<PAGE>
THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT IS NOT COMPLETE AND MAY BE
CHANGED. THIS PROSPECTUS SUPPLEMENT RELATES TO SECURITIES THAT ARE THE SUBJECT
OF AN EFFECTIVE REGISTRATION STATEMENT. THIS PROSPECTUS SUPPLEMENT IS NOT AN
OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
Subject to completion, dated November 10, 1998
Filed Pursuant to Rule 424(b)(3)
Registration Nos. 333-56015
333-56015-01
Prospectus Supplement
To Prospectus dated October 29, 1998
$50,000,000
WSFS CAPITAL TRUST I
Floating Rate Cumulative Trust Preferred Securities
(Liquidation amount $1,000 per Trust Preferred Security)
fully and unconditionally guaranteed, based on several obligations, by
WSFS FINANCIAL CORPORATION
A brief description of the trust preferred securities can be found under
"Summary" in this prospectus supplement. The trust preferred securities will
not be listed on any national securities exchange or quoted on the Nasdaq Stock
Market.
Distributions on the trust preferred securities will be payable at an
annual rate, reset quarterly, equal to 3-month LIBOR plus basis points.
----------------
We urge you to carefully read the discussion under "Risk Factors"
beginning on page S-9, where we describe the specific risks associated with
these trust preferred securities, along with this prospectus supplement and the
accompanying prospectus, before you make your investment decision.
----------------
These securities are not savings accounts, deposits or other obligations
of any bank and are not insured by the Federal Deposit Insurance Corporation or
any other governmental agency.
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 supplement or the accompanying
prospectus. Any representation to the contrary is a criminal offense.
<TABLE>
<CAPTION>
Public Underwriting Proceeds
Offering Price Commission to the Trust
---------------- -------------- -------------
<S> <C> <C> <C>
Per trust preferred security ......... $ 1,000 (1) $ 1,000
Total ................................ $50,000,000 (1) $50,000,000
</TABLE>
- ------------
(1) Since the proceeds of the sale of the trust preferred securities will be
invested in junior subordinated debentures of WSFS Financial Corporation,
the Company will pay the underwriting commissions of $ per trust
preferred security (or $ for all securities).
----------------
Sandler O'Neill & Partners, L.P.
----------------
The date of this prospectus supplement is , 1998
<PAGE>
- -------------------------------------------------------------------------------
Forward-Looking Statements
Some of the information presented in or incorporated by reference into
this prospectus supplement and accompanying prospectus contains
"forward-looking" statements within the meaning of the Private Securities
Litigation Reform Act. Although WSFS Financial Corporation believes that the
expectations expressed in these forward-looking statements are based on
reasonable assumptions within the bounds of its knowledge of its business and
operations, it is possible that actual results may differ materially from these
expectations. Accordingly, investors are cautioned not to place undue reliance
on these forward-looking statements. Factors that could cause actual results to
differ from expectations include:
o the growth of the economy
o interest rate movements
o timely development of technology enhancements for the Company's
products and operating systems
o the impact of competitive products, services and pricing
o customer-based requirements
o legislative and regulatory changes affecting the banking industry
- -------------------------------------------------------------------------------
<PAGE>
SUMMARY
The following information supplements, and should be read together
with, the information contained in this prospectus supplement and the
accompanying prospectus. This summary highlights selected information from this
prospectus supplement and the accompanying prospectus to help you understand the
trust preferred securities. You should carefully read this prospectus supplement
and the accompanying prospectus to understand fully the terms of the trust
preferred securities, as well as the tax and other considerations that are
important to you in making a decision about whether to invest in the trust
preferred securities. You should pay special attention to the "Risk Factors"
section beginning on page S-9 of this prospectus supplement to determine whether
an investment in the trust preferred securities is appropriate for you.
Capitalized terms used in this prospectus supplement that are not defined herein
have the meanings given to them in the accompanying prospectus.
The Company
WSFS Financial Corporation, also referred to as the "Company," is the
parent company of Wilmington Savings Fund Society, Federal Savings Bank (the
"Bank"). Founded in 1832, the Bank is one of the oldest financial institutions
in the country and currently conducts its business from 18 branches in Northern
Delaware and Southeastern Pennsylvania. The Company's headquarters is located at
838 Market Street, Wilmington, Delaware 19899, and its telephone number is (302)
792-6000.
The Trust
WSFS Capital Trust I (the "Trust") is a Delaware business trust formed
in May 1998. The Trust will sell its floating rate cumulative trust preferred
securities (the "Trust Preferred Securities") to the public and its common
securities (the "Common Securities") to the Company. The Trust will use the
proceeds from these sales to buy a series of Floating Rate Junior Subordinated
Deferrable Interest Debentures due , 2028 (the "Junior Subordinated
Debentures") from the Company with the same financial terms and payment
obligations as the Trust Preferred Securities.
There are five trustees of the Trust. Three of the trustees are
officers of the Company (the "Administrative Trustees"). Wilmington Trust
Company, Wilmington, Delaware, will serve as Delaware Trustee and Property
Trustee under the Trust Agreement. Wilmington Trust Company is also serving as
the Debenture Trustee under the Indenture and Guarantee Trustee under the
Guarantee.
The Offering
Securities Offered................ 50,000 Floating Rate Cumulative Trust
Preferred Securities (Liquidation amount
$1,000 per Trust Preferred Security).
Offering Price.................... $1,000 per Trust Preferred Security
S-1
<PAGE>
Distributions..................... If you purchase the Trust Preferred
Securities, you are entitled to receive
cumulative cash distributions at a
variable rate, reset quarterly, equal to
3-month LIBOR (as defined herein) plus basis
points (the "Distribution Rate") of the
liquidation amount of $1,000 per Trust
Preferred Security. Distributions will
accumulate from the date the Trust issues
the Trust Preferred Securities and will be
paid quarterly in arrears on March , June
, September and December of each year,
beginning , 1998.
Deferral of Distributions......... So long as no event of default under the
Junior Subordinated Debentures has occurred
and is continuing, the Company has the
right, at one or more times, to defer
interest payments on the Junior Subordinated
Debentures for up to 20 consecutive
quarters, but not beyond the maturity date
of the Junior Subordinated Debentures. See
"Certain Terms of Junior Subordinated
Debentures -- Option to Defer Interest
Payments." During any period in which the
Company defers interest payments on the
Junior Subordinated Debentures, the Company
will not be permitted (with limited
exceptions) to:
o pay a dividend or make any other payment
or distribution on its capital stock;
o redeem, purchase or make a liquidation
payment on any of its capital stock;
o make an interest, principal or premium
payment, or repurchase or redeem, any of
its debt securities that rank equal with
or junior to the Junior Subordinated
Debentures.
If the Company defers interest payments on
the Junior Subordinated Debentures, the
Trust will also defer distributions on the
Trust Preferred Securities. During this
deferral period, you will still accumulate
distributions, plus you will accumulate
additional distributions at the
then-applicable Distribution Rate,
compounded quarterly, on any accrued and
unpaid distributions (to the extent
permitted by law). You will also be required
to accrue interest income and include it in
your gross income for United States federal
income
S-2
<PAGE>
tax purposes before you receive any cash
distributions, even if you are a cash basis
taxpayer.
Ranking........................... The Company's obligations under the Junior
Subordinated Debentures are subject to
payment on its Senior and Subordinated Debt
(as defined herein) and will be effectively
subordinated to all existing and future
liabilities and obligations of the Company's
subsidiaries. As of June 30, 1998, the
aggregate amount of Senior and Subordinated
Debt that ranked senior to the Junior
Subordinated Debentures was approximately
$29.1 million.
The Company will, on a subordinated basis,
fully and unconditionally guarantee the
Trust Preferred Securities (the "Guarantee")
based on:
o its obligations to make payments on the
Junior Subordinated Debentures;
o its obligations under the Guarantee; and
o its obligations under the Amended and
Restated Trust Agreement of WSFS Capital
Trust I (the "Trust Agreement"), which
also sets forth the terms of the Trust.
If the Company does not make a payment on
the Junior Subordinated Debentures, the
Trust will not have sufficient funds to make
payments on the Trust Preferred Securities.
The Guarantee does not cover payments when
the Trust does not have sufficient funds.
For a discussion of the Company's
obligations listed above, see "Certain Terms
of Guarantee" in this prospectus supplement
and "Description of Guarantees" and
"Relationship Among the Trust Preferred
Securities, the Junior Subordinated
Debentures and the Guarantees" in the
accompanying prospectus.
Distribution of Junior Subordinate
Debentures...................... At any time, the Company will have the
right, subject to the receipt of any consent
required by the Federal Reserve, to
liquidate the Trust and cause the Junior
Subordinated Debentures to be distributed to
the holders
S-3
<PAGE>
of the Trust Preferred Securities and the
Common Securities in liquidation of the
Trust.
If the Company elects to liquidate the Trust
and thereby causes the Junior Subordinated
Debentures to be distributed to holders of
the Trust Securities in liquidation of the
Trust, the Company shall have the right,
subject to the receipt of any consent
required from the Federal Reserve, to redeem
such Junior Subordinated Debentures to a
date not earlier than , 2003. In
addition, the Company may redeem the Junior
Subordinated Debentures at its option, in
whole but not in part, if:
o certain tax events occur,
o there is change in the way the Junior
Subordinated Debentures are treated for
regulatory capital purposes, or
o if there is a change in the Investment
Company Act of 1940 that requires the
Trust to register under that law.
In the event of the involuntary or voluntary
liquidation, dissolution, winding up or
termination of the Trust in which the Junior
Subordinated Debentures are not distributed
to you, you, as the holders of the Trust
Preferred Securities, will be entitled to
receive for each Trust Preferred Security a
liquidation amount of $1,000 plus accrued
and unpaid distributions thereon (including
interest thereon) to the date of payment.
The Trust will be able to make this
distribution of cash only if the Junior
Subordinated Debentures are redeemed by the
Company.
Maturity and Redemption........... The Junior Subordinated Debentures mature on
, 2028, which date may be shortened
to a date not earlier than , 2003
if certain conditions are met.
The Trust must redeem the Trust Preferred
Securities when the Junior Subordinated
Debentures are paid at maturity or upon any
earlier redemption. The Company has the
option at any time on or after ,
2003 to redeem the Junior Subordinated
Debentures, in whole or in part, subject to
certain conditions. In addition, the
S-4
<PAGE>
Company may redeem the Junior Subordinated
Debentures at its option, in whole but not
in part:
o if certain tax events occur,
o if there is a change in the way the Junior
Subordinated Debentures are treated for
regulatory capital purposes, or
o if there is a change in the Investment
Company Act of 1940 that requires the
Trust to register under that law,
in each case, subject to the receipt of any
consent that may be required from the
Federal Reserve. See "Certain Terms of Trust
Preferred Securities -- Special Event
Redemption." Upon any redemption of the
Junior Subordinated Debentures, you will
receive the liquidation amount of $1,000 per
Trust Preferred Security plus any accrued
and unpaid distributions to the date of
redemption (the "Redemption Price").
Absence of Market for the
Trust Preferred Securities...... The Company does not intend to seek a
listing for the Trust Preferred Securities
on any national securities exchange or on
the Nasdaq Stock Market. The Company does
not expect an active trading market to
develop for the Trust Preferred Securities.
Use of Proceeds................... The Trust will invest all of the proceeds
from the sale of the Trust Preferred
Securities in Junior Subordinated
Debentures. The Company intends to use the
proceeds from the Junior Subordinated
Debentures for general corporate purposes,
including the redemption of its 11% Senior
Notes due 2005 on or after December 31,
1998.
ERISA Considerations.............. For a discussion of certain prohibited
transactions and fiduciary duty issues
pertaining to purchases by or on behalf of
an employee benefit plan, see "ERISA
Considerations."
Voting Rights..................... The holders of the Trust Preferred
Securities will have no voting rights,
except in limited circumstances. See
"Description of Trust Preferred Securities
-- Voting
S-5
<PAGE>
Rights; Amendment of Each Trust Agreement"
in the accompanying prospectus.
Book Entry........................ The Trust Preferred Securities will be
represented by one or more global securities
that will be deposited with and registered
in the name of The Depository Trust Company,
New York, New York ("DTC") or its nominee.
This means that you will not receive a
certificate for the Trust Preferred
Securities.
The Trust expects that the Trust Preferred
Securities will be ready for delivery though
DTC on or about , 1998.
Risk Factors...................... For a discussion of considerations relevant
to an investment in the Trust Preferred
Securities which should be carefully
considered by prospective investors, see
"Risk Factors."
S-6
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
The following summary consolidated financial information of the Company
and its Subsidiaries is qualified in its entirety by the information included in
the documents incorporated by reference in the accompanying prospectus,
including the consolidated financial statements of the Company and related notes
included in the Company's Annual Report on Form 10-K for the year ended December
31, 1997 and its unaudited consolidated financial statements contained in its
Quarterly Report on Form 10-Q for the quarter ended June 30, 1998. Interim
financial data, in the opinion of management, include all adjustments
(consisting only of normal recurring adjustments) considered necessary for a
fair presentation. The results of operations for an interim period are not
necessarily indicative of results that may be expected for a full year or any
other interim period.
<TABLE>
<CAPTION>
At or for the
Six Months Ended At or for the
June 30, Years Ended December 31,
---------------------- -------------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ---------- ---------- ---------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Net interest income........... $ 19,142 $ 20,444 $ 40,118 $ 42,361 $ 41,869 $ 36,014 $ 33,812
Provision for loan losses 749 673 1,533 1,687 1,403 1,683 2,620
Other income (1).............. 11,860 8,821 19,616 11,193 22,615 7,210 7,970
Other expenses................ 18,244 16,893 35,236 32,345 37,341 34,483 34,485
Income before taxes........... 12,009 11,699 22,965 19,522 25,740 7,058 4,677
Net income (1)................ 8,887 8,237 16,389 16,356 27,008 8,070 6,359
Earnings per share:
Basic....................... 0.71 0.66 1.31 1.18 1.86 0.56 0.90
Diluted..................... 0.70 0.65 1.29 1.16 1.84 0.55 0.44
Balance Sheet Data:
Total assets.................. $1,551,631 $1,508,540 $1,515,217 $1,357,635 $1,218,826 $1,195,686 $ 994,692
Net loans (2)................. 732,482 782,519 764,463 772,847 792,184 710,776 687,492
Vehicles under operating
leases, net................ 177,599 128,308 172,115 52,036 -- -- --
Investment securities (3) 41,676 44,205 78,655 18,933 28,772 64,144 54,346
Investment in reverse
mortgages, net............. 31,923 33,501 32,109 35,796 35,614 32,172 24,913
Other investments............. 58,435 69,921 74,523 47,337 52,128 44,249 110,816
Mortgage-backed securities (3) 440,173 391,832 330,274 365,252 237,132 262,748 43,750
Deposits (1).................. 786,211 755,463 766,966 744,886 724,030 809,707 806,605
Borrowings (4)................ 647,060 650,987 615,578 489,819 370,795 295,244 107,864
11% Senior notes due 2005 29,100 29,100 29,100 29,100 29,850 32,000 32,000
Stockholders' equity.......... 95,457 78,511 86,759 75,788 73,546 45,274 38,693
Number of full-service
branches (1)............... 18 16 16 16 14 16 16
Performance Ratios:
Return on average equity 19.24% 21.26% 20.25% 21.19% 45.68% 19.64% 18.12%
Return on average assets 1.17 1.13 1.11 1.28 2.21 0.73 0.65
Net interest margin........... 3.02 3.16 3.13 3.56 3.57 3.39 3.64
Capital Ratios:
Average equity to average
assets...................... 6.10% 5.31% 5.48% 6.06% 4.84% 3.69% 3.57%
Core capital.................. 7.37 6.41 6.93 7.06 7.85 6.25 6.39
Risk-based capital............ 12.28 10.45 11.05 11.07 12.29 10.09 9.74
</TABLE>
(footnotes on following page)
S-7
<PAGE>
<TABLE>
<CAPTION>
At or for the
Six Months Ended At or for the
June 30, Years Ended December 31,
---------------------- -------------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ---------- ---------- ---------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Asset Quality Ratios:
Allowance for loan/lease
losses to total gross
loans/leases................ 2.77% 2.64% 2.61% 2.84% 2.90% 2.89% 3.26%
Nonaccruing
loans/nonperforming
leases to total
loans/leases................ 0.99 1.94 0.95 1.34 1.30 2.70 4.74
Nonperforming assets to
total assets................ 0.82 1.36 0.92 1.42 1.92 3.47 5.14
Allowance for
loan/lease losses to
nonaccruing loans/leases.... 267.64 130.29 273.06 197.04 201.84 97.79 63.23
Net charge-offs to average
gross loans outstanding, net
of unearned income........... 0.21 0.27 0.19 0.21 0.20 0.51 0.71
Ratio of Earnings to Fixed
Charges:
Including interest on
deposits.................... 1.34x 1.34x 1.33x 1.33x 1.44x 1.16x 1.12x
Excluding interest on
deposits.................... 1.63 1.62 1.59 1.70 2.06 1.40 1.49
</TABLE>
- -------------
(1) During 1995, the Company's wholly-owned subsidiary, Fidelity Federal
Savings and Loan Association, sold the deposits of four branches
resulting in a net pre-tax gain of $14.2 million and an after-tax gain
of $12.4 million. The remaining assets, liabilities and equity were
merged into the Company. Additionally, during 1995 the Company opened
two new branches with deposits acquired from other institutions. During
1996, the Company opened two more new branches.
(2) Includes loans held-for-sale.
(3) Includes securities available-for-sale.
(4) Borrowings consist of Federal Home Loan Bank advances, securities sold
under agreement to repurchase and municipal bond repurchase
obligations. The municipal bond repurchase obligation was called in
1996.
S-8
<PAGE>
RISK FACTORS
You should carefully read the following risk factors and the other
sections of this prospectus supplement and the accompanying prospectus before
purchasing any Trust Preferred Securities. You should consider all of these risk
factors to be important. The risk factors below do not necessarily appear in
their order of importance.
Ranking of the Company's Obligations Under the Junior Subordinated Debentures
and the Guarantee
The Company's obligations under the Guarantee are unsecured and will
rank in priority of payment:
o junior to all of the Company's Senior and Subordinated Debt;
o equal with the Company's obligations under any other similar
guarantees that the Company may issue in the future; and
o senior to the Company's common stock.
The Company's obligations under the Junior Subordinated Debentures are
unsecured and will rank junior in priority of payment to the Company's Senior
and Subordinated Debt. At June 30, 1998, the aggregate amount of Senior and
Subordinated Debt that would have ranked senior to the Junior Subordinated
Debentures was approximately $29.1 million. Because the Company is a holding
company, its right to participate in any distribution of assets upon a
subsidiary's liquidation or reorganization or otherwise is subject to the prior
claims of creditors of that subsidiary except to the extent that the Company may
itself be recognized as a creditor of that subsidiary; therefore, the ability of
the holders of the Trust Preferred Securities to benefit indirectly from such a
distribution will also be limited. There are various legal limitations on the
extent to which the Company's subsidiaries may extend credit, pay dividends or
otherwise supply funds to the Company or certain of its other subsidiaries. The
Company's obligations will also effectively rank junior to all existing and
future liabilities and obligations of the Company's subsidiaries, including
liabilities and obligations to depositors.
The Trust Preferred Securities, the Junior Subordinated Debentures and
the Guarantee do not limit the ability of the Company or any of its subsidiaries
to incur additional debt, including debt that ranks senior to the Junior
Subordinated Debentures and the Guarantee. For more information please refer to
"Description of Guarantees -- Status of the Guarantees," and "Description of
Junior Subordinated Debentures -- Subordination" in the accompanying prospectus.
S-9
<PAGE>
Trust Preferred Securities Guarantee Only Covers Payments if the Trust Has Cash
Available; Direct Action
The ability of the Trust to timely pay distributions on the Trust
Preferred Securities, the redemption price of the Trust Preferred Securities and
the liquidation amount of $1,000 per Trust Preferred Security depends entirely
upon the Company's making the related payments on the Junior Subordinated
Debentures when due.
If the Company defaults on its obligation to pay principal of or
interest on the Junior Subordinated Debentures, the Trust will not have
sufficient funds to pay distributions or the $1,000 liquidation amount per Trust
Preferred Security. As a result, you will not be able to rely upon the Guarantee
for payment of these amounts. Instead, you
o may directly sue the Company or seek other remedies to collect your
pro rata share of payments owed; or
o rely on the Property Trustee to enforce the Trust's rights under
the Junior Subordinated Debentures.
For more information please refer to "Description of Junior Subordinated
Debentures -- Debenture Events of Default" and "Description of Guarantees --
Status of the Guarantee" in the accompanying prospectus.
Option to Defer Interest Payment; Tax Consequences; Market Price Consequences
So long as no event of default under the Junior Subordinated Debentures
has occurred and is continuing, the Company has the right, at one or more times,
to defer interest payments on the Junior Subordinated Debentures for up to 20
consecutive quarters, but not beyond the maturity date of the Junior
Subordinated Debentures.
If the Company defers payments of interest on the Junior Subordinated
Debentures, the Trust would defer distributions on the Trust Preferred
Securities during any deferral period. However, you would still accumulate
distributions at the then-applicable Distribution Rate, compounded quarterly, to
the extent permitted by law.
During a deferral period, you will be required to accrue interest
income for United States federal income tax purposes with respect to your pro
rata share of the Junior Subordinated Debentures held by the Trust. As a result,
you must include the accrued interest as interest income for United States
federal income tax purposes before you receive any cash distributions. You will
also not receive a cash distribution related to any accrued and unpaid interest
from the Trust if you sell the Trust Preferred Securities before the end of any
deferral period or the record date relating to such cash distributions.
S-10
<PAGE>
During a deferral period, accrued but unpaid distributions will
increase your tax basis in the Trust Preferred Securities. 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.
The Company has no current intention of exercising its right to defer
interest payments on the Junior Subordinated Debentures. However, if the Company
exercises its right in the future, the market price of the Trust Preferred
Securities is likely to be affected. The Trust Preferred Securities may trade at
a price that does not fully reflect the value of accrued but unpaid interest on
the Junior Subordinated Debentures. If you sell the Trust Preferred Securities
during an interest deferral period, you may not receive the same return on
investment as someone else who continues to hold the Trust Preferred Securities.
As a result of the existence of the Company's right to defer interest payments,
the market price of the Trust Preferred Securities (which represent preferred
beneficial interests in the Trust) may be more volatile than the market prices
of other debt securities that are not subject to such optional deferrals.
See "Certain Federal Income Tax Consequences" for more information
regarding the tax consequences of purchasing the Trust Preferred Securities.
Tax Event Redemption, Investment Company Event Redemption or Capital Treatment
Event Redemption
At any time a Tax Event, Investment Company Event or Capital Treatment
Event (as these terms are defined under "Certain Terms of Trust Preferred
Securities -- Special Event Redemption" and each a "Special Event") occurs and
is continuing, the Company has the right, subject to the receipt of any consent
required from the Federal Reserve, to redeem the Junior Subordinated Debentures,
in whole (but not in part). If such a redemption happens, the Trust will use the
cash it receives on the redemption of the Junior Subordinated Debentures to
redeem an equivalent amount of the Trust Preferred and Common Securities on a
pro rata basis within 90 days of the event. See "Certain Terms of Trust
Preferred Securities -- Special Event Redemption" for more information.
Pending Tax Litigation
It has been reported that the Internal Revenue Service ("IRS") recently
challenged another company's deduction for interest paid on a debt instrument
similar in some respects to the Junior Subordinated Debentures and issued to an
entity similar to the Trust. Based on available information, the Company and the
Trust do not believe that this challenge will affect the Company's ability to
deduct interest payments on the Junior Subordinated Debentures. However, you
should be aware that further developments favoring the IRS's challenge, or other
unrelated developments, could cause a Tax Event. Laws and regulations have also
been proposed in the past which, if adopted retroactively, could also cause a
Tax Event.
S-11
<PAGE>
Distribution of Junior Subordinated Debentures to Holders of Trust Preferred
Securities
Because you may receive Junior Subordinated Debentures, you must also
make an investment decision with regard to the Junior Subordinated Debentures.
You should carefully review all the information regarding the Junior
Subordinated Debentures contained in this prospectus supplement and the
accompanying prospectus.
The Trust may be terminated before its expiration on , 2028,
if certain events occur. In addition, the Company has the option to terminate
the Trust at any time. As a result, and subject to the terms of the Trust
Agreement, the trustees may distribute the Junior Subordinated Debentures to the
holders of Trust Preferred Securities and Common Securities. The Junior
Subordinated Debentures have substantially the same terms and conditions as the
Trust Preferred Securities in the Offering.
If the trustees distribute the Junior Subordinated Debentures after the
dissolution of the Trust, the Company may redeem the Junior Subordinated
Debentures to a date not earlier than , 2003, subject to the receipt of
any consent required by the Federal Reserve. See "Certain Terms of Junior
Subordinated Debentures -- Interest Rate and Maturity."
Under current United States federal income tax laws, a distribution of
Junior Subordinated Debentures to you on the dissolution of the Trust should not
be a taxable event to you. However, if the Trust is characterized for United
States federal income tax purposes as an association taxable as a corporation at
the time it is dissolved, the distribution of Junior Subordinated Debentures to
you may be a taxable event to you. If there is a change in law, a distribution
of Junior Subordinated Debentures to you on the dissolution of the Trust could
be a taxable event to you.
The Company has no current intention of causing the termination of the
Trust and the distribution of the Junior Subordinated Debentures. However, there
are no restrictions on its ability to do so at any time. The Company anticipates
that it would consider exercising this right in the event that expenses
associated with maintaining the Trust were substantially greater than currently
expected, such as if a Special Event occurred. The Company cannot predict the
other circumstances under which this right would be exercised.
The Company cannot predict the market prices for the Junior
Subordinated Debentures that may be distributed. Accordingly, the Junior
Subordinated Debentures that you receive upon a distribution, or the Trust
Preferred Securities you hold pending such a distribution, may trade at a
discount to the price that you paid to purchase the Trust Preferred Securities.
See "Certain Federal Income Tax Consequences -- Receipt of Junior
Subordinated Debentures or Cash Upon Liquidation of the Trust" where we discuss
applicable United States federal income tax consequences.
S-12
<PAGE>
Shortening of Stated Maturity of Junior Subordinated Debentures
At the option of the Company, subject to the receipt of any consent
required from the Federal Reserve, the Junior Subordinated Debentures may be
redeemed, in whole or in part, at any time on or after , 2003, at a
redemption price equal to 100% of the principal amount to be redeemed plus any
accrued and unpaid interest to the redemption date. See "Certain Terms of Junior
Subordinated Debentures -- Redemption." You should assume that the Company will
exercise its redemption option if the Company is able to refinance at a lower
interest rate or it is otherwise in the interest of the Company to redeem the
Junior Subordinated Debentures. If Junior Subordinated Debentures are redeemed,
the Trust must redeem Trust Securities having an aggregate liquidation amount
equal to the aggregate principal amount of Junior Subordinated Debentures so
redeemed. See "Certain Terms of Trust Preferred Securities -- Redemption."
Lack of Market
The Company does not intend to seek a listing for the Trust Preferred
Securities (or for the Junior Subordinated Debentures that may be distributed on
liquidation of the Trust) on any national securities exchange or on the Nasdaq
Stock Market. Furthermore, an active trading market for the Trust Preferred
Securities (or the Junior Subordinated Debentures) is not expected to develop.
Market Prices
Neither the Company nor the Trust can give you any assurances as to the
market prices for Trust Preferred Securities or for Junior Subordinated
Debentures that may be distributed in exchange for Trust Preferred Securities
upon liquidation of the Trust. Accordingly, the Trust Preferred Securities that
an investor may purchase, whether pursuant to the offer made hereby or in the
secondary market, or the Junior Subordinated Debentures that a holder of Trust
Preferred Securities may receive on liquidation of the Trust, may trade at a
discount to the price that the investor paid to purchase the Trust Preferred
Securities offered hereby. As a result of the existence of the Company's right
to defer interest payments, the market price of the Trust Preferred Securities
may be more volatile than the market prices of other debt securities that are
not subject to such optional deferrals.
Limited Voting Rights
As holders of Trust Preferred Securities, you will have limited voting
rights. In general, only the Company can replace or remove any of the trustees.
However, if an event of default under the Trust Agreement is continuing, the
holders of at least a majority in liquidation amount of the Trust Preferred
Securities may replace the Property Trustee and the Delaware Trustee. See
"Description of Trust Preferred Securities -- Removal of Issuer Trustees," "--
Voting Rights; Amendment of Each Trust Agreement" and "Description of Junior
Subordinated Debentures -- Debenture Events of Default" in the accompanying
prospectus.
S-13
<PAGE>
Limited Covenants
The covenants in the Indenture are limited and there are no covenants
in the Trust Agreement. As a result, neither the Indenture nor the Trust
Agreement protects holders of Junior Subordinated Debentures, or Trust Preferred
Securities, respectively, in the event of a material adverse change in the
Company's financial condition or results of operations or limits the ability of
the Company or any subsidiary to incur additional indebtedness. Therefore, the
provisions of these governing instruments should not be considered a significant
factor in evaluating whether the Company will be able to comply with its
obligations under the Junior Subordinated Debentures or the Guarantee.
Potentially Adverse Impact of Interest Rates and Economic and Industry
Conditions
Like most savings institution holding companies, general economic and
other factors that influence market interest rates affect the Company's net
interest income and the Company's ability to respond to such rate changes.
General economic conditions also affect the credit quality of the Company's
assets. Adverse economic conditions may affect the ability of the Company's
borrowers to repay loans, particularly in the areas of commercial real estate
and consumer lending. To the extent that changes in interest rates and economic
conditions adversely affect the Company's financial condition and results of
operations, the Company's ability to make debt service payments on the Junior
Subordinated Debentures may be impaired.
