<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT IS NOT COMPLETE AND MAY BE +
+CHANGED. WE MAY NOT DELIVER THESE SECURITIES UNTIL A FINAL PROSPECTUS +
+SUPPLEMENT IS DELIVERED. THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING +
+PROSPECTUS ARE NOT OFFERS TO SELL THESE SECURITIES AND WE ARE NOT SOLICITING +
+OFFERS TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT +
+PERMITTED. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
FILED PURSUANT TO RULE 424(b)(5)
FILE NUMBER 333-64877
SUBJECT TO COMPLETION, DATED DECEMBER 7, 1998
PROSPECTUS SUPPLEMENT
(to Prospectus dated October 19, 1998)
2,000,000 CAPITAL SECURITIES
BAY VIEW CAPITAL I
% CUMULATIVE CAPITAL SECURITIES
(LIQUIDATION AMOUNT $25 PER CAPITAL SECURITY)
FULLY AND UNCONDITIONALLY GUARANTEED, TO THE EXTENT DESCRIBED HEREIN, BY
BAY VIEW CAPITAL CORPORATION
For each Capital Security that you own, you will receive cumulative cash
distributions at an annual rate of % on March 31, June 30, September 30 and
December 31 of each year, beginning March 31, 1999. We may defer payment of
distributions at any time for up to 20 consecutive quarters. The Capital
Securities are effectively subordinated to all Senior Indebtedness of Bay View
Capital Corporation. The Capital Securities mature on December 31, 2028. The
Trust may redeem the Capital Securities, at a redemption price of $25 per
Capital Security plus accrued and unpaid distributions, at any time on or after
December 31, 2003, or earlier under certain circumstances. A brief description
of the Capital Securities can be found under "Summary" in this Prospectus
Supplement.
We plan to list the Capital Securities on the Nasdaq National Market under
the trading symbol "BVCCP."
-----------
WE URGE YOU TO CAREFULLY READ THE "RISK FACTORS" SECTION BEGINNING ON PAGE
S-11, WHERE WE DESCRIBE SPECIFIC RISKS RELATED TO AN INVESTMENT IN THE CAPITAL
SECURITIES AND RISKS RELATING TO THE COMPANY, ALONG WITH THE REMAINDER OF THIS
PROSPECTUS SUPPLEMENT AND THE PROSPECTUS, BEFORE YOU MAKE YOUR INVESTMENT
DECISION.
-----------
THESE SECURITIES ARE NOT SAVINGS ACCOUNTS, DEPOSITS OR OBLIGATIONS OF ANY
BANK AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY
OTHER GOVERNMENTAL AGENCY.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS SUPPLEMENT OR PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
=============================================================================
PER CAPITAL
SECURITY TOTAL
- -----------------------------------------------------------------------------
<S> <C> <C>
Public Offering Price $25.00 $50,000,000
- -----------------------------------------------------------------------------
Underwriting Fees to be Paid by the
Company $ $
- -----------------------------------------------------------------------------
Proceeds to the Trust $25.00 $50,000,000
=============================================================================
</TABLE>
We have granted the Underwriters an option to purchase up to 300,000
additional Capital Securities to cover any over-allotments.
-----------
DAIN RAUSCHER WESSELS
A DIVISION OF DAIN RAUSCHER INCORPORATED
EVEREN SECURITIES, INC.
PIPER JAFFRAY INC.
SUTRO & CO. INCORPORATED
The date of this Prospectus Supplement is , 1998.
<PAGE>
ABOUT THIS PROSPECTUS SUPPLEMENT
You should read this Prospectus Supplement along with the Prospectus that
follows. Both documents contain information you should consider when making
your investment decision. You should rely only on the information provided or
incorporated by reference in this Prospectus Supplement and the accompanying
Prospectus. We have not authorized anyone else to provide you with different
information. We are not making an offer of the Capital Securities in any state
where an offer is not permitted. The information in this Prospectus Supplement
and the accompanying Prospectus is accurate only as of the dates of this
Prospectus Supplement and the accompanying Prospectus, regardless of the time
of delivery of this Prospectus Supplement and the accompanying Prospectus or
any sale of the Capital Securities.
----------------
TABLE OF CONTENTS
<TABLE>
<S> <C>
PROSPECTUS SUPPLEMENT
<CAPTION>
PAGE
----
<S> <C>
Summary.................................................................... S-3
Risk Factors............................................................... S-11
Use of Proceeds............................................................ S-21
Accounting and Regulatory Capital Treatment................................ S-21
Capitalization............................................................. S-22
The Trust.................................................................. S-23
Description of the Capital Securities...................................... S-24
Description of the Guarantee............................................... S-40
Description of the Debentures.............................................. S-41
Certain Federal Income Tax Consequences.................................... S-50
ERISA Considerations....................................................... S-54
Underwriting............................................................... S-55
Legal Matters.............................................................. S-57
Experts.................................................................... S-57
</TABLE>
<TABLE>
<S> <C>
PROSPECTUS
<CAPTION>
PAGE
----
<S> <C>
Available Information...................................................... 1
Forward-Looking Statements................................................. 2
Incorporation of Certain Documents by Reference............................ 3
The Company................................................................ 4
The Trusts................................................................. 6
Use of Proceeds............................................................ 6
Consolidated Ratios of Earnings to Fixed Charges........................... 7
Description of Debt Securities............................................. 8
Description of Preferred Stock............................................. 20
Description of Depositary Shares........................................... 25
Description of Common Stock................................................ 29
Description of Common Stock Warrants....................................... 29
Description of Capital Stock............................................... 31
Description of Trust Preferred Securities.................................. 35
Description of Trust Preferred Securities Guarantees....................... 37
Plan of Distribution....................................................... 39
Legal Matters.............................................................. 40
Experts.................................................................... 40
</TABLE>
S-2
<PAGE>
SUMMARY
The following information summary contains basic information about this
offering. It likely does not include all the information important to you and
should be read in conjunction with the information contained elsewhere in this
Prospectus Supplement and in the accompanying Prospectus. For your convenience,
we make reference to specific page numbers in this Prospectus Supplement for
more detailed information on certain terms used throughout this Prospectus
Supplement.
THE COMPANY
GENERAL
Bay View Capital Corporation (the "Company"), a Delaware corporation, is a
diversified financial services company headquartered in San Mateo, California.
Our primary operating subsidiary is Bay View Bank (the "Bank"), a federally
chartered stock savings bank which has 56 branches serving the San Francisco
Bay area and one branch in Southern California. In January 1998, we acquired
America First Eureka Holdings, Inc. and its wholly-owned subsidiary, EurekaBank
(the "Eureka Acquisition"), a savings bank with approximately $2.3 billion of
assets. The Eureka Acquisition, which was accounted for as a purchase,
significantly expanded our banking and depository presence in the San Francisco
Bay area and enabled us to realize operating efficiencies. We currently have
the largest deposit franchise exclusively serving the San Francisco Bay area.
As of September 30, 1998, we had $5.5 billion of total assets, $4.3 billion of
net loans, $3.2 billion of deposits and $381.0 million of common stockholders'
equity.
The Bank was organized in 1911, converted from mutual to stock form in 1986
and became a wholly-owned subsidiary of the Company in 1989. For most of our
history, we have operated as a traditional thrift, specializing in the
origination and retention of single-family and multi-family first mortgage
loans, funded with longer-term, relatively high-cost certificates of deposit.
During the latter half of 1995, our board of directors began a series of
initiatives designed to enhance shareholder value and recruited a new
management team with significant commercial banking experience. Since that
time, we have been transitioning the Company by emphasizing commercial banking
activities. We have applied for regulatory approval for the Company to become a
bank holding company, concurrently with the conversion of the Bank into a
national bank. While we cannot be certain if or when satisfactory regulatory
approvals will be obtained, we currently expect that this change in our
regulatory status will take place in early 1999. Until a satisfactory approval
is received, the Bank will continue to operate as a federal savings bank.
MISSION/STRATEGIES
Our mission is to build a diversified financial services company by investing
in niche businesses with risk-adjusted returns that enhance shareholder value.
We believe that our efforts to implement this mission have contributed to a
significant improvement in our core earnings (net income adjusted for
non-recurring items) since 1996. Our strategies center around the continued
transition to commercial banking activities and the expected expansion of our
net interest margin. In order to realize this objective, management is pursuing
strategies that include the following:
. Replacing lower-yielding single-family first mortgage loans and mortgage-
backed securities with consumer and commercial loans and leases with higher
risk-adjusted returns, shorter maturities
S-3
<PAGE>
and less sensitivity to interest rate fluctuations. However, one result of
the Eureka Acquisition is that single-family first mortgage loans have
increased to 42.0% of our total loan portfolio as of September 30, 1998 from
22.9% as of December 31, 1997 (prior to the Eureka Acquisition).
. Enhancing the Bank's deposit base by reducing our reliance on higher-cost
certificates of deposit and attracting lower cost transaction accounts
such as checking, savings and money market accounts.
. De-emphasizing the less profitable elements of our business activities,
including ceasing single-family first mortgage loan originations and
reducing the Bank's wholesale activities.
. Maintaining the capital level of the Bank at or above the "well-
capitalized" level (as defined for bank regulatory purposes) and returning
any excess capital to the holding company.
. Redeploying any excess capital in businesses intended to generate assets
with higher risk-adjusted returns than those typically provided by single-
family first mortgage loans and mortgage-backed securities.
In addition, we have acquired and expect to continue to acquire financial
services companies. In connection with this activity, we periodically have
discussions with and receive financial information about other companies that
may lead to the acquisition of all or part of that company by us. We currently
have no agreements or understandings to acquire any other company.
BUSINESS PLATFORMS
We operate from three distinct business platforms:
The Banking Platform is largely represented by the operations of the Bank,
which consist primarily of first mortgage loans, mortgage-backed securities and
retail and business deposit products and services. The Banking Platform's
strategic focus is to expand our retail deposit franchise through the growth of
transaction accounts, instead of higher-cost certificates of deposit, as a
source of funding for us. Transaction accounts represented 44.5% of our total
deposits as of September 30, 1998 as compared to 21.3% as of December 31, 1995,
a transition which has contributed to our lower cost of funds. As of September
30, 1998, the Banking Platform had loans outstanding of $3.3 billion,
representing 76.2% of our total loan portfolio. Substantially all of the
Banking Platform's loans at this date were secured by single-family
residential, multi-family residential and commercial real estate properties,
located principally in Northern California.
The Consumer Finance Platform includes (i) fixed rate loans and leases
secured by new and used motor vehicles underwritten and purchased by our
wholly-owned subsidiary, Bay View Acceptance Corporation, and (ii) high loan-
to-value home equity loans ("HLTV loans") purchased by us. In each of these
businesses, we have concentrated on product niches which are not the primary
focus of traditional competitors in these segments. For example, we offer motor
vehicle loans to borrowers who desire a higher relative loan amount and/or a
longer term than is typically available from other sources. In return for this
flexibility, we charge relatively higher interest rates. HLTV loans are secured
by a lien, generally junior in priority to a senior lien on the borrower's
home, and may
S-4
<PAGE>
have, when added to existing senior lien balances, a post-funding combined loan
to value ratio of up to 125% of the value of the home securing the loan. At
September 30, 1998, the average loan to value ratio of our HLTV loan portfolio
was 114% (based on the loan to value ratio at the time of purchase).
We attempt to minimize credit risks associated with these products by
focusing on lending to high quality borrowers. In general, we consider a
borrower with a Fair Isaac Credit Bureau ("FICO") score of 680 or higher as "A-
quality." During the third quarter of 1998, our Consumer Finance Platform
purchased approximately $292.4 million of loans and leases with average FICO
scores of 702 for motor vehicle loans, 736 for motor vehicle leases and 682 for
HLTV loans. As of September 30, 1998, the Consumer Finance Platform had loans
outstanding of $936.3 million, representing 21.7% of our total loan portfolio
and motor vehicle leases of $126.3 million or 2.3% of our consolidated assets.
The Commercial Finance Platform is comprised of the asset-based lending,
factoring and commercial leasing activities of our wholly-owned subsidiary, Bay
View Commercial Finance Group. In December 1997, we announced an expansion of
the Commercial Finance Platform, including the formation of a new asset-based
lending group known as Bay View Financial Corporation. We expanded the asset-
based lending segment of the business by adding personnel with significant
industry experience, relocating the asset-based lending business to Southern
California, one of the top asset-based lending markets in the country, and
adding new and enhanced products to the Commercial Finance Platform's product
array. This expansion represents a significant step toward achieving our goal
of establishing a $200 million to $300 million asset-based lending portfolio.
As of September 30, 1998, the Commercial Finance Platform had loans outstanding
of $91.9 million, representing 2.1% of our total loan portfolio.
Assuming that the expected conversion of the Bank to a national bank occurs,
we anticipate consolidating the operations of our Commercial Finance Platform
into the Bank. We believe that offering asset-based lending products directly
through the Bank will generate additional operating efficiencies and marketing
opportunities that will strengthen our ability to expand this line of business.
The Company's address is 1840 Gateway Drive, San Mateo, California 94404 and
its telephone number is (650) 573-7300.
THE TRUST
Bay View Capital I (the "Trust"), the issuer of the Capital Securities, is a
statutory business trust formed by us under the Delaware Business Trust Act.
Upon issuance of the Capital Securities offered by this Prospectus Supplement,
the holders will own all of the issued and outstanding Capital Securities. We
will acquire common securities of the trust (the "Trust Common Securities") in
an amount equal to at least 3% of the total capital of the Trust and will own,
directly or indirectly, all of the issued and outstanding Trust Common
Securities. The Trust exists for the sole purpose of (a) issuing the Capital
Securities for cash and investing the proceeds in an equivalent amount of %
Junior Subordinated Deferrable Interest Debentures due December 31, 2028 (the
"Debentures") issued by us and (b) engaging in other activities that are
incidental to the issuance of the Capital Securities and the Trust Common
Securities and the investment in the Debentures. See "The Trust."
S-5
<PAGE>
THE OFFERING
Issuer...................... Bay View Capital I, a Delaware statutory business
trust.
Securities Offered.......... 2,000,000 Capital Securities, evidencing
preferred undivided beneficial interests in the
assets of the Trust, which will consist only of
the Debentures and payments thereunder.
The Trust will sell the Capital Securities to the
public and the Trust Common Securities to us. The
Trust will use the proceeds from the sale of the
Capital Securities to buy the Debentures from us.
Distributions............... If you purchase the Capital Securities, you are
entitled to receive cumulative cash distributions
at a % annual rate. Distributions will
accumulate from the date the Trust issues the
Capital Securities and will be paid quarterly in
arrears on March 31, June 30, September 30 and
December 31 of each year, beginning March 31,
1999. The record date for distributions on the
Capital Securities will be the day before the
payment date.
Maturity.................... The Debentures will mature on December 31, 2028,
unless we shorten the maturity date to a date not
earlier than December 31, 2003. We will not
shorten the maturity date unless we have received
the prior approval of the Board of Governors of
the Federal Reserve System (the "Federal
Reserve") if we are then a bank holding company
and approval is required under applicable
regulations.
Redemption.................. The Trust must redeem the Capital Securities when
the Debentures are paid at maturity on December
31, 2028, or upon any earlier redemption of the
Debentures. We have the option at any time on or
after December 31, 2003 to redeem the Debentures,
in whole or in part. In addition, we may redeem
the Debentures at our option, in whole but not in
part, (i) if certain tax events occur or (ii) if
there is a change in the Investment Company Act
of 1940 (the "1940 Act") that requires the Trust
to register under that law or (iii) if there is a
change in the capital adequacy guidelines of the
Federal Reserve, applied as if the Company were a
bank holding company, that results in the Capital
Securities not being counted as Tier 1 Capital.
Redemption of the Debentures prior to maturity is
subject to the prior approval of the Federal
Reserve if we are then a bank holding company and
approval is required under applicable
regulations.
S-6
<PAGE>
Upon any redemption, you will receive the
liquidation amount of $25 per Capital Security
plus any accrued and unpaid distributions to the
date of redemption.
Deferral of Distributions... The ability of the Trust to pay distributions on
the Capital Securities is solely dependent on the
receipt of interest payments from the Company on
the Debentures. So long as no event of default
under the Debentures has occurred and is
continuing, we have the right, at one or more
times, to defer interest payments on the
Debentures for up to 20 consecutive quarters, but
not beyond the maturity date of the Debentures.
If we defer interest payments on the Debentures,
the Trust will also defer distributions on the
Capital Securities. During this deferral period,
distributions to which you are entitled will
continue to accrue at an annual rate of % of
the liquidation amount of $25 per Capital
Security, plus you will accumulate additional
distributions at the same rate, compounded
quarterly, on any unpaid distributions (to the
extent permitted by law). Upon the termination of
a deferral period, payment is due on all
accumulated and unpaid amounts of the Debentures,
and upon such payment, the Trust would be
required to pay all accumulated and unpaid
distributions. If a deferral of an interest
payment occurs, you will still be required to
include income in your gross income for United
States federal income tax purposes in advance of
any corresponding cash distribution, even if you
are a cash basis taxpayer.
We have agreed to certain restrictions, including
that if we exercise our right to defer interest
payments, we will not declare or pay any cash
dividends on our capital stock during any
deferral period.
Guarantee................... We will fully and unconditionally guarantee the
Capital Securities based on:
. our obligations to make payments on the
Debentures;
. our obligations under the Guarantee
(see p. S-40); and
. our obligations under the Declaration
(see p. S-23).
If we do not make payments on the Debentures, the
Trust will not have sufficient funds to make
payments on the Capital Securities. The Guarantee
does not cover payments when the Trust does not
have sufficient funds.
S-7
<PAGE>
Distribution of the We have the right at any time to dissolve the
Debentures.................. Trust and distribute the Debentures to you,
subject to the prior approval of the Federal
Reserve if we are then a bank holding company and
approval is required under applicable
regulations. If the Debentures are distributed,
we will use our best efforts to list them on a
national securities exchange or comparable
automated quotation system.
Ranking..................... Our obligations under the Guarantee are unsecured
and will rank in priority of payment: (1) junior
to all of our indebtedness; and (2) senior to our
capital stock. Our obligations under the
Debentures are unsecured and will rank junior in
priority of payment to our Senior Indebtedness
(see p. S-42).
Voting Rights............... Except in limited circumstances (see p. S-33),
holders of the Capital Securities will have no
voting rights.
Proposed Nasdaq National
Market Symbol.............. BVCCP.
Book-Entry.................. The Capital Securities will be represented by a
global security that will be deposited with and
registered in the name of The Depository Trust
Company, New York, New York ("DTC") or its
nominee. This means that you will not receive a
certificate for the Capital Securities.
Use of Proceeds............. We plan to use up to $50 million of the net
proceeds from the sale of the Capital Securities
to repay our 8.42% Senior Debentures upon their
maturity on June 1, 1999. We plan to use any
remaining net proceeds for general corporate
purposes, including, among other things, the
repayment of other indebtedness, investments in
and extensions of credit to our subsidiaries and
financing potential acquisitions.
S-8
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
The summary consolidated financial data presented below under the captions
"Selected Balance Sheet Information" and "Selected Results of Operations
Information" for, and as of the end of each of the years in the five-year
period ended December 31, 1997, are derived from our consolidated financial
statements, which financial statements have been audited by Deloitte & Touche
LLP, independent certified public accountants. The consolidated financial
statements as of December 31, 1997 and 1996, and for each of the years in the
three-year period ended December 31, 1997, and the report thereon, are
incorporated by reference herein. See "Incorporation of Certain Documents by
Reference" in the accompanying Prospectus.
The summary data presented below for the nine-month periods ended September
30, 1998 and 1997 and as of September 30, 1998, are derived from our unaudited
consolidated financial statements incorporated by reference herein. In the
opinion of Company management, all adjustments, consisting only of normal
recurring adjustments, necessary for a fair statement of results as of or for
the periods indicated have been included. See "Incorporation of Certain
Documents by Reference" in the accompanying Prospectus. The summary
consolidated financial data as of and for the nine months ended September 30,
1998 reflect our acquisition of America First Eureka Holdings, Inc. on
January 2, 1998, which was accounted for under the purchase method of
accounting. The information below under the caption "Selected Other
Information" is unaudited.
<TABLE>
<CAPTION>
AS OF OR FOR THE
NINE MONTHS ENDED
SEPTEMBER 30, AS OF OR FOR THE YEAR ENDED DECEMBER 31,
---------------------- ----------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
SELECTED BALANCE SHEET
INFORMATION:
Total assets............ $5,522,374 $3,162,207 $3,246,476 $3,300,262 $3,004,496 $3,166,529 $2,663,542
Mortgage-backed
securities............. 572,758 513,165 470,261 577,613 731,378 921,680 718,696
Loans receivable, net... 4,313,342 2,382,332 2,373,113 2,474,717 2,062,268 2,054,563 1,776,820
Customer deposits....... 3,229,944 1,624,052 1,677,135 1,763,967 1,819,840 1,707,376 1,694,263
Borrowings.............. 1,879,540 1,319,092 1,355,976 1,245,537 941,465 1,219,958 741,414
Common stockholders'
equity................. 381,031 183,974 173,627 200,062 207,977 217,315 210,976
SELECTED RESULTS OF
OPERATIONS INFORMATION:
Net interest income..... $ 114,542 $ 65,191 $ 87,336 $ 80,982 $ 55,916 $ 66,925 $ 69,676
Provision for loan
losses................. (5,114) (1,828) (1,952) (1,898) (4,284) (2,367) (7,031)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net interest income
after provision for
loan losses............ 109,428 63,363 85,384 79,084 51,632 64,558 62,645
Gain (loss) on sale of
loans and securities,
net.................... 1,067 925 925 (1,453) (2,510) (1,081) 1,091
Leasing income.......... 4,689 -- -- -- -- -- --
Other noninterest
income................. 13,571 8,981 11,830 10,017 8,652 8,619 8,465
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total noninterest
income................. 19,327 9,906 12,755 8,564 6,142 7,538 9,556
Recovery of (provision
for) losses on real
estate................. 89 484 585 103 (749) (145) (819)
SAIF recapitalization
assessment............. -- -- -- (11,750) -- -- --
General and
administrative
expenses............... (87,218) (49,438) (71,913) (58,955) (57,016) (47,287) (46,871)
Leasing expenses........ (3,167) -- -- -- -- -- --
Income (expense) from
real estate owned...... 105 154 543 4,806 1,081 95 (1)
Amortization of
intangibles............ (8,475) (2,675) (4,088) (2,606) (3,944) (2,418) (2,104)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total noninterest
expense................ (98,666) (51,475) (74,873) (68,402) (60,628) (49,755) (49,795)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income (loss) before
income tax (expense)
benefit................ 30,089 21,794 23,266 19,246 (2,854) 22,341 22,406
Income tax (expense)
benefit................ (14,769) (8,964) (9,245) (8,277) 708 (7,828) (9,765)
Extraordinary item, net
of tax................. -- -- -- -- (2,544) -- (132)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income (loss)...... $ 15,320 $ 12,830 $ 14,021 $ 10,969 $ (4,690) $ 14,513 $ 12,509
========== ========== ========== ========== ========== ========== ==========
</TABLE>
S-9
<PAGE>
<TABLE>
<CAPTION>
AS OF OR FOR THE
NINE MONTHS ENDED AS OF OR FOR THE YEAR ENDED DECEMBER
SEPTEMBER 30, 31,
------------------ -------------------------------------------
1998 1997 1997 1996 1995 1994 1993
-------- -------- ------- ------- ------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
SELECTED OTHER
INFORMATION(1):
Net interest margin..... 3.00% 2.84% 2.86% 2.57% 1.86% 2.34% 2.74%
Efficiency ratio(2)..... 67.03 66.65 71.85 64.79 88.30 62.60 59.98
Return on average
assets(3).............. 0.37 0.55 0.45 0.34 (0.15) 0.49 0.47
Return on average
tangible assets(4)..... 0.57 0.67 0.58 0.43 (0.06) 0.55 0.51
Return on average
equity(3).............. 5.25 8.76 7.32 5.39 (2.11) 6.79 6.14
Return on average
tangible equity(5)..... 12.19 11.87 10.66 7.04 (0.81) 8.03 7.08
Ratio of equity to total
assets(6).............. 6.90 5.82 5.35 6.06 6.92 6.86 7.92
Ratio of tangible equity
to tangible assets(7).. 4.55 4.91 4.48 5.77 6.74 6.57 7.50
Nonperforming assets
("NPA")(8)............. $ 17,873 $ 19,246 $15,766 $24,310 $38,811 $50,577 $72,365
Ratio of NPA to total
assets................. 0.32% 0.61% 0.49% 0.74% 1.29% 1.60% 2.72%
Ratio of allowance for
loan losses to gross
loans.................. 1.07% 1.62% 1.60% 1.46% 1.48% 1.40% 1.86%
Troubled debt
restructurings
("TDRs")(8)............ $ 779 $ 736 $ 731 $ 509 $15,641 $13,948 $14,188
Ratio of TDRs to total
assets................. 0.02% 0.02% 0.02% 0.02% 0.52% 0.44% 0.53%
Ratio of earnings to
fixed charges(9):
Including interest on
customer deposits..... 1.16x 1.19x 1.15x 1.12x 0.98x 1.17x 1.18x
Excluding interest on
customer deposits..... 1.40 1.37 1.29 1.31 0.96 1.35 1.41
</TABLE>
- --------
(1) The selected other information was based upon data as of the end of and for
the respective periods, except that average assets, average intangible
assets and average equity were calculated by averaging the relevant month-
end amounts for the respective periods.
(2) The efficiency ratio was calculated by dividing the amount of general and
administrative expenses by operating revenues, defined as net interest
income, loan fees and charges, the excess of the Company's leasing-related
rental income over leasing-related depreciation expense, and other
noninterest income, excluding securities gains and losses. The efficiency
ratios set forth herein include the effect of special mention items.
Excluding the effect of special mention items, the Company's efficiency
ratio was 59.01%, 62.97%, 61.75%, 58.04%, and 73.48% for the nine months
ended September 30, 1998 and 1997 and years ended December 31, 1997, 1996
and 1995, respectively.
(3) The return on average assets and average equity was computed by dividing
net income (loss) by average assets and average equity, respectively. See
note (1) above. In computing these percentages, net income for the nine
months ended September 30, 1998 and 1997 has been annualized.
(4) Return on average tangible assets was calculated by dividing adjusted net
income (loss) by average tangible assets. Adjusted net income (loss) is
defined as net income excluding charges tied to the market value of the
Company's common stock related to management incentive plans and the
Employee Stock Ownership Plan and charges associated with the amortization
of intangibles. Average tangible assets are defined as average assets less
average intangible assets. For purposes of such computation, adjusted net
income (loss) for the nine months ended September 30, 1998 and 1997 has
been annualized.
(5) Return on average tangible equity was calculated by dividing adjusted net
income (loss) by average tangible equity. Adjusted net income (loss) is
defined in note (4) above and average tangible equity is defined as average
equity less average intangible assets. For purposes of such computation,
adjusted net income (loss) for the nine months ended September 30, 1998 and
1997 has been annualized.
(6) Ratio of equity to total assets was calculated by dividing equity by total
assets.
(7) Ratio of tangible equity to tangible assets was calculated by dividing
tangible equity by tangible assets. Tangible equity is defined as total
equity less intangible assets. Tangible assets are defined as total assets
less intangible assets.
(8) Nonperforming assets ("NPAs") are defined as nonaccrual loans, real estate
owned and other repossessed assets. Nonaccrual loans are defined as loans
90 days or more delinquent as to principal and interest payments (unless
the principal and interest are well secured and in the process of
collection) and loans less than 90 days delinquent designated as
nonperforming when the Company determines that the full collection of
principal and/or interest is doubtful. Troubled debt restructurings
("TDRs") are real estate loans that have been modified (due to borrower
financial difficulties) to allow a stated interest rate and/or a monthly
payment lower than those prevailing in the market.
(9) Earnings represent income from continuing operations before income taxes,
fixed charges and extraordinary items. Fixed charges include interest
expense and the portion of rental expense which approximates the interest
component of lease payments (estimated at 20% of rental expense). Such
information is qualified in its entirety by the more detailed financial
information set forth in the Company's financial statements and notes
thereto appearing in the documents incorporated herein by reference. See
"Incorporation of Certain Documents by Reference" in the accompanying
Prospectus. Earnings were inadequate to cover fixed charges for the year
ended December 31, 1995. The amount of the deficiency was $2,853,710.
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RISK FACTORS
You should carefully read the following Risk Factors before purchasing any
Capital Securities.
RISKS RELATED TO AN INVESTMENT IN THE CAPITAL SECURITIES
RANKING OF SUBORDINATED OBLIGATIONS UNDER THE GUARANTEE AND DEBENTURES; RIGHTS
UNDER THE GUARANTEE
Our obligations under the Guarantee are unsecured and will rank in priority
of payment:
. junior to all of our indebtedness; and
. senior to our capital stock.
Our obligations under the Debentures are unsecured and will rank junior in
priority of payment to our Senior Indebtedness. At September 30, 1998, the
Company's Senior Indebtedness totaled approximately $149.4 million. There is no
limit under the Debentures to our ability to incur additional indebtedness,
including indebtedness that ranks senior in priority of payment to the
Debentures and the Guarantee. See "Description of The Debentures--
Subordination."
The ability of the Trust to timely pay distributions on the Capital
Securities and the liquidation amount of $25 per Capital Security is solely
dependent upon our making the related payments on the Debentures when due. If
we default on our obligation to pay principal, premium or interest on the
Debentures, the Trust will not have sufficient funds to pay distributions or
the $25 per Capital Security liquidation amount. Because the Guarantee does not
cover payments when the Trust does not have sufficient funds, you will not be
able to rely upon the Guarantee for payment of these amounts. Instead, you or
the Property Trustee may enforce the rights of the Trust under the Debentures
directly against us. See "Description of The Capital Securities--Declaration
Events of Default."
DISTRIBUTION PAYMENT SOURCES AND RESTRICTIONS
We are a holding company and substantially all of our assets are held by our
subsidiaries. Our ability to make payments on the Debentures when due depends
primarily on the results of operations of our subsidiaries and their ability to
provide funds to us. There are various legal limitations on the extent to which
certain of our subsidiaries may extend credit, pay dividends or otherwise
supply funds to, or engage in transactions with, us or some of our
subsidiaries. See "--Risk Factors Relating to the Company--Regulatory
Oversight" and "Description of Debt Securities--Ranking of Debt Securities;
Holding Company Structure" in the accompanying Prospectus.
Because we are a holding company, our right to participate in any
distribution of the assets of any subsidiary, including the Bank, upon such
subsidiary's liquidation or reorganization or otherwise, is subject to the
prior claims of creditors of that subsidiary, except to the extent that we may
be recognized as a creditor of that subsidiary. Accordingly, the Debentures and
the Guarantee will be effectively subordinated to all existing and future
liabilities of our subsidiaries, and holders of the Debentures and
beneficiaries of the Guarantee should look only to our assets for payments on
the Debentures or under the Guarantee, as the case may be. See "Description of
The Debentures--Subordination" and "Description of The Guarantee."
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DISTRIBUTIONS ON THE CAPITAL SECURITIES COULD BE DEFERRED FOR SUBSTANTIAL
PERIODS ADVERSELY AFFECTING THE MARKET PRICE; HOLDERS WOULD CONTINUE TO
RECOGNIZE INCOME FOR TAX PURPOSES
So long as no event of default under the Debentures has occurred and is
continuing, we have the right, at one or more times, to defer interest payments
on the Debentures for up to 20 consecutive quarters, but not beyond the
maturity date of the Debentures.
As a consequence, the Trust would defer distributions on the Capital
Securities during any deferral period. During a deferral period, you will be
required to accrue income for United States federal income tax purposes equal
to the interest that accrues on your pro-rata share of the Debentures held by
the Trust. As a result, you must include the accrued but unpaid income in your
gross income for United States federal income tax purposes prior to your
receiving cash, even if you are a cash basis taxpayer. You will also not
receive the cash related to any accrued and unpaid interest from the Trust if
you sell the Capital Securities before the end of any deferral period. The
Capital Securities may trade at a price that does not fully reflect the value
of accrued but unpaid interest on the Debentures.
During a deferral period, accrued but unpaid distributions will increase your
tax basis in the Capital Securities. If you sell the Capital Securities during
a deferral period, your increased tax basis will decrease the amount of any
capital gain or increase the amount of any capital loss that you may have
otherwise realized on the sale. A capital loss, except in certain limited
circumstances, cannot be applied to offset ordinary income. As a result,
deferral of distributions could result in ordinary income, and a related tax
liability for the holder, and a capital loss that may only be used to offset a
capital gain.
We do not currently intend to exercise our right to defer interest payments
on the Debentures. However, if we exercise our right in the future, the market
price of the Capital Securities is likely to be adversely affected. If you sell
the Capital Securities during an interest deferral period, you may not receive
the same return on investment as someone who continues to hold the Capital
Securities. See "Certain Federal Income Tax Consequences."
CAPITAL SECURITIES MAY BE REDEEMED OR EXCHANGED IF CERTAIN TAX OR REGULATORY
EVENTS OCCUR
At any time a Tax Event, an Investment Company Event or a Capital Treatment
Event (see "Description of the Capital Securities--Redemption or Exchange")
occurs and is continuing, we have the right to dissolve the Trust and exchange
the Debentures for the Capital Securities or redeem the Debentures, in whole
but not in part, subject to prior approval of the Federal Reserve if we are
then a bank holding company and approval is required under applicable capital
guidelines or policies of the Federal Reserve. The redemption of the Debentures
will cause a mandatory redemption of the Capital Securities within 90 days of
the event at a redemption price equal to the liquidation amount of $25 per
security plus any accrued and unpaid distributions.
You should be aware that Enron Corporation ("Enron") has filed a petition in
the United States Tax Court challenging the proposed disallowance by the
Internal Revenue Service ("IRS") of the deduction of interest expense on
securities issued by Enron in 1993 and 1994 that are similar to, although
different in a number of respects from, the Debentures. A decision of the Tax
Court in the Enron case upholding the position of the IRS would not necessarily
affect the tax treatment of interest paid on the Debentures because such a
decision may be based on factors that differ from those pertaining to the
Debentures, the Trust or us. However, it is possible that such a decision would
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result in the receipt by us or the Trust of an opinion of counsel that there is
a more than insubstantial risk that interest payable on the Debentures is not
or will not be deductible. The receipt of such an opinion would constitute a
Tax Event, which would permit us to cause either an exchange of the Capital
Securities for the Debentures or a redemption of the Debentures, which in turn
would cause the Trust to redeem the Capital Securities. See "Description of The
Capital Securities--Redemption or Exchange."
Under current United States federal income tax law and interpretations and
provided that the Trust is not treated as an association taxable as a
corporation, a distribution of the Debentures should not be a taxable event to
holders of the Capital Securities. Should there be a change in law, a change in
legal interpretation, a Tax Event or other circumstances, however, the
distribution could be a taxable event to holders of the Capital Securities. See
"Certain Federal Income Tax Consequences--Distribution of the Debentures to
Holders of the Capital Securities."
