assigns of the Bank. Except as hereby amended, the terms and provisions of the
Credit Agreement shall remain in full force and effect and the Credit Agreement
is hereby ratified and confirmed in all respects.
10. GOVERNING LAW: VENUE. THIS AMENDMENT NO. 5 SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS (BUT NOT THE LAW OF CONFLICTS)
OF THE STATE OF MINNESOTA, BUT GIVING EFFECT TO LAWS GOVERNING NATIONAL BANKS.
THE COMPANY HEREBY CONSENTS TO THE PERSONAL JURISDICTION OF THE STATE AND
FEDERAL COURTS LOCATED IN THE STATE OF MINNESOTA IN CONNECTION WITH ANY
CONTROVERSY RELATED TO THE CREDIT AGREEMENT, AS AMENDED HEREBY, WAIVES ANY
ARGUMENT THAT VENUE IN SUCH FORUMS IS NOT CONVENIENT AND AGREES THAT ANY
LITIGATION INSTIGATED BY THE COMPANY AGAINST THE BANK IN CONNECTION THEREWITH
SHALL BE VENUED IN EITHER THE DISTRICT COURTS OF HENNEPIN COUNTY, MINNESOTA, OR
THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MINNESOTA, FOURTH DIVISION.
3
<PAGE>
IN WITNESS WHEREOF, the Company and the Bank have caused this Amendment
No. 5 to be executed by their duly authorized officers as of the day and year
first above written.
DECATUR CORPORATION,
an Iowa corporation
By:______________________________
Its:_____________________________
FIRST BANK NATIONAL ASSOCIATION,
a national banking association
By:_______________________________
Its:______________________________
ACKNOWLEDGEMENTS
STATE OF ____________ )
) ss.
COUNTY OF ___________ )
The foregoing Amendment No. 5 to Credit Agreement was acknowledged before
me this ___ day of December, 1996, by__________________ as ______________
of Decatur Corporation, an Iowa corporation, on behalf of said corporation.
______________________________
Notary Public
STATE OF MINNESOTA )
) ss.
COUNTY OF HENNIPIN )
The foregoing Amendment No. 5 to Credit Agreement was-acknowledged before me
this _____ day of ____________________ by _____________, as ____________________
of First Bank National Association, a national banking association, on behalf of
said association.
______________________________
Notary Public
4
<PAGE>
EXHIBIT F
COMPLIANCE CERTIFICATE
This Compliance Certificate is being submitted pursuant to Section
5.1(c) of the Credit Agreement dated as of July 5, 1991 (as amended, from
time to time, the "Credit Agreement') by and between Decatur Corporation, an
Iowa corporation (the "Company") and First Bank National Association (the
"Bank"). The undersigned, being a duly acting and authorized officer of the
Company and familiar with its books and records, and the books and records of
the Subsidiary Banks hereby certifies that, to the best of his knowledge
after reasonable investigation no Default or Event of Default as defined in
the Credit Agreement has occurred and is continuing, except as follows:
[Here state the nature of the Default or Event of Default specifying the
section of the Loan Document under which the Default or Event of Default
occurred and the action the Company has taken or proposes to take to cure
said Default or Event of Default.]
The undersigned further certifies that as of the date of this
Certificate the following are true and correct and were compiled from the
books and records of the Company and the Subsidiary Banks in accordance with
the terms of the Credit Agreement:
1. Section 5.11 SALE OF ASSETS.
(a) Maximum Aggregate Amount Permitted: $200,000
(b) Actual Aggregate for Current Fiscal Year ________
(c) Actual Amount for Last Fiscal Quarter ________
2. Section 5.19 PRIMARY CAPITAL TO TOTAL ASSETS RATIO. The ratio of
the Primary Capital of each Subsidiary Bank to its total assets is as follows:
Princeton: _________ %
Leon: _________ %
Minimum Permitted: 7.0%
5
<PAGE>
3. SECTION 5.20 CLASSIFIED ASSETS RATIO. The ratio of the
Classified Assets of each of the Subsidiary Banks to its Primary Capital is
as follows:
EXCLUDING BENNETT LEASES INCLUDING BENNETT LEASES
------------------------ ------------------------
Princeton: _________ % __________%
Maximum Permitted: 55.0% Maximum Permitted 160.0%
Leon : _________ % __________%
Maximum Permitted: 55.0% Maximum Permitted 55.0%
4. SECTION 5.21 RETURN ON ASSETS. The average after-tax net
income on average total assets for the four preceding fiscal quarters
(except as otherwise specified below) of each of the Subsidiary Banks is as
follows:
Princeton: ______ % Waived for fiscal year 1996
Minimum Permitted:
1997 Fiscal Year - 0.50% (year to date)
Thereafter - 0.65% (rolling 4 quarters)
Leon : ______ % Minimum Permitted: 0.75%
5. SECTION 5.22 CLASSIFIED ASSETS RATIO. The ratio of the
Non-Performing Loans of each of the Subsidiary Banks to its Primary Capital
is as follows:
EXCLUDING BENNETT LEASES INCLUDING BENNETT LEASES
------------------------ ------------------------
Princeton: ___________% __________%
Maximum Permitted: 25.00% Maximum Permitted 160.0%
Leon : ___________% __________%
Maximum Permitted: 25.0% Maximum Permitted 40.0%
6. SECTION 5.23 LOAN LOSS REVENUES. The reserves for loan and
lease losses of each of the Subsidiary Banks calculated in accordance with
Section 5.23 are as follows:
(a) Princeton: (i) Actual Reserves/Non-Performing Loans
and Leases _____% (Excluding Bennett Leases)
Minimum Permitted: 75.0%
Actual Reserves/Non-Performing Loans
and Leases _____% (Including Bennett Leases)
Minimum Permitted: 40.0%
6
<PAGE>
(ii) Actual Reserves (excluding Bennett Leases)
$___________
Actual Reserves (excluding Bennett Leases)
required under SECTION 5.23 $__________
Actual Reserves (including Bennett Leases)
$___________
Actual Reserves (including Bennett Leases)
required under SECTION 5.23 $__________
(b) Leon: (i) Actual Reserves/Non-Performing Loans
and Leases _____% (Excluding Bennett Leases)
Minimum Permitted: 75.0%
Actual Reserves/Non-Performing Loans
and Leases _____% (Including Bennett Leases)
Minimum Permitted: 25.0%
(ii) Actual Reserves (excluding Bennett Leases)
$___________
Actual Reserves (excluding Bennett Leases)
required under SECTION 5.23 $__________
Actual Reserves (including Bennett Leases)
$___________
Actual Reserves (including Bennett Leases)
required under SECTION 5.23 $__________
All capitalized terms not otherwise defined herein shall have the meanings
ascribed to them in the Credit Agreement.
Dated __________, 199___.
DECATUR CORPORATION, an Iowa corporation
By: _______________________________
Its: ______________________________
7
<PAGE>
ACKNOWLEDGEMENT OF GUARANTOR
The undersigned, being a guarantor of the obligations of DECATUR
CORPORATION, an Iowa corporation (the "Company") to FIRST BANK NATIONAL
ASSOCIATION, a national banking association (the "Bank") pursuant to a
Guaranty dated July 8, 1991 (the "Guaranty"), hereby (a) acknowledges the
Company's execution and delivery to the Bank of that certain Amendment No. 5
to Credit Agreement dated as of December 16, 1996 (the "Amendment") and (b)
ratifies and confirms that his Guaranty remains in full force and effect
after giving effect to the Amendment and is enforceable against the
undersigned in accordance with its terms. The undersigned agrees and
acknowledges that the execution, delivery and performance by the Company of
the Amendment shall in no way impair or limit the rights of the Bank under
the Guaranty and confirms that pursuant to the Guaranty, the undersigned
continues to guaranty payment and performance of the obligations of the
Company to the Bank, including without limitation obligations of the Company
under the Credit Agreement dated July 8, 1991, between the Company and the
Bank, as amended by an Amendment No. 1 to Credit Agreement dated December 31,
1992, Amendment No. 2 dated May 10. 1995, and Amendment No. 3 dated March 22,
1996, Amendment No. 4 dated April 29,1996, and the Amendment.
The foregoing Acknowledgement was executed by the undersigned as of
the 16th day of December, 1996.
______________________________
Deryl F. Hamann
ACKNOWLEDGMEMENT
STATE OF NEBRASKA )
) ss.
COUNTY OF DOUGLAS )
The foregoing Acknowledgement of Guarantor was acknowledged before me this 23RD
Day of December, 1996, by Deryl F. Hamann.
[SEAL] ______________________________
Public
8
<PAGE>
EXHIBIT 10.3
FEDERAL HOME LOAN BANK OF DES MOINES
DES MOINES, IOWA
AGREEMENT FOR ADVANCES, PLEDGE AND SECURITY AGREEMENT
BLANKET PLEDGE
This Agreement for Advance, Pledge and Security Agreement ("Agreement"),
effective the ___ day of ____________, 19___, is entered between
_______________, ("Member"), with principal offices at _____________________,
and the Federal Home Loan Bank of Des Moines ("Bank"), with principal offices
at 907 Walnut, Des Moines, lowa 50309.
WHEREAS, The Bank in accordance with the Federal Home Loan Bank Act,
regulations and directives of the Federal Housing Finance Board, and policies
promulgated by its own Board, makes available advances to its members. The
available advances set forth by the Bank in a statement of "Credit Policy,"
as may be amended from time to time.
WHEREAS, The Member may, from time to time, apply for an advance or
advances which may be available to it.
NOW THEREFORE, For valuable consideration and with respect to each and
every such advance, the Parties agree as follows:
SECTION 1. CONFIRMATlON OF ADVANCE. To be bound by the terms and
conditions set forth herein, in the confirmation of advance issued with
respect to each advance, and in the Bank's Credit Policy as may be amended
from time to time. A confirmation at advance shall mean a writing or machine
readable electronic transmission in such form or forms as may be determined
by the Bank from time to time.
SECTION 2. PAYMENT T0 THE BANK. To repay each and any advance together
with interest thereon according to the confirmation of each such advance
communicated to the Member by the Bank, together with any unpaid costs and
expenses in connection therewith. Such payment shall be made at the office
of the Bank in Des Moines, Iowa, or at such other place as the Bank, or its
successors or assigns, may from time to time appoint in writing.
The default rate on past due principal and interest may, at the option
of the Bank, be at a rate 1% per annum higher than the then current rate
being charged by the Bank for advances.
SECTION 3. ASSIGNMENT TO BANK OF SECURITY INTEREST IN BANK STOCK. The
Member hereby assigns, transfers and pledges to the Bank, its
<PAGE>
successors or assigns, all stock of the Federal Home Loan Bank of Des Moines
owned by the Member as collateral security for payment of any and all
indebtedness, whether in the nature of an advance or otherwise, of the Member
to the Bank, its successors and assigns.
SECTION 4. ASSIGNMENT OF SECURITY INTEREST IN OTHER COLLATERAL. As
additional collateral security for any and all such advances, Member assigns,
transfers, and pledges to the Bank, its successors or assigns, each and every
note or other instrument evidencing a debt and any mortgage, deed of trust,
title, or document of title securing it; all securities (including, but not
limited to mortgage-backed securities issued or guaranteed by the Federal
Home Loan Mortgage Corporation, the Federal National Mortgage Association,
obligations of or guaranteed by the United States or an agency thereof, share
certificates or other participation interests in any securities trust,
mortgage loan participation certificates); all contract for deeds; all
chattel paper; any chose in action; all general intangibles; all deposit
accounts; certificates of deposit; and proceeds from any of the above
(hereinafter "Collateral"). With respect to such Collateral, Member
undertakes and agrees as follows:
A. That such security intent shall extend to after acquired Collateral
of a similar nature;
B. That the Member shall be at liberty to use, commingle, and dispose
of all or part of the Collateral, and to collect, compromise, and dispose of
the proceeds of the Collateral without being required to account for the
proceeds or replace the Collateral subject only to its obligation to maintain
the Collateral as herein provided;
C. To keep and maintain such Collateral free and clear of pledges,
liens, and encumbrance to others at the required collateral maintenance
level. The "required collateral maintenance level" means the amount of
collateral the member is required to maintain free and clear of pledge, liens
and encumbrance to others as set forth from time to time in the Credit Policy;
D. To assemble and deliver Collateral to the Bank or its authorized
agents immediately upon demand of the Bank; and as specified by the Bank in
its Credit Policy from time to time, and to pay for the safekeeping
collateral as established by the Bank;
E. To make, execute, and deliver to the Bank such assignments,
endorsements, listings, powers, financing statements or other instruments as
the Bank may reasonably request respecting such Collateral.
SECTION 5. DUTY TO USE REASONABLE CARE. In the event Member delivers
security to Bank or its Agency pursuant to paragraph 4 above, the duty of the
Bank with impact to said security shall be solely to use reasonable care in
the custody and preservation of the security in its possession.
2
<PAGE>
SECTION 6. ADDITIONAL SECURlTY. Member shall assign additional or
substituted Collateral for such advances at any time the Bank shall deem it
necessary for the Bank's protection.
SECTION 7. EVENTS OF DEFAULT. The Bank may consider the Member in
default hereunder upon the occurrence of any of the following events or
conditions:
A. Failure of the Member to pay any interest, or repay any principal,
of any advances herein required; or
B. Breach or failure to perform by the Member of any covenant,
promise, condition, obligation or liability contained or referred to herein,
or any other agreement to which the Member and the Bank are parties; or
C. Proof being made that any representation, statements or warranty
made or finished in any manner to the Bank by or on behalf of the Member in
connection with all or part of any advance was false in any material respect
when made or finished; or
D. Loss, theft, damage, destruction, sale or encumbrance to or at any
of the Collateral except as herein permitted, or the making of any levy,
seizure or attachment thereof or therein; or
E. Any tax levy, attachment, garnishment, levy of execution or other
process issued against the Member or the Collateral; or
F. Any suspension of payment by the Member to any creditor or any
events which result in acceleration to the maturity of any indebtedness of
the Member to others under any indenture, agreement or undertaking; or
G. Application for, or appointment of, a waiver of any part of the
property of the Member, or in case of adjudication of insolvency, or
assignment for benefit of creditors, or general transfer of assets by the
Member, or if management of the Member is taken over by any supervisory
authority, or in case of any other form of liquidation, merger, sale of
assets or voluntary dissolution, or upon termination of the membership of the
Member in the Federal Home Loan Bank of Des Moines, or in the case of
advances made under the provisions of 12 U.S.C. Section 1431(g)(4), if at
any time thereafter the creditor liabilities of the Member, expecting its
liabilities to the Bank, are increased in any manner to an amount exceeding
5% of its net assets; or
H. Determination by the Bank that a material adverse change has
occurred in the financial condition of the Member from that disclosed at the
time of the making of any advance, or from the condition of the Member as
theretofore most recently disclosed to the Bank in any manner; or
I. If the Bank reasonably and in good faith deems itself insecure even
though the Member is not otherwise in default.
3
<PAGE>
SECTION 8. BANK REMEDIES IN THE EVENT OF DEFAULT. At any time after
any default as herein before provided, the Bank may, at its option, declare
the entire amount of any and all advances to be immediately due and payable.
The Bank shall have all of the remedies of a secured party under the Uniform
Commercial Code of the State of Iowa. In addition thereto, the Bank may take
immediate possession of any of the Collateral or any part thereof wherever
the same may be had. The Member agrees to pay all the costs and expenses of
the Bank in the collection of the secured indebtedness and enforcement of the
Bank's rights hereunder including, without limitation, reasonable attorney's
fees. The Bank may sell the Collateral or any part thereof in such manner
and for such price as the Bank deems appropriate without any liability for
any loss due to decease in the market value of the Collateral during the
period held. The Bank shall have the right to purchase all or part of the
Collateral at public or private sale. If any notification of intended
disposition of any of the Collateral is required by law, such notification
shall be deemed reasonable and properly given if mailed, postage prepaid, at
least five days before any such disposition to the address of the Member
appearing on the records of the Bank. The proceeds of any sale shall be
applied in the following order: First, to pay all costs and expenses of every
kind for the care, collection, safekeeping, sale, foreclosure, delivery or
otherwise respecting the Collateral (including expenses incurred in the
protection of the Bank's title to or lien upon or right in any of the
Collateral, expenses for legal services of any kind in connection therewith
or in making any such sale or sales, insurance, commission for sales and
guaranty); then to interest on all indebtedness of the Member to the Bank;
then to the principal amount of any such indebtedness whether or not such
indebtedness is due or accrued. The Bank, at its discretion, may apply any
surplus to indebtedness of ember to third parties claiming a secondary
security interest in the Collateral. Any remaining surplus shall be paid to
the Member.
SECTION 9. APPOINTMENT OF BANK AS ATTORNEY-IN-FACT. In the event of
default, and without limiting any other rights the Bank might have as a
secured party under the Uniform Commercial Code of Iowa, or the laws of any
jurisdiction under which Bank might be exercising rights hereunder, and under
this Agreement, Member does hereby make, constitute and appoint Bank its true
and lawful attorney-in-fact to deal with the Collateral and, in its name and
stead to release, collect, compromise, settle and release or record any
mortgage of deed or trust which is a part at such Collateral as fully as the
Member could do if acting for itself. The powers herein granted are coupled
with an interest, and are irrevocable, and full power of satisfaction is
granted to the Bank in the premises.
SECTION 10. AUDIT AND VERIFICATION OF COLLATERAL. In extension and
not in limitation of all requirements of law respecting examination of the
Member by or on behalf of the Bank, the Member agrees that all Collateral
pledged hereunder shall always be subject to audit and verification by or on
behalf of the Bank in its corporate capacity.
4
<PAGE>
SECTION 11. RESOLUTION TO BE FURNISHED BY MEMBER. Member agrees to
furnish to the Bank from time to time a certified copy of resolution of its
Board of Directors or other governing body authorizing such of the Member's
officers, as the Member shall select, to apply for advances from the Bank.
Unless the Bank shall be otherwise notified in writing, the Bank may honor
applications made by such officers other than in writing; but, in such event
the Member shall confirm such application for advance in writing on forms
finished by the Bank. But the Member shall forever be estopped to deny its
obligation to repay such advance whether or not an application in writing is
ever received by the Bank so long only as the advance is made in good faith
by the Bank on the request of an officer or employee so authorized by the
Member.
SECTION 12. APPLICABILITY OF BANK ACT. In addition to the terms and
conditions herein specifically set forth, all advances are subject to the
rights, powers, privileges and duties conferred upon the Federal Housing
Finance Board, the Federal Home Loan Banks, and on member institutions by the
Act of Congress entitled, "Federal Home Loan Bank Act, as amended."
SECTION 13. JURISDICTION. In any action or proceeding brought by the
Bank or the Member in order to enforce any right or remedy under this
Agreement, Member will submit to the jurisdiction of the United States
District Court for the Southern District of Iowa, or if such action or
proceeding may not be brought in Federal Court, the jurisdiction of the Iowa
District Court in Polk County.
If any action or proceeding is brought by the Member seeking to obtain
relief against the Bank arising out of this Agreement and such relief is not
granted by a court of competent jurisdiction, the Member will pay all
attorney's fees and court costs incurred by the Bank in connection therewith.
SECTION 14. CHOICE OF LAW. This Agreement shall be construed and
enforced according to the laws of the State of Iowa, except that the rate of
interest on advances hereunder shall be governed by the provisions of 12
US.C. Section 1430 (as amended).
SECTION 15. AGREEMENT CONSTITUTES ENTIRE AGREEMENT. This Agreement
embodies the entire Agreement and understanding between the parties hereto
relating to the subject matter hereof and supersedes all prior agreements
between such parties that relate to the subject matter except that: The
Credit Policy as duly adopted by the Bank's Board of Directors from time to
time shall be incorporated herein, unless agreed to in writing by both
parties. Advances made by the Bank to Member prior to the execution of this
Agreement shall continue to be governed exclusively by the terms of the prior
agreements pursuant to which such advances were made, except that (i) any
default thereunder shall constitute default hereunder, (ii) Collateral
furnished as security hereunder shall also secure such prior advances and
(iii) the rights and obligations with respect to such Collateral shall be
governed by the terms of this Agreement.
5
<PAGE>
SECTION 16. SECTION HEADINGS. Section headings are not to be
considered part of this Agreement. Section headings are solely for
convenience of reference, and shall not effect the meaning or interpretation
of this Agreement or any of its provisions.
SECTION 17. SEVERABILITY OF SECTIONS. If any section or portion
thereof is deemed void in any legal proceeding the remainder of the Agreement
shall remain in full force and effect.
SECTION 18. The person signing this document on behalf of the Member
represents that its execution was authorized by appropriate action of the
directors of the Member which was completed on the 26th day of August, 1995,
and that such action is duly reflected in the records of the Member.
RUSHMORE STATE BANK FEDERAL HOME LOAN BANK OF
(Full Corporate Name of Member) DES MOINES
By: By:
--------------------------------- ------------------------------------
Title: Title:
------------------------------ --------------------------------
Date: Date:
------------------------------ --------------------------------
By: By:
--------------------------------- ------------------------------------
Title: Title:
------------------------------ --------------------------------
Date: Date:
------------------------------ --------------------------------
6
<PAGE>
EXHIBIT 10.4
CMS-TM- AGENCY AGREEMENT
FARMERS AND MERCHANTS BANK AND TRUST OF WATERTOWN
This Agreement is entered into this _________ day of ______, _______, by and
between _____________________________ (hereinafter referred to as "Customer"
whether one or more) and Farmers and Merchants Bank and Trust of Watertown, 35
First Avenue Northeast, Watertown, South Dakota 57201, (hereinafter referred to
as "Bank"), and establishes an agency account with Bank's Trust Department as
follows:
1. DEPOSITS AND INVESTMENTS. Customer shall from time to time deposit
checks or money in checking account # ________ at Bank (the "Checking
Account"). At the conclusion of each business weekday, the balance of
funds in the Checking Account which are deemed collected under normal
banking procedures employed by Bank and its data processor in excess
of $________ ("Minimum Balance") shall be transferred in increments of
$_________ (the "Minimum Transfer Amount") from customer's Checking
Account by Bank into another account in Customer's name at Bank (the"
Agency Account"). Customer hereby directs that the entirety of the
funds in the CMS-TM- Agency Account be invested on a daily basis by
Bank's Trust Department, as agent for Customer in repurchase
agreements of Bank collateralized by a poof of securities which are
direct or indirect obligations of the United States Government or are
obligations of or guaranteed by agencies of United States Government.
The repurchase agreements shall be in the form attached hereto and
incorporated by this reference. In the event that said repurchase
agreement not be offered by the Bank, for whatever reason. Customer
hereby authorizes Bank's Trust Department to select a money market
fund for investment of Customer's funds; in which case the Bank's
Trust Department shall give written notice to Customer of such
selection and Customer agrees to be bound by and be deemed to have
approved such selection until such time as Bank's Trust Department
receives Customer's written objection to such selection. Bank shall
have no liability for the selection of such money market fund except
due to its gross negligence or willful misconduct. Customer expressly
authorizes Bank's Trust Department to make any and all purchases and
sales of any investments permitted hereunder as Customer's agent in
the nominee name of Bank's Trust Department.
2. INSUFFICIENT MINIMUM BALANCE. If at any time Customer's balance of
collected funds in its Checking Account falls below the Minimum
Balance, Customer directs Bank's Trust Department to sell or redeem
investments and to automatically transfer funds in increments of the
<PAGE>
Minimum Transfer Amount from the CMS-TM- Agency Account to the
Checking Account.
3. INCOME AND INTEREST. Bank's Trust Department shall collect and
receive the interest and other income from the investments made in the
CMS-TM- Agency Account and shall credit these earnings to the CMS-TM-
Agency Account on a monthly basis.
4. SERVICE CHARGES: MINIMUM BALANCES. The Bank reserves the right to
make such service charges and to impose and change minimum balance
requirements as may, from time to time, be prescribed by its rules
governing the types of accounts described herein.
5. REPRESENTATIONS.
(a) INDIVIDUAL/FIDUCIARY. Customer, if an individual or fiduciary,
represents, covenants and warrants that he/she/they has/have full
right, power and authority and is/are of legal age to enter into
this Agreement. If more than one individual has executed this
Agreement as Customer, they agree that they are owners of the
Checking Account and CMS-TM- Agency Account, funds placed
therein, and the deposits and investments therein joint tenants
with rights of survivorship, and not as tenants in common, and
the Bank is authorized to pay out, honor checks, or otherwise
disburse on the order of either. During the lifetime of both,
and after the death of either, said accounts and the funds and
investments thereof shall be the property of and payable to the
order of the survivor.
(b) CORPORATION/PARTNERSHIP. The Customer represents, covenants, and
warrants that:
(1) The Customer, if a corporation or partnership, is duly
organized and existing, in good standing under the laws of
the State under which it was incorporated or exists, and has
the power to own its property and to carry on its business
as now being conducted, and is duly qualified to do business
and is in good standing in the State of South Dakota and in
each jurisdiction in which the character of the properties
owned by it therein or in which the transaction of its
business makes such qualification necessary.
(2) The Customer has full power and authority to enter into this
Agreement and no consent or approval or any public authority
or of any other person or entity is required as a condition
to the validity and enforceability of this Agreement.
2
<PAGE>
(3) This Agreement constitutes the valid and legally binding
obligations of the Customer and is enforceable in accordance
with its terms.
6. APPLICABLE LAWS. This Agreement shall be deemed to be a contract made
under and pursuant to the laws of the State of South Dakota and the
rights of the parties hereto shall be controlled, interpreted, and
determined in accordance with the laws of the State of South Dakota
and any rules and regulations applicable to banks in South Dakota.
7. SUCCESSORS, ETC. This Agreement shall inure to the benefit of and be
binding upon the parties hereto, their heirs, personal
representatives, successors and assigns.
8. DEATH/DISSOLUTLON.
(a) INDIVIDUAL/FIDUCIARY. If Customer is an individual, the
authority of Bank to act as agent hereunder shall not be affected
by Customer's disability or incapacity, and the authority granted
herein shall continue during any period while Customer is
disabled or incapacitated. Furthermore, all such authority shall
continue after Customer's death, and notice of such death shall
have been received by a trust officer of the Bank so that Bank
has actual knowledge that Customer has died. Any action taken in
good faith by Bank during any period while it is uncertain
whether Customer is alive, before said Bank receives actual
knowledge of customer's death, or, in any event, taken during any
period while customer is disabled or incapacitated, shall be
valid as if Customer were alive, competent, and not disabled. If
Customer is a fiduciary, Customer warrants that his/her/their
authority shall continue until written notice to the contrary is
delivered to an officer of Bank's Trust Department.
(b) CORPORATION/PARTNERSHIP. If Customer is a Corporation or
Partnership, the authority of Bank to act as agent hereunder
shall not be affected by Customer's dissolution or should
Customer cease doing business for any reason. Furthermore, all
such authority shall continue after Customer's dissolution or
cessation of business, until notice of such dissolution or
cessation of business shall have been received by a trust officer
of the Bank so that Bank has actual knowledge that Customer has
dissolved or ceased doing business. Any action taken by Bank
during any period while it is uncertain of the customer's status
shall be valid as if Customer
3
<PAGE>
were viable.
9. TERMINATION. Either Bank or Customer may cancel this Agreement at any
time by written notice mailed to the address of the other party listed
herein.
10. CHANGE OF TERMS. The terms and conditions of this Agreement may be
changed by Bank by mailing to Customer at their address listed herein
notification of the new terms and conditions at least 30 days prior to
the date on which such new terms and conditions are to become
effective.
11. INVESTMENT ACCOUNT NOT AN FDIC INSURED DEPOSIT. THE MONIES IN THE
CMS-TM- AGENCY ACCOUNT ARE NOT DEPOSITS AND ARE NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION. Neither the value of the
investments purchased or the rate of return are guaranteed by the Bank
and Customer agrees that the Bank shall not be responsible for any
decline in the value of the investments or variation in the rate of
return.
12. INVESTMENT DECISION SOLELY BY CUSTOMER. Customer acknowledges that
this Agreement has been made voluntarily after full and careful review
of the program, including but not limited to the disclosures and terms
in the form of repurchase agreement attached hereto, and that Customer
has relied solely on his/her/their/its knowledge in entering into the
Agreement and making the deposits and investments authorized herein,
and has not relied on any statement made by the Bank or any of its
officers, directors, employees, agents, servants, or independent
contractors concerning this investment. The sole duty of the Bank
with respect to this Agreement and the agency relationship with the
Customer is to execute purchases and redemptions of investments as the
Customer may order pursuant to the terms of this Agreement.
Furthermore, Customer agrees that the Bank shall not be liable on
account of any action, omission, information, or recommendation in
connection with the investment of the Customer except for the Bank's
gross negligence or willful misconduct.
4
<PAGE>
13. SUPERSEDES PRIOR AGREEMENT. This Agreement supersedes any prior
CMS-TM- Agency Account Agreement.
CUSTOMER: ACCEPTED:
Name(s) Farmers & Merchants Bank &
----------------------------- Trust of Watertown
By: By:
--------------------------------- ------------------------------------
Title: Title:
------------------------------ ---------------------------------
Address: ACKNOWLEDGED:
----------------------------
Farmers & Merchants Bank &
- ------------------------------------ Trust of Watertown - Trust
Department
- ------------------------------------
Telephone: By:
-------------------------- -----------------------------------
Taxpayer Identification Number: Title:
----- --------------------------------
5
<PAGE>
EXHIBIT 10.5
CITIZENS BANK
January 16, 1998
Mr. Daniel A. Hamann, Chairman
Citizens Bank
111 North Main
P.O. Box 171
Leon, Iowa 50144
Re: Chairman's Phantom Stock Long-Term Incentive Plan
Dear Dan:
This letter shall constitute an Agreement between you and Citizens
Bank, Leon, Iowa (the "Bank"). The Plan is designed to reward earnings of at
least 1.2% on average assets. Should extraordinary growth occur so that there
is a 10% growth in earnings even though earnings are less than 1.2% on average
assets, that is rewarded. If both occur, both rewards are made.
