<PAGE> 1
As filed with the Securities and Exchange Commission on October 16, 1998
Registration Nos. 333-64335;
333-64335-01
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------------
PRE-EFFECTIVE
AMENDMENT
NO. 1 TO
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
------------------
<TABLE>
<S> <C>
BSB BANCORP, INC. BSB CAPITAL TRUST I
(Exact name of registrant as specified in its charter) (Exact name of registrant as specified in its charter)
Delaware Delaware
(State of incorporation) (State of incorporation)
6712 6719
(Primary Standard Industrial Classification Code No.) (Primary Standard Industrial Classification Code No.)
16-1327860 16-6479360
(I.R.S. Employer Identification No.) (I.R.S. Employer Identification No.)
</TABLE>
58-68 Exchange Street
Binghamton, NY 13902
(607) 779-2492
(Address, including zip code, and telephone number, including area code, of
registrants' principal executive offices)
-----------------
<TABLE>
<S> <C>
Larry G. Denniston Larry G. Denniston
BSB Bancorp, Inc. BSB Capital Trust I
58-68 Exchange Street 58-68 Exchange Street
Binghamton, NY 13902 Binghamton, NY 13902
(607) 779-2492 (607) 779-2492
</TABLE>
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
-----------------------
Copies to:
Stuart G. Stein, Esq.
Roger A. Seiken, Esq.
Hogan & Hartson L.L.P.
555 Thirteenth Street, N.W.
Washington, D.C. 20004
(202) 637-5600
Approximate date of commencement of proposed sale of the securities to
the public: As soon as practicable after this Registration Statement becomes
effective.
--------------------
The registrants hereby amend this registration statement on such date
or dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission acting pursuant to said section 8(a),
may determine.
<PAGE> 2
The information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This Prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
<PAGE> 3
SUBJECT TO COMPLETION, DATED OCTOBER 16, 1998
PROSPECTUS
BSB CAPITAL TRUST I
OFFER TO EXCHANGE ITS
8.125% EXCHANGE CAPITAL SECURITIES
(LIQUIDATION AMOUNT $1,000 PER EXCHANGE CAPITAL SECURITY)
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
FOR ANY AND ALL OF ITS OUTSTANDING
8.125% ORIGINAL CAPITAL SECURITIES
(LIQUIDATION AMOUNT $1,000 PER ORIGINAL CAPITAL SECURITY)
FULLY AND UNCONDITIONALLY GUARANTEED, AS DESCRIBED HEREIN, BY
BSB BANCORP, INC.
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME ON NOVEMBER 20, 1998, UNLESS EXTENDED.
BSB Capital Trust I, a trust formed under the laws of the state of
Delaware (the "Trust"), hereby offers, upon the terms and subject to the
conditions set forth in this prospectus (as the same may be amended or
supplemented from time to time, the "Prospectus") and in the accompanying
Letter of Transmittal (which together constitute the "Exchange Offer"), to
exchange up to $30,000,000 aggregate Liquidation Amount of its 8.125% Exchange
Capital Securities (the "Exchange Capital Securities"), which have been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
pursuant to a Registration Statement of which this Prospectus constitutes a
part, for a like Liquidation Amount of its outstanding 8.125% Capital
Securities (the "Original Capital Securities"), of which $30,000,000 aggregate
Liquidation Amount are issued and outstanding. Pursuant to the Exchange Offer,
BSB Bancorp, Inc., a Delaware-chartered bank holding company (the "Company" or
"BSB Bancorp"), is also offering to exchange (i) its guarantee of payments of
cash distributions and payments on liquidation of the Trust or redemption of
the Original Capital Securities (the "Original Guarantee") for a like guarantee
in respect of the Exchange Capital Securities (the "Exchange Guarantee") and
(ii) $30,000,000 aggregate principal amount of its 8.125% Junior Subordinated
Deferrable Interest Debentures due July 31, 2028 (the "Original Junior
Subordinated Debentures") for
(Continued on next page)
This Prospectus and the Letter of Transmittal are first being mailed
to all holders of Original Capital Securities on or about October 20, 1998.
SEE "RISK FACTORS" BEGINNING ON PAGE 10 FOR CERTAIN INFORMATION THAT
SHOULD BE CONSIDERED BY HOLDERS IN DECIDING WHETHER TO TENDER ORIGINAL CAPITAL
SECURITIES FOR EXCHANGE CAPITAL SECURITIES IN THE EXCHANGE OFFER.
THE SECURITIES OFFERED HEREBY ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF A BANK
AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION
OR ANY OTHER GOVERNMENTAL AGENCY.
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 , 1998.
<PAGE> 4
(Continued from the previous page)
like aggregate principal amount of its 8.125% Exchange Junior Subordinated
Deferrable Interest Debentures due July 31, 2028 (the "Exchange Junior
Subordinated Debentures"), which Exchange Guarantee and Exchange Junior
Subordinated Debentures also have been registered under the Securities Act.
The Original Capital Securities, the Original Guarantee and the Original Junior
Subordinated Debentures are collectively referred to herein as the "Original
Securities" and the Exchange Capital Securities, the Exchange Guarantee and the
Exchange Junior Subordinated Debentures are collectively referred to herein as
the "Exchange Securities."
The terms of the Exchange Securities are identical in all material
respects to the respective terms of the Original Securities, except that (i)
the Exchange Securities have been registered under the Securities Act and
therefore will not be subject to certain restrictions on transfer applicable to
the Original Securities, (ii) the Exchange Capital Securities will not provide
for any increase in the Distribution rate thereon, and (iii) the Exchange
Junior Subordinated Debentures will not provide for any liquidated damages
thereon. See "Description of Exchange Securities" and "Description of Original
Securities." The Exchange Capital Securities are being offered for exchange in
order to satisfy certain obligations of the Company and the Trust under the
Registration Rights Agreement, dated July 24, 1998 (the "Registration Rights
Agreement") among the Company, the Trust and Keefe, Bruyette & Woods, Inc. (the
"Initial Purchaser"). In the event that the Exchange Offer is consummated, any
Original Capital Securities that remain outstanding after consummation of the
Exchange Offer and the Exchange Capital Securities issued in the Exchange Offer
will vote together as a single class for purposes of determining whether
holders of the requisite percentage in outstanding Liquidation Amount thereof
have taken certain actions or exercised certain rights under the Trust
Agreement.
The Exchange Capital Securities and the Original Capital Securities
(together, the "Capital Securities") represent preferred undivided beneficial
interests in the assets of the Trust. The Company is the holder of all of the
common undivided beneficial interests in the assets of the Trust represented by
common securities of the Trust (the "Common Securities," and together with the
Capital Securities, the "Trust Securities"). Bankers Trust Company is the
Property Trustee (the "Property Trustee") of the Trust. The Trust exists for
the sole purpose of issuing the Trust Securities and investing the proceeds
thereof in the Junior Subordinated Debentures. The Exchange Junior
Subordinated Debentures will mature on July 31, 2028 (the "Stated Maturity
Date"). The Exchange Capital Securities will have a preference over the Common
Securities under certain circumstances with respect to cash distributions and
amounts payable on liquidation, redemption or otherwise. See "Description of
Exchange Securities -- Description of Exchange Capital Securities --
Subordination of Common Securities."
As used herein, (i) the "Indenture" means the Junior Subordinated
Indenture, dated as of July 24, 1998, as amended and supplemented from time to
time, between the Company and Bankers Trust Company, as trustee (the "Debenture
Trustee"), relating to the Junior Subordinated Debentures, (ii) the "Trust
Agreement" means the Amended and Restated Trust Agreement, among the Company,
as Depositor, Bankers Trust Company, as Property Trustee, Bankers Trust Company
(Delaware), as Delaware Trustee (the "Delaware Trustee," and collectively, with
the Property Trustee, the "Trustees"), and the Administrators named therein,
and (iii) the "Guarantee" means the Guarantee Agreement, between the Company
and Bankers Trust Company, as Guarantee Trustee (the "Guarantee Trustee"). In
addition, as the context may require, (i) "Junior Subordinated Debentures"
includes the Original Junior Subordinated Debentures and the Exchange Junior
Subordinated Debentures and (ii) "Guarantee" includes the Original Guarantee
and the Exchange Guarantee.
Holders of the Trust Securities will be entitled to receive
preferential cumulative cash distributions arising from the payment of interest
on the Exchange Junior Subordinated Debentures, accumulating from July 24,
1998, and payable semi-annually in arrears on January 31 and July 31 of each
year, commencing January 31, 1999, at the annual rate of 8.125% of the
Liquidation Amount of $1,000 per Trust Security ("Distributions"). The Company
has the right to defer payment of interest on the Exchange Junior Subordinated
Debentures at any time or from time to time for a period not exceeding 10
(ii)
<PAGE> 5
consecutive semi-annual periods with respect to each deferral period (each, an
"Extension Period"), provided that no Extension Period may extend beyond the
Stated Maturity Date of the Exchange Junior Subordinated Debentures. No
interest shall be due and payable during any Extension Period, except at the
end thereof. Upon the termination of any such Extension Period and the payment
of all amounts then due, the Company may elect to begin a new Extension Period
subject to the requirements set forth herein. If interest payments on the
Exchange Junior Subordinated Debentures are so deferred, Distributions on the
Exchange Capital Securities will also be deferred and the Company will not be
permitted, subject to certain exceptions described herein, to declare or pay
any cash distributions with respect to the Company's capital stock or with
respect to debt securities of the Company that rank pari passu in all respects
with or junior to the Exchange Junior Subordinated Debentures. During an
Extension Period, interest on the Exchange Junior Subordinated Debentures will
continue to accrue (and the amount of Distributions to which holders of the
Exchange Capital Securities are entitled will accumulate) at a rate equal to
8.125%, compounded semi-annually, and holders of Exchange Capital Securities
will be required to accrue interest income for United States federal income tax
purposes. See "Description of Exchange Securities -- Description of Exchange
Junior Subordinated Debentures -- Option to Extend Interest Payment Period" and
"Certain Federal Income Tax Consequences -- Interest Income and Original Issue
Discount."
The Company has, through the Exchange Guarantee, the Trust Agreement,
the Exchange Junior Subordinated Debentures and the Indenture, taken together,
fully, irrevocably and unconditionally guaranteed all of the Trust's
obligations under the Exchange Capital Securities as described below. See
"Relationship Among the Exchange Capital Securities, the Exchange Junior
Subordinated Debentures and the Exchange Guarantee -- Full and Unconditional
Guarantee." The Exchange Guarantee guarantees payments of Distributions and
payments upon liquidation of the Trust or redemption of the Exchange Capital
Securities, but in each case only to the extent of funds held by the Trust, as
described herein. See "Description of Exchange Securities -- Description of
Exchange Guarantee." If the Company does not make payments on the Exchange
Junior Subordinated Debentures, the Trust may not have sufficient funds to pay
Distributions on the Exchange Capital Securities. The Exchange Guarantee does
not cover payment of Distributions when the Trust does not have sufficient
funds to pay such Distributions. In such event, a holder of Exchange Capital
Securities may institute a legal proceeding directly against the Company to
enforce payment of such Distributions to such holder. See "Description of
Exchange Securities -- Description of Exchange Junior Subordinated Debentures
- -- Enforcement of Certain Rights by Holders of Exchange Capital Securities."
The obligations of the Company under the Exchange Guarantee and the Exchange
Capital Securities are subordinate and junior in right of payment to all Senior
Indebtedness (as defined in "Description of Exchange Securities -- Description
of Exchange Junior Subordinated Debentures -- Subordination") of the Company.
See "Risk Factors -- Ranking of Subordinated Obligations under the Exchange
Guarantee and the Exchange Junior Subordinated Debentures."
The Exchange Capital Securities are subject to mandatory redemption
(i) in whole, but not in part, upon repayment of the Exchange Junior
Subordinated Debentures on the Stated Maturity Date or their earlier redemption
in whole upon the occurrence of a Tax Event, an Investment Company Event or a
Capital Treatment Event (each as defined herein) and (ii) in whole or in part
at any time on or after July 31, 2008 contemporaneously with the optional
redemption by the Company of the Exchange Junior Subordinated Debentures in
whole or in part. The Exchange Junior Subordinated Debentures are redeemable
prior to maturity at the option of the Company (i) on or after July 31, 2008,
in whole at any time or in part from time to time, or (ii) in whole, but not in
part, at any time within 90 days following the occurrence and continuation of a
Tax Event, Investment Company Event or Capital Treatment Event, in each case at
a redemption price set forth herein, plus the accrued and unpaid interest on
the Exchange Junior Subordinated Debentures so redeemed to the date fixed for
redemption. The ability of the Company to exercise its rights to redeem the
Exchange Junior Subordinated Debentures or to cause the redemption of the
Exchange Capital Securities prior to the Stated Maturity Date may be subject to
prior regulatory approval by the Federal Reserve, if then required under
applicable Federal Reserve capital guidelines or policies. See "Description of
Exchange Securities -- Description of Capital Securities --
(iii)
<PAGE> 6
Liquidation Distribution Upon Dissolution" and "Description of Exchange
Securities -- Description of Exchange Junior Subordinated Debentures --
Redemption."
The holders of the outstanding Common Securities have the right at any
time to dissolve the Trust and, after satisfaction of liabilities of creditors
of the Trust as required by applicable law, to cause the Exchange Junior
Subordinated Debentures to be distributed to the holders of the Trust
Securities in dissolution of the Trust.
In the event of dissolution of the Trust, after satisfaction of
liabilities to creditors of the Trust as required by applicable law, the
holders of the Exchange Capital Securities will be entitled to receive a
Liquidation Amount of $1,000 per Exchange Capital Security plus accumulated and
unpaid Distributions thereon to the date of payment, subject to certain
exceptions, which may be in the form of a distribution of such amount in
Exchange Junior Subordinated Debentures. See "Description of Exchange
Securities -- Description of Exchange Capital Securities -- Liquidation
Distribution Upon Dissolution."
THE EXCHANGE CAPITAL SECURITIES MAY BE TRANSFERRED ONLY IN A BLOCK
HAVING A LIQUIDATION AMOUNT OF NOT LESS THAN $100,000 (100 EXCHANGE CAPITAL
SECURITIES). ANY TRANSFER OF EXCHANGE CAPITAL SECURITIES IN A BLOCK HAVING A
LIQUIDATION AMOUNT OF LESS THAN $100,000 SHALL BE DEEMED TO BE VOID AND OF NO
LEGAL EFFECT WHATSOEVER. ANY SUCH TRANSFEREE SHALL BE DEEMED NOT TO BE THE
HOLDER OF SUCH EXCHANGE CAPITAL SECURITIES FOR ANY PURPOSE, INCLUDING BUT NOT
LIMITED TO THE RECEIPT OF DISTRIBUTIONS ON SUCH EXCHANGE CAPITAL SECURITIES,
AND SUCH TRANSFEREE SHALL BE DEEMED TO HAVE NO INTEREST WHATSOEVER IN SUCH
EXCHANGE CAPITAL SECURITIES.
----------------------------
The Trust is making the Exchange Offer of the Exchange Capital
Securities in reliance on the position of the staff of the Division of Company
Finance (the "Staff") of the Securities and Exchange Commission (the
"Commission") as set forth in certain interpretive letters addressed to third
parties in other transactions. However, neither the Company nor the Trust has
sought its own interpretive letter and there can be no assurance that the Staff
of the Commission would make a similar determination with respect to the
Exchange Offer as it has in such interpretive letters to third parties. Based
on these interpretations by the Staff of the Commission, and subject to the two
immediately following sentences, the Company and the Trust believe that
Exchange Capital Securities issued pursuant to this Exchange Offer in exchange
for Original Capital Securities may be offered for resale, resold and otherwise
transferred by a holder thereof (other than a holder who is a broker-dealer)
without further compliance with the registration and prospectus delivery
requirements of the Securities Act, provided that such Exchange Capital
Securities are acquired in the ordinary course of such holder's business and
that such holder is not participating, and has no arrangement or understanding
with any person to participate, in a distribution (within the meaning of the
Securities Act) of such Exchange Capital Securities. However, any holder of
Original Capital Securities who is an "affiliate" of the Company or the Trust
or who intends to participate in the Exchange Offer for the purpose of
distributing Exchange Capital Securities, or any broker-dealer who purchased
Original Capital Securities from the Trust to resell pursuant to Rule 144A
under the Securities Act ("Rule 144A") or any other available exemption under
the Securities Act, (i) will not be able to rely on the interpretations of the
Staff of the Commission set forth in the above-mentioned interpretive letters,
(ii) will not be permitted or entitled to tender such Original Capital
Securities in the Exchange Offer and (iii) must comply with the registration
and prospectus delivery requirements of the Securities Act in connection with
any sale or other transfer of such Original Capital Securities unless such sale
is made pursuant to an exemption from such requirements. In addition, as
described herein, if any broker-dealer holds Original Capital Securities
acquired for its own account as a result of market-making or other trading
activities and exchanges such Original Capital Securities for Exchange Capital
Securities, then such broker-dealer must deliver a prospectus meeting the
requirements of the Securities Act in connection with any resales of such
Exchange Capital Securities.
(iv)
<PAGE> 7
Each holder of Original Capital Securities who wishes to exchange
Original Capital Securities for Exchange Capital Securities in the Exchange
Offer will be required to represent that (i) it is not an "affiliate" of the
Company or the Trust, (ii) any Exchange Capital Securities to be received by it
are being acquired in the ordinary course of its business, (iii) it has no
arrangement or understanding with any person to participate in a distribution
(within the meaning of the Securities Act) of such Exchange Capital Securities,
and (iv) if such holder is not a broker-dealer, such holder is not engaged in,
and does not intend to engage in, a distribution (within the meaning of the
Securities Act) of such Exchange Capital Securities. In addition, the Company
and the Trust may require such holder, as a condition to such holder's
eligibility to participate in the Exchange Offer, to furnish to the Company and
the Trust (or an agent thereof) in writing information as to the number of
"beneficial owners" (within the meaning of Rule 13d-3 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act")), on behalf of whom such
holder holds the Original Capital Securities to be exchanged in the Exchange
Offer. Each broker-dealer that receives Exchange Capital Securities for its
own account pursuant to the Exchange Offer must acknowledge that it acquired
the Original Capital Securities for its own account as the result of
market-making activities or other trading activities and must agree that it
will deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of such Exchange Capital Securities. The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act. Based on the position taken by the Staff of
the Commission in the interpretive letters referred to above, the Company and
the Trust believe that broker-dealers who acquired Original Capital Securities
for their own accounts, as a result of market-making activities or other
trading activities ("Participating Broker-Dealers"), may fulfill their
prospectus delivery requirements with respect to the Exchange Capital
Securities received upon exchange of such Original Capital Securities (other
than Original Capital Securities which represent an unsold allotment from the
initial sale of the Original Capital Securities) with a prospectus meeting the
requirements of the Securities Act, which may be the prospectus prepared for an
exchange offer so long as it contains a description of the plan of distribution
with respect to the resale of such Exchange Capital Securities. Each
broker-dealer that receives Exchange Capital Securities for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Capital Securities.
The Letter of Transmittal states that by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. This Prospectus, as it
may be amended or supplemented from time to time, may be used by a
broker-dealer in connection with resales of Exchange Capital Securities
received in exchange for Original Capital Securities acquired by such
broker-dealer as a result of market-making activities or other trading
activities. The Trust and the Company have agreed that, ending on the close of
business on the 180th day following the Expiration Date, it will make this
Prospectus available to any broker-dealer for use in connection with any such
resale. See "Plan of Distribution." However, a Participating Broker-Dealer who
intends to use this Prospectus in connection with the resale of Exchange
Capital Securities received in exchange for Original Capital Securities
pursuant to the Exchange Offer must notify the Company or the Trust, or cause
the Company or the Trust to be notified, on or prior to the Expiration Date,
that it is a Participating Broker-Dealer. Such notice may be given in the
space provided for that purpose in the Letter of Transmittal or may be
delivered to Bankers Trust Company (the "Exchange Agent") at the address set
forth herein under "The Exchange Offer -- Exchange Agent." Any Participating
Broker-Dealer who is an "affiliate" of the Company or the Trust may not rely on
such interpretive letters and must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with any resale
transaction. See "The Exchange Offer -- Resales of Exchange Capital
Securities."
In that regard, each Participating Broker-Dealer who surrenders
Original Capital Securities pursuant to the Exchange Offer will be deemed to
have agreed, by execution of the Letter of Transmittal, that upon receipt of
notice from the Company or the Trust of the occurrence of any event or the
discovery of any fact that makes any statement contained or incorporated by
reference in this Prospectus untrue in any material respect or that causes this
Prospectus to omit to state a material fact necessary in order to make the
statements contained or incorporated by reference herein, in light of the
circumstances under which they were made, not misleading or of the occurrence
of certain other events specified in the Registration Rights Agreement, such
Participating Broker-Dealer will suspend the sale of Exchange
(v)
<PAGE> 8
Capital Securities (or the Exchange Guarantee or the Exchange Junior
Subordinated Debentures, as applicable) pursuant to this Prospectus until the
Company or the Trust has amended or supplemented this Prospectus to correct
such misstatement or omission and has furnished copies of the amended or
supplemented Prospectus to such Participating Broker-Dealer, or the Company or
the Trust has given notice that the sale of the Exchange Capital Securities (or
the Exchange Guarantee or the Exchange Junior Subordinated Debentures, as
applicable) may be resumed, as the case may be. If the Company or the Trust
gives such notice to suspend the sale of the Exchange Capital Securities (or
the Exchange Guarantee or the Exchange Junior Subordinated Debentures, as
applicable), it shall extend the 180-day period referred to above during which
Participating Broker-Dealers are entitled to use this Prospectus in connection
with the resale of Exchange Capital Securities by the number of days during the
period from and including the date of the giving of such notice to and
including the date when Participating Broker-Dealers shall have received copies
of the amended or supplemented Prospectus necessary to permit resales of the
Exchange Capital Securities or to and including the date on which the Company
or the Trust has given notice that the sale of Exchange Capital Securities (or
the Exchange Guarantee or the Exchange Junior Subordinated Debentures, as
applicable) may be resumed, as the case may be.
Prior to the Exchange Offer, there has been only a limited secondary
market and no public market for the Original Capital Securities. The Exchange
Capital Securities will be a new issue of securities for which there currently
is no market. Although the Initial Purchaser has informed the Company and the
Trust that it currently intends to make a market in the Exchange Capital
Securities, it is not obligated to do so, and any such market making may be
discontinued at any time without notice. Accordingly, there can be no
assurance as to the development or liquidity of any market for the Exchange
Capital Securities. The Company and the Trust currently do not intend to apply
for listing of the Exchange Capital Securities on any securities exchange or
for quotation through the Nasdaq Stock Market, Inc.
Any Original Capital Securities not tendered and accepted in the
Exchange Offer will remain outstanding and will be entitled to all the same
rights and will be subject to the same limitations applicable thereto under the
Trust Agreement (except for those rights which terminate upon consummation of
the Exchange Offer). Following consummation of the Exchange Offer, the holders
of Original Capital Securities will continue to be subject to all of the
existing restrictions upon transfer thereof and neither the Company nor the
Trust will have any further obligation to such holders (other than under
certain limited circumstances) to provide for registration under the Securities
Act of the Original Capital Securities held by them. To the extent that
Original Capital Securities are tendered and accepted in the Exchange Offer, a
holder's ability to sell untendered Original Capital Securities could be
adversely affected. See "Risk Factors -- Consequences of a Failure to Exchange
Original Capital Securities."
THIS PROSPECTUS AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION. HOLDERS OF ORIGINAL CAPITAL SECURITIES ARE URGED TO
READ THIS PROSPECTUS AND THE RELATED LETTER OF TRANSMITTAL CAREFULLY BEFORE
DECIDING WHETHER TO TENDER THEIR ORIGINAL CAPITAL SECURITIES PURSUANT TO THE
EXCHANGE OFFER.
Original Capital Securities may be tendered for exchange on or prior
to 5:00 p.m., New York City time, on November 20, 1998 (such time on such
date being hereinafter called the "Expiration Date"), unless the Exchange Offer
is extended by the Company or the Trust (in which case the term "Expiration
Date" shall mean the latest date and time to which the Exchange Offer is
extended). Tenders of Original Capital Securities may be withdrawn at any time
on or prior to the Expiration Date. The Exchange Offer is not conditioned upon
any minimum Liquidation Amount of Original Capital Securities being tendered
for exchange. However, the Exchange Offer is subject to certain events and
conditions which may be waived by the Company or the Trust and to the terms and
provisions of the Registration Rights Agreement. Original Capital Securities
may be tendered in whole or in part having an aggregate Liquidation Amount of
not less than $100,000 (100 Original Capital Securities) or any integral
multiple of $1,000 Liquidation Amount (one Original Capital Security) in excess
thereof. The Company has agreed to pay all expenses of the Exchange Offer.
See "The Exchange Offer -- Fees and Expenses." Holders of the
(vi)
<PAGE> 9
Original Capital Securities whose Original Capital Securities are accepted for
exchange will not receive Distributions on such Original Capital Securities and
will be deemed to have waived the right to receive any Distributions on such
Original Capital Securities accumulated from and after July 24, 1998. See "The
Exchange Offer -- Distributions on the Exchange Capital Securities."
Neither the Company nor the Trust will receive any cash proceeds from
the issuance of the Exchange Capital Securities offered hereby. No
dealer-manager is being used in connection with this Exchange Offer. See "Use
of Proceeds" and "Plan of Distribution."
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS IN CONNECTION WITH THIS EXCHANGE
OFFER AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE TRUST. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY
CIRCUMSTANCE CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS
OF THE COMPANY OR THE TRUST SINCE THE DATE HEREOF. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER OR A SOLICITATION BY ANYONE IN ANY JURISDICTION IN WHICH
SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH
OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR ANYONE TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
----------------------------
(vii)
<PAGE> 10
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Exchange Act, and in accordance therewith, files reports, proxy statements and
other information with the Commission. Such reports (including the
Incorporated Documents, as defined below), proxy statements and other
information can be inspected and copied at the public reference facilities of
the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549 and
at the regional offices of the Commission located at 7 World Trade Center, 13th
Floor, Suite 1300, New York, New York 10048 and Suite 1400, Citicorp Center,
14th Floor, 500 West Madison Street, Chicago, Illinois 60661. Copies of such
material (including the Incorporated Documents) can also be obtained at
prescribed rates by writing to the Public Reference Section of the Commission
at 450 Fifth Street, N.W., Washington, D.C. 20549. Such material (including
the Incorporated Documents) may also be accessed electronically by means of the
Commission's home page on the Internet at http://www.sec.gov.
The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997, the Company's Quarterly Reports on Form 10-Q for the three
months ended March 31, 1998 and the three and six months ended June 30, 1998,
and the Company's Current Reports on Form 8-K, dated July 23, 1998 and July 29,
1998, all previously filed by the Company with the Commission, are incorporated
herein by reference and shall be deemed to be a part hereof. Each document
filed by the Company with the Commission pursuant to Sections 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 herein by reference and to be a part hereof
from the date of filing of such document. All such reports and documents filed
by the Company with the Commission are referred to herein as the "Incorporated
Documents." Any statement contained herein, or in any document all or a portion
of which is incorporated or deemed to be incorporated herein by reference shall
be deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
No separate financial statements of the Trust have been included or
incorporated by reference herein. The Company and the Trust do not consider
that such financial statements would be material to holders of the Capital
Securities because the Trust is a newly formed special purpose entity, has no
operating history or independent operations and is not engaged in and does not
propose to engage in any activity other than holding as trust assets the Junior
Subordinated Debentures, issuing the Trust Securities and engaging in
incidental activities. See "BSB Capital Trust I," "Description of Exchange
Securities -- Description of Exchange Capital Securities," "Description of
Exchange Securities -- Description of Exchange Junior Subordinated Debentures"
and "Description of Exchange Securities -- Description of Exchange Guarantee."
In addition, the Company does not expect that the Trust will file reports,
proxy statements and other reports under the Exchange Act with the Commission.
This Prospectus constitutes a part of a registration statement on Form
S-4 (the "Registration Statement") filed by the Company and the Trust with the
Commission under the Securities Act. This Prospectus does not contain all the
information set forth in the Registration Statement, certain parts of which are
omitted in accordance with the rules and regulations of the Commission, and
reference is hereby made to the Registration Statement and to the exhibits
relating thereto for further information with respect to the Company and the
Capital Securities. Any statements contained herein concerning the provisions
of any document are not necessarily complete, and, in each instance, reference
is made to the copy of such document filed as an exhibit to the Registration
Statement or otherwise filed with the Commission. Each such statement is
qualified in its entirety by such reference.
1
<PAGE> 11
SUMMARY
Reference is made to, and the following summary is qualified in its
entirety by, the more detailed information and financial statements, including
the notes thereto, contained elsewhere in this Prospectus and in documents
incorporated by reference hereto.
BSB BANCORP, INC.
BSB Bancorp, Inc. is the Delaware-chartered bank holding company of
BSB Bank and Trust Company (the "Bank"), a New York-chartered commercial bank
and trust company headquartered in Binghamton, New York. Through the Bank, the
Company offers full service business and retail banking, and trust and
investment services throughout the New York State Counties of Broome
(Binghamton), Onondaga (Syracuse), Tioga, Chenango, and Chemung. Through its
wholly owned subsidiary, BSB Financial Services, Inc., the Bank also offers a
complete range of personalized investment services including securities
brokerage, annuity and mutual fund sales, and other traditional
investment/broker activities. At June 30, 1998, the Company had total assets of
$1.8 billion, including $1.3 billion of total loans, total deposits of $1.4
billion and shareholders' equity of $128.3 million.
The Bank's business strategy is to serve as a community-based
commercial bank alternative to large, out-of-market financial institutions.
Through its business and retail banking products, and trust and investment
services, the Company is seeking to be a major source, if not the single
source, of financial products and services for its customers. The Company
believes that its relationship to the communities it serves distinguishes the
Bank from its competitors, most of which are out-of-market financial
institutions. The Bank has served the Binghamton community for over 130 years,
and many of the Bank's officers and employees have spent their entire careers
in the Binghamton area, including working for competitors which were acquired
by or merged with out-of-market financial institutions.
As a full service commercial banking company, the Bank places
particular emphasis on commercial, consumer and real estate loan products, as
well as business and retail consumer banking and trust services. The Bank's
commercial loans are focused on a diverse group of small and medium-sized
businesses in its market area, with an average total lending relationship per
commercial borrower of approximately $411,000, at June 30, 1998. The Bank's
consumer loans reflect a full range of products, including personal, credit
card, home equity, mobile home and indirect auto dealer loans. The Bank also
originates real estate loans, including residential and commercial mortgage
loans, and also services many of the residential mortgage loans that it sells
in the secondary market.
The Bank serves its retail customers through a variety of delivery
platforms, including 13 traditional, full service branches in five counties in
southern and central New York State. In addition, the Bank offers telephone
banking, personal computer banking, cash management services and 35 automatic
teller machines throughout its market area. The Bank also has proprietary
in-store banking service centers at 12 area Giant Food Markets. The Company
intends to continue to pursue electronic and other customer service delivery
channels in an effort to attract more customer deposits and better service its
existing customers.
The Company and the Bank are subject to regulation, examination and
supervision by the Board of Governors of the Federal Reserve System, the
Federal Deposit Insurance Corporation ("FDIC") and the New York State Banking
Department. The Bank is a member of the Federal Home Loan Bank System, and
deposits in the Bank are insured by the FDIC to the maximum extent provided by
law. The Company's executive offices and the Bank's home office are located at
58-68 Exchange Street, Binghamton, New York 13902, telephone (607)779-2492.
For additional information regarding the Company and its financial
condition and results of operations, see "BSB Bancorp, Inc.," "Selected
Consolidated Financial Data and Other Information" and "Capitalization."
2
<PAGE> 12
BSB CAPITAL TRUST I
The Trust is a statutory business trust formed under Delaware law
pursuant to the Trust Agreement and the filing of a certificate of trust with
the Delaware Secretary of State. The Trust's business and affairs are
conducted pursuant to the Trust Agreement by the Trustees and the two
Administrators who are officers of the Company. The Trust exists for the
exclusive purposes of (i) issuing and selling the Trust Securities, (ii) using
the proceeds from the sale of the Trust Securities to acquire the Junior
Subordinated Debentures and (iii) engaging in only those other activities
necessary, advisable or incidental thereto, including the Exchange Offer.
Accordingly, the Junior Subordinated Debentures are the sole assets of the
Trust and payments under the Junior Subordinated Debentures are the sole source
of revenue of the Trust. All of the Common Securities are held by the Company.
THE EXCHANGE OFFER
<TABLE>
<S> <C>
The Exchange Offer . . . . . . . . . . Up to $30,000,000 aggregate Liquidation Amount of Exchange Capital Securities are being
offered in exchange for a like aggregate Liquidation Amount of Original Capital
Securities. Original Capital Securities may be tendered for exchange in whole or in part
in a Liquidation Amount of $100,000 (100 Original Capital Securities) or any integral
multiple of $1,000 (one Original Capital Security) in excess thereof. The Company and the
Trust are making the Exchange Offer in order to satisfy their obligations under the
Registration Rights Agreement relating to the Original Capital Securities. For a
description of the procedures for tendering Original Capital Securities, see "The Exchange
Offer -- Procedures for Tendering Original Capital Securities."
Expiration Date . . . . . . . . . . . . 5:00 p.m., New York City time, on November 20, 1998 unless the Exchange Offer is extended
by the Company and the Trust (in which case the Expiration Date will be the latest date and
time to which the Exchange Offer is extended). See "The Exchange Offer -- Terms of the
Exchange Offer."
Conditions to the Exchange Offer . . . The Exchange Offer is subject to certain conditions, which may be waived by the Company
and the Trust in their sole discretion. The Exchange Offer is not conditioned upon any
minimum Liquidation Amount of Original Capital Securities being tendered. See "The
Exchange Offer -- Conditions to the Exchange Offer."
Terms of the Exchange Offer . . . . . . The Company and the Trust reserve the right in their sole and absolute discretion, subject
to applicable law, at any time and from time to time, (i) to delay the acceptance of the
Original Capital Securities, (ii) to terminate the Exchange Offer if certain specified
conditions have not been satisfied, (iii) to extend the Expiration Date of the Exchange
Offer and retain all Original Capital Securities tendered pursuant to the Exchange Offer,
subject, however, to the right of holders of Original Capital Securities to withdraw their
tendered Original Capital Securities, or (iv) to waive any condition or otherwise amend
the terms of the Exchange Offer in any respect. See "The Exchange Offer -- Terms of the
Exchange Offer."
Withdrawal Rights . . . . . . . . . . . Tenders of Original Capital Securities may be withdrawn at any time on or prior to the
Expiration Date by delivering a written notice of such withdrawal to the Exchange Agent in
conformity
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3
<PAGE> 13
<TABLE>
<S> <C>
with certain procedures as set forth herein under "The Exchange Offer -- Withdrawal
Rights."
Procedures for Tendering
Original Capital Securities . . . . . . Certain brokers, dealers, commercial banks, trust companies and other nominees who hold
Original Capital Securities through The Depository Trust Company ("DTC") must effect
tenders by book-entry transfer through DTC's Automated Tender Offer Program ("ATOP").
Beneficial owners of Original Capital Securities registered in the name of a broker,
dealer, commercial bank, trust company or other nominee are urged to contact such person
promptly if they wish to tender Original Capital Securities pursuant to the Exchange
Offer. Tendering holders of Original Capital Securities that do not use ATOP must
complete and sign a Letter of Transmittal in accordance with the instructions contained
therein and forward the same by mail, facsimile transmission or hand delivery, together
with any other required documents, to the Exchange Agent, either with the certificates of
the Original Capital Securities to be tendered or in compliance with the specified
procedures for guaranteed delivery of Original Capital Securities. Tendering holders of
Original Capital Securities that use ATOP will, by so doing, acknowledge that they are
bound by the terms of the Letter of Transmittal. See "The Exchange Offer -- Procedures
for Tendering Original Capital Securities."
Letters of Transmittal and certificates representing Original Capital Securities should
not be sent to the Company or Trust. Such documents should only be sent to the Exchange
Agent.
Resales of Exchange
Capital Securities . . . . . . . . . . The Company and the Trust are making the Exchange Offer in reliance on the position of the
Staff of the Commission as set forth in certain interpretive letters addressed to third
parties in other transactions. However, neither the Company nor the Trust has sought its
own interpretive letter and there can be no assurance that the Staff of the Commission
would make a similar determination with respect to the Exchange Offer as it has in such
interpretive letters to third parties. Based on these interpretations by the Staff of the
Commission, and subject to the two immediately following sentences, the Company and the
Trust believe that Exchange Capital Securities issued pursuant to this Exchange Offer in
exchange for Original Capital Securities may be offered for resale, resold and otherwise
transferred by a holder thereof (other than a holder who is a broker-dealer) without
further compliance with the registration and prospectus delivery requirements of the
Securities Act, provided that such Exchange Capital Securities are acquired in the
ordinary course of such holder's business and that such holder is not participating, and
has no arrangement or understanding with any person to participate, in a distribution
(within the meaning of the Securities Act) of such Exchange Capital Securities. However,
any holder of Original Capital Securities who is an "affiliate" of the Company or the
Trust or who intends to participate in the Exchange Offer for the purpose of distributing
the Exchange Capital Securities, or any broker-dealer who purchased the Original Capital
Securities from the Trust to
</TABLE>
4
<PAGE> 14
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<S> <C>
resell pursuant to Rule 144A or any other available exemption under the Securities Act,
(i) will not be able to rely on the interpretations of the Staff of the Commission set
forth in the above-mentioned interpretive letters, (ii) will not be permitted or entitled
to tender such Original Capital Securities in the Exchange Offer and (iii) must comply
with the registration and prospectus delivery requirements of the Securities Act in
connection with any sale or other transfer of such Original Capital Securities unless such
sale is made pursuant to an exemption from such requirements. In addition, as described
herein, if any broker-dealer holds Original Capital Securities acquired for its own
account as a result of market-making or other trading activities and exchanges such
Original Capital Securities for Exchange Capital Securities, then such broker-dealer must
deliver a prospectus meeting the requirements of the Securities Act in connection with any
resales of such Exchange Capital Securities.
