As filed with Securities and Exchange Commission on May 27, 1998
Registration Statement Nos. 333-52359
333-52359-01
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------
PRE-EFFECTIVE AMENDMENT NO. 1
to
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------------
<TABLE>
<S> <C> <C>
FCNB Capital Trust FCNB Corp
(Exact Name of Registrant as Specified in its Charter) (Exact Name of Registrant as Specified in its Charter)
Delaware Applied For Maryland 52-1479635
(State or Other Jurisdiction of (IRS Employer I.D. Number) (State or Other Jurisdiction of (IRS Employer I.D. Number)
Incorporation or Organization) Incorporation or Organization)
</TABLE>
7200 FCNB Corp, Frederick, Maryland 21703 (301) 662-2191
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrants' Principal Executive Offices)
A. Patrick Linton, 7200 FCNB Court, Frederick, Maryland 21703 (301) 662-2191
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)
Copies To:
David H. Baris, Esquire
Noel M. Gruber, Esquire
Kennedy, Baris & Lundy, L.L.P.
4719 Hampden Lane, Suite 300, Bethesda, Maryland 20814
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
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, 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. |_|
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT 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.
================================================================================
<PAGE>
PROSPECTUS SUBJECT TO COMPLETION, DATED MAY, 1998
1,400,000 PREFERRED SECURITIES
FCNB CAPITAL TRUST
% CUMULATIVE TRUST PREFERRED SECURITIES
(LIQUIDATION AMOUNT $25 PER PREFERRED SECURITY)
GUARANTEED, AS DESCRIBED HEREIN, BY
FCNB Corp
------------------------------------
The % Cumulative Trust Preferred Securities (the "Preferred Securities")
offered hereby represent preferred undivided beneficial interests in the assets
of FCNB Capital Trust, a statutory business trust created under the laws of the
State of Delaware (the "Trust"). FCNB Corp, a Maryland corporation ("the
Company"), will own all the common securities (the "Common Securities") of the
Trust. The Common Securities and the Preferred Securities (collectively, the
"Trust Securities") represent undivided beneficial interests in the assets of
the Trust.
(continued on following page)
Application has been made to have the Preferred Securities approved for
quotation on The Nasdaq Stock Market's National Market under the symbol "FCNBP".
------------------------------------
SEE "RISK FACTORS," COMMENCING ON PAGE 11, FOR INFORMATION THAT SHOULD BE
CONSIDERED BY PROSPECTIVE INVESTORS.
------------------------------------
THE SECURITIES OFFERED BY THIS PROSPECTUS ARE NOT SAVINGS OR DEPOSIT ACCOUNTS,
ARE NOT OBLIGATIONS OF OR GUARANTEED BY ANY BANKING OR NONBANKING AFFILIATE OF
THE COMPANY, ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY
OTHER GOVERNMENT AGENCY AND INVOLVE INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF
PRINCIPAL.
------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------------------
<TABLE>
<CAPTION>
===================================================================================================================
Price to Underwriting Proceeds to the Trust
Public Commission(1) (2)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Preferred Security $25.00 (2) $25.00
- -------------------------------------------------------------------------------------------------------------------
Total(3) $35,000,000 (2) $35,000,000
===================================================================================================================
</TABLE>
(1) The Trust and the Company have each agreed to indemnify the Underwriters
against certain liabilities, including liabilities under the Securities Act
of 1933, as amended. See "Underwriting."
(2) As the proceeds of the sale of the Preferred Securities will be invested in
the Subordinated Debentures, the Company has agreed to pay the Underwriters
$ per Preferred Security, or $ in the aggregate ($ if the over-allotment
option is exercised in full), as compensation for its arranging the
investment therein of such proceeds. See "Underwriting." The Company has
also agreed to pay the expenses of the offering estimated to be $ .
(3) The Trust has granted the Underwriters an option exercisable within 30 days
from the date of this Prospectus to purchase up to 210,000 additional
Preferred Securities on the same terms and conditions set forth above to
cover over-allotments, if any. If all such additional Preferred Securities
are purchased, the Total Price to Public and Proceeds to the Trust will be
$40,250,000. See "Underwriting."
------------------------------------
The Preferred Securities are offered by the Underwriters subject to receipt
and acceptance by them, prior sale and the Underwriters' right to reject any
order in whole or in part and to withdraw, cancel or modify the offer without
notice. It is expected that delivery of the Preferred Securities will be made in
book-entry form through the book-entry facilities of the Depository Trust
Company on or about , 1998, against payment therefor in immediately available
funds.
Sandler O'Neill Legg Mason Wood Walker
& Partners, L.P. Incorporated
The date of this Prospectus is , 1998
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This Prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy, nor shall there be any sale of these securities
in any state in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such state.
<PAGE>
State Street Bank and Trust Company is the Property Trustee (as defined
herein) of the Trust. The Trust exists for the purpose of issuing the Preferred
Securities and investing the proceeds thereof in an equivalent amount of %
Subordinated Debentures (the "Subordinated Debentures") of the Company. The
Subordinated Debentures will mature on , 2028 (the "Stated Maturity")
which date may be shortened to a date not earlier than , 2003 if
certain conditions are met (including the Company having received prior approval
of the Board of Governors of the Federal Reserve System ("Federal Reserve") to
do so if then required under applicable capital guidelines or policies of the
Federal Reserve). The Preferred Securities will have a preference under certain
circumstances with respect to cash distributions and amounts payable on
liquidation, redemption or otherwise over the Common Securities. See
"Description of the Preferred Securities--Subordination of Common Securities."
Holders of Preferred Securities are entitled to receive preferential
cumulative cash distributions, at the annual rate of % of the liquidation amount
of $25 per Preferred Security (the "Liquidation Amount"), accruing from ,
1998, the date of original issuance, and payable quarterly in arrears on the
last day of January, April, July and October of each year, commencing July 31,
1998 (the "Distributions"). The Company has the right, so long as no Debenture
Event of Default (as defined herein) has occurred and is continuing, to defer
payment of interest on the Subordinated Debentures at any time or from time to
time for a period not to exceed 20 consecutive quarters with respect to each
deferral period (each, an "Extension Period"); provided that no Extension Period
may extend beyond the Stated Maturity of the Subordinated Debentures. Upon the
termination of any such Extension Period and the payment of all amounts then
due, the Company may elect to begin a new Extension Period subject to the
requirements set forth herein. If interest payments on the Subordinated
Debentures are so deferred, Distributions on the Preferred Securities will also
be deferred, and the Company will not be permitted, subject to certain
exceptions described herein, to declare or pay any cash distributions with
respect to its capital stock or debt securities that rank pari passu with or
junior to the Subordinated Debentures.
DURING AN EXTENSION PERIOD, INTEREST ON THE SUBORDINATED DEBENTURES WILL
CONTINUE TO ACCRUE (AND THE AMOUNT OF DISTRIBUTIONS TO WHICH HOLDERS OF THE
PREFERRED SECURITIES ARE ENTITLED WILL ACCUMULATE) AT THE RATE OF % PER ANNUM,
COMPOUNDED QUARTERLY, AND HOLDERS OF THE PREFERRED SECURITIES WILL BE REQUIRED
TO INCLUDE INTEREST INCOME IN THEIR GROSS INCOME FOR UNITED STATES FEDERAL
INCOME TAX PURPOSES IN ADVANCE OF RECEIPT OF THE CASH DISTRIBUTIONS WITH RESPECT
TO SUCH DEFERRED INTEREST PAYMENTS. FOLLOWING THE DEFERRAL OF THE PAYMENT OF
INTEREST ON THE SUBORDINATED DEBENTURES, A HOLDER OF PREFERRED SECURITIES THAT
DISPOSES OF ITS PREFERRED SECURITIES BETWEEN RECORD DATES FOR PAYMENTS OF
DISTRIBUTIONS (AND CONSEQUENTLY DOES NOT RECEIVE A DISTRIBUTION FROM THE TRUST
FOR THE PERIOD OF INTEREST DEFERRAL PRIOR TO SUCH DISPOSITION) WILL NEVERTHELESS
BE REQUIRED TO INCLUDE ACCRUED BUT UNPAID INTEREST ON THE SUBORDINATED
DEBENTURES THROUGH THE DATE OF DISPOSITION IN INCOME AS ORDINARY INCOME AND TO
ADD SUCH AMOUNT TO ITS ADJUSTED TAX BASIS IN ITS PRO RATA SHARE OF THE
UNDERLYING SUBORDINATED DEBENTURES DEEMED DISPOSED OF. See "Description of the
Subordinated Debentures--Option to Extend Interest Payment Period," "Certain
Federal Income Tax Consequences--Potential Extension of Interest Payment Period
and Original Issue Discount" and "--Disposition of Preferred Securities."
The Company and the Trust believe that, taken together, the obligations of
the Company under the Guarantee, the Trust Agreement, the Subordinated
Debentures, the Indenture and the Expense Agreement (each as defined herein)
provide, in the aggregate, a full, irrevocable and unconditional guarantee, on a
subordinated basis, of all of the obligations of the Trust under the Preferred
Securities. See "Relationship Among the Preferred Securities, the Subordinated
Debentures and the Guarantee--Full and Unconditional Guarantee." Under the
Guarantee, the Company guarantees, on a subordinated basis, the payment of
Distributions and payments on liquidation or redemption of the Preferred
Securities, but only to the extent of funds held by the Trust, as described
herein. See "Description of the Guarantee--General." If the Company does not
make interest payments on the Subordinated Debentures held by the Trust, the
Trust will have insufficient funds to pay Distributions on the Preferred
Securities. The Guarantee does not cover payments of Distributions when the
Trust does not have sufficient funds to pay such Distributions. In such event, a
holder of Preferred Securities may institute a legal proceeding directly against
the Company pursuant to the terms of the Indenture to enforce payments of
amounts equal to such Distributions to such holder. See "Description of the
Subordinated Debentures--Enforcement of Certain
- 2 -
<PAGE>
Rights by Holders of the Preferred Securities." The obligations of the Company
under the Guarantee and the Preferred Securities are subordinate and junior in
right of payment to all Senior Debt, Subordinated Debt and Additional Senior
Obligations (each as defined herein) of the Company. The Subordinated Debentures
are unsecured obligations of the Company and are subordinated to all Senior
Debt, Subordinated Debt and Additional Senior Obligations of the Company.
The Preferred Securities are subject to mandatory redemption, in whole or
in part, upon repayment of the Subordinated Debentures at maturity or their
earlier redemption. Subject to Federal Reserve approval, if then required under
applicable capital guidelines or policies of the Federal Reserve, the
Subordinated Debentures are redeemable prior to the Stated Maturity at the
option of the Company: (i) on or after , 2003, in whole at any time, or in part
from time to time; or (ii) at any time, in whole (but not in part), within 90
days following the occurrence of a Tax Event, a Capital Treatment Event or an
Investment Company Event (each as defined herein). In each case the redemption
price will be equal to the accrued and unpaid interest through the date fixed
for redemption on the Subordinated Debentures to be redeemed, plus 100% of the
principal amount thereof. See "Description of the Preferred
Securities--Redemption or Exchange."
The Company has the right at any time to dissolve, wind-up or terminate the
Trust, subject to the Company having received prior approval of the Federal
Reserve to do so, if then required under applicable capital guidelines or
policies of the Federal Reserve. In the event of the voluntary or involuntary
dissolution, winding up or termination of the Trust, after satisfaction of
liabilities to creditors of the Trust as required by applicable law, the holders
of Preferred Securities will be entitled to receive a Liquidation Amount of $25
per Preferred Security, plus accumulated and unpaid Distributions thereon to the
date of payment, which may be in the form of a Subordinated Debenture having an
aggregate principal amount equal to the Liquidation Amount of such Preferred
Securities (and carrying with it accumulated interest in an amount equal to the
accumulated and unpaid Distributions then due on such Preferred Securities),
subject to certain exceptions. See "Description of the Preferred
Securities--Redemption or Exchange" and "--Liquidation Distribution Upon
Termination."
The Preferred Securities will be represented by global certificates
registered in the name of the Depository Trust Company ("DTC") or its nominee.
Beneficial interests in the Preferred Securities will be shown on, and transfers
thereof will only be effected through, records maintained by participants in DTC
("Participants"). Except as described herein, Preferred Securities in
certificated form will not be issued in exchange for the global certificates.
See "Description of the Preferred Securities--Book-Entry Securities; Delivery
and form" and "Book-Entry Issuance."
--------------------
The Company will provide to holders of the Preferred Securities quarterly
reports containing unaudited financial statements, to the extent and in the form
provided to holders of the Company's common stock, and annual reports containing
financial statements audited by the Company's independent auditors. In addition,
the Company will furnish annual reports on Form 10-K and quarterly reports on
Form 10-Q free of charge to holders of Preferred Securities who so request in
writing addressed to the Secretary of the Company.
--------------------
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE PREFERRED
SECURITIES OFFERED HEREBY, INCLUDING OVER-ALLOTTING THE PREFERRED SECURITIES AND
BIDDING OR PURCHASING SUCH PREFERRED SECURITIES AT A LEVEL ABOVE THAT WHICH
MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. FOR A DESCRIPTION OF THESE
ACTIVITIES, SEE "UNDERWRITING." SUCH STABILIZING TRANSACTIONS, IF COMMENCED, MAY
BE DISCONTINUED AT ANY TIME.
- 3 -
<PAGE>
FCNB CORP LOGO
Parent Company of
FCNB Bank logo
Map of market area
- 4 -
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information appearing elsewhere (or incorporated by reference) in this
Prospectus. Unless otherwise indicated, the information in this Prospectus
assumes that the Underwriters' over-allotment option will not be exercised.
Prospective investors should carefully consider the information set forth under
the heading "Risk Factors."
FCNB Corp
The Company was organized in 1986 to serve as the holding company for FCNB
Bank (the "Bank"), its principal operating subsidiary. The Bank, which was
originally chartered in 1818, was converted from a national bank charter to a
Maryland commercial bank in 1993, and is engaged in a general commercial and
consumer banking business, serving individuals and businesses in Frederick, Anne
Arundel, Carroll, Howard, Montgomery and Prince George's counties in Maryland.
The Bank is the sixth largest commercial banking institution headquartered in
Maryland. At March 31, 1998, the Company had assets of approximately $926.9
million, total deposits of approximately $633.0 million, and total shareholders'
equity of approximately $79.6 million. The principal executive office of the
Company is located at 7200 FCNB Court, Frederick, Maryland 21703, and its
telephone number is (301) 662-2191.
In February 1998, the Bank entered into an agreement to assume the deposit
liabilities, and purchase certain assets, relating to four branches of First
Virginia Bank-Maryland located in Montgomery County, Maryland, and three
branches of its sister bank, Farmer's Bank of Maryland, located in Baltimore
County, Maryland. The seven branches held approximately $48.0 million in
deposits at December 31, 1997. The purchase and assumption transaction is
expected to be consummated in June 1998, bringing the total number of branches
operated by the Company to 28, its total deposits to approximately $681.0
million and its total assets to approximately $974.9 million.
Over the past five years, the Company has achieved significant growth in
assets. From 1993 to 1997, the Company's assets grew at an 11.1% compound annual
growth rate, and increased by $8.8 million, or 0.96% in the first three months
of 1998. The Company has achieved its growth both internally and through
acquisition. In addition to the pending branch purchase transaction, the Company
has completed three whole bank acquisitions since 1995, consummating the
acquisition of Elkridge Bank (March 1995), of Laurel Federal Savings Bank
(January 1996) and of Odenton Federal Savings and Loan Association (April 1996),
as well as a number of smaller branch transactions. The Company has also had a
history of earnings growth. Net income (before extraordinary charges and merger
related expenses) grew at a compound annual growth rate of 7.2% from 1993 to
1997. For the five year period from 1993 to 1997, the Company's average annual
return on average assets (before merger-related expenses) was 1.15%. The
annualized return on average equity and the annualized return on average assets
for the three months ended March 31, 1998 were 12.11% and 1.04%, respectively.
The Company routinely explores opportunities for additional growth and
expansion of its core banking business and related activities, including the
acquisition of companies engaged in banking or other related activities, and
internally generated growth. There can be no assurance, however, that the
Company will be able to grow, or if it does, that any such growth or expansion
will result in an increase in the Company's earnings, dividends, book value or
market value of its securities.
FCNB Capital Trust
The Trust is a statutory business trust formed under Delaware law pursuant
to: (i) the Trust Agreement among the Company, as depositor, Wilmington Trust
Company, as Delaware trustee, and the three individual Administrative Trustees
named therein, and (ii) the filing of a certificate of trust with the Delaware
Secretary of State on May 7, 1998. The Trust Agreement will be amended and
restated in its entirety (as so amended, the "Trust Agreement"). All of the
Common Securities of the Trust will be owned by the Company. The Trust's
business and affairs will be conducted by the Delaware Trustee, the
Administrative Trustees, each of whom is an officer, employee
- 5 -
<PAGE>
or otherwise affiliated with the Company, and following amendment and
restatement of the Trust Agreement, State Street Bank and Trust Company, as
Property Trustee. The Trust exists for the exclusive purposes of: (i) issuing
the Trust Securities representing undivided beneficial interests in the assets
of the Trust; (ii) investing the gross proceeds of the Trust Securities in the
Subordinated Debentures issued by the Company; and (iii) engaging in only those
other activities necessary, advisable, or incidental thereto. The Subordinated
Debentures and payments thereunder will be the only assets of the Trust and
payments under the Subordinated Debentures will be the only revenue of the
Trust. The principal executive office of the Trust is located at 7200 FCNB
Court, Frederick, Maryland 21703, and its telephone number is (301) 662-2191.
THE OFFERING
Securities Offered..................... 1,400,000 Preferred Securities having a
Liquidation Amount of $25 per Preferred
Security. The Preferred Securities
represent preferred undivided
beneficial interests in the assets of
the Trust, which will consist solely of
the Subordinated Debentures and
payments thereunder. The Trust has
granted the Underwriters an option,
exercisable within 30 days after the
date of this Prospectus, to purchase up
to an additional 210,000 Preferred
Securities at the initial offering
price, solely to cover over-allotments,
if any.
Distributions.......................... The Distributions payable on each
Preferred Security will be fixed at a
rate per annum of % of the Liquidation
Amount, will be cumulative, will accrue
from , 1998, the date of original
issuance of the Preferred Securities,
and will be payable quarterly in
arrears, on January 31, April 30, July
31 and October 31 of each year,
commencing July 31, 1998. See
"Description of the Preferred
Securities -- Distributions -- Payment
of Distributions."
Extension Periods...................... The Company has the right, at any time,
so long as no Debenture Event of
Default has occurred and is continuing,
to defer payments of interest on the
Subordinated Debentures for a period
not exceeding 20 consecutive quarters;
provided that no Extension Period may
extend beyond the Stated Maturity of
the Subordinated Debentures. If
interest payments on the Subordinated
Debentures are so deferred, quarterly
Distributions on the Preferred
Securities will be deferred (though
such Distributions would continue to
accrue with interest thereon compounded
quarterly, since interest will continue
to accrue and compound on the
Subordinated Debentures) during any
such Extension Period. During an
Extension Period, the Company will be
prohibited, subject to certain
exceptions described herein, from
declaring or paying any cash
distributions with respect to its
capital stock or debt securities that
rank pari passu with or junior to the
Subordinated Debentures. Upon the
termination of any Extension Period and
the payment of all amounts then due,
the Company may commence a new
Extension Period, subject to the
foregoing requirements. See
"Description of the Preferred
Securities -- Distributions --
Extension Period" and "Description of
the Subordinated Debentures -- Option
to Extend Interest Payment Period."
Should an Extension Period occur,
holders of Preferred Securities will be
required to include deferred interest
income in their gross income for
- 6 -
<PAGE>
United States federal income tax
purposes in advance of receipt of the
cash distributions with respect to such
deferred interest payments. The Company
has no current intention of exercising
its right to defer payments of interest
on the Subordinated Debentures by
extending the interest payment period.
See "Certain Federal Income Tax
Consequences-- Potential Extension of
Interest Payment Period and Original
Issue Discount."
Redemption............................. The Preferred Securities are subject to
mandatory redemption, in whole or in
part, upon repayment of the
Subordinated Debentures at maturity or
their earlier redemption. Subject to
Federal Reserve approval, if then
required under applicable capital
guidelines or policies of the Federal
Reserve, the Subordinated Debentures
are redeemable prior to maturity at the
option of the Company: (i) on or after
, 2003, in whole at any time or in part
from time to time; or (ii) at any time,
in whole (but not in part), within 90
days following the occurrence of a Tax
Event, a Capital Treatment Event or an
Investment Company Event, in each case
at the redemption price equal to 100%
of the principal amount of the
Subordinated Debenture, together with
any accrued but unpaid interest to the
date fixed for redemption. See
"Description of the Subordinated
Debentures--Redemption or Exchange."
Distribution of Subordinated
Debentures............................ The Company has the right at any time
to terminate the Preferred Securities
and cause the Subordinated Debentures
to be distributed to holders of
Preferred Securities in liquidation of
the Trust, subject to the Company
having received prior approval of the
Federal Reserve to do so, if then
required under applicable capital
guidelines or policies of the Federal
Reserve. See "Description of the
Preferred Securities--Redemption or
Exchange" and "Description of the
Preferred Securities--Liquidation
Distribution Upon Termination."
Guarantee.............................. The Company has guaranteed the payment
of Distributions and payments on
liquidation or redemption of the
Preferred Securities, but only to the
extent of funds held by the Trust, as
described herein. The Company and the
Trust believe that, taken together, the
obligations of the Company under the
Guarantee, the Trust Agreement, the
Subordinated Debentures, the Indenture
and the Expense Agreement provide, in
the aggregate, a full, irrevocable and
unconditional guarantee,on a
subordinated basis, of all of the
obligations of the Trust under the
Preferred Securities. The obligations
of the Company under the Guarantee and
the Preferred Securities are
subordinate and junior in right of
payment to all Senior Debt,
Subordinated Debt and Additional Senior
Obligations of the Company. If the
Company does not make principal or
interest payments on the Subordinated
Debentures, the Trust will not have
sufficient funds to make Distributions
on the Preferred Securities; in which
event, the Guarantee will not apply to
such Distributions until the Trust has
sufficient funds available therefor.
See "Description of the Guarantee."
Voting Rights.......................... The holders of the Preferred Securities
will have no voting rights, except in
limited circumstances. See "Description
of the Preferred Securities-- Voting
Rights; Amendment of Trust Agreement."
- 7 -
<PAGE>
Use of Proceeds........................ The proceeds from the sale of the
Preferred Securities will be used by
the Trust to purchase Subordinated
Debentures from the Company. The net
proceeds to the Company from the sale
of the Subordinated Debentures will be
used for general corporate purposes,
including use in the Bank's lending and
investment activities, and to enable
the Company to pursue opportunities for
future growth through possible
acquisitions. See "Use of Proceeds."
Nasdaq National Market Symbol.......... Application has been made to have the
Preferred Securities approved for
quotation on The Nasdaq Stock Market's
National Market under the symbol
"FCNBP".
- 8 -
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data for the five years ended
December 31, 1997 are derived from the audited consolidated financial statements
of the Company. The data for the three month periods ended March 31, 1997 and
1998 have been derived from unaudited interim financial statements and include,
in the opinion of management, all adjustments (consisting of only normal
recurring adjustments) necessary to present fairly the data for such period. The
results of operations for the three month period ended March 31, 1998 are not
necessarily indicative of results which may be expected for any other interim
period or for the full year. The summary consolidated financial data set forth
below does not purport to be complete and should be read in conjunction with,
and is qualified in its entirety by, the more detailed information contained in
the consolidated financial statements of the Company and related notes, and the
discussion under "Management's Discussion and Analysis of Financial Condition
and Results of Operations," included in the Company's Annual Report to
Shareholders for the year ended December 31, 1997 and Quarterly Report on Form
10-Q for the three months ended March 31, 1998.
<TABLE>
<CAPTION>
At or for the three
months ended March 31, At or for the years ended December 31,
------------------------- -----------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
(dollars in thousands, except per share data)
Summary of Operating Results:
<S> <C> <C>
Total interest income $ 16,804 $ 14,734 $ 63,191 $ 54,653 $ 51,126 $ 43,892 $ 41,691
Total interest expense(1) 8,596 6,956 31,012 25,014 22,759 17,010 16,054
------------------------- -----------------------------------------------------------
Net interest income 8,208 7,778 32,179 29,639 28,367 26,882 25,637
Provision for credit losses 100 231 1,329 318 710 525 765
------------------------- -----------------------------------------------------------
Net interest income after
provision for credit losses 8,108 7,547 30,850 29,321 27,657 26,357 24,872
Net securities gains (losses) 152 87 580 193 123 375 (1,183)
Noninterest income (excluding net
securities gains (losses)) 1,632 1,206 5,540 4,068 3,795 2,503 4,497
Noninterest expenses 6,452 6,218 23,949 24,470 20,689 19,191 18,013
------------------------- -----------------------------------------------------------
Income before provision for income taxes 3,440 2,622 13,021 9,112 10,886 10,044 10,173
Provision for income taxes 1,086 772 4,218 3,245 3,888 3,272 3,301
------------------------- -----------------------------------------------------------
Net income $ 2,354 $ 1,850 $ 8,803 $ 5,867 $ 6,998 $ 6,772 $ 6,872
Other comprehensive income (loss)(2) 737 (1,068) 2,912 (26) 2,680 (3,285) 1,135
------------------------- -----------------------------------------------------------
Comprehensive income(2) $ 3,091 $ 782 $ 11,715 $ 5,841 $ 9,678 $ 3,487 $ 8,007
========================= ===========================================================
Net income before merger-related
expenses $ 2,354 $ 2,065 $ 9,088 $ 7,778$ 7,301 $ 6,999$ 6,872
========================= ===========================================================
Per Share Data:
Basic and diluted earnings $ 0.40 $ 0.31 $ 1.49 $ 0.99 $ 1.19 $ 1.15 $ 1.17
Basic and diluted earnings before
merger-related expenses 0.40 0.35 1.54 1.31 1.24 1.19 1.17
Cash dividends declared 0.17 0.14 0.57 0.49 0.50 0.44 0.35
Book value at period-end 13.46 11.70 13.11 11.71 11.36 10.18 9.96
Shares outstanding at period-end 5,915,442 5,894,416 5,912,284 5,901,016 5,828,197 5,796,869 5,789,812
Balance Sheet Data (At Period-End):
Total loans, net of unearned income $573,492 $513,140 $574,105 $497,995 $439,794 $390,177 $336,916
Total assets 926,898 807,332 918,084 779,169 660,984 627,050 603,497
Total deposits 632,971 595,899 616,512 587,074 529,988 505,202 485,543
Federal funds purchased and securities
sold under agreements to repurchase 34,449 46,414 65,163 40,739 21,043 25,103 32,304
Other short-term borrowings 173,137 89,213 152,138 76,516 32,426 26,089 13,776
Long-term debt -- -- -- -- 5,680 7,000 10,106
Total shareholders' equity 79,647 68,959 77,518 69,110 66,219 59,037 57,689
Performance Ratios:
Return on average total assets 1.04% 0.94% 1.07% 0.84% 1.09% 1.14% 1.23%
Return on average total assets before
merger-related expenses 1.04 1.05 1.09 1.11 1.14 1.17 1.23
Return on average shareholders' equity 12.11 10.72 12.25 8.92 11.21 11.79 12.73
Return on average shareholder's equity
before merger-related expenses 12.11 11.96 12.65 11.82 11.70 12.18 12.73
Net interest margin 4.00 4.32 4.24 4.52 4.78 4.96 5.08
Cash dividends declared to net income 42.69 43.51 38.77 49.86 41.61 36.62 30.32
</TABLE>
- 9 -
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Asset Quality Ratios:
Nonperforming assets to total loans
(net of unearned income) and
foreclosed properties at period-end(3) 1.39% 1.79% 1.40% 2.05% 1.11% 1.48% 1.78%
Nonperforming assets to total assets at
period end (3) 0.86 1.14 0.88 1.32 0.74 0.93 1.00
Allowance for credit losses to
nonperforming loans at period-end 99.5 93.7 123.7 71.5 197.5 130.4 125.2
Net charge-offs (recoveries) to average
total loans 0.02 (0.03) 0.14 0.19 0.04 0.01 0.07
Capital Ratios:
Total capital to risk-weighted assets 11.95 12.81 11.92 13.57 14.12 13.67 14.87
Tier 1 capital to risk-weighted assets 11.08 11.82 11.03 12.58 12.97 12.64 13.77
Leverage ratio 8.03 8.46 8.10 8.74 8.91 8.40 8.25
</TABLE>
(1) Net of $108,000 and $300,000 of capitalized construction period interest in
1996 and 1995, respectively.
(2) Statement of Financial Accounting Standards No. 130 requires that
comprehensive income be reported in financial statements for periods beginning
after December 15, 1997. Reclassification of prior period statements is required
for comparative purposes.
(3) Nonperforming assets consist of nonaccrual loans, loans contractually past
due 90 days or more, loans with restructured terms and foreclosed properties.
RATIO OF EARNINGS TO FIXED CHARGES(1)
<TABLE>
<CAPTION>
Three Months
Ended March 31, Years Ended December 31,
--------------------------- --------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C> <C> <C>
Including interest on deposits 1.40x 1.38x 1.42x 1.36x 1.46x 1.59x 1.63x
Excluding interest on deposits 4.23 5.67 4.96 7.46 9.10 11.35 14.78
</TABLE>
(1) Fixed charges means interest, whether expensed or capitalized. Earnings is
defined as pretax income with fixed charges added back, but excluding any
amount of interest capitalized during the period.
- 10 -
<PAGE>
RISK FACTORS
Prospective investors should carefully consider, together with the other
information contained and incorporated by reference in this Prospectus, the
following risk factors in evaluating the Company and its business and the Trust
and the Preferred Securities before purchasing the Preferred Securities offered
hereby. Prospective investors should note, in particular, that this Prospectus
contains forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), including
statements of goals, intentions, and expectations, regarding or based upon
general economic conditions, interest rates, developments in national and local
markets, and other matters, and which, by their nature, are subject to
significant uncertainties. Because of these uncertainties and the assumptions on
which statements in this Prospectus are based, actual future results may differ
materially from those contemplated by such statements. The considerations listed
below represent certain important factors the Company believes could cause such
results to differ. These considerations are not intended to represent a complete
list of the general or specific risks that may affect the Company and the Trust.
It should be recognized that other risks may be significant, presently or in the
future, and the risks set forth below may affect the Company and the Trust to a
greater, or lesser, extent than indicated.
SUBORDINATION OF THE GUARANTEE AND THE SUBORDINATED DEBENTURES
The obligations of the Company under the Guarantee issued for the benefit
of the holders of Preferred Securities and under the Subordinated Debentures are
unsecured and rank subordinate and junior in right of payment to all Senior
Debt, Subordinated Debt and Additional Senior Obligations of the Company,
whether now existing or hereafter incurred. At , 1998, the Company had no
outstanding Senior Debt, Subordinated Debt or Additional Senior Obligations.
Because the Company is a holding company, the right of the Company to
participate in any distribution of assets of the Bank upon the Bank's
liquidation or reorganization or otherwise (and thus the ability of holders of
the Preferred Securities to benefit indirectly from such distribution) is
subject to the prior claims of creditors of the Bank, except to the extent that
the Company may itself be recognized as a creditor of the Bank. The Subordinated
Debentures, therefore, will be effectively subordinated to all existing and
future liabilities of the Bank and holders of Subordinated Debentures and
Preferred Securities should look only to the assets of the Company for payments
on the Subordinated Debentures. Neither the Indenture, the Guarantee nor the
Trust Agreement places any limitation on the amount of secured or unsecured
debt, including Senior Debt, Subordinated Debt and Additional Senior
Obligations, that may be incurred by the Company. See "Description of the
Guarantee--Status of the Guarantee" and "Description of the Subordinated
Debentures--Subordination."
The ability of the Trust to pay amounts due on the Preferred Securities is
solely dependent upon the Company making payments on the Subordinated Debentures
as and when required.
OPTION TO EXTEND INTEREST PAYMENT PERIOD; TAX CONSEQUENCES; MARKET PRICE
CONSEQUENCES
The Company has the right under the Indenture, so long as no Debenture
Event of Default has occurred and is continuing, to defer the payment of
interest on the Subordinated Debentures, at any time or from time to time, for a
period not exceeding 20 consecutive quarters with respect to each Extension
Period; provided that no Extension Period may extend beyond the Stated Maturity
of the Subordinated Debentures. As a consequence of any such deferral, quarterly
Distributions on the Preferred Securities by the Trust will be deferred (and the
amount of Distributions to which holders of the Preferred Securities are
entitled will accumulate additional Distributions thereon at the rate of % per
annum, compounded quarterly from the relevant payment date for such
Distributions) during any such Extension Period. During any such Extension
Period, the Company may not, subject to limited exceptions: (i) declare or pay
any dividends or distributions on, or redeem, purchase, acquire, or make a
liquidation payment with respect to, any of the Company's capital stock; (ii)
make any payment of principal, interest or premium, if any, on or repay,
repurchase or redeem any debt securities of the Company that rank pari passu
with or junior in interest to the Subordinated Debentures or make any guarantee
payments with respect to any guarantee by the Company of
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<PAGE>
the debt securities of any subsidiary of the Company if such guarantee ranks
pari passu with or junior in interest to the Subordinated Debentures (other than
payments under the Guarantee); or (iii) redeem, purchase or acquire less than
all of the Subordinated Debentures or any of the Preferred Securities. Prior to
the termination of any such Extension Period, the Company may further defer the
payment of interest; provided that no Extension Period may exceed 20 consecutive
quarters or extend beyond the Stated Maturity of the Subordinated Debentures.
Upon the termination of any Extension Period and the payment of all interest
then accrued and unpaid (together with interest thereon at the annual rate of %
compounded quarterly, to the extent permitted by applicable law), the Company
may elect to begin a new Extension Period, subject to the above requirements.
Subject to the foregoing, there is no limitation on the number of times that the
Company may elect to begin an Extension Period. See "Description of the
Preferred Securities--Distributions--Extension Period" and "Description of the
Subordinated Debentures--Option to Extend Interest Payment Period."
Should an Extension Period occur, each holder of Preferred Securities will
be required to accrue and recognize income (in the form of original issue
discount ("OID")) in respect of its pro rata share of the interest accruing on
the Subordinated Debentures held by the Trust for United States federal income
tax purposes. Under such circumstances, a holder of Preferred Securities would
be required to include such income in gross income for United States federal
income tax purposes in advance of the receipt of cash, and will not receive the
cash related to such income from the Trust if the holder disposes of the
Preferred Securities prior to the record date for the payment of the related
Distributions. See "Certain Federal Income Tax Consequences--Potential Extension
of Interest Payment Period and Original Issue Discount."
The Company has no current intention of exercising its right to defer
payments of interest by extending the interest payment period on the
Subordinated Debentures, and believes the likelihood of its exercising such
right to be remote. Should the Company elect, however, to exercise such right in
the future, the market price of the Preferred Securities is likely to be
adversely affected. A holder that disposes of its Preferred Securities during an
Extension Period, therefore, might not receive the same return on its investment
as a holder that continues to hold its Preferred Securities. As a result of the
existence of the Company's right to defer interest payments, the market price of
the Preferred Securities may be more volatile than the market prices of other
securities on which original issue discount accrues that are not subject to such
optional deferrals.
REDEMPTION UPON TAX EVENT, CAPITAL TREATMENT EVENT OR INVESTMENT COMPANY EVENT
The Company has the right to redeem the Subordinated Debentures in whole
(but not in part) within 90 days following the occurrence of a Tax Event, a
Capital Treatment Event or Investment Company Event (whether occurring before or
after , 2003), and, therefore, cause a mandatory redemption of the Preferred
Securities. The exercise of such right is subject to the Company having received
prior approval of the Federal Reserve to do so, if then required under
applicable capital guidelines or policies of the Federal Reserve.
