<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 20, 1997
333-22871
333-22871-01
333-22871-02
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
PRE-EFFECTIVE AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
FIRST MARYLAND BANCORP
FIRST MARYLAND CAPITAL I
FIRST MARYLAND CAPITAL II
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MARYLAND
DELAWARE
DELAWARE
(STATE OR OTHER JURISDICTION OF INCORPORATION OR FORMATION)
#6712
6719
6719
(PRIMARY STANDARD INDUSTRIAL CLASSIFICATION CODE NUMBER)
52-0981378
52-6840516
52-6840515
(I.R.S. EMPLOYER IDENTIFICATION NO.)
25 SOUTH CHARLES STREET
BALTIMORE, MARYLAND 21201
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF EACH REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
GREGORY K. THORESON
VICE PRESIDENT AND GENERAL COUNSEL
FIRST MARYLAND BANCORP
25 SOUTH CHARLES STREET, MS101-850
BALTIMORE, MARYLAND 21201
(410) 244-3800
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING OF AREA
CODE, OF AGENT FOR SERVICE)
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after the effective date of this Registration Statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, please check the following box. [ ]
------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
PROSPECTUS
<TABLE>
<S> <C>
$150,000,000 $150,000,000
FIRST MARYLAND CAPITAL I FIRST MARYLAND CAPITAL II
FLOATING RATE SUBORDINATED CAPITAL INCOME FLOATING RATE SUBORDINATED CAPITAL INCOME
SECURITIES SECURITIES
(LIQUIDATION AMOUNT $1,000 PER CAPITAL (LIQUIDATION AMOUNT $1,000 PER CAPITAL
SECURITY) SECURITY)
FULLY AND UNCONDITIONALLY GUARANTEED TO THE FULLY AND UNCONDITIONALLY GUARANTEED TO THE
EXTENT DESCRIBED HEREIN BY EXTENT DESCRIBED HEREIN BY
FIRST MARYLAND BANCORP FIRST MARYLAND BANCORP
</TABLE>
---------------------------
OFFER TO EXCHANGE ITS FLOATING RATE SUBORDINATED CAPITAL INCOME SECURITIES
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 FOR ANY AND ALL OF
ITS OUTSTANDING FLOATING RATE SUBORDINATED CAPITAL INCOME SECURITIES
(LIQUIDATION AMOUNT $1,000 PER CAPITAL SECURITY) FULLY AND UNCONDITIONALLY
GUARANTEED, AS DESCRIBED HEREIN, BY FIRST MARYLAND BANCORP.
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK
CITY TIME, ON APRIL 23, 1997, UNLESS EXTENDED.
Each of First Maryland Capital I ("Capital I") and First Maryland Capital
II ("Capital II"), a trust formed under the laws of the State of Delaware,
together with First Maryland Bancorp, a Maryland corporation (the "Company"), as
sponsor of each trust, hereby separately offers upon the terms and subject to
the conditions set forth in this Prospectus (as the same may be amended or
supplemented from time to time, the "Prospectus") and in the accompanying Letter
of Transmittal (which together constitute the "Exchange Offer"), to exchange up
to $150,000,000 aggregate liquidation amount of its Floating Rate Subordinated
Capital Income Securities which have been registered under the Securities Act of
1933, as amended (the "Securities Act"), pursuant to a Registration Statement
(as defined herein) of which this Prospectus constitutes a part, for a like
liquidation amount of its outstanding Floating Rate Subordinated Capital Income
Securities, of which $150,000,000 aggregate liquidation amount is outstanding.
Pursuant to the Exchange Offer, the Company is also exchanging (i) the Old
Guarantee for the Guarantee and (ii) all of the Old Junior Subordinated
Debentures for the Junior Subordinated Debentures. The Guarantee and the Junior
Subordinated Debentures have also been registered under the Securities Act.
Although each Exchange Offer is being conducted simultaneously, and is intended
to expire at the same time, the closing of one Exchange Offer is not conditioned
on the closing of the other. See "Certain Defined Terms," "Prospectus Summary,"
"Description of New Capital Securities," "Description of Junior Subordinated
Debentures" and "Description of Guarantee."
The terms of the New Capital Securities are identical in all material
respects to the respective terms of the Old Capital Securities, except that (i)
the New Capital Securities have been registered under the Securities Act and
therefore will not be subject to certain restrictions on transfer applicable to
the Old Capital Securities, (ii) the New Capital Securities will not provide for
any increase in the Distribution rate thereon and (iii) the
(continued on next page)
SEE "CERTAIN DEFINED TERMS" ON PAGE 4 FOR A GLOSSARY OF CERTAIN CAPITALIZED
TERMS USED IN THIS PROSPECTUS WITHOUT DEFINITION.
SEE "RISK FACTORS" COMMENCING ON PAGE 14 FOR CERTAIN INFORMATION THAT
SHOULD BE CONSIDERED BY HOLDERS WHO TENDER OLD CAPITAL SECURITIES IN THE
EXCHANGE OFFER.
THESE SECURITIES ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF A BANK AND ARE
NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENTAL AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE CAPITAL SECURITIES WILL BE ISSUED, AND MAY BE TRANSFERRED, ONLY IN
BLOCKS HAVING A LIQUIDATION AMOUNT OF NOT LESS THAN $100,000 (100 CAPITAL
SECURITIES). ANY TRANSFER, SALE OR OTHER DISPOSITION OF CAPITAL SECURITIES IN A
BLOCK HAVING A LIQUIDATION AMOUNT OF LESS THAN $100,000 SHALL BE DEEMED TO BE
VOID AND OF NO LEGAL EFFECT WHATSOEVER. ANY SUCH TRANSFEREE SHALL BE DEEMED NOT
TO BE THE HOLDER OF SUCH CAPITAL SECURITIES FOR ANY PURPOSE, INCLUDING BUT NOT
LIMITED TO THE RECEIPT OF DISTRIBUTIONS ON SUCH CAPITAL SECURITIES, AND SUCH
TRANSFEREE SHALL BE DEEMED TO HAVE NO INTEREST WHATSOEVER IN SUCH CAPITAL
SECURITIES.
The date of this Prospectus is March 21, 1997.
<PAGE> 3
(Continued from previous page)
New Junior Subordinated Debentures will not provide for any increase in the
interest rate thereon. See "Description of the New Capital Securities." The New
Capital Securities are being offered for exchange in order to satisfy certain
obligations of the Company and the Trusts under the Registration Rights
Agreements.
The Company and each Trust are making the Exchange Offer of the New Capital
Securities in reliance on the position of the staff of the Division of
Corporation Finance of the Securities and Exchange Commission (the "Staff") as
set forth in certain interpretive letters addressed to third parties in other
transactions. Certain holders of Old Capital Securities may not be able to
participate in the Exchange Offer. See "Risk Factors -- Consequences of a
Failure to Exchange Old Capital Securities" and "The Exchange Offer -- Resales
of New Capital Securities."
Prior to the Exchange Offer, there has been only a limited secondary market
and no public market for the Old Capital Securities. The New Capital Securities
will be a new issue of securities for which there currently is no market.
Although the Initial Purchasers have informed the Company and the Trust that
they each currently intend to make a market in the New Capital Securities, they
are not obligated to do so, and any such market making may be discontinued at
any time without notice. Accordingly, there can be no assurance as to the
development or liquidity of any market for the New Capital Securities. Neither
the Company nor the Trust currently intends to apply for listing of the New
Capital Securities on any securities exchange or for quotation through the
National Association of Securities Dealers Automated Quotation System.
Any Old Capital Securities not tendered and accepted in the Exchange Offer
will remain outstanding and will be entitled to all the same rights and will be
subject to the same limitations applicable thereto under the Declaration (except
for those rights which terminate upon consummation of the Exchange Offer). Any
Old Capital Securities which remain outstanding after consummation of the
Exchange Offer and the New Capital Securities issued in the Exchange Offer will
vote together as a single class for purposes of determining whether holders of
the requisite percentage in outstanding liquidation amount thereof have taken
certain actions or exercised certain rights under the Declaration. Following
consummation of the Exchange Offer, the holders of Old Capital Securities will
continue to be subject to all of the existing restrictions upon transfer thereof
and neither the Company nor the Trust will have any further obligation to such
holders (other than under certain limited circumstances) to provide for
registration under the Securities Act of the Old Capital Securities held by
them. To the extent that Old Capital Securities are tendered and accepted in the
Exchange Offer, a holder's ability to sell untendered Old Capital Securities
could be adversely affected. See "Risk Factors -- Consequences of a Failure to
Exchange Old Capital Securities."
THIS PROSPECTUS AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION. HOLDERS OF OLD CAPITAL SECURITIES ARE URGED TO READ THIS PROSPECTUS
AND THE RELATED LETTER OF TRANSMITTAL CAREFULLY BEFORE DECIDING WHETHER TO
TENDER THEIR OLD CAPITAL SECURITIES PURSUANT TO THE EXCHANGE OFFER.
Old Capital Securities may be tendered for exchange on or prior to 5:00
p.m., New York City time, on April 23, 1997 (such time on such date being
hereinafter called the "Expiration Date"), unless the Exchange Offer is extended
by the Company and Capital I or Capital II, as the case may be (in which case
the term "Expiration Date" shall mean the latest date and time to which the
Exchange Offer is extended). Tenders of Old Capital Securities may be withdrawn
at any time on or prior to the Expiration Date. The Exchange Offer is not
conditioned upon any minimum Liquidation Amount of Old Capital Securities being
tendered for exchange. However, the Exchange Offer is subject to certain events
and conditions which may be waived by the Company or the Trust and to the terms
and provisions of the Registration Rights Agreement. The Company has agreed to
pay all expenses of the Exchange Offer. See "The Exchange Offer -- Fees and
Expenses." Each New Capital Security will pay cumulative Distributions from the
most recent Distribution Date on the Old Capital Securities surrendered in
exchange for such New Capital Securities or, if no Distributions have been paid
on such Old Capital Securities, from December 30, 1996, in the case of Capital I
or February 4, 1997, in the case of Capital II. Holders of the Old Capital
Securities whose Old Capital Securities are accepted for exchange will not
receive accumulated Distributions on such Old Capital
ii
<PAGE> 4
(Continued from previous page)
Securities for any period from and after the last Distribution Date on such Old
Capital Securities prior to the original issue date of the New Capital
Securities or, if no such Distributions have been paid, will not receive any
accumulated Distributions on such Old Capital Securities, and will be deemed to
have waived the right to receive any Distributions on such Old Capital
Securities accumulated from and after such Distribution Date or, if no such
Distributions have been paid or duly provided for, from and after December 30,
1996, in the case of Capital I or February 4, 1997, in the case of Capital II.
This Prospectus, together with the Letter of Transmittal, is being sent to all
registered holders of Old Capital Securities as of March 21, 1997.
Neither the Company nor the Trust will receive any cash proceeds from the
issuance of the New Capital Securities offered hereby. No dealer-manager is
being used in connection with this Exchange Offer.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR THE TRUSTS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF
ANY SECURITIES OTHER THAN THE SECURITIES TO WHICH IT RELATES OR AN OFFER TO ANY
PERSON IN ANY JURISDICTION WHERE SUCH OFFER WOULD BE UNLAWFUL. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF SUCH INFORMATION.
iii
<PAGE> 5
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports and other information with the Securities and Exchange
Commission (the "Commission"). Reports, proxy statements, information statements
and other information filed by the Company with the Commission pursuant to the
informational requirements of the Exchange Act may be inspected and copied at
the public reference facilities maintained by the Commission at Room 1024, 450
Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549, and at the
following Regional Offices of the Commission: Chicago Regional Office, Suite
1400, Citicorp Center, 14th Floor, 500 West Madison Street, Chicago, Illinois
60661; and New York Regional Office, 7 World Trade Center, 13th Floor, Suite
1300, New York, New York 10048. Copies of such material can be obtained at
prescribed rates from the Public Reference Section of the Commission at 450
Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549. The Commission also
maintains a Web site (http://www.sec.gov) that contains reports, proxy
statements, information statements and other information regarding the Company.
No separate financial statements of the Trust have been included or
incorporated by reference herein. The Company does not believe such financial
statements would be material to holders of the Capital Securities because (i)
all of the voting securities of the Trust will be owned, directly or indirectly,
by the Company, a reporting company under the Exchange Act, (ii) the Trust has
no independent operations but exists for the sole purpose of issuing securities
representing undivided beneficial interests in its assets and investing the
proceeds thereof in Junior Subordinated Debentures issued by the Company, and
(iii) the obligations of the Trust under the Capital Securities are guaranteed
by the Company to the extent described herein. See "Relationship Among the
Capital Securities, the Junior Subordinated Debentures and the Guarantee."
This Prospectus constitutes a part of a registration statement on Form S-4
(together with all exhibits thereto, the "Registration Statement") filed by the
Company and the Trust with the Commission under the Securities Act. This
Prospectus does not contain all the information set forth in the Registration
Statement, certain parts of which are omitted in accordance with the rules and
regulations of the Commission, and reference is hereby made to the Registration
Statement for further information with respect to the Company and the New
Securities. Any statements contained herein concerning the provisions of any
document are not necessarily complete, and, in each instance, reference is made
to the copy of such document filed as an exhibit to the Registration Statement
or otherwise filed with the Commission. Each such statement is qualified in its
entirety by such reference.
2
<PAGE> 6
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1995 the Company's Quarterly Reports on Form 10-Q for the quarters ended
March 31, June 30, and September 30, 1996, and the Company's Current Reports on
Form 8-K dated January 21, 1997, February 3, 1997 and March 5, 1997 previously
filed by the Company with the Commission, are incorporated by reference in this
Prospectus and shall be deemed to be a part hereof.
Each document filed by the Company with the Commission pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this
Prospectus and prior to the termination of any offering of securities made by
this Prospectus shall be deemed to be incorporated herein by reference and to be
a part hereof from the date of filing such document. Any statement contained
herein, or in a document all or a portion of which is incorporated or deemed to
be incorporated by reference herein, shall be deemed to be modified or
superseded for purposes of the Registration Statement and this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of the Registration Statement or this Prospectus. As used
herein, the terms "Prospectus" and "herein" mean this Prospectus, including the
documents incorporated or deemed to be incorporated herein by reference, as the
same may be amended, supplemented or otherwise modified from time to time.
Statements contained in this Prospectus as to the contents of any contract or
other document referred to herein do not purport to be complete, and where
reference is made to the particular provisions of such contract or other
document, such provisions are qualified in all respects by reference to all of
the provisions of such contract or other document.
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT PRESENTED
HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE AVAILABLE UPON REQUEST FROM
THE COMPANY AT FIRST MARYLAND BANCORP, ATTN. JAMES A. SMITH, 25 SOUTH CHARLES
STREET, SUITE 1900, BALTIMORE, MARYLAND 21201, TELEPHONE: (410) 545-2100. IN
ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUESTS SHOULD BE MADE BY
APRIL 16, 1997.
RECENT EVENTS
On January 21, 1997, the Company and its parent, Allied Irish Banks, p.1.c.
("AIB"), entered into a definitive agreement pursuant to which Dauphin Deposit
Corporation ("Dauphin") will be merged into the Company and each outstanding
share of Dauphin common stock will be converted into the right to receive AIB
American Depository Shares having a market value of $43 or cash in the amount of
$43, at the election of the holder; provided, that at least 51% of the
outstanding Dauphin common stock must be converted into AIB American Depository
Shares. Dauphin shareholders will receive cash and AIB securities with an
aggregate value of approximately $1.36 million in the merger.
Dauphin is headquartered in Harrisburg, Pennsylvania, and provides a wide
range of financial products and services through its primary subsidiary, Dauphin
Bank and Trust Company, and other subsidiaries. Dauphin's primary market is
south-central Pennsylvania. At December 31, 1996, Dauphin had total consolidated
assets of $5.9 billion, total deposits of $4.0 billion and total stockholders'
equity of $570.4 million. Consummation of the transaction is subject to
regulatory and shareholder approvals and is expected to occur during the third
quarter of 1997. Reference is made to the documents described under
"Incorporation of Certain Information by Reference" for additional information
concerning the merger.
3
<PAGE> 7
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Available Information................. 2
Incorporation of Certain Information
by Reference........................ 3
Recent Events......................... 3
Certain Defined Terms................. 4
Prospectus Summary.................... 6
Risk Factors.......................... 14
Ratio of Earnings to Fixed Charges and
Ratio of Earnings to Combined
Fixed Charges and Preferred
Stock Dividends..................... 20
Accounting Treatment.................. 20
Regulatory Treatment.................. 20
Selected Consolidated Financial
Data................................ 21
The Trust............................. 22
<CAPTION>
PAGE
-----
<S> <C>
The Exchange Offer.................... 23
Description of New Capital
Securities.......................... 31
Description of Junior Subordinated
Debentures.......................... 41
Description of Guarantee.............. 48
Relationship Among The Capital
Securities, the Junior Subordinated
Debentures and the Guarantee........ 51
Certain United States Federal Income
Tax Consequences.................... 53
Book-Entry Issuance................... 59
Benefit Plan Considerations........... 61
Plan of Distribution.................. 63
Legal Matters......................... 63
Experts............................... 63
</TABLE>
CERTAIN DEFINED TERMS
The capital securities issued by Capital I on December 30, 1996, and by
Capital II on February 4, 1997 are substantially identical, except for terms
such as Distribution rate, Distribution Dates and redemption date. Except for
similar matters and for maturity dates, the related junior subordinated
debentures and guarantees issued by the Company on those dates are also
substantially identical. The Exchange Offers to which this Prospectus relates
will be conducted on the same terms and conditions, although the closing of one
offer is not conditioned upon the closing of the other offer. For these reasons,
the securities and the Exchange Offers will be described, to the greatest extent
practicable, in the singular and in generic terms without distinctions between
Capital I or Capital II. As used in this Prospectus, the following terms have
the meanings indicated;
"Capital Securities" means, with respect to each Trust, the New Capital
Securities and the Old Capital Securities of such Trust.
"Declaration" means (i) with respect to Capital I, the Amended and Restated
Declaration of Trust, dated as of December 30, 1996, among the Company, Capital
I, The Bank of New York, as property trustee, The Bank of New York (Delaware),
as Delaware trustee, and the three Regular Trustees named therein, pursuant to
which Capital Securities were, and will be, issued and (ii) with respect to
Capital II, the Amended and Restated Declaration of Trust, dated as of February
4, 1997, among the Company, Capital II, The Bank of New York, as property
trustee, The Bank of New York (Delaware), as Delaware trustee, and the three
Regular Trustees named therein, pursuant to which Capital Securities were, and
will be, issued.
"Distribution Date" means (i) with respect to Capital Securities of Capital
I, the 15th day of January, April, July and October in each year, and (ii) with
respect to the Capital Securities of Capital II, the first day of February, May,
August and November in each year.
"Guarantee" means (i) with respect to Capital I, the Guarantee Agreement
from the Company in favor of The Bank of New York, as Guarantee Trustee for the
benefit of the holders of Capital Securities to be issued in exchange for the
Old Guarantee and (ii) with respect to Capital II, the Guarantee Agreement from
the Company in favor of The Bank of New York, as Guarantee Trustee, for the
benefit of the holders of Capital Securities to be issued in exchange for the
Old Guarantee.
"Indenture" means (i) with respect to Capital I, the Indenture, dated as of
December 30, 1996, from the Company to The Bank of New York, as Indenture
Trustee, for the benefit of the holders of the Junior Subordinated Debentures
and (ii) with respect to Capital II, the Indenture, dated as of February 4,
1997, from the Company of The Bank of New York, as Indenture Trustee, for the
benefit of the holders of Junior Subordinated Debentures.
4
<PAGE> 8
"Interest Payment Date" means (i) with respect to the Junior Subordinated
Debentures issued to Capital I, the 15th day of January, April, July and October
in each year, and (ii) with respect to the Junior Subordinated Debentures issued
to Capital II, the first day of February, May, August and November in each year.
"Junior Subordinated Debentures" means (i) with respect to Capital I, the
$154,460,000 aggregate liquidation amount of Floating Rate Junior Subordinated
Debentures due 2027 to be issued by the Company to Capital I in exchange for Old
Junior Subordinated Debentures and (ii) with respect to Capital II, the
$154,460,000 aggregate liquidation amount of Floating Rate Junior Subordinated
Debentures due 2027, Series B, to be issued by the Company to Capital II in
exchange for Old Junior Subordinated Debentures.
"New Capital Securities" means (i) with respect to Capital I, the
$150,000,000 aggregate liquidation amount of Floating Rate Subordinated Capital
Income Securities to be issued by Capital I in exchange for Old Capital
Securities and (ii) with respect to Capital II, the $150,000,000 aggregate
liquidation amount of Floating Rate Subordinated Capital Income Securities to be
issued by Capital II in exchange for Old Capital Securities.
"Old Capital Securities" means (i) with respect to Capital I, the
$150,000,000 aggregate liquidation amount of Floating Rate Subordinated Capital
Income Securities issued by Capital I on December 30, 1996 and having a variable
per annum Distribution rate of LIBOR plus 1.00% and (ii) with respect to Capital
II, the $150,000,000 aggregate liquidation amount of Floating Rate Subordinated
Capital Income Securities issued by Capital II on February 4, 1997 and having a
variable per annum Distribution rate of LIBOR plus 0.85%.
"Old Guarantee" means (i) with respect to Capital I, the Guarantee
Agreement, dated as of December 30, 1996, from the Company in favor of The Bank
of New York, as Guarantee Trustee for the benefit of the holders of Old Capital
Securities and (ii) with respect to Capital II, the Guarantee Agreement, dated
as of February 4, 1997, from the Company in favor of The Bank of New York, as
Guarantee Trustee for the benefit of the holders of Old Capital Securities.
"Old Junior Subordinated Debentures" means (i) with respect to Capital I,
the $154,460,000 aggregate liquidation amount of Floating Rate Junior
Subordinated Debentures issued by the Company to Capital I on December 30, 1996,
and having a variable per annum interest rate of LIBOR plus 1.00% and (ii) with
respect to Capital II, the $154,460,000 aggregate liquidation amount of Floating
Rate Junior Subordinated Debentures due 2027, Series B, issued by the Company to
Capital II on February 4, 1997 and having a variable per annum interest rate of
LIBOR plus 0.85%.
Registration Rights Agreement" means (i) with respect to Capital I, the
Registration Rights Agreement, dated as of December 30, 1996, among Capital I,
the Company, and Lehman Brothers Inc., ABN AMRO Securities (USA) Inc., Bear,
Stearns & Co. Inc., HSBC Securities, Inc., PaineWebber Incorporated and Sanwa
International plc, as Initial Purchasers (the "Initial Purchasers") and (ii)
with respect to Capital II, the Registration Rights Agreement, dated as of
February 4, 1997, among Capital II, the Company, and Lehman Brothers Inc., Bear,
Stearns & Co. Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated and
Salomon Brothers Inc, as Initial Purchasers (the "Initial Purchasers").
"Trust" means either Capital I or Capital II, and "Trusts" means Capital I
and Capital II.
5
<PAGE> 9
PROSPECTUS SUMMARY
This summary is qualified by the more detailed information and financial
statements appearing elsewhere, or incorporated by reference, in this
Prospectus. Holders of Old Capital Securities are urged to read this Prospectus
in its entirety.
THE COMPANY AND THE TRUSTS
The Company is a Maryland corporation incorporated in 1973 and is
registered as a bank holding company under the Bank Holding Company Act of 1956,
as amended (the "Bank Holding Company Act"). At December 31, 1996, the Company
had consolidated total assets of $10.8 billion, total deposits of $7.5 billion,
and total stockholders' equity of $1.2 billion. Its principal subsidiaries are
The First National Bank of Maryland ("First National"), First Omni Bank, N.A.
("First Omni" and, together with First National, the "National Banks") and The
York Bank and Trust Company ("York Bank" and, together with the National Banks,
the "Banks"). The Banks, together with the Company's other subsidiaries, provide
comprehensive corporate, commercial, correspondent and retail banking services,
personal and corporate trust services and related financial products and
services to individuals, businesses, governmental units and financial
institutions primarily in Maryland and the adjacent states. The assets of the
Banks at December 31, 1996 accounted for approximately 96% of the Company's
consolidated total assets.
Allied Irish Banks, p.1.c. ("AIB") an Irish banking corporation, owns all
of the Company's outstanding common stock, and approximately 99% of the voting
power of the Company's outstanding capital stock. AIB's securities are traded on
the Dublin, London and New York Stock Exchanges. AIB is a registered bank
holding company under the Bank Holding Company Act and is the largest banking
corporation organized under the laws of Ireland, based upon total assets at
December 31, 1996. AIB and its subsidiaries provide a full range of banking,
financial and related services principally in Ireland, the United States and the
United Kingdom.
Each Trust is a statutory business trust formed under Delaware law pursuant
to (i) the Declaration and (ii) the filing of a certificate of trust with the
Delaware Secretary of State on December 24, 1996, in the case of Capital I, and
on January 30, 1997 in the case of Capital II. Each Trust's business and affairs
are conducted by the Issuer Trustees: The Bank of New York, as Property Trustee,
The Bank of New York (Delaware), as Delaware Trustee, and three individual
Regular Trustees who are employees or officers of or affiliated with the
Company. Each Trust exists for the exclusive purposes of (i) issuing and selling
the Trust Securities and effecting the Exchange Offer for the New Capital
Securities, (ii) using the proceeds from the sale of the Trust Securities to
acquire the Old Junior Subordinated Debentures issued by the Company, (iii)
exchanging the Old Junior Subordinated Debentures for the Junior Subordinated
Debentures in the Exchange Offer and (iv) engaging in only those other
activities necessary, advisable or incidental thereto (such as registering the
transfer of the Trust Securities). Accordingly, the New Junior Subordinated
Debentures will be the sole assets of each Trust, and payments under the New
Junior Subordinated Debentures and the Declaration will be the sole revenues of
the Trust. All of the Common Securities of each Trust are owned by the Company.
The Company and each Trust maintain their principal executive offices at 25
South Charles Street, Suite 2222, Baltimore, Maryland 21201, telephone
(410) 244-4000.
THE EXCHANGE OFFER
The Exchange Offer......... Up to $150,000,000 aggregate liquidation amount of
New Capital Securities are being offered in
exchange for a like aggregate liquidation amount
of Old Capital Securities. Old Capital Securities
may be tendered for exchange in whole or in part
in a liquidation amount of $100,000 (100 Capital
Securities) or any integral multiple of $1,000 in
excess thereof. The Company and the Trust are
making the Exchange Offer in order to satisfy
their obligations under the Registration Rights
Agreement relating to the Old Capital Securities.
For a description of the procedures for tendering
Old Capital Securities, see "The Exchange
Offer -- Procedures for Tendering Old Capital
Securities."
6
<PAGE> 10
Expiration Date............ 5:00 p.m., New York City time, on April 23, 1997
(such time on such date being hereinafter called
the "Expiration Date") unless the Exchange Offer
is extended by the Company and the Trust (in
which case the term "Expiration Date" shall mean
the latest date and time to which the Exchange
Offer is extended). See "The Exchange Offer --
Expiration Date; Extensions; Amendments."
Conditions to the
Exchange Offer........... The Exchange Offer is subject to certain
conditions, which may be waived by the Company
and the Trust in their sole discretion. The
Exchange Offer is not conditioned upon any
minimum liquidation amount of Old Capital
Securities being tendered. See "The Exchange
Offer -- Conditions to the Exchange Offer." The
Company and the Trust reserve the right in their
sole and absolute discretion, subject to
applicable law, at any time and from time to
time, (i) to delay the acceptance of the Old
Capital Securities for exchange, (ii) to
terminate the Exchange Offer if certain specified
conditions have not been satisfied, (iii) to
extend the Expiration Date of the Exchange Offer
and retain all Old Capital Securities tendered
pursuant to the Exchange Offer, subject, however,
to the right of holders of Old Capital Securities
to withdraw their tendered Old Capital
Securities, or (iv) to waive any condition or
otherwise amend the terms of the Exchange Offer
in any respect. See "The Exchange
Offer -- Expiration Date; Extensions;
Amendments."
Withdrawal Rights.......... Tenders of Old Capital Securities may be withdrawn
at any time on or prior to the Expiration Date by
delivering a written notice of such withdrawal to
the Exchange Agent in conformity with certain
procedures set forth below under "The Exchange
Offer -- Withdrawal Rights."
Procedures for Tendering
Old Capital Securities... Tendering holders of Old Capital Securities must
complete and sign a Letter of Transmittal in
accordance with the instructions contained
therein and forward the same by mail, facsimile
or hand delivery, together with any other
required documents, to the Exchange Agent, either
with the Old Capital Securities to be tendered or
in compliance with the specified procedures for
guaranteed delivery of Old Capital Securities.
Certain brokers, dealers, commercial banks, trust
companies and other nominees may also effect
tenders by book-entry transfer. Holders of Old
Capital Securities registered in the name of a
broker, dealer, commercial bank, trust company or
other nominee are urged to contact such person
promptly if they wish to tender Old Capital
Securities pursuant to the Exchange Offer. See
"The Exchange Offer -- Procedures for Tendering
Old Capital Securities." Letters of Transmittal
and certificates representing Old Capital
Securities should not be sent to the Company or
the Trust. Such documents should only be sent to
the Exchange Agent. Questions regarding how to
tender and requests for information should be
directed to the Exchange Agent. See "The Exchange
Offer -- Exchange Agent."
Resales of New Capital
Securities............... The Company and the Trust are making the Exchange
Offer in reliance on the position of the Staff of
the Commission as set forth in certain
interpretive letters addressed to third parties
in other transactions. However, neither the
Company nor the Trust has sought its own
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<PAGE> 11
interpretive letter and there can be no assurance
that the Staff would make a similar determination
with respect to the Exchange Offer as it has in
such interpretive letters to third parties. Based
on these interpretations by the Staff, and
subject to the two immediately following
sentences, the Company and the Trust believe that
New Capital Securities issued pursuant to this
Exchange Offer in exchange for Old Capital
Securities may be offered for resale, resold and
otherwise transferred by a holder thereof (other
than a holder who is a broker-dealer) without
further compliance with the registration and
prospectus delivery requirements of the
Securities Act, provided that such New Capital
Securities are acquired in the ordinary course of
such holder's business and that such holder is
not participating, and has no arrangement or
understanding with any person to participate, in
a distribution (within the meaning of the
Securities Act) of such New Capital Securities.
However, any holder of Old Capital Securities who
is an "affiliate" of the Company or the Trust or
who intends to participate in the Exchange Offer
for the purpose of distributing the New Capital
Securities, or any broker-dealer who purchased
the Old Capital Securities from the Trust to
resell pursuant to Rule 144A or any other
available exemption under the Securities Act, (a)
will not be able to rely on the interpretations
of the Staff set forth in the above-mentioned
interpretive letters, (b) will not be permitted
or entitled to tender such Old Capital Securities
in the Exchange Offer and (c) must comply with
the registration and prospectus delivery
requirements of the Securities Act in connection
with any sale or other transfer of such Old
Capital Securities unless such sale is made
pursuant to an exemption from such requirements.