CAPITAL SECURITIES MAY NOT BE REDEEMABLE FOR CASH BEFORE THE MATURITY OR
REDEMPTION OF SUBORDINATED NOTES
The Indenture relating to our 9 1/8% Subordinated Notes due 2007 (the
"Subordinated Notes Indenture") did not permit us to make "Restricted
Payments," such as payment of cash dividends, repurchases of common stock or
the redemption of the Capital Securities for cash, unless the Company was
"well-capitalized" for bank holding company regulatory purposes (assuming for
this purpose that the Company was a bank holding company) and the Bank was
"well-capitalized" under federal banking laws and regulations. As the ultimate
source of funds for interest payments on the Capital Securities and the
Subordinated Notes, the Bank has been and continues to be well-capitalized and
we have consistently stated our intention to maintain the Bank's capital at
that level. Although we anticipate that the Company will become well-
capitalized upon completion of the Offering (it was only slightly below the
well-capitalized level at September 30, 1998), in October 1998 the Company
repurchased common stock on the open market at a time when it was not well-
capitalized. This technical default did not give the holders of the
Subordinated Notes (the "Subordinated Noteholders") the right to accelerate the
Subordinated Notes, but could have prohibited future Restricted Payments and
certain types of merger and sale of assets transactions involving us.
The Subordinated Notes Indenture permits the making of amendments to the
indenture without the consent of the Subordinated Noteholders which do not
adversely affect the interests of the Subordinated Noteholders in any material
respect. On October 30, 1998, the trustee under the Subordinated Notes
Indenture and the Company entered into a First Supplemental Indenture, revising
the "well-capitalized" standard to "adequately-capitalized" for only the
Company. The First Supplemental Indenture was effected by the Company and the
trustee after receipt and review by the trustee's counsel of the opinion of
Silver, Freedman & Taff, L.L.P. ("Silver Freedman") that the amendment of the
Restricted Payments covenant was permitted without Subordinated Noteholder
consent because it was not adverse in any material respect to the interests of
the Subordinated Noteholders. Silver Freedman has also opined that no
continuing default as a result of the October 1998 stock repurchases exists
under the Subordinated Notes Indenture, as amended by the First Supplemental
Indenture.
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If the Subordinated Noteholders were to successfully assert that a technical
default under the Subordinated Notes Indenture is continuing, then any cash
redemption of the Capital Securities by the Trust or the Debentures by the
Company prior to the maturity or earlier redemption of the Subordinated Notes,
as well as any other Restricted Payment made by us from and after the date of
the October 1998 stock repurchases, would be a breach of the Subordinated Notes
Indenture. Similarly, if the Subordinated Noteholders were to challenge
successfully the actions of the trustee and the Company in revising the
Company's capital standard for Restricted Payments, Restricted Payments made at
a time when the Company was not well-capitalized would be a breach of the
Subordinated Notes Indenture. In any such circumstance, we could seek the
necessary permission from the Subordinated Noteholders to resume Restricted
Payments. If the permission of the Subordinated Noteholders was not obtained, a
court could enjoin the cash redemption of the Capital Securities. The
Subordinated Noteholders could also seek damages against us for impermissible
Restricted Payments. A successful challenge to a Restricted Payment made when
the Company was only adequately-capitalized after giving effect to the payment
could have a material adverse effect on the Company and the Capital Securities
if the Subordinated Noteholders were awarded damages in a material amount.
DISTRIBUTION OF DEBENTURES COULD ADVERSELY AFFECT MARKET PRICE FOR THE CAPITAL
SECURITIES
The Trust may be dissolved before the maturity of the Debentures on December
31, 2028, if certain events occur and at any time at our option. As a result,
and subject to the terms of the Declaration, the Trustees may distribute the
Debentures to the Capital Securities holders. Although we have agreed to use
our best efforts to list the Debentures on a national securities exchange or
comparable automated quotation system if this occurs, there can be no assurance
that the Debentures will be approved for listing or that a trading market will
exist for the Debentures.
We cannot predict the market prices for the Debentures that may be
distributed. Accordingly, the Debentures that you receive upon a distribution,
or the Capital Securities you hold pending such a distribution, may trade at a
discount to the price that you paid to purchase the Capital Securities. Because
you may receive Debentures, you must also make an investment decision with
regard to the Debentures. You should carefully review all the information
regarding the Debentures contained in this Prospectus Supplement and the
accompanying Prospectus. See "Certain Federal Income Tax Consequences--
Distribution of the Debentures to Holders of the Capital Securities."
PREPAYMENT CONSIDERATIONS
We may, subject to obtaining any consent required by the terms of any of our
indebtedness which may be outstanding from time to time and upon receiving
prior approval of the Federal Reserve if we are then a bank holding company and
Federal Reserve approval is then required under applicable capital guidelines
or policies, redeem the Debentures, in whole or in part, at any time on or
after December 31, 2003, at a redemption price equal to 100% of the principal
amount of Debentures to be redeemed plus any accrued and unpaid interest to the
redemption date. We could also shorten the maturity of the Debentures and
therefore change the mandatory redemption date for the Capital Securities to as
early as December 31, 2003. You should assume that we will exercise our
redemption option if we are able to refinance at a lower interest rate or it is
otherwise in our interest to redeem the Debentures. If the Debentures are
redeemed, the Trust must redeem Capital Securities having an
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aggregate liquidation amount equal to the aggregate principal amount of
Debentures so redeemed. See "Description of The Capital Securities--Redemption
at the Option of the Company" and "--Redemption or Exchange."
TRADING CHARACTERISTICS
The Capital Securities will be a new issue of securities for which there
currently is no market. We plan to list the Capital Securities on the Nasdaq
National Market under the symbol "BVCCP." Further, although each of the
underwriters has indicated that they intend to make a market in the Capital
Securities, they are not obligated to do so and may discontinue any such
market-making activities at any time without notice. No assurance can be given
as to the liquidity of the trading market for the Capital Securities.
MARKET PRICES
There can be no assurance as to the market prices for Capital Securities or
Debentures that may be distributed in exchange for Capital Securities upon
liquidation of the Trust. Accordingly, the Capital Securities or the Debentures
that you may receive in the event the Trust is liquidated may trade at a
discount to the price that you paid to purchase the Capital Securities. As a
result of our right to defer interest payments, the market price of the Capital
Securities may be more volatile than the market prices of other securities that
are not subject to such optional deferrals. In addition, the Capital Securities
may trade at prices that do not fully reflect the value of accumulated and
unpaid distributions on the Capital Securities.
NO LIMITATION ON ADDITIONAL INDEBTEDNESS AND LIENS; NO EVENT RISK PROTECTION
The indenture governing the Debentures will not limit the amount of
indebtedness, guarantees or other liabilities that may be incurred by us and
our subsidiaries and will not prohibit us and our subsidiaries from creating or
assuming liens on our and our subsidiaries' properties. The indenture will not
require us to maintain any financial ratios, or specified levels of net worth,
revenues, income, cash flow or liquidity.
LIMITED VOTING RIGHTS
Holders of Capital Securities have limited voting rights. In general, only we
can replace or remove any of the Trustees. However, if an event of default
under the Declaration occurs and is continuing, the holders of at least a
majority in aggregate liquidation amount of the Capital Securities may replace
the Property Trustee and the Delaware Trustee. See "Description of the Capital
Securities--Voting Rights; Amendment of Declaration."
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RISK FACTORS RELATING TO THE COMPANY
CREDIT RISK OF LENDING ACTIVITIES
Our strategy centers around the continued transition to commercial banking
activities and the resulting expansion of our net interest margin. In order to
realize this objective, one of our main strategies is to replace lower-yielding
single-family first mortgage loans and mortgage-backed securities with consumer
and commercial loans and leases with higher risk-adjusted returns, shorter
maturities and less sensitivity to interest rate fluctuations. These assets are
funded with our low cost deposit base. As this process takes place, a gradual
increase in our consolidated credit risk is likely to occur. While consumer
assets (primarily motor vehicle loans and leases and HLTV loans) and commercial
finance assets (primarily asset-based loans) possess higher credit risk
profiles than single-family first mortgage loans, we expect these new assets to
allow us to achieve greater profitability despite higher loan loss
expectations.
Single-Family First Mortgage Residential Loans
Single-family first mortgage loans comprise the largest component of our loan
portfolio and are secured primarily by properties located in Northern
California. These loans are generally made on the basis of the borrower's
ability to make repayment from his or her employment and the value of the
property securing the loan. Despite our decision to discontinue the origination
of single-family first mortgage loans in 1996, our exposure to these low
yielding, and relatively low risk assets, has actually increased to
approximately $1.8 billion, or 42.0%, of our total loan portfolio, at September
30, 1998 from $551 million, or 22.9%, at December 31, 1997, primarily due to
the Eureka Acquisition on January 2, 1998.
Commercial Real Estate and Multi-Family Residential Loans
Commercial real estate loans and multi-family residential loans, which are
generally considered to be riskier than single-family first mortgage loans,
have declined significantly as a percentage of our total loan portfolio.
Commercial real estate loans were $349 million at December 31, 1997 and
September 30, 1998, but declined as a percentage of our total loan portfolio
from approximately 14.5% at December 31, 1997 to approximately 8.1% at
September 30, 1998. Multi-family residential loans were $1.0 billion at
December 31, 1997 and September 30, 1998, but declined as a percentage of our
total loan portfolio from approximately 42.6% at December 31, 1997 to
approximately 24.2% at September 30, 1998.
Commercial real estate loans and multi-family residential loans are generally
considered to be riskier than single-family first mortgage loans because
commercial real estate loans and multi-family residential loans typically have
larger balances to a single borrower or group of related borrowers. In
addition, the borrower's ability to repay multi-family residential and
commercial real estate loans typically depends upon the successful operation of
the property or business conducted on the property securing the loan (as
opposed to a desire by the borrower to continue to occupy the residence on the
property securing the loan). Such loans may therefore be more adversely
affected by conditions in the real estate markets or in the economy generally.
If the cash flow from the project is reduced (for example, if leases are not
obtained or renewed), the borrower's ability to repay the loan may be impaired.
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These loans represent our second largest loan concentration and are also
primarily secured by properties located in Northern California.
Motor Vehicle Loans and Leases
At September 30, 1998, motor vehicle loans totaled $514.4 million, which was
approximately 12.0% of our total loan portfolio, and motor vehicle leases
totaled $126.3 million, which was 2.3% of our consolidated assets. Our primary
focus for motor vehicle loans and leases is on the credit quality of the
customer rather than the value of the collateral.
We rely on the borrower's continuing financial stability, rather than the
value of the vehicle, for the repayment of a motor vehicle loan and for payment
of all required amounts under a motor vehicle lease. Because motor vehicles
usually rapidly depreciate in value, it is unlikely that a repossessed vehicle
will cover repayment of the outstanding loan balance or unpaid amounts under
the terms of the lease. Thus, the collectibility of motor vehicle loans and
leases is more likely than a single-family first mortgage loan to be affected
by adverse personal circumstances.
Our typical motor vehicle loan customer desires a longer term and/or higher
relative loan amount than is offered by many automobile financing sources. We
have therefore been able to charge interest rates of 200 to 300 basis points
over the rates typically offered by traditional sources of motor vehicle
financing such as banks and captive finance companies. The higher interest rate
and longer maturity of the loans does increase the risk that the borrower will
be unable to repay the loan.
High Loan-to-Value Home Equity Loans
Our HLTV loans, all of which we recently purchased, totaled approximately
$422 million or 9.8% of our total loan portfolio as of September 30, 1998. HLTV
loans are secured by a lien, generally junior in priority to a senior lien on
the borrower's home. HLTV loans may have, when added to existing senior lien
balances, a post funding combined loan to value ratio of up to 125% of the
value of the home securing the loan. At September 30, 1998, the average loan to
value ratio of our HLTV loan portfolio was 114% (based on the loan to value
ratio at the time of purchase). Because of this loan to value ratio, we rely
principally on the creditworthiness of the borrower for repayment of our HLTV
loans and receive interest on these loans at a rate which is substantially
higher than the interest rate we receive on single-family first mortgage loans.
HLTV loans are subject to increased risk of delinquency and default as
compared to single-family first mortgage loans. If a borrower defaults on an
HLTV loan our security interest will be subordinate to all senior lien
balances. It is therefore likely that in case of default, the collateral for
the loan will not be sufficient to cover the principal amount of the loan. In
addition, the market value of the properties securing these loans may decline,
especially in an economic slowdown or recession. We do not intend to
significantly increase the percentage amount of HLTV loans in our loan
portfolio.
Commercial Loans
Commercial loans were $91.9 million or 2.1% of our total loan portfolio as of
September 30, 1998. Our commercial loans, which are comprised primarily of
asset-based loans and factoring, are higher risk and typically made on the
value of the collateral provided by the borrower to secure the loan. Most
often, this collateral is accounts receivable, although at times we also rely
upon collateral
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such as inventory, or machinery. There is little additional credit support
provided by the borrower for most of these loans and the probability of
repayment is based almost solely on the liquidation of the pledged collateral.
As a result, in the case of loans secured by accounts receivable, the
availability of funds for the repayment of such loans may be substantially
dependent on the ability of the borrower to collect amounts due from its
customers. The collateral securing other loans may depreciate over time, may be
difficult to appraise and may fluctuate in value based on the success of the
business. In addition, these loans carry much higher rates of interest than
those charged by traditional small business lenders (such as commercial banks)
to compensate for the greater risk that our borrowers will be unable to repay
their loans. The higher interest rates charged on these loans increase the risk
that the borrower will be unable to repay the loan.
We could be adversely affected by these and the other risks related to our
loans. Borrower defaults resulting in losses in excess of our allowance for
loan losses could have a material adverse effect on our profitability and
financial condition.
GEOGRAPHIC CONCENTRATION OF LOAN PORTFOLIO
The current loan portfolio is concentrated in certain geographic regions,
particularly Northern California. The number of borrowers unable to repay their
loans may be affected by changes in local economic and business conditions.
Unfavorable or worsened economic conditions in Northern California could
significantly increase the number of borrowers unable to timely repay their
loans, and could result in a decline in the value of the properties securing
our loans, which could have a material adverse effect on us. In addition, the
Northern California area has been, and may in the future be, subject to
earthquakes and we usually do not require our borrowers to maintain earthquake
insurance on properties securing mortgage loans. Accordingly, earthquake damage
to properties securing mortgage loans or to properties we own could have a
material adverse effect on us.
IMPLEMENTATION OF BUSINESS PLAN
During the second half of 1995, our Board of Directors hired new management
personnel to improve our financial performance and to transform us into a
commercial banking organization. The new management team was led by Edward H.
Sondker, the Company's and the Bank's President and Chief Executive Officer,
and David A. Heaberlin, the Company's Chief Financial Officer and the Bank's
Chief Operating Officer, who implemented the strategies described above. We
cannot be sure that these strategies will be successfully implemented, or even
if successfully implemented, that our objectives will be achieved. If our
business plan is not successfully implemented, we could be adversely affected.
Further, we continuously consider our business strategy which, as a result, may
be changed or abandoned at any time.
VULNERABILITY TO CHANGES IN INTEREST RATES
Our ability to make a profit, like that of most financial institutions,
substantially depends upon our net interest income, which is the difference
between the interest income we earn on our interest-earning assets (such as
loans) and the interest expense we pay on our interest-bearing liabilities
(such as deposits). Certain assets and liabilities, however, may react in
different degrees to changes in market interest rates. Further, interest rates
on some types of assets and liabilities may fluctuate prior
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to changes in broader market interest rates, while rates on other types may lag
behind. Additionally, some of our assets, such as adjustable rate mortgages,
have features, including payment and rate caps, which restrict changes in their
interest rates.
Factors such as inflation, recession, unemployment, money supply,
international disorders, instability in domestic and foreign financial markets,
and other factors beyond our control may affect interest rates. Changes in
market interest rates will also affect the level of voluntary prepayments on
our loans and the receipt of payments on our mortgage-backed securities
resulting in the receipt of proceeds that may be reinvested at a lower rate
than the loan or mortgage-backed security being prepaid. Although we pursue an
asset-liability management strategy designed to control our risk from changes
in market interest rates, changes in interest rates can still have a material
adverse effect on our profitability.
COMPETITION
We face competition both in originating loans and in attracting deposits.
Competition in originating multi-family and commercial real estate mortgage
loans comes primarily from other savings institutions, commercial banks,
mortgage bankers and insurance companies. We compete for these mortgage loans
based on interest rates, types of products, loan fees charged and the quality
of customer service that we provide to our borrowers. Competition in attracting
deposits comes primarily from other savings institutions, commercial banks,
brokerage firms, mutual funds, credit unions and various types of investment
companies. We also experience competition for our motor vehicle loan and
leasing programs, primarily from large well-capitalized lending institutions
and finance companies, as well as from financing provided directly by
automobile manufacturers. Competition for factoring clients comes primarily
from small local factors or factors specializing in a specific industry
segment, such as trucking or personnel agencies. Competition for asset-based
loans comes from primarily small local based commercial finance companies,
large national commercial finance companies and banks. Due to their size, some
of our competitors may achieve economies of scale and, as a result, offer a
broader range of products and services and lower pricing than we currently
offer. The competition we face could adversely affect our profitability.
REGULATORY OVERSIGHT
The Bank is subject to extensive regulation, supervision and examination by
the Office of Thrift Supervision ("OTS") as its chartering authority and
primary federal regulator, and by the Federal Deposit Insurance Corporation
(the "FDIC"), which insures its deposits up to applicable limits. As the
holding company of the Bank, the Company is also subject to regulation and
oversight by the OTS. Assuming that the expected conversion of the Bank to a
national bank occurs, the Company will instead be supervised by the Federal
Reserve and the Bank will be primarily supervised by the Office of the
Comptroller of the Currency. Such regulation and supervision governs the
activities in which an institution and its holding company may engage and is
intended primarily for the protection of the FDIC insurance funds and
depositors. If we become a bank holding company, Federal Reserve regulation and
supervision will for the first time place restrictions on the operations of the
Company and its subsidiaries other than the Bank. The Company will become
subject to separate capital requirements and will need to seek prior approval
for many non-bank investments and activities. Regulatory authorities have been
granted extensive discretion in connection with their supervisory
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and enforcement activities and regulations have been implemented which have
increased capital requirements, increased insurance premiums and have resulted
in increased administrative, professional and compensation expenses. Any change
in the regulatory structure or the applicable statutes or regulations could
have a material impact on the Company and the Bank and their operations.
Additional legislation and regulations may be enacted or adopted in the future
which could significantly affect the powers, authority and operations of the
Bank and the Bank's competitors which in turn could have a material adverse
effect on the Bank and its operations. See "The Company--Pending Structural
Changes" in the accompanying Prospectus.
YEAR 2000 ISSUES
The "Year 2000 problem" arose in industries of all types because many
existing computer programs use only the last two digits to refer to a year.
Therefore, these computer programs do not properly recognize a year that begins
with "20" instead of the familiar "19." If not corrected, many computer
applications could fail or create erroneous results. The extent of the
potential global impact of the Year 2000 problem is not known; however, if not
timely corrected, it may adversely affect the worldwide economy.
Accurate data processing is essential to our business and a lack of accurate
processing either internally or by our vendors could have a significant adverse
impact on our financial condition and profitability. We rely upon third-party
software vendors and data processing service providers for the majority of our
electronic data processing and do not operate any proprietary programs which
are critical to our operations. We closely monitor the progress of our primary
software and data processing service providers in resolving Year 2000
compliance issues and plan to test actual data in simulated processing of
future-sensitive dates.
Due to the general uncertainty inherent in the Year 2000 problem, resulting
primarily from the uncertainty of the Year 2000 readiness of our third-party
suppliers and customers, we are unable to determine at this time whether the
consequences of Year 2000 failures will have a material adverse impact on our
financial condition and profitability.
S-20
<PAGE>
USE OF PROCEEDS
The net proceeds from the sale of the Capital Securities will be invested by
the Trust in the Debentures. The Company intends to use up to $50 million of
the net proceeds from the sale of the Debentures to the Trust to repay the
Company's 8.42% Senior Debentures upon their maturity on June 1, 1999. The
Company intends to use any remaining net proceeds from the sale of the
Debentures for general corporate purposes, which may include, among other
things, the repayment of indebtedness, investments in or extensions of credit
to its subsidiaries and the financing of potential acquisitions. Pending their
use for such purposes, such proceeds may be invested by the Company in short-
term investments and marketable securities.
ACCOUNTING AND REGULATORY CAPITAL TREATMENT
The Trust will be treated as a subsidiary of the Company, and the accounts of
the Trust will be included in the Company's financial statements. The Capital
Securities will be presented as a separate line item labeled "Guaranteed
Preferred Beneficial Interests in the Company's Subordinated Debentures" in the
Company's balance sheet and disclosures concerning the Capital Securities, the
Guarantee and the Debentures will be included in the notes to the consolidated
financial statements. The Company will record distributions paid on the Capital
Securities as an expense.
Assuming that the expected conversion of the Bank to a national bank occurs,
the Company will be required by the Federal Reserve Board to maintain certain
levels of capital for bank regulatory purposes. For these purposes, different
capital instruments are classified as either Tier 1 or Tier 2 capital, with
Tier 1 being the more favorable classification. The Federal Reserve has stated
that long-term cumulative preferred instruments issued by a special-purpose
subsidiary of a bank holding company and structured in the manner in which the
Capital Securities are structured normally will be accorded Tier 1 capital
treatment. The Company believes that the Capital Securities will qualify for
Tier 1 capital treatment. Such treatment, together with the Company's ability
to deduct, for income tax purposes, the interest payable on the Debentures,
will provide the Company with a cost-effective means of obtaining capital for
regulatory purposes.
S-21
<PAGE>
CAPITALIZATION
The following table sets forth the consolidated capitalization of the Company
as of September 30, 1998, as adjusted to give effect to the consummation of the
offering of the Capital Securities assuming no exercise of the underwriters'
over-allotment option. The following data should be read in conjunction with
the Consolidated Financial Statements and Notes thereto of the Company
incorporated herein by reference. See "Incorporation of Certain Documents by
Reference" in the accompanying Prospectus.
<TABLE>
<CAPTION>
AS
ACTUAL ADJUSTED
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
Deposits........................................... $3,229,944 $3,229,944
========== ==========
Borrowings:
Advances from FHLB of San Francisco.............. $1,664,480 $1,664,480
Securities sold under agreements to repurchase... 60,381 60,381
Senior debentures, due June 1999................. 50,000 50,000
Subordinated notes, due 2007..................... 99,420 99,420
Other borrowings................................. 5,259 5,259
---------- ----------
Total borrowings............................... $1,879,540 $1,879,540
========== ==========
Guaranteed Preferred Beneficial Interests in the
Debentures........................................ $ -- $ 50,000
========== ==========
Stockholders' Equity:
Common stock ($.01 par value).................... $ 204 $ 204
Additional paid-in capital....................... 250,870 250,870
Retained earnings (substantially restricted)..... 150,342 150,342
Treasury stock, at cost.......................... (16,556) (16,556)
Unrealized loss on securities available-for-sale,
net of tax...................................... (70) (70)
Debt of Employee Stock Ownership Plan............ (3,759) (3,759)
---------- ----------
Total stockholders' equity..................... $ 381,031 $ 381,031
========== ==========
Bank regulatory capital ratios:
Leverage......................................... 6.41% 6.41%
Tier 1 risk-based................................ 9.29% 9.29%
Total risk-based................................. 10.50% 10.50%
Company regulatory capital ratios(1):
Leverage......................................... 4.03% 4.90%
Tier 1 risk-based................................ 5.94% 7.26%
Total risk-based................................. 9.82% 11.13%
</TABLE>
- --------
(1) Assuming the Company is a bank holding company.
S-22
<PAGE>
THE TRUST
The Trust is a statutory business trust formed under the Delaware Business
Trust Act (the "Business Trust Act") pursuant to a trust agreement executed by
the Company, as sponsor for the Trust (the "Sponsor"), and certain of the Bay
View Trustees (as defined herein), and the filing of a certificate of trust
with the Secretary of State of the State of Delaware. The trust agreement will
be amended and restated in its entirety (as so amended and restated, the
"Declaration") as of the date the Capital Securities are initially issued. The
Declaration is qualified under the Trust Indenture Act. Upon issuance of the
Capital Securities offered hereby, the holders thereof will own all of the
issued and outstanding Capital Securities. The Company will acquire Trust
Common Securities in an amount equal to at least 3% of the total capital of the
Trust and will own, directly or indirectly, all of the issued and outstanding
Trust Common Securities (together with the Capital Securities, the "Trust
Securities"). The Trust exists for the purpose of (a) issuing its Capital
Securities for cash and investing the proceeds thereof in an equivalent amount
of Debentures and (b) engaging in such other activities as are necessary,
convenient or incidental thereto. The rights of the holders of the Trust
Securities are as set forth in the Declaration, the Business Trust Act and the
Trust Indenture Act. The Declaration does not permit the incurrence by the
Trust of any indebtedness for borrowed money or the making of any investment
other than in the Debentures. In the Subordinated Indenture, the Company has
agreed to pay for all debts and obligations (other than with respect to the
Trust Securities) and all costs and expenses of the Trust, including the fees
and expenses of the Bay View Trustees and any income taxes, duties and other
governmental charges, and all costs and expenses with respect thereto, to which
the Trust may become subject, except for United States withholding taxes that
are properly withheld.
Pursuant to the Declaration, the number of trustees of the Trust (the "Bay
View Trustees") will initially be four. Two of the Bay View Trustees (the
"Regular Trustees") will be persons who are employees or officers of or who are
affiliated with the Company. The third trustee will be an institution that
maintains its principal place of business in the State of Delaware (the
"Delaware Trustee"). Initially, Wilmington Trust Company will act as Delaware
Trustee. The fourth trustee will be a financial institution that is
unaffiliated with the Company and will serve as institutional trustee under the
Declaration and as indenture trustee for the purposes of compliance with the
provisions of the Trust Indenture Act (the "Property Trustee"). Initially,
Wilmington Trust Company will be the Property Trustee until removed or replaced
by the holder of the Trust Common Securities. For the purpose of compliance
with the provisions of the Trust Indenture Act, Wilmington Trust Company will
act as Guarantee Trustee (as defined herein) and as Debt Trustee (as defined
herein) under the Subordinated Indenture. See "Description of the Guarantee"
and "Description of the Capital Securities--Voting Rights; Amendment of
Declaration." The Trust has a term of approximately 30 years but may terminate
earlier as provided in the Declaration.
The Property Trustee will hold the Debentures for the benefit of the Trust
and the holders of the Trust Securities and the Property Trustee will have the
power to exercise all rights, powers and privileges under the Subordinated
Indenture as the holder of the Debentures. In addition, the Property Trustee
will maintain exclusive control of a segregated noninterest-bearing account
(the "Property Account") to hold all payments made in respect of the Debentures
for the benefit of the holders of the Trust Securities. The Property Trustee
will make payments of Distributions and payments on
S-23
<PAGE>
liquidation, redemption and otherwise to the holders of the Trust Securities
out of funds from the Property Account. The Guarantee Trustee will hold the
Guarantee for the benefit of the holders of the Capital Securities. The
Company, as the direct or indirect holder of all of the Trust Common
Securities, will have the right to appoint, remove or replace any Trustee
unless an event of default under the Subordinated Indenture shall have occurred
and be continuing and to increase or decrease the number of Bay View Trustees.
DESCRIPTION OF THE CAPITAL SECURITIES
The Capital Securities will be issued pursuant to the terms of the
Declaration. The Declaration is qualified as an indenture under the Trust
Indenture Act. The Property Trustee will act as indenture trustee for the
Capital Securities under the Declaration for purposes of compliance with the
provisions of the Trust Indenture Act. The terms of the Capital Securities will
include those stated in the Declaration and those made part of the Declaration
by the Trust Indenture Act. The following summary of certain provisions of the
Capital Securities and the Declaration does not purport to be complete and is
subject to, and is qualified in its entirety by reference to, all of the
provisions of the Declaration and the Capital Securities (which provisions,
including defined terms, are incorporated herein by reference), the Business
Trust Act and the Trust Indenture Act. A copy of the form of Declaration
(including the form of certificate evidencing the Capital Securities) has been
filed as an exhibit to the Registration Statement of which the accompanying
Prospectus is a part. See "Available Information" in the accompanying
Prospectus. The Capital Securities are a series of Trust Preferred Securities
described in the accompanying Prospectus.
GENERAL
The Declaration authorizes the Regular Trustees to issue on behalf of the
Trust the Trust Securities, which represent undivided beneficial interests in
the assets of the Trust. All of the Trust Common Securities will be owned,
directly or indirectly, by the Company. The Trust Common Securities rank pari
passu, and payments will be made thereon on a pro rata basis, with the Capital
Securities, except that upon the occurrence and during the continuance of a
Declaration Event of Default, the rights of the holders of the Trust Common
Securities to receive payment of periodic Distributions and payments upon
liquidation, redemption and otherwise will be subordinated to the rights of the
holders of the Capital Securities. The Declaration does not permit the issuance
by the Trust of any securities other than the Trust Securities or the
incurrence of any indebtedness by the Trust. Pursuant to the Declaration, the
Property Trustee will hold the Debentures purchased by the Trust for the
benefit of the holders of the Trust Securities. The payment of Distributions
(as defined herein) out of money held by the Trust, and payments upon
redemption of the Capital Securities or liquidation of the Trust, are
guaranteed by the Company to the extent described under "Description of the
Guarantee." The Guarantee will be held by the Guarantee Trustee for the benefit
of the holders of the Capital Securities. The Guarantee does not cover payment
of Distributions when the Trust does not have sufficient available funds to pay
such Distributions. In such event, the remedy of a holder of Capital Securities
is to vote to direct the Property Trustee to enforce the Property Trustee's
rights under the Debentures except in the limited circumstances in which the
holder may take Direct Action. See "--Declaration Events of Default" and "--
Voting Rights; Amendment of Declaration."
S-24
<PAGE>
DISTRIBUTIONS
Distributions on the Capital Securities will be payable at an annual rate of
% of the stated liquidation amount of $25 per Capital Security. To the
extent permitted by applicable law, Distributions in arrears for more than one
quarter will accrue interest thereon at the Distribution rate, compounded
quarterly. The term "Distribution" as used herein includes any such interest
payable unless otherwise stated.
Distributions on the Capital Securities will be cumulative, will accumulate
from the date of issuance and will be payable quarterly in arrears on March 31,
June 30, September 30, and December 31 of each year, commencing March 31, 1999,
when, as and if available for payment. Distributions will be made by the
Property Trustee, except as otherwise described below. The amount of
Distributions payable for any period will be computed on the basis of a 360-day
year of twelve 30-day months and, for any period of less than a full calendar
month, the actual number of days elapsed in such a 30-day month.
So long as no Indenture Event of Default has occurred and is continuing, the
Company has the right under the Subordinated Indenture to defer payments of
interest on the Debentures by extending the interest payment period from time
to time on the Debentures, which, if exercised, would defer quarterly
Distributions on the Capital Securities (though such Distributions would
continue to accumulate with interest thereon (to the extent permitted by
applicable law) at the Distribution rate, compounded quarterly, since interest
would continue to accrue on the Debentures) during any such Extension Period.
Such right to extend the interest payment period for the Debentures is limited
to a period not exceeding 20 consecutive quarters and such period may not
extend beyond the maturity of the Debentures or end on other than a
Distribution payment date. In the event that the Company exercises this right,
then (a) the Company shall not declare or pay dividends on, make distributions
with respect to, or redeem, purchase or acquire, or make a liquidation payment
with respect to, any of its capital stock (other than (x)(i) purchases or
acquisitions of shares of the Company's capital stock (or capital stock
equivalents) in connection with the satisfaction by the Company of its
obligations under any officers, directors or employee benefit plans (or any
options or other instruments issued thereunder), (ii) as a result of a
reclassification, combination or subdivision of the Company's capital stock or
the exchange or conversion of one class or series of the Company's capital
stock for another class or series of the Company's capital stock, (iii)
dividends or distributions of shares of common stock of the Company, (iv) 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 any
security being converted or exchanged, or (v) any dividend or distribution of
capital stock (or capital stock equivalents) in connection with the
implementation of a stockholders' rights plan, or the issuance of stock under
any such plan in the future, or the redemption or repurchase of any such rights
pursuant thereto, or (y) guarantee payments made with respect to any of the
foregoing), (b) the Company shall not make any payment of interest, principal
or premium, if any, on or repay, repurchase or redeem any debt securities
issued by the Company that rank pari passu with or junior to the Debentures and
(c) the Company shall not make any guarantee payments with respect to the debt
securities of any Company subsidiary if such guarantee ranks pari passu with or
junior to the Debentures (other than pursuant to the Guarantee or the Company's
guarantee of the Trust Common Securities). Prior to the termination of any such
Extension Period of less than 20 consecutive quarters, the Company may further
extend the interest payment period; provided, that such Extension
S-25
<PAGE>
Period, together with all such previous and further extensions, may not exceed
20 consecutive quarters or extend beyond the maturity of the Debentures or end
on other than a Distribution payment date. Upon the termination of any
Extension Period and the payment of all amounts then due on the Debentures, the
Company may commence a new Extension Period, subject to the above requirements.
If Distributions are deferred, the deferred Distributions and, to the extent
permitted by law, accrued interest thereon shall be paid to holders of record
of the Capital Securities as they appear on the books and records of the Trust
at the close of business on the record date for the Distribution payment date
upon which such Extension Period terminates. See "Risk Factors--Risks Related
to an Investment in the Capital Securities--Distributions on the Capital
Securities Could Be Deferred for Substantial Periods Adversely Affecting the
Market Price; Holders Would Continue to Recognize Income for Tax Purposes" and
"Description of the Debentures--Option to Extend Interest Payment Period."
The Company has no present intention of exercising its right to defer
payments of interest by extending the interest payment period on the
Debentures.
Distributions on the Capital Securities must be paid on the dates payable to
the extent that the Trust has funds available for the payment of such
Distributions. The Trust's funds available for Distribution to the holders of
Capital Securities will be limited to payments received from the Company on the
Debentures. The payment of Distributions out of moneys held by the Trust is
guaranteed by the Company to the extent set forth under "Description of the
Guarantee."
Distributions on the Capital Securities will be payable to the holders
thereof as they appear on the books and records of the Trust at the close of
business on the relevant record dates, which, as long as the Capital Securities
remain in book-entry only form, will be one Business Day (as defined below)
prior to the relevant payment dates. Such Distributions will be paid through
the Property Trustee, who will hold amounts received in respect of the
Debentures for the benefit of the holders of the Trust Securities. Subject to
any applicable laws and regulations and the provisions of the Declaration, each
such payment will be made as described under "--Book-Entry Only Issuance--The
Depository Trust Company" below. In the event that the Capital Securities do
not continue to remain in book-entry only form, the Regular Trustees shall
select the relevant record dates for the Capital Securities, which shall be at
least 15 Business Days prior to the relevant payment dates (provided that such
record dates must conform to the rules of any securities exchange on which the
Capital Securities are listed) and Distributions payable on Capital Securities
which are not in book-entry form may be made at the option of the Trust by
check mailed to the address of the holder entitled thereto or by wire transfer
to an account in the United States appropriately designated by the holder
entitled thereto prior to the record date for the corresponding Distribution
payment date. In the event that any date on which Distributions are to be made
on the Capital Securities is not a Business Day, then payment of the
Distributions payable on such date will be made on the next succeeding day
which is a Business Day (and without any interest or other payment in respect
of any such delay), except that, if such Business Day is in the next succeeding
calendar year, such payment shall be made on the immediately preceding Business
Day, in each case with the same force and effect as if made on the date such
payment was originally payable. A "Business Day" means any day other than
Saturday, Sunday or any other day on which banking institutions in New York
City are
S-26
<PAGE>
permitted or required by any applicable law to close or a day on which the
corporate trust office of the Property Trustee or the Delaware Trustee is
closed for business.
