As filed with the Securities and Exchange Commission on August 13, 1999
Registration No. 333-83921
Registration No. 333-83921-01
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
PRE-EFFECTIVE AMENDMENT NO. 2 TO
FORM S-3
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
FIRST UNITED CORPORATION
FIRST UNITED CAPITAL TRUST
(Exact name of registrants as specified in their Charters)
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Maryland 6712 52-1380770
Delaware 6719 51-6513713
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification
incorporation or organization) Classification Code Numbers) Numbers)
19 South Second Street, Oakland, Maryland 21550 (301) 334-9471
(Address, including zip code, and telephone number, including area code,
of registrants' principal executive offices)
William B. Grant, 19 South Second Street, Oakland,
Maryland 21550 (301) 334-9471 (Name, address, including zip
code, and telephone number, including area code, of agent for
service)
With copies to:
Abba David Poliakoff, Esquire Christopher D. Olander, Esquire
Michael A. Refolo, Esquire Sheryl N. Stephenson, Esquire
Gordon, Feinblatt, Rothman, Hoffberger & Hollander, LLC Shapiro and Olander
233 E. Redwood Street, Baltimore, Maryland 21202 36 S. Charles Street, Baltimore, Maryland 21201
(410) 576-4000 (410) 385-0202
Approximate date of commencement of the proposed sale to public: As soon as
practicable after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. |_|
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. |_|
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. |_|
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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 the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
EXPLANATORY NOTE
The prospectus contained in this Registration Statement will be used in
connection with the offering of the following securities: (1) _________%
Preferred Securities of First United Capital Trust; (2) _________% Junior
Subordinated Deferrable Interest Debentures of First United Corporation; (3) a
Guarantee of First United Corporation of certain obligations under the Preferred
Securities.
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The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
PROSPECTUS Preliminary Prospectus dated
August 5, 1999
$20,000,000
[LOGO]
First United Capital Trust
First United Corporation
_______% Preferred Securities
Guaranteed by First United Corporation.
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Consider carefully the "Risk First United Corporation--
Factors" beginning on Page 7 of o We are a bank holding company that offers, through our
this Prospectus. bank subsidiary, a full range of community banking and
related financial services to customers in Maryland and
Neither the Securities and West Virginia.
Exchange Commission nor any o We will purchase all of the common securities of the Trust.
State Securities Commission has o We have irrevocably and unconditionally guaranteed the Trust's
approved or disapproved of obligations under the preferred securities.
these securities passed upon
the adequacy or accuracy of this The Trust--
Prospectus. Any representation o First United Capital Trust is a Delaware business trust.
to the contrary is a criminal o We created the Trust for the limited purposes of issuing the
offense. common and preferred securities, investing in the junior
subordinated debentures, and engaging in incidental
Neither the preferred securities activities.
nor the junior subordinated The Preferred Securities--
debentures are deposit accounts o The preferred securities represent beneficial interests
of any bank, and neither are in the assets of the Trust, which will include the
insured to any extent by the junior subordinated debentures and payments on the
Federal Deposit Insurance junior subordinated debentures.
Corporation or any other o Holders of the preferred securities are entitled to cumulative
governmental agency. distributions at the annual rate of_______%.
o We have applied to have the preferred securities approved
The underwriters are offering for quotation under the proposed Nasdaq National Market
the preferred securities subject symbol "FUNCP."
to prior sale, when, as and if o The public offering price is $10.00 per preferred security.
delivered to and accepted by the o The Trust may redeem the preferred securities for cash or
underwriters. The underwriters in exchange for the junior subordinated debentures.
have the right to reject orders in o If we defer interest payments on the junior subordinated
whole or in part. The debentures, the Trust will defer distributions on the
underwriters expect that the preferred securities.
Trust will deliver the preferred The Junior Subordinated Debentures--
securities on or about _________, o We will sell up to $23,000,000 of our_____% junior
1999. subordinated debentures to the Trust, an amount equal to
the proceeds to the Trust from the sale of the common
and preferred securities.
o The junior subordinated debentures are scheduled to
mature on September 30, 2029, but we may shorten this
date.
o We may defer interest payments on the junior subordinated
debentures from time to time.
=============================================================================================================================
Price Underwriting Proceeds to the
to Discounts or Commissions Issuer Trust
Public
- -----------------------------------------------------------------------------------------------------------------------------
Per Preferred Security.............. $ $
- -----------------------------------------------------------------------------------------------------------------------------
Total............................... $ $
=============================================================================================================================
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In the table above, the price to the public includes accrued distributions, if
any, from ________________, 1999. We, along with the Trust, have agreed to
indemnify the underwriters against certain liabilities, including certain
liabilities under the Securities Act of 1933. See "Underwriting." Because all of
the proceeds from the sale of the preferred securities will be used to purchase
the junior subordinated debentures, we have agreed to pay the underwriters, as
compensation, $___ per preferred security or $____________ in the aggregate
($_____________ if the over-allotment option is exercised in full). See
"Underwriting." We have also agreed to pay the expenses of this offering,
estimated to be $_______. We have also granted the underwriters a 30-day option
to purchase up to a maximum of 300,000 additional preferred securities to cover
over-allotments, if any. If the over-allotment option is exercised in full, the
total price to the public will be $23,000,000, the total underwriting commission
will be $_______ and the total proceeds to the Trust will be $_______. See
"Underwriting."
Ferris, Baker Watts Advest, Inc.
Incorporated
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[FIRST UNITED MAP]
Certain persons participating in this offering may engage in transactions that
stabilize, maintain, or otherwise affect the market price of the preferred
securities being offered, including over-allotting shares of the preferred
securities and bidding for and purchasing these shares at a level above that
which otherwise might prevail in the open market. For a description of these
activities, see "Underwriting." These stabilizing transactions, once begun, may
be discontinued at any time. In connection with this offering, certain
underwriters (and selling group members) may engage in passive market making
transactions in the preferred securities on the Nasdaq National Market in
accordance with Rule 103 of SEC Regulation M. See "Underwriting."
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PROSPECTUS SUMMARY
First United Corporation
Overview
First United Corporation is a bank holding company whose principal
business is conducted by its wholly-owned subsidiary, First United Bank & Trust,
which is headquartered in Oakland, Maryland. We are the largest bank in Garrett
County, Maryland, where we have more than 50% of that county's deposits, and we
are among the leaders in deposit market share in five of the eight counties we
serve.
We provide a full range of commercial, retail banking, trust, and
related financial services from 22 branches and 26 ATMs in towns and rural areas
of western Maryland and West Virginia. In addition to our banking business, we
own a reinsurance company, Oakfirst Life Insurance Corporation, that reinsures
credit life, credit accident, and health insurance written on consumer loans
made by First United Bank & Trust. We also own an auto leasing company, First
United Auto Finance, LLC, and an insurance agency, Gonder Insurance Agency,
Inc., which sells business and personal insurance policies as agent and broker.
Since our formation in 1985, our return on assets has exceeded 1%. In
1998, our return on assets was 1.24%, and our return on equity was 12.92%. Our
net income for that period was $7.4 million, an 11.77% increase over 1997. As of
June 30, 1999, we had total assets of $689.9 million, gross loans of $551.0
million, deposits of $539.2 million, and shareholders' equity of $57.2 million.
For the six months ended June 30, 1999, our return on assets was 1.13% and our
return on equity was 12.98%.
Our Strategy
Our goal is to continue to build a responsive, high performance
community bank. We intend to achieve this goal by:
o Broadening our products and services to meet our customers'
changing needs;
o Retaining our most profitable and potentially profitable
customers;
o Expanding our geographic market area to attract profitable
customers; and
o Expanding the lines of business in which we can compete
profitably.
We believe that we will achieve these goals. In the past two years, we
have begun several strategic initiatives to make us more profitable and
competitive. We employed several nationally recognized industry consultants, and
together with our management, to examine almost every area of our operations.
These consultants, with management, reviewed our core businesses, operating
structure, management, personnel, staffing, technology, products, services,
policies, credit scoring, and loan and investment practices. We then changed our
organization and the way we conduct our businesses to enhance our relationships
with less profitable customers, provide better service to our most profitable
customers, and identify profitable opportunities in new markets and service
areas. In addition, to reduce the cost and investment of management time in
regulatory issues, we converted from a national banking association to a
Maryland-chartered bank.
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Services
We provide a complete range of retail and commercial banking, trust,
brokerage and insurance services to customers from Maryland, West Virginia, and
western Pennsylvania. Our customers include individuals, businesses, and
municipalities. Our services include checking, savings, NOW, money market
accounts, business loans, personal loans, mortgage loans, lines of credit, IRA
and KEOGH accounts, safe deposit and night depository facilities, and a complete
line of trust services. We respond to our customers' needs and are willing to
customize the products we offer based on the needs of individual customers.
Although traditionally a residential mortgage lender, we recently
expanded our efforts in indirect consumer lending, commercial lending, and home
equity lines to improve our asset mix, increase earnings and establish a broader
relationship with our customers. We are a certified Small Business
Administration lender. Commercial loans include lines of credit, term and demand
loans for the purchase of equipment and inventory, and accounts receivable
financing. We rely principally upon conventional deposits, Federal Home Loan
Bank borrowings, and a limited amount of wholesale deposits as funding sources.
We provide brokerage services through an arrangement with PrimeVest
Financial Services, Inc., a full service broker-dealer.
First United Capital Trust
First United Capital Trust is a Delaware statutory business trust that
we created for the limited purposes of:
o issuing the preferred securities and the common securities;
o investing the proceeds it receives from issuing the preferred
securities and the common securities in equivalent amount of
junior subordinated debentures issued by us; and
o engaging in activities related to the activities described
above.
The Trust will issue all of the preferred securities to the purchasers
in this offering. We will purchase all of the Trust's common securities. The
Trust's common securities will represent an aggregate liquidation amount equal
to at least 3% of the total capital of the Trust.
The junior subordinated debentures will be the only assets of the
Trust, and payments under the junior subordinated debentures will be the only
revenue of the Trust.
The Trust will be governed by the trust agreement among us, as
depositor, Bankers Trust (Delaware), as Delaware trustee, and Bankers Trust
Company, as property trustee.
The principal executive office of the Trust is c/o First United
Corporation at 19 South Second Street, Oakland, Maryland 21550, and its
telephone number is (301) 334-9471.
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The Offering
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The Issuer.............................. First United Capital Trust, a Delaware statutory business trust.
The Securities Being Offered............ 2,000,000 preferred securities having a liquidation amount of
$10.00 per preferred security. The preferred securities represent
preferred undivided beneficial interests in the assets of the Trust,
which will consist solely of junior subordinated debentures. We
will guarantee payments on the preferred securities to the extent
of funds in the Trust. We have granted the underwriters an
option, exercisable within 30 days after the date of the offering,
to purchase up to an additional 300,000 preferred securities at
the initial offering price, solely to cover over-allotments, if any.
The Offering Price...................... $10.00 per preferred security.
The Payment of
Distributions........................... The Trust will pay distributions to you on each preferred
security at an annual rate of ____%. The distributions will be
cumulative, will accumulate from the date of issue, and will be
payable in arrears with additional distributions, compounded
quarterly, beginning September 30, 1999.
Our Option to Extend the
Interest Payment Period ................ At any time that we are not in default under the junior
subordinated debentures, we may defer payments of interest on
the junior subordinated debentures for up to 20 consecutive
quarters, but not beyond their stated maturity date. The Trust
would defer quarterly distributions on the preferred securities
while we are deferring payment on the junior subordinated
debentures. Deferred quarterly distributions will accumulate
additional distributions at an annual rate of ____% compounded
quarterly.
During any period that we are deferring interest payments, we
may not declare or pay any cash distributions on our capital
stock or debt securities that are of equal or lower rank than the
junior subordinated debentures. After the end of any period in
which we are deferring interest payments, if we have paid all
deferred and current interest under the junior subordinated
debentures, we may defer interest payments again. If we defer
interest payments, you will be required to include deferred
interest income in your gross income for United States federal
income tax purposes even if you have not received distributions.
Junior Subordinated
Debentures.............................. The Trust will invest the proceeds from the issuance of the
preferred securities and common securities in an equivalent
amount of our _____% junior subordinated debentures.
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Maturity of Debentures.................. The junior subordinated debentures are scheduled to mature on
September 30, 2029 unless we shorten the maturity date. We
will not shorten the maturity date unless we have received prior
approval, from our regulator, if it is required. The Trust must
redeem the preferred securities when the junior subordinated
debentures are paid on the maturity date, or following any
earlier redemption of the junior subordinated debentures.
Redemption of the
Preferred Securities
is Possible ............................ The Trust may redeem the preferred securities in whole or in
part, if we repay the junior subordinated debentures. Subject to
any regulatory approval that may then be required, we may
redeem the junior subordinated debentures before their scheduled
maturity either (1) on or after September 30, 2004, in whole at
any time or in part, from time to time, or (2) at any time, in
whole, but not in part, within 90 days after:
o certain tax events occur or become likely to occur;
o the Trust is or becomes likely to be deemed to be an
investment company; or
o there is a change in the regulatory capital treatment of the
preferred securities.
We will use the cash proceeds of any redemption to pay you the
liquidation amount for the preferred securities. The liquidation
amount you will receive will be $10.00 per preferred security
plus any accrued and unpaid distributions to the date of
redemption.
How the Securities will
Rank in Right of Payment................ The preferred securities will rank equally with the common
securities. The Trust will pay distributions on the preferred
securities and the common securities pro rata. If we default by
failing to pay interest payments on the junior subordinated
debentures, no distributions on the common securities will be
paid until all accumulated and unpaid distributions on the
preferred securities have been paid.
Our obligation under the junior subordinated debentures is
unsecured and generally will rank junior in priority to any of our
senior and other subordinated indebtedness. If we create any
other trusts similar to this Trust, then the subordinated
debentures will rank equally with any other junior subordinated
debentures we issue to the trusts.
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Our obligation under the guarantee is unsecured and will rank
junior to our senior and other subordinated indebtedness. If we
issue any other guarantees in the future relating to preferred
securities issued by the other trusts, then the guarantee issued in
this transaction will rank equally with the other guarantees.
Because we are a holding company, the junior subordinated
debentures and the guarantee will effectively be subordinated to
all existing and future liabilities of our subsidiaries.
The Junior Subordinated
Debentures may be
Distributed to You...................... Under certain circumstances and after we obtain any necessary
regulatory approvals, we may dissolve the Trust. If we dissolve
the Trust, after satisfaction of any of the Trust's liabilities to
creditors, the Trust will distribute your pro rata share of the
junior subordinated debentures to you in liquidation of the Trust.
Our Obligations to Guarantee
Payments................................ We provide an irrevocable and unconditional guarantee of
payments of distributions and other amounts due on the
preferred securities. Our obligations to guarantee the payments
and other amounts are found under the junior subordinated
debentures, the indenture, the trust agreement and the guarantee,
taken together.
If we do not make payments on the junior subordinated
debentures, the Trust will not have sufficient funds to make
distributions on the preferred securities. The guarantee does not
cover distributions when the Trust does not have sufficient
funds.
Limited Voting Rights................... You will have no voting rights except in limited circumstances.
The Use of Proceeds..................... The Trust will invest all of the proceeds from the sale of the
preferred and the common securities in our junior subordinated
debentures. We intend to contribute a large portion of the net
proceeds from our sale of the junior subordinated debentures to
our subsidiary bank to support internal growth opportunities, and
to use the remainder to finance growth, including future
acquisitions if and when suitable opportunities arise, and for
general corporate purposes.
The preferred securities may qualify in whole or in part, as our
"Tier 1" capital or core capital, with certain limitations, in
accordance with capital guidelines provided by The Federal
Reserve. The remaining amount of preferred securities that does
not qualify as our "Tier 1" capital will qualify as "Tier 2," or
supplementary capital.
Nasdaq National Market
Symbol.................................. The proposed Nasdaq National Market symbol is "FUNCP."
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Book-entry.............................. The preferred securities will be represented by a global security
that will be deposited with and registered in the name of The
Depository Trust Company, New York, New York, or its
nominee. You will not receive a certificate for your preferred
securities.
No Rating .............................. We do not expect that the preferred securities will be rated by
any rating service. Our other securities are not rated by any
rating service.
ERISA Considerations.................... You must consider carefully the information described under
"Certain ERISA Considerations."
For additional information regarding the preferred securities, see: "Description of Preferred
Securities," "Description of Junior Subordinated Debentures," "Description of Guarantee,"
"Relationship Among the Preferred Securities, the Junior Subordinated Debentures and the Guarantee,"
and "Certain Federal Income Tax Consequences."
RISK FACTORS
Before purchasing the preferred securities offered by this prospectus
you should carefully consider the "Risk Factors" beginning on page 7.
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RISK FACTORS
You should carefully consider the following risk factors before
purchasing the preferred securities. This prospectus contains forward-looking
statements that involve risk and uncertainties. You can identify these
forward-looking statements because they may include terms such as "believes,"
"anticipates," "intends," "expects," or similar expressions, and may include
discussions of future strategy. We caution you not to rely unduly on any
forward-looking statements in this prospectus. Our actual results could differ
materially from the forward-looking statements. The risk factors described below
could cause or contribute to these differences and apply to all forward-looking
statements wherever they appear in this prospectus.
Risk Factors Relating to the Preferred Securities
If we default on our obligations to pay our other creditors, then we
may be prohibited from paying you. Our obligations to you under the guarantee
and the junior subordinated debentures are subordinate to our obligations to
most of our other creditors. If we do not pay our other creditors amounts we owe
them, we may be prohibited from paying you. If we go into bankruptcy or
insolvency, our other creditors must be paid in full before you may be paid.
If we extend the interest payment period, you will not receive
distributions, but you will recognize ordinary income, and incur a related
federal income tax liability, and you will recognize a capital loss that may be
used only to offset a capital gain. So long as we are not in default, we may
defer the payment of interest on the junior subordinated debentures from time to
time for up to 20 consecutive quarters. If we defer interest payments, the Trust
will defer quarterly distributions to you on the preferred securities. During a
deferral period you will continue to accrue income (in the form of original
issue discount) for federal income tax purposes on the preferred securities, but
you will not receive your cash distributions. In addition, your tax basis in the
preferred securities will increase by the amount of accrued but unpaid
distributions. If you sell the preferred securities during a deferral period,
your increased tax basis will decrease the amount of any capital gain or
increase the amount of any capital loss that you may have otherwise realized on
the sale. A capital loss, except in certain limited circumstances, cannot be
applied to offset ordinary income.
The Trust may return your principal to you early, which would require
you to reinvest your principal at a time when you may not be able to earn a
return that is as high as you were earning on the preferred securities. Under
the following circumstances we may return your principal before the stated
maturity of the junior subordinated debentures:
o We may redeem all of the junior subordinated debentures in
whole, but not in part, prior to maturity within 90 days after
certain occurrences at any time during the life of the Trust.
If we redeem the junior subordinated debentures due to the
occurrence of one of these events, the Trust will redeem the
preferred securities. You would receive the redemption price.
o We may also at any time shorten the maturity of the junior
subordinated debentures to a date not earlier than September
30, 2004. We may be required to obtain regulatory approval
before shortening the maturity of the junior subordinated
debentures.
o You should be aware that Congress may enact legislation that
would adversely affect our ability to deduct the interest we
pay on the junior subordinated debentures or that otherwise
results in unfavorable tax consequences for us or the Trust.
This legislation may cause us to redeem the junior
subordinated debentures and cause the Trust to redeem the
preferred securities.
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If we redeem the junior subordinated debentures we would redeem the
preferred securities, and you may be required to reinvest your principal.
We can distribute the junior subordinated debentures to you, which may
have adverse tax consequences for you and which may adversely affect the market
price of your investment. The Trust may be dissolved at any time before maturity
of the junior subordinated debentures on September 30, 2029. Then, the trustees
would distribute the junior subordinated debentures to the holders of the
preferred securities. The junior subordinated debentures that you receive upon a
distribution, or the preferred securities you hold pending this type of
distribution, may trade at a price that is less than you paid to purchase the
preferred securities.
Under current United States federal income tax laws, a distribution of
the junior subordinated debentures to you upon the dissolution of the Trust
would not be a taxable event to you. However, if the Trust were classified for
United States federal income tax purposes as an association taxable as a
corporation at the time it is dissolved, the distribution of the junior
subordinated debentures would be a taxable event to you. In addition, if there
is a change in law, a distribution of junior subordinated debentures upon the
dissolution of the Trust could be a taxable event to you.
Our guarantee covers payments to you only if the Trust has cash
available to make payments. If we do not make payments on the junior
subordinated debentures, the Trust will not have sufficient funds to pay
distributions or the liquidation amount. Because our guarantee does not cover
payments when the Trust does not have sufficient funds, you will not be able to
rely on our guarantee for payment of these amounts. Instead, you or the property
trustee may enforce the rights of the Trust under the junior subordinated
debentures against us directly.
You will have only limited voting rights as a holder of the preferred
securities, and we can amend the trust agreement without your consent. Your
voting rights will relate only to the modification of the preferred securities
and the exercise of the Trust's rights as holder of the junior subordinated
debentures. You will not usually be able to appoint, remove or replace the
property trustee or the Delaware trustee because these rights generally reside
with us as the holder of the common securities. Even if it would adversely
affect your rights, we, together with the property trustee and the trust
administrators, may amend the trust agreement without your consent to ensure
that the Trust will be classified as a grantor trust for United States federal
income tax purposes.
The market price for the preferred securities may decline during any
period that we are deferring interest payments on the junior subordinated
debentures. If this were the case, the preferred securities would not trade at a
price that accurately reflects the value of accrued but unpaid interest on the
underlying junior subordinated debentures.
There is no current public market for the preferred securities and one
may not develop. We plan to list the preferred securities on the Nasdaq National
Market. There is no guarantee that an active or liquid public trading market
will develop for the preferred securities or whether there will be continued
listing of the preferred securities on the Nasdaq National Market. Although the
underwriters have informed the Trust and us that they intend to make a market in
the preferred securities, they are not obligated to do so and any market making
activity may be terminated at any time without notice. Even if an active public
market does develop, there is no guarantee that the market price for the
preferred securities will equal or exceed the price you pay for the preferred
securities.
The indenture and the trust agreement do not restrict our business
operations for your benefit. Neither the indenture, which sets forth the terms
of the junior subordinated debentures, nor the trust agreement, which sets forth
the terms of the preferred securities and the common securities, protects
holders of junior subordinated debentures or the preferred securities if we
experience adverse changes in our financial condition or results of operations.
In addition, neither the indenture nor the trust agreement limit our ability or
the ability of any subsidiary to incur additional indebtedness.
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The preferred securities are not insured. Neither the Federal Deposit
Insurance Corporation nor any other governmental agency or private company has
insured the preferred securities.
Risk Factors Relating to the Company
The Trust will depend solely on our payments on the junior subordinated
debentures to pay amounts due to you on the preferred securities. Our ability to
make payments on the junior subordinated debentures is subject to the following
risks:
We depend primarily on dividends from our subsidiaries to pay you and
those dividends are restricted by regulation. We are a separate legal entity
from our subsidiaries and do not have significant operations of our own. We will
depend primarily on dividends we receive from our subsidiaries to make payments
on the junior subordinated debentures. Federal and state law and regulations
restrict the dividends our subsidiaries may pay us. If our subsidiaries are
prohibited from issuing dividends to us, we may not be able to make payments on
the junior subordinated debentures and the Trust will not be able to make
payments to you on the preferred securities.
The creditors of our subsidiaries have priority over us and you in any
distribution of our subsidiaries' assets in a liquidation or reorganization. We
are a holding company and our assets are primarily comprised of our investment
in the stock of our subsidiaries. The creditors of our subsidiaries will have
priority over us and you in any distribution of the subsidiaries' assets in a
liquidation, reorganization or otherwise, except to the extent that we are
recognized as a creditor of our subsidiaries. We will depend on dividends and
other amounts we receive from our subsidiaries to make payments on the junior
subordinated debentures. If our subsidiaries make no distributions to us, we may
not be able to make payments on the junior subordinated debentures and the Trust
will not be able to make payments to you on the preferred securities.
The Bank's reserve for possible credit losses may not be adequate to
cover actual loan losses and if we are required to increase our reserve, current
earnings may be reduced. When borrowers default and do not repay the loans that
we make to them, we may lose money. Our experience shows that some borrowers
either will not pay on time or will not pay at all, which will require us to
cancel or "charge off" the defaulted loan or loans. We provide for losses by
reserving what we believe to be an adequate amount to absorb any probable
inherent losses. A "charge off" reduces our reserve for possible credit losses.
If our reserve is not sufficient, we would have to record a larger reserve which
would reduce current period earnings.
Changes in the real estate market could result in "charge offs." The
Bank's loan portfolio includes many real estate secured loans. Real estate loans
are in demand when interest rates are low and economic conditions are favorable.
Even when economic conditions are favorable and interest rates are low, these
conditions may not continue. If the borrower does not pay a real estate loan, we
may have to "charge off" the loan. If real estate values decrease, then we may
not recover the full amount of the loan when we foreclose on the real estate.
The Bank's increased emphasis on indirect automobile lending could
result in increased "charge offs." Our indirect automobile lending grew 120.76%
in 1998 and comprised 25.81% of our loan portfolio on June 30, 1999. While we
have established credit and other controls, indirect lending can be subject to
greater credit risk, and possibly higher charge offs than direct lending.
The geographic concentration of the Bank's loans could result in
"charge offs." Most of our loans are made to borrowers located in Maryland, West
Virginia and Pennsylvania, in counties or surrounding counties in which our Bank
and its branches are located. A decline in local economic conditions could cause
more borrowers to default on their loans.
9
<PAGE>
The Bank may be unable to manage interest rate risks that could reduce
our net interest income. Our earnings depend greatly on our net interest income,
the difference between the interest earned on loans and investments and the
interest paid on deposits. If the interest rate paid on deposits is high and the
interest rate earned on loans and investments is low, we earn less or may lose
money. Because interest rates are established by competition, we have limited
control over our net interest income.
Risk Factors Relating to the Company's Industry
The banking industry is subject to extensive regulation which may
change the conditions of doing business without warning and increase the cost of
doing business. The banking industry is subject to many laws and regulations
which generally protect depositors, not shareholders. These regulations and laws
increase our operating expenses, affect our earnings, and put us at a
disadvantage relative to less regulated competitors, such as finance companies,
mortgage banking companies, and leasing companies.
The banking industry is heavily dependent on developments in
technology. Financial services use technology, including telecommunications,
data processing, computers, automation, telebanking, Internet-based banking,
debit cards, and "smart" cards. Technology changes rapidly. Our ability to
compete successfully with other banks and non-banks may depend on whether we can
exploit technological changes. We may not be able to exploit technological
changes and expensive new technology may not make us more profitable.
Our operations may be adversely affected if we, or certain persons with
whom we do business, fail to adequately address the Year 2000 issue. The "Year
2000 Issue" describes the problems that may result from the improper processing
of dates and date-sensitive calculations beginning in the Year 2000. Many
existing computer programs use only two digits to identify the year in the date
field of a program. These programs could experience serious malfunctions when
the last two digits of the year change to "00" as a result of identifying a year
designated "00" as the Year 1900 rather than the Year 2000. A system failure or
other disruptions of operations could occur if our computer programs and other
equipment identify a year designated "00" as the Year 1900 rather than the Year
2000. We cannot be certain that our computer programs and other equipment, and
the computer programs and other equipment of our customers, vendors, suppliers
and even the government will be Year 2000 compliant. Any systems failure,
disruption, or other losses could reduce our earnings.
For a more detailed discussion of our Year 2000 initiatives, see the
disclosure under "Impact of Year 2000" in our Annual Report on Form 10-K for the
year ended December 31, 1998, which has been incorporated by reference into this
prospectus.
10
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected financial data for the five years ended December
31, 1998 are derived from our audited consolidated financial statements. The
financial data for the six-month periods ended June 30, 1999 and 1998 are
derived from our unaudited financial statements. The unaudited financial
statements include all adjustments, consisting of normal recurring accruals,
which we consider necessary for a fair presentation of the financial position
and the results of operations for these periods. Our operating results for the
six months ended June 30, 1999 are not necessarily indicative of the results
that may be expected for the entire year ending December 31, 1999. You should
read the selected consolidated financial data with our consolidated financial
statements, related notes, and other financial information incorporated into
this prospectus by reference. See "Where You Can Find More Information."
<TABLE>
<CAPTION>
As of and For the Six
Months Ended June 30, As of and for the Years Ended December 31,
--------------------- ------------------------------------------
1999 1998 1998 1997 1996 1995 1994
-------- -------- ------- -------- -------- -------- --------
(In thousands, except per share data and ratios)
Balance Sheet Data
<S> <C> <C> <C> <C> <C> <C> <C>
Total Assets $ 689,888 $ 595,471 $ 641,114 $ 569,030 $ 523,621 $ 487,169 $ 459,040
Total Deposits 539,161 493,183 511,500 500,060 452,539 424,294 391,650
Net Loans 547,253 463,957 505,668 438,738 380,594 358,464 333,375
Total Shareholders' Equity 57,157 57,454 58,474 56,714 56,815 55,504 51,131
Statements of Income Data
Interest Income $ 25,526 $ 22,856 $ 47,242 $ 43,348 $ 39,273 $ 37,274 $ 33,059
Interest Expense 11,919 10,499 21,915 18,978 16,376 14,721 11,265
Net Interest Income 13,607 12,357 25,327 24,370 22,897 22,553 21,794
Provision for Possible
Credit Losses 836 475 1,176 935 749 - 165
Other Operating Income 3,074 3,069 6,316 6,037 4,869 4,290 3,832
Other Operating Expense 10,122 9,697 19,058 19,530 17,394 18,390 16,220
Income Before Income Taxes 5,723 5,254 11,409 9,942 9,623 8,453 9,241
Income Taxes 1,960 1,830 3,982 3,297 3,144 2,849 3,014
----- ----- ----- ----- ----- ----- -----
Net Income $ 3,763 $ 3,424 $ 7,427 $ 6,645 $ 6,479 $ 5,604 $ 6,227
===== ===== ===== ===== ===== ===== =====
Per Share Data
Net Income $ 0.61 $ 0.55 $ 1.20 $ 1.05 $ 1.00 $ 0.86 $ 0.96
Dividends Paid 0.31 0.30 .60 .56 .51 .46 .43
Book Value 9.39 9.23 9.50 9.05 8.82 8.96 8.25
Performance Ratios
Return on Average Assets 1.13% 1.18% 1.24% 1.21% 1.29% 1.18% 1.40 %
Return on Average Equity 12.98 12.01 12.92 11.70 11.48 10.44 12.45
Efficiency Ratio 59.34 61.62 58.98 62.98 61.48 67.33 62.46
Net Interest Margin 4.43 4.62 4.56 4.83 4.97 5.15 5.21
Net Interest Spread 3.96 4.24 4.33 4.60 4.73 4.89 5.18
Dividend Payout 50.82 54.55 50.00 53.33 51.00 53.49 44.79
Asset Quality Ratios
Reserve for Possible Credit Losses
to Total Loans 0.68% 0.63% 0.65% 0.60% 0.57% 0.59% 0.70 %
Net Charge-Offs to Average Loans 0.07 0.04 0.11 0.11 0.19 0.07 0.04
Reserve for Possible Credit Losses
to Non-Performing Loans 198.89 187.51 329.08 235.91 133.70 104.02 155.01
Capital Ratios
Tier 1 Risk-Based
Capital Ratio 11.06% 14.02% 12.68% 14.16% 17.26% 17.94% 15.49 %
Total Risk-Based
Capital Ratio 11.78 14.74 13.40 14.82 17.92 18.63 16.18
Leverage Ratio 8.60 10.02 9.71 10.33 11.31 11.48 11.52
</TABLE>
11
<PAGE>
RATIO OF EARNINGS TO FIXED CHARGES
Our consolidated ratio of earnings to fixed charges is as follows:
<TABLE>
<CAPTION>
Six Months Ended Year Ended December 31,
June 30, 1999 1998 1997 1996 1995 1994
------------- ---- ---- ---- ---- ----
Earnings to Fixed Charges:
<S> <C> <C> <C> <C> <C> <C>
Including Interest on Deposits 1.48 1.52 1.52 1.59 1.57 1.82
Excluding Interest on Deposits 4.36 7.25 26.43 58.62 39.48 27.18
</TABLE>
The ratio of earnings to fixed charges is computed by dividing income
before income taxes and fixed charges less interest capitalized during the
period, net of amortization of previously capitalized interest, by fixed
charges. Fixed charges consist of interest, expended or capitalized, on
borrowings (including or excluding deposits, as applicable), and the portion of
rental expense which is deemed representative of interest.
