<PAGE> 1
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
<TABLE>
<S> <C>
ABINGTON BANCORP
ABINGTON BANCORP, INC. CAPITAL TRUST
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS TRUST
CHARTER) AGREEMENT)
MASSACHUSETTS DELAWARE
(STATE OR OTHER JURISDICTION OF (STATE OR OTHER JURISDICTION OF
INCORPORATION OR ORGANIZATION) INCORPORATION OR ORGANIZATION)
6712 6719
(PRIMARY STANDARD INDUSTRIAL (PRIMARY STANDARD INDUSTRIAL
CLASSIFICATION CODE NUMBER) CLASSIFICATION CODE NUMBER)
04-3334127 (APPLIED FOR)
(I.R.S. EMPLOYER (I.R.S. EMPLOYER
IDENTIFICATION NO.) IDENTIFICATION NO.)
</TABLE>
536 WASHINGTON STREET
ABINGTON, MASSACHUSETTS 02351
(781) 982-3200
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
JAMES P. MCDONOUGH
PRESIDENT AND CHIEF EXECUTIVE OFFICER
ABINGTON BANCORP, INC.
536 WASHINGTON STREET
ABINGTON, MASSACHUSETTS 02351
(781) 982-3200
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
COPIES TO:
<TABLE>
<S> <C>
PETER W. COOGAN, ESQ. REGINA M. PISA, P.C.
DAVID W. WALKER, ESQ. GOODWIN, PROCTER & HOAR LLP
FOLEY, HOAG & ELIOT LLP EXCHANGE PLACE
ONE POST OFFICE SQUARE BOSTON, MA 02109
BOSTON, MA 02109 (617) 570-1000
(617) 832-1000
</TABLE>
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<PAGE> 2
PART I. INFORMATION REQUIRED IN PROSPECTUS
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> 3
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.
SUBJECT TO COMPLETION, DATED MAY 27, 1998
PROSPECTUS
LOGO
1,100,000 PREFERRED SECURITIES
ABINGTON BANCORP CAPITAL TRUST
% CUMULATIVE TRUST PREFERRED SECURITIES
(LIQUIDATION AMOUNT $10 PER PREFERRED SECURITY)
GUARANTEED, AS DESCRIBED HEREIN, BY
ABINGTON BANCORP, INC.
------------------------
$11,000,000 % JUNIOR SUBORDINATED DEBENTURES OF
ABINGTON BANCORP, INC.
------------------------
The % Cumulative Trust Preferred Securities (the "Preferred
Securities") offered hereby represent preferred undivided beneficial interests
in the assets of Abington Bancorp Capital Trust, a statutory business trust
created under the
laws of the State of Delaware (the "Trust"). Abington Bancorp, Inc., a
Massachusetts corporation (the "Company"), will own all the common securities
(the "Common Securities" and, together with the Preferred Securities, the "Trust
Securities") representing undivided beneficial interests in the assets of the
Trust.
(Continued on next page)
Application has been made to have the Preferred Securities approved for
quotation on the Nasdaq National Market under the Symbol "ABBKP".
------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 13 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
------------------------
THE SECURITIES OFFERED HEREBY ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF A BANK
AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION
OR ANY OTHER GOVERNMENTAL 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
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
=================================================================================================================
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC COMMISSION(1) TRUST(2)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Preferred Security................ $10.00 (2) $10.00
- -----------------------------------------------------------------------------------------------------------------
Total(3).............................. $11,000,000 (2) $11,000,000
=================================================================================================================
</TABLE>
(1) The Company and the Trust have agreed to indemnify the Underwriters against
certain liabilities, including certain liabilities under the Securities Act
of 1933, as amended. See "Underwriting."
(2) In view of the fact that the proceeds of the sale of the Preferred
Securities will be invested in the Junior Subordinated Debentures, the
Company, as issuer of the Junior Subordinated Debentures, has agreed to pay
the Underwriters, as compensation, $ per Preferred Security or
$ in the aggregate ($ if the over-allotment option is
exercised in full). See "Underwriting." The Company has also agreed to pay
the expenses of the offering estimated to be $ .
(3) The Trust has granted the Underwriters a 30-day option to purchase up to a
maximum of 165,000 additional Preferred Securities to cover over-allotments,
if any. If such option is exercised in full the total Price to Public,
Underwriting Commission and Proceeds to Trust will be $12,650,000, $ and
$12,650,000, respectively. See "Underwriting."
------------------------
The Preferred Securities are being offered by the Underwriters, subject to
prior sale, when, as and if delivered to and accepted by the Underwriters and
subject to their right to reject orders in whole or in part. It is expected that
delivery of the Preferred Securities will be made on or about , 1998.
TUCKER ANTHONY MCCONNELL, BUDD & DOWNES, INC.
INCORPORATED
The date of this Prospectus is , 1998.
<PAGE> 4
(Continued from the previous 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 %
Junior Subordinated Debentures (the "Junior Subordinated Debentures") of the
Company. The Junior Subordinated Debentures will mature on June 30, 2029, which
date may be shortened to a date not earlier than June 30, 2003 if certain
conditions are met (including, in the case of shortening the Stated Maturity (as
defined herein), 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 over the Common
Securities under certain circumstances with respect to cash distributions and
amounts payable on liquidation, redemption or otherwise. See "Description of the
Preferred Securities -- Subordination of the Common Securities."
Holders of Preferred Securities are entitled to receive preferential
cumulative cash distributions, at the annual rate of % of the liquidation
amount of $10 per Preferred Security (the "Liquidation Amount"), accumulating
from , 1998, the date of original issuance, and payable quarterly
in arrears on the last day of March, June, September and December of each year,
commencing September 30, 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 Junior 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
Junior 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 Junior 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 Junior Subordinated Debentures. DURING AN
EXTENSION PERIOD, INTEREST ON THE JUNIOR SUBORDINATED DEBENTURES WILL CONTINUE
TO ACCRUE (AND THE AMOUNT OF DISTRIBUTIONS TO WHICH HOLDERS OF THE 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. UPON THE OCCURRENCE OF AN EXTENSION PERIOD,
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 PRIOR TO SUCH DISPOSITION)
WILL NEVERTHELESS BE REQUIRED TO INCLUDE ACCUMULATED BUT UNPAID INTEREST ON THE
JUNIOR 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 JUNIOR SUBORDINATED DEBENTURES DEEMED DISPOSED OF. See
"Description of the Junior 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 Junior 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 Junior
Subordinated Debentures and the Guarantee -- Full and Unconditional Guarantee."
The Guarantee of the Company guarantees the payment of Distributions and
payments on liquidation or redemption of the Preferred Securities, but only in
each case to the extent of funds held by the Trust, as described herein. See
"Description of the Guarantee -- General." If the Company does not make interest
payments on the Junior 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
2
<PAGE> 5
the Junior Subordinated Debentures -- Enforcement of Certain 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 Junior 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 Junior 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
Junior Subordinated Debentures are redeemable prior to maturity at the option of
the Company (i) on or after June 30, 2003, in whole at any time or in part from
time to time, or (ii) at any time, in whole (but not in part), within 180 days
following the occurrence of a Tax Event, a Capital Treatment Event or an
Investment Company Event (each as defined herein), in each case at a redemption
price equal to the accumulated and unpaid interest on the Junior Subordinated
Debentures so redeemed to the date fixed for redemption, plus 100% of the
principal amount thereof. See "Description of the Preferred
Securities -- Redemption or Exchange."
The Company intends to take the position that the Junior Subordinated
Debentures will be classified under current law as indebtedness of the Company
for United States federal income tax purposes and accordingly, the Company
intends to treat the interest payable by the Company on the Junior Subordinated
Debentures as deductible for United States federal income tax purposes. There is
no assurance 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. See "Risk Factors -- Proposed Tax Legislation."
The Company has the right at any time to dissolve 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 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 the
Liquidation Amount per Preferred Security, plus accumulated and unpaid
Distributions thereon to the date of payment, which may be in the form of a
Junior Subordinated Debenture having an aggregate principal amount equal to the
aggregate Liquidation Amount of such Preferred Securities (and carrying with it
accrued 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 Dissolution."
The Company will provide to the holders of the Preferred Securities
quarterly reports containing unaudited financial statements and annual reports
containing financial statements audited by the Company's independent auditors.
The Company will also furnish the Company's annual reports on Form 10-K and
quarterly reports on Form 10-Q free of charge to holders of the Preferred
Securities who so request in writing addressed to the Clerk 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-ALLOTMENTS, STABILIZING TRANSACTIONS,
SYNDICATE SHORT COVERING TRANSACTIONS AND PENALTY BIDS. SUCH TRANSACTIONS, IF
COMMENCED, MAY BE DISCONTINUED AT ANY TIME. FOR A DESCRIPTION OF THESE
ACTIVITIES, SEE "UNDERWRITING."
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS (AND SELLING GROUP
MEMBERS) MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE PREFERRED
SECURITIES OFFERED HEREBY ON THE NASDAQ NATIONAL MARKET IN ACCORDANCE WITH RULE
103 OF REGULATION M. SEE "UNDERWRITING."
3
<PAGE> 6
ABINGTON BANCORP, INC.
[MAP OF OPERATIONS -- COMPANY TO PROVIDE]
4
<PAGE> 7
SUMMARY
The following summary is qualified in its entirety by the more detailed
information, including "Risk Factors" and the Consolidated Financial Statements
and Notes thereto, appearing elsewhere in this Prospectus or incorporated herein
by reference. The discussion in this Prospectus contains forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as
amended (the "Securities Act") and Section 21E of the Securities Exchange Act of
1934, as amended (the "Exchange Act") that involve risks and uncertainties. The
Company's actual results and the timing of certain events may differ materially
from the results discussed in the forward-looking statements. Factors that could
cause or contribute to such differences include, but are not limited to, those
discussed in "Risk Factors." As used herein, (i) the "Indenture" means the
Indenture, dated as of , 1998, as amended and supplemented from
time to time, between the Company and State Street Bank and Trust Company, as
Debenture Trustee (the "Debenture Trustee"), relating to the Junior Subordinated
Debentures, (ii) the "Trust Agreement" means the Amended and Restated
Declaration of Trust relating to the Trust among the Company, as Depositor,
State Street Bank and Trust Company, as Property Trustee (the "Property
Trustee"), Wilmington Trust Company, as Delaware Trustee (the "Delaware
Trustee"), and the Administrative Trustees named therein (collectively, with the
Property Trustee and Delaware Trustee, the "Issuer Trustees") and (iii) the
"Guarantee" means the Guarantee Agreement relating to the Preferred Securities
between the Company and State Street Bank and Trust Company, as Guarantee
Trustee (the "Guarantee Trustee").
ABINGTON BANCORP, INC.
Abington Bancorp, Inc. (the "Company"), a Massachusetts corporation, is a
one-bank holding company doing business through a wholly-owned subsidiary,
Abington Savings Bank (the "Bank"). Abington Bancorp, Inc. was re-established as
the Bank's holding company on January 31, 1997. Previously, the Company's
predecessor, also known as Abington Bancorp, Inc., had served as the Bank's
holding company from February 1988 until its dissolution in December 1992.
The Bank operated as a Massachusetts-chartered mutual savings bank from its
incorporation in 1853 until June 1986 when the Bank converted from mutual to
stock form of ownership. From June 1986 to the present, the Bank has operated as
a stock savings bank.
The Bank is a community bank engaged principally in the business of
attracting deposits from the general public, borrowing funds and investing those
deposits and funds. In its investments, the Bank has emphasized various types of
residential and commercial real estate loans, residential construction loans,
consumer loans, and investments in securities. The Bank considers its principal
market area to be the towns in and around Plymouth County, Massachusetts.
The Company has grown to $549.8 million in assets and $333.2 million in
deposits at March 31, 1998 from $347.4 million in assets and $209.9 million in
deposits at December 31, 1993. Deposits are insured by the Bank Insurance Fund
of the Federal Deposit Insurance Corporation ("FDIC") up to FDIC limits
(generally $100,000 per depositor) and by the Depositors Insurance Fund of the
Mutual Savings Central Fund, Inc. (the "Depositors Insurance Fund" or "Central
Fund") for the portion of deposits in excess of that insured by the FDIC.
Acquisitions and branch openings are an important part of the Company's
ongoing strategy of planned growth which will enable the Company to have a
greater regional presence. On June 3, 1994, the Company acquired Hull
Co-Operative Bank by merger. On June 26, 1995, the Company acquired the deposits
and certain assets and other liabilities of the Holbrook branch of The First
National Bank of Boston. Additionally, in August 1997 and April 1998, the
Company opened the first two of three planned de novo supermarket branches, in
Cohasset and Randolph, with a branch in Hanson scheduled to open in the fall of
1998.
The Bank has three wholly-owned subsidiaries: Holt Park Place Development
Corporation and Norroway Pond Development Corporation, which own properties
being marketed for sale, and Abington Securities Corporation, which invests
primarily in United States Government obligations and obligations of related
agencies and equity securities.
5
<PAGE> 8
FINANCIAL SUMMARY
<TABLE>
<CAPTION>
AT OR FOR THE THREE
MONTHS ENDED
MARCH 31, AT OR FOR THE YEAR ENDED DECEMBER 31,
------------------- ----------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
-------- -------- -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Assets.................. $549,838 $492,058 $531,986 $486,958 $460,492 $421,833 $347,354
Deposits................ 333,210 305,674 324,934 300,445 280,070 246,843 209,911
Stockholders' equity.... 34,584 33,835 36,321 33,546 30,561 28,366 27,869
Pre-tax income.......... 1,733 1,741 7,057 5,672 2,447+ 4,329 4,085
Net income.............. 1,136 1,052 4,378 3,533 1,429+ 2,743 2,529*
Net yield on average
earning assets,
taxable equivalent.... 3.17% 3.50% 3.41% 3.26% 3.30% 3.45% 3.55%
Return on average
equity................ 12.85% 12.39% 12.59% 11.00% 4.68%+ 9.23% 9.33%*
Return on average total
assets................ .85% .86% .87% .74% .33%+ .70% .76%*
</TABLE>
- ---------------
+ Reflects sale in 1995 of approximately $9.2 million of loans, including
approximately $5.7 million of loans that were non-accrual at September 30,
1995, at a price approximately 64% of par. See Note 6 of Notes to Consolidated
Financial Statements in Appendix A to this Prospectus.
* Excludes the favorable impact of a $650,000 adjustment due to a change in
accounting for income taxes.
The Company has sought to consistently increase earnings per share and to
maximize return on equity through a combination of strategies, including:
Growth of Retail Deposit Franchise -- Management has demonstrated over the
past five years its desire and ability to grow the Company's retail deposit
franchise by acquiring other whole institutions or branches, broadening delivery
systems (supermarket branches) and introducing products that are attractive to
retail customers (such as Totally Free Checking, first offered in March 1995),
combined with designing targeted marketing campaigns. The Bank has increased the
number of checking accounts to approximately 31,400 at March 31, 1998 from 7,000
at December 31, 1994. Management currently intends to maintain these core
strategies for retail growth in the future as well as to develop or provide
access to other products and services to best serve the customers in its
community.
Expansion of Business Banking Activities -- Commencing in 1996, the Company
adopted a strategy to become a more active business lender and, as a result, to
achieve a greater diversification of assets on its balance sheet. Commercial and
commercial real estate loans are generally funded through deposit growth and/or
through runoff from the Company's investment portfolio. Since commercial and
commercial real estate loans typically carry a higher yield than investment
securities, it is anticipated that growth in these portfolios will enhance
overall levels of profitability. The Company's commercial and commercial real
estate portfolios totaled $49.4 million at March 31, 1998, compared to $29.2
million at December 31, 1996. While competition for good business credits has
intensified over the past six to 18 months, management believes that there is
still an opportunity to grow this aspect of the Company's franchise by providing
high-quality service to the small- to medium-sized businesses located in the
Company's market area.
Efficient Capital Management -- The Company has made progress in providing
a more attractive return on equity over the past few years primarily as a result
of growth of the Company's loan and deposit portfolios, increases in customer
service fees and controlled growth of non-interest expenses. Additionally, in
each of 1997 and 1998, the Company's Board of Directors authorized the Company
to repurchase shares of its outstanding common stock from time to time at
prevailing market prices, up to a maximum of 10% of the shares outstanding in
each year (approximately 722,000 shares in the aggregate). See Note 19 of Notes
to Consolidated Financial Statements. As of May 5, 1998, the Company had
repurchased approximately 309,000 shares in total under the repurchase program
at a cost of approximately $5,181,000. The Company expects that its stock
repurchase programs will contribute to enhanced return on equity.
