AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 23, 1997
REGISTRATION NOS. 333-30045
333-30045-01
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT No. 1
to
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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COMMUNITY BANK SYSTEM, INC. COMMUNITY CAPITAL TRUST I
(Exact name of Registrant as specified (Exact name of Registrant as
in its charter) specified
in its trust agreement)
DELAWARE DELAWARE
(State or other jurisdiction of (State or other jurisdiction of
incorporation or organization) incorporation or organization)
_________ _________
6712 6719
(Primary Standard Industrial (Primary Standard Industrial
Classification Code Number) Classification Code Number)
16-1213679 16-6453481
(I.R.S. Employer (I.R.S. Employer
Identification No.) Identification No.)
5790 WIDEWATERS PARKWAY
DEWITT, NEW YORK 13214
(315) 445-2282
(Address, including zip code, and telephone number, including area code,
of Registrants' principal executive offices)
SANFORD A. BELDEN
PRESIDENT AND CHIEF
EXECUTIVE OFFICER
COMMUNITY BANK SYSTEM, INC.
5790 WIDEWATERS PARKWAY
DEWITT, NEW YORK 13214
(315) 445-2282
(Name, address, including zip code, and telephone number, including area
code, of agents for service)
COPIES TO:
GEORGE J. GETMAN, ESQ. CRAIG E. CHAPMAN, ESQ.
BOND, SCHOENECK & KING, LLP BROWN & WOOD LLP
ONE LINCOLN CENTER ONE WORLD TRADE CENTER
SYRACUSE, NEW YORK 13202 NEW YORK, NEW YORK 10048
Approximate Date of Commencement of Proposed Sale to the Public:
As soon as practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered
in connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. / /
---------------------------------------------
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
PROSPECTUS
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COMMUNITY CAPITAL TRUST I
OFFER TO EXCHANGE ITS
9.75% CAPITAL SECURITIES, SERIES B
(LIQUIDATION AMOUNT $1,000 PER CAPITAL SECURITY)
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
FOR ANY AND ALL OF ITS OUTSTANDING
9.75% CAPITAL SECURITIES, SERIES A
(LIQUIDATION AMOUNT $1,000 PER CAPITAL SECURITY)
UNCONDITIONALLY GUARANTEED, AS DESCRIBED HEREIN, BY
COMMUNITY BANK SYSTEM, INC.
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON AUGUST 25, 1997, UNLESS EXTENDED.
____________________
Community Capital Trust I, a trust formed under the laws of the State of
Delaware (the "Trust"), hereby offers, upon the terms and subject to the
conditions set forth in this Prospectus (as the same may be amended or
supplemented from time to time, the "Prospectus") and in the accompanying
Letter of Transmittal (which together constitute the "Exchange Offer"), to
exchange up to $30,000,000 aggregate Liquidation Amount of its 9.75% Capital
Securities, Series B (the "New Capital Securities") which have been
registered under the Securities Act of 1933, as amended (the "Securities
Act"), pursuant to a Registration Statement (as defined herein) of which this
Prospectus constitutes a part, for a like Liquidation Amount of its
outstanding 9.75% Capital Securities, Series A (the "Old Capital
Securities"), of which $30,000,000 aggregate Liquidation Amount is
outstanding. Pursuant to the Exchange Offer, Community Bank System, Inc., a
Delaware corporation (the "Corporation"), is also offering to exchange (i)
its guarantee of payments of cash distributions and payments on liquidation
of the Trust or redemption of the Old Capital Securities (the "Old
Guarantee") for a like guarantee in respect of the New Capital Securities
(the "New Guarantee") and (ii) all of its 9.75% Junior Subordinated
Deferrable Interest Debentures, Series B, due January 31, 2027 (the "New
Junior Subordinated Debentures") for a like aggregate principal amount of its
9.75% Junior Subordinated Deferrable Interest Debentures, Series A, due
January 31, 2027 (the "Old Junior Subordinated Debentures"), which New
Guarantee and New Junior Subordinated Debentures also have been registered
under the Securities Act. The Old Capital Securities, the Old Guarantee and
the Old Junior Subordinated Debentures are collectively referred to herein as
the "Old Securities" and the New Capital Securities, the New Guarantee and
the New Junior Subordinated Debentures are collectively referred to herein as
the "New Securities."
The terms of the New Securities are identical in all material respects
to the respective terms of the Old Securities, except that (i) the New
Securities have been registered under the Securities Act and therefore will
not be subject to certain restrictions on transfer applicable to the Old
Securities, (ii) the New Capital Securities will not contain the
$100,000 minimum Liquidation Amount transfer restriction, (iii) the New
Capital Securities will not provide for any increase in the Distribution
rate thereon, (iv) the New Junior Subordinated Debentures will not
contain the $100,000 minimum principal amount transfer restriction and (v)
the New Junior Subordinated Debentures will not provide for any increase
in the interest rate thereon. See "Description of New Securities" and
"Description of Old Securities." The New Capital Securities are being
offered for exchange in order to satisfy certain obligations of the
Corporation and the Trust under the Registration Rights Agreement dated
as of February 3, 1997 (the "Registration Rights Agreement") among the
Corporation, the Trust and the Initial Purchaser (as defined herein). In
the event that the Exchange Offer is consummated, any Old Capital
Securities which remain outstanding after consummation of the Exchange
Offer and the New Capital Securities issued in the Exchange Offer will
vote together as a single class for purposes of determining whether
holders of the requisite percentage in outstanding Liquidation Amount
thereof have taken certain actions or exercised certain rights under the
Trust Agreement.
(Continued on the following page)
THIS PROSPECTUS AND THE LETTER OF TRANSMITTAL ARE FIRST BEING MAILED TO
ALL HOLDERS OF OLD CAPITAL SECURITIES ON JULY 24, 1997.
SEE "RISK FACTORS" COMMENCING ON PAGE 17 FOR CERTAIN INFORMATION THAT
SHOULD BE CONSIDERED BY HOLDERS IN DECIDING WHETHER TO TENDER OLD CAPITAL
SECURITIES IN THE EXCHANGE OFFER.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is July 24, 1997.
The New Capital Securities and the Old Capital Securities (collectively,
the "Capital Securities") represent beneficial interests in the assets of the
Trust. The Corporation is the owner of all of the beneficial interests
represented by common securities of the Trust (the "Common Securities," and
together with the Capital Securities, the "Trust Securities"). The Chase
Manhattan Bank is the Property Trustee of the Trust. The Trust exists for
the sole purpose of issuing the Trust Securities and investing the proceeds
thereof in the Junior Subordinated Debentures (as defined herein), and
engaging in only those activities necessary, advisable or incidental thereto.
The Junior Subordinated Debentures will mature on January 31, 2027 (the
"Stated Maturity Date"). The Capital Securities will have a preference over
the Common Securities under certain circumstances with respect to cash
distributions and amounts payable on liquidation, redemption or otherwise.
See "Description of New Securities--Description of New Capital Securities--
Subordination of Common Securities."
As used herein, (i) the "Indenture" means the Indenture, dated as of
February 3, 1997, as amended and supplemented from time to time, between the
Corporation and The Chase Manhattan Bank, as Debenture Trustee (the
"Debenture Trustee"), (ii) the "Trust Agreement" means the Amended and
Restated Declaration of Trust relating to the Trust among the Corporation, as
Sponsor, The Chase Manhattan Bank as Property Trustee (the "Property
Trustee"), Chase Manhattan Bank Delaware, as Delaware Trustee, (the "Delaware
Trustee"), and the Administrative Trustees named therein (collectively, with
the Property Trustee and the Delaware Trustee, the "Issuer Trustees"). In
addition, as the context may require, unless otherwise expressly stated, (i)
the term "Capital Securities" includes the Old Capital Securities and the New
Capital Securities, (ii) the term "Trust Securities" includes the Capital
Securities and the Common Securities, (iii) the term "Junior Subordinated
Debentures" includes the Old Junior Subordinated Debentures and the New
Junior Subordinated Debentures and (iv) the term "Guarantee" includes the Old
Guarantee and the New Guarantee.
Except as provided below, the New Capital Securities will be represented
by global Capital Securities in fully registered form, deposited with a
custodian for and registered in the name of a nominee of The Depository Trust
Company ("DTC"). Beneficial interests in the New Capital Securities will be
shown on, and transfers thereof will be effected through, records maintained
by DTC and its participants. Beneficial interests in the New Capital
Securities will trade in DTC's Same-Day Funds Settlement System and secondary
market trading activity in such interests will therefore settle in
immediately available funds.
Holders of the New Capital Securities will be entitled to receive
cumulative cash distributions arising from the payment of interest on the
Junior Subordinated Debentures, accumulating from February 3, 1997, and
payable semi-annually in arrears on January 31 and July 31 of each year,
commencing July 31, 1997, at the annual rate of 9.75% of the Liquidation
Amount of $1,000 per New Capital Security ("Distributions"). So long as no
Debenture Event of Default (as defined herein) has occurred and is
continuing, the Corporation will have the right to defer payments of interest
on the Junior Subordinated Debentures at any time and from time to time for a
period not exceeding 10 consecutive semi-annual periods with respect to each
deferral period (each, an "Extension Period"), provided that no Extension
Period may extend beyond the Stated Maturity Date. Upon the termination of
any such Extension Period and the payment of all amounts then due, the
Corporation may elect to begin a new Extension Period, subject to the
requirements set forth in the Indenture. If and for so long as interest
payments on the Junior Subordinated Debentures are so deferred, Distributions
on the Trust 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 (which
includes common and preferred stock) or to make any payment with respect to
debt securities of the Corporation that rank pari passu with or junior to the
Junior Subordinated Debentures. During an Extension Period, interest on the
Junior Subordinated Debentures will continue to accrue (and the amount of
Distributions to which holders of the Trust Securities are entitled will
accumulate) at the rate of 9.75% per annum, compounded semi-annually, and
holders of Trust Securities will be required to accrue such deferred interest
income for United States federal income tax purposes prior to the receipt of
cash payments attributable to such interest income. See "Description of New
Securities--Description of New Junior Subordinated Debentures--Option to
Extend Interest Payment Date" and "Certain United States Federal Income Tax
Considerations--Interest Income and Original Issue Discount."
Through the Guarantee, the guarantee agreement of the Corporation
relating to the Common Securities (the "Common Guarantee"), the Trust
Agreement, the Junior Subordinated Debentures and the Indenture, taken
together, the Corporation has guaranteed or will guarantee, as the case may
be, fully, irrevocably and unconditionally, all of the Trust's obligations
under the Trust Securities. See "Relationship Among the New Capital
Securities, the New Junior Subordinated Debentures and the New Guarantee--
Full and Unconditional Guarantee." The Old Guarantee and the Common
Guarantee currently guarantee, and the New Guarantee will guarantee, payments
of Distributions and payments on liquidation of the Trust or redemption of
the Trust Securities, but in each case only to the extent that the Trust
holds funds on hand legally available therefor and has failed to make such
payments, as described herein. See "Description of New Securities--
Description of New Guarantee." If the Corporation fails to make a required
payment on the Junior Subordinated Debentures, the Trust will not have
sufficient funds to make the related payments, including Distributions, on
the Trust Securities. The Guarantee and the Common Guarantee will not cover
any such payment when the Trust does not have sufficient funds on hand
legally available therefor. In such event, a holder of Capital Securities
may institute a legal proceeding directly against the Corporation to enforce
its rights in respect of such payment. See "Description of New Securities--
Description of New Junior Subordinated Debentures--Enforcement of Certain
Rights By Holders of New Capital Securities." The obligations of the
Corporation under the Guarantee, the Common Guarantee and the Junior
Subordinated Debentures will be unsecured and subordinate and rank junior
in right of payment to all Senior Indebtedness (as defined in "Description
of New Securities -- Description of New Junior Subordinated Debentures--
Subordination"). At June 30, 1997, the Corporation had no outstanding
Senior Indebtedness. See "Risk Factors--Ranking of Subordinated Obligations
under the Guarantee and the Junior Subordinated Debentures."
The Trust Securities will be subject to mandatory redemption in a Like
Amount (as defined herein), (i) in whole but not in part, on the Stated
Maturity Date upon repayment of the Junior Subordinated Debentures at a
redemption price equal to the principal amount of, plus accrued and unpaid
interest on, the Junior Subordinated Debentures (the "Maturity Redemption
Price"), (ii) in whole but not in part, at any time prior to January 31,
2007, contemporaneously with the optional prepayment of the Junior
Subordinated Debentures, upon the occurrence and continuation of a Special
Event (as defined herein) at a redemption price equal to the Special Event
Prepayment Price (as defined below) (the "Special Event Redemption Price"),
and (iii) in whole or in part, on or after January 31, 2007,
contemporaneously with the optional prepayment by the Corporation of the
Junior Subordinated Debentures, at a redemption price equal to the Optional
Prepayment Price (as defined below) (the "Optional Redemption Price"). Any
of the Maturity Redemption Price, the Special Event Redemption Price and the
Optional Redemption Price may be referred to herein as the "Redemption
Price." See "Description of New Securities--Description of New Capital
Securities--Redemption."
Subject to the Corporation's having received any required regulatory
approval, the Junior Subordinated Debentures will be prepayable prior to the
Stated Maturity Date at the option of the Corporation (i) on or after January
31, 2007, in whole or in part, at a prepayment price (the "Optional
Prepayment Price") equal to 104.54% of the principal amount thereof on
January 31, 2007, declining ratably on each January 31 thereafter to 100% on
or after January 31, 2017 and (ii) prior to January 31, 2007, in whole but
not in part, upon the occurrence and continuation of a Special Event, at a
prepayment price (the "Special Event Prepayment Price") equal to the greater
of (a) 100% of the principal amount thereof and (b) the sum, as determined by
a Quotation Agent (as defined herein), of the present value of 104.54% of the
principal amount thereof plus the scheduled payments of interest thereon from
the prepayment date to and including January 31, 2007, discounted to the
prepayment date on a semi-annual basis (assuming a 360-day year consisting of
twelve 30-day months) at the Adjusted Treasury Rate (as defined herein) plus,
in the case of a redemption under clause (i) or clause (ii), accrued and
unpaid interest thereon to the date of prepayment. Either of the Optional
Prepayment Price or the Special Event Prepayment Price may be referred to
herein as the "Prepayment Price." See "Description of New Securities--
Description of New Junior Subordinated Debentures--Optional Prepayment" and
"--Special Event Prepayment."
The Corporation will have the right at any time to terminate the Trust
and cause a Like Amount of the Junior Subordinated Debentures to be
distributed to the holders of the Trust Securities in liquidation of the
Trust, subject to (i) the Corporation having received an opinion of counsel
to the effect that such distribution will not be a taxable event to holders
of Capital Securities and (ii) the 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 of the Federal
Reserve. Unless the Junior Subordinated Debentures are distributed to the
holders of the Trust Securities, in the event of a liquidation of the Trust
as described herein, after satisfaction of liabilities to creditors of the
Trust as required by applicable law, the holders of the Trust Securities
generally will be entitled to receive a Liquidation Amount of $1,000 per
Trust Security plus accumulated Distributions thereon to the date of payment.
See "Description of New Securities--Description of New Capital Securities--
Liquidation of the Trust and Distribution of Junior Subordinated Debentures."
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The Trust is making the Exchange Offer of the New Capital Securities in
reliance on the position of the staff of the Division of Corporation Finance
of the Securities and Exchange Commission (the "Commission") as set forth in
certain interpretive letters addressed to third parties in other
transactions. However, neither the Corporation nor the Trust has sought its
own interpretive letter and there can be no assurance that the staff of the
Division of Corporation Finance of the Commission would make a similar
determination with respect to the Exchange Offer as it has in such
interpretive letters to third parties. Based on these interpretations by the
staff of the Division of Corporation Finance of the Commission, and subject
to the two immediately following sentences, the Corporation and the Trust
believe that New Capital Securities issued pursuant to this Exchange Offer in
exchange for Old Capital Securities may be offered for resale, resold and
otherwise transferred by a holder thereof (other than a holder who is a
broker-dealer) without further compliance with the registration and
prospectus delivery requirements of the Securities Act, provided that such
New Capital Securities are acquired in the ordinary course of such holder's
business and that such holder is not participating, and has no arrangement or
understanding with any person to participate, in a distribution (within the
meaning of the Securities Act) of such New Capital Securities. However, any
holder of Old Capital Securities who is an "affiliate", as such term is
defined in Rule 405 under the Securities Act (an "Affiliate") of the
Corporation or the Trust or who intends to participate in the Exchange Offer
for the purpose of distributing New Capital Securities, or any broker-dealer
who purchased Old Capital Securities from the Trust for resale pursuant to
Rule 144A under the Securities Act ("Rule 144A") or any other available
exemption under the Securities Act, (a) will not be able to rely on the
interpretations of the staff of the Division of Corporation Finance of the
Commission set forth in the above-mentioned interpretive letters, (b) will
not be permitted or entitled to tender such Old Capital Securities in the
Exchange Offer and (c) must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with any sale or
other transfer of such Old Capital Securities unless such sale is made
pursuant to an exemption from such requirements. In addition, as described
below, if any broker-dealer holds Old Capital Securities acquired for its own
account as a result of market-making or other trading activities and
exchanges such Old Capital Securities for New Capital Securities, then such
broker-dealer must deliver a prospectus meeting the requirements of the
Securities Act in connection with any resales of such New Capital Securities.
Each holder of Old Capital Securities who wishes to exchange Old Capital
Securities for New Capital Securities in the Exchange Offer will be required
to represent that (i) it is not an Affiliate of the Corporation or the Trust,
(ii) any New Capital Securities to be received by it are being acquired in
the ordinary course of its business, (iii) it has no arrangement or
understanding with any person to participate in a distribution (within the
meaning of the Securities Act) of such New Capital Securities, and (iv) if
such holder is not a broker-dealer, such holder is not engaged in, and does
not intend to engage in, a distribution (within the meaning of the Securities
Act) of such New Capital Securities. In addition, the Corporation and the
Trust may require such holder, as a condition to such holder's eligibility to
participate in the Exchange Offer, to furnish to the Corporation and the
Trust (or an agent thereof) in writing information as to the number of
"beneficial owners" (within the meaning of Rule 13d-3 under the Securities
Exchange Act of 1934, as amended) on behalf of whom such holder holds the
Capital Securities to be exchanged in the Exchange Offer. Each broker-dealer
that receives New Capital Securities for its own account pursuant to the
Exchange Offer must acknowledge that it acquired the Old Capital Securities
for its own account as the result of market-making activities or other
trading activities and must agree that it will deliver a prospectus meeting
the requirements of the Securities Act in connection with any resale of such
New Capital Securities. The Letter of Transmittal states that, by so
acknowledging and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the
Securities Act. Based on the position taken by the staff of the Division of
Corporation Finance of the Commission in the interpretive letters referred to
above, the Corporation and the Trust believe that broker-dealers who acquired
Old Capital Securities for their own accounts, as a result of market-making
activities or other trading activities ("Participating Broker-Dealers"), may
fulfill their prospectus delivery requirements with respect to the New
Capital Securities received upon exchange of such Old Capital Securities
(other than Old Capital Securities which represent an unsold allotment from
the original sale of the Old Capital Securities) with a prospectus meeting
the requirements of the Securities Act, which may be the prospectus prepared
for the Exchange Offer so long as it contains a description of the plan of
distribution with respect to the resale of such New Capital Securities.
Accordingly, this Prospectus, as it may be amended or supplemented from time
to time, may be used by a Participating Broker-Dealer during the period
referred to below in connection with resales of New Capital Securities
received in exchange for Old Capital Securities where such Old Capital
Securities were acquired by such Participating Broker-Dealer for its own
account as a result of market-making or other trading activities. Subject to
certain provisions set forth in the Registration Rights Agreement, the
Corporation and the Trust have agreed that this Prospectus, as it may be
amended or supplemented from time to time, may be used by a Participating
Broker-Dealer in connection with resales of such New Capital Securities for a
period ending 90 days after the Expiration Date (as defined herein) (subject
to extension under certain limited circumstances described below) or, if
earlier, when all such New Capital Securities have been disposed of by such
Participating Broker-Dealer. See "Plan of Distribution." However, a
Participating Broker-Dealer who intends to use this Prospectus in connection
with the resale of New Capital Securities received in exchange for Old
Capital Securities pursuant to the Exchange Offer must notify the Corporation
or the Trust, or cause the Corporation or the Trust to be notified, on or
prior to the Expiration Date, that it is a Participating Broker-Dealer. Such
notice may be given in the space provided for that purpose in the Letter of
Transmittal or may be delivered to the Exchange Agent at one of the addresses
set forth herein under "The Exchange Offer--Exchange Agent." Any
Participating Broker-Dealer who is an Affiliate of the Corporation or the
Trust may not rely on such interpretive letters and must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction. See "The Exchange Offer--Resales of
New Capital Securities."
In that regard, each Participating Broker-Dealer who surrenders Old
Capital Securities pursuant to the Exchange Offer will be deemed to have
agreed, by execution of the Letter of Transmittal, that, upon receipt of
notice from the Corporation or the Trust of the occurrence of any event or
the discovery of any fact which makes any statement contained or incorporated
by reference in this Prospectus untrue in any material respect or which
causes this Prospectus to omit to state a material fact necessary in order to
make the statements contained or incorporated by reference herein, in light
of the circumstances under which they were made, not misleading or of the
occurrence of certain other events specified in the Registration Rights
Agreement, such Participating Broker-Dealer will suspend the sale of New
Capital Securities (or the New Guarantee or the New Junior Subordinated
Debentures, as applicable) pursuant to this Prospectus until the Corporation
or the Trust has amended or supplemented this Prospectus to correct such
misstatement or omission and has furnished copies of the amended or
supplemented Prospectus to such Participating Broker-Dealer or the
Corporation or the Trust has given notice that the sale of the New Capital
Securities (or the New Guarantee or the New Junior Subordinated Debentures,
as applicable) may be resumed, as the case may be. If the Corporation or the
Trust gives such notice to suspend the sale of the New Capital Securities (or
the New Guarantee or the New Junior Subordinated Debentures, as applicable),
it shall extend the 90-day period referred to above during which
Participating Broker-Dealers are entitled to use this Prospectus in
connection with the resale of New Capital Securities by the number of days
during the period from and including the date of the giving of such notice to
and including the date when Participating Broker-Dealers shall have received
copies of the amended or supplemented Prospectus necessary to permit resales
of the New Capital Securities or to and including the date on which the
Corporation or the Trust has given notice that the sale of New Capital
Securities (or the New Guarantee or the New Junior Subordinated Debentures,
as applicable) may be resumed, as the case may be.
-----------------
Prior to the Exchange Offer, there has been only a limited secondary
market and no public market for the Old Capital Securities. The New Capital
Securities will be a new issue of securities for which there currently is no
market. Although the Initial Purchaser has informed the Corporation and the
Trust that it currently intends to make a market in the New Capital
Securities, it is not obligated to do so, and any such market making may be
discontinued at any time without notice. Accordingly, there can be no
assurance as to the development or liquidity of any market for the New
Capital Securities. The Corporation and the Trust currently do not intend to
apply for listing of the New Capital Securities on any securities exchange or
for quotation through the National Association of Securities Dealers
Automated Quotation ("NASDAQ") System.
Any Old Capital Securities not tendered and accepted in the Exchange
Offer will remain outstanding and will be entitled to all of the same rights
and will be subject to the same limitations applicable thereto under the
Trust Agreement (except for those rights which terminate upon consummation of
the Exchange Offer). Following consummation of the Exchange Offer, the
holders of Old Capital Securities will continue to be subject to all of the
existing restrictions upon transfer thereof and neither the Corporation nor
the Trust will have any further obligation to such holders (other than under
certain limited circumstances) to provide for registration under the
Securities Act of the Old Capital Securities held by them. To the extent
that Old Capital Securities are tendered and accepted in the Exchange Offer,
a holder's ability to sell untendered Old Capital Securities could be
adversely affected. See "Risk Factors--Consequences of a Failure to Exchange
Old Capital Securities."
THIS PROSPECTUS AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION. HOLDERS OF OLD CAPITAL SECURITIES ARE URGED TO READ THIS
PROSPECTUS AND THE RELATED LETTER OF TRANSMITTAL CAREFULLY BEFORE DECIDING
WHETHER TO TENDER THEIR OLD CAPITAL SECURITIES PURSUANT TO THE EXCHANGE
OFFER.
Old Capital Securities may be tendered for exchange on or prior to 5:00
p.m., New York City time, on August 25, 1997 (such time on such date being
hereinafter called the "Expiration Date"), unless the Exchange Offer is
extended by the Corporation or the Trust (in which case the term "Expiration
Date" shall mean the latest date and time to which the Exchange Offer is
extended). Tenders of Old Capital Securities may be withdrawn at any time on
or prior to the Expiration Date. The Exchange Offer is not conditioned upon
any minimum Liquidation Amount of Old Capital Securities being tendered for
exchange. However, the Exchange Offer is subject to certain events and
conditions which may be waived by the Corporation or the Trust and to the
terms and provisions of the Registration Rights Agreement. Old Capital
Securities may be tendered in whole or in part having an aggregate
Liquidation Amount of not less than $100,000 (100 Capital Securities) or any
integral multiple of $1,000 (one Capital Security) in excess thereof,
provided that, if any Old Capital Securities are tendered for exchange in
part, the untendered Liquidation Amount thereof must be $100,000 (100
Capital Securities) or any integral multiple of $1,000 in excess thereof.
The Corporation has agreed to pay all expenses of the Exchange Offer. See
"The Exchange Offer-- Fees and Expenses." Holders of the Old Capital
Securities whose Old Capital Securities are accepted for exchange will be
deemed to have waived the right to receive any Distributions on such Old
Capital Securities accumulated from and including August 1, 1997. Instead,
holders of New Capital Securities as of the relevant record date shall be
entitled to receive, on January 31, 1998, Distributions accumulated from and
including August 1, 1997. See "The Exchange Offer--Distributions on New
Capital Securities."
Neither the Corporation nor the Trust will receive any cash proceeds
from the issuance of the New Capital Securities offered hereby. No dealer-
manager is being used in connection with this Exchange Offer. See "Use of
Proceeds" and "Plan of Distribution."
-------------------
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 THIS EXCHANGE
OFFER AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE CORPORATION OR THE TRUST.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY EXCHANGE MADE PURSUANT HERETO
SHALL UNDER ANY CIRCUMSTANCE CREATE AN IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE CORPORATION OR THE TRUST SINCE THE DATE HEREOF.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR A 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 ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
-------------------
TABLE OF CONTENTS
Page
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Available Information . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Incorporation of Certain Documents by Reference . . . . . . . . . . . . . . 8
Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Ratios of Earnings to Fixed Charges . . . . . . . . . . . . . . . . . . . 21
Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Selected Consolidated Financial Information . . . . . . . . . . . . . . . 23
Community Capital Trust I . . . . . . . . . . . . . . . . . . . . . . . . 24
Community Bank System, Inc. . . . . . . . . . . . . . . . . . . . . . . . 24
Recent Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
The Exchange Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Description of New Securities . . . . . . . . . . . . . . . . . . . . . . 37
Description of Old Securities . . . . . . . . . . . . . . . . . . . . . . 55
Relationship Among the New Capital Securities, the. . . . . . . . . . . . 56
New Junior Subordinated Debentures and the New Guarantee . . . . . . . . 57
Certain United States Federal Income Tax Considerations . . . . . . . . . 60
ERISA Considerations . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Plan of Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Legal Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
AVAILABLE INFORMATION
The Corporation is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith, files reports, proxy statements and other information
with the Commission. Such reports, proxy statements and other information
can be inspected and copied at the public reference facilities of the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549 and
at the regional offices of the Commission located at 7 World Trade Center,
13th Floor, Suite 1300, New York, New York 10048 and Citicorp Center, 500
West Madison Street, 14th Floor, Suite 1400, Chicago, Illinois 60661. Copies
of such material can also be obtained at prescribed rates by writing to the
Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549. Such information may also be accessed by means of
the Commission's home page on the Internet (http://www.sec.gov.) through the
Commission's electronic data gathering, analysis and retrieval system
("EDGAR"). The Corporation's common stock (the "Common Stock") is traded on
the NASDAQ National Market System. 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.
No separate financial statements of the Trust have been included herein.
The Corporation and the Trust do not consider that such financial statements
would be material to holders of the Capital Securities because the Trust 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 Junior Subordinated
Debentures and issuing the Trust Securities. See "Community Capital Trust I"
and "Description of New Securities." In addition, the Corporation does not
expect that the Trust will file reports under the Exchange Act with the
Commission.
This Prospectus constitutes a part of a registration statement on Form
S-4 (the "Registration Statement") filed by the Corporation and the Trust
with the Commission under the Securities Act. This Prospectus does not
contain all of the information set forth in the Registration Statement,
certain parts of which are omitted in accordance with the rules and
regulations of the Commission, and reference is hereby made to the
Registration Statement and to the exhibits relating thereto for further
information with respect to the Corporation, the Trust and the New
Securities. Any statements contained herein concerning the provisions of any
document are not necessarily complete, and, in each instance, reference is
made to the copy of such document filed as an exhibit to the Registration
Statement or otherwise filed with the Commission. Each such statement is
qualified in its entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Corporation with the Commission
pursuant to Section 13 of the Exchange Act are incorporated into this
Prospectus by reference:
1. The Corporation's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996;
2. The Corporation's Quarterly Report on Form 10-Q for the fiscal
quarter ended March 31, 1997; and
3. The Corporation's Current Report on Form 8-K, as filed on March 6,
1997.
All documents subsequently 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 the Exchange Offer 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 incorporated or deemed to be incorporated by reference herein shall
be deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
As used herein, the terms "Prospectus" and "herein" mean this Prospectus
including the documents incorporated or deemed to be incorporated herein by
reference, as the same may be amended, supplemented or otherwise modified
from time to time. Statements contained in this Prospectus as to the contents
of any contract or other document referred to herein do not purport to be
complete, and where reference is made to the particular provisions of such
contract or other document, such provisions are qualified in all respects by
reference to all of the provisions of such contract or other document. The
Corporation will provide without charge to any person to whom this Prospectus
is delivered, on the written or oral request of such person, a copy of any or
all of the foregoing documents incorporated by reference herein (other than
exhibits not specifically incorporated by reference into the texts of such
documents). Requests for such documents should be directed to: Loretta L.
Marx, Secretary of the Corporation, 5790 Widewaters Parkway, DeWitt, New York
13214. Telephone requests may be directed to Loretta L. Marx at (315) 445-
2282.
SUMMARY
The following is a summary of certain information contained
elsewhere in this Prospectus. Reference is made to, and this summary is
qualified in its entirety by, the more detailed information contained
elsewhere in this Prospectus.
COMMUNITY BANK SYSTEM, INC.
Community Bank System, Inc., a Delaware corporation (the
"Corporation"), is a bank holding company headquartered in DeWitt, New York,
which owns all of the outstanding stock of its principal operating
subsidiary, Community Bank, National Association ("Community Bank").
Community Bank is a full service commercial bank providing a range of banking
services through its two regional offices in Canton, New York and Olean, New
York, and through a total (after giving effect to the requisitions discussed
below) of 68 customer facilities in the counties of St. Lawrence,
Jefferson, Lewis, Cayuga, Seneca, Ontario, Oswego, Oneida, Wayne, Yates,
Onondaga, Allegany, Cattaraugus, Tioga, Chautaugua, Franklin, Herkimer and
Steuben. These counties are grouped by Community Bank into three distinct
banking markets: Northern New York, Finger Lakes Region, and the Southern Tier
(which is further divided into the Olean and Corning submarkets).
As of December 31, 1996, the Corporation had consolidated assets of
$1.3 billion, deposits of $1.0 billion and shareholders' equity of $109.4
million. The Corporation's net income for the year ended December 31, 1996
was $14.1 million, or $1.83 per share.
On February 10, 1997, Community Bank entered into a Purchase and
Assumption Agreement with KeyBank National Association (New York) ("KeyBank")
relating to the acquisition of certain assets and assumption of certain
liabilities associated with eight KeyBank branch locations in upstate New
York. The transactions contemplated by the KeyBank Purchase and Assumption
Agreement were consummated effective June 16, 1997. In addition, on March
21, 1997, Community Bank entered into a Purchase and Assumption Agreement
with Fleet Bank relating to the acquisition of certain assets and assumption
of certain liabilities associated with twelve Fleet Bank branch locations in
upstate New York. The transactions contemplated by the Fleet Bank Purchase
and Assumption Agreement were consummated effective July 18, 1997. See
"Recent Developments--Acquisitions."
COMMUNITY CAPITAL TRUST I
The Trust is a statutory business trust created under Delaware law
pursuant to the filing of a certificate of trust with the Delaware Secretary
of State on January 29, 1997. The Trust'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 Trust exists for the exclusive purposes
of (i) issuing and selling the Trust Securities, (ii) using the proceeds from
the sale of the Trust Securities to acquire the Junior Subordinated
Debentures issued by the Corporation and (iii) engaging in only those other
activities necessary, advisable or incidental thereto (such as registering
the transfer of the Trust Securities). The Junior Subordinated Debentures
will be the sole assets of the Trust, and payments under the Junior
Subordinated Debentures will be the sole revenue of the Trust. All of the
Common Securities are owned by the Corporation.
THE EXCHANGE OFFER
The Exchange Offer . . . . . . . Up to $30,000,000 aggregate
Liquidation Amount of New Capital
Securities are being offered in
exchange for a like aggregate
Liquidation Amount of Old Capital
Securities. Old Capital
Securities may be tendered for
exchange in whole or in part in a
Liquidation Amount of $100,000
(100 Capital Securities) or any
integral multiple of $1,000 (one
Capital Security) in excess
thereof, provided that, if any Old
Capital Securities are tendered
for exchange in part, the
untendered Liquidation Amount
thereof must be $100,000 (100
Capital Securities) or any
integral multiple of $1,000 in
excess thereof. The Corporation
and the Trust are making the
Exchange Offer in order to satisfy
their obligations under the
Registration Rights Agreement
relating to the Old Capital
Securities. For a description of
the procedures for tendering Old
Capital Securities, see "The
Exchange Offer--Procedures for
Tendering Old Capital Securities."
Expiration Date . . . . . . . . . 5:00 p.m., New York City time, on
August 25, 1997, unless the
Exchange Offer is extended by the
Corporation or the Trust (in which
case the Expiration Date will be
the latest date and time to which
the Exchange Offer is extended).
See "The Exchange Offer--Terms of
the Exchange Offer."
Conditions to the Exchange Offer The Exchange Offer is subject to
certain conditions, which may be
waived by the Corporation and the
Trust in their sole discretion.
The Exchange Offer is not
conditioned upon any minimum
Liquidation Amount of Old Capital
Securities being tendered. See
"The Exchange Offer--Conditions to
the Exchange Offer."
Terms of the Exchange Offer . . . The Corporation and the Trust
reserve the right in their sole
and absolute discretion, subject
to applicable law, at any time and
from time to time, (i) to delay
the acceptance of the Old Capital
Securities for exchange, (ii) to
terminate the Exchange Offer if
certain specified conditions have
not been satisfied, (iii) to
extend the Expiration Date of the
Exchange Offer and retain all Old
Capital Securities tendered
pursuant to the Exchange Offer,
subject, however, to the right of
holders of Old Capital Securities
to withdraw their tendered Old
Capital Securities, or (iv) to
waive any condition or otherwise
amend the terms of the Exchange
Offer in any respect. See "The
Exchange Offer--Terms of the
Exchange Offer."
Withdrawal Rights . . . . . . . . Tenders of Old Capital Securities
may be withdrawn at any time on or
prior to the Expiration Date by
delivering a written notice of
such withdrawal to the Exchange
Agent in conformity with certain
procedures set forth below under
"The Exchange Offer--Withdrawal
Rights."
Procedures for Tendering Old Tendering holders of Old Capital
Capital Securities . . . . . . . Securities must complete and sign
a Letter of Transmittal in
accordance with the instructions
contained therein and forward the
same by mail, facsimile or hand
delivery, together with any other
required documents, to the
Exchange Agent, either with the
Old Capital Securities to be
tendered or in compliance with the
specified procedures for
guaranteed delivery of Old Capital
Securities. Certain brokers,
dealers, commercial banks, trust
companies and other nominees may
also effect tenders by book-entry
transfer. Holders of Old Capital
Securities registered in the name
of a broker, dealer, commercial
bank, trust company or other
nominee are urged to contact such
person promptly if they wish to
tender Old Capital Securities
pursuant to the Exchange Offer.
See "The Exchange Offer--
Procedures for Tendering Old
Capital Securities."
Letters of Transmittal and
certificates representing Old
Capital Securities should not be
sent to the Corporation or the
Trust. Such documents should only
be sent to the Exchange Agent.
Resales of New Capital Securities The Corporation and the Trust are
making the Exchange Offer in
reliance on the position of the
staff of the Division of
Corporation Finance of the
Commission as set forth in certain
interpretive letters addressed to
third parties in other
transactions. However, neither
the Corporation nor the Trust has
sought its own interpretive letter
and there can be no assurance that
the staff of the Division of
Corporation Finance of the
Commission would make a similar
determination with respect to the
Exchange Offer as it has in such
interpretive letters to third
parties. Based on these
interpretations by the staff of
the Division of Corporation
Finance of the Commission, and
subject to the two immediately
following sentences, the
Corporation and the Trust believe
that New Capital Securities issued
pursuant to this Exchange Offer in
exchange for Old Capital
Securities may be offered for
resale, resold and otherwise
transferred by a holder thereof
(other than a holder who is a
broker-dealer) without further
compliance with the registration
and prospectus delivery
requirements of the Securities
Act, provided that such New
Capital Securities are acquired in
the ordinary course of such
holder's business and that such
holder is not participating, and
has no arrangement or
understanding with any person to
participate, in a distribution
(within the meaning of the
Securities Act) of such New
Capital Securities. However, any
holder of Old Capital Securities
who is an Affiliate of the
Corporation or the Trust or who
intends to participate in the
Exchange Offer for the purpose of
distributing the New Capital
Securities, or any broker-dealer
who purchased the Old Capital
Securities from the Trust for
resale pursuant to Rule 144A or
any other available exemption
under the Securities Act, (a) will
not be able to rely on the
interpretations of the staff of
the Division of Corporation
Finance of the Commission set
forth in the above-mentioned
interpretive letters, (b) will not
be permitted or entitled to tender
such Old Capital Securities in the
Exchange Offer and (c) must comply
with the registration and
prospectus delivery requirements
of the Securities Act in
connection with any sale or other
transfer of such Old Capital
Securities unless such sale is
made pursuant to an exemption from
such requirements. In addition,
as described below, if any broker-
dealer holds Old Capital
Securities acquired for its own
account as a result of market-
making or other trading activities
and exchanges such Old Capital
Securities for New Capital
Securities, then such broker-
dealer must deliver a prospectus
meeting the requirements of the
Securities Act in connection with
any resales of such New Capital
Securities.
Each holder of Old Capital
Securities who wishes to exchange
Old Capital Securities for New
Capital Securities in the Exchange
Offer will be required to
represent that (i) it is not an
Affiliate of the Corporation or
the Trust, (ii) any New Capital
Securities to be received by it
are being acquired in the ordinary
course of its business, (iii) it
has no arrangement or
understanding with any person to
participate in a distribution
(within the meaning of the
Securities Act) of such New
Capital Securities, and (iv) if
such holder is not a broker-dealer,
such holder is not engaged in, and
does not intend to engage in, a
distribution (within the meaning
of the Securities Act) of such New
Capital Securities. Each broker-
dealer that receives New Capital
Securities for its own account
pursuant to the Exchange Offer must
acknowledge that it acquired the
Old Capital Securities for its own
account as the result of market-
making activities or other trading
activities and must agree that it
will deliver a prospectus meeting
the requirements of the Securities
Act in connection with any resale
of such New Capital Securities.
The Letter of Transmittal states
that, by so acknowledging and by
delivering a prospectus, a broker-
dealer will not be deemed to admit
that it is an "underwriter" within
the meaning of the Securities Act.
Based on the position taken by the
staff of the Division of
Corporation Finance of the
Commission in the interpretive
letters referred to above, the
Corporation and the Trust believe
that Participating Broker-Dealers
who acquired Old Capital
Securities for their own accounts
as a result of market-making
activities or other trading
activities may fulfill their
prospectus delivery requirements
with respect to the New Capital
Securities received upon exchange
of such Old Capital Securities
(other than Old Capital Securities
which represent an unsold
allotment from the original sale
of the Old Capital Securities)
with a prospectus meeting the
requirements of the Securities
Act, which may be the prospectus
prepared for an exchange offer so
long as it contains a description
of the plan of distribution with
respect to the resale of such New
Capital Securities. Accordingly,
this Prospectus, as it may be
amended or supplemented from time
to time, may be used by a
Participating Broker-Dealer in
connection with resales of New
Capital Securities received in
exchange for Old Capital
Securities where such Old Capital
Securities were acquired by such
Participating Broker-Dealer for
its own account as a result of
market-making or other trading
activities. Subject to certain
provisions set forth in the
Registration Rights Agreement and
to the limitations described below
under "The Exchange Offer--Resales
of New Capital Securities," the
Corporation and the Trust have
agreed that this Prospectus, as it
may be amended or supplemented
from time to time, may be used by
a Participating Broker-Dealer in
connection with resales of such
New Capital Securities for a
period ending 90 days after the
Expiration Date (subject to
extension under certain limited
circumstances) or, if earlier,
when all such New Capital
Securities have been disposed of
by such Participating Broker-
Dealer. See "Plan of
Distribution." Any Participating
Broker-Dealer who is an Affiliate
of the Corporation or the Trust
may not rely on such interpretive
letters and must comply with the
registration and prospectus
delivery requirements of the
Securities Act in connection with
any resale transaction. See "The
Exchange Offer--Resales of New
Capital Securities."
Exchange Agent . . . . . . . . . The exchange agent with respect to
the Exchange Offer is The Chase
Manhattan Bank (the "Exchange
Agent"). The addresses, and
telephone and facsimile numbers,
of the Exchange Agent are set
forth in "The Exchange Offer--
Exchange Agent" and in the Letter
of Transmittal.
Use of Proceeds . . . . . . . . . Neither the Corporation nor the
Trust will receive any cash
proceeds from the issuance of the
New Capital Securities offered
hereby. See "Use of Proceeds."
Certain United States Federal
Income Tax Considerations . . . . Holders of Old Capital Securities
should review the information set
forth under "Certain United States
Federal Income Tax Considerations"
and "ERISA Considerations" prior
to tendering Old Capital
Securities in the Exchange Offer.
Certain ERISA Considerations . . Prospective holders of the New
Capital Securities should review
the information set forth under
"ERISA Considerations" prior to
acquiring an interest in the New
Capital Securities.
THE NEW CAPITAL SECURITIES
Securities Offered . . . . . . . Up to $30,000,000 aggregate
Liquidation Amount of the Trust's
New Capital Securities which have
been registered under the
Securities Act (Liquidation Amount
$1,000 per New Capital Security).
The New Capital Securities will be
issued, and the Old Capital
Securities were issued, under the
Trust Agreement. The New Capital
Securities and any Old Capital
Securities which remain
outstanding after consummation of
the Exchange Offer will vote
together as a single class for
purposes of determining whether
holders of the requisite percentage
in outstanding Liquidation Amount
thereof have taken certain actions
or exercised certain rights
under the Trust Agreement. See
"Description of New Securities--
Description of New Capital
Securities -- Voting Rights;
Amendment of the Trust Agreement."
The terms of the New Capital
Securities are identical in all
material respects to the terms of
the Old Capital Securities, except
that the New Capital Securities
have been registered under the
Securities Act and will not be
subject to the $100,000 minimum
Liquidation Amount transfer
restriction and certain other
restrictions on transfer applicable
to the Old Capital Securities and
will not provide for any increase
in the Distribution rate thereon.
See "The Exchange Offer--Purpose of
the Exchange Offer," "Description
of New Securities" and
"Description of Old Securities."
Distribution Dates . . . . . . . January 31 and July 31 of each
year, commencing January 31, 1998.
Extension Periods . . . . . . . . So long as no Debenture Event of
Default (as defined herein) has
occurred and is continuing,
Distributions on the New 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 New Junior
Subordinated Debentures. No
Extension Period will exceed 10
consecutive semi-annual periods or
extend beyond the Stated Maturity
Date. See "Description of New
Securities--Description of New
Junior Subordinated Debentures--
Option to Extend Interest Payment
Date" and "Certain United States
Federal Income Tax Considerations-
-Interest Income and Original
Issue Discount."