Each holder of Original Capital Securities who wishes to exchange Original Capital
Securities for Exchange Capital Securities in the Exchange Offer will be required to
represent that (i) it is not an "affiliate" of the Company or the Trust, (ii) any Exchange
Capital Securities to be received by it are being acquired in the ordinary course of its
business, (iii) it has no arrangement or understanding with any person to participate in a
distribution (within the meaning of the Securities Act) of such Exchange Capital
Securities, and (iv) if such holder is not a broker-dealer, such holder is not engaged in,
and does not intend to engage in, a distribution (within the meaning of the Securities Act)
of such Exchange Capital Securities. Each broker-dealer that receives Exchange Capital
Securities for its own account in exchange for Original Capital Securities, where such
Original Capital Securities were acquired by such broker-dealer as a result of
market-making activities or other trading activities, must acknowledge that it will
deliver a prospectus meeting the requirements of the Exchange Act in connection with any
resale of such Exchange Capital Securities. See "Plan of Distribution." The Letter of
Transmittal states that, by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning
of the Securities Act. Based on the position taken by the Staff of the Commission in the
interpretive letters referred to above, the Company and the Trust believe that
Participating Broker-Dealers who acquired Original Capital Securities for their own
accounts as a result of market-making activities or other trading activities may fulfill
their prospectus delivery requirements with respect to the Exchange Capital Securities
received upon exchange of such Original Capital Securities (other than Original Capital
Securities that represent an unsold allotment from the initial sale of the Original
Capital Securities) with a prospectus meeting the requirements of the Securities Act,
which may be the prospectus prepared for an exchange offer so long as it contains a
description of the plan of distribution with respect to the resale of such Exchange Capital
Securities. Accordingly, this Prospectus, as it may be amended or supplemented from time
to time, may be used by a Participating Broker-Dealer in connection with resales of
Exchange Capital
</TABLE>
5
<PAGE> 15
<TABLE>
<S> <C>
Securities received in exchange for Original Capital Securities where such Original
Capital Securities were acquired by such Participating Broker-Dealer for its own account
as a result of market-making or other trading activities. Subject to certain provisions
set forth in the Registration Rights Agreement and to the limitations described herein
under "The Exchange Offer -- Resales of Exchange Capital Securities," the Company and the
Trust have agreed that this Prospectus, as it may be amended or supplemented from time to
time, may be used by a Participating Broker-Dealer in connection with resales of such
Exchange Capital Securities for a period ending 180 days after the Expiration Date
(subject to extension under certain limited circumstances) or, if earlier, when all such
Exchange Capital Securities have been disposed of by such Participating Broker-Dealer. See
"Plan of Distribution." Any Participating Broker-Dealer who is an "affiliate" of the
Company or the Trust may not rely on such interpretive letters and must comply with the
registration and prospectus delivery requirements of the Securities Act in connection with
any resale transaction. See "The Exchange Offer -- Resales of Exchange Capital
Securities."
Exchange Agent . . . . . . . . . . . . The Exchange Agent with respect to the Exchange Offer is Bankers Trust Company. The
address, and telephone and facsimile number of the Exchange Agent are set forth in "The
Exchange Offer -- Exchange Agent" and in the Letter of Transmittal.
Use of Proceeds . . . . . . . . . . . . Neither the Company nor the Trust will receive any cash proceeds from the issuance of the
Exchange Capital Securities offered hereby. See "Use of Proceeds."
Federal Income Tax Considerations . . . The exchange of Original Capital Securities for Exchange Capital Securities will not be a
taxable exchange for federal income tax purposes, and holders should not recognize any
taxable gain or loss or any interest income as a result of such exchange. See "Certain
Federal Income Tax Consequences -- Exchange of Original Capital Securities."
ERISA Considerations . . . . . . . . . Holders of Original Capital Securities should review the information set forth under
"ERISA Considerations" prior to tendering Original Capital Securities in the Exchange
Offer.
THE EXCHANGE CAPITAL SECURITIES
Securities Offered . . . . . . . . . . Up to $30,000,000 aggregate Liquidation Amount of Exchange Capital Securities (Liquidation
Amount $1,000 per Exchange Capital Security) will have been registered under the
Securities Act. The Exchange Capital Securities will be issued and the Original Capital
Securities were issued under the Trust Agreement. The Exchange Capital Securities and any
Original Capital Securities that remain outstanding after consummation of the Exchange
Offer will vote together as a single class for purposes of determining whether holders of
the requisite percentage in outstanding Liquidation Amount thereof have taken certain
actions or exercised certain rights under the Trust Agreement. See "Description of
Exchange Securities -- Description of Exchange
</TABLE>
6
<PAGE> 16
<TABLE>
<S> <C>
Capital Securities -- Voting Rights; Amendment of Trust Agreement." The terms of the
Exchange Capital Securities are identical in all material respects to the terms of the
Original Capital Securities, except that the Exchange Capital Securities have been
registered under the Securities Act, will not be subject to certain restrictions on
transfer applicable to the Original Capital Securities and will not provide for any
increase in the Distribution rate thereon. See "The Exchange Offer -- Purpose and Effect
of the Exchange Offer," "Description of Exchange Securities" and "Description of Original
Securities."
Distribution Dates . . . . . . . . . . January 31 and July 31 of each year, commencing January 31, 1999.
Extension Periods . . . . . . . . . . . So long as no Debenture Event of Default has occurred and is continuing, Distributions on
Exchange Capital Securities may be deferred for the duration of any Extension Period
selected by the Company with respect to the payment of interest on the Exchange Junior
Subordinated Debentures. No Extension Period may exceed 10 consecutive semi-annual
periods or extend beyond the Stated Maturity Date. See "Description of Exchange
Securities -- Description of Exchange Junior Subordinated Debentures -- Option to Extend
Interest Payment Period" and "Certain Federal Income Tax Consequences -- Interest Income
and Original Issue Discount."
Ranking. . . . . . . . . . . . . . . . The Exchange Capital Securities will rank pari passu, and payments thereon will be made
pro rata, with the Original Capital Securities and the Common Securities, except as
described under "Description of Exchange Securities -- Description of Exchange Capital
Securities." The Exchange Junior Subordinated Debentures will rank pari passu with the
Original Junior Subordinated Debentures, and will constitute unsecured and subordinate
obligations, junior in right of payment to all Senior Indebtedness to the extent and in
the manner set forth in the Indenture. See "Description of Exchange Securities
--Description of Exchange Junior Subordinated Debentures." The Exchange Guarantee will
rank pari passu with the Original Guarantee and will constitute an unsecured obligation of
the Company and will rank subordinate and junior in right of payment to all Senior
Indebtedness to the extent and in the manner set forth in the Guarantee Agreement. See
"Description of Exchange Securities -- Description of Exchange Guarantee." In addition,
because the Company is a holding company, the Exchange Junior Subordinated Debentures and
the Exchange Guarantee will be effectively subordinated to all existing and future
liabilities of the Company's subsidiaries, including the deposit liabilities of the Bank.
See "Risk Factors -- Risk Factors Relating to the Company -- Source of Funds for Payment
of Interest" and "Description of Exchange Securities -- Description of Exchange Junior
Subordinated Debenture -- Subordination."
Redemption . . . . . . . . . . . . . . The Trust Securities are subject to mandatory redemption (i) in whole, but not in part, on
the Stated Maturity Date upon repayment of the Exchange Junior Subordinated Debentures,
(ii)
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<PAGE> 17
<TABLE>
<S> <C>
in whole, but not in part, contemporaneously with the optional redemption at any time by
the Company of the Exchange Junior Subordinated Debentures at any time within 90 days
following the occurrence and during the continuation of a Tax Event, Investment Company
Event or Capital Treatment Event in each case, subject to possible regulatory approval and
(iii) in whole or in part, at any time on or after July 31, 2008, contemporaneously with
the optional redemption by the Company of the Exchange Junior Subordinated Debentures in
whole or in part, in each case at the applicable Redemption Price (as defined herein).
See "Description of Exchange Securities -- Description of Exchange Capital Securities --
Redemption."
Rating . . . . . . . . . . . . . . . . The Exchange Capital Securities are not expected to be rated by any rating service and no
other security issued by the Company is so rated.
Transfer Restrictions . . . . . . . . . The Exchange Capital Securities will be issued, and may be transferred, only in blocks
having a Liquidation Amount of not less than $100,000 (100 Exchange Capital Securities).
See "Description of Exchange Securities -- Description of Exchange Capital Securities --
Restrictions on Transfer." Any such transfer of Exchange Capital Securities in a block
having a Liquidation Amount of less than $100,000 shall be deemed to be void and of no
legal effect whatsoever.
Absence of Market for the
Exchange Capital Securities . . . . . . The Exchange Capital Securities will be a new issue of securities for which there
currently is no market. Although the Initial Purchaser has informed the Company and the
Trust that it currently intends to make a market in the Exchange Capital Securities, the
Initial Purchaser is not obligated to do so, and any such market making may be
discontinued at any time without notice. Accordingly, there can be no assurance as to the
development or liquidity of any market for the Exchange Capital Securities. The Trust and
the Company do not intend to apply for listing of the Exchange Capital Securities on any
securities exchange or for quotation through the Nasdaq Stock Market, Inc. See "Plan of
Distribution."
</TABLE>
RISK FACTORS
For a discussion of the considerations relevant to the exchange of
Original Capital Securities for Exchange Capital Securities, see "Risk Factors"
beginning on page 10.
8
<PAGE> 18
SELECTED CONSOLIDATED FINANCIAL DATA AND OTHER INFORMATION
The following Selected Balance Sheet Data and Selected Income
Statement Data for the years ended December 31, 1997, 1996, 1995, 1994 and 1993
has been derived from consolidated financial statements audited by
PricewaterhouseCoopers LLP. All other financial information presented is
unaudited. The consolidated financial information is not necessarily
indicative of the results for any future period and is qualified in its
entirety by the detailed information available in the Company's reports as
described under "Available Information."
<TABLE>
<CAPTION>
AT OR FOR THE SIX
MONTHS ENDED
JUNE 30, AT OR FOR THE YEAR ENDED DECEMBER 31,
----------------------- --------------------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
---------- ----------- --------- ---------- ---------- ---------- -----------
(UNAUDITED) (DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
SELECTED BALANCE SHEET DATA:
Total assets $ 1,772,640 $ 1,465,726 $ 1,560,571 $ 1,363,120 $ 1,239,036 $ 1,161,901 $ 1,093,436
Total loans 1,297,498 1,106,891 1,205,797 1,008,540 927,016 865,082 808,101
Investment securities 365,880 281,019 284,988 287,665 247,092 229,863 236,860
Deposits 1,411,797 1,138,868 1,239,508 1,118,052 1,006,465 962,780 894,293
Borrowings 210,187 194,894 178,644 120,502 98,949 79,028 79,563
Shareholders' equity 128,266 114,212 120,866 108,729 116,774 106,870 109,186
Allowance for possible
credit losses 20,746 17,915 19,207 17,054 14,065 13,354 12,756
SELECTED INCOME STATEMENT DATA:
Total interest income $ 69,922 $ 58,693 $ 122,380 $ 106,252 $ 99,034 $ 84,924 $ 80,854
Total interest expense 36,082 29,618 62,016 52,471 50,421 39,201 35,261
----------- ---------- ----------- ---------- ----------- ----------- ----------
Net Interest income 33,840 29,075 60,364 53,781 48,613 45,723 45,593
Provision for credit
losses 5,704 4,813 10,314 9,971 7,333 3,717 5,580
----------- ---------- ----------- ---------- ----------- ----------- ----------
Net interest income after
provision for credit losses 28,136 24,262 50,050 43,810 41,280 42,006 40,013
Gains (losses) on sale
of securities (503) (18) 380 1,208 97 355 1,421
Gains (losses) on sale
of mortgages (380) (90) (377) (34) (41) (952) 129
Non-interest income 3,708 3,003 6,298 8,140 6,672 5,501 4,465
Non-interest expense 15,424 13,838 28,631 28,045 27,239 25,752 23,952
------------ ---------- ------------ ---------- ----------- ----------- ----------
Income before income
taxes 15,537 13,319 27,720 25,079 20,769 21,158 22,076
Income tax expense 6,023 5,191 10,734 9,875 8,175 8,287 8,680
------------ ---------- ------------ ---------- ----------- ----------- ----------
Net income $9,514 $ 8,128 $16,986 $ 15,204 $ 12,594 $ 12,871 $ 13,396
============ ========== ============ ========== =========== =========== ==========
PERFORMANCE RATIOS:
Return on average assets 1.15% 1.15% 1.17% 1.19% 1.06% 1.15% 1.27%
Return on average equity 15.22 14.37 14.65 13.49 10.89 11.59 13.14
Net interest rate margin 4.30 4.34 4.39 4.46 4.30 4.30 4.52
Efficiency ratio(1) 41.08 43.14 42.95 45.29 49.27 50.27 47.85
CREDIT QUALITY RATIOS:
Asset quality ratio(2) 0.64 0.85 1.01 1.00 1.23 0.96 1.05
Allowance for loan losses
to total loans 1.60 1.62 1.59 1.69 1.52 1.54 1.58
Allowance for loan losses
to non-performing loans 232.29 210.22 148.02 139.59 109.78 169.45 119.65
Net charge-offs to average
loans 0.66 0.74 0.74 0.72 0.72 0.37 0.41
CAPITAL RATIOS:
Average equity to average
assets 7.53 8.01 7.98 8.83 9.71 9.94 9.70
Tier 1 risk-based capital
ratio 8.95 9.39 9.18 9.97 11.51 11.80 12.03
Total risk-based capital
ratio 10.20 10.78 10.44 11.22 12.76 13.06 13.23
Leverage ratio(3)
7.25 7.86 7.79 8.06 9.28 9.61 9.83
RATIOS OF EARNINGS TO FIXED
CHARGES:(4)
Excluding interest on deposits 3.84x 3.90x 3.75x 5.87x 4.37x 6.14x 5.47x
Including interest on deposits 1.43x 1.45x 1.45x 1.48x 1.41x 1.54x 1.63x
</TABLE>
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(1) Non-interest expense divided by net interest income plus non-interest
income.
(2) Non-performing loans and other real estate owned to total assets.
Non-performing loans consist of non-accrual loans and accruing loans
contractually past due 90 days or more.
(3) Leverage ratio is Tier 1 capital to average total assets.
(4) For purposes of computing the ratios of earnings to combined fixed
charges, earnings represent net income (loss) before extraordinary items
and cumulative effect of changes in accounting principles plus applicable
income taxes and fixed charges. Fixed charges, excluding interest on
deposits, include gross interest expense (other than on deposits) and
the proportion deemed representative of the interest factor of rent
expense, net of income from subleases. Fixed charges, including gross
interest on deposits, include all interest expense and the proportion
deemed representative of the interest factor of rent expense, net of
income from subleases.
9
<PAGE> 19
RISK FACTORS
Prospective investors should consider carefully, in addition to the
other information contained in this Prospectus, the following factors in
connection with the Exchange Offer and the Exchange Capital Securities offered
hereby. This Prospectus contains certain forward-looking statements and
information relating to the Company that are based on the beliefs of management
as well as assumptions made by and information currently available to
management. The words "believes," "expects," "may," "will," "should,"
"projected," "contemplates" or "anticipates" or the negative thereof or other
variations thereon or comparable terminology, as they relate to the Company or
the Company's management, are intended to identify forward-looking statements.
Such statements reflect the current views of the Company with respect to future
events and are subject to certain risks, uncertainties and assumptions,
including the risk factors described in this Prospectus. No assurance can be
given that the future results covered by the forward-looking statements will be
achieved. The following matters constitute cautionary statements identifying
important factors with respect to such forward-looking statements, including
certain risks and uncertainties, that could cause actual results to vary
materially from the future results covered in such forward-looking statements.
Other factors, such as the general state of the economy, could also cause
actual results to vary materially from the future results covered in such
forward-looking statements. Should one or more of these risks or uncertainties
materialize, or should underlying assumptions prove incorrect, actual results
may vary materially from those described herein as anticipated, believed,
estimated or expected, or by other comparable terminology. The Company does not
intend to update these forward-looking statements.
RISK FACTORS RELATING TO THE OFFERING
Ranking of Subordinated Obligations Under the Exchange Guarantee and
the Exchange Junior Subordinated Debentures
The obligations of the Company under the Exchange Guarantee issued by
the Company for the benefit of the holders of Exchange Capital Securities and
under the Exchange Junior Subordinated Debentures are subordinate and junior in
right of payment to all Senior Indebtedness now or hereinafter incurred and are
effectively subordinated to the indebtedness and other liabilities of the
Company's subsidiaries, including the Bank. See "-- Risk Factors Relating to
the Company -- Source of Funds for Payment of Interest." At June 30, 1998, the
Company had no outstanding Senior Indebtedness. None of the Indenture, the
Guarantee or the Trust Agreement places any limitation on the amount of secured
or unsecured debt, including Senior Indebtedness, that may be incurred by the
Company. See "Description of Exchange Securities -- Description of Exchange
Guarantee -- Status of the Exchange Guarantee" and "Description of Exchange
Securities -- Description of Exchange Junior Subordinated Debentures --
Subordination."
The ability of the Trust to pay amounts due on the Exchange Capital
Securities is solely dependent upon the Company's making payments on the
Exchange Junior Subordinated Debentures as and when required.
Option to Extend Interest Payment Period; Tax Consequences
So long as no Event of Default (as defined in the Indenture) has
occurred and is continuing with respect to the Exchange Junior Subordinated
Debentures (a "Debenture Event of Default"), the Company has the right under
the Indenture to defer the payment of interest on the Exchange Junior
Subordinated Debentures at any time or from time to time for a period not
exceeding 10 consecutive semi-annual periods with respect to each Extension
Period, provided that no Extension Period may extend beyond the Stated Maturity
Date of the Exchange Junior Subordinated Debentures. See "Description of
Exchange Securities -- Description of Exchange Junior Subordinated Debentures
- -- Debenture Events of Default." As a consequence of any such deferral,
semi-annual Distributions on the Exchange Capital Securities by the Trust will
be deferred during any such Extension Period. Distributions to which holders
of the Exchange Capital Securities are entitled will accumulate additional
Distributions thereon during any Extension Period at a rate equal to 8.125% per
annum, compounded semi-annually from the relevant
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<PAGE> 20
payment date for such Distributions, computed on the basis of a 360-day year of
twelve 30-day months and the actual days elapsed in a partial month in such
period. Additional Distributions payable for each full Distribution period
will be computed by dividing the rate per annum by two. The term
"Distributions" as used herein shall include any such additional Distributions.
During any such Extension Period, the Company may not (i) declare or pay any
dividends or distributions on, or redeem, purchase, acquire or make a
liquidation payment with respect to, any of the Company's capital stock or (ii)
make any payment of principal of or 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 Exchange Junior Subordinated
Debentures (other than (a) repurchases, redemptions or other acquisitions of
shares of capital stock of the Company in connection with any employment
contract, benefit plan or other similar arrangement with or for the benefit of
any one or more employees, officers, directors or consultants, in connection
with a dividend reinvestment or shareholder stock purchase plan or in
connection with the issuance of capital stock of the Company (or securities
convertible into or exercisable for such capital stock) as consideration in an
acquisition transaction entered into prior to the applicable Extension Period,
(b) as a result of an exchange or conversion of any class or series of the
Company's capital stock (or any capital stock of a subsidiary of the Company)
for any class or series of the Company's capital stock or of any class or
series of the Company's indebtedness for any class or series of the Company's
capital stock, (c) the purchase of fractional interests in shares of the
Company's capital stock pursuant to the conversion or exchange provisions of
such capital stock or the security being converted or exchanged, (d) any
declaration of a dividend in connection with any shareholder's rights plan, or
the issuance of rights, stock or other property under any shareholder's rights
plan, or the redemption or repurchase of rights pursuant thereto, or (e) any
dividend in the form of stock, warrants, options or other rights where the
dividend stock or the stock issuable upon exercise of such warrants, options or
other rights is the same stock as that on which the dividend is being paid or
ranks pari passu with or junior to such stock). Prior to the termination of
any such Extension Period, the Company may further defer the payment of
interest, provided that no Extension Period may exceed 10 consecutive
semi-annual periods or extend beyond the Stated Maturity Date of the Exchange
Junior Subordinated Debentures. Upon the termination of any Extension Period
and the payment of all interest then accrued and unpaid (together with interest
thereon at a rate equal to 8.125% per annum, compounded semi-annually), the
Company may elect to begin a new Extension Period subject to the above
conditions. No interest shall be due and payable during an Extension Period,
except at the end thereof. The Company must give the Trustees notice of its
election of such Extension Period at least one Business Day prior to the
earlier of (i) the date the Distributions on the Exchange Capital Securities
would have been payable but for the election to begin such Extension Period and
(ii) the date the Property Trustee is required to give notice to holders of the
Exchange Capital Securities of the record date or the date such Distributions
are payable, but in any event not less than one Business Day prior to such
record date. The Property Trustee will give notice of the Company's election
to begin a new Extension Period to the holders of the Exchange Capital
Securities. Subject to the foregoing, there is no limitation on the number of
times that the Company may elect to begin an Extension Period. See
"Description of Exchange Securities -- Description of Exchange Capital
Securities -- Distributions" and "Description of Exchange Securities --
Description of Exchange Junior Subordinated Debentures -- Option to Extend
Interest Payment Period."
Should an Extension Period occur, a holder of Exchange Capital
Securities will continue to accrue income (in the form of original issue
discount) for United States federal income tax purposes in respect of its pro
rata share of the Exchange Junior Subordinated Debentures held by the Trust
(which will include a holder's pro rata share of both the stated interest and
de minimis original issue discount, if any, on the Exchange Junior Subordinated
Debentures). As a result, a holder of Exchange Capital Securities will include
such interest income in gross income for United States federal income tax
purposes in advance of the receipt of cash attributable to such original issue
discount interest income, and will not receive the cash related to such income
from the Trust if the holder disposes of the Exchange Capital Securities prior
to the record date for the payment of Distributions with respect to such
Extension Period. See "Certain Federal Income Tax Consequences -- Interest
Income and Original Issue Discount" and "-- Sales of Exchange Capital
Securities."
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<PAGE> 21
The Company has no current intention of exercising its right to defer
payments of interest by extending the interest payment period on the Exchange
Junior Subordinated Debentures. However, should the Company elect to exercise
such right in the future, the market price of the Exchange Capital Securities
is likely to be affected. A holder that disposes of its Exchange Capital
Securities during an Extension Period, therefore, might not receive the same
return on its investment as a holder that continues to hold its Exchange
Capital Securities. In addition, as a result of the existence of the Company's
right to defer interest payments, the market price of the Exchange Capital
Securities (which represent preferred undivided beneficial interests in the
assets of the Trust) may be more volatile than the market prices of other
securities on which original issue discount accrues that are not subject to
such deferrals.
Tax Event, Investment Company Event or Capital Treatment Event
Redemption
Upon the occurrence and during the continuation of a Tax Event,
Investment Company Event or Capital Treatment Event, the Company has the right
to redeem the Exchange Junior Subordinated Debentures in whole, but not in
part, at any time within 90 days following the occurrence of such Tax Event,
Investment Company Event or Capital Treatment Event and thereby cause a
mandatory redemption of the Trust Securities. Any such redemption shall be at
a price equal to the liquidation amount of the Trust Securities, together with
accumulated Distributions to but excluding the date fixed for redemption. The
ability of the Company to exercise its rights to redeem the Exchange Junior
Subordinated Debentures prior to the stated maturity may be subject to prior
regulatory approval by the Federal Reserve, if then required under applicable
Federal Reserve capital guidelines or policies. See "Description of Exchange
Securities -- Description of Exchange Junior Subordinated Debentures --
Redemption" and "Description of Exchange Securities -- Description of Capital
Securities -- Liquidation Distribution Upon Dissolution."
A "Tax Event" means the receipt by the Trust of an opinion of counsel
to the Company 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 or administrative pronouncement or action or judicial decision
interpreting or applying such laws or regulations, which amendment or change is
effective or which pronouncement or decision is announced on or after July 24,
1998, there is more than an insubstantial risk that (i) the Trust is, or will
be within 90 days of the delivery of such opinion, subject to United States
federal income tax with respect to income received or accrued on the Exchange
Junior Subordinated Debentures, (ii) interest payable by the Company on the
Exchange Junior Subordinated Debentures is not, or within 90 days of the
delivery of such opinion will not be, deductible by the Company, in whole or in
part, for United States federal income tax purposes or (iii) the Trust is, or
will be within 90 days of the delivery of the opinion, subject to more than a
de minimis amount of other taxes, duties or other governmental charges. See
"-- Possible Tax Law Changes" for a discussion of certain matters that could
give rise to a Tax Event, which may permit the Company to redeem the Exchange
Junior Subordinated Debentures prior to July 31, 2008.
"Investment Company Event" means the receipt by the Trust of an
opinion of counsel to the Company experienced in such matters to the effect
that, as a result of the occurrence of a change in law or regulation or a
written change (including any announced prospective change) in interpretation
or application of law or regulation by any legislative body, court,
governmental agency or regulatory authority, there is more than an
insubstantial risk that the Trust is or will be considered an "investment
company" that is required to be registered under the Investment Company Act of
1940, as amended (the "Investment Company Act"), which change or prospective
change becomes effective or would become effective, as the case may be, on or
after July 24, 1998.
A "Capital Treatment Event" means the reasonable determination by the
Company that, as a result of the occurrence of any amendment to, or change
(including any announced prospective change) in, the laws (or any rules or
regulations thereunder) of the United States or any political subdivision
thereof or therein, or as a result of any official or administrative
pronouncement or action or judicial decision
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<PAGE> 22
interpreting or applying such laws or regulations, which amendment or change is
effective or such pronouncement, action or decision is announced on or after
July 24, 1998, there is more than an insubstantial risk that the Company will
not be entitled to treat an amount equal to the Liquidation Amount of the
Capital Securities as "Tier 1 Capital" (or the then equivalent thereof), except
as otherwise restricted under the 25% Capital Limitation (as defined herein),
for purposes of the risk-based capital adequacy guidelines of the Federal
Reserve, as then in effect and applicable to the Company.
Possible Tax Law Changes
Prospective investors should be aware that a taxpayer recently filed a
petition in the United States Tax Court contesting the proposed disallowance by
the IRS of interest deductions that the taxpayer claimed in respect of
securities issued in 1993 and 1994 that are, in some respects, similar to the
Capital Securities. (Enron Corp. v. Commissioner, Docket No. 6149-98, filed
April 1, 1998). It is possible that an adverse decision by the Tax Court
concerning the deductibility of such interest could give rise to a Tax Event,
which would give the Company the right to redeem the Exchange Junior
Subordinated Debentures.
Exchange of Exchange Capital Securities for Exchange Junior
Subordinated Debentures
The holders of all the outstanding Common Securities have the right at
any time to dissolve the Trust and, after satisfaction of liabilities to
creditors of the Trust as provided by applicable law, cause the Exchange Junior
Subordinated Debentures to be distributed to the holders of the Capital
Securities and Common Securities in liquidation of the Trust. The ability of
the Company to dissolve the Trust may be subject to prior regulatory approval
of the Federal Reserve, if then required under applicable Federal Reserve
capital guidelines or policies. See "Description of Exchange Securities --
Description of Exchange Capital Securities -- Liquidation Distribution Upon
Dissolution."
Under current United States federal income tax law and interpretations
and assuming, as expected, that the Trust will not be taxable as a corporation,
a distribution of the Exchange Junior Subordinated Debentures upon a
dissolution of the Trust will not be a taxable event to holders of the Exchange
Capital Securities. However, if a Tax Event were to occur that would cause the
Trust to be subject to United States federal income tax with respect to income
received or accrued on the Exchange Junior Subordinated Debentures, a
distribution of the Exchange Junior Subordinated Debentures by the Trust would
be a taxable event to the Trust and the holders of the Exchange Capital
Securities. See "Certain Federal Income Tax Consequences -- Receipt of
Exchange Junior Subordinated Debentures or Cash Upon Dissolution of the Trust."
Rights Under the Exchange Guarantee
Bankers Trust Company will act as the trustee under the Exchange
Guarantee (the "Guarantee Trustee") and will hold the Exchange Guarantee for
the benefit of the holders of the Exchange Capital Securities. Bankers Trust
Company will also act as Debenture Trustee for the Exchange Junior Subordinated
Debentures and as Property Trustee under the Trust Agreement. Bankers Trust
(Delaware) acts as Delaware Trustee under the Trust Agreement. The Exchange
Guarantee guarantees to the holders of the Exchange Capital Securities the
following payments, to the extent not paid by or on behalf of the Trust: (i)
any accumulated and unpaid Distributions required to be paid on the Exchange
Capital Securities, to the extent that the Trust has funds on hand available
therefor at such time; (ii) the Redemption Price (as defined in "Description of
Exchange Securities -- Description of Exchange Capital Securities --
Redemption") with respect to any Exchange Capital Securities called for
redemption, to the extent that the Trust has funds on hand available therefor
at such time; and (iii) upon a voluntary or involuntary dissolution of the
Trust (unless the Exchange Junior Subordinated Debentures are distributed to
holders of the Exchange Capital Securities), the lesser of (a) the aggregate of
the Liquidation Amount and all accumulated and unpaid Distributions to the date
of payment, to the extent that the Trust has funds on hand available therefor
at such time, and (b) the amount of assets of the Trust remaining available for
distribution to holders of the Exchange Capital Securities on dissolution of
the
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<PAGE> 23
Trust. The Exchange Guarantee is subordinated as described under "-- Ranking
of Subordinated Obligations Under the Exchange Guarantee and the Exchange
Junior Subordinated Debentures" and "Description of Exchange Securities --
Description of Exchange Guarantee -- Status of the Exchange Guarantee." The
holders of not less than a majority in aggregate Liquidation Amount of the
outstanding Exchange Capital Securities have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Guarantee Trustee in respect of the Exchange Guarantee or to direct the
exercise of any trust power conferred upon the Guarantee Trustee under the
Exchange Guarantee. Any holder of the Exchange Capital Securities may
institute a legal proceeding directly against the Company to enforce its rights
under the Exchange 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
payable under the Exchange Junior Subordinated Debentures, the Trust may lack
funds for the payment of Distributions or amounts payable on redemption of the
Exchange Capital Securities or otherwise, and, in such event, holders of the
Exchange Capital Securities would not be able to rely upon the Exchange
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 any amounts payable in respect of the Exchange
Junior Subordinated Debentures on the payment date on which such payment is due
and payable, then a holder of Exchange Capital Securities may institute a legal
proceeding directly against the Company for enforcement of payment to such
holder of any amounts payable in respect of such Exchange Junior Subordinated
Debentures having a principal amount equal to the aggregate Liquidation Amount
of the Exchange Capital Securities of such holder (a "Direct Action"). In
connection with such Direct Action, the Company will have a right of set-off
under the Indenture to the extent of any payment made by the Company to such
holder of Exchange Capital Securities in the Direct Action. Except as
described herein, holders of Exchange Capital Securities will not be able to
exercise directly any other remedy available to the holders of the Exchange
Junior Subordinated Debentures or assert directly any other rights in respect
of the Exchange Junior Subordinated Debentures. See "Description of Exchange
Securities -- Description of Exchange Junior Subordinated Debentures --
Enforcement of Certain Rights by Holders of Exchange Capital Securities,"
"Description of Exchange Securities -- Description of Exchange Junior
Subordinated Debentures -- Debenture Events of Default" and "Description of
Exchange Securities -- Description of Exchange Guarantee." The Trust Agreement
provides that each holder of Exchange Capital Securities by acceptance thereof
agrees to the provisions of the Exchange Guarantee and the Indenture.
Limited Voting Rights
Holders of Exchange Capital Securities will have limited voting rights
relating generally to the modification of the Exchange Capital Securities and
the Exchange Guarantee and the exercise of the Trust's rights as holder of
Exchange Junior Subordinated Debentures. Holders of Exchange Capital
Securities will not be entitled to appoint, remove or replace the Property
Trustee or the Delaware Trustee except upon the occurrence of certain events
specified in the Trust Agreement and described herein. The Property Trustee
and the holders of all the Common Securities may, subject to certain
conditions, amend the Trust Agreement without the consent of holders of
Exchange Capital Securities to cure any ambiguity or make other provisions not
inconsistent with the Trust Agreement or to ensure that the Trust (i) will not
be taxable as a corporation for United States federal income tax purposes or
(ii) will not be required to register as an "investment company" under the
Investment Company Act. See "Description of Exchange Securities -- Description
of Exchange Capital Securities -- Voting Rights; Amendment of Trust Agreement"
and "Description of Exchange Securities -- Description of Exchange Capital
Securities -- Removal of Trustees; Appointment of Successors."
Market Prices
There can be no assurance as to the market prices for Exchange Capital
Securities, or the market prices for Exchange Junior Subordinated Debentures
that may be distributed in exchange for Exchange Capital Securities if a
dissolution of the Trust occurs. Accordingly, the Exchange Capital Securities
or the Exchange Junior Subordinated Debentures that a holder of Exchange
Capital Securities may receive on
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<PAGE> 24
dissolution of the Trust may trade at a discount to the price that the investor
paid to purchase the Exchange Capital Securities offered hereby. Because
holders of Exchange Capital Securities may receive Exchange Junior Subordinated
Debentures on dissolution of the Trust, prospective purchasers of Exchange
Capital Securities are also making an investment decision with regard to the
Exchange Junior Subordinated Debentures and should carefully review all the
information regarding the Exchange Junior Subordinated Debentures contained
herein. See "Description of Exchange Securities -- Description of Exchange
Capital Securities -- Liquidation Distribution Upon Dissolution" and
"Description of Exchange Securities -- Description of Exchange Junior
Subordinated Debentures."
Absence of Public Market
The Original Capital Securities were issued to, and the Company
believes such securities are currently owned by, a relatively small number of
beneficial owners. The Original Capital Securities have not been registered
under the Securities Act and are subject to restrictions on transferability if
they are not exchanged for the Exchange Capital Securities. Although the
Exchange Capital Securities may be resold or otherwise transferred by the
holders (who are not affiliates of the Company or the Trust) without compliance
with the registration requirements under the Securities Act, they will
constitute a new issue of securities with no established trading market.
Exchange Capital Securities may be transferred by the holders thereof only in
blocks having a Liquidation Amount of not less than $100,000 (100 Exchange
Capital Securities). The Company and the Trust have been advised by the
Initial Purchaser that the Initial Purchaser presently intends to make a market
in the Exchange Capital Securities. However, the Initial Purchaser is not
obligated to do so and any market-making activity with respect to the Exchange
Capital Securities may be discontinued at any time without notice. In
addition, such market-making activity will be subject to the limits imposed by
the Securities Act and the Exchange Act and may be limited during the Exchange
Offer. Accordingly, no assurance can be given that an active public or other
market will develop for the Capital Securities, or as to the liquidity of or
the trading market for the Exchange Capital Securities. If an active public
market does not develop, the market price and liquidity of the Exchange Capital
Securities may be adversely affected.
If a public trading market develops for the Exchange Capital
Securities, future trading prices will depend on many factors, including, among
other things, prevailing interest rates, the financial condition of the Company
and the market for similar securities. Depending on these and other factors,
the Exchange Capital Securities may trade at a discount.
Notwithstanding the registration of the Exchange Capital Securities in
the Exchange Offer, holders who are "affiliates" (as defined under Rule 405 of
the Securities Act) of the Company or the Trust may publicly offer for sale or
resell the Exchange Capital Securities only in compliance with the provisions
of Rule 144 under the Securities Act.
Each broker-dealer that receives Exchange Capital Securities for its
own account in exchange for Original Capital Securities, where such Original
Capital Securities were acquired by such broker-dealer as a result of
market-making activities or other trading activities, must acknowledge that it
will deliver a prospectus in connection with any resale of such Exchange
Capital Securities. See "Plan of Distribution."
Exchange Offer Procedures
Subject to conditions set forth under "The Exchange Offer --
Conditions to the Exchange Offer," issuance of the Exchange Capital Securities
in exchange for Original Capital Securities pursuant to the Exchange Offer will
be made only after a timely receipt by the Trust of (i) a book-entry
confirmation evidencing the tender of such Original Capital Securities through
ATOP or (ii) certificates representing such Original Capital Securities, a
properly completed and duly executed Letter of Transmittal, with any required
signature guarantees, and all other required documents. See "The Exchange
Offer -- Acceptance for Exchange and Issuance of Exchange Capital Securities"
and "The Exchange Offer -- Procedures for Tendering Original Capital
Securities." Therefore, holders of the Original Capital Securities desiring to
tender such Original Capital Securities in exchange for Exchange Capital
Securities should allow
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<PAGE> 25
sufficient time to ensure timely delivery. Neither the Company nor the Trust
is under any duty to give notification of defects or irregularities with
respect to the tenders of Original Capital Securities for exchange.
Trading Characteristics of the Exchange Capital Securities
The Exchange Capital Securities may trade at a price that does not
fully reflect the value of accrued but unpaid interest with respect to the
underlying Exchange Junior Subordinated Debentures. A holder who uses the
accrual method of accounting for tax purposes (and a cash method holder, if the
Exchange Junior Subordinated Debentures are deemed to have been issued with
OID) and who disposes of its Exchange Capital Securities between record dates
for payments of Distributions thereon will be required to include accrued but
unpaid interest on the Exchange Junior Subordinated Debentures through the date
of disposition in income as ordinary income (i.e., interest or, possibly, OID),
and to add such amount to its adjusted tax basis in its share of the underlying
Exchange Junior Subordinated Debentures deemed disposed of. If the selling
price is less than the holder's adjusted tax basis (which will include all
accrued but unpaid interest), a holder will recognize a capital loss. Subject
to certain limited exceptions, capital losses cannot be applied to offset
ordinary income for U.S. federal income tax purposes. See "Certain Federal
Income Tax Considerations -- Interest Income and Original Issue Discount" and
"Certain Federal Income Tax Considerations -- Sales of Exchange Capital
Securities."
Consequences of a Failure to Exchange Original Capital Securities
The Original Capital Securities have not been registered under the
Securities Act or any state securities laws and therefore may not be offered,
sold or otherwise transferred except in compliance with the registration
requirements of the Securities Act and any other applicable securities laws, or
pursuant to an exemption therefrom or in a transaction not subject thereto, and
in each case in compliance with certain other conditions and restrictions.
Original Capital Securities that remain outstanding after consummation of the
Exchange Offer will continue to bear a legend reflecting such restrictions on
transfer. In addition, upon consummation of the Exchange Offer, holders of
Original Capital Securities that remain outstanding will not be entitled to any
rights to have such Original Capital Securities registered under the Securities
Act or to any similar rights under the Registration Rights Agreement (subject
to certain limited exceptions). The Company and the Trust do not intend to
register under the Securities Act any Original Capital Securities that remain
outstanding after consummation of the Exchange Offer (subject to such limited
exceptions, if applicable). To the extent that Original Capital Securities are
tendered and accepted in the Exchange Offer, a holder's ability to sell
untendered Original Capital Securities could be adversely affected.
The Exchange Capital Securities and any Original Capital Securities
that remain outstanding after consummation of the Exchange Offer will vote
together as a single class for purposes of determining whether holders of the
requisite percentage in outstanding Liquidation Amount thereof have taken
certain actions or exercised certain rights under the Trust Agreement. See
"Description of Exchange Securities -- Description of Exchange Capital
Securities -- Voting Rights; Amendment of the Trust Agreement."
The Original Capital Securities provide, among other things, that, if
a registration statement relating to the Exchange Offer has not been declared
effective by January 20, 1999, the Distribution rate borne by the Original
Capital Securities will increase by 0.25% per annum until the Exchange Offer is
consummated. Upon consummation of the Exchange Offer, holders of Original
Capital Securities will not be entitled to any increase in the Distribution
rate thereon or any further registration rights under the Registration Rights
Agreement, except under limited circumstances. See "Description of Original
Securities."