Significant and rapid changes have occurred in the savings institution
industry in recent years, and the future of the industry is subject to various
uncertainties. The traditional role of savings institutions as the nation's
primary housing lenders is diminishing and savings institutions are subject to
increasing competition from commercial banks, mortgage bankers and others. The
savings institution industry also faces a volatile and uncertain regulatory
environment in which applicable laws, regulations and enforcement policies are
subject to significant change. There can be no assurance that changes in the
savings institution industry, regulatory and otherwise, will not adversely
affect the financial condition and results of operations of the Company and, as
a result, impair its ability to make debt service payments on the Junior
Subordinated Debentures.
Credit Risk
A significant source of risk for the Company arises from the
possibility that borrowers, guarantors and related parties may fail to repay
their loans or otherwise abide the terms of their loans. The Company has adopted
underwriting and credit monitoring procedures that management believes are
appropriate to minimize its credit risk. These policies include the initial
assessment of risk of nonpayment before deciding to make a loan, monitoring
loans, particularly loans where payments are not timely made, to determine the
borrower's status and the continual review of the level of the Bank's allowance
for loan losses. Such policies and procedures, however, may not prevent
unexpected credit losses that could materially affect the Company's results of
operations.
S-14
<PAGE>
Year 2000 Compliance
Year 2000 issues result from the inability of many computer programs or
computerized equipment to accurately calculate, store or use a date after
December 31, 1999. Since many programs only use a two digit field for input of
the year, the year 2000 may be interpreted as the year 1900. Correctly
identifying the year 2000 as a leap year may also be a problem. These
misidentifications could result in system failure or miscalculations causing
disruptions of operations, including a temporary inability to process
transactions, track important customer account information, provide convenient
access to this information, or engage in normal business operations.
The Company has completed an assessment of its core financial and
operational software systems and has determined that such systems are either
already compliant or has determined the necessary steps to make them compliant.
These tasks are scheduled for completion by December 1998 with the full year of
1999 available for testing. While addressing year 2000 issues will require
substantial effort, a large portion of the costs related to this issue will be
met from existing resources through reprioritizing of the technology department
initiatives, with the remainder representing incremental costs which are not
expected to be material. The Company has also assessed its vulnerability to the
failure of third parties with which it deals to properly address the year 2000
issues. While the Company believes that it has substantially addressed this
issue, there can be no assurance that it will not experience problems as a
result of year 2000 issues.
WSFS FINANCIAL CORPORATION
The Company is a savings and loan holding company headquartered in
Wilmington, Delaware. Substantially all of the Company's assets are held by its
subsidiary, the Bank. The long term goal of the Company is to be a
high-performing, customer-centered financial services company focused on its
core savings bank business in the Delaware Valley, while developing unique,
profitable niches in complementary businesses which may operate outside the
Bank's market area.
Founded in 1832, the Bank is one of the oldest financial institutions
in the country. It has operated under the same name and charter serving the
residents of Delaware for over 165 years. The Bank is the largest thrift
institution headquartered in Delaware and is the fourth largest financial
institution in the state on the basis of deposits traditionally garnered
in-market. The Company's market area is in the Mid-Atlantic regions of the
United States, characterized by a diversified manufacturing and service economy.
Banking operations are conducted from 18 retail banking offices in Northern
Delaware and Southeastern Pennsylvania. An additional nine locations are
scheduled to open over the next 24 months. The Bank provides cash management
services as well as residential real estate, commercial real estate and
commercial and consumer lending services, funding these activities primarily by
attracting retail deposits and borrowings. Deposits are insured by the Bank
Insurance Fund ("BIF") of the Federal Deposit Insurance Corporation ("FDIC").
Other operating subsidiaries of the Bank include WSFS Credit
Corporation, engaged in indirect motor vehicle leasing; 838 Investment Group,
Inc., which markets insurance products and securities; and Community Credit
Corporation, a consumer finance company specializing in consumer loans secured
by first and second mortgages.
S-15
<PAGE>
The Company's principal executive offices are located at 838 Market
Street, Wilmington, Delaware 19899, and its telephone number is (302) 792-6000.
Recent Developments
The following is comparative summary financial data for the Company's
results of operations for the periods ended September 30, 1998 and 1997.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------- ---------------------------
1998 1997 1998 1997
---------- ---------- ---------- ----------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C>
Statement of Operations Data:
Net interest income............................ $ 9,101 $ 10,100 $ 28,243 $ 30,544
Provision for loan losses...................... 189 400 938 1,073
Other income................................... 6,401 5,051 18,261 13,872
Other expenses................................. 9,085 8,738 27,329 25,631
Net income..................................... 4,609 4,280 13,496 12,517
Earnings per share:
Basic....................................... $ 0.37 $ 0.34 $ 1.08 $ 1.00
Diluted..................................... 0.37 0.34 1.07 0.98
Performance Ratios:
Net interest margin............................ 2.77% 3.15% 2.93% 3.16%
Return on average assets....................... 1.17 1.15 1.17 1.14
Return on average equity....................... 19.04 20.84 19.17 21.11
Efficiency ratio............................... 57.44 56.50 57.61 56.92
Overhead ratio................................. 2.28 2.34 2.28 2.29
</TABLE>
For the quarter ended September 30, 1998, the Company reported net
income of $4.6 million ($0.37 per diluted share) compared to $4.3 million in net
income ($0.34 per diluted share) for the quarter ended September 30, 1997. Net
income for the nine months ended September 30, 1998 was $13.5 million ($1.07 per
diluted share) compared to $12.5 million ($0.98 per diluted share) for the nine
months ended September 30, 1997. The improvement in net income during both the
three and nine months periods was due mainly to increased non-interest income
which offset a reduction in net interest income and an increase in non-interest
expense. The increase in non-interest income reflects the Company's ongoing
efforts to increase fee income including credit/debit card and ATM income. At
September 30, 1998, the Company was deriving fee income from a total of 373 ATM
machines including 262 ATMs which it was servicing on behalf of others. The
Company also recorded increases in income from operating leases which grew by
$597,000 (25%) and $2.5 million (41%) during the three and nine month periods,
respectively. The average balances of the Company's portfolio of operating
leases have grown to $180.6 million and $175.9 million for the three and nine
months ended September 30, 1998, respectively, compared to average balances of
$141.3 million and $124.2 million during the three and nine months ended
September 30, 1997, respectively. Because the Company funds its leasing
activities with borrowings, the growth in this
S-16
<PAGE>
portfolio has depressed net interest income which is the difference between the
interest earned on interest-earning assets and the interest paid on
interest-bearing liabilities. The change in the Company's asset mix coupled with
the flatter "yield curve" and controlled run-off in the commercial mortgage
portfolio has narrowed the Company's net interest margin to 2.77% and 2.93% for
the three and nine months ended September 30, 1998, respectively, compared to
3.15% and 3.16% for the three and nine months ended September 30, 1997,
respectively.
Non-interest expense increased $347,000, or 4%, during the quarter and
$1.7 million, or 7%, during the nine months ended September 30, 1998 compared to
$8.7 million for the quarter ended September 30, 1997 and $25.6 million for the
nine months ended September 30, 1997. Significant contributors to this increase
included equipment and occupancy expense which grew an aggregate of $256,000 and
$525,000 during the three and nine month periods, respectively, due to the
Company's continued investment in its branch and ATM networks and technology
upgrades. During 1998, the Company has opened three new branches and plans to
open at least seven new in-store branches before the end of 1999. The Company's
commitment to building its franchise is also reflected in increases of $121,000
and $119,000 in marketing expense during the three and nine month periods,
respectively. Data processing and operations expense increased $581,000 during
the nine-month period and $60,000 during the quarter as the result of technology
upgrades and the Company's decision to out-source certain back-office functions.
Salaries and compensation expense was reduced by $531,000 and $440,000 during
the three and nine month periods, respectively, generally from lower incentive
compensation and SAR expense.
Since the end of the last fiscal year, the Company's total assets have
grown by $80 million, or 5% to $1.6 billion. Substantially all of the Company's
asset growth was attributable to a $128.4 million expansion of the
mortgage-backed securities portfolio. This growth offset a $37.4 million decline
in the investment securities portfolio and a $26.8 million decrease in the loan
portfolio. Also helping to offset these decreases was $13.9 million growth in
the Company's portfolio of vehicles under operating leases. Total non-performing
assets (consisting of non-accruing loans and non-performing leases, assets
acquired through foreclosure and non-performing investments in real estate)
declined to $11.3 million at September 30, 1998 from $13.9 million at December
31, 1997. The ratio of non-performing assets to total assets improved to 0.71%
at September 30, 1998 from 0.92% at December 31, 1997. The ratio of the
allowance for loan/lease losses improved to 297% of non-accruing loans/leases
from 273% at December 31, 1997. The allowance for loan/lease losses was 2.63% of
total loans/leases at September 30, 1998 compared to 2.69% at December 31, 1997.
Since the end of the third quarter, the Company has repurchased 380,000
shares of its common stock for an aggregate purchase price of $5.2 million.
Under its repurchase plan, the Company is authorized to repurchase an additional
450,000 shares.
On October 5, 1998, the U.S. Supreme Court denied an appeal by a group
of plaintiffs seeking class action status for a suit alleging, among other
things, violations of the Truth-in-Lending Act in connection with the sale of
reverse mortgages between 1988 and 1994 by Providential Home Income Plan, Inc.,
a company purchased by the Company in November 1994. These plaintiffs may still
pursue claims individually against the Company but only through separate cases
in binding arbitration and not as a single class action in federal court.
S-17
<PAGE>
CAPITALIZATION
The following table presents the consolidated capitalization of the
Company at June 30, 1998, and the pro forma capitalization of the Company, after
giving effect to the sale of the Trust Preferred Securities in this Offering and
the application of the net proceeds as described herein.
In addition, at June 30, 1998, the Company had other funding
liabilities consisting of deposits ($786 million), Federal Home Loan Bank
advances ($435 million) and other borrowings ($183 million) incurred in the
ordinary course of business.
The following data should be read together with the consolidated
financial statements and notes thereto of the Company and its subsidiaries
incorporated herein by reference.
<TABLE>
<CAPTION>
June 30, 1998
-------------------------------
Actual As Adjusted
---------- -----------
(In thousands)
<S> <C> <C>
Long-term debt:
11% Senior Notes due 2005............................................. $ 29,100 $ --
---------- ----------
Total long-term debt................................................ 29,100 --
---------- ----------
Company Obligated Mandatorily Redeemable
Trust Preferred Securities of Subsidiary Trust
Holding Solely Junior Subordinated Debentures (1)(2)..................... -- 50,000
---------- ----------
Stockholders' equity:
Preferred stock, $.01 par value; 7,500,000 shares authorized;
issued and outstanding, none........................................ -- --
Common stock, $.01 par value; 20,000,000 shares authorized;
14,682,688 issued and outstanding................................... 147 147
Capital in excess of par.............................................. 57,667 57,667
Retained earnings (3)................................................. 57,763 56,142
Net unrealized gains on securities available for sale, net of tax..... 321 321
Treasury stock at cost, 2,157,809 shares.............................. (20,441) (20,441)
---------- ----------
Total stockholders' equity.......................................... 95,457 93,836
---------- ----------
Total capitalization........................................... $ 124,557 $ 143,836
========== ==========
</TABLE>
- ---------------
(1) The Trust is a wholly owned subsidiary of the Company that will hold the
Junior Subordinated Debentures as its sole asset. The Trust Preferred
Securities are issued by the Trust. The sole assets of the Trust will
consist of approximately $51.5 million principal amount of Junior
Subordinated Debentures issued by the Company to the Trust. The Junior
Subordinated Debentures will bear interest at a floating rate and will
mature on , 2028, which date may be shortened to a date not
earlier than , 2003 if certain conditions are met. The Junior
Subordinated Debentures are redeemable prior to maturity at the option of
the Company, subject to any required prior approval of the Federal Reserve,
(i) on or after , 2003, in whole at any time or in part from time
to time, or (ii) at any time, in whole (but not in part), upon the
occurrence and continuation of a Tax Event, Capital Treatment Event or an
Investment Company Event (each as defined herein). See "Description of
Junior Subordinated Debentures -- Redemption" in the accompanying
prospectus. The Company owns all of the Common Securities of the Trust.
(2) For financial reporting purposes, the Trust will be treated as a subsidiary
of the Company and, accordingly, the accounts of the Trust will be included
in the consolidated financial statements of the Company. The Trust
Preferred Securities will be presented as a separate line item in the
consolidated statement of financial condition of the Company under the
caption "Company Obligated Mandatorily Redeemable Trust Preferred
Securities of Subsidiary Trust Holding Solely Junior Subordinated
Debentures," and appropriate disclosures about the Trust Preferred
Securities, the Guarantee and the Junior Subordinated Debentures will be
included in the notes to consolidated financial statements. For financial
reporting purposes, the Company will record distributions payable on the
Trust Preferred Securities as minority interest expense, net of related
S-18
<PAGE>
tax benefit, in the consolidated statement of operations. The Company has
agreed that future financial reports of the Company will: (i) include, in a
footnote to the audited financial statements, disclosure that (a) the Trust
is wholly owned, (b) the sole assets of the Trust are Junior Subordinated
Debentures (specifying the principal amount, interest rate and maturity
date of the Junior Subordinated Debentures held), and (c) the obligations
of the Company under the documents, in the aggregate, constitute a full and
unconditional guarantee by the Company of the obligations of the Trust
under the Trust Preferred Securities.
(3) Retained earnings have been adjusted for the after-tax loss from redemption
of notes. The retained earnings of the Company are subject to certain
restrictions. See Notes 10 and 11 to Notes to the Company's Consolidated
Financial Statements, which are incorporated herein by reference.
USE OF PROCEEDS
All of the proceeds from the sale of the Trust Preferred Securities,
together with the proceeds from the sale of the Common Securities to the
Company, will be invested by the Trust in Junior Subordinated Debentures. The
Company intends to use the net proceeds from the sale of the Junior Subordinated
Debentures for general corporate purposes, which may include, without
limitation, repayment of debt, possible future acquisitions, funding investments
in, or extensions of credit to, the Company's subsidiaries and redemption of
securities. The Company intends to use a portion of the net proceeds to redeem,
at or after December 31, 1998, all of the $29.1 million of its 11% Senior Notes
due 2005. Pending their application to these uses, the net proceeds may be
invested in short-term investment grade financial instruments.
Although the Company, as a savings and loan holding company, is not
subject to the Federal Reserve capital requirements for bank holding companies,
it is possible that in the future it could become subject to such requirements
as a result of the acquisition of a bank or a change in regulations. On October
21, 1996, the Federal Reserve announced that cumulative preferred securities
having the characteristics of the Trust Preferred Securities could be included
as Tier 1 capital for bank holding companies. Such Tier 1 capital treatment,
together with the Company's ability to deduct, for income tax purposes, interest
payable on the Junior Subordinated Debentures, will provide the Company with a
more cost-effective means of obtaining capital for regulatory purposes than if
the Company were to issue preferred stock.
ACCOUNTING TREATMENT
The Trust will be treated as a subsidiary of the Company and the
accounts of the Trust will be included in the Company's consolidated financial
statements. The Trust Preferred Securities will be presented as a separate line
item in the Company's consolidated statement of financial condition and
disclosures about the Trust Preferred Securities, the Guarantee and the Junior
Subordinated Debentures will be included in the Company's notes to the
consolidated financial statements. The Company will record distributions payable
on the Trust Preferred Securities as minority interest expense, net of related
tax benefit, in its consolidated statement of operations.
S-19
<PAGE>
DESCRIPTION OF SECURITIES
This prospectus supplement discloses the specific terms and provisions
of the Trust Preferred Securities, the Junior Subordinated Debentures and the
Guarantee and supplements the general description of the terms and provisions of
these securities set forth in the accompanying prospectus. These summaries are
not meant to be a complete description of each security. However, this
prospectus supplement and the accompanying prospectus contain the material terms
and conditions for each security. For more information, please refer to the
Trust Agreement, the Indenture, the Supplemental Indenture and the Guarantee.
Forms of these documents are filed as exhibits to the registration statement of
which the prospectus supplement and the prospectus are a part. All terms used in
this prospectus supplement and not defined in this prospectus supplement have
the meanings given to them in these documents.
CERTAIN TERMS OF TRUST PREFERRED SECURITIES
Distributions
The Trust Preferred Securities represent undivided preferred beneficial
interests in the assets of the Trust. Distributions on the Trust Preferred
Securities will be payable at a rate per annum reset quarterly equal to 3-month
LIBOR (as defined below) plus basis points (the "Distribution Rate") of the
stated liquidation amount of $1,000 per Trust Preferred Security, payable
quarterly in arrears on the day of March, June, September and December of
each year, beginning , 1998. Distributions not paid when due will
themselves accumulate additional distributions, at the then-applicable
Distribution Rate on the amount of unpaid distributions (to the extent permitted
by law). The term "distributions" includes any such additional distributions.
The amount of distributions payable for any period will be computed on the basis
of actual days elapsed and a 360-day year.
If distributions are payable on a date that is not a Business Day (as
defined at the end of this paragraph), payment will be made on the next Business
Day (and without any interest or other payment in respect of such delay).
However, if the next Business Day is in the next succeeding calendar month, such
distribution date and the first day of the next succeeding distribution period
will be the immediately preceding Business Day. A "Business Day" means each day
except Saturday, Sunday or any day on which banking institutions in The City of
New York or Wilmington, Delaware are authorized or required by law to close or a
day on which the Debenture Trustee is closed for business.
The Distribution Rate on the Trust Preferred Securities for any quarter
will be effective as of the first day of such quarter. The Distribution Rate on
the Trust Preferred Securities for each quarter will be determined on the
Determination Date (as defined at the end of this paragraph) for such quarter.
Distributions will be computed on the basis of the actual days elapsed and a
360-day year. The distribution amount will be calculated by applying the
Distribution Rate to the liquidation amount of each Trust Preferred Security
outstanding at the beginning of the distribution period and
S-20
<PAGE>
multiplying each such liquidation amount by the actual number of days in the
distribution period concerned (which actual number of days shall include the
first day but exclude the last day of such distribution period) divided by 360.
"Determination Date" means the date that is two London Banking Days preceding
the first day of a period for which a distribution will be payable.
Determination of 3-Month LIBOR
On each Determination Date, the Calculation Agent will calculate the
Distribution Rate for the upcoming quarterly period. As soon as practicable
after 11:00 a.m. (London time) on each Determination Date, the Calculation Agent
will determine the Distribution Rate and inform the Debenture Trustee. The
Distribution Rate will equal 3-month LIBOR plus basis points. "3-month
LIBOR" means, with respect to a distribution period relating to a distribution
date, the London interbank offered rate for three-month, Eurodollar deposits
determined in the following order of priority:
(a) the rate (expressed as a percentage per annum) for Eurodollar
deposits having a three-month maturity that appears on Telerate Page 3750 as of
11:00 a.m. (London time) on the particular Determination Date.
(b) if such rate does not appear on Telerate Page 3750 as of 11:00 a.m.
(London time) on the Determination Date, 3-month LIBOR will be the arithmetic
mean of the rates (expressed as percentages per annum) for Eurodollar deposits
having a three-month maturity that appear on Reuters Monitor Money Rates Page
LIBO ("Reuters Page LIBO") as of 11:00 a.m. (London time) on such Determination
Date;
(c) if such rate does not appear on Reuters Page LIBO as of 11:00 a.m.
(London time) on the related Determination Date, the Calculation Agent will
request the principal London offices of four leading banks in the London
interbank market to provide such banks' offered quotations (expressed as
percentages per annum) to prime banks in the London interbank market for
Eurodollar deposits having a three-month maturity as of 11:00 a.m. (London time)
on such Determination Date. If at least two quotations are provided, 3-month
LIBOR will be the arithmetic mean of such quotations;
(d) if fewer than two such quotations are provided as requested in
clause (c) above, the Calculation Agent will request four major New York City
banks to provide such banks' offered quotations (expressed as percentages per
annum) to leading European banks for loans in Eurodollars as of 11:00 a.m.
(London time) on such Determination Date. If at least two such quotations are
provided, 3-month LIBOR will be the arithmetic mean of such quotations; and
(e) if fewer than two such quotations are provided as requested in
clause (d) above, 3-month LIBOR will be 3-month LIBOR determined with respect to
the distribution period immediately preceding such current distribution period.
S-21
<PAGE>
If the rate for Eurodollar deposits having a three-month maturity that
initially appears on Telerate Page 3750 or Reuters Page LIBO, as the case may
be, as of 11:00 a.m. (London time) on the related Determination Date is
superseded on Telerate Page 3750 or Reuters Page LIBO, as the case may be, by a
corrected rate before 12:00 noon (London time) on such Determination Date, the
corrected rate as so substituted on the applicable page will be the applicable
3-month LIBOR for such Determination Date.
As used herein:
"Calculation Agent" means Wilmington Trust Company.
"London Banking Day" means a day on which dealings in deposits in U.S.
dollars are transacted in the London interbank market.
"Telerate Page 3750" means the display designated as "Page 3750" on the
Dow Jones Telerate Service (or such other page as may replace Page 3750 on that
service or such other service or services as may be nominated by the British
Bankers' Association as the information vendor for the purpose of displaying
London interbank offered rates for U.S. dollars deposits).
All percentages resulting from any calculations on the Trust Preferred
Securities will be rounded, if necessary, to the nearest one hundred-thousandth
of a percentage point, with five one-millionths of a percentage point rounded
upward (e.g., 9.876545% (or .09876545) being rounded to 9.87655% (or .0987655)),
and all dollar amounts used in or resulting from such calculation will be
rounded to the nearest cent (with one-half cent being rounded upward).
The Calculation Agent will, upon the request of the holder of any Trust
Preferred Securities, provide the Distribution Rate then in effect. All
calculations made by the Calculation Agent in the absence of manifest error
shall be conclusive for all purposes and binding on the Company and the holders
of the Trust Preferred Securities.
Deferral of Distributions
If no Debenture Event of Default has occurred and is continuing under
the Junior Subordinated Debentures, the Company can defer interest payments for
up to 20 consecutive quarters. A deferral of interest payments cannot extend,
however, beyond the maturity date of the Junior Subordinated Debentures. If the
Company defers interest payments on the Junior Subordinated Debentures, the
Trust will also defer quarterly distributions on the Trust Preferred Securities.
During any such deferral period, the amount of distributions due to you would
continue to accumulate additional distributions thereon at the then-applicable
periodic Distribution Rate, to the extent permitted by law.
Once the Company makes all deferred interest payments on the Junior
Subordinated Debentures, with accrued interest, the Company can again defer
interest payments on the Junior
S-22
<PAGE>
Subordinated Debentures if no event of default under the Junior Subordinated
Debentures has occurred and is continuing.
The Company does not currently intend to exercise its right to defer
payments of interest by extending the interest payment period on the Junior
Subordinated Debentures. If the Company defers interest payments on the Junior
Subordinated Debentures, it would be subject to certain restrictions relating to
the payment of dividends on or purchases of its capital stock and payments on
any debt securities ranking equal with or junior to the Junior Subordinated
Debentures. See "Certain Terms of Junior Subordinated Debentures -- Option to
Defer Interest Payments."
Payment of Distributions
Distributions on the Trust Preferred Securities will be payable to
holders named on the securities register of the Trust on the relevant record
date. Payments on the Trust Preferred Securities represented by a global
security will be made in immediately available funds to DTC, the depositary for
the Trust Preferred Securities.
As long as the Trust Preferred Securities are in book-entry only form,
the record date for the payment of distributions will be one Business Day prior
to the distribution date. If the Trust Preferred Securities are ever issued in
certificated form, the record date for the payment of distributions will be the
15th day of the last month of each calendar quarter, whether or not a Business
Day.
Redemption
The Company has the right to redeem the Junior Subordinated Debentures
before their maturity, subject to prior approval by the Federal Reserve if then
required under applicable capital guidelines or policies of the Federal Reserve:
o on or after , 2003, in whole at any time or in part from
time to time, or
o upon the occurrence of a Special Event (described herein), at any
time, in whole (but not in part).
When the Company pays the Junior Subordinated Debentures at maturity on
, 2028 or upon earlier redemption, the Property Trustee will use the
proceeds to redeem a like amount of the Trust Preferred Securities and the
Common Securities. The Property Trustee will give you at least 30 days, but not
more than 60 days, notice before the redemption date. The Trust Preferred
Securities and (unless there is a default under the Junior Subordinated
Debentures) the Common Securities will be redeemed at a price equal to the
liquidation amount of $1,000 per security plus accumulated and unpaid
distributions to the date of redemption. To the extent funds are available for
payment, the Property Trustee will irrevocably deposit with the paying agent
sufficient funds to pay the liquidation amount and all accrued and unpaid
distributions for the Trust Preferred and
S-23
<PAGE>
Common Securities being redeemed. The Property Trustee will also give the paying
agent irrevocable instructions and authority to pay the liquidation amount and
accrued and unpaid distributions to the Trust Preferred and Common Securities
holders upon surrender of their securities. Distributions to be paid on or prior
to the redemption date for any securities called for redemption will be payable
to the holders on the record dates for the related dates of distributions.
Once notice of redemption is given and the redemption amount is
irrevocably deposited, all rights of the holders of the Trust Preferred and
Common Securities called for redemption will cease, except for the right of
holders to receive the redemption amount (but without interest on such
redemption amount). The Trust Preferred and Common Securities holders will
receive the liquidation amount plus accrued and unpaid distributions to the date
of redemption and the securities will no longer be outstanding.
If any redemption date is not a Business Day, then the liquidation
amount and all accrued and unpaid distributions to the date of redemption will
be payable on the next Business Day (and without any interest or other payment
in respect of any such delay). However, if the Business Day is in the next
calendar year, the redemption amount will be payable on the preceding Business
Day.
If payment of the redemption amount for any Trust Preferred and Common
Securities called for redemption is improperly withheld or refused and not paid
either by the Trust or by the Company pursuant to the Guarantee, distributions
on the Trust Preferred and Common Securities will continue to accumulate at the
applicable rate from the original redemption date to the date of payment. In
this case, the actual payment date will be the redemption date for purposes of
calculating the redemption amount.
In compliance with applicable law (including the United States federal
securities laws), the Company or its subsidiaries may, at any time and from time
to time, purchase outstanding Trust Preferred Securities by tender, in the open
market, or by private agreement.
Special Event Redemption
If a Tax Event, a Capital Treatment Event or an Investment Company
Event, as we define below (each a Special Event) has occurred and is continuing,
the Company may redeem the Junior Subordinated Debentures, in whole but not in
part. This will cause a mandatory redemption of the Trust Preferred and Common
Securities, in whole but not in part, at the liquidation amount of $1,000 per
security plus accrued and unpaid distributions to the date of redemption within
90 days following the occurrence of the Special Event.
However, in the case of an occurrence of a Tax Event, if the Company
can eliminate, within the 90 day period, the Tax Event by taking some action,
such as filing a form or making an election, or pursuing some other similar
reasonable measure which has no adverse effect on the Company, the Trust or the
Trust Preferred and Common Securities holders, the Company will pursue that
action instead of redemption. The Company will have no right to redeem the
Junior Subordinated
S-24
<PAGE>
Debentures while the Trust is pursuing any similar action based on its
obligations under the Trust Agreement.
A "Tax Event" means the receipt by the Company and the Trust of an
opinion of its tax advisors (which may be its independent public accountants or
counsel experienced in such matters) to the effect that, as a result of any
amendment to, or change (including any announced prospective change) in, the
laws (or any regulations thereunder) of the United States or any political
subdivision or taxing authority thereof or therein, or as a result of any
official administrative pronouncement or judicial decision interpreting or
applying such laws or regulations, which amendment or change is effective or
such prospective change, pronouncement or decision is announced on or after the
date of issuance of the Trust Preferred Securities under the Trust Agreement,
there is more than an insubstantial risk that
o the Trust is, or will be within 90 days of the date of such
opinion, subject to United States federal income tax with
respect to income received or accrued on the Junior
Subordinated Debentures,
o interest payable by the Company on the Junior Subordinated
Debentures is not, or within 90 days of the date of such
opinion, will not be, deductible by the Company, in whole or
in part, for United States federal income tax purposes or
o the Trust is, or will be within 90 days of the date of the
opinion, subject to more than a de minimis amount of other
taxes, duties or other governmental charges.
The Company understands it has been reported that the Internal Revenue
Service ("IRS") recently challenged another company's deduction for interest
paid on a debt instrument similar in some respects to the Junior Subordinated
Debentures and issued to an entity similar to the Trust. Based on available
information, the Company and the Trust do not believe that this challenge will
affect the Company's ability to deduct interest payments on the Junior
Subordinated Debentures. However, you should be aware that further developments
favoring the IRS's challenge, or other unrelated developments, could cause a Tax
Event. Laws and regulations have also been proposed in the past which, if
adopted retroactively, could also cause a Tax Event.
An "Investment Company Event" means the receipt by the Company and the
Trust of an opinion of counsel experienced in such matters to the effect that,
as a result of any change in law or regulation by any legislative body, court,
governmental agency or regulatory authority, the Trust is or will be considered
an "investment company" that is required to be registered under the Investment
Company Act of 1940, as amended (the "Investment Company Act"), which change
becomes effective on or after the date of issuance of the Trust Preferred
Securities under the Trust Agreement.
A "Capital Treatment Event" means the reasonable determination by the
Company that, as a result of any amendment to, or change (including any
prospective change) in, the laws (or any regulations thereunder) of the United
States or any political subdivision thereof or therein, or as a
S-25
<PAGE>
result of any official or administrative pronouncement or action or judicial
decision interpreting or applying such laws or regulations, which amendment or
change is effective or such prospective change, pronouncement or decision is
announced on or after the date of issuance of the Trust Preferred Securities
under the Trust Agreement, there is more than an insubstantial risk of
impairment of the Company's ability to treat an amount equal to the liquidation
amount of the Trust Preferred Securities (or a substantial portion thereof) as
"Tier I Capital" (or the then equivalent thereof) for purposes of the capital
adequacy guidelines of the Federal Reserve, as then in effect and applicable to
the Company.