Ranking . . . . . . . . . . . . . The New Capital Securities will
rank pari passu, and payments
thereon will be made pro rata,
with the Old Capital Securities
and the Common Securities except
as described under "Description of
New Securities-- Description of
New Capital Securities--
Subordination of Common
Securities." The New Junior
Subordinated Debentures will rank
pari passu with the Old Junior
Subordinated Debentures and all
other junior subordinated
debentures (if any) issued by the
Corporation (collectively, the
"Other Debentures") and sold (if
at all) to other trusts (if any)
established by the Corporation, in
each case similar to the Trust
(the "Other Trusts"), and will be
unsecured and subordinate and rank
junior in right of payment to all
Senior Indebtedness to the extent
and in the manner set forth in the
Indenture. See "Description of
New Securities--Description of New
Junior Subordinated Debentures."
The New Guarantee will rank pari
passu with the Old Guarantee and
all other guarantees (if any)
issued by the Corporation with
respect to capital securities (if
any) issued by Other Trusts
(collectively, the "Other
Guarantees") and will be unsecured
and subordinate and rank junior in
right of payment to all Senior
Indebtedness to the extent and in
the manner set forth in the New
Guarantee. See "Description of
New Securities--Description of New
Guarantee."
Redemption . . . . . . . . . . . The Trust Securities are subject
to mandatory redemption in a Like
Amount, (i) in whole but not in
part, on the Stated Maturity Date
upon repayment of the Junior
Subordinated Debentures, (ii) in
whole but not in part, at any time
prior to January 31, 2007,
contemporaneously with the
optional prepayment of the Junior
Subordinated Debentures by the
Corporation upon the occurrence
and continuation of a Special
Event and (iii) in whole or in
part, at any time on or after
January 31, 2007, contemporaneously
with the optional prepayment by the
Corporation of the Junior
Subordinated Debentures, in each
case at the applicable Redemption
Price. See "Description of New
Securities--Description of New
Capital Securities-- Redemption."
Rating . . . . . . . . . . . . . The New Capital Securities are
expected to be rated "BBB-" by
Thomson BankWatch, Inc.
Voting Rights . . . . . . . . . . Holders of New Capital Securities
will have limited voting rights
relating generally to the
modification of the New Capital
Securities and the New Guarantee
and the exercise of the Trust's
rights as the holder of the New
Junior Subordinated Debentures.
Holders of New Capital Securities
will not be entitled to appoint,
remove or replace the
Administrative Trustees at any
time or the Property Trustee or
the Delaware Trustee except upon
the occurrence of certain events
described herein. See "Description
of New Securities--Description of
New Capital Securities-- Voting
Rights; Amendment of the Trust
Agreement" and "--Removal of Issuer
Trustees."
Absence of Market for the New The New Capital Securities will be
Capital Securities . . . . . . . a new issue of securities for
which there currently is no
market. Although M.A. Schapiro &
Co., Inc. (the "Initial Purchaser")
has informed the Corporation and
the Trust that it currently intends
to make a market in the New Capital
Securities, it is not obligated to
do so, and any such market making
may be discontinued at any time
without notice. Accordingly, there
can be no assurance as to the
development or liquidity of any
market for the New Capital
Securities. The Trust and the
Corporation do not intend to apply
for listing of the New Capital
Securities on any securities
exchange or for quotation through
NASDAQ. See "Plan of Distribution."
RISK FACTORS
Prospective investors should consider carefully, in addition to the
other information contained in this Prospectus, and incorporated by reference
herein, the following factors in connection with the Exchange Offer and the
New Capital Securities offered hereby.
RANKING OF SUBORDINATED OBLIGATIONS UNDER THE GUARANTEE AND THE JUNIOR
SUBORDINATED DEBENTURES
The obligations of the Corporation under the Guarantee and the Junior
Subordinated Debentures will be unsecured and subordinate and rank junior in
right of payment to all Senior Indebtedness. In addition, in the case of a
bankruptcy or insolvency proceeding involving the Corporation, the
Corporation's obligations under the Guarantee will also be subordinate and
rank junior in right of payment to all liabilities (other than Other
Guarantees) of the Corporation. At June 30, 1997, the Corporation had no
outstanding Senior Indebtedness. Because the Corporation is a bank 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 (and thus the ability of holders of the Capital Securities to
benefit indirectly from such distribution) 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. At March 31, 1997,
Community Bank had an aggregate (excluding deposits and liabilities owed to
the Corporation) of approximately $1,108 million of interest-bearing deposits
and other borrowings outstanding. Accordingly, the Junior Subordinated
Debentures will be effectively subordinated to all existing and future
liabilities of Community Bank, and holders of Junior Subordinated Debentures
should look only to the assets of the Corporation for payments on the Junior
Subordinated Debentures. In addition, Community Bank is subject to certain
restrictions imposed by state and federal law on any loans or extensions of
credit to, investments in or asset purchases from, the Corporation or its
non-banking affiliates. Such transactions by Community Bank are generally
limited in amount as to the Corporation and as to each of such other
affiliates to 10% of Community Bank's capital and surplus and as to the
Corporation and all of such other affiliates to an aggregate of 20% of
Community Bank's capital and surplus. Such restrictions also prevent the
Corporation and such other affiliates from borrowing from Community Bank
unless the loans are secured in specific amounts. In addition, there are
state and federal regulatory limitations on the payment of dividends directly
or indirectly to the Corporation from Community Bank. Federal and state
regulatory agencies also have the authority to limit payment of dividends by
Community Bank based on the capital adequacy of Community Bank and the safety
and soundness of Community Bank following payment of the proposed dividend.
None of the Indenture, the Guarantee or the Trust Agreement places any
limitation on the amount of indebtedness, including Senior Indebtedness, that
may be incurred by the Corporation. See "Description of New Securities--
Description of New Guarantee--Status of New Guarantee" and "--Description of
New Junior Subordinated Debentures--Subordination."
The ability of the Trust to pay amounts due on the Capital Securities is
solely dependent upon the Corporation making payments on the Junior
Subordinated Debentures as and when required.
OPTION TO EXTEND INTEREST PAYMENT PERIOD; TAX CONSIDERATIONS
So long as no Debenture Event of Default shall have occurred and be
continuing, the Corporation will have the right under the Indenture to defer
payments of interest on the Junior Subordinated Debentures at any time or
from time to time for a period not exceeding 10 consecutive semi-annual
periods with respect to each Extension Period, provided that no Extension
Period may extend beyond the Stated Maturity Date. As a consequence of any
such deferral, semi-annual Distributions on the Trust Securities by the Trust
will be deferred (and the amount of Distributions to which holders of the
Trust Securities are entitled will accumulate additional Distributions
thereon at the rate of 9.75% per annum, compounded semi-annually, but not
exceeding the interest rate then accruing on the Junior Subordinated
Debentures) from the respective payment dates for such Distributions during
the relevant Extension Period.
The Corporation may extend any existing Extension Period, provided that
such extension does not cause such Extension Period to exceed 10 consecutive
semi-annual periods or to extend beyond the Stated Maturity Date. Upon the
expiration of any Extension Period and the payment of all interest then
accrued and unpaid on the Junior Subordinated Debentures (together with
interest thereon at the annual rate of 9.75%, compounded semi-annually, 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 New Securities--Description of New
Capital Securities--Distributions" and "--Description of New Junior
Subordinated Debentures--Option to Extend Interest Payment Date."
Should the Corporation exercise its right to defer payments of interest
on the Junior Subordinated Debentures, each holder of Trust Securities will
be required to accrue income (as original issue discount ("OID")) in respect
of the deferred stated interest allocable to its Trust Securities for United
States federal income tax purposes, which will be allocated but not
distributed to holders of Trust Securities. As a result, each such holder of
Capital Securities will recognize income for United States federal income tax
purposes in advance of the receipt of cash and will not receive the cash
related to such income from the Trust if the holder disposes of the Capital
Securities prior to the record date for the payment of Distributions
thereafter. See "Certain United States Federal Income Tax Considerations--
Interest Income and Original Issue Discount" and "--Sales of Capital
Securities."
Should the Corporation elect to exercise its right to defer payments of
interest on the Junior Subordinated Debentures in the future, the market
price of the Capital Securities is likely to be affected. A holder that
disposes of its Capital Securities during an Extension Period, therefore,
might not receive the same return on its investment as a holder that
continues to hold its Capital Securities. In addition, merely as a result of
the existence of the Corporation's right to defer payments of interest on the
Junior Subordinated Debentures, the market price of the Capital Securities
may be more volatile than the market prices of other securities on which OID
accrues and that are not subject to such deferrals.
SPECIAL EVENT REDEMPTION
Upon the occurrence and continuation of a Special Event (as defined
under "Description of New Securities--Description of New Junior Subordinated
Debentures--Special Event Prepayment"), the Corporation will have the right
to prepay the Junior Subordinated Debentures in whole (but not in part) prior
to January 31, 2007, at the Special Event Prepayment Price within 90 days
following the occurrence of such Special Event and therefore cause a
mandatory redemption of the Trust Securities at the Special Event Redemption
Price. The exercise of such right is subject to the Corporation having
received the prior approval of the Federal Reserve, if then required under
applicable guidelines or policies thereof. See "Description of New
Securities--Description of New Capital Securities--Redemption."
POSSIBLE TAX LAW CHANGES AFFECTING THE CAPITAL SECURITIES
On February 6, 1997, as part of the Clinton Administration's fiscal 1998
Budget Proposal, the Treasury Department proposed legislation (the "Proposed
Legislation") which would, among other things, generally deny corporate
issuers a deduction for interest in respect of the debt obligations, such as
the New Junior Subordinated Debentures, issued on or after the date "of first
committee action," if such debt obligations have a maximum term in excess of
15 years and are not shown as indebtedness on the issuer's applicable
consolidated balance sheet. On June 9, 1997, Representative William Archer,
Chairman of the House Ways and Means Committee (the "House Committee"),
released the House Committee Chairman's proposed tax provisions (the "House
Committee Chairman's Proposals") to be included in the 1997 budget
reconciliation bill. In addition, on June 17, 1997, Senator William Roth,
Chairman of the Senate Finance Committee (the "Senate Committee"), released
the Senate Committee Chairman's proposed tax provisions (the "Senate
Committee Chairman's Proposals") to be included in the 1997 budget
reconciliation bill. The Proposed Legislation was not included in either the
House Committee Chairman's Proposals or the Senate Committee Chairman's
Proposals. If legislation similar to the Proposed Legislation were
enacted, there can be no assurance that it will not adversely affect the
ability of the Corporation to deduct the interest payable on the Junior
Subordinated Debentures. Such a change could give rise to a Tax Event, which
would permit the Corporation to cause a redemption of the Trust Securities
at the Special Event Redemption Price by electing to prepay the Junior
Subordinated Debentures at the Special Event Prepayment Price. See "Certain
United States Federal Income Tax Considerations--Proposed Tax Legislation."
POSSIBLE ADVERSE EFFECT ON MARKET PRICES
There can be no assurance as to the market prices for New Capital
Securities or New Junior Subordinated Debentures distributed to the holders
of New Capital Securities if a termination of the Trust were to occur.
Accordingly, the New Capital Securities or the New Junior Subordinated
Debentures may trade at a discount from the price that the investor paid to
purchase the Old Capital Securities. Because holders of Capital Securities
may receive Junior Subordinated Debentures in liquidation of the Trust and
because Distributions are otherwise limited to payments on the Junior
Subordinated Debentures, prospective purchasers of New Capital Securities are
also making an investment decision with regard to the New Junior Subordinated
Debentures and should carefully review all of the information regarding the
New Junior Subordinated Debentures contained herein. See "Description of New
Securities--Description of New Junior Subordinated Debentures."
RIGHTS UNDER THE GUARANTEE
The Chase Manhattan Bank will act as Guarantee Trustee and will hold the
Guarantee for the benefit of the holders of the Capital Securities. The
Chase Manhattan Bank will also act as Property Trustee and as Debenture
Trustee under the Indenture. The Chase Manhattan Bank Delaware will act as
Delaware Trustee under the Trust Agreement. The Old Guarantee guarantees,
and the New Guarantee will guarantee, as the case may be, to the holders of
the Capital Securities the following payments, to the extent not paid by the
Trust: (i) any accumulated and unpaid Distributions required to be paid on
the Capital Securities, to the extent that the Trust has funds on hand
legally available therefor at such time, (ii) the applicable Redemption Price
with respect to any Capital Securities called for redemption, to the extent
that the Trust has funds on hand legally available therefor at such time, and
(iii) upon a voluntary or involuntary termination and liquidation of the
Trust (unless the Junior Subordinated Debentures are distributed to holders
of the 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 Trust has funds on hand legally available
therefor at such time and (b) the amount of assets of the Trust remaining
available for distribution to holders of the Capital Securities upon a
termination and liquidation of the Trust. The holders of a majority in
Liquidation Amount of the Capital Securities will have the right to direct
the time, method and place of conducting any proceeding for any remedy
available to the Guarantee Trustee in respect of the Guarantee or to direct
the exercise of any trust power conferred upon the Guarantee Trustee. Any
holder of the Capital Securities may institute a legal proceeding directly
against the Corporation to enforce its rights under the Guarantee without
first instituting a legal proceeding against the Trust, the Guarantee Trustee
or any other person or entity. If the Corporation defaults on its obligation
to pay amounts payable under the Junior Subordinated Debentures, the Trust
will not have sufficient funds for the payment of Distributions or amounts
payable on liquidation of the Trust or redemption of the Capital Securities
or otherwise, and, in such event, holders of the Capital Securities will not
be able to rely upon the Guarantee for payment of such amounts. Instead, in
the event a Debenture Event of Default shall have occurred and be continuing
and such event is attributable to the failure of the Corporation to pay
principal of (or premium, if any) or interest on the Junior Subordinated
Debentures on the payment date on which such payment is due and payable, then
a holder of Capital Securities may institute a legal proceeding directly
against the Corporation for enforcement of payment to such holder of the
principal of (or premium, if any) or interest on such Junior Subordinated
Debentures having a principal amount equal to the Liquidation Amount of the
Capital Securities of such holder (a "Direct Action"). Notwithstanding any
payments made to a holder of Capital Securities by the Corporation in
connection with a Direct Action, the Corporation shall remain obligated to
pay the principal of (and premium, if any) and interest on the Junior
Subordinated Debentures, and the Corporation shall be subrogated to the
rights of the holder of such Capital Securities with respect to payments on
the Capital Securities to the extent of any payments made by the Corporation
to such holder in any Direct Action. Except as described herein, holders of
Capital Securities will not be able to exercise directly any other remedy
available to the holders of the Junior Subordinated Debentures or to assert
directly any other rights in respect of the Junior Subordinated Debentures.
See "Description of New Securities--Description of New Junior Subordinated
Debentures--Enforcement of Certain Rights by Holders of New Capital
Securities," "--Description of New Junior Subordinated Debentures--Debenture
Events of Default" and "--Description of New Guarantee." The Trust Agreement
provides that each holder of Capital Securities by acceptance thereof agrees
to the provisions of the Indenture.
LIMITED VOTING RIGHTS
Holders of Capital Securities will generally have limited voting rights
relating only to the modification of the Capital Securities, the termination
or liquidation of the Trust, and the exercise of the Trust's rights as holder
of Junior Subordinated Debentures. Holders of Capital Securities will not be
entitled to vote to appoint, remove or replace the Administrative Trustees at
any time or the Property Trustee or the Delaware Trustee, except upon the
occurrence of certain events described herein, and such voting rights are
vested exclusively in the holder of the Common Securities. The Property
Trustee, the Administrative Trustees and the Corporation may amend the Trust
Agreement without the consent of holders of Capital Securities to ensure that
the Trust will be classified for United States federal income tax purposes as
a grantor trust even if such action adversely affects the interests of such
holders. See "Description of New Securities--Description of New Capital
Securities--Voting Rights; Amendment of the Trust Agreement" and "--Removal
of Issuer Trustees."
CONSEQUENCES OF A FAILURE TO EXCHANGE OLD CAPITAL SECURITIES
The Old Capital Securities have not been registered under the Securities
Act or any state securities laws and therefore may not be offered, sold or
otherwise transferred except in compliance with the registration requirements
of the Securities Act and any other applicable securities laws, or pursuant
to an exemption therefrom or in a transaction not subject thereto, and in
each case in compliance with certain other conditions and restrictions. Old
Capital Securities which remain outstanding after consummation of the
Exchange Offer will continue to bear a legend reflecting such restrictions on
transfer. In addition, upon consummation of the Exchange Offer, holders of
Old Capital Securities which remain outstanding will not be entitled to any
rights to have such Old Capital Securities registered under the Securities
Act or to any similar rights under the Registration Rights Agreement (subject
to certain limited exceptions). The Corporation and the Trust do not intend
to register under the Securities Act any Old Capital Securities which remain
outstanding after consummation of the Exchange Offer (subject to such limited
exceptions, if applicable). To the extent that Old Capital Securities are
tendered and accepted in the Exchange Offer, a holder's ability to sell
untendered Old Capital Securities could be adversely affected.
The New Capital Securities and any Old Capital Securities which remain
outstanding after consummation of the Exchange Offer will vote together as a
single class for purposes of determining whether holders of the requisite
percentage in outstanding Liquidation Amount thereof have taken certain
actions or exercised certain rights under the Trust Agreement. See
"Description of New Securities--Description of New Capital Securities--Voting
Rights; Amendment of the Trust Agreement."
The Old Capital Securities provide, among other things, that, if a
registration statement relating to the Exchange Offer has not been filed by
June 28, 1997 and declared effective by July 28, 1997, the Distribution rate
borne by the Old Capital Securities, currently 9.75% per annum, commencing on
July 29, 1997 will increase by 0.25% per annum until the Exchange Offer is
consummated. Upon consummation of the Exchange Offer, holders of Old Capital
Securities will not be entitled to any increase in the Distribution rate
thereon or any further registration rights under the Registration Rights
Agreement, except under limited circumstances. See "Description of Old
Securities."
ABSENCE OF PUBLIC MARKET
The Old Capital Securities were issued to, and the Corporation believes
the Old Capital Securities are currently owned by, a relatively small number
of beneficial owners. The Old Capital Securities have not been registered
under the Securities Act and will be subject to restrictions on
transferability if they are not exchanged for the New Capital Securities.
Although the New Capital Securities generally may be resold or otherwise
transferred by the holders (who are not affiliates of the Corporation or the
Trust) without compliance with the registration requirements under the
Securities Act, they will constitute a new issue of securities with no
established trading market. Old Capital Securities may be transferred by the
holders thereof only in blocks having a Liquidation Amount of not less than
$100,000 (100 Old Capital Securities). New Capital Securities may be
transferred by the holders thereof in blocks having a Liquidation Amount of
$1,000 (one New Capital Security) or integral multiples thereof. The
Corporation and the Trust have been advised by the Initial Purchaser that the
Initial Purchaser presently intends to make a market in the New Capital
Securities. However, the Initial Purchaser is not obligated to do so and any
market-making activity with respect to the New Capital Securities may be
discontinued at any time without notice. In addition, such market-making
activity will be subject to the limits imposed by the Securities Act and the
Exchange Act and may be limited during the Exchange Offer. Accordingly, no
assurance can be given that an active public or other market will develop for
the New Capital Securities or the Old Capital Securities or as to the
liquidity of or the trading market for the New Capital Securities or the Old
Capital Securities. If an active public market does not develop, the market
price and liquidity of the New Capital Securities may be adversely affected.
If a public trading market develops for the New Capital Securities,
future trading prices will depend on many factors, including, among other
things, prevailing interest rates, the Corporation's results and the market
for similar securities. Depending on prevailing interest rates, the market
for similar securities and other factors, including the financial condition
of the Corporation, the New Capital Securities may trade at a discount.
Notwithstanding the registration of the New Capital Securities in the
Exchange Offer, holders who are Affiliates of the Corporation or the Trust
may publicly offer for sale or resell the New Capital Securities only in
compliance with the provisions of Rule 144 under the Securities Act.
Each broker-dealer that receives New Capital Securities for its own
account in exchange for Old Capital Securities, where such Old Capital
Securities were acquired by such broker-dealer as a result of market-making
activities or other trading activities, must acknowledge that it will deliver
a prospectus in connection with any resale of such New Capital Securities.
See "Plan of Distribution."
RATIOS OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratios of earnings to fixed charges
of the Corporation for the respective periods indicated.
<TABLE>
<CAPTION>
Three Months
Ended
March 31,
1997
Years Ended December 31,
1996 1995
1994 1993 1992
<S> <C> <C> <C>
<C> <C> <C>
Ratio of Earnings to Fixed Charges . . 2.71x 4.79x 4.28x
5.01x 17.53x 22.33x
</TABLE>
For purposes of computing the ratios of earnings to fixed charges,
earnings represent net income before extraordinary items plus applicable
income taxes and fixed charges. Fixed charges include gross interest expense
(other than on deposits) and the proportion deemed representative of the
interest factor of rent expense.
USE OF PROCEEDS
Neither the Corporation nor the Trust will receive any cash proceeds
from the issuance of the New Capital Securities offered hereby. In
consideration for issuing the New Capital Securities in exchange for Old
Capital Securities as described in this Prospectus, the Trust will receive
Old Capital Securities in like Liquidation Amount. The Old Capital
Securities surrendered in exchange for the New Capital Securities will be
retired and cancelled.
The proceeds to the Trust (without giving effect to expenses of the
offering payable by the Corporation) from the offering of the Old Capital
Securities was $29,797,500. All of the proceeds from the sale of Old Capital
Securities were invested by the Trust in the Junior Subordinated Debentures.
The Corporation used a portion of the net proceeds from the sale of the Old
Junior Subordinated Debentures to redeem all 45,000 shares of its 9.00%
Cumulative Perpetual Preferred Stock, Series A at $104 per share plus $4.00
per share in accrued dividends, effective March 10, 1997. The Corporation
intends to use the remaining net proceeds for general corporate purposes,
including the making of advances to its subsidiaries, principally Community
Bank. A portion of such proceeds has been used in connection with the
Fleet
Bank and KeyBank acquisitions. See "Recent Developments--Acquisitions."
Pending such applications by the Corporation, such net proceeds may be
advanced to Community Bank to be used to pay down existing short-term
borrowings or invested in interest-bearing securities.
CAPITALIZATION
The following table sets forth the unaudited consolidated capitalization
of the Corporation as of December 31, 1996, as adjusted to give effect to the
issuance of the Old Securities and to the application of the proceeds
thereof. The following data should be read in conjunction with the financial
information incorporated herein by reference. See "Incorporation of Certain
Documents by Reference." The issuance of the New Securities in the Exchange
Offer will have no effect on the capitalization of the Corporation.
<TABLE>
<CAPTION>
December 31, 1996
Actual As Adjusted
(in thousands)
<S> <C>
<C>
Term borrowings . . . . . . . . . . . . . . . . . . . . . . .
$100,000 $100,000
Corporation obligated mandatorily redeemable preferred
securities of subsidiary trust holding solely subordinated
debentures of the Corporation (net of issuance discount)(1) .
- -- 29,798
Shareholders' equity:(2)
Preferred stock, $100 stated value, 45,000 shares
authorized, issued and outstanding(3) . . . . . . . . .
4,500 --
Common stock, $1.00 stated value, 20,000,000 shares
authorized, 7,474,406 shares issued and outstanding . .
7,474 7,474
Surplus . . . . . . . . . . . . . . . . . . . . . . . .
30,782 30,602
Undivided profits . . . . . . . . . . . . . . . . . . .
65,691 65,691
Unrealized gains (losses) on available for sale
948 948
securities . . . . . . . . . . . . . . . . . . . . . . .
Shares issued under employee stock plan--unearned . . .
(43) (43)
Total stockholders' equity . . . . . . . . . . . . . .
109,352 104,672
Total capitalization . . . . . . . . . . . . . . . . .
$209,352 $234,470
</TABLE>
__________________
(1) Reflects the Old Capital Securities. The Trust is a subsidiary of the
Corporation and holds the Old Junior Subordinated Debentures as its sole
asset.
(2) The common stock and surplus accounts have been adjusted to reflect a
two-for-one stock split, effected as a stock dividend on March 12, 1997
to shareholders of record on February 10, 1997. In conjunction with the
stock split, the $1.25 par value common stock was changed to no par with
a $1.00 stated value, and the number of authorized shares increased from
5,000,000 to 20,000,000.
(3) Reflects the Corporation's March 10, 1997 redemption of the 45,000
shares of preferred stock at $104 per share, plus $4.00 per share in
accrued dividends, utilizing a portion of the proceeds from the Old
Junior Subordinated Debentures.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
The following table sets forth selected consolidated historical
financial
data of the Corporation as of and for each of the years in the five-year
period ended December 31, 1996 (the "Year End Data") and the three months
ended March 31, 1997 and March 31, 1996, (the "Quarterly Data"). The
historical "Income Statement Data", "End of Period Balance Sheet Data", "Per
Share Data", "Outstanding Shares", and certain "Selected Ratios" contained in
the Year End Data are derived from financial statements which have been
audited by Coopers & Lybrand L.L.P., independent public accountants. All
other information contained in the Year End Data and all Quarterly Data are
unaudited.
<TABLE>
<CAPTION> Three Months ended
March 31,
Year ended December 31,
1997 1996 1996 1995
1994 1993 1992
(DOLLARS IN THOUSANDS, EXCEPT PER
SHARE DATA)
<S> <C> <C> <C> <C>
<C> <C> <C>
INCOME STATEMENT DATA:
Interest income . . . . . $ 27,048 $ 22,677 $ 97,688 $83,387
$61,575 $ 54,642 $ 56,345
Interest expense . . . . 12,678 9,472 42,422 36,307
22,130 17,733 21,608
Net interest income 14,370 13,205 55,266 47,080
39,445 36,909 34,737
Provision for possible
loan losses . . . . . . . 730 588 2,897 1,765
1,702 1,506 2,727
Net interest income
after provision for 13,640 12,617 52,369 45,315
37,743 35,403 32,010
possible loan losses
Non-interest income . . . 2,326 1,953 8,874 6,558
5,120 4,764 5,082
Non-interest expense . . 10,179 9,252 37,450 33,019
26,498 24,827 26,447
Income before income 5,787 5,318 23,793 18,854
16,365 15,340 10,645
taxes . . . . . . .
Provision for income taxes 2,122 2,180 9,660 7,384
6,256 5,765 3,139
Net income . . . . . $ 3,665 $ 3,138$ 14,133$ 11,470 $
10,109 $ 9,575 $ 7,506
END OF PERIOD BALANCE
SHEET DATA:
Total Assets . . . . . . $1,395,284 $1,208,127$1,343,865$1,152,045 $
915,501 $ 713,053 $ 669,274
Net Loans . . . . . . . . 674,178 576,495 652,474 560,151
483,079 417,871 362,356
Earning Assets . . . . . 1,283,340 1,078,762 1,231,0581,034,183
861,599 671,415 625,342
Total Deposits . . . . . 1,061,061 1,059,508 1,027,2131,016,946
679,638 588,315 557,915
Long-term debt and capital 100,000 25,550 100,000 25,550
550 592 139
lease . . . .
Shareholders' equity . . 106,244 101,488 109,352 100,060
66,290 61,986 53,417
AVERAGE BALANCE SHEET
DATA:
Total Assets . . . . . . $1,373,667 $1,173,828$1,251,826$1,054,610$
808,948 $ 684,863 $ 650,804
Net Loans . . . . . . . . 661,724 569,267 602,717 519,762
446,135 382,680 351,241
Earning Assets . . . . . 1,269,910 1,063,977 1,147,455 975,257
756,871 640,070 601,636
Total Deposits . . . . . 1,038,433 1,035,593 1,032,169 871,050
651,479 598,860 585,571
Long-term debt and capital 100,000 25,550 57,006 3,399
557 256 379
lease . . . .
Shareholders' equity . . 108,887 100,223 103,398 84,229
64,033 57,298 50,868
COMMON PER SHARE DATA:(2)
Net Income . . . . . . . $ 0.47 $ 0.41$ 1.83 $ 1.70 $
1.80 $ 1.72 $ 1.38
Cash dividend declared . 0.18 0.17 0.69 0.62
0.57 0.52 0.45
Period-end book value . . 14.13 13.17 14.03 12.99
11.89 11.28 9.91
Period-end tangible book 10.07 8.65 9.85 8.37
10.80 11.20 9.79
value . . . . . . . . . .
OUTSTANDING COMMON
SHARES:
Average during period . . 7,620,333 7,427,433 7,482,518 6,522,410
5,629,420 5,576,660 5,444,186
End of period . . . . . . 7,518,262 7,364,630 7,474,406 7,359,250
5,576,300 5,496,636 5,393,520
SELECTED RATIOS:
Return on average total 1.08% 1.08% 1.13% 1.09%
1.25% 1.40% 1.15%
assets(1) . . . . . . . .
Return on average 13.79% 12.76% 13.88% 13.85%
15.79% 16.71% 14.76%
shareholders' equity(1) .
Common dividend payout 36.93% 38.72% 37.27% 34.79%
31.24% 29.67% 32.26%
ratio . . . . . . . . . .
Net interest margin
(taxable equivalent 4.62% 5.04% 4.86% 4.88%
5.30% 5.90% 5.82%
basis)(1) . . . . . . . .
Non-interest income to
average assets (excluding 0.69% 0.67% 0.71% 0.64%
0.69% 0.70% 0.75%
security gains and
losses)(1) . . . . . . .
Efficiency ratio . . . . 60.60% 60.60% 58.00% 60.82%
57.94% 58.45% 65.48%
Non-performing assets to
period-end total loans and 0.60% 0.54% 0.55% 0.47%
0.72% 0.73% 0.67%
other real estate owned .
Allowance for loan losses
to period-end loans . . . 1.25% 1.25% 1.25% 1.25%
1.30% 1.37% 1.37%
Allowance for loan losses
to period-end non- 255.00% 273.00% 285.58% 349.69%
192.79% 238.67% 310.05%
performing loans . . . .
Allowance for loan losses
to period-end non- 208.85% 228.56% 224.33% 267.40%
179.67% 186.06% 205.72%
performing assets . . . .
Net charge-offs
(recoveries) to average 0.28% 0.27% 0.29% 0.21%
0.25% 0.20% 0.59%
total loans . . . . .
Average net loans to 63.72% 54.97% 58.39% 59.67%
68.48% 63.90% 59.98%
average total deposits .
Period-end total
shareholders' equity to 7.61% 8.40% 8.14% 8.69%
7.24% 8.69% 7.98%
period end assets . . . .
Tier I capital to risk- 13.95% 10.67% 10.70% 10.62%
12.43% 14.87% 13.13%
adjusted assets . . . . .
Total risk-based capital
to risk-adjusted assets . 15.06% 11.81% 11.83% 11.76%
13.68% 16.12% 14.37%
Tier I leverage ratio . . 7.86% 5.75% 5.88% 5.83%
6.80% 8.46% 7.90%
Ratio of earnings to fixed
charges:
Including interest on 145.42% 155.82% 155.77% 151.63%
173.40% 185.75% 148.72%
deposits . . . . . . . .
Excluding interest on 271.37% 1338.81% 478.68% 428.30%
500.78% 1,753.02% 2,233.27%
deposits . . . . . . . .
</TABLE>
____________________
(1) Annualized for the three months ended March 31, 1997 and 1996.
(2) Adjusted to reflect two-for-one stock split. See "Capitalization."
COMMUNITY CAPITAL TRUST I
The Trust is a statutory business trust created under Delaware law
pursuant to the filing of a certificate of trust with the Delaware Secretary
of State on January 29, 1997. The Trust exists for the exclusive purposes of
(i) issuing and selling the Trust Securities, (ii) using the proceeds from
the sale of Trust Securities to acquire the Junior Subordinated Debentures
and, (iii) engaging in only those other activities necessary, advisable or
incidental thereto (such as registering the transfer of the Trust
Securities). The Junior Subordinated Debentures will be the sole assets of
the Trust, and payments under the Junior Subordinated Debentures will be the
sole revenues of the Trust. All of the Common Securities are owned by the
Corporation. The Common Securities will rank pari passu, and payments will be
made thereon pro rata, with the Capital Securities, except that upon the
occurrence and continuance of an event of default under the Trust Agreement
resulting from a Debenture Event of Default, the rights of the Corporation as
holder of the Common Securities to payments in respect of Distributions and
payments upon liquidation, redemption or otherwise will be subordinated to
the rights of the holders of the Capital Securities. See "Description of New
Capital Securities--Subordination of Common Securities." The Corporation has
acquired Common Securities in a Liquidation Amount equal to at least 3% of
the total capital of the Trust. The Trust has a term of 31 years, but may
terminate earlier as provided in the Trust Agreement. The Trust's business
and affairs are conducted by its trustees, each appointed by the Corporation
as holder of the Common Securities. The trustees for the Trust are The Chase
Manhattan Bank, as the Property Trustee (the "Property Trustee"), The Chase
Manhattan Bank Delaware, as the Delaware Trustee (the "Delaware Trustee"),
and three individual trustees (the "Administrative Trustees") who are
employees or officers of or affiliated with the Corporation (collectively,
the "Issuer Trustees"). The Chase Manhattan Bank, as Property Trustee, will
act as sole indenture trustee under the Trust Agreement. The Chase Manhattan
Bank will also act as indenture trustee under the Guarantee and the
Indenture. See "Description of New Securities--Description of New Guarantee"
and "--Description of New Junior Subordinated Debentures." The holder of the
Common Securities or, if an Event of Default under the Trust Agreement has
occurred and is continuing, the holders of a majority in Liquidation Amount
of the Capital Securities will be entitled to appoint, remove or replace the
Property Trustee and/or the Delaware Trustee. In no event will the holders of
the Capital Securities have the right to vote to appoint, remove or replace
the Administrative Trustees; such voting rights will be vested exclusively in
the holder of the Common Securities. The duties and obligations of each
Issuer Trustee are governed by the Trust Agreement. The Corporation, as
issuer of the Junior Subordinated Debentures, will pay all fees, expenses,
debts and obligations (other than the Trust's obligations to holders of Trust
Securities with respect to payments of principal, interest and premium, if
any) related to the Trust and the offering and exchange of the Capital
Securities and will pay, directly or indirectly, all ongoing costs, expenses
and liabilities of the Trust. The principal executive office of the Trust is
5790 Widewaters Parkway, DeWitt, New York 13214.
COMMUNITY BANK SYSTEM, INC.
Community Bank System, Inc., a Delaware corporation (the
"Corporation), is a bank holding company headquartered in DeWitt, New York
which owns all of the outstanding stock of its principal operating subsidiary
Community Bank, National Association ("Community Bank"). Community Bank is a
full service commercial bank providing a range of banking services through
its two regional offices in Canton, New York and Olean, New York, and through
a total (after giving effect to the acquisitions discussed below) of 68
customer facilities in the counties of St. Lawrence, Jefferson, Lewis,
Cayuga, Seneca, Ontario, Oswego, Oneida, Wayne, Yates, Onondaga, Allegany,
Cattaraugus, Tioga, Chautaugua, Franklin, Herkimer and Steuben. These counties
are grouped by Community Bank into three distinct banking markets: Northern
New York, Finger Lakes Region, and the Southern Tier (which is further divided
into the Olean and Corning submarkets).
Community Bank has expanded its market area and customer base
through a series of branch acquisitions over the past several years. Most
notably, in July 1995, Community Bank acquired fifteen branches from The
Chase Manhattan Bank, N.A. having $383 million in deposits. Three
of these branches, having $43 million in deposits, which were outside of
Community Bank's core market areas, were subsequently sold to another
financial institution in December 1995. In addition, the Corporation acquired
Benefit Plans Administrators ("BPA"), a pension administration and consulting
firm located in Utica, New York, in July 1996 to help expand its product
offerings. Effective June 16, 1997, Community Bank acquired certain assets
and assumed certain liabilities in connection with eight KeyBank branch
locations in upstate New York. Lastly, on July 18, 1997, Community Bank
acquired certain assets and assumed certain liabilities relating to twelve
Fleet Bank branch locations in upstate New York. See "Recent Developments--
Acquisitions."
As of December 31, 1996, the Corporation had consolidated assets of
$1.3 billion, deposits of $1.0 billion and shareholders' equity of $109.4
million. The Corporation's net income for the year ended December 31, 1996
was $14.1 million, or $1.83 per share.
Community Bank offers a broad range of financial services to both
commercial and retail customers located in its market area, including
accepting time, demand and savings deposits, and making secured and unsecured
commercial, real estate and consumer loans. Related financial services
provided include a range of trust services and the offering of annuities,
mutual funds and other non-deposit investment products. Community Bank's
lending activities primarily take the form of commercial, agricultural,
consumer and real estate loans and indirect consumer financing. Community
Bank's lending and investment activities are funded principally by deposits
gathered through its retail branch office network.
Consistent with its commitment to serving the financial needs of
customers in the local communities where its offices are located, Community
Bank's marketing efforts are directed primarily toward individuals and small-
to medium-sized businesses. Community Bank's strategy for growth focuses
primarily on the further development of its community-based retail branch
network. As a community-oriented bank, Community Bank's emphasis is on
development of long-term customer relationships, personalized service,
convenient locations, and responding to the specific needs of individuals and
businesses in its market area. The Corporation believes that the local
character of the business environment, knowledge of the customer and customer
needs, and comprehensive retail and small business products, together with
rapid decision-making at the branch and regional level, enable Community Bank
to compete effectively in its market area.
The Corporation is a legal entity separate and distinct from its
subsidiaries. The ability of holders of debt and equity securities of the
Corporation to benefit from the distribution of assets of any subsidiary upon
the liquidation or reorganization of such subsidiary is subordinate to prior
claims of creditors of the subsidiary (including depositors in the case of
banking subsidiaries) except to the extent that a claim of the Corporation as
a creditor may be recognized.
There are various statutory and regulatory limitations of the
extent to which present and future banking subsidiaries of the Corporation
can finance or otherwise transfer funds to the Corporation or its nonbanking
subsidiaries, whether in the form of loans, extensions of credit, investments
or asset purchases.
In addition, there are regulatory limitations on the payment of
dividends directly or indirectly to the Corporation from its bank subsidiary.
Under applicable banking statutes, at December 31, 1996, Community Bank could
have declared additional dividends of approximately $18.3 million. However,
federal and state regulatory agencies also have the authority to limit
further Community Bank's payment of dividends based on other factors, such as
the maintenance of adequate capital for Community Bank, which would reduce
the amount of dividends otherwise payable.
Under the policy of the Federal Reserve, the Corporation is
expected to act as a source of financial strength to Community Bank and to
commit resources to support Community Bank in circumstances where the
Corporation might not do so absent such policy. In addition, any subordinated
loans by the Corporation to Community Bank would also be subordinate in right
of payment to depositors and obligations to general creditors of Community
Bank.
RECENT DEVELOPMENTS
Acquisitions
- ------------
KeyBank Acquisition. On February 10, 1997, Community Bank entered
into a Purchase and Assumption Agreement (the "Key Agreement") with KeyBank.
The Key Agreement provided for the acquisition of certain assets and the
assumption of certain liabilities (the "Key Acquisition") by Community Bank
relating to eight KeyBank branches located in Alfred, Cuba, Wellsville,
Gowanda, Cassadaga, Clymer, Ripley and Sherman, New York (the "Key
Branches").
The Key Acquisition was consummated effective June 16, 1997. At
the closing, and subject to the terms of the Key Agreement: (i) Community
Bank assumed deposit liabilities booked at the Key Branches of approximately
$149.9 million; (ii) Community Bank acquired certain commercial and consumer
loans associated with the Key Branches of approximately $24.9 million; and
(iii) Community Bank acquired real property owned or leased by KeyBank for
operation of the Key Branches and related furniture, equipment and other
fixed operating assets worth, in the aggregate, approximately $1.8 million.
Community Bank did not acquire any nonconforming assets, and did not assume
any material contingent liabilities, in connection with the Key Acquisition.
The Key Acquisition will be accounted for as a purchase and assumption.
Following the Key Acquisition, Community Bank will retain
approximately 45 full-time equivalent KeyBank employees currently associated
with the Key Branches. All such personnel are administrative, clerical,
customer service representatives, or branch managers.
Pursuant to the Key Agreement, neither KeyBank nor any of its
affiliates may solicit any customer of the Key Branches or any middle-market
loan designated in the Key Agreement, except as may occur as a result of
solicitations to the general public. In addition, for two years following
the closing, KeyBank may not open any branch office or install any automatic
teller machine in any city, town or village in which the former Key Branches
are located. Finally, for two years following the closing, KeyBank may not
solicit the employment of any employees of the former Key Branches without
the written consent of Community Bank.
Fleet Bank Acquisition. On March 21, 1997, Community Bank entered
into a Purchase and Assumption Agreement (the "Fleet Agreement") with Fleet
Bank. The Fleet Agreement provided for the acquisition of certain assets and
the assumption of certain liabilities (the "Fleet Acquisition") by Community
Bank relating to twelve Fleet Bank branches located in St. Regis Falls, Old
Forge, Clayton, Watertown (two branches), Lowville, Boonville, Ogdensburg
(two branches), Gouverneur, and Massena (two branches), New York (the "Fleet
Branches").
The Fleet Acquisition was consummated on July 18, 1997. At the
closing, and subject to the terms of the Fleet Agreement: (i) Community Bank
assumed deposit liabilities booked at the Fleet Branches of approximately
$159.1 million; (ii) Community Bank acquired certain commercial, consumer
and home equity loans associated with the Fleet Branches of approximately
$65.2 million; and (iii) Community Bank acquired real property and fixed
assets related to the Fleet Branches worth, in the aggregate, approximately
$2.0 million. Community Bank did not assume any material contingent
liabilities in connection with the Fleet Acquisition. The Fleet Acquisition
will be accounted for as a purchase and assumption.
Following the Fleet Acquisition, Community Bank will retain
approximately 55 full-time equivalent Fleet Bank employees currently
associated with the Fleet Branches. All such personnel are administrative,
clerical, customer service representatives or branch managers.
Pursuant to the Fleet Agreement, for a period of two years
following the closing, Fleet Bank may not directly and actively solicit
deposit or lending customers of the former Fleet Branches.
Results of Operations
- ---------------------
For the Year Ended December 31, 1996
As of December 31, 1996, total assets were $1.3 billion, total
deposits were $1.0 billion and shareholders' equity was $109.4 million. Total
assets were up 16.7% from December 31, 1995 due primarily to increases in
investment securities from $468.0 million to $578.6 million and in loans from
$560.2 million to $652.5 million. These earning-asset increases were funded
primarily through increased borrowings. Borrowed funds increased from $25.6
million at December 31, 1995 to $196.8 million at December 31, 1996, while
deposits increased only $10.3 million or 1.0%. Total shareholders' equity
increased to $109.4 million from $100.1 million, primarily as a result of
retained earnings.
Net income for the year ending December 31, 1996 was $14.1 million,
up 23.2% from the prior year's $11.5 million. Earnings per share rose 7.6% to
$1.83 per share in 1996 from $1.70 in 1995. Greater average shares
outstanding during 1996 is the reason earnings per share showed a smaller
increase over 1995 than net income. For the three months ended December 31,
1996, net income was $3.7 million and earnings per share was $0.48. These
results reflected increases of 18% over the $3.1 million in net income and
20% over the $0.40 per share earned during the three months ended December
31, 1995.
Net interest income for the year ended December 31, 1996 increased
17.4% over 1995 to $55.3 million, primarily due to the increased level of
average earning-assets. Net interest margin for 1996 was 4.86% versus 4.88%
in 1995. For the three-month period ended December 31, 1996, net interest
income rose 6.6% over the comparable period in 1995 to $14.2 million. The
higher level of earning-assets was partially offset by higher funding costs,
largely as a result of increased borrowings, which resulted in a net interest
margin of 4.70% for the three-month period in 1996 versus 5.05% during the
comparable period in 1995.
The provision for possible loan losses was increased to $2.9
million in 1996, up 64.1% from $1.8 million in 1995. This increase was a
result of increased loans outstanding during the year and higher levels of
charge-offs during 1996, especially in the fourth quarter as the Corporation
undertook an intensive review of its nonperforming loans in light of
management's concerns and views about potential economic uncertainties
associated with the latter stages of the current expansionary business cycle.
Net charge-offs for 1996 increased to 0.29% of average loans from 0.21% in
1995. Nonperforming loans were $2.8 million or 0.44% of total loans
outstanding at December 31, 1996, up from $2.0 million and 0.36% at December
31, 1995.