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<PAGE> 26
RISK FACTORS RELATING TO THE COMPANY
Source of Funds for Payment of Interest
The principal source of the Company's cash revenues is dividends from
the Bank. The Company has traditionally invested substantially all of its
liquid assets in the Bank. The Company's liquidity and ability to pay
obligations such as principal, premium (if any) and interest on the Exchange
Junior Subordinated Debentures and dividends to its shareholders is primarily
derived from and dependent on the ability of the Bank to pay dividends to the
Company. Furthermore, as a bank holding company and a legal entity separate
and distinct from the Bank, the right of the Company to participate in the
assets of any subsidiary upon the latter's liquidation, reorganization or
otherwise (and thus the ability of the holders of Exchange Capital Securities
to benefit indirectly from any such distribution) will be subject to the claims
of such subsidiary's creditors, which will take priority except to the extent
that the Company may itself be a creditor with a recognized claim. As of June
30, 1998, the Company's subsidiaries (which includes the Bank and its
subsidiaries) had indebtedness and other liabilities of approximately $1.6
billion.
Payment of dividends by the Bank is restricted by various legal and
regulatory limitations. At June 30, 1998, approximately $26.2 million was
available for payment of dividends to the Company from the Bank without prior
regulatory approval and without giving consideration to the impact on the
Bank's regulatory capital ratios. The requirement to maintain regulatory
capital may further restrict the Bank's ability to pay dividends.
The Bank is also subject to restrictions under federal law which limit
the transfer of funds by the Bank to the Company, whether in the form of loans,
extensions of credit, investments, asset purchases or otherwise. Such
transfers by the Bank to the Company are limited in amount to 10% of the Bank's
capital and surplus and, with respect to the Company and all its non-bank
subsidiaries, to an aggregate of 20% of the Bank's capital and surplus.
Furthermore, such loans and extensions of credit are required to be secured in
specified amounts. Federal law also prohibits banks from purchasing
"low-quality" assets from affiliates.
Effect of Interest Rate Fluctuations
The Company's consolidated results of operations depend to a large
extent on the level of its net interest income, which is the difference between
interest income from interest-earning assets (such as loans and investments)
and interest expense on interest-bearing liabilities (such as deposits and
borrowings). If interest-rate fluctuations cause the Company's cost of funds
to increase faster than the yield on its interest-bearing assets, net interest
income will decrease. In addition, the market values of most of its financial
assets are sensitive to fluctuations in market interest rates. The Company
measures and manages its interest-rate risk by focusing on the Company's "gap,"
which is the measure of the mismatch between the dollar amount of the Company's
interest-earning assets and interest-bearing liabilities which mature or
reprice within certain time frames.
Based on the Company's asset/liability mix at April 30, 1998,
management's simulation analysis of the effects of changing interest rates
projected that a gradual 200 basis point increase in interest rates over the 12
months ending April 30, 1999 would decrease net interest income for that period
by 3.83% or less and that a similar decrease in interest rates would increase
net interest income by 3.87% or less. The test is based on a number of
assumptions and there can be no assurance that if interest rates did move by
one percent that the Company's results of operations would be impacted as
estimated. Although the Company uses various monitors of interest-rate risk,
the Company is unable to predict future fluctuations in interest rates or the
specific impact thereof.
Changes in interest rates can also affect the amount of loans the
Company originates, as well as the value of its loans and other
interest-earning assets and its ability to realize gains on the sale of such
assets and liabilities. Prevailing interest rates also affect the extent to
which borrowers prepay loans
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<PAGE> 27
owned by the Company. When interest rates increase, borrowers are less likely
to prepay their loans, and when interest rates decrease, borrowers are more
likely to prepay loans. Funds generated by prepayment might be invested at less
favorable interest rates. Prepayments may adversely affect the value of
mortgage loans, the levels of such assets that are retained in the Company's
portfolio, net interest income and loan servicing income. Similarly,
prepayments on mortgage-backed securities can adversely affect the value of
such securities and the interest income generated by them.
Increases in interest rates might cause depositors to shift funds from
accounts that have a comparatively lower cost (such as regular savings
accounts) to accounts with a higher cost (such as certificates of deposit). If
the cost of deposits increases at a rate greater than yields on
interest-earning assets increase, the interest-rate spread will be negatively
affected. Changes in the asset and liability mix also affect the Company's
interest-rate risk.
The Company faces substantial competition for deposits and loans
throughout its market area both from local financial institutions and from
out-of-state financial institutions that either solicit deposits or maintain
loan production offices in the Company's market area. The Company competes for
deposits and loans primarily with other financial service providers such as
savings institutions, commercial banks, credit unions, money market funds and
other investment alternatives. The Company believes that its ability to
compete effectively depends largely on its ability to compete with regard to
interest rates, as well as service fees, personalized services, quality and
range of financial products and services offered, convenience of office hours
and locations and automated services.
Allowance for Possible Credit Losses
In originating loans, there is a substantial likelihood that loan
losses will be experienced. The risk of loss will vary with, among other
things, general economic conditions, the type of loan being made, the
creditworthiness of the borrower over the term of the loan and, in the case of
a collateralized loan, the quality of the collateral for the loan. In order to
manage credit quality in its loan portfolio, the Company utilizes a system to
rate substantially all of its loans based on their respective risks. The
Company considers a loan in its portfolio to be "impaired" if it is probable,
based on current information and events, that the Company will be unable to
collect the scheduled principal and interest payments when due. The Company
maintains reserves to cover potential credit losses based on the Company's
estimate of impaired loans and other factors. Although management considers
the current level of reserves adequate to cover potential credit losses, there
can be no assurance that such reserves will in fact be sufficient to cover
actual losses. At June 30, 1998, the Bank's allowance for possible credit
losses was $20.7 million, or 1.60% of total loans and 232.29% of non-performing
loans at that date. At June 30, 1998, non-performing loans totaled $8.9
million, including $6.5 million of commercial loans, $194,000 of consumer
loans, $1.7 million of residential real estate loans and $492,000 of commercial
real estate loans. Net charge offs during 1997 were $8.2 million, of which $5.9
million was attributable to commercial and consumer loans. Net charge offs
during the first six months of 1998 were $4.2 million, substantially all of
which was attributable to commercial and consumer loans.
Asset Growth
The Company has grown significantly in recent years, and intends to
continue to expand its operations and asset size. At June 30, 1998, the
Company had total assets of $1.8 billion, a 62.1% increase from December 31,
1993, when the Company had total assets of $1.1 billion. The Company's total
assets are comprised primarily of loans and investments and mortgage related
securities, and much of the Company's growth in total assets is attributable to
the Company's ability to originate new commercial and consumer loans in its
lending market. In 1997, the Company originated $576.2 million of loans, and
during the first six months of 1998, the Company originated $365.9 million of
loans. The Bank's total loans increased by $197.3 million, or 19.6%, from year
end 1996 to year end 1997, and by $91.7 million, or 7.6%, from year end 1997 to
June 30, 1998.
18
<PAGE> 28
The Company presently intends to continue to emphasize growth through
loan originations. The Company also intends to explore acquisitions of other
financial institutions and/or branches inside or outside of its market area.
The market for both lending and acquisitions in the Company's market area is
highly competitive, and there can be no assurance that the Company will be able
to sustain its level of growth, or even grow at all. The ability to originate
loans is based on a number of factors, including competition and general
economic conditions which impact loan demand. If the Company acquires another
institution or additional branches, there can be no assurance that the Company
will be able to integrate the acquired institution or branches successfully
into its existing operations or otherwise achieve levels of profitability
comparable to those achieved by the Company's existing operations prior to such
acquisition. Both as to internal growth and acquisitions, the failure to
manage growth effectively could have a material adverse effect on the Company's
business, financial condition and results of operations.
Lending Risks
The Company's loan originations include primarily commercial, consumer
and, to a lesser extent, real estate loans. Commercial loans may involve
greater risk than other types of lending because such loans are often made
based on varying forms of collateral and repayment of such loans is often
dependent on the success of the commercial venture. Consumer loans may also
involve greater risk because changes in borrowers' incomes and employment
statuses after funding of the loans may impact their abilities to repay the
loans. Commercial real estate loans may also involve greater risk because
repayment of such loans is dependent, in large part, on sufficient income from
the properties securing the loans to cover operating expenses and debt service.
General economic conditions, monetary policies of the federal
government, legislative tax policies, governmental budget matters and other
events, including environmental factors, beyond the Company's or borrowers'
control may effect interest rates and market conditions which in turn may
effect prepayment and default rates, the demand for new loans and the
underlying values and cash flows of any collateral, especially real estate,
securing the Company's loans. In addition, the Company's net income may be
effected by the Company's increased interest rate sensitivity that is caused by
loans being tied to the Company's prime rate. Furthermore, an economic
recession over a prolonged period of time in the Bank's market area would
likely cause significant increases in non-performing assets, thereby causing
operating losses, impairing liquidity and eroding capital.
Competition
The banking business is highly competitive and the profitability of
the Company depends principally upon its ability to compete in its market area.
The Company competes with other commercial banks, mortgage banking companies,
savings and loan associations, credit unions, automobile manufacturers and
consumer finance companies, mutual funds, insurance companies, brokerage and
investment banking firms, asset-based non-bank lenders, and governmental
organizations that may offer subsidized financing at lower rates than those
offered by the Company. Many of the Company's competitors have significantly
greater resources (financial and other) than the Company and may offer certain
services that the Bank does not provide at this time. Various legislative acts
and regulatory rules and interpretations in recent years have led to increased
competition among financial institutions. There can be no assurance that new
legislation or regulations will not further increase competitive pressures on
the Company. Moreover, certain of the Bank's competitors are not subject to
the regulation and supervision to which the Company and Bank are subject, and
therefore may have a competitive advantage over the Company and Bank.
Year 2000 Issues
The "Year 2000" issue is the result of computer programs and equipment
which are dependent on "embedded chip technology" using two digits rather than
four to define the applicable year. This could result in a system failure or
miscalculations causing disruptions of operations including, among other
things, a temporary inability to process transactions, send invoices, or engage
in similar normal business
19
<PAGE> 29
activities. The Company started to address the issue in 1995 when technology
upgrade plans were approved by an internal Systems Application and Technology
Planning Committee. In addition, an inventory of all systems, hardware, media,
transmissions, and networks was evaluated. During 1995 and 1996, these
technology upgrades were installed throughout the branches and back office
areas to enhance the operating efficiencies within the Bank. An evaluation of
core banking systems was performed in 1997, and, in late 1998, the Company
expects to convert to a new data processing provider which has indicated that
its software, systems and equipment will be Year 2000 compliant. However, the
Company has no control over the effective implementation of such vendor's Year
2000 compliance programs, and there can be no assurance that such vendor will
be in compliance with Year 2000 issues. Further, there can be no guarantee
that the systems of other companies on which the Company's systems rely will be
timely converted, or that a failure to convert by another company, or a
conversion that is incompatible with the Company's systems, would not have a
material adverse effect on the Company.
Supervision and Regulation
The Company and the Bank are subject to federal and state regulatory
oversight as a bank holding company and state bank and trust company bank,
respectively. The Federal Reserve regulates, examines and supervises the
Company, and the FDIC and Banking Department regulate and examine the Bank.
These laws and regulations govern matters ranging from the regulation of
certain debt obligations, changes of control and mergers, and the maintenance
of adequate capital to the general business operations and financial condition
of the Bank, including permissible types, amounts, and terms of loans and
investments, the amount of reserves against deposits, restrictions on
dividends, establishment of branch offices, and subsidiary investments and
activities. These regulations are intended primarily for the protection of
depositors, rather than the benefit of investors, and they restrict the manner
by which the Company and the Bank may conduct their business and obtain
financing. The Company and the Bank are subject to changes in federal and
state law, income tax laws and accounting principles, and the FDIC, the Federal
Reserve or the Banking Department may adopt additional regulations and
undertake further regulatory initiatives, any or all of which could have an
adverse effect on the Bank and the Company.
BSB BANCORP, INC.
BSB Bancorp, Inc. is the Delaware-chartered bank holding company for
BSB Bank and Trust Company, a New York-chartered commercial bank and trust
company headquartered in Binghamton, New York. Through the Bank, the Company
offers full service business and retail banking, and trust and investment
services throughout the New York State Counties of Broome (Binghamton),
Onondaga (Syracuse), Tioga, Chenango, and Chemung. The Bank's business
strategy is to serve as a community-based commercial bank alternative to large,
out-of-market financial institutions. Through its business and retail banking
products, and trust and investment services, the Company is seeking to be a
major source, if not the single source, of financial products and services for
its customers.
As a full service commercial banking company, the Bank places
particular emphasis on commercial and consumer loan products, as well as
business and retail consumer banking and trust services. Through its wholly
owned subsidiary, BSB Financial Services, Inc., the Bank also offers a complete
range of personalized investment services including securities brokerage,
annuity and mutual fund sales, and other traditional investment/brokerage
activities.
The Company believes that its relationship to the communities it
serves distinguishes the Bank from its competitors, most of which are
out-of-market financial institutions. The Bank has served the Binghamton
community for over 130 years. The Bank maintains a highly visible role in its
communities by participating in and sponsoring charities and charitable events,
and many of the Bank's employees serve on civic and community boards. The
Bank's President and two Executive Vice Presidents have been with the Bank for
a combined 50 years, and have spent their entire careers in the Binghamton
area. In addition, many of the Bank's officers joined the Bank after working
for competitors which were acquired by or merged with out-of-market financial
institutions.
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<PAGE> 30
At June 30, 1998, the Company had total assets of $1.8 billion,
including $1.3 billion of total loans, total deposits of $1.4 billion and
shareholders' equity of $128.3 million. Of the total loan portfolio at that
date, $728.9 million were commercial loans, $338.0 million were consumer loans
and $231.6 million were real estate mortgage loans.
In 1997, the Company originated $576.2 million of loans, 42.4%, 35.7%
and 21.9% of which were commercial loans, consumer loans and real estate
mortgage loans, respectively. For the second quarter of 1998, the Company
originated $365.9 million of loans, 41.5%, 30.7% and 27.8% of which were
commercial loans, consumer loans and real estate mortgage loans, respectively.
The Bank's total loans increased by $197.3 million, or 19.6%, from year end
1996 to year end 1997, and by $91.7 million, or 7.6%, from year end 1997 to
June 30, 1998.
The Bank's commercial loans are focused on a diverse group of small
and medium-sized businesses in its market area. The Bank's average total
lending relationship per commercial borrower at June 30, 1998 was approximately
$411,000. Management of the Bank believes that its ability to make timely
local decisions on commercial loans provides a significant competitive
advantage. As part of its effort to expand its commercial lending market area,
while retaining its competitive advantages, in late 1996 the Bank opened a
branch office in Syracuse, New York. During 1997 and the second quarter of
1998, the Bank originated $42.2 million and $19.3 million, respectively, of
commercial loans in the Syracuse market area.
The Bank's consumer loans reflect a full range of products, including
personal, credit card, home equity, auto and mobile home loans. The focus of
the Bank's consumer lending program in recent years has been on indirect auto
dealer lending, and particularly on used autos. The Bank's portfolio of used
auto loans was $139.9 million, or 10.8% of total loans, at June 30, 1998.
These loans, which are originated through a network of approximately 200
dealers, are underwritten by the Bank with a focus on high credit quality
borrowers purchasing late model cars, and have an average initial outstanding
loan balance of approximately $12,000.
The Bank also offers real estate loans, including residential and
commercial mortgage loans. Although residential mortgage loans reflect a
steadily declining percentage of the Bank's total loan portfolio, the Bank
continues to originate a significant amount of fixed-rate residential mortgage
loans for sale into the secondary market, while retaining servicing rights in
order to generate fee income.
The Bank serves its retail customers through a variety of delivery
platforms, including 13 traditional, full service branches in five counties in
southern and central New York State. In addition, the Bank offers telephone
banking, personal computer banking, cash management services and 35 automatic
teller machines ("ATMs"), in locations that include the area's two largest
hospitals, Broome Community College, the Binghamton Regional Airport, shopping
malls and retail stores, and large private employers. The Bank also has
proprietary in-store banking service centers (StoreTeller) at 12 area Giant
Food Markets. Currently, the Bank is processing, on average, approximately
130,000 transactions per month at its ATMs and in-store banking service
centers, and is handling approximately 52,000 calls monthly through its
telephone teller and call center. The Company intends to continue to pursue
electronic and other customer service delivery channels in an effort to attract
more customer deposits at an efficient cost structure.
The five-county primary market area of the Bank has a combined
population of 880,433 according to the 1990 United States Census. This market
area is located on many major highway networks offering easy access to the east
coast, New England, the midwest and Canada, and is home to major industries,
including defense, high-tech, manufacturing, healthcare and government. The 10
largest employers in Broome County employ over 26,000 workers, and major
companies located in the Binghamton market include IBM, Lockheed Martin,
Raytheon, Universal Instruments and the Raymond Corporation. Major companies
located in the Syracuse market include Carrier Corp., New Process Gear
(Chrysler Corporation), SUNY Health Science Center, Niagara Mohawk Power and
Bristol-Myers Squibb. The Bank's market area is also home to Binghamton
University (SUNY), Syracuse University and Broome
21
<PAGE> 31
Community College. The Bank intends to continue to explore expansion both
within its market and to adjacent geographic areas.
The Company and the Bank are subject to regulation, examination and
supervision by the Board of Governors of the Federal Reserve System, the FDIC
and the New York State Banking Department. The Bank is a member of the Federal
Home Loan Bank System, and deposits in the Bank are insured by the FDIC to the
maximum extent provided by law. The Company's executive offices and the Bank's
home office are located at 58-68 Exchange Street, Binghamton, New York 13902,
telephone (607)779-2492.
BSB CAPITAL TRUST I
The Trust is a statutory business trust created under Delaware law
upon the filing of a certificate of trust with the Delaware Secretary of State.
The Trust's business and affairs are conducted pursuant to the Trust Agreement
by the Trustees and two administrators who are officers of the Company (the
"Administrators"). See "Description of Exchange Securities -- Description of
Exchange Capital Securities -- Miscellaneous." The Trust exists for the
exclusive purposes of (i) issuing and selling the Original Capital Securities
and Common Securities, (ii) using the proceeds from the sale of the Original
Capital Securities and Common Securities to acquire the Original Junior
Subordinated Debentures and (iii) engaging in only those other activities
necessary, advisable or incidental thereto, including the Exchange Offer.
Accordingly, the Exchange Junior Subordinated Debentures are the sole assets of
the Trust, and payments under the Exchange Junior Subordinated Debentures are
the sole source of revenue of the Trust.
All of the Common Securities are held by the Company. The Common
Securities rank pari passu, and payments will be made thereon pro rata, with
the Exchange Capital Securities, except that upon the occurrence and during the
continuation of a Debenture Event of Default arising as a result of any failure
by the Company to pay any amounts in respect of the Exchange Junior
Subordinated Debentures when due, the rights of the holders of the Common
Securities to payment in respect of Distributions and payments upon
liquidation, redemption or otherwise will be subordinated to the rights of the
holders of the Exchange Capital Securities. See "Description of Exchange
Securities -- Description of Exchange Capital Securities -- Subordination of
Common Securities." The Company acquired Common Securities in an aggregate
liquidation amount equal to 3% of the total capital of the Trust. The Trust
has a term of 31 years, but may terminate earlier as provided in the Trust
Agreement. The address of the Delaware Trustee is Bankers Trust (Delaware),
1011 Centre Road, Suite 200, Trust Department, Wilmington, Delaware 19805,
telephone number (302) 636-3301. The address of the Property Trustee, the
Guarantee Trustee and the Debenture Trustee is Bankers Trust Company, Four
Albany Street, 4th Floor, New York, New York 10006, telephone number (212)
250-2500.
USE OF PROCEEDS
Neither the Company nor the Trust will receive any cash proceeds from
the Exchange Offering. In consideration for issuing the Exchange Capital
Securities in exchange for Original Capital Securities as described in this
Prospectus, the Company will receive Original Capital Securities in like
Liquidation Amount. The Original Capital Securities surrendered in exchange
for the Exchange Capital Securities will be retired and canceled.
The proceeds to the Trust (without giving effect to expenses of the
offering payable by the Company) from the offering of the Original Capital
Securities were $30.0 million. All of the proceeds from the sale of the
Original Capital Securities were invested by the Trust in the Original Junior
Subordinated Debentures. The Company's net proceeds of approximately $29.3
million from the sale of the Original Junior Subordinated Debentures were added
to the general funds of the Company to be used for general corporate purposes,
including investment in the Bank to increase the Bank's regulatory capital.
The proceeds qualify as Tier 1 or core capital with respect to the
Company under the risk-based capital guidelines established by the Federal
Reserve. Such capital, however, when taken together with
22
<PAGE> 32
all cumulative preferred stock of the Company, if any, cannot constitute more
than 25% of the total Tier 1 capital of the Company (the "25% Capital
Limitation").
RATIO OF EARNINGS TO COMBINED FIXED CHARGES
The following table sets forth the ratios of earnings to combined
fixed charges of the Company on a consolidated basis for the respective periods
indicated.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
ENDED JUNE 30, YEAR ENDED DECEMBER 31,
--------------- ------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
------ ------ ------ ------ -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to
Combined Fixed Charges:
Excluding interest on deposits . . . . . . . 3.84x 3.90x 3.75x 5.87x 4.37x 6.14x 5.47x
Including interest on deposits . . . . . . . 1.43x 1.45x 1.45x 1.48x 1.41x 1.54x 1.63x
</TABLE>
For purposes of computing the ratios of earnings to combined fixed
charges, earnings represent net income (loss) before extraordinary items and
cumulative effect of changes in accounting principles plus applicable income
taxes and fixed charges. Fixed charges, excluding interest on deposits,
include gross interest expense (other than on deposits) and the proportion
deemed representative of the interest factor of rent expense, net of income
from subleases. Fixed charges, including gross interest on deposits, include
all interest expense and the proportion deemed representative of the interest
factor of rent expense, net of income from subleases.
ACCOUNTING TREATMENT
For financial reporting purposes, the Trust is treated as a subsidiary
of the Company and, accordingly, the accounts of the Trust are included in the
consolidated financial statements of the Company. The Exchange Capital
Securities will be shown in the consolidated balance sheets of the Company, as
"Company-obligated mandatorily redeemable capital securities of subsidiary
trust holding solely junior subordinated debentures of the Company," and
appropriate disclosures about the Exchange Capital Securities, the Exchange
Guarantee and the Exchange Junior Subordinated Debentures will be included in
the notes to the consolidated financial statements of the Company. For
financial reporting purposes, Distributions payable on the Exchange Capital
Securities will be recorded in the consolidated statements of income of the
Company.
23
<PAGE> 33
CAPITALIZATION
The following table sets forth the unaudited consolidated
capitalization and certain capital ratios of the Company as of June 30, 1998,
and as adjusted to give effect to the offering of the Original Capital
Securities. Consummation of the Exchange Offer will have no effect on such
capitalization. This data should be read in conjunction with the consolidated
financial statements of the Company, including the related notes thereto and
discussion thereof, which are incorporated herein by reference. See "Available
Information."
<TABLE>
<CAPTION>
AS OF JUNE 30, 1998
-------------------
AS
ACTUAL ADJUSTED
------ --------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
LONG-TERM OBLIGATIONS:
Company-obligated mandatorily redeemable capital securities
of subsidiary trust holding solely junior subordinated
debentures of the Company(1) . . . . . . . . . . . . . . . . . . . . . . . . $ 0 $30,000
SHAREHOLDERS' EQUITY:
Preferred stock, par value $0.01 per share; 2,500,000 shares
authorized; none issued . . . . . . . . . . . . . . . . . . . . . . . . . . 0 0
Common stock, par value $0.01 per share; 30,000,000 shares
authorized; 11,197,474 shares issued . . . . . . . . . . . . . . . . . . . . 112 112
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . 29,705 29,705
Undivided profits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127,761 127,761
Accumulated other comprehensive income . . . . . . . . . . . . . . . . . . . . . 461 461
Treasury stock, at cost: 2,602,692 shares . . . . . . . . . . . . . . . . . . . (29,773) (29,773)
Total shareholders' equity . . . . . . . . . . . . . . . . . . . . . . . . . . . 128,266 128,266
Total capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 128,266 $ 158,266
COMPANY CAPITAL RATIOS:
Equity to total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.24% 7.24%
Tier 1 risk-based capital ratio(2) . . . . . . . . . . . . . . . . . . . . . . 8.95 11.10
Total risk-based capital . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.20 12.35
Leverage ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.25 8.99
</TABLE>
(1) As described herein, the sole asset of the Trust, which is a subsidiary of
the Company, is $30,928,000 aggregate principal amount of the 8.125% Junior
Subordinated Debentures, which will mature on July 31, 2028. The Company
will own all of the Common Securities issued by the Trust.
(2) The Federal Reserve's risk-based capital guidelines limit the amount of
cumulative preferred stock and Capital Securities that may be included in
Tier 1 capital to 25% of total Tier 1 capital.
24
<PAGE> 34
THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
In connection with the sale of the Original Capital Securities, the
Company and the Trust entered into the Registration Rights Agreement with the
Initial Purchaser, pursuant to which the Company and the Trust agreed to file
and use commercially reasonable efforts to cause to become effective with the
Commission a registration statement relating to the exchange of the Original
Capital Securities for capital securities with terms identical in all material
respects to the terms of the Original Capital Securities. A copy of the
Registration Rights Agreement has been filed as an exhibit to the Registration
Statement of which this Prospectus is a part.
The Exchange Offer is being made to satisfy the contractual
obligations of the Company and the Trust under the Registration Rights
Agreement. The form and terms of the Exchange Capital Securities are the same
as the form and terms of the Original Capital Securities except that the
Exchange Capital Securities have been registered under the Securities Act and
will not be subject to certain restrictions on transfer applicable to the
Original Capital Securities, and will not provide for any increase in the
Distribution rate thereon. In that regard, the Original Capital Securities
provide, among other things, that, if a registration statement relating to the
Exchange Offer has not been declared effective by January 20, 1999, then the
Distribution rate borne by the Original Capital Securities will increase by
.25% per annum until such registration statement is filed or declared
effective, as the case may be. In addition, the Original Capital Securities
provide that, if the Trust has not exchanged Exchange Capital Securities for
all Original Capital Securities validly tendered by the 30th day after the date
on which the registration statement is declared effective, the Distribution
rate borne by the Original Capital Securities will increase by .25% per annum
for the period from the occurrence of such event until the Exchange Offer has
been consummated. Upon consummation of the Exchange Offer, holders of Original
Capital Securities will not be entitled to any increase in the Distribution
rate thereon or any further registration rights under the Registration Rights
Agreement, except under limited circumstances. See "Risk Factors --
Consequences of a Failure to Exchange Original Capital Securities" and
"Description of Original Securities."
The Exchange Offer is not being made to, and the Trust will not accept
tenders for exchange from, holders of Original Capital Securities in any
jurisdiction in which the Exchange Offer or the acceptance thereof would not be
in compliance with the securities or blue sky laws of such jurisdiction.
Unless the context requires otherwise, the term "holder" with respect
to the Exchange Offer means any person in whose name the Original Capital
Securities are registered on the books of the Trust or any other person who has
obtained a properly completed bond power from the registered holder, or any
person whose Original Capital Securities are held of record by DTC who desires
to deliver such Original Capital Security by book-entry transfer at DTC.
Pursuant to the Exchange Offer, the Company will exchange as soon as
practicable after the date hereof, the Exchange Guarantee for the Original
Guarantee and the Exchange Junior Subordinated Debentures, in an amount
corresponding to the Original Capital Securities accepted for exchange, for a
like aggregate principal amount of the Original Junior Subordinated Debentures.
The Exchange Guarantee and the Exchange Junior Subordinated Debentures have
been registered under the Securities Act.
TERMS OF THE EXCHANGE OFFER
The Trust hereby offers, upon the terms and subject to the conditions
set forth in this Prospectus and in the accompanying Letter of Transmittal, to
exchange up to $30,000,000 aggregate Liquidation Amount of Exchange Capital
Securities for a like aggregate Liquidation Amount of Original Capital
Securities properly tendered on or prior to the Expiration Date and not
properly withdrawn in accordance with the procedures described herein. The
Trust will issue, promptly after the Expiration Date, an aggregate Liquidation
Amount of up to $30,000,000 of Exchange Capital Securities in exchange for a
like
25
<PAGE> 35
principal amount of outstanding Original Capital Securities tendered and
accepted in connection with the Exchange Offer. Holders may tender their
Original Capital Securities in whole or in part in a Liquidation Amount of not
less than $100,000 (100 Original Capital Securities) or any integral multiple
of $1,000 Liquidation Amount (one Original Capital Security) in excess
thereof.
The Exchange Offer is not conditioned upon any minimum Liquidation
Amount of Original Capital Securities being tendered. As of the date of this
Prospectus, $30,000,000 aggregate Liquidation Amount of the Original Capital
Securities is outstanding.
Holders of Original Capital Securities do not have any appraisal or
dissenters' rights in connection with the Exchange Offer. Original Capital
Securities that are not tendered for or are tendered but not accepted in
connection with the Exchange Offer will remain outstanding and be entitled to
the benefits of the Trust Agreement, but will not be entitled to any further
registration rights under the Registration Rights Agreement, except under
limited circumstances. See "Risk Factors -- Consequences of a Failure to
Exchange Original Capital Securities" and "Description of Original Securities."
If any tendered Original Capital Securities are not accepted for
exchange because of an invalid tender, the occurrence of certain other events
set forth herein or otherwise, certificates for any such unaccepted Original
Capital Securities will be returned, without expense, to the tendering holder
thereof promptly after the Expiration Date.
Holders who tender Original Capital Securities in connection with the
Exchange Offer will not be required to pay brokerage commissions or fees or,
subject to the instructions in the Letter of Transmittal, transfer taxes with
respect to the exchange of Original Capital Securities in connection with the
Exchange Offer. The Company will pay all charges and expenses, other than
certain applicable taxes described herein, in connection with the Exchange
Offer. See " -- Fees and Expenses."
NEITHER THE COMPANY, THE BOARD OF DIRECTORS OF THE COMPANY NOR ANY
TRUSTEE OF THE TRUST MAKES ANY RECOMMENDATION TO HOLDERS OF ORIGINAL CAPITAL
SECURITIES AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING ALL OR ANY PORTION
OF THEIR ORIGINAL CAPITAL SECURITIES PURSUANT TO THE EXCHANGE OFFER. IN
ADDITION, NO ONE HAS BEEN AUTHORIZED TO MAKE ANY SUCH RECOMMENDATION. EACH
HOLDER OF ORIGINAL CAPITAL SECURITIES MUST DECIDE WHETHER TO TENDER PURSUANT TO
THE EXCHANGE OFFER AND, IF SO, THE AGGREGATE AMOUNT OF ORIGINAL CAPITAL
SECURITIES TO TENDER BASED ON SUCH HOLDER'S OWN FINANCIAL POSITION AND
REQUIREMENTS.
EXPIRATION DATE, EXTENSIONS, AMENDMENTS
The term "Expiration Date" means 5:00 p.m., New York City time, on
November 20, 1998 unless the Exchange Offer is extended by the Company or
the Trust (in which case the term "Expiration Date" shall mean the latest date
and time to which the Exchange Offer is extended).
The Company and the Trust expressly reserve the right in their sole
and absolute discretion, subject to applicable law, at any time and from time
to time, (i) to delay the acceptance of the Original Capital Securities for
exchange, (ii) to terminate the Exchange Offer (whether or not any Original
Capital Securities have theretofore been accepted for exchange) if the Trust
determines, in its sole and absolute discretion, that any of the events or
conditions referred to under "-- Conditions to the Exchange Offer" have
occurred or exist or have not been satisfied, (iii) to extend the Expiration
Date of the Exchange Offer and retain all Original Capital Securities tendered
pursuant to the Exchange Offer, subject, however, to the right of holders of
Original Capital Securities to withdraw their tendered Original Capital
Securities as described under "-- Withdrawal Rights," and (iv) to waive any
condition or otherwise amend the terms of the Exchange Offer in any respect.
If the Exchange Offer is amended in a manner determined by the Company and the
Trust to constitute a material change, or if the Company and the Trust waive a
material condition of the Exchange Offer, the Company and the Trust will
promptly disclose such amendment by
26
<PAGE> 36
means of a prospectus supplement that will be distributed to the holders of the
Original Capital Securities, and the Company and the Trust will extend the
Exchange Offer to the extent required by Rule 14e-1 under the Exchange Act.
Any such delay in acceptance, extension, termination or amendment will
be followed promptly by oral or written notice thereof to the Exchange Agent
and by making a public announcement thereof, and such announcement in the case
of an extension will be made no later than 9:00 a.m., New York City time, on
the next Business Day after the previously scheduled Expiration Date. Without
limiting the manner in which the Company and the Trust may choose to make any
public announcement and subject to applicable laws, the Company and the Trust
shall have no obligation to publish, advertise or otherwise communicate any
such public announcement other than by issuing a release to an appropriate news
agency.
ACCEPTANCE FOR EXCHANGE AND ISSUANCE OF EXCHANGE CAPITAL SECURITIES
Upon the terms and subject to the conditions of the Exchange Offer,
the Trust will exchange, and will issue to the Exchange Agent, Exchange Capital
Securities for Original Capital Securities validly tendered and not withdrawn
promptly after the Expiration Date.
In all cases, delivery of Exchange Capital Securities in exchange for
Original Capital Securities tendered and accepted for exchange pursuant to the
Exchange Offer will be made only after timely receipt by the Exchange Agent of
(i) the book-entry confirmation described below under "-- Procedures for
Tendering Original Capital Securities -- Book-Entry Transfer" or (ii)
certificates representing such Original Capital Securities, the Letter of
Transmittal (or facsimile thereof), properly completed and duly executed, with
any required signature guarantees, and any other documents required by the
Letter of Transmittal.
Subject to the terms and conditions of the Exchange Offer, the Trust
will be deemed to have accepted for exchange, and thereby exchanged, Original
Capital Securities validly tendered and not withdrawn as, if and when the Trust
gives oral or written notice to the Exchange Agent (any such oral notice to be
promptly confirmed in writing) of the Trust's acceptance of such Original
Capital Securities for exchange pursuant to the Exchange Offer. The Exchange
Agent will act as agent for the Trust for the purpose of receiving tenders of
book-entry confirmations or certificates representing Original Capital
Securities, Letters of Transmittal and related documents, and as agent for
tendering holders for the purpose of receiving book-entry confirmations or
certificates representing Original Capital Securities, Letters of Transmittal
and related documents and transmitting Exchange Capital Securities to validly
tendered holders. Such exchange will be made promptly after the Expiration
Date. If for any reason whatsoever, acceptance for exchange or the exchange of
any Original Capital Securities tendered pursuant to the Exchange Offer is
delayed (whether before or after the Trust's acceptance for exchange of
Original Capital Securities) or the Trust extends the Exchange Offer or is
unable to accept for exchange or exchange Original Capital Securities tendered
pursuant to the Exchange Offer, then, without prejudice to the Trust's rights
set forth herein, the Exchange Agent may, nevertheless, on behalf of the Trust
and subject to Rule 14e-1(c) under the Exchange Act, retain tendered Original
Capital Securities and such Original Capital Securities may not be withdrawn
except to the extent tendering holders are entitled to withdrawal rights as
described under "-- Withdrawal Rights."
Pursuant to the Letter of Transmittal, a holder of Original Capital
Securities will warrant and agree that it has full power and authority to
tender, exchange, sell, assign and transfer Original Capital Securities, that
the Trust will acquire good, marketable and unencumbered title to the tendered
Original Capital Securities, free and clear of all liens, restrictions, charges
and encumbrances, and the Original Capital Securities tendered for exchange are
not subject to any adverse claims or proxies. The holder also will warrant and
agree that it will, upon request, execute and deliver any additional documents
deemed by the Trust or the Exchange Agent to be necessary or desirable to
complete the exchange, sale, assignment, and transfer of the Original Capital
Securities tendered pursuant to the Exchange Offer.
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<PAGE> 37
Tendering holders of Original Capital Securities that use ATOP will, by doing
so, acknowledge that they are bound by the terms of the Letter of Transmittal.
PROCEDURES FOR TENDERING ORIGINAL CAPITAL SECURITIES
Valid Tender
Except as set forth herein, in order for Original Capital Securities
to be validly tendered pursuant to the Exchange Offer, a properly completed and
duly executed Letter of Transmittal (or facsimile thereof), with any required
signature guarantees and any other required documents, must be received by the
Exchange Agent at its address set forth under "-- Exchange Agent," and either
(i) tendered Original Capital Securities must be received by the Exchange
Agent, or (ii) such Original Capital Securities must be tendered pursuant to
the procedures for book-entry transfer set forth herein and a book-entry
confirmation must be received by the Exchange Agent, in each case on or prior
to the Expiration Date, or (iii) the guaranteed delivery procedures set forth
herein must be complied with.
If less than all of the Original Capital Securities are tendered, a
tendering holder should fill in the amount of Original Capital Securities being
tendered in the appropriate box on the Letter of Transmittal or so indicate in
an Agent's Message in lieu of the Letter of Transmittal. The entire amount of
Original Capital Securities delivered to the Exchange Agent will be deemed to
have been tendered unless otherwise indicated.
THE METHOD OF DELIVERY OF THE BOOK-ENTRY CONFIRMATIONS OR
CERTIFICATES, THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS IS AT
THE OPTION AND SOLE RISK OF THE TENDERING HOLDER, AND DELIVERY WILL BE DEEMED
MADE ONLY WHEN ACTUALLY RECEIVED BY THE EXCHANGE AGENT. IF DELIVERY IS BY
MAIL, REGISTERED MAIL, RETURN RECEIPT REQUESTED, PROPERLY INSURED, OR AN
OVERNIGHT DELIVERY SERVICE IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME
SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
Book-Entry Transfer
For purposes of the Exchange Offer, the Exchange Agent will establish
an account with respect to the Original Capital Securities at DTC within two
Business Days after the date of this Prospectus. Any tendering financial
institution that is a participant in DTC's book-entry transfer facility system
must make a book-entry delivery of the Original Capital Securities by causing
DTC to transfer such Original Capital Securities into the Exchange Agent's
account at DTC in accordance with DTC's ATOP procedures for transfers. Such
holder of Original Capital Securities using ATOP should transmit its acceptance
to DTC on or prior to the Expiration Date (or comply with the guaranteed
delivery procedures set forth below). DTC will verify such acceptance, execute
a book-entry transfer of the tendered Original Capital Securities into the
Exchange Agent's account at DTC and then send to the Exchange Agent
confirmation of such book-entry transfer, including an agent's message
confirming that DTC has received an express acknowledgment from such holder
that such holder has received and agrees to be bound by the Letter of
Transmittal and that the Trust and the Company may enforce the Letter of
Transmittal against such holder (a "book-entry confirmation").
A beneficial owner of Original Capital Securities that are held by or
registered in the name of a broker, dealer, commercial bank, trust company or
other nominee or custodian is urged to contact such entity promptly if such
beneficial owner wishes to participate in the Exchange Offer.
Certificates
If the tender is not made through ATOP, certificates representing
Original Capital Securities, as well as the Letter of Transmittal (or facsimile
thereof), properly completed and duly executed, with any required signature
guarantees, and any other required documents required by the Letter of
Transmittal,
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<PAGE> 38
must be received by the Exchange Agent at its address set forth under "--
Exchange Agent" on or prior to the Expiration Date in order for such tender to
be effective (or the guaranteed delivery procedure set forth herein must be
complied with).