RECENT DEVELOPMENTS
Results of Operations
Our net income for the quarter ended June 30, 1999 was $1.95 million,
an increase of $200,000 or 11.43% over the $1.75 million earned during the
second quarter in 1998. This increase translates into $.31 earnings per share
for the current period, compared to $.28 earnings per share earned during the
second quarter of 1998. Our net income for the six months ended June 30, 1999
was $3.76 million as compared to $3.42 million for the same period in 1998, an
increase of $340,000, or 9.94%.
We have generated significant loan growth during the second quarter of
1999. Our loans increased by $25.52 million or 4.86% to $551.00 million. Our
loan growth during the second quarter of 1998 was $16.54 million. Our year to
date loan growth, through June 30, 1999, is $42.03 million, or 8.25%. Over the
past twelve months, our loan portfolio grew by $84.09 million, or 18.00%. The
majority of our loan growth has been in our commercial and indirect auto loan
portfolios.
Our loan quality continues to be strong as demonstrated by the over
30-day delinquency ratio of .94% of gross loans, a number which compares very
favorably with our peers. Non performing loans were .34% of total loans as of
June 30, 1999, and our loan loss reserve of .68% of total loans represents
198.89% of nonperforming loans. Our core deposits grew $14.47 million for the
year to date through June 30, 1999. Since the core deposit growth was not
sufficient to support the strong loan demand that we experienced during the
first half of 1999, we drew upon supplementary funds from the Federal Home Loan
Bank System and from non-core brokered deposits.
Our fee income from other lines of businesses within our organization,
including income from our purchase of accounts receivables from commercial
customers, from our arrangement with PrimeVest, a full service broker-dealer,
and our trust department, continues to grow. During the second quarter of 1999,
our fee income increased $80,000 or 17.13% over the same time period in 1998.
Our year to date fee income increased $160,000, or 16.80%, over the same time
period in 1998.
12
<PAGE>
Year 2000 Issue
We are diligently preparing our computer systems, facilities, and
hardware for the upcoming century change. We are following the FFIEC guidelines
for Year 2000 readiness and have recently met important deadlines. As of June
30, 1999, all mission-critical systems have been thoroughly tested and are in
place, ready to transact business on January 1, 2000. We have significantly
completed testing of all non-mission critical systems in our test lab.
Additionally, we are testing the interfaces that connect us to the rest of the
financial services industry. As an added precaution, we are re-testing
mission-critical systems and any changed systems during the fourth quarter.
Contingency plans, a standard procedure in all financial institutions, have been
modified and expanded to include any possible Year 2000 issues. We also are
completing for the end of 1999 our development of a "command center" for the
century change period.
USE OF PROCEEDS
All the proceeds to the Trust from the sale of the preferred securities
will be invested by the Trust in the junior subordinated debentures. The net
proceeds we receive from the sale of the junior subordinated debentures, which
we estimate to be approximately $20,000,000 ($23,000,000 if the over-allotment
option is exercised in full), will be used:
o to make an equity contribution to our subsidiary, First United
Bank & Trust, to support internal growth opportunities;
o to finance growth, which may include one or more branch
acquisitions, acquisitions of other financial institutions, or
acquisitions of other financial services companies;
o to increase our capital; and
o for general corporate purposes.
The precise amounts and timing of the application of proceeds, and the type of
investment, will depend upon our and our subsidiaries' funding requirements and
the availability of other funds. We do not have any specific plans at this time
to make any particular acquisition.
Under the risk-based capital adequacy guidelines established by the
Board of Governors of The Federal Reserve System, the preferred securities
cannot constitute more than 25% of our total Tier 1 capital. Amounts in excess
of this 25% capital limitation will be Tier 2, or supplemental, capital, and
therefore will be included in total risk-based capital. We estimate that 95% of
the net proceeds of the sale of the preferred securities of the Trust will
initially be included in our Tier 1 capital, and the full amount will be
included in our total risk-based capital.
CAPITALIZATION
The following table sets forth: (1) our consolidated capitalization at
June 30, 1999; (2) our consolidated capitalization giving effect to the issuance
of the preferred securities; and (3) actual and pro forma capital ratios. The
"As Adjusted" column assumes application of the net proceeds from the
corresponding sale of the junior subordinated debentures to the Trust as if the
sale of the preferred securities had been consummated on June 30, 1999, and as
if the underwriters' over-allotment was not exercised. The table assumes that
the offering occurs on the last day of the period and that any resulting change
to average assets is considered immaterial.
13
<PAGE>
<TABLE>
<CAPTION>
At June 30, 1999
Actual As Adjusted
------ -----------
(Unaudited)
(Dollars In thousands)
Guaranteed preferred beneficial interests in our
<S> <C> <C> <C>
subordinated debt(1) $ 0 $20,000
Shareholders' Equity
Preferred stock no par value, 2,000,000
shares authorized, none issued 0 0
Capital stock .01 par value, 25,000,000
shares authorized; 6,085,192 shares
issued and outstanding 61 61
Surplus 20,397 20,397
Retained earnings 37,903 37,903
Accumulated other comprehensive income (1,204) (1,204)
------ ------
Total shareholders' equity $57,157 $57,157
------ ------
Total capitalization $57,157 $77,157
====== ======
Capital Ratios(2):
Equity to total assets 8.28% 8.05%
Tier 1 risk-based capital ratio(3)(4) 11.06 14.63
Total risk-based capital ratio(3)(4) 11.78 15.51
Leverage ratio 8.60 11.46
</TABLE>
(1) Reflects the Trust's preferred securities representing beneficial
interests in an aggregate principal amount of $20,000,000 of our ___%
junior subordinated debentures (not including the $3,000,000 aggregate
principal amount of junior subordinated debentures to be purchased in
the event the underwriters exercise their over-allotment option) that
will mature on September 30, 2029.
(2) The capital ratios, as adjusted, are computed including the total
estimated proceeds from the sale of the preferred securities in a
manner consistent with The Federal Reserve guidelines.
(3) The Federal Reserve guidelines for calculation of Tier 1 capital limit
the amount of preferred securities of the type offered by this
prospectus, together with other cumulative preferred stock, which can
be included in Tier 1 capital, to 25% of total Tier 1 capital.
(4) Assumes net proceeds of the offering of the preferred securities are
invested in assets with a 20% risk weighing under the risk-based
capital rules of The Federal Reserve.
14
<PAGE>
FIRST UNITED CAPITAL TRUST
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 July 19, 1999. The Trust will be governed by the trust agreement among
us, as depositor, Bankers Trust (Delaware), as Delaware trustee, and Bankers
Trust Company, as property trustee. We will select two individuals who are our
employees or officers to act as administrators of the Trust. See "Description of
Preferred Securities--Miscellaneous." The Trust exists for the exclusive
purposes of:
o issuing and selling the preferred securities and the common
securities;
o using the proceeds from the sale of the preferred securities
and the common securities to acquire the junior subordinated
debentures; and
o engaging in incidental activities (such as registering the
transfer of the preferred securities and the common
securities).
The junior subordinated debentures will be the sole assets of the Trust, and
payments under the junior subordinated debentures will be the sole source of
revenue of the Trust.
We will own all of the common securities. The common securities will
rank equally, and payments on them will be made pro rata, with the preferred
securities, except that upon the occurrence and during the continuation of an
event of default under the junior subordinated debentures, our rights as the
holder of the common securities to all payments will be subordinated to the
rights of the holders of the preferred securities. See "Description of Preferred
Securities--Subordination of Common Securities." We will acquire common
securities in an aggregate liquidation amount equal to 3% of the total capital
of the Trust. The Trust has a term of 30 years, but may terminate earlier as
provided in the trust agreement.
The address of the Delaware trustee is Bankers Trust (Delaware), 1101
Centre Road, Suite 200, Trust Department, Wilmington, Delaware 19805, and the
telephone number is (302) 636-3301.
The address of the property trustee, the guarantee trustee and the
debenture trustee is Bankers Trust Company, Four Albany Street, 4th Floor, New
York, New York 10006, and the telephone number is (212) 250-2500.
ACCOUNTING TREATMENT
For financial reporting purposes, the Trust will be treated as our
subsidiary and the accounts of the Trust will be included in our consolidated
financial statements. The preferred securities will be reflected as debt in the
consolidated balance sheet and appropriate disclosures about the preferred
securities, the guarantee and the junior subordinated debentures will be
included in the notes to our consolidated financial statements. For financial
reporting purposes, we will record distributions on the preferred securities as
an expense in our consolidated statement of income.
DESCRIPTION OF PREFERRED SECURITIES
The Trust will issue the preferred securities and the common securities
under the trust agreement. The preferred securities will represent preferred
undivided beneficial interests in the assets of the Trust. You will be entitled
a preference with respect to distributions and amounts payable on redemption or
liquidation over the common securities in certain circumstances, as well as
other benefits as described in the trust agreement.
15
<PAGE>
This summary of certain provisions of the preferred securities and the
trust agreement is not complete. You should read the form of the trust
agreement, which is filed as an exhibit to the registration statement of which
this prospectus is a part. Wherever particular defined terms of the trust
agreement are referred to in this prospectus, the defined terms are incorporated
in this prospectus by reference. A copy of the form of the trust agreement is
also available upon request from the trustees.
General
The preferred securities will be limited to $20,000,000 aggregate
liquidation amount (as defined in the trust agreement) outstanding (which amount
may be increased to up to $23,000,000 aggregate liquidation amount of preferred
securities for exercise of the underwriters' over-allotment option, if any). See
"Underwriting." The preferred securities will rank equally, and payments will be
made pro rata, with the common securities except as described under
"Subordination of Common Securities." The junior subordinated debentures will be
registered in the name of the Trust and held by the property trustee in trust
for your benefit, as a holder of preferred securities, and for our benefit, as
the holders of the common securities. The guarantee we will execute for the
benefit of the holders of the preferred securities will be a guarantee on a
subordinated basis with respect to the preferred securities but will not
guarantee payments when the Trust does not have funds on hand available to make
these payments. See "Description of Guarantee."
Distributions
You will receive distributions on each preferred security at the annual
rate of ___% of the stated liquidation amount of $10.00, payable quarterly in
arrears on March 31, June 30, September 30 and December 31 of each year, to
record holders at the close of business on the 15th day of March, June,
September and December (whether or not a business day) next preceding the
relevant distribution date. Distributions on the preferred securities will be
cumulative. Distributions will accumulate from the date of issue. The first
distribution date for the preferred securities will be September 30, 1999. The
amount of distributions payable for any period less than a full distribution
period will be computed on the basis of a 360-day year of twelve 30-day months
and the actual days elapsed in a partial month in the period. Distributions
payable for each full distribution period will be computed by dividing the
annual rate by four. If any date on which distributions are payable is not a
business day, then payment will be made on the next succeeding day that is a
business day (without any additional distributions or other payment because of
the delay), except that, if the business day falls in the next calendar year,
the payment will be made on the immediately preceding business day.
So long as no debenture event of default has occurred and is
continuing, we have the right to defer the payment of interest on the junior
subordinated debentures at any time or from time to time for an "extension
period" not exceeding 20 consecutive quarterly periods, but not beyond the
maturity date of the junior subordinated debentures. Quarterly distributions on
the preferred securities will be deferred during the extension period.
Distributions to which you are entitled will accumulate additional distributions
at the annual rate of ______%, compounded quarterly from the relevant payment
date, computed on the basis of a 360-day year of twelve 30-day months and the
actual days elapsed in a partial month in the period. Additional distributions
payable for each full distribution period will be computed by dividing the
annual rate by four.
During any extension period, we may not: (1) declare or pay any
dividends or distributions on, or redeem, purchase, acquire or make a
liquidation payment with respect to, any of our capital stock; or (2) make any
payment of principal (or any premium on the principal) or interest, or repay,
repurchase or redeem any of our debt securities that rank equally in all
respects with or junior in interest to the junior subordinated debentures.
16
<PAGE>
These prohibitions, however, do not apply to:
o repurchases, redemptions or other acquisitions of our capital
stock, in connection with any employment contract, benefit
plan or other similar arrangement, a dividend reinvestment or
shareholder stock purchase plan or the issuance of our capital
stock (or securities convertible into or exercisable for the
capital stock) as consideration in an acquisition or merger
transaction entered into prior to the applicable extension
period;
o a reclassification, exchange or conversion of any class or
series of our capital stock (or any capital stock of our
subsidiaries) for any class or series of our capital stock or
of any class or series of any indebtedness for any class or
series of our capital stock;
o the purchase of fractional interests in shares of our capital
stock pursuant to the conversion or exchange provisions of the
capital stock or the security being converted or exchanged;
o any declaration of a dividend in connection with any
shareholders' rights plan, or the issuance of rights, stock or
other property under any shareholders' rights plan, or the
redemption or repurchase of rights pursuant to any
shareholders' rights plan; or
o any dividend in the form of stock, warrants, options or other
rights, where the dividend stock or the stock issuable upon
exercise of the warrants, options or other rights is the same
stock as that on which the dividend is being paid or ranks
equally with or junior to the stock.
Upon the termination of an extension period and the payment of all
amounts then due, we may begin a new extension period. We must give the trustees
notice of our election to defer the payment of interest at least one business
day before the earlier of: (1) the date the distributions on the preferred
securities would have been payable but for the election to begin the extension
period; or (2) the date the property trustee is required to give you notice of
the record date or the date the distributions are payable, but in any event not
less than one business day prior to the record date. The property trustee will
give you notice of our election to begin a new extension period. Subject to the
foregoing, there is no limitation on the number of times that we may elect to
begin an extension period. See "Description of Junior Subordinated
Debentures--Option To Extend Interest Payment Period" and "Certain Federal
Income Tax Consequences--Interest Income and Original Issue Discount."
We currently do not intend to exercise our right to defer payments of
interest.
The revenue of the Trust available for distribution to you will be
limited to payments under the junior subordinated debentures. See "Description
of Junior Subordinated Debentures." If we do not make payments on the junior
subordinated debentures, the Trust may not have funds available to pay
distributions or other amounts payable on the preferred securities. The payment
of distributions and other amounts payable on the preferred securities (if and
to the extent the Trust has funds legally available for and cash sufficient to
make these payments) is guaranteed by us on a limited basis as described below
under "Description of Guarantee."
Redemption
If we repay or redeem the junior subordinated debentures, we must give
the property trustee not less than 30, nor more than 60 days notice so that it
can redeem a proportionate amount of the preferred and common securities.
17
<PAGE>
The redemption price for each preferred security shall equal $10.00
plus accumulated but unpaid distributions on the redemption date and the related
amount of the premium, if any, paid by us upon the concurrent redemption of the
junior subordinated debentures. See "Description of Junior Subordinated
Debentures--Redemption." If less than all the junior subordinated debentures are
to be repaid or redeemed on a redemption date, then the proceeds from the
repayment or redemption shall be allocated to the redemption pro rata of the
preferred securities and the common securities.
We may redeem the junior subordinated debentures: (1) on or after
September 30, 2004 in whole at any time or in part from time to time; or (2) in
whole, but not in part, at any time within 90 days following the occurrence and
during the continuation of a Tax Event, Investment Company Event or Capital
Treatment Event (each as defined below), in each case subject to possible
regulatory approval. See "Liquidation Distribution Upon Dissolution." A
redemption of the junior subordinated debentures would cause a mandatory
redemption of a proportionate amount of the preferred securities and common
securities at the redemption price.
"Tax Event" means the receipt by the Trust of an opinion of an
experienced counsel matters to the effect that, as a result of any amendment to,
or change (including an announced prospective change) in, the laws (or any
regulations thereunder) of the United States or any of its political
subdivisions or taxing authorities, or as a result of any official or
administrative pronouncement or action or judicial decision interpreting or
applying these laws or regulations, which amendment or change is effective or
which pronouncement or decision is announced on or after the date of issuance of
the preferred securities, there is more than an insubstantial risk that:
o the Trust is, or will be within 90 days of the delivery of the
opinion, subject to United States federal income tax with
respect to income received or accrued on the junior
subordinated debentures;
o interest payable by us on the junior subordinated debentures
is not, or within 90 days of the delivery of the opinion will
not be, deductible by us, in whole or in part, for United
States federal income tax purposes; or
o the Trust is, or will be within 90 days of the delivery of the
opinion, subject to more than a de minimis amount of other
taxes, duties or other governmental charges.
See "Certain Federal Income Tax Consequences--Pending Tax Litigation Affecting
the Preferred Securities" for a discussion of pending United States Tax Court
litigation that, if decided adversely to the taxpayer, could give rise to a Tax
Event, that may permit us to redeem the junior subordinated debentures before
September 30, 2004.
If a Tax Event described in the first or third circumstances above has
occurred and is continuing and the Trust holds all of the junior subordinated
debentures, we will pay on the junior subordinated debentures any additional
amounts necessary so that the amount of distributions then due and payable by
the Trust on the outstanding preferred securities and common securities of the
Trust will not be reduced as a result of any additional taxes, duties and other
governmental charges to which the Trust has become subject as a result of a Tax
Event.
"Investment Company Event" means the receipt by the Trust of an opinion
of an experienced counsel to the effect that, as a result of the occurrence of a
change in law or regulation or a written change (including any announced
prospective change) in interpretation or application of law or regulation by any
legislative body, court, governmental agency or regulatory authority, there is
more than an insubstantial risk that the Trust is or will be considered an
"investment company" that is required to be registered under the Investment
Company Act, which change or prospective change
18
<PAGE>
becomes effective or would become effective, as the case may be, on or after the
date of the issuance of the preferred securities.
"Capital Treatment Event" means the reasonable determination by us
that, as a result of the occurrence of any amendment to, or change (including
any announced prospective change) in, the laws (or any rules or regulations
thereunder) of the United States or its political subdivisions, or as a result
of any official or administrative pronouncement or action or judicial decision
interpreting or applying their laws or regulations, which amendment or change is
effective or pronouncement, action or decision is announced on or after the date
of issuance of the preferred securities, there is more than an insubstantial
risk that we will not be entitled to treat an amount equal to the liquidation
amount of the preferred securities, as Tier 1 Capital (or any equivalent
amount), except as otherwise restricted by The Federal Reserve, for purposes of
the capital adequacy guidelines of The Federal Reserve, as then in effect and
applicable to us. The Federal Reserve has determined that the proceeds of
certain qualifying securities like the preferred securities will qualify as Tier
1 capital for us only up to an amount not to exceed, when taken together with
all of our cumulative preferred stock, if any, 25% of our Tier 1 capital.
Redemption Procedures
Preferred securities redeemed on each redemption date shall be redeemed
at a price equal to $10.00 plus accumulated but unpaid distributions, with the
applicable proceeds from the contemporaneous redemption of the junior
subordinated debentures. Redemptions of the preferred securities will be made
and the redemption price will be payable on each redemption date only to the
extent that the Trust has funds on hand available for the payment of the
redemption price. See also "Subordination of Common Securities."
If the Trust gives you notice of redemption of the preferred
securities, then, by 12:00 noon, eastern time, on the redemption date, to the
extent funds are available, in the case of preferred securities held in
book-entry form, the property trustee will deposit irrevocably with The
Depository Trust Company funds sufficient to pay the redemption price and will
give DTC irrevocable instructions and authority to pay the redemption price to
you. With respect to preferred securities not held in book-entry form, the
property trustee, to the extent funds are available, will irrevocably deposit
with the paying agent for the preferred securities funds sufficient to pay the
redemption price and will give the paying agent irrevocable instructions and
authority to pay the redemption price to you once you surrender your
certificates evidencing the preferred securities. However, distributions payable
on or before the redemption date for any preferred securities called for
redemption will be payable to you on the relevant record dates for the related
distribution dates.
If notice of redemption is given and funds are deposited as required,
then upon the date of the deposit all of your rights with respect to your
preferred securities so called for redemption will cease, except your right to
receive the redemption price and any distributions payable in respect of the
preferred securities on or prior to the redemption date, but without interest,
and preferred securities that are redeemed will no longer be outstanding. If any
date fixed for redemption of preferred securities is not a business day, then
payment of the redemption price payable on that date will be made on the next
succeeding day which is a business day (without any interest or other payment in
respect of any delay), except that, if the business day falls in the next
calendar year, the payment will be made on the immediately preceding business
day. In the event that payment of the redemption price for the preferred
securities called for redemption is improperly withheld or refused and not paid
either by the Trust or by us pursuant to the guarantee as described under
"Description of Guarantee," distributions on the preferred securities will
continue to accumulate at the then applicable rate, from the redemption date
originally established by the Trust for the preferred securities to the date the
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redemption price is actually paid, in which case the actual payment date will be
the date fixed for redemption for purposes of calculating the redemption price.
Subject to applicable law (including United States federal securities
laws), we or our affiliates may at any time and from time to time purchase
outstanding preferred securities by tender, in the open market or by private
agreement, and may resell the securities.
If less than all the preferred securities and common securities are to
be redeemed on a redemption date, then the aggregate liquidation amount of the
preferred securities and common securities to be redeemed will be allocated pro
rata to the preferred securities and the common securities based upon the
relative liquidation amounts of the classes. The particular preferred securities
to be redeemed will be selected on a pro rata basis not more than 60 days before
the redemption date by the property trustee from the outstanding preferred
securities not previously called for redemption, or in accordance with DTC's
customary procedures if the preferred securities are then held in the form of a
global preferred security. The property trustee must promptly notify the
securities registrar for the preferred securities in writing of the preferred
securities selected for redemption and, in the case of any preferred securities
selected for partial redemption, the liquidation amount of the preferred
securities to be redeemed. For all purposes of the trust agreement, unless the
context otherwise requires, all provisions relating to the redemption of
preferred securities will relate, in the case of any preferred securities
redeemed or to be redeemed only in part, to the portion of the aggregate
liquidation amount of preferred securities which has been or is to be redeemed.
Notice of any redemption will be mailed to you at your address as it
appears on the securities register for the Trust at least 30 days but not more
than 60 days before the redemption date if your preferred securities will be
redeemed. Unless we default in payment of the redemption price on the junior
subordinated debentures, on and after the redemption date, interest will no
longer accrue on the junior subordinated debentures or any portions called for
redemption.
Unless payment of the redemption price in respect of the preferred
securities is withheld or refused and not paid either by the Trust or us
pursuant to the guarantee, distributions will no longer accumulate on the
preferred securities or any portions called for redemption.
Subordination of Common Securities
Payment of distributions on, the redemption price of, and the
liquidation distribution in respect of, the preferred securities and common
securities, as applicable, will be made pro rata based on the liquidation amount
of the preferred securities and common securities. However, if on any
distribution date or redemption date a debenture event of default has occurred
and is continuing as a result of our failure by us to pay any amounts in respect
of the junior subordinated debentures when due, no payment of any distribution
on, or redemption price of, or liquidation distribution in respect of, any of
the common securities, and no other payment on account of the redemption,
liquidation or other acquisition of the common securities, may be made unless
payment in full in cash of all accumulated and unpaid distributions on all the
outstanding preferred securities for all distribution periods terminating on or
prior to our failure to pay, or in the case of payment of the redemption price,
the full amount of the redemption price on all the outstanding preferred
securities then called for redemption, shall have been made or provided for, and
all funds immediately available to the property trustee must first be applied to
the payment in full in cash of all distributions on, or redemption price of, the
preferred securities then due and payable.
In the case of any event of default with respect to the preferred
securities (as described below under "Events of Default; Notice") resulting from
an event of default with respect to junior subordinated debentures (as described
below under "Description of Junior Subordinated
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Debentures--Debenture Events of Default"), the holders of the common securities
will have no right to act with respect to any event of default under the trust
agreement until the effects of these events of default with respect to the
preferred securities have been cured, waived or otherwise eliminated. See
"Events of Default; Notice" and "Description of Junior Subordinated
Debentures--Debenture Events of Default." Until all events of default under the
trust agreement with respect to the preferred securities have been so cured,
waived or otherwise eliminated, the property trustee will act solely on your
behalf and not on our behalf, as the holders of the common securities, and only
you will have the right to direct the property trustee to act on your behalf.
Liquidation Distribution Upon Dissolution
The amount payable on the preferred securities in the event of any
liquidation of the Trust is $10.00 per preferred security plus accumulated and
unpaid distributions, subject to certain exceptions which may be in the form of
a distribution of this amount in junior subordinated debentures.
The holders of all the outstanding common securities have the right at
any time to dissolve the Trust and, after satisfaction of liabilities to
creditors of the Trust as provided by applicable law, cause the junior
subordinated debentures to be distributed to you and the holders of the common
securities in liquidation of the Trust.
The Federal Reserve's risk-based capital guidelines currently provide
that redemptions of permanent equity or other capital instruments before stated
maturity could have a significant impact on a bank holding company's overall
capital structure and that any organization considering a redemption should
consult with The Federal Reserve before redeeming any equity or capital
instrument prior to maturity if the redemption could have a material effect on
the level or composition of the organization's capital base (this consultation
may not be necessary if the equity or capital instrument is redeemed with the
proceeds of, or replaced by, a like amount of a similar or higher quality
capital instrument and The Federal Reserve considers the organization's capital
position to be fully adequate after the redemption).
In the event we, while a holder of common securities, dissolve the
Trust before the maturity date of the preferred securities and the dissolution
of the Trust is deemed to constitute the redemption of capital instruments by
The Federal Reserve under its risk-based capital guidelines or policies, our
dissolution of the Trust may be subject to the prior approval of The Federal
Reserve. Moreover, any changes in applicable law or changes in The Federal
Reserve's risk-based capital guidelines or policies could impose a requirement
on us to obtain the prior approval of The Federal Reserve to dissolve the Trust.
Pursuant to the trust agreement, the Trust will automatically dissolve
upon expiration of its term or, if earlier, will dissolve on the first to occur
of:
o certain events of bankruptcy, dissolution or liquidation of us
or another holder of the common securities;
o the distribution of a proportionate amount of the junior
subordinated debentures to you and the holders of the common
securities, if the holders of common securities have given
written direction to the property trustee to dissolve the
Trust (which direction, subject to the foregoing restrictions,
is optional and wholly within the discretion of the holders of
common securities);
o the redemption of all the preferred securities in connection
with the redemption of all the preferred securities and common
securities as described under "Redemption"; and
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o the entry of an order for the dissolution of the Trust by a
court of competent
jurisdiction.
If dissolution of the Trust occurs as described in any of the first three
circumstances described above, the Trust will be liquidated by the property
trustee as expeditiously as the property trustee determines to be possible by
distributing, after satisfaction of liabilities to creditors of the Trust as
provided by applicable law, to you and the holders of the common securities a
proportionate amount of the junior subordinated debentures, unless the
distribution is not practical.
If distribution of the junior subordinated debentures is not practical,
you and the holders of preferred securities and common securities will be
entitled to receive out of the assets of the Trust available for distribution to
holders, after satisfaction of liabilities to creditors of the Trust as provided
by applicable law, an amount equal to, in the case of your distribution, the
aggregate of the liquidation amount plus accumulated and unpaid distributions
thereon to the date of payment. If the liquidation distribution can be paid only
in part because the Trust has insufficient assets available to pay in full the
aggregate liquidation distribution, then the amounts payable directly by the
Trust on its preferred securities shall be paid on a pro rata basis.
The holders of the common securities will be entitled to receive
distributions upon any liquidation pro rata with you, except that if an event of
default under the junior subordinated debentures has occurred and is continuing
as a result of our failure to pay any amounts in respect of the junior
subordinated debentures when due, the preferred securities shall have a priority
over the common securities. See "Subordination of Common Securities."
After the liquidation date is fixed for any distribution of junior
subordinated debentures:
o the preferred securities will no longer be deemed to be
outstanding;
o DTC or its nominee, as the registered holder of preferred
securities, will receive a registered global certificate or
certificates (which are not the registered global
certificates) representing the junior subordinated debentures
to be delivered upon the distribution with respect to
preferred securities held by DTC or its nominee; and
o any certificates representing the preferred securities not
held by DTC or its nominee will be deemed to represent the
junior subordinated debentures having a principal amount equal
to the stated liquidation amount of the preferred securities
and bearing accrued and unpaid interest in an amount equal to
the accumulated and unpaid distributions on the preferred
securities until the certificates are presented to the
security registrar for the preferred securities and common
securities for transfer or reissuance.
If we do not redeem the junior subordinated debentures before maturity,
the Trust is not liquidated, and the junior subordinated debentures are not
distributed to you, then the preferred securities will remain outstanding until
the repayment of the junior subordinated debentures and the distribution of the
liquidation distribution to you.
There can be no assurance as to the market prices for the preferred
securities or the junior subordinated debentures that may be distributed in
exchange for preferred securities if a dissolution and liquidation of the Trust
were to occur. Accordingly, the preferred securities that you may purchase, or
the junior subordinated debentures that you may receive on dissolution and
liquidation of the Trust, may trade at a discount to the price that you paid to
purchase the preferred securities offered by this prospectus.
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Events of Default; Notice
Any one of the following events is an event of default under the trust
agreement with respect to the preferred securities (whatever the reason for the
event of default and whether it is voluntary or involuntary or effected by
operation of law or pursuant to a judgment, decree or order of any court or any
order, rule or regulation of any administrative or governmental body):
o the occurrence of a event of default with respect to the
junior subordinated debentures (see "Description of Junior
Subordinated Debentures--Debenture Events of Default");
o default by the Trust in the payment of any distribution when
it becomes due and payable, and continuation of the default
for a period of 30 days;
o default by the Trust in the payment of any redemption price of
any preferred security and common security when it becomes due
and payable;
o default in the performance, or breach, in any material
respect, of any covenant or warranty of the trustees in the
trust agreement (other than a covenant or warranty a default
in the performance of which or the breach of which is
addressed in either of the second or third circumstances
above), and continuation of the default or breach for a period
of 60 days after the holders of at least 25% in aggregate
liquidation amount of the outstanding preferred securities
give, by registered or certified mail, to the trustees and us,
a written notice specifying the default or breach and
requiring it to be remedied and stating that the notice is a
"Notice of Default" under the trust agreement; or
o the occurrence of certain events of bankruptcy or insolvency
with respect to the property trustee if a successor property
trustee has not been appointed within 90 days of the event.
Within five business days after the occurrence of any event of default
actually known to the property trustee, the property trustee will transmit
notice of the event of default to you and the holders of the common securities
and the preferred securities and the administrators, unless the event of default
has been cured or waived. We, as depositor, and the administrators are required
to file annually with the property trustee a certificate as to whether or not we
are in compliance with all the conditions and covenants applicable to us under
the trust agreement.
If an event of default with respect to the junior subordinated
debentures has occurred and is continuing as a result of any failure by us to
pay any amounts in respect of the junior subordinated debentures when due, the
preferred securities will have a preference over the common securities with
respect to payments of any amounts as described above. See "Subordination of
Common Securities," "Liquidation Distribution Upon Dissolution" and "Description
of Junior Subordinated Debentures--Debenture Events of Default."
Removal of Trustees; Appointment of Successors
The holders of at least a majority in aggregate liquidation amount of
the outstanding preferred securities may remove any trustee for cause, or if an
event of default with respect to the junior subordinated debentures has occurred
and is continuing, with or without cause. If a trustee is removed by the holders
of the outstanding preferred securities, the successor may be appointed by the
holders of at least 25% in aggregate liquidation amount of preferred securities.
If a trustee resigns, the trustee will appoint its successor. If a trustee fails
to appoint a successor, the holders of at least 25% in
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aggregate liquidation amount of the outstanding preferred securities may appoint
a successor. If a successor has not been appointed by you or the holders, any
holder of preferred securities or common securities or the other trustee may
petition a court in the State of Delaware to appoint a successor. Any Delaware
trustee must meet the applicable requirements of Delaware law. Any property
trustee must be a national or state-chartered bank, and at the time of
appointment have securities rated in one of the three highest rating categories
by a nationally recognized statistical rating organization and have capital and
surplus of at least $50,000,000. No resignation or removal of a 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 Trustees
Any entity into which the property trustee or the Delaware trustee may
be merged or converted or with which it may be consolidated, or any entity
resulting from any merger, conversion or consolidation to which the trustee is a
party, or any entity succeeding to all or substantially all the corporate trust
business of the trustee, will be the successor of the trustee under the trust
agreement, provided the entity is otherwise qualified and eligible.
