PROSPECTUS
1,100,000 PREFERRED SECURITIES
AMERICAN BANCORPORATION CAPITAL TRUST I
8.50% CUMULATIVE TRUST PREFERRED SECURITIES
(LIQUIDATION AMOUNT $10 PER TRUST PREFERRED SECURITY)
FULLY AND UNCONDITIONALLY GUARANTEED, AS DESCRIBED HEREIN, BY
[LOGO]
AMERICAN BANCORPORATION
----------------
The 8.50% Cumulative Trust Preferred Securities (the "Preferred
Securities") offered hereby represent beneficial interests in American
Bancorporation Capital Trust I, a trust created under the laws of the State of
Delaware (the "Trust Issuer"). American Bancorporation, an Ohio corporation
("American Bancorporation" or the "Company"), will be the owner of all of the
beneficial interests represented by common securities of the Trust Issuer (the
"Common Securities" and, collectively with the Preferred Securities, the "Trust
Securities"). The Bank of New York is the Property Trustee of the Trust Issuer.
The Trust Issuer exists for the sole purpose of issuing the Trust Securities and
investing the proceeds from the sale thereof in 8.50% Junior Subordinated
Deferrable Interest Debentures (the "Junior Subordinated Debentures") to be
issued by the Company. The Junior Subordinated Debentures will mature on April
30, 2028 (the "Stated Maturity"). The Preferred Securities will have a
preference over the Common Securities under certain circumstances with respect
to cash distributions and amounts payable on liquidation, redemption or
otherwise. See "Description of the Preferred Securities -- Subordination of the
Common Securities."
The Preferred Securities have been approved for listing on the Nasdaq Stock
Market's National Market under the symbol "AMBCP." See "Risk Factors -- Absence
of Prior Public Market for the Preferred Securities; Trading Price and Tax
Considerations."
(continued on next page)
----------------
SEE "RISK FACTORS" BEGINNING ON PAGE 12 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE
CONSIDERED BY PROSPECTIVE INVESTORS.
----------------
THE SECURITIES OFFERED HEREBY ARE NOT SAVINGS OR DEPOSIT ACCOUNTS AND ARE NOT
INSURED BY THE SAVINGS ASSOCIATION INSURANCE FUND OR THE BANK INSURANCE FUND OF
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.
<TABLE>
<CAPTION>
=====================================================================================
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC COMMISSION(1) ISSUER(2)(3)
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Preferred Security ......... $ 10.00 (2) $ 10.00
- -------------------------------------------------------------------------------------
Total(4) ....................... $11,000,000 (2) $11,000,000
=====================================================================================
</TABLE>
(1) The Trust Issuer and American Bancorporation have agreed to indemnify the
Underwriter against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting."
(2) In view of the fact that the proceeds of the sale of the Preferred
Securities will be invested in the Junior Subordinated Debentures of
American Bancorporation, American Bancorporation has agreed to pay the
Underwriter, as compensation for their arranging the investment of such
proceeds in the Junior Subordinated Debentures, $0.40 per Preferred
Security, or $440,000 in the aggregate ($506,000 in the aggregate if the
over-allotment option is exercised in full). See "Underwriting."
(3) Before deducting expenses payable by American Bancorporation, estimated to
be approximately $250,000.
(4) The Trust Issuer and American Bancorporation have granted the Underwriter a
30-day option to purchase up to 165,000 additional Preferred Securities on
the same terms and conditions set forth above solely to cover
over-allotments, if any. If this option is exercised in full, the total
Price to Public and Proceeds to Issuer will be $12,650,000. See
"Underwriting."
----------------
The Preferred Securities are offered by the Underwriter subject to receipt
and acceptance by it, prior sale and the Underwriter's right to reject any order
in whole or in part and to withdraw, cancel or modify the offer without notice.
It is expected that delivery of the Preferred Securities will be made in
book-entry form through the book-entry facilities of The Depository Trust
Company on or about April 27, 1998 against payment therefor in immediately
available funds.
LEGG MASON WOOD WALKER
INCORPORATED
THE DATE OF THIS PROSPECTUS IS APRIL 21, 1998
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
(continued from the previous page)
The Preferred Securities will be represented by one or more global
securities registered in the name of a nominee of The Depository Trust Company,
as depository ("DTC"). Beneficial interests in the global securities will be
shown on, and transfer thereof will be effected only through, records maintained
by DTC and its participants. Except as described under "Description of Preferred
Securities," Preferred Securities in definitive form will not be issued and
owners of beneficial interests in the global securities will not be considered
holders of the Preferred Securities. Settlement for the Preferred Securities
will be made in immediately available funds. The Preferred Securities will trade
in DTC's Same-Day Funds Settlement System, and secondary market trading activity
for the Preferred Securities will therefore settle in immediately available
funds.
Holders of the Preferred Securities will be entitled to receive
preferential cumulative cash distributions accumulating from the date of
original issuance and payable quarterly in arrears on March 1, June 1, September
1 and December 1 of each year, commencing June 1, 1998, at the annual rate of
8.50% of the Liquidation Amount (as defined herein) of $10 per Preferred
Security ("Distributions"). Subject to certain exceptions, American
Bancorporation has the right to defer payment of interest on the Junior
Subordinated Debentures at any time or from time to time for a period not
exceeding 20 consecutive quarters with respect to each deferral period (each, an
"Extension Period"), provided that no Extension Period may extend beyond the
Stated Maturity of the Junior Subordinated Debentures. Upon the termination of
any such Extension Period and the payment of all interest then accrued and
unpaid (together with interest thereon at the rate of 8.50%, compounded
quarterly, to the extent permitted by applicable law), American Bancorporation
may elect to begin a new Extension Period subject to the requirements set forth
herein. If interest payments on the Junior Subordinated Debentures are so
deferred, Distributions on the Preferred Securities will also be deferred, and
American Bancorporation will not be permitted, subject to certain exceptions
described herein, to declare or pay any cash distributions with respect to the
capital stock of American Bancorporation or debt securities of American
Bancorporation that rank pari passu with or junior to the Junior Subordinated
Debentures.
During an Extension Period, interest on the Junior Subordinated Debentures
would continue to accrue (and the amount of Distributions to which holders of
the Preferred Securities are entitled would accumulate) at the rate of 8.50% per
annum, compounded quarterly, and holders of the Preferred Securities would be
required to include interest income in their gross income for United States
federal income tax purposes in advance of receipt of the cash distributions with
respect to such deferred interest payments. American Bancorporation believes
that the mere existence of its right to defer interest payments should not cause
the Preferred Securities to be issued with original issue discount for federal
income tax purposes. However, it is possible that the Internal Revenue Service
("IRS") could take the position that the likelihood of deferral was not a remote
contingency within the meaning of applicable Treasury Regulations. See
"Description of the Junior Subordinated Debentures-Right to Defer Interest
Payment Obligation" and "Certain Federal Income Tax Consequences -- Interest
Income and Original Issue Discount."
American Bancorporation and the Trust Issuer believe that, taken together,
the obligations of American Bancorporation under the Guarantee, the Trust
Agreement, the Junior Subordinated Debentures, the Indenture and the Expense
Agreement (each as defined herein), constitute in the aggregate, a full,
irrevocable and unconditional guarantee, on a subordinated basis, of all of the
Trust Issuer's obligations under the Preferred Securities. See "Relationship
Among the Preferred Securities, the Junior Subordinated Debentures, the Expense
Agreement and the Guarantee -- Full and Unconditional Guarantee." The Guarantee
of American Bancorporation (the "Guarantee") guarantees the payment of
Distributions and payments on liquidation or redemption of the Preferred
Securities, but only in each case to the extent of funds held by the Trust
Issuer, as described herein. See "Description of the Guarantee." If American
Bancorporation does not make interest payments on the Junior Subordinated
Debentures held by the Trust Issuer, the Trust Issuer will have insufficient
funds to pay Distributions on the Preferred Securities. The Guarantee does not
cover payment of Distributions when the Trust Issuer does not have sufficient
funds to pay such Distributions. In such event, a holder of the Preferred
Securities may institute a legal proceeding directly against American
Bancorporation to enforce payment of
i
<PAGE>
amounts equal to such Distributions to such holder. See "Description of the
Junior Subordinated Debentures-Enforcement of Certain Rights by Holders of the
Preferred Securities."
The Preferred Securities are subject to mandatory redemption, in whole or
in part, upon repayment of the Junior Subordinated Debentures at their Stated
Maturity or their earlier redemption. Subject to regulatory approval, if then
required under applicable capital guidelines or regulatory policies, the Junior
Subordinated Debentures are redeemable prior to their Stated Maturity at the
option of the Company (i) on or after April 30, 2003, in whole at any time or in
part from time to time, or (ii) at any time, in whole (but not in part), upon
the occurrence and continuation of a Tax Event, an Investment Company Event or a
Capital Treatment Event (each as defined herein) at a redemption price (the
"Redemption Price") equal to the accrued and unpaid interest on the Junior
Subordinated Debentures so redeemed to the date fixed for redemption plus 100%
of the principal amount thereof. See "Description of the Junior Subordinated
Debentures-Redemption or Exchange."
The obligations of American Bancorporation under the Guarantee and the
Junior Subordinated Debentures will be unsecured and are subordinate and junior
in right of payment to all Senior Indebtedness (as defined in "Description of
the Junior Subordinated Debentures -- Subordination") of American
Bancorporation. At December 31, 1997, American Bancorporation had no outstanding
Senior Indebtedness. There is no limitation on the amount of Senior Indebtedness
which American Bancorporation may issue. American Bancorporation may from time
to time incur indebtedness constituting Senior Indebtedness. See "Description of
the Junior Subordinated Debentures-Subordination."
American Bancorporation, as the holder of the Common Securities, will have
the right at any time to dissolve the Trust Issuer. The ability of American
Bancorporation to do so may be subject to American Bancorporation's prior
receipt of regulatory approval. In the event of the dissolution of the Trust
Issuer, after satisfaction of liabilities to creditors of the Trust Issuer as
required by applicable law, the holders of the Preferred Securities will be
entitled to receive a Liquidation Amount of $10 per Preferred Security plus
accumulated and unpaid Distributions thereon to the date of payment, which may
be in the form of a distribution of such amount in Junior Subordinated
Debentures, subject to certain exceptions. See "Description of the Preferred
Securities -- Liquidation Distribution upon Dissolution."
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE PREFERRED
SECURITIES OFFERED HEREBY, INCLUDING OVER-ALLOTMENT, STABILIZING TRANSACTIONS,
SYNDICATE SHORT COVERING TRANSACTIONS AND PENALTY BIDS. ANY OF THE FOREGOING
TRANSACTIONS, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME WITHOUT NOTICE. FOR
A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
ii
<PAGE>
[LOGO]
AMERICAN BANCORPORATION
Branch Offices
[MAP INDICATING AMERICAN
BANCORPORATION'S BRANCH OFFICES]
<PAGE>
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, proxy statements and other information with the
Commission. Such reports, proxy statements and other information can be
inspected and copied at the public reference facilities of the Commission at
Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the regional
offices of the Commission located at 7 World Trade Center, 13th Floor, Suite
1300, New York, New York 10048 and Suite 1400, Citicorp Center, 14th Floor, 500
West Madison Street, Chicago, Illinois 60661. Copies of such material can also
be obtained at prescribed rates by writing to the Public Reference Section of
the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. Such material
may also be accessed electronically by means of the Commission's home page on
the Internet at http://www.sec.gov. The Corporation's common stock is traded on
the Nasdaq National Market. Such reports, proxy statements and other information
concerning the Corporation also may be inspected at the office of the National
Association of Securities Dealers, Inc., 1735 K Street, N.W., Washington D.C.
20006.
The Company and the Trust Issuer have filed with the Commission a
Registration Statement on Form S-2 (together with all amendments thereto, the
"Registration Statement"), of which this Prospectus is a part, under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to the
Preferred Securities, the Junior Subordinated Debentures and the Guarantee. This
Prospectus does not contain all of the information set forth in the Registration
Statement, certain portions of which have been omitted as permitted by the rules
and regulations of the Commission. For further information with respect to the
Company, the Trust Issuer, the Preferred Securities and the Junior Subordinated
Debentures, reference is made to the Registration Statement, including the
exhibits thereto. Any statements contained herein concerning the provisions of
any document filed as an exhibit to the Registration Statement are not
necessarily complete, and, in each instance, reference is made to the copy of
such document so filed for a more complete description of the matter involved.
Each such statement is qualified in its entirely by such reference. The
Registration Statement may be inspected without charge at the principal office
of the Commission in Washington, D.C., and copies of all or part of it may be
obtained from the Commission upon payment of the prescribed fees.
No separate financial statements of the Trust Issuer have been included
herein. The Company does not consider that such financial statements would be
material to holders of Preferred Securities because (i) all of the voting
securities of the Trust Issuer will be owned by the Company, a reporting company
under the Exchange Act, (ii) the Trust Issuer has no independent operations but
exists for the sole purpose of issuing securities representing undivided
beneficial interests in the assets of the Trust Issuer and investing the
proceeds thereof in Junior Subordinated Debentures issued by the Company, and
(iii) the obligations of the Company described herein to provide certain
indemnities in respect of and be responsible for certain costs, expenses, debts
and liabilities of the Trust Issuer under the Indenture and pursuant to the
Trust Agreement, the guarantee issued by the Company with respect to the
Preferred Securities, the Junior Subordinated Debentures purchased by the Trust
Issuer, the related Indenture and the Expense Agreement, taken together,
constitute, in the belief of the Company and the Trust Issuer full and
unconditional guarantee of payments due on the Preferred Securities. See
"Description of the Junior Subordinated Debentures" and "Description of the
Guarantee."
The Trust Issuer is not currently subject to the information reporting
requirements of the Exchange Act and the Company does not expect that the Trust
Issuer will file reports, proxy statements and other information under the
Exchange Act with the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Corporation with the Commission are
incorporated into this Prospectus by reference:
1. The Corporation's Annual Report on Form 10-K for the year ended December
31, 1997.
2
<PAGE>
Any statement contained herein or in a document incorporated or deemed to
be incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of 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
documents, such provisions are qualified in all respects by reference to all of
the provisions of such contract or other document.
The Corporation will provide without charge to any person to whom this
Prospectus is delivered, on the written or oral request of such person, a copy
of any or all of the foregoing documents incorporated by reference herein (other
than exhibits unless such exhibits are specifically incorporated by reference in
such documents). Requests for such documents should be directed to: American
Bancorporation, 1025 Main Street, Suite 800, Wheeling, West Virginia 26003,
Attention: Shareholder Relations (telephone (304) 233-5006).
3
<PAGE>
SUMMARY
The following summary is qualified in its entirety by the more detailed
information appearing elsewhere in this Prospectus. Unless otherwise indicated,
the information in this Prospectus assumes that the Underwriters' over-allotment
option will not be exercised.
AMERICAN BANCORPORATION
American Bancorporation is a bank holding company, headquartered in
Wheeling, West Virginia, which through its subsidiaries provides commercial and
mortgage banking services to customers in central and eastern Ohio and northern
West Virginia. The Company's principal subsidiary, Wheeling National Bank ("WNB"
or the "Bank"), headquartered in St. Clairsville, Ohio, is a full-service
commercial bank operating through 20 offices. As of December 31, 1997, the
Company had consolidated total assets of $484.6 million, deposits of $355.7
million and stockholders' equity of $33.7 million.
The Company, registered under the Bank Holding Company Act of 1956, as
amended ("BHCA"), was incorporated under the laws of the State of Ohio in 1966.
WNB, a national banking association organized in 1978, was acquired by the
Company in 1988. In 1996, the Company merged its other former banking
subsidiary, Columbus National Bank, into Wheeling National Bank, under the
charter of WNB.
Through WNB, the Company provides a full range of commercial banking
services to retail customers and small to medium-sized businesses in its market
area. In eastern Ohio and northern West Virginia the Company focuses on local
customer needs. In the Columbus, Ohio area, the Company focuses its marketing
efforts on local businesses, whose needs are not being served effectively by
larger institutions, including SBA guaranteed commercial loans.
The banking services the Company offers its customers include checking,
savings, time and money market accounts, personal, commercial, construction and
real estate loans, individual retirement accounts, safe deposit boxes, wire
transfers, credit cards and debit cards, among other standard banking products
and services.
In addition to its banking activities, the Company originates and services
mortgage loans through American Mortgages, Inc. ("AMI"), a wholly-owned
subsidiary. AMI owns 51% of Premier Mortgage, Ltd. ("Premier"), located in
Columbus, Ohio, a joint venture which originates residential mortgage loans. The
Company also operates three additional subsidiaries which provide data
processing equipment, real estate leasing and transfer agent services for the
Company, the Bank and AMI.
The Company's lending activities include real estate, commercial and
consumer installment lending. At December 31, 1997 the total loan portfolio
amounted to $286.7 million or 59.2% of total consolidated assets. At December
31, 1997 real estate mortgage loans totalled $144.2 million, commercial loans
totalled $93.3 million and consumer installment loans totalled $49.2 million.
Total loans increased by $15.2 million or 5.6% between December 31, 1996 and
December 31, 1997 as commercial loans increased $8.7 million or 10.3% and real
estate mortgage loans increased $7.7 million or 5.6% while consumer installment
loans decreased $1.2 million or 2.3%.
The Company also invests its funds in U.S. Government and agency securities
including mortgage-backed securities and collateralized mortgage obligations, as
well as municipal, equity securities and short-term investments. At December 31,
1997 investment securities and other short-term investments were $171.6 million
or 35.4% of total consolidated assets as compared to $161.3 million or 35.0% at
December 31, 1996.
4
<PAGE>
The Company offers a variety of traditional deposit products to its
customers. At December 31, 1997 deposits totalled $355.7 million compared to
$319.8 million at December 31, 1996. At December 31, 1997 noninterest bearing
demand deposits totalled $33.5 million, NOW money market and savings deposits
totalled $119.5 million and time deposits totalled $202.7 million.
The Company also maintains a leveraging strategy designed to enhance its
return on equity and earnings. The Company invests in U.S. Government and agency
obligations at a positive interest rate spread on the funding obligations, which
has been Federal Home Loan Bank ("FHLB") advances. At December 31, 1997 the
Company held total FHLB advances outstanding of $74.0 million.
The Company derives its income principally from interest earned on loans,
securities and other investments and to a lesser extent, from fees received in
connection with the origination of loans and for other services. The Company's
primary expenses are interest expense on deposits and borrowings and other
operating expenses.
The Company's executive office is located at 1025 Main Street, Suite 800,
Wheeling, West Virginia, 26003 and its telephone number is (304) 233-5006.
THE TRUST ISSUER
The Trust Issuer is a statutory business trust created under Delaware law
pursuant to (i) the Trust Agreement executed by the Company, as depositor, The
Bank of New York, as Property Trustee, The Bank of New York (Delaware), as
Delaware Trustee, and the Administrative Trustees named therein and (ii) the
filing of a certificate of trust with the Delaware Secretary of State on March
11, 1998. The trust agreement will be amended and restated in its entirety (as
so amended, the "Trust Agreement"). All of the Common Securities will be owned
by the Company. The Company will acquire Common Securities in an aggregate
Liquidation Amount equal to 3% of the total capital of the Trust Issuer. The
Trust Issuer exists for the exclusive purposes of (i) issuing and selling the
Trust Securities, (ii) using the proceeds from the sale of the Trust Securities
to acquire Junior Subordinated Debentures issued by the Company and (iii)
engaging in only those other activities necessary, advisable or incidental
thereto (such as registering the transfer of the Trust Securities). Accordingly,
the Junior Subordinated Debentures will be the sole assets of the Trust Issuer,
and payments under the Junior Subordinated Debentures will be the sole revenue
of the Trust Issuer. The principal executive office of the Trust Issuer is 1025
Main Street, Suite 800, Wheeling, West Virginia 26003 and its telephone number
is (304) 233-5006.
5
<PAGE>
THE OFFERING
THE TRUST ISSUER......... American Bancorporation Capital Trust I, a Delaware
statutory business trust (the "Trust Issuer"). The
sole assets of the Trust Issuer will be the Junior
Subordinated Debentures.
SECURITIES OFFERED....... 1,100,000 shares of 8.50% Cumulative Trust Preferred
Securities (the "Preferred Securities"), evidencing
preferred undivided beneficial interests in the
assets of the Trust Issuer, which will consist only
of the Junior Subordinated Debentures.
OFFERING PRICE........... $10 per Preferred Security (Liquidation Amount $10).
DISTRIBUTIONS............ Holders of the Preferred Securities will be entitled
to receive cumulative cash Distributions at an
annual rate of 8.50% of the Liquidation Amount of
$10 per Preferred Security, accumulating from the
date of original issuance and payable quarterly in
arrears on March 1, June 1, September 1 and December
1 of each year, commencing on June 1, 1998. The
distribution rate and the distribution and other
payment dates for the Preferred Securities will
correspond to the interest rate and interest and
other payment dates on the Junior Subordinated
Debentures. See "Description of the Preferred
Securities."
