<PAGE> 1
As filed with the Securities and Exchange Commission on October __, 2000
Registration No. 333-_____
Registration No. 333-_____
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-----------------------------------------------
BAYLAKE CORP. BAYLAKE CAPITAL TRUST I
(Exact Name of Co-Registrants as Specified in Charters)
<TABLE>
<S> <C> <C> <C>
WISCONSIN 39-1268055 DELAWARE APPLIED FOR
(State or Other Jurisdiction (I.R.S. Employer (State or Other Jurisdiction of (I.R.S. Employer
of Incorporation or Identification Number) Incorporation or Organization) Identification Number)
Organization)
</TABLE>
217 NORTH FOURTH AVENUE
STURGEON BAY, WISCONSIN 54235
(920) 743-5551
(Address, Including Zip Code, and Telephone Number, Including
Area Code, of Co-Registrants' Principal Executive Offices)
STEVEN D. JENNERJOHN
TREASURER
217 NORTH FOURTH AVENUE
STURGEON BAY, WISCONSIN 54235
(920) 743-5551
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent For Service For Co-Registrants)
Copies to
SCOTT J. LUEDKE, ESQ. HAROLD R. BURROUGHS, ESQ.
JENKENS & GILCHRIST, BRYAN CAVE LLP
A PROFESSIONAL CORPORATION ONE METROPOLITAN SQUARE
1445 ROSS AVENUE, SUITE 3200 211 NORTH BROADWAY, SUITE 3600
DALLAS, TEXAS 75202-2799 ST. LOUIS, MISSOURI 63102-2750
(214) 855-4500 (314) 259-2000
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box: [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering: [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(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,
please check the following box. [ ]
-----------------------------------------------
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(1) per unit offering price registration fee(2)
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
% Cumulative Trust Preferred
Securities of Baylake Capital Trust I 1,725,000 shares $10.00 $17,250,000 $4,554.00
% Subordinated Debentures
due 2030 of Baylake Corp. (3)(4)
Guarantee of Preferred Securities (3)(5)
================================================================================================================================
</TABLE>
(1) Includes 225,000 of preferred securities which may be sold by Baylake
Capital Trust I to cover over-allotments.
(2) The registration fee is calculated in accordance with Rule 457(i) and (n).
(3) This Registration Statement is deemed to cover the ____% Subordinated
Debentures due 2030 of Baylake Corp., the rights of holders of ____%
Subordinated Debentures of Baylake Corp. under the Indenture, and the
rights of holders of the Preferred Securities under the Trust Agreement,
the Guarantee and the Expense Agreement entered into by Baylake Corp.
(4) The ____% Subordinated Debentures due 2030 will be purchased by Baylake
Capital Trust I with the proceeds of the sale of the Preferred Securities.
Such securities may later be distributed for no additional consideration
to the holders of the Preferred Securities of Baylake Capital Trust I upon
its dissolution and the distribution of its assets.
(5) No separate consideration will be received for the Guarantee.
-----------------------------------------------
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 THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
<PAGE> 2
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.
SUBJECT TO COMPLETION, DATED OCTOBER 30, 2000
PROSPECTUS
1,500,000 PREFERRED SECURITIES
BAYLAKE CAPITAL TRUST I
% CUMULATIVE TRUST PREFERRED SECURITIES
(LIQUIDATION AMOUNT $10 PER PREFERRED SECURITY)
[LOGO]
FULLY, IRREVOCABLY AND UNCONDITIONALLY GUARANTEED
ON A SUBORDINATED BASIS, AS DESCRIBED IN THIS PROSPECTUS, BY
BAYLAKE CORP.
------------------------
The preferred securities represent undivided beneficial interests in the
assets of Baylake Capital Trust I. The trust will invest all of the proceeds of
this offering of preferred securities to purchase % subordinated debentures
due 2030 of Baylake Corp.
For each of the preferred securities that you own, you will receive
cumulative cash distributions at an annual rate of % on March 31, June 30,
September 30 and December 31 of each year, beginning March 31, 2001, from
payments on the debentures. We may defer payments of distributions at any time
for up to 20 consecutive quarters. The preferred securities are effectively
subordinated to all of our senior and subordinated indebtedness as well as the
indebtedness of our subsidiaries. The debentures mature and the preferred
securities must be redeemed by December 31, 2030. The trust may redeem the
preferred securities, at a redemption price of $10 per preferred security plus
accrued and unpaid distributions, at any time on or after December 31, 2005, or
earlier under circumstances specified in this prospectus.
The preferred securities are expected to be approved for trading on the
American Stock Exchange under the symbol "BYL.A." Trading is expected to
commence on or prior to delivery of the preferred securities.
------------------------
INVESTING IN THE PREFERRED SECURITIES INVOLVES RISKS. SEE "RISK FACTORS"
BEGINNING ON PAGE 12.
------------------------
THE PREFERRED SECURITIES ARE NOT SAVINGS ACCOUNTS, DEPOSITS OR OBLIGATIONS
OF ANY BANK AND ARE NOT INSURED BY THE BANK INSURANCE FUND OF THE FEDERAL
DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY.
<TABLE>
<CAPTION>
PER PREFERRED
SECURITY TOTAL
------------- -----
<S> <C> <C>
Public offering price..................................... $10.00 $15,000,000
Proceeds to the trust..................................... $10.00 $15,000,000
</TABLE>
This is a firm commitment underwriting. We will pay underwriting
commissions of $ per preferred security, or a total of $ , for
arranging the investment in our debentures. The underwriters have been granted a
30-day option to purchase up to an additional 225,000 preferred securities to
cover over-allotments, if any.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary
is a criminal offense.
<TABLE>
<S> <C>
STIFEL, NICOLAUS & COMPANY HOWE BARNES INVESTMENTS,
INC.
INCORPORATED
</TABLE>
, 2000
<PAGE> 3
[MAP]
[REFLECTS LOCATIONS OF BAYLAKE BANK'S OFFICES AS OF SEPTEMBER 30, 2000]
i
<PAGE> 4
SUMMARY
This summary highlights information contained elsewhere in, or incorporated
by reference into, this prospectus. Because this is a summary, it may not
contain all of the information that is important to you. Therefore, you should
also read the more detailed information set forth in this prospectus, our
financial statements and the other information that is incorporated by reference
in this prospectus. Unless otherwise indicated, the information in this
prospectus assumes that the underwriters will not exercise their option to
purchase additional preferred securities to cover over-allotments.
BAYLAKE CORP.
Baylake Corp., a Wisconsin corporation organized in 1976, is a bank holding
company headquartered in Sturgeon Bay, Wisconsin. We provide a variety of
financial services through our subsidiary bank, Baylake Bank, a Wisconsin state
bank and member of the Federal Reserve System. Baylake Bank was chartered in
1876.
We conduct our community banking business through 25 financial centers
located throughout Northeast Wisconsin, in Brown, Door, Green Lake, Kewaunee,
Manitowoc, Outagamie, Waupaca, and Waushara Counties. Our largest presence is in
Door County, which is known for its seasonal tourism and tourism related
services, where our bank operates eight banking facilities. Other principal
industries in our market area include light industry and manufacturing,
agriculture, food related products, and to a lesser degree, lumber and
furniture. In the third quarter of 2000, our bank opened two new branches, one
in downtown Green Bay and another in Ashwaubenon, increasing to six the number
of our banking facilities located in Brown County, one of Wisconsin's primary
growth areas.
Our bank is an independent community bank offering a full range of
financial services primarily to small businesses and individuals located in our
geographic market. To complement our bank's traditional banking products, such
as demand deposit accounts, various savings account plans, certificates of
deposit and real estate, consumer, commercial/industrial and agricultural loans,
our bank offers its customers a variety of services. These services include
transfer agency, personal and corporate trust, insurance agency, brokerage,
financial planning and electronic banking services.
In addition to our banking operations, our bank owns four non-bank
subsidiaries: Baylake Investments, Inc., which manages certain assets of our
bank available for investment; Bank of Sturgeon Bay Building Corporation, which
owns the main office building, conference center facilities and underlying real
property of our bank; Cornerstone Financial, Inc., which manages the conference
center facilities; and Baylake Insurance Company, which offers various types of
insurance products to the general public as an independent agent. Our bank also
owns a minority interest in United Financial Services, Inc., a data processing
services company that provides data processing services to 20 banks and ATM
processing services to 50 banks.
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FINANCIAL SUMMARY
As reflected in the financial summary presented, over the last five years
we have achieved profitable growth while expanding our presence into markets
that we believe to be attractive. Since the end of 1995, we have opened six new
banking facilities and acquired six banking branches. The strategy of
establishing new branches requires a significant expenditure of capital and
additional expenses; generally, it takes from 36 to 60 months for new branches
to be profitable. As our new branches mature, we are able to reduce our cost of
funds by replacing expensive initial funding with lower yielding deposits.
<TABLE>
<CAPTION>
AS OF AND FOR THE
NINE MONTHS
ENDED
SEPTEMBER 30, AS OF AND FOR THE YEAR ENDED DECEMBER 31,
------------------- ----------------------------------------------------
2000 1999 1999 1998 1997 1996 1995
-------- -------- -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Net income.............. $ 5,056 $ 4,932 $ 6,923 $ 6,017 $ 5,270 $ 4,703 $ 4,644
Earnings per share
(diluted)............. 0.66 0.64 0.90 0.80 0.71 0.63 0.62
Total assets............ 743,979 632,914 646,310 607,438 450,062 395,356 309,428
Total deposits.......... 547,717 502,290 504,074 495,284 345,976 327,165 266,980
Total shareholders'
equity................ 50,267 46,142 46,210 45,272 41,855 39,234 36,275
Return on average total
shareholders'
equity(1)............. 14.10% 14.24% 15.07% 13.87% 13.14% 12.39% 13.43%
Number of banking
facilities............ 25 23 23 22 17 17 13
</TABLE>
-------------------------
(1) Ratios for the nine-month periods are annualized.
OPERATING STRATEGY
We directly compete with other financial institutions and businesses in
both attracting and retaining deposits and making loans. To remain competitive
within our markets, we have developed, and are committed to, an operating
strategy the key elements of which are:
- FOCUSING ON PROFITABLE GROWTH. We have historically grown through
acquisitions and the opening of new branches. At the same time, we have
increased our net income each year, achieving a compound annual growth
rate of 10% from 1995 to 1999. We focus on and will continue to focus on
increasing our return on shareholders' equity, which has increased from
13.43% in 1995 to 14.10% for the nine months ended September 30, 2000.
Start-up expenses associated with opening our four new banking facilities
since the beginning of this year have impacted our earnings. In July and
August 2000, we opened two new banking facilities in the Green Bay area,
one in downtown Green Bay and another in Ashwaubenon. Additionally, in
August 2000, we replaced our facility in King, Wisconsin with a newer
facility. In September 2000, we opened a new financial center in
Kewaunee, which replaced a leased location in Kewaunee County and offers
our customers added conveniences and services. As these new banking
facilities mature, we expect them to have a positive impact on earnings
through a reduction of funding costs and an increase in earning assets.
We also own two additional properties for possible
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<PAGE> 6
future growth. Although our current focus is on profitability, we will not
ignore opportunities to add offices in areas consistent with our long range
plans.
- IMPLEMENTING NEW DELIVERY CHANNELS AND SERVICE OPPORTUNITIES. To enhance
customer convenience and product delivery, we recently announced 24-hour
on-line banking through "eBanc." With "eBanc," customers can access a
secure site to transfer funds, make loan payments, review account
balances and transactions in "real time," or contact bank personnel. We
continue to emphasize efforts to attract customers to our website at
www.baylake.com, which includes such features as on-line applications for
deposit and loan products. Information on our website is not a part of
this prospectus and should not be relied upon in making your decision
whether to purchase the preferred securities described in this
prospectus, as explained under "Information on our Website" below.
- MAINTAINING A STRONG COMMUNITY FOCUS. We are committed to local decision
making and input. We strive to be a valuable partner in the communities
we serve by establishing quality relationships with customers and local
businesses. To help us keep a community focus, we have organized our 25
offices into five geographic regions. Local lenders within each region
are able to maintain close community ties, with many loan decisions being
made locally. In addition, we have established local advisory boards in
each region to ensure that we stay in touch with the financial needs of
the communities we serve.
- CONTINUING DIFFERENTIATION AS A LEADING SMALL BUSINESS BANK. Because of
the knowledge and expertise demonstrated by our commercial lenders, we
are one of only a few banks in the State of Wisconsin to be recognized by
the Small Business Administration as a "preferred lender." This
designation allows our commercial lenders to approve SBA loans at the
time of application, making responsiveness and quick turnaround time a
part of the value-added service we provide to our customers. Because of
this high level of service, we have been one of the leading SBA loan
producers based on dollar volumes in the State of Wisconsin for the last
four consecutive calendar years. In addition to our commitment to provide
loans to our commercial customers, we offer a selection of cash
management products not generally available from a bank our size. We are
also in a position to satisfy the financial needs of not only the
business, but the business owner as well, by offering a broad and
competitively priced line of retail loan and deposit products.
- INCREASING THE ATTRACTIVENESS OF DEPOSIT PRODUCTS AND IDENTIFYING OTHER
SOURCES OF FUNDS TO SUPPORT LOAN GROWTH. Currently, we offer demand
deposit accounts, interest-bearing checking, savings and money market
accounts, individual retirement accounts, and certificates of deposit. We
will continue to emphasize the generation of additional core deposits
through competitive pricing, expanded product offerings and new delivery
channels. To supplement our traditional funding sources, we have borrowed
from the Federal Home Loan Bank and anticipate taking advantage of other
wholesale funding sources in the future.
INFORMATION ON OUR WEBSITE
Information on our Internet website, including information about any of our
subsidiaries, is not part of this prospectus, and you should not rely on that
information unless that information is also in this document or in a document
that is incorporated by reference into this prospectus.
3
<PAGE> 7
Our principal executive offices are located at 217 North Fourth Avenue,
Sturgeon Bay, Wisconsin 54235, and our telephone number is (920) 743-5551.
BAYLAKE CAPITAL TRUST I
The trust is a newly formed financing subsidiary of Baylake. Upon issuance
of the preferred securities offered by this prospectus, the purchasers in this
offering will own all of the issued and outstanding preferred securities of the
trust. In exchange for our capital contribution to the trust, we will own all of
the common securities of the trust. The trust exists exclusively for the
following purposes:
- issuing and selling the preferred securities to the public for cash;
- issuing and selling the common securities to us;
- investing the proceeds from the sale of the preferred and common
securities in an equivalent amount of % subordinated debentures due
December 31, 2030, to be issued by us; and
- engaging in activities that are incidental to those listed above, such as
receiving payments on the debentures, making distributions to security
holders, furnishing notices and performing other administrative tasks.
The trust's address is 217 North Fourth Avenue, Sturgeon Bay, Wisconsin
54235, and its telephone number is (920) 743-5551.
THE OFFERING
The issuer...................... Baylake Capital Trust I.
Securities being offered........ 1,500,000 preferred securities, which
represent preferred undivided interests in
the assets of the trust. Those assets will
consist solely of the debentures and
payments received on the debentures.
The trust will sell the preferred securities
to the public for cash. The trust will use
that cash to buy the debentures from us.
Offering price.................. $10 per preferred security.
When the trust will pay
distributions to you............ Your purchase of the preferred securities
entitles you to receive cumulative cash
distributions at a % annual rate.
Distributions will accumulate from the date
the trust issues the preferred securities
and are to be paid quarterly on March 31,
June 30, September 30 and December 31 of
each year, beginning March 31, 2001. As long
as the preferred securities are represented
by a global security, the record date
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<PAGE> 8
for distributions on the preferred
securities will be the business day prior to
the distribution date. We may defer the
payment of cash distributions, as described
below.
When the trust must redeem the
preferred securities.......... The debentures will mature and we must
redeem the preferred securities on December
31, 2030. We have the option, however, to
shorten the maturity date to a date not
earlier than December 31, 2005. We will not
shorten the maturity date unless we have
received the prior approval of the Board of
Governors of the Federal Reserve System, if
required by law or regulation.
Redemption of the preferred
securities before December 31,
2030 is possible.............. The trust must redeem the preferred
securities when the debentures are paid at
maturity or upon any earlier redemption of
the debentures to the extent the debentures
are redeemed. We may redeem all or part of
the debentures at any time on or after
December 31, 2005.
In addition, we may redeem, at any time, all
of the debentures if:
- existing laws or regulations, or the
interpretation or application of these
laws or regulations, change, causing the
interest we pay on the debentures to no
longer be deductible by us for federal
income tax purposes; or causing the trust
to become subject to federal income tax or
to certain other taxes or governmental
charges;
- existing laws or regulations change,
requiring the trust to register as an
investment company; or
- the capital adequacy guidelines of the
Federal Reserve change so that the
preferred securities no longer qualify as
Tier 1 capital.
We may also redeem the debentures at any
time, and from time to time, in an amount
equal to the liquidation amount of any
preferred securities we purchase, plus a
proportionate amount of common securities,
but only in exchange for a like amount of
the preferred securities and common
securities that we then own.
Redemption of the debentures prior to
maturity will be subject to the prior
approval of the Federal Reserve, if approval
is then required by law or
5
<PAGE> 9
regulation. If your preferred securities are
redeemed by the trust, you will receive the
liquidation amount of $10 per preferred
security, plus any accrued and unpaid
distributions to the date of redemption.
We have the option to extend the
interest payment period....... The trust will rely solely on payments made
by us under the debentures to pay
distributions on the preferred securities.
As long as we are not in default under the
indenture relating to the debentures, we
may, at one or more times, defer interest
payments on the debentures for up to 20
consecutive quarters, but not beyond
December 31, 2030. If we defer interest
payments on the debentures:
- the trust will also defer distributions on
the preferred securities;
- the distributions you are entitled to will
accumulate; and
- these accumulated distributions will earn
interest at an annual rate of %,
compounded quarterly, until paid.
At the end of any deferral period, we will
pay to the trust all accrued and unpaid
interest under the debentures. The trust
will then pay all accumulated and unpaid
distributions to you.
You will still be taxed if
distributions on the preferred
securities are deferred....... If a deferral of payment occurs, you must
recognize the amount of the deferred
distributions as income for United States
federal income tax purposes in advance of
receiving the actual cash distributions,
even if you are a cash basis taxpayer.
Our guarantee of payment........ Our obligations described in this
prospectus, in the aggregate, constitute a
full, irrevocable and unconditional
guarantee on a subordinated basis by us of
the obligations of the trust under the
preferred securities. Under the guarantee
agreement, we guarantee that the trust will
use its assets to pay the distributions on
the preferred securities and the liquidation
amount upon liquidation of the trust.
However, the guarantee does not apply when
the trust does not have sufficient funds to
make the payments. If we do not make
payments on the debentures, the trust will
not have sufficient funds to make payments
on the preferred securities. In this event,
your remedy is to institute a legal
6
<PAGE> 10
proceeding directly against us for
enforcement of payments under the
debentures.
We may distribute the debentures
directly to you............... We may, at any time, dissolve the trust and
distribute the debentures to you, subject to
the prior approval of the Federal Reserve,
if required by law or regulation. If we
distribute the debentures, we will use our
best efforts to list them on a national
securities exchange or comparable automated
quotation system.
How the securities will rank in
right of payment................ Our obligations under the preferred
securities, debentures and guarantee are
unsecured and will rank as follows with
regard to right of payment:
- the preferred securities will rank equally
with the common securities of the trust.
The trust will pay distributions on the
preferred securities and the common
securities pro rata. However, if we
default with respect to the debentures,
then no distributions on the common
securities of the trust or our common
stock will be paid until all accumulated
and unpaid distributions on the preferred
securities have been paid;
- our obligations under the debentures and
the guarantee are unsecured and generally
will rank junior in priority to our
existing and future senior and
subordinated indebtedness; and
- because we are a holding company, the
debentures and the guarantee will
effectively be subordinated to all
depositors' claims, as well as existing
and future liabilities of our
subsidiaries.
Voting rights of the preferred
securities.................... Except in limited circumstances, holders of
the preferred securities will have no voting
rights.
Proposed American Stock Exchange
symbol........................ BYL.A
You will not receive
certificates.................... 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, New York, New
York, or its nominee. As a result, you will
not receive a certificate for the preferred
securities, and your beneficial ownership
interests will be recorded through the DTC
book-entry system.