Mergers, Consolidations, Amalgamations or Replacements of the Trust
The Trust may not merge with or into, consolidate, amalgamate, or be
replaced by, convey, transfer or lease its properties and assets substantially
as an entirety to, any entity, except as described below or as otherwise
provided in the trust agreement. The Trust may, at the request of the holders of
the common securities and with the consent of the holders of at least a majority
aggregate liquidation amount of the outstanding preferred securities, merge with
or into, consolidate, amalgamate, or be replaced by or convey, transfer or lease
its properties and assets substantially as an entirety to a trust organized
under the laws of any state, so long as:
o the successor entity: (1) expressly assumes all the
obligations of the Trust with respect to the preferred
securities; or (2) substitutes for the preferred securities
other securities having substantially the same terms as the
preferred securities so long as the substitute preferred
securities have the same priority as the preferred securities
with respect to distributions and payments upon liquidation,
redemption and otherwise;
o a trustee of the successor entity, possessing the same powers
and duties as the property trustee, is appointed to hold the
junior subordinated debentures;
o the merger, consolidation, amalgamation, replacement,
conveyance, transfer or lease does not cause the preferred
securities (including any substitute preferred securities) to
be downgraded by any nationally recognized statistical rating
organization, if then rated;
o the merger, consolidation, amalgamation, replacement,
conveyance, transfer or lease does not adversely affect the
rights, preferences and privileges of the holders of the
preferred securities (including any substitute preferred
securities) in any material respect;
o the successor entity has a purpose substantially identical to
that of the Trust;
o before the merger, consolidation, amalgamation, replacement,
conveyance, transfer or lease, the Trust has received an
opinion from independent and experienced counsel to
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the effect that: (1) the merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease does not adversely
affect your rights, preference and privileges as a holder of
preferred securities (including any substitute preferred
securities) in any material respect; and (2) following the
merger, consolidation, amalgamation, replacement, conveyance,
transfer or lease, neither the Trust nor the successor entity
will be required to register as an investment company under
the Investment Company Act; and
o we or any permitted successor or assignee own all the common
securities of the successor entity and guarantee the
obligations of the successor entity under the successor
securities at least to the extent provided by the guarantee.
However, the Trust may not, except with the consent of all the holders of the
preferred securities, consolidate, amalgamate, merge with or into, or be
replaced by or convey, transfer or lease its properties and assets substantially
as an entirety to, any other entity or permit any other entity to consolidate,
amalgamate, merge with or into or replace it if the consolidation, amalgamation,
merger, replacement, conveyance, transfer or lease would cause the Trust or the
successor entity to be taxable as a corporation for United States federal income
tax purposes.
Voting Rights; Amendment of Trust Agreement
Except as provided above and under "Removal of Trustees; Appointment of
Successors" and "Description of Guarantee--Amendments and Assignment" and as
otherwise required by law and the trust agreement, you will have no voting
rights.
The trust agreement may be amended from time to time by the holders of
a majority of the common securities and the property trustee, without your
consent to:
o 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,
provided that the amendment does not adversely affect in any
material respect your interests; or
o modify, eliminate or add to any provisions of the trust
agreement to the extent as may be necessary to ensure that the
Trust will not be taxable as a corporation for United States
federal income tax purposes at any time that any preferred or
common securities are outstanding or to ensure that the Trust
will not be required to register as an "investment company"
under the Investment Company Act.
Any amendments of the trust agreement will become effective when notice of the
amendment is given to the holders of preferred securities and common securities.
The trust agreement may be amended by the holders of a majority of the
common securities and the property trustee with:
o the consent of holders representing not less than a majority
in aggregate liquidation amount of the outstanding preferred
securities; and
o receipt by the trustees of an opinion of counsel to the effect
that the amendment or the exercise of any power granted to the
trustees in accordance with the amendment will
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not affect the Trust's not being taxable as a corporation for
United States federal income tax purposes or the Trust's
exemption from status as an "investment company" under the
Investment Company Act.
However, without the consent of every holder of preferred securities or common
securities affected, the trust agreement may not be amended to:
o change the amount or timing of any distribution on the
preferred securities and common securities or otherwise
adversely affect the amount of any distribution required to be
made in respect of the preferred securities and common
securities as of a specified date; or
o restrict your right and the right of a holder of common
securities to institute suit for the enforcement of the
payment on or after the specified date.
So long as any junior subordinated debentures are held by the Trust,
the property trustee will not:
o direct the time, method and place of conducting any proceeding
for any remedy available to the debenture trustee, or execute
any trust or power conferred on the property trustee with
respect to the junior subordinated debentures;
o waive any past default that is waivable under Section 5.13 of
the indenture;
o exercise any right to rescind or annul a declaration that the
principal of all the junior subordinated debentures shall be
due and payable; or
o consent to any amendment, modification or termination of the
indenture or the junior subordinated debentures, where the
consent shall be required, without, in each case, obtaining
the prior approval of the holders of at least a majority in
aggregate liquidation amount of the outstanding preferred
securities, or, if a consent under the indenture would require
the consent of every holder of junior subordinated debentures
affected, no consent will be given by the property trustee
without the prior consent of each holder of the preferred
securities.
The property trustee may not revoke any action previously authorized or
approved by a vote of the holders of the preferred securities except by
subsequent vote of the holders of the preferred securities. The property trustee
will notify you of any notice of default with respect to the junior subordinated
debentures. In addition to obtaining your approval as described above, before
taking any of the actions listed above, the property trustee will obtain an
opinion of experienced counsel to the effect that the Trust will not be taxable
as a corporation for United States federal income tax purposes on account of the
action.
Any required approval of holders of preferred securities may be given
at a meeting of holders of preferred securities convened for the purpose or
pursuant to written consent. The property trustee will cause a notice of any
meeting at which you are entitled to vote, or of any matter upon which action by
your written consent is to be taken, to be given to you in the manner provided
in the trust agreement.
Your vote or consent will not be required to redeem and cancel
preferred securities in accordance with the trust agreement.
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Notwithstanding that you are entitled to vote or consent under any of
the circumstances described above, any of the preferred securities that are
owned by us, the trustees or any of our affiliates or any trustees, will, for
purposes of the vote or consent, be treated as if they were not outstanding.
Expenses and Taxes
In the indenture, we have agreed to pay all debts and other obligations
(other than distributions on the preferred securities) and all costs and
expenses of the Trust (including costs and expenses relating to the organization
of the Trust, the fees and expenses of the trustees and the costs and expenses
relating to the operation of the Trust) and to pay any and all taxes and all
costs and expenses with respect to any taxes (other than United States
withholding taxes) to which the Trust might become subject. Our obligations
under the indenture are for the benefit of, and shall be enforceable by, any
creditor of the Trust to whom any of these debts, obligations, costs, expenses
and taxes are owed whether or not the creditor has received notice. The creditor
may enforce these obligations directly against us, and we have irrevocably
waived any right or remedy to require that any creditor take any action against
the Trust or any other person before proceeding against us. We have also agreed
in the indenture to execute the additional agreements as may be necessary or
desirable to give full effect to these payment obligations.
Book Entry, Delivery and Form
The preferred securities will be issued in the form of one or more
fully registered global securities, which will be deposited with, or on behalf
of, DTC and registered in the name of a DTC nominee. Unless and until it is
exchangeable in whole or in part for the preferred securities in definitive
form, a global security may not be transferred except as a whole by DTC to a
nominee of DTC or by a nominee of DTC to DTC or to another nominee of DTC or by
DTC or the nominee to a successor of DTC or to a nominee of the successor.
Ownership of beneficial interests in a global security will be limited
to participants that have accounts with DTC or its nominee or persons that may
hold interests through the participants. We expect that, upon the issuance of a
global security, DTC will credit, on its book-entry registration and transfer
system, the participants' accounts with their respective principal amounts of
preferred securities represented by the global security. Ownership of beneficial
interests in the global security will be shown on, and the transfer of the
ownership interests will be effected only through, records maintained by DTC
(with respect to your interests of participants) and on the records of
participants (with respect to your interests). You will not receive written
confirmation from DTC of your purchase, but are expected to receive written
confirmations from participants through which you entered into the transaction.
Transfers of ownership interests will be accomplished by entries on the
books of participants acting on your behalf. So long as DTC, or its nominee, is
the registered owner of a global security, DTC or the nominee, as the case may
be, will be considered the sole owner or holder of the preferred securities
represented by the global security for all purposes under the trust agreement.
Except as provided below, you are the owner of beneficial interests in a global
security and will not be entitled to receive physical delivery of the preferred
securities in definitive form.
You will not be considered an owner or holder under the trust
agreement. Accordingly, you must rely on the procedures of DTC and, if you are
not a participant, on the procedures of the participant through which you own
your interest, to exercise any rights as a holder of preferred securities under
the trust agreement. We understand that, under DTC's existing practices, in the
event that we request any action you, or if you desire to take any action which
a holder is entitled to take
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under the trust agreement, DTC would authorize the participants holding your
interests to take the action, and the participants would authorize you to take
the action or would otherwise act upon your instructions. Redemption notices
will also be sent to DTC. If less than all of the preferred securities are being
redeemed, we understand that it is DTC's existing practice to determine by lot
the amount of the interest of each participant to be redeemed.
Distributions on the preferred securities registered in the name of DTC
or its nominee will be made to DTC or its nominee, as the case may be, as the
registered owner of the global security representing the preferred securities.
Neither the trustees, nor the administrators, any paying agent or any other
agent of ours or the trustees will have any responsibility or liability for any
aspect of the records relating to or payments made on account of beneficial
ownership interests in the global security for the preferred securities or for
maintaining, supervising or reviewing any records relating to the beneficial
ownership interests. Disbursements of distributions to participants will be
DTC's responsibility. DTC's practice is to credit participants' accounts on a
payable date in accordance with their respective holdings shown on DTC's records
unless DTC has reason to believe that it will not receive payment on the payable
date. Payments by participants to you will be governed by standing instructions
and customary practices, as is the case with securities held for the accounts of
customers in bearer form or registered in "street name," and will be the
responsibility of the participant and not of DTC, us, the trustees, the paying
agent or any other agent of ours, subject to any statutory or regulatory
requirements as may be in effect from time to time.
DTC may discontinue providing its services as securities depository
with respect to the preferred securities at any time by giving reasonable notice
to us or the trustees. If DTC notifies us that it is unwilling to continue as
depository, or if it is unable to continue or ceases to be a clearing agency
registered under the Securities Exchange Act of 1934 and a successor depository
is not appointed by us within 90 days after receiving the notice or becoming
aware that DTC is no longer a registered clearing agency, we will issue the
preferred securities in definitive form upon registration of transfer of, or in
exchange for, the global security. In addition, we may at any time and in our
sole discretion determine not to have the preferred securities represented by
one or more global securities and, in this event, will issue preferred
securities in definitive form in exchange for all of the global securities
representing the preferred securities.
DTC has advised the Trust and us as follows:
o DTC is a limited purpose trust company organized under the
laws of the State of New York, a member of The Federal
Reserve, a "clearing corporation" within the meaning of the
Uniform Commercial Code and a "clearing agency" registered
pursuant to the provisions of Section 17A of the Exchange Act;
o DTC was created to hold securities for its participants and to
facilitate the clearance and settlement of securities
transactions between participants through electronic book
entry changes to accounts of its participants, thereby
eliminating the need for physical movement of certificates;
o participants include securities brokers and dealers (such as
the underwriters), banks, trust companies and clearing
corporations and may include certain other organizations;
o certain of the participants (or their representatives),
together with other entities, own DTC; and
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o indirect access to the DTC system is available to others such
as banks, brokers, dealers and trust companies that clear
through, or maintain a custodial relationship with, a
participant, either directly or indirectly.
Same-Day Settlement and Payment
Settlement for the preferred securities will be made by the
underwriters in immediately available funds.
Secondary trading in preferred securities of corporate issuers is
generally settled in clearinghouse or next-day funds. In contrast, the preferred
securities will trade in DTC's Same-Day Funds Settlement System, and secondary
market trading activity in the preferred securities will therefore be required
by DTC to settle in immediately available funds. No assurance can be given as to
the effect, if any, of settlement in immediately available funds on trading
activity in the preferred securities.
Payment and Paying Agency
Payments in respect of the preferred securities will be made to DTC,
which will credit the relevant accounts at DTC on the applicable distribution
dates or, if the preferred securities are not held by DTC, the payments will be
made by check mailed to the address of the holder entitled to it at the address
that appears on the securities register for the preferred securities and common
securities. The paying agent will initially be the property trustee and any
co-paying agent chosen by the property trustee and acceptable to the
administrators. The paying agent will be permitted to resign as paying agent
upon 30 days written notice to the property trustee and the administrators. If
the property trustee is no longer the paying agent, the property trustee will
appoint a successor (which must be a bank or trust company reasonably acceptable
to the administrators) to act as paying agent.
Registrar and Transfer Agent
The property trustee will act as registrar and transfer agent for the
preferred securities.
Registration of transfers of preferred securities will be effected
without charge by or on behalf of the Trust, but only 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 preferred securities after the preferred
securities have been called for redemption.
Obligations and Duties of the Property Trustee
The property trustee, other than during the occurrence and continuance
of an event of default undertakes to perform only the duties that are
specifically provided in the trust agreement and, after any 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 your request unless it is offered
reasonable indemnity against the costs, expenses and liabilities that might be
incurred.
For information concerning the relationships between Bankers Trust
Company, the property trustee, and us, see "Description of Junior Subordinated
Debentures--Information Concerning the Debenture Trustee."
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Miscellaneous
The administrators and the property trustee are authorized and directed
to conduct the affairs of and to operate the Trust in such a way that: (1) the
Trust will not be deemed to be an "investment company" required to be registered
under the Investment Company Act or taxable as a corporation for United States
federal income tax purposes; and (2) the junior subordinated debentures will be
treated as our indebtedness for United States federal income tax purposes. In
this connection, the property trustee and the holders of common securities are
authorized to take any action not inconsistent with applicable law, the
certificate of trust of the Trust or the trust agreement that the property
trustee and the holders of common securities determine in their discretion to be
necessary or desirable for these purposes, as long as the action does not
materially adversely affect your interests.
You will not have preemptive or similar rights.
The Trust may not borrow money, issue debt or mortgage or pledge any of
its assets.
Governing Law
The trust agreement will be governed by and construed in accordance
with the laws of the State of Delaware.
DESCRIPTION OF JUNIOR SUBORDINATED DEBENTURES
The junior subordinated debentures are to be issued under the indenture
between Bankers Trust Company, the debenture trustee, and us. This summary of
certain terms and provisions of the junior subordinated debentures and the
indenture is not complete. You should read the form of the indenture that is
filed as an exhibit to the registration statement of which this prospectus is a
part. Whenever particular defined terms of the indenture (in effect from time to
time) are referred to in this prospectus, the defined terms are incorporated in
this prospectus by reference. A copy of the form of indenture is available from
the debenture trustee upon request.
General
Concurrently with the issuance of the preferred securities, the Trust
will invest the proceeds, together with the consideration paid by us for the
common securities, in the junior subordinated debentures issued by us. The
junior subordinated debentures will bear interest, accruing from the date of
issue, at the annual rate of ___% of the principal amount, payable quarterly in
arrears on March 31, June 30, September 30 and December 31 of each year,
beginning September 30, 1999, to the person in whose name each junior
subordinated debenture is registered at the close of business on the 15th day of
March, June, September or December (whether or not a business day) next
preceding the interest payment date. It is anticipated that, until the
liquidation, if any, of the Trust, each junior subordinated debenture will be
registered in the name of the Trust and held by the property trustee in trust
for you and the holders of the common securities.
The amount of interest payable for any period less than a full interest
period will be computed on the basis of a 360-day year of twelve 30-day months
and the actual days elapsed in a partial month in the period. The amount of
interest payable for any full interest period will be computed by dividing the
annual rate by four. If any date on which interest is payable to the junior
subordinated debentures is not a business day, then payment of the interest
payable on the date will be made on the next business day (without any interest
or other payment in respect of the delay), or, if the business day falls in the
next calendar year, the payment will be made on the immediately preceding
business day in each case with the same force and effect as if made on the date
the payment was originally payable.
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Accrued interest that is not paid on the applicable interest payment
date will bear additional interest on the amount (to the extent permitted by
law) at the annual rate of ___%, compounded quarterly and computed on the basis
of a 360-day year of twelve 30-day months and the actual days elapsed in a
partial month in the period. The amount of additional interest payable for any
full interest period will be computed by dividing the annual rate by four.
The term "interest" as used in this prospectus includes quarterly
interest payments, interest on quarterly interest payments not paid on the
applicable interest payment date and, if applicable, any additional sums we pay
on the junior subordinated debentures following a Tax Event (as defined under
"Description of Preferred Securities--Redemption") that may be required so that
distributions payable by the Trust will not be reduced by any additional taxes,
duties or other governmental changes resulting from the Tax Event.
The junior subordinated debentures will mature on September 30, 2029,
subject to our right to shorten the maturity date at any time to any date not
earlier than September 30, 2004, if we have received prior approval of The
Federal Reserve if the approval is then required under applicable capital
guidelines or policies of The Federal Reserve. If we elect to shorten the
maturity of the junior subordinated debentures, we will give notice to the
registered holders of the junior subordinated debentures, the debenture trustee
and the Trust no less than 90 days before the effectiveness of the maturity
date. The property trustee must give you and the holders of the common
securities notice of the shortened stated maturity at least 30 but not more than
60 days before the applicable date.
The junior subordinated debentures will be unsecured and will rank
junior and be subordinate in right of payment to any senior indebtedness. The
junior subordinated debentures will not be subject to a sinking fund. The
indenture does not limit our ability to incur or issue other secured or
unsecured debt, including senior indebtedness, whether under the junior
subordinated debentures or any existing or other indenture that we may enter
into in the future or otherwise. See "Subordination."
Option to Extend Interest Payment Period
So long as no event of default under the junior subordinated debentures
has occurred and is continuing, we have the right at any time during the term of
the junior subordinated debentures to defer the payment of interest at any time
or from time to time for a period not exceeding 20 consecutive quarterly periods
with respect to each extension period, provided that no extension period may
extend beyond the stated maturity of the junior subordinated debentures. During
any extension period we have the right to make partial payments of interest on
any interest payment date. At the end of an extension period, we must pay all
interest then accrued and unpaid (together with interest thereon at the annual
rate of ___%, compounded quarterly and computed on the basis of a 360-day year
of twelve 30-day months and the actual days elapsed in a partial month in the
period, to the extent permitted by applicable law). The amount of additional
interest payable for any full interest period will be computed by dividing the
annual rate by four. During an extension period, interest will continue to
accrue and holders of junior subordinated debentures (or holders of preferred
securities while outstanding) will be required to accrue interest income for
United States federal income tax purposes. See "Certain Federal Income Tax
Consequences--Interest Income and Original Issue Discount. "
During any extension period, we may not:
o make any payment of principal (or any premium on the
principal) or interest, or repay, repurchase or redeem any of
our debt securities that rank equally in all respects with or
junior in interest to the junior subordinated debentures; or
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o declare or pay any dividends or distributions on, or redeem,
purchase, acquire or make a liquidation payment with respect
to, any of our capital stock, except that we may:
(a) repurchase, redeem or make other acquisitions of
shares of our capital stock in connection with any
employment contract benefit plan or other similar
arrangement with or for the benefit of any one or
more employees, officers directors or consultants, in
connection with a dividend reinvestment or
shareholder stock purchase plan or in connection with
the issuance of our capital stock (or securities
convertible into or exercisable for the capital
stock) as consideration in an acquisition transaction
entered into prior to the applicable extension
period;
(b) take any necessary action in connection with any
reclassification, exchange or conversion of any class
or series of our capital stock (or any capital stock
of any of our subsidiaries) for any class or series
of our capital stock or of any class or series of our
indebtedness for any class or series of our capital
stock;
(c) purchase fractional interests in shares of our
capital stock pursuant to the conversion or exchange
provisions of the capital stock or the security being
converted or exchanged;
(d) declare a dividend in connection with any
shareholders' rights plan, or issue rights, stock or
other property under any shareholders' rights plan,
or redeem or repurchase rights pursuant to any
shareholders' rights plan; or
(e) declare a dividend in the form of stock warrants,
options or other rights where the dividend stock or
the stock issuable upon exercise of the warrants,
options or other rights is the same stock as that on
which the dividend is being paid or ranks equally
with or junior to the stock.
Before the termination of any extension period, we may further defer
the payment of interest, provided that no extension period may exceed 20
consecutive quarterly periods or extend beyond the stated maturity of the junior
subordinated debentures. Upon the termination of any extension period and the
payment of all amounts then due, we may elect to begin a new extension period
subject to the above conditions. No interest shall be due and payable during an
extension period, except at its end. We must give the trustees notice of our
election of the extension period at least one business day prior to the earlier
of: (1) the date the distribution on the preferred securities would have been
payable but for the election to begin an extension period; and (2) the date the
property trustee is required to give you notice of the record date or the date
the distribution is payable, but in any event not less than one business day
prior to the record date. The property trustee will give you notice of our
election to begin a new extension period. There is no limitation on the number
of times that we may elect to begin an extension period.
Redemption
We may redeem the junior subordinated debentures prior to maturity at
our option: (1) on or after September 30, 2004, in whole at any time or in part
from time to time; or (2) in whole, but not in part, at any time within 90 days
following the occurrence and during the continuation of a Tax Event, Investment
Company Event or Capital Treatment Event (each as defined under "Description of
Preferred Securities--Redemption"), in each case at a redemption price equal to
the outstanding principal amount of the junior subordinated debentures plus
accrued interest (including any additional
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interest on any additional sums we pay following a Tax Event as described below
under "Additional Sums"). The proceeds of the redemption will be used by the
Trust to redeem the preferred securities.
The Federal Reserve's risk-based capital guidelines, which are subject
to change, currently provide that redemptions of permanent equity or other
capital instruments before stated maturity could have a significant impact on a
bank holding company's overall capital structure and that any organization
considering a redemption should consult with The Federal Reserve before
redeeming any equity or capital instrument prior to maturity if the redemption
could have a material effect on the level or composition of the organization's
capital base.
Consultation may not be necessary if the equity or capital instrument
was redeemed with the proceeds of, or replaced by, a like amount of a similar or
higher quality capital instrument and The Federal Reserve considers the
organization's capital position to be fully adequate after the redemption.
If we redeem the junior subordinated debentures prior to their stated
maturity, that would constitute the redemption of capital instruments under The
Federal Reserve's current risk-based capital guidelines and may be subject to
the prior approval of The Federal Reserve. The redemption of the junior
subordinated debentures also could be subject to the additional prior approval
of The Federal Reserve under its current risk-based capital guidelines.
Additional Sums
We have covenanted in the indenture that, if and for so long as the
Trust is the holder of all junior subordinated debentures and the Trust is
required to pay any additional taxes, duties or other governmental charges as a
result of a Tax Event, we will pay as additional sums on the junior subordinated
debentures the amounts as may be required so that the distributions payable by
the Trust will not be reduced as a result of any additional taxes, duties or
other governmental charges. See "Description of Preferred
Securities--Redemption."
Registration, Denomination and Transfer
The junior subordinated debentures will initially be registered in the
name of the Trust. If the junior subordinated debentures are distributed to you,
it is anticipated that the depositary arrangements for the junior subordinated
debentures will be substantially identical to those in effect for the preferred
securities. See "Description of Preferred Securities--Book Entry, Delivery and
Form."
Although DTC has agreed to the procedures described above, it is under
no obligation to perform or continue to perform the procedures, and the
procedures may be discontinued at any time. If DTC is at any time unwilling or
unable to continue as depositary and we do not appoint a successor depositary
within 90 days of receipt of notice from DTC to the effect, we will cause the
junior subordinated debentures to be issued in definitive form.
Payments on junior subordinated debentures represented by a global
security will be made to Cede & Co., the nominee for DTC, as the registered
holder of the junior subordinated debentures, described under "Description of
Preferred Securities--Book Entry, Delivery and Form." If junior subordinated
debentures are issued in certificated form, principal and interest will be
payable, the transfer of the junior subordinated debentures will be
registerable, and junior subordinated debentures will be exchangeable for junior
subordinated debentures of other authorized denominations of a like aggregate
principal amount, at the corporate trust office of the debenture trustee in New
York, New York, or at the offices of any paying agent or transfer agent we
appoint, provided that payment of interest may be made at our option by check
mailed to the address of the persons entitled to the payment. However, a holder
of $1 million or more in aggregate principal amount of junior
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subordinated debentures may receive payments of interest (other than interest
payable at the stated maturity) by wire transfer of immediately available funds
upon written request to the debenture trustee not later than 15 calendar days
prior to the date on which the interest is payable.
Junior subordinated debentures are issuable only in registered form
without coupons in integral multiples of $10.00. Junior subordinated debentures
will be exchangeable for other junior subordinated debentures of like tenor, of
any authorized denominations, and of a like aggregate principal amount.
Junior subordinated debentures may be presented for exchange as
provided above, and may be presented for registration of transfer (with the form
of transfer endorsed thereon, or a satisfactory written instrument of transfer,
duly executed), at the office of the securities registrar appointed under the
indenture or at the office of any transfer agent we designate for that purpose
without service charge and upon payment of any taxes and other governmental
charges as described in the indenture. We will appoint the debenture trustee as
securities registrar under the indenture. We may at any time designate
additional transfer agents with respect to the junior subordinated debentures.
In the event of any redemption, we will not, nor will the debenture
trustee be required to:
o issue, register the transfer of, or exchange junior
subordinated debentures during a period beginning at the
opening of business 15 days before the day of selection for
redemption of the junior subordinated debentures to be
redeemed and ending at the close of business on the day of
mailing of the relevant notice of redemption; or
o transfer or exchange any junior subordinated debentures
selected for redemption, except, in the case of any junior
subordinated debentures being redeemed in part, any portion of
the debenture not to be redeemed.
Any monies deposited with the debenture trustee or any paying agent, or
then held by us in trust, for the payment of the principal of (and premium, if
any) or interest on any junior subordinated debenture and remaining unclaimed
for two years after this principal (and premium, if any) or interest has become
due and payable shall, at our request, be repaid to us, and the holder of the
junior subordinated debenture shall thereafter look, as a general unsecured
creditor, only to us for payment.
Restrictions on Certain Payments; Certain Covenants of the Company
We have covenanted that at any time: (1) there has occurred any event
(a) of which we have actual knowledge that with the giving of notice or the
lapse of time, or both, would constitute an event of default under the junior
subordinated debentures and that we have not taken reasonable steps to cure; (2)
if the junior subordinated debentures are held by the Trust, we are in default
with respect to our payment of any obligations under the guarantee; or (3) we
have given notice of our election of an extension period as provided in the
indenture and have not rescinded the notice, or any extension period, is
continuing, then we will not:
o make any payment of principal (or any premium on the
principal) or interest, or repay, repurchase or redeem any of
our debt securities that rank equally in all respects with, or
junior in interest to, the junior subordinated debentures; or
o declare or pay any dividends or distributions on, or redeem,
purchase, acquire, or make a liquidation payment with respect
to, any of our capital stock, except that we may:
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(a) repurchase, redeem or make other acquisitions of
shares of our capital stock in connection with any
employment contract, benefit plan or other similar
arrangement with or for the benefit of any one or
more employees, officers, directors or consultants,
in connection with a dividend reinvestment or
shareholder stock purchase plan or in connection with
the issuance of our capital stock (or securities
convertible into or exercisable for the capital
stock) as consideration in an acquisition transaction
entered into prior to the applicable extension period
or other event referred to below;
(b) take any necessary action in connection with any
reclassification, exchange or conversion of any class
or series of our capital stock (or any capital stock
of any of our subsidiaries) for any class or series
of our capital stock or of any class or series of our
indebtedness for any class or series of our capital
stock;
(c) purchase fractional interests in shares of our
capital stock pursuant to the conversion or exchange
provisions of the capital stock or the security being
converted or exchanged;
(d) declare a dividend in connection with any
shareholders' rights plan, or issue rights, stock or
other property under any shareholders' rights plan,
or redeem or repurchase rights pursuant to any
shareholders' rights plan; or
(e) declare a dividend in the form of stock, warrants,
options or other rights where the dividend stock or
the stock issuable upon exercise of the warrants,
options or other rights is the same stock as that on
which the dividend is being paid or ranks equally
with or junior to the stock.
We have covenanted in the indenture:
o to continue to hold, directly or indirectly, all of the common
securities, provided that certain successors that are
permitted pursuant to the indenture may succeed to our
ownership of the common securities;
o as holder of the common securities, not to voluntarily
terminate, wind up or liquidate the Trust, other than:
(a) in connection with a distribution of junior
subordinated debentures to the holders of the
preferred securities in liquidation of the Trust; or
(b) in connection with certain mergers, consolidations or
amalgamations permitted by the trust agreement; and
o to use reasonable efforts, consistent with the terms and
provisions of the trust agreement, to cause the Trust to
continue not to be taxable as a corporation for United States
federal income tax purposes.
Modification of Indenture
From time to time, we as well as the debenture trustee may, without the
consent of any of the holders of the outstanding junior subordinated debentures,
amend, waive or supplement the provisions of the indenture to:
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o evidence our succession to another corporation or association
and the assumption by the person of our obligations under the
junior subordinated debentures;
o add further covenants, restrictions or conditions for the
protection of holders of the junior subordinated debentures;
o cure ambiguities or correct the junior subordinated debentures
in the case of defects or inconsistencies in the provisions of
the debentures, so long as any cure or correction does not
adversely affect the interest of the holders of the junior
subordinated debentures in any material respect;
o change the terms of the junior subordinated debentures to
facilitate the issuance of the junior subordinated debentures
in certificated or other definitive form;
o evidence or provide for the appointment of a successor
debenture trustee; or
o qualify, or maintain the qualification of, the indenture under
the Trust Indenture Act.
The indenture contains provisions permitting the debenture trustee and
us, with the consent of the holders of not less than a majority in principal
amount of the junior subordinated debentures, to modify the indenture in a
manner affecting the rights of the holders of the junior subordinated
debentures. However, none of these modifications may be made, without the
consent of the holder of each outstanding junior subordinated debenture so
affected that would:
o change the stated maturity of, or any installment of interest
on, the junior subordinated debentures, or reduce the
principal amount, their rate of interest or any premium
payable upon any redemption, or change the place of payment
where, or the currency in which, the amount is payable, or
impair the right to institute suit for the enforcement of any
payment on junior subordinated debentures; or
o reduce the percentage of principal amount of junior
subordinated debentures, the holders of which are required to
consent to any modification of, or waiver of rights under, the
indenture.
Furthermore, so long as any of the preferred securities remain
outstanding, no modification may be made that adversely affects you in any
material respect, and no termination of the indenture may occur, and no waiver
of any event of default or compliance with any covenant under the indenture may
be effective, without the prior consent of the holders of at least a majority of
the aggregate liquidation amount of the outstanding preferred securities unless
and until the principal of (and premium, if any, on) the junior subordinated
debentures and all accrued and unpaid interest have been paid in full and
certain other conditions are satisfied.
Debenture Events of Default
The indenture provides that any one or more of the following described
events with respect to the junior subordinated debentures that has occurred and
is continuing constitute an "event of default" with respect to the junior
subordinated debentures:
o failure to pay any interest on the junior subordinated
debentures when due and continuance of this default for a
period of 30 days (subject to the deferral of any due date in
the case of an extension period); or
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o failure to pay any principal (or any premium on the principal)
on the junior subordinated debentures when due whether at the
stated maturity; or
o failure to observe or perform certain other covenants
contained in the indenture for 90 days after written notice of
the failure to us from the debenture trustee or the holders of
at least 25% in aggregate outstanding principal amount of the
outstanding junior subordinated debentures; or
o the occurrence of the appointment of a receiver or other
similar official in any liquidation, insolvency or similar
proceeding with respect to us or all or substantially all of
our property; or a court or other governmental agency shall
enter a decree or order appointing a receiver or similar
official and the decree or order shall remain unstayed and
undischarged for a period of 60 days.
As described in "Description of Preferred Securities--Events of
Default; Notice," the occurrence of an event of default in respect of the junior
subordinated debentures will also be an event of default in respect of the
preferred securities and common securities.
The holders of at least a majority in aggregate principal amount of
outstanding 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 principal amount of outstanding junior subordinated debentures may
declare the principal due and payable immediately upon an event of default, and,
should the debenture trustee or the holders of junior subordinated debentures
fail to make the declaration, the holders of at least 25% in aggregate
liquidation amount of the outstanding preferred securities shall have the right.