Subordination of Common Securities
Payment of distributions on, and the redemption amount of, the Trust
Preferred and Common Securities will be made pro rata based on the aggregate
liquidation amounts of the Trust Preferred and Common Securities. However, if an
event of default has occurred and is continuing with respect to the Junior
Subordinated Debentures, no payments may be made on the Common Securities unless
all unpaid amounts on the Trust Preferred Securities have been provided for or
paid in full.
If an event of default has occurred and is continuing with respect to
the Junior Subordinated Debentures, the Common Securities holder will be deemed
to have waived any right to act with respect to the event of default or any
related event of default under the Trust Agreement until the event of default
has been cured, waived or eliminated. Until any event of default has been cured,
waived or eliminated, the Property Trustee will act solely on your behalf and
only you will have the right to direct the Property Trustee to act on your
behalf.
Liquidation of Trust and Distribution of Junior Subordinated Debentures to
Holders
The Company will have the right at any time to liquidate the Trust and
cause the Junior Subordinated Debentures to be distributed to the holders of the
Trust Preferred Securities. Such right is subject to the Company having received
prior approval of the Federal Reserve, if then required under applicable capital
guidelines or policies of the Federal Reserve.
Under current United States federal income tax law and interpretations
and assuming, as expected, the Trust is treated as a grantor trust, a
distribution of Junior Subordinated Debentures should not be a taxable event to
holders of the Trust Preferred Securities. However, should there be a change in
law, a change in legal interpretation, a Tax Event or other circumstances, the
distribution could be a taxable event to holders of the Trust Preferred
Securities. See "Certain Federal Income Tax Consequences -- Receipt of Junior
Subordinated Debentures or Cash upon Liquidation of the Trust." If the Company
elects neither to redeem the Junior Subordinated Debentures prior to maturity
nor to liquidate the Trust and distribute the Junior Subordinated Debentures to
holders of the Trust Preferred Securities, the Trust Preferred Securities will
remain outstanding until the stated maturity of the Junior Subordinated
Debentures.
S-26
<PAGE>
If the Company elects to liquidate the Trust and thereby causes the
Junior Subordinated Debentures to be distributed to holders of the Trust
Preferred Securities in exchange therefor upon liquidation of the Trust, the
Company shall continue to have the right to redeem the Junior Subordinated
Debentures in certain circumstances, as described under "Certain Terms of Junior
Subordinated Debentures -- Redemption."
Registration of Trust Preferred Securities
The Trust Preferred Securities will be represented by one or more
global securities registered in the name of DTC or its nominee. This means that
the Trust will not issue certificates to you for the Trust Preferred Securities.
Each global security will be issued to DTC or its nominee, which will keep a
computerized record of its participants (for example, your broker) whose clients
have purchased the Trust Preferred Securities. Each participant will then keep a
record of its clients. Unless it is exchanged in whole or in part for a
certificated security, a global security may not be transferred. However, DTC,
its nominees, and their successors may transfer a global security as a whole to
one another.
Beneficial interests in the global security will be shown on, and
transfers of the global security will be made only through, records maintained
by DTC and its participants. DTC has provided the Trust and the Company with the
following information: DTC is a limited-purpose trust company organized under
the New York Banking Law, a "banking organization" within the meaning of the New
York Banking Law, a member of the United States Federal Reserve System, a
"clearing corporation" within the meaning of the New York Uniform Commercial
Code and a "clearing agency" registered under the provisions of Section 17A of
the Securities Exchange Act of 1934. DTC holds securities that its participants
("Direct Participants") deposit with DTC. DTC also records the settlement among
Direct Participants of securities transactions, such as transfers and pledges,
in deposited securities through computerized records for Direct Participant's
accounts. This eliminates the need to exchange certificates. Direct Participants
include securities brokers and dealers, banks, trust companies, clearing
corporations and certain other organizations.
DTC's book-entry system is also used by other organizations such as
securities brokers and dealers, banks and trust companies that work through a
Direct Participant. The rules that apply to DTC and its participants are on file
with the Commission.
DTC is owned by a number of its Direct Participants and by the New York
Stock Exchange, Inc., the American Stock Exchange, Inc., and the National
Association of Securities Dealers, Inc.
When you purchase Trust Preferred Securities through the DTC system,
the purchases must be made by or through a Direct Participant, who will receive
credit for the Trust Preferred Securities on DTC's records. Since you actually
own the Trust Preferred Security, you are the beneficial owner and your
ownership interest will only be recorded on the Direct (or indirect)
Participants' records. DTC has no knowledge of your individual ownership of the
Trust Preferred Securities. DTC's records only show the identity of the Direct
Participants and the amount of the Trust Preferred
S-27
<PAGE>
Securities held by or through them. You will not receive a written confirmation
of your purchase or sale or any periodic account statement directly from DTC.
You will receive these from your Direct (or indirect) Participant. Thus the
Direct (or indirect) Participants are responsible for keeping accurate account
of the holdings of their customers like you.
The Property Trustee will wire principal and interest payments to DTC's
nominee. The Company, the Trust and the Property Trustee will treat DTC's
nominee as the owner of the global security for all purposes. Accordingly, the
Company, the Trust, the Property Trustee and any paying agent will have no
direct responsibility or liability to pay amounts due on the global security to
you or any other beneficial owners in the global security.
Any redemption notices will be sent by the Company and the Trust
directly to DTC, who will in turn inform the Direct Participants, who will then
contact you as a beneficial holder. If less than all of the Trust Preferred
Securities are being redeemed, DTC's practice is to choose by lot the amount of
the interest of each Direct Participant to be redeemed. The Direct Participant
will then use an appropriate method to allocate the redemption among its
beneficial holders like you.
It is DTC's current practice, upon receipt of any payment of
distributions or liquidation amount, to credit Direct Participants's accounts on
the payment date based on their holdings of beneficial interests in the global
securities as shown on DTC's records. In addition, it is DTC's current practice
to assign any consenting or voting rights to Direct Participants whose accounts
are credited with Trust Preferred Securities on a record date, by using an
omnibus proxy. Payments by participants to owners of beneficial interests in the
global securities, and voting by participants, will be based on the customary
practices between the participants and owners of beneficial interests, as is the
case with the Trust Preferred Securities held for the account of customers
registered in "street name." However, payments will be the responsibility of the
participants and not of DTC, the Property Trustee, the Trust or the Company.
Trust Preferred Securities represented by a global security will be
exchangeable for certificated securities with the same terms in authorized
denominations only if:
o DTC is unwilling or unable to continue as depositary or if DTC
ceases to be a clearing agency registered under applicable law
and a successor depositary is not appointed by the Company
within 90 days;
o The Company determines not to require all of the Trust Preferred
Securities to be represented by a global security and notifies the
Property Trustee of its decision; or
o an event of default under the indenture has occurred.
If the book-entry-only system is discontinued, the Property Trustee
will keep the registration books for the Trust Preferred Securities at its
corporate office and follow the practices and procedures discussed below.
S-28
<PAGE>
Certificated Securities -- Registration, Transfer and Payment
In the event Trust Preferred Securities are issued in certificated
form, they will be registered in the name of the securityholder. The Trust
Preferred Securities may be transferred or exchanged, based on administrative
procedures in the Trust Agreement, without the payment of any service charge
(other than any tax or other governmental charge) by contacting the Property
Trustee in Wilmington, Delaware, or at the offices of any paying agent or
transfer agent appointed by the Administrative Trustees.
Distribution payments will be made by check or wire transfer. Payment
of the redemption price or liquidation amount will be made in immediately
available funds when you surrender the Trust Preferred Security.
CERTAIN TERMS OF JUNIOR SUBORDINATED DEBENTURES
The Junior Subordinated Debentures will be issued as a series pursuant
to a supplemental indenture (the "Supplemental Indenture") under the Indenture.
The Junior Subordinated Debentures are unsecured and rank subordinate and junior
in right of payment to all of the Company's Senior and Subordinated Debt.
Subordination
The Junior Subordinated Debentures are unsecured and are junior in
right of payment to all Senior and Subordinated Debt (as we define below) of the
Company. This means that no payment on the Junior Subordinated Debentures may be
made if:
o any Senior and Subordinated Debt of the Company, as the case
may be, is not paid when due, any applicable grace period with
respect to any such non-payment default has ended and such
default has not been cured or waived or ceased to exist; or
o if the maturity of any Senior and Subordinated Debt of the
Company has been accelerated because of a default.
On any distribution of assets of the Company to creditors upon any
dissolution, winding-up, liquidation or reorganization, whether voluntary or
involuntary or in bankruptcy, insolvency, receivership or other proceedings, all
allocable amounts (as defined in the accompanying prospectus) on all Senior and
Subordinated Debt must be paid in full before the holders of the Junior
Subordinated Debentures are entitled to receive or retain any payment. In such
event, the holders of the Junior Subordinated Debentures will assume the rights
of the holders of Senior and Subordinated Debt of the Company to receive
payments or distributions applicable to Senior and Subordinated Debt until all
amounts owing on the Junior Subordinated Debentures are paid in full.
S-29
<PAGE>
The Junior Subordinated Debentures will rank at least equal with all
other subordinated debentures initially issued to the other trusts referred to
in the accompanying prospectus.
Senior and Subordinated Debt means:
o all obligations of the Company for money borrowed;
o all obligations of the Company evidenced by bonds, debentures,
notes or similar instruments, including obligations incurred in
connection with the acquisition of property, assets or
businesses;
o all obligations of the Company to reimburse under any letter of
credit, bankers acceptance or similar facilities;
o all obligations issued or assumed by the Company as the deferred
purchase price of property or services (other than trade accounts
payable and other accrued liabilities arising in the ordinary
course of business);
o all capital lease obligations of the Company;
o all indebtedness incurred by the Company for claims under
derivatives;
o all obligations of type referred to above of other pensions for
the payment of which the Company is responsible or liable as
quorum or otherwise.
Senior and Subordinated Debt does not include:
o any indebtedness that is by its terms is not superior in right of
repayment to the Junior Subordinated Debentures:
o any indebtedness that was incurred without recourse to the
Company;
o any debt of the Company to its subsidiaries;
o any debt to any employee of the Company;
o any series of junior subordinated debentures initially issued to
the other Company trusts referred to in the accompanying
prospectus.
The Trust Preferred Securities, the Guarantee and the Junior
Subordinated Debentures do not limit the ability of the Company and its
subsidiaries to incur additional indebtedness, including indebtedness that ranks
senior in priority of payment to the Junior Subordinated Debentures and the
S-30
<PAGE>
Guarantee. At June 30, 1998, the total amount of Senior and Subordinated Debt of
the Company was $29.1 million.
Interest Rate and Maturity
The Junior Subordinated Debentures will bear interest at the rate per
annum reset quarterly equal to 3-month LIBOR (as defined under "Certain Terms of
Trust Preferred Securities -- Determination of 3-Month LIBOR") plus basis
points (the "Interest Rate") of the principal amount thereof, payable quarterly
in arrears on the day of March, June, September and December of each year
(each, an "Interest Payment Date"), commencing , 1998. Interest
payments not paid when due will accrue additional interest compounded quarterly
at the applicable Interest Rate. The term "interest payments" includes this
additional interest. The amount of interest payable for any period will be
computed on the basis of actual days elapsed and a 360-day year. The interest
payment provisions for the Junior Subordinated Debentures correspond to the
distribution provisions of the Trust Preferred Securities.
The Interest Rate for any interest rate period may not exceed the
maximum rate of interest then permitted by New York law as the same may be
modified by federal law.
The Junior Subordinated Debentures will mature on , 2028. Such
date may be shortened at any time by the Company to any date not earlier than
, 2003, subject to the Company having received prior approval of the
Federal Reserve, if then required under applicable capital guidelines or
policies of the Federal Reserve. In the event that the Company elects to shorten
the maturity of (and thereby redeem) the Junior Subordinated Debentures, it
shall give notice to the Debenture Trustee, and the Debenture Trustee shall give
notice of such redemption to the holders of the Junior Subordinated Debentures
no more than 60 and no less than 30 days prior to the effectiveness thereof. The
Junior Subordinated Debentures do not have a sinking fund; however, this does
not mean that the Company is not required to make any principal payments prior
to maturity.
Redemption
Subject to the Company having received prior approval of the Federal
Reserve if then required under applicable capital guidelines or policies of the
Federal Reserve, the Company has the right to redeem the Junior Subordinated
Debentures prior to maturity: (1) on or after , 2003, in whole at any
time or in part from time to time; or (2) at any time in whole (but not in part)
upon the occurrence and continuation of a Tax Event, Investment Company Event or
Capital Treatment Event, in each case at a redemption price equal to the accrued
and unpaid interest on the Junior Subordinated Debentures so redeemed to the
date fixed for redemption, plus 100% of the principal amount thereof.
S-31
<PAGE>
Distribution of Junior Subordinated Debentures
In certain circumstances involving the termination of the Trust, the
Property Trustee may distribute Junior Subordinated Debentures to the holders of
the Trust Preferred Securities in exchange therefor after satisfaction of
liabilities to creditors of the Trust as provided by applicable law. If
distributed to holders of Trust Preferred Securities, the Junior Subordinated
Debentures will initially be issued in the form of one or more global securities
and DTC, or any successor depositary for the Trust Preferred Securities, will
act as depositary for the Junior Subordinated Debentures. It is anticipated that
the depositary arrangements for the Junior Subordinated Debentures would be
substantially identical to those in effect for the Trust Preferred Securities.
Option to Defer Interest Payments
So long as no Debenture Event of Default has occurred and is
continuing, the Company has the right under the Indenture at any time or from
time to time during the term of the Junior Subordinated Debentures to defer
interest payments on the Junior Subordinated Debentures for up to 20 consecutive
quarters with respect to each deferral period (each, an "Extension Period"),
provided that no deferral period may extend beyond the maturity date of the
Junior Subordinated Debentures. At the end of such deferral period, the Company
must pay all interest then due (together with interest thereon at the applicable
periodic Interest Rate, compounded quarterly, to the extent permitted by law).
During any deferral period, interest will accrue and holders of Junior
Subordinated Debentures (or holders of Trust Preferred Securities, as the case
may be) will be required to accrue income for United States federal income tax
purposes. See "Description of Junior Subordinated Debentures -- Option to Defer
Interest Payments" in the accompanying prospectus and "Certain Federal Income
Tax Consequences -- Interest Income and Original Issue Discount."
During any such deferral period, the Company may not, and may not
permit any subsidiary of the Company to, (1) declare or pay any dividends or
distributions on, or redeem, purchase, acquire or make a liquidation payment
with respect to, any of the Company's capital stock (which includes common and
preferred stock), (2) make any payment of principal, interest or premium, if
any, on or repay, repurchase or redeem any debt securities of the Company that
rank pari passu with or junior in interest to the Junior Subordinated Debentures
or (3) make any guarantee payments with respect to any guarantee by the Company
of debt securities of any subsidiary of the Company if such guarantee ranks pari
passu with or junior in interest to the Junior Subordinated Debentures (other
than (a) dividends or distributions in capital stock of the Company (which
includes common and preferred stock), (b) any declaration of a dividend in
connection with the implementation of a stockholders' rights plan, the
redemption or repurchase of any such rights pursuant thereto, (c) payments under
the Guarantee and (d) purchases of common stock related to the issuance of
common stock or rights under any of the Company's benefit plans for its
directors, officers or employees.
Prior to the termination of any such deferral period, the Company may
further defer the interest payment period, provided that no deferral period may
exceed 20 consecutive quarters or
S-32
<PAGE>
extend beyond the maturity date of the Junior Subordinated Debentures. Upon the
termination of any such deferral period and the payment of all amounts then due,
the Company may elect to begin a new Extension Period subject to the above
requirements.
The Company must give the Property Trustee, the Administrative Trustees
and the Debenture Trustee notice of its election to begin such deferral period
at least one Business Day prior to the earlier of
o the date interest on the Junior Subordinated Debentures would have
been payable except for the election to begin such deferral
period,
o the date the Administrative Trustees are required to give notice
to any applicable stock exchange or automated quotation system on
which the Trust Preferred Securities are then listed or quoted or
to holders of Trust Preferred Securities of the record date, or
o the date such distributions are payable, but in any event not less
than one Business Day prior to such record date.
The Debenture Trustee shall give notice of the Company's election to
begin a new Extension Period to the holders of the Junior Subordinated
Debentures. There is no limitation on the number of times that the Company may
elect to begin an Extension Period.
Distributions on the Trust Preferred Securities will be deferred by the
Trust during any such Extension Period. See "Certain Terms of Trust Preferred
Securities -- Distributions." For a description of certain federal income tax
consequences and special considerations applicable to any such Junior
Subordinated Debentures, see "Certain Federal Income Tax Consequences."
Additional Sums
If the Trust is required to pay any additional taxes, duties or other
governmental charges as a result of a Tax Event, the Company will pay as
additional sums on the Junior Subordinated Debentures such amounts as shall be
required so that the distributions payable by the Trust shall not be reduced as
a result of any such additional taxes, duties or other governmental charges
("Additional Sums").
Covenants
The Company will covenant in the Indenture, as to the Junior
Subordinated Debentures, that if and so long as: (1) the Trust is the holder of
all the Junior Subordinated Debentures; (2) a Tax Event in respect of the Trust
has occurred and is continuing and (3) the Company has elected, and has not
revoked such election, to pay Additional Sums in respect of the Trust Preferred
Securities, the Company will pay to the Trust such Additional Sums. The Company
will also covenant, as to
S-33
<PAGE>
the Junior Subordinated Debentures: (1) to maintain directly or indirectly 100%
ownership of the Common Securities, provided that certain successors which are
permitted pursuant to the Indenture may succeed to the Company's ownership of
the Common Securities; (2) not to voluntarily terminate, wind up or liquidate
the Trust, except upon prior approval of the Federal Reserve if then so required
under applicable capital guidelines or policies of the Federal Reserve, and
except (a) in connection with a distribution of Junior Subordinated Debentures
to the holders of the Trust Preferred Securities in liquidation of the Trust or
(b) in connection with certain mergers, consolidations or amalgamations
permitted by the Trust Agreement and (3) to use its reasonable efforts,
consistent with the terms and provisions of the Trust Agreement, to cause the
Trust to be treated as a grantor trust and not as an association taxable as a
corporation for United States federal income tax purposes.
Global Junior Subordinated Debentures
The Junior Subordinated Debentures will be represented by global
certificates registered in the name of DTC or its nominee. Beneficial interests
in the Junior Subordinated Debentures will be shown on, and transfers thereof
will be effected only through, records maintained by participants in DTC. Except
as described in the accompanying prospectus, Junior Subordinated Debentures in
certificated form will not be issued in exchange for the global certificates.
See "Description of Junior Subordinated Debentures -- Global Junior Subordinated
Debentures" and "Book-Entry Issuance" in the accompanying prospectus.
Payments on Junior Subordinated Debentures represented by a global
security will be made to DTC or its nominee, as the depositary for the Junior
Subordinated Debentures. In the event Junior Subordinated Debentures are issued
in certificated form, principal and interest will be payable, the transfer of
the Junior Subordinated Debentures will be registrable, and Junior Subordinated
Debentures will be exchangeable for Junior Subordinated Debentures of other
denominations of a like aggregate principal amount, at the corporate office of
the Debenture Trustee in Wilmington, Delaware, or at the offices of any paying
agent or transfer agent appointed by the Company, provided that payment of
interest may be made at the option of the Company by check mailed to the address
of the persons entitled thereto or by wire transfer. In addition, if the Junior
Subordinated Debentures are issued in certificated form, the record dates for
payment of interest will be the 15th day of the last month of each calendar
quarter. For a description of DTC and the terms of the depositary arrangements
relating to payments, transfers, voting rights, redemptions and other notices
and other matters, see "Book-Entry Issuance" in the accompanying prospectus.
CERTAIN TERMS OF GUARANTEE
The Guarantee guarantees on a subordinated basis to the holders of the
Trust Preferred Securities the following payments, to the extent not paid by the
Trust: (1) any accrued but unpaid distributions, to the extent that the Trust
has funds on hand available therefor at such time; (2) the redemption price with
respect to any Trust Preferred Securities called for redemption, to the extent
S-34
<PAGE>
that the Trust has funds on hand available therefor at such time; and (3) upon a
voluntary or involuntary dissolution, winding-up or liquidation of the Trust
(unless the Junior Subordinated Debentures are distributed to holders of the
Trust Preferred Securities), the lesser of (a) the liquidation distribution (as
defined in the accompanying prospectus) and (b) the amount of assets of the
Trust remaining available for distribution to holders of the Trust Preferred
Securities after satisfaction of liabilities to creditors of the Trust as
required by applicable law. Wilmington Trust Company will act as the Guarantee
Trustee for the purposes of compliance with the Trust Indenture Act and will
hold the Guarantee for the benefit of the holders of the Trust Preferred
Securities.
The holders of not less than a majority in aggregate liquidation amount
of the 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 or to direct the exercise of any trust power given the Guarantee Trustee
under the Guarantee. Any holder of the Trust Preferred Securities may institute
a legal proceeding directly against the Company to enforce its rights under the
Guarantee without first instituting a legal proceeding against the Trust, the
Guarantee Trustee or any other person or entity.
If the Company were to default on its obligation to pay amounts due on
the Junior Subordinated Debentures, the Trust would lack funds for the payment
of distributions or amounts payable on redemption of the Trust Preferred
Securities or otherwise. In such event, you would not be able to rely upon the
Guarantee for payment of such amounts. Instead, if a Debenture Event of Default
has occurred and is continuing and such event is attributable to the failure of
the Company to pay interest on or principal of the Junior Subordinated
Debentures, then you may institute a direct action against the Company pursuant
to the terms of the Indenture for enforcement of payment to such holder of the
principal of or interest on such Junior Subordinated Debentures having a
principal amount equal to the aggregate liquidation amount of your Trust
Preferred Securities. In connection with such action, the Company will have a
right of set-off under the Indenture to the extent of any payment made by the
Company to you. Except as described herein, you will not be able to exercise
directly any other remedy available to the holders of the Junior Subordinated
Debentures or assert directly any other rights in connection with the Junior
Subordinated Debentures. See "Description of Guarantees" in the accompanying
prospectus.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
General
In this section, we summarize the material United States federal income
tax consequences of purchasing, holding and disposing of the Trust Preferred
Securities. This summary is based upon: (1) the Internal Revenue Code of 1986,
as amended ("Code"); (2) income tax regulations issued under the Code; and (3)
associated administrative and judicial interpretations, all as they currently
exist as of
S-35
<PAGE>
the date of this prospectus supplement. These income tax laws and regulations,
however, may change at any time, and any change could be retroactive to the
issuance date of the Trust Preferred Securities.
These income tax laws and regulations are also subject to various
interpretations, and the IRS or the courts could later disagree with the
explanations or conclusions contained in this summary. The IRS has not formally
ruled (and we do not intend to seek a ruling) on the tax consequences of
purchasing, holding and selling the Trust Preferred Securities. Accordingly, the
IRS could challenge the opinions expressed in this prospectus supplement
concerning such consequences, and a court could agree with the IRS.
Except as otherwise stated, this summary deals only with Trust
Preferred Securities held as a capital asset (as defined in the Code) by a
holder who (1) purchases the Trust Preferred Securities at their original
offering price when the Trust originally issues them and (2) is a US Holder (as
defined below).
We do not address all of the tax consequences that may be relevant to a
US Holder. We also do not address, except as stated below, any of the tax
consequences to Non-US Holders, to holders that may be subject to special tax
treatment under United States federal income tax laws such as banks, thrift
institutions, real estate investment trusts, regulated investment companies,
insurance companies, brokers and dealers in securities or currencies, financial
institutions or persons who have acquired Trust Preferred Securities as part of
a straddle, synthetic security hedge, conversion transaction or other integrated
investment. Further, we do not address:
o the United States federal income tax consequences to shareholders
in, or partners or beneficiaries of, a holder of the Trust
Preferred Securities;
o the United States federal alternative minimum tax consequences of
the purchase, ownership or sale of the Trust Preferred
Securities; or
o any state, local or foreign tax consequences of the purchase,
ownership and sale of Trust Preferred Securities.
A "US Holder" is a Trust Preferred Securities holder who or which is:
o a United States citizen or resident individual (or someone
treated as a citizen or resident individual for United States
federal income tax purposes);
o a corporation or partnership created or organized (or treated as
created or organized for United States federal income tax
purposes) in or under the laws of the United States or any
political subdivision thereof;
S-36
<PAGE>
o an estate if its income is subject to United States federal income
taxation regardless of its source; or
o a trust if (1) a United States court can exercise primary
supervision over its administration; and (2) one or more United
States persons have the authority to control all of its
substantial decisions.
A "Non-US Holder" is a Trust Preferred Securities holder other than a
US Holder.
The tax information below is intended only as a summary of material
United States federal tax consequences of an investment in the Trust. We urge
you to consult with your own tax advisor as to the United States federal, state,
local, foreign and other tax consequences associated with purchasing, owning and
selling the Trust Preferred Securities. The statements of United States tax laws
described above are based on the laws in force as of the date of this prospectus
supplement, and are subject to any changes in United States law occurring after
that date.
Characterization of the Trust
When the Trust issues the Trust Preferred Securities, Housley Kantarian
& Bronstein, P.C., special tax counsel to the Company and the Trust, will give a
legal opinion stating that, under current law and based on the representations,
facts and assumptions described in this prospectus supplement and the
accompanying prospectus, and assuming full compliance with the terms of the
Trust Agreement, the underwriting agreement and the Indenture (and other
relevant documents), the Trust will be characterized for United States federal
income tax purposes as a grantor trust and will not be characterized for United
States federal income tax purposes as a partnership and not as an association or
publically traded partnership taxable as a corporation. As a result, for United
States federal income tax purposes, you will be treated as the beneficial owner
of a pro rata undivided interest in the Junior Subordinated Debentures.
Accordingly, you will be required to include in gross income for United States
federal income tax purposes all interest on and any gain recognized with respect
to your pro rata share of the Junior Subordinated Debentures.
Characterization of the Junior Subordinated Debentures
The Company and the Trust will agree to treat the Junior Subordinated
Debentures as debt for United States federal income tax purposes. By accepting
the Trust Preferred Securities, you agree to treat the Junior Subordinated
Debentures as debt and to accept the Trust Preferred Securities as evidence of
an indirect beneficial ownership interest in the Junior Subordinated Debentures.
S-37
<PAGE>
Interest Income and Original Issue Discount
The Company has the right to defer payments of interest on the Junior
Subordinated Debentures, which could cause the Junior Subordinated Debentures to
be subject to the original issue discount ("OID") rules. Under applicable income
tax regulations, if there is only a remote likelihood that a company will defer
its interest payments, then the debt will be considered to be issued without
OID. The Company believes as of the issuance date, that the likelihood that it
will elect to defer interest payments is remote, since this would prevent the
Company from declaring cash dividends on any of its common stock or making
payments on its debt securities which rank equal with or junior to the Junior
Subordinated Debentures until it made up all of the missed interest payments.
Accordingly, the Company will take the position that the Junior Subordinated
Debentures will not be issued with OID. As a result, the interest payments on
the Junior Subordinated Debentures (which are used to make distributions on the
Trust Preferred Securities) generally will be taxable to you as ordinary income
when they are paid or accrued depending on your method of United States federal
income tax accounting.
If, however, the Company elects to defer payments of interest, the
Junior Subordinated Debentures would at that time be treated, solely for
purposes of the OID rules, as re-issued with OID equal to the remaining interest
payable. If the Junior Subordinated Debentures were treated with OID, all of
your taxable interest income on the Junior Subordinated Debentures would
constitute OID and have to be included in your gross income for United States
federal income tax purposes as it accrued daily on an economic accrual basis
even if you otherwise use a cash basis method of tax accounting, and actual
distributions of stated interest would not be reported as taxable income. This
means that you would include interest income for tax purposes, and pay United
States federal income taxes, on the interest income you would have received on
the interest payment dates even though the Company did not actually make cash
interest payments on those dates.
If the likelihood of the Company deciding to defer any payments of
interest were not treated as remote, the Junior Subordinated Debentures would be
considered as issued initially with OID in an amount equal to the sum of all the
interest payable over the term of the Junior Subordinated Debentures. Again,
this would mean that you would have to include interest income in gross income
for United States federal income tax purposes as it accrued daily on an economic
accrual basis instead of on the dates you actually received the cash payments.
The IRS has not issued any rulings or interpretations which define the
meaning of the term "remote" as used in the applicable income tax regulations.
The IRS could take a position that differs from what we state in this prospectus
supplement.
Corporate US Holders
Because the income from the Trust Preferred Securities will not be
considered to be dividends for United States federal income tax purposes,
corporate US Holders of the Trust Preferred
S-38
<PAGE>
Securities will not be entitled to a dividends-received deduction for any income
received from the Trust Preferred Securities.
Sales of Trust Preferred Securities
If you sell your Trust Preferred Securities you will be considered to
have sold all or part of your pro rata share of the Junior Subordinated
Debenture and you will recognize a gain or loss equal to the difference between
the amount realized from the sale of the Trust Preferred Securities (generally,
your selling price) and your adjusted tax basis in the Trust Preferred
Securities. If the Company does not defer interest on the Junior Subordinated
Debentures, your adjusted tax basis in the Trust Preferred Securities generally
will equal the initial purchase price that you paid for the Trust Preferred
Securities. If, however, the Company elects to defer interest payments on the
Junior Subordinated Debentures, your adjusted tax basis in the Trust Preferred
Securities generally will equal (1) the initial purchase price that you paid for
the Trust Preferred Securities increased (2) by the amount of any accrued and
unpaid distributions that you were required to treat as OID; and (3) reduced by
the amount of cash or other property received by you with respect to such OID.