"Tax Event" means the receipt by the Trust of an opinion of counsel
experienced in such matters to the effect that, as a result of any amendment to,
or change (including any announced prospective change) in the laws the United
States or any political subdivision or taxing authority thereof or therein (or
any regulations thereunder) of, or as a result of any official administrative
pronouncement or judicial decision interpreting or applying such laws or
regulations, which amendment or change is effective or such pronouncement or
decision is announced on or after the date of issuance of the Preferred
Securities under the Trust Agreement, there is more than an insubstantial risk
that: (i) the Trust is, or will be within 90 days of the date of such opinion,
subject to United States federal income tax with respect to income received or
accrued on the Subordinated Debentures; (ii) interest payable by the Company on
the Subordinated Debentures is not, or, within 90 days of such opinion, will not
be, deductible by the Company, in whole or in part, for United States federal
income tax purposes; or (iii) the Trust is, or within 90 days of the date of the
opinion will be, subject to more than a de minimis amount of other taxes, duties
or other governmental charges. The Company must request and receive an opinion
with regard to such matters within a reasonable period of time after it becomes
aware of the possible occurrence of any of the events described in clauses (i)
through (iii)
- 12 -
<PAGE>
above. See "Risk Factors--Proposed Tax Legislation" for a discussion of certain
legislative proposals that, if adopted, could give rise to a Tax Event, which
may permit the Company to cause a redemption of the Preferred Securities prior
to , 2003.
"Capital Treatment Event" means the receipt by the Trust of an opinion of
counsel experienced in such matters to the effect that, as a result of any
amendment to or any change (including any announced prospective change) in the
laws of the United States or any political subdivision thereof or therein (or
any regulations thereunder), or as a result of any official administrative
pronouncement or judicial decision interpreting or applying such laws or
regulations, which amendment or change is effective or such proposed change,
pronouncement or decision is announced on or after the date of issuance of the
Preferred Securities under the Trust Agreement, there is more than an
insubstantial risk of impairment of the Company's ability to treat the aggregate
Liquidation Amount of the Preferred Securities (or any substantial portion
thereof) as "Tier 1 Capital" (or the then equivalent thereof) for purposes of
the capital adequacy guidelines of the Federal Reserve, as then applicable to
the Company, provided, however, that the inability of the Company to treat all
or any portion of the Liquidation Amount of the Preferred Securities as Tier 1
Capital shall not constitute the basis of a Capital Treatment Event if such
inability results from the Company having cumulative preferred capital in excess
of the amount which may qualify for treatment as Tier 1 Capital under applicable
capital adequacy guidelines of the Federal Reserve.
"Investment Company Event" means the receipt by the Trust of an opinion of
counsel experienced in such matters to the effect that, as a result of the
occurrence of a change in law or regulation or a change in interpretation or
application of law or regulation by any legislative body, court, governmental
agency or regulatory authority, the Trust is or will be considered an
"investment company" that is required to be registered under the Investment
Company Act of 1940, as amended (the "Investment Company Act"), which change
becomes effective on or after the date of original issuance of the Preferred
Securities.
SHORTENING OF STATED MATURITY OF SUBORDINATED DEBENTURES
The Company has the right, at any time, to shorten the maturity of the
Subordinated Debentures to a date not earlier than , 2003. The exercise of such
right is subject to the Company having received prior approval of the Federal
Reserve, if then required under applicable capital guidelines or policies of the
Federal Reserve. See "Description of the Subordinated Debentures--General."
RIGHTS UNDER THE GUARANTEE
The Guarantee guarantees: to the holders of the Preferred Securities, to
the extent not paid by the Trust (i) any accrued and unpaid Distributions
required to be paid on the Preferred Securities, to the extent that the Trust
has funds available therefor at such time; (ii) the Redemption Price (as defined
herein) with respect to any Preferred Securities called for redemption, to the
extent that the Trust has funds available therefor at such time; and (iii) upon
a voluntary or involuntary dissolution, winding-up or liquidation of the Trust
(other than in connection with the distribution of Subordinated Debentures to
the holders of Preferred Securities or a redemption of all of the Preferred
Securities), the lesser of (a) the amount of the Liquidation Distribution (as
defined herein), to the extent the Trust has funds available therefor at such
time, and (b) the amount of assets of the Trust remaining available for
distribution to holders of the Preferred Securities in liquidation of the Trust.
The holders of not less than a majority in Liquidation Amount of the Preferred
Securities have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Guarantee Trustee in respect of the
Guarantee or to direct the exercise of any trust power conferred upon the
Guarantee Trustee under the Guarantee. Any holder of the Preferred Securities
may institute a legal proceeding directly against the Company to enforce its
rights under the Guarantee without first instituting a legal proceeding against
the Trust, the Guarantee Trustee or any other Person (as defined in the
Guarantee). If the Company were to default on its obligation to pay amounts
payable under the Subordinated Debentures, the Trust would lack funds for the
payment of Distributions or amounts payable on redemption of the Preferred
Securities or otherwise, and, in such event, holders of Preferred Securities
would not be able to rely upon
- 13 -
<PAGE>
the Guarantee for such amounts. In the event, however, that a Debenture Event of
Default has occurred and is continuing and such event is attributable to the
failure of the Company to pay interest on or principal of the Subordinated
Debentures on the payment date on which such payment is due and payable, then a
holder of Preferred Securities may institute a legal proceeding directly against
the Company for enforcement of payment to such holder of the principal of or
interest on such Subordinated Debentures having a principal amount equal to the
aggregate Liquidation Amount of the Preferred Securities of such holder (a
"Direct Action"). The exercise by the Company of its right, as described herein,
to defer the payment of interest on the Subordinated Debentures does not
constitute a Debenture Event of Default. In connection with such Direct Action,
the Company will have a right of set-off under the Indenture to the extent of
any payment made by the Company to such holder of Preferred Securities in the
Direct Action. Except as described herein, holders of Preferred Securities will
not be able to exercise directly any other remedy available to the holders of
the Subordinated Debentures or assert directly any other rights in respect of
the Subordinated Debentures. See "Description of the Subordinated
Debentures--Enforcement of Certain Rights by Holders of Preferred Securities,"
"Description of the Subordinated Debentures--Debenture Events of Default" and
"Description of the Guarantee." The Trust Agreement provides that each holder of
Preferred Securities by acceptance thereof agrees to the provisions of the
Guarantee and the Indenture.
LIMITED VOTING RIGHTS
Holders of Preferred Securities will have no voting rights, except in
limited circumstances relating only to the modification of the Preferred
Securities and the exercise of the rights of the Trust as holder of the
Subordinated Debentures and the Guarantee. Holders of Preferred Securities will
not be entitled to vote to appoint, remove or replace the Property Trustee or
the Delaware Trustee, as such voting rights are vested exclusively in the holder
of the Common Securities (except upon the occurrence of certain events described
herein). The Property Trustee, the Administrative Trustees and the Company may
amend the Trust Agreement without the consent of holders of Preferred Securities
to ensure that the Trust will be classified for United States federal income tax
purposes as a grantor trust even if such action adversely affects the interests
of such holders. See "Description of the Preferred Securities--Voting Rights;
Amendment of Trust Agreement" and "Description of the Preferred
Securities--Removal of the Trustees."
PROPOSED TAX LEGISLATION
On February 6, 1997, President Clinton proposed certain tax law changes
(the "1997 Proposed Legislation") that would, among other things, generally deny
corporate issuers a deduction for interest or OID in respect of certain debt
obligations if such debt obligations have a maximum term in excess of 15 years
and are not shown as indebtedness on the issuer's applicable consolidated
balance sheet. The 1997 Proposed Legislation was not included in the Taxpayer
Relief Act of 1997 as enacted, and was not included in President Clinton's 1999
budget proposal released in February 1998.
However, if legislation similar to the 1997 Proposed Legislation is enacted
in the future with retroactive effect, the Company would not be entitled to an
interest deduction with respect to the Subordinated Debentures. There can be no
assurance that legislation enacted after the date hereof will not adversely
affect, in the manner proposed in the 1997 Proposed Legislation or otherwise,
the ability of the Company to deduct the interest payable on the Subordinated
Debentures. Consequently, there can be no assurance that a Tax Event will not
occur. A Tax Event would permit the Company, upon approval of the Federal
Reserve, if then required under applicable capital guidelines or policies of the
Federal Reserve, to cause a redemption of the Preferred Securities before, as
well as after, , 2003. See "Description of the Subordinated
Debentures--Redemption or Exchange" and "Description of the Preferred
Securities--Redemption or Exchange--Tax Event Redemption, Capital Treatment
Event Redemption or Investment Company Event Redemption" and "Certain Federal
Income Tax Consequences-- Effect of Proposed Changes in Tax Laws."
EXCHANGE OF PREFERRED SECURITIES FOR SUBORDINATED DEBENTURES
The Company has the right at any time to dissolve, wind-up or terminate the
Trust and cause the Subordinated Debentures to be distributed to the holders of
the Preferred Securities in exchange therefor in
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<PAGE>
liquidation of the Trust. The exercise of such right is subject to the Company
having received prior approval of the Federal Reserve, if then required under
applicable capital guidelines or policies of the Federal Reserve. The Company
will have the right, in certain circumstances, to redeem the Subordinated
Debentures in whole or in part, in lieu of a distribution of the Subordinated
Debentures by the Trust, in which event the Trust will redeem the Trust
Securities on a pro rata basis to the same extent as the Subordinated Debentures
are redeemed by the Company. Any such distribution or redemption prior to the
Stated Maturity will be subject to prior approval of the Federal Reserve, if
then required under applicable capital guidelines or policies of the Federal
Reserve. See "Description of the Preferred Securities--Redemption or
Exchange--Tax Event Redemption, Capital Treatment Event Redemption or Investment
Company Event Redemption."
Under current United States federal income tax law, a distribution of
Subordinated Debentures upon the dissolution of the Trust would not be a taxable
event to holders of the Preferred Securities. If, however, the Trust is
characterized as an association taxable as a corporation at the time of the
dissolution of the Trust, the distribution of the Subordinated Debentures may
constitute a taxable event to holders of Preferred Securities. Moreover, upon
occurrence of a Tax Event, a dissolution of the Trust in which holders of the
Preferred Securities receive cash may be a taxable event to such holders. See
"Certain Federal Income Tax Consequences--Receipt of Subordinated Debentures or
Cash Upon Liquidation of the Trust."
There can be no assurance as to the market prices for the Preferred
Securities or the Subordinated Debentures that may be distributed in exchange
for Preferred Securities upon a dissolution or liquidation of the Trust. The
Preferred Securities or the Subordinated Debentures, may trade at a discount to
the price that the investor paid to purchase the Preferred Securities offered
hereby. Because holders of Preferred Securities may receive Subordinated
Debentures, prospective purchasers of Preferred Securities are also making an
investment decision with regard to the Subordinated Debentures and should
carefully review all the information regarding the Subordinated Debentures
contained herein.
If the Subordinated Debentures are distributed to the holders of Preferred
Securities upon the liquidation of the Trust, the Company will use its best
efforts to list the Subordinated Debentures on The Nasdaq Stock Market's
National Market or such stock exchanges, if any, on which the Preferred
Securities are then listed.
TRADING PRICE; ABSENCE OF PRIOR PUBLIC MARKET FOR THE PREFERRED SECURITIES
The Preferred Securities may trade at prices that do not fully reflect the
value of accrued but unpaid interest with respect to the underlying Subordinated
Debentures. A holder of Preferred Securities who uses the accrual method of
accounting (and a cash method holder if the Subordinated Debentures are deemed
to be issued with original issue discount ("OID")) that disposes of its
Preferred Securities between record dates for payments of Distributions (and
consequently does not receive a Distribution from the Trust for the period prior
to such disposition) will nevertheless be required to include accrued but unpaid
interest (or OID) on the Subordinated Debentures through the date of disposition
in income as ordinary income and to add the amount of any accrued OID to its
adjusted tax basis in its pro rata share of the underlying Subordinated
Debentures deemed disposed of. Such holder will recognize a capital loss to the
extent the selling price (which may not fully reflect the value of accrued but
unpaid interest) is less than its adjusted tax basis (which will include all
accrued OID). Subject to certain limited exceptions, capital losses cannot be
applied to offset ordinary income for United States federal income tax purposes.
See "Certain Federal Income Tax Consequences--Disposition of Preferred
Securities."
There is no current public market for the Preferred Securities. Although
application has been made to approve the Preferred Securities for quotation on
The Nasdaq Stock Market's National Market, there can be no assurance that an
active public market will develop for the Preferred Securities or that, if such
market develops, the market price will equal or exceed the public offering price
set forth on the cover page of this Prospectus. The public offering price for
the Preferred Securities and the Distribution rate have been determined through
negotiations between the Company and the Underwriters. Prices for the Preferred
Securities will be determined in the marketplace
- 15 -
<PAGE>
and may be influenced by many factors, including prevailing interest rates, the
liquidity of the market for the Preferred Securities, investor perceptions of
the Company and general industry and economic conditions.
PREFERRED SECURITIES ARE NOT INSURED
The Preferred Securities are not insured by the Bank Insurance Fund (the
"BIF") or the Savings Association Insurance Fund (the "SAIF") of the Federal
Deposit Insurance Corporation (the "FDIC") or by any other governmental agency.
EXPOSURE TO LOCAL ECONOMIC CONDITIONS
Although the Bank makes loans throughout the State of Maryland, the
Company's lending operations are concentrated primarily in the Bank's service
areas. Consequently, adverse changes in economic conditions in those service
areas, including a decline in the real estate market in the Bank's service areas
would impair the Company's ability to collect loans and would otherwise have a
negative effect on the financial condition of the Company.
INTEREST RATE RISK
Changes in interest rates can have significant effects on the Company's
profitability, which depends largely on its net interest income, the difference
between the interest income received on interest earning assets and the interest
expense incurred on interest bearing liabilities. The Company's net interest
income and the market value of its assets and liabilities could be significantly
affected by changes in interest rates. In a rising interest rate environment,
the Company anticipates that its net interest income could be adversely affected
as liabilities more quickly reprice to market interest rates than assets.
Additionally, loans and mortgage backed securities in the Company's portfolio
may prepay more rapidly than anticipated, reducing interest income as the
Company is unable to reinvest the proceeds of such prepayments at comparable
yields.
DIVIDEND RESTRICTIONS
The ability of the Company to pay amounts due on the Subordinated
Debentures is largely dependent on its receipt of dividends from the Bank. The
amount of dividends that the Bank may pay to the Company is limited by various
federal laws and by the regulations promulgated by their respective primary
regulators, which impose certain minimum capital requirements.
- 16 -
<PAGE>
USE OF PROCEEDS
The proceeds from the sale of the Preferred Securities will be used by the
Trust to purchase the Subordinated Debentures from the Company. The net proceeds
to the Company from the sale of the Subordinated Debentures are estimated to be
$35 million (or $40.25 million if the Underwriters' over-allotment option is
exercised in full) before deducting the Underwriters' compensation and estimated
expenses. The Company proposes to use the net proceeds for general corporate
purposes, including use in the Bank's lending and investment activities, and to
allow the Company to pursue opportunities for future growth through possible
acquisitions. Pending such uses, the net proceeds from the sale of the
Subordinated Debentures may be invested in a variety of short term investment
securities.
MARKET FOR THE PREFERRED SECURITIES
Application has been made to have the Preferred Securities approved for
quotation on the Nasdaq National Market under the symbol "FCNBP". There can be
no assurance that such approval will be obtained. Sandler O'Neill & Partners,
L.P. and Legg Mason Wood Walker, Incorporated, have informed the Company that
they presently intend to make a market in the Preferred Securities. There can be
no assurance, however, that an active and liquid trading market will develop for
the Preferred Securities, or, if developed, that such a market will continue.
The offering
price and Distribution rate have been determined by negotiations among the
Company and the Underwriters, and the offering price of the Preferred Securities
may not be indicative of the market price following the offering. See
"Underwriting."
ACCOUNTING TREATMENT
The Trust will be treated, for financial reporting purposes, as a
subsidiary of the Company and, accordingly, the accounts of the Trust will be
included in the consolidated financial statements of the Company. The Preferred
Securities will be presented as a separate category of long-term debt in the
consolidated statement of financial condition of the Company under the caption
"Guaranteed Preferred Beneficial Interests in the Company's Subordinated
Debentures," and appropriate disclosures about the Preferred Securities, the
Guarantee and the Subordinated Debentures will be included in the notes to
consolidated financial statements. The Company will record Distributions payable
on the Preferred Securities as an interest expense in the consolidated
statements of operations for financial reporting purposes.
All future reports of the Company filed under the Exchange Act will: (i)
present the Trust Securities issued by the Trust on the statement of financial
condition as a separate category of long-term debt entitled "Guaranteed
Preferred Beneficial Interests in the Company's Subordinated Debentures;" (ii)
include in a footnote to the financial statements disclosure that the sole
assets of the Trust are the Subordinated Debentures (including the outstanding
principal amount, interest rate and maturity date of such Subordinated
Debentures); and (iii) include in a footnote to the financial statements
disclosure that the Company owns all of the Common Securities of the Trust, the
sole assets of the Trust are the Subordinated Debentures, and the back-up
obligations, in the aggregate, constitute a full and unconditional guarantee by
the Company of the obligations of the Trust under the Preferred Securities.
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<PAGE>
CAPITALIZATION
The following table sets forth (i) the consolidated capitalization of the
Company at March 31, 1998 and (ii) the pro forma consolidated capitalization of
the Company giving effect to the issuance of the Preferred Securities by the
Trust, and the sale of the Subordinated Debentures to the Trust by the Company.
The pro forma presentation assumes the Offering was completed by March 31, 1998,
and that the Underwriters' over-allotment option was not exercised.
<TABLE>
<CAPTION>
At March 31, 1998
---------------------------------------------
Actual Pro Forma
------------------ -------------------
(dollars in thousands)
<S> <C> <C>
LONG-TERM DEBT:
Guaranteed preferred beneficial interests in the Company's
subordinated debentures $ - $ 35,000
================== ===================
SHAREHOLDERS' EQUITY:
Preferred Stock, par value $1.00 per share;
1,000,000 shares authorized; none issued 0 0
Common Stock, par value $1.00 per share;
20,000,000 shares authorized; 5,915,442 shares issued and 5,915 5,915
outstanding
Capital surplus 43,445 43,445
Retained earnings 26,134 26,134
Accumulated other comprehensive income 4,153 4,153
------------------ -------------------
Total shareholders' equity $ 79,647 $ 79,647
================== ===================
CAPITAL RATIOS:
Leverage ratio(1)(2) 8.03% 10.71%
Tier 1 capital to risk-weighted assets(2) 11.08% 14.77%
Total capital to risk-weighted assets(2) 11.95% 17.33%
</TABLE>
(1) The leverage ratio is Tier 1 capital divided by quarterly average total
assets less intangibles.
(2) The total risk-based capital ratio, as adjusted, is computed including the
total estimated net proceeds from the sale of the Preferred Securities.
Federal Reserve guidelines limit the amount of the Preferred Securities and
cumulative perpetual preferred stock included in Tier 1 capital to an
aggregate of 25% of Tier 1 capital, and accordingly the leverage and Tier 1
capital ratios, as adjusted, are computed excluding $11.0 million of the
Preferred Securities.
THE COMPANY
The Company was organized in 1986 to serve as the holding company for FCNB
Bank (the "Bank"), its principal operating subsidiary. The Bank, which was
originally chartered in 1818, was converted from a national bank charter to a
Maryland commercial bank in 1993, and is engaged in a general commercial and
consumer banking business, serving individuals and businesses in Frederick, Anne
Arundel, Carroll, Howard, Montgomery and Prince George's counties in Maryland.
The Bank is the sixth largest commercial banking institution headquartered in
Maryland.
The Bank is engaged in the financing of commerce and industry, providing
credit facilities and related services principally for businesses located in its
market areas. The Bank offers all forms of commercial lending, including lines
of credit, revolving credits, term loans, accounts receivable financing, real
estate loans and other forms of secured financing. The Bank also provides a wide
range of personal banking services to consumers, including checking and savings
account products, installment and personal loans, credit cards, home equity and
mortgage loans,
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<PAGE>
automobile loans, safe deposit boxes and other services.
At March 31, 1998, the Company had assets of approximately $926.9 million,
total deposits of approximately $633.0 million, and total shareholders' equity
of approximately $79.6 million. The principal executive office of the Company is
located at 7200 FCNB Court, Frederick, Maryland 21703, and its telephone number
is (301) 662-2191.
In February 1998, the Bank entered into an agreement to assume the deposit
liabilities, and purchase certain assets, relating to four branches of First
Virginia Bank-Maryland located in Montgomery County, Maryland, and three
branches of its sister bank, Farmer's Bank of Maryland, located in Baltimore
County, Maryland. The seven branches held approximately $48.0 million in
deposits at December 31, 1997. The purchase and assumption transaction is
expected to be consummated in June 1998, bringing the total number of branches
operated by the Company to 28, its total deposits to approximately $681.0
million and its total assets to approximately $974.9 million.
Over the past five years, the Company has achieved significant growth in
assets. From 1993 to 1997, the Company's assets grew at an 11.1% compound annual
growth rate, and increased by $8.8 million, or 0.96% in the first three months
of 1998. The Company has achieved its growth both internally and through
acquisition. In addition to the pending branch purchase transaction, the Company
has completed three whole bank acquisitions since 1995, consummating the
acquisition of Elkridge Bank (March 1995), of Laurel Federal Savings Bank
(January 1996) and of Odenton Federal Savings and Loan Association (April 1996),
as well as a number of smaller branch transactions. The Company has also had a
history of earnings growth. Net income (before extraordinary charges and merger
related expenses) grew at a compound annual growth rate of 7.2% from 1993 to
1997. For the five year period from 1993 to 1997, the Company's average annual
return on average assets (before merger-related expenses) was 1.15%. The
annualized return on average equity and the annualized return on average assets
for the three months ended March 31, 1998 were 12.11% and 1.04%, respectively.
The Company routinely explores opportunities for additional growth and
expansion of its core banking business and related activities, including the
acquisition of companies engaged in banking or other related activities, and
internally generated growth. There can be no assurance, however, that the
Company will be able to grow, or if it does, that any such growth or expansion
will result in an increase in the Company's earnings, dividends, book value or
market value of its securities.
THE TRUST
FCNB Capital Trust (the "Trust") is a statutory business trust formed under
Delaware law pursuant to: (i) a trust agreement, dated as of , 1998, executed by
the Company, as depositor, and the trustees of the Trust (together with the
Property Trustee, the "Trustees"), and (ii) a certificate of trust filed with
the Secretary of State of the State of Delaware on , 1998. The initial trust
agreement will be amended and restated in its entirety (as so amended and
restated, the "Trust Agreement") substantially in the form filed as an exhibit
to the Registration Statement of which this Prospectus forms a part. The Trust
Agreement will be qualified as an indenture under the Trust Indenture Act of
1939, as amended (the "Trust Indenture Act").
Upon issuance of the Preferred Securities, the purchasers thereof will own
all of the Preferred Securities. The Company will acquire all of the Common
Securities, which will represent an aggregate liquidation amount equal to at
least 3% of the total capital of the Trust. The Common Securities will rank pari
passu, and payments will be made thereon pro rata, with the Preferred
Securities, except that upon the occurrence and during the continuance of an
Event of Default (as defined herein) under the Trust Agreement resulting from a
Debenture Event of Default, the rights of the Company as holder of the Common
Securities to payment in respect of Distributions and payments upon liquidation,
redemption or otherwise will be subordinated to the rights of the holders of the
Preferred Securities. See "Description of the Preferred
Securities--Subordination of Common Securities."
The Trust exists for the exclusive purposes of: (i) issuing the Trust
Securities representing undivided beneficial interests in the assets of the
Trust; (ii) investing the gross proceeds of the Trust Securities in the
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<PAGE>
Subordinated Debentures issued by the Company; and (iii) engaging in only those
other activities necessary, advisable, or incidental thereto. The Subordinated
Debentures and payments thereunder will be the only assets of the Trust and
payments under the Subordinated Debentures will be the only revenue of the
Trust. The Trust has a term of 35 years, but may terminate earlier as provided
in the Trust Agreement.
The principal executive office of the Trust is located at 7200 FCNB Court,
Frederick, Maryland 21703, and its telephone number is (301) 662-2191.
The number of Trustees will, pursuant to the Trust Agreement, as amended,
initially be five. Three of the Trustees (the "Administrative Trustees") will be
persons who are employees or officers of, or who are affiliated with, the
Company. The fourth trustee will be a financial institution that is unaffiliated
with the Company, which trustee will serve as institutional trustee under the
Trust Agreement and as indenture trustee for the purposes of compliance with the
provisions of the Trust Indenture Act (the "Property Trustee"). State Street
Bank and Trust Company, a state chartered trust company organized under the laws
of the Commonwealth of Massachusetts, will be the Property Trustee until removed
or replaced by the holder of the Common Securities. For purposes of compliance
with the provisions of the Trust Indenture Act, State Street Bank and Trust
Company will also act as trustee (the "Guarantee Trustee") under the Guarantee
and as Debenture Trustee (as defined herein) under the Indenture. The fifth
trustee will be an entity that maintains its principal place of business in the
State of Delaware (the "Delaware Trustee"). Wilmington Trust Company, a Delaware
chartered trust company, will act as Delaware Trustee.
The Property Trustee will hold title to the Subordinated Debentures for the
benefit of the holders of the Trust Securities and in such capacity will have
the power to exercise all rights, powers and privileges under the Indenture. The
Property Trustee will also maintain exclusive control of a segregated
non-interest-bearing bank account (the "Property Account") to hold all payments
made in respect of the Subordinated Debentures for the benefit of the holders of
the Trust Securities. The Property Trustee will make payments of Distributions
and payments on liquidation, redemption and otherwise to the holders of the
Trust Securities out of funds from the Property Account. The Guarantee Trustee
will hold the Guarantee for the benefit of the holders of the Preferred
Securities. The Company, as the holder of all the Common Securities, will have
the right to appoint, remove or replace any Trustee and to increase or decrease
the number of Trustees. The Company will pay all fees and expenses related to
the Trust and the offering of the Trust Securities.
The rights of the holders of the Preferred Securities, including economic
rights, rights to information and voting rights, are set forth in the Trust
Agreement, the Delaware Business Trust Act (the "Trust Act") and the Trust
Indenture Act. See "Description of the Preferred Securities."
DESCRIPTION OF THE PREFERRED SECURITIES
The Preferred Securities will be issued pursuant to the terms of the Trust
Agreement. The Trust Agreement will be qualified as an indenture under the Trust
Indenture Act. The Property Trustee, State Street Bank and Trust Company, will
act as indenture trustee for the Preferred Securities under the Trust Agreement
for purposes of complying with the provisions of the Trust Indenture Act. The
terms of the Preferred Securities will include those stated in the Trust
Agreement and those made part of the Trust Agreement by the Trust Indenture Act.
The following summary of the material terms and provisions of the Preferred
Securities and the Trust Agreement does not purport to be complete and is
subject to, and is qualified in its entirety by reference to, the Trust
Agreement, the Trust Act, and the Trust Indenture Act. Wherever particular
defined terms of the Trust Agreement are referred to, but not defined herein,
such defined terms are incorporated herein by reference. The form of the Trust
Agreement has been filed as an exhibit to the Registration Statement of which
this Prospectus forms a part.
- 20 -
<PAGE>
GENERAL
Pursuant to the terms of the Trust Agreement, the Trustees, on behalf of
the Trust, will issue the Trust Securities. All of the Common Securities will be
owned by the Company. The Preferred Securities will represent preferred
undivided beneficial interests in the assets of the Trust, and the holders
thereof will be entitled to a preference in certain circumstances with respect
to Distributions and amounts payable on redemption or liquidation over the
Common Securities, as well as other benefits as described in the Trust
Agreement. The Trust Agreement does not permit the issuance by the Trust of any
securities other than the Trust Securities or the incurrence of any indebtedness
by the Trust.
The Preferred Securities will rank pari passu, and payments will be made
thereon pro rata, with the Common Securities, except as described under
"--Subordination of Common Securities." Legal title to the Subordinated
Debentures will be held by the Property Trustee in trust for the benefit of the
holders of the Trust Securities. The Guarantee executed by the Company 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 payment of Distributions or amounts payable on redemption or
liquidation of such Preferred Securities when the Trust does not have funds on
hand available to make such payments. State Street Bank and Trust Company, as
Guarantee Trustee, will hold the Guarantee for the benefit of the holders of the
Preferred Securities. See "Description of the Guarantee."
DISTRIBUTIONS
Payment of Distributions. Distributions on each Preferred Security will be
payable at the annual rate of % of the stated Liquidation Amount, payable
quarterly in arrears on the last day of January, April, July and October of each
year, to the holders of the Preferred Securities on the relevant record dates
(each date on which Distributions are payable in accordance with the foregoing,
a "Distribution Date"). Distributions on the Preferred Securities will be
payable to the holders thereof as they appear on the register of holders of the
Preferred Securities on the relevant record dates, which will be the 15th day of
the month in which the relevant Distribution Date occurs. Distributions will
accumulate from , 1998, the date of original issuance. The first Distribution
Date for the Preferred Securities will be July 31, 1998. The amount of
Distributions payable for any period will be computed on the basis of a 360-day
year of twelve 30-day months. In the event that any date on which Distributions
are payable on the Preferred Securities is not a Business Day, then payment of
the Distributions payable on such date will be made on the next succeeding day
that is a Business Day (and without any additional Distributions, interest or
other payment in respect of any such delay) with the same force and effect as if
made on the date such payment was originally due and payable. "Business Day"
means any day other than a Saturday or a Sunday, a day on which banking
institutions in the City of New York are authorized or required by law or
executive order to remain closed, or a day on which the corporate trust office
of the Property Trustee or the Debenture Trustee is closed for business.
Extension Period. The Company has the right under the Indenture, so long as
no Debenture Event of Default has occurred and is continuing, to defer the
payment of interest on the Subordinated Debentures at any time, or from time to
time (each, an "Extension Period"), which, if exercised, would defer quarterly
Distributions on the Preferred Securities during any such Extension Period.
Distributions to which holders of the Preferred Securities are entitled, but
which are deferred during the Extension Period, will accumulate additional
Distributions thereon at the rate per annum of % thereof, compounded quarterly
from the relevant Distribution Date. "Distributions," as used herein, includes
any such additional Distributions. The right to defer the payment of interest on
the Subordinated Debentures is limited, however, to a period, in each instance,
not exceeding 20 consecutive quarters and no Extension Period may extend beyond
the Stated Maturity of the Subordinated Debentures. During any such Extension
Period, the Company may not: (i) declare or pay any dividends or distributions
on, or redeem, purchase, acquire or make a liquidation payment with respect to,
any of the Company's capital stock; (ii) make any payment of principal, interest
or premium, if any, on or repay, repurchase or redeem any debt securities of the
Company that rank pari passu with or junior in interest to the Subordinated
Debentures; (iii) make any guarantee payments with respect to any guarantee by
the Company of the debt securities of any subsidiary of the Company if such
guarantee ranks pari passu
- 21 -
<PAGE>
with or junior in interest to the Subordinated Debentures; or (iv) redeem,
purchase or acquire less than all of the Subordinated Debentures or any of the
Preferred Securities (except that the Company may make: (a) dividends or
distributions payable in common stock of the Company; (b) any declaration of a
dividend in connection with the implementation of a stockholder rights plan, any
issuance under any such plan, or the repurchase or redemption of any such rights
pursuant thereto; (c) payments under the Guarantee; and (d) purchases of common
stock of the Company in connection with the distribution or sale of shares of
Company common stock pursuant to the benefit plans of the Company and any
subsidiary for its directors, officers or employees). Prior to the termination
of any such Extension Period, the Company may further defer the payment of
interest; provided that such Extension Period may not exceed 20 consecutive
quarters or extend beyond the Stated Maturity of the Subordinated Debentures.
Upon the termination of any such Extension Period and the payment of all amounts
then due, the Company may elect to begin a new Extension Period, subject to the
above requirements. Subject to the foregoing, there is no limitation on the
number of times that the Company may elect to begin an Extension Period.
The Company has no current intention of exercising its right to defer
payments of interest by extending the interest payment period on the
Subordinated Debentures.
Source Of Distributions. The funds of the Trust available for distribution
to holders of its Preferred Securities will be limited to payments under the
Subordinated Debentures in which the Trust will invest the proceeds from the
issuance and sale of its Trust Securities. See "Description of the Subordinated
Debentures." Distributions will be paid through the Property Trustee who will
hold amounts received in respect of the Subordinated Debentures in the Property
Account for the benefit of the holders of the Trust Securities. If the Company
does not make interest payments on the Subordinated Debentures, the Property
Trustee will not have funds available to pay Distributions on the Preferred
Securities. The payment of Distributions (if and to the extent the Trust has
funds legally available for the payment of such Distributions and cash
sufficient to make such payments) is guaranteed by the Company. See "Description
of the Guarantee."
REDEMPTION OR EXCHANGE
General. The Subordinated Debentures will mature on , 2028. The Company
will have the right to redeem the Subordinated Debentures (i) on or after ,
2003, in whole at any time or in part from time to time, or (ii) at any time, in
whole (but not in part), within 90 days following the occurrence of a Tax Event,
a Capital Treatment Event or an Investment Company Event, in each case subject
to receipt of prior approval by the Federal Reserve, if then required under
applicable capital guidelines or policies of the Federal Reserve. The Company
will not have the right to purchase the Subordinated Debentures, in whole or in
part, from the Trust until after , 2003. See "Description of the Subordinated
Debentures--General."
Mandatory Redemption. Upon the repayment or redemption, in whole or in
part, of any Subordinated Debentures, whether at Stated Maturity or upon earlier
redemption as provided in the Indenture, the proceeds from such repayment or
redemption will be applied by the Property Trustee to redeem a Like Amount (as
defined herein) of the Trust Securities, upon not less than 30 nor more than 60
days notice, at a redemption price (the "Redemption Price") equal to the
aggregate Liquidation Amount of such Trust Securities, plus accumulated but
unpaid Distributions thereon to the date of redemption (the "Redemption Date").
See "Description of the Subordinated Debentures--Redemption or Exchange." If
less than all of the Subordinated Debentures are to be repaid or redeemed on a
Redemption Date, then the proceeds from such repayment or redemption will be
allocated to the redemption of the Trust Securities pro rata.
Distribution of Subordinated Debentures. Subject to the Company having
received prior approval of the Federal Reserve, if so required under applicable
capital guidelines or policies of the Federal Reserve, the Company will have the
right at any time to dissolve, wind-up or terminate the Trust and, after
satisfaction of the liabilities of creditors of the Trust as provided by
applicable law, cause the Subordinated Debentures to be distributed to the
holders of Trust Securities in liquidation of the Trust. See "--Liquidation
Distribution Upon Termination."
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<PAGE>
Tax Event Redemption, Capital Treatment Event Redemption or Investment
Company Event Redemption. If a Tax Event, a Capital Treatment Event or an
Investment Company Event in respect of the Trust Securities occurs and is
continuing, the Company has the right to redeem the Subordinated Debentures in
whole (but not in part) and thereby cause a mandatory redemption of such Trust
Securities at any time, in whole (but not in part,) at the Redemption Price,
within 90 days following the occurrence of such Tax Event, Capital Treatment
Event or Investment Company Event. In the event a Tax Event, a Capital Treatment
Event or an Investment Company Event in respect of the Trust Securities has
occurred and the Company does not elect to redeem the Subordinated Debentures
and thereby cause a mandatory redemption of such Trust Securities or to
liquidate the Trust and cause the Subordinated Debentures to be distributed to
holders of such Trust Securities in liquidation of the Trust as described below
under "--Liquidation Distribution Upon Termination," such Preferred Securities
will remain outstanding and Additional Interest (as defined herein) may be
payable on the Subordinated Debentures.