If less than all of the Original Capital Securities are tendered, a
tendering holder should fill in the amount of Original Capital Securities being
tendered in the appropriate box on the Letter of Transmittal. The entire
amount of Original Capital Securities delivered to the Exchange Agent will be
deemed to have been tendered unless otherwise indicated.
Signature Guarantees
Certificates for the Original Capital Securities need not be endorsed
and signature guarantees on the Letter of Transmittal are unnecessary unless
(i) a certificate for the Original Capital Securities is registered in a name
other than that of the person surrendering the certificate or (ii) such holder
completes the box entitled "Special Issuance Instructions" or "Special Delivery
Instructions" in the Letter of Transmittal. In the case of (i) or (ii) above,
such certificates for Original Capital Securities must be duly endorsed or
accompanied by a properly executed bond power, with the endorsement or
signature on the bond power and on the Letter of Transmittal guaranteed by a
firm or other entity identified in Rule 17Ad-15 under the Exchange Act as an
"eligible guarantor institution," including (as such terms are defined
therein): (a) a bank; (b) a broker, dealer, municipal securities broker or
dealer or government securities broker or dealer; (c) a credit union; (d) a
national securities exchange, registered securities association or clearing
agency; or (e) a savings association that is a participant in a Securities
Transfer Association (an "Eligible Institution"), unless surrendered on behalf
of such Eligible Institution. See Instruction 1 to the Letter of Transmittal.
Delivery
The method of delivery of the book-entry confirmation or certificates
representing tendered Original Capital Securities, the Letter of Transmittal,
and all other required documents is at the option and sole risk of the
tendering holder, and delivery will be deemed made only when actually received
by the Exchange Agent. If delivery is by mail, registered mail, return receipt
requested, properly insured, or an overnight delivery service is recommended.
In all cases, sufficient time should be allowed to ensure timely delivery.
Notwithstanding any other provision hereof, the delivery of Exchange
Capital Securities in exchange for Original Capital Securities tendered and
accepted for exchange pursuant to the Exchange Offer will in all cases be made
only after timely receipt by the Exchange Agent of (i) a book-entry
confirmation with respect to such Original Capital Securities or (ii)
certificates representing Original Capital Securities and a properly completed
and duly executed Letter of Transmittal (or facsimile thereof), together with
any required signature guarantees and any other documents required by the
Letter of Transmittal. Accordingly, the delivery of Exchange Capital
Securities might not be made to all tendering holders at the same time, and
will depend upon when book-entry confirmations with respect to Original Capital
Securities or certificates representing Original Capital Securities and other
required documents are received by the Exchange Agent.
DELIVERY OF DOCUMENTS TO DTC IN ACCORDANCE WITH DTC'S PROCEDURES DOES
NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
Guaranteed Delivery
If a holder desires to tender Original Capital Securities pursuant to
the Exchange Offer and the certificates for such Original Capital Securities
are not immediately available or time will not permit all required documents to
reach the Exchange Agent on or prior to the Expiration Date, or the procedure
for book-entry transfer cannot be completed on a timely basis, such Original
Capital Securities may
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<PAGE> 39
nevertheless be tendered, provided that all of the following guaranteed
delivery procedures are complied with:
(i) such tenders are made by or through an Eligible Institution;
(ii) a properly completed and duly executed notice to the Exchange
Agent guaranteeing delivery to the Exchange Agent of either certificates
representing Original Capital Securities or a book-entry confirmation in
compliance with the requirements set forth herein (the "Notice of Guaranteed
Delivery"), substantially in the form accompanying the Letter of Transmittal,
is received by the Exchange Agent, as provided herein, on or prior to
Expiration Date; and
(iii) a book-entry confirmation or the certificates representing all
tendered Original Capital Securities, in proper form for transfer, together
with a properly completed and duly executed Letter of Transmittal (or facsimile
thereof), with any required signature guarantees and any other documents
required by the Letter of Transmittal, are, in any case, received by the
Exchange Agent within three New York Stock Exchange trading days after the date
of execution of such Notice of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand, or
transmitted by facsimile or mail to the Exchange Agent and must include a
guarantee by an Eligible Institution in the form set forth in such notice.
The Trust's acceptance for exchange of Original Capital Securities
tendered pursuant to any of the procedures described above will constitute a
binding agreement between the tendering holder and the Trust upon the terms and
subject to the conditions of the Exchange Offer.
Determination of Validity
All questions as to the form of documents, validity, eligibility
(including time of receipt) and acceptance for exchange of any tendered
Original Capital Securities will be determined by the Company and the Trust, in
their sole discretion, whose determination shall be final and binding on all
parties. The Company and the Trust reserve the absolute right, in their sole
and absolute discretion, to reject any and all tenders determined by them not
to be in proper form or the acceptance of which, or exchange for, may, in the
opinion of counsel to the Company and the Trust, be unlawful. The Company and
the Trust also reserve the absolute right, subject to applicable law, to waive
any of the conditions of the Exchange Offer as set forth under " -- Conditions
to the Exchange Offer" or any condition or irregularity in any tender of
Original Capital Securities of any particular holder whether or not similar
conditions or irregularities are waived in the case of other holders.
The interpretation by the Company and the Trust of the terms and
conditions of the Exchange Offer (including the Letter of Transmittal and the
instructions thereto) will be final and binding. No tender of Original Capital
Securities will be deemed to have been validly made until all irregularities
with respect to such tender have been cured or waived. None of the Company, the
Trust, any affiliates or assigns of the Company or the Trust, the Exchange
Agent or any other person shall be under any duty to give any notification of
any irregularities in tenders or incur any liability for failure to give any
such notification.
If any Letter of Transmittal, endorsement, bond power, power of
attorney, or any other document required by the Letter of Transmittal is signed
by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or representative capacity,
such person should so indicate when signing, and unless waived by the Company
and the Trust, proper evidence satisfactory to the Company and the Trust, in
their sole discretion, of such person's authority to so act must be submitted.
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<PAGE> 40
RESALES OF EXCHANGE CAPITAL SECURITIES
The Trust is making the Exchange Offer for the Exchange Capital
Securities in reliance on the position of the Staff of the Commission as set
forth in certain interpretive letters addressed to third parties in other
transactions. However, neither the Company nor the Trust sought its own
interpretive letter and there can be no assurance that the Staff of the
Commission would make a similar determination with respect to the Exchange
Offer as it has in such interpretive letters to third parties. Based on these
interpretations by the Staff of the Commission, and subject to the two
immediately following sentences, the Company and the Trust believe that
Exchange Capital Securities issued pursuant to this Exchange Offer in exchange
for Original Capital Securities may be offered for resale, resold and otherwise
transferred by a holder thereof (other than a holder who is a broker-dealer)
without further compliance with the registration and prospectus delivery
requirements of the Securities Act, provided that such Exchange Capital
Securities are acquired in the ordinary course of such holder's business and
that such holder is not participating, and has no arrangement or understanding
with any person to participate, in a distribution (within the meaning of the
Securities Act) of such Exchange Capital Securities. However, any holder of
Original Capital Securities who is an "affiliate" of the Company or the Trust
or who intends to participate in the Exchange Offer for the purpose of
distributing Exchange Capital Securities, or any broker-dealer who purchased
Original Capital Securities from the Trust to resell pursuant to Rule 144A or
any other available exemption under the Securities Act, (i) will not be able to
rely on the interpretations of the Staff of the Commission set forth in the
above-mentioned interpretive letters, (ii) will not be permitted or entitled to
tender such Original Capital Securities in the Exchange Offer and (iii) must
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any sale or other transfer of such Original
Capital Securities unless such sale is made pursuant to an exemption from such
requirements. In addition, as described herein, if any broker-dealer holds
Original Capital Securities acquired for its own account as a result of
market-making or other trading activities and exchanges such Original Capital
Securities for Exchange Capital Securities, then such broker-dealer must
deliver a prospectus meeting the requirements of the Securities Act in
connection with any resales of such Exchange Capital Securities.
Each holder of Original Capital Securities who wishes to exchange
Original Capital Securities for Exchange Capital Securities in the Exchange
Offer will be required to represent that (i) it is not an "affiliate" of the
Company or the Trust, (ii) any Exchange Capital Securities to be received by it
are being acquired in the ordinary course of its business, (iii) it has no
arrangement or understanding with any person to participate in a distribution
(within the meaning of the Securities Act) of such Exchange Capital Securities,
and (iv) if such holder is not a broker-dealer, such holder is not engaged in,
and does not intend to engage in, a distribution (within the meaning of the
Securities Act) of such Exchange Capital Securities. In addition, the Company
and the Trust may require such holder, as a condition to such holder's
eligibility to participate in the Exchange Offer, to furnish to the Company and
the Trust (or an agent thereof) in writing information as to the number of
"beneficial owners" (within the meaning of Rule 13d-3 under the Exchange Act)
on behalf of whom such holder holds the Original Capital Securities to be
exchanged in the Exchange Offer. Each broker-dealer that receives Exchange
Capital Securities for its own account pursuant to the Exchange Offer must
acknowledge that it acquired the Original Capital Securities for its own
account as the result of market-making activities or other trading activities
and must agree that it will deliver a prospectus meeting the requirements of
the Securities Act in connection with any resale of such Exchange Capital
Securities. The Letter of Transmittal states that by so acknowledging and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act. Based on the
position taken by the Staff of the Commission in the interpretive letters
referred to above, the Company and the Trust believe that Participating
Broker-Dealers who acquired Original Capital Securities for their own accounts
as a result of market-making activities or other trading activities may fulfill
their prospectus delivery requirements with respect to the Exchange Capital
Securities received upon exchange of such Original Capital Securities (other
than Original Capital Securities which represent an unsold allotment from the
initial sale of the Original Capital Securities) with a prospectus meeting the
requirements of the Securities Act, which may be the prospectus prepared for an
exchange offer so long as it contains a description of the plan of distribution
with respect to the resale of such Exchange Capital Securities. Accordingly,
this
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<PAGE> 41
Prospectus, as it may be amended or supplemented from time to time, may be used
by a Participating Broker-Dealer during the period referred to below in
connection with resales of Exchange Capital Securities received in exchange for
Original Capital Securities where such Original Capital Securities were
acquired by such Participating Broker-Dealer for its own account as a result of
market-making or other trading activities. Subject to certain provisions set
forth in the Registration Rights Agreement, the Company and the Trust have
agreed that this Prospectus, as it may be amended or supplemented from time to
time, may be used by a Participating Broker-Dealer in connection with resales
of such Exchange Capital Securities for a period ending 180 days after the
Expiration Date (subject to extension under certain limited circumstances
described herein) or, if earlier, when all such Exchange Capital Securities
have been disposed of by such Participating Broker-Dealer. See "Plan of
Distribution." However, a Participating Broker-Dealer who intends to use this
Prospectus in connection with the resale of Exchange Capital Securities
received in exchange for Original Capital Securities pursuant to the Exchange
Offer must notify the Company or the Trust, or cause the Company or the Trust
to be notified, on or prior to the Expiration Date, that it is a Participating
Broker-Dealer. Such notice may be given in the space provided for that purpose
in the Letter of Transmittal or may be delivered to the Exchange Agent at its
address set forth herein under "-- Exchange Agent." Any Participating
Broker-Dealer who is an "affiliate" of the Company or the Trust may not rely on
such interpretive letters and must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with any resale
transaction.
In that regard, each Participating Broker-Dealer who surrenders
Original Capital Securities pursuant to the Exchange Offer will be deemed to
have agreed, by execution of the Letter of Transmittal, that upon receipt of
notice from the Company or the Trust of the occurrence of any event or the
discovery of (i) any fact that makes any statement contained or incorporated by
reference in this Prospectus untrue in any material respect or (ii) any fact
that causes this Prospectus to omit to state a material fact necessary in order
to make the statements contained or incorporated by reference herein, in light
of the circumstances under which they were made, not misleading, or (iii) of
the occurrence of certain other events specified in the Registration Rights
Agreement, such Participating Broker-Dealer will suspend the sale of Exchange
Capital Securities (or the Exchange Guarantee or the Exchange Junior
Subordinated Debentures, as applicable) pursuant to this Prospectus until the
Company or the Trust has amended or supplemented this Prospectus to correct
such misstatement or omission and has furnished copies of the amended or
supplemented Prospectus to such Participating Broker-Dealer, or the Company or
the Trust has given notice that the sale of the Exchange Capital Securities (or
the Exchange Guarantee or the Exchange Junior Subordinated Debentures, as
applicable) may be resumed, as the case may be. If the Company or the Trust
gives such notice to suspend the sale of the Exchange Capital Securities (or
the Exchange Guarantee or the Exchange Junior Subordinated Debentures, as
applicable), it shall extend the 180-day period referred to above during which
Participating Broker-Dealers are entitled to use this Prospectus in connection
with the resale of Exchange Capital Securities by the number of days during the
period from and including the date of the giving of such notice to and
including the date when Participating Broker-Dealers shall have received copies
of the amended or supplemented Prospectus necessary to permit resales of the
Exchange Capital Securities or to and including the date on which the Company
or the Trust has given notice that the sale of Exchange Capital Securities (or
the Exchange Guarantee or the Exchange Junior Subordinated Debentures, as
applicable) may be resumed, as the case may be.
WITHDRAWAL RIGHTS
Except as otherwise provided herein, tenders of Original Capital
Securities may be withdrawn at any time on or prior to the Expiration Date.
In order for a withdrawal to be effective a written, telegraphic or
facsimile transmission of such notice of withdrawal must be timely received by
the Exchange Agent at its address set forth under "-- Exchange Agent" on or
prior to the Expiration Date. Any such notice of withdrawal must specify the
name of the person who tendered the Original Capital Securities to be
withdrawn, the aggregate principal amount of Original Capital Securities to be
withdrawn, and (if certificates for such Original Capital Securities have been
tendered) the name of the registered holder of the Original Capital Securities
as set
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forth on the such certificates if different from that of the person who
tendered such Original Capital Securities. If certificates representing
Original Capital Securities have been delivered or otherwise identified to the
Exchange Agent, then prior to the physical release of such certificates, the
tendering holder must submit the serial numbers shown on the particular
certificates to be withdrawn and the signature on the notice of withdrawal must
be guaranteed by an Eligible Institution, except in the case of Original
Capital Securities tendered for the account of an Eligible Institution. If
Original Capital Securities have been tendered pursuant to the procedures for
book-entry transfer set forth in "-- Procedures for Tendering Original Capital
Securities -- Book-Entry Transfer," the notice of withdrawal must specify the
name and number of the account at DTC to be credited with the withdrawal of
Original Capital Securities. Withdrawals of tenders of Original Capital
Securities may not be rescinded. Original Capital Securities properly
withdrawn will not be deemed validly tendered for purposes of the Exchange
Offer, but may be retendered at any subsequent time on or prior to the
Expiration Date by following any of the procedures described above under "--
Procedures for Tendering Original Capital Securities."
All questions as to the validity, form and eligibility (including time
of receipt) of such withdrawal notices will be determined by the Trust, in its
sole discretion, whose determination shall be final and binding on all parties.
None of the Company, the Trust, any affiliates or assigns of the Company or the
Trust, the Exchange Agent or any other person shall be under any duty to give
any notification of any irregularities in any notice of withdrawal or incur any
liability for failure to give any such notification. Any Original Capital
Securities that have been tendered but are withdrawn will be returned to the
holder thereof promptly after withdrawal.
DISTRIBUTIONS ON THE EXCHANGE CAPITAL SECURITIES
Holders of Original Capital Securities whose Original Capital
Securities are accepted for exchange will not receive Distributions on such
Original Capital Securities and will be deemed to have waived the right to
receive any Distributions on such Original Capital Securities accumulated from
and after July 24, 1998. Accordingly, holders of Exchange Capital Securities
(as of the record date) for the payment of Distributions on January 31, 1998
will be entitled to receive Distributions accumulated from and after July 24,
1998.
CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provisions of the Exchange Offer, or any
extension of the Exchange Offer, the Company and the Trust will not be required
to accept for exchange, or to exchange, any Original Capital Securities for any
Exchange Capital Securities, and, as described herein, may terminate the
Exchange Offer (whether or not any Original Capital Securities have theretofore
been accepted for exchange) or may waive any conditions to or amend the
Exchange Offer, if any of the following conditions have occurred or exists or
have not been satisfied:
(i) there shall occur a change in the current interpretation by the
Staff of the Commission that permits the Exchange Capital Securities issued
pursuant to the Exchange Offer in exchange for Original Capital Securities to
be offered for resale, resold and otherwise transferred by holders thereof
(other than broker-dealers and any such holder that is an "affiliate" of the
Company or the Trust within the meaning of Rule 405 under the Securities Act)
without compliance with the registration and prospectus delivery provisions of
the Securities Act, provided that such Exchange Capital Securities are acquired
in the ordinary course of such holders' business and such holders have no
arrangement or understanding with any person to participate in the distribution
of such Exchange Capital Securities; or
(ii) any law, statute, rule or regulation shall have been adopted or
enacted which, in the judgment of Company or the Trust, would reasonably be
expected to impair its ability to proceed with the Exchange Offer; or
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<PAGE> 43
(iii) a stop order shall have been issued by the Commission or any
state securities authority suspending the effectiveness of the Registration
Statement, or proceedings shall have been initiated or, to the knowledge of the
Company or the Trust, threatened for that purpose, or any governmental approval
has not been obtained, which approval the Company or the Trust shall, in its
sole discretion, deem necessary for the consummation of the Exchange Offer as
contemplated hereby; or
(iv) the Company determines in good faith (i) that there is a
reasonable likelihood that, or a material uncertainty exists as to whether,
consummation of the Exchange Offer would result in an adverse tax consequence
to the Trust or the Company and (ii) that such condition exists on the 240th
day following the Closing Date.
If the Company or the Trust determine in its sole and absolute
discretion that any of the foregoing events or conditions has occurred or
exists or has not been satisfied, it may, subject to applicable law, terminate
the Exchange Offer (whether or not any Original Capital Securities have
theretofore been accepted for exchange) or may waive any such condition or
otherwise amend the terms of the Exchange Offer in any respect. If such waiver
or amendment constitutes a material change to the Exchange Offer, the Company
or the Trust will promptly disclose such waiver or amendment by means of a
prospectus supplement that will be distributed to the registered holders of the
Original Capital Securities and will extend the Exchange Offer to the extent
required by Rule 14e-1 under the Exchange Act.
EXCHANGE AGENT
Bankers Trust Company has been appointed as Exchange Agent for the
Exchange Offer. Delivery of the Letters of Transmittal and any other required
documents, questions, requests for assistance, and requests for additional
copies of this Prospectus or of the Letter of Transmittal should be directed to
the Exchange Agent as follows:
<TABLE>
<CAPTION>
By Mail: By Hand: By Overnight Mail:
<S> <C> <C>
BT Services Tennessee, Inc. Bankers Trust Company BT Services Tennessee, Inc.
Corporate Trust and Agency Group Corporate Trust and Agency Group Corporate Trust and Agency Group
Reorganization Unit Receipt and Delivery Window Reorganization Unit
P.O. Box 292737 123 Washington Street, 1st Floor 648 Grassmere Park Road
Nashville, TN 37229-2737 New York, NY 10006 Nashville, TN 37211
</TABLE>
For Information Call:
(800) 735-7777
Confirm: (615) 835-3572
Facsimile: (615) 835-3701
Delivery to other than the above address or facsimile number will not
constitute a valid delivery.
FEES AND EXPENSES
The Company has agreed to pay the Exchange Agent reasonable and
customary fees for its services and will reimburse it for its reasonable
out-of-pocket expenses in connection therewith. The Company will also pay
brokerage houses and other custodians, nominees and fiduciaries the reasonable
out-of-pocket expenses incurred by them in forwarding copies of this Prospectus
and related documents to the beneficial owners of Original Capital Securities,
and in handling or tendering for their customers.
Holders who tender their Original Capital Securities for exchange will
not be obligated to pay any transfer taxes in connection therewith. If,
however, Exchange Capital Securities are to be delivered to, or are to be
issued in the name of, any person other than the registered holder of the
Original Capital Securities tendered, or if a transfer tax is imposed for any
reason other than the exchange of Original Capital Securities in connection
with the Exchange Offer, then the amount of any such transfer taxes
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<PAGE> 44
(whether imposed on the registered holder or any other persons) will be payable
by the tendering holder. If satisfactory evidence of payment of such taxes or
exemption therefrom is not submitted with the Letter of Transmittal, the amount
of such transfer taxes will be billed directly to such tendering holder.
Neither the Company nor the Trust will make any payment to brokers,
dealers or others soliciting acceptances of the Exchange Offer.
The Registration Rights Agreement is governed by, and construed in
accordance with, the laws of the State of New York. The summary herein of
certain provisions of the Registration Rights Agreement does not purport to be
complete and is subject to, and is qualified in its entirety by reference to,
all the provisions of the Registration Rights Agreement. See "Incorporation of
Certain Documents by Reference." In addition, the information set forth above
concerning certain interpretations of and positions taken by the Staff of the
Commission is not intended to constitute legal advice, and prospective
investors should consult their own legal advisors with respect to such matters.
DESCRIPTION OF EXCHANGE SECURITIES
DESCRIPTION OF EXCHANGE CAPITAL SECURITIES
Pursuant to the terms of the Trust Agreement, the Issuer Trustees on
behalf of the Trust will issue the Exchange Capital Securities. The Exchange
Capital Securities will represent preferred undivided beneficial interests in
the assets of the Trust, and the holders thereof will be entitled to a
preference over the Common Securities in certain circumstances with respect to
Distributions and amounts payable on redemption or liquidation, as well as
other benefits as described in the Trust Agreement. This summary of certain
provisions of the Exchange Capital Securities, the Common Securities and the
Trust Agreement does not purport to be complete and is subject to, and
qualified in its entirety by reference to, all the provisions of the Trust
Agreement, including the definitions therein of certain terms.
GENERAL
The Exchange Capital Securities will be limited to $30,000,000
aggregate Liquidation Amount outstanding. The Exchange Capital Securities will
rank pari passu, and payments will be made thereon pro rata, with the Common
Securities except as described under "-- Subordination of Common Securities."
The Exchange Junior Subordinated Debentures will be registered in the name of
the Trust and held by the Property Trustee in trust for the benefit of the
holders of the Exchange Capital Securities and Common Securities. The Exchange
Guarantee will be a guarantee on a subordinated basis with respect to the
Exchange Capital Securities but will not guarantee payment of Distributions or
amounts payable on redemption or liquidation of such Exchange Capital
Securities when the Trust does not have funds on hand available to make such
payments. See "Description of Exchange Securities -- Description of Exchange
Guarantee."
DISTRIBUTIONS
The Exchange Capital Securities represent preferred undivided
beneficial interests in the assets of the Trust, and Distributions on each
Exchange Capital Security will be payable at an annual rate equal to 8.125% on
the stated Liquidation Amount of $1,000, payable semi-annually in arrears on
the 31st day of January and July of each year (each a "Distribution Date"), to
the holders of the Exchange Capital Securities at the close of business on the
January 15th or July 15th (whether or not a Business Day (as defined below))
next preceding the relevant Distribution Date. Distributions on the Exchange
Capital Securities will be cumulative and will accumulate from the date of
original issuance. The first Distribution Date for the Exchange Capital
Securities will be January 31, 1999. The amount of Distributions payable for
any period less than a full Distribution period will be computed on the basis
of a 360-day year of twelve 30-day months and the actual days elapsed in a
partial month in such period. Distributions payable for each full Distribution
period will be computed by dividing the rate per annum by
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<PAGE> 45
two. If any date on which Distributions are payable on the Exchange Capital
Securities is not a Business Day, then payment of the Distributions payable on
such date will be made on the next succeeding day that is a Business Day
(without any additional Distributions or other payment in respect of any such
delay), with the same force and effect as if made on the date such payment was
originally payable.
So long as no Debenture Event of Default has occurred and is
continuing, the Company has the right under the Indenture to defer the payment
of interest on the Exchange Junior Subordinated Debentures at any time or from
time to time for a period not exceeding 10 consecutive semi-annual periods with
respect to each Extension Period, provided that no Extension Period may extend
beyond the Stated Maturity Date of the Exchange Junior Subordinated Debentures.
As a consequence of any such deferral, semi-annual Distributions on the
Exchange Capital Securities by the Trust will be deferred during any such
Extension Period. Distributions to which holders of the Exchange Capital
Securities are entitled will accumulate additional Distributions thereon at a
rate equal to 8.125% per annum, compounded semi-annually from the relevant
payment date for such Distributions, computed on the basis of a 360-day year of
twelve 30-day months and the actual days elapsed in a partial month in such
period. Additional Distributions payable for each full Distribution period
will be computed by dividing the rate per annum by two. The term
"Distributions" as used herein shall include any such additional Distributions.
During any such Extension Period, the Company may not (i) declare or pay any
dividends or distributions on, or redeem, purchase, acquire or make a
liquidation payment with respect to, any of the Company's capital stock or (ii)
make any payment of principal of or 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 Exchange Junior Subordinated
Debentures (other than (a) repurchases, redemptions or other acquisitions of
shares of capital stock of the Company in connection with any employment
contract, benefit plan or other similar arrangement with or for the benefit of
any one or more employees, officers, directors or consultants, in connection
with a dividend reinvestment or shareholder stock purchase plan or in
connection with the issuance of capital stock of the Company (or securities
convertible into or exercisable for such capital stock) as consideration in an
acquisition transaction entered into prior to the applicable Extension Period,
(b) as a result of an exchange or conversion of any class or series of the
Company's capital stock (or any capital stock of a subsidiary of the Company)
for any class or series of the Company's capital stock or of any class or
series of the Company's indebtedness for any class or series of the Company's
capital stock, (c) the purchase of fractional interests in shares of the
Company's capital stock pursuant to the conversion or exchange provisions of
such capital stock or the security being converted or exchanged, (d) any
declaration of a dividend in connection with any shareholder's rights plan, or
the issuance of rights, stock or other property under any shareholder's rights
plan, or the redemption or repurchase of rights pursuant thereto, or (e) any
dividend in the form of stock, warrants, options or other rights where the
dividend stock or the stock issuable upon exercise of such warrants, options or
other rights is the same stock as that on which the dividend is being paid or
ranks pari passu with or junior to such stock). Prior to the termination of
any such Extension Period, the Company may further defer the payment of
interest, provided that no Extension Period may exceed 10 consecutive
semi-annual periods or extend beyond the Stated Maturity Date of the Exchange
Junior Subordinated Debentures. Upon the termination of any such Extension
Period and the payment of all amounts then due, the Company may elect to begin
a new Extension Period. No interest shall be due and payable during an
Extension Period, except at the end thereof. The Company must give the Issuer
Trustees notice of its election of such Extension Period at least one Business
Day prior to the earlier of (i) the date the Distributions on the Exchange
Capital Securities would have been payable but for the election to begin such
Extension Period and (ii) the date the Property Trustee is required to give
notice to holders of the Exchange Capital Securities of the record date or the
date such Distributions are payable, but in any event not less than one
Business Day prior to such record date. The Property Trustee will give notice
of the Company's election to begin a new Extension Period to the holders of the
Exchange Capital Securities. Subject to the foregoing, there is no limitation
on the number of times that the Company may elect to begin an Extension Period.
See "-- Description of Exchange Junior Subordinated Debentures -- Option To
Extend Interest Payment Period" and "Certain Federal Income Tax Consequences --
Interest Income and Original Issue Discount."
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<PAGE> 46
The Company has no current intention of exercising its right to defer
payments of interest by extending the interest payment period on the Exchange
Junior Subordinated Debentures.
The revenue of the Trust available for distribution to holders of the
Exchange Capital Securities will be limited to payments under the Exchange
Junior Subordinated Debentures in which the Trust will invest the proceeds from
the issuance and sale of the Exchange Capital Securities. See "-- Description
of Exchange Junior Subordinated Debentures." If the Company does not make
payments on the Exchange Junior Subordinated Debentures, the Trust may not have
funds available to pay Distributions or other amounts payable on the Exchange
Capital Securities. The payment of Distributions and other amounts payable on
the Exchange Capital Securities (if and to the extent the Trust has funds
legally available for and cash sufficient to make such payments) is guaranteed
by the Company on a limited basis as set forth herein under "-- Description of
Exchange Guarantee."
REDEMPTION
Upon the repayment or redemption, in whole or in part, of the Exchange
Junior Subordinated Debentures, whether at 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 Securities, upon not less than 30 nor more than 60 days'
notice, at a redemption price (the "Redemption Price") equal to the aggregate
Liquidation Amount of such Trust Securities plus accumulated but unpaid
Distributions thereon to the date of redemption (the "Redemption Date") and the
related amount of the premium, if any, paid by the Company upon the concurrent
redemption of such Exchange Junior Subordinated Debentures. See "--
Description of Exchange Junior Subordinated Debentures -- Redemption." If less
than all the Exchange 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 Exchange
Capital Securities and the Common Securities. The amount of premium, if any,
paid by the Company upon the redemption of all or any part of the Exchange
Junior Subordinated Debentures to be repaid or redeemed on a Redemption Date
shall be allocated to the redemption pro rata of the Exchange Capital
Securities and the Common Securities.
The Company has the right to redeem the Exchange Junior Subordinated
Debentures (i) on or after July 31, 2008, in whole at any time or in part from
time to time, or (ii) in whole, but not in part, at any time within 90 days
following the occurrence and during the continuation of a Tax Event, Investment
Company Event or Capital Treatment Event, in each case subject to possible
regulatory approval. See "-- Liquidation Distribution Upon Dissolution." A
redemption of the Exchange Junior Subordinated Debentures would cause a
mandatory redemption of a Like Amount of the Exchange Capital Securities and
Common Securities at the Redemption Price.
The Redemption Price, in the case of a redemption under (i) in the
immediately preceding paragraph, shall equal the following prices, expressed in
percentages of the Liquidation Amount (as defined below), together with
accumulated Distributions to but excluding the date fixed for redemption, if
redeemed during the 12-month period beginning July 31:
<TABLE>
<CAPTION>
YEAR REDEMPTION PRICE
---- ----------------
<S> <C>
2008 104.063%
2009 103.657%
2010 103.250%
2011 102.844%
2012 102.438%
2013 102.032%
2014 101.626%
2015 101.219%
2016 100.813%
2017 100.407%
</TABLE>
37
<PAGE> 47
and at 100% on or after July 31, 2018.
The Redemption Price, in the case of a redemption on or after July 31,
2008 following a Tax Event, Investment Company Event or Capital Treatment Event
shall equal the Redemption Price then applicable to a redemption under (i)
above. The Redemption Price, in the case of a redemption prior to July 31,
2008 following a Tax Event, Investment Company Event or Capital Treatment Event
as described under (ii) above, will equal for each Exchange Capital Security
the Make-Whole Amount for a corresponding $1,000 principal amount of Exchange
Junior Subordinated Debentures together with accumulated Distributions to but
excluding the date fixed for redemption. The "Make-Whole Amount" will be equal
to the greater of (i) 100% of the principal amount of such Exchange Junior
Subordinated Debentures and (ii) as determined by a Quotation Agent (as defined
below), the sum of the present values of the principal amount and premium
payable as part of the Redemption Price with respect to an optional redemption
of such Exchange Junior Subordinated Debentures on July 31, 2008, together with
the present values of scheduled payments of interest (not including the portion
of any such payments of interest accrued as of the Redemption Date) from the
Redemption Date to July 31, 2008 (the "Remaining Life"), in each case
discounted to the Redemption Date on a semi-annual basis (assuming a 360-day
year consisting of 30-day months) at the Adjusted Treasury Rate.
"Adjusted Treasury Rate" means, with respect to any Redemption Date,
the Treasury Rate plus (i) 195 basis points if such Redemption Date occurs on
or before July 31, 1999, or (ii) 155 basis points if such Redemption Date
occurs after July 31, 1999.
"Treasury Rate" means (i) the yield, under the heading which
represents the average for the week immediately prior to the calculation date,
appearing in the most recently published statistical release designated "H.15
(519)" or any successor publication which is published weekly by the Federal
Reserve and which establishes yields on actively traded United States Treasury
securities adjusted to constant maturity under the caption "Treasury Constant
Maturities," for the maturity corresponding to the Remaining Life (if no
maturity is within three months before or after the Remaining Life, yields for
the two published maturities most closely corresponding to the Remaining Life
shall be determined and the Treasury Rate shall be interpolated or extrapolated
from such yields on a straight-line basis, rounding to the nearest month) or
(ii) if such release (or any successor release) is not published during the
week preceding the calculation date or does not contain such yields, the rate
per annum equal to the semi-annual equivalent yield to maturity of the
Comparable Treasury Issue, calculated using a price for the Comparable Treasury
Issue (expressed as a percentage of its principal amount) equal to the
Comparable Treasury Price for such Redemption Date. The Treasury Rate shall be
calculated on the third Business Day preceding the Redemption Date.
"Business Day" means a day other than (a) a Saturday or Sunday, (b) a
day on which banking institutions in the City of New York are authorized or
required by law or executive order to remain closed, or (c) a day on which the
Property Trustee's Corporate Trust Office or the Corporate Trust Office of the
Debenture Trustee is closed for business.
"Like Amount" means (i) with respect to a redemption of Trust
Securities, Trust Securities having a Liquidation Amount (as defined below)
equal to that portion of the principal amount of Exchange Junior Subordinated
Debentures to be contemporaneously redeemed in accordance with the Indenture,
allocated to the Common Securities and to the Exchange Capital Securities based
upon the relative Liquidation Amounts of such classes and (ii) with respect to
a distribution of Exchange Junior Subordinated Debentures to holders of Trust
Securities in connection with a dissolution of the Trust, Exchange Junior
Subordinated Debentures having a principal amount equal to the Liquidation
Amount of the Trust Securities of the holder to whom such Exchange Junior
Subordinated Debentures are distributed.
"Liquidation Amount" means the stated amount of $1,000 per Trust
Security.
Payment of Additional Sums. If a Tax Event described in clause (i) or
(iii) of the definition of Tax Event under "Risk Factors -- Risk Factors
Relating to the Offering -- Tax Event, Investment Company
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<PAGE> 48
Event or Capital Treatment Event Redemption" has occurred and is continuing and
the Trust is the holder of all the Exchange Junior Subordinated Debentures, the
Company will pay Additional Sums (as defined below), if any, on the Exchange
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 the Trust on the
outstanding Exchange Capital Securities and Common Securities of the Trust will
not be reduced as a result of any additional taxes, duties and other
governmental charges to which the Trust has become subject as a result of a Tax
Event.
REDEMPTION PROCEDURES
Exchange Capital Securities redeemed on each Redemption Date shall be
redeemed at the Redemption Price with the applicable proceeds from the
contemporaneous redemption of the Exchange Junior Subordinated Debentures.
Redemptions of the Exchange Capital Securities shall be made and the Redemption
Price shall be payable on each Redemption Date only to the extent that the
Trust has funds on hand available for the payment of such Redemption Price. See
also "-- Subordination of Common Securities."
If the Property Trustee gives a notice of redemption in respect of the
Exchange Capital Securities, then, by 12:00 noon, New York City time, on the
Redemption Date, to the extent funds are available, in the case of Exchange
Capital Securities held in book-entry form, the Property Trustee will deposit
irrevocably with DTC funds sufficient to pay the applicable Redemption Price
and will give DTC irrevocable instructions and authority to pay the Redemption
Price to the holders of the Exchange Capital Securities. With respect to
Exchange Capital Securities not held in book-entry form, the Property Trustee,
to the extent funds are available, will irrevocably deposit with the paying
agent for the Exchange Capital 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 the Exchange Capital
Securities. Notwithstanding the foregoing, Distributions payable on or prior
to the Redemption Date for any Exchange Capital Securities called for
redemption shall be payable to the holders of the Exchange Capital 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 Exchange Capital
Securities so called for redemption will cease, except the right of the holders
of such Exchange Capital Securities to receive the Redemption Price, but
without interest on such Redemption Price, and such Exchange Capital Securities
will cease to be outstanding. If any date fixed for redemption of Exchange
Capital 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 (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. If payment of
the Redemption Price in respect of Exchange Capital Securities called for
redemption is improperly withheld or refused and not paid either by the Trust
or by the Company pursuant to the Exchange Guarantee as described under "--
Description of Exchange Guarantee," Distributions on such Exchange Capital
Securities will continue to accumulate at the then applicable rate, from the
Redemption Date originally established by the Trust for such Exchange Capital
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 laws), the Company or its affiliates may at any time
and from time to time purchase outstanding Exchange Capital Securities by
tender, in the open market or by private agreement, and may resell such
securities.
If less than all the Exchange Capital Securities and Common Securities
are to be redeemed on a Redemption Date, then the aggregate Liquidation Amount
of such Exchange Capital Securities and Common Securities to be redeemed shall
be allocated pro rata to the Exchange Capital Securities and the Common
Securities based upon the relative Liquidation Amounts of such classes. The
particular Exchange Capital Securities to be redeemed shall be selected on a
pro rata basis, or by such method as the
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<PAGE> 49
Property Trustee shall deem fair and appropriate, not more than 60 days prior
to the Redemption Date by the Property Trustee from the outstanding Exchange
Capital Securities not previously called for redemption, or if the Exchange
Capital Securities are then held in the form of a Global Capital Security (as
defined below), in accordance with DTC's customary procedures. The Property
Trustee shall promptly notify the securities registrar for the Exchange Capital
Securities in writing of the Exchange Capital Securities selected for
redemption and, in the case of any Exchange Capital Securities selected for
partial redemption, the Liquidation Amount thereof to be redeemed. For all
purposes of the Trust Agreement, unless the context otherwise requires, all
provisions relating to the redemption of Exchange Capital Securities shall
relate, in the case of any Exchange Capital Securities redeemed or to be
redeemed only in part, to the portion of the aggregate Liquidation Amount of
Exchange Capital 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 registered holder of Exchange
Capital Securities to be redeemed at its address appearing on the securities
register for the Exchange Capital Securities. Unless the Company defaults in
payment of the Redemption Price on the Exchange Junior Subordinated Debentures,
on and after the Redemption Date interest will cease to accrue on the Exchange
Junior Subordinated Debentures or portions thereof (and, unless payment of the
Redemption Price in respect of the Exchange Capital Securities is withheld or
refused and not paid either by the Trust or the Company pursuant to the
Exchange Guarantee, Distributions will cease to accumulate on the Exchange
Capital Securities or portions thereof) called for redemption.
SUBORDINATION OF COMMON SECURITIES
Payment of Distributions on, and the Redemption Price of, the Exchange
Capital Securities and Common Securities, as applicable, shall be made pro rata
based on the Liquidation Amount of such Exchange Capital Securities and Common
Securities. However, if on any Distribution Date or Redemption Date a
Debenture Event of Default has occurred and is continuing as a result of any
failure by the Company to pay any amounts in respect of the Exchange Junior
Subordinated Debentures when due, no payment of any Distribution on, or
Redemption Price of, or Liquidation Distribution in respect of, any of the
Common Securities, and no other payment on account of the redemption,
liquidation or other acquisition of such Common Securities, shall be made
unless payment in full in cash of all accumulated and unpaid Distributions on
all the outstanding Exchange Capital 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 the outstanding Exchange
Capital 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, or
Liquidation Distribution in respect of, the Exchange Capital Securities then
due and payable.