Noninterest income (excluding security gains and losses) rose to
$8.8 million in 1996, up 31.8% over the $6.7 million earned in 1995. The
increase is largely a result of revenues associated with the July 1996
acquisition of BPA, increased commission income from the sale of mutual funds
and a full year impact of an increased customer base gained from the mid-1995
Chase branch purchase. For the three month period ended December 31, 1996,
noninterest income was $2.4 million, up 23.6% from the comparable period in
1995. Higher personal trust fees, in addition to the three major factors
noted above for the full year, contributed to this improvement.
Noninterest expense rose to $37.4 million in 1996, up 13.4% over
1995. The increase is almost entirely due to a full year of expenses related
to the Chase branch purchase and six months of expenses related to the
acquisition of BPA, offset somewhat by reductions in office supply and FDIC
deposit insurance costs and the absence of one-time expenses related to the
Chase branch purchase in 1995. For the three-month period ended December 31,
1996, noninterest expenses were $9.5 million or 1.6% below that during the
comparable period in 1995. The impact of the expense reductions noted above,
plus reduced foreclosure expenses and lower medical costs in the 1996 three-
month period, more than offset the increases due to the acquisition of BPA.
For the First Quarter Ended March 31, 1997
Net income for the first quarter ended March 31, 1997 was $3.7
million, up 16.8% from $3.1 million in the same period in 1996. Earnings per
share rose 14.6% to $0.47 per share in the first quarter of 1997, from $0.41
per share in the first quarter of 1996.
Net interest income for the first quarter ended March 31, 1997
increased 8.8% over the first quarter of 1996 to $14.4 million, primarily due
to the continued increase in average earning assets. Net interest margin for
the first quarter of 1997 was 4.62% versus 5.04% for the first quarter of
1996. Higher borrowing costs during the first quarter of 1997 versus the
first quarter of 1996 contributed to the decrease in the net interest margin.
The provision for possible loan losses was increased to $730,000
during the first quarter of 1997, up 24.1% from $588,000 during the first
quarter of 1996. This increase reflects coverage of a higher level of net
charge-offs and the Corporation's practice of increasing the loan loss
reserve consistent with loan growth, so that the reserve to loans outstanding
ratio is maintained at 1.25%. Net charge-offs for the first quarter of 1997
were $457,000 or 0.28% of average loans outstanding, compared to $378,000 or
0.27% during the first quarter of 1996. Nonperforming loans were $3.3 million
or 0.49% of total loans outstanding at March 31, 1997, up from $2.6 million
or 0.44% of total loans outstanding at March 31, 1996.
Noninterest income (excluding security gains and losses) rose to
$2.3 million in the first quarter of 1997, up 19.1% over the $2.0 million
earned in the first quarter of 1996. The increase is largely the result of
revenues associated with the Corporation's July 1996 acquisition of BPA, and
increased commission income from the sale of mutual funds.
Noninterest expense rose to $10.2 million in the first quarter of
1997, up 10.0% over the first quarter of 1996. This increase reflects the
operating costs of BPA, annual personnel increases, higher consulting fees,
and higher advertising expense.
THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
In connection with the sale of the Old Capital Securities, the
Corporation and the Trust entered into the Registration Rights Agreement with
the Initial Purchaser, pursuant to which the Corporation and the Trust agreed
to file and to use their reasonable efforts to cause to become effective with
the Commission a registration statement with respect to the exchange of the
Old Capital Securities for the New Capital Securities. A copy of the
Registration Rights Agreement has been filed as an Exhibit to the
Registration Statement of which this Prospectus is a part.
The Exchange Offer is being made to satisfy the contractual obligations
of the Corporation and the Trust under the Registration Rights Agreement.
The form and terms of the New Capital Securities are the same as the form and
terms of the Old Capital Securities except that the New Capital Securities
have been registered under the Securities Act and will not be subject to the
$100,000 minimum Liquidation Amount transfer restriction and certain other
restrictions on transfer applicable to the Old Capital Securities and will
not provide for any increase in the Distribution rate thereon. In that
regard, the Old Capital Securities provide, among other things, that, if a
registration statement relating to the Exchange Offer has not been filed by
June 28, 1997 and declared effective by July 28, 1997, the Distribution rate
borne by the Old Capital Securities, commencing on July 29, 1997, will
increase by 0.25% per annum until the Exchange Offer is consummated. Upon
consummation of the Exchange Offer, holders of Old Capital Securities will
not be entitled to any increase in the Distribution rate thereon or any
further registration rights under the Registration Rights Agreement, except
under limited circumstances. See "Risk Factors--Consequences of a Failure to
Exchange Old Capital Securities" and "Description of Old Securities."
The Exchange Offer is not being made to, nor will the Trust accept
tenders for exchange from, holders of Old Capital Securities in any
jurisdiction in which the Exchange Offer or the acceptance thereof would not
be in compliance with the securities or "blue sky" laws of such jurisdiction.
Unless the context requires otherwise, the term "holder" with respect to
the Exchange Offer means any person in whose name the Old Capital Securities
are registered on the books of the Trust or any other person who has obtained
a properly completed bond power from such holder, or any person whose Old
Capital Securities are held of record by The Depository Trust Company ("DTC")
who desires to deliver such Old Capital Securities by book-entry transfer at
DTC.
Pursuant to the Exchange Offer, the Corporation will exchange promptly
after the Expiration Date the Old Guarantee for the New Guarantee and the Old
Junior Subordinated Debentures, in an amount corresponding to the aggregate
Liquidation Amount of Old Capital Securities accepted for exchange, for a
like aggregate principal amount of the New Junior Subordinated Debentures.
The New Guarantee and New Junior Subordinated Debentures have been registered
under the Securities Act.
TERMS OF THE EXCHANGE OFFER
The Trust hereby offers, upon the terms and subject to the conditions
set forth in this Prospectus and in the accompanying Letter of Transmittal,
to exchange up to $30,000,000 aggregate Liquidation Amount of New Capital
Securities for a like aggregate Liquidation Amount of Old Capital Securities
properly tendered on or prior to the Expiration Date and not properly
withdrawn in accordance with the procedures described below. The Trust will
issue, promptly after the Expiration Date, an aggregate Liquidation Amount of
up to $30,000,000 of New Capital Securities in exchange for a like principal
amount of outstanding Old Capital Securities tendered and accepted in
connection with the Exchange Offer. Holders may tender their Old Capital
Securities in whole or in part in a Liquidation Amount of not less than
$100,000 (100 Capital Securities) or any integral multiple of $1,000
(one Capital Security) in excess thereof, provided that if any Old Capital
Securities are tendered for exchange in part the untendered Liquidation
Amount thereof must be $100,000 (100 Capital Securities) or any integral
multiple of $1,000 in excess thereof.
The Exchange Offer is not conditioned upon any minimum Liquidation
Amount of Old Capital Securities being tendered. As of the date of this
Prospectus, $30,000,000 aggregate Liquidation Amount of the Old Capital
Securities is outstanding.
Holders of Old Capital Securities do not have any appraisal or
dissenters' rights in connection with the Exchange Offer. Old Capital
Securities which are not tendered for or are tendered but not accepted in
connection with the Exchange Offer will remain outstanding and be entitled to
the benefits of the Trust Agreement, but will not be entitled to any further
registration rights under the Registration Rights Agreement, except under
limited circumstances. See "Risk Factors--Consequences of a Failure to
Exchange Old Capital Securities" and "Description of Old Securities."
If any tendered Old Capital Securities are not accepted for exchange
because of an invalid tender, the occurrence of certain other events set
forth herein or otherwise, certificates for any such unaccepted Old Capital
Securities will be returned, without expense, to the tendering holder thereof
promptly after the Expiration Date.
Holders who tender Old Capital Securities in connection with the
Exchange Offer will not be required to pay brokerage commissions or fees or,
subject to the instructions in the Letter of Transmittal, transfer taxes with
respect to the exchange of Old Capital Securities in connection with the
Exchange Offer. The Corporation will pay all charges and expenses, other
than certain applicable taxes described below, in connection with the
Exchange Offer. See "--Fees and Expenses."
NEITHER THE CORPORATION, THE BOARD OF DIRECTORS OF THE CORPORATION NOR
ANY ISSUER TRUSTEE OF THE TRUST MAKES ANY RECOMMENDATION TO HOLDERS OF OLD
CAPITAL SECURITIES AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING ALL OR
ANY PORTION OF THEIR OLD CAPITAL SECURITIES PURSUANT TO THE EXCHANGE OFFER.
IN ADDITION, NO ONE HAS BEEN AUTHORIZED TO MAKE ANY SUCH RECOMMENDATION.
EACH HOLDER OF OLD CAPITAL SECURITIES MUST MAKE ITS OWN DECISION WHETHER TO
TENDER PURSUANT TO THE EXCHANGE OFFER AND, IF SO, THE AGGREGATE AMOUNT OF OLD
CAPITAL SECURITIES TO TENDER BASED ON SUCH HOLDER'S OWN FINANCIAL POSITION
AND REQUIREMENTS.
The term "Expiration Date" means 5:00 p.m., New York City time, on August
(25), 1997 unless the Exchange Offer is extended by the Corporation or the
Trust (in which case the term "Expiration Date" shall mean the latest date
and time to which the Exchange Offer is extended).
The Corporation and the Trust expressly reserve the right in their sole
and absolute discretion, subject to applicable law, at any time and from time
to time, (i) to delay the acceptance of the Old Capital Securities for
exchange, (ii) to terminate the Exchange Offer (whether or not any Old
Capital Securities have theretofore been accepted for exchange) if the Trust
determines, in its sole and absolute discretion, that any of the events or
conditions referred to under "--Conditions to the Exchange Offer" have
occurred or exist or have not been satisfied, (iii) to extend the Expiration
Date of the Exchange Offer and retain all Old Capital Securities tendered
pursuant to the Exchange Offer, subject, however, to the right of holders of
Old Capital Securities to withdraw their tendered Old Capital Securities as
described under "--Withdrawal Rights," and (iv) to waive any condition or
otherwise amend the terms of the Exchange Offer in any respect. If the
Exchange Offer is amended in a manner determined by the Corporation and the
Trust to constitute a material change, or if the Corporation and the Trust
waive a material condition of the Exchange Offer, the Corporation and the
Trust will promptly disclose such amendment by means of a prospectus
supplement that will be distributed to the holders of the Old Capital
Securities, and the Corporation and the Trust will extend the Exchange Offer
to the extent required by Rule 14e-1 under the Exchange Act.
Any such delay in acceptance, extension, termination or amendment will
be followed promptly by oral or written notice thereof to the Exchange Agent
and by making a public announcement thereof, and such announcement in the
case of an extension will be made no later than 9:00 a.m., New York City
time, on the next business day after the previously scheduled Expiration
Date. Without limiting the manner in which the Corporation and the Trust may
choose to make any public announcement and subject to applicable law, the
Corporation and the Trust shall have no obligation to publish, advertise or
otherwise communicate any such public announcement other than by issuing a
release to an appropriate news agency.
ACCEPTANCE FOR EXCHANGE AND ISSUANCE OF NEW CAPITAL SECURITIES
Upon the terms and subject to the conditions of the Exchange Offer, the
Trust will exchange, and will issue to the Exchange Agent, New Capital
Securities for Old Capital Securities validly tendered and not withdrawn
promptly after the Expiration Date.
In all cases, delivery of New Capital Securities in exchange for Old
Capital Securities tendered and accepted for exchange pursuant to the
Exchange Offer will be made only after timely receipt by the Exchange Agent
of (i) Old Capital Securities or a book-entry confirmation of a book-entry
transfer of Old Capital Securities into the Exchange Agent's account at DTC,
(ii) the Letter of Transmittal (or facsimile thereof), properly completed and
duly executed, with any required signature guarantees, and (iii) any other
documents required by the Letter of Transmittal.
The term "book-entry confirmation" means a timely confirmation of a
book-entry transfer of Old Capital Securities into the Exchange Agent's
account at DTC.
Subject to the terms and conditions of the Exchange Offer, the Trust
will be deemed to have accepted for exchange, and thereby exchanged, Old
Capital Securities validly tendered and not withdrawn as, if and when the
Trust gives oral or written notice to the Exchange Agent of the Trust's
acceptance of such Old Capital Securities for exchange pursuant to the
Exchange Offer. The Exchange Agent will act as agent for the Trust for the
purpose of receiving tenders of Old Capital Securities, Letters of
Transmittal and related documents, and as agent for tendering holders for the
purpose of receiving Old Capital Securities, Letters of Transmittal and
related documents and transmitting New Capital Securities to validly
tendering holders. Such exchange will be made promptly after the Expiration
Date. If for any reason whatsoever, acceptance for exchange or the exchange
of any Old Capital Securities tendered pursuant to the Exchange Offer is
delayed (whether before or after the Trust's acceptance for exchange of Old
Capital Securities) or the Trust extends the Exchange Offer or is unable to
accept for exchange or exchange Old Capital Securities tendered pursuant to
the Exchange Offer, then, without prejudice to the Trust's rights set forth
herein, the Exchange Agent may, nevertheless, on behalf of the Trust and
subject to Rule 14e-1(c) under the Exchange Act, retain tendered Old Capital
Securities and such Old Capital Securities may not be withdrawn except to the
extent tendering holders are entitled to withdrawal rights as described under
"--Withdrawal Rights."
Pursuant to the Letter of Transmittal, a holder of Old Capital
Securities will warrant and agree in the Letter of Transmittal that it has
full power and authority to tender, exchange, sell, assign and transfer Old
Capital Securities, that the Trust will acquire good, marketable and
unencumbered title to the tendered Old Capital Securities, free and clear of
all liens, restrictions, charges and encumbrances, and that the Old Capital
Securities tendered for exchange are not subject to any adverse claims or
proxies. The holder also will warrant and agree that it will, upon request,
execute and deliver any additional documents deemed by the Trust or the
Exchange Agent to be necessary or desirable to complete the exchange, sale,
assignment, and transfer of the Old Capital Securities tendered pursuant to
the Exchange Offer.
PROCEDURES FOR TENDERING OLD CAPITAL SECURITIES
VALID TENDER. Except as set forth below, in order for Old Capital
Securities to be validly tendered pursuant to the Exchange Offer, a properly
completed and duly executed Letter of Transmittal (or facsimile thereof),
with any required signature guarantees and any other required documents, must
be received by the Exchange Agent at one of its addresses set forth under "--
Exchange Agent," and either (i) tendered Old Capital Securities must be
received by the Exchange Agent, or (ii) such Old Capital Securities must be
tendered pursuant to the procedures for book-entry transfer set forth below
and a book-entry confirmation must be received by the Exchange Agent, in each
case on or prior to the Expiration Date, or (iii) the guaranteed delivery
procedures set forth below must be complied with.
If a holder of Old Capital Securities is tendering less than all of the
Old Capital Securities held by such holder, the tendering holder should fill
in the amount of Old Capital Securities being tendered in the appropriate box
on the Letter of Transmittal. The entire amount of Old Capital Securities
delivered to the Exchange Agent will be deemed to have been tendered unless
otherwise indicated.
THE METHOD OF DELIVERY OF CERTIFICATES, THE LETTER OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND SOLE RISK OF THE TENDERING
HOLDER, AND DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE
EXCHANGE AGENT. IF DELIVERY IS BY MAIL, REGISTERED MAIL, RETURN RECEIPT
REQUESTED, PROPERLY INSURED, OR AN OVERNIGHT DELIVERY SERVICE IS RECOMMENDED.
IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
BOOK-ENTRY TRANSFER. The Exchange Agent will establish an account with
respect to the Old Capital Securities at DTC for purposes of the Exchange
Offer within two business days after the date of this Prospectus. Any
financial institution that is a participant in DTC's book-entry transfer
facility system may make a book-entry delivery of the Old Capital Securities
by causing DTC to transfer such Old Capital Securities into the Exchange
Agent's account at DTC in accordance with DTC's procedures for transfers.
However, although delivery of Old Capital Securities may be effected through
book-entry transfer into the Exchange Agent's account at DTC, the Letter of
Transmittal (or facsimile thereof), properly completed and duly executed,
with any required signature guarantees and any other required documents, must
in any case be delivered to and received by the Exchange Agent at its address
set forth under "--Exchange Agent" on or prior to the Expiration Date, or the
guaranteed delivery procedure set forth below must be complied with.
DELIVERY OF DOCUMENTS TO DTC IN ACCORDANCE WITH DTC'S PROCEDURES DOES
NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
SIGNATURE GUARANTEES. Certificates for the Old Capital Securities need
not be endorsed and signature guarantees on the Letter of Transmittal are
unnecessary unless (a) a certificate for the Old Capital Securities is
registered in a name other than that of the person surrendering the
certificate or (b) such holder completes the box entitled "Special Issuance
Instructions" or "Special Delivery Instructions" in the Letter of
Transmittal. In the case of (a) or (b) above, such certificates for Old
Capital Securities must be duly endorsed or accompanied by a properly
executed bond power, with the endorsement or signature on the bond power and
on the Letter of Transmittal guaranteed by a firm or other entity identified
in Rule 17Ad-15 under the Exchange Act as an "eligible guarantor
institution," including (as such terms are defined therein): (i) a bank; (ii)
a broker, dealer, municipal securities broker or dealer or government
securities broker or dealer; (iii) a credit union; (iv) a national securities
exchange, registered securities association or clearing agency; or (v) a
savings association that is a participant in a Securities Transfer
Association (each of the foregoing, an "Eligible Institution"), unless
surrendered on behalf of such Eligible Institution. See Instruction 1 to the
Letter of Transmittal.
GUARANTEED DELIVERY. If a holder desires to tender Old Capital
Securities pursuant to the Exchange Offer and the certificates for such Old
Capital Securities are not immediately available or time will not permit all
required documents to reach the Exchange Agent on or prior to the Expiration
Date, or the procedure for book-entry transfer cannot be completed on a
timely basis, such Old Capital Securities may nevertheless be tendered,
provided that all of the following guaranteed delivery procedures are
complied with:
(a) such tenders are made by or through an Eligible Institution;
(b) a properly completed and duly executed Notice of Guaranteed Delivery,
substantially in the form accompanying the Letter of Transmittal, is received
by the Exchange Agent, as provided below, on or prior to the Expiration Date;
and
(c) the certificates (or a book-entry confirmation) representing all
tendered Old Capital Securities, in proper form for transfer, together with a
properly completed and duly executed Letter of Transmittal (or facsimile
thereof), with any required signature guarantees and any other documents
required by the Letter of Transmittal, are received by the Exchange Agent
within three New York Stock Exchange trading days after the date of execution
of such Notice of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand, or
transmitted by facsimile or mail to the Exchange Agent and must include a
guarantee by an Eligible Institution in the form set forth in such notice.
Notwithstanding any other provision hereof, the delivery of New Capital
Securities in exchange for Old Capital Securities tendered and accepted for
exchange pursuant to the Exchange Offer will in all cases be made only after
timely receipt by the Exchange Agent of Old Capital Securities, or of a book-
entry confirmation with respect to such Old Capital Securities, and a
properly completed and duly executed Letter of Transmittal (or facsimile
thereof), together with any required signature guarantees and any other
documents required by the Letter of Transmittal. Accordingly, the delivery
of New Capital Securities might not be made to all tendering holders at the
same time, and will depend upon when Old Capital Securities, book-entry
confirmations with respect to Old Capital Securities and other required
documents are received by the Exchange Agent.
The Trust's acceptance for exchange of Old Capital Securities tendered
pursuant to any of the procedures described above will constitute a binding
agreement between the tendering holder and the Trust upon the terms and
subject to the conditions of the Exchange Offer.
DETERMINATION OF VALIDITY. All questions as to the form of documents,
validity, eligibility (including time of receipt) and acceptance for exchange
of any tendered Old Capital Securities will be determined by the Corporation
and the Trust, in their sole discretion, whose determination shall be final
and binding on all parties. The Corporation and the Trust reserve the
absolute right, in their sole and absolute discretion, to reject any and all
tenders determined by them not to be in proper form or the acceptance of
which, or exchange for which, may, in the opinion of counsel to the
Corporation and the Trust, be unlawful. No alternative, conditional or
contingent tenders will be accepted. The Corporation and the Trust also
reserve the absolute right, subject to applicable law, to waive any of the
conditions of the Exchange Offer as set forth under "--Conditions to the
Exchange Offer" or any condition or irregularity in any tender of Old Capital
Securities of any particular holder whether or not similar conditions or
irregularities are waived in the case of other holders.
The interpretation by the Corporation and the Trust of the terms and
conditions of the Exchange Offer (including the Letter of Transmittal and the
instructions thereto) will be final and binding. No tender of Old Capital
Securities will be deemed to have been validly made until all irregularities
with respect to such tender have been cured or waived. Neither the
Corporation, the Trust, any affiliates or assigns of the Corporation or the
Trust, the Exchange Agent nor any other person shall be under any duty to
give any notification of any irregularities in tenders or incur any liability
for failure to give any such notification.
If any Letter of Transmittal, endorsement, bond power, power of
attorney, or any other document required by the Letter of Transmittal is
signed by a trustee, executor, administrator, guardian, attorney-in-fact,
officer of a corporation or other person acting in a fiduciary or
representative capacity, such person should so indicate when signing, and
unless waived by the Corporation and the Trust, proper evidence satisfactory
to the Corporation and the Trust, in their sole discretion, of such person's
authority to so act must be submitted.
A beneficial owner of Old Capital Securities that are held by or
registered in the name of a broker, dealer, commercial bank, trust company or
other nominee or custodian is urged to contact such entity promptly if such
beneficial holder wishes to participate in the Exchange Offer.
RESALES OF NEW CAPITAL SECURITIES
The Trust is making the Exchange Offer for the New Capital Securities in
reliance on the position of the staff of the Division of Corporation Finance
of the Commission as set forth in certain interpretive letters addressed to
third parties in other transactions. However, neither the Corporation nor
the Trust sought its own interpretive letter and there can be no assurance
that the staff of the Division of Corporation Finance of the Commission would
make a similar determination with respect to the Exchange Offer as it has in
such interpretive letters to third parties. Based on these interpretations
by the staff of the Division of Corporation Finance of the Commission, and
subject to the two immediately following sentences, the Corporation and the
Trust believe that New Capital Securities issued pursuant to this Exchange
Offer in exchange for Old Capital Securities may be offered for resale,
resold and otherwise transferred by a holder thereof (other than a holder who
is a broker-dealer) without further compliance with the registration and
prospectus delivery requirements of the Securities Act, provided that such
New Capital Securities are acquired in the ordinary course of such holder's
business and that such holder is not participating, and has no arrangement or
understanding with any person to participate, in a distribution (within the
meaning of the Securities Act) of such New Capital Securities. However, any
holder of Old Capital Securities who is an Affiliate of the Corporation or
the Trust or who intends to participate in the Exchange Offer for the purpose
of distributing New Capital Securities, or any broker-dealer who purchased
Old Capital Securities from the Trust for resale pursuant to Rule 144A
or any other available exemption under the Securities Act, (a) will not be
able to rely on the interpretations of the staff of the Division of
Corporation Finance of the Commission set forth in the above-mentioned
interpretive letters, (b) will not be permitted or entitled to tender
such Old Capital Securities in the Exchange Offer and (c) must comply with
the registration and prospectus delivery requirements of the Securities Act
in connection with any sale or other transfer of such Old Capital
Securities unless such sale is made pursuant to an exemption from such
requirements. In addition, as described below, if any broker-dealer holds
Old Capital Securities acquired for its own account as a result of market-
making or other trading activities and exchanges such Old Capital Securities
for New Capital Securities, then such broker-dealer must deliver a prospectus
meeting the requirements of the Securities Act in connection with any resales
of such New Capital Securities.
Each holder of Old Capital Securities who wishes to exchange Old Capital
Securities for New Capital Securities in the Exchange Offer will be required
to represent that (i) it is not an Affiliate of the Corporation or the Trust,
(ii) any New Capital Securities to be received by it are being acquired in
the ordinary course of its business, (iii) it has no arrangement or
understanding with any person to participate in a distribution (within the
meaning of the Securities Act) of such New Capital Securities, and (iv) if
such holder is not a broker-dealer, such holder is not engaged in, and
does not intend to engage in, a distribution (within the meaning of the
Securities Act) of such New Capital Securities. In addition, the
Corporation and the Trust may require such holder, as a condition to such
holder's eligibility to participate in the Exchange Offer, to furnish to the
Corporation and the Trust (or an agent thereof) in writing information as to
the number of "beneficial owners" (within the meaning of Rule 13d-3 under the
Exchange Act) on behalf of whom such holder holds the Capital Securities to
be exchanged in the Exchange Offer. Each broker-dealer that receives New
Capital Securities for its own account pursuant to the Exchange Offer must
acknowledge that it acquired the Old Capital Securities for its own account
as the result of market-making activities or other trading activities
and must agree that it will deliver a prospectus meeting the requirements of
the Securities Act in connection with any resale of such New Capital
Securities. The Letter of Transmittal states that, by so acknowledging
and by delivering a prospectus, a broker-dealer will not be deemed to admit
that it is an "underwriter" within the meaning of the Securities Act.
Based on the position taken by the staff of the Division of Corporation
Finance of the Commission in the interpretive letters referred to above, the
Corporation and the Trust believe that Participating Broker-Dealers who
acquired Old Capital Securities for their own accounts as a result of
market-making activities or other trading activities may fulfill their
prospectus delivery requirements with respect to the New Capital
Securities received upon exchange of such Old Capital Securities (other than
Old Capital Securities which represent an unsold allotment from the original
sale of the Old Capital Securities) with a prospectus meeting the
requirements of the Securities Act, which may be the prospectus prepared for
an exchange offer so long as it contains a description of the plan of
distribution with respect to the resale of such New Capital Securities.
Accordingly, this Prospectus, as it may be amended or supplemented from time
to time, may be used by a Participating Broker-Dealer during the period
referred to below in connection with resales of New Capital Securities
received in exchange for Old Capital Securities where such Old Capital
Securities were acquired by such Participating Broker-Dealer for its own
account as a result of market-making or other trading activities. Subject to
certain provisions set forth in the Registration Rights Agreement, the
Corporation and the Trust have agreed that this Prospectus, as it may be
amended or supplemented from time to time, may be used by a Participating
Broker-Dealer in connection with resales of such New Capital Securities for a
period ending 90 days after the Expiration Date (subject to extension under
certain limited circumstances described below) or, if earlier, when all such
New Capital Securities have been disposed of by such Participating Broker-
Dealer. See "Plan of Distribution." However, a Participating Broker-Dealer
who intends to use this Prospectus in connection with the resale of New
Capital Securities received in exchange for Old Capital Securities pursuant
to the Exchange Offer must notify the Corporation or the Trust, or cause the
Corporation or the Trust to be notified, on or prior to the Expiration Date,
that it is a Participating Broker-Dealer. Such notice may be given in the
space provided for that purpose in the Letter of Transmittal or may be
delivered to the Exchange Agent at one of the addresses set forth herein
under "--Exchange Agent." Any Participating Broker-Dealer who is an
"affiliate" of the Corporation or the Trust may not rely on such interpretive
letters and must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale transaction.
In that regard, each Participating Broker-Dealer who surrenders Old
Capital Securities pursuant to the Exchange Offer will be deemed to have
agreed, by execution of the Letter of Transmittal, that, upon receipt of
notice from the Corporation or the Trust of the occurrence of any event or
the discovery of any fact which makes any statement contained or incorporated
by reference in this Prospectus untrue in any material respect or which
causes this Prospectus to omit to state a material fact necessary in order to
make the statements contained or incorporated by reference herein, in light
of the circumstances under which they were made, not misleading or of the
occurrence of certain other events specified in the Registration Rights
Agreement, such Participating Broker-Dealer will suspend the sale of New
Capital Securities (or the New Guarantee or the New Junior Subordinated
Debentures, as applicable) pursuant to this Prospectus until the Corporation
or the Trust has amended or supplemented this Prospectus to correct such
misstatement or omission and has furnished copies of the amended or
supplemented Prospectus to such Participating Broker-Dealer or the
Corporation or the Trust has given notice that the sale of the New Capital
Securities (or the New Guarantee or the New Junior Subordinated Debentures,
as applicable) may be resumed, as the case may be. If the Corporation or the
Trust gives such notice to suspend the sale of the New Capital Securities (or
the New Guarantee or the New Junior Subordinated Debentures, as applicable),
it shall extend the 90-day period referred to above during which
Participating Broker-Dealers are entitled to use this Prospectus in
connection with the resale of New Capital Securities by the number of days
during the period from and including the date of the giving of such notice to
and including the date when Participating Broker-Dealers shall have received
copies of the amended or supplemented Prospectus necessary to permit resales
of the New Capital Securities or to and including the date on which the
Corporation or the Trust has given notice that the sale of New Capital
Securities (or the New Guarantee or the New Junior Subordinated Debentures,
as applicable) may be resumed, as the case may be.
WITHDRAWAL RIGHTS
Except as otherwise provided herein, tenders of Old Capital Securities
may be withdrawn at any time on or prior to the Expiration Date.
In order for a withdrawal to be effective, a written, telegraphic, telex
or facsimile transmission of such notice of withdrawal must be timely
received by the Exchange Agent at one of its addresses set forth under "--
Exchange Agent" on or prior to the Expiration Date. Any such notice of
withdrawal must specify the name of the person who tendered the Old Capital
Securities to be withdrawn, the aggregate principal amount of Old Capital
Securities to be withdrawn, and (if certificates for such Old Capital
Securities have been tendered) the name of the registered holder of the Old
Capital Securities as set forth on the Old Capital Securities, if different
from that of the person who tendered such Old Capital Securities. If Old
Capital Securities have been delivered or otherwise identified to the
Exchange Agent, then prior to the physical release of such Old Capital
Securities, the tendering holder must submit the serial numbers shown on the
particular Old Capital Securities to be withdrawn and the signature on the
notice of withdrawal must be guaranteed by an Eligible Institution, except in
the case of Old Capital Securities tendered for the account of an Eligible
Institution. If Old Capital Securities have been tendered pursuant to the
procedures for book-entry transfer set forth in "--Procedures for Tendering
Old Capital Securities," the notice of withdrawal must specify the name and
number of the account at DTC to be credited with the withdrawal of Old
Capital Securities, in which case a notice of withdrawal will be effective if
delivered to the Exchange Agent by written, telegraphic, telex or facsimile
transmission. Withdrawals of tenders of Old Capital Securities may not be
rescinded. Old Capital Securities properly withdrawn will not be deemed
validly tendered for purposes of the Exchange Offer, but may be retendered at
any subsequent time on or prior to the Expiration Date by following any of
the procedures described above under "--Procedures for Tendering Old Capital
Securities."
All questions as to the validity, form and eligibility (including time
of receipt) of such withdrawal notices will be determined by the Corporation
and the Trust, in their sole discretion, whose determination shall be final
and binding on all parties. Neither the Corporation, the Trust, any
affiliates or assigns of the Corporation or the Trust, the Exchange Agent nor
any other person shall be under any duty to give any notification of any
irregularities in any notice of withdrawal or incur any liability for failure
to give any such notification. Any Old Capital Securities which have been
tendered but which are withdrawn will be returned to the holder thereof
promptly after withdrawal.
DISTRIBUTIONS ON NEW CAPITAL SECURITIES
Holders of Old Capital Securities whose Old Capital Securities are
accepted for exchange will not receive Distributions on such Old Capital
Securities and will be deemed to have waived the right to receive any
Distributions on such Old Capital Securities accumulated from and including
August 1, 1997. Accordingly, such holders will not receive Distributions on
the Old Capital Securities as of January 31, 1998. Instead, holders of New
Capital Securities as of the relevant record date shall be entitled to
receive, on January 31, 1998, Distributions accumulated from and including
August 1, 1997.
CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provisions of the Exchange Offer, or any
extension of the Exchange Offer, the Corporation and the Trust will not be
required to accept for exchange, or to exchange, any Old Capital Securities
for any New Capital Securities, and, as described below, may terminate the
Exchange Offer (whether or not any Old Capital Securities have theretofore
been accepted for exchange) or may waive any conditions to or amend the
Exchange Offer, if any of the following conditions have occurred or exists or
have not been satisfied:
(a) there shall occur a change in the current interpretation by the
staff of the Commission which permits the New Capital Securities issued
pursuant to the Exchange Offer in exchange for Old Capital Securities to be
offered for resale, resold and otherwise transferred by holders thereof
(other than broker-dealers and any such holder which is an Affiliate of the
Corporation or the Trust without compliance with the registration and
prospectus delivery provisions of the Securities Act provided that such New
Capital Securities are acquired in the ordinary course of such holders'
business and such holders have no arrangement or understanding with any
person to participate in the distribution of such New Capital Securities); or
(b) any law, statute, rule or regulation shall have been adopted or
enacted which, in the judgment of the Corporation or the Trust, would
reasonably be expected to impair its ability to proceed with the Exchange
Offer; or
(c) a stop order shall have been issued by the Commission or any state
securities authority suspending the effectiveness of the Registration
Statement or proceedings shall have been initiated or, to the knowledge of
the Corporation or the Trust, threatened for that purpose; or
(d) any governmental approval has not been obtained, which approval the
Corporation or the Trust shall, in its sole discretion, deem necessary for
the consummation of the Exchange Offer as contemplated hereby.
If the Corporation or the Trust determines in its sole and absolute
discretion that any of the foregoing events or conditions has occurred or
exists or has not been satisfied, it may, subject to applicable law,
terminate the Exchange Offer (whether or not any Old Capital Securities have
theretofore been accepted for exchange) or may waive any such condition or
otherwise amend the terms of the Exchange Offer in any respect. If such
waiver or amendment constitutes a material change to the Exchange Offer, the
Corporation or the Trust will promptly disclose such waiver or amendment by
means of a prospectus supplement that will be distributed to the registered
holders of the Old Capital Securities and will extend the Exchange Offer to
the extent required by Rule 14e-1 under the Exchange Act.
EXCHANGE AGENT
The Chase Manhattan Bank has been appointed as Exchange Agent for the
Exchange Offer. Delivery of the Letters of Transmittal and any other
required documents, questions, requests for assistance, and requests for
additional copies of this Prospectus or of the Letter of Transmittal should
be directed to the Exchange Agent as follows:
<TABLE>
<CAPTION>
<S> <C>
BY REGISTERED OR CERTIFIED MAIL: BY HAND OR
OVERNIGHT DELIVERY:
The Chase Manhattan Bank The Chase
Manhattan Bank
450 West 33rd Street - 15th floor 450 West 33rd
Street - 15th floor
New York, NY 10001 New York, NY
10001
Attention: James D. Heaney Attention: James
D. Heaney
Vice President Vice President
Gloval Trust Services Global Trust
Services
</TABLE>
Confirm By Telephone:
(212) 946-3084
Facsimile Transmissions:
(ELIGIBLE INSTITUTIONS ONLY)
(212) 946-8161
Delivery to other than the above addresses or facsimile number will not
constitute a valid delivery.
FEES AND EXPENSES
The Corporation has agreed to pay the Exchange Agent reasonable and
customary fees for its services and will reimburse it for its reasonable out-
of-pocket expenses in connection therewith. The Corporation will also pay
brokerage houses and other custodians, nominees and fiduciaries the
reasonable out-of-pocket expenses incurred by them in forwarding copies of
this Prospectus and related documents to the beneficial owners of Old Capital
Securities, and in handling or tendering for their customers.
Holders who tender their Old Capital Securities for exchange will not be
obligated to pay any transfer taxes in connection therewith. If, however,
New Capital Securities are to be delivered to, or are to be issued in the
name of, any person other than the registered holder of the Old Capital
Securities tendered, or if a transfer tax is imposed for any reason other
than the exchange of Old Capital Securities in connection with the Exchange
Offer, then the amount of any such transfer taxes (whether imposed on the
registered holder or any other persons) will be payable by the tendering
holder. If satisfactory evidence of payment of such taxes or exemption
therefrom is not submitted with the Letter of Transmittal, the amount of such
transfer taxes will be billed directly to such tendering holder.
Neither the Corporation nor the Trust will make any payment to brokers,
dealers or other nominees soliciting acceptances of the Exchange Offer.
DESCRIPTION OF NEW SECURITIES
DESCRIPTION OF NEW CAPITAL SECURITIES
Pursuant to the terms of the Trust Agreement, the Trust has issued the
Old Capital Securities and the Common Securities and will issue the New
Capital Securities pursuant to the Exchange Offer. The New Capital
Securities will represent preferred beneficial interests in the Trust and the
holders of the New Capital Securities and the Old Capital Securities will be
entitled to a preference over the Common Securities in certain circumstances
with respect to Distributions and amounts payable on redemption of the Trust
Securities or liquidation of the Trust. See "--Subordination of Common
Securities." The Trust Agreement has been qualified under the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act"). This summary
of certain provisions of the New Capital Securities and the Trust Agreement
does not purport to be complete and is subject to, and is qualified in its
entirety by reference to, all the provisions of the Trust Agreement,
including the definitions therein of certain terms.
GENERAL. The Capital Securities (including the Old Capital Securities
and the New Capital Securities) are limited to $30,000,000 aggregate
Liquidation Amount at any one time outstanding. The New Capital Securities
will rank pari passu, and payments will be made thereon pro rata, with the
Old Capital Securities and the Common Securities except as described under "-
- -Subordination of Common Securities." Legal title to the Junior Subordinated
Debentures will be held by the Property Trustee in trust for the benefit of
the holders of the Capital Securities and Common Securities. The New
Guarantee will be a guarantee on a subordinated basis but will not guarantee
payment of Distributions or amounts payable on redemption of the New Capital
Securities or on liquidation of the Trust when the Trust does not have funds
on hand legally available for such payments. See "--Description of New
Guarantee."
DISTRIBUTIONS. Distributions on the New Capital Securities will be
cumulative, will accumulate from August 1, 1997 and will be payable
semi-annually in arrears on January 31 and July 31 of each year, commencing
January 31, 1998, at the annual rate of 9.75% of the Liquidation Amount to the
holders of the New Capital Securities on the relevant record date. The record
date will be the fifteenth day prior to the relevant Distribution Date (as
defined below). The amount of Distributions payable for any period will be
computed on the basis of a 360-day year of twelve 30-day months and, for any
period of less than a full calendar month, the number of days elapsed in such
month. In the event that any date on which Distributions are payable on the
New Capital Securities is not a Business Day (as defined below), payment of
the Distribution payable on such date will be made on the next succeeding day
that is a Business Day (and without any interest or other payment in respect
to any such delay), in each case with the same force and effect as if made on
such date (each date on which Distributions are payable in accordance with
the foregoing, a "Distribution Date"). A "Business Day" shall mean any day
other than a Saturday or a Sunday, or a day on which banking institutions in
The City of New York or Wilmington, Delaware are authorized or required
by law or executive order to remain closed.
So long as no Debenture Event of Default shall have occurred and be
continuing, the Corporation will have the right under the Indenture to defer
the payment of interest on the New Junior Subordinated Debentures at any time
or from time to time for a period not exceeding 10 consecutive semi-annual
periods with respect to each Extension Period, provided that no Extension
Period may extend beyond the Stated Maturity Date. Upon any such election,
semi-annual Distributions on the New Capital Securities will be deferred by
the Trust during any such Extension Period. Distributions to which holders of
the New Capital Securities are entitled during any such Extension Period will
accumulate additional Distributions thereon at the rate per annum of 9.75%
thereof, compounded semi-annually from the relevant Distribution Date, but
not exceeding the interest rate then accruing on the New Junior Subordinated
Debentures. The term "Distributions," as used herein, shall include any such
additional Distributions.
During any Extension Period, the Corporation may further extend such
Extension Period, provided that such extension does not cause such Extension
Period to exceed 10 consecutive semi-annual periods or to extend beyond the
Stated Maturity Date. Upon the expiration of any Extension Period and the
payment of all amounts then due, and subject to the foregoing limitations,
the Corporation may elect to begin a new Extension Period. The Corporation
must give the Property Trustee, the Administrative Trustees and the Debenture
Trustee notice of its election of any Extension Period at least five Business
Days prior to the earlier of (i) the date the Distributions on the New
Capital Securities would have been payable except for the election to begin
such Extension Period or (ii) the date the Administrative Trustees are
required to give notice to any securities exchange or to holders of such New
Capital Securities of the record date or the date such Distributions are
payable but in any event not less than five Business Days prior to such
record date. There is no limitation on the number of times that the
Corporation may elect to begin an Extension Period. See "--Description of New
Junior Subordinated Debentures--Option to Extend Interest Payment Date" and
"Certain United States Federal Income Tax Considerations--Interest Income and
Original Issue Discount."
During any Extension Period, the Corporation may not (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
or (ii) make any payment of principal of or premium, if any, or interest on
or repay, repurchase or redeem any debt securities of the Corporation
(including Other Debentures) that rank pari passu with or junior in right of
payment to the Junior 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 (including Other Guarantees)
if such guarantee ranks pari passu with or junior in right of payment to the
Junior Subordinated Debentures (other than (a) dividends or distributions in
shares of, or options, warrants or rights to subscribe for or purchase shares
of, common stock of the Corporation, (b) any declaration of a dividend in
connection with the implementation of a stockholders' rights plan, or the
issuance of stock under any such plan in the future, or the redemption or
repurchase of any such rights pursuant thereto, (c) payments under the
Guarantee, (d) as a result of a reclassification of the Corporation's capital
stock or the exchange or conversion of one class or series of the
Corporation's capital stock for another class or series of the Corporation's
capital stock, (e) the purchase of fractional interests in shares of the
Corporation's capital stock pursuant to the conversion or exchange provisions
of such capital stock or the security being converted or exchanged, and (f)
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 or any of the Corporation's dividend reinvestment plans).
The revenue of the Trust available for distribution to holders of the
Capital Securities will be limited to payments under the New Junior
Subordinated Debentures. See "--Description of New Junior Subordinated
Debentures--General." If the Corporation does not make interest payments on
the New Junior Subordinated Debentures, the Property Trustee will not have
funds available to pay Distributions on the New Capital Securities. The
payment of Distributions on the New Capital Securities (if and to the extent
the Trust has funds on hand legally available for the payment of such
Distributions) will be guaranteed by the Corporation on a limited basis as
set forth herein under "--Description of New Guarantee."
REDEMPTION. Upon the repayment on the Stated Maturity Date or
prepayment prior to the Stated Maturity Date of the New Junior Subordinated
Debentures, the proceeds from such repayment or prepayment shall be applied
by the Property Trustee to redeem a Like Amount (as defined below) of the
Trust Securities, upon not less than 30 nor more than 60 days notice of a
date of redemption (the "Redemption Date"), at the applicable Redemption
Price, which shall be equal to (i) in the case of the repayment of the New
Junior Subordinated Debentures on the Stated Maturity Date, the Maturity
Redemption Price (equal to the principal of, and accrued interest on, the
New Junior Subordinated Debentures), (ii) in the case of the optional
prepayment of the New Junior Subordinated Debentures prior to January 31,
2007, upon the occurrence and continuation of a Special Event, the Special
Event Redemption Price (equal to the Special Event Prepayment Price in
respect of the New Junior Subordinated Debentures) and (iii) in the case of
the optional prepayment of the New Junior Subordinated Debentures on or after
January 31, 2007, the Optional Redemption Price (equal to the Optional
Prepayment Price in respect of the New Junior Subordinated Debentures). See
"--Description of New Junior Subordinated Debentures--Optional Prepayment"
and "--Special Event Prepayment."
"Like Amount" means (i) with respect to a redemption of the Trust
Securities, Trust Securities having a Liquidation Amount equal to the
principal amount of Junior Subordinated Debentures to be paid in accordance
with their terms and (ii) with respect to a distribution of Junior
Subordinated Debentures upon the liquidation of the Trust, Junior
Subordinated Debentures having a principal amount equal to the Liquidation
Amount of the Trust Securities of the holder to whom such Junior Subordinated
Debentures are distributed.
The Corporation will have the option to prepay the New Junior
Subordinated Debentures, (i) in whole or in part, on or after January 31,
2007, at the applicable Optional Prepayment Price and (ii) in whole but not
in part, at any time prior to January 31, 2007, upon the occurrence of a
Special Event, at the Special Event Prepayment Price, in each case subject to
receipt of prior approval by the Federal Reserve if then required under
applicable capital guidelines or policies of the Federal Reserve.