The holders of a majority in aggregate principal amount of outstanding junior
subordinated debentures may annul the declaration and waive the default if all
defaults (other than the non-payment of the principal of junior subordinated
debentures which has become due solely by the acceleration) have 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.
Should the holders of junior subordinated debentures fail to annul the
declaration and waive the default, the holders of a majority in aggregate
liquidation amount of the outstanding preferred securities shall have the right.
The holders of at least a majority in aggregate principal amount of the
outstanding junior subordinated debentures affected 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 any premium) or interest
(unless this default has been cured and a sum sufficient to pay all matured
installments of interest and principal (and premium on, if any) 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 affected by the default. See "Modification of Junior
Subordinated Indenture." We are required to certify annually to the debenture
trustee as to whether or not we are in compliance with all the conditions and
covenants applicable to us under the indenture.
If an event of default occurs and is continuing, the property trustee
will have the right to declare the principal of and the interest on the junior
subordinated debentures, and any other amounts payable under the indenture, to
be due and payable and to enforce its other rights as a creditor with respect to
the junior subordinated debentures.
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Enforcement of Certain Rights by Holders of Preferred Securities
If an event of default has occurred and is continuing and the event is
attributable to our failure to pay any amounts payable in respect of the junior
subordinated debentures on the date the amounts are otherwise payable, you may
institute a legal action against us to enforce the payment to you of an amount
equal to the amount payable in respect of junior subordinated debentures having
a principal amount equal to the aggregate liquidation amount of the preferred
securities you hold. We may not amend the indenture to remove the foregoing
right to bring legal action without your prior written consent. We will have the
right under the indenture to set off any payment we make to you in connection
with a legal action.
You are not able to exercise directly any remedies available to the
holders of the junior subordinated debentures except under the circumstances
described in the preceding paragraph. See "Description of Preferred
Securities--Events of Default; Notice."
Consolidation, Merger, Sale of Assets and Other Transactions
The indenture provides that we may not consolidate with or merge into
any other entity or sell, convey, transfer or lease our properties and assets
substantially as an entirety, or sell, convey, transfer or distribute the
capital stock or all or substantially all of the assets of any principal
subsidiary bank to any entity, and no entity may consolidate with or merge into
us or convey, transfer or lease its properties and assets substantially as an
entirety to us, unless:
o in the event we consolidate with or merge into another entity
or convey or transfer our properties and assets substantially
as an entirety to any entity, the successor entity is
organized under the laws of the United States or any state or
the District of Columbia, and the successor entity expressly
assumes our obligations in respect of the junior subordinated
debentures; provided, however, that nothing in the indenture
shall be deemed to restrict or prohibit, and no supplemental
indenture shall be required in the case of the merger of a
bank (as defined below) with and into a bank or us, the
consolidation of banks into a bank or us, or the sale or other
disposition of all or substantially all of the assets of any
bank to another bank or us, if, in any case in which we are
not the surviving, resulting or acquiring entity, we would
own, directly or indirectly, at least 80% of the voting
securities of the bank (and of any other bank any voting
securities of which are owned, directly or indirectly, by the
bank) surviving the merger, resulting from the consolidation
or acquiring the assets;
o immediately after giving effect to the transaction, no event
of default with respect to the junior subordinated debentures,
and no event which, after notice or lapse of time or both,
would constitute an event of default with respect to the
junior subordinated debentures, has occurred and is
continuing; and
o certain other conditions as prescribed in the indenture are
satisfied.
For purposes of the first bullet point above, the term "bank" means
each of:
o any banking subsidiary of ours the consolidated assets of
which constitute 20% or more of our consolidated assets and
our consolidated subsidiaries;
o any other banking subsidiary designated as a bank pursuant to
a board resolution and provided in an officers' certificate
delivered to the trustee; and
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o any of our subsidiaries that owns, directly or indirectly, any
voting securities, or options, warrants or rights to subscribe
for or purchase voting securities, of any bank under the first
and second bullet points above and in the case of all three
bullet points above their respective successors (whether by
consolidation, merger, conversion, transfer of substantially
all their assets and business or otherwise) so long as the
successor is a banking subsidiary (in the case of the first
and second bullet point) or a subsidiary (in the case of the
third bullet point) of ours.
The provisions of the indenture do not afford holders of the junior
subordinated debentures protection in the event we are involved in a highly
leveraged or other transaction that may adversely affect holders of the junior
subordinated debentures.
Satisfaction and Discharge
The indenture will no longer be in effect and we will deemed to have
satisfied and discharged the indenture when:
o all junior subordinated debentures not previously delivered to
the debenture trustee for cancellation: (1) have become due
and payable; or (2) will become due and payable at the stated
maturity within one year;
o we deposit or cause 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 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 or redemption date; and
o we have paid all other sums payable by us under the indenture
and we have delivered applicable certificates and opinions
that indicate we have complied with all of our obligations.
Subordination
The junior subordinated debentures will be subordinate and junior in
right of payment, to the extent provided in the indenture, to all our senior
indebtedness (as defined below) of and equally with our obligations associated
with any future issuances of preferred securities. If we default in the payment
of any principal, premium, if any, or interest, if any, or any other amount
payable on any senior indebtedness when the payment becomes due and payable
whether at maturity or at a date fixed for redemption or by declaration of
acceleration or otherwise, then unless and until the default has been cured or
waived or has ceased to exist or all senior indebtedness has been paid, no
direct or indirect payment (in cash, property, securities, by set-off or
otherwise) may be made or agreed to be made on the junior subordinated
debentures, or in respect of any redemption repayment, retirement, purchase or
other acquisition of any of the junior subordinated debentures.
As used in this prospectus, "senior indebtedness" means, whether
recourse is to all or a portion of our assets and whether or not contingent:
o every obligation of ours for money borrowed;
o every obligation of ours evidenced by bonds, debentures, notes
or other similar instruments, including obligations incurred
in connection with the acquisition of property, assets or
businesses;
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o every reimbursement obligation of ours with respect to letters
of credit, bankers' acceptance or similar facilities issued
for our account;
o every obligation of ours issued or assumed as the deferred
purchase price of property or services (but excluding trade
accounts payable or accrued liabilities arising in the
ordinary course of business);
o every capital lease obligation of ours;
o every obligation of ours for claims (as defined in Section
101(4) of the United States Bankruptcy Code of 1978 and in any
amendments to the Bankruptcy Code) in respect of derivative
products such as interest foreign exchange rate contracts,
commodity contracts and similar arrangements; and
o every obligation of the type referred to above of another
person and all dividends of another person the payment of
which, in either case, we have guaranteed or are responsible
or liable, directly or indirectly, as obligor or otherwise.
However, senior indebtedness does not include any of the following:
o any obligations which, by their terms, are expressly stated to
rank equally in right of payment with or, to not be superior
in right of payment to, the junior subordinated debentures;
o any of our senior indebtedness which when incurred and without
respect to any election under Section 1111(b) of the United
States Bankruptcy Code of 1978, and in any amendments to the
Bankruptcy Code, was without recourse to us;
o any indebtedness of ours to any of our subsidiaries;
o any indebtedness to our executive officers or directors; or
o any indebtedness in respect of debt securities issued to any
trust, or a trustee of the trust, partnership or other entity
affiliated with us that is our financing entity in connection
with the issuance by the financing entity of securities that
are similar to the preferred securities.
As of July 28, 1999, we had no senior indebtedness. Any future senior
indebtedness (including any interest on the indebtedness accruing after the
commencement of any proceedings) shall first be paid in full before any payment
or distribution whether in cash, securities or other property is made on account
of the junior subordinated debentures in the event of:
o certain events of bankruptcy, dissolution or liquidation of us
or another holder of the common securities;
o any proceeding for our liquidation, dissolution or other
winding up, voluntary or involuntary, whether or not involving
insolvency or bankrupt proceedings;
o any assignment by us for the benefit of creditors; or
o any other marshaling of our assets.
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In this event, any payment or distribution on account of the junior subordinated
debentures, whether in cash, securities or other property, that would otherwise
(but for the subordination provisions) be payable or deliverable in respect of
the junior subordinated debentures will be paid as described above, directly to
the holders of senior indebtedness in accordance with the priorities then
existing among the holders until all senior indebtedness (including any interest
on the indebtedness accruing after the commencement of the proceedings) has been
paid in full.
In the event of any proceeding described above, after payment in full
of all sums owing with respect to our senior indebtedness, if any, the holders
of junior subordinated debentures, together with the holders of our obligations
ranking on a parity with the junior subordinated debentures, will be entitled to
be paid from our remaining assets the amounts at the time due and owing on the
junior subordinated debentures and other obligations. This payment will be made
before any payment or other distribution, whether in cash, property or
otherwise, will be made on account of any capital stock or obligations ranking
junior to the junior subordinated debentures and other obligations. If payment
or distribution on account of the junior subordinated debentures of any
character or security, whether in cash, securities or other property, is
received by any holder of any junior subordinated debentures in contravention of
any of these terms and before all our senior indebtedness, if any, has been paid
in full, the payment or distribution or security will be received in trust for
the benefit of, and must be paid over or delivered and transferred to, the
holders of our senior indebtedness at the time outstanding in accordance with
the priorities then existing among the holders for application to the payment of
all senior indebtedness remaining unpaid to the extent necessary to pay all
senior indebtedness in full.
By reason of the subordination, in the event of our insolvency, holders
of senior indebtedness may receive more, ratably, and holders of the junior
subordinated debentures may receive less, ratably, than our other creditors. The
subordination will not prevent the occurrence of any event of default in respect
of the junior subordinated debentures.
The indenture places no limitation on the amount of additional senior
indebtedness that we may incur. We expect from time to time to incur additional
senior indebtedness.
Information Concerning the Debenture Trustee
The debenture trustee, other than during the occurrence and continuance
of a default in the performance of our obligations under the junior subordinated
debentures, is under no obligation to exercise any of the powers vested in it by
the indenture at the request of any holder of junior subordinated debentures,
unless offered reasonable indemnity by the holder against the costs, expenses
and liabilities that might be incurred by the exercise of these powers. 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.
Bankers Trust Company, the debenture trustee, may serve from time to
time as trustee under other indentures or trust agreements with us or our
subsidiaries relating to other issues of our securities. In addition, we as well
as certain of our affiliates may have other banking relationships with Bankers
Trust Company and its affiliates.
Governing Law
The indenture and the junior subordinated debentures will be governed
by and construed in accordance with the laws of the State of New York.
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DESCRIPTION OF GUARANTEE
We will execute and deliver the guarantee concurrently with the
issuance of preferred securities by the Trust for your benefit. Bankers Trust
Company will act as guarantee trustee under the guarantee. The guarantee trustee
will hold the guarantee for your benefit. This summary of certain provisions of
the guarantee is not complete. You should read the form of the guarantee, which
is filed as an exhibit to the registration statement of which this prospectus is
a part. A copy of the form of guarantee is available upon request from the
guarantee trustee.
General
We will irrevocably agree to pay in full on a subordinated basis, to
the extent provided in the guarantee and described in this prospectus, the
guarantee payments described below to you, as and when due, regardless of any
defense, right of set-off or counterclaim that the Trust may have or assert
other than the defense of payment. The following payments with respect to the
preferred securities, to the extent not paid by or on behalf of the Trust, will
be subject to the guarantee:
o any accrued and unpaid distributions required to be paid on
the preferred securities, to the extent that the Trust has
funds on hand available therefor at that time;
o the redemption price with respect to any preferred securities
called for redemption, to the extent that the Trust has funds
on hand available for its payment at that time; and
o upon a voluntary or involuntary dissolution, termination,
winding up or liquidation of the Trust (unless the junior
subordinated debentures are distributed to you), the lessor
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 available for their payment; and
(b) the amount of assets of the Trust remaining available
for distribution to you on liquidation of the Trust.
Our obligation to make a guarantee payment may be satisfied by our
direct payment to you or by causing the Trust to pay these amounts to you.
The guarantee will be an irrevocable guarantee of payment on a
subordinated basis of the Trust's obligations under the preferred securities,
but will apply only to the extent that the Trust has funds sufficient to make
the payments, and is not a guarantee of collection.
If we do not make payments on the junior subordinated debentures held
by the Trust, the Trust will not be able to pay any amounts payable in respect
of the preferred securities and will not have funds legally available for these
payments. The guarantee will rank subordinate and junior in right of payment to
all of our senior indebtedness. See "Status of the Guarantee." The guarantee
does not limit our ability to incur or issue other secured or unsecured debt,
including senior indebtedness, whether under the indenture or any other
indenture that we may enter into in the future or otherwise.
We have through the guarantee, the trust agreement, the junior
subordinated debentures and the indenture, taken together, fully, irrevocably
and unconditionally guaranteed all the Trust's obligations under the preferred
securities on a subordinated basis. No single document standing alone
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or operating in conjunction with fewer than all the other documents constitutes
the guarantee. Only the combined operation of these documents that has the
effect of providing a full, irrevocable and unconditional guarantee of the
Trust's obligations in respect of the preferred securities. See "Relationship
Among the Preferred Securities, the Junior Subordinated Debentures and the
Guarantee."
Status of the Guarantee
The guarantee will constitute our unsecured obligation and will rank
subordinate and junior in right of payment to our senior indebtedness, if any,
and equally with any additional obligations associated with any future issuances
of preferred securities.
The guarantee will constitute a guarantee of payment and not of
collection. This means that the guarantee trustee may institute a legal
proceeding directly against us as the guarantor to enforce its rights under the
guarantee without first instituting a legal proceeding against any other person
or entity. The guarantee will be held by the guarantee trustee for your benefit.
The guarantee will not be discharged except by payment of the guarantee payments
in full to the extent not paid by the Trust or distribution to the holders of
the preferred securities or the junior subordinated debentures.
Amendments and Assignment
Except with respect to any changes which do not materially adversely
affect your rights (in which case no consent will be required), the guarantee
may not be amended without the prior approval of the holders of not less than a
majority of the aggregate liquidation amount of the outstanding preferred
securities. The manner of obtaining the approval is described under "Description
of Preferred Securities--Voting Rights; Amendment of Trust Agreement." All
guarantees and agreements contained in the guarantee shall bind our successors,
assigns, receivers, trustees and representatives and shall inure to your benefit
and the benefit of all of the holders of the preferred securities then
outstanding.
Events of Default
An event of default under the guarantee will occur if we fail to
perform any of our payment or other obligations under the guarantee, or to
perform any non-payment obligation if the non-payment default remains unremedied
for 30 days. The holders of not less than a majority in aggregate liquidation
amount of the outstanding preferred securities have the right to direct the
time, method and place of conducting any proceeding for any remedy available to
the guarantee trustee in respect of the guarantee or to direct the exercise of
any trust or power conferred upon the guarantee trustee under the guarantee.
You may institute a legal proceeding directly against us to enforce
your rights under the guarantee without first instituting a legal proceeding
against the Trust, the guarantee trustee or any other person or entity.
We are required, as guarantor, to certify annually to the guarantee
trustee whether or not we are in compliance with all the conditions and
covenants applicable to us under the guarantee.
Information Concerning the Guarantee Trustee
The guarantee trustee, other than during the occurrence and continuance
of a default by us in performance of the guarantee, undertakes to perform only
the duties as are specifically provided in the guarantee and, after the
occurrence of an event of default with respect to the guarantee, must exercise
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the same degree of care and skill as a prudent person would exercise or use in
the conduct of his or her own affairs. Subject to this provision, the guarantee
trustee is under no obligation to exercise any of the powers vested in it by the
guarantee at your request unless it is offered reasonable indemnity against the
costs, expenses and liabilities that it might incur in the exercise of these
powers.
For information concerning our relationship with Bankers Trust Company,
as guarantee trustee, see "Description of Junior Subordinated
Debentures--Information Concerning the Debenture Trustee."
Termination of the Guarantee
The guarantee will terminate and be of no further force and effect upon
full payment of the redemption price of the preferred securities, upon full
payment of the amounts payable with respect to the preferred securities upon
liquidation of the Trust, or upon distribution of junior subordinated debentures
to you and the other holders of the preferred securities in exchange for all of
the preferred securities. The guarantee will continue to be effective or will be
reinstated, as the case may be, if at any time you must restore payment of any
sums paid to you under the preferred securities or the guarantee.
Governing Law
The guarantee will be governed by and construed in accordance with the
laws of the State of New York.
RELATIONSHIP AMONG THE PREFERRED SECURITIES,
THE JUNIOR SUBORDINATED DEBENTURES, AND THE GUARANTEE
Full and Unconditional Guarantee
We have irrevocably guaranteed, on a subordinate basis, payments of
distributions and other amounts due on the preferred securities (to the extent
that Trust has funds available for the payment) and to the extent described
under "Description of Guarantee." Taken together, our obligations under the
junior subordinated debentures, the indenture, the trust agreement and the
guarantee provide, in the aggregate, a full, irrevocable and unconditional
guarantee of payments of distributions and other amounts due on the preferred
securities. No single document standing alone or operating in conjunction with
fewer than all the other documents constitutes the 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 in respect of
the preferred securities.
If and to the extent that we do not make payments on the junior
subordinated debentures, the Trust will not have sufficient funds to pay
distributions or other amounts due on the preferred securities. The guarantee
does not cover payment of amounts payable with respect to the preferred
securities when the Trust does not have sufficient funds to pay the amounts. In
this event, your remedy is to institute a legal proceeding directly against us
for enforcement of our payment obligations under the junior subordinated
debentures having a principal amount equal to the liquidation amount of the
preferred securities you hold.
Our obligations under the junior subordinated debentures and the
guarantee are subordinate and junior in right of payment to all senior
indebtedness, if any, and rank equally with any additional obligations
associated with any future issuances of preferred securities.
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Sufficiency of Payments
As long as we make the payments on the junior subordinated debentures
when they are due, the payments will be sufficient to cover distributions and
other payments distributable on the preferred securities, primarily because:
o the aggregate principal amount of the junior subordinated
debentures will be equal to the sum of the aggregate stated
liquidation amount of the preferred securities and common
securities;
o the interest rate and interest and other payment dates on the
junior subordinated debentures will match the distribution
rate, distribution dates and other payment dates for the
preferred securities;
o we will pay for any and all costs, expenses and liabilities of
the Trust except the Trust's obligations to you and the
holders of the common securities; and
o the trust agreement further provides that the Trust will not
engage in any activity that is not consistent with the limited
purposes of the Trust.
Notwithstanding anything to the contrary in the indenture, we have the
right to set off any payment we are otherwise required to make thereunder
against and to the extent we have previously made, or are concurrently on the
date of the payment making, a payment under the guarantee.
Enforcement Rights of Holders of Preferred Securities
You may institute a legal proceeding directly against us to enforce
your rights under the guarantee without first instituting a legal proceeding
against the guarantee trustee, the Trust or any other person or entity. See
"Description of Guarantee."
A default or event of default under any of our senior indebtedness
would not constitute a default or event of default in respect of the preferred
securities. However, in the event of payment defaults under, or acceleration of
our senior indebtedness, the subordination provisions of the indenture provide
that no payments may be made in respect of the junior subordinated debentures
until the senior indebtedness has been paid in full or any payment default on
senior indebtedness has been cured or waived. See "Description of Junior
Subordinated Debentures--Subordination."
Limited Purpose of Trust
The preferred securities represent preferred undivided beneficial
interests in the assets of the Trust, and the Trust exists for the sole purpose
of issuing the preferred securities and common securities and investing the
proceeds from their issuance in the junior subordinated debentures. A principal
difference between your rights as a holder of preferred securities and a holder
of a junior subordinated debenture is that a holder of a junior subordinated
debenture is entitled to receive from us payments on junior subordinated
debentures held, while you are entitled to receive distributions or other
amounts distributable with respect to the preferred securities from the Trust
(or from us under the Guarantee) only if and to the extent the Trust has funds
available for the payment of the distributions.
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Rights Upon Dissolution
Upon any voluntary or involuntary dissolution of the Trust, other than
the dissolution involving the distribution of the junior subordinated debentures
and after satisfaction of liabilities to creditors of the Trust as required by
applicable law, you will be entitled to receive, out of assets held by the
Trust, the liquidation distribution in cash. See "Description of Preferred
Securities--Liquidation Distribution Upon Dissolution." If we are voluntarily or
involuntarily liquidated or declare bankruptcy, the Trust, as registered holder
of the junior subordinated debentures, will be our subordinated creditor,
subordinated and junior in right of payment to all our senior indebtedness, if
any, as provided in the indenture, but entitled to receive payment in full of
all amounts payable with respect to the junior subordinated debentures before
any of our shareholders receive payments or distributions. Since we are the
guarantor under the guarantee and have agreed under the indenture to pay for all
costs, expenses and liabilities of the Trust (other than the Trust's obligations
to you and the holders of the common securities), your position as a holder of
the preferred securities and the position of a holder of the junior subordinated
debentures relative to other creditors and to our shareholders in the event of
our liquidation or bankruptcy are expected to be substantially the same.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
General
The preferred securities and payments on the preferred securities
generally are subject to taxation. Therefore, you should consider the tax
consequences of owning and receiving payments on the preferred securities before
acquiring them.
We have engaged Gordon, Feinblatt, Rothman, Hoffberger & Hollander,
LLC, Baltimore, Maryland as special tax counsel to review the following
discussion. They have given us their written legal opinion that the discussion
correctly describes the principal aspects of the U.S. federal tax treatment of
beneficial owners of preferred securities.
The following discussion is general and may not apply to your
particular circumstances for any of the following (or other) reasons:
o This summary is based on federal tax laws in effect as of the
date of this prospectus. Changes to any of these laws after
this date may affect the tax consequences described below.
o This summary discusses only preferred securities you acquire
at original issuance at the original offering price and hold
as capital assets (within the meaning of federal tax law). It
does not discuss all of the tax consequences that may be
relevant to the owners of preferred securities who are subject
to special rules, such as banks, thrift institutions, real
estate investment trusts, regulated investment companies,
insurance companies, brokers and dealers in securities or
currencies, certain securities traders, tax-exempt
organizations and certain other financial institutions.
This discussion also does not discuss tax consequences that may be relevant to
an owner of preferred securities in light of the owner's particular
circumstances, such as an owner holding a preferred security as a position in a
straddle, hedging, conversion or other integrated investment.
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o This summary does not address:
(a) The income tax consequences to shareholders in, or
partners or beneficiaries of, a holder of preferred
securities;
(b) the United States alternative minimum tax
consequences of purchasing, owning and disposing of
preferred securities; or
(c) any state, local or foreign tax consequences of
purchasing, owning and disposing of preferred
securities.
The authorities on which this summary is based are subject to various
interpretations, and the opinions of Gordon, Feinblatt, as tax counsel, are not
binding on the Internal Revenue Service or the courts, either of which could
take a contrary position. Moreover, no rulings have been or will be sought from
the IRS with respect to the transaction described in this prospectus.
Accordingly, we cannot assure you that the IRS will not challenge the opinion
expressed in this prospectus or that a court would not sustain a challenge.
We advise you to consult your own tax advisors regarding the tax
consequences of purchasing, owning and disposing of the preferred securities
because the following discussion may not apply to you.
U.S. Holders
In General. For purposes of the following discussion, a "U.S. Holder"
means:
o a citizen or individual resident of the United States;
o a corporation or partnership created or organized in or under
the laws of the United States or any of its political
subdivisions;
o an estate the income of which is includible in its gross
income for U.S. federal income tax purposes without regard to
its source; or
o a trust if a court within the United States is able to
exercise primary supervision over its administration and at
least one United States person has the authority to control
all substantial decisions of the trust.
Characterization of the Trust. Prior to the time that the preferred
securities are issued, Gordon, Feinblatt will give its opinion that: (1) under
then current law and based on the representations, facts and assumptions
provided in this prospectus; (2) assuming full compliance with the terms of the
trust agreement (and other relevant documents); and (3) based on certain
assumptions and qualifications referred to in the opinion, the Trust will be
characterized for United States federal income tax purposes as a grantor trust.
Accordingly, for United States federal income tax purposes, if you, as a U.S.
Holder, purchase a preferred security you will be considered the owner of an
undivided interest in the junior subordinated debentures owned by the Trust, and
you will be required to include all income or gain recognized for United States
federal income tax purposes with respect to your share of the junior
subordinated debentures on your income tax return.
Characterization of the Junior Subordinated Debentures. We intend to
take the position that, under current law, the junior subordinated debentures
are our debt for United States federal income tax purposes. We, along with the
Trust and you (by acceptance of a beneficial interest in a preferred
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security) agree to treat the junior subordinated debentures as our debt and the
preferred securities as evidence of a beneficial ownership interest in the
Trust. We cannot assure you, however, that the position will not be challenged
by the IRS or, if challenged, that a challenge will not be successful. The
remainder of this discussion assumes that the junior subordinated debentures
will be classified as our debt for United States federal income tax purposes.
Interest Income and Original Issue Discount. Under the terms of the
junior subordinated debentures, we have the ability to defer payments of
interest from time to time by extending the interest payment period for a period
not exceeding 20 consecutive quarterly periods, but not beyond the maturity of
the junior subordinated debentures. Treasury regulations provide that debt
instruments like the junior subordinated debentures will not be considered
issued with original issue discount ("OID") even if their issuer can defer
payments of interest if the likelihood of any deferral is "remote."
We have concluded, and this discussion assumes, that, as of the date of
this prospectus, the likelihood of our deferring payments of interest is
"remote" within the meaning of the applicable Treasury regulations. This
conclusion is based in part on the fact that exercising that option would
prevent us from declaring dividends on our common stock and would prevent us
from making any payments with respect to debt securities that rank equally with
or junior to the junior subordinated debentures. Therefore, the junior
subordinated debentures should not be treated as issued with OID by reason of
our deferral option. Rather, you will be taxed on stated interest on the junior
subordinated debentures when it is paid or accrued in accordance with your
method of accounting for income tax purposes. You should note, however, that no
published rulings or any other published authorities of the IRS have addressed
this issue. Accordingly, it is possible that the IRS could take a position
contrary to the interpretation described in this prospectus.
If we exercise our option to defer payments of interest, the junior
subordinated debentures would be treated as redeemed and reissued for OID
purposes. The sum of the remaining interest payments (and any de minimis OID) on
the junior subordinated debentures would thereafter be treated as OID. The OID
would accrue, and be includible in your taxable income, on an economic accrual
basis (regardless of your method of accounting for income tax purposes) over the
remaining term of the junior subordinated debentures (including any period of
interest deferral), without regard to the timing of payments under the junior
subordinated debentures. Subsequent distributions of interest on the junior
subordinated debentures generally would not be taxable. The amount of OID that
would accrue in any period would generally equal the amount of interest that
accrued on the junior subordinated debentures in that period at the stated
interest rate. Consequently, during any period of interest deferral, you will
include OID in gross income in advance of the receipt of cash, and if you
dispose of a preferred security prior to the record date for payment of
distributions on the junior subordinated debentures following that period, you
will be subject to income tax on OID accrued through the date of disposition
(and not previously included in income), but you will not receive cash from the
Trust with respect to the OID.
If the possibility of our exercising our option to defer payments of
interest is not remote, the junior subordinated debentures would be treated as
initially issued with OID in an amount equal to the aggregate stated interest
(plus any de minimis OID) over the term of the junior subordinated debentures.
You would include that OID in your taxable income, over the term of the junior
subordinated debentures, on an economic accrual basis.
Characterization of Income. Because the income underlying the preferred
securities will not be characterized as dividends for income tax purposes, if
you are a corporate holder of the preferred securities you will not be entitled
to a dividends-received deduction for any income you recognize with respect to
the preferred securities.
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Market Discount and Bond Premium. Under certain circumstances, you may
be considered to have acquired your undivided interests in the junior
subordinated debentures with market discount or bond premium (as each phrase is
defined for United States federal income tax purposes).
Receipt of Junior Subordinated Debentures or Cash Upon Liquidation of
the Trust. Under certain circumstances described above (See "Description of the
Preferred Securities--Liquidation Distribution Upon Dissolution"), the Trust may
distribute the junior subordinated debentures to you in exchange for your
preferred securities and in liquidation of the Trust. Except as discussed below,
a distribution would not be a taxable event for United States federal income tax
purposes, and you would have an aggregate adjusted basis in the junior
subordinated debentures you receive for United States federal income tax
purposes equal to your aggregate adjusted basis in your preferred securities.
For United States federal income tax purposes, your holding period in the junior
subordinated debentures you receive in a liquidation of the Trust would include
the period during which you held the preferred securities. If, however, the
relevant event is a Tax Event that results in the Trust being treated as an
association taxable as a corporation, the distribution would likely constitute a
taxable event to the Trust and to you for United States federal income tax
purposes, and in that event, your holding period for the junior subordinated
debentures would begin on the date that you received the debentures.
Under certain circumstances described in this prospectus (see
"Description of the Preferred Securities"), we may redeem junior subordinated
debentures for cash and distribute the proceeds of the redemption to you in
redemption of your preferred securities. A redemption would be taxable for
United States federal income tax purposes, and you would recognize gain or loss
as if you had sold the preferred securities for cash. See "Sales of Preferred
Securities" below.
Sales of Preferred Securities. If you sell preferred securities, you
will recognize gain or loss equal to the difference between your adjusted basis
in the preferred securities and the amount realized on the sale of the preferred
securities. Your adjusted basis in the preferred securities generally will be
the initial purchase price, increased by OID previously included (or currently
includible) in your gross income to the date of disposition, and decreased by
payments received on the preferred securities (other than any interest received
with respect to the period prior to the effective date we first exercise our
option to defer payments of interest). A gain or loss generally will be capital
gain or loss, and generally will be a long-term capital gain or loss if you have
held the preferred securities for more than one year prior to the date of
disposition.
If you dispose of your preferred securities between record dates for
payments of distributions thereon, you will be required to include accrued but
unpaid interest (or OID) on the junior subordinated debentures through the date
of disposition in your taxable income for United States federal income tax
purposes (notwithstanding that you may receive a separate payment from the
purchaser with respect to accrued interest). You may deduct that amount from the
sales proceeds received (including the separate payment, if any, with respect to
accrued interest) for the preferred securities (or as to OID only, to add the
amount to your adjusted tax basis in the preferred securities). To the extent
the selling price is less than your adjusted tax basis (which will include
accrued but unpaid OID if any), you 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.
Pending Tax Litigation Affecting the Preferred Securities
Last year, a taxpayer filed a petition in the United States Tax Court
contesting the IRS's disallowance of interest deductions that taxpayer claimed
in respect of securities issued in 1993 and 1994 that are, in some respects,
similar to the preferred securities. (Enron Corp. v. Commissioner, Docket No.
6149-98, filed April 1, 1998). Recently the IRS issued a private letter ruling
(PLR
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199910046) concluding that instruments similar in some respects to the preferred
securities were debt securities rather than equity securities. While a private
letter ruling may not be used as a legal precedent, it does provide insight as
to the views of the IRS on the issues in the ruling. An adverse decision by the
Tax Court in Enron Corp. concerning the deductibility of the interest may cause
a Tax Event. A Tax Event would give us the right to redeem the junior
subordinated debentures. See "Description of Junior Subordinated
Debentures--Redemption" and "Description of Preferred Securities--Liquidation
Distribution Upon Dissolution."
Non-U.S. Holders
The following discussion applies to you if you are not a U.S. Holder as
described above.
Payments to you, as a non-U.S. Holder, on a preferred security will
generally not be subject to withholding of income tax, provided that:
o you did not (directly or indirectly, actually or
constructively) own 10% or more of the total combined voting
power of all classes of our stock entitled to vote;
o you are not a controlled foreign corporation that is related
to us through stock ownership; and
o either (a) you certify to the Trust or its agent under
penalties of perjury, that you are not a U.S. Holder and
provide your 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, and holds the preferred security in that capacity,
certifies to the Trust or its agent, under penalties of
perjury, that it requires and has received a statement from
you or another financial institution between it and you in the
chain of ownership, and furnishes a copy of the statement to
the Trust or its agent.
As discussed above, it is possible that changes in the law affecting
the income tax consequences of the junior subordinated debentures could
adversely affect our ability to deduct interest payable on the junior
subordinated debentures. These changes could also cause the junior subordinated
debentures to be classified as our equity (rather than our debt) for United
States federal income tax purposes. This might cause the income derived from the
junior subordinated debentures to be characterized as dividends, generally
subject to a 30% income tax (on a withholding basis) when paid to you if you are
not a U.S. Holder, rather than as interest which, as discussed above, generally
is exempt from income tax in the hands of a person who is not a U.S. Holder.