1. OFFICE. You have been appointed Chairman of the Bank and have
agreed to so serve. Your base compensation will be determined and agreed from
time to time.
2. STOCK OUTSTANDING. There are 8,000 shares of common stock
outstanding.
3. PHANTOM STOCK. As of January 1, 1998, you are "deemed" to have
purchased One Hundred Sixty (160) shares of common stock of Bank. The Bank will
maintain a record of such "deemed" shares, but no actual acquisition of such
shares shall be made nor shall any shares be issued to you or on your account.
You shall pay nothing for the deemed shares nor shall the Bank pay you or your
beneficiaries anything therefor. Such deemed shares are solely for the purpose
of calculating accruals to your account pursuant to this Agreement.
4. EARNINGS ACCRUAL. Subject to paragraphs 5 and 6 hereof, starting
with the fiscal year of the Bank beginning January 1, 1998, and ending as of the
end of the month preceding the month in which occurs the date of termination of
your employment by Bank, the Bank shall accrue an amount payable to you which
shall be equal to the total earnings per share of the One Hundred Sixty (160)
Bank common shares which are deemed owned by you for such year as if you had
in
<PAGE>
Daniel A. Hamann
January 16, 1998
Page 2
fact purchased such common shares from the Bank. In calculating such
earnings per share, the "deemed" common shares shall be divided into the net
after tax earnings of the Bank allocable to common stock. Payment of cash
dividends on the common stock outstanding shall not affect the amount
allocated to the common shares "deemed" purchased by you. Any partial year
accruals shall be computed on an annualized basis.
5. MINIMUM GOALS. In the event the net after tax earnings of the
Bank do not, for any fiscal year, both exceed 1.2% of the average assets of
Bank, and also exceed the prior year's earnings of Bank by at least 10% over the
previous year, then only one-half the amount otherwise allocable to such shares
shall be allocated thereto; however, if the compound earnings growth is 50% or
more for the five-year period ending with a year in which the 10% growth goal is
not met, such goal will be deemed met for that year; PROVIDED, if neither of
said goals be met, then nothing shall be allocated to such deemed shares for
such year. The Bank retains full discretionary right to adjust earnings for any
year from those otherwise shown on the Bank's financial statements to, in its
judgment, make the year's income reasonably comparable to prior years and
amortize or adjust for extraordinary items. Without limitation, such
adjustments may include elimination of tax benefits due to carryover deductions
or credits; change in or correction of accounting methods, amortization of
income from standby or commitment fees, "points" on low interest real estate
mortgages which the Bank keeps in its portfolio, intercorporate transactions,
etc. Any such decision shall be made within 45 days after the Bank's financial
statements are furnished to it by outside auditors. If no change be so made in
such time, the figures on the Bank's financial statement prepared by outside
auditors, audited or unaudited, shall be used for all purposes of this
agreement.
6. MINIMUM EMPLOYMENT PERIOD TO VEST. In the event your employment
by Bank is terminated for reasons other than death, disability or becoming
employed by a company or bank affiliated with Bank, prior to December 31, 2000,
all amounts accrued to your account shall be forfeited. An "affiliate" for
these purposes shall be deemed a bank or company 25% or more of the voting stock
of which is owned or controlled, directly or indirectly by or for any holder
(legally or beneficially) of Bank common stock, or any spouse, parent or
descendant or trust for such spouse, parent or descendant of such holder.
7. PAYMENT ON RETIREMENT OR DISABILITY. The total amount accrued to
your account pursuant to paragraph 4 hereof shall be paid to you in 120 equal
monthly installments, beginning on the 31st day of January following the year in
which you shall have terminated your employment with Bank, due to retirement
after having attained an age of not less than 65 years or due to disability. In
the event of termination of employment prior to age 65 for reasons other than
disability or death, but after December 31, 2000, the monthly payments shall
begin in January of the year following the year in which you attain age 65
unless the Bank in its sole discretion elects to commence the payments at an
earlier date. Bank may, at its option, prepay any amount due you in
installments by delivery to you of an annuity contract, or by paying you the
then present value of the amount, such present value to be computed at the
current rate for ten year U.S. Government Bonds.
<PAGE>
Daniel A. Hamann
January 16, 1998
Page 3
8. PAYMENT ON DEATH. In the event of your death prior to age 65, the
monthly payments under this agreement shall commence in the third month
following the month during which death occurred and payment shall be made to the
beneficiaries designated by you in writing, or in the absence of such
designation, to your estate. In the event of your death when installments from
the accrual accounts have become payable because of retirement at or after age
65, or due to disability, or due to attainment of age 65 when no longer in the
employment of the Bank, unpaid monthly installments shall continue to be paid to
your living designated beneficiaries, or if none are so designated, to your
estate. Bank may discharge its obligations by delivery of an annuity or
prepaying the present value as set forth in Paragraph 8.
9. NO TRUST. The amount credited to your account shall not be held
by Bank in a trust, escrow or similar fiduciary capacity and neither you nor any
legal representative shall have any right against the Bank with respect to any
portio of the account, except as a general unsecured creditor of the Bank.
10. SPENDTHRIFT CLAUSE. Neither you nor any beneficiary entitled to
payment hereunder shall have any right to participate, alienate, sell, transfer,
assign or encumber any benefit or payment hereunder nor shall such rights
thereto be subject to attachment or other legal process for you or a
beneficiary's debts.
11. ANTI DILUTION. In the event of any common stock split or common
stock dividend by which shares of common stock are issued for no new
consideration, or for less than per share book value, the number of shares
"deemed" owned by you hereunder shall be adjusted accordingly, at book value.
12. CAPTIONS. The captions of the paragraphs are for identification
only and do not affect the meaning of the text.
13. NON-COMPETITION CLAUSE. In the event you become associated with,
employed by, or consultant to, 5% or greater owner of, or otherwise affiliated
with another bank, bank holding company, credit union or similar financial
institution, having a home office, branch, office facility, or subsidiary in
Wayne or Lucas Counties, Iowa, or an adjoining county, within 3 years following
termination of your employment with Bank, all amounts otherwise due hereunder
shall be forfeited; PROVIDED, HOWEVER, in the event of the sale of Bank, then
there shall thereafter be no forfeiture under this paragraph of amounts
otherwise due you because of your engaging in any act set forth herein, if your
employment by Bank was terminated: (a) involuntarily, or (b) voluntarily in the
event you shall have been demoted from the position of chairman of the Bank or
if your base salary shall have been reduced below the level at which it stood at
the beginning of the year in which such sale was concluded. For these purposes,
a "sale" shall be deemed to have occurred in the event that both of the
following occur:
<PAGE>
Daniel A. Hamann
January 16, 1998
Page 4
(i) Deryl F. Hamann, his family and corporations or other entities
controlled by him or his family collectively fail to own directly or indirectly,
outright or in trust, in the aggregate, at least 51% of the voting stock of the
Bank, and
(ii) there is at least 25% ownership of Bank vested in some other
person or entity.
Please indicate your acceptance of the terms of this Agreement by
signing below.
CITIZENS BANK,
LEON, IOWA
By /s/ John L. Hendren
------------------------------
Vice Chairman
Accepted:
/s/ Daniel A. Hamann
- -------------------------------
Daniel A. Hamann
<PAGE>
EXHIBIT 10.6
LICENSE AGREEMENT # 1196-0001
LICENSE AGREEMENT
THIS AGREEMENT made and executed this 5th day of September, 1997 between
JACK HENRY & ASSOCIATES, INC. ("JHA") P.O. Box 807, 663 Highway 60, Monett,
MO 65708 and SPECTRUM BANC SERVICE CORPORATION ("LICENSEE") having its
principal office at 35 First Avenue NE, Watertown, South Dakota 57201.
WITNESSETH:
WHEREAS, JHA is engaged in the business of providing various services
relating to the design of computer software programming for use by financial
institutions; and
WHEREAS, Licensee is a financial institution engaged in providing
various financial services; and
WHEREAS, Licensee agrees to obtain from JHA, and JHA by its execution of
this Agreement, agrees to furnish to Licensee on the terms and conditions
contained herein, all of the computer software and services detailed in
Exhibit A which is specifically made part of this Agreement;
NOW, THEREFORE, in consideration of the premises and in further
consideration of the performance of the terms and provisions herein
contained, JHA and Licensee do hereby contract and agree as follows:
1. SOFTWARE DEFINITION. In this Agreement Software shall mean only
the computer application programs, manuals, specifications, other
documentation or services itemized in Exhibit A, together with all fixture
releases, modifications and customization furnished or performed by JHA; in
any printed, machine readable or other form including but not limited to
listings, manuals, and magnetic media.
2. FEES. Licensee agrees to pay to JHA the fees, payments and
expenses set out in attached Exhibit A, for the licensed use of computer
Software programs and services described in said Exhibit A.
In addition to fees and payments provided for in this Agreement,
Licensee will promptly reimburse JHA for all actual, out-of-pocket expenses
including but not limited to travel, lodging, meals, telephone, postage and
shipping costs; together with any taxes related to this Agreement that might
be levied by any governmental body against JHA, other than personal property
taxes or income taxes.
<PAGE>
Licensee will pay JHA one and one-half percent (1 1/2%) interest per
month (18% annual), plus all attorney fees and expenses actually incurred by
JHA in collecting any delinquent or past due fees, payments or reimbursements
of any kind due JHA by Licensee.
3. LICENSE. JHA hereby grants and Licensee accepts a non-transferable
and non-exclusive license (the "License") to use the Software described in
Exhibit A for the original term and all renewals of this Agreement.
The License granted herein is restricted as follows:
The Software will be used only to process data of those financial
institutions listed in Exhibit B hereto, on IBM AS/400 equipment operated
only by Licensee employees or the employees of such financial institutions.
Additional license fees for processing data for additional financial
institutions, other than those listed on Exhibit B, and for processing
acquisitions by any of the financial institutions listed on Exhibit B, on JHA
Software as described in Exhibit A, will be determined by an addendum to this
Agreement.
The License and the Software may not be assigned, sublicensed, or
otherwise transferred or copied in any manner by Licensee without prior
written consent from JHA.
Licensee agrees not to remove or alter proprietary notices of JHA on any
of the materials associated with the Software.
Licensee shall use the Software only at the site locations of Licensee
or the financial institutions that are described in Exhibit B hereto. However
off-site testing and/or disaster processing is permitted provided the
owner/operator of the off-site facility has signed JHA's Confidentiality
Agreement, and JHA is promptly notified by Licensee.
Licensee also covenants and warrants to JHA that all other financial
institutions being processed and off-site test/disaster facilities will
conform to, abide by and be governed and bound by this License Agreement the
same as though they were a signing Licensee. Licensee accepts full
responsibility and liability to JHA for any violation or breach of this
License Agreement by any other financial institution being processed by
Licensee and an off-site test/disaster facility used by Licensee. If
Licensee or any other financial institution being processed by Licensee or
off-site test/disaster facility violates or breaches this or any other
written Agreement it has with JHA or any of its subsidiaries, and such
violation or breach is not corrected within thirty days after Licensee
receives written notice thereof from JHA, then JHA may terminate Licensee's
license to use the Software, and Licensee will cease using the Software and
will return all of same to JRA. Licensee further covenants and warrants to
JHA that neither Licensee, nor any of its affiliated companies, nor any
financial institutions processed by Licensee, will employ, in any capacity,
any personnel of JHA or any of its
2
<PAGE>
affiliated companies within one year of their employment termination from JHA
or any of its affiliated companies, unless JHA consents in writing.
4. WARRANTIES. JHA warrants that unmodified Software will operate in
accordance with the then current documentation provided by JHA. This warranty
is valid for sixty (60) days from the date of last initial installation of
all of said Software. Under this warranty, JHA will correct any program
errors in the unmodified Software at no extra charge to Licensee. THIS
WARRANTY IS EXPRESSLY IN LIEU OF ALL OTHER WARRANTIES. EXPRESS OR IMPLIED, OR
ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
IN NO EVENT SHALL JHA BE LIABLE FOR INDIRECT, CONSEQUENTIAL, PUNITIVE OR
SPECIAL DAMAGES.
5. PROPRIETARY PRODUCT. All Software, customization, modification,
releases and optional modules furnished now or hereafter by JIHA to Licensee,
shall be and remain the property of JHA, subject to the rights of the
Licensee as defined in this Agreement.
6. TERM. This Agreement grants the Licensee a non-exclusive, paid-up
license to use the Software described in Exhibit A, in the manner provided in
paragraph 3 above, for twenty-five (25) years immediately subsequent to the
date of this Agreement, except as modified by conditions described in
paragraph 9 of this Agreement.
7. TRADE SECRET. Licensee hereby acknowledges that the Software
provided by JHA under this Agreement is a trade secret of JHA, and as such is
protected by civil and criminal law, is very valuable to JHA, and that its
use must be carefully and continuously controlled. In accordance with the
aforesaid, Licensee agrees to use the highest standard of diligence to ensure
the confidentiality of the Software, and will, prohibit the unauthorized
access to, use or duplication of any of the Software. Licensee agrees to
keep all machine-readable Software in a secure place which is as secure as
Licensee provides for its most confidential-materials. Licensee will not
cause, permit nor allow the Software or materials provided by JHA to be
copied, duplicated, transcribed, reverse engineered, sold to, revealed to, or
used by any other person, firm or company without prior written consent of
JHA. Licensee agrees to notify JHA immediately of the unauthorized
possession, use or knowledge of any item supplied under this Agreement by any
person or organization not authorized by this Agreement to have such
possession, use or knowledge. Licensee will promptly furnish JHA full
details of such possession, use or knowledge, and will cooperate fully within
any litigation against third parties deemed necessary by JHA to protect its
proprietary rights. Licensee's compliance with the above shall not be
construed in any way as a waiver of JHA's right to recover damages or obtain
other relief against Licensee for its negligent or intentional harm to JHA's
proprietary rights or for breach of contractual rights. If Licensee attempts
or allows others to attempt to use, copy, duplicate, transcribe or convey the
items supplied by JHA pursuant to this Agreement, in a manner contrary to the
terms of this Agreement or in derogation of JHA's proprietary rights, whether
these
3
<PAGE>
rights are explicitly herein stated, determined by law, or otherwise, JHA
shall have, in addition to any other remedies available to it at law or
equity, the right to injunctive relief enjoining such actions, Licensee
hereby acknowledging that irreparable harm will occur to JHA and that other
remedies are inadequate. This paragraph will survive expiration or
termination of this Agreement.
8. COMPLIANCE WITH LAWS. Licensee assumes all responsibility in
assuring compliance with all regulations relating to Licensee's use of the
Software.
9. BUSINESS TERMINATION. At JHA's option, all of Licensee's rights
under this Agreement shall terminate, and the Software shall be returned to
JHA if the ownership or management of Licensee or any of its subsidiaries
changes by reason of voluntary or involuntary bankruptcy, receivership,
conservatorship, custodianship, assignment for benefit of creditors, seizure
of assets, liquidation, dissolution, ceasing to do business, or action by
FDIC, RTC or other State or Federal authorities which would divest control
from present ownership and management of Licensee.
In the event JHA ceases to do business, the successor to JHA's assets
will be bound by this Agreement the same as JHA, and Licensee may continue to
use the Software under all the terms and conditions of this Agreement. If
there is no successor to JHA's assets, then the Software shall become the
non-exclusive proprietary product of Licensee subject to all of the
confidentiality restrictions described in paragraph 7 above; except that
Licensee may reveal Software and/or materials to third parties for the sole
purpose of maintenance and customization of the Software for the sole use of
Licensee, provided said third parties have signed similar written
confidentiality restrictions.
10. CONFIDENTIALITY. JHA and Licensee each agree that all information
communicated to it by the other, including the terms and conditions of this
Agreement, whether before the effective date or during the term of this
Agreement, shall be received in strict confidence, shall be used only for the
purposes of this Agreement, and that no such information shall be disclosed
by the recipient party, its agents or employees without prior written consent
of the other party, unless such information is publicly available from other
than a breach of this provision. Each party agrees to take all reasonable
precautions to prevent the disclosure to outside panics of such information,
including without limitation, the terms of this Agreement except as may be
necessary by reason of legal, accounting or regulatory requirements beyond
the reasonable control of JHA or Licensee, as the case may be.
11. DELIVERY. Delivery of said Software shall be at a time mutually
agreed upon by JHA and Licensee, but in no instance shall such date be longer
than ninety (90) days following the execution of this Agreement.
12. MODIFICATION. Licensee may modify source code or procedures, but
shall notify JHA in writing of any modifications so made.
4
<PAGE>
13. STATUTE OF LIMITATIONS. No action arising out of this Agreement
may be brought by Licensee or JHA more than two years after the cause of
action has accrued, and the injured party has actual knowledge of the accrual.
14. COMPLETE AGREEMENT. This document contains the entire agreement
between the parties with respect to the transactions contained herein, and it
may be modified or altered only by a written instrument signed by all parties
hereto. Attached Exhibits A and B are part of this Agreement.
15. HEADINGS. The headings of each paragraph contained herein are
provided only for convenience and shall not be deemed controlling.
16. BINDING. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective assigns and successors.
17. ASSIGNABILITY. This Agreement shall not be transferable or
assignable by Licensee without prior written consent by JHA. However,
Licensee may assign its rights and obligations under this Agreement by
written document, to which JHA is a signing party, to any holding company
which becomes a majority stockholder or parent company of Licensee by
voluntary action and with the written approval of Licensee and its
stockholders. In this event, both Licensee and the assignee shall be
responsible and liable to JHA for the performance of the obligations and
duties of Licensee pursuant to this Agreement.
18. GOVERNING LAW. This Agreement shall be governed by, construed and
enforced under, and subject to, the laws of the State of Missouri. If any of
the provisions of this Agreement are invalid under any applicable statute or
rule of law, they are, to that extent, deemed omitted. Such omission does
not change the intent or binding nature of any or all of the rest of this
Agreement.
19. SERVICES. At Licensee's request JHA will provide the following
services:
(a) Software customization and/or modification, to the extent
possible with Licensee's equipment and the Software. Licensee accepts
responsibility for any requested customization and modification.
(b) Training and education for Licensee's employees concerning the
operation and use of the Software.
(c) Consultation concerning Licensee's electronic data processing
needs, problems and solutions.
(d) Licensee will promptly pay JHA its then current fees for services
performed per (a), (b) and (c) above plus all associated out-of-pocket
expenses. As of the date of this Agreement the current fees for items (a),
(b) and (c) above are listed in attached Exhibit A.
5
<PAGE>
20. INSTALLATION. JHA will install said unmodified Software at
Licensee's principal office so it will properly operate on Licensee's IBM
computer, as specified on Exhibit A and will assist Licensee in converting
the financial institutions listed in Exhibit B to the Software system.
Licensee will furnish data needed and requested by JHA, and will co-operate
with and assist JHA personnel in the installation and conversion of said
Software. For the installation and conversion of said Software, Licensee
agrees to pay JHA's current fees as described in Exhibit A attached hereto.
No hourly charge will be made for JHA personnel for travel or transportation
time. All installation and conversion charges and out-of-pocket expenses
will be billed monthly and promptly paid by Licensee. JHA's current billing
terms are payable upon receipt. A one and one-half percent (1 1/2%) interest
charge per month (18% per annum) will be added to delinquent accounts.
21. LIMITATION OF LIABILITY. JHA shall not be liable to Licensee or
any other person, firm or company, for failure to fulfill its obligation
hereunder due to an event of "force majeure" (herein defined as acts of God,
public disaster, fire, flood, riot, war, labor strikes/disputes, judicial
orders/decrees, government laws/regulations, or interruptions of
communications, transportation or electricity). Any liability of JHA for any
loss, damage, or cost hereunder shall be limited to actual direct damages
incurred by Licensee, but in no event shall the aggregate of liability exceed
the total license fees paid by Licensee to JHA under paragraph 2 above, nor
shall any amount of the liability include any indirect, consequential,
punitive or special damages incurred by Licensee.
22. SUPERSEDES. This Agreement supersedes all prior agreements, if
any, for the licensed use of or the support/maintenance of other JHA software
or products.
23. NOTICE. Any notices under this Agreement shall be written and
shall be deemed delivered when actually received, or three days after they
are deposited with the United States Postal Service, certified-mail return
receipt requested when addressed to the other party at its above address,
which may be changed by written notice.
24. COUNTERPARTS. Two (2) duplicate originals of this Agreement are
executed with each party retaining one (1) copy.
6
<PAGE>
IN WITNESS WIEREOF, the parties hereto have caused this Agreement to be
duly executed on the date first above written.
(Seal) JACK HENRY & ASSOCIATES, INC.
ATTEST: 663 Highway 60 - P.O. Box 807
Monett, MO 65708
(JHA)
By: By:
------------------------------- -------------------------------
----------------------------------
Print/Type Name
Title:
-------------------------------
Date:
-------------------------------
(Seal) SPECTRUM BANC SERVICE
ATTEST: CORPORATION
35 First Avenue NE
Watertown, South Dakota 57201
(LICENSEE)
By: By:
------------------------------- -------------------------------
Secretary
----------------------------------
Print/Type Name
Title:
-------------------------------
Date:
-------------------------------
7
<PAGE>
PEFORMANCE GUARANTEE
For valuable consideration, receipt of which is hereby acknowledged, we the
undersigned five banks, being all of the shareholders of the aforementioned
Licensee, do hereby individually and collectively guarantee the performance
of this License Agreement by Licensee.
(Seal) F & M BANK
ATTEST: 35 First Avenue, NE
Watertown, South Dakota 57201
By: By:
------------------------------- -------------------------------
----------------------------------
Print/Type Name
Title:
-------------------------------
Date:
-------------------------------
(Seal) RUSHMORE BANK & TRUST
ATTEST: 14 Saint Joseph Street
Rapid City, South Dakota 57709
By: By:
------------------------------- -------------------------------
Secretary
----------------------------------
Print/Type Name
Title:
-------------------------------
Date:
-------------------------------
8
<PAGE>
(Seal) CITIZENS BANK
ATTEST: 309 East Jefferson
Corydon, Iowa 50060
By: By:
------------------------------- -------------------------------
Secretary
----------------------------------
Print/Type Name
Title:
-------------------------------
Date:
-------------------------------
(Seal) CITIZENS BANK
ATTEST: 111 North Main
Leon, Iowa 50144
By: By:
------------------------------- -------------------------------
Secretary
----------------------------------
Print/Type Name
Title:
-------------------------------
Date:
-------------------------------
(Seal) CITIZENS BANK OF PRINCETON
ATTEST: US Highway 65 & 136
Princeton, Missouri 64673
By: By:
------------------------------- -------------------------------
Secretary
----------------------------------
Print/Type Name
Title:
-------------------------------
Date:
-------------------------------
9
<PAGE>
EXHIBIT 10.6 (CONTINUED)
LICENSE AGREEMENT # 1196-0001
CONTRACT MODIFICATION
This Contract Modification is entered into on September 5,1997, by and
between SPECTRUM BANC SERVICE CORPORATION (Licensee") and JACK HENRY &
ASSOCIATES, INC. ("JHA") who mutually contract and agree as follows:
Licensee and JHA are signing and entering into multiple other written
contracts and agreements dated September 5, 1997. Certain of those contracts
and agreements are changed and modified as follows:
1. The "LICENSE AGREEMENT" is changed and modified as follows:
A. Change "4. WARRANTIES." to read:
4. WARRANTIES. JHA warrants as follows:
(a) The Software furnished hereunder are free and clear of all
liens and encumbrances, and Licensor has full power and
authority to grant the rights granted to Licensee with
respect to the Software without the consent of any other
person or such consent has been obtained; the Software
furnished hereunder will not infringe or violate any
copyright, trade secret, trademark, patent or other
intellectual property rights of any third party; and there
is no litigation pending against Licensor which would limit,
restrict or prevent Licensee's use of the Software.
Licensor shall defend, indemnify and hold harmless Licensee,
its directors, officers, members, employees and agents and
its successors and assigns from and against any and all
claims, demands, actions, liabilities, losses, damages and
expenses, including, without limitation, settlement costs
and reasonable attorneys' fees, arising out of or relating
to any actual or alleged infringement or violation of any
third party's trade secrets, trademark, copyright, patent or
other intellectual property rights (the "Intellectual
Property Rights") in connection with the use of the
Software. Licensor' s obligation pursuant to the
immediately-preceding sentence is subject to the following
conditions: (i) Licensee shall give Licensor prompt written
notice of all actions, claims or threats against Licensee of
infringement of any Intellectual Property Rights; (ii)
Licensee shall permit Licensor to elect to assume complete
control of such claims at its sole discretion and expense;
and (iii) Licensee shall cooperate with Licensor in
defending against claims, including making known or
available to Licensor all records and
<PAGE>
documents pertaining to claims upon reimbursement of all
costs associated with provision or reproduction thereof
(but not salary or wages of Licensee's Software is
prohibited by either judicial action or Licensor's
agreement, Licensor, at its own expense, shall elect to
either (i) procure for Licensee the right to continue using
the Software; or (ii) replace as soon as practicable the
Software with a noninfringing product which has
substantially similar functional capability; or (iii) modify
the Software so that they become noninfringing without any
material loss of functionality; or (iv) remove the Software
and any interdependent product whose function is
significantly impaired by the removal of the infringing
Software and refund Licensee an amount equal to the license
fee paid to Licensor for the Softwares as depreciated and
accept the return. Such depreciation shall be calculated as
an equal amount per year for five years.
(b) The Software do not and shall not contain any lock, clock,
timer, counter, copy protection feature, replication devices
or defect ("virus" or "worm" as such terms are commonly used
in the computer industry), CPU serial number reference, or
other device which; (i) might lock, disable or erase the
Software; (ii) prevent Licensee from fully utiIizing the
Software; or (iii) require action or intervention by
Licensor or other persons or entities to allow Licensee to
utilize the Software.
(c) The occurrence in or use by the Software of dates on or
after January 1, 2000, ("Millennial Dates') will not
adversely affect its performance with respect to date-
dependent data, computations, output, or other functions
(including, without limitation, calculating, comparing and
sequencing) and that the Software will create, store,
process and output information related to or including
Millennial Dates without error or omissions and at no
additional cost to Licensee. At Licensee's request,
Licensor will provide evidence sufficient to demonstrate
adequate testing of the Software to meet the foregoing
requirements.
(d) During the applicability of the foregoing warranties,
Licensor shall promptly provide corrections to the Software
where Licensee notifies Licensor in writing of any failure
of the Software to perform in accordance with JHA's
Documentation. Licensee shall assist Licensor in
identifying the circumstances on which such failure is
discovered and, if requested by Licensor, shall document the
circumstances. The Licensor shall furnish to Licensee
revised or updated documentation reflecting
2
<PAGE>
corrections made to the Software pursuant hereto. If in
Licensor's reasonable judgement, repair or replacement is
not possible or practicable, Licensor shall refund to
Licensee an amount equal to the license fee paid to Licensor
for the Software as depreciated; which shall be calculated
as an equal amount per year for five years.
(e) The services provided hereunder, including without
limitation, installation services, will be performed in a
good and workmanlike manner.
(f) At the time of delivery the unmodified Software will operate
in accordance with the then current documentation provided
by JHA. Under this warranty, IRA will correct any program
errors in the unmodified Software at no extra charge to
Licensee.
(g) At the time of delivery the Software will be in compliance
with Federal Laws."
THE ABOVE WARRANTIES ARE EXPRESSLY IN LIEU OF ALL OTHER WARRANTIES, EXPRESS
OR IMPLIED, OR ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE. IN NO EVENT SHALL JHA BE LIABLE FOR INDIRECT,
CONSEQUENTIAL, PUNITIVE OR SPECIAL DAMAGES."
B. In paragraphs "2. FEES", "19. SERVICES. (d)", "20. INSTALLATION.",
and "EXHIBIT A - SERVICES PROVIDED: 4" change "expenses" to
"reasonable expenses".
C. In paragraph "2. FEES." to the second subparagraph add
"Notwithstanding the above, expenses reimbursable to JHA for meals and
lodging will not exceed $125.00 per day/per person."
D. In the second subparagraph of "2. FEES," change "other than personal
property taxes or income taxes" to "other than personal property
taxes, income taxes, or franchise taxes levied by Missouri."
E. In "3. LICENSE.":
a. To the third subparagraph add "No additional license fee will be
charged for an Exhibit B Bank operating a branch bank under the
same name and charter of the Exhibit B Bank"
b. To the fourth subparagraph add "In the future, newly acquired 85%
owned and controlled banks may be added to Exhibit B and
processed by Licensee for an additional license fee paid to JHA
3
<PAGE>
equal to the then current license fee for each added bank less
75% discount."
F. Add the following to paragraph "20. INSTALLATION.":
"Installation of said Software will be in accordance with
attached Exhibit C which is incorporated herein."