JUNIOR SUBORDINATED DEBEN
TURES................... The Trust Issuer will invest the proceeds from the
issuance of the Trust Securities in an equivalent
amount of the Junior Subordinated Debentures. The
Junior Subordinated Debentures will mature on April
30, 2028. The Junior Subordinated Debentures will
rank subordinate and junior in right of payment to
all Senior Indebtedness of American Bancorporation.
At December 31, 1997, American Bancorporation had no
outstanding Senior Indebtedness. There is no
limitation on the amount of Senior Indebtedness, or
Subordinated Debt (as defined in "Description of
Junior Subordinated Debentures- Subordination")
which is pari passu with the Junior Subordinated
Debentures, which American Bancorporation may issue.
American Bancorporation may from time to time, incur
indebtedness constituting Senior Indebtedness. In
addition, because American Bancorporation is a
holding company, American Bancorporation's
obligations under the Junior Subordinated Debentures
will effectively be subordinated to all existing and
future liabilities and obligations of its
subsidiaries, including the Bank. See "Risk Factors
-- Subordination of the Guarantee and the Junior
Subordinated Debentures," "Risk Factors -- Source of
Payments to Holders of Preferred Securities" and
"Description of the Junior Subordinated Debentures
-- Subordination."
GUARANTEE................ Payments of Distributions out of funds held by the
Trust Issuer, and payments on liquidation of the
Trust Issuer or the redemption of the Preferred
Securities, are guaranteed by American
Bancorporation to the extent the Trust Issuer has
funds available therefor. American Bancorporation
and the Trust Issuer believe that, taken together,
the obligations of American Bancorporation under the
Guarantee, the Trust
6
<PAGE>
Agreement, the Junior Subordinated Debentures, the
Indenture and the Expense Agreement, constitute, in
the aggregate, a full and unconditional guarantee,
on a subordinated basis, of all of the Trust
Issuer's obligations under the Preferred Securities.
See "Description of the Guarantee" and "Relationship
Among the Preferred Securities, the Junior
Subordinated Debentures, the Expense Agreement and
the Guarantee." The obligations of American
Bancorporation under the Guarantee are subordinate
and junior in right of payment to all Senior
Indebtedness of American Bancorporation. See "Risk
Factors -- Subordination of the Guarantee and the
Junior Subordinated Debentures" and "Description of
the Guarantee."
RIGHT TO DEFER INTEREST PAY-
MENTS .................... So long as no event of default under the Indenture
has occurred and is continuing, American
Bancorporation has the right under the Indenture at
any time during the term of the Junior Subordinated
Debentures 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 Period, American Bancorporation must pay
all interest then accrued and unpaid (together with
interest thereon at the annual rate of 8.50%,
compounded quarterly, to the extent permitted by
applicable law). During an Extension Period,
interest will continue to accrue and holders of the
Junior Subordinated Debentures (or holders of the
Preferred Securities, while outstanding) will be
required to accrue interest income for United States
federal income tax purposes in advance of receipt of
payment of such deferred interest. See "Certain
Federal Income Tax Consequences -- Interest Income
and Original Issue Discount".
During any such Extension Period, American
Bancorporation may not, and may not permit any
subsidiary of American Bancorporation to, (i)
declare or pay any dividends or distributions on, or
redeem, purchase, acquire or make a liquidation
payment with respect to, any of American
Bancorporation's capital stock (other than (a) the
reclassification of any class of American
Bancorporation's capital stock into another class of
capital stock, (b) dividends or distributions
payable in common stock of American Bancorporation,
(c) any declaration of a dividend in connection with
the implementation of a stockholders' rights plan,
the issuance of stock under any such plan in the
future or the redemption or repurchase of any such
rights pursuant thereto, (d) payments under the
Guarantee and (e) purchases of common stock related
to the issuance of common stock or rights under any
of American Bancorporation's benefit plans for its
directors, officers or employees), (ii) make any
payment of principal, interest or premium, if any,
on, or repay, repurchase or redeem, any debt
securities of American Bancorporation that rank pari
passu with or junior in right of payment to the
Junior Subordinated Debentures, or (iii) make
7
<PAGE>
any guarantee payments with respect to any guarantee
by American Bancorporation of the debt securities of
any subsidiary of American Bancorporation if such
guarantee ranks pari passu with or junior in right
of payment to the Junior Subordinated Debentures
other than payments pursuant to the Guarantee. Prior
to the termination of any such Extension Period,
American Bancorporation may further defer the
payment of interest on the Junior Subordinated
Debentures, provided that no Extension Period may
exceed 20 consecutive quarters or extend beyond the
Stated Maturity of the Junior Subordinated
Debentures. There is no limitation on the number of
times that American Bancorporation may elect to
begin an Extension Period. See "Description of the
Junior Subordinated Debentures -- Right to Defer
Interest Payment Obligation" and "Certain Federal
Income Tax Consequences -- Interest Income and
Original Issue Discount."
American Bancorporation 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
American Bancorporation elect to exercise such right
in the future, the market price of the Preferred
Securities is likely to be adversely affected. As a
result of the existence of American Bancorporation's
right to defer interest payments, the market price
of the Preferred Securities may be more volatile
than the market prices of other similar securities
that do not provide for such optional deferrals.
REDEMPTION............... The Junior Subordinated Debentures are subject to
redemption prior to their Stated Maturity at the
option of American Bancorporation (i) on or after
April 30, 2003, in whole at any time or in part from
time to time, or (ii) at any time, in whole (but not
in part), within 180 days following the occurrence
and continuation of a Tax Event, an Investment
Company Event or a Capital Treatment Event (each as
defined herein), in each case at a redemption price
equal to 100% of the principal amount of the Junior
Subordinated Debentures so redeemed, together with
any accrued and unpaid interest to the date fixed
for redemption.
If the Junior Subordinated Debentures are redeemed
prior to their Stated Maturity, the Trust Issuer
must apply the proceeds of such redemption to redeem
a Like Amount (as defined herein) of the Preferred
Securities and the Common Securities. The Preferred
Securities will be redeemed upon repayment of the
Junior Subordinated Debentures at their Stated
Maturity. See "Description of the Preferred
Securities -- Redemption."
DISTRIBUTION OF THE JUNIOR
SUBORDINATED DEBENTURES UPON
LIQUIDATION OF THE TRUST
ISSUER. American Bancorporation will have the right at any
time to dissolve the Trust Issuer and, after
satisfaction of creditors of the Trust Issuer, if
any, as provided by applicable law, cause the Junior
Subordinated Debentures to be distributed to the
holders of the Preferred Securities and the Common
Securities in exchange
8
<PAGE>
therefor upon liquidation of the Trust Issuer. The
ability of American Bancorporation to do so may be
subject to American Bancorporation's prior receipt
of regulatory approval.
In the event of the liquidation of the Trust Issuer,
after satisfaction of the claims of creditors of the
Trust Issuer, if any, as provided by applicable law,
the holders of the Preferred Securities will be
entitled to receive a Liquidation Amount of $10 per
Preferred Security plus accumulated and unpaid
Distributions thereon to the date of payment, which
may be in the form of a distribution of a Like
Amount (as defined herein) of the Junior
Subordinated Debentures, subject to certain
exceptions as described herein. See "Description of
the Preferred Securities -- Liquidation of the Trust
Issuer and Distribution of the Junior Subordinated
Debentures to Holders."
VOTING RIGHTS............ Except in limited circumstances, the holders of the
Preferred Securities will have no voting rights. See
"Description of the Preferred Securities -- Voting
Rights; Amendment of Trust Agreement."
USE OF PROCEEDS.......... All of the proceeds from the sale of the Preferred
Securities will be used by the Trust Issuer to
purchase Junior Subordinated Debentures. American
Bancorporation intends that the net proceeds from
the sale of such Junior Subordinated Debentures will
be used for general corporate purposes, including,
but not limited to, acquisitions by either the
Company or the Bank (although there presently exist
no agreements or understandings with respect to any
such acquisition), capital contributions to the Bank
to support growth and for working capital, and the
possible repurchase of shares of American
Bancorporation's common stock, subject to acceptable
market conditions.
RISK FACTORS............. An investment in the Preferred Securities involves
substantial risks that should be considered by
prospective purchasers. In addition, because holders
of the Preferred Securities may receive Junior
Subordinated Debentures on dissolution of the Trust
Issuer, and because payments on the Junior
Subordinated Debentures are the sole source of funds
for Distributions on and redemptions of the
Preferred Securities, prospective purchasers of the
Preferred Securities are also making an investment
decision with regard to the Junior Subordinated
Debentures and should carefully review all of the
information regarding the Junior Subordinated
Debentures contained herein. See "Risk Factors" and
"Description of the Junior Subordinated Debentures."
NASDAQ NATIONAL
MARKET SYMBOL........... The Preferred Securities have been approved for
listing on the Nasdaq Stock Market's National Market
under the symbol "AMBCP."
ERISA CONSIDERATIONS..... For a discussion of certain restrictions on
purchases, see "ERISA Considerations."
9
<PAGE>
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA OF THE COMPANY
The selected consolidated financial and other data of the Company set forth
below does not purport to be complete and should be read in conjunction with,
and is qualified in its entirety by, the more detailed information, included in
the Corporation's Annual Report on Form 10-K for the year ended December 31,
1997. See "Incorporation of Certain Documents by Reference."
<TABLE>
<CAPTION>
AS OF OR FOR THE YEAR ENDED
DECEMBER 31,
------------------------------
1997 1996
------------- ----------------
(DOLLARS IN THOUSANDS EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C>
SELECTED FINANCIAL AND OTHER DATA:
Total assets ....................................................... $ 484,606 $ 461,632
Investment securities .............................................. 169,176 143,474
Loans receivable, net .............................................. 286,691 271,450
Cash and cash equivalents .......................................... 13,443 29,420
Deposits ........................................................... 355,734 319,811
FHLB advances and other short term borrowings ...................... 87,574 104,096
Long-term debt ..................................................... 1,425 938
Stockholders' equity ............................................... 33,694 30,423
Non-performing assets(1) ........................................... 2,894 2,570
Full-service offices at end of period .............................. 20 20
SELECTED OPERATING DATA:
Interest income .................................................... $ 35,539 $ 29,885
Interest expense ................................................... 18,278 13,802
--------- ---------
Net interest income ................................................ 17,261 16,083
Provision for loan losses .......................................... 0 0
--------- ---------
Net interest income after provision for loan losses ................ 17,261 16,083
Net gain (losses) on sale of securities ............................ 34 (1)
Other non-interest income .......................................... 2,892 2,393
Special SAIF assessment(2) ......................................... 0 245
Other noninterest expenses ......................................... 13,101 12,462
--------- ---------
Income before income taxes ......................................... 7,086 5,768
Income taxes ....................................................... 2,577 2,102
--------- ---------
Net income ......................................................... $ 4,509 $ 3,666(2)
========= ===========
PER BASIC COMMON SHARE:
Net income ......................................................... $ 1.44 $ 1.17(2)
Cash dividends ..................................................... 0.50 0.45
Book value ......................................................... 10.77 9.72
SELECTED OPERATING RATIOS:
Average yield earned on interest-earning assets .................... 8.09% 7.99%
Average rate paid on interest- bearing liabilities ................. 4.62 4.14
Average interest rate spread(4) .................................... 3.47 3.85
Net interest margin(4) ............................................. 3.93 4.30
Ratio of average interest-earning assets to average
interest-bearing liabilities ...................................... 110.95 112.06
Net interest income to operating expenses .......................... 1.32 1.27
Operating expenses as a percent of average assets .................. 2.80 3.17(2)
Return on average assets ........................................... 0.96 0.91(2)
Return on average equity ........................................... 14.15 12.62(2)
Ratio of average equity to average assets .......................... 6.81 7.25
<CAPTION>
AS OF OR FOR THE YEAR ENDED DECEMBER 31,
-----------------------------------------
1995 1994 1993
------------- ------------- -------------
(DOLLARS IN THOUSANDS EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C> <C>
SELECTED FINANCIAL AND OTHER DATA:
Total assets ....................................................... $ 353,995 $ 338,116 $ 276,390
Investment securities .............................................. 68,015 78,189 94,103
Loans receivable, net .............................................. 250,372 228,866 150,523
Cash and cash equivalents .......................................... 22,357 14,628 21,833
Deposits ........................................................... 292,665 292,341 248,040
FHLB advances and other short term borrowings ...................... 27,523 13,398 1,609
Long-term debt ..................................................... 1,047 2,000 0
Stockholders' equity ............................................... 28,012 26,193 24,158
Non-performing assets(1) ........................................... 2,640 3,272 4,197
Full-service offices at end of period .............................. 19 19 17
SELECTED OPERATING DATA:
Interest income .................................................... $ 26,496 $ 20,135 $ 20,570
Interest expense ................................................... 11,171 7,189 8,009
--------- --------- ---------
Net interest income ................................................ 15,325 12,946 12,561
Provision for loan losses .......................................... 105 215 844
--------- --------- ---------
Net interest income after provision for loan losses ................ 15,220 12,731 11,717
Net gain (losses) on sale of securities ............................ 3 3 219
Other non-interest income .......................................... 1,677 1,059 1,230
Special SAIF assessment(2) ......................................... 0 0 0
Other noninterest expenses ......................................... 12,090 11,215 10,397
--------- --------- ---------
Income before income taxes ......................................... 4,810 2,578 2,769
Income taxes ....................................................... 1,758 882 999
--------- --------- ---------
Net income ......................................................... $ 3,052 $ 1,696 $ 1,770
========= ========= =========
PER BASIC COMMON SHARE:
Net income ......................................................... $ 0.98 $ 0.56 $ 0.59
Cash dividends ..................................................... 0.35 0.25 0.25
Book value ......................................................... 8.95 8.37 8.02
SELECTED OPERATING RATIOS:
Average yield earned on interest-earning assets .................... 8.18% 7.65% 7.99%
Average rate paid on interest- bearing liabilities ................. 3.93 3.15 3.51
Average interest rate spread(4) .................................... 4.25 4.50 4.48
Net interest margin(4) ............................................. 4.73 4.92 4.88
Ratio of average interest-earning assets to average
interest-bearing liabilities ...................................... 113.87 115.36 112.84
Net interest income to operating expenses .......................... 1.27 1.15 1.21
Operating expenses as a percent of average assets .................. 3.47 3.94 3.73
Return on average assets ........................................... 0.88 0.60 0.64
Return on average equity ........................................... 11.20 6.73 7.45
Ratio of average equity to average assets .......................... 7.82 8.84 8.53
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
AS OF OR FOR THE YEAR ENDED DECEMBER 31,
--------------------------------------------------------------
1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
ASSET QUALITY RATIOS (3):
Non-performing loans as a percent of total loans .......... 0.93% 0.72% 0.82% 1.13% 2.32%
Non-performing assets as a percent of total assets ........ 0.60 0.56 0.75 0.97 1.52
Allowance for loan losses as a percent of total loans ..... 1.15 1.31 1.54 1.63 2.35
Allowance for loan losses as a percent of non-
performing loans ......................................... 123.55 181.56 186.63 144.29 101.32
BANK CAPITAL RATIOS (3):
Tier 1 risk-based capital ratio ........................... 11.21% 10.51% 11.66% 11.48% 14.53%
Total risk-based capital ratio ............................ 12.39 11.76 12.91 12.74 15.79
Tier 1 leverage capital ratio ............................. 6.53 6.49 7.47 6.92 8.30
</TABLE>
- ----------
(1) Non-performing assets consist of non-performing loans and real estate owned
("REO"). Non-performing loans consist of non-accrual loans and accruing
loans 90 days or more overdue, while REO consists of real estate acquired
through foreclosure and former banking facilities.
(2) Without giving effect to the one-time special Savings Association Insurance
fund ("SAIF") assessment of $245,000 or $147,000 after tax ($0.05 basic net
income per share) incurred in the September 1996 quarter to recapitalize the
SAIF of the Federal Deposit Insurance Corporation ("FDIC"), net income and
basic net income per share would have been $3,813,000 and $1.22,
respectively, and operating expenses as a percent of average assets, return
on average assets and return on average equity would have been 3.11%, 0.95%
and 13.13%, respectively.
(3) Asset Quality Ratios and Capital Ratios are end of period ratios. With the
exception of end of period ratios, all ratios are based on month end average
balances during the indicated periods.
(4) Interest rate spread represents the difference between the weighted average
yield on average interest-earning assets and the weighted average cost of
average interest-bearing liabilities, and net interest margin represents net
interest income as a percent of average interest-earning assets.
11
<PAGE>
RISK FACTORS
An investment in the Preferred Securities involves a high degree of risk.
Prospective investors should carefully consider, together with the other
information contained in this Prospectus, the following factors in evaluating
the Company, its business and the Trust Issuer before purchasing the Preferred
Securities offered hereby. Prospective investors should note, in particular,
that this Prospectus contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended (the "Securities Act"),
and Section 21E of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), that involve substantial risks and uncertainties. When used in
this Prospectus, the words "anticipate," "believe," "estimate," "may," "intend"
and "expect" and similar expressions identify certain of such forward-looking
statements. Actual results, performance or achievements could differ materially
from those contemplated, expressed or implied by the forward-looking statements
contained herein. The considerations listed below represent certain important
factors the Company believes could cause such results to differ. These
considerations are not intended to represent a complete list of the general or
specific risks that may affect the Company and the Trust Issuer. It should be
recognized that other risks, including general economic factors and expansion
strategies, may be significant, presently or in the future, and the risks set
forth below may affect American Bancorporation and the Trust Issuer to a greater
extent than indicated.
RISK FACTORS RELATING TO THE OFFERING
SUBORDINATION OF THE GUARANTEE AND THE JUNIOR SUBORDINATED DEBENTURES
The obligations of American Bancorporation under the Guarantee issued by
American Bancorporation for the benefit of the holders of the Preferred
Securities and under the Junior Subordinated Debentures issued to the Trust
Issuer will be unsecured and will rank subordinate and junior in right of
payment to all Senior Indebtedness of American Bancorporation. At December 31,
1997, American Bancorporation had no outstanding Senior Indebtedness. There is
no limitation on the amount of Senior Indebtedness, or subordinated debt which
is pari passu with the Junior Subordinated Debentures, which American
Bancorporation may issue. Because American Bancorporation is a holding company,
the right of American Bancorporation to participate in any distribution of
assets of any subsidiary, including the Bank, upon such subsidiary's liquidation
or reorganization or otherwise (and thus the ability of holders of the Preferred
Securities to benefit indirectly from such distribution), is subject to the
prior claims of creditors of that subsidiary (including depositors in the Bank),
except to the extent that American Bancorporation may itself be recognized as a
creditor of that subsidiary. If American Bancorporation is a creditor of a
subsidiary, the claims of American Bancorporation would be subject to any prior
security interest in the assets of the subsidiary and any indebtedness of the
subsidiary senior to that of American Bancorporation. Accordingly, the Junior
Subordinated Debentures and the Guarantee will be effectively subordinated to
all existing and future liabilities of American Bancorporation's subsidiaries,
including the Bank. At December 31, 1997, the Company had aggregate liabilities
of $450.9 million (including $355.7 million in deposits). Only the capital stock
of American Bancorporation is currently junior in right of payment to the Junior
Subordinated Debentures to be issued to the Trust Issuer. Holders of the Junior
Subordinated Debentures will be able to look only to the assets of American
Bancorporation for payments on the Junior Subordinated Debentures. None of the
Indenture, the Guarantee, the Expense Agreement or the Trust Agreement places
any limitation on the amount of secured or unsecured debt, including Senior
Indebtedness, that may be incurred by American Bancorporation. American
Bancorporation may, from time to time, incur indebtedness constituting Senior
Indebtedness. See "Description of the Guarantee -- Status of the Guarantee" and
"Description of the Junior Subordinated Debentures -- Subordination."
SOURCE OF PAYMENTS TO HOLDERS OF PREFERRED SECURITIES
As a bank holding company, American Bancorporation conducts its operations
principally through its subsidiaries and, therefore, its principal source of
cash, other than its investing and financing activities, is the receipt of
dividends from the Bank. Since American Bancorporation is without significant
assets other than the capital stock of the Bank, the ability of American
Bancorporation to pay interest
12
<PAGE>
on the principal of the Junior Subordinated Debentures to the Trust Issuer (and
consequently, the Trust Issuer's ability to pay Distributions on the Preferred
Securities and American Bancorporation's ability to pay its obligations under
the Guarantee) will be dependent on the ability of the Bank to pay dividends to
American Bancorporation in amounts sufficient to service American
Bancorporation's obligations. American Bancorporation may become obligated to
make other payments with respect to securities issued by American Bancorporation
in the future which are pari passu or have a preference over the Junior
Subordinated Debentures issued to the Trust Issuer with respect to the payment
of principal, interest or dividends. There is no restriction on the ability of
American Bancorporation to issue, or limitations on the amount of securities
which American Bancorporation may issue, which are pari passu or have a
preference over the Junior Subordinated Debentures issued to the Trust Issuer,
nor is there any restriction on the ability of the Bank to issue additional
capital stock or incur additional indebtedness.