You, as a non-U.S. Holder, will generally not be subject to withholding
of income tax on any gain realized upon the sale or other disposition of a
preferred security.
If you hold the preferred securities in connection with the active
conduct of a United States trade or business, you will be subject to income tax
on all income and gains recognized with respect to your proportionate share of
the junior subordinated debentures.
Information Reporting
In general, information reporting requirements will apply to payments
made on, and proceeds from the sale of, the preferred securities held by a
noncorporate U.S. Holder within the United States. In addition, payments made
on, and payments of the proceeds from the sale of, the preferred securities to
or through the United States office of a broker are subject to information
reporting unless you
50
<PAGE>
certify as to your non-U.S. Holder status or otherwise establish an exemption
from information reporting and backup withholding. See "Backup Withholding."
Taxable income on the preferred securities for a calendar year should be
reported to U.S. Holders on the appropriate forms by the following January 31st.
Backup Withholding
Payments made on, and proceeds from the sale of, the preferred
securities may be subject to a "backup" withholding tax of 31% unless you comply
with certain identification or exemption requirements. Any amounts so withheld
will be allowed as a credit against your income tax liability, or refunded,
provided the required information is provided to the IRS.
The preceding discussion is only a summary and does not address the
consequences to a particular person of the purchase, ownership and disposition
of the preferred securities. You are urged to contact your own tax advisor to
determine your particular tax consequences.
CERTAIN ERISA CONSIDERATIONS
We and certain of our affiliates may each be considered a "party in
interest" within the meaning of the Employee Retirement Income Security Act of
1974 ("ERISA"), and any amendments to ERISA, or a "disqualified person" within
the meaning of Section 4975 of the Internal Revenue Code with respect to many
employee benefit plans that are subject to ERISA and individual retirement
accounts ("IRAs"). The purchase of the preferred securities by an employee
benefit plan or IRA that is subject to the fiduciary responsibility provisions
of ERISA or the prohibited transaction provisions of Section 4975(e)(1) of the
Internal Revenue Code and with respect to which we, or any of our affiliates are
service providers (or otherwise a party in interest or a disqualified person),
may constitute or result in a prohibited transaction under ERISA or Section 4975
of the Internal Revenue Code, unless the preferred securities are acquired
pursuant to and in accordance with an applicable exemption. Any pension or other
employee benefit plan, fiduciary or IRA holder, proposing to acquire any
preferred securities for this type of plan or IRA should consult with legal
counsel.
UNDERWRITING
Subject to the terms and conditions of the underwriting agreement,
dated _________, 1999, among us, the Trust, and Ferris, Baker Watts Incorporated
and Advest, Inc., as representatives of the underwriters, the Trust has agreed
to sell to the underwriters, and the underwriters have severally agreed to
purchase from the Trust, the following respective aggregate liquidation amounts
of preferred securities at the public offering price less the underwriting
discounts and commissions provided on the cover page of this prospectus:
Liquidation Amount of
Underwriter Preferred Securities
Ferris, Baker Watts Incorporated $_________
Advest, Inc. $_________
Total $_________
The underwriting agreement provides that the obligations of the
underwriters are subject to certain conditions precedent and that the
underwriters will purchase all of the preferred securities offered if any of the
preferred securities are purchased.
51
<PAGE>
The underwriters have advised us that they propose to offer the
preferred securities to the public at the public offering price provided on the
cover page of this prospectus and to certain dealers at the price less a
concession not in excess of $_______ per preferred security. The underwriters
may allow, and the dealers may reallow, a concession not in excess of $_______
per preferred security to certain other dealers. After the public offering, the
offering price and other selling terms may be changed by the underwriters. In
addition, we have agreed to pay a financial advisory fee to Ferris, Baker Watts
Incorporated of up to $75,000 in connection with the offering.
We have granted to the underwriters an option, exercisable not later
than 30 days after the date of the underwriting agreement, to purchase up to an
additional $3,000,000 aggregate liquidation amount of the preferred securities
at the public offering price. To the extent that the underwriters exercise the
option, we will be obligated, pursuant to the option, to sell the preferred
securities to the underwriters. The underwriters may exercise the option only to
cover over-allotments made in connection with the sale of the preferred
securities offered in this prospectus. If purchased, the underwriters will offer
these additional preferred securities on the same terms as those on which the
$20,000,000 aggregate liquidation amount of the preferred securities are being
offered.
In connection with this offering, the underwriters and any selling
group members and their respective affiliates may engage in transactions
effected in accordance with Rule 104 of SEC Regulation M that are intended to
stabilize, maintain or otherwise affect the market price of the preferred
securities. The transactions may include over-allotment transactions in which
the underwriters create a short position for their own account by selling more
preferred securities than they are committed to purchase from the Trust. In this
case, to cover all or part of the short position, the underwriters may exercise
the over-allotment option described above or may purchase preferred securities
in the open market following the initial offering of the preferred securities.
In connection with this offering, certain underwriters (and selling group
members) may engage in passive market making transactions in the preferred
securities on the Nasdaq National Market in accordance with Rule 103 of SEC
Regulation M. The underwriters also may engage in stabilizing transactions in
which they bid for, and purchase, shares of the preferred securities at a level
above that which might otherwise prevail in the open market for the purpose of
preventing or retarding a decline in the market price of the preferred
securities. The underwriters also may reclaim any selling concessions allowed to
an underwriter or dealer if the underwriters repurchase shares distributed by
that underwriter or dealer. Any of these transactions may result in the
maintenance of a price for the preferred securities at a level above that which
might otherwise prevail in the open market. We do not, nor do any of the
underwriters, make any representation or prediction as to the direction or
magnitude of any effect that the transactions described above may have on the
price of the preferred securities. The underwriters are not required to engage
in at any of the transactions and, once begun, the transactions may be
discontinued at any time without notice.
In view of the fact that the proceeds from the sale of the preferred
securities will be used to purchase our junior subordinated debentures, the
underwriting agreement provides that we will pay as compensation for the
underwriters' arranging the investment of the proceeds an amount of $_______ per
preferred security (or $_______ ($_______ if the over-allotment option is
exercised in full) in the aggregate).
Because the National Association of Securities Dealers, Inc. is
expected to view the preferred securities as interests in a direct participation
program, this offering is being made in compliance with the applicable
provisions of Rule 2810 of the NASD's Conduct Rules.
The preferred securities are a new issue of securities with no
established trading market. The representatives have advised the Trust and us
that they intend to make a market in the preferred securities. However, the
underwriters are not obligated to do so and the market making may be
52
<PAGE>
interrupted or discontinued at any time without notice at the sole discretion of
each of the underwriters. We have applied to have the preferred securities
approved for quotation on the Nasdaq National Market but a requirement for
initial listing, and for continued listing, is the presence of three, and two,
market makers, respectively, for the preferred securities, and the presence of a
third market maker cannot be assured. Accordingly, no assurance can be given as
to the development or liquidity of any market for the preferred securities.
We have agreed to indemnify the underwriters against certain
liabilities, including liabilities under the Securities Act.
The representatives and certain of the other underwriters have in the
past, and may in the future perform various services for us, including
investment banking services, for which they have and may receive customary fees.
VALIDITY OF SECURITIES
The validity of the guarantee and the junior subordinated debentures
and certain tax matters will be passed upon for us by Gordon, Feinblatt,
Rothman, Hoffberger & Hollander, LLC, Baltimore, Maryland, our counsel, and
certain legal matters will be passed upon for the underwriters by Shapiro and
Olander, Baltimore, Maryland. Certain matters of Delaware law relating to the
validity of the preferred securities, the enforceability of the trust agreement
and the creation of the Trust will be passed upon by Richards, Layton & Finger,
as special Delaware counsel to us and the Trust. Gordon, Feinblatt, Rothman,
Hoffberger & Hollander, LLC and Shapiro and Olander will rely as to certain
matters of Delaware law on the opinion of Richards, Layton & Finger.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements included in our Annual Report on Form 10-K for the year
ended December 31, 1998, as set forth in their report, which is incorporated by
reference in this prospectus. Our financial statements are incorporated by
reference in reliance on Ernst & Young LLP's report, given on their authority as
experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We are subject to the informational requirements of the Securities
Exchange Act of 1934, and any amendments to the Exchange Act, and in accordance
with the Exchange Act, we file reports, proxy statements, information statements
and other information with the SEC. These reports, proxy statements and other
information can be inspected and copied at the public reference facilities of
the SEC at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the
regional offices of the SEC located at 7 World Trade Center, 13th Floor, Suite
1300, New York, New York 10048 and Suite 1400, Citicorp Center, 14th Floor, 50
West Madison Street, Chicago, Illinois 60661. You may obtain information on the
operation of the public reference room by calling the SEC at 1-800-SEC-0330.
Copies of this material can also be obtained at prescribed rates by writing to
the Public Reference Section of the SEC at 450 Fifth Street, N.W., Washington,
D.C. 20549. This material also may be accessed electronically by means of the
SEC's home page on the Internet at www.sec.gov.
Our common stock trades on the Nasdaq National Market under the symbol
"FUNC." Documents filed by us with the SEC also can be inspected at the offices
of the National Association of Securities Dealers, Inc., 1735 K Street, N.W.,
Washington, D.C. 20006.
53
<PAGE>
We have filed a registration statement on Form S-3 with the SEC under
the Securities Act in connection with the offering. This prospectus does not
contain all of the information provided in the registration statement, certain
parts of which are omitted in accordance with the rules and regulations of the
SEC. The registration statement, including any amendments, schedules and
exhibits, is available for inspection and copying as provided above.
Statements contained in this prospectus as to the contents of any
contract or other document referred to in this document include all material
terms of the contract or other documents but are not necessarily complete, and
in each instance reference is made to the copy of the contract or other document
which may have been filed as an exhibit to the registration statement, each
statement being qualified in all respects by the reference.
No separate financial statements of the Trust have been included or
incorporated by reference in this document. We do not, nor does the Trust,
consider that the financial statements would be material to holders of the
preferred 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 preferred securities and
common securities. See "First United Capital Trust," "Description of Preferred
Securities," "Description of Junior Subordinated Debentures" and "Description of
Guarantee." In addition, we do not expect that the Trust will be filing reports
under the Exchange Act with the SEC.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
Our Annual Report on Form 10-K for the fiscal year ended December 31,
1998, our Quarterly Report on Form 10-Q for the quarter ended March 31, 1999,
and our Current Report on Form 8-K dated May 20, 1999, are incorporated into
this prospectus by reference.
In addition, all subsequent documents filed with the SEC by us pursuant
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this
prospectus shall be deemed to be incorporated by reference into this prospectus
and to be a part of this prospectus from the date of filing the documents. Any
statement contained in this prospectus or in a document incorporated or deemed
to be incorporated by reference in this prospectus or any other document shall
be deemed to be modified or superseded for purposes of this prospectus to the
extent that a statement contained in this prospectus or any other document or in
any subsequently filed document which also is or is deemed to be incorporated by
reference in this prospectus modified or supersedes the statement. Any statement
so modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this prospectus.
This prospectus incorporates documents by reference which are not
presented here or delivered with this document. These documents (excluding
exhibits unless specifically incorporated in these documents) are available
without charge upon written or oral request to First United Corporation, 19
South Second Street, Oakland, Maryland 21550, attention: Corporate Secretary,
telephone: (301) 334- 9471.
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING INFORMATION
This prospectus (including information included or incorporated by
reference in this prospectus) contains forward-looking statements with respect
to our financial condition, results of operations, plans, objectives, future
performance and business, including statements preceded by, followed by or that
include the words, "believes," "expects," "anticipates" or similar expressions.
54
<PAGE>
These forward-looking statements involve certain risks and uncertainties and may
relate to our future operating results.
Factors that may cause actual results to differ materially from those
contemplated by these forward-looking statements include, among others, the
following possibilities:
o earnings following acquisitions being lower than expected;
o a significant increase in competitive pressure among
depository and other financial
institutions;
o costs or difficulties related to the integration of the
acquired businesses being greater
than expected;
o changes in the interest rate environment resulting in reduced
margins;
o general economic or business conditions, either nationally or
in Maryland or West Virginia, being less favorable than
expected, resulting in, among other things, a deterioration in
credit quality or a reduced demand for credit;
o legislative or regulatory changes adversely affecting the
businesses in which we will be engaged;
o changes in the securities markets; and
o changes in the banking industry, including, the effects of
consolidation resulting from possible mergers of financial
institutions.
For other matters that may affect operating results you should
carefully consider the "Risk Factors" beginning on page 7.
55
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
====================================================== =========================================================
We have not authorized any person to give any
information or to make any representations
other than those contained in this Prospectus in
connection with the offer made by this [Logo]
Prospectus and, if given or made, the
information or representations must not be
relied upon as having been authorized by us or $20,000,000
any underwriter. The delivery of this Aggregate Liquidation Amount
Prospectus shall not create an implication that
the information in this Prospectus is correct
after the date of this Prospectus. This
Prospectus is not an offer to, or solicitation by,
anyone in any jurisdiction in which the offer or First United Capital Trust
solicitation is not authorized or in which the
person making the offer or solicitation is not
qualified to do so or to anyone to whom it is ______% Preferred Securities
unlawful to make the offer or solicitation.
_______________ Guaranteed by
First United Corporation
---------------
Prospectus
---------------
FERRIS, BAKER WATTS
INCORPORATED
ADVEST, INC.
______________, 1999
TABLE OF CONTENTS
Page
Prospectus Summary............................... 1
Risk Factors..................................... 7
Selected Consolidated Financial Data............. 11
Ratio of Earnings to Fixed Charges............... 12
Recent Developments ............................. 12
Use of Proceeds.................................. 13
Capitalization .................................. 13
First United Capital Trust....................... 15
Accounting Treatment............................. 15
Description of Preferred Securities.............. 15
Description of Junior Subordinated
Debentures.................................... 30
Description of Guarantee......................... 42
Relationship among the Preferred Securities,
the Junior Subordinated Debentures,
and the Guarantee.............................. 44
Certain Federal Income Tax Consequences.......... 46
Certain ERISA Considerations..................... 51
Underwriting...................................... 51
Validity of Securities........................... 53
Experts ......................................... 53
Where You Can Find More Information.............. 53
Incorporation of Certain Documents
by Reference.................................... 54
Cautionary Statement Concerning
Forward-Looking Information................... 54
====================================================== =========================================================
</TABLE>
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The following expenses will be incurred in connection with the issuance
and distribution of the Securities being registered, other than underwriting
discounts and commissions.
SEC registration fee $ 6,394
Printing and engraving 12,000
Accounting fees and expenses 40,000
Company counsel fees and expenses 45,000
Delaware counsel fees and expenses 7,500
Transfer agent fee 1,000
Trustee fee 8,000
Trustee counsel fee 8,000
Nasdaq listing fees 48,750
Blue sky fees and expenses 3,500
Financial advisory fee 71,500
Miscellaneous 5,000
------------
Total $ 256,644
===========
Item 15. Indemnification of Directors and Officers
Section 2-418 of the Maryland Annotated Code, Corporations and
Associations Article (1993) ("Maryland Code") provides that a corporation may
indemnify directors and officers against liabilities they may incur in such
capacities unless it is established that: (a) the directors act or omission was
material and (i) was committed in bad faith or (ii) was the result of active and
deliberate dishonesty; or (b) the director actually received an improper
personal benefit; or (c) the director had reasonable cause to believe that the
act or omission was unlawful. A corporation is required to indemnify directors
and officers against expenses they may incur in defending actions against them
in such capacities if they are successful on the merits or otherwise in the
defense of such actions.
The Maryland Code provides that the foregoing provisions shall not be
deemed exclusive of any other rights to which a director or officer seeking
indemnification may be entitled under, among other things, any by-law provision.
The Bylaws of the Company provide that it shall indemnify and advance
expenses to an officer or director in connection with a proceeding to the
fullest extent permitted by and in accordance with the Maryland Code and federal
law.
II-1
<PAGE>
Item 16. Exhibits
The exhibits listed on the Exhibit Index on page II-6 of this
Registration Statement are filed herewith or will be filed by amendment.
Item 17. Undertakings
Each of the undersigned Registrants hereby undertakes:
1. That, for purposes of determining any liability under the Securities
Act of 1933 and any amendments (the "Securities Act"), each filing of
the Registrant's annual report pursuant to Section 13(a) or Section
15(d) of the Securities Exchange Act of 1934 that is incorporated by
reference in the Registration Statement shall be deemed to be a new
registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
2. That, for purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained
in a form of prospectus filed by the registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to
be part of this registration statement as of the time it was declared
effective.
3. That, for the purpose of determining any lability under the Securities
Act, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to directors, officers and controlling persons of the Registrants
pursuant to the provisions provided in Item 15 hereof, or otherwise, the
Registrants have been advised that in the opinion of the Securities and Exchange
Commission ("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 the Registrants of expenses incurred or paid by a director, officer
or controlling person of the Registrants in the successful defense of any
action, suit or proceedings) is asserted by such director, officer or
controlling person in connection with the securities being registered and the
Commission remains of the same opinion, the Registrants will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Amendment
No. 2 to be signed on its behalf by the undersigned, thereunto duly authorized
in the City of Oakland, State of Maryland, on August 13, 1999.
FIRST UNITED CORPORATION
By: /s/ William B. Grant
-------------------------------------
William B. Grant
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Amendment No. 2 has been signed by the following persons in the capacities and
on the dates indicated.
Signature Title Date
- --------- ----- ----
/s/ William B. Grant Chairman of the Board August 13, 1999
- ---------------------------
William B. Grant Chief Executive Officer
and Director (Principal
Executive Officer)
/s/ Robert W. Kurtz President, Chief Financial August 13, 1999
- ----------------------------
Robert W. Kurtz Officer and Director
(Principal Financial and
Accounting Officer)
/s/ David J. Beachy* Director August 13, 1999
- ----------------------------
David J. Beachy
/s/ Donald M. Browning* Director August 13, 1999
- ----------------------------
Donald M. Browning
/s/ Rex W. Burton* Director August 13, 1999
- ----------------------------
Rex W. Burton
/s/ Paul Cox, Jr.* Director August 13, 1999
- ----------------------------
Paul Cox, Jr.
/s/ Richard D. Dailey, Jr.* Director August 13, 1999
- ----------------------------
Richard D. Dailey, Jr.
II-3
<PAGE>
/s/ Maynard G. Grossnickle* Director August 13, 1999
- ----------------------------
Maynard G. Grossnickle
/s/ Raymond F. Hinkle* Director August 13, 1999
- -----------------------------
Raymond F. Hinkle
/s/ Andrew E. Mance* Director August 13, 1999
- -----------------------------
Dr. Andrew E. Mance
/s/ Elaine L. McDonald Director August 13, 1999
- -----------------------------
Elaine L. McDonald
/s/ Donald E. Moran* Director August 13, 1999
- -----------------------------
Donald E. Moran
/s/ I. Robert Rudy* Director August 13, 1999
- -----------------------------
I. Robert Rudy
/s/ James F. Scarpelli, Sr.* Director August 13, 1999
- -----------------------------
James F. Scarpelli, Sr.
/s/ Richard G. Stanton * Director August 13, 1999
- -----------------------------
Richard G. Stanton
/s/ Robert G. Stuck* Director August 13, 1999
- -----------------------------
Robert G. Stuck
/s/Frederick A. Thayer, III* Director August 13, 1999
- -----------------------------
Frederick A. Thayer, III
*By: /s/ William B. Grant
----------------------------------
William B. Grant, Attorney-in-Fact August 13, 1999
II-4
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, the Issuer
Trust has duly caused this Amendment No. 2 to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Oakland, State of
Maryland, on August 13, 1999.
FIRST UNITED CAPITAL TRUST
By: First United Corporation,
as Depositor
By: /s/ William B. Grant
---------------------------------
William B. Grant
Chairman of the Board and
Chief Executive Officer
F7777f.600 T
1:08/13/99
II-5
<PAGE>
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
1.1 Form of Underwriting Agreement
4.1 Form of Junior Subordinated Indenture*
4.2 Form of Amended and Restated Trust Agreement*
4.3 Form of Guarantee by First United Corporation*
5.1 Opinion of Gordon, Feinblatt, Rothman, Hoffberger & Hollander, LLC*
5.2 Opinion of Richards, Layton & Finger*
8.1 Tax opinion of Gordon, Feinblatt, Rothman, Hoffberger & Hollander, LLC*
23.1 Consent of Ernst & Young LLP*
23.2 Consent of Gordon, Feinblatt, Rothman, Hoffberger & Hollander, LLC
(included in Exhibits 5.1 and 8.1)*
23.3 Consent of Richards, Layton & Finger (included in Exhibit 5.2)*
24.1 Powers of Attorney of certain directors of First United Corporation*
25.1 Statement of Eligibility under the Trust Indenture Act of 1939, and any
amendments, of Bankers Trust Company, as trustee under the Junior
Subordinated Indenture, the Amended and Restated Trust Agreement and the
Guarantee*
- -----------------------------------
* Previously filed with the initial filing of this Registration Statement and
the same is incorporated herein by reference.
II-6
<PAGE>
$20,000,000
(Aggregate Liquidation Amount)
FIRST UNITED CAPITAL TRUST
[9.0-9.5%] Preferred Securities
(Liquidation Amount $10.00 per Preferred Security)
UNDERWRITING AGREEMENT
August __, 1999
12:00 p.m.
FERRIS, BAKER WATTS, INCORPORATED and ADVEST, INC.
As Representatives of the
Several Underwriters Identified
c/o FBW In Schedule I Hereto,
1720 Eye Street, N.W.
Washington, D.C. 20006
Ladies and Gentlemen:
Section 1. Introduction. First United Corporation, a Maryland
corporation (the "Company"), and First United Capital Trust, statutory business
trust organized under the Delaware Business Trust Act (the "Delaware Act") (the
"Trust" and, together with the Company, sometimes the "Offerors"), propose, upon
the terms and subject to the conditions set forth in this underwriting agreement
(this "Agreement") that the Trust issue and sell to the several underwriters
named in Schedule I hereto (each an "Underwriter" and, collectively, the
"Underwriters"), for which Ferris, Baker Watts, Incorporated and Advest, Inc.
are acting as Representatives (the "Representatives"), with respect to the
proposed issuance and sale by the Trust of its ____% Preferred Securities, with
a liquidation amount of $10.00 per Preferred Security (the "Securities"), the
terms of which are more fully described in the Prospectus (as hereinafter
defined). Such Securities will be issued pursuant to an Amended and Restated
Trust Agreement, dated August __, 1999 (the "Trust Agreement") among the Company
as Depositor, Bankers Trust Company, as Property Trustee and Bankers Trust
(Delaware) as Delaware Trustee. The Preferred Securities will be guaranteed by
the Company with respect to distributions and payments upon liquidation,
redemption and otherwise (the "Guarantee") pursuant to and to the extent
provided by a Guarantee Agreement (the "Guarantee Agreement"), August __, 1999,
between the Company and Bankers Trust Company, as Guarantee Trustee (the
"Guarantee Trustee").
<PAGE>
The entire proceeds of the sale of the Securities to be issued pursuant
hereto will be used to purchase an equivalent dollar amount of junior
subordinated debentures (the "Subordinated Debentures") to be issued by the
Company pursuant to a Junior Subordinated Indenture (the "Indenture"), dated
August __, 1999, between the Company and Bankers Trust Company, as Debenture
Trustee (the "Debenture Trustee").
The Securities proposed to be sold by the Trust are referred to herein
as the "Firm Securities." The Offerors also propose to grant to the Underwriters
an option to purchase up to an additional 300,000 Securities, referred to herein
as the "Additional Securities" (and, together with the Firm Securities, the
"Preferred Securities"), if requested by the Underwriters as provided in Section
3 hereof.
The registration statement on Form S-3 under the Securities Act of
1933, as amended (the "Securities Act") with respect to the Preferred
Securities, the Subordinated Debentures and the Guarantee, as amended at the
time it is or was declared effective by the Securities and Exchange Commission
(the "Commission") and, in the event of any amendment thereto after the
effective date, such registration statement as so amended (but only from and
after the effectiveness of such amendment), including a registration statement
(if any) filed pursuant to Rule 462(b) of the rules and regulations of the
Commission under the Securities Act (the "Securities Act Rules and Regulations")
increasing the size of the offering registered under the Securities Act and
information (if any) deemed to be part of the registration statement at the time
of effectiveness pursuant to Rules 430A(b) and 434(d) of the Securities Act
Rules and Regulations, is hereinafter called the "Registration Statement." The
prospectus included in the Registration Statement at the time it is or was
declared effective by the Commission and any related prospectus supplement or
supplements relating to the Preferred Securities, the Guarantee or the
Subordinated Debentures as previously filed with or promptly hereafter filed
with the Commission pursuant to Rule 424(b) of the Securities Act Rules and
Regulations, is hereinafter called the "Prospectus," except that if any
prospectus (including any term sheet meeting the requirements of Rule 434 of the
Securities Act Rules and Regulations provided by the Offerors for use with a
prospectus subject to completion within the meaning of such Rule 434 in order to
meet the requirements of Section 10(a) of the Securities Act) filed by the
Offerors with the Commission pursuant to Rule 424(b) (and Rule 434, if
applicable) of the Securities Act Rules and Regulations or any other such
prospectus provided to the Underwriters by the Offerors for use in connection
with the offering of the Preferred Securities (whether or not required to be
filed by the Offerors with the Commission pursuant to Rule 424(b) of the
Securities Act Rules and Regulations) differs from the prospectus on file at the
time the Registration Statement is or was declared effective by the Commission,
the term "Prospectus" shall refer to such differing prospectus (including any
term sheet within the meaning of Rule 434 of the Securities Act Rules and
Regulations) from and after the time such prospectus is filed with the
Commission or transmitted to the Commission for filing pursuant to such Rule
424(b) (and Rule 434, if applicable) or from and after the time it is first
provided to the Underwriters by the Offerors for such use. The term "Preliminary
Prospectus" as used herein means the preliminary prospectus included in any
Registration Statement prior to the time it becomes or became effective under
the Securities Act and any prospectus subject to completion as described in Rule
430A or 434 of the Securities Act Rules and Regulations. The term "disclosed in"
when referring to the Registration Statement, the Preliminary Prospectus, or the
Prospectus includes documents that are incorporated in or made an exhibit to any
of the foregoing. The term "Material Adverse Effect" means (i) when used in
connection with the Company, any development, change or effect that is
materially adverse to the business, properties, assets, net worth, condition
(financial or other), or results of operations of the Company and the
Subsidiaries, taken as a whole and (ii) when used in connection with the Trust,
any development, change or effect that is materially adverse to the business,
properties, assets, net worth, condition (financial or other) or results of
operations of the Trust.
Section 2. Representations and Warranties and Agreements of the
Offerors.
(a) The Offerors, jointly and severally, represent and warrant
to, and agree with, each of the Underwriters, as of the date hereof, as of the
Closing Date and as of each Option Closing Date (as each such term is defined in
Section 5 hereof), if any, (except in respect of such representations as are
specified as being made as of a particular date) as follows:
(i) A registration statement on Form S-3 (File Nos.
333-83921 and 333-83921-01) under the Securities Act with respect to the
Preferred Securities, the Subordinated Debentures and the Guarantee, including a
form of prospectus subject to completion, has been prepared by the Offerors in
conformity with the requirements of the Securities Act, the Securities Act Rules
and Regulations, the Trust Indenture Act of 1939, as amended (the "Trust
Indenture Act") and the rules and regulations thereunder and has been filed with
the Commission. The Offerors have prepared and filed such amendments thereto, if
any, and such amended preliminary prospectuses, if any, as may have been
required to the date hereof, and will file such additional amendments thereto
and such amended prospectuses as may hereafter be required. If the Offerors have
elected to rely upon Rule 462(b) of the Securities Act Rules and Regulations to
increase the size of the offering registered under the Securities Act, the
Offerors will prepare and file with the Commission a registration statement with
respect to such increase pursuant to such Rule.
If the Offerors have elected not to rely upon Rule 430A of
the Securities Act Rules and Regulations, the Offerors have prepared and will
promptly file an amendment to the registration statement and an amended
prospectus (including a term sheet meeting the requirements of Rule 434 of the
Securities Act Rules and Regulations) if necessary to complete the Prospectus.
If the Offerors have elected to rely upon Rule 430A of the Securities Act Rules
and Regulations, they will prepare and file a prospectus (or a term sheet
meeting the requirements of Rule 434) pursuant to Rule 424(b) that discloses the
information previously omitted from the prospectus in reliance upon Rule 430A.
Copies of the Registration Statement, any amendment thereto
and any Preliminary Prospectus filed with the Commission, including the
exhibits, financial statements and schedules thereto, have been delivered by the
Offerors to the Representatives on behalf of the Underwriters.
(ii) If the Registration Statement or any post-effective
amendment thereto has been declared effective, the Commission has not issued any
stop order suspending the effectiveness thereof or any order preventing or
suspending the use of any Preliminary Prospectus, the Prospectus, the
Registration Statement or any amendment or supplement thereto, and the
Commission has not instituted or threatened to institute any proceedings with
respect to such an order.
(iii) The Registration Statement, on the date it was or is
declared effective by the Commission, each Preliminary Prospectus, on the date
of the filing thereof with the Commission, and the Prospectus and any amendment
or supplement thereto, on the date of filing thereof with the Commission (or if
not filed, on the date provided by the Offerors to the Underwriters in
connection with offering and sale of the Preferred Securities) at the Closing
Date and at each Option Closing Date, if any, conformed or will conform in all
material respects with the requirements of the Securities Act, the Securities
Act Rules and Regulations, the Trust Indenture Act and the rules and regulations
thereunder, all federal, state, or local statutes, and any other administrative
regulation or other law enacted, adopted or issued by any governmental agency;
and every request of the Commission, or any securities authority or agency of
any jurisdiction, for additional information (to be included in the Registration
Statement or the Prospectus or otherwise) has been complied with in all material
respects. The Registration Statement, on the date it was or is declared
effective by the Commission, upon the filing or first delivery to the
Underwriters of the Prospectus (or any supplement to the Prospectus (including
any term sheet meeting the requirements of Rule 434 of the Securities Act Rules
and Regulations)) at the Closing Date and at each Option Closing Date, if any,
did not and will not contain an untrue statement of material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading; each Preliminary Prospectus on the date of
the filing thereof with the Commission, and the Prospectus and any amendment or
supplement thereto on the date of filing-thereof with the Commission (or if not
filed, on the date provided by the Offerors to the Underwriters in connection
with the offering and sale of the Preferred Securities) at the Closing Date and
at each Option Closing Date, if any, did not and will not include an untrue
statement of material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading;
provided, however, that the foregoing representation and warranty shall not
apply to (i) any statements or omissions made in reliance upon and in conformity
with information furnished in writing to the Offerors by an Underwriter through
the Representatives or by the Delaware Trustee, the Property Trustee, the
Guarantee Trustee or the Debenture Trustee expressly for use therein (as
identified in Section 9(b) hereof) and (ii) that part of the Registration
Statement which constitutes the Statement of Eligibility and Qualification under
the Trust Indenture Act. As of the date that the Registration Statement was or
is declared effective by the Commission, as of the date that each Preliminary
Prospectus was filed with the Commission, as of the date that the Prospectus and
any amendment or supplement thereto was of is with the Commission (or if not
filed, on the date provided by the Offerors to the Underwriters in connection
with offering and sale of the Preferred Securities), at the Closing Date and at
each Option Closing Date, no event has or will have occurred which should have
been set forth in an amendment or supplement to the Registration Statement or
the Prospectus which has not then been set forth in such an amendment or
supplement.
(iv) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State of
Maryland, its jurisdiction of incorporation, has been duly qualified as a
foreign corporation for the transaction of business and is in good standing
under the laws of each other jurisdiction in which it owns or leases properties
or conducts any business so as to require such qualification, and has all power
and authority necessary to own or hold its properties and assets and to conduct
the business in which it engages as described in or contemplated by the
Registration Statement and the Prospectus. The Company is duly registered as a
bank holding company under the Bank Holding Company Act of 1956, as amended.