REDEMPTION OR EXCHANGE
The Debentures will mature on December 31, 2028 unless the maturity date is
shortened to a date not earlier than December 31, 2003, subject to prior
approval of the Federal Reserve if the Company is then a bank holding company
and approval is required under applicable regulations. The Debentures may be
redeemed, in whole or in part, at any time on or after December 31, 2003 or at
any time in whole (but not in part), within 90 days following the occurrence of
a Tax Event, an Investment Company Event or a Capital Treatment Event.
Redemption of the Debentures prior to maturity is subject to prior approval of
the Federal Reserve if the Company is then a bank holding company and approval
is required under applicable regulations. Under current regulations of the
Federal Reserve, any perpetual preferred securities with a feature permitting
redemption at the option of the issuer can qualify as Tier 1 capital only if
the redemption is subject to prior approval of the Federal Reserve. Therefore,
any prepayment of the Debentures and consequent redemption of the Capital
Securities will be subject to the prior approval of the Federal Reserve if the
Company is then a bank holding company and such regulations have not been
revised. Upon the repayment of the Debentures, whether at stated maturity or
upon redemption, the proceeds from such repayment or payment shall
simultaneously be applied to redeem Trust Securities having an aggregate
liquidation amount equal to the aggregate principal amount of the Debentures so
repaid or redeemed at the applicable redemption price, together with
accumulated and unpaid Distributions thereon; provided, that, except in the
case of redemption upon maturity of the Debentures, holders of Trust Securities
shall be given not less than 30 nor more than 60 days notice of such
redemption. The applicable redemption price per Capital Security shall be equal
to the redemption price per $25 principal amount of Debentures. See
"Description of the Debentures--Redemption at the Option of the Company." In
the event that fewer than all of the outstanding Trust Securities are to be
redeemed, the Capital Securities and the Trust Common Securities will be
redeemed on a pro rata basis and, in such case, the redemption of Capital
Securities will be made as described under "Book-Entry Only Issuance--The
Depository Trust Company" below.
"Tax Event" means that the Regular Trustees shall have received an opinion of
nationally recognized independent tax counsel experienced in such matters (a
"Dissolution Tax Opinion") to the effect that, as a result of (a) 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, (b) any amendment to, or change in, an
interpretation or application of any such laws or regulations by any
legislative body, court or governmental or regulatory agency or authority
(including the enactment of any legislation and the publication of any judicial
decision or regulatory determination) or (c) any official interpretation or
pronouncement by any legislative body, court or governmental or regulatory
agency or authority that provides for a position with respect to such laws or
regulations that differs from the theretofore generally accepted position,
which amendment or change is enacted, promulgated, issued or announced or which
interpretation or pronouncement is issued or announced, in each case, on or
after the date of this Prospectus Supplement (collectively, a "Change in Tax
Law"), there is more than an insubstantial risk that (i) the Trust is, or will
be within 90 days of the date thereof, subject to federal income tax
S-27
<PAGE>
with respect to interest accrued or received on the Debentures, (ii) the Trust
is, or will be within 90 days of the date thereof, subject to more than a de
minimis amount of other taxes, duties or other governmental charges or (iii)
interest (including original issue discount) payable by the Company to the
Trust on the Debentures is not, or within 90 days of the date thereof will not
be, deductible by the Company for United States Federal income tax purposes on
a current accrual basis (by reason of deferral, disallowance or otherwise).
"Investment Company Event" means that each of the Regular Trustees shall have
received an opinion of a nationally recognized independent counsel experienced
in such matters to the effect that, as a result of the occurrence of a change
in law or regulation or a change in interpretation or application of law or
regulation by any legislative body, court, governmental agency or regulatory
authority which change is enacted, promulgated, issued or becomes effective on
or after the date of this Prospectus Supplement (a "Change in 1940 Act Law"),
there is more than an insubstantial risk that the Trust is or will be
considered an "investment company" which is required to be registered under the
Investment Company Act of 1940, as amended (the "1940 Act").
"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 interpreting or applying such laws or regulations,
which amendment or change is effective or such proposed change, pronouncement,
action or decision is announced on or after the date of original issuance of
the Capital Securities, there is more than an insubstantial risk that the
Company will not be entitled to treat the allowable amount (subject to current
interpretations of the Federal Reserve as of the date of this Prospectus
Supplement) of the liquidation amount of the Capital Securities as "Tier 1
Capital" (or the then equivalent thereof) applied as if the Company (or its
successor) were a bank holding company for purposes of the capital adequacy
guidelines of the Federal Reserve (or any successor regulatory authority with
jurisdiction over bank holding companies), or any capital adequacy guidelines
as then in effect and applicable to the Company.
If, at any time, a Tax Event, an Investment Company Event or a Capital
Treatment Event (each, a "Special Event") shall occur and be continuing, the
Trust may, after satisfaction of the liabilities of creditors of the Trust as
provided by applicable law, with the prior written consent of the Company, be
dissolved with the result that Debentures with an aggregate principal amount
equal to the aggregate stated liquidation amount of, with an interest rate
identical to the Distribution rate of and accrued and unpaid interest equal to
accumulated and unpaid Distributions on, the Trust Securities outstanding at
such time would be distributed to the holders of the Trust Securities in
liquidation of such holders' interests in the Trust on a pro rata basis within
90 days following the occurrence of the Special Event; provided, however, that
if at the time there is available to the Trust the opportunity to eliminate,
within such 90-day period the Special Event by taking some ministerial action,
such as filing a form or making an election, or pursuing some other similar
reasonable measure which in the sole judgment of the Company has or will cause
no adverse effect on the Trust, the Company or the holders of the Trust
Securities and will involve no material cost, the Trust will pursue such
measure in lieu of dissolution. If the Company declines to consent to such a
dissolution of the Trust and distribution of the Debentures or declines to
redeem the Debentures as described above, the Capital
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<PAGE>
Securities will remain outstanding and the Company may incur an obligation to
pay Additional Interest (as defined herein). See "Description of the
Debentures--Additional Interest."
After the date fixed for any distribution of Debentures upon dissolution of
the Trust, (i) the Capital Securities will no longer be deemed to be
outstanding, (ii) the Depositary (as defined herein) or its nominee, as the
record holder of the Capital Securities, will receive a registered global
certificate or certificates representing the Debentures to be delivered upon
such distribution, and (iii) any certificates representing Capital Securities
not held by the Depositary or its nominee will be deemed to represent
Debentures having an aggregate principal amount equal to the aggregate stated
liquidation amount of, with an interest rate identical to the Distribution rate
of, and accrued and unpaid interest equal to accumulated and unpaid
Distributions on, such Capital Securities until such certificates are presented
to the Company or its agent for transfer, exchange or reissuance.
Under current United States federal income tax law and interpretations and
provided that the Trust is not treated as an association taxable as a
corporation, a distribution of the Debentures should not be a taxable event to
holders of the Capital Securities. Should there be a change in law, a change in
legal interpretation, a Tax Event or other circumstances, however, the
distribution could be a taxable event to holders of the Capital Securities. See
"Certain Federal Income Tax Consequences--Distribution of the Debentures to
Holders of the Capital Securities."
There can be no assurance as to the market price for the Debentures which may
be distributed in exchange for Capital Securities if a dissolution and
liquidation of the Trust were to occur. Accordingly, the Debentures which an
investor may subsequently receive on dissolution and liquidation of the Trust
may trade at a discount to the price of the Capital Securities exchanged. If
the Debentures are distributed to the holders of Capital Securities upon the
dissolution of the Trust, the Company will use its reasonable best efforts to
list the Debentures on a national securities exchange or similar organization.
REDEMPTION PROCEDURES FOR REDEMPTION BY THE TRUST
The Trust may not redeem fewer than all of the outstanding Capital Securities
unless all accumulated and unpaid Distributions have been or contemporaneously
are paid (or such payment duly provided for) on all Capital Securities for all
quarterly Distribution periods terminating on or prior to the date of
redemption.
If the Trust gives notice of redemption in respect of Capital Securities
(which notice will be irrevocable), then, on the redemption date, provided that
the Company has paid to the Property Trustee a sufficient amount of cash in
connection with the related redemption of the Debentures, the Trust will
irrevocably deposit with the Depositary funds sufficient to pay the applicable
redemption price and will give the Depositary irrevocable instructions and
authority to pay the redemption price to the holders of the Capital Securities.
If notice of redemption shall have been given and funds deposited as required,
then, on the date fixed for such redemption, Distributions will cease to accrue
and all rights of holders of such Capital Securities so called for redemption
will cease, except the right of the holders of such Capital Securities to
receive the redemption price but without interest on such redemption price. In
the event that any date generally fixed for redemption of Capital Securities is
not a Business Day, then payment of the redemption price payable on such date
will be made on
S-29
<PAGE>
the next succeeding day that 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. In the event that payment of the redemption price in
respect of Capital Securities is improperly withheld or refused and not paid
either by the Trust or by the Company pursuant to the Guarantee, Distributions
on such Capital Securities will continue to accumulate at the then applicable
rate from the original redemption date to the date of payment, in which case
the actual payment date will be considered the date fixed for redemption for
purposes of calculating the redemption price. See "--Book-Entry Only Issuance--
The Depository Trust Company."
In the event that fewer than all of the outstanding Trust Securities are to
be redeemed, the Capital Securities and the Trust Common Securities will be
redeemed on a pro rata basis and, in such case, the redemption of Capital
Securities will be made as described below under "--Book-Entry Only Issuance--
The Depository Trust Company."
Subject to the foregoing and applicable law (including, without limitation,
U.S. federal securities laws), the Company or its subsidiaries may at any time,
and from time to time, purchase outstanding Capital Securities by tender, in
the open market or by private agreement.
LIQUIDATION OF THE TRUST AND DISTRIBUTION OF THE DEBENTURES TO HOLDERS
Subsequent to the Company having received prior approval of the Federal
Reserve, if the Company is then a bank holding company and approval is required
under applicable regulations, the Company has the right at any time to dissolve
the Trust and, after satisfaction of the liabilities of creditors of the Trust
as provided by applicable law, cause Debentures to be distributed to the
holders of the Capital Securities in exchange therefor upon liquidation of the
Trust.
After the liquidation date fixed for any distribution of the Debentures for
Capital Securities (i) such Capital Securities will no longer be deemed to be
outstanding, and (ii) DTC or its nominee, as the registered holder of Capital
Securities, will receive a registered global certificate or certificates
representing the Debentures to be delivered upon such distribution with respect
to Capital Securities held by DTC or its nominee, (iii) any certificates
representing the Capital Securities not held by DTC or its nominee will be
deemed to represent Debentures having a principal amount equal to the stated
liquidation amount of such Capital Securities, and bearing accrued and unpaid
interest in an amount equal to the accumulated and unpaid Distributions on such
series of the Capital Securities until such certificates are presented to the
Property Trustee or its agent for transfer or reissuance.
Under current United States federal income tax law and interpretations and
provided that the Trust is not treated as an association taxable as a
corporation, a distribution of the Debentures should not be a taxable event to
holders of the Capital Securities. Should there be a change in law, a change in
legal interpretation, a Tax Event or other circumstances, however, the
distribution could be a taxable event to holders of the Capital Securities. See
"Certain Federal Income Tax Consequences--Distribution of the Debentures to
Holders of the Capital Securities."
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LIQUIDATION DISTRIBUTION UPON DISSOLUTION
Pursuant to the Declaration, the Trust shall automatically dissolve upon
expiration of its term and shall dissolve on the first to occur of (i) certain
events of bankruptcy, dissolution or liquidation of the Company, subject in
certain instances to any such event remaining in effect for a period of
90 consecutive days; (ii) the distribution of the Debentures to the holders of
Capital Securities; (iii) redemption of all of the Capital Securities as
described under "Description of the Capital Securities-Redemption Procedures
for Redemption by the Trust"; (iv) delivery by the Regular Trustees of written
direction to the Property Trustee to terminate the Trust and (v) the entry of
an order for the dissolution of the Trust by a court of competent jurisdiction.
In the event of any voluntary or involuntary liquidation, dissolution,
winding-up or termination of the Trust (each a "Liquidation"), the then holders
of the Capital Securities will be entitled to receive out of the assets of the
Trust, after satisfaction of liabilities to creditors, distributions in an
amount equal to the aggregate of the stated liquidation amount of $25 per
Capital Security plus accumulated and unpaid Distributions thereon to the date
of payment (the "Liquidation Distribution"), unless, in connection with such
Liquidation, Debentures in an aggregate stated principal amount equal to the
aggregate stated liquidation amount of, with an interest rate identical to the
Distribution rate of, and accrued and unpaid interest equal to accumulated and
unpaid Distributions on, the Capital Securities have been distributed on a pro
rata basis to the holders of the Capital Securities.
If, upon any such Liquidation, the Liquidation Distribution can be paid only
in part because the Trust has insufficient assets available to pay in full the
aggregate Liquidation Distribution, then the amounts payable directly by the
Trust on the Capital Securities shall be paid on a pro rata basis. The holders
of the Trust Common Securities will be entitled to receive distributions upon
any such dissolution pro rata with the holders of the Capital Securities,
except that if a Declaration Event of Default has occurred and is continuing,
the Capital Securities shall have a preference over the Trust Common Securities
with regard to such distributions.
DECLARATION EVENTS OF DEFAULT
The "events of default" under the Subordinated Indenture, insofar as they
apply to the Debentures, have been modified, pursuant to the First Supplemental
Indenture (as hereinafter defined), from those described in the accompanying
Prospectus. The events of default, as so modified, applicable to the Debentures
(the "Indenture Events of Default") are described in this Prospectus Supplement
under "Description of the Debentures--Indenture Events of Default."
Any one of the following events that has occurred and is continuing
constitutes an "Event of Default" under the Declaration (a "Declaration Event
of Default") with respect to the Capital Securities (whatever the reason for
such Event of Default and whether it shall be voluntary or involuntary or be
effected by operation of law or pursuant to any judgment, decree or order of
any court or any order, rule or regulation of any administrative or
governmental body):
(i) the occurrence of a Indenture Event of Default; or
(ii) default by the Property Trustee in the payment of any Distribution
when it becomes due and payable, and continuation of such default for a
period of 30 days; or
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(iii) default by the Property Trustee in the payment of any redemption
price of any Trust Security when it becomes due and payable;
(iv) default in the performance, or breach, in any material respect, of any
covenant or warranty of the Trustees in the Declaration (other than a
default or breach in the performance of a covenant or warranty which is
addressed in clause (ii) or (iii) above, and the continuation of any such
default or breach for a period of 60 days after there has been given, by
registered or certified mail, to the defaulting Trustee or Trustees by the
holders of a least 25% in aggregate liquidation amount of the outstanding
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 Declaration; or
(v) the occurrence of certain events of bankruptcy or insolvency with
respect to the Property Trustee and the failure by the Company to appoint a
successor Property Trustee within 60 days thereof.
Within five Business Days after the occurrence of any Declaration Event of
Default actually known to the Property Trustee, the Property Trustee shall
transmit notice of such Declaration Event of Default to the holders of the
Capital Securities, the Regular Trustees and the Company, unless such
Declaration Event of Default shall have been cured or waived. Pursuant to the
Declaration, the holder of the Trust Common Securities will be deemed to have
waived any Declaration Event of Default with respect to the Trust Common
Securities until all Declaration Events of Default with respect to the Capital
Securities have been cured, waived or otherwise eliminated. Until such
Declaration Events of Default with respect to the Capital Securities have been
so cured, waived, or otherwise eliminated, the Property Trustee will be deemed
to be acting solely on behalf of the holders of the Capital Securities and only
the holders of the Capital Securities will have the right to direct the
Property Trustee with respect to certain matters under the Declaration, and
therefore the Subordinated Indenture. If the Property Trustee fails to enforce
its rights under the Debentures, holders of Capital Securities, to the fullest
extent permitted by law, may institute a legal proceeding against the Company
to enforce the Property Trustee's rights under the Debentures. Notwithstanding
the foregoing, if a Declaration Event of Default has occurred and is continuing
and such event is attributable to the failure of the Company to pay interest or
principal on the Debentures on the date such interest or principal is otherwise
payable (or in the case of redemption, the redemption date), the Company
acknowledges in the Subordinated Indenture that a holder of Capital Securities
may institute a Direct Action for enforcement of payment to such holder
directly of the principal of or interest on Debentures having an aggregate
principal amount equal to the aggregate liquidation amount of the Capital
Securities of such holder on or after the respective due date specified in the
Debentures. In connection with such Direct Action, the Company will remain
obligated to pay the principal or interest on such Debentures and will be
subrogated to the rights of such holders of Capital Securities under the
Declaration to the extent of any payment made by the Company to such holder of
Capital Securities in such Direct Action. The holders of Capital Securities
will not be able to exercise directly any other remedy available to the holders
of the Debentures.
Upon the occurrence of an Indenture Event of Default, the Property Trustee as
the sole holder of the Debentures will have the right under the Indenture to
declare the principal of and interest on the Debentures to be immediately due
and payable. Upon an Indenture Event of Default, unless the
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principal of all the Debentures has already become due and payable, either the
Property Trustee or the holders of not less than 25% in aggregate principal
amount of the Debentures then outstanding may declare all of the Debentures to
be due and payable immediately by giving notice in writing to the Company (and
to the Property Trustee, if notice is given by holders of the Debentures). If
the Property Trustee or the holders of the Debentures fail to declare the
principal of all of the Debentures due and payable upon an Indenture Event of
Default, the holders of at least 25% in liquidation amount of the Capital
Securities then outstanding shall have the right to declare the Debentures
immediately due and payable. The Company and the Trust are each required to
file annually with the Property Trustee an officer's certificate as to its
compliance with all conditions and covenants under the Declaration.
VOTING RIGHTS; AMENDMENT OF DECLARATION
Except as described herein, under the Trust Act, Trust Indenture Act and
under "Description of Trust Preferred Securities Guarantees--Modification of
the Trust Preferred Securities Guarantees; Assignment" in the accompanying
Prospectus, and as otherwise required by law and the Declaration, the holders
of the Capital Securities will have no voting rights.
The Declaration may be modified and amended if approved by the Regular
Trustees (and in certain circumstances the Property Trustee or the Delaware
Trustee). The Declaration may be amended from time to time without the consent
of the holders of the Capital Securities, (i) unless a Declaration Event of
Default shall have occurred and be continuing, with respect to acceptance of
appointment of a successor Trustee, (ii) to cure any ambiguity, correct or
supplement any provision in the Declaration that may be inconsistent with any
other provision or to make any other provisions with respect to matters or
questions arising under the Declaration, which shall not be inconsistent with
the other provisions of the Declaration or (iii) to modify, eliminate or add to
any provisions of the Declaration to such extent as shall be necessary to
ensure that the Trust will be classified for United States federal income tax
purposes as a grantor trust or to ensure that the Trust will not be required to
register as an "investment company" under the 1940 Act, provided, however, that
in the case of clauses (ii) and (iii), such action shall not adversely affect
in any material respect the interests of any holder of Trust Securities, and
any amendments of the Declaration shall become effective when notice thereof is
given to the holders of the Trust Securities. The Declaration may be amended by
the Trustees with (a) the consent of holders representing not less than a
majority of the aggregate liquidation value of the outstanding Trust Securities
and (b) receipt by the Trustees of an opinion of counsel that such amendment or
modification would not (i) cause the Trust to be classified for purposes of
United States federal income taxation as other than a grantor trust, (ii)
reduce or otherwise adversely affect the powers of the Property Trustee in
contravention of the Trust Indenture Act or (iii) cause the Trust to be deemed
an "investment company" which is required to be registered under the 1940 Act.
Subject to the requirement of each of the Bay View Trustees obtaining a tax
opinion in certain circumstances set forth in the last sentence of the next
paragraph, the holders of a majority in aggregate liquidation amount of the
Capital Securities have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Property Trustee, or
exercising any trust or power conferred upon the Property Trustee under the
Declaration including the right to
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direct the Property Trustee, as holder of the Debentures, to (i) exercise the
remedies available under the Subordinated Indenture with respect to the
Debentures, (ii) waive any past Indenture Event of Default and its consequences
that is waivable under the Subordinated Indenture, or (iii) exercise any right
to rescind or annul a declaration that the principal of all the Debentures
shall be due and payable; provided, however, that if an Indenture Event of
Default has occurred and is continuing, the holders of 25% of the aggregate
liquidation amount of the Capital Securities then outstanding may direct the
Property Trustee to declare the principal and interest of the Debentures
immediately due and payable; and provided, further, that where a consent under
the Subordinated Indenture would require the consent of (a) holders of
Debentures representing a specified percentage greater than a majority in
principal amount of the Debentures (a "Super-Majority") or (b) each holder of
Debentures affected thereby, no such consent shall be given by the Property
Trustee without the prior consent of, in the case of clause (a) above, holders
of Capital Securities representing at least such specified percentage of the
aggregate liquidation amount of the Capital Securities or, in the case of
clause (b) above, each holder of Capital Securities affected thereby.
The Property Trustee shall notify all holders of the Capital Securities of
any notice of default received from the Debt Trustee with respect to the
Debentures. Except with respect to directing the time, method and place of
conducting a proceeding for a remedy, the Property Trustee shall not take any
of the actions described in clause (i), (ii) or (iii) above unless each of the
Bay View Trustees has obtained an opinion of nationally recognized independent
tax counsel experienced in such matters to the effect that, as a result of such
action, the Trust will not be classified as other than a grantor trust for
United States federal income tax purposes and each holder will be treated as
owning an undivided beneficial interest in the Debentures.
In the event the consent of the Property Trustee, as the holder of the
Debentures, is required under the Subordinated Indenture with respect to any
amendment, modification or termination of the Subordinated Indenture, the
Property Trustee shall request the direction of the holders of the Trust
Securities with respect to such amendment, modification or termination and
shall vote with respect to such amendment, modification or termination as
directed by a majority in liquidation amount of the Trust Securities voting
together as a single class; provided, however, that where a consent under the
Subordinated Indenture would require the consent of a Super-Majority, the
Property Trustee may only give such consent at the direction of the holders of
at least the proportion in liquidation amount of the Trust Securities which the
relevant Super-Majority represents of the aggregate principal amount of the
Debentures outstanding. The Property Trustee shall be under no obligation to
take any such action in accordance with the directions of the holders of the
Trust Securities unless each of the Bay View Trustees has obtained an opinion
of nationally recognized independent tax counsel experienced in such matters to
the effect that for United States federal income tax purposes the Trust will
not be classified as other than a grantor trust.
A waiver of an Indenture Event of Default will constitute a waiver of the
corresponding Declaration Event of Default.
Any required approval or direction of holders of Capital Securities may be
given at a separate meeting of holders of Capital Securities convened for such
purpose, at a meeting of all of the holders of Trust Securities or pursuant to
written consent. The Regular Trustees will cause a notice of any meeting at
which holders of Capital Securities are entitled to vote, or of any matter upon
which
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action by written consent of such holders is to be taken, to be mailed to each
holder of record of Capital Securities. Each such notice will include a
statement setting forth the following information: (i) the date of such meeting
or the date by which such action is to be taken; (ii) a description of any
resolution proposed for adoption at such meeting on which such holders are
entitled to vote or of such matter upon which written consent is sought; and
(iii) instructions for the delivery of proxies or consents. No vote or consent
of the holders of Capital Securities will be required for the Trust to redeem
and cancel Capital Securities or distribute Debentures in accordance with the
Declaration.
Notwithstanding that holders of Capital Securities are entitled to vote or
consent under any of the circumstances described above, any of the Capital
Securities that are owned at such time by the Company or any entity directly or
indirectly controlling or controlled by, or under common control with, the
Company, shall not be entitled to vote or consent and shall, for purposes of
such vote or consent, be treated as if such Capital Securities were not
outstanding.
The procedures by which holders of Capital Securities in book-entry form may
exercise their voting rights are described below. See "--Book-Entry Only
Issuance--The Depository Trust Company" below.
Holders of the Capital Securities will have no rights to appoint or remove
the Bay View Trustees, who may be appointed, removed or replaced solely by the
Company as the indirect or direct holder of all of the Trust Common Securities.
MERGERS, CONSOLIDATIONS OR AMALGAMATIONS
The Trust may not 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 corporation or other body, except as described below or as
otherwise provided in the Declaration. The Trust may, with the consent of the
Regular Trustees and without the consent of the holders of the Trust
Securities, the Property Trustee or the Delaware Trustee, consolidate,
amalgamate, merge with or into, convey, transfer or lease its properties and
assets substantially as an entirety to, or be replaced by a trust organized as
such under the laws of any State of the United States; provided, that (i) if
the Trust is not the survivor, such successor entity either (x) expressly
assumes all of the obligations of the Trust under the Trust Securities or (y)
substitutes for the Capital Securities other securities having substantially
the same terms as the Capital Securities (the "Successor Securities"), so long
as the Successor Securities rank the same as the Capital Securities rank with
respect to Distributions and payments upon liquidation, redemption and
otherwise, (ii) if the Trust is not the survivor, the Company expressly
acknowledges or appoints a trustee of such successor entity possessing the same
powers and duties as the Property Trustee as the holder of the Debentures,
(iii) the Capital Securities or any Successor Securities are listed, or any
Successor Securities will be listed upon notification of issuance, on any
national securities exchange or with another organization on which the Capital
Securities are then listed or quoted, (iv) such merger, consolidation,
amalgamation or replacement does not cause the Capital Securities (including
any Successor Securities) to be downgraded by any nationally recognized
statistical rating organizations, (v) such merger, consolidation, amalgamation
or replacement does not adversely affect the rights, preferences and privileges
of the holders of the Trust Securities (including any Successor Securities) in
any material respect (other than with respect to any dilution of the holders'
interest in the new entity, if any), (vi) such successor entity has a
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purpose substantially identical to that of the Trust, (vii) prior to such
merger, consolidation, amalgamation or replacement, the Company has received an
opinion of a nationally recognized independent counsel to the Trust experienced
in such matters to the effect that, (a) such merger, consolidation,
amalgamation or replacement does not adversely affect the rights, preferences
and privileges of the holders of the Trust Securities (including any Successor
Securities) in any material respect (other than with respect to any dilution of
the holders' interest in the new entity), (b) following such merger,
consolidation, amalgamation or replacement, neither the Trust nor such
successor entity, if any, will be required to register as an investment company
under the 1940 Act, and (c) following such merger, consolidation, amalgamation
or replacement, the Trust (or such successor entity) will be treated as a
grantor trust for United States federal income tax purposes, and (viii) if the
Trust is not the survivor, the Company guarantees the obligations of such
successor entity under the Successor Securities at least to the extent provided
by the Guarantee and Company's guarantee of the Trust Common Securities.
Notwithstanding the foregoing, the Trust shall not, except with the consent of
holders of 100% in liquidation amount of the Trust 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 such successor entity to
be classified as other than a grantor trust for United States federal income
tax purposes.
BOOK-ENTRY ONLY ISSUANCE--THE DEPOSITORY TRUST COMPANY
The Depository Trust Company ("DTC") will act as securities depositary (the
"Depository") for the Capital Securities. The Capital Securities will be issued
only as fully registered securities registered in the name of Cede & Co. (DTC's
nominee). One or more fully registered global Capital Securities certificates,
representing the total aggregate number of Capital Securities, will be issued
and will be deposited with DTC.
The laws of some jurisdictions require that certain purchasers of securities
take physical delivery of securities in definitive form. Such laws may impair
the ability to transfer or pledge beneficial interests in such global Capital
Securities.
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"). DTC holds securities that its
participants ("Participants") deposit with DTC. DTC also facilitates the
settlement among Participants of securities transactions, such as transfers and
pledges, in deposited securities through electronic computerized book-entry
changes in Participants' accounts, thereby eliminating the need for physical
movement of securities certificates. Direct Participants include securities
brokers and dealers, banks, trust companies, clearing corporations and certain
other organizations ("Direct Participants"). DTC is owned by a number of its
Direct Participants and by the New York Stock Exchange, Inc., the American
Stock Exchange, Inc. and the National Association of Securities Dealers, Inc.
Access to the DTC system is also available to others, such as securities
brokers and
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dealers, banks and trust companies that clear transactions through or maintain
a direct or indirect custodial relationship with a Direct Participant either
directly or indirectly ("Indirect Participants"). The rules applicable to DTC
and its Participants are on file with the Securities and Exchange Commission.
Purchases of Capital Securities within the DTC system must be made by or
through Direct Participants, which will receive a credit for the Capital
Securities on DTC's records. The ownership interest of each actual purchaser of
each Capital Securities ("Beneficial Owner") is in turn to be recorded on the
Direct and Indirect Participants' records. Beneficial Owners will not receive
written confirmation from DTC of their purchases, but Beneficial Owners are
expected to receive written confirmations providing details of the
transactions, as well as periodic statements of their holdings, from the Direct
or Indirect Participants through which the Beneficial Owners purchased Capital
Securities. Transfers of ownership interests in the Capital Securities are to
be accomplished by entries made on the books of Participants acting on behalf
of Beneficial Owners. Beneficial Owners will not receive certificates
representing their ownership interests in the Capital Securities, except in the
event that use of the book-entry system for the Capital Securities is
discontinued or in certain other limited circumstances.
To facilitate subsequent transfers, all the Capital Securities deposited by
Participants with DTC are registered in the name of DTC's nominee, Cede & Co.
The deposit of Capital Securities with DTC and their registration in the name
of Cede & Co. effect no change in beneficial ownership. DTC has no knowledge of
the actual Beneficial Owners of the Capital Securities. DTC's records reflect
only the identity of the Direct Participants to whose accounts such Capital
Securities are credited, which may or may not be the Beneficial Owners. The
Participants will remain responsible for keeping account of their holdings on
behalf of their customers.
Conveyance of notices and other communications by DTC to Direct Participants,
by Direct Participants to Indirect Participants and by Direct Participants and
Indirect Participants to Beneficial Owners will be governed by arrangements
among them, subject to any statutory or regulatory requirements that may be in
effect from time to time.
Redemption notices shall be sent to Cede & Co. If less than all of the
Capital Securities are being redeemed, DTC will reduce the amount of the
interest of each Direct Participant in such Capital Securities in accordance
with its procedures.
Although voting with respect to the Capital Securities is limited, in those
cases where a vote is required, neither DTC nor Cede & Co. will itself consent
or vote with respect to Capital Securities. Under its usual procedures, DTC
would mail an Omnibus Proxy to the Trust as soon as possible after the record
date. The Omnibus Proxy assigns the consenting or voting rights of Cede & Co.
to those Direct Participants to whose accounts the Capital Securities are
credited on the record date (identified in a listing attached to the Omnibus
Proxy). The Company and the Trust believe that the arrangements among DTC,
Direct and Indirect Participants, and Beneficial Owners will enable the
Beneficial Owners to exercise rights equivalent in substance to the rights that
can be directly exercised by a holder of a beneficial interest in the Trust.
Distribution payments on the Capital Securities will be made to DTC. DTC's
practice is to credit Direct Participants' accounts on the relevant payment
date in accordance with their respective holdings shown on DTC's records unless
DTC has reason to believe that it will not receive payments
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on such payment date. Payments by Participants to Beneficial Owners will be
governed by standing instructions and customary practices, as is the case with
securities held for the account of customers in bearer form or registered in
"street name," and such payments will be the responsibility of such Participant
and not of DTC, the Trust or the Company, subject to any statutory or
regulatory requirements to the contrary that may be in effect from time to
time. Payment of distributions to DTC is the responsibility of the Trust,
disbursement of such payments to Direct Participants is the responsibility of
DTC, and disbursement of such payments to the Beneficial Owners is the
responsibility of Direct and Indirect Participants.
Except as described herein, a Beneficial Owner in a global Capital Securities
certificate will not be entitled to receive physical delivery of Capital
Securities. Accordingly, each Beneficial Owner must rely on the procedures of
DTC to exercise any rights under the Capital Securities.
DTC is under no obligation to provide services as Depository for the Capital
Securities and may discontinue providing such services at any time. Neither the
Company, the Trust, the Debt Trustee nor the Bay View Trustees will have any
responsibility for the performance by DTC or its Participants or Indirect
Participants under the rules and procedures governing DTC. In the event that
(i) DTC notifies the Trust that it is unwilling or unable to continue as a
Depository for the global Capital Securities or if at any time DTC ceases to be
a clearing agency registered as such under the Exchange Act and no successor
Depository shall have been appointed within 90 days of such notification or of
the Trust becoming aware of DTC's ceasing to be so registered, as the case may
be, (ii) the Regular Trustees, in their sole discretion, execute and deliver to
the Property Trustee an order to the effect that such global Capital Securities
shall be so exchangeable, or (iii) a Declaration Event of Default has occurred
and is continuing, certificates for the Capital Securities will be prepared and
delivered in exchange for beneficial interests in the global Capital
Securities. Any beneficial interest in global Capital Securities that is
exchangeable pursuant to the preceding sentence shall be exchangeable for
Capital Securities in definitive certificated form registered in such names as
the Depository shall direct. It is expected that such instructions will be
based upon directions received by the Depository from its Participants with
respect to ownership of beneficial interests in such global Capital Securities.
The information in this section and elsewhere in this Prospectus Supplement
concerning DTC and DTC's book-entry system has been obtained from sources that
the Company and the Trust believe to be reliable, but neither the Company nor
the Trust takes responsibility for the accuracy thereof.
INFORMATION CONCERNING THE PROPERTY TRUSTEE
The Property Trustee, prior to the occurrence of a default with respect to
the Trust Securities and after the curing of any defaults that may have
occurred, undertakes to perform only such duties as are specifically set forth
in the Declaration and, after default, shall exercise the same degree of care
as a prudent individual would exercise in the conduct of his or her own
affairs. Subject to such provisions, the Property Trustee is under no
obligation to exercise any of the powers vested in it by the Declaration at the
request of any holder of Capital Securities, unless offered reasonable
indemnity by such holder against the costs, expenses and liabilities which
might be incurred thereby. The holders of Capital Securities will not be
required to offer such indemnity in the event such holders,
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by exercising their voting rights, direct the Property Trustee to take any
action it is empowered to take under the Declaration following a Declaration
Event of Default. The Property Trustee also serves as trustee under the
Guarantee and the Subordinated Indenture.
The Company may maintain banking and other commercial relationships with the
Property Trustee and its affiliates in the ordinary course of business, and the
Property Trustee may own Securities (as defined in the accompanying
Prospectus).
PAYING AGENT
In the event that the Capital Securities do not remain in book-entry only
form, the following provisions would apply:
The Property Trustee will act as initial paying agent and transfer agent and
may designate additional or substitute paying agents and transfer agents at any
time. Registration of transfers of Capital Securities will be effected without
charge by or on behalf of the Trust, but upon payment (with the giving of such
indemnity as the Regular Trustees, the Property Trustee or the Company may
require) in respect of any tax or other government charges that may be imposed
in relation thereto. The Trust will not be required to register the transfer of
or exchange Capital Securities during the period beginning at the opening of
business 15 days before any selection of Capital Securities to be redeemed and
ending at the close of business on the day of that selection or register the
transfer of or exchange any Capital Securities, or portion thereof, called for
redemption, except the unredeemed portion of any Capital Securities being
redeemed in part. In addition, with respect to Capital Securities not held in
book-entry form, holders will be required to surrender certificates evidencing
the Capital Securities in order to receive payment due upon redemption or at
maturity and in order to convert the Capital Securities.