A gain or loss on the sale of Trust Preferred Securities generally will
be a capital gain or loss. The maximum regular United States federal income tax
rate on capital gains for individual taxpayers is currently 20% for sales and
exchanges of capital assets held for more than one year. All net capital gains
of a corporate taxpayer are subject to tax at ordinary corporate income tax
rates of up to 35%.
The Trust Preferred Securities may trade at a price that does not
accurately reflect the value of accrued but unpaid interest relating to the
underlying Junior Subordinated Debentures. If the Company elects to defer
payments of interest, and you sell your Trust Preferred Securities between
record dates for payments of distributions on the Trust Preferred Securities,
you will be required to include in gross income for United States federal income
tax purposes accrued and unpaid interest through the date of sale. This accrued
and unpaid interest will be added to your adjusted tax basis but may not be
reflected in the sale price. To the extent the sale price is less than your
adjusted tax basis, 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.
Receipt of Junior Subordinated Debentures or Cash upon Liquidation of the Trust
Under certain circumstances, as described in the section "Description
of Trust Preferred Securities -- Liquidation Distribution Upon Dissolution" in
the accompanying prospectus, the Property Trustee may distribute the Junior
Subordinated Debentures to you in exchange for your Trust Preferred Securities.
This will also liquidate or close the Trust. Except as discussed below, such a
distribution would not be a taxable event for United States federal income tax
purposes, and you would have an aggregate adjusted tax basis in the Junior
Subordinated Debentures you received equal to your aggregate adjusted tax basis
in your Trust Preferred Securities. For a description of adjusted tax basis, see
the discussion above in " -- Sales of Trust Preferred Securities."
S-39
<PAGE>
Further, the holding period of the Junior Subordinated Debentures you
received would be the same as the period during which you held your Trust
Preferred Securities. If, however, the distribution were caused by a Tax Event
and the Trust were taxable as a corporation, the distribution would be a taxable
event for United States federal income tax purposes. In that case, you could
recognize gain or loss, your adjusted tax basis in the Junior Subordinated
Debentures could differ from your adjusted tax basis in the Trust Preferred
Securities, and your holding period for the Junior Subordinated Debentures would
not include the period during which you held the Trust Preferred Securities.
Under certain circumstances, as described in the section "Certain Terms
of Trust Preferred Securities -- Redemption," the Junior Subordinated Debentures
may be redeemed for cash. Such a redemption would be a taxable event 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" above.
Non-US Holders
Payments to a Non-US Holder will generally not be subject to United
States federal withholding tax, provided the holder:
o does not own (directly or indirectly, actually or constructively)
10% or more of the total combined voting power of all classes of
stock of the Company entitled to vote;
o is not a controlled foreign corporation that is related to the
Company actually or constructively through stock ownership; and
o is not a bank whose receipt of interest on Junior Subordinated
Debentures is on an extension of credit made pursuant to a loan
agreement entered into in the ordinary course of business.
To qualify for this exemption from withholding, the last United States payer in
the chain of payment prior to payment to a Non-US Holder ("Withholding Agent")
must have received in the year in which a payment of interest or principal
occurs, or in either of the two preceding calendar years, a statement that:
o is signed by the holder of the Trust Preferred Securities under
penalties of perjury;
o certifies that such holder is not a US Holder; and
o provides the name and address of the holder.
S-40
<PAGE>
The statement may be made on an IRS Form W-8 or a substantially similar form,
and the holder must inform the Withholding Agent of any change in the
information on the statement within 30 days of such change. If the Trust
Preferred Securities are held through a securities clearing organization or
certain other financial institutions, the organization or institution may
provide a signed statement to the Withholding Agent along with a copy of the IRS
Form W-8 or the substitute form provided by the holder.
A Non-US Holder will generally not be subject to United States federal
withholding or income tax on any gain realized upon the sale or other
disposition of the Trust Preferred Securities. However, if a Non-US Holder holds
the Trust Preferred Securities in connection with a trade or business conducted
in the United States, or is present in the United States in certain
circumstances, it may be subject to income tax on all income and gains
recognized on a net income basis in the same manner as if the Non-US Holder were
a US Holder. In addition, if such holder is a foreign corporation, it may be
subject to a branch profits tax at a rate of 30% or (if applicable) a lower rate
specified by a treaty.
Backup Withholding
You may be subject to a "backup withholding" tax of 31% on
distributions made on the Trust Preferred Securities and on the entire price
received on the sale of the Trust Preferred Securities if you are a US Holder
and you:
o fail to provide your social security or taxpayer identification
number to your broker;
o provide your broker with an incorrect social security or tax
identification number;
o fail to provide your broker with a certified statement that your
social security or tax identification number is correct and that
you are not subject to backup withholding; or
o improperly report interest and dividends on your tax return.
Backup withholding, however, does not apply to payments made to certain exempt
recipients such as corporations or tax-exempt organizations. Any withheld
amounts will be allowed as a credit against your United States federal income
tax, provided the required information is provided to the IRS.
If you are a Non-US Holder you must comply with applicable
certification procedures to establish that you are not a US Holder in order to
avoid the application of backup withholding, such as providing an IRS Form W-8.
If you provide the certification described above or otherwise establish an
exemption from backup withholding, then you generally will not be subject to
backup withholding. Payments by a United States office of a broker of the
proceeds of a disposition of the Junior Subordinated Debentures generally will
be subject to backup withholding at a rate of 31%
S-41
<PAGE>
unless you certify you are not a Non-US Holder under penalties of perjury, or
otherwise establish an exemption.
The U.S. Treasury Department recently issued final regulations
governing information reporting and the certification procedures regarding
withholding and backup withholding on certain amounts paid to Non-US Holders
after December 31, 1999. The new Treasury regulations would not alter the
treatment described above. The new Treasury regulations would alter the
procedures for claiming the benefits of an income tax treaty and may change the
certification procedures relating to the receipt by intermediaries of payments
on behalf of a beneficial owner of a Junior Subordinated Debenture. You should
consult your tax advisor concerning the effect, if any, of such new Treasury
regulations on an investment in the Junior Subordinated Debentures.
ERISA CONSIDERATIONS
Each of the Company (the obligor with respect to the Junior
Subordinated Debentures) and its affiliates, and the Property Trustee may be
considered a "party in interest" (within the meaning of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")) or a "disqualified person"
(within the meaning of Section 4975 of the Code) with respect to many employee
benefit plans that are subject to ERISA and certain employee benefit-related
provisions of the Code. A fiduciary of a pension, profit-sharing or other
employee benefit plan subject to ERISA should consult with its counsel before
authorizing an investment in the Trust Preferred Securities. The purchase and/or
holding of Trust Preferred Securities by a plan that is subject to the fiduciary
responsibility provisions of ERISA or the prohibited transaction provisions of
the Code (which generally includes individual retirement accounts and so-called
"Keogh" plans) and with respect to which the Company, the Property Trustee or
any affiliate is a service provider (or otherwise is a party in interest or a
disqualified person) might constitute or give rise to a prohibited transaction
under ERISA and the Code unless such Trust Preferred Securities are acquired
pursuant to and in accordance with an applicable exemption.
If the assets of the Trust were deemed to be plan assets of employee
benefit plans that are holders of the Trust Preferred Securities (including
holders who are not employee benefit plans themselves but are investing "plan
assets" of an employee benefit plan), any persons exercising discretion with
respect to the Junior Subordinated Debentures may become fiduciary parties in
interest or disqualified persons with respect to investing plans. Accordingly,
each investing plan will be deemed to have directed the Trust to invest in the
Junior Subordinated Debentures and to have consented to the appointment of the
Property Trustee.
A plan fiduciary should consider whether the purchase of Trust
Preferred Securities could result in the delegation of fiduciary authority to
the Property Trustee and, if so, whether such a delegation of authority is
consistent with the terms of the plan's governing instrument or any applicable
investment management agreement. The plan's investment in the Trust Preferred
S-42
<PAGE>
Securities might be deemed to constitute a delegation under ERISA of the duty to
manage plan assets by an ERISA plan fiduciary to the Property Trustee.
UNDERWRITING
General
Based on the terms and conditions contained in the Underwriting
Agreement, the Trust has agreed to sell to Sandler O'Neill & Partners, L.P. (the
"Underwriter") and the Underwriter has agreed to purchase from the Trust 50,000
of Trust Preferred Securities.
The Underwriter is obligated to purchase all the Trust Preferred
Securities, if any Trust Preferred Securities are purchased.
The Company and/or the Trust will have agreements with the Underwriter
to indemnify it against certain civil liabilities, including liabilities under
the Securities Act of 1933, or to contribute with respect to payments which the
Underwriter may be required to make.
The Underwriter has in the past and may in the future engage in
transactions with, or perform services for, the Company or its subsidiaries in
the ordinary course of their businesses.
The Company will pay the Underwriter's expenses, including legal fees,
up to a maximum of $125,000, that were incurred in connection with the offering
of the Trust Preferred Securities. The Company will also pay its own expenses
related to this offering. The aggregate expenses related to this Offering are
estimated to be $ , including the expenses of the Underwriter.
Commissions and Discounts
The Underwriter has advised the Company and the Trust that it proposes
to offer the Trust Preferred Securities directly to the public initially at
$1,000 per Trust Preferred Security. The Underwriter may also offer the Trust
Preferred Securities to certain dealers at such price less a concession not in
excess of $ per Trust Preferred Security. The Underwriter may allow, and such
dealers may reallow, a discount not in excess of $ per Trust Preferred
Security to certain other dealers. After the initial public offering, the public
offering price, concession and discount may be changed by the Underwriter.
Since the proceeds from the sale of the Trust Preferred Securities will
be used to purchase the Junior Subordinated Debentures issued by the Company,
the Company has agreed to pay to the Underwriter an underwriting commission of
$ per Trust Preferred Security (or a total of $ ).
S-43
<PAGE>
No Sales of Similar Securities
The Company and the Trust have agreed that for 180 days after the date
of this prospectus supplement they will not, without the prior written consent
of the Underwriter, directly or indirectly, issue, sell, offer or agree to sell,
grant any option for the sale of, or otherwise dispose of the following:
o any Trust Preferred Securities or any security convertible into,
exchangeable or exercisable for Trust Preferred Securities or
o the Junior Subordinated Debentures or any debt securities
substantially similar (including provisions with respect to the
deferral of interest) to the Junior Subordinated Debentures or
o any equity security substantially similar to the Preferred
Securities
(except for the Trust Preferred Securities and the disposal of the Junior
Subordinated Debentures following any liquidation of the Trust).
Price Stabilization and Short Positions
In connection with the offering of the Trust Preferred Securities, the
Commission allows the Underwriter to engage in transactions that stabilize,
maintain or otherwise affect the price of the Trust Preferred Securities.
Specifically, the Underwriter may: (1) bid for and purchase Trust Preferred
Securities in the open market to cover a short position; (2) bid for and
purchase Trust Preferred Securities in the open market to stabilize the price of
the Trust Preferred Securities; or (3) reclaim any selling concession allowed to
a dealer if the Underwriter repurchases shares distributed by that dealer. These
activities may stabilize or maintain the market price of the Trust Preferred
Securities above independent market levels which could make the price of the
Trust Preferred Securities higher than it might have been without such
activities. The Underwriter is not required to engage in these activities, and
may end these activities at any time.
The Trust Preferred Securities are a new issue of securities with no
established trading market and the Trust does not intend to apply for listing of
the Trust Preferred Securities on a national securities exchange or quotation on
the Nasdaq Stock Market. The Underwriter has advised the Trust that it presently
intends to make a market in the Trust Preferred Securities, but no assurances
can be given that an active and liquid trading market will develop or, if
developed, be maintained. The offering price and Distribution Rate have been
determined by negotiations between representatives of the Company and the
Underwriter, and the offering price of the Trust Preferred Securities may not be
indicative of the market price following the offering. The Underwriter will not
have any obligation to make a market in the Trust Preferred Securities, however,
and may cease market-making activities, if commenced, at any time.
S-44
<PAGE>
VALIDITY OF SECURITIES
Certain matters of Delaware law relating to the validity of the Trust
Preferred Securities, the enforceability of the Trust Agreement and the
formation of the Trust will be passed upon by Richards, Layton & Finger, P.A.,
Wilmington, Delaware, special Delaware counsel to the Company and the Trust. The
validity of the Guarantee and the Junior Subordinated Debentures will be passed
upon for the Company by Housley Kantarian & Bronstein, P.C., Washington, D.C.
Certain legal matters in connection with this offering will be passed upon for
the Underwriter by Skadden, Arps, Slate, Meagher & Flom LLP, New York, New York.
Housley Kantarian & Bronstein, P.C., and Skadden, Arps, Slate, Meagher & Flom
LLP, will rely on the opinion of Richards, Layton & Finger, P.A. as to matters
of Delaware law. Housley Kantarian & Bronstein, P.C. and Richards, Layton &
Finger, P.A. will rely on the opinion of Skadden, Arps, Slate, Meagher & Flom
LLP as to matters of New York law. Certain matters relating to United States
federal income tax considerations will be passed upon for the Company by Housley
Kantarian & Bronstein, P.C.
S-45
<PAGE>
PROSPECTUS
$75,000,000
JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURES
WSFS FINANCIAL CORPORATION
WSFS CAPITAL TRUST I
WSFS CAPITAL TRUST II
TRUST PREFERRED SECURITIES
GUARANTEED TO THE EXTENT SET FORTH HEREIN
by
WSFS FINANCIAL CORPORATION
WSFS Financial Corporation, a Delaware corporation (the "Company"), may
from time to time offer in one or more series or issuances its junior
subordinated deferrable interest debentures (the "Junior Subordinated
Debentures"). The Junior Subordinated Debentures will be unsecured and
subordinate and junior in right of payment to certain other indebtedness of the
Company. If provided in an accompanying Prospectus Supplement, the Company will
have the right to defer payments of interest on any series of Junior
Subordinated Debentures by extending the interest payment period thereon at any
time or from time to time for such number of consecutive interest payment
periods (which shall not extend beyond the Stated Maturity (as defined herein)
of the Junior Subordinated Debentures) with respect to each deferral period as
may be specified in such Prospectus Supplement (each, an "Extension Period").
See "Description of Junior Subordinated Debentures -- Option to Defer Interest
Payments."
WSFS Capital Trust I and WSFS Capital Trust II, each a trust created
under the laws of the State of Delaware (each, an "Issuer" and collectively, the
"Issuers"), may offer, from time to time, Trust Preferred Securities (the "Trust
Preferred Securities") representing beneficial ownership interests in such
Issuer. The Company will be the owner of the common securities (the "Common
Securities" and, together with the Trust Preferred Securities, the "Trust
Securities") representing common beneficial ownership interests in the Issuer.
The payment of periodic cash distributions ("Distributions") with respect to the
Trust Preferred Securities of each Issuer and payments on liquidation or
redemption with respect to such Trust Preferred Securities, in each case out of
funds held by such Issuer, are each irrevocably guaranteed by the Company to the
extent described herein (each, a "Guarantee"). See "Descriptions of Guarantees."
The obligations of the Company under each Guarantee will be subordinate and
junior in right of payment to all Senior and Subordinated Debt (as defined
herein) of the Company. Concurrently with the issuance by an Issuer of its Trust
Preferred Securities, such Issuer will invest the proceeds thereof and any
contributions made in respect of the Common Securities in a corresponding series
of the Company's Junior Subordinated Debentures (the "Corresponding Junior
Subordinated Debentures") with terms corresponding to the terms of that Issuer's
Trust Preferred Securities (the "Related Trust Preferred Securities"). The
Corresponding Junior Subordinated Debentures will be the sole assets of each
Issuer, and payments under the Corresponding Junior Subordinated Debentures and
the related Expense Agreement (as defined herein) will be the only revenue of
each Issuer. Unless otherwise specified in the applicable Prospectus Supplement,
the Company may, upon receipt of approval of the Board of Governors of the
Federal Reserve System (the "Federal Reserve") (if such approval is then
required under the applicable capital guidelines or policies of the Federal
Reserve), redeem the Corresponding Junior Subordinated Debentures (and thereby
cause the redemption of the Trust Securities) or may terminate each Issuer and,
after satisfaction of liabilities to the creditors of each respective Issuer as
required by applicable law, cause the Corresponding Junior Subordinated
Debentures to be distributed to the holders of Trust Preferred Securities in
exchange therefor upon liquidation of their interests in such Issuer. See
"Description of Trust Preferred Securities -- Liquidation Distribution Upon
Dissolution."
(continued on following page)
THE SECURITIES OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS OR DEPOSITS AND
ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION,
ANY OTHER GOVERNMENTAL AGENCY OR OTHERWISE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
The date of this Prospectus is October 29, 1998
<PAGE>
(continued from previous page)
Holders of the Trust Preferred Securities will be entitled to receive
preferential cumulative cash Distributions accumulating from the date of
original issuance and payable periodically as specified in an accompanying
Prospectus Supplement. If provided in the accompanying Prospectus Supplement,
the Company will have the right to defer payments of interest on any series of
Corresponding Junior Subordinated Debentures by extending the interest payment
period thereon at any time or from time to time for one or more Extension
Periods (which shall not extend beyond the Stated Maturity of the Corresponding
Junior Subordinated Debentures). If interest payments are so deferred,
Distributions on the Related Trust Preferred Securities will also be deferred
and the Company will not be permitted, subject to certain exceptions set forth
herein, to declare or pay any cash distributions with respect to the Company's
capital stock or debt securities that rank pari passu with or junior to the
Corresponding Junior Subordinated Debentures. See "Description of Junior
Subordinated Debentures -- Option to Defer Interest Payments." During an
Extension Period, Distributions will continue to accumulate (and the Trust
Preferred Securities will accumulate additional Distributions thereon at the
rate per annum set forth in the related Prospectus Supplement). See "Description
of Trust Preferred Securities -- Distributions."
The Company has, through the related Guarantee, the related Guarantee
Agreement, the related Trust Agreement, the Indenture and the Expense Agreement
(each as defined herein), taken together, fully, irrevocably and unconditionally
guaranteed all of the Issuer's obligations under the Trust Preferred Securities.
See "Relationship Among the Trust Preferred Securities, the Junior Subordinated
Debentures and the Guarantees." The Guarantee of the Company guarantees the
payment of Distributions and payments on liquidation or redemption of the Trust
Preferred Securities, but only in each case to the extent of funds held by the
respective Issuer, as described herein. See "Description of Guarantees." If the
Company does not make interest payments on the Junior Subordinated Debentures
held by the Issuer, the Issuer will have insufficient funds to pay
Distributions. The Guarantee does not cover payment of Distributions when the
Issuer has insufficient funds to pay such Distributions. In such event, a holder
of Trust Preferred Securities may institute a legal proceeding directly against
the Company pursuant to the terms of the Indenture to enforce payment of amounts
equal to such Distributions to such holder. See "Description of Junior
Subordinated Debentures -- Enforcement of Certain Rights by Holders of Trust
Preferred Securities." The obligations of the Company under the Guarantee and
the Junior Subordinated Debentures are subordinate and junior in right of
payment to all Senior and Subordinated Debt of the Company.
The Trust Preferred Securities and the Junior Subordinated Debentures
may be offered in amounts, at prices and on terms to be determined at the time
of offering; provided, however, the aggregate initial public offering price of
all the Trust Preferred Securities and the Junior Subordinated Debentures issued
pursuant to the Registration Statement of which this Prospectus forms a part
shall not exceed $75,000,000. Certain specific terms of the Trust Preferred
Securities and the Junior Subordinated Debentures in respect of which this
Prospectus is being delivered will be described in the applicable Prospectus
Supplement, including without limitation and where applicable and to the extent
not set forth herein, (a) in the case of the Trust Preferred Securities,
specific title, aggregate stated liquidation amount (the "Liquidation Amount"),
number of securities, the rate or method of calculating the rate of cumulative
cash Distributions, Distribution payment dates, applicable Distribution deferral
terms, if any, place or places where Distributions will be payable, any terms of
redemption, exchange, initial offering or purchase price, methods of
distribution and any other special terms, and (b) in the case of the Junior
Subordinated Debentures, the specific designation, aggregate principal amount,
denominations, Stated Maturity (including any provisions for the shortening
thereof), interest payment dates, interest rate (which may be fixed or variable)
or method of calculating interest, if any, applicable Extension Period or
interest deferral terms, if any, place or places where principal, premium, if
any, and interest, if any, will be payable, any terms of redemption, any sinking
fund provisions, terms for any conversion or exchange into other securities,
initial offering or purchase price, methods of distribution and any other
special terms.
The Trust Preferred Securities and the Junior Subordinated Debentures
may be sold to or through underwriters, through dealers, remarketing firms or
agents or directly to purchasers. See "Plan of Distribution." The names of any
underwriters, dealers, remarketing firms or agents involved in the sale of the
Trust Preferred Securities or the Junior Subordinated Debentures in respect of
which this Prospectus is being delivered and any applicable fee, commission or
discount arrangements with them will be set forth in a Prospectus Supplement.
The Prospectus Supplement will state whether the Trust Preferred Securities or
the Junior Subordinated Debentures will be listed on any national securities
exchange or automated quotation system. If the Trust Preferred Securities or the
Junior Subordinated Debentures are not listed on any national securities
exchange or automated quotation system, there can be no assurance that there
will be a secondary market for the Trust Preferred Securities or the Junior
Subordinated Debentures.
This Prospectus may not be used to consummate sales of the Trust
Preferred Securities or the Junior Subordinated Debentures unless accompanied by
a Prospectus Supplement.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files reports and other information with the Securities
and Exchange Commission (the "Commission"). Copies of reports, proxy statements
and other information filed by the Company with the Commission may be inspected
and copied at the public reference facilities maintained by the Commission at
Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and
at the following regional offices of the Commission: Citicorp Center, 500 West
Madison, Suite 1400, Chicago, Illinois 60661; and Seven World Trade Center, 13th
Floor, New York, New York 10048. Copies of such material also can be obtained at
prescribed rates from the Public Reference Section of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549. Information on the operation of the
Public Reference Room may be obtained by calling the Commission at
1-800-SEC-0330. Reports, proxy statements and other information that have been
filed electronically with the Commission may also be obtained from the
Commission's Website, the address of which is http://www.sec.gov. In addition,
such reports, proxy statements and other information may be inspected at the
offices of The Nasdaq Stock Market, 1735 K Street, N.W., Washington, D.C. 20006.
No separate financial statements of either of the Issuers have been
included herein. The Company and Issuers do not consider that such financial
statements would be material to holders of the Trust Preferred Securities
because each of the Issuers 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 issuing the Trust Securities, and
investing the proceeds therefrom in Junior Subordinated Debentures and
activities incidental thereto. See "The Company," "The Issuers," "Description of
Trust Preferred Securities," "Description of Junior Subordinated Debentures" and
"Description of Guarantees."
The Company and the Issuers have filed with the Commission a combined
registration statement on Form S-3 (herein, together with all exhibits and
amendments thereto, called the "Registration Statement") under the Securities
Act of 1933, as amended, with respect to the Trust Preferred Securities, the
Guarantee and the Junior Subordinated Debentures. This Prospectus does not
contain all of the information set forth in the Registration Statement, certain
parts of which are omitted in accordance with the rules and regulations of the
Commission. For further information, reference is made to the Registration
Statement. Copies of the Registration Statement, including any amendments and
exhibits thereto, can be inspected and copied at the offices of the Commission
as set forth above. Statements contained in this Prospectus as to the contents
of any contract or any other document are not necessarily complete, and in each
instance reference is made to the copy of such contract or other document filed
as an exhibit to the Registration Statement, each such statement being qualified
in all respects by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents of the Company which have been previously filed
with the Commission are hereby incorporated by reference in this Prospectus:
(a) the Company's Annual Report on Form 10-K for the Fiscal Year
Ended December 31, 1997;
(b) the Company's Quarterly Reports on Form 10-Q for the Quarters
Ended March 31, 1998 and June 30, 1998; and
(c) the Company's Current Report on Form 8-K dated April 23, 1998.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14
or 15(d) of the Exchange Act subsequent to the date of this Prospectus and prior
to the termination of any offering of securities made by this Prospectus shall
be deemed to be incorporated by reference into this Prospectus and to be a part
hereof from the
1
<PAGE>
respective dates of filing such documents. Any statement contained herein or in
a document all or part of which is incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein or in any
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
The Company will provide without charge to any person to whom this
Prospectus is delivered, upon the written or oral request of such person, a copy
of any or all of the foregoing documents incorporated by reference (other than
exhibits to such documents which are not specifically incorporated by reference
in such documents). Requests for such copies should be directed to WSFS
Financial Corporation, Corporate Secretary, 838 Market Street, Wilmington,
Delaware 19899, telephone number (302) 792-6000.
THE COMPANY
The Company is a savings and loan holding company headquartered in
Wilmington, Delaware. Substantially all of the Company's assets are held by its
subsidiary, Wilmington Savings Fund Society, Federal Savings Bank (the "Bank").
The long term goal of the Company is to be a high-performing, customer-centered
financial services company focused on its core savings bank business in
Delaware, while developing unique, profitable niches in complementary businesses
which may operate outside the Bank's market area.
Founded in 1832, the Bank is one of the oldest financial institutions
in the country. It has operated under the same name and charter serving the
residents of Delaware for over 165 years. The Bank is the largest thrift
institution headquartered in Delaware and is the fourth largest financial
institution in the state on the basis of deposits traditionally garnered
in-market. The Company's market area is the Mid-Atlantic region of the United
States, characterized by a diversified manufacturing and service economy.
Banking operations are conducted from 18 retail banking offices in Northern
Delaware and Southeastern Pennsylvania. An additional nine locations are
scheduled to open over the next 24 months. The Bank provides cash management
services as well as residential real estate, commercial real estate and
commercial and consumer lending services, funding these activities primarily by
attracting retail deposits and borrowings. Deposits are insured by the Bank
Insurance Fund ("BIF") of the Federal Deposit Insurance Corporation ("FDIC").
Other operating subsidiaries of the Bank include WSFS Credit
Corporation, engaged primarily in motor vehicle leasing; 838 Investment Group,
Inc., which markets insurance products and securities; and Community Credit
Corporation, a consumer finance company specializing in consumer loans secured
by first and second mortgages.
The Company's principal executive offices are located at 838 Market
Street, Wilmington, Delaware 19899, and its telephone number is (302) 792-6000.
THE ISSUERS
Each Issuer is a statutory business trust created under Delaware law
pursuant to (i) a trust agreement executed by the Company, as Depositor,
Wilmington Trust Company, as Delaware Trustee, Wilmington Trust Company, as
Property Trustee, and the Administrative Trustees, as named therein, of the
Issuer and (ii) the filing of a certificate of trust with the Delaware Secretary
of State on May 28, 1998. Each trust agreement will be amended and restated in
its entirety (each, as so amended and restated a "Trust Agreement")
substantially in the form filed as an exhibit to the Registration Statement of
which this Prospectus forms a part. Each Trust Agreement will be qualified as an
indenture under the Trust Indenture Act of 1939, as amended (the "Trust
Indenture Act"). Each Issuer exists for the exclusive purposes of (i) issuing
and selling its Trust Securities, (ii) using the proceeds from the sale of such
Trust Securities to
2
<PAGE>
acquire a corresponding series of Corresponding Junior Subordinated Debentures
issued by the Company, and (iii) engaging in only those other activities which
are necessary, convenient or incidental thereto. Accordingly, the Corresponding
Junior Subordinated Debentures will be the sole assets of each Issuer, and
payments under the Corresponding Junior Subordinated Debentures and the Expense
Agreement will be the sole revenue of each Issuer.
All of the Common Securities of each Issuer will be owned by the
Company. The Common Securities of an Issuer will rank pari passu, and payments
will be made thereon pro rata, with the Trust Preferred Securities of such
Issuer, except that upon the occurrence and continuance of an event of default
under a Trust Agreement resulting from an event of default under the Indenture,
the rights of the Company as holder of the Common Securities to payment in
respect of Distributions and payments upon liquidation or redemption will be
subordinated to the rights of the holders of the Trust Preferred Securities of
such Issuer. See "Description of Trust Preferred Securities -- Subordination of
Common Securities." The Company will acquire Common Securities in an aggregate
Liquidation Amount equal to not less than 3% of the total capital of each
Issuer.
Unless otherwise specified in the Prospectus Supplement, each Issuer
has a term of approximately 55 years, but may terminate earlier as provided in
the Trust Agreement. Each Issuer's business and affairs are conducted by its
trustees, each appointed by the Company as holder of the Common Securities.
Wilmington Trust Company, as Property Trustee, will act as sole trustee under
each Trust Agreement for purposes of compliance with the Trust Indenture Act.
Wilmington Trust Company will also act as trustee under the Guarantees and the
Indenture. See "Description of Guarantees" and "Description of Junior
Subordinated Debentures." The holder of the Common Securities of an Issuer, or
the holders of a majority in Liquidation Amount of the Related Trust Preferred
Securities if an event of default under the Trust Agreement for such Issuer has
occurred and is continuing, will be entitled to appoint, remove or replace the
Property Trustee and/or the Delaware Trustee for such Issuer. In no event will
the holders of the Trust Preferred Securities have the right to vote to appoint,
remove or replace the Administrative Trustees; such voting rights are vested
exclusively in the holder of the Common Securities. The duties and obligations
of each Issuer Trustee are governed by the applicable Trust Agreement. Pursuant
to the Expense Agreement, the Company will pay all fees and expenses related to
each Issuer and the offering of the Trust Preferred Securities and will pay,
directly or indirectly, all ongoing costs, expenses and liabilities of each
Issuer.
The principal executive office of each Issuer is 838 Market Street,
Wilmington, Delaware 19899 and its telephone number is (302) 792-6000.
USE OF PROCEEDS
All of the proceeds from the sale of the Trust Preferred Securities
will be invested by the Issuer in Junior Subordinated Debentures. Except as
otherwise set forth in the applicable Prospectus Supplement, the Company intends
that the proceeds from the sale of the Junior Subordinated Debentures will be
used for general corporate purposes including, without limitation, possible
future acquisitions, funding investments in, or extensions of credit to, the
Company's subsidiaries, repayment of obligations and redemption of securities.