(v) First United Bank & Trust (the "Bank Subsidiary") is a
state-chartered trust company organized, validly existing and in good standing
under the laws of the State of Maryland, its state of organization. All eligible
deposit accounts issued by the Bank Subsidiary are insured by the Federal
Deposit Insurance Corporation (the "FDIC",) up to the maximum applicable amount
in accordance with applicable law and the rules and regulations of the FDIC and
no proceedings for the termination or revocation of such insurance are pending
or, to the best knowledge of the Offerors, threatened. Oakfirst Life Insurance
Corporation (the "Reinsurance Subsidiary") has been duly incorporated and is
validly existing as a corporation in good standing under the laws of the State
of Arizona, its jurisdiction of incorporation. Gonder Insurance Agency, a wholly
owned subsidiary of the Bank Subsidiary (the "Insurance Agency Subsidiary"), has
been duly incorporated and is validly existing as a corporation in good standing
under the laws of the State of Maryland, its jurisdiction of incorporation.
First United Securities, Inc., a wholly owned subsidiary of the Bank Subsidiary
(the "Securities Subsidiary"), has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State of
Delaware, its jurisdiction of incorporation. First United Auto Finance, LLC, a
wholly owned subsidiary of the Bank Subsidiary (the "Auto Financing
Subsidiary"), has been duly organized and is validly existing as a limited
liability company in good standing under the laws of the State of Maryland, its
jurisdiction of organization. First United Insurance Agency, Inc., a wholly
owned subsidiary of the Bank Subsidiary (the "Insurance Subsidiary"), has been
duly incorporated and is validly existing as a corporation in good standing
under the laws of the State of Maryland, its jurisdiction of incorporation. Each
of the Bank Subsidiary, the Reinsurance Subsidiary, the Insurance Agency
Subsidiary, the Securities Subsidiary, the Auto Financing Subsidiary and the
Insurance Subsidiary (collectively, the "Subsidiaries" and, individually, a
"Subsidiary") has been duly qualified as a foreign corporation for the
transaction of business and is in good standing under the laws of each other
jurisdiction in which it owns or leases properties or conducts any business so
as to require such qualification (except to the extent the lack of such
qualification will not result in a material adverse effect to the Offerors), and
has all power and authority necessary to own or hold its properties and assets
and to conduct the business in which it engages as described in or contemplated
by the Registration Statement and the Prospectus. The Subsidiaries are all of
the direct and indirect subsidiaries of the Company, and the Subsidiaries,
together with the Trust, include all of the "significant subsidiaries" of the
Company as defined in Rule 1-02 of Regulation S-X of the Commission.
(vi) The Trust has been duly created and is validly
existing in good standing as a business trust under the Delaware Act, has been
duly authorized to do business in each jurisdiction where such qualification is
required and has all power and authority necessary to own or hold its properties
and assets and to conduct the business in which it is engaged as described in or
contemplated by the Registration Statement and the Prospectus. The Trust has
conducted and will conduct no business other than as contemplated by the Trust
Agreement and as described in or contemplated by the Registration Statement and
the Prospectus. The Trust is not a party to or otherwise bound by any agreement
other than those described in the Prospectus. At and after such time as the
Company has purchased Common Securities equal to at least 3% of the total equity
of the Trust, 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
and the Trust is and will be treated as a consolidated subsidiary of the Company
pursuant to generally accepted accounting principles.
(vii) The Company has all power and authority necessary to
enter into, execute, deliver and perform its obligations under and with respect
to the Indenture, the Trust Agreement, the Guarantee Agreement and the
Subordinated Debentures. All necessary corporate proceedings of the Company have
been duly taken to authorize the execution, delivery and performance by the
Company of its obligations under the Indenture, the Trust Agreement, the
Guarantee Agreement and the Subordinated Debentures. The Indenture, the Trust
Agreement, the Guarantee Agreement and the Subordinated Debentures have been
duly authorized, and when executed and delivered by the Company, will be the
valid and binding obligations of the Company, enforceable against the Company,
in accordance with their respective terms (except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other laws of general application relating to or affecting the enforcement of
creditors' rights and by the application of equitable principles relating to the
availability of remedies, and except as rights to indemnity or contribution may
be limited by federal or state securities laws and the public policy underlying
such laws). The Indenture has been or will be duly qualified under the Trust
Indenture Act. The Indenture, the Trust Agreement, the Guarantee Agreement and
the Subordinated Debentures conform or will conform in all material respects to
the descriptions thereof contained in the Registration Statement and the
Prospectus and are in substantially the forms filed as exhibits to the
Registration Statement.
(viii) The Trust has all power and authority necessary to
enter into, execute, deliver and perform its obligations under and with respect
to the Common Securities and the Preferred Securities. All necessary trust
action on the part of the Trust has been duly taken to authorize the execution,
issuance, sale, delivery and performance by the Trust of its obligations under
the Common Securities and the Preferred Securities. The Common Securities and
the Preferred Securities have been duly authorized by the Trust Agreement, and
when issued by the Trust against payment therefor as contemplated by the
Prospectus, will be validly issued and (subject to the terms of the Trust
Agreement) fully paid and nonassessable undivided beneficial interests in the
assets of the Trust, entitled to the benefits provided by the Trust Agreement.
Good and marketable title to the Preferred Securities will pass to the
Underwriters on the Closing Date or the applicable Option Closing Date, if any,
free and clear of all liens, security interests, pledges, charges, mortgages or
other defects or encumbrances of any kind or nature. The issuance of the Common
Securities and the Preferred Securities is not subject to preemptive or other
similar rights and holders of Preferred Securities will be entitled to the same
limitation of personal liability under Delaware law as is extended to
stockholders of private corporations for profit organized under the General
Corporation Law of the State of Delaware. The Common Securities and the
Preferred Securities conform or will conform in all material respects to the
descriptions thereof contained in the Registration Statement and the Prospectus.
(ix) The Company has the duly authorized capital stock set
forth in the Prospectus. All of the shares of capital stock of the Company
issued and outstanding have been duly and validly authorized and issued, are
fully paid and nonassessable, without personal liability attaching to the
ownership thereof, and none of such shares have been issued or are owned or held
in violation of any preemptive or other similar rights. There are no holders of
the securities of the Company having rights to registration thereof or
preemptive or other similar rights to purchase capital stock or membership
interests of the Company and neither the filing of the Registration Statement
nor the offering or sale of the Preferred Securities or the Subordinated
Debentures as contemplated by the Registration Statement, the Prospectus and
this Agreement gives rise to any rights (other than have been waived or
satisfied) for or relating to the registration of any securities of the Company.
The capital stock of the Company conforms in all material respects to the
descriptions thereof contained in the Registration Statement and the Prospectus.
There are no options, warrants, or other rights to purchase or acquire from the
Company or from any of the Subsidiaries shares of the capital stock of the
Company or any such Subsidiary. All of the issued and outstanding shares of
capital stock of each of the Subsidiaries have been duly authorized, validly
issued and are fully paid and nonassessable and all such shares are held, in the
case of the Bank Subsidiary and the Reinsurance Subsidiary, by the Company, and
in the case of the Insurance Agency Subsidiary, the Securities Subsidiary, the
Auto Financing Subsidiary and the Insurance Subsidiary, by the Bank Subsidiary,
free and clear of any liens, security interests, pledges, charges, mortgages or
other defects or encumbrances of any kind or nature.
(x) The consolidated financial statements of the Company
and the related notes thereto incorporated by reference in the Registration
Statement and the Prospectus comply in all material respects with the
requirements of the Securities Act and the Securities Act Rules and Regulations
at the dates and for the periods indicated, are accurate in all material
respects and fairly present the financial condition, results of operations,
stockholders' equity and cash flows, and the other information of the Company
and its consolidated subsidiaries at the respective dates and for the respective
periods specified therein. Such financial statements and the related notes
thereto have been prepared in accordance with generally accepted accounting
principles consistently applied throughout the periods presented (except as
otherwise noted therein) and have been properly derived from the books and
records of the Company, and such financial statements have been audited by Ernst
& Young, LLP, who are independent public accountants within the meaning of the
Securities Act and the Securities Act Rules and Regulations, as indicated in
their reports filed therewith. The selected financial information and
statistical data set forth under the captions "Prospectus Summary," "Selected
Consolidated Financial Data," "Use of Proceeds", "Capitalization," in the
Prospectus fairly present the information set forth therein, have been derived
from the financial statements or operating records of the Company and have been
compiled on a basis consistent with that of the audited financial statements
incorporated by reference in the Registration Statement and the Prospectus. No
other financial statements or financial information, except that which is
contained in the Registration Statement or the Prospectus, is required by Form
S-3, the Securities Act Rules and Regulations or otherwise, to be included in
the Registration Statement or the Prospectus.
(xi) Since the respective dates as of which information is
given in the Prospectus, and except as otherwise may be stated therein or
contemplated thereby (A) none of the Subsidiaries, the Company or the Trust has
entered into any transaction or incurred any liability or obligation, direct,
contingent or otherwise, which is material to the Company and the Subsidiaries,
taken as a whole or to the Trust, (B) there has not been any material change in
the outstanding capital stock of the Company, or any issuance of options,
warrants or rights to purchase the capital stock of the Company (through any
existing stock repurchase plan, dividend reinvestment plan, employee benefit
plan or otherwise), or any material increase in the short-term or long-term debt
the Company or the Subsidiaries, except indebtedness and deposit liabilities
incurred by the Bank Subsidiary in the ordinary course of its banking business,
or any event or circumstance giving rise to a Material Adverse Effect (as
hereinafter defined) relating to the Company or the Trust; (C) none of the
Subsidiaries, the Company or the Trust has sustained any loss or damage (whether
or not insured) which has resulted in or reasonably could be expected, in the
aggregate, to result in a Material Adverse Effect to the Company or the Trust;
(D) there has not been any material interference with the business of any of the
Subsidiaries taken as a whole, the Company or the Trust from any labor dispute
or court or governmental action, order or decree; (E) there has not been any
change greater than ten percent (10%), contingent or otherwise, in the direct or
indirect control of the Company nor has there been any change in control, direct
or indirect, in the Trust and, to the best knowledge of the Company and the
Trust, there do not exist any events or conditions which would reasonably be
expected to result in such changes in the Company or the Trust, respectively;
(F) other than as set forth in the Prospectus, there are no actions, suits,
proceedings, or investigations or litigation pending, or, to the best knowledge
of the Company or the Trust, threatened or contemplated actions, suits or
proceedings against the Subsidiaries, the Company or the Trust before any court,
regulatory body, administrative agency or other governmental body which might,
in the aggregate, have a Material Adverse Effect on the Company or the Trust, or
which is required by the Securities Act and the Securities Act Rules and
Regulations to be set forth in the Registration Statement or the Prospectus
which has not been so set forth, and (G) there has not occurred any other event
and there has arisen no set of circumstances required by the Securities Act and
the Securities Act Rules and Regulations to be set forth in the Registration
Statement or the Prospectus which has not been so set forth in the Registration
Statement or Prospectus as fairly and accurately summarized therein. None of the
Subsidiaries, the Company or the Trust has any material contingent liabilities,
taken as a whole, that are not disclosed in the Prospectus.
(xii) Each of the Subsidiaries, the Company and the Trust
has filed all foreign, federal, state and local income, franchise and other
material tax returns required to be filed (or has obtained extensions with
respect thereto) and has paid all taxes shown as due thereunder and all
assessments received by it to the extent that payment has become due, and has
made all required payroll tax payments. All tax liabilities have been adequately
provided for in the consolidated financial statements of the Company and, to the
best knowledge of the Company and the Trust, there are no tax deficiencies which
have been or might be asserted against any of the Company, the Subsidiaries or
the Trust which, if so assessed, would have a Material Adverse Effect on the
Company or the Trust, as the case may be.
(xiii) The Company and each of the Subsidiaries maintains
insurance of the types and in amounts which the Company reasonably believes to
be adequate for the conduct of their respective businesses and the value of
their prospective properties and in such amounts and with such deductibles as
are customary for companies in the same or similar businesses, all of which
insurance is in full force and effect.
(xiv) Each of the Company and the Trust has all power and
authority to enter into, execute, deliver and perform its obligations under and
with respect to this Agreement. All necessary corporate or trust proceedings, as
the case may be, of the Company and the Trust have been duly taken to authorize
the execution, delivery and performance by the Company and the Trust of this
Agreement. This Agreement has been duly authorized, executed and delivered by
the Company and the Trust and constitutes a valid and binding obligation of the
Company and of the Trust, enforceable against each in accordance with its terms
(except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of general application
relating to or affecting the enforcement of creditors' rights and by the
application of equitable principles relating to the availability of remedies,
and except as rights to indemnity or contribution may be limited by federal or
state securities laws and the public policy underlying such laws).
(xv) None of the Subsidiaries, the Company or the Trust is
in default in the performance or observance of any obligation, agreement,
covenant or condition contained in any contract, indenture, mortgage, loan
agreement, note, lease, franchise, license, bond or other evidence of
indebtedness or other agreement or instrument to which it is a party, by which
it may be bound or to which any of its assets, properties or businesses are or
may be subject, except for such defaults that would not, in the aggregate, have
a Material Adverse Effect on the Company or the Trust, as the case may be, or
which could in any way, in the aggregate, impair or delay, for twenty-four (24)
hours or more, the consummation of the transactions contemplated by this
Agreement, the Indenture, the Trust Agreement or the Guarantee Agreement, or the
issuance and sale of the Common Securities, the Preferred Securities or of the
Subordinated Debentures, or the consummation by the Company and the Trust of the
other transactions contemplated by this Agreement, the Indenture, the Trust
Agreement or the Guarantee Agreement. The Company's and the Trust's execution
and delivery of this Agreement, and the Company's execution of the Indenture,
the Trust Agreement and the Guarantee Agreement, and the consummation by the
Company and/or the Trust of the transactions contemplated hereby and thereby,
including, without limitation, the issuance, sale and delivery of the Preferred
Securities and the Common Securities by the Trust and of the Subordinated
Debentures by the Company, and the conduct of their respective businesses as
described in or contemplated by the Registration Statement and the Prospectus,
will not violate of any provision of the charter, bylaws or other governing
documents of any of the Subsidiaries, the Company or the Trust Agreement or the
Trust's certificate of trust filed with the state of Delaware on July 19, 1999
(the "Certificate of Trust"), or similar constructive documents of any of them
and will not result in the breach of, or be in contravention of, constitute a
default under, cause (or permit) the maturation or acceleration of any liability
or the termination of any rights under, or result in the creation or imposition
of any lien, security interest, pledge, charge, mortgage or other defect in or
encumbrance upon, any assets, property or business of the Subsidiaries, the
Company, or the Trust pursuant to the terms of any contract, indenture,
mortgage, loan agreement, note, lease, franchise, license, bond, other evidence
of indebtedness, or other agreement or instrument to which any of the
Subsidiaries, the Company or the Trust is a party, by which it may be bound or
to which any of its assets, properties or businesses are or may be subject, or,
assuming compliance with the Securities Act and applicable state securities or
Blue Sky laws, any statute, judgment, decree, order, rule or regulation
applicable to any of the Subsidiaries, the Company or the Trust of any
arbitrator, court, regulatory body, administrative agency or other governmental
body, except those, if any, that are described in the Prospectus or those which
would not, individually or in the aggregate, have a Material Adverse Effect on
the Company or the Trust, as the case may be.
(xvi) All executed agreements or copies of executed
agreements filed as exhibits to the Registration Statement to which any of the
Subsidiaries, the Company or the Trust is a party, by which any of them is or
may be bound or to which any of their respective assets, properties or
businesses are or may be subject have been duly and validly authorized, executed
and delivered by such Subsidiary, the Company or the Trust, as the case may be,
and constitute the legal, valid and binding agreements of such Subsidiary, the
Company or the Trust, enforceable against it in accordance with its terms
(except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization or other laws of general application relating to or
affecting enforcement of creditors' rights, and application of equitable
principles relating to the availability of remedies, and except as rights to
indemnity or contribution may be limited by federal or state securities laws and
the public policy underlying such laws). The descriptions and summaries
contained in the Registration Statement of contracts and other documents and the
statements set forth in the Prospectus under the captions "Description of
Preferred Securities Debentures," "Description of Junior Subordinated
Debentures," "Description of Guarantee" and "Relationship Among the Preferred
Securities, the Subordinated Debentures and the Guarantee," insofar as they
purport to constitute a summary of the terms of the Company's and the Trust's
securities, and under the captions (except, with respect to the statements under
the caption "Underwriting," for information furnished in writing to the Company
by the Underwriters through the Representatives expressly for use therein (as
identified in Section 9(b) hereof)) insofar as they purport to describe the
provisions of the laws and the provisions of documents referred to therein, are
accurate and fairly present in all material respects the information required to
be disclosed with respect thereto by the Securities Act and the Securities Act
Rules and Regulations, and there are no contracts, other documents, transactions
or circumstances which are required by the Securities Act and the Securities Act
Rules and Regulations to be described in the Prospectus, the Registration
Statement or filed as exhibits thereto which are not so described or filed. The
exhibits which have been filed are complete and correct copies of the documents
of which they purport to be copies.
(xvii) The Company and the Bank Subsidiary has good and
marketable title in fee simple to all real property and good and marketable
title to all other property and assets owned thereby as set forth in the
Prospectus, in each case free and clear of all liens, security interests,
pledges, charges, mortgages and other defects or encumbrances of any kind or
nature, except in the ordinary course of business, and except such as are
described in the Prospectus or such as do not materially affect the value of any
such property, and do not interfere with the use made or proposed to be made of
such property by the Company or the Bank Subsidiary. Any real properties held or
used by the Company or the Bank Subsidiary under lease are held or used under
valid, subsisting and enforceable leases, such leases are in full force and
effect, the Company or the Bank Subsidiary, as the case may be, is not in
default in respect of any material terms of any such lease and enjoys peaceful
and undisturbed possession thereunder and, to the best knowledge of the Company,
there are no claims that have been asserted by any party adverse to the
Company's or the Bank Subsidiary's right as lessee under any such lease or
affecting or challenging the Company's or the Bank Subsidiary's right to
continue possession of the premises subject to any such lease which,
individually or in the aggregate, would have a Material Adverse Affect on the
Company. No real property owned, held or used by the Company or the Bank
Subsidiary is situated in an area which is or, to the best knowledge of the
Company and the Bank Subsidiary, will be, subject to zoning, use, or building
code restrictions that would prohibit (and no state of facts relating to the
actions or inaction of another person or entity or his or its ownership,
leasing, or use of any real or personal property exists or will exist which
would prevent) the continued effective ownership, holding or use of such real
property in the business of the Company or the Bank Subsidiary as described in
or contemplated by the Registration Statement and the Prospectus.
(xviii) All legally required proceedings in connection
with the issuance and sale of the Common Securities, the Preferred Securities,
and the Subordinated Debentures and the Guarantee in accordance with this
Agreement and as contemplated by the Registration Statement and the Prospectus
have been taken and no consent, authorization, approval, order, registration,
license, certificate, declaration or permit of or from, or filing with, any
court, regulatory body, administrative agency or other governmental body, is
required in connection with the execution and delivery of this Agreement, the
Indenture, the Trust Agreement or the Guarantee Agreement, or the issuance and
sale of the Common Securities, the Preferred Securities or the Subordinated
Debentures, or the consummation by each of the Company and the Trust of the
transactions contemplated by this Agreement, the Indenture, the Trust Agreement
or the Guarantee Agreement, except such as have been described in the Prospectus
or may be required, under the Securities Act, the Securities Act Rules and
Regulations, the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and such as may be required under state securities or Blue Sky laws in
connection with the purchase and distribution of the Preferred Securities by the
Underwriters, or by The Nasdaq National Market (the "NNM") to have the Preferred
Securities listed thereon, and by the National Association of Securities
Dealers, Inc. (the "NASD") in connection with the terms and conditions set forth
in this Agreement. No consent of any party to any material contract, agreement,
mortgage, loan agreement, note, franchise, lease, bond, other evidence of
indebtedness or other agreement or instrument, or any arrangement or
understanding to which the Company or the Trust is a party, by which either of
them may be bound or to which any of their respective assets, properties or
businesses are or may be subject, is required for the execution, delivery or
performance of this Agreement, the Indenture, the Trust Agreement or the
Guarantee Agreement, or the issuance and sale of the Common Securities, the
Preferred Securities or the Subordinated Debentures, or the consummation by each
of the Company and the Trust of the transactions contemplated by this Agreement,
the Indenture, the Trust Agreement or the Guarantee Agreement.
(xix) None of the Subsidiaries, the Company or the Trust,
or the conduct of their respective businesses as described in or contemplated by
the Prospectus is in violation of any federal, state or local statute,
administrative regulation or other law, the consequence of which violation(s),
individually or in the aggregate, would have a Material Adverse Effect on the
Company or the Trust, as the case may be, or which could in any way,
individually or in the aggregate, impair or delay the consummation of the
transactions contemplated by this Agreement, the Indenture, the Trust Agreement,
or the Guarantee Agreement, or the issuance and sale of the Common Securities,
the Preferred Securities, or of the Subordinated Debentures, or the consummation
by each of the Company and by the Trust of the other transactions contemplated
by this Agreement, the Indenture, the Trust Agreement or the Guarantee
Agreement.
(xx) The Company has received, subject to notice of
issuance, approval to have the Preferred Securities listed on the NNM and the
Company knows of no reason which is likely to adversely affect such approval.
(xxi) None of the Subsidiaries, the Company or the Trust
is and, after giving effect to the offering and sale of the Preferred
Securities, the Common Securities and the Junior Subordinated Debentures, will
not be, an "investment company" or an "affiliated person" of or a "promoter" or
"principal underwriter" of or an entity "controlled" by an "investment company",
as such terms are defined in the Investment Company Act of 1940 (the "Investment
Company Act").
(xxii) Each the Company, the Subsidiaries, the Company and
the Trust owns or is licensed or otherwise has sufficient right to use the
proprietary knowledge, trademarks, service marks, trade names, trademark
registrations, service mark registrations, logo marks, copyrights and rights
(collectively, "Intellectual Property") necessary for the conduct of its
business as described in or contemplated by the Registration Statement and the
Prospectus. To the best knowledge of the Company and the Trust, none of the
activities engaged in by the Company, the Subsidiaries or the Trust materially
infringes upon or otherwise materially conflicts with Intellectual Property
rights of others. No claims have been asserted or, to the best knowledge of the
Offerors, threatened against the Company, the Subsidiaries or the Trust by any
person with respect to the use of any such Intellectual Property or challenging
or questioning the validity or effectiveness of any such Intellectual Property.
(xxiii) No labor disturbance(s) by, or labor dispute(s)
with the employees of the Company or the Subsidiaries exists or, to the best
knowledge of the Offerors, is threatened or imminent which, in the aggregate,
would have a Material Adverse Effect on the Company.
(xxiv) Each of the administrators under the Trust
Agreement (each of the "Administrators") has been duly authorized to execute and
deliver the Trust Agreement.
(xxv) To the best knowledge of the Offerors, no hazardous
substances, hazardous wastes, pollutants or contaminants have been deposited or
disposed of in, on or under the properties of the Company, or any of the
Subsidiaries (including properties owned, managed or controlled by a Subsidiary
in connection with its lending activities) during the period in which the
Company or the Subsidiary has owned, occupied, managed, controlled or operated
such properties, in violation of any environmental, safety, health or similar
laws or regulations, orders, decrees or permits relating to the protection of
human health and safety, the environment or hazardous or toxic substances or
wastes, pollutants or contaminants ("Environmental Regulations"), or any order,
judgment, decree or permit which would require remedial action under any
Environmental Regulations, except for any violations or remedial actions which
would not have, in the aggregate, a Material Adverse Effect on the Company. The
Company and each of the Subsidiaries (i) is in material compliance with all
applicable Environmental Regulations and (ii) has received all permits,
licenses, consents or other approvals required under applicable Environmental
Regulations to conduct its business, in each case except where the failure(s) to
do so would not, in the aggregate, have a Material Adverse Effect on the
Company.
(xxvi) The employee benefit plans, including employee
welfare benefit plans, of the Company and each of the Subsidiaries (the
"Employee Plans",) have been operated in material compliance with the applicable
provisions of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), the Internal Revenue Code of 1986, as amended (the "Code"), all
regulations, rulings and announcements promulgated or issued thereunder and all
other applicable governmental laws and regulations (except to the extent such
noncompliance would not, in the aggregate, have a Material Adverse Effect on the
Company). No reportable event under Section 4043(c) of ERISA has occurred with
respect to any Employee Plan of the Company or any of the Subsidiaries for which
the reporting requirements have not been waived by the Pension Benefit Guaranty
Corporation. No prohibited transaction under Section 406 of ERISA, for which an
exemption does not apply, has occurred with respect to any Employee Plan of the
Company or any of the Subsidiaries. There are no pending or, to the Company's
best knowledge, threatened claims by or on behalf of any Employee Plan, by any
employee or beneficiary covered under any such Plan or by any governmental
authority or otherwise involving such Plans or any of their respective
fiduciaries (other than for routine claims for benefits). All Employee Plans
that are group health plans have been operated in material compliance with the
group health plan continuation coverage requirements of Section 4980B of the
Code.
(xxvii) None of the Company, the Subsidiaries or the Trust
is party to or otherwise subject to any consent decree, memorandum of
understanding, written commitment or other supervisory agreement (restricting
the activities of the Company, the Subsidiaries or the Trust in a material way)
with the Board of Governors of the Federal Reserve System or any Federal Reserve
Bank (the "Federal Reserve"), the FDIC, the Maryland Commissioner of Financial
Regulation (the "Maryland Commissioner") or any other federal or state authority
or agency responsible for the supervision, regulation or insurance of depository
institutions, mortgage companies and their subsidiaries and holding companies
(any "Bank Regulator").
(xxviii) None of the Company, the Subsidiaries, the Trust
or, to the best knowledge of the Offerors, any other person associated with or
acting on behalf of the Company, any of the Subsidiaries or the Trust,
including, without limitation, any director, officer, agent, or employee of any
of the Subsidiaries or the Company has, directly or indirectly, while acting on
behalf of such Subsidiary, the Company or the Trust (i) used any corporate funds
for unlawful contributions, gifts, entertainment, or other unlawful expenses
relating to political activity; (ii) made any unlawful contribution to any
candidate for foreign or domestic office, or to any foreign or domestic
government officials or employees or other person charged with similar public or
quasi-public duties, other than payments required or permitted by the laws of
the United States or any jurisdiction thereof or to foreign or domestic
political parties or campaigns from corporate funds, or failed to disclose fully
any contribution in violation of law; (iii) violated any provision of the
Foreign Corrupt Practices Act of 1977, as amended; or (iv) made any other
payment of funds of the Company or a Subsidiary or retained any funds which
constitutes a violation of any law, rule or regulation or which was or is
required to be disclosed in the Registration Statement or the Prospectus
pursuant to the requirements of the Securities Act or the Securities Act Rules
and Regulations.
(xxix) The Bank Subsidiary is in good standing with the
Division of Financial Regulations of the Department of Licensing and Regulations
and the activities of the Company and the Bank Subsidiary are permitted under
applicable federal and state banking laws, rules and regulations. The Company
and each of the Subsidiaries have all necessary approvals, including approvals
of each Bank Regulator having jurisdiction over it. The Company and each
Subsidiary has filed with the appropriate governmental authorities each and
every statement, report, information or form required to be filed by it pursuant
to any applicable law, regulation, license, permit or order, except where the
failure(s) to so file would not, in the aggregate, have a Material Adverse
Effect on the Company, all such filings or submissions were in compliance in all
material respects with applicable laws and regulations when filed, and no
deficiencies have been asserted by any regulatory commission, agency or
authority with respect to such filings or submissions, except where the
failure(s) to so file or cure would not, in the aggregate, have such a Material
Adverse Effect in the Company. No report or application filed by the Company or
any of the Subsidiaries with any Bank Regulator (each such report or
application, together with all exhibits thereto, a "Regulatory Report"), as of
the date it was filed, contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein not misleading when made or failed to comply with
the applicable requirements of the applicable Bank Regulators, as the case may
be. The Company and each of the Subsidiaries has filed each Regulatory Report
that it was required to file with any Bank Regulator except where the failure(s)
to so file would not, in the aggregate, have a Material Adverse Effect on the
Company.
(xxx) The books, records and accounts and systems of
internal accounting controls of the Company and of each of the Subsidiaries
comply in all material respects with the requirements of Section 13(b)(2) of the
Exchange Act.
(xxxi) The minute books of the Company and each of the
Subsidiaries are current and contain a correct record, in all material respects,
of all corporate action reflected therein as taken by the Boards of Directors
and shareholders of the Company and the Subsidiaries and a correct and complete
record of the ratification by the Boards of Directors of the Company and the
Subsidiaries of all corporate action taken by such Boards for which such minute
books do not contain a record, and all signatures contained therein are true
signatures of the persons whose signatures they purport to be.
(xxxii) Except pursuant to this Agreement, the Company has
not incurred, directly or indirectly, any liability for a fee, commission or
other compensation or reimbursement on account of the employment of a broker,
finder agent, investment adviser or otherwise in connection with the
transactions contemplated by this Agreement, the Indenture, the Trust Agreement,
or the Guarantee Agreement.
(xxxiii) As of March 18, 1999, there are no business
relationships or related party transactions of the nature described in Item 404
of Regulation S-K of the Commission involving the Company, the Subsidiaries or
the Trust and any person referred to in Items 401 or 404 of Regulation S-K,
except as required to be described, and as so described, in the Prospectus.
(xxxiv) To the best knowledge of the Offerors, since its
inception, the Company has not incurred any liability arising under or as a
result of the application of the provisions of the Securities Act. Without
limiting the generality of the foregoing, all offers and sales of the Company's
capital stock prior to the date hereof were at all relevant times exempt from
the registration requirements of the Securities Act and from applicable state
securities or Blue Sky laws or were made pursuant to effective registration
statements in conformity with the Securities Act and the Securities Act Rules
and Regulations and were properly qualified under all applicable state
securities or Blue Sky laws. Any offering materials prepared in connection
therewith did not include any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements therein not
misleading.
(xxxv) The conditions for use of Form S-3, as set forth in
the General Instructions thereto, have been satisfied.
(b) Any certificate signed by any officer of the Company or
Administrator of the Trust and delivered to the Representatives or to counsel to
the Underwriters shall be deemed a representation and warranty by the Company
and each of the Subsidiaries or of the Trust, as the case may be, to the
underwriters as to the matters covered thereby.
Section 3. Purchase of Securities by the Underwriters. On the basis of
the representations, warranties, covenants and agreements herein contained, and
subject to the terms and conditions herein set forth, the Trust agrees to issue
and sell to each of the Underwriters, and each of the Underwriters agrees,
severally and not jointly, to purchase from the Trust, the respective number of
Firm Securities set forth opposite the name of each such Underwriter in Schedule
I hereto at a purchase price of $10.00 per Firm Security (the "Purchase Price").
As compensation to the Underwriters for their commitments hereunder and in view
of the fact that the proceeds of the sale of the Preferred Securities (together
with the entire proceeds from the sale by the Trust to the Company of the Common
Securities) will be used to purchase the Subordinated Debentures, on the Closing
Date the Company hereby agrees to pay to the Representatives, on behalf of the
several Underwriters, a commission of $0.35 per Firm Security ($700,000 in the
aggregate).
On the basis of the representations, warranties, covenants and
agreements herein contained, and subject to the terms and conditions herein set
forth, the Offerors agree to issue and sell to each of the Underwriters, and
each of the Underwriters shall have the right to purchase from the Trust,
severally and not jointly from time to time, up to an aggregate of 300,000
Additional Securities at the Purchase Price. Additional Securities may be
purchased as provided in Section 5 hereof solely for the purpose of covering
over-allotments, if any, made in connection with the offering of the Firm
Securities. If any Additional Securities are to be purchased, each Underwriter,
severally and not jointly, agrees to purchase the number of Additional
Securities that bears the same proportion to the total number of Additional
Securities to be purchased as the number of Firm Securities set forth opposite
the name of such Underwriter in Schedule I bears to the total number of Firm
Securities. As compensation to the Underwriters for their commitments hereunder
and in view of the fact that the proceeds of the sale of the Preferred
Securities (together with the entire proceeds from the sale by the Trust to the
Company of the Common Securities) will be used to purchase the Subordinated
Debentures, or any Option Closing Date the Company hereby agrees to pay to the
Representatives, on behalf of the several Underwriters, a commission of $0.35
per Additional Security purchased on such Option Closing Date (up to an
aggregate of $105,000).
Section 4. Offering of the Preferred Securities by the Underwriters.