7
<PAGE> 11
How the proceeds of this
offering will be used........... The trust will invest all of the proceeds
from the sale of the preferred securities in
the debentures. We estimate that the net
proceeds to us from the sale of the
debentures to the trust, after deducting
underwriting expenses and commissions, will
be approximately $14.2 million. We expect to
use approximately $7.8 million of the net
proceeds from the sale of the debentures to
repay holding company debt. We will use the
remaining net proceeds to provide capital
contributions to our bank and its operating
subsidiaries, to support future growth and
for general corporate purposes.
Before purchasing the preferred securities being offered, you should
carefully consider the "Risk Factors" beginning on page 12.
8
<PAGE> 12
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
The following table sets forth our selected consolidated financial
information and other data. Our consolidated financial statements for the five
years ended December 31, 1999 have been audited by Smith & Gesteland, LLP,
independent accountants. The summary data presented below for the nine-month
periods ended September 30, 2000 and September 30, 1999 are derived from
unaudited financial statements. This information should be read in conjunction
with the consolidated financial statements and the notes thereto incorporated
herein by reference. Results for the nine-month periods are unaudited but in the
opinion of management reflect all necessary adjustments for a fair presentation
of results as of the dates and for the periods covered. Results for past periods
are not necessarily indicative of results that may be expected for future
periods, and results for the nine-month period ended September 30, 2000 are not
necessarily indicative of results that may be expected for the entire year
ending December 31, 2000.
<TABLE>
<CAPTION>
AS OF AND FOR THE
NINE MONTHS
ENDED
SEPTEMBER 30, AS OF AND FOR THE YEAR ENDED DECEMBER 31,
------------------- ----------------------------------------------------
2000 1999 1999 1998 1997 1996 1995
-------- -------- -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
SELECTED INCOME DATA:
Total interest income................ $ 41,017 $ 34,390 $ 46,467 $ 38,061 $ 31,577 $ 26,926 $ 24,487
Total interest expense............... 23,086 17,089 23,280 19,148 14,662 12,046 10,131
-------- -------- -------- -------- -------- -------- --------
Net interest income.................. 17,931 17,301 23,187 18,913 16,915 14,880 14,356
Provision for loan losses............ 330 538 850 1,135 1,115 400 250
-------- -------- -------- -------- -------- -------- --------
Net interest income after provision
for loan losses.................... 17,601 16,763 22,337 17,778 15,800 14,480 14,106
-------- -------- -------- -------- -------- -------- --------
Non-interest income:
Gain on sale of loans.............. 139 256 295 893 678 212 26
Loan servicing fees................ 582 618 875 846 731 674 505
Trust fees......................... 389 430 553 451 491 611 394
Service charges on deposit
accounts......................... 1,109 1,010 1,369 1,074 844 743 627
Securities gains, net.............. 0 0 (2) 0 292 38 4
Other.............................. 1,088 933 1,466 1,113 1,032 1,173 1,025
-------- -------- -------- -------- -------- -------- --------
Total non-interest income............ 3,307 3,247 4,556 4,377 4,068 3,451 2,581
-------- -------- -------- -------- -------- -------- --------
Non-interest expense:
Salaries and employee benefits..... 7,852 7,211 9,700 7,772 7,003 6,270 5,391
Occupancy expense, net............. 2,198 1,872 2,668 2,192 2,035 1,732 1,322
Data processing.................... 686 640 872 699 642 548 514
Other non-interest expense......... 2,982 3,244 4,247 3,213 2,861 2,927 2,751
Operation of other real estate..... (70) 9 (117) 15 30 (188) (84)
-------- -------- -------- -------- -------- -------- --------
Total non-interest expense........... 13,648 12,976 17,370 13,891 12,571 11,289 9,894
-------- -------- -------- -------- -------- -------- --------
Income before income tax............. 7,260 7,034 9,523 8,264 7,297 6,642 6,793
Income tax provision................. 2,204 2,102 2,600 2,247 2,027 1,939 2,149
-------- -------- -------- -------- -------- -------- --------
Net income........................... $ 5,056 $ 4,932 $ 6,923 $ 6,017 $ 5,270 $ 4,703 $ 4,644
======== ======== ======== ======== ======== ======== ========
PER SHARE DATA:(1)
Net income per share (basic)......... $ 0.68 $ 0.67 $ 0.94 $ 0.82 $ 0.72 $ 0.64 $ 0.63
Net income per share (diluted)....... 0.66 0.64 0.90 0.80 0.71 0.63 0.62
Cash dividends per common share...... 0.30 0.27 0.37 0.47 0.40 0.31 0.38
Book value per share................. 6.75 6.21 6.21 6.17 5.71 5.32 4.93
</TABLE>
9
<PAGE> 13
<TABLE>
<CAPTION>
AS OF AND FOR THE
NINE MONTHS
ENDED
SEPTEMBER 30, AS OF AND FOR THE YEAR ENDED DECEMBER 31,
------------------- ----------------------------------------------------
2000 1999 1999 1998 1997 1996 1995
-------- -------- -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
SELECTED FINANCIAL CONDITION DATA (AT
END OF PERIOD):
Total assets......................... $743,979 $632,914 $646,310 $607,438 $450,062 $395,356 $309,428
Investment securities(2)............. 147,954 147,978 145,080 128,046 114,899 99,138 75,611
Total loans.......................... 532,319 433,821 447,767 408,921 293,438 260,854 210,230
Total deposits....................... 547,717 502,290 504,074 495,284 345,976 327,165 266,980
Borrowings(3)........................ 130,966 77,602 89,231 56,758 56,649 23,840 1,528
Notes payable and subordinated
debt............................... 8,011 264 264 392 383 422 475
Total shareholders' equity........... 50,267 46,142 46,210 45,272 41,855 39,234 36,275
PERFORMANCE RATIOS:(4)
Return on average total assets....... 0.97% 1.08% 1.12% 1.21% 1.29% 1.34% 1.56%
Return on average total shareholders'
equity............................. 14.10 14.24 15.07 13.87 13.14 12.39 13.43
Net interest margin(5)............... 3.96 4.37 4.35 4.42 4.77 4.97 5.38
Net interest spread(5)............... 3.47 3.91 3.89 3.85 4.12 4.36 4.56
Non-interest income to average
assets............................. 0.64 0.71 0.74 0.88 1.00 0.98 0.86
Non-interest expense to average
assets............................. 2.63 2.84 2.82 2.79 3.08 3.20 3.31
Net overhead ratio(6)................ 1.99 2.13 2.08 1.91 2.08 2.22 2.45
Average loan-to-average deposit
ratio.............................. 95.63 86.06 85.54 86.28 83.14 78.44 79.05
Average interest-earning assets to
average interest-bearing
liabilities........................ 110.12 111.42 111.14 113.63 116.51 115.83 122.46
ASSET QUALITY RATIOS:(4)(7)(8)
Non-performing loans to total
loans.............................. 2.33% 2.92% 2.80% 3.45% 1.58% 1.79% 0.71%
Allowance for possible loan losses
to:
Total loans........................ 1.53 1.89 1.70 2.71 1.32 1.11 1.24
Non-performing loans............... 65.48 62.92 60.67 78.33 83.46 61.86 175.17
Net charge-offs to average loans..... (0.04) 0.60 0.80 0.14 0.05 0.10 0.08
Non-performing assets to total
assets............................. 1.74 2.09 1.95 2.41 1.03 1.27 0.60
CAPITAL RATIOS:(4)(9)
Shareholders' equity to assets....... 6.76% 7.29% 7.15% 7.45% 9.30% 9.92% 11.72%
Tier 1 risk-based capital............ 8.01 8.43 8.81 7.97 11.31 12.14 16.71
Total risk-based capital............. 9.26 9.69 10.07 9.22 12.52 13.18 17.92
Leverage ratio....................... 6.35 6.52 6.79 6.02 8.86 9.63 12.09
RATIO OF EARNINGS TO FIXED
CHARGES:(10)
Including deposit interest........... 1.31x 1.41x 1.41x 1.43x 1.50x 1.55x 1.67x
Excluding deposit interest........... 2.21 3.78 3.55 3.44 5.24 10.83 24.34
OTHER DATA AT END OF PERIOD:
Number of bank subsidiaries.......... 1 1 1 2 1 1 2
Number of banking facilities......... 25 23 23 22 17 17 13
</TABLE>
-------------------------
(1) Earnings and dividends per share are based on the weighted average number
of shares outstanding for the period. All per share data has been adjusted
to reflect (a) a 2 for 1 stock dividend paid on November 15, 1999, and (b)
a 3 for 2 stock dividend paid on May 15, 1998.
(2) Includes securities classified as held-to-maturity and available for sale.
(3) Consists of Federal Home Loan Bank advances, federal funds purchased and
collaterized borrowings.
(4) Ratios for the nine-month periods have been annualized.
(5) Net interest margin represents net interest income as a percentage of
average interest-earning assets, and net interest rate spread represents
the difference between the weighted average yield on interest-earning
assets and the weighted average cost of interest-bearing liabilities.
10
<PAGE> 14
(6) Net overhead ratio represents the difference between noninterest expense
and noninterest income, divided by average assets.
(7) Non-performing loans consist of non-accrual loans, guaranteed loans 90 days
or more past due but still accruing interest and restructured loans.
(8) The increases in non-performing loans culminating with the period ended
December 31, 1998 were due, in part, to various troubled loans acquired as
a result of the Evergreen Bank acquisition. For additional information, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the section titled "Non-performing Loans, Potential Problem
Loans and Other Real Estate" incorporated by reference into this prospectus
from our Annual Report on Form 10-K for the fiscal year ended December 31,
1999, and from our Quarterly Report on Form 10-Q for the quarter ended
September 30, 2000.
(9) The capital ratios are presented on a consolidated basis. For information
on our and our bank's regulatory capital requirements, see "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Capital Resources" and "Business -- Regulation and
Supervision" incorporated by reference into this prospectus from our Annual
Report on Form 10-K for the fiscal year ended December 31, 1999, and from
our Quarterly Report on Form 10-Q for the quarter ended September 30, 2000.
(10) For purposes of calculating the ratio of earnings to fixed charges,
earnings consist of income before taxes plus interest and rent expense.
Fixed charges consist of interest and rent expense.
11
<PAGE> 15
RISK FACTORS
An investment in the preferred securities involves a number of risks. Some
of these risks relate to the preferred securities and others relate to us. We
urge you to read all of the information contained in this prospectus. In
addition, we urge you to consider carefully the following factors in evaluating
an investment in the trust before you purchase the preferred securities offered
by this prospectus.
Because the trust will rely on the payments it receives on the debentures
from us to fund all payments on the preferred securities, and because the trust
may distribute the debentures in exchange for the preferred securities,
purchasers of the preferred securities are making an investment decision that
relates to the debentures being issued by us as well as the preferred
securities. Purchasers should carefully review the information in the prospectus
about the preferred securities, the debentures and the guarantee.
RISKS RELATED TO AN INVESTMENT IN BAYLAKE CORP.
WE MAY NOT BE ABLE TO IMPLEMENT SUCCESSFULLY OUR STRATEGY TO ENTER NEW MARKETS.
Among other matters, our strategic plan includes expansion into new markets
by establishing new branches. The establishment of such branches requires a
significant expenditure of capital in order to prepare the facilities for
operation, and additional overhead expense in order to staff these new
facilities. Based on our experience, management believes that it generally takes
from 36 to 60 months for new branches to first achieve operational
profitability. This lag in profitability is due primarily to the impact of
organizational and overhead expenses and the start-up phase of generating
deposits. As our new branches mature, we are able to reduce our cost of funds by
replacing expensive initial funding with lower yielding deposits. During the
third quarter of 2000, we expanded our presence in the Green Bay, Wisconsin
banking market through the establishment of two new branches, and we may
undertake additional branch openings in the future in order to expand into
additional communities in Wisconsin.
While our branches in Green Bay are generating loan and deposit activity
consistent with our projections, we may encounter unanticipated difficulties
that could adversely affect future profitability. In addition, we cannot assure
you that we will be able to successfully operate and manage our operations in
new markets or recover our initial capital investment in such operations.
Start-up costs associated with the establishment of new branches may impact our
earnings. To the extent that we undertake additional branching, we are likely to
continue to experience the effects of higher operating expenses relative to
operating income from the new branches.
OUR CONTINUED PACE OF GROWTH MAY REQUIRE US TO RAISE ADDITIONAL CAPITAL IN THE
FUTURE, BUT THAT CAPITAL MAY NOT BE AVAILABLE WHEN IT IS NEEDED.
We are required by federal and state regulatory authorities to maintain
adequate levels of capital to support our operations. We anticipate that our
existing capital resources and the net proceeds from the sale of preferred
securities in this offering will satisfy our immediately foreseeable capital
requirements. To the extent we continue to expand our asset base, primarily
through loan growth, we will be required to support such growth by increasing
our capital to acceptable regulatory levels. Based on historical trends, the net
proceeds of this offering may be insufficient to fund our continued rate of loan
growth beyond a twelve-month period. Accordingly, we may need to raise
additional capital in the
12
<PAGE> 16
future to support continued asset growth. We may accomplish this capital raising
through the sale of additional securities of Baylake Corp., including the
issuance of additional shares of our common stock. In the alternative, we could
slow the rate of our growth and reduce our assets.
Our ability to raise additional capital if we need it to support loan
growth in the future will depend on conditions in the capital markets, which are
outside of our control, and on our financial performance. Accordingly, we cannot
assure you of our ability to raise additional capital when needed or on
favorable terms. If we cannot raise additional capital when needed, we will be
subject to increased regulatory supervision and the imposition of restrictions
on our growth and our business, which could negatively impact our ability to
further expand our operations through acquisitions or the establishment of
additional branches and which could result in increases in operating expenses
and reductions in revenues that would harm our operating results.
WE RELY HEAVILY ON OUR MANAGEMENT TEAM, AND THE UNEXPECTED LOSS OF KEY MANAGERS
MAY ADVERSELY AFFECT OUR OPERATIONS.
Much of our success to date has been influenced strongly by our ability to
attract and to retain senior management experienced in banking and financial
services. Our ability to retain executive officers and the current management
team of our bank will continue to be important to the successful implementation
of our strategies. It is also critical, as we grow, to be able to attract and
retain qualified additional senior and middle management. We currently maintain
key-man life insurance policies for certain individuals in amounts which we deem
appropriate. The unexpected loss of services of any key management personnel, or
the inability to recruit and retain qualified personnel in the future, could
have an adverse effect on our business, financial condition and results of
operations.
OUR ALLOWANCE FOR LOAN LOSSES MAY PROVE TO BE INSUFFICIENT TO ABSORB POTENTIAL
LOSSES IN OUR LOAN PORTFOLIO.
We established our allowance for possible loan losses in consultation with
management of our bank subsidiary and maintain it at a level considered adequate
by management to absorb loan losses that are inherent in the portfolio. The
amount of future loan losses is susceptible to changes in economic, operating
and other conditions, including changes in interest rates, that may be beyond
our control, and such losses may exceed current estimates. At September 30,
2000, our allowance for possible loan losses as a percentage of total loans was
1.53% and as a percentage of total non-performing loans was 65.5%. Although
management believes that the allowance for possible loan losses is adequate to
absorb losses on any existing loans that may become uncollectible, we cannot
predict loan losses with certainty, and we cannot assure you that our allowance
for possible loan losses will prove sufficient to cover actual loan losses in
the future. Loan losses in excess of our reserves may adversely affect our
business, financial condition and results of operations.
WE MAY BE ADVERSELY AFFECTED BY INTEREST RATE CHANGES.
Our earnings are derived from the operations of our direct and indirect
subsidiaries, and we are principally dependent on net interest income,
calculated as the difference between interest earned on loans and investments
and the interest expense paid on deposits and other borrowings. Like other
financial institutions, our interest income and interest expense are affected by
general economic conditions and by the policies of regulatory authorities,
including the monetary policies of the Federal Reserve. Changes in the economic
environment may influence the growth rate of loans and deposits, the quality of
13
<PAGE> 17
the loan portfolio and loan and deposit pricing. Management uses a simulation
modeling method to quantify the bank's exposure to interest rate risk. This
method attempts to project the change in earnings under varying rate conditions
by calculating net interest income under three different rate scenarios: a flat
rate scenario; a scenario under which the national prime rate rises 200 basis
points; and a scenario under which the national prime rate falls 200 basis
points. As of September 30, 2000, the simulation model projected net interest
income fluctuations within our policy limits. At that time, the model projected
that the bank would generally benefit from declining rates. While management has
taken measures intended to manage the risks of operating in a changing interest
rate environment, we cannot assure you that a dramatic change in the interest
rate environment will not adversely affect our business, financial condition and
results of operations.
OUR BUSINESS IS SUBJECT TO CREDIT RISKS.
Our loan customers may not repay their loans according to their terms, and
the collateral securing their loans, if any, may not have a value equal to
amounts owed under their loans. A substantial portion of the loans made by our
bank is secured by real estate. Adverse developments affecting real estate in
one or more of our markets could increase the credit risk associated with our
loan portfolio.
OUR FUTURE SUCCESS IS DEPENDENT ON OUR ABILITY TO COMPETE EFFECTIVELY IN THE
HIGHLY COMPETITIVE BANKING INDUSTRY.
The financial services business is highly competitive. We experience strong
competition in our efforts to make loans and attract deposits in the markets we
serve. Competitors include other commercial banks, savings banks, and non-bank
competitors. Non-bank competitors with respect to deposits and deposit-type
accounts include savings associations, mutual funds, money market funds, finance
companies, trust companies, insurers, leasing companies, credit unions, private
issuers of debt obligations and suppliers of other investment alternatives, such
as securities firms. With respect to loans, we encounter competition from other
commercial banks, savings associations, finance companies, mortgage lenders,
insurance companies, small loan and credit card companies, credit unions,
pension funds and securities firms. Many of our non-bank competitors are not
subject to the same degree of regulation as that imposed on bank holding
companies, federally insured banks and Wisconsin chartered banks. As a result,
such non-bank competitors may have advantages over us in providing certain
services. In addition, in recent years, several major multi-bank holding
companies have entered or expanded in Wisconsin. Generally, these financial
institutions are significantly larger than us and have greater access to capital
and other resources.
OUR BUSINESS MAY BE ADVERSELY AFFECTED BY THE HIGHLY REGULATED ENVIRONMENT IN
WHICH WE OPERATE.
The banking industry is heavily regulated under both federal and state law.
These regulations are primarily intended to protect depositors and the Federal
Deposit Insurance Corporation, not our creditors or shareholders. Our non-bank
subsidiaries are also subject to the supervision of the Federal Reserve.
Recently enacted, proposed and future legislation and regulations have had, will
continue to have or may have significant impact on the financial services
industry. Some of the legislative and regulatory changes may benefit us, our
bank and the other subsidiaries; other changes, however, could increase our
costs of doing business and, as a result, provide an advantage to our
competitors.
14
<PAGE> 18
WE FREQUENTLY ENCOUNTER TECHNOLOGICAL CHANGE, AND WE MAY DEVOTE FEWER RESOURCES
THAN MANY OF OUR COMPETITORS IN ADDITIONAL TECHNOLOGICAL IMPROVEMENTS.
The financial services industry is undergoing rapid technological changes.
New technological products and services are frequently introduced. In addition
to better serving customers, the effective use of technology increases
efficiency and enables financial institutions to reduce costs. Our future
success will depend, in part, upon our ability to address the needs of our
customers by using technology to provide products and services that will satisfy
customer demands for convenience, as well as to create additional efficiencies
in our operations. Many of our competitors have substantially greater resources
to invest in technological improvements. We cannot assure you that we will be
able to effectively implement new technology-driven products and services or be
successful in marketing these products and services to our customers.
RISKS RELATED TO AN INVESTMENT IN THE PREFERRED SECURITIES
IF WE DO NOT MAKE INTEREST PAYMENTS UNDER THE DEBENTURES, THE TRUST WILL BE
UNABLE TO PAY DISTRIBUTIONS AND LIQUIDATION AMOUNTS. THE GUARANTEE WILL NOT
APPLY BECAUSE THE GUARANTEE COVERS PAYMENTS ONLY IF THE TRUST HAS FUNDS
AVAILABLE.
The trust will depend solely on our payments on the debentures to pay
amounts due to you on the preferred securities. If we default on our obligation
to pay the principal or interest on the debentures, the trust will not have
sufficient funds to pay distributions or the liquidation amount on the preferred
securities. In that case, you will not be able to rely on the guarantee for
payment of these amounts because the guarantee only applies if the trust has
sufficient funds to make distributions on or to pay the liquidation amount of
the preferred securities. Instead, you or the property trustee will have to
institute a direct action against us to enforce the property trustee's rights
under the indenture relating to the debentures.