Possible debt repayment includes the redemption at December 31, 1998 of the
Company's 11% Senior Notes due 2005, although there can be no assurance that
such redemption will ultimately occur. A more detailed description of the use of
proceeds of any specific offering will be set forth in the Prospectus Supplement
pertaining to such offering.
Although the Company, as a savings and loan holding company, is not
subject to the Federal Reserve capital requirements for bank holding companies,
it is possible that in the future it could become subject to such requirements
as a result of the acquisition of a bank or change in regulations. On October
21, 1996, the Federal Reserve announced that cumulative preferred securities
having the characteristics of the Trust Preferred Securities could be included
as Tier 1 capital for bank holding companies. Such Tier 1 capital treatment,
together with the Company's ability to deduct, for income tax purposes, interest
payable on the Junior Subordinated Debentures, will provide the Company with a
more cost-effective means of obtaining capital for regulatory purposes than if
the Company were to issue preferred stock.
3
<PAGE>
RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
Six Months Ended
June 30, Year Ended December 31,
------------------- --------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Excluding interest on deposits........ 1.63x 1.62x 1.59x 1.70x 2.06x 1.40x 1.49x
Including interest on deposits........ 1.34 1.34 1.33 1.33 1.44 1.16 1.12
</TABLE>
DESCRIPTION OF TRUST PREFERRED SECURITIES
Pursuant to the terms of the Trust Agreement for each Issuer, the
Issuer Trustees on behalf of such Issuer will issue the Trust Preferred
Securities and the Common Securities. Each Trust Agreement will be qualified as
an indenture under the Trust Indenture Act. Initially, Wilmington Trust Company
will be the Delaware Trustee and the Property Trustee and will also act as
trustee for the purpose of complying with the Trust Indenture Act. The terms of
the Trust Preferred Securities will include those stated in the respective Trust
Agreement and those made part of the respective Trust Agreement by the Trust
Indenture Act. This summary of certain provisions of the Trust Preferred
Securities and of each Trust Agreement, which summarizes the material terms
thereof, does not purport to be complete and is subject to, and is qualified in
its entirety by reference to, all the provisions of each Trust Agreement,
including the definitions therein of certain terms, and the Trust Indenture Act,
to each of which reference is hereby made. Wherever particular defined terms of
a Trust Agreement (as amended or supplemented from time to time) are referred to
herein or in a Prospectus Supplement, such defined terms are incorporated herein
or therein by reference. The form of the Trust Agreement has been filed as an
exhibit to the Registration Statement of which this Prospectus forms a part.
Each of the Issuers is a legally separate entity and the assets of one are not
available to satisfy the obligations of the other.
General
The Trust Preferred Securities of an Issuer will represent beneficial
ownership interests in such Issuer and the holders thereof will be entitled to a
preference in certain circumstances with respect to Distributions and amounts
payable on redemption or liquidation over the Common Securities of such Issuer,
as well as other benefits as described in the corresponding Trust Agreement. See
" -- Subordination of Common Securities." The Trust Preferred Securities of an
Issuer will rank pari passu, and payments will be made thereon pro rata, with
the Common Securities of that Issuer except as described under " --
Subordination of Common Securities." Legal title to the Corresponding Junior
Subordinated Debentures will be held by the Property Trustee in trust for the
benefit of the holders of the Related Trust Preferred Securities and Common
Securities. Each Guarantee Agreement executed by the Company for the benefit of
the holders of an applicable Issuer's Trust Preferred Securities will be a
guarantee on a subordinated basis with respect to the Related Trust Preferred
Securities but will not guarantee payment of Distributions or amounts payable on
redemption or liquidation of such Trust Preferred Securities when the related
Issuer does not have funds on hand available to make such payments. See
"Description of Guarantees."
Distributions
Distributions on the Trust Preferred Securities will be cumulative,
will accumulate from the date of original issuance and will be payable on such
dates as specified in the Prospectus Supplement. In the event that any date on
which Distributions are payable on the Trust Preferred Securities is not a
Business Day (as defined below), payment of the Distribution payable on such
date will be made on the next succeeding day that is a Business Day (and without
any interest or other payment in respect to any such delay) except that, if such
Business Day is in the next succeeding calendar year, payment of such
Distribution shall be made on the immediately preceding Business Day, in either
case with the same force and effect as if made on such date (each date on which
Distributions are payable in accordance with the foregoing, a "Distribution
Date"). A "Business Day" shall mean any day other than a Saturday or a Sunday,
or a
4
<PAGE>
day on which banking institutions in The City of New York are authorized or
required by law or executive order to remain closed or a day on which the
corporate trust office of the Property Trustee or the Debenture Trustee is
closed for business.
Each Issuer's Trust Preferred Securities represent beneficial ownership
interests in the applicable Issuer, and the Distributions on each Trust
Preferred Security will be payable at a rate specified in the Prospectus
Supplement for such Trust Preferred Securities. The amount of Distributions
payable for any period will be computed on the basis of a 360-day year of twelve
30-day months unless otherwise specified in the Prospectus Supplement.
Distributions to which holders of Trust Preferred Securities are entitled will
accumulate additional Distributions at the rate per annum if and as specified in
the Prospectus Supplement. The term "Distributions" as used herein includes any
such additional Distributions unless otherwise stated.
Unless otherwise provided in the Prospectus Supplement and so long as
no Debenture Event of Default (as defined herein) has occurred and is
continuing, the Company has the right under the Indenture, pursuant to which it
will issue the Corresponding Junior Subordinated Debentures, to defer the
payment of interest at any time or from time to time on any series of the
Corresponding Junior Subordinated Debentures for a period which will be
specified in such Prospectus Supplement relating to such series, provided that
no Extension Period may extend beyond the Stated Maturity of the Corresponding
Junior Subordinated Debentures. As a consequence of any such deferral,
Distributions on the Trust Preferred Securities would be deferred (but would
continue to accumulate additional Distributions thereon at the rate per annum
set forth in the Prospectus Supplement for such Trust Preferred Securities) by
the Issuer of such Trust Preferred Securities during any such Extension Period.
During such Extension Period, the Company may not, and may not permit any
subsidiary of the Company to, (i) declare or pay any dividends or distributions
on, or redeem, purchase, acquire or make a liquidation payment with respect to,
any of the Company's capital stock (which includes common and preferred stock),
(ii) make any payment of principal, interest or premium, if any, on or repay,
repurchase or redeem any debt securities of the Company that rank pari passu
with or junior in interest to the Junior Subordinated Debentures or (iii) make
any guarantee payments with respect to any guarantee by the Company of debt
securities of any subsidiary of the Company if such guarantee ranks pari passu
with or junior in interest to the Corresponding Junior Subordinated Debentures
(other than (a) dividends or distributions in capital stock of the Company
(which includes common and preferred stock), (b) any declaration of a dividend
in connection with the implementation of a stockholders' rights plan, the
redemption or repurchase of any such rights pursuant thereto, (c) payments under
any Guarantee and (d) purchases of common stock related to the issuance of
common stock or rights under any of the Company's benefit plans for its
directors, officers or employees or related to the issuance of common stock (or
securities convertible into or exchangeable for common stock) as consideration
in an acquisition transaction).
The revenue of each Issuer available for distribution to holders of its
Trust Preferred Securities will be limited to payments under the Corresponding
Junior Subordinated Debentures in which the Issuer will invest the proceeds from
the issuance and sale of its Trust Securities. If the Company does not make
interest payments on such Corresponding Junior Subordinated Debentures, the
Property Trustee will not have funds available to pay Distributions on the
Related Trust Preferred Securities. The payment of Distributions (if and to the
extent the Issuer has funds legally available for the payment of such
Distributions and cash sufficient to make such payments) is guaranteed by the
Company on a limited basis set forth herein under "Description of Guarantees."
Distributions on the Trust Preferred Securities will be payable to the
holders thereof as they appear on the register of such Issuer on the relevant
record dates, which, as long as the Trust Preferred Securities remain in
book-entry form, will be one Business Day prior to the relevant Distribution
Date. Subject to any applicable laws and regulations and the provisions of the
applicable Trust Agreement, each such payment will be made as described under
"Book-Entry Issuance." In the event any Trust Preferred Securities are not in
book-entry form, the relevant record date for such Trust Preferred Securities
shall be the date at least 15 days prior to the relevant Distribution Date, as
specified in the applicable Prospectus Supplement.
5
<PAGE>
Redemption
Mandatory Redemption. Upon the repayment or redemption, in whole or in
part, of any Corresponding Junior Subordinated Debentures, whether at Stated
Maturity or upon earlier redemption as provided in the Indenture, the proceeds
from such repayment or redemption shall be applied by the Property Trustee to
redeem a Like Amount (as defined below) of the Trust Preferred Securities, upon
not less than 30 nor more than 60 days notice, at a redemption price (the
"Redemption Price") equal to the aggregate Liquidation Amount of such Trust
Preferred Securities plus accumulated but unpaid Distributions thereon to the
date of redemption (the "Redemption Date") and the related amount of the
premium, if any, paid by the Company upon the concurrent redemption of such
Corresponding Junior Subordinated Debentures. See "Description of Junior
Subordinated Debentures -- Redemption." If less than all of any series of
Corresponding Junior Subordinated Debentures are to be repaid or redeemed on a
Redemption Date, then the proceeds from such repayment or redemption shall be
allocated to the redemption pro rata of the Trust Preferred Securities and the
Common Securities. The amount of premium, if any, paid by the Company upon the
redemption of all or any part of any Corresponding Junior Subordinated
Debentures to be repaid or redeemed on a Redemption Date shall be allocated to
the redemption pro rata of the Trust Preferred Securities and the Common
Securities.
The Company will have the right to redeem any series of Corresponding
Junior Subordinated Debentures (i) on or after such date as may be specified in
the applicable Prospectus Supplement, in whole at any time or in part from time
to time, or (ii) at any time, in whole (but not in part), upon the occurrence of
a Tax Event, Capital Treatment Event or Investment Company Event or (iii) as may
be otherwise specified in the applicable Prospectus Supplement, in each case
subject to receipt of prior approval by the Federal Reserve if then required
under applicable capital guidelines or policies of the Federal Reserve.
Tax Event, Capital Treatment Event or Investment Company Event
Redemption. If a Tax Event, Capital Treatment Event or Investment Company Event
(all, as defined below) in respect of a series of Trust Preferred Securities and
Common Securities shall occur and be continuing, the Company has the right to
redeem the Corresponding Junior Subordinated Debentures in whole (but not in
part) and thereby cause a mandatory redemption of such Trust Preferred
Securities and Common Securities in whole (but not in part) at the Redemption
Price within 90 days following the occurrence of such Tax Event, Capital
Treatment Event or Investment Company Event. In the event a Tax Event, Capital
Treatment Event or Investment Company Event in respect of a series of Trust
Preferred Securities and Common Securities has occurred and is continuing and
the Company does not elect to redeem the Corresponding Junior Subordinated
Debentures and thereby cause a mandatory redemption of such Trust Preferred
Securities and Common Securities or to liquidate the related Issuer and cause
the Corresponding Junior Subordinated Debentures to be distributed to holders of
such Trust Preferred Securities and Common Securities in exchange therefor upon
liquidation of the related Issuer as described above, such Trust Preferred
Securities will remain outstanding and Additional Sums (as defined below) may be
payable on the Corresponding Junior Subordinated Debentures.
"Additional Sums" means the additional amounts as may be necessary in
order that the amount of Distributions then due and payable by an Issuer on the
outstanding Trust Preferred Securities and Common Securities of the Issuer shall
not be reduced as a result of any additional taxes, duties and other
governmental charges to which such Issuer has become subject as a result of a
Tax Event.
"Like Amount" means (i) with respect to a redemption of any Trust
Securities, Trust Securities having a Liquidation Amount (as defined below)
equal to that portion of the principal amount of Corresponding Junior
Subordinated Debentures to be contemporaneously redeemed in accordance with the
Indenture, allocated to the Common Securities and to the Trust Preferred
Securities pro rata based upon the relative Liquidation Amounts of such classes
and the proceeds of which will be used to pay the Redemption Price of such Trust
Securities, and (ii) with respect to a distribution of Corresponding Junior
Subordinated Debentures to holders of any Trust Securities in exchange therefor
in connection with a dissolution or liquidation of the related Issuer,
Corresponding Junior Subordinated Debentures having a principal amount equal to
the Liquidation Amount of the Trust Securities of the holder to whom such Junior
Subordinated Debentures would be distributed.
6
<PAGE>
A "Tax Event" means the receipt by the Company and the applicable
Issuer of an opinion of its tax advisors (which may be its independent public
accountants or counsel experienced in such matters) to the effect that, as a
result of any amendment to, or change (including any announced prospective
change) in, the laws (or any regulations thereunder) of the United States or any
political subdivision or taxing authority thereof or therein, or as a result of
any official administrative pronouncement or judicial decision interpreting or
applying such laws or regulations, which amendment or change is effective or
such prospective change, pronouncement or decision is announced on or after the
date of issuance of the applicable Trust Preferred Securities under the Trust
Agreement, there is more than an insubstantial risk that (i) the Issuer is, or
will be within 90 days of the date of such opinion, subject to United States
federal income tax with respect to income received or accrued on the Junior
Subordinated Debentures, (ii) interest payable by the Company on the Junior
Subordinated Debentures is not, or within 90 days of the date of such opinion,
will not be, deductible by the Company, in whole or in part, for United States
federal income tax purposes or (iii) the Issuer is, or will be within 90 days of
the date of the opinion, subject to more than a de minimis amount of other
taxes, duties or other governmental charges.
A "Capital Treatment Event" means the reasonable determination by the
Company that, as a result of any amendment to, or change (including any
prospective change) in, the laws (or any regulations thereunder) of the United
States or any political subdivision thereof or therein, or as a result of any
official or administrative pronouncement or action or judicial decision
interpreting or applying such laws or regulations, which amendment or change is
effective or such prospective change, pronouncement or decision is announced on
or after the date of issuance of the Trust Preferred Securities under the Trust
Agreement, there is more than an insubstantial risk of impairment of the
Company's ability to treat an amount equal to the Liquidation Amount of the
Trust Preferred Securities (or a substantial portion thereof) as "Tier I
Capital" (or the then equivalent thereof) for purposes of the capital adequacy
guidelines of the Federal Reserve, as then in effect and applicable to the
Company.
An "Investment Company Event" means the receipt by the Company and the
Issuer of an opinion of counsel experienced in such matters to the effect that,
as a result of any change in law or regulation by any legislative body, court,
governmental agency or regulatory authority, the Issuer is or will be considered
an "investment company" that is required to be registered under the Investment
Company Act of 1940, as amended (the "Investment Company Act"), which change
becomes effective on or after the date of issuance of the Trust Preferred
Securities under the Trust Agreement.
After the liquidation date fixed for any distribution of Corresponding
Junior Subordinated Debentures for any series of Trust Preferred Securities (i)
such series of Trust Preferred Securities will no longer be deemed to be
outstanding, (ii) the Depository Trust Company as depositary (the "Depositary")
or its nominee, as the record holder of such series of Trust Preferred
Securities, will receive a registered global certificate or certificates
representing the Corresponding Junior Subordinated Debentures to be delivered
upon such distribution and (iii) any certificates representing such series of
Trust Preferred Securities not held by the Depositary or its nominee will be
deemed to represent the Corresponding 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
accrued and unpaid Distributions on such series of Trust Preferred Securities
until such certificates are presented to the Administrative Trustees or their
agent for transfer or reissuance.
There can be no assurance as to the market prices for the Trust
Preferred Securities or the Corresponding Junior Subordinated Debentures that
may be distributed in exchange for Trust Preferred Securities if a dissolution
and liquidation of an Issuer were to occur. Accordingly, the Trust Preferred
Securities that an investor may purchase, or the Corresponding Junior
Subordinated Debentures that the investor may receive on dissolution and
liquidation of an Issuer, may trade at a discount to the price that the investor
paid to purchase the Trust Preferred Securities offered hereby.
7
<PAGE>
Redemption Procedures
Trust Preferred Securities redeemed on each Redemption Date shall be
redeemed at the Redemption Price with the applicable proceeds from the
contemporaneous redemption of the Corresponding Junior Subordinated Debentures.
Redemptions of the Trust Preferred Securities shall be made and the Redemption
Price shall be payable on each Redemption Date only to the extent that the
related Issuer has funds on hand available for the payment of such Redemption
Price. See also " -- Subordination of Common Securities."
If the Issuer gives a notice of redemption of Trust Preferred
Securities, then, by 12:00 noon, New York City time, on the Redemption Date, to
the extent funds are available, the Property Trustee will deposit irrevocably
with the Depositary funds sufficient to pay the applicable Redemption Price and
will give the Depositary irrevocable instructions and authority to pay the
Redemption Price to the holders of the Trust Preferred Securities. See
"Book-Entry Issuance." If such Trust Preferred Securities are no longer in
book-entry form, the Property Trustee, to the extent funds are available, will
irrevocably deposit with the paying agent for such Trust Preferred Securities
funds sufficient to pay the applicable Redemption Price and will give such
paying agent irrevocable instructions and authority to pay the Redemption Price
to the holders thereof upon surrender of their certificates evidencing such
Trust Preferred Securities. Notwithstanding the foregoing, Distributions payable
on or prior to the Redemption Date for any Trust Preferred Securities called for
redemption shall be payable to the holders of such Trust Preferred Securities on
the relevant record dates for the related Distribution Dates. If notice of
redemption shall have been given and funds deposited as required, then upon the
date of such deposit, all rights of the holders of such Trust Preferred
Securities so called for redemption will cease, except the right of the holders
of such Trust Preferred Securities to receive the Redemption Price, but without
interest on such Redemption Price, and such Trust Preferred Securities will
cease to be outstanding. In the event that any date fixed for redemption of
Trust Preferred Securities is not a Business Day, then payment of the Redemption
Price payable on such date will be made on the next succeeding day which is a
Business Day (and without any interest or other payment in respect of any such
delay), except that, if such Business Day falls in the next calendar year, such
payment will be made on the immediately preceding Business Day. In the event
that payment of the Redemption Price in respect of Trust Preferred Securities
called for redemption is improperly withheld or refused and not paid either by
the Issuer or by the Company pursuant to the Guarantee as described under
"Description of Guarantees," Distributions on such Trust Preferred Securities
will continue to accrue at the then applicable rate, from the Redemption Date
originally established by the Issuer for such Trust Preferred Securities to the
date such Redemption Price is actually paid, in which case the actual payment
date will be the date fixed for redemption for purposes of calculating the
Redemption Price.
Subject to applicable law (including, without limitation, United States
federal securities law), the Company or its subsidiaries may at any time and
from time to time purchase outstanding Trust Preferred Securities by tender, in
the open market or by private agreement.
Payment of the Redemption Price on the Trust Preferred Securities and
any distribution of Corresponding Junior Subordinated Debentures to holders of
Trust Preferred Securities shall be made to the applicable recordholders thereof
as they appear on the register for such Trust Preferred Securities on the
relevant record date, which shall be one Business Day prior to the relevant
Redemption Date or liquidation date, as applicable; provided, however, that in
the event that any Trust Preferred Securities are not in book-entry form, the
relevant record date for such Trust Preferred Securities shall be a date at
least 15 days prior to the Redemption Date or liquidation date, as applicable,
as specified in the applicable Prospectus Supplement.
If less than all of the Trust Preferred Securities and Common
Securities issued by an Issuer are to be redeemed on a Redemption Date, then the
aggregate Liquidation Amount of such Trust Preferred Securities and Common
Securities to be redeemed shall be allocated pro rata to the Trust Preferred
Securities and the Common Securities based upon the relative Liquidation Amounts
of such classes. The particular Trust Preferred Securities to be redeemed shall
be selected on a pro rata basis not more than 60 days prior to the Redemption
Date by the Property Trustee from the outstanding Trust Preferred Securities not
previously called for redemption, by such method as the Property Trustee shall
deem fair and appropriate and which may provide for the selection for redemption
of portions (equal to $1,000
8
<PAGE>
or an integral multiple of $1,000 in excess thereof) of the Liquidation Amount
of Trust Preferred Securities of a denomination larger than $1,000. The Property
Trustee shall promptly notify the trust registrar in writing of the Trust
Preferred Securities selected for redemption and, in the case of any Trust
Preferred Securities selected for partial redemption, the Liquidation Amount
thereof to be redeemed. For all purposes of each Trust Agreement, unless the
context otherwise requires, all provisions relating to the redemption of Trust
Preferred Securities shall 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 at least 30 days but not more
than 60 days before the Redemption Date to each holder of Trust Securities to be
redeemed at its registered address. Unless the Company defaults in payment of
the Redemption Price on the Corresponding Junior Subordinated Debentures, on and
after the Redemption Date interest will cease to accrue on such Junior
Subordinated Debentures or portions thereof (and distributions will cease to
accrue on the Related Trust Preferred Securities or portions thereof) called for
redemption.
Subordination of Common Securities
Payment of Distributions on, and the Redemption Price of, each Issuer's
Trust Preferred Securities and Common Securities, as applicable, shall be made
pro rata based on the Liquidation Amount of such Trust Preferred Securities and
Common Securities; provided, however, that if on any Distribution Date or
Redemption Date a Debenture Event of Default shall have occurred and be
continuing, no payment of any Distribution on, or Redemption Price of, any of
the Issuer's Common Securities, and no other payment on account of the
redemption, liquidation or other acquisition of such Common Securities, shall be
made unless payment in full in cash of all accumulated and unpaid Distributions
on all of the Issuer's outstanding Trust Preferred Securities for all
Distribution periods terminating on or prior thereto, or in the case of payment
of the Redemption Price the full amount of such Redemption Price on all of the
Issuer's outstanding Trust Preferred Securities then called for redemption,
shall have been made or provided for, and all funds available to the Property
Trustee shall first be applied to the payment in full in cash of all
Distributions on, or Redemption Price of, the Issuer's Trust Preferred
Securities then due and payable.
In the case of any event of default under a Trust Agreement resulting
from a Debenture Event of Default, the Company as holder of such Issuer's Common
Securities will be deemed to have waived any right to act with respect to any
such event of default under the applicable Trust Agreement until the effect of
all such events of default with respect to such Trust Preferred Securities have
been cured, waived or otherwise eliminated. Until any such events of default
under the applicable Trust Agreement with respect to the Trust Preferred
Securities have been so cured, waived or otherwise eliminated, the Property
Trustee shall act solely on behalf of the holders of such Trust Preferred
Securities and not on behalf of the Company as holder of the Issuer's Common
Securities, and only the holders of such Trust Preferred Securities will have
the right to direct the Property Trustee to act on their behalf.
Liquidation Distribution Upon Dissolution
Pursuant to each Trust Agreement, each Issuer shall automatically
dissolve upon expiration of its term and shall dissolve on the first to occur
of: (i) certain events of bankruptcy, dissolution or liquidation of the Company;
(ii) the distribution of a Like Amount of the Corresponding Junior Subordinated
Debentures to the holders of its Trust Securities, if the Company, as Depositor,
has given written direction to the Property Trustee to liquidate the Issuer
(subject to the Company having received prior approval of the Federal Reserve if
so required under applicable capital guidelines or policies of the Federal
Reserve); (iii) redemption of all of the Issuer's Trust Preferred Securities as
described under " -- Redemption -- Mandatory Redemption;" and (iv) the entry of
an order for the dissolution of the Issuer by a court of competent jurisdiction.
If an early termination occurs as described in clause (i), (ii) or (iv)
above, the Issuer shall be liquidated by the Issuer Trustees as expeditiously as
the Issuer Trustees determine to be possible by distributing, after satisfaction
of liabilities to creditors as provided by applicable law, to the holders of
such Trust Securities in exchange therefor a Like
9
<PAGE>
Amount of the Corresponding Junior Subordinated Debentures, unless such
distribution is determined by the Property Trustee not to be practical, in which
event such holders will be entitled to receive out of the assets of the Issuer
available for distribution to holders, after satisfaction of liabilities to
creditors of such Issuer as provided by applicable law, an amount equal to, in
the case of holders of Trust Preferred Securities, the aggregate of the
Liquidation Amount plus accrued and unpaid Distributions thereon to the date of
payment (such amount being the "Liquidation Distribution"). If such Liquidation
Distribution can be paid only in part because such Issuer has insufficient
assets available to pay in full the aggregate Liquidation Distribution, then the
amounts payable directly by such Issuer on its Trust Preferred Securities shall
be paid on a pro rata basis. The holder(s) of such Issuer's Common Securities
will be entitled to receive distributions upon any such liquidation pro rata
with the holders of its Trust Preferred Securities, except that if a Debenture
Event of Default has occurred and is continuing, the Trust Preferred Securities
shall have a priority over the Common Securities. See " -- Subordination of
Common Securities."
Events of Default; Notice
Any one of the following events constitutes an "Event of Default" under
each Trust Agreement with respect to the Trust Preferred Securities issued
thereunder (whatever the reason for such Event of Default and whether it shall
be voluntary or involuntary or be effected by operation of law or pursuant to
any judgment, decree or order of any court or any order, rule or regulation of
any administrative or governmental body):
(i) the occurrence of a Debenture Event of Default (see "Description
of Junior Subordinated Debentures -- Debenture Events of Default"); or
(ii) default by the Property Trustee in the payment of any
Distribution when it becomes due and payable, and continuation of such default
for a period of 30 days; or
(iii) default by the Property Trustee in the payment of any Redemption
Price of any Trust Security when it becomes due and payable; or
(iv) default in the performance, or breach, in any material respect,
of any covenant or warranty of the Issuer Trustees in such Trust Agreement
(other than a covenant or warranty a default in the performance of which or the
breach of which is dealt with in clause (ii) or (iii) above), and continuation
of such default or breach for a period of 60 days after there has been given, by
registered or certified mail, to the defaulting Issuer Trustee or Trustees by
the holders of at least 25% in aggregate Liquidation Amount of the outstanding
Trust Preferred Securities of the applicable Issuer, a written notice specifying
such default or breach and requiring it to be remedied and stating that such
notice is a "Notice of Default" under such Trust Agreement; or
(v) the occurrence of certain events of bankruptcy or insolvency with
respect to the Property Trustee and the failure by the Company to appoint a
successor Property Trustee within 60 days thereof.
Within five Business Days after the occurrence of any Event of Default
actually known to the Property Trustee, the Property Trustee shall transmit
notice of such Event of Default to the holders of such Issuer's Trust Preferred
Securities, the Administrative Trustees and the Company, as Depositor, unless
such Event of Default shall have been cured or waived. The Company, as
Depositor, and the Administrative Trustees are required to file annually with
the Property Trustee a certificate as to whether or not they are in compliance
with all the conditions and covenants applicable to them under the Trust
Agreement.
If a Debenture Event of Default has occurred and is continuing, the
Trust Preferred Securities shall have a preference over the Common Securities
upon termination of each Issuer as described above. See " -- Subordination of
Common Securities" and " -- Liquidation Distribution Upon Dissolution." The
existence of an Event of Default does not entitle the holders of Trust Preferred
Securities to accelerate the maturity thereof.
10
<PAGE>
Removal of Issuer Trustees
Unless a Debenture Event of Default shall have occurred and be
continuing, any Issuer Trustee may be removed at any time by the holder of the
Common Securities. If a Debenture Event of Default has occurred and is
continuing, the Property Trustee and the Delaware Trustee may be removed at such
time by the holders of a majority in Liquidation Amount of the outstanding Trust
Preferred Securities. In no event will the holders of the Trust Preferred
Securities have the right to vote to appoint, remove or replace the
Administrative Trustees, which voting rights are vested exclusively in the
Company as the holder of the Common Securities. No resignation or removal of an
Issuer Trustee and no appointment of a successor trustee shall be effective
until the acceptance of appointment by the successor trustee in accordance with
the provisions of the applicable Trust Agreement.
Co-Trustees and Separate Property Trustee
Unless an Event of Default shall have occurred and be continuing, at
any time or from time to time, for the purpose of meeting the legal requirements
of the Trust Indenture Act or of any jurisdiction in which any part of the Trust
property may at the time be located, the Company, as the holder of the Common
Securities, and the Administrative Trustees shall have power to appoint one or
more persons either to act as a co-trustee, jointly with the Property Trustee,
of all or any part of such Trust Property, or to act as separate trustee of any
such property, in either case with such powers as may be provided in the
instrument of appointment, and to vest in such person or persons in such
capacity any property, title, right or power deemed necessary or desirable,
subject to the provisions of the applicable Trust Agreement. In case a Debenture
Event of Default has occurred and is continuing, the Property Trustee alone
shall have power to make such appointment.
Merger or Consolidation of Issuer Trustees
Any Person (as defined in the Trust Agreement) into which the Property
Trustee, the Delaware Trustee or any Administrative Trustee that is not a
natural person may be merged or converted or with which it may be consolidated,
or any Person resulting from any merger, conversion or consolidation to which
such Issuer Trustee shall be a party, or any Person succeeding to all or
substantially all the corporate trust business of such Issuer Trustee, shall be
the successor of such Trustee under each Trust Agreement, provided such Person
shall be otherwise qualified and eligible.