GOVERNING LAW
The Declaration and the Capital Securities will be governed by, and construed
in accordance with, the internal laws of the State of Delaware.
MISCELLANEOUS
The Regular Trustees are authorized and directed to conduct the affairs of
and to operate the Trust in such a way so that the Trust will not be required
to register as an "investment company" under the 1940 Act or characterized as
other than a grantor trust for United States federal income tax purposes and so
that the Debentures will be treated as indebtedness of the Company for United
States federal income tax purposes. In this connection, the Company and the
Regular Trustees are authorized to take any action, not inconsistent with
applicable law or the Declaration, that each of the Company and the Regular
Trustees determine in their discretion to be necessary or desirable to achieve
such end, as long as such action does not adversely affect the interests of the
holders of Capital Securities.
Holders of the Capital Securities, as such, have no preemptive or similar
rights.
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DESCRIPTION OF THE GUARANTEE
GENERAL
Pursuant to the Guarantee, the Company will irrevocably and unconditionally
agree, to the extent set forth therein, to pay in full, to the holders of the
Capital Securities issued by the Trust, the Guarantee Payments as defined in
the accompanying Prospectus (except to the extent paid by the Trust), as and
when due, regardless of any defense, right of set-off or counterclaim which the
Trust may have or assert. 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 Capital Securities or by causing the Trust to pay such amounts
to such holders. The Guarantee will be qualified as an indenture under the
Trust Indenture Act. The Property Trustee will act as indenture trustee under
the Guarantee (the "Guarantee Trustee"). The terms of the Guarantee will be
those set forth in such Guarantee and those made part of such Guarantee by the
Trust Indenture Act. The Guarantee will be held by the Guarantee Trustee for
the benefit of the holders of the Capital Securities. A more detailed summary
of the Guarantee appears in the accompanying Prospectus under the caption
"Description of Trust Preferred Securities Guarantees."
In the Guarantee, the Company will covenant that, so long as any Capital
Securities remain outstanding, if there shall have occurred and be continuing
any event of default under the Guarantee or any Declaration Event of Default,
then (a) the Company shall not declare or pay dividends on, or make
distributions with respect to, or redeem, purchase or acquire, or make a
liquidation payment with respect to, any of its capital stock (other than
(x)(i) purchases or acquisitions of shares of the Company's capital stock (or
capital stock equivalents) in connection with the satisfaction by the Company
of its obligations under any officers, directors or employee benefit plans (or
any options or other instruments issued thereunder), (ii) as a result of a
reclassification, combination or subdivision of the Company's capital stock or
the exchange or conversion of one class or series of the Company's capital
stock for another class or series of the Company's capital stock, (iii)
dividends or distributions of shares of common stock of the Company, (iv) 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 any
security being converted or exchanged into such capital stock, or (v) any
dividend or distribution of capital stock (or capital stock equivalents) in
connection with the implementation of a stockholders' rights plan, or the
issuance of stock under any such plan in the future, or the redemption or
repurchase of any such rights pursuant thereto, or (y) guarantee payments made
with respect to any of the foregoing), (b) the Company shall not make any
payment of interest, principal or premium, if any, on or repay, repurchase or
redeem any debt securities issued by the Company which rank pari passu with or
junior to the Debentures and (c) the Company shall not make any guarantee
payments with respect to debt securities of any Company subsidiary that rank
pari passu with or junior to the Debentures (other than pursuant to the
Guarantee or the Company's guarantee of the Trust Common Securities).
If the Company does not make interest payments on the Debentures held by the
Trust, the Trust will not be able to pay Distributions on the Capital
Securities and will not have funds legally available therefor. The Guarantee
will rank subordinate and junior in right of payment to all Senior Indebtedness
of the Company. Because the Company is a holding company, the right of the
Company to participate in any distribution of assets of any subsidiary upon
such subsidiary's
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liquidation or reorganization or otherwise is subject to the prior claims of
creditors of that subsidiary, except to the extent the Company may itself be
recognized as a creditor of that subsidiary. Accordingly, the Company's
obligations under the Guarantee will be effectively subordinated to all
existing and future liabilities of the Company's subsidiaries, and claimants
should look only to the assets of the Company for payments thereunder. The
Guarantee does not limit the incurrence or issuance of other secured or
unsecured debt of the Company, including Senior Debt, whether under the
Indenture, any other indenture that the Company may enter into in the future,
or otherwise. The Company may from time to time to incur indebtedness
constituting Senior Indebtedness.
GOVERNING LAW
The Guarantee will be governed by and construed in accordance with the laws
of the State of Delaware, without regard to conflicts of laws principles
thereof.
DESCRIPTION OF THE DEBENTURES
Set forth below is a description of the specific terms of the Debentures in
which the Trust will invest the proceeds from the issuance and sale of the
Trust Securities. This description supplements and, to the extent inconsistent
therewith, replaces the description of the general terms and provisions of the
Debentures set forth in the accompanying Prospectus under the caption
"Description of Debt Securities." In particular, the Indenture Events of
Default applicable to the Debentures set forth herein supersede and replace,
insofar as is applicable to the Debentures, the Events of Default set forth in
the accompanying Prospectus. The following summary of certain provisions of the
subordinated indenture (the "Base Indenture"), between the Company and
Wilmington Trust Company, as Trustee (the "Debt Trustee"), as supplemented by
the first supplemental indenture thereto (the "First Supplemental Indenture"
and, together with the Base Indenture, the "Subordinated Indenture"), and the
Debentures does not purport to be complete and is subject to, and qualified in
its entirety by reference to, all of the provisions of the Subordinated
Indenture and the Debt Securities (which provisions, including defined terms,
are incorporated herein by reference) and the Trust Indenture Act. A copy of
the form of Subordinated Indenture and the form of Debenture has been or will
be filed or incorporated by reference as an exhibit to the Registration
Statement of which the accompanying Prospectus is a part. See "Available
Information" in the accompanying Prospectus. Certain capitalized terms used
herein are defined in the Subordinated Indenture.
Under certain circumstances involving the dissolution of the Trust following
the occurrence of a Special Event, Debentures may be distributed to the holders
of the Trust Securities in liquidation of the Trust. See "Description of the
Capital Securities--Redemption or Exchange."
If the Debentures are distributed to the holders of the Capital Securities,
the Company will use its reasonable best efforts to have the Debentures listed
on the same national securities exchange or similar organization on which the
Capital Securities are then listed or quoted.
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GENERAL
The Debentures will be issued as unsecured debt under the Subordinated
Indenture. The Debentures will be limited in aggregate principal amount to
approximately $ million (or $ million if the Underwriters' over-allotment
option is exercised in full), such amount being the sum of the aggregate stated
liquidation of the Capital Securities and the capital contributed by the
Company in exchange for the Trust Common Securities (the "Company Payment").
The Debentures are not subject to a sinking fund provision or to defeasance
or covenant defeasance. The entire principal amount of the Debentures will
mature and become due and payable, together with any accrued and unpaid
interest thereon including, to the extent permitted by law, Compound Interest
(as defined herein) and Additional Interest (as defined herein), if any, on
December 31, 2028 unless the maturity date is shortened to a date not earlier
than December 31, 2003, subject to prior approval of the Federal Reserve if the
Company is then a bank holding company and approval is required under
applicable regulations.
If Debentures are distributed to holders of Capital Securities in liquidation
of such holders' interests in the Trust, such Debentures will initially be
issued as a Global Security (as defined herein). As described herein, under
certain limited circumstances, Debentures may be issued in certificated form in
exchange for a Global Security. See "--Book-Entry and Settlement" below. In the
event that Debentures are issued in certificated form, such Debentures will be
in denominations of $25 and integral multiples thereof and may be transferred
or exchanged at the offices described below. Payments on Debentures issued as a
Global Security will be made to DTC, a successor Depository or, in the event
that no depositary is used, to a paying agent for the Debentures. In the event
Debentures are issued in certificated form, principal and interest will be
payable, the transfer of the Debentures will be registrable and Debentures will
be exchangeable for Debentures of other denominations of a like aggregate
principal amount at the office or agency maintained by the Company for that
purpose from time to time in New York, New York; provided, that payment of
interest may be made at the option of the Company by check mailed to the
address of the holder entitled thereto or by wire transfer to an account in the
United States appropriately designated by the holder entitled thereto prior to
the record date for the corresponding interest payment date. Notwithstanding
the foregoing, so long as the holder of any Debentures is the Property Trustee,
the payment of principal and interest on the Debentures held by the Property
Trustee will be made at such place and to such account in the United States as
may be designated by the Property Trustee.
SUBORDINATION
The Subordinated Indenture provides that the Debentures are subordinated in
right of payment to all present and future Senior Debt and Subordinated Debt
(collectively "Senior Indebtedness") of the Company. No payment of principal
of, or premium, if any, or interest on the Debentures may be made if there
shall have occurred and be continuing (i) a default in the payment when due of
principal, of premium, if any, sinking funds, if any, or interest, if any, on
any Senior Indebtedness of the Company and any applicable grace period with
respect to such default shall have ended without such default having been cured
or waived or ceasing to exist or (ii) an event of default with respect to any
Senior Indebtedness of the Company resulting in the acceleration of the
maturity thereof without such acceleration having been rescinded or annulled.
See "Risk Factors--Risks Related to an Investment in
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the Capital Securities--Ranking of Subordinate Obligations Under the Guarantee
and Debentures; Rights Under the Guarantee" for information as to the amount of
Senior Indebtedness outstanding as of a recent date. Upon any distribution of
assets of the Company upon any dissolution, winding-up, liquidation or
reorganization of the Company, all Senior Indebtedness shall first be paid in
full, or such payment shall be provided for, before any payment on account of
the principal of, or premium, if any, or interest on the Debentures is made.
See "Description of Debt Securities--Ranking of Debt Securities; Holding
Company Structure" in the accompanying Prospectus for further information
regarding the subordination provisions applicable to the Debentures.
"Senior Debt" means the principal of (and premium, if any) and interest, if
any (including interest accruing on or after the filing of any petition in
bankruptcy or for reorganization relating to the Company whether or not such
claim for post-petition interest is allowed in such proceeding), on Debt,
whether incurred on or prior to the date of the Indenture or thereafter
incurred, unless, in the instrument creating or evidencing the same or pursuant
to which the same is outstanding, it is provided that such obligations are not
superior in right of payment to the Debentures or to other Debt which is pari
passu with, or subordinated to, the Debentures; provided, however, that Senior
Debt shall not be deemed to include: (i) any Debt of the Company which when
incurred and without respect to any election under Section 1111(b) of the
United States Bankruptcy Code of 1978, as amended, was without recourse to the
Company, (ii) any Debt of the Company to any of its subsidiaries, and (iii) any
Debt to any employee of the Company.
"Subordinated Debt" means the principal of (and premium, if any) and
interest, if any (including interest accruing on or after the filing of any
petition in bankruptcy or for reorganization relating to the Company whether or
not such claim for post-petition interest is allowed in such proceeding), on
Debt, whether incurred on or prior to the date of the Indenture or thereafter
incurred, which is by its terms expressly provided to be junior and subordinate
to other Debt of the Company (other than the Debentures), except that
Subordinated Debt shall not include the Debentures. Subordinated Debt includes
the Company's outstanding 9 1/8% Subordinated Notes due 2007.
"Debt" means with respect to any person, including the Company, whether
recourse is to all or a portion of the assets of such person and whether or not
contingent: (i) every obligation of such person for money borrowed; (ii) every
obligation of such person evidenced by bonds, debentures, notes or other
similar instruments, including obligations incurred in connection with the
acquisition of property, assets or businesses; (iii) every reimbursement
obligation of such person with respect to letters of credit, bankers'
acceptances or similar facilities issued for the account of such person;
(iv) every obligation of such person issued or assumed as the deferred purchase
price of property or services (but excluding trade accounts payable or accrued
liabilities arising in the ordinary course of business); (v) every capital
lease obligation of such person; (vi) all indebtedness of such person whether
incurred or on prior to the date of the Indenture or thereafter incurred, for
claims in respect of derivative products, including interest rate, foreign
exchange rate and commodity forward contracts, options and swaps and similar
arrangements; and (vii) every obligation of the type referred to in clauses (i)
through (vi) of another person and all dividends of another person the payment
of which, in either case, such person has guaranteed or is responsible or
liable, directly or indirectly, as obligor or otherwise.
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The Subordinated Indenture does not limit the aggregate amount of Senior
Indebtedness that may be issued by the Company or the aggregate amount of
liabilities that may be incurred by the Company's subsidiaries. In that
regard, Senior Indebtedness may include debt securities, indebtedness and
other obligations that constitute "Senior Indebtedness" for purposes of (and
which are therefore senior in right of payment to) the Debentures but which
are subordinate in right of payment to certain other indebtedness and
obligations of the Company. See "Description of Debt Securities--Ranking of
Debt Securities; Holding Company Structure" in the accompanying Prospectus.
REDEMPTION AT THE OPTION OF THE COMPANY
The Company will have the right to redeem the Debentures prior to maturity
(i) on or after December 31, 2003, in whole at any time or in part from time
to time, or (ii) at any time in whole (but not in part), within 90 days
following the occurrence of a Tax Event, an Investment Company Event or a
Capital Treatment Event, in each case at a redemption price equal to the
accrued and unpaid interest on the Debentures so redeemed to the date fixed
for redemption, including to the extent permitted by law any Compound Interest
(as defined herein), plus 100% of the principal amount thereof. Redemption of
the Debentures prior to maturity is subject to prior approval of the Federal
Reserve if the Company is then a bank holding company and approval is required
under applicable regulations.
If Debentures are redeemed on any March 31, June 30, September 30, or
December 31, accrued and unpaid interest shall be payable to holders of record
on the relevant record date.
So long as the corresponding Capital Securities are outstanding, the
proceeds from the redemption of any of the Debentures will be used to redeem
Trust Securities.
The Company may not redeem any Debentures unless all accrued and unpaid
interest thereon, including (to the extent permitted by applicable law)
Compound Interest, has been or is contemporaneously paid (or duly provided
for) for all quarterly interest payment periods terminating on or prior to the
date of notice of redemption.
If a partial redemption of the Capital Securities resulting from a partial
redemption of the Debentures would result in the delisting of the Capital
Securities from any national securities exchange on which the Capital
Securities are then listed, the Company may only redeem the Debentures in
whole.
INTEREST
Each Debenture shall bear interest at the rate of % per annum from the
first date of issuance, payable quarterly in arrears on March 31, June 30,
September 30 and December 31 of each year (each an "Interest Payment Date"),
commencing March 31, 1999, to the person in whose name such Debenture is
registered, subject to certain exceptions, at the close of business on the
Business Day next preceding such Interest Payment Date. In the event the
Debentures or the Capital Securities shall not continue to remain in book-
entry only form, the Company shall have the right to select record dates,
which shall be at least one Business Day prior to the Interest Payment Date.
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The amount of interest payable for any period will be computed on the basis
of a 360-day year of twelve 30-day months and, for any period of less than a
full calendar month, the actual number of days elapsed in such 30-day month. In
the event that any date on which interest is payable on the Debentures is not a
Business Day, then payment of the interest payable on such date will be made on
the next succeeding day that is a Business Day (and without any interest or
other payment in respect of any such delay), except that, if such Business Day
is in the next succeeding calendar year, then such payment shall be made on the
immediately preceding Business Day, in each case with the same force and effect
as if made on such date.
OPTION TO EXTEND INTEREST PAYMENT PERIOD
So long as the Company shall not be in default in the payment of interest on
the Debentures, the Company has the right at any time and from time to time,
during the term of the Debentures, to defer payments of interest for successive
periods not exceeding 20 consecutive quarters for each Extension Period. At the
end of each Extension Period, the Company shall pay all interest then accrued
and unpaid (including, to the extent permitted by applicable law, any
Additional Interest, as herein defined), together with interest thereon
compounded quarterly at the rate specified for the Debentures to the extent
permitted by applicable law ("Compound Interest"); provided, that during any
Extension Period, (a) the Company shall not declare or pay dividends on, make
distributions with respect to, or redeem, purchase or acquire, or make a
liquidation payment with respect to, any of its capital stock (other than
(x)(i) purchases or acquisitions of shares of the Company's capital stock (or
capital stock equivalents) in connection with the satisfaction by the Company
of its obligations under any officers, directors or employee benefit plans (or
any options or other instruments issued thereunder), (ii) as a result of a
reclassification, combination or subdivision of the Company's capital stock or
the exchange or conversion of one class or series of the Company's capital
stock for another class or series of the Company's capital stock, (iii)
dividends or distributions of shares of common stock of the Company, (iv) 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 any
security being converted or exchanged, or (v) any dividend or distribution of
capital stock (or capital stock equivalents) in connection with the
implementation of a stockholders' rights plan, or the issuance of stock under
any such plan in the future, or the redemption or repurchase of any such rights
pursuant thereto, or (y) guarantee payments made with respect to any of the
foregoing), (b) the Company shall not make any payment of interest, principal
or premium, if any, on or repay, repurchase or redeem any debt securities
issued by the Company that rank pari passu with or junior to the Debentures and
(c) the Company shall not make any guarantee payments with respect to the debt
securities of any Company subsidiary that rank pari passu with or junior to the
Debentures (other than pursuant to the Guarantee or the Company's guarantee of
the Trust Common Securities). Prior to the termination of any such Extension
Period of less than 20 consecutive quarters, the Company may further defer
payments of interest by extending the interest payment period; provided,
however, that, such Extension Period, including all such previous and further
extensions, may not exceed 20 consecutive quarters or extend beyond the
maturity of the Debentures or end other than on an interest payment date. Upon
the termination of any Extension Period and the payment of all amounts then due
on the Debentures, the Company may commence a new Extension Period, subject to
the terms set forth in this section. No interest shall be due or payable on the
Debentures during an Extension Period, except at the end thereof. The Company
has no present intention of exercising its right to defer
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payments of interest by extending the interest payment period on the
Debentures. If the Property Trustee shall be the sole holder of the Debentures,
the Company shall give the Regular Trustees and the Property Trustee notice of
its selection of such Extension Period one Business Day prior to the earlier of
(i) the next succeeding date Distributions on the Capital Securities are
payable and (ii) the date the Regular Trustees are required to give notice to
the Nasdaq National Market (or other applicable securities exchange) or to
holders of the Capital Securities of the record date or the date such
Distribution is payable. The Regular Trustees shall give notice of the
Company's selection of such Extension Period to the holders of the Capital
Securities. If the Property Trustee shall not be the sole holder of the
Debentures, the Company shall give the holders of the Debentures notice of its
selection of such Extension Period ten Business Days prior to the earlier of
(i) the next succeeding Interest Payment Date or (ii) the date upon which the
Company is required to give notice to the applicable self-regulatory
organization or to holders of the Debentures of the record or payment date of
such related interest payment. See "Risk Factors--Risk Related to an Investment
in the Capital Securities--Distribution Payments on the Capital Securities
Could Be Deferred for Substantial Periods Affecting the Market Price and
Resulting in Holders Continuing to Recognize Income for Tax Purposes."
ADDITIONAL INTEREST
If at any time when the Property Trustee is the sole holder of the
Debentures, the Trust shall be required to pay any taxes, duties, assessments
or governmental charges of whatever nature (other than withholding taxes that
are properly withheld) imposed by the United States, or any other taxing
authority, then, in any such case, the Company will pay as additional interest
("Additional Interest") on the Debentures, to the extent permitted by
applicable law, such additional amounts as shall be required so that the net
amounts received and retained by the Trust after paying any such taxes, duties,
assessments or other governmental charges will not be less than the amounts the
Trust would have received had no such taxes, duties, assessments or other
governmental charges been imposed.
INDENTURE EVENTS OF DEFAULT
If any Indenture Event of Default shall occur and be continuing, the Property
Trustee, as the holder of the Debentures, will have the right to declare the
principal of and the interest on the Debentures (including, to the extent
permitted by law, any Compound Interest and Additional Interest, if any) to be
forthwith due and payable. The Subordinated Indenture provides that any of the
following described events (each, an "Indenture Event of Default"), which has
occurred and is continuing, constitutes an "event of default" with respect to
the Debentures: (i) default for 30 days in payment of any interest on any
Debentures, including any Additional Interest and Compound Interest, if any, in
respect thereof, provided that a valid extension of an interest payment period
will not constitute a default in the payment of interest (including any
Additional Interest and Compound Interest, if any) for this purpose; or (ii)
default in payment of principal of or premium, if any, on any Debenture when
due upon maturity, redemption or otherwise; or (iii) failure to observe or
perform in any material respect any other covenant or warranty in the
Subordinated Indenture (other than a covenant or warranty included therein
solely for the benefit of a series of Subordinated Debt Securities other than
the Debentures) which shall not have been remedied for a period of 90 days
after written notice to the Company by the Debt Trustee or the holders of not
less than 25% in
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aggregate principal amount of the Debentures then outstanding; or (iv) certain
events of bankruptcy, insolvency or reorganization of the Company. The only
Indenture Events of Default applicable to the Debenture are those set forth
above, which supersede and replace, insofar as is applicable to the Debentures,
the Events of Default set forth in the accompanying Prospectus under
"Description of Debt Securities--Events of Default; Limited Rights of
Acceleration of Subordinated Debt Securities." An Indenture Event of Default
also constitutes a Declaration Event of Default. The holders of Capital
Securities in certain circumstances have the right to direct the Property
Trustee to exercise its rights as the holder of the Debentures. Notwithstanding
the foregoing, if a Declaration Event of Default has occurred and is continuing
and such event is attributable to the failure of the Company to pay interest or
principal on the Debentures on the date such interest or principal is otherwise
payable (or in the case of redemption, the redemption date), a holder of
Capital Securities may institute a Direct Action for payment on or after the
respective due date specified in the Debentures. Notwithstanding any payments
made to such holder of Capital Securities by the Company in connection with a
Direct Action, the Company shall remain obligated to pay the principal of or
interest on the Debentures held by the Trust or the Property Trustee of the
Trust, and the Company shall be subrogated to the rights of the holder of such
Capital Securities with respect to payments on the Capital Securities to the
extent of any payments made by the Company to such holder in any Direct Action.
The holders of Capital Securities will not be able to exercise directly any
other remedy available to the holders of the Debentures. See "Description of
the Capital Securities--Voting Rights; Amendment of Declaration."
BOOK-ENTRY AND SETTLEMENT
If distributed to holders of Capital Securities in connection with the
involuntary or voluntary dissolution, winding-up or liquidation of the Trust as
a result of the occurrence of a Special Event, the Debentures will (except
under the limited circumstances described below) be issued in the form of one
or more global certificates (each, a "Global Security") registered in the name
of the Depository or its nominee. Except under the limited circumstances
described below, Debentures represented by the Global Security will not be
exchangeable for, and will not otherwise be issuable as, Debentures in
definitive form. The Global Securities may not be transferred except by the
Depository to a nominee of the Depository or by a nominee of the Depository to
the Depository or another nominee of the Depository or to a successor
Depository or its nominee.
The laws of some jurisdictions may require that certain purchasers of
securities take physical delivery of such securities in definitive form. Such
laws may impair the ability to transfer or pledge beneficial interests in such
a Global Security.
Except as provided below, owners of beneficial interests in such a Global
Security will not be entitled to receive physical delivery of Debentures in
definitive form and will not be considered the holders (as defined in the
Subordinated Indenture) thereof for any purpose under the Subordinated
Indenture and no Global Security representing Debentures shall be exchangeable,
except for another Global Security of like denomination and tenor to be
registered in the name of the Depository or its nominee or a successor
Depository or its nominee. Accordingly, each Beneficial Owner must rely on the
procedures of the Depository or if such person is not a Participant, on the
procedures of the
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Participant or Indirect Participant through which such person owns its interest
to exercise any rights of a holder under the Subordinated Indenture.
THE DEPOSITORY
If Debentures are distributed to holders of Capital Securities in liquidation
of such holders' interests in the Trust, DTC will act as Depository for the
Debentures. For a description of DTC and the specific terms of the depository
arrangements, see "Description of the Capital Securities--Book-Entry Only
Issuance--The Depository Trust Company." As of the date of this Prospectus
Supplement, the description therein of DTC's book-entry system and DTC's
practices as they relate to purchases, transfers, notices and payments with
respect to the Capital Securities apply in all material respects to any debt
obligations represented by one or more Global Securities. The Company may
appoint a successor to DTC or any successor Depository in the event DTC or such
successor Depository is unable or unwilling to continue as a Depository for the
Global Securities.
None of the Company, the Trust, the Property Trustee, the Debt Trustee, any
paying agent, any transfer agent or any other agent of the Company or the Debt
Trustee will have any responsibility or liability for any aspect of the records
relating to or payments made on account of beneficial ownership interests in a
Global Security for such Debentures or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interests.
DISCONTINUANCE OF THE DEPOSITORY'S SERVICES
DTC is under no obligation to provide services as Depository for the Global
Security and may discontinue providing such services at any time. Neither the
Company, the Trust, the Debt Trustee nor the Bay View Trustees will have any
responsibility for the performance by DTC or its Participants or Indirect
Participants under the rules and procedures governing DTC. In the event that
(i) DTC notifies the Company that it is unwilling or unable to continue as a
Depository for the Global Security or if at any time DTC ceases to be a
clearing agency registered as such under the Exchange Act, and no successor
Depository shall have been appointed within 90 days of such notification or of
the Company becoming aware of DTC's ceasing to be so registered, as the case
may be, (ii) the Company, in its sole discretion, executes and delivers to the
Debt Trustee a Company order to the effect that such Global Security shall be
so exchangeable, or (iii) an Indenture Event of Default has occurred and is
continuing with respect to the Debentures, certificates for the Debentures will
be prepared and delivered in exchange for beneficial interests in the Global
Security. Any Global Security that is exchangeable pursuant to the preceding
sentence shall be exchangeable for Debentures registered in such names as the
Depositary shall direct. It is expected that such instructions will be based
upon directions received by the Depositary from its Participants with respect
to ownership of beneficial interests in such Global Security.
GOVERNING LAW
The Subordinated Indenture and the Debentures will be governed by, and
construed in accordance with, the internal laws of the State of Delaware.
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MISCELLANEOUS
The Subordinated Indenture will provide that the Company will pay all fees
and expenses related to (i) the offering of the Trust Securities and the
Debentures, (ii) the organization, maintenance and dissolution of the Trust,
(iii) the retention of the Bay View Trustees, and (iv) the enforcement by the
Property Trustee of the rights of the holders of the Capital Securities.
EFFECT OF OBLIGATIONS UNDER THE DEBENTURES AND THE GUARANTEE
As set forth in the Declaration, the sole purpose of the Trust is to issue
the Trust Securities evidencing undivided beneficial interests in the assets of
the Trust, and to invest the proceeds from such issuance and sale in the
Debentures and to engage in such other activities as are necessary, convenient
or incidental thereto.
As long as payments of interest and other payments are made when due on the
Debentures, such payments will be sufficient to cover Distributions and other
payments due on the Trust Securities because of the following factors: (i) the
aggregate principal amount of Debentures will be equal to the aggregate stated
liquidation amount of the Trust Securities; (ii) the interest rate and the
interest and other payment dates on the Debentures will match the Distribution
rate and Distribution and other payment dates for the Capital Securities; (iii)
the Subordinated Indenture provides that the Company shall pay, and the Trust
shall not be obligated to pay, directly or indirectly, any costs, expenses,
debt, and obligations of the Trust (other than with respect to the Trust
Securities); and (iv) the Declaration provides that the Bay View Trustees shall
not cause or permit the Trust to, among other things, engage in any activity
that is not consistent with the purposes of the Trust.
Payments of Distributions (to the extent funds therefor are available) and
other payments due on the Capital Securities (to the extent funds therefor are
available) are guaranteed by the Company as and to the extent set forth under
"Description of Guarantee." If the Company does not make interest payments on
the Debentures purchased by the Trust, it is expected that the Trust will not
have sufficient funds to pay Distributions on the Capital Securities. The
Guarantee is a guarantee on a subordinated basis with respect to the Capital
Securities issued by the Trust from the time of its issuance but does not apply
to any payment of Distributions unless and until the Trust has sufficient funds
for the payment of such Distributions. The Guarantee covers the payment of
Distributions and other payments on the Capital Securities only if and to the
extent that the Company has made a payment of interest or principal on the
Debentures held by the Trust as its sole asset. The Guarantee, when taken
together with the Company's obligations under the Debentures, the Subordinated
Indenture and the Declaration, including its obligations to pay costs,
expenses, debts, and liabilities of the Trust (other than with respect to the
Trust Securities), provides a full and unconditional guarantee, on a
subordinated basis, of amounts due on the Capital Securities.
If the Company fails to make interest or other payments on the Debentures
when due (taking account of any Extension Period), the Declaration provides a
mechanism whereby a holder of the Capital Securities, using the procedures
described in "Description of the Capital Securities--Voting Rights; Amendment
of Declaration" and "--Book-Entry Only Issuance--The Depository Trust Company"
may direct the Property Trustee to enforce its rights under the Debentures.
Notwithstanding the foregoing, in such circumstances, a holder of Capital
Securities may institute a Direct Action for
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payment on or after the respective due dates specified in the Debentures. In
connection with such Direct Action, the Company will remain obligated to pay
the principal or interest on the Debentures and will be subrogated to the
rights of such holder of Capital Securities under the Declaration to the extent
of any payment made by the Company to such holder of Capital Securities in such
Direct Action. The Company, under the Guarantee, acknowledges that the
Guarantee Trustee shall enforce the Guarantee on behalf of the holders of the
Capital Securities. If the Company fails to make payments under the Guarantee,
the Guarantee provides a mechanism whereby the holders of the Capital
Securities may direct the Guarantee Trustee to enforce its rights thereunder.
If the Guarantee Trustee fails to enforce the Guarantee, any holder of Capital
Securities may institute a legal proceeding directly against the Company to
enforce the Guarantee Trustee's rights under the Guarantee without first
instituting a legal proceeding against the Trust, the Guarantee Trustee, or any
other person or entity.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the principal United States federal income tax
consequences of the purchase, ownership and disposition of the Capital
Securities. This summary addresses only the tax consequences to a person that
acquires Capital Securities on their original issue at the stated offering
price and does not address the tax consequences to persons that may be subject
to special treatment under United States federal income tax law, such as banks,
insurance companies, thrift institutions, regulated investment companies, real
estate investment trusts, employee benefit plans, tax-exempt organizations,
United States Alien Holders, dealers in securities or currencies, persons that
will hold Capital Securities as part of a position in a "straddle" or as part
of a "hedging", "conversion" or other integrated investment transaction for
federal income tax purposes, persons whose functional currency is not the
United States dollar or persons that do not hold Capital Securities as capital
assets.
The statements of law or legal conclusions set forth in this summary
constitute the opinion of Silver Freedman, special tax counsel to the Company
and the Trust. This summary is based upon the Internal Revenue Code of 1986, as
amended (the "Code"), Treasury Regulations, IRS rulings and pronouncements and
judicial decisions now in effect, all of which are subject to change at any
time. Such changes may be applied retroactively in a manner that could cause
the tax consequences to vary substantially from the consequences described
below, possibly adversely affecting a beneficial owner of the Capital
Securities. The authorities on which this summary is based are subject to
various interpretations, and it is therefore possible that the United States
federal income tax treatment of the purchase, ownership and disposition of the
Capital Securities may differ from the treatment described below.
PROSPECTIVE INVESTORS ARE ADVISED TO CONSULT WITH THEIR OWN TAX ADVISORS IN
LIGHT OF THEIR OWN PARTICULAR CIRCUMSTANCES AS TO THE UNITED STATES FEDERAL TAX
CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE CAPITAL
SECURITIES, AS WELL AS THE EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS.
S-50
<PAGE>
CLASSIFICATION OF THE TRUST AND THE DEBENTURES
In the opinion of Silver Freedman, for United States federal income tax
purposes under current law, (i) the Trust will not be classified as an
association taxable as a corporation, and (ii) the Debentures will be
classified as indebtedness. As a result, each beneficial owner of Capital
Securities (a "Securityholder") will be required to include in its gross income
its pro rata share of the interest (or accrued original issue discount) in
addition to any interest and other income (if any) with respect to the
Debentures. See "--Interest Income and Original Issue Discount." No amount
included in income with respect to the Capital Securities will be eligible for
the dividends-received deduction. This opinion is based in part upon certain
factual assumptions and upon certain representations made by the Company, which
representations Silver Freedman has relied upon and assumed to be true, correct
and complete. If such representations are inaccurate, either in whole or in
part, this opinion could be adversely affected.
INTEREST INCOME AND ORIGINAL ISSUE DISCOUNT
Under applicable Treasury regulations, currently Section 1.1275-2(h) (the
"Regulations"), if the terms and conditions of a debt instrument make the
likelihood that stated interest will not be timely paid a "remote" contingency,
such contingency will be ignored in determining whether the debt instrument is
issued with original issue discount ("OID"). The Company believes that the
likelihood of its exercising its option to defer payments of interest on the
Debentures is remote, since exercising that option would prevent it from
declaring cash dividends on any class of its stock. The Company's determination
that such likelihood is remote is binding on each Securityholder unless the
Securityholder discloses in the manner required by applicable Treasury
Regulations that its determination is different than the Company's. The
Company's determination is not binding on the IRS. Based on the foregoing, the
Company intends to take the position that the Debentures were not issued with
OID and, accordingly, a Securityholder purchasing the Capital Securities at the
stated price should be required to include in gross income only such
Securityholder's pro rata share of stated interest on the Debentures in
accordance with such Securityholder's method of tax accounting.
The Regulations have not yet been addressed in any rulings or other published
interpretations by the Internal Revenue Service (the "IRS"). In the opinion of
Silver Freedman, it is not unreasonable for the Company to take the position
that the Debentures will not be issued with OID. However, it is possible the
IRS could take the position that the likelihood of deferral was not a remote
contingency within the meaning of the Regulations.
Under the Regulations, if the Company were to exercise its option to defer
payments of interest after treating the Debentures as issued without OID, the
Debentures would be treated as reissued with OID at that time, and all stated
interest (and de minimis OID, if any) on the Debentures would thereafter be
treated as OID as long as the Debentures remained outstanding. In such event,
all of a Securityholder's interest income with respect to the Debentures would
be accounted for as OID on an economic accrual basis regardless of such
Securityholder's method of tax accounting, and actual distributions of stated
interest related thereto would not be includable in gross income. Consequently,
a Securityholder would be required to include OID in gross income even though
the Company would not make and the Securityholder would not receive any actual
cash payments during an Extension Period.
S-51
<PAGE>
A Securityholder that disposed of Capital Securities prior to the record date
for the payment of Distributions following an Extension Period would include
OID in gross income but would not receive any cash related thereto from the
Trust. Any amount of OID included in a Securityholder's gross income (whether
or not during an Extension Period) would increase such Securityholder's tax
basis in its Capital Securities, and the amount of Distributions not includable
in gross income would reduce such Securityholder's tax basis in its Capital
Securities.
DISTRIBUTION OF THE DEBENTURES TO HOLDERS OF THE CAPITAL SECURITIES
Under current United States federal income tax law and provided that the
Trust is not treated as an association taxable as a corporation, a distribution
by the Trust of the Debentures as described under the caption "Description of
the Capital Securities--Liquidation of the Trust and Distribution of the
Debentures to Holders" will be nontaxable to the Securityholders and will
result in a Securityholder receiving its pro rata share of the Debentures
previously held indirectly through the Trust, with a holding period and
aggregate tax basis equal to the holding period and aggregate tax basis such
Securityholder had in its Capital Securities before such distribution. A
Securityholder will account for interest in respect of the Debentures received
from the Trust in the manner described above under "--Interest Income and
Original Issue Discount," including any accrual of OID (if any) attributed to
the Debentures upon the distribution.