"Additional Interest" means the additional amounts as may be necessary in
order that the amount of Distributions then due and payable by the Trust on the
outstanding Trust Securities 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.
"Like Amount" means: (i) with respect to a redemption of Trust Securities,
Trust Securities having a Liquidation Amount equal to that portion of the
principal amount of Subordinated Debentures to be contemporaneously redeemed in
accordance with the Indenture, which will be used to pay the Redemption Price of
such Trust Securities, and (ii) with respect to a distribution of Subordinated
Debentures to holders of Trust Securities in connection with a dissolution or
liquidation of the Trust, Subordinated Debentures having a principal amount
equal to the Liquidation Amount of the Trust Securities of the holder to whom
such Subordinated Debentures are distributed. Each Subordinated Debenture
distributed pursuant to clause (ii) above will carry with it accumulated
interest in an amount equal to the accumulated and unpaid interest then due on
such Subordinated Debentures.
"Liquidation Amount" means the stated amount of $25 per Trust Security.
After the liquidation date fixed for any distribution of Subordinated
Debentures for Preferred Securities (i) such Preferred Securities will no longer
be deemed to be outstanding, and (ii) any certificates representing Preferred
Securities will be deemed to represent the Subordinated Debentures having a
principal amount equal to the Liquidation Amount of such Preferred Securities,
and bearing accrued and unpaid interest in an amount equal to the accrued and
unpaid Distributions on the Preferred Securities until such certificates are
presented to the Administrative Trustees or their agent for transfer or
reissuance.
There can be no assurance as to the market prices for the Preferred
Securities or the Subordinated Debentures that may be distributed in exchange
for Preferred Securities if a dissolution and liquidation of the Trust were to
occur. The Preferred Securities that an investor may purchase, or the
Subordinated Debentures that an investor may receive on dissolution and
liquidation of the Trust, may, therefore, trade at a discount to the price that
the investor paid to purchase the Preferred Securities offered hereby.
REDEMPTION PROCEDURES
Preferred Securities redeemed on each Redemption Date will be redeemed at
the Redemption Price with the applicable proceeds from the contemporaneous
redemption of the 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 such Redemption Price. See "--Subordination of Common
Securities."
If the Trust gives a notice of redemption in respect of its Preferred
Securities, then, by 12:00 noon, eastern standard time, on the Redemption Date,
to the extent funds are available, the Property Trustee will irrevocably
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<PAGE>
deposit with the paying agent for the Preferred Securities funds sufficient to
pay the aggregate Redemption Price, and will give the paying agent for the
Preferred Securities irrevocable instructions and authority to pay the
Redemption Price to the holders thereof upon surrender of their certificates
evidencing such Preferred Securities. Notwithstanding the foregoing,
Distributions payable on or prior to the Redemption Date for any Preferred
Securities called for redemption will be payable to the holders of such
Preferred Securities on the relevant record dates for the related Distribution
Dates. If notice of redemption will have been given and funds deposited as
required, then upon the date of such deposit, all rights of the holders of such
Preferred Securities so called for redemption will cease, except the right of
the holders of such Preferred Securities to receive the Redemption Price, but
without interest on such Redemption Price, and such Preferred Securities will
cease to be outstanding. In the event that any date fixed for redemption of
Preferred Securities is not a Business Day, then payment of the Redemption Price
payable on such date will be made on the next succeeding day which is a Business
Day (and without any additional Distribution, interest or other payment in
respect of any such delay) with the same force and effect as if made on such
date. In the event that payment of the Redemption Price in respect of Preferred
Securities called for redemption is improperly withheld or refused and not paid
either by the Trust, or by the Company pursuant to the Guarantee, Distributions
on such Preferred Securities will continue to accrue at the applicable rate,
from the Redemption Date originally established by the Trust for such Preferred
Securities to the date such Redemption Price is actually paid, in which case the
actual payment date will be considered the date fixed for redemption for
purposes of calculating the Redemption Price. See "Description of the
Guarantee."
Subject to applicable law (including, without limitation, United States
federal securities law), and provided that the Company does not and is not
continuing to exercise its right to defer interest payments, the Company or its
subsidiaries may at any time and from time to time purchase outstanding
Preferred Securities by tender, in the open market or by private agreement.
Payment of the Redemption Price on the Preferred Securities will be made to
the recordholders thereof as they appear on the register for the Preferred
Securities on the record date, which date will be the date 15 days prior to the
Redemption Date. In the event of the liquidation of the Trust, the Subordinated
Debentures will be distributed to holders of Preferred Securities as they appear
on the register for the Preferred Securities on the record date, which will be
not more than 45 days prior to the Liquidation Date.
If less than all of the Trust Securities are to be redeemed on a Redemption
Date, then the aggregate Liquidation Amount of such Trust Securities to be
redeemed will be allocated pro rata to the Trust Securities based upon the
relative Liquidation Amounts of such classes. The particular Preferred
Securities to be redeemed will be selected by the Property Trustee from the
outstanding Preferred Securities not previously called for redemption, by such
method as the Property Trustee deems fair and appropriate and which may provide
for the selection for redemption of portions (equal to $25 or an integral
multiple of $25 in excess thereof) of the Liquidation Amount of Preferred
Securities of a denomination larger than $25. The Property Trustee will promptly
notify the 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 thereof 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 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 at least 30 days, but not more than
60 days, before the Redemption Date to each holder of Trust Securities to be
redeemed at its registered address. Unless the Company defaults in payment of
the redemption price on the Subordinated Debentures, on and after the Redemption
Date interest will cease to accrue on such Subordinated Debentures or portions
thereof (and Distributions will cease to accrue on the related Preferred
Securities or portions thereof) called for redemption.
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<PAGE>
SUBORDINATION OF COMMON SECURITIES
Payment of Distributions on, and the Redemption Price 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;
provided, however, that if on any Distribution Date or Redemption Date a
Debenture Event of Default has occurred and is continuing, no payment of any
Distribution on, or Redemption Price of, any of the Common Securities, and no
other payment on account of the redemption, liquidation or other acquisition of
such Common Securities, will be made unless payment in full in cash of all
accumulated and unpaid Distributions on all of the outstanding Preferred
Securities for all Distribution periods terminating on or prior thereto, or in
the case of payment of the Redemption Price, the full amount of such Redemption
Price on all of the outstanding Preferred Securities then called for redemption,
will have been made or provided for, and all funds available to the Property
Trustee will 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 resulting from a Debenture Event of
Default, the Company as holder of the Common Securities will be deemed to have
waived any right to act with respect to any such Event of Default under the
Trust Agreement until the effect of all such Events of Default with respect to
the Preferred Securities have been cured, waived or otherwise eliminated. Until
any such Events of Default under the Trust Agreement with respect to the
Preferred Securities has been so cured, waived or otherwise eliminated, the
Property Trustee will act solely on behalf of the holders of the Preferred
Securities and not on behalf of the Company, as holder of the Common Securities,
and only the holders of the Preferred Securities will have the right to direct
the Property Trustee to act on their behalf.
LIQUIDATION DISTRIBUTION UPON TERMINATION
The Company will have the right at any time to dissolve, wind-up or
terminate the Trust and cause the Subordinated Debentures to be distributed to
the holders of the Preferred Securities. Such right is subject, however, to the
Company having received prior approval of the Federal Reserve if then required
under applicable capital guidelines or policies of the Federal Reserve.
Additionally, pursuant to the Trust Agreement, the Trust will automatically
dissolve upon expiration of its term, and will dissolve earlier on the first to
occur of: (i) certain events of bankruptcy, dissolution or liquidation of the
Company; (ii) the distribution of a Like Amount of the Subordinated Debentures
to the holders of its Trust Securities, if the Company, as depositor, has given
written direction to the Property Trustee to terminate the Trust (which
direction is optional and wholly within the discretion of the Company, as
depositor); (iii) redemption of all of the Preferred Securities as described
under "Description of the Preferred Securities--Redemption or Exchange--
Mandatory Redemption;" or (iv) the entry of an order for the dissolution of the
Trust by a court of competent jurisdiction (each an "Early Termination Event").
If an Early Termination Event described in clause (i), (ii) or (iv) of the
preceding paragraph occurs, the Trust will be liquidated by the Trustees as
expeditiously as the Trustees determine to be possible by distributing, after
satisfaction of liabilities to creditors of the Trust as provided by applicable
law, to the holders of such Trust Securities a Like Amount of the Subordinated
Debentures, unless such distribution is determined by the Property Trustee not
to be practical, in which event such holders will be entitled to receive out of
the assets of the Trust 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 holders of Preferred Securities, the
aggregate of the Liquidation Amount plus accrued and unpaid Distributions
thereon to the date of payment (such amount being the "Liquidation
Distribution"). If such Liquidation Distribution can be paid only in part
because the Trust has insufficient assets available to pay in full the aggregate
Liquidation Distribution, then the amounts payable directly by the Trust on the
Preferred Securities will be paid on a pro rata basis. The Company, as the
holder of the Common Securities, will be entitled to receive distributions upon
any such liquidation pro rata with the holders of the Preferred Securities,
except that,
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if a Debenture Event of Default has occurred and is continuing, the Preferred
Securities will have a priority over the Common Securities. See "--Subordination
of Common Securities."
Under current United States federal income tax law and interpretations and
assuming, as expected, that the Trust is treated as a grantor trust, a
distribution of the Subordinated Debentures should not be a taxable event to
holders of the Preferred Securities. Should there be a change in law, a change
in legal interpretation, a Tax Event or other circumstances, however, the
distribution could be a taxable event to holders of the Preferred Securities.
See "Certain Federal Income Tax Consequences--Receipt of Subordinated Debentures
or Cash Upon Liquidation of the Trust." If the Company elects neither to redeem
the Subordinated Debentures prior to maturity nor to liquidate the Trust and
distribute the Subordinated Debentures to holders of the Preferred Securities,
the Preferred Securities will remain outstanding until the repayment of the
Subordinated Debentures.
If the Company elects to dissolve the Trust and thereby causes the
Subordinated Debentures to be distributed to holders of the Preferred Securities
in liquidation of the Trust, the Company will continue to have the right to
shorten the maturity of such Subordinated Debentures, subject to certain
conditions. See "Description of the Subordinated Debentures--General."
LIQUIDATION VALUE
The amount of the Liquidation Distribution payable on the Preferred
Securities in the event of any liquidation of the Trust is $25 per Preferred
Security, plus accrued and unpaid Distributions thereon to the date of payment,
which may be in the form of a distribution of such amount in Subordinated
Debentures, subject to certain exceptions. See "--Liquidation Distribution Upon
Termination."
EVENTS OF DEFAULT; NOTICE
Any one of the following events constitutes an event of default under the
Trust Agreement (an "Event of Default") with respect to the Preferred Securities
(whatever the reason for such Event of Default and whether voluntary or
involuntary or effected by operation of law or pursuant to any judgment, decree
or order of any court or any order, rule or regulation of any administrative or
governmental body):
(i) the occurrence of a Debenture Event of Default (see "Description of the
Subordinated Debentures-- Debenture Events of Default"); or
(ii) default by the Trust or the Property Trustee in the payment of any
Distribution when it becomes due and payable, and continuation of such default
for a period of 30 days; or
(iii) default by the Trust or the Property Trustee in the payment of any
Redemption Price of any Trust Security when it becomes due and payable; or
(iv) default in the performance, or breach, in any material respect, of any
covenant or warranty of the Trustees in the Trust Agreement (other than a
covenant or warranty a default in the performance of which or the breach of
which is dealt with in clauses (ii) or (iii) above), and continuation of such
default or breach for a period of 60 days after there has been given, by
registered or certified mail, to the defaulting Trustee(s) by the holders of at
least 25% in aggregate Liquidation Amount of the outstanding Preferred
Securities, a written notice specifying such default or breach and requiring it
to be remedied and stating that such notice is a "Notice of Default" under the
Trust Agreement; or
(v) the occurrence of certain events of bankruptcy or insolvency with
respect to the Property Trustee and the failure by the Company to appoint a
successor Property Trustee within 60 days thereof.
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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 such Event of Default to the holders of the Preferred Securities, the
Administrative Trustees and the Company, as depositor, unless such Event of
Default has been cured or waived. The Company, as depositor, and the
Administrative Trustees are required to file annually with the Property Trustee
a certificate as to whether or not they are in compliance with all the
conditions and covenants applicable to them under the Trust Agreement.
If a Debenture Event of Default has occurred and is continuing, the
Preferred Securities will have a preference over the Common Securities upon
termination of the Trust. See "--Liquidation Distribution Upon Termination." The
existence of an Event of Default does not entitle the holders of Preferred
Securities to accelerate the maturity thereof.
REMOVAL OF THE TRUSTEES
Unless a Debenture Event of Default has occurred and is continuing, any
Trustee may be removed at any time by the Company as the holder of the Common
Securities. If a Debenture Event of Default has occurred and is continuing, the
Property Trustee and the Delaware Trustee may be removed at such time by the
holders of a majority in Liquidation Amount of the outstanding Preferred
Securities. In no event, however, will the holders of the Preferred Securities
have the right to vote to appoint, remove or replace the Administrative
Trustees, which voting rights are vested exclusively in the Company as the
holder of the Common Securities. No resignation or removal of a Trustee and no
appointment of a successor trustee will be effective until the acceptance of
appointment by the successor trustee in accordance with the provisions of the
Trust Agreement.
CO-TRUSTEES AND SEPARATE PROPERTY TRUSTEE
Unless an Event of Default has occurred and is continuing, at any time or
times, for the purpose of meeting the legal requirements of the Trust Indenture
Act or of any jurisdiction in which any part of the Trust Property (as defined
in the Trust Agreement) may at the time be located, the Company, as the holder
of the Common Securities, will have power along with the Property Trustee to
appoint one or more Persons (as defined in the Trust Agreement) either to act as
a co-trustee, jointly with the Property Trustee, of all or any part of such
Trust Property, or to act as separate trustee of any such Trust Property, in
either case with such powers as may be provided in the instrument of
appointment, and to vest in such Person or Persons in such capacity any
property, title, right or power deemed necessary or desirable, subject to the
provisions of the Trust Agreement. In case a Debenture Event of Default has
occurred and is continuing, the Property Trustee alone will have power to make
such appointment.
MERGER OR CONSOLIDATION OF TRUSTEES
Any Person into which the Property Trustee, the Delaware Trustee or any
Administrative Trustee that is not a natural person may be merged or converted
or with which it may be consolidated, or any Person resulting from any merger,
conversion or consolidation to which such Trustee is a party, or any Person
succeeding to all or substantially all the corporate trust business of such
Trustee, will be the successor of such Trustee under the Trust Agreement,
provided such Person 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, or convey, transfer or lease its properties and assets
substantially as an entirety to any Person, except as described below. The Trust
may, at the request of the Company, with the consent of the Administrative
Trustees and without the consent of the holders of the Preferred Securities, the
Property Trustee or the Delaware Trustee, merge with or into, consolidate,
amalgamate, or be replaced by, or convey, transfer or lease its properties and
assets substantially as an entirety to, a trust organized as such under the laws
of any State; provided, that: (i) such successor entity either (a) expressly
assumes all of the obligations of the Trust with respect to the Preferred
Securities, or (b) substitutes for the Preferred
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Securities other securities having substantially the same terms as the Preferred
Securities (the "Successor Securities") so long as the Successor Securities rank
the same as the Preferred Securities rank in priority with respect to
distributions and payments upon liquidation, redemption and otherwise; (ii) the
Company expressly appoints a trustee of such successor entity possessing the
same powers and duties as the Property Trustee in its capacity as the holder of
the Subordinated Debentures; (iii) the Successor Securities are listed, or any
Successor Securities will be listed upon notification of issuance, on any
national securities exchange or other organization on which the Preferred
Securities are then listed, if any; (iv) such merger, consolidation,
amalgamation, replacement, conveyance, transfer or lease does not adversely
affect the rights, preferences and privileges of the holders of the Preferred
Securities (including any Successor Securities) in any material respect, (v)
prior to such merger, consolidation, amalgamation, replacement, conveyance,
transfer or lease, the Company has received an opinion from independent counsel
to the effect that (a) such merger, consolidation, amalgamation, replacement,
conveyance, transfer or lease does not adversely affect the rights, preferences
and privileges of the holders of the Preferred Securities (including any
Successor Securities) in any material respect, and (b) following such merger,
consolidation, amalgamation, replacement, conveyance, transfer or lease, neither
the Trust nor such successor entity will be required to register as an
"investment company" under the Investment Company Act, and (vi) the Company owns
all of the common securities of such successor entity and guarantees the
obligations of such successor entity under the Successor Securities at least to
the extent provided by the Guarantee, the Indenture, the Subordinated
Debentures, the Trust Agreement and the Expense Agreement. Notwithstanding the
foregoing, the Trust will not, except with the consent of holders of 100% in
Liquidation Amount of the Preferred Securities, consolidate, amalgamate, merge
with or into, or be replaced by or convey, transfer or lease its properties and
assets substantially as an entirety to any other Person or permit any other
Person to consolidate, amalgamate, merge with or into, or replace it if such
consolidation, amalgamation, merger, replacement, conveyance, transfer or lease
would cause the Trust or the successor entity to be classified as other than a
grantor trust for United States federal income tax purposes.
VOTING RIGHTS; AMENDMENT OF TRUST AGREEMENT
Except as provided below and under "Description of the
Guarantee--Amendments and Assignment" and as otherwise required by law and the
Trust Agreement, the holders of the Preferred Securities will have no voting
rights.
The Trust Agreement may be amended from time to time by the Company, the
Property Trustee and the Administrative Trustees, without the consent of the
holders of the Preferred Securities: (i) with respect to acceptance of
appointment by a successor trustee; (ii) to cure any ambiguity, correct or
supplement any provisions in such Trust Agreement that may be inconsistent with
any other provision, or to make any other provisions with respect to matters or
questions arising under the Trust Agreement (provided such amendment is not
inconsistent with the other provisions of the Trust Agreement); or (iii) to
modify, eliminate or add to any provisions of the Trust Agreement to such extent
as is necessary to ensure that the Trust will be classified for United States
federal income tax purposes as a grantor trust at all times that any Trust
Securities are outstanding or to ensure that the Trust will not be required to
register as an "investment company" under the Investment Company Act; provided,
however, that in the case of clause (ii), such action may not adversely affect
in any material respect the interests of any holder of Trust Securities, and any
amendments of such Trust Agreement will become effective when notice thereof is
given to the holders of Trust Securities. The Trust Agreement may be amended by
the Trustees and the Company with: (i) the consent of holders representing not
less than a majority in the aggregate Liquidation Amount of the outstanding
Trust Securities; and (ii) receipt by the Trustees of an opinion of counsel to
the effect that such amendment or the exercise of any power granted to the
Trustees in accordance with such amendment will not affect the Trust's status as
a grantor trust for United States federal income tax purposes or the Trust's
exemption from status as an "investment company" under the Investment Company
Act. Notwithstanding anything in this paragraph to the contrary, without the
consent of each holder of Trust Securities, the Trust Agreement may not be
amended to (a) change the amount or timing of any Distribution on the Trust
Securities or otherwise adversely affect the amount of any Distribution required
to be made in respect of the Trust Securities as of a specified date, or (b)
restrict the right of a holder of Trust Securities to institute suit for the
enforcement of any such payment on or after such date.
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<PAGE>
The Trustees will not, so long as any Subordinated Debentures are held by
the Property Trustee: (i) direct the time, method and place of conducting any
proceeding for any remedy available to the Debenture Trustee, or executing any
trust or power conferred on the Property Trustee with respect to the
Subordinated Debentures; (ii) waive any past default that is waivable under the
Indenture; (iii) exercise any right to rescind or annul a declaration that the
principal of all the Subordinated Debentures will be due and payable; or (iv)
consent to any amendment, modification or termination of the Indenture or the
Subordinated Debentures, where such consent is required, without, in each case,
obtaining the prior approval of the holders of a majority in aggregate
Liquidation Amount of all outstanding Preferred Securities; provided, however,
that where a consent under the Indenture requires the consent of each holder of
Subordinated Debentures affected thereby, no such consent will be given by the
Property Trustee without the prior consent of each holder of the Preferred
Securities. The Trustees 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 each holder of Preferred Securities of any notice of default with
respect to the Subordinated Debentures. In addition to obtaining the foregoing
approvals of the holders of the Preferred Securities, prior to taking any of the
foregoing actions, the Trustees must obtain an opinion of counsel experienced in
such matters to the effect that the Trust will not be classified as an
association taxable as a corporation for United States federal income tax
purposes on account of such action.
Any required approval of holders of Preferred Securities may be given at a
meeting of holders of Preferred Securities convened for such purpose or pursuant
to written consent. The Property Trustee will cause a notice of any meeting at
which holders of Preferred Securities are entitled to vote, or of any matter
upon which action by written consent of such holders is to be taken, to be given
to each holder of record of Preferred Securities in the manner set forth in the
Trust Agreement.
No vote or consent of the holders of Preferred Securities will be required
for the Trust to redeem and cancel its Preferred Securities in accordance with
the Trust Agreement.
Notwithstanding the fact that holders of Preferred Securities are entitled
to vote or consent under any of the circumstances described above, any of the
Preferred Securities that are owned by the Company, the Trustees or any
affiliate of the Company or any Trustee, will, for purposes of such vote or
consent, be treated as if they were not outstanding.
BOOK-ENTRY SECURITIES; DELIVERY AND FORM
The Preferred Securities will be issued in the form of one or more global
certificates ("Global Preferred Securities") registered in the name of and
deposited with, or on behalf of, the Depository Trust Company as depository
("DTC"). Global Preferred Securities may be issued only in fully registered form
and in either temporary or permanent form. Beneficial interests in the Preferred
Securities will be shown on, and transfers thereof will be effected only
through, records maintained by DTC. Except as described below, certificates for
Preferred Securities will not be issued in exchange for the global certificates.
See "Book-Entry Issuance."
Unless and until it is exchanged in whole or in part for the individual
Preferred Securities represented thereby, a Global Preferred Security may not be
transferred except as a whole by DTC to a nominee of DTC, or by a nominee of DTC
to DTC or another nominee of DTC, or by DTC or any nominee to a successor
depository or any nominee of such successor.
The Global Preferred Security will be exchangeable for Preferred Securities
registered in the names of persons other than DTC or its nominee only if: (i)
DTC notifies the Trust that it is unwilling or unable to continue as a
depository for such global security and no successor depository shall have been
appointed, or if at any time DTC ceases to be a clearing agency registered under
the Exchange Act at a time when DTC is required to be so registered to act as
such depository; (ii) the Company in its sole discretion determines that such
global security shall be so exchangeable; or (iii) there shall have occurred and
be continuing a Debenture Event of Default. Any Global Preferred Security that
is exchangeable pursuant to the preceding sentence shall be exchangeable for
definitive
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<PAGE>
certificates registered in such names as DTC shall direct. It is expected that
such instructions will be based upon directions received by DTC from its
Participants with respect to ownership of beneficial interests in such global
security. In the event that Preferred Securities are issued in definitive form,
such Preferred Securities will be in denominations of $25 and integral multiples
thereof and may be transferred or exchanged at the offices described below.
Payments on Preferred Securities represented by a Global Preferred Security
will be made to DTC, as the depository for the Preferred Securities. In the
event Preferred Securities are issued in certificated form, the Liquidation
Amount and Distributions will be payable, the transfer of the Preferred
Securities will be registrable, and Preferred Securities will be exchangeable
for Preferred Securities of other denominations of a like aggregate Liquidation
Amount, at the corporate office of the Property Trustee, or at the offices of
any paying agent or transfer agent appointed by the Company, provided that
payment of any Distribution may be made by check mailed to the address of the
persons entitled thereto or by wire transfer.
Upon the issuance of a Global Preferred Security, and the deposit of such
Global Preferred Security with or on behalf of DTC, DTC for such Global
Preferred Security or its nominee will credit, on its book-entry registration
and transfer system, the respective aggregate Liquidation Amounts of the
individual Preferred Securities represented by such Global Preferred Securities
to the accounts of Participants. Such accounts shall be designated by the
dealers, underwriters or agents with respect to such Preferred Securities.
Ownership of beneficial interests in a Global Preferred Security will be limited
to Participants or persons that may hold interests through Participants.
Ownership of beneficial interests in such Global Preferred Security will be
shown on, and the transfer of that ownership will be effected only through,
records maintained by DTC or its nominee (with respect to interests of
Participants) and the records of Participants (with respect to interests of
persons who hold through Participants). The laws of some states require that
certain purchasers of securities take physical delivery of such securities in
definite form. Such limits and such laws may impair the ability to transfer
beneficial interests in a Global Preferred Security.
So long as DTC for a Global Preferred Security, or its nominee, is the
registered owner of such Global Preferred Security, DTC or such nominee, as the
case may be, will be considered the sole owner or holder of the Preferred
Securities represented by such Global Preferred Security for all purposes under
the Indenture governing such Preferred Securities. Except as provided below,
owners of beneficial interests in a Global Preferred Security will not be
entitled to have any of the individual Preferred Securities represented by such
Global Preferred Security registered in their names, will not receive or be
entitled to receive physical delivery of any such Preferred Securities in
definitive form and will not be considered the owners or holders thereof under
the Indenture.
Payments of principal of and interest on individual Preferred Securities
represented by a Global Preferred Security 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 Preferred Security representing such Preferred
Securities. None of the Company, the Property Trustee, any Paying Agent, or the
Securities Registrar for such Preferred Securities will have any responsibility
or liability for any aspect of the records relating to or payments made on
account of beneficial ownership interests of the Global Preferred Security
representing such Preferred Securities or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interests.
The Company expects that DTC or its nominee, upon receipt of any payment of
Liquidation Amount, Redemption Price, premium or Distributions in respect of a
permanent Global Preferred Security representing any of such Preferred
Securities, immediately will credit Participants' accounts with payments in
amounts proportionate to their respective beneficial interest in the aggregate
Liquidation Amount of such Global Preferred Security for such Preferred
Securities as shown on the records of DTC or its nominee. The Company also
expects that payments by Participants to owners of beneficial interests in such
Global Preferred Security held through such Participants will be governed by
standing instructions and customary practices, as is now the case with
securities held for the accounts of customers in bearer form or registered in
"street name." Such payments will be the responsibility of such Participants.
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<PAGE>
If DTC is at any time unwilling, unable or ineligible to continue as
depository and a successor depository is not appointed by the Issuer within 90
days, the Trust will issue individual Preferred Securities in exchange for the
Global Preferred Security. In addition, the Trust may at any time and in its
sole discretion, subject to any limitations described in the Prospectus
Supplement, determine not to have any Preferred Securities represented by one or
more Global Preferred Securities and, in such event, will issue individual
Preferred Securities in exchange for the Global Preferred Security or Securities
representing such Preferred Securities. Further, if the Trust so specifies with
respect to the Preferred Securities, an owner of a beneficial interest in a
Global Preferred Security representing Preferred Securities may, on terms
acceptable to the Trust, the Property Trustee and DTC for such Global Preferred
Security, receive individual Preferred Securities in exchange for such
beneficial interests. In any such instance, an owner of a beneficial interest in
a Global Preferred Security will be entitled to physical delivery of individual
Preferred Securities represented by such Global Preferred Security equal in
principal amount to such beneficial interest and to have such Preferred
Securities registered in its name. Individual Preferred Securities so issued
will be issued in denominations of $25 and integral multiplies thereof.
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, payments in respect of the
Preferred Securities will be made by check mailed to the address of the holder
entitled thereto as such address will appear on the register of holders of the
Preferred Securities. The paying agent for the Preferred Securities will
initially be the Property Trustee and any co-paying agent chosen by the Property
Trustee and acceptable to the Administrative Trustees and the Company. The
paying agent for the Preferred Securities may resign as paying agent upon 30
days' written notice to the Property Trustee and the Company. In the event that
the Property Trustee no longer is the paying agent for the Preferred Securities,
the Administrative Trustees will appoint a successor (which must be a bank or
trust company acceptable to the Administrative Trustees and the Company) to act
as paying agent.
REGISTRAR AND TRANSFER AGENT
The Property Trustee will act as the registrar and the transfer agent for
the Preferred Securities. Registration of transfers of Preferred Securities will
be effected without charge by or on behalf of the Trust, but upon payment of any
tax or other governmental charges that may be imposed in connection with any
transfer or exchange. The Trust will not be required to register or cause to be
registered the transfer of Preferred Securities after such Preferred Securities
have been called for redemption.
INFORMATION CONCERNING THE PROPERTY TRUSTEE
The Property Trustee, other than upon the occurrence and during the
continuance of an Event of Default, undertakes to perform only such duties as
are specifically set forth in the Trust Agreement and, upon the occurrence and
during the continuance of an Event of Default, must exercise the same degree of
care and skill as a prudent person would exercise or use in the conduct of his
or her own affairs. Subject to this provision, the Property Trustee is under no
obligation to exercise any of the powers vested in it by the Trust Agreement at
the request of any holder of Preferred Securities unless it is offered
reasonable indemnity against the costs, expenses and liabilities that might be
incurred thereby. If no Event of Default has occurred and is continuing and the
Property Trustee is required to decide between alternative causes of action,
construe ambiguous provisions in the Trust Agreement or is unsure of the
application of any provision of the Trust Agreement, and the matter is not one
on which holders of Preferred Securities are entitled under the Trust Agreement
to vote, then the Property Trustee will take such action as is directed by the
Company and if not so directed, will take such action as it deems advisable and
in the best interests of the holders of the Trust Securities and will have no
liability except for its own bad faith, negligence or willful misconduct.
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MISCELLANEOUS
The Administrative Trustees are authorized and directed to conduct the
affairs of and to operate the Trust in such a way that the Trust will not be
deemed to be an "investment company" required to be registered under the
Investment Company Act or classified as an association taxable as a corporation
for United States federal income tax purposes and so that the Subordinated
Debentures will be treated as indebtedness of the Company for United States
federal income tax purposes. The Company and the Administrative Trustees are
authorized, in this connection, to take any action, not inconsistent with
applicable law, the certificate of trust of the Trust or the Trust Agreement,
that the Company and the Administrative Trustees determine in their discretion
to be necessary or desirable for such purposes.
Holders of the Preferred Securities have no preemptive or similar rights.
The Trust Agreement and the Preferred Securities will be governed by, and
construed in accordance with, the internal laws of the State of Delaware.
DESCRIPTION OF THE SUBORDINATED DEBENTURES
Concurrently with the issuance of the Preferred Securities, the Trust will
invest the proceeds thereof, together with the consideration paid by the Company
for the Common Securities, in the Subordinated Debentures issued by the Company.
The Subordinated Debentures will be issued as unsecured debt under the
Indenture, to be dated as of , 1998 (the "Indenture"), between the Company and
State Street Bank and Trust Company, as trustee (the "Debenture Trustee"). The
Indenture will be qualified as an indenture under the Trust Indenture Act. The
following summary of the material terms and provisions of the Subordinated
Debentures and the Indenture does not purport to be complete and is subject to,
and is qualified in its entirety by reference to, the Indenture and to the Trust
Indenture Act. Wherever particular defined terms of the Indenture are referred
to, but not defined herein, such defined terms are incorporated herein by
reference. The form of the Indenture has been filed as an exhibit to the
Registration Statement of which this Prospectus forms a part.
GENERAL
The Subordinated Debentures will be limited in aggregate principal amount
to approximately $36,082,500 (or $41,495,000 if the over-allotment option
described under the heading "Underwriting" is exercised by the Underwriters),
such amount being the sum of the aggregate stated Liquidation Amount of the
Trust Securities. The Subordinated Debentures will bear interest at the annual
rate of % of the principal amount thereof, payable quarterly in arrears on the
last day of January, April, July and October of each year (each, an "Interest
Payment Date") beginning July 31, 1998, to the Person (as defined in the
Indenture) in whose name each Subordinated Debenture is registered, subject to
certain exceptions, at the close of business on the fifteenth day of the month
in which the Interest Payment Date occurs. It is anticipated that, until the
liquidation of the Trust, the Subordinated Debentures will be held in the name
of the Property Trustee in trust for the benefit of the holders of the Preferred
Securities. The amount of interest payable for any period will be computed on
the basis of a 360-day year of twelve 30-day months. In the event that any date
on which interest is payable on the Subordinated Debentures is not a Business
Day, then payment of the interest payable on such date will be made on the next
succeeding day that is a Business Day (and without any interest or other payment
in respect of any such delay), with the same force and effect as if made on the
date such payment was originally payable. Accrued interest that is not paid on
the applicable Interest Payment Date will bear additional interest on the amount
thereof (to the extent permitted by law) at the rate per annum of % thereof,
compounded quarterly. The term "interest," as used herein, includes quarterly
interest payments, interest on quarterly interest payments not paid on the
applicable Interest Payment Date and Additional Interest, as applicable.
The Subordinated Debentures will mature on , 2028 (such date, as it may be
shortened as hereinafter described, the "Stated Maturity"). Such date may be
shortened at any time by the Company to any date not earlier
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than , 2003, subject to the Company having received prior approval of the
Federal Reserve, if then required under applicable capital guidelines or
policies of the Federal Reserve. In the event that the Company elects to shorten
the Stated Maturity of the Subordinated Debentures, it will give notice thereof
to the Debenture Trustee, the Trust and to the holders of the Subordinated
Debentures no more than 180 days and no less than 90 days prior to the
effectiveness thereof. The Company will not have the right to purchase the
Subordinated Debentures, in whole or in part, from the Trust until after , 2003,
except if a Tax Event, Capital Treatment Event or an Investment Company Event
has occurred and is continuing.
The Subordinated Debentures will be unsecured and will rank junior and be
subordinate in right of payment to all Senior Debt, Subordinated Debt and
Additional Senior Obligations of the Company. Because the Company is a holding
company, the right of the Company to participate in any distribution of assets
of the Bank, upon the Bank's liquidation or reorganization or otherwise (and
thus the ability of holders of the Subordinated Debentures to benefit indirectly
from such distribution), is subject to the prior claim of creditors of the Bank,
except to the extent that the Company may itself be recognized as a creditor of
the Bank. The Subordinated Debentures will, therefore, be effectively
subordinated to all existing and future liabilities of the Bank, and holders of
Subordinated Debentures should look only to the assets of the Company for
payments on the Subordinated Debentures.
The Indenture does not limit the incurrence or issuance of other secured or
unsecured debt of the Company, including Senior Debt, Subordinated Debt and
Additional Senior Obligations, whether under the Indenture or any existing
indenture or other indenture that the Company may enter into in the future, or
otherwise. See "-- Subordination." The Indenture does not contain provisions
that afford holders of the Subordinated Debentures protection in the event of a
highly leveraged transaction or other similar transaction involving the Company
that may adversely affect such holders.
OPTION TO EXTEND INTEREST PAYMENT PERIOD
The Company has the right under the Indenture at any time during the term
of the Subordinated Debentures, so long as no Debenture Event of Default has
occurred and is continuing, to defer the payment of interest at any time, or
from time to time (each, an "Extension Period"). The right to defer the payment
of interest on the Subordinated Debentures is limited, however, to a period, in
each instance, not exceeding 20 consecutive quarters and no Extension Period may
extend beyond the Stated Maturity of the Subordinated Debentures. At the end of
each Extension Period, the Company must pay all interest then accrued and unpaid
(together with interest thereon at the annual rate of %, compounded quarterly,
to the extent permitted by applicable law). During an Extension Period, interest
will continue to accrue and holders of Subordinated Debentures (or the holders
of Preferred Securities if such securities are then outstanding) will be
required to accrue and recognize income for United States federal income tax
purposes. See "Certain Federal Income Tax Consequences--Potential Extension of
Interest Payment Period and Original Issue Discount."