In the case of any Event of Default (as defined below) resulting from
a Debenture Event of Default, the holders of the Common Securities will be
deemed to have waived any right to act with respect to any such Event of
Default under the Trust Agreement until the effects of all such Events of
Default with respect to such Capital Securities have been cured, waived or
otherwise eliminated. See "-- Events of Default; Notice" and "-- Description
of Exchange Junior Subordinated Debentures -- Debenture Events of Default."
Until all such Events of Default under the Trust Agreement with respect to the
Exchange Capital Securities have been so cured, waived or otherwise eliminated,
the Property Trustee will act solely on behalf of the holders of the Exchange
Capital Securities and not on behalf of the holders of the Common Securities,
and only the holders of the Exchange Capital Securities will have the right to
direct the Property Trustee to act on their behalf.
LIQUIDATION DISTRIBUTION UPON DISSOLUTION
The amount payable on the Exchange Capital Securities in the event of
any dissolution of the Trust is $1,000 per Exchange Capital Security plus
accumulated and unpaid Distributions, subject to
40
<PAGE> 50
certain exceptions, which may be in the form of a distribution of such amount
in Exchange Junior Subordinated Debentures.
The holders of all the outstanding Common Securities have the right at
any time to dissolve the Trust and, after satisfaction of liabilities to
creditors of the Trust as provided by applicable law, cause the Exchange Junior
Subordinated Debentures to be distributed to the holders of the Exchange
Capital Securities and Common Securities in dissolution of the Trust.
The Federal Reserve's risk-based capital guidelines currently provide
that redemptions of permanent equity or other capital instruments before stated
maturity could have a significant impact on a bank holding company's overall
capital structure and that any organization considering such a redemption
should consult with the Federal Reserve before redeeming any equity or capital
instrument prior to maturity if such redemption could have a material effect on
the level or composition of the organization's capital base (unless the equity
or capital instrument were redeemed with the proceeds of, or replaced by, a
like amount of a similar or higher quality capital instrument and the Federal
Reserve considers the organization's capital position to be fully adequate
after the redemption).
If the Company, while a holder of Common Securities, dissolves the
Trust prior to the Stated Maturity Date of the Exchange Capital Securities and
the dissolution of the Trust is deemed to constitute the redemption of capital
instruments by the Federal Reserve under its risk-based capital guidelines or
policies, the dissolution of the Trust by the Company may be subject to the
prior approval of the Federal Reserve. Moreover, any changes in applicable law
or changes in the Federal Reserve's risk-based capital guidelines or policies
could impose a requirement on the Company that it obtain the prior approval of
the Federal Reserve to dissolve the Trust.
Pursuant to the Trust Agreement, the Trust will automatically dissolve
upon expiration of its term or, if earlier, will dissolve on the first to occur
of: (i) certain events of bankruptcy, dissolution or liquidation of the
Company or the holder of the Common Securities, (ii) the distribution of a Like
Amount of the Exchange Junior Subordinated Debentures to the holders of the
Exchange Capital Securities, if the holders of Common Securities have given
written direction to the Property Trustee to dissolve the Trust (which
direction, subject to the foregoing restrictions, is optional and wholly within
the discretion of the holders of Common Securities), (iii) the repayment of all
the Exchange Capital Securities in connection with the redemption of all the
Exchange Capital Securities as described under "-- Redemption" and (iv) the
entry of an order for the dissolution of the Trust by a court of competent
jurisdiction.
If dissolution of the Trust occurs as described in clause (i), (ii) or
(iv) above, the Trust will be liquidated by the Property Trustee as
expeditiously as the Property Trustee determines to be possible by
distributing, after satisfaction of liabilities to creditors of the Trust as
provided by applicable law, to the holders of such Exchange Capital Securities
a Like Amount of the Exchange Junior Subordinated Debentures, unless such
distribution is not practical, in which event such holders will be entitled to
receive out of the assets of the Trust available for distribution to holders,
after satisfaction of liabilities to creditors of the Trust as provided by
applicable law, an amount equal to, in the case of holders of Exchange Capital
Securities, the aggregate of the Liquidation Amount plus accumulated and unpaid
Distributions thereon to the date of payment (such amount being the
"Liquidation Distribution"). If such Liquidation Distribution can be paid only
in part because the Trust has insufficient assets available to pay in full the
aggregate Liquidation Distribution, then the amounts payable directly by the
Trust on its Exchange Capital Securities shall be paid on a pro rata basis.
The holders of the Common Securities will be entitled to receive distributions
upon any such liquidation pro rata with the holders of the Exchange Capital
Securities, except that if a Debenture Event of Default has occurred and is
continuing as a result of any failure by the Company to pay any amounts in
respect of the Exchange Junior Subordinated Debentures when due, the Exchange
Capital Securities shall have a priority over the Common Securities. See "--
Subordination of Common Securities."
After the liquidation date fixed for any distribution of Exchange
Junior Subordinated Debentures (i) the Exchange Capital Securities will no
longer be deemed to be outstanding, (ii) DTC or its nominee, as
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<PAGE> 51
the registered holder of Exchange Capital Securities, will receive a registered
global certificate or certificates representing the Exchange Junior
Subordinated Debentures to be delivered upon such distribution with respect to
Exchange Capital Securities held by DTC or its nominee and (iii) any
certificates representing the Exchange Capital Securities not held by DTC or
its nominee will be deemed to represent the Exchange Junior Subordinated
Debentures having a principal amount equal to the stated Liquidation Amount of
the Exchange Capital Securities and bearing accrued and unpaid interest in an
amount equal to the accumulated and unpaid Distributions on the Exchange
Capital Securities until such certificates are presented to the security
registrar for the Exchange Capital Securities for transfer or reissuance.
If the Company does not redeem the Exchange Junior Subordinated
Debentures prior to the Stated Maturity Date and the Trust is not liquidated
and the Exchange Junior Subordinated Debentures are not distributed to holders
of the Exchange Capital Securities, the Exchange Capital Securities will remain
outstanding until the repayment of the Exchange Junior Subordinated Debentures
and the distribution of the Liquidation Distribution to the holders of the
Exchange Capital Securities.
There can be no assurance as to the market prices for the Exchange
Capital Securities or the Exchange Junior Subordinated Debentures that may be
distributed in exchange for Exchange Capital Securities if a dissolution and
liquidation of the Trust were to occur. Accordingly, the Exchange Capital
Securities that an investor may purchase, or the Exchange Junior Subordinated
Debentures that the investor may receive on dissolution and liquidation of the
Trust, may trade at a discount to the price that the investor paid to purchase
the Exchange Capital Securities offered hereby.
EVENTS OF DEFAULT; NOTICE
Any one of the following events constitutes an "Event of Default"
under the Trust Agreement (an "Event of Default") with respect to the Exchange
Capital Securities (whatever the reason for such Event of Default and whether
it is 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 Exchange Junior Subordinated Debentures --
Debenture Events of Default"); or
(ii) default by the Trust in the payment of any
Distribution when it becomes due and payable, and continuation of such
default for a period of 30 days; or
(iii) default by the Trust 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 the Trust Agreement (other than a covenant or warranty a default in
the performance of which or the breach of which is dealt with in
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 Issuer Trustees and the Company
by the holders of at least 25% in aggregate Liquidation Amount of the
outstanding Exchange Capital Securities, a written notice specifying
such default or breach and requiring it to be remedied and stating
that such notice is a "Notice of Default" under the Trust Agreement;
or
(v) the occurrence of certain events of bankruptcy or
insolvency with respect to the Property Trustee if a successor
Property Trustee has not been appointed within 90 days thereof.
Within five Business Days after the occurrence of any Event of Default
actually known to the Property Trustee, the Property Trustee will transmit
notice of such Event of Default to the holders of Trust Securities and the
Administrators, unless such Event of Default has been cured or waived. The
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<PAGE> 52
Company, as Depositor, and the Administrators 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 as a
result of any failure by the Company to pay any amounts in respect of the
Exchange Junior Subordinated Debentures when due, the Exchange Capital
Securities will have a preference over the Common Securities with respect to
payments of any amounts in respect of the Exchange Capital Securities as
described above. See "-- Subordination of Common Securities," "-- Liquidation
Distribution Upon Dissolution" and "-- Description of Exchange Junior
Subordinated Debentures -- Debenture Events of Default."
REMOVAL OF ISSUER TRUSTEES; APPOINTMENT OF SUCCESSORS
The holders of at least a majority in aggregate Liquidation Amount of
the outstanding Exchange Capital Securities may remove an Issuer Trustee for
cause or, if a Debenture Event of Default has occurred and is continuing, with
or without cause. If an Issuer Trustee is removed by the holders of the
outstanding Exchange Capital Securities, the successor may be appointed by the
holders of at least 25% in Liquidation Amount of Exchange Capital Securities.
If an Issuer Trustee resigns, such Issuer Trustee will appoint its successor.
If an Issuer Trustee fails to appoint a successor, the holders of at least 25%
in Liquidation Amount of the outstanding Exchange Capital Securities may
appoint a successor. If a successor has not been appointed by the holders, any
holder of Exchange Capital Securities or Common Securities or the other Issuer
Trustee may petition a court in the State of Delaware to appoint a successor.
Any Delaware Trustee must meet the applicable requirements of Delaware law.
Any Property Trustee must be a national or state-chartered bank, and at the
time of appointment have securities rated in one of the three highest rating
categories by a nationally recognized statistical rating organization and have
capital and surplus of at least $50,000,000. No resignation or removal of 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 Trust Agreement.
MERGER OR CONSOLIDATION OF ISSUER TRUSTEES
Any entity into which the Property Trustee or the Delaware Trustee may
be merged or converted or with which it may be consolidated, or any entity
resulting from any merger, conversion or consolidation to which such Issuer
Trustee is a party, or any entity succeeding to all or substantially all of the
corporate trust business of such Issuer Trustee, will be the successor of such
Issuer Trustee under the Trust Agreement, provided such entity is otherwise
qualified and eligible.
MERGERS, CONSOLIDATIONS, AMALGAMATIONS OR REPLACEMENTS OF THE TRUST
The Trust may not merge with or into, consolidate, amalgamate, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to, any entity, except as described below or as
otherwise set forth in the Trust Agreement. The Trust may, at the request of
the holders of the Common Securities and with the consent of the holders of at
least a majority in aggregate Liquidation Amount of the outstanding Exchange
Capital Securities, merge with or into, consolidate, amalgamate, or be replaced
by or convey, transfer or lease its properties and assets substantially as an
entirety to a trust organized as such under the laws of any State, so long as
(i) such successor entity either (a) expressly assumes all the obligations of
the Trust with respect to the Exchange Capital Securities or (b) substitutes
for the Exchange Capital Securities other securities having substantially the
same terms as the Exchange Capital Securities (the "Successor Securities") so
long as the Successor Securities have the same priority as the Exchange Capital
Securities with respect to distributions and payments upon liquidation,
redemption and otherwise, (ii) a trustee of such successor entity, possessing
the same powers and duties as the Property Trustee, is appointed to hold the
Exchange Junior Subordinated Debentures, (iii) such merger, consolidation,
amalgamation, replacement, conveyance, transfer or lease does not cause the
Exchange Capital Securities (including any Successor Securities) to be
downgraded, to the extent the Exchange Capital Securities are rated at such
time, by any nationally recognized statistical rating
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organization, (iv) such merger, consolidation, amalgamation, replacement,
conveyance, transfer or lease does not adversely affect the rights, preferences
and privileges of the holders of the Exchange Capital Securities (including any
Successor Securities) in any material respect, (v) such successor entity has a
purpose substantially identical to that of the Trust, (vi) prior to such
merger, consolidation, amalgamation, replacement, conveyance, transfer or
lease, the Trust has received an opinion from independent counsel experienced
in such matters substantially 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 Exchange Capital Securities (including any Successor Securities) in any
material respect and (b) following such merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease, neither the Trust nor such
successor entity will be required to register as an investment company under
the Investment Company Act, and (vii) the Company or any permitted successor or
assignee owns all 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 Exchange Guarantee. Notwithstanding the
foregoing, the Trust may not, except with the consent of holders of 100% in
aggregate Liquidation Amount of the Exchange Capital 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 Trust or the successor entity to
be taxable as a corporation for United States federal income tax purposes.
VOTING RIGHTS; AMENDMENT OF TRUST AGREEMENT
Except as provided below and under "-- Removal of Issuer Trustees;
Appointment of Successors" and "-- Description of Exchange Guarantee --
Amendments and Assignment" and as otherwise required by law and the Trust
Agreement, the holders of the Exchange Capital Securities will have no voting
rights.
The Trust Agreement may be amended from time to time by the Property
Trustee, the Administrators, or the holders of a majority of the Common
Securities, without the consent of the holders of the Exchange Capital
Securities, (i) to cure any ambiguity, correct or supplement any provisions in
the Trust Agreement that may be inconsistent with any other provision, or to
make any other provisions with respect to matters or questions arising under
the Trust Agreement, provided that any such amendment does not adversely affect
in any material respect the interests of any holder of Trust Securities, or
(ii) to modify, eliminate or add to any provisions of the Trust Agreement to
such extent as may be necessary to ensure that the Trust will not be taxable as
a corporation for United States federal income tax purposes at any time that
any Trust Securities are outstanding or to ensure that the Trust will not be
required to register as an "investment company" under the Investment Company
Act, and any amendments of the Trust Agreement will become effective when
notice of such amendment is given to the holders of Trust Securities. The
Trust Agreement may be amended by the Property Trustee, the Administrators, and
the holders of a majority of the Common Securities with (i) the consent of
holders of at least a majority in aggregate Liquidation Amount of the
outstanding Exchange Capital Securities and (ii) receipt by the Issuer Trustees
of an opinion of counsel to the effect that such amendment or the exercise of
any power granted to the Issuer Trustees in accordance with such amendment will
not affect the Trust's not being taxable as a corporation for United States
federal income tax purposes or the Trust's exemption from status as an
"investment company" under the Investment Company Act, except that, without the
consent of each holder of Trust Securities affected thereby, the Trust
Agreement may not be amended to (x) change the amount or timing of any
Distribution on the Trust Securities or otherwise adversely affect the amount
of any Distribution required to be made in respect of the Trust Securities as
of a specified date or (y) restrict the right of a holder of Trust Securities
to institute suit for the enforcement of any such payment on or after such
date.
So long as any Exchange Junior Subordinated Debentures are held by the
Property Trustee on behalf of the Trust, the Property Trustee will not (i)
direct the time, method and place of conducting any proceeding for any remedy
available to the Property Trustee, or execute any trust or power conferred on
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the Property Trustee with respect to the Exchange 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 Exchange Junior Subordinated Debentures shall be due and payable or
(iv) consent to any amendment, modification or termination of the Indenture or
the Exchange Junior Subordinated Debentures, where such consent shall be
required, without, in each case, obtaining the prior approval of the holders of
at least a majority in aggregate Liquidation Amount of the outstanding Exchange
Capital Securities, except that, if a consent under the Indenture would require
the consent of each holder of Exchange Junior Subordinated Debentures affected
thereby, no such consent will be given by the Property Trustee without the
prior consent of each holder of the Exchange Capital Securities. The Property
Trustee may not revoke any action previously authorized or approved by a vote
of the holders of the Capital Securities except by subsequent vote of the
holders of the Exchange Capital Securities. The Property Trustee will notify
each holder of Exchange Capital Securities of any notice of default with
respect to the Exchange Junior Subordinated Debentures. In addition to
obtaining the foregoing approvals of the holders of the Exchange Capital
Securities, before taking any of the foregoing actions, the Property Trustee
will obtain an opinion of counsel experienced in such matters to the effect
that the Trust will not be taxable as a corporation for United States federal
income tax purposes on account of such action.
Any required approval of holders of Exchange Capital Securities may be
given at a meeting of holders of Exchange Capital Securities convened for such
purpose or pursuant to written consent. The Property Trustee will cause a
notice of any meeting at which holders of Exchange Capital Securities are
entitled to vote, or of any matter upon which action by written consent of such
holders is to be taken, to be given to each registered holder of Exchange
Capital Securities in the manner set forth in the Trust Agreement.
No vote or consent of the holders of Exchange Capital Securities will
be required to redeem and cancel Exchange Capital Securities in accordance with
the Trust Agreement.
Notwithstanding that holders of Exchange Capital Securities are
entitled to vote or consent under any of the circumstances described above, any
of the Exchange Capital Securities that are owned by the Company, an Issuer
Trustee or any affiliate of the Company or an Issuer Trustee, will, for
purposes of such vote or consent, be treated as if they were not outstanding.
BOOK ENTRY, DELIVERY AND FORM
The Exchange Capital Securities initially will be represented by one
or more Exchange Capital Securities in registered, global form (collectively,
the "Global Capital Securities"). The Global Capital Securities will be
deposited upon issuance with the Property Trustee as custodian for DTC, in New
York, New York, and registered in the name of DTC or its nominee, in each case
for credit to an account of a direct or indirect participant in DTC as
described herein.
In the event that Exchange Capital Securities are issued in
certificated form, the Exchange Capital Securities will be in blocks having a
Liquidation Amount of not less than $100,000 (100 Exchange Capital Securities)
and may be transferred or exchanged on in such blocks in the manner described
herein.
Except as set forth herein, the Global Capital Securities may be
transferred, in whole and not in part, only to another nominee of DTC or to a
successor of DTC or its nominee and only in amounts that would not cause a
holder to own less than 100 Exchange Capital Securities. Beneficial interests
in the Global Capital Securities may not be exchanged for Exchange Capital
Securities in certificated form except in the limited circumstances described
herein. See " -- Exchange of Book-Entry Capital Securities for Certificated
Capital Securities."
DEPOSITORY PROCEDURES
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DTC has advised the Trust and the Company that DTC is a
limited-purpose trust company organized under the laws of the state of New
York, a member of the Federal Reserve System, a "clearing corporation" within
the meaning of the Uniform Commercial Code and a "clearing agency" registered
pursuant to the provisions of Section 17A of the Exchange Act. DTC was created
to hold securities for its participating organizations (collectively, the
"Participants") and to facilitate the clearance and settlement of transactions
in those securities between Participants through electronic book-entry changes
in accounts of its Participants, thereby eliminating the need for physical
movement of certificates. Participants include securities brokers and dealers
(including the Initial Purchaser), banks, trust companies, clearing
corporations and certain other organizations. Indirect access to DTC's system
is also available to other entities such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a
Participant, either directly or indirectly (collectively, the "Indirect
Participants"). Persons who are not Participants may beneficially own
securities held by or on behalf of DTC only through the Participants or the
Indirect Participants. The ownership interest and transfer of ownership
interest of each actual purchaser of each security held by or on behalf of DTC
are recorded on the records of the Participants and Indirect Participants.
DTC has also advised the Trust and the Company that, pursuant to
procedures established by it, (i) upon deposit of the Global Capital
Securities, DTC will credit the accounts of Participants designated by the
Initial Purchaser with portions of the principal amount of the Global Capital
Securities and (ii) ownership of such interests in the Global Capital
Securities will be shown on, and the transfer of ownership thereof will be
effected only through, records maintained by DTC (with respect to the
Participants) or by the Participants and the Indirect Participants (with
respect to other owners of beneficial interests in the Global Capital
Securities).
Investors in the Global Capital Securities may hold their interests
therein directly through DTC if they are Participants, or indirectly through
organizations that are Participants. All interests in a Global Capital
Security will be subject to the procedures and requirements of DTC. The laws
of some states require that certain persons take physical delivery in
certificated form of securities that they own. Consequently, the ability to
transfer beneficial interests in a Global Capital Security to such persons will
be limited to that extent. Because DTC can act only on behalf of Participants,
which in turn act on behalf of Indirect Participants and certain banks, the
ability of a person having beneficial interests in a Global Capital Security to
pledge such interests to persons or entities that do not participate in the DTC
system, or otherwise take actions in respect of such interests, may be affected
by the lack of a physical certificate evidencing such interests. For certain
other restrictions on the transferability of the Exchange Capital Securities,
see " -- Exchange of Book-Entry Capital Securities for Certificated Capital
Securities."
EXCEPT AS DESCRIBED HEREIN, OWNERS OF INTERESTS IN THE GLOBAL CAPITAL
SECURITIES WILL NOT HAVE EXCHANGE CAPITAL SECURITIES REGISTERED IN THEIR NAMES,
WILL NOT RECEIVE PHYSICAL DELIVERY OF EXCHANGE CAPITAL SECURITIES IN
CERTIFICATED FORM AND WILL NOT BE CONSIDERED THE REGISTERED OWNERS OR HOLDERS
THEREOF UNDER THE TRUST AGREEMENT FOR ANY PURPOSE.
Payments in respect of the Global Capital Security registered in the
name of DTC or its nominee will be payable by the Property Trustee to DTC in
its capacity as the registered holder under the Trust Agreement. Under the
terms of the Trust Agreement, the Property Trustee will treat the persons in
whose names the Exchange Capital Securities, including the Global Capital
Securities, are registered as the owners thereof for the purpose of receiving
such payments and for any and all other purposes whatsoever. Consequently,
neither the Property Trustee nor any agent thereof has or will have any
responsibility or liability for (i) any aspect of DTC's records or any
Participant's or Indirect Participant's records relating to, or payments made
on account of, beneficial ownership interests in the Global Capital Securities,
or for maintaining, supervising or reviewing any of DTC's records or any
Participant's or Indirect Participant's records relating to the beneficial
ownership interests in the Global Capital Securities or (ii) any other matter
relating to the actions and practices of DTC or any of its Participants or
Indirect Participants. DTC has advised the Trust and the Company that its
current practice, upon receipt of any payment in respect of securities such as
the Exchange Capital Securities, is to credit the accounts of the relevant
Participants with the payment on the payment date, in amounts proportionate to
their
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respective holdings in Liquidation Amount of beneficial interests in the
relevant security as shown on the records of DTC unless DTC has reason to
believe it will not receive payment on such payment date. Payments by the
Participants and the Indirect Participants to the beneficial owners of Exchange
Capital Securities will be governed by standing instructions and customary
practices and will be the responsibility of the Participants or the Indirect
Participants and will not be the responsibility of DTC, the Property Trustee,
the Trust or the Company. None of the Trust, the Company or the Property
Trustee will be liable for any delay by DTC or any of its Participants in
identifying the beneficial owners of the Exchange Capital Securities, and the
Trust, the Company and the Property Trustee may conclusively rely on and will
be protected in relying on instructions from DTC or its nominee for all
purposes.
Interests in the Global Capital Securities will trade in DTC's
Same-Day Funds Settlement System and secondary market trading activity in
interests in the Global Capital Securities will settle in immediately available
funds, subject in all cases to the rules and procedures of DTC and its
Participants. Transfers between Participants in DTC will be effected in
accordance with DTC's procedures, and will settle in same-day funds.
DTC has advised the Trust and the Company that it will take any action
permitted to be taken by a holder of Exchange Capital Securities (including,
without limitation, the presentation of Exchange Capital Securities for
exchange as described herein) only at the direction of one or more Participants
to whose account with DTC interests in the Global Capital Securities are
credited and only in respect of such portion of the aggregate Liquidation
Amount of the Exchange Capital Securities as to which such Participant or
Participants has or have given such direction. However, if there is an Event
of Default under the Trust Agreement, DTC reserves the right to exchange the
Global Capital Securities for legended Exchange Capital Securities in
certificated form and to distribute such Exchange Capital Securities to its
Participants.
So long as DTC or its nominee is the registered owner of the Global
Capital Securities, DTC or such nominee, as the case may be, will be considered
the sole owner or holder of the Exchange Capital Securities represented by the
Global Capital Security for all purposes under the Trust Agreement.
Although DTC has agreed to the foregoing procedures to facilitate
transfers of interest in the Global Capital Securities among Participants in
DTC, it is under no obligation to perform or to continue to perform such
procedures, and such procedures may be discontinued at any time. None of the
Trust, the Company or the Property Trustee will have any responsibility for the
performance by DTC or its Participants or Indirect Participants of their
respective obligations under the rules and procedures governing its operations.
The information in this section concerning DTC and its book-entry
system has been obtained from sources that the Trust and the Company believe to
be reliable, but neither the Trust nor the Company takes responsibility for the
accuracy thereof.
EXCHANGE OF BOOK-ENTRY CAPITAL SECURITIES FOR CERTIFICATED CAPITAL SECURITIES
A Global Capital Security is exchangeable for Exchange Capital
Securities in registered certificated form if (i) DTC (a) notifies the Trust
that it is unwilling or unable to continue as Depository for the Global Capital
Security or (b) has ceased to be a clearing agency registered under the
Exchange Act, and the Trust thereupon fails to appoint a successor Depository
within 90 days, (ii) the Trust in its sole discretion elects to cause the
issuance of the Exchange Capital Securities in certificated form or (iii) there
shall have occurred and be continuing an Event of Default or any event which
after notice or lapse of time or both would be an Event of Default under the
Trust Agreement. In addition, beneficial interests in a Global Capital
Security may be exchanged by or on behalf of DTC for certificated Exchange
Capital Securities upon request by DTC, but only upon at least 20 days' prior
written notice given to the Property Trustee in accordance with DTC's customary
procedures. In all cases, certificated Exchange Capital Securities delivered
in exchange for any Global Capital Security or beneficial interests therein
will be
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registered in the names, and issued in any approved denominations, requested by
or on behalf of the Depository (in accordance with its customary procedures)
EXPENSES AND TAXES
In the Trust Agreement, the Company, as borrower, has agreed to pay
all debts and other obligations (other than with respect to the Exchange
Capital Securities) and all costs and expenses of the Trust (including costs
and expenses relating to the organization of the Trust, the fees and expenses
of the Issuer Trustees and the costs and expenses relating to the operation of
the Trust) and to pay any and all taxes and all costs and expenses with respect
thereto (other than United States withholding taxes) to which the Trust might
become subject. The foregoing obligations of the Company under the Trust
Agreement are for the benefit of, and shall be enforceable by, any person to
whom any such debts, obligations, costs, expenses and taxes are owed (a
"Creditor") whether or not such Creditor has received notice thereof. Any such
Creditor may enforce such obligations of the Company directly against the
Company, and the Company has irrevocably waived any right or remedy to require
that any such Creditor take any action against the Trust or any other person
before proceeding against the Company. The Company has also agreed in the
Trust Agreement to execute such additional agreements as may be necessary or
desirable to give full effect to the foregoing.
RESTRICTIONS ON TRANSFER
The Exchange Capital Securities are issued, and may be transferred
only, in blocks having a Liquidation Amount of not less than $100,000 (100
Exchange Capital Securities). Any such transfer of Exchange Capital Securities
in a block having a Liquidation Amount of less than $100,000 shall be deemed to
be void and of no legal effect whatsoever. Any such transferee shall be deemed
not to be the holder of such Exchange Capital Securities for any purpose,
including but not limited to the receipt of Distributions on such Exchange
Capital Securities, and such transferee shall be deemed to have no interest
whatsoever in such Exchange Capital Securities.
PAYMENT AND PAYING AGENCY
Payments in respect of the Exchange Capital Securities will be made to
DTC, which will credit the relevant accounts at DTC on the applicable
Distribution Dates or, if the Exchange Capital Securities are not held by DTC,
such payments will be made by check mailed to the address of the holder
entitled thereto as such address appears on the securities register for the
Trust Securities. The paying agent (the "Paying Agent") initially will be the
Property Trustee and any co-paying agent chosen by the Property Trustee and
acceptable to the Administrators. The Paying Agent will be permitted to resign
as Paying Agent upon 30 days' written notice to the Property Trustee and the
Administrators. If the Property Trustee is no longer the Paying Agent, the
Property Trustee will appoint a successor (which must be a bank or trust
company reasonably acceptable to the Administrators) to act as Paying Agent.
REGISTRAR AND TRANSFER AGENT
The Property Trustee will act as registrar and transfer agent for the
Exchange Capital Securities.
Registration of transfers of Exchange Capital Securities will be
effected without charge by or on behalf of the Trust, but upon payment of any
tax or other governmental charges that may be imposed in connection with any
transfer or exchange. The Trust will not be required to register or cause to
be registered the transfer of the Exchange Capital Securities after the
Exchange Capital Securities have been called for redemption.
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 the Trust Agreement and, after such
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Event of Default, must exercise the same degree of care and skill as a prudent
person would exercise or use in the conduct of his or her own affairs. Subject
to this provision, the Property Trustee is under no obligation to exercise any
of the powers vested in it by the Trust Agreement at the request of any holder
of Exchange Capital Securities unless it is offered reasonable indemnity
against the costs, expenses and liabilities that might be incurred thereby.
The Property Trustee also serves as the Debenture Trustee and the
Guarantee Trustee. See "-- Description of Exchange Junior Subordinated
Debentures -- Information Concerning the Debenture Trustee" and "-- Description
of Exchange Guarantee -- Information Concerning the Guarantee Trustee."
MISCELLANEOUS
The Administrators and the Property Trustee are authorized and
directed to conduct the affairs of and to operate the Trust in such a way that
the Trust will not be deemed to be an "investment company" required to be
registered under the Investment Company Act or taxable as a corporation for
United States federal income tax purposes and so that the Exchange Junior
Subordinated Debentures will be treated as indebtedness of the Company for
United States federal income tax purposes. In this connection, the Property
Trustee and the holders of Common Securities are authorized to take any action,
not inconsistent with applicable law, the certificate of trust of the Trust or
the Trust Agreement, that the Property Trustee and the holders of Common
Securities determine in their discretion to be necessary or desirable for such
purposes, as long as such action does not materially adversely affect the
interests of the holders of the Exchange Capital Securities.
Holders of the Exchange Capital Securities have no preemptive or
similar rights.
The Trust may not borrow money or issue debt or mortgage or pledge any
of its assets.
GOVERNING LAW
The Trust Agreement will be governed by and construed in accordance
with the laws of the State of Delaware.
DESCRIPTION OF EXCHANGE JUNIOR SUBORDINATED DEBENTURES
The Original Junior Subordinated Debentures were, and the Exchange
Junior Subordinated Debentures will be, issued under the Indenture, under which
Bankers Trust Company is acting as Debenture Trustee. This summary of certain
terms and provisions of the Exchange Junior Subordinated Debentures and the
Indenture does not purport to be complete and is subject to, and is qualified
in its entirety by reference to, all the provisions of the Indenture, including
the definitions therein of certain terms.
GENERAL
Concurrently with the issuance of the Original Capital Securities, the
Trust invested the proceeds thereof, together with the consideration paid by
the Company for the Common Securities, in the Original Junior Subordinated
Debentures issued by the Company. The Original Junior Subordinated Debentures
bear, and the Exchange Junior Subordinated Debentures will bear, interest,
accruing from the date of original issuance, at a rate equal to 8.125% per
annum on the principal amount thereof, payable semi-annually in arrears on the
31st day of January and July of each year (each, an "Interest Payment Date"),
commencing January 31, 1999, to the person in whose name each Original Junior
Subordinated Debenture or Exchange Junior Subordinated Debenture, as the case
may be, is registered at the close of business on the January 15th or July 15th
(whether or not a Business Day) next preceding such Interest Payment Date. It
is anticipated that, until the liquidation, if any, of the Trust, each Exchange
Junior Subordinated Debenture will be registered in the name of the Trust and
held by the Property Trustee in trust for the benefit of the holders of the
Trust Securities. The amount of interest payable for any period
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less than a full interest period will be computed on the basis of a 360-day
year of twelve 30-day months and the actual days elapsed in a partial month in
such period. The amount of interest payable for any full interest period will
be computed by dividing the rate per annum by two. If any date on which
interest is payable on the Exchange Junior Subordinated Debentures is not a
Business Day, then payment of the interest payable on such date will be made on
the next succeeding day that is a Business Day (without any interest or other
payment in respect of any such delay), with the same force and effect as if
made on the date such payment was originally payable. Accrued interest that is
not paid on the applicable Interest Payment Date will bear additional interest
on the amount thereof (to the extent permitted by law) at a rate equal to
8.125% per annum, compounded semi-annually and computed on the basis of a
360-day year of twelve 30-day months and the actual days elapsed in a partial
month in such period. The amount of additional interest payable for any full
interest period will be computed by dividing the rate per annum by two. The
term "interest" as used herein includes semi-annual interest payments, interest
on semi-annual interest payments not paid on the applicable Interest Payment
Date and Additional Sums (as defined below), as applicable.
The Exchange Junior Subordinated Debentures will mature on July 31,
2028.
The Exchange Junior Subordinated Debentures will be unsecured
obligations and will rank junior and be subordinate in right of payment to all
Senior Indebtedness of the Company. The Indenture does not limit the
incurrence or issuance of other secured or unsecured debt by the Company,
including Senior Indebtedness, whether under the Indenture or any existing or
other indenture or agreement that the Company may enter into in the future or
otherwise. See "-- Subordination."
OPTION TO EXTEND INTEREST PAYMENT PERIOD
So long as no Debenture Event of Default has occurred and is
continuing, the Company has the right at any time during the term of the
Exchange Junior Subordinated Debentures to defer the payment of interest at any
time or from time to time for a period not exceeding 10 consecutive semi-annual
periods with respect to each Extension Period, provided that no Extension
Period may extend beyond the Stated Maturity Date of the Exchange Junior
Subordinated Debentures. At the end of such Extension Period, the Company must
pay all interest then accrued and unpaid (together with interest thereon at a
rate equal to 8.125% per annum, compounded semi-annually and computed on the
basis of a 360-day year of twelve 30-day months and the actual days elapsed in
a partial month in such period, to the extent permitted by applicable law).
The amount of additional interest payable for any full interest period will be
computed by dividing the rate per annum by two. During an Extension Period,
interest will continue to accrue and holders of Exchange Junior Subordinated
Debentures (or holders of Exchange Capital Securities while outstanding) will
be required to accrue interest income for United States federal income tax
purposes. See "Certain Federal Income Tax Consequences -- Interest Income and
Original Issue Discount."
During any such Extension Period, the Company may not (i) declare or
pay any dividends or distributions on, or redeem, purchase, acquire or make a
liquidation payment with respect to, any of the Company's capital stock or (ii)
make any payment of principal of or 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 Exchange Junior Subordinated
Debentures (other than (a) repurchases, redemptions or other acquisitions of
shares of capital stock of the Company in connection with any employment
contract, benefit plan or other similar arrangement with or for the benefit of
any one or more employees, officers, directors or consultants, in connection
with a dividend reinvestment or shareholder stock purchase plan or in
connection with the issuance of capital stock of the Company (or securities
convertible into or exercisable for such capital stock) as consideration in an
acquisition transaction entered into prior to the applicable Extension Period,
(b) as a result of an exchange or conversion of any class or series of the
Company's capital stock (or any capital stock of a subsidiary of the Company)
for any class or series of the Company's capital stock or of any class or
series of the Company's indebtedness for any class or series of the Company's
capital stock, (c) the purchase of fractional interests in shares of the
Company's capital stock pursuant to the conversion or exchange provisions of
such capital stock or the
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security being converted or exchanged, (d) any declaration of a dividend in
connection with any shareholder's rights plan, or the issuance of rights, stock
or other property under any shareholders rights plan, or the redemption or
repurchase of rights pursuant thereto, or (e) any dividend in the form of
stock, warrants, options or other rights where the dividend stock or the stock
issuable upon exercise of such warrants, options or other rights is the same
stock as that on which the dividend is being paid or ranks pari passu with or
junior to such stock). Prior to the termination of any such Extension Period,
the Company may further defer the payment of interest, provided that no
Debenture Event of Default has occurred and is continuing, and no Extension
Period exceeds 10 consecutive semi-annual periods or extends beyond the Stated
Maturity Date of the Exchange Junior Subordinated Debentures. Upon the
termination of any such Extension Period and the payment of all amounts then
due, the Company may elect to begin a new Extension Period subject to the above
conditions. No interest shall be due and payable during an Extension Period,
except at the end thereof. The Company must give the holders of the Exchange
Junior Subordinated Debentures and the Issuer Trustees notice of its election
to begin any such Extension Period at least one Business Day prior to the
earlier of (i) the date the Distributions on the Exchange Capital Securities
would have been payable but for the election to begin such Extension Period and
(ii) the date the Property Trustee is required to give notice to holders of the
Exchange Capital Securities of the record date or the date such Distributions
are payable, but in any event not less than one Business Day prior to such
record date. The Property Trustee will give notice of the Company's election
to begin a new Extension Period to the holders of the Exchange Capital
Securities. There is no limitation on the number of times that the Company may
elect to begin an Extension Period.
REDEMPTION
The Exchange Junior Subordinated Debentures are redeemable prior to
maturity at the option of the Company (i) on or after July 31, 2008, in whole
at any time or in part from time to time, or (ii) in whole, but not in part, at
any time within 90 days following the occurrence and during the continuation of
a Tax Event, Investment Company Event or Capital Treatment Event (each as
defined under "Risk Factors -- Risk Factors Relating to the Offering -- Tax
Event, Investment Company Event or Capital Treatment Event Redemption"), in
each case at the redemption prices described below. The proceeds of any such
redemption will be used by the Trust to redeem the Exchange Capital Securities.
The Federal Reserve's risk-based capital guidelines, which are subject
to change, currently provide that redemptions of permanent equity or other
capital instruments before stated maturity could have a significant impact on a
bank holding company's overall capital structure and that any organization
considering such a redemption should consult with the Federal Reserve before
redeeming any equity or capital instrument prior to maturity if such redemption
could have a material effect on the level or composition of the organization's
capital base (unless the equity or capital instrument were redeemed with the
proceeds of, or replaced by, a like amount of a similar or higher quality
capital instrument and the Federal Reserve considers the organization's capital
position to be fully adequate after the redemption).
The redemption of the Exchange Junior Subordinated Debentures by the
Company prior to their Stated Maturity Date would constitute the redemption of
capital instruments under the Federal Reserve's current risk-based capital
guidelines and may be subject to the prior approval of the Federal Reserve.
The redemption of the Exchange Junior Subordinated Debentures also could be
subject to the additional prior approval of the Federal Reserve under its
current risk-based capital guidelines.
The Redemption Price for Exchange Junior Subordinated Debentures in
the case of a redemption under (i) above shall equal the following prices,
expressed in percentages of the principal amount, together with accrued
interest to but excluding the date fixed for redemption. If redeemed during
the 12-month period beginning July 31:
<TABLE>
<CAPTION>
Year Redemption Price
---- ----------------
<S> <C>
2008 104.063%
2009 103.657%
2010 103.250%
2011 102.844%
</TABLE>
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<PAGE> 61
<TABLE>
<S> <C>
2012 102.438%
2013 102.032%
2014 101.626%
2015 101.219%
2016 100.813%
2017 100.407%
</TABLE>
and at 100% on or after July 31, 2018.
The Redemption Price in the case of a redemption on or after July 31,
2008 following a Tax Event, Investment Company Event or Capital Treatment Event
shall equal the Redemption Price then applicable to a redemption under (i)
above. The Redemption Price for Exchange Junior Subordinated Debentures, in
the case of a redemption prior to July 31, 2008 following a Tax Event,
Investment Company Event or Capital Treatment Event as described under (ii)
above, will equal the Make-Whole Amount (as defined under "Description of
Exchange Securities -- Description of Exchange Capital Securities --
Redemption"), together with accrued interest to but excluding the date fixed
for redemption.