If, however, the distribution of the Debentures were to occur because the
Trust is or would be subject to United States federal income tax with respect
to income accrued or received on the Debentures as a result of a Tax Event or
otherwise, the distribution of Debentures to Securityholders by the Trust could
be a taxable event to the Trust and each Securityholder, and a Securityholder
could be required to recognize gain or loss as if the Securityholder had
exchanged its Capital Securities for the Debentures it received upon the
liquidation of the Trust, and the Securityholder's holding period for the
Debentures received would not include the holding period for the Capital
Securities surrendered in the liquidation.
SALES OR REDEMPTION OF THE CAPITAL SECURITIES
Gain or loss will be recognized by a Securityholder on the sale of Capital
Securities (including a redemption for cash or other consideration) in an
amount equal to the difference between the amount realized on the sale (or
redemption) and the Securityholder's adjusted tax basis in the Capital
Securities sold or so redeemed. Gain or loss recognized by a Securityholder on
Capital Securities held for more than one year will generally be taxable as
long-term capital gain or loss. Capital Securities constituting a capital asset
held for more than 12 months are accorded a maximum United States federal
capital gains tax rate of 20%. Capital Securities held by an individual for 12
months or less are taxed at the applicable ordinary income rate.
If the Company were to exercise its option to defer payments of interest on
the Debentures, the Capital Securities might trade at a price that did not
fully reflect the value of accrued but unpaid interest with respect to the
underlying Debentures. A Securityholder that disposed of its Capital Securities
between record dates for payments of Distributions (and consequently did not
receive a Distribution from the Trust for the period prior to such disposition)
would nevertheless be required to include in income as ordinary income accrued
but unpaid interest on the Debentures through the date
S-52
<PAGE>
of disposition and to add such amount to its adjusted tax basis in its Capital
Securities disposed of. Such Securityholder would recognize a capital loss on
the disposition of its Capital Securities to the extent the selling price
(which might not fully reflect the value of accrued but unpaid interest) was
less than the Securityholder's adjusted tax basis in the Capital Securities
(which would include accrued but unpaid interest). Subject to certain limited
exceptions, capital losses cannot be applied to offset ordinary income for
United States federal income tax purposes.
UNITED STATES ALIEN HOLDERS
For purposes of this discussion, a "United States Alien Holder" is any
corporation, individual, partnership, estate or trust that is, as to the United
States, a foreign corporation, a non-resident alien individual, a foreign
partnership or a non-resident fiduciary of a foreign estate or trust.
Under current United States federal income tax law: (i) payments by the Trust
or any of its paying agents to any Securityholder who or which is a United
States Alien Holder will not be subject to United States federal withholding
tax provided that (a) the Securityholder does not 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 Securityholder is not a controlled
foreign corporation that is related to the Company through stock ownership and
(c) either (A) the Securityholder certifies to the Trust or its agent, under
penalties of perjury, that it is not a United States holder and provides its
name and address or (B) a securities clearing organization, bank or other
financial institution that holds customers' securities in the ordinary course
of its trade or business (a "Financial Institution") certifies to the Trust or
its agent, under penalties of perjury, that such statement has been received
from the Securityholder by it or by a Financial Institution holding such
security for the Securityholder and furnishes the Trust or its agent with a
copy thereof, and (ii) a United States Alien Holder of a Capital Security will
not be subject to United States federal withholding tax on any gain realized
upon the sale or other disposition of a Capital Security. Final Treasury
Regulations (the "Withholding Regulations") would provide alternative methods
for satisfying the certification requirement described in clause (i)(c) above.
The Withholding Regulations are to be effective for certain payments made to
United States Alien Holders after December 31, 1999.
INFORMATION REPORTING TO SECURITYHOLDERS
Generally, income on the Capital Securities will be reported to
Securityholders on Forms 1099-INT, which will be mailed to Securityholders by
January 31 following each calendar year.
BACKUP WITHHOLDING
Payments made on, and proceeds from the sale of, Capital Securities may be
subject to a "backup" withholding tax of 31% unless the Securityholder complies
with certain certification requirements and meets certain other requirements.
Any withheld amounts will be allowed as a credit against the Securityholder's
United States federal income tax, provided the required information is provided
to the Internal Revenue Service on a timely basis.
S-53
<PAGE>
ERISA CONSIDERATIONS
The Company and certain affiliates of the Company may each be considered a
"party in interest" within the meaning of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), or a "disqualified person" within
the meaning of Section 4975 of the Code with respect to many employee benefit
plans ("Plans") that are subject to ERISA. The purchase of the Capital
Securities by a Plan that is subject to the fiduciary responsibility provisions
of ERISA or the prohibited transaction provisions of Section 4975 of the Code
and with respect to which the Company, or any affiliate of the Company, 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 the Capital Securities are acquired pursuant
to and in accordance with an applicable exemption.
Any Plan fiduciary considering whether to purchase or hold any Capital
Securities on behalf of a Plan should consult with its counsel regarding the
applicability of the fiduciary responsibility and prohibited transaction
provisions of ERISA and the prohibited transaction provisions of the Code to
such investment. Among other things, before purchasing any Capital Securities,
a fiduciary of a Plan that is subject to the fiduciary responsibility and
prohibited transaction provisions of ERISA or to the prohibited transaction
provisions of the Code should make its own determination as to its compliance
with such applicable provisions, together with the availability, if needed, of
the exemptive relief provided in an exemption.
In addition, a Plan fiduciary considering the purchase of Capital Securities
should be aware that the assets of the Trust may be considered "plan assets"
for ERISA purposes. In such event, any persons exercising discretion with
respect to the debentures may become fiduciaries, parties in interest or
disqualified persons with respect to investing Plans. Accordingly, each
investing Plan, by purchasing the Capital Securities, will be deemed to have
directed the Trust to invest in the debentures and to have consented to the
appointment of the Property Trustee.
S-54
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Underwriters named below have severally agreed to purchase from the Trust an
aggregate of 2,000,000 Capital Securities in the amounts set forth below
opposite their respective names.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER CAPITAL SECURITIES
----------- ------------------
<S> <C>
Dain Rauscher Wessels, a division of Dain Rauscher
Incorporated..........................................
EVEREN Securities, Inc.................................
Piper Jaffray Inc......................................
Sutro & Co. Incorporated...............................
---------
Total.............................................. 2,000,000
=========
</TABLE>
The Underwriting Agreement provides that the Underwriters' obligations are
subject to conditions precedent and that the Underwriters are committed to
purchase all of the Capital Securities offered hereby if the Underwriters
purchase any Capital Securities.
The Underwriters have advised the Company and the Trust that they propose to
offer the Capital Securities to the public at the Public Offering Price set
forth on the cover page of this Prospectus Supplement and to selected dealers
at such price less a concession not in excess of $ per Capital Security.
The Underwriters may allow and such dealers may reallow a discount not in
excess of $ per Capital Security to certain other brokers and dealers.
After the offering, the Public Offering Price, concession, discount, and other
selling terms may be changed by the Underwriters.
Accumulated distributions from , 1998, if any, will be added to
the public offering price of the Capital Securities set forth on the cover page
of this Prospectus Supplement.
The Company has granted to the Underwriters an option, exercisable for 30
days after the date of this Prospectus, to purchase up to 300,000 additional
shares of Capital Securities to cover overallotments, if any, at the same price
per Capital Security to be paid by the Underwriters for the other Capital
Securities offered hereby.
In view of the fact that all of the proceeds from the sale of the Capital
Securities will be used to purchase the Debentures, the Underwriting Agreement
provides that the Company will pay the Underwriters as compensation for
arranging the investment therein of such proceeds, $ per Capital
Security. The Underwriters' commissions are shown in the following table. These
amounts are shown assuming both no exercise and full exercise of the
Underwriters' option to purchase additional Capital Securities.
<TABLE>
<CAPTION>
NO EXERCISE FULL EXERCISE
----------- -------------
<S> <C> <C>
Per Capital Security............................. $ $
Total............................................ $ $
</TABLE>
S-55
<PAGE>
In connection with the offering of the Capital Securities, the Underwriters
and any selling group members and their respective affiliates may engage in
transactions effected in accordance with Rule 104 of the Commission's
Regulation M that are intended to stabilize, maintain or otherwise affect the
market price of the Capital Securities. Such transactions may include over-
allotment transactions in which the Underwriters create a short position for
their own account by selling more Capital Securities than they are committed to
purchase from the Trust. In such a case, to cover all or part of the short
position, the Underwriters may purchase Capital Securities in the open market
following completion of the initial offering of the Capital Securities. The
Underwriters also may engage in stabilizing transactions in which they bid for,
and purchase, the Capital Securities at a level above that which might
otherwise prevail in the open market for the purpose of preventing or retarding
a decline in the market price of the Capital Securities. Any of the foregoing
transactions may result in the maintenance of a price for the Capital
Securities at a level above that which might otherwise prevail in the open
market. Neither the Company nor any of the Underwriters makes any
representation or prediction as to the direction or magnitude of any effect
that the transactions described above may have on the price of the Capital
Securities. The Underwriters are not required to engage in any of the foregoing
transactions and, if commenced, such transactions may be discontinued at any
time without notice.
Each of the Company and the Trust has agreed to indemnify the Underwriters
and their controlling persons against certain liabilities, including
liabilities under the Securities Act of 1933, as amended, or to contribute to
payments the Underwriters may be required to make in respect thereof.
The Underwriters have advised the Trust that they do not intend to confirm
any sales of Capital Securities to any discretionary accounts. In connection
with the offer and sale of the Capital Securities, the Underwriters will comply
with Rule 2810 under the NASD Conduct Rules.
From time to time, certain of the Underwriters have provided, and expect to
provide in the future, investment banking services to the Company for which the
Underwriters have received, and will receive, customary fees and commissions.
S-56
<PAGE>
LEGAL MATTERS
Certain matters of Delaware law relating to the validity of the Capital
Securities, the enforceability of the Trust Agreement and the creation of the
Trust will be passed upon by Richards, Layton & Finger, P.A., Wilmington,
Delaware, special Delaware counsel to the Company and the Trust. The validity
of the Guarantee and the Debentures and certain matters relating to United
States federal income tax considerations will be passed upon for the Company by
Silver, Freedman & Taff, L.L.P., Washington, D.C. Certain legal matters will be
passed upon for the Underwriters by Gibson, Dunn & Crutcher, LLP, San
Francisco, California.
EXPERTS
The consolidated financial statements of the Company as of December 31, 1997
and 1996, and for each of the years in the three-year period ended December 31,
1997 incorporated by reference in the accompanying Prospectus and elsewhere in
the Registration Statement referred to therein have been audited by Deloitte &
Touche LLP, independent auditors, as stated in their report dated January 26,
1998 which is incorporated herein and therein by reference, and have been so
incorporated in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.
The consolidated financial statements of America First Eureka Holdings, Inc.
("AFEH") and EurekaBank as of December 31, 1997 and 1996, and for each of the
years in the three-year period ended December 31, 1997 have been incorporated
by reference herein and in the Prospectus/ Registration Statement in reliance
upon the report of KPMG Peat Marwick LLP, independent auditors, incorporated by
reference herein and in the Prospectus/Registration Statement, and upon the
authority of said firm as experts in accounting and auditing. The report of
KPMG Peat Marwick LLP with respect to the consolidated financial statements of
AFEH and EurekaBank as of December 31, 1997 refers to the consummation of a
merger between AFEH and EurekaBank and the Company effective January 2, 1998.
S-57
<PAGE>
PROSPECTUS
BAY VIEW CAPITAL CORPORATION
DEBT SECURITIES, PREFERRED STOCK, DEPOSITARY SHARES,
COMMON STOCK AND COMMON STOCK WARRANTS
BAY VIEW CAPITAL I AND BAY VIEW CAPITAL II
TRUST PREFERRED SECURITIES GUARANTEED TO THE EXTENT SET FORTH HEREIN BY
BAY VIEW CAPITAL CORPORATION
----------------
Bay View Capital Corporation (the "Company") may from time to time offer and
sell (i) its unsecured senior debt securities (the "Senior Debt Securities"),
its unsecured subordinated debt securities (the "Subordinated Debt
Securities") and its unsecured junior subordinated debt securities (the
"Junior Subordinated Debt Securities" and, together with the Senior Debt
Securities and the Subordinated Debt Securities, the "Debt Securities"); (ii)
shares of its serial preferred stock, par value $.01 per share (the "Preferred
Stock"), in one or more series; (iii) depositary shares (the "Depositary
Shares") representing fractional interests in shares of Preferred Stock; (iv)
shares of its common stock, par value $.01 per share (the "Common Stock"); and
(v) warrants to purchase shares of Common Stock (the "Common Stock Warrants").
Unless otherwise stated in the applicable Prospectus Supplement (as defined
herein), payment of the principal of the Subordinated Debt Securities of any
series may be accelerated only in the case of certain events involving the
bankruptcy, insolvency or reorganization of the Company or any Major Bank
Subsidiary (as defined in the applicable Prospectus Supplement) of the
Company, and no right of acceleration will exist with respect to the
Subordinated Debt Securities of any series in the case of default in the
payment of the principal of, or premium, if any, or interest, if any, on the
Subordinated Debt Securities of such series or in the performance of any other
covenant of the Company applicable to the Subordinated Debt Securities of such
series. See "Description of Debt Securities--Events of Default; Limited Rights
of Acceleration of Subordinated Debt Securities."
Bay View Capital I and Bay View Capital II (the "Trusts"), each a statutory
business trust created under the laws of the State of Delaware, may each offer
preferred securities representing undivided beneficial interests in the assets
of such Trust ("Trust Preferred Securities"). The payment of periodic cash
distributions ("distributions") with respect to Trust Preferred Securities out
of moneys held by the applicable Trust, and payment on liquidation, redemption
or otherwise with respect to such Trust Preferred Securities, will be
guaranteed by the Company to the extent described herein (a "Trust Preferred
Securities Guarantee"). See "Description of Trust Preferred Securities
Guarantees." Unless otherwise stated in the applicable Prospectus Supplement,
the Company's obligations under a Trust Preferred Securities Guarantee will be
subordinate and junior in right of payment to all other liabilities of the
Company. A series of Junior Subordinated Debt Securities may be issued and
sold to the applicable Trust, or a trustee of such Trust, in connection with
the investment of the proceeds from the offering of the Trust Preferred
Securities and Trust Common Securities (as defined herein, together, "Trust
Securities") of such Trust. The Junior Subordinated Debt Securities purchased
by a Trust may be subsequently distributed pro rata to holders of its Trust
Preferred Securities and Trust Common Securities in connection with the
dissolution of such Trust upon the occurrence of certain events as may be
described in an accompanying supplement to this Prospectus (a "Prospectus
Supplement"). A Trust Preferred Securities Guarantee, when taken together with
the Company's other obligations under the Junior Subordinated Debt Securities
sold to the applicable Trust, the Indenture (as defined herein) relating to
such Junior Subordinated Debt Securities and the Declaration (as defined
herein) of such Trust, including the Company's obligations to pay certain
costs, expenses, debts and liabilities of such Trust (other than with respect
to its Trust Securities), will provide a full and unconditional guarantee on a
subordinated basis by the Company of payments due on the Trust Preferred
Securities of such Trust.
The Debt Securities, Preferred Stock, Depositary Shares, Common Stock,
Common Stock Warrants and Trust Preferred Securities (collectively, the
"Securities") may be offered from time to time for an aggregate initial public
offering price of up to $500,000,000 (or the equivalent in foreign currencies,
currency units or composite currencies (each, a "Currency")). The Securities
may be offered independently or together in any combination for sale directly
to purchasers or through dealers, underwriters or agents to be designated. The
Debt Securities, Preferred Stock and Trust Preferred Securities may be
convertible into or exchangeable for other Securities. The Securities will be
offered to the public at prices and on terms determined at the time of
offering. The Securities may be sold for U.S. dollars or other Currencies and
any amounts payable by the Company or any Trust, as the case may be, in
respect of the Securities may likewise be payable in U.S. dollars or other
Currencies.
(continued on following page)
----------------
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.
----------------
THESE DEBT SECURITIES ARE UNSECURED OBLIGATIONS OF THE COMPANY. THESE
SECURITIES ARE NOT DEPOSITS OR SAVINGS ACCOUNTS AND ARE NOT INSURED
BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENTAL AGENCY OR INSTRUMENTALITY.
----------------
The date of this Prospectus is October 19, 1998.
<PAGE>
(continued from cover page)
The Prospectus Supplement to this Prospectus sets forth (where applicable),
with respect to the series or issue of Securities (the "Offered Securities")
for which such Prospectus Supplement is being delivered: (i) the terms of any
Debt Securities offered, including, where applicable, their title, ranking,
aggregate principal amount, maturity, rate of interest (or method of
calculation) and time of payment thereof, any redemption or repayment terms,
the Currency or Currencies in which such Debt Securities will be denominated
or payable, any index, formula or other method pursuant to which principal,
premium, if any, or interest, if any, may be determined, any conversion or
exchange provisions, the right of the Company, if any, to defer payment of
interest on such Debt Securities and the maximum length of any such deferral
period, and other specific terms not described in this Prospectus; (ii) the
terms of any Preferred Stock offered, including, where applicable, the
specific designation, number of shares, dividend rate (or method of
calculation) and time of payment thereof, liquidation preference, any
redemption or repayment terms, any conversion or exchange provisions, any
voting rights, and other specific terms not described in this Prospectus;
(iii) the terms of any Depositary Shares offered which are not described in
this Prospectus, including the fraction of a share of Preferred Stock
represented by each such Depositary Share; (iv) the terms of any Common Stock
Warrants offered, including where applicable, the exercise price,
detachability, duration and other specific terms not described in this
Prospectus; (v) the initial public offering price and the net proceeds to the
Company and other specific terms related to the Offered Securities; and (vi)
the terms of any Trust Preferred Securities offered, including, where
applicable, the specific designation, number of Trust Preferred Securities,
distribution rate (or method of calculation) and time of payment thereof,
liquidation amount, any redemption or repayment terms, any conversion or
exchange provisions, any voting rights, the right of the applicable Trust, if
any, to defer payment of distributions on the Trust Preferred Securities and
the maximum length of any such deferral period, and other specific terms not
described in this Prospectus.
This Prospectus may not be used to consummate sales of Securities unless
accompanied or, to the extent permitted by applicable law, preceded by a
Prospectus Supplement.
The Securities may be offered through dealers, underwriters or agents
designated from time to time, as set forth in the accompanying Prospectus
Supplement. The Securities may be sold for U.S. dollars or other Currencies
and any amounts payable by the Company in respect of the Securities may
likewise be payable in U.S. dollars or other Currencies. Net proceeds from the
sale of Securities will be equal to the purchase price in the case of a
dealer, the public offering price less discount in the case of an underwriter
or the purchase price less commission in the case of an agent, in each case
less other expenses attributable to the issuance and distribution of the
Securities. The Company and the Trusts may also sell Securities directly to
investors on their own behalf. In the case of sales made directly by the
Company or the Trusts, no commission will be payable. See "Plan of
Distribution" for possible indemnification arrangements for dealers,
underwriters and agents.
Certain persons participating in an offering of Securities may engage in
transactions that stabilize, maintain or otherwise affect the price of such
Securities. Such transactions may include stabilizing and the purchase of such
Securities to cover syndicate short positions. For a description of any such
activities, see the applicable Prospectus Supplement.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information may be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Judiciary Plaza, Washington, D.C. 20549, and at the Commission's
Regional Offices in New York (Seven World Trade Center, 13th Floor, New York,
New York 10048), and Chicago (Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661). Copies of these materials may be obtained from
the Public Reference Section of the Commission, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. Such material may also be
accessed electronically by means of the Commission's home page on the Internet
at http://www.sec.gov. Reports, proxy statements and other information
concerning the Company may also be inspected at the offices of the National
Association of Securities Dealers, Inc., 1735 K Street, N.W., Washington, D.C.
20006.
This Prospectus constitutes a part of a registration statement on Form S-3
(the "Registration Statement") filed by the Company and the Trusts with the
Commission under the Securities Act of 1933, as amended (the "Securities
Act"). This Prospectus omits certain of the information contained in the
Registration Statement in accordance with the rules and regulations of the
Commission. Reference is hereby made to the Registration Statement and related
exhibits for further information with respect to the Company, the Trusts and
the Securities. 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 or incorporated by reference as an exhibit
to the Registration Statement or otherwise filed with the Commission. Each
such statement is qualified in its entirety by such reference.
No separate financial statements of the Trusts have been included herein.
The Company does not consider that such financial statements would be material
to holders of the Trust Preferred Securities because (i) all of the voting
securities of the Trusts will be owned, directly or indirectly, by the
Company, a reporting company under the Exchange Act, (ii) the Trusts have no
independent operations but exist for the sole purpose of issuing securities
representing undivided beneficial interests in the assets of the respective
Trusts and investing the proceeds thereof in Junior Subordinated Debt
Securities issued by the Company, and (iii) the Company's obligations
described herein and in any accompanying Prospectus Supplement under the
applicable Trust Preferred Securities Guarantee, when taken together with the
Company's other obligations under the Junior Subordinated Debt Securities sold
to the applicable Trust, the Indenture relating to such Junior Subordinated
Debt Securities and the Declaration of such Trust, including the Company's
obligations to pay certain costs, expenses, debts and liabilities of such
Trust (other than with respect to its Trust Securities), will provide a full
and unconditional guarantee on a subordinated basis by the Company of payments
due on the Trust Preferred Securities of such Trust. See "Description of Debt
Securities" and "Description of Trust Preferred Securities Guarantees."
1
<PAGE>
FORWARD-LOOKING STATEMENTS
Certain statements included or incorporated by reference herein and in the
accompanying Prospectus Supplement constitute "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933, as amended
(the "Securities Act"), and Section 21E of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and are subject to a number of risks
and uncertainties. Any such forward-looking statements contained or
incorporated by reference herein or in the accompanying Prospectus Supplement
should not be relied upon as predictions of future events. Certain forward-
looking statements can be identified by the use of forward-looking terminology
such as "believes," "expects," "may," "are expected to," "will," "will allow,"
"will continue," "will likely result," "should," "would be," "seeks,"
"approximately," "intends," "plans," "projects," "estimates," or
"anticipates," or similar expressions or the negative thereof or other
variations thereof or comparable terminology, or by discussions of strategy,
plans or intentions. In addition, all information contained or incorporated by
reference herein or in the accompanying Prospectus Supplement with respect to
projected results of operations, financial condition, financial performance or
other financial or statistical matters constitutes such forward-looking
statements. Such forward-looking statements are necessarily dependent on
assumptions, data or methods that may be incorrect or imprecise and that may
be incapable of being realized and in some instances are based on consensus
estimates of analysts not affiliated with the Company. In that regard, the
following factors, among others, could cause actual results and other matters
to differ materially from those in such forward-looking statements: increases
in defaults by borrowers and other loan delinquencies; increases in the
provision for loan losses; failure by the Company to realize expected cost
savings or revenue enhancements from the acquisition of America First Eureka
Holdings, Inc. ("AFEH"); deposit attrition, customer loss or revenue loss;
costs or difficulties related to the integration of the businesses of the
Company and AFEH and their respective subsidiaries; the Company's ability to
sustain or improve the performance of its subsidiaries; a delay or denial of
approval of the Company's conversion to a bank holding company; the ability to
identify suitable future acquisition candidates; changes in interest rates
which may, among other things, adversely affect net interest margins,
derivative positions and the level of prepayments on loans and mortgage-backed
securities; competition in the banking, financial services and related
industries; government regulation and tax matters; the outcome of pending or
threatened legal or regulatory disputes and proceedings; credit and other
risks of lending and investment activities; changes in conditions in the
securities markets including the value of the Company's common stock; changes
in regional and national business and economic conditions and inflation; the
inability to utilize net operating loss carryforwards acquired in conjunction
with the Company's acquisition of AFEH; and unanticipated effects of Year 2000
on the Company and the economy. As a result of the foregoing, no assurance can
be given as to future results of operations or financial condition or as to
any other matters covered by any such forward-looking statements, and the
Company wishes to caution investors not to rely on any such forward-looking
statements. The Company does not undertake, and specifically disclaims any
obligation, to update any forward-looking statements, which speak only as to
the date made.
2
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents have been filed by the Company with the Commission
and are incorporated herein by reference:
1. The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997,
2. The Company's Quarterly Report on Form 10-Q for the quarterly period
ended March 31, 1998,
3. The Company's Quarterly Report on Form 10-Q for the quarterly period
ended June 30, 1998,
4. The Company's Current Report on Form 8-K filed on January 20, 1998,
5. The Company's Current Report on Form 8-K filed on March 3, 1998,
6. The Company's Current Report on Form 8-K filed on May 14, 1998,
7. The Company's Current Report on Form 8-K/A filed on June 15, 1998,
amending the Current Report on Form 8-K/A, filed on June 12, 1998,
amending the Current Report on Form 8-K/A, filed on May 6, 1998,
amending the Current Report on Form 8-K, filed on April 30, 1998 (all
such Current Reports being incorporated herein by reference),
8. The Company's Current Report on Form 8-K filed on June 15, 1998,
9. The Company's Current Report on Form 8-K filed on June 24, 1998,
10. The Company's Current Report on Form 8-K filed on August 31, 1998,
and
11. The Company's Current Report on Form 8-K filed on September 30, 1998.
All documents filed by the Company with the Commission pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date hereof and prior
to the termination of the offering of the Securities shall be deemed to be
incorporated by reference into this Prospectus and to be a part hereof from
the respective dates of filing of such documents. Any statement contained
herein or in a document incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein, in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein or in the applicable Prospectus Supplement modifies or
supersedes such statement. Any statement or document so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute part
of this Prospectus.
The Company will furnish without charge to each person to whom this
Prospectus is delivered, upon request, a copy of any and all of the documents
described above that are incorporated by reference herein other than exhibits
to such documents which are not specifically incorporated by reference in such
documents. Written or telephone requests should be directed to: Robert J.
Flax, Esq., Executive Vice President, General Counsel and Secretary, Bay View
Capital Corporation, 1840 Gateway Drive, San Mateo, California 94404
(telephone (650) 573-7300).
No person has been authorized to give any information or to make any
representations other than those contained or incorporated by reference in
this Prospectus and, if given or made, such information or representations
must not be relied upon as having been authorized. This Prospectus does not
constitute an offer to sell or the solicitation of an offer to buy any
securities other than the securities described in this Prospectus or an offer
to sell or the solicitation of an offer to buy such securities in any
jurisdiction where or to any person to whom it is unlawful to make such an
offer or solicitation. Neither the delivery of this Prospectus or any
Prospectus Supplement nor any sale made hereunder or thereunder shall, under
any circumstances, create any implication that there has been no change in the
affairs of the Company or the Trusts since the date hereof or thereof or that
the information contained or incorporated by reference herein or therein is
correct as of any time subsequent to its date.
3
<PAGE>
THE COMPANY
GENERAL
Bay View Capital Corporation (the "Company"), a Delaware corporation, is a
diversified financial services company. The Company conducts its operations
through the following subsidiaries: (i) Bay View Bank (the "Bank"), a
federally chartered capital stock savings bank, (ii) Bay View Acceptance
Corporation ("BVAC"), a Nevada corporation operating as a consumer finance
company, and its subsidiaries Bay View Credit ("BVC") (formerly California
Thrift & Loan), a California corporation, Ultra Funding, Inc. ("Ultra"), a
California corporation, and LFS-BV, Inc., a Nevada corporation, and (iii) Bay
View Commercial Finance Group ("BVCF") (formerly Concord Growth Corporation),
a California corporation operating as a commercial finance company. The
Company also owns Bay View Securitization Corporation ("BVSC"), a Delaware
corporation formed for the purpose of issuing asset-backed securities through
a trust, and Regent Financial Corporation ("Regent"), a California corporation
providing data processing services.
Effective January 2, 1998, the Company acquired America First Eureka
Holdings, Inc. ("AFEH") and AFEH's wholly owned subsidiary, EurekaBank, a
Federal Savings Bank ("EurekaBank"). Under the terms of the definitive merger
agreement (the "Merger Agreement"), AFEH was merged into the Company, with the
Company as the surviving corporation (the "Merger"), and EurekaBank was merged
into the Bank, with the Bank as the surviving bank. At December 31, 1997, AFEH
had $2.3 billion in assets and 36 retail banking branches operating throughout
the San Francisco Bay Area.
The Company's executive offices are located at 1840 Gateway Drive, San
Mateo, California 94404, and its telephone number is (650) 573-7300. Unless
otherwise indicated or unless the context otherwise requires, all references
in this Prospectus and any Prospectus Supplement to the Company include Bay
View Capital Corporation and its consolidated subsidiaries.
PENDING STRUCTURAL CHANGES
In September 1998, the Bank filed an application with the Office of the
Comptroller of the Currency to convert from a federally chartered savings bank
to a national bank and, in connection therewith, the Company filed an
application with the Federal Reserve Board (as defined herein) to become a
bank holding company. Although there can be no assurance that these
applications will be approved, management anticipates that the required
approvals will be obtained and the transactions completed in the fourth
quarter of 1998. Thereafter, the Company will be a bank holding company
regulated by the Federal Reserve Board and the Bank will be a national bank
regulated by the Office of the Comptroller of the Currency. Upon becoming a
bank holding company, the Company will deregister as a savings and loan
holding company with the Office of Thrift Supervision. Set forth below is a
summary, which does not purport to be complete, of certain aspects of bank
holding company regulation.
Regulation of Bank Holding Companies. Bank holding companies are, and if the
Company becomes a bank holding company, the Company will be, subject to
comprehensive regulation by the Federal Reserve Board under the Bank Holding
Company Act of 1956, as amended (the "BHCA"), and the regulations of the
Federal Reserve Board. As a bank holding company, the Company will be required
to file reports with the Federal Reserve Board and such additional information
as the Federal Reserve Board may require, and will be subject to regular
inspections by the Federal Reserve Board. The Federal Reserve Board also has
extensive enforcement authority over bank holding companies, including, among
other things, the ability to assess civil money penalties, to issue cease and
desist or removal orders and to require that a bank holding company divest
subsidiaries (including its bank subsidiaries). In general, enforcement
actions may be initiated for violations of law and regulation as well as
unsafe or unsound practices.
Under Federal Reserve Board policy, a bank holding company must serve as a
source of strength for its subsidiary banks. Under this policy the Federal
Reserve Board may require, and has required in the past, bank holding
companies to contribute additional capital to undercapitalized subsidiary
banks.
4
<PAGE>
Under the BHCA, a bank holding company must obtain Federal Reserve Board
approval before, among other matters: (i) acquiring, directly or indirectly,
ownership or control of any voting shares of another bank or bank holding
company if, after such acquisition, it would own or control more than 5% of
such shares (unless it already owns or controls the majority of such shares);
(ii) acquiring all or substantially all of the assets of another bank or bank
holding company; or (iii) merging or consolidating with another bank holding
company.
As a savings and loan holding company, the Company is generally not subject
to any activity restrictions, but as a bank holding company it will be subject
to the activity limitations imposed on bank holding companies. The BHCA
prohibits a bank holding company, with certain exceptions, from acquiring
direct or indirect ownership or control of more than 5% of the voting shares
of any company which is not a bank or bank holding company, or from engaging
directly or indirectly in activities other than those of banking, managing or
controlling banks, or providing services for its subsidiaries. The principal
exceptions to these prohibitions involve certain non-bank activities which, by
statute or by Federal Reserve Board regulation or order, have been identified
as activities closely related to the business of banking or managing or
controlling banks. The list of activities permitted by the Federal Reserve
Board includes, among other things, operating a savings institution, mortgage
company, finance company, credit card company or factoring company; performing
certain data processing operations; providing certain investment and financial
advice; underwriting and acting as an insurance agent for certain types of
credit-related insurance; leasing property on a full-payout, non-operating
basis; selling money orders, travelers' checks and United States savings
bonds; real estate and personal property appraising; providing tax planning
and preparation services; and providing securities brokerage services for
customers. The scope of permissible activities may be expanded from time to
time by the Federal Reserve Board. Such activities may also be affected by
federal legislation.
Dividends. The Federal Reserve Board has issued a policy statement on the
payment of cash dividends by bank holding companies, which expresses the
Federal Reserve Board's view that a bank holding company should pay cash
dividends only to the extent that its net income for the past year is
sufficient to cover both the cash dividends and a rate of earning retention
that is consistent with the bank holding company's capital needs, asset
quality and overall financial condition. The Federal Reserve Board also has
indicated that it would be inappropriate for a company experiencing serious
financial problems to borrow funds to pay dividends. Furthermore, under the
prompt corrective action regulations adopted by the Federal Reserve Board, the
Federal Reserve Board may prohibit a bank holding company from paying any
dividends if any of the holding company's bank subsidiaries are classified as
"undercapitalized."
Repurchase or Redemption of Equity Securities. Bank holding companies are
required to give the Federal Reserve Board prior written notice of any
purchase or redemption of their outstanding equity securities if the gross
consideration for the purchase or redemption, when combined with the net
consideration paid for all such purchases or redemptions during the preceding
12 months, is equal to 10% or more of their consolidated net worth. The
Federal Reserve Board may disapprove such a purchase or redemption if it
determines that the proposal would constitute an unsafe or unsound practice or
would violate any law, regulation, Federal Reserve Board order, or any
condition imposed by, or written agreement with, the Federal Reserve Board.
This notification requirement does not apply to any company that meets the
well-capitalized standard for commercial banks, has a safety and soundness
examination rating of at least a "2" and is not subject to any unresolved
supervisory issues.
Capital Requirements. The Federal Reserve Board has established capital
requirements for bank holding companies that generally parallel the capital
requirements for national banks and federal thrift institutions. As a savings
and loan holding company, the Company is not subject to any minimum capital
requirements.
5
<PAGE>
THE TRUSTS
Each of Bay View Capital I and Bay View Capital II (each, a "Trust") is a
statutory business trust created under Delaware law pursuant to (i) a trust
agreement (as the same may be amended, supplemented or restated from time to
time, a "Declaration") executed by the Company, as sponsor (the "Sponsor"),
and certain of the Bay View Trustees (as defined herein) for such Trust and
(ii) the filing of a certificate of trust with the Delaware Secretary of
State. Each Trust exists for the exclusive purposes of (i) issuing its Trust
Preferred Securities and common securities representing undivided beneficial
interests in the assets of such Trust (the "Trust Common Securities" and,
together with the Trust Preferred Securities, the "Trust Securities"), (ii)
investing the gross proceeds of its Trust Securities in a specific series of
Junior Subordinated Debt Securities and (iii) engaging in only those other
activities necessary or incidental thereto. All of the Trust Common Securities
will be directly or indirectly owned by the Company. The Trust Common
Securities of each Trust will rank pari passu, and payments will be made
thereon pro rata, with the Trust Preferred Securities of such Trust except
that upon an event of default under the Declaration of such Trust, the rights
of the holders of its Trust Common Securities to payment in respect of
distributions and payments upon liquidation, redemption and otherwise will be
subordinated to the rights of the holders of its Trust Preferred Securities.