Mergers, Consolidations, Amalgamations or Replacements of the Issuer
An Issuer may not merge with or into, consolidate, amalgamate, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to any corporation or other Person, except as
described below. An Issuer may, at the request of the Company, with the consent
of the Administrative Trustees of such Issuer and without the consent of the
holders of the Trust Preferred Securities of such Issuer, merge with or into,
consolidate, amalgamate, or be replaced by, or convey, transfer or lease its
properties and assets substantially as an entirety to, a trust organized as such
under the laws of any State; provided, that (i) such successor entity either (a)
expressly assumes all of the obligations of such Issuer with respect to its
Trust Preferred Securities or (b) substitutes for such Trust Preferred
Securities other securities having substantially the same terms as such Trust
Preferred Securities (the "Successor Securities") so long as the Successor
Securities rank the same as such Trust Preferred Securities in priority with
respect to distributions and payments upon liquidation, redemption and
otherwise; (ii) the Company expressly appoints a trustee of such successor
entity possessing the same powers and duties as the Property Trustee of such
Issuer as the holder of the Corresponding Junior Subordinated Debentures; (iii)
the Successor Securities are listed, or any Successor Securities will be listed
upon notification of issuance, on any national securities exchange or other
organization on which such Trust Preferred Securities are then listed, if any;
(iv) such merger, consolidation, amalgamation, replacement, conveyance, transfer
or lease does not cause such Trust Preferred Securities to be downgraded by any
nationally recognized statistical rating organization which gives ratings on
such Trust Preferred Securities; (v) such merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease does not adversely affect the rights,
preferences and privileges of the holders of such Trust Preferred Securities
(including any Successor Securities) in any material
11
<PAGE>
respect; (vi) such successor entity has a purpose identical to that of such
Issuer, (vii) prior to such merger, consolidation, amalgamation, replacement,
conveyance, transfer or lease, the Company has received an opinion from
independent counsel to such Issuer experienced in such matters to the effect
that (a) such merger, consolidation, amalgamation, replacement, conveyance,
transfer or lease does not adversely affect the rights, preferences and
privileges of the holders of the Trust Preferred Securities (including any
Successor Securities) in any material respect, and (b) following such merger,
consolidation, amalgamation, replacement, conveyance, transfer or lease, neither
such Issuer nor such successor entity will be required to register as an
investment company under the Investment Company Act; and (viii) the Company or
any permitted successor or assignee owns all of the Common Securities of such
successor entity and guarantees the obligations of such successor entity under
the Successor Securities at least to the extent provided by the Guarantee.
Notwithstanding the foregoing, an Issuer shall not, except with the consent of
holders of 100% in Liquidation Amount 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 consolidation, amalgamation, merger, replacement,
conveyance, transfer or lease would cause the Issuer or the successor entity to
be classified as other than a grantor trust for United States federal income tax
purposes.
Voting Rights; Amendment of Each Trust Agreement
Except as provided below and under "Description of Guarantees --
Amendments and Assignment" and as otherwise required by law and the applicable
Trust Agreement, the holders of the Trust Preferred Securities will have no
voting rights.
Each Trust Agreement may be amended from time to time by the Company,
the Property Trustee and the Administrative Trustees, without the consent of the
holders of the Related Trust Preferred Securities (i) to cure any ambiguity,
correct or supplement any provisions in such Trust Agreement that may be
inconsistent with any other provision, or to make any other provisions with
respect to matters or questions arising under such Trust Agreement, which shall
not be inconsistent with the other provisions of such Trust Agreement; or (ii)
to modify, eliminate or add to any provisions of such Trust Agreement to such
extent as shall be necessary to ensure that the related Issuer will be
classified for United States federal income tax purposes as a grantor trust at
all times that any Trust Securities are outstanding or to ensure that such
Issuer will not be required to register as an "investment company" under the
Investment Company Act; provided, however, that in the case of clause (i) such
action shall not adversely affect in any material respect the interests of any
holder of Trust Securities, and any amendments of such Trust Agreement shall
become effective when notice thereof is given to the holders of the Trust
Securities of such Issuer. Each Trust Agreement may be amended by the applicable
Issuer Trustees and the Company with (i) the consent of holders representing not
less than a majority (based upon Liquidation Amounts) of the outstanding Trust
Securities of the related Issuer, and (ii) receipt by such Issuer Trustees of an
opinion of counsel to the effect that such amendment or the exercise of any
power granted to such Issuer Trustees in accordance with such amendment will not
affect the applicable Issuer's status as a grantor trust for United States
federal income tax purposes or such Issuer's exemption from status as an
"investment company" under the Investment Company Act, provided that without the
consent of each holder of Trust Securities of such Issuer, such Trust Agreement
may not be amended to (i) change the amount or timing of any Distribution on
such Trust Securities or otherwise adversely affect the amount of any
Distribution required to be made in respect of such Trust Securities as of a
specified date or (ii) restrict the right of a holder of Trust Securities of
such Issuer to institute suit for the enforcement of any such payment on or
after such date.
So long as any Corresponding Junior Subordinated Debentures are held by
the Property Trustee of any Issuer, the Issuer Trustees of such Issuer shall not
(i) direct the time, method and place of conducting any proceeding for any
remedy available to the Debenture Trustee, or executing any trust or power
conferred on the Property Trustee with respect to such Corresponding Junior
Subordinated Debentures; (ii) waive any past default that is waivable under the
Indenture; (iii) exercise any right to rescind or annul a declaration that the
principal of all the Corresponding Junior Subordinated Debentures shall be due
and payable; or (iv) consent to any amendment, modification or termination of
the Indenture or such Corresponding Junior Subordinated Debentures, where such
consent shall be required, without,
12
<PAGE>
in each case, obtaining the prior approval of the holders of a majority in
aggregate Liquidation Amount of all outstanding Related Trust Preferred
Securities; provided, however, that where a consent under the Indenture would
require the consent of each holder of Corresponding Junior Subordinated
Debentures affected thereby, no such consent shall be given by the Property
Trustee without the prior consent of each holder of the Related Trust Preferred
Securities. The Issuer Trustees of such Issuer shall not revoke any action
previously authorized or approved by a vote of the holders of the Trust
Preferred Securities of such Issuer except by subsequent vote of such holders.
The Property Trustee of such Issuer shall notify each holder of Trust Preferred
Securities of such Issuer of any notice of default with respect to the Junior
Subordinated Debentures. In addition to obtaining the foregoing approvals of the
holders of the Trust Preferred Securities, prior to taking any of the foregoing
actions, the Issuer Trustees of such Issuer shall obtain an opinion of counsel
experienced in such matters to the effect that such action would not cause such
Issuer to be classified as other than a grantor trust for United States federal
income tax purposes.
Any required approval of holders of Trust Preferred Securities of any
Issuer may be given at a meeting of such holders convened for such purpose or
pursuant to written consent. The Property Trustee will cause a notice of any
meeting at which holders of Trust Preferred Securities of such Issuer are
entitled to vote, or of any matter upon which action by written consent of such
holders is to be taken, to be given to each holder of record of Trust Preferred
Securities of such Issuer in the manner set forth in the applicable Trust
Agreement.
No vote or consent of the holders of Trust Preferred Securities will be
required for the Issuer to redeem and cancel its Trust Preferred Securities in
accordance with the Trust Agreement.
Notwithstanding that holders of Trust Preferred Securities are entitled
to vote or consent under any of the circumstances described above, any of the
Trust Preferred Securities that are owned by the Company, the Issuer Trustees or
any affiliate of the Company or any Issuer Trustees, shall, for purposes of such
vote or consent, be treated as if they were not outstanding.
Global Trust Preferred Securities
Unless otherwise specified in the applicable Prospectus Supplement, the
Trust Preferred Securities of any series will be issued in whole or in part in
the form of one or more global certificates ("Global Trust Preferred
Securities") registered in the name of and deposited with, or on behalf of, the
Depositary. Global Trust Preferred Securities may be issued only in fully
registered form and in either temporary or permanent form. Beneficial interests
in the Trust Preferred Securities will be shown on, and transfers thereof will
be effected only through, records maintained by Depositary. Except as described
below, Trust Preferred Securities in certificated form will not be issued in
exchange for the global certificates. See "Book-Entry Issuance."
Unless and until it is exchanged in whole or in part for the individual
Trust Preferred Securities represented thereby, a Global Trust Preferred
Security may not be transferred except as a whole by the Depositary for such
Global Trust Preferred Security to a nominee of such Depositary or by a nominee
of such Depositary to such Depositary or another nominee of such Depositary or
by the Depositary or any nominee to a successor Depositary or any nominee of
such successor.
The specific terms of the depositary arrangement with respect to a
series of Trust Preferred Securities will be described in the Prospectus
Supplement relating to such series. The Company anticipates that the following
provisions will generally apply to depositary arrangements.
A global security shall be exchangeable for Trust Preferred Securities
of such series registered in the names of persons other than the Depositary or
its nominee only if (i) the Depositary notifies such Issuer that it is unwilling
or unable to continue as a depositary for such global security and no successor
depositary shall have been appointed, or if at any time the Depositary ceases to
be a clearing agency registered under the Exchange Act at a time when the
Depositary is required to be so registered to act as such depositary; (ii) the
Company in its sole discretion determines
13
<PAGE>
that such global security shall be so exchangeable; or (iii) there shall have
occurred and be continuing a Debenture Event of Default. Any global security
that is exchangeable pursuant to the preceding sentence shall be exchangeable
for definitive certificates registered in such names as the Depositary shall
direct. It is expected that such instructions will be based upon directions
received by the Depositary from its Participants (as defined herein in
"Book-Entry Issuance") with respect to ownership of beneficial interests in such
global security. In the event that Trust Preferred Securities of any series are
issued in definitive form, such Trust Preferred Securities will be in
denominations of $1,000 and integral multiples thereof and may be transferred or
exchanged at the offices described below.
Payments on individual Trust Preferred Securities represented by a
global security will be made to the Depositary, as the depositary for the Trust
Preferred Securities. In the event Trust Preferred Securities are issued in
certificated form, the Liquidation Amount and Distributions will be payable, the
transfer of such Trust Preferred Securities will be registrable, and Trust
Preferred Securities will be exchangeable for Trust Preferred Securities of
other denominations of a like aggregate Liquidation Amount, at the corporate
office of the Property Trustee in Wilmington, Delaware, or at the offices of any
paying agent or transfer agent appointed by the Administrative Trustees,
provided that payment of any Distribution may be made at the option of the
Administrative Trustees by check mailed to the address of the persons entitled
thereto or by wire transfer. In addition, if the Trust Preferred Securities are
issued in certificated form, the record dates for payment of Distributions will
be the 15th day of the month in which the relevant Distribution payment is
scheduled to be paid.
Upon the issuance of a Global Trust Preferred Security, and the deposit
of such Global Trust Preferred Security with or on behalf of the Depositary, the
Depositary for such Global Trust Preferred Security or its nominee will credit,
on its book-entry registration and transfer system, the respective aggregate
Liquidation Amounts of the individual Trust Preferred Securities represented by
such Global Trust Preferred Securities to the accounts of Participants. Such
accounts shall be designated by the dealers, underwriters or agents with respect
to such Trust Preferred Securities or by the Company if such Trust Preferred
Securities are offered and sold directly by the Company. Ownership of beneficial
interests in a Global Trust Preferred Security will be limited to Participants
or persons that may hold interests through Participants. Ownership of beneficial
interests in such Global Trust Preferred Security will be shown on, and the
transfer of that ownership will be effected only through, records maintained by
the applicable Depositary or its nominee (with respect to interests of
Participants) and the records of Participants (with respect to interests of
persons who hold through Participants). The laws of some states require that
certain purchasers of securities take physical delivery of such securities in
definitive form. Such limits and such laws may impair the ability to transfer
beneficial interests in a Global Trust Preferred Security.
So long as the Depositary for a Global Trust Preferred Security, or its
nominee, is the registered owner of such Global Trust Preferred Security, such
Depositary or such nominee, as the case may be, will be considered the sole
owner or holder of the Trust Preferred Securities represented by such Global
Trust Preferred Security for all purposes under the Indenture governing such
Trust Preferred Securities. Except as provided below, owners of beneficial
interests in a Global Trust Preferred Security will not be entitled to have any
of the individual Trust Preferred Securities represented by such Global Trust
Preferred Security registered in their names, will not receive or be entitled to
receive physical delivery of any such Trust Preferred Securities in definitive
form and will not be considered the owners or holders thereof under the
Indenture.
Payments of principal of (and premium, if any) and interest on
individual Trust Preferred Securities represented by a Global Trust Preferred
Security registered in the name of the Depositary or its nominee will be made to
the Depositary or its nominee, as the case may be, as the registered owner of
the Global Trust Preferred Security representing such Trust Preferred
Securities. None of the Company, the Property Trustee, any paying agent (the
"Paying Agent"), or the securities registrar for such Trust Preferred Securities
will have any responsibility or liability for any aspect of the records relating
to or payments made on account of beneficial ownership interests of the Global
Trust Preferred Security representing such Trust Preferred Securities or for
maintaining, supervising or reviewing any records relating to such beneficial
ownership interests.
14
<PAGE>
The Company expects that the Depositary or its nominee, upon receipt of
any payment of Liquidation Amount, Redemption Price, premium or Distributions in
respect of a permanent Global Trust Preferred Security representing any of such
Trust Preferred Securities, immediately will credit Participants' accounts with
payments in amounts proportionate to their respective beneficial interest in the
aggregate Liquidation Amount of such Global Trust Preferred Security for such
Trust Preferred Securities as shown on the records of such Depositary or its
nominee. The Company also expects that payments by Participants to owners of
beneficial interests in such Global Trust Preferred Security held through such
Participants will be governed by standing instructions and customary practices,
as is now the case with securities held for the accounts of customers in bearer
form or registered in "street name." Such payments will be the responsibility of
such Participants.
Unless otherwise specified in the Prospectus Supplement, if a
Depositary for a series of Trust Preferred Securities is at any time unwilling,
unable or ineligible to continue as depositary and a successor depositary is not
appointed by the Company within 90 days, an Issuer will issue individual Trust
Preferred Securities in exchange for the Global Trust Preferred Security. In
addition, the Issuer may at any time and in its sole discretion, subject to any
limitations described in the Prospectus Supplement, determine not to have any
Trust Preferred Securities of such series represented by one or more Global
Trust Preferred Securities and, in such event, will issue individual Trust
Preferred Securities of such series in exchange for the Global Trust Preferred
Security or Securities representing such series of Trust Preferred Securities.
Further, if the Company so specifies with respect to the Trust Preferred
Securities of a series, an owner of a beneficial interest in a Global Trust
Preferred Security representing Trust Preferred Securities of such series may,
on terms acceptable to the applicable Issuer, the Property Trustee and the
Depositary for such Global Trust Preferred Security, receive individual Trust
Preferred Securities of such series in exchange for such beneficial interests,
subject to any limitations described in the Prospectus Supplement relating to
such Trust Preferred Securities. In any such instance, an owner of a beneficial
interest in a Global Trust Preferred Security will be entitled to physical
delivery of individual Trust Preferred Securities of the series represented by
such Global Trust Preferred Security equal in principal amount to such
beneficial interest and to have such Trust Preferred Securities registered in
its name. Individual Trust Preferred Securities of such series so issued will be
issued in denominations, unless otherwise specified by the applicable Issuer, of
$1,000 and integral multiples thereof.
Payment and Paying Agency
Payments in respect of the Trust Preferred Securities shall be made to
the Depositary, which shall credit the relevant accounts at the Depositary on
the applicable Distribution Dates or, if any Issuer's Trust Preferred Securities
are not held by the Depositary, such payments shall be made by check mailed to
the address of the holder entitled thereto as such address shall appear on the
register. Unless otherwise specified in the Prospectus Supplement, the Paying
Agent shall initially be the Property Trustee and any co-paying agent chosen by
the Property Trustee and acceptable to the Administrative Trustees and the
Company. The Paying Agent shall be permitted to resign as Paying Agent upon 30
days' written notice to the Property Trustee and the Company. In the event that
the Property Trustee shall no longer be the Paying Agent, the Administrative
Trustees shall appoint a successor (which shall be a bank or trust company
acceptable to the Administrative Trustees and the Company) to act as Paying
Agent.
Registrar and Transfer Agent
Unless otherwise specified in the Prospectus Supplement, the Property
Trustee will act as registrar and transfer agent for the Trust Preferred
Securities.
Registration of transfers of Trust Preferred Securities will be
effected without charge by or on behalf of each Issuer, but upon payment of any
tax or other governmental charges that may be imposed in connection with any
transfer or exchange. The Issuers will not be required to register or cause to
be registered the transfer of their Trust Preferred Securities after such Trust
Preferred Securities have been called for redemption.
15
<PAGE>
Information Concerning the Property Trustee
The Property Trustee, other than during the occurrence and continuance
of an Event of Default, undertakes to perform only such duties as are
specifically set forth in each Trust Agreement and, after such Event of Default,
must exercise the same degree of care and skill as a prudent person would
exercise or use in the conduct of his or her own affairs. Subject to this
provision, the Property Trustee is under no obligation to exercise any of the
powers vested in it by the applicable Trust Agreement at the request of any
holder of Trust Preferred Securities unless it is offered reasonable indemnity
against the costs, expenses and liabilities that might be incurred thereby. If
no Event of Default has occurred and is continuing and the Property Trustee is
required to decide between alternative causes of action, construe ambiguous
provisions in the applicable Trust Agreement or is unsure of the application of
any provision of the applicable Trust Agreement, and the matter is not one on
which holders of Trust Preferred Securities are entitled under such Trust
Agreement to vote, then the Property Trustee shall take such action as is
directed by the Company and if not so directed, shall take such action as it
deems advisable and in the best interests of the holders of the Trust Securities
and will have no liability except for its own bad faith, negligence or willful
misconduct.
Governing Law
Each Trust Agreement will be governed by and construed in accordance
with the laws of the State of Delaware.
Miscellaneous
The Administrative Trustees are authorized and directed to conduct the
affairs of and to operate the Issuers in such a way that no Issuer will not be
deemed to be an "investment company" required to be registered under the
Investment Company Act or classified as other than a grantor trust for United
States federal income tax purposes and so that the Corresponding Junior
Subordinated Debentures will be treated as indebtedness of the Company for
United States federal income tax purposes. In this connection, the Company and
the Administrative Trustees are authorized to take any action, not inconsistent
with applicable law, the certificate of trust of each Issuer or each Trust
Agreement, that the Company and the Administrative Trustees determine in their
discretion to be necessary or desirable for such purposes, as long as such
action does not materially adversely affect the interests of the holders of the
Related Trust Preferred Securities.
Holders of the Trust Preferred Securities have no preemptive or similar
rights.
No Issuer may borrow money or issue debt or mortgage or pledge any of
its assets.
DESCRIPTION OF JUNIOR SUBORDINATED DEBENTURES
The Junior Subordinated Debentures are to be issued in one or more
series under the Indenture between the Company and Wilmington Trust Company, as
Debenture Trustee as supplemented from time to time. The following summary of
certain terms and provisions of the Junior Subordinated Debentures,
Corresponding Junior Subordinated Debentures and the Indenture, which summarizes
the material provisions thereof, does not purport to be complete and is subject
to, and is qualified in its entirety by reference to, the Indenture, the form of
which is filed as an exhibit to the Registration Statement of which this
Prospectus forms a part, and to the Trust Indenture Act, to each of which
reference is hereby made. The Indenture is qualified under the Trust Indenture
Act. Whenever particular defined terms of the Indenture (as supplemented or
amended) are referred to herein or in a Prospectus Supplement, such defined
terms are incorporated herein or therein by reference.
16
<PAGE>
General
Each series of the Junior Subordinated Debentures will rank pari passu
with all other series of Junior Subordinated Debentures and will be unsecured
and subordinate and junior in right of payment to the extent and in the manner
set forth in the Indenture to all Senior and Subordinated Debt (as defined
below) of the Company. See " -- Subordination." Because the Company is a holding
company, the right of the Company to participate in any distribution of assets
of any subsidiary, including the Bank, upon such subsidiary's liquidation or
reorganization or otherwise (and thus the ability of holders of the Trust
Preferred Securities to benefit indirectly from such distribution), is subject
to the prior claims of creditors of the subsidiary, except to the extent the
Company may itself be recognized as a creditor of that subsidiary. Accordingly,
the Junior Subordinated Debentures will be effectively subordinated to all
existing and future liabilities of the Company's subsidiaries, and holders of
Junior Subordinated Debentures should look only to the assets of the Company for
payments on the Junior Subordinated Debentures. Except as otherwise provided in
the applicable Prospectus Supplement, the Indenture does not limit the
incurrence or issuance of other secured or unsecured debt of the Company,
including Senior and Subordinated Debt, whether under the Indenture, any other
existing indenture or any other indenture that the Company may enter into in the
future or otherwise. See " -- Subordination" and the Prospectus Supplement
relating to any offering of Trust Preferred Securities or Junior Subordinated
Debentures.
The Junior Subordinated Debentures will be issuable in one or more
series pursuant to an indenture supplemental to the Indenture or pursuant to a
resolution of the Company's Board of Directors or a committee thereof and a
certificate of duly authorized officers of the Company. The applicable
Prospectus Supplement will describe the following terms of the Junior
Subordinated Debentures: (1) the title of the Junior Subordinated Debentures;
(2) any limit upon the aggregate principal amount of the Junior Subordinated
Debentures; (3) the date on which the principal of the Junior Subordinated
Debentures is payable (the "Stated Maturity") or the method of determination
thereof; (4) the rate or rates at which the Junior Subordinated Debentures shall
bear interest, the dates on which any such interest shall be payable (the
"Interest Payment Dates"), the right, if any, of the Company to defer or extend
an Interest Payment Date, and the record dates for any interest payable on any
Interest Payment Date (the "Regular Record Dates") or the method by which any of
the foregoing shall be determined; (5) the method in which, subject to the terms
of the Indenture as described below under " -- Payment and Paying Agents," the
principal of and premium, if any, and interest on the Junior Subordinated
Debentures will be payable and how, subject to the terms of the Indenture as
described below under " -- Denominations, Registration and Transfer," the Junior
Subordinated Debentures may be presented for registration of transfer or
exchange and the place where notices and demands to or upon the Company in
respect of the Junior Subordinated Debentures and the Indenture may be made
("Place of Payment"); (6) any period or periods within which, or date or dates
on which, the price or prices at which and the terms and conditions upon which
Junior Subordinated Debentures may be redeemed, in whole or in part, at the
option of the Company or a holder thereof; (7) the obligation or the right, if
any, of the Company or a holder thereof to redeem, purchase or repay the Junior
Subordinated Debentures and the period or periods within which, the price or
prices at which, the currency or currencies (including currency units) in which
and the other terms and conditions upon which the Junior Subordinated Debentures
shall be redeemed, repaid or purchased, in whole or in part, pursuant to such
obligation; (8) the denominations in which any Junior Subordinated Debentures
shall be issuable if other than denominations of $1,000 and any integral
multiple thereof; (9) if other than in U.S. Dollars, the currency or currencies
(including currency unit or units) in which the principal of (and premium, if
any) and interest, if any, on the Junior Subordinated Debentures shall be
payable, or in which the Junior Subordinated Debentures shall be denominated;
(10) any additions, modifications or deletions in the events of default under
the Indenture or covenants of the Company specified in the Indenture with
respect to the Junior Subordinated Debentures; (11) if other than the principal
amount thereof, the portion of the principal amount of Junior Subordinated
Debentures that shall be payable upon declaration of acceleration of the
maturity thereof; (12) any additions or changes to the Indenture with respect to
the Junior Subordinated Debentures as shall be necessary to permit or facilitate
their issuance of such series in bearer form, registrable or not registrable as
to principal, and with or without interest coupons; (13) any index or indices
used to determine the amount of payments of principal of and premium, if any, on
the Junior Subordinated Debentures and the manner in which such amounts will be
determined; (14) the terms and conditions relating to the issuance of a
temporary global security representing all of the Junior Subordinated Debentures
of such
17
<PAGE>
series and the exchange of such temporary global security for definitive Junior
Subordinated Debentures of such series; (15) subject to the terms described
herein under " -- Global Junior Subordinated Debentures," whether the Junior
Subordinated Debentures of such series shall be issued in whole or in part in
the form of one or more global securities and, in such case, the depositary for
such global securities, which depositary shall be a clearing agency registered
under the Exchange Act; (16) the appointment of any paying agent or agents; (17)
the terms and conditions of any obligation or right of the Company or a holder
to convert or exchange the Junior Subordinated Debentures into any other
securities or property of the Company and the additions or changes to the
Indenture to facilitate such conversion or exchange; (18) the form of the Trust
Agreement and Guarantee Agreement, if applicable; (19) the relative degree, if
any, to which such Junior Subordinated Debentures of such series shall be senior
to or be subordinated to other indebtedness of the Company in right of payment,
whether such other series of Junior Subordinated Debentures or other
indebtedness are outstanding or not; and (20) any other terms of the Junior
Subordinated Debentures not inconsistent with the provisions of the Indenture.
If any index is used to determine the amount of payments of principal
of, premium, if any, or interest on any series of Junior Subordinated
Debentures, special United States federal income tax, accounting and other
considerations applicable thereto will be described in the Prospectus
Supplement.
Junior Subordinated Debentures may be sold at a substantial discount
below their stated principal amount, bearing no interest or interest at a rate
which at the time of issuance is below market rates. Certain United States
federal income tax consequences and special considerations applicable to any
such Junior Subordinated Debentures will be described in the applicable
Prospectus Supplement.
If the purchase price of any of the Junior Subordinated Debentures is
payable in one or more foreign currencies or currency units or if any Junior
Subordinated Debentures are denominated in one or more foreign currencies or
currency units or if the principal of, premium, if any, or interest, if any, on
any Junior Subordinated Debenture is payable in one or more foreign currencies
or currency units, the restrictions, elections, certain United States federal
income tax consequences, specific terms and other information with respect to
such issue of Junior Subordinated Debentures and such foreign currency or
currency units will be set forth in the applicable Prospectus Supplement.
Option to Defer Interest Payments
Unless otherwise specified in the Prospectus Supplement, the Company
will have the right at any time and from time to time during the term of any
series of Junior Subordinated Debenture to defer payment of interest for up to
such number of consecutive interest payment periods as may be specified in the
Prospectus Supplement, provided that such Extension Period may not extend beyond
the Stated Maturity of such Junior Subordinated Debentures. During any such
Extension Period, the Company may not, and may not permit any subsidiary of the
Company to, (1) declare or pay any dividends or distributions on, or redeem,
purchase, acquire or make a liquidation payment with respect to, any of the
Company's capital stock (which includes common and preferred stock ), (2) make
any payment of principal, interest or premium, if any, on or repay, repurchase
or redeem any debt securities of the Company that rank pari passu in all
respects with or junior in interest to the Junior Subordinated Debentures or (3)
make any guarantee payments with respect to any guarantee by the Company of the
debt securities of any subsidiary of the Company if such guarantee ranks pari
passu with or junior in interest to the Junior Subordinated Debentures (other
than (a) dividends or distributions in capital stock of the Company (which
includes common and preferred stock), (b) any declaration of a dividend in
connection with the implementation of a stockholders' rights plan or the
issuance of stock under any such plan in the future, or the redemption or
repurchase of any such rights pursuant thereto, (c) payments under the
Guarantee, and (d) purchases of common stock related to the issuance of common
stock or rights under any of the Company's benefit plans for its directors,
officers or employees). Prior to the termination of any such Extension Period,
the Company may further defer the payment of interest on the Junior Subordinated
Debentures, provided that no Extension Period may exceed 20 consecutive quarters
or extend beyond the Stated Maturity of the Junior Subordinated Debentures. Upon
the termination of any such Extension Period and the payment of all interest
then accrued and unpaid (together with interest thereon at the rate specified in
the applicable Prospectus Supplement, compounded quarterly, to the extent
permitted
18
<PAGE>
by applicable law), the Company may elect to begin a new Extension Period
subject to the above requirements. No interest shall be due and payable during
an Extension Period, except at the end thereof. The Company must give the
Property Trustee, the Administrative Trustees and the Debenture Trustee notice
of its election to begin such Extension Period at least one Business Day prior
to the earlier of (1) the date interest on the Junior Subordinated Debentures
would have been payable except for the election to begin such Extension Period;
(2) the date the Administrative Trustees are required to give notice to the New
York Stock Exchange, the Nasdaq National Market or other applicable stock
exchange or automated quotation system, if any, on which the Trust Preferred
Securities are then listed or quoted or to holders of Trust Preferred Securities
of the record date; or (3) the date such Distributions are payable, but in any
event not less than one Business Day prior to such record date. The Debenture
Trustee shall give notice of the Company's election to begin a new Extension
Period to the holders of the Junior Subordinated Debentures. There is no
limitation on the number of times that the Company may elect to begin an
Extension Period.
Distributions on the Trust Preferred Securities will be deferred by the
Issuer during any such Extension Period. See "Description of Trust Preferred
Securities -- Distributions."
See "Certain Federal Income Tax Consequences" in the accompanying
Prospectus Supplement for a description of certain federal income tax
consequences and special considerations applicable to any such Junior
Subordinated Debentures.
Additional Sums
If any Issuer is required to pay any additional taxes, duties or other
governmental charges as a result of a Tax Event, the Company will pay as
additional amounts on such series of Junior Subordinated Debentures such amounts
as shall be required so that the Distributions payable by such Issuer shall not
be reduced as a result of any such additional taxes, duties or other
governmental charges.
Redemption
Unless otherwise specified in the Prospectus Supplement, Junior
Subordinated Debentures will not be subject to any sinking fund.
Unless otherwise specified in the Prospectus Supplement, the Company
may, at its option and subject to receipt of prior approval by the Federal
Reserve if then required under applicable capital guidelines or policies of the
Federal Reserve, redeem the Junior Subordinated Debentures of any series in
whole at any time or in part from time to time. If the Junior Subordinated
Debentures are so redeemable only after a certain date upon the satisfaction of
additional conditions, the applicable Prospectus Supplement will specify such
date or describe such conditions. Junior Subordinated Debentures in
denominations larger than $1,000 may be redeemed in part but only in integral
multiples of $1,000. Except as otherwise specified in the applicable Prospectus
Supplement, the redemption price for any Junior Subordinated Debenture so
redeemed shall equal any accrued and unpaid interest thereon to the redemption
date, plus 100% of the principal amount thereof.