ADDITIONAL SUMS
The Company has covenanted in the Indenture that, if and for so long
as (i) the Trust is the holder of all Exchange Junior Subordinated Debentures
and (ii) a Tax Event has occurred and is continuing in respect of the Trust,
the Company will pay to the Trust for so long as the Trust is the registered
holder of the Exchange Junior Subordinated Debentures, such Additional Sums on
the Exchange Junior Subordinated Debentures as may be required so that the
Distributions payable by the Trust will not be reduced as a result of any such
additional taxes, duties or other governmental charges. See "Description of
Exchange Securities -- Description of Exchange Capital Securities --
Redemption."
REGISTRATION, DENOMINATION AND TRANSFER
The Exchange Junior Subordinated Debentures will initially be
registered in the name of the Trust. If the Exchange Junior Subordinated
Debentures are distributed to holders of Exchange Capital Securities, it is
anticipated that the depositary arrangements for the Junior Subordinated
Debentures will be substantially identical to those in effect for the Exchange
Capital Securities. See "Description of Exchange Securities -- Description of
Exchange Capital Securities -- Book Entry, Delivery and Form."
Although DTC has agreed to the procedures described above, it is under
no obligation to perform or continue to perform such procedures, and such
procedures may be discontinued at any time. If DTC is at any time unwilling or
unable to continue as depositary and a successor depositary is not appointed by
the Company within 90 days of receipt of notice from DTC to such effect, the
Company will cause the Exchange Junior Subordinated Debentures to be issued in
definitive form.
Payments on Exchange Junior Subordinated Debentures represented by a
global security will be made to Cede, the nominee for DTC, as the registered
holder of the Exchange Junior Subordinated Debentures, as described under
"Description of Exchange Securities -- Description of the Exchange Capital
Securities -- Book Entry, Delivery and Form." If Exchange Junior Subordinated
Debentures are issued in certificated form, principal and interest will be
payable, the transfer of the Exchange Junior Subordinated Debentures will be
registrable, and Exchange Junior Subordinated Debentures will be exchangeable
for Exchange Junior Subordinated Debentures of other authorized denominations
of a like aggregate principal amount, at the Corporate Trust Office of the
Debenture Trustee in New York, New York or at the offices of any Paying Agent
or transfer agent 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. However, a holder of $1.0 million or more in
aggregate principal amount of Exchange Junior Subordinated Debentures may
receive payments of interest (other than interest payable at the Stated
Maturity Date) by wire transfer of immediately available funds upon written
request to the Debenture Trustee not later than 15 calendar days prior to the
date on which the interest is payable.
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<PAGE> 62
The Exchange Junior Subordinated Debentures will be issuable only in
registered form without coupons and shall be issuable in minimum denominations
of $100,000 and any integral multiples of $1,000 in excess thereof. Exchange
Junior Subordinated Debentures will be exchangeable for other Exchange Junior
Subordinated Debentures of like tenor, of any authorized denominations, and of
a like aggregate principal amount.
Exchange Junior Subordinated Debentures may be presented for exchange
as provided above, and may be presented for registration of transfer (with the
form of transfer endorsed thereon, or a satisfactory written instrument of
transfer, duly executed), at the office of the securities registrar appointed
under the Exchange Junior Subordinated Debenture or at the office of any
transfer agent designated by the Company for such purpose 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. The Company may at any time
designate additional transfer agents with respect to the Exchange 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
Exchange Junior Subordinated Debentures during a period beginning at the
opening of business 15 days before the day of selection for redemption of the
Exchange Junior Subordinated Debentures to be redeemed and ending at the close
of business on the day of mailing of the relevant notice of redemption or (ii)
transfer or exchange any Exchange Junior Subordinated Debentures so selected
for redemption, except, in the case of any Exchange Junior Subordinated
Debentures being redeemed in part, any portion thereof not to be redeemed.
Any monies 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 Exchange 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 Exchange Junior Subordinated
Debenture shall thereafter look, as a general unsecured creditor, only to the
Company for payment thereof.
RESTRICTIONS ON CERTAIN PAYMENTS; CERTAIN COVENANTS OF THE COMPANY
The Company has covenanted that it will not (i) declare or pay any
dividends or distributions on, or redeem, purchase, acquire, or make a
liquidation payment with respect to, any of the Company's capital stock or (ii)
make any payment of principal of or 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 Exchange Junior Subordinated
Debentures (other than (a) repurchases, redemptions or other acquisitions of
shares of capital stock of the Company in connection with any employment
contract, benefit plan or other similar arrangement with or for the benefit of
any one or more employees, officers, directors or consultants, in connection
with a dividend reinvestment or shareholder stock purchase plan or in
connection with the issuance of capital stock of the Company (or securities
convertible into or exercisable for such capital stock) as consideration in an
acquisition transaction entered into prior to the applicable Extension Period
or other event referred to below, (b) as a result of an exchange or conversion
of any class or series of the Company's capital stock (or any capital stock of
a subsidiary of the Company) for any class or series of the Company's capital
stock or of any class or series of the Company's indebtedness for any class or
series of the Company's capital stock, (c) the purchase of fractional interests
in shares of the Company's capital stock pursuant to the conversion or exchange
provisions of such capital stock or the security being converted or exchanged,
(d) any declaration of a dividend in connection with any shareholder's rights
plan, or the issuance of rights, stock or other property under any
shareholder's rights plan, or the redemption or repurchase of rights pursuant
thereto, or (e) any dividend in the form of stock, warrants, options or other
rights where the dividend stock or the stock issuable upon exercise of such
warrants, options or other rights is the same stock as that on which the
dividend is being paid or ranks pari passu with or junior to such stock), if at
such time (x) there has occurred any event (1) of which the Company has actual
knowledge that with the giving of notice or the lapse of time, or both, would
constitute a Debenture Event of Default and (2) that the Company has not taken
reasonable steps to cure,
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<PAGE> 63
(y) if the Exchange Junior Subordinated Debentures are held by the Trust, the
Company is in default with respect to its payment of any obligations under the
Guarantee or (z) the Company has given notice of its election of an Extension
Period as provided in the Indenture and has not rescinded such notice, or such
Extension Period, or any extension thereof, is continuing.
The Company has covenanted in the Indenture (i) to continue to hold,
directly or indirectly, 100% 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, (ii) as holder of the Common
Securities, not to voluntarily terminate, windup or dissolve the Trust, other
than (a) in connection with a distribution of Exchange Junior Subordinated
Debentures to the holders of the Capital Securities in dissolution of the Trust
or (b) in connection with certain mergers, consolidations or amalgamations
permitted by the Trust Agreement and (iii) to use its reasonable efforts,
consistent with the terms and provisions of the Trust Agreement, to cause the
Trust to continue not to be taxable as a corporation for United States federal
income tax purposes.
MODIFICATION OF INDENTURE
From time to time, the Company and the Debenture Trustee may, without
the consent of any of the holders of the outstanding Exchange Junior
Subordinated Debentures, amend, waive or supplement the provisions of the
Indenture to: (i) evidence succession of another corporation or association to
the Company and the assumption by such person of the obligations of the Company
under the Exchange Junior Subordinated Debentures; (ii) add further covenants,
restrictions or conditions for the protection of holders of the Exchange Junior
Subordinated Debentures; (iii) cure ambiguities or correct the Exchange Junior
Subordinated Debentures in the case of defects or inconsistencies in the
provisions thereof, so long as any such cure or correction does not adversely
affect the interest of the holders of the Exchange Junior Subordinated
Debentures in any material respect; (iv) change the terms of the Exchange
Junior Subordinated Debentures to facilitate the issuance of the Exchange
Junior Subordinated Debentures in certificated or other definitive form; (v)
evidence or provide for the appointment of a successor Debenture Trustee; or
(vi) qualify, or maintain the qualification of, the Indenture under the Trust
Indenture Act. The Indenture contains provisions permitting the Company and
the Debenture Trustee, with the consent of the holders of not less than a
majority in principal amount of the Exchange Junior Subordinated Debentures, to
modify the Indenture in a manner affecting the rights of the holders of the
Exchange Junior Subordinated Debentures, except that no such modification may,
without the consent of the holder of each outstanding Exchange Junior
Subordinated Debenture so affected, (i) change the Stated Maturity Date of the
Exchange Junior Subordinated Debentures, or reduce the principal amount
thereof, the rate of interest thereon or any premium payable upon the
redemption thereof, or change the place of payment where, or the currency in
which, any such amount is payable or impair the right to institute suit for the
enforcement of any Exchange Junior Subordinated Debenture or (ii) reduce the
percentage of principal amount of Exchange Junior Subordinated Debentures, the
holders of which are required to consent to any such modification of the
Indenture. Furthermore, so long as any of the Exchange Capital Securities
remain outstanding, no such modification may be made that adversely affects the
holders of such Exchange Capital Securities in any material respect, and no
termination of the Indenture may occur, and no waiver of any Debenture Event of
Default or compliance with any covenant under the Indenture may be effective,
without the prior consent of the holders of at least a majority of the
aggregate Liquidation Amount of the outstanding Exchange Capital Securities
unless and until the principal of (and premium, if any, on) the Exchange Junior
Subordinated Debentures and all accrued and unpaid interest thereon have been
paid in full and certain other conditions are satisfied.
DEBENTURE EVENTS OF DEFAULT
The Indenture provides that any one or more of the following described
events with respect to the Exchange Junior Subordinated Debentures that has
occurred and is continuing constitutes an "Event of Default" with respect to
the Exchange Junior Subordinated Debentures:
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<PAGE> 64
(i) failure to pay any interest on the Exchange Junior
Subordinated Debentures when due and payable, and continuance of such
default for a period of 30 days (subject to the deferral of any due
date in the case of an Extension Period); or
(ii) failure to pay any principal of or premium, if any,
on the Exchange Junior Subordinated Debentures when due whether at
maturity, upon redemption, by declaration of acceleration or
otherwise; or
(iii) failure to observe or perform in any material respect
certain other covenants contained in the Indenture for 90 days after
written notice to the Company from the Debenture Trustee or the
holders of at least 25% in aggregate outstanding principal amount of
the outstanding Exchange Junior Subordinated Debentures; or
(iv) certain events in bankruptcy, insolvency or
reorganization of the Company.
For purposes of the Trust Agreement and this Prospectus, each such
Event of Default under the Indenture is referred to as a "Debenture Event of
Default." As described in "Description of Exchange Securities -- Description of
Exchange Capital Securities -- Events of Default; Notice," the occurrence of a
Debenture Event of Default will also constitute an Event of Default in respect
of the Trust Securities.
The holders of at least a majority in aggregate principal amount of
outstanding Exchange Junior Subordinated Debentures have the right to direct
the time, method and place of conducting any proceeding for any remedy
available to the Debenture Trustee. The Debenture Trustee or the holders of
not less than 25% in aggregate principal amount of outstanding Exchange Junior
Subordinated Debentures may declare the principal due and payable immediately
upon a Debenture Event of Default, and, should the Debenture Trustee or such
holders of Exchange Junior Subordinated Debentures fail to make such
declaration, the holders of at least 25% in aggregate Liquidation Amount of the
outstanding Capital Securities shall have such right. The holders of a
majority in aggregate principal amount of outstanding Exchange Junior
Subordinated Debentures may annul such declaration and waive the default if all
defaults (other than the non-payment of the principal of Exchange Junior
Subordinated Debentures which has become due solely by such acceleration) have
been cured and a sum sufficient to pay all matured installments of interest and
principal due otherwise than by acceleration has been deposited with the
Debenture Trustee. Should the holders of Exchange Junior Subordinated
Debentures fail to annul such declaration and waive such default, the holders
of a majority in aggregate Liquidation Amount of the outstanding Exchange
Capital Securities shall have such right.
The holders of at least a majority in aggregate principal amount of
the outstanding Exchange Junior Subordinated Debentures affected thereby and
the holders of a majority in aggregate Liquidation Amount of the Exchange
Capital Securities issued by the Trust may waive any past default, except a
default in the payment of principal (or premium, if any) 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 Exchange Junior
Subordinated Debenture affected thereby. See "-- Modification of Indenture."
The Company is required to file annually with the Debenture Trustee a
certificate as to whether or not the Company is in compliance with all the
conditions and covenants applicable to it under the Indenture.
If a Debenture Event of Default occurs and is continuing, the Property
Trustee will have the right to declare the principal of and the interest on the
Exchange 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 the Exchange Junior Subordinated Debentures.
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF EXCHANGE CAPITAL SECURITIES
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<PAGE> 65
If a Debenture Event of Default has occurred and is continuing and
such event is attributable to the failure of the Company to pay any amounts
payable in respect of the Exchange Junior Subordinated Debentures on the date
such amounts are otherwise payable, a registered holder of Exchange Capital
Securities may institute a legal proceeding directly against the Company for
enforcement of payment to such holder of an amount equal to the amount payable
in respect of Exchange Junior Subordinated Debentures having a principal amount
equal to the aggregate Liquidation Amount of the Capital Securities held by
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 the Exchange Capital Securities. The Company
will have the right under the Indenture to set-off any payment made to such
holder of Exchange Capital Securities by the Company in connection with a
Direct Action.
The holders of the Exchange Capital Securities would not be able to
exercise directly any remedies available to the holders of the Exchange Junior
Subordinated Debentures except under the circumstances described in the
preceding paragraph. See "Description of Exchange Securities -- Description of
Exchange Capital Securities -- Events of Default; Notice."
CONSOLIDATION, MERGER, SALE OF ASSETS AND OTHER TRANSACTIONS
The Indenture provides that the Company may 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 may
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)
if 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 in respect of the Exchange Junior Subordinated
Debentures; (ii) immediately after giving effect thereto, no Debenture Event of
Default, and no event which, after notice or lapse of time or both, would
constitute a Debenture Event of Default, has occurred and is continuing; and
(iii) certain other conditions as prescribed in the Indenture are satisfied.
The provisions of the Indenture do not afford holders of the Exchange
Junior Subordinated Debentures protection in the event of a highly leveraged or
other transaction involving the Company that may adversely affect holders of
the Exchange Junior Subordinated Debentures.
SATISFACTION AND DISCHARGE
The Indenture provides that when, among other things, all Exchange
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 the Stated Maturity Date within one year or (iii) are to be
called for redemption within one year, and the Company deposits or causes to be
deposited with the Debenture Trustee funds, in trust, for the purpose and in an
amount sufficient to pay and discharge the entire indebtedness on the Exchange
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 Date, 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.
SUBORDINATION
The Exchange Junior Subordinated Debentures will be subordinate and
junior in right of payment, to the extent set forth in the Indenture, to all
Senior Indebtedness (as defined below) of the Company. If the Company defaults
in the payment of any principal, premium, if any, or interest, if any, or any
other amount payable on any Senior Indebtedness when the same becomes due and
payable,
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<PAGE> 66
whether at maturity or at a date fixed for redemption or by declaration of
acceleration or otherwise, then, unless and until such default has been cured
or waived or has ceased to exist or all Senior Indebtedness has been paid, no
direct or indirect payment (in cash, property, securities, by setoff or
otherwise) may be made or agreed to be made on the Exchange Junior Subordinated
Debentures, or in respect of any redemption, repayment, retirement, purchase or
other acquisition of any of the Exchange Junior Subordinated Debentures.
As used herein, "Senior Indebtedness" means, whether recourse is to
all or a portion of the assets of the Company and whether or not contingent,
(i) every obligation of the Company for money borrowed; (ii) every obligation
of the Company 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 the
Company with respect to letters of credit, bankers' acceptances or similar
facilities issued for the account of the Company; (iv) every obligation of the
Company issued or assumed as the deferred purchase price of property services
(but excluding trade accounts payable or accrued liabilities arising in the
ordinary course of business); (v) every capital lease obligation of the
Company; (vi) every obligation of the Company for claims (as defined in Section
101(4) of the United States Bankruptcy Code of 1978, as amended) in respect of
derivative products such as interest and foreign exchange rate contracts,
commodity contracts and similar arrangements; and (vii) 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, the Company
has guaranteed or is responsible or liable, directly or indirectly, as obligor
or otherwise. At June 30, 1998, the Company had no outstanding Senior
Indebtedness. Senior Indebtedness shall not include (i) any obligations which,
by their terms, are expressly stated to rank pari passu in right of payment
with, or to not be superior in right of payment to, the Exchange Junior
Subordinated Debentures, (ii) any Senior Indebtedness 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, (iii) any Senior Indebtedness of the Company to any of its
subsidiaries, (iv) Senior Indebtedness to any executive officer or director of
the Company, or (v) any indebtedness in respect of debt securities issued to
any trust, or a trustee of such trust, partnership or other entity affiliated
with the Company that is a financing entity of the Company in connection with
the issuance of such financing entity of securities that are similar to the
Capital Securities.
In the event of (i) certain events of bankruptcy, dissolution or
liquidation relating to the Company, its creditors or its property, (ii) any
proceeding for the liquidation, dissolution or other winding up of the Company,
voluntary or involuntary, whether or not involving insolvency or bankruptcy
proceedings, (iii) any assignment by the Company for the benefit of creditors
or (iv) any other marshalling of the assets of the Company, all Senior
Indebtedness (including any interest thereon accruing after the commencement of
any such proceedings) shall first be paid in full before any payment or
distribution, whether in cash, securities or other property, shall be made on
account of the Exchange Junior Subordinated Debentures. In such event, any
payment or distribution on account of the Exchange Junior Subordinated
Debentures, whether in cash, securities or other property, that would otherwise
(but for the subordination provisions) be payable or deliverable in respect of
the Exchange Junior Subordinated Debentures will be paid or delivered directly
to the holders of Senior Indebtedness in accordance with the priorities then
existing among such holders until all Senior Indebtedness (including any
interest thereon accruing after the commencement of any such proceedings) has
been paid in full.
In the event of any such proceeding, after payment in full of all sums
owing with respect to Senior Indebtedness, the holders of Exchange Junior
Subordinated Debentures, together with the holders of any obligations of the
Company ranking on a parity with the Exchange Junior Subordinated Debentures,
will be entitled to be paid from the remaining assets of the Company the
amounts at the time due and owing on the Exchange Junior Subordinated
Debentures and such other obligations before any payment or other distribution,
whether in cash, property or otherwise, will be made on account of any capital
stock or obligations of the Company ranking junior to the Exchange Junior
Subordinated Debentures and such other obligations. If any payment or
distribution on account of the Exchange Junior Subordinated Debentures of any
character or any security, whether in cash, securities or other property, is
received by
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<PAGE> 67
the Debenture Trustee or any holder of any Exchange Junior Subordinated
Debentures in contravention of any of the terms hereof and before all the
Senior Indebtedness has been paid in full, such payment or distribution or
security will be received in trust for the benefit of, and must be paid over or
delivered and transferred to, the holders of the Senior Indebtedness at the
time outstanding in accordance with the priorities then existing among such
holders for application to the payment of all Senior Indebtedness remaining
unpaid to the extent necessary to pay all such Senior Indebtedness in full. By
reason of such subordination, in the event of the insolvency of the Company,
holders of Senior Indebtedness may receive more, ratably, and holders of the
Exchange Junior Subordinated Debentures may receive less, ratably, than the
other creditors of the Company. Such subordination will not prevent the
occurrence of any Debenture Event of Default.
The Indenture places no limitation on the amount of additional Senior
Indebtedness that may be incurred by the Company. The Company expects from
time to time to incur additional indebtedness including Senior Indebtedness.
INFORMATION CONCERNING THE DEBENTURE TRUSTEE
The Debenture Trustee, other than during the occurrence and
continuance of a Debenture Event of Default, undertakes to perform only such
duties as are specifically set forth in the Indenture, is under no obligation
to exercise any of the powers vested in it by the Indenture at the request of
any holder of Exchange Junior Subordinated Debentures, unless offered
reasonable indemnity by such holder against the costs, expenses and liabilities
that might be incurred thereby and, after such Debenture Event of Default, must
exercise the same degree of care and skill as a prudent person would in the
conduct of his or her own affairs. The Debenture Trustee is not required to
expend or risk its own funds or otherwise incur personal financial liability in
the performance of its duties if the Debenture Trustee reasonably believes that
repayment or adequate indemnity is not reasonably assured to it.
The Debenture Trustee also serves as the Property Trustee and the
Guarantee Trustee. See "Description of Exchange Securities -- Description of
Exchange Capital Securities -- Information Concerning the Property Trustee" and
"-- Description of Exchange Guarantee -- Information Concerning the Guarantee
Trustee."
Bankers Trust Company, the Debenture Trustee, may serve from time to
time as trustee under other indentures or trust agreements with the Company or
its subsidiaries relating to other issues of their securities. In addition,
the Company and certain of its affiliates may have other banking relationships
with Bankers Trust Company and its affiliates.
RESTRICTIONS ON TRANSFER
The Exchange Junior Subordinated Debentures will be issued, and may be
transferred only, in blocks having an aggregate principal amount of not less
than $100,000 (100 Exchange Junior Subordinated Debentures). Any such transfer
of Exchange Junior Subordinated Debentures in a block having an aggregate
principal amount of less than $100,000 shall be deemed to be void and of no
legal effect whatsoever. Any such transferee shall be deemed not to be the
holder of such Exchange Junior Subordinated Debentures for any purpose,
including but not limited to the receipt of payments on such Exchange Junior
Subordinated Debentures, and such transferee shall be deemed to have no
interest whatsoever in such Exchange Junior Subordinated Debentures.
GOVERNING LAW
The Indenture and the Junior Subordinated Debentures are governed by
and construed in accordance with the laws of the State of New York.
DESCRIPTION OF EXCHANGE GUARANTEE
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<PAGE> 68
The Exchange Guarantee will be executed and delivered by the Company
concurrently with the issuance of the Exchange Capital Securities by the Trust
for the benefit of the holders from time to time of the Exchange Capital
Securities. The terms of the Exchange Guarantee are identical in all material
respects to the terms of the Original Guarantee. Bankers Trust Company will
act as Guarantee Trustee under the Exchange Guarantee. This summary of certain
provisions of the Exchange Guarantee does not purport to be complete and is
subject to, and qualified in its entirety by reference to, all the provisions
of the Exchange Guarantee, including the definitions therein of certain terms.
The Guarantee Trustee will hold the Exchange Guarantee for the benefit of the
holders of the Exchange Capital Securities.
STATUS OF ORIGINAL GUARANTEE
If not all the Original Capital Securities are exchanged for Exchange
Capital Securities in the Exchange Offer, the Original Guarantee will not
terminate, but will continue to guarantee the obligations of the Company for
the benefit of the holders of Original Securities. The Original Guarantee will
terminate upon full payment of the applicable Redemption Price of the Original
Capital Securities, upon full payment of the Liquidation Amount payable upon
liquidation of the Trust or upon distribution of Original Junior Subordinated
Debentures to the holders of the Original Capital Securities. The Original
Guarantee will continue to be effective or will be reinstated, as the case may
be, if at any time any holder of the Original Capital Securities must restore
payment of any sums paid under the Original Capital Securities or the Original
Guarantee.
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 Exchange Capital Securities, as and when due,
regardless of any defense, right of set-off or counterclaim that the Trust may
have or assert other than the defense of payment. The following payments with
respect to the Exchange Capital Securities, to the extent not paid by or on
behalf of the Trust (the "Guarantee Payments"), will be subject to the Exchange
Guarantee: (i) any accumulated and unpaid Distributions required to be paid on
such Exchange Capital Securities, to the extent that the Trust has funds on
hand available therefor at such time; (ii) the Redemption Price with respect to
any Exchange Capital Securities called for redemption, to the extent that the
Trust has funds on hand available therefor at such time; and (iii) upon a
voluntary or involuntary dissolution of the Trust (unless the Exchange Junior
Subordinated Debentures are distributed to holders of the Exchange Capital
Securities), the lesser of (a) the aggregate of the Liquidation Amount and all
accumulated and unpaid Distributions to the date of payment, to the extent that
the Trust has funds on hand available therefor at such time, and (b) the amount
of assets of the Trust remaining available for distribution to holders of the
Exchange Capital Securities on liquidation of the Trust. 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 Exchange Capital
Securities or by causing the Trust to pay such amounts to such holders.
The Exchange Guarantee will be an irrevocable guarantee on a
subordinated basis of the Trust's obligations under the Exchange Capital
Securities, but will apply only to the extent that the Trust has funds
sufficient to make such payments, and is not a guarantee of collection.
If the Company does not make payments on the Exchange Junior
Subordinated Debentures held by the Trust, the Trust will not be able to pay
any amounts payable in respect of the Exchange Capital Securities and will not
have funds legally available therefor. The Exchange Guarantee will rank
subordinate and junior in right of payment to all Senior Indebtedness of the
Company. See "-- Status of the Exchange Guarantee." The Exchange Guarantee
does not limit the incurrence or issuance of other secured or unsecured debt of
the Company, including Senior Indebtedness, whether under the Indenture, any
other indenture that the Company may enter into in the future or otherwise.
The Company has, through the Exchange Guarantee, the Trust Agreement,
the Exchange Junior Subordinated Debentures and the Indenture, taken together,
fully, irrevocably and unconditionally
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guaranteed all the Trust's obligations under the Exchange Capital Securities.
No single document standing alone or operating in conjunction with fewer than
all 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 Trust's obligations in respect
of the Exchange Capital Securities. See "Relationship Among the Exchange
Capital Securities, the Exchange Junior Subordinated Debentures and the
Exchange Guarantee."
STATUS OF THE EXCHANGE GUARANTEE
The Exchange Guarantee will rank pari passu with the Original
Guarantee, and will constitute an unsecured obligation of the Company and will
rank subordinate and junior in right of payment to all Senior Indebtedness of
the Company in the same manner as the Exchange Junior Subordinated Debentures.
The Exchange 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
Agreement without first instituting a legal proceeding against any other person
or entity). The Exchange Guarantee will be held by the Guarantee Trustee for
the benefit of the holders of the Exchange Capital Securities. The Exchange
Guarantee will not be discharged except by payment of the Guarantee Payments in
full to the extent not paid by the Trust or distribution to the holders of the
Exchange Capital Securities of the Exchange Junior Subordinated Debentures.
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes which do not materially adversely
affect the rights of holders of the Exchange Capital Securities (in which case
no vote will be required), the Exchange Guarantee may not be amended without
the prior approval of the holders of not less than a majority of the aggregate
Liquidation Amount of the outstanding Exchange Capital Securities. The manner
of obtaining any such approval will be as set forth under "Description of
Exchange Securities -- Description of the Exchange Capital Securities -- Voting
Rights; Amendment of Trust Agreement." All guarantees and agreements contained
in the Exchange Guarantee shall bind the successors, assigns, receivers,
trustees and representatives of the Company and shall inure to the benefit of
the holders of the Capital Securities then outstanding.
EVENTS OF DEFAULT
An event of default under the Exchange Guarantee will occur upon the
failure of the Company to perform any of its payment or other obligations
thereunder, or to perform any non-payment obligation if such non-payment
default remains unremedied for 30 days. The holders of not less than a
majority in aggregate Liquidation Amount of the outstanding Exchange Capital
Securities have the right to direct the time, method and place of conducting
any proceeding for any remedy available to the Guarantee Trustee in respect of
the Exchange Guarantee or to direct the exercise of any trust or power
conferred upon the Guarantee Trustee under the Exchange Guarantee.
Any registered holder of Capital Securities may institute a legal
proceeding directly against the Company to enforce its rights under the
Exchange Guarantee without first instituting a legal proceeding against the
Trust, 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 the
Exchange Guarantee.
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INFORMATION CONCERNING THE GUARANTEE TRUSTEE
The Guarantee Trustee, other than during the occurrence and
continuance of a default by the Company in performance of the Exchange
Guarantee, undertakes to perform only such duties as are specifically set forth
in the Exchange Guarantee and, after the occurrence of an event of default with
respect to the Exchange Guarantee, must exercise the same degree of care and
skill as a prudent person would exercise or use in the conduct of his or her
own affairs. Subject to this provision, the Guarantee Trustee is under no
obligation to exercise any of the powers vested in it by the Exchange Guarantee
at the request of any holder of the Exchange Capital Securities unless it is
offered reasonable indemnity against the costs, expenses and liabilities that
might be incurred thereby.
The Guarantee Trustee also serves as the Property Trustee and the
Debenture Trustee. See "Description of Exchange Securities -- Description of
Exchange Capital Securities -- Information Concerning the Property Trustee" and
"Description of Exchange Securities -- Description of Exchange Junior
Subordinated Debentures -- Information Concerning the Debenture Trustee."
TERMINATION OF THE EXCHANGE GUARANTEE
The Exchange Guarantee will terminate and be of no further force and
effect upon full payment of the Redemption Price of the Exchange Capital
Securities, upon full payment of the amounts payable with respect to the
Exchange Capital Securities upon liquidation of the Trust or upon distribution
of Exchange Junior Subordinated Debentures to the holders of the Exchange
Capital Securities. The Exchange Guarantee will continue to be effective or
will be reinstated, as the case may be, if at any time any holder of the
Exchange Capital Securities must restore payment of any sums paid under the
Exchange Capital Securities or the Exchange Guarantee.
GOVERNING LAW
The Exchange Guarantee will be governed by and construed in accordance
with the laws of the State of New York.
DESCRIPTION OF ORIGINAL SECURITIES
The terms of the Original Securities are identical in all materials
respects to the Exchange Securities, except that (i) the Original Securities
have not been registered under the Securities Act, are subject to certain
restrictions on transfer and are entitled to certain rights under the
applicable Registration Rights Agreement (which rights will terminate upon
consummation of the Exchange Offer, except under limited circumstances), (ii)
the Exchange Capital Securities will not provide for any increase in the
Distribution rate thereon and (iii) the Exchange Junior Subordinated Debentures
will not provide for any liquidated damages thereon. The Original Securities
provide that, if a registration statement relating to the Exchange Offer has
not been declared effective by January 20, 1999, then liquidated damages will
accrue at the rate of 0.25% per annum on the principal amount of the Original
Junior Subordinated Debentures and Distributions will accrue at the rate of
0.25% per annum on the Liquidation Amount of the Original Capital Securities,
for the period from the occurrence of such event until such time as such
registration statement has been filed or declared effective, as the case may
be. In addition, the Original Capital Securities provide that, if the Trust
has not exchanged Exchange Capital Securities for all Original Capital
Securities validly tendered by the 45th day after the date on which the
registration statement is declared effective, the Distribution rate borne by
the Original Capital Securities will increase by 0.25% per annum for the period
from the occurrence of such event until such time as the Exchange Offer has
been consummated. The Exchange Securities are not, and upon consummation of
the Exchange Offer, the Original Securities will not be, entitled to any such
additional interest or Distributions. Accordingly, holders of Original Capital
Securities should review the information set forth under "Risk Factors --
Consequences of a Failure to Exchange Original Capital Securities" and
"Description of Exchange Securities."
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RELATIONSHIP AMONG THE EXCHANGE CAPITAL SECURITIES, THE EXCHANGE
JUNIOR SUBORDINATED DEBENTURES AND THE EXCHANGE GUARANTEE
FULL AND UNCONDITIONAL GUARANTEE
Payments of Distributions and other amounts due on the Exchange
Capital Securities (to the extent the Trust has funds available for such
payment) are irrevocably guaranteed by the Company as and to the extent set
forth under "Description of Exchange Securities -- Description of Exchange
Guarantee." Taken together, the Company's obligations under the Exchange
Junior Subordinated Debentures, the Indenture, the Trust Agreement and the
Exchange Guarantee provide, in the aggregate, a full, irrevocable and
unconditional guarantee of payments of Distributions and other amounts due on
the Exchange Capital Securities. No single document standing alone or
operating in conjunction with fewer than all 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
Trust's obligations in respect of the Exchange Capital Securities. If and to
the extent that the Company does not make payments on the Exchange Junior
Subordinated Debentures, the Trust will not have sufficient funds to pay
Distributions or other amounts due on the Exchange Capital Securities. The
Exchange Guarantee does not cover payment of amounts payable with respect to
the Exchange Capital Securities when the Trust does not have sufficient funds
to pay such amounts. In such event, the remedy of a holder of the Exchange
Capital Securities is to institute a legal proceeding directly against the
Company for enforcement of payment of the Company's obligations under Exchange
Junior Subordinated Debentures having a principal amount equal to the
Liquidation Amount of the Exchange Capital Securities held by such holder.
The obligations of the Company under the Exchange Junior Subordinated
Debentures and the Exchange Guarantee are subordinate and junior in right of
payment to all Senior Indebtedness.
SUFFICIENCY OF PAYMENTS
As long as interest and principal payments are made when due on the
Exchange Junior Subordinated Debentures, such payments will be sufficient to
cover Distributions and other payments distributable on the Exchange Capital
Securities, primarily because: (i) the aggregate principal amount of the
Exchange Junior Subordinated Debentures will be equal to the sum of the
aggregate stated Liquidation Amount of the Trust Securities; (ii) the interest
rate and interest and other payment dates on the Exchange Junior Subordinated
Debentures will match the Distribution rate, Distribution Dates and other
payment dates for the Exchange Capital Securities; (iii) the Company will pay
for all and any costs, expenses and liabilities of the Trust except the Trust's
obligations to holders of the Trust Securities; and (iv) the Trust Agreement
further provides that the Trust will not engage in any activity that is not
consistent with the limited purposes of the Trust.
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 against and to the extent the Company has theretofore made, or is
concurrently on the date of such payment making, a payment under the Exchange
Guarantee.
ENFORCEMENT RIGHTS OF HOLDERS OF EXCHANGE CAPITAL SECURITIES
A holder of any Exchange Capital Security may institute a legal
proceeding directly against the Company to enforce its rights under the
Exchange Guarantee without first instituting a legal proceeding against the
Guarantee Trustee, the Trust or any other person or entity. See "Description
of Exchange Securities -- Description of Exchange Guarantee."
A default or event of default under any Senior Indebtedness of the
Company would not constitute a default or Event of Default in respect of the
Exchange Capital Securities. However, in the event of payment defaults under,
or acceleration of, Senior Indebtedness of the Company, the subordination
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provisions of the Indenture provide that no payments may be made in respect of
the Exchange Junior Subordinated Debentures until such Senior Indebtedness has
been paid in full or any payment default thereunder has been cured or waived.
See "Description of Exchange Securities -- Description of Exchange Junior
Subordinated Debentures -- Subordination." Failure to make required payments
on the Exchange Junior Subordinated Debentures would constitute a Debenture
Event of Default under the Trust Agreement.
LIMITED PURPOSE OF TRUST
The Exchange Capital Securities represent preferred undivided
beneficial interests in the assets of the Trust, and the Trust exists for the
sole purpose of issuing and selling the Trust Securities, using the proceeds
from the sale of the Trust Securities to acquire the Original Junior
Subordinated Debentures, exchanging the Original Capital Securities and the
Original Junior Subordinated Debentures in the Exchange Offer, and engaging in
only those other activities necessary, advisable or incidental thereto. A
principal difference between the rights of a holder of an Exchange Capital
Security and a holder of an Exchange Junior Subordinated Debenture is that a
holder of an Exchange Junior Subordinated Debenture is entitled to receive from
the Company payments on Exchange Junior Subordinated Debentures held, while a
holder of Exchange Capital Securities is entitled to receive Distributions or
other amounts distributable with respect to the Exchange Capital Securities
from the Trust (or from the Company under the Exchange Guarantee) only if and
to the extent the Trust has funds available for the payment of such
Distributions.
RIGHTS UPON DISSOLUTION
Upon any voluntary or involuntary dissolution of the Trust, other than
any such dissolution involving the distribution of the Exchange Junior
Subordinated Debentures, after satisfaction of liabilities to creditors of the
Trust as required by applicable law, the holders of the Exchange Capital
Securities will be entitled to receive, out of assets held by the Trust, the
Liquidation Distribution in cash. See "Description of Exchange Securities --
Description of Exchange Capital Securities -- Liquidation Distribution Upon
Dissolution." Upon any voluntary or involuntary liquidation or bankruptcy of
the Company, the Trust, as registered holder of the Exchange Junior
Subordinated Debentures, would be a subordinated creditor of the Company,
subordinated and junior in right of payment to all Senior Indebtedness as set
forth in the Indenture, but entitled to receive payment in full of all amounts
payable with respect to the Exchange Junior Subordinated Debentures before any
shareholders of the Company receive payments or distributions. Since the
Company is the guarantor under the Exchange Guarantee and has agreed under the
Indenture to pay for all costs, expenses and liabilities of the Trust (other
than the Trust's obligations to the holders of the Trust Securities), the
positions of a holder of the Exchange Capital Securities and a holder of such
Exchange Junior Subordinated Debentures relative to other creditors and to
shareholders of the Company in the event of liquidation or bankruptcy of the
Company are expected to be substantially the same.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
GENERAL
The following discussion summarizes the principal material United
States federal income tax consequences of an exchange of Original Capital
Securities for Exchange Capital Securities and of the ownership and disposition
of the Capital Securities. This summary is based on the Internal Revenue Code
of 1986, as amended (the "Code"), Treasury regulations thereunder, and
administrative and judicial interpretations thereof, each as of the date
hereof, all of which are subject to change, possibly on a retroactive basis.
Hogan & Hartson L.L.P., Washington D.C., in its capacity as special
tax counsel to the Company ("Tax Counsel"), has reviewed this summary and is of
the opinion that, to the extent that it constitutes matters of law or purports
to describe certain provisions of the U.S. federal income tax laws, it is a
correct
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summary in all material respects of the matters discussed therein. In
connection with the issuance of the Junior Subordinated Debentures and the
Capital Securities, Tax Counsel also rendered the opinion described under "--
Characterization of the Issuer Trust." The opinions of Tax Counsel are not
binding on the Internal Revenue Service (the "IRS") or the courts, either of
which could take a contrary position. Moreover, no rulings have been or will be
sought from the IRS with respect to the transactions described herein.
Accordingly, there can be no assurance that the IRS will not challenge the
opinions described herein or that a court would not sustain such a challenge.
Except as otherwise stated, this summary deals only with the Capital
Securities held as a capital asset by a beneficial owner who or which (i)
purchased the Original Capital Securities upon original issuance at their
original offering price and (ii) is a US Holder (as defined below). This
summary does not address all the tax consequences that may be relevant to a US
Holder, nor does it address the tax consequences, except as stated below, to
holders that are not US Holders ("Non-US Holders") or to holders that may be
subject to special tax treatment (such as banks, thrift institutions, real
estate investment trusts, regulated investment companies, insurance companies,
brokers and dealers in securities or currencies, certain securities traders,
other financial institutions, tax-exempt organizations, persons holding the
Capital Securities as a position in a "straddle," or as part of a "synthetic
security," "hedging," as part of a "conversion" or other integrated investment,
persons having a functional currency other than the U.S. Dollar and certain
United States expatriates). Further, this summary does not address (a) the
income tax consequences to shareholders in, or partners or beneficiaries of, a
holder of the Capital Securities, (b) the United States federal alternative
minimum tax consequences of the purchase, ownership or disposition of the
Capital Securities, or (c) any state, local or foreign tax consequences of the
purchase, ownership and disposition of Capital Securities.