In addition, as described below, if any
broker-dealer holds Old Capital Securities
acquired for its own account as a result of
market-making or other trading activities and
exchanges such Old Capital Securities for New
Capital Securities, then such broker-dealer must
deliver a prospectus meeting the requirements of
the Securities Act in connection with any resales
of such New Capital Securities.
Each holder of Old Capital Securities who wishes to
exchange Old Capital Securities for New Capital
Securities in the Exchange Offer will be required
to represent that (i) it is not an "affiliate" of
the Company or the Trust, (ii) any New Capital
Securities to be received by it are being
acquired in the ordinary course of its business,
(iii) it has no arrangement or understanding with
any person to participate in a distribution
(within the meaning of the Securities Act) of
such New Capital Securities, and (iv) if such
holder is not a broker-dealer, such holder is not
engaged in, and does not intend to engage in, a
distribution (within the meaning of the
Securities Act) of such New Capital Securities.
Each broker-dealer that receives New Capital
Securities for its own account pursuant to the
Exchange Offer must acknowledge that it acquired
the Old Capital Securities for its own account as
the result of market-making activities or other
trading activities and must agree that it will
deliver a prospectus meeting the requirements of
the Securities Act in connection with any resale
of such New Capital Securities. The Letter of
Transmittal states that by so acknowledging and
by delivering a prospectus, a broker-dealer will
not be deemed to admit that it is an
"underwriter" within the meaning
8
<PAGE> 12
of the Securities Act. Based on the position
taken by the Staff in the interpretive letters
referred to above, the Company and the Trust
believe that broker-dealers who acquired Old
Capital Securities for their own accounts as a
result of market-making activities or other
trading activities ("Participating
Broker-Dealers") may fulfill their prospectus
delivery requirements with respect to the New
Capital Securities received upon exchange of such
Old Capital Securities (other than Old Capital
Securities which represent an unsold allotment
from the original sale of the Old Capital
Securities) with a prospectus meeting the
requirements of the Securities Act, which may be
the prospectus prepared for an exchange offer so
long as it contains a description of the plan of
distribution with respect to the resale of such
New Capital Securities. Accordingly, this
Prospectus, as it may be amended or supplemented
from time to time, may be used by a Participating
Broker-Dealer in connection with resales of New
Capital Securities received in exchange for Old
Capital Securities where such Old Capital
Securities were acquired by such Participating
Broker-Dealer for its own account as a result of
market-making or other trading activities.
Subject to certain provisions set forth in the
Registration Rights Agreement and to the
limitations described below under "The Exchange
Offer -- Resales of New Capital Securities," the
Company and the Trust have agreed that this
Prospectus, as it may be amended or supplemented
from time to time, may be used by a Participating
Broker-Dealer in connection with resales of such
New Capital Securities for a period ending 90
days after the Expiration Date or, if earlier,
when all such New Capital Securities have been
disposed of by such Participating Broker-Dealer.
See "Plan of Distribution." Any Participating
Broker-Dealer who is an "affiliate" of the
Company or the Trust may not rely on such
interpretive letters and must comply with the
registration and prospectus delivery requirements
of the Securities Act in connection with any
resale transaction. See "The Exchange
Offer -- Resales of New Capital Securities."
Exchange Agent............. The exchange agent with respect to the Exchange
Offer is The Bank of New York (the "Exchange
Agent"). The addresses, and telephone and
facsimile numbers of the Exchange Agent are set
forth in "The Exchange Offer -- Exchange Agent"
and in the Letter of Transmittal.
Certain Federal Income
Tax Consequences;
ERISA Considerations..... Holders of Old Capital Securities should review the
information set forth under "Certain United
States Federal Income Tax Consequences" and
"Benefit Plan Considerations" prior to tendering
Old Capital Securities in the Exchange Offer.
9
<PAGE> 13
THE NEW CAPITAL SECURITIES
Securities Offered......... Up to $150,000,000 aggregate liquidation amount of
the Trust's Floating Rate Subordinated Capital
Income Securities which have been registered
under the Securities Act (liquidation amount
$1,000 per Capital Security). The New Capital
Securities will be issued, and the Old Capital
Securities were issued, under the Declaration.
The New Capital Securities and any Old Capital
Securities which remain outstanding after
consummation of the Exchange Offer will
constitute a single series of Capital Securities
under the Declaration and, accordingly, will vote
together as a single class for purposes of
determining whether holders of the requisite
percentage in outstanding liquidation amount
thereof have taken certain actions or exercised
certain rights under the Declaration. See
"Description of New Capital
Securities -- General." The terms of the New
Capital Securities are identical in all material
respects to the terms of the Old Capital
Securities, except that the New Capital
Securities have been registered under the
Securities Act and therefore are not subject to
certain restrictions on transfer applicable to
the Old Capital Securities and will not provide
for any increase in the Distribution rate
thereon. See "The Exchange Offer -- Purpose and
Effect of the Exchange Offer" and "Description of
New Capital Securities."
Distributions.............. Holders of the New Capital Securities are entitled
to receive cumulative cash distributions at a
variable annual rate equal to LIBOR plus 1.0% in
the case of Capital I, or LIBOR plus 0.85% in the
case of Capital II, of the liquidation amount of
$1,000 per Capital Security, accruing from the
date of original issuance and payable quarterly
in arrears on each Distribution Date commencing
on April 15, 1997 for Capital I and on May 1,
1997 for Capital II. The distribution rate and
the distribution and other payment dates for the
New Capital Securities correspond to the interest
rate and interest and other payment dates on the
Junior Subordinated Debentures. The initial
distribution rates for the Capital Securities of
Capital I and Capital II and the interest rates
for the related Junior Subordinated Debentures
are 6.59375% and 6.4125%, respectively. See
"Description of New Capital Securities."
Junior Subordinated
Debentures............... The Trust invested the proceeds from the issuance
of the Old Capital Securities and Common
Securities in an equivalent amount of Old Junior
Subordinated Debentures of the Company which will
be exchanged for Junior Subordinated Debentures.
The Junior Subordinated Debentures mature on
January 15, 2027 in the case of Capital I and on
February 1, 2027, in the case of Capital II. The
Junior Subordinated Debentures rank subordinate
and junior in right of payment to all
Indebtedness of the Company. In addition, the
Company's obligations under the Junior
Subordinated Debentures are effectively
subordinated to all existing and future
liabilities and obligations of its subsidiaries.
See "Risk Factors -- Ranking of Subordinate
Obligations Under the Guarantee and the Junior
Subordinated Debentures", "Risk Factors -- Status
of Company as Holding Company" and "Description
of Junior Subordinated Debentures --
Subordination."
Guarantee.................. Payment of distributions out of moneys held by the
Trust, and payments on liquidation of the Trust
or the redemption of Capital Securities, are
10
<PAGE> 14
guaranteed by the Company to the extent the Trust
has funds available therefor. If the Company does
not make principal or interest payments on the
Junior Subordinated Debentures, the Trust will
not have sufficient funds to make Distributions
on the Capital Securities, in which event the
Guarantee shall not apply to such Distributions
until the Trust has sufficient funds available
therefor. The Company's obligations under the
Guarantee, taken together with its obligations
under the Junior Subordinated Debentures and the
Indenture, including its obligation to pay all
costs, expenses and liabilities of the Trust
(other than with respect to the Capital
Securities), constitute a full and unconditional
guarantee of all of the Trust's obligations under
the Capital Securities. See "Description of
Guarantee" and "Relationship Among the Capital
Securities, the Junior Subordinated Debentures
and the Guarantee." The obligations of the
Company under the Guarantee are subordinate and
junior in right of payment to all Indebtedness of
the Company. See "Risk Factors -- Ranking of
Subordinated Obligations Under the Guarantee and
the Junior Subordinated Debentures" and
"Description of Guarantee."
Relative Rank.............. The Company's obligations with respect to the
Capital Securities of Capital I and the related
Junior Subordinated Debentures rank pari passu
with the Company's obligations with respect to
the Capital Securities of Capital II and the
related Junior Subordinated Debentures.
Right to Defer Interest.... The Company has the right to defer payment of
interest on the Junior Subordinated Debentures by
extending the interest payment period on the
Junior Subordinated Debentures, from time to
time, for up to 20 consecutive quarters. There
could be multiple Extension Periods of varying
lengths throughout the term of the Junior
Subordinated Debentures. If interest payments on
the Junior Subordinated Debentures are so
deferred, distributions on the Capital Securities
will also be deferred for an equivalent period
and the Company may not, and may not permit any
subsidiary of the Company to, (i) declare or pay
any dividends or distributions on, or redeem,
purchase, acquire, or make a liquidation payment
with respect to, the Company's capital stock or
(ii) make any payment of principal, interest or
premium, if any, on or repay, repurchase or
redeem any debt securities that rank pari passu
with or junior to the Junior Subordinated
Debentures or make any guarantee payments with
respect to any guarantee by the Company of the
debt securities of any subsidiary of the Company
if such guarantee ranks pari passu with or junior
to the Junior Subordinated Debentures (other than
(a) repurchases, redemptions or other
acquisitions of shares of capital stock of the
Company in connection with any employment
contract, benefit plan or other similar
arrangement with or for the benefit of any one or
more employees, officers, directors or
consultants, or in connection with a dividend
reinvestment or stockholder stock purchase plan,
(b) as a result of an exchange or conversion of
any class or series of the Company's capital
stock (or any capital stock of a subsidiary of
the Company) for any class or series of the
Company's capital stock or of any class or series
of the Company's indebtedness for any class or
series of the Company's capital stock, (c) the
purchase of fractional interests in shares of the
Company's capital stock pursuant to the
conversion or exchange
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<PAGE> 15
provisions of such capital stock or the security
being converted or exchanged, (d) any declaration
of a dividend in connection with any
stockholder's rights plan, or the issuance of
rights, stock or other property under any
stockholder's rights plan, or the redemption or
repurchase of rights pursuant thereto, or (e) any
dividend in the form of stock, warrants, options
or other rights where the dividend stock or the
stock issuable upon exercise of such warrants,
options or other rights is the same stock as that
on which the dividend is being paid (or ranks
pari passu with or junior to such stock)). During
an Extension Period, interest on the Junior
Subordinated Debentures will continue to accrue
(and the amount of Distributions to which holders
of the Capital Securities are entitled will
accumulate) at a variable annual rate equal to
LIBOR plus 1.0% for Capital I or LIBOR plus 0.85%
for Capital II, compounded quarterly. During an
Extension Period, holders of Capital Securities
will be required to include the interest on their
pro rata share of the Junior Subordinated
Debentures in their gross income as original
issue discount ("OID") even though the cash
payments attributable thereto have not been made.
See "Description of Junior Subordinated
Debentures -- Option to Extend Interest Payment
Period" and "Certain United States Federal Income
Tax Consequences -- Interest Income and Original
Issue Discount."
Redemption................. The Junior Subordinated Debentures are redeemable
by the Company in whole or in part on or after
January 15, 2007, in the case of Capital I, or
February 1, 2027, in the case of Capital II, or
at any time, in whole but not in part, upon the
occurrence of a Special Event, in either case
subject to any necessary prior approval of the
Federal Reserve and the Central Bank of Ireland.
If the Junior Subordinated Debentures are
redeemed, the Trust must redeem Trust Securities
having an aggregate liquidation amount equal to
the aggregate principal amount of the Junior
Subordinated Debentures so redeemed. The Trust
Securities will be redeemed upon maturity of the
Junior Subordinated Debentures. See "Description
of New Capital Securities -- Redemption --
Mandatory Redemption" and "-- Special Event
Redemption or Distribution of Junior Subordinated
Debentures."
Liquidation of the Trust... Upon the occurrence and continuation of a Special
Event, the Company will have the right, subject
to any necessary prior approval of the Federal
Reserve and the Central Bank of Ireland, to
dissolve the Trust and cause the Junior
Subordinated Debentures to be distributed to the
holders of the Capital Securities and the Common
Securities in liquidation of the Trust. See
"Description of New Capital
Securities -- Redemption -- Special Event
Redemption or Distribution of Junior Subordinated
Debentures."
In the event of the liquidation of the Trust, after
satisfaction of the claims of creditors of the
Trust, if any, as provided by applicable law, the
holders of the Capital Securities will be
entitled to receive a liquidation amount of
$1,000 per Capital Security plus accumulated and
unpaid Distributions thereon to the date of
payment, which may be in the form of a
distribution of such amount in Junior
Subordinated Debentures as described above. If
such Liquidation Distribution (as defined herein)
can be paid only in part because the Trust has
insufficient assets available to pay in full the
aggregate Liquidation Distribution, then the
amounts payable directly by the Trust on the
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<PAGE> 16
Capital Securities shall be paid on a pro rata
basis. The holder(s) of the Common Securities
will be entitled to receive distributions upon
any such liquidation pro rata with the holders of
the Capital Securities, except that if an
Indenture Event of Default has occurred and is
continuing, the Capital Securities shall have a
priority over the Common Securities. See
"Description of New Capital Securities --
Liquidation Distribution Upon Dissolution."
Ratings.................... The New Capital Securities have been rated "a3" by
Moody's Investors Service, Inc. and "BBB+" by
Standard & Poor's Ratings Services. A security
rating is not a recommendation to buy, sell or
hold securities and may be subject to revision or
withdrawal at any time by the assigning rating
organization.
13
<PAGE> 17
RISK FACTORS
Holders of Old Capital Securities should carefully review the information
contained elsewhere in this Prospectus and should particularly consider the
following matters. Certain statements in this Prospectus and documents
incorporated herein by reference are forward-looking and are identified by the
use of forward-looking words or phrases such as "intended," "will be
positioned," "expects," is or are "expected," "anticipates," and "anticipated."
These forward-looking statements are based on the Company's current
expectations. To the extent any of the information contained or incorporated by
reference in this Prospectus constitutes a "forward-looking statement" as
defined in Section 27A(i)(1) of the Securities Act, the risk factors set forth
below are cautionary statements identifying important factors that could cause
actual results to differ materially from those in the forward-looking statement.
RANKING OF SUBORDINATED OBLIGATIONS UNDER THE GUARANTEE AND THE JUNIOR
SUBORDINATED DEBENTURES
The obligations of the Company under the Guarantee issued by the Company
for the benefit of the holders of Capital Securities and under the Junior
Subordinated Debentures are unsecured and rank subordinate and junior in right
of payment to all Indebtedness of the Company. At December 31, 1996, the
Indebtedness of the Company aggregated approximately $539.6 million. Neither the
Indenture, the Guarantee nor the Declaration (as defined herein) places any
limitation on the amount of secured or unsecured Indebtedness that may be
incurred by the Company. See "Description of Guarantee -- Status of the
Guarantee" and "Description of Junior Subordinated Debentures -- Subordination."
STATUS OF COMPANY AS HOLDING COMPANY
The Company is a legal entity separate and distinct from the Banks and its
other subsidiaries, although the principal source of the Company's cash revenues
is dividends from the Banks. The right of the Company to participate in the
assets of any subsidiary upon the latter's liquidation, reorganization or
otherwise (and thus the ability of the holders of Capital Securities to benefit
indirectly from any such distribution) will be subject to the claims of the
subsidiaries' creditors, which will take priority except to the extent to which
the Company may itself be a creditor with a recognized claim. As of December 31,
1996, the Company's subsidiaries had indebtedness and other liabilities of
approximately $8.9 billion. Various federal and state laws and regulations also
limit the extent to which the Banks can pay dividends, extend credit or
otherwise supply funds to the Company and its subsidiaries.
The approval of the Office of Comptroller of the Currency is required for
any dividend by a national bank if the total of all dividends declared by such
bank in any calendar year would exceed the total of its net profits, as defined
by the Comptroller, for that year combined with its retained net profits for the
preceding two years less any required transfers to surplus or a fund for the
retirement of any preferred stock. Additionally, national bank subsidiaries may
not declare dividends in excess of net profits on hand, after deducting the
amount by which the principal amount of all loans on which interest is past due
for a period of six months or more exceeds the reserve for credit losses. Under
the first and currently more restrictive of the foregoing dividend limitations,
at January 1, 1997, none of the retained earnings of the National Banks was
available to pay dividends to the Company.
Pursuant to Pennsylvania law, York Bank may pay dividends only out of
accumulated net earnings and may not pay a dividend if any transfer of net
earnings to surplus is required.
The Banks are also subject to restrictions under federal law which limit
the transfer of funds by any of the Banks to the Company and its nonbanking
subsidiaries, whether in the form of loans, extensions of credit, investments,
asset purchases or otherwise. Such transfers by any Bank to the Company or any
of the Company's nonbanking subsidiaries are limited in amount to 10% of such
Bank's capital and surplus and, with respect to the Company and all such
nonbanking subsidiaries, to an aggregate of 20% of such Bank's capital and
surplus. Furthermore, such loans and extensions of credit are required to be
secured in specified amounts.
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF CAPITAL SECURITIES
If a Trust Enforcement Event (as defined herein) occurs and is continuing,
then the holders of Capital Securities would rely on the enforcement by the
Property Trustee (as defined herein) of its rights as a holder of the Junior
Subordinated Debentures against the Company. The holders of a majority in
liquidation amount of the Capital Securities will have the right to direct the
time, method and place of conducting any proceeding
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<PAGE> 18
for any remedy available to the Property Trustee or to direct the exercise of
any trust or power conferred upon the Property Trustee under the Declaration,
including the right to direct the Property Trustee to exercise the remedies
available to it as a holder of the Junior Subordinated Debentures. If the
Property Trustee fails to enforce its rights with respect to the Junior
Subordinated Debentures held by the Trust, any record holder of Capital
Securities may institute legal proceedings directly against the Company to
enforce the Property Trustee's rights under such Junior Subordinated Debentures
without first instituting any legal proceedings against such Property Trustee or
any other person or entity.
If the Company were to default on its obligation to pay amounts payable
under the Junior Subordinated Debentures, the Trust would lack funds for the
payment of Distributions or amounts payable on redemption of the Capital
Securities or otherwise, and, in such event, holders of the Capital Securities
would not be able to rely upon the Guarantee for payment of such amounts.
However, in the event the Company failed to pay interest on or principal of the
Junior Subordinated Debentures on the payment date on which such payment is due
and payable, then a holder of Capital Securities may directly institute a
proceeding against the Company under the Indenture for enforcement of payment to
such holder of the interest on or principal of such Junior Subordinated
Debentures having a principal amount equal to the aggregate liquidation amount
of the Capital Securities of such holder (a "Direct Action"). In connection with
such Direct Action, the Company will be subrogated to the rights of such holder
of Capital Securities under the Declaration to the extent of any payment made by
the Company to such holder of Capital Securities in such Direct Action. Except
as set forth herein, holders of Capital Securities will not be able to exercise
directly any other remedy available to the holders of Junior Subordinated
Debentures or assert directly any other rights in respect of the Junior
Subordinated Debentures. See "Description of New Capital Securities -- Trust
Enforcement Events", "Description of Guarantee" and "Description of Junior
Subordinated Debentures -- Indenture Events of Default." The Declaration
provides that each holder of Capital Securities by acceptance thereof agrees to
the provisions of the Guarantee and the Indenture.
OPTION TO EXTEND INTEREST PAYMENT PERIOD; TAX CONSEQUENCES
The Company has the right under the Indenture to defer the payment of
interest on the Junior Subordinated Debentures at any time or from time to time
for a period not exceeding 20 consecutive quarters, provided that no Extension
Period may extend beyond the Stated Maturity of the Junior Subordinated
Debentures. As a consequence of any such deferral, quarterly Distributions on
the Capital Securities by the Trust will be deferred during any such Extension
Period but would continue to accumulate at a variable annual rate equal to LIBOR
plus 1.0% in the case of Capital I, or LIBOR plus 0.85% in the case of Capital
II, in each case, compounded quarterly during any such Extension Period. During
any such Extension Period, the Company may not, and may not permit any
subsidiary of the Company to, (i) declare or pay any dividends or distributions
on, or redeem, purchase, acquire, or make a liquidation payment with respect to,
any of the Company's capital stock or (ii) make any payment of principal,
interest or premium, if any, on or repay, repurchase or redeem any debt
securities of the Company that rank pari passu with or junior to the Junior
Subordinated Debentures or make any guarantee payments with respect to any
guarantee by the Company of the debt securities of any subsidiary of the Company
if such guarantee ranks pari passu with or junior to the Junior Subordinated
Debentures (other than (a) repurchases, redemptions or other acquisitions of
shares of capital stock of the Company in connection with any employment
contract, benefit plan or other similar arrangement with or for the benefit of
any one or more employees, officers, directors or consultants, or in connection
with a dividend reinvestment or stockholder stock purchase plan, (b) as a result
of an exchange or conversion of any class or series of the Company's capital
stock (or any capital stock of a subsidiary of the Company) for any class or
series of the Company's capital stock or of any class or series of the Company's
indebtedness for any class or series of the Company's capital stock, (c) the
purchase of fractional interests in shares of the Company's capital stock
pursuant to the conversion or exchange provisions of such capital stock or the
security being converted or exchanged, (d) any declaration of a dividend in
connection with any stockholder's rights plan, or the issuance of rights, stock
or other property under any stockholder's rights plan, or the redemption or
repurchase of rights pursuant thereto, or (e) any dividend in the form of stock,
warrants, options or other rights where the dividend stock or the stock issuable
upon exercise of such warrants, options or other rights is the same stock as
that on which the dividend is being paid (or ranks pari passu with or junior to
such stock)). Prior to the termination of any such Extension Period, the Company
may further extend the
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<PAGE> 19
Extension Period, provided that no Extension Period may exceed 20 consecutive
quarters or extend beyond the Stated Maturity of the Junior Subordinated
Debentures. Upon the termination of any Extension Period and the payment of all
amounts then due on any Interest Payment Date, the Company may elect to begin a
new Extension Period subject to the above requirements. See "Description of New
Capital Securities -- Distributions" and "Description of Junior Subordinated
Debentures -- Option to Extend Interest Payment Period."
Should the Company defer payment of interest on the Junior Subordinated
Debentures, a holder of Capital Securities will be required to accrue income (in
the form of OID) for United States federal income tax purposes in respect of its
pro rata share of the Junior Subordinated Debentures held by the Trust. As a
result, a holder of Capital Securities will include such interest income in
gross income for United States federal income tax purposes in advance of the
receipt of cash attributable to such interest income, and will not receive the
cash related to such income from the Trust if the holder disposes of the Capital
Securities prior to the record date for the payment of Distributions with
respect to such Extension Period. See "Certain United States Federal Income Tax
Consequences -- Interest Income and Original Issue Discount" and "-- Sales of
New Capital Securities."
The Company has no current intention of exercising its right to defer
payments of interest by extending the interest payment period on the Junior
Subordinated Debentures. However, should the Company elect to exercise such
right in the future, the market price of the Capital Securities is likely to be
adversely affected. A holder that disposes of its Capital Securities during an
Extension Period, therefore, might not receive the same return on its investment
as a holder that continues to hold its Capital Securities. In addition, as a
result of the Company's right to defer interest payments, the market price of
the Capital Securities (which represent preferred undivided beneficial interests
in the Junior Subordinated Debentures) may be more volatile than the market
prices of other similar securities where the issuer does not have such right to
defer interest payments.
SPECIAL EVENT REDEMPTION; PROPOSED TAX LAW CHANGES
Upon the occurrence and continuation of a Special Event, the Company has
the right, subject to any necessary prior approval of the Federal Reserve and
the Central Bank of Ireland, to redeem the Junior Subordinated Debentures in
whole (but not in part) within 90 days following the occurrence of such Special
Event and thereby cause a mandatory redemption of the Capital Securities and
Common Securities. A "Special Event" means a Tax Event, a Regulatory Capital
Event or an Investment Company Event (each as defined herein).
On February 6, 1997, President Clinton released his budget proposals for
fiscal year 1998. One of the revenue provisions of those proposals would
generally deny interest deductions for interest on an instrument issued by a
corporation that has a maximum term of more than 15 years and that is not shown
as indebtedness on the separate balance sheet of the issuer or, where the
instrument is issued to a related party (other than a corporation), where the
holder or some other related party issues a related instrument that is not shown
as indebtedness on the issuer's consolidated balance sheet. If enacted as
proposed by the President, this provision would be effective for instruments
issued on or after the date of first action by a Congressional committee with
respect to the proposal. It is not clear from the President's proposals as to
what constitutes "Congressional committee action" with respect to the proposal.
If this provision were to apply to the Junior Subordinated Debentures, the
Company would not be able to deduct interest on the Junior Subordinated
Debentures. There can be no assurance, however that future legislative or
administrative proposals or final legislation will not adversely affect the
ability of the Company to deduct interest on the Junior Subordinated Debentures
or otherwise affect the tax treatment described herein. Such a change,
therefore, could give rise to a Tax Event, which would permit the Company to
cause a redemption of the Capital Securities or to dissolve the Trust and
distribute the Junior Subordinated Debentures to the holders of Trust Securities
in liquidation of the Trust as described more fully under "Description of New
Capital Securities -- Redemption -- Special Event Redemption or Distribution of
Junior Subordinated Debentures."
LIQUIDATION DISTRIBUTION OF JUNIOR SUBORDINATED DEBENTURES
Upon the occurrence and continuation of a Special Event the Company will
have the right, subject to any necessary prior approval of the Federal Reserve
and the Central Bank of Ireland, to dissolve the Trust and cause the Junior
Subordinated Debentures to be distributed to the holders of the Capital
Securities and the
16
<PAGE> 20
Common Securities in liquidation of the Trust. In addition, upon liquidation of
the Trust and certain other events, the Junior Subordinated Debentures may be
distributed to such holders. Under current United States federal income tax law
and interpretations thereof and assuming, as expected, the Trust is treated as a
grantor trust for United States federal income tax purposes, a distribution by
the Trust of the Junior Subordinated Debentures pursuant to a liquidation of the
Trust will not be a taxable event to the Trust or to holders of the Capital
Securities, and will result in a holder of the Capital Securities receiving
directly such holder's pro rata share of the Junior Subordinated Debentures
(previously held indirectly through the Trust). If, however, the liquidation of
the Trust were to occur because the Trust is subject to United States federal
income tax with respect to income accrued or received on the Junior Subordinated
Debentures as a result of the occurrence of a Tax Event or otherwise, the
distribution of Junior Subordinated Debentures to holders of the Capital
Securities by the Trust could be a taxable event to the Trust and each holder,
and holders of the Capital Securities may be required to recognize gain or loss
as if they had exchanged their Capital Securities for the Junior Subordinated
Debentures they received upon the liquidation of the Trust. See "Certain United
States Federal Income Tax Consequences -- Distribution of Junior Subordinated
Debentures or Cash Upon Liquidation of the Trust."
There can be no assurance as to the market prices for Capital Securities or
Junior Subordinated Debentures that may be distributed in exchange for Capital
Securities if a liquidation of the Trust occurs. Accordingly, the Capital
Securities that an investor may purchase, whether pursuant to the offer made
hereby or in the secondary market, or the Junior Subordinated Debentures that a
holder of Capital Securities may receive on liquidation of the Trust, may trade
at a discount to the price that the investor paid to purchase the Capital
Securities offered hereby. Because holders of Capital Securities may receive
Junior Subordinated Debentures on termination of the Trust, prospective
purchasers of Capital Securities are also making an investment decision with
regard to the Junior Subordinated Debentures and should carefully review all the
information regarding the Junior Subordinated Debentures contained herein. See
"Description of New Capital Securities -- Redemption -- Special Event Redemption
or Distribution of Junior Subordinated Debentures" and "Description of Junior
Subordinated Debentures -- General."
LIMITED VOTING RIGHTS
Holders of Capital Securities generally will have limited voting rights
relating only to the modification of the Capital Securities and certain other
matters described herein. Holders of Capital Securities will not be entitled to
vote to appoint, remove or replace any of the Trustees (as defined below), which
voting rights are vested exclusively in the holder of the Common Securities. The
Trustees and the Company may amend the Declaration without the consent of
holders of Capital Securities to ensure that the Trust will be classified as a
grantor trust for United States federal income tax purposes even if such action
adversely affects the interests of such holders. See "Description of New Capital
Securities -- Voting Rights; Amendment of the Declaration."
BANK REGULATORY RESTRICTIONS
Because the Trust is a subsidiary of the Company, federal banking
authorities will have the right to examine the Trust and its activities. Under
certain circumstances, including any determination that the Company's
relationship to the Trust results in an unsafe and unsound banking practice,
such banking authorities will have the authority to issue orders which could
restrict the ability of the Trust to make distributions on or to redeem the
Capital Securities.
Under the Financial Institutions Reform, Recovery and Enforcement Act of
1989 ("FIRREA"), a depository institution insured by the Federal Deposit
Insurance Corporation ("FDIC") can be held liable for any loss incurred by, or
reasonably expected to be incurred by, the FDIC in connection with (i) the
default of a commonly controlled FDIC-insured depository institution or (ii) any
assistance provided by the FDIC to a commonly controlled FDIC-insured depository
institution in danger of default. "Default" is defined generally as the
appointment of a conservator or receiver and "in danger of default" is defined
generally as the existence of certain conditions indicating that a "default" is
likely to occur in the absence of regulatory assistance.
Under Federal Reserve policy, and as a result of the law described in the
following paragraph, the Company is expected to act as a source of financial
strength to the Banks and to commit resources to support the Banks in
circumstances where it might not do so absent such policy. In addition, any
capital loans by the Company to any of the Banks would also be subordinate in
right of payment to deposits and to certain other
17
<PAGE> 21
indebtedness of such Bank. In the event of a bank holding company's bankruptcy,
any commitment by the bank holding company to a federal bank regulatory agency
to maintain the capital of a subsidiary bank at a certain level will be assumed
by the bankruptcy trustee and entitled to a priority of payment.
The Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA") provides, among other things, that if a bank does not meet any one of
its minimum capital requirements set by its regulators, then the bank must
submit a capital restoration plan for improving its capital. The bank's holding
company must guarantee that the undercapitalized subsidiary will meet its
recapitalization plan and may be liable for civil monetary penalties for failure
to fulfill its commitment on such guarantee. In addition, FDICIA prohibits a
bank from making a capital distribution, to its holding company or otherwise, if
the bank fails to meet any minimum capital requirements or if payment of the
distribution would cause it to fail to meet any minimum capital requirement.
Furthermore, under certain circumstances, a holding company of an
undercapitalized bank may be prohibited from making any capital distribution to
its shareholders or otherwise. As of December 31, 1996, each of the Banks met or
exceeded the requirements of a "well-capitalized" institution as prescribed in
the rules of the Bank's primary federal regulator.
CONSEQUENCES OF A FAILURE TO EXCHANGE OLD CAPITAL SECURITIES
The Old Capital Securities have not been registered under the Securities
Act or any state securities laws and therefore may not be offered, sold or
otherwise transferred except in compliance with the registration requirements of
the Securities Act and any other applicable securities laws, or pursuant to an
exemption therefrom or in a transaction not subject thereto, and in each case in
compliance with certain other conditions and restrictions. Old Capital
Securities which remain outstanding after consummation of the Exchange Offer
will continue to bear a legend reflecting such restrictions on transfer. In
addition, upon consummation of the Exchange Offer, holders of Old Capital
Securities which remain outstanding will not be entitled to any rights to have
such Old Capital Securities registered under the Securities Act or to any
similar rights under the Registration Rights Agreement (subject to certain
limited exceptions). The Company and the Trust do not intend to register under
the Securities Act any Old Capital Securities which remain outstanding after
consummation of the Exchange Offer (subject to such limited exceptions, if
applicable).
