<PAGE> 1
$34,500,000
USBANCORP CAPITAL TRUST I
BLUS(SM)
8.45% BENEFICIAL UNSECURED SECURITIES, SERIES A
(LIQUIDATION AMOUNT $25 PER CAPITAL SECURITY)
FULLY AND UNCONDITIONALLY GUARANTEED, AS DESCRIBED HEREIN, BY
[USBANCORP LOGO]
The 8.45% Beneficial Unsecured Securities, Series A (the "Series A Capital
Securities"), offered hereby represent beneficial ownership interests in
USBANCORP Capital Trust I, a statutory business trust created under the laws of
the State of Delaware (the "Issuer"). USBANCORP, Inc., a Pennsylvania
corporation (the "Corporation"), will be the owner of all the beneficial
ownership interests represented by common securities of the Issuer (the "Series
A Common Securities" or "Common Securities" and, collectively with the Series A
Capital Securities, the "Series A Securities"). The Bank of New York is the
Property Trustee of the Issuer. The Issuer exists for the sole purpose of
issuing the Series A Capital Securities and the Series A Common Securities and
investing the proceeds thereof in approximately $35,567,025 of 8.45% Junior
Subordinated Deferrable Interest Debentures, Series A (the "Series A
Subordinated Debentures"), to be issued by the Corporation. The Series A
Subordinated Debentures will mature on June 30, 2028. The Series A Capital
Securities will have a preference under certain circumstances with respect to
cash distributions and amounts payable on liquidation or redemption over the
Series A Common Securities. See "Description of Series A Capital Securities --
Subordination of Common Securities."
Holders of the Series A Capital Securities will be entitled to receive
cumulative cash distributions accruing from the date of original issuance and
payable quarterly in arrears on the last day of March, June, September and
December of each year, commencing June 30, 1998, at the annual rate of 8.45% on
the Liquidation Amount (as defined herein) of $25 per Series A Capital Security
("Distributions"). Subject to certain exceptions, as described herein, the
Corporation has the right to defer payment of interest on the Series A
Subordinated Debentures at any time or from time to time for a period not
exceeding 20 consecutive quarterly periods with respect to each deferral period
(each, an "Extension Period"), provided that no Extension Period may extend
beyond the Stated Maturity of the Series A 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 8.45% per
annum, compounded quarterly, to the extent permitted by applicable law), the
Corporation may elect to begin a new Extension Period subject to the
requirements set forth herein. If interest
Continued on next page
------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 9 HEREOF FOR CERTAIN INFORMATION
RELEVANT TO AN INVESTMENT IN THE SERIES A CAPITAL SECURITIES.
------------------
THESE SECURITIES ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF A BANK AND ARE NOT
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL
AGENCY.
------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS TO WHICH IT RELATES. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------
<TABLE>
<S> <C> <C> <C>
=================================================================================================================================
INITIAL PUBLIC UNDERWRITING PROCEEDS TO THE
OFFERING PRICE(1) COMMISSIONS(2) ISSUER(1)(3)(4)
- ---------------------------------------------------------------------------------------------------------------------------------
Per Series A Capital Security............ $25.00 (3) $25.00
Total.................................... $34,500,000 (3) $34,500,000
=================================================================================================================================
</TABLE>
(1) Plus accrued Distributions, if any, from April 30, 1998 to the date of
delivery.
(2) The Issuer and the Corporation have each agreed to indemnify the several
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting."
(3) In view of the fact that the proceeds of the sale of the Series A Capital
Securities will be invested in the Series A Subordinated Debentures, the
Corporation has agreed to pay to the Underwriters as compensation for their
arranging the investment therein of such proceeds $0.81 per Series A Capital
Security (or $1,117,800 in the aggregate). See "Underwriting."
(4) Expenses of the offering, which are payable by the Corporation, are
estimated to be $250,000.
------------------
The Series A Capital Securities offered hereby are offered severally by the
Underwriters, as specified herein, subject to receipt and acceptance by them and
subject to their right to reject any order in whole or in part. It is expected
that the Series A Capital Securities will be ready for delivery in book-entry
form only through the facilities of The Depository Trust Company in New York,
New York, on or about April 30, 1998, against payment therefor in immediately
available funds.
------------------
CIBC OPPENHEIMER LEGG MASON WOOD WALKER
INCORPORATED
The date of this Prospectus is April 27, 1998
<PAGE> 2
CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE SERIES A CAPITAL
SECURITIES, INCLUDING SYNDICATE COVERING TRANSACTIONS AND THE IMPOSITION OF A
PENALTY BID. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
- ------------------------
(cover page continued)
payments on the Series A Subordinated Debentures are so deferred, distributions
on the Series A Capital Securities will also be deferred and the Corporation
will not be permitted, subject to certain exceptions described herein, to
declare or pay any cash distributions with respect to the Corporation's capital
stock or debt securities that rank pari passu with or junior to the Series A
Subordinated Debentures. During an Extension Period, interest on the Series A
Subordinated Debentures will continue to accrue (and the amount of Distributions
to which holders of the Series A Capital Securities are entitled will
accumulate) at the rate of 8.45% per annum, compounded quarterly from the
relevant payment date for such interest, and holders of Series A Capital
Securities will be required to accrue interest income for United States federal
income tax purposes. See "Description of Series A Subordinated
Debentures -- Option to Defer Interest Payments" and "Certain Federal Income Tax
Consequences -- Interest Income and Original Issue Discount."
The Series A Subordinated Debentures are unsecured and subordinated to all
Senior Debt (as defined herein). Substantially all of the Corporation's existing
indebtedness constitutes Senior Debt. Because the Corporation is a holding
company, the right of the Corporation to participate in any distribution of
assets of any subsidiary, including, United States National Bank in Johnstown
("U.S. Bank") and Three Rivers Bank and Trust Company ("Three Rivers 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
Corporation may itself be recognized as a creditor of that subsidiary.
Accordingly, the Series A Subordinated Debentures (and therefore the Series A
Capital Securities) will be effectively subordinated to all existing and future
liabilities of the Corporation's subsidiaries, and holders thereof should only
look to the assets of the Corporation for payments on the Series A Subordinated
Debentures. See "Description of Junior Subordinated Debentures --
Subordination".
The Corporation has, through the Series A Guarantee, the Series A Trust
Agreement, the Series A Subordinated Debentures and the Indenture (each as
defined herein), taken together, fully, irrevocably and unconditionally
guaranteed all of the Issuer's obligations under the Series A Capital
Securities. See "Relationship Among the Series A Securities, the Series A
Subordinated Debentures and the Series A Guarantees -- Full and Unconditional
Guarantee." The Series A Guarantee of the Corporation (the "Series A Guarantee")
guarantees the payment of Distributions and payments on liquidation of the
Issuer or redemption of the Series A Capital Securities, but only in each case
to the extent of funds held by the Issuer, as described herein. See "Description
of Series A Guarantee." If the Corporation does not make interest payments on
the Series A Subordinated Debentures held by the Issuer, the Issuer will have
insufficient funds to pay Distributions on the Series A Capital Securities. The
Series A Guarantee does not cover payment of Distributions when the Issuer has
insufficient funds to pay such Distributions. In such event, a holder of Series
A Capital Securities may institute a legal proceeding directly against the
Corporation pursuant to the terms of the Indenture to enforce payment of amounts
equal to such Distributions to such holder. See "Description of Junior
Subordinated Debentures -- Enforcement of Certain Rights by Holders of Series A
Capital Securities." The obligations of the Corporation under the Series A
Guarantee are subordinate and junior in right of payment to all Senior Debt of
the Corporation.
The Series A Capital Securities are subject to mandatory redemption, in
whole or in part, upon repayment of the Series A Subordinated Debentures at
their Stated Maturity or earlier redemption. Subject to the Corporation having
received prior approval of the Board of Governors of the Federal Reserve System
(the "Federal Reserve") to do so if then required under applicable capital
guidelines or policies, the Series A Subordinated Debentures are redeemable
prior to their Stated Maturity at the option of the Corporation (i) on or after
June 30, 2003, in whole at any time or in part from time to time, or (ii) at any
time in certain circumstances as described under "Description of Series A
Subordinated Debentures -- Conditional Right to
2
<PAGE> 3
Redeem upon a Tax Event or Capital Treatment Event," in whole (but not in part),
within 90 days following the occurrence of a Tax Event or Capital Treatment
Event. See "Description of Series A Capital Securities -- Redemption" and
"Description of Series A Subordinated Debentures -- Redemption."
The Corporation will have the right at any time to terminate the Issuer,
subject to the Corporation having received prior approval of the Federal Reserve
to do so if then required under applicable capital guidelines or policies. See
"Description of Series A Capital Securities -- Liquidation of Issuer and
Distribution of Series A Subordinated Debentures to Holders." In the event of
the termination of the Issuer, after satisfaction of liabilities to creditors of
the Issuer as required by applicable law, the holders of the Series A Capital
Securities will be entitled to receive $25 per Series A Capital Security (the
"Liquidation Amount") plus accumulated and unpaid Distributions thereon to the
date of payment, which may be in the form of a distribution of such amount in
Series A Subordinated Debentures in exchange therefor, subject to certain
exceptions. See "Description of Series A Capital Securities -- Liquidation
Distribution Upon Termination".
The Series A Capital Securities will be represented by one or more global
certificates registered in the name of The Depository Trust Company ("DTC") or
its nominee. Beneficial interests in the Series A Capital Securities will be
shown on, and transfers thereof will be effected only through, records
maintained by DTC and its participants ("Participants"). Except as described
herein, Series A Capital Securities in certificated form will not be issued in
exchange for the global certificates. See "Description of Series A Capital
Securities -- Registration of Series A Capital Securities."
3
<PAGE> 4
------------------
As used herein, (i) the "Indenture" means the Junior Subordinated
Indenture, dated as of April 1, 1998, as amended and supplemented from time to
time, between the Corporation and The Bank of New York, as trustee (the
"Debenture Trustee"), and (ii) the "Series A Trust Agreement" means the Trust
Agreement as amended and restated by the Amended and Restated Trust Agreement
relating to the Issuer among the Corporation, as Depositor, The Bank of New
York, as Property Trustee (the "Property Trustee"), The Bank of New York
(Delaware), as Delaware Trustee (the "Delaware Trustee"), the Administrative
Trustees named therein (collectively, with the Property Trustee and Delaware
Trustee, the "Issuer Trustees") and the holders of the Series A Capital
Securities and the Series A Common Securities.
AVAILABLE INFORMATION
The Corporation is subject to the information 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 Securities and Exchange Commission (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.,
Judiciary Plaza, 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., Judiciary Plaza, Washington, D.C. 02549. Such material
may also be accessed electronically by means of the Commission's home page on
the internet at http://www.sec.gov. In addition, such reports, proxy statements
and other information concerning the Corporation can be inspected at the offices
of the National Association of Securities Dealers, Inc., 1735 K Street N.W.,
Washington, D.C. 20006.
The Corporation and the Issuer have filed with the Commission a
Registration Statement on Form S-3 (together with all amendments and exhibits
thereto, the "Registration Statement") under the Securities Act of 1933, as
amended (the "Securities Act"), with respect to the securities offered hereby.
This Prospectus does not contain all 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 Corporation and the securities offered hereby, reference is made
to the Registration Statement and the exhibits and the financial statements,
notes and schedules filed as a part thereof or incorporated by reference
therein, which may be inspected at the public reference facilities of the
Commission at the addresses set forth above or through the Commission's home
page on the Internet. Statements made in this Prospectus concerning the contents
of any documents referred to herein are not necessarily complete, and in each
instance are qualified in all respects by reference to the copy of such document
filed as an exhibit to the Registration Statement.
No separate financial statements of the Issuer have been included herein.
The Corporation and the Issuer do not consider that such financial statements
would be material to holders of the Series A Capital Securities because the
Issuer is a newly formed special purpose entity, has no operating history or
independent operations and is not engaged in and does not propose to engage in
any activity other than holding as trust assets the Series A Subordinated
Debentures of the Corporation and issuing the Series A Capital Securities. See
"The Issuer," "Description of Series A Capital Securities," "Description of
Series A Subordinated Debentures" and "Description of Series A Guarantee." In
addition, the Corporation does not expect that the Issuer will be filing reports
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. Annual Report on Form 10-K for the year ended December 31, 1997.
4
<PAGE> 5
Each document or report filed by the Corporation pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act after the date hereof and prior to the
termination of any offering of securities made by this Prospectus shall be
deemed to be incorporated by reference into this Prospectus and to be a part of
this Prospectus from the date of filing of such document. Any statement
contained herein, or in a document all or a portion of which is incorporated or
deemed to be incorporated by reference herein, shall be deemed to be modified or
superseded for purposes of the Registration Statement and this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of the Registration Statement or this Prospectus.
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 not specifically incorporated by reference into the texts of such
documents). Requests for such documents should be directed to: USBANCORP, Inc.,
P.O. Box 430, Main and Franklin Streets, Johnstown, Pennsylvania 15907-0430,
Attention: Chief Financial Officer, telephone number (814) 533-5310.
5
<PAGE> 6
SUMMARY
The following summary is qualified in its entirety by the more detailed
information appearing elsewhere in this Prospectus.
USBANCORP, INC.
The Corporation is a Pennsylvania corporation and bank holding company
headquartered in Johnstown, Pennsylvania and is the holding company for United
States National Bank in Johnstown ("U.S. Bank") and Three Rivers Bank & Trust
Company ("Three Rivers Bank"). At December 31, 1997, the Corporation had total
consolidated assets, deposits and shareholders' equity of $2.24 billion, $1.14
billion and $158 million, respectively.
U.S. Bank is a national banking association organized under the laws of the
United States. Through 20 locations in Cambria, Clearfield, Somerset, and
Westmoreland Counties, Pennsylvania, U.S. Bank conducts a general banking
business. Three Rivers Bank is a state bank organized under Pennsylvania law.
Through 23 locations in Allegheny and Washington Counties, Pennsylvania, Three
Rivers Bank conducts a general banking business.
RECENT DEVELOPMENTS
The Corporation's net income for the quarter ended March 31, 1998 was
$5,695,000 or $1.15 on a diluted per share basis compared to net income of
$5,668,000 or $1.10 per diluted share for the quarter ended March 31, 1997.
Earnings per share grew at a faster rate than net income due to the
Corporation's on-going treasury stock repurchase program. The Corporation's
return on equity averaged 14.6% in the first quarter of 1998 compared to a
return on equity of 14.9% in the first quarter of 1997. The Corporation's return
on assets was 1.03% in the first quarter of 1998. At March 31, 1998, the
Corporation had consolidated assets, net loans, deposits and shareholders'
equity of $2.21 billion, $1.02 billion, $1.17 billion and $155.7 million,
respectively. At December 31, 1997, the Corporation had consolidated assets, net
loans, deposits and shareholders' equity of $2.24 billion, $989.6 million, $1.14
billion and $158.2 million, respectively.
USBANCORP CAPITAL TRUST I
The Issuer is a statutory business trust formed under Delaware law pursuant
to (i) the Series A Trust Agreement executed by the Corporation, as Sponsor, The
Bank of New York, as Property Trustee, The Bank of New York (Delaware), as
Delaware Trustee and the three individual Administrative Trustees named therein,
and (ii) the filing of a certificate of trust with the Delaware Secretary of
State on April 15, 1998. The Issuer's business and affairs are conducted by the
Issuer Trustees: the Property Trustee, the Delaware Trustee, and the three
individual Administrative Trustees who are employees or officers of or
affiliated with the Corporation. The Issuer exists for the exclusive purposes of
(i) issuing and selling the Series A Capital Securities and the Series A Common
Securities, (ii) using the proceeds from the sale of the Series A Capital
Securities and the Series A Common Securities to acquire the Series A
Subordinated Debentures issued by the Corporation and (iii) engaging in only
those other activities necessary or incidental thereto (such as registering the
transfer of the Series A Capital Securities and the Series A Common Securities).
Accordingly, the Series A Subordinated Debentures will be the sole assets of the
Issuer, and payments under the Series A Subordinated Debentures will be the sole
revenue of the Issuer. All of the Series A Common Securities will be owned by
the Corporation.
6
<PAGE> 7
THE OFFERING
Securities Offered......... 1,380,000 Series A Capital Securities
Offering Price............. $25.00 per Capital Security plus accumulated
Distributions, if any, from April 30, 1998.
Distributions.............. The Distributions payable on each Series A Capital
Security will be fixed at a rate per annum of 8.45%
of the Liquidation Amount of $25 per Series A
Capital Security, will be cumulative, will accrue
from the date of issuance of the Series A Capital
Securities, and will be payable quarterly in
arrears on the last day of March, June, September
and December of each year, commencing on June 30,
1998 (subject to possible deferral as described
below) and on the Stated Maturity Date. The amount
of each Distribution due with respect to the Series
A Capital Securities will include amounts accrued
through the date the Distribution payment is due.
See "Description of Series A Capital
Securities -- Distributions."
Extension Periods.......... Distributions on Series A Capital Securities will
be deferred for the duration of any Extension
Period elected by the Corporation with respect to
the payment of interest on the Series A
Subordinated Debentures. No Extension Period will
exceed 20 consecutive quarterly periods, end on a
date other than an Interest Payment Date or extend
beyond the Stated Maturity Date. See "Description
of Series A Subordinated Debentures -- Option to
Extend Interest Payment Date" and "Certain Federal
Income Tax Consequences -- Interest Income and
Original Issue Discount."
Ranking.................... The Series A Capital Securities will rank pari
passu, and payments thereon will be made pro rata,
with the Common Securities except as described
under "Description of Series A Capital
Securities -- Subordination of Common Securities."
The Series A Subordinated Debentures will rank pari
passu with all other junior subordinated debentures
to be issued by the Corporation with substantially
similar subordination terms and which have been or
may be issued and sold to any other trust, or a
trustee of such trust, partnership or other entity
affiliated with the Corporation that is a financing
vehicle of the Corporation (a "financing entity")
established or to be established by the Corporation
and will be unsecured and subordinate and junior in
right of payment to the extent and in the manner
set forth in the Indenture to all Senior Debt (as
defined herein) of the Corporation. See
"Description of Series A Subordinated Debentures."
The Series A Guarantee will rank pari passu with
all other guarantees issued or to be issued by the
Corporation with respect to capital securities
issued or to be issued by a financing entity and
will constitute an unsecured obligation of the
Corporation and will rank subordinate and junior in
right of payment to the extent and in the manner
set forth in the Guarantee Agreement to all Senior
Debt of the Corporation. See "Description of Series
A Guarantee." In addition, because the Corporation
is a holding company, the Series A Subordinated
Debentures and the Series A Guarantee will be
effectively subordinated to all existing and future
liabilities of the Corporation's subsidiaries,
including the deposit liabilities of U.S. Bank and
Three Rivers Bank. See "Description of Series A
Subordinated Debentures -- Subordination."
7
<PAGE> 8
Redemption................. The Series A Capital Securities will be subject to
mandatory redemption, (i) in whole but not in part,
on the Stated Maturity Date upon repayment of the
Series A Subordinated Debentures, (ii) in whole but
not in part, at any time prior to June 30, 2003,
contemporaneously with the optional prepayment of
the Series A Subordinated Debentures by the
Corporation upon the occurrence and continuation of
a Tax Event or Capital Treatment Event and (iii) in
whole or in part, on or after June 30, 2003,
contemporaneously with the optional prepayment by
the Corporation of the Series A Subordinated
Debentures. See "Description of Series A Capital
Securities -- Redemption."
Absence of Market for the
Series A Capital
Securities............... The Series A Capital Securities will be a new issue
of securities for which there currently is no
market. The Series A Capital Securities have been
approved for quotation on the Nasdaq National
Market. The Series A Capital Securities will trade
under the symbol "UBANP." See "Underwriting."
Although the underwriters have informed the Issuer
and the Corporation that they each currently intend
to make a market in the Series A Capital
Securities, the underwriters are not obligated to
do so, and any such market making may be
discontinued at any time without notice.
Accordingly, there can be no assurance as to the
development or liquidity of any market for the
Series A Capital Securities.
Use of Proceeds............ The proceeds to the Issuer from the sale of the
Series A Capital Securities will be invested by the
Issuer in the Series A Subordinated Debentures. The
Corporation intends to use the net proceeds from
the sale of the Series A Subordinated Debentures
for general corporate purposes, including the
repayment of debt, the repurchase of Corporation
common stock and investments in and advances to
Corporation subsidiaries. See "Use of Proceeds."
ERISA Considerations....... For a discussion of certain restrictions on
purchases, see "ERISA Considerations."
Risk Factors............... For a discussion of considerations relevant to an
investment in the Series A Capital Securities, see
"Risk Factors."
8
<PAGE> 9
RISK FACTORS
Prospective purchasers of the Series A Capital Securities should carefully
review the information contained elsewhere in this Prospectus and should
particularly consider the following matters. In addition, because holders of
Series A Capital Securities may receive Series A Subordinated Debentures in
exchange therefor upon liquidation of the Issuer, prospective purchasers of
Series A Capital Securities are also making an investment decision with regard
to the Series A Subordinated Debentures and should carefully review all the
information regarding the Series A Subordinated Debentures contained herein.