G. Change the payment schedule on "EXHIBIT A" (page 12) to read:
- -------------------------------------------------------------------------------
<TABLE>
<S> <C>
"Deposit at execution of Agreement (25%) $ 84,437.50
Due upon delivery of Software (35%) 118,212.50
Due at Final Conversion Date of first bank install (15%) 50,662.50
Due at Final Conversion Date of third bank install (15%) 50,662.50
Due at Final Conversion Date of fifth and final bank install (10%) 33,775.00"
</TABLE>
H. In "EXHIBIT A - APPLICABLE TAXES:" change "exclusive ... net income."
to read "exclusive of property taxes, taxes based on net income and
franchise taxes levied by Missouri."
I. To "6. Term." add "If during the term of this license, Licensee
elects to deconvert off the JHA Software, JHA, will provide Licensee
assistance with the deconversion at JHA's then current fees and
expenses, provided JHA's Deconversion Agreement is fully signed, and
provided Licensee is not then in breach or default on any contract or
agreement with JHA."
2. The "COMPUTER SOFTWARE MAINTENANCE AGREEMENT" is changed and modified as
follows:
A. In "1. MAINTENANCE AND SUPPORT. (a)" change "within a reasonable
time" to "in a timely manner"; and add "However, JHA will use due
diligence to see that its Software is kept in compliance with Federal
and State banking laws."
B. To "1. MAINTENANCE AND SUPPORT" add new subparagraph (f) as follows:
"(f) All JHA program interfaces licensed by JHA to Licensee are
covered by this Agreement the same as the unmodified initial
Software licensed by JHA to Licensee."
C. To "1. MAINTENANCE AND SUPPORT." add new subparagraph (g) as follows:
"(g) JHA shall maintain a 24-hour day, 7-day a week telephone support
line, which shall be continuously manned by qualified JHA
personnel in order that Licensee shall have access to assistance
by telephone 365 days a year, toll free except for
4
<PAGE>
data line support."
D. To "1. MAINTENANCE AND SUPPORT" add new subparagraph (h) as follows:
"(h) JHA will keep the unmodified Software licensed to Licensee
working and functioning in accordance with JHA's Documentation on
same.
E. To "1. MAINTENANCE AND SUPPORT." add new subparagraph (I) as follows:
"(I) JHA will provide Licensee Support/Maintenance for JHA's Software
for a period not less than five (5) years by written agreement,
provided Licensee is not delinquent with payments to JHA and is
not in default or breach of any agreement between Licensee and
JHA."
F. To "3. MAINTENANCE FEES. (b)" add:
"The annual advance fee stated is for all five banks, which will be
apportioned-for each bank as its assets relate to the total assets of
all five banks. The initial fee for each bank will be prorated from
its install date to next July 1. After all five banks are installed,
the annual advance fee will be payable each July 1."
G. In "3. MAINTENANCE FEES. (d)" change "(if any)" to "(if any, but not
personal property taxes, income taxes, or franchise taxes levied by
Missouri)"; and change "expenses" to "reasonable expenses".
H. To 4. TERM AND AUTOMATIC RENEWAL." add:
"Prior to July 1, 2003, JHA will not increase the percentage rate used
to set the annual maintenance fee on the initial Software more than
the percentage increase in the Consumer Price Index for each year,
cumulative from the original fee or the last fee increase; provided
however, this limitation will not apply to additional fees based on
increases in Licensee's total assets being processed, or use of
additional customization or Software programs.
If this Agreement is lawfully terminated in the middle of a term,
then:
(a) if the reason for termination is JHA's refusal or inability to
provide Support/Maintenance, provided for herein to Licensee,
then JHA will refund the unused portion of the prepaid annual fee
to Licensee, and
5
<PAGE>
(b) if the reason for termination is the sale, acquisition or merger
of Licensee, no refund will be due from JHA to Licensee.''
3. The "Agreement for Purchase of Machines" is changed and modified as follows:
A. Change the third subparagraph to read:
"The Customer-agrees to purchase and accept the Machines under the
terms and conditions of this Agreement. The Customer further agrees,
with respect to the Machines and programming, to accept responsibility
for (I) their use, and (2) the results obtained therefrom. The
Customer also has the responsibility for the use of and results
obtained from, any other equipment, programs (other than JHA
Software), or services used with the Machines and programming."
B. Add the following new subparagraph to "GENERAL":
"Any contractual conflict between this Agreement and a later signed
Supplement will be resolved in accordance with the Supplement."
In witness whereof, the parties have caused this CONTRACT MODIFICATION to be
executed by their duly authorized representatives.
JACK HENRY & ASSOCIATES, INC. SPECTRUM BANC SERVICE
663 Highway 60, P.O. Box 807 CORPORATION
Monett, MO 65708 35 First Avenue NE
Watertown, South Dakota 57201
(LICENSEE)
BY: BY:
------------------------------- -------------------------------
- ---------------------------------- ----------------------------------
Type/Print Name Type/Print Name
TITLE: TITLE:
----------------------------- -----------------------------
6
<PAGE>
EXHIBIT 10.7
SPLIT-DOLLAR AGREEMENT
THIS AGREEMENT made and entered into as of the 12th day of July, 1995,
by and among: (a) Decatur Corporation, an Iowa corporation (hereinafter
referred to as the "Corporation"); and (b) Daniel A. Hamann, Esther Hamann
Brabec, and Julie Hamann Bunderson (hereinafter collectively referred to as
the "Owner").
RECITALS
A. Deryl F. Hamann (the "Employee"), is employed as President of the
Corporation.
B. The Employee wishes to provide life insurance protection for his
family, under a policy of life insurance (hereinafter referred to as the
"Policy"), insuring his life (the "Insured"), which Policy is described in
Exhibit A attached hereto and by this reference made a part hereof and which
was or will be issued by Phoenix Home Life Insurance Co. (hereinafter
referred to as the "Insurer").
C. The Corporation is willing to pay a portion of the premiums due on
the Policy as an additional employment benefit for the Employee, which the
Owner agrees to repay to the Corporation, on the terms and conditions
hereinafter set forth.
D. Owner is the owner of the Policy and, as such, possesses all
incidents of ownership in and to the Policy.
E. The Owner will assign the death benefit under the policy to the
Corporation as security for the repayment of the amounts which the
Corporation will contribute toward the payment of the premiums due on the
policy.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and of the mutual
promises contained herein, the parties hereto agree as follows:
1. PURCHASE OF POLICY. The Owner has purchased the Policy from the
Insurer in the total face amount of One Million Dollars ($1,000,000.00). The
parties hereto have taken all necessary action to cause the Insurer to issue
the Policy, and shall take any further action which may be necessary to cause
the Policy to conform to the provisions of this Agreement
2. OWNERSHIP OF POLICY. The Owner shall be the sole, exclusive and
absolute
<PAGE>
owner of the Policy, and may exercise all ownership rights granted to the
owner thereof by the terms of the Policy, except as otherwise provided in
this Agreement. This shall include, but not be limited to, the right to
designate beneficiaries, select settlement and dividend options, borrow on
the security of the Policy, and to surrender the Policy. All such rights may
be exercised by the Owner without the Corporation's consent.
3. POLICY DIVIDENDS. The dividends declared by the Insurer on the
Policy will be applied to purchase additional paid-up insurance on the life
of the Employee, or surrendered to pay policy premiums.
4. PAYMENT OF PREMIUMS.
a. The annual economic benefit to the Employee shall be an amount
measured by the lower of the Internal Revenue Service Table P.S. 58 rates,
set forth in Revenue Ruling 55-747 (or the corresponding applicable
provision of any future Revenue Ruling), or the Insurer's current published
premium rate for annually renewable term insurance for standard risks
(hereinafter referred to as the "Employee's portion of the premium.")
b. On or before the due date of each Policy premium, or within the
grace period provided therein, the Corporation shall pay the full amount of
the premium to the Insurer, and shall, upon request, promptly furnish the
Employee evidence of timely payment of such premium.
c. The Corporation shall annually furnish the Employee a statement
of the amount of income reportable by the Employee for federal and state
income tax purposes, if any, as a result of the insurance protection
provided the Owner as the Policy beneficiary.
5. REPAYMENT TO THE CORPORATION.
a. The Owner must repay to the Corporation an amount equal to the
total amount of the Corporation's portion of the premiums paid by the
Corporation hereunder, less any amounts previously repaid to the
Corporation by the Owner. This repayment must be made in accordance with
Paragraphs 6 and 8 of this Agreement.
b. The Owner will collaterally assign the death benefit under the
insurance policy to the Corporation as security for repayment of the
Corporation's portion of the premiums paid by the Corporation hereunder,
less any amounts previously repaid to the Corporation by the Owner.
6. DEATH CLAIMS.
2
<PAGE>
a. When the Employee dies, the Corporation shall receive from the
death benefits provided under the Policy, the total amount paid by the
Corporation hereunder pursuant to Paragraph 4(a) of this Agreement as the
Corporation's portion of the premiums, less any amounts previously repaid
to the Corporation by the Owner. The receipt of this amount by the
Corporation will constitute satisfaction of the obligation to the
Corporation pursuant to Paragraph 5 of this Agreement.
b. When the Employee dies, the Owner shall receive the amount of the
death benefits provided under the Policy in excess of the amount payable to
the Corporation pursuant to subparagraph (a) of this Paragraph. This amount
will be paid under the settlement option elected by the Owner.
7. TERMINATION OF THE AGREEMENT DURING THE EMPLOYEE'S LIFETIME. This
Agreement shall terminate upon the occurrence of any of the following events:
(a) total cessation of the Corporation's business;
(b) upon written notice by any party to the other parties hereto;
(c) bankruptcy, receivership or dissolution of the Corporation;
(d) upon the election of any party, if either the Corporation or the
Owner fails for any reason to make the contribution of or payment of, any
premium due on the Policy, provided that such election must be made within
ninety days after the failure to make the required contribution occurs;
(e) full repayment by the Owner of the contributions made by the
Corporation pursuant to Paragraph 4 of this Agreement, at which time the
Corporation will be required to release the collateral assignment of the
policy death benefit made by the Owner pursuant to Paragraph 5 of this
Agreement.
8. DISPOSITION OF POLICY ON TERMINATION OF AGREEMENT. If this
Agreement is terminated under subparagraphs 7(a), 7(b), 7(c) or 7(d) of this
Agreement, the Owner will have thirty days in which to repay the Corporation
the amount which it has contributed toward payment of the premiums due on the
Policy (less any amounts previously repaid to the Corporation by the Owner).
Upon receipt of this amount, the Corporation shall release the collateral
assignment of the policy death benefit. If the amount to which the
Corporation is entitled hereby has not been repaid within this thirty day
period, the Corporation may enforce its rights against the Owner in any way
it deems fit.
9. INSURER NOT A PARTY. The Insurer shall be fully discharged from its
obligations under the Policy by payment of the Policy death benefit to the
beneficiary or beneficiaries named in the Policy, subject to the terms and
conditions of the Policy. In
3
<PAGE>
no event shall the Insurer be considered a party to this Agreement, or any
modification or amendment hereof. No provision of this Agreement, nor of any
modification or amendment hereof, shall in any way be construed as enlarging,
changing, varying, or in any other way affecting the obligations of the
Insurer as expressly provided in the Policy.
10. NAMED FIDUCIARY, DETERMINATION OF BENEFITS, CLAIMS PROCEDURE AND
ADMINISTRATION.
a. The Corporation is hereby designated as the named fiduciary under
this Agreement. The named fiduciary shall have authority to control and
manage the operation and administration of this Agreement.
b. (1) CLAIM. A person who believes that he or she is being denied
a benefit to which he or she is entitled under this Agreement (hereinafter
referred to as a "Claimant') may file a written request for such benefit
with the Corporation, setting forth his or her claim. The request must be
addressed to the Secretary of the Corporation at its then principal place
of business.
(2) CLAIM DECISION. Upon receipt of a claim, the Corporation
shall advise the Claimant that a reply will be forthcoming within ninety
(90) days and shall, in fact, deliver such reply within such period. The
Corporation may, however, extend the reply period for an additional ninety
(90) days for reasonable cause.
If the claim is denied in whole or in part, the Corporation shall
adopt a written opinion, using language calculated to be understood by the
Claimant, setting forth: (a) the specific reason or reasons for such
denial; (b) the specific reference to pertinent provisions of this
Agreement on which such denial is based; (c) a description of any
additional material or information necessary for the Claimant to perfect
his or her claim and an explanation why such material or such information
is necessary; (d) appropriate information as to the steps to be taken if
the Claimant wishes to submit the claim for review; and (e) the time limits
for requesting a review under subsection (3) and for review under
subsection (4) hereof.
(3) REQUEST FOR REVIEW. Within sixty (60) days after the
receipt by the Claimant of the written opinion described above, the
Claimant may request in writing that the Treasurer of the Corporation
review the determination of the Corporation. Such request must be
addressed to the Treasurer of the Corporation, at its then principal place
of business. The Claimant or his or her duly authorized representative
may, but need not, review the pertinent documents and submit issues and
comments in writing for consideration by the Corporation. If the Claimant
does not request a review of the Corporation's determination within such
sixty (60) day period, he shall be barred and estopped
4
<PAGE>
from challenging the Corporation's determination.
(4) REVIEW OF DECISION. Within sixty (60) days after the
Treasurer's receipt of a request for review, a review will be made of the
Corporation's determination. After considering all materials presented by
the Claimant, the Treasurer will render a written opinion, written in a
manner calculated to be understood by the Claimant, setting forth the
specific reasons for the decision and containing specific references to the
pertinent provisions of this Agreement on which the decision is based. If
special circumstances require that the sixty (60) day time period be
extended, the Secretary will so notify the Claimant and will render the
decision as soon as possible, but no later than one hundred twenty (120)
days after receipt of the request for review.
11. AMENDMENT. This Agreement may not be amended, altered or modified,
except by a written instrument signed by the parties hereto, or their
respective successors or assigns, and may not be otherwise terminated except
as provided herein.
12. BINDING EFFECT. This Agreement shall be binding upon and inure to
the benefit of the Corporation and its successors and assigns, and to the
Owner and their respective successors and assigns.
13. NOTICE. Any notice, consent or demand required or permitted to be
given under the provisions of this Agreement shall be in writing, and shall
be signed by the party giving or making the same. If such notice, consent or
demand is mailed to a party hereto, it shall be sent by United States
certified mail, postage prepaid, addressed to such party's last known address
as shown on the records of the Corporation. The date of such mailing shall
be deemed the date of notice, consent or demand.
14. GOVERNING LAW. This Agreement, and the rights of the Parties
hereunder, shall be governed by and construed in accordance with the laws of
the State of Iowa.
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement, in
triplicate, as of the 12th day of July, 1995.
Decatur Corporation,
the "Corporation"
By: /s/ Daniel A. Hamann
----------------------------------
Its: Vice President
----------------------------------
ATTEST:
/s/ Lawrence E. Ziska, Jr.
- ----------------------------------
Secretary
/s/ Daniel A. Hamann
----------------------------------
Daniel A. Hamann
/s/ Esther Hamann Brabec
----------------------------------
Esther Hamann Brabec
/s/ Julie Hamann Bunderson
----------------------------------
Julie Hamann Bunderson
6
<PAGE>
EXHIBIT A
The following life insurance policy is subject to the attached
Spit-Dollar Agreement:
Insurer: Phoenix Home Life Insurance Co.
Insured: Deryl F. Hamann
Policy Number: 2679389
Face Amount: $1,000,000.00
Dividend Option: dividends used to purchase paid-up additions
Date of Issue: June 8, 1995
<PAGE>
EXHIBIT 12.1
SPECTRUM BANCORPORATION, INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED DIVIDENDS
<TABLE>
Nine Months Nine Months
Ended Ended Year Ended Year Ended Year Ended Year Ended Year Ended
March 31, March 31, June 30 June 30 June 30 June 30 June 30
1999 1998 1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C> <C>
Income before income taxes and
minority interest in net income of
subsidiaries 8297 6816 9271 7660 4770 4910 4247
Add:
Interest expense, including interest on deposits 17406 16098 21760 18531 14196 11983 8255
----- ----- ----- ----- ----- ----- ----
Income as adjusted 25703 22914 31031 26191 18966 16893 12502
==========================================================================
Preferred dividend requirements 114 114 152 152 187 182 182
Ratio of income before provision for income taxes
to income before minority interest 156% 1.5 1.51 1.42 1.55 1.54 1.51
---- --- ---- ---- ---- ---- ----
Preferred dividend factor on pretax basis 178 171 230 216 290 280 275
Fixed charges
Interest expense, including interest on deposits 17406 16098 21760 18531 14196 11983 8255
----- ----- ----- ----- ----- ----- ----
Fixed charges and preferred dividends 17584 16269 21990 18747 14486 12263 8530
==========================================================================
Ratio on earnings to fixed charges and preferred
dvidends, including interest on deposits 1.46% 1.41% 1.41% 1.40% 1.31% 1.38% 1.47%
==========================================================================
Income before income taxes and
minority interest in net income of
subsidiaries 8297 6816 9271 7660 4770 4910 4247
Add:
Interest expenses, excluding interest on deposits 2541 2651 3590 2540 1559 887 448
---- ---- ---- ---- ---- --- ---
Income as adjusted 10838 9467 12861 10200 6329 5797 4695
==========================================================================
Preferred dividend requirements 114 114 152 152 187 182 182
Ratio of income before provision for income taxes
to income before minority interest 156% 150% 151% 142% 155% 154% 151%
---- ---- ---- ---- ---- ---- ----
Preferred dividend factor on pretax basis 178 171 230 216 290 280 275
Fixed charges
Interest expense, excluding interest on deposits 2541 2651 3590 2540 1559 887 448
---- ---- ---- ---- ---- --- ---
Fixed charges and preferred dividends 2719 2822 3820 2756 1849 1167 723
Ratio on earnings to fixed charges and preferred
dividends, excluding interest on deposits 3.99% 3.35% 3.37% 3.70% 3.42% 4.97% 6.49%
==========================================================================
</TABLE>
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF SPECTRUM BANCORPORATION, INC.
<TABLE>
<CAPTION>
NAME STATE OF INCORPORATION
- ---- ----------------------
<S> <C>
F&M Bank South Dakota
Rushmore Bank & Trust Co. South Dakota
Citizens Bank(1) Iowa
Citizens Bank of Princeton Missouri
Spectrum Banc Service Corporation South Dakota
</TABLE>
- ---------------------
(1) Also does business as Citizens Bank, Mount Ayr.
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in the Registration Statement (Form S-1) and related
Prospectus of Spectrum Bancorporation, Inc. relating to Preferred Securities of
Spectrum Capital Trust I of our report dated June 1, 1999 with respect to the
consolidated financial statements of Spectrum Bancorporation, Inc. and
subsidiaries as of June 30, 1998 and 1997 and for the three years ended June 30,
1998. We also consent to the reference to our firm under the caption "Experts."
McGladrey & Pullen, LLP
Sioux Falls, South Dakota
June 10, 1999
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the use in this Registration Statement of Spectrum
Bancorporation, Inc. on Form S-1 of our report dated February 7, 1997
(relating to the consolidated financial statements of Decatur Corporation and
Subsidiaries not presented separately herein) appearing in the Prospectus,
which is part of this Registration Statement.
We also consent to the reference of us under the heading "Experts" in such
Prospectus.
Deloitte & Touche, LLP
Omaha, Nebraska
June 9, 1999
<PAGE>
EXHIBIT 23.3
[BAIRD HOLM LETTERHEAD]
________________, 1999
Spectrum Bancorporation, Inc.
10834 Old Mill Road, Suite One
Omaha, Nebraska 68154-2648
Re: Registration Statement on Form S-1
Ladies and Gentlemen:
In connection with the Registration Statement on Form S-1 filed by Spectrum
Bancorporation, Inc. (the "Company") and Spectrum Capital Trust I ("Spectrum
Capital") with the Securities and Exchange Commission on or about __________,
1999 relating to a public offering by Spectrum Capital of up to
$_____________ and _____% Cumulative Preferred Securities (the "Preferred
Securities"), please be advised that as counsel to the Company, upon
examination of such corporate documents and records as we have deemed
necessary or advisable for the purposes of this opinion, it is our opinion
that:
1. The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Iowa.
2. The Guarantee, when executed and delivered as contemplated by the
Registration Statement, and the Junior Subordinated Debentures, when issued
and paid for as contemplated by the Registration Statement, will be validly
issued obligations of the Company enforceable in accordance with their terms
except as such enforceability may be limited by bankruptcy, insolvency,
reorganization or similar laws affecting the rights of creditors generally
and subject to general principles of equity.
Capitalized terms used herein shall have the definitions given to such terms
in the Registration Statement. We hereby consent to the filing of this
opinion as an exhibit to the Registration Statement, and to the reference to
our firm under the headings "Material Federal Income Tax Consequences" and
"Legal Matters" in the Prospectus comprising a part of the Registration
Statement.
Respectfully Submitted,
BAIRD, HOLM, McEACHEN,
PEDERSEN, HAMANN & STRASHEIM
<PAGE>
EXHIBIT 25.1
Registration No.
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2)
WILMINGTON TRUST COMPANY
(Exact name of trustee as specified in its charter)
Delaware 51-0055023
(State of incorporation) (I.R.S. employer identification no.)
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
(Address of principal executive offices)
Cynthia L. Corliss
Vice President and Trust Counsel
Wilmington Trust Company
Rodney Square North
Wilmington, Delaware 19890
(302) 651-8516
(Name, address and telephone number of agent for service)
SPECTRUM BANCORPORATION, INC.
(Exact name of obligor as specified in its charter)
Iowa 42-0867112
(State of incorporation) (I.R.S. employer identification no.)
10834 Old Mill Road, Suite One
Omaha, Nebraska 68154-2648
(Address of principal executive offices) (Zip Code)
___% Junior Subordinated Debentures of Spectrum Bancorporation, Inc.
(Title of the indenture securities)
<PAGE>
ITEM 1. GENERAL INFORMATION.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to which
it is subject.
Federal Deposit Insurance Co. State Bank Commissioner
Five Penn Center Dover, Delaware
Suite #2901
Philadelphia, PA
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR.
If the obligor is an affiliate of the trustee, describe each
affiliation:
Based upon an examination of the books and records of the trustee
and upon information furnished by the obligor, the obligor is not an
affiliate of the trustee.
ITEM 3. LIST OF EXHIBITS.
List below all exhibits filed as part of this Statement of
Eligibility and Qualification.
A. Copy of the Charter of Wilmington Trust Company, which includes the
certificate of authority of Wilmington Trust Company to commence
business and the authorization of Wilmington Trust Company to exercise
corporate trust powers.
B. Copy of By-Laws of Wilmington Trust Company.
C. Consent of Wilmington Trust Company required by Section 321(b) of
Trust Indenture Act.
D. Copy of most recent Report of Condition of Wilmington Trust Company.
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, Wilmington Trust Company, a corporation organized and
existing under the laws of Delaware, has duly caused this Statement of
Eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of Wilmington and State of Delaware on the 10th
day of June, 1999.
WILMINGTON TRUST COMPANY
[SEAL]
Attest: /s/ Patricia A. Evans By: /s/ Norma P. Closs
-------------------------- ---------------------------
Assistant Secretary Name: Norma P. Closs
Title: Vice President
2
<PAGE>
EXHIBIT A
AMENDED CHARTER
Wilmington Trust Company
Wilmington, Delaware
As existing on May 9, 1987
<PAGE>
Amended Charter
or
Act of Incorporation
of
Wilmington Trust Company
Wilmington Trust Company, originally incorporated by an Act of the
General Assembly of the State of Delaware, entitled "An Act to Incorporate
the Delaware Guarantee and Trust Company", approved March 2, A.D. 1901, and
the name of which company was changed to "Wilmington Trust Company" by an
amendment filed in the Office of the Secretary of State on March 18, A.D.
1903, and the Charter or Act of Incorporation of which company has been from
time to time amended and changed by merger agreements pursuant to the
corporation law for state banks and trust companies of the State of Delaware,
does hereby alter and amend its Charter or Act of Incorporation so that the
same as so altered and amended shall in its entirety read as follows:
First: - The name of this corporation is Wilmington Trust Company.
Second: - The location of its principal office in the State of Delaware is
at Rodney Square North, in the City of Wilmington, County of New Castle;
the name of its resident agent is Wilmington Trust Company whose address is
Rodney Square North, in said City. In addition to such principal office,
the said corporation maintains and operates branch offices in the City of
Newark, New Castle County, Delaware, the Town of Newport, New Castle
County, Delaware, at Claymont, New Castle County, Delaware, at Greenville,
New Castle County Delaware, and at Milford Cross Roads, New Castle County,
Delaware, and shall be empowered to open, maintain and operate branch
offices at Ninth and Shipley Streets, 418 Delaware Avenue, 2120 Market
Street, and 3605 Market Street, all in the City of Wilmington, New Castle
County, Delaware, and such other branch offices or places of business as
may be authorized from time to time by the agency or agencies of the
government of the State of Delaware empowered to confer such authority.
Third: - (a) The nature of the business and the objects and purposes
proposed to be transacted, promoted or carried on by this Corporation are
to do any or all of the things herein mentioned as fully and to the same
extent as natural persons might or could do and in any part of the world,
viz.:
<PAGE>
(1) To sue and be sued, complain and defend in any Court of law or
equity and to make and use a common seal, and alter the seal at
pleasure, to hold, purchase, convey, mortgage or otherwise deal in
real and personal estate and property, and to appoint such officers
and agents as the business of the Corporation shall require, to make
by-laws not inconsistent with the Constitution or laws of the United
States or of this State, to discount bills, notes or other evidences
of debt, to receive deposits of money, or securities for money, to buy
gold and silver bullion and foreign coins, to buy and sell bills of
exchange, and generally to use, exercise and enjoy all the powers,
rights, privileges and franchises incident to a corporation which are
proper or necessary for the transaction of the business of the
Corporation hereby created.
(2) To insure titles to real and personal property, or any estate or
interests therein, and to guarantee the holder of such property, real
or personal, against any claim or claims, adverse to his interest
therein, and to prepare and give certificates of title for any lands
or premises in the State of Delaware, or elsewhere.
(3) To act as factor, agent, broker or attorney in the receipt,
collection, custody, investment and management of funds, and the
purchase, sale, management and disposal of property of all
descriptions, and to prepare and execute all papers which may be
necessary or proper in such business.
(4) To prepare and draw agreements, contracts, deeds, leases,
conveyances, mortgages, bonds and legal papers of every description,
and to carry on the business of conveyancing in all its branches.
(5) To receive upon deposit for safekeeping money, jewelry, plate,
deeds, bonds and any and all other personal property of every sort and
kind, from executors, administrators, guardians, public officers,
courts, receivers, assignees, trustees, and from all fiduciaries, and
from all other persons and individuals, and from all corporations
whether state, municipal, corporate or private, and to rent boxes,
safes, vaults and other receptacles for such property.
(6) To act as agent or otherwise for the purpose of registering,
issuing, certificating, countersigning, transferring or underwriting
the stock, bonds or other obligations of any corporation, association,
state or municipality, and may receive and manage any sinking fund
therefor on such terms as may be agreed upon between the two parties,
and in like manner may act as
2
<PAGE>
Treasurer of any corporation or municipality.
(7) To act as Trustee under any deed of trust, mortgage, bond or
other instrument issued by any state, municipality, body politic,
corporation, association or person, either alone or in conjunction
with any other person or persons, corporation or corporations.
(8) To guarantee the validity, performance or effect of any contract
or agreement, and the fidelity of persons holding places of
responsibility or trust; to become surety for any person, or persons,
for the faithful performance of any trust, office, duty, contract or
agreement, either by itself or in conjunction with any other person,
or persons, corporation, or corporations, or in like manner become
surety upon any bond, recognizance, obligation, judgment, suit, order,
or decree to be entered in any court of record within the State of
Delaware or elsewhere, or which may now or hereafter be required by
any law, judge, officer or court in the State of Delaware or
elsewhere.
(9) To act by any and every method of appointment as trustee, trustee
in bankruptcy, receiver, assignee, assignee in bankruptcy, executor,
administrator, guardian, bailee, or in any other trust capacity in the
receiving, holding, managing, and disposing of any and all estates and
property, real, personal or mixed, and to be appointed as such
trustee, trustee in bankruptcy, receiver, assignee, assignee in
bankruptcy, executor, administrator, guardian or bailee by any
persons, corporations, court, officer, or authority, in the State of
Delaware or elsewhere; and whenever this Corporation is so appointed
by any person, corporation, court, officer or authority such trustee,
trustee in bankruptcy, receiver, assignee, assignee in bankruptcy,
executor, administrator, guardian, bailee, or in any other trust
capacity, it shall not be required to give bond with surety, but its
capital stock shall be taken and held as security for the performance
of the duties devolving upon it by such appointment.
(10) And for its care, management and trouble, and the exercise of
any of its powers hereby given, or for the performance of any of the
duties which it may undertake or be called upon to perform, or for the
assumption of any responsibility the said Corporation may be entitled
to receive a proper compensation.
(11) To purchase, receive, hold and own bonds, mortgages, debentures,
shares of capital stock, and other securities, obligations, contracts
and
3
<PAGE>
evidences of indebtedness, of any private, public or municipal
corporation within and without the State of Delaware, or of the
Government of the United States, or of any state, territory, colony,
or possession thereof, or of any foreign government or country; to
receive, collect, receipt for, and dispose of interest, dividends
and income upon and from any of the bonds, mortgages, debentures,
notes, shares of capital stock, securities, obligations, contracts,
evidences of indebtedness and other property held and owned by it,
and to exercise in respect of all such bonds, mortgages, debentures,
notes, shares of capital stock, securities, obligations, contracts,
evidences of indebtedness and other property, any and all the
rights, powers and privileges of individual owners thereof,
including the right to vote thereon; to invest and deal in and with
any of the moneys of the Corporation upon such securities and in
such manner as it may think fit and proper, and from time to time to
vary or realize such investments; to issue bonds and secure the same
by pledges or deeds of trust or mortgages of or upon the whole or
any part of the property held or owned by the Corporation, and to
sell and pledge such bonds, as and when the Board of Directors shall
determine, and in the promotion of its said corporate business of
investment and to the extent authorized by law, to lease, purchase,
hold, sell, assign, transfer, pledge, mortgage and convey real and
personal property of any name and nature and any estate or interest
therein.