To the extent that Old Capital Securities are tendered and accepted in the
Exchange Offer, a holder's ability to sell untendered Old Capital Securities
could be adversely affected. In addition, although the Old Capital Securities
have been designated for trading in the Private Offerings, Resale and Trading
through Automatic Linkages ("PORTAL") market, to the extent that Old Capital
Securities are tendered and accepted in connection with the Exchange Offer, any
trading market for Old Capital Securities which remain outstanding after the
Exchange Offer could be adversely affected.
The New Capital Securities and any Old Capital Securities which remain
outstanding after consummation of the Exchange Offer will constitute a single
series of Capital Securities under the Declaration and, accordingly, will vote
together as a single class for purposes of determining whether holders of the
requisite percentage in outstanding liquidation amount thereof have taken
certain actions or exercised certain rights under the Declaration. See
"Description of New Capital Securities -- General." The Old Capital Securities
provide that, if the Exchange Offer is not consummated within 30 days of the
effective date of the Registration Statement, then the Distribution rate borne
by the Old Capital Securities will increase by up to a maximum of $.50 per week
per $1,000 liquidation amount of Capital Securities. Following consummation of
the Exchange Offer, the Old Capital Securities will not be entitled to any
increase in the Distribution rate thereon. The New Capital Securities will not
be entitled to any such increase in the interest rate thereon. See "The Exchange
Offer -- Purpose and Effect of the Exchange Offer."
ABSENCE OF PUBLIC MARKET
The Old Capital Securities were issued to, and the Company believes are
currently owned by, a relatively small number of beneficial owners. The Old
Capital Securities have not been registered under the Securities Act and will be
subject to restrictions on transferability to the extent that they are not
exchanged for the New Capital Securities. Although the New Capital Securities
will generally be permitted to be resold or otherwise transferred by the holders
(who are not affiliates of the Company or the Trust) without compliance with the
registration requirements under the Securities Act, they will constitute a new
issue of securities with no
18
<PAGE> 22
established trading market. Capital Securities may be transferred by the holders
thereof only in blocks having a liquidation amount of not less than $100,000
(100 Capital Securities). The Company and the Trust have been advised by the
Initial Purchasers that the Initial Purchasers presently intend to make a market
in the New Capital Securities. However, the Initial Purchasers are not obligated
to do so and any market-making activity with respect to the New Capital
Securities may be discontinued at any time without notice. In addition, such
market-making activity will be subject to the limits imposed by the Securities
Act and the Exchange Act and may be limited during the Exchange Offer.
Accordingly, no assurance can be given that an active public or other market
will develop for the New Capital Securities or the Old Capital Securities or as
to the liquidity of or the trading market for the New Capital Securities or the
Old Capital Securities. If an active public market does not develop, the market
price and liquidity of the New Capital Securities may be adversely affected.
If a public trading market for the New Capital Securities develops, future
trading prices of such securities will depend on many factors, including, among
other things, prevailing interest rates, results of operations and the market
for similar securities. Depending on prevailing interest rates, the market for
similar securities and other factors, including the financial condition of the
Company, the New Capital Securities may trade at a discount.
Notwithstanding the registration of the New Capital Securities in the
Exchange Offer, holders who are "affiliates" (as defined under Rule 405 of the
Securities Act) of the Company or the Trust may publicly offer for sale or
resell the New Capital Securities only in compliance with the provisions of Rule
144 under the Securities Act.
Each broker-dealer that receives New Capital Securities for its own account
in exchange for Old Capital Securities, where such Old Capital Securities were
acquired by such broker-dealer as a result of market-making activities or other
trading activities, must acknowledge that it will deliver a prospectus in
connection with any resale of such New Capital Securities. See "Plan of
Distribution."
EXCHANGE OFFER PROCEDURES
Issuance of the New Capital Securities in exchange for Old Capital
Securities pursuant to the Exchange Offer will be made only after a timely
receipt by the Trust of such Old Capital Securities, a properly completed and
duly executed Letter of Transmittal and all other required documents. Therefore,
holders of the Old Capital Securities desiring to tender such Old Capital
Securities in exchange for New Capital Securities should allow sufficient time
to ensure timely delivery. The Trust is under no duty to give notification of
defects or irregularities with respect to the tenders of Old Capital Securities
for exchange.
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<PAGE> 23
RATIO OF EARNINGS TO FIXED CHARGES AND RATIO OF EARNINGS TO
COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
The Company's consolidated ratios of earnings to fixed charges and
consolidated ratios of earnings to combined fixed charges and preferred stock
dividend requirements for each of the periods indicated are set forth below:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Earnings to Fixed Charges:
Excluding Interest on Deposits.......................... 2.78x 2.59x 3.16x 3.55x 3.22x
Including Interest on Deposits.......................... 1.64 1.57 1.69 1.73 1.49
Earnings to Combined Fixed Charges and Preferred Stock
Dividend Requirements:
Excluding Interest on Deposits.......................... 2.52 2.35 2.75 3.47 3.22
Including Interest on Deposits.......................... 1.58 1.52 1.61 1.72 1.49
</TABLE>
For purposes of computing the ratios of earnings to fixed charges and
earnings to combined fixed charges and preferred stock dividend requirements,
earnings represent net income plus applicable income taxes and fixed charges.
Fixed charges, excluding interest on deposits, represent interest expense on
long-term debt and short term borrowings and the interest factor included in
rents (which is deemed to be one-third of rental expense). Fixed charges,
including interest on deposits, represent all interest expense and the interest
factor included in rents. Combined fixed charges and preferred stock dividend
requirements, excluding interest on deposits, represent interest expense on
long-term debt and short-term borrowings, an amount equal to the pretax earnings
required to meet applicable preferred stock dividend requirements, and the
interest factor included in rents. Combined fixed charges and preferred stock
dividend requirements, including interest on deposits, represent all interest
expense, an amount equal to the pretax earnings required to meet applicable
preferred stock dividend requirements and the interest factor included in rents.
ACCOUNTING TREATMENT
For financial reporting purposes, the Trust will be treated as a subsidiary
of the Company and, accordingly, the accounts of the Trust will be included in
the consolidated financial statements of the Company. The Capital Securities
will be presented in the consolidated balance sheet of the Company as a separate
line item directly above stockholders' equity under the caption "Guaranteed
Preferred Beneficial Interests in Company's Junior Subordinated Debentures" and
appropriate disclosures about the Capital Securities, the Guarantee and the
Junior Subordinated Debentures will be included in the notes to the consolidated
financial statements for financial reporting purposes. The Company will record
Distributions payable on the Capital Securities as an expense in the
consolidated statements of income.
REGULATORY TREATMENT
The Company is required by the Federal Reserve to maintain certain levels
of capital for bank regulatory purposes. The Company will treat the Capital
Securities as Tier 1 capital of the Company for such purposes.
20
<PAGE> 24
SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth selected historical consolidated financial
information for the Company as of and for the periods indicated below. The
summary consolidated financial data as of and for the four years ended December
31, 1995 was derived from the audited consolidated financial statements of the
Company incorporated herein by reference. The summary data as of and for the
year ended December 31, 1996 are unaudited.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------------------------
1996 1995 1994 1993 1992
----------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED SUMMARY OF OPERATIONS:
Interest and dividend income............................ $ 719,029 $ 707,541 $ 619,746 $ 617,237 $ 648,009
Interest expense........................................ 315,318 314,548 241,099 234,038 284,657
---------- --------- --------- --------- ---------
Net interest income..................................... 403,711 392,993 378,647 383,199 363,352
Provision for credit losses............................. 6,500 16,000 22,996 45,291 58,126
---------- --------- --------- --------- ---------
Net interest income after provision for credit losses... 397,211 376,993 355,651 337,908 305,226
Noninterest income...................................... 216,892 195,910 210,978 233,445 198,182
Noninterest expenses.................................... 406,916 388,724 396,201 394,653 361,730
---------- --------- --------- --------- ---------
Income before income taxes.............................. 207,187 184,179 170,428 176,700 141,678
Income tax expense...................................... 74,850 63,992 59,288 62,832 49,205
---------- --------- --------- --------- ---------
Net income.............................................. $ 132,337 $ 120,187 $ 111,140 $ 113,868 $ 92,473
========== ========= ========= ========= =========
Dividends declared on preferred stock................... $ 11,820 $ 11,820 $ 11,820 $ 1,575 --
Dividends declared on redeemable preferred stock........ 203 -- -- -- --
CONSOLIDATED AVERAGE BALANCES:
Total assets............................................ $10,477,100 $9,789,500 $9,411,400 $9,395,700 $9,003,000
Loans, net of unearned income........................... 6,312,300 5,804,700 5,291,200 5,099,300 5,293,900
Deposits................................................ 7,073,500 6,744,100 6,635,300 6,651,800 6,764,400
Long-term debt.......................................... 481,000 269,500 198,000 189,500 165,500
Common stockholder's equity............................. 1,062,300 965,000 856,600 756,700 646,700
Stockholders' equity.................................... 1,207,200 1,109,800 1,001,500 763,900 646,700
CONSOLIDATED RATIOS:
Return on average assets(1)............................. 1.26% 1.23% 1.18% 1.21% 1.03%
Return on average common stockholder's equity(2)........ 11.33 11.23 11.59 14.84 14.30
Return on average total stockholders' equity(2)......... 10.96 10.83 11.10 14.91 14.30
Average total stockholders' equity to average total
assets(2)............................................. 11.52 11.34 10.64 8.13 7.18
Period end capital to risk adjusted assets(3):
Tier 1................................................ 14.12 13.77 14.05 12.88 10.02
Total................................................. 17.20 17.05 17.68 16.62 14.05
Period end Tier 1 leverage ratio(3)..................... 12.18 10.91 11.05 9.60 7.20
Net interest margin(4).................................. 4.30 4.47 4.51 4.64 4.58
Net charge-offs to average loans less average unearned
income................................................ 0.61 0.51 0.56 0.83 1.15
Period end nonperforming assets to period end loans, net
of unearned income plus other foreclosed assets
owned(6).............................................. 0.87 0.73 1.35 2.59 3.83
Period end allowance for credit losses to period end
loans, net of unearned income......................... 2.28 2.89 3.50 3.85 3.88
Period end allowance for credit losses to period end
nonperforming loans(5)................................ 337.95 532.82 322.26 177.16 113.98
</TABLE>
- ---------------
(1) Average assets include average unrealized gains (losses) on investment
securities available-for-sale.
(2) Average stockholders' equity includes average net unrealized gains (losses)
on investment securities available-for-sale.
(3) The Federal Reserve guidelines for risk-based capital requirements
applicable to all bank holding companies require minimum ratios of Tier 1
and total capital to risk-adjusted assets to be 4% and 8%, respectively. The
Federal Reserve's minimum leverage guidelines require all bank holding
companies to maintain a ratio of Tier 1 capital to total average quarterly
assets of at least 3%.
(4) Net interest margin is the ratio of net interest income on a fully tax
equivalent basis to average earning assets.
(5) Nonperforming loans include nonaccrual loans and restructured loans.
(6) Nonperforming assets include nonaccrual loans, restructured loans,
in-substance foreclosures, and collateral on loans to which the Company has
taken title.
21
<PAGE> 25
THE TRUST
Each Trust is a statutory business trust formed under the Delaware Business
Trust Act, as amended (the "Trust Act"), pursuant to a declaration of trust (as
so amended and restated, the "Declaration") and the filing of a certificate of
trust as filed with the Secretary of State of the State of Delaware. The Company
has acquired Common Securities in an aggregate liquidation amount equal to
approximately 3% of the total capital of each Trust. The Trust used all the
proceeds derived from the issuance of the Capital Securities and the Common
Securities (the "Trust Securities") to purchase the Old Junior Subordinated
Debentures and, accordingly, the assets of the Trust consist solely of the Old
Junior Subordinated Debentures. After consummation of the Exchange Offer, the
Trust's assets will consist solely of Junior Subordinated Debentures. The Trust
exists for the exclusive purpose of (i) issuing the Trust Securities
representing undivided beneficial ownership interests in the assets of the
Trust, (ii) investing the gross proceeds of the Trust Securities in the Junior
Subordinated Debentures, (iii) effecting the Exchange Offer and (iv) engaging in
only those other activities necessary or incidental thereto. The Declaration
does not limit the aggregate liquidation amount of Trust Securities that may be
issued thereunder, provided that prior to issuing any additional Trust
Securities, the Trustees shall have received an opinion of counsel to the effect
that the issuance of such Trust Securities will not affect the Trust status as a
grantor trust for United States federal income tax purposes.
Pursuant to the Declaration, there are initially five trustees (the
"Trustees") for each Trust. Three of the Trustees (the "Regular Trustees") are
individuals who are employees or officers of or who are affiliated with the
Company. The fourth trustee is a financial institution that is unaffiliated with
the Company (the "Property Trustee"). The fifth trustee is an entity that
maintains its principal place of business in the State of Delaware (the
"Delaware Trustee"). Initially, The Bank of New York is acting as Property
Trustee, and its affiliate, The Bank of New York (Delaware), is acting as
Delaware Trustee until, in each case, removed or replaced by the holder of the
Common Securities. The Bank of New York will also act as trustee under the
Guarantee (the "Guarantee Trustee") and trustee under the Indenture (the
"Indenture Trustee").
The Property Trustee holds title to the Junior Subordinated Debentures for
the benefit of the holders of the Trust Securities, and the Property Trustee has
the power to exercise all rights, powers and privileges with respect to the
Junior Subordinated Debentures under the Indenture (as defined herein) as the
holder of the Junior Subordinated Debentures. In addition, the Property Trustee
will maintain exclusive control of a segregated non-interest bearing bank
account (the "Property Account") to hold all payments made in respect of the
Junior Subordinated Debentures for the benefit of the holders of the Trust
Securities. The Guarantee Trustee holds the Guarantee for the benefit of the
holders of the Capital Securities. The Company, as the holder of all the Common
Securities, has the right to appoint, remove or replace any of the Trustees and
to increase or decrease the number of Trustees, provided there shall always be a
Delaware Trustee, a Property Trustee and a Regular Trustee.
The Company will pay all fees and expenses related to the organization and
operations of each Trust (including any taxes, duties, assessments or
governmental charges of whatever nature (other than withholding taxes) imposed
by the United States or any other domestic taxing authority upon the Trust) and
the offering of the Capital Securities and be responsible for all debts and
obligations of the Trust (other than with respect to the Capital Securities).
For so long as the Capital Securities remain outstanding, the Company will
covenant (i) to maintain directly or indirectly 100% ownership of the Common
Securities, (ii) to cause the Trust to remain a statutory business trust and not
to voluntarily dissolve, wind-up, liquidate or be terminated, except as
permitted by the Declaration, (iii) to use its commercially reasonable efforts
to ensure that the Trust will not be an "investment company" for purposes of the
Investment Company Act of 1940, as amended, and (iv) to take no action that
would be reasonably likely to cause the Trust to be classified as an association
or a publicly traded partnership taxable as a corporation for United States
federal income tax purposes.
The rights of the holders of the Capital Securities, including economic
rights, rights to information and voting rights, are set forth in the
Declaration and the Trust Indenture Act. See "Description of Capital
Securities." The Declaration and the Guarantee also incorporate by reference the
terms of the Trust Indenture Act.
22
<PAGE> 26
The location of the principal executive office of each Trust is c/o First
Maryland Bancorp, Attn. James A. Smith, 25 South Charles Street, Suite 1900,
Baltimore, Maryland, 21201 and its telephone number is (410) 545-2100.
THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
In connection with the sale of the Old Capital Securities, the Company and
each Trust entered into the Registration Rights Agreement with the Initial
Purchasers, pursuant to which the Company and each Trust agreed, among other
things, to file and to use their reasonable efforts to cause to become effective
with the Commission a registration statement with respect to the exchange of the
Old Capital Securities for capital securities with terms identical in all
material respects to the terms of the Old Capital Securities. Copies of the
Registration Rights Agreement have been filed as Exhibits to the Registration
Statement of which this Prospectus is a part.
The Exchange Offer is being made to satisfy the contractual obligations of
the Company and each Trust under the Registration Rights Agreement. The form and
terms of the New Capital Securities are the same as the form and terms of the
Old Capital Securities, except that the New Capital Securities have been
registered under the Securities Act and therefore will not be subject to certain
restrictions on transfer applicable to the Old Capital Securities and will not
provide for any increase in the Distribution rate thereon. In that regard, the
Old Capital Securities provide, among other things, that if the Company and the
Trust fail to consummate the Exchange Offer within 30 days after the effective
date of the Registration Statement, then the Distribution rate borne by the Old
Capital Securities will increase by $0.25 per week per $1,000 liquidation amount
thereof for the first 90-day period after such failure, and by an additional
$0.05 per week per $1,000 liquidation amount for each subsequent 90-day period
until such failure is remedied, up to a maximum additional amount of $.50 per
week per $1,000 liquidation amount of Capital Securities. Upon consummation of
the Exchange Offer, holders of Old Capital Securities will not be entitled to
any increase in the Distribution rate thereon or any further registration rights
under the Registration Rights Agreement, except under limited circumstances. See
"Risk Factors -- Consequences of a Failure to Exchange Old Capital Securities."
The Exchange Offer is not being made to, nor will the Company or the Trust
accept tenders for exchange from, holders of Old Capital Securities in any
jurisdiction in which the Exchange Offer or the acceptance thereof would not be
in compliance with the securities or blue sky laws of such jurisdiction.
Unless the context requires otherwise, the term "holder" with respect to
the Exchange Offer means any person in whose name the Old Capital Securities are
registered on the books of the Trust or any other person who has obtained a
properly completed bond power from the registered holder, or any person whose
Old Capital Securities are held of record by The Depository Trust Company who
desires to deliver such Old Capital Securities by book-entry transfer at The
Depository Trust Company. Pursuant to the Exchange Offer, the Company will
exchange as soon as practicable after the date hereof, the Old Guarantee for the
Guarantee and $150 million aggregate principal amount of the Old Junior
Subordinated Debentures for a like aggregate principal amount of the Junior
Subordinated Debentures. The Guarantee and Junior Subordinated Debentures have
also been registered under the Securities Act.
TERMS OF THE EXCHANGE
The Company and each Trust hereby offer, upon the terms and subject to the
conditions set forth in this Prospectus and in the accompanying Letter of
Transmittal, to exchange up to $150,000,000 aggregate liquidation amount of New
Capital Securities for a like aggregate liquidation amount of Old Capital
Securities properly tendered on or prior to the Expiration Date (as defined
below) and not properly withdrawn in accordance with the procedures described
below. Each Trust will issue, promptly after the Expiration Date, an aggregate
liquidation amount of up to $150,000,000 of New Capital Securities in exchange
for a like principal amount of outstanding Old Capital Securities tendered and
accepted in connection with the Exchange Offer.
23
<PAGE> 27
Holders may tender their Old Capital Securities in whole or in part in a
liquidation amount of not less than $100,000 or any integral multiple of $1,000
in excess thereof.
The Exchange Offer is not conditioned upon any minimum liquidation amount
of Old Capital Securities being tendered. As of the date of this Prospectus,
$150,000,000 aggregate liquidation amount of the Old Capital Securities is
outstanding. Holders of Old Capital Securities do not have any appraisal or
dissenters' rights in connection with the Exchange Offer. Old Capital Securities
which are not tendered for or are tendered but not accepted in connection with
the Exchange Offer will remain outstanding and be entitled to the benefits of
the Declaration, but will not be entitled to any further registration rights
under the Registration Rights Agreement, except under limited circumstances. See
"Risk Factors -- Consequences of a Failure to Exchange Old Capital Securities."
If any tendered Old Capital Securities are not accepted for exchange
because of an invalid tender, the occurrence of certain other events set forth
herein or otherwise, certificates for any such unaccepted Old Capital Securities
will be returned, without expense, to the tendering holder thereof promptly
after the Expiration Date.
Holders who tender Old Capital Securities in connection with the Exchange
Offer will not be required to pay brokerage commissions or fees or, subject to
the instructions in the Letter of Transmittal, transfer taxes with respect to
the exchange of Old Capital Securities in connection with the Exchange Offer.
the Company will pay all charges and expenses, other than certain applicable
taxes described below, in connection with the Exchange Offer. See "-- Fees and
Expenses."
NEITHER THE BOARD OF DIRECTORS OF THE COMPANY NOR THE TRUSTEE OF THE TRUST
MAKES ANY RECOMMENDATION TO HOLDERS OF OLD CAPITAL SECURITIES AS TO WHETHER TO
TENDER OR REFRAIN FROM TENDERING ALL OR ANY PORTION OF THEIR OLD CAPITAL
SECURITIES PURSUANT TO THE EXCHANGE OFFER. IN ADDITION, NO ONE HAS BEEN
AUTHORIZED TO MAKE ANY SUCH RECOMMENDATION. HOLDERS OF OLD CAPITAL SECURITIES
MUST MAKE THEIR OWN DECISION WHETHER TO TENDER PURSUANT TO THE EXCHANGE OFFER
AND, IF SO, THE AGGREGATE AMOUNT OF OLD CAPITAL SECURITIES TO TENDER AFTER
READING THIS PROSPECTUS AND THE LETTER OF TRANSMITTAL AND CONSULTING WITH THEIR
ADVISERS, IF ANY, BASED ON THEIR OWN FINANCIAL POSITION AND REQUIREMENTS.
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" means 5:00 p.m., New York City time, on April
23, 1997, unless the Exchange Offer is extended by the Company and the Trust (in
which case the term "Expiration Date" shall mean the latest date and time to
which the Exchange Offer is extended). The Company and the Trust expressly
reserve the right in their sole and absolute discretion, subject to applicable
law, at any time and from time to time, (i) to delay the acceptance of the Old
Capital Securities for exchange, (ii) to terminate the Exchange Offer (whether
or not any Old Capital Securities have theretofore been accepted for exchange)
if the Company and the Trust determine, in their sole and absolute discretion,
that any of the events or conditions referred to under "-- Conditions to the
Exchange Offer" have occurred or exist or have not been satisfied, (iii) to
extend the Expiration Date of the Exchange Offer and retain all Old Capital
Securities tendered pursuant to the Exchange Offer, subject, however, to the
right of holders of Old Capital Securities to withdraw their tendered Old
Capital Securities as described under "-- Withdrawal Rights," and (iv) to waive
any condition or otherwise amend the terms of the Exchange Offer in any respect.
If the Exchange Offer is amended in a manner determined by the Company and the
Trust to constitute a material change, or if the Company and the Trust waive a
material condition of the Exchange Offer, the Company or the Trust will promptly
disclose such amendment by means of a prospectus supplement that will be
distributed to the registered holders of the Old Capital Securities, and the
Company and the Trust will extend the Exchange Offer to the extent required by
Rule 14e-1 under the Exchange Act.
Any such delay in acceptance, extension, termination or amendment will be
followed promptly by oral or written notice thereof to the Exchange Agent and by
making a public announcement thereof, and such
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announcement in the case of an extension will be made no later than 9:00 a.m.,
New York City time, on the next business day after the previously scheduled
Expiration Date. Without limiting the manner in which the Company or the Trust
may choose to make any public announcement and subject to applicable law,
neither the Company nor the Trust shall have any obligation to publish,
advertise or otherwise communicate any such public announcement other than by
issuing a release to an appropriate news agency.
ACCEPTANCE FOR EXCHANGE AND ISSUANCE OF NEW CAPITAL SECURITIES
Upon the terms and subject to the conditions of the Exchange Offer, the
Company and the Trust will exchange, and will issue to the Exchange Agent, New
Capital Securities for Old Capital Securities validly tendered and not withdrawn
(pursuant to the withdrawal rights described under "-- Withdrawal Rights")
promptly after the Expiration Date.
In all cases, delivery of New Capital Securities in exchange for Old
Capital Securities tendered and accepted for exchange pursuant to the Exchange
Offer will be made only after timely receipt by the Exchange Agent of (i) Old
Capital Securities or a book-entry confirmation of a book-entry transfer of Old
Capital Securities into the Exchange Agent's account at The Depositary Trust
Company ("DTC"), (ii) the Letter of Transmittal (or facsimile thereof), properly
completed and duly executed, with any required signature guarantees, and (iii)
any other documents required by the Letter of Transmittal.
The term "book-entry confirmation" means a timely confirmation of a book-
entry transfer of Old Capital Securities into the Exchange Agent's account at
DTC.
Subject to the terms and conditions of the Exchange Offer, the Company and
the Trust will be deemed to have accepted for exchange, and thereby exchanged,
Old Capital Securities validly tendered and not withdrawn as, if and when the
Company or the Trust gives oral or written notice to the Exchange Agent of the
Company's and the Trust's acceptance of such Old Capital Securities for exchange
pursuant to the Exchange Offer. The Exchange Agent will act as agent for the
Company and the Trust for the purpose of receiving tenders of Old Capital
Securities, Letters of Transmittal and related documents, and as agent for
tendering holders for the purpose of receiving Old Capital Securities, Letters
of Transmittal and related documents and transmitting New Capital Securities to
validly tendering holders. Such exchange will be made promptly after the
Expiration Date. If for any reason whatsoever, acceptance for exchange or the
exchange of any Old Capital Securities tendered pursuant to the Exchange Offer
is delayed (whether before or after the Company's and the Trust's acceptance for
exchange of Old Capital Securities) or the Company or the Trust extends the
Exchange Offer or is unable to accept for exchange or exchange Old Capital
Securities tendered pursuant to the Exchange Offer, then, without prejudice to
the Company or the Trust's rights set forth herein, the Exchange Agent may,
nevertheless, on behalf of the Company and the Trust and subject to Rule
14e-1(c) under the Exchange Act, retain tendered Old Capital Securities and such
Old Capital Securities may not be withdrawn except to the extent tendering
holders are entitled to withdrawal rights as described under "-- Withdrawal
Rights."
Pursuant to the Letter of Transmittal, a holder of Old Capital Securities
will warrant and agree in the Letter of Transmittal that it has full power and
authority to tender, exchange, sell, assign and transfer Old Capital Securities,
that the Trust will acquire good, marketable and unencumbered title to the
tendered Old Capital Securities, free and clear of all liens, restrictions,
charges and encumbrances, and the Old Capital Securities tendered for exchange
are not subject to any adverse claims or proxies. The holder also will warrant
and agree that it will, upon request, execute and deliver any additional
documents deemed by the Company, the Trust or the Exchange Agent to be necessary
or desirable to complete the exchange, sale, assignment, and transfer of the Old
Capital Securities tendered pursuant to the Exchange Offer.
PROCEDURES FOR TENDERING OLD CAPITAL SECURITIES
Valid Tender. Except as set forth below, in order for Old Capital
Securities to be validly tendered pursuant to the Exchange Offer, a properly
completed and duly executed Letter of Transmittal (or facsimile thereof), with
any required signature guarantees and any other required documents, must be
received by the Exchange Agent at one of its addresses set forth under
"-- Exchange Agent," and either (i) tendered Old
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<PAGE> 29
Capital Securities must be received by the Exchange Agent, or (ii) such Old
Capital Securities must be tendered pursuant to the procedures for book-entry
transfer set forth below and a book-entry confirmation must be received by the
Exchange Agent, in each case on or prior to the Expiration Date, or (iii) the
guaranteed delivery procedures set forth below must be complied with.
If less than all of the Old Capital Securities are tendered, a tendering
holder should fill in the amount of Old Capital Securities being tendered in the
appropriate box on the Letter of Transmittal. The entire amount of Old Capital
Securities delivered to the Exchange Agent will be deemed to have been tendered
unless otherwise indicated.
THE METHOD OF DELIVERY OF CERTIFICATES, THE LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS, IS AT THE OPTION AND SOLE RISK OF THE TENDERING
HOLDER, AND DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE
EXCHANGE AGENT. IF DELIVERY IS BY MAIL, REGISTERED MAIL, RETURN RECEIPT
REQUESTED, PROPERLY INSURED, OR AN OVERNIGHT DELIVERY SERVICE IS RECOMMENDED. IN
ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
Book-entry Transfer. The Exchange Agent will establish an account with
respect to the Old Capital Securities at DTC for purposes of the Exchange Offer
within two business days after the date of this Prospectus. Any financial
institution that is a participant in DTC's book-entry transfer facility system
may make a book-entry delivery of the Old Capital Securities by causing DTC to
transfer such Old Capital Securities into the Exchange Agent's account at DTC in
accordance with DTC's procedures for transfers. However, although delivery of
Old Capital Securities may be effected through book-entry transfer into the
Exchange Agent's account at DTC, the Letter of Transmittal (or facsimile
thereof), properly completed and duly executed, with any required signature
guarantees and any other required documents, must in any case be delivered to
and received by the Exchange Agent at its address set forth under "-- Exchange
Agent" on or prior to the Expiration Date, or the guaranteed delivery procedure
set forth below must be complied with.
DELIVERY OF DOCUMENTS TO DTC IN ACCORDANCE WITH DTC'S PROCEDURES DOES NOT
CONSTITUTE DELIVERY TO THE EXCHANGE AGENT
Signature Guarantees. Certificates for the Old Capital Securities need not
be endorsed and signature guarantees on the Letter of Transmittal are
unnecessary unless (a) a certificate for the Old Capital Securities is
registered in a name other than that of the person surrendering the certificate
or (b) such registered holder completes the box entitled "Special Issuance
Instructions" or "Special Delivery Instructions" in the Letter of Transmittal.
In the case of (a) or (b) above, such certificates for Old Capital Securities
must be duly endorsed or accompanied by a properly executed bond power, with the
endorsement or signature on the bond power and on the Letter of Transmittal
guaranteed by a firm or other entity identified in Rule 17Ad-15 under the
Exchange Act as an "eligible guarantor institution," including (as such terms
are defined therein): (i) a bank; (ii) a broker, dealer, municipal securities
broker or dealer or government securities broker or dealer; (iii) a credit
union; (iv) a national securities exchange, registered securities association or
clearing agency; or (v) a savings association that is a participant in a
Securities Transfer Association (an "Eligible Institution"), unless surrendered
on behalf of such Eligible Institution. See Instruction 1 to the Letter of
Transmittal.
Guaranteed Delivery. If a holder desires to tender Old Capital Securities
pursuant to the Exchange Offer and the certificates for such Old Capital
Securities are not immediately available or time will not permit all required
documents to reach the Exchange Agent on or before the Expiration Date, or the
procedures for book-entry transfer cannot be completed on a timely basis, such
Old Capital Securities may nevertheless be tendered, provided that all of the
following guaranteed delivery procedures are complied with:(i) such tenders are
made by or through an Eligible Institution; (ii) a properly completed and duly
executed Notice of Guaranteed Delivery, substantially in the form accompanying
the Letter of Transmittal, is received by the Exchange Agent, as provided below,
on or prior to the Expiration Date; and (iii) the certificates (or a book-entry
confirmation) representing all tendered Old Capital Securities, in proper form
for transfer, together with a properly completed and duly executed Letter of
Transmittal (or facsimile thereof), with any required signature guarantees and
any other documents required by the Letter of Transmittal, are received by
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<PAGE> 30
the Exchange Agent within five New York Stock Exchange trading days after the
date of execution of such Notice of Guaranteed Delivery. The Notice of
Guaranteed Delivery may be delivered by hand, or transmitted by facsimile or
mail to the Exchange Agent and must include a guarantee by an Eligible
Institution in the form set forth in such notice.