There are regulatory limitations on the payment of dividends directly or
indirectly to the Company from the Bank. As of December 31, 1997, under
applicable banking statutes, the total capital available for payment of
dividends by the Bank to the Company was approximately $7.3 million.
Federal and state bank regulatory agencies have the power to prohibit any
act, including the payment of dividends, if such act would reduce the Bank's
capital to a point that, in their opinion, would render the Bank
undercapitalized and thus constitute an unsafe or unsound banking practice. In
addition to restrictions on the payment of dividends, the Bank is subject to
certain restrictions imposed by federal law on any extensions of credit to, and
certain other transactions with, the Company and certain other affiliates, and
on investments in stock or other securities thereof. Such restrictions prevent
the Company and such other affiliates from borrowing from the Bank unless the
loans are secured by various types of collateral. Further, such secured loans,
other transactions and investments by the Bank are generally limited in amount
as to the Company and as to each of such other affiliates to 10% of the Bank's
capital and surplus and as to the Company and all of such other affiliates to an
aggregate of 20% of the Bank's capital and surplus.
RIGHT TO DEFER INTEREST PAYMENT OBLIGATION; TAX CONSEQUENCES; MARKET PRICE
CONSEQUENCES
So long as no event of default under the Indenture has occurred and is
continuing, American Bancorporation 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 with
respect to each Extension Period, 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 Preferred
Securities by the Trust Issuer would also be deferred (and the amount of
Distributions to which holders of the Preferred Securities are entitled would
accumulate additional Distributions thereon at the rate of 8.50% per annum,
compounded quarterly from the relevant payment date for such Distributions)
during any such Extension Period. During any such Extension Period, American
Bancorporation may not, and may not permit any subsidiary of American
Bancorporation to, (i) declare or pay any dividends or distributions on, or
redeem, purchase, acquire or make a liquidation payment with respect to, any of
American Bancorporation's capital stock, (other than (a) the reclassification of
American Bancorporation's capital stock into another class of capital stock, (b)
dividends or distributions in common stock of American Bancorporation, (c) any
declaration of a dividend in connection with the implementation of a
stockholders' rights plan, or the issuance of stock under any such plan in the
future or the redemption or repurchase of any such rights pursuant thereto, (d)
payments under the Guarantee and (e) purchases of common stock related to the
issuance of common stock or rights under any of American Bancorporation's
benefit plans for its directors, officers or employees), (ii) make any payment
of principal, interest or premium, if any, on or repay, repurchase or redeem any
debt securities of American Bancorporation that rank pari passu with or junior
in interest to the Junior Subordinated Debentures or (iii) make any guarantee
payments with respect to any guarantee by American Bancorporation of the debt
securities of any subsidiary of American Bancorporation if such guarantee ranks
pari passu with or junior in interest to the Junior Subordinated Debentures
other than payments pursuant to the Guarantee. Prior to the termination of any
such Extension Period, American Bancorporation may further defer the payment of
interest, provided that
13
<PAGE>
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 interest then accrued and unpaid on
the Junior Subordinated Debentures (together with interest thereon at the annual
rate of 8.50%, compounded quarterly from the relevant payment date for such
interest, to the extent permitted by applicable law), American Bancorporation
may elect to begin a new Extension Period subject to the above requirements.
There is no limitation on the number of times that American Bancorporation may
elect to begin an Extension Period so long as no event of default under the
Indenture has occurred and is continuing. See "Description of the Preferred
Securities -- Distributions" and "Description of the Junior Subordinated
Debentures -- Right to Defer Interest Payment Obligation."
If an Extension Period were to occur, a holder of the Preferred Securities
would continue to accrue income (in the form of original issue discount) for
United States federal income tax purposes in respect of its pro rata share of
the interest accruing on the Junior Subordinated Debentures held by the Trust
Issuer. As a result, a holder of the Preferred Securities would be required to
include such income in gross income for United States federal income tax
purposes in advance of the receipt of cash and would not receive the cash
related to such income from the Trust Issuer if the holder disposed of the
Preferred Securities prior to the record date for the payment of Distributions.
See "Certain Federal Income Tax Consequences -- Interest Income and Original
Issue Discount" and "-- Sales or Redemption of the Preferred Securities."
American Bancorporation has no current intention of exercising its right to
defer payments of interest on the Junior Subordinated Debentures. However,
should American Bancorporation elect to exercise such right in the future, the
market price of the Preferred Securities would likely be adversely affected. A
holder that disposed of its Preferred Securities during an Extension Period,
therefore, might not receive the same return on its investment as a holder that
continued to hold its Preferred Securities. In addition, as a result of the
existence of American Bancorporation's right to defer interest payments, the
market price of the Preferred Securities may be more volatile than the market
prices of other similar securities that are not subject to such deferrals.
OPTIONAL REDEMPTION AFTER 2003
American Bancorporation has the right to redeem the Junior Subordinated
Debentures prior to their Stated Maturity on or after April 30, 2003 in whole at
one time or in part from time to time. The exercise of such right may be subject
to American Bancorporation having received prior regulatory approval. See
"Description of the Junior Subordinated Debentures -- General."
REDEMPTION DUE TO TAX EVENT, INVESTMENT COMPANY EVENT OR CAPITAL TREATMENT
EVENT
American Bancorporation has the right, but not the obligation, to redeem
the Junior Subordinated Debentures in whole (but not in part) within 180 days
following the occurrence of a Tax Event, an Investment Company Event or a
Capital Treatment Event (whether occurring before or after April 30, 2003), and,
therefore, cause a mandatory redemption of the Preferred Securities. The
exercise of such right may be subject to American Bancorporation having received
prior regulatory approval.
A "Tax Event" means the receipt by the Trust Issuer of an Opinion of
Counsel to the effect that, as a result of any amendment to, or change
(including any announced prospective change) in, the laws (or any regulations
thereunder) of the United States or any political subdivision or taxing
authority thereof or therein, or as a result of any official administrative
pronouncement or judicial decision interpreting or applying such laws or
regulations, which amendment or change is effective or such pronouncement or
decision is announced on or after the date of issuance of the Preferred
Securities under the Trust Agreement, there is more than an insubstantial risk
that (i) the Trust Issuer 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 American Bancorporation on the Junior Subordinated Debentures is not, or
within 90 days of the date of such opinion will not be, deductible by American
Bancorporation, in whole or in part, for United States federal income tax
purposes or (iii) the Trust Issuer 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. The Trust Issuer or
14
<PAGE>
American Bancorporation must request and receive an opinion with regard to such
matters within a reasonable period of time after it becomes aware of the
possible occurrence of any of the events described in clauses (i) through (iii)
above.
"Investment Company Event" means the receipt by the Trust Issuer of an
Opinion of Counsel 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, the Trust Issuer is or will be considered an "investment company"
that is required to be registered under the Investment Company Act of 1940, as
amended (the "Investment Company Act"), which change occurs or becomes effective
on or after the date of original issuance of the Preferred Securities.
"Capital Treatment Event" means the receipt by the Trust Issuer of an
Opinion of Counsel to the effect that as a result of any amendment to, or change
(including any proposed change) in, the laws (or any regulations thereunder) of
the United States or any political subdivision thereof or therein, or as a
result of any official or administrative pronouncement or action or judicial
decision interpreting or applying such laws or regulations, which amendment or
change is effective or such proposed change, pronouncement, action or decision
is announced on or after the date of original issuance of the Preferred
Securities, there is more than an insubstantial risk that the Preferred
Securities would not constitute Tier 1 Capital (or the then equivalent thereof)
applied as if American Bancorporation (or its successor) were a bank holding
company for purposes of applicable capital adequacy guidelines of the Federal
Reserve (or any successor regulatory authority with jurisdiction over bank
holding companies), or any capital adequacy guidelines as then in effect and
applicable to American Bancorporation.
"Opinion of Counsel" means an opinion in writing of independent legal
counsel experienced in such matters as are being opined upon.
EXCHANGE OF PREFERRED SECURITIES FOR JUNIOR SUBORDINATED DEBENTURES; REDEMPTION
AND TAX CONSEQUENCES
American Bancorporation has the right at any time to dissolve the Trust
Issuer and, after the satisfaction of liabilities to creditors of the Trust
Issuer as required by applicable law, cause the Junior Subordinated Debentures
to be distributed to the holders of the Preferred Securities in exchange
therefor in liquidation of the Trust Issuer. The exercise of such right may be
subject to American Bancorporation having received prior regulatory approval.
American Bancorporation will have the right, in certain circumstances, to redeem
the Junior Subordinated Debentures in whole or in part, in lieu of a
distribution of the Junior Subordinated Debentures by the Trust Issuer, in which
event the Trust Issuer will redeem the Preferred Securities on a pro rata basis
to the same extent as the Junior Subordinated Debentures are redeemed by
American Bancorporation. Any such distribution or redemption prior to the Stated
Maturity will be subject to prior regulatory approval if then required under
applicable capital guidelines or regulatory policies. See "Description of the
Preferred Securities -- Liquidation of the Trust Issuer and Distribution of the
Junior Subordinated Debentures to Holders" and "Description of the Junior
Subordinated Debentures -- Redemption or Exchange."
Under current United States federal income tax law, a distribution of
Junior Subordinated Debentures upon the dissolution of the Trust Issuer would
not be a taxable event to holders of the Preferred Securities. If, however, the
Trust Issuer were characterized as an association taxable as a corporation at
the time of the dissolution of the Trust Issuer, the distribution of the Junior
Subordinated Debentures would constitute a taxable event to holders of Preferred
Securities. Moreover, any redemption of the Preferred Securities for cash would
be a taxable event to such holders. See "Certain Federal Income Tax Consequences
- -- Distribution of the Junior Subordinated Debentures to Holders of the
Preferred Securities" and "-- Sales or Redemption of the Preferred Securities."
There can be no assurance as to the market prices for the Preferred
Securities or the Junior Subordinated Debentures that may be distributed in
exchange for Preferred Securities upon a dissolution or liquidation of the Trust
Issuer. The Preferred Securities or the Junior Subordinated Debentures may trade
at a discount to the price that the investor paid to purchase the Preferred
Securities offered
15
<PAGE>
hereby. Because holders of Preferred Securities may receive Junior Subordinated
Debentures as a result of the liquidation of the Trust, and because payments on
the Junior Subordinated Debentures are the sole source of funds for
Distributions and redemptions of the Preferred Securities, prospective
purchasers of Preferred 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.
If the Junior Subordinated Debentures are distributed to the holders of
Preferred Securities upon the liquidation of the Trust Issuer, American
Bancorporation will use its reasonable efforts to list the Junior Subordinated
Debentures on the Nasdaq Stock Market's National Market or SmallCap Market or
such stock exchanges, if any, on which the Preferred Securities are then listed.
RIGHTS UNDER THE GUARANTEE
The Guarantee guarantees to the holders of the Preferred Securities the
following payments, to the extent not paid by the Trust Issuer: (i) any
accumulated and unpaid Distributions required to be paid on the Preferred
Securities, to the extent that the Trust Issuer has funds on hand available
therefor at such time, (ii) the redemption price with respect to any Preferred
Securities called for redemption, to the extent that the Trust Issuer has funds
on hand available therefor at such time, and (iii) upon a voluntary or
involuntary dissolution, winding-up or liquidation of the Trust Issuer (unless
the Junior Subordinated Debentures are distributed to holders of the Preferred
Securities in exchange therefor), the lesser of (a) the aggregate of the
Liquidation Amount and all accumulated and unpaid Distributions to the date of
payment, to the extent that the Trust Issuer has funds on hand available
therefor at such time, and (b) the amount of assets of the Trust Issuer
remaining available for distribution to holders of the Preferred Securities
after payment of creditors of the Trust Issuer as required by applicable law.
If American Bancorporation were to default on its obligation to pay amounts
payable under the Junior Subordinated Debentures, the Trust Issuer would lack
funds for the payment of Distributions or amounts payable on redemption of the
Preferred Securities or otherwise, and, in such event, holders of the Preferred
Securities would not be able to rely upon the Guarantee for payment of such
amounts. The holders of not less than a majority in aggregate Liquidation Amount
of the Preferred Securities have the right to direct the time, method and place
of conducting any proceeding for any remedy available to the Guarantee Trustee
in respect of the Guarantee or to direct the exercise of any trust power
conferred upon the Guarantee Trustee under the Guarantee. Any holder of the
Preferred Securities may institute a legal proceeding directly against American
Bancorporation to enforce its rights under the Guarantee without first
instituting a legal proceeding against the Trust Issuer, the Guarantee Trustee
or any other person or entity. In the event an event of default under the
Indenture shall have occurred and be continuing and such event is attributable
to the failure of American Bancorporation to pay interest on or principal of the
Junior Subordinated Debentures on the applicable payment date, a holder of the
Preferred Securities may institute a legal proceeding directly against American
Bancorporation for enforcement of payment to such holder of the principal of or
interest on such Junior Subordinated Debentures having a principal amount equal
to the aggregate Liquidation Amount of the Preferred Securities of such holder
(a "Direct Action"). The exercise by American Bancorporation of its right, as
described herein, to defer the payment of interest on the Junior Subordinated
Debentures does not constitute an event of default under the Indenture. In
connection with any Direct Action, American Bancorporation will have a right of
set-off under the Indenture to the extent of any payment made by American
Bancorporation to such holder of the Preferred Securities in the Direct Action.
Except as described herein, holders of the Preferred Securities will not be able
to exercise directly any other remedy available to the holders of the Junior
Subordinated Debentures or assert directly any other rights in respect of the
Junior Subordinated Debentures. The Bank of New York will act as the guarantee
trustee under the Guarantee (the "Guarantee Trustee") and will hold the
Guarantee for the benefit of the holders of the Preferred Securities. The Bank
of New York will also act as Debenture Trustee for the Junior Subordinated
Debentures and as Property Trustee, and The Bank of New York (Delaware) will act
as Delaware Trustee under the Trust Agreement. See "Description of the Junior
Subordinated Debentures -- Enforcement of Certain Rights by Holders of the
Preferred Securities," "Description of
16
<PAGE>
the Junior Subordinated Debentures -- Debenture Events of Default" and
"Description of the Guarantee." The Trust Agreement provides that each holder of
the Preferred Securities by acceptance thereof agrees to the provisions of the
Guarantee and the Indenture.
LIMITED COVENANTS
The covenants in the Indenture are limited and there are no covenants in
the Trust Agreement. As a result, neither the Indenture nor the Trust Agreement
protects holders of Junior Subordinated Debentures or Preferred Securities,
respectively, in the event of a material adverse change in American
Bancorporation's financial condition or results of operations or limits the
ability of American Bancorporation or any subsidiary to incur or assume
additional indebtedness or other obligations. Additionally, neither the
Indenture nor the Trust Agreement contains any financial ratios or specified
levels of liquidity to which American Bancorporation must adhere. Therefore, the
provisions of these governing instruments should not be considered a significant
factor in evaluating whether American Bancorporation will be able to or will
comply with its obligations under the Junior Subordinated Debentures or the
Guarantee.
LIMITED VOTING RIGHTS
Holders of the Preferred Securities will generally have limited voting
rights relating only to the modification of the Preferred Securities and the
exercise of the Trust Issuer's rights as holder of the Junior Subordinated
Debentures and the Guarantee. Holders of the Preferred Securities will not be
entitled to vote to appoint, remove or replace the Property Trustee, the
Delaware Trustee or the Administrative Trustees, as such voting rights are
vested exclusively in American Bancorporation, as the holder of the Common
Securities (except, with respect to the Property Trustee and the Delaware
Trustee, upon the occurrence of certain events described herein). The Property
Trustee, the Administrative Trustees and American Bancorporation may amend the
Trust Agreement without the consent of holders of the Preferred Securities to
ensure that the Trust Issuer will be classified for United States federal income
tax purposes as a grantor trust even if such action adversely affects the
interests of such holders. See "Description of the Preferred Securities --
Voting Rights; Amendment of the Trust Agreement" and "-- Removal of the Trust
Issuer Trustees."
ABSENCE OF PRIOR PUBLIC MARKET FOR THE PREFERRED SECURITIES; TRADING PRICE AND
TAX CONSIDERATIONS
There is no current public market for the Preferred Securities. The
Preferred Securities have been approved for listing on the Nasdaq Stock Market's
National Market. However, the requirements for listing and continued listing is
the presence of three initial market makers for the Preferred Securities, at
least 1.1 million shares, not including shares held by affiliates, and at least
400 stockholders. American Bancorporation has been advised that the Underwriter
intends to make a market in the Preferred Securities. However, the Underwriter
is not obligated to do so and such market making may be discontinued at any
time. Therefore, there is no assurance that an active trading market will
develop for the Preferred Securities or, if such market develops, that it will
be maintained or that the market price will equal or exceed the public offering
price set forth on the cover page of this Prospectus. Accordingly, holders of
Preferred Securities may experience difficulty reselling them or may be unable
to sell them at all. The public offering price for the Preferred Securities has
been determined through negotiations between American Bancorporation and the
Underwriter. Prices for the Preferred Securities will be determined in the
marketplace and may be influenced by many factors, including prevailing interest
rates, the liquidity of the market for the Preferred Securities, investor
perceptions of American Bancorporation and general industry and economic
conditions.
Further, should American Bancorporation exercise its option to defer any
payment of interest on the Junior Subordinated Debentures, the Preferred
Securities would be likely to trade at prices that do not fully reflect the
value of accrued but unpaid interest with respect to the underlying Junior
Subordinated Debentures. In the event of such a deferral, a holder of Preferred
Securities that disposed of its Preferred Securities between record dates for
payments of Distributions (and consequently did not receive a Distribution from
the Trust Issuer for the period prior to such disposition) would nevertheless
17
<PAGE>
be required to include accrued but unpaid interest on the Junior Subordinated
Debentures through the date of disposition in income as ordinary income and to
add such amount to the adjusted tax basis of the Preferred Securities disposed
of. Upon disposition of the Preferred Securities, such holder would recognize a
capital loss to the extent the selling price (which might not fully reflect the
value of accrued but unpaid interest) was less than its adjusted tax basis
(which would include all accrued but unpaid interest). Subject to certain
limited exceptions, capital losses cannot be applied to offset ordinary income
for United States federal income tax purposes. See "Certain Federal Income Tax
Consequences -- Sales or Redemption of the Preferred Securities."
POSSIBLE TAX LAW CHANGES AFFECTING THE PREFERRED SECURITIES
Under current law, American Bancorporation will be able to deduct interest
on the Junior Subordinated Debentures. However, there is no assurance that
future legislation will not affect the ability of the Company to deduct interest
on the Junior Subordinated Debentures. Such a change would give rise to a Tax
Event. A Tax Event would permit American Bancorporation, upon receipt of
regulatory approval if then required under applicable capital guidelines or
regulatory policies, to cause a redemption of the Preferred Securities before,
as well as after, April 30, 2003. See "Description of the Junior Subordinated
Debentures -- Redemption or Exchange."
RISK FACTORS RELATING TO THE COMPANY
POTENTIAL IMPACT OF CHANGES IN INTEREST RATES
The Bank's profitability is dependent to a large extent on its net interest
income, which is the difference between its income on interest-earning assets
and its expense on interest-bearing liabilities. The Bank, like most financial
institutions, is affected by changes in general interest rate levels and by
other economic factors beyond its control. Interest rate risk arises in part
from mismatches (i.e., the interest sensitivity gap) between the dollar amount
of repricing or maturing assets and liabilities, and is measured in terms of the
ratio of the interest rate sensitivity gap to total assets. More assets than
liabilities repricing or maturing over a given time frame is considered
asset-sensitive and is reflected as a positive gap, and more liabilities than
assets repricing or maturing over a given time frame is considered
liability-sensitive and is reflected as a negative gap. A liability-sensitive
position (i.e., a negative gap) will generally enhance earnings in a falling
interest rate environment and reduce earnings in a rising interest rate
environment, while an asset-sensitive position (i.e., a positive gap) will
generally enhance earnings in a rising interest rate environment and will reduce
earnings in a falling interest rate environment. Fluctuations in interest rates
are not predictable or controllable. The Company utilizes OTS guidelines in
calculating their gap position.
COMPOSITION OF LOAN PORTFOLIO
A majority of the loans in the Company's portfolio are secured by real
estate. At December 31, 1997, the Company estimates that a substantial majority
of its total loans receivable were secured by properties located in its primary
market areas of central and eastern Ohio and northern West Virginia. Conditions
in the real estate markets in which the collateral for the Company's mortgage
loans are located strongly influence the level of the Company's non-performing
loans and its results of operations. Real estate values are affected by, among
other things, changes in general or local economic conditions, changes in
governmental rules or policies, the availability of loans to potential
purchasers, and natural disasters. Declines in real estate markets could
negatively impact the value of the collateral securing the Company's loans and
its results of operations.