(b) In furtherance of, and not in limitation, of the powers conferred by
the laws of the State of Delaware, it is hereby expressly provided that the
said Corporation shall also have the following powers:
(1) To do any or all of the things herein set forth, to the same
extent as natural persons might or could do, and in any part of the
world.
(2) To acquire the good will, rights, property and franchises and to
undertake the whole or any part of the assets and liabilities of any
person, firm, association or corporation, and to pay for the same in
cash, stock of this Corporation, bonds or otherwise; to hold or in any
manner to dispose of the whole or any part of the property so
purchased; to conduct in any lawful manner the whole or any part of
any business so acquired, and to exercise all the powers necessary or
convenient in and about the conduct and management of such business.
(3) To take, hold, own, deal in, mortgage or otherwise lien, and to
lease, sell, exchange, transfer, or in any manner whatever dispose of
property, real, personal or mixed, wherever situated.
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(4) To enter into, make, perform and carry out contracts of every
kind with any person, firm, association or corporation, and, without
limit as to amount, to draw, make, accept, endorse, discount, execute
and issue promissory notes, drafts, bills of exchange, warrants,
bonds, debentures, and other negotiable or transferable instruments.
(5) To have one or more offices, to carry on all or any of its
operations and businesses, without restriction to the same extent as
natural persons might or could do, to purchase or otherwise acquire,
to hold, own, to mortgage, sell, convey or otherwise dispose of, real
and personal property, of every class and description, in any State,
District, Territory or Colony of the United States, and in any foreign
country or place.
(6) It is the intention that the objects, purposes and powers
specified and clauses contained in this paragraph shall (except where
otherwise expressed in said paragraph) be nowise limited or restricted
by reference to or inference from the terms of any other clause of
this or any other paragraph in this charter, but that the objects,
purposes and powers specified in each of the clauses of this paragraph
shall be regarded as independent objects, purposes and powers.
Fourth: - (a) The total number of shares of all classes of stock which the
Corporation shall have authority to issue is forty-one million (41,000,000)
shares, consisting of:
(1) One million (1,000,000) shares of Preferred stock, par value
$10.00 per share (hereinafter referred to as "Preferred Stock"); and
(2) Forty million (40,000,000) shares of Common Stock, par value
$1.00 per share (hereinafter referred to as "Common Stock").
(b) Shares of Preferred Stock may be issued from time to time in one or
more series as may from time to time be determined by the Board of
Directors each of said series to be distinctly designated. All shares of
any one series of Preferred Stock shall be alike in every particular,
except that there may be different dates from which dividends, if any,
thereon shall be cumulative, if made cumulative. The voting powers and the
preferences and relative, participating, optional and other special rights
of each such series, and the qualifications, limitations or restrictions
thereof, if any, may differ from those of any and all other series at any
time outstanding; and, subject to the provisions of subparagraph 1 of
Paragraph (c)
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of this Article Fourth, the Board of Directors of the Corporation is
hereby expressly granted authority to fix by resolution or resolutions
adopted prior to the issuance of any shares of a particular series of
Preferred Stock, the voting powers and the designations, preferences and
relative, optional and other special rights, and the qualifications,
limitations and restrictions of such series, including, but without
limiting the generality of the foregoing, the following:
(1) The distinctive designation of, and the number of shares of
Preferred Stock which shall constitute such series, which number may
be increased (except where otherwise provided by the Board of
Directors) or decreased (but not below the number of shares thereof
then outstanding) from time to time by like action of the Board of
Directors;
(2) The rate and times at which, and the terms and conditions on
which, dividends, if any, on Preferred Stock of such series shall be
paid, the extent of the preference or relation, if any, of such
dividends to the dividends payable on any other class or classes, or
series of the same or other class of stock and whether such dividends
shall be cumulative or non-cumulative;
(3) The right, if any, of the holders of Preferred Stock of such
series to convert the same into or exchange the same for, shares of
any other class or classes or of any series of the same or any other
class or classes of stock of the Corporation and the terms and
conditions of such conversion or exchange;
(4) Whether or not Preferred Stock of such series shall be subject to
redemption, and the redemption price or prices and the time or times
at which, and the terms and conditions on which, Preferred Stock of
such series may be redeemed.
(5) The rights, if any, of the holders of Preferred Stock of such
series upon the voluntary or involuntary liquidation, merger,
consolidation, distribution or sale of assets, dissolution or winding-
up, of the Corporation.
(6) The terms of the sinking fund or redemption or purchase account,
if any, to be provided for the Preferred Stock of such series; and
(7) The voting powers, if any, of the holders of such series of
Preferred Stock which may, without limiting the generality of the
foregoing include the right, voting as a series or by itself or
together with other series of Preferred Stock or all series of
Preferred Stock as a class, to elect one or more directors of the
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<PAGE>
Corporation if there shall have been a default in the payment of
dividends on any one or more series of Preferred Stock or under such
circumstances and on such conditions as the Board of Directors may
determine.
(c) (1) After the requirements with respect to preferential dividends on
the Preferred Stock (fixed in accordance with the provisions of section (b)
of this Article Fourth), if any, shall have been met and after the
Corporation shall have complied with all the requirements, if any, with
respect to the setting aside of sums as sinking funds or redemption or
purchase accounts (fixed in accordance with the provisions of section (b)
of this Article Fourth), and subject further to any conditions which may be
fixed in accordance with the provisions of section (b) of this Article
Fourth, then and not otherwise the holders of Common Stock shall be
entitled to receive such dividends as may be declared from time to time by
the Board of Directors.
(2) After distribution in full of the preferential amount, if any,
(fixed in accordance with the provisions of section (b) of this
Article Fourth), to be distributed to the holders of Preferred Stock
in the event of voluntary or involuntary liquidation, distribution or
sale of assets, dissolution or winding-up, of the Corporation, the
holders of the Common Stock shall be entitled to receive all of the
remaining assets of the Corporation, tangible and intangible, of
whatever kind available for distribution to stockholders ratably in
proportion to the number of shares of Common Stock held by them
respectively.
(3) Except as may otherwise be required by law or by the provisions
of such resolution or resolutions as may be adopted by the Board of
Directors pursuant to section (b) of this Article Fourth, each holder
of Common Stock shall have one vote in respect of each share of Common
Stock held on all matters voted upon by the stockholders.
(d) No holder of any of the shares of any class or series of stock or of
options, warrants or other rights to purchase shares of any class or
series of stock or of other securities of the Corporation shall have any
preemptive right to purchase or subscribe for any unissued stock of any
class or series or any additional shares of any class or series to be
issued by reason of any increase of the authorized capital stock of the
Corporation of any class or series, or bonds, certificates of
indebtedness, debentures or other securities convertible into or
exchangeable for stock of the Corporation of any class or series, or
carrying any right to purchase stock of any class or series, but any such
unissued stock, additional authorized issue of shares of any class or
series of stock or securities convertible into or
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<PAGE>
exchangeable for stock, or carrying any right to purchase stock, may be
issued and disposed of pursuant to resolution of the Board of Directors
to such persons, firms, corporations or associations, whether such
holders or others, and upon such terms as may be deemed advisable by the
Board of Directors in the exercise of its sole discretion.
(e) The relative powers, preferences and rights of each series of
Preferred Stock in relation to the relative powers, preferences and rights
of each other series of Preferred Stock shall, in each case, be as fixed
from time to time by the Board of Directors in the resolution or
resolutions adopted pursuant to authority granted in section (b) of this
Article Fourth and the consent, by class or series vote or otherwise, of
the holders of such of the series of Preferred Stock as are from time to
time outstanding shall not be required for the issuance by the Board of
Directors of any other series of Preferred Stock whether or not the powers,
preferences and rights of such other series shall be fixed by the Board of
Directors as senior to, or on a parity with, the powers, preferences and
rights of such outstanding series, or any of them; provided, however, that
the Board of Directors may provide in the resolution or resolutions as to
any series of Preferred Stock adopted pursuant to section (b) of this
Article Fourth that the consent of the holders of a majority (or such
greater proportion as shall be therein fixed) of the outstanding shares of
such series voting thereon shall be required for the issuance of any or all
other series of Preferred Stock.
(f) Subject to the provisions of section (e), shares of any series of
Preferred Stock may be issued from time to time as the Board of Directors
of the Corporation shall determine and on such terms and for such
consideration as shall be fixed by the Board of Directors.
(g) Shares of Common Stock may be issued from time to time as the Board of
Directors of the Corporation shall determine and on such terms and for such
consideration as shall be fixed by the Board of Directors.
(h) The authorized amount of shares of Common Stock and of Preferred Stock
may, without a class or series vote, be increased or decreased from time to
time by the affirmative vote of the holders of a majority of the stock of
the Corporation entitled to vote thereon.
Fifth: - (a) The business and affairs of the Corporation shall be
conducted and managed by a Board of Directors. The number of directors
constituting the entire Board shall be not less than five nor more than
twenty-five as fixed from time to time by vote of a majority of the whole
Board, provided, however, that the number
8
<PAGE>
of directors shall not be reduced so as to shorten the term of any
director at the time in office, and provided further, that the number of
directors constituting the whole Board shall be twenty-four until
otherwise fixed by a majority of the whole Board.
(b) The Board of Directors shall be divided into three classes, as nearly
equal in number as the then total number of directors constituting the
whole Board permits, with the term of office of one class expiring each
year. At the annual meeting of stockholders in 1982, directors of the
first class shall be elected to hold office for a term expiring at the next
succeeding annual meeting, directors of the second class shall be elected
to hold office for a term expiring at the second succeeding annual meeting
and directors of the third class shall be elected to hold office for a term
expiring at the third succeeding annual meeting. Any vacancies in the
Board of Directors for any reason, and any newly created directorships
resulting from any increase in the directors, may be filled by the Board of
Directors, acting by a majority of the directors then in office, although
less than a quorum, and any directors so chosen shall hold office until the
next annual election of directors. At such election, the stockholders
shall elect a successor to such director to hold office until the next
election of the class for which such director shall have been chosen and
until his successor shall be elected and qualified. No decrease in the
number of directors shall shorten the term of any incumbent director.
(c) Notwithstanding any other provisions of this Charter or Act of
Incorporation or the By-Laws of the Corporation (and notwithstanding the
fact that some lesser percentage may be specified by law, this Charter or
Act of Incorporation or the By-Laws of the Corporation), any director or
the entire Board of Directors of the Corporation may be removed at any time
without cause, but only by the affirmative vote of the holders of two-
thirds or more of the outstanding shares of capital stock of the
Corporation entitled to vote generally in the election of directors
(considered for this purpose as one class) cast at a meeting of the
stockholders called for that purpose.
(d) Nominations for the election of directors may be made by the Board of
Directors or by any stockholder entitled to vote for the election of
directors. Such nominations shall be made by notice in writing, delivered
or mailed by first class United States mail, postage prepaid, to the
Secretary of the Corporation not less than 14 days nor more than 50 days
prior to any meeting of the stockholders called for the election of
directors; provided, however, that if less than 21 days' notice of the
meeting is given to stockholders, such written notice shall be delivered or
mailed, as prescribed, to the Secretary of the Corporation not later than
the close of the seventh day following the day on which notice of the
meeting was mailed to
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stockholders. Notice of nominations which are proposed by the Board of
Directors shall be given by the Chairman on behalf of the Board.
(e) Each notice under subsection (d) shall set forth (i) the name, age,
business address and, if known, residence address of each nominee proposed
in such notice, (ii) the principal occupation or employment of such nominee
and (iii) the number of shares of stock of the Corporation which are
beneficially owned by each such nominee.
(f) The Chairman of the meeting may, if the facts warrant, determine and
declare to the meeting that a nomination was not made in accordance with
the foregoing procedure, and if he should so determine, he shall so declare
to the meeting and the defective nomination shall be disregarded.
(g) No action required to be taken or which may be taken at any annual or
special meeting of stockholders of the Corporation may be taken without a
meeting, and the power of stockholders to consent in writing, without a
meeting, to the taking of any action is specifically denied.
Sixth: - The Directors shall choose such officers, agent and servants as
may be provided in the By-Laws as they may from time to time find necessary
or proper.
Seventh: - The Corporation hereby created is hereby given the same powers,
rights and privileges as may be conferred upon corporations organized under
the Act entitled "An Act Providing a General Corporation Law", approved
March 10, 1899, as from time to time amended.
Eighth: - This Act shall be deemed and taken to be a private Act.
Ninth: - This Corporation is to have perpetual existence.
Tenth: - The Board of Directors, by resolution passed by a majority of the
whole Board, may designate any of their number to constitute an Executive
Committee, which Committee, to the extent provided in said resolution, or
in the By-Laws of the Company, shall have and may exercise all of the
powers of the Board of Directors in the management of the business and
affairs of the Corporation, and shall have power to authorize the seal of
the Corporation to be affixed to all papers which may require it.
Eleventh: - The private property of the stockholders shall not be liable
for the payment of corporate debts to any extent whatever.
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Twelfth: - The Corporation may transact business in any part of the world.
Thirteenth: - The Board of Directors of the Corporation is expressly
authorized to make, alter or repeal the By-Laws of the Corporation by a
vote of the majority of the entire Board. The stockholders may make, alter
or repeal any By-Law whether or not adopted by them, provided however, that
any such additional By-Laws, alterations or repeal may be adopted only by
the affirmative vote of the holders of two-thirds or more of the
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors (considered for this purpose as one
class).
Fourteenth: - Meetings of the Directors may be held outside
of the State of Delaware at such places as may be from time to time
designated by the Board, and the Directors may keep the books of the
Company outside of the State of Delaware at such places as may be from time
to time designated by them.
Fifteenth: - (a) (1) In addition to any affirmative vote required by law,
and except as otherwise expressly provided in sections (b) and (c) of this
Article Fifteenth:
(A) any merger or consolidation of the Corporation or any Subsidiary
(as hereinafter defined) with or into (i) any Interested Stockholder
(as hereinafter defined) or (ii) any other corporation (whether or not
itself an Interested Stockholder), which, after such merger or
consolidation, would be an Affiliate (as hereinafter defined) of an
Interested Stockholder, or
(B) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or a series of related transactions)
to or with any Interested Stockholder or any Affiliate of any
Interested Stockholder of any assets of the Corporation or any
Subsidiary having an aggregate fair market value of $1,000,000 or
more, or
(C) the issuance or transfer by the Corporation or any Subsidiary (in
one transaction or a series of related transactions) of any securities
of the Corporation or any Subsidiary to any Interested Stockholder or
any Affiliate of any Interested Stockholder in exchange for cash,
securities or other property (or a combination thereof) having an
aggregate fair market value of $1,000,000 or more, or
(D) the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation, or
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<PAGE>
(E) any reclassification of securities (including any reverse stock
split), or recapitalization of the Corporation, or any merger or
consolidation of the Corporation with any of its Subsidiaries or any
similar transaction (whether or not with or into or otherwise
involving an Interested Stockholder) which has the effect, directly or
indirectly, of increasing the proportionate share of the outstanding
shares of any class of equity or convertible securities of the
Corporation or any Subsidiary which is directly or indirectly owned by
any Interested Stockholder, or any Affiliate of any Interested
Stockholder, shall require the affirmative vote of the holders of at
least two-thirds of the outstanding shares of capital stock of the
Corporation entitled to vote generally in the election of directors,
considered for the purpose of this Article Fifteenth as one class
("Voting Shares"). Such affirmative vote shall be required
notwithstanding the fact that no vote may be required, or that some
lesser percentage may be specified, by law or in any agreement with
any national securities exchange or otherwise.
(2) The term "business combination" as used in this Article
Fifteenth shall mean any transaction which is referred to any one
or more of clauses (A) through (E) of paragraph 1 of the section
(a).
(b) The provisions of section (a) of this Article Fifteenth shall not
be applicable to any particular business combination and such business
combination shall require only such affirmative vote as is required by
law and any other provisions of the Charter or Act of Incorporation of
By-Laws if such business combination has been approved by a majority
of the whole Board.
(c) For the purposes of this Article Fifteenth:
(1) A "person" shall mean any individual firm, corporation or other
entity.
(2) "Interested Stockholder" shall mean, in respect of any business
combination, any person (other than the Corporation or any Subsidiary) who
or which as of the record date for the determination of stockholders
entitled to notice of and to vote on such business combination, or
immediately prior to the consummation of any such transaction:
(A) is the beneficial owner, directly or indirectly, of more than 10%
of the Voting Shares, or
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(B) is an Affiliate of the Corporation and at any time within two
years prior thereto was the beneficial owner, directly or indirectly,
of not less than 10% of the then outstanding voting Shares, or
(C) is an assignee of or has otherwise succeeded in any share of
capital stock of the Corporation which were at any time within two
years prior thereto beneficially owned by any Interested Stockholder,
and such assignment or succession shall have occurred in the course of
a transaction or series of transactions not involving a public
offering within the meaning of the Securities Act of 1933.
(3) A person shall be the "beneficial owner" of any Voting Shares:
(A) which such person or any of its Affiliates and Associates (as
hereafter defined) beneficially own, directly or indirectly, or
(B) which such person or any of its Affiliates or Associates has (i)
the right to acquire (whether such right is exercisable immediately or
only after the passage of time), pursuant to any agreement,
arrangement or understanding or upon the exercise of conversion
rights, exchange rights, warrants or options, or otherwise, or (ii)
the right to vote pursuant to any agreement, arrangement or
understanding, or
(C) which are beneficially owned, directly or indirectly, by any
other person with which such first mentioned person or any of its
Affiliates or Associates has any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or
disposing of any shares of capital stock of the Corporation.
(4) The outstanding Voting Shares shall include shares deemed owned
through application of paragraph (3) above but shall not include any other
Voting Shares which may be issuable pursuant to any agreement, or upon
exercise of conversion rights, warrants or options or otherwise.
(5) "Affiliate" and "Associate" shall have the respective meanings given
those terms in Rule 12b-2 of the General Rules and Regulations under the
Securities Exchange Act of 1934, as in effect on December 31, 1981.
(6) "Subsidiary" shall mean any corporation of which a majority of any
class of equity security (as defined in Rule 3a11-1 of the General Rules
and Regulations under the Securities Exchange Act of 1934, as in effect in
December 31, 1981) is
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owned, directly or indirectly, by the Corporation; provided, however,
that for the purposes of the definition of Investment Stockholder set
forth in paragraph (2) of this section (c), the term "Subsidiary" shall
mean only a corporation of which a majority of each class of equity
security is owned, directly or indirectly, by the Corporation.
(d) majority of the directors shall have the power and duty to
determine for the purposes of this Article Fifteenth on the basis of
information known to them, (1) the number of Voting Shares
beneficially owned by any person (2) whether a person is an Affiliate
or Associate of another, (3) whether a person has an agreement,
arrangement or understanding with another as to the matters referred
to in paragraph (3) of section (c), or (4) whether the assets subject
to any business combination or the consideration received for the
issuance or transfer of securities by the Corporation, or any
Subsidiary has an aggregate fair market value of $1,000,000 or more.
(e) Nothing contained in this Article Fifteenth shall be construed to
relieve any Interested Stockholder from any fiduciary obligation
imposed by law.
Sixteenth: Notwithstanding any other provision of this Charter or Act of
Incorporation or the By-Laws of the Corporation (and in addition to any
other vote that may be required by law, this Charter or Act of
Incorporation by the By-Laws), the affirmative vote of the holders of at
least two-thirds of the outstanding shares of the capital stock of the
Corporation entitled to vote generally in the election of directors
(considered for this purpose as one class) shall be required to amend,
alter or repeal any provision of Articles Fifth, Thirteenth, Fifteenth or
Sixteenth of this Charter or Act of Incorporation.
Seventeenth: (a) a Director of this Corporation shall not be liable to the
Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a Director, except to the extent such exemption from
liability or limitation thereof is not permitted under the Delaware General
Corporation Laws as the same exists or may hereafter be amended.
(b) Any repeal or modification of the foregoing paragraph shall not
adversely affect any right or protection of a Director of the
Corporation existing hereunder with respect to any act or omission
occurring prior to the time of such repeal or modification."
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EXHIBIT B
BY-LAWS
WILMINGTON TRUST COMPANY
WILMINGTON, DELAWARE
As existing on January 16, 1997
<PAGE>
BY-LAWS OF WILMINGTON TRUST COMPANY
ARTICLE I
Stockholders' Meetings
Section 1. The Annual Meeting of Stockholders shall be held on the
third Thursday in April each year at the principal office at the Company
or at such other date, time, or place as may be designated by resolution
by the Board of Directors.
Section 2. Special meetings of all stockholders may be called at
any time by the Board of Directors, the Chairman of the Board or the
President.
Section 3. Notice of all meetings of the stockholders shall be
given by mailing to each stockholder at least ten (10) days before said
meeting, at his last known address, a written or printed notice fixing
the time and place of such meeting.
Section 4. A majority in the amount of the capital stock of the
Company issued and outstanding on the record date, as herein determined,
shall constitute a quorum at all meetings of stockholders for the
transaction of any business, but the holders of a small number of shares
may adjourn, from time to time, without further notice, until a quorum is
secured. At each annual or special meeting of stockholders, each
stockholder shall be entitled to one vote, either in person or by proxy,
for each shares of stock registered in the stockholder's name on the
books of the Company on the record date for any such meeting as
determined herein.
ARTICLE II
Directors
Section 1. The number and classification of the Board of Directors
shall be as set forth in the Charter of the Bank.
Section 2. No person who has attained the age of seventy-two (72)
years shall be nominated for election to the Board of Directors of the
Company, provided, however, that this limitation shall not apply to any
person who was serving as director of the Company on September 16, 1971.
Section 3. The class of Directors so elected shall hold office for
three years or until their successors are elected and qualified.
Section 4. The affairs and business of the Company shall be managed
and
<PAGE>
conducted by the Board of Directors.
Section 5. The Board of Directors shall meet at the principal
office of the Company or elsewhere in its discretion at such times to be
determined by a majority of its members, or at the call of the Chairman
of the Board of Directors or the President.
Section 6. Special meetings of the Board of Directors may be called
at any time by the Chairman of the Board of Directors or by the
President, and shall be called upon the written request of a majority of
the directors.
Section 7. A majority of the directors elected and qualified shall
be necessary to constitute a quorum for the transaction of business at
any meeting of the Board of Directors.
Section 8. Written notice shall be sent by mail to each director of
any special meeting of the Board of Directors, and of any change in the
time or place of any regular meeting, stating the time and place of such
meeting, which shall be mailed not less than two days before the time of
holding such meeting.
Section 9. In the event of the death, resignation, removal,
inability to act, or disqualification of any director, the Board of
Directors, although less than a quorum, shall have the right to elect the
successor who shall hold office for the remainder of the full term of the
class of directors in which the vacancy occurred, and until such
director's successor shall have been duly elected and qualified.
Section 10. The Board of Directors at its first meeting after its
election by the stockholders shall appoint an Executive Committee, a
Trust Committee, an Audit Committee and a Compensation Committee, and
shall elect from its own members a Chairman of the Board of Directors and
a President who may be the same person. The Board of Directors shall
also elect at such meeting a Secretary and a Treasurer, who may be the
same person, may appoint at any time such other committees and elect or
appoint such other officers as it may deem advisable. The Board of
Directors may also elect at such meeting one or more Associate Directors.
Section 11. The Board of Directors may at any time remove, with or
without cause, any member of any Committee appointed by it or any
associate director or officer elected by it and may appoint or elect his
successor.
Section 12. The Board of Directors may designate an officer to be
in charge of such of the departments or division of the Company as it may
deem advisable.
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ARTICLE III
Committees
Section 1. Executive Committee
(A) The Executive Committee shall be composed of not more
than nine members who shall be selected by the Board of Directors from its
own members and who shall hold office during the pleasure of the Board.
(B) The Executive Committee shall have all the powers of
the Board of Directors when it is not in session to transact all business for
and in behalf of the Company that may be brought before it.
(C) The Executive Committee shall meet at the principal
office of the Company or elsewhere in its discretion at such times to be
determined by a majority of its members, or at the call of the Chairman of
the Executive Committee or at the call of the Chairman of the Board of
Directors. The majority of its members shall be necessary to constitute a
quorum for the transaction of business. Special meetings of the Executive
Committee may be held at any time when a quorum is present.
(D) Minutes of each meeting of the Executive Committee
shall be kept and submitted to the Board of Directors at its next meeting.
(E) The Executive Committee shall advise and superintend
all investments that may be made of the funds of the Company, and shall
direct the disposal of the same, in accordance with such rules and
regulations as the Board of Directors from time to time make.
(F) In the event of a state of disaster of sufficient
severity to prevent the conduct and management of the affairs and business of
the Company by its directors and officers as contemplated by these By-Laws
any two available members of the Executive Committee as constituted
immediately prior to such disaster shall constitute a quorum of that
Committee for the full conduct and management of the affairs and business of
the Company in accordance with the provisions of Article III of these
By-Laws; and if less than three members of the Trust Committee is constituted
immediately prior to such disaster shall be available for the transaction of
its business, such Executive Committee shall also be empowered to exercise
all of the powers reserved to the Trust Committee under Article III Section 2
hereof. In the event of the unavailability, at such time, of a minimum of
two members of such Executive Committee, any three available directors shall
constitute the Executive Committee for the full conduct and management of the
affairs and business of the Company in accordance with the foregoing
provisions of this Section. This By-Law shall be
3
<PAGE>
subject to implementation by Resolutions of the Board of Directors presently
existing or hereafter passed from time to time for that purpose, and any
provisions of these By-Laws (other than this Section) and any resolutions
which are contrary to the provisions of this Section or to the provisions of
any such implementary Resolutions shall be suspended during such a disaster
period until it shall be determined by any interim Executive Committee acting
under this section that it shall be to the advantage of the Company to resume
the conduct and management of its affairs and business under all of the other
provisions of these By-Laws.
4
<PAGE>
Section 2. Trust Committee
(A) The Trust Committee shall be composed of not more than
thirteen members who shall be selected by the Board of Directors, a majority
of whom shall be members of the Board of Directors and who shall hold office
during the pleasure of the Board.
(B) The Trust Committee shall have general supervision over
the Trust Department and the investment of trust funds, in all matters,
however, being subject to the approval of the Board of Directors.
(C) The Trust Committee shall meet at the principal office
of the Company or elsewhere in its discretion at such times to be determined
by a majority of its members or at the call of its chairman. A majority of
its members shall be necessary to constitute a quorum for the transaction of
business.
(D) Minutes of each meeting of the Trust Committee shall be
kept and promptly submitted to the Board of Directors.
(E) The Trust Committee shall have the power to appoint
Committees and/or designate officers or employees of the Company to whom
supervision over the investment of trust funds may be delegated when the
Trust Committee is not in session.
Section 3. Audit Committee
(A) The Audit Committee shall be composed of five members
who shall be selected by the Board of Directors from its own members, none of
whom shall be an officer of the Company, and shall hold office at the
pleasure of the Board.
(B) The Audit Committee shall have general supervision over
the Audit Division in all matters however subject to the approval of the
Board of Directors; it shall consider all matters brought to its attention by
the officer in charge of the Audit Division, review all reports of
examination of the Company made by any governmental agency or such
independent auditor employed for that purpose, and make such recommendations
to the Board of Directors with respect thereto or with respect to any other
matters pertaining to auditing the Company as it shall deem desirable.
(C) The Audit Committee shall meet whenever and wherever
the majority of its members shall deem it to be proper for the transaction of
its business, and a majority of its Committee shall constitute a quorum.
5
<PAGE>
Section 4. Compensation Committee
(A) The Compensation Committee shall be composed of not
more than five (5) members who shall be selected by the Board of Directors
from its own members who are not officers of the Company and who shall hold
office during the pleasure of the Board.
(B) The Compensation Committee shall in general advise upon
all matters of policy concerning the Company brought to its attention by the
management and from time to time review the management of the Company, major
organizational matters, including salaries and employee benefits and
specifically shall administer the Executive Incentive Compensation Plan.
(C) Meetings of the Compensation Committee may be called at
any time by the Chairman of the Compensation Committee, the Chairman of the
Board of Directors, or the President of the Company.
Section 5. Associate Directors
(A) Any person who has served as a director may be elected
by the Board of Directors as an associate director, to serve during the
pleasure of the Board.
(B) An associate director shall be entitled to attend all
directors meetings and participate in the discussion of all matters brought
to the Board, with the exception that he would have no right to vote. An
associate director will be eligible for appointment to Committees of the
Company, with the exception of the Executive Committee, Audit Committee and
Compensation Committee, which must be comprised solely of active directors.
Section 6. Absence or Disqualification of Any Member of a Committee
(A) In the absence or disqualification of any member of any
Committee created under Article III of the By-Laws of this Company, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously
appoint another member of the Board of Directors to act at the meeting in the
place of any such absence or disqualified member.
ARTICLE IV
Officers
Section 1. The Chairman of the Board of Directors shall preside at all
meetings of
6
<PAGE>
the Board and shall have such further authority and powers and shall perform
such duties as the Board of Directors may from time to time confer and
direct. He shall also exercise such powers and perform such duties as may
from time to time be agreed upon between himself and the President of the
Company.