TO THE EXTENT WE MUST RELY ON DIVIDENDS FROM OUR SUBSIDIARIES TO MAKE INTEREST
PAYMENTS ON THE DEBENTURES TO THE TRUST, OUR AVAILABLE CASH FLOW MAY BE
RESTRICTED AND DISTRIBUTIONS MAY BE DEFERRED.
We are a holding company and substantially all of our assets are held by
our direct and indirect subsidiaries. Our ability to make payments on the
debentures when due will depend primarily on available cash resources at the
bank holding company level and dividends from our direct and indirect
subsidiaries. Dividend payments or extensions of credit from our banking
subsidiary are subject to regulatory limitations, generally based on capital
levels and current and retained earnings, imposed by the various regulatory
agencies with authority over such subsidiary. The ability of our banking
subsidiary to pay dividends is also subject to its profitability, financial
condition, capital expenditures and other cash flow requirements. We cannot
assure you that our direct and indirect subsidiaries will be able to pay
dividends in the future.
THE DEBENTURES AND THE GUARANTEE RANK LOWER THAN MOST OF OUR OTHER INDEBTEDNESS,
AND OUR HOLDING COMPANY STRUCTURE EFFECTIVELY SUBORDINATES ANY CLAIMS AGAINST US
TO THOSE OF OUR SUBSIDIARIES' CREDITORS.
Our obligations under the debentures and the guarantee are unsecured and
will rank junior in priority of payment to our existing and future senior and
subordinated indebtedness. As of September 30, 2000, we had existing senior and
subordinated indebtedness, which totaled $8.0 million of outstanding principal
amount. The issuance of
15
<PAGE> 19
the debentures and the preferred securities does not limit our ability or the
ability of our subsidiaries to incur additional indebtedness, guarantees or
other liabilities.
Because we are a holding company, the creditors of Baylake Bank, including
depositors, also will have priority over you in any distribution of Baylake
Bank's assets in liquidation, reorganization or otherwise. Accordingly, the
debentures and the guarantee will be effectively subordinated to all existing
and future liabilities of our direct and indirect subsidiaries, and you should
look only to our assets for payments on the preferred securities and the
debentures.
WE MAY DEFER INTEREST PAYMENTS ON THE DEBENTURES FOR SUBSTANTIAL PERIODS, WHICH
COULD HAVE ADVERSE CONSEQUENCES FOR YOU.
We may, at one or more times, defer interest payments on the debentures for
up to 20 consecutive quarters. If we defer interest payments on the debentures,
the trust will defer distributions on the preferred securities during any
deferral period. During a deferral period, you will be required to recognize as
income for federal income tax purposes the amount approximately equal to the
interest that accrues on your proportionate share of the debentures held by the
trust in the tax year in which that interest accrues, even though you will not
receive these amounts until a later date.
You will also not receive the cash related to any accrued and unpaid
interest from the trust if you sell the preferred securities before the end of
any deferral period. During a deferral period, accrued but unpaid distributions
will increase your tax basis in the preferred securities. If you sell the
preferred securities during a deferral period, your increased tax basis will
decrease the amount of any capital gain or increase the amount of any capital
loss that you may have otherwise realized on the sale. A capital loss, except in
certain limited circumstances, cannot be applied to offset ordinary income. As a
result, deferral of distributions could result in ordinary income, and a related
tax liability for the holder, and a capital loss that may only be used to offset
a capital gain.
We do not currently intend to exercise our right to defer interest payments
on the debentures. However, in the event of a deferral period, the market price
of the preferred securities would likely be adversely affected. The preferred
securities may trade at a price that does not fully reflect the value of accrued
but unpaid interest on the debentures. If you sell the preferred securities
during a deferral period, you may not receive the same return on investment as
someone who continues to hold the preferred securities. Due to our right to
defer interest payments, the market price of the preferred securities may be
more volatile than the market prices of other securities without the deferral
feature.
REGULATORS MAY PRECLUDE US FROM MAKING DISTRIBUTIONS ON THE DEBENTURES IN THE
EVENT OUR REGULATORY CAPITAL, LIQUIDITY OR FINANCIAL PERFORMANCE DETERIORATES.
We and our subsidiaries are subject to extensive federal and state law,
regulation and supervision. Our regulators monitor our financial condition on a
periodic basis and may impose limitations on our operations and business
activities under various circumstances. In response to any perceived
deficiencies in liquidity or regulatory capital levels, our regulators may
require us to obtain their consent prior to paying dividends on our capital
stock or interest on the debentures. In the event our regulators withheld their
consent to our payment of interest on the debentures, we would exercise our
right to defer interest payments on the debentures and the trust would not have
funds available to make distributions on the preferred securities during this
deferral period. This action by our regulators may or may not be taken in
conjunction with similar restrictions on the ability
16
<PAGE> 20
of our subsidiaries to pay dividends to us. See "-- To the extent we must rely
on dividends from our subsidiaries to make interest payments on the debentures
to the trust, our available cash flow may be restricted and distributions may be
deferred" on page 15. The commencement of a deferral period with respect to
interest on the debentures and, accordingly, distributions on the preferred
securities, would likely cause the market price of the preferred securities to
decline. See "-- We may defer interest payments on the debentures for
substantial periods, which could have adverse consequences for you" on page 16.
WE HAVE MADE ONLY LIMITED COVENANTS IN THE INDENTURE AND THE TRUST AGREEMENT.
The indenture governing the debentures and the trust agreement governing
the trust do not require us to maintain any financial ratios or specified levels
of net worth, revenues, income, cash flow or liquidity, and therefore do not
protect holders of the debentures or the preferred securities in the event we
experience significant adverse changes in our financial condition or results of
operations. In addition, neither the indenture nor the trust agreement limits
our ability or the ability of any subsidiary to incur additional indebtedness.
Therefore, you should not consider the provisions of these governing instruments
as a significant factor in evaluating whether we will be able to comply with our
obligations under the debentures or the guarantee.
WE MAY REDEEM THE DEBENTURES BEFORE DECEMBER 31, 2030.
Under the following circumstances, we may redeem the debentures before
their stated maturity:
- We may redeem the debentures, in whole or in part, at any time on or
after December 31, 2005.
- We may redeem the debentures in whole, but not in part, within 180 days
after certain occurrences at any time during the life of the trust. These
occurrences may include adverse tax, investment company or bank
regulatory developments. See "Description of the
Debentures -- Redemption" beginning on page 41.
You should assume that we will exercise our redemption option if we are
able to obtain capital at a lower cost than we must pay on the debentures or if
it is otherwise in our interest to redeem the debentures. If the debentures are
redeemed, the trust must redeem preferred securities having an aggregate
liquidation amount equal to the aggregate principal amount of debentures
redeemed, and you may be required to reinvest your principal at a time when you
may not be able to earn a return that is as high as you were earning on the
preferred securities.
WE CAN DISTRIBUTE THE DEBENTURES TO YOU, WHICH MAY HAVE ADVERSE TAX CONSEQUENCES
FOR YOU AND WHICH MAY ADVERSELY AFFECT THE MARKET PRICE OF THE PREFERRED
SECURITIES PRIOR TO SUCH DISTRIBUTION.
The trust may be dissolved at any time before maturity of the debentures on
December 31, 2030. As a result, and subject to the terms of the trust agreement,
the trustees may distribute the debentures to you.
We cannot predict the market prices for the debentures that may be
distributed in exchange for preferred securities upon liquidation of the trust.
The preferred securities, or the debentures that you may receive if the trust is
liquidated, may trade at a discount to the price that you paid to purchase the
preferred securities. Because you may receive
17
<PAGE> 21
debentures, your investment decision with regard to the preferred securities
will also be an investment decision with regard to the debentures. You should
carefully review all of the information contained in this prospectus regarding
the debentures.
Under current interpretations of United States federal income tax laws
supporting classification of the trust as a grantor trust for tax purposes, a
distribution of the debentures to you upon the dissolution of the trust would
not be a taxable event to you. Nevertheless, if the trust is classified for
United States income tax purposes as an association taxable as a corporation at
the time it is dissolved, the distribution of the debentures would be a taxable
event to you. In addition, if there is a change in law, a distribution of
debentures upon the dissolution of the trust could be a taxable event to you.
YOU ARE SUBJECT TO REPAYMENT RISK BECAUSE POSSIBLE TAX LAW CHANGES COULD RESULT
IN A REDEMPTION OF THE PREFERRED SECURITIES.
Future legislation may be enacted that could adversely affect our ability
to deduct our interest payments on the debentures for federal income tax
purposes, making early redemption of the debentures likely and resulting in
redemption of the preferred securities.
From time to time, Congress has proposed federal income 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. These proposals
were not enacted into law. Although it is impossible to predict whether future
proposals of this nature will be introduced and enacted with application to
already issued and outstanding securities, in the future we could be precluded
from deducting interest on the debentures in this event. Enactment of this type
of proposal might in turn give rise to a tax event as described under
"Description of the Preferred Securities -- Redemption or Exchange -- Redemption
upon a Tax Event, Investment Company Event or Capital Treatment Event" beginning
on page 28.
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 debentures. If you
dispose of your preferred securities between record dates for distributions 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 debentures allocable to the preferred securities through the date of
disposition in your income as ordinary income if you use the accrual method of
accounting or if this interest represents original issue discount.
If interest on the 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 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, subject to limited exceptions, cannot be applied
to offset ordinary income for federal income tax purposes. See "Federal Income
Tax Consequences" beginning on page 54, for more information on possible adverse
tax consequences to you.
18
<PAGE> 22
THERE IS NO CURRENT PUBLIC MARKET FOR THE PREFERRED SECURITIES AND THEIR MARKET
PRICE MAY DECLINE AFTER YOU INVEST.
There is currently no public market for the preferred securities. Although
we have applied to have the preferred securities listed for trading on the
American Stock Exchange, there is no guarantee that an active or liquid trading
market will develop for the preferred securities or that the listing of the
preferred securities will continue on the American Stock Exchange. If an active
trading market does not develop, the market price and liquidity of the preferred
securities will be adversely affected. Even if an active public market does
develop, there is no guarantee that the market price for the preferred
securities will equal or exceed the price you pay for the preferred securities.
Future trading prices of the preferred securities may be subject to
significant fluctuations in response to prevailing interest rates, our future
operating results and financial condition, the market for similar securities and
general economic and market conditions. The initial public offering price of the
preferred securities has been determined by us and the underwriters and may be
greater than the market price following the offering.
The market price for the preferred securities, or the debentures that you
may receive in a distribution, is also likely to decline during any period that
we are deferring interest payments on the debentures.
YOU MUST RELY ON THE PROPERTY TRUSTEE TO ENFORCE YOUR RIGHTS IF THERE IS AN
EVENT OF DEFAULT UNDER THE INDENTURE.
You may not be able to directly enforce your rights against us if an event
of default under the indenture occurs. If an event of default under the
indenture occurs and is continuing, this event will also be an event of default
under the trust agreement. In that case, you must rely on the enforcement by the
property trustee of its rights as holder of the debentures against us. 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 following an event of default and a
request by the record holders to do so, any record holder may, to the extent
permitted by applicable law, take action directly against us to enforce the
property trustee's rights. If an event of default occurs under the trust
agreement that is attributable to our failure to pay interest or principal on
the debentures, or if we default under the guarantee, you may proceed directly
against us. You will not be able to exercise directly any other remedies
available to the holders of the debentures unless the property trustee fails to
do so.
AS A HOLDER OF PREFERRED SECURITIES, YOU HAVE LIMITED VOTING RIGHTS.
Holders of preferred securities have limited voting rights. Your voting
rights pertain primarily to amendments to the trust agreement. In general, only
we can replace or remove any of the trustees. However, if an event of default
under the trust agreement occurs and is continuing, the holders of at least a
majority in aggregate liquidation amount of the preferred securities may replace
the property trustee and the Delaware trustee.
THE PREFERRED SECURITIES ARE NOT INSURED.
Neither the FDIC nor any other governmental agency has insured the
preferred securities, the guarantee or the debentures.
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<PAGE> 23
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained in or incorporated by reference into this
prospectus constitute forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934. We intend such forward-looking statements to be covered by the safe
harbor provisions for forward-looking statements contained in the Private
Securities Litigation Reform Act of 1995, and are including this statement for
purposes of invoking these safe harbor provisions. You can identify these
statements from our use of the words "estimate," "project," "believe," "intend,"
"anticipate," "expect," "target" and similar expressions. These forward-looking
statements may include, among other things:
- statements relating to projected growth; anticipated improvements in
earnings, earnings per share, and other financial performance measures;
and management's long term performance goals;
- statements relating to the anticipated effects on results of operations
or financial condition from expected developments or events;
- statements relating to our business and growth strategies, including
potential acquisitions; and
- any other statements which are not historical facts.
Such forward-looking statements involve known and unknown risks,
uncertainties and other important factors that could cause our actual results,
performance or achievements, or industry results, to differ materially from our
expectations of future results, performance or achievements expressed or implied
by such forward-looking statements. In addition, our past results of operations
do not necessarily indicate our future results. We discuss these and other
uncertainties in the "Risk Factors" section of this prospectus beginning on page
12.
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<PAGE> 24
USE OF PROCEEDS
The trust will invest all of the proceeds from the sale of the preferred
securities in the debentures. We anticipate that the net proceeds from the sale
of the debentures will be approximately $14.2 million after deduction of
offering expenses estimated to be $250,000 and underwriting commissions.
We expect to use approximately $7.8 million of the net proceeds from the
sale of the debentures to repay holding company indebtedness currently
outstanding. Our holding company debt consists of three separate borrowings from
an unaffiliated lender, each of which accrues interest on the outstanding
principal balance at a floating rate equal to the lender's prime rate less 1%:
- a $2.0 million note with a current outstanding balance of $1.8 million.
We make principal and interest payments of $100,000 on a quarterly basis
under the terms of this note, which matures on March 29, 2002;
- a $3.0 million note requiring interest-only payments until maturity on
June 30, 2001; and
- a $3.0 million note requiring interest-only payments until maturity on
September 29, 2001.
We intend to repay these borrowings within one year from the date of
origination. We used the proceeds from the first two loans to maintain
regulatory capital levels at our bank. We used a portion of the proceeds from
the third borrowing ($2,345,000) for the same purpose, and the balance
($655,000) is used by us for working capital purposes. We incurred all three
borrowings in anticipation of raising additional equity capital in this, or a
similar, offering. We will not incur any prepayment penalty by the early
retirement of these three borrowings.
We will use the remaining net proceeds of the offering, approximately $6.4
million, to provide capital to fund continued growth at our bank and other
operating subsidiaries and for general corporate purposes.
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<PAGE> 25
CAPITALIZATION
The following table sets forth our total capitalization at September 30,
2000, on a historical basis and as adjusted for the offering and the application
of the estimated net proceeds from the corresponding sale of the debentures, as
if such sale had been consummated on September 30, 2000. This data should be
read in conjunction with the consolidated financial statements and notes thereto
incorporated by reference into this prospectus from our Annual Report on Form
10-K for the fiscal year ended December 31, 1999, and from our Quarterly Report
on Form 10-Q for the quarter ended September 30, 2000. See "Documents
Incorporated by Reference" on page 62.
<TABLE>
<CAPTION>
SEPTEMBER 30, 2000
----------------------
ACTUAL AS ADJUSTED
------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Long-term debt -- trust preferred securities(1)............. $ -- $15,000
SHAREHOLDERS' EQUITY:
Common stock, $5 par value; 10,000,000 shares authorized;
7,467,433 shares issued and 7,444,274 shares
outstanding............................................... 37,337 37,337
Surplus..................................................... 7,126 7,126
Treasury stock, 23,159 shares at cost....................... (625) (625)
Retained earnings........................................... 7,835 7,835
Accumulated other comprehensive loss........................ (1,406) (1,406)
------- -------
Total shareholders' equity................................ 50,267 50,267
------- -------
Total capitalization...................................... $50,267 $65,267
======= =======
CAPITAL RATIOS:(2)(3)
Leverage ratio(4)........................................... 6.35% 8.41%
Tier 1 capital ratio........................................ 8.01 10.62
Total risk based capital ratio.............................. 9.26 11.87
</TABLE>
-------------------------
(1) A portion of the proceeds of this offering will be used to repay $7.8
million of outstanding debt evidenced by three notes made to an unaffiliated
lender.
(2) The capital ratios, as adjusted, assume the receipt of $15.0 million from
the sale of the preferred securities, in a manner consistent with Federal
Reserve regulations.
(3) The preferred securities have been structured to qualify as Tier 1 capital.
However, in calculating the amount of Tier 1 qualifying capital, the
preferred securities, together with any other trust preferred securities or
cumulative preferred stock that we have issued or may issue in the future
may only be included up to the amount constituting 25% of total Tier 1 core
capital elements, including the preferred securities. As adjusted for this
offering, our Tier 1 capital as of September 30, 2000, would have been
approximately $61.0 million. Accordingly, all of the trust preferred
securities offered by this prospectus will qualify as Tier 1 capital.
(4) The leverage ratio is Tier 1 capital divided by average quarterly assets,
after deducting intangible assets and net deferred tax assets in excess of
regulatory maximum limits.
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ACCOUNTING AND REGULATORY TREATMENT
The trust will be treated, for financial reporting purposes, as our
subsidiary and, accordingly, the accounts of the trust will be included in our
consolidated financial statements. The preferred securities will be presented as
a separate line item in our consolidated balance sheet under the caption
"Long-term debt-trust preferred securities," or other similar caption. In
addition, appropriate disclosures about the preferred securities, the guarantee
and the debentures will be included in the notes to our consolidated financial
statements. For financial reporting purposes, we will record distributions
payable on the preferred securities in our consolidated statements of income.
Our future reports filed under the Securities Exchange Act of 1934 will
include a footnote to the audited consolidated financial statements stating
that:
- the trust is wholly-owned;
- the sole assets of the trust are the debentures, specifying the
debentures' outstanding principal amount, interest rate and maturity
date; and
- our obligations described in this prospectus, in the aggregate,
constitute a full, irrevocable and unconditional guarantee on a
subordinated basis by us of the obligations of the trust under the
preferred securities.
We have not included separate financial statements of the trust in this
prospectus. We do not consider that separate financial statements would be
material to holders of preferred securities because we will own all of the
trust's voting securities, the trust has no independent operations and we
guarantee the payments on the preferred securities to the extent described in
this prospectus.
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<PAGE> 27
DESCRIPTION OF THE TRUST
The trust is a statutory business trust formed pursuant to the Delaware
Business Trust Act under a trust agreement executed by us, as depositor, and the
trustees named in the trust agreement. A certificate of trust has been filed
with the Delaware Secretary of State. The trust agreement will be amended and
restated in its entirety in the form filed as an exhibit to the registration
statement of which this prospectus is a part, as of the date the preferred
securities are initially issued. The trust agreement will be qualified under the
Trust Indenture Act of 1939.
The following discussion is subject to, and is qualified in its entirety by
reference to, the amended and restated trust agreement and the Trust Indenture
Act. We urge prospective investors to read the form of amended and restated
trust agreement which is filed as an exhibit to the registration statement of
which this prospectus forms a part.
The holders of the preferred securities issued pursuant to the offering
described in this prospectus will own all of the issued and outstanding
preferred securities of the trust which have certain prior rights over the other
securities of the trust. We will not initially own any of the preferred
securities. We will acquire common securities in an amount equal to at least 3%
of the total capital of the trust and will initially own, directly or
indirectly, all of the issued and outstanding common securities. The common
securities, together with the preferred securities, are called the trust
securities.
The trust exists exclusively for the purposes of:
- issuing the preferred securities to the public for cash;
- issuing its common securities to us in exchange for our capitalization of
the trust;
- investing the proceeds from the sale of the trust securities in an
equivalent amount of our debentures; and
- engaging in other activities that are incidental to those listed above.
The rights of the holders of the trust securities are as set forth in the
trust agreement, the Delaware Business Trust Act and the Trust Indenture Act.
The trust agreement does not permit the trust to borrow money or make any
investment other than in the debentures. Other than with respect to the trust
securities, we have agreed to pay for all debts and obligations and all costs
and expenses of the trust, including the fees and expenses of the trustees and
any income taxes, duties and other governmental charges, and all costs and
expenses related to these charges, to which the trust may become subject, except
for United States withholding taxes that are properly withheld.
The number of trustees of the trust will initially be five. Three of the
trustees will be persons who are employees or officers of or who are affiliated
with us. They are the administrative trustees. The fourth trustee will be an
entity that maintains its principal place of business in the State of Delaware.