During any such Extension Period, the Company may not: (i) declare or pay
any dividends or distributions on, or redeem, purchase, acquire or make a
liquidation payment with respect to, any of the Company's capital stock; (ii)
make any payment of principal, interest or premium, if any, on or repay,
repurchase or redeem any debt securities of the Company that rank pari passu
with or junior in interest to the Subordinated Debentures; (iii) make any
guarantee payments with respect to any guarantee by the Company of the debt
securities of any subsidiary of the Company if such guarantee ranks pari passu
with or junior in interest to the Subordinated Debentures; or (iv) redeem,
purchase or acquire less than all of the Subordinated Debentures or any of the
Preferred Securities (except that the Company may make: (a) dividends or
distributions payable in common stock of the Company; (b) any declaration of a
dividend in connection with the implementation of a stockholder rights plan, any
issuance under any such plan, or the repurchase or redemption of any such rights
pursuant thereto; (c) payments under the Guarantee; and (d) purchases of common
stock of the Company in connection with the distribution or sale of shares of
Company common stock pursuant to the benefit plans of the Company and any
subsidiary for its directors, officers or employees). Prior to the termination
of any such Extension Period, the Company may further defer the payment of
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interest, provided that no Extension Period may exceed 20 consecutive quarters
or extend beyond the Stated Maturity of the Subordinated Debentures. Upon the
termination of any such Extension Period and the payment of all amounts then due
on any Interest Payment Date, the Company may elect to begin a new Extension
Period subject to the above requirements. No interest will be due and payable
during an Extension Period, except at the end thereof. The Company has no
present intention of exercising its rights to defer payments of interest on the
Subordinated Debentures. The Company must give the Property Trustee, the
Administrative Trustees and the Debenture Trustee notice of its election of such
Extension Period at least two Business Days prior to the earlier of (i) the next
succeeding date on which Distributions on the Trust Securities would have been
payable except for the election to begin such Extension Period, or (ii) the date
the Trust is required to give notice of the record date, or the date such
Distributions are payable, to The Nasdaq Stock Market's National Market (or
other applicable self-regulatory organization) or to holders of the Preferred
Securities, but in any event at least one Business Day before such record date.
Subject to the foregoing, there is no limitation on the number of times that the
Company may elect to begin an Extension Period.
ADDITIONAL SUMS
If the Trust or the Property Trustee is required to pay any additional
taxes, duties or other governmental charges as a result of the occurrence of a
Tax Event, the Company will pay as additional amounts (referred to herein as
"Additional Interest") on the Subordinated Debentures such additional amounts as
may be required so that the net amounts received and retained by the Trust after
paying any such additional taxes, duties or other governmental charges will not
be less than the amounts the Trust would have received had such additional
taxes, duties or other governmental charges not been imposed.
REDEMPTION OR EXCHANGE
The Company will have the right to redeem the Subordinated Debentures prior
to maturity (i) on or after , 2003, in whole at any time or in part from time to
time, or (ii) at any time in whole (but not in part), within 90 days following
the occurrence of a Tax Event, a Capital Treatment Event or an Investment
Company Event, in each case at a redemption price equal to the accrued and
unpaid interest on the Subordinated Debentures so redeemed to the date fixed for
redemption, plus 100% of the principal amount thereof. Any such redemption prior
to the Stated Maturity will be subject to prior approval of the Federal Reserve,
if then required under applicable capital guidelines or policies of the Federal
Reserve.
"Tax Event" means the receipt by the Trust of an opinion of counsel
experienced in such matters to the effect that, as a result of any amendment to,
or change (including any announced prospective change) in, the laws (or any
regulations thereunder) of the United States or any political subdivision or
taxing authority thereof or therein, or as a result of any official
administrative pronouncement or judicial decision interpreting or applying such
laws or regulations, which amendment or change is effective or which
pronouncement or decision is announced on or after the date of issuance of the
Preferred Securities under the Trust Agreement, there is more than an
insubstantial risk that: (i) interest payable by the Company on the Subordinated
Debentures is not, or within 90 days of the date of such opinion will not be,
deductible by the Company, in whole or in part, for United States federal income
tax purposes; (ii) the Trust is, or will be within 90 days after the date of
such opinion of counsel, subject to United States federal income tax with
respect to income received or accrued on the Subordinated Debentures; or (iii)
the Trust is, or will be within 90 days after the date of such opinion of
counsel, subject to more than a de minimis amount of other taxes, duties,
assessments or other governmental charges. The Company must request and receive
an opinion with regard to such matters within a reasonable period of time after
it becomes aware of the possible occurrence of any of the events described in
clauses (i) through (iii) above.
"Capital Treatment Event" means the receipt by the Trust of an opinion of
counsel experienced in such matters to the effect that, as a result of any
amendment to, or change (including any announced prospective change) in the laws
(or any regulations thereunder) of the United States or any political
subdivision thereof or therein, or as
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a result of any official administrative pronouncement or judicial decision
interpreting or applying such laws or regulations, which amendment or change is
effective or such proposed change, pronouncement or decision is announced on or
after the date of issuance of the Preferred Securities under the Trust
Agreement, there is more than an insubstantial risk of impairment of the
Company's ability to treat the aggregate Liquidation Amount of the Preferred
Securities (or any substantial portion thereof) as "Tier 1 Capital" (or the then
equivalent thereof) for purposes of the capital adequacy guidelines of the
Federal Reserve, as then in effect and applicable to the Company, provided,
however, that the inability of the Company to treat all or any portion of the
Liquidation Amount of the Preferred Securities as Tier 1 Capital shall not
constitute the basis of a Capital Treatment Event if such inability results from
the Company having cumulative preferred capital in excess of the amount which
may qualify for treatment as Tier 1 Capital under applicable capital adequacy
guidelines of the Federal Reserve.
"Investment Company Event" means the receipt by the Trust of an opinion of
counsel experienced in such matters to the effect that, as a result of the
occurrence of a change in law or regulation or a change in interpretation or
application of law or regulation by any legislative body, court, governmental
agency or regulatory authority, the Trust is or will be considered an
"investment company" that is required to be registered under the Investment
Company Act, which change becomes effective on or after the date of original
issuance of the Preferred Securities.
Notice of any redemption will be mailed at least 30 days but not more than
60 days before the redemption date to each holder of Subordinated Debentures to
be redeemed at its registered address. Unless the Company defaults in payment of
the redemption price for the Subordinated Debentures, on and after the
redemption date interest ceases to accrue on such Subordinated Debentures or
portions thereof called for redemption.
The Subordinated Debentures will not be subject to any sinking fund.
DISTRIBUTION UPON LIQUIDATION
As described under "Description of the Preferred Securities--Liquidation
Distribution Upon Termination," under certain circumstances involving the
termination of the Trust, the Subordinated Debentures may be distributed to the
holders of the Preferred Securities in liquidation of the Trust after
satisfaction of liabilities to creditors of the Trust as provided by applicable
law. Any such distribution will be subject to receipt of prior approval by the
Federal Reserve, if then required under applicable policies or guidelines of the
Federal Reserve. If the Subordinated Debentures are distributed to the holders
of Preferred Securities upon the liquidation of the Trust, the Company will use
its best efforts to list the Subordinated Debentures on The Nasdaq Stock
Market's National Market or such stock exchanges, if any, on which the Preferred
Securities are then listed. There can be no assurance as to the market price of
any Subordinated Debentures that may be distributed to the holders of Preferred
Securities.
RESTRICTIONS ON CERTAIN PAYMENTS
If at any time: (i) there has occurred a Debenture Event of Default; (ii)
the Company is in default with respect to its obligations under the Guarantee;
or (iii) the Company has given notice of its election of an Extension Period as
provided in the Indenture with respect to the Subordinated Debentures and has
not rescinded such notice, or such Extension Period, or any extension thereof,
is continuing, the Company will not: (a) declare or pay any dividends or
distributions on, or redeem, purchase, acquire, or make a liquidation payment
with respect to, any of the Company's capital stock; (b) make any payment of
principal, interest or premium, if any, on or repay or repurchase or redeem any
debt securities of the Company that rank pari passu with or junior in interest
to the Subordinated Debentures; (c) make any guarantee payments with respect to
any guarantee by the Company of the debt securities of any subsidiary of the
Company if such guarantee ranks pari passu or junior in interest to the
Subordinated Debentures (other than payments under the Guarantee); or (d)
redeem, purchase or acquire less than all of the Subordinated Debentures or any
of the Preferred Securities, except that during an Extension Period the Company
may make: (1) dividends or distributions payable in common stock of the Company;
(2) any declaration of a dividend in connection with the implementation of a
stockholder rights plan, any issuance under any such plan, or the repurchase or
redemption of any such rights pursuant thereto; and (3) purchases of common
stock of the Company in connection with the distribution or sale of shares of
Company common stock pursuant to the benefit plans of the Company and any
subsidiary for its directors, officers and employees.
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SUBORDINATION
The Indenture provides that the Subordinated Debentures issued thereunder
are subordinated and junior in right of payment to all Senior Debt, Subordinated
Debt and Additional Senior Obligations of the Company. Upon any payment or
distribution of assets to creditors upon any liquidation, dissolution, winding
up, reorganization, assignment for the benefit of creditors, marshaling of
assets or any bankruptcy, insolvency, debt restructuring or similar proceedings
in connection with any insolvency or bankruptcy proceedings of the Company, the
holders of Senior Debt, Subordinated Debt and Additional Senior Obligations of
the Company will first be entitled to receive payment in full of principal of
(and premium, if any) and interest, if any, on such Senior Debt, Subordinated
Debt and Additional Senior Obligations of the Company before the holders of
Subordinated Debentures will be entitled to receive or retain any payment in
respect of the principal of or interest on the Subordinated Debentures.
In the event of the acceleration of the maturity of any Subordinated
Debentures, the holders of all Senior Debt, Subordinated Debt and Additional
Senior Obligations of the Company outstanding at the time of such acceleration
will first be entitled to receive payment in full of all amounts due thereon
(including any amounts due upon acceleration) before the holders of the
Subordinated Debentures will be entitled to receive or retain any payment in
respect of the principal of or interest on the Subordinated Debentures.
No payments on account of principal or interest in respect of the
Subordinated Debentures may be made if there has occurred and is continuing a
default in any payment with respect to Senior Debt, Subordinated Debt or
Additional Senior Obligations of the Company or an event of default with respect
to any Senior Debt, Subordinated Debt or Additional Senior Obligations of the
Company resulting in the acceleration of the maturity thereof, or if any
judicial proceeding is pending with respect to any such default.
"Debt" means, with respect to any Person, whether recourse is to all or a
portion of the assets of such Person and whether or not contingent: (i) every
obligation of such person for money borrowed; (ii) every obligation of such
Person evidenced by bonds, debentures, notes or other similar instruments,
including obligations incurred in connection with the acquisition of property,
assets or businesses; (iii) every reimbursement obligation of such Person with
respect to letters of credit, bankers' acceptances or similar facilities issued
for the account of such Person;, (iv) every obligation of such Person issued or
assumed as the deferred purchase price of property or services (but excluding
trade accounts payable or accrued liabilities arising in the ordinary course of
business); (v) every capital lease obligation of such Person; and (vi) and every
obligation of the type referred to in clauses (i) through (v) of another Person
and all dividends of another Person the payment of which, in either case, such
Person has guaranteed or is responsible or liable, directly or indirectly, as
obligor or otherwise.
"Senior Debt" means, with respect to the Company, the principal of (and
premium, if any) and interest, if any (including interest accruing on or after
the filing of any petition in bankruptcy or for reorganization relating to the
Company whether or not such claim for post-petition interest is allowed in such
proceeding), on Debt, whether incurred on or prior to the date of the Indenture
or thereafter incurred, unless, in the instrument creating or evidencing the
same or pursuant to which the same is outstanding, it is provided that such
obligations are not superior in right of payment to the Subordinated Debentures
or to other Debt which is pari passu with, or subordinated to, the Subordinated
Debentures; provided, however, that Senior Debt will not be deemed to include:
(i) any Debt of the Company which when incurred and without respect to any
election under section 1111(b) of the United States Bankruptcy Code of 1978, as
amended, was without recourse to the Company; (ii) any Debt of the Company to
any of its subsidiaries; (iii) any Debt to any employee of the Company; (iv) any
Debt which by its terms is subordinated to trade accounts payable or accrued
liabilities arising in the ordinary course of business to the extent that
payments made to the holders of such Debt by the holders of the Subordinated
Debentures as a result of the subordination provisions of the Indenture would be
greater than they otherwise would have been as a result of any obligation of
such holders to pay amounts over to the obligees on such trade accounts payable
or accrued liabilities arising in the ordinary course of business as a result of
subordination provisions to which such Debt is subject; and (v) Debt which
constitutes Subordinated Debt.
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"Subordinated Debt" means, with respect to the Company, the principal of
(and premium, if any) and interest, if any (including interest accruing on or
after the filing of any petition in bankruptcy or for reorganization relating to
the Company whether or not such claim for post-petition interest is allowed in
such proceeding), on Debt, whether incurred on or prior to the date of the
Indenture or thereafter incurred, which is by its terms expressly provided to be
junior and subordinate to other Debt of the Company (other than the Subordinated
Debentures).
"Additional Senior Obligations" means, with respect to the Company, all
indebtedness, whether incurred on or prior to the date of the Indenture or
thereafter incurred, for claims in respect of derivative products such as
interest and foreign exchange rate contracts, commodity contracts and similar
arrangements; provided, however, that Additional Senior Obligations do not
include claims in respect of Senior Debt or Subordinated Debt or obligations
which, by their terms, are expressly stated to be not superior in right of
payment to the Subordinated Debentures or to rank pari passu in right of payment
with the Subordinated Debentures. "Claim," as used herein, has the meaning
assigned thereto in Section 101(4) of the United States Bankruptcy Code of 1978,
as amended.
The Indenture places no limitation on the amount of additional Senior Debt,
Subordinated Debt or Additional Senior Obligations that may be incurred by the
Company. The Company expects from time to time to incur additional indebtedness
constituting Senior Debt, Subordinated Debt and Additional Senior Obligations.
At , 1998, the Company had no outstanding Senior Debt, Subordinated Debt or
Additional Senior Obligations. Because the Company is a holding company, the
Subordinated Debentures are effectively subordinated to all existing and future
liabilities of the Company's subsidiaries, including obligations to depositors
of the Subsidiary Banks.
PAYMENT AND PAYING AGENTS
Payment of principal of and any interest on the Subordinated Debentures
will be made at the office of the Company's paying agent in New York, New York,
except that, at the option of the Company, payment of any interest may be made:
(i) by check mailed to the address of the Person entitled thereto as such
address appears in the register of holders of the Subordinated Debentures; or
(ii) by transfer to an account maintained by the Person entitled thereto as
specified in the register of holders of the Subordinated Debentures, provided
that proper transfer instructions have been received by the regular record date.
Payment of any interest on Subordinated Debentures will be made to the Person in
whose name such Subordinated Debenture is registered at the close of business on
the regular record date for such interest, except in the case of defaulted
interest. The Company may at any time designate additional paying agents for the
Subordinated Debentures or rescind the designation of any paying agent for the
Subordinated Debentures. In the event that the Company fails to maintain a
paying agent in New York, New York, Subordinated Debentures may be presented for
payment of principal and interest at the Corporate Trust Office of the Debenture
Trustee in Boston, Massachusetts.
Any moneys deposited with the Debenture Trustee or any paying agent for the
Subordinated Debentures, or then held by the Company in trust, for the payment
of the principal of or interest on the Subordinated Debentures and remaining
unclaimed for two years after such principal or interest has become due and
payable will be repaid to the Company on May 31 of each year or (if then held in
trust by the Company) will be discharged from such trust and the holder of such
Subordinated Debenture will thereafter look, as a general unsecured creditor,
only to the Company for payment thereof.
REGISTRAR AND TRANSFER AGENT
The Debenture Trustee will act as the registrar and the transfer agent for
the Subordinated Debentures. Subordinated Debentures may be presented for
registration of transfer (with the form of transfer endorsed thereon, or a
satisfactory written instrument of transfer, duly executed), in New York, New
York or at the office of the registrar in Boston, Massachusetts. The Company may
at any time rescind the designation of any such transfer agent or approve a
change in the location through which any such transfer agent acts; provided that
the Company maintains a transfer agent in New York, New York. The Company may at
any time designate additional transfer agents with
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respect to the Subordinated Debentures. In the event of any redemption, neither
the Company nor the Debenture Trustee will be required to (i) issue, register
the transfer of or exchange Subordinated Debentures during a period beginning at
the opening of business 15 days before the day of selection for redemption of
Subordinated Debentures and ending at the close of business on the day of
mailing of the relevant notice of redemption, or (ii) transfer or exchange any
Subordinated Debentures so selected for redemption, except, in the case of any
Subordinated Debentures being redeemed in part, any portion thereof not to be
redeemed.
In the event that the Subordinated Debentures are distributed to Holders of
the Preferred Securities in liquidation of the Trust, the Subordinated
Debentures will initially be represented by one or more fully registered global
certificates representing the full aggregate amount of the Subordinated
Debentures, and the Subordinated Debentures will be transferable, and payments
of interest on and principal of the Subordinated Debentures will be effected in
substantially the same manner as with respect to the Preferred Securities. The
Subordinated Debentures would remain subject to the book-entry system until such
time as use of the book-entry system is discontinued as set forth herein.
MODIFICATION OF INDENTURE
The Company and the Debenture Trustee may, from time to time without the
consent of the holders of the Subordinated Debentures, amend, waive or
supplement the Indenture for specified purposes, including, among other things,
curing ambiguities, defects or inconsistencies, and qualifying, or maintaining
the qualification of, the Indenture under the Trust Indenture Act. The Company
and the Indenture Trustee may also amend, waive or supplement the Indenture
relating to the Subordinated Debentures, without the consent of holders of the
Preferred Securities or Subordinated Debentures, to provide for the book-entry
transfer of the Subordinated Debentures. The Indenture contains provisions
permitting the Company and the Debenture Trustee, with the consent of the
holders of not less than a majority in principal amount of the outstanding
Subordinated Debentures, to modify the Indenture; provided, that no such
modification may, without the consent of the holder of each outstanding
Subordinated Debenture affected by such proposed modification: (i) extend the
fixed maturity of the Subordinated Debentures, or reduce the principal amount
thereof, or reduce the rate or extend the time of payment of interest thereon;
or (ii) reduce the percentage of principal amount of Subordinated Debentures,
the holders of which are required to consent to any such modification of the
Indenture; and provided further that so long as any of the Preferred Securities
remain outstanding, no such modification may be made that requires the consent
of the holders of the Subordinated Debentures, and no termination of the
Indenture may occur, and no waiver of any Debenture Event of Default may be
effective, without the prior consent of the holders of at least a majority of
the aggregate Liquidation Amount of the Preferred Securities and that if the
consent of the holder of each Subordinated Debenture is required, such
modification will not be effective until each holder of Trust Securities has
consented thereto.
DEBENTURE EVENTS OF DEFAULT
The Indenture provides that any one or more of the following described
events with respect to the Subordinated Debentures that has occurred and is
continuing constitutes an event of default (each, a "Debenture Event of
Default") with respect to the Subordinated Debentures:
(i) failure for 30 days to pay any interest on the Subordinated Debentures,
when due (subject to the deferral of any due date in the case of an Extension
Period); or
(ii) failure to pay any principal on the Subordinated Debentures when due
whether at maturity, upon redemption by declaration or otherwise; or
(iii) failure to observe or perform in any material respect certain other
covenants contained in the Indenture for 90 days after written notice to the
Company from the Debenture Trustee or the holders of at least 25% in aggregate
outstanding principal amount of the Subordinated Debentures; or
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(iv) certain events of bankruptcy, insolvency or reorganization of the
Company.
The holders of a majority in aggregate outstanding principal amount of the
Subordinated Debentures have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Debenture Trustee. The
Debenture Trustee, or the holders of not less than 25% in aggregate outstanding
principal amount of the Subordinated Debentures, may declare the principal due
and payable immediately upon a Debenture Event of Default. The holders of a
majority in aggregate outstanding principal amount of the Subordinated
Debentures may annul such declaration and waive the default if the default
(other than the non-payment of the principal of the Subordinated Debentures
which has become due solely by such acceleration) has been cured and a sum
sufficient to pay all matured installments of interest and principal due
otherwise than by acceleration has been deposited with the Debenture Trustee.
Should the holders of the Subordinated Debentures fail to annul such declaration
and waive such default, the holders of a majority in aggregate Liquidation
Amount of the Preferred Securities will have such right.
The Company is required to file annually with the Debenture Trustee a
certificate as to whether or not the Company is in compliance with all the
conditions and covenants applicable to it under the Indenture.
If a Debenture Event of Default has occurred and is continuing, the
Property Trustee will have the right to declare the principal of and the
interest on such Subordinated Debentures, and any other amounts payable under
the Indenture, to be forthwith due and payable and to enforce its other rights
as a creditor with respect to such Subordinated Debentures.
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF THE PREFERRED SECURITIES
If a Debenture Event of Default has occurred and is continuing and such
event is attributable to the failure of the Company to pay interest on or
principal of the Subordinated Debentures on the payment date on which such
payment is due and payable, then a holder of Preferred Securities may institute
a legal proceeding directly against the Company for enforcement of payment to
such holder of the principal of or interest on such Subordinated Debentures
having a principal amount equal to the aggregate Liquidation Amount of the
Preferred Securities of such holder (a "Direct Action"). In connection with such
Direct Action, the Company will have a right of set-off under the Indenture to
the extent of any payment made by the Company to such holder of Preferred
Securities in the Direct Action. The Company may not amend the Indenture to
remove the foregoing right to bring a Direct Action without the prior written
consent of the holders of all of the Preferred Securities. If the right to bring
a Direct Action is removed, the Trust may become subject to the reporting
obligations under the Exchange Act. The Company has the right under the
Indenture to set-off any payment made to such holder of Preferred Securities by
the Company in connection with a Direct Action.
The holders of the Preferred Securities will not be able to exercise
directly any remedies, other than those set forth in the preceding paragraph,
available to the holders of the Subordinated Debentures unless there has been an
Event of Default under the Trust Agreement. See "Description of the Preferred
Securities--Events of Default; Notice."
CONSOLIDATION, MERGER, SALE OF ASSETS AND OTHER TRANSACTIONS
The Company may not consolidate with or merge into any other Person or
convey or transfer its properties and assets substantially as an entirety to any
Person, and no Person may consolidate with or merge into the Company or sell,
convey, transfer or otherwise dispose of its properties and assets substantially
as an entirety to the Company, unless: (i) in the event the Company consolidates
with or merges into another Person or conveys or transfers its properties and
assets substantially as an entirety to any Person, the successor Person is
organized under the laws of the United States or any State or the District of
Columbia, and such successor Person expressly assumes by supplemental indenture
the Company's obligations on the Subordinated Debentures issued under the
Indenture; (ii) immediately after giving effect thereto, no Debenture Event of
Default, and no event which, after notice or lapse of
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time or both, would become a Debenture Event of Default, has occurred and is
continuing; and (iii) certain other conditions as prescribed in the Indenture
are met.
SATISFACTION AND DISCHARGE
The Indenture will cease to be of further effect (except as to the
Company's obligations to pay certain sums due pursuant to the Indenture and to
provide certain officers' certificates and opinions of counsel described
therein) and the Company will be deemed to have satisfied and discharged the
Indenture when, among other things, all Subordinated Debentures not previously
delivered to the Debenture Trustee for cancellation (i) have become due and
payable, or (ii) will become due and payable at their Stated Maturity within one
year, or are to be called for redemption within one year, and the Company
deposits or causes to be deposited with the Debenture Trustee funds, in trust,
for the purpose and in an amount sufficient to pay and discharge the entire
indebtedness on the Subordinated Debentures not previously delivered to the
Debenture Trustee for cancellation, for the principal and interest to the date
of the deposit or to the Stated Maturity or redemption date, as the case may be.
GOVERNING LAW
The Indenture and the Subordinated Debentures will be governed by and
construed in accordance with the laws of the State of New York.
INFORMATION CONCERNING THE DEBENTURE TRUSTEE
The Debenture Trustee has and is subject to all the duties and
responsibilities specified with respect to an indenture trustee under the Trust
Indenture Act. Subject to such provisions, the Debenture Trustee is under no
obligation to exercise any of the powers vested in it by the Indenture at the
request of any holder of Subordinated Debentures, unless offered reasonable
indemnity by such holder against the costs, expenses and liabilities which might
be incurred thereby. The Debenture Trustee is not required to expend or risk its
own funds or otherwise incur personal financial liability in the performance of
its duties if the Debenture Trustee reasonably believes that repayment or
adequate indemnity is not reasonably assured to it.
MISCELLANEOUS
The Company has agreed, pursuant to the Indenture, for so long as Trust
Securities remain outstanding: (i) to maintain directly or indirectly 100%
ownership of the Common Securities of the Trust (provided that certain
successors which are permitted pursuant to the Indenture may succeed to the
Company's ownership of the Common Securities); (ii) not to voluntarily
terminate, wind up or liquidate the Trust, except upon prior approval of the
Federal Reserve, if then so required under applicable capital guidelines or
policies of the Federal Reserve, and (a) in connection with a distribution of
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 (iii) to
use its reasonable efforts, consistent with the terms and provisions of the
Trust Agreement, to cause the Trust to remain classified as a grantor trust and
not as an association taxable as a corporation for United States federal income
tax purposes.
BOOK-ENTRY ISSUANCE
The Depository Trust Company ("DTC") will act as securities depository for
all of the Preferred Securities. The Preferred Securities will be issued only as
fully-registered securities registered in the name of Cede & Co. (DTC's
nominee). One or more fully-registered global certificates will be issued for
the Preferred Securities of the Trust, representing in the aggregate the total
number of the Trust's Preferred Securities, and will be deposited with DTC.
DTC is a limited purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a
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"clearing corporation" within the meaning of the New York Uniform Commercial
Code, and a "clearing agency" registered pursuant to the provisions of Section
17A of the Exchange Act. DTC holds securities that its Participants deposit with
DTC. DTC also facilitates the settlement among Participants of securities
transactions, such as transfers and pledges, in deposited securities through
electronic computerized book-entry changes in Participants' accounts, thereby
eliminating the need for physical movement of securities certificates. "Direct
Participants" include securities brokers and dealers, banks, trust companies,
clearing corporations and certain other organizations. DTC is owned by a number
of its Direct Participants and by the New York Stock Exchange, Inc., the
American Stock Exchange, Inc. and the National Association of Securities
Dealers, Inc. Access to the DTC system is also available to others such as
securities brokers and dealers, banks and trust companies that clear through or
maintain custodial relationships with Direct Participants, either directly or
indirectly ("Indirect Participants"). The rules applicable to DTC and its
Participants are on file with the Commission.
Purchases of Preferred Securities within the DTC system must be made by or
through Direct Participants, which will receive a credit for the Preferred
Securities on DTC's records. The ownership interest of each actual purchaser of
each Preferred Security ("Beneficial Owner") is in turn to be recorded on the
Direct and Indirect Participants' records. Beneficial Owners will not receive
written confirmation from DTC of their purchases, but Beneficial Owners are
expected to receive written confirmations providing details of the transactions,
as well as periodic statements of their holdings, from the Direct or Indirect
Participants through which the Beneficial Owners purchased Preferred Securities.
Transfers of ownership interests in the Preferred Securities are to be
accomplished by entries made on the books of Participants acting on behalf of
Beneficial Owners. Beneficial Owners will not receive certificates representing
their ownership interests in Preferred Securities, except in the event that use
of the book-entry system for the Preferred Securities is discontinued.
DTC has no knowledge of the actual Beneficial Owners of the Preferred
Securities; DTC's records reflect only the identity of the Direct Participants
to whose accounts such Preferred Securities are credited, which may or may not
be the Beneficial Owners. The Participants will remain responsible for keeping
account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners and the voting
rights of Direct Participants, Indirect Participants and Beneficial Owners will
be governed by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time.
Redemption notices will be sent to Cede & Co. as the registered holder of
the Preferred Securities. If less than all of the Preferred Securities are being
redeemed, DTC's current practice is to determine by lot the amount of the
interest of each Direct Participant to be redeemed.
Although voting with respect to the Preferred Securities is limited to the
holders of record of the Preferred Securities, in those instances in which a
vote is required, neither DTC nor Cede & Co. will itself consent or vote with
respect to Preferred Securities. Under its usual procedures, DTC would mail an
omnibus proxy (the "Omnibus Proxy") to the Trust as soon as possible after the
record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights
to those Direct Participants to whose accounts such Preferred Securities are
credited on the record date (identified in a listing attached to the Omnibus
Proxy).
Distribution payments on the Preferred Securities will be made by the
Trustee to DTC. DTC's practice is to credit Direct Participants' accounts on the
relevant payment date in accordance with their respective holdings shown on
DTC's records unless DTC has reason to believe that it will not receive payments
on such payment date. Payments by Participants to Beneficial Owners will be
governed by standing instructions and customary practices and will be the
responsibility of such Participant and not of DTC, the Trustee or the Trust
subject to any statutory or regulatory requirements as may be in effect from
time to time. Payment of Distributions to DTC is the responsibility of the
Trustee, disbursement of such payments to Direct Participants is the
responsibility of DTC, and disbursements of such payments to the Beneficial
Owners is the responsibility of Direct and Indirect Participants.
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DTC may discontinue providing its services as securities depository with
respect to any of the Preferred Securities at any time by giving reasonable
notice to the Trustee and the Company. In the event that a successor securities
depository is not obtained, definitive Preferred Security certificates
representing such Preferred Securities are required to be printed and delivered.
The Company, at its option, may decide to discontinue use of the system of
book-entry transfers through DTC (or a successor depository). After a Debenture
Event of Default, the holders of a majority in liquidation preference of
Preferred Securities may determine to discontinue the system of book-entry
transfers through DTC. In any such event, definitive certificates for such
Preferred Securities will be printed and delivered.
It is anticipated that if the Subordinated Debentures are distributed to
Holders of the Preferred Securities in liquidation of the Trust, the Indenture
will be amended to provide for book-entry issuance and transfer of the
Subordinated Debentures. In such event, the Subordinated Debentures will
initially be represented by one or more fully registered global certificates
representing the full aggregate amount of the Subordinated Debentures, and the
Subordinated Debentures will be transferable, and payments of interest on and
principal of the Subordinated Debentures will be effected in substantially the
same manner as with respect to the Preferred Securities. The Subordinated
Debentures would remain subject to the book-entry system until such time as use
of the book-entry system is discontinued as set forth herein.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that the Trust and the Company believe to be
accurate, but the Trust and the Company assume no responsibility for the
accuracy thereof. Neither the Trust nor the Company has any responsibility for
the performance by DTC or its Participants of their respective obligations as
described herein or under the rules and procedures governing their respective
operations.
DESCRIPTION OF THE GUARANTEE
The Preferred Securities Guarantee Agreement (the "Guarantee") will be
executed and delivered by the Company concurrently with the issuance of the
Preferred Securities, for the benefit of the holders of the Preferred
Securities. The Guarantee will be qualified as an indenture under the Trust
Indenture Act. The Guarantee Trustee will act as indenture trustee under the
Guarantee for purposes of complying with the provisions of the Trust Indenture
Act. The Guarantee Trustee, State Street Bank and Trust Company, will hold the
Guarantee for the benefit of the holders of the Preferred Securities. The
following summary of the material terms and provisions of the Guarantee does not
purport to be complete and is subject to, and qualified in its entirety by
reference to, all of the provisions of the Guarantee and the Trust Indenture
Act. Wherever particular defined terms of the Guarantee are referred to, but not
defined herein, such defined terms are incorporated herein by reference. The
form of the Guarantee has been filed as an exhibit to the Registration Statement
of which this Prospectus forms a part.
GENERAL
The Company will, pursuant to the Guarantee, irrevocably agree to pay in
full on a subordinated basis, to the extent set forth therein, the Guarantee
Payments (as defined below) to the holders of the Preferred Securities, as and
when due, regardless of any defense, right of set-off or counterclaim that the
Trust 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 (the "Guarantee Payments"), will be subject to the
Guarantee: (i) any accrued and unpaid Distributions required to be paid on the
Preferred Securities, to the extent that the Trust has funds available therefor
at such time, (ii) the Redemption Price with respect to any Preferred Securities
called for redemption, to the extent that the Trust has funds available therefor
at such time, and (iii) upon a voluntary or involuntary dissolution, winding up
or liquidation of the Trust (other than in connection with the distribution of
Subordinated Debentures to the holders of Preferred Securities or a redemption
of all of the Preferred Securities), the lesser of (a) the amount of the
Liquidation Distribution, to the extent the Trust has funds available therefor
at such time, and (b) the amount of assets of the Trust remaining available for
distribution to holders of Preferred Securities in liquidation of the Trust. The
obligation of the Company to make a Guarantee Payment may be satisfied by direct
payment of the required
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amounts by the Company to the holders of the Preferred Securities or by causing
the Trust to pay such amounts to such holders.
The Guarantee will not apply to any payment of Distributions except to the
extent the Trust has funds available therefor. If the Company does not make
interest payments on the Subordinated Debentures held by the Trust, the Trust
will not pay Distributions on the Preferred Securities and will not have funds
available therefor.
STATUS OF THE GUARANTEE
The Guarantee will constitute an unsecured obligation of the Company and
will rank subordinate and junior in right of payment to all Senior Debt,
Subordinated Debt and Additional Senior Obligations of the Company in the same
manner as the Subordinated Debentures. The Guarantee does not place a limitation
on the amount of additional Senior Debt, Subordinated Debt or Additional Senior
Obligations that may be incurred by the Company. The Company expects from time
to time to incur additional indebtedness constituting Senior Debt, Subordinated
Debt and Additional Senior Obligations.
The Guarantee will constitute a guarantee of payment and not of collection
(that is, the guaranteed party may institute a legal proceeding directly against
the Company to enforce its rights under the Guarantee without first instituting
a legal proceeding against any other Person). The Guarantee will not be
discharged except by payment of the Guarantee Payments in full to the extent not
paid by the Trust, or upon distribution of the Subordinated Debentures to the
holders of the Preferred Securities. Because the Company is a holding company,
the right of the Company to participate in any distribution of assets of the
Bank upon the Bank's liquidation or reorganization or otherwise is subject to
the prior claims of creditors of the Bank, except to the extent the Company may
itself be recognized as a creditor of the Bank. The Company's obligations under
the Guarantee, therefore, will be effectively subordinated to all existing and
future liabilities of the Company's subsidiaries, and claimants should look only
to the assets of the Company for payments thereunder.
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes which do not materially adversely affect
the rights of holders of the Preferred Securities (in which case no vote will be
required), the Guarantee may not be amended without the prior approval of the
holders of not less than a majority of the aggregate Liquidation Amount of the
outstanding Preferred Securities. See "Description of the Preferred
Securities--Voting Rights; Amendment of Trust Agreement." All guarantees and
agreements contained in the Guarantee will bind the successors, assigns,
receivers, trustees and representatives of the Company and will inure to the
benefit of the holders of the Preferred Securities then outstanding.
EVENTS OF DEFAULT
An event of default under the Guarantee will occur upon the failure of the
Company to perform any of its payment or other obligations thereunder. The
holders of not less than a majority in aggregate Liquidation Amount of the
Preferred Securities have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Guarantee Trustee in
respect of the Guarantee or to direct the exercise of any trust or power
conferred upon the Guarantee Trustee under the Guarantee.