Section 2. THE VICE CHAIRMAN OF THE BOARD. The Vice Chairman of the
Board of Directors shall preside at all meetings of the Board of Directors at
which the Chairman of the Board shall not be present and shall have such
further authority and powers and shall perform such duties as the Board of
Directors or the Chairman of the Board may from time to time confer and
direct.
Section 3. The President shall have the powers and duties pertaining to
the office of the President conferred or imposed upon him by statute or
assigned to him by the Board of Directors in the absence of the Chairman of
the Board the President shall have the powers and duties of the Chairman of
the Board.
Section 4. The Chairman of the Board of Directors or the President as
designated by the Board of Directors, shall carry into effect all legal
directions of the Executive Committee and of the Board of Directors, and
shall at all times exercise general supervision over the interest, affairs
and operations of the Company and perform all duties incident to his office.
Section 5. There may be one or more Vice Presidents, however
denominated by the Board of Directors, who may at any time perform all the
duties of the Chairman of the Board of Directors and/or the President and
such other powers and duties as may from time to time be assigned to them by
the Board of Directors, the Executive Committee, the Chairman of the Board or
the President and by the officer in charge of the department or division to
which they are assigned.
Section 6. The Secretary shall attend to the giving of notice of
meetings of the stockholders and the Board of Directors, as well as the
Committees thereof, to the keeping of accurate minutes of all such meetings
and to recording the same in the minute books of the Company. In addition to
the other notice requirements of these By-Laws and as may be practicable
under the circumstances, all such notices shall be in writing and mailed well
in advance of the scheduled date of any other meeting. He shall have custody
of the corporate seal and shall affix the same to any documents requiring
such corporate seal and to attest the same.
Section 7. The Treasurer shall have general supervision over all assets
and liabilities of the Company. He shall be custodian of and responsible for
all monies, funds and valuables of the Company and for the keeping of proper
records of the evidence of
7
<PAGE>
property or indebtedness and of all the transactions of the Company. He
shall have general supervision of the expenditures of the Company and shall
report to the Board of Directors at each regular meeting of the condition of
the Company, and perform such other duties as may be assigned to him from
time to time by the Board of Directors of the Executive Committee.
Section 8. There may be a Controller who shall exercise general
supervision over the internal operations of the Company, including
accounting, and shall render to the Board of Directors at appropriate times a
report relating to the general condition and internal operations of the
Company.
There may be one or more subordinate accounting or controller officers
however denominated, who may perform the duties of the Controller and such
duties as may be prescribed by the Controller.
Section 9. The officer designated by the Board of Directors to be in
charge of the Audit Division of the Company with such title as the Board of
Directors shall prescribe, shall report to and be directly responsible only
to the Board of Directors.
There shall be an Auditor and there may be one or more Audit Officers,
however denominated, who may perform all the duties of the Auditor and such
duties as may be prescribed by the officer in charge of the Audit Division.
Section 10. There may be one or more officers, subordinate in rank to
all Vice Presidents with such functional titles as shall be determined from
time to time by the Board of Directors, who shall ex officio hold the office
Assistant Secretary of this Company and who may perform such duties as may be
prescribed by the officer in charge of the department or division to whom
they are assigned.
Section 11. The powers and duties of all other officers of the Company
shall be those usually pertaining to their respective offices, subject to the
direction of the Board of Directors, the Executive Committee, Chairman of the
Board of Directors or the President and the officer in charge of the
department or division to which they are assigned.
ARTICLE V
Stock and Stock Certificates
Section 1. Shares of stock shall be transferrable on the books of the
Company and a transfer book shall be kept in which all transfers of stock
shall be recorded.
8
<PAGE>
Section 2. Certificate of stock shall bear the signature of the
President or any Vice President, however denominated by the Board of
Directors and countersigned by the Secretary or Treasurer or an Assistant
Secretary, and the seal of the corporation shall be engraved thereon. Each
certificate shall recite that the stock represented thereby is transferrable
only upon the books of the Company by the holder thereof or his attorney,
upon surrender of the certificate properly endorsed. Any certificate of
stock surrendered to the Company shall be cancelled at the time of transfer,
and before a new certificate or certificates shall be issued in lieu thereof.
Duplicate certificates of stock shall be issued only upon giving such
security as may be satisfactory to the Board of Directors or the Executive
Committee.
Section 3. The Board of Directors of the Company is authorized to fix
in advance a record date for the determination of the stockholders entitled
to notice of, and to vote at, any meeting of stockholders and any adjournment
thereof, or entitled to receive payment of any dividend, or to any allotment
or rights, or to exercise any rights in respect of any change, conversion or
exchange of capital stock, or in connection with obtaining the consent of
stockholders for any purpose, which record date shall not be more than 60 nor
less than 10 days proceeding the date of any meeting of stockholders or the
date for the payment of any dividend, or the date for the allotment of
rights, or the date when any change or conversion or exchange of capital
stock shall go into effect, or a date in connection with obtaining such
consent.
ARTICLE VI
Seal
Section 1. The corporate seal of the Company shall be in the following
form:
Between two concentric circles the words
"Wilmington Trust Company" within the inner
circle the words "Wilmington, Delaware."
ARTICLE VII
Fiscal Year
Section 1. The fiscal year of the Company shall be the calendar year.
ARTICLE VIII
Execution of Instruments of the Company
9
<PAGE>
Section 1. The Chairman of the Board, the President or any Vice
President, however denominated by the Board of Directors, shall have full
power and authority to enter into, make, sign, execute, acknowledge and/or
deliver and the Secretary or any Assistant Secretary shall have full power
and authority to attest and affix the corporate seal of the Company to any
and all deeds, conveyances, assignments, releases, contracts, agreements,
bonds, notes, mortgages and all other instruments incident to the business of
this Company or in acting as executor, administrator, guardian, trustee,
agent or in any other fiduciary or representative capacity by any and every
method of appointment or by whatever person, corporation, court officer or
authority in the State of Delaware, or elsewhere, without any specific
authority, ratification, approval or confirmation by the Board of Directors
or the Executive Committee, and any and all such instruments shall have the
same force and validity as though expressly authorized by the Board of
Directors and/or the Executive Committee.
10
<PAGE>
ARTICLE IX
Compensation of Directors and Members of Committees
Section 1. Directors and associate directors of the Company, other than
salaried officers of the Company, shall be paid such reasonable honoraria or
fees for attending meetings of the Board of Directors as the Board of
Directors may from time to time determine. Directors and associate directors
who serve as members of committees, other than salaried employees of the
Company, shall be paid such reasonable honoraria or fees for services as
members of committees as the Board of Directors shall from time to time
determine and directors and associate directors may be employed by the
Company for such special services as the Board of Directors may from time to
time determine and shall be paid for such special services so performed
reasonable compensation as may be determined by the Board of Directors.
ARTICLE X
Indemnification
Section 1. (A) The Corporation shall indemnify and hold harmless, to
the fullest extent permitted by applicable law as it presently exists or may
hereafter be amended, any person who was or is made or is threatened to be
made a party or is otherwise involved in any action, suit or proceeding,
whether civil, criminal, administrative or investigative (a "proceeding") by
reason of the fact that he, or a person for whom he is the legal
representative, 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, fiduciary or agent of another corporation or of
a partnership, joint venture, trust, enterprise or non-profit entity,
including service with respect to employee benefit plans, against all
liability and loss suffered and expenses reasonably incurred by such person.
The Corporation shall indemnify a person in connection with a proceeding
initiated by such person only if the proceeding was authorized by the Board
of Directors of the Corporation.
(B) The Corporation shall pay the expenses incurred in
defending any proceeding in advance of its final disposition, PROVIDED,
HOWEVER, that the payment of expenses incurred by a Director officer in his
capacity as a Director or officer in advance of the final disposition of the
proceeding shall be made only upon receipt of an undertaking by the Director
or officer to repay all amounts advanced if it should be ultimately
determined that the Director or officer is not entitled to be indemnified
under this Article or otherwise.
(C) If a claim for indemnification or payment of expenses,
under this Article X is not paid in full within ninety days after a written
claim therefor has been received by the Corporation the claimant may file
suit to recover the unpaid amount of such
11
<PAGE>
claim and, if successful in whole or in part, shall be entitled to be paid
the expense of prosecuting such claim. In any such action the Corporation
shall have the burden of proving that the claimant was not entitled to the
requested indemnification of payment of expenses under applicable law.
(D) The rights conferred on any person by this Article X
shall not be exclusive of any other rights which such person may have or
hereafter acquire under any statute, provision of the Charter or Act of
Incorporation, these By-Laws, agreement, vote of stockholders or
disinterested Directors or otherwise.
(E) Any repeal or modification of the foregoing provisions
of this Article X shall not adversely affect any right or protection
hereunder of any person in respect of any act or omission occurring prior to
the time of such repeal or modification.
ARTICLE XI
Amendments to the By-Laws
Section 1. These By-Laws may be altered, amended or repealed, in whole
or in part, and any new By-Law or By-Laws adopted at any regular or special
meeting of the Board of Directors by a vote of the majority of all the
members of the Board of Directors then in office.
12
<PAGE>
EXHIBIT C
Section 321(b) Consent
Pursuant to Section 321(b) of the Trust Indenture Act of 1939, as
amended, Wilmington Trust Company hereby consents that reports of
examinations by Federal, State, Territorial or District authorities may be
furnished by such authorities to the Securities and Exchange Commission upon
requests therefor.
WILMINGTON TRUST COMPANY
Dated: June 10, 1999 By: /s/ Norma P. Closs
-----------------------------
Name: Norma P. Closs
Title: Vice President
<PAGE>
EXHIBIT D
NOTICE
This form is intended to assist state nonmember banks and savings
banks with state publication requirements. It has not been approved
by any state banking authorities. Refer to your appropriate state
banking authorities for your state publication requirements.
R E P O R T O F C O N D I T I O N
Consolidating domestic subsidiaries of the
WILMINGTON TRUST COMPANY of WILMINGTON
-------------------------------- ----------------
Name of Bank City
in the State of DELAWARE , at the close of business on March 31, 1999.
----------
<TABLE>
<CAPTION>
ASSETS
- ------ Thousands of dollars
<S> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coins . . . . . . . . . . .196,035
Interest-bearing balances . . . . . . . . . . . . . . . . . . . . . . . . . . 0
Held-to-maturity securities. . . . . . . . . . . . . . . . . . . . . . . . . . 44,909
Available-for-sale securities. . . . . . . . . . . . . . . . . . . . . . . .1,396,028
Federal funds sold and securities purchased under agreements to resell . . . .127,340
Loans and lease financing receivables:
Loans and leases, net of unearned income. . . . . . . 4,176,290
LESS: Allowance for loan and lease losses. . . . . . 68,543
LESS: Allocated transfer risk reserve. . . . . . . . 0
Loans and leases, net of unearned income, allowance, and reserve. . . .4,107,747
Assets held in trading accounts. . . . . . . . . . . . . . . . . . . . . . . . . . .0
Premises and fixed assets (including capitalized leases) . . . . . . . . . . .139,843
Other real estate owned. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,055
Investments in unconsolidated subsidiaries and associated companies. . . . . . .1,225
Customers' liability to this bank on acceptances outstanding . . . . . . . . . . . .0
Intangible assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,265
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99,073
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6,118,520
CONTINUED ON NEXT PAGE
<PAGE>
<CAPTION>
LIABILITIES
<S> <C>
Deposits:
In domestic offices. . . . . . . . . . . . . . . . . . . . . . . . . . . . .4,332,124
Noninterest-bearing . . . . . . . . 959,777
Interest-bearing. . . . . . . . . . 3,372,347
Federal funds purchased and Securities sold under agreements to
repurchase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 432,395
Demand notes issued to the U.S. Treasury . . . . . . . . . . . . . . . . . . . 28,906
Trading liabilities (from Schedule RC-D) . . . . . . . . . . . . . . . . . . . . . .0
Other borrowed money:. . . . . . . . . . . . . . . . . . . . . . . . . . . . .///////
With original maturity of one year or less. . . . . . . . . . . . . . . .715,000
With original maturity of more than one year. . . . . . . . . . . . . . . 43,000
Bank's liability on acceptances executed and outstanding . . . . . . . . . . . . . .0
Subordinated notes and debentures. . . . . . . . . . . . . . . . . . . . . . . . . .0
Other liabilities (from Schedule RC-G) . . . . . . . . . . . . . . . . . . . 93,311
Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5,644,736
EQUITY CAPITAL
Perpetual preferred stock and related surplus. . . . . . . . . . . . . . . . . . . .0
Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .500
Surplus (exclude all surplus related to preferred stock) . . . . . . . . . . . 62,118
Undivided profits and capital reserves . . . . . . . . . . . . . . . . . . . .408,053
Net unrealized holding gains (losses) on available-for-sale securities . . . . 3,113
Total equity capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . .473,784
Total liabilities, limited-life preferred stock, and equity capital. . . . .6,118,520
</TABLE>
2
<PAGE>
EXHIBIT 25.2
Registration No.
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2)
WILMINGTON TRUST COMPANY
(Exact name of trustee as specified in its charter)
Delaware 51-0055023
(State of incorporation) (I.R.S. employer identification no.)
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
(Address of principal executive offices)
Cynthia L. Corliss
Vice President and Trust Counsel
Wilmington Trust Company
Rodney Square North
Wilmington, Delaware 19890
(302) 651-8516
(Name, address and telephone number of agent for service)
SPECTRUM BANCORPORATION, INC.
SPECTRUM CAPITAL TRUST I
(Exact name of obligor as specified in its charter)
Iowa 42-0867112
Delaware Applied For
(State of incorporation) (I.R.S. employer identification no.)
10834 Old Mill Road, Suite One
Omaha, Nebraska 68154-2648
(Address of principal executive offices) (Zip Code)
___% Cumulative Preferred Securities of Spectrum Capital Trust I
(Title of the indenture securities)
<PAGE>
ITEM 1. GENERAL INFORMATION.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to which
it is subject.
Federal Deposit Insurance Co. State Bank Commissioner
Five Penn Center Dover, Delaware
Suite #2901
Philadelphia, PA
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR.
If the obligor is an affiliate of the trustee, describe each
affiliation:
Based upon an examination of the books and records of the trustee and
upon information furnished by the obligor, the obligor is not an affiliate
of the trustee.
ITEM 3. LIST OF EXHIBITS.
List below all exhibits filed as part of this Statement of
Eligibility and Qualification.
A. Copy of the Charter of Wilmington Trust Company, which includes the
certificate of authority of Wilmington Trust Company to commence
business and the authorization of Wilmington Trust Company to exercise
corporate trust powers.
B. Copy of By-Laws of Wilmington Trust Company.
C. Consent of Wilmington Trust Company required by Section 321(b) of
Trust Indenture Act.
D. Copy of most recent Report of Condition of Wilmington Trust Company.
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, Wilmington Trust Company, a corporation organized and
existing under the laws of Delaware, has duly caused this Statement of
Eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of Wilmington and State of Delaware on the 10th day
of June, 1999.
WILMINGTON TRUST COMPANY
[SEAL]
Attest:/s/ Patricia A. Evans By:/s/ Norma P. Closs
----------------------- ----------------------
Assistant Secretary Name: Norma P. Closs
Title: Vice President
2
<PAGE>
EXHIBIT A
AMENDED CHARTER
Wilmington Trust Company
Wilmington, Delaware
As existing on May 9, 1987
<PAGE>
Amended Charter
or
Act of Incorporation
of
Wilmington Trust Company
Wilmington Trust Company, originally incorporated by an Act of the
General Assembly of the State of Delaware, entitled "An Act to Incorporate
the Delaware Guarantee and Trust Company", approved March 2, A.D. 1901, and
the name of which company was changed to "Wilmington Trust Company" by an
amendment filed in the Office of the Secretary of State on March 18, A.D.
1903, and the Charter or Act of Incorporation of which company has been from
time to time amended and changed by merger agreements pursuant to the
corporation law for state banks and trust companies of the State of Delaware,
does hereby alter and amend its Charter or Act of Incorporation so that the
same as so altered and amended shall in its entirety read as follows:
First: - The name of this corporation is Wilmington Trust Company.
Second: - The location of its principal office in the State of Delaware is
at Rodney Square North, in the City of Wilmington, County of New Castle;
the name of its resident agent is Wilmington Trust Company whose address is
Rodney Square North, in said City. In addition to such principal office,
the said corporation maintains and operates branch offices in the City of
Newark, New Castle County, Delaware, the Town of Newport, New Castle
County, Delaware, at Claymont, New Castle County, Delaware, at Greenville,
New Castle County Delaware, and at Milford Cross Roads, New Castle County,
Delaware, and shall be empowered to open, maintain and operate branch
offices at Ninth and Shipley Streets, 418 Delaware Avenue, 2120 Market
Street, and 3605 Market Street, all in the City of Wilmington, New Castle
County, Delaware, and such other branch offices or places of business as
may be authorized from time to time by the agency or agencies of the
government of the State of Delaware empowered to confer such authority.
Third: - (a) The nature of the business and the objects and purposes
proposed to be transacted, promoted or carried on by this Corporation are
to do any or all of the things herein mentioned as fully and to the same
extent as natural persons might or could do and in any part of the world,
viz.:
<PAGE>
(1) To sue and be sued, complain and defend in any Court of law or
equity and to make and use a common seal, and alter the seal at
pleasure, to hold, purchase, convey, mortgage or otherwise deal in
real and personal estate and property, and to appoint such officers
and agents as the business of the Corporation shall require, to make
by-laws not inconsistent with the Constitution or laws of the United
States or of this State, to discount bills, notes or other evidences
of debt, to receive deposits of money, or securities for money, to buy
gold and silver bullion and foreign coins, to buy and sell bills of
exchange, and generally to use, exercise and enjoy all the powers,
rights, privileges and franchises incident to a corporation which are
proper or necessary for the transaction of the business of the
Corporation hereby created.
(2) To insure titles to real and personal property, or any estate or
interests therein, and to guarantee the holder of such property, real
or personal, against any claim or claims, adverse to his interest
therein, and to prepare and give certificates of title for any lands
or premises in the State of Delaware, or elsewhere.
(3) To act as factor, agent, broker or attorney in the receipt,
collection, custody, investment and management of funds, and the
purchase, sale, management and disposal of property of all
descriptions, and to prepare and execute all papers which may be
necessary or proper in such business.
(4) To prepare and draw agreements, contracts, deeds, leases,
conveyances, mortgages, bonds and legal papers of every description,
and to carry on the business of conveyancing in all its branches.
(5) To receive upon deposit for safekeeping money, jewelry, plate,
deeds, bonds and any and all other personal property of every sort and
kind, from executors, administrators, guardians, public officers,
courts, receivers, assignees, trustees, and from all fiduciaries, and
from all other persons and individuals, and from all corporations
whether state, municipal, corporate or private, and to rent boxes,
safes, vaults and other receptacles for such property.
(6) To act as agent or otherwise for the purpose of registering,
issuing, certificating, countersigning, transferring or underwriting
the stock, bonds or other obligations of any corporation, association,
state or municipality, and may receive and manage any sinking fund
therefor on such terms as may be agreed upon between the two parties,
and in like manner may act as
2
<PAGE>
Treasurer of any corporation or municipality.
(7) To act as Trustee under any deed of trust, mortgage, bond or
other instrument issued by any state, municipality, body politic,
corporation, association or person, either alone or in conjunction
with any other person or persons, corporation or corporations.
(8) To guarantee the validity, performance or effect of any contract
or agreement, and the fidelity of persons holding places of
responsibility or trust; to become surety for any person, or persons,
for the faithful performance of any trust, office, duty, contract or
agreement, either by itself or in conjunction with any other person,
or persons, corporation, or corporations, or in like manner become
surety upon any bond, recognizance, obligation, judgment, suit, order,
or decree to be entered in any court of record within the State of
Delaware or elsewhere, or which may now or hereafter be required by
any law, judge, officer or court in the State of Delaware or
elsewhere.
(9) To act by any and every method of appointment as trustee, trustee
in bankruptcy, receiver, assignee, assignee in bankruptcy, executor,
administrator, guardian, bailee, or in any other trust capacity in the
receiving, holding, managing, and disposing of any and all estates and
property, real, personal or mixed, and to be appointed as such
trustee, trustee in bankruptcy, receiver, assignee, assignee in
bankruptcy, executor, administrator, guardian or bailee by any
persons, corporations, court, officer, or authority, in the State of
Delaware or elsewhere; and whenever this Corporation is so appointed
by any person, corporation, court, officer or authority such trustee,
trustee in bankruptcy, receiver, assignee, assignee in bankruptcy,
executor, administrator, guardian, bailee, or in any other trust
capacity, it shall not be required to give bond with surety, but its
capital stock shall be taken and held as security for the performance
of the duties devolving upon it by such appointment.
(10) And for its care, management and trouble, and the exercise of
any of its powers hereby given, or for the performance of any of the
duties which it may undertake or be called upon to perform, or for the
assumption of any responsibility the said Corporation may be entitled
to receive a proper compensation.
(11) To purchase, receive, hold and own bonds, mortgages, debentures,
shares of capital stock, and other securities, obligations, contracts
and
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evidences of indebtedness, of any private, public or municipal
corporation within and without the State of Delaware, or of the
Government of the United States, or of any state, territory, colony,
or possession thereof, or of any foreign government or country; to
receive, collect, receipt for, and dispose of interest, dividends and
income upon and from any of the bonds, mortgages, debentures, notes,
shares of capital stock, securities, obligations, contracts, evidences
of indebtedness and other property held and owned by it, and to
exercise in respect of all such bonds, mortgages, debentures, notes,
shares of capital stock, securities, obligations, contracts, evidences
of indebtedness and other property, any and all the rights, powers and
privileges of individual owners thereof, including the right to vote
thereon; to invest and deal in and with any of the moneys of the
Corporation upon such securities and in such manner as it may think
fit and proper, and from time to time to vary or realize such
investments; to issue bonds and secure the same by pledges or deeds of
trust or mortgages of or upon the whole or any part of the property
held or owned by the Corporation, and to sell and pledge such bonds,
as and when the Board of Directors shall determine, and in the
promotion of its said corporate business of investment and to the
extent authorized by law, to lease, purchase, hold, sell, assign,
transfer, pledge, mortgage and convey real and personal property of
any name and nature and any estate or interest therein.
(b) In furtherance of, and not in limitation, of the powers conferred by
the laws of the State of Delaware, it is hereby expressly provided that the
said Corporation shall also have the following powers:
(1) To do any or all of the things herein set forth, to the same
extent as natural persons might or could do, and in any part of the
world.
(2) To acquire the good will, rights, property and franchises and to
undertake the whole or any part of the assets and liabilities of any
person, firm, association or corporation, and to pay for the same in
cash, stock of this Corporation, bonds or otherwise; to hold or in any
manner to dispose of the whole or any part of the property so
purchased; to conduct in any lawful manner the whole or any part of
any business so acquired, and to exercise all the powers necessary or
convenient in and about the conduct and management of such business.
(3) To take, hold, own, deal in, mortgage or otherwise lien, and to
lease, sell, exchange, transfer, or in any manner whatever dispose of
property, real, personal or mixed, wherever situated.
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(4) To enter into, make, perform and carry out contracts of every
kind with any person, firm, association or corporation, and, without
limit as to amount, to draw, make, accept, endorse, discount, execute
and issue promissory notes, drafts, bills of exchange, warrants,
bonds, debentures, and other negotiable or transferable instruments.
(5) To have one or more offices, to carry on all or any of its
operations and businesses, without restriction to the same extent as
natural persons might or could do, to purchase or otherwise acquire,
to hold, own, to mortgage, sell, convey or otherwise dispose of, real
and personal property, of every class and description, in any State,
District, Territory or Colony of the United States, and in any foreign
country or place.
(6) It is the intention that the objects, purposes and powers
specified and clauses contained in this paragraph shall (except where
otherwise expressed in said paragraph) be nowise limited or restricted
by reference to or inference from the terms of any other clause of
this or any other paragraph in this charter, but that the objects,
purposes and powers specified in each of the clauses of this paragraph
shall be regarded as independent objects, purposes and powers.
Fourth: - (a) The total number of shares of all classes of stock which the
Corporation shall have authority to issue is forty-one million (41,000,000)
shares, consisting of:
(1) One million (1,000,000) shares of Preferred stock, par value
$10.00 per share (hereinafter referred to as "Preferred Stock"); and
(2) Forty million (40,000,000) shares of Common Stock, par value
$1.00 per share (hereinafter referred to as "Common Stock").
(b) Shares of Preferred Stock may be issued from time to time in one or
more series as may from time to time be determined by the Board of
Directors each of said series to be distinctly designated. All shares of
any one series of Preferred Stock shall be alike in every particular,
except that there may be different dates from which dividends, if any,
thereon shall be cumulative, if made cumulative. The voting powers and the
preferences and relative, participating, optional and other special rights
of each such series, and the qualifications, limitations or restrictions
thereof, if any, may differ from those of any and all other series at any
time outstanding; and, subject to the provisions of subparagraph 1 of
Paragraph (c)
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of this Article Fourth, the Board of Directors of the Corporation is
hereby expressly granted authority to fix by resolution or resolutions
adopted prior to the issuance of any shares of a particular series of
Preferred Stock, the voting powers and the designations, preferences and
relative, optional and other special rights, and the qualifications,
limitations and restrictions of such series, including, but without
limiting the generality of the foregoing, the following:
(1) The distinctive designation of, and the number of shares of
Preferred Stock which shall constitute such series, which number may
be increased (except where otherwise provided by the Board of
Directors) or decreased (but not below the number of shares thereof
then outstanding) from time to time by like action of the Board of
Directors;
(2) The rate and times at which, and the terms and conditions on
which, dividends, if any, on Preferred Stock of such series shall be
paid, the extent of the preference or relation, if any, of such
dividends to the dividends payable on any other class or classes, or
series of the same or other class of stock and whether such dividends
shall be cumulative or non-cumulative;
(3) The right, if any, of the holders of Preferred Stock of such
series to convert the same into or exchange the same for, shares of
any other class or classes or of any series of the same or any other
class or classes of stock of the Corporation and the terms and
conditions of such conversion or exchange;
(4) Whether or not Preferred Stock of such series shall be subject to
redemption, and the redemption price or prices and the time or times
at which, and the terms and conditions on which, Preferred Stock of
such series may be redeemed.
(5) The rights, if any, of the holders of Preferred Stock of such
series upon the voluntary or involuntary liquidation, merger,
consolidation, distribution or sale of assets, dissolution or winding-
up, of the Corporation.
(6) The terms of the sinking fund or redemption or purchase account,
if any, to be provided for the Preferred Stock of such series; and
(7) The voting powers, if any, of the holders of such series of
Preferred Stock which may, without limiting the generality of the
foregoing include the right, voting as a series or by itself or
together with other series of Preferred Stock or all series of
Preferred Stock as a class, to elect one or more directors of the
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Corporation if there shall have been a default in the payment of
dividends on any one or more series of Preferred Stock or under such
circumstances and on such conditions as the Board of Directors may
determine.
(c) (1) After the requirements with respect to preferential dividends on
the Preferred Stock (fixed in accordance with the provisions of section (b)
of this Article Fourth), if any, shall have been met and after the
Corporation shall have complied with all the requirements, if any, with
respect to the setting aside of sums as sinking funds or redemption or
purchase accounts (fixed in accordance with the provisions of section (b)
of this Article Fourth), and subject further to any conditions which may be
fixed in accordance with the provisions of section (b) of this Article
Fourth, then and not otherwise the holders of Common Stock shall be
entitled to receive such dividends as may be declared from time to time by
the Board of Directors.
(2) After distribution in full of the preferential amount, if any,
(fixed in accordance with the provisions of section (b) of this
Article Fourth), to be distributed to the holders of Preferred Stock
in the event of voluntary or involuntary liquidation, distribution or
sale of assets, dissolution or winding-up, of the Corporation, the
holders of the Common Stock shall be entitled to receive all of the
remaining assets of the Corporation, tangible and intangible, of
whatever kind available for distribution to stockholders ratably in
proportion to the number of shares of Common Stock held by them
respectively.
(3) Except as may otherwise be required by law or by the provisions
of such resolution or resolutions as may be adopted by the Board of
Directors pursuant to section (b) of this Article Fourth, each holder
of Common Stock shall have one vote in respect of each share of Common
Stock held on all matters voted upon by the stockholders.
(d) No holder of any of the shares of any class or series of stock or of
options, warrants or other rights to purchase shares of any class or series
of stock or of other securities of the Corporation shall have any
preemptive right to purchase or subscribe for any unissued stock of any
class or series or any additional shares of any class or series to be
issued by reason of any increase of the authorized capital stock of the
Corporation of any class or series, or bonds, certificates of indebtedness,
debentures or other securities convertible into or exchangeable for stock
of the Corporation of any class or series, or carrying any right to
purchase stock of any class or series, but any such unissued stock,
additional authorized issue of shares of any class or series of stock or
securities convertible into or
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<PAGE>
exchangeable for stock, or carrying any right to purchase stock, may be
issued and disposed of pursuant to resolution of the Board of Directors
to such persons, firms, corporations or associations, whether such
holders or others, and upon such terms as may be deemed advisable by the
Board of Directors in the exercise of its sole discretion.