As of December 31, 1997, $121.3 million, or 42.3% of the Company's total
loan portfolio consisted of loans secured by first liens on one- to four-family
residences. At that date, $1.0 million or 0.3% of the Company's total loan
portfolio consisted of construction loans, $24.1 million or 8.4% of the
Company's total loan portfolio consisted of home equity loans and lines of
credit, an aggregate of $75.1 million or 26.2% of the Company's total loan
portfolio consisted of consumer loans and commercial loans and
18
<PAGE>
$65.2 million or 22.8% of the Company's total loan portfolio consisted of
commercial real estate and multi-family real estate loans. Although these types
of loans generally have higher yields than one- to four-family loans, such loans
generally carry a higher level of credit risk than do single-family residential
loans.
ASSET QUALITY
The future success of the Company is dependent upon the quality of its
assets. Although management of the Company devotes substantial time and
resources to the identification, collection and work-out of non-performing
assets, the real estate markets and the overall economy in its market area are
likely to be significant determinants of the quality of the Company's assets in
future periods and, thus, its financial condition and results of operations.
During the fiscal year ended December 31, 1997, total non-performing assets
increased by $0.3 million or 12.6%. Nonaccrual loans due increased by $0.3
million and loans 90 days past due increased $0.5 million while restructured
loans decreased by $0.1 million and other real estate owned decreased by $0.4
million.
ALLOWANCE FOR LOAN LOSSES
Industry experience indicates that a portion of the Company's loans will
become delinquent and a portion of the loans may require partial or entire
charge-off. Regardless of the underwriting criteria utilized by the Company,
losses may be experienced as a result of various factors beyond the Company's
control, including, among other things, changes in market conditions affecting
the value of properties and problems affecting the credit of the borrower. The
Company's determination of the adequacy of its allowance for loan losses is
based on various considerations, including an analysis of the risk
characteristics of various classifications of loans, previous loan loss
experience, specific loans which would have loan loss potential, delinquency
trends, estimated fair value of the underlying collateral, current economic
conditions, the views of the Company's regulators (who have the authority to
require additional reserves), and geographic and industry loan concentration.
However, if delinquency levels were to increase as a result of adverse general
economic conditions, especially in Ohio and West Virginia where the Company's
exposure is greatest, the loan loss reserve so determined by the Company may not
be adequate. There can be no assurance that the allowance will be adequate to
cover loan losses or that the Company will not experience significant losses in
its loan portfolios which may require significant increases to the allowance for
loan losses in the future. While the Company has not made a provision for loan
losses since 1995, it is likely that the Company will begin making a provision
to the allowance for loan losses during 1998. The increase in the amount of the
Company's provision for loan losses is due to both the increased levels of loan
originations as well as the increase in the Company's non-performing assets.
There can be no assurance that the Company will not further increase its
provision for loan losses, which could negatively impact results of operations.
At December 31, 1997, the ratio of the Company's allowance for loan losses to
total loans was 1.15%, and the allowance for loan losses to non-performing loans
was 123.56%.
REGULATORY OVERSIGHT
The Bank is subject to extensive regulation, supervision and examination by
the Department as its chartering authority and primary regulator, and by the
FDIC, which insures its deposits up to applicable limits. The Bank is a member
of the FHLB of Pittsburgh and is subject to certain limited regulation by the
Federal Reserve Board. As the holding company of the Bank, American
Bancorporation is also subject to regulation and oversight by the Federal
Reserve Board. Such regulation and supervision governs the activities in which
an institution may engage and is intended primarily for the protection of the
FDIC insurance funds and depositors. Regulatory authorities have been granted
extensive discretion in connection with their supervisory and enforcement
activities and regulations have been implemented which have increased capital
requirements, increased insurance premiums and have resulted in increased
administrative, professional and compensation expenses. Any change in the
regulatory structure or the applicable statutes or regulations could have a
material impact on the Company and the Bank and their
19
<PAGE>
operations. Additional legislation and regulations may be enacted or adopted in
the future which could significantly affect the powers, authority and operations
of the Bank and the Bank's competitors which in turn could have a material
adverse effect on the Bank and its operations.
COMPETITION
The Company faces substantial competition in purchasing and originating
real estate loans and in attracting deposits. The Company's competition in
originating real estate loans is principally from banks, other thrifts, mortgage
banking companies, real estate financing conduits, and small insurance
companies. Although it has not done so in recent years, in purchasing real
estate loans, the Company competes with other participants in the secondary
mortgage market. Many entities competing with the Company enjoy competitive
advantages over the Company relative to a potential borrower or seller in terms
of a prior business relationship, wide geographic presence or more accessible
branch office locations, the ability to offer additional services or more
favorable pricing alternatives, a lower origination and operating cost
structure, and other relevant items. Increased competition in the areas in which
the Company conducts operations from traditional competitors or new sources
could result in a decrease in the origination or purchase of mortgage loans and
could adversely affect the Company's results of operations. In its deposit
gathering activities, the Company competes with insured depository institutions
such as thrifts, credit unions, and banks, as well as uninsured investment
alternatives including money market funds. These competitors may offer higher
rates than the Company, which could result in the Company either attracting
fewer deposits or in requiring the Company to increase the rates it pays to
attract deposits. Increased deposit competition could adversely affect the
Company's ability to generate the funds necessary for its lending operations and
could adversely affect the Company's results of operations.
USE OF PROCEEDS
All of the proceeds from the sale of the Preferred Securities will be
invested by the Trust Issuer in Junior Subordinated Debentures. The net proceeds
to the Company from the sale of the Junior Subordinated Debentures are estimated
to be approximately $10.3 million ($11.9 million if the Underwriter's
over-allotment option is exercised in full after deduction of the underwriting
discount and estimated expenses), American Bancorporation intends to use the net
proceeds from the sale of the Junior Subordinated Debentures for general
corporate purposes, including, but not limited to, acquisitions by either the
Company or the Bank (although there presently exist no agreements or
understandings with respect to any such acquisition), capital contributions to
the Bank to support growth and for working capital, including continuation of
the wholesale leveraging strategy discussed under "Summary - American
Bancorporation" and possible repurchase of shares of American Bancorporation's
common stock, subject to regulatory requirements and acceptable market
conditions.
MARKET FOR THE PREFERRED SECURITIES
The Preferred Securities have been approved for listing on the Nasdaq Stock
Market's National Market under the symbol "AMBCP." Although the Underwriter has
informed the Company that it presently intends to make a market in the Preferred
Securities, the Underwriter is not obligated to do so and any such market making
may be discontinued at any time. Accordingly, there is no assurance that an
active and liquid trading market will develop or, if developed, that such a
market will be sustained. The offering price and distribution rate have been
determined by negotiations among representatives of the Company and the
Underwriter, and the offering price of the Preferred Securities may not be
indicative of the market price following the offering. See "Underwriting."
ACCOUNTING TREATMENT
For financial reporting purposes, the Trust Issuer will be treated as a
subsidiary of the Company and, accordingly, the Trust Issuer's financial
statements will be included in the consolidated financial statements of the
Company. The Preferred Securities will be presented as a separate line item in
the
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<PAGE>
consolidated balance sheet of the Company under the caption "Guaranteed
Preferred Beneficial Interests in the Company's Junior Subordinated Debentures"
and appropriate disclosures about the Preferred Securities will be included in
the notes to the consolidated financial statements. For financial reporting
purposes, the Company will record distributions payable on the Preferred
Securities as an interest expense in the consolidated statements of operations.
In its future financial reports, the Company will: (i) present the
Preferred Securities on the Company's statements of financial condition as a
separate line item entitled "Guaranteed Preferred Beneficial Interests in the
Company's Junior Subordinated Debentures;" (ii) include in a footnote to the
financial statements disclosure that the sole assets of the Trust Issuer are the
Junior Subordinated Debentures specifying the principal amount, interest rate
and maturity date of Junior Subordinated Debentures held; and (iii) if Staff
Accounting Bulletin No. 53 treatment is sought, include, in an audited footnote
to the financial statements, disclosure that (a) the Trust Issuer is wholly
owned, (b) the sole assets of the Trust Issuer are its Junior Subordinated
Debentures, and (c) the obligations of the Company under the Junior Subordinated
Debentures, the Indenture, the Trust Agreement and the Guarantee, in the
aggregate, constitute a full and unconditional guarantee by the Company of the
Trust Issuer's obligations under the Preferred Securities.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the Company's consolidated ratios of
earnings to fixed charges for the periods indicated.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------
1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Earnings to Fixed Charges:
Including interest on deposits ......... 1.39x 1.42x 1.43x 1.36x 1.35x
Excluding interest on deposits ......... 2.39x 3.01x 4.50x 17.21x 44.27x
</TABLE>
For purposes of computing the ratios of earnings to fixed charges, earnings
represent income from continuing operations before income taxes, extraordinary
items and cumulative effect of a change in accounting principle plus fixed
charges. Fixed charges represent total interest expense, including and excluding
interest on deposits, as applicable.
21
<PAGE>
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company as of December 31, 1997, as adjusted to give effect to the consummation
of the offering of the Trust Preferred Securities. The following data should be
read in conjunction with the financial information included in documents
incorporated herein by reference. See "Incorporation of Certain Documents by
Reference".
<TABLE>
<CAPTION>
AS
ACTUAL ADJUSTED
----------- ------------
(IN THOUSANDS)
<S> <C> <C>
Deposits .......................................................... $355,734 $ 355,734
Borrowings:
FHLB of Pittsburgh advances ..................................... 74,000 74,000
Securities sold under repurchase agreements ..................... 7,912 7,912
Other borrowings ................................................ 7,087 7,087
-------- ---------
Total deposits and borrowed funds ............................ 444,733 444,733
-------- ---------
Guaranteed Preferred Beneficial Interests in the Company's
Junior Subordinated Debentures(1) ............................... -- 11,000
-------- ---------
Stockholders' equity:
Preferred Stock, $100 par value; 200,000 shares authorized;
none issued .................................................... -- --
Common stock, no par value, 6,500,000 shares authorized;
3,129,674 issued and outstanding ............................... 7,824 7,824
Additional paid-in capital ........................................ 10,302 10,302
Net unrealized gain on securities available for sale, net ......... 603 603
Retained earnings ................................................. 14,965 14,965
-------- ---------
Total stockholders' equity ..................................... 33,694 33,694
-------- ---------
</TABLE>
- ----------
(1) Preferred Securities of the Trust Issuer representing beneficial interests
in $11.0 million aggregate principal amount of the Junior Subordinated
Debentures issued by the Company to the Trust Issuer. The Junior
Subordinated Debentures will bear interest at the annual rate of 8.50% of
the principal amount thereof, payable quarterly and will mature on April 30,
2028. The Company owns all of the Common Securities of the Trust Issuer.
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<PAGE>
DESCRIPTION OF THE PREFERRED SECURITIES
GENERAL
The following is a summary of certain terms and provisions of the Preferred
Securities. This summary of certain terms and provisions of the Preferred
Securities does not purport to be complete and is subject to, and qualified in
its entirety by reference to, the Trust Agreement. Wherever particular defined
terms of the Trust Agreement are referred to, but not defined herein, such
defined terms are incorporated herein by reference. The form of the Trust
Agreement has been filed as an exhibit to the Registration Statement of which
this Prospectus forms a part. Unless otherwise expressly stated or the context
otherwise requires, all references to the "Company" appearing under this caption
"Description of the Preferred Securities" and under the caption "Description of
the Junior Subordinated Debentures" shall mean American Bancorporation excluding
its consolidated subsidiaries.
DISTRIBUTIONS
The Preferred Securities represent preferred undivided beneficial interests
in the assets of the Trust Issuer. Distributions on such Preferred Securities
will be payable at the annual rate of 8.50% of the stated Liquidation Amount of
$10, payable quarterly in arrears on March 1, June 1, September 1 and December 1
of each year, to the holders of the Preferred Securities on the relevant record
dates. The record date will be the 15th day of the preceding month in which the
relevant Distribution payment date occurs. Distributions will accumulate from
the date of the initial issuance of the Preferred Securities and are cumulative.
The first Distribution payment date for the Preferred Securities will be June 1,
1998. The amount of Distributions payable for any period will be computed on the
basis of a 360-day year of twelve 30-day months. In the event that any date on
which Distributions are payable on the Preferred Securities is not a Business
Day, then payment of the Distributions payable on such date will be made on the
next succeeding day that is a Business Day (and without any additional
Distributions or other payment in respect of any such delay), except that, if
such Business Day is in the next succeeding calendar year, such payment shall be
made on the immediately preceding Business Day, in each case with the same force
and effect as if made on the date such payment was originally payable (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 are
authorized or required by law or executive order to remain closed or a day on
which the principal corporate trust office of the Property Trustee or the
Debenture Trustee is closed for business.
So long as no event of default under the Indenture has occurred and is
continuing, 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 with respect to each
Extension Period, provided that no Extension Period may extend beyond the Stated
Maturity of the Junior Subordinated Debentures. As a consequence of any such
deferral of interest, quarterly Distributions on the Preferred Securities by the
Trust Issuer will also be deferred during any such Extension Period.
Distributions to which holders of the Preferred Securities are entitled will
accumulate additional Distributions thereon at the rate per annum of 8.50%
thereof, compounded quarterly from the relevant payment date for such
Distributions. The term "Distributions" as used herein, shall include any such
additional Distributions. 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 other
than payments pursuant to the Guarantee (other than (a) the reclassification of
any class of the Company's capital stock into another class of capital stock,
(b) dividends or distributions in common stock of the Company, (c) any
declaration of a dividend in connection with the implementation of a
stockholders' rights plan, or the issuance of stock under any such plan in the
future or the redemption or repurchase of any such rights pursuant thereto, (d)
payments under the Guarantee and (e) purchases of common stock related to the
issuance of common stock or rights under any of the Company's benefit plans for
its directors, officers or employees), (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
23
<PAGE>
junior in interest to the Junior Subordinated Debentures or (iii) 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
payments pursuant to the Guarantee. Prior to the termination of any such
Extension Period, the Company may further defer the payment of interest on the
Junior Subordinated Debentures, provided that no Extension Period may exceed 20
consecutive quarters periods or extend beyond the Stated Maturity of the Junior
Subordinated Debentures. Upon the termination of any such Extension Period and
the payment of all interest then accrued and unpaid (together with interest
thereon at the rate of 8.50%, compounded quarterly, to the extent permitted by
applicable law), the Company may elect to begin a new Extension Period. There is
no limitation on the number of times that the Company may elect to begin an
Extension Period. See "Description of the Junior Subordinated Debentures --
Right to Defer Interest Payment Obligation" and "Certain Federal Income Tax
Consequences -- Interest Income and Original Issue Discount."
The revenue of the Trust Issuer available for distribution to holders of
its Preferred Securities will be limited to payments under the Junior
Subordinated Debentures in which the Trust Issuer will invest the proceeds from
the issuance and sale of its Trust Securities. See "Description of the 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 Preferred Securities. The payment of
Distributions (if and to the extent the Trust Issuer has funds legally available
for the payment of such Distributions and cash sufficient to make such payments)
is guaranteed by the Company on a limited basis as set forth herein under
"Description of the Guarantee."
The Company has no current intention of exercising its right to defer
payments of interest on the Junior Subordinated Debentures.
SUBORDINATION OF THE COMMON SECURITIES
Payment of Distributions on, and the Redemption Price of, the Preferred
Securities and Common Securities, as applicable, shall be made pro rata based on
the Liquidation Amount of the Preferred Securities and the Common Securities;
provided, however, that if on any Distribution Date or Redemption Date an event
of default under the Indenture 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
Preferred Securities for all Distribution periods terminating on or prior
thereto, or, in the case of payment of the Redemption Price, the full amount of
such Redemption Price on all of the outstanding Preferred 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 Preferred Securities then due
and payable.
In the case of any event of default under the Trust Agreement resulting
from an event of default under the Indenture, the Company as holder of the
Common Securities will be deemed to have waived any right to act with respect to
any such event of default under the Trust Agreement until the effect of all such
events of default with respect to the Preferred Securities shall have been
cured, waived or otherwise eliminated. Until any such events of default under
the Trust Agreement shall have been so cured, waived or otherwise eliminated,
the Property Trustee shall act solely on behalf of the holders of the Preferred
Securities and not on behalf of the Company as holder of the Common Securities,
and only the holders of the Preferred Securities will have the right to direct
the Property Trustee to act on their behalf.
REDEMPTION
The Preferred Securities are subject to mandatory redemption, in whole or
in part, upon repayment of the Junior Subordinated Debentures at their Stated
Maturity or earlier redemption as provided in the Indenture. The proceeds from
such repayment or redemption shall be applied by the Property Trustee to redeem
a Like Amount (as defined below) of the Preferred Securities upon not less than
30 nor more
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than 60 days notice prior to the date fixed for repayment or redemption, at a
redemption price equal to the aggregate Liquidation Amount of such Preferred
Securities plus accumulated and unpaid Distributions thereon (the "Redemption
Price") to the date of redemption (the "Redemption Date"). For a description of
the Stated Maturity and redemption provisions of the Junior Subordinated
Debentures, see "Description of the Junior Subordinated Debentures -- General"
and "-- Redemption or Exchange."
The Company has the option to redeem the Junior Subordinated Debentures
prior to maturity on or after April 30, 2003, in whole at any time or in part
from time to time, and thereby cause a mandatory redemption of a Like Amount of
the Preferred Securities. See "Description of the Junior Subordinated Debentures
- -- Redemption or Exchange." Any time that a Tax Event, an Investment Company
Event or a Capital Treatment Event (each as defined below) shall occur and be
continuing, the Company has the right to redeem the Junior Subordinated
Debentures in whole (but not in part) and thereby cause a mandatory redemption
of the Preferred Securities in whole (but not in part). See "Description of the
Junior Subordinated Debentures -- Redemption or Exchange."
REDEMPTION PROCEDURES
Preferred Securities redeemed on each Redemption Date shall be redeemed at
the Redemption Price with the applicable proceeds from the contemporaneous
redemption of a Like Amount of the Junior Subordinated Debentures. Redemptions
of the Preferred Securities shall be made and the Redemption Price shall be paid
on each Redemption Date only to the extent that the Trust Issuer has funds on
hand available for the payment of such Redemption Price. See also "Description
of the Preferred Securities -- Subordination of the Common Securities."
If the Trust Issuer gives a notice of redemption in respect of the
Preferred Securities, then, by 10:00 a.m., New York City time, on the Redemption
Date, to the extent funds are available, the Property Trustee will deposit
irrevocably with the DTC funds sufficient to pay the applicable Redemption Price
and will give DTC irrevocable instructions and authority to pay the Redemption
Price to the holders thereof upon surrender of their certificates evidencing
such Preferred Securities. Notwithstanding the foregoing, Distributions payable
on or prior to the Redemption Date for the Preferred Securities called for
redemption shall be payable to the holders of the Preferred Securities on the
relevant record dates for the related Distribution Dates. If notice of
redemption shall have been given and funds deposited as required, then, upon the
date of such deposit, all rights of the holders of such Preferred Securities so
called for redemption will cease, except the right of the holders of such
Preferred Securities to receive the Redemption Price, but without interest on
such Redemption Price, and such Preferred Securities will cease to be
outstanding.
In the event that any date fixed for redemption of the Preferred Securities
is not a Business Day, then payment of the Redemption Price payable on 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 the event that payment of the Redemption
Price in respect of the Preferred Securities called for redemption is improperly
withheld or refused and not paid either by the Trust Issuer or by the Company
pursuant to the Guarantee as described under "Description of the Guarantee,"
Distributions on such Preferred Securities will continue to accrue at the then
applicable rate, from the Redemption Date originally established by the Trust
Issuer for such Preferred 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), the Company or its subsidiaries may at any time and
from time to time purchase outstanding Preferred Securities by private
agreement.
Payment of the Redemption Price on the Preferred Securities and any
distribution of the Junior Subordinated Debentures to holders of the Preferred
Securities shall be made to the applicable recordholders thereof as they appear
on the register for the Preferred Securities on the relevant record
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date, which date shall be one Business Day prior to the relevant Redemption
Date, however, in the event the Preferred Securities do not remain in book entry
form, the relevant record date shall be the date at least 15 days prior to the
Redemption Date or liquidation date, as applicable.
If less than all of the Preferred Securities and Common Securities issued
by the Trust Issuer are to be redeemed on a Redemption Date, then the aggregate
Liquidation Amount of the Preferred Securities and Common Securities to be
redeemed shall be allocated pro rata to the Preferred Securities and the Common
Securities based upon the relative Liquidation Amounts of such classes. The
particular Preferred Securities to be redeemed shall be selected not more than
60 days prior to the Redemption Date by the Property Trustee from the
outstanding Preferred Securities not previously called for redemption, or if the
Preferred Securities are then held in the form of a global preferred security in
accordance with DTC's customary procedures. The Property Trustee shall promptly
notify the trust registrar in writing of the Preferred Securities selected for
redemption and, in the case of any Preferred Securities selected for partial
redemption, the Liquidation Amount thereof to be redeemed. For all purposes of
the Trust Agreement, unless the context otherwise requires, all provisions
relating to the redemption of the Preferred Securities shall relate, in the case
of the Preferred Securities redeemed or to be redeemed only in part, to the
portion of the aggregate Liquidation Amount of the Preferred Securities which
has been or is to be redeemed.