It is the Delaware trustee. Initially, Wilmington Trust Company, a Delaware
banking corporation, will act as Delaware trustee. The fifth trustee, called the
property trustee, will also initially be Wilmington Trust Company. The property
trustee is the institutional trustee under the trust agreement and acts as the
indenture trustee called for under the applicable provisions of the Trust
Indenture Act. Also for purposes of compliance with the Trust Indenture Act,
Wilmington Trust Company, will act as guarantee trustee and indenture trustee
under the guarantee agreement and the indenture. See "Description of the
Debentures" beginning on page 39 and "Description of the Guarantee" beginning on
page 50. We, as holder of all of the
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<PAGE> 28
common securities, will have the right to appoint or remove any trustee unless
an event of default under the indenture has occurred and is continuing, in which
case only the holders of the preferred securities may remove the Delaware
trustee or the property trustee. The trust has a term of approximately 30 years
but may terminate earlier as provided in the trust agreement.
The property trustee will hold the debentures for the benefit of the
holders of the trust securities and will have the power to exercise all rights,
powers and privileges under the indenture as the holder of the debentures. In
addition, the property trustee will maintain exclusive control of a segregated
noninterest-bearing "payment account" established with Wilmington Trust Company
to hold all payments made on the debentures for the benefit of the holders of
the trust securities. The property trustee will make payments of distributions
and payments on liquidation, redemption and otherwise to the holders of the
trust securities out of funds from the payment account. The guarantee trustee
will hold the guarantee for the benefit of the holders of the preferred
securities. We will pay all fees and expenses related to the trust and the
offering of the preferred securities, including the fees and expenses of the
trustees.
DESCRIPTION OF THE PREFERRED SECURITIES
The following is a summary of certain terms and provisions of the preferred
securities. This summary does not purport to be complete and is subject to, and
qualified in its entirety by reference to, the amended and restated trust
agreement under which the preferred securities will be issued and to the Trust
Indenture Act. We urge prospective investors to read the form of amended and
restated trust agreement, which is filed as an exhibit to the registration
statement of which this prospectus forms a part. For more information about the
trust agreement, see "Description of the Trust" beginning on page 24. Wilmington
Trust Company will act as property trustee for the preferred securities under
the trust agreement for purposes of complying with the provisions of the Trust
Indenture Act.
GENERAL
The trust agreement authorizes the administrative trustees, on behalf of
the trust, to issue the trust securities, which are comprised of the preferred
securities to be sold to the public and the common securities which we will
acquire. We will own all of the common securities issued by the trust. The trust
is not permitted to issue any securities other than the trust securities or to
incur any indebtedness.
The preferred securities will represent preferred undivided beneficial
interests in the assets of the trust, and the holders of the preferred
securities will be entitled to a preference over the common securities upon an
event of default with respect to distributions and amounts payable on redemption
or liquidation. The preferred securities will rank equally, and payments on the
preferred securities will be made proportionally, with the common securities,
except as described under "-- Subordination of Common Securities" beginning on
page 30.
The property trustee will hold legal title to the debentures in trust for
the benefit of the holders of the trust securities. We will guarantee the
payment of distributions out of money held by the trust, and payments upon
redemption of the preferred securities or liquidation of the trust, to the
extent described under "Description of the Guarantee" beginning on page 50. The
guarantee agreement does not cover the payment of any
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<PAGE> 29
distribution or the liquidation amount when the trust does not have sufficient
funds available to make these payments.
DISTRIBUTIONS
Source of Distributions. The funds of the trust available for distribution
to holders of the preferred securities will be limited to payments made under
the debentures, which the trust will purchase with the proceeds from the sale of
the trust securities. Distributions will be paid through the property trustee,
which will hold the amounts received from our interest payments on the
debentures in the payment account for the benefit of the holders of the trust
securities. If we do not make interest payments on the debentures, the property
trustee will not have funds available to pay distributions on the preferred
securities.
Payment of Distributions. Distributions on the preferred securities will
be payable at the annual rate of % of the $10 stated liquidation amount,
payable quarterly on March 31, June 30, September 30 and December 31 of each
year, to the holders of the preferred securities on the relevant record dates.
So long as the preferred securities are represented by a global security, as
described below, the record date will be the business day immediately preceding
the relevant distribution date. The first distribution date for the preferred
securities will be March 31, 2001.
Distributions will accumulate from the date of issuance, will be cumulative
and will be computed on the basis of a 360-day year of twelve 30-day months. If
the distribution date is not a business day, then payment of the distributions
will be made on the next day that is a business day, without any additional
interest or other payment for the delay. However, if the next business day is in
the next calendar year, payment of the distribution will be made on the business
day immediately preceding the scheduled distribution date. When we use the term
"business day" we mean any day other than a Saturday, a Sunday, a day on which
banking institutions in New York, New York are authorized or required by law,
regulation 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.
Extension Period. As long as no event of default under the indenture has
occurred and is continuing, we have the right to defer the payment of interest
on the debentures at any time for a period not exceeding 20 consecutive
quarters. We refer to this period of deferral as an "extension period." No
extension period may extend beyond December 31, 2030 or end on a date other than
an interest payment date, which dates are the same as the distribution dates. If
we defer the payment of interest, quarterly distributions on the preferred
securities will also be deferred during any such extension period. Any deferred
distributions under the preferred securities will accumulate additional amounts
at the annual rate of %, compounded quarterly from the relevant
distribution date. The term "distributions" as used in this prospectus includes
those accumulated amounts.
During an extension period, we may not:
- declare or pay any dividends or distributions on, or redeem, purchase,
acquire or make a liquidation payment with respect to, any of our capital
stock, other than stock dividends, non-cash dividends in connection with
the implementation of a shareholder rights plan, purchases of common
stock in connection with employee benefit plans or in connection with the
reclassification of any class of our capital stock into another class of
capital stock, or allow any of our direct or indirect subsidiaries to do
the same with respect to their capital stock, other than the
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<PAGE> 30
payment of dividends or distributions to us or to any of our direct or
indirect subsidiaries;
- make, or allow any of our direct or indirect subsidiaries to make, any
payment of principal, interest or premium on or repay, repurchase or
redeem any debt securities that rank equally with, or junior to, the
debentures;
- make, or allow any of our direct or indirect subsidiaries to make, any
guarantee payments with respect to any other guarantee by us of any other
debt securities of any of our direct or indirect subsidiaries if the
guarantee ranks equally with or junior to the debentures, other than
payments under the guarantee; or
- redeem, purchase or acquire less than all of the debentures or any of the
preferred securities.
After the termination of any extension period and the payment of all amounts
due, we may elect to begin a new extension period, subject to the above
requirements.
We do not currently intend to exercise our right to defer distributions on
the preferred securities by deferring the payment of interest on the debentures.
REDEMPTION OR EXCHANGE
General. Subject to the prior approval of the Federal Reserve, if required
by law or regulation, we will have the right to redeem the debentures:
- in whole at any time, or in part from time to time, on or after December
31, 2005;
- at any time, in whole, within 180 days following the occurrence of a Tax
Event, an Investment Company Event or a Capital Treatment Event, which
terms we define below; or
- at any time, to the extent of any preferred securities we repurchase,
plus a proportionate amount of the common securities we hold.
Mandatory Redemption. Upon our repayment or redemption, in whole or in
part, of any debentures, whether on December 31, 2030 or earlier, the property
trustee will apply the proceeds to redeem the same amount of the trust
securities, upon not less than 30 days' nor more than 60 days' notice, at the
redemption price. The redemption price will equal 100% of the aggregate
liquidation amount of the trust securities plus accumulated but unpaid
distributions to the date of redemption. If less than all of the debentures are
to be repaid or redeemed on a date of redemption, then the proceeds from such
repayment or redemption will be allocated to redemption of preferred securities
and common securities proportionately.
Distribution of Debentures in Exchange for Preferred Securities. Upon
prior approval of the Federal Reserve, if required by law or regulation, we will
have the right at any time to dissolve, wind-up or terminate the trust and,
after satisfaction of the liabilities of creditors of the trust as provided by
applicable law, including, without limitation, amounts due and owing the
trustees of the trust, cause the debentures to be distributed directly to the
holders of trust securities in liquidation of the trust. See "-- Liquidation
Distribution Upon Termination" beginning on page 31.
After the liquidation date fixed for any distribution of debentures in
exchange for preferred securities:
- those trust securities will no longer be deemed to be outstanding;
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<PAGE> 31
- certificates representing debentures in a principal amount equal to the
liquidation amount of those preferred securities will be issued in
exchange for the preferred securities certificates;
- we will use our best efforts to list the debentures on the American Stock
Exchange or another national exchange or to have them designated for
inclusion on the Nasdaq National Market, if the preferred securities are
then listed or included;
- any certificates representing trust securities that are not surrendered
for exchange will be deemed to represent debentures with a principal
amount equal to the liquidation amount of those preferred securities,
plus unpaid interest in an amount equal to the accumulated and unpaid
distributions on the preferred securities and accruing interest at the
rate provided for in the debentures from the last distribution date on
the preferred securities; and
- all rights of the trust security holders other than the right to receive
debentures upon surrender of a certificate representing trust securities
will terminate.
We cannot assure you that the market prices for the preferred securities or
the debentures that may be distributed if a dissolution and liquidation of the
trust were to occur would be favorable. The preferred securities that an
investor may purchase, or the debentures that an investor may receive on
dissolution and liquidation of the trust, may trade at a discount to the price
that the investor paid to purchase the preferred securities.
Redemption upon a Tax Event, Investment Company Event or Capital Treatment
Event. If a Tax Event, an Investment Company Event or a Capital Treatment Event
occurs, we will have the right to redeem the debentures in whole, but not in
part, and thereby cause a mandatory redemption of all of the trust securities at
the redemption price. If one of these events occurs and we do not elect to
redeem the debentures, or to dissolve the trust and cause the debentures to be
distributed to holders of the trust securities, then the preferred securities
will remain outstanding and additional interest may be payable on the
debentures. See "Description of the Debentures -- Redemption" beginning on page
41.
"Tax Event" means the receipt by the trust and us of an opinion of counsel
having a recognized federal tax and securities law practice stating that there
is more than an insubstantial risk that:
- interest payable by us on the debentures is not, or within 90 days of the
date of the opinion will not be, deductible by us, in whole or in part,
for federal income tax purposes;
- the trust is, or will be within 90 days after the date of the opinion,
subject to federal income tax with respect to income received or accrued
on the debentures; or
- the trust is, or will be within 90 days after the date of opinion,
subject to more than an immaterial amount of other taxes, duties,
assessments or other governmental charges, as a result of any amendment
to any tax laws or regulations.
"Investment Company Event" means the receipt by the trust and us of an
opinion of counsel having a recognized federal tax and securities law practice
to the effect that the trust is, or will be, considered an "investment company"
that is required to be registered under the Investment Company Act, as a result
of a change in law or regulation or a change in interpretation or application of
law or regulation.
"Capital Treatment Event" means the receipt by the trust and us of an
opinion of counsel having a recognized bank regulatory practice to the effect
that there is more than
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<PAGE> 32
an insubstantial risk of impairment of our ability to treat the preferred
securities as Tier 1 capital for purposes of the current capital adequacy
guidelines of the Federal Reserve, as a result of any amendment to any laws or
any regulations.
For all of the events described above, we or the trust must request and
receive an opinion of counsel experienced in such matters with regard to the
event within a reasonable period of time after we become aware of the possible
occurrence of an event of this kind.
Redemption of Debentures in Exchange for Preferred Securities We
Purchase. Upon prior approval of the Federal Reserve, if required by law or
regulation, we will also have the right at any time, and from time to time, to
redeem debentures in exchange for any preferred securities we may have
repurchased in the market. If we elect to surrender any preferred securities
beneficially owned by us in exchange for redemption of a like amount of
debentures, we will also surrender a proportionate amount of common securities
in exchange for debentures. Neither we nor the trust will call for redemption
any preferred securities owned by other holders at any time when we elect to
exchange trust securities we own for debentures.
The common securities we surrender will be in the same proportion to the
preferred securities we surrender as is the ratio of common securities then
outstanding to the preferred securities then outstanding. In exchange for the
trust securities surrendered by us, the property trustee will cause to be
released to us for cancellation debentures with a principal amount equal to the
liquidation amount of the trust securities, plus any accumulated but unpaid
distributions, if any, then held by the property trustee allocable to those
trust securities. After the date of redemption involving an exchange by us, the
trust securities we surrender will no longer be deemed outstanding and the
debentures redeemed in exchange will be cancelled.
REDEMPTION PROCEDURES
Preferred securities will be redeemed at the redemption price with the
applicable proceeds from our contemporaneous redemption of the 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 the trust has
funds available for the payment of the redemption price.
Notice of any redemption will be mailed at least 30 days but not more than
60 days before the date of redemption to each holder of trust securities to be
redeemed at its registered address. Unless we default in payment of the
redemption price on the debentures, interest will cease to accumulate on the
debentures called for redemption on and after the date of redemption.
If the trust gives notice of redemption of its trust securities, then the
property trustee, to the extent funds are available, will irrevocably deposit
with the depositary for the trust securities funds sufficient to pay the
aggregate redemption price and will give the depositary for the trust securities
irrevocable instructions and authority to pay the redemption price to the
holders of the trust securities. See "Book-Entry Issuance" beginning on page 48.
If the preferred securities are no longer in book-entry only form, the property
trustee, to the extent funds are available, will deposit with the designated
paying agent for such preferred securities funds sufficient to pay the aggregate
redemption price and will give the paying agent irrevocable instructions and
authority to pay the redemption price to the holders upon surrender of their
certificates evidencing the preferred securities.
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<PAGE> 33
Notwithstanding the foregoing, distributions payable on or prior to the date of
redemption for any trust securities called for redemption will be payable to the
holders of the trust securities on the relevant record dates for the related
distribution dates.
If notice of redemption has been given and we have deposited funds as
required, then on the date of the deposit all rights of the holders of the trust
securities called for redemption will cease, except the right to receive the
redemption price, but without interest on such redemption price after the date
of redemption. The trust securities will also cease to be outstanding on the
date of the deposit. If any date fixed for redemption of trust securities is not
a business day, then payment of the redemption price payable on that date will
be made on the next day that is a business day without any additional interest
or other payment in respect of the delay. However, if the next business day is
in the next succeeding calendar year, payment of the interest will be made on
the immediately preceding business day.
If payment of the redemption price in respect of trust securities called
for redemption is improperly withheld or refused and not paid by the trust, or
by us pursuant to the guarantee, distributions on the trust securities will
continue to accumulate at the applicable rate from the date of redemption
originally established by the trust for the trust securities to the date the
redemption price is actually paid. In this case, the actual payment date will be
considered the date fixed for redemption for purposes of calculating the
redemption price. See "Description of the Guarantee" beginning on page 50.
Payment of the redemption price on the preferred securities and any
distribution of debentures to holders of preferred securities will be made to
the applicable recordholders as they appear on the register for the preferred
securities on the relevant record date. As long as the preferred securities are
represented by a global security, the record date will be the business day
immediately preceding the date of redemption or liquidation date, as applicable.
If less than all of the trust securities are to be redeemed, then the
aggregate liquidation amount of the trust securities to be redeemed will be
allocated proportionately to those trust securities based upon the relative
liquidation amounts. The particular preferred securities to be redeemed will be
selected by the property trustee from the outstanding preferred securities not
previously called for redemption by a method the property trustee deems fair and
appropriate. This method may provide for the redemption of portions equal to
$10, or an integral multiple of $10, of the liquidation amount of the preferred
securities. The property trustee will promptly notify the registrar for the
preferred securities in writing of the preferred securities selected for
redemption and, in the case of any preferred securities selected for partial
redemption, the liquidation amount to be redeemed.
Subject to applicable law, and if we are not exercising our right to defer
interest payments on the debentures, we may, at any time, purchase outstanding
preferred securities.
SUBORDINATION OF COMMON SECURITIES
Payment of distributions on, and the redemption price of, the preferred
securities and common securities of the trust will be made based on the
liquidation amount of these securities. However, if an event of default under
the indenture has occurred and is continuing, no distributions on or redemption
of the common securities may be made unless payment in full in cash of all
accumulated and unpaid distributions on all of the
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<PAGE> 34
outstanding preferred securities for all distribution periods terminating on or
before that time, or in the case of payment of the redemption price, payment of
the full amount of the 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 the redemption price of, the preferred
securities then due and payable.
In the case of the occurrence and continuance of any event of default under
the trust agreement resulting from an event of default under the indenture, we,
as holder of the common securities, will be deemed to have waived any right to
act with respect to that event of default under the trust agreement until the
effect of the event of default has been cured, waived or otherwise eliminated.
Until the event of default under the trust agreement has 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 our behalf, 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
We will have the right at any time to dissolve, wind-up or terminate the
trust and cause the debentures to be distributed to the holders of the preferred
securities. This right is subject, however, to us receiving approval of the
Federal Reserve, if required by law or regulation.
In addition, the trust will automatically terminate upon expiration of its
term and will terminate earlier on the first to occur of:
- our bankruptcy, dissolution or liquidation;
- the distribution of a like amount of the debentures to the holders of
trust securities, if we have given written direction to the property
trustee to terminate the trust;
- redemption of all of the preferred securities as described on page 27
under "-- Redemption or Exchange -- Mandatory Redemption"; or
- the entry of a court order for the dissolution of the trust.
With the exception of a redemption as described on page 27 under
"-- Redemption or Exchange -- Mandatory Redemption," if an early termination of
the trust occurs, the trust will be liquidated by the administrative trustees as
expeditiously as they determine to be possible. After satisfaction of
liabilities to creditors of the trust as provided by applicable law, the
trustees will distribute to the holders of trust securities, debentures:
- in an aggregate stated principal amount equal to the aggregate stated
liquidation amount of the trust securities;
- with an interest rate identical to the distribution rate on the trust
securities; and
- with accrued and unpaid interest equal to accumulated and unpaid
distributions on the trust securities.
However, if the property trustee determines that the distribution is not
practical, then the holders of trust securities will be entitled to receive,
instead of debentures, a proportionate amount of the liquidation distribution.
The liquidation distribution will be the amount equal to the aggregate of the
liquidation amount plus accumulated and unpaid distributions to the date of
payment. If the liquidation distribution can be paid only in part because the
trust has insufficient assets available to pay in full the aggregate liquidation
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distribution, then the amounts payable directly by the trust on the trust
securities will be paid on a proportional basis, based on liquidation amounts,
to us, as the holder of the common securities, and to the holders of the
preferred securities. However, if an event of default under the indenture has
occurred and is continuing, the preferred securities will have a priority over
the common securities. See "-- Subordination of Common Securities" beginning on
page 30.
Under current United States federal income tax law and interpretations and
assuming that the trust is treated as a grantor trust, as is expected, a
distribution of the 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 another circumstance, however, the distribution
could be a taxable event to holders of the preferred securities. See "Federal
Income Tax Consequences -- Receipt of Debentures or Cash Upon Liquidation of the
Trust" on page 57. If we do not elect to redeem the debentures prior to maturity
or to liquidate the trust and distribute the debentures to holders of the
preferred securities, the preferred securities will remain outstanding until the
repayment of the debentures.
If we elect to dissolve the trust and thus cause the debentures to be
distributed to holders of the preferred securities in liquidation of the trust,
we will continue to have the right to shorten the maturity of the debentures.
See "Description of the Debentures -- General" beginning on page 39.
LIQUIDATION VALUE
The amount of the liquidation distribution payable on the preferred
securities in the event of any liquidation of the trust is $10 per preferred
security plus accumulated and unpaid distributions to the date of payment, which
may be in the form of a distribution of debentures having a liquidation value
and accrued interest of an equal amount. See "-- Liquidation Distribution Upon
Termination" beginning on page 31.
EVENTS OF DEFAULT; NOTICE
Any one of the following events constitutes an event of default under the
trust agreement with respect to the preferred securities:
- the occurrence of an event of default under the indenture, see
"Description of the Debentures -- Debenture Events of Default" on page
46;
- a default by the trust in the payment of any distribution when it becomes
due and payable, and continuation of the default for a period of 30 days;
- a default by the trust in the payment of any redemption price of any of
the trust securities when it becomes due and payable;
- a default in the performance, or breach, in any material respect, of any
covenant or warranty of the trustees in the trust agreement, other than
those defaults covered in the previous two points, and continuation of
the default or breach for a period of 60 days after there has been given,
by registered or certified mail, to the defaulting trustee(s) 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
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- the occurrence of events of bankruptcy or insolvency with respect to the
property trustee and our failure to appoint a successor property trustee
within 60 days.