Notwithstanding any other provision hereof, the delivery of New Capital
Securities in exchange for Old Capital Securities tendered and accepted for
exchange pursuant to the Exchange Offer will in all cases be made only after
timely receipt by the Exchange Agent of Old Capital Securities, or of a
book-entry confirmation with respect to such Old Capital Securities, and a
properly completed and duly executed Letter of Transmittal (or facsimile
thereof), together with any required signature guarantees and any other
documents required by the Letter of Transmittal. Accordingly, the delivery of
New Capital Securities might not be made to all tendering holders at the same
time, and will depend upon when Old Capital Securities, book-entry confirmations
with respect to Old Capital Securities and other required documents are received
by the Exchange Agent.
The acceptance by the Company and the Trust for exchange of Old Capital
Securities tendered pursuant to any of the procedures described above will
constitute a binding agreement between the tendering holder, the Company and the
Trust upon the terms and subject to the conditions of the Exchange Offer.
Determination of Validity. All questions as to the form of documents,
validity, eligibility (including time of receipt) and acceptance for exchange of
any tendered Old Capital Securities will be determined by the Trust, in its sole
discretion, whose determination shall be final and binding on all parties. The
Company and the Trust reserve the absolute right, in their sole and absolute
discretion, to reject any and all tenders determined by them not to be in proper
form or the acceptance of which, or exchange for, may, in the view of counsel to
the Company and the Trust, be unlawful. the Company and the Trust also reserve
the absolute right, subject to applicable law, to waive any of the conditions of
the Exchange Offer as set forth under "-- Conditions to the Exchange Offer" or
any condition or irregularity in any tender of Old Capital Securities of any
particular holder whether or not similar conditions or irregularities are waived
in the case of other holders.
The Company and the Trust's interpretation of the terms and conditions of
the Exchange Offer (including the Letter of Transmittal and the instructions
thereto) will be final and binding. No tender of Old Capital Securities will be
deemed to have been validly made until all irregularities with respect to such
tender have been cured or waived. Neither the Company, the Trust, any affiliates
or assigns of the Company, the Trust, the Exchange Agent nor any other person
shall be under any duty to give any notification of any irregularities in
tenders or incur any liability for failure to give any such notification.
If any Letter of Transmittal, endorsement, bond power, power of attorney,
or any other document required by the Letter of Transmittal is signed by a
trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or representative capacity,
such person should so indicate when signing, and unless waived by the Company or
the Trust, proper evidence satisfactory to the Company or the Trust, in its sole
discretion, of such person's authority to so act must be submitted.
A beneficial owner of Old Capital Securities that are held by or registered
in the name of a broker, dealer, commercial bank, trust company or other nominee
or custodian is urged to contact such entity promptly if such beneficial holder
wishes to participate in the Exchange Offer.
RESALES OF NEW CAPITAL SECURITIES
The Company and the Trust are making the Exchange Offer for the Capital
Securities in reliance on the position of the Staff of the Commission as set
forth in certain interpretive letters addressed to third parties in other
transactions. However, neither the Company nor the Trust sought its own
interpretive letter and there can be no assurance that the Staff would make a
similar determination with respect to the Exchange Offer as it has in such
interpretive letters to third parties. Based on these interpretations by the
Staff, and subject to the two immediately following sentences, the Company and
the Trust believe that New Capital Securities issued pursuant to this Exchange
Offer in exchange for Old Capital Securities may be offered for resale, resold
and
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<PAGE> 31
otherwise transferred by a holder thereof (other than a holder who is a
broker-dealer) without further compliance with the registration and prospectus
delivery requirements of the Securities Act, provided that such New Capital
Securities are acquired in the ordinary course of such holder's business and
that such holder is not participating, and has no arrangement or understanding
with any person to participate, in a distribution (within the meaning of the
Securities Act) of such New Capital Securities. However, any holder of Old
Capital Securities who is an "affiliate" of the Company or the Trust or who
intends to participate in the Exchange Offer for the purpose of distributing New
Capital Securities, or any broker-dealer who purchased Old Capital Securities
from the Trust to resell pursuant to Rule 144A or any other available exemption
under the Securities Act, (a) will not be able to rely on the interpretations of
the Staff of the Commission set forth in the above-mentioned interpretive
letters, (b) will not be permitted or entitled to tender such Old Capital
Securities in the Exchange Offer and (c) must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
sale or other transfer of such Old Capital Securities unless such sale is made
pursuant to an exemption from such requirements. In addition, as described
below, if any broker-dealer holds Old Capital Securities acquired for its own
account as a result of market-making or other trading activities and exchanges
such Old Capital Securities for New Capital Securities, then such broker-dealer
must deliver a prospectus meeting the requirements of the Securities Act in
connection with any resales of such New Capital Securities.
Each holder of Old Capital Securities who wishes to exchange them for New
Capital Securities in the Exchange Offer will be required to represent that: (i)
it is not an "affiliate" of the Company or the Trust; (ii) any New Capital
Securities to be received by it are being acquired in the ordinary course of its
business; (iii) it has no arrangement or understanding with any person to
participate in a distribution (within the meaning of the Securities Act) of such
New Capital Securities; and (iv) if such holder is not a broker-dealer, such
holder is not engaged in, and does not intend to engage in, a distribution
(within the meaning of the Securities Act) of such New Capital Securities. In
addition, the Company and the Trust may require such holder, as a condition to
such holder's eligibility to participate in the Exchange Offer, to furnish to
the Company and the Trust (or an agent thereof) in writing information as to the
number of "beneficial owners" (within the meaning of Rule 13d-3 under the
Exchange Act) on behalf of whom such holder holds the Capital Securities to be
exchanged in the Exchange Offer. Each broker-dealer that receives New Capital
Securities for its own account pursuant to the Exchange Offer must acknowledge
that it acquired the Old Capital Securities for its own account as the result of
market-making activities or other trading activities and must agree that it will
deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of such New Capital Securities. The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. Based on the position taken by the Staff in the
interpretive letters referred to above, the Company and the Trust believe that
broker-dealers who acquired Old Capital Securities for their own accounts as a
result of market-making activities or other trading activities ("Participating
Broker-Dealers") may fulfill their prospectus delivery requirements with respect
to the New Capital Securities received upon exchange of such Old Capital
Securities (other than Old Capital Securities which represent an unsold
allotment from the original sale of the Old Capital Securities) with a
prospectus meeting the requirements of the Securities Act, which may be the
prospectus prepared for an exchange offer so long as it contains a description
of the plan of distribution with respect to the resale of such New Capital
Securities. Accordingly, this Prospectus, as it may be amended or supplemented
from time to time, may be used by a Participating Broker-Dealer during the
period referred to below in connection with resales of New Capital Securities
received in exchange for Old Capital Securities where such Old Capital
Securities were acquired by such Participating Broker-Dealer for its own account
as a result of market-making or other trading activities. Subject to certain
provisions set forth in the Registration Rights Agreement, the Company and the
Trust have agreed that this Prospectus, as it may be amended or supplemented
from time to time, may be used by a Participating Broker-Dealer in connection
with resales of such New Capital Securities for a period ending 90 days after
the Expiration Date or, if earlier, when all such New Capital Securities have
been disposed of by such Participating Broker-Dealer. See "Plan of
Distribution." Any Participating Broker-Dealer who is an "affiliate" of the
Company or the Trust may not rely on such interpretive letters and must comply
with the
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registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction.
In that regard, each Participating Broker-Dealer who surrenders Old Capital
Securities pursuant to the Exchange Offer will be deemed to have agreed, by
execution of the Letter of Transmittal, that, upon receipt of notice from the
Company or the Trust of the occurrence of any event or the discovery of any fact
which makes any statement contained or incorporated by reference in this
Prospectus untrue in any material respect or which causes this Prospectus to
omit to state a material fact necessary in order to make the statements
contained or incorporated by reference herein, in light of the circumstances
under which they were made, not misleading or of the occurrence of certain other
events specified in the Registration Rights Agreements, such Participating
Broker-Dealer will suspend the sale of New Capital Securities (or the New
Guarantee or the New Junior Subordinated Debentures, as applicable) pursuant to
this Prospectus until the Company or the Trust has amended or supplemented this
Prospectus to correct such misstatement or omission and has furnished copies of
the amended or supplemented Prospectus to such Participating Broker-Dealer or
the Company or the Trust has given notice that the sale of the New Capital
Securities (or the New Guarantee or the New Junior Subordinated Debentures, as
applicable) may be resumed, as the case may be.
WITHDRAWAL RIGHTS
Except as otherwise provided herein, tenders of Old Capital Securities may
be withdrawn at any time on or prior to the Expiration Date. In order for a
withdrawal to be effective a written, telegraphic, telex or facsimile
transmission of such notice of withdrawal must be timely received by the
Exchange Agent at one of its addresses set forth under "-- Exchange Agent" on or
prior to the Expiration Date. Any such notice of withdrawal must specify the
name of the person who tendered the Old Capital Securities to be withdrawn, the
aggregate principal amount of Old Capital Securities to be withdrawn, and (if
certificates for such Old Capital Securities have been tendered) the name of the
registered holder of the Old Capital Securities as set forth on the Old Capital
Securities, if different from that of the person who tendered such Old Capital
Securities. If Old Capital Securities have been delivered or otherwise
identified to the Exchange Agent, then prior to the physical release of such Old
Capital Securities, the tendering holder must submit the serial numbers shown on
the particular Old Capital Securities to be withdrawn and the signature on the
notice of withdrawal must be guaranteed by an Eligible Institution, except in
the case of Old Capital Securities tendered for the account of an Eligible
Institution. If Old Capital Securities have been tendered pursuant to the
procedures for book-entry transfer set forth in "-- Procedures for Tendering Old
Capital Securities," then the notice of withdrawal must specify the name and
number of the account at DTC to be credited with the withdrawal of Old Capital
Securities, in which case a notice of withdrawal will be effective if delivered
to the Exchange Agent by written, telegraphic, telex or facsimile transmission.
Withdrawals of tenders of Old Capital Securities may not be rescinded. Old
Capital Securities properly withdrawn will not be deemed validly tendered for
purposes of the Exchange Offer, but may be re-tendered at any subsequent time on
or prior to the Expiration Date by following any of the procedures described
above under "-- Procedures for Tendering Old Capital Securities."
All questions as to the validity, form and eligibility (including time of
receipt) of such withdrawal notices will be determined by the Company and the
Trust, in their sole discretion, whose determination shall be final and binding
on all parties. Neither the Company, the Trust, any affiliates or assigns of the
Company, the Trust, the Exchange Agent nor any other person shall be under any
duty to give any notification of any irregularities in any notice of withdrawal
or incur any liability for failure to give any such notification. Any Old
Capital Securities which have been tendered but which are withdrawn will be
returned to the holder thereof promptly after withdrawal.
DISTRIBUTIONS ON THE NEW CAPITAL SECURITIES
Holders of Old Capital Securities whose Old Capital Securities are accepted
for exchange will not receive accumulated Distributions on such Old Capital
Securities for any period from and after the last Distribution Date with respect
to such Old Capital Securities prior to the original issue date of the New
Capital Securities or, if no such Distributions have been made, will not receive
any accumulated Distributions on such Old Capital Securities, and will be deemed
to have waived the right to receive any Distributions on such Old
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<PAGE> 33
Capital Securities accumulated from and after such Distribution Date or, if no
such Distributions have been made, from and after December 30, 1996 in the case
of Capital I, or February 4, 1997 in the case of Capital II. However, because
Distributions on the New Capital Securities will accumulate from such respective
dates for the Trusts, the amount of the Distributions received by holders whose
Old Capital Securities are accepted for exchange will not be affected by the
exchange.
CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provisions of the Exchange Offer, or any
extension of the Exchange Offer, the Trust will not be required to accept for
exchange, or to exchange, any Old Capital Securities for any New Capital
Securities, and, as described below, may terminate the Exchange Offer (whether
or not any Old Capital Securities have theretofore been accepted for exchange)
or may waive any conditions to or amend the Exchange Offer, if there shall occur
a change in the current interpretation by the Staff which permits the New
Capital Securities issued pursuant to the Exchange Offer in exchange for Old
Capital Securities to be offered for resale, resold and otherwise transferred by
holders thereof (other than broker-dealers and any such holder which is an
"affiliate" of the Company or the Trust within the meaning of Rule 405 under the
Securities Act) without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that such New Capital Securities are
acquired in the ordinary course of such holders' business and such holders have
no arrangement or understanding with any person to participate in the
distribution of such New Capital Securities.
If the Company and the Trust determine in their sole and absolute
discretion that the foregoing event has occurred, the Company and the Trust may,
subject to applicable law, terminate the Exchange Offer (whether or not any Old
Capital Securities have theretofore been accepted for exchange) or may waive any
such condition or otherwise amend the terms of the Exchange Offer in any
respect. If such waiver or amendment constitutes a material change to the
Exchange Offer, the Company and the Trust will promptly disclose such waiver by
means of a prospectus supplement that will be distributed to the registered
holders of the Old Capital Securities, and the Company and the Trust will extend
the Exchange Offer to the extent required by Rule 14e-1 under the Exchange Act.
EXCHANGE AGENT
The Bank of New York has been appointed as Exchange Agent for the Exchange
Offer. Delivery of the Letters of Transmittal and any other required documents,
questions, requests for assistance, and requests for additional copies of this
Prospectus or of the Letter of Transmittal should be directed to the Exchange
Agent as follows:
The Bank of New York
101 Barclay Street, 7E
New York, New York 10286
Attention: Reorganization Section
Telephone: (212) 815-6333
Facsimile: (212) 571-3080
Delivery to other than the above addresses or facsimile number will not
constitute a valid delivery.
FEES AND EXPENSES
The Company has agreed to pay the Exchange Agent reasonable and customary
fees for its services and will reimburse it for its reasonable out-of-pocket
expenses in connection therewith. The Company will also pay brokerage houses and
other custodians, nominees and fiduciaries the reasonable out-of-pocket expenses
incurred by them in forwarding copies of this Prospectus and related documents
to the beneficial owners of Old Capital Securities, and in handling or tendering
for their customers.
Holders who tender their Old Capital Securities for exchange will not be
obligated to pay any transfer taxes in connection therewith. If, however, New
Capital Securities are to be delivered to, or are to be issued in the name of,
any person other than the registered holder of the Old Capital Securities
tendered, or if a transfer
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<PAGE> 34
tax is imposed for any reason other than the exchange of Old Capital Securities
in connection with the Exchange Offer, then the amount of any such transfer
taxes (whether imposed on the registered holder or any other persons) will be
payable by the tendering holder. If satisfactory evidence of payment of such
taxes or exemption therefrom is not submitted with the Letter of Transmittal,
the amount of such transfer taxes will be billed directly to such tendering
holder.
Neither the Company nor the Trust will make any payment to brokers, dealers
or others soliciting acceptances of the Exchange Offer.
DESCRIPTION OF NEW CAPITAL SECURITIES
Pursuant to the terms of the Declaration, the Regular Trustees on behalf of
the Trust have issued the Old Capital Securities and the Common Securities and
will issue the New Capital Securities. The New Capital Securities will represent
undivided beneficial ownership interests in the assets of the Trust and the
holders thereof will be entitled to a preference in certain circumstances with
respect to Distributions and amounts payable on redemption or liquidation over
the Common Securities, as well as other benefits as described in the
Declaration. The Declaration has been qualified under the Trust Indenture Act.
This summary of certain provisions of the Capital Securities and the Declaration
does not purport to be complete and is subject to, and is qualified in its
entirety by reference to, all the provisions of the Declaration, including the
definitions therein of certain terms, and the Trust Indenture Act. Wherever
particular defined terms of the Declaration (as supplemented or amended from
time to time) are referred to herein, the definitions of such defined terms are
incorporated herein by reference.
GENERAL
The Capital Securities (including the Old Capital Securities and the New
Capital Securities) rank pari passu, and payments will be made thereon pro rata,
with the Common Securities except as described under "-- Subordination of Common
Securities." Legal title to the Junior Subordinated Debentures is held by the
Property Trustee in trust for the benefit of the holders of the Capital
Securities and the Common Securities. The Guarantee executed by the Company for
the benefit of the holders of the Capital Securities is on a subordinated basis
with respect to the Capital Securities but does not guarantee payment of
Distributions or amounts payable on redemption or liquidation of the Capital
Securities when the Trust does not have sufficient funds available to make such
payments. See "Description of Guarantee." The Company's obligations under the
Guarantee, taken together with its obligations under the Junior Subordinated
Debentures and the Indenture, including its obligation to pay all costs,
expenses and liabilities of the Trust (other than with respect to the Capital
Securities), constitute a full and unconditional guarantee, subordinated as
described herein, of all of the Trust's obligations under the Capital
Securities.
The Company's obligations with respect to the Capital Securities of each
Trust (and the related Junior Subordinated Debentures and Guarantee) rank pari
passu with the Company's obligations with respect to the Capital Securities (and
related Junior Subordinated Debentures and Guarantee) of the other.
Holders of the Capital Securities have no preemptive or similar rights.
DISTRIBUTIONS
Distributions on each Capital Security will be payable at a variable annual
rate equal to LIBOR plus 1.0% in the case of Capital I, or LIBOR plus 0.85% in
the case of Capital II, on the liquidation amount of $1,000, payable quarterly
in arrears on the applicable Distribution Dates. Distributions will accumulate
from the date of original issuance and commence on April 15, 1997 for Capital I
and on May 1, 1997 for Capital II. The amount of Distributions payable for any
period will be computed on the basis of the actual number of days elapsed in a
year of twelve 30-day months.
Distributions on the Capital Securities must be paid on the dates payable
to the extent that the Trust has funds available for the payment of such
Distributions. The revenue of the Trust available for distribution to holders of
its Capital Securities will be limited to payments under the Junior Subordinated
Debentures in
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which the Trust invested the proceeds from the issuance and sale of the Capital
Securities and the Common Securities. See "Description of Junior Subordinated
Debentures." If the Company does not make interest payments on the Junior
Subordinated Debentures, the Property Trustee will not have funds available to
pay Distributions on the Capital Securities.
The Company has the right under the Indenture to defer the payment of
interest on the Junior Subordinated Debentures at any time or from time to time
for a period not exceeding 20 consecutive quarters (each, an "Extension
Period"), provided that no Extension Period may extend beyond the Stated
Maturity of the Junior Subordinated Debentures. Accordingly, there could be
multiple Extension Periods of varying lengths throughout the term of the Junior
Subordinated Debentures. As a consequence of any such extension, quarterly
Distributions on the Capital Securities will be deferred by the Trust during any
such Extension Period. Distributions to which holders of the Capital Securities
are entitled will accumulate and compound quarterly at a variable annual rate
equal to LIBOR plus 1.0% for Capital I or LIBOR plus 0.85% for Capital II from
the relevant payment date for such Distributions. The term "Distributions" as
used herein shall include any such compounded amounts (and any Additional
Distributions) unless the context otherwise requires. During any such Extension
Period, the Company may not, and may not permit any subsidiary of the Company
to, (i) declare or pay any dividends or distributions on, or redeem, purchase,
acquire, or make a liquidation payment with respect to, any of the Company's
capital stock or (ii) make any payment of principal, interest or premium, if
any, on or repay, repurchase or redeem any debt securities of the Company that
rank pari passu with or junior to the Junior Subordinated Debentures or make any
guarantee payments with respect to any guarantee by the Company of the debt
securities of any subsidiary of the Company if such guarantee ranks pari passu
with or junior in interest to the Junior Subordinated Debentures (other than (a)
repurchases, redemptions or other acquisitions of shares of capital stock of the
Company in connection with any employment contract, benefit plan or other
similar arrangement with or for the benefit of any one or more employees,
officers, directors or consultants, or in connection with a dividend
reinvestment or stockholder stock purchase plan, (b) as a result of an exchange
or conversion of any class or series of the Company's capital stock (or any
capital stock of a subsidiary of the Company) for any class or series of the
Company's capital stock or of any class or series of the Company's indebtedness
for any class or series of the Company's capital stock, (c) the purchase of
fractional interests in shares of the Company's capital stock pursuant to the
conversion or exchange provisions of such capital stock or the security being
converted or exchanged, (d) any declaration of a dividend in connection with any
stockholder's rights plan, or the issuance of rights, stock or other property
under any stockholder's rights plan, or the redemption or repurchase of rights
pursuant thereto, or (e) any dividend in the form of stock, warrants, options or
other rights where the dividend stock or the stock issuable upon exercise of
such warrants, options or other rights is the same stock as that on which the
dividend is being paid (or ranks pari passu with or junior to such stock)).
Prior to the termination of any such Extension Period, the Company may further
extend the Extension Period, provided that no Extension Period may exceed 20
consecutive quarters or extend beyond the Stated Maturity of the Junior
Subordinated Debentures. Upon the termination of any such Extension Period and
the payment of all amounts then due on any Interest Payment Date, the Company
may elect to begin a new Extension Period subject to the foregoing requirements.
See "Description of Junior Subordinated Debentures -- Option to Extend Interest
Payment Period." The Company has no current intention of exercising its right to
defer payments of interest by extending the interest payment period of the
Junior Subordinated Debentures.
In the event that any date on which Distributions are payable on the
Capital Securities is not a Business Day, then payment of the Distributions
payable on such date will be made on the next succeeding day that is a Business
Day (and without any additional Distributions or other payment in respect of any
such delay), with the same force and effect as if made on the date such payment
was originally payable (each date on which Distributions are payable in
accordance with the foregoing, a "Distribution Date"). A "Business Day" shall
mean any day other than a Saturday or a Sunday, or a day on which banking
institutions in The City of New York or the City of Baltimore, Maryland are
authorized or required by law or executive order to remain closed or a day on
which the corporate trust office of the Property Trustee or the Indenture
Trustee (as defined herein) is closed for business.
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Distributions on the Capital Securities (other than distributions on a
Redemption Date) will be payable to the holders thereof as they appear on the
register of the Trust on the relevant record dates, which shall be the first day
of the month of the relevant Distribution Date. Distributions payable on any
Capital Securities that are not punctually paid on any Distribution Date will
cease to be payable to the person in whose name such Capital Securities are
registered on the relevant record date, and such defaulted Distribution will
instead be payable to the person in whose name such Capital Securities are
registered on the special record date or other specified date determined in
accordance with the Declaration.
REDEMPTION
Mandatory Redemption. Unless a Special Event has occurred, the Capital
Securities will not be redeemable prior to January 15, 2007 in the case of
Capital I or February 1, 2007 in the case of Capital II. Upon the repayment or
redemption, in whole or in part, of the Junior Subordinated Debentures, whether
at Stated Maturity or upon earlier redemption as provided in the Indenture, the
proceeds from such repayment or redemption shall be applied by the Property
Trustee to redeem Capital Securities and Common Securities upon not less than 30
nor more than 60 days' notice prior to the date fixed for repayment or
redemption. If less than all of the Junior Subordinated Debentures are to be
repaid or redeemed on a Redemption Date, then the proceeds from such repayment
or redemption shall be allocated to the redemption pro rata of the Capital
Securities and the Common Securities. See "Description of Junior Subordinated
Debentures -- Redemption."
Special Event Redemption or Distribution of Junior Subordinated
Debentures. If a Special Event shall occur and be continuing, the Company will
have the right, subject to the receipt of any necessary prior approval of the
Federal Reserve and the Central Bank of Ireland, to either (i) redeem within 90
days following the occurrence of such Special Event the Junior Subordinated
Debentures on the date of redemption (the "Redemption Date") in whole (but not
in part) and thereby cause a mandatory redemption of the Capital Securities in
whole (but not in part) at a redemption price with respect to the Capital
Securities equal to the redemption price in respect of the Junior Subordinated
Debentures or (ii) to dissolve the Trust and, after satisfaction of the claims
of creditors of the Trust as provided by applicable law, cause the Junior
Subordinated Debentures to be distributed to the holders of the Capital
Securities in liquidation of the Trust. Under current United States federal
income tax law and interpretations thereof and assuming, as expected, the Trust
is treated as a grantor trust, a distribution of the Junior Subordinated
Debentures should not be a taxable event to holders of the Capital Securities.
Should there be a change in law, a change in legal interpretation, certain Tax
Events or other circumstances, however, the distribution could be a taxable
event to holders of the Capital Securities. See "Certain United States Federal
Income Tax Consequences -- Distribution of Junior Subordinated Debentures or
Cash upon Liquidation of the Trust."
If the Company does not elect either option described above, the Capital
Securities will remain outstanding until the repayment of the Junior
Subordinated Debentures, whether at maturity or redemption, and in the event a
Tax Event has occurred and is continuing, the Company will be obligated to pay
any additional taxes, duties, assessments and other governmental charges (other
than withholding taxes) to which the Trust has become subject as a result of a
Tax Event.
A "Special Event" means a Tax Event, a Regulatory Capital Event or an
Investment Company Event. A "Tax Event" means the receipt by the Company of an
opinion of counsel, rendered by a law firm having a recognized national tax
practice, to the effect that, as a result of any amendment to, change in or
announced proposed change in the laws (or any regulations thereunder) of the
United States or any political subdivision or taxing authority thereof or
therein, or as a result of any official or administrative pronouncement or
action or judicial decision interpreting or applying such laws or regulations,
which amendment or change is adopted or which proposed change, pronouncement or
action or decision is announced or which action is taken on or after the date of
original issuance of the Old Capital Securities, there is more than an
insubstantial risk that (i) the Trust is, or will be within 90 days of the date
of such opinion, subject to United States federal income tax with respect to
income received or accrued on the Junior Subordinated Debentures, (ii) interest
payable by the Company on such Junior Subordinated Debentures is not, or within
90 days of the date of such opinion, will not be, deductible by the Company, in
whole or in part, for United States federal income tax purposes, or
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(iii) the Trust is, or will be within 90 days of the date of such opinion,
subject to more than a de minimis amount of other taxes, duties or other
governmental charges. A "Regulatory Capital Event" means that the Company shall
have received an opinion of independent bank regulatory counsel experienced in
such matters to the effect that, as a result of (a) any amendment to or change
(including any announced prospective change) in the laws (or any regulations
thereunder) of the United States or any rules, guidelines or policies of the
Federal Reserve or (b) any official or administrative pronouncement or action or
judicial decision interpreting or applying such laws or regulations, which
amendment or change is effective or such pronouncement or action or decision is
announced on or after the date of original issuance of the Old Capital
Securities, the Capital Securities do not constitute, or within 90 days of the
date thereof, will not constitute Tier 1 capital (or its then equivalent);
provided, however, that the distribution of the Junior Subordinated Debentures
in connection with the liquidation of the Trust by the Company shall not in and
of itself constitute a Regulatory Capital Event unless such liquidation shall
have occurred in connection with a Tax Event or an Investment Company Event.
"Investment Company Event" means the receipt by the Trust of an opinion of
counsel, rendered by a law firm having a recognized national securities
practice, to the effect that, as a result of the occurrence of a change in law
or regulation or a change in interpretation or application of law or regulation
by any legislative body, court, governmental agency or regulatory authority (a
"Change in 1940 Act Law"), the Trust is or will be considered an "investment
company" that is required to be registered under the Investment Company Act of
1940, as amended, which Change in 1940 Act Law becomes effective on or after the
date of original issuance of the Old Capital Securities.
REDEMPTION PROCEDURES
Capital Securities redeemed on each Redemption Date shall be redeemed at
the redemption price received by the Trust in respect of the Junior Subordinated
Debentures (the "Redemption Price") with the applicable proceeds from the
contemporaneous redemption or payment at Stated Maturity of the Junior
Subordinated Debentures. Redemptions of the Capital Securities shall be made and
the Redemption Price shall be payable on each Redemption Date only to the extent
that the Trust has sufficient funds available for the payment of such Redemption
Price. See also "-- Subordination of Common Securities."
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 Capital Securities to be
redeemed at its registered address. If the Trust gives a notice of redemption in
respect of the Capital Securities, then, by 12:00 noon, New York City time, on
the Redemption Date, to the extent funds are available, the Property Trustee
will deposit irrevocably with DTC or its nominee funds sufficient to pay the
applicable Redemption Price for all securities held in DTC and will give DTC
irrevocable instructions and authority to pay the Redemption Price to the
holders of the Capital Securities. See "Book-Entry Issuance." If any Capital
Securities are held in certificated form, the Trust, to the extent funds are
available, will irrevocably deposit with the paying agent for such Capital
Securities funds sufficient to pay the applicable Redemption Price and will give
the paying agent irrevocable instructions and authority to pay the Redemption
Price to the holders thereof upon surrender of their certificates evidencing the
Capital Securities. Notwithstanding the foregoing, Distributions payable on or
prior to the Redemption Date for any Capital Security called for redemption
shall be payable to the holders of such Capital Security on the relevant record
dates for the related Distribution Dates. If notice of redemption shall have
been given and funds deposited as required, then upon the date of such deposit,
all rights of the holders of such Capital Securities so called for redemption
will cease, except the right of the holders of such Capital Securities to
receive the Redemption Price, but without interest on such Redemption Price, and
such Capital Securities will cease to be outstanding. In the event that any date
fixed for redemption of Capital Securities is not a Business Day, then payment
of the Redemption Price payable on such date will be made on the next succeeding
day which is a Business Day (and without any interest or other payment in
respect of any such delay), except that, if such Business Day falls in the next
calendar year, such payment will be made on the immediately preceding Business
Day, in each case with the same force and effect as if made on the date such
payment was originally payable. In the event that payment of the Redemption
Price in respect of Capital Securities called for redemption is improperly
withheld or refused and not paid either by the Trust or by the Company pursuant
to the Guarantee as described under "Description of Guarantee", Distributions on
such Capital Securities will continue to accrue at the then applicable rate,
from the Redemption Date originally
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established by the Trust for the Capital Securities to the date such Redemption
Price is actually paid, in which case the actual payment date will be the date
fixed for redemption for purposes of calculating the Redemption Price.
Subject to applicable law (including, without limitation, United States
federal securities law) and to the provisions of the Declaration, the Company or
its subsidiaries may at any time and from time to time purchase outstanding
Capital Securities by tender, in the open market or by private agreement.
The Trust may not redeem fewer than all of the outstanding Capital
Securities unless all accrued and unpaid distributions have been paid on all
Capital Securities for all quarterly Distribution periods terminating on or
prior to the date of redemption. If less than all of the Capital Securities and
Common Securities issued by the Trust are to be redeemed on a Redemption Date,
then the aggregate amount of such Capital Securities and Common Securities to be
redeemed shall be allocated pro rata among the Capital Securities and the Common
Securities. If the Capital Securities are in book-entry form, they will be
redeemed as described below under "Book-Entry Issuance." If not, the particular
Capital Securities to be redeemed shall be selected on a pro rata basis not more
than 60 days prior to the Redemption Date by the Property Trustee from the
outstanding Capital Securities not previously called for redemption, by such
method as the Property Trustee shall deem fair and appropriate and which may
provide for the selection for redemption of portions (equal to $1,000 or an
integral multiple of $1,000 in excess thereof) of the liquidation amount of
Capital Securities of a denomination larger than $1,000. The Property Trustee
shall promptly notify the Trust registrar in writing of the Capital Securities
selected for redemption and, in the case of any Capital Security selected for
partial redemption, the liquidation amount thereof to be redeemed. For all
purposes of the Declaration, unless the context otherwise requires, all
provisions relating to the redemption of Capital Securities shall relate, in the
case of any Capital Security redeemed or to be redeemed only in part, to the
portion of the aggregate liquidation amount of Capital Securities which has been
or is to be redeemed.