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 the Preferred Securities to
be redeemed at its registered address. Unless the Company defaults in payment of
the Redemption Price on the Junior Subordinated Debentures, on and after the
Redemption Date interest will cease to accrue on the Junior Subordinated
Debentures or portions thereof called for redemption.
LIQUIDATION OF THE TRUST ISSUER AND DISTRIBUTION OF THE JUNIOR SUBORDINATED
DEBENTURES TO HOLDERS
The Company has the right at any time to dissolve the Trust Issuer and,
after satisfaction of the liabilities of creditors of the Trust Issuer as
provided by applicable law, cause Junior Subordinated Debentures to be
distributed to the holders of the Preferred Securities and Common Securities in
exchange therefor upon liquidation of the Trust Issuer.
After the liquidation date fixed for any distribution of the Junior
Subordinated Debentures for Preferred Securities (i) such Preferred Securities
will no longer be deemed to be outstanding, and (ii) DTC or its nominee, as the
registered holder of Preferred Securities, will receive a registered global
certificate or certificates representing the Junior Subordinated Debentures to
be delivered upon such distribution with respect to Preferred Securities held by
DTC or its nominee, (iii) any certificates representing the Preferred Securities
not held by DTC or its nominee will be deemed to represent Junior Subordinated
Debentures having a principal amount equal to the stated Liquidation Amount of
such Preferred Securities, and bearing accrued and unpaid interest in an amount
equal to the accumulated and unpaid Distributions on such series of the
Preferred Securities until such certificates are presented to the Administrative
Trustees or their agent for transfer or reissuance.
Under current United States federal income tax law and interpretations, a
distribution of the Junior Subordinated Debentures should not be a taxable event
to holders of the Preferred Securities. Should there be a change in law, a
change in legal interpretation, a Tax Event or other circumstances, however, the
distribution could be a taxable event to holders of the Preferred Securities.
See "Certain Federal Income Tax Consequences -- Distribution of the Junior
Subordinated Debentures to Holders of the Preferred Securities."
LIQUIDATION DISTRIBUTION UPON DISSOLUTION
Pursuant to the Trust Agreement, the Trust Issuer 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,
subject in certain instances to any such event remaining in effect for a period
of 90 consecutive days; (ii) the distribution of a Like Amount of the Junior
Subordinated Debentures to the holders of its Preferred Securities, if the
Company, as depositor, has given written direction to the
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Property Trustee to dissolve the Trust Issuer (which direction is optional and
wholly within the discretion of the Company, as depositor); (iii) redemption of
all of the Preferred Securities as described under "Description of the Preferred
Securities-Redemption;" and (iv) the entry of an order for the dissolution of
the Trust Issuer by a court of competent jurisdiction.
If an early dissolution occurs as described in clause (i), (ii) or (iv) of
the preceding paragraph, the Trust Issuer shall be liquidated by the Trust
Issuer Trustees as expeditiously as the Trust Issuer Trustees determine to be
possible by distributing, after satisfaction of liabilities to creditors of the
Trust Issuer, if any, as provided by applicable law, to the holders of the
Preferred Securities a Like Amount of the Junior Subordinated Debentures, unless
such distribution is determined by the Property Trustee not to be practical, in
which event such holders will be entitled to receive out of the assets of the
Trust Issuer available for distribution to holders, after satisfaction of
liabilities to creditors of the Trust Issuer, if any, as provided by applicable
law, an amount equal to, in the case of holders of the Preferred 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 Issuer has insufficient assets available to pay in full the
aggregate Liquidation Distribution, then the amounts payable directly by the
Trust Issuer on Preferred Securities shall be paid on a pro rata basis. The
Company, as the holder of the Common Securities, will be entitled to receive
distributions upon any such liquidation pro rata with the holders of the
Preferred Securities, except that if an event of default under the Indenture has
occurred and is continuing, the Preferred Securities shall have a priority over
the Common Securities with respect to any such distributions.
EVENTS OF DEFAULT; NOTICE
Any one of the following events constitutes an "Event of Default" under the
Trust Agreement (an "Event of Default") with respect to the Preferred Securities
issued thereunder (whatever the reason for such Event of Default and whether it
shall be voluntary or involuntary or be effected by operation of law or pursuant
to any judgment, decree or order of any court or any order, rule or regulation
of any administrative or governmental body):
(i) the occurrence of an event of default under the Indenture (see
"Description of the Junior Subordinated Debentures -- Debenture Events of
Default"); or
(ii) default in the payment of any Distribution when it becomes due and
payable, and continuation of such default for a period of 30 days; or
(iii) default in the payment of any Redemption Price of any Preferred
Security when it becomes due and payable; or
(iv) default in the performance, or breach, in any material respect, of
any covenant or warranty of the Trust Issuer Trustees in the Trust Agreement
(other than a covenant or warranty a default in the performance of which or
the breach of which is dealt with in clause (ii) or (iii) above), and
continuation of such default or breach for a period of 60 days after there
has been given, by registered or certified mail, to the defaulting Trust
Issuer Trustee or Trustees by the holders of at least 25% in aggregate
Liquidation Amount of the outstanding Preferred Securities, a written notice
specifying such default or breach and requiring it to be remedied and stating
that such notice is a "Notice of Default" under the Trust Agreement; or
(v) the occurrence of certain events of bankruptcy or insolvency with
respect to the Property Trustee and the failure by the Company to appoint a
successor Property Trustee within 60 days thereof.
Within 90 days after the occurrence of any Event of Default actually known
to the Property Trustee, the Property Trustee shall transmit notice of such
Event of Default to the holders of the Preferred Securities, the Administrative
Trustees and the Company, as depositor, unless such Event of Default shall have
been cured or waived. The Company, as depositor, and the Administrative Trustees
are required to file annually with the Property Trustee a certificate as to
whether or not they are in compliance with all the conditions and covenants
applicable to them under the Trust Agreement.
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If an event of default under the Indenture has occurred and is continuing,
the Preferred Securities shall have a preference over the Common Securities as
described above. See "Description of the Preferred Securities -- Subordination
of the Common Securities" and "-- Liquidation Distribution Upon Dissolution."
The existence of an event of default does not entitle the holders of the
Preferred Securities to accelerate the payment thereof.
REMOVAL OF THE TRUST ISSUER TRUSTEES
Unless an event of default under the Indenture shall have occurred and be
continuing, any Trust Issuer Trustee may be removed at any time by the holder of
the Common Securities. If an event of default under the Indenture has occurred
and is continuing, the Property Trustee and the Delaware Trustee may be removed
at such time by the holders of a majority in Liquidation Amount of the
outstanding Preferred Securities. In no event will the holders of the Preferred
Securities have the right to vote to appoint, remove or replace the
Administrative Trustees, which voting rights are vested exclusively in the
Company as the holder of the Common Securities. No resignation or removal of any
Trust Issuer Trustee and no appointment of a successor trustee shall be
effective until the acceptance of appointment by the successor trustee in
accordance with the provisions of the Trust Agreement.
CO-TRUSTEES AND SEPARATE PROPERTY TRUSTEE
Unless an Event of Default shall have occurred and be continuing, at any
time or times, for the purpose of meeting the legal requirements of the Trust
Indenture Act, if applicable, or of any jurisdiction in which any part of the
Trust Property (as defined in the Trust Agreement) may at the time be located,
the Company, as the holder of the Common Securities, shall have power to appoint
one or more persons either to act as a co-trustee, jointly with the Property
Trustee, of all or any part of such Trust Property, or to act as separate
trustee of any such property, in either case with such powers as may be provided
in the instrument of appointment, and to vest in such person or persons in such
capacity any property, title, right or power deemed necessary or desirable,
subject to the provisions of the Trust Agreement. In the event an event of
default under the Indenture has occurred and is continuing, the Property Trustee
alone shall have power to make such appointment.
MERGER OR CONSOLIDATION OF THE TRUST ISSUER TRUSTEES
Any entity into which the Property Trustee, the Delaware Trustee or any
Administrative Trustee that is not a natural person may be merged or converted
or with which it may be consolidated, or any entity resulting from any merger,
conversion or consolidation to which such Trustee shall be a party or any entity
succeeding to all or substantially all the corporate trust business of such
Trustee, shall be the successor of such Trustee under the Trust Agreement,
provided such entity shall be otherwise qualified and eligible.
MERGERS, CONSOLIDATIONS, AMALGAMATIONS OR REPLACEMENTS OF THE TRUST ISSUER
The Trust Issuer may not merge with or into, consolidate, amalgamate, be
replaced by, convey, transfer or lease its properties and assets substantially
as an entirety to any entity or other Person, except as described below or as
otherwise described in the Trust Agreement. The Trust Issuer may, at the request
of the Company, with the consent of the Administrative Trustees and without the
consent of the holders of the Preferred Securities, the Property Trustee or the
Delaware Trustee, merge with or into, consolidate, amalgamate, be replaced by,
convey, transfer or lease its properties and assets substantially as an entirety
to, a trust organized as such under the laws of any State: provided, that (i)
such successor entity either (a) expressly assumes all of the obligations of the
Trust Issuer with respect to the Preferred Securities or (b) substitutes for the
Preferred Securities other securities having substantially the same terms as the
Preferred Securities (the "Successor Securities") so long as the Successor
Securities rank the same as the Preferred Securities in priority with respect to
Distributions and payments upon liquidation, redemption and otherwise, (ii) the
Company expressly appoints a trustee of such successor entity possessing the
same powers and duties as the Property Trustee as the holder of the Junior
Subordinated Debentures, (iii) the Successor Securities are registered or
listed, or any Successor
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Securities will be registered or listed upon notification of issuance, on any
national securities exchange or other organization on which the Preferred
Securities are then registered or listed (including, if applicable, the Nasdaq
Stock Market's National Market), if any, (iv) such merger, consolidation,
amalgamation, replacement, conveyance, transfer or lease does not cause the
Preferred Securities (including any Successor Securities) to be downgraded by
any nationally recognized statistical rating organization, (v) such merger,
consolidation, amalgamation, replacement, conveyance, transfer or lease does not
adversely affect the rights, preferences and privileges of the holders of the
Preferred Securities (including any Successor Securities) in any material
respect, (vi) such successor entity has a purpose substantially identical to
that of the Trust Issuer, (vii) prior to such merger, consolidation,
amalgamation, replacement, conveyance, transfer or lease, the Company has
received an opinion from independent counsel to the Trust Issuer experienced in
such matters to the effect that (a) such merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease does not adversely affect the rights,
preferences and privileges of the holders of the Preferred Securities (including
any Successor Securities) in any material respect and (b) following such merger,
consolidation, amalgamation, replacement, conveyance, transfer or lease, neither
the Trust Issuer nor such successor entity will be required to register as an
investment company under the Investment Company Act of 1940, as amended (the
"Investment Company Act") and (viii) the Company or any permitted successor or
assignee owns all of the common securities or its equivalent of such successor
entity and guarantees the obligations of such successor entity under the
Successor Securities at least to the extent provided by the Guarantee.
Notwithstanding the foregoing, the Trust Issuer shall not, except with the
consent of holders of 100% in Liquidation Amount of the Preferred Securities,
consolidate, amalgamate, merge with or into or be replaced by or convey,
transfer or lease its properties and assets substantially as an entirety to any
other 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 Issuer or the successor
entity to be classified as other than a grantor trust for United States federal
income tax purposes.
VOTING RIGHTS; AMENDMENT OF THE TRUST AGREEMENT
Except as provided below and under "Description of the Guarantee --
Amendments and Assignment" and as otherwise required by law and the Trust
Agreement, the holders of the Preferred Securities will have no voting rights.
The Trust Agreement may be amended from time to time by the Company, the
Property Trustee and the Administrative Trustees, without the consent of the
holders of the Preferred Securities, (i) with respect to acceptance of
appointment of a successor trustee, (ii) to cure any ambiguity, correct or
supplement any provisions in the Trust Agreement that may be inconsistent with
any other provision or to make any other provisions with respect to matters or
questions arising under the Trust Agreement, which shall not be inconsistent
with the other provisions of the Trust Agreement or (iii) to modify, eliminate
or add to any provisions of the Trust Agreement to such extent as shall be
necessary to ensure that the Trust Issuer will be classified for United States
federal income tax purposes as a grantor trust at all times that the Preferred
Securities are outstanding or to ensure that the Trust Issuer will not be
required to register as an "investment company" under the Investment Company
Act; provided, however, that in the case of clause (ii), such action shall not
adversely affect in any material respect the interests of any holder of the
Preferred Securities, and any such amendments of the Trust Agreement shall
become effective when notice thereof is given to the holders of the Preferred
Securities. The Trust Agreement may be amended by the Trust Issuer Trustees and
the Company with (i) the consent of holders representing not less than a
majority (based upon Liquidation Amounts) of the outstanding Preferred
Securities and (ii) receipt by the Trust Issuer Trustees of an opinion of
counsel to the effect that such amendment or the exercise of any power granted
to the Trust Issuer Trustees in accordance with such amendment will not affect
the Trust Issuer's status as a grantor trust for United States federal income
tax purposes or the Trust Issuer's exemption from status as an "investment
company" under the Investment Company Act, provided that without the consent of
each holder of the Preferred Securities, the Trust Agreement may not be amended
to (a) change the amount or timing of any Distribution on the Preferred
Securities or otherwise adversely affect the amount of any Distribution required
to be made in respect of the Preferred Securities as of a specified date or (b)
restrict the right of a holder of the Preferred Securities to institute suit for
the enforcement of any such payment on or after such date.
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So long as the Junior Subordinated Debentures are held by the Property
Trustee, the Trust Issuer Trustees shall not (i) direct the time, method and
place of conducting any proceeding for any remedy available to the Debenture
Trustee or executing any trust or power conferred on the Property Trustee with
respect to the 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 the 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 Preferred
Securities; provided, however, that where a consent under the Indenture would
require the consent of each holder of the Junior Subordinated Debentures
affected thereby, no such consent shall be given by the Property Trustee without
the prior consent of each holder of the Preferred Securities. The Trust Issuer
Trustees shall not revoke any action previously authorized or approved by a vote
of the holders of the Preferred Securities except by subsequent vote of the
holders of the Preferred Securities. The Property Trustee shall notify each
holder of the Preferred Securities of any notice of default with respect to the
Junior Subordinated Debentures. In addition to obtaining the foregoing approvals
of the holders of the Preferred Securities, prior to taking any of the foregoing
actions, the Trust Issuer Trustees shall obtain an opinion of counsel
experienced in such matters to the effect that the Trust Issuer will not be
classified as an association taxable as a corporation for United States federal
income tax purposes on account of such action.
Any required approval of holders of the Preferred Securities may be given
at a meeting of holders of the Preferred Securities convened for such purpose or
pursuant to written consent. The Property Trustee will cause a notice of any
meeting at which holders of the Preferred Securities are entitled to vote, or of
any matter upon which action by written consent of such holders is to be taken,
to be given to each holder of record of the Preferred Securities in the manner
set forth in the Trust Agreement.
No vote or consent of the holders of the Preferred Securities will be
required for the Trust Issuer to redeem and cancel the Preferred Securities in
accordance with the Trust Agreement.
Notwithstanding that holders of the Preferred Securities are entitled to
vote or consent under any of the circumstances described above, any of the
Preferred Securities that are owned by the Company, the Trust Issuer Trustees or
any affiliate of the Company or the Trust Issuer Trustees shall, for purposes of
such vote or consent, be treated as if they were not outstanding.
LIQUIDATION VALUE
The amount payable on the Preferred Securities in the event of any
liquidation of the Trust Issuer is $10 per Preferred Security plus accumulated
and unpaid Distributions, which may be in the form of a distribution of such
amount in Junior Subordinated Debentures, subject to certain exceptions. See
"Description of the Preferred Securities -- Liquidation Distribution Upon
Dissolution."
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 Preferred Securities) and all
costs and expenses of the Trust Issuer (including costs and expenses relating to
the organization of the Trust Issuer, the fees and expenses of the Trust Issuer
Trustees and the costs and expenses relating to the operation of the Trust
Issuer) 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 Issuer
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 Issuer 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.
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BOOK ENTRY, DELIVERY AND FORM
The Preferred Securities will be issued in the form of one or more fully
registered global securities which will be deposited with, or on behalf of, DTC
and registered in the name of DTC's nominee. Unless and until it is exchangeable
in whole on in part for the Preferred Securities in definitive form, a global
security may not be transferred except as a whole by DTC to a nominee of DTC or
by a nominee of DTC to DTC or another nominee of DTC or by DTC or any such
nominee to a successor of such Depository or a nominee of such successor.
Ownership of beneficial interests in a global security will be limited to
persons that have accounts with DTC or its nominee ("Participants") or persons
that may hold interests through Participants. The Company expects that, upon the
issuance of a global security, DTC will credit, on its book-entry registration
and transfer system, the Participants' accounts with their respective principal
amounts of the Preferred Securities represented by such global security.
Ownership of beneficial interests in such global security will be shown on, and
the transfer of such ownership interests will be effected only through, records
maintained by DTC (with respect to interests of Participants) and on the records
of Participants (with respect to interests of Persons held through
Participants). Beneficial owners will not receive written confirmation from DTC
of their purchase, but are expected to receive written confirmations from the
Participants through which the beneficial owner entered into the transaction.
Transfers of ownership interests will be accomplished by entries on the books of
Participants acting on behalf of the beneficial owners.
So long as DTC, or its nominee, is the registered owner of a global
security, DTC or such nominee, as the case may be, will be considered the sole
owner or holder of the Preferred Securities represented by such global security
for all purposes under the Trust Agreement. Except as provided below, owners of
beneficial interests in a global security will not be entitled to receive
physical delivery of the Preferred Securities in definitive form and will not be
considered the owners or holders thereof under the Trust Agreement. Accordingly,
each person owning a beneficial interest in such a global security must rely on
the procedures of DTC and, if such person is not a Participant, on the
procedures of the Participant through which such person owns its interest, to
exercise any rights of a holder of Preferred Securities under the Trust
Agreement. The Company understands that, under DTC's existing practices, in the
event that the Company requests any action of holders, or an owner of a
beneficial interest in such a global security desires to take any action which a
holder is entitled to take under the Trust Agreement, DTC would authorize the
Participants holding the relevant beneficial interests to take such action, and
such Participants would authorize beneficial owners owning through such
Participants to take such action or would otherwise act upon the instructions of
beneficial owners owning through them. Redemption notices will also be sent to
DTC. If less than all of the Preferred Securities are being redeemed, the
Company understands that it is DTC's existing practice to determine by lot the
amount of the interest of each Participant to be redeemed.
Distributions on the Preferred Securities registered in the name of DTC or
its nominee will be made to DTC or its nominee, as the case may be, as the
registered owner of the global security representing such Preferred Securities.
None of the Company, the Trust Issuer Trustees, any Paying Agent or any other
agent of the Company or the Trust Issuer Trustees will have any responsibility
or liability for any aspect of the records relating to or payments made on
account of beneficial ownership interests in the global security for such
Preferred Securities or for maintaining, supervising or reviewing any records
relating to such beneficial ownership interests. Disbursements of Distributions
to Participants shall be the responsibility of DTC. DTC's practice is to credit
Participants' accounts on a payable date in accordance with their respective
holdings shown on DTC's records unless DTC has reason to believe that it will
not receive payment on the payable date. Payments by Participants to beneficial
owners will be governed by standing instructions and customary practices, as is
the case with securities held for the accounts of customers in bearer form or
registered in "street name," and will be the responsibility of such Participant
and not of DTC, the Company, the Trust Issuer Trustees, the Paying Agent or any
other agent of the Company or Trust Issuer, subject to any statutory or
regulatory requirements as may be in effect from time to time.
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DTC may discontinue providing its services as securities depository with
respect to the Preferred Securities at any time by giving reasonable notice to
the Company or the Trust Issuer Trustees. If DTC notifies the Company that it is
unwilling to continue as such, or if it is unable to continue or ceases to be a
clearing agency registered under the Exchange Act and a successor depository is
not appointed by the Company within ninety days after receiving such notice or
becoming aware that DTC is no longer so registered, the Company will issue the
Preferred Securities in definitive form upon registration of transfer of, or in
exchange for, such global security. In addition, the Company may at any time and
in its sole discretion determine not to have the Preferred Securities
represented by one or more global securities and, in such event, will issue
Preferred Securities in definitive form in exchange for all of the global
securities representing such Preferred Securities.