The Company and the Trust are advised that the Underwriters propose to make a
public offering of the Firm Securities, on the terms and conditions set forth in
the Registration Statement from time to time as and when the Representatives
deems advisable after the Registration Statement becomes effective. Because the
NASD is expected to view the Firm Securities as interests in a direct
participation program, the offering of the Preferred Securities is being made in
compliance with the applicable provisions of Rule 2810 of the NASD's Conduct
Rules.
Section 5. Delivery of and Payment for the Preferred Securities.
(a) Delivery to the Underwriters of, and payment to the Trust
for, the Firm Securities shall be made at 10:00 a.m., Washington, DC time, on
the third (or if the Firm Securities are priced, as contemplated by Rule
l5c6-l(c) under the Exchange Act, after 4:30 p.m., on the fourth) full business
day (such time and date being referred to as the "Closing Date") following the
date of the initial public offering of the Firm Securities as advised to the
Representatives by the Company, at such place as the Representatives shall
designate.
(b) Delivery to the Underwriters of and payment for any
Additional Securities to be purchased by the Underwriters shall be made at such
place as the Representatives shall designate, at 10:00 a.m., Washington, DC
time, on such date or dates (individually, an "Option Closing Date" and
collectively, the "Option Closing Dates"), which may be the same as the Closing
Date but shall in no event be earlier than the Closing Date, as shall be
specified in a written notice from the Representatives to the Offerors of the
Underwriters' determination to purchase a number, specified in said notice, of
Additional Securities. Any such notice may be given at any time within thirty
(30) calendar days after the effective date of this Agreement.
(c) The Preferred Securities will be delivered by the Trust to
the Underwriters on the Closing Date or the applicable Option Closing Date, as
the case may be, against payment of the Purchase Price therefor by wire transfer
of same-day funds, payable to the order of the Trust to an account designated
thereby. Delivery of the Preferred Securities may be made by credit through full
fast transfer to the accounts at The Depository Trust Company designated by the
Representatives. The Preferred Securities shall be represented in the form of
one or more fully registered global notes (the "Global Notes") in book-entry
form registered in the name of the nominee of The Depository Trust Company. The
Global Notes representing the Preferred Securities shall be made available for
examination by the Representatives not later than 10:00 a.m., Washington, DC
time, on the last business day prior to the Closing Date or the applicable
Option Closing Date, as the case may be, with any transfer taxes payable upon
initial issuance or the transfer thereof duly paid by the Company for the
respective accounts of the Underwriters against payment of the Purchase Price
therefor.
(d) The documents to be delivered on the Closing Date or on an
Option Closing Date, as the case may be, by or on behalf of the parties hereto
pursuant to Section 8 hereof, including the cross-receipt for the Preferred
Securities to be purchased and any additional documents requested by the
Underwriters, will be delivered at the offices of Shapiro and Olander, P.A.,
Twentieth Floor, 36 South Charles Street, Baltimore, Maryland 21201-3147, or
such other location as the Representatives may designate (the "Closing
Location").
(e) A meeting will be held at the Closing Location at 2:00
p.m., Washington, DC time, on the business day next preceding Closing Date and
each Option Closing Date, if any, or at such other time(s) and location as is
mutually agreed upon by the parties hereto, at which meeting(s) the final drafts
of the documents to be delivered pursuant to the preceding paragraph will be
available for review by the parties hereto.
Section 6. Covenants of the Company and the Trust. The Offerors,
jointly and severally, covenant and agree with each of the Underwriters as
follows:
(a) The Offerors will use their respective best efforts to
cause the Registration Statement, if not effective at the time of execution of
this Agreement, to become effective as promptly as practicable thereafter. If
required, the Offerors will file the Prospectus and any amendments or
supplements thereto with the Commission in the manner and within the time period
required by Rule 424(b) under the Securities Act. During any time when a
prospectus relating to the Preferred Securities is required to be delivered
under the Securities Act, each of the Offerors will comply in all material
respects with all requirements imposed by the Securities Act and the Securities
Act Rules and Regulations to the extent necessary to permit the continuance of
sales of or dealings in the Preferred Securities in accordance with the
provisions hereof and as contemplated by the Registration Statement and the
Prospectus. With respect to any registration statement, prospectus, amendment
(including any post-effective amendment), or supplement to be filed with the
Commission in connection with the Preferred Securities, the Offerors will
provide a copy of each such document to the Representatives a reasonable time
prior to the date such document is proposed to be filed with the Commission and
will not file any such document without the consent of the Representatives. Any
such registration statement, prospectus, amendment or supplement, when filed,
will comply in all material respects with the Securities Act and the Securities
Act Rules and Regulations. In the event that the Registration Statement is
effective at the time of execution of this Agreement, but the total number of
Preferred Securities subject to this Agreement exceeds the number of Preferred
Securities covered by the Registration Statement, the Offerors promptly will
file with the Commission the date hereof a registration statement pursuant to
Rule 462(b) of the Rules and Regulations in accordance with the requirements of
such Rule and will make payment of the filing fee therefor in accordance with
the requirements of Rule 111(b) of the Rules and Regulations.
(b) The Offerors will advise the Representatives promptly and,
if requested by the Representatives, will confirm such advice in writing (i)
when the Registration Statement, as amended, has become effective; (ii) if the
provisions of Rule 430A of the Securities Act Rules and Regulations will be
relied upon, when the Prospectus has been filed in accordance with said Rule
430A; (iii) when any post-effective amendment to the Registration Statement
becomes effective; (iv) of any request made by the Commission for amendments or
supplements to the Registration Statement, any Preliminary Prospectus or
Prospectus or for additional information; (v) of the issuance by the Commission
of any stop order suspending the effectiveness of the Registration Statement or
any post-effective amendment thereto or any order preventing or suspending the
use of any Preliminary Prospectus or Prospectus or any amendment or supplement
thereto or the qualification of the securities for offering or sale in any
jurisdiction, or the institution or threat of any investigation or proceedings
for any such purpose by the Commission, any state securities commission or any
other regulatory authority; and (vi) of the receipt of any comments from the
Commission regarding the Registration Statement, any post-effective amendment
thereto, the Preliminary Prospectus, the Prospectus, or any amendment or
supplement thereto. The Offerors will use their best efforts to prevent the
issuance of any stop order by the Commission, and if at any time the Commission
shall issue any stop order, the Offerors will use their best efforts to obtain
the withdrawal of such stop order at the earliest possible moment.
(c) The Offerors will cooperate with the Representatives, the
Underwriters and counsel to the Underwriters in qualifying or registering the
Preferred Securities for sale, or obtaining an exemption therefrom, under the
securities or Blue Sky laws of such jurisdictions as the Representatives shall
designate, and will continue such qualifications or registrations or exemptions
in effect so long as requested by the Representatives to complete the
distribution of the Preferred Securities. Notwithstanding the foregoing, neither
of the Offerors shall be required to qualify as a foreign corporation or to file
a general consent to service of process in any such jurisdiction where it is not
presently qualified.
(d) The Offerors' consent to the use of the Prospectus (and
any amendment or supplement thereto) by the Underwriters and all dealers to whom
the Preferred Securities may be sold, in connection with the offering or sale of
the Preferred Securities and for such period of time thereafter as the
Prospectus is required by law to be delivered in connection therewith. If, at
any time when a prospectus relating to the Preferred Securities is required
under the Securities Act to be delivered in connection with sales of the
securities by an underwriter or dealer, any event occurs as a result of which
the Prospectus, as then amended or supplemented, would include any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements therein not misleading, or if it becomes necessary at any time to
amend or supplement the Prospectus to comply with the Securities Act or the
Securities Act Rules and Regulations, the Offerors promptly will so notify the
Representatives and will prepare and file with the Commission an amendment to
the Registration Statement or an amendment or supplement to the Prospectus which
will correct such statement or omission or effect such compliance. The Offerors
will provide a copy of each such amendment or supplement to the Representatives
a reasonable time prior to the date on which it is proposed to be filed with the
Commission and will not file any such amendment or supplement without the
consent of the Representatives.
(e) As soon as practicable, but in any event not later than
forty-five (45) calendar days after the end of the twelve (12) month period
beginning on the day after the end of the fiscal quarter of the Offerors during
which the effective date of the Registration Statement occurs (ninety (90)
calendar days in the event that such quarter is the last fiscal quarter), the
Offerors, to the extent not exempt pursuant to the Securities Act, the
Securities Act Rules and Regulations or the exemptive authority of the
Commission, will make generally available to their security holders, in the
manner specified in Rule 158(b) of the Securities Act Rules and Regulations, and
will deliver to the Representatives, an earnings statement (which need not be
audited) which will be in the detail required by, and will otherwise comply
with, the provisions of Section 11(a) of the Securities Act and Rule 158(a) of
the Securities Act Rules and Regulations, which statement need not be audited
unless required by the Securities Act or the Securities Act Rules and
Regulations, covering a period of at least twelve (12) consecutive months after
the effective date of the Registration Statement.
(f) For a period of three (3) years commencing with the date
hereof, as promptly as practical after filing or release, as the case may be,
each of the Offerors will furnish to the Representatives copies of (i) all
annual reports, quarterly reports and current reports filed thereby with the
Commission on Forms 10-K, 10-Q and 8-K, or such other similar forms as may be
designated by the Commission; (ii) such other documents, proxy statements,
reports and information as are furnished thereby to its security holders
generally; (iii) each report filed thereby with the NNM; (iv) each press release
in respect thereof; (v) and such other public information relating to the
Offerors as the Representatives may reasonably request.
(g) The Offerors will furnish, without charge, to the
Representatives or on the Representative's request, at such place as the
Representatives may designate, copies of each Preliminary Prospectus, the
Registration Statement and any amendments thereto, any registration statement
filed pursuant to Rule 462(b) (of which copies two (2) will be signed and will
include all financial statements and exhibits) and the Prospectus, and all
amendments and supplements thereto, in each case as soon as available and in
such quantities as the Representatives may reasonably request.
(h) Each of the Offerors will use its best efforts to cause
the Preferred Securities to be duly approved for listing on the NNM, subject to
notice of issuance, prior to the Closing Date and to cause the Preferred
Securities to remain listed for at least thirty-six (36) months thereafter.
(i) None of the Offerors, the Subsidiaries or any of their
officers or directors, trustees or affiliates, (within the meaning of the
Securities Act Rules and Regulations) will take, directly or indirectly, any
action designed to, or which might reasonably be expected to, cause or result in
stabilization or manipulation of the price of any securities of the Offerors.
(j) The Offerors will apply the net proceeds from the sale of
the Preferred Securities and the Subordinated Debentures in the manner and for
the purposes set forth in the Prospectus and will make such disclosures of the
application of such proceeds as may be required by Rule 463 of the Securities
Act Rules and Regulations. Pending application of the net proceeds of the sale
of the Common Securities, the Preferred Securities and the Subordinated
Debentures in such manner, the Offerors and each of the Subsidiaries will
operate their businesses in such manner and for such purposes and each will
invest such net proceeds in such securities, so as not to become an "investment
company" as such term is defined under the Investment Company Act.
(k) To the extent not exempt pursuant to the Securities Act,
the Securities Act Rules and Regulations or the exemptive authority of the
Commission, each of the Offerors will timely file all such reports, forms or
other documents as may be required from time to time, under the Securities Act,
the Securities Act Rules and Regulations, the Exchange Act and the rules and
regulations thereunder, and all such reports, forms and documents so filed will
materially comply as to form and substance with the applicable requirements
under the Securities Act, the Securities Act Rules and Regulations, the Exchange
Act and the rules and regulations thereunder which may from time to time be
applicable thereto. Each of the Offerors shall comply with the provisions of all
undertakings contained in the Registration Statement.
(l) Neither of the Offerors shall, prior to the exercise in
full or expiration of the Underwriters' option to purchase Additional
Securities, offer, sell, contract to sell or otherwise dispose of any securities
issued or guaranteed by the Trust or the Company that, in the reasonable
judgment of the Representatives are substantially similar to the Preferred
Securities, without the prior written consent of the Representatives.
(m) The Offerors will not, without the prior written consent
of the Representatives, which shall not be unreasonably withheld, prior to the
exercise in full or termination or expiration of the Underwriters' option to
purchase the Additional Securities, incur any material liability or obligation,
direct or contingent, or enter into any material transaction, other than in the
ordinary course of business, except as described in or contemplated by the
Registration Statement and the Prospectus.
(n) Neither of the Offerors shall enter into any contractual
agreement with respect to the distribution of the Preferred Securities except
for the arrangements with the Underwriters pursuant hereto.
(o) Each of the Offerors will use its best efforts to comply
or cause to be complied with the conditions to the Underwriters' obligations set
forth in Section 8 hereof.
Section 7. Expenses.
(a) If the Underwriters purchase the Firm Securities in
accordance with the terms of this Agreement, the Company shall pay all costs,
expenses and fees incident to the performance of its obligations and those of
the Trust under this Agreement including the costs and expenses associated with
(i) the printing and filing of the Registration Statement as originally filed
and any amendments and exhibits thereto; (ii) the filing fee of the NASD and
expenses relating to any review of the offering and listing of the Preferred
Securities on the NNM; (iii) all costs and expenses incurred in connection with
the preparation, issuance and delivery of the Preferred Securities to the
Underwriters; (iv) the fees and disbursements of the Trust's and the Company's
counsel and accountants; (v) all costs and expenses in connection with the
qualification of the Preferred Securities under state securities laws in
accordance with the provisions of Section 6(c), including filing fees and the
reasonable fees and disbursements of counsel to the Underwriters in connection
therewith and in connection with the preparation of the preliminary and final
Blue Sky memoranda; (vi) the printing and delivery of copies of the preliminary
and final Blue Sky memoranda; and (vii) the fees and expenses of the Property
Trustee, the Delaware Trustee, the Indenture Trustee, and the Guarantee Trustee,
and any agent of the Property Trustee, the Delaware Trustee, the Indenture
Trustee, and the Guarantee Trustee, and the fees and disbursements of Trustees'
counsel, in connection with the Trust Agreement and the issuance and delivery of
the Preferred Securities. Notwithstanding the foregoing, the reasonable out of
pocket costs, fees and expenses of the Underwriters, its agents or counsel,
charged to the Company, shall not exceed seventy-five thousand dollars
($75,000).
(b) If the purchase of the Firm Securities as herein
contemplated is not consummated for any reason other than the Underwriters'
default under this Agreement is not consummated or by reason of Section 11(a)
hereof, the Company shall pay all reasonable costs, expenses and fees incident
to the performance of its obligations and those of the Trust under this
Agreement and shall reimburse the several Underwriters for their reasonable
out-of-pocket expenses (including but not limited to reasonable counsel fees and
disbursements) in connection with any investigation made by them, and any
preparation made by them in respect of marketing of the Firm Securities or in
contemplation of the performance by them of their obligations hereunder,
provided, however, that in no event shall the amount of such reimbursement
exceed $35,000 in the aggregate.
Section 8. Conditions of the Underwriters' Obligations. The obligations
of each Underwriter to purchase and pay for the number of Firm Securities set
forth opposite the name of such Underwriter in Schedule I on the Closing Date
and the ratable portion of any Additional Securities on any Option Closing Date
are subject to the continuing accuracy of the representations and warranties of
the Offerors contained herein as of the date hereof, as of the Closing Date and
as of any such Option Closing Date, as the case may be, as if they had been made
on and as of the Closing Date or any such Option Closing Date; the accuracy, on
and as of the Closing Date or any such Option Closing Date, of the statements of
officers or trustees of the Offerors, as the case may be, made pursuant to the
provisions hereof; the performance by the Offerors, on and as of the Closing
Date or any such Option Closing Date, of their respective covenants and
agreements hereunder; and the following additional conditions (which may, in the
absolute and sole discretion of the Underwriters, be waived, in whole or in
part):
(a) The Registration Statement shall have been declared
effective, and the Prospectus (containing the information omitted pursuant to
Rule 430(A)) shall have been filed with the Commission not later than the
Commission's close of business on the second business day following the date
hereof or such later time and date to which the Representatives shall have
consented. No stop order suspending the effectiveness of the Registration
Statement or any post-effective amendment thereto or any order preventing or
suspending the use of any Prospectus or any amendment or supplement thereto
shall have been issued, and no proceedings for that purpose shall have been
instituted or pending or, to the best knowledge of the Offerors or the
Representatives, shall be contemplated or threatened by the Commission. The
Offerors shall have complied with any request of the Commission for additional
information (to be included in the Registration Statement or the Prospectus or
otherwise). No stop orders suspending the sale of the Preferred Securities in
any jurisdiction referred to in Section 6(c) shall have been issued, and no
proceedings for that purpose shall have been instituted or shall be pending or,
to the best knowledge of the Offerors or the Representatives, shall be
contemplated or threatened by the officials of any such jurisdiction.
(b) The Representatives shall not have advised the Offerors
that the Registration Statement contains an untrue statement of fact which the
Representatives reasonably believe is material, or omits to state a fact which
the Representatives reasonably believe is material and is required to be stated
therein or is necessary to make the statements therein not misleading, or that
the Prospectus, or any supplement thereto, contains an untrue statement of fact
which the Representatives reasonably believe is material, or omits to state a
fact which the Representatives reasonably believe is material and is required to
be stated therein or is necessary to make the statements therein not misleading.
(c) On or prior to the Closing Date and each Option Closing
Date, if any, the Representatives shall have received from counsel to the
Underwriter, such opinion or opinions with respect to the issuance and sale of
the Common Securities, the Preferred Securities and the Subordinated Debentures,
the Registration Statement and the Prospectus and such other related matters as
the Representatives reasonably may request, and such counsel shall have received
such documents and other information as it requests to enable it to pass upon
such matters.
(d) On the Closing Date and each Option Closing, if any, the
Representatives shall receive:
(i) The favorable opinion, dated as of the Closing Date or
such Option Closing Date, of Gordon, Feinblatt, Rothman, Hoffberger & Hollander,
LLC, counsel to the Company, substantially in the form and substance of Exhibit
A attached hereto. In rendering such opinion, counsel may state that it is
passing only on matters of Maryland and United States federal law. In rendering
such opinion, counsel may rely upon an opinion or opinions, each dated the
Closing Date or such Option Closing Date, of other counsel retained by it, the
Company or the Trust as to laws of any jurisdiction other than the United States
or the State of Maryland, provided that (A) such reliance is expressly
authorized by each opinion so relied upon and a copy of each such opinion is
delivered to the Underwriter and (B) counsel to the Company shall state in its
opinion that it is justified in relying thereon. Insofar as such opinions
involve factual matters, such counsel may rely, to the extent such counsel deems
proper, upon certificates of officers and trustees of the Company, the
Subsidiaries and the Trust, as the case may be, and certificates of public
officials, provided that copies of all such certificates shall be attached to or
referenced in the opinion.
(ii) The favorable opinion, dated the Closing Date or such
Option Closing Date, of White & Case, counsel to Bankers Trust (Delaware), as
the Delaware Trustee, and the Property Trustee, the Debenture Trustee and the
Guarantor Trustee, substantially in the form and substance of Exhibit B attached
hereto.
(iii) The favorable opinion, dated the Closing Date or
such Option Closing Date, of Richards, Layton & Finger, special Delaware counsel
to the Company and the Trust, substantially in the form and substance of Exhibit
C attached hereto.
In rendering the opinions contemplated by clauses (ii) and (iii)
above, counsel may rely upon an opinion or opinions, each dated the Closing Date
or such Option Closing Date, of other counsel retained by it or the Company as
to laws of any jurisdiction other than the United States or the State of
Delaware, provided that (A) such reliance is expressly authorized by each
opinion so relied upon and a copy of each such opinion is delivered to the
Representatives and (B) counsel shall state in its opinion that it believes that
it is justified in relying thereon. Insofar as such opinions involve factual
matters, such counsel may rely, to the extent such counsel deems proper, upon
certificates of officers and trustees of the Company, the Subsidiaries and the
Trust, as the case may be, and certificates of public officials, provided that
copies of all such opinions shall be attached to or referenced in the opinion.
(e) On or prior to the Closing Date and each Option Closing
Date, if any, counsel to the Underwriters shall have been furnished such
documents, certificates and opinions as they may reasonably request in order to
evidence the accuracy, completeness or satisfaction of any of the
representations or warranties of the Company or the Trust or conditions herein
contained.
(f) On the date hereof the Representatives shall have received
a "comfort" letter from Ernst & Young, LLP, independent certified public
accountants, dated such date and addressed to the Underwriters, in form and
substance satisfactory to the Representatives, with respect to the financial
statements and certain financial information contained in the Registration
Statement and the Prospectus.
(g) On the Closing Date, and each Option Closing Date, if any,
the Representatives shall have received from Ernst & Young, LLP a letter, dated
as of the such date, to the effect that they reaffirm the statements made in the
letter furnished pursuant to Section 8(f).
(h) On the Closing Date and each Option Closing Date, if any,
the Underwriters shall have received a certificate, dated such date, of the
Chairman of the Board/Chief Executive Officer and President/Chief Financial
Officer of the Company to the effect that each such person has carefully
examined the Registration Statement, to the best knowledge of each such person,
and the Prospectus and any amendments or supplements thereto and this Agreement,
and that:
(i) The representations and warranties of the Company in
this Agreement are true and correct in all material respects, as if made on and
as of the Closing Date or the applicable Option Closing Date, as the case may
be, and the Company has complied with all agreements and covenants and
satisfied, in all material respects, all conditions contained in this Agreement
on its part to be performed or satisfied at or prior to the Closing Date or such
Option Closing Date;
(ii) No stop order suspending the effectiveness of the
Registration Statement or post-effective amendment thereto or suspending the use
of any Prospectus or amendment or supplement thereto or the qualification of the
Preferred Securities for offering or sale has been issued, and no proceedings
for that purpose have been instituted or are pending or, to the best knowledge
of each such person, are contemplated or threatened under the Securities Act,
and any and all filings required by Rule 424, Rule 430A and Rule 462(b) have
been timely made; and
(iii) The Registration Statement and Prospectus and, if
any, each amendment and each supplement thereto, contain all statements and
information required to materially comply with the Securities Act or the
Securities Act Rules and Regulations to be included therein, and neither the
Registration Statement or the Prospectus nor any amendment or supplement thereto
includes any untrue statement of a material fact or omits to state any material
fact required to be stated therein or necessary to make the statements therein
not materially misleading.
References to the Registration Statement and the
Prospectus in this Section 8(h) are to such documents as amended and
supplemented at the date of the certificate required hereby.
(i) On the Closing Date and each Option Closing Date, if any,
the Underwriters shall have received a certificate, dated the Closing Date, of
the Administrators to the effect that each such Administrator has carefully
examined the Registration Statement and the Prospectus and any amendments or
supplements thereto and this Agreement, and that, to the best knowledge of each
person:
(i) the representations and warranties of the Trust in
this Agreement are true and correct in all material respects, as if made on and
as of the Closing Date and each Option Closing Date, if any, and the Trust has
complied with all agreements and covenants and satisfied, in all material
respects, all conditions contained in this Agreement on its part to be performed
or satisfied at or prior to the Closing Date or such Option Closing Date;
(ii) no stop order suspending the effectiveness of the
Registration Statement or any post-effective amendment thereto or suspending the
use of any Prospectus in any amendment or supplement thereto, or the
qualification of the Preferred Securities for offering or sale has been issued
has been issued, and no proceedings for that purpose have been instituted or are
pending or, to the best knowledge of each such person, are contemplated or
threatened under the Securities Act, and any and all filings required by Rule
424, Rule 430A and Rule 462(b) have been timely made; and
(iii) the Registration Statement and Prospectus and, if
any, each amendment and supplement thereto, contain all statements and
information required to materially comply with the Securities Act and the Rules
and the Securities Act Regulations to be included therein, and neither the
Registration Statement or the Prospectus nor any amendment or supplement thereto
includes any untrue statement of a material fact or omits to state any material
fact required to be stated therein or necessary to make the statements therein
not materially misleading.
References to the Registration Statement and the Prospectus in
this Section 8(i) are to such documents as amended and supplemented at the date
of the certificate required hereby.
(j) Subsequent to the respective dates as of which information
is given in the Registration Statement and the Prospectus up to and including
the Closing Date or the applicable Option Closing Date, as the case may be,
there has not been any material change in the business or properties of the
Company, any of the Subsidiaries or the Trust which change, taken as a whole,
makes it reasonably impractical or inadvisable in the Representative's
reasonable judgment to proceed with the public offering or the delivery of the
Preferred Securities as contemplated by the Prospectus.
(k) Prior to the Closing Date, the Preferred Securities shall
have been duly authorized for listing on the NNM.
(l) Prior to the Closing Date, the Preferred Securities shall
have been qualified under the securities or Blue Sky laws of such jurisdictions
as the Representatives shall have designated or an exemption therefrom shall be
available;
(m) Prior to the Closing Date, the NASD, upon review of the
terms of the public offering of the Preferred Securities contemplated hereby,
shall have indicated that it has no objection to the underwriting arrangements
pertaining to the sale of the Preferred Securities and the Underwriters'
participation in the sale of the Preferred Securities as so contemplated.
All opinions, certificates, letters and documents to be
furnished by the Offerors will comply with the provisions hereof only if they
are reasonably satisfactory in all material respects to the Representatives and
to counsel for the Underwriters. The Offerors shall furnish the Underwriters
with manually signed or conformed copies of such opinions, certificates, letters
and documents in such quantities as the Representatives reasonably requests. The
certificates delivered under this Section 8 shall constitute representations,
warranties and agreements of the Offerors as to all matters set forth therein as
fully and effectively as if such matters had been set forth in Section 2 of this
Agreement.
If any condition to the Underwriters' obligations hereunder to
be satisfied prior to or at the Closing Date or any Option Closing Date is not
so satisfied, in all material respects, or waived by the Representatives, in its
discretion, this Agreement, at the Representative's election, will terminate
upon notification to the Offerors without liability on the part of any
Underwriter (including the Representatives), or the Offerors, except for the
expenses to be paid by the Company pursuant to Section 7 hereof and except to
the extent provided in Section 9 hereof.
Section 9. Indemnification and Contribution.
(a) The Offerors agree, jointly and severally, to indemnify
and hold harmless each Underwriter, and its officers, directors, partners,
employees and agents and each person, if any, who controls such Underwriter
within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act, against any and all losses, claims, damages, liabilities or
expenses whatsoever (which shall include, for all purposes of this Section 9,
but not be limited to, attorneys' fees and any and all fees and expenses
whatsoever incurred in investigating, preparing or defending against any
litigation, commenced or threatened, or any claim whatsoever and any and all
amounts paid in settlement), joint or several (and actions in respect thereof),
to which such Underwriter, officer, partner, employee, agent, counsel or
controlling person may become subject, under the Securities Act or other federal
or state statutory law or regulation, at common law or otherwise, insofar as
such losses, claims, damages, liabilities, expenses or actions arise out of or
are based upon any untrue statement or alleged untrue statement of any material
fact contained in the Registration Statement or the Prospectus or any
Preliminary Prospectus, or any Blue Sky application or other document executed
by the Offerors specifically for the purposes of qualifying, or based upon
written information furnished by the Offerors in any state or other jurisdiction
in order to qualify, any or all of the Preferred Securities under the securities
or Blue Sky laws thereof (any such application, document or information being
hereinafter called a "Blue Sky Application"), or arise out of or are based upon
the omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
will reimburse, as incurred, expenses of such Underwriter, partner, employee,
agent or controlling person in connection with investigating, defending or
appearing as a third party witness in connection with any such loss, claim,
damage, liability, expense or action; provided, however, that neither of the
Offerors will be liable in any such case to the extent that any such loss,
claim, damage, liability, expense or action arises out of or is based upon any
untrue statement or alleged untrue statement or omission or alleged omission
made in any of such documents in reliance upon and in conformity with
information furnished in writing to the Offerors on behalf of such Underwriter
through the Representatives expressly for use therein (as identified in Section
9(b) hereof), or provided, that such indemnity with respect to any Preliminary
Prospectus shall not inure to the benefit of any Underwriter (or to the benefit
of any person controlling such Underwriter) from whom the person asserting any
such loss, claim, damage, liability or action purchased Preferred Securities
which are the subject thereof to the extent that any such loss, claim, damage,
liability or action (i) results from the fact that such Underwriter failed to
send or give a copy of the Prospectus to such person at or prior to the
confirmation of the sale of such Preferred Securities to such person in any case
where such delivery is required by the Securities Act or (ii) arises out of or
is based upon an untrue statement or omission of a material fact contained in
such Preliminary Prospectus that was corrected in the Prospectus, unless such
failure resulted from non-compliance by the Offerors with Section 6(d) hereof.
The indemnity agreement in this Section 9(a) shall be in addition to any
liability which the Offerors may otherwise have. Notwithstanding the foregoing,
the Offerors shall not be liable for any losses, claims, damages, liabilities or
expenses that a court having jurisdiction shall have determined such loss,
claim, damage, liability or expenses resulted from any of the Underwriters'
gross negligence or willful misconduct.
(b) Each of the Underwriters agrees severally, but not
jointly, to indemnify and hold harmless the Offerors, each of their respective
directors or trustees, as the case may be, each of their respective officers or
Administrators, as the case may be, who has signed the Registration Statement,
their respective employees and agents and each person, if any, who controls
either of the Offerors within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act against any and all losses, claims, damages,
liabilities or expenses whatsoever (which shall include, for all purposes of
this Section 9, but not be limited to, attorneys' fees and any and all fees and
expenses whatsoever incurred in investigating, preparing or defending against
any litigation, commenced or threatened, or any claim whatsoever and any and all
amounts paid in settlement), (and actions in respect thereof) to which the
Offerors or any such director, trustee, Administrator, officer, employee, agent
or controlling person may become subject, under the Securities Act or other
federal or state statutory law or regulation, at common law or otherwise,
insofar as such losses, claims, damages, liabilities, expenses or actions arise
out of or are based upon any untrue statement or alleged untrue statement of any
material fact contained in the Registration Statement or the Prospectus or any
Preliminary Prospectus, or in any Blue Sky Application, or arise out of or are
based upon the omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements not
misleading, in each case to the extent, but only to the extent, that such untrue
statement or alleged untrue statement or omission or alleged omission was made
in reliance upon and in conformity with information furnished by the
Underwriters through the Representatives to the Offerors expressly for use
therein. The Company and the Trust acknowledge that the statements with respect
to the public offering of the Preferred Securities set forth under the caption
"Underwriting" and the stabilization legend in the Prospectus have been
furnished by the Underwriters to the Offerors expressly for use therein and
constitute the only information furnished in writing by or on behalf of the
Underwriters for inclusion in the Prospectus. The indemnity agreement contained
in this Section 9(b) shall be in addition to any liability which the
Underwriters may otherwise have. Each Underwriter will severally reimburse any
legal fees or other expenses reasonably incurred by the Offerors, or any such
director, officer, or controlling person in connection with investigating or
defending any such claims or threatened claim, and from any and all claims or
threatened claims resulting from failure of such Underwriter to deliver a copy
of the Prospectus, if the person asserting such claim or threatened claim
purchased Preferred Securities from such Underwriter and a copy of the
Prospectus (as then amended if the Offerors shall have amended the Prospectus)
was not sent or given by or on behalf of such Underwriter to such person, if
required by law so to have been delivered, at or prior to the written
confirmation of the sale of the Preferred Securities to such person, and if the
Prospectus (as so amended) would have cured the defect giving rise to such Claim
(unless such failure was due to a failure by the Company and the Trust to
provide sufficient copies of the Prospectuses (as so amended) to each
Underwriter).
(c) Promptly after receipt by an indemnified party under this
Section 9 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof it to be made against one or more
indemnifying parties under this Section 9, notify such indemnifying party or
parties of the commencement thereof; but the failure so to notify the
indemnifying party shall not relieve it from any liability which it may have to
any indemnified party otherwise than under Section 9(a) or Section 9(b) to the
extent that the indemnifying party was not actually prejudiced by such omission.