SUBORDINATION OF COMMON SECURITIES
Payment of Distributions on, and the Redemption Price of, the Capital
Securities and the Common Securities, as applicable, shall be made pro rata
based on the liquidation amount of such Capital Securities and Common
Securities; provided, however, that if on any Distribution Date or Redemption
Date an Indenture Event of Default shall have occurred and be continuing, no
payment of any Distribution on, or Redemption Price of, any of the Common
Securities, and no other payment on account of the redemption, liquidation or
other acquisition of such Common Securities, shall be made unless payment in
full in cash of all accumulated and unpaid Distributions on all of the
outstanding Capital Securities for all Distribution periods terminating on or
prior thereto, or in the case of payment of the Redemption Price, the full
amount of such Redemption Price on all of the outstanding Capital Securities
then called for redemption, shall have been made or provided for, and all funds
available to the Property Trustee shall first be applied to the payment in full
in cash of all Distributions on, or Redemption Price of, the Capital Securities
then due and payable.
LIQUIDATION DISTRIBUTION UPON DISSOLUTION
Pursuant to the Declaration, the Trust shall automatically dissolve upon
expiration of its term and shall dissolve on the first to occur of: (i) certain
events of bankruptcy, dissolution or liquidation of the Company or the holder of
the Common Securities; (ii) the distribution of the Junior Subordinated
Debentures to the holders of the Capital Securities and Common Securities; (iii)
the repayment of all of the Capital Securities in connection with the maturity
or redemption of all of the Junior Subordinated Debentures; and (iv) the entry
by a court of competent jurisdiction of an order for the dissolution of the
Trust.
If an early dissolution occurs as described in clause (i), (ii) or (iv)
above, the Trust shall be liquidated by the Trustees as expeditiously as the
Trustees determine to be possible by distributing, after satisfaction of
liabilities to creditors of the Trust as provided by applicable law, to the
holders of the Capital Securities and Common Securities their pro rata interest
in the Junior Subordinated Debentures, unless such distribution is determined by
the Property Trustee not to be practicable, in which event such holders will be
entitled to receive out of the assets of the Trust available for distribution to
holders, after satisfaction of liabilities to
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creditors of the Trust as provided by applicable law, an amount equal to, in the
case of holders of Capital Securities, the aggregate of the liquidation amount
plus accrued and unpaid Distributions thereon to the date of payment (such
amount being the "Liquidation Distribution"). If such Liquidation Distribution
can be paid only in part because the Trust has insufficient assets available to
pay in full the aggregate Liquidation Distribution, then the amounts payable
directly by the Trust on the Capital Securities shall be paid on a pro rata
basis. The holder(s) of the Common Securities will be entitled to receive
distributions upon any such liquidation pro rata with the holders of the Capital
Securities, except that if an Indenture Event of Default has occurred and is
continuing, the Capital Securities shall have a priority over the Common
Securities.
After the liquidation date is fixed for any distribution of Junior
Subordinated Debentures to holders of the Capital Securities (i) the Capital
Securities will no longer be deemed to be outstanding, (ii) DTC or its nominee,
as a record holder of Capital Securities, will receive a registered global
certificate or certificates representing the Junior Subordinated Debentures to
be delivered upon such distribution and (iii) any certificates representing
Capital Securities held in certificated form will be deemed to represent Junior
Subordinated Debentures having a principal amount equal to the liquidation
amount of such Capital Securities, and bearing accrued and unpaid interest in an
amount equal to the accrued and unpaid Distributions on such Capital Securities
until such certificates are presented for cancellation whereupon the Company
will issue to such holder, and the Indenture Trustee will authenticate, a
certificate representing such Junior Subordinated Debentures.
TRUST ENFORCEMENT EVENTS
An Indenture Event of Default constitutes a Trust Enforcement Event under
the Declaration with respect to the Trust Securities, provided that pursuant to
the Declaration, the holder of the Common Securities will be deemed to have
waived any Trust Enforcement Event with respect to the Common Securities until
all Trust Enforcement Events with respect to the Capital Securities have been
cured, waived or otherwise eliminated. Until such Trust Enforcement Event with
respect to the Capital Securities has been so cured, waived or otherwise
eliminated, the Property Trustee will be deemed to be acting solely on behalf of
the holders of the Capital Securities and only the holders of the Capital
Securities will have the right to direct the Property Trustee with respect to
certain matters under the Declaration, and therefore the Indenture.
Upon the occurrence of a Trust Enforcement Event, the Indenture Trustee (as
defined herein) or the Property Trustee as the holder of the Junior Subordinated
Debentures will have the right under the Indenture to declare the principal of
and interest on the Junior Subordinated Debentures to be immediately due and
payable. Each of the Company and the Trust is required to file annually with the
Property Trustee an officer's certificate as to its compliance with all
conditions and covenants under the Declaration.
If the Property Trustee fails to enforce its rights with respect to the
Junior Subordinated Debentures held by the Trust, any record holder of Capital
Securities may institute legal proceedings directly against the Company to
enforce the Property Trustee's rights under such Junior Subordinated Debentures
without first instituting any legal proceedings against such Property Trustee or
any other person or entity. In addition, if a Trust Enforcement Event has
occurred and is continuing and such event is attributable to the failure of the
Company to pay interest, principal or other required payments on the Junior
Subordinated Debentures issued to the Trust on the date such interest, principal
or other payment is otherwise payable, then a record holder of Capital
Securities may, on or after the respective due dates specified in the Junior
Subordinated Debentures, institute a proceeding directly against the Company
under the Indenture for enforcement of payment on Junior Subordinated Debentures
having a principal amount equal to the aggregate liquidation amount of the
Capital Securities held by such holder. In connection with such Direct Action,
the Company will be subrogated to the rights of such record holder of Capital
Securities to the extent of any payment made by the Company to such record
holder of Capital Securities.
VOTING RIGHTS; AMENDMENT OF THE DECLARATION
Except as provided below and under "Description of Guarantee -- Amendments
and Assignment" and as otherwise required by law and the Declaration, the
holders of the Capital Securities have no voting rights.
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So long as any Junior Subordinated Debentures are held by the Property
Trustee, the Trustees shall not (i) direct the time, method and place of
conducting any proceeding for any remedy available to the Indenture Trustee or
executing any trust or power conferred on the Property Trustee with respect to
such Junior Subordinated Debentures, (ii) waive any past default that is
waivable under the Indenture, (iii) exercise any right to rescind or annul a
declaration that the principal of all the Junior Subordinated Debentures shall
be due and payable, or (iv) consent to any amendment, modification or
termination of the Indenture or such Junior Subordinated Debentures, where such
consent shall be required, without, in each case, obtaining the prior approval
of the holders of a majority in aggregate liquidation amount of all outstanding
Capital Securities; provided, however, that where a consent under the Indenture
would require the consent of each holder of Junior Subordinated Debentures
affected thereby, no such consent shall be given by the Property Trustee without
the prior consent of each holder of Capital Securities. The Trustees shall not
revoke any action previously authorized or approved by a vote of the holders of
the Capital Securities except pursuant to a subsequent vote of the holders of
the Capital Securities. The Property Trustee shall notify each holder of record
of the Capital Securities of any notice of default which it receives with
respect to the Junior Subordinated Debentures. In addition to obtaining the
foregoing approvals of the holders of the Capital Securities, prior to taking
any of the foregoing actions, the Trustees shall receive an opinion of counsel
experienced in such matters to the effect that the Trust will not be classified
as other than a grantor trust for United States federal income tax purposes on
account of such action.
The Declaration may be amended from time to time by the holders of a
majority of the Common Securities and the Regular Trustees (and in certain
circumstances the Property Trustee and the Delaware Trustee), without the
consent of the holders of the Capital Securities, (i) to cure any ambiguity,
correct or supplement any provisions in the Declaration that may be inconsistent
with any other provision, or to make any other provisions with respect to
matters or questions arising under the Declaration that shall not be
inconsistent with the other provisions of the Declaration or (ii) to modify,
eliminate or add to any provisions of the Declaration to such extent as shall be
necessary to ensure that the Trust will be classified as a grantor trust for
United States federal income tax purposes at all times that any Capital
Securities and Common Securities are outstanding or to ensure that the Trust
will not be required to register as an "investment company" under the Investment
Company Act or (iii) to conform to any change in Rule 3a-5 or written change in
interpretation or application of Rule 3a-5 by any legislative body, court,
government agency or regulatory authority which amendment does not have a
material adverse effect on the rights, preferences or privileges of the Holders;
provided, however, that such action shall not adversely affect in any material
respect the interests of any holder of Capital Securities or Common Securities,
and any amendments of the Declaration shall become effective when notice thereof
is given to the holders of Capital Securities and Common Securities. The
Declaration may be amended by the holders of a majority of the Common Securities
and the Regular Trustees with (i) the consent of holders representing not less
than a majority (based upon liquidation amounts) of the outstanding Capital
Securities and (ii) receipt by the Regular Trustees of an opinion of counsel to
the effect that such amendment or the exercise of any power granted to the
Regular Trustees in accordance with such amendment will not affect the Trust's
status as a grantor trust for United States federal income tax purposes or the
Trust's exemption from status as an "investment company" under the Investment
Company Act, provided, further that without the consent of each holder of
Capital Securities and Common Securities affected thereby, the Declaration may
not be amended to (i) change the amount or timing of any Distribution on the
Capital Securities and Common Securities or otherwise adversely affect the
amount of any Distribution required to be made in respect of the Capital
Securities and Common Securities as of a specified date or (ii) restrict the
right of a holder of Capital Securities or Common Securities to institute suit
for the enforcement of any such payment on or after such date.
Any required approval of holders of Capital Securities may be given at a
meeting of holders of Capital Securities convened for such purpose or pursuant
to written consent. The Regular Trustees will cause a notice of any meeting at
which holders of Capital Securities are entitled to vote, or of any matter upon
which action by written consent of such holders is to be taken, to be given to
each holder of record of Capital Securities in the manner set forth in the
Declaration.
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No vote or consent of the holders of Capital Securities will be required
for the Trust to redeem and cancel its Capital Securities in accordance with the
Declaration.
Notwithstanding that holders of Capital Securities are entitled to vote or
consent under any of the circumstances described above, any of the Capital
Securities that are owned by the Company, the Trustees or any affiliate of the
Company or any Trustees, shall, for purposes of such vote or consent, be treated
as if they were not outstanding.
EXPENSES AND TAXES
In the Indenture, the Company, as borrower, has agreed to pay all debts and
other obligations (other than with respect to the Capital Securities) and all
costs and expenses of the Trust (including costs and expenses relating to the
organization of the Trust, the fees and expenses of the Trustees and the costs
and expenses relating to the operation of the Trust) and to pay any and all
taxes and all costs and expenses with respect thereto (other than United States
withholding taxes) to which the Trust might become subject. The foregoing
obligations of the Company under the Indenture are for the benefit of, and shall
be enforceable by, any person to whom any such debts, obligations, costs,
expenses and taxes are owed (a "Creditor") whether or not such Creditor has
received notice thereof. Any such Creditor may enforce such obligations of the
Company directly against the Company, and the Company has irrevocably waived any
right or remedy to require that any such Creditor take any action against the
Trust or any other person before proceeding against the Company. The Company has
also agreed in the Indenture to execute such additional agreements as may be
necessary or desirable to give full effect to the foregoing.
REGISTRAR AND TRANSFER AGENT
The Bank of New York is acting as the initial registrar and transfer agent
for the Capital Securities.
Registration of transfers of Capital Securities will be effected without
charge by or on behalf of the Trust, but the Trust may require payment of any
tax or other governmental charges that may be imposed in connection with any
transfer or exchange. The Trust will not be required (i) to register or cause to
be registered the transfer or exchange of the Capital Securities during a period
beginning at the opening of business 15 days before the day of the mailing of
the relevant notice of redemption and ending at the close of business on the day
of mailing of such notice of redemption or (ii) to register or cause to be
registered the transfer or exchange of any Capital Securities so selected for
redemption, except in the case of any Capital Securities being redeemed in part,
any portion thereof not to be redeemed.
INFORMATION CONCERNING THE PROPERTY TRUSTEE
The Property Trustee, other than during the occurrence and continuance of a
Trust Enforcement Event, undertakes to perform only such duties as are
specifically set forth in the Declaration and, after such Trust Enforcement
Event, must exercise the same degree of care and skill as a prudent person would
exercise or use in the conduct of his or her own affairs. Subject to this
provision, the Property Trustee is under no obligation to exercise any of the
powers vested in it by the Declaration at the request of any holder of Capital
Securities unless it is offered reasonable indemnity against the costs, expenses
and liabilities that might be incurred thereby. If no Trust Enforcement Event
has occurred and is continuing and the Property Trustee is required to decide
between alternative causes of action, construe ambiguous provisions in the
Declaration or is unsure of the application of any provision of the Declaration,
and the matter is not one on which holders of Capital Securities are entitled
under the Declaration to vote, then the Property Trustee may, but shall be under
no duty to, take such action as is directed by the Company and, if not so
directed, shall take such action as it deems advisable and in the best interests
of the holders of the Capital Securities and the Common Securities and will have
no liability except for its own bad faith, negligence or willful misconduct.
PAYMENT AND PAYING AGENCY
Payments in respect of the Global Capital Securities (as defined herein)
shall be made to DTC, which shall credit the relevant accounts at DTC on the
applicable Distribution Dates or, if the Capital Securities are
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held in certificated form, such payments shall be made by check mailed to the
address of the holder entitled thereto as such address shall appear on the
register maintained by the registrar. The paying agent (the "Paying Agent")
shall initially be the Property Trustee and any co-paying agent chosen by the
Property Trustee and acceptable to the Regular Trustees and the Company. The
Paying Agent shall be permitted to resign as Paying Agent upon 30 days' written
notice to the Property Trustee and the Company. In the event that the Property
Trustee shall no longer be the Paying Agent, the Regular Trustees shall appoint
a successor (which shall be a bank or trust company acceptable to the Regular
Trustees and the Company) to act as Paying Agent.
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. The Trust may, at the request of the Company with the consent
of the holders of at least a majority in aggregate liquidation amount of the
Capital Securities, merge with or into, consolidate, amalgamate, be replaced by
or convey, transfer or lease its properties and assets substantially as an
entirety to a trust organized as such under the laws of any State; provided that
(i) such successor entity (if not the Trust) either (a) expressly assumes all of
the obligations of the Trust with respect to the Capital Securities or (b)
substitutes for the Capital Securities other securities having substantially the
same terms as the Capital Securities (the "Successor Securities") so long as the
Successor Securities rank the same as the Capital Securities rank in priority
with respect to distributions and payments upon liquidation, redemption and
otherwise, (ii) if the Trust is not the successor entity, the Property Trustee
expressly appoints a trustee of such successor entity possessing the same powers
and duties as the Property Trustee as the holder of the Junior Subordinated
Debentures, (iii) such merger, consolidation, amalgamation, replacement,
conveyance, transfer or lease does not cause the Capital Securities (including
any Successor Securities) to be downgraded by any nationally recognized
statistical rating organization, (iv) such merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease does not adversely affect the rights,
preferences and privileges of the holders of the Capital Securities (including
any Successor Securities) in any material respect, (v) such successor entity has
a purpose identical to that of the Trust, (vi) prior to such merger,
consolidation, amalgamation, replacement, conveyance, transfer, or lease, the
Company has received an opinion from independent counsel to the Trust
experienced in such matters to the effect that (a) such merger, consolidation,
amalgamation, replacement, conveyance, transfer or lease does not adversely
affect the rights, preferences and privileges of the holders of the Capital
Securities (including any Successor Securities) in any material respect and (b)
following such merger, consolidation, amalgamation, replacement, conveyance,
transfer or lease, (1) neither the Trust nor such successor entity will be
required to register as an investment company under the Investment Company Act
and (2) the Trust or the successor entity will continue to be classified as a
grantor trust for United States federal income tax purposes, (vii) the Company
or any permitted successor or assignee owns all of the Common Securities of such
successor entity and guarantees the obligations of such successor entity under
the Successor Securities at least to the extent provided by the Guarantee, and
(viii) such successor entity (if not the Trust) expressly assumes all of the
obligations of the Trust with respect to the Trustees. Notwithstanding the
foregoing, the Trust shall not, except with the consent of holders of 100% in
aggregate liquidation amount of the Capital Securities, consolidate, amalgamate,
merge with or into, be replaced by or convey, transfer or lease its properties
and assets substantially as an entirety to any other entity or permit any other
entity to consolidate, amalgamate, merge with or into, or replace it if such
consolidation, amalgamation, merger, replacement, conveyance, transfer or lease
would cause the Trust or the successor entity to be classified as other than a
grantor trust for United States federal income tax purposes.
MERGER OR CONSOLIDATION OF TRUSTEES
Any corporation into which the Property Trustee, the Delaware Trustee or
any Regular Trustee may be merged or converted or with which it may be
consolidated, or any corporation resulting from any merger, conversion or
consolidation to which such Trustee shall be a party, or any corporation
succeeding to all or substantially all the corporate trust business of such
Trustee, shall be the successor of such Trustee under the Declaration, provided
such corporation shall be otherwise qualified and eligible.
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DESCRIPTION OF JUNIOR SUBORDINATED DEBENTURES
The Old Junior Subordinated Debentures were issued under, and the Junior
Subordinated Debentures will be issued under, the Indenture. This summary of
certain terms and provisions of the Junior Subordinated Debentures and the
Indenture does not purport to be complete and is subject to, and is qualified in
its entirety by reference to, the Indenture.
GENERAL
Concurrently with the issuance of the Old Capital Securities, the Trust
invested the proceeds thereof and the consideration paid by the Company for the
Common Securities in the Old Junior Subordinated Debentures issued by the
Company. Pursuant to the Exchange Offer, the Company will exchange $150 million
aggregate principal amount of Old Junior Subordinated Debentures for a like
amount of Junior Subordinated Debentures as soon as is practicable after the
date of this Prospectus, and thereafter $4,640,000 aggregate principal amount of
Old Junior Subordinated Debentures will remain outstanding. The Old Junior
Subordinated Debentures were, and the Junior Subordinated Debentures will be in
the principal amount equal to the aggregate liquidation amount of the Capital
Securities plus the Company's concurrent investment in the Common Securities. It
is anticipated that, until the liquidation, if any, of the Trust, each Junior
Subordinated Debenture will be held in the name of the Property Trustee in trust
for the benefit of the holders of the Capital Securities and the Common
Securities.
The Junior Subordinated Debentures will bear interest at a variable annual
rate equal to LIBOR plus 1.0% in the case of Capital I, and LIBOR plus 0.85%, in
the case of Capital II, on the principal amount thereof, payable quarterly in
arrears on the relevant Interest Payment Date, commencing April 15, 1997, in the
case of Capital I and May 1, 1997, in the case of Capital II, to the person in
whose name each Junior Subordinated Debenture is registered, subject to certain
exceptions, at the close of business on the first day of the month of (in the
case of Capital I), and the fifteenth day of the month preceding (in the case of
Capital II), the relevant Interest Payment Date. The amount of interest payable
for any period will be computed on the basis of the actual number of days
elapsed in a year of twelve 30-day months. In the event that any date on which
interest is payable on the Junior Subordinated Debentures is not a Business Day,
then payment of the interest payable on such date will be made on the next
succeeding day that is a Business Day (and without any interest or other payment
in respect of any such delay), with the same force and effect as if made on the
date such payment was originally payable. Accrued interest that is not paid on
the applicable Interest Payment Date will bear additional interest on the amount
thereof (to the extent permitted by law) at a variable annual rate equal to
LIBOR plus 1.0% in the case of Capital I, and LIBOR plus 0.85%, in the case of
Capital II, compounded quarterly. The term "interest" as used herein shall
include quarterly interest payments, interest on quarterly interest payments not
paid on the applicable Interest Payment Date and any Additional Interest, as
applicable.
The Junior Subordinated Debentures will mature on January 15, 2027 in the
case of Capital I, and on February 1, 2027, in the case of Capital II (in each
case the "Stated Maturity"). The Junior Subordinated Debentures will be
unsecured and will rank junior and be subordinate in right of payment to all
Indebtedness (as defined below) of the Company. The Indenture does not limit the
incurrence or issuance of other secured or unsecured debt of the Company,
whether under the Indenture or any existing or other indenture that the Company
may enter into in the future or otherwise. See "--Subordination."
The Indenture does not limit the aggregate principal amount of Junior
Subordinated Debentures that may be issued thereunder.
The general provisions of the Indenture do not afford holders of the Junior
Subordinated Debentures protection in the event of a highly leveraged or other
transaction involving the Company that may adversely affect holders of the
Junior Subordinated Debentures.
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INTEREST
The Bank of New York, as Calculation Agent (the "Calculation Agent"), will
calculate the interest rate for each quarterly interest period based on LIBOR
determined as of two London Business Days (defined as any day, other than a
Saturday or Sunday, on which banks are open for business in London) prior to the
first day of such interest period (each, a "Determination Date"). "LIBOR" means,
with respect to a quarterly interest period relating to an Interest Payment Date
(in the following order of priority):
(i) the rate (expressed as a percentage per annum) for Eurodollar
deposits having a three-month maturity that appears on Telerate Page 3750
as of 11:00 a.m. (London time) on the related Determination Date;
(ii) if such rate does not appear on Telerate Page 3750 as of 11:00
a.m. (London time) on the related Determination Date, LIBOR will be the
arithmetic mean (if necessary rounded upwards to the nearest whole multiple
of .00001%) of the rates (expressed as percentages per annum) for
Eurodollar deposits having a three-month maturity that appear on Reuters
Monitor Money Rates Page LIBO ("Reuters Page LIBO") as of 11:00 a.m.
(London time) on such Determination Date;
(iii) if such rate does not appear on Reuters Page LIBO as of 11:00
a.m. (London time) on the related Determination Date, the Calculation Agent
will request the principal London offices of four leading banks in the
London interbank market to provide such banks' offered quotations
(expressed as percentages per annum) to prime banks in the London interbank
market for Eurodollar deposits having a three-month maturity as of 11:00
a.m. (London time) on such Determination Date. If at least two quotations
are provided, LIBOR will be the arithmetic mean (if necessary rounded
upwards to the nearest whole multiple of .00001%) of such quotations;
(iv) if fewer than two such quotations are provided as requested in
clause (iii) above, the Calculation Agent will request four major New York
City banks to provide such banks' offered quotations (expressed as
percentages per annum) to leading European banks for loans in Eurodollars
as of 11:00 a.m. (London time) on such Determination Date. If at least two
such quotations are provided, LIBOR will be the arithmetic mean (if
necessary rounded upwards to the nearest whole multiple of .00001%) of such
quotations; and
(v) if fewer than two such quotations are provided as requested in
clause (iv) above, LIBOR will be LIBOR determined with respect to the
interest period immediately preceding such current interest period.
If the rate for Eurodollar deposits having a three-month maturity that
initially appears on Telerate Page 3750 or Reuters Page LIBO, as the case may
be, as of 11:00 a.m. (London time) on the related Determination Date is
superseded on Telerate Page 3750 or Reuters Page LIBO, as the case may be, by a
corrected rate before 12:00 noon (London time) on such Determination Date, the
corrected rate as so substituted on the applicable page will be the applicable
LIBOR for such Determination Date.
The initial Distribution rates for the Capital Securities of each Trust and
the interest rates for related Junior Subordinated Debentures are 6.59375% for
Capital I and 6.4125% for Capital II.
Absent manifest error, the Calculation Agent's determination of LIBOR and
its calculation of the applicable interest rate for each interest period will be
final and binding. Investors may obtain the interest rates for the current and
preceding interest period by writing or calling Corporate Trust Administration
at the Calculation Agent at The Bank of New York, 101 Barclay Street, Floor 21
West, New York, New York 10286 (telephone (212) 815-5375).
OPTION TO EXTEND INTEREST PAYMENT PERIOD
So long as no Indenture Event of Default has occurred and is continuing,
the Company has the right under the Indenture to defer the payment of interest
at any time or from time to time for a period not exceeding 20 consecutive
quarters with respect to each Extension Period, provided that no Extension
Period may extend beyond the Stated Maturity of the Junior Subordinated
Debentures. At the end of such Extension
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Period, the Company must pay all interest then accrued and unpaid (together with
interest thereon at a variable annual rate equal to LIBOR plus 1.0% for Capital
I or LIBOR plus 0.85% for Capital II, compounded quarterly, to the extent
permitted by applicable law). During an Extension Period, interest will continue
to accrue and holders of Junior Subordinated Debentures (or holders of Capital
Securities while the Capital Securities are outstanding) will be required to
accrue interest income (as OID) for United States federal income tax purposes.
See "Certain United States Federal Income Tax Consequences -- Interest Income
and Original Issue Discount."
During any such Extension Period, the Company may not, and may not permit
any subsidiary of the Company to, (i) declare or pay any dividends or
distributions on, or redeem, purchase, acquire, or make a liquidation payment
with respect to, any of the Company's capital stock or (ii) make any payment of
principal, interest or premium, if any, on or repay, repurchase or redeem any
debt securities of the Company that rank pari passu with or junior in interest
to the Junior Subordinated Debentures or make any guarantee payments with
respect to any guarantee by the Company of the debt securities of any subsidiary
of the Company if such guarantee ranks pari passu with or junior in interest to
the Junior Subordinated Debentures (other than (a) repurchases, redemptions or
other acquisitions of shares of capital stock of the Company in connection with
any employment contract, benefit plan or other similar arrangement with or for
the benefit of any one or more employees, officers, directors or consultants, or
in connection with a dividend reinvestment or stockholder stock purchase plan,
(b) as a result of an exchange or conversion of any class or series of the
Company's capital stock (or any capital stock of a subsidiary of the Company)
for any other class or series of the Company's capital stock or of any class or
series of the Company's indebtedness for any class or series of the Company's
capital stock, (c) the purchase of fractional interests in shares of the
Company's capital stock pursuant to the conversion or exchange provisions of
such capital stock or the security being converted or exchanged, (d) any
declaration of a dividend in connection with any stockholder's rights plan, or
the issuance of rights, stock or other property under any stockholder's rights
plan, or the redemption or repurchase of rights pursuant thereto, or (e) any
dividend in the form of stock, warrants, options or other rights where the
dividend stock or the stock issuable upon exercise of such warrants, options or
other rights is the same stock as that on which the dividend is being paid (or
ranks pari passu with or junior to such stock)). Prior to the termination of any
such Extension Period, the Company may further extend the Extension Period,
provided that no Extension Period may exceed 20 consecutive quarters or extend
beyond the Stated Maturity of the Junior Subordinated Debentures. Upon the
termination of any such Extension Period and the payment of all amounts then due
on any Interest Payment Date, the Company may elect to begin a new Extension
Period subject to the above requirements. No interest shall be due and payable
during an Extension Period, except at the end thereof. The Company must give the
Property Trustee, the Regular Trustees and the Indenture Trustee notice of its
election of such Extension Period not less than one Business Day prior to such
record date. The Property Trustee shall give notice of the Company's election to
begin a new Extension Period to the holders of the Capital Securities.
REDEMPTION
The Junior Subordinated Debentures are not redeemable prior to January 15,
2007, in the case of Capital I, or February 1, 2007, in the case of Capital II,
unless a Special Event has occurred. The Junior Subordinated Debentures are
redeemable prior to maturity at the option of the Company, subject to the
receipt of any necessary prior approval of the Federal Reserve and the Central
Bank of Ireland, (i) on or after January 15, 2007 or February 1, 2007, as
applicable, in whole or in part at any time, at a redemption price equal to the
principal amount of the Junior Subordinated Debentures so redeemed plus accrued
and unpaid interest, if any, to the date of redemption, or (ii) at any time in
whole (but not in part), within 90 days of the occurrence of a Special Event, at
such redemption price.
If the Junior Subordinated Debentures are redeemed, the Trust must redeem
Trust Securities having an aggregate liquidation amount equal to the aggregate
principal amount of Junior Subordinated Debentures so redeemed. See "Description
of New Capital Securities -- Redemption -- Mandatory Redemption."
Notice of any redemption will be mailed at least 30 days but not more than
60 days before the redemption date to each holder of Junior Subordinated
Debentures to be redeemed at its registered address. Unless the
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Company defaults in payment of the redemption price, on and after the redemption
date interest ceases to accrue on such Junior Subordinated Debentures or
portions thereof called for redemption.
CERTAIN COVENANTS OF THE COMPANY
The Company has agreed in the Indenture that if and so long as the Trust is
the holder of all Junior Subordinated Debentures, the Company, as borrower, will
pay to the Trust all fees and expenses related to the Trust and the offering of
the Capital Securities and will pay, directly or indirectly, all ongoing costs,
expenses and liabilities of the Trust (including any taxes, duties, assessments
or governmental charges of whatever nature (other than withholding taxes)
imposed by the United States or any domestic taxing authority upon the Trust but
excluding obligations under the Capital Securities).
The Company also agreed that it will not, and will not permit any
subsidiary of the Company to, (i) declare or pay any dividends or distributions
on, or redeem, purchase, acquire, or make a liquidation payment with respect to,
any of the Company's capital stock or (ii) make any payment of principal,
interest or premium, if any, on or repay or repurchase or redeem any debt
securities of the Company that rank pari passu with or junior in interest to the
Junior Subordinated Debentures or make any guarantee payments with respect to
any guarantee by the Company of the debt securities of any subsidiary of the
Company if such guarantee ranks pari passu with or junior in interest to the
Junior Subordinated Debentures (other than (a) repurchases, redemptions or other
acquisitions of shares of capital stock of the Company in connection with any
employment contract, benefit plan or other similar arrangement with or for the
benefit of any one or more employees, officers, directors or consultants, or in
connection with a dividend reinvestment or stockholder stock purchase plan, (b)
as a result of an exchange or conversion of any class or series of the Company's
capital stock (or any capital stock of a subsidiary of the Company) for any
other class or series of the Company's capital stock or of any class or series
of the Company's indebtedness for any class or series of the Company's capital
stock, (c) the purchase of fractional interests in shares of the Company's
capital stock pursuant to the conversion or exchange provisions of such capital
stock or the security being converted or exchanged, (d) any declaration of a
dividend in connection with any stockholder's rights plan, or the issuance of
rights, stock or other property under any stockholder's rights plan, or the
redemption or repurchase of rights pursuant thereto, or (e) any dividend in the
form of stock, warrants, options or other rights where the dividend stock or the
stock issuable upon exercise of such warrants, options or other rights is the
same stock as that on which the dividend is being paid (or ranks pari passu with
or junior to such stock)) if at such time (x) there shall have occurred any
event of which the Company has actual knowledge that (I) with the giving of
notice or the lapse of time, or both, would constitute an Indenture Event of
Default with respect to Junior Subordinated Debentures and (II) in respect of
which the Company shall not have taken reasonable steps to cure, (y) the Company
shall be in default with respect to its payment of any obligations under the
Guarantee or (z) the Company shall have given notice of its election of an
Extension Period as provided in the Indenture and shall not have rescinded such
notice, or such Extension Period, or any extension thereof, shall be continuing.