(e) The relative powers, preferences and rights of each series of
Preferred Stock in relation to the relative powers, preferences and rights
of each other series of Preferred Stock shall, in each case, be as fixed
from time to time by the Board of Directors in the resolution or
resolutions adopted pursuant to authority granted in section (b) of this
Article Fourth and the consent, by class or series vote or otherwise, of
the holders of such of the series of Preferred Stock as are from time to
time outstanding shall not be required for the issuance by the Board of
Directors of any other series of Preferred Stock whether or not the powers,
preferences and rights of such other series shall be fixed by the Board of
Directors as senior to, or on a parity with, the powers, preferences and
rights of such outstanding series, or any of them; provided, however, that
the Board of Directors may provide in the resolution or resolutions as to
any series of Preferred Stock adopted pursuant to section (b) of this
Article Fourth that the consent of the holders of a majority (or such
greater proportion as shall be therein fixed) of the outstanding shares of
such series voting thereon shall be required for the issuance of any or all
other series of Preferred Stock.
(f) Subject to the provisions of section (e), shares of any series of
Preferred Stock may be issued from time to time as the Board of Directors
of the Corporation shall determine and on such terms and for such
consideration as shall be fixed by the Board of Directors.
(g) Shares of Common Stock may be issued from time to time as the Board of
Directors of the Corporation shall determine and on such terms and for such
consideration as shall be fixed by the Board of Directors.
(h) The authorized amount of shares of Common Stock and of Preferred Stock
may, without a class or series vote, be increased or decreased from time to
time by the affirmative vote of the holders of a majority of the stock of
the Corporation entitled to vote thereon.
Fifth: - (a) The business and affairs of the Corporation shall be
conducted and managed by a Board of Directors. The number of directors
constituting the entire Board shall be not less than five nor more than
twenty-five as fixed from time to time by vote of a majority of the whole
Board, provided, however, that the number
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<PAGE>
of directors shall not be reduced so as to shorten the term of any
director at the time in office, and provided further, that the number of
directors constituting the whole Board shall be twenty-four until
otherwise fixed by a majority of the whole Board.
(b) The Board of Directors shall be divided into three classes, as nearly
equal in number as the then total number of directors constituting the
whole Board permits, with the term of office of one class expiring each
year. At the annual meeting of stockholders in 1982, directors of the
first class shall be elected to hold office for a term expiring at the next
succeeding annual meeting, directors of the second class shall be elected
to hold office for a term expiring at the second succeeding annual meeting
and directors of the third class shall be elected to hold office for a term
expiring at the third succeeding annual meeting. Any vacancies in the
Board of Directors for any reason, and any newly created directorships
resulting from any increase in the directors, may be filled by the Board of
Directors, acting by a majority of the directors then in office, although
less than a quorum, and any directors so chosen shall hold office until the
next annual election of directors. At such election, the stockholders
shall elect a successor to such director to hold office until the next
election of the class for which such director shall have been chosen and
until his successor shall be elected and qualified. No decrease in the
number of directors shall shorten the term of any incumbent director.
(c) Notwithstanding any other provisions of this Charter or Act of
Incorporation or the By-Laws of the Corporation (and notwithstanding the
fact that some lesser percentage may be specified by law, this Charter or
Act of Incorporation or the By-Laws of the Corporation), any director or
the entire Board of Directors of the Corporation may be removed at any time
without cause, but only by the affirmative vote of the holders of two-
thirds or more of the outstanding shares of capital stock of the
Corporation entitled to vote generally in the election of directors
(considered for this purpose as one class) cast at a meeting of the
stockholders called for that purpose.
(d) Nominations for the election of directors may be made by the Board of
Directors or by any stockholder entitled to vote for the election of
directors. Such nominations shall be made by notice in writing, delivered
or mailed by first class United States mail, postage prepaid, to the
Secretary of the Corporation not less than 14 days nor more than 50 days
prior to any meeting of the stockholders called for the election of
directors; provided, however, that if less than 21 days' notice of the
meeting is given to stockholders, such written notice shall be delivered or
mailed, as prescribed, to the Secretary of the Corporation not later than
the close of the seventh day following the day on which notice of the
meeting was mailed to
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stockholders. Notice of nominations which are proposed by the Board of
Directors shall be given by the Chairman on behalf of the Board.
(e) Each notice under subsection (d) shall set forth (i) the name, age,
business address and, if known, residence address of each nominee proposed
in such notice, (ii) the principal occupation or employment of such nominee
and (iii) the number of shares of stock of the Corporation which are
beneficially owned by each such nominee.
(f) The Chairman of the meeting may, if the facts warrant, determine and
declare to the meeting that a nomination was not made in accordance with
the foregoing procedure, and if he should so determine, he shall so declare
to the meeting and the defective nomination shall be disregarded.
(g) No action required to be taken or which may be taken at any annual or
special meeting of stockholders of the Corporation may be taken without a
meeting, and the power of stockholders to consent in writing, without a
meeting, to the taking of any action is specifically denied.
Sixth: - The Directors shall choose such officers, agent and servants as
may be provided in the By-Laws as they may from time to time find necessary
or proper.
Seventh: - The Corporation hereby created is hereby given the same powers,
rights and privileges as may be conferred upon corporations organized under
the Act entitled "An Act Providing a General Corporation Law", approved
March 10, 1899, as from time to time amended.
Eighth: - This Act shall be deemed and taken to be a private Act.
Ninth: - This Corporation is to have perpetual existence.
Tenth: - The Board of Directors, by resolution passed by a majority of the
whole Board, may designate any of their number to constitute an Executive
Committee, which Committee, to the extent provided in said resolution, or
in the By-Laws of the Company, shall have and may exercise all of the
powers of the Board of Directors in the management of the business and
affairs of the Corporation, and shall have power to authorize the seal of
the Corporation to be affixed to all papers which may require it.
Eleventh: - The private property of the stockholders shall not be liable
for the payment of corporate debts to any extent whatever.
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Twelfth: - The Corporation may transact business in any part of the world.
Thirteenth: - The Board of Directors of the Corporation is expressly
authorized to make, alter or repeal the By-Laws of the Corporation by a
vote of the majority of the entire Board. The stockholders may make, alter
or repeal any By-Law whether or not adopted by them, provided however, that
any such additional By-Laws, alterations or repeal may be adopted only by
the affirmative vote of the holders of two-thirds or more of the
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors (considered for this purpose as one
class).
Fourteenth: - Meetings of the Directors may be held outside
of the State of Delaware at such places as may be from time to time
designated by the Board, and the Directors may keep the books of the
Company outside of the State of Delaware at such places as may be from time
to time designated by them.
Fifteenth: - (a) (1) In addition to any affirmative vote required by law,
and except as otherwise expressly provided in sections (b) and (c) of this
Article Fifteenth:
(A) any merger or consolidation of the Corporation or any Subsidiary
(as hereinafter defined) with or into (i) any Interested Stockholder
(as hereinafter defined) or (ii) any other corporation (whether or not
itself an Interested Stockholder), which, after such merger or
consolidation, would be an Affiliate (as hereinafter defined) of an
Interested Stockholder, or
(B) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or a series of related transactions)
to or with any Interested Stockholder or any Affiliate of any
Interested Stockholder of any assets of the Corporation or any
Subsidiary having an aggregate fair market value of $1,000,000 or
more, or
(C) the issuance or transfer by the Corporation or any Subsidiary (in
one transaction or a series of related transactions) of any securities
of the Corporation or any Subsidiary to any Interested Stockholder or
any Affiliate of any Interested Stockholder in exchange for cash,
securities or other property (or a combination thereof) having an
aggregate fair market value of $1,000,000 or more, or
(D) the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation, or
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(E) any reclassification of securities (including any reverse stock
split), or recapitalization of the Corporation, or any merger or
consolidation of the Corporation with any of its Subsidiaries or any
similar transaction (whether or not with or into or otherwise
involving an Interested Stockholder) which has the effect, directly or
indirectly, of increasing the proportionate share of the outstanding
shares of any class of equity or convertible securities of the
Corporation or any Subsidiary which is directly or indirectly owned by
any Interested Stockholder, or any Affiliate of any Interested
Stockholder, shall require the affirmative vote of the holders of at
least two-thirds of the outstanding shares of capital stock of the
Corporation entitled to vote generally in the election of directors,
considered for the purpose of this Article Fifteenth as one class
("Voting Shares"). Such affirmative vote shall be required
notwithstanding the fact that no vote may be required, or that some
lesser percentage may be specified, by law or in any agreement with
any national securities exchange or otherwise.
(2) The term "business combination" as used in this Article
Fifteenth shall mean any transaction which is referred to any one
or more of clauses (A) through (E) of paragraph 1 of the section
(a).
(b) The provisions of section (a) of this Article Fifteenth shall not
be applicable to any particular business combination and such business
combination shall require only such affirmative vote as is required by
law and any other provisions of the Charter or Act of Incorporation of
By-Laws if such business combination has been approved by a majority
of the whole Board.
(c) For the purposes of this Article Fifteenth:
(1) A "person" shall mean any individual firm, corporation or other
entity.
(2) "Interested Stockholder" shall mean, in respect of any business
combination, any person (other than the Corporation or any Subsidiary) who
or which as of the record date for the determination of stockholders
entitled to notice of and to vote on such business combination, or
immediately prior to the consummation of any such transaction:
(A) is the beneficial owner, directly or indirectly, of more than 10%
of the Voting Shares, or
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(B) is an Affiliate of the Corporation and at any time within two
years prior thereto was the beneficial owner, directly or indirectly,
of not less than 10% of the then outstanding voting Shares, or
(C) is an assignee of or has otherwise succeeded in any share of
capital stock of the Corporation which were at any time within two
years prior thereto beneficially owned by any Interested Stockholder,
and such assignment or succession shall have occurred in the course of
a transaction or series of transactions not involving a public
offering within the meaning of the Securities Act of 1933.
(3) A person shall be the "beneficial owner" of any Voting Shares:
(A) which such person or any of its Affiliates and Associates (as
hereafter defined) beneficially own, directly or indirectly, or
(B) which such person or any of its Affiliates or Associates has (i)
the right to acquire (whether such right is exercisable immediately or
only after the passage of time), pursuant to any agreement,
arrangement or understanding or upon the exercise of conversion
rights, exchange rights, warrants or options, or otherwise, or (ii)
the right to vote pursuant to any agreement, arrangement or
understanding, or
(C) which are beneficially owned, directly or indirectly, by any
other person with which such first mentioned person or any of its
Affiliates or Associates has any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or
disposing of any shares of capital stock of the Corporation.
(4) The outstanding Voting Shares shall include shares deemed owned
through application of paragraph (3) above but shall not include any other
Voting Shares which may be issuable pursuant to any agreement, or upon
exercise of conversion rights, warrants or options or otherwise.
(5) "Affiliate" and "Associate" shall have the respective meanings given
those terms in Rule 12b-2 of the General Rules and Regulations under the
Securities Exchange Act of 1934, as in effect on December 31, 1981.
(6) "Subsidiary" shall mean any corporation of which a majority of any
class of equity security (as defined in Rule 3a11-1 of the General Rules
and Regulations under the Securities Exchange Act of 1934, as in effect in
December 31, 1981) is
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owned, directly or indirectly, by the Corporation; provided, however,
that for the purposes of the definition of Investment Stockholder set
forth in paragraph (2) of this section (c), the term "Subsidiary" shall
mean only a corporation of which a majority of each class of equity
security is owned, directly or indirectly, by the Corporation.
(d) majority of the directors shall have the power and duty to
determine for the purposes of this Article Fifteenth on the basis of
information known to them, (1) the number of Voting Shares
beneficially owned by any person (2) whether a person is an Affiliate
or Associate of another, (3) whether a person has an agreement,
arrangement or understanding with another as to the matters referred
to in paragraph (3) of section (c), or (4) whether the assets subject
to any business combination or the consideration received for the
issuance or transfer of securities by the Corporation, or any
Subsidiary has an aggregate fair market value of $1,000,000 or more.
(e) Nothing contained in this Article Fifteenth shall be construed to
relieve any Interested Stockholder from any fiduciary obligation
imposed by law.
Sixteenth: Notwithstanding any other provision of this Charter or Act of
Incorporation or the By-Laws of the Corporation (and in addition to any
other vote that may be required by law, this Charter or Act of
Incorporation by the By-Laws), the affirmative vote of the holders of at
least two-thirds of the outstanding shares of the capital stock of the
Corporation entitled to vote generally in the election of directors
(considered for this purpose as one class) shall be required to amend,
alter or repeal any provision of Articles Fifth, Thirteenth, Fifteenth or
Sixteenth of this Charter or Act of Incorporation.
Seventeenth: (a) a Director of this Corporation shall not be liable to the
Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a Director, except to the extent such exemption from
liability or limitation thereof is not permitted under the Delaware General
Corporation Laws as the same exists or may hereafter be amended.
(b) Any repeal or modification of the foregoing paragraph shall not
adversely affect any right or protection of a Director of the
Corporation existing hereunder with respect to any act or omission
occurring prior to the time of such repeal or modification."
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EXHIBIT B
BY-LAWS
WILMINGTON TRUST COMPANY
WILMINGTON, DELAWARE
As existing on January 16, 1997
<PAGE>
BY-LAWS OF WILMINGTON TRUST COMPANY
ARTICLE I
Stockholders' Meetings
Section 1. The Annual Meeting of Stockholders shall be held on the
third Thursday in April each year at the principal office at the Company or
at such other date, time, or place as may be designated by resolution by the
Board of Directors.
Section 2. Special meetings of all stockholders may be called at any
time by the Board of Directors, the Chairman of the Board or the President.
Section 3. Notice of all meetings of the stockholders shall be given by
mailing to each stockholder at least ten (10) days before said meeting, at
his last known address, a written or printed notice fixing the time and place
of such meeting.
Section 4. A majority in the amount of the capital stock of the Company
issued and outstanding on the record date, as herein determined, shall
constitute a quorum at all meetings of stockholders for the transaction of
any business, but the holders of a small number of shares may adjourn, from
time to time, without further notice, until a quorum is secured. At each
annual or special meeting of stockholders, each stockholder shall be entitled
to one vote, either in person or by proxy, for each shares of stock
registered in the stockholder's name on the books of the Company on the
record date for any such meeting as determined herein.
ARTICLE II
Directors
Section 1. The number and classification of the Board of Directors
shall be as set forth in the Charter of the Bank.
Section 2. No person who has attained the age of seventy-two (72) years
shall be nominated for election to the Board of Directors of the Company,
provided, however, that this limitation shall not apply to any person who was
serving as director of the Company on September 16, 1971.
Section 3. The class of Directors so elected shall hold office for
three years or until their successors are elected and qualified.
Section 4. The affairs and business of the Company shall be managed and
<PAGE>
conducted by the Board of Directors.
Section 5. The Board of Directors shall meet at the principal office of
the Company or elsewhere in its discretion at such times to be determined by
a majority of its members, or at the call of the Chairman of the Board of
Directors or the President.
Section 6. Special meetings of the Board of Directors may be called at
any time by the Chairman of the Board of Directors or by the President, and
shall be called upon the written request of a majority of the directors.
Section 7. A majority of the directors elected and qualified shall be
necessary to constitute a quorum for the transaction of business at any
meeting of the Board of Directors.
Section 8. Written notice shall be sent by mail to each director of any
special meeting of the Board of Directors, and of any change in the time or
place of any regular meeting, stating the time and place of such meeting,
which shall be mailed not less than two days before the time of holding such
meeting.
Section 9. In the event of the death, resignation, removal, inability
to act, or disqualification of any director, the Board of Directors, although
less than a quorum, shall have the right to elect the successor who shall
hold office for the remainder of the full term of the class of directors in
which the vacancy occurred, and until such director's successor shall have
been duly elected and qualified.
Section 10. The Board of Directors at its first meeting after its
election by the stockholders shall appoint an Executive Committee, a Trust
Committee, an Audit Committee and a Compensation Committee, and shall elect
from its own members a Chairman of the Board of Directors and a President who
may be the same person. The Board of Directors shall also elect at such
meeting a Secretary and a Treasurer, who may be the same person, may appoint
at any time such other committees and elect or appoint such other officers as
it may deem advisable. The Board of Directors may also elect at such meeting
one or more Associate Directors.
Section 11. The Board of Directors may at any time remove, with or
without cause, any member of any Committee appointed by it or any associate
director or officer elected by it and may appoint or elect his successor.
Section 12. The Board of Directors may designate an officer to be in
charge of such of the departments or division of the Company as it may deem
advisable.
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ARTICLE III
Committees
Section 1. Executive Committee
(A) The Executive Committee shall be composed of not more
than nine members who shall be selected by the Board of Directors from its
own members and who shall hold office during the pleasure of the Board.
(B) The Executive Committee shall have all the powers of
the Board of Directors when it is not in session to transact all business for
and in behalf of the Company that may be brought before it.
(C) The Executive Committee shall meet at the principal
office of the Company or elsewhere in its discretion at such times to be
determined by a majority of its members, or at the call of the Chairman of
the Executive Committee or at the call of the Chairman of the Board of
Directors. The majority of its members shall be necessary to constitute a
quorum for the transaction of business. Special meetings of the Executive
Committee may be held at any time when a quorum is present.
(D) Minutes of each meeting of the Executive Committee
shall be kept and submitted to the Board of Directors at its next meeting.
(E) The Executive Committee shall advise and superintend
all investments that may be made of the funds of the Company, and shall
direct the disposal of the same, in accordance with such rules and
regulations as the Board of Directors from time to time make.
(F) In the event of a state of disaster of sufficient
severity to prevent the conduct and management of the affairs and business of
the Company by its directors and officers as contemplated by these By-Laws
any two available members of the Executive Committee as constituted
immediately prior to such disaster shall constitute a quorum of that
Committee for the full conduct and management of the affairs and business of
the Company in accordance with the provisions of Article III of these
By-Laws; and if less than three members of the Trust Committee is constituted
immediately prior to such disaster shall be available for the transaction of
its business, such Executive Committee shall also be empowered to exercise
all of the powers reserved to the Trust Committee under Article III Section 2
hereof. In the event of the unavailability, at such time, of a minimum of
two members of such Executive Committee, any three available directors shall
constitute the Executive Committee for the full conduct and management of the
affairs and business of the Company in accordance with the foregoing
provisions of this Section. This By-Law shall be
3
<PAGE>
subject to implementation by Resolutions of the Board of Directors presently
existing or hereafter passed from time to time for that purpose, and any
provisions of these By-Laws (other than this Section) and any resolutions
which are contrary to the provisions of this Section or to the provisions of
any such implementary Resolutions shall be suspended during such a disaster
period until it shall be determined by any interim Executive Committee acting
under this section that it shall be to the advantage of the Company to resume
the conduct and management of its affairs and business under all of the other
provisions of these By-Laws.
4
<PAGE>
Section 2. Trust Committee
(A) The Trust Committee shall be composed of not more than
thirteen members who shall be selected by the Board of Directors, a majority
of whom shall be members of the Board of Directors and who shall hold office
during the pleasure of the Board.
(B) The Trust Committee shall have general supervision over
the Trust Department and the investment of trust funds, in all matters,
however, being subject to the approval of the Board of Directors.
(C) The Trust Committee shall meet at the principal office
of the Company or elsewhere in its discretion at such times to be determined
by a majority of its members or at the call of its chairman. A majority of
its members shall be necessary to constitute a quorum for the transaction of
business.
(D) Minutes of each meeting of the Trust Committee shall be
kept and promptly submitted to the Board of Directors.
(E) The Trust Committee shall have the power to appoint
Committees and/or designate officers or employees of the Company to whom
supervision over the investment of trust funds may be delegated when the
Trust Committee is not in session.
Section 3. Audit Committee
(A) The Audit Committee shall be composed of five members
who shall be selected by the Board of Directors from its own members, none of
whom shall be an officer of the Company, and shall hold office at the
pleasure of the Board.
(B) The Audit Committee shall have general supervision over
the Audit Division in all matters however subject to the approval of the
Board of Directors; it shall consider all matters brought to its attention by
the officer in charge of the Audit Division, review all reports of
examination of the Company made by any governmental agency or such
independent auditor employed for that purpose, and make such recommendations
to the Board of Directors with respect thereto or with respect to any other
matters pertaining to auditing the Company as it shall deem desirable.
(C) The Audit Committee shall meet whenever and wherever
the majority of its members shall deem it to be proper for the transaction of
its business, and a majority of its Committee shall constitute a quorum.
5
<PAGE>
Section 4. Compensation Committee
(A) The Compensation Committee shall be composed of not
more than five (5) members who shall be selected by the Board of Directors
from its own members who are not officers of the Company and who shall hold
office during the pleasure of the Board.
(B) The Compensation Committee shall in general advise upon
all matters of policy concerning the Company brought to its attention by the
management and from time to time review the management of the Company, major
organizational matters, including salaries and employee benefits and
specifically shall administer the Executive Incentive Compensation Plan.
(C) Meetings of the Compensation Committee may be called at
any time by the Chairman of the Compensation Committee, the Chairman of the
Board of Directors, or the President of the Company.
Section 5. Associate Directors
(A) Any person who has served as a director may be elected
by the Board of Directors as an associate director, to serve during the
pleasure of the Board.
(B) An associate director shall be entitled to attend all
directors meetings and participate in the discussion of all matters brought
to the Board, with the exception that he would have no right to vote. An
associate director will be eligible for appointment to Committees of the
Company, with the exception of the Executive Committee, Audit Committee and
Compensation Committee, which must be comprised solely of active directors.
Section 6. Absence or Disqualification of Any Member of a Committee
(A) In the absence or disqualification of any member of any
Committee created under Article III of the By-Laws of this Company, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously
appoint another member of the Board of Directors to act at the meeting in the
place of any such absence or disqualified member.
ARTICLE IV
Officers
Section 1. The Chairman of the Board of Directors shall preside at all
meetings of
6
<PAGE>
the Board and shall have such further authority and powers and shall perform
such duties as the Board of Directors may from time to time confer and
direct. He shall also exercise such powers and perform such duties as may
from time to time be agreed upon between himself and the President of the
Company.
Section 2. THE VICE CHAIRMAN OF THE BOARD. The Vice Chairman of the
Board of Directors shall preside at all meetings of the Board of Directors at
which the Chairman of the Board shall not be present and shall have such
further authority and powers and shall perform such duties as the Board of
Directors or the Chairman of the Board may from time to time confer and
direct.
Section 3. The President shall have the powers and duties pertaining to
the office of the President conferred or imposed upon him by statute or
assigned to him by the Board of Directors in the absence of the Chairman of
the Board the President shall have the powers and duties of the Chairman of
the Board.
Section 4. The Chairman of the Board of Directors or the President as
designated by the Board of Directors, shall carry into effect all legal
directions of the Executive Committee and of the Board of Directors, and
shall at all times exercise general supervision over the interest, affairs
and operations of the Company and perform all duties incident to his office.
Section 5. There may be one or more Vice Presidents, however
denominated by the Board of Directors, who may at any time perform all the
duties of the Chairman of the Board of Directors and/or the President and
such other powers and duties as may from time to time be assigned to them by
the Board of Directors, the Executive Committee, the Chairman of the Board or
the President and by the officer in charge of the department or division to
which they are assigned.
Section 6. The Secretary shall attend to the giving of notice of
meetings of the stockholders and the Board of Directors, as well as the
Committees thereof, to the keeping of accurate minutes of all such meetings
and to recording the same in the minute books of the Company. In addition to
the other notice requirements of these By-Laws and as may be practicable
under the circumstances, all such notices shall be in writing and mailed well
in advance of the scheduled date of any other meeting. He shall have custody
of the corporate seal and shall affix the same to any documents requiring
such corporate seal and to attest the same.
Section 7. The Treasurer shall have general supervision over all assets
and liabilities of the Company. He shall be custodian of and responsible for
all monies, funds and valuables of the Company and for the keeping of proper
records of the evidence of
7
<PAGE>
property or indebtedness and of all the transactions of the Company. He
shall have general supervision of the expenditures of the Company and shall
report to the Board of Directors at each regular meeting of the condition of
the Company, and perform such other duties as may be assigned to him from
time to time by the Board of Directors of the Executive Committee.
Section 8. There may be a Controller who shall exercise general
supervision over the internal operations of the Company, including
accounting, and shall render to the Board of Directors at appropriate times a
report relating to the general condition and internal operations of the
Company.
There may be one or more subordinate accounting or controller officers
however denominated, who may perform the duties of the Controller and such
duties as may be prescribed by the Controller.
Section 9. The officer designated by the Board of Directors to be in
charge of the Audit Division of the Company with such title as the Board of
Directors shall prescribe, shall report to and be directly responsible only
to the Board of Directors.
There shall be an Auditor and there may be one or more Audit Officers,
however denominated, who may perform all the duties of the Auditor and such
duties as may be prescribed by the officer in charge of the Audit Division.
Section 10. There may be one or more officers, subordinate in rank to
all Vice Presidents with such functional titles as shall be determined from
time to time by the Board of Directors, who shall ex officio hold the office
Assistant Secretary of this Company and who may perform such duties as may be
prescribed by the officer in charge of the department or division to whom
they are assigned.
Section 11. The powers and duties of all other officers of the Company
shall be those usually pertaining to their respective offices, subject to the
direction of the Board of Directors, the Executive Committee, Chairman of the
Board of Directors or the President and the officer in charge of the
department or division to which they are assigned.
ARTICLE V
Stock and Stock Certificates
Section 1. Shares of stock shall be transferrable on the books of the
Company and a transfer book shall be kept in which all transfers of stock
shall be recorded.
8
<PAGE>
Section 2. Certificate of stock shall bear the signature of the President
or any Vice President, however denominated by the Board of Directors and
countersigned by the Secretary or Treasurer or an Assistant Secretary, and the
seal of the corporation shall be engraved thereon. Each certificate shall
recite that the stock represented thereby is transferrable only upon the books
of the Company by the holder thereof or his attorney, upon surrender of the
certificate properly endorsed. Any certificate of stock surrendered to the
Company shall be cancelled at the time of transfer, and before a new certificate
or certificates shall be issued in lieu thereof. Duplicate certificates of
stock shall be issued only upon giving such security as may be satisfactory to
the Board of Directors or the Executive Committee.
Section 3. The Board of Directors of the Company is authorized to fix
in advance a record date for the determination of the stockholders entitled
to notice of, and to vote at, any meeting of stockholders and any adjournment
thereof, or entitled to receive payment of any dividend, or to any allotment
or rights, or to exercise any rights in respect of any change, conversion or
exchange of capital stock, or in connection with obtaining the consent of
stockholders for any purpose, which record date shall not be more than 60 nor
less than 10 days proceeding the date of any meeting of stockholders or the
date for the payment of any dividend, or the date for the allotment of
rights, or the date when any change or conversion or exchange of capital
stock shall go into effect, or a date in connection with obtaining such
consent.
ARTICLE VI
Seal
Section 1. The corporate seal of the Company shall be in the following
form:
Between two concentric circles the words
"Wilmington Trust Company" within the inner
circle the words "Wilmington, Delaware."
ARTICLE VII
Fiscal Year
Section 1. The fiscal year of the Company shall be the calendar year.
ARTICLE VIII
Execution of Instruments of the Company
9
<PAGE>
Section 1. The Chairman of the Board, the President or any Vice
President, however denominated by the Board of Directors, shall have full
power and authority to enter into, make, sign, execute, acknowledge and/or
deliver and the Secretary or any Assistant Secretary shall have full power
and authority to attest and affix the corporate seal of the Company to any
and all deeds, conveyances, assignments, releases, contracts, agreements,
bonds, notes, mortgages and all other instruments incident to the business of
this Company or in acting as executor, administrator, guardian, trustee,
agent or in any other fiduciary or representative capacity by any and every
method of appointment or by whatever person, corporation, court officer or
authority in the State of Delaware, or elsewhere, without any specific
authority, ratification, approval or confirmation by the Board of Directors
or the Executive Committee, and any and all such instruments shall have the
same force and validity as though expressly authorized by the Board of
Directors and/or the Executive Committee.
10
<PAGE>
ARTICLE IX
Compensation of Directors and Members of Committees
Section 1. Directors and associate directors of the Company, other than
salaried officers of the Company, shall be paid such reasonable honoraria or
fees for attending meetings of the Board of Directors as the Board of
Directors may from time to time determine. Directors and associate directors
who serve as members of committees, other than salaried employees of the
Company, shall be paid such reasonable honoraria or fees for services as
members of committees as the Board of Directors shall from time to time
determine and directors and associate directors may be employed by the
Company for such special services as the Board of Directors may from time to
time determine and shall be paid for such special services so performed
reasonable compensation as may be determined by the Board of Directors.
ARTICLE X
Indemnification
Section 1. (A) The Corporation shall indemnify and hold harmless, to
the fullest extent permitted by applicable law as it presently exists or may
hereafter be amended, any person who was or is made or is threatened to be
made a party or is otherwise involved in any action, suit or proceeding,
whether civil, criminal, administrative or investigative (a "proceeding") by
reason of the fact that he, or a person for whom he is the legal
representative, 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, fiduciary or agent of another corporation or of
a partnership, joint venture, trust, enterprise or non-profit entity,
including service with respect to employee benefit plans, against all
liability and loss suffered and expenses reasonably incurred by such person.
The Corporation shall indemnify a person in connection with a proceeding
initiated by such person only if the proceeding was authorized by the Board
of Directors of the Corporation.
(B) The Corporation shall pay the expenses incurred in
defending any proceeding in advance of its final disposition, PROVIDED,
HOWEVER, that the payment of expenses incurred by a Director officer in his
capacity as a Director or officer in advance of the final disposition of the
proceeding shall be made only upon receipt of an undertaking by the Director
or officer to repay all amounts advanced if it should be ultimately
determined that the Director or officer is not entitled to be indemnified
under this Article or otherwise.