RANKING OF SUBORDINATED OBLIGATIONS UNDER THE SERIES A GUARANTEE AND THE SERIES
A SUBORDINATED DEBENTURES
The obligations of the Corporation under the Series A Guarantee issued by
the Corporation for the benefit of the holders of Series A Capital Securities
and under the Series A Subordinated Debentures are unsecured and rank
subordinate and junior in right of payment to all Senior Debt of the
Corporation. Substantially all of the Corporation's existing indebtedness
constitutes Senior Debt. Because the Corporation is a holding company, the right
of the Corporation to participate in any distribution of the assets of any
subsidiary, including the U.S. Bank and Three Rivers 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
Corporation may itself be recognized as a creditor of that subsidiary. There are
various legal limitations on the extent to which certain of the Corporation's
subsidiaries may extend credit, pay dividends or otherwise supply funds to, or
engage in transactions with, the Corporation or certain of its other
subsidiaries. Accordingly, the Series A Subordinated Debentures and the Series A
Guarantee will be effectively subordinated to all existing and future
liabilities of the Corporation's subsidiaries, and holders of Series A
Subordinated Debentures and beneficiaries of the Series A Guarantee should look
only to the assets of the Corporation for payments on the Series A Subordinated
Debentures or under the Series A Guarantee, as the case may be. See "USBANCORP,
Inc." None of the Indenture, the Series A Guarantee or the Series A Trust
Agreement places any limitation on the amount of secured or unsecured debt,
including Senior Debt, that may be incurred by the Corporation. See "Description
of Series A Guarantee -- Status of the Guarantee" and "Description of Series A
Subordinated Debentures -- Subordination."
The ability of the Issuer to pay amounts due on the Series A Capital
Securities is solely dependent upon the Corporation's making payments on the
Series A Subordinated Debentures as and when required.
OPTION TO DEFER INTEREST PAYMENT; TAX CONSEQUENCES; MARKET PRICE CONSEQUENCES
So long as no event of default under the Indenture has occurred and is
continuing, the Corporation has the right under the Indenture to defer payment
of interest on the Series A Subordinated Debentures at any time or from time to
time for a period not exceeding 20 consecutive quarterly periods with respect to
each Extension Period, provided that no Extension Period may extend beyond the
Stated Maturity of the Series A Subordinated Debentures. As a consequence of any
such deferral, quarterly Distributions on the Series A Capital Securities by the
Issuer will also be deferred (and the amount of Distributions to which holders
of the Series A Capital Securities are entitled will accumulate additional
Distributions thereon at the rate of 8.45% per annum, compounded quarterly from
the relevant payment date for such Distributions) during any such Extension
Period. During any such Extension Period, the Corporation may not, and may not
permit any subsidiary of the Corporation 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 Corporation's capital stock, (ii) make any payment
of principal, interest or premium, if any, on or repay, repurchase or redeem any
debt securities of the Corporation (including other series of Junior
Subordinated Debentures) that rank pari passu with or junior in interest to the
Series A Subordinated Debentures or (iii) make any guarantee payments with
respect to any guarantee by the Corporation of the debt securities of any
subsidiary of the Corporation if such guarantee ranks pari passu with or junior
in interest to the Series A Subordinated Debentures (other than (a) dividends or
distributions in capital stock of the Corporation, (b) any declaration of a
dividend in connection with the implementation of a shareholders' rights plan or
the redemption or repurchase of any such rights pursuant thereto, (c) payments
under the Series A Guarantee and (d) purchases of common stock related to the
issuance of common stock or
9
<PAGE> 10
rights under any of the Corporation's benefit plans for its directors, officers
or employees, related to the issuance of common stock or rights under a dividend
reinvestment and stock purchase plan, or related to the issuance of common stock
(or securities convertible into or exchangeable for common stock) as
consideration in an acquisition transaction that was entered into prior to the
commencement of such Extension Period). Prior to the termination of any such
Extension Period, the Corporation may further defer the payment of interest,
provided that no Extension Period may exceed 20 consecutive quarterly periods or
extend beyond the Stated Maturity of the Series A Subordinated Debentures. Upon
the termination of any Extension Period and the payment of all interest then
accrued and unpaid (together with interest thereon at the rate of 8.45% per
annum, compounded quarterly from the interest payment date for such interest, to
the extent permitted by applicable law), the Corporation may elect to begin a
new Extension Period subject to the above requirements. There is no limitation
on the number of times that the Corporation may elect to begin an Extension
Period. See "Description of Series A Capital Securities -- Distributions" and
"Description of Series A Subordinated Debentures -- Option to Defer Interest
Payments."
Should an Extension Period occur, a holder of Series A Capital Securities
will be required to accrue income (in the form of original issue discount) in
respect of its pro rata share of the Series A Subordinated Debentures held by
the Issuer for United States federal income tax purposes. As a result, a holder
of Series A Capital Securities will be required to include such income in gross
income for United States federal income tax purposes in advance of the receipt
of cash attributable to such income, and will not receive the cash related to
such income from the Issuer if the holder disposes of the Series A Capital
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 Series A Capital Securities."
The Corporation has no current intention of exercising its right to defer
payments of interest on the Series A Subordinated Debentures. However, should
the Corporation elect to exercise such right in the future, the market price of
the Series A Capital Securities is likely to be affected. A holder that disposes
of its Series A Capital Securities during an Extension Period, therefore, might
not receive the same return on its investment as a holder that continues to hold
its Series A Capital Securities.
REDEMPTION UPON TAX EVENT OR CAPITAL TREATMENT EVENT
Upon the occurrence and continuation of a Tax Event or Capital Treatment
Event (whether occurring before or after June 30, 2003), the Corporation has the
right if certain conditions are met, to redeem the Series A Subordinated
Debentures in whole (but not in part) within 90 days following the occurrence of
such Tax Event or Capital Treatment Event and thereby cause a mandatory
redemption of the Series A Capital Securities. The exercise of such right is
subject to the Corporation's having received prior approval of the Federal
Reserve to do so if then required under applicable capital guidelines or
policies. See "Description of Series A Subordinated Debentures -- Conditional
Right to Redeem upon a Tax Event or Capital Treatment Event" and "Description of
Series A Capital Securities -- Redemption or Exchange."
A "Tax Event" means the receipt by the Issuer of an opinion of counsel
experienced in such matters to the effect that, as a result of any amendment to,
or change (including any announced proposed change) in, the laws (or any
regulations thereunder) of the United States or any political subdivision or
taxing authority thereof or therein, or as a result of any official
administrative pronouncement or judicial decision interpreting or applying such
laws or regulations, which amendment or change is effective or which proposed
change, pronouncement or decision is announced on or after the date of issuance
of the Series A Capital Securities under the Series A Trust Agreement, there is
more than an insubstantial risk that (i) the 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 Series A Subordinated
Debentures, (ii) interest payable by the Corporation on the Series A
Subordinated Debentures is not, or within 90 days of the date of such opinion,
will not be, deductible by the Corporation, in whole or in part, for United
States federal income tax purposes or (iii) the Issuer is, or will be within 90
days of the date of the opinion, subject to more than a de minimis amount of
other taxes, duties or other governmental charges. With respect to Series A
Subordinated Debentures which are no longer held by the Issuer or another
issuer, "Tax Event" means the receipt by the Corporation of an opinion of
counsel experienced in such matters to the effect that, as a result of any
amendment to, or change (including
10
<PAGE> 11
any announced proposed change) in, the laws (or any regulations thereunder) of
the United States or any political subdivision or taxing authority thereof or
therein, or as a result of any official administrative pronouncement or judicial
decision interpreting or applying such laws or regulations, which amendment or
change is effective or which proposed change, pronouncement or decision is
announced on or after the date of issuance of the Series A Subordinated
Debentures under the Indenture, there is more than an insubstantial risk that
interest payable by the Corporation on the Series A Subordinated Debentures is
not, or within 90 days of the date of such opinion will not be, deductible by
the Corporation, in whole or in part, for United States federal income tax
purposes (each of the circumstances referred to in clauses (i), (ii) and (iii)
of the preceding sentence and the circumstances referred to in this sentence
being referred to herein as an "Adverse Tax Consequence").
A "Capital Treatment Event" means the reasonable determination by the
Corporation 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 which proposed change, pronouncement, action or decision is
announced on or after the date of issuance of the Series A Capital Securities
under the Series A Trust Agreement, there is more than an insubstantial risk
that the Corporation will not be entitled to treat an amount equal to the
Liquidation Amount of the Series A Capital Securities as "Tier 1 Capital" (or
the then equivalent thereof) for purposes of the capital adequacy guidelines of
the Federal Reserve, as then in effect and applicable to the Corporation.
EXCHANGE OF SERIES A CAPITAL SECURITIES FOR SERIES A SUBORDINATED DEBENTURES
The Corporation will have the right at any time to terminate the Issuer
and, after satisfaction of liabilities to creditors of the Issuer as required by
applicable law, cause the Series A Subordinated Debentures to be distributed to
the holders of the Series A Capital Securities in exchange therefor upon
liquidation of the Issuer. The exercise of such right is subject to the
Corporation having received prior approval of the Federal Reserve if then
required under applicable capital guidelines or policies. See "Description of
Series A Capital Securities -- Liquidation of Issuer and Distribution of Series
A Subordinated Debentures to Holders" and "Description of Series A
Securities -- Redemption or Exchange."
Under current United States federal income tax law and interpretations and
assuming, as expected, the Issuer is classified as a grantor trust for such
purposes, a distribution of the Series A Subordinated Debentures upon a
liquidation of the Issuer should not be a taxable event to holders of the Series
A Capital Securities. However, if a Tax Event were to occur which would cause
the Issuer to be subject to United States federal income tax with respect to
income received or accrued on the Series A Subordinated Debentures, a
distribution of the Series A Subordinated Debentures by the Issuer could be a
taxable event to the Issuer and the holders of the Series A Capital Securities.
See "Certain Federal Income Tax Consequences -- Distribution of Series A
Subordinated Debentures to Holders of Series A Capital Securities."
MARKET PRICES
There can be no assurance as to the market prices for Series A Capital
Securities or Series A Subordinated Debentures that may be distributed in
exchange for Series A Capital Securities upon liquidation of the Issuer.
Accordingly, the Series A Capital Securities that an investor may purchase,
whether pursuant to the offer made hereby or in the secondary market, or the
Series A Subordinated Debentures that a holder of Series A Capital Securities
may receive on liquidation of the Issuer, may trade at a discount to the price
that the investor paid to purchase the Series A Capital Securities offered
hereby. As a result of the existence of the Corporation's right to defer
interest payments, the market price of the Series A Capital Securities (which
represent beneficial ownership interests in the Issuer) may be more volatile
than the market prices of other securities that are not subject to such optional
deferrals. See "Description of Series A Subordinated Debentures" and
"Description of Series A Subordinated Debentures."
11
<PAGE> 12
RIGHTS UNDER THE SERIES A GUARANTEE
The Series A Guarantee guarantees to the holders of the Series A Capital
Securities the following payments, to the extent not paid by the Issuer: (i) any
accumulated and unpaid Distributions required to be paid on the Series A Capital
Securities, to the extent that the Issuer has funds on hand available therefor
at such time, (ii) the redemption price with respect to any Series A Capital
Securities called for redemption, to the extent that the Issuer has funds on
hand available therefor at such time, and (iii) upon a voluntary or involuntary
dissolution, winding up or liquidation of the Issuer (unless the Series A
Subordinated Debentures are distributed to holders of the Series A Capital
Securities), 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 Issuer has funds on hand available therefor at such time, and (b) the amount
of assets of the Issuer remaining available for distribution to holders of the
Series A Capital Securities after payment of creditors of the Issuer as required
by applicable law. The Series A Guarantee will be qualified as an indenture
under the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act").
The Bank of New York will act as the indenture trustee under the Series A
Guarantee (the "Guarantee Trustee") for the purpose of compliance with the Trust
Indenture Act and will hold the Series A Guarantee for the benefit of the
holders of the Series A Capital Securities. The Bank of New York will also act
as Debenture Trustee for the Series A Subordinated Debentures and as Property
Trustee under the Indenture and The Bank of New York (Delaware) will act as
Delaware Trustee under the Series A Trust Agreement.
The Series A Guarantee is subordinate as described under "-- Ranking of
Subordinated Obligations Under the Series A Guarantee and the Series A
Subordinated Debentures."
The holders of not less than a majority in aggregate Liquidation Amount of
the Series A Capital Securities have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Guarantee
Trustee in respect of the Series A Guarantee or to direct the exercise of any
trust power conferred upon the Guarantee Trustee under the Series A Guarantee.
Any holder of the Series A Capital Securities may institute a legal proceeding
directly against the Corporation to enforce its rights under the Series A
Guarantee without first instituting a legal proceeding against the Issuer, the
Guarantee Trustee or any other person or entity. If the Corporation were to
default on its obligation to pay amounts payable under the Series A Subordinated
Debentures, the Issuer would lack funds for the payment of Distributions or
amounts payable on redemption of the Series A Capital Securities or otherwise,
and, in such event, holders of the Series A Capital Securities would not be able
to rely upon the Series A Guarantee for payment of such amounts. Instead, if an
event of default under the Indenture shall have occurred and be continuing and
such event is attributable to the failure of the Corporation to pay interest on
or principal of the Series A Subordinated Debentures on the applicable payment
date, then a holder of Series A Capital Securities may institute a legal
proceeding directly against the Corporation pursuant to the terms of the
Indenture for enforcement of payment to such holder of the principal of or
interest on such Series A Subordinated Debentures having a principal amount
equal to the aggregate Liquidation Amount of the Series A Capital Securities of
such holder (a "Direct Action"). In connection with such Direct Action, the
Corporation will have a right of set-off under the Indenture to the extent of
any payment made by the Corporation to such holder of Series A Capital
Securities in the Direct Action. Except as described herein, holders of Series A
Capital Securities will not be able to exercise directly any other remedy
available to the holders of the Series A Subordinated Debentures or assert
directly any other rights in respect of the Series A Subordinated Debentures.
See "Description of Series A Subordinated Debentures -- Enforcement of Certain
Rights by Holders of Preferred Securities," "-- Debenture Events of Default" and
"Description of Series A Guarantee." The Series A Trust Agreement provides that
each holder of Series A Capital Securities by acceptance thereof agrees to the
provisions of the Series A Guarantee and the Indenture.
LIMITED VOTING RIGHTS
Holders of Series A Capital Securities generally will have limited voting
rights relating only to the modification of the Series A Capital Securities and
the Series A Guarantee and the exercise of the Issuer's rights as holder of
Series A Subordinated Debentures. Holders of Series A Capital Securities will
not be entitled to vote to appoint, remove or replace the Property Trustee, the
Delaware Trustee or any Administrative Trustee, and such voting rights are
vested exclusively in the holder of the Series A Common Securities
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<PAGE> 13
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 the Corporation may amend the Series A Trust
Agreement without the consent of holders of Series A Capital Securities to
ensure that the Issuer will not be classified for United States federal income
tax purposes as an association or publicly traded partnership subject to
taxation as a corporation unless such action materially and adversely affects
the interests of such holders. See "Description of Series A Capital
Securities -- Removal of Issuer Trustees" and "--Voting Rights; Amendment of
Series A Trust Agreement."
TRADING CHARACTERISTICS
The Series A Capital Securities have been approved for quotation on the
Nasdaq National Market. Although the Underwriters have indicated to the
Corporation and the Issuer that they intend to make a market in the Series A
Capital Securities, they are not obligated to do so and may discontinue any such
market-making activities at any time without notice. No assurance can be given
as to the liquidity of the trading market for the Series A Capital Securities.
The Series A Capital Securities may trade at prices that do not fully
reflect the value of accrued and unpaid interest with respect to the underlying
Series A Subordinated Debentures. See "Certain Federal Income Tax
Consequences -- Interest Income and Original Issue Discount" and "-- Sales or
Redemption of Series A Capital Securities" for a discussion of the United States
federal income tax consequences that may result from a taxable disposition of
the Series A Capital Securities.
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<PAGE> 14
USBANCORP CAPITAL TRUST I
USBANCORP Capital Trust I (the "Issuer") is a statutory business trust
created under Delaware law pursuant to (i) the Series A Trust Agreement executed
by the Corporation, 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 April 15, 1998. The Series A Trust Agreement will
be qualified as an indenture under the Trust Indenture Act of 1939, as amended
(the "Trust Indenture Act"). The Issuer exists for the exclusive purposes of (i)
issuing and selling the Series A Capital Securities and Series A Common
Securities, (ii) using the proceeds from the sale of Series A Capital Securities
and Series A Common Securities to acquire Series A Subordinated Debentures
issued by the Corporation and (iii) engaging in only those other activities
necessary or incidental thereto (such as registering the transfer of the Series
A Capital Securities). Accordingly, the Series A Subordinated Debentures will be
the sole assets of the Issuer, and payments under the Series A Subordinated
Debentures will be the sole revenue of the Issuer.
All of the Series A Common Securities will be owned by the Corporation. The
Series A Common Securities will rank pari passu, and payments will be made
thereon pro rata, with the Series A Capital Securities, except that upon the
occurrence and continuance of an event of default under the Series A Trust
Agreement resulting from an event of default under the Indenture, the rights of
the Corporation as holder of the Series A Common Securities to payment in
respect of Distributions and payments upon liquidation, redemption or otherwise
will be subordinated to the rights of the holders of the Series A Capital
Securities. See "Description of Series A Capital Securities -- Subordination of
Common Securities." The Corporation will acquire Series A Common Securities in
an aggregate Liquidation Amount at least equal to 3% of the total capital of the
Issuer.
The Issuer has a term of 55 years, but may terminate earlier as provided in
the Series A Trust Agreement. The Issuer's business and affairs are conducted by
the Issuer Trustees: The Bank of New York, as Property Trustee, and The Bank of
New York (Delaware), as Delaware Trustee, and individual Administrative Trustees
who are employees or officers of or affiliated with the Corporation. The Bank of
New York, as Property Trustee, will act as sole trustee under the Series A Trust
Agreement for purposes of compliance with the Trust Indenture Act. The Bank of
New York will also act as trustee under the Series A Guarantee and the
Indenture. See "Description of Series A Guarantee" and "Description of Series A
Subordinated Debentures." The holder of the Series A Common Securities of the
Issuer, or the holders of a majority in Liquidation Amount of the Series A
Capital Securities if an event of default under the Series A Trust Agreement has
occurred and is continuing, will be entitled to appoint, remove or replace the
Property Trustee and/or the Delaware Trustee. In no event will the holders of
the Series A Capital Securities have the right to vote to appoint, remove or
replace the Administrative Trustees; such voting rights are vested exclusively
in the holder of the Series A Common Securities. The Corporation will pay all
fees and expenses related to each Issuer and the offering of the Series A
Capital Securities and will pay, directly or indirectly, all ongoing costs,
expenses and liabilities of each Issuer.
The principal executive office of the Issuer is c/o The Bank of New York
(Delaware), White Clay Center, Newark, Delaware 19711, Attention: Corporate
Trust Department and its telephone number is (814) 533-5300.
It is anticipated that the Issuer will not be subject to the reporting
requirements under the Securities Exchange Act of 1934, as amended (the
"Exchange Act").
USBANCORP, INC.
GENERAL
The Corporation is a registered bank holding company organized under the
Pennsylvania Business Corporation Law and is registered under the Bank Holding
Corporation Act of 1956, as amended (the "BHCA"). The Corporation's principal
activities consist of owning and operating its five wholly-owned
14
<PAGE> 15
subsidiary entities, U.S. Bank, Three Rivers Bank, USBANCORP Trust Corporation,
United Bancorp Life Insurance Corporation and UBAN Associates. At December 31,
1997, the Corporation had, on a consolidated basis, total assets, deposits, and
shareholders' equity of $2.24 billion, $1.14 billion and $158 million,
respectively.
The Corporation and the subsidiary entities derive substantially all of
their income from banking and bank-related services. The Corporation functions
primarily as a coordinating and servicing unit for its subsidiary entities in
general management, credit policies and procedures, accounting and taxes, loan
review, auditing, investment advisory, compliance, marketing, insurance risk
management, general corporate services, and financial and strategic planning.
The Corporation, as a bank holding company, is regulated under the BHCA, and is
supervised by the Board of Governors of the Federal Reserve System.
USBANCORP BANKING SUBSIDIARIES:
U.S. Bank
U.S. Bank is a national banking association organized under the laws of the
United States. Through 20 locations in Cambria, Clearfield, Somerset, and
Westmoreland Counties, Pennsylvania, U.S. Bank conducts a general banking
business. It is a full-service bank offering (i) retail banking services; (ii)
lending, depository and related financial services to commercial, industrial,
financial, and governmental customers; and (iii) credit card operations through
MasterCard and VISA. U.S. Bank also operates 24 automated bank teller machines
("ATMs") through its 24-Hour Banking Network which is linked with MAC(R), a
regional ATM(R) network, and CIRRUS, a national ATM network. Additionally, USNB
Financial Services Corporation, a wholly owned subsidiary of U.S. Bank, engages
in the sale of annuities, mutual funds, and insurance.
Three Rivers Bank
Three Rivers Bank is a state bank chartered under the Pennsylvania Banking
Code of 1965, as amended. Through 23 locations in Allegheny and Washington
Counties, Pennsylvania, Three Rivers Bank conducts a general retail banking
business consisting of granting commercial, consumer, construction, mortgage and
student loans, and offering checking, interest bearing demand, savings and time
deposit services. It also operates 23 ATMs that are affiliated with MAC(R), and
Plus System(R), a national ATM network. Three Rivers Bank also offers wholesale
banking services to other banks, merchants, governmental units, and other large
commercial accounts. Three Rivers Bank has also executed an agreement to acquire
two additional branches having approximately $38 million in deposits from
another financial institution. Three Rivers is paying a deposit premium of 7%
and an existing Three Rivers Bank branch will be consolidated into one of the
acquired branches. Three Rivers Bank also has two wholly owned mortgage banking
subsidiaries -- Standard Mortgage Corporation and UBAN Mortgage Corporation.