Within five business days after the occurrence of any event of default
actually known to the property trustee, the property trustee will transmit
notice of the event of default to the holders of the preferred securities, the
administrative trustees and to us, unless the event of default has been cured or
waived. We and the administrative trustees are required to file annually with
the property trustee a certificate as to whether or not we or they are in
compliance with all applicable conditions and covenants under the trust
agreement.
If an event of default under the indenture has occurred and is continuing,
the preferred securities will have preference over the common securities upon
termination of the trust. See "-- Subordination of Common Securities" beginning
on page 30 and "-- Liquidation Distribution Upon Termination" beginning on page
31. The existence of an event of default under the trust agreement does not
entitle the holders of preferred securities to accelerate the maturity thereof,
unless the event of default is caused by the occurrence of an event of default
under the indenture and both the indenture trustee and holders of at least 25%
in principal amount of the debentures fail to accelerate the maturity thereof.
REMOVAL OF THE TRUSTEES
Unless an event of default under the indenture has occurred and is
continuing, we may remove any trustee at any time. If an event of default under
the indenture has occurred and is continuing, only the holders of a majority in
liquidation amount of the outstanding preferred securities may remove the
property trustee or the Delaware trustee. The holders of the preferred
securities have no right to vote to appoint, remove or replace the
administrative trustees. These rights are vested exclusively with us 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 successor trustee
accepts the appointment in accordance with the trust agreement.
CO-TRUSTEES AND SEPARATE PROPERTY TRUSTEE
Unless an event of default under the indenture has occurred and is
continuing, for the purpose of meeting the legal requirements of the Trust
Indenture Act or of any jurisdiction in which any part of the trust property may
at the time be located, we will have the power to appoint at any time or times,
and upon written request of the property trustee will appoint, one or more
persons or entities either (a) to act as a co-trustee, jointly with the property
trustee, of all or any part of the trust property, or (b) to act as separate
trustee of any trust property. In either case, these trustees will have the
powers that 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 an event of
default under the indenture 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 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.
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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 as
described below. For these purposes, if we consolidate or merge with another
entity, or transfer or sell substantially all of our assets to another entity,
in some cases that transaction may be considered to involve a replacement of the
trust, and the conditions set forth below would apply to such transaction. The
trust may, at our request, 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, undertake a transaction listed above if the
following conditions are met:
- the 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, referred to as "successor
securities", so long as the successor securities rank the same in
priority as the preferred securities with respect to distributions and
payments upon liquidation, redemption and otherwise;
- we appoint a trustee of the successor entity possessing substantially the
same powers and duties as the property trustee in its capacity as the
holder of the debentures;
- the successor securities are listed or traded or will be listed or traded
on any national securities exchange or other organization on which the
preferred securities are then listed, if any;
- the 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;
- the successor entity has a purpose substantially identical to that of the
trust;
- prior to the merger, consolidation, amalgamation, replacement,
conveyance, transfer or lease, we have received an opinion from
independent counsel that (a) 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, and (b) following the transaction, neither the trust
nor the successor entity will be required to register as an "investment
company" under the Investment Company Act; and
- we own all of the common securities of the successor entity and guarantee
the obligations of the successor entity under the successor securities at
least to the extent provided by the guarantee, the debentures, the trust
agreement and the expense agreement.
Notwithstanding the foregoing, the trust may not, except with the consent of
every holder of the preferred securities, enter into any transaction of this
kind if the transaction would cause the trust or the successor entity not to be
classified as a grantor trust for United States federal income tax purposes.
VOTING RIGHTS; AMENDMENT OF TRUST AGREEMENT
Except as described below and under "Description of the
Guarantee -- Amendments and Assignment" on page 51, and as otherwise required by
the Trust Indenture Act and the trust agreement, the holders of the preferred
securities will have no voting rights.
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The trust agreement may be amended from time to time by us, as holders of
the common securities, and the trustees, without the consent of the holders of
the preferred securities, in the following circumstances:
- with respect to acceptance of appointment by a successor trustee;
- to cure any ambiguity, correct or supplement any provisions in the trust
agreement that may be inconsistent with any other provision, or to make
any other provisions with respect to matters or questions arising under
the trust agreement, as long as the amendment is not inconsistent with
the other provisions of the trust agreement and does not have a material
adverse effect on the interests of any holder of trust securities; or
- to modify, eliminate or add to any provisions of the trust agreement if
necessary to ensure that the trust will be classified for 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.
With the consent of the holders of a majority of the aggregate liquidation
amount of the outstanding trust securities, we and the trustees may amend the
trust agreement if the trustees receive 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 the trust's status as a grantor trust for
federal income tax purposes or the trust's exemption from status as an
"investment company" under the Investment Company Act. However, without the
consent of each holder of trust securities, the trust agreement may not be
amended to (a) change the amount or timing of any distribution on the trust
securities or otherwise adversely affect the amount of any distribution required
to be made in respect of the trust securities as of a specified date, or (b)
restrict the right of a holder of trust securities to institute suit for the
enforcement of the payment on or after that date.
As long as the property trustee holds any debentures, the trustees will
not, without obtaining the prior approval of the holders of a majority in
aggregate liquidation amount of all outstanding preferred securities:
- 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 property trustee with respect to the 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 debentures will be due and payable; or
- consent to any amendment or termination of the indenture or the
debentures, where the property trustee's consent is required. However,
where a consent under the indenture requires the consent of each holder
of the affected debentures, no consent will be given by the property
trustee without the prior consent of each holder of the preferred
securities.
The trustees may 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 preferred securities of any notice of default with respect to the
debentures. In addition to obtaining the foregoing approvals of the holders of
the preferred securities, prior to taking any of the foregoing actions, the
trustees must obtain an opinion of counsel experienced in these matters to the
effect that
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the trust will not be classified as an association taxable as a corporation for
federal income tax purposes on account of the action.
Any required approval of holders of trust securities may be given at a
meeting or by written consent. The property trustee will cause a notice of any
meeting at which holders of the trust 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 trust securities.
No vote or consent of the holders of preferred securities will be required
for the trust to redeem and cancel its preferred securities in accordance with
the trust agreement.
Notwithstanding the fact that holders of preferred securities are entitled
to vote or consent under any of the circumstances described above, any of the
preferred securities that are owned by us, the trustees or any of our affiliates
or any trustee, 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
preferred securities registered in the name of The Depository Trust Company, New
York, New York, or its nominee. A global preferred security is a security
representing interests of more than one beneficial holder. Ownership of
beneficial interests in the global preferred securities will be reflected in DTC
participant account records through DTC's book-entry transfer and registration
system. Participants are brokers, dealers, or others having accounts with DTC.
Indirect beneficial interests of other persons investing in the preferred
securities will be shown on, and transfers will be effected only through,
records maintained by DTC participants. Except as described below, preferred
securities in definitive form will not be issued in exchange for the global
preferred securities. See "Book-Entry Issuance" beginning on page 48.
No global preferred security may be exchanged for preferred securities
registered in the names of persons other than DTC or its nominee unless:
- DTC notifies the indenture trustee that it is unwilling or unable to
continue as a depositary for the global preferred security and we are
unable to locate a qualified successor depositary;
- we execute and deliver to the indenture trustee a written order stating
that we elect to terminate the book-entry system through DTC; or
- there shall have occurred and be continuing an event of default under the
indenture.
Any global preferred security that is exchangeable pursuant to the preceding
sentence shall be exchangeable for definitive certificates registered in the
names as DTC shall direct. It is expected that the instructions will be based
upon directions received by DTC with respect to ownership of beneficial
interests in the global preferred security. If preferred securities are issued
in definitive form, the preferred securities will be in denominations of $10,
and 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 represented thereby, a global preferred security may not be
transferred except as a whole by DTC to a nominee of DTC, by a nominee of DTC to
DTC or another nominee of DTC or by DTC or any nominee to a successor depositary
or any nominee of the successor.
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Payments on global preferred securities will be made to DTC, as the
depositary for the global preferred securities. If the preferred securities are
issued in definitive form, distributions will be payable by check mailed to the
address of record of the persons entitled to the distribution, and 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. In addition, if the preferred securities are issued in
definitive form, the record dates for payment of distributions will be the 15th
day of the month in which the relevant distribution date occurs. For a
description of the terms of DTC arrangements relating to payments, transfers,
voting rights, redemptions and other notices and other matters, see "Book-Entry
Issuance" beginning on page 48.
Upon the issuance of one or more global preferred securities, and the
deposit of the global preferred security with or on behalf of DTC or its
nominee, DTC or its nominee will credit, on its book-entry registration and
transfer system, the respective aggregate liquidation amounts of the individual
preferred securities represented by the global preferred security to the
designated accounts of persons that participate in the DTC system. These
participant accounts will be designated by the dealers, underwriters or agents
selling the preferred securities. Ownership of beneficial interests in a global
preferred security will be limited to persons or entities having an account with
DTC or who may hold interests through participants. With respect to interests of
any person or entity that is a DTC participant, ownership of beneficial
interests in a global preferred security will be shown on, and the transfer of
that ownership will be effected only through, records maintained by DTC or its
nominee. With respect to persons or entities who hold interests in a global
preferred security through a participant, the interest and any transfer of the
interest will be shown only on the participant's records. The laws of some
states require that certain purchasers of securities take physical delivery of
securities in definitive form. These laws may impair the ability to transfer
beneficial interests in a global preferred security.
So long as DTC or another depositary, or its nominee, is the registered
owner of the global preferred security, the depositary or the nominee, as the
case may be, 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. Except as described in this prospectus, owners of
beneficial 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 of the preferred securities under the
trust agreement.
None of us, 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 representing the
preferred securities or for maintaining, supervising or reviewing any records
relating to the beneficial ownership interests.
We expect that DTC or its nominee, upon receipt of any payment of the
liquidation amount or distributions in respect of a 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
DTC or its nominee. We also expect that payments by participants to
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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. See "Book-Entry Issuance" beginning on page 48.
PAYMENT AND PAYING AGENCY
Payments in respect of the preferred securities shall be made to DTC, which
shall credit the relevant accounts of participants on the applicable
distribution dates, or, if any of the preferred securities are not held by DTC,
the payments shall be made by check mailed to the address of the holder as
listed on the register of holders of the preferred securities. The paying agent
for the preferred securities will initially be the property trustee and any
co-paying agent chosen by the property trustee and acceptable to us and the
administrative trustees. The paying agent for the preferred securities may
resign as paying agent upon 30 days' written notice to the administrative
trustees, the property trustee and us. If the property trustee no longer is the
paying agent for the preferred securities, the administrative trustees will
appoint a successor to act as paying agent. The successor must be a bank or
trust company acceptable to us and the property trustee.
REGISTRAR AND TRANSFER AGENT
The property trustee will act as the registrar and the transfer agent for
the preferred securities. Registration of transfers of preferred securities will
be effected without charge by or on behalf of the trust, but upon payment of any
tax or other governmental charges that may be imposed in connection with any
transfer or exchange. The trust and its registrar and transfer agent will not be
required to register or cause to be registered the transfer of preferred
securities after they have been called for redemption.
INFORMATION CONCERNING THE PROPERTY TRUSTEE
The property trustee undertakes to perform only the duties set forth in the
trust agreement and as required by the Trust Indenture Act. After the occurrence
of an event of default that is continuing, the property trustee must exercise
the same degree of care and skill as a prudent person exercises or uses in the
conduct of his or her own affairs. 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 under the trust agreement has occurred and is continuing and the
property trustee is required to decide between alternative causes of action,
construe ambiguous or inconsistent provisions in the trust agreement or is
unsure of the application of any provision of the trust agreement, and the
matter is not one on which holders of preferred securities are entitled to vote,
then the property trustee will take the action directed in writing by us. If the
property trustee is not so directed, then it will take the action it deems
advisable and in the best interests of the holders of the trust securities and
will have no liability except for its own bad faith, negligence or willful
misconduct.
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MISCELLANEOUS
The administrative trustees are authorized and directed to conduct the
affairs of and to operate the trust in such a way that:
- the trust will not be deemed to be an "investment company" required to be
registered under Investment Company Act;
- the trust will not be classified as an association taxable as a
corporation for federal income tax purposes; and
- the debentures will be treated as indebtedness incurred by us for federal
income tax purposes.
In this regard, we and the administrative trustees are authorized to take any
action not inconsistent with applicable law, the certificate of trust or the
trust agreement, that we and the administrative trustees determine to be
necessary or desirable for these purposes.
Holders of the preferred securities have no preemptive or similar rights.
The trust agreement and the trust securities will be governed by Delaware law.
DESCRIPTION OF THE DEBENTURES
Concurrently with the issuance of the preferred securities, the trust will
invest the proceeds from the sale of the trust securities in the debentures
issued by us. The debentures will be issued as unsecured debt under the
indenture between us and Wilmington Trust Company, as indenture trustee. The
indenture will be qualified under the Trust Indenture Act.
The following discussion is subject to, and is qualified in its entirety by
reference to, the indenture and to the Trust Indenture Act. We urge prospective
investors to read the form of the indenture, which is filed as an exhibit to the
registration statement of which this prospectus forms a part.
GENERAL
The debentures will be limited in aggregate principal amount to
$15,463,920, or $17,783,510 if the Underwriters' over-allotment option is
exercised in full. This amount represents the sum of the aggregate stated
liquidation amounts of the trust securities. The debentures will bear interest
at the annual rate of % of the principal amount. The interest will be
payable quarterly on March 31, June 30, September 30 and December 31 of each
year, beginning March 31, 2001, to the person in whose name each debenture is
registered at the close of business on the 15th day of the last month of the
calendar quarter. It is anticipated that, until the liquidation, if any, of the
trust, the debentures will be held in the name of the property trustee in trust
for the benefit of the holders of the trust securities.
The amount of interest payable for any period will be computed on the basis
of a 360-day year of twelve 30-day months. If any date on which interest is
payable on the debentures is not a business day, then payment of interest will
be made on the next day that is a business day without any additional interest
or other payment in respect of the delay. However, if the next business day is
in the next calendar year, payment of interest 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 on the amount due at the
annual rate of %, compounded quarterly.
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The debentures will mature on December 31, 2030, the stated maturity date.
We may shorten this date once at any time to any date after December 31, 2005,
subject to the prior approval of the Federal Reserve, if required by law or
regulation.
We will give notice to the indenture trustee and the holders of the
debentures, no more than 180 days and no less than 30 days prior to the
effectiveness of any change in the stated maturity date. We will not have the
right to redeem the debentures from the trust until after December 31, 2005,
except if (a) a Tax Event, an Investment Company Event or a Capital Treatment
Event, which terms are defined on pages 28 and 29, has occurred, or (b) we
repurchase preferred securities in the market, in which case we can elect to
redeem debentures specifically in exchange for a like amount of preferred
securities owned by us plus a proportionate amount of common securities.
The debentures will be unsecured and will rank junior to all of our senior
and subordinated debt, including indebtedness we may incur in the future.
Because we are a holding company, our right to participate in any distribution
of assets of any of our subsidiaries, upon any subsidiary's liquidation or
reorganization or otherwise, and thus the ability of holders of the debentures
to benefit indirectly from any distribution by a subsidiary, is subject to the
prior claim of creditors of the subsidiary, except to the extent that we may be
recognized as a creditor of the subsidiary. The debentures will, therefore, be
effectively subordinated to all existing and future liabilities of our
subsidiaries, and holders of debentures should look only to our assets for
payment. The indenture does not limit our ability to incur or issue secured or
unsecured senior and junior debt. See "-- Subordination" beginning on page 43.
The indenture does not contain provisions that afford holders of the
debentures protection in the event of a highly leveraged transaction or other
similar transaction involving us, nor does it require us to maintain or achieve
any financial performance levels or to obtain or maintain any credit rating on
the debentures.
OPTION TO EXTEND INTEREST PAYMENT PERIOD
As long as no event of default under the indenture has occurred and is
continuing, we have the right under the indenture to defer the payment of
interest on the debentures at any time for a period not exceeding 20 consecutive
quarters. However, no extension period may extend beyond the stated maturity of
the debentures or end on a date other than a date interest is normally due. At
the end of an extension period, we must pay all interest then accrued and
unpaid, together with interest thereon at the annual rate of %, compounded
quarterly. During an extension period, interest will continue to accrue and
holders of debentures, or the holders of preferred securities if they are then
outstanding, will be required to accrue and recognize as income for federal
income tax purposes the accrued but unpaid interest amounts in the year in which
such amounts accrued. See "Federal Income Tax Consequences -- Interest Payment
Period and Original Issue Discount" on page 56.
During an extension period, we may not:
- declare or pay any dividends or distributions on, or redeem, purchase,
acquire or make a liquidation payment with respect to, any of our capital
stock, other than stock dividends, non-cash dividends in connection with
the implementation of a shareholders' rights plan, purchases of common
stock in connection with employee benefit plans or in connection with the
reclassification of any class of capital stock into another class of
capital stock, or allow any of our direct or indirect subsidiaries
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to do the same with respect to their capital stock, other than payment of
dividends or distributions to us or to any of our direct or indirect
subsidiaries;
- make, or allow any of our direct or indirect subsidiaries to make, any
payment of principal, interest or premium on, or repay, repurchase or
redeem any debt securities issued by us that rank equally with or junior
to the debentures;
- make, or allow any of our direct or indirect subsidiaries to make, any
guarantee payments with respect to any other guarantee by us of any other
debt securities of any of our direct or indirect subsidiaries if the
guarantee ranks equally with or junior to the debentures, other than
payments under the guarantee; or
- redeem, purchase or acquire less than all of the debentures or any of the
preferred securities.
Prior to the termination of any extension period, so long as no event of
default under the indenture is continuing, we may further defer the payment of
interest subject to the above stated requirements. Upon the termination of any
extension period and the payment of all amounts then due, we may elect to begin
a new extension period at any time. We do not currently intend to exercise our
right to defer payments of interest on the debentures.
We must give the property trustee, the administrative trustees and the
indenture trustee notice of our election of an extension period at least two
business days prior to the earlier of (a) the next date on which distributions
on the trust securities would have been payable except for the election to begin
an extension period, or (b) the date we are required to give notice of the
record date, or the date the distributions are payable, to the American Stock
Exchange, or other applicable exchange of self-regulatory organization, or to
holders of the preferred securities, but in any event at least one business day
prior to the record date.
Other than as described above, there is no limitation on the number of
times that we may elect to begin an extension period.
ADDITIONAL SUMS TO BE PAID AS A RESULT OF ADDITIONAL TAXES
If the trust is required to pay any additional taxes, duties, assessments
or other governmental charges as a result of the occurrence of a Tax Event, we
will pay as additional interest on the debentures any amounts which may be
required so that the net amounts received and retained by the trust after paying
any additional taxes, duties, assessments or other governmental charges will not
be less than the amounts the trust would have received had the additional taxes,
duties, assessments or other governmental charges not been imposed.
REDEMPTION
Subject to prior approval of the Federal Reserve, if required by law or
regulation, we may redeem the debentures prior to maturity:
- on or after December 31, 2005, in whole at any time or in part from time
to time; or
- in whole at any time within 180 days following the occurrence of a Tax
Event, an Investment Company Event or a Capital Treatment Event; or
- at any time to the extent of any preferred securities we purchase, plus a
proportionate amount of the common securities we hold.
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In each case we will pay a redemption price equal to the accrued and unpaid
interest on the debentures so redeemed to the date fixed for redemption, plus
100% of the principal amount of the redeemed debentures.
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 debentures to be redeemed
at its registered address. Redemption of less than all outstanding debentures
must be effected proportionately, by lot or in any other manner deemed to be
fair and appropriate by the indenture trustee. Unless we default in payment of
the redemption price for the debentures, on and after the redemption date
interest will no longer accrue on the debentures or the portions of the
debentures called for redemption.
The debentures will not be subject to any sinking fund.
DISTRIBUTION UPON LIQUIDATION
As described on pages 31 and 32 under "Description of the Preferred
Securities -- Liquidation Distribution Upon Termination," under certain
circumstances and with the Federal Reserve's approval, the debentures may be
distributed to the holders of the preferred securities in liquidation of the
trust after satisfaction of liabilities to creditors of the trust. If this
occurs, we will use our best efforts to list the debentures on the American
Stock Exchange or other national exchange or to have them designated for
inclusion on the Nasdaq National Market, if the preferred securities are then
listed or included. There can be no assurance as to the market price of any
debentures that may be distributed to the holders of preferred securities.
RESTRICTIONS ON PAYMENTS
We are restricted from making certain payments (as described below) if we
have chosen to defer payment of interest on the debentures, if an event of
default has occurred and is continuing under the indenture, or if we are in
default with respect to our obligations under the guarantee.