6
<PAGE> 9
Strategic Acquisitions -- The Company will continue to consider
opportunities for expansion through selective acquisitions as a means for
increasing market penetration, providing diversified financial service, and
achieving greater economies of scale. Since 1993, the Company has acquired two
branches with total deposits at time of purchase of approximately $49.3 million.
The Company's technology, operations and product offerings are also being
evaluated in connection with the assessment of growth opportunities.
The principal executive office of the Company is located at 536 Washington
Street, Abington, Massachusetts 02351 and its telephone number is (781)
982-3200.
ABINGTON BANCORP 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 Junior Subordinated
Debentures issued by the Company, and (iii) engaging in only those other
activities necessary, advisable, or incidental thereto. The Junior Subordinated
Debentures will be the only assets of the Trust and payments under the Junior
Subordinated Debentures will be the only revenue of the Trust. The Trust has a
term of 55 years, but may dissolve earlier as provided in the Trust Agreement.
The principal executive office of the Trust is c/o Abington Bancorp, Inc., 536
Washington Street, Abington, Massachusetts 02351, and its telephone number is
(781) 982-3200.
7
<PAGE> 10
THE OFFERING
Securities Offered............ 1,100,000 Preferred Securities having a
Liquidation Amount of $10 per Preferred
Security. The Preferred Securities represent
preferred undivided beneficial interests in the
assets of the Trust, which will consist solely
of the Junior Subordinated Debentures and
payments thereunder. The Trust has granted the
Underwriters an option, exercisable within 30
days after the date of the Offering, to
purchase up to an additional 165,000 Preferred
Securities at the initial offering price,
solely to cover over-allotments, if any.
Offering Price................ $10 per Preferred Security (Liquidation Amount
$10).
Distributions................. The Distributions payable on each Preferred
Security will be fixed at a rate per annum of
% of the Liquidation Amount of $10 per
Preferred Security, will be cumulative, will
accumulate from , 1998, the date
of original issuance of the Preferred
Securities, and will be payable quarterly in
arrears, on March 31, June 30, September 30 and
December 31 of each year, commencing September
30, 1998. See "Description of the Preferred
Securities -- Distributions -- Payment of
Distributions."
Junior Subordinated
Debentures.................... The Trust will invest the proceeds from the
issuance of the Preferred Securities and Common
Securities in an equivalent amount of %
Junior Subordinated Debentures of the Company.
The Junior Subordinated Debentures will mature
on June 30, 2029. The Junior Subordinated
Debentures will rank subordinate and junior in
right of payment to all Senior Debt and
Subordinated Debt of the Company. In addition,
the Company's obligations under the Junior
Subordinated Debentures will be structurally
subordinated to all existing and future
liabilities and obligations of its
subsidiaries.
Option to Extend Interest
Payment Period.............. 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 Junior Subordinated Debentures
for a period not exceeding 20 consecutive
quarters; provided, that no Extension Period
may extend beyond the Stated Maturity of the
Junior Subordinated Debentures. As a
consequence of the extension by the Company of
the interest payment period, quarterly
Distributions on the Preferred Securities will
be deferred (though such Distributions will
continue to accumulate with interest thereon
compounded quarterly, since interest will
continue to accrue and compound on the Junior
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
Junior 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 Junior
Subordinated Debentures -- Option to Extend
Interest Pay-
8
<PAGE> 11
ment Period." Should an Extension Period occur,
holders of Preferred Securities will be
required to include deferred 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. 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 Junior 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 Junior
Subordinated Debentures are redeemable prior to
maturity at the option of the Company (i) on or
after June 30, 2003, in whole at any time or in
part from time to time, or (ii) at any time, in
whole (but not in part), within 180 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 100% of the principal amount of
the Junior Subordinated Debentures, together
with any accrued but unpaid interest on the
Junior Subordinated Debentures to the date
fixed for redemption. See "Description of the
Junior Subordinated Debentures -- Redemption or
Exchange."
Ranking....................... The Preferred Securities will rank pari passu,
and payments thereon will be made pro rata,
with the Common Securities except as described
under "Description of the Preferred
Securities -- Subordination of the Common
Securities." The Junior Subordinated Debentures
will rank pari passu with all other Junior
Subordinated Debentures (if any) issued by the
Company (the "Other Debentures"), which are
issued and sold (if at all) to other trusts
established by the Company (if any), in each
case similar to the Trust ("Other Trusts"), and
will constitute unsecured obligations of the
Company and will rank subordinate and junior in
right of payment to all Senior Indebtedness to
the extent and in the manner set forth in the
Indenture. See "Description of the Junior
Subordinated Debentures." The Guarantee will
rank pari passu with all other guarantees (if
any) issued by the Company with respect to
Preferred Securities (if any) issued by Other
Trusts ("Other Guarantees") and will constitute
an unsecured obligation of the Company and will
rank subordinate and junior in right of payment
to all Senior Indebtedness to the extent and in
the manner set forth in the Guarantee
Agreement. See "Description of the Guarantee."
In addition, because the Company is a holding
company, the Junior Subordinated Debentures and
the Guarantee will be effectively subordinated
to all existing and future liabilities of the
Company's subsidiaries, including the Bank's
deposit liabilities. See "Description of the
Junior Subordinated Debentures --
Subordination."
Distribution of Junior
Subordinated Debentures..... The Company has the right at any time to
dissolve the Trust and cause the Junior
Subordinated Debentures, after satisfaction of
liabilities to creditors of the Trust as
required by applicable law, to
9
<PAGE> 12
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
Dissolution."
Guarantee..................... The Company has guaranteed the payment of
Distributions and payments on liquidation or
redemption of the Preferred Securities, but
only in each case to the extent of funds held
by the Trust, as described herein. The Company
and the Trust believe that, taken together, the
obligations of the Company under the Guarantee,
the Trust Agreement, the Junior 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 Junior Subordinated
Debentures, the Trust will not have sufficient
funds to make distributions on the Preferred
Securities. In such 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."
Use of Proceeds............... All of the proceeds from the sale of the Trust
Securities will be invested by the Trust in the
Junior Subordinated Debentures. The Company
intends to use the net proceeds from the sale
of the Junior Subordinated Debentures for
general corporate purposes, including the
repurchase of outstanding equity securities of
the Company, contributions to the Bank to fund
its operations and the financing of one or more
future acquisitions by the Company if and when
suitable opportunities arise. Initially, the
net proceeds may be used to make investments in
investment securities and/or to pay down
outstanding debt. See "Use of Proceeds."
Nasdaq National Market
Symbol........................ Application has been made to have the Preferred
Securities approved for quotation on the Nasdaq
National Market under the symbol "ABBKP".
10
<PAGE> 13
SELECTED CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
AT OR FOR THE
THREE MONTHS
ENDED MARCH 31, AT OR FOR THE YEAR ENDED DECEMBER 31,
--------------------- ---------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
--------- --------- --------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED OPERATING RESULTS:
Net interest income.......................... $ 4,035 $ 4,053 $ 16,206 $ 14,815 $ 13,727 $ 12,733 $ 11,289
Provision for loan losses.................... 190 158 630 480 2,233 610 720
--------- --------- --------- --------- --------- --------- ---------
Net interest income after provision for
loan losses.............................. 3,845 3,895 15,576 14,335 11,494 12,123 10,569
Non-interest income.......................... 1,493 1,137 4,986 4,177 2,908 2,461 2,287
Non-interest expenses........................ 3,605 3,291 13,505 12,840 11,955 10,255 8,771
--------- --------- --------- --------- --------- --------- ---------
Income before income taxes and cumulative
effect of accounting change................ 1,733 1,741 7,057 5,672 2,447 4,329 4,085
Provision for income taxes................... 597 689 2,679 2,139 1,018 1,586 1,556
--------- --------- --------- --------- --------- --------- ---------
Income before cumulative effect of accounting
change..................................... 1,136 1,052 4,378 3,533 1,429 2,743 2,529
Cumulative effect of accounting change....... -- -- -- -- -- -- 650
--------- --------- --------- --------- --------- --------- ---------
Net income................................... $ 1,136 $ 1,052 $ 4,378 $ 3,533 $ 1,429 $ 2,743 $ 3,179
========= ========= ========= ========= ========= ========= =========
Weighted average common shares outstanding,
basic...................................... 3,586,000 3,788,000 3,716,000 3,774,000 3,758,000 3,748,000 3,738,000
Weighted average common shares outstanding,
diluted.................................... 3,852,000 4,014,000 3,966,000 3,964,000 3,928,000 3,922,000 3,830,000
Net income per share before cumulative effect
of accounting change, basic(1)............. $ .32 $ .28 $ 1.18 $ .94 $ .38 $ .73 $ .68
Cumulative effect of accounting change....... -- -- -- -- -- -- .17
--------- --------- --------- --------- --------- --------- ---------
Basic earnings per share..................... $ .32 $ .28 $ 1.18 $ .94 $ .38 $ .73 $ .85
========= ========= ========= ========= ========= ========= =========
Net income per share before cumulative effect
of accounting change, diluted.............. $ .30 $ .26 $ 1.10 $ .89 $ .37 $ .70 $ .66
Cumulative effect of accounting change....... -- -- -- -- -- -- .17
--------- --------- --------- --------- --------- --------- ---------
Diluted earnings per share................... $ .30 $ .26 $ 1.10 $ .89 $ .37 $ .70 $ .83
========= ========= ========= ========= ========= ========= =========
Book value per common share.................. $ 9.70 $ 8.93 $ 9.99 $ 8.86 $ 8.11 $ 7.57 $ 7.45
========= ========= ========= ========= ========= ========= =========
Tangible book value per share(6)............. $ 8.82 $ 7.98 $ 9.08 $ 7.89 $ 7.05 $ 6.69 $ 7.23
========= ========= ========= ========= ========= ========= =========
CONSOLIDATED BALANCE SHEET DATA:
Total assets................................. $ 549,838 $ 492,058 $ 531,986 $ 486,958 $ 460,492 $ 421,833 $ 347,354
Total loans, net(2).......................... 341,380 300,137 330,792 298,970 260,585 235,614 199,807
Investment securities(3)..................... 50,406 33,337 47,187 31,950 33,343 28,328 15,915
Mortgage-backed investments.................. 129,637 132,180 126,016 131,184 138,937 133,882 113,052
Deposits..................................... 333,210 305,674 324,934 300,445 280,070 246,843 209,911
Borrowed funds............................... 176,260 147,836 165,910 147,524 145,609 134,155 106,921
Stockholders' equity......................... 34,584 33,835 36,321 33,546 30,561 28,366 27,869
PERFORMANCE RATIOS:
Net yield on average earning assets, taxable
equivalent................................. 3.17% 3.50% 3.41% 3.26% 3.30% 3.45% 3.55%
Average equity to average total assets....... 6.61% 6.96% 6.94% 6.69% 7.00% 7.61% 8.10%
Return on average stockholders' equity....... 12.85% 12.39% 12.59% 11.00% 4.68% 9.23% 11.73%
Return on average total assets............... .85% .86% .87% .74% .33% .70% .95%
Efficiency ratio(4).......................... 65.14% 63.12% 63.65% 66.95% 68.54% 65.43% 60.45%
NON-PERFORMING ASSETS AS A PERCENTAGE OF:
Total loans and real estate owned............ .23% .48% .29% .56% .68% 2.78% 3.84%
Total assets................................. .14% .30% .18% .34% .39% 1.58% 2.26%
ALLOWANCES FOR LOAN LOSSES AS A PERCENTAGE OF
NON-PERFORMING LOANS....................... 466.04% 182.29% 319.78% 154.52% 196.84% 52.67% 38.85%
NET LOAN CHARGE-OFFS AS A PERCENTAGE OF
AVERAGE OUTSTANDING LOANS.................. -- .03% .05% .04% 1.49% .18% .38%
</TABLE>
11
<PAGE> 14
<TABLE>
<CAPTION>
AT OR FOR THE
THREE MONTHS
ENDED MARCH 31, AT OR FOR THE YEAR ENDED DECEMBER 31,
--------------------- ---------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
CAPITAL RATIOS:
Leverage ratio............................... 5.46% 6.27% 6.01% 6.14% 5.77% 6.28% 7.80%
Total risk-based capital ratio............... 11.87% 13.57% 13.02% 13.65% 12.50% 13.53% 15.20%
RATIO OF EARNINGS TO FIXED CHARGES(5)
Including interest on deposits............... 1.32 1.36 1.35 1.29 1.13 1.30 1.33
Excluding interest on deposits............... 1.67 1.81 1.76 1.63 1.28 1.63 1.86
</TABLE>
- ---------------
(1) The Company declared a 2-for-1 stock split in the form of a dividend to
holders of record on November 14, 1997. All share and per-share amounts have
been adjusted to reflect the split.
(2) Total loans include loans held for sale.
(3) Includes Federal Home Loan Bank stock.
(4) Efficiency ratio equals non-interest expenses, exclusive of expenses
associated with other real estate owned, divided by the sum of net interest
income and non-interest income, net of gains or losses associated with other
real estate owned.
(5) For purposes of calculating the ratio of earnings to combined fixed charges,
earnings consist of income before taxes plus interest and rent expense.
Fixed charges consist of interest and rent expense.
(6) Tangible net book value equals stockholders' equity less intangible assets
divided by period ending common shares.
12
<PAGE> 15
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
before purchasing the Preferred Securities offered hereby. Prospective investors
should note, in particular, that certain statements contained or incorporated by
reference in this Prospectus, including, without limitation, statements
containing the words "believes," "anticipates," "intends," "expects" and words
of similar import, constitute "forward-looking statements" within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act. Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause the actual results, performance or achievements of
the Company to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements. Such
factors include the following: general economic and business conditions in those
areas in which the Company operates; demographic changes; competition;
fluctuations in interest rates; changes in business strategy or development
plans; changes in governmental regulation; credit quality; the availability of
capital to fund the expansion of the Company's business; and other factors
referenced in this Prospectus or incorporated by reference herein. Given these
uncertainties, prospective investors are cautioned not to place undue reliance
on such forward-looking statements. The Company disclaims any obligation to
update any such factors or to publicly announce the results of any revisions to
any of the forward-looking statements contained or incorporated by reference
herein to reflect future events or developments. 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 extent than indicated.
RISK FACTORS RELATING TO THE PREFERRED SECURITIES
ABILITY TO MAKE PAYMENTS ON THE PREFERRED SECURITIES AND JUNIOR SUBORDINATED
DEBENTURES
The Company is a legal entity separate and distinct from its subsidiaries,
including the Bank. The ability of the Trust to pay amounts due on the Preferred
Securities is solely dependent upon the Company making payments on the Junior
Subordinated Debentures as and when required. As a holding company without
significant assets other than its equity interest in the Bank, the Company's
ability to pay interest on the Junior Subordinated Debentures to the Trust (and
consequently, the Trust's ability to pay distributions on the Preferred
Securities and the Company's ability to pay its obligations under the Guarantee)
depends primarily on cash and liquid investments of the Company and upon cash
dividends the Company may receive in the future from the Bank. The Bank's
ability to pay dividends to the Company is restricted by Massachusetts state
law, which requires that retained earnings are available to pay such dividends.
At March 31, 1998, the Bank had retained earnings of $34.1 million, of which
approximately $16.3 million were unrestricted and available for dividend
payments to the Company. At March 31, 1998, the Company had cash and liquid
investments of approximately $0.8 million. See "Use of Proceeds."
RANKING OF SUBORDINATED OBLIGATIONS UNDER THE GUARANTEE AND THE JUNIOR
SUBORDINATED DEBENTURES
The obligations of the Company under the Guarantee issued for the benefit
of the holders of Preferred Securities and under the Junior 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 March 31, 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 Junior
Subordinated Debentures, therefore, will be effectively subordinated to all
existing and future liabilities of the Bank and holders of Junior
13
<PAGE> 16
Subordinated Debentures and Preferred Securities should look only to the assets
of the Company for payments on the Junior 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 Junior 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 Junior 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 Junior Subordinated Debentures at any time or from time to time
for a period not exceeding 20 consecutive quarters with respect to each
Extension Period; provided that no Extension Period may extend beyond the Stated
Maturity of the Junior Subordinated Debentures. As a consequence of any such
deferral, quarterly Distributions on the Preferred Securities by the Trust 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 (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 Junior Subordinated Debentures or make any guarantee payments with
respect to any guarantee by the Company of the debt securities of any subsidiary
of the Company if such guarantee ranks pari passu with or junior in interest to
the Junior Subordinated Debentures (other than payments under the Guarantee), or
(iii) redeem, purchase or acquire less than all of the Junior Subordinated
Debentures or any of the Preferred Securities. Prior to the termination of any
such Extension Period, the Company may further defer the payment of interest;
provided, that no Extension Period may exceed 20 consecutive quarters or extend
beyond the Stated Maturity of the Junior Subordinated Debentures. Upon the
termination of any 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 Junior 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 Junior Subordinated Debentures held by the Trust for United States federal
income tax purposes. A holder of Preferred Securities must, as a result, 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 Junior
Subordinated Debentures. 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.