LIQUIDATION OF THE TRUST AND DISTRIBUTION OF NEW JUNIOR SUBORDINATED
DEBENTURES. The Corporation will have the right at any time to dissolve the
Trust and cause the New Junior Subordinated Debentures to be distributed to
the holders of the Trust Securities in liquidation of the Trust. Such right
is subject to (i) the Corporation having received an opinion of counsel to
the effect that such distribution will not be a taxable event to holders of
New Capital Securities and (ii) receipt of approval of the Federal Reserve if
then required under applicable capital guidelines or policies of the Federal
Reserve.
The Trust shall automatically dissolve and its affairs shall be wound up
upon 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
Junior Subordinated Debentures to the holders of the Trust Securities, if the
Corporation, as Sponsor, has given written direction to the Property Trustee
to terminate the Trust (which direction is optional and, except as described
above, wholly within the discretion of the Corporation, as Sponsor); (iii)
redemption of all of the Trust Securities; (iv) expiration of the term of the
Trust; and (v) the entry of an order for the dissolution of the Trust by a
court of competent jurisdiction.
If a dissolution occurs as described in clause (i), (ii), (iv), or (v)
of the preceding paragraph, the Trust shall be liquidated by the Issuer
Trustees as expeditiously as the Issuer Trustees determine to be possible by
distributing, after satisfaction of liabilities to creditors of the Trust as
provided by applicable law, to the holders of the Trust Securities a Like
Amount of the New Junior Subordinated Debentures, unless such distribution is
determined by the Property Trustee not to be practicable, in which event such
holders will be entitled to receive out of the assets of the Trust legally
available for distribution to holders, after satisfaction of liabilities to
creditors of the Trust as provided by applicable law, an amount equal to the
aggregate of the Liquidation Amount plus accumulated and unpaid Distributions
thereon to the date of payment (such amount being the "Liquidation
Distribution"). If such Liquidation Distribution can be paid only in part
because the Trust has insufficient assets on hand legally available to pay in
full the aggregate Liquidation Distribution, then the amounts payable
directly by the Trust on the Trust Securities shall be paid on a pro rata
basis, except that if a Debenture Event of Default has occurred and is
continuing, the Capital Securities shall have a priority over the Common
Securities. See "--Subordination of Common Securities."
If the Corporation elects not to prepay the Junior Subordinated
Debentures prior to maturity in accordance with their terms and either elects
not to or is unable to liquidate the Trust and distribute the Junior
Subordinated Debentures to holders of the Trust Securities, the Trust
Securities will remain outstanding until the repayment of the Junior
Subordinated Debentures on the Stated Maturity Date.
After the liquidation date is fixed for any distribution of Junior
Subordinated Debentures to holders of the Trust Securities, (i) the Trust
Securities will no longer be deemed to be outstanding, (ii) each holder
of Trust Securities will receive a registered global certificate or
certificates representing the Junior Subordinated Debentures to be
delivered upon such distribution and (iii) Trust Securities will be deemed
to represent New Junior Subordinated Debentures having a principal amount
equal to the Liquidation Amount of such Trust Securities, and bearing
accrued and unpaid interest in an amount equal to the accumulated and unpaid
Distributions on such Trust Securities until such certificates are presented
to the Administrative Trustees or their agent for cancellation, whereupon
the Corporation will issue to such holder, and the Debenture Trustee will
authenticate, a certificate representing such Junior Subordinated
Debentures.
There can be no assurance as to the market prices for the New Capital
Securities or the New Junior Subordinated Debentures that may be distributed
in exchange for the Trust Securities if a dissolution and liquidation of the
Trust were to occur. Accordingly, the New Capital Securities that an investor
may purchase, or the New Junior Subordinated Debentures that the investor may
receive on dissolution and liquidation of the Trust, may trade at a discount
to the price that the investor paid to purchase the New Capital Securities
offered hereby.
REDEMPTION PROCEDURES. If applicable, Trust Securities shall be
redeemed at the applicable Redemption Price with the proceeds from the
contemporaneous repayment or prepayment of the New Junior Subordinated
Debentures. Any redemption of Trust Securities shall be made and the
applicable Redemption Price shall be payable on the Redemption Date only to
the extent that the Trust has funds legally available for the payment of such
applicable Redemption Price. See also "--Subordination of Common Securities."
If the Trust gives a notice of redemption in respect of the New Capital
Securities, then, by 12:00 noon, New York City time, on the Redemption Date,
to the extent funds are legally available, with respect to the New Capital
Securities held by DTC or its nominee, the Property Trustee or the Paying
Agent will pay the applicable Redemption Price to DTC. See "--Form,
Denomination, Book--Entry Procedures and Transfer." With respect to the New
Capital Securities held in certificated form, the Property Trustee, to the
extent funds are legally available, will pay the applicable Redemption Price
to the holders thereof upon surrender of their certificates evidencing the
Trust Securities. See "--Payment and Paying Agency." Distributions payable
on or prior to the Redemption Date shall be payable to the holders of such
New Capital Securities on the relevant record dates from the related
Distribution Dates. If notice of redemption shall have been given and funds
deposited with the Property Trustee to pay the Redemption Price for the New
Capital Securities called for redemption, then upon the date of such deposit,
all rights of the holders of the New Capital Securities will cease, except
the right of the holders of the New Capital Securities to receive the
applicable Redemption Price, but without interest on such Redemption Price,
and the New Capital Securities will cease to be outstanding. In the event
that any Redemption Date of New Capital Securities is not a Business Day,
then the applicable Redemption Price payable on such date will be paid on the
next succeeding day that is a Business Day ( and without any interest or
other payment in respect of any such delay), in each case with the same force
and effect as if made on such date. In the event that payment of the
applicable Redemption Price is improperly withheld or refused and not paid
either by the Trust or by the Corporation pursuant to the Guarantee as
described under "Description of New Guarantee," (i) Distributions on New
Capital Securities will continue to accumulate at the then applicable rate,
from the Redemption Date originally established by the Trust to the date such
applicable Redemption Price is actually paid, and (ii) the actual payment
date will be the Redemption Date for purposes of calculating the applicable
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 Capital Securities by tender, in
the open market or by private agreement.
Notice of any redemption will be mailed at least 30 days but not more
than 60 days prior to the Redemption Date to each holder of Trust Securities
at its registered address. Unless the Corporation defaults in payment of the
applicable Prepayment Price on, or in the repayment of, the Junior
Subordinated Debentures, Distributions will cease to accrue on the Trust
Securities called for redemption on and after the Redemption Date.
SUBORDINATION OF COMMON SECURITIES. Payment of Distributions on, and
the Redemption Price of, the Capital Securities and Common Securities, as
applicable, shall be made pro rata based on the Liquidation Amount of the
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 applicable
Redemption Price of, any of the Common Securities, and no other payment on
account of the redemption, liquidation or other acquisition of the Common
Securities, shall be made unless payment in full in cash of all
accumulated and unpaid Distributions on all of the outstanding Capital
Securities for all Distribution periods terminating on or prior thereto, or
in the case of payment of the applicable Redemption Price the full amount of
such Redemption Price, shall have been made or provided for, and all funds
available to the Property Trustee shall first be applied to the payment in
full in cash of all Distributions on, or Redemption Price of, the Capital
Securities then due and payable.
In the case of any Event of Default, the Corporation as holder of the
Common Securities will be deemed to have waived any right to act with respect
to such Event of Default until the effect of such Event of Default shall have
been cured, waived or otherwise eliminated. Until any such Event of Default
has been so cured, waived or otherwise eliminated, the Property Trustee shall
act solely on behalf of the holders of the Capital Securities and not on
behalf of the Corporation as holder of the Common Securities, and only the
holders of the Capital Securities will have the right to direct the Property
Trustee to act on their behalf.
EVENTS OF DEFAULT; NOTICE. The occurrence of a Debenture Event of
Default (see "Description of New Junior Subordinated Debentures--Debenture
Events of Default") constitutes an "Event of Default" under the Trust
Agreement.
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 the Capital Securities, the
Administrative Trustees and the Corporation, as Sponsor, unless such Event of
Default shall have been cured or waived. The Corporation, as Sponsor, 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 of
the conditions and covenants applicable to them under the Trust Agreement.
If a Debenture Event of Default has occurred and is continuing, the
Capital Securities shall have a preference over the Common Securities as
described under "--Liquidation of the Trust and Distribution of New Junior
Subordinated Debentures" and "--Subordination of Common Securities."
REMOVAL OF ISSUER TRUSTEES. Unless a Debenture Event of Default shall
have occurred and be continuing, any Issuer 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 Capital Securities. In no event will the holders of
the 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 an Issuer Trustee and no appointment of a successor trustee shall
be effective until the acceptance of appointment by the successor trustee in
accordance with the provisions of the Trust Agreement.
MERGER OR CONSOLIDATION OF ISSUER TRUSTEES. Any corporation 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 corporation resulting from any merger, conversion or
consolidation to which such Issuer Trustee shall be a party, or any
corporation succeeding to all or substantially all the corporate trust
business of such Issuer Trustee, shall be the successor of such Issuer
Trustee under the Trust Agreement, provided such corporation shall be
otherwise qualified and eligible.
MERGERS, CONVERSIONS, CONSOLIDATIONS, AMALGAMATIONS OR REPLACEMENTS OF
THE TRUST. The Trust may not merge or convert with or into, consolidate,
amalgamate, or be replaced by, or convey, transfer or lease its properties
and assets as an entirety or substantially as an entirety to any corporation
or other Person, except as described below. The Trust may, at the request of
the Corporation, as Sponsor, with the consent of the Administrative Trustees
but without the consent of the holders of the Capital Securities, merge or
convert with or into, consolidate, amalgamate, or be replaced by or convey,
transfer or lease its properties and assets as an entirety or substantially
as an entirety to a trust organized as such under the laws of any State;
provided, that (i) such successor entity either (a) expressly assumes all of
the obligations of the Trust with respect to the Capital Securities or (b)
substitutes for the Capital Securities other securities having substantially
the same terms as the Capital Securities (the "Successor Securities") so long
as the Successor Securities rank the same as the Capital Securities rank in
priority with respect to distributions and payments upon liquidation,
redemption and otherwise, (ii) the Corporation expressly appoints a trustee
of such successor entity possessing the same powers and duties as the
Property Trustee with respect to the Junior 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 Capital Securities are then
listed, if any, (iv) such merger, consolidation, conversion, amalgamation,
replacement, conveyance, transfer or lease does not cause the Capital
Securities (including any Successor Securities) to be downgraded by any
nationally recognized statistical rating organization then rating the Capital
Securities or any Successor Securities, (v) such merger, consolidation,
conversion, amalgamation, replacement, conveyance, transfer or lease does not
adversely affect the rights, preferences and privileges of the holders of the
Capital Securities (including any Successor Securities) in any material
respect (other than dilution of such holders' interests in the new entity,
if any), (vi) such successor entity has a purpose substantially identical
to that of the Trust, (vii) prior to such merger, consolidation, conversion,
amalgamation, replacement, conveyance, transfer or lease, the Corporation
has received an opinion from independent counsel to the Trust experienced
in such matters to the effect that (a) such merger, consolidation,
conversion, amalgamation, replacement, conveyance, transfer or lease does not
adversely affect the rights, preferences and privileges of the holders of the
Capital Securities (including any Successor Securities) in any material
respect (other than dilution of such holders' interests in the new entity, if
any), and (b) following such merger, consolidation, conversion, amalgamation,
replacement, conveyance, transfer or lease, neither the Trust nor such
successor entity will be required to register as an investment company
under the Investment Company Act 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 Guarantee. Notwithstanding the
foregoing, the Trust shall not, except with the consent of holders of 100%
in Liquidation Amount of the Trust Securities, consolidate, amalgamate,
merge or convert with or into, or be replaced by or convey, transfer or lease
its properties and assets as an entirety or substantially as an entirety to
any other entity or permit any other entity to consolidate, amalgamate, merge
or convert with or into, or replace it if such consolidation, conversion,
amalgamation, merger, replacement, conveyance, transfer or lease would cause
the Trust or the successor entity not to be classified as a grantor trust for
United States federal income tax purposes.
VOTING RIGHTS; AMENDMENT OF THE TRUST AGREEMENT. Except as provided
below and under "--Mergers, Conversions, Consolidations, Amalgamations or
Replacements of the Trust" and "--Description of New Guarantee--Amendments
and Assignment" and as otherwise required by law and the Trust Agreement, the
holders of the New Capital Securities will have no voting rights.
The 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 Trust Securities (i) to cure any ambiguity, correct or
supplement any provisions in the Trust Agreement that may be inconsistent
with any other provision, or to make any other provisions with respect to
matters or questions arising under the Trust Agreement, which shall not be
inconsistent with the other provisions of the Trust Agreement, or (ii) to
modify, eliminate or add to any provisions of the Trust Agreement to such
extent as shall be necessary to ensure that the Trust will be classified for
United States federal income tax purposes as a grantor trust at all times
that any Trust Securities are outstanding or to ensure that the Trust will
not be required to register as an "investment company" under the Investment
Company Act; provided, however, that in the case of clause (i), such action
shall not adversely affect in any material respect the interests of the
holders of the Trust Securities, and any amendments of the Trust Agreement
shall become effective when notice thereof is given to the holders of the
Trust Securities. The Trust Agreement may be amended by the Issuer Trustees
and the Corporation (i) with the consent of holders representing a majority
(based upon Liquidation Amount) of the outstanding Trust Securities, and (ii)
upon 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 Trust's status
as a grantor trust for United States federal income tax purposes or the
Trust's exemption from status as an "investment company" under the Investment
Company Act, provided that, without the consent of each holder of Trust
Securities, the Trust Agreement may not be amended to (i) change the amount
or timing of any Distribution on the Trust Securities or otherwise adversely
affect the amount of any Distribution required to be made in respect of the
Trust Securities as of a specified date or (ii) restrict the right of a
holder of Trust Securities to institute suit for the enforcement of any such
payment on or after such date.
So long as any Junior 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 such Property Trustee
with respect to the Junior Subordinated Debentures, (ii) waive certain past
defaults under the Indenture, (iii) exercise any right to rescind or annul a
declaration of acceleration of the maturity of the principal of the Junior
Subordinated Debentures or (iv) consent to any amendment, modification or
termination of the Indenture or the Junior Subordinated Debentures, where
such consent shall be required, without, in each case, obtaining the prior
approval of the holders of a majority in Liquidation Amount of all
outstanding Capital Securities; provided, however, that where a consent under
the Indenture would require the consent of each holder of Junior Subordinated
Debentures affected thereby, no such consent shall be given by the Property
Trustee without the prior approval of each holder of the Capital Securities.
The Issuer Trustees shall not revoke any action previously authorized or
approved by a vote of the holders of the Capital Securities except by
subsequent vote of such holders. The Property Trustee shall notify each
holder of Capital Securities of any notice of default with respect to the
Junior Subordinated Debentures. In addition to obtaining the foregoing
approvals of such holders of the 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 the Trust will not be
classified as an association taxable as a corporation for United States
federal income tax purposes on account of such action.
Any required approval of holders of New Capital Securities may be given
at a meeting of such holders convened for such purpose or pursuant to written
consent. The Property Trustee will cause a notice of any meeting at which
holders of New 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 New Capital Securities in the manner set forth in
the Trust Agreement.
No vote or consent of the holders of New Capital Securities will be
required for the Trust to redeem and cancel the New Capital Securities in
accordance with the Trust Agreement.
Notwithstanding that holders of the Capital Securities are entitled to
vote or consent under any of the circumstances described above, any of the
Capital Securities that are owned by the 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.
FORM, DENOMINATION, BOOK-ENTRY PROCEDURES AND TRANSFER. The New Capital
Securities initially will be represented by one or more Capital Securities in
registered, global form (collectively, the "Global Capital Securities"). The
Global Capital Securities will be deposited upon issuance with the Property
Trustee as custodian for DTC, in New York, New York, and registered in the
name of DTC or its nominee, in each case for credit to an account of a direct
or indirect participant in DTC as described below.
Except as set forth below, the Global Capital Securities may be
transferred, in whole and not in part, only to another nominee of DTC or to a
successor of DTC or its nominee. Beneficial interests in the Global Capital
Securities may not be exchanged for Capital Securities in certificated form
except in the limited circumstances described below.
DEPOSITORY PROCEDURES. DTC has advised the Trust and the Corporation
that DTC is a limited purpose trust company created to hold securities for
its participating organizations (collectively, the "Participants") and to
facilitate the clearance and settlement of transactions in those securities
between Participants through electronic book-entry changes in accounts of its
Participants. The Participants include securities brokers and dealers
(including the Initial Purchaser), banks, trust companies, clearing
corporations and certain other organizations. Access to DTC's system is also
available to other entities such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a
Participant, either directly or indirectly (collectively, the "Indirect
Participants"). Persons who are not Participants may beneficially own
securities held by or on behalf of DTC only through the Participants or the
Indirect Participants. The ownership interest and transfer of ownership
interest of each actual purchaser of each security held by or on behalf of
DTC are recorded on the records of the Participants and Indirect
Participants.
DTC has also advised the Trust and the Corporation that, pursuant to
procedures established by it, (i) upon deposit of the Global Capital
Securities, DTC will credit the accounts of Participants with portions of the
Liquidation Amount of the Global Capital Securities and (ii) ownership of
such interests in the Global Capital Securities will be shown on, and the
transfer of ownership thereof will be effected only through, records
maintained by DTC (with respect to the Participants) or by the Participants
and the Indirect Participants (with respect to other owners of beneficial
interests in the Global Capital Securities).
Except as described below, owners of beneficial interests in the Global
Capital Securities will not have Capital Securities registered in their name,
will not receive physical delivery of Capital Securities in certificated form
and will not be considered the registered owners or holders thereof under the
Trust Agreement for any purpose.
Payments in respect of the Global Capital Securities registered in the
name of DTC or its nominee will be payable by the Property Trustee to DTC in
its capacity as the registered holder under the Trust Agreement. Under the
terms of the Trust Agreement, the Property Trustee will treat the persons in
whose names the Capital Securities, including the Global Capital Securities,
are registered as the owners thereof for the purpose of receiving such
payments and for any and all other purposes whatsoever. Consequently, neither
the Property Trustee nor any agent thereof has or will have any
responsibility or liability for (i) any aspect of DTC's records or any
Participant's or Indirect Participant's records relating to or payments made
on account of beneficial interests in the Global Capital Securities, or for
maintaining, supervising or reviewing any of DTC's records or any
Participant's or Indirect Participant's records relating to the beneficial
interests in the Global Capital Securities or (ii) any other matter relating
to the actions and practices of DTC or any of its Participants or Indirect
Participants. DTC has advised the Trust and the Corporation that its current
practice, upon receipt of any payment in respect of securities such as the
Capital Securities, is to credit the accounts of the relevant Participants
with the payment on the payment date, in amounts proportionate to their
respective holdings in Liquidation Amount of beneficial interests in the
relevant security as shown on the records of DTC unless DTC has reason to
believe it will not receive payment on such payment date. Payments by the
Participants and the Indirect Participants to the beneficial owners of New
Capital Securities will be governed by standing instructions and customary
practices and will be the responsibility of the Participants or the Indirect
Participants and will not be the responsibility of DTC, the Property Trustee,
the Trust or the Corporation. Neither the Trust or the Corporation nor the
Property Trustee will be liable for any delay by DTC or any of its
Participants in identifying the beneficial owners of the New Capital
Securities, and the Trust, the Corporation and the Property Trustee may
conclusively rely on and will be protected in relying on instructions from
DTC or its nominee for all purposes.
Beneficial interests in the Global Capital Securities will trade in
DTC's Same-Day Funds Settlement System and secondary market trading activity
in such interests will therefore settle in immediately available funds,
subject in all cases to the rules and procedures of DTC and its Participants.
Transfers between Participants in DTC will be effected in accordance with
DTC's procedures, and will be settled in same-day funds.
DTC has advised the Trust and the Corporation that it will take any
action permitted to be taken by a holder of New Capital Securities only at
the direction of one or more Participants to whose account with DTC interests
in the Global Capital Securities are credited and only in respect of such
portion of the Liquidation Amount of the New Capital Securities as to which
such Participant or Participants has or have given such direction. However,
if there is an Event of Default under the Trust Agreement, DTC reserves the
right to exchange the Global Capital Securities for New Capital Securities in
certificated form and to distribute such New Capital Securities to its
Participants.
THE INFORMATION IN THIS SECTION CONCERNING DTC AND ITS BOOK-ENTRY SYSTEM
HAS BEEN OBTAINED FROM SOURCES THAT THE TRUST AND THE CORPORATION BELIEVE TO
BE RELIABLE, BUT NEITHER THE TRUST NOR THE CORPORATION TAKES RESPONSIBILITY
FOR THE ACCURACY THEREOF. ALTHOUGH DTC HAS AGREED TO THE FOREGOING
PROCEDURES TO FACILITATE TRANSFERS IN INTERESTS IN THE GLOBAL CAPITAL
SECURITIES AMONG PARTICIPANTS IN DTC, IT IS UNDER NO OBLIGATION TO PERFORM OR
TO CONTINUE TO PERFORM SUCH PROCEDURES, AND SUCH PROCEDURES MAY BE
DISCONTINUED AT ANY TIME. NEITHER THE TRUST NOR THE CORPORATION OR THE
PROPERTY TRUSTEE WILL HAVE ANY RESPONSIBILITY FOR THE PERFORMANCE BY DTC OR
ITS PARTICIPANTS OR INDIRECT PARTICIPANTS OF ITS OBLIGATIONS UNDER THE RULES
AND PROCEDURES GOVERNING ITS OPERATIONS.
EXCHANGE OF BOOK-ENTRY CAPITAL SECURITIES FOR CERTIFICATED CAPITAL
SECURITIES. A Global Capital Security is exchangeable for New Capital
Securities in registered certificated form if (i) DTC (x) notifies the Trust
that it is unwilling or unable to continue as Depositary for the Global
Capital Security and the Trust thereupon fails to appoint a successor
Depositary within 90 days or (y) has ceased to be a clearing agency
registered under the Exchange Act, (ii) the Corporation in its sole
discretion elects to cause the issuance of the New Capital Securities in
certificated form or (iii) there shall have occurred and be continuing an
Event of Default or any event which after notice or lapse of time or both
would be an Event of Default under the Trust Agreement. In addition,
beneficial interests in a Global Capital Security may be exchanged for
certificated New Capital Securities upon request but only upon at least 20
days prior written notice given to the Property Trustee by or on behalf
of DTC in accordance with customary procedures. In all cases, certificated
New Capital Securities delivered in exchange for any Global Capital Security
or beneficial interests therein will be registered in the names, and issued
in any approved denominations, requested by or on behalf of the Depositary
(in accordance with its customary procedures), unless the Property Trustee
determines otherwise in compliance with applicable law.
PAYMENT AND PAYING AGENCY. Payments in respect of the New Capital
Securities held in global form shall be made to the Depositary, which shall
credit the relevant accounts at the Depositary on the applicable Distribution
Dates or in respect of the New Capital Securities that are not held by the
Depositary, 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 New Capital Securities.
Registration of transfers of the New Capital Securities will be effected
without charge by or on behalf of the Trust, but upon payment of any tax or
other governmental charges that may be imposed in connection with any
transfer or exchange. The Trust will not be required to register or cause to
be registered the transfer of the New Capital Securities after they 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
Trust Agreement and, after such Event of Default, must exercise the same
degree of care and skill as a prudent person would exercise or use in the
conduct of his or her own affairs. Subject to this provision, the Property
Trustee is under no obligation to exercise any of the powers vested in it by
the Trust Agreement at the request of any holder of Trust 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 courses of action, construe ambiguous provisions in the
Trust Agreement or is unsure of the application of any provision of the Trust
Agreement, and the matter is not one on which holders of the Capital
Securities or the Common Securities are entitled under the 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 Trust Securities
and will have no liability except for its own bad faith, negligence or
willful misconduct.
MISCELLANEOUS. The Administrative Trustees are authorized and directed
to conduct the affairs of and to operate the Trust in such a way that the
Trust will not be deemed to be an "investment company" required to be
registered under the Investment Company Act or classified as an association
taxable as a corporation for United States federal income tax purposes and so
that the Junior Subordinated Debentures will be treated as indebtedness of
the 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 the Trust or the 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 Trust Securities.
Holders of the Trust Securities have no preemptive or similar rights.
The Trust may not borrow money, issue debt, execute mortgages or pledge
any of its assets.
DESCRIPTION OF NEW JUNIOR SUBORDINATED DEBENTURES
The Old Junior Subordinated Debentures were issued, and the New Junior
Subordinated Debentures will be issued, as a separate series under the
Indenture. The Indenture has been qualified under the Trust Indenture Act.
This summary of certain terms and provisions of the Junior Subordinated
Debentures and the Indenture does not purport to be complete, and where
reference is made to particular provisions of the Indenture, such provisions,
including the definitions of certain terms, some of which are not otherwise
defined herein, are qualified in their entirety by reference to all of the
provisions of the Indenture and those terms made a part of the Indenture by
the Trust Indenture Act.
GENERAL. Concurrently with the issuance of the Old Capital Securities,
the Trust invested the proceeds thereof, together with the consideration paid
by the Corporation for the Common Securities, in Old Junior Subordinated
Debentures issued by the Corporation. Pursuant to the Exchange Offer, the
Corporation will exchange the Old Junior Subordinated Debentures, in an
amount corresponding to the Old Capital Securities accepted for exchange, for
a like aggregate principal amount of the New Junior Subordinated Debentures
promptly after the Expiration Date.
The New Junior Subordinated Debentures will bear interest at the annual
rate of 9.75% of the principal amount thereof, payable semi-annually in
arrears on January 31 and July 31 of each year (each, an "Interest Payment
Date"), commencing August 1, 1997, to the person in whose name each Junior
Subordinated Debenture is registered, subject to certain exceptions, at the
close of business on the fifteenth day prior to the relevant payment date.
It is anticipated that, until the liquidation, if any, of the Trust, each New
Junior Subordinated Debenture will be held in the name of the Property
Trustee in trust for the benefit of the holders of the Trust Securities. The
amount of interest payable for any period will be computed on the basis of a
360-day year of twelve 30-day months and for any period of less than one full
calendar month, the number of days elapsing in such month. In the event that
any date on which interest is payable on the New Junior Subordinated
Debentures is not a Business Day, then payment of the interest payable on
such date will be made on the next succeeding day that is a Business Day (and
without any interest or other payment in respect of any such delay), in each
case with the same force and effect as if made on such date. Accrued interest
that is not paid on the applicable Interest Payment Date will bear additional
interest on the amount thereof (to the extent permitted by law) at the rate
per annum of 9.75% thereof, compounded semi-annually. The term "interest," as
used herein, shall include semi-annual interest payments, interest on
semi-annual interest payments not paid on the applicable Interest Payment
Date and Additional Sums (as defined below), as applicable.
The New Junior Subordinated Debentures will be issued in denominations
of $1,000 and integral multiples thereof. The New Junior Subordinated
Debentures will mature on January 31, 2027 (the "Stated Maturity Date"). The
New Junior Subordinated Debentures will rank pari passu with the Old Junior
Subordinated Debentures and with all Other Debentures 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 Indebtedness. See "--
Subordination." The Corporation is a non-operating holding company and
substantially all of the operating assets of the Corporation and its
consolidated subsidiaries are owned by Community Bank. The Corporation
relies primarily on dividends from such subsidiaries to meet its obligations.
The Corporation is a legal entity separate and distinct from its
subsidiaries. The principal sources of the Corporation's income are
dividends and interest from its banking and non-banking affiliates. Community
Bank is subject to certain restrictions imposed by federal law on any loans
or extensions of credit to, and other transactions with, the Corporation and
certain other affiliates, and on investments in stock or other securities
thereof. Such restrictions prevent the Corporation and its non-banking
affiliates from borrowing from Community Bank unless the loans are secured by
various types of collateral and in specified amounts. Further, such secured
loans, other transactions and investments by any of Community Bank are
generally limited in amount as to the Corporation and as to each of such
other affiliates to 10% of Community Bank's capital and surplus and as to the
Corporation and all of such other affiliates to an aggregate of 20% of
Community Bank's capital and surplus. In addition, payment of dividends to
the Corporation by Community Bank is subject to various statutory limitations
and in certain circumstances requires approval by banking regulatory
authorities. Among other things, federal and state regulatory agencies have
the authority to limit payments of dividends by Community Bank based upon the
capital adequacy of Community Bank and the safety and soundness of Community
Bank following payment of the proposed dividend. 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 the subsidiary, except to the extent the Corporation may itself be
recognized as a creditor of that subsidiary. Accordingly, the New Junior
Subordinated Debentures will be effectively subordinated to all existing and
future liabilities of the Corporation's subsidiaries, and holders of New
Junior Subordinated Debentures should not rely upon the assets of the
Corporation's subsidiaries for repayment of the New Junior Subordinated
Debentures. The Indenture does not limit the incurrence or issuance of
other indebtedness of the Corporation, including Senior Indebtedness.
See "--Subordination."
FORM, REGISTRATION AND TRANSFER. If the Junior Subordinated Debentures
are distributed to holders of the Trust Securities, such Junior Subordinated
Debentures may be represented by one or more global certificates registered
in the name of Cede & Co. as the nominee of DTC. The depositary arrangements
for such Junior Subordinated Debentures are expected to be substantially
similar to those in effect for the New Capital Securities. For a description
of DTC and the terms of the depositary arrangements relating to payments,
transfers, voting rights, redemptions and other notices and other matters,
see "--Description of New Capital Securities--Form, Denomination, Book-Entry
Procedures and Transfer."
PAYMENT AND PAYING AGENTS. Payment of principal of (and premium, if
any) and any interest on New Junior 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 except in the case of New Junior Subordinated Debentures
in global form, (i) by check mailed to the address of the Person entitled
thereto as such address shall appear in the register for New Junior
Subordinated Debentures or (ii) by transfer to an account maintained by the
Person entitled thereto as specified in such register, provided that proper
transfer instructions have been received by the relevant Record Date. Payment
of any interest on any New Junior Subordinated Debenture will be made to the
Person in whose name such New Junior Subordinated Debenture is 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 New Junior 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
(and premium, if any) or interest on any New Junior Subordinated Debenture
and remaining unclaimed for two years after such principal (and premium, if
any) or interest has become due and payable shall, at the request of the
Corporation, be repaid to the Corporation and the holder of such New Junior
Subordinated Debenture shall thereafter look, as a general unsecured
creditor, only to the Corporation for payment thereof.
OPTION TO EXTEND INTEREST PAYMENT DATE. So long as no Debenture Event
of Default has occurred and is continuing, the Corporation will have the
right under the Indenture at any time during the term of the New Junior
Subordinated Debentures to defer the payment of interest for a period not
exceeding 10 consecutive semi-annual periods with respect to each Extension
Period, provided that no Extension Period may extend beyond the Stated
Maturity Date. At the end of such Extension Period, the Corporation must pay
all interest then accrued and unpaid (together with interest thereon at the
annual rate of 9.75%, compounded semi-annually, to the extent permitted by
applicable law). During an Extension Period, interest will continue to accrue
and holders of New Junior Subordinated Debentures (and holders of the Trust
Securities while Trust Securities are outstanding) will be required to accrue
interest income for United States federal income tax purposes prior to the
receipt of cash attributable to such income. See "Certain United States
Federal Income Tax Considerations--Interest Income and Original Issue
Discount."
During any such Extension Period, the Corporation may not (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
(which includes common and preferred 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 any Other Debentures) that rank
pari passu with or junior in right of payment to the New Junior 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 (including any Other Guarantees) if such guarantee ranks pari
passu with or junior in right of payment to the New Junior Subordinated
Debentures (other than (a) dividends or distributions in shares of or
options, warrants or rights to subscribe for or purchase shares of, common
stock of the Corporation, (b) any declaration of a dividend in connection
with the implementation of a stockholders' rights plan, or the issuance of
stock under any such plan in the future, or the redemption or repurchase of
any such rights pursuant thereto, (c) payments under the Guarantee, (d) as a
result of a reclassification of the Corporation's capital stock or the
exchange or conversion of one class or series of the Corporation's capital
stock for another class or series of the Corporation's capital stock, (e) the
purchase of fractional interests in shares of the Corporation's capital stock
pursuant to the conversion or exchange provisions of such capital stock
or the security being converted or exchanged, and (f) 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 or
any of the Corporation's dividend reinvestment plans).
Prior to the expiration of any Extension Period, the Corporation may
further extend such Extension Period, provided that such extension does not
cause such Extension Period to exceed 10 consecutive semi-annual periods or
to extend beyond the Stated Maturity Date. Upon the expiration of any
Extension Period and the payment of all amounts then due on any Interest
Payment Date, 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 of any Extension Period (or an extension
thereof) at least five Business Days prior to the earlier of (i) the date the
Distributions on the Trust Securities would have been payable except for the
election to begin or extend such Extension Period or (ii) the date the
Administrative Trustees are required to give notice to any securities
exchange or to holders of New Capital Securities of the record date or the
date such Distributions are payable, but in any event not less than five
Business Days prior to such record date. The Debenture Trustee shall give
notice of the Corporation's election to begin or extend a new Extension
Period to the holders of the Capital Securities in accordance with the terms
of the Indenture. There is no limitation on the number of times that the
Corporation may elect to begin an Extension Period.
OPTIONAL PREPAYMENT. The New Junior Subordinated Debentures will be
prepayable, in whole or in part, at the option of the Corporation on or after
January 31, 2007, subject to the Corporation having received any required
regulatory approval, at a prepayment price (the "Optional Prepayment Price")
equal to the percentage of the outstanding principal amount of the New Junior
Subordinated Debentures specified below, plus, in each case, accrued interest
thereon to the date of prepayment if redeemed during the 12-month period
beginning January 31 of the years indicated below:
<TABLE>
<CAPTION>
Year
Percentage
<S>
<C>
2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. 104.54%
2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. 104.08%
2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. 103.63%
2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. 103.18%
2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. 102.72%
2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. 102.27%
2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. 101.82%
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. 101.36%
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. 100.91%
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. 100.45%
2017 and thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. 100.00%
</TABLE>
SPECIAL EVENT PREPAYMENT. If a Special Event occurs and is continuing,
the Corporation may, at its option and subject to receipt of any required
regulatory approval, prepay the New Junior Subordinated Debentures in whole
(but not in part) at any time prior to January 31, 2007 within 90 days of the
occurrence of such Special Event, at a prepayment price (the "Special Event
Prepayment Price") equal to the greater of (i) 100% of the principal amount
of such Junior Subordinated Debentures or (ii) the sum, as determined by a
Quotation Agent, of the present values of 104.54% of the principal amount
thereof plus the scheduled payments of interest thereon from the repayment
date to and including the Initial Optional Prepayment Date (the "Remaining
Life"), discounted to the prepayment date on a semi-annual basis (assuming a
360-day year consisting of twelve 30-day months) at the Adjusted Treasury
Rate, plus, in the case of a redemption under clause (i) or clause (ii),
accrued interest thereon to the date of prepayment.
A "Special Event" means a Tax Event or a Regulatory Capital Event (as
defined below), as the case may be.
A "Tax Event" means the receipt by the Corporation and the Trust of an
opinion of a nationally recognized tax counsel experienced in such matters to
the effect that, as a result of (a) any amendment to, or change (including
any announced prospective change) in, the laws or any regulations thereunder
of the United States or any political subdivision or taxing authority thereof
or therein, or (b) any official administrative pronouncement or judicial
decision interpreting or applying such laws or regulations, which amendment
or change is effective or which pronouncement or decision is announced on or
after February 3, 1997, there is more than an insubstantial risk that (i) the
Trust is, or will be within 90 days of the date of such opinion, subject to
United States federal income tax with respect to income received or accrued
on the Junior Subordinated Debentures, (ii) interest payable by the
Corporation on the Junior 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
Trust is, or will be within 90 days of the date of such opinion, subject to
more than a de minimis amount of other taxes, duties or other governmental
charges.
A "Regulatory Capital Event" means that the Corporation shall have
received an opinion of independent bank regulatory counsel experienced in
such matters to the effect that, as a result of (a) any amendment to, or
change (including any announced prospective change) in, the laws (or any
regulations thereunder) of the United States or any rules, guidelines or
policies of the Federal Reserve or (b) any official administrative
pronouncement or judicial decision interpreting or applying such laws or
regulations, which amendment or change is effective or such pronouncement or
decision is announced on or after February 3, 1997, the Capital Securities do
not constitute, or within 90 days of the date of such opinion, will not
constitute, Tier I Capital (or its then equivalent); provided, however, that
the distribution of the Junior Subordinated Debentures in connection with the
liquidation of the Trust by the Corporation shall not in and of itself
constitute a Regulatory Capital Event unless such liquidation shall have
occurred in connection with a Tax Event.
"Adjusted Treasury Rate" means, with respect to any prepayment date, the
rate per annum equal to (i) the yield, under the heading which represents the
average for the immediately prior week, appearing in the most recently
published statistical release designated "H.15 (519)" or any successor
publication which is published weekly by the Federal Reserve and which
establishes yields on actively traded United States Treasury securities
adjusted to constant maturity under the caption "Treasury Constant
Maturities," for the maturity corresponding to the Remaining Life (if no
maturity is within three months before or after the maturity corresponding to
the Remaining Life, yields for the two published maturities most closely
corresponding to the Remaining Life shall be interpolated, and the Adjusted
Treasury Rate shall be interpolated or extrapolated from such yields on a
straight-line basis, rounding to the nearest month) or (ii) if such release
(or any successor release) is not published during the week preceding the
calculation date or does not contain such yields, the rate per annum equal to
the semi-annual equivalent yield to maturity of the Comparable Treasury
Issue, calculated using a price for the Comparable Treasury Issue (expressed
as a percentage of its principal amount) equal to the Comparable Treasury
Price for such prepayment date, in each case calculated on the third Business
Day preceding the prepayment date, plus in each case (a) 1.00% if such
prepayment date occurs on or prior to January 31, 1998, and (b) 0.50% in all
other cases.
"Comparable Treasury Issue" means the United States Treasury security
selected by the Quotation Agent as having a maturity comparable to the
Remaining Life of the New Junior Subordinated Debentures that would be
utilized, at the time of selection and in accordance with customary financial
practice, in pricing new issues of corporate debt securities of comparable
maturity to the Remaining Life of the New Junior Subordinated Debentures. If
no United States Treasury security has a maturity which is within a period
from three months before to three months after the Initial Optional
Prepayment Date, the two most closely corresponding United States Treasury
securities shall be used as the Comparable Treasury Issue, and the Adjusted
Treasury Rate shall be interpolated or extrapolated on a straight-line basis,
rounding to the nearest month, using such securities.
"Quotation Agent" means the Reference Treasury Dealer appointed by the
Corporation or, if the Corporation fails to do so, by the Property Trustee.
"Reference Treasury Dealer" means a primary U.S. Government securities dealer
in New York City (a "Primary Treasury Dealer").
"Comparable Treasury Price" means, with respect to any prepayment date,
(i) the average of five Reference Treasury Dealer Quotations for such
prepayment date, after excluding the highest and lowest such Reference
Treasury Dealer Quotations, or (ii) if the Debenture Trustee obtains fewer
than three such Reference Treasury Dealer Quotations, the average of all such
Quotations.
"Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any prepayment date, the average, as determined
by the Debenture Trustee, of the bid and asked prices for the Comparable
Treasury Issue (expressed in each case as a percentage of its principal
amount) quoted in writing to the Debenture Trustee by such Reference
Treasury Dealer at 5:00 p.m., New York City time, on the third Business
Day preceding such prepayment date.
"Additional Sums" means such additional amounts as may be necessary in
order that the amount of Distributions then due and payable by the Trust on
the outstanding Trust Securities shall not be reduced as a result of any
additional taxes, duties or other governmental charges to which the Trust has
become subject as a result of a Tax Event.
Notice of any prepayment will be mailed at least 30 days but not more
than 60 days before the redemption date to each holder of New Junior
Subordinated Debentures to be prepaid at its registered address. Unless the
Corporation defaults in payment of the prepayment price, on and after the
prepayment date interest ceases to accrue on such New Junior Subordinated
Debentures called for prepayment.
If the Trust is required to pay any additional taxes, duties or other
governmental charges as a result of a Tax Event, the Corporation will pay as
additional amounts on the New Junior Subordinated Debentures the Additional
Sums.
RESTRICTIONS ON CERTAIN PAYMENTS. The Corporation will also covenant
that it will not, (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 (which includes common and preferred
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 Debentures) that rank pari passu with or junior in right of
payment to the New Junior 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 (including any Other
Guarantees) if such guarantee ranks pari passu or junior in right of payment
to the New Junior Subordinated Debentures (other than (a) dividends or
distributions in shares of, or options, warrants or rights to subscribe for
or purchase shares of, common stock of the Corporation, (b) any declaration
of a dividend in connection with the implementation of a stockholder's rights
plan, or the issuance of stock under any such plan in the future, or the
redemption or repurchase of any such rights pursuant thereto, (c) payments
under the Guarantee, (d) as a result of a reclassification of the
Corporation's capital stock or the exchange or conversion of one class or
series of the Corporation's capital stock for another class or series of the
Corporation's capital stock, (e) the purchase of fractional interests in
shares of the Corporation's capital stock pursuant to the conversion or
exchange provisions of such capital stock or the security being converted or
exchanged, and (f) 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 or any of the Corporation's dividend
reinvestment plans) if at such time (1) there shall have occurred any event
of which the Corporation has actual knowledge that (a) is, or with the giving
of notice or the lapse of time, or both, would be, a Debenture Event of
Default and (b) in respect of which the Corporation shall not have taken
reasonable steps to cure, (2) if such New Junior Subordinated Debentures are
held by the Trust, the Corporation shall be in default with respect to its
payment of any obligations under the New Guarantee or (3) the Corporation
shall have given notice of its election of an Extension Period as provided in
the Indenture and shall not have rescinded such notice, and such Extension
Period, or any extension thereof, shall have commenced.
MODIFICATION OF INDENTURE. From time to time, the Corporation and the
Debenture Trustee may, without the consent of the holders of Junior
Subordinated Debentures, amend, waive or supplement the Indenture for
specified purposes, including, among other things, curing ambiguities,
defects or inconsistencies (provided that any such action does not materially
adversely affect the interest of the holders of Junior Subordinated
Debentures) and qualifying, or maintaining the qualification of, the
Indenture under the Trust Indenture Act. The Indenture contains provisions
permitting the Corporation and the Debenture Trustee, with the consent of the
holders of a majority in principal amount of Junior Subordinated Debentures,
to modify the Indenture in a manner affecting the rights of the holders of
Junior Subordinated Debentures; provided, that no such modification may,
without the consent of the holders of each outstanding Junior Subordinated
Debenture so affected, (i) change the Stated Maturity, or reduce the
principal amount of the Junior Subordinated Debentures or amount payable upon
prepayment thereof, or reduce the rate or extend the time of payment of
interest thereon, or make the principal of or interest or premium on, the
Junior Subordinated Debentures payable in any coin or currency other than
that provided in the Junior Subordinated Debentures, or impair or affect the
right of any holder of the Junior Subordinated Debentures to institute suit
for the payment thereof, or (ii) reduce the percentage of principal amount of
Junior Subordinated Debentures, the holders of which are required to consent
to any such modification of the Indenture.
DEBENTURE EVENTS OF DEFAULT. The Indenture provides that any one or
more of the following described events with respect to the New Junior
Subordinated Debentures constitutes a "Debenture Event of Default" (whatever
the reason for such Debenture 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) failure for 30 days to pay any interest on the New Junior
Subordinated Debentures or any Other Debentures when due (subject to the
deferral of any due date in the case of an Extension Period); or
(ii) failure to pay any principal or premium, if any, on the New Junior
Subordinated Debentures or any Other Debentures when due whether at maturity,
upon redemption, by declaration of acceleration of maturity or otherwise; 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 Junior 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
the Junior Subordinated Debentures have the right to direct the time, method
and place of conducting any proceeding for any remedy available to the
Debenture Trustee. The Debenture Trustee or the holders of not less than 25%
in aggregate outstanding principal amount of the Junior Subordinated
Debentures may declare the principal due and payable immediately upon a
Debenture Event of Default. The holders of a majority in aggregate
outstanding principal amount of the Junior Subordinated Debentures may annul
such declaration and waive the default if the default (other than the
non-payment of the principal of the Junior Subordinated Debentures which has
become due solely by such acceleration) has been cured and a sum sufficient
to pay all matured installments of interest and principal due otherwise than
by acceleration has been deposited with the Debenture Trustee.