If any of these events occur, we may not:
- declare or pay any dividends or distributions on, or redeem, purchase,
acquire, or make a liquidation payment with respect to, any of our
capital stock, other than stock dividends, non-cash dividends in
connection with the implementation of a shareholder rights plan,
purchases of common stock in connection with employee benefit plans or in
connection with the reclassification of any class of our capital stock
into another class of capital stock, or allow any of our direct or
indirect subsidiaries to do the same with respect to their capital stock,
other than payment of dividends or distributions to us or to any of our
direct or indirect subsidiaries;
- make, or allow any of our direct or indirect subsidiaries to make, any
payment of principal, interest or premium on, or repay or repurchase or
redeem any of our debt securities that rank equally with or junior to the
debentures;
- make, or allow any of our direct or indirect subsidiaries to make, any
guarantee payments with respect to any guarantee by us of the debt
securities of any of our direct or indirect subsidiaries if the guarantee
ranks equally with or junior to the debentures, other than payments under
the guarantee; or
- redeem, purchase or acquire less than all of the debentures or any of the
preferred securities.
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SUBORDINATION
The debentures are subordinated and junior in right of payment to all of
our senior and subordinated debt, as defined below. Upon any payment or
distribution of assets to creditors upon any liquidation, dissolution, winding
up or reorganization of our company, whether voluntary or involuntary in
bankruptcy, insolvency, receivership or other proceedings in connection with any
insolvency or bankruptcy proceedings, the holders of our senior and subordinated
debt will first be entitled to receive payment in full of principal and interest
before the holders of debentures will be entitled to receive or retain any
payment in respect of the debentures.
If the maturity of any debentures is accelerated, the holders of all of our
senior and subordinated debt outstanding at the time of the acceleration will
also be entitled to first receive payment in full of all amounts due to them,
including any amounts due upon acceleration, before the holders of the
debentures will be entitled to receive or retain any principal or interest
payments on the debentures.
No payments of principal or interest on the debentures may be made if there
has occurred and is continuing a default in any payment with respect to any of
our senior or subordinated debt or an event of default with respect to any of
our senior or subordinated debt resulting in the acceleration of the maturity of
the senior or subordinated debt, or if any judicial proceeding is pending with
respect to any default.
The term "debt" means, with respect to 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;
- 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 with respect to 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, 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 the first five points of
another person and all dividends of another person the payment of which,
in either case, the first person has guaranteed or is responsible or
liable, directly or indirectly, as obligor or otherwise.
The term "senior debt" means the principal of, and premium and interest,
including interest accruing on or after the filing of any petition in bankruptcy
or for reorganization relating to us, on, debt, whether incurred on or prior to
the date of the indenture or incurred after such date. However, senior debt will
not be deemed to include:
- any debt where it is provided in the instrument creating the debt that
the obligations are not superior in right of payment to the debentures or
to other debt which is equal with, or subordinated to, the debentures;
- any of our debt that when incurred and without regard to any election
under the federal bankruptcy laws, was without recourse to us;
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- any debt of ours to any of our subsidiaries;
- any debt to any of our employees;
- any debt that 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 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; and
- debt which constitutes subordinated debt.
The term "subordinated debt" means the principal of, and premium and
interest, including interest accruing on or after the filing of any petition in
bankruptcy or for reorganization relating to us, on, debt. Subordinated debt
includes debt incurred on or prior to the date of the indenture or thereafter
incurred, which is by its terms expressly provided to be junior and subordinate
to other debt of ours, other than the debentures. However, subordinated debt
will not be deemed to include:
- any of our debt which when incurred and without regard to any election
under the federal bankruptcy laws was without recourse to us;
- any debt of ours to any of our subsidiaries;
- any debt to any of our employees;
- 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 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;
- debt which constitutes senior debt; and
- any debt of ours under debt securities (and guarantees in respect of
these debt securities) initially issued to any trust, or a trustee of a
trust, partnership or other entity affiliated with us that is, directly
or indirectly, our financing subsidiary in connection with the issuance
by that entity of preferred securities or other securities which are
intended to qualify for "Tier 1" capital treatment.
We expect from time to time to incur additional indebtedness, and there is
no limitation under the indenture on the amount of indebtedness we may incur. We
had consolidated senior debt of $8.01 million outstanding principal amount at
September 30, 2000. Although a portion of this amount is expected to be repaid
with a portion of the proceeds from the sale of the debentures, we expect to
incur additional senior or subordinated debt in the future.
PAYMENT AND PAYING AGENTS
Generally, payment of principal of and interest on the debentures will be
made at the office of the indenture trustee in Wilmington, Delaware. However, we
have the option to
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make payment of any interest by (a) check mailed to the address of the person
entitled to payment at the address listed in the register of holders of the
debentures, or (b) wire transfer to an account maintained by the person entitled
thereto as specified in the register of holders of the debentures, provided that
proper transfer instructions have been received by the applicable record date.
Payment of any interest on debentures will be made to the person in whose name
the debenture is registered at the close of business on the regular record date
for the interest payment, except in the case of defaulted interest.
Any moneys deposited with the indenture trustee or any paying agent for the
debentures, or then held by us in trust, for the payment of the principal of or
interest on the debentures and remaining unclaimed for two years after the
principal or interest has become due and payable, will be repaid to us on June
30 of each year. If we hold any of this money in trust, then it will be
discharged from the trust to us and the holder of the debenture will thereafter
look, as a general unsecured creditor, only to us for payment.
REGISTRAR AND TRANSFER AGENT
The indenture trustee will act as the registrar and the transfer agent for
the debentures. Debentures may be presented for registration of transfer, with
the form of transfer endorsed thereon, or a satisfactory written instrument of
transfer, duly executed, at the office of the registrar. Provided that we
maintain a transfer agent in Wilmington, Delaware or the Borough of Manhattan,
City of New York, we may rescind the designation of any transfer agent or
approve a change in the location through which any transfer agent acts. We may
at any time designate additional transfer agents with respect to the debentures.
If we redeem any of the debentures, neither we nor the indenture trustee
will be required to (a) issue, register the transfer of or exchange any
debentures during a period beginning at the opening of business 15 days before
the day of the mailing of and ending at the close of business on the day of the
mailing of the relevant notice of redemption, or (b) transfer or exchange any
debentures so selected for redemption, except, in the case of any debentures
being redeemed in part, any portion not to be redeemed.
MODIFICATION OF INDENTURE
We and the indenture trustee may, from time to time without the consent of
the holders of the debentures, amend, waive our rights under or supplement the
indenture for purposes which do not materially adversely affect the rights of
the holders of the debentures. Other changes may be made by us and the indenture
trustee with the consent of the holders of a majority in total principal amount
of the outstanding debentures. However, without the consent of the holder of
each outstanding debenture affected by the proposed modification, no
modification may:
- extend the maturity date of the debentures;
- reduce the principal amount or the rate or extend the time of payment of
interest; or
- reduce the percentage of principal amount of debentures required to amend
the indenture.
As long as any of the preferred securities remain outstanding, no modification
of the indenture may be made that requires the consent of the holders of the
debentures, no termination of the indenture may occur, and no waiver of any
event of default under the
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indenture may be effective, without the prior consent of the holders of a
majority of the aggregate liquidation amount of the preferred securities.
DEBENTURE EVENTS OF DEFAULT
The indenture provides that any one or more of the following events with
respect to the debentures constitutes an event of default under the indenture:
- our failure to pay any interest on the debentures for 30 days after the
due date, except where we have properly extended the interest payment;
- our failure to pay any principal on the debentures when due whether at
maturity, upon redemption or otherwise;
- our failure to observe or perform in any material respect any other
covenants or agreements contained in the indenture for 90 days after
written notice to us from the indenture trustee or the holders of at
least 25% in aggregate outstanding principal amount of the debentures; or
- our bankruptcy, insolvency or reorganization or dissolution of the trust
(except for certain transactions specifically permitted by the trust
agreement).
The holders of a majority of the aggregate outstanding principal amount of
the 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 at least 25% in aggregate outstanding principal
amount of the debentures, may declare the principal due and payable immediately
upon an event of default under the indenture. The holders of a majority of the
outstanding principal amount of the debentures may rescind and annul the
declaration and waive the default if the default has been cured and a sum
sufficient to pay all matured installments of interest and principal due
otherwise than by acceleration, has been deposited with the indenture trustee.
The holders may not annul the declaration and waive a default if the default is
the non-payment of the principal of the debentures which has become due solely
by the acceleration. Should the holders of the debentures fail to annul the
declaration and waive the default, the holders of at least 25% in aggregate
liquidation amount of the preferred securities will have this right.
If an event of default under the indenture has occurred and is continuing,
the property trustee will have the right to declare the principal of and the
interest on the debentures, and any other amounts payable under the indenture,
to be immediately due and payable and to enforce its other rights as a creditor
with respect to the debentures.
We are required to file annually with the indenture trustee a certificate
as to whether or not we are in compliance with all of the conditions and
covenants applicable to us under the indenture.
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF THE PREFERRED SECURITIES
If an event of default under the indenture has occurred and is continuing
and the event is attributable to the failure by us to pay interest on or
principal of the debentures on the date on which the payment is due and payable,
then a holder of preferred securities may institute a direct action against us
to compel us to make the payment. We may not amend the indenture to remove the
foregoing right to bring a direct action without the prior written consent of
all of the holders of the preferred securities. If the right to bring a direct
action is removed, the trust may become subject to the reporting obligations
under the Securities Exchange Act of 1934.
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The holders of the preferred securities will not be able to exercise
directly any remedies, other than those set forth in the preceding paragraph,
available to the holders of the debentures unless there has been an event of
default under the trust agreement. See "Description of the Preferred
Securities -- Events of Default; Notice" beginning on page 32.
CONSOLIDATION, MERGER, SALE OF ASSETS AND OTHER TRANSACTIONS
We may not consolidate with or merge into any other entity or convey or
transfer our properties and assets substantially as an entirety to any entity,
and no entity may be consolidated with or merged into us or sell, convey,
transfer or otherwise dispose of its properties and assets substantially as an
entirety to us, unless:
- if we consolidate with or merge into another person or convey or transfer
our 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 person expressly
assumes by supplemental indenture our obligations on the debentures;
- immediately after the transaction, no event of default under the
indenture, and no event which, after notice or lapse of time, or both,
would become an event of default under the indenture, has occurred and is
continuing; and
- certain other conditions as prescribed in the indenture are satisfied.
Under certain circumstances, if we consolidate or merge with another
entity, or transfer or sell substantially all of our assets to another entity,
such transaction may be considered to involve a replacement of the trust, and
the provisions of the trust agreement relating to a replacement of the trust
would apply to such transaction. See "Description of the Preferred
Securities -- Mergers, Consolidations, Amalgamations or Replacements of the
Trust" on page 34.
SATISFACTION AND DISCHARGE
The indenture will cease to be of further effect and we will be deemed to
have satisfied and discharged our obligations under the indenture when all
debentures not previously delivered to the indenture trustee for cancellation:
- have become due and payable; or
- will become due and payable at their stated maturity within one year or
are to be called for redemption within one year, and we deposit or cause
to be deposited with the indenture trustee funds, in trust, for the
purpose and in an amount sufficient to pay and discharge the entire
indebtedness on the debentures not previously delivered to the indenture
trustee for cancellation, for the principal and interest due to the date
of the deposit or to the stated maturity or redemption date, as the case
may be.
We may still be required to provide officers' certificates, opinions of
counsel and pay fees and expenses due after these events occur.
GOVERNING LAW
The indenture and the debentures will be governed by and construed in
accordance with Wisconsin law.
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INFORMATION CONCERNING THE INDENTURE TRUSTEE
The indenture trustee is subject to all the duties and responsibilities
specified with respect to 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 debentures, unless offered reasonable security or 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.
MISCELLANEOUS
We have agreed, pursuant to the indenture, for so long as preferred
securities remain outstanding:
- to maintain directly or indirectly 100% ownership of the common
securities of the trust, except that certain successors that are
permitted pursuant to the indenture may succeed to our ownership of the
common securities;
- not to voluntarily terminate, wind up or liquidate the trust without
prior approval of the Federal Reserve, if required by law or regulation;
- to use our reasonable efforts to cause the trust (a) to remain a business
trust, and to avoid involuntary termination, winding up or liquidation,
except in connection with a distribution of debentures, the redemption of
all of the trust securities of the trust or mergers, consolidations or
amalgamations, each as permitted by the trust agreement, and (b) to
otherwise continue not to be treated as an association taxable as a
corporation or a partnership for federal income tax purposes;
- to use our reasonable efforts to cause each holder of trust securities to
be treated as owning an individual beneficial interest in the debentures;
and
- to use our reasonable efforts to maintain the eligibility of the
preferred securities for quotation or listing on any national securities
exchange or other organization for as long as the preferred securities
are outstanding.
BOOK-ENTRY ISSUANCE
GENERAL
DTC will act as securities depositary for the preferred securities and may
act as securities depositary for all of the debentures in the event of the
distribution of the debentures to the holders of preferred securities. Except as
described below, the preferred securities will be issued only as registered
securities in the name of Cede & Co., as DTC's nominee. One or more global
preferred securities will be issued for the preferred securities and will be
deposited with DTC.
DTC is a limited purpose trust company organized under New York banking
law, a "banking organization" within the meaning of the New York banking law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to Section 17A of the Securities Exchange Act of 1934. DTC
holds securities that its participants deposit with DTC. DTC also facilitates
the settlement among participants of securities transactions, such as transfers
and pledges, in deposited securities through electronic
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computerized book-entry changes in participants' accounts, thereby eliminating
the need for physical movement of securities certificates. Direct participants
include securities brokers and dealers, banks, trust companies, clearing
corporations and certain other organizations. DTC is owned by a number of its
direct participants and by the New York Stock Exchange, the American Stock
Exchange and the National Association of Securities Dealers, Inc. Access to the
DTC system is also available to indirect participants, 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 DTC and its participants are on file with the SEC.
Purchases of preferred securities within the DTC system must be made by or
through direct participants, which will receive a credit for the preferred
securities on the DTC's records. The ownership interest of each actual purchaser
of each preferred security is in turn to be recorded on the direct and indirect
participants' records. These beneficial owners will not receive written
confirmation from DTC 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. Transfers of
ownership interests in the preferred securities are to be accomplished by
entries made on the books of participants acting on behalf of beneficial owners.
Beneficial owners will not receive certificates representing their ownership
interest in preferred securities, except if use of the book-entry-only system
for the preferred securities is discontinued.
DTC will have no knowledge of the actual beneficial owners of the preferred
securities; DTC's records reflect only the identity of the direct participants
to whose accounts the preferred securities are credited, which may or may not be
the beneficial owners. The participants will remain responsible for keeping
account of their holdings on behalf of their customers.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that we believe to be accurate, but we and the
trust assume no responsibility for the accuracy thereof. Neither we nor the
trust have any responsibility for the performance by DTC or its participants of
their respective obligations as described in this prospectus or under the rules
and procedures governing their respective operations.
NOTICES AND VOTING
Conveyance of notices and other communications by DTC to direct
participants, by direct participants to indirect participants, and by direct and
indirect participants to beneficial owners will be governed by arrangements
among them, subject to any statutory or regulatory requirements as may be in
effect from time to time.
Redemption notices will be sent to Cede & Co. as the registered holder of
the preferred securities. If less than all of the preferred securities are being
redeemed, the amount to be redeemed will be determined in accordance with the
trust agreement.
Although voting with respect to the preferred securities is limited to the
holders of record of the preferred securities, in those instances in which a
vote is required, neither DTC nor Cede & Co. will itself consent or vote with
respect to preferred securities. Under its usual procedures, DTC would mail an
omnibus proxy to the property trustee as soon as possible after the record date.
The omnibus proxy assigns Cede & Co.'s consenting or voting rights to those
direct participants to whose accounts the preferred securities are credited on
the record date.
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DISTRIBUTION OF FUNDS
The property trustee will make distributions on the preferred securities to
DTC. DTC's practice is to credit direct participants' accounts on the relevant
payment date in accordance with their respective holdings shown on DTC's records
unless DTC has reason to believe that it will not receive payments on the
payment date. Payments by participants to beneficial owners will be governed by
standing instructions and customary practices and will be the responsibility of
the participant and not of DTC, the property trustee, the trust or us, subject
to any statutory or regulatory requirements as may be in effect from time to
time. Payment of distributions to DTC is the responsibility of the property
trustee, disbursement of the payments to direct participants is the
responsibility of DTC, and disbursements of the payments to the beneficial
owners is the responsibility of direct and indirect participants.
SUCCESSOR DEPOSITARIES AND TERMINATION OF BOOK-ENTRY SYSTEM
DTC may discontinue providing its services with respect to any of the
preferred securities at any time by giving reasonable notice to the property
trustee or us. If no successor securities depositary is obtained, definitive
certificates representing the preferred securities are required to be printed
and delivered. We also have the option to discontinue use of the system of
book-entry transfers through DTC, or a successor depositary. After an event of
default under the indenture, the holders of a majority in liquidation amount of
preferred securities may determine to discontinue the system of book-entry
transfers through DTC. In these events, definitive certificates for the
preferred securities will be printed and delivered.
DESCRIPTION OF THE GUARANTEE
The preferred securities guarantee agreement will be executed and delivered
by us concurrently with the issuance of the preferred securities for the benefit
of the holders of the preferred securities. The guarantee agreement will be
qualified as an indenture under the Trust Indenture Act. Wilmington Trust
Company, the guarantee trustee, will act as trustee for purposes of complying
with the provisions of the Trust Indenture Act, and will also hold the guarantee
for the benefit of the holders of the preferred securities.
The following discussion is subject to, and is qualified in its entirety by
reference to, the guarantee agreement and to the Trust Indenture Act. We urge
prospective investors to read the form of the guarantee agreement, which is
filed as an exhibit to the registration statement of which this prospectus forms
a part.
GENERAL
We agree to pay in full on a subordinated basis, to the extent described in
the guarantee agreement, the guarantee payments, as defined below, to the
holders of the preferred securities, as and when due, regardless of any defense,
right of set-off or counterclaim that the trust may have or assert other than
the defense of payment.
The following payments with respect to the preferred securities are called
the "guarantee payments" and, to the extent not paid or made by the trust and to
the extent that the trust has funds available for those distributions, will be
subject to the guarantee:
- any accumulated and unpaid distributions required to be paid on the
preferred securities;
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- with respect to any preferred securities called for redemption, the
redemption price; and
- upon a voluntary or involuntary dissolution, winding up or termination of
the trust (other than in connection with the distribution of debentures
to the holders of preferred securities in exchange for preferred
securities), the lesser of:
(a) the amount of the liquidation distribution; or
(b) the amount of assets of the trust remaining available for
distribution to holders of preferred securities in liquidation of the
trust.
We may satisfy our obligations to make a guarantee payment by making a direct
payment of the required amounts to the holders of the preferred securities or by
causing the trust to pay the amounts to the holders.
The guarantee agreement is a guarantee, on a subordinated basis, of the
guarantee payments, but the guarantee only applies to the extent the trust has
funds available for those distributions. If we do not make interest payments on
the debentures purchased by the trust, the trust will not have funds available
to make the distributions and will not pay distributions on the preferred
securities.
STATUS OF THE GUARANTEE
The guarantee constitutes our unsecured obligation that ranks subordinate
and junior in right of payment to all of our senior and subordinated debt in the
same manner as the debentures. We expect to incur additional indebtedness in the
future, although we have no specific plans in this regard presently, and neither
the indenture nor the trust agreement limits the amounts of the obligations that
we may incur.
The guarantee constitutes a guarantee of payment and not of collection. If
we fail to make guarantee payments when required, holders of preferred
securities may institute a legal proceeding directly against us to enforce their
rights under the guarantee without first instituting a legal proceeding against
any other person or entity.
The guarantee will not be discharged except by payment of the guarantee
payments in full to the extent not paid by the trust or upon distribution of the
debentures to the holders of the preferred securities. Because we are a bank
holding company, our right 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 we may be recognized as a creditor of that subsidiary. Our obligations
under the guarantee, therefore, will be effectively subordinated to all existing
and future liabilities of our subsidiaries, and claimants should look only to
our assets for payments under the guarantee.
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes that do not materially adversely affect
the rights of holders of the preferred securities, in which case no vote will be
required, the guarantee may be amended only with the prior approval of the
holders of a majority of the aggregate liquidation amount of the outstanding
preferred securities. See "Description of the Preferred Securities -- Voting
Rights; Amendment of Trust Agreement" beginning on page 34.