14
<PAGE> 17
REDEMPTION DUE TO TAX EVENT, CAPITAL TREATMENT EVENT OR INVESTMENT COMPANY EVENT
The Company has the right to redeem the Junior Subordinated Debentures in
whole (but not in part) within 180 days following the occurrence of a Tax Event,
a Capital Treatment Event or an Investment Company Event (whether occurring
before or after June 30, 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 (or any
regulations thereunder) of the United States or any political subdivision or
taxing authority thereof or therein, or as a result of any official
administrative pronouncement or judicial decision interpreting or applying such
laws or regulations, which amendment or change is effective or which
pronouncement or decision is announced on or after the date of issuance of the
Preferred Securities under the Trust Agreement, there is more than an
insubstantial risk that (i) the Trust is, or will be within 90 days of the date
of such opinion, subject to United States federal income tax with respect to
income received or accrued on the Junior Subordinated Debentures, (ii) interest
payable by the Company on the Junior 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
will be within 90 days of the date of the opinion, subject to more than a de
minimis amount of other taxes, duties or other governmental charges. 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. See "-- Risk
Factors Relating to the Preferred Securities -- 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 June 30, 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 (or any regulations thereunder) of the United States or any political
subdivision thereof or therein, or as a result of any official administrative
pronouncement or judicial decision interpreting or applying such laws or
regulations, which amendment or change is effective or which proposed change,
pronouncement or decision is announced on or after the date of issuance of the
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 for 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 JUNIOR SUBORDINATED DEBENTURES
The Company has the right, at any time, to shorten the maturity of the
Junior Subordinated Debentures to a date not earlier than June 30, 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 Junior Subordinated
Debentures -- General."
15
<PAGE> 18
RIGHTS UNDER THE GUARANTEE
The Guarantee guarantees to the holders of the Preferred Securities, to the
extent not paid by the Trust, (i) any accumulated 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 Junior 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 Junior 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 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 Junior 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 Junior
Subordinated Debentures having a principal amount equal to the aggregate
Liquidation Amount of the Preferred Securities of such holder (a "Direct
Action"). The exercise by the Company of its right, as described herein, to
defer the payment of interest on the Junior 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 Junior Subordinated Debentures or assert directly any other rights in
respect of the Junior Subordinated Debentures. See "Description of the Junior
Subordinated Debentures -- Enforcement of Certain Rights by Holders of Preferred
Securities," "Description of the Junior 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.
NO VOTING RIGHTS EXCEPT IN LIMITED CIRCUMSTANCES
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 Junior
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 Trust Trustees."
16
<PAGE> 19
PROPOSED TAX LEGISLATION
In both 1996 and 1997 legislation was proposed that would, if enacted, have
adversely affected the tax treatment of the Preferred Securities. On March 19,
1996, President Clinton proposed certain tax law changes (the "1996 Proposed
Legislation") that would, among other things, generally deny corporate issuers a
deduction for interest in respect of certain debt obligations having a maximum
term in excess of 20 years and not shown as indebtedness on the issuer's
applicable consolidated balance sheet. Neither the 1996 Proposed Legislation or
similar legislation was enacted during the 104th Congress. On February 6, 1997,
President Clinton proposed in the administration's fiscal year 1998 budget
certain tax law changes (the "Administration's 1997 Tax Proposals") that would,
among other things, generally deny corporate issuers a deduction for interest or
OID in respect of certain debt obligations having a maximum term in excess of 15
years and not shown as indebtedness on the issuer's applicable consolidated
balance sheet. Neither the Administration's 1997 Tax Proposals nor similar
legislation was enacted by the 105th Congress. There can be no assurance,
however, that legislation enacted after the date hereof will not adversely
affect the ability of the Company to deduct the interest payable on the Junior
Subordinated Debentures or otherwise give rise to a Tax Event.
REDEMPTION; EXCHANGE OF PREFERRED SECURITIES FOR JUNIOR SUBORDINATED DEBENTURES
The Company has the right at any time to dissolve the Trust and cause the
Junior Subordinated Debentures, after satisfaction of liabilities to creditors
of the Trust, to be distributed to the holders of the Preferred Securities in
exchange therefor in 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 Junior Subordinated Debentures in whole or in part, in lieu of a
distribution of the Junior 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 Junior 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
Junior 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 Junior 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 Junior 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 Junior Subordinated Debentures that may be distributed in
exchange for Preferred Securities upon a dissolution or liquidation of the
Trust. The Preferred Securities or the Junior Subordinated Debentures may trade
at a discount to the price that the investor paid to purchase the Preferred
Securities offered hereby. Because holders of Preferred Securities may receive
Junior Subordinated Debentures, prospective purchasers of Preferred Securities
are also making an investment decision with regard to the Junior Subordinated
Debentures and should carefully review all the information regarding the Junior
Subordinated Debentures contained herein.
If the Junior Subordinated Debentures are distributed to the holders of
Preferred Securities upon the liquidation of the Trust, the Company will use its
best efforts to list the Junior Subordinated Debentures on the Nasdaq National
Market or such stock exchanges, if any, on which the Preferred Securities are
then listed.
LIMITED COVENANTS
The covenants in the Indenture are limited, and there are no covenants
relating to the company in the Trust Agreement. As a result, neither the
Indenture nor the Trust Agreement protects holders of Junior Subordinated
Debentures, or Preferred Securities, respectively, in the event of a material
adverse change in
17
<PAGE> 20
the Company's financial condition or results of operations or limits the ability
of the Company or any subsidiary to incur additional indebtedness. Therefore,
the provisions of these governing instruments should not be considered a
significant factor in evaluating whether the Company will be able to comply with
its obligations under the Junior Subordinated Debentures or the Guarantee.
TRADING PRICE; ABSENCE OF PRIOR PUBLIC MARKET FOR THE PREFERRED SECURITIES
The Preferred Securities may trade at a price that does not accurately
reflect the value of accrued but unpaid interest (or OID if the Junior
Subordinated Debentures are treated as having been issued, or reissued, with
OID) with respect to the underlying Junior Subordinated Debentures. A holder who
disposes of his Preferred Securities will be required to include in ordinary
income (i) any portion of the amount realized that is attributable to such
accrued but unpaid interest to the extent not previously included in income, or
(ii) any amount of OID, in either case, that has accrued on his pro rata share
of the underlying Junior Subordinated Debentures during the taxable year of sale
through the date of disposition. Any such income inclusion will increase the
holder's adjusted tax basis in his Preferred Securities disposed of. To the
extent that the amount realized in the sale is less than the holder's adjusted
tax basis, 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. 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 have the Preferred Securities approved for
quotation on the Nasdaq 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 has been determined through negotiations between the
Company and the Underwriters. Prices for the Preferred Securities will be
determined in the marketplace and may be influenced by many factors, including
prevailing interest rates, the liquidity of the market for the Preferred
Securities, investor perceptions of the Company and general industry and
economic conditions.
POSSIBLE ADVERSE EFFECT ON MARKET PRICES
There can be no assurance as to the market prices for the Preferred
Securities or the Junior Subordinated Debentures that may be distributed in
exchange for Preferred Securities if a termination of the Trust were to occur.
Accordingly, the Preferred Securities or the Junior Subordinated Debentures may
trade at a discount from the price that investors paid to purchase the Preferred
Securities offered hereby. Because holders of Preferred Securities may receive
Junior Subordinated Debentures in liquidation of the Trust and because
Distributions are otherwise limited to payments on the Junior Subordinated
Debentures, prospective purchasers of the Preferred Securities are also making
an investment decision with regard to the Junior Subordinated Debentures and
should carefully review all the information regarding the Junior Subordinated
Debentures contained herein. See "Description of the Junior Subordinated
Debentures."
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"), by the Depositors Insurance Fund
("DIF") of the Mutual Savings Central Fund, Inc., or by any other governmental
agency.
RISK FACTORS RELATING TO THE COMPANY AND ITS INDUSTRY
SENSITIVITY TO FLUCTUATIONS IN INTEREST RATES
The Company's profitability, like that of most similarly situated financial
institutions, is dependent to a large extent upon the Bank's net interest
income, which is the difference between its interest income on interest-earning
assets, such as loans and investments, and its interest expense on
interest-bearing liabilities,
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<PAGE> 21
such as deposits and borrowings. Accordingly, the Company's results of
operations and financial condition are largely dependent on movements in market
interest rates and its ability to manage its assets in response to such
movements. The difference between the amount of the total interest-earning
assets and interest-bearing liabilities which reprice within a given time period
could have a negative effect on the Bank's net interest income depending on
whether such difference was positive or negative and the direction of movement
of interest rates.
Increases in interest rates may reduce demand for loans and, thus, the
amount of loan and commitment fees. In addition, fluctuations in interest rates
may also result in disintermediation, which is the flow of funds away from
depository institutions into direct investments which pay a higher rate of
return, and may affect the value of the Company's investment securities and
other interest earning assets. Given that the Bank's assets consist of a
substantial number of loans with interest rates which change in accordance with
changes in prevailing market rates, if interest rates rise sharply, many of the
Bank's borrowers would be required to make higher interest payments on their
loans. Thus, increases in interest rates may cause the Bank to experience an
increase in delinquent loans and defaults to the extent that borrowers are
unable to meet their increased debt servicing obligations. In addition, the Bank
has a substantial portfolio of fixed-rate loans that may be prepaid without
significant penalty, so that customers might prepay or refinance them in a
period of declining interest rates. That would alter the Bank's asset-liability
gap position and ultimately reduce the rates earned on those assets, as cash
flows from loan repayments would be re-invested at lower rates.
LENDING RISKS -- CREDIT QUALITY
A central focus of the Company's and the Bank's strategy is the continued
development and growth of a diversified loan portfolio, with emphasis on
residential real estate, commercial real estate, commercial loans, and second
mortgage and home equity loans. Certain risks are inherent in the lending
function, including a borrower's inability to pay, insufficient collateral
coverage and changes in interest rates. Repayment risk on commercial loans is
significantly affected by changing economic conditions in a particular
geographical area, business or industry which could impair future operating
performance. Risks associated with real estate loans and general business loans
include changes in general economic conditions which may affect the borrower's
ability to repay as well as underlying collateral values. Installment and other
consumer loans are subject to repayment risk.
Commercial real estate and multi-family residential loans are generally
viewed in the banking community as exposing the lender to greater credit risk
than 1-4 family residential real estate loans and typically involve higher loan
principal amounts. At March 31, 1998, the Bank's multi-family residential and
commercial real estate portfolios totaled $41.4 million, or 12.0% of total loans
and loans held for sale. Of that amount, less than 1.5% consisted of
multi-family residential loans.
The Bank currently originates loans secured by commercial real estate
properties. The Bank attempts to offset the risks associated with commercial
real estate lending by primarily lending to individuals who have proven
management experience and who will be actively involved in the management of the
property, and by making such loans with lower loan-to-value ratios than 1-4
family residential real estate loans. Economic events and government
regulations, which are outside the control of the borrower or lender, could
affect the value of the security for such loans or the future cash flow of the
affected properties.
At March 31, 1998, the Bank had $60,000 non-performing commercial real
estate and multi-family residential real estate loans. For the twelve months
ended December 31, 1997 and the three months ended March 31, 1998, the Bank
experienced charge-offs of $20,000 and $0, respectively, on commercial real
estate loans and multi-family residential real estate loans.
At March 31, 1998, 75.0% of the Bank's total loans and loans held for sale
were secured by first mortgages on 1-4 family residences, of which 27.6% were
adjustable rate mortgages ("ARMs"). Generally, ARMs pose credit risks different
from the risks inherent in fixed-rate loans because when interest rates rise the
borrower's payments rise, thereby increasing the potential for default. However,
long-term fixed-rate loans expose the Bank to higher interest-rate risk.
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<PAGE> 22
ALLOWANCE FOR LOAN LOSSES
The Bank has established an allowance for loan losses in accordance with
generally accepted accounting principles. The Company believes that the
allowance is adequate. Nevertheless, future additions to the allowance in the
form of the provision for loan losses may be necessary due to changes in
economic conditions and growth of the Bank's loan portfolio. In addition,
various regulatory agencies, as an integral part of their examination process,
periodically review the Bank's allowance for loan losses. An increase in the
Bank's provision for loan losses would negatively affect the Company's earnings.
COMPETITION
The Bank faces significant competition both in generating loans and in
attracting deposits. The eastern Massachusetts area is a highly competitive
market. The Bank faces direct competition from a significant number of financial
institutions operating in its market area, many with a state-wide or regional
presence and, in some cases, a national presence. Many of these financial
institutions are significantly larger and have greater financial resources than
the Bank. The Bank's competition for loans comes principally from commercial
banks, savings banks, mortgage banking companies, credit unions and insurance
companies. The Bank faces competition for deposits from savings and commercial
banks and credit unions. In addition, the Bank faces increasing competition for
deposits from non-bank institutions such as brokerage firms and insurance
companies in such instruments as short-term money market funds, corporate and
government securities funds, mutual funds and annuities. Competition may also
increase as a result of the lifting of restrictions on the interstate operations
of financial institutions.
SENSITIVITY TO LOCAL ECONOMY
Prevailing economic conditions, as well as government policies and
regulations concerning, among other things, monetary and fiscal affairs,
significantly affect the operations of financial institutions such as the Bank.
The New England region of the United States, including southeastern
Massachusetts (the Bank's primary market area) experienced a significant
economic decline which began in 1988 and outlasted the national recession. This
decline adversely affected employment, the real estate markets and the banking
industry in the Bank's market area. Any deterioration of economic conditions or
real estate markets in the Bank's market area could adversely affect the
financial condition and results of operations of the Bank in the future.
ECONOMIC CONDITIONS AND MONETARY POLICIES
Conditions beyond the Company's control may have a significant impact on
changes in net interest income from one period to another. Examples of such
conditions could include: (i) the strength of credit demands by customers; (ii)
fiscal and debt management policies of the federal government, including changes
in tax laws; (iii) the Federal Reserve's monetary policy, including the
percentage of deposits that must be held in the form of non-earning cash
reserves; (iv) the introduction and growth of new investment instruments and
transaction accounts by non-bank financial competitors; and (v) changes in rules
and regulations governing the payment of interest on deposit accounts.
LEGISLATIVE AND REGULATORY DEVELOPMENTS
The financial institutions industry is subject to significant regulation
which has materially affected the financial institutions industry in the past
and will do so in the future. Such regulations, which affect the Company on a
daily basis, may be changed at any time, and the interpretation of the relevant
law and regulations are also subject to change by the authorities who examine
the Company and the Bank and interpret those laws and regulations. There can be
no assurance that any present or future changes in the laws or regulations or in
their interpretation will not adversely and materially affect the Company.
POTENTIAL LIABILITY FOR UNDERCAPITALIZED SUBSIDIARY BANK
Under federal law, a bank holding company may be required to guarantee a
capital plan filed by an undercapitalized bank or thrift subsidiary with its
primary regulator. If the subsidiary defaults under the plan,
20
<PAGE> 23
the holding company may be required to contribute to the capital of the
subsidiary bank an amount equal to the lesser of 5% of the bank's assets at the
time it became undercapitalized or the amount necessary to bring the bank into
compliance with applicable capital standards. It is, therefore, possible that
the Company would be required to contribute capital to the Bank or any other
bank it may acquire in the event that the Bank or such other bank becomes
undercapitalized.
YEAR 2000 COMPLIANCE
During 1997 the Company completed an assessment of the majority of its
computer systems to identify the systems that could be affected by the "Year
2000" issue and developed an implementation plan to address the issue. The Year
2000 issue is the result of computer programs being written using two digits
rather than four to define the applicable year. Any of the Company's programs
that have time-sensitive software may recognize a date using "00" as the year
1900 rather than the year 2000. This could result in a major system failure or
miscalculations. The Company's various systems generally operate on software
which is provided and maintained by outside vendors, many of whom are larger,
well-established companies who are well-known and established in the banking
industry. At this time, the Company does not anticipate incurring significant
costs related to the year 2000 problem as currently the Company is highly
reliant on the efforts of those outside vendors. The Company does, however,
anticipate an increase in the amount of time management and staff will devote to
closely monitor the progress of these vendors and also testing applications. The
Company has a Year 2000 Compliance Committee of its Board of Directors, charged
with supervising the plan and reporting to the full Board. There can be no
assurance that the systems of other companies on which the Company's systems
rely also will be converted in a timely manner or that any such failure to
convert by another company would not have an adverse effect on the Company's
systems.
ABINGTON BANCORP, INC.
Abington Bancorp, Inc. (the "Company"), a Massachusetts corporation, is a
one-bank holding company doing business through a wholly-owned subsidiary,
Abington Savings Bank (the "Bank"). Abington Bancorp, Inc. was re-established as
the Bank's holding company on January 31, 1997. Previously, the Company's
predecessor, also known as Abington Bancorp, Inc., had served as the Bank's
holding company from February 1988 until its dissolution in December 1992.
The Bank operated as a Massachusetts-chartered mutual savings bank from its
incorporation in 1853 until June 1986 when the Bank converted from mutual to
stock form of ownership. From June 1986 to the present, the Bank has operated as
a stock savings Bank.
The Bank is a community bank engaged principally in the business of
attracting deposits from the general public, borrowing funds and investing those
deposits and funds. In its investments, the Bank has emphasized various types of
residential and commercial real estate loans, residential construction loans,
consumer loans, and investments in securities. The Bank considers its principal
market area to be the towns in and around Plymouth County, Massachusetts.
The Company has grown to $549.8 million in assets and $333.2 million in
deposits at March 31, 1998 from $347.4 million in assets and $209.9 million in
deposits at December 31, 1993 . Deposits are insured by the Bank Insurance Fund
of the Federal Deposit Insurance Corporation ("FDIC") up to FDIC limits
(generally $100,000 per depositor) and by the Depositors Insurance Fund of the
Mutual Savings Central Fund, Inc. (the "Depositors Insurance Fund" or "Central
Fund") for the portion of deposits in excess of that insured by the FDIC.
On June 3, 1994, the Company acquired Hull Co-Operative Bank by merger. On
June 26, 1995, the Company acquired the deposits and certain assets and other
liabilities of the Holbrook branch of The First National Bank of Boston.
Additionally, in August 1997 and April 1988, the Company also opened the first
two of three planned de novo supermarket branches, in Cohasset and Randolph,
with a branch in Hanson scheduled to open in the fall of 1998. These
acquisitions and branch openings are consistent with the
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<PAGE> 24
Company's ongoing strategy of planned growth which will enable the Company to
have a greater regional presence.
The Bank has three wholly-owned subsidiaries: Holt Park Place Development
Corporation and Norroway Pond Development Corporation, which own properties
being marketed for sale, and Abington Securities Corporation, which invests
primarily in United States Government obligations and obligations of related
agencies and equity securities.
FINANCIAL SUMMARY
<TABLE>
<CAPTION>
AT OR FOR THE THREE
MONTHS ENDED
MARCH 31, AT OR FOR THE YEAR ENDED DECEMBER 31,
------------------- ----------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
-------- -------- -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Assets................. $549,838 $492,058 $531,986 $486,958 $460,492 $421,833 $347,354
Deposits............... 333,210 305,674 324,934 300,445 280,070 246,843 209,911
Stockholders' equity... 34,584 33,835 36,321 33,546 30,561 28,366 27,869
Pre-tax income......... 1,733 1,741 7,057 5,672 2,447+ 4,329 4,085
Net income............. 1,136 1,052 4,378 3,533 1,429+ 2,743 2,529*
Net yield on average
earning assets,
taxable equivalent... 3.17% 3.50% 3.41% 3.26% 3.30% 3.45% 3.55%
Return on average
equity............... 12.85% 12.39% 12.59% 11.00% 4.68%+ 9.23% 9.33%*
Return on average total
assets............... .85% .86% .87% .74% .33%+ .70% .76%*
</TABLE>
- ---------------
+ Reflects sale in 1995 of approximately $9.2 million of loans, including
approximately $5.7 million of loans that were non-accrual at September 30,
1995, at a price approximately 64% of par. See Note 6 of Notes to Consolidated
Financial Statements in Appendix A to this Prospectus.
* Excludes the favorable impact of a $650,000 adjustment due to a change in
accounting for income taxes.
The Company has sought to consistently increase earnings per share and to
maximize return on equity through a combination of strategies, including:
Growth of Retail Deposit Franchise -- Management has demonstrated over the
past five years its desire and ability to grow the Company's retail deposit
franchise by acquiring other whole institutions or branches, broadening delivery
systems (supermarket branches) and introducing products that are attractive to
retail customers (such as Totally Free Checking, first offered in March 1995),
combined with designing targeted marketing campaigns. The Bank has increased the
number of checking accounts to approximately 31,400 at March 31, 1998 from 7,000
at December 31, 1994. Management currently intends to maintain these core
strategies for retail growth in the future as well as to develop or provide
access to other products and services to best serve the customers in its
community.
Expansion of Business Banking Activities -- Commencing in 1996, the Company
adopted a strategy to become a more active business lender and, as a result, to
achieve a greater diversification of assets on its balance sheet. Commercial and
commercial real estate loans are generally funded through deposit growth and/or
through runoff from the Company's investment portfolio. Since commercial and
commercial real estate loans typically carry a higher yield than investment
securities, it is anticipated that growth in these portfolios will enhance
overall levels of profitability. The Company's commercial and commercial real
estate portfolios totaled $49.4 million at March 31, 1998, compared to $29.2
million at December 31, 1996. While competition for good business credits has
intensified over the past six to 18 months, management believes that there is
still an opportunity to grow this aspect of the Company's franchise by providing
high-quality service to the small- to medium-sized businesses located in the
Company's market area.
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<PAGE> 25
Efficient Capital Management -- The Company has made progress in providing
a more attractive return on equity over the past few years primarily as a result
of growth of the Company's loan and deposit portfolios, increases in customer
service fees and controlled growth of non-interest expenses. Additionally, in
each 1997 and 1998, the Company's Board of Directors authorized the Company to
repurchase its outstanding common stock from time to time at prevailing market
prices, up to a maximum of 10% of the shares outstanding in each year
(approximately 722,000 shares in the aggregate). See Note 19 of Notes to
Consolidated Financial Statements. As of May 5, 1998, the Company had
repurchased approximately 309,000 shares in total under the repurchase program
at a cost of approximately $5,181,000. The Company expects that stock repurchase
programs will contribute to enhance return on equity.
Strategic Acquisitions -- The Company will continue to consider
opportunities for expansion through selective acquisitions as a means for
increasing market penetration, providing diversified financial service, and
achieving greater economies of scale. Since 1993, the Company has acquired two
branches with total deposits at time of purchase of approximately $49.3 million.
The Company's technology, operations and product offerings are also being
evaluated in connection with the assessment of growth opportunities.
The principal executive office of the Company is located at 536 Washington
Street, Abington, Massachusetts 02351 and its telephone number is (781)
982-3200.
MANAGEMENT
The executive officers of the Company and the Bank and the principal
occupation and business experience during at least the last five years for each
are set forth below.
JAMES P. MCDONOUGH has been President and Chief Executive Officer of the
Company since its incorporation on October 15, 1996. Mr. McDonough has also
served as President and Chief Executive Officer of the Bank since August 1991.
Previously, he served as President and Chief Operating Officer of the Bank from
November 1990 to August 1991 and Senior Vice President -- Lending of the Bank
from December 1987 to November 1990. Mr. McDonough was also Vice
President -- Regional Manager of GEM Mortgage Corporation of North America from
1983 to 1987. Mr. McDonough is a graduate of Massasoit Community College and
Boston State College. Mr. McDonough is 47 years old.
EDWARD J. MERRITT has been Executive Vice President of the Bank since
September 1993. He was Treasurer of the Company since its incorporation on
October 15, 1996 until June 1997 and Executive Vice President and Chief
Financial Officer of the Bank from September 1993 until June 1997. Prior to that
date, he served as Senior Vice President and Chief Financial Officer of the Bank
from June 1991 to September 1993 and Treasurer and Chief Financial Officer of
the Bank from July 1986 to June 1991. Previously, he held various positions,
including Senior Accountant and Supervisor, at Wolf & Company of Massachusetts,
P.C., from 1983 to 1986. Mr. Merritt is a graduate of Salem State College and is
a Certified Public Accountant. Mr. Merritt is 38 years old.
MARIO M. BERLINGHIERI has been Senior Vice President -- Business Banking
Division of the Bank since January 29, 1996. Prior to that date, he served as
Program Manager of the Executive Office of Communities & Development for The
Commonwealth of Massachusetts in 1995; Vice President and Senior Risk Manager of
Fleet Bank of Massachusetts in charge of commercial portfolio approval from 1992
to 1994; and Regional Manager -- Boston Small Business Lending for Bank of New
England from 1990 to 1992. Mr. Berlinghieri is a graduate of Suffolk University
with a B.S.B.A. degree in Banking/Finance and an M.B.A. in Business
Administration. Mr. Berlinghieri is 48 years old.
DONNA L. THAXTER has been Senior Vice President -- Consumer Banking
Division of the Bank since December 1993. Prior to that date, she was Vice
President -- Retail Banking since August 1992. Ms. Thaxter joined the Bank in
January 1988 and has held various positions including Production Manager,
Commercial Loan Officer and Compliance Officer. Previously, she worked as
Underwriting Manager for GEM Mortgage Corporation of North America from 1984 to
1988. Ms. Thaxter is a graduate of Framingham State College. Ms. Thaxter is 37
years old.
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<PAGE> 26
ROBERT M. LALLO has been Treasurer of the Company and Senior Vice
President -- Treasurer and Chief Financial Officer of the Bank since June 1997.
Prior to that date, he served as Vice President and Treasurer since he joined
the Bank in October 1993 until June 1997. Previously, he held various positions,
including Audit Manager, with Arthur Andersen & Co., currently known as Arthur
Andersen LLP, from July 1986 to October 1993. Mr. Lallo is a graduate of Boston
College with degrees in both Accounting and Finance and is a Certified Public
Accountant. Mr. Lallo is 33 years old.
In addition to Mr. McDonough, the Directors of the Company are:
ROBERT J. ARMSTRONG has been President and General Manager of Armstrong
Construction Corporation, a home building firm, since 1952.
BRUCE G. ATWOOD has been Vice President -- Operations and Treasurer of Hyer
Industries, Inc., a manufacturer of industrial scales, since 1978.
WILLIAM F. BORHEK has been President of Wm. F. Borhek Insurance Agency,
Inc., a general insurance agency, since 1964.
RALPH B. CARVER, JR. has been President, Treasurer and a director of
Den-Lea Rental, Inc., a truck leasing company, since 1979.
JOEL S. GELLER is the owner-manager and a director of Abington Liquors
Corp., a retail liquor store.
RODNEY D. HENRIKSON has been Treasurer of Henrikson Realty Corp., a real
estate company, since 1986. He was Treasurer of Henrikson's Dairy, Inc., a food
processing and distribution company, from 1982 through 1984 and President from
1984 through 1986.
A. STANLEY LITTLEFIELD is an attorney in private practice in Rockland,
Massachusetts. He was formerly District Attorney of Plymouth County.
JAY TIMOTHY NOONAN has been with J. P. Noonan Trans., Inc., an interstate
hauler, in a management capacity since 1968 and is currently Chief Financial
Officer. Mr. Noonan was also President of Rourke Coal and Oil Co. from 1960 to
1989.
GORDON N. SANDERSON has been retired since 1991. From 1970 to 1991, he was
Vice President -- Sales of B & W Press, Inc., a specialty printing company.
JAMES J. SLATTERY has been President of J. H. Slattery Insurance Agency,
Inc., Abington, Massachusetts, an independent insurance agency, since 1958.
WAYNE P. SMITH is Treasurer and a director of Suburban Enterprises Inc.,
Abington, Massachusetts, a sales and marketing firm.
ABINGTON BANCORP 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, 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. 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
24
<PAGE> 27
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 Junior Subordinated Debentures issued by the Company, and (iii) engaging
in only those other activities necessary, advisable, or incidental thereto. The
Junior Subordinated Debentures and payments thereunder will be the only assets
of the Trust and payments under the Junior Subordinated Debentures will be the
only revenue of the Trust. The Trust has a term of 55 years, but may dissolve
earlier as provided in the Trust Agreement. The principal executive office of
the Trust is c/o Abington Bancorp, Inc., 536 Washington Street, Abington,
Massachusetts 02351, and its telephone number is (781) 982-3200.
The number of Trustees will, pursuant to the Trust Agreement, 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
banking corporation, will act as Delaware Trustee.
The Property Trustee will hold title to the Junior 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 Junior 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."
25
<PAGE> 28
USE OF PROCEEDS
The Trust will use the gross proceeds from the sale of the Preferred
Securities to purchase Junior Subordinated Debentures of the Company. The
Company intends to use the net proceeds of the sale of the Junior Subordinated
Debentures for general corporate purposes, including the repurchase of
outstanding equity securities of the Company, contributions to the Bank to fund
its operations and the financing of one or more future acquisitions by the
Company if and when suitable opportunities arise. Initially, the net proceeds
may be used to make investments in investment securities and/or to pay down
outstanding borrowings from the Federal Home Loan Bank pending its use for the
purposes described above.
The Federal Reserve has approved, subject to certain limitations as to
amount, the use of certain cumulative preferred stock instruments such as the
Preferred Securities as Tier 1 capital for bank holding companies such as the
Company. The Company has elected to issue the Preferred Securities because the
Company expects the Preferred Securities to qualify as Tier 1 capital and the
Distributions payable on the Preferred Securities to be a tax deductible expense
of the Company. The Company expects that, upon completion of the sale of the
Preferred Securities offered hereby (and assuming exercise of the over-allotment
option in full), Preferred Securities having an aggregate Liquidation Amount of
approximately $9.8 million will be eligible to qualify as Tier 1 capital under
the capital guidelines of the Federal Reserve. Preferred Securities representing
an aggregate Liquidation Amount in excess of that amount are expected to be
treated as Tier 2 capital until all or some of that excess is eligible to
qualify as Tier 1 capital under the capital guidelines of the Federal Reserve.
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 ABBKP. Although the
Underwriters have informed the Company that they currently intend to make a
market in the Preferred Securities, there can be no assurance that an active and
liquid trading market will develop, or, if developed, that such a market 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. 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 in the consolidated balance
sheet of the Company under the caption "Guaranteed Preferred Beneficial
Interests in the Company's Junior Subordinated Debentures," and appropriate
disclosures about the Preferred Securities, the Guarantee and the Junior
Subordinated Debentures will be included in the notes to consolidated financial
statements. The Company will record Distributions payable on the Preferred
Securities as an expense in the consolidated statements of income for financial
reporting purposes.
All future reports of the Company filed under the Exchange Act will (a)
present the Trust Securities issued by the Trust on the balance sheet as a
separate category item entitled "Guaranteed Preferred Beneficial Interests in
the Company's Junior Subordinated Debentures," (b) include in a footnote to the
financial statements disclosure that the sole assets of the Trust are the Junior
Subordinated Debentures (including the outstanding principal amount, interest
rate and maturity date of such Junior Subordinated Debentures), and (c) include
in an audited footnote to the financial statements disclosure that the Company
owns all the Common Securities of the Trust, and that 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> 29
CAPITALIZATION
The following table sets forth (i) the consolidated capitalization of the
Company at March 31, 1998 and (ii) the consolidated capitalization of the
Company giving effect to the issuance of the Preferred Securities hereby offered
by the Trust and receipt by the Company of the net proceeds from the
corresponding sale of the Junior Subordinated Debentures to the Trust, as if the
sale of the Preferred Securities had been consummated on March 31, 1998 and
assuming the Underwriters' over-allotment option was not exercised.
<TABLE>
<CAPTION>
MARCH 31, 1998
-----------------------
AS
ACTUAL ADJUSTED
--------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Guaranteed preferred beneficial interests in the Company's
Junior Subordinated Debentures............................ $ 0 $11,000(1)
STOCKHOLDERS' EQUITY:
Serial Preferred stock, par value $0.10 per share;
3,000,000 shares authorized; none issued............... -- --
Common stock, par value $0.10 per share; 12,000,000 shares
authorized; 4,747,000 shares issued and outstanding,
actual and as adjusted................................. 475 475
Additional paid-in capital................................ 21,367 21,367
Retained earnings......................................... 20,458 20,458
Treasury stock at cost.................................... (8,884) (8,884)
Unearned compensation -- ESOP............................. (210) (210)
Other Accumulated Comprehensive Income --
Net unrealized gain on securities available for sale, net
of taxes............................................... 1,378 1,378
------- -------
Total stockholders' equity........................ 34,584 34,584
------- -------
Total capitalization.............................. $34,584 $45,584
======= =======
CAPITAL RATIOS:
Stockholders' equity to total assets...................... 6.29% 6.17%
Leverage-based capital ratio(2)(3)(4)..................... 5.46% 6.98%
Risk-based capital ratios(3)(4):
Tier 1 capital to risk-weighted assets............ 10.97% 13.74%
Total risk-based capital to risk-weighted
assets........................................... 11.87% 15.03%
</TABLE>
- ---------------
(1) In connection with the issuance of the guaranteed preferred beneficial
interests in the Company's Junior Subordinated Debentures, the Company
estimates it will incur expenses of $ (including Underwriters'
compensation of $ ). The Junior Subordinated Debentures will mature
on June 30, 2029, which date may be shortened to a date not earlier than
June 30, 2003, if certain conditions are met.
(2) The leverage ratio is Tier 1 capital divided by average quarterly assets,
after deducting intangible assets and deferred tax assets in excess of
regulatory maximum limits.
(3) The capital ratios, as adjusted, are computed including the total estimated
net proceeds from the sale of the Preferred Securities, in a manner
consistent with Federal Reserve guidelines, and assuming that no proceeds
will be used to pay down outstanding debt.
(4) Federal Reserve guidelines for calculation of Tier 1 capital to
risk-weighted assets limit the amount of cumulative preferred stock and
securities similar to the Preferred Securities which can be included in Tier
1 capital to 25% of total Tier 1 capital.
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<PAGE> 30
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, 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.
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 over the Common Securities in certain
circumstances with respect to Distributions and amounts payable on redemption or
liquidation, 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 Junior 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 of
$ , payable quarterly in arrears on March 31, June 30, September 30 and
December 31 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"). The record date will be
the fifteenth 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
September 30, 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 Boston 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 Junior Subordinated Debentures at any time, or from
time to time (each, an "Extension Period"), which, if exercised, would defer
28
<PAGE> 31
quarterly Distributions on the Preferred Securities during any such Extension
Period. Distributions to which holders of the Preferred Securities are entitled
will accumulate additional Distributions thereon at the rate per annum of %
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 Junior 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
Junior 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 Junior
Subordinated Debentures or make any guarantee payments with respect to any
guarantee by the Company of the debt securities of any subsidiary of the Company
if such guarantee ranks pari passu with or junior in interest to the Junior
Subordinated Debentures (other than payments under the Guarantee), or (iii)
redeem, purchase or acquire less than all of the Junior Subordinated Debentures
or any of the Preferred Securities. Prior to the termination of any such
Extension Period, the Company may further defer the payment of interest;
provided, that such Extension Period may not exceed 20 consecutive quarters or
extend beyond the Stated Maturity of the Junior Subordinated Debentures. Upon
the termination of any such Extension Period and the payment of all 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 Junior
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
Junior Subordinated Debentures in which the Trust will invest the proceeds from
the issuance and sale of its Trust Securities. See "Description of the Junior
Subordinated Debentures." Distributions will be paid through the Property
Trustee who will hold amounts received in respect of the Junior 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 Junior
Subordinated Debentures, the Property Trustee will not have funds available to
pay Distributions on the Preferred Securities. The payment of Distributions (if
and to the extent the Trust 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 Junior Subordinated Debentures will mature on June 30, 2029.
The Company will have the right to redeem the Junior Subordinated Debentures (i)
on or after June 30, 2003, in whole at any time or in part from time to time, or
(ii) at any time, in whole (but not in part), within 180 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 Junior Subordinated
Debentures, in whole or in part, from the Trust until after June 30, 2003. See
"Description of the Junior Subordinated Debentures -- General."
Mandatory Redemption. Upon the repayment or redemption, in whole or in
part, of any Junior 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 Junior Subordinated Debentures -- Redemption or
Exchange." If less than all of the Junior Subordinated Debentures are to be
repaid or redeemed on a Redemption
29
<PAGE> 32
Date, then the proceeds from such repayment or redemption will be allocated to
the redemption of the Trust Securities pro rata.
Distribution of Junior 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 the Trust and, after satisfaction of
the liabilities of creditors of the Trust as provided by applicable law, cause
the Junior Subordinated Debentures to be distributed to the holders of Trust
Securities in liquidation of the Trust. See "-- Liquidation Distribution Upon
Dissolution."
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 Junior Subordinated
Debentures in whole (but not in part) and thereby cause a mandatory redemption
of such Trust Securities in whole (but not in part) at the Redemption Price
within 180 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 has occurred with respect to the Trust
Securities and the Company does not elect to redeem the Junior Subordinated
Debentures and thereby cause a mandatory redemption of such Trust Securities or
to liquidate the Trust and cause the Junior Subordinated Debentures to be
distributed to holders of such Trust Securities in liquidation of the Trust as
described below under "-- Liquidation Distribution Upon Dissolution," such
Preferred Securities will remain outstanding and Additional Interest (as defined
herein) may be payable on the Junior 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 Junior 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 Junior Subordinated Debentures to holders of Trust Securities in
connection with a dissolution or liquidation of the Trust, Junior Subordinated
Debentures having a principal amount equal to the Liquidation Amount of the
Trust Securities of the holder to whom such Junior Subordinated Debentures are
distributed. Each Junior 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 Junior Subordinated Debenture.
"Liquidation Amount" means the stated amount of $10 per Trust Security.
After the liquidation date fixed for any distribution of Junior
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 Junior
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 accumulated 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 Junior 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
Junior 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 Junior Subordinated Debentures. Redemptions of the Preferred
Securities will be made and the Redemption Price will be payable on each
30
<PAGE> 33
Redemption Date only to the extent that the Trust has funds on hand available
for the payment of such Redemption Price. See "-- Subordination of the Common
Securities."
If the Trust gives a notice of redemption in respect of its Preferred
Securities, then, by 12:00 noon, New York time, on the Redemption Date, to the
extent funds are available, the Property Trustee will irrevocably 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 and any Distribution payable on or
before the Redemption Date, but without interest on such Redemption Price or
Distribution, 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 accumulate at the then 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, further provided that the Company does not and is
not continuing to exercise its right to defer interest payments on the Junior
Subordinated Debentures, 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 and any
distribution of Junior Subordinated Debentures to holders of Preferred
Securities will be made to the applicable record holders thereof as they appear
on the register for the Preferred Securities on the relevant record date, which
date will be the date 15 days prior to the Redemption Date or liquidation date,
as applicable.
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 $10 or an integral
multiple of $10 in excess thereof) of the Liquidation Amount of Preferred
Securities of a denomination larger than $10. 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 Junior Subordinated Debentures, on and after the
Redemption Date interest will cease to accrue on such Junior Subordinated
Debentures or portions thereof (and Distributions will cease to accumulate on
the related Preferred Securities or portions thereof) called for redemption.
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<PAGE> 34
SUBORDINATION OF THE 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 such Events of Default with respect to the
Preferred Securities have been cured, waived or otherwise eliminated. Until any
such Event 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 DISSOLUTION
The Company will have the right at any time to dissolve the Trust and cause
the Junior Subordinated Debentures, after satisfaction of liabilities to
creditors of the Trust, 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.
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 Company, as depositor, giving written direction to the Property Trustee to
dissolve 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 "Redemption or Exchange -- Mandatory Redemption,"
or (iv) the entry of an order for the dissolution of the Trust by a court of
competent jurisdiction.
If an early dissolution occurs as described in clause (i), (ii) or (iv) of
the preceding paragraph, the Trust 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 Junior
Subordinated Debentures, unless such distribution is determined by the Property
Trustee not to be practical, in which event such holders will be entitled to
receive out of the assets of the Trust 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 accumulated but 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, 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 Junior Subordinated Debentures should not be a taxable event
to holders of the Preferred Securities. Should there be a change in law, a
change in legal
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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 Junior Subordinated Debentures or
Cash Upon Liquidation of the Trust." If the Company elects neither to redeem the
Junior Subordinated Debentures prior to maturity nor to liquidate the Trust and
distribute the Junior Subordinated Debentures to holders of the Preferred
Securities, the Preferred Securities will remain outstanding until the repayment
of the Junior Subordinated Debentures.
If the Company elects to dissolve the Trust and thereby causes the Junior
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 or extend the maturity of such Junior Subordinated Debentures, subject
to certain conditions. See "Description of the Junior 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 $10 per Preferred
Security plus accumulated but unpaid Distributions thereon to the date of
payment, which may be in the form of a distribution of such amount in Junior
Subordinated Debentures, subject to certain exceptions. See "-- Liquidation
Distribution Upon Dissolution."
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 Junior 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 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.
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
dissolution of the Trust. See "-- Liquidation Distribution Upon Dissolution."
The existence of an Event of Default does not entitle the holders of Preferred
Securities to accelerate the maturity thereof.
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REMOVAL OF THE TRUST TRUSTEES
Unless a Debenture Event of Default has occurred and is continuing, any
Trustee may be removed at any time by the holder of the Common Securities. If a
Debenture Event of Default has occurred and is continuing, the Property Trustee
and the Delaware Trustee may be removed at such time by the holders of a
majority in Liquidation Amount of the outstanding 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 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 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 Junior Subordinated
Debentures, (iii) the Successor Securities are listed, or any Successor
Securities will be listed upon notification of issuance, on any national
securities exchange or other organization on which the Preferred Securities are
then listed (including, if applicable, the Nasdaq National Market), 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
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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 Junior 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 the Trust
Act 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; or (iv) to
reduce or increase the Liquidation Amount per Trust Security and simultaneously
to increase or reduce the number of Trust Securities issued and outstanding
solely for the purpose of maintaining the eligibility of the Preferred
Securities for listing or quotation on any national securities exchange or other
organization on which the Preferred Securities are then listed or quoted
(including, if applicable, the Nasdaq National Market); 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 that, in the case
of clause (iv), the aggregate Liquidation Amount of the Trust Securities
outstanding upon completion of any such reduction or increase, must be the same
as the aggregate Liquidation Amount of the Trust Securities outstanding
immediately prior to any such reduction or increase, and any amendments of such
Trust Agreement will become effective when notice thereof is given to the
holders of Trust Securities (or, in the case of an amendment pursuant to clause
(iv), as of the date specified in the notice). 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.
The Trustees will not, so long as any Junior 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 Junior
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Subordinated Debentures, (ii) waive any past default that is waivable under the
Indenture, (iii) exercise any right to rescind or annul a declaration that the
principal of all the Junior Subordinated Debentures will be due and payable, or
(iv) consent to any amendment, modification or termination of the Indenture or
the Junior 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 Junior 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 Junior Subordinated Debentures. In addition to
obtaining the foregoing approvals of the holders of the Preferred Securities,
prior to taking any of the foregoing actions, the 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.
PAYMENT AND PAYING AGENCY
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,
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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.
MISCELLANEOUS
The Administrative Trustees are authorized and directed to conduct the
affairs of and to operate the Trust in such a way that the Trust will not be
deemed to be an "investment company" required to be registered under the
Investment Company Act or classified as an association taxable as a corporation
for United States federal income tax purposes and so that the Junior
Subordinated Debentures will be treated as indebtedness of the 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.
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DESCRIPTION OF THE JUNIOR 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 Junior Subordinated Debentures issued by the
Company. The Junior 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 Junior Subordinated Debentures and the Indenture does not purport to be
complete and is subject to, and is qualified in its entirety by reference to,
the Indenture and to the Trust Indenture Act. Wherever particular defined terms
of the Indenture are referred to, but not defined herein, such defined terms are
incorporated herein by reference. The form of the Indenture has been filed as an
exhibit to the Registration Statement of which this Prospectus forms a part.
GENERAL
The Junior Subordinated Debentures will be limited in aggregate principal
amount to approximately $11,340,210 (or $13,041,250 if the Underwriters'
over-allotment option is exercised), the sum of the aggregate stated Liquidation
Amount of the Trust Securities. The Junior Subordinated Debentures will bear
interest at the annual rate of % of the principal amount thereof, payable
quarterly in arrears on March 31, June 30, September 30, and December 31 of each
year (each, an "Interest Payment Date") beginning September 30, 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 last month of the calendar quarter. It is anticipated that,
until the liquidation of the Trust, the Junior Subordinated Debentures will be
held in the name of the Property Trustee in trust for the benefit of the holders
of the Preferred Securities. The amount of interest payable for any period will
be computed on the basis of a 360-day year of twelve 30-day months. In the event
that any date on which interest is payable on the Junior Subordinated Debentures
is not a Business Day, then payment of the interest payable on such date will be
made on the next succeeding day that is a Business Day (and without any interest
or other payment in respect of any such delay), 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 Junior Subordinated Debentures will mature on June 30, 2029 (such date,
as it may be shortened or extended as hereinafter described, the "Stated
Maturity"). Such date may be shortened at any time by the Company to any date
not earlier than June 30, 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 or extend the Stated Maturity of the Junior Subordinated
Debentures, it will give notice thereof to the Debenture Trustee, the Trust and
to the holders of the Junior 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 Junior Subordinated Debentures, in whole or in
part, from the Trust until on or after June 30, 2003, except if a Tax Event, a
Capital Treatment Event or an Investment Company Event has occurred and is
continuing.
The Junior 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 Junior 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 Junior Subordinated Debentures will, therefore, be
effectively subordinated to all existing and future liabilities of the Bank, and
holders of Junior Subordinated Debentures should look only to the assets of the
Company for payments on the Junior Subordinated Debentures. The Indenture does
not limit the incurrence or issuance of
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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 Junior
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 Junior 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 Junior 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 Junior 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
Junior 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 Junior Subordinated Debentures or make any
guarantee payments with respect to any guarantee by the Company of the debt
securities of any subsidiary of the Company if such guarantee ranks pari passu
or junior in interest to the Junior Subordinated Debentures (other than payments
under the Guarantee), or (iii) redeem, purchase or acquire less than all of the
Junior Subordinated Debentures or any of the Preferred Securities. Prior to the
termination of any such Extension Period, the Company may further defer the
payment of interest; provided, that no Extension Period may exceed 20
consecutive quarters or extend beyond the Stated Maturity of the Junior
Subordinated Debentures. Upon the termination of any such Extension Period and
the payment of all 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 Junior 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 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 to the holders of the Junior Subordinated
Debentures as additional amounts (referred to herein as "Additional Interest")
on the Junior 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
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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 Junior Subordinated
Debentures prior to maturity (i) on or after June 30, 2003, in whole at any time
or in part from time to time, or (ii) at any time in whole (but not in part),
within 180 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 Junior Subordinated Debentures so
redeemed to the date fixed for redemption, plus 100% of the principal amount
thereof. Any such redemption prior to the Stated Maturity will be subject to
prior 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) 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 Junior Subordinated
Debentures, (ii) interest payable by the Company on the Junior Subordinated
Debentures is not, or within 90 days of the date of such opinion will not be,
deductible by the Company, in whole or in part, for United States federal income
tax purposes, or (iii) the Trust 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 any 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 a result of any official administrative
pronouncement or judicial decision interpreting or applying such laws or
regulations, which amendment or change is effective or which proposed change,
pronouncement or decision is announced on or after the date of issuance of the
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 for 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 Junior Subordinated
Debentures to be redeemed at its registered address. Unless the Company defaults
in payment of the redemption price for the Junior Subordinated Debentures, on
and after
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the redemption date interest ceases to accrue on such Junior Subordinated
Debentures or portions thereof called for redemption.
The Junior Subordinated Debentures will not be subject to any sinking fund.
DISTRIBUTION UPON LIQUIDATION
As described under "Description of the Preferred Securities -- Liquidation
Distribution Upon Dissolution," under certain circumstances involving the
dissolution of the Trust, the Junior 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 Junior Subordinated Debentures are distributed to the
holders of Preferred Securities upon the dissolution of the Trust, the Company
will use its best efforts to list the Junior Subordinated Debentures on the
Nasdaq National Market or such stock exchanges, if any, on which the Preferred
Securities are then listed. There can be no assurance as to the market price of
any Junior Subordinated Debentures that may be distributed to the holders of
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 Junior Subordinated Debentures and
has not rescinded such notice, or such Extension Period, or any extension
thereof, is continuing, the Company will not (1) 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, (2) make any payment of
principal, interest or premium, if any, on or repay or repurchase or redeem any
debt securities of the Company that rank pari passu with or junior in interest
to the Junior Subordinated Debentures or make any guarantee payments with
respect to any guarantee by the Company of the debt securities of any subsidiary
of the Company if such guarantee ranks pari passu or junior in interest to the
Junior Subordinated Debentures (other than payments under the Guarantee), or (3)
redeem, purchase or acquire less than all of the Junior Subordinated Debentures
or any of the Preferred Securities.
SUBORDINATION
The Indenture provides that the Junior Subordinated Debentures 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 on, if any) and interest on, if any, such Senior Debt, Subordinated
Debt and Additional Senior Obligations of the Company before the holders of
Junior Subordinated Debentures will be entitled to receive or retain any payment
in respect of the principal of or interest on the Junior Subordinated
Debentures.
In the event of the acceleration of the maturity of any Junior 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 Junior
Subordinated Debentures will be entitled to receive or retain any payment in
respect of the principal of or interest on the Junior Subordinated Debentures.
No payments on account of principal or interest in respect of the Junior
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
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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) 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 Junior Subordinated
Debentures or to other Debt which is pari passu with, or subordinated to, the
Junior 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
Junior 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.
"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 Junior
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 Junior Subordinated Debentures or to rank pari passu in right of
payment with the Junior 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.
As of , 1998, the Company had no outstanding Senior Debt, Subordinated
Debt or Additional Senior Obligations. Because the Company is a holding company,
the Junior Subordinated
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Debentures are effectively subordinated to all existing and future liabilities
of the Company's subsidiaries, including obligations to depositors of the Bank.
PAYMENT AND PAYING AGENTS
Payment of principal of and any interest on the Junior Subordinated
Debentures will be made at the office of the Debenture Trustee in Boston,
Massachusetts, 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 Junior
Subordinated Debentures, or (ii) by transfer to an account maintained by the
Person entitled thereto as specified in the register of holders of the Junior
Subordinated Debentures, provided that proper transfer instructions have been
received by the regular record date. Payment of any interest on Junior
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 Junior
Subordinated Debentures or rescind the designation of any paying agent for the
Junior Subordinated Debentures; however, the Company will at all times be
required to maintain a paying agent in Boston, Massachusetts and each place of
payment for the Junior Subordinated Debentures.
Any moneys deposited with the Debenture Trustee or any paying agent for the
Junior Subordinated Debentures, or then held by the Company in trust, for the
payment of the principal of or interest on the Junior Subordinated Debentures
and remaining unclaimed for two years after such principal or interest has
become due and payable 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 Junior 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 Junior Subordinated Debentures. Junior Subordinated Debentures may be
presented for registration of transfer (with the form of transfer endorsed
thereon, or a satisfactory written instrument of transfer, duly executed), in
Boston, Massachusetts 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. The Company may at any time designate additional transfer
agents with respect to the Junior Subordinated Debentures. In the event of any
redemption, neither the Company nor the Debenture Trustee will be required to
(i) issue, register the transfer of or exchange Junior Subordinated Debentures
during a period beginning at the opening of business 15 days before the day of
selection for redemption of Junior Subordinated Debentures and ending at the
close of business on the day of mailing of the relevant notice of redemption, or
(ii) transfer or exchange any Junior Subordinated Debentures so selected for
redemption, except, in the case of any Junior Subordinated Debentures being
redeemed in part, any portion thereof not to be redeemed.
MODIFICATION OF INDENTURE
The Company and the Debenture Trustee may, from time to time without the
consent of the holders of the Junior Subordinated Debentures, amend, waive or
supplement the Indenture for specified purposes, including, among other things,
curing ambiguities, defects or inconsistencies and qualifying, or maintaining
the qualification of, the Indenture under the Trust Indenture Act. The Indenture
contains provisions permitting the Company and the Debenture Trustee, with the
consent of the holders of not less than a majority in principal amount of the
outstanding Junior 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 Junior 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 Junior
Subordinated Debentures, the holders of which are required to consent to any
such modification of the Indenture; provided 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
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the Junior 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 Junior Subordinated Debentures that has occurred and
is continuing constitutes an event of default (each, a "Debenture Event of
Default") with respect to the Junior Subordinated Debentures:
(i) failure for 30 days to pay any interest on the Junior 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 Junior 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 Junior Subordinated
Debentures; or
(iv) certain events in bankruptcy, insolvency or reorganization of the
Company.
The holders of a majority in aggregate outstanding principal amount of the
Junior Subordinated Debentures have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Debenture
Trustee. The Debenture Trustee, or the holders of not less than 25% in aggregate
outstanding principal amount of the Junior Subordinated Debentures, may declare
the principal due and payable immediately upon a Debenture Event of Default. The
holders of a majority in aggregate outstanding principal amount of the Junior
Subordinated Debentures may annul such declaration and waive the default if the
default (other than the non-payment of the principal of the Junior Subordinated
Debentures which has become due solely by such acceleration) has been cured and
a sum sufficient to pay all matured installments of interest and principal due
otherwise than by acceleration has been deposited with the Debenture Trustee.
Should the holders of the Junior 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 Junior 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 Junior 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 Junior 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 Junior
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
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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 Junior 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 obligations on the Junior Subordinated Debentures, (ii) immediately
after giving effect thereto, no Debenture Event of Default, and no event which,
after notice or lapse of time or both, would become a Debenture Event of
Default, has occurred and is continuing, and (iii) certain other conditions
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 Junior Subordinated Debentures not
previously delivered to the Debenture Trustee for cancellation (i) have become
due and payable, or (ii) will become due and payable at their Stated Maturity
within one year 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 Junior Subordinated Debentures not previously
delivered to the Debenture Trustee for cancellation, for the principal and
interest to the date of the deposit or to the Stated Maturity or redemption
date, as the case may be.
GOVERNING LAW
The Indenture and the Junior Subordinated Debentures will be governed by
and construed in accordance with the laws of The Commonwealth of Massachusetts.
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 Junior Subordinated Debentures, unless offered
reasonable indemnity by such holder against the costs, expenses and liabilities
which might be incurred thereby. The Debenture Trustee is not required to expend
or risk its own funds or otherwise incur personal financial liability in the
performance of its duties if the Debenture Trustee reasonably believes that
repayment or adequate indemnity is not reasonably assured to it.
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 dissolve
the Trust, except upon prior approval of the Federal
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Reserve if then so required under applicable capital guidelines or policies of
the Federal Reserve, and (a) in connection with a distribution of Junior
Subordinated Debentures to the holders of the Preferred Securities in
liquidation of the Trust, or (b) in connection with certain mergers,
consolidations or amalgamations permitted by the Trust Agreement, and (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.
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 accumulated 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 Junior 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 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 Junior Subordinated Debentures held by the Trust, the
Trust will not pay Distributions on the Preferred Securities and will not have
funds legally 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 Junior 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.
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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 Junior 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.
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 Junior 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.
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GOVERNING LAW
The Guarantee will be governed by and construed in accordance with the laws
of The Commonwealth of Massachusetts.
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 JUNIOR 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 Junior
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 Junior 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.
SUFFICIENCY OF PAYMENTS
As long as payments of interest and other payments are made when due on the
Junior Subordinated Debentures, such payments will be sufficient to cover
Distributions and other payments due on the Preferred Securities, primarily
because (i) the aggregate principal amount of the Junior Subordinated Debentures
will be equal to the sum of the aggregate stated Liquidation Amount of the Trust
Securities, (ii) the interest rate and interest and other payment dates on the
Junior Subordinated Debentures will match the Distribution rate and Distribution
and other payment dates for the Preferred Securities, (iii) the Company 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
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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 Junior
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 Junior
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 Junior 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 Junior 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 DISSOLUTION
Upon any voluntary or involuntary dissolution of the Trust involving the
liquidation of the Junior 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 Dissolution." Upon any voluntary or
involuntary liquidation or bankruptcy of the Company, the Property Trustee, as
holder of the Junior Subordinated Debentures, would be a subordinated creditor
of the Company, subordinated in right of payment to all Senior Debt,
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 Junior
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 principal United States federal income
tax consequences of the purchase, ownership and disposition of Preferred
Securities which has been passed upon by Foley, Hoag & Eliot LLP, counsel to the
Company and the Trust insofar as it relates to matters of law and legal
conclusions. The discussion only addresses the tax consequences to a person that
acquires Preferred Securities on their original issue at their original offering
price and that is (i) an individual citizen or resident of the United States,
(ii) a corporation or partnership organized in or under the laws of the United
States or any state thereof or the District of Columbia or (iii) an estate or
trust the income of which is subject to United States federal income tax
regardless of source. This discussion does not attempt to discuss all tax
consequences that may be applicable to a holder of Preferred Securities, nor
does it address the tax consequences to (i) persons who are not United States
Persons, (ii) persons that may be subject to special tax treatment under United
States federal income tax law, such as banks, insurance companies, thrift
institutions, real estate investment trusts, regulated investment companies,
tax-exempt organizations, and dealers in securities or currencies, (iii) persons
that will hold the Preferred Securities as part of a position in a "straddle,"
as part of a "hedge or "synthetic security," as part of a "conversion
transaction" or other integrated investment transaction for federal income tax
purposes, or as other than a capital asset, or (iv) persons whose functional
currency is not the United States dollar. 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.
The summary is based on current provisions of the Internal Revenue Code of
1986, as amended (the "Code"), Treasury regulations thereunder and
administrative and judicial interpretations thereof, all of which are subject to
change, with possible retroactive effect. Subsequent changes may cause tax
consequences to vary substantially from the consequences described below.
Furthermore, the authorities on which this summary is based are subject to
various interpretations, and it is therefore possible that the federal income
tax treatment of the purchase, ownership and disposition of Preferred Securities
may differ from the treatment described below.
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. As a result,
each holder of Preferred Securities generally will be considered the owner of an
undivided beneficial interest in the Junior Subordinated Debentures.
Accordingly, for United States federal income tax purposes, each holder of
Preferred Securities will be required to include in its gross income any
interest, including original issue discount, paid or accrued with respect to its
allocable share of the Junior Subordinated Debentures whether or not cash is
actually distributed to such holder.
CLASSIFICATION OF THE JUNIOR SUBORDINATED DEBENTURES
The Company intends to take the position that the Junior Subordinated
Debentures will be classified for United States federal income tax purposes as
indebtedness of the Company under current law and each holder of Preferred
Securities will be treated as owning an indirect beneficial interest in the
Junior Subordinated Debentures. No ruling is being requested from the Internal
Revenue Service and there is no direct authority addressing the characterization
of the Junior Subordinated Debentures. No assurance can be given 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 Junior Subordinated Debentures will be
classified for United States federal income tax purposes as indebtedness of the
Company.
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POTENTIAL EXTENSION OF INTEREST PAYMENT PERIOD AND ORIGINAL ISSUE DISCOUNT
Under recently issued Treasury regulations (the "Regulations"), a debt
instrument will be deemed to be issued with original issue discount ("OID") if
there is more than a "remote" contingency that periodic stated interest payments
due on the instrument will not be timely paid. Because the exercise by the
Company of its option to defer the payment of stated interest on the Junior
Subordinated Debentures would prevent the Company from declaring dividends on
any class of equity, the Company believes that the likelihood of its exercising
the option is "remote" within the meaning of the Regulations. As a result, the
Company intends to take the position that the Junior Subordinated Debentures
will not be considered to be issued with OID. Accordingly, based on this
position, stated interest on the Junior Subordinated Debentures will be
includible in the ordinary income of a holder at the time that such payments are
paid or accrued in accordance with such holder's regular method of tax
accounting. Because the Regulations have not yet been addressed in any published
rulings or other published interpretations issued by the Internal Revenue
Service, it is possible that the Internal Revenue Service could take a position
contrary to the position taken by the Company.
Under the Regulations, if the Company were to exercise its option to defer
the payment of stated interest on the Junior Subordinated Debentures, the Junior
Subordinated Debentures would at that time be treated as issued with OID and all
stated interest on the Junior Subordinated Debentures would thereafter be
treated as OID as long as the Junior Subordinated Debentures remain outstanding.
In such event, a holder of the Junior Subordinated Debentures would be required
to include OID in ordinary income, on a current basis, over the period that the
instrument is held even though the Company would not be making any actual cash
payments during the extended interest payment period. The amount of interest
income includible in the taxable income of a holder of the Junior Subordinated
Debentures would be determined on the basis of a constant yield method over the
remaining term of the instrument and the actual receipt of future payments of
stated interest on the Junior Subordinated Debentures would no longer be
separately reported as taxable income. The amount of OID that would accrue, in
the aggregate, during the extended interest payment period would be
approximately equal to the amount of the cash payment due at the end of such
period. Any OID included in income would increase the holder's adjusted tax
basis in the Junior Subordinated Debentures and the holder's actual receipt of
interest payments would reduce such basis.
Because income on the Preferred Securities will constitute interest or OID,
corporate 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.
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 interest in the Junior 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 JUNIOR SUBORDINATED DEBENTURES OR CASH UPON LIQUIDATION OF THE TRUST
Under certain circumstances, as described herein (see "Description of the
Preferred Securities -- Redemption or Exchange" and "Description of the
Preferred Securities -- Liquidation Distribution Upon Dissolution"), the Junior
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 adjusted tax basis in the
Junior Subordinated Debentures received in the liquidation equal to such
holder's adjusted tax basis in the Preferred Securities immediately before the
distribution. A holder's holding period in the Junior Subordinated Debentures so
received in liquidation of the Trust would include the period for which such
holder held the Preferred Securities. If, however, the Trust is characterized
for United States federal income tax purposes as an association taxable as a
corporation at the time of its dissolution, the distribution of the Junior
Subordinated Debentures may constitute a taxable event to holders of Preferred
Securities.
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Under certain circumstances described herein, the Junior 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 "Description of the Preferred Securities -- Liquidation
Distribution Upon Dissolution."
DISPOSITION OF PREFERRED SECURITIES
Upon the sale of the Preferred Securities, a holder will recognize gain or
loss in an amount equal to the difference between its adjusted tax basis in the
Preferred Securities and the amount realized in the sale (except to the extent
of any amount received in respect of accrued but unpaid interest not previously
included in income). A holder's adjusted tax basis in the Preferred Securities
generally will be its initial purchase price increased by the amount of OID
accrued and decreased by payments (if any) received on the Preferred Securities
in respect of OID (if any) to the date of disposition. Such gain or loss
generally will be a capital gain or loss and generally will be long-term capital
gain or loss if the Preferred Securities have been held for more than one year
at the time of sale. Amounts attributable to accrued interest with respect to a
holder's share of the Junior Subordinated Debentures not previously included in
income will be taxable as ordinary income.
Should the Corporation exercise its option to defer any payment of interest
on the Junior Subordinated Debentures, 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 Junior Subordinated Debentures (or OID if the
Junior Subordinated Debentures are treated as having been issued with OID). In
the event of such a deferral, a holder who disposes of its Preferred Securities
will be required to include in ordinary income (i) any portion of the amount
realized that is attributable to such accrued but unpaid interest to the extent
not previously included in income, or (ii) any amount of OID, in either case,
that has accrued on its pro rata share of the underlying Junior Subordinated
Debentures during the taxable year of sale through the date of disposition. Any
such income inclusion will increase the holder's adjusted tax basis in the
Preferred Securities disposed of. To the extent that the amount realized in the
sale is less than the holder's adjusted tax basis, 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.
BACKUP WITHHOLDING AND INFORMATION REPORTING
The amount of interest paid and any 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 of
interest may be subject to a "backup" withholding tax at a rate of 31% unless
the holder complies with certain identification and other requirements. Payment
of the proceeds from the sale of Preferred Securities may also be subject to
information reporting and backup withholding. 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
furnished to the Internal Revenue Service.
EFFECT OF PROPOSED CHANGES IN TAX LAWS
In both 1996 and 1997 legislation was proposed that would, if enacted, have
adversely affected the tax treatment of the Preferred Securities. On March 19,
1996, President Clinton proposed certain tax law changes (the "1996 Proposed
Legislation") that would, among other things, generally deny corporate issuers a
deduction for interest in respect of certain debt obligations having a maximum
term in excess of 20 years and not shown as indebtedness on the issuer's
applicable consolidated balance sheet. Neither the 1996 Proposed Legislation or
similar legislation was enacted during the 104th Congress. On February 6, 1997,
President Clinton proposed in the administration's fiscal year 1998 budget
certain tax law changes (the "Administration's 1997 Tax Proposals") that would,
among other things, generally deny corporate issuers a deduction for
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interest or OID in respect of certain debt obligations having a maximum term in
excess of 15 years and not shown as indebtedness on the issuer's applicable
consolidated balance sheet. Neither the Administration's 1997 Tax Proposals nor
similar legislation was enacted by the 105th Congress. There can be no
assurance, however, that legislation enacted after the date hereof will not
adversely affect the ability of the Company to deduct the interest payable on
the Junior Subordinated Debentures or otherwise give rise to a Tax Event.
THE UNITED STATES FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE MAY NOT BE
APPLICABLE DEPENDING UPON A HOLDER'S PARTICULAR SITUATION. HOLDERS SHOULD
CONSULT THEIR TAX ADVISOR 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 THE 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.
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.
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UNDERWRITING
The Underwriters named below, represented by Tucker Anthony Incorporated
(the "Representative"), 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 several Underwriters have agreed in
the Underwriting Agreement, subject to the terms and conditions set forth
therein, to purchase all the Preferred Securities offered hereby if any of the
Preferred Securities are purchased. In the event of 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.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER PREFERRED SECURITIES
----------- --------------------
<S> <C>
Tucker Anthony Incorporated.................................
McConnell, Budd & Downes, Inc. .............................
---------
Total............................................. 1,100,000
=========
</TABLE>
The Representative has advised the Trust that it proposes 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 Junior Subordinated Debentures of the
Company, the Underwriting Agreement provides that the Company will pay as
compensation to the Underwriters arranging the investment therein of such
proceeds, an amount in immediately available funds of $ per Preferred
Security (or $ in the aggregate) for the accounts of the several
Underwriters.
The Trust has granted the Underwriters an option to purchase up to an
additional 165,000 Preferred Securities at the 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
such option, each of the Underwriters will have a firm commitment, subject to
certain conditions, to purchase approximately the same percentage of the
additional Preferred Securities that the number of Preferred Securities to be
purchased initially by the Underwriter is of the 1,100,000 Preferred Securities
initially purchased by the Underwriters.
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 Junior 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 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 also may 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 concessions
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<PAGE> 57
allowed to an Underwriter or dealer if the Underwriters repurchase shares
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 makes any representation or prediction as to the
direction or magnitude of any effect that the transactions described above may
have on the price of the Preferred Securities. The Underwriters are not required
to engage in any of the foregoing transactions and, if commenced, such
transactions may be discontinued at any time 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 Representative, 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 Junior Subordinated Debentures or any debt
securities substantially similar to the Junior Subordinated Debentures or equity
securities substantially similar to the Preferred Securities (except for Junior
Subordinated Debentures and the Preferred Securities offered hereby).
Because the National Association of Securities Dealers, Inc. ("NASD") is
expected to view the Preferred Securities as interests in a direct participation
program, the offering of the Preferred Securities is being made in compliance
with the applicable provisions of Rule 2810 of the NASD's Conduct Rules.
Application has been made to have the Preferred Securities approved for
quotation on the Nasdaq National Market. The Representative has advised the
Trust that it presently intends to make a market in the Preferred Securities
after the commencement of trading on the Nasdaq 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 Representative 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.
LEGAL MATTERS
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 Morris, Nichols, Arsht & Tunnell, Wilmington,
Delaware, special Delaware counsel to the Company and the Trust. Certain legal
matters for the Company and the Trust, including matters relating to United
States federal income tax considerations and the validity of the Guarantee and
the Junior Subordinated Debentures, will be passed upon for the Company and the
Trust by Foley, Hoag & Eliot LLP, Boston, Massachusetts, counsel to the Company
and the Trust. Certain legal matters will be passed upon for the Underwriters by
Goodwin, Procter & Hoar LLP, Boston, Massachusetts. Foley, Hoag & Eliot LLP will
rely on the opinion of Morris, Nichols, Arsht & Tunnell as to matters of
Delaware law.
EXPERTS
The consolidated financial statements of the Company as of December 31,
1997 and 1996, and for each of the years in the three-year period ended December
31, 1997, appearing in the 1997 Annual Report of the Company to its shareholders
and incorporated by reference in the Annual Report on Form 10-K for the year
ended December 31, 1997, have been incorporated by reference in this Prospectus
and in the Registration Statement of which this Prospectus forms a part, in
reliance upon the report of Arthur Andersen LLP, independent public accountants,
incorporated by reference herein, whose report thereon appears therein, and upon
the authority of said firm as experts in accounting and auditing.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission are
incorporated into this Prospectus by reference:
1. The Company's Annual Report on Form 10-K for the year ended
December 31, 1997; and
2. The Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1998 (attached hereto as Appendix B).
The following portions of the Company's 1997 Annual Report to Shareholders
(attached hereto as Appendix A) are incorporated into this Prospectus by
reference:
1. Management's Discussion and Analysis of Financial Condition and
Result of Operations; and
2. Selected Consolidated Financial Data, Consolidated Balance Sheets,
Consolidated Statements of Income, Consolidated Statements of Changes in
Shareholders' Equity, Consolidated Statements of Cash Flows, and Notes to
Consolidated Financial Statements.
Any statement contained herein or in a document incorporated or deemed to
be incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
THE COMPANY WILL PROVIDE WITHOUT CHARGE TO ANY PERSON TO WHOM THIS
PROSPECTUS IS DELIVERED, ON THE WRITTEN OR ORAL REQUEST OF SUCH PERSON, A COPY
OF ANY OR ALL OF THE FOREGOING DOCUMENTS INCORPORATED BY REFERENCE HEREIN (OTHER
THAN EXHIBITS, UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE
IN SUCH DOCUMENTS). REQUESTS FOR SUCH DOCUMENTS SHOULD BE DIRECTED TO: ABINGTON
BANCORP, INC., 536 WASHINGTON STREET, ABINGTON, MASSACHUSETTS 02351, ATTN: CHIEF
FINANCIAL OFFICER (TELEPHONE (781) 982-3200).
As used herein, the terms "Prospectus" and "herein" mean this Prospectus,
including the documents incorporated or deemed to be incorporated herein by
reference, as the same may be amended, supplemented or otherwise modified from
time to time. Statements contained in this Prospectus as to the contents of any
contract or other document referred to herein do not purport to be complete, and
where reference is made to the particular provisions of such contract or other
document, such provisions are qualified in all respects by reference to all of
the provisions of such contract or other document.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith, files reports, proxy statements and other information with the
Commission. Such reports, proxy statements and other information may be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549 and at
the Commission's regional offices at 7 World Trade Center, 13th Floor, Suite
1300, New York, New York 10048 and Suite 1400, Citicorp Center, 500 West Madison
Street, Chicago, Illinois 60661. Copies of such material may also be obtained by
mail from the Public Reference Section of the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549 at prescribed rates. If available, such information
also may be accessed through the Commission's electronic data gathering,
analysis and retrieval system ("EDGAR") via electronic means, including the
Commission's home page on the Internet (http://www.sec.gov). The Company's
common stock is traded on the Nasdaq National Market. Such reports, proxy
statements and other information concerning the Company also may be inspected at
the offices of the National Association of Securities Dealers, Inc., 1735 K
Street, N.W., Washington D.C. 20006.
The Company has filed with the Commission a Registration Statement on Form
S-2 (the "Registration Statement") pursuant to the Securities Act of 1933, as
amended (the "Securities Act"), with respect to the securities offered hereby.
This Prospectus does not contain all of the information set forth in the
Registration Statement and the exhibits and schedules relating thereto as
permitted by the rules and regulations of the
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<PAGE> 59
Commission. For further information pertaining to the Company and the securities
offered hereby, reference is made to the Registration Statement and the exhibits
thereto. Items of information omitted from this Prospectus, but contained in the
Registration Statement, may be obtained at prescribed rates or inspected without
charge at the offices of the Commission set forth above. Any statements
contained herein concerning the provisions of any document are not necessarily
complete, and, in each instance, reference is made to the copy of such document
filed as an exhibit to the Registration Statement or otherwise filed with the
Commission. Each such statement is qualified in its entirety by such reference.
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 the 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 interest in
the assets of the Trust and investing the proceeds thereof in the Junior
Subordinated Debentures issued by the Company, and (iii) the obligations of the
Company described herein to provide certain indemnities in respect of and be
responsible for certain costs, expenses, debts and liabilities of the Trust
under the Indenture and pursuant to the Trust Agreement, the guarantee issued by
the Company with respect to the Preferred Securities, and the Junior
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 Junior 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.
57
<PAGE> 60
======================================================
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary............................... 5
Selected Consolidated Financial
Data................................ 11
Risk Factors.......................... 13
Abington Bancorp, Inc................. 21
Management............................ 23
Abington Bancorp Capital Trust........ 24
Use of Proceeds....................... 26
Market for the Preferred Securities... 26
Accounting Treatment.................. 26
Capitalization........................ 27
Description of the Preferred
Securities.......................... 28
Description of the Junior Subordinated
Debentures.......................... 38
Description of the Guarantee.......... 46
Expense Agreement..................... 48
Relationship Among the Preferred
Securities, the Junior Subordinated
Debentures and the Guarantee........ 48
Certain Federal Income Tax
Consequences........................ 50
ERISA Considerations.................. 53
Underwriting.......................... 54
Legal Matters......................... 55
Experts............................... 55
Incorporation of Certain Documents by
Reference........................... 56
Available Information................. 56
Appendix A -- The Company's 1997
Annual Report to Shareholders
Appendix B -- The Company's Quarterly
Report on Form 10-Q for the quarter
ended March 31, 1998
</TABLE>
------------------------
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER
TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE PREFERRED SECURITIES IN ANY
JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER
OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR THE AFFAIRS OF
THE COMPANY SINCE THE DATE HEREOF.
======================================================
======================================================
1,100,000 PREFERRED SECURITIES
ABINGTON BANCORP
CAPITAL TRUST
% CUMULATIVE TRUST
PREFERRED SECURITIES
(LIQUIDATION AMOUNT $10 PER
PREFERRED SECURITY)
GUARANTEED, AS DESCRIBED HEREIN, BY
LOGO
ABINGTON BANCORP, INC.
$11,000,000
% JUNIOR SUBORDINATED
DEBENTURES OF
ABINGTON BANCORP, INC.
------------------------
PROSPECTUS
------------------------
, 1998
TUCKER ANTHONY
INCORPORATED
MCCONNELL, BUDD & DOWNES, INC.
======================================================
<PAGE> 61
PART II. INFORMATION NOT IN PROSPECTUS
ITEM 16. EXHIBITS.
The following is a complete list of exhibits filed as part of this
Registration Statement.
<TABLE>
<C> <S>
1.1 Draft form of Underwriting Agreement by and between the
Company as issuer and Tucker Anthony Incorporated and
McConnell, Budd & Downes, Inc., as representatives of the
several Underwriters.
4.1 Form of Indenture of the Company relating to the Junior
Subordinated Debentures.
4.2 Form of Junior Subordinated Debenture.
4.3 Certificate of Trust of Abington Bancorp Capital Trust.
4.4 Form of Amended and Restated Trust Agreement of Abington
Bancorp Capital Trust.
4.5 Form of Preferred Security Certificate for Abington Bancorp
Capital Trust.
4.6 Form of Preferred Securities Guarantee Agreement of the
Company relating to the Preferred Securities.
4.7 Form of Agreement as to Expenses and Liabilities.
*5.1 Opinion of Foley, Hoag & Eliot LLP as to legality of the
Junior Subordinated Debentures and the Guarantee to be
issued by the Company.
*5.2 Opinion of Morris, Nichols, Arsht & Tunnell as to legality
of the Preferred Securities to be issued by Abington Bancorp
Capital Trust.
*8.1 Opinion of Foley, Hoag & Eliot LLP as to certain federal
income tax matters.
12.1 Computation of ratio of earnings to fixed charges (excluding
interest on deposits).
+13.1 Annual Report on Form 10-K of Abington Bancorp, Inc. for the
fiscal year ended December 31, 1997 (the "10-K"), Commission
File No. 0-16018.
+13.2 Quarterly Report on Form 10-Q of Abington Bancorp, Inc. for
the fiscal quarter ended March 31, 1998, Commission File No.
0-16018.
+13.3 1997 Annual Report to Shareholders of Abington Bancorp, Inc.
(filed with the Commission as Exhibit 13 to the 10-K).
23.1 Consent of Arthur Andersen LLP.
*23.2 Consent of Foley, Hoag & Eliot LLP (included in Exhibit
5.1).
*23.3 Consent of Morris, Nichols, Arsht & Tunnell (included in
Exhibit 5.2).
24.1 Power of Attorney of certain officers and directors of the
Corporation (located on the signature page hereto).
25.1 Form T-1 Statement of Eligibility of State Street Bank and
Trust Company to act as trustee under the Indenture.
25.2 Form T-1 Statement of Eligibility of State Street Bank and
Trust Company to act as trustee under the Declaration of
Trust of Abington Bancorp Capital Trust.
25.3 Form T-1 Statement of Eligibility of State Street Bank and
Trust Company under the Guarantee for the benefit of the
holders of Preferred Securities of Abington Bancorp Capital
Trust.
</TABLE>
- ---------------
* Filed with this Amendment.
+ Incorporated by reference.
II-1
<PAGE> 62
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-2 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the Town of Abington, Massachusetts, on May 28, 1998.
ABINGTON BANCORP, INC.
By: /s/ * JAMES P. MCDONOUGH
------------------------------------
President and Chief Executive
Officer
Pursuant to the requirements of Securities Act of 1933, Abington Bancorp
Capital Trust certifies that it has reasonable grounds to believe that it meets
all the requirements for filing on Form S-2 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the Town of Abington, Massachusetts, on May 11, 1998.
ABINGTON BANCORP CAPITAL TRUST
By: /s/ * JAMES P. MCDONOUGH
------------------------------------
Administrative Trustee
By: /s/ ROBERT M. LALLO
------------------------------------
Administrative Trustee
By: /s/ * LEWIS PARAGONA
------------------------------------
Administrative Trustee
II-2
<PAGE> 63
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 indicated on May 28, 1998.
<TABLE>
<S> <C>
/s/ * JAMES P. MCDONOUGH /s/ A. STANLEY LITTLEFIELD
- ----------------------------------- -----------------------------------
James P. McDonough, Director, A. Stanley Littlefield, Director
President and Chief Executive
Officer
/s/ * ROBERT J. ARMSTRONG /s/ * JAY TIMOTHY NOONAN
- ----------------------------------- -----------------------------------
Robert J. Armstrong, Director Jay Timothy Noonan, Director
/s/ * BRUCE G. ATWOOD /s/ * GORDON N. SANDERSON
- ----------------------------------- -----------------------------------
Bruce G. Atwood, Director Gordon N. Sanderson, Director
/s/ * WILLIAM F. BORHEK /s/ * JAMES J. SLATTERY
- ----------------------------------- -----------------------------------
William F. Borhek, Director James J. Slattery, Director
/s/ * RALPH B. CARVER, JR. /s/ * WAYNE P. SMITH
- ----------------------------------- -----------------------------------
Ralph B. Carver, Jr., Director Wayne P. Smith, Director
/s/ * JOEL S. GELLER /s/ ROBERT M. LALLO
- ----------------------------------- -----------------------------------
Joel S. Geller, Director Robert M. Lallo, Senior Vice
President,
Treasurer and Chief Financial
Officer
/s/ * RODNEY HENRIKSON
- -----------------------------------
Rodney Henrikson, Director
*By /s/ ROBERT M. LALLO
- -----------------------------------
Attorney-in-fact
</TABLE>
II-3
<PAGE> 64
EXHIBIT INDEX
<TABLE>
<C> <S>
1.1 Draft form of Underwriting Agreement by and between the
Company as issuer and Tucker Anthony Incorporated and
McConnell, Budd & Downes, Inc., as representatives of the
several Underwriters.
4.1 Form of Indenture of the Company relating to the Junior
Subordinated Debentures.
4.2 Form of Junior Subordinated Debenture.
4.3 Certificate of Trust of Abington Bancorp Capital Trust.
4.4 Form of Amended and Restated Trust Agreement of Abington
Bancorp Capital Trust.
4.5 Form of Preferred Security Certificate for Abington Bancorp
Capital Trust.
4.6 Form of Preferred Securities Guarantee Agreement of the
Company relating to the Preferred Securities.
4.7 Form of Agreement as to Expenses and Liabilities.
*5.1 Opinion of Foley, Hoag & Eliot LLP as to legality of the
Junior Subordinated Debentures and the Guarantee to be
issued by the Company.
*5.2 Opinion of Morris, Nichols, Arsht & Tunnell as to legality
of the Preferred Securities to be issued by Abington Bancorp
Capital Trust.
*8.1 Opinion of Foley, Hoag & Eliot LLP as to certain federal
income tax matters.
12.1 Computation of ratio of earnings to fixed charges (excluding
interest on deposits).
+13.1 Annual Report on Form 10-K of Abington Bancorp, Inc. for the
fiscal year ended December 31, 1997 (the "10-K"), Commission
File No. 0-16018.
+13.2 Quarterly Report on Form 10-Q of Abington Bancorp, Inc. for
the fiscal quarter ended March 31, 1998, Commission File No.
0-16018.
+13.3 1997 Annual Report to Shareholders of Abington Bancorp, Inc.
(filed with the Commission as Exhibit 13 to the 10-K).
23.1 Consent of Arthur Andersen LLP.
*23.2 Consent of Foley, Hoag & Eliot LLP (included in Exhibit
5.1).
*23.3 Consent of Morris, Nichols, Arsht & Tunnell (included in
Exhibit 5.2).
24.1 Power of Attorney of certain officers and directors of the
Corporation (located on the signature page hereto).
25.1 Form T-1 Statement of Eligibility of State Street Bank and
Trust Company to act as trustee under the Indenture.
25.2 Form T-1 Statement of Eligibility of State Street Bank and
Trust Company to act as trustee under the Declaration of
Trust of Abington Bancorp Capital Trust.
25.3 Form T-1 Statement of Eligibility of State Street Bank and
Trust Company under the Guarantee for the benefit of the
holders of Preferred Securities of Abington Bancorp Capital
Trust.
</TABLE>
- ---------------
* Filed with this Amendment.
+ Incorporated by reference.
<PAGE> 1
EXHIBIT 5.1
[Letterhead of Foley, Hoag & Eliot LLP]
May 28, 1998
Abington Bancorp, Inc.
536 Washington Street
Abington, Massachusetts 02351
Re: Abington Bancorp Capital Trust
Ladies and Gentlemen:
We have acted as counsel to Abington Bancorp Capital Trust, a Delaware
statutory business trust (the "Trust"), and Abington Bancorp, Inc., a
Massachusetts corporation ("Abington Bancorp"), in connection with certain
matters relating to (i) the creation of the Trust and (ii) the proposed issuance
by the Trust of Preferred Securities to beneficial owners pursuant to and as
described in Registration Statement No. 333-52499 (and the Prospectus forming a
part thereof) on Form S-2 filed with the Securities and Exchange Commission on
May 12, 1998, as amended by Amendment No. 1 thereto (as so amended, the
"Registration Statement"), and (iii) the proposed issuance by Abington Bancorp
of up to $12,650,000 principal amount of Junior Subordinated Debentures due 2029
(the "Debentures") as described in the Registration Statement.
In rendering this opinion, we have examined and relied upon copies of
the following documents in the forms provided to us: the Indenture to be entered
into between Abington Bancorp and State Street Bank and Trust Company, as
Trustee (the "Indenture"); the Preferred Securities Guarantee Agreement to be
entered into between Abington Bancorp and State Street Bank and Trust Company,
as Trustee (the "Guarantee Agreement"); the form of Underwriting Agreement
relating to the Preferred Securities among Abington Bancorp, the Trust, Tucker
Anthony Incorporated and McConnell, Budd & Downes, Inc., as representative of
the several underwriters (the "Underwriting Agreement"); the Registration
Statement; and such other documents and certificates as we have considered
necessary for purposes of this opinion. In such examinations, we have assumed
the genuineness of all signatures, the conformity to original documents of all
documents submitted to us as drafts or copies or forms of documents to be
executed and the legal capacity of natural persons to complete the execution of
documents. We have further assumed for purposes of this opinion: (i) the due
formation or organization, valid
<PAGE> 2
existence and good standing of each entity (other than Abington Bancorp) that is
a party to any of the documents reviewed by us under the laws of the
jurisdiction of its respective formation or organization; and (ii) the due
authorization, execution and delivery by, or on behalf of, each of the parties
thereto of the above-referenced documents.
Based on and subject to the foregoing, and limited in all respects to
matters of Massachusetts law, it is our opinion that:
1. The Debentures have been duly authorized by all necessary corporate
action of Abington Bancorp and, when duly issued, executed, authenticated, paid
for and delivered in accordance with the terms of the Indenture and as described
in the Prospectus, will constitute legal, valid and binding obligations of
Abington Bancorp, enforceable against Abington Bancorp in accordance with their
terms, except to the extent that enforcement thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium, liquidation, fraudulent
conveyance and transfer or other similar laws affecting the enforcement of
creditors' rights generally and by 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 entity or at law); provided, however, that we express no opinion as to the
legality, validity or binding nature of any choice of law provision.
2. When the Guarantee Agreement has been duly authorized, executed and
delivered by Abington Bancorp, the Guarantee Agreement will constitute a legal,
valid and binding obligation of Abington Bancorp, enforceable against Abington
Bancorp in accordance with its terms, except to the extent that enforcement
thereof may be limited by bankruptcy, insolvency, reorganization, moratorium,
liquidation, fraudulent conveyance and transfer or other similar laws affecting
the enforcement of creditors' rights generally and by 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); provided, however, that we
express no opinion as to the legality, validity or binding nature of any choice
of law provision.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name and reference to our opinion
under the heading "LEGAL MATTERS" in the Prospectus forming a part thereof. In
giving this consent, we do not thereby admit that we come within the category of
persons whose consent is required under Section 7 of the Securities Act of 1933,
as amended, or the rules and regulations of the Securities and Exchange
Commission thereunder.
Very truly yours,
FOLEY, HOAG & ELIOT LLP
<PAGE> 1
EXHIBIT 5.2
[Letterhead of Morris, Nichols, Arsht & Tunnell]
May 28, 1998
Abington Bancorp Capital Trust
c/o Abington Bancorp, Inc.
536 Washington Street
Abington, Massachusetts 02351
Re: Abington Bancorp Capital Trust
Ladies and Gentlemen:
We have acted as special Delaware counsel to Abington Bancorp Capital
Trust, a Delaware statutory business trust (the "Trust"), and Abington Bancorp,
Inc., a Massachusetts corporation ("Abington Bancorp"), in connection with
certain matters relating to (i) the creation of the Trust and (ii) the proposed
issuance by the Trust of Preferred Securities to beneficial owners pursuant to
and as described in Registration Statement No. 333-52499 (and the Prospectus
forming a part thereof) on Form S-2 filed with the Securities and Exchange
Commission on May 12, 1998, as amended by Amendment No. 1 (as so amended, the
"Registration Statement"). Capitalized terms used herein and not otherwise
herein defined are used as defined in the Amended and Restated Trust Agreement
of the Trust in the form attached as an exhibit to the Registration Statement
(the "Governing Instrument").
In rendering this opinion, we have examined and relied upon copies of
the following documents in the forms provided to us: the Certificate of Trust of
the Trust as filed in the Office of the Secretary of State of the State of
Delaware (the "State Office") on May 7, 1998 (the "Certificate of Trust"); a
Trust Agreement of the Trust dated as of May 7, 1998 (the "Original Governing
Instrument"); the Governing Instrument; the Indenture to be entered into between
Abington Bancorp and State Street Bank and Trust Company, as Trustee (the
"Indenture"); the Preferred Securities Guarantee Agreement to be entered into
between Abington Bancorp and State Street Bank and Trust Company, as Trustee
(the "Guarantee Agreement"); the form of Underwriting Agreement relating to the
Preferred Securities among Abington Bancorp, the Trust and Tucker Anthony
Incorporated and McConnell, Budd & Downes, Inc. as representative of the several
underwriters (the "Underwriting Agreement"); the Registration Statement; and a
certification of good standing of the Trust obtained as of a recent date from
the State Office. In
<PAGE> 2
such examinations, we have assumed the genuineness of all signatures, the
conformity to original documents of all documents submitted to us as drafts or
copies or forms of documents to be executed and the legal capacity of natural
persons to complete the execution of documents. We have further assumed for
purposes of this opinion: (i) the due formation or organization, valid existence
and good standing of each entity (other than the Trust) that is a party to any
of the documents reviewed by us under the laws of the jurisdiction of its
respective formation or organization; (ii) the due authorization, execution and
delivery by, or on behalf of, each of the parties thereto of the
above-referenced documents (including, without limitation, the due
authorization, execution and delivery of the Governing Instrument and the
Underwriting Agreement prior to the first issuance of Preferred Securities);
(iii) that no event has occurred subsequent to the filing of the Certificate of
Trust, or will occur prior to the first issuance of Preferred Securities, that
would cause a dissolution or liquidation of the Trust under the Original
Governing Instrument or the Governing Instrument, as applicable; (iv) that the
activities of the Trust have been and will be conducted in accordance with the
Original Governing Instrument or the Governing Instrument, as applicable, and
the Delaware Business Trust Act, 12 Del. C. ss. 3801 et seq. (the "Delaware
Act"); (v) that each Holder of Preferred Securities has, or prior to the first
issuance of Preferred Securities will have, made payment of the required
consideration therefor and received a Preferred Securities Certificate in
consideration thereof in accordance with the terms and conditions of the
Governing Instrument, the Registration Statement and the Underwriting Agreement
and that the Preferred Securities are otherwise issued and sold to the Preferred
Securities Holders in accordance with the terms, conditions, requirements and
procedures set forth in the Governing Instrument, the Registration Statement and
the Underwriting Agreement; and (vi) that the documents examined by us are in
full force and effect, express the entire understanding of the parties thereto
with respect to the subject matter thereof and have not been modified,
supplemented or otherwise amended, except as herein referenced. We have not
reviewed any documents other than those identified above in connection with this
opinion, and we have assumed that there are no other documents that are contrary
to or inconsistent with the opinions expressed herein. Further, we express no
opinion with respect to, and assume no responsibility for the contents of, the
Registration Statement or any other offering material relating to the Preferred
Securities. No opinion is expressed herein with respect to the requirements of,
or compliance with, federal or state securities or blue sky laws. As to any fact
material to our opinion, other than those assumed, we have relied without
independent investigation on the above-referenced documents and on the accuracy,
as of the date hereof, of the matters therein contained.
Based on and subject to the foregoing, and limited in all respects to
matters of Delaware law, it is our opinion that:
1. The Trust is a duly created and validly existing business trust in
good standing under the laws of the State of Delaware.
2. Upon issuance, the Preferred Securities will constitute validly
issued and, subject to the qualifications set forth in paragraph 3 below, fully
paid and nonassessable beneficial interests in the assets of the Trust.
<PAGE> 3
3. Under the Delaware Act and the terms of the Governing Instrument,
each Preferred Security Holder of the Trust, in such capacity, will be entitled
to the same limitation of personal liability as that extended to stockholders of
private corporations for profit organized under the General Corporation Law of
the state of Delaware; provided, however, we express no opinion with respect to
the liability of any Preferred Security Holder who is, was or may become a named
Trustee of the Trust. Notwithstanding the foregoing, we note that pursuant to
the Governing Instrument, Preferred Security Holders may be obligated to make
payments or provide indemnity or security under the circumstances set forth
therein.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name and reference to our opinion
under the heading "Legal Matters" in the Prospectus forming a part thereof. In
giving this consent, we do not thereby admit that we come within the category of
persons whose consent is required under Section 7 of the Securities Act of 1933,
as amended, or the rules and regulations of the Securities and Exchange
Commission thereunder. This opinion speaks only as of the date hereof and is
based on our understandings and assumptions as to present facts, and on our
review of the above-referenced documents and the application of Delaware law as
the same exist as of the date hereof, and we undertake no obligation to update
or supplement this opinion after the date hereof for the benefit of any person
or entity with respect to any facts or circumstances that may hereafter come to
our attention or any changes in facts or law that may hereafter occur or take
effect. This opinion is intended solely for the benefit of the addressee hereof
in connection with the matters contemplated hereby and may not be relied on by
any other person or entity or for any other purpose without our prior written
consent. Very truly yours,
MORRIS, NICHOLS, ARSHT & TUNNELL
<PAGE> 1
EXHIBIT 8.1
[Foley, Hoag & Eliot LLP letterhead]
May 28, 1998
Abington Bancorp, Inc.
536 Washington Street
Abington, Massachusetts 02351
Abington Bancorp Capital Trust
c/o Century Bancorp, Inc.
536 Washington Street
Abington, Massachusetts 02351
Re: Abington Bancorp Capital Trust
Ladies and Gentlemen:
We have acted as counsel to Abington Bancorp, Inc., a Massachusetts
corporation (the "Company"), and to Abington Bancorp Capital Trust, a statutory
business trust created under the laws of Delaware (the "Trust"), in connection
with the proposed issuance of (i) Preferred Securities (the "Preferred
Securities") of the Trust pursuant to the terms of the Amended and Restated
Trust Agreement (the "Trust Agreement") among the Company, as Depositor, State
Street Bank and Trust Company, as Property Trustee, Wilmington Trust Company, as
Delaware Trustee, and the Administrative Trustees, to be offered in an
underwritten public offering, and (ii) Junior Subordinated Debentures (the
"Debentures") of the Company pursuant to the terms of an indenture from the
Company to State Street Bank and Trust Company, as Trustee (the "Indenture"), to
be sold by the Company to the Trust. The Preferred Securities and the Debentures
are to be issued as contemplated by the registration statement on Form S-2 (the
Registration Statement") to be filed by the Company and the Trust to register
the issuance of the Preferred Securities and the Debentures under the Securities
Act of 1933, as amended. You have requested our opinion on certain federal
income tax matters relating to the Preferred Securities.
In preparing this opinion, we have examined and relied on (i) the
Registration Statement, (ii) the Form of Indenture attached as an exhibit to the
Registration Statement, (iii) the Form of Debenture included as an exhibit to
the Form of Indenture, (iv) the Form of Trust Agreement attached as an exhibit
to the Registration Statement, (v) the Form of Preferred Security
<PAGE> 2
Abington Bancorp, Inc.
Abington Bancorp Capital Trust
[date]
Page 2
Certificate included as an exhibit to the Form of Trust Agreement, and (vi) the
Form of Guarantee attached as an exhibit to the Registration Statement, and such
other documents and instruments (collectively, the "Documents"), and we have
made such investigations of law, as we have deemed appropriate as a basis for
the opinion expressed below.
Based on the foregoing, and assuming (i) the final Documents will be
substantially identical to the forms attached as exhibits to the Registration
Statement and (ii) full compliance with all terms of the final Documents, we are
of the opinion that the discussion set forth under the caption "Certain Federal
Income Tax Consequences" in the preliminary prospectus constituting part of the
Registration Statement constitutes, in all material respects, a fair and
accurate summary of the United States federal income tax consequences of the
purchase, ownership and disposition of Preferred Securities, based upon current
law. The opinion rendered above is not binding on the Internal Revenue Service
or a court of law, and no assurance can be given that legislative or
administrative action or judicial decisions that differ from the opinion
rendered above will not be forthcoming. We note that there is no authority
directly on point dealing with securities such as the Preferred Securities. We
express no opinion as to the federal income tax consequences other than those
described, if any, or as to any state, local or foreign income or other tax
consequences of the purchase, ownership and disposition of the Preferred
Securities.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. We also consent to the reference to Foley, Hoag & Eliot
LLP under the captions "Certain Federal Income Tax Consequences" and "Legal
Matters" in the Registration Statement. In giving this consent, we do not admit
that we are in the category of persons whose consent is required by Section 7 of
the Securities Act of 1933, as amended, or the rules and regulations promulgated
thereunder by the Securities and Exchange Commission.
Very truly yours,
FOLEY, HOAG & ELIOT LLP