Standard Mortgage Corporation, based in Atlanta, Georgia, is a mortgage banking
company that originates, sells, and services residential mortgage loans. UBAN
Mortgage Corporation was formed in January 1997 for the purpose of originating
and selling mortgage loans primarily in Western Pennsylvania. Additionally, TRB
Financial Services Corporation, a wholly owned subsidiary of Three Rivers Bank,
engages in the sale of annuities and mutual funds.
USBANCORP NON-BANKING SUBSIDIARIES:
USBANCORP Trust Corporation
USBANCORP Trust Corporation is a trust company organized under Pennsylvania
law which offers a complete range of trust services through each of the
Corporation's subsidiary banks. At December 31, 1997, USBANCORP Trust
Corporation had $1.12 billion in assets under management which included both
discretionary and non-discretionary assets.
United Life
United Life is a captive insurance company organized under the laws of the
State of Arizona. United Life engages in underwriting, as reinsurer, of credit
life and disability insurance within the Corporation's six county market area.
Operations of United Life are conducted in each office of the Corporation's
banking subsidiaries.
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<PAGE> 16
UBAN Associates
UBAN Associates is a registered investment advisory firm that administers
investment portfolios, offers operational support systems and provides asset and
liability management services to small and mid-sized community banks. UBAN
Associates was formed in January 1997.
Recent Developments
The Corporation's net income for the quarter ended March 31, 1998 was
$5,695,000 or $1.15 on a diluted per share basis compared to net income of
$5,668,000 or $1.10 per diluted share for the quarter ended March 31, 1997.
Earnings per share grew at a faster rate than net income due to the
Corporation's on-going treasury stock repurchase program. The Corporation's
return on equity averaged 14.6% in the first quarter of 1998 compared to a
return on equity of 14.9% in the first quarter of 1997. The Corporation's return
on assets was 1.03% in the first quarter of 1998. At March 31, 1998, the
Corporation had consolidated assets, net loans, deposits and shareholders'
equity of $2.21 billion, $1.02 billion, $1.17 billion and $155.7 million,
respectively. At December 31, 1997, the Corporation had consolidated assets, net
loans, deposits and shareholders' equity of $2.24 billion, $989.6 million, $1.14
billion and $158.2 million, respectively.
USE OF PROCEEDS
All of the proceeds from the sale of the Series A Capital Securities will
be invested by the Issuer in Series A Subordinated Debentures. The Corporation
intends that the proceeds from the sale of the Series A Subordinated Debentures
will be added to its general corporate funds and will be used for general
corporate purposes, including the repayment of debt, the repurchase of
Corporation common stock and investments in and advances to Corporation
subsidiaries.
The Corporation is required by the Federal Reserve to maintain certain
levels of capital for bank regulatory purposes. On October 21, 1996, the Federal
Reserve announced that cumulative preferred securities having the
characteristics of the Series A Capital Securities could be included as Tier 1
Capital for bank holding companies. Such Tier 1 Capital treatment, together with
the Corporation's ability to deduct, for federal income tax purposes, interest
payable on the Series A Subordinated Debentures, will provide the Corporation
with a more cost-effective means of obtaining capital for bank regulatory
purposes than other Tier 1 Capital alternatives currently available to it.
CONSOLIDATED RATIOS OF EARNINGS TO FIXED CHARGES
The following table sets forth the Corporation's consolidated ratios of
earnings to fixed charges and ratios of earnings to combined fixed charges and
preferred stock dividend requirements for each of the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Earnings to Fixed Charges:
Excluding Interest on Deposits......................... 1.72 1.79 1.77 2.34 5.41
Including Interest on Deposits......................... 1.37 1.36 1.30 1.37 1.45
Earnings to Combined Fixed Charges and Preferred Stock
Dividend Requirements:
Excluding Interest on Deposits......................... 1.72 1.79 1.77 2.34 5.26
Including Interest on Deposits......................... 1.37 1.36 1.30 1.37 1.45
</TABLE>
For purposes of computing the ratios of earnings to fixed charges and of
earnings to combined fixed charges and preferred stock dividend requirements,
earnings represent net income from continuing operations plus total taxes based
on income and fixed charges. Fixed charges, excluding interest on deposits,
include interest expense (other than on deposits), one-third (the proportion
deemed representative of the interest factor) of rents, net of income from
subleases, and capitalized interest. Fixed charges, including interest on
deposits, include all interest expense, one-third (the proportion deemed
representative of the interest factor) of rents, net of income from subleases,
and capitalized interest.
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<PAGE> 17
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Corporation and its subsidiaries as of December 31, 1997 and as adjusted to give
effect to the consummation of the offering of the Series A Capital Securities
and the issuance of the Series A Subordinated Debentures. The following data
should be read in conjunction with the consolidated financial statements and
notes thereto of the Corporation and its subsidiaries incorporated herein by
reference.
<TABLE>
<CAPTION>
DECEMBER 31, 1997
--------------------------
ACTUAL AS ADJUSTED
------ -----------
(IN THOUSANDS)
(UNAUDITED)
<S> <C> <C>
Federal Funds Purchased and Securities Sold Under
Agreements to Repurchase........................ $ 92,829 $ 92,829
Other Short-term Borrowings....................... 57,892 57,892
Advances from Federal Home Loan Bank.............. 754,195 754,195
Collateralized Mortgage Obligation................ 3,779 3,779
Long-term Debt.................................... 4,361 4,361
Guaranteed Preferred Beneficial Interests in
Corporation's Junior Subordinated Deferrable
Interest Debentures, Series A(1)................ -- 34,500
---------- ----------
Total Debt........................................ $ 913,056 $ 947,556
========== ==========
Shareholders' Equity
Common Stock.................................... 14,402 14,402
Capital Surplus................................. 93,934 93,934
Retained Earnings............................... 78,866 78,866
Net Unrealized Gain on Securities Available for
Sale Net of Taxes............................ 2,153 2,153
Treasury Stock, At Cost......................... (31,175) (31,175)
---------- ----------
Total Shareholders' Equity................... $ 158,180 $ 158,180
---------- ----------
Total Capitalization.............................. $1,071,236 $1,105,736
========== ==========
</TABLE>
- ---------------
(1) As described herein, the sole assets of the Issuer will be
approximately $35,567,025 principal amount of Series A Subordinated Debentures
to be issued by the Corporation to the Issuer. The Series A Subordinated
Debentures will bear interest at the rate of 8.45% per annum on the Liquidation
Amount of $25 per Series A Subordinated Debenture and will mature on June 30,
2028. The Corporation will own all of the Series A Common Securities of the
Issuer. It is anticipated that the Issuer will not be subject to the reporting
requirements under the Exchange Act.
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<PAGE> 18
SELECTED CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
AT OR FOR THE YEAR ENDED DECEMBER 31,
--------------------------------------------------------------
1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA AND RATIOS)
<S> <C> <C> <C> <C> <C>
SUMMARY OF INCOME STATEMENT DATA:
Total interest income................ $ 154,788 $ 137,333 $ 129,715 $ 102,811 $ 85,735
Total interest expense............... 87,929 76,195 73,568 46,993 36,250
---------- ---------- ---------- ---------- ----------
Net interest income.................. 66,859 61,138 56,147 55,818 49,485
Provision for loan losses.......... 158 90 285 (2,765) 2,400
---------- ---------- ---------- ---------- ----------
Net interest income after provision
for loan losses.................... 66,701 61,048 55,862 58,583 47,085
Total non-interest income............ 20,203 18,689 16,543 8,187 10,150
Total non-interest expense........... 54,104 52,474 50,557 49,519 40,715
---------- ---------- ---------- ---------- ----------
Income before income taxes and
cumulative effect of change in
accounting principle............... 32,800 27,263 21,848 17,251 16,520
Provision for income taxes......... 9,303 7,244 6,045 5,931 5,484
---------- ---------- ---------- ---------- ----------
Income before cumulative effect of
change in accounting principle..... 23,497 20,019 15,803 11,320 11,036
Cumulative effect of change in
accounting principle............ -- -- -- -- 1,452
---------- ---------- ---------- ---------- ----------
Net income........................... $ 23,497 $ 20,019 $ 15,803 $ 11,320 $ 12,488
========== ========== ========== ========== ==========
Net income applicable to common
stock.............................. $ 23,497 $ 20,019 $ 15,803 $ 11,320 $ 12,385
========== ========== ========== ========== ==========
PER COMMON SHARE DATA:(1)
Basic Earnings:
Net income......................... $ 4.69 $ 3.85 $ 2.89 $ 2.18 $ 2.78
Income before cumulative effect of
change in accounting principle,
and acquisition charge.......... 4.69 3.85 2.89 2.54 2.46
Diluted Earnings:
Net income......................... 4.61 3.83 2.88 2.18 2.78
Income before cumulative effect of
change in accounting principle,
and acquisition charge.......... 4.61 3.83 2.88 2.54 2.45
Cash dividends declared.............. 1.60 1.37 1.06 0.97 0.86
Book value at period end............. 32.32 29.90 28.34 24.57 24.67
BALANCE SHEET AND OTHER DATA:
Total assets......................... $2,239,110 $2,087,112 $1,885,372 $1,788,890 $1,241,521
Loans and loans held for sale, net of
unearned income.................... 989,575 939,726 834,634 868,004 727,186
Allowance for loan losses............ 12,113 13,329 14,914 15,590 15,260
Investment securities available for
sale............................... 580,115 455,890 427,112 259,462 428,712
Investment securities held to
maturity........................... 532,341 546,318 463,951 524,638 --
Deposits............................. 1,139,527 1,138,738 1,177,858 1,196,246 1,048,866
Long-term debt....................... 4,361 4,172 5,061 5,806 3,445
Stockholders' equity................. 158,180 151,917 150,492 137,136 116,615
Full-time equivalent employees(2).... 765 759 742 780 665
</TABLE>
18
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<TABLE>
<CAPTION>
AT OR FOR THE YEAR ENDED DECEMBER 31,
------------------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA AND RATIOS)
<S> <C> <C> <C> <C> <C>
SELECTED FINANCIAL RATIOS:
Return on average total equity before SFAS #109
benefit and acquisition charge................. 15.00% 13.36% 11.03% 10.41% 10.13%
Return on average assets before SFAS #109 benefit
and acquisition charge......................... 1.09 1.03 0.87 0.87 0.91
Loans and loans held for sale, net of unearned
income, as a percent of deposits, at period
end............................................ 86.84 82.52 70.86 72.56 69.33
Ratio of average total equity to average
assets......................................... 7.28 7.69 7.85 8.39 8.96
Common stock cash dividends as a percent of net
income applicable to common stock.............. 34.00 35.28 36.43 44.57 32.28
Common and preferred stock cash dividends as a
percent of net income.......................... 34.00 35.28 36.43 44.57 32.84
Interest rate spread............................. 2.97 3.06 2.94 3.47 3.72
Net interest margin.............................. 3.43 3.52 3.45 4.03 4.34
Allowance for loan losses as a percentage of
loans and loans held for sale, net of unearned
income, at period end.......................... 1.22 1.42 1.79 1.80 2.10
Non-performing assets as a percentage of loans
and loans held for sale and other real estate
owned, at period end........................... 0.89 0.92 1.13 0.91 0.89
Net charge-offs as a percentage of average loans
and loans held for sale........................ 0.14 0.20 0.08 0.04 0.13
Ratio of earnings to fixed charges and preferred
dividends:(3)
Excluding interest on deposits................. 1.72x 1.79x 1.77x 2.34x 5.26x
Including interest on deposits................. 1.37 1.36 1.30 1.37 1.45
One Year GAP ratio, at period end................ 0.88 0.79 0.86 0.79 1.10
</TABLE>
- ---------------
(1) The prior years earnings per share have been restated to reflect adoption of
SFAS #128.
(2) Full-time equivalent employees in 1994 include 115 employees as a result of
the Johnstown Savings Bank acquisition. Full-time equivalent employees in
1993 include 18 employees as a result of certain branch acquisitions.
(3) The ratio of earnings to fixed charges and preferred dividends is computed
by dividing the sum of income before taxes, fixed charges, and preferred
dividends by the sum of fixed charges and preferred dividends. Fixed charges
represent interest expense and are shown as both excluding and including
interest on deposits.
ACCOUNTING TREATMENT
For financial reporting purposes, the Issuer will be treated as a
subsidiary of the Corporation and, accordingly, the accounts of the Issuer will
be included in the consolidated financial statements of the Corporation. The
Series A Capital Securities will be presented as part of a separate line item in
the consolidated balance sheets of the Corporation under the caption "Guaranteed
Preferred Beneficial Interests in Corporation's Junior Subordinated Deferrable
Interest Debentures, Series A" and appropriate disclosures about the Series A
Capital Securities, the Series A Guarantee and the Series A Subordinated
Debentures will be included in the notes to the consolidated financial
statements. For financial reporting purposes, the Corporation will record
Distributions payable on the Series A Capital Securities as an expense in the
consolidated statements of income.
The Corporation has agreed that future financial reports of the Corporation
will: (i) present the Series A Capital Securities issued by the Corporation on
the Corporation's balance sheet as a separate line item entitled "Guaranteed
Preferred Beneficial Interests in Corporation's Junior Subordinated Deferrable
Interest Debentures, Series A;" (ii) include in a footnote to the financial
statements disclosure that the sole assets of the trusts are the Series A
Subordinated Debentures (specifying as to each trust the principal amount,
interest
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<PAGE> 20
rate and maturity date of Series A Subordinated Debentures held); and (iii) if
Staff Accounting Bulletin 53 treatment is sought, include, in an audited
footnote to the financial statements, disclosure that (a) the Issuer is wholly
owned, (b) the sole assets of the trusts are the Series A Subordinated
Debentures (specifying as to each trust the principal amount, interest rate and
maturity date of the Series A Subordinated Debentures held), and (c) the
obligations of the Corporation under the Series A Subordinated Debentures, the
Indenture, the Series A Trust Agreement and the Series A Guarantee, in the
aggregate, constitute a full and unconditional guarantee by the Corporation of
such trust's obligations under the Series A Capital Securities issued by the
Issuer.
DESCRIPTION OF SERIES A CAPITAL SECURITIES
This summary of certain terms and provisions of the Series A Capital
Securities, which describes the material provisions thereof, does not purport to
be complete and is subject to, and qualified in its entirety by reference to,
the Series A Trust Agreement including the definitions therein of certain terms,
and the Trust Indenture Act, to each of which reference is hereby made. Wherever
particular defined terms of the Series A Trust Agreement (as amended or
supplemented from time to time) are referred to herein, such defined terms are
incorporated herein by reference. The form of the Series A Trust Agreement has
been filed as an exhibit to the Registration Statement of which this Prospectus
form a part.
GENERAL
The Series A Capital Securities of an Issuer will rank pari passu, and
payments will be made thereon pro rata, with the Common Securities of that
Issuer except as described under "-- Subordination of Common Securities." Legal
title to the Series A Subordinated Debentures will be held by the Property
Trustee in trust for the benefit of the holders of the Series A Capital
Securities and Common Securities. The Series A Guarantee Agreement executed by
the Corporation for the benefit of the holders of the Series A Capital
Securities (the "Guarantee") will be a guarantee on a subordinated basis with
respect to the Series A Capital Securities but will not guarantee payment of
Distributions or amounts payable on redemption or liquidation of such Series A
Capital Securities when the Issuer does not have funds on hand available to make
such payments. See "Description of Series A Guarantee."
DISTRIBUTIONS
The Series A Capital Securities represent beneficial ownership interests in
the Issuer, and Distributions on the Series A Capital Securities will be
cumulative, will accumulate from the date of original issuance and will be
payable at the annual rate of 8.45% on the stated Liquidation Amount of $25,
payable quarterly in arrears on March 31, June 30, September 30 and December 31
of each year (each, a "Distribution Date"), to the holders of the Series A
Capital Securities on the relevant record dates. The record dates for the Series
A Capital Securities will be, for so long as the Series A Capital Securities
remain in book-entry form, one Business Day (as defined below) prior to the
relevant Distribution Date and, in the event the Series A Capital Securities are
not in book-entry form, the 15th day of the month in which the relevant
Distribution Date occurs. Distributions will accumulate from the date of
original issuance. The first Distribution Date for the Series A Capital
Securities will be June 30, 1998. The period beginning on and including the date
of original issuance and ending on but excluding the first Distribution Date and
each successive period beginning on and including a Distribution Date and ending
on but excluding the next succeeding Distribution Date is herein called a
"Distribution Period". The amount of Distributions payable for any Distribution
Period will be computed on the basis of a 360-day year of twelve 30-day months.
In the event that any Distribution Date would otherwise fall on a day that is
not a Business Day, such Distribution Date shall be postponed to the next day
that is a Business Day (without any additional Distributions or other payment in
respect of such delay) unless it would thereby fall in the next calendar year,
in which event the Distribution Date shall be brought forward to the immediately
preceding Business Day. 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 is
closed for business.
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<PAGE> 21
So long as no event of default under the Indenture has occurred and is
continuing, the Corporation has the right under the Indenture to defer payment
of interest on the Series A Subordinated Debentures at any time or from time to
time for a period not exceeding 20 consecutive quarterly periods with respect to
each Extension Period, provided that no Extension Period may extend beyond the
Stated Maturity of the Series A Subordinated Debentures. As a consequence of any
such deferral of interest payments by the Corporation, quarterly Distributions
on the Series A Capital Securities by the Issuer will also be deferred during
any such Extension Period. Distributions to which holders of the Series A
Capital Securities are entitled will accumulate additional Distributions thereon
at the rate of 8.45% per annum, 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
Corporation may not, and may not permit any subsidiary of the Corporation 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 Corporation's
capital stock, (ii) make any payment of principal, interest or premium, if any,
on or repay, repurchase or redeem any debt securities of the Corporation
(including other series of Junior Subordinated Debentures) that rank pari passu
with or junior in interest to the Series A Subordinated Debentures or (iii) make
any guarantee payments with respect to any guarantee by the Corporation of the
debt securities of any subsidiary of the Corporation if such guarantee ranks
pari passu with or junior in interest to the Series A Subordinated Debentures
(other than (a) dividends or distributions in capital stock of the Corporation,
(b) any declaration of a dividend in connection with the implementation of a
shareholders' rights plan or the redemption or repurchase of any such rights
pursuant thereto, (c) payments under the Series A Guarantee and (d) purchases of
common stock related to the issuance of common stock or rights under any of the
Corporation's benefit plans for its directors, officers or employees, related to
the issuance of common stock or rights under a dividend reinvestment and stock
purchase plan, or related to the issuance of common stock (or securities
convertible into or exchangeable for common stock) as consideration in an
acquisition transaction that was entered into prior to the commencement of such
Extension Period). Prior to the termination of any such Extension Period, the
Corporation may further defer the payment of interest on the Series A
Subordinated Debentures, provided that no Extension Period may exceed 20
consecutive quarterly periods or extend beyond the Stated Maturity of the Series
A 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 8.45% per annum, compounded quarterly, to the extent
permitted by applicable law), the Corporation may elect to begin a new Extension
Period. There is no limitation on the number of times that the Corporation may
elect to begin an Extension Period. See "Description of Series A Subordinated
Debentures -- Option to Defer Interest Payments" and "Certain Federal Income Tax
Consequences -- Interest Income and Original Issue Discount."
The revenue of the Issuer available for distribution to holders of Series A
Capital Securities will be limited to payments under the Series A Subordinated
Debentures in which the Issuer will invest the proceeds from the issuance and
sale of its Series A Capital Securities. See "Description of Series A
Subordinated Debentures." If the Corporation does not make interest payments or
the Series A Subordinated Debentures, the Property Trustee will not have funds
available to pay Distributions on the Series A Capital Securities. The payment
of Distributions (if and to the extent the Issuer has funds legally available
for the payment of such Distributions and cash sufficient to make such payments)
is guaranteed by the Corporation on the basis set forth herein under
"Description of Series A Guarantee."
The Corporation has no current intention of exercising its right to defer
payments of interest by extending the interest payment period on the Series A
Subordinated Debentures.
REDEMPTION
Upon the repayment or redemption, in whole or in part, of the Series A
Subordinated Debentures, whether at Stated Maturity or upon earlier redemption
as provided in the Indenture, the proceeds from such repayment or redemption
shall be applied by the Property Trustee to redeem a Like Amount (as defined
below) of the Series A Capital Securities, upon not less than 30 nor more than
60 days notice prior to the date fixed for redemption, at a redemption price,
with respect to the Series A Capital Securities (the "Redemption Price"), equal
to the aggregate Liquidation Amount of such Series A Capital Securities, plus
accumulated
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<PAGE> 22
and unpaid Distributions thereon to the date of redemption (the "Redemption
Date"). See "Certain Terms of Series A Subordinated Debentures -- Redemption."
If less than all of the Series A Subordinated Debentures are to be repaid or
redeemed on a Redemption Date, then the proceeds from such repayment or
redemption shall be allocated to the redemption pro rata of the Series A Capital
Securities and the Series A Common Securities.