(C) If a claim for indemnification or payment of expenses,
under this Article X is not paid in full within ninety days after a written
claim therefor has been received by the Corporation the claimant may file
suit to recover the unpaid amount of such
11
<PAGE>
claim and, if successful in whole or in part, shall be entitled to be paid
the expense of prosecuting such claim. In any such action the Corporation
shall have the burden of proving that the claimant was not entitled to the
requested indemnification of payment of expenses under applicable law.
(D) The rights conferred on any person by this Article X
shall not be exclusive of any other rights which such person may have or
hereafter acquire under any statute, provision of the Charter or Act of
Incorporation, these By-Laws, agreement, vote of stockholders or
disinterested Directors or otherwise.
(E) Any repeal or modification of the foregoing provisions
of this Article X shall not adversely affect any right or protection
hereunder of any person in respect of any act or omission occurring prior to
the time of such repeal or modification.
ARTICLE XI
Amendments to the By-Laws
Section 1. These By-Laws may be altered, amended or repealed, in whole
or in part, and any new By-Law or By-Laws adopted at any regular or special
meeting of the Board of Directors by a vote of the majority of all the
members of the Board of Directors then in office.
12
<PAGE>
EXHIBIT C
Section 321(b) Consent
Pursuant to Section 321(b) of the Trust Indenture Act of 1939, as
amended, Wilmington Trust Company hereby consents that reports of
examinations by Federal, State, Territorial or District authorities may be
furnished by such authorities to the Securities and Exchange Commission upon
requests therefor.
WILMINGTON TRUST COMPANY
Dated: June 10, 1999 By: /s/ Norma P. Closs
-------------------
Name: Norma P. Closs
Title: Vice President
<PAGE>
EXHIBIT D
NOTICE
This form is intended to assist state nonmember banks and savings
banks with state publication requirements. It has not been approved
by any state banking authorities. Refer to your appropriate state
banking authorities for your state publication requirements.
R E P O R T O F C O N D I T I O N
Consolidating domestic subsidiaries of the
WILMINGTON TRUST COMPANY of WILMINGTON
- -------------------------------------------- -------------------
Name of Bank City
in the State of DELAWARE , at the close of business on March 31, 1999.
-----------
<TABLE>
<CAPTION>
ASSETS
Thousands of dollars
<S> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coins . . . . . . . . . . .196,035
Interest-bearing balances . . . . . . . . . . . . . . . . . . . . . . . . . . 0
Held-to-maturity securities. . . . . . . . . . . . . . . . . . . . . . . . . . 44,909
Available-for-sale securities. . . . . . . . . . . . . . . . . . . . . . . .1,396,028
Federal funds sold and securities purchased under agreements to resell . . . .127,340
Loans and lease financing receivables:
Loans and leases, net of unearned income. . . . . . . 4,176,290
LESS: Allowance for loan and lease losses. . . . . . 68,543
LESS: Allocated transfer risk reserve. . . . . . . . 0
Loans and leases, net of unearned income, allowance, and reserve. . . .4,107,747
Assets held in trading accounts. . . . . . . . . . . . . . . . . . . . . . . . . . .0
Premises and fixed assets (including capitalized leases) . . . . . . . . . . .139,843
Other real estate owned. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,055
Investments in unconsolidated subsidiaries and associated companies. . . . . . .1,225
Customers' liability to this bank on acceptances outstanding . . . . . . . . . . . .0
Intangible assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,265
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99,073
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6,118,520
CONTINUED ON NEXT PAGE
<PAGE>
<CAPTION>
LIABILITIES
<S> <C>
Deposits:
In domestic offices. . . . . . . . . . . . . . . . . . . . . . . . . . . . .4,332,124
Noninterest-bearing . . . . . . . . 959,777
Interest-bearing. . . . . . . . . . 3,372,347
Federal funds purchased and Securities sold under agreements to repurchase . 432,395
Demand notes issued to the U.S. Treasury . . . . . . . . . . . . . . . . . . . 28,906
Trading liabilities (from Schedule RC-D) . . . . . . . . . . . . . . . . . . . . . .0
Other borrowed money:. . . . . . . . . . . . . . . . . . . . . . . . . . . . .///////
With original maturity of one year or less. . . . . . . . . . . . . . . .715,000
With original maturity of more than one year. . . . . . . . . . . . . . . 43,000
Bank's liability on acceptances executed and outstanding . . . . . . . . . . . . . .0
Subordinated notes and debentures. . . . . . . . . . . . . . . . . . . . . . . . . .0
Other liabilities (from Schedule RC-G) . . . . . . . . . . . . . . . . . . . 93,311
Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5,644,736
<CAPTION>
EQUITY CAPITAL
<S> <C>
Perpetual preferred stock and related surplus. . . . . . . . . . . . . . . . . . . .0
Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .500
Surplus (exclude all surplus related to preferred stock) . . . . . . . . . . . 62,118
Undivided profits and capital reserves . . . . . . . . . . . . . . . . . . . .408,053
Net unrealized holding gains (losses) on available-for-sale securities . . . . 3,113
Total equity capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . .473,784
Total liabilities, limited-life preferred stock, and equity capital. . . . .6,118,520
</TABLE>
2
<PAGE>
EXHIBIT 25.3
Registration No.
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2)
WILMINGTON TRUST COMPANY
(Exact name of trustee as specified in its charter)
Delaware 51-0055023
(State of incorporation) (I.R.S. employer identification no.)
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
(Address of principal executive offices)
Cynthia L. Corliss
Vice President and Trust Counsel
Wilmington Trust Company
Rodney Square North
Wilmington, Delaware 19890
(302) 651-8516
(Name, address and telephone number of agent for service)
SPECTRUM BANCORPORATION, INC.
(Exact name of obligor as specified in its charter)
Iowa 42-0867112
(State of incorporation) (I.R.S. employer identification no.)
10834 Old Mill Road, Suite One
Omaha, Nebraska 68154-2648
(Address of principal executive offices) (Zip Code)
Guarantee of Spectrum Bancorporation, Inc. with respect to the
___% Cumulative Preferred Securities
(Title of the indenture securities)
<PAGE>
ITEM 1. GENERAL INFORMATION.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to which
it is subject.
Federal Deposit Insurance Co. State Bank Commissioner
Five Penn Center Dover, Delaware
Suite #2901
Philadelphia, PA
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR.
If the obligor is an affiliate of the trustee, describe each
affiliation:
Based upon an examination of the books and records of the trustee
and upon information furnished by the obligor, the obligor is not an
affiliate of the trustee.
ITEM 3. LIST OF EXHIBITS.
List below all exhibits filed as part of this Statement of Eligibility
and Qualification.
A. Copy of the Charter of Wilmington Trust Company, which includes the
certificate of authority of Wilmington Trust Company to commence
business and the authorization of Wilmington Trust Company to exercise
corporate trust powers.
B. Copy of By-Laws of Wilmington Trust Company.
C. Consent of Wilmington Trust Company required by Section 321(b) of
Trust Indenture Act.
D. Copy of most recent Report of Condition of Wilmington Trust Company.
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, Wilmington Trust Company, a corporation organized and
existing under the laws of Delaware, has duly caused this Statement of
Eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of Wilmington and State of Delaware on the 10th day
of June, 1999.
WILMINGTON TRUST COMPANY
[SEAL]
Attest:/s/ Patricia A. Evans By:/s/ Norma P. Closs
----------------------- ------------------------
Assistant Secretary Name: Norma P. Closs
Title: Vice President
2
<PAGE>
EXHIBIT A
AMENDED CHARTER
Wilmington Trust Company
Wilmington, Delaware
As existing on May 9, 1987
<PAGE>
Amended Charter
or
Act of Incorporation
of
Wilmington Trust Company
Wilmington Trust Company, originally incorporated by an Act of the
General Assembly of the State of Delaware, entitled "An Act to Incorporate
the Delaware Guarantee and Trust Company", approved March 2, A.D. 1901, and
the name of which company was changed to "Wilmington Trust Company" by an
amendment filed in the Office of the Secretary of State on March 18, A.D.
1903, and the Charter or Act of Incorporation of which company has been from
time to time amended and changed by merger agreements pursuant to the
corporation law for state banks and trust companies of the State of Delaware,
does hereby alter and amend its Charter or Act of Incorporation so that the
same as so altered and amended shall in its entirety read as follows:
First: - The name of this corporation is Wilmington Trust Company.
Second: - The location of its principal office in the State of Delaware is
at Rodney Square North, in the City of Wilmington, County of New Castle;
the name of its resident agent is Wilmington Trust Company whose address is
Rodney Square North, in said City. In addition to such principal office,
the said corporation maintains and operates branch offices in the City of
Newark, New Castle County, Delaware, the Town of Newport, New Castle
County, Delaware, at Claymont, New Castle County, Delaware, at Greenville,
New Castle County Delaware, and at Milford Cross Roads, New Castle County,
Delaware, and shall be empowered to open, maintain and operate branch
offices at Ninth and Shipley Streets, 418 Delaware Avenue, 2120 Market
Street, and 3605 Market Street, all in the City of Wilmington, New Castle
County, Delaware, and such other branch offices or places of business as
may be authorized from time to time by the agency or agencies of the
government of the State of Delaware empowered to confer such authority.
Third: - (a) The nature of the business and the objects and purposes
proposed to be transacted, promoted or carried on by this Corporation are
to do any or all of the things herein mentioned as fully and to the same
extent as natural persons might or could do and in any part of the world,
viz.:
(1) To sue and be sued, complain and defend in any Court of law or
equity and to make and use a common seal, and alter the seal at
pleasure, to hold,
<PAGE>
purchase, convey, mortgage or otherwise deal in real and personal
estate and property, and to appoint such officers and agents as the
business of the Corporation shall require, to make by-laws not
inconsistent with the Constitution or laws of the United States or
of this State, to discount bills, notes or other evidences of debt,
to receive deposits of money, or securities for money, to buy gold
and silver bullion and foreign coins, to buy and sell bills of
exchange, and generally to use, exercise and enjoy all the powers,
rights, privileges and franchises incident to a corporation which
are proper or necessary for the transaction of the business of the
Corporation hereby created.
(2) To insure titles to real and personal property, or any estate or
interests therein, and to guarantee the holder of such property, real
or personal, against any claim or claims, adverse to his interest
therein, and to prepare and give certificates of title for any lands
or premises in the State of Delaware, or elsewhere.
(3) To act as factor, agent, broker or attorney in the receipt,
collection, custody, investment and management of funds, and the
purchase, sale, management and disposal of property of all
descriptions, and to prepare and execute all papers which may be
necessary or proper in such business.
(4) To prepare and draw agreements, contracts, deeds, leases,
conveyances, mortgages, bonds and legal papers of every description,
and to carry on the business of conveyancing in all its branches.
(5) To receive upon deposit for safekeeping money, jewelry, plate,
deeds, bonds and any and all other personal property of every sort and
kind, from executors, administrators, guardians, public officers,
courts, receivers, assignees, trustees, and from all fiduciaries, and
from all other persons and individuals, and from all corporations
whether state, municipal, corporate or private, and to rent boxes,
safes, vaults and other receptacles for such property.
(6) To act as agent or otherwise for the purpose of registering,
issuing, certificating, countersigning, transferring or underwriting
the stock, bonds or other obligations of any corporation, association,
state or municipality, and may receive and manage any sinking fund
therefor on such terms as may be agreed upon between the two parties,
and in like manner may act as Treasurer of any corporation or
municipality.
(7) To act as Trustee under any deed of trust, mortgage, bond or
other instrument issued by any state, municipality, body politic,
corporation,
2
<PAGE>
association or person, either alone or in conjunction with any
other person or persons, corporation or corporations.
(8) To guarantee the validity, performance or effect of any contract
or agreement, and the fidelity of persons holding places of
responsibility or trust; to become surety for any person, or persons,
for the faithful performance of any trust, office, duty, contract or
agreement, either by itself or in conjunction with any other person,
or persons, corporation, or corporations, or in like manner become
surety upon any bond, recognizance, obligation, judgment, suit, order,
or decree to be entered in any court of record within the State of
Delaware or elsewhere, or which may now or hereafter be required by
any law, judge, officer or court in the State of Delaware or
elsewhere.
(9) To act by any and every method of appointment as trustee, trustee
in bankruptcy, receiver, assignee, assignee in bankruptcy, executor,
administrator, guardian, bailee, or in any other trust capacity in the
receiving, holding, managing, and disposing of any and all estates and
property, real, personal or mixed, and to be appointed as such
trustee, trustee in bankruptcy, receiver, assignee, assignee in
bankruptcy, executor, administrator, guardian or bailee by any
persons, corporations, court, officer, or authority, in the State of
Delaware or elsewhere; and whenever this Corporation is so appointed
by any person, corporation, court, officer or authority such trustee,
trustee in bankruptcy, receiver, assignee, assignee in bankruptcy,
executor, administrator, guardian, bailee, or in any other trust
capacity, it shall not be required to give bond with surety, but its
capital stock shall be taken and held as security for the performance
of the duties devolving upon it by such appointment.
(10) And for its care, management and trouble, and the exercise of
any of its powers hereby given, or for the performance of any of the
duties which it may undertake or be called upon to perform, or for the
assumption of any responsibility the said Corporation may be entitled
to receive a proper compensation.
(11) To purchase, receive, hold and own bonds, mortgages, debentures,
shares of capital stock, and other securities, obligations, contracts
and evidences of indebtedness, of any private, public or municipal
corporation within and without the State of Delaware, or of the
Government of the United States, or of any state, territory, colony,
or possession thereof, or of any foreign government or country; to
receive, collect, receipt for, and dispose of interest, dividends and
income upon and from any of the bonds, mortgages, debentures, notes,
shares of capital stock, securities, obligations,
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contracts, evidences of indebtedness and other property held and
owned by it, and to exercise in respect of all such bonds,
mortgages, debentures, notes, shares of capital stock, securities,
obligations, contracts, evidences of indebtedness and other
property, any and all the rights, powers and privileges of
individual owners thereof, including the right to vote thereon; to
invest and deal in and with any of the moneys of the Corporation
upon such securities and in such manner as it may think fit and
proper, and from time to time to vary or realize such investments;
to issue bonds and secure the same by pledges or deeds of trust or
mortgages of or upon the whole or any part of the property held or
owned by the Corporation, and to sell and pledge such bonds, as and
when the Board of Directors shall determine, and in the promotion of
its said corporate business of investment and to the extent
authorized by law, to lease, purchase, hold, sell, assign, transfer,
pledge, mortgage and convey real and personal property of any name
and nature and any estate or interest therein.
(b) In furtherance of, and not in limitation, of the powers conferred by
the laws of the State of Delaware, it is hereby expressly provided that the
said Corporation shall also have the following powers:
(1) To do any or all of the things herein set forth, to the same
extent as natural persons might or could do, and in any part of the
world.
(2) To acquire the good will, rights, property and franchises and to
undertake the whole or any part of the assets and liabilities of any
person, firm, association or corporation, and to pay for the same in
cash, stock of this Corporation, bonds or otherwise; to hold or in any
manner to dispose of the whole or any part of the property so
purchased; to conduct in any lawful manner the whole or any part of
any business so acquired, and to exercise all the powers necessary or
convenient in and about the conduct and management of such business.
(3) To take, hold, own, deal in, mortgage or otherwise lien, and to
lease, sell, exchange, transfer, or in any manner whatever dispose of
property, real, personal or mixed, wherever situated.
(4) To enter into, make, perform and carry out contracts of every
kind with any person, firm, association or corporation, and, without
limit as to amount, to draw, make, accept, endorse, discount, execute
and issue promissory notes, drafts, bills of exchange, warrants,
bonds, debentures, and other negotiable or transferable instruments.
(5) To have one or more offices, to carry on all or any of its
operations and
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businesses, without restriction to the same extent as natural
persons might or could do, to purchase or otherwise acquire, to
hold, own, to mortgage, sell, convey or otherwise dispose of, real
and personal property, of every class and description, in any State,
District, Territory or Colony of the United States, and in any
foreign country or place.
(6) It is the intention that the objects, purposes and powers
specified and clauses contained in this paragraph shall (except where
otherwise expressed in said paragraph) be nowise limited or restricted
by reference to or inference from the terms of any other clause of
this or any other paragraph in this charter, but that the objects,
purposes and powers specified in each of the clauses of this paragraph
shall be regarded as independent objects, purposes and powers.
Fourth: - (a) The total number of shares of all classes of stock which the
Corporation shall have authority to issue is forty-one million (41,000,000)
shares, consisting of:
(1) One million (1,000,000) shares of Preferred stock, par value
$10.00 per share (hereinafter referred to as "Preferred Stock"); and
(2) Forty million (40,000,000) shares of Common Stock, par value
$1.00 per share (hereinafter referred to as "Common Stock").
(b) Shares of Preferred Stock may be issued from time to time in one or
more series as may from time to time be determined by the Board of
Directors each of said series to be distinctly designated. All shares of
any one series of Preferred Stock shall be alike in every particular,
except that there may be different dates from which dividends, if any,
thereon shall be cumulative, if made cumulative. The voting powers and the
preferences and relative, participating, optional and other special rights
of each such series, and the qualifications, limitations or restrictions
thereof, if any, may differ from those of any and all other series at any
time outstanding; and, subject to the provisions of subparagraph 1 of
Paragraph (c) of this Article Fourth, the Board of Directors of the
Corporation is hereby expressly granted authority to fix by resolution or
resolutions adopted prior to the issuance of any shares of a particular
series of Preferred Stock, the voting powers and the designations,
preferences and relative, optional and other special rights, and the
qualifications, limitations and restrictions of such series, including, but
without limiting the generality of the foregoing, the following:
(1) The distinctive designation of, and the number of shares of
Preferred Stock which shall constitute such series, which number may
be increased (except where otherwise provided by the Board of
Directors) or decreased
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(but not below the number of shares thereof then outstanding) from
time to time by like action of the Board of Directors;
(2) The rate and times at which, and the terms and conditions on
which, dividends, if any, on Preferred Stock of such series shall be
paid, the extent of the preference or relation, if any, of such
dividends to the dividends payable on any other class or classes, or
series of the same or other class of stock and whether such dividends
shall be cumulative or non-cumulative;
(3) The right, if any, of the holders of Preferred Stock of such
series to convert the same into or exchange the same for, shares of
any other class or classes or of any series of the same or any other
class or classes of stock of the Corporation and the terms and
conditions of such conversion or exchange;
(4) Whether or not Preferred Stock of such series shall be subject to
redemption, and the redemption price or prices and the time or times
at which, and the terms and conditions on which, Preferred Stock of
such series may be redeemed.
(5) The rights, if any, of the holders of Preferred Stock of such
series upon the voluntary or involuntary liquidation, merger,
consolidation, distribution or sale of assets, dissolution or winding-
up, of the Corporation.
(6) The terms of the sinking fund or redemption or purchase account,
if any, to be provided for the Preferred Stock of such series; and
(7) The voting powers, if any, of the holders of such series of
Preferred Stock which may, without limiting the generality of the
foregoing include the right, voting as a series or by itself or
together with other series of Preferred Stock or all series of
Preferred Stock as a class, to elect one or more directors of the
Corporation if there shall have been a default in the payment of
dividends on any one or more series of Preferred Stock or under such
circumstances and on such conditions as the Board of Directors may
determine.
(c) (1) After the requirements with respect to preferential dividends on
the Preferred Stock (fixed in accordance with the provisions of section (b)
of this Article Fourth), if any, shall have been met and after the
Corporation shall have complied with all the requirements, if any, with
respect to the setting aside of sums as sinking funds or redemption or
purchase accounts (fixed in accordance with the provisions of section (b)
of this Article Fourth), and subject further to any conditions which may be
fixed in accordance with the provisions of section (b) of this Article
Fourth, then and not otherwise the holders of Common Stock shall be
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entitled to receive such dividends as may be declared from time to time by
the Board of Directors.
(2) After distribution in full of the preferential amount, if any,
(fixed in accordance with the provisions of section (b) of this
Article Fourth), to be distributed to the holders of Preferred Stock
in the event of voluntary or involuntary liquidation, distribution or
sale of assets, dissolution or winding-up, of the Corporation, the
holders of the Common Stock shall be entitled to receive all of the
remaining assets of the Corporation, tangible and intangible, of
whatever kind available for distribution to stockholders ratably in
proportion to the number of shares of Common Stock held by them
respectively.
(3) Except as may otherwise be required by law or by the provisions
of such resolution or resolutions as may be adopted by the Board of
Directors pursuant to section (b) of this Article Fourth, each holder
of Common Stock shall have one vote in respect of each share of Common
Stock held on all matters voted upon by the stockholders.
(d) No holder of any of the shares of any class or series of stock or of
options, warrants or other rights to purchase shares of any class or series
of stock or of other securities of the Corporation shall have any
preemptive right to purchase or subscribe for any unissued stock of any
class or series or any additional shares of any class or series to be
issued by reason of any increase of the authorized capital stock of the
Corporation of any class or series, or bonds, certificates of indebtedness,
debentures or other securities convertible into or exchangeable for stock
of the Corporation of any class or series, or carrying any right to
purchase stock of any class or series, but any such unissued stock,
additional authorized issue of shares of any class or series of stock or
securities convertible into or exchangeable for stock, or carrying any
right to purchase stock, may be issued and disposed of pursuant to
resolution of the Board of Directors to such persons, firms, corporations
or associations, whether such holders or others, and upon such terms as may
be deemed advisable by the Board of Directors in the exercise of its sole
discretion.
(e) The relative powers, preferences and rights of each series of
Preferred Stock in relation to the relative powers, preferences and rights
of each other series of Preferred Stock shall, in each case, be as fixed
from time to time by the Board of Directors in the resolution or
resolutions adopted pursuant to authority granted in section (b) of this
Article Fourth and the consent, by class or series vote or otherwise, of
the holders of such of the series of Preferred Stock as are from time to
time outstanding shall not be required for the issuance by the Board of
Directors of any other series of Preferred Stock whether or not the powers,
preferences and rights of such other series shall be fixed by the Board of
Directors as senior to, or on a parity with, the powers, preferences and
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rights of such outstanding series, or any of them; provided, however, that
the Board of Directors may provide in the resolution or resolutions as to
any series of Preferred Stock adopted pursuant to section (b) of this
Article Fourth that the consent of the holders of a majority (or such
greater proportion as shall be therein fixed) of the outstanding shares of
such series voting thereon shall be required for the issuance of any or all
other series of Preferred Stock.
(f) Subject to the provisions of section (e), shares of any series of
Preferred Stock may be issued from time to time as the Board of Directors
of the Corporation shall determine and on such terms and for such
consideration as shall be fixed by the Board of Directors.
(g) Shares of Common Stock may be issued from time to time as the Board of
Directors of the Corporation shall determine and on such terms and for such
consideration as shall be fixed by the Board of Directors.
(h) The authorized amount of shares of Common Stock and of Preferred Stock
may, without a class or series vote, be increased or decreased from time to
time by the affirmative vote of the holders of a majority of the stock of
the Corporation entitled to vote thereon.
Fifth: - (a) The business and affairs of the Corporation shall be
conducted and managed by a Board of Directors. The number of directors
constituting the entire Board shall be not less than five nor more than
twenty-five as fixed from time to time by vote of a majority of the whole
Board, provided, however, that the number of directors shall not be reduced
so as to shorten the term of any director at the time in office, and
provided further, that the number of directors constituting the whole Board
shall be twenty-four until otherwise fixed by a majority of the whole
Board.
(b) The Board of Directors shall be divided into three classes, as nearly
equal in number as the then total number of directors constituting the
whole Board permits, with the term of office of one class expiring each
year. At the annual meeting of stockholders in 1982, directors of the
first class shall be elected to hold office for a term expiring at the next
succeeding annual meeting, directors of the second class shall be elected
to hold office for a term expiring at the second succeeding annual meeting
and directors of the third class shall be elected to hold office for a term
expiring at the third succeeding annual meeting. Any vacancies in the
Board of Directors for any reason, and any newly created directorships
resulting from any increase in the directors, may be filled by the Board of
Directors, acting by a majority of the directors then in office, although
less than a quorum, and any
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directors so chosen shall hold office until the next annual election of
directors. At such election, the stockholders shall elect a successor to
such director to hold office until the next election of the class for
which such director shall have been chosen and until his successor shall
be elected and qualified. No decrease in the number of directors shall
shorten the term of any incumbent director.
(c) Notwithstanding any other provisions of this Charter or Act of
Incorporation or the By-Laws of the Corporation (and notwithstanding the
fact that some lesser percentage may be specified by law, this Charter or
Act of Incorporation or the By-Laws of the Corporation), any director or
the entire Board of Directors of the Corporation may be removed at any time
without cause, but only by the affirmative vote of the holders of two-
thirds or more of the outstanding shares of capital stock of the
Corporation entitled to vote generally in the election of directors
(considered for this purpose as one class) cast at a meeting of the
stockholders called for that purpose.
(d) Nominations for the election of directors may be made by the Board of
Directors or by any stockholder entitled to vote for the election of
directors. Such nominations shall be made by notice in writing, delivered
or mailed by first class United States mail, postage prepaid, to the
Secretary of the Corporation not less than 14 days nor more than 50 days
prior to any meeting of the stockholders called for the election of
directors; provided, however, that if less than 21 days' notice of the
meeting is given to stockholders, such written notice shall be delivered or
mailed, as prescribed, to the Secretary of the Corporation not later than
the close of the seventh day following the day on which notice of the
meeting was mailed to stockholders. Notice of nominations which are
proposed by the Board of Directors shall be given by the Chairman on behalf
of the Board.
(e) Each notice under subsection (d) shall set forth (i) the name, age,
business address and, if known, residence address of each nominee proposed
in such notice, (ii) the principal occupation or employment of such nominee
and (iii) the number of shares of stock of the Corporation which are
beneficially owned by each such nominee.
(f) The Chairman of the meeting may, if the facts warrant, determine and
declare to the meeting that a nomination was not made in accordance with
the foregoing procedure, and if he should so determine, he shall so declare
to the meeting and the defective nomination shall be disregarded.
(g) No action required to be taken or which may be taken at any annual or
special meeting of stockholders of the Corporation may be taken without a
meeting, and the power of stockholders to consent in writing, without a
meeting, to the taking of any action is specifically denied.
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Sixth: - The Directors shall choose such officers, agent and servants as
may be provided in the By-Laws as they may from time to time find necessary
or proper.
Seventh: - The Corporation hereby created is hereby given the same powers,
rights and privileges as may be conferred upon corporations organized under
the Act entitled "An Act Providing a General Corporation Law", approved
March 10, 1899, as from time to time amended.
Eighth: - This Act shall be deemed and taken to be a private Act.
Ninth: - This Corporation is to have perpetual existence.
Tenth: - The Board of Directors, by resolution passed by a majority of the
whole Board, may designate any of their number to constitute an Executive
Committee, which Committee, to the extent provided in said resolution, or
in the By-Laws of the Company, shall have and may exercise all of the
powers of the Board of Directors in the management of the business and
affairs of the Corporation, and shall have power to authorize the seal of
the Corporation to be affixed to all papers which may require it.
Eleventh: - The private property of the stockholders shall not be liable
for the payment of corporate debts to any extent whatever.
Twelfth: - The Corporation may transact business in any part of the world.
Thirteenth: - The Board of Directors of the Corporation is expressly
authorized to make, alter or repeal the By-Laws of the Corporation by a
vote of the majority of the entire Board. The stockholders may make, alter
or repeal any By-Law whether or not adopted by them, provided however, that
any such additional By-Laws, alterations or repeal may be adopted only by
the affirmative vote of the holders of two-thirds or more of the
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors (considered for this purpose as one
class).
Fourteenth: - Meetings of the Directors may be held outside
of the State of Delaware at such places as may be from time to time
designated by the Board, and the Directors may keep the books of the
Company outside of the State of Delaware at such places as may be from time
to time designated by them.
Fifteenth: - (a) (1) In addition to any affirmative vote required by law,
and except as otherwise expressly provided in sections (b) and (c) of this
Article Fifteenth:
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(A) any merger or consolidation of the Corporation or any Subsidiary
(as hereinafter defined) with or into (i) any Interested Stockholder
(as hereinafter defined) or (ii) any other corporation (whether or not
itself an Interested Stockholder), which, after such merger or
consolidation, would be an Affiliate (as hereinafter defined) of an
Interested Stockholder, or
(B) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or a series of related transactions)
to or with any Interested Stockholder or any Affiliate of any
Interested Stockholder of any assets of the Corporation or any
Subsidiary having an aggregate fair market value of $1,000,000 or
more, or
(C) the issuance or transfer by the Corporation or any Subsidiary (in
one transaction or a series of related transactions) of any securities
of the Corporation or any Subsidiary to any Interested Stockholder or
any Affiliate of any Interested Stockholder in exchange for cash,
securities or other property (or a combination thereof) having an
aggregate fair market value of $1,000,000 or more, or
(D) the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation, or
(E) any reclassification of securities (including any reverse stock
split), or recapitalization of the Corporation, or any merger or
consolidation of the Corporation with any of its Subsidiaries or any
similar transaction (whether or not with or into or otherwise
involving an Interested Stockholder) which has the effect, directly or
indirectly, of increasing the proportionate share of the outstanding
shares of any class of equity or convertible securities of the
Corporation or any Subsidiary which is directly or indirectly owned by
any Interested Stockholder, or any Affiliate of any Interested
Stockholder, shall require the affirmative vote of the holders of at
least two-thirds of the outstanding shares of capital stock of the
Corporation entitled to vote generally in the election of directors,
considered for the purpose of this Article Fifteenth as one class
("Voting Shares"). Such affirmative vote shall be required
notwithstanding the fact that no vote may be required, or that some
lesser percentage may be specified, by law or in any agreement with
any national securities exchange or otherwise.