Any holder of Preferred Securities may institute a legal proceeding
directly against the Company to enforce its rights under the Guarantee without
first instituting a legal proceeding against the Trust, the Guarantee Trustee or
any other Person.
The Company, as guarantor, is required to file annually with the Guarantee
Trustee a certificate as to whether or not the Company is in compliance with all
the conditions and covenants applicable to it under the Guarantee.
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INFORMATION CONCERNING THE GUARANTEE TRUSTEE
The Guarantee Trustee, other than during the occurrence and continuance of
a default by the Company in performance of the Guarantee, undertakes to perform
only such duties as are specifically set forth in the Guarantee and, after
default with respect to the Guarantee, must exercise the same degree of care and
skill as a prudent person would exercise or use in the conduct of his or her own
affairs. Subject to such provisions, the Guarantee Trustee is under no
obligation to exercise any of the powers vested in it by the Guarantee at the
request of any holder of any Preferred Securities, unless it is offered
reasonable indemnity against the costs, expenses and liabilities that might be
incurred thereby.
TERMINATION OF THE GUARANTEE
The Guarantee will terminate and be of no further force and effect upon:
(a) full payment of the Redemption Price of the Preferred Securities; (b) full
payment of the amounts payable upon liquidation of the Trust; or (c)
distribution of the Subordinated Debentures to the holders of the Preferred
Securities. The Guarantee will continue to be effective or will be reinstated,
as the case may be, if at any time any holder of the Preferred Securities must
restore payment of any sums paid under such 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.
EXPENSE AGREEMENT
The Company will, pursuant to the Agreement as to Expenses and Liabilities
entered into by it under the Trust Agreement (the "Expense Agreement"),
irrevocably and unconditionally guarantee to each person or entity to whom the
Trust becomes indebted or liable, the full payment of any costs, expenses or
liabilities of the Trust, other than obligations of the Trust to pay to the
holders of the Preferred Securities or other similar interests in the Trust of
the amounts due such holders pursuant to the terms of the Preferred Securities
or such other similar interests, as the case may be. Third party creditors of
the Trust may proceed directly against the Company under the Expense Agreement,
regardless of whether such creditors had notice of the Expense Agreement.
RELATIONSHIP AMONG THE PREFERRED SECURITIES, THE SUBORDINATED DEBENTURES
AND THE GUARANTEE
FULL AND UNCONDITIONAL GUARANTEE
Payments of Distributions and other amounts due on the Preferred Securities
(to the extent the Trust has funds available for the payment of such
Distributions) are irrevocably guaranteed by the Company as and to the extent
set forth under "Description of the Guarantee." The Company and the Trust
believe that, taken together, the obligations of the Company under the
Subordinated Debentures, the Indenture, the Trust Agreement, the Expense
Agreement, and the Guarantee provide, in the aggregate, a full, irrevocable and
unconditional guarantee, on a subordinated basis, of payment of Distributions
and other amounts due on the Preferred Securities. No single document standing
alone or operating in conjunction with fewer than all of the other documents
constitutes such guarantee. It is only the combined operation of these documents
that has the effect of providing a full, irrevocable and unconditional guarantee
of the obligations of the Trust under the Preferred Securities. If and to the
extent that the Company does not make payments on the Subordinated Debentures,
the Trust will not pay Distributions or other amounts due on the Preferred
Securities. The Guarantee does not cover payment of Distributions when the Trust
does not have sufficient funds to pay such Distributions. In such event, the
remedy of a holder of Preferred Securities is to institute a legal proceeding
directly against the Company for enforcement of payment of such Distributions to
such holder. The obligations of the Company under the Guarantee are subordinate
and junior in right of payment to all Senior Debt, Subordinated Debt and
Additional Senior Obligations of the Company.
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SUFFICIENCY OF PAYMENTS
As long as payments of interest and other payments are made when due on the
Subordinated Debentures, such payments will be sufficient to cover Distributions
and other payments due on the Preferred Securities, primarily because; (i) the
aggregate principal amount of the Subordinated Debentures will be equal to the
sum of the aggregate stated Liquidation Amount of the Trust Securities; (ii) the
interest rate and interest and other payment dates on the Subordinated
Debentures will match the Distribution rate and Distribution and other payment
dates for the Preferred Securities; (iii) the Company will pay for all and any
costs, expenses and liabilities of the Trust (except the obligations of the
Trust to holders of the Preferred Securities); and (iv) 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.
ENFORCEMENT RIGHTS OF HOLDERS OF PREFERRED SECURITIES
A holder of any Preferred Security may institute a legal proceeding
directly against the Company to enforce its rights under the Guarantee without
first instituting a legal proceeding against the Guarantee Trustee, the Trust or
any other Person. A default or event of default under any Senior Debt,
Subordinated Debt or Additional Senior Obligations of the Company would not
constitute a default or Event of Default. In the event, however, of payment
defaults under, or acceleration of, Senior Debt, Subordinated Debt or Additional
Senior Obligations of the Company, the subordination provisions of the Indenture
provide that no payments may be made in respect of the Subordinated Debentures
until such Senior Debt, Subordinated Debt or Additional Senior Obligations has
been paid in full or any payment default thereunder has been cured or waived.
Failure to make required payments on the Subordinated Debentures would
constitute an Event of Default.
LIMITED PURPOSE OF THE TRUST
The Preferred Securities evidence a preferred undivided beneficial interest
in the assets of the Trust. The Trust exists for the exclusive purposes of: (i)
issuing the Trust Securities representing undivided beneficial interests in the
assets of the Trust; (ii) investing the gross proceeds of the Trust Securities
in the Subordinated Debentures issued by the Company; and (iii) engaging in only
those other activities necessary, advisable, or incidental thereto. A principal
difference between the rights of a holder of a Preferred Security and the rights
of a holder of a Subordinated Debenture is that a holder of a Subordinated
Debenture is entitled to receive from the Company the principal amount of and
interest accrued on Subordinated Debentures held, while a holder of Preferred
Securities is entitled to receive Distributions from the Trust (or from the
Company under the Guarantee) if and to the extent the Trust has funds available
for the payment of such Distributions.
RIGHTS UPON TERMINATION
Upon any voluntary or involuntary termination, winding-up or liquidation of
the Trust involving the liquidation of the Subordinated Debentures, the holders
of the Preferred Securities will be entitled to receive, out of assets held by
the Trust, the Liquidation Distribution in cash. See "Description of the
Preferred Securities-- Liquidation Distribution Upon Termination." Upon any
voluntary or involuntary liquidation or bankruptcy of the Company, the Property
Trustee, as holder of the Subordinated Debentures, would be a subordinated
creditor of the Company, subordinated in right of payment to all Senior Debt,
Subordinated Debt and Additional Senior Obligations of the Company (as set forth
in the Indenture), but entitled to receive payment in full of principal and
interest before any shareholders of the Company receive payments or
distributions. Since the Company is the guarantor under the Guarantee and has
agreed to pay for all costs, expenses and liabilities of the Trust (other than
the obligations of the Trust to the holders of its Preferred Securities), the
positions of a holder of the Preferred Securities and a holder of the
Subordinated Debentures relative to other creditors and to shareholders of the
Company in the event of liquidation or bankruptcy of the Company are expected to
be substantially the same.
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CERTAIN FEDERAL INCOME TAX CONSEQUENCES
GENERAL
The following is a summary of the material United States federal income tax
considerations that may be relevant to the purchasers of Preferred Securities,
which has been passed upon by Kennedy, Baris & Lundy, L.L.P., counsel to the
Company and the Trust, insofar as it relates to matters of law and legal
conclusions. The conclusions expressed herein are based upon current provisions
of the Internal Revenue Code of 1986, as amended (the "Code"), regulations
thereunder and current administrative rulings and court decisions, all of which
are subject to change at any time, with possible retroactive effect. Subsequent
changes may cause tax consequences to vary substantially from the consequences
described below. Furthermore, the authorities on which the following summary is
based are subject to various interpretations, and it is therefore possible that
the United States federal income tax treatment of the purchase, ownership, and
disposition of Preferred Securities may differ from the treatment described
below.
No attempt has been made in the following discussion to comment on all
United States federal income tax matters affecting purchasers of Preferred
Securities. Moreover, the discussion generally focuses on holders of Preferred
Securities who are individual citizens or residents of the United States and who
acquire Preferred Securities on their original issue at their offering price and
hold Preferred Securities as capital assets. The discussion has only limited
application to dealers in securities, corporations, estates, trusts or
nonresident aliens and does not address all the tax consequences that may be
relevant to holders who may be subject to special tax treatment, such as, for
example, banks, thrifts, real estate investment trusts, regulated investment
companies, insurance companies, dealers in securities or currencies, tax-exempt
investors, or persons that will hold the Preferred Securities as a position in a
"straddle," as part of a "synthetic security" or "hedge," as part of a
"conversion transaction" or other integrated investment, or as other than a
capital asset.
The following summary also does not address the tax consequences to persons
that have a functional currency other than the U.S. dollar, or the tax
consequences to shareholders, partners or beneficiaries of a holder of Preferred
Securities. Further, it does not include any description of any alternative
minimum tax consequences, or the tax laws of any state or local government or of
any foreign government, that may be applicable to the Preferred Securities.
Accordingly, each prospective investor should consult, and should rely
exclusively on, such investor's own tax advisors in analyzing the federal,
state, local and foreign tax consequences of the purchase, ownership or
disposition of Preferred Securities.
CLASSIFICATION OF THE SUBORDINATED DEBENTURES
The Company intends to take the position that the Subordinated Debentures
will be classified for United States federal income tax purposes as indebtedness
of the Company under current law, and, by acceptance of a Preferred Security,
each holder covenants to treat the Subordinated Debentures as indebtedness and
the Preferred Securities as evidence of an indirect beneficial ownership
interest in the Subordinated Debentures. No assurance can be given, however,
that such position of the Company will not be challenged by the Internal Revenue
Service or, if challenged, that such a challenge will not be successful. The
remainder of this discussion assumes that the Subordinated Debentures will be
classified for United States federal income tax purposes as indebtedness of the
Company.
CLASSIFICATION OF THE TRUST
Under current law and assuming full compliance with the terms of the Trust
Agreement and Indenture (and certain other documents described herein), the
Trust will be classified for United States federal income tax purposes as a
grantor trust and not as an association taxable as a corporation. Accordingly,
for United States federal income tax purposes, each holder of Preferred
Securities generally will be treated as owning an undivided beneficial interest
in the Subordinated Debentures, and each holder will be required to include in
its gross income items of income realized with respect to its allocable share of
the Subordinated Debentures.
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POTENTIAL EXTENSION OF INTEREST PAYMENT PERIOD AND ORIGINAL ISSUE DISCOUNT
Applicable Treasury regulations generally provide that stated interest on a
debt instrument is not "qualified stated interest" and, therefore, will give
rise to original issue discount ("OID") unless such interest is unconditionally
payable in cash or in property (other than debt instruments of the issuer) at
least annually at a single fixed rate. Interest is considered to be
unconditionally payable only if reasonable legal remedies exist to compel timely
payment or the debt instrument otherwise provides terms and conditions that make
the likelihood of late payment (other than late payment that occurs within a
reasonable grace period) or non-payment a "remote contingency."
The Company has the right, at any time and from time to time during the
term of the Subordinated Debentures, to defer payments of interest by extending
interest payment periods for a period not exceeding 20 consecutive quarters.
Unless the likelihood of exercise of such right to defer is remote, the
Subordinated Debentures would be treated as issued with OID. A holder of a debt
instrument issued with OID must include that discount in income on an economic
accrual basis before the receipt of cash attributable to the interest,
regardless of its method of accounting. Under the Indenture, the Company may
not, subject to limited exceptions: (i) declare or pay any dividends or
distributions on, or redeem, purchase, acquire or make a liquidation payment
with respect to, any of the Company's capital stock; (ii) make any payment of
principal, interest or premium, if any, on, or repay, repurchase or redeem any
debt securities of the Company that rank pari passu with or junior in interest
to the Subordinated Debentures, or make any guarantee payments with respect to
any guarantee by the Company of any debt securities of any subsidiary of the
Company, if such guarantee ranks pari passu or junior in interest to the
Subordinated Debentures (other than payments on the Guarantee); or (iii) redeem,
purchase or acquire less than all of the Subordinated Debentures or any of the
Preferred Securities. See "Description of Subordinated Debentures--Option to
Extend Interest Payment Period." The Company currently believes that the adverse
impact that the imposition of such restrictions would have on the Company and
the value of its equity securities, makes the likelihood of its exercising its
right to defer payments of interest on the Subordinated Debentures remote.
Accordingly, the Company believes that the stated interest on the Subordinated
Debentures should be considered unconditionally payable for purposes of the Code
and that the Subordinated Debentures should not be considered as having been
issued with OID. If so, stated interest paid or payable prior to the exercise,
if any, by the Company of its right to defer payments, will be taxable to
holders as ordinary income, generally at the time it is received or accrued, in
accordance with each holder's regular method of accounting for federal income
tax purposes. There can be no assurance that the Internal Revenue Service will
agree with this position.
If, notwithstanding the foregoing, the Company does exercise its right to
defer payments of interest on the Subordinated Debentures, the Subordinated
Debentures will be considered to be retired and reissued for their adjusted
issue price at such time, and the Subordinated Debentures thereafter will be
considered to have been issued with OID. In such case, all of the interest
payments thereafter payable will be treated as OID. If the payments are treated
as OID (either because the Company exercises the right to defer interest
payments or because the exercise of such right was not remote at the time of
issuance), holders must include that discount in income on an economic accrual
basis before the receipt of cash attributable to the interests, regardless of
their method of tax accounting. Any holder who disposes of Preferred Securities
prior to the record date for the payment of Distributions thereon, following
such Extension Period, will include OID in gross income but will not receive any
cash related thereto from the Trust. The amount of OID that would accrue in any
quarter will approximately equal the amount of the interest that accrues in that
quarter at the stated interest rate. In the event that the interest payment
period is extended, holders will accrue OID approximately equal to the amount of
the interest payment due at the end of the Extension Period on an economic
accrual basis over the length of the Extension Period.
Holders of Preferred Securities will not be entitled to a dividends
received deduction with respect to any income recognized with respect to the
Preferred Securities.
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MARKET DISCOUNT AND ACQUISITION PREMIUM
Holders of Preferred Securities other than a holder who purchased the
Preferred Securities upon original issuance may be considered to have acquired
their undivided interests in the Subordinated Debentures with "market discount"
or "acquisition premium" as such phrases are defined for United States federal
income tax purposes. Such holders are advised to consult their tax advisors as
to the income tax consequences of the acquisition, ownership and disposition of
the Preferred Securities.
RECEIPT OF SUBORDINATED DEBENTURES OR CASH UPON LIQUIDATION OF THE TRUST
Under certain circumstances, as described under "Description of the
Preferred Securities--Redemption or Exchange" and "--Liquidation Distribution
Upon Termination," the Subordinated Debentures may be distributed to holders of
Preferred Securities upon a liquidation of the Trust. Under current United
States federal income tax law, such a distribution would be treated as a
nontaxable event to each such holder and would result in such holder having an
aggregate tax basis in the Subordinated Debentures received in the liquidation
equal to such holder's aggregate tax basis in the Preferred Securities
immediately before the distribution. A holder's holding period in the
Subordinated Debentures so received in liquidation of the Trust would include
the period for which such holder held the Preferred Securities.
If, however, a Tax Event occurs which results in the Trust being treated as
an association taxable as a corporation, the distribution would likely
constitute a taxable event to holders of the Preferred Securities. Under certain
circumstances described herein, the Subordinated Debentures may be redeemed for
cash and the proceeds of such redemption distributed to holders in redemption of
their Preferred Securities. Under current law, such a redemption would, for
United States federal income tax purposes, constitute a taxable disposition of
the redeemed Preferred Securities, and a holder would recognize gain or loss as
if the holder sold such Preferred Securities for cash. See "Description of the
Preferred Securities--Redemption or Exchange" and "--Liquidation Distribution
Upon Termination."
DISPOSITION OF PREFERRED SECURITIES
A holder that sells Preferred Securities will recognize gain or loss equal
to the difference between the amount realized on the sale of the Preferred
Securities (other than amounts attributable to accrued but unpaid interest which
has not yet been included in income, which will be treated as ordinary income)
and the holder's adjusted tax basis in such Preferred Securities. A holder's
adjusted tax basis in the Preferred Securities generally will be its initial
purchase price increased by OID (if any) previously includable in such holder's
gross income to the date of disposition (and the accrual of market discount, if
any, if an election to accrue market discount in income currently is made) and
decreased by payments received on the Preferred Securities to the date of
disposition (other than payments of qualified stated interest). Such gain or
loss will generally be a capital gain or loss if the Preferred Securities are
held as a capital asset.
The Preferred Securities may trade at a price that does not accurately
reflect the value of accrued but unpaid interest with respect to the underlying
Subordinated Debentures. A holder that uses the accrual method of accounting
(and a cash method holder if the Subordinated Debentures are deemed to have been
issued with OID) that disposes of its Preferred Securities between record dates
for payments of distributions thereon will be required to include accrued but
unpaid interest on the Subordinated Debentures through the date of disposition
in income as ordinary income, and to add such amount to its adjusted tax basis
in its pro rata share of the underlying Subordinated Debentures deemed disposed
of. To the extent the selling price (which may not fully reflect the value of
accrued but unpaid interest) is less than the holder's adjusted tax basis (which
basis will include, in the form of OID, all accrued but unpaid interest), a
holder will recognize a capital loss. Subject to certain limited exceptions,
capital losses cannot be applied to offset ordinary income for United States
federal income tax purposes.
EFFECT OF PROPOSED CHANGES IN TAX LAWS
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On February 6, 1997, President Clinton proposed certain tax law changes
that would, among other things, generally deny corporate issuers a deduction for
interest or OID in respect of certain debt obligations if such debt obligations
have a maximum term in excess of 15 years and are not shown as indebtedness on
the issuer's applicable consolidated balance sheet. The 1997 Proposed
Legislation was not included in the Taxpayer Relief Act of 1997 as enacted, and
was not included in President Clinton's 1999 budget proposal released in
February 1998. However, if legislation similar to the 1997 Proposed Legislation
is enacted in the future with retroactive effect, the Company would not be
entitled to an interest deduction with respect to the Subordinated Debentures.
There can be no assurance that legislation enacted after the date hereof will
not adversely affect, in the manner proposed in the 1997 Proposed Legislation or
otherwise, the ability of the Company to deduct the interest payable on the
Subordinated Debentures. Consequently, there can be no assurance that a Tax
Event will not occur. A Tax Event would permit the Company, upon approval of the
Federal Reserve, if then required under applicable capital guidelines or
policies of the Federal Reserve, to cause a redemption of the Preferred
Securities before, as well as after, , 2003. See "Description of the
Subordinated Debentures--Redemption or Exchange" and "Description of the
Preferred Securities--Redemption or Exchange--Tax Event Redemption, Capital
Treatment Event Redemption or Investment Company Event Redemption.
BACKUP WITHHOLDING AND INFORMATION REPORTING
The amount of interest (or OID) accrued on the Preferred Securities held of
record by individual citizens or residents of the United States, or certain
trusts, estates, and partnerships, will be reported to the Internal Revenue
Service on Forms 1099, which forms should be mailed to such holders of Preferred
Securities by January 31 following each calendar year. Payments made on, and
proceeds from the sale of, the Preferred Securities may be subject to a "backup"
withholding tax (currently at 31%) unless the holder complies with certain
identification and other requirements. Any amounts withheld under the backup
withholding rules will be allowed as a credit against the holder's United States
federal income tax liability, provided the required information is provided to
the Internal Revenue Service.
THE UNITED STATES FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED
FOR GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON THE
PARTICULAR SITUATION OF A HOLDER OF PREFERRED SECURITIES. HOLDERS OF PREFERRED
SECURITIES SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE TAX
CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE PREFERRED
SECURITIES, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN AND OTHER
TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN UNITED STATES FEDERAL OR OTHER
TAX LAWS.
ERISA CONSIDERATIONS
Employee benefit plans that are subject to the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), or Section 4975 of the Code
("Plans") generally may purchase Preferred Securities, subject to the investing
fiduciary's determination that the investment in Preferred Securities satisfies
ERISA's fiduciary standards and other requirements applicable to investments by
the Plan.
In any case, the Company and/or any of its affiliates may be considered a
"party in interest" (within the meaning of ERISA) or a "disqualified person"
(within the meaning of Section 4975 of the Code) with respect to certain Plans
(generally, Plans maintained or sponsored by, or contributed to by, any such
persons with respect to which the Company or an affiliate is a fiduciary, or
Plans for which the Company or an affiliate provides services). The acquisition
and ownership of Preferred Securities by a Plan (or by an individual retirement
arrangement or other Plans described in Section 4975(e)(1) of the Code) with
respect to which the Company or any of its affiliates is considered a party in
interest or a disqualified person may constitute or result in a prohibited
transaction under ERISA or Section 4975 of the Code, unless such Preferred
Securities are acquired pursuant to and in accordance with an applicable
exemption.
- 49 -
<PAGE>
As a result, Plans with respect to which the Company or any of its
affiliates is a party in interest or a disqualified person should not acquire
Preferred Securities unless such Preferred Securities are acquired pursuant to
and in accordance with an applicable exemption. Any other Plans or other
entities whose assets include Plan assets subject to ERISA or Section 4975 of
the Code proposing to acquire Preferred Securities should consult with their own
counsel.
UNDERWRITING
The Underwriters named below (the "Underwriters"), have severally agreed,
subject to the terms and conditions set forth in the Underwriting Agreement, the
form of which is filed as an exhibit to the Registration Statement of which this
Prospectus forms a part, to purchase from the Trust the number of Preferred
Securities set forth opposite their respective names below. The Underwriters
have agreed in the Underwriting Agreement, subject to the terms and conditions
set forth therein, to purchase all of the Preferred Securities offered hereby if
any of the Preferred Securities are purchased. In the event of a default by an
Underwriter, the Underwriting Agreement provides that, in certain circumstances,
purchase commitments of the nondefaulting Underwriters may be increased, or the
Underwriting Agreement may be terminated.
Underwriter Number of
Preferred Securities
- ---------------------------------------------- ---------------------------
Sandler O'Neill & Partners, L.P. 700,000
Legg Mason Wood Walker, Incorporated 700,000
---------------------------
Total 1,400,000
===========================
The Underwriters have advised the Trust that they propose initially to
offer the Preferred Securities to the public at the public offering price set
forth on the cover page of this Prospectus, and to certain dealers at such price
less a concession not in excess of $ per Preferred Security. The Underwriters
may allow, and such dealers may reallow, a discount not in excess of $ per
Preferred Security to certain other dealers. After the initial public offering,
the public offering price, concession and discount may be changed.
In view of the fact that the proceeds of the sale of the Preferred
Securities will be used to purchase the Subordinated Debentures of the Company,
the Underwriting Agreement provides that the Company will pay, as compensation
to the Underwriters for arranging the investment therein of such proceeds, $ per
Preferred Security (or $ in the aggregate, or $ in the aggregate if the
Underwriters' over-allotment option, described below, is exercised in full), in
immediately available funds. In addition to such compensation, the Company has
agreed to pay the Underwriters' expenses in connection with this Offering,
including legal expenses.
The Trust has granted the Underwriters an option to purchase up to an
additional 210,000 Preferred Securities at the initial public offering price.
Such option, which expires 30 days from the date of this Prospectus, may be
exercised solely to cover over-allotments. To the extent that the Underwriters
exercise their option to purchase additional Preferred Securities, the Trust
will issue and sell to the Company additional Common Securities in such
aggregate Liquidation Amount as is required for the Company to continue to hold
Common Securities in an aggregate Liquidation Amount equal to at least 3% of the
total capital of the Trust, and the Company will issue and sell to the Trust
Subordinated Debentures in an aggregate principal amount equal to the total
aggregate Liquidation Amount of the additional Preferred Securities being
purchased pursuant to the option and the additional Common Securities.
In connection with the offering of the Preferred Securities, the
Underwriters and any selling group members and their respective affiliates may
engage in transactions effected in accordance with Rule 104 of the Securities
and Exchange Commission's Regulation M that are intended to stabilize, maintain
or otherwise affect the market price of the Preferred Securities. Such
transactions may include over-allotment transactions in which the Underwriters
create a short position for their own account by selling more Preferred
Securities than they are committed to purchase
- 50 -
<PAGE>
from the Trust. In such 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 completion of the
initial offering of the Preferred Securities.
The Underwriters may also engage in stabilizing transactions in which they
bid for and purchase 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 concession allowed to an Underwriter or dealer if the
Underwriters repurchase securities distributed by that Underwriter or dealer.
Any of the foregoing transactions may result in the maintenance of a price for
the Preferred Securities at a level above that which might otherwise prevail in
the open market. Neither the Company nor 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 the foregoing
transactions and, if commenced, such transactions may be discontinued without
notice.
During a period of 180 days from the date of this Prospectus, neither the
Trust nor the Company will, subject to certain exceptions, without the prior
written consent of the Underwriters, directly or indirectly, sell, offer to
sell, grant any option for sale of, or otherwise dispose of, any Preferred
Securities, any security convertible into or exchangeable into or exercisable
for Preferred Securities or Subordinated Debentures or any debt securities
substantially similar to the Subordinated Debentures or equity securities
substantially similar to the Preferred Securities (except for Subordinated
Debentures and the Preferred Securities offered hereby).
Because the National Association of Securities Dealers, Inc. (the "NASD")
is expected to view the Preferred Securities as interests in a direct
participation program, the offering of the Preferred Securities is being made in
compliance with the applicable provisions of Rule 2810 of the NASD's Rules of
Conduct.
Application has been made to have the Preferred Securities approved for
quotation on The Nasdaq Stock Market's National Market. The Underwriters have
advised the Trust that they presently intend to make a market in the Preferred
Securities after the commencement of trading on The Nasdaq Stock Market's
National Market, but no assurances can be made as to the liquidity of such
Preferred Securities or that an active and liquid trading market will develop
or, if developed, that it will continue. The offering price and distribution
rate have been determined by negotiations among representatives of the Company
and the Underwriters, and the offering price of the Preferred Securities may not
be indicative of the market price following the offering. The Underwriters will
have no obligation to make a market in the Preferred Securities, however, and
may cease market-making activities, if commenced, at any time.
The Trust and the Company have agreed to indemnify the Underwriters
against, or contribute to payments that the Underwriters may be required to make
in respect of, certain liabilities, including liabilities under the Securities
Act.
The Underwriters engage in transactions with, and, from time to time, have
performed services for, the Company and its subsidiaries in the ordinary course
of business.
VALIDITY OF SECURITIES
Certain matters of Delaware law relating to the validity of the Preferred
Securities, the enforceability of the Trust Agreement and the formation of the
Trust will be passed upon by Richards, Layton & Finger, P.A., special Delaware
counsel to the Company and the Trust. Certain legal matters for the Company and
the Trust, including the validity of the Guarantee and the Subordinated
Debentures, will be passed upon for the Company and the Trust by Kennedy, Baris
& Lundy, L.L.P., Bethesda, Maryland, counsel to the Company and the Trust.
Certain legal matters will be passed upon for the Underwriters by Breyer &
Aguggia LLP, Washington, D.C. Kennedy, Baris & Lundy, L.L.P. and Breyer &
Aguggia LLP will rely on the opinion of Richards, Layton & Finger, P.A. as to
matters of Delaware law. Certain matters relating to United States federal
income tax considerations will be passed upon for the Company by Kennedy, Baris
& Lundy, L.L.P.
- 51 -
<PAGE>
EXPERTS
The consolidated financial statements at December 31, 1997 and 1996 and for
each of the three years in the period ended December 31, 1997 incorporated by
reference in this Prospectus have been audited by Keller Bruner & Company, LLC.
independent auditors, as stated in its report, which is incorporated by
reference herein, and have been so incorporated in reliance upon the report of
such firm given its authority as an expert in accounting and auditing.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed by the Company with the Securities
and Exchange Commission (the "Commission") are incorporated herein by reference:
(1) The Company's Annual Report on Form 10-K for the year ended December
31, 1997;
(2) The Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1998;
All reports filed by the Company with the Commission pursuant to Section
13(a) or 15(d) of the Exchange Act subsequent to the date of this Prospectus and
prior to the termination of the offering of the Preferred Securities offered
hereby shall be deemed to be incorporated by reference in this Prospectus and to
be a part hereof from the date of filing of such documents. Any statement
contained in a document incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
THE COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH PERSON TO WHOM THIS
PROSPECTUS IS DELIVERED, ON THE WRITTEN OR ORAL REQUEST OF ANY SUCH PERSON, A
COPY OF ANY OR ALL OF THE DOCUMENTS INCORPORATED HEREIN BY REFERENCE (OTHER THAN
EXHIBITS TO SUCH DOCUMENTS WHICH ARE NOT SPECIFICALLY INCORPORATED BY REFERENCE
IN SUCH DOCUMENTS). WRITTEN REQUESTS FOR SUCH COPIES SHOULD BE DIRECTED TO MARK
A. SEVERSON, SENIOR VICE PRESIDENT, FCNB CORP, 7200 FCNB COURT, FREDERICK,
MARYLAND 21703. TELEPHONE REQUESTS MAY BE DIRECTED TO (301) 662-2191.
AVAILABLE INFORMATION
This Prospectus constitutes a part of a Registration Statement on Form S-3
(together with all amendments and exhibits thereto, the "Registration
Statement") filed by the Company and the Trust with the Commission under the
Securities Act, with respect to the Preferred Securities and the Subordinated
Debentures. This Prospectus does not contain all of the information set forth in
such Registration Statement, certain parts of which are omitted in accordance
with the rules and regulations of the Commission. Reference is made to such
Registration Statement and to the exhibits relating thereto for further
information with respect to the Company, the Trust, the Preferred Securities and
the Subordinated Debentures. Any statements contained herein concerning the
provisions of any document filed as an exhibit to the Registration Statement or
otherwise filed with the Commission or incorporated by reference herein are not
necessarily complete, and, in each instance, reference is made to the copy of
such document so filed for a more complete description of the matter involved.
Each such statement is qualified in its entirety by such reference.
The Company is subject to the informational requirements of the Exchange
Act and, in accordance therewith, files reports, proxy statements and other
information with the Commission. Such reports, proxy statements and other
information can be inspected and copied at the following public reference
facilities maintained by the Commission: 450 Fifth Street, N.W., Washington,
D.C. 20549; 7 World Trade Center, Suite 1300, New York, New York 10048; and the
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511. Copies of such material
- 52 -
<PAGE>
may also be obtained by mail from the Public Reference Section of the Commission
at 450 Fifth Street, N.W., Room 1024, Washington, DC 20549, upon payment of
prescribed rates. The Commission maintains in Internet web site that contains
reports, proxy and information statements and other information regarding
issuers who file electronically with the Commission. The address of that site is
http://www.sec.gov.
No separate financial statements of the Trust have been included herein.
The Company does not consider that such financial statements would be material
to holders of Preferred Securities because: (i) all of the voting securities of
the Trust will be owned by the Company, a reporting company under the Exchange
Act; (ii) the Trust has no independent operations but exists for the sole
purpose of issuing securities representing undivided beneficial interests in the
assets of the Trust and investing the proceeds thereof in Subordinated
Debentures issued by the Company; and (iii) the obligations of the Company
described herein to provide certain indemnities in respect of and be responsible
for certain costs, expenses, debts and liabilities of the Trust under the
Indenture and pursuant to the Trust Agreement, the Guarantee issued by the
Company with respect to the Preferred Securities, the Subordinated Debentures
purchased by the Trust and the related Indenture, taken together, constitute, in
the belief of the Company and the Trust, a full and unconditional guarantee of
payments due on the Preferred Securities. See "Description of the Subordinated
Debentures" and "Description of the Guarantee."
The Trust is not currently subject to the information reporting
requirements of the Exchange Act. The Trust will become subject to such
requirements upon the effectiveness of the Registration Statement, although it
intends to seek and expects to receive an exemption therefrom.
- 53 -
<PAGE>
======================================= =======================================
TABLE OF CONTENTS
Page
Prospectus Summary................ 5
Selected Consolidated
Financial Data.................. 9
Ratio of Earnings to Fixed
Charges......................... 10
Risk Factors...................... 11
Use of Proceeds................... 17
Market for the Preferred 1,400,000 Preferred Securities
Securities...................... 17
Accounting Treatment.............. 17 FCNB CAPITAL TRUST
Capitalization.................... 18 % Cumulative Trust Preferred
The Company....................... 19 Securities
The Trust ........................ 19 (Liquidation Amount $25 per
Description of the Preferred Preferred Security)
Securities...................... 21 guaranteed, as described
Description of the Subordinated herein, by
Debentures...................... 32
Book-Entry Issuance............... 41
Description of the Guarantee...... 42
Relationship Among the
Preferred Securities,
Subordinated Debentures
and the Guarantee............... 45
Certain Federal Income Tax FCNB CORP LOGO
Consequences.................... 46
ERISA Considerations.............. 50
Underwriting...................... 50
Validity of Securities............ 52
Experts........................... 52
Incorporation of Certain Documents -------------------
by Reference.................... 52
Available Information............. 53 Prospectus
___________, 1998
------------------------------- -------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY
REPRESENTATION OTHER THAN THOSE
CONTAINED IN THIS PROSPECTUS AND, IF
GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON Sandler O'Neill & Partners, L.P.
AS HAVING BEEN AUTHORIZED BY THE TRUST,
THE COMPANY OR THE UNDERWRITERS.
NEITHER THE DELIVERY OF THIS PROSPECTUS
NOR ANY SALE MADE HEREUNDER SHALL,
UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO Legg Mason Wood Walker
CHANGE IN THE AFFAIRS OF THE COMPANY Incorporated
SINCE THE DATE OF THIS PROSPECTUS. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER
TO SELL OR A SOLICITATION OF AN OFFER
TO BUY ANY SECURITIES OFFERED HEREBY IN
ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION IS NOT AUTHORIZED OR IN
WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO
OR TO ANYONE TO WHOM IT IS UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION.
-------------------------------
======================================= =======================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The expenses payable by the Company in connection with the Offering
described in this Registration Statement (other than underwriting discounts and
commissions) are as follows:
SEC Registration Fee..................................................$ 11,874
NASD Filing Fee............................................................4,525
Nasdaq Listing Fee........................................................13,400
*Blue Sky Filing Fees and Expenses (Including counsel fees)................7,500
*Legal Fees..............................................................120,000
*Printing, Engraving and Edgar............................................17,500
*Accounting Fees and Expenses.............................................30,000
*Other Expenses.......................................................... 12,701
Total................................................$ 217,500
- ----------
* Estimated
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Articles of Incorporation and Bylaws of FCNB provide for the
indemnification of the officers and directors of FCNB to the fullest extent
permitted by the Maryland General Corporation Law (the "MGCL"), and for the
indemnification of other persons to the extent permitted by law and as
determined by the Board of Directors. The MGCL provides, in general, that a
corporation has the power to indemnify a director, officer, employee or agent of
the corporation, who was, is or is threatened to be made a defendant or
respondent to any action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that he served as a
director, officer, employee or agent of the corporation, or served at the
corporation's request in any capacity of another enterprise or employee benefit
plan, unless (i) the act or omission giving rise to the liability of such person
was material to the matter giving rise to the proceeding and (a) was committed
in bad faith or (b) was the result of active and deliberate dishonesty; (ii) the
director received an improper personal benefit in money, property or services;
or (iii) in the case of any criminal proceeding, such person had reasonable
cause to believe the act or omission was unlawful. Notwithstanding the
foregoing, no indemnification shall be authorized in the case of any proceeding
by or in the right of the corporation, if the person has been adjudged liable to
the corporation, except that a court may order indemnification against expenses
(including attorney fees) only. The indemnification is mandatory in the case of
success, on the merits or otherwise, in the defense of any proceeding.