A "US Holder" generally is a holder of the Capital Securities who or
which is (i) a citizen or individual resident (or is treated as a citizen or
individual resident) of the United States for income tax purposes, (ii) a
corporation or partnership created or organized (or treated as created or
organized for income tax purposes) in or under the laws of the United States or
any political subdivision thereof, (iii) an estate the income of which is
includible in its gross income for United States federal income tax purposes
without regard to its source, or (iv) a trust if (a) a court within the United
States is able to exercise primary supervision over the administration of the
trust and (b) one or more United States persons have the authority to control
all substantial decisions of the trust.
HOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE TAX
CONSEQUENCES TO THEM OF AN EXCHANGE OF ORIGINAL CAPITAL SECURITIES FOR EXCHANGE
CAPITAL SECURITIES AND OF THE OWNERSHIP AND DISPOSITION OF THE CAPITAL
SECURITIES, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN AND
OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN UNITED STATES FEDERAL OR
OTHER TAX LAWS.
EXCHANGE OF EXCHANGE CAPITAL SECURITIES
The exchange of Original Capital Securities for Exchange Capital
Securities should not be a taxable event to holders for U.S. federal income tax
purposes. The exchange of Original Capital Securities for Exchange Capital
Securities pursuant to the Exchange Offer should not be treated as an
"exchange" for U.S. federal income tax purposes because the Exchange Capital
Securities should not be considered to differ materially in kind or extent from
the Original Capital Securities and because the exchange will occur by
operation of the terms of the Original Capital Securities. Accordingly, the
Exchange Capital Securities should have the same issue price as the Original
Capital Securities, and a holder should have the same adjusted tax basis and
holding period in the Exchange Capital Securities immediately after the
exchange as the holder had in the Original Capital Securities immediately
before the exchange.
US HOLDERS
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Characterization of the Issuer Trust. In connection with the issuance
of the Original Capital Securities, Tax Counsel rendered its opinion generally
to effect that, under then current law and based on the representations, facts
and assumptions set forth in this Prospectus, and assuming full compliance with
the terms of the Trust Agreement (and other relevant documents), and based on
certain assumptions and qualifications referenced in the opinion, the Issuer
Trust will be characterized for United States federal income tax purposes as a
grantor trust and will not be characterized as an association taxable as a
corporation. Accordingly, for United States federal income tax purposes, each
holder of the Capital Securities generally will be considered the owner of an
undivided interest in the Junior Subordinated Debentures owned by the Issuer
Trust, and each US Holder will be required to include all income or gain
recognized for United States federal income tax purposes with respect to its
allocable share of the Junior Subordinated Debentures on its own income tax
return.
Characterization of the Junior Subordinated Debentures. The Company
intends to take the position that, under current law, the Junior Subordinated
Debentures constitute indebtedness for United States federal income tax
purposes. The Company, the Issuer Trust and the holders of the Capital
Securities (by acceptance of a beneficial interest in a Capital Security) agree
to treat the Junior Subordinated Debentures as indebtedness of the Company and
the Capital Securities as evidence of a beneficial ownership interest in the
Junior Subordinated Debentures. No assurance can be given, however, that such
position will not be challenged by the IRS or, if challenged, that such
challenge will not be successful. The remainder of this discussion assumes
that the Junior Subordinated Debentures will be classified as indebtedness of
the Company for United States federal income tax purposes.
Interest Income and Original Issue Discount. Under the terms of the
Junior Subordinated Debentures, the Company has the ability to defer payments
of interest from time to time by extending the interest payment period for a
period not exceeding 10 consecutive semi-annual periods, but not beyond the
Stated Maturity. Treasury regulations under Section 1273 of the Code provide
that debt instruments like the Junior Subordinated Debentures will not be
considered issued with original issue discount ("OID") by reason of certain
contingencies such as the Company's ability to defer payments of interest.
The Company has concluded, and this discussion assumes, that, as of
the date of this Prospectus, the likelihood of deferring payments of
interest under the terms of the Junior Subordinated Debentures is "remote"
within the meaning of the applicable Treasury regulations, in part because
exercising that option would prevent the Company from declaring dividends on
its stock and would prevent the Company from making any payments with respect
to debt securities that rank pari passu with or junior to the Junior
Subordinated Debentures. Therefore, the Company intends to treat the Junior
Subordinated Debentures as not issued with OID by reason of the Company's
deferral option. Under such treatment, stated interest on the Junior
Subordinated Debentures will generally be taxable to a US Holder as ordinary
income when paid or accrued in accordance with that holder's method of
accounting for income tax purposes. It should be noted, however, that these
Treasury regulations have not yet been interpreted in any rulings or any other
published authorities of the IRS. Accordingly, it is possible that the IRS
could take a position contrary to the interpretation described herein.
In the event the Company exercises its option to defer payments of
interest, the Junior Subordinated Debentures would be treated as redeemed and
reissued for OID purposes and the sum of the remaining interest payments (and
any de minimis OID) on the Junior Subordinated Debentures would thereafter be
treated as OID, which would accrue, and be includible in a US Holder's taxable
income, on an economic accrual basis (regardless of the US Holder's method of
accounting for income tax purposes) over the remaining term of the Junior
Subordinated Debentures (including any period of interest deferral), without
regard to the timing of payments under the Junior Subordinated Debentures.
(Subsequent distributions of interest on the Junior Subordinated Debentures
generally would not be taxable.) Consequently, during any period of interest
deferral, US Holders will include OID in gross
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income in advance of the receipt of cash, and a US Holder that disposes of a
Capital Security prior to the record date for payment of distributions on the
Junior Subordinated Debentures following that period will be subject to income
tax on OID accrued through the date of disposition (and not previously included
in income), but will not receive cash from the Issuer Trust with respect to the
OID.
If the possibility of the Company's exercise of its option to defer
payments of interest is not remote, the Junior Subordinated Debentures would be
treated as initially issued with OID in an amount equal to the aggregate stated
interest (plus any de minimis OID) over the term of the Junior Subordinated
Debentures. That OID would generally be includible in a US Holder's taxable
income, over the term of the Junior Subordinated Debentures, on an economic
accrual basis.
Characterization of Income. Because the income underlying the Capital
Securities will not be characterized as dividends for income tax purposes,
corporate holders of the Capital Securities will not be entitled to a dividends
received deduction for any income recognized with respect to the Capital
Securities.
Market Discount and Bond Premium. Under certain circumstances,
holders of the Capital Securities may be considered to have acquired their
undivided interests in the Junior Subordinated Debentures with market discount
or acquisition premium (as each phrase is defined for United States federal
income tax purposes). Such holders are advised to consult their tax advisors
as to the income tax consequences of the acquisition, ownership and disposition
of the Capital Securities.
Receipt of Junior Subordinated Debentures or Cash Upon Liquidation of
the Issuer Trust. Under certain circumstances described herein (See
"Description of the Capital Securities -- Liquidation Distribution Upon
Dissolution"), the Issuer Trust may distribute the Junior Subordinated
Debentures to holders in exchange for the Capital Securities and in liquidation
of the Issuer Trust. Except as discussed below, such a distribution would not
be a taxable event for United States federal income tax purposes, and each US
Holder would have an aggregate adjusted basis in its Junior Subordinated
Debentures for United States federal income tax purposes equal to such holder's
aggregate adjusted basis in its Capital Securities. For United States federal
income tax purposes, a US Holder's holding period in the Junior Subordinated
Debentures received in such a liquidation of the Issuer Trust would include the
period during which the Capital Securities were held by the holder. A holder
would accrue interest in respect of the Junior Subordinated Debentures received
from the Issuer Trust in the manner described above under "-- Interest Income
and Original Issue Discount." If, however, the relevant event is a Tax Event
which results in the Issuer Trust being treated as an association taxable as a
corporation, the distribution would likely constitute a taxable event to US
Holders of the Capital Securities for United States federal income tax
purposes, and the US Holder's holding period in the Junior Subordinated
Debentures would begin at the date such Junior Subordinated Debentures were
received.
Under certain circumstances described herein (see "Description of the
Capital Securities"), the Junior Subordinated Debentures may be redeemed for
cash and the proceeds of such redemption distributed to holders in redemption
of their Capital Securities. Such a redemption would be taxable for United
States federal income tax purposes, and a US Holder would recognize gain or
loss as if it had sold the Capital Securities for cash. See "-- Sales of
Capital Securities" below.
Sales of Capital Securities. A US Holder that sells Capital
Securities will recognize gain or loss equal to the difference between its
adjusted basis in the Capital Securities and the amount realized on the sale of
such Capital Securities. A US Holder's adjusted basis in the Capital Securities
generally will be its initial purchase price, increased by OID (if any)
previously included (or currently includible) in such
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holder's gross income to the date of disposition, and decreased by payments
received on the Capital Securities (other than any interest received with
respect to the period prior to the effective date of the Company's first
exercise of its option to defer payments of interest). Any such gain or loss
generally will be capital gain or loss, and generally will be a long-term
capital gain or loss if the Capital Securities have been held for more than one
year prior to the date of disposition. Tax rates on capital gains received by
individual US Holders vary depending on each US Holder's income and holding
period for the Capital Securities. US Holders who are individuals should
contact their own tax advisors for more information or for the capital gains
rate applicable to a specific Capital Security.
A holder who disposes of his Capital Securities between record dates
for payments of distributions thereon will be required to include accrued but
unpaid interest (or OID) on the Junior Subordinated Debentures through the date
of disposition in its taxable income for United States federal income tax
purposes (notwithstanding that the holder may receive a separate payment from
the purchaser with respect to accrued interest), and to deduct that amount from
the sales proceeds received (including the separate payment, if any, with
respect to accrued interest) for the Capital Securities (or as to OID only, to
add such amount to such holder's adjusted tax basis in its Capital Securities).
To the extent the selling price is less than the holder's adjusted tax basis
(which will include accrued but unpaid OID, if any), a holder will recognize a
capital loss. Subject to certain limited exceptions, capital losses cannot be
applied to offset ordinary income for United States federal income tax
purposes.
PENDING TAX LITIGATION AFFECTING THE CAPITAL SECURITIES
Recently, a taxpayer filed a petition in the United States Tax Court
contesting the IRS' proposed disallowance of interest deductions that taxpayer
claimed in respect of securities issued in 1993 and 1994 that are, in some
respects, similar to the Capital Securities. (Enron Corp. v. Commissioner,
Docket No. 6149-98, filed April 1, 1998). It is possible that an adverse
decision by the Tax Court concerning the deductibility of such interest could
give rise to a Tax Event. Such a Tax Event would give the Company the right to
redeem the Junior Subordinated Debentures. See "Description of Junior
Subordinated Debentures -- Redemption" and "Description of Capital Securities
- -- Liquidation Distribution Upon Dissolution."
NON-US HOLDERS
The following discussion applies to a Non-US Holder.
Payments to a holder of a Capital Security which is a Non-US Holder
will generally not be subject to withholding of income tax, provided that (a)
the beneficial owner of the Capital Security does not (directly or indirectly,
actually or constructively) own 10% or more of the total combined voting power
of all classes of stock of the Company entitled to vote, (b) the beneficial
owner of the Capital Security is not a controlled foreign corporation that is
related to the Company through stock ownership, and (c) either (i) the
beneficial owner of the Capital Securities certifies to the Issuer Trust or its
agent, under penalties of perjury, that it is a Non-US Holder and provides its
name and address, or (ii) a securities clearing organization, bank or other
financial institution that holds customers' securities in the ordinary course
of its trade or business (a "Financial Institution"), and holds the Capital
Security in such capacity, certifies to the Issuer Trust or its agent, under
penalties of perjury, that such a statement has been received from the
beneficial owner by it or by another Financial Institution between it and the
beneficial owner in the chain of ownership, and furnishes the Issuer Trust or
its agent with a copy thereof.
A Non-US Holder of a Capital Security will generally not be subject to
withholding of income tax on any gain realized upon the sale or other
disposition of a Capital Security.
As discussed above, changes in law affecting the income tax
consequences of the Junior Subordinated Debentures are possible, and could
adversely affect the ability of the Company to deduct interest payable on the
Junior Subordinated Debentures. Such changes could also cause the Junior
Subordinated Debentures to be classified as equity (rather than indebtedness)
of the Company for United
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States federal income tax purposes and, thus, might cause the income derived
from the Junior Subordinated Debentures to be characterized as dividends,
generally subject to a 30% income tax (on a withholding basis) when paid to a
Non-US Holder, rather than as interest which, as discussed above, is generally
exempt from income tax in the hands of a Non-US Holder.
A Non-US Holder that holds the Capital Securities in connection with
the active conduct of a United States trade or business will be subject to
income tax on all income and gains recognized with respect to its proportionate
share of the Junior Subordinated Debentures in the same manner as if it were a
US Holder.
INFORMATION REPORTING
In general, information reporting requirements will apply to payments
made on, and proceeds from the sale of, the Capital Securities held by a
noncorporate US Holder within the United States. In addition, payments made
on, and payments of the proceeds from the sale of, the Capital Securities to or
through the United States office of a broker or through certain U.S.-related
financial intermediaries are subject to information reporting unless the holder
thereof certifies as to its Non-United States status or otherwise establishes
an exemption from information reporting and backup withholding. See "-- Backup
Withholding." Taxable income on the Capital Securities for a calendar year
should be reported to US Holders on the appropriate forms by the following
January 31st.
BACKUP WITHHOLDING
Payments made on, and proceeds from the sale of, the Capital
Securities may be subject to a "backup" withholding tax of 31% unless the
holder complies with certain identification or exemption requirements. Any
amounts so withheld will be allowed as a credit against the holder's income tax
liability, or refunded, provided the required information is provided to the
IRS.
The preceding discussion is only a summary and does not address all
the consequences to a particular holder of an exchange of Original Capital
Securities for Exchange Capital Securities and of the ownership and disposition
of the Capital Securities. Potential holders of the Capital Securities are
urged to contact their own tax advisors to determine their particular tax
consequences.
ERISA CONSIDERATIONS
Each of the Company (the obligor with respect to the Exchange Junior
Subordinated Debentures held by the Trust), and its affiliates and the Property
Trustee may be considered a "party in interest" (within the meaning of ERISA)
or a "disqualified person" (within the meaning of Section 4975 of the Code)
with respect to many Plans. The purchase and/or holding of Exchange Capital
Securities by a Plan 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) may constitute or result in a prohibited transaction under
ERISA or Section 4975 of the Code, unless such Exchange Capital Securities are
acquired pursuant to and in accordance with an applicable exemption, such as
Prohibited Transaction Class Exemption ("PTCE") 84-14 (an exemption for certain
transactions determined by an independent qualified professional asset
manager), PTCE 91-38 (an exemption for certain transactions involving bank
collective investment funds), PTCE 90-1 (an exemption for certain transactions
involving insurance company pooled separate accounts), PTCE 95-60 (an exemption
for transactions involving certain insurance company general accounts) or PTCE
96-23 (an exemption for certain transactions determined by an in-house asset
manager). In addition, a Plan fiduciary considering the purchase of Exchange
Capital Securities should be aware that the assets of the Trust may be
considered "plan assets" for ERISA purposes. In such event, the Property
Trustee, as well as any other persons exercising discretion with respect to the
Exchange Junior Subordinated Debentures, may become fiduciaries, parties in
interest or disqualified persons with respect to investing Plans. In order to
avoid certain prohibited transactions under ERISA and the Code that could
thereby result, each investing Plan, by purchasing the Exchange Capital
Securities, will be deemed to have directed the Trust to invest in the Exchange
Junior Subordinated Debentures and to have consented
68
<PAGE> 78
to the appointment of the Property Trustee. In this regard, it should be noted
that, in an Event of Default, the Company may not remove the Property Trustee
without the approval of a majority of the holders of the Exchange Capital
Securities.
A Plan fiduciary should consider whether the purchase of Exchange
Capital Securities could result in a delegation of fiduciary authority to the
Property Trustee, and, if so, whether such a delegation of authority is
permissible under the Plan's governing instrument or any investment management
agreement with the Plan.
THE SALE OF INVESTMENTS TO PLANS IS IN NO RESPECT A REPRESENTATION BY
THE TRUST, THE CORPORATION, THE PROPERTY TRUSTEE, THE INITIAL PURCHASER OR ANY
OTHER PERSON ASSOCIATED WITH THE SALE OF THE EXCHANGE CAPITAL SECURITIES THAT
SUCH SECURITIES MEET RELEVANT LEGAL REQUIREMENTS WITH RESPECT TO INVESTMENTS BY
PLANS GENERALLY OR ANY PARTICULAR PLAN, OR THAT SUCH SECURITIES ARE OTHERWISE
APPROPRIATE FOR PLANS GENERALLY OR ANY PARTICULAR PLAN. ANY PURCHASER
PROPOSING TO ACQUIRE EXCHANGE CAPITAL SECURITIES WITH ASSETS OF ANY PLAN SHOULD
CONSULT WITH ITS COUNSEL.
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Capital Securities for its
own account pursuant to the Exchange Offer must acknowledge that it will
deliver a prospectus in connection with any resale of such Exchange Capital
Securities. This Prospectus, as it may be amended or supplemented from time to
time, may be used by a broker-dealer in connection with resales of Exchange
Capital Securities received in exchange for Original Capital Securities where
such Original Capital Securities were acquired by such broker-dealer as a
result of market-making activities or other trading activities. The Trust and
the Company have agreed that, starting on the Expiration Date and ending on the
close of business on the 180th day following the Expiration Date, it will make
this Prospectus, as amended or supplemented, available to any broker-dealer for
use in connection with any such resale. In addition, for a period of 180 days
after the Expiration Date, all dealers effecting transactions in the Exchange
Securities may be required to deliver a prospectus.
The Trust and the Company will not receive any proceeds from any sale
of Exchange Capital Securities by broker-dealers. Exchange Capital Securities
received by broker-dealers for their own account pursuant to the Exchange Offer
may be sold from time to time in one or more transactions, in the
over-the-counter market, in negotiated transactions, through the writing of
options on the Exchange Capital Securities or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or at negotiated prices. Any such resale may be
made directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such Exchange Capital Securities.
Any broker-dealer that resells Exchange Capital Securities that were received
by it for its own account pursuant to the Exchange Offer and any broker or
dealer that participates in a distribution of such Exchange Capital Securities
may be deemed to be an "underwriter" within the meaning of the Securities Act
and any profit of any such resale of Exchange Capital Securities and any
commissions or concessions received by any such persons may be deemed to be
underwriting compensation under the Securities Act. The Letter of Transmittal
states that by acknowledging that it will deliver and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
For a period of 180 days after the Expiration Date, the Trust and the
Company will promptly send additional copies of this Prospectus and any
amendment or supplement to this Prospectus to any broker-dealer that requests
such documents in the Letter of Transmittal. The Trust and the Company have
agreed to pay all expenses incident to the Exchange Offer (including the
expenses of one counsel for the holders of the Capital Securities) other than
commissions or concessions of any brokers or dealers and will
69
<PAGE> 79
indemnify the holders of the Exchange Capital Securities (including any
broker-dealers) against certain liabilities, including liabilities under the
Securities Act.
VALIDITY OF EXCHANGE SECURITIES
The validity of the Exchange Guarantee and the Exchange Junior
Subordinated Debentures will be passed upon for the Company by Hogan & Hartson
L.L.P., Washington, D.C. Certain matters of Delaware law relating to the
validity of the Exchange Capital Securities will be passed upon on behalf of
the Trust by Morris, James, Hitchens & Williams, special Delaware counsel to
the Trust. Certain matters relating to U.S. federal income tax considerations
will be passed upon for the Company by Hogan & Hartson L.L.P., Washington, D.C.
INDEPENDENT AUDITORS
The consolidated financial statements of the Company and its
subsidiaries included in the Company's 1997 Annual Report on Form 10-K have
been audited by PricewaterhouseCoopers LLP, independent auditors, as set forth
in their report thereon included therein in, and have been incorporated herein
by reference.
70
<PAGE> 80
================================================================================
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS IN CONNECTION WITH THIS EXCHANGE
OFFER AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE TRUST. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY
CIRCUMSTANCES CREATE AN IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE
AFFAIRS OF THE COMPANY OR THE TRUST SINCE THE DATE HEREOF. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY JURISDICTION IN
WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON
MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO
WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Available Information . . . . . . . . . . . . . 1
Summary . . . . . . . . . . . . . . . . . . . . 2
Selected Consolidated Financial Data . . . . . 9
Risk Factors . . . . . . . . . . . . . . . . . 10
BSB Bancorp, Inc.. . . . . . . . . . . . . . . 20
BSB Capital Trust I . . . . . . . . . . . . . . 22
Use of Proceeds . . . . . . . . . . . . . . . . 22
Ratios of Earnings to Combined Fixed
Charges . . . . . . . . . . . . . . . . . . 23
Accounting Treatment . . . . . . . . . . . . . 23
Capitalization . . . . . . . . . . . . . . . . 24
The Exchange Offer . . . . . . . . . . . . . . 25
Description of Exchange Securities . . . . . . 35
Description of Original Securities . . . . . . 61
Relationship Among the Exchange Capital
Securities, the Exchange Junior
Subordinated Debentures and the
Exchange Guarantee . . . . . . . . . . . . . 62
Certain Federal Income Tax Consequences . . . . 63
ERISA Considerations . . . . . . . . . . . . . 68
Plan of Distribution . . . . . . . . . . . . . 69
Independent Auditors . . . . . . . . . . . . . 70
Validity of Exchange Securities . . . . . . . . 70
</TABLE>
================================================================================
<PAGE> 81
================================================================================
$30,000,000
BSB CAPITAL TRUST I
OFFER TO EXCHANGE ITS
8.125% EXCHANGE CAPITAL SECURITIES
(LIQUIDATION AMOUNT $1,000 PER EXCHANGE CAPITAL SECURITY)
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
FOR ANY AND ALL OF ITS OUTSTANDING
8.125% ORIGINAL CAPITAL SECURITIES
(LIQUIDATION AMOUNT $1,000 PER ORIGINAL CAPITAL SECURITY)
UNCONDITIONALLY GUARANTEED,
AS DESCRIBED HEREIN, BY
BSB BANCORP, INC.
-------------------------------------------------------------------
PROSPECTUS
-------------------------------------------------------------------
October , 1998
================================================================================
<PAGE> 82
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
As authorized by Section 145 of the Delaware General Company Law, the
Company may indemnify its directors and officers against expenses (including
attorneys' fees, judgments, fines and amounts paid in settlement) actually and
reasonably incurred in connection with the defense or settlement of any
threatened, pending or completed legal proceedings in which the director or
officer is involved by reason of the fact that he is or was a director or
officer of the Company if he acted in good faith and in the manner that he
reasonably believed to be in, or not opposed to, the best interests of the
Company and, with respect to any criminal action or proceeding, if he had no
reasonable cause to believe that his conduct was unlawful. If the legal
proceeding, however, is by or in the right of the Company, the director or
officer may not be indemnified in respect of any claim, issue or matter as to
which he shall have been adjudged to be liable to the Company unless a court
determines otherwise.
Article 8 of the Company's Bylaws requires that the Company indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed legal proceeding (other than an action by or in
right of the Company) by reason of the fact that such person is or was a
director, officer, trustee, employee, or agent of the Company, or is or was
serving at the request of the Company as a director, officer, trustee, employee,
or agent of another corporation, association, partnership, joint venture, trust,
employee benefit plan or other enterprise, against expenses (including
attorney's fees, judgments, fines and amounts paid in settlement) actually and
reasonably incurred by such person in connection with such legal proceeding, if
such person acted in good faith and in a manner which such person reasonably
believed to be in, or not opposed to, the best interests of the Company, and,
with respect to any criminal legal proceeding, had no reasonable cause to
believe that such conduct was unlawful. The Company is also required to
indemnify any such person in connection with a legal proceeding brought by or in
the right of the Company to procure a judgment in the Company's favor by reason
of such person's connection to the Company, against such expenses incurred by
such person in connection with the defense or settlement of such legal
proceeding if such person acted in good faith and in a manner which such person
reasonably believed to be in, or not opposed to, the best interests of the
Company. No such indemnification shall be made against expenses in respect of
any claim, issue or matter as to which such person shall have been adjudged to
be liable to the Company or against amounts paid in settlement unless and only
to the extent that there is a determination that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses or amounts paid in
settlement. The Company is permitted to advance expenses incurred by such person
in advance of the final disposition of such legal proceeding upon the receipt of
an undertaking by or on behalf of such person to repay such amount if it shall
ultimately be determined that such person is not entitled to indemnification
from the Company.
The Company also has the power to purchase and maintain insurance on
behalf of its directors, officers, trustees, employees and agents and persons
serving in such capacities with other entities at the Company's request. The
Company has a policy of liability insurance covering its directors and officers,
the effect of which is to reimburse the directors and officers of the Company
against certain damages and expenses resulting from certain claims made against
them caused by their negligent act, error or omission.
The foregoing indemnity and insurance provisions have the effect of
reducing directors' and officers' exposure to personal liability for actions
taken in connection with their respective positions.
II-1
<PAGE> 83
<TABLE>
<CAPTION>
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
-------------------------------------------
<C> <S>
3.1 Certificate of Trust of BSB Capital Trust I, dated as of June 3, 1997. *
3.2 Trust Agreement of BSB Capital Trust I, dated as of July 16, 1998. *
3.3 Amended and Restated Trust Agreement, among BSB Bancorp, Inc., Bankers
Trust Company and Bankers Trust Company (Delaware), dated as of July
24, 1998. *
4.1 Junior Subordinated Indenture, between BSB Bancorp, Inc. and Bankers
Trust Company, dated as of July 24, 1998. *
4.2 Form of Certificate of Exchange Junior Subordinated Debentures.
4.3 Certificate of Trust of BSB Capital Trust I, dated as of June 3, 1997
(filed as Exhibit 3.1 hereto). *
4.4 Trust Agreement of BSB Capital Trust I, dated as of July 16, 1998
(filed as Exhibit 3.2 hereto). *
4.5 Amended and Restated Trust Agreement, among BSB Bancorp, Inc., Bankers
Trust Company and Bankers Trust Company (Delaware), dated as of July
24, 1998 (filed as Exhibit 3.3 hereto). *
4.6 Form of Exchange Capital Security Certificate.
4.7 Guarantee Agreement, dated as of July 24, 1998, between BSB Bancorp,
Inc. and Bankers Trust Company. *
4.8 Registration Rights Agreement, dated July 24, 1998, among BSB Bancorp,
Inc., BSB Capital Trust I and Keefe, Bruyette & Woods, Inc. *
4.9 Form of Exchange Guarantee Agreement by BSB Bancorp, Inc. for the
benefit of the holders of Exchange Capital Securities. *
5.1 Opinion of Hogan & Hartson L.L.P. as to the validity of the securities
registered hereunder (including the consent of that firm).
5.2 Opinion of Morris, James, Hitchens & Williams as to the validity
of the Exchange Capital Securities (including the consent of that firm).
8 Opinion of Hogan & Hartson L.L.P. as to certain federal income
tax matters (including the consent of that firm).
10 Purchase Agreeement, dated July 21, 1998, among BSB Bancorp, Inc., the
Trust and Keefe, Bruyette & Woods, Inc. *
12 Computation of ratio of earnings to combined fixed charges.
21 Subsidiaries of BSB Capital Trust I. *
23.1 Consent of Hogan & Hartson L.L.P. (included as part of Exhibit 5.1 and
Exhibit 8).
23.2 Consent of Morris, James, Hitchens & Williams (included as part of
Exhibit 5.2).
23.3 Consent of PricewaterhouseCoopers LLP.
24 Power of Attorney (incorporated herein by reference from the signature
page of the Registration Statement on Form S-4 filed by BSB Bancorp,
Inc. and BSB Capital Trust I on September 25, 1998).
25 Form T-1 Statement of Eligibility of Bankers Trust Company to act as
trustee. *
99.1 Form of Letter of Transmittal. *
99.2 Form of Notice of Guaranteed Delivery. *
99.3 Form of Exchange Agent Agreement. *
99.4 Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies
and Other Nominees. *
99.5 Form of Client Letter. *
- ----------------
* Previously filed.
</TABLE>
II-2
<PAGE> 84
ITEM 22. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, each of the
registrants has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of such registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, each registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
Each of the undersigned registrants hereby undertakes to respond to
requests for information that is incorporated by reference into the prospectus
pursuant to Items 4, 10(b), 11, or 13 of this Form, within one business day of
receipt of such request, and to send the incorporated documents by first class
mail or other equally prompt means. This includes information contained in
documents filed subsequent to the effective date of the registration statement
through the date of responding to the request.
Each of the undersigned registrants hereby undertakes to supply by means
of a post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-3
<PAGE> 85
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrants
have duly caused this registration statement to be signed on their behalf by
the undersigned, thereunto duly authorized, in Binghamton, New York on October
15, 1998.
BSB BANCORP, INC. BSB CAPITAL TRUST I
By: /s/ Alex S. DePersis By: /s/ Alex S. DePersis
------------------------------------- ---------------------------
Alex S. DePersis Alex S. DePersis,
President and Chief Executive Officer as Administrator
By: /s/ Larry G. Denniston
---------------------------
Larry G. Denniston,
as Administrator
Pursuant to the requirements of the Securities Act, this registration
statement has been signed by the following persons in the capacities indicated
on October 15, 1998.
<TABLE>
<CAPTION>
Signature Title
- --------- -----
<S> <C>
/s/ Alex S. DePersis President, Chief Executive Officer and Director
- ------------------------ (Principal Executive Officer)
Alex S. DePersis
/s/ Edward R. Andrejko Senior Vice President and Chief Financial Officer
- ------------------------ (Principal Financial and Accounting Officer)
Edward R. Andrejko
Ferris G. Akel * Director William H. Rincker * Director
- ------------------------ ------------------------
Ferris G. Akel William H. Rincker
Robert W. Allen * Director Thomas L. Thorn * Director
- ------------------------ ------------------------
Robert W. Allen Thomas L. Thorn
William C. Craine * Director Mark T. O'Neil, Jr. * Director
- ------------------------ ------------------------
William C. Craine Mark T. O'Neil, Jr.
- ------------------------ Director
Thomas F. Kelley
- ------------------------ Director
Herbert R. Levine
David A. Niermeyer *
- ------------------------
David A. Niermeyer Director
</TABLE>
/s/ Larry G. Denniston
- ------------------------
* By power of attorney
Larry G. Denniston
<PAGE> 86
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBITS PAGE NO.
- ----------- -------- --------
<C> <S>
3.1 Certificate of Trust of BSB Capital Trust I, dated as of June 3, 1997. *
3.2 Trust Agreement of BSB Capital Trust I, dated as of July 16, 1998. *
3.3 Amended and Restated Trust Agreement, among BSB Bancorp, Inc., Bankers
Trust Company and Bankers Trust Company (Delaware), dated as of July 24,
1998. *
4.1 Junior Subordinated Indenture, between BSB Bancorp, Inc. and Bankers
Trust Company, dated as of July 24, 1998. *
4.2 Form of Certificate of Exchange Junior Subordinated Debentures.
4.3 Certificate of Trust of BSB Capital Trust I, dated as of June 3, 1997
(filed as Exhibit 3.1 hereto). *
4.4 Trust Agreement of BSB Capital Trust I, dated as of July 16, 1998
(filed as Exhibit 3.2 hereto). *
4.5 Amended and Restated Trust Agreement, among BSB Bancorp, Inc., Bankers
Trust Company and Bankers Trust Company (Delaware), dated as of July 24,
1998 (filed as Exhibit 3.3 hereto). *
4.6 Form of Exchange Capital Security Certificate.
4.7 Guarantee Agreement, dated as of July 24, 1998, between BSB Bancorp, Inc.
and Bankers Trust Company. *
4.8 Registration Rights Agreement, dated July 24, 1998, among BSB Bancorp,
Inc., BSB Capital Trust I and Keefe, Bruyette & Woods, Inc. *
4.9 Form of Exchange Guarantee Agreement by BSB Bancorp, Inc. for the benefit
of the holders of Exchange Capital Securities. *
5.1 Opinion of Hogan & Hartson L.L.P. as to the validity of the securities
registered hereunder (including the consent of that firm).
5.2 Opinion of Morris, James, Hitchens & Williams as to the validity
of the Exchange Capital Securities (including the consent of that firm).
8 Opinion of Hogan & Hartson L.L.P. as to certain federal income
tax matters (including the consent of that firm).
10 Purchase Agreeement, dated July 21, 1998, among BSB Bancorp, Inc., the
Trust and Keefe, Bruyette & Woods, Inc. *
12 Computation of ratio of earnings to combined fixed charges.
21 Subsidiaries of BSB Capital Trust I. *
23.1 Consent of Hogan & Hartson L.L.P. (included as part of Exhibit 5.1 and
Exhibit 8).
23.2 Consent of Morris, James, Hitchens & Williams (included as part of
Exhibit 5.2).
23.3 Consent of PricewaterhouseCoopers LLP.
24 Power of Attorney (incorporated herein by reference from the signature
page of the Registration Statement on Form S-4 filed by BSB Bancorp, Inc.
and BSB Capital Trust I on September 25, 1998).
25 Form T-1 Statement of Eligibility of Bankers Trust Company to act as
trustee. *
99.1 Form of Letter of Transmittal. *
99.2 Form of Notice of Guaranteed Delivery. *
99.3 Form of Exchange Agent Agreement. *
99.4 Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and
Other Nominees. *
99.5 Form of Client Letter. *
- ----------------
* Previously filed.
</TABLE>
<PAGE> 1
EXHIBIT 4.2
BSB BANCORP, INC.
FORM OF
8.125% EXCHANGE JUNIOR SUBORDINATED
DEFERRABLE INTEREST DEBENTURES
DUE JULY 31, 2028
NO. R-2 $30,000,000
CUSIP NO. 055652AC5
BSB BANCORP, INC., a Delaware corporation (hereinafter called the
"Company," which term includes any successor Person under the Indenture
hereinafter referred to), for value received, hereby promises to pay to BSB
Capital Trust I, or registered assigns, the principal sum of Thirty Million
Dollars on July 31, 2028, or such other principal amount represented hereby as
may be set forth in the records of the Securities Registrar hereinafter
referred to in accordance with the Indenture. The Company further promises to
pay interest on said principal from July 24, 1998, or from the most recent
Interest Payment Date to which interest has been paid or duly provided for,
semi-annually (subject to deferral as set forth herein) in arrears on January
31 and July 31 of each year, commencing January 31, 1999 at the rate of 8.125%
per annum, together with Additional Sums, if any, as provided in Section 10.6
of the Indenture, until the principal hereof is paid or duly provided for or
made available for payment; provided that any overdue principal, premium or
Additional Sums and any overdue installment of interest shall bear Additional
Interest at the rate of 8.125% per annum (to the extent that the payment of
such interest shall be legally enforceable), compounded semi-annually from the
dates such amounts are due until they are paid or made available for payment,
and such interest shall be payable on demand. The amount of interest payable
for any period less than a full interest period shall be computed on the basis
of a 360-day year of twelve 30-day months and the actual days elapsed in a
partial month in such period. The amount of interest payable for any full
interest period shall be computed by dividing the applicable rate per annum by
two. The interest so payable, and punctually paid or duly provided for, on any
Interest Payment Date will, as provided in the Indenture, be paid to the Person
in whose name this Security (or one or more Predecessor Securities) is
registered at the close of business on the Regular Record Date for such
interest installment, which shall be the 15th day of January or July (whether
or not a Business Day), as the case may be, next preceding such Interest
Payment Date. Any such interest not so punctually paid or duly provided for
shall forthwith cease to be payable to the Holder on such Regular Record Date
and may either be paid to the Person in whose name this Security (or one or
more Predecessor Securities) is registered at the close of business on a
Special Record Date for the payment of such Defaulted Interest to be fixed by
the Trustee (notice whereof shall be given to Holders of Securities of this
series not less than 10 days prior to such Special Record Date) or be paid at
any time in any other lawful manner not inconsistent with the requirements of
any securities exchange on which the Securities of this series may be listed,
and upon such notice as may be required by such exchange, all as more fully
provided in said Indenture.
So long as no Event of Default has occurred and is continuing, the
Company shall have the right, at any time during the term of this Security,
from time to time to defer the payment of interest on this Security for up to
10 consecutive semi-annually interest payment
<PAGE> 2
periods with respect to each deferral period (each an "Extension Period"),
during which Extension Periods the Company shall have the right to make partial
payments of interest on any Interest Payment Date, and at the end of which the
Company shall pay all interest then accrued and unpaid including Additional
Interest, as provided below; provided, however, that no Extension Period shall
extend beyond the Stated Maturity of the principal of this Security, as then in
effect, and no such Extension Period may end on a date other than an Interest
Payment Date; and provided further, however, that during any such Extension
Period, the Company shall not (i) declare or pay any dividends or distributions
on, or redeem, purchase, acquire or make a liquidation payment with respect to,
any of the Company's capital stock, or (ii) make any payment of principal of or
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 this Security (other than (a) repurchases, redemptions or other
acquisitions of shares of capital stock of the Company in connection with any
employment contract, benefit plan or other similar arrangement with or for the
benefit of any one or more employees, officers, directors or consultants, in
connection with a dividend reinvestment or stockholder stock purchase plan or
in connection with the issuance of capital stock of the Company (or securities
convertible into or exercisable for such capital stock) as consideration in an
acquisition transaction entered into prior to the applicable Extension Period,
(b) as a result of a reclassification, an exchange or conversion of any class
or series of the Company's capital stock (or any capital stock of a Subsidiary
of the Company) for any class or series of the Company's capital stock or of
any class or series of the Company's indebtedness for any class or series of
the Company's capital stock, (c) the purchase of fractional interests in shares
of the Company's capital stock pursuant to the conversion or exchange
provisions of such capital stock or the security being converted or exchanged,
(d) any declaration of a dividend in connection with any Rights Plan, or the
issuance of rights, stock or other property under any Rights Plan, or the
redemption or repurchase of rights pursuant thereto, or (e) any dividend in the
form of stock, warrants, options or other rights where the dividend stock or
the stock issuable upon exercise of such warrants, options or other rights is
the same stock as that on which the dividend is being paid or ranks pari passu
with or junior to such stock). Prior to the termination of any such Extension
Period, the Company may further defer the payment of interest, provided that no
Extension Period shall exceed 10 consecutive semi-annual interest payment
periods, extend beyond the Stated Maturity of the principal of this Security or
end on a date other than an Interest Payment Date. Upon the termination of any
such Extension Period and upon the payment of all accrued and unpaid interest
and any Additional Interest then due on any Interest Payment Date, the Company
may elect to begin a new Extension Period, subject to the above conditions. No
interest shall be due and payable during an Extension Period, except at the end
thereof, but each installment of interest that would otherwise have been due
and payable during such Extension Period shall bear Additional Interest (to the
extent that the payment of such interest shall be legally enforceable) at the
rate of 8.125% per annum, compounded semi-annually and calculated as set forth
in the first paragraph of this Security, from the date on which such amounts
would otherwise have been due and payable until paid or made available for
payment. The Company shall give the Holder of this Security and the Trustee
notice of its election to begin any Extension Period at least one Business Day
prior to the next succeeding Interest Payment Date on which interest on this
Security would be payable but for such deferral or so long as such securities
are held by BSB Capital Trust I (the "Issuer Trust"), at least one Business Day
prior to the earlier of (i) the next succeeding date on which Distributions on
the Capital Securities of the Issuer Trust would be payable but for such
deferral, and (ii) the date on which the Property Trustee of the Issuer Trust
is required to give notice to holders of such Capital Securities of the record
date or the date such Distributions are payable, but in any event not less than
one Business Day prior to such record date.