Except as otherwise specified in the applicable Prospectus Supplement,
if a Tax Event, Capital Treatment Event or Investment Company Event shall occur
and be continuing in respect of a series of Junior Subordinated Debentures, the
Company may, at its option and subject to receipt of prior approval by the
Federal Reserve if then required under applicable capital guidelines or policies
of the Federal Reserve, redeem such series of Junior Subordinated Debentures in
whole (but not in part) at any time within 90 days following of the occurrence
of such Tax Event, Capital Treatment Event or Investment Company Event, at a
redemption price equal to 100% of the principal amount of such Junior
Subordinated Debentures then outstanding plus accrued and unpaid interest to the
date fixed for redemption except as otherwise specified in the Prospectus
Supplement.
19
<PAGE>
Notice of any redemption will be mailed at least 30 days but not more
than 60 days before the redemption date to each holder of Junior Subordinated
Debentures to be redeemed at its registered address. Unless the Company defaults
in payment of the redemption price, on and after the redemption date interest
ceases to accrue on such Junior Subordinated Debentures or portions thereof
called for redemption.
Distribution Upon Liquidation
As described under "Description of Trust Preferred Securities --
Liquidation Distribution Upon Dissolution," under certain circumstances
involving the termination of the Issuer, the Junior Subordinated Debentures may
be distributed to the holders of the Trust Preferred Securities in the
liquidation of the Issuer after satisfaction of liabilities to creditors of the
Issuer as provided by applicable law. If distributed to holders of the Trust
Preferred Securities in liquidation, the Junior Subordinated Debentures will
initially be issued in the form of one or more global securities and the
Depositary, or any successor depositary for the Trust Preferred Securities, will
act as depositary for the Junior Subordinated Debentures. It is anticipated that
the depositary arrangements for the Junior Subordinated Debentures would be
substantially identical to those in effect for the Trust Preferred Securities.
If the Junior Subordinated Debentures are distributed to the holders of Capital
Stock upon the liquidation of the Issuer, there can be no assurance as to the
market price of any Junior Subordinated Debentures that may be distributed to
the holders of Trust Preferred Securities.
Restrictions on Certain Payments
The Company will also covenant, as to each series of the Junior
Subordinated Debentures, that it will not, and will not permit any subsidiary of
the Company to, (i) declare or pay any dividends or distributions on, or redeem,
purchase, acquire or make a liquidation payment with respect to, any of the
Company's capital stock (which includes common and preferred stock); (ii) make
any payment of principal, interest or premium, if any, on or repay or repurchase
or redeem any debt securities of the Company (including other Junior
Subordinated Debentures) that rank pari passu in all respects with or junior in
interest to the Junior Subordinated Debentures; or (iii) make any guarantee
payments with respect to any guarantee by the Company of the debt securities of
any subsidiary of the Company if such guarantee ranks pari passu in all respects
with or junior in interest to the Junior Subordinated Debentures (other than (a)
dividends or distributions in capital stock of the Company (which includes
common and preferred stock), (b) any declaration of a dividend in connection
with the implementation of a stockholders' rights plan, or the redemption or
repurchase of any such rights pursuant thereto, (c) payments under any Guarantee
and (d) purchases of common stock related to the issuance of common stock or
rights under any of the Company's benefit plans for its directors, officers or
employees, or related to the issuance of common stock (or securities convertible
into or exchangeable for common stock) as consideration in an acquisition
transaction) if at such time (i) there shall have occurred any event of which
the Company has actual knowledge (a) that with the giving of notice or the lapse
of time, or both, would constitute an "Event of Default" under the Indenture
with respect to the Junior Subordinated Debentures of such series and (b) in
respect of which the Company shall not have taken reasonable steps to cure, (ii)
if such Junior Subordinated Debentures are held by an Issuer of a series of
Related Trust Preferred Securities, the Company shall be in default with respect
to its payment of any obligations under the Guarantee relating to such Related
Trust Preferred Securities or (iii) the Company shall have given notice of its
selection of an Extension Period as provided in the Indenture with respect to
the Junior Subordinated Debentures of such series and shall not have rescinded
such notice, or such Extension Period, or any extension thereof, shall be
continuing.
Subordination
In the Indenture, the Company has covenanted and agreed that any Junior
Subordinated Debentures issued thereunder will be subordinate and junior in
right of payment to all Senior and Subordinated Debt to the extent provided in
the Indenture. Upon any payment or distribution of assets of the Company upon
any liquidation, dissolution, winding up, reorganization, assignment for the
benefit of creditors, marshaling of assets or any bankruptcy, insolvency, debt
restructuring or similar proceedings in connection with any insolvency or
bankruptcy proceeding of the Company, the
20
<PAGE>
holders of Senior and Subordinated Debt will first be entitled to receive
payment in full of all Allocable Amounts (as defined below) on such Senior and
Subordinated Debt before the holders of Junior Subordinated Debentures will be
entitled to receive or retain any payment in respect thereof.
In the event of the acceleration of the maturity of any Junior
Subordinated Debentures, the holders of all Senior and Subordinated Debt
outstanding at the time of such acceleration will first be entitled to receive
payment in full of all amounts due thereon (including any amounts due upon
acceleration) before the holders of Junior Subordinated Debentures will be
entitled to receive or retain any payment in respect of the Junior Subordinated
Debentures.
No payments on account of principal (or premium, if any) or interest in
respect of the Junior Subordinated Debentures may be made if there shall have
occurred and be continuing a default in any payment with respect to Senior and
Subordinated Debt or an event of default with respect to any Senior and
Subordinated Debt resulting in the acceleration of the maturity thereof, or if
any judicial proceeding shall be pending with respect to any such default.
"Allocable Amounts," when used with respect to any Senior and
Subordinated Debt, means all amounts due or to become due on such Senior and
Subordinated Debt less, if applicable, any amount which would have been paid to,
and retained by, the holders of such Senior and Subordinated Debt (whether as a
result of the receipt of payments by the holders of such Senior and Subordinated
Debt from the Company or any other obligor thereon or from any holders of, or
trustee in respect of, other indebtedness that is subordinate and junior in
right of payment to such Senior and Subordinated Debt pursuant to any provision
of such indebtedness for the payment over of amounts received on account of such
indebtedness to the holders of such Senior and Subordinated Debt or otherwise)
but for the fact that such Senior and Subordinated Debt is subordinate or junior
in right of payment to (or subject to a requirement that amounts received on
such Senior and Subordinated Debt be paid over to obligees on) trade accounts
payable or accrued liabilities arising in the ordinary course of business.
"Debt" means with respect to any Person, whether recourse is to all or
a portion of the assets of such Person and whether or not contingent, (i) every
obligation of such Person for money borrowed; (ii) every obligation of such
Person evidenced by bonds, debentures, notes or other similar instruments,
including obligations incurred in connection with the acquisition of property,
assets or businesses; (iii) every reimbursement obligation of such Person with
respect to letters of credit, bankers' acceptances or similar facilities issued
for the account of such Person; (iv) every obligation of such Person issued or
assumed as the deferred purchase price of property or services (but excluding
trade accounts payable or accrued liabilities arising in the ordinary course of
business); (v) every capital lease obligation of such Person; (vi) all
indebtedness of such Person whether incurred on or prior to the date of the
Indenture or thereafter incurred, for claims in respect of derivative products
including interest rate, foreign exchange rate and commodity forward contracts,
options and swaps and similar arrangements; and (vii) and every obligation of
the type referred to in clauses (i) through (vi) of another Person and all
dividends of another Person the payment of which, in either case, such Person
has guaranteed or is responsible or liable, directly or indirectly, as obligor
or otherwise.
"Senior and Subordinated Debt" means the principal of (and premium, if
any) and interest, if any (including interest accruing on or after the filing of
any petition in bankruptcy or for reorganization relating to the Company whether
or not such claim for post-petition interest is allowed in such proceeding), on
Debt of the Company, whether incurred on or prior to the date of the Indenture
or thereafter incurred, unless, in the instrument creating or evidencing the
same or pursuant to which the same is outstanding, it is provided that such
obligations are not superior in right of payment to the Junior Subordinated
Debentures or to other Debt which is pari passu with, or subordinated to, the
Junior Subordinated Debentures; provided, however, that Senior and Subordinated
Debt shall not be deemed to include (i) any Debt of the Company which when
incurred and without respect to any election under Section 1111(b) of the United
States Bankruptcy Code of 1978, as amended, was without recourse to the Company,
(ii) any Debt of the Company to any of its subsidiaries, (iii) Debt to any
employee of the Company, and (iv) any other debt securities issued pursuant to
the Indenture.
21
<PAGE>
The Indenture places no limitation on the amount of Senior and
Subordinated Debt that may be incurred by the Company. The Company expects from
time to time to incur additional indebtedness and other obligations constituting
Senior and Subordinated Debt.
The Indenture provides that the foregoing subordination provisions,
insofar as they relate to any particular issue of Junior Subordinated
Debentures, may be changed prior to such issuance. Any such change would be
described in the applicable Prospectus Supplement.
Global Junior Subordinated Debentures
Unless otherwise specified in the applicable Prospectus Supplement, the
Junior Subordinated Debentures of a series will be issued in whole or in part in
the form of one or more global certificates ("Global Junior Subordinated
Debentures") registered in the name of and deposited with, or on behalf of, the
Depositary of such series. Global Junior Subordinated Debentures may be issued
only in fully registered form and in either temporary or permanent form.
Beneficial interests in the Junior Subordinated Debentures will be shown on, and
transfers thereof will be effected only through, records maintained by the
Depositary. Except as described below, Junior Subordinated Debentures in
certified form will not be issued in exchange for the global certificates. See
"Book-Entry Issuance."
Unless and until it is exchanged in whole or in part for the individual
Junior Subordinated Debentures represented thereby, a Global Junior Subordinated
Debenture may not be transferred except as a whole by the Depositary for such
Global Junior Subordinated Debenture to a nominee of such Depositary or by a
nominee of such Depositary to such Depositary or another nominee of such
Depositary or by the Depositary or any nominee to a successor depositary or any
nominee of such successor.
The specific terms of the depositary arrangement with respect to a
series of Junior Subordinated Debentures will be described in the Prospectus
Supplement relating to such series. The Company anticipates that the following
provisions will generally apply to depositary arrangements.
Upon the issuance of a Global Junior Subordinated Debenture, and the
deposit of such Global Junior Subordinated Debenture with or on behalf of the
Depositary, the Depositary for such Global Junior Subordinated Debenture or its
nominee will credit, on its book-entry registration and transfer system, the
respective principal amounts of the individual Junior Subordinated Debentures
represented by such Global Junior Subordinated Debenture to the accounts of
persons that have accounts with such Depositary ("Participants"). Such accounts
shall be designated by the dealers, underwriters or agents with respect to such
Junior Subordinated Debentures or by the Company if such Junior Subordinated
Debentures are offered and sold directly by the Company. Ownership of beneficial
interests in a Global Junior Subordinated Debenture will be limited to
Participants or persons that may hold interests through Participants. Ownership
of beneficial interests in such Global Junior Subordinated Debenture will be
shown on, and the transfer of that ownership will be effected only through,
records maintained by the Depositary or its nominee (with respect to interests
of Participants) and the records of Participants (with respect to interests of
persons who hold through Participants). The laws of some states require that
certain purchasers of securities take physical delivery of such securities in
definitive form. Such limits and such laws may impair the ability to transfer
beneficial interests in a Global Junior Subordinated Debenture.
So long as the Depositary for a Global Junior Subordinated Debenture,
or its nominee, is the registered owner of such Global Junior Subordinated
Debenture, such Depositary or such nominee, as the case may be, will be
considered the sole owner or holder of the Junior Subordinated Debentures
represented by such Global Junior Subordinated Debenture for all purposes under
the Indenture governing such Junior Subordinated Debentures. Except as provided
below, owners of beneficial interests in a Global Junior Subordinated Debenture
will not be entitled to have any of the individual Junior Subordinated
Debentures of the series represented by such Global Junior Subordinated
Debenture registered in their names, will not receive or be entitled to receive
physical delivery of any such Junior Subordinated Debentures of the series in
definitive form and will not be considered the owners or holders thereof under
the Indenture.
22
<PAGE>
Payments of principal of (and premium, if any) and interest on
individual Junior Subordinated Debentures represented by a Global Junior
Subordinated Debenture registered in the name of a Depositary or its nominee
will be made to the Depositary or its nominee, as the case may be, as the
registered owner of the Global Junior Subordinated Debenture representing such
Junior Subordinated Debentures. None of the Company, the Debenture Trustee, any
Paying Agent, or the Securities Registrar for such Junior Subordinated
Debentures will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests of the Global Junior Subordinated Debenture representing such Junior
Subordinated Debentures or for maintaining, supervising or reviewing any records
relating to such beneficial ownership interests.
The Company expects that the Depositary for a series of Junior
Subordinated Debentures or its nominee, upon receipt of any payment of
principal, premium, if any, or interest in respect of a permanent Global Junior
Subordinated Debenture representing any of such Junior Subordinated Debentures,
immediately will credit Participants' accounts with payments in amounts
proportionate to their respective beneficial interest in the principal amount of
such Global Junior Subordinated Debenture for such Junior Subordinated
Debentures as shown on the records of such Depositary or its nominee. The
Company also expects that payments by Participants to owners of beneficial
interests in such Global Junior Subordinated Debenture held through such
Participants will be governed by standing instructions and customary practices,
as is now the case with securities held for the accounts of customers in bearer
form or registered in "street name." Such payments will be the responsibility of
such Participants.
Unless otherwise specified in the Prospectus Supplement, if the
Depositary for a series of Junior Subordinated Debentures is at any time
unwilling, unable or ineligible to continue as depositary and a successor
depositary is not appointed by the Company within 90 days, the Company will
issue individual Junior Subordinated Debentures of such series in exchange for
the Global Junior Subordinated Debenture representing such series of Junior
Subordinated Debentures. In addition, the Company may at any time and in its
sole discretion, subject to any limitations described in the Prospectus
Supplement relating to such Junior Subordinated Debentures, determine not to
have any Junior Subordinated Debentures of such series represented by one or
more Global Junior Subordinated Debentures and, in such event, will issue
individual Junior Subordinated Debentures of such series in exchange for the
Global Junior Subordinated Debenture or Debentures representing such Junior
Subordinated Debentures of such series. Further, if the Company so specifies
with respect to the Junior Subordinated Debentures of such series, an owner of a
beneficial interest in a Global Junior Subordinated Debenture representing
Junior Subordinated Debentures of such series may, on terms acceptable to the
Company, the Debenture Trustee and the Depositary for such Global Junior
Subordinated Debenture, receive individual Junior Subordinated Debentures of
such series in exchange for such beneficial interests, subject to any
limitations described in the Prospectus Supplement relating to such Junior
Subordinated Debentures. In any such instance, an owner of a beneficial interest
in a Global Junior Subordinated Debenture will be entitled to physical delivery
of individual Junior Subordinated Debentures of the series represented by such
Global Junior Subordinated Debenture equal in principal amount to such
beneficial interest and to have such Junior Subordinated Debentures registered
in its name. Individual Junior Subordinated Debentures so issued will be issued
in denominations, unless otherwise specified by the Company, of $1,000 and
integral multiples thereof.
Denominations, Registration and Transfer
Unless otherwise specified in the Prospectus Supplement, the Junior
Subordinated Debentures will be issuable only in registered form without coupons
in denominations of $1,000 and any integral multiple thereof. Junior
Subordinated Debentures of any series will be exchangeable for other Junior
Subordinated Debentures of the same issue and series, of any authorized
denominations, of a like aggregate principal amount, of the same original issue
date and Stated Maturity and bearing the same interest rate.
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 appropriate securities registrar or at the
office of any transfer agent designated by the Company for such purpose with
respect to any series of Junior Subordinated Debentures and referred to in the
applicable
23
<PAGE>
Prospectus Supplement, without service charge and upon payment of any taxes and
other governmental charges as described in the Indenture. The Company will
appoint the Debenture Trustee as securities registrar under the Indenture. If
the applicable Prospectus Supplement refers to any transfer agents (in addition
to the securities registrar) initially designated by the Company with respect to
any series of Junior Subordinated Debentures, the Company may at any time
rescind the designation of any such transfer agent or approve a change in the
location through which any such transfer agent acts, provided that the Company
maintains a transfer agent in each place of payment. The Company may at any time
designate additional transfer agents with respect to any series of Junior
Subordinated Debentures.
In the event of any redemption, neither the Company nor the Debenture
Trustee shall be required to (i) issue, register the transfer of or exchange
Junior Subordinated Debentures of any series during a period beginning at the
opening of business 15 days before the day of selection for redemption of Junior
Subordinated Debentures of that series and ending at the close of business on
the day of mailing of the relevant notice of redemption or (ii) transfer or
exchange any Junior Subordinated Debentures so selected for redemption, except,
in the case of any Junior Subordinated Debentures being redeemed in part, any
portion thereof not to be redeemed.
Payment and Paying Agents
Unless otherwise specified in the applicable Prospectus Supplement,
payment of principal of (and premium, if any) and any interest on a series of
Junior Subordinated Debentures will be made at the office of the Debenture
Trustee or at the office of such paying agent or paying agents as the Company
may designate from time to time in the applicable Prospectus Supplement, except
that at the option of the Company payment of any interest may be made (i) except
in the case of Global Junior Subordinated Debentures, by check mailed to the
address of the person entitled thereto as such address shall appear in the
securities register or (ii) by transfer to an account maintained by the person
entitled thereto as specified in the securities register, provided that proper
transfer instructions have been received by the Regular Record Date. Unless
otherwise indicated in the applicable Prospectus Supplement, payment of any
interest on Junior Subordinated Debentures will be made to the person in whose
name such Junior Subordinated Debenture is registered at the close of business
on the Regular Record Date for such interest, except in the case of defaulted
interest. The Company may at any time designate additional paying agents or
rescind the designation of any paying agent; however the Company will at all
times be required to maintain a paying agent in each place of payment for all of
the Junior Subordinated Debentures.
Any moneys deposited with the Debenture Trustee or any paying agent, or
then held by the Company 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 such principal (and premium, if any) or interest
has become due and payable shall, at the request of the Company, be repaid to
the Company and the holder of such Junior Subordinated Debenture shall
thereafter look, as a general unsecured creditor, only to the Company for
payment thereof.
Modification of Indenture
From time to time the Company and the Debenture Trustee may, without
the consent of the holders of any series of Junior Subordinated Debentures,
amend, waive or supplement the Indenture for specified purposes, including,
among other things, curing ambiguities, defects or inconsistencies (provided
that any such action does not materially adversely affect the interest of the
holders of any series of the Junior Subordinated Debentures or in the case of
Corresponding Junior Subordinated Debentures, the holders of the Related Trust
Preferred Securities so long as they remain outstanding) and qualifying, or
maintaining the qualification of, the Indenture under the Trust Indenture Act.
The Indenture contains provisions permitting the Company and the Debenture
Trustee, with the consent of the holders of not less than a majority in
principal amount of each outstanding series of Junior Subordinated Debentures
affected, to modify the Indenture in a manner affecting the rights of the
holders of such series of Junior Subordinated Debentures in any material
respect; provided, that no such modification may, without the consent of the
holder of each outstanding Junior Subordinated Debenture so affected, (i) change
the Stated Maturity of any series of Junior Subordinated Debentures (except as
otherwise specified in the applicable Prospectus Supplement), or reduce the
principal amount
24
<PAGE>
thereof, or reduce the rate or extend the time of payment of interest thereon;
(ii) reduce the percentage of principal amount of Junior Subordinated Debentures
of any series, the holders of which are required to consent to any such
modification of the Indenture; (iii) modify certain provisions of the Indenture
relating to modification or waiver except to increase the required percentage;
or (iv) modify the provisions with respect to the subordination of outstanding
Junior Subordinated Debentures of any series in a manner adverse to the holders
thereof, provided that in the case of Corresponding Junior Subordinated
Debentures, so long as any of the holders of the Related Trust Preferred
Securities remain outstanding, no such modification may be made that adversely
affects the holders of such Trust Preferred Securities 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 all such Related Trust Preferred Securities unless and
until the principal of the Corresponding Junior Subordinated Debentures and all
accrued and unpaid interest thereon have been paid in full and certain other
conditions have been satisfied.
In addition, the Company and the Debenture Trustee may execute, without
the consent of any holder of Junior Subordinated Debentures, any supplemental
Indenture for the purpose of creating any new series of Junior Subordinated
Debentures.
Debenture Events of Default
The Indenture provides that any one or more of the following described
events with respect to a series of Junior Subordinated Debentures that has
occurred and is continuing constitutes a "Debenture Event of Default" with
respect to such series of Junior Subordinated Debentures:
(i) failure for 30 days to pay any interest on such series of Junior
Subordinated Debentures when due (subject to the deferral of any
interest payment in the case of an Extension Period); or
(ii) failure to pay any principal or premium, if any, on such series of
Junior Subordinated Debentures when due whether at maturity or upon
redemption by declaration or otherwise; or
(iii) failure to observe or perform in any material respect certain
other covenants contained in the Indenture for 60 days after written
notice to the Company from the Debenture Trustee or the holders of at
least 25% in aggregate outstanding principal amount of such affected
series of outstanding Junior Subordinated Debentures; or
(iv) certain events in bankruptcy, insolvency or reorganization of the
Company.
The holders of a majority in aggregate outstanding principal amount of
each series affected of Junior Subordinated Debentures have the right to direct
the time, method and place of conducting any proceeding for any remedy available
to the Debenture Trustee. The Debenture Trustee or the holders of not less than
25% in aggregate outstanding principal amount of such series of Junior
Subordinated Debentures may declare the principal due and payable immediately
upon a Debenture Event of Default and, in the case of Corresponding Junior
Subordinated Debentures, should the Debenture Trustee or such holders of such
Corresponding Junior Subordinated Debentures fail to make such declaration, the
holders of at least 25% in aggregate Liquidation Amount of the Related Trust
Preferred Securities shall have such right. The holders of a majority in
aggregate outstanding principal amount of Junior Subordinated Debentures may
annul such declaration and waive such default (other than the non-payment of the
principal of such series of Junior Subordinated Debentures which has become due
solely by such acceleration) has been cured and a sum sufficient to pay all
matured installments of interest and principal due otherwise than by
acceleration has been deposited with the Debenture Trustee. In the case of
Corresponding Junior Subordinated Debentures, should the holders of such
Corresponding Junior Subordinated Debentures fail to annul such declaration and
waive such default, the holders of a majority in aggregate Liquidation Amount of
the Trust Preferred Securities affected shall have such right.
25
<PAGE>
The holders of a majority in aggregate outstanding principal amount of
each series of Junior Subordinated Debentures affected thereby may, on behalf of
the holders of all the Junior Subordinated Debentures of such series, waive any
default, except a default in the payment of principal or interest (unless such
default has been cured and a sum sufficient to pay all matured installments of
interest and principal due otherwise than by acceleration has been deposited
with the Debenture Trustee) or a default in respect of a covenant or provision
which under the Indenture cannot be modified or amended without the consent of
the holder of each outstanding Junior Subordinated Debenture. In the case of
Corresponding Junior Subordinated Debentures, should the holders of such
Corresponding Junior Subordinated Debentures fail to annul such declaration and
waive such default, the holders of a majority in aggregate Liquidation Amount of
the Related Trust Preferred Securities shall have such right. The Company is
required to file annually with the Debenture Trustee a certificate as to whether
or not the Company is in compliance with all the conditions and covenants
applicable to it under the Indenture.
In case a Debenture Event of Default shall occur and be continuing as
to a series of Corresponding Junior Subordinated Debentures, the Property
Trustee will have the right to declare the principal of and the interest on such
Corresponding Junior Subordinated Debentures, and any other amounts payable
under the Indenture, to be forthwith due and payable and to enforce its other
rights as a creditor with respect to such Corresponding Junior Subordinated
Debentures.
Enforcement of Certain Rights By Holders of Trust Preferred Securities
If a Debenture Event of Default with respect to a series of Junior
Subordinated Debentures has occurred and is continuing and such event is
attributable to the failure of the Company to pay interest or principal on such
series of Junior Subordinated Debentures on the date such interest or principal
is due and payable, a holder of Trust Preferred Securities may institute a legal
proceeding directly against the Company for enforcement of payment to such
holder of the principal of or interest on such series of Junior Subordinated
Debentures having a principal amount equal to the aggregate Liquidation Amount
of the Related Trust Preferred Securities of such holder (a "Direct Action").
The Company may not amend the Indenture to remove the foregoing right to bring a
Direct Action without the prior written consent of the holders of all of the
Trust Preferred Securities outstanding. If the right to bring a Direct Action is
removed, the applicable Issuer may become subject to the reporting obligations
under the Exchange Act. The Company shall have the right under the Indenture to
set-off any payment made to such holder of Trust Preferred Securities by the
Company in connection with a Direct Action. See "Risk Factors -- Trust Preferred
Securities Guarantee Only Covers Payments if the Trust Has Cash Available;
Direct Action" in the accompanying Prospectus Supplement.
The holders of the Trust Preferred Securities will not be able to
exercise directly any remedies other than those set forth in the preceding
paragraph available to the holders of the Junior Subordinated Debentures unless
there shall have been an Event of Default under the Trust Agreement. See
"Description of Trust Preferred Securities -- Events of Default; Notice."
Consolidation, Merger, Sale of Assets and Other Transactions
The Indenture provides that the Company shall not consolidate with or
merge into any other Person or convey, transfer or lease its properties and
assets substantially as an entirety to any Person, and no Person shall
consolidate with or merge into the Company or convey, transfer or lease its
properties and assets substantially as an entirety to the Company, unless (i) in
case the Company consolidates with or merges into another Person or conveys or
transfers its properties and assets substantially as an entirety to any Person,
the successor Person is organized under the laws of the United States or any
state or the District of Columbia, and such successor Person expressly assumes
the Company's obligations on the Junior Subordinated Debentures issued under the
Indenture; (ii) immediately after giving effect thereto, no Debenture Event of
Default, and no event which, after notice or lapse of time or both, would become
a Debenture Event of Default, shall have occurred and be continuing; (iii) in
the case of Corresponding Junior Subordinated Debentures, such transaction is
permitted under the related Trust Agreement and the related Guarantee
26
<PAGE>
Agreement and does not give rise to any breach or violation of the related Trust
Agreement or related Guarantee Agreement; and (iv) certain other conditions as
prescribed by the Indenture are met.
The general provisions of the Indenture do not afford holders of the
Junior Subordinated Debentures protection in the event of a highly leveraged or
other transaction involving the Company that may adversely affect holders of the
Junior Subordinated Debentures.
Satisfaction and Discharge
The Indenture provides that when, among other things, all Junior
Subordinated Debentures not previously delivered to the Debenture Trustee for
cancellation (i) have become due and payable or (ii) will become due and payable
at their Stated Maturity within one year, and the Company deposits or causes to
be deposited with the Debenture Trustee funds, in trust, for the purpose and in
an amount in the currency or currencies in which the Junior Subordinated
Debentures are payable 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, as the case may be, then
the Indenture will cease to be of further effect (except as to the Company's
obligations to pay all other sums due pursuant to the Indenture and to provide
the officers' certificates and opinions of counsel described therein), and the
Company will be deemed to have satisfied and discharged the Indenture.
Covenants of the Company
The Company will covenant, as to each series of Junior Subordinated
Debentures and Corresponding Junior Subordinated Debentures, in the Indenture
that, if and so long as (i) the Issuer is the holder of all such Junior
Subordinated Debentures, (ii) a Tax Event in respect of the Issuer has occurred
and is continuing and (iii) the Company has elected, and has not revoked such
election, to pay Additional Sums (as defined under "Description of Trust
Preferred Securities -- Redemption") in respect of such Trust Securities, the
Company will pay to the Issuer such Additional Sums. The Company will also
covenant (i) to maintain directly or indirectly 100% ownership of the Common
Securities of the Issuer, provided that certain successors which are permitted
pursuant to the Indenture may succeed to the Company's ownership of the Common
Securities; (ii) not to voluntarily terminate, wind up or liquidate the Issuer,
except (a) in connection with a distribution of Junior Subordinated Debentures
to the holders of the Trust Preferred Securities in exchange therefor upon
liquidation of the Issuer, or (b) in connection with certain mergers,
consolidations or amalgamations permitted by the Trust Agreement, in either such
case, if so specified in the Prospectus Supplement upon prior approval of the
Federal Reserve if then so required under applicable capital guidelines or
policies; and (iii) to use its reasonable efforts, consistent with the terms and
provisions of the Trust Agreement, to cause the Issuer to remain classified as a
grantor trust and not as an association taxable as a corporation for United
States federal income tax purposes.
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.
Information Concerning the Debenture Trustee
The Debenture Trustee shall have and be subject to all the duties and
responsibilities specified with respect to an indenture trustee under the Trust
Indenture Act. Subject to such provisions, the Debenture Trustee is under no
obligation to exercise any of the powers vested in it by the Indenture at the
request of any holder of Junior Subordinated Debentures, unless offered
reasonable indemnity by such holder against the costs, expenses and liabilities
which might be incurred thereby. The Debenture Trustee is not required to expend
or risk its own funds or otherwise incur personal
27
<PAGE>
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.
Corresponding Junior Subordinated Debentures
The Corresponding Junior Subordinated Debentures may be issued in one
or more series of Junior Subordinated Debentures under the Indenture with terms
corresponding to the terms of a series of Related Trust Preferred Securities. In
that event, concurrently with the issuance of each Issuer's Trust Preferred
Securities, such Issuer will invest the proceeds thereof and the consideration
paid by the Company for the Related Common Securities in a series of
Corresponding Junior Subordinated Debentures issued by the Company to such
Issuer. Each series of Corresponding Junior Subordinated Debentures will be in
the principal amount equal to the aggregate stated Liquidation Amount of the
Related Trust Preferred Securities and Common Securities of such Issuer and will
rank pari passu with all other series of Junior Subordinated Debentures. Holders
of the Related Trust Preferred Securities for a series of Corresponding Junior
Subordinated Debentures will have the rights in connection with modifications to
the Indenture or upon occurrence of Debenture Events of Default described under
" -- Modification of Indenture" and " -- Debenture Events of Default," unless
provided otherwise in the Prospectus Supplement for such Related Trust Preferred
Securities.