DTC has advised the Company and the Trust Issuer as follows: DTC is a
limited purpose trust company organized under the laws of the State of New York,
a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the Uniform Commercial Code of the state of New York and a "clearing
agency" registered pursuant to the provisions of Section 17A of the Exchange
Act. DTC was created to hold securities for its Participants and to facilitate
the clearance and settlement of securities transactions between Participants
through electronic book entry changes to accounts of its Participants, thereby
eliminating the need for physical movement of certificates. Participants include
securities brokers and dealers, banks, trust companies and clearing corporations
and may include certain other organizations. Certain of such Participants (or
their representatives), together with other entities, own DTC. Indirect access
to the DTC system is available to others such as banks, brokers, dealers and
trust companies that clear through, or maintain a custodial relationship with, a
Participant, either directly or indirectly.
SAME-DAY SETTLEMENT AND PAYMENT
Settlement for the Preferred Securities will be made by the Underwriter in
immediately available funds.
Secondary trading in preferred securities of corporate issuers is generally
settled in clearinghouse or next-day funds. In contrast, the Preferred
Securities will trade in DTC's Same-Day Funds Settlement System, and secondary
market trading activity in the Preferred Securities will therefore be required
by DTC to settle in immediately available funds. No assurance can be given as to
the effect, if any, of settlement in immediately available funds on trading
activity in the Preferred Securities.
PAYMENT AND PAYING AGENCY
Payments in respect of the Preferred Securities will be made to DTC, which
will credit the relevant accounts at DTC on the applicable Distribution Dates
or, if the Preferred Securities are not held by DTC, such payments will be made
by check mailed to the address of the holder entitled thereto, as such address
appears on the securities register for the Trust Securities. The paying agent
(the "Paying Agent") will initially be the Property Trustee and any co-paying
agent chosen by the Property Trustee and acceptable to the Administrative
Trustees and the Company. The Paying Agent will be permitted to resign as Paying
Agent upon 30 days' written notice to the Property Trustee and the
Administrative Trustees. If the Property Trustee is no longer the Paying Agent,
the Property Trustee will appoint a successor (which must be a bank or trust
company reasonably acceptable to the Administrative Trustees) to act as Paying
Agent.
REGISTRAR AND TRANSFER AGENT
The Property Trustee will act as the registrar and the transfer agent for
the Preferred Securities. Registration of transfers of Preferred Securities will
be effected without charge by or on behalf of the Trust Issuer, except for the
payment of any tax or other governmental charges that may be imposed in
connection with any transfer or exchange. In the event of any redemption, the
Trust Issuer will not be required to (i) issue, register the transfer of, or
exchange any Preferred Securities during a period beginning at the opening of
business 15 days before the date of mailing of a notice of redemption of any
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Preferred Securities called for redemption and ending at the close of business
on the day of such mailing; or (ii) register the transfer of or exchange any
Preferred Securities so selected for redemption, in whole or in part, except the
unredeemed portion of any such Preferred Securities being redeemed in part.
INFORMATION CONCERNING THE PROPERTY TRUSTEE
The Property Trustee, other than upon the occurrence and during the
continuance of an Event of Default, undertakes to perform only such duties as
are specifically set forth in the Trust Agreement and, after such Event of
Default, must exercise the same degree of care and skill as a prudent person
would exercise or use in the conduct of his or her own affairs. Subject to this
provision, the Property Trustee is under no obligation to exercise any of the
powers vested in it by the Trust Agreement at the request of any holder of
Preferred Securities unless it is offered reasonable indemnity against the
costs, expenses and liabilities that might be incurred thereby. If no Event of
Default has occurred and is continuing and the Property Trustee is required to
decide between alternative causes of action, construe ambiguous provisions in
the Trust Agreement or is unsure of the application of any provision of the
Trust Agreement, and the matter is not one on which holders of Preferred
Securities are entitled under the Trust Agreement to vote, then the Property
Trustee will take such action as it deems advisable and in the best interests of
the holders of the Preferred Securities and will have no liability except for
its own bad faith, negligence or willful misconduct.
MISCELLANEOUS
The Administrative Trustees are authorized and directed to conduct the
affairs of and to operate the Trust Issuer in such a way that the Trust Issuer
will not be deemed to be an "investment company" required to be registered under
the Investment Company Act or classified as an association taxable as a
corporation for United States federal income tax purposes and so that the Junior
Subordinated Debentures will be treated as indebtedness of the Company for
United States federal income tax purposes. In this connection, the Company and
the Administrative Trustees are authorized to take any action, not inconsistent
with applicable law, the certificate of trust of the Trust Issuer or the Trust
Agreement, that the Company and the Administrative Trustees determine in their
discretion to be necessary or desirable for such purposes.
Holders of the Preferred Securities have no preemptive or similar rights.
The Trust Agreement and the Preferred Securities will be governed by, and
construed in accordance with, the laws of the State of Delaware.
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DESCRIPTION OF THE JUNIOR SUBORDINATED DEBENTURES
The Junior Subordinated Debentures are to be issued under an Indenture (the
"Indenture") between the Company and The Bank of New York, as trustee (the
"Debenture Trustee"). The Indenture will be qualified as an indenture under the
Trust Indenture Act. This summary of certain terms and provisions of the Junior
Subordinated Debentures and the Indenture does not purport to be complete and is
subject to, and is qualified in its entirety by reference to, the Indenture, and
to the Trust Indenture Act. Wherever particular defined terms of the Indenture
are referred to, but not defined herein, such defined terms are incorporated
herein by reference. The form of the Indenture has been filed as an exhibit to
the Registration Statement of which this Prospectus forms a part.
GENERAL
Concurrently with the issuance of the Preferred Securities, the Trust
Issuer will invest the proceeds thereof, together with the consideration paid by
the Company for the Common Securities, in the Junior Subordinated Debentures.
The Junior Subordinated Debentures will bear interest at the annual rate of
8.50%, payable quarterly in arrears on March 1, June 1, September 1 and December
1 of each year (each, an "Interest Payment Date"), commencing June 1, 1998, to
the person in whose name each Junior Subordinated Debenture is registered,
subject to certain exceptions, at the close of business on the Business Day next
preceding such Interest Payment Date. It is anticipated that, until the
liquidation, if any, of the Trust Issuer, the Junior Subordinated Debentures
will be held in the name of the Property Trustee in trust for the benefit of the
holders of the Preferred Securities. The amount of interest payable for any
period will be computed on the basis of a 360-day year of twelve 30-day months.
In the event that any date on which interest is payable on the Junior
Subordinated Debentures is not a Business Day, then payment of the interest
payable on such date will be made on the next succeeding day that is a Business
Day (and without any interest or other payment in respect of any such delay),
except that, if such Business Day is in the next succeeding calendar year, such
payment shall be made on the immediately preceding Business Day, in each case
with the same force and effect as if made on 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 the rate per annum of 8.50% thereof, compounded quarterly
from the relevant Interest Payment Date. 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 Additional
Interest (as defined below), as applicable.
The Junior Subordinated Debentures will mature on April 30, 2028 (the
"Stated Maturity").
The Junior Subordinated Debentures will be unsecured and will rank junior
and be subordinate in right of payment to all Senior Debt and Subordinated Debt
(collectively "Senior Indebtedness") of the Company. Because the Company is a
holding company, the right of the Company to participate in any distribution of
assets of any subsidiary, including the Bank, upon such subsidiary's liquidation
or reorganization or otherwise, is subject to the prior claims of creditors of
that subsidiary, except to the extent that the Company may itself be recognized
as a creditor of that subsidiary. Accordingly, the Junior Subordinated
Debentures will be effectively subordinated to all existing and future
liabilities of the Company's subsidiaries, and holders of the Junior
Subordinated Debentures should look only to the assets of the Company for
payments on the Junior Subordinated Debentures. The Indenture does not limit the
incurrence or issuance of other secured or unsecured debt of the Company,
including Senior Indebtedness, whether under the Indenture or any existing or
other indenture that the Company may enter into in the future or otherwise.
RIGHT TO DEFER INTEREST PAYMENT OBLIGATION
So long as no event of default under the Indenture has occurred and is
continuing, the Company has the right under the Indenture at any time or from
time to time during the term of the Junior Subordinated Debentures to defer the
payment of interest on the Junior Subordinated Debentures 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
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the end of each Extension Period, the Company must pay all interest then accrued
and unpaid on the Junior Subordinated Debentures (together with interest on such
unpaid interest at the annual rate of 8.50%, compounded quarterly from the
relevant Interest Payment Date, to the extent permitted by applicable law,
referred to herein as "Compounded Interest"). During an Extension Period,
interest would continue to accrue and holders of the Junior Subordinated
Debentures would be required to accrue interest income for United States federal
income tax purposes. See "Certain 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 (other than (a) the
reclassification of any class of the Company's capital stock into another class
of capital stock, (b) dividends or distributions in common stock of the Company,
(c) any declaration of a dividend in connection with the implementation of a
stockholders' rights plan, the issuance of stock under any such plan in the
future or the redemption or repurchase of any such rights pursuant thereto, (d)
payments under the Guarantee and (e) purchases of common stock related to the
issuance of common stock or rights under any of the Company's benefit plans for
its directors, officers or employees) 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 payments pursuant to the Guarantee;
and (iii) the Company shall not redeem, purchase or acquire less than all the
outstanding Junior Subordinated Debentures or any of the Preferred Securities.
Prior to the termination of any such Extension Period, the Company may further
defer the payment of interest, 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 interest then accrued and unpaid (together with interest
thereon at the rate of 8.50%, compounded quarterly, to the extent permitted by
applicable law), 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 Administrative Trustees and the Debenture Trustee notice of its
election of such Extension Period at least one Business Day prior to the earlier
of (i) the date interest on the Junior Subordinated Debentures would have been
payable except for the election to begin such Extension Period or (ii) the date
the Administrative Trustees are required to give notice of the record date, or
the date such Distributions are payable, to the Nasdaq Stock Market's National
Market or other applicable self-regulatory organization or to holders of the
Preferred Securities as of the record date or the date such Distributions are
payable, but in any event not less than one Business Day prior to such record
date. The Debenture Trustee shall give notice of the Company's election to begin
a new Extension Period to the holders of the Preferred Securities. There is no
limitation on the number of times that the Company may elect to begin an
Extension Period.
ADDITIONAL INTEREST
If the Trust Issuer or the Property Trustee is required to pay any
additional taxes, duties or other governmental charges as a result of a Tax
Event, the Company will pay such additional amounts (the "Additional Sums") on
the Junior Subordinated Debentures as shall be required so that the
Distributions payable by the Trust Issuer shall not be reduced as a result of
any such additional taxes, duties or other governmental charges.
REDEMPTION OR EXCHANGE
The Company will have the right to redeem the Junior Subordinated
Debentures prior to maturity (i) on or after April 30, 2003, in whole at any
time or in part from time to time, or (ii) at any time in whole (but not in
part), within 180 days following the occurrence of a Tax Event, an Investment
Company Event or a Capital Treatment Event, in each case at a redemption price
equal to the accrued and
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unpaid interest on the Junior Subordinated Debentures so redeemed to the date
fixed for redemption, plus 100% of the principal amount thereof. Any such
redemption prior to the Stated Maturity will be subject to prior regulatory
approval if then required.
"Investment Company Event" means the receipt by the Trust Issuer of an
Opinion of Counsel 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, the Trust Issuer is or will be considered an "investment company"
that is required to be registered under the Investment Company Act, which change
becomes effective on or after the date of original issuance of the Preferred
Securities.
"Capital Treatment Event" means the receipt by the Trust Issuer of an
Opinion of Counsel to the effect that, as a result of any amendment to, or
change (including any proposed change) in, the laws (or any regulations
thereunder) of the United States or any political subdivision thereof or
therein, or as a result of any official or administrative pronouncement or
action or judicial decision interpreting or applying such laws or regulations,
which amendment or change is effective or such proposed change, pronouncement,
action or decision is announced on or after the date of original issuance of the
Preferred Securities, there is more than an insubstantial risk that the
Preferred Securities would not constitute Tier 1 Capital (or the then equivalent
thereof) applied as if the Company (or its successor) were a bank holding
company for purposes of the capital adequacy guidelines of the Federal Reserve
(or any successor regulatory authority with jurisdiction over bank holding
companies), or any capital adequacy guidelines as then in effect and applicable
to the Company. There are currently no capital adequacy guidelines applicable to
savings bank holding companies such as the Company.
The Junior Subordinated Debentures will not be subject to any sinking fund.
"Tax Event" means the receipt by the Trust Issuer of an Opinion of Counsel
to the effect that, as a result of any amendment to, or change (including any
announced prospective change) in, the laws (or any regulations thereunder) of
the United States or any political subdivision or taxing authority thereof or
therein, or as a result of any official administrative pronouncement or judicial
decision interpreting or applying such laws or regulations, which amendment or
change is effective or which pronouncement or decision is announced on or after
the date of issuance of the Preferred Securities under the Trust Agreement,
there is more than an insubstantial risk that (i) the Trust Issuer is, or will
be within 90 days of the date of such opinion, subject to United Stated federal
income tax with respect to income received or accrued on the Junior Subordinated
Debentures, (ii) interest payable by the Company on the 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 (iii) the Trust Issuer 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.
"Opinion of Counsel" means an opinion in writing of independent legal
counsel experienced in such matters as being opined upon, that is delivered to
the Trust Issuer Trustees.
"Additional Interest" means the additional amounts as may be necessary in
order that the amount of Distributions then due and payable by the Trust Issuer
on the outstanding Preferred Securities and Common Securities shall not be
reduced as a result of any additional taxes, duties and other governmental
charges to which the Trust Issuer has become subject as a result of a Tax Event.
"Like Amount" means (i) with respect to a redemption of the Preferred
Securities, Preferred Securities having a Liquidation Amount equal to that
portion of the principal amount of the Junior Subordinated Debentures to be
contemporaneously redeemed in accordance with the Indenture, allocated to the
Common Securities and to the Preferred Securities pro rata based upon the
relative Liquidation Amounts of such Preferred Securities and Common Securities
and the proceeds of which will be used to pay the Redemption Price of such
Preferred Securities and Common Securities and (ii) with respect to a
distribution of the Junior Subordinated Debentures to holders of the Preferred
Securities in exchange therefor in connection with a dissolution or liquidation
of the Trust Issuer, Junior Subordinated Debentures having a principal amount
equal to the Liquidation Amount of the Preferred Securities of the holder to
whom such Junior Subordinated Debentures would be distributed.
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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 the Junior Subordinated
Debentures to be redeemed at its registered address. Unless the Company defaults
in payment of the redemption price, on and after the redemption date interest
ceases to accrue on the Junior Subordinated Debentures or portions thereof
called for redemption.
REGISTRATION, DENOMINATION AND TRANSFER
The Junior Subordinated Debentures will initially be registered in the name
of the Property Trustee. If the Junior Subordinated Debentures are distributed
to holders of Preferred Securities, it is anticipated that the depository
arrangements for the Junior Subordinated Debentures will be substantially
identical to those in effect for the Preferred Securities. See "Description of
Preferred Securities -- Book Entry, Delivery and Form."
Although DTC has agreed to the procedures described above, it is under no
obligation to perform or continue to perform such procedures, and such
procedures may be discontinued at any time. If DTC is at any time unwilling or
unable to continue as depositary and a successor depositary is not appointed by
the Company within 90 days of receipt of notice from DTC to such effect, the
Company will cause the Junior Subordinated Debentures to be issued in definitive
form.
Payments on Junior Subordinated Debentures represented by a global security
will be made to Cede & Co., the nominee for DTC, as the registered holder of the
Junior Subordinated Debentures, as described under "Description of Preferred
Securities -- Book Entry, Delivery and Form." If Junior Subordinated Debentures
are issued in certificated form, principal and interest will be payable, the
transfer of the Junior Subordinated Debentures will be registrable, and Junior
Subordinated Debentures will be exchangeable for Junior Subordinated Debentures
of other authorized denominations of a like aggregate principal amount, at the
corporate trust office of the Debenture Trustee in New York, New York or at the
offices of any paying agent or transfer agent appointed by the Company, provided
that payment of interest may be made at the option of the Company by check
mailed to the address of the persons entitled thereto. However, a holder of $1
million or more in aggregate principal amount of Junior Subordinated Debentures
may receive payments of interest (other than interest payable at the Stated
Maturity) by wire transfer of immediately available funds upon written request
to the Debenture Trustee not later than 15 calendar days prior to the date on
which the interest is payable.
Junior Subordinated Debentures will be exchangeable for other Junior
Subordinated Debentures of like tenor, of any authorized denominations and of a
like aggregate principal amount.
Junior Subordinated Debentures may be presented for exchange as provided
above, and may be presented for registration of transfer (with the form of
transfer endorsed thereon, or a satisfactory written instrument of transfer,
duly executed), at the office of the securities registrar appointed under the
Indenture or at the office of any transfer agent designated by the Company for
such purpose without service charge and upon payment of any taxes and other
governmental charges as described in the Indenture. The Company will appoint the
Debenture Trustee as securities registrar under the Indenture. The Company may
at any time designate additional transfer agents with respect to the Junior
Subordinated Debentures.
In the event of any redemption, neither the Company nor the Debenture
Trustee shall be required to (i) issue, register the transfer of or exchange
Junior Subordinated Debentures during a period beginning at the opening of
business 15 days before the day of selection for redemption of the Junior
Subordinated Debentures to be redeemed and ending at the close of business on
the day of mailing of the relevant notice of redemption or (ii) transfer or
exchange any Junior Subordinated Debentures so selected for redemption, except,
in the case of any Junior Subordinated Debentures being redeemed in part, any
portion thereof not to be redeemed.
Any monies deposited with the Debenture 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 Debenture and remaining
unclaimed for two years after such principal (and premium, if
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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
Debenture shall thereafter look, as a general unsecured creditor, only to the
Company for payment thereof.
RESTRICTIONS ON CERTAIN PAYMENTS
The Company will also covenant, as to the Junior Subordinated Debentures,
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 (other than (a) the reclassification of any class of the Company's capital
stock into another class of capital stock, (b) dividends or distributions in
common stock of the Company, (c) any declaration of a dividend in connection
with the implementation of a stockholders' rights plan, the issuance of stock
under any such plan in the future or the redemption or repurchase of any such
rights pursuant thereto, (d) payments under the Guarantee and (e) purchases of
common stock related to the issuance of common stock or rights under any of the
Company's benefit plans for its directors, officers or employees), (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 other than payments pursuant to
the Guarantee or (iii) the Company shall not redeem, purchase or acquire less
than all the outstanding Junior Subordinated Debentures or any of the Preferred
Securities if at such time (i) there shall have occurred an Event of Default
under the Indenture with respect to the Junior Subordinated Debentures, (ii) if
the Junior Subordinated Debentures are held by the Trust Issuer, the Company
shall be in default with respect to its payment of any obligations under the
Guarantee relating to such Preferred Securities or (iii) the Company shall have
given notice of its selection of an Extension Period as provided in the
Indenture with respect to the Junior Subordinated Debentures and shall not have
rescinded such notice, or such Extension Period, or any extension thereof, shall
be continuing.
MODIFICATION OF INDENTURE
From time to time the Company and the Debenture 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 the Junior
Subordinated Debentures or the ability to qualify, or maintain the qualification
of, the Indenture under the Trust Indenture Act. The Indenture contains
provisions permitting the Company and the Debenture Trustee, with the consent of
the holders of not less than a majority in principal amount of the Junior
Subordinated Debentures affected, to modify the Indenture in a manner affecting
the rights of the holders of the Junior Subordinated Debentures, provided that
no such modification may, without the consent of the holder of each outstanding
Junior Subordinated Debenture so affected, (i) extend the Stated Maturity of the
Junior Subordinated Debentures, reduce the principal amount thereof or reduce
the rate or extend the time of payment of interest thereon or (ii) reduce the
percentage of principal amount of the Junior Subordinated Debentures, the
holders of which are required to consent to any such modification of the
Indenture.
DEBENTURE 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 a "Debenture Event of Default":
(i) failure for 30 days to pay interest (including Additional Interest or
Compounded Interest, if any) on the Junior Subordinated Debentures when due
(subject to the deferral of certain due dates 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 declaration of acceleration of maturity
or otherwise; or
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(iii) failure to observe or perform certain other covenants contained in
the Indenture for 90 days after written notice to the Company from the
Debenture Trustee or the holders of at least 25% in aggregate outstanding
principal amount of the outstanding Junior Subordinated Debentures; or
(iv) certain events in bankruptcy, insolvency or reorganization of the
Company, subject in certain instances to any such event remaining in effect
for a period of 60 consecutive days.
The holders of a majority in aggregate outstanding principal amount of the
Junior Subordinated Debentures have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Debenture
Trustee. The Debenture Trustee or the holders of not less than 25% in aggregate
outstanding principal amount of the Junior Subordinated Debentures may declare
the principal due and payable immediately upon a Debenture Event of Default. The
holders of a majority in aggregate outstanding principal amount of the Junior
Subordinated Debentures may annul such declaration and waive the default if the
default (other than the non-payment of the principal of the Junior Subordinated
Debentures which has become due solely by such acceleration) has been cured and
a sum sufficient to pay all matured installments of interest and principal due
otherwise than by acceleration has been deposited with the Debenture Trustee.