The holders of a majority in aggregate outstanding principal amount of
the Junior Subordinated Debentures affected thereby may, on behalf of the
holders of all the Junior Subordinated Debentures, waive any past default,
except a default in the payment of principal (or premium, if any) or interest
(unless such default has been cured and a sum sufficient to pay all matured
installments of interest (and premium, if any) and principal due otherwise
than by acceleration has been deposited with the Debenture Trustee) or a
default in respect of a covenant or provision which under the Indenture
cannot be modified or amended without the consent of the holder of each
outstanding Junior Subordinated Debenture.
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF NEW CAPITAL SECURITIES. If
a Debenture Event of Default shall have occurred and be continuing and shall
be attributable to the failure of the Corporation to pay interest (or
premium, if any) on or principal of the New Junior Subordinated Debentures on
the due date, a holder of New Capital Securities may institute 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 New Capital Securities. Notwithstanding any payments
made to a holder of New Capital Securities by the Corporation in connection
with a Direct Action, the Corporation shall remain obligated to pay the
principal of (or premium, if any) or interest on the New Junior Subordinated
Debentures, and the Corporation shall be subrogated to the rights of the
holder of such New Capital Securities with respect to payments on the New
Capital Securities to the extent of any payments made by the Corporation to
such holder in any Direct Action.
The holders of the New 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 New Junior Subordinated Debentures unless
there shall have been an Event of Default under the Trust Agreement. See "--
Description of New Capital 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
or convert into any other Person or convey, transfer or lease its properties
and assets as an entirety or substantially as an entirety to any Person, and
no Person shall consolidate with or merge or convert into the Corporation or
convey, transfer or lease its properties and assets as an entirety or
substantially as an entirety to the Corporation, unless: (i) in case the
Corporation consolidates with or merges or converts 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 Junior Subordinated
Debentures; (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;
and (iii) certain other conditions as prescribed in the Indenture are met.
The general provisions of the Indenture do not afford holders of the
Junior Subordinated Debentures protection in the event of a highly leveraged
or other transaction involving the Corporation that may adversely affect
holders of the New Junior Subordinated Debentures.
SATISFACTION AND DISCHARGE. The Indenture provides that when, among
other things, all New Junior Subordinated Debentures not previously delivered
to the Debenture Trustee for cancellation (i) have become due and payable or
(ii) will become due and payable at 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 sufficient to pay and
discharge the entire indebtedness on the New Junior Subordinated Debentures
not previously delivered to the Debenture Trustee for cancellation, for the
principal (and premium, if any) and interest to the date of the deposit or to
the Stated Maturity Date, 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. The Indenture provides that the Junior Subordinated
Debentures issued thereunder will be subordinate and rank junior in right of
payment to all Senior Indebtedness. No payment of principal (including
redemption payments), premium, if any, or interest on the Junior Subordinated
Debentures may be made at any time when (i) any Senior Indebtedness is not
paid when due, (ii) any applicable grace period with respect to such default
has ended and such default has not been cured or waived or ceased to exist,
or (iii) the maturity of any Senior Indebtedness has been accelerated because
of a default.
Upon any distribution of assets to creditors 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, all Senior Indebtedness must be
paid in full before the holders of Junior Subordinated Debentures are
entitled to receive or retain any payment in respect thereof.
In the event of the acceleration of the maturity of Junior Subordinated
Debentures, the holders of all Senior Indebtedness outstanding at the time of
such acceleration will first be entitled to receive payment in full before
the holders of Junior Subordinated Debentures will be entitled to receive or
retain any payment in respect of the Junior Subordinated Debentures.
"Senior Indebtedness" shall mean all Indebtedness for Money Borrowed,
whether outstanding on the date of execution of the Indenture or thereafter
created, assumed or incurred, unless the terms thereof specifically provide
that it is not superior in right of payment to the Junior Subordinated
Debentures, and any deferrals, renewals or extensions of such Senior
Indebtedness.
"Indebtedness for Money Borrowed" shall mean any obligation of, or any
obligation guaranteed by, the Corporation for the repayment of borrowed
money, whether or not evidenced by bonds, debentures, notes or other written
instruments, but shall not include (i) any trade accounts payable in the
ordinary course of business, (ii) any such indebtedness that by its terms
ranks pari passu with or junior in right of payment to the Junior
Subordinated Debentures, (iii) all other debt securities, and guarantees in
respect of those debt securities, issued 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") in
connection with the issuance by such financing entity of equity securities or
other securities guaranteed by the Corporation pursuant to an instrument that
ranks pari passu with or junior in right of payment to the Guarantee, and
(iv) any other indebtedness that would otherwise qualify as "Indebtedness for
Money Borrowed" to the extent that such indebtedness by its terms ranks pari
passu with or junior in right of payment to any of the indebtedness described
in clause (i), (ii) or (iii) above.
The Indenture places no limitation on the amount of additional Senior
Indebtedness that may be incurred by the Corporation. The Corporation expects
from time to time to incur additional indebtedness constituting Senior
Indebtedness.
GOVERNING LAW. The Indenture and the New Junior Subordinated Debentures
will be governed by and construed in accordance with the laws of the State of
New York.
INFORMATION CONCERNING THE DEBENTURE TRUSTEE. Following the Exchange
Offer and the qualification of the Indenture under the Trust Indenture Act,
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 New Junior Subordinated Debentures,
unless offered reasonable indemnity by such holder against the costs,
expenses and liabilities which might be incurred thereby. The Debenture
Trustee is not required to expend or risk its own funds or otherwise incur
personal financial liability in the performance of its duties if the
Debenture Trustee reasonably believes that repayment or adequate indemnity is
not reasonably assured to it.
DESCRIPTION OF NEW GUARANTEE
The Old Guarantee was executed and delivered by the Corporation
concurrently with the issuance by the Trust of the Old Capital Securities for
the benefit of the holders from time to time of the Old Capital Securities.
Promptly after the Expiration Date, the New Guarantee will be issued by the
Corporation for the benefit of the holders from time to time of the New
Capital Securities. The Guarantee has been qualified under the Trust
Indenture Act. This summary of certain provisions of the Guarantee does not
purport to be complete and is subject to, and qualified in its entirety by
reference to, all of the provisions of the Guarantee, including the
definitions therein of certain terms, and the Trust Indenture Act.
GENERAL. The Corporation will irrevocably agree to pay in full on a
subordinated basis, to the extent set forth herein, the Guarantee Payments
(as defined below) to the holders of the New Capital Securities, as and when
due, regardless of any defense, right of set-off or counterclaim that the
Trust may have or assert other than the defense of payment. The following
payments with respect to the New Capital Securities, to the extent not paid
by or on behalf of the Trust (the "Guarantee Payments"), will be subject to
the New Guarantee: (i) any accumulated and unpaid Distributions required to
be paid on New Capital Securities, to the extent that the Trust has funds on
hand legally available therefor, (ii) the applicable Redemption Price with
respect to New Capital Securities called for redemption, to the extent that
the Trust has funds on hand legally available therefor, or (iii) upon a
voluntary or involuntary termination and liquidation of the Trust, the lesser
of (a) the Liquidation Distribution and (b) the amount of assets of the Trust
remaining available for distribution to holders of New Capital Securities.
The Corporation's obligation to make a Guarantee Payment may be satisfied by
direct payment of the required amounts by the Corporation to the holders of
the New Capital Securities or by causing the Trust to pay such amounts to
such holders.
The New Guarantee will rank subordinate and junior in right of payment
to all Senior Indebtedness to the extent provided therein. See "--Status of
New 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 New
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. See "--Description
of New Junior Subordinated Debentures--General." The New Guarantee does not
limit the incurrence or issuance of other indebtedness of the Corporation,
including Senior Indebtedness, whether under the Indenture, any other
indenture that the Corporation may enter into in the future or otherwise.
The Corporation will, through the New Guarantee, the Trust Agreement,
the New Junior Subordinated Debentures and the Indenture, taken together,
fully, irrevocably and unconditionally guarantee all of the Trust's
obligations under the New 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 subordinated guarantee of the Trust's obligations under the New
Capital Securities. See "Relationship Among the New Capital Securities, the
New Junior Subordinated Debentures and the New Guarantee."
STATUS OF NEW GUARANTEE. The New Guarantee will constitute an unsecured
obligation of the Corporation and will rank subordinate and junior in right
of payment to all Senior Indebtedness in the same manner as New Junior
Subordinated Debentures, except in the case of a bankruptcy or insolvency
proceeding in respect of the Corporation, in which case the New Guarantee
will rank subordinate and junior in right of payment to all liabilities
(other than Other Guarantees) of the Corporation.
The New Guarantee will rank pari passu with the Old Guarantee and with
all Other Guarantees issued by the Corporation. The New Guarantee will
constitute a guarantee of payment and not of collection (i.e., the guaranteed
party may institute a legal proceeding directly against the Corporation to
enforce its rights under the New Guarantee without first instituting a legal
proceeding against any other person or entity). The New Guarantee will be
held for the benefit of the holders of the New Capital Securities. The New
Guarantee will not be discharged except by payment of the Guarantee Payments
in full to the extent not paid by the Trust or upon distribution to the
holders of the New Capital Securities of the New Junior Subordinated
Debentures. The Guarantee does not place a limitation on the amount of
additional Senior Indebtedness that may be incurred by the Corporation. The
Corporation expects from time to time to incur additional indebtedness
constituting Senior Indebtedness.
RESTRICTIONS ON CERTAIN PAYMENTS. In the New Guarantee, the Corporation
will covenant that, so long as any Capital Securities remain outstanding, if
there shall have occurred any event that would constitute an event of default
under the New Guarantee or the Trust Agreement, then the Corporation will not
(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 (which includes common and preferred 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 any
Other Debentures) that rank pari passu with or junior in right of payment to
the Junior 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 (including any Other Guarantees) if such
guarantee ranks pari passu with or junior in right of payment to the Junior
Subordinated Debentures (other than (a) dividends or distributions in shares
of or options, warrants or rights to subscribe for or purchase shares of,
common stock of the Corporation, (b) any declaration of a dividend in
connection with the implementation of a stockholders' rights plan, or the
issuance of stock under any such plan in the future, or the redemption or
repurchase of any such rights pursuant thereto, (c) payments under the New
Guarantee, (d) as a result of a reclassification of the Corporation's capital
stock or the exchange or conversion of one class or series of the
Corporation's capital stock for another class or series of the Corporation's
capital stock, (e) the purchase of fractional interests in shares of the
Corporation's capital stock pursuant to the conversion or exchange provisions
of such capital stock or the security being converted or exchanged, and (f)
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 or any of the Corporation's dividend reinvestment plans).
AMENDMENTS AND ASSIGNMENT. Except with respect to any changes that do
not materially adversely affect the rights of holders of the New Capital
Securities (in which case no consent will be required), the New Guarantee may
not be amended without the prior approval of the holders of a majority of the
Liquidation Amount of such outstanding New Capital Securities. The manner of
obtaining any such approval will be as set forth under "--Description of New
Capital Securities--Voting Rights; Amendment of the Trust Agreement." All
guarantees and agreements contained in the New Guarantee shall bind the
successors, assigns, receivers, trustees and representatives of the
Corporation and shall inure to the benefit of the holders of the New Capital
Securities then outstanding.
EVENTS OF DEFAULT. An event of default under the New Guarantee will
occur upon the failure of the Corporation to perform any of its payment or
other obligations thereunder. The holders of a majority in Liquidation Amount
of the New Capital Securities will have the right to direct the time, method
and place of conducting any proceeding for any remedy available to the
Guarantee Trustee in respect of the New Guarantee or to direct the exercise
of any trust or power conferred upon the Guarantee Trustee under the New
Guarantee.
Any holder of the New Capital Securities may institute a legal
proceeding directly against the Corporation to enforce its rights under the
New Guarantee without first instituting a legal proceeding against the Trust,
the Guarantee Trustee or any other person or entity.
The Corporation, as guarantor, will be 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 New Guarantee.
TERMINATION OF THE NEW GUARANTEE. The New Guarantee will terminate and
be of no further force and effect upon full payment of the applicable
Redemption Price of the New Capital Securities, upon full payment of the
Liquidation Amount payable upon liquidation of the Trust or upon distribution
of New Junior Subordinated Debentures to the holders of the New Capital
Securities. The New Guarantee will continue to be effective or will be
reinstated, as the case may be, if at any time any holder of the New Capital
Securities must restore payment of any sums paid under the New Capital
Securities or the New Guarantee.
GOVERNING LAW. The New Guarantee will be governed by and construed in
accordance with the laws of the State of New York.
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 New Guarantee, will undertake to perform
only such duties as are specifically set forth in the New Guarantee and,
after default with respect to the New 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 will be under no obligation to exercise any of the powers vested in
it by the New Guarantee at the request of any holder of the New Capital
Securities unless it is offered reasonable indemnity against the costs,
expenses and liabilities that might be incurred thereby.
DESCRIPTION OF OLD SECURITIES
The terms of the Old Securities are identical in all material respects
to the New Securities, except that (i) the Old Securities have not been
registered under the Securities Act, are subject to certain restrictions on
transfer and are entitled to certain rights under the applicable Registration
Rights Agreement (which rights will terminate upon consummation of the
Exchange Offer, except under limited circumstances), (ii) the New Capital
Securities will not contain the $100,000 minimum Liquidation Amount transfer
restriction and certain other restrictions on transfer applicable to Old
Capital Securities, and (iii) the New Junior Subordinated Debentures will not
contain the $100,000 minimum principal amount transfer restriction. In
addition, the Old Securities provide that, in the event that a registration
statement relating to the Exchange Offer has not been filed by June 28, 1997
and been declared effective by July 28, 1997 or, in certain limited
circumstances, in the event a shelf registration statement (the "Shelf
Registration Statement") with respect to the resale of the Old Capital
Securities is not declared effective by July 29, 1997, then interest will
accumulate (in addition to the stated interest rate on the Old Junior
Subordinated Debentures) at the rate of 0.25% per annum on the principal
amount of the Old Junior Subordinated Debentures and Distributions will
accumulate (in addition to the stated Distribution rate on the Old Capital
Securities) at the rate of 0.25% per annum on the Liquidation Amount of the
Old Capital Securities, for the period from the occurrence of such event
until such time as such required Exchange Offer is consummated or any
required Shelf Registration Statement is effective. The New Securities are
not, and upon consummation of the Exchange Offer the Old Securities will not
be, entitled to any such additional interest or Distributions. Accordingly,
holders of Old Capital Securities should review the information set forth
under "Risk Factors--Certain Consequences of a Failure to Exchange Old
Capital Securities" and "Description of New Securities."
RELATIONSHIP AMONG THE NEW CAPITAL SECURITIES, THE
NEW JUNIOR SUBORDINATED DEBENTURES AND THE NEW GUARANTEE
FULL AND UNCONDITIONAL GUARANTEE
Payments of Distributions and other amounts due on the New Capital
Securities (to the extent the Trust has funds on hand legally available for
the payment of such Distributions) will be irrevocably guaranteed by the
Corporation as and to the extent set forth under "Description of New
Securities--Description of New Guarantee." Taken together, the Corporation's
obligations under the New Junior Subordinated Debentures, the Indenture, the
Trust Agreement and the New Guarantee will provide, in the aggregate, a full,
irrevocable and unconditional guarantee of payments of Distributions and
other amounts due on the New 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 Trust's obligations under the New Capital
Securities. If and to the extent that the Corporation does not make the
required payments on the New Junior Subordinated Debentures, the Trust will
not have sufficient funds to make the related payments, including
Distributions, on the New Capital Securities. The New Guarantee will not
cover any such payment when the Trust does not have sufficient funds on hand
legally available therefor. In such event, the remedy of a holder of New
Capital Securities is to institute a Direct Action. The obligations of the
Corporation under the New Guarantee will be subordinate and junior in right
of payment to all Senior Indebtedness.
SUFFICIENCY OF PAYMENTS
As long as payments of interest and other payments are made when due on
the New Junior Subordinated Debentures, such payments will be sufficient to
cover Distributions and other payments due on the New Capital Securities,
primarily because: (i) the aggregate principal amount or Prepayment Price of
the New Junior Subordinated Debentures will be equal to the sum of the
Liquidation Amount or Redemption Price, as applicable, of the New Capital
Securities and Common Securities; (ii) the interest rate and interest and
other payment dates on the New Junior Subordinated Debentures will match the
Distribution rate and Distribution and other payment dates for the New
Capital Securities; (iii) the Corporation shall pay for all and any costs,
expenses and liabilities of the Trust except the Trust's obligations to
holders of Trust Securities under the Trust Agreement; and (iv) the Trust
Agreement provides that the Trust is not authorized to engage in any activity
that is not consistent with the limited purposes thereof.
ENFORCEMENT RIGHTS OF HOLDERS OF NEW CAPITAL SECURITIES
A holder of any New Capital Security may institute a legal proceeding
directly against the Corporation to enforce its rights under the New
Guarantee without first instituting a legal proceeding against the Guarantee
Trustee, the Trust or any other person or entity. A default or event of
default under any Senior Indebtedness would not constitute a default or Event
of Default under the Trust Agreement. However, in the event of payment
defaults under, or acceleration of, Senior Indebtedness, the subordination
provisions of the Indenture provide that no payments may be made in respect
of the New Junior Subordinated Debentures until such Senior Indebtedness has
been paid in full or any payment default thereunder has been cured or waived.
Failure to make required payments on New Junior Subordinated Debentures would
constitute an Event of Default under the Trust Agreement.
LIMITED PURPOSE OF THE TRUST
The Trust exists for the sole purpose of issuing and selling the Trust
Securities, using the proceeds from the sale of the Trust Securities to
acquire the Junior Subordinated Debentures and engaging in only those other
activities necessary, advisable or incidental thereto. The New Capital
Securities will represent preferred beneficial interests in the Trust. A
principal difference between the rights of a holder of a New Capital Security
and a holder of a New Junior Subordinated Debenture is that a holder of a New
Junior Subordinated Debenture will be entitled to receive from the
Corporation the principal amount of (and premium, if any) and interest on New
Junior Subordinated Debentures held, while a holder of New Capital Securities
is entitled to receive Distributions from the Trust (or, in certain
circumstances, from the Corporation under the New Guarantee) if and to the
extent the Trust has funds on hand legally available for the payment of such
Distributions.
RIGHTS UPON TERMINATION
Unless the Junior Subordinated Debentures are distributed to holders of
the Trust Securities, upon any voluntary or involuntary termination and
liquidation of the Trust, the holders of the Trust Securities will be
entitled to receive, out of assets held by the Trust, the Liquidation
Distribution in cash. See "Description of New Securities--Description of New
Capital Securities--Liquidation of the Trust and Distribution of New Junior
Subordinated Debentures." Upon any voluntary or involuntary liquidation or
bankruptcy of the Corporation, the Property Trustee, as holder of the New
Junior Subordinated Debentures, would be a subordinated creditor of the
Corporation, subordinated in right of payment to all Senior Indebtedness as
set forth in the Indenture, but entitled to receive payment in full of
principal (and premium, if any) and interest, before any stockholders of the
Corporation receive payments or distributions. Since the Corporation will be
the guarantor under the New Guarantee and will agree to pay for all costs,
expenses and liabilities of the Trust (other than the Trust's obligations to
the holders of its Trust Securities), the positions of a holder of New
Capital Securities and a holder of New Junior Subordinated Debentures
relative to stockholders of the Corporation in the event of liquidation or
bankruptcy of the Corporation are expected to be substantially the same.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
GENERAL
In the opinion of Brown & Wood LLP, tax counsel to the Corporation and
the Trust ("Tax Counsel"), the following is a summary of certain of the
material United States federal income tax consequences of the purchase,
ownership and disposition of Capital Securities held as capital assets by a
holder. This summary only addresses the tax consequences to a holder that
acquired the Old Capital Securities upon initial issuance at their original
offering price. It does not deal with special classes of holders such as
banks, thrifts, real estate investment trusts, regulated investment
companies, insurance companies, dealers in securities or currencies,
tax-exempt investors, or persons that will hold the Capital Securities as a
position in a "straddle," as part of a "synthetic security" or "hedge," as
part of a "conversion transaction" or other integrated investment, or as
other than a capital asset. This summary also does not address the tax
consequences to persons that have a functional currency other than the U.S.
dollar or the tax consequences to shareholders, partners or beneficiaries of
a holder of Capital Securities. Further, it does not include any description
of any alternative minimum tax consequences or the tax laws of any state or
local government or of any foreign government that may be applicable to the
Capital Securities. This summary is based on the Internal Revenue Code of
1986, as amended (the "Code"), Treasury regulations thereunder, the
administrative and judicial interpretations thereof, as of the date hereof,
all of which are subject to change, possibly on a retroactive basis.
EXCHANGE OF CAPITAL SECURITIES
The exchange of Old Capital Securities for New Capital Securities should
not be a taxable event to holders for United States federal income tax
purposes. The exchange of Old Capital Securities for New Capital Securities
pursuant to the Exchange Offer should not be treated as an "exchange" for
United States federal income tax purposes because the New Capital Securities
should not be considered to differ materially in kind or extent from the Old
Capital Securities and because the exchange will occur by operation of the
terms of the Old Capital Securities. If, however, the exchange of the Old
Capital Securities for the New Capital Securities were treated as an exchange
for federal income tax purposes, such exchange should constitute a
recapitalization for United States federal income tax purposes. Accordingly,
the New Capital Securities should have the same issue price as the Old
Capital Securities, and a holder should have the same adjusted tax basis and
holding period in the New Capital Securities as the holder had in the Old
Capital Securities immediately before the exchange.
CLASSIFICATION OF THE JUNIOR SUBORDINATED DEBENTURES
In connection with the issuance of the Old Junior Subordinated
Debentures, Tax Counsel has rendered its opinion generally to the effect
that, under then current law and assuming full compliance with the terms of
the Indenture (and certain other documents), and based on certain facts and
assumptions contained in such opinion, the Old Junior Subordinated Debentures
will be classified for United States federal income tax purposes as
indebtedness of the Corporation. An opinion of Tax Counsel, however, is not
binding on the Internal Revenue Service (the "IRS") or the courts.
Prospective investors should note that no rulings have been or are expected
to be sought from the IRS with respect to any of these issues and no
assurance can be given that the IRS will not take contrary positions.
Moreover, no assurance can be given that any of the opinions expressed herein
will not be challenged by the IRS or, if challenged, that such a challenge
would not be successful.
CLASSIFICATION OF THE TRUST
In connection with the issuance of the Old Capital Securities, Tax
Counsel has rendered its opinion generally to the effect that, under then
current law and assuming full compliance with the terms of the Trust
Agreement and the Indenture (and certain other documents), and based on
certain facts and assumptions contained in such opinion, the Trust will be
classified for United States federal income tax purposes as a grantor trust
and not as an association taxable as a corporation. Accordingly, for United
States federal income tax purposes, each holder of Capital Securities
generally will be considered the owner of an undivided interest in the Junior
Subordinated Debentures, and each holder will be required to include in its
gross income any interest (or OID accrued) with respect to its allocable
share of those Junior Subordinated Debentures.
INTEREST INCOME AND ORIGINAL ISSUE DISCOUNT
Under recently issued Treasury regulations (the "Regulations")
applicable to debt instruments issued on or after August 13, 1996, a "remote"
contingency that stated interest will not be timely paid will be ignored in
determining whether a debt instrument is issued with OID. The Corporation
believes that the likelihood of its exercising its option to defer payments
of interest is "remote" since exercising that option would prevent the
Corporation from declaring dividends on any class of its equity securities.
Accordingly, the Corporation intends to take the position, based on the
advice of Tax Counsel, that the Junior Subordinated Debentures will not be
considered to be issued with OID and, accordingly, stated interest on the
Junior Subordinated Debentures generally will be taxable to a holder as
ordinary income at the time it is paid or accrued in accordance with such
holder's method of accounting.
Under the Regulations, if the Corporation were to exercise its option to
defer payments of interest, the Junior Subordinated Debentures would at that
time be treated as issued with OID, and all stated interest on the Junior
Subordinated Debentures would thereafter be treated as OID as long as the
Junior Subordinated Debentures remain outstanding. In such event, all of a
holder's taxable interest income with respect to the Junior Subordinated
Debentures would thereafter be accounted for on an economic accrual basis
regardless of such holder's method of tax accounting, and actual
distributions of stated interest would not be reported as taxable income.
Consequently, a holder of Capital Securities would be required to include in
gross income OID even though the Corporation would not make actual cash
payments during an Extension Period. Moreover, under the Regulations, if the
option to defer the payment of interest was determined not to be "remote",
the Junior Subordinated Debentures would be treated as having been originally
issued with OID. In such event, all of a holder's taxable interest income
with respect to the Junior Subordinated Debentures would be accounted for on
an economic accrual basis regardless of such holder's method of tax
accounting, and actual distributions of stated interest would not be reported
as taxable income.
The Regulations have not yet been addressed in any rulings or other
interpretations by the IRS, and it is possible that the IRS could take a
position contrary to Tax Counsel's interpretation herein.
Because income on the Capital Securities will constitute interest or
OID, corporate holders of the Capital Securities will not be entitled to a
dividends-received deduction with respect to any income recognized with
respect to the Capital Securities.
RECEIPT OF JUNIOR SUBORDINATED DEBENTURES OR CASH UPON LIQUIDATION OF THE
TRUST
The Corporation will have the right at any time to liquidate the Trust
and cause the Junior Subordinated Debentures to be distributed to the holders
of the Trust Securities. Under current law, such a distribution, for United
States federal income tax purposes, would be treated as a nontaxable event to
each holder, and each holder would receive an aggregate tax basis in the
Junior Subordinated Debentures equal to such holder's aggregate tax basis in
its Capital Securities. A holder's holding period in the Junior Subordinated
Debentures so received in liquidation of the Trust would include the period
during which the Capital Securities were held by such holder. If, however,
the Trust is characterized for United States federal income tax purposes as
an association taxable as a corporation at the time of its dissolution, the
distribution of the Junior Subordinated Debentures may constitute a taxable
event to holders of Capital Securities and a holder's holding period in
Junior Subordinated Debentures would begin on the date such Junior
Subordinated Debentures were received.
Under certain circumstances described herein (see "Description of New
Securities--Description of New Capital Securities"), the Junior Subordinated
Debentures may be redeemed for cash and the proceeds of such redemption
distributed to holders in redemption of their Capital Securities. Under
current law, such a redemption would, for United States federal income tax
purposes, constitute a taxable disposition of the redeemed Capital
Securities, and a holder could recognize gain or loss as if it sold such
redeemed Capital Securities for cash. See "--Sales of Capital Securities."
SALES OF CAPITAL SECURITIES
A holder that sells Capital Securities will recognize gain or loss equal
to the difference between its adjusted tax basis in the Capital Securities
and the amount realized on the sale of such Capital Securities (other than
with respect to accrued and unpaid interest which has not yet been included
in income, which will be treated as ordinary income).
A holder's adjusted tax basis in the Capital Securities generally will
be its initial purchase price increased by OID (if any) previously includible
in such holder's gross income to the date of disposition and decreased
by payments (if any) received on the Capital Securities in respect of OID.
Such gain or loss generally will be a capital gain or loss and generally will
be a long-term capital gain or loss if the Capital Securities have been held
for more than one year.
The Capital Securities may trade at a price that does not accurately
reflect the value of accrued but unpaid interest with respect to the
underlying Junior Subordinated Debentures. A holder who uses the accrual
method of accounting for tax purposes (and a cash method holder, if the
Junior Subordinated Debentures are deemed to have been issued with OID) who
disposes of his Capital Securities between record dates for payments of
distributions thereon will be required to include accrued but unpaid interest
on the Junior Subordinated Debentures through the date of disposition in
income as ordinary income (i.e., interest or, possibly, OID), and to add such
amount to his adjusted tax basis in his pro rata share of the underlying
Junior Subordinated Debentures deemed disposed of. To the extent the selling
price is less than the holder's adjusted tax basis (which will include all
accrued but unpaid interest) a holder will recognize a capital loss. Subject
to certain limited exceptions, capital losses cannot be applied to offset
ordinary income for United States federal income tax purposes.
PROPOSED TAX LEGISLATION
On February 6, 1997, as part of the Clinton Administration's Fiscal 1998
Budget Proposal, the Treasury Department proposed legislation (the "Proposed
Legislation") which would, among other things, generally deny corporate
issuers a deduction for interest in respect of debt obligations, such as the
New Junior Subordinated Debentures, issued on or after the date "of first
committee action," if such debt obligations have a maximum term in excess of
15 years and are not shown as indebtedness on the issuer's applicable
consolidated balance sheet. On June 9, 1997, Representative William Archer,
Chairman of the House Committee, released the House Committee Chairman's
Proposals to be included in the 1997 budget reconciliation bill. In addition,
on June 17, 1997, Senator William Roth, Chairman of the Senate Committee,
released the Senate Committee Chairman's Proposals to be included in the 1997
budget reconciliation bill. The Proposed Legislation was not included in
either the House Committee Chairman's Proposals or the Senate Committee
Chairman's Proposals. If legislation similar to the Proposed Legislation
were enacted, there can be no assurance that it will not adversely affect
the ability of the Company to deduct the interest payable on the Junior
Subordinated Debentures. Such a change could give rise to a Tax Event, which
would permit the Company to cause a redemption of the Trust Securities at
the Special Event Redemption Price by electing to prepay the Junior
Subordinated Debentures at the Special Event Prepayment Price. See
"Description of New Securities--Description of New Junior Subordinated
Debentures."
UNITED STATES ALIEN HOLDERS
For purposes of this discussion, a "United States Alien Holder" is any
corporation, individual, partnership, estate or trust that is not a U.S.
Holder for United States federal income tax purposes. A "U.S. Holder" is a
holder of Capital Securities who or which is a citizen or individual resident
(or is treated as a citizen or individual resident) of the United States for
federal income tax purposes, a corporation or partnership created or
organized (or treated as created or organized for federal income tax
purposes) in or under the laws of the United States or any political
subdivision thereof, or a trust or estate the income of which is includible
in its gross income for federal income tax purposes without regard to its
source. (For taxable years beginning after December 31, 1996 (or for the
immediately preceding taxable year, if the trustee of a trust so elects), a
trust is a U.S. Holder for federal income tax purposes if, and only if, (i) a
court within the United States is able to exercise primary supervision over
the administration of the trust and (ii) one or more United States trustees
have the authority to control all substantial decisions of the trust.) Under
present United States federal income tax laws: (i) payments by the Trust
or any of its paying agents to any holder of a Capital Security who or which
is a United States Alien Holder will not be subject to United States federal
withholding tax; provided that, (a) the beneficial owner of the Capital
Security does not actually or constructively own 10 percent or more of the
total combined voting power of all classes of stock of the Corporation
entitled to vote, (b) the beneficial owner of the Capital Security is not a
controlled foreign corporation that is related to the Corporation through
stock ownership, and (c) either (A) the beneficial owner of the Capital
Security certifies to the Trust or its agent, under penalties of perjury,
that it is not a United States holder and provides its name and address or
(B) a securities clearing organization, bank or other financial institution
that holds customers' securities in the ordinary course of its trade or
business (a "Financial Institution"), and holds the Capital Security in such
capacity, certifies to the Trust or its agent, under penalties of perjury,
that such statement has been received from the beneficial owner by it or by a
Financial Institution between it and the beneficial owner and furnishes the
Trust or its agent with a copy thereof; and (ii) a United States Alien Holder
of a Capital Security will not be subject to United States federal
withholding tax on any gain realized upon the sale or other disposition of a
Capital Security.
INFORMATION REPORTING TO HOLDERS
Generally, income on the Capital Securities will be reported to holders
on Forms 1099, which forms should be mailed to holders of Capital Securities
by January 31 following each calendar year.
BACKUP WITHHOLDING
Payments made on, and proceeds from the sale of, the Capital Securities
may be subject to a "backup" withholding tax of 31 percent unless the holder
complies with certain identification requirements. Any withheld amounts will
be allowed as a credit against the holder's United States federal income tax,
provided the required information is provided to the IRS.
THE UNITED STATES FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS
INCLUDED FOR GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING
UPON A HOLDER'S PARTICULAR SITUATION. HOLDERS SHOULD CONSULT THEIR TAX
ADVISORS WITH RESPECT TO THE TAX CONSEQUENCES TO THEM OF THE PURCHASE,
OWNERSHIP AND DISPOSITION OF THE CAPITAL SECURITIES, INCLUDING THE TAX
CONSEQUENCES UNDER STATE, LOCAL, FOREIGN AND OTHER TAX LAWS AND THE POSSIBLE
EFFECTS OF CHANGES IN UNITED STATES FEDERAL OR OTHER TAX LAWS.
ERISA CONSIDERATIONS
The Corporation, the obligor with respect to the New Junior Subordinated
Debentures held by the Trust, and its affiliates and the Property Trustee may
be considered a "party in interest" (within the meaning of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")) or a
"disqualified person" (within the meaning of Section 4975 of the Code) with
respect to many employee benefit plans ("Plans") that are subject to ERISA.
Any purchaser proposing to acquire New Capital Securities with assets of any
Plan should consult with its counsel. The purchase and/or holding of New
Capital Securities by a Plan that is subject to the fiduciary responsibility
provisions of ERISA or the prohibited transaction provisions of Section 4975
of the Code (including individual retirement arrangements and other plans
described in Section 4975(e)(1) of the Code) and with respect to which the
Corporation, the Property Trustee or any affiliate is a service provider (or
otherwise is a party in interest or a disqualified person) may constitute or
result in a prohibited transaction under ERISA or Section 4975 of the Code,
unless such New Capital Securities are acquired pursuant to and in accordance
with an applicable exemption, such as Prohibited Transaction Class Exemption
("PTCE") 84-14 (an exemption for certain transactions determined by an
independent qualified professional asset manager), PTCE 91-38 (an exemption
for certain transactions involving bank collective investment funds), PTCE
90-1 (an exemption for certain transactions involving insurance company
pooled separate accounts), PTCE 95-60 (an exemption for transactions
involving certain insurance company general accounts) or PTCE 95-23 (an
exemption for certain transactions determined by an in-house manager). In
addition, as described below, a Plan fiduciary considering the acquisition of
New Capital Securities should be aware that the assets of the Trust may be
considered "plan assets" for ERISA purposes. Therefore, a Plan fiduciary
should consider whether the acquisition of Capital Securities could result in
a delegation of fiduciary authority to the Property Trustee, and, if so,
whether such a delegation of authority is permissible under the Plan's
governing instrument or any investment management agreement with the Plan. In
making such determination, a Plan fiduciary should note that the Property
Trustee is a U.S. bank qualified to be an investment manager (within the
meaning of section 3(38) of ERISA) to which such a delegation of authority
generally would be permissible under ERISA. Further, prior to an Event of
Default with respect to the New Junior Subordinated Debentures, the Property
Trustee will have only limited custodial and ministerial authority with
respect to Trust assets.
Under the U.S. Department of Labor regulations defining "plan assets"
for ERISA purposes (the "Plan Assets Regulations"), the assets of the Trust
will be considered plan assets of Plans owning New Capital Securities unless
the aggregate investment in New Capital Securities by "benefit plan
investors" is not deemed "significant" or the New Capital Securities qualify
as "publicly offered securities" as defined in such Regulations. For this
purpose, equity participation by benefit plan investors will not be
considered "significant" on any date only if, immediately after the most
recent acquisition of Capital Securities, the aggregate interest in the New
Capital Securities held by benefit plan investors will be less than 25% of
the value of the New Capital Securities. Although it is possible that the
equity participation by benefit plan investors in New Capital Securities on
any date will not be "significant" for purposes of the Plan Assets
Regulations, such result cannot be assured.
The New Capital Securities may qualify as "publicly offered securities"
under the Plan Assets Regulations if at the time of the Exchange Offer they
are also "widely held" and "freely transferable." Under the Regulations, a
class of securities is "widely held" only if it is a class of securities that
is owned by 100 or more investors independent of the issuer and of one
another. Although it is possible that at the time of the Exchange Offer the
New Capital Securities will be "widely held," such result cannot be assured.
Whether a security is "freely transferable" for purposes of the Regulations
is a factual question to be determined on the basis of all relevant facts and
circumstances. If at the time of the Exchange Offer the New Capital
Securities qualify as "publicly offered securities," the assets of the Trust
should not be "plan assets" with respect to Plans acquiring New Capital
Securities. If at the time of the Exchange Offer the New Capital Securities
do not qualify as "publicly offered securities," the "plan asset"
considerations discussed in the preceding paragraphs could be applicable in
connection with the investment by Plans in the New Capital Securities.
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Capital Securities for its own
account in connection with the Exchange Offer must acknowledge that it will
deliver a prospectus in connection with any resale of such New Capital
Securities. This Prospectus, as it may be amended or supplemented from time
to time, may be used by Participating Broker-Dealers during the period
referred to below in connection with resales of New Capital Securities
received in exchange for Old Capital Securities if such Old Capital
Securities were acquired by such Participating Broker-Dealers for their own
accounts as a result of market-making activities or other trading activities.
The Corporation and the Trust have agreed that this Prospectus, as it may
be amended or supplemented from time to time, may be used by a Participating
Broker-Dealer in connection with resales of such New Capital Securities for
a period ending 90 days after the Expiration Date (subject to extension under
certain limited circumstances described herein) or, if earlier, when all such
New Capital Securities have been disposed of by such Participating
Broker-Dealer. However, a Participating Broker-Dealer who intends to use this
Prospectus in connection with the resale of New Capital Securities received
in exchange for Old Capital Securities pursuant to the Exchange Offer must
notify the Corporation or the Trust, or cause the Corporation or the Trust
to be notified, on or prior to the Expiration Date, that it is a
Participating Broker-Dealer. Such notice may be given in the space provided
for that purpose in the Letter of Transmittal or may be delivered to the
Exchange Agent at one of the addresses set forth herein under "The Exchange
Offer--Exchange Agent." See "The Exchange Offer--Resales of New Capital
Securities."
The Corporation or the Trust will not receive any cash proceeds from the
issuance of the New Capital Securities offered hereby. New Capital
Securities received by broker-dealers for their own accounts in connection
with the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the New Capital Securities or a combination
of such methods of resale, at market prices prevailing at the time of resale,
at prices related to such prevailing market prices or at negotiated prices.
Any such resale may be made directly to purchasers or to or through brokers
or dealers who may receive compensation in the form of commissions or
concessions from any such broker-dealer and/or the purchasers of any such New
Capital Securities.
Any broker-dealer that resells New Capital Securities that were received
by it for its own account in connection with the Exchange Offer and any
broker or dealer that participates in a distribution of such New Capital
Securities may be deemed to be an "underwriter" within the meaning of the
Securities Act, and any profit on any such resale of New Capital Securities
and any commissions or concessions received by any such persons may be deemed
to be underwriting compensation under the Securities Act. The Letter of
Transmittal states that, by acknowledging that it will deliver and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act.
LEGAL MATTERS
The validity of the New Guarantee and the New Junior Subordinated
Debentures will be passed upon for the Corporation by Bond, Schoeneck & King,
LLP, Syracuse, New York. Certain matters relating to United States federal
income tax considerations will be passed upon by Brown & Wood LLP, New York,
New York. Certain matters of Delaware law relating to the validity of the
New Capital Securities will be passed upon on behalf of the Trust by
Richards, Layton & Finger, special Delaware counsel to the Trust.
EXPERTS
The consolidated financial statements of the Corporation and
subsidiaries incorporated by reference in the Corporation's Annual Report on
Form 10-K for the fiscal year ended December 31, 1996 have been incorporated
herein by reference in reliance upon the reports set forth therein of Coopers
& Lybrand L.L.P., independent auditors, and upon the authority of such firm
as experts in accounting and auditing.
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law authorizes a
corporation to indemnify any director, officer, employee or other agent of
the corporation.
The Corporation's By-laws provide indemnity to the Corporation's
directors and officers in such capacity or as directors or officers of a
wholly-owned subsidiary of the Corporation for liability resulting from
judgments, fines, expenses or settlement amounts actually and reasonably
incurred in connection with any action brought against such person in such
capacity to the fullest extent and in the manner set forth in and permitted
by the Delaware General Corporation Law, and any other applicable law, as
from time to time in effect. Under Delaware law and the By-laws, no
indemnification may be provided for any person with respect to any matter as
to which he or she shall have been adjudicated in any proceeding not to have
acted in good faith in the reasonable belief that his or her action was in
the best interests of the Corporation or of such subsidiary.
In addition, as permitted under Delaware law, the Corporation maintains
liability insurance covering directors and officers of the Corporation and
its subsidiaries.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
EXHIBIT
4.1 Indenture of Community Bank System, Inc. relating to the
Junior Subordinated Debentures*
4.2 Form of Certificate of New Junior Subordinated Debenture
(included as Exhibit A to Exhibit 4.1)*
4.3 Certificate of Trust of Community Capital Trust I*
4.4 Declaration of Trust of Community Capital Trust I*
4.5 Amended and Restated Declaration of Trust of Community Capital
Trust I*
4.6 Form of New Capital Security Certificate of Community Capital
Trust I (included as Exhibit D to Exhibit 4.5)*
4.7 Form of New Guarantee of Community Bank System, Inc. relating
to the New Capital Securities
4.8 Registration Rights Agreement*
5.1 Opinion and consent of Bond, Schoeneck & King, LLP to
Community Bank System, Inc. as to legality of the New Junior
Subordinated Debentures and the New Guarantee to be issued by
Community Bank System, Inc.
5.2 Opinion of Richards, Layton & Finger, special Delaware
counsel, as to legality of the New Capital Securities to be
issued by Community Capital Trust I
8 Opinion of Brown & Wood LLP, special tax counsel, as to
certain federal income tax matters
12.1 Computation of ratio of earnings to fixed charges*
23.1 Consent of Coopers & Lybrand L.L.P.
23.2 Consent of Bond, Schoeneck & King, LLP (included in Exhibit
5.1)
23.3 Consent of Richards, Layton & Finger (included in Exhibit 5.2)
23.4 Consent of Brown & Wood LLP (included in Exhibit 8)
24 Power of Attorney of certain officers and directors of
Community Bank System, Inc.*
25.1 Form T-1 Statement of Eligibility of The Chase Manhattan Bank
to act as trustee under the Indenture*
25.2 Form T-1 Statement of Eligibility of The Chase Manhattan Bank
to act as trustee under the Amended and Restated Declaration
of Trust of Community Capital Trust I*
25.3 Form T-1 Statement of Eligibility of The Chase Manhattan Bank
under the New Guarantee for the benefit of the holders of New
Capital Securities of Community Capital Trust I*
99.1 Form of Letter of Transmittal
99.2 Form of Notice of Guaranteed Delivery
99.3 Form of Exchange Agent Agreement
_______________
*Previously filed as an Exhibit to the initial Registration Statement on Form
S-4, which was filed with the Securities and Exchange Commission on June 25,
1997.
ITEM 22. UNDERTAKINGS
Each of the undersigned Registrants hereby undertakes that, for purposes
of determining any liability under the Securities Act of 1933, as amended
(the "Securities Act"), each filing of a Registrant's annual report pursuant
to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934
(and, where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that
is incorporated by reference in this Registration Statement shall be deemed
to be a new registration statement relating to the securities offered herein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of each
undersigned Registrant pursuant to the provisions, or otherwise, each
Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by each undersigned Registrant of expenses incurred or paid by a
director, officer of controlling person of each Registrant in the successful
defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being
registered, each Registrant will, unless in the opinion of its counsel the
matter has been settled by the controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.
The undersigned Registrants hereby undertake to respond to requests for
information that is incorporated by reference into the Prospectus pursuant to
Item 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through
the date of responding to the request.
The undersigned Registrants hereby undertake to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired or involved therein, that was not the subject of and
included in the registration statement when it became effective.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Community
Bank System, Inc. certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form S-4 and has duly caused this
registration statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of DeWitt, and State of New York, on
the 23rd day of July, 1997.
COMMUNITY BANK SYSTEM, INC.
By /s/Sanford A. Belden
- --------------------------------------
Sanford A. Belden
President, Chief Executive Officer
and Director
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----
President, Chief
Sanford A. Belden* Executive Officer
--------------------- and Director
(Sanford A. Belden)
Earl W. MacArthur*
--------------------- Chairman of the
(Dr. Earl W. MacArthur) Board of Directors
Directors and Director
David G. Wallace*
---------------------
(David G. Wallace) Treasurer
John M. Burgess* Director
---------------------
(John M. Burgess)
William M. Dempsey* Director
---------------------
(William M. Dempsey)
Lee T. Hirschey* Director
---------------------
(Lee T. Hirschey)
William N. Sloan* Director
---------------------
(William N. Sloan)
Hugh G. Zimmer* Director
---------------------
(Hugh G. Zimmer)
Richard C. Cummings*
--------------------- Director
(Richard C. Cummings)
Nicholas A. DiCerbo*
--------------------- Director
(Nicholas A. DiCerbo)
James A. Gabriel*
--------------------- Director
(James A. Gabriel)
David C. Patterson*
--------------------- Director
(David C. Patterson)
*By:/s/Sanford A. Belden
------------------- July 23, 1997
Sandford A. Belden
(Attorney-in-fact)
Pursuant to the requirements of the Securities Act of 1933, Community
Capital Trust I certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form S-4 and has duly caused this
registration statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of DeWitt, and State of New York, on
the 23rd day of July, 1997.