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EVENTS OF DEFAULT; REMEDIES
An event of default under the guarantee agreement will occur upon our
failure to make any required guarantee payments or to perform any other
obligations under the guarantee. The holders of a majority in aggregate
liquidation amount of the preferred securities will have the right to direct the
time, method and place of conducting any proceeding for any remedy available to
the guarantee trustee in respect of the guarantee and may direct the exercise of
any power conferred upon the guarantee trustee under the guarantee agreement.
Any holder of preferred securities may institute and prosecute a legal
proceeding directly against us to enforce its rights under the guarantee without
first instituting a legal proceeding against the trust, the guarantee trustee or
any other person or entity.
We are required to provide to the guarantee trustee annually a certificate
as to whether or not we are in compliance with all of the conditions and
covenants applicable to us under the guarantee agreement.
TERMINATION OF THE GUARANTEE
The guarantee will terminate and be of no further force and effect upon:
- full payment of the redemption price of the preferred securities;
- full payment of the amounts payable upon liquidation of the trust; or
- distribution of the debentures to the holders of the preferred
securities.
If at any time any holder of the preferred securities must restore payment of
any sums paid under the preferred securities or the guarantee, the guarantee
will continue to be effective or will be reinstated with respect to such
amounts.
INFORMATION CONCERNING THE GUARANTEE TRUSTEE
The guarantee trustee, other than during the occurrence and continuance of
our default in performance of the guarantee, undertakes to perform only those
duties as are specifically set forth in the guarantee. When an event of default
has occurred and is continuing, 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 those provisions, the guarantee
trustee is under no obligation to exercise any of the powers vested in it by the
guarantee at the request of any holder of any preferred securities unless it is
offered reasonable indemnity against the costs, expenses and liabilities that
might be incurred thereby.
EXPENSE AGREEMENT
We will, pursuant to the agreement as to expenses and liabilities entered
into by us and the trust under the trust agreement, irrevocably and
unconditionally guarantee to each person or entity to whom the trust becomes
indebted or liable, the full payment of any costs, expenses or liabilities of
the trust, other than obligations of the trust to pay to the holders of the
preferred securities or other similar interests in the trust of the amounts due
to the holders pursuant to the terms of the preferred securities or other
similar interests, as the case may be. Third party creditors of the trust may
proceed directly against us under the expense agreement, regardless of whether
they had notice of the expense agreement.
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GOVERNING LAW
The guarantee will be governed by Wisconsin law.
RELATIONSHIP AMONG THE PREFERRED SECURITIES,
THE DEBENTURES AND THE GUARANTEE
FULL AND UNCONDITIONAL GUARANTEE
We irrevocably guarantee, as and to the extent described in this
prospectus, payments of distributions and other amounts due on the preferred
securities, to the extent the trust has funds available for the payment of these
amounts. We and the trust believe that, taken together, our obligations under
the debentures, the indenture, the trust agreement, the expense agreement and
the guarantee agreement provide, in the aggregate, a full, irrevocable and
unconditional guarantee, on a subordinated basis, of payment 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 a guarantee. It is only the combined operation of these documents
that has the effect of providing a full, irrevocable and unconditional guarantee
of the obligations of the trust under the preferred securities.
If and to the extent that we do not make payments on the debentures, the
trust will not pay distributions or other amounts due on the preferred
securities. The guarantee does not cover payment of distributions when the trust
does not have sufficient funds to pay the distributions. In this event, the
remedy of a holder of preferred securities is to institute a legal proceeding
directly against us for enforcement of payment of the distributions to the
holder. Our obligations under the guarantee are subordinated and junior in right
of payment to all of our other indebtedness.
SUFFICIENCY OF PAYMENTS
As long as payments of interest and other payments are made when due on the
debentures, these payments will be sufficient to cover distributions and other
payments due on the preferred securities, primarily because:
- the aggregate principal amount of the debentures will be equal to the sum
of the aggregate stated liquidation amount of the trust securities;
- the interest rate and interest and other payment dates on the debentures
will match the distribution rate and distribution and other payment dates
for the preferred securities;
- we will pay for any and all costs, expenses and liabilities of the trust,
except the obligations of the trust to pay to holders of the preferred
securities the amounts due to the holders pursuant to the terms of the
preferred securities; and
- the trust will not engage in any activity that is not consistent with the
limited purposes of the trust.
ENFORCEMENT RIGHTS OF HOLDERS OF PREFERRED SECURITIES
A holder of any preferred security may institute a legal proceeding
directly against us to enforce its rights under the guarantee without first
instituting a legal proceeding against the guarantee trustee, the trust or any
other person. A default or event of default under
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any of our senior or subordinated debt would not constitute a default or event
of default under the trust agreement. In the event, however, of payment defaults
under, or acceleration of, our senior or subordinated debt, the subordination
provisions of the indenture provide that no payments may be made in respect of
the debentures until the obligations have been paid in full or any payment
default has been cured or waived. Failure to make required payments on the
debentures would constitute an event of default under the trust agreement.
LIMITED PURPOSE OF THE TRUST
The preferred securities evidence preferred undivided beneficial interests
in the assets of the trust. The trust exists for the exclusive purposes of
issuing the trust securities, investing the proceeds thereof in debentures
issued by us and engaging in only those other activities necessary, advisable or
incidental thereto. A principal difference between the rights of a holder of a
preferred security and the rights of a holder of a debenture is that a holder of
a debenture is entitled to receive from us the principal amount of and interest
accrued on debentures held, while a holder of preferred securities is entitled
to receive distributions from the trust, or from us under the guarantee
agreement, if and to the extent the trust has funds available for the payment of
the distributions.
RIGHTS UPON TERMINATION
Upon any voluntary or involuntary termination, winding-up or liquidation of
the trust involving the liquidation of the debentures, the holders of the
preferred securities will be entitled to receive, out of assets held by the
trust, the liquidation distribution in cash. See "Description of the Preferred
Securities -- Liquidation Distribution Upon Termination" beginning on page 31.
Upon our voluntary or involuntary liquidation or bankruptcy, the property
trustee, as holder of the debentures, would be a subordinated creditor of ours.
Therefore, the property trustee would be subordinated in right of payment to all
of our senior and subordinated debt, but is entitled to receive payment in full
of principal and interest before any of our shareholders receive payments or
distributions. Since we are the guarantor under the guarantee and have agreed to
pay for all costs, expenses and liabilities of the trust other than the
obligations of the trust to pay to holders of the preferred securities the
amounts due to the holders pursuant to the terms of the preferred securities,
the positions of a holder of the preferred securities and a holder of the
debentures relative to our other creditors and to our stockholders in the event
of liquidation or bankruptcy are expected to be substantially the same.
FEDERAL INCOME TAX CONSEQUENCES
GENERAL
The following summary of the material federal income tax considerations
that may be relevant to the purchasers of preferred securities represents the
opinion of Jenkens & Gilchrist, a Professional Corporation, special counsel to
us and the trust insofar as it relates to matters of law and legal conclusions,
referred to in this section as Tax Counsel. The conclusions expressed herein are
based upon current provisions of the Internal Revenue Code regulations
thereunder and current administrative rulings and court decisions, all of which
are subject to change at any time, with possible retroactive effect. Subsequent
changes may cause tax consequences to vary substantially from the consequences
described
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below. Furthermore, the authorities on which the following summary is based are
subject to various interpretations, and 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.
No attempt has been made in the following discussion to comment on all
federal income tax matters affecting purchasers of preferred securities.
Moreover, unless otherwise stated, the discussion addresses only preferred
securities held as capital assets by holders who are individual citizens or
residents of the U.S. and who purchase preferred securities at original
issuance. The discussion does not address all the tax consequences that may be
relevant to holders who may be subject to special tax treatment, such as, for
example, banks, thrifts, real estate investment trusts, regulated investment
companies, insurance companies, dealers in securities or currencies, tax-exempt
investors or persons that will hold the preferred securities as a position in a
"straddle," as part of a "synthetic security" or "hedge," as part of a
"conversion transaction" or other integrated investment, or as other than a
capital asset. The following summary also does not address the tax consequences
to persons that have a functional currency other than the U.S. dollar or the tax
consequences to shareholders, partners or beneficiaries of a holder of preferred
securities. Further, it does not include any description of any alternative
minimum tax consequences or the tax laws of any state or local government or of
any foreign government that may be applicable to the preferred securities.
Accordingly, each prospective investor should consult, and should rely
exclusively on, the investor's own tax advisors in analyzing the federal, state,
local and foreign tax consequences of the purchase, ownership or disposition of
preferred securities.
CLASSIFICATION OF THE DEBENTURES
In the opinion of our Tax Counsel, the debentures will be classified for
federal income tax purposes under current law as our indebtedness, and, by
acceptance of a preferred security, each holder covenants to treat the
debentures as indebtedness and the preferred securities as evidence of an
indirect beneficial ownership interest in the debentures. No assurance can be
given, however, that this position will not be challenged by the Internal
Revenue Service or, if challenged, that it will be sustained. The remainder of
this discussion assumes that the debentures will be classified for federal
income tax purposes as our indebtedness.
CLASSIFICATION OF THE TRUST
With respect to the preferred securities, Tax Counsel is of the opinion
that under then current law and assuming full compliance with the terms of the
trust agreement and indenture, the trust will be classified for federal income
tax purposes as a grantor trust and not as an association taxable as a
corporation. Accordingly, for federal income tax purposes, each holder of
preferred securities generally will be treated as owning an undivided beneficial
interest in the debentures, and each holder will be required to include in its
gross income any interest with respect to the debentures at the time such
interest is accrued or is received, in accordance with the holder's method of
accounting. If the debentures were determined to be subject to the original
issue discount, or OID, rules, each holder would instead be required to include
in its gross income any OID accrued with respect to its allocable share of the
debentures whether or not cash was actually distributed to the holder.
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INTEREST PAYMENT PERIOD AND ORIGINAL ISSUE DISCOUNT
United States holders, including cash basis taxpayers, of debt instruments
issued with OID must generally include such OID in income as it accrues on a
constant yield method even if there is not a corresponding receipt of cash
attributable to such income. Debt instruments such as the debentures will
generally be treated as issued with OID if the stated interest on the instrument
does not constitute "qualified stated interest." Qualified stated interest is
generally any one of a series of stated interest payments on an instrument that
are unconditionally payable at least annually at a single fixed rate. In
determining whether stated interest on an instrument is unconditionally payable
and thus constitutes qualified stated interest, remote contingencies as to the
timely payment of stated interest are ignored. In the case of the debentures, we
have concluded that the likelihood of exercising our option to defer payments of
interest is remote. This is in part because we are currently paying, and have a
history of paying, dividends on our common stock and intend to continue to do
so. If we exercised our option to defer payments of interest, we would be unable
to continue paying these dividends, which could adversely affect the market for
our common stock.
If the option to defer any payment of interest was determined not to be
"remote" or if we elect to exercise our option to defer the payment of interest,
the debentures would be treated as issued with OID at the time of issuance or at
the time of such exercise, as the case may be, and all stated interest would
thereafter be treated as OID as long as the debentures remained outstanding. In
such event, all of a holder's taxable interest income in respect of the
debentures would constitute OID that would have to be included in income on a
constant yield method before the receipt of the cash attributable to such
income, regardless of such holder's method of tax accounting, and actual
distributions of stated interest would not be reported as taxable income.
Consequently, a holder of preferred securities would be required to include such
OID in gross income even though he would not receive any cash payments during an
extension period.
The above information is based on promulgated Treasury Regulations, which
have not been interpreted by any court decisions or addressed in any ruling or
other pronouncements of the IRS, and it is possible that the IRS could take a
position contrary to the conclusions herein. If the IRS were to assert
successfully that the stated interest on the debentures was OID regardless of
whether we exercise our right to defer payments of interest on such debentures,
a holder of preferred securities would be required to include such stated
interest in income on a constant yield basis as described above.
Because income on the preferred securities will constitute interest,
corporate holders of preferred securities will not be entitled to a
dividends-received deduction with respect to any income recognized with respect
to the preferred securities.
MARKET DISCOUNT AND ACQUISITION PREMIUM
Holders of preferred securities other than a holder who purchased the
preferred securities upon original issuance may be considered to have acquired
their undivided interests in the debentures with "market discount" or
"acquisition premium" as these phrases are defined for federal income tax
purposes. Such holders are advised to consult their tax advisors as to the
income tax consequences of the acquisition, ownership and disposition of the
preferred securities.
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RECEIPT OF DEBENTURES OR CASH UPON LIQUIDATION OF THE TRUST
Under the circumstances described under "Description of the Preferred
Securities -- Redemption or Exchange" beginning on page 27 and "-- Liquidation
Distribution Upon Termination" beginning on page 31, the debentures may be
distributed to holders of preferred securities upon a liquidation of the trust.
Under current federal income tax law, such a distribution would be treated as a
nontaxable event to the holder and would result in the holder having an
aggregate tax basis in the debentures received in the liquidation equal to the
holder's aggregate tax basis in the preferred securities immediately before the
distribution. A holder's holding period in debentures received in liquidation of
the trust would include the period for which the holder held the preferred
securities.
If, however, a Tax Event occurs which results in the trust being treated as
an association taxable as a corporation, the distribution would likely
constitute a taxable event to holders of the preferred securities. Under certain
circumstances described herein, the debentures may be redeemed for cash and the
proceeds of the redemption distributed to holders in redemption of their
preferred securities. Under current law, such a redemption should, to the extent
that it constitutes a complete redemption, constitute a taxable disposition of
the redeemed preferred securities, and, for federal income tax purposes, a
holder should therefore recognize gain or loss as if the holder sold the
preferred securities for cash.
DISPOSITION OF PREFERRED SECURITIES
A holder that sells preferred securities will recognize gain or loss equal
to the difference between the amount realized on the sale of the preferred
securities and the holder's adjusted tax basis in the preferred securities. A
holder's adjusted tax basis in the preferred securities generally will be its
initial purchase price increased by OID, if any, previously includable in the
holder's gross income to the date of disposition and decreased by payments other
than qualified stated interest received on the preferred securities to the date
of disposition. A gain or loss of this kind will generally be a capital gain or
loss and will be a long-term capital gain or loss if the preferred securities
have been held for more than one year at the time of sale.
The preferred securities may trade at a price that does not accurately
reflect the value of accrued but unpaid interest with respect to the underlying
debentures. A holder that disposes of its preferred securities between record
dates for payments of distributions thereon will be required to include accrued
but unpaid interest on the debentures through the date of disposition in income
as ordinary income, and to add the amount to its adjusted tax basis in its
proportionate share of the underlying debentures deemed disposed of. To the
extent the selling price is less than the holder's adjusted tax basis a holder
will recognize a capital loss. The adjusted basis would include, in the form of
OID, all accrued but unpaid interest. Subject to certain limited exceptions,
capital losses cannot be applied to offset ordinary income for federal income
tax purposes.
EFFECT OF POSSIBLE CHANGES IN TAX LAWS
Congress and the Clinton Administration have considered certain proposed
tax law changes in the past that would, among other things, generally deny
corporate issuers a deduction for interest in respect of certain debt
obligations if the debt obligations have a maximum term in excess of 15 years
and are not shown as indebtedness on the issuer's applicable consolidated
balance sheet. Other proposed tax law changes would have denied interest
deductions if the term was in excess of 20 years. Although these proposed tax
law
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changes have not been enacted into law, there can be no assurance that tax law
changes will not be reintroduced into future legislation which, if enacted after
the date hereof, may adversely affect the federal income tax deductibility of
interest payable on the debentures. Accordingly, there can be no assurance that
a Tax Event will not occur. A Tax Event would permit us, upon approval of the
Federal Reserve, if then required, to cause a redemption of the preferred
securities before, as well as after, December 31, 2005. See "Description of the
Debentures -- Redemption" beginning on page 41 and "Description of the Preferred
Securities -- Redemption or Exchange -- Redemption upon a Tax Event, Investment
Company Event or Capital Treatment Event" beginning on page 28.
INFORMATION REPORTING
Generally, interest paid, or, if applicable, OID accrued, on the preferred
securities held of record by individual citizens or residents of the United
States, or certain trusts, estates and partnerships, will be reported to the
Internal Revenue Service on Forms 1099-INT, or, where applicable, Forms
1099-OID, which forms should be mailed to the holders by January 31 following
each calendar year.
BACKUP WITHHOLDING
Unless a holder of preferred securities complies with certain
identification requirements, "backup" withholding tax of 31% may apply to
payments made on, and proceeds from the sale of, preferred securities. Any
withheld amounts will be allowed as a credit against the holder's federal income
tax liability, provided the required information is provided to the Internal
Revenue Service on a timely basis.
THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL
INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON THE PARTICULAR
SITUATION OF A HOLDER OF PREFERRED SECURITIES. HOLDERS OF PREFERRED SECURITIES
SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE 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 FEDERAL OR OTHER TAX LAWS.
ERISA CONSIDERATIONS
Employee benefit plans that are subject to the Employee Retirement Income
Security Act of 1974 or ERISA, or section 4975 of the Internal Revenue 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.
In any case, we and/or any of our affiliates may be considered a "party in
interest" (within the meaning of ERISA) or a "disqualified person" (within the
meaning of section 4975 of the Internal Revenue Code) with respect to certain
plans. These plans generally include plans with respect to which we or any of
our affiliates are a fiduciary or provide services to either the plan or the
sponsor or contributor to such plan. The acquisition and ownership of preferred
securities by a plan (or by an individual retirement arrangement described in
section 4975(e)(1) of the Internal Revenue Code) with respect to which we or any
of our affiliates are considered a party in interest or a disqualified person
may result in a prohibited transaction under ERISA or the Internal Revenue Code,
unless the preferred securities are acquired pursuant to and in accordance with
an applicable exemption.
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As a result, plans with respect to which we or any of our affiliates 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
pursuant to and in accordance with an applicable exemption. Any other plans or
other entities whose assets include plan assets subject to ERISA or section 4795
of the Internal Revenue Code proposing to acquire preferred securities should
consult with their own counsel.
UNDERWRITING
Subject to the terms and conditions of the underwriting agreement among us,
the trust and the underwriters named below, for whom Stifel, Nicolaus & Company,
Incorporated and Howe Barnes Investments, Inc. are acting as representatives,
the underwriters have severally agreed to purchase from the trust, and the trust
has agreed to sell to them, an aggregate of 1,500,000 preferred securities in
the amounts set forth below opposite their respective names.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS PREFERRED SECURITIES
------------ --------------------
<S> <C>
Stifel, Nicolaus & Company, Incorporated...................
Howe Barnes Investments, Inc...............................
---------
Total.................................................... 1,500,000
=========
</TABLE>
In the underwriting agreement, the obligations of the underwriters are
subject to approval of certain legal matters by their counsel and to various
other conditions. 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.
The underwriters propose to offer the preferred securities directly to the
public at the public offering price set forth on the cover page of this
prospectus, and to certain securities dealers (who may include the underwriters)
at this price, less a concession not in excess of $ per preferred
security. The underwriters may allow, and the selected dealers may reallow, a
concession not in excess of $ per preferred security to certain 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 changed by
the underwriters.
The trust has granted to the underwriters an option, exercisable within 30
days after the date of this prospectus, to purchase up to 225,000 additional
preferred securities at the same price per preferred security to be paid by the
underwriters for the other preferred securities being offered. 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 allocated to them 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 being offered.
If the underwriters exercise their option to purchase additional preferred
securities, the trust will issue and sell to us additional common securities and
we will issue and sell to the trust debentures in an aggregate principal amount
equal to the total aggregate liquidation amount of the additional preferred
securities being purchased under the option and the additional common securities
sold to us.
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The table below shows the price and proceeds on a per security and
aggregate basis. The proceeds to be received by the trust as shown in the table
below do not reflect estimated expenses of $250,000 payable by us.
<TABLE>
<CAPTION>
PER PREFERRED
SECURITY TOTAL
------------- -----------
<S> <C> <C>
Public Offering Price............................ $10.00 $15,000,000
Proceeds to Baylake Capital Trust I.............. $10.00 $15,000,000
</TABLE>
In view of the fact that the proceeds of the sale of the preferred
securities will be used by the trust to purchase the debentures from us, we have
agreed to pay the underwriters $ per preferred security, or a total of
$ , as compensation for arranging the investment in the debentures.
Should the underwriters exercise the over-allotment option, an aggregate of
$ will be paid to the underwriters for arranging the investment in the
debentures.