SUBORDINATION
In the Indenture, the Company has covenanted and agreed that any Junior
Subordinated Debentures issued thereunder will be subordinated and junior in
right of payment to all Indebtedness to the extent provided in the Indenture.
Upon any payment or distribution of assets of the Company upon any liquidation,
dissolution, winding-up, reorganization, assignment for the benefit of
creditors, marshaling of assets or any bankruptcy, insolvency, debt
restructuring or similar proceedings in connection with any insolvency or
bankruptcy proceeding of the Company, the holders of Indebtedness will first be
entitled to receive payment in full of principal of and premium, if any, and
interest, if any, on such Indebtedness before the holders of Junior Subordinated
Debentures or the Property Trustee on behalf of the holders of Capital
Securities will be entitled to receive or retain any payment in respect of the
principal of and premium, if any, or interest, if any, on the Junior
Subordinated Debentures; provided, however, that holders of Indebtedness shall
not be entitled to receive payment of any such amounts to the extent that such
holders would be required by the subordination provisions of such Indebtedness
to pay such amounts over to the obligees on trade accounts payable or other
liabilities arising in the ordinary course of the Company's business.
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In the event of the acceleration of the maturity of any Junior Subordinated
Debentures, the holders of all Indebtedness outstanding at the time of such
acceleration will first be entitled to receive payment in full of all amounts
then due thereon (including any amounts due upon acceleration) before the
holders of Junior Subordinated Debentures will be entitled to receive or retain
any payment in respect of the principal of and premium, if any, or interest, if
any, on the Junior Subordinated Debentures; provided, however, that holders of
Indebtedness shall not be entitled to receive payment of any such amounts to the
extent that such holders would be required by the subordination provisions of
such Indebtedness to pay such amounts over to the obligees on trade accounts
payable or other liabilities arising in the ordinary course of the Company's
business.
No payments on account of principal (or premium, if any) or interest, if
any, in respect of the Junior Subordinated Debentures may be made if there shall
have occurred and be continuing a default in any payment with respect to
Indebtedness, or an event of default with respect to any Indebtedness resulting
in the acceleration of the maturity thereof, or if any judicial proceeding shall
be pending with respect to any such default.
"Indebtedness" means, whether recourse is to all or a portion of the assets
of the Company and whether or not contingent, (i) every obligation of the
Company for money borrowed; (ii) every obligation of the Company evidenced by
bonds, debentures, notes or other similar instruments, including obligations
incurred in connection with the acquisition of property, assets or businesses;
(iii) every reimbursement obligation of the Company with respect to letters of
credit, bankers' acceptances or similar facilities issued for the account of the
Company; (iv) every obligation of the Company issued or assumed as the deferred
purchase price of property or services (but excluding trade accounts payable or
accrued liabilities arising in the ordinary course of business); (v) every
capital lease obligation of the Company; (vi) every obligation of the Company
for claims (as defined in Section 101(4) of the United States Bankruptcy Code of
1978, as amended) in respect of derivative products such as interest and foreign
exchange rate contracts, commodity contracts and similar arrangements; and (vii)
every obligation of the type referred to in clauses (i) through (vi) of another
person and all dividends of another person the payment of which, in either case,
the Company has guaranteed or is responsible or liable, directly or indirectly,
as obligor or otherwise; provided that "Indebtedness" shall not include (i) any
obligations which, by their terms, are expressly stated to rank pari passu in
right of payment with, or to not be superior in right of payment to, the Junior
Subordinated Debentures (including the Company's obligations under the Capital
Securities), (ii) any Indebtedness of the Company which when incurred and
without respect to any election under Section 1111(b) of the United States
Bankruptcy Code of 1978, as amended, was without recourse to the Company, (iii)
any Indebtedness of the Company to any of its subsidiaries, (iv) Indebtedness to
any employee of the Company, or (v) any indebtedness in respect of debt
securities issued to any trust, or a trustee of such trust, partnership or other
entity affiliated with the Company that is a financing entity of the Company in
connection with the issuance of such financing entity of securities that are
similar to the Capital Securities.
The Indenture places no limitation on the amount of additional Indebtedness
that may be incurred by the Company or any indebtedness or other liabilities
that may be incurred by the Company's subsidiaries. As of December 31, 1996,
Indebtedness of the Company aggregated approximately $539.6 million, and the
Company's subsidiaries had indebtedness and other liabilities of approximately
$8.9 billion to which the Junior Subordinated Debentures would be effectively
subordinated.
INDENTURE EVENTS OF DEFAULT
The Indenture provides that any one or more of the following described
events with respect to the Junior Subordinated Debentures that has occurred and
is continuing constitutes an "Indenture Event of Default" with respect to the
Junior Subordinated Debentures:
(i) failure for 30 days to pay any interest on the Junior
Subordinated Debentures when due (subject to the deferral of any due date
in the case of an Extension Period); or
(ii) failure to pay any principal on the Junior Subordinated
Debentures when due whether at maturity, upon redemption by declaration or
otherwise; or
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(iii) failure to observe or perform in any material respect any other
covenant contained in the Indenture for 90 days after written notice to the
Company from the Indenture Trustee or the holders of at least 25% in
aggregate outstanding principal amount of outstanding Junior Subordinated
Debentures; or
(iv) certain events in bankruptcy, insolvency or reorganization of
the Company.
The holders of a majority in aggregate outstanding principal amount of
Junior Subordinated Debentures have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Indenture
Trustee. The Indenture Trustee or the holders of not less than 25% in aggregate
outstanding principal amount of Junior Subordinated Debentures may declare the
principal due and payable immediately upon an Indenture Event of Default, and,
should the Indenture Trustee or such holders of such Junior Subordinated
Debentures fail to make such declaration, the holders of at least 25% in
aggregate liquidation amount of the Capital Securities shall have such right.
The holders of a majority in aggregate outstanding principal amount of Junior
Subordinated Debentures may annul such declaration and waive the default if the
default (other than the non-payment of the principal of Junior Subordinated
Debentures which has become due solely by such acceleration) has been cured and
a sum sufficient to pay all matured installments of interest and principal due
otherwise than by acceleration has been deposited with the Indenture Trustee,
and should the holders of such Junior Subordinated Debentures fail to annul such
declaration and waive such default, the holders of a majority in aggregate
liquidation amount of the Capital Securities shall have such right.
The holders of a majority in aggregate outstanding principal amount of the
Junior Subordinated Debentures affected thereby may, on behalf of the holders of
all the Junior Subordinated Debentures, waive any past default, except a default
in the payment of principal or interest (unless such default has been cured and
a sum sufficient to pay all matured installments of interest and principal due
otherwise than by acceleration has been deposited with the Indenture Trustee) or
a default in respect of a covenant or provision which under the Indenture cannot
be modified or amended without the consent of the holder of each outstanding
Junior Subordinated Debentures, and should the holders of such Junior
Subordinated Debentures fail to waive such default, the holders of a majority in
aggregate liquidation amount of the Capital Securities shall have such right.
The Company is required to file annually with the Indenture Trustee a
certificate as to whether or not the Company is in compliance with all the
conditions and covenants applicable to it under the Indenture.
In case an Indenture Event of Default shall occur and be continuing, the
Property Trustee will have the right to declare the principal of and the
interest on such Junior Subordinated Debentures and any other amounts payable
under the Indenture to be forthwith due and payable and to enforce its other
rights as a creditor with respect to such Junior Subordinated Debentures.
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF CAPITAL SECURITIES
If an Indenture Event of Default has occurred and is continuing and such
event is attributable to the failure of the Company to pay interest or principal
on the Junior Subordinated Debentures on the date such interest or principal is
otherwise payable, a holder of Capital Securities may institute a Direct Action
for payment. The Company may not amend the Indenture to remove the foregoing
right to bring a Direct Action without the prior written consent of the holders
of all of the Capital Securities. Notwithstanding any payment made to such
holder of Capital Securities by the Company in connection with a Direct Action,
the Company shall remain obligated to pay the principal of or interest on the
Junior Subordinated Debentures held by the Trust or the Property Trustee and the
Company shall be subrogated to the rights of the holder of such Capital
Securities with respect to payments on the Capital Securities to the extent of
any payments made by the Company to such holder in any Direct Action. The
holders of Capital Securities will not be able to exercise directly any other
remedy available to the holders of the Junior Subordinated Debentures.
CONSOLIDATION, MERGER, SALE OF ASSETS AND OTHER TRANSACTIONS
The Indenture provides that the Company shall not consolidate with or merge
into any other Person or convey, transfer or lease its properties and assets
substantially as an entirety to any Person, unless (i) in case the Company
consolidates with or merges into another Person or conveys, transfers or leases
its properties and
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assets substantially as an entirety to any Person, the successor Person is
organized under the laws of the United States or any state or the District of
Columbia, and such successor Person expressly assumes the Company's obligations
on the Junior Subordinated Debentures issued under the Indenture; (ii)
immediately after giving effect thereto, no Indenture Event of Default, and no
event which, after notice or lapse of time or both, would become an Indenture
Event of Default, shall have happened and be continuing; (iii) if at the time
any Capital Securities are outstanding, such transaction is permitted under the
Declaration and Guarantee and does not give rise to any breach or violation of
the Declaration or Guarantee; (iv) any such lease shall provide that it will
remain in effect so long as any Junior Subordinated Debentures are outstanding;
and (v) certain other conditions prescribed in the Indenture are met.
MODIFICATION OF INDENTURE
From time to time the Company and the Indenture Trustee may, without the
consent of the holders of the Junior Subordinated Debentures, amend, waive or
supplement the Indenture for specified purposes, including, among other things,
curing ambiguities, defects or inconsistencies (provided that any such action
does not materially adversely affect the interest of the holders of Junior
Subordinated Debentures) and qualifying, or maintaining the qualification of,
the Indenture under the Trust Indenture Act. The Indenture contains provisions
permitting the Company and the Indenture Trustee, with the consent of the
holders of not less than a majority in principal amount of outstanding Junior
Subordinated Debentures affected, to modify the Indenture in a manner affecting
the rights of the holders of such Junior Subordinated Debentures; provided that
no such modification may, without the consent of the holder of each outstanding
Junior Subordinated Debentures so affected, (i) change the stated maturity of
Junior Subordinated Debentures, or reduce the principal amount thereof, or
reduce the rate or extend the time of payment of interest thereon (except such
extension as is contemplated hereby) or (ii) reduce the percentage of principal
amount of Junior Subordinated Debentures the holders of which are required to
consent to any such modification of the Indenture, provided that, so long as any
Capital Securities remain outstanding, no such modification may be made that
adversely affects the holders of such Capital Securities in any material
respect, and no termination of the Indenture may occur, and no waiver of any
Indenture Event of Default or compliance with any covenant under the Indenture
may be effective, without the prior consent of the holders of at least a
majority of the aggregate liquidation amount of the outstanding Capital
Securities unless and until the principal of the Junior Subordinated Debentures
and all accrued and unpaid interest thereon have been paid in full and certain
other conditions are satisfied.
DEFEASANCE AND DISCHARGE
The Indenture provides that the Company, at the Company's option: (a) will
be discharged from any and all obligations in respect of the Junior Subordinated
Debentures (except for certain obligations to register the transfer or exchange
of Junior Subordinated Debentures, replace stolen, lost or mutilated Junior
Subordinated Debentures, maintain paying agencies and hold moneys for payment in
trust) or (b) need not comply with certain restrictive covenants of the
Indenture (including that described in the second paragraph under "Certain
Covenants of the Company"), in each case if the Company deposits, in trust with
the Indenture Trustee, money or U.S. Government Obligations which through the
payment of interest thereon and principal thereof in accordance with their terms
will provide money, in an amount sufficient to pay all the principal of, and
interest and premium, if any, on the Junior Subordinated Debentures on the dates
such payments are due in accordance with the terms of such Junior Subordinated
Debentures. To exercise any such option, the Company is required to deliver to
the Indenture Trustee an opinion of counsel to the effect that the deposit and
related defeasance would not cause the holders of the Junior Subordinated
Debentures to recognize income, gain or loss for United States federal income
tax purposes and, in the case of a discharge pursuant to clause (a), such
opinion shall be accompanied by a private letter ruling to the effect received
by the Company from the United States Internal Revenue Service or revenue ruling
pertaining to a comparable form of transaction to such effect published by the
United States Internal Revenue Service.
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DISTRIBUTIONS OF JUNIOR SUBORDINATED DEBENTURES; BOOK-ENTRY ISSUANCE
Under certain circumstances involving the termination of the Trust, Junior
Subordinated Debentures may be distributed to the holders of the Capital
Securities in liquidation of the Trust after satisfaction of liabilities to
creditors of the Trust as provided by applicable law. If distributed to holders
of Capital Securities in liquidation, the Junior Subordinated Debentures will
initially be issued in the form of global securities and certificated
securities. DTC, or any successor depositary, will act as depositary for such
global securities. It is anticipated that the depositary arrangements for such
global securities would be substantially identical to those in effect for the
Capital Securities. For a description of global securities and certificated
securities, see "Book-Entry Issuance."
There can be no assurance as to the market price of any Junior Subordinated
Debentures that may be distributed to the holders of Capital Securities.
PAYMENT AND PAYING AGENTS
The Company initially will act as Paying Agent with respect to the Junior
Subordinated Debentures except that, if the Junior Subordinated Debentures are
distributed to the holders of the Capital Securities in liquidation of such
holders' interests in the Trust, the Indenture Trustee will act as the Paying
Agent. The Company at any time may designate additional Paying Agents or rescind
the designation of any Paying Agent or approve a change in the office through
which any Paying Agent acts, except that the Company will be required to
maintain a Paying Agent at the place of payment.
Any moneys deposited with the Indenture Trustee or any Paying Agent, or
then held by the Company in trust, for the payment of the principal of and
premium, if any, or interest on any Junior Subordinated Debentures and remaining
unclaimed for two years after such principal and premium, if any, or interest
has become due and payable shall, at the request of the Company, be repaid to
the Company and the holder of such Junior Subordinated Debentures shall
thereafter look, as a general unsecured creditor, only to the Company for
payment thereof.
GOVERNING LAW
The Indenture and the Junior Subordinated Debentures will be governed by
and construed in accordance with the laws of the State of New York.
INFORMATION CONCERNING THE INDENTURE TRUSTEE
The Indenture Trustee shall have and be subject to all the duties and
responsibilities specified with respect to an indenture trustee under the Trust
Indenture Act. Subject to such provisions, the Indenture Trustee is under no
obligation to exercise any of the powers vested in it by the Indenture at the
request of any holder of Junior Subordinated Debentures, unless offered
reasonable indemnity by such holder against the costs, expenses and liabilities
which might be incurred thereby. 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.
DESCRIPTION OF GUARANTEE
The Old Guarantee was executed and delivered by the Company concurrently
with the issuance by the Trust of the Old Capital Securities for the benefit of
the holders from time to time of the Capital Securities. As soon as is
practicable after the date hereof, the Company will exchange the Old Guarantee
for the Guarantee. The Guarantee has been qualified under the Trust Indenture
Act. This summary of certain provisions of the Guarantee does not purport to be
complete and is subject to, and qualified in its entirety by reference to, all
of the provisions of the Guarantee, including the definitions therein of certain
terms. The Guarantee Trustee will hold the Guarantee for the benefit of the
holders of the Capital Securities.
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GENERAL
The Company will irrevocably and unconditionally agree to pay in full on a
subordinated basis, to the extent set forth in the Guarantee and described
herein, the Guarantee Payments (as defined below) to the holders of the Capital
Securities, as and when due, regardless of any defense, right of set-off or
counterclaim that the Trust may have or assert other than the defense of
payment. The following payments with respect to the Capital Securities, to the
extent not paid by or on behalf of the Trust (the "Guarantee Payments"), will be
subject to the Guarantee: (i) any accumulated and unpaid Distributions required
to be paid on the Capital Securities, to the extent that the Trust has
sufficient funds available therefor at the time, (ii) the redemption price with
respect to any Capital Securities called for redemption, to the extent that the
Trust has sufficient funds available therefor at such time, or (iii) upon a
voluntary or involuntary dissolution, winding up or liquidation of the Trust
(unless the Junior Subordinated Debentures are distributed to holders of the
Capital Securities), the lesser of (a) the aggregate liquidation amount of the
Capital Securities and all accrued and unpaid Distributions thereon to the date
of payment and (b) the amount of assets of the Trust remaining available for
distribution to holders of Capital Securities. The Company's obligation to make
a Guarantee Payment may be satisfied by direct payment of the required amounts
by the Company to the holders of the applicable Capital Securities or by causing
the Trust to pay such amounts to such holders.
The Guarantee will be an irrevocable guarantee on a subordinated basis of
the Trust's obligations under the Capital Securities, but will apply only to the
extent that the Trust has sufficient funds available to make such payments.
If the Company does not make interest payments on the Junior Subordinated
Debentures held by the Trust, the Trust will not be able to pay Distributions on
the Capital Securities and will not have funds legally available therefor. The
Guarantee will rank subordinate and junior in right of payment to all
Indebtedness of the Company. See " -- Status of the Guarantee." The Guarantee
does not limit the incurrence or issuance of other secured or unsecured debt of
the Company, whether under the Indenture or any existing or other indenture that
the Company may enter into in the future or otherwise.
The Company has, through the Guarantee, the Junior Subordinated Debentures
and the Indenture, taken together, fully and unconditionally guaranteed all of
the Trust's obligations under the Capital Securities to the extent described
herein. No single document standing alone or operating in conjunction with fewer
than all of the other documents constitutes such guarantee. It is only the
combined operation of these documents that has the effect of providing a full
and unconditional guarantee of the Trust's obligations under the Capital
Securities. See "Relationship Among the Capital Securities, the Junior
Subordinated Debentures and the Guarantee."
STATUS OF THE GUARANTEE
The Guarantee will constitute an unsecured obligation of the Company and
will rank subordinate and junior in right of payment to all Indebtedness of the
Company. The Guarantee does not place a limitation on the amount of additional
Indebtedness that may be incurred by the Company.
The Guarantee will constitute a guarantee of payment and not of collection
(i.e., the guaranteed party may institute a legal proceeding directly against
the Guarantor to enforce its rights under the Guarantee without first
instituting a legal proceeding against any other person or entity). The
Guarantee will be held for the benefit of the holders of the Capital Securities.
The Guarantee will not be discharged except by payment of the Guarantee Payments
in full to the extent not paid by the Trust or upon distribution of the Junior
Subordinated Debentures to the holders of the Capital Securities in exchange for
all of the Capital Securities.
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes that do not materially adversely affect
the rights of holders of the Capital Securities (in which case no vote will be
required), the Guarantee may not be amended without the prior approval of the
holders of not less than a majority of the aggregate liquidation amount of the
outstanding Capital Securities. The manner of obtaining any such approval will
be as set forth under "Description of New
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Capital Securities -- Voting Rights; Amendment of the Declaration." All
guarantees and agreements contained in the Guarantee shall bind the successors,
assigns, receivers, trustees and representatives of the Company and shall inure
to the benefit of the registered holders of the Capital Securities then
outstanding.
EVENTS OF DEFAULT
An event of default under the Guarantee will occur upon the failure of the
Company to perform any of its payment or other obligations thereunder. The
holders of a majority in aggregate liquidation amount of the Capital Securities
have the right to direct the time, method and place of conducting any proceeding
for any remedy available to the Guarantee Trustee in respect of the Guarantee or
to direct the exercise of any trust or power conferred upon the Guarantee
Trustee under the Guarantee.
Any holder of the Capital Securities may institute a legal proceeding
directly against the Company to enforce its rights under the Guarantee without
first instituting a legal proceeding against the Trust, the Guarantee Trustee or
any other person or entity.
The Company, as guarantor, is required to file annually with the Guarantee
Trustee a certificate as to whether or not the Company is in compliance with all
the conditions and covenants applicable to it under the Guarantee.
INFORMATION CONCERNING THE GUARANTEE TRUSTEE
The Guarantee Trustee, other than during the occurrence and continuance of
a default by the Company in performance of the Guarantee, undertakes to perform
only such duties as are specifically set forth in each Guarantee and, after
default with respect to the Guarantee, must exercise the same degree of care and
skill as a prudent person would exercise or use in the conduct of his or her own
affairs. Subject to this provision, the Guarantee Trustee is under no obligation
to exercise any of the powers vested in it by the Guarantee at the request of
any holder of any Capital Security unless it is offered reasonable indemnity
against the costs, expenses and liabilities that might be incurred thereby.
TERMINATION OF THE GUARANTEE
The Guarantee will terminate and be of no further force and effect upon
full payment of the redemption price of all of the Capital Securities, upon full
payment of the amounts payable upon liquidation of the Trust or upon
distribution of Junior Subordinated Debentures to the holders of the Capital
Securities in exchange for all of the Capital Securities. The Guarantee will
continue to be effective or will be reinstated, as the case may be, if at any
time any holder of the Capital Securities must restore payment of any sums paid
under the Capital Securities or the Guarantee.
GOVERNING LAW
The Guarantee will be governed by and construed in accordance with the laws
of the State of New York.
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RELATIONSHIP AMONG THE CAPITAL SECURITIES,
THE JUNIOR SUBORDINATED DEBENTURES AND THE GUARANTEE
Payments of Distributions and other amounts due on the Capital Securities
(to the extent the Trust has funds available for the payment of such
Distributions) are irrevocably guaranteed by the Company as and to the extent
set forth under "Description of Guarantee." If and to the extent that the
Company does not make payments under the Junior Subordinated Debentures, the
Trust will not pay Distributions or other amounts due on the Capital Securities.
The Guarantee does not cover payment of Distributions when the Trust does not
have sufficient funds to pay such Distributions. In such event, a holder of
Capital Securities may institute a legal proceeding directly against the Company
under the Indenture to enforce payment of such Distributions to such holder
after the respective due dates. Taken together, the Company's obligations under
the Junior Subordinated Debentures, the Indenture and the Guarantee provide, in
the aggregate, a full and unconditional guarantee of payments of distributions
and other amounts due on the Capital Securities. No single document standing
alone or operating in conjunction with fewer than all of the other documents
constitutes such guarantee. It is only the combined operation of these documents
that has the effect of providing a full and unconditional guarantee of the
Trust's obligations under the Capital Securities. The obligations of the Company
under the Guarantee and the Junior Subordinated Debentures are subordinate and
junior in right of payment to all Indebtedness of the Company.
SUFFICIENCY OF PAYMENTS
As long as payments of interest and other payments are made when due on the
Junior Subordinated Debentures, such payments will be sufficient to cover
Distributions and other payments due on the Capital Securities, primarily
because (i) the aggregate principal amount of the Junior Subordinated Debentures
will be equal to the sum of the aggregate stated liquidation amount of the
Capital Securities and the Common Securities; (ii) the interest rate and
interest and other payment dates on the Junior Subordinated Debentures will
match the Distribution rate and Distribution and other payment dates for the
related Capital Securities; (iii) the Company will pay for all and any costs,
expenses and liabilities of the Trust except the Trust's obligations under the
Capital Securities; and (iv) the Declaration further provides that the Trust
will not engage in any activity that is not consistent with the limited purposes
of the Trust.
Notwithstanding anything to the contrary in the Indenture, the Company has
the right to set-off any payment it is otherwise required to make thereunder
with and to the extent the Company has theretofore made, or is concurrently on
the date of such payment making, a related payment under the Guarantee.
ENFORCEMENT RIGHTS OF HOLDERS OF CAPITAL SECURITIES
A holder of Capital Securities may institute a legal proceeding directly
against the Company to enforce its rights under the Guarantee without first
instituting a legal proceeding against the Guarantee Trustee, the Trust or any
other person or entity.
A default or event of default under any Indebtedness of the Company will
not constitute a default or Indenture Event of Default. In addition, in the
event of payment defaults under, or acceleration of, Indebtedness of the
Company, the subordination provisions of the Indenture provide that no payments
may be made in respect of the Junior Subordinated Debentures until such
Indebtedness has been paid in full or any payment default thereunder has been
cured or waived. Failure to make required payments on the Junior Subordinated
Debentures would constitute an Indenture Event of Default under the Indenture.
LIMITED PURPOSE OF TRUST
The Capital Securities evidence a beneficial ownership interest in the
assets of the Trust, and the Trust exists for the sole purpose of issuing the
Capital Securities and the Common Securities and investing the proceeds thereof
in Junior Subordinated Debentures. A principal difference between the rights of
a holder of Capital Securities and a holder of Junior Subordinated Debentures is
that a holder of Junior Subordinated Debentures is entitled to receive from the
Company the principal amount of and interest accrued on Junior Subordinated
Debentures held, while a holder of Capital Securities is entitled to receive
Distributions from
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the Trust (or from the Company under the Guarantee) if and to the extent the
Trust has funds available for the payment of such Distributions.
RIGHTS UPON TERMINATION
Upon any voluntary or involuntary termination, winding-up or liquidation of
the Trust involving the liquidation of the Junior Subordinated Debentures, the
holders of the Capital Securities will be entitled to receive, out of assets
held by the Trust, the liquidation distribution in cash. See "Description of
Capital Securities -- Liquidation Distribution Upon Dissolution." Upon any
voluntary or involuntary liquidation or bankruptcy of the Company, the Property
Trustee, as holder of the Junior Subordinated Debentures, would be a
subordinated creditor of the Company, subordinated in right of payment to all
Indebtedness, but entitled to receive payment in full of principal and interest
before any stockholders of the Company receive payments or distributions. Since
the Company is the guarantor under the Guarantee and has agreed to pay for all
costs, expenses and liabilities of the Trust (other than the Trust's obligations
to the holders of the Capital Securities), the positions of a holder of Capital
Securities and a holder of the Junior Subordinated Debentures relative to other
creditors and to stockholders of the Company in the event of liquidation or
bankruptcy of the Company would be substantially the same.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
In the opinion of Arnold & Porter, in its capacity as special tax counsel
to the Company and the Trust ("Tax Counsel"), the following summary accurately
describes the material United States federal income tax consequences that may be
relevant to the purchase, ownership and disposition of the Capital Securities.
Unless otherwise stated, this summary deals only with Capital Securities held as
capital assets by United States Holders (defined below) who purchased the
Capital Securities upon original issuance at their original offering price. As
used herein, a "United States Holder" means (i) a person that is a citizen or
resident of the United States, (ii) a corporation, partnership or other entity
created or organized in or under the laws of the United States or any political
subdivision thereof, (iii) an estate the income of which is subject to United
States federal income taxation regardless of its source, or (iv) a trust if a
court within the United States is able to exercise primary supervision over the
administration of such trust and one or more United States fiduciaries have the
authority to control all the substantial decisions of such trust. The tax
treatment of a holder may vary depending on its particular situation. This
summary does not address all the tax consequences that may be relevant to a
United States Holder, nor does it address the tax consequences, except as stated
below, to holders that are not United States Holders or to holders that may be
subject to special tax treatment, such as banks, real estate investment trusts,
regulated investment companies, insurance companies, dealers in securities or
currencies, tax-exempt investors, or persons holding Capital Securities as part
of a "straddle," "hedge," "conversion" or other integrated transaction for
United States tax purposes. In addition, this summary does not include any
description of any alternative minimum tax consequences or the tax laws of any
state, local or foreign government that may be applicable to a holder of Capital
Securities. This summary is based on the Internal Revenue Code of 1986, as
amended (the "Code"), the Treasury regulations promulgated thereunder and
administrative and judicial interpretations thereof, as of the date hereof, all
of which are subject to change, possibly on a retroactive basis. The authorities
on which this summary is based are subject to various interpretations, and the
opinions of Tax Counsel are not binding on the Internal Revenue Service ("IRS")
or the courts, either of which could take a contrary position. Moreover, no
rulings have been or will be sought from the IRS with respect to the
transactions described herein. Accordingly, there can be no assurance that the
IRS will not challenge the opinions expressed herein or that a court would not
sustain such a challenge. Nevertheless, Tax Counsel has advised that it is of
the view that, if challenged, the opinions expressed herein would be sustained
by a court with jurisdiction in a properly presented case.
HOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE TAX
CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE CAPITAL
SECURITIES, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN, AND
OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN UNITED STATES FEDERAL OR
OTHER TAX LAWS. FOR A DISCUSSION OF THE POSSIBLE
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REDEMPTION OF THE CAPITAL SECURITIES UPON THE OCCURRENCE OF CERTAIN TAX EVENTS
SEE "DESCRIPTION OF CAPITAL SECURITIES -- REDEMPTION -- SPECIAL EVENT REDEMPTION
OR DISTRIBUTION OF JUNIOR SUBORDINATED DEBENTURES."
CLASSIFICATION OF THE TRUST
In connection with the issuance of the Capital Securities, Tax Counsel is
of the opinion that under current law and assuming full compliance with the
terms of the Declaration and other documents, the Trust will be classified as a
grantor trust and will not be taxable as a corporation for United States federal
income tax purposes. Accordingly, for United States federal income tax purposes,
each holder of Capital Securities will be treated as owning an undivided
beneficial interest in the Junior Subordinated Debentures and, thus, will be
required to include in its gross income its pro rata share of interest income or
original issue discount that is paid or accrued on the Junior Subordinated
Debentures.
CLASSIFICATION OF THE JUNIOR SUBORDINATED DEBENTURES
The Company, the Trust and the holders of the Capital Securities (by the
acceptance of a beneficial interest in a Capital Security) have agreed to treat
the Junior Subordinated Debentures as indebtedness for all United States federal
income tax purposes. In connection with the issuance of the Junior Subordinated
Debentures, Tax Counsel is of the opinion that, under current law, and based on
the representations, facts and assumptions set forth herein, the Junior
Subordinated Debentures will be classified as indebtedness for United States
federal income tax purposes.
INTEREST INCOME AND ORIGINAL ISSUE DISCOUNT
Under applicable Treasury regulations, the Junior Subordinated Debentures
will not be treated as issued with OID within the meaning of section 1273(a) of
the Code. Accordingly, except as set forth below, stated interest on the Junior
Subordinated Debentures generally will be taxable to a holder as ordinary income
at the time it is paid or accrued in accordance with such holder's regular
method of tax accounting.
If, however, the Company exercises its right to defer payments of interest
on the Junior Subordinated Debentures, the Junior Subordinated Debentures will
become OID instruments at such time and all holders of the Junior Subordinated
Debentures and, consequently, holders of the Capital Securities will be required
to accrue their pro rata share of OID (which will include both the stated
interest and de minimis OID on the Junior Subordinated Debentures) on a daily
economic accrual basis during the Extension Period even though the Company will
not pay such interest until the end of the Extension Period, and even though
some holders may use the cash method of tax accounting. Moreover, thereafter the
Junior Subordinated Debentures will be taxed as OID instruments for as long as
they remain outstanding. Thus, even after the end of an Extension Period, all
holders would be required to continue to include the stated interest (and any de
minimis OID) on the Junior Subordinated Debentures in income on a daily basis,
regardless of their method of tax accounting and in advance of receipt of the
cash attributable to such interest income. Under the OID economic accrual rules,
a holder would accrue an amount of interest income each year that approximates
the stated interest payments called for under the terms of the Junior
Subordinated Debentures, and actual cash payments of interest on the Junior
Subordinated Debentures would not be reported separately as taxable income. Any
amount of OID included in a holder's gross income (whether or not during an
Extension Period) with respect to a Capital Security will increase such holder's
tax basis in such Capital Security, and the amount of Distributions received by
a holder in respect of such accrued OID will reduce the tax basis of such
Capital Security.