(2) The term "business combination" as used in this Article
Fifteenth shall mean any transaction which is referred to any one
or more of clauses (A) through (E) of paragraph 1 of the section
(a).
(b) The provisions of section (a) of this Article Fifteenth shall not
be
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applicable to any particular business combination and such business
combination shall require only such affirmative vote as is required by
law and any other provisions of the Charter or Act of Incorporation of
By-Laws if such business combination has been approved by a majority
of the whole Board.
(c) For the purposes of this Article Fifteenth:
(1) A "person" shall mean any individual firm, corporation or other
entity.
(2) "Interested Stockholder" shall mean, in respect of any business
combination, any person (other than the Corporation or any Subsidiary) who
or which as of the record date for the determination of stockholders
entitled to notice of and to vote on such business combination, or
immediately prior to the consummation of any such transaction:
(A) is the beneficial owner, directly or indirectly, of more than 10%
of the Voting Shares, or
(B) is an Affiliate of the Corporation and at any time within two
years prior thereto was the beneficial owner, directly or indirectly,
of not less than 10% of the then outstanding voting Shares, or
(C) is an assignee of or has otherwise succeeded in any share of
capital stock of the Corporation which were at any time within two
years prior thereto beneficially owned by any Interested Stockholder,
and such assignment or succession shall have occurred in the course of
a transaction or series of transactions not involving a public
offering within the meaning of the Securities Act of 1933.
(3) A person shall be the "beneficial owner" of any Voting Shares:
(A) which such person or any of its Affiliates and Associates (as
hereafter defined) beneficially own, directly or indirectly, or
(B) which such person or any of its Affiliates or Associates has (i)
the right to acquire (whether such right is exercisable immediately or
only after the passage of time), pursuant to any agreement,
arrangement or understanding or upon the exercise of conversion
rights, exchange rights, warrants or options, or otherwise, or (ii)
the right to vote pursuant to any agreement, arrangement or
understanding, or
(C) which are beneficially owned, directly or indirectly, by any
other person
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with which such first mentioned person or any of its Affiliates or
Associates has any agreement, arrangement or understanding for the
purpose of acquiring, holding, voting or disposing of any shares of
capital stock of the Corporation.
(4) The outstanding Voting Shares shall include shares deemed owned
through application of paragraph (3) above but shall not include any other
Voting Shares which may be issuable pursuant to any agreement, or upon
exercise of conversion rights, warrants or options or otherwise.
(5) "Affiliate" and "Associate" shall have the respective meanings given
those terms in Rule 12b-2 of the General Rules and Regulations under the
Securities Exchange Act of 1934, as in effect on December 31, 1981.
(6) "Subsidiary" shall mean any corporation of which a majority of any
class of equity security (as defined in Rule 3a11-1 of the General Rules
and Regulations under the Securities Exchange Act of 1934, as in effect in
December 31, 1981) is owned, directly or indirectly, by the Corporation;
provided, however, that for the purposes of the definition of Investment
Stockholder set forth in paragraph (2) of this section (c), the term
"Subsidiary" shall mean only a corporation of which a majority of each
class of equity security is owned, directly or indirectly, by the
Corporation.
(d) majority of the directors shall have the power and duty to
determine for the purposes of this Article Fifteenth on the basis of
information known to them, (1) the number of Voting Shares
beneficially owned by any person (2) whether a person is an Affiliate
or Associate of another, (3) whether a person has an agreement,
arrangement or understanding with another as to the matters referred
to in paragraph (3) of section (c), or (4) whether the assets subject
to any business combination or the consideration received for the
issuance or transfer of securities by the Corporation, or any
Subsidiary has an aggregate fair market value of $1,000,000 or more.
(e) Nothing contained in this Article Fifteenth shall be construed to
relieve any Interested Stockholder from any fiduciary obligation
imposed by law.
Sixteenth: Notwithstanding any other provision of this Charter or Act of
Incorporation or the By-Laws of the Corporation (and in addition to any
other vote that may be required by law, this Charter or Act of
Incorporation by the By-Laws), the affirmative vote of the holders of at
least two-thirds of the outstanding shares of the capital stock of the
Corporation entitled to vote generally in the election of directors
(considered for this purpose as one class) shall be required to amend,
alter or repeal any provision of Articles Fifth, Thirteenth, Fifteenth or
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Sixteenth of this Charter or Act of Incorporation.
Seventeenth: (a) a Director of this Corporation shall not be liable to the
Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a Director, except to the extent such exemption from
liability or limitation thereof is not permitted under the Delaware General
Corporation Laws as the same exists or may hereafter be amended.
(b) Any repeal or modification of the foregoing paragraph shall not
adversely affect any right or protection of a Director of the
Corporation existing hereunder with respect to any act or omission
occurring prior to the time of such repeal or modification."
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EXHIBIT B
BY-LAWS
WILMINGTON TRUST COMPANY
WILMINGTON, DELAWARE
As existing on January 16, 1997
<PAGE>
BY-LAWS OF WILMINGTON TRUST COMPANY
ARTICLE I
Stockholders' Meetings
Section 1. The Annual Meeting of Stockholders shall be held on the
third Thursday in April each year at the principal office at the Company or
at such other date, time, or place as may be designated by resolution by the
Board of Directors.
Section 2. Special meetings of all stockholders may be called at any
time by the Board of Directors, the Chairman of the Board or the President.
Section 3. Notice of all meetings of the stockholders shall be given by
mailing to each stockholder at least ten (10) days before said meeting, at
his last known address, a written or printed notice fixing the time and place
of such meeting.
Section 4. A majority in the amount of the capital stock of the Company
issued and outstanding on the record date, as herein determined, shall
constitute a quorum at all meetings of stockholders for the transaction of
any business, but the holders of a small number of shares may adjourn, from
time to time, without further notice, until a quorum is secured. At each
annual or special meeting of stockholders, each stockholder shall be entitled
to one vote, either in person or by proxy, for each shares of stock
registered in the stockholder's name on the books of the Company on the
record date for any such meeting as determined herein.
ARTICLE II
Directors
Section 1. The number and classification of the Board of Directors
shall be as set forth in the Charter of the Bank.
Section 2. No person who has attained the age of seventy-two (72) years
shall be nominated for election to the Board of Directors of the Company,
provided, however, that this limitation shall not apply to any person who was
serving as director of the Company on September 16, 1971.
Section 3. The class of Directors so elected shall hold office for
three years or until their successors are elected and qualified.
Section 4. The affairs and business of the Company shall be managed and
conducted by the Board of Directors.
<PAGE>
Section 5. The Board of Directors shall meet at the principal office of
the Company or elsewhere in its discretion at such times to be determined by
a majority of its members, or at the call of the Chairman of the Board of
Directors or the President.
Section 6. Special meetings of the Board of Directors may be called at
any time by the Chairman of the Board of Directors or by the President, and
shall be called upon the written request of a majority of the directors.
Section 7. A majority of the directors elected and qualified shall be
necessary to constitute a quorum for the transaction of business at any
meeting of the Board of Directors.
Section 8. Written notice shall be sent by mail to each director of any
special meeting of the Board of Directors, and of any change in the time or
place of any regular meeting, stating the time and place of such meeting,
which shall be mailed not less than two days before the time of holding such
meeting.
Section 9. In the event of the death, resignation, removal, inability
to act, or disqualification of any director, the Board of Directors, although
less than a quorum, shall have the right to elect the successor who shall
hold office for the remainder of the full term of the class of directors in
which the vacancy occurred, and until such director's successor shall have
been duly elected and qualified.
Section 10. The Board of Directors at its first meeting after its
election by the stockholders shall appoint an Executive Committee, a Trust
Committee, an Audit Committee and a Compensation Committee, and shall elect
from its own members a Chairman of the Board of Directors and a President who
may be the same person. The Board of Directors shall also elect at such
meeting a Secretary and a Treasurer, who may be the same person, may appoint
at any time such other committees and elect or appoint such other officers as
it may deem advisable. The Board of Directors may also elect at such meeting
one or more Associate Directors.
Section 11. The Board of Directors may at any time remove, with or
without cause, any member of any Committee appointed by it or any associate
director or officer elected by it and may appoint or elect his successor.
Section 12. The Board of Directors may designate an officer to be in
charge of such of the departments or division of the Company as it may deem
advisable.
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ARTICLE III
Committees
Section 1. Executive Committee
(A) The Executive Committee shall be composed of not more
than nine members who shall be selected by the Board of Directors from its
own members and who shall hold office during the pleasure of the Board.
(B) The Executive Committee shall have all the powers of
the Board of Directors when it is not in session to transact all business for
and in behalf of the Company that may be brought before it.
(C) The Executive Committee shall meet at the principal
office of the Company or elsewhere in its discretion at such times to be
determined by a majority of its members, or at the call of the Chairman of
the Executive Committee or at the call of the Chairman of the Board of
Directors. The majority of its members shall be necessary to constitute a
quorum for the transaction of business. Special meetings of the Executive
Committee may be held at any time when a quorum is present.
(D) Minutes of each meeting of the Executive Committee
shall be kept and submitted to the Board of Directors at its next meeting.
(E) The Executive Committee shall advise and superintend
all investments that may be made of the funds of the Company, and shall
direct the disposal of the same, in accordance with such rules and
regulations as the Board of Directors from time to time make.
(F) In the event of a state of disaster of sufficient severity
to prevent the conduct and management of the affairs and business of the Company
by its directors and officers as contemplated by these By-Laws any two available
members of the Executive Committee as constituted immediately prior to such
disaster shall constitute a quorum of that Committee for the full conduct and
management of the affairs and business of the Company in accordance with the
provisions of Article III of these By-Laws; and if less than three members of
the Trust Committee is constituted immediately prior to such disaster shall be
available for the transaction of its business, such Executive Committee shall
also be empowered to exercise all of the powers reserved to the Trust Committee
under Article III Section 2 hereof. In the event of the unavailability, at such
time, of a minimum of two members of such Executive Committee, any three
available directors shall constitute the Executive Committee for the full
conduct and management of the affairs and business of the
3
<PAGE>
Company in accordance with the foregoing provisions of this Section. This
By-Law shall be subject to implementation by Resolutions of the Board of
Directors presently existing or hereafter passed from time to time for that
purpose, and any provisions of these By-Laws (other than this Section) and
any resolutions which are contrary to the provisions of this Section or to
the provisions of any such implementary Resolutions shall be suspended during
such a disaster period until it shall be determined by any interim Executive
Committee acting under this section that it shall be to the advantage of the
Company to resume the conduct and management of its affairs and business
under all of the other provisions of these By-Laws.
4
<PAGE>
Section 2. Trust Committee
(A) The Trust Committee shall be composed of not more than
thirteen members who shall be selected by the Board of Directors, a majority
of whom shall be members of the Board of Directors and who shall hold office
during the pleasure of the Board.
(B) The Trust Committee shall have general supervision over
the Trust Department and the investment of trust funds, in all matters,
however, being subject to the approval of the Board of Directors.
(C) The Trust Committee shall meet at the principal office
of the Company or elsewhere in its discretion at such times to be determined
by a majority of its members or at the call of its chairman. A majority of
its members shall be necessary to constitute a quorum for the transaction of
business.
(D) Minutes of each meeting of the Trust Committee shall be
kept and promptly submitted to the Board of Directors.
(E) The Trust Committee shall have the power to appoint
Committees and/or designate officers or employees of the Company to whom
supervision over the investment of trust funds may be delegated when the
Trust Committee is not in session.
Section 3. Audit Committee
(A) The Audit Committee shall be composed of five members
who shall be selected by the Board of Directors from its own members, none of
whom shall be an officer of the Company, and shall hold office at the
pleasure of the Board.
(B) The Audit Committee shall have general supervision over
the Audit Division in all matters however subject to the approval of the
Board of Directors; it shall consider all matters brought to its attention by
the officer in charge of the Audit Division, review all reports of
examination of the Company made by any governmental agency or such
independent auditor employed for that purpose, and make such recommendations
to the Board of Directors with respect thereto or with respect to any other
matters pertaining to auditing the Company as it shall deem desirable.
(C) The Audit Committee shall meet whenever and wherever
the majority of its members shall deem it to be proper for the transaction of
its business, and a majority of its Committee shall constitute a quorum.
Section 4. Compensation Committee
5
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(A) The Compensation Committee shall be composed of not
more than five (5) members who shall be selected by the Board of Directors
from its own members who are not officers of the Company and who shall hold
office during the pleasure of the Board.
(B) The Compensation Committee shall in general advise upon
all matters of policy concerning the Company brought to its attention by the
management and from time to time review the management of the Company, major
organizational matters, including salaries and employee benefits and
specifically shall administer the Executive Incentive Compensation Plan.
(C) Meetings of the Compensation Committee may be called at
any time by the Chairman of the Compensation Committee, the Chairman of the
Board of Directors, or the President of the Company.
Section 5. Associate Directors
(A) Any person who has served as a director may be elected
by the Board of Directors as an associate director, to serve during the
pleasure of the Board.
(B) An associate director shall be entitled to attend all
directors meetings and participate in the discussion of all matters brought
to the Board, with the exception that he would have no right to vote. An
associate director will be eligible for appointment to Committees of the
Company, with the exception of the Executive Committee, Audit Committee and
Compensation Committee, which must be comprised solely of active directors.
Section 6. Absence or Disqualification of Any Member of a Committee
(A) In the absence or disqualification of any member of any
Committee created under Article III of the By-Laws of this Company, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously
appoint another member of the Board of Directors to act at the meeting in the
place of any such absence or disqualified member.
ARTICLE IV
Officers
Section 1. The Chairman of the Board of Directors shall preside at all
meetings of the Board and shall have such further authority and powers and
shall perform such duties as the Board of Directors may from time to time
confer and direct. He shall also exercise such powers and perform such
duties as may from time to time be agreed upon between himself and the
President of the Company.
6
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Section 2. THE VICE CHAIRMAN OF THE BOARD. The Vice Chairman of the
Board of Directors shall preside at all meetings of the Board of Directors at
which the Chairman of the Board shall not be present and shall have such
further authority and powers and shall perform such duties as the Board of
Directors or the Chairman of the Board may from time to time confer and
direct.
Section 3. The President shall have the powers and duties pertaining to
the office of the President conferred or imposed upon him by statute or
assigned to him by the Board of Directors in the absence of the Chairman of
the Board the President shall have the powers and duties of the Chairman of
the Board.
Section 4. The Chairman of the Board of Directors or the President as
designated by the Board of Directors, shall carry into effect all legal
directions of the Executive Committee and of the Board of Directors, and
shall at all times exercise general supervision over the interest, affairs
and operations of the Company and perform all duties incident to his office.
Section 5. There may be one or more Vice Presidents, however
denominated by the Board of Directors, who may at any time perform all the
duties of the Chairman of the Board of Directors and/or the President and
such other powers and duties as may from time to time be assigned to them by
the Board of Directors, the Executive Committee, the Chairman of the Board or
the President and by the officer in charge of the department or division to
which they are assigned.
Section 6. The Secretary shall attend to the giving of notice of
meetings of the stockholders and the Board of Directors, as well as the
Committees thereof, to the keeping of accurate minutes of all such meetings
and to recording the same in the minute books of the Company. In addition to
the other notice requirements of these By-Laws and as may be practicable
under the circumstances, all such notices shall be in writing and mailed well
in advance of the scheduled date of any other meeting. He shall have custody
of the corporate seal and shall affix the same to any documents requiring
such corporate seal and to attest the same.
Section 7. The Treasurer shall have general supervision over all assets
and liabilities of the Company. He shall be custodian of and responsible for
all monies, funds and valuables of the Company and for the keeping of proper
records of the evidence of property or indebtedness and of all the
transactions of the Company. He shall have general supervision of the
expenditures of the Company and shall report to the Board of Directors at
each regular meeting of the condition of the Company, and perform such other
duties as may be assigned to him from time to time by the Board of Directors
of the Executive Committee.
7
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Section 8. There may be a Controller who shall exercise general
supervision over the internal operations of the Company, including
accounting, and shall render to the Board of Directors at appropriate times a
report relating to the general condition and internal operations of the
Company.
There may be one or more subordinate accounting or controller officers
however denominated, who may perform the duties of the Controller and such
duties as may be prescribed by the Controller.
Section 9. The officer designated by the Board of Directors to be in
charge of the Audit Division of the Company with such title as the Board of
Directors shall prescribe, shall report to and be directly responsible only
to the Board of Directors.
There shall be an Auditor and there may be one or more Audit Officers,
however denominated, who may perform all the duties of the Auditor and such
duties as may be prescribed by the officer in charge of the Audit Division.
Section 10. There may be one or more officers, subordinate in rank to
all Vice Presidents with such functional titles as shall be determined from
time to time by the Board of Directors, who shall ex officio hold the office
Assistant Secretary of this Company and who may perform such duties as may be
prescribed by the officer in charge of the department or division to whom
they are assigned.
Section 11. The powers and duties of all other officers of the Company
shall be those usually pertaining to their respective offices, subject to the
direction of the Board of Directors, the Executive Committee, Chairman of the
Board of Directors or the President and the officer in charge of the
department or division to which they are assigned.
ARTICLE V
Stock and Stock Certificates
Section 1. Shares of stock shall be transferrable on the books of the
Company and a transfer book shall be kept in which all transfers of stock
shall be recorded.
8
<PAGE>
Section 2. Certificate of stock shall bear the signature of the
President or any Vice President, however denominated by the Board of
Directors and countersigned by the Secretary or Treasurer or an Assistant
Secretary, and the seal of the corporation shall be engraved thereon. Each
certificate shall recite that the stock represented thereby is transferrable
only upon the books of the Company by the holder thereof or his attorney,
upon surrender of the certificate properly endorsed. Any certificate of
stock surrendered to the Company shall be cancelled at the time of transfer,
and before a new certificate or certificates shall be issued in lieu thereof.
Duplicate certificates of stock shall be issued only upon giving such
security as may be satisfactory to the Board of Directors or the Executive
Committee.
Section 3. The Board of Directors of the Company is authorized to fix
in advance a record date for the determination of the stockholders entitled
to notice of, and to vote at, any meeting of stockholders and any adjournment
thereof, or entitled to receive payment of any dividend, or to any allotment
or rights, or to exercise any rights in respect of any change, conversion or
exchange of capital stock, or in connection with obtaining the consent of
stockholders for any purpose, which record date shall not be more than 60 nor
less than 10 days proceeding the date of any meeting of stockholders or the
date for the payment of any dividend, or the date for the allotment of
rights, or the date when any change or conversion or exchange of capital
stock shall go into effect, or a date in connection with obtaining such
consent.
ARTICLE VI
Seal
Section 1. The corporate seal of the Company shall be in the following
form:
Between two concentric circles the words
"Wilmington Trust Company" within the inner
circle the words "Wilmington, Delaware."
ARTICLE VII
Fiscal Year
Section 1. The fiscal year of the Company shall be the calendar year.
ARTICLE VIII
Execution of Instruments of the Company
9
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Section 1. The Chairman of the Board, the President or any Vice
President, however denominated by the Board of Directors, shall have full
power and authority to enter into, make, sign, execute, acknowledge and/or
deliver and the Secretary or any Assistant Secretary shall have full power
and authority to attest and affix the corporate seal of the Company to any
and all deeds, conveyances, assignments, releases, contracts, agreements,
bonds, notes, mortgages and all other instruments incident to the business of
this Company or in acting as executor, administrator, guardian, trustee,
agent or in any other fiduciary or representative capacity by any and every
method of appointment or by whatever person, corporation, court officer or
authority in the State of Delaware, or elsewhere, without any specific
authority, ratification, approval or confirmation by the Board of Directors
or the Executive Committee, and any and all such instruments shall have the
same force and validity as though expressly authorized by the Board of
Directors and/or the Executive Committee.
10
<PAGE>
ARTICLE IX
Compensation of Directors and Members of Committees
Section 1. Directors and associate directors of the Company, other than
salaried officers of the Company, shall be paid such reasonable honoraria or
fees for attending meetings of the Board of Directors as the Board of
Directors may from time to time determine. Directors and associate directors
who serve as members of committees, other than salaried employees of the
Company, shall be paid such reasonable honoraria or fees for services as
members of committees as the Board of Directors shall from time to time
determine and directors and associate directors may be employed by the
Company for such special services as the Board of Directors may from time to
time determine and shall be paid for such special services so performed
reasonable compensation as may be determined by the Board of Directors.
ARTICLE X
Indemnification
Section 1. (A) The Corporation shall indemnify and hold harmless, to
the fullest extent permitted by applicable law as it presently exists or may
hereafter be amended, any person who was or is made or is threatened to be
made a party or is otherwise involved in any action, suit or proceeding,
whether civil, criminal, administrative or investigative (a "proceeding") by
reason of the fact that he, or a person for whom he is the legal
representative, 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, fiduciary or agent of another corporation or of
a partnership, joint venture, trust, enterprise or non-profit entity,
including service with respect to employee benefit plans, against all
liability and loss suffered and expenses reasonably incurred by such person.
The Corporation shall indemnify a person in connection with a proceeding
initiated by such person only if the proceeding was authorized by the Board
of Directors of the Corporation.
(B) The Corporation shall pay the expenses incurred in
defending any proceeding in advance of its final disposition, PROVIDED,
HOWEVER, that the payment of expenses incurred by a Director officer in his
capacity as a Director or officer in advance of the final disposition of the
proceeding shall be made only upon receipt of an undertaking by the Director
or officer to repay all amounts advanced if it should be ultimately
determined that the Director or officer is not entitled to be indemnified
under this Article or otherwise.
(C) If a claim for indemnification or payment of expenses,
under this Article X is not paid in full within ninety days after a written
claim therefor has been received by the Corporation the claimant may file
suit to recover the unpaid amount of such
11
<PAGE>
claim and, if successful in whole or in part, shall be entitled to be paid
the expense of prosecuting such claim. In any such action the Corporation
shall have the burden of proving that the claimant was not entitled to the
requested indemnification of payment of expenses under applicable law.
(D) The rights conferred on any person by this Article X
shall not be exclusive of any other rights which such person may have or
hereafter acquire under any statute, provision of the Charter or Act of
Incorporation, these By-Laws, agreement, vote of stockholders or
disinterested Directors or otherwise.
(E) Any repeal or modification of the foregoing provisions
of this Article X shall not adversely affect any right or protection
hereunder of any person in respect of any act or omission occurring prior to
the time of such repeal or modification.
ARTICLE XI
Amendments to the By-Laws
Section 1. These By-Laws may be altered, amended or repealed, in whole
or in part, and any new By-Law or By-Laws adopted at any regular or special
meeting of the Board of Directors by a vote of the majority of all the
members of the Board of Directors then in office.
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EXHIBIT C
Section 321(b) Consent
Pursuant to Section 321(b) of the Trust Indenture Act of 1939, as
amended, Wilmington Trust Company hereby consents that reports of
examinations by Federal, State, Territorial or District authorities may be
furnished by such authorities to the Securities and Exchange Commission upon
requests therefor.
WILMINGTON TRUST COMPANY
Dated: June 10, 1999 By: /s/ NORMA P. CLOSS
------------------------
Name: Norma P. Closs
Title: Vice President
<PAGE>
EXHIBIT D
NOTICE
This form is intended to assist state nonmember banks and savings
banks with state publication requirements. It has not been approved
by any state banking authorities. Refer to your appropriate state
banking authorities for your state publication requirements.
R E P O R T O F C O N D I T I O N
Consolidating domestic subsidiaries of the
WILMINGTON TRUST COMPANY of WILMINGTON
- ---------------------------------------------------------- ---------------
Name of Bank City
in the State of DELAWARE , at the close of business on March 31, 1999.
------------
<TABLE>
<CAPTION>
ASSETS
Thousands of dollars
<S> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coins . . . . . . . . . . .196,035
Interest-bearing balances . . . . . . . . . . . . . . . . . . . . . . . . . . 0
Held-to-maturity securities. . . . . . . . . . . . . . . . . . . . . . . . . . 44,909
Available-for-sale securities. . . . . . . . . . . . . . . . . . . . . . . .1,396,028
Federal funds sold and securities purchased under agreements to resell . . . .127,340
Loans and lease financing receivables:
Loans and leases, net of unearned income. . . . . . . 4,176,290
LESS: Allowance for loan and lease losses. . . . . . 68,543
LESS: Allocated transfer risk reserve. . . . . . . . 0
Loans and leases, net of unearned income, allowance, and reserve. . . .4,107,747
Assets held in trading accounts. . . . . . . . . . . . . . . . . . . . . . . . . . .0
Premises and fixed assets (including capitalized leases) . . . . . . . . . . .139,843
Other real estate owned. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,055
Investments in unconsolidated subsidiaries and associated companies. . . . . . .1,225
Customers' liability to this bank on acceptances outstanding . . . . . . . . . . . .0
Intangible assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,265
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99,073
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6,118,520
CONTINUED ON NEXT PAGE
<PAGE>
<CAPTION>
LIABILITIES
<S> <C>
Deposits:
In domestic offices. . . . . . . . . . . . . . . . . . . . . . . . . . . . .4,332,124
Noninterest-bearing . . . . . . . . 959,777
Interest-bearing. . . . . . . . . . 3,372,347
Federal funds purchased and Securities sold under agreements to
repurchase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 432,395
Demand notes issued to the U.S. Treasury . . . . . . . . . . . . . . . . . . . 28,906
Trading liabilities (from Schedule RC-D) . . . . . . . . . . . . . . . . . . . . . .0
Other borrowed money:. . . . . . . . . . . . . . . . . . . . . . . . . . . . .///////
With original maturity of one year or less. . . . . . . . . . . . . . . .715,000
With original maturity of more than one year. . . . . . . . . . . . . . . 43,000
Bank's liability on acceptances executed and outstanding . . . . . . . . . . . . . .0
Subordinated notes and debentures. . . . . . . . . . . . . . . . . . . . . . . . . .0
Other liabilities (from Schedule RC-G) . . . . . . . . . . . . . . . . . . . 93,311
Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5,644,736
EQUITY CAPITAL
Perpetual preferred stock and related surplus. . . . . . . . . . . . . . . . . . . .0
Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .500
Surplus (exclude all surplus related to preferred stock) . . . . . . . . . . . 62,118
Undivided profits and capital reserves . . . . . . . . . . . . . . . . . . . .408,053
Net unrealized holding gains (losses) on available-for-sale securities . . . . 3,113
Total equity capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . .473,784
Total liabilities, limited-life preferred stock, and equity capital. . . . .6,118,520
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF SPECTRUM BANCORPORATION, INC. FOR THE YEAR ENDED JUNE
30, 1998 AND THE 9-MONTH PERIOD ENDED MARCH 31, 1999.
</LEGEND>
<MULTIPLIER> 1,000
<CIK>0001088381
<NAME>SPECTRUM BANCORPORATION INC
<S> <C> <C>
<PERIOD-TYPE> 9-MOS YEAR
<FISCAL-YEAR-END> JUN-30-1998 JUN-30-1998
<PERIOD-END> MAR-31-1999 JUN-30-1998
<CASH> 14,240 19,019
<INT-BEARING-DEPOSITS> 991 2,008
<FED-FUNDS-SOLD> 28,990 21,785
<TRADING-ASSETS> 0 0
<INVESTMENTS-HELD-FOR-SALE> 95,267 79,511
<INVESTMENTS-CARRYING> 0 0
<INVESTMENTS-MARKET> 0 0
<LOANS> 435,549 408,470
<ALLOWANCE> 5,970 5,599
<TOTAL-ASSETS> 593,937 548,077
<DEPOSITS> 489,544 450,790
<SHORT-TERM> 19,301 20,588
<LIABILITIES-OTHER> 6,313 5,677
<LONG-TERM> 40,320 37,502
0 0
1,700 1,700
<COMMON> 72 72
<OTHER-SE> 34,615 29,776
<TOTAL-LIABILITIES-AND-EQUITY> 593,937 548,077
<INTEREST-LOAN> 28,094 35,414
<INTEREST-INVEST> 4,478 5,178
<INTEREST-OTHER> 1,196 1,313
<INTEREST-TOTAL> 33,768 41,905
<INTEREST-DEPOSIT> 14,865 18,170
<INTEREST-EXPENSE> 17,406 21,780
<INTEREST-INCOME-NET> 16,363 20,145
<LOAN-LOSSES> 882 1,374
<SECURITIES-GAINS> (15) 179
<EXPENSE-OTHER> 11,936 14,074
<INCOME-PRETAX> 8,297 9,271
<INCOME-PRE-EXTRAORDINARY> 5,312 6,187
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 5,048 5,835
<EPS-BASIC> 68.79 79.15
<EPS-DILUTED> 68.79 79.15
<YIELD-ACTUAL> 4.12 4.22
<LOANS-NON> 1,897 2,337
<LOANS-PAST> 1,207 1,484
<LOANS-TROUBLED> 4,186 4,186
<LOANS-PROBLEM> 0 0
<ALLOWANCE-OPEN> 5,599 5,803
<CHARGE-OFFS> 658 1,931
<RECOVERIES> 147 224
<ALLOWANCE-CLOSE> 5,970 5,599
<ALLOWANCE-DOMESTIC> 5,970 5,599
<ALLOWANCE-FOREIGN> 0 0
<ALLOWANCE-UNALLOCATED> 0 0
</TABLE>