COMMUNITY CAPITAL TRUST I
By: /s/Sanford A. Belden
-----------------------------------
Sanford A. Belden,
as Administrative Trustee
By: /s/David G. Wallace
-----------------------------------
David G. Wallace,
as Administrative Trustee
By: /s/Joseph J. Lemchak
-----------------------------------
Joseph J. Lemchak,
as Administrative Trustee
EXHIBIT INDEX
PAGE EXHIBIT NO. DESCRIPTION
4.7 Form of New Guarantee of Community Bank system, Inc. relating
to the New Capital Securities.
5.1 Opinion and consent of Bond, Schoeneck & King, LLP to
Community Bank System, Inc. as to legality of the New Junior
Subordinated Debentures and the New Guarantee to be issued by
Community Bank System, Inc.
5.2 Opinion of Richards, Layton & Finger, special Delaware
counsel, as to legality of the New Capital Securities to be
issued by Community Capital Trust I
8 Opinion of Brown & Wood LLP, special tax counsel, as to
certain federal income tax matters
23.1 Consent of Coopers & Lybrand L.L.P.
23.2 Consent of Bond, Schoeneck & King, LLP (included in Exhibit
5.1)
23.3 Consent of Richards, Layton & Finger (included in Exhibit 5.2)
23.4 Consent of Brown & Wood LLP (included in Exhibit 8)
99.1 Form of Letter of Transmittal
99.2 Form of Notice of Guaranteed Delivery
99.3 Form of Exchange Agent Agreement
EXHIBIT 4.7
========================================
SERIES B CAPITAL SECURITIES GUARANTEE AGREEMENT
COMMUNITY BANK SYSTEM, INC.
Dated as of August ( ), 1997
=========================================
TABLE OF CONTENTS
-----------------
Page
----
ARTICLE I
DEFINITIONS AND INTERPRETATION . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.1 Definitions and Interpretation . . . . . . . . . . 2
ARTICLE II
TRUST INDENTURE ACT . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 2.1 Trust Indenture Act; Application . . . . . . . . 6
SECTION 2.2 Lists of Holders of Securities . . . . . . . . . 6
SECTION 2.3 Reports by the Capital Securities Guarantee
Trustee . . . . . . . . . . . . . . . . . . . . 7
SECTION 2.4 Periodic Reports to Capital Securities
Guarantee Trustee . . . . . . . . . . . . . . . 7
SECTION 2.5 Evidence of Compliance with Conditions
Precedent . . . . . . . . . . . . . . . . . . . 7
SECTION 2.6 Events of Default: Waiver . . . . . . . . . . . 8
SECTION 2.7 Event of Default: Notice . . . . . . . . . . . . 8
SECTION 2.8 Conflicting Interests . . . . . . . . . . . . . 8
ARTICLE III
POWERS, DUTIES AND RIGHTS OF CAPITAL SECURITIES GUARANTEE TRUSTEE . . . . 9
SECTION 3.1 Powers and Duties of the Capital Securities
Guarantee Trustee . . . . . . . . . . . . . . . 9
SECTION 3.2 Certain Rights of Capital Securities Guarantee
Trustee . . . . . . . . . . . . . . . . . . . . 11
SECTION 3.3 Not Responsible for Recitals orIssuance of
Series B Capital Securities Guarantee . . . . . 14
ARTICLE IV
CAPITAL SECURITIES GUARANTEE TRUSTEE . . . . . . . . . . . . . . . . . . 14
SECTION 4.1 Capital Securities Guarantee Trustee;
Eligibility . . . . . . . . . . . . . . . . . . 14
ARTICLE V
GUARANTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 5.1 Guarantee . . . . . . . . . . . . . . . . . . . 16
SECTION 5.2 Waiver of Notice and Demand . . . . . . . . . . 16
SECTION 5.3 Obligations Not Affected . . . . . . . . . . . . 16
SECTION 5.4 Rights of Holders . . . . . . . . . . . . . . . 17
SECTION 5.5 Guarantee of Payment . . . . . . . . . . . . . . 18
SECTION 5.6 Subrogation . . . . . . . . . . . . . . . . . . 18
SECTION 5.7 Independent Obligations . . . . . . . . . . . . 18
SECTION 5.8 Possibility of Advancement of Maturity Date of
Debentures . . . . . . . . . . . . . . . . . . . 19
ARTICLE VI
LIMITATION OF TRANSACTIONS; SUBORDINATION . . . . . . . . . . . . . . . . 19
SECTION 6.1 Limitation of Transactions . . . . . . . . . . . 19
SECTION 6.2 Ranking . . . . . . . . . . . . . . . . . . . . 20
ARTICLE VII
TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 7.1 Termination . . . . . . . . . . . . . . . . . . 20
ARTICLE VIII
INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 8.1 Exculpation . . . . . . . . . . . . . . . . . . 21
SECTION 8.2 Indemnification . . . . . . . . . . . . . . . . 21
ARTICLE IX
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 9.1 Successors and Assigns . . . . . . . . . . . . . 22
SECTION 9.2 Amendments . . . . . . . . . . . . . . . . . . . 22
SECTION 9.3 Notices . . . . . . . . . . . . . . . . . . . . 22
SECTION 9.4 Benefit . . . . . . . . . . . . . . . . . . . . 23
SECTION 9.5 Governing Law . . . . . . . . . . . . . . . . . 24
SERIES B CAPITAL SECURITIES GUARANTEE AGREEMENT
This GUARANTEE AGREEMENT (the "Series B Capital Securities
Guarantee"), dated as of August ( ), 1997, is executed and delivered by
Community Bank System, Inc., a Delaware corporation (the "Guarantor"), and
The Chase Manhattan Bank, a New York banking corporation, as indenture
trustee (the "Capital Securities Guarantee Trustee"), for the benefit of the
Holders (as defined herein) from time to time of the Series B Capital
Securities (as defined herein) of Community Capital Trust I, a Delaware
statutory business trust (the Issuer").
WHEREAS, pursuant to an Amended and Restated Declaration of Trust
(the "Trust Agreement", which includes Annex I and Exhibits A-1, A-2, B and C
thereto), dated as of February 3, 1997, among the trustees of the Issuer, the
Guarantor, as sponsor, and the holders from time to time of undivided
beneficial interests in the assets of the Issuer, the Issuer issued on
February 3, 1997 30,000 capital securities, having an aggregate liquidation
amount of $30,000,000, such capital securities being designated the 9.75%
Capital Securities, Series A (the "Series A Capital Securities") and, in
connection with the Exchange Offer (as defined in the Trust Agreement), is
executing and delivering on the date hereof this Series B Capital Securities
Guarantee (as defined in the Trust Agreement) for the benefit of holders of
$30,000,000 aggregate liquidation amount of the Series B Capital Securities
(as defined in the Trust Agreement) being issued by the Issuer on the date
hereof; and
WHEREAS, as incentive for the Holders to exchange their Series A
Capital Securities for an equal aggregate liquidation amount of the Series B
Capital Securities, the Guarantor desires irrevocably and unconditionally to
agree, to the extent set forth in this Series B Capital Securities Guarantee,
to pay to the Holders of the Series B Capital Securities the Guarantee
Payments (as defined below). The Guarantor agrees to make certain other
payments on the terms and conditions set forth herein; and
WHEREAS, the Guarantor executed and delivered on February 3, 1997 a
guarantee agreement (the "Common Securities Guarantee"), with substantially
identical terms to this Series B Capital Securities Guarantee, for the
benefit of the holders of the Common Securities (as defined herein), except
that if an Event of Default (as defined in the Trust Agreement) has occurred
and is continuing, the rights of holders of the Common Securities to receive
Guarantee Payments under the Common Securities Guarantee are subordinated, to
the extent and in the manner set forth in the Common Securities Guarantee, to
the rights of holders of Series A Capital Securities and the Series B
Capital Securities to receive Guarantee Payments under the Series A Capital
Securities Guarantee and this Series B Capital Securities Guarantee, as the
case may be;
NOW, THEREFORE, in consideration of the exchange by each Holder of
its Series A Capital Securities for Series B Capital Securities, which
exchange the Guarantor hereby acknowledges shall benefit the Guarantor, the
Guarantor executes and delivers this Series B Capital Securities Guarantee
for the benefit of the Holders.
ARTICLE I
DEFINITIONS AND INTERPRETATION
SECTION 1.1 Definitions and Interpretation
------------------------------
In this Series B Capital Securities Guarantee, unless the context
otherwise requires:
(a) capitalized terms used in this Series B Capital Securities
Guarantee but not defined in the preamble above have the
respective meanings assigned to them in this Section 1.1;
(b) terms defined in the Trust Agreement or the Indenture as at
the date of execution of this Series B Capital Securities
Guarantee have the same meaning when used in this Series B
Capital Securities Guarantee unless otherwise defined in this
Series B Capital Securities Guarantee;
(c) a term defined anywhere in this Series B Capital Securities
Guarantee has the same meaning throughout;
(d) all references to "the Series B Capital Securities Guarantee"
or "this Series B Capital Securities Guarantee" are to this
Series B Capital Securities Guarantee as modified,
supplemented or amended from time to time;
(e) all references in this Series B Capital Securities Guarantee
to Articles and Sections are to Articles and Sections of this
Series B Capital Securities Guarantee, unless otherwise
specified;
(f) a term defined in the Trust Indenture Act has the same meaning
when used in this Series B Capital Securities Guarantee
unless otherwise defined in this Series B Capital Securities
Guarantee or unless the context otherwise requires; and
(g) a reference to the singular includes the plural and vice
versa.
"Affiliate" has the same meaning as given to that term in Rule 405
---------
under the Securities Act of 1933, as amended, or any successor rule
thereunder.
"Business Day" means any day other than a Saturday or a Sunday, or
------------
a day on which banking institutions in The City of New York or Wilmington,
Delaware are authorized or required by law or executive order to close.
"Capital Securities Guarantee Trustee" means The Chase Manhattan
------------------------------------
Bank, a New York banking corporation, until a Successor Capital Securities
Guarantee Trustee has been appointed and has accepted such appointment
pursuant to the terms of this Series B Capital Securities Guarantee and
thereafter means each such Successor Capital Securities Guarantee Trustee.
"Common Securities" means the securities representing common
-----------------
undivided beneficial interests in the assets of the Issuer
"Corporate Trust Office" means the office of the Capital Securities
----------------------
Guarantee Trustee at which the corporate trust business of the Capital
Securities Guarantee Trustee shall, at any particular time, be principally
administered, which office at the date of execution of this Agreement is
located at 450 West 33rd Street, 15th Floor, New York, New York 10001,
Attention: Global Trust Services.
"Covered Person" means any Holder or beneficial owner of Series B
--------------
Capital Securities.
"Debentures" means the series of subordinated debt securities of
----------
the Guarantor designated the 9.75% Series B Junior Subordinated Deferrable
Interest Debentures due January 31, 2027 held by the Property Trustee (as
defined in the Trust Agreement) of the Issuer.
"Event of Default" means a default by the Guarantor on any of its
----------------
payment or other obligations under this Series B Capital Securities
Guarantee.
"Guarantee Payments" means the following payments or
------------------
distributions, without duplication, with respect to the Series B Capital
Securities, to the extent not paid or made by the Issuer: (i) any accumulated
and unpaid Distributions (as defined in the Trust Agreement) that are
required to be paid on such Series B Capital Securities to the extent that
the Issuer has funds on hand legally available therefor at such time, (ii)
the applicable redemption price, including all accumulated and unpaid
Distributions to the date of redemption (the Redemption Price") to the extent
the Issuer has funds on hand legally available therefor at such time, with
respect to any Series B Capital Securities called for redemption by the
Issuer, and (iii) upon a voluntary or involuntary termination and liquidation
of the Issuer (other than in connection with the distribution of Debentures
to the Holders in exchange for Series B Capital Securities as provided in the
Trust Agreement), the lesser of (a) the aggregate of the liquidation amount
and all accumulated and unpaid Distributions on the Series B Capital
Securities to the date of payment, to the extent the Issuer has funds on hand
legally available therefor, and (b) the amount of assets of the Issuer
remaining available for distribution to Holders in liquidation of the Issuer
(in either case, the "Liquidation Distribution"). If an Event of Default has
occurred and is continuing, no Guarantee Payments under the Common Securities
Guarantee with respect to the Common Securities or any guarantee payment
under any Other Common Securities Guarantees shall be made until the Holders
of the Series B Capital Securities shall be paid in full the Guarantee
Payments to which they are entitled under this Series B Capital Securities
Guarantee.
"Holder" shall mean any holder, as registered on the books and
------
records of the Issuer, of any Series B Capital Securities; provided, however,
that, in determining whether the holders of the requisite percentage of
Series B Capital Securities have given any request, notice, consent or waiver
hereunder, "Holder" shall not include the Guarantor or any Affiliate of the
Guarantor.
"Indemnified Person" means the Capital Securities Guarantee
------------------
Trustee, any Affiliate of the Capital Securities Guarantee Trustee, or any
officers, directors, shareholders, members, partners, employees,
representatives, nominees, custodians or agents of the Capital Securities
Guarantee Trustee.
"Indenture" means the Indenture dated as of February 3, 1997, among
---------
the Guarantor (the "Debenture Issuer") and The Chase Manhattan Bank, as
trustee, pursuant to which the Debentures are to be issued to the Property
Trustee of the Issuer.
"Majority in liquidation amount of the Series B Capital Securities"
-----------------------------------------------------------------
means, except as provided by the Trust Indenture Act or in the terms of the
Capital Securities, a vote by Holder(s) of Series B Capital Securities,
voting separately as a class, of more than 50% of the aggregate liquidation
amount (including the stated amount that would be paid on redemption,
liquidation or otherwise, plus accumulated and unpaid Distributions to the
date upon which the voting percentages are determined) of all Series B
Capital Securities.
"Officers' Certificate" means, with respect to any person, a
---------------------
certificate signed by two of the following: the Chairman a Vice Chairman, the
Chief Executive Officer, the President, a Vice President (whether or not
designated by a number or a word or words added before or after such title),
the Comptroller, the Secretary, an Assistant Secretary, the Treasurer or an
Assistant Treasurer of the Guarantor. Any Officers' Certificate delivered
with respect to compliance with a condition or covenant provided for in this
Series B Capital Securities Guarantee shall include:
(a) a statement that each officer signing the Officers' Certificate
has read the covenant or condition and the definitions relating thereto;
(b) a brief statement of the nature and scope of the
examination or investigation undertaken by each other in rendering
the Certificate;
(c) a statement that each such officer has made such examination or
investigation as, in such officer's opinion, is necessary to enable such
officer to express an informed opinion as to whether or not such
covenant or condition has been complied with; and
(d) a statement as to whether, in the opinion of each such officer,
such condition or covenant has been complied with.
"Other Common Securities Guarantees" shall have the same meaning
----------------------------------
as "Other Guarantees" as set forth in the Common Securities Guarantee.
"Other Debentures" means all junior subordinated debentures issued
----------------
by the Guarantor from time to time and sold to trusts to be established by
the Guarantor (if any), in each case similar to the Issuer.
"Other Guarantees" means all guarantees hereafter issued by the
----------------
Guarantor with respect to capital securities (if any) similar to the Series B
Capital Securities issued by other trusts to be established by the Guarantor
(if any), in each case similar to the Issuer.
"Person" means a legal person, including any individual,
------
corporation, estate, partnership, joint venture, association, joint stock
company, limited liability company, trust, unincorporated association, or
government or any agency or political subdivision thereof, or any other
entity of-whatever nature.
"Registration Rights Agreement" means the Registration Rights
-----------------------------
Agreement, dated as of February 3, 1997, by and among the Guarantor, the
Issuer and the Initial Purchasers named therein as such agreement may be
amended, modified or supplemented from time to time.
"Responsible Officer" means, with respect to the Capital
-------------------
Securities Guarantee Trustee, any officer of the Capital Securities Guarantee
Trustee, with responsibility for the administration of this Series B Capital
Securities Guarantee and also means, with respect to a particular corporate
trust matter, any other officer to whom such matter is referred because of
that officer's knowledge of and familiarity with the particular subject.
"Successor Capital Securities Guarantee Trustee" means a successor
----------------------------------------------
Capital Securities Guarantee Trustee possessing the qualifications to act as
Capital Securities Guarantee Trustee under Section 4.1.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as
-------------------
amended.
"Trust Securities" means the Common Securities and the Series A
----------------
Capital Securities and Series B Capital Securities, collectively.
ARTICLE II
TRUST INDENTURE ACT
SECTION 2.1 Trust Indenture Act; Application
--------------------------------
(a) This Series B Capital Securities Guarantee is subject to the
provisions of the Trust Indenture Act that are required to be part of
this Series B Capital Securities Guarantee in order for the Trust
Agreement to be a qualified indenture under the Trust Indenture Act and
shall, to the extent applicable, be governed by such provisions; and
(b) if and to the extent that any provision of this Series B
Capital Securities Guarantee limits, qualifies or conflicts with the
duties imposed by Section 310 to 317, inclusive, of the Trust Indenture
Act, such imposed duties shall control.
SECTION 2.2 Lists of Holders of Securities
------------------------------
(a) The Guarantor shall provide the Capital Securities Guarantee
Trustee (unless the Capital Securities Guarantee Trustee is otherwise
the registrar of the Series B Capital Securities) with a list, in such
form as the Capital Securities Guarantee Trustee may reasonably require,
of the names and addresses of the Holders of the Series B Capital
Securities ("List of Holders") as of such date, (i) within five days
after the fifteenth day prior to each Distribution Date, and (ii) at any
other time within 30 days of receipt by the Guarantor of a written
request for a List of Holders as of a date no more than 14 days before
such List of Holders is given to the Capital Securities Guarantee
Trustee, provided that the Guarantor shall not be obligated to provide
such List of Holders at any time the List of Holders does not differ
from the most recent List of Holders given to the Capital Securities
Guarantee Trustee by the Guarantor. The Capital Securities Guarantee
Trustee may destroy any List of Holders previously given to it on
receipt of a new List of Holders.
(b) The Capital Securities Guarantee Trustee shall comply with its
obligations under Sections 311(a), 311(b) and Section 312(b) of the
Trust Indenture Act.
SECTION 2.3 Reports by the Capital Securities Guarantee Trustee
---------------------------------------------------
Within 60 days after January 31 of each year, commencing
January 31, 1998, the Capital Securities Guarantee Trustee shall provide
to the Holders of the Series B Capital Securities such reports as are
required by Section 313 of the Trust Indenture Act, if any, in the form
and in the manner provided by Section 313 of the Trust Indenture Act.
The Capital Securities Guarantee Trustee shall also comply with the
requirements of Section 313(d) of the Trust Indenture Act.
SECTION 2.4 Periodic Reports to Capital Securities Guarantee Trustee
--------------------------------------------------------
The Guarantor shall provide to the Capital Securities
Guarantee Trustee such documents, reports and information as required by
Section 314 (if any) and the compliance certificate required by Section
314 of the Trust Indenture Act in the form, in the manner and at the
times required by Section 314 of the Trust Indenture Act. Delivery of
such reports, information and documents to the Capital Securities
Guarantee Trustee is for informational purposes only and the Capital
Securities Guarantee Trustee's receipt of such shall not constitute
constructive notice of any information contained therein or determinable
from information contained therein, including the Guarantor's compliance
with any of its covenants hereunder (as to which the Capital Securities
Guarantee Trustee is entitled to rely exclusively on Officers'
Certificates).
SECTION 2.5 Evidence of Compliance with Conditions Precedent
------------------------------------------------
The Guarantor shall provide to the Capital Securities
Guarantee Trustee such evidence of compliance with any conditions
precedent, if any, provided for in this Series B Capital Securities
Guarantee that relate to any of the matters set forth in Section 314(c)
of the Trust Indenture Act. Any certificate or opinion required to be
given by an officer pursuant to Section 314(c)(1) may be given in the
form of an Officers' Certificate.
SECTION 2.6 Events of Default: Waiver
-------------------------
The Holders of a Majority in liquidation amount of Series B
Capital Securities may, by vote, on behalf of the Holders of all of the
Series B Capital Securities, waive any past Event of Default and its
consequences. Upon such waiver, any such Event of Default shall cease
to exist, and any Event of Default arising therefrom shall be deemed to
have been cured, for every purpose of this Series B Capital Securities
Guarantee, but no such waiver shall extend to any subsequent or other
default or Event of Default or impair any right consequent thereon.
SECTION 2.7 Event of Default: Notice
------------------------
(a) The Capital Securities Guarantee Trustee shall, within 90
days after the occurrence of a default with respect to this Capital
Securities Guarantee known to a Responsible Officer of the Capital
Securities Guarantee Trustee, mail by first class postage prepaid, to
all Holders, notices of all defaults actually known to a Responsible
Officer of the Capital Securities Guarantee Trustee, unless such
defaults have been cured before the giving of such notice, provided,
that, except in the case of default in the payment of any Guarantee
Payment, the Capital Securities Guarantee Trustee shall be protected in
withholding such notice if and so long as the board of directors, the
executive committee, or a trust committee of directors and/or
Responsible Officers of the Capital Securities Guarantee Trustee in good
faith determines that the withholding of such notice is in the interests
of the Holders of the Series B Capital Securities.
(b) The Capital Securities Guarantee Trustee shall not be
deemed to have knowledge of any Event of Default unless the Capital
Securities Guarantee Trustee shall have received written notice, or a
Responsible Officer of the Capital Securities Guarantee Trustee charged
with the administration of the Trust Agreement shall have obtained
actual knowledge, of such Event of Default.
SECTION 2.8 Conflicting Interests
---------------------
The Trust Agreement shall be deemed to be specifically
described in this Series B Capital Securities Guarantee and the
Indenture for the purposes of clause (i) of the first proviso contained
in Section 310(b) of the Trust Indenture Act.
ARTICLE III
POWERS, DUTIES AND RIGHTS OF
Capital Securities Guarantee Trustee
SECTION 3.1 Powers and Duties of the Capital Securities Guarantee
-----------------------------------------------------
Trustee
-------
(a) This Series B Capital Securities Guarantee shall be held
by the Capital Securities Guarantee Trustee for the benefit of the
Holders of the Series B Capital Securities, and the Capital Securities
Guarantee Trustee shall not transfer this Series B Capital Securities
Guarantee to any Person except a Holder of Series B Capital Securities
exercising his or her rights pursuant to Section 5.4(b) or to a
Successor Capital Securities Guarantee Trustee on acceptance by such
Successor Capital Securities Guarantee Trustee of its appointment to act
as Successor Capital Securities Guarantee Trustee. The right, title and
interest of the Capital Securities Guarantee Trustee shall automatically
vest in any Successor Capital Securities Guarantee Trustee, and such
vesting and succession of title shall be effective whether or not
conveyancing documents have been executed and delivered pursuant to the
appointment of such Successor Capital Securities Guarantee Trustee.
(b) If an Event of Default actually known to a Responsible
Officer of the Capital Securities Guarantee Trustee has occurred and is
continuing, the Capital Securities Guarantee Trustee shall enforce this
Series B Capital Securities Guarantee for the benefit of the Holders of
the Series B Capital Securities.
(c) The Capital Securities Guarantee Trustee, before the
occurrence of any Event of Default and after the curing of all Events of
Default that may have occurred, shall undertake to perform only such
duties as are specifically set forth in this Series B Capital Securities
Guarantee, and no implied covenants shall be read into this Series B
Capital Securities Guarantee against the Capital Securities Guarantee
Trustee. In case an Event of Default has occurred (that has not been
cured or waived pursuant to Section 2.6) and is actually known to a
Responsible Officer of the Capital Securities Guarantee Trustee, the
Capital Securities Guarantee Trustee shall exercise such of the rights
and powers vested in it by this Series B Capital Securities Guarantee,
and use the same degree of care and skill in its exercise thereof, as a
prudent person would exercise or use under the circumstances in the
conduct of his or her own affairs.
(d) No provision of this Series B Capital Securities Guarantee
shall be construed to relieve the Capital Securities Guarantee Trustee
from liability for its own negligent action, its own negligent failure
to act, or its own willful misconduct, except that:
(i) prior to the occurrence of any Event of Default and after
the curing or waiving of all such Events of Default that may have
occurred:
(A) the duties and obligations of the Capital Securities
Guarantee Trustee shall be determined solely by the express
provisions of this Series B Capital Securities Guarantee, and
the Capital Securities Guarantee Trustee shall not be liable
except for the performance of such duties and obligations as
are specifically set forth in this Series B Capital Securities
Guarantee, and no implied covenants or obligations shall be
read into this Series B Capital Securities Guarantee against
the Capital Securities Guarantee Trustee; and
(B) in the absence of bad faith on the part of the
Capital Securities Guarantee Trustee, the Capital Securities
Guarantee Trustee may conclusively rely, as to the truth of
the statements and the correctness of the opinions expressed
therein, upon any certificates or opinions furnished to the
Capital Securities Guarantee Trustee and conforming to the
requirements of this Series B Capital Securities Guarantee;
but in the case of any such certificates or opinions that by
any provision hereof are specifically required to be furnished
to the Capital Securities Guarantee Trustee, the Capital
Securities Guarantee Trustee shall be under a duty to examine
the same to determine whether or not they conform to the
requirements of this Series B Capital Securities Guarantee;
(ii) the Capital Securities Guarantee Trustee shall not be
liable for any error of judgment made in good faith by a
Responsible Officer of the Capital Securities Guarantee Trustee,
unless it shall be proved that the Capital Securities Guarantee
Trustee was negligent in ascertaining the pertinent facts upon
which such judgment was made;
(iii) the Capital Securities Guarantee Trustee shall not be
liable with respect to any action taken or omitted to be taken by
it in good faith in accordance with the direction of the Holders of
a Majority in liquidation amount of the Series B Capital Securities
relating to the time, method and place of conducting any proceeding
for any remedy available to the Capital Securities Guarantee
Trustee, or exercising any trust or power conferred upon the
Capital Securities Guarantee Trustee under this Series B Capital
Securities Guarantee; and
(iv) no provision of this Series B Capital Securities
Guarantee shall require the Capital Securities Guarantee Trustee to
expend or risk its own funds or otherwise incur personal financial
liability in the performance of any of its duties or in the
exercise of any of its rights or powers, if the Capital Securities
Guarantee Trustee shall have reasonable grounds for believing that
the repayment of such funds or liability is not reasonably assured
to it under the terms of this Series B Capital Securities Guarantee
or indemnity, reasonably satisfactory to the Capital Securities
Guarantee Trustee, against such risk or liability is not reasonably
assured to it.
SECTION 3.2 Certain Rights of Capital Securities Guarantee Trustee
------------------------------------------------------
(a) Subject to the provisions of Section 3.1:
(i) The Capital Securities Guarantee Trustee may conclusively
rely, and shall be fully protected in acting or refraining from
acting, upon any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond,
debenture, note, other evidence of indebtedness or other paper or
document believed by it to be genuine and to have been signed, sent
or presented by the proper party or parties.
(ii) Any direction or act of the Guarantor contemplated by
this Series B Capital Securities Guarantee may be sufficiently
evidenced by an Officers' Certificate.
(iii) Whenever, in the administration of this Series B Capital
Securities Guarantee, the Capital Securities Guarantee Trustee
shall deem it desirable that a matter be proved or established
before taking, suffering or omitting any action hereunder, the
Capital Securities Guarantee Trustee (unless other evidence is
herein specifically prescribed) may, in the absence of bad faith on
its part, request and conclusively rely upon an Officers'
Certificate which, upon receipt of such request, shall be promptly
delivered by the Guarantor.
(iv) The Capital Securities Guarantee Trustee shall have no
duty to see to any recording, filing or registration of any
instrument (or any rerecording, refiling or registration thereof).
(v) The Capital Securities Guarantee Trustee may consult with
counsel of its selection, and the advice or opinion of such counsel
with respect to legal matters shall be full and complete
authorization and protection in respect of any action taken,
suffered or omitted by it hereunder in good faith and in accordance
with such advice or opinion. Such counsel may be counsel to the
Guarantor or any of its Affiliates and may include any of its
employees. The Capital Securities Guarantee Trustee shall have the
right at any time to seek instructions concerning the
administration of this Series B Capital Securities Guarantee from
any court of competent jurisdiction.
(vi) The Capital Securities Guarantee Trustee shall be under
no obligation to exercise any of the rights or powers vested in it
by this Series B Capital Securities Guarantee at the request or
direction of any Holder, unless such Holder shall have provided to
the Capital Securities Guarantee Trustee such security and
indemnity, reasonably satisfactory to the Capital Securities
Guarantee Trustee, against the costs, expenses (including
attorneys' fees and expenses and the expenses of the Capital
Securities Guarantee Trustee's agents, nominees or custodians) and
liabilities that might be incurred by it in complying with such
request or direction, including such reasonable advances as may be
requested by the Capital Securities Guarantee Trustee; provided
that, nothing contained in this Section 3.2(a)(vi) shall be taken
to relieve the Capital Securities Guarantee Trustee, upon the
occurrence of an Event of Default, of its obligation to exercise
the rights and powers vested in it by this Series B Capital
Securities Guarantee.
(vii) The Capital Securities Guarantee Trustee shall not be
bound to make any investigation into the facts or matters stated in
any resolution, certificate, statement, instrument, opinion,
report, notice, request, direction, consent, order, bond,
debenture, note, other evidence of indebtedness or other paper or
document, but the Capital Securities Guarantee Trustee, in its
discretion, may make such further inquiry or investigation into
such facts or matters as it may see fit.
(viii) The Capital Securities Guarantee Trustee may execute
any of the trusts or powers hereunder or perform any duties
hereunder either directly or by or through agents, nominees,
custodians or attorneys, and the Capital Securities Guarantee
Trustee shall not be responsible for any misconduct or negligence
on the part of any agent or attorney appointed with due care by it
hereunder.
(ix) Any action taken by the Capital Securities Guarantee
Trustee or its agents hereunder shall bind the Holders of the
Series B Capital Securities, and the signature of the Capital
Securities Guarantee Trustee or its agents alone shall be
sufficient and effective to perform any such action. No third
party shall be required to inquire as to the authority of the
Capital Securities Guarantee Trustee to so act or as to its
compliance with any of the terms and provisions of this Series B
Capital Securities Guarantee, both of which shall be conclusively
evidenced by the Capital Securities Guarantee Trustee's or its
agent's taking such action.
(x) Whenever in the administration of this Series B Capital
Securities Guarantee the Capital Securities Guarantee Trustee shall
deem it desirable to receive instructions with respect to enforcing
any remedy or right or taking any other action hereunder, the
Capital Securities Guarantee Trustee (i) may request instructions
from the Holders of a Majority in liquidation amount of the Series
B Capital Securities, (ii) may refrain from enforcing such remedy
or right or taking such other action until such instructions are
received, and (iii) shall be protected in conclusively relying on
or acting in accordance with such instructions.
(xi) The Capital Securities Guarantee Trustee shall not be
liable for any action taken, suffered, or omitted to be taken by it
in good faith, without negligence, and reasonably believed by it to
be authorized or within the discretion or rights or powers
conferred upon it by this Series B Capital Securities Guarantee.
(b) No provision of this Series B Capital Securities Guarantee
shall be deemed to impose any duty or obligation on the Capital
Securities Guarantee Trustee to perform any act or acts or exercise any
right, power, duty or obligation conferred or imposed on it in any
jurisdiction in which it shall be illegal, or in which the Capital
Securities Guarantee Trustee shall be unqualified or incompetent in
accordance with applicable law, to perform any such act or acts or to
exercise any such right, power, duty or obligation. No permissive power
or authority available to the Capital Securities Guarantee Trustee shall
be construed to be a duty.
SECTION 3.3 Not Responsible for Recitals or Issuance of Series B
----------------------------------------------------
Capital Securities Guarantee
----------------------------
The recitals contained in this Series B Capital Securities
Guarantee shall be taken as the statements of the Guarantor, and the
Capital Securities Guarantee Trustee does not assume any responsibility
for their correctness. The Capital Securities Guarantee Trustee makes
no representation as to the validity or sufficiency of this Series B
Capital Securities Guarantee.
ARTICLE IV
Capital Securities Guarantee Trustee
SECTION 4.1 Capital Securities Guarantee Trustee; Eligibility
-------------------------------------------------
(a) There shall at all times be a Capital Securities Guarantee
Trustee which shall:
(i) not be an Affiliate of the Guarantor; and
(ii) be a corporation organized and doing business under the
laws of the United States of America or any State or Territory
thereof or of the District of Columbia, or a corporation or Person
permitted by the Securities and Exchange Commission to act as an
institutional trustee under the Trust Indenture Act, authorized
under such laws to exercise corporate trust powers, having a
combined capital and surplus of at least 50 million U.S. dollars
($50,000,000), and subject to supervision or examination by
Federal, state, territorial or District of Columbia authority. If
such corporation publishes reports of condition at least annually,
pursuant to law or to the requirements of the supervising or
examining authority referred to above, then, for the purposes of
this Section 4.1(a)(ii), the combined capital and surplus of such
corporation shall be deemed to be its combined capital and surplus
as set forth in its most recent report of condition so Published.
(b) If at any time the Capital Securities Guarantee Trustee
shall cease to be eligible to so act under Section 4.1(a), the Capital
Securities Guarantee Trustee shall immediately resign in the manner and
with the effect set out in Section 4.2(c).
(c) If the Capital Securities Guarantee Trustee has or shall
acquire any "conflicting interest" within the meaning of Section 310(b)
of the Trust Indenture Act, the Capital Securities Guarantee Trustee and
Guarantor shall in all respects comply with the provisions of Section
310(b) of the Trust Indenture Act.
SECTION 4.2 Appointment Removal and Resignation of Capital
----------------------------------------------
Securities Guarantee Trustee
----------------------------
(a) Subject to Section 4.2(b), the Capital Securities
Guarantee Trustee may be appointed or removed without cause at any time
by the Guarantor except during an Event of Default.
(b) The Capital Securities Guarantee Trustee shall not be
removed in accordance with Section 4.2(a) until a Successor Capital
Securities Guarantee Trustee has been appointed and has accepted such
appointment by written instrument executed by such Successor Capital
Securities Guarantee Trustee and delivered to the Guarantor.
(c) The Capital Securities Guarantee Trustee shall hold office
until a Successor Capital Securities Guarantee Trustee shall have been
appointed or until its removal or resignation. The Capital Securities
Guarantee Trustee may resign from office (without need for prior or
subsequent accounting) by an instrument in writing executed by the
Capital Securities Guarantee Trustee and delivered to the Guarantor,
which resignation shall not take effect until a Successor Capital
Securities Guarantee Trustee has been appointed and has accepted such
appointment by instrument in writing executed by such Successor Capital
Securities Guarantee Trustee and delivered to the Guarantor and the
resigning Capital Securities Guarantee Trustee.
(d) If no Successor Capital Securities Guarantee Trustee shall
have been appointed and accepted appointment as provided in this Section
4.2 within 60 days after delivery of an instrument of removal or
resignation, the Capital Securities Guarantee Trustee resigning or being
removed may petition any court of competent jurisdiction for appointment
of a Successor Capital Securities Guarantee Trustee. Such court may
thereupon, after prescribing such notice, if any, as it may deem proper,
appoint a Successor Capital Securities Guarantee Trustee.
(e) No Capital Securities Guarantee Trustee shall be liable
for the acts or omissions to act of any Successor Capital Securities
Guarantee Trustee.
(f) Upon termination of this Series B Capital Securities
Guarantee or removal or resignation of the Capital Securities Guarantee
Trustee pursuant to this Section 4.2, the Guarantor shall pay to the
Capital Securities Guarantee Trustee all amounts due to the Capital
Securities Guarantee Trustee accrued to the date of such termination,
removal or resignation.
ARTICLE V
GUARANTEE
SECTION 5.1 Guarantee
---------
The Guarantor irrevocably and unconditionally agrees to pay in
full on a subordinated basis to the extent set forth in this Series B
Capital Securities Guarantee to the Holders of the Series B Capital
Securities the Guarantee Payments (without duplication of amounts
theretofore paid by the Issuer), as and when due, regardless of any
defense, right of set-off or counterclaim that the Issuer may have or
assert. The Guarantor's obligation to make a Guarantee Payment may be
satisfied by direct payment of the required amounts by the Guarantor to
the Holders or by causing the Issuer to pay such amounts to the Holders.
SECTION 5.2 Waiver of Notice and Demand
---------------------------
The Guarantor hereby waives notice of acceptance of this
Series B Capital Securities Guarantee and of any liability to which it
applies or may apply, presentment, demand for payment, any right to
require a proceeding first against the Issuer or any other Person before
proceeding against the Guarantor, protest, notice of nonpayment, notice
of dishonor, notice of redemption and all other notices and demands.
SECTION 5.3 Obligations Not Affected
------------------------
The obligations, covenants, agreements and duties of the
Guarantor under this Series B Capital Securities Guarantee shall in no
way be affected or impaired by reason of the happening from time to time
of any of the following:
(a) the release or waiver, by operation of law or otherwise,
of the performance or observance by the Issuer of any express or implied
agreement, covenant, term or condition relating to the Series B Capital
Securities to be performed or observed by the Issuer;
(b) the extension of time for the payment by the Issuer of all
or any portion of the Distributions, Redemption Price, Liquidation
Distribution or any other sums payable under the terms of the Series B
Capital Securities or the extension of time for the performance of any
other obligation under, arising out of, or in connection with, the
Series B Capital Securities (other than an extension of time for payment
of Distributions, Redemption Price, Liquidation Distribution or other
sum payable that results from the extension of any interest payment
period on the Debentures permitted by the Indenture);
(c) any failure, omission, delay or lack of diligence on the
part of the Holders to enforce, assert or exercise any right, privilege,
power or remedy conferred on the Holders pursuant to the terms of the
Series B Capital Securities, or any action on the part of the Issuer
granting indulgence or extension of any kind;
(d) the voluntary or involuntary liquidation, dissolution,
sale of any collateral, receivership, insolvency, bankruptcy, assignment
for the benefit of creditors, reorganization, arrangement, composition
or readjustment of debt of, or other similar proceedings affecting, the
Issuer or any of the assets of the Issuer;
(e) any invalidity of, or defect or deficiency in, the Series
B Capital Securities;
(f) the settlement or compromise of any obligation guaranteed
hereby or hereby incurred; or
(g) any other circumstance whatsoever that might otherwise
constitute a legal or equitable discharge or defense of a guarantor, it
being the intent of this Section 5.3 that the obligations of the
Guarantor with respect to the Guarantee Payments shall be absolute and
unconditional under any and all circumstances.
There shall be no obligation of the Holders to give notice to,
or obtain consent of, the Guarantor with respect to the happening of any
of the foregoing.
SECTION 5.4 Rights of Holders
-----------------
(a) The Holders of a Majority in Liquidation Amount of the
Series B Capital Securities have the right to direct the time, method
and place of conducting any proceeding for any remedy available to the
Capital Securities Guarantee Trustee in respect of this Series B Capital
Securities Guarantee or exercising any trust or power conferred upon the
Capital Securities Guarantee Trustee under this Series B Capital
Securities Guarantee.
(b) If the Capital Securities Guarantee Trustee fails to
enforce such Series B Capital Securities Guarantee, any Holder of Series
B Capital Securities may institute a legal proceeding directly against
the Guarantor to enforce the Capital Securities Guarantee Trustee's
rights under this Series B Capital Securities Guarantee, without first
instituting a legal proceeding against the Issuer, the Capital
Securities Guarantee Trustee or any other person or entity. The
Guarantor waives any right or remedy to require that any action be
brought first against the Issuer or any other person or entity before
proceeding directly against the Guarantor.
SECTION 5.5 Guarantee of Payment
--------------------
This Series B Capital Securities Guarantee creates a guarantee
of payment and not of collection
SECTION 5.6 Subrogation
-----------
The Guarantor shall be subrogated to all (if any) rights of
the Holders of Series B Capital Securities against the Issuer in respect
of any amounts paid to such Holders by the Guarantor under this Series B
Capital Securities Guarantee; provided, however, that the Guarantor
shall not (except to the extent required by mandatory provisions of law)
be entitled to enforce or exercise any right that it may acquire by way
of subrogation or any indemnity, reimbursement or other agreement, in
all cases as a result of payment under this Series B Capital Securities
Guarantee, if, at the time of any such payment, any amounts are due and
unpaid under this Series B Capital Securities Guarantee. If any amount
shall be paid to the Guarantor in violation of the preceding sentence,
the Guarantor agrees to hold such amount in trust for the Holders and to
pay over such amount to the Holders.
SECTION 5.7 Independent Obligations
-----------------------
The Guarantor acknowledges that its obligations hereunder are
independent of the obligations of the Issuer with respect to the Series
B Capital Securities, and that the Guarantor shall be liable as
principal and as debtor hereunder to make Guarantee Payments pursuant to
the terms of this Series B Capital Securities Guarantee notwithstanding
the occurrence of any event referred to in subsections (a) through (h),
inclusive, of Section 5.3 hereof.
ARTICLE VI
LIMITATION OF TRANSACTIONS; SUBORDINATION
SECTION 6.1 Limitation of Transactions
--------------------------
So long as any Capital Securities remain outstanding, the
Guarantor shall not (i) declare or pay any dividends or distributions
on, or redeem, purchase, acquire, or make a liquidation payment with
respect to, any of the Guarantor's capital stock (which includes common
and preferred stock) or (ii) make any payment of principal, interest or
premium, if any, with respect to, or repay or repurchase or redeem any
debt securities of the Guarantor (including any Other Debentures) that
rank pari passu with or junior in right of payment to the Debentures or
(iii) make any guarantee payments with respect to any guarantee by the
Guarantor of the debt securities of any subsidiary of the Guarantor
(including Other Guarantees) if such guarantee ranks pari passu with or
junior in right of payment to the Debentures (other than (a) dividends
or distributions in shares of, or options, warrants or rights to
subscribe for or purchase shares of, common stock of the Guarantor, (b)
any declaration of a dividend in connection with the implementation of a
stockholders' rights plan, or the issuance of stock under any such plan
in the future, or the redemption or repurchase of any such rights
pursuant thereto, (c) payments under the Capital Securities Guarantee,
(d) as a result of a reclassification of the Guarantor's capital stock
or the exchange or the conversion of one class or series of the
Guarantor's capital stock for another class or series of the Guarantor's
capital stock, (e) the purchase of fractional interests in shares of the
Guarantor's capital stock pursuant to the conversion or exchange
provisions of such capital stock or the security being converted or
exchanged, and (f) purchases or issuances of common stock in connection
with any of the Guarantor's stock option, stock purchase, stock loan or
other benefit plans for its directors, officers or employees or any of
the Guarantor's dividend reinvestment plans, in each case as now
existing or hereafter established or amended), if at such time (i) there
shall have occurred any event of which the Guarantor has actual
knowledge that (a) is, or with the giving of notice or the lapse of
time, or both, would be an Event of Default and (b) in respect of which
the Guarantor shall not have taken reasonable steps to cure, (ii) if
such Debentures are held by the Property Trustee, the Guarantor shall be
in default with respect to its payment of any obligations under this
Series B Capital Securities Guarantee or (iii) the Guarantor shall have
given notice of its election of the exercise of its right to extend the
interest payment period pursuant to Section 16.01 of the Indenture and
any such extension shall be continuing.
SECTION 6.2 Ranking
-------
This Series B Capital Securities Guarantee will constitute an
unsecured obligation of the Guarantor and will rank (i) subordinate and
junior in right of payment to Senior Indebtedness (as defined in the
Indenture), to the same extent and in the same manner that the
Debentures are subordinated to Senior Indebtedness pursuant to the
Indenture (except as indicated below), it being understood that the
terms of Article XV of the Indenture shall apply to the obligations of
the Guarantor under this Series B Capital Securities Guarantee as if (x)
such Article XV were set forth herein in full and (y) such obligations
were substituted for the term "Securities" appearing in such Article XV,
except that with respect to Section 15.03 of the Indenture only, insofar
as such section relates to bankruptcy or insolvency proceedings only,
the term "Senior Indebtedness" shall mean all liabilities of the
Guarantor, whether or not for money borrowed (other than obligations in
respect of Other Guarantees), (ii) pari passu with the most senior
preferred or preference stock now or hereafter issued by the Guarantor
and with any Other Guarantee (as defined herein) and any guarantee now
or hereafter entered into by the Guarantor in respect of any preferred
or preference stock of any Affiliate of the Guarantor and any Other
Common Securities Guarantee and (iii) senior to any obligations in
respect of any class of the Guarantor's capital stock.