The Corporation has the right to redeem the Series A Subordinated
Debentures (i) on or after June 30, 2003, in whole at any time or in part from
time to time, or (ii) at any time, in certain circumstances as described under
"Description of Series A Subordinated Debentures -- Conditional Right to Redeem
upon a Tax Event or Capital Treatment Event," in whole (but not in part) within
90 days following the occurrence of a Tax Event or Capital Treatment Event. A
redemption of the Series A Subordinated Debentures would cause a mandatory
redemption of the Series A Capital Securities and the Series A Common
Securities.
REDEMPTION PROCEDURES
Series A Capital Securities redeemed on each Redemption Date shall be
redeemed at the Redemption Price with the applicable proceeds from the
contemporaneous redemption of the Series A Subordinated Debentures. Redemptions
of the Series A Capital Securities shall be made and the Redemption Price shall
be payable on each Redemption Date only to the extent that the Issuer has funds
on hand available for the payment of such Redemption Price. See also
"-- Subordination of Common Securities."
If the Issuer gives a notice of redemption in respect of the Series A
Capital Securities, then, by 12:00 noon, New York City time, on the Redemption
Date, to the extent funds are available, the Property Trustee will deposit
irrevocably with DTC funds sufficient to pay the Redemption Price and will give
DTC irrevocable instructions and authority to pay the Redemption Price to the
holders of such Series A Capital Securities. See "Book-Entry Issuance." If the
Series A Capital Securities are no longer in book-entry form, the Property
Trustee, to the extent funds are available, will irrevocably deposit with the
paying agent for the Series A Capital Securities funds sufficient to pay the
Redemption Price and will give such paying agent irrevocable instructions and
authority to pay the Redemption Price the holders thereof upon surrender of
their certificates evidencing the Series A Capital Securities. Notwithstanding
the foregoing, Distributions payable on or prior to the Redemption Date for the
Series A Capital Securities called for redemption shall be payable to the
holders of Series A Capital 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 Series A Capital Securities so called for redemption will cease,
except the right of the holders of Series A Capital Securities to receive the
Redemption Price, but without interest on such Redemption Price, and such Series
A Capital Securities will cease to be outstanding. In the event that payment of
the Redemption Price in respect of Series A Capital Securities called for
redemption is improperly withheld or refused and not paid either by the Issuer
or by the Corporation pursuant to the Series A Guarantee as described under
"Description of Guarantee," Distributions on the Series A Capital Securities
will continue to accrue at the then applicable rate, from the Redemption Date
originally established by the Issuer for the Series A Capital Securities to the
date such Redemption Price is actually paid, in which case the actual payment
date will be the date fixed for redemption for purposes of calculating the
Redemption Price.
Subject to applicable law (including, without limitation, United States
federal securities law), the Corporation or its subsidiaries may at any time and
from time to time purchase outstanding Series A Capital Securities by tender, in
the open market or by private agreement.
Payment of the Redemption Price on Series A Capital Securities and any
distribution of Series A Subordinated Debentures to holders of Series A Capital
Securities shall be made to the applicable recordholders thereof as they appear
on the register for Series A Capital Securities on the relevant record date,
which shall be one Business Day prior to the relevant Redemption Date or
liquidation date, as applicable; provided, however, that in the event that
Series A Capital Securities are not in book-entry form, the relevant record date
for Series A Capital Securities shall be a date at least 15 days prior to the
Redemption Date or liquidation date, as applicable.
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<PAGE> 23
If less than all of the Series A Capital Securities and Common Securities
issued by an Issuer are to be redeemed on a Redemption Date, then the aggregate
Liquidation Amount of Series A Capital Securities and Common Securities to be
redeemed shall be allocated pro rata to the Series A Capital Securities and the
Common Securities based upon the relative Liquidation Amounts of such classes.
The particular Series A Capital Securities to be redeemed shall be selected on a
pro rata basis not more than 60 days prior to the Redemption Date by the
Property Trustee from the outstanding Series A Capital Securities not previously
called for redemption, by such method as the Property Trustee shall deem fair
and appropriate. The Property Trustee shall promptly notify the trust registrar
in writing of the Series A Capital Securities selected for redemption.
Notice of any redemption will be mailed at least 30 days but not more than
60 days before the Redemption Date to each holder of Series A Capital Securities
to be redeemed at its registered address.
LIQUIDATION OF ISSUER AND DISTRIBUTION OF SERIES A SUBORDINATED DEBENTURES TO
HOLDERS
The Corporation will have the right at any time to terminate the Issuer
and, after satisfaction of liabilities to creditors of the Issuer as required by
applicable law, to cause the Series A Subordinated Debentures to be distributed
to the holders of the Series A Capital Securities in exchange therefor upon
liquidation of the Issuer. Such right is subject to the Corporation's having
received prior approval of the Federal Reserve if then required under applicable
capital guidelines or policies.
Under current United States federal income tax law and interpretations and
assuming, as expected, the Issuer is treated as a grantor trust, a distribution
of Series A Subordinated Debentures in exchange for the Series A Capital
Securities should not be a taxable event to holders of the Series A Capital
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 Series A Capital Securities. See "Certain Federal Income
Tax Consequences -- Distribution of Series A Subordinated Debentures to Holders
of Series A Capital Securities." If the Corporation elects neither to redeem the
Series A Subordinated Debentures prior to maturity nor to liquidate the Series A
Issuer and distribute the Series A Subordinated Debentures to holders of the
Series A Capital Securities in exchange therefor, the Series A Capital
Securities will remain outstanding until the Stated Maturity of the Series A
Subordinated Debentures.
If the Corporation elects to liquidate the Issuer and thereby causes the
Series A Subordinated Debentures to be distributed to holders of the Series A
Capital Securities in exchange therefor upon liquidation of the Issuer, the
Corporation shall continue to have the right to redeem the Series A Subordinated
Debentures in certain circumstances upon the occurrence of a Tax Event or
Capital Treatment Event, as described under "Description of Series A
Subordinated Debentures -- Conditional Right to Redeem upon a Tax Event or
Capital Treatment Event."
After the liquidation date fixed for any distribution of the Series A
Subordinated Debentures for the Series A Capital Securities (i) the Series A
Capital Securities will no longer be deemed to be outstanding, (ii) the
depositary or its nominee, as the record holder of the Series A Capital
Securities, will receive a registered global certificate or certificates
representing the Series A Subordinated Debentures to be delivered upon such
distribution and (iii) any certificates representing the Series A Capital
Securities not held by DTC or its nominee will be deemed to represent the Series
A Subordinated Debentures having a principal amount equal to the stated
Liquidation Amount of the Series A Capital Securities, and bearing accrued and
unpaid interest in an amount equal to the accrued and unpaid Distributions on
the Series A Capital Securities until such certificates are presented to the
Administrative Trustees or their agent for transfer or reissuance.
There can be no assurance as to the market prices for the Series A Capital
Securities or the Series A Subordinated Debentures that may be distributed in
exchange for the Series A Capital Securities if a dissolution and liquidation of
the Issuer were to occur. Accordingly, the Series A Capital Securities that an
investor may purchase, or the Series A Subordinated Debentures that the investor
may receive on dissolution and liquidation of the Issuer, may trade at a
discount to the price that the investor paid to purchase the Series A Capital
Securities offered hereby.
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<PAGE> 24
If a Tax Event or Capital Treatment Event in respect of the Series A
Capital Securities and Common Securities shall occur and be continuing, the
Corporation has the right to redeem the Series A Subordinated Debentures in
whole (but not in part) and thereby cause a mandatory redemption of the Series A
Capital Securities and Common Securities in whole (but not in part) at the
Redemption Price within 90 days following the occurrence of such Tax Event or
Capital Treatment Event. In the event a Tax Event or Capital Treatment Event in
respect of the Series A Capital Securities and Common Securities has occurred
and is continuing and the Corporation does not elect to redeem the Series A
Subordinated Debentures and thereby cause a mandatory redemption of the Series A
Capital Securities and Common Securities or to terminate the Issuer and cause
the Series A Subordinated Debentures to be distributed to holders of the Series
A Capital Securities and Common Securities in exchange therefor upon liquidation
of the Issuer as described above, such Series A Capital Securities will remain
outstanding.
Recently, the Internal Revenue Service ("IRS") asserted that the interest
payable on a security with terms that are similar to the terms of the Series A
Subordinated Debentures (but with a longer maturity than the Series A
Subordinated Debentures) was not deductible for United States federal income tax
purposes. The taxpayer in that case has filed a petition in the United States
Tax Court challenging the IRS's position on this matter. If this matter is in
fact litigated and the Tax Court were to sustain the IRS's position on this
matter, such judicial decision could constitute a Tax Event which could result
in an early mandatory redemption of the Series A Capital Securities.
"Like Amount" means (i) with respect to a redemption of the Series A
Capital Securities, the Series A Capital Securities having a Liquidation Amount
(as defined below) equal to that portion of the principal amount of the Series A
Subordinated Debentures to be contemporaneously redeemed in accordance with the
Indenture, the proceeds of which will be used to pay the Redemption Price of
such Series A Capital Securities, and (ii) with respect to a distribution of the
Series A Subordinated Debentures to holders of the Series A Capital Securities
in exchange therefor in connection with a dissolution or liquidation of the
Issuer, the Series A Subordinated Debentures having a principal amount equal to
the Liquidation Amount of the Series A Capital Securities of the holder.
The amount payable on the Series A Capital Securities in the event of any
liquidation of the Issuer is $25 per Series A Capital Security plus accumulated
and unpaid Distributions, which amount may be paid in the form of a distribution
of a Like Amount of Series A Subordinated Debentures.
"Tax Event" with respect to the Issuer means the receipt by the Issuer of
Series A Capital Securities of an opinion of counsel experienced in such matters
to the effect that, as a result of any amendment to, or change (including any
announced proposed change) in, the laws (or any regulations thereunder) of the
United States or any political subdivision or taxing authority thereof or
therein, or as a result of any official administrative pronouncement or judicial
decision interpreting or applying such laws or regulations, which amendment or
change is effective or which proposed change, pronouncement or decision is
announced on or after the date of issuance of the Series A Capital Securities
under the Series A Trust Agreement, there is more than an insubstantial risk
that (i) the 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 Series A Subordinated Debentures, (ii) interest payable by the
Corporation on the Series A Subordinated Debentures is not, or within 90 days of
the date of such opinion, will not be, deductible by the Corporation, in whole
or in part, for United States federal income tax purposes, or (iii) the 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.
SUBORDINATION OF COMMON SECURITIES
Payment of Distributions on, and the Redemption Price of, the Series A
Capital Securities and Common Securities, as applicable, shall be made pro rata
based on the Liquidation Amount of such Series A Capital Securities and Common
Securities; provided, however, that if on any Distribution Date or Redemption
Date a Debenture Event of Default shall have occurred and be continuing, no
payment of any Distribution on, or Redemption Price of, any of the Common
Securities, and no other payment on account of the redemption, liquidation or
other acquisition of such Common Securities, shall be made unless payment in
full in cash of all accumulated and unpaid Distributions on all of the
outstanding Series A Capital Securities for all Distribution
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<PAGE> 25
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 Series A Capital Securities then called for redemption, shall have
been made or provided for, and all funds available to the Property Trustee shall
first be applied to the payment in full in cash of all Distributions on, or
Redemption Price of, the Series A Capital Securities then due and payable.
In the case of any event of default under the Series A Trust Agreement
resulting from a Debenture Event of Default, the Corporation as holder of such
the Common Securities will be deemed to have waived any right to act with
respect to any such event of default under the Series A Trust Agreement until
the effect of all such events of default with respect to such Series A Capital
Securities have been cured, waived or otherwise eliminated. Until all events of
default under the Series A Trust Agreement with respect to the Series A Capital
Securities have been so cured, waived or otherwise eliminated, the Property
Trustee shall act solely on behalf of the holders of Series A Capital Securities
and not on behalf of the Corporation as holder of the Common Securities, and
only the holders of Series A Capital Securities will have the right to direct
the Property Trustee to act on their behalf.
LIQUIDATION DISTRIBUTION UPON TERMINATION
Pursuant to the Series A Trust Agreement, the Issuer shall automatically
terminate upon expiration of its term and shall terminate on the first to occur
of: (i) certain events of bankruptcy, dissolution or liquidation of the
Corporation; (ii) the distribution of a Like Amount of the Series A Subordinated
Debentures to the holders of Series A Securities, if the Corporation, as
Depositor, has given written direction to the Property Trustee to terminate the
Issuer (subject to the Corporation having received prior approval of the Federal
Reserve if so required under applicable capital guidelines or policies); (iii)
redemption of all Series A Capital Securities as described under "-- Redemption
or Exchange -- Mandatory Redemption"; and (iv) the entry of an order for the
dissolution of the Issuer by a court of competent jurisdiction.
If an early termination occurs as described in clause (i), (ii) or (iv)
above, the Issuer shall be liquidated by the Property Trustee as expeditiously
as the Property Trustee determine to be possible by distributing, after
satisfaction of liabilities to creditors of the Issuer as provided by applicable
law, to the holders of Series A Capital Securities in exchange therefor a Like
Amount of the Series A 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 Issuer available
for distribution to holders, after satisfaction of liabilities to creditors of
such Issuer as provided by applicable law, an amount equal to, in the case of
holders of Series A Capital Securities, the aggregate 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 Issuer has insufficient assets available to pay in
full the aggregate Liquidation Distribution, then the amounts payable directly
by the Issuer on the Series A Capital Securities shall be paid on a pro rata
basis. The holder(s) of the Common Securities will be entitled to receive
distributions upon any such liquidation pro rata with the holders of Series A
Capital Securities, except that if a Debenture Event of Default has occurred and
is continuing, the Series A Capital Securities shall have a priority over the
Common Securities.
EVENTS OF DEFAULT; NOTICE
Any one of the following events constitutes an "Event of Default" under the
Series A Trust Agreement (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 a Debenture Event of Default under the Indenture
(see "Description of Series A Subordinated Debentures -- Debenture Events
of Default"); or
(ii) default by the Property Trustee in the payment of any
Distribution when it becomes due and payable, and continuation of such
default for a period of 30 days; or
(iii) default by the Property Trustee in the payment of any Redemption
Price of any Series A Capital Security when it becomes due and payable; or
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<PAGE> 26
(iv) default in the performance, or breach, in any material respect,
of any covenant or warranty of the Property Trustee in the Series A 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 90 days
after there has been given, by registered or certified mail, to the
defaulting Property Trustee by the holders of at least 25% in aggregate
Liquidation Amount of the outstanding Series A Capital Securities of the
Issuer, 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 Series A Trust Agreement; or
(v) the occurrence of certain events of bankruptcy or insolvency with
respect to the Property Trustee and the failure by the Corporation to
appoint a successor Property Trustee within 90 days thereof.
Within five Business 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 Series A Capital Securities,
the Administrative Trustees and the Corporation, as Depositor, unless such Event
of Default shall have been cured or waived. The Corporation, 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 Series A Trust Agreement.
If a Debenture Event of Default has occurred and is continuing, the Series
A Capital Securities shall have a preference over the Common Securities as
described above. See "-- Subordination of Common Securities" and "-- Liquidation
Distribution Upon Termination." The existence of an Event of Default does not
entitle the holders of Series A Capital Securities to accelerate the maturity
thereof.
REMOVAL OF ISSUER TRUSTEES
Unless a Debenture Event of Default shall have occurred and be continuing,
the Property Trustee and the Delaware Trustee may be removed at any time by the
holder of the Common Securities. If a Debenture Event of Default has occurred
and is continuing, the Property Trustee and the Delaware Trustee may be removed
at such time by the holders of a majority in Liquidation Amount of the
outstanding Series A Capital Securities. In no event will the holders of the
Series A Capital Securities have the right to vote to appoint, remove or replace
the Administrative Trustees, which voting rights are vested exclusively in the
Corporation as the holder of the Common Securities. No resignation or removal of
the Property Trustee or the Delaware 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 Series A Trust Agreement.
CO-TRUSTEES AND SEPARATE PROPERTY TRUSTEE
Unless an Event of Default shall have occurred and be continuing, at any
time or from time to time, for the purpose of meeting the legal requirements of
the Trust Indenture Act or of any jurisdiction in which any part of the Trust
Property may at the time be located, the Corporation, as the holder of the
Common Securities, and the Administrative Trustees shall have the 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 Series A Trust Agreement. In case a
Debenture Event of Default has occurred and is continuing, the Property Trustee
alone shall have power to make such appointment.
MERGER OR CONSOLIDATION OF ISSUER TRUSTEES
Any Person into which the Property Trustee, the Delaware Trustee or any
Administrative Trustee that is not a natural person may be merged or converted
or with which it may be consolidated, or any Person resulting from any merger,
conversion or consolidation to which such Trustee shall be a party, or any
Person succeeding to all or substantially all the corporate trust business of
such Trustee, shall be the successor of such Trustee under the Series A Trust
Agreement, provided such Person shall be otherwise qualified and eligible.
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MERGERS, CONSOLIDATIONS, AMALGAMATIONS OR REPLACEMENTS OF THE ISSUER
The Issuer may not merge with or into, consolidate, amalgamate or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to any corporation or other Person, except as
described below or as otherwise described in the Series A Trust Agreement. The
Issuer may, at the request of the Corporation, with the consent of the
Administrative Trustees and without the consent of the holders of the Series A
Capital Securities, merge with or into, consolidate, amalgamate, or be replaced
by, or convey, transfer or lease its properties and assets substantially as an
entirety to, a trust organized as such under the laws of any State; provided,
that (i) such successor entity either (a) expressly assumes all of the
obligations of the Issuer with respect to the Series A Capital Securities or (b)
substitutes for the Series A Capital Securities other securities having
substantially the same terms as the Series A Capital Securities (the "Successor
Securities") so long as the Successor Securities rank the same as the Series A
Capital Securities in priority with respect to distributions and payments upon
liquidation, redemption and otherwise, (ii) the Corporation expressly appoints a
trustee of such successor entity possessing the same powers and duties as the
Property Trustee as the holder of the Series A Subordinated Debentures, (iii)
the Successor Securities are listed, or any Successor Securities will be listed
upon notification of issuance, on any national securities exchange or other
organization on which the Series A Capital Securities are then listed, if any,
(iv) such merger, consolidation, amalgamation, replacement, conveyance, transfer
or lease does not cause the Series A Capital 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
Series A Capital Securities (including any Successor Securities) in any material
respect, (vi) such successor entity has a purpose substantially identical to
that of the Issuer, (vii) prior to such merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease, the Corporation has received an
opinion from independent counsel to the 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 Series A Capital Securities (including any
Successor Securities) in any material respect, and (b) following such merger,
consolidation, amalgamation, replacement, conveyance, transfer or lease, neither
the 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 Corporation or any permitted successor
or assignee owns all of the Common Securities of such successor entity and
guarantees the obligations of such successor entity under the Successor
Securities at least to the extent provided by the Series A Guarantee.
Notwithstanding the foregoing, an Issuer shall not, except with the consent of
holders of 100% in Liquidation Amount of the Series A Capital 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 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 SERIES A TRUST AGREEMENT
Except as provided below and under "Description of Series A
Guarantee -- Amendments and Assignment" and as otherwise required by law and the
Series A Trust Agreement, the holders of the Series A Capital Securities will
have no voting rights.
The Series A Trust Agreement may be amended from time to time by the
Corporation, the Property Trustee and the Administrative Trustees, without the
consent of the holders of the Series A Capital Securities (i) to cure any
ambiguity, correct or supplement any provisions in such Trust Agreement that may
be inconsistent with any other provision, or to make any other provisions with
respect to matters or questions arising under the Series A Trust Agreement,
which shall not be inconsistent with the other provisions of the Series A Trust
Agreement, or (ii) to modify, eliminate or add to any provisions of such Series
A Trust Agreement to such extent as shall be necessary to ensure that the Issuer
will be classified for United States federal income tax purposes as a grantor
trust at all times that any Series A Capital Securities are outstanding or to
ensure that the Issuer will not be required to register as an "investment
company" under the Investment Company Act; provided, however, that in the case
of either clause (i) or clause (ii), such action shall not
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adversely affect in any material respect the interests of any holder of Series A
Capital Securities, and any such amendments of the Series A Trust Agreement
shall become effective when notice thereof is given to the holders of Series A
Capital Securities. The Series A Trust Agreement may be amended by the Issuer
Trustees and the Corporation with (i) the consent of holders representing not
less than a majority (based upon Liquidation Amounts) of the outstanding Series
A Capital Securities, and (ii) receipt by the Issuer Trustees of an opinion of
counsel to the effect that such amendment or the exercise of any power granted
to the Issuer Trustees in accordance with such amendment will not affect the
Issuer's status as a grantor trust for United States federal income tax purposes
or the Issuer's exemption from status as an "investment company" under the
Investment Company Act, provided that without the consent of each holder of
Series A Capital Securities, the Series A Trust Agreement may not be amended to
(i) change the amount or timing of any Distribution on the Series A Capital
Securities or otherwise adversely affect the amount of any Distribution required
to be made in respect of the Series A Capital Securities as of a specified date
or (ii) restrict the right of a holder of Series A Capital Securities to
institute suit for the enforcement of any such payment on or after such date.
So long as Series A Subordinated Debentures are held by the Property
Trustee, the 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
such Series A 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 Series A Subordinated Debentures shall
be due and payable or (iv) consent to any amendment, modification or termination
of the Indenture or Series A 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 Series A
Capital Securities; provided, however, that where a consent under the Indenture
would require the consent of each holder of Series A Subordinated Debentures
affected thereby, no such consent shall be given by the Property Trustee without
the prior consent of each holder of the Series A Capital Securities. The Issuer
Trustees shall not revoke any action previously authorized or approved by a vote
of the holders of the Series A Capital Securities except by subsequent vote of
the holders of the Series A Capital Securities. The Property Trustee shall
notify each holder of Series A Capital Securities of any notice of default with
respect to the Series A Subordinated Debentures. In addition to obtaining the
foregoing approvals of the holders of the Series A Capital Securities, prior to
taking any of the foregoing actions, the Issuer Trustees shall obtain an opinion
of counsel experienced in such matters to the effect that such action would not
cause the Issuer to be classified as other than a grantor trust for United
States federal income tax purposes.
Any required approval of holders of Series A Capital Securities may be
given at a meeting of holders of Series A Capital Securities convened for such
purpose or pursuant to written consent. The Property Trustee will cause a notice
of any meeting at which holders of Series A Capital Securities are entitled to
vote, or of any matter upon which action by written consent of such holders is
to be taken, to be given to each holder of record of Series A Capital Securities
in the manner set forth in the Series A Trust Agreement.
No vote or consent of the holders of Series A Capital Securities will be
required for the issuer to redeem and cancel Series A Capital Securities in
accordance with the Series A Trust Agreement.
Notwithstanding that holders of Series A Capital Securities are entitled to
vote or consent under any of the circumstances described above, any of the
Series A Capital Securities that are owned by the Corporation, the Issuer
Trustees or any affiliate of the Corporation or any Issuer Trustees, shall, for
purposes of such vote or consent, be treated as if they were not outstanding.
REGISTRATION OF SERIES A CAPITAL SECURITIES
The Series A Capital Securities will be represented by global certificates
registered in the name of DTC or its nominee. Beneficial interests in the Series
A Capital Securities will be shown on, and transfers thereof will be effected
only through, records maintained by participants in DTC. Except as described
below, Series A Capital Securities in certificated form will not be issued in
exchange for the global certificates. See "Book-Entry Issuance."
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Upon the issuance of a global Series A capital security, and the deposit of
such Series A global capital security with DTC will credit, on its book-entry
registration and transfer system, the respective aggregate Liquidation Amounts
of the individual Series A Capital Securities represented by such Series A
global preferred securities to the accounts of Participants, which may include
Euroclear and Cedel. Such accounts shall be designated by the dealers,
underwriters or agents with respect to Series A Capital Securities. Ownership of
beneficial interests in the Series A global capital security will be limited to
Participants or persons that may hold interests through Participants including
Euroclear and Cedel. Ownership of beneficial interests in the Series A global
preferred security will be shown on, and the transfer of that ownership will be
effected only through, records maintained by DTC (with respect to interests of
Participants) and the records of Participants (with respect to interests of
persons who hold through Participants). The laws of some states require that
certain purchasers of securities take physical delivery of such securities in
definitive form. Such limits and such laws may impair the ability to transfer
beneficial interests in the Series A global capital security.
So long as DTC is the registered owner of global preferred security, DTC
will be considered the sole owner or holder of the Series A Capital Securities
represented by such global capital security for all purposes under the Indenture
governing the Series A Capital Securities. Except as provided below, owners of
beneficial interests in the Series A global preferred security will not be
entitled to have any of the individual Series A Capital Securities registered in
their names, will not receive or be entitled to receive physical delivery of any
such Series A Capital Securities of such series in definitive form and will not
be considered the owners or holders thereof under the Indenture.
A global security shall be exchangeable for Series A Capital Securities
registered in the names of persons other than DTC or its nominee only if (i) DTC
notifies the Series A Issuer that it is unwilling or unable to continue as a
depositary for such global security and no successor depositary shall have been
appointed, or if at any time DTC ceases to be a clearing agency registered under
the Exchange Act at a time when DTC is required to be so registered to act as
such depositary, (ii) the Issuer in its sole discretion determines that such
global security shall be so exchangeable or (iii) there shall have occurred and
be continuing an event of default under the Indenture with respect to the Series
A Subordinated Debentures. Any global security that is exchangeable pursuant to
the preceding sentence shall be exchangeable for definitive certificates
registered in such names as DTC shall direct. It is expected that such
instructions will be based upon directions received by DTC from its Participants
with respect to ownership of beneficial interests in such global security. In
the event that Series A Capital Securities are issued in definitive form, such
Series A Capital Securities will be in denominations of $25 and integral
multiples thereof and may be transferred or exchanged at the offices described
below.
Payments on and any distributions of Series A Subordinated Debentures in
exchange for Series A Capital Securities represented by a global security will
be made to DTC, as the depositary for the Series A Capital Securities. In the
event Series A Capital Securities are issued in certificated form, the
Liquidation Amount and Distributions will be payable, the transfer of the Series
A Capital Securities will be registrable, Series A Subordinated Debentures will
be distributed in exchange for Series A Capital Securities following a
termination of the Issuer and Series A Capital Securities will be exchangeable
for Series A Capital Securities of other denominations of a like aggregate
Liquidation Amount, at the principal corporate trust office of the Property
Trustee in New York, New York, or at the offices of any paying agent or transfer
agent appointed by the Administrative Trustees, provided that payment of any
Distribution may be made at the option of the Administrative Trustees by check
mailed to the address of the persons entitled thereto or by wire transfer. None
of the Corporation, the Property Trustee, any Paying Agent, or the Securities
Registrar for the Series A Capital Securities will have any responsibility or
liability for any aspect of the records relating to or payments made on account
of beneficial ownership interests of the global capital securities representing
the Series A Capital Securities or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interests. In addition, if the
Series A Capital Securities are issued in certificated form, the record dates
for payment of Distributions will be the 15th day of the month in which the
relevant Distribution payment is scheduled to be paid. For a description of DTC
and the terms of the
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depositary arrangements relating to payments, transfers, voting rights,
redemptions and other notices and other matters, see "Book-Entry Issuance."
The Corporation expects that DTC, upon receipt of any payment of
Liquidation Amount, Redemption Price, premium or Distributions in respect of the
Series A global preferred security representing any of the Series A Capital
Securities, immediately will credit Participants' accounts with payments in
amounts proportionate to their respective beneficial interest in the aggregate
Liquidation Amount of the Series A global preferred security for the Series A
Capital Securities as shown on the records of DTC. The Corporation also expects
that payments by Participants to owners of beneficial interests in the Series A
global preferred security held through such Participants will be governed by
standing instructions and customary practices, as is now the case with
securities held for the accounts of customers in bearer form or registered in
"street name." Such payments will be the responsibility of such Participants.
PAYMENT AND PAYING AGENCY
Payments in respect of the Series A Capital Securities shall be made to
DTC, which shall credit the relevant accounts at the Depositary on the
applicable Distribution Dates or, if the Series A Capital Securities are not
held by DTC, such payments shall be made by check mailed to the address of the
holder entitled thereto as such address shall appear on the Register. The paying
agent (the "Paying Agent") shall initially be the Property Trustee and any
co-paying agent chosen by the Property Trustee and acceptable to the
Administrative Trustees and the Corporation. The Paying Agent shall be permitted
to resign as Paying Agent upon 30 days' written notice to the Property Trustee
and the Corporation. In the event that the Property Trustee shall no longer be
the Paying Agent, the Administrative Trustees shall appoint a successor (which
shall be a bank or trust company acceptable to the Administrative Trustees and
the Corporation) to act as Paying Agent.
REGISTRAR AND TRANSFER AGENT
The Property Trustee will act as registrar and transfer agent for the
Series A Capital Securities.
Registration of transfers of Series A Capital Securities will be effected
without charge by or on behalf of the Issuer, but upon payment of any tax or
other governmental charges that may be imposed in connection with any transfer
or exchange. The Issuer will not be required to register or cause to be
registered the transfer of Series A Capital Securities after Series A Capital
Securities have been called for redemption.
INFORMATION CONCERNING THE PROPERTY TRUSTEE
The Property Trustee, other than during the occurrence and continuance of
an Event of Default, undertakes to perform only such duties as are specifically
set forth in the Series A 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 Series A Trust Agreement at the request of any holder of Series A
Capital 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
Series A Trust Agreement or is unsure of the application of any provision of the
Series A Trust Agreement and the matter is not one on which holders of Series A
Capital Securities are entitled under the Series A Trust Agreement to vote, then
the Property Trustee shall take such action as is directed by the Corporation
and if not so directed, shall take such action as it deems advisable and in the
best interests of the holders of the Series A Capital 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 Issuer in such a way that the Issuer will not be
deemed to be an "investment company" required to be
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registered under the Investment Company Act or classified as other than a
grantor trust for United States federal income tax purposes and so that the
Series A Junior Subordinated Debentures will be treated as indebtedness of the
Corporation for United States federal income tax purposes. In this connection,
the Corporation and the Administrative Trustees are authorized to take any
action, not inconsistent with applicable law, the certificate of trust of each
Issuer or the Series A Trust Agreement, that the Corporation and the
Administrative Trustees determine in their discretion to be necessary or
desirable for such purposes, as long as such action does not materially
adversely affect the interests of the holders of the Series A Capital
Securities.
Holders of the Series A Capital Securities have no preemptive or similar
rights.
The Issuer may not borrow money or issue debt or mortgage or pledge any of
its assets.
DESCRIPTION OF SERIES A SUBORDINATED DEBENTURES
This summary of certain terms and provisions of the Series A Subordinated
Debentures set forth below, which describes the material provisions thereof,
does not purport to be complete and is subject to, and qualified in its entirety
by reference to, the Indenture, and the Trust Indenture Act, to each of which
reference is hereby made. The Indenture has been filed as an exhibit to the
Registration Statement of which this Prospectus forms a part. The Indenture is
qualified under the Trust Indenture Act. Whenever particular defined terms of
the Indenture (as supplemented or amended from time to time) are referred to
herein, such defined terms are incorporated herein by reference.
Concurrently with the issuance of the Series A Capital Securities, the
Issuer will invest the proceeds thereof, together with the consideration paid by
the Corporation for the Series A Common Securities, in the Series A Subordinated
Debentures issued by the Corporation. The Series A Subordinated Debentures will
bear interest at the annual rate of 8.45% of the principal amount thereof,
payable quarterly in arrears on March 31, June 30, September 30 and December 31
of each year (each, an "Interest Payment Date"), commencing June 30, 1998, and
at maturity to the person in whose name each Series A Subordinated Debenture is
registered at the close of business on the record date next preceding such
Interest Payment Date. The period beginning on and including the date of
original issuance of the Series A Subordinated Debentures and ending on but
excluding the first Interest Payment Date and each successive period beginning
on and including an Interest Payment Date and ending on but excluding the next
succeeding Interest Payment Date is herein called an "Interest Period." It is
anticipated that, until the liquidation, if any, of the Issuer, each Series A
Subordinated Debenture will be held by the Property Trustee in trust for the
benefit of the holders of the Series A Capital Securities. The amount of
interest payable for any Interest Period will be computed on the basis of a
360-day year of twelve 30-day months. In the event that any Interest Payment
Date would otherwise fall on a day that is not a Business Day, such Interest
Payment Date shall be postponed to the next day that is a Business Day (without
any interest or other payment in respect of any such delay) unless it would
thereby fall in the next calendar year, in which event the Interest Payment Date
shall be brought forward to the immediately preceding Business Day. 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 of 8.45% per annum, compounded quarterly from the relevant Interest
Payment Date. The term "interest" as used herein shall include quarterly
interest payments and interest on quarterly interest payments not paid on the
applicable Interest Payment Date, as applicable. Notwithstanding anything to the
contrary set forth above, if the maturity date falls on a day that is not a
Business Day, the payment of principal and interest will be paid on the next
succeeding Business Day, with the same force and effect as if made on such
maturity date and no interest on such payments will accrue from and after the
maturity date.
The Series A Subordinated Debentures will be issued as a series of junior
subordinated deferrable interest debentures under the Indenture.
The Series A Subordinated Debentures will mature on June 30, 2028.
The Series A Subordinated Debentures will be unsecured and will rank junior
and be subordinate in right of payment to all Senior Debt of the Corporation.
See "Subordinated Debentures -- Subordination." Substantially all of the
Corporation's existing indebtedness constitutes Senior Debt. Because the
Corporation is a holding company, the right of the Corporation to participate in
any distribution of assets of any subsidiary,
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including the U.S. Bank and Three Rivers 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 Corporation may
itself be recognized as a creditor of that subsidiary. Accordingly, the Series A
Subordinated Debentures and the Series A Guarantee will be effectively
subordinated to all existing and future liabilities of the Corporation's
subsidiaries, and holders of Series A Subordinated Debentures and beneficiaries
of the Series A Guarantee should look only to the assets of the Corporation for
payments on the Series A Subordinated Debentures or under the Series A
Guarantee. The Indenture does not limit the incurrence or issuance of other
secured or unsecured debt of the Corporation, including Senior Debt, whether
under the Indenture, any other existing indenture or any other indenture that
the Corporation may enter into in the future or otherwise. See
"-- Subordination."
OPTION TO DEFER INTEREST PAYMENTS
So long as no event of default under the Indenture has occurred and is
continuing, the Corporation has the right under the Indenture at any time or
from time to time during the term of the Series A Subordinated Debentures to
defer payment of interest on the Series A Subordinated Debentures for a period
not exceeding 20 consecutive quarterly periods with respect to each Extension
Period, provided that no Extension Period may extend beyond the Stated Maturity
of the Series A Subordinated Debentures. At the end of such Extension Period,
the Corporation must pay all interest then accrued and unpaid on the Series A
Subordinated Debentures (together with interest on such unpaid interest at the
rate of 8.45% per annum, compounded quarterly from the relevant Interest Payment
Date, to the extent permitted by applicable law). During an Extension Period,
interest will accrue and holders of Series A Subordinated Debentures (or holders
of Series A Capital Securities while such series is outstanding) will 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 Corporation may not, and may not
permit any subsidiary of the Corporation 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 Corporation's capital stock, (ii) make any payment
of principal, interest or premium, if any, on or repay, repurchase or redeem any
debt securities of the Corporation (including other series of Junior
Subordinated Debentures) that rank pari passu with or junior in interest to the
Series A Subordinated Debentures or (iii) make any guarantee payments with
respect to any guarantee by the Corporation of the debt securities of any
subsidiary of the Corporation if such guarantee ranks pari passu with or junior
in interest to the Series A Subordinated Debentures (other than (a) dividends or
distributions in capital stock of the Corporation, (b) any declaration of a
dividend in connection with the implementation of a shareholders' rights plan,
or the redemption or repurchase of any such rights pursuant thereto, (c)
payments under the Series A Guarantee, and (d) purchases of common stock related
to the issuance of common stock or rights under any of the Corporation's benefit
plans for its directors, officers or employees, related to the issuance of
common stock or rights under a dividend reinvestment and stock purchase plan, or
related to the issuance of common stock (or securities convertible into or
exchangeable for common stock) as consideration in an acquisition transaction
that was entered into prior to the commencement of such Extension Period). Prior
to the termination of any such Extension Period, the Corporation may further
defer the payment of interest on the Series A Subordinated Debentures, provided
that no Extension Period may exceed 20 consecutive quarterly periods or extend
beyond the Stated Maturity of the Series A 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 8.45% per
annum, compounded quarterly, to the extent permitted by applicable law), the
Corporation 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 Corporation must give the Property Trustee, the
Administrative Trustees and the Debenture Trustee notice of its election to
begin such Extension Period at least one Business Day prior to the earlier of
(i) the date Distributions on the Series A Capital Securities would have been
payable except for the election to begin such Extension Period, (ii) the date
the Administrative Trustees are required to give notice to the New York Stock
Exchange, the Nasdaq National Market or other applicable stock exchange or
automated quotation system on which the Series A Capital Securities may then be
listed or quoted or to holders of Series A Subordinated Debentures of the record
date for such Distributions or (iii) the date such Distributions are payable,
but in
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any event not less than one Business Day prior to such record date. The
Debenture Trustee shall give notice of the Corporation's election to begin a new
Extension Period to the holders of the Series A Subordinated Debentures. There
is no limitation on the number of times that the Corporation may elect to begin
an Extension Period.
TRUST COSTS AND EXPENSES
In the Indenture, the Corporation, as borrower, has agreed to pay all debts
and other obligations (other than with respect to the Series A Capital
Securities) and all costs and expenses of the Issuer (including costs and
expenses relating to the organization of the Issuer, the fees and expenses of
the Issuer Trustees and the costs and expenses relating to the operation of the
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 Issuer might
become subject.
PAYMENT AND PAYING AGENTS
Payment of principal of and any interest on Series A Subordinated
Debentures will be made at the office of the Debenture Trustee in the City of
New York or at the office of such paying agent or paying agents as the
Corporation may designate from time to time, except that at the option of the
Corporation 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
securities register or (ii) by transfer to an account maintained by the person
entitled thereto as specified in the securities register, provided that proper
transfer instructions have been received by the Record Date. Payment of any
interest on Series A Subordinated Debentures will be made to the person in whose
name such Series A Subordinated Debentures are registered at the close of
business on the Record Date for such interest, except in the case of defaulted
interest. The Corporation may at any time designate additional paying agents or
rescind the designation of any paying agent; however, the Corporation will at
all times be required to maintain a paying agent in each place of payment for
the Series A Subordinated Debentures.
Any moneys deposited with the Debenture Trustee or any paying agent, or
then held by the Corporation in trust, for the payment of the principal of or
interest on any Series A Subordinated Debenture and remaining unclaimed for two
years after such principal or interest has become due and payable shall, at the
request of the Corporation, be repaid to the Corporation and the holder of such
Series A Subordinated Debenture shall thereafter look, as a general unsecured
creditor, only to the Corporation for payment thereof.
REDEMPTION
Subject to the Corporation's having received prior approval of the Federal
Reserve if then required under applicable capital guidelines or policies, the
Series A Subordinated Debentures are redeemable prior to maturity at the option
of the Corporation (i) on or after June 30, 2003, in whole at any time or in
part from time to time or (ii) at any time, in certain circumstances as
described under "-- Conditional Right to Redeem upon a Tax Event or Capital
Treatment Event," in whole (but not in part) within 90 days following the
occurrence of a Tax Event or Capital Treatment Event. The proceeds of any such
redemption will be used by the Issuer to redeem the Series A Securities.
The redemption price with respect to the Series A Subordinated Debentures
shall be equal to 100% of the principal amount of the Series A Subordinated
Debentures so redeemed plus accrued and unpaid interest thereon to the date of
redemption.
Notice of any redemption will be mailed at least 30 days but not more than
60 days before the redemption date to each holder of Series A Subordinated
Debentures to be redeemed at its registered address. Unless the Corporation
defaults in payment of the redemption price, on and after the redemption date,
interest will cease to accrue on such Series A Subordinated Debentures or
portions thereof called for redemption.
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DISTRIBUTION OF SERIES A SUBORDINATED DEBENTURES
As described under "Description of Series A Capital Securities --
Liquidation of Issuer and Distribution of Series A Subordinated Debentures to
Holders," under certain circumstances involving the termination of the Issuer,
Series A Subordinated Debentures may be distributed to the holders of the Series
A Capital Securities in exchange therefor upon liquidation of the Issuer after
satisfaction of liabilities to creditors of the Issuer as provided by applicable
law. If distributed to holders of Series A Capital Securities, the Series A
Subordinated Debentures will initially be issued in the form of one or more
global securities and DTC, or any successor depositary for the Series A Capital
Securities, will act as depositary for the Series A Subordinated Debentures. It
is anticipated that the depositary arrangements for the Series A Subordinated
Debentures would be substantially identical to those in effect for the Series A
Capital Securities. If Series A Subordinated Debentures are distributed to the
holders of Series A Capital Securities in exchange therefor upon the liquidation
of the Issuer, the Corporation will use its best efforts to list the
Subordinated Debentures on the New York Stock Exchange or such other stock
exchanges or automated quotation systems, if any, on which the Series A Capital
Securities are then listed or quoted. There can be no assurance as to the market
price of any Series A Subordinated Debentures that may be distributed to the
holders of Series A Capital Securities.
CONDITIONAL RIGHT TO REDEEM UPON A TAX EVENT OR CAPITAL TREATMENT EVENT
If a Tax Event or a Capital Treatment Event occurs and either (i) in the
opinion of counsel to the Corporation experienced in such matters, there would
in all cases, after effecting the termination of the Issuer and the distribution
of the Series A Subordinated Debentures to the holders of the Series A Capital
Securities in exchange therefor upon liquidation of the Issuer, be more than an
insubstantial risk that an Adverse Tax Consequence (as defined in "Risk
Factors -- Tax Event or Capital Treatment Event -- Exchange of Series A Capital
Securities for Series A Subordinated Debentures or Redemption") would continue
to exist, (ii) in the reasonable determination of the Corporation, there would
in all cases, after effecting the termination of the Issuer and the distribution
of the Series A Subordinated Debentures to the holders of the Series A Capital
Securities in exchange therefor upon liquidation of the Issuer, be more than an
insubstantial risk that the Corporation will not be entitled to treat an amount
equal to the Liquidation Amount of the Series A Capital Securities as "Tier 1
Capital" (or the then equivalent thereof) for purposes of the capital adequacy
guidelines of the Federal Reserve, as then in effect and applicable to the
Corporation, or (iii) the Series A Subordinated Debentures are not held by the
Issuer, then the Corporation shall have the right to redeem the Series A
Subordinated Debentures, in whole but not in part, at any time within 90 days
following the occurrence of a Tax Event or Capital Treatment Event at a
redemption price equal to 100% of the principal amount thereof plus accrued and
unpaid interest thereon to the date of redemption. See "-- Redemption" and
"-- Liquidation of Issuer and Distribution of Series A Subordinated Debentures
to Holders."