Indemnification is against judgements, penalties, fines, settlements, and
reasonable expenses actually incurred (including attorney's fees) in connection
with the proceeding. A corporation has the power to purchase and maintain
insurance or maintain other arrangements in respect of such indemnification. The
indemnification provided by the MGCL is not exclusive of other rights to
indemnification to which any person may otherwise be entitled.
ITEM 16. EXHIBITS.
Number Description
------ -----------
1 Form of Underwriting Agreement
4.1 Form of Indenture for Subordinated Debentures(1)
II-1
<PAGE>
Number Description
------ -----------
1 Form of Underwriting Agreement
4.1 Form of Indenture for Subordinated Debenture(1)
4.2 Form of Subordinated Debenture (included as an exhibit to
Exhibit 4.1)(1)
4.3 Certificate of Trust of FCNB Capital Trust(1)
4.4 Trust Agreement, of FCNB Capital Trust(1)
4.5 Form of Amended and Restated Trust Agreement of FCNB Capital
Trust(1)
4.6 Form of Preferred Security Certificate of FCNB Capital Trust
(included as an exhibit to Exhibit 4.5)(1)
4.7 Form of Preferred Securities Guarantee Agreement(1)
4.8 Form of Agreement as to Expenses and Liabilities (included as
an exhibit to Exhibit 4.5)(1)
5.1 Form of Opinion of Kennedy, Baris & Lundy, L.L.P.(1)
5.2 Form of Opinion of Richards, Layton & Finger, P.A.(1)
8 Form of Tax Opinion of Kennedy, Baris & Lundy, L.L.P.(1)
12.1 Statement Regarding Computation of Ratio of Earnings to Fixed
Charges(1)
23.1 Consent of Keller Bruner & Company, LLC, Independent Auditors
23.2 Consents of Kennedy, Baris & Lundy, L.L.P. (included in
Exhibits 5.1 and 8)
23.3 Consent of Richards, Layton & Finger, P.A. (included in
Exhibit 5.2)
25.1 Form T-1 Statement of Eligibility of State Street Bank and
Trust Company to act as trustee under the Indenture(1)
25.2 Form T-1 Statement of Eligibility of State Street Bank and
Trust Company to act as trustee under the Amended and Restated
Trust Agreement(1)
25.3 Form T-1 Statement of Eligibility of State Street Bank and
Trust Company to act as trustee under the Preferred Securities
Guarantee Agreement(1)
- ----------
(1) Previously filed.
ITEM 17. UNDERTAKINGS.
The Registrant hereby undertakes that it will:
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933 (the "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 (the "Exchange Act") (and, where
applicable, each filing of an employee benefit plan's annual report pursuant to
section 15(d) of the Exchange Act) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities
II-2
<PAGE>
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 Act may be
permitted to directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant 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 of whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by the
final adjudication of such issue.
The undersigned registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent or
given, the latest annual report to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Exchange Act; and, where
interim financial information required to be presented by Article 3 of
Regulation S-X are not set forth in the prospectus, to deliver, or cause to be
delivered to each person to whom the prospectus is sent or given, the latest
quarterly report that is specifically incorporated by reference in the
prospectus to provide such interim financial information.
The undersigned registrant hereby undertakes that: (1) For purposes of
determining any liability under the 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 Act shall be deemed to be part of this
registration statement as of the time it was declared effective. (2) For the
purpose of determining any liability under the 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.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, 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 registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Frederick, State of Maryland on May 26, 1998.
FCNB CORP
By: /s/ A. Patrick Linton
----------------------------
A. Patrick Linton, President
and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as amended, 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 registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Frederick, State of Maryland on May 26, 1998.
FCNB CAPITAL TRUST
BY: FCNB CORP
By: /s/ A. Patrick Linton
----------------------------
A. Patrick Linton, President
and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
<S> <C> <C>
/s/ George B. Callan, Jr. Director May 26, 1998
- --------------------------------
George B. Callan, Jr.
- -------------------------------- Director
Miles M. Circo
/s/ Shirley D. Collier Director May 26, 1998
- --------------------------------
Shirley D. Collier
/s/ Clyde C. Crum Chairman of the Board of May 26, 1998
- -------------------------------- Directors
Clyde C. Crum
- -------------------------------- Director
James S. Grimes
/s/ Bernard L. Grove
- -------------------------------- Director May 26, 1998
Bernard L. Grove, Jr.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
/s/ Gail T. Guyton Director May 26, 1998
- --------------------------------
Gail T. Guyton
/s/ Frank L. Hewitt, III Director May 26, 1998
- --------------------------------
Frank L. Hewitt, III
/s/ A. Patrick Linton President, Chief Executive Officer May 26, 1998
- -------------------------------- and Director
A. Patrick Linton
/s/ Jacob R. Ramsburg, Jr. Director May 26, 1998
- --------------------------------
Jacob R. Ramsburg, Jr.
- -------------------------------- Director
Ramona C. Remsberg
/s/ Kenneth W. Rice Director May 26, 1998
- --------------------------------
Kenneth W. Rice
/s/ Rand D. Weinberg Director May 26, 1998
- --------------------------------
Rand D. Weinberg
/s/ DeWalt J. Willard, Jr. Director May 26, 1998
- --------------------------------
DeWalt J. Willard, Jr.
/s/ Mark A. Severson Senior Vice President, Treasurer,
- -------------------------------- Principal Financial and May 26, 1998
Mark A. Severson Accounting Officer
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
Number Description
------ -----------
1 Form of Underwriting Agreement
4.1 Form of Indenture for Subordinated Debenture(1)
4.2 Form of Subordinated Debenture (included as an exhibit to
Exhibit 4.1)(1)
4.3 Certificate of Trust of FCNB Capital Trust(1)
4.4 Trust Agreement, of FCNB Capital Trust(1)
4.5 Form of Amended and Restated Trust Agreement of FCNB Capital
Trust(1)
4.6 Form of Preferred Security Certificate of FCNB Capital Trust
(included as an exhibit to Exhibit 4.5)(1)
4.7 Form of Preferred Securities Guarantee Agreement(1)
4.8 Form of Agreement as to Expenses and Liabilities (included as
an exhibit to Exhibit 4.5)(1)
5.1 Form of Opinion of Kennedy, Baris & Lundy, L.L.P.(1)
5.2 Form of Opinion of Richards, Layton & Finger, P.A.(1)
8 Form of Tax Opinion of Kennedy, Baris & Lundy, L.L.P.(1)
12.1 Statement Regarding Computation of Ratio of Earnings to Fixed
Charges(1)
23.1 Consent of Keller Bruner & Company, LLC, Independent Auditors
23.2 Consents of Kennedy, Baris & Lundy, L.L.P. (included in
Exhibits 5.1 and 8)(1)
23.3 Consent of Richards, Layton & Finger, P.A. (included in
Exhibit 5.2)
25.1 Form T-1 Statement of Eligibility of State Street Bank and
Trust Company to act as trustee under the Indenture(1)
25.2 Form T-1 Statement of Eligibility of State Street Bank and
Trust Company to act as trustee under the Amended and Restated
Trust Agreement(1)
25.3 Form T-1 Statement of Eligibility of State Street Bank and
Trust Company to act as trustee under the Preferred Securities
Guarantee Agreement(1)
- ----------
(1) Previously filed.
1,400,000 Preferred Securities
FCNB Capital Trust
___% Cumulative Trust Preferred Securities
(Liquidation Amount of $25 per Preferred Security)
UNDERWRITING AGREEMENT
----------------------
_______________, 1998
SANDLER O'NEILL & PARTNERS, L.P.
Two World Trade Center, 104th Floor
New York, New York 10048
LEGG MASON WOOD WALKER, INCORPORATED
1747 Pennsylvania Avenue, N.W.
Washington, D.C. 20006
Ladies and Gentlemen:
FCNB Corp, a Maryland corporation (the "Company") and its
financing subsidiary, FCNB Capital Trust, a Delaware business trust (the
"Trust", and hereinafter together with the Company, the "Offerors"), propose
that the Trust issue and sell to Sandler O'Neill & Partners, L.P. and Legg Mason
Wood Walker, Incorporated (the "Underwriters"), pursuant to the terms of this
Agreement, 1,400,000 of the Trust's ____% Cumulative Trust Preferred Securities,
with a liquidation amount of $25 per preferred security (the "Preferred
Securities"), to be issued under the Trust Agreement (as hereinafter defined),
the terms of which are more fully described in the Prospectus (as hereinafter
defined). The aforementioned 1,400,000 Preferred Securities to be sold to the
Underwriters are herein called the "Firm Preferred Securities". Solely for the
purpose of covering over-allotments in the sale of the Firm Preferred
Securities, the Offerors further propose that the Trust issue and sell to the
Underwriters, at the Underwriters' option, up to an additional 210,000 Preferred
Securities (the "Option Preferred Securities") upon exercise of the
over-allotment option granted in Section 1 hereof. The Firm Preferred Securities
and any Option Preferred Securities are herein collectively referred to as the
"Designated Preferred Securities".
The Offerors hereby confirm as follows their agreement with
the Underwriters in connection with the proposed purchase of the Designated
Preferred Securities. The terms, conditions, covenants and agreements set forth
in this Agreement supersede and preempt the terms, conditions, covenants and
agreements of the parties set forth in any and all other agreements among the
parties hereto relating to the issuance of the Preferred Securities.
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1. SALE, PURCHASE AND DELIVERY OF DESIGNATED PREFERRED SECURITIES;
DESCRIPTION OF DESIGNATED PREFERRED SECURITIES.
(a) On the basis of the representations, warranties and
agreements herein contained, and subject to the terms and conditions herein set
forth, the Offerors hereby agree that the Trust shall issue and sell to the
Underwriters and the Underwriters agree to purchase from the Trust, at a
purchase price of $25 per share (the "Purchase Price"), the Firm Preferred
Securities. Because the proceeds from the sale of the Firm Preferred Securities
will be used to purchase from the Company its Debentures (as hereinafter defined
and as described in the Prospectus), the Company shall pay to the Underwriters a
commission of $0.875 per Firm Preferred Security purchased (the "Firm Preferred
Securities Commission").
In addition, on the basis of the representations, warranties
and agreements herein contained and subject to the terms and conditions herein
set forth, the Trust hereby grants to the Underwriters, an option to purchase
all or any portion of the 210,000 Option Preferred Securities, and upon the
exercise of such option in accordance with this Section 1, the Offerors hereby
agree that the Trust shall issue and sell to the Underwriters all or any portion
of the Option Preferred Securities at the same Purchase Price per share paid for
the Firm Preferred Securities. Because the proceeds from the sale of the Option
Preferred Securities will be used to purchase from the Company its Debentures,
the Company shall pay to the Underwriters a commission of $0.875 per Option
Preferred Security for each Option Preferred Security purchased (the "Option
Preferred Securities Commission"). The option hereby granted (the "Option")
shall expire 30 days after the date upon which the Registration Statement (as
hereinafter defined) becomes effective and may be exercised only for the purpose
of covering over-allotments which may be made in connection with the offering
and distribution of the Firm Preferred Securities. The Option may be exercised
in whole or in part at any time (but not more than once) by you giving notice
(confirmed in writing) to the Trust setting forth the number of Option Preferred
Securities as to which the Underwriters are exercising the Option and the time,
date and place for payment and delivery of certificates for such Option
Preferred Securities. Such time and date of payment and delivery for the Option
Preferred Securities (the "Option Closing Date") shall be determined by you, but
shall not be earlier than two nor later than five full business days after the
exercise of such Option, nor in any event prior to the Closing Date (as
hereinafter defined). Certificates for the Option Preferred Securities will be
made available for inspection at least 24 hours prior to the Option Closing Date
at the offices of the DTC (as hereinafter defined), or its designated custodian,
or at such other location as specified by the Underwriter. The Option Closing
Date may be the same as the Closing Date (as hereinafter defined).
Payment of the Purchase Price and the Firm Preferred
Securities Commission and delivery of the Firm Preferred Securities shall be
made at the offices of Sandler O'Neill & Partners, L.P., Two World Trade Center,
104th Floor, New York, New York 10048, or such other place as shall be agreed to
by you and the Offerors, at 11:00 a.m., New York time, on _________, 1998, or at
such other time not more than five full business days thereafter as the Offerors
and you shall determine (the "Closing Date"). The Firm Preferred Securities
shall be issued in the form of one or more fully registered global securities
(the "Global Securities") in book-entry form in such denominations and
registered in the name of the nominee of The
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<PAGE>
Depository Trust Company (the "DTC") or in such names as the Underwriters may
request in writing at least two business days before the Closing Date. The
Global Securities representing the Firm Preferred Securities shall be made
available for examination by the Underwriters and counsel to the Underwriters
not later than 9:30 a.m. Eastern Standard Time on the last business day prior to
the Closing Date. If the Underwriters exercise the option to purchase any or all
of the Option Preferred Securities, payment of the Purchase Price and Option
Preferred Securities Commission and delivery of the certificate representing the
Option Preferred Securities shall be made on the Option Closing Date at the
offices of Sandler O'Neill & Partners, L.P., or at such other place as the
Offerors and you shall determine. Such payments shall be made to an account
designated by the Trust by wire transfer in immediately available funds, in the
amount of the Purchase Price therefor, against delivery by or on behalf of the
Trust to you of certificates for the Designated Preferred Securities to be
purchased.
The Agreement contained herein with respect to the timing of
the Closing Date and Option Closing Date is intended to, and does, constitute an
express agreement, as described in Rule 15c6-1(a) and (d) promulgated under the
1934 Act (as defined herein), for a settlement date other than three business
days after the date of the contract.
(b) The Offerors propose that the Trust issue the Designated
Preferred Securities pursuant to an Amended and Restated Trust Agreement among
Wilmington Trust Company, as Delaware Trustee, State Street Bank and Trust
Company, as Property Trustee, the Administrative Trustees named therein
(collectively, the "Trustees"), and the Company, in substantially the form
heretofore delivered to the Underwriters, said Agreement being hereinafter
referred to as the "Trust Agreement". In connection with the issuance of the
Designated Preferred Securities, the Company proposes (i) to issue its
Subordinated Debentures ( the "Debentures") pursuant to an Indenture, dated as
of ___________, 1998, between the Company and State Street Bank and Trust
Company, as Trustee (the "Indenture") and (ii) to guarantee certain payments on
the Designated Preferred Securities pursuant to a Guarantee Agreement between
the Company and State Street Bank and Trust Company, as guarantee trustee (the
"Guarantee"), to the extent described therein.
2. REPRESENTATIONS AND WARRANTIES.
(a) The Offerors jointly and severally represent and warrant
to the Underwriters that:
(i) The reports filed with the Securities and
Exchange Commission (the "Commission") by the Company under the
Securities Exchange Act of 1934, as amended (the "1934 Act") and the
rules and regulations thereunder (the "1934 Act Regulations") during
the two year period ending on the date hereof, at the time they were
filed with the Commission, complied as to form in all material respects
with the requirements of the 1934 Act and the 1934 Act Regulations and
did not contain an untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to
3
<PAGE>
make the statements therein, in light of the circumstances in which
they were made, not misleading.
(ii) The Offerors have prepared and filed with the
Commission a registration statement on Form S-3 (File Numbers 333-52359
and 333-52359-01) for the registration of the Designated Preferred
Securities, the Guarantee and $40,250,000 aggregate principal amount of
Debentures under the Securities Act of 1933, as amended (the "1933
Act"), including the related prospectus subject to completion, and one
or more amendments to such registration statement may have been so
filed, in each case in conformity in all material respects with the
requirements of the 1933 Act, the rules and regulations promulgated
thereunder (the "1933 Act Regulations") and the Trust Indenture Act of
1939, as amended (the "Trust Indenture Act") and the rules and
regulations thereunder. Copies of such registration statement,
including any amendments thereto, each Preliminary Prospectus (as
defined herein) contained therein and the exhibits, financial
statements and schedules to such registration statement, as finally
amended and revised, have heretofore been delivered by the Offerors to
the Underwriters. After the execution of this Agreement, the Offerors
will file with the Commission (A) if such registration statement, as it
may have been amended, has been declared by the Commission to be
effective under the 1933 Act, a prospectus in the form most recently
included in an amendment to such registration statement (or, if no such
amendment shall have been filed, in such registration statement), with
such changes or insertions as are required by Rule 430A of the 1933 Act
Regulations ("Rule 430A") or permitted by Rule 424(b) of the 1933 Act
Regulations ("Rule 424(b)") and as have been provided to and not
objected to by the Underwriters prior to (or as are agreed to by the
Underwriters subsequent to) the execution of this Agreement, or (B) if
such registration statement, as it may have been amended, has not been
declared by the Commission to be effective under the 1933 Act, an
amendment to such registration statement, including a form of final
prospectus, necessary to permit such registration statement to become
effective, a copy of which amendment has been furnished to and not
objected to by the Underwriters prior to (or is agreed to by the
Underwriters subsequent to) the execution of this Agreement. As used in
this Agreement, the term "Registration Statement" means such
registration statement, as amended at the time when it was or is
declared effective under the 1933 Act, including (1) all financial
schedules and exhibits thereto, (2) all documents (or portions thereof)
incorporated by reference therein filed under the 1934 Act, and (3) any
information omitted therefrom pursuant to Rule 430A and included in the
Prospectus (as hereinafter defined); the term "Preliminary Prospectus"
means each prospectus subject to completion filed with such
registration statement or any amendment thereto including all documents
(or portions thereof) incorporated by reference therein under the 1934
Act (including the prospectus subject to completion, if any, included
in the Registration Statement and each prospectus filed pursuant to
Rule 424(a) under the 1933 Act); and the term "Prospectus" means the
prospectus first filed with the Commission pursuant to Rule 424(b)(1)
or (4) or, if no prospectus is required to be filed pursuant to Rule
424(b)(1) or (4), the prospectus included in the Registration
Statement, in each case including the financial schedules and all
documents (or portions thereof) incorporated by reference therein under
4
<PAGE>
the 1934 Act. The date on which the Registration Statement becomes
effective is hereinafter referred to as the "Effective Date."
(iii) The documents incorporated by reference in the
Preliminary Prospectus or Prospectus or from which information is so
incorporated by reference, when they became effective or were filed
with the Commission, as the case may be, complied in all material
respects with the requirements of the 1934 Act and the 1934 Act
Regulations, and when read together and with the other information in
the Preliminary Prospectus or Prospectus, as the case may be, at the
time the Registration Statement became or becomes effective and at the
Closing Date and any Option Closing Date, did not or will not, as the
case may be, contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which
they were made, not misleading.
(iv) No order preventing or suspending the use of any
Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus) has been issued by the Commission, nor has the
Commission threatened to issue such an order or instituted proceedings
for that purpose. Each Preliminary Prospectus, at the time of filing
thereof, (A) complied in all material respects with the requirements of
the 1933 Act and the 1933 Act Regulations and (B) did not contain an
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading; provided, however, that this representation and warranty
does not apply to statements or omissions made in reliance upon and in
conformity with information furnished in writing to the Offerors by the
Underwriters expressly for inclusion in the Prospectus beneath the
heading "Underwriting" (such information referred to herein as the
"Underwriters' Information").
(v) At the Effective Date and at all times subsequent
thereto, up to and including the Closing Date and, if applicable, the
Option Closing Date, the Registration Statement and any post-effective
amendment thereto (A) complied and will comply in all material respects
with the requirements of the 1933 Act, the 1933 Act Regulations and the
Trust Indenture Act (and the rules and regulations thereunder) and (B)
did not and will not contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein, not misleading. At the
Effective Date and at all times when the Prospectus is required to be
delivered in connection with offers and sales of Designated Preferred
Securities, including, without limitation, the Closing Date and, if
applicable, the Option Closing Date, the Prospectus, as amended or
supplemented, (A) complied and will comply in all material respects
with the requirements of the 1933 Act and the 1933 Act Regulations and
the Trust Indenture Act (and the rules and regulations thereunder) and
(B) did not contain and will not contain an untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances
5
<PAGE>
under which they were made, not misleading; provided, however, that
this representation and warranty does not apply to Underwriters'
Information.
(vi) (A) The Company is duly organized, validly
existing and in good standing under the laws of the State of Maryland,
with full corporate and other power and authority to own, lease and
operate its properties and conduct its business as described in and
contemplated by the Registration Statement and the Prospectus (or, if
the Prospectus is not in existence, the most recent Preliminary
Prospectus) and as currently being conducted and is duly registered as
a bank holding company under the Bank Holding Company Act of 1956, as
amended (the "BHC Act").
(B) The Trust has been duly created and is
validly existing as a statutory business trust in good standing under
the Delaware Business Trust Act with the power and authority (trust and
other) to own its property and conduct its business as described in the
Registration Statement and Prospectus, to issue and sell its common
securities (the "Common Securities") to the Company pursuant to the
Trust Agreement, to issue and sell the Designated Preferred Securities,
to enter into and perform its obligations under this Agreement and to
consummate the transactions herein contemplated; the Trust has no
subsidiaries and is duly qualified to transact business and is in good
standing in each jurisdiction in which the conduct of its business or
the ownership of its property requires such qualification, except to
the extent that the failure to be so qualified or be in good standing
would not have a material adverse effect on the Trust; the Trust has
conducted and will conduct no business other than the transactions
contemplated by this Agreement and described in the Prospectus; the
Trust is not a party to or bound by any agreement or instrument other
than this Agreement, the Trust Agreement and the agreements and
instruments contemplated by the Trust Agreement and described in the
Prospectus; the Trust has no liabilities or obligations other than
those arising out of the transactions contemplated by this Agreement
and the Trust Agreement and described in the Prospectus; the Trust is
not a party to or subject to any action, suit or proceeding of any
nature; the Trust is not, and at the Closing Date or any Option Closing
Date will not be, to the knowledge of the Offerors, classified as an
association taxable as a corporation for United States federal income
tax purposes; and the Trust is, and as of the Closing Date or any
Option Closing Date will be, treated as a consolidated subsidiary of
the Company pursuant to generally accepted accounting principles.
(vii) The Company has one direct subsidiary and FCNB
Bank (the "Bank") has three direct subsidiaries. They are listed on
Exhibit A attached hereto and incorporated herein (the "Subsidiaries").
The Company does not own or control, directly or indirectly, more than
5% of any class of equity security of any corporation, association or
other entity other than the Subsidiaries, except that the Bank has a
16% interest in Maryland Title Center - West, LLC. Each Subsidiary is a
bank, corporation, or Delaware business trust duly incorporated (or
created, as the case may be), validly existing and in good standing
under the laws of its respective jurisdiction of incorporation. Each
such Subsidiary has full corporate and other power and authority to
own, lease and operate its
6
<PAGE>
properties and to conduct its business as described in and contemplated
by the Registration Statement and the Prospectus (or, if the Prospectus
is not in existence, the most recent Preliminary Prospectus) and as
currently being conducted. The deposit accounts of the Bank are insured
by the Federal Deposit Insurance Corporation up to the maximum amount
provided by law; and no proceedings for the modification, termination
or revocation of any such insurance are pending or have been
threatened.
(viii) Each of the Company and the Subsidiaries is
duly qualified to transact business as a foreign corporation and is in
good standing in each other jurisdiction in which it owns or leases
property or conducts its business so as to require such qualification
and in which the failure to so qualify would, individually or in the
aggregate, have a material adverse effect on the condition (financial
or otherwise), earnings, business, prospects or results of operations
of the Company and the Subsidiaries on a consolidated basis. All of the
issued and outstanding shares of capital stock of the Subsidiaries (A)
have been duly authorized and are validly issued, (B) are fully paid
and nonassessable except to the extent such shares may be deemed
assessable under 12 U.S.C. Sections 1815(e) or 1831o, and (C) except as
disclosed in the Prospectus (or, if the Prospectus is not in existence,
the most recent Preliminary Prospectus), are directly owned by the
Company free and clear of any security interest, mortgage, pledge,
lien, encumbrance, restriction upon voting or transfer, preemptive
rights, claim or equity. Except as disclosed in the Prospectus, there
are no outstanding rights, warrants or options to acquire or
instruments convertible into or exchangeable for any capital stock or
equity securities of the Offerors or the Subsidiaries.
(ix) The capital stock of the Company and the equity
securities of the Trust conform to the descriptions thereof contained
in the Prospectus (or, if the Prospectus is not in existence, the most
recent Preliminary Prospectus). The outstanding shares of capital stock
and equity securities of each Offeror have been duly authorized and
validly issued and are fully paid and nonassessable, and no such shares
were issued in violation of the preemptive or similar rights of any
security holder of an Offeror; no person has any preemptive or similar
right to purchase any shares of capital stock or equity securities of
the Offerors. Except as disclosed in the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary
Prospectus), there are no outstanding rights, options or warrants to
acquire any securities of the Offerors, and there are no outstanding
securities convertible into or exchangeable for any such securities and
no restrictions upon the voting or transfer of any capital stock of the
Company or equity securities of the Trust pursuant to the Company's
corporate charter or bylaws, the Trust Agreement or any agreement or
other instrument to which an Offeror is a party or by which an Offeror
is bound.
(x) (A) The Trust has all requisite power and
authority to issue, sell and deliver the Designated Preferred
Securities in accordance with and upon the terms and conditions set
forth in this Agreement, the Trust Agreement, the Registration
Statement and the Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary
7
<PAGE>
Prospectus). All corporate and trust action required to be taken by the
Offerors for the authorization, issuance, sale and delivery of the
Designated Preferred Securities in accordance with such terms and
conditions has been validly and sufficiently taken. The Designated
Preferred Securities, when delivered in accordance with this Agreement,
will be duly and validly issued and outstanding, will be fully paid and
nonassessable undivided beneficial interests in the assets of the
Trust, will be entitled to the benefits of the Trust Agreement, will
not be issued in violation of or subject to any preemptive or similar
rights, and will conform in all material respects to the description
thereof in the Registration Statement and the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary Prospectus)
and the Trust Agreement. None of the Designated Preferred Securities,
immediately prior to delivery, will be subject to any security
interest, lien, mortgage, pledge, encumbrance, restriction upon voting
or transfer, preemptive rights, claim, equity or other title defect.
(B) The Debentures have been duly and
validly authorized, and, when duly and validly executed, authenticated
and issued as provided in the Indenture and delivered to the Trust
pursuant to the Trust Agreement, will constitute valid and legally
binding obligations of the Company entitled to the benefits of the
Indenture and will conform in all material respects to the description
thereof contained in the Prospectus.
(C) The Guarantee has been duly and validly
authorized, and, when duly and validly executed and delivered to the
guarantee trustee for the benefit of the Trust, will constitute a valid
and legally binding obligation of the Company and will conform in all
material respects to the description thereof contained in the
Prospectus.
(D) The Agreement as to Expenses and
Liabilities (the "Expense Agreement") has been duly and validly
authorized, and, when duly and validly executed and delivered by
Company, will constitute a valid and legally binding obligation of the
Company and will conform in all material respects to the description
thereof contained in the Prospectus.
(xi) The Offerors and the Subsidiaries have complied
with all federal, state and local statutes, regulations, ordinances and
rules applicable to the ownership and operation of their properties or
the conduct of their businesses as described in and contemplated by the
Registration Statement and the Prospectus (or, if the Prospectus is not
in existence, the most recent Preliminary Prospectus) and as currently
being conducted except where the failure to so comply would not have a
material adverse effect on the condition, financial or otherwise,
earnings, affairs, business, prospects or results of operations of the
Offerors and the Subsidiaries on a consolidated basis.
(xii) The Offerors and the Subsidiaries have all
permits, easements, consents, licenses, franchises and other
governmental and regulatory authorizations from all appropriate
federal, state, local or other public authorities ("Permits") as are
necessary to own and lease their properties and conduct their
businesses in the manner described in
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<PAGE>
and contemplated by the Registration Statement and the Prospectus (or,
if the Prospectus is not in existence, the most recent Preliminary
Prospectus) and as currently being conducted, except where the failure
to have such Permits would not have a material adverse effect on the
condition, financial or otherwise, earnings, affairs, business,
prospects or results of operations of the Offerors and the Subsidiaries
on a consolidated basis. All such Permits are in full force and effect
and each of the Offerors and the Subsidiaries are in all material
respects complying therewith, and no event has occurred that allows, or
after notice or lapse of time would allow, revocation or termination
thereof or will result in any other material impairment of the rights
of the holder of any such Permit, subject in each case to such
qualification as may be adequately disclosed in the Prospectus (or, if
the Prospectus is not in existence, the most recent Preliminary
Prospectus), except where the failure of such Permits to be in full
force and effect or the lack of such compliance would not have a
material adverse effect on the condition, financial or otherwise,
earnings, affairs, business, prospects or results of operations of the
Offerors and the Subsidiaries on a consolidated basis. Such Permits
contain no restrictions that would materially impair the ability of the
Company or the Subsidiaries to conduct their businesses in the manner
consistent with their past practices. Neither the Offerors nor any of
the Subsidiaries has received notice or otherwise has knowledge of any
proceeding or action relating to the revocation or modification of any
such Permit.
(xiii) Neither of the Offerors nor any of the
Subsidiaries is in breach or violation of their corporate charter,
by-laws or other governing documents (including without limitation, the
Trust Agreement). Neither of the Offerors nor any of the Subsidiaries
are, and to the knowledge of the Offerors no other party is, in
violation, breach or default (with or without notice or lapse of time
or both) in the performance or observance of any term, covenant,
agreement, obligation, representation, warranty or condition contained
in (A) any contract, indenture, mortgage, deed of trust, loan or credit
agreement, note, lease, franchise, license, Permit or any other
agreement or instrument to which it is a party or by which it or any of
its properties may be bound, except where such breach, violation or
default would not have a material adverse effect on the condition
(financial or otherwise), earnings, affairs, business, prospects, or
results of operations of the Offerors and the Subsidiaries on a
consolidated basis, and to the knowledge of the Offerors, no other
party has asserted that the Offerors or any of the Subsidiaries is in
such violation, breach or default (provided that the foregoing shall
not apply to defaults by borrowers from the Bank), or (B) any order,
decree, judgment, rule or regulation of any court, arbitrator,
government, or governmental agency or instrumentality, domestic or
foreign, having jurisdiction over the Offerors or the Subsidiaries or
any of their respective properties the breach, violation or default of
which could have a material adverse effect on the condition, financial
or otherwise, earnings, affairs, business, prospects, or results of
operations of the Offerors and the Subsidiaries on a consolidated
basis.
(xiv) The execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated by this
Agreement, the Trust Agreement, the Registration Statement and the
Prospectus (or, if the Prospectus in not in existence,
9
<PAGE>
the most recent Preliminary Prospectus) do not and will not conflict
with, result in the creation orimposition of any material lien, claim,
charge, encumbrance or restriction upon any property or assets of the
Offerors or the Subsidiaries or the Designated Preferred Securities
pursuant to, constitute a breach or violation of, or constitute a
default under, with or without notice or lapse of time or both, any of
the terms, provisions or conditions of the charter or by-laws of the
Company or the Subsidiaries, the Trust Agreement, the Guarantee, the
Indenture, any contract, indenture, mortgage, deed of trust, loan or
credit agreement, note, lease, franchise, license, Permit or any other
agreement or instrument to which the Offerors or the Subsidiaries is a
party or by which any of them or any of their respective properties may
be bound or any order, decree, judgment, rule or regulation of any
court, arbitrator, government, or governmental agency or
instrumentality, domestic or foreign, having jurisdiction over the
Offerors or the Subsidiaries or any of their respective properties
which conflict, creation, imposition, breach, violation or default
would have either singly or in the aggregate a material adverse effect
on the condition, financial or otherwise, earnings, affairs, business,
prospects or results of operations of the Offerors and the Subsidiaries
on a consolidated basis. No authorization, approval, consent or order
of, or filing, registration or qualification with, any person
(including, without limitation, any court, governmental body or
authority) is required in connection with the transactions contemplated
by this Agreement, the Trust Agreement, the Indenture, the Guarantee,
the Registration Statement and the Prospectus (or such Preliminary
Prospectus), except such as may be required by, and have been obtained
under, the 1933 Act and the Trust Indenture Act and from the Nasdaq
Stock Market's National Market relating to the listing of the
Designated Preferred Securities and such as may be required under state
securities laws or Interpretations or Rules of the National Association
of Securities Dealers, Inc. ("NASD") in connection with the purchase
and distribution of the Designated Preferred Securities by the
Underwriters.
(xv) The Offerors have all requisite corporate power
and authority to enter into this Agreement and this Agreement has been
duly and validly authorized, executed and delivered by the Offerors and
constitutes the legal, valid and binding agreement of the Offerors,
enforceable against the Offerors in accordance with its terms, except
as the enforcement thereof may be limited by general principles of
equity and by bankruptcy or other laws relating to or affecting
creditors' rights generally and except as any indemnification or
contribution provisions thereof may be limited under applicable
securities laws. Each of the Indenture, the Trust Agreement, the
Guarantee and the Expense Agreement has been duly authorized by the
Company, and, when executed and delivered by the Company on the Closing
Date, each of said agreements will constitute a valid and legally
binding obligation of the Company and will be enforceable against the
Company in accordance with its terms, except as the enforcement thereof
may be limited by general principles of equity and by bankruptcy or
other laws relating to or affecting creditors' rights generally and
except as any indemnification or contribution provisions thereof may be
limited under applicable securities laws. The Trust Agreement has been
duly authorized and, when executed by the proper officers of the Trust
and delivered by the Trust, will have been duly executed and delivered
by the Trust and will constitute the
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valid and legally binding instrument of the Trust, enforceable in
accordance with its terms, except as the enforcementthereof may be
limited by general principles of equity and by bankruptcy or other laws
relating to or affecting creditors' rights generally and except as any
indemnification or contribution provisions thereof may be limited under
applicable securities laws. Each of the Indenture, the Trust Agreement
and the Guarantee has been duly qualified under the Trust Indenture Act
and will conform in all material respects to the description thereof
contained in the Prospectus.
(xvi) The Company and the Subsidiaries have good and
marketable title in fee simple to all real property and good title to
all personal property owned by them and material to their business, in
each case free and clear of all security interests, liens, mortgages,
pledges, encumbrances, restrictions, claims, equities and other defects
except such as are referred to in the Prospectus (or, if the Prospectus
is not in existence, the most recent Preliminary Prospectus) or such as
do not materially affect the value of such property in the aggregate
and do not materially interfere with the use made or proposed to be
made of such property; and all of the leases under which the Company or
the Subsidiaries hold real or personal property are valid, existing and
enforceable leases and in full force and effect with such exceptions as
are not material and do not materially interfere with the use made or
proposed to be made of such real or personal property, and neither the
Company nor any of the Subsidiaries is in default in any material
respect of any of the terms or provisions of any leases.
(xvii) Keller Bruner & Company, LLC, who have
certified certain of the consolidated financial statements of the
Company and the Subsidiaries including the notes thereto, included or
incorporated by reference in the Registration Statement and Prospectus,
are independent public accountants with respect to the Company and the
Subsidiaries, as required by the 1933 Act and the 1933 Act Regulations.
(xviii) The consolidated financial statements
including the notes thereto, included by incorporation or otherwise in
the Registration Statement and the Prospectus (or, if the Prospectus is
not in existence, the most recent Preliminary Prospectus) with respect
to the Company and the Subsidiaries comply in all material respects
with the 1933 Act and the 1933 Act Regulations and present fairly the
consolidated financial position of the Company and the Subsidiaries as
of the dates indicated and the consolidated results of operations, cash
flows and shareholders' equity of the Company and the Subsidiaries for
the periods specified and have been prepared in conformity with
generally accepted accounting principles applied on a consistent basis.