ARTICLE VII
TERMINATION
SECTION 7.1 Termination
-----------
This Series B Capital Securities Guarantee shall terminate and
be of no further force and effect (i) upon full payment of the
Redemption Price (as defined in the Trust Agreement) of all Series B
Capital Securities, or (ii) upon liquidation of the Issuer, the full
payment of the amounts payable in accordance with the Trust Agreement or
(iii) the distribution of the Debentures to the Holders of all the
Series B Capital Securities. Notwithstanding the foregoing, this Series
B Capital Securities Guarantee will continue to be effective or will be
reinstated, as the case may be, if at any time any Holder of Series B
Capital Securities must restore payment of any sums paid under the
Series B Capital Securities or under this Series B Capital Securities
Guarantee.
ARTICLE VIII
INDEMNIFICATION
SECTION 8.1 Exculpation
-----------
(a) No Indemnified Person shall be liable, responsible or
accountable in damages or otherwise to the Guarantor or any Covered
Person for any loss, damage or claim incurred by reason of any act or
omission performed or omitted by such Indemnified Person in good faith
in accordance with this Series B Capital Securities Guarantee and in a
manner that such Indemnified Person reasonably believed to be within the
scope of the authority conferred on such Indemnified Person by this
Series B Capital Securities Guarantee or by law, except that an
Indemnified Person shall be liable for any such loss, damage or claim
incurred by reason of such Indemnified Person's negligence or willful
misconduct with respect to such acts or omissions.
(b) An Indemnified Person shall be fully protected in relying
in good faith upon the records of the Guarantor and upon such
information, opinions, reports or statements presented to the Guarantor
by any Person as to matters the Indemnified Person reasonably believes
are within such other Person's professional or expert competence and who
has been selected with reasonable care by or on behalf of the Guarantor,
including information, opinions, reports or statements as to the value
and amount of the assets, liabilities, profits, losses, or any other
facts pertinent to the existence and amount of assets from which
Distributions to Holders might properly be paid.
SECTION 8.2 Indemnification
---------------
The Guarantor agrees to indemnify each Indemnified Person for,
and to hold each Indemnified Person harmless against, any and all loss,
liability, damage, claim or expense incurred without negligence or bad
faith on its part, arising out of or in connection with the acceptance
or administration of the trust or trusts hereunder, including the costs
and expenses (including reasonable legal fees and expenses) of defending
itself against, or investigating, any claim or liability in connection
with the exercise or performance of any of its powers or duties
hereunder. The obligation to indemnify as set forth in this Section 8.2
shall survive the termination of this Series B Capital Securities
Guarantee or the earlier resignation or removal of the Capital
Securities Guarantee Trustee.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1 Successors and Assigns
----------------------
All guarantees and agreements contained in this Series B
Capital Securities Guarantee shall bind the successors, assigns,
receivers, trustees and representatives of the Guarantor and shall inure
to the benefit of the Holders of the Series B Capital Securities then
outstanding.
SECTION 9.2 Amendments
----------
Except with respect to any changes that do not materially
adversely affect the rights of Holders (in which case no consent of
Holders will be required), this Series B Capital Securities Guarantee
may only be amended with the prior approval of the Holders of a Majority
in liquidation amount of the Securities (including the stated amount
that would be paid on redemption, liquidation or otherwise, plus accrued
and unpaid Distributions to the date upon which the voting percentages
are determined). The provisions of Section 12.2 of the Trust Agreement
with respect to meetings of Holders apply to the giving of such
approval.
SECTION 9.3 Notices
-------
All notices provided for in this Series B Capital Securities
Guarantee shall be in writing, duly signed by the party giving such
notice, and shall be delivered, telecopied or mailed by first class
mail, as follows:
(a) If given to the Issuer, in care of the Administrative
Trustee at the Issuer's mailing address set forth below (or such other
address as the Issuer may give notice of to the holders of the Common
Securities):
Community Capital Trust I
c/o Community Bank System, Inc.
5790 Widewaters Parkway
DeWitt, New York 13214
Attention: Chief Executive Officer and Chief
Financial Officer
Telecopy: (315) 445-2997
with a copy to:
George J. Getman, Esq.
Bond, Schoeneck & King, LLP
One Lincoln Center
Syracuse, New York 13202
Telecopy: (315) 422-3598
(b) If given to the Capital Securities Guarantee Trustee, at
the Capital Securities Guarantee Trustee's mailing address set forth
below (or such other address as the Capital Securities Guarantee Trustee
may give notice of to the Holders of the Series B Capital Securities):
The Chase Manhattan Bank
450 West 33rd Street
New York, New York 10001
Attention: Global Trust Services
Telecopy: (212) 946-8160
(c) If given to the Guarantor, at the Guarantor's mailing
address set forth below (or such other address as the Guarantor may give
notice of to the Holders of the Series B Capital Securities):
Community Bank System, Inc.
5790 Widewaters Parkway
DeWitt, New York 13214
Attention: Chief Executive Officer and
Chief Financial Officer
Telecopy: (315) 445-2997
with a copy to:
George J. Getman, Esq.
Bond, Schoeneck & King, LLP
One Lincoln Center
Syracuse, New York 13202
Telecopy: (315) 422-3598
(d) If given to any Holder of Series B Capital Securities, at
the address set forth on the books and records of the Issuer.
All such notices shall be deemed to have been given when
received in person, telecopied with receipt confirmed, or mailed by
first class mail, postage prepaid except that if a notice or other
document is refused delivery or cannot be delivered because of a changed
address of which no notice was given, such notice or other document
shall be deemed to have been delivered on the date of such refusal or
inability to deliver.
SECTION 9.4 Benefit
-------
This Series B Capital Securities Guarantee is solely for the
benefit of the Holders of the Series B Capital Securities and, subject
to Section 3.1(a), is not separately transferable from the Series B
Capital Securities.
SECTION 9.5 Governing Law
-------------
THIS SERIES B CAPITAL SECURITIES GUARANTEE SHALL BE GOVERNED
BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES
THEREOF.
THIS SERIES B CAPITAL SECURITIES GUARANTEE is executed as of the
day and year first above written
COMMUNITY BANK SYSTEM, INC., as
Guarantor
By:___________________________
Name:
Title:
THE CHASE MANHATTAN BANK, as
Capital Securities Guarantee
Trustee
By:___________________________
Name:
Title:
EXHIBIT 5.1
July 23, 1997
Community Bank System, Inc.
5790 Widewaters Parkway
DeWitt, New York 13214
Re: Community Bank System, Inc./Community Capital Trust I
Registration Statement on Form S-4 (File No. 333-30045)
-------------------------------------------------------
Ladies and Gentlemen:
We have acted as counsel to Community Bank System, Inc., a Delaware
corporation (the "Corporation") and sponsor of Community Capital Trust I, a
Delaware statutory business trust (the "Trust"), in connection with a
Registration Statement on Form S-4 (the "Registration Statement") relating
to: (i) the proposed issuance by the Trust of up to $30,000,000 aggregate
Liquidation Amount of the Trust's 9.75% Capital Securities, Series B (the
"New Capital Securities") registered under the Securities Act of 1933, as
amended (the "Securities Act"), in exchange for a like Liquidation Amount of
the Trust's outstanding 9.75% Capital Securities, Series A (the "Old Capital
Securities"); (ii) the proposed issuance by the Corporation to the Trust, in
an aggregate principal amount corresponding to the aggregate Liquidation
Amount of the New Capital Securities, of the Corporation's 9.75% Junior
Subordinated Deferrable Interest Debentures, Series B, due January 31, 2027
(the "New Junior Subordinated Debentures") registered under the Securities
Act in exchange for a comparable aggregate principal amount of the Company's
outstanding 9.75% Junior Subordinated Deferrable Interest Debentures, Series
A, due January 31, 2027 (the "Old Junior Subordinated Debentures"); and (iii)
the Corporation's guarantee of the New Capital Securities (the "New
Guarantee") registered under the Securities Act in exchange for the
Corporation's guarantee of the Old Capital Securities (the "Old Guarantee").
The New Capital Securities will be issued under an Amended and Restated
Declaration of Trust for the Trust, dated February 3, 1997 (the "Amended
Declaration"), among the Corporation, as sponsor, The Chase Manhattan Bank,
as property trustee, Chase Manhattan Bank Delaware, as Delaware trustee, and
the Administrative Trustees named therein, while the New Junior Subordinated
Debentures will be issued under an Indenture, dated as of February 3, 1997
(the "Indenture"), between the Corporation and The Chase Manhattan Bank, as
debenture trustee.
In rendering this opinion, we have examined such documents and records
as we deemed appropriate, including the following:
(i) Copy of the Certificate of Incorporation of the Corporation,
as amended, certified as of a recent date by the Secretary of State of the
State of Delaware;
(ii) Copy of the By-Laws of the Corporation, as amended, certified
as of a recent date by the Secretary of the Corporation to be a true and
complete copy;
(iii) Copies, certified by the Secretary of the Corporation to be
true and complete copies, of the resolutions duly adopted by the Board of
Directors of the Corporation on January 15, 1997 and its Executive Committee
and Pricing Committee on January 29, 1997 which, among other things,
authorized the filing of the Registration Statement and the exchange of the
New Capital Securities, the New Junior Subordinated Debentures and the New
Guarantee in the circumstances referred to above;
(iv) Minute book records of the Corporation and its subsidiaries;
(v) Executed counterparts of the Amended Declaration;
(vi) Specimen of the New Capital Security;
(vii) Executed counterparts of the Indenture;
(viii) Specimen of the New Junior Subordinated Debenture;
(ix) Executed counterparts of the New Guarantee; and
(x) Executed counterparts of the Registration Rights Agreement,
dated as of February 3, 1997 (the "Registration Rights Agreement"), among the
Trust, the Corporation and the Initial Purchaser named therein.
In addition, as to questions of fact material to our opinions, we have
relied upon statements and certificates of officers of the Corporation, the
Administrative Trustees of the Trust and public officials.
In the course of our examination, we have assumed the legal capacity of
all natural persons, the genuineness of all signatures, the authenticity of
all documents submitted to us as originals, the conformity to original
documents of all documents submitted to us as certified or photostatic copies
and the authenticity of the originals of such latter documents. In making
our examination of documents executed by parties other than the Corporation
or the Trust, we have assumed that such parties had the power, corporate or
other, to enter into and perform all obligations thereunder and have also
assumed the due authorization by all requisite action, corporate or other,
and execution and delivery by such parties of such documents and the validity
and binding effect thereof on such parties.
Based upon the foregoing, we are of the opinion that:
(1) The New Junior Subordinated Debentures have been duly authorized by
all requisite corporate action of the Corporation and, when executed and
authenticated in the manner provided for in the Indenture and delivered
against surrender and cancellation of a like aggregate principal amount of
Old Junior Subordinated Debentures as contemplated in the Registration Rights
Agreement, the New Junior Subordinated Debentures will constitute valid and
binding obligations of the Corporation entitled to the benefits of the
Indenture and enforceable against the Corporation in accordance with their
terms, except as enforcement thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance or other
similar laws relating to or affecting creditors' rights generally or by
general equitable principles (regardless of whether considered in a
proceeding in equity or at law).
(2) The New Guarantee has been duly authorized by all requisite
corporate action of the Corporation and, when executed and delivered to The
Chase Manhattan Bank, as guarantee trustee, as contemplated in the
Registration Rights Agreement, the New Guarantee will constitute a valid and
binding agreement of the Corporation, enforceable against the Corporation in
accordance with its terms, except as enforcement thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or
other similar laws relating to or affecting creditors' rights generally or by
general equitable principles (regardless of whether considered in a
proceeding in equity or at law).
We are members of the Bar of the State of New York and we express no
opinion as to the laws of any jurisdiction other than the laws of the State
of New York and the federal laws of the United States of America and the
Delaware General Corporation Law.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our firm under the caption
"Legal Matters" contained in the Prospectus included therein. In giving this
consent, we do not thereby admit that we come within the category of persons
whose consent is required under Section 7 of the Securities Act or the Rules
and Regulations of the Securities and Exchange Commission thereunder.
Very truly yours,
BOND, SCHOENECK & KING, LLP
EXHIBIT 5.2
(LETTERHEAD OF RICHARDS, LAYTON & FINGER)
July 23, 1997
Community Capital Trust I
c/o Community Bank System, Inc.
5790 Widewaters Parkway
DeWitt, New York 13214
Re: Community Capital Trust I
-------------------------
Ladies and Gentlemen:
We have acted as special Delaware counsel for Community Bank
System, Inc., a Delaware corporation (the "Company"), and Community Capital
Trust I, a Delaware business trust (the "Trust"), in connection with the
matters set forth herein. At your request, this opinion is being furnished
to you.
For purposes of giving the opinions hereinafter set forth, our
examination of documents has been limited to the examination of originals or
copies of the following:
(a) The Certificate of Trust of the Trust, dated as of January 27,
1997 (the "Certificate"), as filed in the office of the Secretary of State of
the State of Delaware (the "Secretary of State") on January 29, 1997;
(b) The Declaration of Trust of the Trust, dated as of January 29,
1997, between the Company and the trustee of the Trust named therein;
(c) The Amended and Restated Declaration of Trust of the Trust,
dated as of February 3, 1997 (the "Trust Agreement"), among the Company, as
sponsor, the trustees of the Trust named therein and the holders, from time
to time, of undivided beneficial interests in the Trust;
(d) The registration statement (the "Initial Registration
Statement") on Form S-4 (Registration No. 333-30045), filed by the Company
and the Trust with the Securities Exchange Commission (the "SEC") on June 25,
1997, as amended by Amendment No. 1 to the Initial Registration Statement,
including a related preliminary prospectus (the "Prospectus"), relating to
the Capital Securities, Series B of the Trust representing beneficial
interests in the assets of the Trust (each, a "Capital Security" and
collectively, the "Capital Securities"), as proposed to be filed by the
Company and the Trust with the SEC on or about July 23, 1997 ("Amendment No.
1") (the Initial Registration Statement, as amended by Amendment No. 1,
hereinafter referred to as the "Registration Statement"); and
(e) A Certificate of Good Standing for the Trust, dated July 23,
1997, obtained from the Secretary of State.
Initially capitalized terms used herein and not otherwise defined
are used as defined in the Trust Agreement.
For purposes of this opinion, we have not reviewed any documents
other than the documents listed above, and we have assumed that there exists
no provision in any document that we have not reviewed that bears upon or is
inconsistent with the opinions stated herein. We have conducted no
independent factual investigation of our own but rather have relied solely
upon the foregoing documents, the statements and information set forth
therein and the additional matters recited or assumed herein, all of which we
have assumed to be true, complete and accurate in all material respects.
With respect to all documents examined by us, we have assumed (i)
the authenticity of all documents submitted to us as authentic originals,
(ii) the conformity with the originals of all documents submitted to us as
copies or forms, and (iii) the genuineness of all signatures.
For purposes of this opinion, we have assumed (ii) that the Trust
Agreement constitutes the entire agreement among the parties thereto with
respect to the subject matter thereof, including with respect to the
creation, operation and termination of the Trust, and that the Trust
Agreement and the Certificate are in full force and effect and have not been
amended, (ii) except to the extent provided in paragraph 1 below, the due
creation or due organization or due formation, as the case may be, and valid
existence in good standing of each party to the documents examined by us
under the laws of the jurisdiction governing its creation, organization or
formation, (iii) the legal capacity of natural persons who are parties to the
documents examined by us, (iv) that each of the parties to the documents
examined by us has the power and authority to execute and deliver, and to
perform its obligations under, such documents, (v) the due authorization,
execution and delivery by all parties thereto of all documents examined by
us, (vi) the receipt by each Person to whom a Capital Security is to be
issued by the Trust (collectively, the "Capital Security Holders") of a
certificate evidencing the Capital Security and the payment for the Capital
Security acquired by it, in accordance with the Trust Agreement and the
Registration Statement, and (vii) that the Capital Securities are issued and
sold to the Capital Security Holders in accordance with the Trust Agreement
and the Registration Statement. We have not participated in the preparation
of the Registration Statement and assume no responsibility for its contents.
This opinion is limited to the laws of the State of Delaware
(excluding the securities laws of the State of Delaware), and we have not
considered and express no opinion on the laws of any other jurisdiction,
including federal laws and rules and regulations relating thereto. Our
opinions are rendered only with respect to Delaware laws and rules,
regulations and orders thereunder which are currently in effect.
Based upon the foregoing, and upon our examination of such
questions of law and statutes of the State of Delaware as we have considered
necessary or appropriate, and subject to the assumptions, qualifications,
limitations and exceptions set forth herein, we are of the opinion that:
1. The Trust has been duly created and is validly existing in
good standing as a business trust under the Delaware Business Trust Act, 12
Del. C. Section 3801, et seq.
- ------- -- ----
2. When issued and sold, the Capital Securities will represent
valid and, subject to the qualifications set forth in paragraph 3 below,
fully paid and nonassessable undivided beneficial interests in the assets of
the Trust.
3. The Capital Security Holders, as beneficial owners of the
Trust, will be entitled to the same limitation of personal liability extended
to stockholders of private corporations for profit organized under the
General Corporation Law of the State of Delaware. We note that the Capital
Security Holders may be obligated to make payments as set forth in the Trust
Agreement.
We consent to the filing of this opinion with the SEC as an exhibit
to the Registration Statement. In addition, we hereby consent to the use of
our name under the heading "Legal Matters" in the Prospectus. In giving the
foregoing consents, we do not thereby admit that we come within the category
of Persons whose consent is required under Section 7 of the Securities Act of
1933, as amended, or the rules and regulations of the SEC thereunder. Except
as stated above, without our prior written consent, this opinion may not be
furnished or quoted to, or relied upon by, any other Person for any purpose.
Very truly yours,
/s/ RICHARDS, LAYTON & FINGER
EXHIBIT 8
July 23, 1997
Community Bank System, Inc.
5790 Widewaters Parkway
Dewitt, New York 13214
Re: Community Bank System, Inc.
Community Capital Trust I
Registration Statement on Form S-4
File No. 333-30045
----------------------------------
Ladies and Gentlemen:
We have acted as special tax counsel for Community Bank System, Inc.
(the "Corporation") and Community Capital Trust I (the "Trust") in connection
with the offer to exchange up to U.S. $30,000,000 of the Trust's 9.75%
Capital Securities, Series B which have been registered under the Securities
Act of 1933, as amended, for a like Liquidation Amount of the Trust's
outstanding 9.75% Capital Securities, Series A. In rendering our opinion, we
have examined the Amended and Restated Trust Agreement dated as of February
3, 1997 (the "Trust Agreement") and have assumed that the Issuer Trustees
will conduct the affairs of the Trust in accordance with the Trust Agreement.
We hereby confirm the opinions described under the caption "Certain United
States Federal Income Tax Consequences" in the prospectus (the "Prospectus")
that is part of the Registration Statement on Form S-4 filed by the
Corporation and the Trust with the Securities and Exchange Commission on July
23, 1997. Capitalized terms used herein but not defined have the meanings as
provided in the Prospectus.
We hereby consent to the use of our name under the caption "Certain
United States Federal Income Tax Consequences" in the Prospectus. The
issuance of such a consent does not concede that we are an "Expert" for the
purposes of the Securities Act of 1933.
Very truly yours,
/s/ Brown & Wood LLP
BROWN & WOOD LLP
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
__________________
We consent to the incorporation by reference in this registration statement
of Community Capital Trust I, a subsidiary business trust of Community Bank
System, Inc., on Form S-4 of our report dated January 24, 1997 (except for
Note R for which the date is February 11, 1997) on our audits of the
consolidated financial statements of Community Bank System, Inc. as of
December 31, 1996 and 1995 and for each of the three years in the period
ended December 31, 1996, included in the Company's Annual Report on Form 10-
K. We also consent to the reference to our firm under the caption "Experts."
/s/ COOPERS & LYBRAND, L.L.P.
Syracuse, New York
July 23, 1997
EXHIBIT 99.1
LETTER OF TRANSMITTAL
COMMUNITY CAPITAL TRUST I
Offer to Exchange its
9.75% Capital Securities, Series B
(Liquidation Amount $1,000 per Capital Security)
which have been registered under the Securities Act of 1933
for any and all of its outstanding
9.75% Capital Securities, Series A
(Liquidation Amount $1,000 per Capital Security)
Pursuant to the Prospectus
dated July 24, 1997
------------------------
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK
CITY TIME, ON AUGUST 25, 1997, UNLESS THE OFFER IS EXTENDED.
------------------------------
The Exchange Agent for the Exchange Offer is:
THE CHASE MANHATTAN BANK
By Registered or Certified Mail: By Hand or Overnight Delivery:
------------------------------- -----------------------------
The Chase Manhattan Bank The Chase Manhattan Bank
450 West 33rd Street - 15th Floor 450 West 33rd Street - 15th Floor
New York, New York 10001 New York, New York 10001
Attention: James D. Heaney Attention: James D. Heaney
Vice President Vice President
Global Trust Services Global Trust Services
Confirm by Telephone:
--------------------
(212) 946-3084
Facsimile Transmission
----------------------
(Eligible Institutions Only)
(212) 946-8161
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF THIS LETTER OF TRANSMITTAL VIA FACSIMILE TO
A NUMBER OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS CONTAINED HEREIN SHOULD BE READ CAREFULLY BEFORE THIS LETTER
OF TRANSMITTAL IS COMPLETED.
Capitalized terms used but not defined herein shall have the same
meaning given them in the Prospectus (as defined below).
This Letter of Transmittal is to be completed by holders of Old Capital
Securities (as defined below) either if Old Capital Securities are to be
forwarded herewith or if tenders of Old Capital Securities are to be made by
book-entry transfer to an account maintained by The Chase Manhattan Bank (the
"Exchange Agent") at The Depository Trust Company ("DTC") pursuant to the
procedures set forth in "The Exchange Offer--Procedures for Tendering Old
Capital Securities" in the Prospectus.
Holders of Old Capital Securities whose certificates (the
"Certificates") for such Old Capital Securities are not immediately available
or who cannot deliver their Certificates and all other required documents to
the Exchange Agent on or prior to the Expiration Date (as defined in the
Prospectus) or who cannot complete the procedures for book-entry transfer on
a timely basis must tender their Old Capital Securities according to the
guaranteed delivery procedures set forth in "The Exchange Offer--Procedures
for Tendering Old Capital Securities" in the Prospectus.
DELIVERY OF DOCUMENTS TO DTC DOES NOT CONSTITUTE DELIVERY TO THE
EXCHANGE AGENT.
NOTE: SIGNATURES MUST BE PROVIDED BELOW.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY.
ALL TENDERING HOLDERS COMPLETE THIS BOX:
DESCRIPTION OF OLD CAPITAL SECURITIES TENDERED
- ------------------------------------------------------------------------------
If blank, please print name and Old Capital Securities tendered
address of registered holder. (Attach additional list if necessary)
- ------------------------------------------------------------------------------
Aggregate Liquidation
Liquidation Amount
Certificate Amount of Old Capital
Number(s)/*/ of Old Capital Securities
Securities Tendered
(if less than
all)/**/
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
TOTAL
AMOUNT
TENDERED:
- -------------------------------------------------------------------------------
* Need not be completed by book-entry holders.
** Old Capital Securities may be tendered in whole or in part in denominations
of $100,000 and integral multiples of $1,000 in excess thereof, provided
that if any Old Capital Securities are tendered for exchange in part, the
untendered Liquidation Amount thereof must be $100,000 or any integral
multiple of $1,000 in excess thereof. All Old Capital Securities held
shall be deemed tendered unless a lesser number is specified in this
column. See Instruction 4.
(BOXES BELOW TO BE CHECKED BY ELIGIBLE INSTITUTIONS ONLY)
/ / CHECK HERE IF TENDERED OLD CAPITAL SECURITIES ARE BEING DELIVERED BY
BOOK-ENTRY TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT
WITH DTC AND COMPLETE THE FOLLOWING:
Name of Tendering Institution
____________________________________________
DTC Account Number
_______________________________________________________
Transaction Code Number
__________________________________________________
/ / CHECK HERE AND ENCLOSE A PHOTOCOPY OF THE NOTICE OF GUARANTEED DELIVERY
IF TENDERED OLD CAPITAL SECURITIES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND
COMPLETE THE FOLLOWING:
Name of Registered Holder(s)
_____________________________________________
Window Ticket Number (if any)
_____________________________________________
Date of Execution of Notice of Guaranteed Delivery
________________________
Name of Institution which Guaranteed Delivery
____________________________
If Guaranteed Delivery is to be made By Book-Entry Transfer:
Name of Tendering Institution
____________________________________________
DTC Account Number
________________________________________________________
Transaction Code Number
___________________________________________________
/ / CHECK HERE IF TENDERED BY BOOK-ENTRY TRANSFER AND NON-EXCHANGED OLD
CAPITAL SECURITIES ARE TO BE RETURNED BY CREDITING THE DTC ACCOUNT
NUMBER SET FORTH ABOVE.
/ / CHECK HERE IF YOU ARE A BROKER-DEALER WHO ACQUIRED THE OLD CAPITAL
SECURITIES FOR ITS OWN ACCOUNT AS A RESULT OF MARKET MAKING OR OTHER
TRADING ACTIVITIES (A "PARTICIPATING BROKER-DEALER") AND WISH TO RECEIVE
10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS
OR SUPPLEMENTS THERETO.
Name:
_____________________________________________________________________
Address:
__________________________________________________________________
Ladies and Gentlemen:
The undersigned hereby tenders to Community Capital Trust I, a statutory
business trust formed under the laws of the State of Delaware (the "Trust"),
and Community Bank System, Inc., a Delaware corporation (the "Corporation"),
the above described aggregate Liquidation Amount of the Trust's 9.75% Capital
Securities, Series A (the "Old Capital Securities") in exchange for a like
aggregate Liquidation Amount of the Trust's 9.75% Capital Securities, Series
B (the "New Capital Securities") which have been registered under the
Securities Act of 1933 (the "Securities Act"), upon the terms and subject to
the conditions set forth in the Prospectus dated July 24, 1997 (as the same
may be amended or supplemented from time to time, the "Prospectus"), receipt
of which is acknowledged, and in this Letter of Transmittal (which, together
with the Prospectus, constitute the "Exchange Offer").
Subject to and effective upon the acceptance for exchange of all or any
portion of the Old Capital Securities tendered herewith in accordance with
the terms and conditions of the Exchange Offer (including, if the Exchange
Offer is extended or amended, the terms and conditions of any such extension
or amendment), the undersigned hereby sells, assigns and transfers to or upon
the order of the Trust all right, title and interest in and to such Old
Capital Securities as are being tendered herewith. The undersigned hereby
irrevocably constitutes and appoints the Exchange Agent as its agent and
attorney-in-fact (with full knowledge that the Exchange Agent is also acting
as agent of the Corporation and the Trust in connection with the Exchange
Offer) with respect to the tendered Old Capital Securities, with full power
of substitution (such power of attorney being deemed to be an irrevocable
power coupled with an interest), subject only to the right of withdrawal
described in the Prospectus, to (i) deliver Certificates for Old Capital
Securities to the Corporation or the Trust together with all accompanying
evidences of transfer and authenticity to, or upon the order of, the Trust,
upon receipt by the Exchange Agent, as the undersigned's agent, of the New
Capital Securities to be issued in exchange for such Old Capital Securities,
(ii) present Certificates for such Old Capital Securities for transfer, and
to transfer the Old Capital Securities on the books of the Trust, and (iii)
receive for the account of the Trust all benefits and otherwise exercise all
rights of beneficial ownership of such Old Capital Securities, all in
accordance with the terms and conditions of the Exchange Offer.
THE UNDERSIGNED HEREBY REPRESENTS AND WARRANTS THAT THE UNDERSIGNED HAS
FULL POWER AND AUTHORITY TO TENDER, EXCHANGE, SELL, ASSIGN AND TRANSFER THE
OLD CAPITAL SECURITIES TENDERED HEREBY AND THAT, WHEN THE SAME ARE ACCEPTED
FOR EXCHANGE, THE TRUST WILL ACQUIRE GOOD, MARKETABLE AND UNENCUMBERED TITLE
THERETO, FREE AND CLEAR OF ALL LIENS, RESTRICTIONS, CHARGES AND ENCUMBRANCES,
AND THAT THE OLD CAPITAL SECURITIES TENDERED HEREBY ARE NOT SUBJECT TO ANY
ADVERSE CLAIMS OR PROXIES. THE UNDERSIGNED WILL, UPON REQUEST, EXECUTE AND
DELIVER ANY ADDITIONAL DOCUMENTS DEEMED BY THE TRUST OR THE EXCHANGE AGENT TO
BE NECESSARY OR DESIRABLE TO COMPLETE THE EXCHANGE, SALE, ASSIGNMENT AND
TRANSFER OF THE OLD CAPITAL SECURITIES TENDERED HEREBY, AND THE UNDERSIGNED
WILL COMPLY WITH ITS OBLIGATIONS UNDER THE REGISTRATION RIGHTS AGREEMENT (AS
DEFINED IN THE PROSPECTUS). THE UNDERSIGNED HAS READ AND AGREES TO ALL OF
THE TERMS OF THE EXCHANGE OFFER.
The name(s) and address(es) of the registered holder(s) of the Old
Capital Securities tendered hereby should be printed above, if they are not
already set forth above, as they appear on the Certificates representing such
Old Capital Securities. The Certificate number(s) and the Old Capital
Securities that the undersigned wishes to tender should be indicated in the
appropriate boxes above.
If any tendered Old Capital Securities are not exchanged pursuant to the
Exchange Offer for any reason, or if Certificates are submitted for more Old
Capital Securities than are tendered or accepted for exchange, Certificates
for such nonexchanged or nontendered Old Capital Securities will be returned
(or, in the case of Old Capital Securities tendered by book-entry transfer,
such Old Capital Securities will be credited to an account maintained at
DTC), without expense to the tendering holder, promptly following the
expiration or termination of the Exchange Offer.
The undersigned understands that tenders of Old Capital Securities
pursuant to any one of the procedures described in "The Exchange Offer--
Procedures for Tendering Old Capital Securities" in the Prospectus and in the
instructions will, upon the Trust's acceptance for exchange of such tendered
Old Capital Securities, constitute a binding agreement between the
undersigned and the Trust upon the terms and subject to the conditions of the
Exchange Offer. The undersigned recognizes that, under certain circumstances
set forth in the Prospectus, the Trust may not be required to accept for
exchange any of the Old Capital Securities tendered hereby.
Unless otherwise indicated herein in the box entitled "Special Issuance
Instructions" below, the undersigned hereby directs that the New Capital
Securities be issued in the name(s) of the undersigned or, in the case of a
book-entry transfer of Old Capital Securities, that such New Capital
Securities be credited to the account indicated above maintained at DTC. If
applicable, substitute Certificates representing Old Capital Securities not
exchanged or not accepted for exchange will be issued to the undersigned or,
in the case of a book-entry transfer of Old Capital Securities, will be
credited to the account indicated above maintained at DTC. Similarly, unless
otherwise indicated under "Special Delivery Instructions" below, please
deliver New Capital Securities to the undersigned at the address shown below
the undersigned's signature.
BY TENDERING OLD CAPITAL SECURITIES AND EXECUTING THIS LETTER OF
TRANSMITTAL, THE UNDERSIGNED HEREBY REPRESENTS AND AGREES THAT (I) THE
UNDERSIGNED IS NOT AN "AFFILIATE" OF THE CORPORATION OR THE TRUST WITHIN THE
MEANING OF RULE 405 UNDER THE SECURITIES ACT, (II) ANY NEW CAPITAL SECURITIES
TO BE RECEIVED BY THE UNDERSIGNED ARE BEING ACQUIRED IN THE ORDINARY COURSE
OF ITS BUSINESS, (III) THE UNDERSIGNED HAS NO ARRANGEMENT OR UNDERSTANDING
WITH ANY PERSON TO PARTICIPATE IN A DISTRIBUTION (WITHIN THE MEANING OF THE
SECURITIES ACT) OF NEW CAPITAL SECURITIES TO BE RECEIVED IN THE EXCHANGE
OFFER, AND (IV) IF THE UNDERSIGNED IS NOT A BROKER-DEALER, THE UNDERSIGNED IS
NOT ENGAGED IN, AND DOES NOT INTEND TO ENGAGE IN, A DISTRIBUTION (WITHIN THE
MEANING OF THE SECURITIES ACT) OF SUCH NEW CAPITAL SECURITIES. BY TENDERING
OLD CAPITAL SECURITIES PURSUANT TO THE EXCHANGE OFFER AND EXECUTING THIS
LETTER OF TRANSMITTAL, A HOLDER OF OLD CAPITAL SECURITIES WHICH IS A
BROKER-DEALER REPRESENTS AND AGREES, CONSISTENT WITH CERTAIN INTERPRETIVE
LETTERS ISSUED BY THE STAFF OF THE DIVISION OF CORPORATION FINANCE OF THE
SECURITIES AND EXCHANGE COMMISSION TO THIRD PARTIES, THAT (A) SUCH OLD
CAPITAL SECURITIES HELD BY THE BROKER-DEALER ARE HELD ONLY AS A NOMINEE, OR
(B) SUCH OLD CAPITAL SECURITIES WERE ACQUIRED BY SUCH BROKER-DEALER FOR ITS
OWN ACCOUNT AS A RESULT OF MARKET-MAKING ACTIVITIES OR OTHER TRADING
ACTIVITIES AND IT WILL DELIVER A PROSPECTUS (AS AMENDED OR SUPPLEMENTED FROM
TIME TO TIME) MEETING THE REQUIREMENTS OF THE SECURITIES ACT IN CONNECTION
WITH ANY RESALE OF SUCH NEW CAPITAL SECURITIES (PROVIDED THAT, BY SO
ACKNOWLEDGING AND BY DELIVERING A PROSPECTUS, SUCH BROKER-DEALER WILL NOT BE
DEEMED TO ADMIT THAT IT IS AN "UNDERWRITER" WITHIN THE MEANING OF THE
SECURITIES ACT).
THE CORPORATION AND THE TRUST HAVE AGREED THAT, SUBJECT TO THE
PROVISIONS OF THE REGISTRATION RIGHTS AGREEMENT, THE PROSPECTUS, AS IT MAY BE
AMENDED OR SUPPLEMENTED FROM TIME TO TIME, MAY BE USED BY A PARTICIPATING
BROKER-DEALER (AS DEFINED BELOW) IN CONNECTION WITH RESALES OF NEW CAPITAL
SECURITIES RECEIVED IN EXCHANGE FOR OLD CAPITAL SECURITIES, WHERE SUCH
OLD CAPITAL SECURITIES WERE ACQUIRED BY SUCH PARTICIPATING BROKER-DEALER
FOR ITS OWN ACCOUNT AS A RESULT OF MARKET-MAKING ACTIVITIES OR OTHER TRADING
ACTIVITIES, FOR A PERIOD ENDING 90 DAYS AFTER THE EXPIRATION DATE (SUBJECT TO
EXTENSION UNDER CERTAIN LIMITED CIRCUMSTANCES DESCRIBED IN THE PROSPECTUS)
OR, IF EARLIER, WHEN ALL SUCH NEW CAPITAL SECURITIES HAVE BEEN DISPOSED
OF BY SUCH PARTICIPATING BROKER-DEALER. IN THAT REGARD, EACH BROKER-DEALER
WHO ACQUIRED OLD CAPITAL SECURITIES FOR ITS OWN ACCOUNT AS A RESULT OF
MARKET-MAKING OR OTHER TRADING ACTIVITIES (A "PARTICIPATING BROKER-DEALER"),
BY TENDERING SUCH OLD CAPITAL SECURITIES AND EXECUTING THIS LETTER OF
TRANSMITTAL AGREES THAT, UPON RECEIPT OF NOTICE FROM THE CORPORATION OR THE
TRUST OF THE OCCURRENCE OF ANY EVENT OR THE DISCOVERY OF ANY FACT WHICH MAKES
ANY STATEMENT CONTAINED OR INCORPORATED BY REFERENCE IN THE PROSPECTUS UNTRUE
IN ANY MATERIAL RESPECT OR WHICH CAUSES THE PROSPECTUS TO OMIT TO STATE A
MATERIAL FACT NECESSARY IN ORDER TO MAKE THE
STATEMENTS CONTAINED OR INCORPORATED BY REFERENCE THEREIN, IN LIGHT OF THE
CIRCUMSTANCES UNDER WHICH THEY WERE MADE, NOT MISLEADING OR OF THE OCCURRENCE
OF CERTAIN OTHER EVENTS SPECIFIED IN THE REGISTRATION RIGHTS AGREEMENT, SUCH
PARTICIPATING BROKER-DEALER WILL SUSPEND THE SALE OF NEW CAPITAL SECURITIES
(OR THE NEW GUARANTEE OR THE NEW JUNIOR SUBORDINATED DEBENTURES, AS
APPLICABLE) PURSUANT TO THE PROSPECTUS UNTIL THE CORPORATION OR THE TRUST HAS
AMENDED OR SUPPLEMENTED THE PROSPECTUS TO CORRECT SUCH MISSTATEMENT OR
OMISSION AND HAS FURNISHED COPIES OF THE AMENDED OR SUPPLEMENTED PROSPECTUS
TO THE PARTICIPATING BROKER-DEALER OR THE CORPORATION OR THE TRUST HAS GIVEN
NOTICE THAT THE SALE OF THE NEW CAPITAL SECURITIES (OR THE NEW GUARANTEE OR
THE NEW JUNIOR SUBORDINATED DEBENTURES, AS APPLICABLE) MAY BE RESUMED, AS THE
CASE MAY BE. IF THE CORPORATION OR THE TRUST GIVES SUCH NOTICE TO SUSPEND
THE SALE OF THE NEW CAPITAL SECURITIES, IT SHALL EXTEND THE 90-DAY PERIOD
REFERRED TO ABOVE DURING WHICH PARTICIPATING BROKER-DEALERS ARE ENTITLED TO
USE THE PROSPECTUS IN CONNECTION WITH THE RESALE OF NEW CAPITAL SECURITIES BY
THE NUMBER OF DAYS DURING THE PERIOD FROM AND INCLUDING THE DATE OF THE
GIVING OF SUCH NOTICE TO AND INCLUDING THE DATE WHEN PARTICIPATING
BROKER-DEALERS SHALL HAVE RECEIVED COPIES OF THE SUPPLEMENTED OR AMENDED
PROSPECTUS NECESSARY TO PERMIT RESALES OF THE NEW CAPITAL SECURITIES OR TO
AND INCLUDING THE DATE ON WHICH THE CORPORATION OR THE TRUST HAS GIVEN NOTICE
THAT THE SALE OF NEW CAPITAL SECURITIES (OR THE NEW GUARANTEE OR THE NEW
JUNIOR SUBORDINATED DEBENTURES, AS APPLICABLE) MAY BE RESUMED, AS THE CASE
MAY BE.
AS A RESULT, A PARTICIPATING BROKER-DEALER WHO INTENDS TO USE THE
PROSPECTUS IN CONNECTION WITH RESALES OF NEW CAPITAL SECURITIES RECEIVED IN
EXCHANGE FOR OLD CAPITAL SECURITIES PURSUANT TO THE EXCHANGE OFFER MUST
NOTIFY THE CORPORATION OR THE TRUST, OR CAUSE THE CORPORATION OR THE TRUST TO
BE NOTIFIED, ON OR PRIOR TO THE EXPIRATION DATE, THAT IT IS A PARTICIPATING
BROKER-DEALER. SUCH NOTICE MAY BE GIVEN IN THE SPACE PROVIDED ABOVE OR MAY
BE DELIVERED TO THE EXCHANGE AGENT AT THE ADDRESS SET FORTH IN THE PROSPECTUS
UNDER "THE EXCHANGE OFFER--EXCHANGE AGENT."
Holders of Old Capital Securities whose Old Capital Securities are
accepted for exchange will be deemed to have waived the right to receive any
Distribution on such Old Capital Securities accumulated from and including
August 1, 1997. Instead, holders of New Capital Securities as of the
relevant record date shall be entitled to receive, on January 31, 1998,
Distributions accumulated from and including August 1, 1997.
The undersigned will, upon request, execute and deliver any additional
documents deemed by the Trust or the Exchange Agent to be necessary or
desirable to complete the exchange, sale, assignment and transfer of the Old
Capital Securities tendered hereby. All authority herein conferred or
agreed to be conferred in this Letter of Transmittal shall survive the death
or incapacity of the undersigned and any obligation of the undersigned
hereunder shall be binding upon the heirs, executors, administrators,
personal representatives, trustees in bankruptcy, legal representatives,
successors and assigns of the undersigned. Except as stated in the
Prospectus, this tender is irrevocable.
THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF OLD
CAPITAL SECURITIES TENDERED" ABOVE AND SIGNING THIS LETTER, WILL BE DEEMED TO
HAVE TENDERED THE OLD CAPITAL SECURITIES AS SET FORTH IN SUCH BOX.
HOLDER(S) SIGN HERE
(SEE INSTRUCTIONS 1, 5 AND 6)
(PLEASE COMPLETE SUBSTITUTE FORM W-9 ON PAGE 15)
(NOTE: SIGNATURE(S) MUST BE GUARANTEED IF REQUIRED BY INSTRUCTION 2)
Must be signed by registered holder(s) exactly as name(s) appear(s) on
Certificate(s) for the Old Capital Securities hereby tendered or on the register
of holders maintained by the Trust, or by any person(s) authorized to become
the registered holder(s) by endorsements and documents transmitted herewith
(including such opinions of counsel, certificates and other information as may
be required by the Trust or the Trustee for the Old Capital Securities to
comply with the restrictions on transfer applicable to the Old Capital
Securities). If signature is by an attorney-in-fact, executor,
administrator, trustee, guardian, officer of a corporation or another acting
in a fiduciary capacity or representative capacity, please set forth the
signer's full title. See Instruction 5.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(SIGNATURE(S) OF HOLDER(S))
Date: , 1997
-------------------
Name(s)
------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(PLEASE PRINT)
Capacity (full title)
----------------------------------------------------------
Address
------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone Number
-------------------------------------------------
- -------------------------------------------------------------------------------
(TAX IDENTIFICATION OR SOCIAL SECURITY NUMBER(S))
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 2 AND 5)
- -------------------------------------------------------------------------------
(AUTHORIZED SIGNATURE)
Date , 1997
---------------------
Name of Firm
------------------------------------------------------------------
Capacity (full title)
----------------------------------------------------------
(PLEASE PRINT)
Address
------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone Number
-------------------------------------------------
<TABLE>
<CAPTION>
SPECIAL ISSUANCE INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5 AND 6) (SEE INSTRUCTIONS 1, 5 AND 6)
<S> <C>
To be completed ONLY if New Capital Securities or To be completed ONLY if New Capital Securities or
Old Capital Securities not tendered are to be Old Capital Securities not tendered are to be sent
issued in the name of someone other than the to someone other than the registered holder of the
registered holder of the Old Capital Securities Old Capital Securities whose name(s) appear(s)
whose name(s) appear(s) above. above, or such registered holder(s) at an address
other than that shown above.
Issue Mail
/ / Old Capital Securities not tendered to: / / Old Capital Securities not tendered to:
/ / New Capital Securities to: / / New Capital Securities to:
Name(s) Name(s)
------------------------------------- --------------------------------------
Address Address
------------------------------------- --------------------------------------
(INCLUDE ZIP CODE) (INCLUDE ZIP CODE)
Area Code and Area Code and
Telephone Number Telephone Number
----------------------------- ------------------------------
- --------------------------------------------- ----------------------------------------------
(TAX IDENTIFICATION OR SOCIAL SECURITY NUMBER(S)) (TAX IDENTIFICATION OR SOCIAL SECURITY NUMBER(S))
</TABLE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES; GUARANTEED
DELIVERY PROCEDURES. This Letter of Transmittal is to be completed either if
(a) tenders are to be made pursuant to the procedures for tender by
book-entry transfer set forth in "The Exchange Offer--Procedures for
Tendering Old Capital Securities" in the Prospectus, and DTC's ATOP system
(as described below) is not utilized or (b) Certificates are to be forwarded
herewith. Timely confirmation of a book-entry transfer of such Old Capital
Securities into the Exchange Agent's account at DTC (a "book-entry
confirmation"), or Certificates as well as this Letter of Transmittal
(or facsimile thereof), properly completed and duly executed, with any
required signature guarantees, and any other documents required by this
Letter of Transmittal, must be received by the Exchange Agent at its
addresses set forth herein on or prior to the Expiration Date.