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 Series A Subordinated
Debentures to be redeemed at its registered address. Unless the Corporation
defaults in payment of the redemption price, on and after the redemption date,
interest will cease to accrue on such Series A Subordinated Debentures or
portions thereof called for redemption.
REGISTRATION OF SERIES A SUBORDINATED DEBENTURES
The Series A Subordinated Debentures will be registered in the name of the
Issuer. In the event that the Series A Subordinated Debentures are distributed
to holders of Series A Capital Securities, it is anticipated that the depositary
and other arrangements for the Series A Subordinated Debentures will be
substantially identical to those in effect for the Series A Capital Securities,
as applicable. See "Description of Series A Capital Securities -- Registration
of Series A Capital Securities."
RESTRICTIONS ON CERTAIN PAYMENTS
The Corporation will also covenant, as to the Series A Subordinated
Debentures, that it will not, and will not permit any subsidiary of the
Corporation 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
Corporation's capital
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stock, (ii) make any payment of principal, interest or premium, if any, on or
repay or repurchase or redeem any debt securities of the Corporation (including
other series of Junior Subordinated Debentures) that rank pari passu with or
junior in interest to the Series A Subordinated Debentures or (iii) make any
guarantee payments with respect to any guarantee by the Corporation of the debt
securities of any subsidiary of the Corporation if such guarantee ranks pari
passu with or junior in interest to the Series A Subordinated Debentures (other
than (a) dividends or distributions in capital stock of the Corporation, (b) any
declaration of a dividend in connection with the implementation of a
shareholders' rights plan, or the redemption or repurchase of any such rights
pursuant thereto, (c) payments under the Series A Guarantee with respect to the
Series A Capital Securities and (d) purchases of common stock related to the
issuance of common stock or rights under any of the Corporation's benefit plans
for its directors, officers or employees, related to the issuance of common
stock or rights under a dividend reinvestment and stock purchase plan, or
related to the issuance of common stock (or securities convertible into or
exchangeable for common stock) as consideration in an acquisition transaction
that was entered into prior to the commencement of such Extension Period) if at
such time (i) there shall have occurred any event of which the Corporation has
actual knowledge (a) that with the giving of notice or the lapse of time, or
both, would constitute a "Debenture Event of Default" under the Indenture with
respect to the Series A Subordinated Debentures of such series and (b) in
respect of which the Corporation shall not have taken reasonable steps to cure,
(ii) if such Series A Subordinated Debentures are held by an Issuer of a series
of Series A Capital Securities, the Corporation shall be in default with respect
to its payment of any obligations under the Guarantee relating to such Series A
Capital Securities or (iii) the Corporation shall have given notice of its
election of an Extension Period as provided in the Indenture with respect to the
Series A Subordinated Debentures of such series 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 Corporation and the Debenture Trustee may, without
the consent of the holders of the Series A 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 interests of the holders of the
Series A Subordinated Debentures or the holders of the Series A Capital
Securities so long as they remain outstanding) and qualifying, or maintaining
the qualification of, the Indenture under the Trust Indenture Act. The Indenture
contains provisions permitting the Corporation and the Debenture Trustee, with
the consent of the holders of not less than a majority in principal amount of
each outstanding Series A Subordinated Debentures affected, to modify the
Indenture in a manner adversely affecting the rights of the holders of the
Series A Subordinated Debentures in any material respect; provided, that no such
modification may, without the consent of the holder of each outstanding Series A
Subordinated Debenture so affected, (i) change the Stated Maturity of the Series
A Subordinated Debentures, or reduce the principal amount thereof, or reduce the
rate or extend the time of payment of interest thereon or (ii) reduce the
percentage of principal amount of Series A Subordinated Debentures of any
series, the holders of which are required to consent to any such modification of
the Indenture, provided further that, in the case of Series A Subordinated
Debentures, so long as any Series A Capital Securities remain outstanding, (a)
no such modification may be made that adversely affects the holders of such
Series A Capital Securities in any material respect, and no termination of the
Indenture may occur, and no waiver of any event of default or compliance with
any covenant under the Indenture may be effective, without the prior consent of
the holders of at least a majority of the aggregate Liquidation Amount of all
outstanding Series A Capital Securities affected unless and until the principal
of the Series A Subordinated Debentures and all accrued and unpaid interest
thereon have been paid in full and certain other conditions have been satisfied,
and (b) where a consent under the Indenture would require the consent of each
holder of Series A Subordinated Debentures, no such consent shall be given by
the Property Trustee without the prior consent of each holder of Series A
Capital Securities.
In addition, the Corporation and the Debenture Trustee may execute, without
the consent of any holder of the Series A Subordinated Debentures, any
supplemental Indenture for the purpose of creating any new series of Junior
Subordinated Debentures.
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DEBENTURE EVENTS OF DEFAULT
The Indenture provides that any one or more of the following described
events with respect to the Series A Subordinated Debentures that has occurred
and is continuing constitutes a "Debenture Event of Default" with respect to the
Series A Subordinated Debentures:
(i) failure for 30 days to pay any interest on the Series A
Subordinated Debentures when due (subject to the deferral of any interest
payment in the case of an Extension Period); or
(ii) failure to pay any principal or premium, if any, on the Series A
Subordinated Debentures when due whether at maturity or upon redemption; or
(iii) failure to observe or perform in any material respect certain
other covenants contained in the Indenture for 90 days after written notice
to the Corporation from the Debenture Trustee or the holders of at least
25% in aggregate outstanding principal amount of the Series A Subordinated
Debentures; or
(iv) certain events in bankruptcy, insolvency or reorganization of the
Corporation.
The holders of a majority in aggregate outstanding principal amount of
Series A 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 Series A Subordinated Debentures may declare the
principal due and payable immediately upon a Debenture Event of Default, should
the Debenture Trustee or such holders of such Series A Junior Subordinated
Debentures fail to make such declaration, the holders of at least 25% in
aggregate Liquidation Amount of the Series A Capital Securities shall have such
right. The holders of a majority in aggregate outstanding principal amount of
Series A Subordinated Debentures may annul such declaration of such Subordinated
Debentures fail to annul such declaration and waive such default, the holders of
a majority in aggregate Liquidation Amount of the Series A Capital Securities
affected shall have such right.
The holders of a majority in aggregate outstanding principal amount of
Series A Subordinated Debentures affected thereby may, on behalf of the holders
of all Series A Subordinated Debentures, waive any 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
Series A Subordinated Debenture. Should the holders of Series A Subordinated
Debentures fail to waive such default, the holders of a majority in aggregate
Liquidation Amount of the Series A Capital Securities affected shall have such
right. The Corporation is required to file annually with the Debenture Trustee a
certificate as to whether or not the Corporation is in compliance with all the
conditions and covenants applicable to it under the Indenture.
In case a Debenture Event of Default shall occur and be continuing as to
the Series A Subordinated Debentures, the Property Trustee will have the right
to declare the principal of and the interest on the Series A Subordinated
Debentures, and any other amounts payable under the Indenture, to be forthwith
due and payable and to enforce its other rights as a creditor with respect to
the Series A Subordinated Debentures.
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF SERIES A CAPITAL SECURITIES
If a Debenture Event of Default with respect to the Series A Subordinated
Debentures has occurred and is continuing and such event is attributable to the
failure of the Corporation to pay interest or principal on such the Series A
Subordinated Debentures on the date such interest or principal is due and
payable, a holder of Series A Capital Securities may institute a legal
proceeding directly against the Corporation for enforcement of payment to such
holder of the principal of or interest on the Series A Subordinated Debentures
having a principal amount equal to the aggregate Liquidation Amount of the
Series A Capital Securities of such holder (a "Direct Action"). The Corporation
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 Series A
Capital Securities
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outstanding. If the right to bring a Direct Action is removed, the Issuer may
become subject to the reporting obligations under the Exchange Act. The
Corporation shall have the right under the Indenture to set-off any payment made
to such holder of Series A Capital Securities by the Corporation in connection
with a Direct Action.
The holders of the Series A Capital 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 Series A Subordinated Debentures unless there
shall have been an event of default under the Series A Trust Agreement. See
"Description of Preferred Securities -- Events of Default; Notice."
CONSOLIDATION, MERGER, SALE OF ASSETS AND OTHER TRANSACTIONS
The Indenture provides that the Corporation shall not consolidate with or
merge into any other Person or convey, transfer or lease its properties and
assets substantially as an entirety to any Person, and no Person shall
consolidate with or merge into the Corporation or convey, transfer or lease its
properties and assets substantially as an entirety to the Corporation, unless
(i) in case the Corporation consolidates with or merges into another Person or
conveys or transfers its properties and assets substantially as an entirety to
any Person, the successor Person is organized under the laws of the United
States or any state or the District of Columbia, and such successor Person
expressly assumes the Corporation's obligations on the Series A Subordinated
Debentures issued under the Indenture; (ii) immediately after giving effect
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; (iii) such transaction is not prohibited under the
Series A Trust Agreement and Series A Guarantee and does not give rise to any
breach or violation of the Series A Trust Agreement or Series A Guarantee, and
(iv) certain other conditions as prescribed by the Indenture are met.
The general provisions of the Indenture do not afford holders of the Series
A Subordinated Debentures protection in the event of a highly leveraged or other
transaction involving the Corporation that may adversely affect holders of the
Series A Subordinated Debentures.
SATISFACTION AND DISCHARGE
The Indenture provides that when, among other things, all Series A
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 Corporation 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 Series A Subordinated
Debentures are payable sufficient to pay and discharge the entire indebtedness
on the Series A 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 Corporation'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 Corporation
will be deemed to have satisfied and discharged the Indenture.
SUBORDINATION
In the Indenture, the Corporation has covenanted and agreed that the Series
A Subordinated Debentures issued thereunder will be subordinate and junior in
right of payment to all Senior Debt to the extent provided in the Indenture.
Upon any payment or distribution of assets of the Corporation upon any
liquidation, dissolution, winding up, reorganization, assignment for the benefit
of creditors, marshaling of assets or any bankruptcy, insolvency, debt
restructuring or similar proceedings in connection with any insolvency or
bankruptcy proceeding of the Corporation, the holders of Senior Debt will first
be entitled to receive payment in full of principal of (and premium, if any) and
interest, if any, on such Senior Debt before the holders of Series A
Subordinated Debentures will be entitled to receive or retain any payment in
respect of the principal of (and premium, if any) or interest, if any, on the
Series A Subordinated Debentures; provided, however, that holders of Senior Debt
shall not be entitled to receive payment of any such amounts to the extent that
such holders would be required by the subordination provisions of such Senior
Debt to pay such amounts over to the
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obligees on trade accounts payable or other liabilities arising in the ordinary
course of the Corporation's business.
In the event of the acceleration of the maturity of Series A Subordinated
Debentures, the holders of all Senior Debt 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 thereof) before the
holders of Series A Subordinated Debentures will be entitled to receive or
retain any payment in respect of the principal of (or premium, if any) or
interest, if any, on the Series A Subordinated Debentures; provided, however,
that holders of Senior Debt shall not be entitled to receive payment of any such
amounts to the extent that such holders would be required by the subordination
provisions of such Senior Debt to pay such amounts over to the obligees on trade
accounts payable or other liabilities arising in the ordinary course of the
Corporation's business.
No payments on account of principal or interest in respect of the Series A
Subordinated Debentures may be made if there shall have occurred and be
continuing a default in any payment with respect to Senior Debt or an event of
default with respect to any Senior Debt 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) every
obligation of such Person for claims in respect of derivative products such as
interest and foreign exchange rate contracts, commodity contracts and similar
arrangements; and (vii) every obligation of the type referred to in clauses (i)
through (vi) of another Person and all dividends of another Person the payment
of which, in either case, such Person has guaranteed or is responsible or liable
for, 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 Corporation 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 Series A Subordinated Debentures or to other
Debt which is pari passu with, or subordinated to, the Series A Subordinated
Debentures; provided, however, that Senior Debt shall not be deemed to include
(i) any Debt of the Corporation 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 Corporation, (ii) any Debt of the
Corporation to any of its subsidiaries, (iii) Debt to any employee of the
Corporation, (iv) Debt which by its terms is subordinated to trade accounts
payable or accrued liabilities arising in the ordinary course of business to the
extent that payments made to the holders of such Debt by the holders of the
Series A Subordinated Debentures as a result of the subordination provisions of
the Indenture would be greater than such payments otherwise would have been as a
result of any obligation of such holders of such Debt to pay amounts over to the
obligees on such trade accounts payable or accrued liabilities arising in the
ordinary course of business as a result of subordination provisions to which
such Debt is subject, and (v) any other debt securities issued pursuant to the
Indenture.
The Indenture places no limitation on the amount of Senior Debt that may be
incurred by the Corporation. The Corporation expects from time to time to incur
additional indebtedness and other obligations constituting Senior Debt.
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GOVERNING LAW
The Indenture is, and the Series A Subordinated Debentures will be,
governed by and construed in accordance with the laws of the State of New York.
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 Series A 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.
BOOK-ENTRY ISSUANCE
DTC will act as securities depositary for all of the Series A Capital
Securities. The Series A Capital Securities and the Series A Subordinated
Debentures will be issued only as fully-registered securities registered in the
name of Cede & Co. (DTC's nominee). One or more fully-registered global
certificates will be issued for the Series A Capital Securities of the Issuer
and the Series A Subordinated Debentures, representing in the aggregate the
total number of the Series A Capital Securities or aggregate principal balance
of Series A Subordinated Debentures, respectively, and will be deposited with
the Property Trustee as custodian for DTC.
DTC is a limited purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
holds securities that its Participants deposit with DTC. DTC also facilitates
the settlement among Participants of securities transactions, such as transfers
and pledges, in deposited securities through electronic computerized book-entry
changes in Participants' accounts, thereby eliminating the need for physical
movement of securities certificates. "Direct Participants" include securities
brokers and dealers, banks, trust companies, clearing corporations and certain
other organizations. DTC is owned by a number of its Direct Participants and by
the New York Stock Exchange, Inc., the American Stock Exchange, Inc. and the
National Association of Securities Dealers, Inc. Access to the DTC system is
also available to others such as securities brokers and dealers, banks and trust
companies that clear through or maintain custodial relationships with Direct
Participants, either directly or indirectly ("Indirect Participants"). The rules
applicable to DTC and its Participants are on file with the Commission.
Purchases of Series A Capital Securities or Series A Subordinated
Debentures within the DTC system must be made by or through Direct Participants,
which will receive a credit for the Series A Capital Securities or Series A
Subordinated Debentures on DTC's records. The ownership interest of each actual
purchaser of each Series A Capital Security and each Series A Subordinated
Debenture ("Beneficial Owner") is in turn to be recorded on the Direct and
Indirect Participants' records, including Euroclear and Cedel. Beneficial Owners
will not receive written confirmation from DTC of their purchases, but
Beneficial Owners are expected to receive written confirmations providing
details of the transactions, as well as periodic statements of their holdings,
from the Direct or Indirect Participants through which the Beneficial Owners
purchased Series A Capital Securities or Series A Subordinated Debentures.
Transfers of ownership interests in the Series A Capital Securities or Series A
Subordinated Debentures are to be accomplished by entries made on the books of
Participants acting on behalf of Beneficial Owners. Beneficial Owners will not
receive certificates representing their ownership interests in Series A Capital
Securities or Series A Subordinated Debentures, except in the event that use of
the book-entry system for the Series A Capital Securities of such Issuer or
Series A Subordinated Debentures is discontinued.
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Transfers between Participants will be effected in accordance with DTC's
procedures and will be settled in same-day funds. Transfers between participants
in Euroclear and Cedel will be effected in the ordinary way in accordance with
their respective rules and operating procedures.
Cross-market transfers between Participants, on the one hand, and Euroclear
participants or Cedel participants, on the other hand, will be effected in DTC
in accordance with DTC's rules on behalf of Euroclear or Cedel, as the case may
be, by its respective depositary; however, such cross-market transactions will
require delivery of instructions to Euroclear or Cedel, as the case may be, by
the counterparty in such system in accordance with the rules and procedures and
within the established deadlines (Brussels time) of such system. Euroclear or
Cedel, as the case may be, will, if the transaction meets its settlement
requirements, deliver instructions to its respective depositary to take action
to effect final settlement on its behalf by delivering or receiving interests in
the Series A Capital Securities or Series A Subordinated Debentures in DTC, and
making or receiving payment in accordance with normal procedures for same-day
funds settlement applicable to DTC. Euroclear participants and Cedel
participants may not deliver instructions directly to the depositaries for
Euroclear or Cedel.
Because of time zone differences, the securities account of a Euroclear or
Cedel participant purchasing an interest in a Series A Capital Security or
Series A Subordinated Debenture from a Participant in DTC will be credited, and
any such crediting will be reported to the relevant Euroclear participant or
Cedel participant, during the securities settlement processing day (which must
be a business day for Euroclear and Cedel, as the case may be) immediately
following the DTC settlement date. Cash received in Euroclear or Cedel as a
result of sales of interests in a Series A Capital Security or Series A
Subordinated Debenture by or through a Euroclear or Cedel participant to a
Participant in DTC will be received with value on the DTC settlement date but
will be available in the relevant Euroclear or Cedel cash account only as of the
business day for Euroclear or Cedel following the DTC settlement date.
DTC has no knowledge of the actual Beneficial Owners of the Series A
Capital Securities or Series A Subordinated Debentures; DTC's records reflect
only the identity of the Direct Participants to whose accounts such Series A
Capital Securities or Series A Subordinated Debentures are credited, which may
or may not be the Beneficial Owners. The Participants will remain responsible
for keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners and the voting
rights of Direct Participants, Indirect Participants and Beneficial Owners will
be governed by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time.
Redemption notices will be sent to Cede & Co. as the registered holder of
the Series A Capital Securities or Series A Subordinated Debentures. If less
than all Series A Capital Securities or the Series A Subordinated Debentures are
being redeemed, DTC's current practice is to determine by lot the amount of the
interest of each Direct Participant to be redeemed.
Although voting with respect to the Series A Capital Securities or the
Series A Subordinated Debentures is limited to the holders of record of the
Series A Capital Securities or Series A Subordinated Debentures, in those
instances in which a vote is required, neither DTC nor Cede & Co. will itself
consent or vote with respect to Series A Capital Securities or Series A
Subordinated Debentures. Under its usual procedures, DTC would mail an omnibus
proxy (the "Omnibus Proxy") to the relevant Trustee as soon as possible after
the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting
rights to those Direct Participants to whose accounts such Series A Capital
Securities or Series A Subordinated Debentures are credited on the record date
(identified in a listing attached to the Omnibus Proxy).
Distribution payments on the Series A Capital Securities or the Series A
Subordinated Debentures will be made by the relevant Trustee to DTC. DTC's
practice is to credit Direct Participants' accounts on the relevant payment date
in accordance with their respective holdings shown on DTC's records unless DTC
has reason to believe that it will not receive payments on such payment date.
Payments by Participants to
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Beneficial Owners will be governed by standing instructions and customary
practices and will be the responsibility of such Participant and not of DTC, the
relevant Trustee, the Issuer thereof or the Corporation, subject to any
statutory or regulatory requirements as may be in effect from time to time.
Payment of Distributions to DTC is the responsibility of the relevant Trustee,
disbursement of such payments to Direct Participants is the responsibility of
DTC, and disbursements of such payments to the Beneficial Owners is the
responsibility of Direct and Indirect Participants.
DTC may discontinue providing its services as securities depositary with
respect to any of the Series A Capital Securities or the Series A Subordinated
Debentures at any time by giving reasonable notice to the relevant Trustee and
the Corporation. In the event that a successor securities depositary is not
obtained, definitive Series A Capital Security or Series A Subordinated
Debenture certificates representing such Series A Capital Securities or Series A
Subordinated Debentures are required to be printed and delivered. The
Corporation, at its option, may decide to discontinue use of the system of
book-entry transfers through DTC (or a successor depositary). After a Debenture
Event of Default, the holders of a majority in liquidation preference of Series
A Capital Securities or aggregate principal amount of Series A Subordinated
Debentures may determine to discontinue the system of book-entry transfers
through DTC. In any such event, definitive certificates for such Series A
Capital Securities or Series A Subordinated Debentures will be printed and
delivered.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that the Issuer and the Corporation believe to be
accurate, but the Issuer and the Corporation assume no responsibility for the
accuracy thereof. Neither the Issuer nor the Corporation has any responsibility
for the performance by DTC or its Participants of their respective obligations
as described herein or under the rules and procedures governing their respective
operations.
DESCRIPTION OF SERIES A GUARANTEE
The Series A Guarantee will be executed and delivered by the Corporation
concurrently with the issuance by the Issuer of Series A Capital Securities for
the benefit of the holders from time to time of Series A Capital Securities and
Common Securities. The Bank of New York will act as indenture trustee
("Guarantee Trustee") under the Series A Guarantee for the purposes of
compliance with the Trust Indenture Act and the Series A Guarantee will be
qualified as an indenture under the Trust Indenture Act. This summary of certain
provisions of the Guarantee, which summarizes the material terms thereof, does
not purport to be complete and is subject to, and qualified in its entirety by
reference to, all of the provisions of the Series A Guarantee, including the
definitions therein of certain terms, and the Trust Indenture Act, to each of
which reference is hereby made. The form of the Series A Guarantee has been
filed as an exhibit to the Registration Statement of which this Prospectus forms
a part. Reference in this summary to Series A Capital Securities means the
Series A Capital Securities to which the Series A Guarantee relates. The
Guarantee Trustee will hold the Series A Guarantee for the benefit of the
holders of the Series A Capital Securities and Common Securities.