The offering of the preferred securities is made for delivery when, as and
if accepted by the underwriters and subject to prior sale and to withdrawal,
cancellation or modification of the offering without notice. The underwriters
reserve the right to reject any order for the purchase of the preferred
securities.
We and the trust have agreed to indemnify the several underwriters against
several liabilities, including liabilities under the Securities Act of 1933.
We have applied to have the preferred securities listed for trading on the
American Stock Exchange under the symbol "BYL.A", subject to official notice of
issuance. In order to meet one of the requirements for listing on the American
Stock Exchange, the underwriters have undertaken to sell the preferred
securities to a minimum of 400 owners. However, we cannot assure you as to the
liquidity of the preferred securities or that an active and liquid market will
develop or, if developed, that the market will continue. The offering price and
distribution rate have been determined by negotiations between the underwriters
and us, and the offering price of the preferred securities may not be indicative
of the market price following the offering. The representatives of the
underwriters will have no obligation to make a market in the preferred
securities, however, and may cease market-making activities, if commenced, at
any time.
In connection with the offering, the underwriters may engage in
transactions that are intended to stabilize, maintain or otherwise affect the
price of the preferred securities during and after the offering, such as the
following:
- the underwriters may over-allot or otherwise create a short position in
the preferred securities for their own account by selling more preferred
securities than have been sold to them;
- the underwriters may elect to cover any short position by purchasing
preferred securities in the open market or by exercising the
over-allotment option;
- the underwriters may stabilize or maintain the price of the preferred
securities by bidding;
- the underwriters may engage in passive market making transactions; and
- the underwriters may impose penalty bids, under which selling concessions
allowed to syndicate members or other broker-dealers participating in
this offering are reclaimed if preferred securities previously
distributed in the offering are repurchased in connection with
stabilization transactions or otherwise.
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The effect of these transactions may be to stabilize or maintain the market
price at a level above that which might otherwise prevail in the open market.
The imposition of a penalty bid may also affect the price of the preferred
securities to the extent that it discourages resales. No representation is made
as to the magnitude or effect of any such stabilization or other transactions.
Such transactions may be effected on the American Stock Exchange or otherwise
and, if commenced, may be discontinued at any time.
Because the National Association of Securities Dealers, Inc. may view the
preferred securities as interests in a direct participation program, the offer
and sale of the preferred securities is being made in compliance with the
provisions of Rule 2810 under the NASD Conduct Rules.
LEGAL MATTERS
Certain matters of Delaware law relating to the validity of the preferred
securities and the formation of the trust will be passed upon by Richards,
Layton & Finger, P.A., Wilmington, Delaware, special Delaware counsel to us and
the trust. The validity of the preferred securities guarantee, the debentures
and matters relating to federal income tax considerations will be passed upon
for us by Jenkens & Gilchrist, a Professional Corporation, Dallas, Texas,
special counsel to us and the trust. Certain legal matters will be passed upon
for the underwriters by Bryan Cave LLP, St. Louis, Missouri. Jenkens & Gilchrist
and Bryan Cave LLP will rely on the opinion of Richards, Layton & Finger, P.A.
as to matters of Delaware law.
EXPERTS
Our consolidated financial statements, incorporated in this prospectus by
reference from our Annual Report on Form 10-K for the fiscal year ended December
31, 1999, have been audited by Smith & Gesteland, LLP, independent auditors, as
set forth in their report included in our Annual Report. These consolidated
financial statements are incorporated by reference in this prospectus in
reliance upon the report given on the authority of Smith & Gesteland, LLP as
experts in accounting and auditing.
WHERE YOU CAN FIND INFORMATION
This prospectus is a part of a Registration Statement on Form S-3 filed by
us and the trust with the SEC under the Securities Act, with respect to the
preferred securities, the debentures and the guarantee. This prospectus does not
contain all the information set forth in the registration statement, certain
parts of which are omitted in accordance with the rules and regulations of the
SEC. For further information with respect to Baylake and the securities offered
by this prospectus, reference is made to the registration statement, including
the exhibits to the registration statement and documents incorporated by
reference. Statements contained in this prospectus concerning the provisions of
such documents are necessarily summaries of such documents and each such
statement is qualified in its entirety by reference to the copy of the
applicable document filed with the SEC.
We file periodic reports, proxy statements and other information with the
SEC. Our filings are available to the public over the Internet at the SEC's web
site at http://www.sec.gov. You may also inspect and copy these materials at the
public reference facilities of the SEC at 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549, as well as at 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661 and 75 Park Place, Room 1400, New York, New York 1000.
Copies of such material can be obtained
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at prescribed rates from the Public Reference Section of the SEC at 450 Fifth
Street N.W., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for
further information.
The trust is not currently subject to the information reporting
requirements of the Securities Exchange Act of 1934 and, although the trust will
become subject to such requirements upon the effectiveness of the registration
statement, it is not expected that the trust will be required to file separate
reports under the Securities Exchange Act.
Each holder of the trust securities will receive a copy of our annual
report at the same time as we furnish the annual report to the holders of our
common stock.
DOCUMENTS INCORPORATED BY REFERENCE
We "incorporate by reference" into this prospectus the information in
documents we file with the SEC, which means that we can disclose important
information to you through those documents. The information incorporated by
reference is an important part of this prospectus. Some information contained in
this prospectus updates the information incorporated by reference and some
information that we file subsequently with the SEC will automatically update
this prospectus. We incorporate by reference the documents listed below:
(a) our Annual Report on Form 10-K for the year ended December 31, 1999,
filed with the SEC on March 27, 2000;
(b) our Quarterly Report on Form 10-Q for the quarter ended March 31,
2000, filed with the SEC on May 12, 2000;
(c) our Quarterly Report on Form 10-Q for the quarter ended June 30, 2000,
filed with the SEC on August 11, 2000; and
(d) our Quarterly Report on Form 10-Q for the quarter ended September 30,
2000, filed with the SEC on October 26, 2000.
We also incorporate by reference any filings we make with the SEC under
Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 after
the initial filing of the registration statement that contains this prospectus
and before the time that all of the securities offered in this prospectus are
sold.
You may request, and we will provide, a copy of these filings at no cost by
contacting Steven D. Jennerjohn, our Treasurer, at the following address and
phone number:
Baylake Corp.
217 North Fourth Avenue
Sturgeon Bay, Wisconsin 54235
(920) 743-5551
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<CAPTION>
PAGE
----
<S> <C>
Summary............................... 1
Risk Factors.......................... 12
Special Note Regarding Forward-Looking
Statements.......................... 20
Use of Proceeds....................... 21
Capitalization........................ 22
Accounting and Regulatory Treatment... 23
Description of the Trust.............. 24
Description of the Preferred
Securities.......................... 25
Description of the Debentures......... 39
Book-Entry Issuance................... 48
Description of the Guarantee.......... 50
Relationship Among the Preferred
Securities, the Debentures and the
Guarantee........................... 53
Federal Income Tax Consequences....... 54
ERISA Considerations.................. 58
Underwriting.......................... 59
Legal Matters......................... 61
Experts............................... 61
Where You Can Find Information........ 61
Documents Incorporated By Reference... 62
</TABLE>
- YOU SHOULD ONLY RELY ON THE INFORMATION CONTAINED OR INCORPORATED BY REFERENCE
IN THIS PROSPECTUS. WE HAVE NOT, AND OUR UNDERWRITERS HAVE NOT, AUTHORIZED ANY
PERSON TO PROVIDE YOU WITH DIFFERENT INFORMATION. IF ANYONE PROVIDES YOU WITH
DIFFERENT OR INCONSISTENT INFORMATION, YOU SHOULD NOT RELY ON IT.
- WE ARE NOT, AND OUR UNDERWRITERS ARE NOT, MAKING AN OFFER TO SELL THESE
SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED.
- YOU SHOULD ASSUME THAT THE INFORMATION APPEARING IN THIS PROSPECTUS IS
ACCURATE AS OF THE DATE ON THE FRONT COVER OF THIS PROSPECTUS ONLY.
- THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR THE SOLICITATION OF
AN OFFER TO BUY, ANY SECURITIES OTHER THAN THE SECURITIES TO WHICH IT RELATES.
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
1,500,000 PREFERRED SECURITIES
BAYLAKE CAPITAL TRUST I
% CUMULATIVE TRUST PREFERRED
SECURITIES
(LIQUIDATION AMOUNT $10 PER
PREFERRED SECURITY)
FULLY, IRREVOCABLY AND UNCONDITIONALLY
GUARANTEED ON A SUBORDINATED BASIS, AS
DESCRIBED IN THIS PROSPECTUS, BY
BAYLAKE CORP.
[LOGO]
$15,000,000
% SUBORDINATED DEBENTURES
OF
BAYLAKE CORP.
------------------------
PROSPECTUS
, 2000
------------------------
STIFEL, NICOLAUS & COMPANY
INCORPORATED
HOWE BARNES INVESTMENTS, INC.
------------------------------------------------------
------------------------------------------------------
<PAGE> 67
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. Other Expenses of Issuance and Distribution.
The following table sets forth the various expenses payable in
connection with the sale and distribution of the securities being registered,
other than underwriting discounts and commissions. All of such expenses will be
paid by Baylake Corp. ("Baylake"). All amounts shown are estimates, except the
SEC registration fee and the NASD and the American Stock Exchange filing fees:
<TABLE>
<S> <C>
SEC registration fee ........................................ $ 4,554
NASD filing fee.............................................. 2,225
American Stock Exchange filing fee........................... 15,000
Trustees' fees............................................... 17,500
Printing and mailing expenses................................ 65,000
Fees and expenses of counsel................................. 110,000
Accounting and related expenses.............................. 20,000
Blue Sky fees and expenses................................... 3,500
Miscellaneous................................................ 12,221
------
Total............................. $250,000
========
</TABLE>
ITEM 15. Indemnification of Directors and Officers.
Baylake is incorporated under the Wisconsin Business
Corporation Law ("WBCL"). Under Section 180.0851(1) of the WBCL, Baylake is
required to indemnify a director or officer, to the extent such person is
successful on the merits or otherwise in the defense of a proceeding, for all
reasonable expenses incurred in the proceeding, if such person was a party
because he or she was a director or officer of Baylake. In all other cases,
Baylake is required by Section 180.0851(2) of the WBCL to indemnify a director
or officer against liability incurred in a proceeding to which such person was a
party because he or she was an officer or director of Baylake, unless it is
determined that he or she breached or failed to perform a duty owed to Baylake
and the breach or failure to perform constitutes: (i) a willful failure to deal
fairly with Baylake or its shareholders in connection with a matter in which
such person has a material conflict of interest; (ii) a violation of criminal
law, unless such person had reasonable cause to believe his or her conduct was
lawful or no reasonable cause to believe his or her conduct was unlawful; (iii)
a transaction from which such person derived an improper personal profit; or
(iv) willful misconduct. Section 180.0858(1) of the WBCL provides that, subject
to certain limitations, the mandatory indemnification provisions of the WBCL do
not preclude any additional right to indemnification or allowance of expenses
that a director or officer may have under Baylake's articles of incorporation,
bylaws, a written agreement or a resolution of the Board of Directors or
shareholders.
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<PAGE> 68
Section 180.0859 of the WBCL provides that it is the public
policy of the State of Wisconsin to require or permit indemnification, allowance
of expenses and insurance to the extent required or permitted under Sections
180.0850 to 180.0858 of the WBCL for any liability incurred in connection with a
proceeding involving a federal or state statute, rule or regulation regulating
the offer, sale or purchase of securities.
Section 180.0828 of the WBCL provides that, with certain
exceptions, a director is not liable to a corporation, its shareholders, or any
person asserting rights on behalf of the corporation or its shareholders, for
damages, settlements, fees, fines, penalties or other monetary liabilities
arising from a breach of, or failure to perform, any duty resulting solely from
his or her status as a director, unless the person asserting liability proves
that the breach or failure to perform constitutes any of the four exceptions to
mandatory indemnification under Section 180.0851(2) referred to above.
Under Section 180.0833 of the WBCL, a director who votes for
or assents to an improper dividend or other distribution to shareholders is
personally liable to the corporation for the amount of the distribution that
exceeds what could have been legally distributed if it is established that the
director's vote or assent constitutes conduct described by Section 180.0828 of
the WBCL.
Article 10.01 of Baylake's Bylaws contains provisions that
generally parallel the indemnification provisions of the WBCL and provide that
each officer and director shall be indemnified to the fullest extent permitted
by law and cover certain procedural matters not dealt with in the WBCL.
Baylake has purchased $5 million of insurance policies which
insure Baylake's directors and officers against liability which they may incur
as a result of actions taken in such capacities. In addition, Baylake maintains
trust department/fiduciary errors and omissions liability coverage up to a $1
million limit.
The Amended and Restated Trust Agreement will provide for
indemnification of the Delaware Trustee and each of the administrative trustees
by Baylake against any loss, damage, claims, liability, penalty or expense of
any kind incurred by the trustees in connection with the performance of their
duties or powers under the agreement in a manner reasonably believed by the
trustee to be within the scope of its authority under the agreement, except that
none of these trustees will be so indemnified for any loss, damage or claim
incurred by reason of such trustee's gross negligence, bad faith or willful
misconduct. Similarly, the agreement provides for indemnification of the
Property Trustee, except that the Property Trustee is not indemnified from
liability for its own negligent action, negligent failure to act or willful
misconduct. Under the agreement, Baylake agrees to advance those expenses
incurred by any trustee in defending any such claim, demand, action, suit or
proceeding.
II-2
<PAGE> 69
ITEM 16. Exhibits.
<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------
<S> <C>
1.1 Form of Underwriting Agreement.
4.1 Form of Indenture.
4.2 Form of Subordinated Debenture (included as Exhibit A to Exhibit
4.1).
4.3 Certificate of Trust.
4.4 Trust Agreement.
4.5 Form of Amended and Restated Trust Agreement.
4.6 Form of Preferred Securities Certificate (included as Exhibit D to
Exhibit 4.5).
4.7 Form of Preferred Securities Guarantee Agreement.
4.8 Form of Agreement as to Expenses and Liabilities (included as
Exhibit C to Exhibit 4.5).
5.1 Opinion of Jenkens & Gilchrist, a Professional Corporation.
5.2 Opinion of Richards, Layton & Finger, P.A.
8.1 Opinion of Jenkens & Gilchrist, a Professional Corporation, as to
certain tax matters.
12.1 Calculation of ratios of earnings to fixed charges.
23.1 Consent of Smith & Gesteland, LLP.
23.2 Consent of Jenkens & Gilchrist, a Professional Corporation
(included in opinion filed as Exhibits 5.1 and 8.1).
23.3 Consent of Richards, Layton & Finger, P.A. (included in opinion filed as
Exhibit 5.2)
24.1 Powers of Attorney (included as part of signature pages).
</TABLE>
II-3
<PAGE> 70
<TABLE>
<S> <C>
25.1 Form T-1 Statement of Eligibility under the Trust Indenture Act of
1939, as amended, of Wilmington Trust Company, as trustee under
the Indenture.
25.2 Form T-1 Statement of Eligibility under the Trust Indenture Act of
1939, as amended, of Wilmington Trust Company, as trustee under
the Trust Agreement.
25.3 Form T- 1 Statement of Eligibility under the Trust Indenture Act of
1939, as amended, of Wilmington Trust Company, as trustee under
the Guarantee Agreement.
</TABLE>
ITEM 17. Undertakings.
The undersigned registrants hereby undertake that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Company's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in this
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrants pursuant to the foregoing provisions, or otherwise, the
registrants have been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, each registrant will, unless in the opinion of its counsel the
matter has been settled by 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.
The undersigned registrants hereby undertake that:
(1) For purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus
filed as part of this registration statement in reliance upon
Rule 430A and contained in a form of prospectus filed by the
registrants 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> 71
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Baylake
Capital Trust I certifies that it has reasonable grounds to believe that it
meets all of the requirements of filing on Form S-3 and has duly caused this
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Sturgeon Bay, State of Wisconsin, on October
30, 2000.
BAYLAKE CAPITAL TRUST I
By: BAYLAKE CORP.,
as Depositor
By: /s/ Thomas L. Herlache
----------------------
Thomas L. Herlache
President, Chief Executive Officer
and Chairman
Pursuant to the requirements of the Securities Act of 1933, Baylake
Corp. certifies that it has reasonable grounds to believe that it meets all of
the requirements of filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Sturgeon Bay, State of Wisconsin, on October 30,
2000.
BAYLAKE CORP.
By: /s/ Thomas L. Herlache
----------------------
Thomas L. Herlache
President, Chief Executive Officer
and Chairman
KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature
appears below hereby designates and appoints Thomas H. Herlache and Steven D.
Jennerjohn, and each of them, any one of whom may act without the joinder of the
other, as such person's true and lawful attorney-in-fact and agents (the
"Attorneys-in-Fact") with full power of substitution and resubstitution, for
such person and in such person's name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective amendments)
to this registration statement, which amendments may make such changes in this
registration statement as any Attorney-in-Fact deems appropriate, and any
registration statement relating to the same offering filed pursuant to Rule
462(b) under the Securities Act of 1933 and requests to accelerate the
effectiveness of such registration statements, and to file each such amendment
II-5
<PAGE> 72
with all exhibits thereto, and all documents in connection therewith, with the
Securities and Exchange Commission, granting unto such Attorneys-in-Fact and
each of them, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as fully to
all intents and purposes as such person might or could do in person, hereby
ratifying and confirming all that such Attorneys-in-Fact or either of them, or
their substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
Name Title Date
---- ----- ----
<S> <C> <C>
/s/ Thomas L. Herlache President, Chief Executive October 30, 2000
------------------------- Officer, Chairman and Director
Thomas L. Herlache (Principal Executive Officer)
/s/ Steven D. Jennerjohn Treasurer October 30, 2000
------------------------- (Principal Financial Officer)
Steven D. Jennerjohn (Controller)
/s/ Richard A. Braun Executive Vice President, October 30, 2000
------------------------- Vice Chairman and Director
Richard A. Braun
/s/ Ronald D. Berg Director October 30, 2000
-------------------------
Ronald D. Berg
------------------------- Director October , 2000
John Bunda
------------------------- Director October , 2000
John D. Collins
/s/ George Delveaux, Jr. Director October 30, 2000
-------------------------
George Delveaux, Jr.
/s/ L. George Evenson Director October 30, 2000
-------------------------
L. George Evenson
</TABLE>
II-6
<PAGE> 73
<TABLE>
<S> <C> <C>
/s/ Glenn Miller
------------------------- Director October 30, 2000
Glenn Miller
Director October , 2000
-------------------------
Joseph Morgan
/s/ Ruth Nelson Director October 30, 2000
-------------------------
Ruth Nelson
/s/ Paul Jay Sturm Director October 30, 2000
------------------------
Paul Jay Sturm
</TABLE>
II-7
<PAGE> 74
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<S> <C>
1.1 Form of Underwriting Agreement.
4.1 Form of Indenture.
4.2 Form of Subordinated Debenture (included as Exhibit A to Exhibit 4.1).
4.3 Certificate of Trust.
4.4 Trust Agreement.
4.5 Form of Amended and Restated Trust Agreement.
4.6 Form of Preferred Securities Certificate (included as Exhibit D to Exhibit
4.5).
4.7 Form of Preferred Securities Guarantee Agreement.
4.8 Form of Agreement as to Expenses and Liabilities (included as Exhibit C to
Exhibit 4.5).
5.1 Opinion of Jenkens & Gilchrist, a Professional Corporation.
5.2 Opinion of Richards, Layton & Finger, P.A.
8.1 Opinion of Jenkens, & Gilchrist, a Professional Corporation, as to certain tax
matters.
12.1 Calculation of ratios of earnings to fixed charges.
23.1 Consent of Smith & Gesteland, LLP.
23.2 Consent of Jenkens & Gilchrist, a Professional Corporation (included in
opinion filed as Exhibits 5.1 and 8.1).
23.3 Consent of Richards, Layton & Finger, P.A. (included in opinion filed as
Exhibit 5.2)
24.1 Powers of Attorney (included as part of signature pages).
</TABLE>
II-8
<PAGE> 75
25.1 Form T-1 Statement of Eligibility under the
Trust Indenture Act of 1939, as amended, of
Wilmington Trust Company, as trustee under
the Indenture.
25.2 Form T-1 Statement of Eligibility under the
Trust Indenture Act of 1939, as amended, of
Wilmington Trust Company, as trustee under
the Trust Agreement.
25.3 Form T-1 Statement of Eligibility under the
Trust Indenture Act of 1939, as amended, of
Wilmington Trust Company, as trustee under
the Guarantee Agreement.
II-9