In connection with the issuance of Trust Preferred Securities by a Trust, the
Company will, directly or indirectly, acquire Trust Common Securities of such
Trust in an aggregate liquidation amount equal to approximately 3% of the
total capital of such Trust. Each Trust's business and affairs will be
conducted by the trustees (with respect to each Trust, the "Bay View
Trustees") appointed by the Company, as the direct or indirect holder of all
the Trust Common Securities of such Trust. Except in certain limited
circumstances, the holder of the Trust Common Securities of a Trust will be
entitled to appoint, remove or replace any of, and to increase or reduce the
number of, the Bay View Trustees of such Trust. The duties and obligations of
the Bay View Trustees of each Trust shall be governed by its Declaration. A
majority of the Bay View Trustees (the "Regular Trustees") of each Trust will
be persons who are employees or officers of or affiliated with the Company.
One Bay View Trustee of each Trust will be a financial institution which will
be unaffiliated with the Company and which shall act as property trustee and
as indenture trustee (the "Property Trustee") of such Trust for purposes of
the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"). In
addition, unless the Property Trustee of a Trust maintains a principal place
of business in the State of Delaware, and otherwise meets the requirements of
applicable law, one Bay View Trustee of each Trust will have its principal
place of business or reside in the State of Delaware (the "Delaware Trustee").
The Regular Trustees, Property Trustee and Delaware Trustee of a Trust may be
different from the Regular Trustees, Property Trustee and Delaware Trustee of
the other Trust. The Company will pay all fees and expenses related to the
Trusts and the offering of Trust Securities. The payment of periodic
distributions with respect to the Trust Preferred Securities of a Trust out of
moneys held by such Trust, and payment on liquidation, redemption or otherwise
with respect to the Trust Preferred Securities, will be guaranteed by the
Company to the extent described herein. See "Description of Trust Preferred
Securities Guarantees." Unless otherwise stated in the applicable Prospectus
Supplement, the Company's obligations under each Trust Preferred Securities
Guarantee will be subordinate and junior in right of payment to all other
liabilities of the Company. The principal place of business of the Trusts
shall be c/o Bay View Capital Corporation, 1840 Gateway Drive, San Mateo,
California 94404 (telephone: (650) 573-7300).
USE OF PROCEEDS
Unless otherwise described in the applicable Prospectus Supplement, the
Company intends to use the net proceeds from the sale of the Securities
offered hereby for general corporate purposes, which may include, among other
things, the repayment of indebtedness, investments in or extensions of credit
to its subsidiaries and the financing of acquisitions. Pending such
application, such proceeds may be invested in short-term investments and
marketable securities. The proceeds from the sale of Trust Securities will be
invested by the respective Trusts in Junior Subordinated Debt Securities.
6
<PAGE>
CONSOLIDATED RATIOS OF EARNINGS TO FIXED CHARGES
The following table sets forth the consolidated ratios of earnings to fixed
charges for the Company for the periods indicated. Earnings represent income
from continuing operations before income taxes, fixed charges and
extraordinary items. Fixed charges include interest expense and the portion of
rental expense which approximates the interest component of lease payments
(estimated at 20% of rental expense). Such information is qualified in its
entirety by the more detailed financial information set forth in the Company's
financial statements and notes thereto appearing in the documents incorporated
herein by reference. See "Incorporation of Certain Documents by Reference."
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30, YEAR ENDED DECEMBER 31,
-------------- ----------------------------------------------
1998 1997 1997 1996 1995 1994 1993
------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges:
Including interest on customer
deposits........................... 1.16x 1.23x 1.15x 1.12x 0.98x(1) 1.17x 1.18x
Excluding interest on customer
deposits........................... 1.43x 1.46x 1.29x 1.31x 0.96x(1) 1.35x 1.41x
</TABLE>
- --------
(1) Earnings were inadequate to cover fixed charges for the year ended
December 31, 1995. The amount of the deficiency was $2,853,710.
7
<PAGE>
DESCRIPTION OF DEBT SECURITIES
The Company may issue Debt Securities either separately, or together with,
or upon the conversion of or in exchange for, other Securities. The Debt
Securities are to be either unsecured senior obligations (the "Senior Debt
Securities") of the Company issued in one or more series, unsecured
subordinated obligations (the "Subordinated Debt Securities") of the Company
issued in one or more series, or unsecured junior subordinated obligations
(the "Junior Subordinated Debt Securities") of the Company issued in one or
more series. The Senior Debt Securities will be issued under an Indenture (the
"Senior Indenture") to be entered into by the Company and a trustee (the
"Senior Trustee") whose name will be set forth in the applicable Prospectus
Supplement; the Subordinated Debt Securities will be issued under an Indenture
(the "Subordinated Indenture") to be entered into by the Company and a trustee
(the "Subordinated Trustee") whose name will be set forth in the applicable
Prospectus Supplement; and the Junior Subordinated Debt Securities will be
issued under an Indenture (the "Junior Subordinated Indenture") to be entered
into by the Company and a trustee (the "Junior Subordinated Trustee") whose
name will be set forth in the applicable Prospectus Supplement. The Senior
Indenture, Subordinated Indenture and Junior Subordinated Indenture are
hereinafter called, collectively, the "Indentures" and, individually, an
"Indenture"; and the Senior Trustee, Subordinated Trustee and Junior
Subordinated Trustee are hereinafter called, collectively, the "Trustees" and,
individually, a "Trustee." The forms of the Indentures have been filed as
exhibits to the Registration Statement. The terms of any series of Debt
Securities will be those set forth in the applicable Indenture and such Debt
Securities and those made part of such Indenture by the Trust Indenture Act.
The summary of certain provisions of the Indentures and the Debt Securities
set forth below and the summary of certain terms of a particular series of
Debt Securities set forth in the applicable Prospectus Supplement do not
purport to be complete and are subject to and are qualified in their entirety
by reference to all of the provisions of the Indentures, which provisions of
the Indentures (including defined terms) are incorporated herein by reference.
Certain capitalized terms used herein and not defined are defined in the
Indentures. As used in this "Description of Debt Securities," all references
to the "Company" shall mean Bay View Capital Corporation, excluding, unless
otherwise expressly stated or the context shall otherwise require, its
subsidiaries.
In the event that Junior Subordinated Debt Securities are issued to a Trust
or a trustee of such Trust in connection with the issuance of its Trust
Securities, such Junior Subordinated Debt Securities may subsequently be
distributed pro rata to the holders of such Trust Securities in connection
with the dissolution of such Trust upon the occurrence of certain events
described in the Prospectus Supplement relating to such Trust Securities. Only
one series of Junior Subordinated Debt Securities will be issued to a Trust or
a trustee of such Trust in connection with the issuance of Trust Securities by
such Trust.
The following description of Debt Securities sets forth certain general
terms and provisions of the series of Debt Securities to which any Prospectus
Supplement may relate. Certain other specific terms of any particular series
of Debt Securities will be described in the applicable Prospectus Supplement.
To the extent that any particular terms of the Debt Securities described in a
Prospectus Supplement differ from any of the terms described herein, then such
terms described herein shall be deemed to have been superseded by such
Prospectus Supplement.
GENERAL
The Debt Securities may be issued from time to time in one or more series of
Senior Debt Securities, one or more series of Subordinated Debt Securities and
one or more series of Junior Subordinated Debt Securities. The Indentures do
not limit the aggregate principal amount of Debt Securities which may be
issued thereunder and provide that Debt Securities of any series may be issued
thereunder up to an aggregate principal amount which may be authorized from
time to time by the Company. Reference is made to the applicable Prospectus
Supplement relating to the series of Debt Securities offered thereby for
specific terms, including (where applicable): (1) the title or designation of
such Debt Securities; (2) any limit on the aggregate principal amount of such
Debt Securities; (3) the price or prices (expressed as a percentage of the
principal amount thereof) at which such Debt Securities will be issued; (4)
the date or dates on which the principal of such Debt Securities
8
<PAGE>
will be payable, or the method or methods, if any, by which such date or dates
will be determined; (5) the rate or rates (which may be fixed or variable) at
which such Debt Securities will bear interest, if any, or the method or
methods, if any, by which such rate or rates are to be determined, the date or
dates, if any, from which such interest will accrue, or the method or methods,
if any, by which such date or dates are to be determined, and whether and
under what circumstances Additional Amounts on such Debt Securities will be
payable, and the basis upon which interest will be calculated if other than
that of a 360-day year of twelve 30-day months; (6) the dates on which such
interest, if any, will be payable and the record dates, if any, therefor and,
if applicable, the manner in which such interest payments may be deferred; (7)
the place or places where the principal of, premium, if any, and interest, if
any, on such Debt Securities will be payable and the place or places where
such Debt Securities may be surrendered for registration of transfer and
exchange, if other than the Borough of Manhattan, The City of New York; (8) if
applicable, the date or dates on which, the period or periods within which,
the price or prices at which and the other terms and conditions upon which
such Debt Securities may be redeemed at the option of the Company or are
subject to repurchase at the option of the holders; (9) the terms of any
sinking fund or analogous provision; (10) if other than U.S. dollars, the
Currency for which the Debt Securities may be purchased and the Currency in
which the payment of principal thereof and premium, if any, and interest, if
any, thereon may be made, and the ability, if any, of the Company or the
holders of Debt Securities to have payments made in any Currency other than
those in which the Debt Securities are stated to be payable; (11) any addition
to, or modification or deletion of, any covenant or Event of Default with
respect to such Debt Securities; (12) whether any such Debt Securities are to
be issuable in registered or bearer form or both and, if in bearer form, the
terms and conditions relating thereto and any limitations on issuance of such
Bearer Securities (including in exchange for Registered Securities of the same
series); (13) whether any such Debt Securities will be issued in temporary or
permanent global form and, if so, the identity of the depositary for such
global Debt Security; (14) whether and under what circumstances the Company
will pay Additional Amounts (as contemplated by the relevant Indenture) on
such Debt Securities to any holder who is a United States Alien (as defined in
the relevant Indenture, as such definition may be modified) in respect of any
tax, assessment or other governmental charge and, if so, whether the Company
will have the option to redeem such Debt Securities rather than pay such
Additional Amounts; (15) the person to whom any interest on any Registered
Securities of the series shall be payable, if other than the person in whose
name the Registered Security (or one or more Predecessor Securities) is
registered at the close of business on the Regular Record Date for such
interest, the manner in which, or the person to whom, any interest on any
Bearer Security of the series shall be payable, if other than upon
presentation and surrender of the coupons appertaining thereto as they
severally mature, and the extent to which, or the manner in which, any
interest payable on a temporary global Debt Security will be paid if other
than in the manner provided in the relevant Indenture; (16) the portion of the
principal amount of such Debt Securities which shall be payable upon
acceleration thereof if other than the full principal amount thereof; (17) the
authorized denominations in which such Debt Securities will be issuable, if
other than denominations of $1,000 and any integral multiple thereof (in the
case of Registered Securities) or $5,000 (in the case of Bearer Securities);
(18) the terms, if any, upon which such Debt Securities may be convertible
into or exchangeable for other Securities; (19) whether such Debt Securities
will be Senior Debt Securities, Subordinated Debt Securities or Junior
Subordinated Debt Securities and, if Subordinated Debt Securities or Junior
Subordinated Debt Securities, the subordination provisions and the definition
of "Senior Indebtedness" applicable thereto; (20) whether the amount of
payments of principal of, premium, if any, and interest, if any, on such Debt
Securities may be determined with reference to an index, formula or other
method or methods (any such Debt Securities being hereinafter called "Indexed
Securities") and the manner in which such amounts will be determined; and (21)
any other terms of such Debt Securities.
As used in this Prospectus and any Prospectus Supplement relating to the
offering of any Debt Securities, references to the principal of and premium,
if any, and interest, if any, on such Debt Securities will be deemed to
include mention of the payment of Additional Amounts, if any, required by the
terms of such Debt Securities in such context.
Debt Securities may be issued as Original Issue Discount Securities (as
defined in the Indentures) to be sold at a substantial discount below their
principal amount. In the event of an acceleration of the maturity of any
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<PAGE>
Original Issue Discount Security, the amount payable to the holder thereof
upon such acceleration will be determined in the manner described in the
applicable Prospectus Supplement. As noted elsewhere herein, unless otherwise
stated in the applicable Prospectus Supplement, payment of the principal of
the Subordinated Debt Securities may be accelerated only in the case of
certain events of bankruptcy, insolvency or reorganization of the Company or
any Major Bank Subsidiary (as defined in the applicable Prospectus Supplement)
of the Company. See "--Events of Default; Limited Rights of Acceleration of
Subordinated Debt Securities." Material federal income tax and other
considerations applicable to Original Issue Discount Securities will be
described in the applicable Prospectus Supplement.
If the purchase price of any Debt Securities is payable in a Currency other
than U.S. dollars or if principal of, or premium, if any, or interest, if any,
on any of the Debt Securities is payable in any Currency other than U.S.
dollars, the specific terms and other information with respect to such Debt
Securities and such foreign Currency will be specified in the Prospectus
Supplement relating thereto.
Under the Indentures, the terms of the Debt Securities of any series may
differ and the Company, without the consent of the holders of the Debt
Securities of any series, may reopen a previous series of Debt Securities and
issue additional Debt Securities of such series or establish additional terms
of such series.
REGISTRATION, TRANSFER, PAYMENT AND PAYING AGENT
Unless otherwise indicated in the applicable Prospectus Supplement, each
series of Debt Securities will be issued in registered form only, without
coupons. The Indentures, however, provide that the Company may also issue Debt
Securities in bearer form only, or in both registered and bearer form. Bearer
Securities shall not be offered, sold, resold or delivered in connection with
their original issuance in the United States or to any United States person
(as defined below) other than offices located outside the United States of
certain United States financial institutions. As used herein, "United States
person" means any citizen or resident of the United States, any corporation,
partnership or other entity created or organized in or under the laws of the
United States, any estate the income of which is subject to United States
federal income taxation regardless of its source, or any trust whose
administration is subject to the primary supervision of a United States court
and which has one or more United States fiduciaries who have the authority to
control all substantial decisions of the trust, and "United States" means the
United States of America (including the states thereof and the District of
Columbia), its territories, its possessions and other areas subject to its
jurisdiction. Purchasers of Bearer Securities will be subject to certification
procedures and may be affected by certain limitations under United States tax
laws. Such procedures and limitations will be described in the Prospectus
Supplement relating to the offering of the Bearer Securities.
Unless otherwise indicated in the applicable Prospectus Supplement,
Registered Securities will be issued in denominations of $1,000 or any
integral multiple thereof, and Bearer Securities will be issued in
denominations of $5,000.
Unless otherwise indicated in the applicable Prospectus Supplement, the
principal, premium, if any, and interest, if any, of or on the Debt Securities
will be payable, and Debt Securities may be surrendered for registration of
transfer or exchange, at an office or agency to be maintained by the Company
in the Borough of Manhattan, The City of New York, provided that payments of
interest with respect to any Registered Security may be made at the option of
the Company by check mailed to the address of the person entitled thereto or
by transfer to an account maintained by the payee with a bank located in the
United States. No service charge shall be made for any registration of
transfer or exchange of Debt Securities, but the Company may require payment
of a sum sufficient to cover any tax or other governmental charge and any
other expenses that may be imposed in connection therewith.
Unless otherwise indicated in the applicable Prospectus Supplement, payment
of principal of, premium, if any, and interest, if any, on Bearer Securities
will be made, subject to any applicable laws and regulations, at such office
or agency outside the United States as specified in the Prospectus Supplement
and as the Company
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may designate from time to time. Unless otherwise indicated in the applicable
Prospectus Supplement, payment of interest due on Bearer Securities on any
Interest Payment Date will be made only against surrender of the coupon
relating to such Interest Payment Date. Unless otherwise indicated in the
applicable Prospectus Supplement, no payment of principal, premium or interest
with respect to any Bearer Security will be made at any office or agency in
the United States or by check mailed to any address in the United States or by
transfer to an account maintained with a bank located in the United States;
provided, however, that if amounts owing with respect to any Bearer Securities
shall be payable in U.S. dollars, payment with respect to any such Bearer
Securities may be made at the Corporate Trust Office of the applicable Trustee
or at any office or agency designated by the Company in the Borough of
Manhattan, The City of New York, if (but only if) payment of the full amount
of such principal, premium or interest at all offices outside of the United
States maintained for such purpose by the Company is illegal or effectively
precluded by exchange controls or similar restrictions.
Unless otherwise indicated in the applicable Prospectus Supplement, the
Company will not be required to (i) issue, register the transfer of or
exchange Debt Securities of any series during a period beginning at the
opening of business 15 days before any selection of Debt Securities of that
series of like tenor to be redeemed and ending at the close of business on the
day of that selection; (ii) register the transfer of or exchange any
Registered Security, or portion thereof, called for redemption, except the
unredeemed portion of any Registered Security being redeemed in part; (iii)
exchange any Bearer Security called for redemption, except to exchange such
Bearer Security for a Registered Security of that series and like tenor that
is simultaneously surrendered for redemption; or (iv) issue, register the
transfer of or exchange any Debt Security which has been surrendered for
repayment at the option of the holder, except the portion, if any, of such
Debt Security not to be so repaid.
RANKING OF DEBT SECURITIES; HOLDING COMPANY STRUCTURE
The Senior Debt Securities of each series will be unsecured unsubordinated
obligations of the Company and will rank on a parity in right of payment with
all other unsecured and unsubordinated indebtedness of the Company. The
Subordinated Debt Securities of each series will be unsecured obligations of
the Company and will be subordinated in right of payment to all existing and
future Senior Indebtedness (as defined with respect to the Subordinated Debt
Securities of such series) of the Company. The Junior Subordinated Debt
Securities of each series will be unsecured obligations of the Company and
will be subordinated in right of payment to all existing and future Senior
Indebtedness (as defined with repect to the Junior Subordinated Debt
Securities of such series). If this Prospectus is being delivered in
connection with the offering of a series of Subordinated Debt Securities or
Junior Subordinated Debt Securities, the accompanying Prospectus Supplement
will describe the subordination provisions and set forth the definition of
"Senior Indebtedness" applicable to such Subordinated Debt Securities or
Junior Subordinated Debt Securities, as the case may be, and such Prospectus
Supplement or the information incorporated or deemed to be incorporated by
reference herein will set forth the approximate amount of such Senior
Indebtedness outstanding as of a recent date. There are no limitations in any
of the Indentures on the issuance or incurrence of indebtedness (including
Senior Indebtedness) by the Company.
The Debt Securities will be obligations exclusively of the Company. The
Company is a holding company, substantially all of whose consolidated assets
are held by its subsidiaries. Accordingly, the cash flow of the Company and
the consequent ability to service its debt, including the Debt Securities, are
dependent upon the results of operations of such subsidiaries and the
distribution of funds by such subsidiaries to the Company. Various statutory
and regulatory restrictions, however, limit directly or indirectly the amount
of dividends the Company's subsidiaries can pay, and also restrict certain
subsidiaries from making investments in or loans to the Company, and similar
restrictions will be applicable to the Bank if it becomes a national bank. In
addition, if the Company becomes a bank holding company, various regulatory
restrictions will limit directly or indirectly the amount of dividends the
Company can pay as well as the repurchase or redemption of its capital stock.
See "The Company--Pending Structural Changes--Dividends" and "--Repurchase or
Redemption of Equity Securities."
In particular, savings associations, such as the Bank, that before and after
a proposed capital distribution meet their regulatory capital requirements,
may make capital distributions during any calendar year equal to the greater
of (i) 100% of net income for the year-to-date plus 50% of the lowest of the
amounts by which the
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association's tangible, core or risk-based capital exceeds its regulatory
capital requirement for such capital component, as measured at the beginning
of the calendar year, or (ii) 75% of its net income for the most recent four
quarter period. The Bank currently may pay dividends in accordance with this
general authority. However, an association deemed to be in need of more than
normal supervision by the Office of Thrift Supervision (the "OTS") may have
its dividend authority restricted by the OTS. In general, savings associations
proposing to make any capital distribution need only submit written notice to
the OTS 30 days prior to such distribution. The OTS may object to the
distribution during that 30-day notice period based on safety and soundness
concerns. If the Bank were to become a national bank, the Bank would be
permitted to pay dividends, without prior notice to the Office of the
Comptroller of the Currency, equal to its year-to-date net income plus the
Bank's net income for the prior two fiscal years. The payment of dividends in
excess of this amount would require prior approval of the Office of the
Comptroller of the Currency.
Under Nevada law, a Nevada corporation such as BVAC and LFS-BV, Inc., may
not pay dividends if, after giving effect to such payment: (a) the corporation
would not be able to pay its debts as they become due in the usual course of
business; or (b) except as otherwise specifically allowed by the articles of
incorporation, the corporation's total assets would be less than the sum of
its total liabilities plus the amount that would be needed, if the corporation
were to be dissolved at the time of such payment, to satisfy the preferential
rights upon dissolution of stockholders whose preferential rights are superior
to those receiving the dividend payment. Under California law, a California
corporation, such as BVC, BVCF, Regent and Ultra, may not pay dividends
unless, in general, (i) the payment would not exceed the corporation's
retained earnings or (ii) in the alternative, after giving effect to the
dividend, and subject to certain adjustments and exceptions, (A) the sum of
the corporation's assets (exclusive of goodwill, capitalized research and
development expenses and deferred charges) would not be less than 125% of its
liabilities (not including deferred taxes, deferred income and other deferred
credits) and (B) if the corporation classifies its assets into current and
fixed assets, the current assets of the corporation would be at least equal to
its current liabilities or, if the corporation's average earnings before
income taxes and interest expense for the two preceding fiscal years were less
than its average interest expense for such fiscal years, at least equal to
125% of its current liabilities. In addition, a California corporation is not
permitted to make a dividend or other distribution to its shareholders if it
is, or as a result thereof would be, likely to be unable to meet its
liabilities as they mature. A California corporation must also meet certain
additional financial tests to pay dividends on any junior class or series of
stock if it has outstanding any preferred or other senior class or series of
stock. BVSC, a Delaware corporation, is subject to certain limitations on
dividends under Delaware law.
An institution insured by the Federal Deposit Insurance Corporation (the
"FDIC"), including the Bank, may not pay a dividend if the institution does
not meet its minimum regulatory capital requirements prior to, or as a result
of, such dividend unless it receives prior regulatory approval. This
prohibition will continue to apply to the Bank if the Bank becomes a national
bank.
Because the Company is a holding company, the Debt Securities will be
effectively subordinated to all existing and future liabilities, including
indebtedness, customer deposits, trade payables, guarantees and lease
obligations, of the Company's subsidiaries. Therefore, the Company's rights
and the rights of its creditors, including the holders of the Debt Securities,
to participate in the assets of any subsidiary upon the latter's liquidation
or reorganization will be subject to the prior claims of such subsidiary's
creditors and, if applicable, its depositors, except to the extent that the
Company may itself be a creditor with recognized claims against the
subsidiary, in which case the claims of the Company would still be effectively
subordinate to any security interest in, or mortgages or other liens on, the
assets of such subsidiary and would be subordinate to any indebtedness of such
subsidiary senior to that held by the Company. In that regard, in the event
that a receiver or conservator is appointed for any subsidiary of the Company
whose deposits are insured by the FDIC, such as the Bank (as a savings bank or
a national bank), the Federal Deposit Insurance Act recognizes a priority in
favor of the holders of withdrawable deposits (including the FDIC as subrogee
or transferee) over general creditors. Thus, in the event of a conservatorship
or receivership of such a subsidiary, claims for customer deposits would have
a priority over any claims the Company may itself have as a creditor of such
subsidiary. The Indentures do not
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limit the amount of indebtedness or other liabilities that may be incurred by
the Company and its subsidiaries and both the Company and its subsidiaries
retain the ability to incur substantial additional indebtedness and other
financial obligations. See "--Absence of Limitation on Indebtedness and Liens;
Absence of Event Risk Protection."
SUBORDINATED DEBT SECURITIES INTENDED TO QUALIFY AS TIER 2 CAPITAL
Unless otherwise stated in the applicable Prospectus Supplement, it is
currently intended that the Subordinated Debt Securities would qualify, in the
event the Company were to become a bank holding company (which would occur if
the Bank were to convert from a federal savings bank to a national bank or
other commercial bank or if the Company were to acquire control of a
commercial bank), as Tier 2 Capital under the guidelines established by the
Board of Governors of the Federal Reserve System (the "Federal Reserve Board")
for bank holding companies. As described above under "The Company--Pending
Structural Changes," the Bank has filed an application with the Office of the
Comptroller of the Currency to become a national bank. The guidelines set
forth specific criteria for subordinated debt to qualify as Tier 2 Capital.
Among other things, the subordinated debt must: (i) be unsecured; (ii) have a
minimum average maturity of five years; (iii) be subordinated in right of
payment; (iv) not contain provisions permitting the holders thereof to
accelerate payment of principal prior to maturity except in the event of
bankruptcy, insolvency or reorganization of the issuer or a major bank
subsidiary of the issuer; and (v) not contain provisions that would adversely
affect liquidity or unduly restrict management's flexibility to operate the
organization, particularly in times of financial difficulty, such as
limitations on additional secured or senior borrowings, sales or dispositions
of assets or changes in control. See "--Events of Default; Limited Rights of
Acceleration of Subordinated Debt Securities."
GLOBAL SECURITIES
The Debt Securities of a series may be issued in whole or in part in the
form of one or more global securities that will be deposited with, or on
behalf of, a depositary (the "Depositary") identified in the Prospectus
Supplement relating to such series. Global Debt Securities may be issued in
either registered or bearer form and in either temporary or permanent form.
Unless and until it is exchanged in whole or in part for individual
certificates evidencing Debt Securities in definitive form represented
thereby, a global Debt Security may not be transferred except as a whole by
the Depositary for such global Debt Security to a nominee of such Depositary
or by a nominee of such Depositary to such Depositary or another nominee of
such Depositary or by such Depositary or any such nominee to a successor of
such Depositary or a nominee of such successor.
The specific terms of the depositary arrangement with respect to a series of
global Debt Securities and certain limitations and restrictions relating to a
series of global Bearer Securities will be described in the Prospectus
Supplement relating to such series.
OUTSTANDING DEBT SECURITIES
In determining whether the holders of the requisite principal amount of
outstanding Debt Securities have given any request, demand, authorization,
direction, notice, consent or waiver under the relevant Indenture, (i) the
portion of the principal amount of an Original Issue Discount Security that
shall be deemed to be outstanding for such purposes shall be that portion of
the principal amount thereof that could be declared to be due and payable upon
a declaration of acceleration thereof pursuant to the terms of such Original
Issue Discount Security as of the date of such determination, (ii) the
principal amount of any Indexed Security that shall be deemed to be
outstanding for such purpose shall be the principal face amount of such
Indexed Security determined on the date of its original issuance, (iii) the
principal amount of a Debt Security denominated in a Currency other than U.S.
dollars shall be the U.S. dollar equivalent, determined on the date of
original issue of such Debt Security, of the principal amount of such Debt
Security and (iv) any Debt Security owned by the Company or any obligor on
such Debt Security or any Affiliate (other than the Trusts) of the Company or
such other obligor shall be deemed not to be outstanding.
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REDEMPTION AND REPURCHASE
The Debt Securities of any series may be redeemable at the option of the
Company, may be subject to mandatory redemption pursuant to a sinking fund or
otherwise, or may be subject to repurchase by the Company at the option of the
holders, in each case upon the terms, at the times and at the prices set forth
in the applicable Prospectus Supplement. However, unless otherwise stated in
the applicable Prospectus Supplement, the Company currently does not intend to
issue Subordinated Debt Securities with redemption or repurchase features to
the extent such features would prevent the Subordinated Debt Securities from
qualifying as Tier 2 Capital under the Federal Reserve Board's guidelines. See
"--Subordinated Debt Securities Intended to Qualify as Tier 2 Capital."
CONVERSION AND EXCHANGE
The terms, if any, on which Debt Securities of any series are convertible
into or exchangeable for Common Stock, Preferred Stock, Depositary Shares or
other Debt Securities will be set forth in the applicable Prospectus
Supplement. Such terms may include provisions for conversion or exchange,
either mandatory, at the option of the holders or at the option of the
Company.
ABSENCE OF LIMITATION ON INDEBTEDNESS AND LIENS; ABSENCE OF EVENT RISK
PROTECTION
Unless otherwise provided in the Prospectus Supplement relating to a series
of Debt Securities, the Indentures will not limit the amount of indebtedness,
guarantees or other liabilities that may be incurred by the Company and its
subsidiaries and will not prohibit the Company and its subsidiaries from
creating or assuming liens on their property (including capital stock of the
Bank and other subsidiaries of the Company). Unless otherwise provided in the
Prospectus Supplement relating to a series of Debt Securities, the Indentures
will not require the maintenance of any financial ratios by, or specified
levels of net worth, revenues, income, cash flow or liquidity of, the Company,
and will not contain provisions which would give holders of the Debt
Securities the right to require the Company to repurchase their Debt
Securities in the event of a takeover, recapitalization or similar
restructuring or change in control of the Company.
CONSOLIDATION, MERGER AND SALE OF ASSETS
Each Indenture provides that the Company shall not, in any transaction or
series of related transactions, consolidate with or merge into any Person or
sell, assign, transfer, lease or otherwise convey all or substantially all its
properties and assets to any Person unless (a) either the Company shall be the
continuing entity, or the successor Person (if other than the Company) is a
corporation which is organized and existing under the laws of the United
States of America, any state thereof or the District of Columbia and shall
expressly assume the due and punctual payment of the principal of, premium, if
any, and interest, if any, on all the Debt Securities outstanding under such
Indenture and the performance of the Company's other obligations under such
Indenture and the Debt Securities outstanding thereunder; (b) immediately
after giving effect to such transaction, no Event of Default under such
Indenture, and no event which, after notice or lapse of time or both would
become an Event of Default under such Indenture, shall have happened and be
continuing; and (c) certain other conditions are met.
Upon any such merger, consolidation, sale, assignment, transfer, lease or
conveyance in which the Company is not the continuing corporation, the
successor corporation formed by such consolidation or into which the Company
is merged or to which such sale, assignment, transfer, lease or other
conveyance is made shall succeed to, and be substituted for, and may exercise
every right and power of, the Company under such Indenture with the same
effect as if such successor corporation had been named as the Company therein
and thereafter (except in the case of a lease) the Company shall be released
from its obligations under such Indenture and the Debt Securities outstanding
thereunder.
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EVENTS OF DEFAULT; LIMITED RIGHTS OF ACCELERATION OF SUBORDINATED DEBT
SECURITIES
Unless otherwise specified in the applicable Prospectus Supplement, an Event
of Default with respect to the Debt Securities of any series is defined in the
applicable Indenture as being: (i) default for 30 days in payment of any
interest with respect to any Debt Security of such series; (ii) default in
payment of principal or any premium with respect to any Debt Security of such
series when due upon maturity, redemption, repurchase at the option of the
holder or otherwise; (iii) default in deposit of any sinking fund payment when
due with respect to any Debt Security of such series; (iv) default by the
Company in the performance, or breach, of any other covenant or warranty in
such Indenture (other than a covenant or warranty included therein solely for
the benefit of series of Debt Securities other than that series) or any Debt
Security of such series which shall not have been remedied for a period of 30
days after notice to the Company by the applicable Trustee or the holders of
not less than 25% in aggregate principal amount of the Debt Securities of such
series then outstanding; (v) certain events of bankruptcy, insolvency or
reorganization of the Company or any Major Bank Subsidiary of the Company; or
(vi) any other Event of Default established for the Debt Securities of such
series. No Event of Default with respect to any particular series of Debt
Securities necessarily constitutes an Event of Default with respect to any
other series of Debt Securities. Each Indenture provides that the Trustee
thereunder may withhold notice to the holders of the Debt Securities of any
series outstanding under such Indenture of the occurrence of a default with
respect to the Debt Securities of such series (except a default in payment of
principal, premium, if any, interest, if any, or sinking fund payments, if
any) if the Trustee considers it in the interest of the holders to do so.
Each of the Senior Indenture and the Junior Subordinated Indenture provides
that if an Event of Default with respect to any series of Debt Securities
issued thereunder shall have occurred and be continuing, either the relevant
Trustee or the holders of at least 25% in principal amount of the Debt
Securities of such series then outstanding may declare the principal amount
(or if any Debt Securities of such series are Original Issue Discount
Securities, such lesser amount as may be specified in the terms thereof) of
all the Debt Securities of such series to be due and payable immediately, but
upon certain conditions such declaration and its consequences may be rescinded
and annulled by the holders of a majority in principal amount of the Debt
Securities of such series then outstanding.
Unless otherwise stated in the applicable Prospectus Supplement, no Event of
Default described in clauses (i), (ii), (iii), (iv) or (vi) of the second
preceding paragraph will permit acceleration of the payment of the principal
of the Subordinated Debt Securities. Unless otherwise stated in the applicable
Prospectus Supplement, the Subordinated Indenture will provide that, if an
Event of Default described under clause (v) of the preceding paragraph shall
have occurred and be continuing, either the Trustee or the holders of at least
25% in principal amount of the Subordinated Debt Securities of any series then
outstanding may declare the principal amount (or if any Subordinated Debt
Securities of such series are Original Issue Discount Securities, such lesser
amount as may be specified in the terms thereof) of all the Subordinated Debt
Securities of such series to be due and payable immediately, but upon certain
conditions such declaration and its consequences may be rescinded and annulled
by the holders of a majority in principal amount of the Subordinated Debt
Securities of such series then outstanding.
As described in the preceding paragraph, unless otherwise stated in the
applicable Prospectus Supplement, there will be no right of acceleration with
respect to the Subordinated Debt Securities of any series in the case of,
among other things, (i) a default in the payment of the principal of, or
premium, if any, or interest, if any, on, or sinking fund payments, if any,
with respect to, the Subordinated Debt Securities of such series or (ii) a
default in the performance of any other covenant of the Company in the
Subordinated Indenture or the Subordinated Debt Securities of such series. In
the case of a default in the payment of principal of, or premium, if any, or
interest, if any, on any Subordinated Debt Securities of any series, the
Subordinated Trustee, subject to certain limitations and conditions, may
institute a judicial proceeding for the collection thereof. The limitation on
acceleration described above is intended, in the event the Company were to
become a bank holding company (which would occur if the Bank were to convert
from a federal savings bank to a national bank or other commercial bank or if
the Company were to acquire control of a commercial bank), to permit the
Subordinated Debt Securities to qualify as Tier 2 Capital under the guidelines
established by the Federal Reserve Board for bank holding companies. As
described above under "The Company--Pending Structural Changes," the Bank has
filed an application with the Office of the Comptroller of the Currency to
become a national bank. See "--Subordinated Debt Securities Intended to
Qualify as Tier 2 Capital."
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Subject to the provisions of Trust Indenture Act requiring each Trustee,
during the continuance of an Event of Default under the relevant Indenture, to
act with the requisite standard of care, a Trustee is under no obligation to
exercise any of its rights or powers under the relevant Indenture at the
request or direction of any of the holders of Debt Securities of any series
unless such holders have offered such Trustee reasonable indemnity. Subject to
the foregoing, holders of a majority in principal amount of the then
outstanding Debt Securities of any series issued under an Indenture shall have
the right, subject to certain limitations, to direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee
under such Indenture with respect to such series. Each Indenture requires the
annual filing by the Company with the relevant Trustee of a certificate as to
whether or not the Company is in default under the terms of such Indenture.