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 Debenture Trustee) or
a default in respect of a covenant or provision which under the Indenture cannot
be modified or amended without the consent of the holder of each outstanding
Junior Subordinated Debenture. The Company is required to file annually with the
Debenture Trustee a certificate as to whether or not the Company is in
compliance with all the conditions and covenants applicable to it under the
Indenture.
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF THE PREFERRED SECURITIES
If a Debenture Event of Default has occurred and is continuing and such
event is attributable to the failure of the Company to pay interest or principal
on the Junior Subordinated Debentures on the date such interest or principal is
otherwise payable, a holder of the Preferred Securities may institute a legal
proceeding directly against the Company for enforcement of payment to such
holder of the principal of or interest on the Junior Subordinated Debentures
having a principal amount equal to the aggregate Liquidation Amount of the
Preferred Securities of such holder (a "Direct Action"). The Company may not
amend the Indenture to remove the foregoing right to bring a Direct Action
without the prior written consent of the holders of all of the Preferred
Securities. If the right to bring a Direct Action is removed, the Trust Issuer
may become subject to the reporting obligations under the Exchange Act. The
Company shall have the right under the Indenture to set-off any payment made to
such holder of the Preferred Securities by the Company in connection with a
Direct Action.
The holders of the Preferred Securities will not be able to exercise
directly any remedies other than those set forth in the preceding paragraph
available to the holders of the Junior Subordinated Debentures. See "Description
of the Preferred Securities -- Events of Default; Notice."
CONSOLIDATION, MERGER, SALE OF ASSETS AND OTHER TRANSACTIONS
The Indenture provides that the Company shall not consolidate with or merge
into any other entity or convey, transfer or lease its properties and assets
substantially as an entirety to any entity, and no entity shall consolidate with
or merge into the Company or convey, transfer or lease its properties and assets
substantially as an entirety to the Company, unless: (i) in the event the
Company consolidates with or merges into another entity or conveys or transfers
its properties and assets substantially as an entirety to any entity, the
successor entity is organized under the laws of the United States or any state
or the District of Columbia, and such successor entity expressly assumes the
Company's obligations on the Junior Subordinated Debentures issued under the
Indenture; (ii) immediately after giving effect
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thereto, no Debenture Event of Default, and no event which, after notice or
lapse of time or both, would become a Debenture Event of Default, shall have
occurred and be continuing; and (iii) certain other conditions as prescribed by
the Indenture are met. The general provisions of the Indenture do not afford
holders of the Junior Subordinated Debentures protection in the event of a
highly leveraged or other transaction involving the Company that may adversely
affect holders of the Junior Subordinated Debentures.
SATISFACTION AND DISCHARGE
The Indenture provides that when, among other things, all of the Junior
Subordinated Debentures not previously delivered to the Debenture Trustee for
cancellation (i) have become due and payable or (ii) will become due and payable
at their Stated Maturity within one year, and the Company deposits or causes to
be deposited with the Debenture Trustee funds, in trust, for the purpose and in
an amount in the currency or currencies in which the Junior Subordinated
Debentures are payable sufficient to pay and discharge the entire indebtedness
on the Junior Subordinated Debentures not previously delivered to the Debenture
Trustee for cancellation, for the principal and interest to the date of the
deposit or to the Stated Maturity, as the case may be, then the Indenture will
cease to be of further effect (except as to the Company's obligations to pay all
other sums due pursuant to the Indenture and to provide the officers'
certificates and opinions of counsel described therein), and the Company will be
deemed to have satisfied and discharged the Indenture.
SUBORDINATION
In the Indenture, the Company has covenanted and agreed that the Junior
Subordinated Debentures issued thereunder will be subordinate and junior in
right of payment to all Senior Indebtedness to the extent provided in the
Indenture. Upon any payment or distribution of assets to creditors upon the
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 Senior Indebtedness will
first be entitled to receive payment in full of principal of (and premium, if
any) and interest, if any, on such Senior Indebtedness before the holders of the
Junior Subordinated Debentures, or the Property Trustee on behalf of the
holders, will be entitled to receive or retain any payment in respect of the
principal of or interest, if any, on the Junior Subordinated Debentures.
In the event of the acceleration of the maturity of any of the Junior
Subordinated Debentures, the holders of all Senior Indebtedness outstanding at
the time of such acceleration will first be entitled to receive payment in full
of all amounts due thereon (including any amounts due upon acceleration) before
the holders of the Junior Subordinated Debentures will be entitled to receive or
retain any payment in respect of the principal of or interest, if any, on the
Junior Subordinated Debentures.
No payments on account of principal or interest, if any, in respect of the
Junior Subordinated Debentures may be made if there shall have occurred and be
continuing a default in any payment with respect to Senior Indebtedness or an
event of default with respect to any Senior Indebtedness resulting in the
acceleration of the maturity thereof, or if any judicial proceeding shall be
pending with respect to any such default.
"Debt" means with respect to any Person, whether recourse is to all or a
portion of the assets of such Person and whether or not contingent: (i) every
obligation of such Person for money borrowed; (ii) every obligation of such
Person evidenced by bonds, debentures, notes or other similar instruments,
including obligations incurred in connection with the acquisition of property,
assets or businesses; (iii) every reimbursement obligation of such Person with
respect to letters of credit, bankers' acceptances or similar facilities issued
for the account of such Person; (iv) every obligation of such Person issued or
assumed as the deferred purchase price of property or services (but excluding
trade accounts payable or accrued liabilities arising in the ordinary course of
business); (v) every capital lease obligation of such Person; (vi) all
indebtedness of such Person whether incurred on or prior to the date of the
Indenture or thereafter incurred, for claims in respect of derivative products,
including interest rate, foreign exchange rate and commodity forward contracts,
options and swaps and similar arrangements; and (vii) every
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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, such
Person has guaranteed or is responsible or liable, directly or indirectly, as
obligor or otherwise.
"Senior Debt" means the principal of (and premium, if any) and interest, if
any (including interest accruing on or after the filing of any petition in
bankruptcy or for reorganization relating to the Company whether or not such
claim for post-petition interest is allowed in such proceeding), on Debt,
whether incurred on or prior to the date of the Indenture or thereafter
incurred, unless, in the instrument creating or evidencing the same or pursuant
to which the same is outstanding, it is provided that such obligations are not
superior in right of payment to the Junior Subordinated Debentures or to other
Debt which is pari passu with, or subordinated to, the Junior Subordinated
Debentures; provided, however, that Senior Debt shall not be deemed to include:
(i) any Debt of the Company which when incurred and without respect to any
election under Section 1111(b) of the United States Bankruptcy Code of 1978, as
amended, was without recourse to the Company, (ii) any Debt of the Company to
any of its subsidiaries, and (iii) any Debt to any employee of the Company.
"Subordinated Debt" means the principal of (and premium, if any) and
interest, if any (including interest accruing on or after the filing of any
petition in bankruptcy or for reorganization relating to the Company whether or
not such claim for post-petition interest is allowed in such proceeding), on
Debt, whether incurred on or prior to the date of the Indenture or thereafter
incurred, which is by its terms expressly provided to be junior and subordinate
to other Debt of the Company (other than the Junior Subordinated Debentures),
except that Subordinated Debt shall not include debentures sold by the Company
to the Trust Issuer.
The Indenture places no limitation on the amount of Senior Indebtedness
that may be incurred by the Company. The Company may from time to time incur
indebtedness constituting Senior Indebtedness.
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, without
regard to conflicts of laws principles thereof.
INFORMATION CONCERNING THE DEBENTURE TRUSTEE
The Debenture 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 Debenture Trustee is under no
obligation to exercise any of the powers vested in it by the Indenture at the
request of any holder of the Junior Subordinated Debentures, unless offered
reasonable indemnity by such holder against the costs, expenses and liabilities
which might be incurred thereby. The Debenture Trustee is not required to expend
or risk its own funds or otherwise incur personal financial liability in the
performance of its duties if the Debenture Trustee reasonably believes that
repayment or adequate indemnity is not reasonably assured to it.
DISTRIBUTION OF THE JUNIOR SUBORDINATED DEBENTURES
As described under "Description of the Preferred Securities -- Liquidation
of the Trust Issuer and Distribution of the Junior Subordinated Debentures to
Holders," under certain circumstances involving the dissolution of the Trust
Issuer, Junior Subordinated Debentures may be distributed to the holders of the
Preferred Securities in exchange therefor upon liquidation of the Trust Issuer,
after satisfaction of liabilities to creditors of the Trust Issuer as provided
by applicable law. Any such distribution will be subject to receipt of prior
regulatory approval if then required. If the Junior Subordinated Debentures are
distributed to the holders of Preferred Securities upon the liquidation of the
Trust Issuer, the Company will use its best efforts to list the Junior
Subordinated Debentures on the Nasdaq Stock Market's National Market or such
stock exchanges, if any, on which the Preferred Securities are then listed.
There can be no assurance as to the market price of any Junior Subordinated
Debentures that may be distributed to the holders of the Preferred Securities.
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PAYMENT AND PAYING AGENTS
Payment of principal of and any interest on the Junior Subordinated
Debentures will be made at the offices of the Debenture Trustee in the city of
New York or at the offices of such paying agent or paying agents as the Company
may designate from time to time, except that at the option of the Company
payment of any interest may be made (i) by check mailed to the address of the
Person entitled thereto as such address shall appear in the Debenture Register
or (ii) by transfer to an account maintained by the Person entitled thereto as
specified in the Debenture Register, provided that proper transfer instructions
have been received by the regular record date. Payment of any interest on the
Junior Subordinated Debentures will be made to the Person in whose name the
Subordinated Debenture is registered at the close of business on the regular
record date for such interest, except in the case of Deferred Interest. The
Company may at any time designate additional Paying Agents or rescind the
designation of any Paying Agent; however, the Company will at all times be
required to maintain a Paying Agent in each Place of Payment for the Junior
Subordinated Debentures.
Any moneys deposited with the Debenture Trustee or any Paying Agent, or
then held by the Company in trust, for the payment of the principal of or
interest on the Junior Subordinated Debentures and remaining unclaimed for two
years after such principal or interest has become due and payable shall be
repaid to the Company upon written request of the Company on May 31 of each year
or (if then held in trust by the Company) will be discharged from such trust and
the holders of the Junior Subordinated Debentures shall thereafter look, as
general unsecured creditors, only to the Company for payment thereof.
REGISTRAR AND TRANSFER AGENT
The Debenture Trustee will act as the registrar and the transfer agent for
the Junior Subordinated Debentures. Junior Subordinated Debentures may be
presented for registration of transfer (with the form of transfer endorsed
thereon, or a satisfactory written instrument of transfer, duly executed) at the
office of the registrar. The Company may at any time rescind the designation of
any such transfer agent or approve a change in the location through which any
such transfer agent acts; provided that the Company maintains a transfer agent
in the place of payment. The Company may at any time designate additional
transfer agents with respect to the Junior Subordinated Debentures. In the event
of any redemption, neither the Company nor the Debenture Trustee will be
required to (i) issue, register the transfer of or exchange Junior Subordinated
Debentures during a period beginning at the opening of business 15 days before
the day of selection for redemption of Junior Subordinated Debentures and ending
at the close of business on the day of mailing of the relevant notice of
redemption, or (ii) transfer or exchange any Junior Subordinated Debentures so
selected for redemption, except, in the case of any Junior Subordinated
Debentures being redeemed in part, any portion thereof not to be redeemed.
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DESCRIPTION OF THE GUARANTEE
A Guarantee will be executed and delivered by the Company concurrently with
the issuance of the Preferred Securities for the benefit of the holders from
time to time of such Preferred Securities (the "Guarantee"). The Bank of New
York will act as trustee ("Guarantee Trustee") under the Guarantee. 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. Wherever particular defined terms of the Guarantee are
referred to, but not defined herein, such defined terms are incorporated herein
by reference. The form of the Guarantee has been filed as an exhibit to the
Registration Statement of which this Prospectus forms a part.
GENERAL
The Company will irrevocably agree to pay in full on a subordinated basis,
to the extent set forth herein, the Guarantee Payments (as defined below) to the
holders of the Preferred Securities, as and when due, regardless of any defense,
right of set-off or counterclaim that the Trust Issuer may have or assert other
than the defense of payment. The following payments with respect to the
Preferred Securities, to the extent not paid by or on behalf of the Trust Issuer
(the "Guarantee Payments"), will be subject to the Guarantee: (i) any accrued
and unpaid Distributions required to be paid on the Preferred Securities, to the
extent that the Trust Issuer has funds on hand available therefor at such time,
(ii) the Redemption Price with respect to any Preferred Securities called for
redemption, to the extent that the Trust Issuer has funds on hand available
therefor at such time, or (iii) upon a voluntary or involuntary dissolution,
winding up or termination of the Trust Issuer (unless the Junior Subordinated
Debentures are distributed to holders of the Preferred Securities), the lesser
of (a) the Liquidation Distribution, to the extent that the Trust Issuer has
funds available therefor at such time, and (b) the amount of assets of the Trust
Issuer remaining available for distribution to holders of the Preferred
Securities after satisfaction of liabilities to creditors of the Trust Issuer as
required by applicable law. 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 Preferred Securities or by causing the Trust Issuer to pay such
amounts to such holders.
The Guarantee will be an irrevocable guarantee on a subordinated basis of
the Trust Issuer's obligations under the Preferred Securities, but will apply
only to the extent that the Trust Issuer has funds sufficient to make such
payments, and is not a guarantee of collection.
If the Company does not make interest payments on the Junior Subordinated
Debentures held by the Trust Issuer, the Trust Issuer will not be able to pay
Distributions on the Preferred Securities and will not have funds legally
available therefor. The Guarantee will rank subordinate and junior in right of
payment to all Senior Debt of the Company. See "Description of the Guarantee --
Status of the Guarantee." Because the Company is a holding company, the right of
the Company to participate in any distribution of assets of any subsidiary upon
such subsidiary's liquidation or reorganization or otherwise is subject to the
prior claims of creditors of that subsidiary, except to the extent the Company
may itself be recognized as a creditor of that subsidiary. Accordingly, the
Company's obligations under the Guarantee will be effectively subordinated to
all existing and future liabilities of the Company's subsidiaries, and claimants
should look only to the assets of the Company for payments thereunder. The
Guarantee does not limit the incurrence or issuance of other secured or
unsecured debt of the Company, including Senior Debt, whether under the
Indenture, any other indenture that the Company may enter into in the future, or
otherwise. The Company may from time to time to incur indebtedness constituting
Senior Indebtedness.
The Company and the Trust Issuer believe that the Company has, through the
Guarantee, the Trust Agreement, the Junior Subordinated Debentures, the
Indenture and the Expense Agreement, taken together, fully, irrevocably and
unconditionally guaranteed all of the Trust Issuer's obligations under the
Preferred Securities, on a subordinated basis. No single document standing alone
or operating in conjunction with fewer than all of the other documents
constitutes such guarantee. It is only the combined operation of these documents
that has the effect of providing a full, irrevocable and unconditional guarantee
of the Trust Issuer's obligations under the Preferred Securities. See
"Relationship Among the Preferred Securities, the Junior Subordinated
Debentures, the Expense Agreement and the Guarantee."
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STATUS OF THE GUARANTEE
The Guarantee will constitute an unsecured obligation of the Company and
will rank subordinate and junior in right of payment to all Senior Indebtedness
of the Company in the same manner as the Junior Subordinated Debentures.
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 Company 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 Preferred Securities. The Guarantee
will not be discharged except by payment of the Guarantee Payments in full to
the extent not paid by the Trust Issuer or upon distribution to the holders of
the Preferred Securities of the Junior Subordinated Debentures.
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes that do not materially adversely affect
the rights of holders of the Preferred Securities (in which case no vote will be
required), the Guarantee may not be amended without the prior approval of the
holders of not less than a majority of the aggregate Liquidation Amount of such
outstanding Preferred Securities. The manner of obtaining any such approval will
be as set forth under "Description of the Preferred Securities -- Voting Rights;
Amendment of the Trust Agreement." 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 holders of
the Preferred 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 payments or other obligations thereunder. The
holders of not less than a majority in aggregate Liquidation Amount of the
Preferred Securities have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Guarantee Trustee in
respect of such Guarantee or to direct the exercise of any trust or power
conferred upon the Guarantee Trustee under the Guarantee.
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 the performance of the Guarantee, undertakes to
perform only such duties as are specifically set forth in the Guarantee and,
after default with respect to the Guarantee, must exercise the same degree of
care and skill as a prudent person would 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 the Preferred Securities unless it is offered
reasonable indemnity by such holder against the costs, expenses and liabilities
that might be incurred thereby. The Guarantee 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 Guarantee Trustee reasonably believes repayment
or adequate indemnity is not reasonably assured to it.
TERMINATION OF THE GUARANTEE
The Guarantee will terminate and be of no further force and effect upon (a)
full payment of the Redemption Price of the Preferred Securities, (b) full
payment of the amounts payable upon liquidation of the Trust Issuer, or (c)
distribution of the Junior Subordinated Debentures to the holders of the
Preferred Securities in exchange therefor. The Guarantee will continue to be
effective or will be reinstated, as the case may be, if at any time any holder
of the Preferred Securities must restore payment of any sums paid under the
Preferred Securities or the Guarantee.
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GOVERNING LAW
The Guarantee will be governed by and construed in accordance with the laws
of the State of New York, without regard to conflicts of laws principles
thereof.
THE EXPENSE AGREEMENT
Pursuant to the Agreement as to Expenses and Liabilities entered into by
the Company under the Trust Agreement (the "Expense Agreement"), the Company
will irrevocably and unconditionally guarantee to each person or entity to whom
the Trust Issuer becomes indebted or liable, the full payment of any costs,
expenses or liabilities of the Trust Issuer, other than obligations of the Trust
Issuer to pay to the holders of the Preferred Securities the amounts due such
holders pursuant to the terms of the Preferred Securities. Third party creditors
of the Trust Issuer may proceed directly against the Company under the Expense
Agreement, regardless of whether such creditors had notice of the Expense
Agreement.
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RELATIONSHIP AMONG THE PREFERRED SECURITIES,
THE JUNIOR SUBORDINATED DEBENTURES, THE EXPENSE
AGREEMENT AND THE GUARANTEE
FULL AND UNCONDITIONAL GUARANTEE
Payments of Distributions and other amounts due on the Preferred Securities
(to the extent the Trust Issuer has funds available for the payment of such
Distributions) are irrevocably guaranteed by the Company as and to the extent
set forth under "Description of the Guarantee." The Company and the Trust Issuer
believe that, taken together, the Company's obligations under the Junior
Subordinated Debentures, the Indenture, the Trust Agreement, the Expense
Agreement and the Guarantee provide, in the aggregate, a full, irrevocable and
unconditional guarantee of payments of distributions and other amounts due on
the Preferred Securities, on a subordinated basis. No single document standing
alone or operating in conjunction with fewer than all of the other documents
constitutes such guarantee. It is only the combined operation of these documents
that has the effect of providing a full, irrevocable and unconditional guarantee
of the Trust Issuer's obligations under the Preferred Securities. If and to the
extent that the Company does not make payments on the Junior Subordinated
Debentures, the Trust Issuer will not pay Distributions or other amounts due on
its Preferred Securities. The Guarantee does not cover payment of Distributions
when the Trust Issuer does not have sufficient funds to pay such Distributions.
In such event, the remedy of a holder of the Preferred Securities is to
institute a Direct Action against the Company for enforcement of payment of such
Distributions to such holder. The obligations of the Company under the Guarantee
are subordinate and junior in right of payment to all Senior Debt.
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 Preferred 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 Preferred Securities and 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
Preferred Securities; (iii) the Company shall pay for all and any costs,
expenses and liabilities of the Trust Issuer except the Trust Issuer's
obligations to holders of its Preferred Securities; and (iv) the Trust Agreement
further provides that the Trust Issuer will not engage in any activity that is
not consistent with the limited purposes of the Trust Issuer.
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 making such payment, a payment under the Guarantee.
ENFORCEMENT RIGHTS OF HOLDERS OF THE PREFERRED SECURITIES
A holder of a Preferred Security may institute a legal proceeding directly
against the Company to enforce its rights under the Guarantee without first
instituting a legal proceeding against the Guarantee Trustee, the Trust Issuer
or any other person or entity.
A default or event of default under any Senior Debt of the Company would
not constitute a default or event of default under the Indenture. However, in
the event of payment defaults under, or acceleration of, Senior Debt 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 Senior
Debt 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 event of default under the Indenture.