GENERAL
The Series A Guarantee guarantees to the holders of the Series A Capital
Securities the following payments (the "Guarantee Payments," to the extent not
paid by the Issuer: (i) any accumulated and unpaid Distributions required to be
paid on the Series A Securities, to the extent that the Issuer has funds on hand
available therefor at such time, (ii) the redemption price with respect to any
Series A Securities called for redemption, to the extent that the Issuer has
funds on hand available therefor at such time, and (iii) upon a voluntary or
involuntary dissolution, winding up or liquidation of the Issuer (unless the
Series A Subordinated Debentures are distributed to holders of the Series A
Securities), 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 Issuer has funds on hand available therefor at such time, and (b) the amount
of assets of the Issuer remaining available for distribution to holders of the
Series A Securities after payment of creditors of the Issuer as required by
applicable law. The Series A Guarantee will be qualified as an indenture under
the Trust Indenture Act. The Bank of New York will act as the Guarantee Trustee
for the purposes of compliance with the Trust Indenture Act and will hold the
Series A Guarantee for the benefit of the holders of the Series A
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Securities. The Bank of New York will also act as Debenture Trustee for the
Series A Subordinated Debentures and as Property Trustee.
The holders of not less than a majority in aggregate Liquidation Amount of
the Series A 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 Series A Guarantee or to direct the exercise of any trust power
conferred upon the Guarantee Trustee under the Series A Guarantee. Any holder of
the Series A Securities may institute a legal proceeding directly against the
Corporation to enforce its rights under the Series A Guarantee without first
instituting a legal proceeding against the Issuer, the Guarantee Trustee or any
other person or entity. If the Corporation were to default on its obligation to
pay amounts payable under the Series A Subordinated Debentures, the Series A
Issuer would lack funds for the payment of Distributions or amounts payable on
redemption of the Series A Securities or otherwise, and, in such event, holders
of the Series A Capital Securities would not be able to rely upon the Guarantee
for payment of such amounts. Instead, if an event of default under the Indenture
shall have occurred and be continuing and such event is attributable to the
failure of the Corporation to pay interest on or principal of the Series A
Subordinated Debentures on the applicable payment date, then a holder of Series
A Capital Securities may institute a Direct Action against the Corporation
pursuant to the terms of the Indenture for enforcement of payment to such holder
of the principal of or interest on such Series A Subordinated Debentures having
a principal amount equal to the aggregate Liquidation Amount of the Series A
Capital Securities of such holder. In connection with such Direct Action, the
Corporation will have a right of set-off under the Indenture to the extent of
any payment made by the Corporation to such holder of Series A Capital
Securities in the Direct Action. Except as described herein, holders of Series A
Capital Securities will not be able to exercise directly any other remedy
available to the holders of the Series A Subordinated Debentures or assert
directly any other rights in respect of the Series A Subordinated Debentures.
The Series A Trust Agreement provides that each holder of Series A Securities by
acceptance thereof agrees to the provisions of the Series A Guarantee and the
Indenture.
If the Corporation does not make interest payments on the Series A
Subordinated Debentures held by the Issuer, the Issuer will not be able to pay
Distributions on the Series A Capital Securities and will not have funds legally
available therefor. The Series A Guarantee will rank subordinate and junior in
right of payment to all Senior Debt of the Corporation. See "-- Status of the
Guarantee." Because the Corporation is a holding company, the right of the
Corporation 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
Corporation may itself be recognized as a creditor of that subsidiary.
Accordingly, the Corporation's obligations under the Series A Guarantee will be
effectively subordinated to all existing and future liabilities of the
Corporation's subsidiaries, and claimants should look only to the assets of the
Corporation for payments thereunder. The Series A Guarantee does not limit the
incurrence or issuance of other secured or unsecured debt of the Corporation,
including Senior Debt, whether under the Indenture, any other existing indenture
or any other indenture that the Corporation may enter into in the future or
otherwise.
The Corporation has, through the Series A Guarantee, the Series A Trust
Agreement, the Series A Subordinated Debentures and the Indenture, taken
together, fully, irrevocably and unconditionally guaranteed all of the Issuer's
obligations under the Series A Capital Securities. No single document standing
alone or operating in conjunction with fewer than all of the other documents
constitutes such guarantee. It is only the combined operation of these documents
that has the effect of providing a full, irrevocable and unconditional guarantee
of the Issuer's obligations under the Series A Capital Securities. See
"Relationship Among the Capital Securities, the Corresponding Junior
Subordinated Debentures and the Guarantee."
STATUS OF THE GUARANTEE
The Series A Guarantee will constitute an unsecured obligation of the
Corporation and will rank subordinate and junior in right of payment to all
Senior Debt of the Corporation in the same manner as the Series A Subordinated
Debentures.
The Series A Guarantee will rank pari passu with all other Guarantees
issued by the Corporation. The Series A Guarantee will constitute a guarantee of
payment and not of collection (i.e. the guaranteed party may institute a legal
proceeding directly against the Guarantor to enforce its rights under the Series
A Guarantee without first instituting a legal proceeding against any other
person or entity). The Series A Guarantee will be
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held for the benefit of the holders of the Series A Trust Securities. The Series
A Guarantee will not be discharged except by payment of the Guarantee Payments
in full to the extent not paid by the Issuer or upon distribution to the holders
of the Series A Trust Securities of the Series A Subordinated Debentures. The
Series A Guarantee places no limitation on the amount of additional Senior Debt
that may be incurred by the Corporation. The Corporation expects from time to
time to incur additional indebtedness constituting Senior Debt.
AMENDMENTS AND ASSIGNMENTS
Except with respect to any changes which do not materially adversely affect
the rights of holders of the Series A Trust Securities (in which case no vote
will be required), the Series A 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 Series A Trust Securities. The manner of obtaining
any such approval will be as set forth under "Description of Capital
Securities -- Voting Rights; Amendment of Series A Trust Agreement." All
guarantees and agreements contained in the Series A Guarantee shall bind the
successors, assigns, receivers, trustees and representatives of the Corporation
and shall inure to the benefit of the holders of the Series A Trust Securities
then outstanding.
EVENTS OF DEFAULT
An event of default under the Series A Guarantee will occur upon the
failure of the Corporation to perform any of its payment or other obligations
thereunder. The holders of not less than a majority in aggregate Liquidation
Amount of the Series A Trust 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 Series A Guarantee or to direct the exercise
of any trust or power conferred upon the Guarantee Trustee under the Series A
Guarantee.
Any holder of Series A Trust Securities may institute a legal proceeding
directly against the Corporation to enforce its rights under such Guarantee
without first instituting a legal proceeding against the Issuer, the Guarantee
Trustee or any other person or entity.
The Corporation, as guarantor, is required to file annually with the
Guarantee Trustee a certificate as to whether or not the Corporation 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 Corporation in performance of the Series A Guarantee,
undertakes to perform only such duties as are specifically set forth in the
Series A Guarantee and, after default with respect to the Series A 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 Series A Guarantee at the request of any holder of
Series A Trust Securities unless it is offered reasonable indemnity against the
costs, expenses and liabilities that might be incurred thereby.
TERMINATION OF THE GUARANTEE
The Series A Guarantee will terminate and be of no further force and effect
upon full payment of the Redemption Price of the Series A Trust Securities, upon
full payment of the amounts payable upon liquidation of the Issuer or upon
distribution of Series A Subordinated Debentures to the holders of the Series A
Trust Securities in exchange therefor. The Series A Guarantee will continue to
be effective or will be reinstated, as the case may be, if at any time any
holder of the Series A Trust Securities must restore payment of any sums paid
under such Series A Trust Securities or such Guarantee.
GOVERNING LAW
The Series A Guarantee will be governed by and construed in accordance with
the laws of the State of New York.
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RELATIONSHIP AMONG THE SERIES A CAPITAL SECURITIES,
THE SERIES A SUBORDINATED DEBENTURES
AND THE SERIES A GUARANTEE
FULL AND UNCONDITIONAL GUARANTEE
Payments of Distributions and other amounts due on the Series A Capital
Securities (to the extent the Issuer has funds available for the payment of such
Distributions and other amounts) are irrevocably guaranteed by the Corporation
as and to the extent set forth under "Description of Series A Guarantee." Taken
together, the Corporation's obligations under the Series A Subordinated
Debentures, the Indenture, and the Series A Trust Agreement and the Series A
Guarantee provide, in the aggregate, a full, irrevocable and unconditional
guarantee of payments of Distributions and other amounts due on the Series A
Capital Securities. No single document standing alone or operating in
conjunction with fewer than all of the other documents constitutes such
guarantee. It is only the combined operation of these documents that has the
effect of providing a full, irrevocable and unconditional guarantee of the
Issuer's obligations under the Series A Capital Securities. If and to the extent
that the Corporation does not make payments on the Series A Subordinated
Debentures, the Issuer will not pay Distributions or other amounts due on the
Series A Preferred Securities. The Series A Guarantee does not cover payment of
Distributions when the Issuer does not have sufficient funds to pay such
Distributions. In such event, the remedy of a holder of a Series A Capital
Securities is to institute a legal proceeding directly against the Corporation
pursuant to the terms of the Indenture for enforcement of payment of amounts
equal to such Distributions to such holder. The obligations of the Corporation
under the Series A Guarantee is subordinate and junior in right of payment to
all Senior Debt of the Corporation.
SUFFICIENCY OF PAYMENTS
As long as payments of interest and other payments are made when due on the
Series A Subordinated Debentures, such payments will be sufficient to cover
Distributions and other payments due on the Series A Capital Securities,
primarily because (i) the aggregate principal amount of the Series A
Subordinated Debentures will be equal to the sum of the aggregate stated
Liquidation Amount of the Series A Capital Securities and Common Securities;
(ii) the interest rate and interest and other payment dates on Series A
Subordinated Debentures will match the Distribution rate and Distribution and
other payment dates for the Series A Capital Securities; (iii) the Corporation
shall pay for all and any costs, expenses and liabilities of the Issuer except
the Issuer's obligations to holders of the Series A Capital Securities under the
Series A Capital Securities; and (iv) the Series A Trust Agreement further
provides that the Issuer will not engage in any activity that is not consistent
with the limited purposes of such Issuer.
Notwithstanding anything to the contrary in the Indenture, the Corporation
has the right to set-off any payment it is otherwise required to make thereunder
with and to the extent the Corporation has theretofore made, or is concurrently
on the date of such payment making, a payment under the Series A Guarantee.
ENFORCEMENT RIGHTS OF HOLDERS OF SERIES A CAPITAL SECURITIES
A holder of any Series A Capital Security may institute a legal proceeding
directly against the Corporation to enforce its rights under the Series A
Guarantee without first instituting a legal proceeding against the Guarantee
Trustee, the Issuer or any other person or entity.
A default or event of default under any Senior Debt of the Corporation
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
Corporation, the subordination provisions of the Indenture provide that no
payments may be made in respect of the Series A 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 Series A Subordinated
Debentures would constitute an Event of Default under the Indenture.
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LIMITED PURPOSE OF ISSUER
The Series A Capital Securities evidence a beneficial interest in the
Issuer, and the Issuer exists for the sole purpose of issuing the Series A
Capital Securities and Common Securities and investing the proceeds thereof in
Series A Subordinated Debentures. A principal difference between the rights of a
holder of Series A Capital Securities and a holder of a Series A Subordinated
Debenture is that a holder of a Series A Subordinated Debenture is entitled to
receive from the Corporation the principal amount of and interest accrued on
Series A Subordinated Debentures held, while a holder of Series A Capital
Securities is entitled to receive Distributions from such Issuer (or from the
Corporation under the Series A Guarantee) if and to the extent such Issuer has
funds available for the payment of such Distributions.
RIGHTS UPON TERMINATION
Upon any voluntary or involuntary termination, winding up or liquidation of
the Issuer involving the liquidation of the Series A Subordinated Debentures,
after satisfaction of liabilities to creditors of the Issuer as required by
applicable law, the holders of the Series A Capital Securities will be entitled
to receive, out of the assets held by such Issuer, the Liquidation Distribution
in cash. See "Description of the Series A Capital Securities -- Liquidation
Distribution Upon Termination." Upon any voluntary or involuntary liquidation or
bankruptcy of the Corporation, the Property Trustee, as holder of the Series A
Subordinated Debentures, would be a subordinated creditor of the Corporation,
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 shareholders of the Corporation receive payments or distributions.
Because the Corporation is the guarantor under the Series A Guarantee and has
agreed to pay for all costs, expenses and liabilities of each Issuer (other than
the Issuer's obligations to the holders of the Series A Capital Securities), the
positions of a holder of Series A Capital Securities and a holder of the Series
A Subordinated Debentures relative to other creditors and to shareholders of the
Corporation in the event of liquidation or bankruptcy of the Corporation are
expected to be substantially the same.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
GENERAL
In the opinion of Stevens & Lee, special tax counsel to the Corporation and
the Issuer ("Tax Counsel"), the following summary accurately describes the
material United States federal income tax consequences that may be relevant to
the purchase, ownership and disposition of Series A Capital Securities. Unless
otherwise stated, this summary deals only with Series A Capital Securities held
as capital assets by United States Persons (defined below) who purchase the
Series A Capital Securities upon original issuance at their original offering
price. As used herein, a "United States Person" means a person that is (i) a
citizen or resident of the United States, (ii) a corporation, partnership or
other entity created or organized in or under the laws of the United States or
any political subdivision thereof, (iii) an estate the income of which is
subject to United States federal income taxation regardless of its source, or
(iv) any trust if a court within the United States is able to exercise primary
supervision over the administration of such trust and one or more United States
Persons have the authority to control all substantial decisions of such trust.
The tax treatment of a holder may vary depending on his, her or its particular
situation. This summary does not address all the tax consequences that may be
relevant to a particular holder or to holders who may be subject to special tax
treatment, such as banks, real estate investment trusts, regulated investment
companies, insurance companies, dealers in securities or currencies, tax-exempt
investors, or foreign investors. In addition, this summary does not include any
description of any alternative minimum tax consequences or the tax laws of any
state, local or foreign government that may be applicable to a holder of Series
A Capital Securities. This summary is based on the Internal Revenue Code of
1986, as amended (the "Code"), the Treasury regulations promulgated thereunder
and administrative and judicial interpretations thereof, as of the date hereof,
all of which are subject to change, possibly on a retroactive basis.
The authorities on which this summary is based are subject to various
interpretations and the opinions of Tax Counsel are not binding on the Internal
Revenue Service ("IRS") or the courts, either of which could take a contrary
position. Moreover, no rulings have been or will be sought from the IRS with
respect to the
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transactions described herein. Accordingly, there can be no assurance that the
IRS will not challenge the opinions expressed herein or that a court would not
sustain such a challenge. Nevertheless, Tax Counsel has advised that it is of
the view that, if challenged, the opinions expressed herein would be sustained
by a court with jurisdiction in a properly presented case.
HOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE TAX
CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE SERIES A
CAPITAL SECURITIES, INCLUDING THE TAX CONSEQUENCES UNDER UNITED STATES FEDERAL,
STATE, LOCAL, FOREIGN, AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN
UNITED STATES FEDERAL OR OTHER TAX LAWS. FOR A DISCUSSION OF THE POSSIBLE
REDEMPTION OF THE SERIES A CAPITAL SECURITIES UPON THE OCCURRENCE OF CERTAIN TAX
EVENTS SEE "DESCRIPTION OF THE SERIES A CAPITAL SECURITIES -- REDEMPTION."
CLASSIFICATION OF THE ISSUER
In connection with the issuance of the Series A Capital Securities, Tax
Counsel is of the opinion that, under current law and assuming compliance with
the terms of the Series A Trust Agreement, and based on certain facts and
assumptions contained in such opinion, the Issuer will be classified as a
grantor trust and not as an association taxable as a corporation for United
States federal income tax purposes. As a result, each beneficial owner of Series
A Capital Securities (a "Securityholder") will be treated as owning an undivided
beneficial interest in the Series A Subordinated Debentures. Accordingly, each
Securityholder will be required to include in its gross income its pro rata
share of the interest income or original issue discount that is paid or accrued
on the Series A Subordinated Debentures. See "-- Interest Income and Original
Issue Discount."
CLASSIFICATION OF THE SERIES A SUBORDINATED DEBENTURES
The Corporation, the Issuer and the holders of the Series A Securities (by
acceptance of a beneficial interest in a Series A Security) will agree to treat
the Series A Subordinated Debentures as indebtedness for all United States tax
purposes. In connection with the issuance of the Series A Subordinated
Debentures, Tax Counsel is of the opinion that, under current law, and based on
certain representations, facts and assumptions set forth in such opinion, the
Series A Subordinated Debentures will be classified as indebtedness for United
States federal income tax purposes. No assurance can be given, however, that the
IRS will not challenge such position or, if challenged, that such a challenge
will not be successful. The remainder of this discussion assumes that the Series
A Subordinated Debentures will be treated as indebtedness of the Corporation for
United States federal income tax purposes.
INTEREST INCOME AND ORIGINAL ISSUE DISCOUNT
Under applicable Treasury regulations, the Series A Subordinated Debentures
will not be considered to have been issued with "original issue discount"
("OID") within the meaning of Section 1273(a) of the Code. Accordingly, except
as set forth below, stated interest on the Series A Subordinated Debentures
generally will be included in income by a Securityholder at the time such
interest income is paid or accrued in accordance with such Securityholder's
regular method of tax accounting.
If, however, the Corporation exercises its right to defer payments of
interest on the Series A Subordinated Debentures, the Series A Subordinated
Debentures will become OID instruments at such time and all Securityholders will
be required to accrue the stated interest on the Series A Subordinated
Debentures on a daily basis during the Extension Period, even though the
Corporation will not pay such interest until the end of the Extension Period,
and even though some Securityholders may use the cash method of tax accounting.
Moreover, thereafter the Series A Subordinated Debentures will be taxed as OID
instruments for as long as they remain outstanding. Thus, even after the end of
the Extension Period, all Securityholders would be required to continue to
include the stated interest on the Series A Subordinated Debentures in income on
a daily economic accrual basis, regardless of their method of tax accounting and
in advance of receipt of the cash attributable to such interest income. Under
the OID economic accrual rules, a Securityholder would accrue an amount of
interest income each year that approximates the stated interest payments called
for under the terms of the Series A Subordinated Debentures, and actual cash
payments of interest on the Series A Subordinated Debentures would not be
reported separately as taxable income. Any amount of OID included
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in a Securityholder's gross income (whether or not during an Extension Period)
will increase such Securityholder's tax basis in its Series A Capital
Securities, and the amount of Distributions received by a Securityholder with
respect to such Series A Capital Securities will reduce the tax basis of such
Series A Capital Securities.
The Treasury regulations described above have not yet been addressed in any
rulings or other interpretations by the IRS, and it is possible that the IRS
could take a contrary position. If the IRS were to assert successfully that the
stated interest on the Series A Subordinated Debentures was OID regardless of
whether the Corporation exercises its right to defer payments of interest on
such debentures, all Securityholders would be required to include such stated
interest in income on a daily economic accrual basis as described above.
Corporate Securityholders will not be entitled to a dividends-received
deduction with respect to any income recognized with respect to the Series A
Capital Securities.
DISTRIBUTION OF SERIES A SUBORDINATED DEBENTURES TO HOLDERS OF SERIES A CAPITAL
SECURITIES
Under current law, a distribution by the Issuer of the Series A
Subordinated Debentures as described under the caption "Description of the
Series A Capital Securities -- Liquidation of Issuer and Distribution of Series
A Subordinated Debentures to Holders" will be non-taxable and will result in the
Securityholder receiving directly its pro rata share of the Series A
Subordinated Debentures previously held indirectly through the Issuer, with a
holding period and aggregate tax basis equal to the holding period and aggregate
tax basis such Securityholder had in its Series A Capital Securities before such
distribution. If, however, the liquidation of the Issuer were to occur because
the Issuer is subject to United States federal income tax with respect to income
accrued or received on the Series A Subordinated Debentures as a result of a Tax
Event or otherwise, the distribution of Series A Subordinated Debentures to
Securityholders by the Issuer could be a taxable event to the Issuer and each
Securityholder, and a Securityholder would recognize gain or loss as if the
Securityholder had exchanged its Series A Capital Securities for the Series A
Subordinated Debentures it received upon the liquidation of the Issuer. A
Securityholder will accrue interest in respect of Series A Subordinated
Debentures received from the Issuer in the manner described above under
"-- Interest Income and Original Issue Discount."
SALES OR REDEMPTION OF SERIES A CAPITAL SECURITIES
Gain or loss will be recognized by a Securityholder on a sale of Series A
Capital Securities (including a redemption for cash) in an amount equal to the
difference between the amount realized by the Securityholder on the sale or
redemption of the Series A Capital Securities (except to the extent that such
amount realized is characterized as a payment in respect of accrued but unpaid
interest on such Securityholder's allocable share of the Series A Subordinated
Debentures that such Securityholder had not included in income previously) and
the Securityholder's adjusted tax basis in the Series A Capital Securities sold
or redeemed. Such gain or loss generally will be taxable as long-term capital
gain or loss if the Securityholder held the Series A Capital Securities that it
sold or redeemed for more than one year. Capital gains of individuals derived
with respect to capital assets held for more than one year are eligible for
reduced rates of taxation depending upon the holding period of such capital
assets. Securityholders should consult their own tax advisors regarding capital
gains rates applicable to them. Subject to certain limited exceptions, capital
losses cannot be applied to offset ordinary income for federal income tax
purposes.