Alternatively, Holders who are DTC Participants tendering by book-entry
transfer may execute such tender through DTC's ATOP system. A Holder using
ATOP should transmit its acceptance to DTC on or prior to the Expiration Date.
DTC will verify such acceptance, execute a book-entry transfer of the tendered
Old Capital Securities into the Exchange Agent's account at DTC and then send
to the Exchange Agent a book-entry confirmation, including an Agent's Message
confirming that DTC has received an express acknowledgment from such Holder
that such Holder has received and agrees to be bound by this Letter of
Transmittal and that the Trust and the Corporation may enforce this Letter of
Transmittal against such Holder. The book-entry confirmation must be
received by the Exchange Agent on or prior to the Expiration Date in order for
the tender relating thereto to be effective. Book-entry transfer to DTC in
accordance with DTC's procedures does not constitute delivery of the
book-entry confirmation to the Exchange Agent.
If the tender is not made through ATOP, Certificates, as well as this
Letter of Transmittal (or facsimile thereof), properly completed and duly
executed, with any required signature guarantees, and any other documents
required by this Letter of Transmittal, must be received by the Exchange
Agent at its address set forth herein on or prior to the Expiration Date in
order for such tender to be effective.
Holders who wish to tender their Old Capital Securities and (i) who
cannot complete the procedures for delivery by book-entry transfer on a
timely basis, (ii) who cannot deliver their Old Capital Securities, this
Letter of Transmittal and all other required documents to the Exchange Agent
on or prior to the Expiration Date or (iii) whose Old Capital Securities
are not immediately available may tender their Old Capital Securities by
properly completing and duly executing a Notice of Guaranteed Delivery
pursuant to the guaranteed delivery procedures set forth in "The Exchange
Offer--Procedures for Tendering Old Capital Securities" in the Prospectus.
Pursuant to such procedures: (a) such tender must be made by or through an
Eligible Institution (as defined below); (b) a properly completed and duly
executed Notice of Guaranteed Delivery, substantially in the form
accompanying this Letter of Transmittal, must be received by the Exchange
Agent on or prior to the Expiration Date; and (c) the Certificates (or a
book-entry confirmation) representing tendered Old Capital Securities, in
proper form for transfer, together with a Letter of Transmittal (or facsimile
thereof), properly completed and duly executed, with any required signature
guarantees and any other documents required by this Letter of Transmittal,
must be received by the Exchange Agent within three New York Stock Exchange
trading days after the date of execution of such Notice of Guaranteed
Delivery, all as provided in "The Exchange Offer--Procedures for Tendering
Old Capital Securities" in the Prospectus.
The Notice of Guaranteed Delivery may be delivered by hand or
transmitted by facsimile or mail to the Exchange Agent, and must include a
guarantee by an Eligible Institution in the form set forth in such Notice.
For Old Capital Securities to be properly tendered pursuant to the guaranteed
delivery procedure, the Exchange Agent must receive a Notice of Guaranteed
Delivery on or prior to the Expiration Date. As used herein and in the
Prospectus, "Eligible Institution" means a firm or other entity identified in
Rule 17Ad-15 under the Exchange Act as "an eligible guarantor institution,"
including (as such terms are defined therein) (i) a bank; (ii) a broker,
dealer, municipal securities broker or dealer or government securities broker
or dealer; (iii) a credit union; (iv) a national securities exchange,
registered securities association or clearing agency; or (v) a savings
association that is a participant in a Securities Transfer Association.
THE METHOD OF DELIVERY OF CERTIFICATES, THIS LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND SOLE RISK OF THE TENDERING
HOLDER AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY
THE EXCHANGE AGENT. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN
RECEIPT REQUESTED, PROPERLY INSURED, OR OVERNIGHT DELIVERY SERVICE IS
RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY
DELIVERY.
Neither the Corporation nor the Trust will accept any alternative,
conditional or contingent tenders. Each tendering holder, by execution of a
Letter of Transmittal (or facsimile thereof), waives any right to receive any
notice of the acceptance of such tender.
2. GUARANTEE OF SIGNATURES. No signature guarantee on this Letter of
Transmittal is required if:
(i) this Letter of Transmittal is signed by the registered holder
(which term, for purposes of this document, shall include any
participant in DTC whose name appears on a security position listing as
the owner of the Old Capital Securities) of Old Capital Securities
tendered herewith, unless such holder(s) has completed either the box
entitled "Special Issuance Instructions" or the box entitled "Special
Delivery Instructions" above, or
(ii) such Old Capital Securities are tendered for the account of a
firm that is an Eligible Institution.
In all other cases, an Eligible Institution must guarantee the
signature(s) on this Letter of Transmittal. See Instruction 5.
3. INADEQUATE SPACE. If the space provided in the box captioned
"Description of Old Capital Securities Tendered" is inadequate, the
Certificate number(s) and/or the Liquidation Amount of Old Capital Securities
and any other required information should be listed on a separate signed
schedule which is attached to this Letter of Transmittal.
4. PARTIAL TENDERS AND WITHDRAWAL RIGHTS. Tenders of Old Capital
Securities will be accepted only in the Liquidation Amount of $100,000 (100
Capital Securities) and integral multiples of $1,000 in excess thereof,
provided that if any Old Capital Securities are tendered for exchange in
part, the untendered Liquidation Amount thereof must be $100,000 (100 Capital
Securities) or any integral multiple of $1,000 in excess thereof. If less
than all of the Old Capital Securities evidenced by any Certificate submitted
are to be tendered, fill in the Liquidation Amount of Old Capital Securities
which are to be tendered in the box entitled "Liquidation Amount of Old
Capital Securities Tendered." In such case, new Certificate(s) for the
remainder of the Old Capital Securities that were evidenced by your old
Certificate(s) will be sent to the holder of the Old Capital Securities,
promptly after the Expiration Date, unless the appropriate boxes on this
Letter of Transmittal are completed. All Old Capital Securities
represented by Certificates delivered to the Exchange Agent will be deemed
to have been tendered unless otherwise indicated.
Except as otherwise provided herein, tenders of Old Capital Securities
may be withdrawn at any time on or prior to the Expiration Date. In order for
a withdrawal to be effective on or prior to that time, a written,
telegraphic, telex or facsimile transmission of such notice of withdrawal
must be timely received by the Exchange Agent at one of its addresses set
forth above or in the Prospectus on or prior to the Expiration Date. Any such
notice of withdrawal must specify the name of the person who tendered the Old
Capital Securities to be withdrawn, the aggregate Liquidation Amount of Old
Capital Securities to be withdrawn, and (if Certificates for Old Capital
Securities have been tendered) the name of the registered holder of the Old
Capital Securities as set forth on the Certificates for the Old Capital
Securities, if different from that of the person who tendered such Old
Capital Securities. If Certificates for the Old Capital Securities have been
delivered or otherwise identified to the Exchange Agent, then prior to the
physical release of such Certificates for the Old Capital Securities, the
tendering holder must submit the serial numbers shown on the particular
Certificates for the Old Capital Securities to be withdrawn and the signature
on the notice of withdrawal must be guaranteed by an Eligible Institution,
except in the case of Old Capital Securities tendered for the account of an
Eligible Institution. If Old Capital Securities have been tendered pursuant
to the procedures for book-entry transfer set forth in the Prospectus under
"The Exchange Offer--Procedures for Tendering Old Capital Securities," the
notice of withdrawal must specify the name and number of the account at DTC
to be credited with the withdrawal of Old Capital Securities, in which case a
notice of withdrawal will be effective if delivered to the Exchange Agent by
written, telegraphic, telex or facsimile transmission on or prior to the
Expiration Date. Withdrawals of tenders of Old Capital Securities may not be
rescinded. Old Capital Securities properly withdrawn will not be deemed
validly tendered for purposes of the Exchange Offer, but may be retendered at
any subsequent time on or prior to the Expiration Date by following any of
the procedures described in the Prospectus under "The Exchange Offer--
Procedures for Tendering Old Capital Securities."
All questions as to the validity, form and eligibility (including time
of receipt) of such withdrawal notices will be determined by the Corporation
and the Trust, in their sole discretion, whose determination shall be final
and binding on all parties. Neither the Corporation, the Trust, any
affiliates or assigns of the Corporation or the Trust, the Exchange Agent nor
any other person shall be under any duty to give any notification of any
irregularities in any notice of withdrawal or incur any liability for failure
to give any such notification. Any Old Capital Securities which have been
tendered but which are withdrawn will be returned to the holder thereof
without cost to such holder promptly after withdrawal.
5. SIGNATURES ON LETTER OF TRANSMITTAL, ASSIGNMENTS AND ENDORSEMENTS.
If this Letter of Transmittal is signed by the registered holder(s) of the
Old Capital Securities tendered hereby, the signature(s) must correspond
exactly with the name(s) as written on the face of the Certificate(s) without
alteration, enlargement or any change whatsoever.
If any of the Old Capital Securities tendered hereby are owned of record
by two or more joint owners, all such owners must sign this Letter of
Transmittal.
If any tendered Old Capital Securities are registered in different
name(s) on several Certificates, it will be necessary to complete, sign and
submit as many separate Letters of Transmittal (or facsimiles thereof) as
there are different registrations of Certificates.
If this Letter of Transmittal or any Certificates or bond powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing and must submit proper
evidence satisfactory to the Corporation and the Trust, in their sole
discretion, of such persons' authority to so act.
When this Letter of Transmittal is signed by the registered owner(s) of
the Old Capital Securities listed and transmitted hereby, no endorsement(s)
of Certificate(s) or separate bond power(s) are required unless New Capital
Securities are to be issued in the name of a person other than the registered
holder(s). Signature(s) on such Certificate(s) or bond power(s) must be
guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered owner(s) of the Old Capital Securities listed, the Certificates
must be endorsed or accompanied by appropriate bond powers, signed exactly as
the name or names of the registered owner(s) appear(s) on the Certificates,
and also must be accompanied by such opinions of counsel, certifications and
other information as the Trust or the Exchange Agent may require in
accordance with the restrictions on transfer applicable to the Old Capital
Securities. Signatures on such Certificates or bond powers must be guaranteed
by an Eligible Institution.
6. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. If New Capital
Securities are to be issued in the name of a person other than the signer of
this Letter of Transmittal, or if New Capital Securities are to be sent to
someone other than the signer of this Letter of Transmittal or to an address
other than that shown above, the appropriate boxes on this Letter of
Transmittal should be completed. Certificates for Old Capital Securities not
exchanged will be returned by mail or, if tendered by book-entry transfer, by
crediting the account indicated above maintained at DTC unless the
appropriate boxes on this Letter of Transmittal are completed. See
Instruction 4.
7. IRREGULARITIES. The Corporation and the Trust will determine, in
their sole discretion, all questions as to the form of documents, validity,
eligibility (including time of receipt) and acceptance for exchange of any
tender of Old Capital Securities, which determination shall be final and
binding on all parties. The Corporation and the Trust reserve the absolute
right, in their sole and absolute discretion, to reject any and all tenders
determined by them not to be in proper form or the acceptance of which, or
exchange for, may, in the view of counsel to the Corporation and the Trust,
be unlawful. The Corporation and the Trust also reserve the absolute right,
subject to applicable law, to waive any of the conditions of the Exchange
Offer set forth in the Prospectus under "The Exchange Offer--Conditions to
the Exchange Offer" or any conditions or irregularity in any tender of Old
Capital Securities of any particular holder whether or not similar conditions
or irregularities are waived in the case of other holders. The Corporation's
and the Trust's interpretation of the terms and conditions of the Exchange
Offer (including this Letter of Transmittal and the instructions hereto) will
be final and binding. No tender of Old Capital Securities will be deemed to
have been validly made until all irregularities with respect to such tender
have been cured or waived. Neither the Corporation, the Trust, any affiliates
or assigns of the Corporation, the Trust, the Exchange Agent, nor any other
person shall be under any duty to give notification of any irregularities in
tenders or incur any liability for failure to give such notification.
8. QUESTIONS, REQUESTS FOR ASSISTANCE AND ADDITIONAL COPIES. Questions
and requests for assistance may be directed to the Exchange Agent at its
address and telephone number set forth on the front of this Letter of
Transmittal. Additional copies of the Prospectus, this Letter of Transmittal
and the Notice of Guaranteed Delivery may be obtained from the Exchange Agent
or from your broker, dealer, commercial bank, trust company or other nominee.
9. 31% BACKUP WITHHOLDING; SUBSTITUTE FORM W-9. Under U.S. Federal
income tax law, a holder whose tendered Old Capital Securities are accepted
for exchange is required to provide the Exchange Agent with such holder's
correct taxpayer identification number ("TIN") on Substitute Form W-9 below.
If the Exchange Agent is not provided with the correct TIN, the Internal
Revenue Service (the "IRS") may subject the holder or other payee to a $50
penalty. In addition, payments to such holders or other payees with respect
to Old Capital Securities exchanged pursuant to the Exchange Offer may be
subject to 31% backup withholding.
The box in Part 2 of the Substitute Form W-9 may be checked if the
tendering holder has not been issued a TIN and has applied for a TIN or
intends to apply for a TIN in the near future. If the box in Part 2 is
checked, the holder or other payee must also complete the Certificate of
Awaiting Taxpayer Identification Number below in order to avoid backup
withholding. Notwithstanding that the box in Part 2 is checked and the
Certificate of Awaiting Taxpayer Identification Number is completed, the
Exchange Agent will withhold 31% of all payments made prior to the time a
properly certified TIN is provided to the Exchange Agent. The Exchange Agent
will retain such amounts withheld during the 60-day period following the date
of the Substitute Form W-9. If the holder furnishes the Exchange Agent with
its TIN within 60 days after the date of the Substitute Form W-9, the amounts
retained during the 60-day period will be remitted to the holder and no
further amounts shall bc retained or withheld from payments made to the
holder thereafter. If, however, the holder has not provided the Exchange
Agent with its TIN within such 60-day period, amounts withheld will be
remitted to the IRS as backup withholding. In addition, 31% of all payments
made thereafter will be withheld and remitted to the IRS until a correct TIN
is provided.
The holder is required to give the Exchange Agent the TIN (e.g., social
security number or employer identification number) of the registered owner of
the Old Capital Securities or of the last transferee appearing on the
transfers attached to, or endorsed on, the Old Capital Securities.
Certain holders (including, among others, corporations, financial
institutions and certain foreign persons) may not be subject to these backup
withholding and reporting requirements. Such holders should nevertheless
complete the attached Substitute Form W-9 below, and write "exempt" on the
face thereof, to avoid possible erroneous backup withholding. A foreign
person may qualify as an exempt recipient by submitting a properly completed
IRS Form W-8, signed under penalties of perjury, attesting to that holder's
exempt status.
Backup withholding is not an additional U.S. Federal income tax.
Rather, the U.S. Federal income tax liability of a person subject to backup
withholding will be reduced by the amount of tax withheld. If withholding
results in an overpayment of taxes, a refund may be obtained.
10. WAIVER OF CONDITIONS. The Corporation and the Trust reserve the
absolute right, subject to applicable law, to waive satisfaction of any or
all conditions enumerated in the Prospectus.
11. NO CONDITIONAL TENDERS. No alternative, conditional or contingent
tenders will be accepted. All tendering holders of Old Capital Securities, by
execution of this Letter of Transmittal, shall waive any right to receive
notice of the acceptance of Old Capital Securities for exchange.
Neither the Corporation, the Trust, the Exchange Agent nor any other
person is obligated to give notice of any defect or irregularity with respect
to any tender of Old Capital Securities nor shall any of them incur any
liability for failure to give any such notice.
12. LOST, DESTROYED OR STOLEN CERTIFICATES. If any Certificate(s)
representing Old Capital Securities have been lost, destroyed or stolen, the
holder should promptly notify the Exchange Agent. The holder will then be
instructed as to the steps that must be taken in order to replace the
Certificate(s). This Letter of Transmittal and related documents cannot be
processed until the procedures for replacing lost, destroyed or stolen
Certificate(s) have been followed
13. SECURITY TRANSFER TAXES. Holders who tender their Old Capital
Securities for exchange will not be obligated to pay any transfer taxes in
connection therewith. If, however, New Capital Securities are to be delivered
to, or are to be issued in the name of, any person other than the registered
holder of the Old Capital Securities tendered, or if a transfer tax is
imposed for any reason other than the exchange of Old Capital Securities in
connection with the Exchange Offer, then the amount of any such transfer tax
(whether imposed on the registered holder or any other persons) will be
payable by the tendering holder. If satisfactory evidence of payment of such
taxes or exemption therefrom is not submitted with the Letter of Transmittal,
the amount of such transfer taxes will be billed directly to such tendering
holder.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR FACSIMILE THEREOF)
AND ALL OTHER REQUIRED DOCUMENTS MUST BE RECEIVED BY THE
EXCHANGE AGENT ON OR PRIOR TO THE EXPIRATION DATE.
TO BE COMPLETED BY ALL TENDERING SECURITY HOLDERS
(SEE INSTRUCTION 9)
PAYER'S NAME: THE CHASE MANHATTAN BANK
<TABLE>
<CAPTION>
SUBSTITUTE Part 1--PLEASE PROVIDE YOUR TIN ON THE TIN:
FORM W-9 LINE AT RIGHT AND CERTIFY BY SIGNING AND ____________________
DATING BELOW Social Security Number or
Employer Identification Number
<S> <C>
Department of the
Treasury PART 2--TIN Applied For
Internal Revenue Service
Payer's Request for CERTIFICATION--UNDER THE PENALTIES OF PERJURY, I CERTIFY THAT:
Taxpayer Identification (1) the number shown on this form is my correct taxpayer identification
Number ("TIN") number (or I am waiting for a number to be issued to me).
and Certification (2) I am not subject to backup withholding either because (i) I am
exempt from backup withholding, (ii) I have not been notified by the
Internal Revenue Service ("IRS") that I am subject to backup
withholding as a result of a failure to report all interest or
dividends, or (iii) the IRS has notified me that I am no longer
subject to backup withholding, and
(3) any other information provided on this form is true and correct.
Signature________________________________ Date_____________________, 1997
</TABLE>
You must cross out item (iii) in Part (2) above if you have been notified by
the IRS that you are subject to backup withholding because of underreporting
interest or dividends on your tax return and you have not been notified by the
IRS that you are no longer subject to backup withholding.
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY IN CERTAIN CIRCUMSTANCES
RESULT IN BACKUP WITHHOLDING OF 31% OF ANY AMOUNTS PAID TO YOU PURSUANT TO
THE EXCHANGE OFFER.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX
IN PART 2 OF THE SUBSTITUTE FORM W-9
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification
number has not been issued to me, and either (1) I have mailed or
delivered an application to receive a taxpayer identification number to the
appropriate Internal Revenue Service Center or Social Security
Administration ffice or (2) I intend to mail or deliver an application
in the near future.
I understand that if I do not provide a taxpayer identification number by the
time of payment, 31% of all payments made to me on account of the New Capital
Securities shall be retained until I provide a taxpayer identification number
to the Exchange Agent and that, if I do not provide my taxpayer identification
number within 60 days, such retained amounts shall be remitted to the Internal
Revenue Service as backup withholding and 31% of all reportable payments
made to me thereafter will be withheld and remitted to the Internal
Revenue Service until I provide a taxpayer identification number.
Signature______________________________ Date________________________, 1997
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY
FOR TENDER OF
9.75% Capital Securities, Series A
(Liquidation Amount $1,000 per Capital Security)
OF
COMMUNITY CAPITAL TRUST I
This Notice of Guaranteed Delivery, or one substantially equivalent to
this form, must be used to accept the Exchange Offer (as defined below) if
(i) the procedures for delivery by book-entry transfer cannot be completed on
a timely basis, (ii) certificates for the Trust's (as defined below) 9.75%
Capital Securities, Series A (the "Old Capital Securities") are not
immediately available or (iii) Old Capital Securities, the Letter of
Transmittal and all other required documents cannot be delivered to The Chase
Manhattan Bank (the "Exchange Agent") on or prior to the Expiration Date (as
defined in the Prospectus referred to below). This Notice of Guaranteed
Delivery may be delivered by hand, overnight courier or mail, or transmitted
by facsimile transmission, to the Exchange Agent. See "The Exchange Offer--
Procedures for Tendering Old Capital Securities" in the Prospectus.
The Exchange Agent for the Exchange Offer is:
THE CHASE MANHATTAN BANK
<TABLE>
<CAPTION>
<S> <C> <C>
By Registered or Certified Mail: By Hand or Overnight Delivery:
The Chase Manhattan Bank The Chase Manhattan Bank
450 West 33rd Street, 15th Floor 450 West 33rd Street, 15th Floor
New York, New York 10001 New York, New York 10001
Attention: James D. Heaney, Vice President Attention: James D. Heaney, Vice President
Global Trust Services Global Trust Services
Confirm by Telephone:
(212) 946-3084
Facsimile Transmission
(Eligible Institutions Only)
(212) 946-8161
</TABLE>
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN
AS SET FORTH ABOVE OR TRANSMISSION OF THIS NOTICE OF GUARANTEED DELIVERY VIA
A FACSIMILE TO A NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A
VALID DELIVERY.
THIS NOTICE OF GUARANTEED DELIVERY IS NOT TO BE USED TO GUARANTEE
SIGNATURES. IF A SIGNATURE ON A LETTER OF TRANSMITTAL IS REQUIRED TO BE
GUARANTEED BY AN "ELIGIBLE INSTITUTION" UNDER THE INSTRUCTIONS THERETO, SUCH
SIGNATURE GUARANTEE MUST APPEAR IN THE APPLICABLE SPACE PROVIDED IN THE
SIGNATURE BOX ON THE LETTER OF TRANSMITTAL.
Ladies and Gentlemen:
The undersigned hereby tenders to Community Capital Trust I, a statutory
business trust formed under the laws of the State of Delaware (the "Trust"),
upon the terms and subject to the conditions set forth in the Prospectus
dated July 24, 1997 (as the same may be amended or supplemented from time to
time, the "Prospectus"), and the related Letter of Transmittal (which
together constitute the "Exchange Offer"), receipt of which is hereby
acknowledged, the aggregate Liquidation Amount of Old Capital Securities set
forth below pursuant to the guaranteed delivery procedures set forth in the
Prospectus under the caption "The Exchange Offer--Procedures for Tendering
Old Capital Securities."
Aggregate Liquidation Amount Name(s) of Registered Holder(s):
Tendered:
________________________ __________________________________
Certificate No(s). (if available):
__________________________________ Address(es):
__________________________________ __________________________________
__________________________________
If Old Capital Securities will be Area Code and Telephone Number(s):
tendered by bookentry transfer, __________________________________
provide the following information: __________________________________
DTC Account Number:
______________
Signature (s):
__________________________________
__________________________________
Date: ____________________________ __________________________________
THE GUARANTEE ON THE REVERSE SIDE MUST BE COMPLETED
<TABLE>
<CAPTION>
GUARANTEE
(Not to be used for signature guarantee)
<S> <C> <C>
The undersigned, a firm or other entity identified in Rule 17Ad-15 under the Securities Exchange
Act of 1934, as amended, as an "eligible guarantor institution," including (as such terms are defined
therein): (1) a bank; (2) a broker, dealer, municipal securities broker, municipal securities dealer,
government securities broker, government securities dealer; (3) a credit union; (4) a national
securities exchange, registered securities association or clearing agency; or (5) a savings
association that is a participant in a Securities Transfer Association recognized program (each of
the foregoing being referred to as an "Eligible Institution"), hereby guarantees to deliver to the
Exchange Agent, at one of its addresses set forth above, either the Old Capital Securities tendered
hereby in proper form for transfer, or confirmation of the book-entry transfer of such Old Capital
Securities to the Exchange Agent's account at The Depository Trust Company ("DTC"), pursuant to the
procedures for book-entry transfer set forth in the Prospectus, in either case together with one or
more properly completed and duly executed Letter(s) of Transmittal (or facsimile thereof) and any
other required documents within three New York Stock Exchange trading days after the date of
execution of this Notice of Guaranteed Delivery.
The undersigned acknowledges that it must deliver the Letter(s) of Transmittal and the Old
Capital Securities tendered hereby to the Exchange Agent within the time period set forth above and
that failure to do so could result in a financial loss to the undersigned.
Name of Firm: __________________________________ _______________________________________________
(Authorized Signature)
Address: _______________________________________
Title: _________________________________________
_______________________________________________
(Zip Code) Name: _________________________________________
(Please type or print)
Area Code and
Telephone Number: ______________________________ Date: __________________________________________
NOTE: DO NOT SEND OLD CAPITAL SECURITIES WITH THIS NOTICE OF GUARANTEED DELIVERY. ACTUAL SURRENDER OF
OLD CAPITAL SECURITIES MUST BE MADE PURSUANT TO, AND BE ACCOMPANIED BY, A PROPERLY COMPLETED AND DULY
EXECUTED LETTER OF TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS.
</TABLE>
EXHIBIT 99.3
August __, 1997
Form of
EXCHANGE AGENT AGREEMENT
The Chase Manhattan Bank
450 West 33rd Street, 15th Floor
New York, New York 10001
Ladies and Gentlemen:
Community Capital Trust I, a statutory business trust formed under the
laws of the State of Delaware (the "Trust"), proposes to make an offer (the
"Exchange Offer") to exchange up to $30,000,000 aggregate Liquidation Amount
of its 9.75% Capital Securities, Series B (Liquidation Amount $1,000 per
Capital Security) (the "New Capital Securities"), which have been registered
under the Securities Act of 1933, as amended (the "Securities Act"), for a
like Liquidation Amount of its outstanding 9.75% Capital Securities, Series A
(Liquidation Amount $1,000 per Capital Security) (the "Old Capital
Securities"), of which $30,000,000 aggregate Liquidation Amount is
outstanding. The terms and conditions of the Exchange Offer as currently
contemplated are set forth in a prospectus, dated July 24, 1997 (the
"Prospectus") proposed to be distributed to all record holders of the Old
Capital Securities. The Old Capital Securities and the New Capital
Securities are collectively referred to herein as the "Capital Securities."
Capitalized terms used herein and not otherwise defined shall have the
meanings assigned to them in the Prospectus.
The Trust hereby appoints The Chase Manhattan Bank to act as exchange
agent (the "Exchange Agent") in connection with the Exchange Offer.
References hereinafter to "YOU" shall refer to The Chase Manhattan Bank.
The Exchange Offer is expected to be commenced by the Trust on or about
July 24, 1997. The Letter of Transmittal accompanying the Prospectus is to
be used by the holders of the Old Capital Securities to accept the Exchange
Offer and contains certain instructions with respect to (i) the delivery of
certificates for Old Capital Securities tendered in connection therewith and
(ii) the book entry transfer of Capital Securities to the Exchange Agent's
account at the Depository Trust Company ("DTC").
The Exchange Offer shall expire at 5:00 p.m., New York City time, on
August 25, 1997 or on such later date or time to which the Trust or Community
Bank System, Inc. (the "Corporation") may extend the Exchange Offer (the
"Expiration Date"). Subject to the terms and conditions set forth in the
Prospectus, the Trust and the Corporation expressly reserve the right to
extend the Exchange Offer from time to time by giving oral (to be confirmed
in writing) or written notice to you no later than 5:00 p.m., New York City
time, on the business day following the previously scheduled Expiration Date.
The Trust and the Corporation expressly reserve the right to amend or
terminate the Exchange Offer, and not to accept for exchange any Old Capital
Securities not theretofore accepted for exchange, upon the occurrence of any
of the conditions of the Exchange Offer specified in the Prospectus under the
caption "The Exchange Offer--Conditions to the Exchange Offer." The Trust or
the Corporation will give oral (to be confirmed in writing) or written notice
of any amendment, termination or nonacceptance of Old Capital Securities to
you as promptly as practicable.
In carrying out your duties as Exchange Agent, you are to act in
accordance with the following instructions:
1. You will perform such duties and only such duties as are
specifically set forth in the section of the Prospectus captioned "The
Exchange Offer" and as specifically set forth herein and such duties which
are necessarily incidental thereto; provided, however, that in no way will
your general duty to act in good faith be discharged by the foregoing.
2. You will establish an account with respect to the Old Capital
Securities at DTC (the "Book-Entry Transfer Facility") for purposes of the
Exchange Offer within two business days after the date of the Prospectus, and
any financial institution that is a participant in the Book Entry Transfer
Facility's systems may make book-entry delivery of the Old Capital Securities
by causing the Book-Entry Transfer Facility to transfer such Old Capital
Securities into your account in accordance with the Book-Entry Transfer
Facility's procedure for such transfer.
3. You are to examine each of the Letters of Transmittal, certificates
for Old Capital Securities (or confirmations of book-entry transfers into
your account at the Book-Entry Transfer Facility) and any other documents
delivered or mailed to you by or for holders of the Old Capital Securities to
ascertain whether: (i) the Letters of Transmittal and any such other
documents are duly executed and properly completed in accordance with
instructions set forth therein and (ii) the Old Capital Securities have
otherwise been properly tendered. In each case where the Letter of
Transmittal or any other document has been improperly completed or executed
or any of the certificates for Old Capital Securities are not in proper form
for transfer or some other irregularity in connection with the acceptance of
the Exchange Offer exists, you will endeavor to inform the presenters of the
need for fulfillment of all requirements and to take any other action as may
be necessary or advisable to cause such irregularity to be corrected.
4. With the approval of any Administrative Trustee of the Trust or any
person designated in writing by the Corporation (a "Designated Officer")
(such approval, if given orally, to be confirmed in writing) or any other
party designated by any such Administrative Trustee or Designated Officer in
writing, you are authorized to waive any irregularities in connection with
any tender of Old Capital Securities pursuant to the Exchange Offer.
5. Tenders of Old Capital Securities may be made only as set forth in
the Letter of Transmittal and in the section of the Prospectus captioned "The
Exchange Offer--Procedures for Tendering Old Capital Securities" and Old
Capital Securities shall be considered properly tendered to you only when
tendered in accordance with the Procedures set forth therein.
Notwithstanding the provisions of this paragraph 5, Old Capital
Securities which any Administrative Trustee of the Trust or Designated
Officer of the Corporation shall approve as having been properly tendered
shall be considered to be properly tendered (such approval, if given orally,
shall be confirmed in writing).
6. You shall advise the Trust and the Corporation with respect to any
Old Capital Securities delivered subsequent to the Expiration Date and accept
their instructions with respect to disposition of such Old Capital
Securities.
7. You shall accept tenders:
(a) in cases where the Old Capital Securities are registered in two or
more names only if signed by all named holders;
(b) in cases where the signing person (as indicated on the Letter of
Transmittal) is acting in a fiduciary or a representative capacity only when
proper evidence of such person's authority to so act is submitted; and
(c) from persons other than the registered holder of Old Capital
Securities provided that customary transfer requirements, including payment
of any applicable transfer taxes, are fulfilled.
You shall accept partial tenders of Old Capital Securities where so
indicated and as permitted in the Letter of Transmittal and deliver
certificates for Old Capital Securities to the transfer agent for split-up
and return any untendered Old Capital Securities to the holder (or to such
other person as may be designated in the Letter of Transmittal) as promptly
as practicable after expiration or termination of the Exchange Offer.
8. Upon satisfaction or waiver of all of the conditions to the
Exchange Offer, the Trust will notify you (such notice, if given orally, to
be confirmed in writing) of the Corporation's and the Trust's acceptance,
promptly after the Expiration Date, of all Old Capital Securities properly
tendered and you, on behalf of the Trust, will exchange such Old Capital
Securities for New Capital Securities and cause such Old Capital Securities
to be canceled. Delivery of New Capital Securities will be made on behalf of
the Trust by you at the rate of $1,000 Liquidation Amount at maturity of New
Capital Securities for each $1,000 Liquidation Amount at maturity of the Old
Capital Securities tendered promptly after notice (such notice, if given
orally, to be confirmed in writing) of acceptance of said Old Capital
Securities by the Trust; provided, however, that in all cases, Old Capital
Securities tendered pursuant to the Exchange Offer will be exchanged only
after timely receipt by you of certificates for such Old Capital Securities
(or confirmation of book-entry transfer into your account at the Book-Entry
Transfer Facility), a properly completed and duly executed Letter of
Transmittal (or facsimile thereof) with any required signature guarantees and
any other required documents. You shall issue New Capital Securities only in
denominations of $1,000 or any integral multiple thereof. Old Capital
Securities may be tendered in whole or in part in denominations of $100,000
and integral multiples of $1,000 in excess thereof, provided that if any Old
Capital Securities are tendered for exchange in part, the untendered
Liquidation Amount thereof must be $100,000 or any integral multiple of
$1,000 in excess thereof.
9. Tenders pursuant to the Exchange Offer are irrevocable, except
that, subject to the terms and upon the conditions set forth in the
Prospectus and the Letter of Transmittal, Old Capital Securities tendered
pursuant to the Exchange Offer may be withdrawn at any time on or prior to
the Expiration Date.
10. The Corporation and the Trust shall not be required to exchange any
Old Capital Securities tendered if any of the conditions set forth in the
Exchange Offer are not met. Notice of any decision by the Corporation and
the Trust not to exchange any Old Capital Securities tendered shall be given
(such notice, if given orally, shall be confirmed in writing) by the
Corporation or the Trust to you.
11. If, pursuant to the Exchange offer, the Corporation or the Trust
does not accept for exchange all or part of the Old Capital Securities
tendered because of an invalid tender, the occurrence of certain other events
set forth in the Prospectus under the caption "The Exchange Offer--Conditions
to the Exchange Offer" or otherwise, you shall as soon as practicable after
the expiration or termination of the Exchange Offer return those certificates
for unaccepted Old Capital Securities (or effect the appropriate book-entry
transfer of the unaccepted Old Capital Securities), together with any related
required documents and the Letters of Transmittal relating thereto that are
in your possession, to the persons who deposited them.
12. All certificates for reissued Old Capital Securities, unaccepted
Old Capital Securities or for New Capital Securities shall be forwarded by
(a) first-class mail, return receipt requested, under a blanket surety bond
protecting you, the Trust and the Corporation from loss or liability arising
out of the non-receipt or non-delivery of such certificates or (b) by
registered mail insured separately for the replacement value of each of such
certificates.
13. You are not authorized to pay or offer to pay any concessions,
commissions or solicitation fees to any broker, dealer, bank or other persons
or to engage or utilize any person to solicit tenders.
14. As Exchange Agent hereunder you:
(a) will be regarded as making no representations and having no
responsibilities as to the validity, sufficiency, value or genuineness of any
of the certificates or the Old Capital Securities represented thereby
deposited with you pursuant to the Exchange Offer, and will not be required
to and will make no representation as to the validity, value or genuineness
of the Exchange Offer; provided, however, that in no way will your general
duty to act in good faith be discharged by the foregoing;
(b) shall not be obligated to take any legal action hereunder which
might in your reasonable judgment involve any expense or liability, unless
you shall have been furnished with reasonable indemnity;
(c) may conclusively rely on and shall be fully protected in acting in
good faith in reliance upon any certificate, instrument, opinion, notice,
letter, facsimile or other document or security delivered to you and
reasonably believed by you to be genuine and to have been signed by the
proper party or parties;
(d) may act upon any tender, statement, request, agreement or other
instrument whatsoever not only as to its due execution and validity and
effectiveness of its provisions, but also as to the truth and accuracy of any
information contained therein, which you shall in good faith reasonably
believe to be genuine or to have been signed or represented by a proper
person or persons;
(e) may conclusively rely on and shall be fully protected in acting
upon written or oral instructions from any Administrative Trustee of the
Trust or from any Designated Officer of the Corporation with respect to the
Exchange Offer;
(f) shall not advise any person tendering Old Capital Securities
pursuant to the Exchange Offer as to the wisdom of making such tender or as
to the market value or decline or appreciation in market value of any Old
Capital securities; and
(g) may consult with your counsel with respect to any questions
relating to your duties and responsibilities, and the written opinion of such
counsel shall be full and complete authorization and protection in respect of
any action taken, suffered or omitted by you hereunder in good faith and in
accordance with such advice or written opinion of such counsel.
15. You shall take such action as may from time to time be requested by
any Administrative Trustee of the Trust, any Designated Officer of the
Corporation, or Bond, Schoeneck & King, LLP, counsel for the Corporation and
the Trust, (and such other action as you may reasonably deem appropriate) to
furnish copies of the Prospectus, Letter of Transmittal and the Notice of
Guaranteed Delivery, or such other forms as may be approved from time to time
by the Corporation or the Trust, to all persons requesting such documents and
to accept and comply with telephone requests for information relating to the
Exchange Offer, provided that such information shall relate only to the
procedures for accepting (or withdrawing from) the Exchange Offer. The
Corporation or the Trust will furnish you with copies of such documents at
your request. All other requests for information relating to the Exchange
Offer shall be directed to the Corporation, Attention: David G. Wallace,
Treasurer.
16. You shall advise by facsimile transmission or telephone, and
promptly thereafter confirm in writing to David G. Wallace, Treasurer of the
Corporation, and such other person or persons as the Trust or the Corporation
may request, daily (and more frequently during the week immediately preceding
the Expiration Date and if otherwise requested) up to and including the
Expiration Date, as to the Liquidation Amount of the Old Capital Securities
which have been tendered pursuant to the Exchange Offer and the items
received by you pursuant to this Agreement, separately reporting and giving
cumulative totals as to items properly received and items improperly received
and items covered by Notices of Guaranteed Delivery. In addition, you will
also inform, and cooperate in making available to, the Corporation and the
Trust or any such other person or persons as the company or the Trust
requests from time to time prior to the Expiration Date of such other
information as they or such person reasonably request. Such cooperation
shall include, without limitation, the granting by you to the Corporation,
the Trust and such person as the Corporation or the Trust may request of
access to those persons on your staff who are responsible for receiving
tenders, in order to ensure that immediately prior to the Expiration Date,
the Corporation and the Trust shall have received information in sufficient
detail to enable them to decide whether to extend the Exchange Offer. You
shall prepare a list of persons who failed to tender or whose tenders were
not accepted and the aggregate Liquidation Amount of Old Capital Securities
not tendered or Old Capital Securities not accepted and deliver said list to
the Corporation and the Trust at least seven days prior to the Expiration
Date. You shall also prepare a final list of all persons whose tenders were
accepted, the aggregate Liquidation Amount of Old Capital Securities tendered
and the aggregate Liquidation Amount of Old Capital Securities accepted and
deliver said list to the Corporation.
17. Letters of Transmittal and Notices of Guaranteed Delivery shall be
stamped by you as to the date and the time of receipt thereof and shall be
preserved by you for a period of time at least equal to the period of time
you preserve other records pertaining to the transfer of securities. You
shall dispose of unused Letters of Transmittal and other surplus materials by
returning them to the Corporation at the address set forth below for notices.
18. For services rendered as Exchange Agent hereunder, you shall be
entitled to such compensation and reimbursement of reasonable out-of-pocket
expenses as set forth on Schedule I attached hereto.
19. You hereby acknowledge receipt of the Prospectus and the Letter of
Transmittal and further acknowledge that you have examined each of them to
the extent necessary to perform your duties hereunder. Any inconsistency
between this Agreement, on the one hand, and the Prospectus and the Letter of
Transmittal (as they may be amended from time to time) on the other hand,
shall be resolved in favor of the latter two documents, except with respect
to the duties, liabilities and indemnification of you as Exchange Agent,
which shall be controlled by this Agreement.
20. (a) The Corporation agrees to indemnify and hold you (and your
officers, directors, employees and agents) harmless in your capacity as
Exchange Agent hereunder against any liability, cost or expense, including
reasonable attorneys' fees, arising out of or in connection with any act,
omission, delay or refusal made by you in reasonable reliance upon any
signature, endorsement, assignment, certificate, order, request, notice,
instruction or other instrument or document reasonably believed by you to be
valid, genuine and sufficient and in accepting any tender or effecting any
transfer of Old Capital Securities reasonably believed by you in good faith
to be authorized, and in delaying or refusing in good faith to accept any
tenders or effect any transfer of Old Capital Securities; provided, however,
that the Corporation shall not be liable for indemnification or otherwise for
any loss, liability, cost or expense to the extent arising out of your
negligence, willful misconduct or bad faith. In no case shall the
Corporation be liable under this indemnity with respect to any claim against
you unless the Corporation shall be notified by you, by letter or by
facsimile confirmed by letter, of the written assertion of a claim against
you or of any other action commenced against you promptly after you shall
have received any such written assertion or notice of commencement of action.
The Corporation shall be entitled to participate at its own expense in the
defense of any such claim or other action, and, if the Corporation so elects,
the Corporation shall assume the defense of any suit brought to enforce any
such claim. In the event that the Corporation shall assume the defense of
any such suit, the Corporation shall not thereafter be liable for the fees
and expenses of any counsel retained by you so long as the Corporation shall
retain counsel reasonably satisfactory to you to defend such suit; provided
that the Corporation shall not be entitled to assume the defense of any such
suit if the named parties to such suit include both the Corporation and you
or representation of both parties by the same legal counsel would, in the
reasonable opinion of the Exchange Agent, be inappropriate due to actual or
potential conflicting interests between them.
(b) You agree that, without the prior written consent of the
Corporation, you will not settle, compromise or consent to the entry of
judgment in connection with any pending or threatened claim, action, or
proceeding in respect of which indemnification could be sought in accordance
with the indemnification provisions of this Agreement (whether or not you or
the Corporation or any of its officers, directors or controlling shareholders
is an actual or potential party to such claim, action or proceeding), unless
such settlement, compromise or consent includes an unconditional release of
the Corporation and its officers, directors and controlling shareholders from
all liability arising out of such claim, action or proceeding.
21. This Agreement and your appointment as Exchange Agent hereunder
shall be construed and enforced in accordance with the laws of the State of
New York applicable to agreements made and to be performed entirely within
such state, and without regard to conflicts of law principles, and shall
inure to the benefit of, and the obligations created hereby shall be binding
upon, the successors and assigns of each of the parties hereto.
22. This Agreement may be executed in two or more counterparts, each of
which shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement.
23. In case any provision of this Agreement shall be invalid, illegal
or unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
24. This Agreement shall not be deemed or construed to be modified,
amended, rescinded, canceled or waived, in whole or in part, except by a
written instrument signed by each party thereto. This Agreement may not be
modified orally.
25. Unless otherwise provided herein, all notices, requests and other
communications to any party hereunder shall be in writing (including
facsimile) and shall be given to such party, addressed to it, at its address
or telecopy number set forth below:
If to the Corporation or the Trust:
c/o Community Bank System, Inc.
5790 Widewaters Parkway
Dewitt, New York 13214
Facsimile: (315) 445-2997
Attention: David G. Wallace, Treasurer
With a copy to:
Bond, Schoeneck & King, LLP
One Lincoln Center
Syracuse, New York 13202
Facsimile: (315) 422-3598
Attention: George J. Getman, Esq.
If to the Exchange Agent:
The Chase Manhattan Bank
450 West 33rd Street, 15th Floor
New York, New York 10001
Facsimile: (212) 946-8161
Attention: James D. Heaney
26. Unless terminated earlier by the parties hereto, this Agreement
shall terminate 90 days following the Expiration Date. Notwithstanding the
foregoing, paragraphs 18, 20 and 22 shall survive the termination of this
Agreement. Upon any termination of this Agreement, you shall promptly
deliver to the Corporation any certificates for Capital Securities, funds or
property (including, without limitation, Letters of Transmittal and any other
documents relating to the Exchange Offer) then held by you as Exchange Agent
under this Agreement.
27. This Agreement shall be binding and effective as of the date
hereof.
Please acknowledge receipt of this Agreement and confirm the
arrangements herein provided by signing and returning the enclosed copy.
COMMUNITY BANK SYSTEM, INC.
By: ________________________________________
Name: Sanford A. Belden
Title: President and CEO
COMMUNITY CAPITAL TRUST I
By: ________________________________________
Name: Sanford A. Belden
Title: Administrative Trustee
Accepted as of the date
first above written:
THE CHASE MANHATTAN BANK,
as Exchange Agent
By: Name:
By: ________________________________________
Name:
Title:
