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Filed Pursuant to Rule 424(b)(1)
Registration No. 333-30678
333-30678-01
PROSPECTUS
1,200,000 Trust Preferred Securities
PROVIDENT TRUST II
10% Trust Preferred Securities
guaranteed by
PROVIDENT BANKSHARES
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C O R P O R A T I O N
Provident Bankshares Corporation
. We are a bank holding company for our bank subsidiary, which offers a full
range of consumer and commercial banking services to customers in
Maryland, northern Virginia and southern York County, Pennsylvania.
The Trust
. Provident Trust II is our subsidiary and a statutory business trust
created under the laws of Delaware.
. We created the Trust for the limited purposes of issuing the common and
trust preferred securities, investing in the junior subordinated
debentures, and engaging in incidental activities.
The Trust Preferred Securities
. The trust preferred securities represent undivided beneficial interests in
the assets of the Trust, which will include the junior subordinated
debentures and payments on the debentures.
. Holders of the trust preferred securities are entitled to cumulative cash
distributions at the annual rate of 10% on March 31, June 30, September 30
and December 31 of each year, beginning March 31, 2000.
. We have applied to have the trust preferred securities approved for
quotation under the proposed Nasdaq National Market symbol "PBKSP."
. The Trust may redeem the trust preferred securities at a redemption price
of $25 per trust preferred security, plus accrued and unpaid
distributions, on or after March 31, 2005.
. If we defer interest payments on the junior subordinated debentures, the
Trust will defer distributions on the trust preferred securities.
The Junior Subordinated Debentures
. We will sell $30,927,850 of our 10% junior subordinated debentures to the
Trust, an amount equal to the proceeds to the Trust from the sale of the
common and trust preferred securities.
. The junior subordinated debentures are scheduled to mature on March 31,
2030, but we may shorten this date.
. We may defer interest payments on the junior subordinated debentures from
time to time.
Before you make an investment decision, we urge you to consider carefully the
"Risk Factors" beginning on page 7 of this Prospectus.
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Price Underwriting Proceeds
to Public Commission to Trust
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<S> <C> <C> <C>
Per Trust Preferred Security.................... $ 25.00 (1) $ 25.00
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Total........................................... $30,000,000 (1) $30,000,000
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(1) Because all of the proceeds from the sale of the trust preferred
securities will be used to purchase the junior subordinated debentures, we
have agreed to pay the underwriters, as compensation, $0.875 per trust
preferred security or $1,050,000 in the aggregate.
Neither the Securities and Exchange Commission nor any State Securities
Commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this Prospectus. Any representation to the contrary is
a criminal offense.
Neither the trust preferred securities nor the junior subordinated
debentures are deposit accounts of any bank, and neither are insured to any
extent by the Federal Deposit Insurance Corporation or any other governmental
agency.
Legg Mason Wood Walker Ferris, Baker Watts
Incorporated Incorporated
The date of this prospectus is February 24, 2000.
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TABLE OF CONTENTS
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Page No.
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Summary........................................................................... 1
Risk Factors...................................................................... 7
Selected Consolidated Financial and Other Data.................................... 12
Use of Proceeds................................................................... 14
Capitalization.................................................................... 15
Provident Trust II................................................................ 16
Accounting Treatment.............................................................. 17
Description of Trust Preferred Securities......................................... 17
Description of Junior Subordinated Debentures..................................... 31
Description of Guarantee.......................................................... 42
Relationship among the Trust Preferred Securities, the Junior Subordinated
Debentures, and the Guarantee.................................................... 44
Certain Federal Income Tax Consequences........................................... 46
Certain ERISA Considerations...................................................... 51
Underwriting...................................................................... 51
Validity of Securities............................................................ 53
Experts........................................................................... 53
Where You Can Find More Information............................................... 53
Incorporation of Certain Documents by Reference................................... 54
Cautionary Statement Concerning
Forward-Looking Information..................................................... 55
</TABLE>
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[PROVIDENT BANKSHARES MAP APPEARS HERE]
We have not, and the underwriters have not, authorized any other person to
provide you with information other than that provided in this prospectus. This
prospectus is not an offer to sell, nor is it seeking an offer to buy, these
trust preferred securities in any state where the offer or sale is not
permitted. The information in this prospectus is complete and accurate as of
the date on the front cover, but the information may have changed since that
date.
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SUMMARY
The items in the following summary are described in more detail later in this
prospectus. This summary provides an overview of selected information and does
not contain all the information you should consider. You also should read the
more detailed information set out in this prospectus or incorporated in the
prospectus by reference. See "Where You Can Find More Information" (page 53). In
this prospectus, "we," "our," and "us," refer to Provident Bankshares
Corporation.
Provident Bankshares Corporation
Overview
Provident Bankshares Corporation is a registered bank holding company whose
principal business is conducted by its wholly owned subsidiary, Provident Bank,
which is headquartered in Baltimore, Maryland. At December 31, 1999, the Bank
was the third largest commercial bank chartered in Maryland in terms of assets.
Our common stock trades on the Nasdaq Stock Market's National Market under the
symbol "PBKS."
We provide a full range of commercial banking services from 83 branches (of
which 50 are traditional branch offices and 33 are in-store facilities) in seven
Maryland counties in the Baltimore/Washington, D.C. corridor, Baltimore City in
Maryland, northern Virginia and southern York County, Pennsylvania. The Bank
offers related financial services through its wholly owned subsidiaries,
including mortgages through Provident Mortgage Corp., mutual funds, annuities
and insurance products through Provident Investment Center, Inc. and leases
through Court Square Leasing Corporation and Provident Lease Corporation.
At December 31, 1999, we had total assets of approximately $5.1 billion, total
deposits of $3.8 billion, and total consolidated stockholders' equity of
approximately $275 million.
Our principal executive offices are located at 114 East Lexington Street,
Baltimore, Maryland 21202, and our telephone number at such address is (410)
277-7000.
Our Strategy
Our strategy is to continue to develop our community banking franchise in the
Baltimore/Washington, D.C. corridor as well as develop the northern Virginia
market by emphasizing personalized and responsive banking services in the
communities in which we operate. At the same time, we are continuing to develop
our portfolio and indirect consumer loan operations. Management believes that
the increasing consolidation in the financial services industry, particularly in
our principal market area, provides us with significant opportunities as the
larger regional institutions focus increasingly on higher dollar credits and
less personalized forms of service delivery.
We have experienced significant growth since the management team, led by Carl W.
Stearn and Peter M. Martin, was retained in 1990 to reorient our operations from
a traditional thrift institution to a commercial banking operation. In April
1998, Mr. Stearn retired as Chairman of the Board of Directors and Chief
Executive Officer of Provident Bankshares Corporation and Mr. Martin assumed
those positions. Mr. Stearn remains a director of Provident Bankshares
Corporation. During their tenure, we have grown from approximately $1.5 billion
in assets and 38 banking offices to approximately $5.1 billion in assets and 83
banking offices. In developing our commercial bank franchise, management has
implemented extensive modifications to our lending, funding, balance sheet
management, and operational functions to position us for future profitable
growth.
In August 1997, we completed our acquisition of First Citizens Financial
Corporation, a $674 million financial institution with 15 branches in the
Montgomery and Frederick Counties of Maryland. We will continue to evaluate
business combination opportunities.
Recent Developments
We recorded net income for the year ended December 31, 1999 of $44.2 million or
$1.73 per share basic and $1.67 diluted. This represented a
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13.1% increase in net income over the same period a year ago. Net income for the
year ended December 31, 1998 was $39.0 million or $1.52 per share basic or $1.47
diluted. The higher earnings in 1999 were primarily due to a $17.5 million
increase in net interest income, offset in part by lower non-interest income of
$1.7 million and higher operating costs of $9.3 million. There was a $457,000
decrease in the provision for loan losses during 1999 and net charge-offs of
$13.0 million. We decreased our loan loss provision despite an increase in
charge-offs because the increase in 1999 charge-offs was primarily related to an
adverse decision in a lawsuit associated with a letter of credit issued in 1989.
Our returns on average assets and average equity were 0.90% and 15.46% in 1999,
respectively. Additionally, our efficiency ratio was 63.4% in 1999.
We have transitioned our asset base into higher yielding products since 1995,
with investment securities, residential mortgages and loans held for sale
declining from 51.4% at year-end 1995 to 39.4% of earning assets at December 31,
1999. Average loan growth has ranged between 13-21% from 1996 through 1999,
supported by consumer and commercial loan emphasis as well as disciplined
wholesale purchases of seasoned consumer portfolios. At December 31, 1999,
Provident's loan balance totaled $3.2 billion and was composed of 69% consumer
loans, 23% commercial and commercial real estate loans, and 8% residential
mortgage loans.
At December 31, 1999, we had non-performing loans of $28.9 million, or 0.91% of
total loans. The increase in non-performing loans in 1999 is primarily the
result of one health care relationship, the largest portion of which is part of
a shared national credit of $15 million. The total relationship is $21 million.
The allowance for loan losses at December 31, 1999, was 1.25% of total loans and
137.6% of non-performing loans. Net charge-offs at December 31, 1999 were 0.40%
of average loans. Additionally, our net charge-offs to average loans ratio has
averaged 0.23% over the five years ended December 31, 1999.
In addition to emphasizing credit quality, management has focused on liquidity
by maintaining an investment portfolio of $1.7 billion at December 31, 1999. Of
the investment portfolio, 87.9% is invested in mortgage-backed securities with a
weighted average life of 5.6 years and 3.4% is invested in U.S. government
obligations.
On April 15, 1998, Provident Trust I, a statutory business trust created under
the laws of the State of Delaware, issued $40,000,000 of its 8.29% Exchange
Capital Securities to certain investors. These securities remain outstanding. A
copy of the prospectus dated July 31, 1998, relating to the Exchange Capital
Securities will be made available to you at no cost through our Corporate
Secretary. The 8.29% Exchange Capital Securities will be of equal rank to the
securities offered through this prospectus.
A stockholder has submitted a proposal that would require us to immediately take
steps to achieve a sale, merger or other acquisition of the Company on terms
that will maximize stockholder value. Our Board of Directors intends to oppose
the proposal if it is presented properly at our Annual Meeting of Stockholders.
Provident Trust II
Provident Trust II is a statutory business trust that we formed under the
Delaware Business Trust Act. The trust is selling 1,200,000 trust preferred
securities in this Offering. The Trust also will issue common trust securities
to us. The trust preferred securities and the common securities are referred to
in this prospectus as the trust securities.
The Trust exists only to issue trust securities for cash, to invest the proceeds
in an equivalent amount of 10% Junior Subordinated Deferrable Interest
Debentures due 2030 issued by us, and to engage in other activities that are
necessary or incidental to the issuance of the trust securities and the
investment in junior subordinated debentures. The Trust does not have separate
financial statements. We do not believe that the statements would be significant
to you because the Trust is our direct, wholly owned subsidiary, has no
independent operations, and exists solely for the reasons summarized above. We
will pay all of the expenses of operating the Trust.
The Trust's principal office is located at 114 East Lexington Street, Baltimore,
Maryland, and its telephone number is (410) 277-7000.
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The Offering
The Issuer............................ Provident Trust II, a Delaware statutory
business trust.
Securities Being Offered.............. 1,200,000 trust preferred securities
having a liquidation amount of $25 per
trust preferred security. The trust
preferred securities represent preferred
undivided beneficial interests in the
assets of the Trust, which will consist
solely of junior subordinated
debentures. We will guarantee payments
on the trust preferred securities to the
extent of funds in the Trust.
The Offering Price.................... $25 per trust preferred security.
The Payment of Distributions.......... The Trust will pay distributions to you
on each trust preferred security at an
annual rate of 10%. The distributions
will be cumulative, will accumulate from
the date of issue, and will be payable
in arrears with additional
distributions, compounded quarterly,
beginning March 31, 2000.
Our Option to Extend the Interest
Payment Period..................... At any time that we are not in default
under the junior subordinated
debentures, we may defer payments of
interest on the junior subordinated
debentures for up to 20 consecutive
quarters, but not beyond their stated
maturity date. The Trust would defer
quarterly distributions on the trust
preferred securities while we are
deferring payment on the junior
subordinated debentures. Deferred
quarterly distributions will accumulate
additional distributions at an annual
rate of 10% compounded quarterly.
During any period that we are deferring
interest payments, we may not declare or
pay any cash distributions on our
capital stock or debt securities that
are of equal or lower rank than the
junior subordinated debentures. After
the end of any period in which we are
deferring interest payments, if we have
paid all deferred and current interest
under the junior subordinated
debentures, we may defer interest
payments again. If we defer interest
payments, you will be required to
include deferred interest income in your
gross income for United States federal
income tax purposes even if you have not
received distributions.
Junior Subordinated Debentures........ The Trust will invest the proceeds from
the issuance of the trust preferred
securities and common securities in an
equivalent amount of our 10% junior
subordinated debentures.
Maturity of Debentures................ The junior subordinated debentures are
scheduled to mature on March 31, 2030.
The Trust must redeem the trust
preferred securities when the junior
subordinated debentures are paid on the
maturity date, or following any earlier
redemption of the junior subordinated
debentures.
3
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Redemption of the Trust Preferred
Securities is Possible............. The Trust may redeem the trust preferred
securities in whole or in part, if we
repay the junior subordinated
debentures. Subject to any regulatory
approval that may then be required, we
may redeem the junior subordinated
debentures before their scheduled
maturity either (1) on or after
March 31, 2005, in whole at any time
or in part, from time to time, or (2) at
any time, in whole, but not in part,
within 90 days after:
. certain tax events occur or become
likely to occur;
. the Trust is or becomes likely to
be deemed to be an investment
company; or
. there is a change in the regulatory
capital treatment of the trust
preferred securities.
We will use the cash proceeds of any
redemption to pay you the liquidation
amount for the trust preferred
securities. The liquidation amount you
will receive will be $25 per trust
preferred security plus any accrued and
unpaid distributions to the date of
redemption.
How the Securities will Rank in
Right of Payment................... The trust preferred securities will rank
equally with the common securities
issued by the Trust. The Trust will pay
distributions on the trust preferred
securities and the common securities pro
rata. If we default by failing to pay
interest payments on the junior
subordinated debentures, no
distributions on the common securities
will be paid until all accumulated and
unpaid distributions on the trust
preferred securities have been paid.
Our obligation under the junior
subordinated debentures is unsecured and
generally will rank junior in priority
to any of our senior and other
subordinated indebtedness. If we create
any other trusts similar to this Trust,
then the subordinated debentures will
rank equally with any other junior
subordinated debentures we issue to the
trusts.
Our obligation under the guarantee is
unsecured and will rank junior to our
senior and other subordinated
indebtedness. If we issue any other
guarantees in the future relating to
trust preferred securities issued by the
other trusts, then the guarantee issued
in this transaction will rank equally
with our guarantee related to the trust
preferred securities issued by Provident
Trust I and any other guarantees.
Because we are a holding company, the
junior subordinated debentures and the
guarantee will effectively be
subordinated to all existing and future
liabilities of our subsidiaries.
The trust preferred securities, junior
subordinated debentures and our
guarantee will rank equally with the
Exchange Capital
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Securities that were issued in 1998 in
connection with Provident Trust I.
The Junior Subordinated Debentures
may be Distributed to You.......... Under certain circumstances and after we
obtain any necessary regulatory
approvals, we may dissolve the Trust. If
we dissolve the Trust, after
satisfaction of any of the Trust's
liabilities to creditors, the Trust will
distribute your pro rata share of the
junior subordinated debentures to you in
liquidation of the Trust.
Our Obligations to Guarantee
Payments.......................... We provide an irrevocable and
unconditional guarantee of payments of
distributions and other amounts due on
the trust preferred securities. Our
obligations to guarantee the payments
and other amounts are found under the
junior subordinated debentures, the
indenture, the trust agreement and the
guarantee, taken together.
If we do not make payments on the junior
subordinated debentures, the Trust will
not have sufficient funds to make
distributions on the trust preferred
securities. The guarantee does not cover
distributions when the Trust does not
have sufficient funds.
Limited Voting Rights................ You will have no voting rights except in
limited circumstances.
The Use of Proceeds.................. The Trust will invest all of the
proceeds from the sale of the trust
preferred and the common securities in
our junior subordinated debentures. We
intend to utilize a substantial portion
of the net proceeds for our stock
repurchase program. We intend to
contribute the remainder of the net
proceeds from our sale of the junior
subordinated debentures to our
subsidiary bank to fund the bank's
operations, support internal growth
opportunities, and to use the remainder
to finance growth, including future
acquisitions if and when suitable
opportunities arise, and for general
corporate purposes.
The trust preferred securities may
qualify in whole or in part, as our
"Tier 1" capital or core capital, with
certain limitations, in accordance with
capital guidelines provided by The
Federal Reserve. The remaining amount of
trust preferred securities that does not
qualify as our "Tier 1" capital will
qualify as "Tier 2," or supplementary
capital.
Nasdaq National Market Symbol......... We have applied for a listing of the
securities on the Nasdaq National Market
under the symbol "PBKSP."
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Book-Entry............................ The trust preferred securities will be
represented by a global security that
will be deposited with and registered in
the name of The Depository Trust
Company, New York, New York, or its
nominee. You will not receive a
certificate for your trust preferred
securities.
No Rating............................. We do not expect that the trust
preferred securities will be rated by
any rating service.
ERISA Considerations.................. You must consider carefully the
information described under "Certain
ERISA Considerations."
For additional information regarding the trust preferred securities, see:
"Description of Trust Preferred Securities" on page 17, "Description of Junior
Subordinated Debentures" on page 31, "Description of Guarantee" on page 42,
"Relationship Among the Trust Preferred Securities, the Junior Subordinated
Debentures and the Guarantee" on page 44 and "Certain Federal Income Tax
Consequences" on page 46.
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RISK FACTORS
You should carefully consider the following risk factors before purchasing
the trust preferred securities. This prospectus contains forward-looking
statements that involve risk and uncertainties. You can identify these forward-
looking statements because they may include terms such as "believes,"
"anticipates," "intends," "expects," or similar expressions, and may include
discussions of future strategy. We caution you not to rely unduly on any
forward-looking statements in this prospectus. Our actual results could differ
materially from the forward-looking statements. The risk factors described below
could cause or contribute to these differences and apply to all forward-looking
statements wherever they appear in this prospectus.
Risk Factors Relating to the Trust Preferred Securities
Payments on the trust preferred securities depend on our making payment on the
junior subordinated debentures.
The ability of Provident Trust II to make the required payments on the
trust preferred securities depends on our ability to make the required payments
on the junior subordinated debentures. If we default on our obligations to pay
our other creditors, then we may be prohibited from paying you. Our obligations
to you under the guarantee and the junior subordinated debentures rank lower
than our obligations to most of our other creditors. If we do not pay our other
creditors amounts we owe them, we may be prohibited from paying you. If we go
into bankruptcy or insolvency, our other creditors must be paid in full before
you may be paid. There is no limitation on the amount of secured or unsecured
debt that may be incurred by us.
If we defer interest payments, there may be adverse tax consequences to you and
this may affect the trading price for the securities.
If we extend the interest payment period, you will not receive
distributions, but you will recognize ordinary income and incur a related
federal income tax liability, and you will recognize a capital loss that may be
used only to offset a capital gain. So long as we are not in default, we may
defer the payment of interest on the junior subordinated debentures from time to
time for up to 20 consecutive quarters. If we defer interest payments, the Trust
will defer quarterly distributions to you on the trust preferred securities.
During a deferral period you will continue to accrue income (in the form of
original issue discount) for federal income tax purposes on the trust preferred
securities, but you will not receive your cash distributions. In addition, your
tax basis in the trust preferred securities will increase by the amount of
accrued but unpaid distributions. If you sell the trust preferred securities
during a deferral period, your increased tax basis will decrease the amount of
any capital gain or increase the amount of any capital loss that you may have
otherwise realized on the sale. A capital loss, except in certain limited
circumstances, cannot be applied to offset ordinary income.
We may redeem the securities early, which may adversely affect you.
The Trust may return your principal to you early, which would require you
to reinvest your principal at a time when you may not be able to earn a return
that is as high as you were earning on the trust preferred securities. Under the
following circumstances we may return your principal before the stated maturity
of the junior subordinated debentures:
. We may redeem all of the junior subordinated debentures in whole, but
not in part, prior to maturity within 90 days after certain
occurrences at any time during the life of the Trust. If we redeem the
junior subordinated debentures due to the occurrence of one of these
events, the Trust will redeem the trust preferred securities. You
would receive the redemption price.
. We may also at any time shorten the maturity of the junior
subordinated debentures to a date not earlier than March 31, 2005.
We may be required to obtain regulatory approval before shortening the
maturity of the junior subordinated debentures.
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. You should be aware that Congress may enact legislation that would
adversely affect our ability to deduct the interest we pay on the
junior subordinated debentures or that otherwise results in
unfavorable tax consequences for us or the Trust. This legislation may
cause us to redeem the junior subordinated debentures and cause the
Trust to redeem the trust preferred securities.
If we redeem the junior subordinated debentures we would redeem the trust
preferred securities, and you may be required to reinvest your principal.
We can distribute the junior subordinated debentures to you, which may have
adverse tax consequences for you and which may adversely affect the market price
of your investment. The Trust may be dissolved at any time before maturity of
the junior subordinated debentures on March 31, 2030. Then, the trustees
would distribute the junior subordinated debentures to the holders of the trust
preferred securities. The junior subordinated debentures that you receive upon a
distribution, or the trust preferred securities you hold pending this type of
distribution, may trade at a price that is less than you paid to purchase the
trust preferred securities.
Under current United States federal income tax laws, a distribution of the
junior subordinated debentures to you upon the dissolution of the Trust would
not be a taxable event to you. However, if the Trust were classified for United
States federal income tax purposes as an association taxable as a corporation at
the time it is dissolved, the distribution of the junior subordinated debentures
would be a taxable event to you. In addition, if there is a change in law, a
distribution of junior subordinated debentures upon the dissolution of the Trust
could be a taxable event to you.
We will make payments under the guarantee only if the Trust has cash available.
Our guarantee covers payments to you only if the Trust has cash available
to make payments. If we do not make payments on the junior subordinated
debentures, the Trust will not have sufficient funds to pay distributions or the
liquidation amount. Because our guarantee does not cover payments when the Trust
does not have sufficient funds, you will not be able to rely on our guarantee
for payment of these amounts. Instead, you or the property trustee may enforce
the rights of the Trust under the junior subordinated debentures against us
directly.
You will have limited voting rights.
You will have only limited voting rights as a holder of the trust preferred
securities, and we can amend the trust agreement without your consent. Your
voting rights will relate only to the modification of the trust preferred
securities and the exercise of the Trust's rights as holder of the junior
subordinated debentures. You will not usually be able to appoint, remove or
replace the property trustee or the Delaware trustee because these rights
generally reside with us as the holder of the common securities. Even if it
would adversely affect your rights, we, together with the property trustee and
the trust administrators, may amend the trust agreement without your consent to
ensure that the Trust will not be taxable as a corporation for United States
federal income tax purposes.
The market price of the securities may decline if we defer interest on the
debentures.
The market price for the trust preferred securities may decline during any
period that we are deferring interest payments on the junior subordinated
debentures. If this were the case, the trust preferred securities would not
trade at a price that accurately reflects the value of accrued but unpaid
interest on the underlying junior subordinated debentures.
There may be no active or liquid market for the securities.
There is no current public market for the trust preferred securities and
one may not develop. We plan to list the trust preferred securities on the
Nasdaq National Market. There is no guarantee that an active or liquid public
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trading market will develop for the trust preferred securities or whether there
will be continued listing of the trust preferred securities on the Nasdaq
National Market. Although the underwriters have informed the Trust and us that
they intend to make a market in the trust preferred securities, they are not
obligated to do so and any market making activity may be terminated at any time
without notice. Even if an active public market does develop, there is no
guarantee that the market price for the trust preferred securities will equal or
exceed the price you pay for the trust preferred securities.
Holders of the securities and debentures are not protected by covenants in the
Indenture or the Trust Agreement.
The indenture and the trust agreement do not restrict our business
operations for your benefit. Neither the indenture, which sets forth the terms
of the junior subordinated debentures, nor the trust agreement, which sets forth
the terms of the trust preferred securities and the common securities, protects
holders of junior subordinated debentures or the trust preferred securities if
we experience adverse changes in our financial condition or results of
operations. In addition, neither the indenture nor the trust agreement limit our
ability or the ability of any subsidiary to incur additional indebtedness.
The securities are not insured.
The trust preferred securities are not insured. Neither the Federal Deposit
Insurance Corporation nor any other governmental agency or private company has
insured the trust preferred securities.
Potential tax law changes could require us to redeem the securities.
From time to time, certain tax law changes have been proposed that would
deny interest deductions to corporate issuers of debt instruments with terms
that include certain of the terms of the debentures. In addition, the Internal
Revenue Service ("IRS") has in the past challenged taxpayers' treatment as
indebtedness or securities issued with characteristics similar to the
debentures. To date, these tax law change proposals have not been enacted and
the only known challenge that has advanced as far as litigation was settled
short of trial, with resolution favorable to the taxpayer's position. However,
if any similar tax law change were enacted or a challenge by the IRS were
upheld, that event could give rise to a Tax Event (as defined under "Description
of Trust Preferred Securities--Repayment or Redemption") which could result in
an early redemption of the trust preferred securities.
Risk Factors Relating to Us
Our ability to make payments on the debentures may be limited.
The Trust will depend solely on our payments on the junior subordinated
debentures to pay amounts due to you on the trust preferred securities. Our
ability to make payments on the junior subordinated debentures is subject to the
following risks:
We depend primarily on dividends from our subsidiaries to pay you and those
dividends are restricted by regulation. We are a separate legal entity from our
subsidiaries and have limited operations of our own. We will depend primarily on
dividends we receive from our subsidiaries to make payments on the junior
subordinated debentures. Federal and state law and regulations restrict the
dividends our subsidiaries may pay us. If our subsidiaries are prohibited from
issuing dividends to us, we may not be able to make payments on the junior
subordinated debentures and the Trust will not be able to make payments to you
on the trust preferred securities.
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The securities will be of equal rank to our Exchange Capital Securities
The trust preferred securities will rank equally with the Exchange Capital
Securities that we issued in 1998.
Creditors of our subsidiaries have priority over you in the event of a
distribution of our subsidiaries' assets.
The creditors of our subsidiaries have priority over us and you in any
distribution of our subsidiaries' assets in a liquidation or reorganization. We
are a holding company and our assets are primarily composed of our investment in
the stock of our subsidiaries. The creditors of our subsidiaries will have
priority over us and you in any distribution of the subsidiaries' assets in a
liquidation, reorganization or otherwise, except to the extent that we are
recognized as a creditor of our subsidiaries. We will depend on dividends and
other amounts we receive from our subsidiaries to make payments on the junior
subordinated debentures. If our subsidiaries make no distributions to us, we may
not be able to make payments on the junior subordinated debentures and the Trust
will not be able to make payments to you on the trust preferred securities.
Our allowance for loan losses may be inadequate, which could affect our ability
to make payments on the debentures.
Provident Bank's reserve for possible credit losses may not be adequate to
cover actual loan losses and if we are required to increase our reserve, current
earnings may be reduced. When borrowers default and do not repay the loans that
we make to them, we may lose money. Our experience shows that some borrowers
either will not pay on time or will not pay at all, which will require us to
cancel or "charge off" the defaulted loan or loans. We provide for losses by
reserving what we believe to be an adequate amount to absorb any probable
inherent losses. A "charge-off" reduces our reserve for possible credit losses.
If our reserve is not sufficient, we would have to record a larger reserve which
would reduce current period earnings.
Changes in economic conditions could reduce our income and growth and could lead
to higher charge-offs and problem loans.
Changes in the real estate market could result in "charge-offs." Provident
Bank's loan portfolio includes many real estate secured loans. Real estate loans
are in demand when interest rates are low and economic conditions are favorable.
Even when economic conditions are favorable and interest rates are low, these
conditions may not continue. If the borrower does not pay a real estate loan, we
may have to "charge off" the loan. If real estate values decrease, then we may
not recover the full amount of the loan when we foreclose on the real estate.
Net charge-offs were $13.0 million in 1999 compared to $6.1 million in
1998. This increase in charge-offs is related to an adverse decision in a
lawsuit associated with a letter of credit issued in 1989. Net charge-offs as a
percentage of average loans was 0.40% in 1999 compared to 0.21% in 1998. Non-
accrual loans at December 31, 1999 were $28.9 million, an increase of $17.4
million from December 31, 1998. This increase is due to one health care
relationship, the largest portion of which is a shared national credit.
Changes in interest rates could reduce our profitability.
Provident Bank may be unable to manage interest rate risks that could
reduce our net interest income. Our earnings depend greatly on our net interest
income, the difference between the interest earned on loans and investments and
the interest paid on deposits. If the interest rate paid on deposits is high and
the interest rate earned on loans and investments is low, we earn less or may
lose money. Because interest rates are established by competition, we have
limited control over our net interest income.
10
<PAGE>
Risk Factors Relating to Our Industry
The Board of Governors of the Federal Reserve System regulates Provident
Bankshares Corporation as a bank holding company. We are a legal entity separate
and distinct from Provident Bank. We rely on cash dividends from Provident Bank
to meet our obligations for payment of principal and interest on our outstanding
debt obligations and corporate expenses. Provident Bank's ability to pay us
dividends depends on several factors including the following:
. regulatory limitations imposed by the various regulatory agencies with
authority over Provident Bank, generally based on current and retained
earnings;
. regulatory restrictions if such dividends would impair the capital of
Provident Bank; and
. Provident Bank's profitability and financial condition and its capital
expenditures and other cash flow requirements.
We cannot assure you that Provident Bank will be able to pay dividends at past
levels, or at all, in the future. Please refer to the section entitled
"Business" in our Annual Report on Form 10-K for the year ended December 31,
1999, which is incorporated by reference into this prospectus.
In addition to the restrictions on the payment of dividends, Provident Bank
is subject to additional restrictions required by federal law on extensions of
credit to, and certain other transactions with, us (and any affiliated companies
that are existing or may be formed in the future) and on investments in our and
our other affiliates' stock or other securities. These restrictions prevent us
and our other affiliates from borrowing from the Bank, unless the loans are
secured by various types of collateral. In addition, the amount of such secured
loans, other transactions and investments by the Bank are generally limited as
follows:
. as to us and as to each of our other affiliates, 10% of the Bank's
capital and surplus; and
. as to us and all of our other affiliates, an aggregate of 20% of the
Bank's capital and surplus.
Under the Federal Deposit Insurance Act, the Bank would be prohibited from
making capital distributions, including the payment of cash dividends if, after
making any such distribution, the institution would become "undercapitalized"
(as that term is used in the statute). Based on the Bank's current financial
conditions, we do not expect that this prohibition will have any impact on our
ability to obtain cash dividends from the Bank.
11
<PAGE>
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
The following selected financial data for the five years ended December 31,
1999 are derived from our audited consolidated financial statements. You should
read the selected consolidated financial data along with our consolidated
financial statements, related notes, and other financial information
incorporated into this prospectus by reference. See "Where You Can Find More
Information."
<TABLE>
<CAPTION>
As of and for the Year Ended December 31,
---------------------------------------------------------------
1999 1998 1997(1) 1996 1995
---------- ---------- ---------- ---------- ----------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Results of Operations:
Interest income (tax-equivalent)/(2)/.... $ 353,341 $ 319,240 $ 280,167 $ 248,311 $ 224,236
Interest expense......................... 204,261 187,509 156,718 137,354 122,819
---------- ---------- ---------- ---------- ----------
Net interest income (tax-equivalent)..... 149,080 131,731 123,449 110,957 101,417
Provision for loan losses................ 11,570 12,027 9,953 10,011 1,517
---------- ---------- ---------- ---------- ----------
Net interest income after provision
for loan losses....................... 137,510 119,704 113,496 100,946 99,900
Non-interest income...................... 60,734 55,995 41,672 44,509 34,573
Securities gains (losses)................ 312 6,749 2,337 5,556 (2,683)
Merger expenses.......................... -- -- 10,047 -- --
Non-interest expense..................... 132,243 122,914 107,816 110,323 97,416
---------- ---------- ---------- ---------- ----------
Income before taxes...................... 66,313 59,534 39,642 40,688 34,374
Income tax expense (tax equivalent)...... 22,163 20,504 14,683 14,500 12,242
---------- ---------- ---------- ---------- ----------
Net income............................... $ 44,150 $ 39,030 $ 24,959 $ 26,188 $ 22,132
========== ========== ========== ========== ==========
Per Share Data:
Net income -- Basic...................... $ 1.73 $ 1.52 $ 1.00 $ 1.07 $ 0.92
Net income -- Diluted.................... 1.67 1.47 0.96 1.02 0.88
Cash dividends paid...................... 0.60 0.49 0.40 0.31 0.23
Book value per share..................... 10.76 12.19 11.72 11.13 11.25
Financial Condition:
Assets................................... $5,094,477 $4,675,897 $3,926,739 $3,485,618 $3,170,390
Investments.............................. 1,671,507 1,198,511 983,241 1,054,391 1,168,772
Loans.................................... 3,184,119 3,100,211 2,701,068 2,247,873 1,752,851
Deposits................................. 3,808,528 3,419,557 2,754,515 2,286,144 2,056,436
Borrowings, excludes capital securities.. 928,441 880,602 816,368 930,952 860,646
Stockholders' equity..................... 274,599 296,077 270,182 238,798 223,048
</TABLE>
__________________________________
(1) Merger Related Expenses--Exclusive of after tax merger related expenses
incurred during 1997, net income would have been $33.6 million. Return
on average assets and return on average equity for 1997 would have been
.92% and 13.33%, respectively. Basic earnings per share and diluted
earnings per share would have been $1.34 and $1.29, respectively.
(2) Tax-advantaged income has been adjusted to a tax-equivalent basis using
the combined statutory federal and state income tax rate in effect of 35%
in 1999 and 39.55% for 1998 through 1995.
12
<PAGE>
<TABLE>
<CAPTION>
As of and for the Year Ended December 31,
----------------------------------------------
1999 1998 1997(1) 1996 1995
----------------------------------------------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Selected Ratios:
Return on average assets..................... 0.90% 0.90% 0.68% 0.79% 0.75%
Return on average equity..................... 15.46 13.75 9.90 11.53 11.14
Net interest margin.......................... 3.13 3.12 3.49 3.47 3.56
Efficiency ratio............................. 63.41 65.50 65.30 71.00 71.60
Dividend payout ratio........................ 35.93 32.15 40.14 29.49 24.84
Asset Quality Ratios:
Allowance of loan losses to total loans...... 1.25% 1.38% 1.36% 1.35% 1.57%
Allowance of loan losses to non-
performing loans.......................... 137.61 371.09 374.07 161.29 174.41
Non-performing loans to total loans.......... 0.91 0.37 0.36 0.84 0.90
Non-performing assets to total assets........ 0.63 0.35 0.32 0.84 0.97
Net charge-offs to average loans............. 0.40 0.21 0.14 0.35 0.06
Capital Ratios:/(3)/
Average equity of average assets............. 5.83% 6.52% 6.89% 6.85% 6.70%
Leverage ratio............................... 7.10 7.05 7.06 6.96 7.08
Tier 1 capital to risk-weighted assets....... 9.18 9.21 8.99 9.29 9.43
Total capital ratio to risk-weighted assets.. 10.20 10.26 10.24 10.46 10.57
Ratio of Earnings to Fixed Charges:/(4)/
Including interest on deposits............... 1.32 1.31 1.25 1.29 1.27
Excluding interest on deposits............... 2.16 1.98 1.76 1.80 1.75
</TABLE>
_______________________________
(3) The capital ratios for 1995 do not include pro forma information relating
to the acquisition of First Citizens Financial Corporation and its
subsidiaries.
(4) The ratio of earnings to fixed charges is computed by dividing income
before income taxes and fixed charges less interest capitalized during
the period, net of amortization of previously capitalized interest, by
fixed charges. Fixed charges consist of interest, expended or
capitalized, on borrowings (including or excluding deposits, as
applicable), and the portion of rental expense which is deemed
representative of interest.
13
<PAGE>
USE OF PROCEEDS
All the proceeds to the Trust from the sale of the trust preferred
securities will be invested by the Trust in the junior subordinated debentures.
The net proceeds we receive from the sale of the junior subordinated debentures,
which we estimate to be approximately $28,950,000 will be used:
. to continue our stock repurchase program;
. to make an equity contribution to our subsidiary, Provident Bank, to
support internal growth opportunities at the Bank and its
subsidiaries;
. to finance growth, which may include one or more branch acquisitions,
acquisitions of other financial institutions, or acquisitions of other
financial services companies;
. to increase our capital; and
. for general corporate purposes.
The precise amounts and timing of the application of proceeds, and the type
of investment, will depend upon our and our subsidiaries' funding requirements
and the availability of other funds. We do not have any specific plans at this
time to make any particular acquisition.
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<PAGE>
CAPITALIZATION
The following table sets forth: (1) our consolidated capitalization at
December 31, 1999; (2) our consolidated capitalization giving effect to the
issuance of the trust preferred securities; and (3) actual and pro forma capital
ratios. The "As Adjusted" column assumes application of the net proceeds from
the corresponding sale of the junior subordinated debentures to the Trust as if
the sale of the trust preferred securities had been consummated on December 31,
1999. The table assumes that the offering occurs on the last day of the period
and that any resulting change to average assets is considered immaterial.
<TABLE>
<CAPTION>
At December 31, 1999
------------------------
Actual As Adjusted
------------------------
(Unaudited)
(Dollars in thousands)
<S> <C> <C>
Corporation-obligated mandatorily redeemable capital
securities/(1)/........................................ $ 40,000 $ 70,000
Stockholders' equity:
Common stock, $1.00 par value, 100,000,000
shares authorized, 26,225,752 shares issued......... 26,226 26,226
Capital surplus........................................ 203,364 203,364
Retained earnings...................................... 102,587 102,587
Net accumulated other comprehensive income (loss)...... (44,323) (44,323)
Treasury stock at cost - 693,866
shares at December 31, 1999......................... (13,255) (13,255)
-------- --------
Total stockholders' equity....................... $274,599 $274,599
======== ========
Total capitalization............................. $314,599 $344,599
======== ========
Capital ratios /(2)/:
Tier 1 risk-based capital ratio/(3)/................... 9.18% 9.95%
Total risk-based capital ratio/(3)/.................... 10.20 10.97
Leverage ratio......................................... 7.10 7.69
</TABLE>
_____________________________
(1) Reflects the Trust's trust preferred securities representing beneficial
interests in an aggregate principal amount of $30,000,000 of our 10%
junior subordinated debentures that will mature on March 31, 2030.
(2) The capital ratios, as adjusted, are computed including the total
estimated proceeds from the sale of the trust preferred securities in a
manner consistent with the Federal Reserve guidelines.
(3) Assumes net proceeds of the offering of the trust preferred securities
are invested in assets with various risk weightings under the risk-based
capital rules of the Federal Reserve.
Under the risk-based capital adequacy guidelines established by the Board
of Governors of The Federal Reserve System, the trust preferred securities
cannot constitute more than 25% of our total Tier 1 capital. Amounts in excess
of this 25% capital limitation will be Tier 2, or supplemental, capital, and
therefore will be included in total risk-based capital. We believe the trust
preferred securities will initially be included in our Tier 1 capital, subject
to such 25% limitation, and the full amount will be included in our total risk-
based capital.
We exceed all regulatory capital requirements as of December 31, 1999. The
standards used by federal bank regulators to evaluate capital adequacy are the
risk-based capital and leverage ratio guidelines. Equity for regulatory purposes
does not include market value adjustments as required by Statement of Financial
Accounting Standard No. 115. Risk-based capital ratios measure core and total
stockholders' equity against risk-weighted assets. Our core capital is equal to
our common stock, capital surplus, other qualified Tier 1 components or capital
securities and retained earnings less treasury stock. The calculation of our
total stockholders' equity, for these
15
<PAGE>
purposes, is equal to the above in addition to the allowance for loan losses
subject to certain limitations. Risk-weighted assets are determined by applying
a weighting to asset categories and certain off-balance sheet commitments based
on the level of credit risk inherent in the assets. At December 31, 1999, our
total capital ratio was 10.20% compared to the minimum regulatory guideline of
8%. In addition, Tier 1 capital must be at least 4% of risk-weighted assets. At
year end, our Tier 1 capital ratio was 9.18%.
The leverage ratio represents Tier 1 capital, as defined above, divided by
average total assets. Guidelines for the leverage ratio require the ratio of
core stockholders' equity to average assets to be 100 to 200 basis points above
a 3% minimum, depending on risk profiles and other factors. Our leverage ratio
of 7.10% at December 31, 1999 was in excess of this requirement.
PROVIDENT TRUST II
The Trust is a statutory business trust created under Delaware law. It has
filed a Certificate of Trust with the Delaware Secretary of State on February
11, 2000. The Trust will be governed by the trust agreement, as amended and
restated among us as depositor, Bankers Trust (Delaware) as Delaware trustee,
Bankers Trust Company as property trustee and the holders, from time to time, of
undivided beneficial interests in the Trust. We will select two individuals who
are our employees or officers to act as administrators of the Trust. See
"Description of Preferred Securities--Miscellaneous." The Trust exists
exclusively to:
. issue and sell the trust preferred securities and the common
securities;
. use the proceeds from the sale of the trust preferred securities and
the common securities to acquire the junior subordinated debentures;
and
. engage in those activities necessary or incidental to the maintenance
of the Trust (such as registering the transfer of the trust preferred
securities and the common securities).
The junior subordinated debentures will be the sole assets of the Trust.
Payments under the junior subordinated debentures will be the sole source of
revenue of the Trust.
We will own all of the common securities. The common securities will rank
equally, and payments on them will be made pro rata, with the trust preferred
securities, except that upon the occurrence and during the continuation of an
event of default under the junior subordinated debentures. In such a case, our
rights as the holder of the common securities to all payments will be
subordinated to the rights of the holders of the trust preferred securities. See
"Description of Preferred Securities--Subordination of Common Securities." We
will acquire common securities in an aggregate liquidation amount equal to at
least 3% of the total capital of the Trust. The Trust has a term of 30 years,
but may dissolve earlier as provided in the trust agreement.
The address of the Delaware trustee is Bankers Trust (Delaware), 1011
Centre Road, Suite 200, Trust Department, Wilmington, Delaware 19805, and the
telephone number is (302) 636-3300.
The address of the property trustee, the guarantee trustee and the
debenture trustee is Bankers Trust Company, Four Albany Street, 4th Floor, New
York, New York 10006, and the telephone number is (212) 250-2500.
The holder of the common securities of the Trust can appoint, remove or
replace the property trustee and/or the Delaware trustee. The holders of a
majority in liquidation amount of the trust preferred securities can appoint,
remove or replace the property trustee or the Delaware trustee for cause, or if
an event of default has occurred or is continuing under the trust agreement.
The holders of the trust preferred securities may not appoint, remove or replace
the administrators. This right rests exclusively with us.
16
<PAGE>
ACCOUNTING TREATMENT
For financial reporting purposes, the Trust will be treated as our
subsidiary and the accounts of the Trust will be included in our consolidated
financial statements. The trust preferred securities will be reflected as
capital securities in the consolidated balance sheet and appropriate disclosures
about the trust preferred securities, the guarantee and the junior subordinated
debentures will be included in the notes to our consolidated financial
statements. For financial reporting purposes, we will record distributions on
the trust preferred securities as other non-interest expense in our consolidated
statement of income.
DESCRIPTION OF TRUST PREFERRED SECURITIES
The Trust will issue the trust preferred securities and the common
securities in accordance with the terms of the trust agreement. The trust
preferred securities will represent trust preferred undivided beneficial
interests in the assets of the Trust. You will be entitled to a preference with
respect to distributions and amounts payable on redemption or liquidation over
the common securities in certain circumstances, as well as other benefits as
described in the trust agreement.
This summary of certain provisions of the trust preferred securities and
the trust agreement is not complete. You should read the form of the trust
agreement, which is filed as an exhibit to the registration statement of which
this prospectus is a part. Wherever particular defined terms of the trust
agreement are referred to in this prospectus, the defined terms are incorporated
in this prospectus by reference. A copy of the form of the trust agreement is
also available upon request from the trustees.
General
The trust preferred securities will be limited to $30,000,000 aggregate
liquidation amount (as defined in the trust agreement) outstanding. See
"Underwriting." The trust preferred securities will rank equally, and payments
will be made pro rata, with the common securities except as described under
"Subordination of Common Securities." The junior subordinated debentures will be
registered in the name of the Trust and held by the property trustee in trust
for your benefit, as a holder of trust preferred securities, and for our
benefit, as the holders of the common securities. The guarantee we will execute
for the benefit of the holders of the trust preferred securities will be a
guarantee on a subordinated basis with respect to the trust preferred securities
but will not guarantee payments when the Trust does not have funds on hand
available to make these payments. See "Description of Guarantee."
Distributions
You will receive distributions on each trust preferred security at the
annual rate of 10% of the stated liquidation amount of $25, payable quarterly in
arrears on March 31, June 30, September 30 and December 31 of each year, to
record holders at the close of business on the 15th day of March, June,
September and December (whether or not a business day) next preceding the
relevant distribution date. Distributions on the trust preferred securities will
be cumulative. Distributions will accumulate from the date of original issuance.
The first distribution date for the trust preferred securities will be March 31,
2000. The amount of distributions payable for any period less than a full
distribution period will be computed on the basis of a 360-day year of twelve
30-day months and the actual days elapsed in a partial month in the period.
Distributions payable for each full distribution period will be computed by
dividing the annual rate by four. If any date on which distributions are payable
is not a business day, then payment will be made on the next succeeding day that
is a business day (without any additional distributions or other payment because
of the delay), except that, if the business day falls in the next calendar year,
the payment will be made on the immediately preceding business day.
So long as no debenture event of default has occurred and is continuing, we
have the right to defer the payment of interest on the junior subordinated
debentures at any time or from time to time for an "extension period" not
exceeding 20 consecutive quarterly periods, but not beyond the maturity date of
the junior subordinated
17
<PAGE>
debentures. Quarterly distributions on the trust preferred securities will be
deferred during the extension period. Distributions to which you are entitled
will accumulate additional distributions at the annual rate of 10%, compounded
quarterly from the relevant payment date, computed on the basis of a 360-day
year of twelve 30-day months and the actual days elapsed in a partial month in
the period. Additional distributions payable for each full distribution period
will be computed by dividing the annual rate by four.
During any extension period, we may not: (1) declare or pay any dividends
or distributions on, or redeem, purchase, acquire or make a liquidation payment
with respect to, any of our capital stock; or (2) make any payment of principal
(or any premium on the principal) or interest, or repay, repurchase or redeem
any of our debt securities that rank equally in all respects with or junior in
interest to the junior subordinated debentures, including our obligations
associated with the outstanding trust preferred securities of Provident Trust I.
These prohibitions, however, do not apply to:
. repurchases, redemptions or other acquisitions of our capital stock,
in connection with any employment contract, benefit plan or other
similar arrangement, a dividend reinvestment or shareholder stock
purchase plan or the issuance of our capital stock (or securities
convertible into or exercisable for the capital stock) as
consideration in an acquisition or merger transaction entered into
prior to the applicable extension period;
. a reclassification, exchange or conversion of any class or series of
our capital stock (or any capital stock of our subsidiaries) for any
class or series of our capital stock or of any class or series of any
indebtedness for any class or series of our capital stock;
. the purchase of fractional interests in shares of our capital stock
pursuant to the conversion or exchange provisions of the capital stock
or the security being converted or exchanged;
. any declaration of a dividend in connection with any shareholders'
rights plan, or the issuance of rights, stock or other property under
any shareholders' rights plan, or the redemption or repurchase of
rights pursuant to any shareholders' rights plan; or
. any dividend in the form of stock, warrants, options or other rights,
where the dividend stock or the stock issuable upon exercise of the
warrants, options or other rights is the same stock as that on which
the dividend is being paid or ranks equally with or junior to the
stock.
Upon the termination of an extension period and the payment of all amounts
then due, we may begin a new extension period. We must give the property trustee
notice of our election to defer the payment of interest at least one business
day before the earlier of: (1) the date the distributions on the trust preferred
securities would have been payable but for the election to begin the extension
period; or (2) the date the property trustee is required to give you notice of
the record date or the date the distributions are payable, but in any event not
less than one business day prior to the record date. The property trustee will
give you notice of our election to begin a new extension period. Subject to the
foregoing, there is no limitation on the number of times that we may elect to
begin an extension period. See "Description of Junior Subordinated Debentures--
Option To Extend Interest Payment Period" and "Certain Federal Income Tax
Consequences--Interest Income and Original Issue Discount."
We currently do not intend to exercise our right to defer payments of
interest.
The revenue of the Trust available for distribution to you will be limited
to payments under the junior subordinated debentures. See "Description of Junior
Subordinated Debentures." If we do not make payments on the junior subordinated
debentures, the Trust may not have funds available to pay distributions or other
amounts payable on the trust preferred securities. The payment of distributions
and other amounts payable on the trust preferred securities (if and to the
extent the Trust has funds legally available for and cash sufficient to make
these payments) is guaranteed by us on a limited basis as described below under
"Description of Guarantee."
18
<PAGE>
Repayment or Redemption
If we repay or redeem the junior subordinated debentures, we must give the
property trustee not less than 30 nor more than 60 days notice so that it can
redeem a proportionate amount of the trust preferred and common securities.
The redemption price for each trust preferred security shall equal $25.00
plus accumulated but unpaid distributions on the redemption date and the related
amount of the premium, if any, paid by us upon the concurrent redemption of the
junior subordinated debentures. See "Description of Junior Subordinated
Debentures--Redemption." If less than all the junior subordinated debentures are
to be repaid or redeemed on a redemption date, then the proceeds from the
repayment or redemption shall be allocated to the redemption pro rata of the
trust preferred securities and the common securities.
We may redeem the junior subordinated debentures: (1) in whole or in part
on or after March 31, 2005 in whole at any time or in part from time to
time; or (2) in whole, but not in part, at any time within 90 days following the
occurrence and during the continuation of a Tax Event, Investment Company Event
or Capital Treatment Event (each as defined below), in each case subject to
possible regulatory approval. See "Liquidation Distribution Upon Dissolution." A
redemption of the junior subordinated debentures would cause a mandatory
redemption of a proportionate amount of the trust preferred securities and
common securities at the redemption price.
"Tax Event" means the receipt by the Trust of an opinion of a counsel
experienced in such matters to the effect that, as a result of any amendment to,
or change (including an announced prospective change) in, the laws (or any
regulations thereunder) of the United States or any of its political
subdivisions or taxing authorities, or as a result of any official or
administrative pronouncement or action or judicial decision interpreting or
applying these laws or regulations, which amendment or change is effective or
which pronouncement or decision is announced on or after the date of issuance of
the trust preferred securities, there is more than an insubstantial risk that:
. the Trust is, or will be within 90 days of the delivery of the
opinion, subject to United States federal income tax with respect to
income received or accrued on the junior subordinated debentures;
. interest payable by us on the junior subordinated debentures is not,
or within 90 days of the delivery of the opinion will not be,
deductible by us, in whole or in part, for United States federal
income tax purposes; and
. the Trust is, or will be within 90 days of the delivery of the
opinion, subject to more than a de minimis amount of other taxes,
duties or other governmental charges.
See "Certain Federal Income Tax Consequences--Pending Tax Litigation
Affecting the Preferred Securities" for a discussion of pending United States
Tax Court litigation that, if decided adversely to the taxpayer, could give rise
to a Tax Event, that may permit us to redeem the junior subordinated debentures
before March 31, 2005.
If a Tax Event described in the first or third circumstances above has
occurred and is continuing and the Trust holds all of the junior subordinated
debentures, we will pay on the junior subordinated debentures any additional
amounts necessary so that the amount of distributions then due and payable by
the Trust on the outstanding trust preferred securities and common securities of
the Trust will not be reduced as a result of any additional taxes, duties and
other governmental charges to which the Trust has become subject as a result of
a Tax Event.
"Investment Company Event" means the receipt by the Trust of an opinion of
a counsel experienced in such matters to the effect that, as a result of the
occurrence of a change in law or regulation or a written change
19
<PAGE>
(including any announced prospective change) in interpretation or application of
law or regulation by any legislative body, court, governmental agency or
regulatory authority, there is more than an insubstantial risk that the Trust is
or will be considered an "investment company" that is required to be registered
under the Investment Company Act. This change or prospective change would become
effective on or after the date of the issuance of the trust preferred
securities.
"Capital Treatment Event" means the reasonable determination by us that, as
a result of the occurrence of any amendment to, or change (including any
announced prospective change) in, the laws (or any rules or regulations
thereunder) of the United States or its political subdivisions, or as a result
of any official or administrative pronouncement or action or judicial decision
interpreting or applying their laws or regulations, which amendment or change is
effective or pronouncement, action or decision is announced on or after the date
of issuance of the trust preferred securities, there is more than an
insubstantial risk that we will not be entitled to treat an amount equal to the
liquidation amount of the trust preferred securities, as Tier 1 Capital (or any
equivalent amount), except as otherwise restricted by the Federal Reserve, for
purposes of the capital adequacy guidelines of the Federal Reserve, as then in
effect and applicable to us. The Federal Reserve has determined that the
proceeds of certain qualifying securities like the trust preferred securities
will qualify as Tier 1 capital for us only up to an amount not to exceed, when
taken together with all of our cumulative trust preferred stock, if any, 25% of
our Tier 1 capital.
Redemption Procedures
Trust preferred securities redeemed on each redemption date shall be
redeemed at a price equal to $25.00 plus accumulated but unpaid distributions,
with the applicable proceeds from the contemporaneous redemption of the junior
subordinated debentures. Redemptions of the trust preferred securities will be
made and the redemption price will be payable on each redemption date only to
the extent that the Trust has funds on hand available for the payment of the
redemption price. See also "Subordination of Common Securities."
If the Trust gives you notice of redemption of the trust preferred
securities, then by 12:00 noon, Eastern Standard Time on the redemption date, to
the extent funds are available, in the case of trust preferred securities held
in book entry form, the property trustee will deposit irrevocably with The
Depository Trust Company ("DTC") funds sufficient to pay the redemption price.
It will also give DTC irrevocable instructions and authority to pay the
redemption price to you. With respect to trust preferred securities not held in
book entry form, the property trustee, to the extent funds are available, will
irrevocably deposit with the paying agent for the trust preferred securities
funds sufficient to pay the redemption price. The property trustee also will
give the paying agent irrevocable instructions and authority to pay the
redemption price to you once you surrender your certificates evidencing the
trust preferred securities. However, distributions payable on or before the
redemption date for any trust preferred securities called for redemption will be
payable to you on the relevant record dates for the related distribution dates.
If notice of redemption is given and funds are deposited as required, then
upon the date of the deposit all of your rights with respect to your trust
preferred securities so called for redemption will cease, except your right to
receive the redemption price and any distributions payable with respect to the
trust preferred securities on or prior to the redemption date, but without
interest, and trust preferred securities that are redeemed will no longer be
outstanding. If any date fixed for redemption of trust preferred securities is
not a business day, then payment of the redemption price payable on that date
will be made on the next succeeding day which is a business day (without any
interest or other payment with respect to any delay), except that, if the
business day falls in the next calendar year, the payment will be made on the
immediately preceding business day. In the event that payment of the redemption
price for the trust preferred securities called for redemption is improperly
withheld or refused and not paid either by the Trust or by us pursuant to the
guarantee as described under "Description of Guarantee," distributions on the
trust preferred securities will continue to accumulate at the then applicable
rate, from the redemption date originally established by the Trust for the trust
preferred securities to the date the redemption price is actually paid, in which
case the actual payment date will be the date fixed for redemption for purposes
of calculating the redemption price.
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Subject to applicable law (including United States federal securities
laws), we or our affiliates may at any time and from time to time purchase
outstanding trust preferred securities by tender, in the open market or by
private agreement, and may resell the securities.
If less than all of the trust preferred securities and common securities
are to be redeemed on a redemption date, then the aggregate liquidation amount
of the trust preferred securities and common securities to be redeemed will be
allocated pro rata to the trust preferred securities and the common securities
based upon the relative liquidation amounts of the classes. The particular trust
preferred securities to be redeemed will be selected on a pro rata basis not
more than 60 days before the redemption date by the property trustee from the
outstanding trust preferred securities not previously called for redemption, or
in accordance with DTC's customary procedures if the trust preferred securities
are then held in the form of a global trust preferred security. The property
trustee must promptly notify in writing the securities registrar for the trust
preferred securities of the trust preferred securities selected for redemption
and, in the case of any trust preferred securities selected for partial
redemption, the liquidation amount of the trust preferred securities to be
redeemed. For all purposes of the trust agreement, unless the context otherwise
requires, all provisions relating to the redemption of trust preferred
securities will relate, in the case of any trust preferred securities redeemed
or to be redeemed only in part, to the portion of the aggregate liquidation
amount of trust preferred securities which has been or is to be redeemed.
Notice of any redemption will be mailed to you at your address as it
appears on the securities register for the Trust at least 30 days but not more
than 60 days before the redemption date if your trust preferred securities will
be redeemed. Unless we default in payment of the redemption price on the junior
subordinated debentures, on and after the redemption date, interest will no
longer accrue on the junior subordinated debentures or any portions called for
redemption.
Unless payment of the redemption price with respect to the trust preferred
securities is withheld or refused and not paid either by the Trust or us
pursuant to the guarantee, distributions will no longer accumulate on the trust
preferred securities or any portions called for redemption.
Subordination of Common Securities
Payment of distributions on, the redemption price of and the liquidation
distribution with respect to, the trust preferred securities and common
securities, as applicable, will be made pro rata based on the liquidation amount
of the trust preferred securities and common securities. However, if on any
distribution date or redemption date a debenture event of default has occurred
and is continuing as a result of our failure by us to pay any amounts with
respect to the junior subordinated debentures when due, no payment of any
distribution on, or redemption price of, or liquidation distribution with
respect to, any of the common securities, and no other payment on account of the
redemption, liquidation or other acquisition of the common securities, may be
made unless payment in full in cash of all accumulated and unpaid distributions
on all the outstanding trust preferred securities for all distribution periods
terminating on or prior to our failure to pay, or in the case of payment of the
redemption price, the full amount of the redemption price on all the outstanding
trust preferred securities then called for redemption, shall have been made or
provided for, and all funds immediately available to the property trustee must
first be applied to the payment in full in cash of all distributions on, or
redemption price of, the trust preferred securities then due and payable.
In the case of any event of default with respect to the trust preferred
securities (as described below under "Events of Default; Notice") resulting from
an event of default with respect to junior subordinated debentures (as described
below under "Description of Junior Subordinated Debentures--Debenture Events of
Default"), the holders of the common securities will have no right to act with
respect to any event of default under the trust agreement until the effects of
these events of default with respect to the trust preferred securities have been
cured, waived or otherwise eliminated. See "Events of Default; Notice" and
"Description of Junior Subordinated Debentures--Debenture Events of Default."
Until all events of default under the trust agreement with respect to the trust
preferred securities have been so cured, waived or otherwise eliminated, the
property trustee will act solely on
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your behalf and not on our behalf, as the holders of the common securities, and
only you will have the right to direct the property trustee to act on your
behalf.
Liquidation Distribution Upon Dissolution
The amount payable on the trust preferred securities in the event of any
dissolution and liquidation of the Trust is $25.00 per trust preferred security
plus accumulated and unpaid distributions, subject to certain exceptions which
may be in the form of a distribution of this amount in junior subordinated
debentures.
The holders of all the outstanding common securities have the right at any
time to dissolve the Trust and, after satisfaction of liabilities to creditors
of the Trust as provided by applicable law, distribute the junior subordinated
debentures to you and the holders of the common securities in liquidation of the
Trust.
The Federal Reserve's risk-based capital guidelines currently provide that
redemptions of permanent equity or other capital instruments before stated
maturity could have a significant impact on a bank holding company's overall
capital structure and that any organization considering a redemption should
consult with the Federal Reserve before redeeming any equity or capital
instrument prior to maturity if the redemption could have a material effect on
the level or composition of the organization's capital base. (This consultation
may not be necessary if the equity or capital instrument is redeemed with the
proceeds of, or replaced by, a like amount of a similar or higher quality
capital instrument and the Federal Reserve considers the organization's capital
position to be fully adequate after the redemption).
In the event we, while a holder of common securities, dissolve the Trust
before the maturity date of the trust preferred securities and the dissolution
of the Trust is deemed to constitute the redemption of capital instruments by
the Federal Reserve under its risk-based capital guidelines or policies, our
dissolution of the Trust may be subject to the prior approval of the Federal
Reserve. Moreover, any changes in applicable law or changes in the Federal
Reserve's risk-based capital guidelines or policies could impose a requirement
on us to obtain the prior approval of the Federal Reserve to dissolve the Trust.
Pursuant to the trust agreement, the Trust will automatically dissolve upon
expiration of its term or, if earlier, will dissolve on the first to occur of:
. certain events of bankruptcy, dissolution or liquidation of us or
another holder of the common securities;
. if the holders of common securities have given written direction to
the property trustee to dissolve the Trust (which direction, subject
to the foregoing restrictions, is optional and wholly within the
discretion of the holders of common securities);
. the redemption of all the trust preferred securities in connection
with the redemption of junior subordinated debentures as described
under "Repayment or Redemption"; and
. the entry of an order for the dissolution of the Trust by a court of
competent jurisdiction.
If dissolution of the Trust occurs as described in any of the first three
circumstances described above, the Trust will be liquidated by the property
trustee as expeditiously as the property trustee determines to be possible by
distributing, after satisfaction of liabilities to creditors of the Trust as
provided by applicable law, to you and the holders of the common securities a
proportionate amount of the junior subordinated debentures, unless the
distribution is not practical.
If distribution of the junior subordinated debentures is not practical, you
and the holders of trust preferred securities and common securities, after
satisfaction of liabilities to creditors of the Trust as provided by applicable
law, will be entitled to receive out of the assets of the Trust available for
distribution to holders, an amount equal to,
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in the case of your distribution, the aggregate of the liquidation amount plus
accumulated and unpaid distributions thereon to the date of payment. If the
liquidation distribution can be paid only in part because the Trust has
insufficient assets available to pay in full the aggregate liquidation
distribution, then the amounts payable directly by the Trust on its trust
preferred securities shall be paid on a pro rata basis.
The holders of the common securities will be entitled to receive
distributions upon any liquidation pro rata with you, except that if an event of
default under the junior subordinated debentures has occurred and is continuing
as a result of our failure to pay any amounts with respect to the junior
subordinated debentures when due, the trust preferred securities shall have a
priority over the common securities. See "Subordination of Common Securities."
After the liquidation date is fixed for any distribution of junior
subordinated debentures:
. the trust preferred securities will no longer be deemed to be
outstanding;
. DTC or its nominee, as the registered holder of trust preferred
securities, will receive a registered global certificate or
certificates (which are not the registered global certificates)
representing the junior subordinated debentures to be delivered upon
the distribution with respect to trust preferred securities held by
DTC or its nominee; and
. any certificates representing the trust preferred securities not held
by DTC or its nominee will be deemed to represent the junior
subordinated debentures having a principal amount equal to the stated
liquidation amount of the trust preferred securities and bearing
accrued and unpaid interest in an amount equal to the accumulated and
unpaid distributions on the trust preferred securities until the
certificates are presented to the security registrar for the trust
preferred securities and common securities for transfer or reissuance.
If we do not redeem the junior subordinated debentures before maturity, the
Trust is not dissolved, and the junior subordinated debentures are not
distributed to you, then the trust preferred securities will remain outstanding
until the repayment of the junior subordinated debentures and the distribution
of the liquidation distribution to you.
There can be no assurance as to the market prices for the trust preferred
securities or the junior subordinated debentures that may be distributed in
exchange for trust preferred securities if a dissolution and liquidation of the
Trust were to occur. Accordingly, the trust preferred securities that you may
purchase, or the junior subordinated debentures that you may receive on
dissolution and liquidation of the Trust, may trade at a discount to the price
that you paid to purchase the trust preferred securities offered by this
prospectus.
Events of Default; Notice
Under all circumstances, any one of the following events is an event of
default under the trust agreement with respect to the trust preferred
securities:
. the occurrence of an event of default with respect to the junior
subordinated debentures (see "Description of Junior Subordinated
Debentures--Debenture Events of Default");
. default by the Trust in the payment of any distribution when it
becomes due and payable, and continuation of the default for a period
of 30 days;
. default by the Trust in the payment of any redemption price of any
trust preferred security and common security when it becomes due and
payable;
. default in the performance, or breach, in any material respect, of any
covenant or warranty of the trustees in the trust agreement (other
than a covenant or warranty a default in the performance of which or
the breach of which is addressed in either of the second or third
circumstances above),
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and continuation of the default or breach for a period of 60 days
after the holders of at least 25% in aggregate liquidation amount of
the outstanding trust preferred securities give, by registered or
certified mail, to the trustees and us, a written notice specifying
the default or breach and requiring it to be remedied and stating that
the notice is a "Notice of Default" under the trust agreement; or
. the occurrence of certain events of bankruptcy or insolvency with
respect to the property trustee if a successor property trustee has
not been appointed within 90 days of the event.
Within five business days after the occurrence of any event of default
actually known to the property trustee, the property trustee will transmit
notice of the event of default to you and the holders of the common securities
and the trust preferred securities and the administrators, unless the event of
default has been cured or waived. We, as depositor, and the administrators are
required to file annually with the property trustee a certificate as to whether
or not we are in compliance with all the conditions and covenants applicable to
us under the trust agreement.
If an event of default with respect to the junior subordinated debentures
has occurred and is continuing as a result of any failure by us to pay any
amounts with respect to the junior subordinated debentures when due, the trust
preferred securities will have a preference over the common securities with
respect to payments of any amounts as described above. See "Subordination of
Common Securities," "Liquidation Distribution Upon Dissolution" and "Description
of Junior Subordinated Debentures--Debenture Events of Default."
Removal of Trustees; Appointment of Successors
The holders of at least a majority in aggregate liquidation amount of the
outstanding trust preferred securities may remove any trustee for cause, or if
an event of default with respect to the junior subordinated debentures has
occurred and is continuing, with or without cause. If a trustee is removed by
the holders of the outstanding trust preferred securities, the successor may be
appointed by the holders of at least 25% in aggregate liquidation amount of
trust preferred securities. If a trustee resigns, the trustee will appoint its
successor. If a trustee fails to appoint a successor, the holders of at least
25% in aggregate liquidation amount of the outstanding trust preferred
securities may appoint a successor. If a successor has not been appointed by you
or the holders, any holder of trust preferred securities or common securities or
the other trustee may petition a court in the State of Delaware to appoint a
successor. Any Delaware trustee must meet the applicable requirements of
Delaware law. Any property trustee must be a national or state-chartered bank,
and at the time of appointment have securities rated in one of the three highest
rating categories by a nationally recognized statistical rating organization and
have capital and surplus of at least $50,000,000. No resignation or removal of a
trustee and no appointment of a successor trustee shall be effective until the
acceptance of appointment by the successor trustee in accordance with the
provisions of the trust agreement.
Merger or Consolidation of Trustees
Any entity into which the property trustee or the Delaware trustee may be
merged or converted or with which it may be consolidated, or any entity
resulting from any merger, conversion or consolidation to which the trustee is a
party, or any entity succeeding to all or substantially all the corporate trust
business of the trustee, will be the successor of the trustee under the trust
agreement, provided the entity is otherwise qualified and eligible.
Mergers, Consolidations, Amalgamations or Replacements of the Trust
The Trust may not merge with or into, consolidate, amalgamate, or be
replaced by, convey, transfer or lease its properties and assets substantially
as an entirety to any entity, except as described below or as otherwise provided
in the trust agreement. The Trust may, at the request of the holders of the
common securities, merge with or into, consolidate, amalgamate, or be replaced
by or convey, transfer or lease its properties and assets substantially as an
entirety to a trust organized under the laws of any state, so long as:
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. the successor entity: (1) expressly assumes all the obligations of the
Trust with respect to the trust preferred securities; or (2)
substitutes for the trust preferred securities other securities having
substantially the same terms as the trust preferred securities so long
as the substitute trust preferred securities have the same priority as
the trust preferred securities with respect to distributions and
payments upon liquidation, redemption and otherwise;
. a trustee of the successor entity, possessing the same powers and
duties as the property trustee, is appointed to hold the junior
subordinated debentures;
. the merger, consolidation, amalgamation, replacement, conveyance,
transfer or lease does not cause the trust preferred securities
(including any substitute trust preferred securities) to be downgraded
by any nationally recognized statistical rating organization, if then
rated;
. the merger, consolidation, amalgamation, replacement, conveyance,
transfer or lease does not adversely affect the rights, preferences
and privileges of the holders of the trust preferred securities
(including any substitute trust preferred securities) in any material
respect;
. the successor entity has a purpose substantially identical to that of
the Trust;
. before the merger, consolidation, amalgamation, replacement,
conveyance, transfer or lease, the Trust has received an opinion from
independent and experienced counsel to the effect that:
(1) the merger, consolidation, amalgamation, replacement, conveyance,
transfer or lease does not adversely affect your rights,
preference and privileges as a holder of trust preferred
securities (including any substitute trust preferred securities)
in any material respect; and
(2) following the merger, consolidation, amalgamation, replacement,
conveyance, transfer or lease, neither the Trust nor the
successor entity will be required to register as an investment
company under the Investment Company Act; and
. we or any permitted successor or assignee own all the common
securities of the successor entity and guarantee the obligations of
the successor entity under the successor securities at least to the
extent provided by the guarantee.
Notwithstanding the above, the Trust may not, except with the consent of
all the holders of the trust preferred securities, consolidate, amalgamate,
merge with or into, or be replaced by or convey, transfer or lease its
properties and assets substantially as an entirety to any other entity or permit
any other entity to consolidate, amalgamate, merge with or into or replace it if
such action would cause the Trust or the successor entity to be taxable as a
corporation for United States federal income tax purposes.
Voting Rights; Amendment of Trust Agreement
Except as provided above and under "Removal of Trustees; Appointment of
Successors" and "Description of Guarantee--Amendments and Assignment" and as
otherwise required by law and the trust agreement, you will have no voting
rights.
The trust agreement may be amended from time to time by the holders of a
majority of the common securities and the property trustee, without your consent
to:
. cure any ambiguity, correct or supplement any provisions in the trust
agreement that may be inconsistent with any other provision, or to
make any other provisions with respect to matters or
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questions arising under the trust agreement, provided that the
amendment does not adversely affect in any material respect your
interests; and
. modify, eliminate or add to any provisions of the trust agreement to
the extent as may be necessary to ensure that the Trust will not be
taxable as a corporation for United States federal income tax purposes
at any time that any trust preferred or common securities are
outstanding or to ensure that the Trust will not be required to
register as an "investment company" under the Investment Company Act.
Any amendments to the trust agreement will become effective when notice of
the amendment is given to the holders of trust preferred securities and common
securities.
The trust agreement may be amended by the holders of a majority of the
common securities and the property trustee with:
. the consent of holders representing not less than a majority in
aggregate liquidation amount of the outstanding trust preferred
securities; and
. receipt by the trustees of an opinion of counsel to the effect that
the amendment or the exercise of any power granted to the trustees in
accordance with the amendment will not affect the Trust's not being
taxable as a corporation for United States federal income tax purposes
or the Trust's exemption from status as an "investment company" under
the Investment Company Act.
However, without the consent of every holder of trust preferred securities
or common securities affected, the trust agreement may not be amended to:
. change the amount or timing of any distribution on the trust preferred
securities and common securities or otherwise adversely affect the
amount of any distribution required to be made with respect to the
trust preferred securities and common securities as of a specified
date; or
. restrict your right and the right of a holder of common securities to
institute suit for the enforcement of the payment on or after the
specified date.
So long as any junior subordinated debentures are held by the Trust, the
property trustee will not:
. direct the time, method and place of conducting any proceeding for any
remedy available to the debenture trustee, or execute any trust or
power conferred on the property trustee with respect to the junior
subordinated debentures;
. waive any past default that is waivable under Section 5.13 of the
indenture;
. exercise any right to rescind or annul a declaration that the
principal of all the junior subordinated debentures shall be due and
payable; or
. consent to any amendment, modification or termination of the indenture
or the junior subordinated debentures, where the consent shall be
required, without, in each case, obtaining the prior approval of the
holders of at least a majority in aggregate liquidation amount of the
outstanding trust preferred securities, or, if a consent under the
indenture would require the consent of every holder of junior
subordinated debentures affected, no consent will be given by the
property trustee without the prior consent of each holder of the trust
preferred securities.
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The property trustee may not revoke any action previously authorized or
approved by a vote of the holders of the trust preferred securities except by
subsequent vote of the holders of the trust preferred securities. The property
trustee will notify you of any notice of default with respect to the junior
subordinated debentures. In addition to obtaining your approval as described
above, before taking any of the actions listed above, the property trustee will
obtain an opinion of counsel experienced in such matters to the effect that the
Trust will not be taxable as a corporation for United States federal income tax
purposes on account of the action.
Any required approval of holders of trust preferred securities may be given
at a meeting of holders of trust preferred securities convened for the purpose
or pursuant to written consent without prior notice. The property trustee will
cause a notice of any meeting at which you are entitled to vote to be given to
you in the manner provided in the trust agreement.
Your vote or consent will not be required to redeem and cancel trust
preferred securities in accordance with the trust agreement.
Notwithstanding that you are entitled to vote or consent under any of the
circumstances described above, any of the trust preferred securities that are
owned by us, the trustees or any of our affiliates or any trustees, will, for
purposes of the vote or consent, be treated as if they were not outstanding.
Expenses and Taxes
In the indenture, we have agreed to pay all debts and other obligations
(other than distributions on the trust preferred securities) and all costs and
expenses of the Trust (including costs and expenses relating to the organization
of the Trust, the fees and expenses of the trustees and the costs and expenses
relating to the operation of the Trust) and to pay any and all taxes and all
costs and expenses with respect to any taxes (other than United States
withholding taxes) to which the Trust might become subject. Our obligations
under the indenture are for the benefit of, and shall be enforceable by, any
creditor of the Trust to whom any of these debts, obligations, costs, expenses
and taxes are owed whether or not the creditor has received notice. The creditor
may enforce these obligations directly against us, and we have irrevocably
waived any right or remedy to require that any creditor take any action against
the Trust or any other person before proceeding against us. We have also agreed
in the indenture to execute the additional agreements as may be necessary or
desirable to give full effect to these payment obligations.
Book Entry, Delivery and Form
The trust preferred securities will be issued in the form of one or more
fully registered global securities, which will be deposited with, or on behalf
of, DTC and registered in the name of a DTC nominee. Unless and until it is
exchangeable in whole or in part for the trust preferred securities in
definitive form, a global security may not be transferred except as a whole by
DTC to a nominee of DTC or by a nominee of DTC to DTC or to another nominee of
DTC or by DTC or the nominee to a successor of DTC or to a nominee of the
successor.
Ownership of beneficial interests in a global security will be limited to
participants that have accounts with DTC or its nominee or persons that may hold
interests through the participants. We expect that, upon the issuance of a
global security, DTC will credit, on its book entry registration and transfer
system, the participants' accounts with their respective principal amounts of
trust preferred securities represented by the global security. Ownership of
beneficial interests in the global security will be shown on, and the transfer
of the ownership interests will be effected only through, records maintained by
DTC (with respect to your interests of participants) and on the records of
participants (with respect to your interests). You will not receive written
confirmation from DTC of your purchase, but are expected to receive written
confirmations from participants through which you entered into the transaction.
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Transfers of ownership interests will be accomplished by entries on the
books of participants acting on your behalf. So long as DTC, or its nominee, is
the registered owner of a global security, DTC or the nominee, as the case may
be, will be considered the sole owner or holder of the trust preferred
securities represented by the global security for all purposes under the trust
agreement. Except as provided below, you are the owner of beneficial interests
in a global security and will not be entitled to receive physical delivery of
the trust preferred securities in definitive form.
You will not be considered an owner or holder under the trust agreement.
Accordingly, you must rely on the procedures of DTC and, if you are not a
participant, on the procedures of the participant through which you own your
interest, to exercise any rights as a holder of trust preferred securities under
the trust agreement. We understand that, under DTC's existing practices, in the
event that we request any action you, or if you desire to take any action which
a holder is entitled to take under the trust agreement, DTC would authorize the
participants holding your interests to take the action, and the participants
would authorize you to take the action or would otherwise act upon your
instructions. Redemption notices will also be sent to DTC. If less than all of
the trust preferred securities are being redeemed, we understand that it is
DTC's existing practice to determine by lot the amount of the interest of each
participant to be redeemed.
Distributions on the trust preferred securities registered in the name of
DTC or its nominee will be made to DTC or its nominee, as the case may be, as
the registered owner of the global security representing the trust preferred
securities. Neither the trustees, nor the administrators, any paying agent or
any other agent of ours or the trustees will have any responsibility or
liability for any aspect of the records relating to or payments made on account
of beneficial ownership interests in the global security for the trust preferred
securities or for maintaining, supervising or reviewing any records relating to
the beneficial ownership interests. Disbursements of distributions to
participants will be DTC's responsibility. DTC's practice is to credit
participants' accounts on a payable date in accordance with their respective
holdings shown on DTC's records unless DTC has reason to believe that it will
not receive payment on the payable date. Payments by participants to you will be
governed by standing instructions and customary practices, as is the case with
securities held for the accounts of customers in bearer form or registered in
"street name," and will be the responsibility of the participant and not of DTC,
us, the trustees, the paying agent or any other agent of ours, subject to any
statutory or regulatory requirements as may be in effect from time to time.
DTC may discontinue providing its services as securities depository with
respect to the trust preferred securities at any time by giving reasonable
notice to us or the trustees. If DTC notifies us that it is unwilling to
continue as depository, or if it is unable to continue or ceases to be a
clearing agency registered under the Securities Exchange Act of 1934, as
amended, and a successor depository is not appointed by us within 90 days after
receiving the notice or becoming aware that DTC is no longer a registered
clearing agency, we will issue the trust preferred securities in definitive form
upon registration of transfer of, or in exchange for, the global security. In
addition, we may at any time and in our sole discretion determine not to have
the trust preferred securities represented by one or more global securities and,
in this event, will issue trust preferred securities in definitive form in
exchange for all of the global securities representing the trust preferred
securities.
DTC has advised the Trust and us as follows:
. DTC is a limited purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve, a "clearing
corporation" within the meaning of the Uniform Commercial Code and a
"clearing agency" registered pursuant to the provisions of Section 17A
of the Securities Exchange Act of 1934, as amended,;
. DTC was created to hold securities for its participants and to
facilitate the clearance and settlement of securities transactions
between participants through electronic book entry changes to accounts
of its participants, thereby eliminating the need for physical
movement of certificates;
. participants include securities brokers and dealers (such as the
underwriters), banks, trust companies and clearing corporations and
may include certain other organizations;
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. certain of the participants (or their representatives), together with
other entities, own DTC; and
. indirect access to the DTC system is available to others such as
banks, brokers, dealers and trust companies that clear through, or
maintain a custodial relationship with, a participant, either directly
or indirectly.
Same-Day Settlement and Payment
Settlement for the trust preferred securities will be made by the
underwriters in immediately available funds.
Secondary trading in trust preferred securities of corporate issuers is
generally settled in clearinghouse or next-day funds. In contrast, the trust
preferred securities will trade in DTC's Same-Day Funds Settlement System, and
secondary market trading activity in the trust preferred securities will
therefore be required by DTC to settle in immediately available funds. No
assurance can be given as to the effect, if any, of settlement in immediately
available funds on trading activity in the trust preferred securities.
Payment and Paying Agency
Payments with respect to the trust preferred securities will be made to
DTC, which will credit the relevant accounts at DTC on the applicable
distribution dates or, if the trust preferred securities are not held by DTC,
the payments will be made by check mailed to the address of the holder entitled
to it at the address that appears on the securities register for the trust
preferred securities and common securities. The paying agent will initially be
the property trustee and any co-paying agent chosen by the property trustee and
acceptable to the administrators. The paying agent will be permitted to resign
as paying agent upon 30 days written notice to the property trustee and the
administrators. If the property trustee is no longer the paying agent, the
property trustee will appoint a successor (which must be a bank or trust company
reasonably acceptable to the administrators) to act as paying agent.
Registrar and Transfer Agent
The property trustee will act as registrar and transfer agent for the trust
preferred securities.
Registration or transfers of trust preferred securities will be effected
without charge by or on behalf of the Trust, but only upon payment of any tax or
other governmental charges that may be imposed in connection with any transfer
or exchange. The Trust will not be required to register or cause to be
registered the transfer of the trust preferred securities after the trust
preferred securities have been called for redemption.
Obligations and Duties of the Property Trustee
The property trustee, other than during the occurrence and continuance of
an event of default, undertakes to perform only the duties that are specifically
provided in the trust agreement. After any event of default, the property
trustee must exercise the same degree of care and skill as a prudent person
would exercise or use in the conduct of his or her own affairs. Subject to this
provision, the property trustee is under no obligation to exercise any of the
powers vested in it by the trust agreement at your request unless it is offered
reasonable indemnity against the costs, expenses and liabilities that might be
incurred.
For information concerning the relationships between Bankers Trust Company,
the property trustee, and us, see "Description of Junior Subordinated
Debentures--Information Concerning the Debenture Trustee."
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Miscellaneous
The two administrators and the property trustee are authorized and directed
to conduct the affairs of the Trust and to operate it in such a way that: (1)
the Trust will not be deemed to be an "investment company" required to be
registered under the Investment Company Act or taxable as a corporation for
United States federal income tax purposes; and (2) the junior subordinated
debentures will be treated as our indebtedness for United States federal income
tax purposes. In this connection, the property trustee and the holders of common
securities are authorized to take any action not inconsistent with applicable
law, or the trust agreement that the property trustee and the holders of common
securities determine in their discretion to be necessary or desirable for these
purposes, as long as the action does not materially adversely affect your
interests.
You will not have preemptive or similar rights.
The Trust may not borrow money, issue debt or mortgage or pledge any of its
assets.
Governing Law
The trust agreement will be governed by and construed in accordance with
the laws of the State of Delaware.
DESCRIPTION OF JUNIOR SUBORDINATED DEBENTURES
The junior subordinated debentures are to be issued under the indenture
between Bankers Trust Company, as the debenture trustee, and us. This summary of
certain terms and provisions of the junior subordinated debentures and the
indenture is not complete. You should read the form of the indenture that is
filed as an exhibit to the registration statement of which this prospectus is a
part. Whenever particular defined terms of the indenture (in effect from time to
time) are referred to in this prospectus, the defined terms are incorporated in
this prospectus by reference. A copy of the form of indenture is available from
the debenture trustee upon request.
General
Concurrently with the issuance of the trust preferred securities, the Trust
will invest the proceeds, together with the consideration paid by us for the
common securities, in the junior subordinated debentures issued by us. The
junior subordinated debentures will bear interest, accruing from the date of
issue, at the annual rate of 10% of the principal amount, payable quarterly in
arrears on March 31st, June 30th, September 30th and December 31st of
each year, beginning March 31, 2000, to the person in whose name each junior
subordinated debenture is registered at the close of business on the 15th day
of March, June, September or December (whether or not a business day) next
preceding the interest payment date. It is anticipated that, until the
dissolution of the Trust, if any, each junior subordinated debenture will be
registered in the name of the Trust and held by the property trustee in trust
for you and the holders of the common securities.
The amount of interest payable for any period less than a full interest
period will be computed on the basis of a 360-day year of twelve 30-day months
and the actual days elapsed in a partial month in the period. The amount of
interest payable for any full interest period will be computed by dividing the
annual rate by four. If any date on which interest is payable to the junior
subordinated debentures is not a business day, then payment of the interest
payable on the date will be made on the next business day (without any interest
or other payment with respect to the delay), or, if the business day falls in
the next calendar year, the payment will be made on the immediately preceding
business day in each case with the same force and effect as if made on the date
the payment was originally payable.
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Accrued interest that is not paid on the applicable interest payment date
will bear additional interest on the amount (to the extent permitted by law) at
the annual rate of 10%, compounded quarterly and computed on the basis of a
360-day year of twelve 30-day months and the actual days elapsed in a partial
month in the period. The amount of additional interest payable for any full
interest period will be computed by dividing the annual rate by four.
The term "interest" as used in this prospectus includes quarterly interest
payments, interest on quarterly interest payments not paid on the applicable
interest payment date and, if applicable, any additional sums we pay on the
junior subordinated debentures following a Tax Event (as defined under
"Description of Preferred Securities--Repayment or Redemption") that may be
required so that distributions payable by the Trust will not be reduced by any
additional taxes, duties or other governmental changes resulting from the Tax
Event.
The junior subordinated debentures will mature on March 31, 2030,
subject to our right to shorten the maturity date at any time to any date not
earlier than March 31, 2005, if we have received prior approval of the
Federal Reserve and if the approval is then required under applicable capital
guidelines or policies of the Federal Reserve. If we elect to shorten the
maturity of the junior subordinated debentures, we will give notice to the
registered holders of the junior subordinated debentures, the debenture trustee
and the Trust no less than 90 days before the effectiveness of the maturity
date. The property trustee must give you and the holders of the common
securities notice of the shortened stated maturity at least 30 but not more than
60 days before the applicable date.
The junior subordinated debentures will be unsecured and will rank junior
and be subordinate in right of payment to any senior indebtedness and equally
with our obligations associated with the outstanding trust preferred securities
of Provident Trust I. The junior subordinated debentures will not be subject to
a sinking fund. The indenture does not limit our ability to incur or issue other
secured or unsecured debt, including senior indebtedness, whether under the
junior subordinated debentures or any existing or other indenture that we may
enter into in the future or otherwise. See "Subordination."
Option to Extend Interest Payment Period
So long as no event of default under the junior subordinated debentures has
occurred and is continuing, we have the right at any time during the term of the
junior subordinated debentures to defer the payment of interest at any time or
from time to time for a period not exceeding 20 consecutive quarterly periods
with respect to each extension period, provided that no extension period may
extend beyond the stated maturity of the junior subordinated debentures. During
any extension period we have the right to make partial payments of interest on
any interest payment date. At the end of an extension period, we must pay all
interest then accrued and unpaid (together with interest thereon at the annual
rate of 10%, compounded quarterly and computed on the basis of a 360-day year
of twelve 30-day months and the actual days elapsed in a partial month in the
period, to the extent permitted by applicable law). The amount of additional
interest payable for any full interest period will be computed by dividing the
annual rate by four. During an extension period, interest will continue to
accrue and holders of junior subordinated debentures (or holders of trust
preferred securities while outstanding) will be required to accrue interest
income for United States federal income tax purposes. See "Certain Federal
Income Tax Consequences--Interest Income and Original Issue Discount."
During any extension period, we may not:
. make any payment of principal (or any premium on the principal) or
interest, or repay, repurchase or redeem any of our debt securities
that rank equally in all respects with or junior in interest to the
junior subordinated debentures, including our obligations associated
with the outstanding trust preferred securities of Provident Trust I;
or
. declare or pay any dividends or distributions on, or redeem, purchase,
acquire or make a liquidation payment with respect to, any of our
capital stock, except that we may:
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(1) repurchase, redeem or make other acquisitions of shares of our
capital stock in connection with any employment contract benefit
plan or other similar arrangement with or for the benefit of any
one or more employees, officers directors or consultants, in
connection with a dividend reinvestment or shareholder stock
purchase plan or in connection with the issuance of our capital
stock (or securities convertible into or exercisable for the
capital stock) as consideration in an acquisition transaction
entered into prior to the applicable extension period;
(2) take any necessary action in connection with any
reclassification, exchange or conversion of any class or series
of our capital stock (or any capital stock of any of our
subsidiaries) for any class or series of our capital stock or of
any class or series of our indebtedness for any class or series
of our capital stock;
(3) purchase fractional interests in shares of our capital stock
pursuant to the conversion or exchange provisions of the capital
stock or the security being converted or exchanged;
(4) declare a dividend in connection with any shareholders' rights
plan, or issue rights, stock or other property under any
shareholders' rights plan, or redeem or repurchase rights
pursuant to any shareholders' rights plan; or
(5) declare a dividend in the form of stock warrants, options or
other rights where the dividend stock or the stock issuable upon
exercise of the warrants, options or other rights is the same
stock as that on which the dividend is being paid or ranks
equally with or junior to the stock.
Before the termination of any extension period, we may further defer the
payment of interest, provided that no extension period may exceed 20 consecutive
quarterly periods or extend beyond the stated maturity of the junior
subordinated debentures. Upon the termination of any extension period and the
payment of all amounts then due, we may elect to begin a new extension period
subject to the above conditions. No interest shall be due and payable during an
extension period, except at its end. We must give the trustees notice of our
election of the extension period at least one business day prior to the earlier
of: (1) the date the distribution on the trust preferred securities would have
been payable but for the election to begin an extension period; and (2) the date
the property trustee is required to give you notice of the record date or the
date the distribution is payable, but in any event not less than one business
day prior to the record date. The property trustee will give you notice of our
election to begin a new extension period. There is no limitation on the number
of times that we may elect to begin an extension period.
Redemption
We may redeem the junior subordinated debentures prior to maturity at our
option: (1) on or after March 31, 2005, in whole at any time or in
part from time to time; or (2) in whole, but not in part, at any time within 90
days following the occurrence and during the continuation of a Tax Event,
Investment Company Event or Capital Treatment Event (each as defined under
"Description of Preferred Securities--Repayment or Redemption"), in each case at
a redemption price equal to the outstanding principal amount of the junior
subordinated debentures plus accrued interest (including any additional interest
on any additional sums we pay following a Tax Event as described below under
"Additional Sums"). The proceeds of the redemption will be used by the Trust to
redeem the trust preferred securities.
The Federal Reserve's risk-based capital guidelines, which are subject to
change, currently provide that redemptions of permanent equity or other capital
instruments before stated maturity could have a significant impact on a bank
holding company's overall capital structure and that any organization
considering a redemption should consult with the Federal Reserve before
redeeming any equity or capital instrument prior to maturity if the redemption
could have a material effect on the level or composition of the organization's
capital base.
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Consultation may not be necessary if the equity or capital instrument was
redeemed with the proceeds of, or replaced by, a like amount of a similar or
higher quality capital instrument and the Federal Reserve considers the
organization's capital position to be fully adequate after the redemption.
If we redeem the junior subordinated debentures prior to their stated
maturity, that would constitute the redemption of capital instruments under the
Federal Reserve's current risk-based capital guidelines and may be subject to
the prior approval of the Federal Reserve. The redemption of the junior
subordinated debentures also could be subject to the additional prior approval
of the Federal Reserve under its current risk-based capital guidelines.
Additional Sums
We have covenanted in the indenture that, if and for so long as the Trust
is the holder of all junior subordinated debentures and the Trust is required to
pay any additional taxes, duties or other governmental charges as a result of a
Tax Event, we will pay as additional sums on the junior subordinated debentures
the amounts as may be required so that the distributions payable by the Trust
will not be reduced as a result of any additional taxes, duties or other
governmental charges. See "Description of Trust Preferred Securities--Repayment
or Redemption."
Registration, Denomination and Transfer
The junior subordinated debentures will initially be registered in the name
of the Trust. If the junior subordinated debentures are distributed to you, it
is anticipated that the depositary arrangements for the junior subordinated
debentures will be substantially identical to those in effect for the trust
preferred securities. See "Description of Trust Preferred Securities--Book
Entry, Delivery and Form."
Although DTC has agreed to the procedures described above, it is under no
obligation to perform or continue to perform the procedures, and the procedures
may be discontinued at any time. If DTC is at any time unwilling or unable to
continue as depositary and we do not appoint a successor depositary within 90
days of receipt of notice from DTC to the effect, we will cause the junior
subordinated debentures to be issued in definitive form.
Payments on junior subordinated debentures represented by a global security
will be made to Cede & Co., the nominee for DTC, as the registered holder of the
junior subordinated debentures, described under "Description of Trust Preferred
Securities--Book Entry, Delivery and Form." If junior subordinated debentures
are issued in certificated form, principal and interest will be payable, the
transfer of the junior subordinated debentures will be registerable, and junior
subordinated debentures will be exchangeable for junior subordinated debentures
of other authorized denominations of a like aggregate principal amount, at the
corporate trust office of the debenture trustee in New York, New York, or at the
offices of any paying agent or transfer agent we appoint, provided that payment
of interest may be made at our option by check mailed to the address of the
persons entitled to the payment. However, a holder of $1 million or more in
aggregate principal amount of junior subordinated debentures may receive
payments of interest (other than interest payable at the stated maturity) by
wire transfer of immediately available funds upon written request to the
debenture trustee not later than 15 calendar days prior to the date on which the
interest is payable.
Junior subordinated debentures are issuable only in registered form without
coupons in integral multiples of $25.00. Junior subordinated debentures will be
exchangeable for other junior subordinated debentures of like tenor, of any
authorized denominations, and of a like aggregate principal amount.
Junior subordinated debentures may be presented for exchange as provided
above, and may be presented for registration of transfer (with the form of
transfer endorsed thereon, or a satisfactory written instrument of transfer,
duly executed), at the office of the securities registrar appointed under the
indenture or at the office of any transfer agent we designate for that purpose
without service charge and upon payment of any taxes and other governmental
charges as described in the indenture. We will appoint the debenture trustee as
securities registrar
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under the indenture. We may at any time designate additional transfer agents
with respect to the junior subordinated debentures.
In the event of any redemption, we will not, nor will the debenture trustee
be required to:
. issue, register the transfer of, or exchange junior subordinated
debentures during a period beginning at the opening of business 15
days before the day of selection for redemption of the junior
subordinated debentures to be redeemed and ending at the close of
business on the day of mailing of the relevant notice of redemption;
or
. transfer or exchange any junior subordinated debentures selected for
redemption, except, in the case of any junior subordinated debentures
being redeemed in part, any portion of the debenture not to be
redeemed.
Any monies deposited with the debenture trustee or any paying agent, or
then held by us in trust, for the payment of the principal of (and premium, if
any) or interest on any junior subordinated debenture and remaining unclaimed
for two years after this principal (and premium, if any) or interest has become
due and payable shall, at our request, be repaid to us, and the holder of the
junior subordinated debenture shall thereafter look, as a general unsecured
creditor, only to us for payment.
Restrictions on Certain Payments and Certain Covenants of the Company
We have covenanted that at any time: (1) there has occurred any event (a)
of which we have actual knowledge that with the giving of notice or the lapse of
time, or both, would constitute an event of default under the junior
subordinated debentures and that we have not taken reasonable steps to cure; (2)
if the junior subordinated debentures are held by the Trust, we are in default
with respect to our payment of any obligations under the guarantee; or (3) we
have given notice of our election of an extension period as provided in the
indenture and have not rescinded the notice, or any extension period, is
continuing, then we will not:
. make any payment of principal (or any premium on the principal) or
interest, or repay, repurchase or redeem any of our debt securities
that rank equally in all respects with, or junior in interest to, the
junior subordinated debentures, including our obligations associated
with the outstanding trust preferred securities of Provident Trust I;
or
. declare or pay any dividends or distributions on, or redeem, purchase,
acquire, or make a liquidation payment with respect to, any of our
capital stock, except that we may:
(1) repurchase, redeem or make other acquisitions of shares of our
capital stock in connection with any employment contract, benefit
plan or other similar arrangement with or for the benefit of any
one or more employees, officers, directors or consultants, in
connection with a dividend reinvestment or shareholder stock
purchase plan or in connection with the issuance of our capital
stock (or securities convertible into or exercisable for the
capital stock) as consideration in an acquisition transaction
entered into prior to the applicable extension period or other
event referred to below;
(2) take any necessary action in connection with any
reclassification, exchange or conversion of any class or series
of our capital stock (or any capital stock of any of our
subsidiaries) for any class or series of our capital stock or of
any class or series of our indebtedness for any class or series
of our capital stock;
(3) purchase fractional interests in shares of our capital stock
pursuant to the conversion or exchange provisions of the capital
stock or the security being converted or exchanged;
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(4) declare a dividend in connection with any shareholders' rights
plan, or issue rights, stock or other property under any
shareholders' rights plan, or redeem or repurchase rights
pursuant to any shareholders' rights plan; or
(5) declare a dividend in the form of stock, warrants, options or
other rights where the dividend stock or the stock issuable upon
exercise of the warrants, options or other rights is the same
stock as that on which the dividend is being paid or ranks
equally with or junior to the stock.
We have covenanted in the indenture:
. to continue to hold, directly or indirectly, all of the common
securities, provided that certain successors that are permitted
pursuant to the indenture may succeed to our ownership of the common
securities;
. as holder of the common securities, not to voluntarily terminate,
dissolve and liquidate the Trust, other than:
(1) in connection with a distribution of junior subordinated
debentures to the holders of the trust preferred securities in
liquidation of the Trust; or
(2) in connection with certain mergers, consolidations or
amalgamations permitted by the trust agreement; and
. to use reasonable efforts, consistent with the terms and provisions of
the trust agreement, to cause the Trust to continue not to be taxable
as a corporation for United States federal income tax purposes.
Modification of Indenture
From time to time, we as well as the debenture trustee may, without the
consent of any of the holders of the outstanding junior subordinated debentures,
amend, waive or supplement the provisions of the indenture to:
. evidence our succession to another corporation or association and the
assumption by the person of our obligations under the junior
subordinated debentures;
. add further covenants, restrictions or conditions for the protection
of holders of the junior subordinated debentures;
. cure ambiguities or correct the junior subordinated debentures in the
case of defects or inconsistencies in the provisions of the
debentures, so long as any cure or correction does not adversely
affect the interest of the holders of the junior subordinated
debentures in any material respect;
. change the terms of the junior subordinated debentures to facilitate
the issuance of the junior subordinated debentures in certificated or
other definitive form;
. evidence or provide for the appointment of a successor debenture
trustee; or
. qualify, or maintain the qualification of, the indenture under the
Trust Indenture Act.
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The indenture contains provisions permitting the debenture trustee and us,
with the consent of the holders of not less than a majority in principal amount
of the junior subordinated debentures, to modify the indenture in a manner
affecting the rights of the holders of the junior subordinated debentures.
However, none of these modifications may be made, without the consent of the
holder of each outstanding junior subordinated debenture so affected that would:
. change the stated maturity of, or any installment of interest on, the
junior subordinated debentures, or reduce the principal amount, their
rate of interest or any premium payable upon any redemption, or change
the place of payment where, or the currency in which, the amount is
payable, or impair the right to institute suit for the enforcement of
any payment on junior subordinated debentures; or
. reduce the percentage of principal amount of junior subordinated
debentures, the holders of which are required to consent to any
modification of, or waiver of rights under, the indenture.
Furthermore, so long as any of the trust preferred securities remain
outstanding, no modification may be made that adversely affects you in any
material respect, and no termination of the indenture may occur, and no waiver
of any event of default or compliance with any covenant under the indenture may
be effective, without the prior consent of the holders of at least a majority of
the aggregate liquidation amount of the outstanding trust preferred securities
unless and until the principal of (and premium, if any, on) the junior
subordinated debentures and all accrued and unpaid interest have been paid in
full and certain other conditions are satisfied.
Debenture Events of Default
The indenture provides that any one or more of the following described
events with respect to the junior subordinated debentures that has occurred and
is continuing constitute an "event of default" with respect to the junior
subordinated debentures:
. failure to pay any interest on the junior subordinated debentures when
due and continuance of this default for a period of 30 days (subject
to the deferral of any due date in the case of an extension period);
. failure to pay any principal (or any premium on the principal) on the
junior subordinated debentures when due whether at the stated
maturity;
. failure to observe or perform certain other covenants contained in the
indenture for 90 days after written notice of the failure to us from
the debenture trustee or the holders of at least 25% in aggregate
outstanding principal amount of the outstanding junior subordinated
debentures; or
. the occurrence of the appointment of a receiver or other similar
official in any liquidation, insolvency or similar proceeding with
respect to us or all or substantially all of our property; or a court
or other governmental agency shall enter a decree or order appointing
a receiver or similar official and the decree or order shall remain
unstayed and undischarged for a period of 60 days.
As described in "Description of Trust Preferred Securities--Events of
Default; Notice," the occurrence of an event of default with respect to the
junior subordinated debentures will also be an event of default with respect to
the trust preferred securities and common securities.
The holders of at least a majority in aggregate principal amount of
outstanding junior subordinated debentures have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
debenture trustee. The debenture trustee or the holders of not less than 25% in
aggregate principal amount of outstanding junior subordinated debentures may
declare the principal due and payable immediately upon an event of default, and,
should the debenture trustee or the holders of junior subordinated debentures
fail to make
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the declaration, the holders of at least 25% in aggregate liquidation amount of
the outstanding trust preferred securities shall have the right. The holders of
a majority in aggregate principal amount of outstanding junior subordinated
debentures may annul the declaration and waive the default if all defaults
(other than the non-payment of the principal of junior subordinated debentures
which has become due solely by the acceleration) have been cured and a sum
sufficient to pay all matured installments of interest and principal due
otherwise than by acceleration has been deposited with the debenture trustee.
Should the holders of junior subordinated debentures fail to annul the
declaration and waive the default, the holders of a majority in aggregate
liquidation amount of the outstanding trust preferred securities shall have the
right.
The holders of at least a majority in aggregate principal amount of the
outstanding junior subordinated debentures affected may, on behalf of the
holders of all the junior subordinated debentures, waive any past default,
except a default in the payment of principal (or any premium) or interest
(unless this default has been cured and a sum sufficient to pay all matured
installments of interest and principal (and premium on, if any) due otherwise
than by acceleration has been deposited with the debenture trustee) or a default
with respect to a covenant or provision which under the indenture cannot be
modified or amended without the consent of the holder of each outstanding junior
subordinated debenture affected by the default. See "Modification of Junior
Subordinated Indenture." We are required to certify annually to the debenture
trustee as to whether or not we are in compliance with all the conditions and
covenants applicable to us under the indenture.
If a debenture event of default occurs and is continuing, the property
trustee will have the right to declare the principal of and the interest on the
junior subordinated debentures, and any other amounts payable under the
indenture, to be due and payable and to enforce its other rights as a creditor
with respect to the junior subordinated debentures.
Enforcement of Certain Rights by Holders of Trust Preferred Securities
If a debenture event of default has occurred and is continuing and the
event is attributable to our failure to pay any amounts payable with respect to
the junior subordinated debentures on the date the amounts are otherwise
payable, you may institute a legal action against us to enforce the payment to
you of an amount equal to the amount payable with respect to junior subordinated
debentures having a principal amount equal to the aggregate liquidation amount
of the trust preferred securities you hold. We may not amend the indenture to
remove the foregoing right to bring legal action without your prior written
consent. We will have the right under the indenture to set off any payment we
make to you in connection with a legal action.
You are not able to exercise directly any remedies available to the holders
of the junior subordinated debentures except under the circumstances described
in the preceding paragraph. See "Description of Trust Preferred Securities
- --Events of Default; Notice."
Consolidation, Merger, Sale of Assets and Other Transactions
The indenture provides that we may not consolidate with or merge into any
other entity or sell, convey, transfer or lease our properties and assets
substantially as an entirety, or sell, convey, transfer or distribute the
capital stock or all or substantially all of the assets of any principal
subsidiary bank to any entity, and no entity may consolidate with or merge into
us or convey, transfer or lease its properties and assets substantially as an
entirety to us, unless:
. in the event we consolidate with or merge into another entity or
convey or transfer our properties and assets substantially as an
entirety to any entity, the successor entity is organized under the
laws of the United States or any state or the District of Columbia,
and the successor entity expressly assumes our obligations with
respect to the junior subordinated debentures; provided, however, that
nothing in the indenture shall be deemed to restrict or prohibit, and
no supplemental indenture shall be required in the case of the merger
of a bank (as defined below) with and into a bank or us, the
consolidation of banks into a bank or us, or the sale or other
disposition of all or
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substantially all of the assets of any bank to another bank or us, if,
in any case in which we are not the surviving, resulting or acquiring
entity, we would own, directly or indirectly, at least 80% of the
voting securities of the bank (and of any other bank any voting
securities of which are owned, directly or indirectly, by the bank)
surviving the merger, resulting from the consolidation or acquiring
the assets;
. immediately after giving effect to the transaction, no event of
default with respect to the junior subordinated debentures, and no
event which, after notice or lapse of time or both, would constitute
an event of default with respect to the junior subordinated
debentures, has occurred and is continuing; and
. certain other conditions as prescribed in the indenture are satisfied.
For purposes of the first bullet point above, the term "bank" means each
of:
. any banking subsidiary of ours the consolidated assets of which
constitute 20% or more of our consolidated assets and our consolidated
subsidiaries;
. any other banking subsidiary designated as a bank pursuant to a board
resolution and provided in an officers' certificate delivered to the
trustee; and
. any of our subsidiaries that owns, directly or indirectly, any voting
securities, or options, warrants or rights to subscribe for or
purchase voting securities, of any bank under the first and second
bullet points above and in the case of all three bullet points above
their respective successors (whether by consolidation, merger,
conversion, transfer of substantially all their assets and business or
otherwise) so long as the successor is a banking subsidiary (in the
case of the first and second bullet point) or a subsidiary (in the
case of the third bullet point) of ours.
The provisions of the indenture do not afford holders of the junior
subordinated debentures protection in the event we are involved in a highly
leveraged or other transaction that may adversely affect holders of the junior
subordinated debentures.
Satisfaction and Discharge
The indenture will no longer be in effect and we will deemed to have
satisfied and discharged the indenture when:
. all junior subordinated debentures not previously delivered to the
debenture trustee for cancellation: (1) have become due and payable;
or (2) will become due and payable at the stated maturity within one
year;
. we deposit or cause to be deposited with the debenture trustee funds,
in trust, for the purpose and in an amount sufficient to pay and
discharge the entire indebtedness on the junior subordinated
debentures not previously delivered to the debenture trustee for
cancellation, for the principal (and premium, if any) and interest to
the date of the deposit or to the stated maturity or redemption date;
and
. we have paid all other sums payable by us under the indenture and we
have delivered applicable certificates and opinions that indicate we
have complied with all of our obligations.
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Subordination
The junior subordinated debentures will be subordinate and junior in right
of payment, to the extent provided in the indenture, to all our senior
indebtedness (as defined below) of and equally with our obligations associated
with the outstanding trust preferred securities of Provident Trust I and any
future issuances of trust preferred securities. If we default in the payment of
any principal, premium, if any, or interest, if any, or any other amount payable
on any senior indebtedness when the payment becomes due and payable whether at
maturity or at a date fixed for redemption or by declaration of acceleration or
otherwise, then unless and until the default has been cured or waived or has
ceased to exist or all senior indebtedness has been paid, no direct or indirect
payment (in cash, property, securities, by set-off or otherwise) may be made or
agreed to be made on the junior subordinated debentures, or with respect to any
redemption repayment, retirement, purchase or other acquisition of any of the
junior subordinated debentures.
As used in this prospectus, "senior indebtedness" means, whether recourse
is to all or a portion of our assets and whether or not contingent:
. every obligation of ours for money borrowed;
. every obligation of ours evidenced by bonds, debentures, notes or
other similar instruments, including obligations incurred in
connection with the acquisition of property, assets or businesses;
. every reimbursement obligation of ours with respect to letters of
credit, bankers' acceptance or similar facilities issued for our
account;
. every obligation of ours issued or assumed as the deferred purchase
price of property or services (but excluding trade accounts payable or
accrued liabilities arising in the ordinary course of business);
. every capital lease obligation of ours;
. every obligation of ours for claims (as defined in Section 101(4) of
the United States Bankruptcy Code of 1978 and in any amendments to the
Bankruptcy Code) with respect to derivative products such as interest
foreign exchange rate contracts, commodity contracts and similar
arrangements; and
. every obligation of the type referred to above of another person and
all dividends of another person the payment of which, in either case,
we have guaranteed or are responsible or liable, directly or
indirectly, as obligor or otherwise.
However, senior indebtedness does not include any of the following:
. any obligations which, by their terms, are expressly stated to rank
equally in right of payment with or, to not be superior in right of
payment to, the junior subordinated debentures;
. any of our senior indebtedness which when incurred and without respect
to any election under Section 1111(b) of the United States Bankruptcy
Code of 1978, and in any amendments to the Bankruptcy Code, was
without recourse to us;
. any indebtedness of ours to any of our subsidiaries;
. any indebtedness to our executive officers or directors; or
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. any indebtedness with respect to debt securities issued to any trust,
or a trustee of the trust, partnership or other entity affiliated with
us that is our financing entity in connection with the issuance by the
financing entity of securities that are similar to the trust preferred
securities, including the outstanding trust preferred securities of
Provident Trust I.
As of January 31, 2000, we had senior indebtedness of $620.8 million. In
addition, we have $40 million of 8.29% Exchange Capital Securities that remain
outstanding and that will rank equally to the trust preferred securities offered
through this prospectus. Any future senior indebtedness (including any interest
on the indebtedness accruing after the commencement of any proceedings) shall
first be paid in full before any payment or distribution whether in cash,
securities or other property is made on account of the junior subordinated
debentures in the event of:
. certain events of bankruptcy, dissolution or liquidation of us or
another holder of the common securities;
. any proceeding for our liquidation, dissolution or other winding up,
voluntary or involuntary, whether or not involving insolvency or
bankrupt proceedings;
. any assignment by us for the benefit of creditors; or
. any other marshaling of our assets.
In this event, any payment or distribution on account of the junior
subordinated debentures, whether in cash, securities or other property, that
would otherwise (but for the subordination provisions) be payable or deliverable
with respect to the junior subordinated debentures will be paid as described
above, directly to the holders of senior indebtedness in accordance with the
priorities then existing among the holders until all senior indebtedness
(including any interest on the indebtedness accruing after the commencement of
the proceedings) has been paid in full.
In the event of any proceeding described above, after payment in full of
all sums owing with respect to our senior indebtedness, if any, the holders of
junior subordinated debentures, together with the holders of our obligations
ranking on a parity with the junior subordinated debentures, will be entitled to
be paid from our remaining assets the amounts at the time due and owing on the
junior subordinated debentures and other obligations. This payment will be made
before any payment or other distribution, whether in cash, property or
otherwise, will be made on account of any capital stock or obligations ranking
junior to the junior subordinated debentures and other obligations. If payment
or distribution on account of the junior subordinated debentures of any
character or security, whether in cash, securities or other property, is
received by any holder of any junior subordinated debentures in contravention of
any of these terms and before all our senior indebtedness, if any, has been paid
in full, the payment or distribution or security will be received in trust for
the benefit of, and must be paid over or delivered and transferred to, the
holders of our senior indebtedness at the time outstanding in accordance with
the priorities then existing among the holders for application to the payment of
all senior indebtedness remaining unpaid to the extent necessary to pay all
senior indebtedness in full.
By reason of the subordination, in the event of our insolvency, holders of
senior indebtedness may receive more, ratably, and holders of the junior
subordinated debentures may receive less, ratably, than our other creditors. The
subordination will not prevent the occurrence of any event of default with
respect to the junior subordinated debentures.
The indenture places no limitation on the amount of additional senior
indebtedness that we may incur. We expect from time to time to incur additional
senior indebtedness.
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Information Concerning the Debenture Trustee
The debenture trustee, other than during the occurrence and continuance of
a default in the performance of our obligations under the junior subordinated
debentures, is under no obligation to exercise any of the powers vested in it by
the indenture at the request of any holder of junior subordinated debentures,
unless offered reasonable indemnity by the holder against the costs, expenses
and liabilities that might be incurred by the exercise of these powers. The
debenture trustee is not required to expend or risk its own funds or otherwise
incur personal financial liability in the performance of its duties if the
debenture trustee reasonably believes that repayment or adequate indemnity is
not reasonably assured to it.
Bankers Trust Company, the debenture trustee, may serve from time to time
as trustee under other indentures or trust agreements with us or our
subsidiaries relating to other issues of our securities. In addition, we as well
as certain of our affiliates may have other banking relationships with Bankers
Trust Company and its affiliates.
Governing Law
The indenture and the junior subordinated debentures will be governed by
and construed in accordance with the laws of the State of New York.
DESCRIPTION OF GUARANTEE
We will execute and deliver the guarantee at the same time the Trust issues
the trust preferred securities by the Trust for your benefit. Bankers Trust
Company will act as guarantee trustee under the guarantee. The guarantee trustee
will hold the guarantee for your benefit. This summary of certain provisions of
the guarantee is not complete. You should read the form of the guarantee, which
is filed as an exhibit to the registration statement of which this prospectus is
a part. A copy of the form of guarantee is available upon request from the
guarantee trustee.
General
We will irrevocably agree to pay in full on a subordinated basis, to the
extent provided in the guarantee and described in this prospectus, the guarantee
payments described below to you, as and when due, regardless of any defense,
right of set-off or counterclaim that the Trust may have or assert other than
the defense of payment. The following payments with respect to the trust
preferred securities, to the extent not paid by or on behalf of the Trust, will
be subject to the guarantee:
. any accrued and unpaid distributions required to be paid on the trust
preferred securities, to the extent that the Trust has funds on hand
available therefor at that time;
. the redemption price with respect to any trust preferred securities
called for redemption, to the extent that the Trust has funds on hand
available for its payment at that time; and
. upon a voluntary or involuntary dissolution, termination, winding up
or liquidation of the Trust (unless the junior subordinated debentures
are distributed to you), the lessor of:
(1) the aggregate of the liquidation amount and all accumulated and
unpaid distributions to the date of payment, to the extent that
the Trust has funds on hand available for their payment; and
(2) the amount of assets of the Trust remaining available for
distribution to you on liquidation of the Trust.
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Our obligation to make a guarantee payment may be satisfied by our direct
payment to you or by causing the Trust to pay these amounts to you.
The guarantee will be an irrevocable guarantee of payment on a subordinated
basis of the Trust's obligations under the trust preferred securities, but will
apply only to the extent that the Trust has funds sufficient to make the
payments, and is not a guarantee of collection.
If we do not make payments on the junior subordinated debentures held by
the Trust, the Trust will not be able to pay any amounts payable with respect to
the trust preferred securities and will not have funds legally available for
these payments. The guarantee will rank subordinate and junior in right of
payment to all of our senior indebtedness. See "Status of the Guarantee." The
guarantee does not limit our ability to incur or issue other secured or
unsecured debt, including senior indebtedness, whether under the indenture or
any other indenture that we may enter into in the future or otherwise.
We have through the guarantee, the trust agreement, the junior subordinated
debentures and the indenture, taken together, fully, irrevocably and
unconditionally guaranteed all the Trust's obligations under the trust preferred
securities on a subordinated basis. No single document standing alone or
operating in conjunction with fewer than all the other documents constitutes the
guarantee. Only the combined operation of these documents that has the effect of
providing a full, irrevocable and unconditional guarantee of the Trust's
obligations with respect to the trust preferred securities. See "Relationship
Among the Trust Preferred Securities, the Junior Subordinated Debentures and the
Guarantee."
Status of the Guarantee
The guarantee will constitute our unsecured obligation and will rank
subordinate and junior in right of payment to our senior indebtedness, if any,
and equally with the outstanding trust preferred securities of Provident Trust I
and with any additional obligations associated with any future issuances of
trust preferred securities.
The guarantee will constitute a guarantee of payment and not of collection.
This means that the guarantee trustee may institute a legal proceeding directly
against us as the guarantor to enforce its rights under the guarantee without
first instituting a legal proceeding against any other person or entity. The
guarantee will be held by the guarantee trustee for your benefit. The guarantee
will not be discharged except by payment of the guarantee payments in full to
the extent not paid by the Trust or distribution to the holders of the trust
preferred securities or the junior subordinated debentures.
Amendments and Assignment
Except with respect to any changes which do not materially adversely affect
your rights (in which case no consent will be required), the guarantee may not
be amended without the prior approval of the holders of not less than a majority
of the aggregate liquidation amount of the outstanding trust preferred
securities. The manner of obtaining the approval is described under "Description
of Trust Preferred Securities--Voting Rights; Amendment of Trust Agreement." All
guarantees and agreements contained in the guarantee shall bind our successors,
assigns, receivers, trustees and representatives and shall inure to your benefit
and the benefit of all of the holders of the trust preferred securities then
outstanding.
Events of Default
An event of default under the guarantee will occur if we fail to perform
any of our payment or other obligations under the guarantee, or to perform any
non-payment obligation if the non-payment default remains unremedied for 30
days. The holders of not less than a majority in aggregate liquidation amount of
the outstanding trust preferred securities have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
guarantee trustee with respect to the guarantee or to direct the exercise of any
trust or power conferred upon the guarantee trustee under the guarantee.
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You may institute a legal proceeding directly against us to enforce your
rights under the guarantee without first instituting a legal proceeding against
the Trust, the guarantee trustee or any other person or entity.
We are required, as guarantor, to certify annually to the guarantee trustee
whether or not we are in compliance with all the conditions and covenants
applicable to us under the guarantee.
Information Concerning the Guarantee Trustee
The guarantee trustee, other than during the occurrence and continuance of
a default by us in performance of the guarantee, undertakes to perform only the
duties as are specifically provided in the guarantee and, after the occurrence
of an event of default with respect to the guarantee, must exercise the same
degree of care and skill as a prudent person would exercise or use in the
conduct of his or her own affairs. Subject to this provision, the guarantee
trustee is under no obligation to exercise any of the powers vested in it by the
guarantee at your request unless it is offered reasonable indemnity against the
costs, expenses and liabilities that it might incur in the exercise of these
powers.
For information concerning our relationship with Bankers Trust Company, as
guarantee trustee, see "Description of Junior Subordinated Debentures--
Information Concerning the Debenture Trustee."
Termination of the Guarantee
The guarantee will terminate and be of no further force and effect upon
full payment of the redemption price of the trust preferred securities, upon
full payment of the amounts payable with respect to the trust preferred
securities upon liquidation of the Trust, or upon distribution of junior
subordinated debentures to you and the other holders of the trust preferred
securities in exchange for all of the trust preferred securities. The guarantee
will continue to be effective or will be reinstated, as the case may be, if at
any time you must restore payment of any sums paid to you under the trust
preferred securities or the guarantee.
Governing Law
The guarantee will be governed by and construed in accordance with the laws
of the State of New York.
RELATIONSHIP AMONG THE TRUST PREFERRED SECURITIES,
THE JUNIOR SUBORDINATED DEBENTURES AND THE GUARANTEE
Full and Unconditional Guarantee
We have irrevocably guaranteed, on a subordinate basis, payments of
distributions and other amounts due on the trust preferred securities (to the
extent that Trust has funds available for the payment) and to the extent
described under "Description of Guarantee." Taken together, our obligations
under the junior subordinated debentures, the indenture, the trust agreement and
the guarantee provide, in the aggregate, a full, irrevocable and unconditional
guarantee of payments of distributions and other amounts due on the trust
preferred securities. No single document standing alone or operating in
conjunction with fewer than all the other documents constitutes the guarantee.
It is only the combined operation of these documents that has the effect of
providing a full, irrevocable and unconditional guarantee of the Trust's
obligations with respect to the trust preferred securities.
If and to the extent that we do not make payments on the junior
subordinated debentures, the Trust will not have sufficient funds to pay
distributions or other amounts due on the trust preferred securities. The
guarantee does not cover payment of amounts payable with respect to the trust
preferred securities when the Trust does not have sufficient funds to pay the
amounts. In this event, your remedy is to institute a legal proceeding directly
against us for enforcement of our payment obligations under the junior
subordinated debentures having a principal amount equal to the liquidation
amount of the trust preferred securities you hold.
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Our obligations under the junior subordinated debentures and the guarantee
are subordinate and junior in right of payment to all senior indebtedness, if
any, and rank equally with our obligations associated with the outstanding trust
preferred securities of Provident Trust I and any additional obligations
associated with any future issuances of trust preferred securities.
Sufficiency of Payments
As long as we make the payments on the junior subordinated debentures when
they are due, the payments will be sufficient to cover distributions and other
payments distributable on the trust preferred securities, primarily because:
. the aggregate principal amount of the junior subordinated debentures
will be equal to the sum of the aggregate stated liquidation amount of
the trust preferred securities and common securities;
. the interest rate and interest and other payment dates on the junior
subordinated debentures will match the distribution rate, distribution
dates and other payment dates for the trust preferred securities;
. we will pay for any and all costs, expenses and liabilities of the
Trust except the Trust's obligations to you and the holders of the
common securities; and
. the trust agreement further provides that the Trust will not engage in
any activity that is not consistent with the limited purposes of the
Trust.
Notwithstanding anything to the contrary in the indenture, we have the
right to set off any payment we are otherwise required to make thereunder
against and to the extent we have previously made, or are concurrently on the
date of the payment making, a payment under the guarantee.
Enforcement Rights of Holders of Trust Preferred Securities
You may institute a legal proceeding directly against us to enforce your
rights under the guarantee without first instituting a legal proceeding against
the guarantee trustee, the Trust or any other person or entity. See "Description
of Guarantee."
A default or event of default under any of our senior indebtedness would
not constitute a default or event of default with respect to the trust preferred
securities. However, in the event of payment defaults under, or acceleration of
our senior indebtedness, the subordination provisions of the indenture provide
that no payments may be made with respect to the junior subordinated debentures
until the senior indebtedness has been paid in full or any payment default on
senior indebtedness has been cured or waived. See "Description of Junior
Subordinated Debentures--Subordination."
Limited Purpose of Trust
The trust preferred securities represent trust preferred undivided
beneficial interests in the assets of the Trust, and the Trust exists for the
sole purpose of issuing the trust preferred securities and common securities and
investing the proceeds from their issuance in the junior subordinated
debentures. A principal difference between your rights as a holder of trust
preferred securities and a holder of a junior subordinated debenture is that a
holder of a junior subordinated debenture is entitled to receive from us
payments on junior subordinated debentures held, while you are entitled to
receive distributions or other amounts distributable with respect to the trust
preferred securities from the Trust (or from us under the Guarantee) only if and
to the extent the Trust has funds available for the payment of the
distributions.
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Rights Upon Dissolution
Upon any voluntary or involuntary dissolution of the Trust, other than the
dissolution involving the distribution of the junior subordinated debentures and
after satisfaction of liabilities to creditors of the Trust as required by
applicable law, you will be entitled to receive, out of assets held by the
Trust, the liquidation distribution in cash. See "Description of Trust Preferred
Securities--Liquidation Distribution Upon Dissolution." If we are voluntarily or
involuntarily liquidated or declare bankruptcy, the Trust, as registered holder
of the junior subordinated debentures, will be our subordinated creditor,
subordinated and junior in right of payment to all our senior indebtedness, if
any, as provided in the indenture, but entitled to receive payment in full of
all amounts payable with respect to the junior subordinated debentures before
any of our shareholders receive payments or distributions. Since we are the
guarantor under the guarantee and have agreed under the indenture to pay for all
costs, expenses and liabilities of the Trust (other than the Trust's obligations
to you and the holders of the common securities), your position as a holder of
the trust preferred securities and the position of a holder of the junior
subordinated debentures relative to other creditors and to our shareholders in
the event of our liquidation or bankruptcy are expected to be substantially the
same.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
General
The trust preferred securities and payments on the trust preferred
securities generally are subject to taxation. Therefore, you should consider the
tax consequences of owning and receiving payments on the trust preferred
securities before acquiring them.
We have engaged Muldoon, Murphy & Faucette LLP, Washington, D.C., as
special counsel to review the following discussion. They have given us their
written legal opinion that the discussion correctly describes the principal
aspects of the United States federal tax treatment of beneficial owners of trust
preferred securities.
The following discussion is general and may not apply to your particular
circumstances for any of the following (or other) reasons:
. This summary is based on federal tax laws in effect as of the date of
this prospectus. Changes to any of these laws after this date may
affect the tax consequences described below.
. This summary discusses only trust preferred securities you acquire at
original issuance at the original offering price and hold as capital
assets (within the meaning of federal tax law). It does not discuss
all of the tax consequences that may be relevant to the owners of
trust preferred securities who are subject to special rules, such as
banks, thrift institutions, real estate investment trusts, regulated
investment companies, insurance companies, brokers and dealers in
securities or currencies, certain securities traders, tax-exempt
organizations and certain other financial institutions.
This discussion also does not discuss tax consequences that may be relevant to
an owner of trust preferred securities in light of the owner's particular
circumstances, such as an owner holding a trust preferred security as a position
in a straddle, hedging, conversion or other integrated investment.
. This summary does not address:
(1) the income tax consequences to shareholders in, or partners or
beneficiaries of, a holder of trust preferred securities;
(2) the United States alternative minimum tax consequences of
purchasing, owning and disposing of trust preferred securities;
or
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(3) any state, local or foreign tax consequences of purchasing,
owning and disposing of trust preferred securities.
The authorities on which this summary is based are subject to various
interpretations, and the opinions of Muldoon, Murphy & Faucette LLP, as counsel,
represents counsel's best legal judgment based on current authorities and are
not binding on the Internal Revenue Service or the courts, either of which could
take a contrary position. Moreover, no rulings have been or will be sought from
the IRS with respect to the transaction described in this prospectus.
Accordingly, we cannot assure you that the IRS will not challenge the opinion
expressed in this prospectus or that a court would not sustain a challenge.
We advise you to consult your own tax advisors regarding the tax
consequences of purchasing, owning and disposing of the trust preferred
securities because the following discussion may not apply to you.
U.S. Holders
In General. For purposes of the following discussion, a "U.S. Holder"
means:
. a citizen or individual resident of the United States;
. a corporation or partnership created or organized in or under the laws
of the United States or any of its political subdivisions;
. an estate the income of which is includable in its gross income for
United States federal income tax purposes without regard to its
source; or
. a trust if a court within the United States is able to exercise
primary supervision over its administration and at least one United
States person has the authority to control all substantial decisions
of the trust.
Characterization of the Trust. Prior to the time that the trust preferred
securities are issued, Muldoon, Murphy & Faucette LLP will give its opinion
that: (1) under then current law and based on the representations, facts and
assumptions provided in this prospectus; (2) assuming full compliance with the
terms of the trust agreement (and other relevant documents); and (3) based on
certain assumptions and qualifications referred to in the opinion, the Trust
will be characterized for United States federal income tax purposes as a grantor
trust. Accordingly, for United States federal income tax purposes, if you, as a
U.S. Holder, purchase a trust preferred security you will be considered the
owner of an undivided interest in the junior subordinated debentures owned by
the Trust, and you will be required to include all income or gain recognized for
United States federal income tax purposes with respect to your share of the
junior subordinated debentures on your income tax return.
Characterization of the Junior Subordinated Debentures. We intend to take
the position that, under current law, the junior subordinated debentures are our
debt for United States federal income tax purposes. We, along with the Trust and
you (by acceptance of a beneficial interest in a trust preferred security),
agree to treat the junior subordinated debentures as our debt and the trust
preferred securities as evidence of a beneficial ownership interest in the
Trust. We cannot assure you, however, that the position will not be challenged
by the IRS or, if challenged, that a challenge will not be successful. The
remainder of this discussion assumes that the junior subordinated debentures
will be classified as our debt for United States federal income tax purposes.
Interest Income and Original Issue Discount. Under the terms of the junior
subordinated debentures, we have the ability to defer payments of interest from
time to time by extending the interest payment period for a period not exceeding
20 consecutive quarterly periods, but not beyond the maturity of the junior
subordinated debentures. Treasury regulations provide that debt instruments like
the junior subordinated debentures will not be considered issued with original
issue discount ("OID") even if their issuer can defer payments of interest if
the likelihood of any deferral is "remote."
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We have concluded, and this discussion assumes, that, as of the date of
this prospectus, the likelihood of our deferring payments of interest is
"remote" within the meaning of the applicable treasury regulations. This
conclusion is based in part on the fact that exercising that option would
prevent us from declaring dividends on our common stock and would prevent us
from making any payments with respect to debt securities that rank equally with
or junior to the junior subordinated debentures. Therefore, the junior
subordinated debentures should not be treated as issued with OID by reason of
our deferral option. Rather, you will be taxed on stated interest on the junior
subordinated debentures when it is paid or accrued in accordance with your
method of accounting for income tax purposes. You should note, however, that no
published rulings or any other published authorities of the IRS have addressed
this issue. Accordingly, it is possible that the IRS could take a position
contrary to the interpretation described in this prospectus.
If we exercise our option to defer payments of interest, the junior
subordinated debentures would be treated as redeemed and reissued for OID
purposes. The sum of the remaining interest payments (and any de minimis OID) on
the junior subordinated debentures would thereafter be treated as OID. The OID
would accrue, and be includable in your taxable income, on an economic accrual
basis (regardless of your method of accounting for income tax purposes) over the
remaining term of the junior subordinated debentures (including any period of
interest deferral), without regard to the timing of payments under the junior
subordinated debentures. Subsequent distributions of interest on the junior
subordinated debentures generally would not be taxable. The amount of OID that
would accrue in any period would generally equal the amount of interest that
accrued on the junior subordinated debentures in that period at the stated
interest rate. Consequently, during any period of interest deferral, you will
include OID in gross income in advance of the receipt of cash, and if you
dispose of a trust preferred security prior to the record date for payment of
distributions on the junior subordinated debentures following that period, you
will be subject to income tax on OID accrued through the date of disposition
(and not previously included in income), but you will not receive cash from the
Trust with respect to the OID.
If the possibility of our exercising our option to defer payments of
interest is not remote, the junior subordinated debentures would be treated as
initially issued with OID in an amount equal to the aggregate stated interest
(plus any de minimis OID) over the term of the junior subordinated debentures.
You would include that OID in your taxable income, over the term of the junior
subordinated debentures, on an economic accrual basis.
Characterization of Income. Because the income underlying the trust
preferred securities will not be characterized as dividends for income tax
purposes, if you are a corporate holder of the trust preferred securities, you
will not be entitled to a dividends-received deduction for any income you
recognize with respect to the trust preferred securities.
Market Discount and Bond Premium. Under certain circumstances, you may be
considered to have acquired your undivided interests in the junior subordinated
debentures with market discount or bond premium (as each phrase is defined for
United States federal income tax purposes).
Receipt of Junior Subordinated Debentures or Cash Upon Liquidation of the
Trust. Under certain circumstances described above (See "Description of the
Trust Preferred Securities--Liquidation Distribution Upon Dissolution"), the
Trust may distribute the junior subordinated debentures to you in exchange for
your trust preferred securities and in liquidation of the Trust. Except as
discussed below, a distribution would not be a taxable event for United States
federal income tax purposes, and you would have an aggregate adjusted basis in
the junior subordinated debentures you receive for United States federal income
tax purposes equal to your aggregate adjusted basis in your trust preferred
securities. For United States federal income tax purposes, your holding period
in the junior subordinated debentures you receive in a liquidation of the Trust
would include the period during which you held the trust preferred securities.
If, however, the relevant event is a Tax Event that results in the Trust being
treated as an association taxable as a corporation, the distribution would
likely constitute a taxable event to the Trust and to you for United States
federal income tax purposes, and in that event, your holding period for the
junior subordinated debentures would begin on the date that you received the
debentures.
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Under certain circumstances described in this prospectus (see "Description
of the Trust Preferred Securities"), we may redeem junior subordinated
debentures for cash and distribute the proceeds of the redemption to you in
redemption of your trust preferred securities. A redemption would be taxable for
United States federal income tax purposes, and you would recognize gain or loss
as if you had sold the trust preferred securities for cash. See "Sales of
Trust Preferred Securities" below.
Sales of Trust Preferred Securities. If you sell trust preferred
securities, you will recognize gain or loss equal to the difference between your
adjusted basis in the trust preferred securities and the amount realized on the
sale of the trust preferred securities. Your adjusted basis in the trust
preferred securities generally will be the initial purchase price, increased by
OID previously included (or currently includable) in your gross income to the
date of disposition, and decreased by payments received on the trust preferred
securities (other than any interest received with respect to the period prior to
the effective date we first exercise our option to defer payments of interest).
A gain or loss generally will be capital gain or loss, and generally will be a
long-term capital gain or loss if you have held the trust preferred securities
for more than one year prior to the date of disposition.
If you dispose of your trust preferred securities between record dates for
payments of distributions thereon, you will be required to include accrued but
unpaid interest (or OID) on the junior subordinated debentures through the date
of disposition in your taxable income for United States federal income tax
purposes (notwithstanding that you may receive a separate payment from the
purchaser with respect to accrued interest). You may deduct that amount from the
sales proceeds received (including the separate payment, if any, with respect to
accrued interest) for the trust preferred securities (or as to OID only, to add
the amount to your adjusted tax basis in the trust preferred securities). To the
extent the selling price is less than your adjusted tax basis (which will
include accrued but unpaid OID if any), you will recognize a capital loss.
Subject to certain limited exceptions, capital losses cannot be applied to
offset ordinary income for United States federal income tax purposes.
Pending Tax Litigation Affecting the Trust Preferred Securities
In 1998, a taxpayer filed a petition in the United States Tax Court
contesting the IRS's disallowance of interest deductions that taxpayer claimed
with respect to securities issued in 1993 and 1994 that are, in some respects,
similar to the trust preferred securities. (Enron Corp. v. Commissioner, Docket
No. 6149-98, filed April 1, 1998). Recently the IRS issued a private letter
ruling (PLR 199910046) concluding that instruments similar in some respects to
the trust preferred securities were debt securities rather than equity
securities. While a private letter ruling may not be used as a legal precedent,
it does provide insight as to the views of the IRS on the issues in the ruling.
An adverse decision by the Tax Court in Enron Corp. concerning the deductibility
of the interest may cause a Tax Event. A Tax Event would give us the right to
redeem the junior subordinated debentures. See "Description of Junior
Subordinated Debentures--Redemption" and "Description of Trust Preferred
Securities--Liquidation Distribution Upon Dissolution."
Non-U.S. Holders
The following discussion applies to you if you are not a U.S. Holder as
described above.
Payments to you, as a non-U.S. Holder, on a trust preferred security will
generally not be subject to withholding of income tax, provided that:
. you did not (directly or indirectly, actually or constructively) own
10% or more of the total combined voting power of all classes of our
stock entitled to vote;
. you are not a controlled foreign corporation that is related to us
through stock ownership; and
. either (a) you certify to the Trust or its agent under penalties of
perjury, that you are not a U.S. Holder and provide your name and
address, or (b) a securities clearing organization, bank or other
financial institution that holds customers' securities in the ordinary
course of its trade or business,
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and holds the trust preferred security in that capacity, certifies to
the Trust or its agent, under penalties of perjury, that it requires
and has received a statement from you or another financial institution
between it and you in the chain of ownership, and furnishes a copy of
the statement to the Trust or its agent.
As discussed above, it is possible that changes in the law affecting the
income tax consequences of the junior subordinated debentures could adversely
affect our ability to deduct interest payable on the junior subordinated
debentures. These changes could also cause the junior subordinated debentures to
be classified as our equity (rather than our debt) for United States federal
income tax purposes. This might cause the income derived from the junior
subordinated debentures to be characterized as dividends, generally subject to a
30% income tax (on a withholding basis) when paid to you if you are not a U.S.
Holder, rather than as interest which, as discussed above, generally is exempt
from income tax in the hands of a person who is not a U.S. Holder.
You, as a non-U.S. Holder, will generally not be subject to withholding of
income tax on any gain realized upon the sale or other disposition of a trust
preferred security.
If you hold the trust preferred securities in connection with the active
conduct of a United States trade or business, you will be subject to income tax
on all income and gains recognized with respect to your proportionate share of
the junior subordinated debentures.
Information Reporting
In general, information reporting requirements will apply to payments made
on, and proceeds from the sale of, the trust preferred securities held by a non-
corporate U.S. Holder within the United States. In addition, payments made on,
and payments of the proceeds from the sale of, the trust preferred securities to
or through the United States office of a broker are subject to information
reporting unless you certify as to your non-U.S. Holder status or otherwise
establish an exemption from information reporting and backup withholding. See
"Backup Withholding." Taxable income on the trust preferred securities for a
calendar year should be reported to U.S. Holders on the appropriate forms by the
following January 31st.
Backup Withholding
Payments made on, and proceeds from the sale of, the trust preferred
securities may be subject to a "backup" withholding tax of 31% unless you comply
with certain identification or exemption requirements. Any amounts so withheld
will be allowed as a credit against your income tax liability, or refunded,
provided the required information is provided to the IRS.
The preceding discussion is only a summary and does not address the
consequences to a particular person of the purchase, ownership and disposition
of the trust preferred securities. You are urged to contact your own tax advisor
to determine your particular tax consequences.
Possible Tax Law Changes
In 1996 and 1997, the Clinton Administration proposed to amend the Internal
Revenue Code of 1986, as amended, (the "Code") to deny deductions of interest on
instruments with features similar to those of the junior subordinated debentures
when issued under arrangements similar to the issuer trust. Congress did not
pass that proposal. The Clinton Administration did not include this proposal in
its fiscal year 1999 budget proposal. However, we make no assurance that future
legislative proposals, regulations, official administrative pronouncements or
judicial decisions will not affect our ability to deduct interest on the junior
subordinated debentures. Such a change could give rise to a tax event, which
may permit us, upon approval of the Federal Reserve if then required under its
applicable capital guidelines or policies, to cause a redemption of the trust
preferred securities, as described more fully under "Description of Trust
Preferred Securities--Redemption."
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CERTAIN ERISA CONSIDERATIONS
We and certain of our affiliates may each be considered a "party in
interest" within the meaning of the Employee Retirement Income Security Act of
1974 ("ERISA"), and any amendments to ERISA, or a "disqualified person" within
the meaning of Section 4975 of the Code with respect to many employee benefit
plans that are subject to ERISA and individual retirement accounts ("IRAs"). The
purchase of the trust preferred securities by an employee benefit plan or IRA
that is subject to the fiduciary responsibility provisions of ERISA or the
prohibited transaction provisions of Section 4975(e)(1) of the Code and with
respect to which we, or any of our affiliates are service providers (or
otherwise a party in interest or a disqualified person), may constitute or
result in a prohibited transaction under ERISA or Section 4975 of the Code,
unless the trust preferred securities are acquired pursuant to and in accordance
with an applicable exemption. Any pension or other employee benefit plan,
fiduciary or IRA holder, proposing to acquire any trust preferred securities for
this type of plan or IRA should consult with legal counsel.
UNDERWRITING
Subject to the terms and conditions of the underwriting agreement, dated
February 24, 2000, among us, the Trust, Legg Mason Wood Walker, Incorporated and
Ferris, Baker Watts, Incorporated, as the representatives of the underwriters,
the Trust has agreed to sell to the underwriters, and the underwriters have
severally agreed to purchase from the Trust, the following respective aggregate
liquidation amounts of trust preferred securities at the public offering price
less the underwriting discounts and commissions provided on the cover page of
this prospectus:
Number of Trust
Underwriter Preferred Securities
----------- ---------------------
Legg Mason Wood Walker, Incorporated 600,000
Ferris, Baker Watts, Incorporated 600,000
---------
Total 1,200,000
=========
The underwriting agreement provides that the obligations of the
underwriters are subject to certain conditions precedent and that the
underwriters will purchase all of the trust preferred securities offered if any
of the trust preferred securities are purchased.
In the event of a default by an underwriter, the underwriting agreement
provides that, in certain circumstances, purchase commitments of the
nondefaulting underwriters may be increased, or the underwriting agreement may
be determined. The underwriters may reject orders in whole or in part and
withdraw, cancel, or modify the offer without notice.
The underwriters also may impose a penalty bid on certain selling group
members. This means that if the underwriters purchase trust preferred
securities in the open market to reduce the underwriter's short position or to
stabilize the price of the trust preferred securities, it may reclaim the amount
of the selling concession from the selling group members who sold those trust
preferred securities as part of the offering.
The underwriters have advised us and the Trust that they propose to offer
the trust preferred securities to the public at the public offering price
provided on the cover page of this prospectus and to certain dealers at the
price less a concession not in excess of $0.50 per trust preferred security.
The underwriters may allow, and the dealers may reallow, a concession not in
excess of $0.45 per trust preferred security to certain other dealers. After
the public offering, the offering price and other selling terms may be changed
by the underwriters.
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In connection with this offering, the underwriters and any selling group
members and their respective affiliates may engage in transactions effected in
accordance with Rule 104 of SEC Regulation M that are intended to stabilize,
maintain or otherwise affect the market price of the trust preferred securities.
The transactions may include over-allotment transactions in which the
underwriters create a short position for their own account by selling more trust
preferred securities than they are committed to purchase from the Trust. In this
case, to cover all or part of the short position, the underwriters may purchase
trust preferred securities in the open market following the initial offering of
the trust preferred securities. In connection with this offering, certain
underwriters (and selling group members) may engage in passive market making
transactions in the trust preferred securities on the Nasdaq National Market in
accordance with Rule 103 of SEC Regulation M. The underwriters also may engage
in stabilizing transactions in which they bid for, and purchase, trust 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 trust preferred securities. The underwriters also may reclaim any selling
concessions allowed to an underwriter or dealer if the underwriters repurchase
trust preferred securities distributed by that underwriter or dealer. Any of
these transactions may result in the maintenance of a price for the trust
preferred securities at a level above that which might otherwise prevail in the
open market. We do not, nor do any of the underwriters, make any representation
or prediction as to the direction or magnitude of any effect that the
transactions described above may have on the price of the trust preferred
securities. The underwriters are not required to engage in any of these
transactions and, once begun, the transactions may be discontinued at any time
without notice.
In view of the fact that the proceeds from the sale of the trust preferred
securities will be used to purchase our junior subordinated debentures, the
underwriting agreement provides that we will pay as compensation for the
underwriters' arranging the investment of the proceeds, an amount of $0.875
per trust preferred security.
Because the National Association of Securities Dealers, Inc. ("NASD") is
expected to view the trust preferred securities as interests in a direct
participation program, this offering is being made in compliance with the
applicable provisions of the NASD's Conduct Rules.
The trust preferred securities are a new issue of securities with no
established trading market. The representatives have advised the Trust and us
that they intend to make a market in the trust preferred securities. However,
the underwriters are not obligated to do so and the market making may be
interrupted or discontinued at any time without notice at the sole discretion of
each of the underwriters. We have applied to have the trust preferred securities
approved for quotation on the Nasdaq National Market but a requirement for
initial listing, and for continued listing, is the presence of three, and two,
market makers, respectively, for the trust preferred securities, and the
presence of a third market maker cannot be assured. Accordingly, no assurance
can be given as to the development or liquidity of any market for the trust
preferred securities.
We have agreed to indemnify the underwriters against certain liabilities,
including liabilities under the Securities Act.
The representatives and certain of the other underwriters have in the past,
and may in the future perform various services for us, including investment
banking services, for which they have and may receive customary fees.
VALIDITY OF SECURITIES
The validity of the guarantee and the junior subordinated debentures and
certain tax matters will be passed upon for us by our counsel, Muldoon, Murphy &
Faucette LLP, Washington, D.C., and certain other legal matters will be passed
upon for the underwriters by Gordon, Feinblatt, Rothman, Hoffberger & Hollander,
LLC, Baltimore, Maryland. Certain matters of Delaware law relating to the
validity of the trust preferred securities, the enforceability of the trust
agreement and the creation of the Trust will be passed upon by Richards, Layton
& Finger, P.A., as special Delaware counsel to us and the Trust. Muldoon, Murphy
& Faucette LLP and Gordon, Feinblatt, Rothman, Hoffberger & Hollander, LLC will
rely as to certain matters of Delaware law on the opinion of Richards, Layton &
Finger, P.A.
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EXPERTS
The financial statements incorporated in this Prospectus by Reference to
the Annual Report on Form 10-K for the year ended December 31, 1999, have been
so incorporated in reliance on the report of PricewaterhouseCoopers LLP
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
WHERE YOU CAN FIND MORE INFORMATION
We are subject to the informational requirements of the Securities Exchange
Act of 1934, as amended, and any amendments to the Securities Exchange Act of
1934, as amended, and in accordance with the Securities Exchange Act of 1934, as
amended, we file reports, proxy statements, information statements and other
information with the SEC. These reports, proxy statements and other information
can be inspected and copied at the public reference facilities of the SEC at
Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the regional
offices of the SEC located at 7 World Trade Center, 13th Floor, Suite 1300, New
York, New York 10048 and Suite 1400, Citicorp Center, 14th Floor, 50 West
Madison Street, Chicago, Illinois 60661. You may obtain information on the
operation of the public reference room by calling the SEC at 1-800-SEC-0330.
Copies of this material can also be obtained at prescribed rates by writing to
the Public Reference Section of the SEC at 450 Fifth Street, N.W., Washington,
D.C. 20549. This material also may be accessed electronically by means of the
SEC's home page on the Internet at www.sec.gov.
Our common stock trades on the Nasdaq National Market under the symbol
"PBKS." Documents filed by us with the SEC also can be inspected at the offices
of NASD, 1735 K Street, N.W., Washington, D.C. 20006.
We and the Trust have filed a registration statement on Form S-3 with the
SEC under the Securities Act in connection with the offering. This prospectus
does not contain all of the information provided in the registration statement,
certain parts of which are omitted in accordance with the rules and regulations
of the SEC. The registration statement, including any amendments, schedules and
exhibits, is available for inspection and copying as provided above.
Statements contained in this prospectus as to the contents of any contract
or other document referred to in this document include all material terms of the
contract or other documents but are not necessarily complete, and in each
instance reference is made to the copy of the contract or other document which
may have been filed as an exhibit to the registration statement, each statement
being qualified in all respects by the reference.
No separate financial statements of the Trust have been included or
incorporated by reference in this document. We do not, nor does the Trust,
consider that the financial statements would be material to holders of the trust
preferred securities because the Trust is a newly formed special purpose entity,
has no operating history or independent operations and is not engaged in and
does not propose to engage in any activity other than holding as trust assets
the junior subordinated debentures and issuing the trust preferred securities
and common securities. See "Provident Trust II," "Description of Trust Preferred
Securities," "Description of Junior Subordinated Debentures" and "Description of
Guarantee." In addition, we do not expect that the Trust will be filing reports
under the Securities Exchange Act of 1934, as amended, with the SEC.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
Our Annual Report on Form 10-K for the fiscal year ended December 31, 1999,
as amended, is incorporated into this prospectus by reference.
In addition, all subsequent documents filed with the SEC by us pursuant
Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as
amended, after the date of this prospectus shall be deemed to be incorporated by
reference into this prospectus and to be a part of this prospectus from the date
of filing the
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documents. Any statement contained in this prospectus or in a document
incorporated or deemed to be incorporated by reference in this prospectus or any
other document shall be deemed to be modified or superseded for purposes of this
prospectus to the extent that a statement contained in this prospectus or any
other document or in any subsequently filed document which also is or is deemed
to be incorporated by reference in this prospectus modified or supersedes the
statement. Any statement so modified or superseded shall not be deemed to
constitute a part of this prospectus, except as so modified or superseded.
This prospectus incorporates documents by reference which are not presented
here or delivered with this document. These documents (excluding exhibits unless
specifically incorporated in these documents) are available without charge upon
written or oral request to Provident Bankshares Corporation, 114 East Lexington
Street, Baltimore, Maryland 21202, Attention: Corporate Secretary, telephone:
(410) 277-7000.
You should rely only on the information contained or incorporated by
reference in this prospectus. We have not authorized anyone to provide you with
information that is different from what is contained in this prospectus. This
prospectus is dated February 24, 2000. You should not assume the information
contained in this prospectus is accurate as of any date other than that date.
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING INFORMATION
This prospectus (including information included or incorporated by
reference in this prospectus) contains forward-looking statements with respect
to our financial condition, results of operations, plans, objectives, future
performance and business, including statements preceded by, followed by or that
include the words, "believes," "expects," "anticipates" or similar expressions.
These forward-looking statements involve certain risks and uncertainties
and may relate to our future operating results.
Factors that may cause actual results to differ materially from those
contemplated by these forward-looking statements include, among others, the
following possibilities:
. earnings following acquisitions being lower than expected;
. a significant increase in competitive pressure among depository and
other financial institutions;
. costs or difficulties related to the integration of the acquired
businesses being greater than expected;
. changes in the interest rate environment resulting in reduced margins;
. general economic or business conditions, either nationally or in
Maryland, Virginia or Pennsylvania, being less favorable than
expected, resulting in, among other things, a deterioration in credit
quality or a reduced demand for credit;
. legislative or regulatory changes adversely affecting the businesses
in which we will be engaged;
. changes in the securities markets; and
. changes in the banking industry, including, the effects of
consolidation resulting from possible mergers of financial
institutions.
For other matters that may affect operating results you should carefully
consider the "Risk Factors" beginning on page 7.
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1,200,000 Trust Preferred Securities
Provident Trust II
10% Trust Preferred Securities
guaranteed by
PROVIDENT BANKSHARES
--------------------
CORPORATION
----------------
PROSPECTUS
----------------
Legg Mason Wood Walker Ferris, Baker Watts
Incorporated Incorporated
February 24, 2000
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