Unless otherwise specified in the applicable Prospectus Supplement, if
a Tax Event in respect of an Issuer of Related Trust Preferred Securities shall
occur and be continuing, the Company may, at its option and subject to prior
approval by the Federal Reserve (if then required under applicable capital
guidelines or policies) redeem the Corresponding Junior Subordinated Debentures
at any time within 90 days of the occurrence of such Tax Event, in whole but not
in part, subject to the provisions of the Indenture and whether or not such
Corresponding Junior Subordinated Debentures are then otherwise redeemable at
the option of the Company. The Redemption Price for any Corresponding Junior
Subordinated Debentures shall be equal to 100% of the principal amount of such
Corresponding Junior Subordinated Debentures then outstanding plus accrued and
unpaid interest to the date fixed for redemption. For so long as the applicable
Issuer is the holder of all the outstanding series of Corresponding Junior
Subordinated Debentures, the proceeds of any such redemption will be used by
such Issuer to redeem the corresponding Trust Securities in accordance with
their terms. The Company may not redeem a series of Corresponding Junior
Subordinated Debentures in part unless all accrued and unpaid interest has been
paid in full on all outstanding Corresponding Junior Subordinated Debentures of
such series for all interest periods terminating on or prior to the Redemption
Date.
BOOK-ENTRY ISSUANCE
The Depositary will act as securities depositary for all of the Trust
Preferred Securities and the Junior Subordinated Debentures, unless otherwise
referred to in the Prospectus Supplement relating to an offering of Trust
Preferred Securities or Junior Subordinated Debentures. The Trust Preferred
Securities and the Junior Subordinated Debentures will be issued only as
fully-registered securities registered in the name of Cede & Co. (the
Depositary's nominee). One or more fully-registered global certificates will be
issued for the Trust Preferred Securities of each Issuer and the Junior
Subordinated Debentures, representing in the aggregate the total number of such
Issuer's Trust Preferred Securities or aggregate principal balance of Junior
Subordinated Debentures, respectively, and will be deposited with the
Depositary.
The Depositary is a limited purpose trust company organized under the
New York Banking Law, a "banking organization" within the meaning of the New
York Banking Law, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code, and a
"clearing agency" registered pursuant to the provisions of Section 17A of the
Exchange Act. The Depositary holds securities that its Participants deposit with
the Depositary. The Depositary also facilitates the settlement among
Participants of securities transactions, such as transfers and pledges, in
deposited securities through electronic computerized book-entry changes in
Participants' accounts, thereby eliminating the need for physical movement of
securities certificates. "Direct Participants" include securities brokers and
dealers, banks, trust companies, clearing corporations and certain other
organizations. The Depositary is owned by a number of its Direct Participants
and by the New York Stock Exchange,
28
<PAGE>
Inc., the American Stock Exchange, Inc. and the National Association of
Securities Dealers, Inc. Access to the Depositary system is also available to
others such as securities brokers and dealers, banks and trust companies that
clear through or maintain custodial relationships with Direct Participants,
either directly or indirectly ("Indirect Participants"). "Participants" means
Direct Participants and Indirect Participants. The rules applicable to the
Depositary and its Participants are on file with the Commission.
Purchases of Trust Preferred Securities or Junior Subordinated
Debentures within the depositary system must be made by or through Direct
Participants, which will receive a credit for the Trust Preferred Securities or
Junior Subordinated Debentures on the Depositary's records. The ownership
interest of each actual purchaser of each Trust Preferred Security and each
Junior Subordinated Debenture ("Beneficial Owner") is in turn to be recorded on
the Direct and Indirect Participants' records. Beneficial Owners will not
receive written confirmation from the Depositary of their purchases, but
Beneficial Owners are expected to receive written confirmations providing
details of the transactions, as well as periodic statements of their holdings,
from the Direct or Indirect Participants through which the Beneficial Owners
purchased Trust Preferred Securities or Junior Subordinated Debentures.
Transfers of ownership interests in the Trust Preferred Securities or Junior
Subordinated Debentures are to be accomplished by entries made on the books of
Participants acting on behalf of Beneficial Owners. Beneficial Owners will not
receive certificates representing their ownership interests in Trust Preferred
Securities or Junior Subordinated Debentures, except in the event that use of
the book-entry system for the Trust Preferred Securities of such Issuer or
Junior Subordinated Debentures is discontinued.
The Depositary has no knowledge of the actual Beneficial Owners of the
Trust Preferred Securities or Junior Subordinated Debentures; the Depositary's
records reflect only the identity of the Direct Participants to whose accounts
such Trust Preferred Securities or Junior Subordinated Debentures are credited,
which may or may not be the Beneficial Owners. The Participants will remain
responsible for keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by the Depositary to
Direct Participants, by Direct Participants to Indirect Participants, and by
Direct Participants and Indirect Participants to Beneficial Owners and the
voting rights of Direct Participants, Indirect Participants and Beneficial
Owners will be governed by arrangements among them, subject to any statutory or
regulatory requirements as may be in effect from time to time.
Redemption notices will be sent to Cede & Co. as the registered holder
of the Trust Preferred Securities or Junior Subordinated Debentures. If less
than all of an Issuer's Trust Preferred Securities or the Junior Subordinated
Debentures are being redeemed, the Depositary's current practice is to determine
by lot the amount of the interest of each Direct Participant to be redeemed.
Although voting with respect to the Trust Preferred Securities or the
Junior Subordinated Debentures is limited to the holders of record of the Trust
Preferred Securities or Junior Subordinated Debentures, in those instances in
which a vote is required, neither the Depositary nor Cede & Co. will itself
consent or vote with respect to Trust Preferred Securities or Junior
Subordinated Debentures. Under its usual procedures, the Depositary would mail
an omnibus proxy (the "Omnibus Proxy") to the relevant Trustee as soon as
possible after the record date. The Omnibus Proxy assigns Cede & Co.'s
consenting or voting rights to those Direct Participants to whose accounts such
Trust Preferred Securities or Junior Subordinated Debentures are credited on the
record date (identified in a listing attached to the Omnibus Proxy).
Distribution payments on the Trust Preferred Securities or the Junior
Subordinated Debentures will be made by the relevant Trustee to the Depositary.
The Depositary's practice is to credit Direct Participants' accounts on the
relevant payment date in accordance with their respective holdings shown on the
Depositary's records unless the Depositary has reason to believe that it will
not receive payments on such payment date. Payments by Participants to
Beneficial Owners will be governed by standing instructions and customary
practices and will be the responsibility of such Participant and not of the
Depositary, the relevant Trustee, the Issuer thereof or the Company, subject to
any statutory or regulatory requirements as may be in effect from time to time.
Payment of Distributions to the Depositary is the responsibility of the relevant
Trustee, disbursement of such payments to Direct Participants is the
responsibility
29
<PAGE>
of the Depositary, and disbursements of such payments to the Beneficial Owners
is the responsibility of Direct and Indirect Participants.
The Depositary may discontinue providing its services as securities
depositary with respect to any of the Trust Preferred Securities or the Junior
Subordinated Debentures at any time by giving reasonable notice to the Trustee
and the Company. In the event that a successor securities depositary is not
obtained, definitive Trust Preferred Security or Junior Subordinated Debenture
certificates representing such Trust Preferred Securities or Junior Subordinated
Debentures are required to be printed and delivered. The Company, at its option,
may decide to discontinue use of the system of book-entry transfers through the
Depositary (or a successor depositary). After a Debenture Event of Default, the
holders of a majority in liquidation preference of Trust Preferred Securities or
aggregate principal amount of Junior Subordinated Debentures may determine to
discontinue the system of book-entry transfers through the Depositary. In any
such event, definitive certificates for such Trust Preferred Securities or
Junior Subordinated Debentures will be printed and delivered.
The information in this section concerning the Depositary and the
Depositary's book-entry system has been obtained from sources that the Issuers
and the Company believe to be accurate, but the Issuers and the Company assume
no responsibility for the accuracy thereof. Neither the Issuers nor the Company
has any responsibility for the performance by the Depositary or its Participants
of their respective obligations as described herein or under the rules and
procedures governing their respective operations.
DESCRIPTION OF GUARANTEES
Guarantees will be executed and delivered by the Company concurrently
with the issuance by each Issuer of its Trust Preferred Securities and Common
Securities for the benefit of the holders from time to time of such Trust
Preferred Securities and Common Securities. Wilmington Trust Company will act as
the Guarantee Trustee under each Guarantee Agreement for the purposes of
compliance with the Trust Indenture Act and each Guarantee Agreement will be
qualified as an indenture under the Trust Indenture Act. This summary of certain
provisions of the Guarantees, which summarizes the material terms thereof, does
not purport to be complete and is subject to, and qualified in its entirety by
reference to, all of the provisions of each Guarantee, including the definitions
therein of certain terms, and the Trust Indenture Act, to each of which
reference is hereby made. The form of the Guarantee Agreement relating to the
Trust Preferred Securities has been filed as an exhibit to the Registration
Statement of which this Prospectus forms a part. Reference in this summary to
Trust Preferred Securities or Trust Securities means that Issuer's Trust
Preferred Securities to which a Guarantee relates. The Guarantee Trustee will
hold each Guarantee for the benefit of the holders of the related Issuer's Trust
Preferred Securities and Common Securities.
General
The Company will irrevocably agree to pay in full on a subordinated
basis, to the extent set forth herein, the Guarantee Payments (as defined below)
to the holders of the Trust Preferred Securities, as and when due, regardless of
any defense, right of set-off or counterclaim that such Issuer 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
related Issuer (the "Guarantee Payments"), will be subject to the Guarantee: (i)
any accumulated and unpaid Distributions required to be paid on such Trust
Preferred Securities, to the extent that such Issuer has funds on hand available
therefor at such time; (ii) the Redemption Price with respect to any Trust
Preferred Securities called for redemption, to the extent that such Issuer has
funds on hand available therefor at such time; or (iii) upon a voluntary or
involuntary dissolution, winding up or liquidation of such Issuer (unless the
Corresponding Junior Subordinated Debentures are distributed to holders of such
Trust Preferred Securities in exchange therefor), the lesser of (a) the
Liquidation Distribution and (b) the amount of assets of such Issuer remaining
available for distribution to holders of Trust Preferred Securities after
satisfaction of liabilities to creditors of such Issuer as required by
applicable law. The Company's obligation to make a Guarantee Payment may be
satisfied by direct payment of the required amounts by the Company to the
holders of the applicable Trust Preferred Securities or by causing the Issuer to
pay such amounts to such holders.
30
<PAGE>
Each Guarantee will be an irrevocable guarantee on a subordinated basis
of the related Issuer's obligations under the Trust Preferred Securities, but
will apply only to the extent that such related Issuer has funds sufficient to
make such payments, and is not a guarantee of collection.
If the Company does not make interest payments on the Corresponding
Junior Subordinated Debentures held by the Issuer, the Issuer will not be able
to pay Distributions on the Trust Preferred Securities and will not have funds
legally available therefor. Each Guarantee will rank subordinate and junior in
right of payment to all Senior and Subordinated Debt of the Company. See " --
Status of the Guarantees." Because the Company is a holding company, the right
of the Company to participate in any distribution of assets of any subsidiary
upon such subsidiary's liquidation or reorganization or otherwise, is subject to
the prior claims of creditors of that subsidiary, except to the extent the
Company may itself be recognized as a creditor of that subsidiary. Accordingly,
the Company's obligations under the Guarantees will be effectively subordinated
to all existing and future liabilities of the Company's subsidiaries, and
claimants should look only to the assets of the Company for payments thereunder.
See "The Company." Except as otherwise provided in the applicable Prospectus
Supplement, the Guarantees do not limit the incurrence or issuance of other
secured or unsecured debt of the Company, including Senior and Subordinated
Debt, whether under the Indenture, any other existing indenture or any other
indenture that the Company may enter into in the future or otherwise.
The Company has, through the applicable Guarantee, the applicable
Guarantee Agreement, the applicable Trust Agreement, the related Junior
Subordinated Debentures, the Indenture and the Expense Agreement, taken
together, fully, irrevocably and unconditionally guaranteed all of the Issuer's
obligations under the Trust Preferred Securities. No single document standing
alone or operating in conjunction with fewer than all of the other documents
constitutes such guarantee. It is only the combined operation of these documents
that has the effect of providing a full, irrevocable and unconditional guarantee
of the Issuer's obligations under the Trust Preferred Securities. See
"Relationship Among the Trust Preferred Securities, the Junior Subordinated
Debentures and the Guarantees."
Status of the Guarantees
Each Guarantee will constitute an unsecured obligation of the Company
and will rank subordinate and junior in right of payment to all Senior and
Subordinated Debt of the Company in the same manner as the Junior Subordinated
Debentures.
Each Guarantee will rank pari passu with all other Guarantees issued by
the Company. Each Guarantee will constitute a guarantee of payment and not of
collection (i.e., the guaranteed party may institute a legal proceeding directly
against the Guarantor to enforce its rights under the Guarantee without first
instituting a legal proceeding against any other person or entity). Each
Guarantee will be held for the benefit of the holders of the Related Trust
Preferred Securities. Each Guarantee will not be discharged except by payment of
the Guarantee Payments in full to the extent not paid by the Issuer or upon
distribution to the holders of the Trust Preferred Securities of the
Corresponding Junior Subordinated Debentures. None of the Guarantees places a
limitation on the amount of additional Senior and Subordinated Debt that may be
incurred by the Company. The Company expects from time to time to incur
additional indebtedness constituting Senior and Subordinated Debt.
Amendments and Assignment
Except with respect to any changes which do not materially adversely
affect the rights of holders of the Related Trust Preferred Securities (in which
case no vote will be required), no Guarantee may be amended without the prior
approval of the holders of not less than a majority of the aggregate Liquidation
Amount of such outstanding Trust Preferred Securities. The manner of obtaining
any such approval will be as set forth under "Description of Trust Preferred
Securities -- Voting Rights; Amendment of each Trust Agreement." All guarantees
and agreements contained in each Guarantee shall bind the successors, assigns,
receivers, trustees and representatives of the Company and shall inure to the
benefit of the holders of the Related Trust Preferred Securities then
outstanding.
31
<PAGE>
Events of Default
An event of default under each Guarantee Agreement will occur upon the
failure of the Company to perform any of its payment or other obligations
thereunder. The holders of not less than a majority in aggregate Liquidation
Amount of the Related 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 in respect of such Guarantee or to direct the exercise of
any trust or power conferred upon the Guarantee Trustee under such Guarantee
Agreement.
Any holder of the Trust Preferred Securities may institute a legal
proceeding directly against the Company to enforce its rights under such
Guarantee without first instituting a legal proceeding against the Issuer, the
Guarantee Trustee or any other person or entity.
The Company, as guarantor, is required to file annually with the
Guarantee Trustee a certificate as to whether or not the Company is in
compliance with all the conditions and covenants applicable to it under each
Guarantee.
Information Concerning the Guarantee Trustee
The Guarantee Trustee, other than during the occurrence and continuance
of a default by the Company in performance of any Guarantee, undertakes to
perform only such duties as are specifically set forth in each Guarantee and,
after default with respect to any 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 any Guarantee at the
request of any holder of any Trust Preferred Securities unless it is offered
reasonable indemnity against the costs, expenses and liabilities that might be
incurred thereby.
Termination of the Guarantee
Each Guarantee will terminate and be of no further force and effect
upon full payment of the Redemption Price of the Related Trust Preferred
Securities, upon full payment of the amounts payable upon liquidation of the
related Issuer or upon distribution of Corresponding Junior Subordinated
Debentures to the holders of the Related Trust Preferred Securities in exchange
therefor. Each Guarantee will continue to be effective or will be reinstated, as
the case may be, if at any time any holder of the Related Trust Preferred
Securities must restore payment of any sums paid under such Trust Preferred
Securities or such Guarantee.
Governing Law
Each Guarantee will be governed by and construed in accordance with the
laws of the State of New York.
The Expense Agreement
Pursuant to an Expense Agreement entered into by the Company under each
Trust Agreement (the "Expense Agreement"), the Company will irrevocably and
unconditionally guarantee to each person or entity to whom the applicable Issuer
becomes indebted or liable, the full payment of any costs, expenses or
liabilities of such Issuer, other than obligations of such Issuer to pay to the
holders of any Trust Preferred Securities or other similar interests in such
Issuer of the amounts due such holders pursuant to the terms of the Trust
Preferred Securities or such other similar interests, as the case may be.
32
<PAGE>
RELATIONSHIP AMONG THE TRUST PREFERRED SECURITIES,
THE JUNIOR SUBORDINATED DEBENTURES AND THE GUARANTEES
Full and Unconditional Guarantee
Payments of Distributions and other amounts due on the Trust Preferred
Securities (to the extent the Issuer has funds available for the payment of such
Distributions) are irrevocably guaranteed by the Company as and to the extent
set forth under "Description of Guarantees." Taken together, the Company's
obligations under each series of Junior Subordinated Debentures, the Indenture,
the related Trust Agreement, the related Expense Agreement, the related
Guarantee Agreement and the related Guarantee provide, in the aggregate, a full,
irrevocable and unconditional guarantee of payments of distributions and other
amounts due on the related series of Trust Preferred Securities. No single
document standing alone or operating in conjunction with fewer than all of the
other documents constitutes such guarantee. It is only the combined operation of
these documents that has the effect of providing a full, irrevocable and
unconditional guarantee of the Issuer's obligations under the Trust Preferred
Securities. If and to the extent that the Company does not make payments on any
series of Corresponding Junior Subordinated Debentures, such Issuer will not pay
Distributions or other amounts due on its Trust Preferred Securities. The
Guarantees do not cover payment of Distributions when the related Issuer does
not have sufficient funds to pay such Distributions. In such event, the remedy
of a holder of a series of Trust Preferred Securities is to institute a Direct
Action. The obligations of the Company under each Guarantee are subordinate and
junior in right of payment to all Senior and Subordinated Debt of the Company.
Sufficiency of Payments
As long as payments of interest and other payments are made when due on
each series of Corresponding Junior Subordinated Debentures, such payments will
be sufficient to cover Distributions and other payments due on the Related Trust
Preferred Securities, primarily because (i) the aggregate principal amount of
each series of Corresponding Junior Subordinated Debentures will be equal to the
sum of the aggregate stated Liquidation Amount of the Related Trust Preferred
Securities and Common Securities; (ii) the interest rate and interest and other
payment dates on each series of Corresponding Junior Subordinated Debentures
will match the Distribution rate and Distribution and other payment dates for
the related Trust Securities; (iii) the Company shall pay for all and any costs,
expenses and liabilities of such Issuer except the Issuer's obligations to
holders of the Trust Securities under such Trust Securities; and (iv) each Trust
Agreement further provides that the Issuer will not engage in any activity that
is not consistent with the limited purposes thereof.
Notwithstanding anything to the contrary in the Indenture, the Company
has the right to set-off any payment it is otherwise required to make thereunder
with and to the extent the Company has theretofore made, or is concurrently on
the date of such payment making, a payment under the related Guarantee.
Enforcement Rights of Holders of Trust Preferred Securities
A holder of any Related Trust Preferred Security may institute a legal
proceeding directly against the Company to enforce its rights under the related
Guarantee without first instituting a legal proceeding against the Guarantee
Trustee, the related Issuer or any other person or entity.
A default or event of default under any Senior and Subordinated Debt of
the Company would not constitute a default or a Debenture Event of Default.
However, in the event of payment defaults under, or acceleration of, Senior and
Subordinated Debt of the Company, the subordination provisions of the Indenture
provide that no payments may be made in respect of the Corresponding Junior
Subordinated Debentures until such Senior and Subordinated Debt has been paid in
full or any payment default thereunder has been cured or waived. Failure to make
required payments on any series of Corresponding Junior Subordinated Debentures
would constitute an Event of Default under each Trust Agreement.
33
<PAGE>
Limited Purpose of Issuers
Each Issuer's Trust Preferred Securities evidence a beneficial interest
in such Issuer, and each Issuer exists for the sole purpose of issuing its Trust
Preferred Securities and Common Securities, investing the proceeds thereof in
Corresponding Junior Subordinated Debentures and activities incidental thereto.
A principal difference between the rights of a holder of a Trust Preferred
Security and a holder of a Corresponding Junior Subordinated Debenture is that a
holder of a Corresponding Junior Subordinated Debenture is entitled to receive
from the Company the principal amount of and interest accrued on Corresponding
Junior Subordinated Debentures held, while a holder of Trust Preferred
Securities is entitled to receive Distributions from such Issuer (or from the
Company under the applicable Guarantee) if and to the extent such Issuer has
funds available for the payment of such Distributions.
Rights Upon Termination
Upon any voluntary or involuntary termination, winding up or
liquidation of any Issuer involving the liquidation of the Corresponding Junior
Subordinated Debentures, the holders of the Related Trust Preferred Securities
will be entitled to receive, out of the assets held by such Issuer, the
Liquidation Distribution in cash. See "Description of Trust Preferred Securities
- -- Liquidation Distribution Upon Dissolution." Upon any voluntary or involuntary
liquidation or bankruptcy of the Company, the Property Trustee, as holder of the
Corresponding Junior Subordinated Debentures, would be a subordinated creditor
of the Company, subordinated in right of payment to all Senior and Subordinated
Debt as set forth in the Indenture, but entitled to receive payment in full of
principal and interest, before any stockholders of the Company receive payments
or distributions. Since the Company is the guarantor under each Guarantee and
has agreed to pay for all costs, expenses and liabilities of each Issuer (other
than the Issuer's obligations to the holders of its Trust Preferred Securities),
the positions of a holder of such Trust Preferred Securities and a holder of
such Corresponding Junior Subordinated Debentures relative to other creditors
and to stockholders of the Company in the event of liquidation or bankruptcy of
the Company are expected to be substantially the same.
PLAN OF DISTRIBUTION
The Trust Preferred Securities or the Junior Subordinated Debentures
may be sold in a public offering to or through underwriters or dealers
designated from time to time. The Company and each Issuer may sell its Trust
Preferred Securities or Junior Subordinated Debentures as soon as practicable
after effectiveness of the Registration Statement of which this Prospectus forms
a part. The names of any underwriters or dealers involved in the sale of the
Trust Preferred Securities or Junior Subordinated Debentures in respect of which
this Prospectus is delivered, the amount or number of Trust Preferred Securities
and Junior Subordinated Debentures to be purchased by any such underwriters and
any applicable commissions or discounts will be set forth in the Prospectus
Supplement.
Underwriters may offer and sell Trust Preferred Securities or Junior
Subordinated Debentures at a fixed price or prices, which may be changed, or
from time to time at market prices prevailing at the time of sale, at prices
related to such prevailing market prices or at negotiated prices. In connection
with the sale of Trust Preferred Securities, underwriters may be deemed to have
received compensation from the Company and/or the applicable Issuer in the form
of underwriting discounts or commissions and may also receive commissions.
Underwriters may sell Trust Preferred Securities or Junior Subordinated
Debentures to or through dealers, and such dealers may receive compensation in
the form of discounts, concessions or commissions from the underwriters.
Any underwriting compensation paid by the Company and/or the applicable
Issuer to underwriters in connection with the offering of Trust Preferred
Securities or Junior Subordinated Debentures, and any discounts, concessions or
commissions allowed by such underwriters to participating dealers, will be
described in an accompanying Prospectus Supplement. Underwriters and dealers
participating in the distribution of Trust Preferred Securities or Junior
Subordinated Debentures may be deemed to be underwriters, and any discounts and
commissions received by them and any profit realized by them on resale of such
Trust Preferred Securities or Junior Subordinated Debentures may be
34
<PAGE>
deemed to be underwriting discounts and commissions, under the Securities Act.
Underwriters and dealers may be entitled, under agreement with the Company and
the applicable Issuer, to indemnification against and contribution toward
certain civil liabilities, including liabilities under the Securities Act, and
to reimbursement by the Company for certain expenses.
In connection with the offering of the Trust Preferred Securities, the
underwriters may engage in transactions that stabilize, maintain or otherwise
affect the price of the Trust Preferred Securities during and after the
offering. Specifically, the Underwriters may over-allot or otherwise create a
short position in the Trust Preferred Securities for their own account by
selling more Trust Preferred Securities than have been sold to them by the
Company. The underwriters may elect to cover any such short position by
purchasing Trust Preferred Securities in the open market. In addition, the
underwriters may stabilize or maintain the price of the Trust Preferred
Securities by bidding for or purchasing Trust Preferred Securities in the open
market and may impose penalty bids, under which selling concessions allowed to
syndicate members or other broker-dealers participating in the offering are
reclaimed if Trust Preferred Securities previously distributed in the offering
are repurchased in connection with stabilization transactions or otherwise. The
effect of these transactions may be to stabilize or maintain the market price of
the Trust Preferred Securities at a level above that which might otherwise
prevail in the open market. The imposition of a penalty bid may also affect the
price of the Trust Preferred Securities to the extent that it discourages
resales thereof. No representation is made as to the magnitude or effect of any
stabilization or other transactions. Such transactions, if commenced, may be
discontinued at any time.
In connection with the offering of the Trust Preferred Securities of
the Issuer, the Issuer may grant to the underwriters an option to purchase
additional Trust Preferred Securities to cover over-allotments, if any, at the
initial public offering price (with an additional underwriting commission), as
may be set forth in the accompanying Prospectus Supplement. If the Issuer grants
any over-allotment option, the terms of such over-allotment option will be set
forth in the Prospectus Supplement for such Trust Preferred Securities.
Underwriters and dealers may engage in transactions with, or perform
services for, the Company and/or the applicable Issuer and/or any of their
affiliates in the ordinary course of business.
The Trust Preferred Securities and the Junior Subordinated Debentures
will be new issues of securities and will have no established trading market.
Any underwriters to whom Trust Preferred Securities or Junior Subordinated
Debentures are sold for public offering and sale may make a market in such Trust
Preferred Securities and Junior Subordinated Debentures, but such underwriters
will not be obligated to do so and may discontinue any market making at any time
without notice. Such Trust Preferred Securities or Junior Subordinated
Debentures may or may not be listed on a national securities exchange or the
Nasdaq National Market. No assurance can be given as to the liquidity of or the
existence of trading markets for any Trust Preferred Securities or Junior
Subordinated Debentures.
LEGAL MATTERS
Certain legal matters will be passed upon for the Company and the
Issuers by Housley Kantarian & Bronstein, P.C., Washington, D.C., counsel to the
Company and for the Issuers by Richards, Layton & Finger, P.A., Wilmington,
Delaware, special Delaware counsel to the Issuers. Unless otherwise indicated in
the applicable Prospectus Supplement, the validity of the Guarantees and the
Junior Subordinated Debentures will be passed upon for the Underwriters by
Skadden, Arps, Slate, Meagher & Flom LLP, New York, New York. Housley Kantarian
& Bronstein, P.C. and Skadden, Arps, Slate, Meagher & Flom LLP, will rely on the
opinions of Richards, Layton & Finger, P.A., as to certain matters of Delaware
law.
EXPERTS
The consolidated financial statements of the Company as of December 31,
1997 and 1996 and for each of the years in the three-year period ended December
31, 1997, have been incorporated in this Prospectus by reference from the
Company's Annual Report on Form 10-K in reliance upon the report of KPMG Peat
Marwick LLP, independent auditors, which report is incorporated herein by
reference, and upon the authority of said firm as experts in accounting and
auditing.
35
<PAGE>
<TABLE>
<S> <C>
=============================================================================== =================================================
No dealer, salesperson or other person is authorized to give any information or
to represent anything not incorporated by reference or contained in this $50,000,000
prospectus supplement or accompanying prospectus. You should rely only on the
information incorporated by reference or provided in this prospectus supplement
and the prospectus. The Company has not authorized anyone to provide you with
different information. Neither the Company, the Trust nor Sandler O'Neill is
making an offer of these securities in any state where the offer is not
permitted. You should not assume that the information in this prospectus
supplement or the prospectus is accurate as of any date other than the date on
the front of these documents.
WSFS CAPITAL TRUST I
Page
----- Floating Rate Cumulative
Prospectus Supplement Trust Preferred Securities
Summary ................................................. S-1
Summary Consolidated Financial Information .............. S-7
Risk Factors ............................................ S-9
WSFS Financial Corporation .............................. S-15 fully and unconditionally
Capitalization .......................................... S-18 guaranteed, based on
Use of Proceeds ......................................... S-19 several obligations, by
Accounting Treatment .................................... S-19
Description of Securities ............................... S-20
Certain Terms of Trust Preferred Securities ............. S-20
Certain Terms of Junior Subordinated Debentures ......... S-29 WSFS
Certain Terms of Guarantee .............................. S-34 FINANCIAL CORPORATION
Certain Federal Income Tax Consequences ................. S-35
ERISA Considerations .................................... S-42
Underwriting ............................................ S-43
Validity of Securities .................................. S-45 ---------------------
Prospectus PROSPECTUS SUPPLEMENT
Available Information ................................... 1 ---------------------
Incorporation of Certain Documents by Reference ......... 1
The Company ............................................. 2
The Issuers ............................................. 2
Use of Proceeds ......................................... 3
Ratio of Earnings to Fixed Charges ...................... 4
Description of Trust Securities ......................... 4
Description of Junior Subordinated Debentures ........... 16
Book-Entry Issuance ..................................... 28 Sandler O'Neill &
Description of Guarantees ............................... 30 Partners, L.P.
Relationship Among the Trust Preferred Securities,
the Junior Subordinated Debentures and the
Guarantees ........................................... 33
Plan of Distribution .................................... 34
Legal Matters ........................................... 35 _____________________, 1998
Experts ................................................. 35
=============================================================================== ================================================
</TABLE>