LIMITED PURPOSE OF THE TRUST ISSUER
The Preferred Securities evidence a preferred undivided beneficial interest
in the assets of the Trust Issuer, and the Trust Issuer exists for the sole
purpose of issuing its Preferred Securities and Common Securities and investing
the proceeds thereof in Junior Subordinated Debentures. A principal difference
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between the rights of a holder of a Preferred Security and a holder of a Junior
Subordinated Debenture is that a holder of a Junior Subordinated Debenture is
entitled to receive from the Company the principal amount of and interest
accrued on Junior Subordinated Debentures held, while a holder of the Preferred
Securities is entitled to receive Distributions from the Trust Issuer (or from
the Company under the Guarantee) if, and to the extent, the Trust Issuer has
funds available for the payment of such Distributions.
RIGHTS UPON DISSOLUTION
Upon any voluntary or involuntary dissolution, winding-up or liquidation of
the Trust Issuer involving the liquidation of the Junior Subordinated
Debentures, after satisfaction of liabilities to creditors of the Trust Issuer,
if any, as provided by applicable law, the holders of the Preferred Securities
will be entitled to receive, out of assets held by the Trust Issuer, the
Liquidation Distribution in cash. See "Description of the Preferred
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 Senior Debt as set forth
in the Indenture, 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 Issuer (other
than the Trust Issuer's obligations to the holders of its Preferred Securities),
the positions of a holder of such Preferred 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 are
expected to be substantially the same.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the principal United States federal income
tax consequences of the purchase, ownership and disposition of the Preferred
Securities. This summary addresses only the tax consequences to a person that
acquires Preferred Securities on their original issue at the stated offering
price and does not address the tax consequences to persons that may be subject
to special treatment under United States federal income tax law, such as banks,
insurance companies, thrift institutions, regulated investment companies, real
estate investment trusts, employee benefit plans, tax-exempt organizations,
dealers in securities or currencies, persons that will hold Preferred Securities
as part of a position in a "straddle" or as part of a "hedging", "conversion" or
other integrated investment transaction for federal income tax purposes, persons
whose functional currency is not the United States dollar or persons that do not
hold Preferred Securities as capital assets.
The statements of law or legal conclusions set forth in this summary
constitute the opinion of Maloney & Knox, special tax counsel to the Company and
the Trust Issuer. This summary is based upon the Internal Revenue Code of 1986,
as amended (the "Code"), Treasury Regulations, Internal Revenue Service rulings
and pronouncements and judicial decisions now in effect, all of which are
subject to change at any time. Such changes may be applied retroactively in a
manner that could cause the tax consequences to vary substantially from the
consequences described below, possibly adversely affecting a beneficial owner of
the Preferred Securities. The authorities on which this summary is based are
subject to various interpretations, and it is therefore possible that the United
States federal income tax treatment of the purchase, ownership and disposition
of the Preferred Securities may differ from the treatment described below.
THE UNITED STATES FEDERAL INCOME TAX DISCUSSION SET FORTH BELOW IS INCLUDED
FOR GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING ON A HOLDER'S
PARTICULAR SITUATION. PROSPECTIVE INVESTORS ARE ADVISED TO CONSULT WITH THEIR
OWN TAX ADVISORS IN LIGHT OF THEIR OWN PARTICULAR CIRCUMSTANCES AS TO THE UNITED
STATES FEDERAL TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF
THE PREFERRED SECURITIES, AS WELL AS THE EFFECT OF ANY STATE, LOCAL OR FOREIGN
TAX LAWS.
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CLASSIFICATION OF THE TRUST ISSUER
In the opinion of Maloney & Knox, under current law, the Trust Issuer will
not be classified as an association taxable as a corporation for United States
federal income tax purposes. As a result, for United States federal income tax
purposes, each beneficial owner of Preferred Securities (a "Securityholder")
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 the interest (or accrued original issue discount)
in addition to any interest and other income (if any) with respect to the Junior
Subordinated Debentures. See "-- Interest Income and Original Issue Discount."
No amount included in income with respect to the Preferred Securities will be
eligible for the dividends-received deduction.
CLASSIFICATION OF THE JUNIOR SUBORDINATED DEBENTURES
In connection with the classification of the Junior Subordinated
Debentures, Maloney & Knox is of the opinion that such securities will be
classified for United States federal income tax purposes as indebtedness of the
Company under current law, and thus the payments designated as interest under
the terms of the Junior Subordinated Debentures will be deductible by the
Company for federal income tax purposes. No assurance can be given, however,
that the Internal Revenue Service will not challenge such classification.
INTEREST INCOME AND ORIGINAL ISSUE DISCOUNT
Under applicable Treasury regulations, currently Section 1.1275-2(h) (the
"Regulations"), if the terms and conditions of a debt instrument make the
likelihood that stated interest will not be timely paid a "remote" contingency,
such contingency will be ignored in determining whether the debt instrument is
issued with original issue discount ("OID"). The Company believes that the
likelihood of its exercising its option to defer payments of interest on the
Junior Subordinated Debentures is remote, since exercising that option would
prevent it from declaring dividends on any class of its stock. Based on the
foregoing, the Company intends to take the position that the Junior Subordinated
Debentures were not issued with OID and, accordingly, a Securityholder
purchasing the Preferred Securities at the stated price should be required to
include in gross income only such Securityholder's pro rata share of stated
interest on the Junior Subordinated Debentures in accordance with such
Securityholder's method of tax accounting.
The Regulations have not yet been addressed in any rulings or other
published interpretations by the Internal Revenue Service (the "IRS"). In the
opinion of Maloney & Knox, it is not unreasonable for the Company to take the
position that the Junior Subordinated Debentures will not be issued with OID.
However, it is possible the IRS could take the position that the likelihood of
deferral was not a remote contingency within the meaning of the Regulations.
Under the Regulations, if the Company were to exercise its option to defer
payments of interest after treating the Junior Subordinated Debentures as issued
without OID, the Junior Subordinated Debentures would be treated as re-issued
with OID at that time, and all stated interest (and de minimis OID, if any) on
the Junior Subordinated Debentures would thereafter be treated as OID as long as
the Junior Subordinated Debentures remained outstanding. In such event, all of a
Securityholder's interest income with respect to the Junior Subordinated
Debentures would be accounted for as OID on an economic accrual basis regardless
of such Securityholder's method of tax accounting, and actual distributions of
stated interest related thereto would not be includable in gross income.
Consequently, a Securityholder would be required to include OID in gross income
even though the Company would not make and the Securityholder would not receive
any actual cash payments during an Extension Period.
A Securityholder that disposed of Preferred Securities prior to the record
date for the payment of Distributions following an Extension Period would
include OID in gross income but would not receive any cash related thereto from
the Trust Issuer. Any amount of OID included in a Securityholder's gross income
(whether or not during an Extension Period) would increase such Securityholder's
tax basis in its Preferred Securities, and the amount of Distributions not
includable in gross income would reduce such Securityholder's tax basis in its
Preferred Securities.
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DISTRIBUTION OF THE JUNIOR SUBORDINATED DEBENTURES TO HOLDERS OF
THE PREFERRED SECURITIES
Under current United States federal income tax law and provided that the
Trust Issuer is not treated as an association taxable as a corporation, a
distribution by the Trust Issuer of the Junior Subordinated Debentures as
described under the caption "Description of the Preferred Securities-Liquidation
of the Trust Issuer and Distribution of the Junior Subordinated Debentures to
Holders" will be nontaxable to the Securityholders and will result in a
Securityholder receiving its pro rata share of the Junior Subordinated
Debentures previously held indirectly through the Trust Issuer, with a holding
period and aggregate tax basis equal to the holding period and aggregate tax
basis such Securityholder had in its Preferred Securities before such
distribution. A Securityholder will account for interest in respect of the
Junior Subordinated Debentures received from the Trust Issuer in the manner
described above under "Certain Federal Income Tax Consequences -- Interest
Income and Original Issue Discount," including any accrual of OID (if any)
attributed to the Junior Subordinated Debentures upon the distribution.
SALES OR REDEMPTION OF THE PREFERRED SECURITIES
Gain or loss will be recognized by a Securityholder on the sale of
Preferred Securities (including a redemption for cash or other consideration) in
an amount equal to the difference between the amount realized on the sale (or
redemption) and the Securityholder's adjusted tax basis in the Preferred
Securities sold or so redeemed. Gain or loss recognized by a Securityholder on
Preferred Securities held for more than one year will generally be taxable as
long-term capital gain or loss. Pursuant to the Taxpayer Relief Act of 1997,
Preferred Securities constituting a capital asset which are acquired by an
individual after July 28, 1997, and held for more than 18 months are accorded a
maximum United States federal capital gains tax rate of 20% (or a rate of 10%,
if the individual taxpayer is in the 15% tax bracket). Effective in 2001, the
20% rate drops to 18% (and the 10% rate drops to 8%) for capital assets acquired
after the year 2000 and held more than five years; however, the requirement that
the capital asset be acquired after the year 2000 does not apply to the 8% rate.
Preferred Securities held by an individual for more than one year, but not more
than 18 months, are accorded a United States federal capital gains tax rate of
28%.
If the Company were to exercise its option to defer payments of interest on
the Junior Subordinated Debentures, the Preferred Securities might trade at a
price that did not fully reflect the value of accrued but unpaid interest with
respect to the underlying Junior Subordinated Debentures. A Securityholder that
disposed of its Preferred Securities between record dates for payments of
Distributions (and consequently did not receive a Distribution from the Trust
Issuer for the period prior to such disposition) would nevertheless be required
to include in income as ordinary income accrued but unpaid interest on the
Junior Subordinated Debentures through the date of disposition and to add such
amount to its adjusted tax basis in its Preferred Securities disposed of. Such
Securityholder would recognize a capital loss on the disposition of its
Preferred Securities to the extent the selling price (which might not fully
reflect the value of accrued but unpaid interest) was less than the
Securityholder's adjusted tax basis in the Preferred Securities (which would
include accrued but unpaid interest). Subject to certain limited exceptions,
capital losses cannot be applied to offset ordinary income for United States
federal income tax purposes.
UNITED STATES ALIEN HOLDERS
For purposes of this discussion, a "United States Alien Holder" is any
corporation, individual, partnership, estate or trust that is, as to the United
States, a foreign corporation, a non-resident alien individual, a foreign
partnership or a non-resident fiduciary of a foreign estate or trust.
Under current United States federal income tax law: (i) payments by the
Trust Issuer or any of its paying agents to any Securityholder who or which is a
United States Alien Holder will not be subject to United States federal
withholding tax provided that (a) the Securityholder 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, (b) the Securityholder is not a
controlled foreign corporation that is related to the Company through stock
ownership and (c) either (A) the Securityholder certifies to the Trust Issuer or
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its agent, under penalties of perjury, that it is not a United States holder and
provides its name and address or (B) a securities clearing organization, bank or
other financial institution that holds customers' securities in the ordinary
course of its trade or business (a "Financial Institution") certifies to the
Trust Issuer or its agent, under penalties of perjury, that such statement has
been received from the Securityholder by it or by a Financial Institution
holding such security for the Securityholder and furnishes the Trust Issuer or
its agent with a copy thereof, and (ii) a United States Alien Holder of a
Preferred Security will not be subject to United States federal withholding tax
on any gain realized upon the sale or other disposition of a Preferred Security.
Proposed Treasury regulations (the "Proposed Regulations") would provide
alternative methods for satisfying the certification requirement described in
clause (i)(c) above. The Proposed Regulations also would require, in the case of
Preferred Securities held by a foreign partnership, that (x) the certification
described in clause (i)(c) above be provided by the partners rather than by the
foreign partnership and (y) the partnership provide certain information,
including a United States taxpayer identification number. A look-through rule
would apply in the case of tiered partnerships. The Proposed Regulations are
proposed to be effective for payments made after December 31, 1997. There can be
no assurance that the Proposed Regulations will be adopted or as to the
provisions that they will include if and when adopted in temporary or final
form. The Trust Issuer will issue a Form 1042 or Form 1042-S, where appropriate.
INFORMATION REPORTING TO SECURITYHOLDERS
Generally, income on the Preferred Securities will be reported to
Securityholders on Forms 1099-INT, which will be mailed to Securityholders by
January 31 following each calendar year.
BACKUP WITHHOLDING
Payments made on, and proceeds from the sale of, Preferred Securities may
be subject to a "backup" withholding tax of 31% unless the Securityholder
complies with certain certification requirements. Any withheld amounts will be
allowed as a credit against the Securityholder's United States federal income
tax, provided the required information is provided to the Internal Revenue
Service.
ERISA CONSIDERATIONS
The Company and certain affiliates of the Company may each be considered a
"party in interest" within the meaning of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), or a "disqualified person" within
the meaning of Section 4975 of the Code with respect to many employee benefit
plans ("Plans") that are subject to ERISA. The purchase of the Preferred
Securities by a Plan that is subject to the fiduciary responsibility provisions
of ERISA or the prohibited transaction provisions of Section 4975(e)(1) of the
Code and with respect to which the Company, or any affiliate of the Company, is
a service provider (or otherwise is a party in interest or a disqualified
person) may constitute or result in a prohibited transaction under ERISA or
Section 4975 of the Code, unless the Preferred Securities are acquired pursuant
to and in accordance with an applicable exemption. Any pension or other employee
benefit plan proposing to acquire any Preferred Securities should consult with
its counsel.
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement (the
"Underwriting Agreement") dated April 21, 1998, among the Company, the Trust
Issuer and Legg Mason Wood Walker, Incorporated (the "Underwriter"), the Trust
Issuer has agreed to sell to the Underwriter, and the Underwriter has agreed to
purchase from the Trust Issuer, $11,000,000 aggregate Liquidation Amount of
Preferred Securities at the public offering price subject to the underwriting
commissions set forth on the cover page of this Prospectus.
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The Underwriting Agreement provides that the obligations of the Underwriter
are subject to certain conditions precedent and that the Underwriter will
purchase all of the Preferred Securities offered hereby if any of such Preferred
Securities are purchased.
The Company has been advised by the Underwriter that the Underwriter
proposes to offer the Preferred Securities to the public and other dealers at
the public offering price set forth on the cover page of this Prospectus and
will share with certain dealers from its commission a concession not in excess
of $0.20 per Preferred Security. After the public offering, the offering price
and other selling terms may be changed by the Underwriter.
The Company has granted to the Underwriter an option, exercisable not later
than 30 days after the date of this Prospectus, to purchase up to an additional
$1,650,000 aggregate Liquidation Amount of the Preferred Securities at the
public offering price plus accrued Distributions, if any, from April 27, 1998.
To the extent that the Underwriter exercises such option, the Company will be
obligated, pursuant to the option, to sell such Preferred Securities to the
Underwriter. The Underwriter may exercise such option only to cover
over-allotments made in connection with the sale of the Preferred Securities
offered hereby. If purchased, the Underwriter will offer such additional
Preferred Securities on the same terms as those on which the $11,000,000
aggregate Liquidation Amount of the Preferred Securities are being offered.
In view of the fact that the proceeds from the sale of the Preferred
Securities will be used to purchase the Junior Subordinated Debentures issued by
the Company, the Underwriting Agreement provides that the Company will pay as
compensation for the Underwriter's arranging the investment therein of such
proceeds an amount of $0.40 per Preferred Security (or $440,000 ($506,000 if the
over-allotment option is exercised in full) in the aggregate). The Company has
also agreed to reimburse the Underwriter for its reasonable out-of-pocket
expenses, including legal fees and expenses relating to the offering of the
Preferred Securities.
In connection with the offering of the Preferred Securities, the
Underwriter and any selling group members and their respective affiliates may
engage in transactions effected in accordance with Rule 104 of the Securities
and Exchange Commission's Regulation M that are intended to stabilize, maintain
or otherwise affect the market price of the Preferred Securities. Such
transactions may include over-allotment transactions in which the Underwriter
creates a short position for its own account by selling more Preferred
Securities than it is committed to purchase from the Trust Issuer. In such a
case, to cover all or part of the short position, the Underwriter may exercise
the over-allotment option described above or may purchase Preferred Securities
in the open market following completion of the initial offering of the Preferred
Securities. The Underwriter also may engage in stabilizing transactions in which
it bids for, and purchases, shares of the Preferred Securities at a level above
that which might otherwise prevail in the open market for the purpose of
preventing or retarding a decline in the market price of the Preferred
Securities. The Underwriter also may reclaim any selling concessions allowed to
an Underwriter or dealer if the Underwriter repurchases shares distributed by
the Underwriter or dealer. Any of the foregoing transactions may result in the
maintenance of a price for the Preferred Securities at a level above that which
might otherwise prevail in the open market. Neither the Company nor the
Underwriter makes any representation or prediction as to the direction or
magnitude of any effect that the transactions described above may have on the
price of the Preferred Securities. The Underwriter is not required to engage in
any of the foregoing transactions and, if commenced, such transactions may be
discontinued at any time without notice.
Because the National Association of Securities Dealers, Inc. ("NASD") is
expected to view the Preferred Securities as interests in a direct participation
program, the offering of the Preferred Securities is being made in compliance
with the applicable provisions of Rule 2810 of the NASD's Conduct Rules.
The Preferred Securities are a new issue of securities with no established
trading market. The Company and the Trust Issuer have been advised by the
Underwriter that it intends to make a market in the Preferred Securities.
However, the Underwriter is not obligated to do so and such market making may be
interrupted or discontinued at any time without notice at the sole discretion of
the Underwriter. The Preferred Securities have been approved for listing on the
Nasdaq National Market, but one of the
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requirements for listing and continuing listing is the presence of two market
makers for the Preferred Securities, and the presence of a second market maker
cannot be assured. Accordingly, no assurance can be given as to the development
or liquidity of any market for the Preferred Securities.
The Company and the Trust Issuer have agreed to indemnify the Underwriter
against certain liabilities, including liabilities under the Securities Act.
The Underwriter has in the past and may in the future perform various
services for the Company, including investment banking services, for which it
has and will receive customary fees for such services.
VALIDITY OF SECURITIES
Certain matters of Delaware law relating to the validity of the Preferred
Securities, the enforceability of the Trust Agreement and the creation of the
Trust Issuer will be passed upon by Richards, Layton & Finger, P.A., special
Delaware counsel to the Company and the Trust Issuer. The validity of the
Guarantee and the Junior Subordinated Debentures will be passed upon for the
Company by Maloney & Knox. Certain legal matters will be passed upon for the
Underwriter by Elias, Matz, Tiernan & Herrick L.L.P. Certain matters relating to
the United States federal income tax considerations will be passed upon for the
Company by Maloney & Knox.
EXPERTS
The consolidated financial statements of the Company as of December 31,
1997 and 1996, and for each of the years in the three-year period ended December
31, 1997, appearing in the 1997 Annual Report of the Company to its shareholders
and incorporated by reference in the Annual Report on Form 10-K for the year
ended December 31, 1997, have been incorporated by reference in the Prospectus
and in the Registration Statement of which this Prospectus forms a part, in
reliance upon the report of KPMG Peat Marwick LLP, independent public
accountants, incorporated by reference herein, whose report thereon appears
therein, and upon the authority of said firm as experts in accounting and
auditing. The report of KPMG Peat Marwick LLP refers to a change in the method
of accounting for mortgage servicing rights as of January 1, 1996.
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APPENDIX A
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A-1
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APPENDIX B
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A-2
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR 1,100,000 PREFERRED
TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS OFFERING SECURITIES
OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN
OR MADE, SUCH INFORMATION AND REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, THE
TRUST ISSUER OR THE UNDERWRITER. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO AMERICAN BANCORPORATION
CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR CAPITAL TRUST I
THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY
TIME SUBSEQUENT TO THE DATE HEREOF. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY ANY SECURITIES OTHER THAN THE REGISTERED SECURITIES TO
WHICH IT RELATES. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY SUCH
SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR 8.50% CUMULATIVE TRUST PREFERRED SECURITIES
SOLICITATION IS UNLAWFUL. FULLY AND UNCONDITIONALLY GUARANTEED,
AS DESCRIBED HEREIN, BY
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Available Information ............................ 2 AMERICAN BANCORPORATION
Incorporation of Certain Documents by
Reference ..................................... 2
Summary .......................................... 4
Selected Consolidated Financial and Other Data
of the Company ................................ 10
Risk Factors ..................................... 12
Use of Proceeds .................................. 20
Market for the Preferred Securities .............. 20 ------------
Accounting Treatment ............................. 20 PROSPECTUS
Ratio of Earnings to Fixed Charges ............... 21 ------------
Capitalization ................................... 22
Description of the Preferred Securities .......... 23
Description of Junior Subordinated Debentures. 34
Description of the Guarantee ..................... 43
Relationship Among the Preferred Securities,
the Junior Subordinated Debentures, the
Expense Agreement and the Guarantee ........... 46 LEGG MASON WOOD WALKER
Certain Federal Income Tax Consequences .......... 47 INCORPORATED
ERISA Considerations ............................. 50
Underwriting ..................................... 50
Validity of Securities ........................... 52
Experts .......................................... 52
Appendix A -- Form 10-K for Year Ended
April 21, 1998
December 31, 1997 ............................. A-1
Appendix B -- Annual Report for Year Ended
December 31, 1997 ............................. B-1
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