Notwithstanding any other provision of the Indentures, the holder of any
Debt Security shall have the right, which is absolute and unconditional, to
receive payment of the principal of and premium, if any, and interest, if any,
on such Debt Security on the respective due dates therefor (as the same may be
extended, if applicable, in accordance with the terms of such Debt Security)
and to institute suit for enforcement of any such payment, and such right
shall not be impaired without the consent of such holder. In addition, in the
case of a Junior Subordinated Debt Security issued to a Trust, if an Event of
Default has occurred and is continuing and such Event of Default is
attributable to the failure by the Company to pay the principal of or premium,
if any, or interest, if any, on such Junior Subordinated Debt Security, then a
holder of Trust Preferred Securities of such Trust may directly institute a
proceeding against the Company for payment.
MODIFICATION, WAIVERS AND MEETINGS
Each Indenture contains provisions permitting the Company and the Trustee
thereunder, with the consent of the holders of a majority in principal amount
of the outstanding Debt Securities of each series issued under such Indenture
and affected by a modification or amendment, to modify or amend any of the
provisions of such Indenture or of the Debt Securities of such series or the
rights of the holders of the Debt Securities of such series under such
Indenture, provided that no such modification or amendment shall, among other
things, (i) change the stated maturity of the principal of, or premium, if
any, or any installment of interest, if any, on any Debt Securities issued
under such Indenture or reduce the principal amount thereof or any premium
thereon, or reduce the rate of interest thereon, or reduce the amount of
principal of any Original Issue Discount Securities that would be due and
payable upon an acceleration of the maturity thereof, or change any place
where, or the Currency in which, any Debt Securities issued under such
Indenture are payable, or impair the holder's right to institute suit to
enforce the payment of any such Debt Securities on or after the stated
maturity thereof (as the same may be extended in accordance with the terms of
such Debt Securities), or make any change that adversely affects the right, if
any, to convert or exchange such Debt Securities for other securities in
accordance with their terms, or (ii) reduce the aforesaid percentage of Debt
Securities of any series issued under such Indenture, the consent of the
holders of which is required for any such modification or amendment or the
consent of whose holders is required for any waiver (of compliance with
certain provisions of such Indenture or certain defaults thereunder and their
consequences) or reduce the requirements for a quorum or voting at a meeting
of holders of such Debt Securities or (iii) solely in the case of a series of
Subordinated Debt Securities or Junior Subordinated Debt Securities, modify
any of the subordination provisions applicable thereto or the definition of
Senior Indebtedness applicable thereto in a manner adverse to the holders of
such Subordinated Debt Securities or Junior Subordinated Debt Securities, as
the case may be, without in each such case obtaining the consent of the holder
of each outstanding Debt Security issued under such Indenture so affected.
If a Trust or the Property Trustee of such Trust holds a series of Junior
Subordinated Debt Securities, no such amendment, modification or waiver which
requires approval of holders of a certain percentage in principal amount of
the outstanding Junior Subordinated Debt Securities of such series shall be
effective as to such series of Junior Subordinated Debt Securities, without
the approval of the holders of at least the same percentage of aggregate liq-
uidation amount of outstanding Trust Securities of such Trust.
Each Indenture also contains provisions permitting the Company and the
relevant Trustee, without the consent of the holders of any Debt Securities
issued thereunder, to modify or amend such Indenture in order to,
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among other things, (a) add to the Events of Default or the covenants of the
Company for the benefit of the holders of all or any series of Debt Securities
issued under such Indenture; (b) to add or change any provisions of such
Indenture to facilitate the issuance of Bearer Securities; (c) to establish
the form or terms of Debt Securities of any series and any related coupons;
(d) to cure any ambiguity or correct or supplement any provision therein which
may be defective or inconsistent with other provisions therein, or to make any
other provisions with respect to matters or questions arising under such
Indenture which shall not adversely affect the interests of the holders of any
series of Debt Securities issued thereunder in any material respect; or (e) to
amend or supplement any provision contained in such Indenture, provided that
such amendment or supplement does not apply to any outstanding Debt Securities
issued prior to the date of such amendment or supplement and entitled to the
benefits of such provision.
The holders of a majority in aggregate principal amount of the outstanding
Debt Securities of any series may waive compliance by the Company with certain
restrictive provisions of the relevant Indenture, including a restrictive
covenant set forth therein and such other restrictive covenants, if any, as
may be set forth in the applicable Prospectus Supplement. The Holders of a
majority in aggregate principal amount of the outstanding Debt Securities of
any series may, on behalf of all holders of Debt Securities of that series,
waive any past default under the applicable Indenture with respect to Debt
Securities of that series and its consequences, except a default in the
payment of the principal of, or premium, if any, or interest, if any, on any
Debt Securities of such series or in respect of a covenant or provision which
cannot be modified or amended without the consent of the holder of each
outstanding Debt Securities of such series affected.
Each Indenture contains provisions for convening meetings of the holders of
Debt Securities of a series issued thereunder. A meeting may be called at any
time by the relevant Trustee, and also, upon request, by the Company or the
holders of at least 10% in principal amount of the outstanding Debt Securities
of such series, in any such case upon notice given in accordance with the
provisions of such Indenture. Except for any consent which must be given by
the holder of each outstanding Debt Security affected thereby, as described
above, any resolution presented at a meeting or adjourned meeting duly
reconvened at which a quorum (as described below) is present may be adopted by
the affirmative vote of the holders of a majority in principal amount of the
outstanding Debt Securities of that series; provided, however, that any
resolution with respect to any request, demand, authorization, direction,
notice, consent, waiver or other action which may be made, given or taken by
the holders of a specified percentage, which is more or less than a majority,
in principal amount of the outstanding Debt Securities of a series may be
adopted at a meeting or adjourned meeting duly reconvened at which a quorum is
present by the affirmative vote of the holders of such specified percentage in
principal amount of the outstanding Debt Securities of that series. Any
resolution passed or decision taken at any meeting of holders of Debt
Securities of any series duly held in accordance with the relevant Indenture
will be binding on all holders of Debt Securities of that series and the
related coupons. The quorum at any meeting called to adopt a resolution, and
at any reconvened meeting, will be persons holding or representing a majority
in principal amount of the outstanding Debt Securities of a series, subject to
certain exceptions.
DISCHARGE, DEFEASANCE AND COVENANT DEFEASANCE
Upon the direction of the Company, either Indenture shall cease to be of
further effect with respect to any series of Debt Securities issued thereunder
specified by the Company (subject to the survival of certain provisions
thereof, including the obligation, if any, to pay Additional Amounts to the
extent described below) when (i) either (A) all outstanding Debt Securities of
such series and, in the case of Bearer Securities, all coupons appertaining
thereto, have been delivered to the relevant Trustee for cancellation (subject
to certain exceptions) or (B) all Debt Securities of such series and, if
applicable, any coupons appertaining thereto, have become due and payable or
will become due and payable at their stated maturity within one year or are to
be called for redemption within one year and the Company has deposited with
the Trustee, in trust, funds in U.S. dollars or in such Foreign Currency in
which such Debt Securities are payable in an amount sufficient to pay the
entire indebtedness on such Debt Securities in respect of principal (and
premium, if any) and interest, if any, (and, to the extent that (x) the Debt
Securities of such series provide for the payment of Additional Amounts upon
the occurrence of certain events of taxation, assessment or governmental
charge with respect to payments on such Debt Securities and (y) the amount
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of any such Additional Amounts is at the time of deposit reasonably
determinable by the Company (in the exercise of its sole discretion), any such
Additional Amounts) to the date of such deposit (if such Debt Securities have
become due and payable) or to the Maturity thereof, as the case may be, (ii)
the Company has paid all other sums payable under the Indenture with respect
to the Debt Securities of such series, and (iii) certain other conditions are
met. If the Debt Securities of any such series provide for the payment of
Additional Amounts, the Company will remain obligated, following such deposit,
to pay Additional Amounts on such Debt Securities to the extent that the
amount thereof exceeds the amount deposited in respect of such Additional
Amounts as aforesaid.
Unless otherwise provided in the applicable Prospectus Supplement, the
Company may elect with respect to any series of Debt Securities either (a) to
defease and be discharged from any and all obligations with respect to such
Debt Securities (except for, among other things, the obligation to pay
Additional Amounts, if any, upon the occurrence of certain events of taxation,
assessment or governmental charge with respect to payments on such Debt
Securities to the extent that the amount thereof exceeds the amount deposited
in respect of such Additional Amounts as provided below, and the obligations
to register the transfer or exchange of such Debt Securities, to replace
temporary or mutilated, destroyed, lost or stolen Debt Securities, to maintain
an office or agency in respect of such Debt Securities, to hold moneys for
payment in trust, and, if applicable, to exchange or convert such Debt
Securities into other securities in accordance with their terms)
("defeasance"), or (b) to be released from its obligations with respect to
such Debt Securities under a restrictive covenant set forth in the relevant
Indenture and such other restrictive covenants, if any, as may be set forth in
the applicable Prospectus Supplement, and any omission to comply with such
obligations shall not constitute a default or an Event of Default with respect
to the Debt Securities of such series ("covenant defeasance"), in either case
upon the irrevocable deposit with the relevant Trustee (or other qualifying
trustee), in trust for such purpose, of an amount, in U.S. dollars or in such
Foreign Currency in which such Debt Securities are payable at Stated Maturity
or, if applicable, upon redemption, and/or Government Obligations (as defined
in the relevant Indenture) which through the payment of principal and interest
in accordance with their terms will provide money, in an amount sufficient to
pay the principal of and any premium and any interest on (and, to the extent
that (x) the Debt Securities of such series provide for the payment of
Additional Amounts and (y) the amount of any such Additional Amounts is at the
time of deposit reasonably determinable by the Company (in the exercise of its
sole discretion), any such Additional Amounts with respect to) such Debt
Securities, and any mandatory sinking fund or analogous payments thereon, on
the scheduled due dates therefor or the applicable redemption date, as the
case may be.
Unless otherwise stated in the applicable Prospectus Supplement, such
defeasance or covenant defeasance shall only be effective if, among other
things, (i) it shall not result in a breach or violation of, or constitute a
default under, the relevant Indenture or any other material agreement or
instrument to which the Company or any Major Bank Subsidiary is a party or is
bound, (ii) the Company has delivered to the relevant Trustee an opinion of
counsel (as specified in the relevant Indenture) to the effect that the
holders of such Debt Securities will not recognize income, gain or loss for
federal income tax purposes as a result of such defeasance or covenant
defeasance, as the case may be, and will be subject to federal income tax on
the same amounts, in the same manner and at the same times as would have been
the case if such defeasance or covenant defeasance had not occurred, (iii) if
the cash and Government Obligations deposited are sufficient to pay the
outstanding Debt Securities of such series provided such Debt Securities are
redeemed on a particular redemption date, the Company shall have given the
applicable Trustee irrevocable instructions to redeem such Debt Securities on
such date, and (iv) in the case of Subordinated Debt Securities it is effected
during the last year prior to the final stated maturity date of such Debt
Securities. It shall also be a condition to the effectiveness of such
defeasance or covenant defeasance that no Event of Default or event which with
notice or lapse of time or both would become an Event of Default with respect
to Debt Securities of such series shall have occurred and been continuing on
the date of such deposit into trust and, solely in the case of defeasance, no
Event of Default described in clause (v) of the first paragraph under "--
Events of Default; Limited Right of Acceleration of Subordinated Debt
Securities" above shall have occurred and be continuing during the period
ending on the 91st day after the date of, such deposit into trust.
Unless otherwise provided in the applicable Prospectus Supplement, if after
the Company has deposited funds and/or Government Obligations to effect
defeasance or covenant defeasance with respect to Debt Securities
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of any series, (a) the holder of a Debt Security of such series is entitled
to, and does, elect pursuant to the applicable Indenture or the terms of such
Debt Security to receive payment in a Currency other than that in which such
deposit has been made in respect of such Debt Security, or (b) a Conversion
Event (as defined below) occurs in respect of the Foreign Currency in which
such deposit has been made, the indebtedness represented by such Debt Security
shall be deemed to have been, and will be, fully discharged and satisfied
through the payment of the principal of (and premium, if any) and interest, if
any, on such Debt Security as such Debt Security becomes due out of the
proceeds yielded by converting the amount so deposited in respect of such Debt
Security into the Currency in which such Debt Security becomes payable as a
result of such election or such Conversion Event based on (x) in the case of
payments made pursuant to clause (a) above, the applicable market exchange
rate for such Foreign Currency in effect on the second business day prior to
such payment date, or (y) with respect to a Conversion Event, the applicable
market exchange rate for such Foreign Currency in effect (as nearly as
feasible) at the time of the Conversion Event.
"Conversion Event" means the cessation of use of (i) a Foreign Currency both
by the government of the country or the confederation which issued such
Foreign Currency and for the settlement of transactions by a central bank or
other public institutions of or within the international banking community,
(ii) the ECU both within the European Monetary System and for the settlement
of transactions by public institutions of or within the European Union or
(iii) any currency unit or composite currency other than the ECU for the
purposes for which it was established.
In the event the Company effects covenant defeasance with respect to any
Debt Securities and such Debt Securities are declared due and payable because
of the occurrence of any Event of Default other than an Event of Default with
respect to a covenant as to which there has been covenant defeasance, the
amount of monies and/or Government Obligations deposited with the applicable
Trustee to effect such covenant defeasance may not be sufficient to pay
amounts due on such Debt Securities at the time of any acceleration resulting
from such Event of Default. However, the Company would remain liable to make
payment of such amounts due at the time of acceleration.
The applicable Prospectus Supplement may further describe the provisions, if
any, permitting or restricting such defeasance or covenant defeasance with
respect to the Debt Securities of a particular series.
GOVERNING LAW
The Indentures and the Debt Securities will be governed by, and construed in
accordance with, the laws of the State of New York.
REGARDING THE TRUSTEES
The Trust Indenture Act contains limitations on the rights of a trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases or to realize on certain property received by it in respect of
any such claims, as security or otherwise. Each Trustee is permitted to engage
in other transactions with the Company and its subsidiaries from time to time,
provided that if such Trustee acquires any conflicting interest it must
eliminate such conflict upon the occurrence of an Event of Default under the
relevant Indenture, or else resign.
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DESCRIPTION OF PREFERRED STOCK
The Company may issue shares of its Preferred Stock, in one or more series,
either separately, or together with, or upon the conversion of or in exchange
for, other Securities. The summary of certain provisions of the Preferred
Stock set forth below and the summary of certain terms of a particular series
of Preferred Stock set forth in the applicable Prospectus Supplement do not
purport to be complete and are subject to and qualified in their entirety by
reference to all of the provisions of the Company's restated certificate of
incorporation, as amended (the "Amended Certificate of Incorporation"), and
the Company's by-laws (the "By-laws"), which have been filed or incorporated
by reference as exhibits to the Registration Statement, and the form of
certificate of designations relating to such series of Preferred Stock which
will be filed as an exhibit to or incorporated by reference in the
Registration Statement, all of which are incorporated herein by reference.
The following description of Preferred Stock sets forth certain general
terms and provisions of the series of Preferred Stock to which any Prospectus
Supplement may relate. Certain other terms of any particular series of
Preferred Stock, including Preferred Stock to be represented by Depositary
Shares, will be described in the applicable Prospectus Supplement. To the
extent that any particular terms of any Preferred Stock described in a
Prospectus Supplement differ from any of the terms described herein, then such
terms described herein shall be deemed to have been superseded by such
Prospectus Supplement.
GENERAL
Under the Amended Certificate of Incorporation, the Company is authorized to
issue up to 7,000,000 shares of Preferred Stock, par value $.01 per share,
which may be issued from time to time in one or more series. Subject to
limitations prescribed by Delaware law and the Amended Certificate of
Incorporation, the Board of Directors is authorized to fix the number of
shares constituting each series of Preferred Stock and the rights and
preferences thereof.
Reference is made to the applicable Prospectus Supplement relating to the
series of Preferred Stock offered thereby (the "Offered Preferred Stock") for
specific terms, including (where applicable): (1) the title of such Offered
Preferred Stock; (2) the number of shares of such Offered Preferred Stock
offered, the liquidation preference per share and the initial public offering
price of such Offered Preferred Stock; (3) the dividend rate or method of
calculation thereof and the dividend payment dates or periods; (4) the date
from which dividends on such Offered Preferred Stock shall accrue and whether
dividends on such Offered Preferred Stock will be cumulative; (5) the
procedures for any auction or remarketing, if any, of such Offered Preferred
Stock; (6) the provisions for a sinking fund, if any, for such Offered
Preferred Stock; (7) the provisions for redemption or repurchase, if
applicable, of such Offered Preferred Stock; (8) any listing of such Offered
Preferred Stock on any securities exchange; (9) the terms and conditions, if
any, upon which such Offered Preferred Stock will be convertible into or
exchangeable for other Securities; (10) whether interests in such Offered
Preferred Stock will be represented by Depositary Shares; (11) the preferences
of such Offered Preferred Stock as to dividends and upon liquidation,
dissolution or winding up of the Company; and (12) any other specific terms of
such Offered Preferred Stock.
RANKING
Unless otherwise specified in the applicable Prospectus Supplement, any
series of Offered Preferred Stock offered thereby will rank, with respect to
both the payment of dividends and the distribution of assets upon liquidation,
dissolution or winding up of the Company, (i) senior to the Common Stock and
(ii) on a parity with shares of any other outstanding series of Offered
Preferred Stock.
DIVIDEND, REPURCHASE AND REDEMPTION RESTRICTIONS
Certain of the Company's debt instruments contain restrictive covenants that
could limit the amount of dividends payable by the Company or the redemption
or repurchase of capital stock by the Company. In the
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event of a deterioration in the financial condition or results of operations
of the Company, such covenants could limit or prohibit the payment of
dividends on, or the repurchase or redemption of, Offered Preferred Stock. In
addition, the Company is a holding company substantially all of whose
consolidated assets are held by its subsidiaries, and the cash flow of the
Company and the consequent ability to pay dividends on and to redeem or
repurchase its securities, including Offered Preferred Stock, are dependent
upon the results of operations of such subsidiaries and the distribution of
funds by such subsidiaries to the Company. In addition, if the Company were to
become a bank holding company, various regulatory restrictions would limit
directly or indirectly the amount of dividends the Company could pay as well
as the repurchase or redemption of its capital stock. See "The Company--
Pending Structural Changes--Dividends," "The Company--Pending Structural
Changes-- Repurchase or Redemption of Equity Securities" and "Description of
Debt Securities--Ranking of Debt Securities; Holding Company Structure."
DIVIDENDS
Subject to the preferential rights of any capital stock of the Company
ranking prior to any series of the Offered Preferred Stock as to dividends,
holders of shares of such Offered Preferred Stock shall be entitled to
receive, when, as and if declared by the Board of Directors of the Company,
out of assets of the Company legally available therefor, dividends at such
rates and on such dates as will be set forth in, or as are determined by the
method described in, the applicable Prospectus Supplement. Such rates may be
fixed or variable or both. If variable, the formula used for determining the
dividend rate for each dividend period will be specified in the applicable
Prospectus Supplement. Each such dividend shall be payable to holders of
record as they appear on the stock transfer books of the Company on such
record dates as shall be fixed by the Board of Directors of the Company.
Dividends may be paid in the form of cash, Preferred Stock (of the same or a
different series), or other securities or property, in each case as specified
in the applicable Prospectus Supplement.
Dividends on any series of the Offered Preferred Stock may be cumulative or
non-cumulative, as provided in the applicable Prospectus Supplement.
Dividends, if cumulative, will be cumulative from and after the date set forth
in the applicable Prospectus Supplement. If the Board of Directors of the
Company fails to declare a dividend payable on a dividend payment date on any
series of the Offered Preferred Stock for which dividends are non-cumulative,
then the holders of such series of the Offered Preferred Stock will have no
right to receive a dividend in respect of the dividend period ending on such
dividend payment date, and the Company will have no obligation to pay the
dividend accrued for such period, whether or not dividends on such series are
declared payable on any future dividend payment date.
No full dividends will be declared or paid or set aside for payment on any
Preferred Stock of the Company ranking, as to dividends, on a parity with or
junior to any outstanding series of Offered Preferred Stock for any period
unless full dividends on such series of Offered Preferred Stock for all past
dividend periods (including accumulated dividends on any such series of
Offered Preferred Stock on which dividends are cumulative) have been or
contemporaneously are declared and paid or declared and a sum sufficient for
the payment thereof set aside for payment. When dividends are not paid in full
on any series of Offered Preferred Stock and any other Preferred Stock ranking
on a parity as to dividends with such series of Offered Preferred Stock, all
dividends declared or paid upon shares of Offered Preferred Stock of such
series and any other Preferred Stock ranking on a parity as to dividends with
the Offered Preferred Stock of such series shall be declared and paid pro rata
so that the amount of dividends declared and paid per share on the Offered
Preferred Stock of such series and such other Preferred Stock shall in all
cases bear to each other the same ratio that accrued dividends per share
(which in the case of non-cumulative Preferred Stock shall not include any
accumulation in respect of unpaid dividends for prior dividend periods) on
shares of such series of Offered Preferred Stock and such other Preferred
Stock bear to each other. Except as provided in the preceding sentence, unless
full dividends on all outstanding shares of any series of Offered Preferred
Stock for all past dividend periods (including accumulated dividends on any
such series on which dividends are cumulative) have been or contemporaneously
are declared and paid or declared and a sum sufficient for the payment thereof
set aside for payment, no dividends (other than dividends or distributions
paid in shares of, or options, warrants or rights to subscribe for or purchase
shares of, Common Stock or any other stock of the
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Company ranking junior to the Offered Preferred Stock of such series as to
dividends and as to distribution of assets upon liquidation, dissolution or
winding up of the Company) shall be declared or paid or set aside for payment
or any other distribution declared or made upon the Common Stock or any other
stock of the Company ranking junior to or on a parity with the Offered
Preferred Stock of such series as to dividends or distribution of assets upon
liquidation, dissolution or winding up of the Company, nor may any Common
Stock or any other stock of the Company ranking junior to or on a parity with
the Offered Preferred Stock of such series as to dividends or distribution of
assets upon liquidation, dissolution or winding up of the Company be redeemed,
purchased or otherwise acquired for any consideration (and no moneys shall be
paid to or made available for a sinking fund for the redemption of any shares
of any such junior of parity stock) by the Company (except by conversion into
or exchange for stock of the Company ranking junior to the Offered Preferred
Stock of such series as to dividends and as to distribution of assets upon
liquidation, dissolution or winding up of the Company).
Holders of shares of any series of Offered Preferred Stock shall not be
entitled to any dividends, whether payable in cash, securities or other
property, in excess of full cumulative (if applicable) dividends on such
series. No interest, or sum of money in lieu of interest, shall be payable in
respect of any dividend or payments which may be in arrears.
The Company may be prohibited from paying dividends on Offered Preferred
Stock of any series as a result of certain dividend restrictions. See "--
Dividend, Repurchase and Redemption Restrictions" above.
REDEMPTION AND REPURCHASE
The shares of Offered Preferred Stock of any series may be redeemable at the
option of the Company, may be subject to mandatory redemption pursuant to a
sinking fund or otherwise, or may be subject to repurchase by the Company at
the option of the holders, in each case upon the terms, at the times and at
the prices set forth in the applicable Prospectus Supplement. Offered
Preferred Stock redeemed by the Company will be restored to the status of
authorized but unissued shares of Preferred Stock.
The Prospectus Supplement relating to a series of Offered Preferred Stock
which is subject to mandatory redemption will specify the number of shares of
such series which shall be redeemed by the Company in each year commencing
after a date to be specified, at a redemption price per share to be specified,
together with an amount equal to all accrued and unpaid dividends thereon
(including accumulated dividends on any such series on which dividends are
cumulative) to the date fixed for redemption. The redemption price may be
payable in cash, securities or other property, as specified in the Prospectus
Supplement relating to such series of Offered Preferred Stock.
If fewer than all of the outstanding shares of any series of Offered
Preferred Stock are to be redeemed, the shares to be redeemed will be
determined pro rata, by lot or by any other method deemed equitable by the
Company.
In the event that full cumulative dividends on any series of Offered
Preferred Stock (including accumulated dividends on any such series on which
dividends are cumulative) have not been declared and paid or declared and a
sum sufficient for the payment thereof set apart for payment, the Company
shall not redeem, repurchase or otherwise acquire any shares of such series of
Offered Preferred Stock except by conversion into or exchange for capital
stock of the Company ranking junior to the Offered Preferred Stock of such
series as to dividends and as to distributions upon liquidation, dissolution
or winding up of the Company, or except pursuant to a purchase or exchange
offer made on the same terms to all holders of such series of Offered
Preferred Stock.
Notice of redemption shall be given by mailing the same to each record
holder of the shares to be redeemed, not less than 30 nor more than 60 days
prior to the date fixed for redemption thereof, to the respective addresses of
such holders as the same shall appear in the stock registry of the Company.
Each such notice shall state: (i) the redemption date; (ii) the number of
shares and series of Offered Preferred Stock to be redeemed; (iii) the
redemption price; (iv) the place or places where certificates for such Offered
Preferred Stock are to be
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surrendered for payment of the redemption price; (v) that dividends on the
shares to be redeemed will cease to accrue on such redemption date; and (vi)
the date upon which the holder's conversion rights as to such shares, if any,
shall terminate. If fewer than all shares of any series of the Preferred Stock
held by any holder are to be redeemed, the notice mailed to such holder shall
also specify the number of shares to be redeemed from such holder.
If a notice of redemption has been given, from and after the redemption date
for the shares of Offered Preferred Stock called for redemption (unless the
Company shall default in providing money for the payment of the redemption
price of the shares so called for redemption plus, if applicable, accrued and
unpaid dividends), dividends on the shares of Offered Preferred Stock so
called for redemption shall cease to accrue and such shares shall no longer be
deemed to be outstanding, and all rights of the holders thereof as
shareholders of the Company shall cease, except the right to receive the
redemption price plus, if applicable, accrued and unpaid dividends upon
surrender of the certificates representing the shares to be so redeemed
(properly endorsed or assigned for transfer, if the Company shall so require)
in accordance with such notice. If fewer than all of the shares represented by
any such certificates are redeemed, a new certificate shall be issued
representing the unredeemed shares.
The Company may be prohibited from redeeming or repurchasing Offered
Preferred Stock of any series as the result of certain dividend restrictions.
See "--Dividend, Repurchase and Redemption Restrictions" above.
LIQUIDATION PREFERENCE
Upon any voluntary or involuntary liquidation, dissolution or winding up of
the Company, and after payment of all amounts due upon liquidation,
dissolution or winding up to holders of any capital stock of the Company
ranking prior to the Offered Preferred Stock of any series as to the
distribution of assets upon liquidation, dissolution or winding up, and
subject to the rights of holders of any capital stock of the Company ranking
on a parity with the shares of Offered Preferred Stock of such series as to
distribution of assets upon liquidation, dissolution or winding up of the
Company, the holders of shares of Offered Preferred Stock of such series shall
be entitled to receive, out of assets of the Company legally available
therefor and before any distribution or payment shall be made to the holders
of any Common Stock or any other class or series of capital stock of the
Company ranking junior to the Offered Preferred Stock of such series as to
distribution of assets upon liquidation, dissolution or winding up of the
Company, liquidating distributions in the amount of the liquidation preference
per share set forth in the applicable Prospectus Supplement, plus accrued and
unpaid dividends (including accumulated dividends if dividends on such series
of Offered Preferred Stock are cumulative). After payment of the full amount
of the liquidating distributions to which they are entitled, the holders of
Offered Preferred Stock of such series will have no right or claim to any of
the remaining assets of the Company. In the event that, upon any such
voluntary or involuntary liquidation, dissolution or winding up, the legally
available assets of the Company are insufficient to pay the amount of the
liquidating distributions on all outstanding shares of Offered Preferred Stock
of any series and the corresponding amounts payable on all shares of other
capital stock of the Company ranking on a parity with the Offered Preferred
Stock of such series in the distribution of assets upon liquidation,
dissolution or winding up, the holders of the Offered Preferred Stock of such
series and of such other capital stock shall share ratably in any such
distribution of assets in proportion to the full liquidating distributions to
which they would otherwise be respectively entitled.
For such purposes, the consolidation or merger of the Company with or into
any other person, or the sale, lease, transfer or conveyance of all or
substantially all or any portion of the property or business of the Company,
shall not be deemed to constitute a liquidation, dissolution or winding up of
the Company.
VOTING RIGHTS
Holders of Offered Preferred Stock will not have any voting rights, except
as set forth below or as otherwise from time to time required by law or as
indicated in the applicable Prospectus Supplement. In the event that the
Company issues a series of Offered Preferred Stock with voting rights or the
Offered Preferred Stock of any
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series is entitled pursuant to applicable law to vote on any matter, then,
unless otherwise specified in the Prospectus Supplement relating to such
series, each share of such series will be entitled to one vote on matters on
which holders of such shares are entitled to vote. However, as more fully
described under "Description of Depositary Shares," if the Company elects to
provide for the issuance of Depositary Shares representing fractional
interests in shares of any such series of Offered Preferred Stock, the holder
of any such Depositary Share will, in effect and subject to certain
limitations and conditions, be entitled to such fraction of a vote, rather
than a full vote. In the case of any series of Offered Preferred Stock having
one vote per share on matters on which holders of such series are entitled to
vote, the voting power of such series on matters on which holders of such
series and holders of any other series of Preferred Stock or other capital
stock of the Company are entitled to vote as a single class will depend on the
number of shares in such series, not the aggregate stated value, liquidation
preference or initial offering price of the shares of such series.
So long as any shares of Offered Preferred Stock of any series remain
outstanding, and except as otherwise set forth in the applicable Prospectus
Supplement or except as otherwise required by applicable law, the Company will
not, without the affirmative vote or consent of the holders of at least a
majority of the shares of such series of Offered Preferred Stock outstanding
at the time (voting separately as a class), given in person or by proxy,
either in writing or at a meeting, (i) authorize, create or issue, or increase
the authorized or issued amount of, any class or series of capital stock
ranking prior to such series of Offered Preferred Stock with respect to
payment of dividends or the distribution of assets upon liquidation,
dissolution or winding up or reclassify any authorized capital stock of the
Company into any such shares, or create, authorize or issue any obligation or
security convertible into, exercisable or exchangeable for or evidencing the
right to purchase, any such shares; or (ii) amend, alter or repeal the
provisions of the Amended Certificate of Incorporation (including the
certificate of designations for such series of Offered Preferred Stock),
whether by merger, consolidation or otherwise, so as to materially and
adversely affect any right, preference, privilege or voting power of such
series of Offered Preferred Stock; provided, however, that (a) any increase in
the amount of the authorized Preferred Stock or authorized Common Stock or (b)
the creation or issuance of any other class or series of capital stock or any
other series of Preferred Stock, or any increase in the number of authorized
shares of any other class or series of capital stock or any other series of
Preferred Stock ranking, in each case described in this clause (b), on a
parity with or junior to the Preferred Stock of such series with respect to
payment of dividends and the distribution of assets upon liquidation,
dissolution or winding up, shall not be deemed to materially and adversely
affect such rights, preferences or privileges.
None of the foregoing voting provisions will apply if, at or prior to the
time when the act with respect to which such vote would otherwise be required
shall be effected or occur, all outstanding shares of the relevant series of
Offered Preferred Stock shall have been redeemed or called for redemption upon
proper notice and sufficient funds shall have been deposited in trust to
effect such redemption.
Under Delaware law, notwithstanding anything to the contrary set forth
above, holders of all outstanding shares of Preferred Stock will be entitled
to vote as a class upon a proposed amendment to the Amended Certificate of
Incorporation if the amendment would increase or decrease the aggregate number
of authorized shares of such class, increase or decrease the par value of the
shares of such class, or alter or change the powers, preferences or rights of
the shares of such class so as to affect them adversely. However, if any such
proposed amendment would change the powers, preferences or rights of one or
more series of Preferred Stock so as to affect them adversely, but shall not
affect all series of Preferred Stock, then only the shares of the series so
affected shall be considered a separate class for such purposes. Any such
amendment requires the vote of a majority of the shares entitled to vote
thereon, voting as a class.
CONVERSION AND EXCHANGE RIGHTS
The terms, if any, upon which shares of any series of Offered Preferred
Stock are convertible into or exchangeable for the Common Stock, another
series of Preferred Stock or other Securities will be set forth in the
applicable Prospectus Supplement relating thereto. Such terms may include
provisions for conversion or exchange, either mandatory, at the option of the
holders or at the option of the Company.
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TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the shares of any series of Offered
Preferred Stock will be named in the applicable Prospectus Supplement.
DESCRIPTION OF DEPOSITARY SHARES
The Company may offer Depositary Shares (either separately or together with
other Securities) representing fractional interests in shares of Preferred
Stock of any series. In connection with the issuance of any Depositary Shares,
the Company will enter into a deposit agreement (a "Deposit Agreement") with a
bank or trust company, as depositary (the "Preferred Stock Depositary"), which
will be named in the applicable Prospectus Supplement. Depositary Shares will
be evidenced by depositary receipts (the "Depositary Receipts") issued
pursuant to the related Deposit Agreement. The summary of certain provisions
of the Depositary Shares and the Deposit Agreement set forth below and the
summary of certain terms of a particular issue of Depositary Shares and the
related Deposit Agreement set forth in the applicable Prospectus Supplement do
not purport to be complete and are subject to and qualified in their entirety
by reference to all the provisions of the form of Deposit Agreement, together
with the form of related Depositary Receipt, which has been or will be filed
as an exhibit to or incorporated by reference in the Registration Statement,
all of which are incorporated herein by reference.
The following description of Depositary Shares sets forth certain general
terms and provisions of the Depositary Shares and the related Deposit
Agreement to which any Prospectus Supplement may relate. Certain other terms
of any such Depositary Shares and the related Deposit Agreement will be
described in the applicable Prospectus Supplement. To the extent that any
particular terms of the Depositary Shares or the related Deposit Agreement
described in a Prospectus Supplement differ from any of the terms described
herein, then such terms described herein shall be deemed to have been
superseded by such Prospectus Supplement.
GENERAL
The Company may provide for the issuance by the Preferred Stock Depositary
of Depositary Receipts evidencing the related Depositary Shares, each of which
Depositary Shares in turn will represent a fractional interest (which will be
specified in the applicable Prospectus Supplement) in one share of a series of
Preferred Stock. Shares of Preferred Stock of any series represented by
Depositary Shares will be deposited under a separate Deposit Agreement.
Subject to the terms of the Deposit Agreement, each owner of a Depositary
Receipt will be entitled, in proportion to the fraction of a share of
Preferred Stock represented by the related Depositary Share, to all the
rights, preferences and privileges of, and will be subject to all of the
limitations and restrictions on, the Preferred Stock represented thereby
(including, if applicable and subject to certain matters discussed below,
dividend, voting, conversion, exchange, redemption and liquidation rights).
Depositary Shares may be issued in respect of shares of the Preferred Stock
of any series. Immediately following the issuance of any such shares of
Preferred Stock by the Company, the Company will deposit such shares of
Preferred Stock with the relevant Preferred Stock Depositary and will cause
the Preferred Stock Depositary to issue, on behalf of the Company, the related
Depositary Receipts.