Payment of the principal of (and premium, if any) and interest on this
Security will be made at the office or agency of the Company maintained for
that purpose in the United
2
<PAGE> 3
States, in such coin or currency of the United States of America as at the
time of payment is legal tender for payment of public and private debts;
provided, however, that at the option of the Company payment of interest may
be made (i) by check mailed to the address of the Person entitled thereto as
such address shall appear in the Securities Register, or (ii) if to a Holder
of $1,000,000 or more in aggregate principal amount of this Security, by wire
transfer in immediately available funds upon written request to the Trustee
not later than 15 calendar days prior to the date on which the interest is
payable.
The indebtedness evidenced by this Security is, to the extent provided
in the Indenture, subordinate and subject in right of payments to the prior
payment in full of all Senior Indebtedness, and this Security is issued subject
to the provisions of the Indenture with respect thereto. Each Holder of this
Security, by accepting the same, (a) agrees to and shall be bound by such
provisions, (b) authorizes and directs the Trustee on his or her behalf to take
such actions as may be necessary or appropriate to effectuate the subordination
so provided, and (c) appoints the Trustee his or her attorney-in-fact for any
and all such purposes. Each Holder hereof, by his or her acceptance hereof,
waives all notice of the acceptance of the subordination provisions contained
herein and in the Indenture by each holder of Senior Indebtedness, whether now
outstanding or hereafter incurred, and waives reliance by each such holder upon
said provisions.
Reference is hereby made to the further provisions of this Security
set forth on the reverse hereof, which further provisions shall for all
purposes have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by
the Trustee referred to on the reverse hereof by manual or facsimile signature,
this Security shall not be entitled to any benefit under the Indenture or be
valid or obligatory for any purpose.
3
<PAGE> 4
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed and sealed this _____ day of __________, 1998.
BSB BANCORP, INC.
By:
----------------------------------------------
Name: Alex S. DePersis
Title: President and Chief Executive Officer
Attest:
- ---------------------------------------
Name: Larry G. Denniston
Title: Vice President and Secretary
CERTIFICATE OF AUTHENTICATION
This is one of the Securities of the series designated therein
referred to in the within-mentioned Indenture.
BANKERS TRUST COMPANY,
as Trustee
By:
----------------------------------------
Name:
Title:
4
<PAGE> 5
REVERSE SIDE
OF
8.125% EXCHANGE JUNIOR SUBORDINATED
DEFERRABLE INTEREST DEBENTURES
This Security is one of a duly authorized issue of securities of the
Company (herein called the "Securities"), issued and to be issued under the
Junior Subordinated Indenture, dated as of July 24, 1998 (herein called the
"Indenture"), between the Company and Bankers Trust Company, as Trustee (herein
called the "Trustee," which term includes any successor trustee under the
Indenture), to which Indenture and all indentures supplemental thereto
reference is hereby made for a statement of the respective rights, limitations
of rights, duties and immunities thereunder of the Company, the Trustee, the
holders of Senior Indebtedness and the Holders of the Securities, and of the
terms upon which the Securities are, and are to be, authenticated and
delivered. This Security is one of the series designated on the face hereof,
limited in aggregate principal amount to $30,000,000.
All terms used in this Security that are defined in the Indenture, or
if not defined in the Indenture, in the Amended and Restated Trust Agreement
dated as of July 24, 1998 (as modified, amended or supplemented from time to
time the "Trust Agreement"), relating to BSB Capital Trust I (the "Issuer
Trust") among the Company, as Depositor, the Trustees named therein and the
Holders from time to time of the Trust Securities issued pursuant thereto shall
have the meanings assigned to them in the Indenture or the Trust Agreement, as
the case may be.
The Company has the right to redeem this Security (i) on or after July
31, 2008, in whole at any time or in part from time to time, or (ii) in whole
(but not in part), at any time within 90 days following the occurrence and
during the continuation of a Tax Event, Investment Company Event, or Capital
Treatment Event, in each case at the Redemption Price described below, and
subject to possible regulatory approval.
In the case of a redemption on or after July 31, 2008, Redemption
Price shall equal the following prices, expressed in percentages of the
principal amount hereof, together with accrued interest to but excluding the
date fixed for redemption, if redeemed during the 12-month period beginning
July 31:
<TABLE>
<CAPTION>
Year Redemption Price
---- ---------------------
<S> <C>
2008 104.063%
2009 103.657%
2010 103.250%
2011 102.844%
2012 102.438%
2013 102.032%
2014 101.626%
2015 101.219%
2016 100.813%
2017 100.407%
</TABLE>
and 100% on or after July 31, 2018.
In the case of a redemption on or after July 31, 2008 following a Tax
Event, Investment Company Event or Capital Treatment Event, the Redemption
Price shall equal the Redemption Price then applicable to a redemption under
the preceding paragraph.
5
<PAGE> 6
In the case of a redemption prior to July 31, 2008 following a Tax
Event, Investment Company Event or Capital Treatment Event in respect of the
Issuer Trust, the Redemption Price shall equal the Make-Whole Amount for a
corresponding $1,000 principal amount hereof, together with accrued interest to
but excluding the date fixed for redemption, which Make-Whole Amount will be
equal to the greater of (i) 100% of the principal amount hereof, and (ii) as
determined by a Quotation Agent (as defined in the Trust Agreement), the sum of
the present values of the principal amount hereof and premium, if any, payable
as part of the Redemption Price with respect to an optional redemption hereof
on July 31, 2008 together with the present values of scheduled payments of
interest (not including the portion of any such payments of interest accrued as
of the Redemption Date) from the date fixed for redemption to July 31, 2008, in
each case discounted to the date fixed for redemption on a semi-annual basis
(assuming a 360-day year consisting of 30-day months) at the Adjusted Treasury
Rate (as defined in the Trust Agreement).
In the event of redemption of this Security in part only, a new
Security or Securities of this series for the unredeemed portion hereof will be
issued in the name of the Holder hereof upon the cancellation hereof.
The Indenture permits, with certain exceptions as therein provided,
the Company and the Trustee at any time to enter into a supplemental indenture
or indentures for the purpose of modifying in any manner the rights and
obligations of the Company and of the Holders of the Securities, with the
consent of the Holders of not less than a majority in principal amount of the
Outstanding Securities of each series to be affected by such supplemental
indenture. The Indenture also contains provisions permitting Holders of
specified percentages in principal amount of the Securities of each series at
the time Outstanding, on behalf of the Holders of all Securities of such
series, to waive compliance by the Company with certain provisions of the
Indenture and certain past defaults under the Indenture and their consequences.
Any such consent or waiver by the Holder of this Security shall be conclusive
and binding upon such Holder and upon all future Holders of this Security and
of any Security issued upon the registration of transfer hereof or in exchange
herefor or in lieu hereof, whether or not notation of such consent or waiver is
made upon this Security.
As provided in and subject to the provisions of the Indenture, if an
Event of Default with respect to the Securities of this series at the time
Outstanding occurs and is continuing, then and in every such case the Trustee
or the Holders of not less than 25% in aggregate principal amount of the
Outstanding Securities of this series may declare the principal amount of all
the Securities of this series to be due and payable immediately, by a notice in
writing to the Company (and to the Trustee if given by Holders), provided that,
if upon an Event of Default, the Trustee or such Holders fail to declare the
principal of all the Outstanding Securities of this series to be immediately
due and payable, the holders of at least 25% in aggregate Liquidation Amount of
the Capital Securities then outstanding shall have the right to make such
declaration by a notice in writing to the Company and the Trustee; and upon any
such declaration the principal amount of and the accrued interest (including
any Additional Interest) on all the Securities of this series shall become
immediately due and payable, provided that the payment of principal and
interest (including any Additional Interest) on such Securities shall remain
subordinated to the extent provided in Article XIII of the Indenture.
No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the obligation of the Company, which
is absolute and unconditional, to pay the principal of (and premium, if any)
and interest (including Additional Interest) on this Security at the times,
place and rate, and in the coin or currency, herein prescribed.
6
<PAGE> 7
As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Security is registrable in the
Securities Register, upon surrender of this Security for registration of
transfer at the office or agency of the Company maintained under Section 10.2
of the Indenture for such purpose, duly endorsed by, or accompanied by a
written instrument of transfer in form satisfactory to the Company and the
Securities Registrar duly executed by, the Holder hereof or such Holder's
attorney duly authorized in writing, and thereupon one or more new Securities
of this series, of like tenor, of authorized denominations and for the same
aggregate principal amount, will be issued to the designated transferee or
transferees.
The Securities of this series are issuable only in registered form
without coupons in denominations of $100,000 and any integral multiple of
$1,000 in excess thereof. As provided in the Indenture and subject to certain
limitations therein set forth, Securities of this series are exchangeable for a
like aggregate principal amount of Securities of this series and of like tenor
of a different authorized denomination, as requested by the Holder surrendering
the same.
No service charge shall be made for any such registration of transfer
or exchange, but the Company may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Security for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name this Security is registered as the owner
hereof for all purposes, whether or not this Security be overdue, and neither
the Company, the Trustee nor any such agent shall be affected by notice to the
contrary.
The Company and, by its acceptance of this Security or a beneficial
interest therein, the Holder of, and any Person that acquires a beneficial
interest in, this Security agrees that for United States federal, state and
local tax purposes it is intended that this Security constitute indebtedness.
THIS SECURITY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK.
THIS SECURITY IS A DIRECT AND UNSECURED OBLIGATION OF THE COMPANY,
DOES NOT EVIDENCE DEPOSITS AND IS NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION OR ANY OTHER INSURER OR GOVERNMENT AGENCY.
7
<PAGE> 1
EXHIBIT 4.6
FORM OF
EXCHANGE CAPITAL SECURITY CERTIFICATE
This Exchange Capital Securities Certificate is a Global Capital
Securities Certificate within the meaning of the Trust Agreement hereinafter
referred to and is registered in the name of a Depositary or a nominee of a
Depositary. This Exchange Capital Security Certificate is exchangeable for
Exchange Capital Securities Certificates registered in the name of a person
other than the Depositary or its nominee only in the limited circumstances
described in the Trust Agreement and may not be transferred except as a whole
by the Depositary to a nominee of the Depositary or by a nominee of the
Depositary to the Depositary or another nominee of the Depositary, except in
the limited circumstances described in the Trust Agreement.
Unless this Exchange Capital Securities Certificate is presented by an
authorized representative of The Depository Trust Company, a New York
Corporation ("DTC"), to BSB Capital Trust I or its agent for registration of
transfer, exchange or payment, and any Exchange Capital Securities Certificate
issued is registered in the name of such nominee as is requested by an
authorized representative of DTC (and any payment is made to Cede & Co. or to
such entity as is requested by an authorized representative of DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO A PERSON
IS WRONGFUL inasmuch as the registered owner hereof, has an interest herein.
THE EXCHANGE CAPITAL SECURITIES WILL BE ISSUED AND MAY BE TRANSFERRED
ONLY IN BLOCKS HAVING A LIQUIDATION AMOUNT OF NOT LESS THAN $100,000 (100
EXCHANGE CAPITAL SECURITIES). ANY SUCH TRANSFER OF EXCHANGE CAPITAL SECURITIES
IN A BLOCK HAVING A LIQUIDATION AMOUNT OF LESS THAN $100,000 SHALL BE DEEMED TO
BE VOID AND OF NO LEGAL EFFECT WHATSOEVER. ANY SUCH TRANSFEREE SHALL BE DEEMED
NOT TO BE THE HOLDER OF SUCH EXCHANGE CAPITAL SECURITIES FOR ANY PURPOSE,
INCLUDING BUT NOT LIMITED TO THE RECEIPT OF DISTRIBUTIONS OF SUCH EXCHANGE
CAPITAL SECURITIES, AND SUCH TRANSFEREE SHALL BE DEEMED TO HAVE NO INTEREST
WHATSOEVER IN SUCH EXCHANGE CAPITAL SECURITIES.
NO EMPLOYEE BENEFIT OR OTHER PLAN OR INDIVIDUAL RETIREMENT ACCOUNT
SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS
AMENDED ("ERISA"), OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS
AMENDED (THE "CODE") (EACH, A "PLAN"), NO ENTITY WHOSE UNDERLYING ASSETS
INCLUDE "PLAN ASSETS" BY REASON OF ANY PLAN'S INVESTMENT IN THE ENTITY (A "PLAN
ASSET ENTITY"), AND NO PERSON INVESTING "PLAN ASSETS" OF ANY PLAN, MAY ACQUIRE
OR HOLD THIS EXCHANGE CAPITAL SECURITIES CERTIFICATE OR ANY INTEREST HEREIN,
UNLESS SUCH PURCHASE OR HOLDING IS COVERED BY THE EXEMPTIVE RELIEF PROVIDED BY
U.S. DEPARTMENT OF LABOR PROHIBITED TRANSACTION CLASS EXEMPTION ("PTCE") 96-23,
95-60, 91-38, 90-1 OR 84-14 OR ANOTHER APPLICABLE EXEMPTION WITH RESPECT TO
SUCH PURCHASE OR HOLDING. ANY PURCHASER OR HOLDER OF THIS EXCHANGE CAPITAL
SECURITIES CERTIFICATE OR ANY INTEREST HEREIN THAT IS A PLAN OR A PLAN ASSET
ENTITY OR IS PURCHASING SUCH SECURITIES ON BEHALF OF OR WITH "PLAN ASSETS" WILL
BE DEEMED TO HAVE REPRESENTED BY ITS PURCHASE AND HOLDING HEREOF THAT (A) THE
PURCHASE AND HOLDING OF THE EXCHANGE CAPITAL SECURITIES IS COVERED BY THE
EXEMPTIVE RELIEF PROVIDED BY PTCE 96-23, 95-60, 91-38, 90-1 OR 84-14 OR ANOTHER
APPLICABLE EXEMPTION, (B) THE COMPANY AND THE ADMINISTRATORS ARE NOT
"FIDUCIARIES" WITHIN THE MEANING OF SECTION 3(21) OF ERISA AND THE REGULATIONS
THEREUNDER, WITH RESPECT TO SUCH PERSON'S INTEREST IN THE EXCHANGE CAPITAL
SECURITIES OR THE EXCHANGE JUNIOR SUBORDINATED DEBENTURES, AND (C) IN
PURCHASING THE EXCHANGE CAPITAL SECURITIES SUCH PERSON APPROVES THE PURCHASE OF
THE EXCHANGE JUNIOR SUBORDINATED DEBENTURES AND THE APPOINTMENT OF THE ISSUER
TRUSTEES.
<PAGE> 2
CERTIFICATE NUMBER: AGGREGATE LIQUIDATION AMOUNT:
P-2 $30,000,000
(30,000 EXCHANGE CAPITAL SECURITIES)
CUSIP NO. 05565N AC9
CERTIFICATE EVIDENCING EXCHANGE CAPITAL SECURITIES
OF
BSB CAPITAL TRUST I
8.125% EXCHANGE CAPITAL SECURITIES
(LIQUIDATION AMOUNT $1,000 PER EXCHANGE CAPITAL SECURITY)
BSB CAPITAL TRUST I, a statutory business trust formed under the laws
of the State of Delaware (the "Issuer Trust"), hereby certifies that Cede & Co.
(the "Holder") is the registered owner of Thirty Million Dollars ($30,000,000)
aggregate liquidation amount of exchange capital securities of the Issuer Trust
representing a preferred undivided beneficial interest in the assets of the
Issuer Trust and designated the BSB Capital Trust I 8.125% Exchange Capital
Securities (liquidation amount $1,000 per Exchange Capital Security) (the
"Exchange Capital Securities"). The Exchange Capital Securities are
transferable on the books and records of the Issuer Trust, in person or by a
duly authorized attorney, upon surrender of this certificate duly endorsed and
in proper form for transfer as provided in Section 5.5 of the Trust Agreement
(as defined below). The designations, rights, privileges, restrictions,
preferences and other terms and provisions of the Exchange Capital Securities
are set forth in, and this certificate and the Exchange Capital Securities
represented hereby are issued and shall in all respects be subject to the terms
and provisions of, the Amended and Restated Trust Agreement of the Issuer
Trust, dated as of July 24, 1998, as the same may be amended from time to time
(the "Trust Agreement"), among BSB Bancorp, Inc., as Depositor, Bankers Trust
Company, as Property Trustee, Bankers Trust (Delaware), as Delaware Trustee,
the Administrators signatory thereto, and the Holders of Trust Securities,
including the designation of the terms of the Exchange Capital Securities as
set forth therein. The Holder is entitled to the benefits of the Exchange
Guarantee Agreement entered into by BSB Bancorp, Inc., a Delaware corporation,
and Bankers Trust Company, as Guarantee Trustee, dated as of _____________,
1998 (the "Exchange Guarantee Agreement"), to the extent provided therein. The
Issuer Trust will furnish a copy of the Trust Agreement and the Exchange
Guarantee Agreement to the Holder without charge upon written request to the
Issuer Trust at its principal place of business.
Upon receipt of this certificate, the Holder is bound by the Trust
Agreement and is entitled to the benefits thereunder.
Terms used but not defined herein have the meanings set forth in the
Trust Agreement.
2
<PAGE> 3
IN WITNESS WHEREOF, one of the Administrators of the Issuer Trust has
executed this certificate this _________ day of ___________, 1998.
BSB CAPITAL TRUST I
By:
-----------------------------------
Name: Larry G. Denniston
Title: Administrator
AUTHENTICATED AND REGISTERED:
BANKERS TRUST COMPANY,
as Property Trustee and Securities Registrar
By:
------------------------------------------------
Name:
Title:
3
<PAGE> 4
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this
Exchange Capital Security to:
- ---------------------------------------------------
(Insert assignee's social security or tax
identification number)
- ---------------------------------------------------
- ---------------------------------------------------
(Insert address and zip code of assignee)
and irrevocably appoints________________________________________________________
___________________________________________________
agent to transfer this Exchange Capital Securities Certificate on the books of
the Issuer Trust. The agent may substitute another to act for him or her.
Date:
------------------
Signature:
----------------------------------
(Sign exactly as your name appears on the other side of this
Exchange Capital Securities Certificate)
- -----------------------
The signature(s) should be guaranteed by an eligible guarantor institution
(banks, stockbrokers, savings and loan associations and credit unions with
membership in an approved signature guarantee medallion program), pursuant to
S.E.C. Rule 17Ad-15.
4
<PAGE> 1
EXHIBIT 5.1
October 16, 1998
Board of Directors
BSB Bancorp, Inc.
58-68 Exchange Street
Binghamton, New York 13902
Ladies and Gentlemen:
We are acting as special counsel to BSB Bancorp, Inc., a Delaware
corporation (the "Corporation") and holder of all of the Common Securities of
BSB Capital Trust I, a Delaware statutory business trust (the "Trust"), in
connection with the registration statement on Form S-4, as amended (File Nos.
333-64335 and 333-64335-01, and hereinafter referred to as the "Registration
Statement"), filed with the Securities and Exchange Commission, relating to
(i) the issuance by the Trust of up to and including $30.0 million aggregate
Liquidation Amount of 8.125% Exchange Capital Securities (the "Exchange
Capital Securities"), in exchange for up to and including $30.0 million
aggregate Liquidation Amount of its outstanding 8.125% Capital Securities
(the "Original Capital Securities"); (ii) the issuance by the Corporation to
the Trust, in an aggregate principal amount corresponding to the aggregate
Liquidation Amount of the Exchange Capital Securities, of the Corporation's
8.125% Exchange Junior Subordinated Deferrable Interest Debentures due July
31, 2028 (the "Exchange Junior Subordinated Debentures"), in exchange for a
comparable aggregate principal amount of the Corporation's outstanding 8.125%
Junior Subordinated Deferrable Interest Debentures due July 31, 2028 (the
"Original Junior Subordinated Debentures"); and (iii) the guarantee by the
Corporation (the "Exchange Guarantee") in connection with the 8.125% Exchange
Capital Securities. This opinion letter is furnished to you at your request
to enable you to fulfill the requirements of Item 601(b)(5) of Regulation
S-K, 17 C.F.R. Section 229.601(b)(5), in connection with the Registration
Statement.
For purposes of this opinion letter, we have examined copies of
the following documents:
1. An executed copy of the Registration Statement.
2. The Certificate of Incorporation of the Corporation, with
amendments thereto, as certified by the Secretary of the
Corporation on the date hereof as then being complete,
accurate and in effect.
3. The Bylaws of the Corporation, as certified by the
Secretary of the Corporation on the date hereof as then
being complete, accurate and in effect.
4. An executed copy of the Junior Subordinated Indenture (the
"Indenture"), dated as of July 24, 1998, between the
Corporation and the Bankers Trust Company ("BTC"), pursuant
to which the Exchange Junior Subordinated Debentures will
be issued.
5. An executed copy of the Amended and Restated Trust
Agreement, dated as of July 24, 1998, among the
Corporation, BTC and Bankers Trust Company (Delaware) and
the Administrators named therein, pursuant to which the
Exchange Capital Securities will be issued.
6. The form of Exchange Guarantee Agreement.
<PAGE> 2
Board of Directors
BSB Bancorp, Inc.
October 16, 1998
Page 2
7. The form of Exchange Capital Security.
8. The form of Exchange Junior Subordinated Debenture.
9. The Registration Rights Agreement, dated as of July 24,
1998, among the Corporation, the Trust and Keefe, Bruyette
& Woods, Inc.
10. Resolutions of the Board of Directors of the Corporation
adopted on June 22, 1998, and Resolutions adopted by the
Executive Committee of the Board of Directors of the
Corporation on July 15, 1998 and July 21, 1998, both as
certified by the Secretary of the Corporation on the date
hereof as then being complete, accurate and in effect,
relating to, among other things, the Exchange Offering.
In our examination of the aforesaid documents, we have assumed
the genuineness of all signatures, the legal capacity of natural persons, the
authenticity, accuracy and completeness of all documents submitted to us, and
the conformity with the original documents of all documents submitted to us
as certified, telecopied, photostatic, or reproduced copies. This opinion
letter is given, and all statements herein are made, in the context of the
foregoing.
This opinion letter is based as to matters of law solely on the
General Corporation Law of the State of Delaware and the contract law of the
State of New York (but not including any statutes, ordinances, administrative
decisions, rules or regulations of any political subdivision of the State of
New York). We express no opinion herein as to any other laws, statutes,
regulations, or ordinances.
Based upon, subject to, and limited by the foregoing, we are of
the opinion that:
(i) following effectiveness of the Registration Statement and
when executed and authenticated in the manner provided for in the
Indenture and delivered against surrender and cancellation of a
like aggregate principal amount of Original Junior Subordinated
Debentures as contemplated in the Registration Rights Agreement,
the Exchange Junior Subordinated Debentures will constitute valid
and binding obligations of the Corporation enforceable in
accordance with their terms, except as may be limited by
bankruptcy, insolvency, reorganization, moratorium or other laws
affecting creditors' rights (including, without limitation, the
effect of statutory and other law regarding fraudulent
conveyances, fraudulent transfers and preferential transfers) and
as may be limited by the exercise of judicial discretion and the
application of principles of equity including, without
limitation, requirements of good faith, fair dealing,
conscionability and materiality (regardless of whether the
Exchange Junior Subordinated Debentures are considered in a
proceeding in equity or at law); and
(ii) following effectiveness of the Registration Statement and
when executed by the Corporation and BTC, as Guarantee Trustee,
and delivered as contemplated in the
<PAGE> 3
Board of Directors
BSB Bancorp, Inc.
October 16, 1998
Page 3
Registration Rights Agreement, the Exchange Guarantee will constitute a
valid and binding obligation of the Corporation enforceable in accordance
with its terms, except as may be limited by bankruptcy, insolvency,
reorganization, moratorium or other laws affecting creditors' rights
(including, without limitation, the effect of statutory and other law
regarding fraudulent conveyances, fraudulent transfers and preferential
transfers) and as may be limited by the exercise of judicial discretion
and the application of principles of equity including, without
limitation, requirements of good faith, fair dealing, conscionability and
materiality (regardless of whether the Exchange Guarantee is considered
in a proceeding in equity or at law).
The above opinions shall be understood to mean only that if there
is a default in performance of an obligation, (i) if a failure to pay or
other damage can be shown and (ii) if the defaulting party can be brought
into a court which will hear the case and apply the governing law, then,
subject to the availability of defenses, and to the exceptions set forth
above, the court will provide a money damage (or perhaps injunctive or
specific performance) remedy.
We assume no obligation to advise you of any changes in the
foregoing subsequent to the delivery of this opinion letter. This opinion
letter has been prepared solely for your use in connection with the filing of
the Registration Statement on the date of this opinion letter and should not
be quoted in whole or in part or otherwise be referred to, nor filed with or
furnished to any governmental agency or other person or entity, without the
prior written consent of this firm.
We hereby consent to the filing of this opinion letter as Exhibit
5.1 to the Registration Statement and to the reference to this firm under the
caption "Validity of the Exchange Securities" in the prospectus constituting
a part of the Registration Statement. In giving this consent, we do not
thereby admit that we are an "expert" within the meaning of the Securities
Act of 1933, as amended.
Very truly yours,
HOGAN & HARTSON L.L.P.
<PAGE> 1
EXHIBIT 5.2
October __, 1998
BSB Capital Trust I
58-68 Exchange Street
Binghamton, NY 13902
RE: BSB CAPITAL TRUST I
Ladies and Gentlemen:
We have acted as special Delaware counsel for BSB Capital Trust I, a
Delaware business trust (the "Trust"), for purposes of giving the opinions
set forth herein. This opinion letter is being furnished to you at your
request.
For purposes of giving the opinions set forth below, our examination of
documents has been limited to the examination of originals or copies
furnished to us of the following:
(a) The Trust Agreement of the Trust, dated as of July 16, 1998,
between BSB Bancorp, Inc. (the "Company") and the trustees of the Trust named
therein;
(b) The Certificate of Trust of the Trust, as filed in the office of
the Secretary of State of the State of Delaware (the "Secretary of State") on
July 16, 1998 (the "Certificate");
(c) The Amended and Restated Trust Agreement of the Trust, dated as
of July 24, 1998 (the "Declaration"), among the Company, as Depositor, the
trustees of the Trust named therein (the "Trustees") and the holders, from
time to time, of undivided beneficial interests in the assets of the Trust;
(d) The Registration Statement on Form S-4 (Registration Nos.
333-64335; 333-64335-01) (the "Registration Statement"), including a
prospectus (the "Prospectus"), relating to the 8.125% Exchange Capital
Securities (Liquidation Amount $1,000 per Exchange Capital Security) of the
Trust representing preferred undivided beneficial interests in the assets of
the Trust (each, an "Exchange Capital Security" and collectively, the
"Exchange Capital Securities"), as filed with the Securities and Exchange
Commission on or about September 25, 1998; and
(e) A Certificate of Good Standing for the Trust, dated October __,
1998, obtained from the Secretary of State.
<PAGE> 2
Unless otherwise defined herein, all capitalized terms used in this
opinion letter shall have the respective meanings provided in the
Declaration, except that reference herein to any document shall mean such
document as in effect on the date hereof.
For the purposes of this opinion letter, we have not reviewed any
documents other than the documents listed in paragraphs (a) through (e)
above. In particular, we have not reviewed any document (other than the
documents listed in paragraphs (a) through (e) above) that is referred to in
or incorporated by reference into the documents reviewed by us. We have
assumed that there exists no provision in any document that we have not
reviewed that bears upon or is inconsistent with or contrary to the opinions
stated herein. We have conducted no factual investigation
of our own but rather have relied solely upon the foregoing documents, the
statements and information set forth therein and the additional matters
recited or assumed herein, all of which we have assumed to be true, complete
and accurate in all material respects.
With respect to all documents examined by us, we have assumed (i) the
authenticity of all documents submitted to us as authentic originals, (ii)
the conformity with the originals of all documents submitted to us as copies
or forms, and (iii) the genuineness of all signatures.
For purposes of this opinion letter, we have assumed (i) that the
Declaration constitutes the entire agreement among the parties thereto with
respect to the subject matter thereof, including with respect to the
creation, operation, and termination of the Trust, and that the Declaration
and the Certificate are in full force and effect and have not been amended,
(ii) except to the extent provided in paragraph 1 below, the due creation,
due formation or due organization, as the case may be, and valid existence in
good standing of each party to the documents examined by us under the laws of
the jurisdiction governing its creation, formation or organization, (iii) the
legal capacity of each natural person who is a party to the documents
examined by us, (iv) that each of the parties to the documents examined by us
has all requisite power and authority to execute and deliver, and to perform
its obligations under, such documents, (v) that each of the parties to the
documents examined by us has duly authorized, executed and delivered such
documents, (vi) the receipt by each Person to whom an Exchange Capital
Security is to be issued by the Trust (the "Exchange Capital Security
Holders") of an appropriate certificate for such Exchange Capital Security
and the exchange by each Exchange Capital Security Holder of its validly
issued Capital Securities accepted for exchange for the Exchange Capital
Securities to be issued to it, in accordance with the Declaration and the
Registration Statement, and (vii) that the Exchange Capital Securities are
issued to the Exchange Capital Security Holders in accordance with the
Declaration and the Registration Statement. We have not participated in the
preparation of the Registration Statement and assume no responsibility for its
contents.
<PAGE> 3
The opinions in this letter are limited to the laws of the State of
Delaware (other than the securities laws of the State of Delaware) and we
have not considered and express no opinion on the effect of or concerning
matters involving the laws of any other jurisdiction, or rules, regulations,
orders and judicial and administrative decisions relating to such laws,
including, without limitation, the federal laws of the United States of
America.
Based upon the foregoing, and subject to the assumptions,
qualifications, limitations and exceptions set forth herein, we are of the
opinion that:
1. The Trust has been duly formed and is validly existing in good
standing as a business trust under the Delaware Business Trust Act, 12 Del.
C. Section 3801, et seq.
2. The Exchange Capital Securities will represent valid and, subject
to the qualifications set forth in paragraph 3 below, fully paid and
nonassessable undivided beneficial interests in the assets of the Trust.
3. The Exchange Capital Security Holders, as beneficial owners of
the Trust, will be entitled to the same limitation of personal liability
extended to stockholders of private corporations for profit organized under
the General Corporation Law of the State of Delaware. We note that the
Exchange Capital Security Holders may be obligated to make payments and
provide indemnity and/or security as set forth in the Declaration.
We consent to the filing of this opinion letter with the Securities and
Exchange Commission as an exhibit to the Registration Statement. In giving
the foregoing consent, we do not thereby admit that we come within the
category of Persons whose consent is required under Section 7 of the
Securities Act of 1933, as amended, or the rules and regulations of the
Securities and Exchange Commission thereunder. Except as stated above,
without our prior written consent, this opinion letter may not be furnished
or quoted to, or relied upon by, any other Person for any purpose.
Very truly yours,
<PAGE> 1
EXHIBIT 8
October 16, 1998
BSB Bancorp, Inc.
56-58 Exchange Street
Binghampton, New York 13902
RE: BSB CAPITAL TRUST I
8.125% EXCHANGE CAPITAL SECURITIES
Ladies and Gentlemen:
We have acted as special counsel to BSB Bancorp, Inc., a Delaware
chartered bank holding company (the "Corporation") and sponsor of BSB Capital
Trust I, a statutory business trust organized under the Delaware Business
Trust Act, 12 Del. C. Section 3801 et seq (the "Trust"), in connection with a
registration statement on Form S-4, as amended (File Nos. 333-64335 and
333-64335-01, and hereinafter referred to as the "Registration Statement"),
filed with the Securities and Exchange Commission relating to (i) the
exchange of up to $30,000,000.00 aggregate liquidation amount of the Trust's
8.125% Exchange Capital Securities (the "Exchange Capital Securities") for a
like liquidation amount of the Trust's 8.125% Original Capital Securities
(the "Original Capital Securities") (the "Exchange Offer"). Pursuant to the
Exchange Offer, the Company is also offering to exchange (i) up to
$30,000,000.00 aggregate principal amount of its 8.125% Exchange Junior
Subordinated Deferrable Interest Debentures (the "Exchange Junior
Subordinated Debentures") for a like aggregate principal amount of its 8.125%
Original Junior Subordinated Deferrable Interest Debentures (the "Original
Junior Subordinated Debentures"), and (ii) its guarantee of payments of cash
distributions and payments on liquidation of the Trust or redemption of the
Exchange Capital Securities (the "Exchange Guarantee") for a like guarantee
in respect of the Original Capital Securities (the "Original Guarantee").
Capitalized terms used in this letter and not otherwise defined herein shall
have the meaning set forth in the prospectus (the "Prospectus") included as
part of the Registration Statement.
The opinion set forth in this letter is based on relevant current
provisions of the Internal Revenue Code of 1986, as amended (the "Code"),
Treasury Regulations thereunder (including proposed and temporary Treasury
Regulations),
<PAGE> 2
BSB Bancorp, Inc.
October 16, 1998
Page 2
and interpretations of the foregoing as expressed in court decisions,
administrative determinations (including administrative explanations of proposed
and final Treasury Regulations), and legislative history as of the date hereof.
These provisions and interpretations are subject to changes, which may or may
not be retroactive in effect, that might result in material modifications of our
opinion.
In rendering the following opinion, we have examined such
statutes, regulations, records, certificates and other documents as we have
considered necessary or appropriate as a basis for such opinions, including
the following: (i) the Trust Agreement; (ii) the Registration Statement;
(iii) the form of the Capital Securities; (iv) the Indenture; and (v) other
documents we have deemed necessary to render the opinion set forth in this
letter.
In our review, we have assumed that all of the representations
and statements set forth in such documents are true and correct, and all of
the obligations imposed by any such documents on the parties thereto have
been and will continue to be performed or satisfied in accordance with their
terms. We also have assumed the genuineness of all signatures, the proper
execution of all documents, the authenticity of all documents submitted to us
as originals, the conformity to originals of documents submitted to us as
copies, and the authenticity of the originals from which any copies were made.
For purposes of rendering our opinion, we have not made an
independent investigation of the facts set forth in any of the
above-referenced documents, including the Prospectus and the Trust
Agreement. We have consequently relied upon representations and information
presented in such documents.
Based upon, and subject to, the foregoing, we are of the opinion
that the information in the Prospectus under the caption "Certain Federal
Income Tax Consequences," to the extent that such information constitutes
matters of law or legal conclusions or purports to describe certain
provisions of the U.S. federal income tax laws, has been reviewed by us and
is a correct summary in all material respects of the matters discussed
therein.
We hereby consent to the filing of this opinion as an exhibit to
the Registration Statement and to the reference to us under the caption
"Certain Federal Income Tax Consequences" in the Prospectus. In giving such
consent, we
<PAGE> 3
BSB Bancorp, Inc.
October 16, 1998
Page 3
do not admit that we are in the category of person whose consent is required
under Section 7 of the Securities Act of 1933, as amended.
Very truly yours,
Hogan & Hartson L.L.P
<PAGE> 1
EXHIBIT 12
COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES
<TABLE>
<S> <C>
EXCLUDING INTEREST ON DEPOSITS INCLUDING INTEREST ON DEPOSITS
1997 1997
---- ----
pretax income 27,720,000 pretax income 27,720,000
borrowings expense 10,080,235 total interest expense 62,015,988
---------- ----------
total 37,800,235 total 89,735,988
divided by divided by
borrowings expense 10,080,235 total interest expense 62,015,988
---------- ----------
3.75 1.45
================================================================================================================
EXCLUDING INTEREST ON DEPOSITS INCLUDING INTEREST ON DEPOSITS
1996 1996
---- ----
pretax income 25,078,046 pretax income 25,078,046
borrowings expense 5,146,385 total interest expense 52,470,742
---------- ----------
total 30,224,431 total 77,548,788
divided by divided by
borrowings expense 5,146,385 total interest income 52,470,742
---------- ----------
5.87 1.48
================================================================================================================
EXCLUDING INTEREST ON DEPOSITS INCLUDING INTEREST ON DEPOSITS
1995 1995
---- ----
pretax income 20,769,346 pretax income 20,769,346
borrowings expense 6,166,894 total interest expense 50,421,804
---------- ----------
total 26,938,240 total 71,191,150
divided by divided by
borrowings expense 6,166,894 total interest income 50,421,804
---------- ----------
4.37 1.41
================================================================================================================
EXCLUDING INTEREST ON DEPOSITS INCLUDING INTEREST ON DEPOSITS
1994 1994
---- ----
pretax income 21,158,349 pretax income 21,158,349
borrowings expense 4,116,348 total interest expense 39,201,768
---------- ----------
total 25,274,697 total 60,360,117
divided by divided by
borrowings expense 4,116,348 total interest expense 39,201,768
---------- ----------
6.14 1.54
================================================================================================================
EXCLUDING INTEREST ON DEPOSITS INCLUDING INTEREST ON DEPOSITS
1993 1993
---- ----
pretax income 22,076,654 pretax income 22,076,654
borrowings expense 4,943,423 total interest expense 35,261,913
---------- ----------
total 27,020,077 total 57,338,567
divided by divided by
borrowings expense 4,943,423 total interest expense 35,261,913
---------- ----------
5.47 1.63
================================================================================================================
EXCLUDING INTEREST ON DEPOSITS INCLUDING INTEREST ON DEPOSITS
SIX MONTHS ENDED SIX MONTHS ENDED
30-JUNE-98 30-JUNE-98
---------- ----------
pretax income 15,537,000 pretax income 15,537,000
borrowings expense 5,480,000 total interest expense 36,082,000
---------- ----------
total 21,017,000 total 51,619,000
divided by divided by
borrowings expense 5,480,000 total interest expense 36,082,000
---------- ----------
3.84 1.43
================================================================================================================
EXCLUDING INTEREST ON DEPOSITS INCLUDING INTEREST ON DEPOSITS
SIX MONTHS ENDED SIX MONTHS ENDED
30-JUNE-97 30-JUNE-97
---------- ----------
pretax income 13,319,000 pretax income 13,319,000
borrowings expense 4,596,000 total interest expense 29,618,000
---------- ----------
total 17,915,000 total 42,937,000
divided by divided by
borrowings expense 4,596,000 total interest expense 29,618,000
---------- ----------
3.90 1.45
================================================================================================================
</TABLE>
<PAGE> 1
EXHIBIT 23.3
[PRICEWATERHOUSECOOPERS LOGO]
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this registration statement of
BSB Bancorp, Inc. and BSB Capital Trust I on Form S-4 (Registration Statement)
of our report dated January 23, 1998, on our audits of the consolidated
financial statements of BSB Bancorp, Inc. as of December 31, 1997 and
1996, and for the years ended December 31, 1997, 1996, and 1995, which report
is included in the Annual Report on Form 10-K. We also consent to the
reference to our firm under the caption "Selected Consolidated Financial
Data and Other Information."
/s/ PRICEWATERHOUSECOOPERS LLP
PricewaterhouseCoopers LLP
Syracuse, New York
October 16, 1998