The Treasury regulations described above have not yet been addressed in any
rulings or other interpretations by the IRS, and it is possible that the IRS
could take a contrary position. If the IRS were to assert successfully that the
stated interest on the Junior Subordinated Debentures was OID regardless of
whether the Company exercises its option to defer payments of interest on such
debentures, all holders of Capital Securities would be required to include such
stated interest in income on a daily economic accrual basis as described above.
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Corporate holders of Capital Securities will not be entitled to a
dividends-received deduction with respect to any income recognized by such
holders with respect to the Capital Securities.
DISTRIBUTION OF JUNIOR SUBORDINATED DEBENTURES OR CASH UPON LIQUIDATION OF THE
TRUST
As described under the caption "Description of Junior Subordinated
Debentures -- Distributions of Junior Subordinated Debentures; Book-Entry
Issuance," Junior Subordinated Debentures may be distributed to holders in
exchange for the Capital Securities and in liquidation of the Trust. Under
current law, such a distribution would be non-taxable, and will result in the
holder receiving directly its pro rata share of the Junior Subordinated
Debentures previously held indirectly through the Trust, with a holding period
and aggregate tax basis equal to the holding period and aggregate tax basis such
holder had in its Capital Securities before such distribution. If, however, the
liquidation of the Trust were to occur because the Trust is subject to United
States federal income tax with respect to income accrued or received on the
Junior Subordinated Debentures, the distribution of the Junior Subordinated
Debentures to holders would be a taxable event to the Trust and to each holder
and a holder would recognize gain or loss as if the holder had exchanged its
Capital Securities for the Junior Subordinated Debentures it received upon
liquidation of the Trust. A holder would accrue interest in respect of the
Junior Subordinated Debentures received from the Trust in the manner described
above under "-- Interest Income and Original Issue Discount."
Under certain circumstances described herein (see "Description of New
Capital Securities -- Redemption -- Special Event Redemption or Distribution of
Junior Subordinated Debentures"), the Junior Subordinated Debentures may be
redeemed for cash, with the proceeds of such redemption distributed to holders
in redemption of their Capital Securities. Under current law, such a redemption
would constitute a taxable disposition of the redeemed Capital Securities for
United States federal income tax purposes, and a holder would recognize gain or
loss as if it sold such redeemed Capital Securities for cash. See "-- Sales of
Capital Securities."
SALES OF CAPITAL SECURITIES
A holder that sells Capital Securities will recognize gain or loss equal to
the difference between the amount realized by such holder on the sale of the
Capital Securities (except to the extent that such amount realized is
characterized as a payment in respect of accrued but unpaid interest on such
holder's allocable share of the Junior Subordinated Debentures that the holder
had not included in gross income previously) and the holder's adjusted tax basis
in the Capital Securities sold. Such gain or loss generally will be a capital
gain or loss and generally will be taxable as a long-term capital gain or loss
if the Capital Securities have been held for more than one year. Subject to
certain limited exceptions, capital losses cannot be applied to offset ordinary
income for United States federal income tax purposes.
EXCHANGE OFFER
The exchange of the Junior Subordinated Debentures for the New Junior
Subordinated Debentures pursuant to the Exchange Offer will not be treated as an
"exchange" for United States federal income tax purposes because the New Junior
Subordinated Debentures should not be considered to differ materially in kind or
extent from the Junior Subordinated Debentures. Rather, the New Junior
Subordinated Debentures received by the Trust should be treated as a
continuation of the Junior Subordinated Debentures in the hands of the Trust. As
a result, there will be no United States federal income tax consequences to a
holder exchanging Capital Securities for New Capital Securities pursuant to the
Exchange Offer. Accordingly, the New Capital Securities will be treated as
having the same issue date and issue price as the Capital Securities for United
States federal income tax purposes.
PROPOSED TAX LAW CHANGES
On February 6, 1997, President Clinton released his budget proposals for
fiscal year 1998. One of the revenue provisions of those proposals would
generally deny interest deductions for interest on an instrument
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issued by a corporation that has a maximum term of more than 15 years and that
is not shown as indebtedness on the separate balance sheet of the issuer or,
where the instrument is issued to a related party (other than a corporation)
where the holder or some other related party issues a related instrument that is
not shown as indebtedness on the issuer's consolidated balance sheet. If enacted
as proposed by the President, this provision would be effective for instruments
issued on or after the date of first action by a Congressional committee with
respect to the proposal. It is not clear from the President's proposals as to
what constitutes "Congressional committee action" with respect to the proposal.
If this provision were to apply to the Junior Subordinated Debentures, the
Company would not be able to deduct interest on the Junior Subordinated
Debentures. There can be no assurance, however, that future legislative or
administrative proposals or final legislation will not adversely affect the
ability of the Company to deduct interest on the Junior Subordinated Debentures
or otherwise affect the tax treatment described herein. Such a change,
therefore, could give rise to a Tax Event, which would permit the Company to
cause the redemption of the Capital Securities or to terminate the Trust and
distribute the Junior Subordinated Debentures to the holders of Trust Securities
in liquidation of the Trust as described more fully under "Description of New
Capital Securities -- Redemption -- Special Event Redemption or Distribution of
Junior Subordinated Debentures."
NON-UNITED STATES HOLDERS
As used herein, the term "Non-United States Holder" means any person that
is not a United States Holder (as defined above). As discussed above, the
Capital Securities will be treated as evidence of an indirect beneficial
ownership interest in the Junior Subordinated Debentures. See "-- Classification
of the Trust." Thus, under present United States federal income tax law, and
subject to the discussion below concerning backup withholding:
(a) no withholding of United States federal income tax will be
required with respect to the payment by the Trust or any paying agent of
principal or interest (which for purposes of this discussion includes any
OID) with respect to the Capital Securities (or on the Junior Subordinated
Debentures) to a Non-United States Holder, provided (i) that the beneficial
owner of the Capital Securities ("Beneficial Owner") does not actually or
constructively own 10% or more of the total combined voting power of all
classes of stock of the Company entitled to vote within the meaning of
section 871(h)(3) of the Code and the regulations thereunder, (ii) the
Beneficial Owner is not a controlled foreign corporation that is related to
the Company through stock ownership, (iii) the Beneficial Owner is not a
bank whose receipt of interest on the Junior Subordinated Debentures is
described in section 881(c)(3)(A) of the Code and (iv) the Beneficial Owner
satisfies the statement requirement (described generally below) set forth
in section 871(h) and section 881(c) of the Code and the regulations
thereunder; and
(b) no withholding of United States federal income tax will be
required with respect to any gain realized by a Non-United States Holder
upon the sale or other disposition of the Capital Securities (or the Junior
Subordinated Debentures).
To satisfy the requirement referred to in (a)(iv) above, the Beneficial
Owner, or a financial institution holding the Capital Securities on behalf of
such owner, must provide, in accordance with specified procedures, to the Trust
or its paying agent, a statement to the effect that the Beneficial Owner is not
a United States Holder. Pursuant to current temporary Treasury regulations,
these requirements will be met if (1) the Beneficial Owner provides his name and
address, and certifies, under penalties of perjury, that it is not a United
States person (which certification may be made on an IRS Form W-8 (or successor
form)) or (2) a financial institution holding the Capital Securities (or the
Junior Subordinated Debentures) on behalf of the Beneficial Owner certifies,
under penalties of perjury, that such statement has been received by it and
furnishes a paying agent with a copy thereof.
If a Non-United States Holder cannot satisfy the requirements of the
"portfolio interest" exception described in (a) above, payments of premium, if
any, and interest (including any OID) made to such Non-United States Holder will
be subject to a 30% withholding tax unless the Beneficial Owner provides the
Trust or its paying agent, as the case may be, with a properly executed (1) IRS
Form 1001 (or successor form)
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<PAGE> 58
claiming an exemption from, or a reduction of, such withholding tax under the
benefit of a tax treaty or (2) IRS Form 4224 (or successor form) stating that
interest paid with respect to the Capital Securities (or on the Junior
Subordinated Debentures) is not subject to withholding tax because it is
effectively connected with the Beneficial Owner's conduct of a trade or business
in the United States.
If a Non-United States Holder is engaged in a trade or business in the
United States and interest on the Junior Subordinated Debentures is effectively
connected with the conduct of such trade or business, the Non-United States
Holder, although exempt from the withholding tax discussed above, will be
subject to United States federal income tax on such interest income on a net
income basis in the same manner as if it were a United States Holder. In
addition, if such Non-United States Holder is a foreign corporation, it may be
subject to a branch profits tax equal to 30% of its effectively connected
earnings and profits for the taxable year, subject to adjustments. For this
purpose, such interest income would be included in such foreign corporation's
earnings and profits.
Any gain realized upon the sale or other disposition of the Capital
Securities (or the Junior Subordinated Debentures) generally will not be subject
to United States federal income tax unless (i) such gain is effectively
connected with a trade or business in the United States of the Non-United States
Holder, (ii) in the case of a Non-United States Holder who is an individual,
such individual is present in the United States for 183 days or more in the
taxable year of such sale, exchange or retirement, and certain other conditions
are met, and (iii) in the case of any gain representing accrued interest on the
Junior Subordinated Debentures, the requirements described above are not
satisfied.
As discussed above, President Clinton has proposed legislation that, if it
were applicable to the Junior Subordinated Debentures, would deny an interest
deduction to the Company for the interest payable on the Junior Subordinated
Debentures. Such legislation also would cause the Junior Subordinated Debentures
to be classified as equity (rather than indebtedness) of the Company for United
States federal income purposes and, thus, cause the income derived from the
Junior Subordinated Debentures to be characterized as dividend, rather than
interest, income for such purposes. Dividend income is not eligible for the
"portfolio interest" exception described in (a) above. Therefore, if such
legislation was enacted and was applicable to the Junior Subordinated
Debentures, income derived by a Non-United States Holder on the Capital
Securities may have been subject to the 30% United States federal withholding
tax described above, unless a reduction or elimination of such tax was available
under an applicable tax treaty or such dividend income was effectively connected
with a trade or business carried on in the United States by such Non-United
States Holder. As currently proposed, the President's proposals would not apply
to the Junior Subordinated Debentures because the debentures were issued prior
to any Congressional committee action relating to the President's proposal.
However, it is possible that final legislation could be enacted in the future
with a retroactive effective date that could affect the characterization of
income paid on the Capital Securities (or the Junior Subordinated Debt
Securities) or otherwise adversely affect a Non-United States Holder. See
"-- Proposed Tax Law Changes."
INFORMATION REPORTING AND BACKUP WITHHOLDING
The amount of interest (or OID, if any) accrued on the Capital Securities
(or the Junior Subordinated Debentures) held of record by United States Holders
(other than corporations and other exempt holders) will be reported annually to
such holders and to the IRS. The Property Trustee currently intends to deliver
such reports to holders of record prior to January 31 following each calendar
year. It is anticipated that persons who hold Capital Securities as nominees for
beneficial holders will report the required tax information to beneficial
holders on Form 1099.
"Backup withholding" at a rate of 31% will apply to payments of interest
(or OID, if any) to non-exempt United States Holders unless the holder furnishes
its taxpayer identification number in the manner prescribed in applicable
Treasury regulations, certifies that such number is correct, certifies as to no
loss of exemption from backup withholding and meets certain other conditions.
No information reporting or backup withholding will be required with
respect to payments made by the Trust or any paying agent to Non-United States
Holders if a statement described in (a)(iv) under "Non-
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<PAGE> 59
United States Holders" has been received and the payor does not have actual
knowledge that the beneficial owner is a United States person.
In addition, backup withholding and information reporting will not apply if
payments of the principal, interest, OID or premium on the Junior Subordinated
Debentures are paid or collected by a foreign office of a custodian, nominee or
other foreign agent on behalf of the Beneficial Owner, or if a foreign office of
a broker (as defined in applicable Treasury regulations) pays the proceeds of
the sale of the Capital Securities to the owner thereof. If, however, such
nominee, custodian, agent or broker is, for United States federal income tax
purposes, a United States person, a controlled foreign corporation or a foreign
person that derives 50% or more of its gross income for certain periods from the
conduct of a trade or business in the United States, such payments will not be
subject to backup withholding but will be subject to information reporting,
unless (1) such custodian, nominee, agent or broker has documentary evidence in
its records that the Beneficial Owner is not a United States person and certain
other conditions are met or (2) the Beneficial Owner otherwise establishes an
exemption.
Payment of the proceeds from disposition of Capital Securities (or the
Junior Subordinated Debentures) to or through a United States office of a broker
is subject to information reporting and backup withholding unless the holder or
beneficial owner establishes an exemption from information reporting and backup
withholding.
Any amounts withheld from a holder of the Capital Securities under the
backup withholding rules will be allowed as a refund or a credit against such
holder's United States federal income tax liability, provided the required
information is furnished to the IRS.
BOOK-ENTRY ISSUANCE
The New Capital Securities initially will be represented by one or more
Capital Securities in registered, global form (collectively, the "Global Capital
Securities"). The Global Capital Securities will be deposited upon issuance with
the Property Trustee as custodian for The Depository Trust Company ("DTC"), in
New York, New York, and registered in the name of DTC or its nominee, in each
case for credit to an account of a direct or indirect participant in DTC as
described below. Except as set forth below, the Global Capital Securities may be
transferred, in whole and not in part, only to another nominee of DTC or to a
successor of DTC or its nominee. Beneficial interests in the Global Capital
Securities may not be exchanged for Capital Securities in certificated form
except in the limited circumstances described below. See "-- Exchange of
Book-Entry Capital Securities for Certificated Capital Securities."
DEPOSITARY PROCEDURES
DTC has advised the Trust and the Company that DTC is a limited-purpose
trust company created to hold securities for its participating organizations
(collectively, the "Participants") and to facilitate the clearance and
settlement of transactions in those securities between Participants through
electronic book-entry changes in accounts of its Participants. The Participants
include securities brokers and dealers, banks, trust companies, clearing
corporations and certain other organizations. Access to DTC's system is also
available to other entities such as banks, brokers, dealers and trust companies
that clear through or maintain a custodial relationship with a Participant,
either directly or indirectly (collectively, the "Indirect Participants").
Persons who are not Participants may beneficially own securities held by or on
behalf of DTC only through the Participants or the Indirect Participants. The
ownership interest and transfer of ownership interest of each actual purchaser
of each security held by or on behalf of DTC are recorded on the records of the
Participants and Indirect Participants.
DTC has also advised the Trust and the Company that, pursuant to procedures
established by it, (i) upon deposit of the Global Capital Securities, DTC will
credit the accounts of Participants with portions of the principal amount of the
Global Capital Securities and (ii) ownership of such interests in the Global
Capital Securities will be shown on, and the transfer of ownership thereof will
be effected only through, records
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<PAGE> 60
maintained by DTC (with respect to the Participants) or by the Participants and
the Indirect Participants (with respect to other owners of beneficial interests
in the Global Capital Securities).
Investors in the Global Capital Securities may hold their interests therein
directly through DTC if they are Participants in such system, or indirectly
through organizations which are Participants in such system. The laws of some
states require that certain persons take physical delivery in certificated form
of securities that they own. Consequently, the ability to transfer beneficial
interests in a Global Capital Security to such persons will be limited to that
extent. Because DTC can act only on behalf of Participants, which in turn act on
behalf of Indirect Participants and certain banks, the ability of a person
having beneficial interests in a Global Capital Security to pledge such
interests to persons or entities that do not participate in the DTC system, or
otherwise take actions in respect of such interests, may be affected by the lack
of a physical certificate evidencing such interests. For certain other
restrictions on the transferability of the Capital Securities, see "-- Exchange
of Book-Entry Capital Securities for Certificated Capital Securities."
Except as described below, owners of interests in the Global Capital
Securities will not have Capital Securities registered in their name, will not
receive physical delivery of Capital Securities in certificated form and will
not be considered the registered owners or holders thereof for any purpose.
Payments in respect of the Global Capital Security registered in the name
DTC or its nominee will be payable by the Property Trustee to DTC in its
capacity as the registered holder. The Property Trustee will treat the persons
in whose names the Capital Securities, including the Global Capital Securities,
are registered as the owners thereof for the purpose of receiving such payments
and for any and all other purposes whatsoever. Consequently, neither the
Property Trustee nor any agent thereof has or will have any responsibility or
liability for (i) any aspect of DTC's records or any Participant's or Indirect
Participant's records relating to or payments made on account of beneficial
ownership interests in the Global Capital Securities, or for maintaining,
supervising or reviewing any of DTC's records or any Participant's or Indirect
Participant's records relating to the beneficial ownership interests in the
Global Capital Securities or (ii) any other matter relating to the actions and
practices of DTC or any of its Participants or Indirect Participants. DTC has
advised the Trust and the Company that its current practice, upon receipt of any
payment in respect of securities such as the Capital Securities, is to credit
the accounts of the relevant Participants with the payment on the payment date
unless DTC has reason to believe it will not receive payment on such payment
date. Payments by the Participants and the Indirect Participants to the
beneficial owners of Capital Securities will be governed by standing
instructions and customary practices and will be the responsibility of the
Participants or the Indirect Participants and will not be the responsibility of
DTC, the Property Trustee or the Trust. Neither the Trust nor the Property
Trustee will be liable for any delay by DTC or any of its Participants in
identifying the beneficial owners of the Capital Securities, and the Trust and
the Property Trustee may conclusively rely on and will be protected in relying
on instructions from DTC or its nominee for all purposes.
Interests in the Global Capital Securities trade in DTC's Same-Day Funds
Settlement System and secondary market trading activity in such interests will
therefore settle in immediately available funds, subject in all cases to the
rules and procedures of DTC and its participants. Transfers between Participants
in DTC will be effected in accordance with DTC's procedures, and will be settled
in same-day funds.
DTC has advised the Trust and the Company that it will take any action
permitted to be taken by a holder of Capital Securities only at the direction of
one or more Participants to whose account with DTC interests in the Global
Capital Securities are credited. However, if there is an Event of Default, DTC
reserves the right to exchange the Global Capital Securities for Capital
Securities in certificated form and to distribute such Capital Securities to its
Participants.
The information in this section concerning DTC and its book-entry system
has been obtained from sources that the Trust and the Company believe to be
reliable, but neither the Trust nor the Company takes responsibility for the
accuracy thereof. Although DTC has agreed to the foregoing procedures to
facilitate transfers of interest in the Global Capital Securities it is under no
obligation to perform or to continue to perform such procedures, and such
procedures may be discontinued at any time. Neither the Trust nor the Property
Trustee will have any responsibility for the performance by DTC, its
participants or indirect participants of their respective obligations under the
rules and procedures governing their operations.
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<PAGE> 61
EXCHANGE OF BOOK-ENTRY CAPITAL SECURITIES FOR CERTIFICATED CAPITAL SECURITIES
A Global Capital Security is exchangeable for Capital Securities in
registered certificated form if (i) DTC (x) notifies the Trust that it is
unwilling or unable to continue as Depositary for the Global Capital Security
and the Trust thereupon fails to appoint a successor Depositary or (y) has
ceased to be a clearing agency registered under the Exchange Act, (ii) the
Company in its sole discretion elects to cause the issuance of the Capital
Securities in certificated form or (iii) there shall have occurred and be
continuing an Event of Default or any event which after notice or lapse of time
or both would be an Event of Default under the Declaration. In addition,
beneficial interests in a Global Capital Security may be exchanged for
certificated Capital Securities upon request but only upon at least 20 days'
prior written notice given to the Property Trustee by or on behalf of DTC in
accordance with customary procedures. In all cases, certificated Capital
Securities delivered in exchange for any Global Capital Security or beneficial
interests therein will be registered in the names, and issued in any approved
denominations, requested by or on behalf of the Depositary (in accordance with
its customary procedures).
JUNIOR SUBORDINATED DEBENTURES
The Junior Subordinated Debentures initially will be represented by one
Junior Subordinated Debenture in registered, global form, and registered in the
name of DTC or its nominee. Accordingly, the foregoing discussion regarding DTC
and its procedures will apply in substantially the same manner to the Junior
Subordinated Debentures as to the New Capital Securities.
BENEFIT PLAN CONSIDERATIONS
Before authorizing an investment in Capital Securities (including Old and
New Capital Securities), fiduciaries of pension, profit sharing or other
employee benefit plans subject to the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), should consider, among other matters, (a) ERISA's
fiduciary standards (including its prudence and diversification requirements),
(b) whether such fiduciaries have authority to make such investment in Capital
Securities under the applicable Plan investment policies and governing
instruments, and (c) rules under ERISA and the Code that prohibit Plan
fiduciaries from causing a Plan to engage in a "prohibited transaction."
Section 406 of ERISA and Section 4975 of the Code prohibit Plans, as well
as individual retirement accounts and Keogh plans subject to Section 4975 of the
Code (also "Plans"), from, among other things, engaging in certain transactions
involving "plan assets" with persons who are "parties in interest" under ERISA
or "disqualified persons" under the Code ("Parties in Interest") with respect to
such Plan. A violation of these "prohibited transaction" rules may result in an
excise tax or other liabilities under ERISA and/or Section 4975 of the Code for
such persons, unless exemptive relief is available under an applicable statutory
or administrative exemption. Employee benefit plans that are governmental plans
(as defined in Section 3(32) of ERISA), certain church plans (as defined in
Section 3(33) of ERISA) and foreign plans (as described in Section 4(b)(5) of
ERISA) are not subject to the requirements of ERISA or Section 4975 of the Code.
The Department of Labor ("DOL") has issued a regulation (29 C.F.R. sec.
2510.3-101) (the "Plan Assets Regulation") concerning the definition of what
constitutes the assets of a Plan. The Plan Assets Regulation provides that as a
general rule, the underlying assets and properties of corporations,
partnerships, trusts and certain other entities in which a plan makes an
"equity" investment will be deemed for purposes of ERISA to be assets of the
investing plan unless certain exceptions apply.
Pursuant to an exception contained in the Plan Assets Regulation, the
assets of a Trust would not be deemed to be "plan assets" of investing Plans if,
immediately after the most recent acquisition of any equity interest in the
Trust, less than 25% of the value of each class of equity interest in the Trust
were held by Plans, other employee benefit plans not subject to ERISA or Section
4975 of the Code (such as governmental, church and foreign plans) and entities
holding assets deemed to be "plan assets" of any Plan (collectively, "Benefit
Plan Investors"). No assurance can be given that the value of the Old or New
Capital Securities of a Trust that are held by Benefit Plan Investors will be
less than 25% of the total value of such securities of the
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<PAGE> 62
Trust, and no monitoring or other measures will be taken with respect to the
satisfaction of the conditions to this exception. All of the Common Securities
will be purchased and held directly by the Company.
It is possible that New Capital Securities received as the result of a
Exchange Offer may qualify as "publicly offered securities" under the Plan
Assets Regulation if, in addition to being offered pursuant to any effective
registration statement, they are subsequently registered under the Exchange Act,
are "widely held" and are "freely transferable" at the time of the Exchange
Offer. Under the Plan Assets Regulation, a class of securities is "widely held"
only if it is a class of securities owned by 100 or more investors independent
of the issuer thereof and each other. Although it is possible that at the time
of the Exchange Offer the "widely held" requirement will be satisfied, no
assurances can be given that will be true. If the New Capital Securities are
"publicly offered securities" at the time of the Exchange Offer, the assets of
the Trusts would not be assets of the Plans holding New Capital Securities as of
such time.
There can be no assurance that any of the exceptions set forth in the Plan
Assets Regulation will apply to the Capital Securities and, as a result, an
investing Plan's assets could be considered to include an undivided interest in
the Junior Subordinated Debentures held by the Trust. In the event that assets
of the Trust are considered assets of an investing Plan, the Trustees, the
Company and/or other persons, in providing services with respect to the Junior
Subordinated Debentures, may be considered fiduciaries to such Plan and subject
to the fiduciary responsibility provisions of Title I of ERISA. In addition,
certain transactions involving the Trust and/or Capital Securities could be
deemed to constitute direct or indirect prohibited transactions under ERISA and
Section 4975 of the Code with respect to a Plan. For example, if the Company is
a Party in Interest with respect to an investing Plan (either directly or by
reason of its ownership of the Banks or other subsidiaries), extensions of
credit between the Company and the Trust (as represented by the Junior
Subordinated Debentures and the Guarantee) would likely be prohibited by Section
406(a)(1)(B) of ERISA and Section 4975(c)(1)(B) of the Code.
The DOL has issued five prohibited transaction class exemptions ("PTCEs")
that may provide exemptive relief for direct or indirect prohibited transactions
resulting from the purchase or holding of the Capital Securities, assuming that
assets of the Trust were deemed to be "plan assets" of Plans investing in the
Trust (see above). Those class exemptions are PTCE 96-23 (for certain
transactions determined by in-house asset managers), PTCE 91-38 (for certain
transactions involving bank collective investment funds), PTCE 95-60 (for
certain transactions involving insurance company general accounts), PTCE 90-1
(for certain transactions involving insurance company pooled separate accounts)
and PTCE 84-14 (for certain transactions determined by independent qualified
professional asset managers).
Because of ERISA's prohibitions and those of Section 4975 of the Code,
Capital Securities may not be purchased or held by any Plan, any entity whose
underlying assets include "plan assets" by reason of any Plan's investment in
the entity (a "Plan Asset Entity") or any person having "plan assets" of any
Plan, unless such purchase or holding is covered by the exemptive relief
provided by PTCE 96-23, 95-60, 91-38, 90-1 or 84-14 or another applicable
exemption. If a purchaser or holder of Capital Securities that is a Plan or a
Plan Asset Entity elects to rely on an exemption other than PTCE 96-23, 95-60,
91-38, 90-1 or 84-14, the Company and the Trust may require a satisfactory
opinion of counsel or other evidence with respect to the availability of such
exemption for such purchase and holding. Any purchaser or holder of the Capital
Securities or any interest therein that is a Plan or a Plan Asset Entity and is
purchasing such securities on behalf of or with "plan assets" is deemed to have
represented by its purchase and holding thereof that (a) the purchase and
holding of the Capital Securities is covered by the exemptive relief provided by
PTCE 96-23, 95-60, 91-38, 90-1, or 84-14 or another applicable exemption, (b)
the Company is not a "Fiduciary," within the meaning of Section 3(21) of ERISA
and the regulations thereunder with respect to such person's interest in the
Capital Securities or the Junior Subordinated Debentures and (c) in purchasing
the Capital Securities, such person approves the purchase and holding of the
Junior Subordinated Debentures and the appointment and retention of the Property
Trustee.
Any Plans or other entities whose assets include Plan assets subject to
ERISA or Section 4975 of the Code proposing to acquire Capital Securities should
consult with their own counsel.
Governmental Plans and certain church plans are not subject to ERISA, and
are also not subject to the prohibited transaction provisions of Section 4975 of
the Code. However, state laws or regulations governing
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the investment and management of the assets of such plans may contain fiduciary
and prohibited transaction provisions similar to those under ERISA and the Code
discussed above. Accordingly, fiduciaries of governmental and church plans, in
consultation with their advisers, should consider the impact of their respective
state laws on investments in Capital Securities, and the considerations
discussed above, to the extent applicable.
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Capital Securities for its own account
in connection with the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such New Capital Securities. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by Participating Broker-Dealers during the period referred to below in
connection with resales of New Capital Securities received in exchange for Old
Capital Securities if such Old Capital Securities were acquired by such
Participating Broker-Dealers for their own accounts as a result of market-making
activities or other trading activities. The Company has agreed that this
Prospectus, as it may be amended or supplemented from time to time, may be used
by a Participating Broker-Dealer in connection with resales of such New Capital
Securities for a period ending 90 days after the Expiration Date (subject to
extension under certain limited circumstances described herein) or, if earlier,
when all such New Capital Securities have been disposed of by such Participating
Broker-Dealer. See "The Exchange Offer -- Resales of New Capital Securities."
Neither the Company nor the Trust will receive any cash proceeds from the
issuance of the New Capital Securities offered hereby. New Capital Securities
received by broker-dealers for their own accounts in connection with the
Exchange Offer may be sold from time to time in one or more transactions in the
over-the-counter market, in negotiated transactions, through the writing of
options on the New Capital Securities or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or at negotiated prices. Any such resale may be
made directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such New Capital Securities. Any
broker-dealer that resells New Capital Securities that were received by it for
its own account in connection with the Exchange Offer and any broker or dealer
that participates in a distribution of such New Capital Securities may be deemed
to be an "underwriter" within the meaning of the Securities Act, and any profit
on any such resale of New Capital Securities and any commissions or concessions
received by any such persons may be deemed to be underwriting compensation under
the Securities Act. The Letter of Transmittal states that by acknowledging that
it will deliver and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the Securities
Act.
LEGAL MATTERS
Certain matters of Delaware law relating to the validity of the Capital
Securities will be passed upon for the Trust by Morris, Nichols, Arsht &
Tunnell, Wilmington, Delaware. The validity of the Junior Subordinated
Debentures and the Guarantee will be passed upon for the Company and each Trust
by Gregory K. Thoreson, Vice President and General Counsel of the Company.
EXPERTS
The consolidated financial statements incorporated herein by reference from
the Company's Annual Report on Form 10-K for the year ended December 31, 1995,
except for the years ended December 31, 1994 and 1993, have been audited by
Coopers & Lybrand L.L.P., independent auditors, as stated in their report, which
is incorporated herein by reference. Such consolidated financial statements are
incorporated herein by reference in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing. The consolidated
financial statements of the Company as of December 31, 1994 and for each of the
years in the two-year period ended December 31, 1994, incorporated herein by
reference from the Company's Annual Report on Form 10-K for the year ended
December 31, 1995, have been audited by KPMG Peat Marwick LLP, independent
auditors, as stated in their report, which is incorporated herein by reference,
and
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<PAGE> 64
are incorporated herein by reference in reliance upon the report of such firm,
given upon their authority as experts in accounting and auditing.
The consolidated financial statements of Dauphin Deposit Corporation for
the year ended December 31, 1995 incorporated herein by reference from the
Company's Current Report on Form 8-K dated February 3, 1997, incorporated herein
by reference, have been audited by KPMG Peat Marwick LLP, independent auditors,
as indicated in their report, which is incorporated herein by reference, and are
incorporated herein in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.
Documents incorporated herein by reference in the future will include
financial statements, related schedules (if required) and auditors' reports,
which financial statements and schedules will have been examined to the extent
and for the period set forth in such reports by the firm or firms rendering such
reports, and, to the extent so examined and consent to incorporation by
reference given, will be incorporated herein by reference in reliance upon such
reports given upon authority of such firms as experts in accounting and
auditing.