NON-UNITED STATES HOLDERS
As used herein, the term "Non-United States Holder" means any
Securityholder that is not a United States Person. As discussed above, the
Series A Capital Securities will be treated as evidence of an indirect
beneficial ownership interest in the Series A Subordinated Debentures. See
"-- Classification of the Trust." Thus, under present United States federal
income tax law, and subject to the discussion below concerning backup
withholding:
(a) no withholding of United States federal income tax will be
required with respect to the payment by the Issuer (or the Corporation) or
any paying agent of principal or interest (which for purposes of this
discussion includes any OID) on the Series A Capital Securities (or the
Series A Subordinated
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Debentures) to a Non-United States Holder, provided (i) that such
Non-United States Holder does not actually or constructively own 10% or
more of the total combined voting power of all classes of stock of the
Corporation entitled to vote within the meaning of section 871(h)(3) of the
Code and the regulations thereunder, (ii) such Non-United States Holder is
not a controlled foreign corporation that is related to the Corporation
through stock ownership, (iii) such Non-United States Holder is not a bank
whose receipt of interest on the Series A Subordinated Debentures is
described in section 881(c)(3)(A) of the Code and (iv) such Non-United
States Holder satisfies the statement requirement (described generally
below) set forth in section 871(h) and section 881(c) of the Code and the
regulations thereunder; and
(b) no withholding of United States federal income tax will be
required with respect to any gain realized by a Non-United States Holder
upon the sale or other disposition of the Series A Capital Securities (or
the Series A Subordinated Debentures).
To satisfy the requirement referred to in (a)(iv) above, the Non-United
States Holder, or a financial institution holding the Series A Capital
Securities on behalf of such owner, must provide, in accordance with specified
procedures, to the Issuer or its paying agent, a statement to the effect that
the Non-United States Holder is not a United States Person. Currently, these
requirements will be met if (1) the Non-United States Holder provides his name
and address, and certifies, under penalties of perjury, that it is not a United
States Person (which certification may be made on an IRS Form W-8 (or successor
form)) or (2) a financial institution holding the Series A Capital Securities on
behalf of the Non-United States Holder certifies, under penalties of perjury,
that such statement has been received by it and furnishes the Issuer or the
paying agent with a copy thereof. Under recently finalized Treasury regulations
(the "Final Regulations"), the statement requirement referred to in (a)(iv)
above may also be satisfied with other documentary evidence for interest paid
after December 31, 1999 with respect to an offshore account or through certain
foreign intermediaries.
If a Non-United States Holder cannot satisfy the requirements of the
"portfolio interest" exception described in (a) above, payments of interest made
to such Non-United States Holder will be subject to a 30% United States federal
withholding tax unless the Beneficial Owner provides the Issuer or its paying
agent, as the case may be, with a properly executed (1) IRS Form 1001 (or a
successor form) claiming an exemption from, or a reduction of, such withholding
tax under the benefit of a tax treaty or (2) IRS Form 4224 (or a successor form)
stating that interest paid on the Series A Capital Securities (or the Series A
Subordinated Debentures) is not subject to such withholding tax because it is
effectively connected with the Beneficial Owner's conduct of a trade or business
in the United States. Under the Final Regulations, Non-United States Holders
generally will be required to provide an IRS Form W-8 in lieu of an IRS Form
1001 or an IRS Form 4224, although alternative documentation may be applicable
in certain situations and certain forms and statements in effect on certain
dates during the transition period described in Notice 98-16, I.R.B. 1998-15
(March 27, 1998), may expire and become ineffective, thus requiring the filing
of new replacement certificates or statements.
If a Non-United States Holder is engaged in a trade or business in the
United States and interest on the Series A Capital Securities (or the Series A
Subordinated Debentures) is effectively connected with the conduct of such trade
or business, the Non-United States Holder, although exempt from the withholding
tax discussed above, will be subject to United States federal income tax on such
interest on a net income basis in the same manner as if it were a United States
Person. In addition, if such Non-United States Holder is a foreign corporation,
it may be subject to a branch profits tax equal to 30% of its effectively
connected earnings and profits for the taxable year, subject to adjustments. For
this purpose, such interest income would be included in such foreign
corporation's earnings and profits. Under the Final Regulations, Non-United
States Holders will generally be required to provide IRS Form W-8 in lieu of IRS
Form 1001 and IRS Form 4224, although alternative documentation may be
applicable in certain situations and certain forms and statements in effect on
certain dates during the transition period described in Notice 98-16 may expire
and become ineffective, thus requiring the filing of new replacement
certificates or statements.
Any gain realized upon the sale or other disposition of the Series A
Capital Securities (or the Series A Subordinated Debentures) generally will not
be subject to United States federal income tax unless (i) such gain is
effectively connected with a United States trade or business of the Non-United
States Holder, (ii) in the case of a Non-United States Holder who is an
individual, such individual is present in the United States for 183 days or more
in the taxable year of such sale, exchange or retirement, and certain other
conditions are
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<PAGE> 49
met, or (iii) in the case of any gain representing accrued interest on the
Series A Subordinated Debentures, the requirements described above are not
satisfied.
HOLDERS SHOULD CONSULT NOTICE 98-16 AND THEIR OWN TAX ADVISORS ABOUT THE
NEW RULES CONCERNING BACKUP WITHHOLDING ON NON-UNITED STATES HOLDERS AND THE
RELATED TRANSITION RULES.
BACKUP WITHHOLDING TAX AND INFORMATION REPORTING
The amount of OID accrued on the Series A Capital Securities held of record
by United States Persons (other than corporations and other exempt
Securityholders), if any, will be reported to the IRS. "Backup" withholding at a
rate of 31% will apply to payments of interest to non-exempt United States
Persons unless the Securityholder furnishes its taxpayer identification number
in the manner prescribed in applicable Treasury Regulations, certifies that such
number is correct, certifies as to no loss of exemption from backup withholding
and meets certain other conditions.
Payment of the proceeds from the disposition of Series A Capital Securities
to or through the United States office of a broker is subject to information
reporting and backup withholding unless the holder or beneficial owner
establishes an exemption from information reporting and backup withholding.
Any amounts withheld from a Securityholder under the backup withholding
rules will be allowed as a refund or a credit against such Securityholder's
United States federal income tax liability, provided the required information is
furnished to the IRS.
It is anticipated that income on the Series A Capital Securities will be
reported to holders on Form 1099 and mailed to holders of the Series A Capital
Securities by January 31 following each calendar year.
CERTAIN ERISA CONSIDERATIONS
Each fiduciary of a pension, profit-sharing or other employee benefit plan
subject to the Employee Retirement Income Security Act of 1974, as amended
("ERISA") (a "Plan"), should consider the fiduciary standards of ERISA in the
context of the Plan's particular circumstances before authorizing an investment
in the Series A Capital Securities. Accordingly, among other factors, the
fiduciary should consider whether the investment would satisfy the prudence and
diversification requirements of ERISA and would be consistent with the documents
and instruments governing the Plan.
Section 406 of ERISA and Section 4975 of the Code prohibit Plans, as well
as individual retirement accounts and Keogh plans subject to Section 4975 of the
Code (also "Plans"), from engaging in certain transactions involving "plan
assets" with persons who are "parties in interest" under ERISA or "disqualified
persons" under the Code ("Parties in Interest") with respect to such Plan. A
violation of these "prohibited transaction" rules may result in an excise tax or
other liabilities under ERISA and/or Section 4975 of the Code for such persons,
unless exemptive relief is available under an applicable statutory or
administrative exemption. Employee benefit plans that are governmental plans (as
defined in Section 3(32) of ERISA), certain church plans (as defined in Section
3(33) of ERISA) and foreign plans (as described in Section 4(b)(4) of ERISA) are
not subject to the requirements of ERISA or Section 4975 of the Code; however,
governmental plans may be subject to similar provisions under applicable state
laws.
Under a regulation (the "Plan Assets Regulation") issued by the U.S.
Department of Labor (the "DOL"), the assets of the Issuer would be deemed to be
"plan assets" of a Plan for purposes of ERISA and Section 4975 of the Code if
"plan assets" of the Plan were used to acquire an equity interest in the Issuer
and no exception were applicable under the Plan Assets Regulation. An "equity
interest" is defined under the Plan Assets Regulation as any interest in an
entity other than an instrument which is treated as indebtedness under
applicable local law and which has no substantial equity features and
specifically includes a beneficial interest in a trust.
Pursuant to an exception contained in the Plan Assets Regulation, the
assets of the Issuer would not be deemed to be "plan assets" of investing Plans
if, at all times, less than 25% of the value of each class of equity interests
in the Issuer were held by Plans, other employee benefit plans not subject to
ERISA or Section 4975 of the Code (such as governmental, church and foreign
plans), and entities holding assets deemed to be "plan assets" of any Plan
(collectively, "Benefit Plan Investors"), or if the Series A Capital Securities
were
49
<PAGE> 50
"publicly-offered securities" for purposes of the Plan Assets Regulation. No
assurance can be given that the Series A Capital Securities held by Benefit Plan
Investors will be less than 25% of the total value of such Series A Capital
Securities at the completion of the initial offering or thereafter, and no
monitoring or other measures will be taken with respect to the satisfaction of
the conditions to this exception. In addition, no assurance can be given that
the Series A Capital Securities would be considered to be "publicly-offered
securities" under the Plan Assets Regulation. All of the Series A Common
Securities will be purchased and initially held by the Corporation.
Certain transactions involving the Issuer could be deemed to constitute
direct or indirect prohibited transactions under ERISA and Section 4975 of the
Code with respect to a Plan if the Series A Capital Securities were acquired
with "plan assets" of such Plan and the assets of the Issuer were deemed to be
"plan assets" of Plans investing in the Issuer. For example, if the Corporation
were a Party in Interest with respect to a Plan (either directly or by reason of
its ownership of the Bank or other subsidiaries), extensions of credit between
the Corporation and the Issuer (as represented by the Series A Subordinated
Debentures and the Series A Guarantee) would likely be prohibited by Section
406(a)(1)(B) of ERISA and Section 4975(c)(1)(B) of the Code, unless exemptive
relief were available under an applicable administrative exemption (see below).
In addition, if the Corporation were considered to be a fiduciary with respect
to the Issuer as a result of certain powers it holds (such as the powers to
remove and replace the Property Trustee and the Administrative Trustees), it is
possible that the optional redemption or acceleration of the Series A
Subordinated Debentures would be considered to be prohibited transactions under
Section 406(b) of ERISA and Section 4975(c)(1)(E) of the Code. IN AN ATTEMPT TO
AVOID SUCH PROHIBITED TRANSACTIONS, EACH INVESTING PLAN, BY PURCHASING SERIES A
CAPITAL SECURITIES, WILL BE DEEMED TO HAVE DIRECTED THE ISSUER TO INVEST IN THE
SERIES A SUBORDINATED DEBENTURES AND TO HAVE APPOINTED THE PROPERTY TRUSTEE.
The DOL has issued five prohibited transaction class exemptions ("PTCEs")
that may provide exemptive relief if required for direct or indirect prohibited
transactions that may arise from the purchase or holding of the Series A Capital
Securities. Those class exemptions are PTCE 96-23 (for certain transactions
determined by in-house asset managers), PTCE 95-60 (for certain transactions
involving insurance company general accounts), PTCE 91-38 (for certain
transactions involving bank collective investment funds), PTCE 90-1 (for certain
transactions involving insurance company separate accounts), and PTCE 84-14 (for
certain transactions determined by independent qualified asset managers).
Because the Series A Capital Securities may be deemed to be equity
interests in the Issuer for purposes of applying ERISA and Section 4975 of the
Code, the Series A Capital Securities may not be purchased or held by any Plan,
any entity whose underlying assets include "plan assets" by reason of any Plan's
investment in the entity (a "Plan Asset Entity") or any person investing "plan
assets" of any Plan, unless such purchaser or holder is eligible for the
exemptive relief available under PTCE 96-23, 95-60, 91-38, 90-1 or 84-14 or
another applicable exemption. Any purchaser or holder of the Series A Capital
Securities or any interest therein will be deemed to have represented by its
purchase and holding thereof that it either (a) is not a Plan or a Plan Asset
Entity and is not purchasing such securities on behalf of or with "plan assets"
of any Plan or (b) is eligible for the exemptive relief available under PTCE
96-23, 95-60, 91-38, 90-1 or 84-14 or another applicable exemption with respect
to such purchase or holding. If a purchaser or holder of the Series A Capital
Securities that is a Plan or a Plan Asset Entity elects to rely on an exemption
other than PTCE 96-23, 95-60, 91-38, 90-1 or 84-14, the Corporation and the
Issuer may require a satisfactory opinion of counsel or other evidence with
respect to the availability of such exemption for such purchase and holding.
Due to the complexity of these rules and the penalties that may be imposed
upon persons involved in non-exempt prohibited transactions, it is particularly
important that fiduciaries or other persons considering purchasing the Series A
Capital Securities on behalf of or with "plan assets" of any Plan consult with
their counsel regarding the potential consequences if the assets of the Issuer
were deemed to be "plan assets" and the availability of exemptive relief under
PTCE 96-23, 95-60, 91-38, 90-1 or 84-14 or any other applicable exemption.
50
<PAGE> 51
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement
dated April 27, 1998 (the "Underwriting Agreement"), the Corporation and the
Issuer have agreed that the Issuer will sell to each of the Underwriters named
below, and each of such Underwriters has severally agreed to purchase from the
Issuer, the respective number of Series A Capital Securities set forth opposite
its name below:
<TABLE>
<CAPTION>
NUMBER OF SERIES A CAPITAL SECURITIES
-------------------------------------
<S> <C>
CIBC Oppenheimer Corp. ........................ 828,000
Legg Mason Wood Walker, Incorporated........... 552,000
---------
Total................................ 1,380,000
=========
</TABLE>
Under the terms and conditions of the Underwriting Agreement, the
Underwriters are committed to take and pay for all of the Series A Capital
Securities if any are taken.
The Underwriters propose initially to offer the Series A Capital Securities
in part directly to the public at the initial public offering price set forth on
the cover page of this Prospectus and in part to certain securities dealers at
such price less a concession not in excess of $0.50 per Series A Capital
Security. The Underwriters may allow, and such dealers may reallow, a concession
not to exceed $0.30 per Series A Capital Security to certain brokers and
dealers. After the Series A Capital Securities are released for sale to the
public, the initial public offering price and other selling terms may from time
to time be varied by the Underwriters.
In view of the fact that the proceeds from the sale of the Series A Capital
Securities will be used to purchase the Series A Subordinated Debentures issued
by the Corporation, the Underwriting Agreement provides that the Corporation
will pay as Underwriters' compensation for the Underwriters' arranging the
investment in such Series A Subordinated Debentures of such proceeds an amount
of $0.81 per Series A Capital Security for the accounts of the several
Underwriters.
The Corporation and the Issuer have agreed that, during the period
beginning from the date of the Underwriting Agreement and continuing to and
including the earlier of (i) the termination of trading restrictions on the
Series A Capital Securities, as determined by the Underwriters, and (ii) the
closing date, they will not offer, sell, contract to sell or otherwise dispose
of, any other beneficial interests in the assets of the Issuer, or any preferred
securities or any other securities of the Issuer or the Corporation which are
substantially similar to the Series A Capital Securities, including any
guarantee of such securities, or any securities convertible into or exchangeable
for or representing the right to receive preferred securities or any such
substantially similar securities of either the Issuer or the Corporation,
without the prior written consent of the Underwriters, except for the Series A
Capital Securities offered in connection with this offering.
Prior to this offering, there has been no public market for the Series A
Capital Securities. Although the Underwriters have indicated to the Corporation
and the Issuer that they intend to make a market in the Series A Capital
Securities, they are not obligated to do so and may discontinue any such
market-making activities at any time without notice. No assurance can be given
as to the liquidity of the trading markets for the Series A Capital Securities.
51
<PAGE> 52
The Corporation and the Issuer have agreed to indemnify the several
Underwriters against certain liabilities, including liabilities under the Act.
It is expected that delivery of the Series A Capital Securities will be
made against payment therefor on or about April 30, 1998, as agreed upon by the
Corporation, the Issuer and the Underwriters in accordance with Rule 15c6-1
under the Exchange Act.
Certain of the Underwriters or their affiliates have provided from time to
time, and expect to provide in the future, investment services to the
Corporation and its affiliates, for which such Underwriters or their affiliates
have received or will receive customary fees and commissions.
In connection with this offering, certain Underwriters and selling group
members and their respective affiliates may engage in transactions that
stabilize, maintain or otherwise affect the market price of the Series A Capital
Securities. Such transactions may include stabilization transactions effected in
accordance with Rule 104 of Regulation M under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), pursuant to which such persons may bid
for or purchase Series A Capital Securities for the purpose of stabilizing the
market price for Series A Capital Securities. The Underwriters also may create a
short position for the account of the Underwriters by selling more Series A
Capital Securities in connection with the offering than they are committed to
purchase from the Issuer, and in such case may purchase Series A Capital
Securities in the open market following completion of the offering to cover all
or a portion of the Series A Capital Securities or by exercising the
Underwriters' overallotment option referred to above. In addition, CIBC
Oppenheimer Corp., on behalf of the Underwriters, may impose "penalty bids"
under contractual arrangements with the Underwriters whereby it may reclaim from
an Underwriter (or dealer participating in the offering) for the account of the
other Underwriters, the selling concession with respect to Series A Capital
Securities that is distributed in the offering but subsequently purchased for
the account of the Underwriters in the open market. Any of the transactions
described in this paragraph may result in the maintenance of the price of the
Series A Capital Securities at a level above that which might otherwise prevail
in the open market. None of the transactions described in this paragraph is
required, and, if they are undertaken, they may be discontinued at any time.
VALIDITY OF SECURITIES
Certain matters of Delaware law relating to the validity of the Series A
Capital Securities, the enforceability of the Series A Trust Agreement and the
formation of the Issuer will be passed upon by Richards, Layton & Finger,
special Delaware counsel to the Corporation and the Issuer. The validity of the
Series A Guarantee and the Series A Subordinated Debentures will be passed upon
for the Corporation by Stevens & Lee and for the Underwriters by Simpson Thacher
& Bartlett. Stevens & Lee and Simpson Thacher & Bartlett will rely on the
opinion of Richards, Layton & Finger as to matters of Delaware law. Simpson
Thacher & Bartlett will rely on the opinion of Stevens & Lee as to matters of
Pennsylvania law and Stevens & Lee will rely on the opinion of Simpson Thacher &
Bartlett as to matters of New York law. Certain matters relating to United
States federal income tax considerations described in this Prospectus will be
passed upon for the Corporation by Stevens & Lee.
EXPERTS
The consolidated financial statements of the Corporation incorporated by
reference in this prospectus and registration statement have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
report with respect thereto, and is incorporated herein by reference in reliance
upon the authority of said firm as experts in accounting and auditing in giving
said report.
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<PAGE> 53
======================================================
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS IN CONNECTION WITH THE OFFER MADE
BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE CORPORATION, THE ISSUER
OR BY THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR
SOLICITATION BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION
IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS
NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS, NOR ANY SALE MADE
HEREUNDER AND THEREUNDER, SHALL UNDER ANY CIRCUMSTANCES CREATE AN IMPLICATION
THAT THE INFORMATION HEREIN OR THEREIN IS CURRENT AS OF ANY TIME SUBSEQUENT TO
THE DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE
CORPORATION OR THE ISSUER SINCE THE DATE HEREOF.
---------------------------------
TABLE OF CONTENTS
<TABLE>
<S> <C>
PROSPECTUS
Available Information..................... 4
Incorporation of Certain Documents by
Reference............................... 4
Summary................................... 6
Risk Factors.............................. 9
USBANCORP Capital Trust I................. 14
USBANCORP, Inc............................ 14
Use of Proceeds........................... 16
Consolidated Ratios of Earnings to Fixed
Charges................................. 16
Capitalization............................ 17
Selected Consolidated Financial Data...... 18
Accounting Treatment...................... 19
Description of Series A Capital
Securities.............................. 20
Description of Series A Subordinated
Debentures.............................. 31
Book-Entry Issuance....................... 39
Description of Series A Guarantee......... 41
Relationship Among the Series A Capital
Securities, the Series A Subordinated
Debentures and the Series A Guarantee... 44
Certain Federal Income Tax Consequences... 45
Certain ERISA Considerations.............. 49
Underwriting.............................. 51
Validity of Securities.................... 52
Experts................................... 52
</TABLE>
======================================================
======================================================
USBANCORP CAPITAL
TRUST I
$34,500,000
BLUS(SM)
8.45% BENEFICIAL UNSECURED SECURITIES,
SERIES A
(LIQUIDATION AMOUNT $25
PER CAPITAL SECURITY)
FULLY AND UNCONDITIONALLY GUARANTEED,
AS DESCRIBED HEREIN, BY
[USBANCORP LOGO]
--------------------
PROSPECTUS
--------------------
CIBC OPPENHEIMER
LEGG MASON WOOD WALKER
INCORPORATED
April 27, 1998
======================================================