The selected and summary consolidated financial data concerning the
Offerors and the Subsidiaries included in the Registration Statement
and the Prospectus (or such Preliminary Prospectus) comply in all
material respects with the 1933 Act and the 1933 Act Regulations,
present fairly the information set forth therein, and have been
compiled on a basis consistent with that of the consolidated financial
statements of the Offerors and the Subsidiaries in the Registration
Statement and the Prospectus (or such Preliminary Prospectus). The
Company had an outstanding capitalization as set forth under
"Capitalization" in the
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Prospectus as of the date indicated therein and there has been no
material change therein since such date except as disclosed in the
Prospectus. The other financial, statistical and numerical information
included in the Registration Statement and the Prospectus (or such
Preliminary Prospectus) comply in all material respects with the 1933
Act and the 1933 Act Regulations, present fairly the information shown
therein, and to the extent applicable have been compiled on a basis
consistent with the consolidated financial statements of the Company
and the Subsidiaries included in the Registration Statement and the
Prospectus (or such Preliminary Prospectus).
(xix) Since the respective dates as of which
information is given in the Registration Statement and the Prospectus
(or, if the Prospectus is not in existence, the most recent Preliminary
Prospectus), except as otherwise stated therein:
(A) neither of the Offerors nor any of the
Subsidiaries have sustained any loss or interference with its
business from fire, explosion, flood or other calamity,
whether or not covered by insurance, or from any labor dispute
or court or governmental action, order or decree which is
material to the condition (financial or otherwise), earnings,
business, prospects or results of operations of the Offerors
and the Subsidiaries on a consolidated basis;
(B) there has not been any material adverse
change in, or any development which is reasonably likely to
have a material adverse effect on, the condition (financial or
otherwise), earnings, business, prospects or results of
operations of the Offerors and the Subsidiaries on a
consolidated basis, whether or not arising in the ordinary
course of business;
(C) neither of the Offerors nor any of the
Subsidiaries have incurred any liabilities or obligations,
direct or contingent, or entered into any transactions, other
than in the ordinary course of business, which are material to
the condition (financial or otherwise), earnings, business,
prospects or results of operations of the Offerors and the
Subsidiaries on a consolidated basis;
(D) neither of the Offerors have declared or
paid any dividend, (other than the $.17 per share cash
dividend paid to the common stockholders of the Company on
April 30, 1998), and neither of the Offerors nor any of the
Subsidiaries has become delinquent in the payment of principal
or interest on any outstanding borrowings; and
(E) there has not been any change in the
capital stock, equity securities, long-term debt, obligations
under capital leases or, other than in the ordinary course of
business, short-term borrowings of the Offerors or the
Subsidiaries.
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(xx) Except as set forth in the Registration
Statement and the Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus), no charge,
investigation, action, suit or proceeding is pending or has been
threatened, against or involving the property or assets of the Offerors
or the Subsidiaries or any of their respective properties before or by
any court or any regulatory, administrative or governmental official,
commission, board, agency or other authority or body, or any
arbitrator, wherein an unfavorable decision, ruling or finding could
reasonably be expected to have a material adverse effect on the
consummation of this Agreement or the transactions contemplated herein
or the condition (financial or otherwise), earnings, affairs, business,
prospects or results of operations of the Offerors and the Subsidiaries
on a consolidated basis or which is required to be disclosed in the
Registration Statement or the Prospectus (or such Preliminary
Prospectus) and is not so disclosed.
(xxi) There are no contracts or other documents
required to be filed as exhibits to the Registration Statement by the
1933 Act or the 1933 Act Regulations or the Trust Indenture Act (or any
rules or regulations thereunder) which have not been filed as exhibits
or incorporated by reference to the Registration Statement, or that are
required to be summarized in the Prospectus (or, if the Prospectus is
not in existence, the most recent Preliminary Prospectus) that are not
so summarized.
(xxii) Neither of the Offerors has taken, directly or
indirectly, any action designed to result in or which has constituted
or which might reasonably be expected to cause or result in
stabilization or manipulation of the price of any security of the
Offerors to facilitate the sale or resale of the Designated Preferred
Securities, and neither of the Offerors is aware of any such action
taken or to be taken by any officer, director, trustee or 5% or more
shareholder of the Offerors.
(xxiii) The Offerors and the Subsidiaries own, or
possess adequate rights to use, all patents, copyrights, trademarks,
service marks, trade names and other rights necessary to conduct the
businesses now conducted by them in all material respects or as
described in the Prospectus (or, if the Prospectus is not in existence,
the most recent Preliminary Prospectus) and neither the Offerors nor
the Subsidiaries have received any notice of infringement or conflict
with asserted rights of others with respect to any patents, copyrights,
trademarks, service marks, trade names or other rights which,
individually or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, would have a material adverse effect on
the condition (financial or otherwise), earnings, affairs, business,
prospects or results of operations of the Offerors and the Subsidiaries
on a consolidated basis, and the Offerors do not know of any basis for
any such infringement or conflict.
(xxiv) No labor dispute involving the Company or the
Subsidiaries exists or, to the knowledge of the Offerors, is imminent
which might be expected to have a material adverse effect on the
condition (financial or otherwise), earnings, affairs, business,
prospects or results of operations of the Offerors and the Subsidiaries
on a
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consolidated basis or which is required to be disclosed in the
Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus). Neither the Company nor any of the
Subsidiaries has received notice of any existing or threatened labor
dispute by the employees of any of its principal suppliers, customers
or contractors which might be expected to have a material adverse
effect on the condition (financial or otherwise), earnings, affairs,
business, prospects or results of operations of the Company and the
Subsidiaries on a consolidated basis.
(xxv) The Offerors and the Subsidiaries have properly
prepared and timely filed all necessary federal, state, local and
foreign tax returns which are required to be filed and have paid all
taxes shown as due thereon and have paid all other taxes and
assessments to the extent that the same shall have become due, except
such as are being contested in good faith or where the failure to so
timely and properly prepare and file would not have a material adverse
effect on the condition (financial or otherwise), earnings, affairs,
business, prospects or results of operations of the Offerors and the
Subsidiaries on a consolidated basis. The Offerors have no knowledge of
any tax deficiency which has been or might be assessed against the
Offerors or the Subsidiaries which, if the subject of an unfavorable
decision, ruling or finding, would have a material adverse effect on
the condition (financial or otherwise), earnings, affairs, business,
prospects or results of operations of the Offerors and the Subsidiaries
on a consolidated basis.
(xxvi) Each of the material contracts, agreements and
instruments described or referred to in the Registration Statement or
the Prospectus (or, if the Prospectus is not in existence, the most
recent Preliminary Prospectus) and each contract, agreement and
instrument filed as an exhibit to the Registration Statement is in full
force and effect and is the legal, valid and binding agreement of the
Offerors or the Subsidiaries, enforceable in accordance with its terms,
except as the enforcement thereof may be limited by general principles
of equity and by bankruptcy or other laws relating to or affecting
creditors' rights generally. Except as disclosed in the Prospectus (or
such Preliminary Prospectus), to the knowledge of the Offerors, no
other party to any such agreement is (with or without notice or lapse
of time or both) in breach or default in any material respect
thereunder.
(xxvii) No relationship, direct or indirect, exists
between or among the Offerors or the Subsidiaries, on the one hand, and
the directors, officers, trustees, shareholders, customers or suppliers
of the Offerors or the Subsidiaries, on the other hand, which is
required to be described in the Registration Statement and the
Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus) which is not adequately described therein.
(xxviii) No person has the right to request or
require the Offerors or the Subsidiaries to register any securities for
offering and sale under the 1933 Act by reason of the filing of the
Registration Statement with the Commission or the issuance and sale
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<PAGE>
of the Designated Preferred Securities except as adequately disclosed
in the Registration Statement and the Prospectus (or, if the Prospectus
is not in existence, the most recent Preliminary Prospectus).
(xxix) The Designated Preferred Securities have been
approved for listing on the Nasdaq National Market.
(xxx) Except as described (or referred to) in the
Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus), there are no contractual encumbrances or
restrictions or material legal restrictions, on the ability of the
Subsidiaries (A) to pay dividends or make any other distributions on
its capital stock or to pay any indebtedness owed to the Offerors, (B)
to make any loans or advances to, or investments in, the Offerors or
(C) to transfer any of its property or assets to the Offerors.
(xxxi) Neither of the Offerors is an "investment
company" within the meaning of the Investment Company Act of 1940, as
amended (the "Investment Company Act").
(xxxii) The Offerors have not distributed and will
not distribute prior to the Closing Date any prospectus in connection
with the Offering, other than a Preliminary Prospectus, the Prospectus,
the Registration Statement and the other materials permitted by the
1933 Act and the 1933 Act Regulations and reviewed by the Underwriters.
(xxxiii) The Company and each Subsidiary have in
place and effective such policies of insurance, with limits of
liability in such amounts, as are normal and prudent in the ordinary
scope of business similar to that of the Company and such Subsidiary in
the respective jurisdiction in which they conduct business.
(xxxiv) The provisions of any employee pension
benefit plan ("Pension Plan") as defined in Section 3(2) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
in which the Company or any Subsidiary is a participating employer are
in substantial compliance with ERISA, and neither the Company nor any
Subsidiary is in violation of ERISA in any material respect. The
Company, each Subsidiary, or the plan sponsor thereof, as the case may
be, has duly and timely filed the reports required to be filed by ERISA
in connection with the maintenance of any Pension Plans in which the
Company or any Subsidiary is a participating employer, and no facts,
including any "reportable event" as defined by ERISA and the
regulations thereunder, exist in connection with any Pension Plan in
which the Company or any Subsidiary is a participating employer which
might constitute grounds for the termination of such plan by the
Pension Benefit Guaranty Corporation or for the appointment by the
appropriate U.S. District Court of a trustee to administer any such
plan. The provisions of any employee benefit welfare plan, as defined
in Section 3(1) of ERISA, in which the
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Company or any Subsidiary is a participating employer, are in
substantial compliance with ERISA, and the Company, any Subsidiary, or
the plan sponsor thereof, as the case may be, has duly and timely filed
the reports required to be filed by ERISA in connection with the
maintenance of any such plans.
3. OFFERING BY THE UNDERWRITER. After the Registration
Statement becomes effective or, if the Registration Statement is already
effective, after this Agreement becomes effective, the Underwriters propose to
offer the Firm Preferred Securities for sale to the public upon the terms and
conditions set forth in the Prospectus. Because the NASD is expected to view the
Preferred Securities as interests in a direct participation program, the
offering of the Preferred Securities is being made in compliance with the
applicable provisions of Rule 2810 of the NASD's Conduct Rules. The Underwriters
may from time to time thereafter reduce the public offering price and change the
other selling terms, provided the proceeds to the Trust shall not be reduced as
a result of such reduction or change.
The Underwriters may reserve and sell such of the Designated
Preferred Securities purchased by the Underwriters as the Underwriters may elect
to dealers chosen by it (the "Selected Dealers") at the public offering price
set forth in the Prospectus less the applicable Selected Dealers' concessions
set forth therein, for re-offering by Selected Dealers to the public at the
public offering price. The Underwriters may allow, and Selected Dealers may
re-allow, a concession set forth in the Prospectus to certain other brokers and
dealers.
4. CERTAIN COVENANTS OF THE OFFERORS. The Offerors jointly and
severally covenant with the Underwriters as follows:
(a) The Offerors shall use their best efforts to cause the
Registration Statement and any amendments thereto, if not effective at the time
of execution of this Agreement, to become effective as promptly as possible. If
the Registration Statement has become or becomes effective pursuant to Rule 430A
and information has been omitted therefrom in reliance on Rule 430A, then, the
Offerors will prepare and file in accordance with Rule 430A and Rule 424(b)
copies of the Prospectus or, if required by Rule 430A, a post-effective
amendment to the Registration Statement (including the Prospectus) containing
all information so omitted and will provide evidence satisfactory to the
Underwriters of such timely filing.
(b) The Offerors shall notify you immediately, and confirm
such notice in writing:
(i) when the Registration Statement, or any
post-effective amendment to the Registration Statement, has become
effective, or when the Prospectus or any supplement to the Prospectus
or any amended Prospectus has been filed;
(ii) of the receipt of any comments or requests from
the Commission;
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(iii) of any request of the Commission to amend or
supplement the Registration Statement, any Preliminary Prospectus or
the Prospectus or for additional information; and
(iv) of the issuance by the Commission or any state
or other regulatory body of any stop order or other order suspending
the effectiveness of the Registration Statement, preventing or
suspending the use of any Preliminary Prospectus or the Prospectus, or
suspending the qualification of any of the Designated Preferred
Securities for offering or sale in any jurisdiction or the institution
or threat of institution of any proceedings for any of such purposes.
The Offerors shall use their best efforts to prevent the issuance of
any such stop order or of any other such order and if any such order is
issued, to cause such order to be withdrawn or lifted as soon as
possible.
(c) The Offerors shall furnish to the Underwriters, from time
to time without charge, as soon as available, as many copies as the Underwriters
may reasonably request of (i) the registration statement as originally filed and
of all amendments thereto, in executed form, including exhibits, whether filed
before or after the Registration Statement becomes effective, (ii) all exhibits
and documents incorporated therein or filed therewith, (iii) all consents and
certificates of experts in executed form, (iv) each Preliminary Prospectus and
all amendments and supplements thereto, and (v) the Prospectus, and all
amendments and supplements thereto.
(d) During the time when a prospectus is required to be
delivered under the 1933 Act, the Offerors shall comply to the best of their
ability with the 1933 Act and the 1933 Act Regulations and the 1934 Act and the
1934 Act Regulations so as to permit the completion of the distribution of the
Designated Preferred Securities as contemplated herein and in the Trust
Agreement and the Prospectus. The Offerors shall not file any amendment to the
registration statement as originally filed or to the Registration Statement and
shall not file any amendment thereto or make any amendment or supplement to any
Preliminary Prospectus or to the Prospectus of which you shall not previously
have been advised in writing and provided a copy a reasonable time prior to the
proposed filings thereof or to which you or counsel to the Underwriters shall
object. If it is necessary, in the Company's reasonable opinion or in the
reasonable opinion of the Company's counsel to amend or supplement the
Registration Statement or the Prospectus in connection with the distribution of
the Designated Preferred Securities, the Offerors shall forthwith amend or
supplement the Registration Statement or the Prospectus, as the case may be, by
preparing and filing with the Commission (provided you or counsel to the
Underwriters does not reasonably object), and furnishing to you, such number of
copies as you may reasonably request of an amendment or amendments of, or a
supplement or supplements to, the Registration Statement or the Prospectus, as
the case may be (in form and substance reasonably satisfactory to you and
counsel to the Underwriters). If any event shall occur as a result of which it
is necessary to amend or supplement the Prospectus to correct an untrue
statement of a material fact or to include a material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, or if for any reason it is necessary at any time to amend or
supplement the Prospectus to comply with the 1933 Act and the 1933 Act
Regulations, the Offerors shall, subject to the second sentence of this
subsection (d),
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<PAGE>
forthwith amend or supplement the Prospectus by preparing and filing with the
Commission, and furnishing to you, such number of copies as you may reasonably
request of an amendment or amendments of, or a supplement or supplements to, the
Prospectus (in form and substance satisfactory to you and counsel to the
Underwriters) so that, as so amended or supplemented, the Prospectus shall not
contain an untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
(e) The Offerors shall cooperate with you and counsel to the
Underwriters in order to qualify the Designated Preferred Securities for
offering and sale under the securities or blue sky laws of such jurisdictions as
you may reasonably request and shall continue such qualifications in effect so
long as may be advisable for distribution of the Designated Preferred
Securities; provided, however, that the Offerors shall not be required to
qualify to do business as a foreign corporation or file a general consent to
service of process in any jurisdiction in connection with the foregoing. The
Offerors shall file such statements and reports as may be required by the laws
of each jurisdiction in which the Designated Preferred Securities have been
qualified as above. The Offerors will notify you immediately of, and confirm in
writing, the suspension of qualification of the Designated Preferred Securities
or threat thereof in any jurisdiction.
(f) The Offerors shall make generally available to their
security holders in the manner contemplated by Rule 158 of the 1933 Act
Regulations, and furnish to you, as soon as practicable, but in any event not
later than 15 months after the Effective Date, a consolidated earnings statement
of the Offerors conforming with the requirements of Section 11(a) of the 1933
Act and Rule 158.
(g) The Offerors shall use the proceeds from the sale of the
Designated Preferred Securities to be sold by the Trust hereunder in the manner
specified in the Prospectus under the caption "Use of Proceeds."
(h) For five years from the Effective Date, the Offerors shall
furnish to the Underwriters copies of all reports and communications (financial
or otherwise) furnished by the Offerors to the holders of the Designated
Preferred Securities as a class, copies of all reports and financial statements
filed with or furnished to the Commission (other than portions for which
confidential treatment has been obtained from the Commission) or with any
national securities exchange or the Nasdaq National Market and such other
documents, reports and information concerning the business and financial
conditions of the Offerors as the Underwriters may reasonably request, other
than such documents, reports and information which the Offerors have a legal
obligation not to reveal to the Underwriters.
(i) For a period of 180 days from the Effective Date, the
Offerors shall not, directly or indirectly, offer for sale, sell or agree to
sell or otherwise dispose of any Designated Preferred Securities other than
pursuant to this Agreement, any other beneficial interests in the assets of the
Trust or any securities of the Trust or the Company that are substantially
similar to
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the Designated Preferred Securities or the Debentures, including any guarantee
of such beneficial interests or substantially similar securities, or securities
convertible into or exchangeable for or that represent the right to receive any
such beneficial interest or substantially similar securities, without the prior
written consent of the Underwriters.
(j) If the Designated Preferred Securities are exchanged for
Debentures, the Company will use its best efforts to have the Debentures
promptly listed on the Nasdaq National Market or other organization on which the
Designated Preferred Securities are then listed, and to have the Debentures
promptly registered under the Exchange Act.
(k) Subsequent to the date of this Agreement and through the
date which is the later of (i) the day following the date on which the
Underwriters' option to purchase the Option Preferred Securities shall expire or
(ii) the day following the Option Closing Date with respect to any Option
Preferred Securities that the Underwriters shall elect to purchase, except as
described in or contemplated by the Prospectus, neither the Offerors nor any of
the Subsidiaries shall take any action (or refrain from taking any action) which
will result in the Offerors or the Subsidiaries incurring any material liability
or obligation, direct or contingent, or enter into any material transaction,
except in the ordinary course of business, and there will not be any material
change in the capital stock, or any material increase in long-term debt,
obligations under capital leases or short-term borrowings of the Offerors and
the Subsidiaries on a consolidated basis.
(l) The Offerors shall not, for a period of 180 days after the
date hereof, without the prior written consent of the Underwriters, purchase,
redeem or call for redemption, or prepay or give notice of prepayment (or
announce any redemption or call for redemption, or any repayment or notice of
prepayment) of any of the Preferred Securities.
(m) The Offerors shall not take, directly or indirectly, any
action designed to result in or which has constituted or which might reasonably
be expected to cause or result in a violation of the Commission's Regulation M
and the Offerors are not aware of any such action taken or to be taken by any
affiliate of the Offerors.
(n) Prior to the Closing Date (and, if applicable, the Option
Closing Date), the Offerors will not issue any press release or other
communication directly or indirectly or hold any press conference with respect
to the Offerors, the Subsidiaries or the offering of the Designated Preferred
Securities (the "Offering") without your prior written consent, which consent
will not be unreasonably withheld.
(o) The Offerors will use their best efforts to satisfy or
cause to be satisfied the conditions to the obligations of the Underwriters in
Section 6 hereof.
(p) The Trust shall comply in all respects with the
undertakings given by the Trust in connection with the qualification or
registration of the Designated Preferred Securities for offering and sale under
the Blue Sky Laws.
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5. PAYMENT OF EXPENSES.
(a) Whether or not this Agreement is terminated or the sale of
the Designated Preferred Securities to the Underwriters is consummated, the
Company covenants and agrees that it will pay or cause to be paid (directly or
by reimbursement) all costs and expenses incident to the performance of the
obligations of the Offerors under this Agreement, including:
(i) the preparation, printing, filing, delivery and
shipping of the initial registration statement, the Preliminary Prospectus or
Prospectuses, the Registration Statement and the Prospectus and any amendments
or supplements thereto, and the printing, delivery and shipping of this
Agreement and any other underwriting documents (including, without limitation,
selected dealers agreements), the certificates for the Designated Preferred
Securities and the Preliminary and Final Blue Sky Memoranda and any legal
investment surveys and any supplements thereto;
(ii) all fees, expenses and disbursements of the
Offerors' counsel and accountants;
(iii) all fees and expenses incurred in connection
with the qualification of the Designated Preferred Securities, Debentures and
the Guarantee under the securities or blue sky laws of such jurisdictions as you
may request, including all filing fees and reasonable fees and disbursements of
counsel to the Underwriters in connection therewith, including, without
limitation, in connection with the preparation of the Preliminary and Final Blue
Sky Memoranda and any legal investment surveys and any supplements thereto;
(iv) all fees and expenses incurred in connection
with filings made with the NASD;
(v) any applicable fees and other expenses incurred
in connection with the listing of the Designated Preferred Securities and, if
applicable, the Guarantee and the Debentures on the Nasdaq National Market;
(vi) the cost of furnishing to you copies of the
initial registration statements, any Preliminary Prospectus, the Registration
Statement and the Prospectus and all amendments or supplements thereto;
(vii) the costs and charges of any transfer agent or
registrar and the fees and disbursements of counsel to any transfer agent or
registrar;
(viii) all costs and expenses (including stock
transfer taxes) incurred in connection with the issuance and delivery of the
Designated Preferred Securities to the Underwriters;
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(ix) all expenses incident to the preparation,
execution and delivery of the Trust Agreement, the Indenture and the Guarantee;
and
(x) all other costs and expenses incident to the
performance of the obligations of the Company hereunder and under the Trust
Agreement that are not otherwise specifically provided for in this Section 5.
If the sale of Designated Preferred Securities contemplated by
this Agreement is not completed for any reason whatsoever (other than as a
result of the Underwriters' refusal to proceed, without cause), whether or not
such termination is allowable hereunder, the Company will pay you your
accountable out-of-pocket expenses in connection herewith or in contemplation of
the performance of your obligations hereunder, including without limitation
travel expenses, reasonable fees, expenses and disbursements of counsel or other
out-of-pocket expenses incurred by you in connection with any discussion of the
Offering or the contents of the Registration Statement, any investigation of the
Offerors and the Subsidiaries, or any preparation for the marketing, purchase,
sale or delivery of the Designated Preferred Securities, in each case following
presentation of reasonably detailed invoices therefor.
(b) In addition to the expenses to be borne by the Company
pursuant to the preceding paragraph (a), the Company agrees to reimburse the
Underwriters, upon request made from time to time, for their reasonable
out-of-pocket expenses incurred in connection with the Offering, regardless of
whether the Offering is consummated, including, without limitation, legal fees
and expenses, marketing, syndication and travel expenses.
6. CONDITIONS OF THE UNDERWRITERS' OBLIGATIONS. The obligations of the
Underwriters to purchase and pay for the Firm Preferred Securities and,
following exercise of the option granted by the Offerors in Section 1 of this
Agreement, the Option Preferred Securities, are subject, in your sole
discretion, to the accuracy of and compliance with the representations and
warranties and agreements of the Offerors herein as of the date hereof and as of
the Closing Date (or in the case of the Option Preferred Securities, if any, as
of the Option Closing Date), to the accuracy of the written statements of the
Offerors made pursuant to the provisions hereof, to the performance by the
Offerors of their covenants and obligations hereunder and to the following
additional conditions:
(a) If the Registration Statement or any amendment thereto
filed prior to the Closing Date has not been declared effective prior to the
time of execution hereof, the Registration Statement shall become effective not
later than 11:00 a.m., New York time, on the first business day following the
time of execution of this Agreement, or at such later time and date as you may
agree to in writing. If required, the Prospectus and any amendment or supplement
thereto shall have been timely filed in accordance with Rule 424(b) and Rule
430A under the 1933 Act and Section 4(a) hereof. No stop order suspending the
effectiveness of the Registration Statement or any amendment or supplement
thereto shall have been issued under the 1933 Act or any applicable state
securities laws and no proceedings for that purpose shall have been instituted
or shall be pending, or, to the knowledge of the Offerors or the Underwriters,
shall
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be contemplated by the Commission or any state authority. Any request on the
part of the Commission or any state authority for additional information (to be
included in the Registration Statement or Prospectus or otherwise) shall have
been disclosed to you and complied with to your satisfaction and to the
satisfaction of your counsel.
(b) The Underwriters shall not have advised the Company at or
before the Closing Date (and, if applicable, the Option Closing Date) that the
Registration Statement or any post-effective amendment thereto, or the
Prospectus or any amendment or supplement thereto, contains an untrue statement
of a fact which, in your reasonable opinion, is material or omits to state a
fact which, in your reasonable opinion, is material and is required to be stated
therein or is necessary to make statements therein (in the case of the
Prospectus or any amendment or supplement thereto, in light of the circumstances
under which they were made) not misleading.
(c) All corporate proceedings and other legal matters incident
to the authorization, form and validity of this Agreement, the Trust Agreement,
and the Designated Preferred Securities, and the authorization and form of the
Registration Statement and Prospectus, other than financial statements and other
financial data, and all other legal matters relating to this Agreement and the
transactions contemplated hereby or by the Trust Agreement shall be reasonably
satisfactory in all respects to counsel to the Underwriters, and the Offerors
and the Subsidiaries shall have furnished to such counsel all documents and
information relating thereto that they may reasonably request to enable them to
pass upon such matters.
(d) Kennedy, Baris & Lundy, L.L.P., counsel to the Offerors,
shall have furnished to you their signed opinion, dated the Closing Date or the
Option Closing Date, as the case may be, in form and substance reasonably
satisfactory to counsel to the Underwriters, to the effect that:
(i) The Company has been duly incorporated and is
validly existing and in good standing under the laws of the State of
Maryland, and is duly registered as a bank holding company under the
BHC Act. Each of the Subsidiaries is duly incorporated, validly
existing and in good standing under the laws of its jurisdiction of
incorporation. Each of the Company and the Subsidiaries has full
corporate power and authority to own or lease its properties and to
conduct its business as such business is described in the Prospectus
and is currently conducted in all material respects. The Company and
each Subsidiary are qualified to do business as foreign corporations
under the corporation laws of each jurisdiction in which the Company or
such Subsidiary, as the case may be, owns or leases properties, has an
office, or in which business is conducted and such qualification is
required. All outstanding shares of capital stock of the Subsidiaries
have been duly authorized and validly issued and are fully paid and
nonassessable except to the extent such shares may be deemed assessable
under 12 U.S.C. Sections 1815(e) or 1831o and, to such counsel's actual
knowledge, except as disclosed in the Prospectus, there are no
outstanding rights, options or warrants to purchase any such shares or
securities convertible into or exchangeable for any such shares.
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(ii) The capital stock, Debentures and Guarantee of
the Company and the equity securities of the Trust conform to the
description thereof contained in the Prospectus in all material
respects. The capital stock of the Company authorized and issued as of
March 31, 1998 is as set forth under the caption "Capitalization" in
the Prospectus, has been duly authorized and validly issued, and is
fully paid and nonassessable. To such counsel's actual knowledge, there
are no outstanding rights, options or warrants to purchase, no other
outstanding securities convertible into or exchangeable for, and no
commitments, plans or arrangements to issue, any shares of capital
stock of the Company or equity securities of the Trust, except as
described in the Prospectus.
(iii) The issuance, sale and delivery of the
Designated Preferred Securities and Debentures in accordance with the
terms and conditions of this Agreement, the Trust Agreement and the
Indenture have been duly authorized by all necessary corporate actions
of the Offerors. All of the Designated Preferred Securities have been
duly and validly authorized and, when delivered in accordance with this
Agreement will be duly and validly issued, fully paid and
nonassessable, and will conform in all material respects to the
description thereof in the Registration Statement, the Prospectus and
the Trust Agreement. There are no preemptive or other rights to
subscribe for or to purchase, and other than as disclosed in the
Prospectus no restrictions upon the voting or transfer of, any shares
of capital stock or equity securities of the Offerors or the
Subsidiaries pursuant to the corporate charter, by-laws or other
governing documents (including without limitation, the Trust Agreement)
of the Offerors or the Subsidiaries, or, to such counsel's actual
knowledge, any agreement or other instrument to which either Offeror or
any of the Subsidiaries is a party or by which either Offeror or any of
the Subsidiaries may be bound.
(iv) The Offerors have all requisite corporate and
trust power to enter into and perform their obligations under this
Agreement, and this Agreement has been duly and validly authorized,
executed and delivered by the Offerors and constitutes the legal, valid
and binding obligations of the Offerors enforceable in accordance with
its terms, except as the enforcement hereof or thereof may be limited
by general principles of equity and by bankruptcy or other laws
relating to or affecting creditors' rights generally, and except as the
indemnification and contribution provisions hereof may be limited under
applicable laws.
(v) Each of the Indenture, the Trust Agreement and
the Guarantee has been duly qualified under the Trust Indenture Act,
has been duly authorized, executed and delivered by the Company, and is
a valid and legally binding obligation of the Company enforceable in
accordance with its terms, subject to the effect of bankruptcy,
insolvency, reorganization, receivership, moratorium and other laws
affecting the rights and remedies of creditors generally and of general
principles of equity.
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(vi) The Debentures have been duly authorized,
executed, authenticated and delivered by the Company, are entitled to
the benefits of the Indenture and are legal, valid and binding
obligations of the Company enforceable against the Company in
accordance with their terms, subject to the effect of bankruptcy,
insolvency, reorganization, receivership, moratorium and other laws
affecting the rights and remedies of creditors generally and of general
principles of equity.
(vii) The Expense Agreement has been duly authorized,
executed and delivered by the Company, and is a valid and legally
binding obligation of the Company enforceable in accordance with its
terms, subject to the effect of bankruptcy, insolvency, reorganization,
receivership, moratorium and other laws affecting the rights and
remedies of creditors generally and of general principles of equity.
(viii) To such counsel's actual knowledge, neither of
the Offerors nor any of the Subsidiaries is in breach or violation of,
or default under, with or without notice or lapse of time or both, its
corporate charter, by-laws or governing document (including without
limitation, the Trust Agreement). The execution, delivery and
performance of this Agreement, the Trust Agreement, the Guarantee
Agreement, the Expense Agreement and the Indenture, the issue and sale
of the Designated Preferred Securities and the Debentures, the
compliance by the Company with the provisions of the Designated
Preferred Securities, the Debentures, the Indenture and this Agreement
and the consummation of the transactions contemplated by this Agreement
and the Trust Agreement do not and will not conflict with, result in
the creation or imposition of any material lien, claim, charge,
encumbrance or restriction upon any property or assets of the Offerors
or the Subsidiaries or the Designated Preferred Securities pursuant to,
or constitute a material breach or violation of, or constitute a
material default under, with or without notice or lapse of time or
both, any of the terms, provisions or conditions of the charter,
by-laws or governing document (including without limitation, the Trust
Agreement) of the Offerors or the Subsidiaries, or any material
contract, indenture, mortgage, deed of trust, loan or credit agreement,
note, lease, franchise, license or any other agreement or instrument to
which either Offeror or the Subsidiaries is a party or any order,
decree, judgment, franchise, license, Permit, rule or regulation of any
court, arbitrator, government, or governmental agency or
instrumentality known to such counsel having jurisdiction over the
Offerors or the Subsidiaries which, in each case, is material to the
Offerors and the Subsidiaries on a consolidated basis. No
authorization, approval, consent or order of, or filing, registration
or qualification with, any person (including, without limitation, any
court, governmental body or authority) is required under New York law
in connection with the transactions contemplated by this Agreement in
connection with the purchase and distribution of the Designated
Preferred Securities by the Underwriters, except such as may be
required under state securities laws, as to which no opinion need be
rendered.
(ix) To such counsel's actual knowledge, holders of
securities of the Offerors either do not have any right that, if
exercised, would require the Offerors to
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cause such securities to be included in the Registration Statement or
have waived such right. To such counsel's actual knowledge, neither the
Offerors nor any of the Subsidiaries is a party to any agreement or
other instrument which grants rights for or relating to the
registration of any securities of the Offerors.
(x) Except as set forth in the Registration Statement
and the Prospectus, to such counsel's actual knowledge, (i) no action,
suit or proceeding at law or in equity is pending or threatened to
which the Offerors or the Subsidiaries is or may be a party, and (ii)
no action, suit or proceeding is pending or threatened against or
affecting the Offerors or the Subsidiaries or any of their properties,
before or by any court or governmental official, commission, board or
other administrative agency, authority or body, or any arbitrator,
wherein an unfavorable decision, ruling or finding could reasonably be
expected to have a material adverse effect on the consummation of this
Agreement or the issuance and sale of the Designated Preferred
Securities as contemplated herein or the condition (financial or
otherwise), earnings, affairs, business, or results of operations of
the Offerors and the Subsidiaries on a consolidated basis or which is
required to be disclosed in the Registration Statement or the
Prospectus and is not so disclosed.
(xi) No authorization, approval, consent or order of
or filing, registration or qualification with, any person (including,
without limitation, any court, governmental body or authority) is
required in connection with the transactions contemplated by this
Agreement, the Trust Agreement, the Guarantee Agreement, the Expense
Agreement, the Indenture, the Registration Statement and the
Prospectus, except such as have been obtained under the 1933 Act, and
except such as may be required under state securities laws or
Interpretations or Rules of the NASD in connection with the purchase
and distribution of the Designated Preferred Securities by the
Underwriters, as to which no opinion need be rendered.
(xii) The Registration Statement and the Prospectus
and any amendments or supplements thereto (other than the financial
statements or other financial or statistical data included therein or
omitted therefrom and Underwriters' Information, as to which such
counsel need express no opinion) comply as to form in all material
respects with the requirements of the 1933 Act and the 1933 Act
Regulations as of their respective dates of effectiveness and in case
at the Closing Date or any Option Closing Date.
(xiii) To such counsel's actual knowledge, there are
no contracts, agreements, leases or other documents of a character
required to be disclosed in the Registration Statement or Prospectus or
to be filed as exhibits to the Registration Statement that are not so
disclosed or filed.
(xiv) The statements under the captions, "Description
of the Preferred Securities", "Description of the Subordinated
Debentures", "Book-Entry Issuance", "Description of the Guarantee",
"Relationship Among the Preferred Securities,
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Subordinated Debentures and the Guarantee", "Certain Federal Income Tax
Consequences", and "ERISA Considerations" in the Prospectus insofar as
such statements constitute a summary of legal and regulatory matters,
documents, instruments or proceedings referred to therein are accurate
in all material respects, other than financial or statistical data as
to which such counsel need express no opinion or belief.
(xv) The Registration Statement has become effective
under the 1933 Act; any required filing of the Prospectus pursuant to
Rule 424(b) has been made within the time period required by Rule
424(b); no stop order suspending the effectiveness of the Registration
Statement has been issued and no proceedings for a stop order are
pending or threatened by the Commission.
(xvi) Except as set forth (or referred to) in the
Prospectus, to such counsel's actual knowledge, there are no
contractual encumbrances or restrictions, or material legal
restrictions on the ability of the Subsidiaries (A) to pay dividends or
make any other distributions on its capital stock or to pay
indebtedness owed to the Offerors, (B) to make any loans or advances
to, or investments in, the Offerors or (C) to transfer any of its
property or assets to the Offerors.
(xvii) To such counsel's actual knowledge, the
business and operations of the Offerors and the Subsidiaries comply in
all material respects with all statutes, ordinances, laws, rules and
regulations applicable thereto which are material to the Offerors and
the Subsidiaries on a consolidated basis, except in those instances
where non-compliance would not materially impair the ability of the
Offerors and the Subsidiaries to conduct their business.