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PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- ------- -------------------------------------------------------------------------------------
<C> <S>
5.1 Opinion of Gregory K. Thoreson, Vice President and General Counsel of the Company, as
to legality of the Junior Subordinated Debentures and the Guarantee to be issued by
the Company
5.2 Opinion of special Delaware counsel as to the legality of the Capital Securities to
be issued by Capital I and by Capital II
8.1 Opinion of special tax counsel as to certain federal income tax matters
23.2 Consent of Gregory K. Thoreson (included in Exhibit 5.1)
23.3 Consent of special Delaware counsel (included in Exhibit 5.2)
23.4 Consent of special tax counsel (included in Exhibit 8.1)
24.1 Powers of Attorney
</TABLE>
II-1
<PAGE> 66
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, First Maryland
Bancorp certifies that it has reasonable grounds to believe that it meets all
the requirements for filing this Pre-Effective Amendment No. 1 to Registration
Statement on Form S-4 and has duly caused this Pre-Effective Amendment No. 1 to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Baltimore, Maryland on March 19, 1997.
FIRST MARYLAND BANCORP
By: /s/ FRANK P. BRAMBLE
------------------------------------
Frank P. Bramble,
President and Chief Executive
Officer Pursuant to the
requirements of the Securities Act of 1933, this Pre-Effective Amendment No. 1
to Registration Statement has been signed by the following persons in the
capacities indicated below on March 19, 1997.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- --------------------------------------------- ----------------------------------------------
<C> <S>
/s/ FRANK P. BRAMBLE President, Chief Executive Officer and
- --------------------------------------------- Director (Principal Executive Officer)
Frank P. Bramble
/s/ JEROME W. EVANS Executive Vice President and Chief Financial
- --------------------------------------------- Officer (Principal Financial Officer)
Jerome W. Evans
/s/ ROBERT L. CARPENTER, JR. Senior Vice President and Controller
- --------------------------------------------- (Principal Accounting Officer)
Robert L. Carpenter, Jr.
</TABLE>
A MAJORITY OF THE BOARD OF DIRECTORS:
Benjamin L. Brown, Jeremiah E. Casey, J. Owen Cole, Edward A. Crooke, John
F. Dealy, Mathias J. DeVito, Rhoda M. Dorsey, Frank A. Gunther, Jr., Curran W.
Harvey, Jr., Margaret M. Heckler, Thomas P. Mulcahy, William M. Passano, Jr.
By: /s/ JEROME W. EVANS
------------------------------------
Jerome W. Evans, as
Attorney-in-Fact
II-2
<PAGE> 67
Pursuant to the requirements of the Securities Act of 1933, First Maryland
Capital I certifies that it has reasonable grounds to believe that it meets all
the requirements for filing this Pre-Effective Amendment No. 1 to Registration
Statement on Form S-4 and has duly caused this Pre-Effective Amendment No. 1 to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Baltimore, Maryland on March 19, 1997.
FIRST MARYLAND CAPITAL I
By: /s/ JEROME W. EVANS
------------------------------------
Name: Jerome W. Evans
Regular Trustee
Pursuant to the requirements of the Securities Act of 1933, First Maryland
Capital II certifies that it has reasonable grounds to believe that it meets all
the requirements for filing this Pre-Effective Amendment No. 1 to Registration
Statement on Form S-4 and has duly caused this Pre-Effective Amendment No. 1 to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Baltimore, Maryland on March 19, 1997.
FIRST MARYLAND CAPITAL II
By: /s/ JEROME W. EVANS
------------------------------------
Name: Jerome W. Evans
Regular Trustee
II-3
<PAGE> 68
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION PAGE
- ------- ------------------------------------------------------------------------------- ----
<C> <S> <C>
4.1 Indenture, dated as of December 30, 1996, between the Company and The Bank of
New York, as Debenture Trustee.................................................
4.2 Indenture, dated as of February 4, 1997, between the Company and The Bank of
New York, as Indenture Trustee.................................................
4.3 Amended and Restated Declaration of Trust, dated as of February 4, 1997, among
the Company, Capital II, The Bank of New York, as Property Trustee, The Bank of
New York (Delaware), as Delaware Trustee, and the Regular Trustees named
therein........................................................................
4.4 Amended and Restated Declaration of Trust, dated as of December 30, 1996,
Agreement among the Company, Capital I, The Bank of New York, as Property
Trustee, The Bank of New York (Delaware), as Delaware Trustee, and the Regular
Trustees named therein.........................................................
4.5 Form of Guarantee Agreement to be entered into by the Company and The Bank of
New York, as Guarantee Trustee, and registered under the Securities Act of
1933, as amended...............................................................
4.6 Registration Rights Agreement, dated December 30, 1996 between Capital I, the
Company and the Initial Purchasers named therein...............................
4.7 Registration Rights Agreement, dated February 4, 1997, between Capital II, the
Company and the Initial Purchasers named therein...............................
5.1 Opinion of Gregory K. Thoreson, Vice President and General Counsel of the
Company, as to legality of the Junior Subordinated Debentures and the Guarantee
to be issued by the Company*...................................................
5.2 Opinion of special Delaware counsel as to the legality of the Capital
Securities to be issued by Capital I and by Capital II*........................
8.1 Opinion of special tax counsel as to certain federal income tax matters*.......
23.1 Consent of Coopers & Lybrand L.L.P.............................................
23.2 Consent of Gregory K. Thoreson (included in Exhibit 5.1).......................
23.3 Consent of special Delaware counsel (included in Exhibit 5.2)..................
23.4 Consent of special tax counsel (included in Exhibit 8.1).......................
23.5 Consent of KPMG Peat Marwick LLP...............................................
23.6 Consent of KPMG Peat Marwick LLP...............................................
24.1 Powers of Attorney.............................................................
25.1 Form T-1 Statement of Eligibility of The Bank of New York to act as trustee
under the Capital I Indenture..................................................
25.2 Form T-1 Statement of Eligibility of The Bank of New York to act as trustee
under the Capital I Amended and Restated Declaration of Trust..................
25.3 Form T-1 Statement of Eligibility of The Bank of New York under the Capital I
Guarantee for the benefit of the holders of Capital Securities.................
25.4 Form T-1 Statement of Eligibility of The Bank of New York to act as trustee
under the Capital II Indenture.................................................
25.5 Form T-1 Statement of Eligibility of The Bank of New York to act as trustee
under the Capital II Amended and Restated Declaration of Trust.................
25.6 Form T-1 Statement of Eligibility of The Bank of New York to act as trustee
under the Capital II Guarantee for the benefit of the holders of Capital
Securities.....................................................................
</TABLE>
<PAGE> 69
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION PAGE
- ------- ------------------------------------------------------------------------------- ----
<C> <S> <C>
99.1 Form of Letter of Transmittal..................................................
99.2 Form of Notice of Guaranteed Delivery..........................................
99.3 Form of Exchange Agent Agreement...............................................
</TABLE>
- ---------------
* To be filed by amendment.
<PAGE> 1
Exhibits 5.1 and 23.2
[First Maryland Bancorp letterhead]
March 20, 1997
First Maryland Bancorp
25 South Charles Street
Baltimore, Maryland 21201
Re: First Maryland Capital I
Ladies and Gentlemen:
I am a Vice President and the General Counsel of First Maryland Bancorp
(the "Company"), and in such capacity have represented the Company in connection
with the registration under the Securities Act of 1933, as amended (the "Act"),
on a Registration Statement on Form S-4, Registration No. 333-22871 (the
"Registration Statement"), of $150,000,000 aggregate principal amount of the
Company's Floating Rate Subordinated Debentures due 2027 (the "Subordinated
Debentures"), and the related Guarantee Agreement (the "Guarantee"), from the
Company to The Bank of New York, as Guarantee Trustee for the benefit of holders
of the Floating Rate Subordinated Capital Income Securities ("Capital
Securities") of First Maryland Capital I, a Delaware business trust ("Capital
I"). I have also represented the Company in connection the qualification under
the Trust Indenture Act of 1939, as amended, of an Indenture with respect to the
Subordinated Debentures between the Company and The Bank of New York, as Trustee
(the "Indenture"), and of the Guarantee. The Subordinated Debentures and the
Guarantee are being registered by the Company and qualified under the Trust
Indenture Act for purposes of exchanging such instruments for like instruments
previously issued by the Company. Such exchange will occur in connection with
the offer of Capital I to exchange Capital Securities registered under the Act
on the Registration Statement for Capital Securities previously issued by
Capital I.
In connection with the opinions contained herein, I have examined the
charter and bylaws of the Company, the corporate action taken by the Company
relating to the Subordinated Debentures and their issuance under the Indenture
and to the Guarantee, and such other documents as I have deemed appropriate as
a basis for the opinions hereinafter expressed.
Based upon the foregoing I am of the opinion as follows:
(a) The Subordinated Notes to be issued by the Company have been duly
and validly authorized and, upon proper execution, authentication and delivery
thereof in accordance with the Indenture, will be legally issued and will
constitute binding obligations of the Company entitled to the benefits of the
Indenture.
(b) The Guarantee to be issued by the Company has been duly and validly
authorized and, upon proper execution and delivery thereof, will be legally
issued and will constitute the binding obligation of the Company.
I hereby consent to the use of this opinion as an exhibit to the
Registration Statement and to the use of my name and reference to this opinion
in the Registration Statement and the related prospectus.
Very truly yours,
/s/ Gregory K. Thoreson
Gregory K. Thoreson
Senior Vice President
and General Counsel
<PAGE> 2
Exhibits 5.1 and 23.2
[First Maryland Bancorp letterhead]
March 20, 1997
First Maryland Bancorp
25 South Charles Street
Baltimore, Maryland 21201
Re: First Maryland Capital II
Ladies and Gentlemen:
I am a Vice President and the General Counsel of First Maryland Bancorp
(the "Company"), and in such capacity have represented the Company in connection
with the registration under the Securities Act of 1933, as amended (the "Act"),
on a Registration Statement on Form S-4, Registration No. 333-22871 (the
"Registration Statement"), of $150,000,000 aggregate principal amount of the
Company's Floating Rate Subordinated Debentures due 2027, Series B (the
"Subordinated Debentures"), and the related Guarantee Agreement (the
"Guarantee"), from the Company to The Bank of New York, as Guarantee Trustee for
the benefit of holders of the Floating Rate Subordinated Capital Income
Securities ("Capital Securities") of First Maryland Capital II, a Delaware
business trust ("Capital II"). I have also represented the Company in connection
the qualification under the Trust Indenture Act of 1939, as amended, of an
Indenture with respect to the Subordinated Debentures between the Company and
The Bank of New York, as Trustee (the "Indenture"), and of the Guarantee. The
Subordinated Debentures and the Guarantee are being registered by the Company
and qualified under the Trust Indenture Act for purposes of exchanging such
instruments for like instruments previously issued by the Company. Such exchange
will occur in connection with the offer of Capital II to exchange Capital
Securities registered under the Act on the Registration Statement for Capital
Securities previously issued by Capital II.
In connection with the opinions contained herein, I have examined the
charter and bylaws of the Company, the corporate action taken by the Company
relating to the Subordinated Debentures and their issuance under the Indenture
and to the Guarantee, and such other documents as I have deemed appropriate as
a basis for the opinions hereinafter expressed.
Based upon the foregoing I am of the opinion as follows:
(a) The Subordinated Notes to be issued by the Company have been duly
and validly authorized and, upon proper execution, authentication and delivery
thereof in accordance with the Indenture, will be legally issued and will
constitute binding obligations of the Company entitled to the benefits of the
Indenture.
(b) The Guarantee to be issued by the Company has been duly and validly
authorized and, upon proper execution and delivery thereof, will be legally
issued and will constitute the binding obligation of the Company.
I hereby consent to the use of this opinion as an exhibit to the
Registration Statement and to the use of my name and reference to this opinion
in the Registration Statement and the related prospectus.
Very truly yours,
/s/ Gregory K. Thoreson
Gregory K. Thoreson
Senior Vice President
and General Counsel
<PAGE> 1
Exhibits 5.2 and 23.3
CONFORMED COPY
[Letterhead of Morris, Nichols, Arsht & Tunnell]
March 20, 1997
First Maryland Capital I
c/o First Maryland Bancorp
25 South Charles Street
Baltimore, MD 21201
Re: First Maryland Capital I
Ladies and Gentlemen:
We have acted as special Delaware counsel to First Maryland Capital I, a
Delaware statutory business trust (the "Trust"), in connection with certain
matters relating to the creation of the Trust and the proposed issuance of New
Capital Securities to beneficial owners pursuant to and as described in
Registration Statement No. 333-22871-01 (and the Prospectus forming a part
thereof) on Form S-4 as filed with the Securities and Exchange Commission (the
"Commission") on March 6, 1997, as amended by Pre-Effective Amendment No. 1
thereto to be filed with the Commission on or about the date hereof (as so
amended, the "Registration Statement"). Capitalized terms used herein and not
otherwise herein defined are used as defined in the Amended and Restated
Declaration of Trust of the Trust dated as of December 30, 1996 (the "Governing
Instrument").
In rendering this opinion, we have examined and relied upon copies of the
following documents in the forms provided to us: the Certificate of Trust of the
Trust as filed in the Office of the Secretary of State of the State of Delaware
(the "State Office") on December 26, 1996 (the "Certificate of Trust"); a
Declaration of Trust of the Trust dated as of December 24, 1996 (the "Original
Governing Instrument"); the Governing Instrument; the Indenture dated as of
December 30, 1996 between First Maryland Bancorp, a Maryland corporation ("First
Maryland") and The Bank of New York, as Trustee; the Guarantee Agreement to be
entered into between First Maryland and The Bank of New York, as Trustee,
relating to the New Capital Securities; the Registration Rights Agreement dated
<PAGE> 2
First Maryland Capital I
March 20, 1997
Page 2
December 30, 1996 among the Trust, First Maryland and the Initial Purchasers
(as defined therein) (the "Registration Rights Agreement"); the Registration
Statement; and a certificate of good standing of the Trust obtained as of a
recent date from the State Office. In such examinations, we have assumed the
genuineness of all signatures, the conformity to original documents of all
documents submitted to us as drafts or copies or forms of documents to be
executed and the legal capacity of natural persons to complete the execution of
documents. We have further assumed for purposes of this opinion: (i) the due
formation or organization, valid existence and good standing of each entity
(other than the Trust) that is a party to any of the documents reviewed by us
under the laws of the jurisdiction of its respective formation or organization;
(ii) the due authorization, execution and delivery by, or on behalf of, each of
the parties thereto of the above-referenced documents; (iii) that no event has
occurred, or prior to the issuance of the New Capital Securities will occur,
that would cause a dissolution or liquidation of the Trust under the Original
Governing Instrument or the Governing Instrument, as applicable; (iv) that the
activities of the Trust have been and will be conducted in accordance with the
Original Governing Instrument or the Governing Instrument, as applicable, and
the Delaware Business Trust Act, 12 Del. C. Sections 3801 et seq. (the "Delaware
Act"); (v) that each Person that will acquire New Capital Securities in the
Exchange Offer (as defined in the Registration Statement and as used herein,
the "Exchange Offer") will validly tender Transfer Restricted Capital
Securities in exchange therefor, that such Transfer Restricted Capital
Securities will be duly accepted, and that each such Person will duly receive
New Capital Security Certificates in consideration thereof, all in accordance
with the terms and conditions of the Governing Instrument, the Registration
Statement and the Registration Rights Agreement, and that the New Capital
Securities are otherwise issued and sold to the New Capital Securities Holders
in accordance with the terms, conditions, requirements and procedures set forth
in the Governing Instrument, the Registration Statement and the Registration
Rights Agreement; and (vi) that the documents examined by us are in full force
and effect, express the entire understanding of the parties thereto with
respect to the subject matter thereof and have not been modified, supplemented
or otherwise amended, except as herein referenced. We have not reviewed any
documents other than those identified above in connection with this opinion,
and we have assumed that there are no other documents that are contrary to or
inconsistent with the opinions expressed herein. Further, we express no opinion
with respect to, and assume no responsibility for the contents of, the
Registration Statement or any other offering material relating to the New
Capital Securities. No opinion is expressed herein with respect to the
requirements of, or compliance with, federal or state securities or blue sky
laws. As to any fact material to our opinion, other than those assumed, we
<PAGE> 3
First Maryland Capital I
March 20, 1997
Page 3
have relied without independent investigation on the above-referenced documents
and on the accuracy, as of the date hereof, of the matters therein contained.
Based on and subject to the foregoing, and limited in all respects to
matters of Delaware law, it is our opinion that:
1. The Trust is a duly created and validly existing business trust in
good standing under the laws of the State of Delaware.
2. The New Capital Securities, upon issuance pursuant to the Exchange
Offer, will constitute validly issued and, subject to the qualifications set
forth in paragraph 3 below, fully paid and nonassessable beneficial interests
in the assets of the Trust.
3. Under the Delaware Act and the terms of the Governing Instrument,
each New Capital Security Holder of the Trust, in such capacity, will be
entitled to the same limitation of personal liability as that extended to
stockholders of private corporations for profit organized under the General
Corporation Law of the State of Delaware; provided, however, we express no
opinion with respect to the liability of any New Capital Security Holder who
is, was or may become a named Trustee of the Trust. Notwithstanding the
foregoing, we note that pursuant to Section 10.4 of the Governing Instrument,
the Trust may withhold amounts otherwise distributable to a Holder and pay over
such amounts to the applicable jurisdictions in accordance with federal, state
and local law and any amount withheld will be deemed to have been distributed
to such Holder and that, pursuant to the Governing Instrument, New Capital
Security Holders may be obligated to make payments or provide indemnity or
security under the circumstances set forth therein.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name and reference to our opinion
under the heading "LEGAL MATTERS" in the Prospectus forming a part thereof. In
giving this consent, we do not thereby admit that we come within the category
of persons whose consent is required under Section 7 of the Securities Act of
1933, as amended, or the rules and regulations of the Securities and Exchange
Commission thereunder. This opinion speaks only as of the date hereof and is
based on our understandings and assumptions as to present facts, and on our
review of the above-referenced documents and the application of Delaware law as
the same exist as of the date hereof, and we undertake no obligation to update
or supplement this opinion after the date hereof for the benefit of any person
or entity with respect to any facts or circumstances that may hereafter come to
our attention or any changes in facts or law that may hereafter occur or take
effect. This opinion is
<PAGE> 4
First Maryland Capital I
March 20, 1997
Page 4
intended solely for the benefit of the addressee hereof in connection with the
matters contemplated hereby and may not be relied on by any other person or
entity or for any other purpose without our prior written consent.
Very truly yours,
MORRIS, NICHOLS, ARSHT & TUNNELL
/s/ Morris, Nichols, Arsht & Tunnell
<PAGE> 5
Exhibits 5.2 and 23.3
CONFORMED COPY
[Letterhead of Morris, Nichols, Arsht & Tunnell]
March 20, 1997
First Maryland Capital II
c/o First Maryland Bancorp
25 South Charles Street
Baltimore, MD 21201
Re: First Maryland Capital II
Ladies and Gentlemen:
We have acted as special Delaware counsel to First Maryland Capital II,
a Delaware statutory business trust (the "Trust"), in connection with certain
matters relating to the creation of the Trust and the proposed issuance of New
Capital Securities to beneficial owners pursuant to and as described in
Registration Statement No. 333-22871-02 (and the Prospectus forming a part
thereof) on Form S-4 as filed with the Securities and Exchange Commission (the
"Commission") on March 6, 1997, as amended by Pre-Effective Amendment No. 1
thereto to be filed with the Commission on or about the date hereof (as so
amended, the "Registration Statement"). Capitalized terms used herein and not
otherwise herein defined are used as defined in the Amended and Restated
Declaration of Trust of the Trust dated as of February 4, 1997 (the "Governing
Instrument").
In rendering this opinion, we have examined and relied upon copies of
the following documents in the forms provided to us: the Certificate of Trust
of the Trust as filed in the Office of the Secretary of State of the State of
Delaware (the "State Office") on January 30, 1997 (the "Certificate of Trust");
a Declaration of Trust of the Trust dated as of January 30, 1997 (the "Original
Governing Instrument"); the Governing Instrument; the Indenture dated as of
February 4, 1997 between First Maryland Bancorp, a Maryland corporation ("First
Maryland") and The Bank of New York, as Trustee; the Guarantee Agreement to be
entered into between First Maryland and The Bank of New York, as Trustee,
relating to the New Capital Securities; the Registration Rights Agreement dated
<PAGE> 6
First Maryland Capital II
March 20, 1997
Page 2
February 4, 1997 among the Trust, First Maryland and the Initial Purchasers (as
defined therein) (the "Registration Rights Agreement"); the Registration
Statement; and a certificate of good standing of the Trust obtained as of a
recent date from the State Office. In such examinations, we have assumed the
genuineness of all signatures, the conformity to original documents of all
documents submitted to us as drafts or copies or forms of documents to be
executed and the legal capacity of natural persons to complete the execution of
documents. We have further assumed for purposes of this opinion: (i) the due
formation or organization, valid existence and good standing of each entity
(other than the Trust) that is a party to any of the documents reviewed by us
under the laws of the jurisdiction of its respective formation or organization;
(ii) the due authorization, execution and delivery by, or on behalf of, each of
the parties thereto of the above-referenced documents; (iii) that no event has
occurred, or prior to the issuance of the New Capital Securities will occur,
that would cause a dissolution or liquidation of the Trust under the Original
Governing Instrument or the Governing Instrument, as applicable; (iv) that the
activities of the Trust have been and will be conducted in accordance with the
Original Governing Instrument or the Governing Instrument, as applicable, and
the Delaware Business Trust Act, 12 Del. C. Sections 3801 et seq. (the "Delaware
Act"); (v) that each Person that will acquire New Capital Securities in the
Exchange Offer (as defined in the Registration Statement and as used herein, the
"Exchange Offer") will validly tender Transfer Restricted Capital Securities in
exchange therefor, that such Transfer Restricted Capital Securities will be duly
accepted, and that each such Person will duly receive New Capital Security
Certificates in consideration thereof, all in accordance with the terms and
conditions of the Governing Instrument, the Registration Statement and the
Registration Rights Agreement, and that the New Capital Securities are otherwise
issued and sold to the New Capital Securities Holders in accordance with the
terms, conditions, requirements and procedures set forth in the Governing
Instrument, the Registration Statement and the Registration Rights Agreement;
and (vi) that the documents examined by us are in full force and effect, express
the entire understanding of the parties thereto with respect to the subject
matter thereof and have not been modified, supplemented or otherwise amended,
except as herein referenced. We have not reviewed any documents other than those
identified above in connection with this opinion, and we have assumed that
there are no other documents that are contrary to or inconsistent with the
opinions expressed herein. Further, we express no opinion with respect to, and
assume no responsibility for the contents of, the Registration Statement or any
other offering material relating to the New Capital Securities. No opinion is
expressed herein with respect to the requirements of, or compliance with,
federal or state securities or blue sky laws. As to any fact material to our
opinion, other than those assumed, we
<PAGE> 7
First Maryland Capital II
March 20, 1997
Page 3
have relied without independent investigation on the above-referenced documents
and on the accuracy, as of the date hereof, of the matters therein contained.
Based on and subject to the foregoing, and limited in all respects to
matters of Delaware law, it is our opinion that:
1. The Trust is a duly created and validly existing business trust in
good standing under the laws of the State of Delaware.
2. The New Capital Securities, upon issuance pursuant to the Exchange
Offer, will constitute validly issued and, subject to the qualifications set
forth in paragraph 3 below, fully paid and nonassessable beneficial interests
in the assets of the Trust.
3. Under the Delaware Act and the terms of the Governing Instrument,
each New Capital Security Holder of the Trust, in such capacity, will be
entitled to the same limitation of personal liability as that extended to
stockholders of private corporations for profit organized under the General
Corporation Law of the State of Delaware; provided, however, we express no
opinion with respect to the liability of any New Capital Security Holder who
is, was or may become a named Trustee of the Trust. Notwithstanding the
foregoing, we note that pursuant to Section 10.4 of the Governing Instrument,
the Trust may withhold amounts otherwise distributable to a Holder and pay over
such amounts to the applicable jurisdictions in accordance with federal, state
and local law and any amount withheld will be deemed to have been distributed
to such Holder and that, pursuant to the Governing Instrument, New Capital
Security Holders may be obligated to make payments or provide indemnity or
security under the circumstances set forth therein.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name and reference to our opinion
under the heading "LEGAL MATTERS" in the prospectus forming a part thereof. In
giving this consent, we do not thereby admit that we come within the category
of persons whose consent is required under Section 7 of the Securities Act of
1933, as amended, or the rules and regulations of the Securities and Exchange
Commission thereunder. This opinion speaks only as of the date hereof and is
based on our understandings and assumptions as to present facts, and on our
review of the above-referenced documents and the application of Delaware law as
the same exist as of the date hereof, and we undertake no obligation to update
or supplement this opinion after the date hereof for the benefit of any person
or entity with respect to any facts or circumstances that may hereafter come to
our attention or any changes in facts or law that may hereafter occur or take
effect. This opinion is
<PAGE> 8
First Maryland Capital II
March 20, 1997
Page 4
intended solely for the benefit of the addressee hereof in connection with the
matters contemplated hereby and may not be relied on by any other person or
entity or for any other purpose without our prior written consent.
Very truly yours,
MORRIS, NICHOLS, ARSHT & TUNNELL
/s/ Morris, Nichols, Arsht & Tunnell
<PAGE> 1
EXHIBITS 8.1 AND 23.4
[Arnold & Porter Letterhead]
March 20, 1997
First Maryland Capital I
First Maryland Capital II
First Maryland Bancorp
25 South Charles Street
Baltimore, Maryland 21201
Ladies and Gentlemen:
Reference is made to the information set forth under the heading
"Certain United States Federal Income Tax Consequences" contained in the
Prospectus included in Pre-Effective Amendment No. 1 to your Registration
Statement on Form S-4 (File No. 333-22871) relating to Capital Securities and
related debentures and guarantees. It is our opinion that the discussion under
that heading, to the extent it reflects matters of law or legal conclusions,
and subject to the assumptions and conditions described therein, accurately
summarizes in all material respects the matters discussed therein.
Our opinion is based on the case law, the Internal Revenue Code,
Treasury Regulations and Internal Revenue Service rulings as they now exist.
These authorities are all subject to change, and such change may be made with
retroactive effect. We can give no assurance that, after such change, our
opinion would not be different. We undertake no responsibility to update or
supplement our opinion.
We hereby consent to the filing with the Securities and Exchange
Commission of this opinion as an exhibit to the Registration Statement of which
the Prospectus is a part and to the reference to our firm under the heading
"Certain United States Federal Income Tax Consequences" contained therein. In
giving such consent, we do not thereby admit that we are in the category of
persons whose consent is required under Section 7 of the Securities Act of
1933.
Very truly yours,
ARNOLD & PORTER
/s/ Arnold & Porter
--------------------------------
<PAGE> 1
Capital II
Exhibit 24.1
FIRST MARYLAND BANCORP
POWER OF ATTORNEY
Each of the undersigned persons, in his or her capacity as an officer or
director, or both, of First Maryland Bancorp (the "Company"), hereby appoints
Jeremiah E. Casey, Frank P. Bramble, Jerome W. Evans, David M. Cronin and Robert
F. Ray, and each of them, with full power of substitution and resubstitution and
with full power in each to act without the others, his or her attorney-in-fact
and agent for the following purposes:
1. To sign for him or her, in his or her name and in his or her capacity
as an officer or director, or both, of the Company, a Registration Statement on
Form S-4 and, if necessary, a Registration Statement on Form S-3, and any
amendments and post-effective amendments thereto (collectively, the
"Registration Statement"), for the registration under the Securities Act of
1933, as amended (the "Act") and Rule 415 thereunder (if applicable), of (i) up
to $300,000,000 in aggregate liquidation amount of Subordinated Capital Income
Securities ("Capital Securities") of First Maryland Capital II or another
grantor trust to be formed by the Company (the "Trust"), which will be issued in
exchange for the Subordinated Capital Income Securities issued or to be issued
by the Trust in transactions exempt from registration under the Act, (ii) up to
$310,000,000 in aggregate principal amount of the Company's Junior Subordinated
Debentures (the "Subordinated Debentures"), to be issued in exchange for Junior
Subordinated Debentures issued or to be issued by the Company in a transaction
exempt from registration under the Act and (iii) the Company's Guarantee, which
will be issued in exchange for a Guarantee issued or to be issued by the Company
in a transaction exempt from registration under the Act;
2. To file or cause to be filed any such Registration Statement with the
Securities and Exchange Commission;
3. To take all such other action as any such attorney-in- fact, or his
substitute, may deem necessary or desirable in order
<PAGE> 2
to effect and maintain the registration of the Capital Securities, the
Subordinated Debentures and the Guarantee; and
4. To sign for him or her, in his or her name and in his or her capacity
as an officer or director, or both, of the Company, all such documents and
instruments as any such attorney-in-fact, or his substitute, may deem necessary
or advisable in connection with the registration, qualification or exemption of
the Capital Securities, the Subordinated Debentures and the Guarantee under the
securities laws of any state or other jurisdiction.
2
<PAGE> 3
This power of attorney shall be effective as of the date written opposite
the signature of each of the undersigned and shall continue in full force and
effect until revoked by the undersigned in a writing filed with the Secretary of
the Company.
JEREMIAH E. CASEY January 28, 1997
- ----------------------------
Jeremiah E. Casey
Chairman of the Board and
Director
FRANK P. BRAMBLE January 28, 1997
- ----------------------------
Frank P. Bramble
President, Chief Executive
Officer and Director
JEROME W. EVANS January 31, 1997
- ----------------------------
Jerome W. Evans
Executive Vice President and
Chief Financial Officer
ROBERT L. CARPENTER January 28, 1997
- ----------------------------
Robert L. Carpenter
Senior Vice President and
Controller
BENJAMIN L. BROWN January 28, 1997
- ----------------------------
Benjamin L. Brown
Director
J. OWEN COLE January 28, 1997
- ----------------------------
J. Owen Cole
Director
EDWARD A. CROOKE January 28, 1997
- ----------------------------
Edward A. Crooke
Director
JOHN F. DEALY January 28, 1997
- ----------------------------
John F. Dealy
Director
3
<PAGE> 4
MATHIAS J. DEVITO January 28, 1997
- ----------------------------
Mathias J. DeVito
Director
RHODA M. DORSEY January 28, 1997
- ----------------------------
Rhoda M. Dorsey
Director
January 28, 1997
- ----------------------------
Jerome W. Geckle
Director
FRANK A. GUNTHER, JR. January 28, 1997
- ----------------------------
Frank A. Gunther, Jr.
Director
CURRAN W. HARVEY, JR. January 28, 1997
- ----------------------------
Curran W. Harvey, Jr.
Director
MARGARET M. HECKLER January 28, 1997
- ----------------------------
Margaret M. Heckler
Director
January ___, 1997
- ----------------------------
Kevin J. Kelly
Director
January ___, 1997
- ----------------------------
Henry J. Knott
Director
THOMAS P. MULCAHY January 28, 1997
- ----------------------------
Thomas P. Mulcahy
Director
WILLIAM M. PASSANO, JR. January 28, 1997
- ----------------------------
William M. Passano, Jr.
Director
4