In case any such action is brought against an indemnified party and it notifies
an indemnifying party or parties of the commencement thereof, the indemnifying
party or parties against which a claim is to be made will be entitled to
participate therein and, to the extent that it or they may wish, to assume the
defense thereof, with counsel reasonably satisfactory to such indemnified party;
provided, however, that if the defendants in any such action include both the
indemnified party and the indemnifying party and the indemnified party has
reasonably concluded that there may be legal defenses available to it and/or
other indemnified parties which are different from or additional to those
available to the indemnifying party, the indemnified party or parties shall have
the right to select separate counsel to assume such legal defenses and otherwise
to participate in the defense of such action on behalf of such indemnified party
or parties. Upon receipt of notice from the indemnifying party to such
indemnified party of its election so to assume the defense of such action and
approval by the indemnified party of counsel which approval shall not be
unreasonably denied or delayed, the indemnifying party will not be liable to
such indemnified party under this Section 9 for any legal or other expenses
(other than the reasonable costs of investigation) subsequently incurred by such
indemnified party in connection with the defense thereof unless (i) the
indemnified party has employed such counsel in connection with the assumption of
such different or additional legal defenses in accordance with the proviso to
the immediately preceding sentence, (ii) the indemnifying party has not employed
counsel reasonably satisfactory to the indemnified party to represent the
indemnified party within a reasonable time after notice of commencement of the
action, or (iii) the indemnifying party has authorized in writing the employment
of counsel for the indemnified party at the expense of the indemnifying party.
It is understood that the indemnifying party shall not, in connection with any
proceeding or related proceedings in the same jurisdiction, be liable for the
reasonable fees and expenses for more than one separate firm (and appropriate
local counsel) for all such indemnified parties, except to the extent such
counsel advises the indemnifying party of a conflict of interest whereby the
indemnifying party shall be liable for the reasonable fees and expenses for
additional counsel for all such indemnified parties to remedy the conflict of
interest. The indemnifying party shall not be liable for any settlement or any
proceeding effected without its written consent but if settled with such consent
or if there be a final judgment for the plaintiff, the indemnifying party agrees
to indemnify the indemnified party from and against any loss or liability by
reason of such settlement or judgment.
(d) If the indemnification provided for in this Section 9 is
unavailable or insufficient to hold harmless an indemnified party under Section
9(a) or Section 9(b) above in respect of any losses, claims, damages,
liabilities or expenses (or actions in respect thereof) referred to therein,
then each indemnifying party shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages, liabilities
or expenses (or actions in respect thereof) (i) in such proportion as is
appropriate to reflect the relative benefits received by each of the
contributing parties, on the one hand, and the party to be indemnified, on the
other hand, from the offering of the Preferred Securities or (ii) if the
allocation provided by clause (i) above is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of each of the
contributing parties, on the one hand, and the party to be indemnified, on the
other hand in connection with the statements or omissions that resulted in such
losses, claims, damages or liabilities, as well as any other relevant equitable
considerations. In any case where the Company and/or the Trust is a contributing
party and the Underwriters are the indemnified party, the relative benefits
received by the Company and/or the Trust on the one hand, and the Underwriters,
on the other hand, shall be deemed to be in the same proportion as the total net
proceeds from the initial offering and issuance of the Preferred Securities
(before deducting expenses) bear to the total underwriting compensation received
by the Underwriters hereunder, in each case as set forth in the table on the
cover page of the Prospectus. Relative fault shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company and/or the Trust or the
Underwriters and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such untrue statement or omission. The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages, liabilities or expenses (or actions in respect thereof)
referred to above in this Section 9(d) shall be deemed to include any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 9(d), the Underwriters shall not be required to
contribute any amount in excess of the underwriting discounts applicable to the
Preferred Securities purchased by the Underwriters hereunder. The Underwriters'
obligations to contribute pursuant to this Section 9(d) are several in
proportion to their respective underwriting obligations, and not joint. No
person guilty of fraudulent misrepresentations (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. For purposes of this
Section 9(d), (i) each person, if any, who controls an Underwriter within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act shall have
the same rights to contribution as such Underwriter and (ii) each director of
the Company, each trustee of the Trust, each officer of the Company or trustee
of the Trust who has signed the Registration Statement, and each person, if any,
who controls the Company or the Trust within the meaning of Section 15 of the
Act or Section 20 of the Exchange Act shall have the same rights to contribution
as the Company or the Trust, as the case may be. Any party entitled to
contribution will, promptly after receipt of notice of commencement of any
action, suit or proceeding against such party in respect to which claim for
contribution may be made against another party or parties under this Section
9(d), notify such party or parties from whom contribution may be sought, but the
omission so to notify such party or parties shall not relieve the party or
parties from whom contribution may be sought from any other obligation (x) it or
they may have hereunder or otherwise than under this Section 9(d) or (y) to the
extent that such party or parties were not actually prejudiced by such omission.
The contribution agreement set forth above shall be in addition to any
liabilities which any indemnifying party may otherwise have.
Section 10. Representations, Etc. to Survive Delivery. The
representations, warranties, agreements, covenants, indemnities and statements
contained shall remain in full force and effect, regardless of (a) any
termination of this Agreement; (b) any investigation made by or on behalf of the
Underwriters or by or on behalf of any person controlling the Underwriters, or
by or on behalf of the Offerors; and (c) delivery of and payment for the
Preferred Securities.
Section 11. Effective Date and Termination.
(a) This Agreement shall become effective at 9:00 a.m.,
Washington, DC time, on the first business day following the date hereof, or at
such earlier time after the Registration Statement becomes effective as the
Representatives, in their sole discretion, shall release the Preferred
Securities for the sale to the public, unless prior to such time the
Representatives shall have received written notice from the Company on behalf of
itself and the Trust that they elect that this Agreement shall not become
effective, or the Representatives shall have given written notice to the
Offerors that the Representatives on behalf of the Underwriters elects that this
Agreement shall not become effective; provided, however, that the provisions of
this Section 11 and of Section 7 and Section 9 hereof shall at all times be
effective. For purposes of this Section 1l(a), the Preferred Securities to be
purchased hereunder shall be deemed to have been so released upon the earlier of
notification by the Representatives to securities dealers releasing such
Preferred Securities for offering or the release by the Representatives for
publication of the first newspaper advertisement which is subsequently published
relating to the Preferred Securities.
(b) This Agreement (except for the provisions of Sections 7
and 9 hereof) may be terminated by the Representatives by written notice to the
Company and the Trust in the event that either of the Offerors has failed to
comply in any material respect with any of the provisions of this Agreement
required on its part to be complied with at or prior to the Closing Date or any
Option Closing Date, or if any of the representations or warranties of the
Offerors are not materially accurate in any respect or if the covenants,
agreements or conditions of, or applicable to, the Offerors herein contained
have not been complied with in any material respect or satisfied within the time
specified or the Closing Date or any Option Closing Date, as the case may be, or
if prior to the Closing Date or Option Closing Date:
(i) the Company or the Subsidiaries, taken as a whole, or
the Trust shall have sustained a loss by strike, fire, flood, accident or other
calamity of such a character, in the judgment of the Representatives, as to
interfere materially with the conduct of the business and operations of the
Company, the Subsidiaries or the Trust, as the case may be, regardless of
whether or not such loss was insured;
(ii) trading in the securities of the Company or in
securities generally on the New York Stock Exchange or the NNM shall have been
suspended or a material limitation on such trading shall have been imposed or
minimum or maximum prices shall have been established on either such exchange or
market;
(iii) a banking moratorium shall have been declared by
Maryland, Delaware or United States authorities;
(iv) there shall have been an outbreak or escalation of
hostilities between the United States and any foreign power or an outbreak or
escalation of any other insurrection or armed conflict involving the United
States which, in each Representatives' reasonable judgment, will materially
affect the general securities market or make it inadvisable, in their sole,
reasonable judgement, to proceed with the sale of and payment for the Preferred
Securities;
(v) there shall have been commenced any action, suit or
proceeding at law or in equity against the Company, the Bank Subsidiary or the
Trust, or by any federal, state or other commission, board or agency, wherein,
in the reasonable judgment of the Representatives, any unfavorable decision
would have a Material Adverse Effect on the Company or the Trust;
(vi) there shall have occurred the enactment, publication,
decree or other promulgation of any federal or state statute, regulation, rule
or order of any court or other governmental authority that in the reasonable
judgment of the Representatives has or will have a Material Adverse Effect on
the Company or the Trust;
(vii) there shall have been taken any action by any
federal, state or local government or agency in respect of its monetary or
fiscal affairs that in the reasonable judgment of the Representatives has a
material adverse effect or will materially adverse affect the financial markets
in the United States; or
(viii) the Company's independent public accountants shall
have imposed qualifications in certifying to, or its attorneys in opining upon,
material items including, without limitation, information in the footnotes to
the financial statements or matters incident to the issuance and sale of the
Common Securities, the Preferred Securities or the Subordinated Debentures,
corporate proceedings or other subjects; or
(ix) there shall have been a material adverse change in
(A) general economic, political or financial conditions or (B) the present or
prospective business or condition (financial or other) of the Company, the
Subsidiaries or the Trust, as the case may be that, in each case, in the
judgment of the Representatives, makes it impracticable or inadvisable to make
or consummate the public offering, sale or delivery of the Preferred Securities
on the terms and in the manner contemplated in the Prospectus and the
Registration Statement.
(c) Termination of this Agreement shall be without liability
of any party to any other party other than as provided in Sections 7 and 9
hereof.
Section 12. Substitution of Underwriters. If one or more of the
Underwriters shall fail or refuse (otherwise than for a reason sufficient to
justify the termination of this Agreement under the provisions of Section 8 or
11 hereof) to purchase and pay for the number of Preferred Securities agreed to
be purchased by such Underwriter or Underwriters (pursuant to Section 3 hereof)
upon tender of such number of Preferred Securities in accordance with the terms
hereof, and the number of such Preferred Securities shall not exceed ten percent
(10%) of the Preferred Securities required to be purchased on the Closing Date,
then, each of the non-defaulting Underwriters shall purchase and pay for (in
addition to the number of such Preferred Securities which it has severally
agreed to purchase hereunder) its proportionate share (based on the monetary
obligations of the several Underwriters hereunder on account of the purchase of
Preferred Securities, excluding the Preferred Securities allocable to the
defaulting Underwriter or Underwriters) which the defaulting Underwriter or
Underwriters shall have so failed or refused to purchase on such Closing Date.
In such case, the Representatives, on behalf the Underwriters, shall have the
right to postpone the Closing Date to a date not exceeding seven (7) full
business days after the date originally fixed as such Closing Date pursuant to
the terms hereof in order that any necessary changes in the Registration
Statement, the Prospectus or any other documents or arrangements may be made.
If one or more of the Underwriters shall fail or refuse
(otherwise than for a reason sufficient to justify the termination of this
Agreement under the provisions of Section 8 or 11 hereof) to purchase and pay
for the number of Preferred Securities agreed to be purchased by such
Underwriter or Underwriters upon tender to the Representatives on behalf thereof
of such Preferred Securities in accordance with the terms hereof and the number
of such Preferred Securities shall equal or exceed ten percent (10%) of the
Preferred Securities required to be purchased by all the Underwriters on the
Closing Date (unless within forty-eight (48) hours after such default
arrangements to the satisfaction of the Representatives shall have been made for
the purchase of the defaulted Preferred Securities by an Underwriter or
Underwriters) and subject to the provisions of Section 1l(b) hereof, this
Agreement will terminate without liability on the part of any non-defaulting
Underwriter or on the part of the Company or the Trust except as otherwise
provided in Sections 7 and 9 hereof. As used in this Agreement, the term
"Underwriter" includes any person substituted for an Underwriter under this
Section 12. Nothing in this Section 12, and no action taken hereunder, shall
relieve any defaulting Underwriter from liability in respect of any default of
such Underwriter under this Agreement.
Section 13. Default by the Company or the Trust. If the Trust shall
fail at the Closing Date to sell and deliver the number of Preferred Securities
which it is obligated to sell hereunder or the Company fails to deliver the
number of Subordinated Debentures required to be delivered pursuant to the Trust
Agreement, then this Agreement shall terminate without any liability on the part
of any non-defaulting party. Nothing in this Section 13 shall relieve the Trust
or the Company so defaulting from liability, if any, in respect of such default.
Section 14. Notices. All communications hereunder shall be in writing
and if sent to the Representatives shall be mailed or delivered or sent by
facsimile transmission and confirmed by letter to Ferris, Baker Watts,
Incorporated at 1720 Eye Street, NW, Washington, DC 20006, Attention: Mike Coiro
(facsimile number: (410) 659-4632) or, if sent to the Company or the Trust,
shall be mailed or delivered or sent by facsimile transmission and confirmed by
letter to the Company at 19 South Second Street, Oakland, Maryland 21550,
Attention: William B. Grant (facsimile number: (301) 334-2318), with a copy to
Michael A. Refolo, Gordon, Feinblatt, Rothman, Hoffberger & Hollander, LLC, 233
East Redwood Street, Baltimore, Maryland 21202 (facsimile number: (410)
576-4246).
Section 15. Successors. This Agreement shall inure to the benefit of
and be binding upon the Company, the Trust and each Underwriter and the
respective successors and legal Representatives thereof, and nothing expressed
or mentioned in this Agreement is intended or shall be construed to give any
other person any legal or equitable right, remedy or claim under or in respect
of this Agreement, or any provisions herein contained, this Agreement and all
conditions and provisions hereof being intended to be and being for the sole and
exclusive benefit of such persons and for the benefit of no other person, except
that the representations, warranties, indemnities and contribution agreements of
the Company and the Trust contained in this Agreement shall also be for the
benefit of the officers, directors, partners, employees and agents of each
Underwriter and any person or persons, if any, who control any Underwriter
within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act, and except that the Underwriters' indemnity and contribution
agreements shall also be for the benefit of the directors of the Company, the
trustees of the Trust, the officers of the Company who have signed the
Registration Statement on behalf of the Company or in the Company's role as
Depositor under the Trust Agreement, the Administrators of the Trust, their
respective employees and agents, and any person or persons, if any, who control
the Company or the Trust within the meaning of Section 15 of the Securities Act
or Section 20 of the Exchange Act. No purchaser of Preferred Securities from the
Underwriters will be deemed a successor because of such purchase.
Section 16. Applicable Law; Jurisdiction. This Agreement shall be
governed by and construed in accordance with the laws of the State of Maryland,
without giving effect to the choice of law or conflict of law principles
thereof. Each party hereto consents to the jurisdiction of each court in which
any action is commenced seeking indemnity or contribution pursuant to Section 9
above and agrees to accept, either directly or through an agent, service of
process of each such court.
Section 17. Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original, and all of
which together shall be deemed to be one and the same instrument.
* * * * * * *
If the foregoing is in accordance with your understanding, please sign
and return to us three (3) counterparts hereof, and upon your acceptance hereof,
on behalf of each of the Underwriters, this letter and such acceptance hereof
shall constitute a binding agreement among each of the Underwriters, the Company
and the Trust in accordance with the terms hereof.
Very truly yours,
FIRST UNITED CAPITAL TRUST
By: FIRST UNITED CORPORATION
Depositor
By ________________________________
Name:
Title:
FIRST UNITED CORPORATION
By ________________________________
Name:
Title:
Accepted as of the date hereof
FERRIS, BAKER WATTS, INCORPORATED
1720 Eye Street, N.W.
Washington, D.C. 20006
By: FERRIS, BAKER WATTS, INCORPORATED
a Representative of the Underwriters
By ________________________________
Name:
Title:
ADVEST, INC.
One Rockefeller Plaza, 20th Floor
New York, New York 10020
By: ADVEST, INC.
a Representative of the Underwriters
By ________________________________
Name:
Title:
<PAGE>
SCHEDULE I
NUMBER OF PREFERRED SECURITIES TO BE
PURCHASED BY EACH UNDERWRITER
<TABLE>
<CAPTION>
Number of Purchased Securities
to be Purchased from the Trust
Name of Underwriter Percentage (Liquidation Amount $10)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Ferris, Baker Watts, Incorporated ___% ____________
The Advest Group, Incorporated ___% ____________
Total 2,000,000
</TABLE>
<PAGE>
Exhibit A to
Underwriting Agreement
The opinion of counsel to the Company to be delivered pursuant to
Section 8(d)(i) of the Underwriting Agreement shall be substantially to the
effect that:
(1) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of Maryland and has
been duly qualified as a foreign corporation for the transaction of business and
is in good standing under the laws of each other jurisdiction in which it owns
or leases properties or conducts any business so as to require such
qualification (except to the extent the lack of such qualification will not
result in a Material Adverse Effect to the Company). The Company has all power
and authority necessary to own or hold its properties and assets and to conduct
the business in which it is engaged as described in or contemplated by the
Prospectus. The Company is duly registered as a bank holding company under the
Bank Holding Company Act of 1956, as amended.
(2) The Bank Subsidiary is a state bank organized, validly
existing and in good standing under the laws of Maryland and has been duly
qualified as a foreign corporation for the transaction of business and is in
good standing under the laws of each other jurisdiction in which it owns or
leases properties or conducts any business so as to require such qualification
(except to the extent the lack of such qualification will not result in a
Material Adverse Effect to the Company). The Bank Subsidiary has all power and
authority necessary to own or hold its properties and assets and to conduct the
business in which it is engaged as described in or contemplated by the
Prospectus. All eligible deposit accounts issued by the Bank Subsidiary are
insured by the FDIC to the full extent permitted under applicable law.
(3) Each of the Subsidiaries has been duly incorporated and is
validly existing as a corporation in good standing under the laws of the
respective state of its incorporation, has been duly qualified as a foreign
corporation for the transaction of business and is in good standing under the
laws of each other jurisdiction in which the conduct of its business (to the
knowledge of such counsel) requires such qualification (except to the extent the
lack of such qualification will not result in a Material Adverse Effect to the
Company) and has the corporate power and authority necessary to own or hold its
properties and assets and to conduct the business in which it is engaged as
described in the Prospectus.
(4) The Trust Agreement has been duly qualified under the
Trust Indenture Act.
(5) Each of the Company and the Trust has the corporate power
and authority necessary to enter into, execute, deliver and perform its
obligations under the Underwriting Agreement, the Indenture, the Trust
Agreement, the Guarantee Agreement and the Subordinated Debentures, as
applicable, and to effect the transactions contemplated thereby and by the
Prospectus. The performance of the Company's and/or the Trust's obligations
under the Underwriting Agreement, the Indenture, the Trust Agreement, the
Guarantee Agreement and the Subordinated Debentures, as applicable, have been
duly authorized by all necessary corporate or
A-1
<PAGE>
trust action, as the case may be. The Underwriting Agreement, the Indenture, the
Trust Agreement, the Guarantee Agreement and the Subordinated Debentures have
been duly authorized, executed and delivered by the Company, the Trust, and/or
the Administrators, as applicable, and each constitutes the valid and binding
obligations of the Company and/or the Trust, as the case may be, enforceable
against the Company and/or the Trust in accordance with their respective terms
(except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of general application
relating to or affecting the enforcement of creditors' rights and by the
application of equitable principles relating to the availability of remedies,
and except as rights to indemnity or contribution may be limited by federal or
state securities laws and the public policy underlying such laws).
(6) The Company has the duly authorized capital stock set
forth in the Prospectus. All of the shares of capital stock of the Company
issued and outstanding have been duly and validly authorized and issued, are
fully paid and non-assessable, without personal liability attaching to the
ownership thereof. To such counsel's knowledge, based solely upon the stock
ledger of the Company and a certificate of the officers of the Company, none of
such shares have been issued or are owned or held in violation of any preemptive
or other similar rights. To such counsel's knowledge, based solely upon the
stock ledger of the Company and a certificate of the officers of the Company,
other than as set forth in the Prospectus, there are no options, warrants, or
other rights to purchase or acquire from the Company or any of the Subsidiaries
any shares of the capital stock of the Company or any such Subsidiary. Such
counsel is not aware of any holders of the securities of the Company having
rights to registration thereof or preemptive rights to purchase capital stock of
the Company and to such counsel's knowledge, based solely upon the stock ledger
of the Company and a certificate of the officers of the Company, neither the
filing of the Registration Statement nor the offering or sale of the Preferred
Securities or the Subordinated Debentures as contemplated by the Underwriting
Agreement and the Prospectus gives rise to any rights (other than have been
waived or satisfied) for or relating to the registration of any securities of
the Company.
(7) All of the issued and outstanding shares of capital stock
of each of the Subsidiaries have been duly authorized, validly issued and are
fully paid and nonassessable, all such shares are held, in the case of the Bank
Subsidiary and the Reinsurance Subsidiary, by the Company, and in the case of
the Insurance Agency Subsidiary, the Securities Subsidiary, the Auto Financing
Subsidiary and the Insurance Subsidiary, by the Bank Subsidiary, free and clear
of any liens, security interests, pledges, charges, mortgages or other defects
or encumbrances of any kind or nature.
(8) Other than as set forth in the Prospectus, counsel has no
knowledge of any pending proceedings or investigations or threatened or
contemplated proceedings or investigations, before any court or other
governmental body that (A) are required to be disclosed in the Registration
Statement or Prospectus which are not so disclosed; (B) reasonably could be
expected, individually or in the aggregate, to have a Material Adverse Effect on
the Company or the Trust; or (C) reasonably could be expected to materially and
adversely affect the consummation of the Underwriting Agreement, the Indenture,
the Trust Agreement or the Guarantee Agreement and the transactions contemplated
thereby.
A-2
<PAGE>
(9) None of (A) the filing of the Registration Statement or
any amendment thereto; (B) the Company's and the Trust's execution and delivery
of the Underwriting Agreement, the Indenture, the Trust Agreement and the
Guarantee Agreement, as applicable; or (C) the consummation by the Company and
the Trust of the transactions contemplated thereby and by the Prospectus will
(X) violate any provision of the charter, bylaws or other governing documents of
the Company of the Subsidiaries, or the Trust Agreement or the Certificate of
the Trust, as applicable; (Y) to such counsel's knowledge, without independent
investigation or verification violate, result in the breach of, or be in
contravention of, or constitute a default under, any agreement or instrument to
which the Company, the Subsidiaries or the Trust is a party or by which it may
be bound or to which any of its assets, properties or businesses are or may be
subject; or (Z) violate any statute, judgment, decree, order, rule or regulation
applicable to the Company, the Subsidiaries or the Trust, except those, if any,
that are described in the Prospectus or those which would not, individually or
in the aggregate, have a Material Adverse Effect on the Company or the Trust, as
the case may be.
(10) No consent, authorization, approval, order,
registration, license, certificate, declaration or permit of or from, or filing
with, any court or other governmental body, is required in connection with the
execution and delivery of the Underwriting Agreement, the Indenture, the Trust
Agreement or the Guarantee Agreement, or the issuance and sale of the
Subordinated Debentures, or the consummation by the Company and the Trust of the
other transactions contemplated by the Underwriting Agreement, the Indenture,
the Trust Agreement or the Guarantee Agreement, except such as may be required
under the Securities Act, which has been obtained, or under state securities or
Blue Sky laws.
(11) The statements set forth in the Registration Statement
under the captions "Description of Preferred Securities," "Description of Junior
Subordinated Debentures," "Description of Guarantee," "Relationship Among the
Preferred Securities, the Junior Subordinated Debentures and the Guarantee" and
"Supervision and Regulation," insofar as they purport to describe the provisions
of the laws and the provisions of documents referred to therein, are accurate
and fairly summarize such provisions and there are no other provisions of law or
of documents which are required by the Securities Act or the Securities Act
Rules and Regulations to be described therein.
(12) The statements of law or legal conclusions and opinions
set forth in the Registration Statement under the caption "Certain Federal
Income Tax Consequences", constitute an accurate summary of the matters
discussed therein, subject to the assumptions and conditions described therein
and accurately and fairly reflect such counsel's opinion.
(13) The Registration Statement was declared effective under
the Securities Act as of the date and time specified in such opinion, the
Prospectus has been filed as required by the Underwriting Agreement, if
necessary, and to the best of counsel's knowledge (A) after telephonic inquiry
of the Commission, no stop order suspending the effectiveness of the
Registration Statement has been issued and (B) no proceedings for that purpose
are pending or have been initiated or threatened by the Commission.
A-3
<PAGE>
(14) The descriptions in the Registration Statement and
Prospectus of contracts, instruments and other documents and any contracts,
instruments or other documents filed as exhibits to the Registration Statement,
and the description of statutes, legal and governmental proceedings and rulings,
are accurate in all material respects and fairly present the information
required to be disclosed, and counsel does not know of any statutes, legal or
governmental proceedings or rulings required to be described in the Prospectus
that are not described, or of any contracts, instruments or other documents of a
character required to be described in the Registration Statement or the
Prospectus or to be filed as exhibits to the Registration Statement that were
not described and filed as required. The Registration Statement (including the
information deemed to be part of the Registration Statement at the time of
effectiveness pursuant to Rule 430A, if applicable), the Prospectus and each
amendment or supplement thereto (except for the financial statements and other
statistical or financial data included therein, as to which such counsel need
express no opinion) made prior to the Closing Date (or an Option Closing Date,
as the case may be) when it or they became effective or were filed with the
Commission, as the case may be, and, in each case, at the Closing Date (or
Option Closing Date, as the case may be), complied as to form in all material
respects with the requirements of the Securities Act, the Securities Act Rules
and Regulations, the Trust Indenture Act and the rules and regulations
thereunder.
(15) None of the Company, the Subsidiaries or the Trust is
and, after giving effect to the offering and sale of the Preferred Securities
and the Subordinated Debentures, will be, an "investment company" or an
"affiliated person" of or a "promoter" or "principal underwriter" of or an
entity "controlled" by an "investment company," as such terms are defined in the
Investment Company Act of 1940.
(16) The Bank Subsidiary is in good standing with the Maryland
Commissioner and the activities of the Company and the Reinsurance Subsidiary
are permitted under applicable federal and state banking laws, rules and
regulations. The Company and the Bank Subsidiary have all necessary approvals,
including approvals of the Federal Reserve, the FDIC, the Maryland Commissioner
and other bank regulating authorities having jurisdiction over it.
(17) Each of the Subsidiaries has, in effect, all consents,
authorizations, approvals, orders, registrations, licenses and permits of all
regulatory bodies, administrative agencies, or other governmental bodies and
other regulating authorities having jurisdiction over it that are reasonably
required to conduct its business in the manner that, to such counsel's
knowledge, such business is currently being conducted, except to the extent the
failure will not result in a Material Adverse Effect to the Company.
(18) To the best knowledge of counsel, the Trust is not
required to be authorized to do business in any other jurisdiction, and the
Trust is not a party to or otherwise bound by any agreement, other than those
described in the Prospectus.
(19) No Tax Event, Capital Treatment Event or Investment
Company Event (as each such term is defined in the Indenture) has occurred.
A-4
<PAGE>
In addition, counsel shall state that in the course of the preparation
of the Registration Statement and the Prospectus, such counsel has participated
in conferences with officers and Representatives of the Company and the Trust,
with the Company's independent public accountants, and with the Representatives,
at which conferences the content of the Registration Statement and the
Prospectus were discussed and at which conferences counsel made inquiries of
such officers, Representatives and accountants and, on the basis of the
foregoing, nothing has come to counsel's attention that would lead such counsel
to believe that either the Registration Statement or any amendment thereto, as
of the date the Registration Statement or such amendment is or was declared
effective, and as of the Closing Date or any Option Closing Date, as the case
may be, or the Prospectus as of the date thereof and as of the Closing Date or
any Option Closing Date, as the case may be, contained or contains any untrue
statement of a material fact or omitted or omits to state a material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading (it
being understood that such counsel need not express any belief with respect to
the financial statements, and the notes and schedules related thereto and other
financial information or statistical data included in the Registration
Statement, any amendment thereto, or the Prospectus).
A-5
<PAGE>
Exhibit B to
Underwriting Agreement
The opinion of counsel to the Property Trustee and the Delaware Trustee
under the Trust Agreement, the Indenture Trustee under the Indenture and the
Guarantee Trustee under the Guarantee to be delivered pursuant to Section
8(d)(ii) of the Underwriting Agreement shall be substantially to the effect
that:
(A) Bankers Trust Company is duly incorporated and is validly
existing in good standing as a banking corporation with trust powers under the
laws of the State of New York.
(B) Bankers Trust Company, as the Indenture Trustee, has the
requisite power and authority to execute, deliver and perform its obligations
under the Indenture, and has taken all necessary corporate action to authorize
the execution, delivery and performance by it of the Indenture.
(C) Bankers Trust Company, as the Guarantee Trustee, has the
requisite power and authority to execute, deliver and perform its obligations
under the Guarantee Agreement, and has taken all necessary corporate action to
authorize the execution, delivery and performance by it of the Guarantee
Agreement.
(D) Bankers Trust Company, as the Property Trustee, has the
requisite power and authority to execute and deliver the Trust Agreement, and
has taken all necessary corporate action to authorize the execution and deliver
of the Trust Agreement.
(E) Each of the Indenture and the Guarantee Agreement has been
duly executed and delivered by the Indenture Trustee and the Guarantee Trustee,
respectively, and constitutes a valid and binding obligation of the Indenture
Trustee and the Guarantee Trustee, respectively, enforceable against the
Indenture Trustee and the Guarantee Trustee, respectively, in accordance with
its respective terms, except that certain payment obligations may be enforceable
solely against the assets of the Trust and except that such enforcement may be
limited by bankruptcy, insolvency, reorganization, moratorium, liquidation,
fraudulent conveyance and transfer or other similar laws affecting the
enforcement of creditors' rights generally, and by principles of equity,
including, without limitation, concepts of materiality, reasonableness, good
faith and fair dealing (regardless of whether such enforceability is considered
in a proceeding in equity or at law), and by the effect of applicable public
policy on the enforceability of provisions relating to indemnification or
contribution.
(F) The Junior Subordinated Debentures delivered on the
Closing Date (or an Option Closing Date, as the case may be) have been duly
authenticated by the Indenture Trustee in accordance with the terms of the
Indenture.
B-1
<PAGE>
Exhibit C to
Underwriting Agreement
The opinion of special Delaware counsel to the Company and the Trust to
be delivered pursuant to Section 8(d)(iii) of the Underwriting Agreement shall
be substantially to the effect that:
(A) The Trust has been duly created and is validly existing
in good standing as a business trust under the Delaware Act, and all filings
required as of the date hereof under the Delaware Act with respect to the
creation and valid existence of the Trust as a business trust have been made.
(B) Under the Trust Agreement and the Delaware Act, the Trust
has all trust power and authority necessary to own property and to conduct its
business, all as described in the Prospectus.
(C) The Trust Agreement constitutes a valid and binding
obligation of the Company and each of the Property Trustee, the Delaware Trustee
and each of the Administrators, and is enforceable against the Company and each
of the Property Trustee, the Delaware Trustee and each of the Administrators in
accordance with its terms.
(D) Under the Trust Agreement and the Delaware Act, the Trust
has the trust power and authority (i) to execute and deliver, and to perform its
obligations under, the Underwriting Agreement and (ii) to issue, and to perform
its obligations under, the Preferred Securities and the Common Securities.
(E) Under the Trust Agreement and the Delaware Act, the
execution and delivery by the Trust of the Underwriting Agreement, and the
performance by it of its obligations thereunder, have been duly authorized by
all necessary trust action on the part of the Trust.
(F) Under the Delaware Act, the certificate attached to the
Trust Agreement as Exhibit D is an appropriate form of certificate to evidence
ownership of the Preferred Securities. The Preferred Securities have been duly
authorized for issuance by the Trust Agreement and, when issued, delivered and
paid for in accordance with the terms of the Trust Agreement and the
Underwriting Agreement, and as described in the Prospectus, will be validly
issued, fully paid undivided beneficial interests in the assets of the Trust.
The holders of the Preferred Securities 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.
[This opinion need not address the liability of any holder of a Preferred
Security that is, was or becomes a named trustee of the Trust. In addition, this
opinion may note that the holders of the Preferred Securities may be required to
make payment or provide indemnity or security as set forth in the Trust
Agreement.]
(G) The Common Securities have been duly authorized for
issuance by the Trust Agreement and, when issued, delivered and paid for in
C-1
<PAGE>
accordance with the terms of theTrust Agreement and as described in the
Prospectus, will be validly issued fully paid undivided beneficial interests in
the assets of the Trust. [This opinion may note that the holders of the Common
Securities may be required to make payment or provide indemnity or security as
set forth in the Trust Agreement.]
(H) Under the Trust Agreement and the Delaware Act, the
issuance of the Preferred Securities and the Common Securities is not subject to
preemptive or similar rights.
(I) The issuance and sale by the Trust of the Preferred
Securities and the Common Securities, the purchase by the Trust of the
Subordinated Debentures, the execution, delivery and performance by the Trust of
the Underwriting Agreement, the consummation by the Trust of the transactions
contemplated by the Underwriting Agreement and the Prospectus and compliance by
the Trust with its obligations under the Underwriting Agreement do not violate
(i) any of the provisions of the Certificate of Trust or the Trust Agreement or
(ii) any applicable Delaware law or administrative regulation.
C-2
<PAGE>