(xviii) The Trust is not an "investment company" or
an entity "controlled" by an "investment company," as such terms are
defined in Investment Company Act of 1940, as amended.
In giving the above opinion, such counsel may state that,
insofar as such opinion involves factual matters, they have relied upon
certificates of officers of the Offerors, including, without limitation,
certificates as to the identity of any and all material contracts, indentures,
mortgages, deeds of trust, loans or credit agrements, notes, leases, franchises,
licenses or other agreements or instruments, and all material permits,
easements, consents, licenses, franchises and government regulatory
authorizations, and certificates of public officials. In giving such opinion,
such counsel may rely as to matters of Delaware law upon the opinion of
Richards, Layton and Finger described herein. In giving the opinion in paragraph
(xv) above, if the order of the Commission declaring the Registration Statement
effective is not available at the time the opinion is delivered, such counsel
may state that such opinion is based on advice by the staff of the Commission,
stating in reasonable detail the identity of the staff member and the date and
time such advice was received.
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Such counsel shall also confirm that, in connection with the
preparation of the Registration Statement and Prospectus, such counsel has
participated in conferences with officers and representatives of the Offerors
and with their independent public accountants and with you and your counsel, at
which conferences such counsel made inquiries of such officers, representatives
and accountants and discussed in detail the contents of the Registration
Statement and Prospectus and such counsel has no reason to believe (A) that the
Registration Statement or any amendment thereto (except for the financial
statements and related schedules and statistical data included therein or
omitted therefrom or Underwriters' Information, as to which such counsel need
express no opinion), at the time the Registration Statement or any such
amendment became effective, contained any untrue statement of a material fact or
omitted to state any 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 or (B) that the Prospectus or any amendment or
supplement thereto (except for the financial statements and related schedules
and statistical data included therein or omitted therefrom or Underwriters'
Information, as to which such counsel need express no opinion), at the time the
Registration Statement became effective (or, if the term "Prospectus" refers to
the prospectus first filed pursuant to Rule 424(b) of the 1933 Act Regulations,
at the time the Prospectus was issued), at the time any such amended or
supplemented Prospectus was issued, at the Closing Date and, if applicable, the
Option Closing Date, contained or contains any untrue statement of a material
fact or omitted or omits to state any material fact required to be stated
therein or necessary to make the statements therein not misleading or (C) that
there is any amendment to the Registration Statement required to be filed that
has not been filed.
(e) Richards, Layton & Finger, P.A., as Delaware counsel to
the Offerors, shall have furnished to you their signed opinion, dated as of
Closing Date or the Option Closing Date, as the case may be, in form and
substance satisfactory to counsel to the Underwriters, to the effect that:
(i) The Trust has been duly created and is validly
existing in good standing as a business trust under the Delaware
Business Trust Act, 12 Del. C. ss.ss. 3801 et seq. (the "Delaware
Act"), with the business trust power and authority to (a) own its
property and conduct its business as described in the Prospectus, (b)
execute and deliver, and perform its obligations under, this Agreement,
and (c) issue and perform its obligations under the Preferred
Securities. All filings required under the laws of the State of
Delaware with respect to the creation and valid existence of the Trust
as a business trust have been made.
(ii) The Trust Agreement constitutes a legal, valid
and binding obligation of the Company and the trustees of the Trust in
accordance with its terms, except to the extent that enforcement
thereof may be limited by (a) bankruptcy, insolvency, receivership,
liquidation, fraudulent conveyance, reorganization, moratorium and
similar laws of general applicability relating to or affecting
creditors' rights and remedies, (b) general principles of equity
including applicable law relating to fiduciary
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duty (regardless of whether considered and applied in a proceeding in
equity or at law) and (c) public policy with respect to
indemnification.
(iii) Under the Trust Agreement and the Delaware Act,
all necessary trust action has been taken on the part of the Trust to
duly authorize the execution and delivery of this Agreement by the
Trust and the performance of its obligations hereunder.
(iv) The Preferred Securities have been duly
authorized for issuance by the Trust and, when issued and delivered in
accordance with the terms of the Trust Agreement and this Agreement and
as described in the Prospectus, will be validly issued and (subject to
the terms of the Trust Agreement) fully paid and non-assessable
undivided beneficial interests in the assets of the Trust. The holders
of the Preferred Securities will be entitled to the benefits of the
Trust Agreement (subject to the limitations set forth in paragraph (ii)
above) and will be entitled to the same limitation of personal
liability extended to stockholders of private corporations for profit
organized under the Delaware General Corporation Law. Such 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.
(v) Under the Trust Agreement and the Delaware Act,
the issuance of the Preferred Securities is not subject to preemptive
rights.
(vi) The issuance and sale by the Trust of the
Preferred Securities and the Common Securities, the purchase by the
Trust of the Debentures, the execution, delivery and performance by the
Trust of this Agreement, and the consummation by the Trust of the
transactions contemplated by this Agreement will not (a) constitute a
violation of or default under any indenture, mortgage, deed of trust,
loan agreement or other agreement to which the Trust is a party, (b)
violate any of the provisions of the Certificate of Trust or the Trust
Agreement or (c) violate any applicable Delaware law or administrative
regulation.
(vii) Assuming that the Trust derives no income from
or connected with sources within the State of Delaware and has no
assets, activities (other than having a Delaware trustee as required by
the Delaware Act and the filing of documents with the Secretary of
State of the State of Delaware) or employees in the State of Delaware,
no filing with, or authorization, approval, consent, license, order,
registration, qualification or decree of, any Delaware court or
Delaware governmental authority or agency (other than as may be
required under the securities or blue sky laws of the State of Delaware
as to which such counsel need express no opinion) is necessary or
required to be obtained by the Trust solely in connection with the due
authorization, execution and delivery of this Agreement by the Trust or
the offering, issuance, sale or delivery of the Preferred Securities by
the Trust in accordance with the Trust Agreement and the Prospectus.
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(viii) To such counsel's knowledge, there are no
actions, suits or proceedings pending or judgments outstanding against
the Trust in any court or agency or instrumentality of the United
States of America that relate to or place or may place in question the
validity or enforceability of this Agreement or the issuance and sale
of the Preferred Securities and the Common Securities by the Trust or
the purchase of the Debentures by the Trust.
(ix) The Common Securities have been duly authorized
by the Trust Agreement and are duly and validly issued undivided
beneficial interests in the assets of the Trust and are entitled to the
benefits of the Trust Agreement.
Such opinion may state that it is limited to the laws of the
State of Delaware. Such counsel shall state that Kennedy, Baris & Lundy, L.L.P.
may rely upon their opinion in rendering the opinions required by Section 6 (d)
hereof.
(f) Bingham Dana LLP, counsel to State Street Bank and Trust
Company ("State Street") shall have furnished to you their signed opinion, dated
the Closing Date or the Option Closing Date, as the case may be, in form and
substance reasonably satisfactory to counsel to the Underwriters, to the effect
that:
(i) State Street is duly incorporated and is validly
existing in good standing as a banking corporation with trust powers
under the laws of the Commonwealth of Massachusetts.
(ii) State Street, as 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.
(iii) State Street, as 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.
(iv) State Street, as 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 delivery of the Trust Agreement.
(v) Each of the Indenture, the Guarantee Agreement
and the Trust Agreement has been duly executed and delivered by State
Street, as Indenture Trustee, Guarantee Trustee and Property Trustee,
respectively, and constitutes a legal, valid and binding obligation of
the Indenture Trustee, the Guarantee Trustee and the Property Trustee,
respectively, enforceable against the Indenture Trustee, the Guarantee
Trustee and the Property Trustee, respectively, in accordance with its
respective terms, except that,
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such enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium, liquidation, fraudulent conveyance and
transfer of other similar laws affecting the enforcement of creditors'
rights generally, and by general 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.
(vi) The Debentures delivered on the date hereof have
been duly authenticated by State Street as Indenture Trustee, in
accordance with the terms of the Indenture.
(g) Richards, Layton & Finger, P.A., counsel to Wilmington
Trust Company ("Wilmington Trust") shall have furnished to you their signed
opinion, dated the Closing Date or the Option Closing Date, as the case may be,
in form and substances reasonably satisfactory to counsel to the Underwriters,
to the effect that:
(i) Wilmington Trust is duly incorporated and is
validly existing in good standing as a banking corporation with trust
powers under the laws of the State of Delaware.
(ii) Wilmington Trust, as Delaware Trustee, has the
requite power and authority to execute and deliver the Trust Agreement,
and has taken all necessary corporate action to authorize the execution
and delivery of the Trust Agreement.
(iii) The Trust Agreement has been duly executed and
delivered by Wilmington Trust, as Delaware Trustee, and constitutes a
legal, valid and binding obligation of the Delaware Trustee,
enforceable against the Delaware Trustee in accordance with its terms.
Such counsel shall state that Kennedy, Baris & Lundy,
L.L.P. may rely upon their opinion in rendering the opinions
required by Section 6(d) hereof.
(h) Breyer & Aguggia LLP, counsel to the Underwriters, shall
have furnished you their signed opinion, dated the Closing Date or the Option
Closing Date, as the case may be, with respect to the sufficiency of all
corporate procedures and other legal matters relating to this Agreement, the
validity of the Designated Preferred Securities, the Registration Statement, the
Prospectus and such other related matters as you may reasonably request and
there shall have been furnished to such counsel such documents and other
information as they may request to enable them to pass on such matters. In
giving such opinion, Breyer & Aguggia LLP may rely as to matters of fact upon
statements and certifications of officers of the Offerors and of other
appropriate persons and may rely as to matters of law, other than law of the
United States, and upon the opinions of Kennedy, Baris & Lundy, L.L.P. described
herein.
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(i) On the date of this Agreement and on the Closing Date
(and, if applicable, any Option Closing Date), the Underwriters shall have
received from Keller Bruner & Company, LLC a letter, dated the date of this
Agreement and the Closing Date (and, if applicable, the Option Closing Date),
respectively, in form and substance satisfactory to the Underwriters, confirming
that they are independent public accountants with respect to Company, within the
meaning of the 1933 Act and the 1933 Act Regulations, and stating in effect
that:
(i) In their opinion, the consolidated financial
statements of the Company audited by them and included in the
Registration Statement comply as to form in all material respects with
the applicable accounting requirements of the 1933 Act and the 1933 Act
Regulations.
(ii) On the basis of the procedures specified by the
American Institute of Certified Public Accountants as described in SAS
No. 71, "Interim Financial Information", inquiries of officials of the
Company responsible for financial and accounting matters, and such
other inquiries and procedures as may be specified in such letter,
which procedures do not constitute an audit in accordance with U.S.
generally accepted auditing standards, nothing came to their attention
that caused them to believe that, if applicable, the unaudited interim
consolidated financial statements of the Company included in the
Registration Statement do not comply as to form in all material
respects with the applicable accounting requirements of the 1933 Act
and 1933 Act Regulations or are not in conformity with U.S. generally
accepted accounting principles applied on a basis substantially
consistent, except as noted in the Registration Statement, with the
basis for the audited consolidated financial statements of the Company
included in the Registration Statement.
(iii) On the basis of limited procedures, not
constituting an audit in accordance with U.S. generally accepted
auditing standards, consisting of a reading of the unaudited interim
financial statements and other information referred to below, a reading
of the latest available unaudited condensed consolidated financial
statements of the Company, inspection of the minute books of the
Company since the date of the latest audited financial statements of
the Company included in the Registration Statement, inquiries of
officials of the Company responsible for financial and accounting
matters and such other inquiries and procedures as may be specified in
such letter, nothing came to their attention that caused them to
believe that:
(A) as of a specified date not more than
five days prior to the date of such letter, there have been
any changes in the consolidated capital stock of the Company,
any increase in the consolidated debt of the Company, any
decreases in consolidated total assets or shareholders equity
of the Company, or any changes, decreases or increases in
other items specified by the Underwriters, in each case as
compared with amounts shown in the latest unaudited interim
consolidated statement of financial condition of the Company
included in the Registration Statement except in each case for
changes, increases or decreases
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which the Registration Statement specifically discloses, have
occurred or may occur or which are described in such letter;
and
(B) for the period from the date of the
latest unaudited interim consolidated financial statements
included in the Registration Statement to the specified date
referred to in Clause (iii)(A), there were any decreases in
the consolidated interest income, net interest income, or net
income of the Company or in the per share amount of net income
of the Company, or any changes, decreases or increases in any
other items specified by the Underwriters, in each case as
compared with the comparable period of the preceding year and
with any other period of corresponding length specified by the
Underwriters, except in each case for increases or decreases
which the Registration Statement discloses have occurred or
may occur, or which are described in such letter.
(iv) In addition to the audit referred to in their
report included in the Registration Statement and the limited
procedures, inspection of minute books, inquiries and other procedures
referred to in paragraphs (ii) and (iii) above, they have carried out
certain specified procedures, not constituting an audit in accordance
with U.S. generally accepted auditing standards, with respect to
certain amounts, percentages and financial information specified by the
Underwriters which are derived from the general accounting records and
consolidated financial statements of the Company which appear in the
Registration Statement specified by the Underwriters in the
Registration Statement, and have compared such amounts, percentages and
financial information with the accounting records and the material
derived from such records and consolidated financial statements of the
Company have found them to be in agreement.
In the event that the letters to be delivered referred to
above set forth any such changes, decreases or increases as specified in Clauses
(iii)(A) or (iii)(B) above, or any exceptions from such agreement specified in
Clause (iv) above, it shall be a further condition to the obligations of the
Underwriters that the Underwriters shall have determined, after discussions with
officers of the Company responsible for financial and accounting matters, that
such changes, decreases, increases or exceptions as are set forth in such
letters do not (x) reflect a material adverse change in the items specified in
Clause (iii)(A) above as compared with the amounts shown in the latest unaudited
consolidated statement of financial condition of the Company included in the
Registration Statement, (y) reflect a material adverse change in the items
specified in Clause (iii)(B) above as compared with the corresponding periods of
the prior year or other period specified by the Underwriters, or (z) reflect a
material change in items specified in Clause (iv) above from the amounts shown
in the Preliminary Prospectus distributed by the Underwriters in connection with
the offering contemplated hereby or from the amounts shown in the Prospectus.
(j) At the Closing Date and, if applicable, the Option Closing
Date, you shall have received certificates of the chief executive officer and
the chief financial and accounting officer of the Company, which certificates
shall be deemed to be made on behalf of the Company
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dated as of the Closing Date and, if applicable, the Option Closing Date,
evidencing satisfaction of the conditions of Section 6(a) and stating that (i)
the representations and warranties of the Company set forth in Section 2(a)
hereof are accurate as of the Closing Date and, if applicable, the Option
ClosingDate, and that the Offerors have complied with all agreements and
satisfied all conditions on their part to be performed or satisfied at or prior
to such Closing Date; (ii) since the respective dates as of which information is
given in the Registration Statement and the Prospectus, there has not been any
material adverse change in the condition (financial or otherwise), earnings,
affairs, business, prospects or results of operations of the Offerors and the
Subsidiaries on a consolidated basis; (iii) since such dates there has not been
any material transaction entered into by the Offerors or the Subsidiaries other
than transactions in the ordinary course of business; and (iv) they have
carefully examined the Registration Statement and the Prospectus as amended or
supplemented and nothing has come to their attention that would lead them to
believe that either the Registration Statement or the Prospectus, or any
amendment or supplement thereto as of their respective effective or issue dates,
contained, and the Prospectus as amended or supplemented at such Closing Date
(and, if applicable, the Option Closing Date), contains any untrue statement of
a material fact, or omits to state a material fact required to be stated therein
or necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; and (v) covering such
other matters as you may reasonably request. The officers' certificate of the
Company shall further state that no stop order affecting the Registration
Statement is in effect or has been threatened.
(k) At the Closing Date and, if applicable, the Option Closing
Date, you shall have received a certificate of an authorized representative of
the Trust to the effect that to the best of his or her knowledge based upon a
reasonable investigation, the representations and warranties of the Trust in
this Agreement are true and correct as though made on and as of the Closing Date
(and, if applicable, the Option Closing Date); the Trust has complied with all
the agreements and satisfied all the conditions required by this Agreement to be
performed or satisfied by the Trust on or prior to the Closing Date and since
the most recent date as of which information is given in the Prospectus, except
as contemplated by the Prospectus, the Trust has not incurred any material
liabilities or obligations, direct or contingent, or entered into any material
transactions not in the ordinary course of business and there has not been any
material adverse change in the condition (financial or otherwise) of the Trust.
(l) On the Closing Date, you shall have received duly executed
counterparts of the Trust Agreement, the Guarantee, the Indenture and the
Expense Agreement.
(m) The NASD, upon review of the terms of the public offering
of the Designated Preferred Securities, shall not have objected to the
Underwriters' participation in such offering. The Preferred Securities, the
Guarantee and the Debentures shall have been qualified or registered for sale,
or subject to an available exemption from such qualification or registration,
under the Blue Sky Laws of such jurisdictions as shall have been reasonably
specified by the Underwriters.
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(n) Prior to the Closing Date and, if applicable, the Option
Closing Date, the Offerors shall have furnished to you and counsel to the
Underwriters all such other documents, certificates and opinions as they have
reasonably requested.
All opinions, certificates, letters and other documents shall
be in compliance with the provisions hereof only if they are reasonably
satisfactory in form and substance to you. The Offerors shall furnish you with
conformed copies of such opinions, certificates, letters and other documents as
you shall reasonably request.
If any of the conditions referred to in this Section 6 shall
not have been fulfilled when and as required by this Agreement, this Agreement
and all of the Underwriters' obligations hereunder may be terminated by you on
notice to the Company at, or at any time before, the Closing Date or the Option
Closing Date, as applicable. Any such termination shall be without liability of
the Underwriters to the Offerors.
7. INDEMNIFICATION AND CONTRIBUTION.
(a) The Offerors jointly and severally agree to indemnify and
hold harmless the Underwriters, each of their directors, partners, officers and
agents, and each person, if any, who controls the Underwriters within the
meaning of the 1933 Act, against any and all losses, claims, damages,
liabilities and expenses (including reasonable costs of investigation and
reasonable attorney fees and expenses), joint or several, arising out of or
based upon (i) any untrue statement or alleged untrue statement of a material
fact made by the Company or the Trust contained in the Registration Statement,
any Preliminary Prospectus or the Prospectus, or in any amendment or supplement
thereto, (ii) any blue sky application or other document executed by the Company
or the Trust specifically for that purpose or based upon written information
furnished by the Company or the Trust filed in any state or other jurisdiction
in order to qualify any of the Designated Preferred Securities under the
securities laws thereof (any such application, document or information being
hereinafter referred to as a "Blue Sky Application"), (iii) any omission or
alleged omission to state a material fact in the registration statement as
originally filed or the Registration Statement, any Preliminary Prospectus or
the Prospectus, or in any amendment or supplement thereto, or in any Blue Sky
Application required to be stated therein or necessary to make the statements
therein not misleading, and against any and all losses, claims, damages,
liabilities and expenses (including reasonable costs of investigation and
attorney fees), joint or several, arising out of or based upon any untrue
statement or alleged untrue statement of a material fact contained in any
Preliminary Prospectus or the Prospectus, or in any amendment or supplement
thereto, or arising out of or based upon any omission or alleged omission to
state therein 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 or (iv) the enforcement of this indemnification provision
or the contribution provisions of Section 7(d); and shall reimburse each such
indemnified party for any reasonable legal or other expenses as incurred, but in
no event less frequently than 30 days after each invoice is submitted, incurred
by them in connection with investigating or defending against or appearing as a
third-party witness in connection with any such loss, claim, damage, liability
or action, notwithstanding the
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possibility that payments for such expenses might later be held to be improper,
in which case such payments shall be promptly refunded; provided, however, that
the Offerors shall not be liable in any such case to the extent, but only to the
extent, that any such losses, claims, damages, liabilities and expenses arise
out of or are based upon any untrue statement or omissionor allegation thereof
that has been made or omitted in reliance upon and in conformity with the
Underwriters' Information; provided, that the indemnification contained in this
paragraph with respect to any Preliminary Prospectus shall not inure to the
benefit of the Underwriters (or of any person controlling the Underwriters) to
the extent any such losses, claims, damages, liabilities or expenses directly
results from the fact that the Underwriters sold Designated Preferred Securities
to a person to whom there was not sent or given, at or prior to the written
confirmation of such sale, a copy of the Prospectus (as amended or supplemented
if any amendments or supplements thereto shall have been furnished to you in
sufficient time to distribute same with or prior to the written confirmation of
the sale involved), if required by law, and if such loss, claim, damage,
liability or expense would not have arisen but for the failure to give or send
such person such document. The foregoing indemnity agreement is in addition to
any liability the Company or the Trust may otherwise have to any such
indemnified party.
(b) The Underwriters agree to indemnify and hold harmless each
Offeror, each of its directors and agents, each of its officers and trustees who
signed the Registration Statement and each person, if any, who controls an
Offeror within the meaning of the 1933 Act, to the same extent as required by
the foregoing indemnity from the Company to the Underwriters, but only with
respect to the Underwriters' Information or information relating to the
Underwriters furnished in writing to an Offeror through the Underwriters by or
on behalf of it expressly for use in a Blue Sky Application. The foregoing
indemnity agreement is in addition to any liability which the Underwriters may
otherwise have to any such indemnified party.
(c) If any action or claim shall be brought or asserted
against any indemnified party or any person controlling an indemnified party in
respect of which indemnity may be sought from the indemnifying party, such
indemnified party or controlling person shall promptly notify the indemnifying
party in writing, and the indemnifying party shall assume the defense thereof,
including the employment of counsel reasonably satisfactory to the indemnified
party and the payment of all expenses; provided, however, that the failure so to
notify the indemnifying party shall not relieve it from any liability which it
may have to an indemnified party otherwise than under such paragraph, and
further, shall only relieve it from liability under such paragraph to the extent
prejudiced thereby. Any indemnified party or any such controlling person shall
have the right to employ separate counsel in any such action and to participate
in the defense thereof, but the fees and expenses of such counsel shall be at
the expense of such indemnified party or such controlling person unless (i) the
employment thereof has been specifically authorized by the indemnifying party in
writing, (ii) the indemnifying party has failed to assume the defense or to
employ counsel reasonably satisfactory to the indemnified party or (iii) the
named parties to any such action (including any impleaded parties) include both
such indemnified party or such controlling person and the indemnifying party and
such indemnified party or such controlling person shall have been advised by
counsel that there may be one or more legal defenses available to it that are
different from or in addition to those available to the indemnifying party (in
which
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case, if such indemnified party or controlling person notifies the indemnifying
party in writing that it elects to employ separate counsel at the expense of the
indemnifying party, the indemnifying party shall not have the right to assume
the defense of such action on behalf of such indemnified party or such
controlling person);it being understood, however, that the indemnifying party
shall not, in connection with any one such action or separate but substantially
similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances, be liable for the reasonable fees and
expenses of more than one separate firm of attorneys (in addition to any local
counsel) separate from their own counsel at any time and for all such
indemnified parties and controlling persons, which firm shall be designated in
writing by the indemnified party. Each indemnified party and each controlling
person, as a condition of such indemnity, shall use reasonable efforts to
cooperate with the indemnifying party in the defense of any such action or
claim. The indemnifying party shall not be liable for any settlement of any such
action effected without its written consent, but if there be a final judgment
for the plaintiff in any such action, the indemnifying party agrees to indemnify
and hold harmless any indemnified party and any such controlling person from and
against any loss, claim, damage, liability or expense by reason of such
settlement or judgment.
An indemnifying party shall not, without the prior written
consent of each indemnified party, settle, compromise or consent to the entry of
any judgment in any pending or threatened claim, action, suit or proceeding in
respect of which indemnity may be sought hereunder (whether or not such
indemnified party or any person who controls such indemnified party within the
meaning of the 1933 Act is a party to such claim, action, suit or proceeding),
unless such settlement, compromise or consent includes a release of each such
indemnified party reasonably satisfactory to each such indemnified party and
each such controlling person from all liability arising out of such claim,
action, suit or proceeding or unless the indemnifying party shall confirm in a
written agreement with each indemnified party, that notwithstanding any federal,
state or common law, such settlement, compromise or consent shall not alter the
right of any indemnified party or controlling person to indemnification or
contribution as provided in this Agreement.
(d) If the indemnification provided for in this Section 7 is
unavailable or insufficient to hold harmless an indemnified party under
paragraphs (a), (b) or (c) hereof in respect of any losses, claims, damages,
liabilities or expenses referred to therein, then each indemnifying party, in
lieu of indemnifying such indemnified party, shall contribute to the amount paid
or payable by such indemnified party as a result of such losses, claims,
damages, liabilities or expenses (i) in such proportion as is appropriate to
reflect the relative benefits received by the Offerors on the one hand and the
Underwriters on the other from the offering of the Designated 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 the Offerors on the one hand and the Underwriters on the other in
connection with the statements or omissions that resulted in such losses,
claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative benefits received by the Offerors on the
one hand and the Underwriters on the other shall be deemed to be in the same
proportion as the total proceeds from
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the offering of the Designated Preferred Securities (before deducting expenses)
received by the Offerors bear to the total underwriting discounts, commissions
and compensation received by the Underwriters, in each case as set forth in the
table on the cover page of the Prospectus. The relative fault of the Offerors on
the one hand and of the Underwriters on the other shall be determined by
reference to, among other things, whether the untrue or alleged untruestatement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Offerors or by the Underwriters and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such untrue statement or omission. The Offerors and the
Underwriters agree that it would not be just and equitable if contribution
pursuant to this paragraph (d) were determined by pro rata allocation or by any
other method of allocation that does not take into account the equitable
considerations referred to herein. The amount paid or payable by an indemnified
party as a result of the losses, claims, damages, liabilities and expenses
referred to in the first sentence of this paragraph (d) shall be deemed to
include, subject to the limitations set forth above, 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
paragraph (d), the Underwriters shall not be required to contribute any amount
in excess of the Firm Preferred Securities Commissions received by them. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the 1933 Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation.
Neither party shall be liable for contribution for claims
settled without such party's consent, provided such consent shall not be
unreasonably withheld, conditioned or delayed.
For purposes of this paragraph (d), each person who controls
the Underwriters within the meaning of Section 15 of the 1933 Act, the partners,
directors, officers, employees and agents of the Underwriters shall have the
same rights to contribution as the Underwriters, and each person who controls an
Offeror within the meaning of Section 15 of the 1933 Act, each officer and
trustee of an Offeror who shall have signed the Registration Statement and each
director and each agent of an Offeror shall have the same rights to contribution
as the Offerors subject in each case to the preceding sentence. The obligations
of the Offerors under this paragraph (d) shall be in addition to any liability
which the Offerors may otherwise have and the obligations of the Underwriters
under this paragraph (d) shall be in addition to any liability that the
Underwriters may otherwise have.
(e) The indemnity and contribution agreements contained in
this Section 7 and the representations and warranties of the Offerors set forth
in this Agreement shall remain operative and in full force and effect,
regardless of (i) any investigation made by or on behalf of the Underwriters or
its partners, directors, officers, employees or agents (or any person
controlling the Underwriters) or by or on behalf of the Offerors, or their
directors, trustees or officers (or any person controlling an Offeror), (ii)
acceptance of any Designated Preferred Securities and payment therefor hereunder
and (iii) any termination of this Agreement. A successor of the Underwriters or
its partners, directors, officers, employees or agents, or of an Offeror, or its
directors, trustees or officers (or of any person controlling the Underwriters
or an
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Offeror) shall be entitled to the benefits of the indemnity, contribution and
reimbursement agreements contained in this Section 7.
(f) The Company agrees to indemnify the Trust against any and
all losses, claims, damages or liabilities that may become due from the Trust
under this Section 7.
8. TERMINATION. You shall have the right to terminate this Agreement at
any time at or prior to the Closing Date or, with respect to the Underwriters'
obligation to purchase the Option Preferred Securities, at any time at or prior
to the Option Closing Date, without liability on the part of the Underwriters to
the Offerors, if:
(a) Either Offeror shall have failed, refused, or been unable
to perform any agreement on its part to be performed under this Agreement, or
any of the conditions referred to in Section 6 shall not have been fulfilled,
when and as required by this Agreement;
(b) The Offerors or any of the Subsidiaries shall have
sustained any material loss or interference with its business from fire,
explosion, flood or other calamity, whether or not covered by insurance, or from
any labor dispute or court or governmental action, order or decree which in the
judgment of the Underwriters materially impairs the investment quality of the
Designated Preferred Securities;
(c) There has been since the respective dates as of which
information is given in the Registration Statement or the Prospectus, any
materially adverse change in, or any development which is reasonably likely to
have a material adverse effect on, the condition (financial or otherwise),
earnings, affairs, business, prospects or results of operations of the Offerors
and the Subsidiaries on a consolidated basis, whether or not arising in the
ordinary course of business;
(d) Any event shall have occurred or shall exist that makes
untrue or incorrect in any material respect any statement or information
contained in the Registration Statement or that is not reflected in the
Registration Statement but should be reflected therein to make the statements or
information contained therein not misleading in any material respect; or
(e) There has occurred any outbreak of hostilities or other
calamity or crisis or material change in general economic, political or
financial conditions, or internal conditions, the effect of which on the
financial markets of the United States is such as to make it, in your reasonable
judgment, impracticable to market the Designated Preferred Securities or enforce
contracts for the sale of the Designated Preferred Securities;
(f) Trading generally on the New York Stock Exchange, the
American Stock Exchange or the Nasdaq National Market shall have been suspended,
or minimum or maximum prices for trading shall have been fixed, or maximum
ranges for prices for securities shall have been required, by any of said
exchanges or market system or by the Commission or any other governmental
authority;
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(g) A banking moratorium shall have been declared by either
federal or Maryland authorities; or
(h) Any action shall have been taken by any government in
respect of its monetary affairs which, in your reasonable judgment, has a
material adverse effect on the United States securities markets.
If this Agreement shall be terminated pursuant to this Section
8, the Offerors shall not then be under any liability to the Underwriters except
that the provisions of Sections 5 and 7 hereof shall survive any termination of
this Agreement.
9. EFFECTIVE DATE OF AGREEMENT. If the Registration Statement is not
effective at the time of execution of this Agreement, this Agreement shall
become effective on the Effective Date at the time the Commission declares the
Registration Statement effective. The Company shall immediately notify the
Underwriters when the Registration Statement becomes effective.
If the Registration Statement is effective at the time of
execution of this Agreement, this Agreement shall become effective at the
earlier of 11:00 a.m. Eastern time, on the first full business day following the
day on which this Agreement is executed, or at such earlier time as the
Underwriters shall release the Designated Preferred Securities for initial
public offering. The Underwriters shall notify the Offerors immediately after
they have taken any action which causes this Agreement to become effective.
Until such time as this Agreement shall have become effective,
it may be terminated by the Offerors, by notifying the Underwriters, or by you,
by notifying either Offeror, except that the provisions of Sections 5 and 7
shall at all times be effective.
10. REPRESENTATIONS, WARRANTIES AND AGREEMENTS TO SURVIVE DELIVERY. The
representations, warranties, indemnities, agreements and other statements of the
Offerors and their officers and trustees set forth in or made pursuant to this
Agreement and the agreements of the Underwriters contained in Section 7 hereof
shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of the Offerors or controlling persons of
either Offeror, or by or on behalf of the Underwriters or controlling persons of
the Underwriters or any termination or cancellation of this Agreement and shall
survive delivery of and payment for the Designated Preferred Securities.
11. NOTICES. Except as otherwise provided in this Agreement, all
notices and other communications hereunder shall be in writing and shall be
deemed to have been duly given if delivered by hand, mailed by registered or
certified mail, return receipt requested, or transmitted by any standard form of
telecommunication and confirmed. Notices to either Offeror shall be sent to 7200
FCNB Court, Frederick, Maryland 21703, Attention: A. Patrick Linton (with a copy
to Kennedy, Baris & Lundy, L.L.P. 4719 Hampden Lane, Suite 300, Bethesda,
Maryland 20814, Attention: David H. Baris, Esq.); and notices to the
Underwriters shall be sent to Sandler O'Neill & Partners, L.P., Two World Trade
Center, 104th Floor, New York, New York 10048,
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Attention: James Nuber and Legg Mason Wood Walker, Incorporated, 1747
Pennsylvania Avenue, N.W.,Washington, D.C. 20006, Attention Mark C. Micklem
(with a copy to Breyer & Aguggia LLP, 1300 I Street, N.W., Suite 470 East,
Washington, D.C. 20005 Attention: Paul M. Aguggia, Esq.).
12. PARTIES. The Agreement herein set forth is made solely for the
benefit of the Underwriters and the Offerors and, to the extent expressed,
directors, trustees and officers of the Offerors, partners, directors, officers,
employees and agents of the Underwriters, any person controlling the Offerors or
the Underwriters, and their respective successors and assigns. No other person
shall acquire or have any right under or by virtue of this Agreement. The term
"successors and assigns" shall not include any purchaser, in his or her status
as such purchaser, from the Underwriters of the Designated Preferred Securities.
The Company on behalf of itself and its Subsidiaries (including,
without limitation, the Trust), hereby irrevocably submits to the jurisdiction
of the federal and New York State courts located in the City of New York in
connection with any suit, action or proceeding related to this agreement or any
of the matters contemplated hereby, irrevocably waives any defense of lack of
personal jurisdiction and irrevocably agrees that all claims in respect of any
suit, action or proceeding may be heard and determined in any such court. The
Company, on behalf of itself and the Subsidiaries (including, without
limitation, the Trust), irrevocably waives, to the fullest extent it may
effectively do so under applicable law, any objection which it may now or
hereafter have to the laying of venue of any such suit, action or proceeding
brought it any such court and any claim that any such suit, action or proceeding
brought in any such court has been brought in an inconvenient forum.
13. GOVERNING LAW. This Agreement shall be governed by the laws of the
State of New York, without giving effect to the choice of law or conflicts of
law principles thereof.
14. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, and when a counterpart has been executed by each party hereto all
such counterparts taken together shall constitute one and the same Agreement.
[Remainder of page intentionally left blank]
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If the foregoing is in accordance with the your understanding
of our agreement, please sign and return to us a counterpart hereof, whereupon
this shall become a binding agreement between the Company, the Trust and you in
accordance with its terms.
Very truly yours,
FCNB CORP
By:
----------------------------------------
Name:
Title:
FCNB CAPITAL TRUST
By:
----------------------------------------
Name:
Title:
CONFIRMED AND ACCEPTED,
as of ____________, 1998.
BY: SANDLER O'NEILL & PARTNERS, L.P.
by Sandler O'Neill & Partners Corp.,
the sole general partner
By:
----------------------------------------
Name:
Title:
BY: LEGG MASON WOOD WALKER, INCORPORATED
By:
----------------------------------------
Name:
Title:
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EXHIBIT A
LIST OF SUBSIDIARIES
--------------------
Subsidiaries of the Company
- ---------------------------
FCNB Bank
FCNB Capital Trust
Subsidiaries of the Bank
- ------------------------
FCNB Investment Holding Corporation - Delaware
Monocacy Management Company - Maryland
First Choice Insurance Agency, Inc. - Maryland
Maryland Title Center - West, LLC (16% interest) - Maryland
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the incorporation by reference in this Pre-Effective
Amendment Number 1 to Form S-3 of FCNB Corp (the "Company") and FCNB Capital
Trust, of our report, dated January 23, 1998, on the consolidated financial
statements of the Company for the year ended December 31, 1997, which appears on
page 45 of the Company's 1997 Annual Report to Shareholders included in the
Company's annual report on Form 10-K for the year ended December 31, 1997, and
to the reference to us under the caption "Experts" in the Prospectus forming a
part of the Form S-3.
KELLER BRUNER & COMPANY,L.L.C.
/s/ Keller Bruner & Company,L.L.C.
- ----------------------------------
Frederick, Maryland
May 28, 1998