Reference is made to the applicable Prospectus Supplement relating to the
Depositary Shares offered thereby for specific terms, including (where
applicable): (1) the terms of the series of Preferred Stock deposited by the
Company under the related Deposit Agreement; (2) the number of such Depositary
Shares and the fraction of one share of such Preferred Stock represented by
one such Depositary Share; (3) whether such Depositary Shares will be listed
on any securities exchange; (4) whether such Depositary Shares will be sold
with any other Securities and, if so, the amount and terms thereof; and (5)
any other specific terms of such Depositary Shares and the related Deposit
Agreement.
Depositary Receipts may be surrendered for transfer or exchange for new
Depositary Receipts of different authorized denominations at any office or
agency of the relevant Preferred Stock Depositary maintained for such
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purpose, subject to the terms of the related Deposit Agreement. Unless
otherwise specified in the applicable Prospectus Supplement, Depositary
Receipts will be issued in denominations evidencing any whole number of
Depositary Shares. No service charge will be made for any permitted transfer
or exchange of Depositary Receipts, but the Company or the Preferred Stock
Depositary may require payment of any tax or other governmental charge payable
in connection therewith.
DIVIDENDS AND OTHER DISTRIBUTIONS
The Preferred Stock Depositary will distribute all cash dividends or other
cash distributions received in respect of the related Preferred Stock to the
record holders of Depositary Receipts in proportion, insofar as possible, to
the number of Depositary Shares evidenced by the Depositary Receipts owned by
such holders on the relevant record date. The Preferred Stock Depositary will
distribute only such amount, however, as can be distributed without
attributing to any holder of Depositary Receipts a fraction of one cent, and
any balance not so distributed will be added to and treated as part of the
next sum, if any, received by the Preferred Stock Depositary for distribution
to the record holders of Depositary Receipts.
In the event of a distribution other than in cash, the Preferred Stock
Depositary will distribute property received by it to the record holders of
Depositary Receipts entitled thereto in proportion, insofar as possible, to
the number of Depositary Shares evidenced by the Depositary Receipts owned by
such holders on the relevant record date, unless the Preferred Stock
Depositary determines that it is not feasible to make such distribution, in
which case the Preferred Stock Depositary may, with the approval of the
Company, adopt such method as it deems equitable and practicable for the
purpose of effecting such distribution, including sale (public or private) of
such property and distribution of the net proceeds from such sale to such
holders.
The Deposit Agreement will also contain provisions relating to the manner in
which any subscription or similar rights offered by the Company to holders of
the related series of Preferred Stock will be made available to holders of
Depositary Receipts.
The amount distributed in any of the foregoing cases will be reduced by any
amount required to be withheld by the Company or the Preferred Stock
Depositary on the account of taxes.
WITHDRAWAL OF PREFERRED STOCK
Upon surrender of the Depositary Receipts at an office or agency of the
Preferred Stock Depositary maintained for such purpose (unless the related
shares of Preferred Stock have previously been called for redemption), the
holder thereof will be entitled to delivery, at such office or agency, to or
upon such holder's order, of the number of whole shares of the related series
of Preferred Stock and any money or other property represented by the
Depositary Shares evidenced by such Depositary Receipts. Shares of Preferred
Stock so withdrawn, however, may not be redeposited. If the Depositary
Receipts delivered by the holder evidence a number of Depositary Shares in
excess of the number of whole shares of Preferred Stock to be withdrawn, the
Preferred Stock Depositary will deliver to such holder at the same time a new
Depositary Receipt evidencing such excess number of Depositary Shares.
REDEMPTION AND REPURCHASE OF PREFERRED STOCK
If a series of Preferred Stock represented by Depositary Shares is subject
to redemption at the option of the Company, then, whenever the Company redeems
shares of Preferred Stock of such series held by the Preferred Stock
Depositary, the Preferred Stock Depositary will redeem as of the same
redemption date the number of Depositary Shares representing the shares of the
Preferred Stock so redeemed, provided the Company shall have paid in full to
the Preferred Stock Depositary the redemption price of the Preferred Stock to
be redeemed plus any other amounts or property payable with respect to the
Preferred Stock to be redeemed. The redemption price per Depositary Share will
be equal to the redemption price and any other amounts or property per share
payable with respect to the Preferred Stock multiplied by the fraction of a
share of Preferred Stock represented by one such
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Depositary Share. If less than all of the Depositary Shares are to be
redeemed, the Depositary Shares to be redeemed will be selected by the
Preferred Stock Depositary by lot or pro rata or other equitable method, in
each case as may be determined by the Company. If the Depositary Shares
evidenced by a Depositary Receipt are to be redeemed in part only, one or more
new Depositary Receipts will be issued for any Depositary Shares not so
redeemed.
After the date fixed for redemption, the Depositary Shares so called for
redemption will no longer be deemed to be outstanding and all rights of the
holders of the Depositary Receipts evidencing the Depositary Shares so called
for redemption will cease, except the right to receive any monies payable upon
such redemption and any money or other property to which the holders of such
Depositary Receipts were entitled upon such redemption upon surrender of such
Depositary Receipts to the Preferred Stock Depositary.
Depositary Shares, as such, are not subject to repurchase by the Company at
the option of the holders. Nevertheless, if the Preferred Stock represented by
Depositary Shares is subject to repurchase of the option of the holders, the
related Depositary Receipts may be surrendered by the holders thereof to the
Preferred Stock Depositary with written instructions to the Preferred Stock
Depositary to instruct the Company to repurchase the Preferred Stock
represented by the Depositary Shares evidenced by such Depositary Receipts at
the applicable repurchase price specified in the related Prospectus
Supplement. The Company, upon receipt of such instructions and subject to the
Company having funds legally available therefor, will repurchase the requisite
whole number of shares of such Preferred Stock from the Preferred Stock
Depositary, who in turn will repurchase such Depositary Receipts.
Notwithstanding the foregoing, holders shall only be entitled to request the
repurchase of Depositary Shares representing one or more whole shares of the
related Preferred Stock. The repurchase price per Depositary Share will be
equal to the repurchase price and any other amounts per share payable with
respect to the Preferred Stock multiplied by the fraction of a share of
Preferred Stock represented by one Depositary Share. If the Depositary Shares
evidenced by a Depositary Receipt are to be repurchased in part only, one or
more new Depositary Receipts will be issued for any Depositary Shares not to
be repurchased.
VOTING THE PREFERRED STOCK
Upon receipt of notice of any meeting at which the holders of the Preferred
Stock of any series represented by Depositary Shares are entitled to vote, the
relevant Preferred Stock Depositary will mail the information contained in
such notice of meeting to the record holders of the related Depositary
Receipts. Each record holder of Depositary Receipts evidencing Depositary
Shares on the record date (which will be the same date as the record date for
the Preferred Stock) will be entitled to instruct the Preferred Stock
Depositary as to the exercise of the voting rights pertaining to the amount of
Preferred Stock represented by such holder's Depositary Shares. The Preferred
Stock Depositary will endeavor, insofar as practicable, to vote the number of
shares of Preferred Stock represented by such Depositary Shares in accordance
with such instructions, and the Company will agree to take all reasonable
action which may be deemed necessary by the Preferred Stock Depositary in
order to enable the Preferred Stock Depositary to do so. The Preferred Stock
Depositary will abstain from voting shares of Preferred Stock to the extent it
does not receive specific instructions from the holders of Depositary Receipts
evidencing the Depositary Shares representing such Preferred Stock.
CONVERSION AND EXCHANGE OF PREFERRED STOCK
If the Preferred Stock represented by Depositary Shares is exchangeable at
the option of the Company for other Securities, then, whenever the Company
exercises its option to exchange all or a portion of such shares of Preferred
Stock held by the Preferred Stock Depositary, the Preferred Stock Depositary
will exchange as of the same exchange date a number of such Depositary Shares
representing the shares of the Preferred Stock so exchanged, provided the
Company shall have issued and deposited with the Preferred Stock Depositary
the Securities for which such shares of Preferred Stock are to be exchanged.
The exchange rate per Depositary Share shall be equal to the exchange rate per
share of Preferred Stock multiplied by the fraction of a share of Preferred
Stock represented by one Depositary Share. If less than all of the Depositary
Shares are to be exchanged, the Depositary Shares to be exchanged will be
selected by the Preferred Stock Depositary by lot or pro rata or other
equitable method, in each case as may be determined by the Company. If the
Depositary Shares evidenced by a
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Depositary Receipt are to be exchanged in part only, a new Depositary Receipt
or Receipts will be issued for any Depositary Shares not to be exchanged.
Depositary Shares, as such, are not convertible or exchangeable at the
option of the holders into other Securities or property. Nevertheless, if the
Preferred Stock represented by Depositary Shares is convertible into or
exchangeable for other Securities at the option of the holders, the related
Depositary Receipts may be surrendered by holders thereof to the Preferred
Stock Depositary with written instructions to the Preferred Stock Depositary
to instruct the Company to cause conversion or exchange, as the case may be,
of the Preferred Stock represented by the Depositary Shares evidenced by such
Depositary Receipts into a whole number of shares of Common Stock or Preferred
Stock, a whole number of Common Stock Warrants, or Debt Securities in
authorized denominations, as specified in the related Prospectus Supplement.
The Company, upon receipt of such instructions and any amounts payable in
respect thereof, will cause the conversion or exchange, as the case may be,
and will deliver to the holders such number of whole shares of Common Stock or
Preferred Stock, a whole number of Common Stock Warrants, or a principal
amount of Debt Securities in authorized denominations (and cash in lieu of any
fractional Security). The exchange or conversion rate per Depositary Share
shall be equal to the exchange or conversion rate per share of Preferred Stock
multiplied by the fraction of a share of Preferred Stock represented by one
Depositary Share. If the Depositary Shares evidenced by a Depositary Receipt
are to be converted or exchanged in part only, a new Depositary Receipt or
Receipts will be issued for any Depositary Shares not to be converted or
exchanged.
AMENDMENT AND TERMINATION OF THE DEPOSIT AGREEMENT
The Depositary Receipts evidencing Depositary Shares and any provision of
the related Deposit Agreement may at any time be amended by agreement between
the Company and the Preferred Stock Depositary. However, any amendment that
materially and adversely alters the rights of the holders of Depositary
Receipts issued under any Deposit Agreement will not be effective unless such
amendment has been approved by the holders of at least a majority of such
Depositary Receipts then outstanding (or such greater proportion as may be
required by the rules of any securities exchange on which the related
Depositary Shares may be listed). In no event may any such amendment impair
the right of any holder of Depositary Receipts, subject to the conditions
specified in the Deposit Agreement, to receive the related Preferred Stock
upon surrender of such Depositary Receipts as described above under "--
Withdrawal of Preferred Stock."
The Deposit Agreement may be terminated by the Company upon not less than 60
days' notice to the Preferred Stock Depositary. In any such case, the
Preferred Stock Depositary shall deliver or make available to each holder of
the related Depositary Receipts, upon surrender of such Depositary Receipts,
such number of whole shares of the related series of Preferred Stock
represented by the Depositary Shares evidenced by such Depositary Receipts,
together with cash in lieu of any fractional shares (to the extent the Company
has deposited such cash with the Preferred Stock Depositary). The Deposit
Agreement will automatically terminate if all of the shares of Preferred Stock
deposited thereunder shall have been withdrawn, redeemed, converted or
exchanged or if there shall have been a final distribution in respect of such
Preferred Stock in connection with any liquidation, dissolution or winding up
of the Company.
CHARGES OF PREFERRED STOCK DEPOSITARY
The Company will pay the fees and expenses of the Preferred Stock Depositary
in connection with the performance of its duties under the Deposit Agreement,
and will pay all transfer and other taxes and governmental charges arising
solely from the existence of the Deposit Agreement. Holders of Depositary
Receipts will be required to pay all other transfer and other taxes and
governmental charges (including taxes and other governmental charges in
connection with the transfer, exchange, surrender or conversion of Depositary
Receipts) and such other charges as are expressly provided in the Deposit
Agreement.
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RESIGNATION AND REMOVAL OF DEPOSITARY
The Preferred Stock Depositary may resign at any time by delivering to the
Company notice of its election to do so, and the Company may at any time
remove the Preferred Stock Depositary, any such resignation or removal to take
effect upon the appointment of a successor Preferred Stock Depositary.
MISCELLANEOUS
The Preferred Stock Depositary will forward to holders of Depositary
Receipts any reports and communications from the Company which are received by
the Preferred Stock Depositary with respect to the related Preferred Stock.
Neither the Preferred Stock Depositary nor the Company will be liable if
either is prevented or delayed by law or any circumstances beyond its control
in performing its obligations under the Deposit Agreement. The obligations of
the Company and the Preferred Stock Depositary under the Deposit Agreement
will be limited to performing their duties thereunder without gross negligence
or willful misconduct, and the Company and the Preferred Stock Depositary will
not be obligated to prosecute or defend any legal proceeding in respect of any
Depositary Shares or any related shares of Preferred Stock or Depositary
Receipts unless satisfactory indemnity is furnished. The Company and the
Preferred Stock Depositary may rely on advice of counsel, accountants or other
advisors, and information provided by persons presenting shares of Preferred
Stock for deposit, holders of Depositary Receipts or other persons believed to
be authorized or competent and on documents believed to be genuine.
In the event that the Preferred Stock Depositary shall receive conflicting
claims, requests or instructions from any holders of Depositary Receipts, on
the one hand, and the Company, on the other hand, the Preferred Stock
Depositary shall be entitled to act on such claims, requests or instructions
received from the Company.
DESCRIPTION OF COMMON STOCK
The Company may issue (either separately or together with other Securities)
shares of its Common Stock. Under its Amended Certificate of Incorporation,
the Company is authorized to issue up to 60,000,000 shares of Common Stock.
Reference is made to the applicable Prospectus Supplement relating to Common
Stock offered thereby for the terms relevant thereto, including the number of
shares offered and the initial public offering price. For a summary of certain
terms of the Common Stock, including certain restrictions on dividends, see
"Description of Capital Stock" below.
DESCRIPTION OF COMMON STOCK WARRANTS
The Company may issue (either separately or together with other Securities)
warrants for the purchase of Common Stock ("Common Stock Warrants"). The
Common Stock Warrants are to be issued under warrant agreements (each a
"Common Stock Warrant Agreement") to be entered into between the Company and a
bank or trust company, as warrant agent ("Common Stock Warrant Agent"), all as
set forth in the Prospectus Supplement relating to the particular issue of
Common Stock Warrants. The form of Common Stock Warrant Agreement, including
the form of certificates representing the Common Stock Warrants ("Common Stock
Warrant Certificates"), that will be entered into with respect to a particular
offering of Common Stock Warrants has been or will be filed as an exhibit to
or incorporated by reference in the Registration Statement. The following
summary of certain provisions of the Common Stock Warrant Agreement and the
Common Stock Warrants and the summary of certain terms of the particular
Common Stock Warrant Agreement and Common Stock Warrants set forth in the
applicable Prospectus Supplement do not purport to be complete and are subject
to, and are qualified in their entirety by reference to, all the provisions of
the particular Common Stock Warrant Agreement and the related Common Stock
Warrant Certificates, all of which are incorporated herein by reference.
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The following description of the Common Stock Warrants sets forth certain
general terms and provisions of the Common Stock Warrants and the related
Common Stock Warrant Agreement to which any Prospectus Supplement may relate.
Certain other terms of any Common Stock Warrants and the related Common Stock
Warrant Agreement will be described in the applicable Prospectus Supplement.
To the extent that any particular terms of the Common Stock Warrants or the
related Common Stock Warrant Agreement described in a Prospectus Supplement
differ from any of the terms described herein, then such terms described
herein shall be deemed to have been superseded by such Prospectus Supplement.
GENERAL
Reference is made to the applicable Prospectus Supplement for the terms of
the Common Stock Warrants offered thereby, including (where applicable): (1)
the title and aggregate number of such Common Stock Warrants; (2) the number
of shares of Common Stock that may be purchased upon exercise of each such
Common Stock Warrant; the price, or the manner of determining the price, at
which such shares may be purchased upon such exercise; if other than cash, the
property and manner in which the exercise price may be paid; and any minimum
number of such Common Stock Warrants that are exercisable at any one time; (3)
the time or times at which, or period or periods during which, such Common
Stock Warrants may be exercised and the expiration date of such Common Stock
Warrants; (4) the terms of any right of the Company to redeem such Common
Stock Warrants; (5) the terms of any right of the Company to accelerate the
exercise of such Common Stock Warrants upon the occurrence of certain events;
(6) whether such Common Stock Warrants will be sold with any other Securities,
and the date, if any, on and after which such Common Stock Warrants and any
such other Securities will be separately transferable; and (7) any other terms
of such Common Stock Warrants.
Common Stock Warrant Certificates may be surrendered for transfer or
exchange for new Common Stock Warrant Certificates of authorized denominations
at any office or agency of the relevant Common Stock Warrant Agent maintained
for such purpose, subject to the terms of the related Common Stock Warrant
Agreement. Unless otherwise specified in the applicable Prospectus Supplement,
Common Stock Warrant Certificates will be issued in denominations evidencing
any whole number of Common Stock Warrants. No service charge will be made for
any permitted transfer or exchange of Common Stock Warrant Certificates, but
the Company or the Common Stock Warrant Agent may require payment of any tax
or other governmental charge payable in connection therewith.
EXERCISE OF WARRANTS
Each Common Stock Warrant will entitle the holder to purchase such number of
shares of Common Stock at such exercise price as shall in each case be set
forth in, or be determinable from, the Prospectus Supplement relating to such
Common Stock Warrants, by payment of such exercise price in the Currency and
in the manner specified in the Prospectus Supplement. Common Stock Warrants
may be exercised at any time up to the date and time specified in the
applicable Prospectus Supplement for the expiration thereof. After the
specified expiration time on the specified date of expiration, unexercised
Common Stock Warrants will become void.
Upon receipt at an office or agency indicated in the applicable Prospectus
Supplement of (i) payment of the exercise price and (ii) the Common Stock
Warrant Certificate properly completed and duly executed, the Company will, as
soon as practicable, forward a certificate or certificates representing the
whole number of shares of Common Stock purchasable upon such exercise. Unless
otherwise indicated in the applicable Prospectus Supplement, fractional shares
of Common Stock will not be issued upon the exercise of Warrants and, in lieu
thereof, the Company will make a cash payment in an amount determined as
provided in the applicable Prospectus Supplement. If less than all of the
Common Stock Warrants represented by such Common Stock Warrant Certificate are
exercised, a new Common Stock Warrant Certificate will be issued for the
remaining number of Common Stock Warrants. The holder of a Common Stock
Warrant will be required to pay any tax or other governmental charge that may
be imposed in connection with any transfer involved in the issuance of the
Common Stock purchased upon such exercise.
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MODIFICATIONS
Any Common Stock Warrant Agreement and the terms of the related Common Stock
Warrants may be modified or amended by the Company and the applicable Common
Stock Warrant Agent, without the consent of any holder of the related Common
Stock Warrants, for the purpose of curing any ambiguity, or of curing,
correcting or supplementing any defective or inconsistent provision contained
therein, or in any other manner that the Company deems necessary or desirable
and that will not materially and adversely affect the interests of the holders
of the related Common Stock Warrants.
The Company and the applicable Common Stock Warrant Agent may also modify or
amend the applicable Common Stock Warrant Agreement and the terms of the
related Common Stock Warrants with the consent of the holders of not less than
a majority in number of the then outstanding unexercised Common Stock Warrants
affected thereby; provided that no such modification or amendment that
accelerates the expiration date, increases the exercise price, or reduces the
number of outstanding Common Stock Warrants the consent of whose holders is
required for any such amendment or modification, may be made without the
consent of each holder affected thereby.
NO RIGHTS AS STOCKHOLDERS
Holders of Common Stock Warrants are not entitled, by virtue of being such
holders, to vote, consent or receive notice as stockholders of the Company in
respect of any meeting of stockholders for the election of directors of the
Company or any other matter, or to exercise any other rights whatsoever as
stockholders of the Company, or to receive any dividends or distributions, if
any, on the Common Stock.
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of (i) 60,000,000
shares of Common Stock, par value $.01 per share, and (ii) 7,000,000 shares of
Preferred Stock, par value $.01 per share. As of June 30, 1998, (i) 20,276,298
shares of Common Stock were issued and outstanding and an additional 66,114
shares of Common Stock were issued and held in the Company's treasury, and
(ii) no shares of Preferred Stock were outstanding.
The following summary of certain provisions of the Common Stock, Preferred
Stock, the Company's Amended Certificate of Incorporation and By-laws, and the
Rights Agreement and the Rights issued thereunder (as such terms are defined
below) does not purport to be complete and is qualified in its entirety by
reference to the Amended Certificate of Incorporation, By-laws and Rights
Agreement, copies of which have been incorporated by reference or filed as
exhibits to the Registration Statement.
COMMON STOCK
The holders of Common Stock are entitled to one vote per share on all
matters voted on by stockholders, including elections of directors, and,
except as otherwise required by law or provided by the express provisions of
any series of Preferred Stock of the Company, the holders of such shares will
exclusively possess all voting power of the Company. There is no cumulative
voting in the election of directors, and no holder of Common Stock is entitled
as such, as a matter of right, to subscribe for or purchase any shares of
Common Stock or Preferred Stock. Subject to the preferential rights of any
outstanding series of Preferred Stock, the holders of Common Stock are
entitled to receive ratably such dividends as may be declared from time to
time by the Board of Directors from funds legally available therefor. In the
event of a liquidation, dissolution or winding up of the Company, holders of
Common Stock are entitled to share ratably in all assets remaining after
payment or provision for liabilities and amounts owing in respect of any
outstanding Preferred Stock. The Common Stock represents non-withdrawable
capital, is not of an insurable type and is not insured by the FDIC or any
other governmental agency or instrumentality.
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Certain of the Company's debt instruments contain restrictive covenants that
could limit the amount of dividends payable by the Company or the redemption
or repurchase of capital stock by the Company. In the event of a deterioration
in the financial condition or results of operations of the Company, such
covenants could limit or prohibit the payment of dividends on Common Stock.
Likewise, the Company is a holding company substantially all of whose
consolidated assets are held by its subsidiaries, and the cash flow of the
Company and the consequent ability to pay dividends on Common Stock are
dependent upon the results of operations of such subsidiaries and the
distribution of funds by such subsidiaries to the Company. In addition, if the
Company were to become a bank holding company, various regulatory restrictions
would limit directly or indirectly the amount of dividends the Company could
pay as well as the repurchase or redemption of its capital stock. See "The
Company--Pending Structural Changes--Dividends," "The Company--Pending
Structural Changes--Repurchase or Redemption of Equity Securities" and
"Description of Debt Securities--Ranking of Debt Securities; Holding Company
Structure."
The transfer agent for the Common Stock is ChaseMellon Shareholder Services,
L.L.C. ("ChaseMellon").
PREFERRED STOCK
Preferred Stock may be issued from time to time in one or more series.
Subject to limitations prescribed by Delaware law and the Amended Certificate
of Incorporation, the Board of Directors is authorized to fix the number of
shares constituting each series of Preferred Stock and the rights and
preferences thereof. Preferred Stock may rank prior to Common Stock with
respect to the payment of dividends and distributions upon liquidation,
dissolution or winding up of the Company and may have full or limited voting
rights. The issuance of Preferred Stock, while providing flexibility in
connection with possible acquisitions and other corporate purposes, could,
among other things, adversely, affect the voting power of the holders of
Common Stock and, under certain circumstances, make it more difficult for a
third party to gain control of the Company and could have the effect of
delaying or preventing a merger, tender offer or other attempted takeover of
the Company. No holder of Preferred Stock shall be entitled, as a matter of
right, to subscribe for or purchase any shares of Preferred Stock or Common
Stock.
RIGHTS AGREEMENT
On July 26, 1990, the Board of Directors of the Company declared a dividend
payable August 6, 1990 of one right (a "Right") for each outstanding share of
Common Stock (i) held of record at the close of business on August 6, 1990
(the "Record Time") or (ii) issued thereafter and prior to the Separation Time
(as hereinafter defined). The Rights were issued pursuant to a Stockholder
Protection Rights Agreement, dated as of July 31, 1990, as amended (the
"Rights Agreement"), between the Company and ChaseMellon, as successor Rights
Agent (the "Rights Agent"). Each Right entitles its registered holder to
purchase from the Company after the Separation Time one share of Common Stock
for $27.50 (the "Exercise Price"), subject to adjustment.
The Rights will be evidenced by the Common Stock certificates until the
close of business on the earlier of (either, the "Separation Time") (i) the
tenth business day (or such later date as the Board of Directors of the
Company may from time to time fix by resolution) after the date on which any
person (other than the Company, a majority-owned subsidiary of the Company or
an employee stock ownership or other employee benefit plan of the Company or a
majority-owned subsidiary of the Company) commences a tender or exchange offer
which, if consummated, would result in such person's becoming the beneficial
owner of 10% or more of the outstanding shares of Common Stock (any person
having such beneficial ownership being referred to as an "Acquiring Person,"
subject to certain exceptions), and (ii) the tenth business day after the
first date (the "Flip-in Date") of public announcement (the "Stock Acquisition
Date") by the Company or an Acquiring Person that an Acquiring Person has
become such, other than as a result of a Flip-over Transaction or Event (as
defined below). The Rights Agreement provides that, until the Separation Time,
the Rights will be transferred with and only with Common Stock. Common Stock
certificates issued after the Record Time but prior to the Separation Time,
and Common Stock certificates evidencing shares of Common Stock outstanding at
the Record Time, shall evidence one Right for each share of Common Stock
evidenced thereby. Promptly following the Separation Time, separate
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certificates evidencing the Rights ("Rights Certificates") and a disclosure
statement describing the Rights will be mailed by the Rights Agent to holders
of record of Common Stock at the Separation Time.
Rights may be exercised on any business day after the Separation Time and
prior to the Expiration Time. The Rights will expire on the earliest of (i)
the Exchange Time (as defined below), (ii) the date on which the Board of
Directors of the Company elects to redeem all of the then outstanding Rights
and (iii) August 6, 2000 (in any such case, the "Expiration Time").
The Exercise Price and the number of Rights outstanding, or in certain
circumstances the securities purchasable upon exercise of the Rights, are
subject to adjustment from time to time under certain circumstances,
including, but not limited to, the payment of a Common Stock dividend or the
issuance of any securities in exchange for Common Stock.
In the event that prior to the Expiration Time, a Flip-in Date occurs, the
Company shall take such action as shall be necessary to ensure and provide
that each Right (other than Rights beneficially owned by the Acquiring Person
or any affiliate or associate thereof, which Rights shall become void) shall
constitute the right to purchase from the Company, upon payment of the
Exercise Price, that number of shares of Common Stock having an aggregate
Market Price (as defined in the Rights Agreement), on the applicable Stock
Acquisition Date equal to twice the Exercise Price. In addition, the Board of
Directors of the Company may, at its option, at any time after a Flip-in Date
and prior to the date on which a Schedule 13D, or any amendment thereto, is
filed with the Commission by an Acquiring Person announcing that such person
has become the beneficial owner of more than 50% of the outstanding shares of
Common Stock, elect to exchange all (but not less than all) of the then
outstanding Rights (other than Rights beneficially owned by the Acquiring
Person or any affiliate or associate thereof, which Rights become void) for
shares of Common Stock at an exchange ratio of one share of Common Stock per
Right, appropriately adjusted to reflect any stock split, stock dividend,
distribution of securities or assets in respect of, in lieu of, or in exchange
for, Common Stock, or similar transaction occurring after the Separation Time
(the "Exchange Ratio"). Immediately upon such action by the Board of Directors
of the Company (the "Exchange Time"), the right to exercise the Rights will
terminate and each Right will thereafter represent only the right to receive a
number of shares of Common Stock equal to the Exchange Ratio.
In the event that there shall not be sufficient treasury shares or
authorized but unissued shares of Common Stock to permit the exercise or
exchange in full of the Rights, the Company shall take such action as shall be
necessary to ensure and provide, to the extent permitted by applicable law and
any agreements or instruments in effect on the Stock Acquisition Date to which
it is a party, that each Right shall thereafter constitute the right to
receive, (x) at the Company's option, either (A) upon payment of the Exercise
Price, debt or equity securities or other assets (or a combination thereof)
having a fair value equal to twice the Exercise Price, or (B) without payment
of consideration (except as otherwise required by applicable law), debt or
equity securities or other assets (or a combination thereof) having a fair
value equal to the Exercise Price, or (y) if the Board of Directors of the
Company elects to exchange the Rights (as described in the preceding
paragraph), debt or equity securities or other assets (or a combination
thereof) having a fair value equal to the product of the Market Price of a
share of Common Stock on the Flip-in Date times the Exchange Ratio in effect
on the Flip-in Date. In any case set forth in (x) or (y) above, the fair value
of such debt or equity securities or other assets shall be as determined in
good faith by the Board of Directors of the Company, after consultation with a
nationally recognized investment banking firm.
Prior to the Expiration Time, the Company shall not enter into, consummate
or permit to occur a transaction or series of transactions after the time an
Acquiring Person has become such in which, directly or indirectly, (i) the
Company shall consolidate or merge or participate in a binding share exchange
with any other person (other than a wholly owned subsidiary of the Company)
if, at the time of the consolidation, merger of share exchange, or at the time
the Company enters into any agreement with respect thereto, the Acquiring
Person controls the Board of Directors of the Company and any term of or
arrangement concerning such consolidation, merger or share exchange relating
to the Acquiring Person is not identical to the terms and arrangements
relating
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to other holders of Common Stock or (ii) wherein the Company shall sell or
otherwise transfer (or one or more of its subsidiaries shall sell or otherwise
transfer) assets (A) aggregating more than 50% of the assets (measured by
either book value or fair market value), or (B) generating more than 50% of
the operating income or cash flow, of the Company and its subsidiaries (taken
as a whole) to any Person or Persons which are affiliated or associated or
otherwise acting in concert, if, at the time of such sale or transfer of
assets or at the time the Company (or any such subsidiary) enters into an
agreement with respect to such sale or transfer, the Acquiring Person controls
the Board of Directors of the Company (a "Flip-over Transaction or Event"),
unless and until it shall have entered into a supplemental agreement with the
person engaging in such Flip-over Transaction or Event (the "Flip-over
Entity"), for the benefit of the holders of the Rights, providing that, upon
consummation or occurrence of the Flip-over Transaction or Event each Right
shall thereafter constitute the right to purchase from the Flip-over Entity,
upon payment of the Exercise Price, that number of shares of capital stock
with the greatest voting power in respect of the election of directors of the
Flip-over Entity having an aggregate Market Price on the date of such Flip-
over Transaction or Event equal to twice the Exercise Price.
The Board of Directors of the Company may, at its option, at any time prior
to the close of business on the Flip-in Date, elect to redeem all (but not
less than all) of the then outstanding Rights at a price of $.01 per Right
(the "Redemption Price"). Immediately upon the action of the Board of
Directors of the Company electing to redeem the Rights (or, if the resolution
of the Board of Directors electing to redeem the Rights states that the
redemption will not be effective until the occurrence of a specified future
time or event, upon the occurrence of such future time or event), the Rights
will terminate and each Right will thereafter represent only the right to
receive the Redemption Price in cash.
The holders of Rights will not, solely by reason of their ownership of
Rights, have any rights as stockholders of the Company, including, without
limitation, the right to vote or to receive dividends.
The Rights will not prevent a takeover of the Company. However, the Rights
may cause substantial dilution to an Acquiring Person unless the Rights are
first redeemed by the Board of Directors of the Company.
SECTION 203 OF THE DELAWARE LAW
Section 203 of the Delaware General Corporation Law (the "DGCL") generally
prohibits a publicly held Delaware corporation from engaging in a "business
combination" with an "interested stockholder" for a period of three years
following the time that such stockholder became an interested stockholder,
unless certain conditions are satisfied. However, a corporation's certificate
of incorporation may exclude such corporation from the restrictions imposed by
Section 203 of the DGCL, and the Amended Certificate of Incorporation provides
that Section 203 of the DGCL shall not govern the Company.
CERTAIN PROVISIONS OF THE AMENDED CERTIFICATE OF INCORPORATION AND BY-LAWS
Several provisions of the Company's Amended Certificate of Incorporation and
By-laws may have the effect of deterring a takeover of the Company. These
provisions include: (i) certain advance notice and content requirements for
business to be brought before the annual stockholders' meeting by a
stockholder or for nomination by any stockholder of persons for election to
the Board of Directors; (ii) a prohibition on stockholder action by written
consent; (iii) a requirement that only the chairman of the Board of Directors
of the Company, president or majority of the directors then in office may call
a special meeting of the stockholders; and (iv) the classification of
Company's Board of Directors into three classes serving staggered three-year
terms.
The foregoing provisions could make it more difficult for a third party to
gain control of the Company, and could have the effect of delaying or
preventing a merger, tender offer or other attempted takeover of the Company.
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DESCRIPTION OF TRUST PREFERRED SECURITIES
Each Trust may issue only one series of Trust Preferred Securities which
shall have terms described in the Prospectus Supplement relating thereto. The
Declaration of each Trust will authorize its Regular Trustees to issue on
behalf of such Trust one series of its Trust Preferred Securities. Each
Declaration will be qualified as an indenture under the Trust Indenture Act.
The forms of Declaration have been or will be filed or incorporated by
reference as exhibits to the Registration Statement. The terms of each
Declaration will be those set forth in the Declaration and those made part of
the Declaration by the Trust Indenture Act. The summary of certain provisions
of the Trust Preferred Securities and the Declarations set forth below and in
any Prospectus Supplement do not purport to be complete and are subject to and
are qualified in their entirety by reference to all of the provisions of the
Declarations and the Trust Preferred Securities, which provisions (including
defined terms) are incorporated herein by reference.
The following description of the Trust Preferred Securities and the
Declaration of any Trust sets forth certain general terms and provisions of
such Trust Preferred Securities and Declaration to which any Prospectus
Supplement may relate. Certain other specific terms of such Trust Preferred
Securities and Declaration will be described in the applicable Prospectus
Supplement. To the extent that any particular terms of any Trust Preferred
Securities or Declaration described in a Prospectus Supplement differ from any
of the terms described herein, then such terms described herein shall be
deemed to have been superseded by such Prospectus Supplement.
The Trust Preferred Securities of any Trust will have such terms, including
distributions, redemption, voting, liquidation, conversion rights and such
other preferred, deferred or other special rights or such restrictions as
shall be set forth in the Declaration of such Trust or made part of such
Declaration by the Trust Indenture Act, and which will generally mirror the
terms of the Junior Subordinated Debt Securities held by such Trust and
described in the Prospectus Supplement related thereto. Reference is made to
the Prospectus Supplement relating to the Trust Preferred Securities of any
Trust for specific terms, including (i) the designation of such Trust
Preferred Securities; (ii) the number of such Trust Preferred Securities;
(iii) the annual distribution rate (or method of determining such rate) for
such Trust Preferred Securities and the date or dates upon which such
distributions shall be payable; (iv) whether distributions on such Trust
Preferred Securities shall be cumulative, and, in the case of Trust Preferred
Securities having such cumulative distribution rights, the date or dates or
method of determining the date or dates from which distributions on such Trust
Preferred Securities shall be cumulative; (v) the amount or amounts which
shall be paid out of the assets of such Trust to the holders of such Trust
Preferred Securities upon voluntary or involuntary dissolution, winding-up or
termination of such Trust; (vi) the right or obligation, if any, of such Trust
to purchase or redeem such Trust Preferred Securities and the price or prices
at which, the period or periods within which, and the terms and conditions
upon which, such Trust Preferred Securities shall or may be purchased or
redeemed, in whole or in part, pursuant to such right or obligation; (vii) the
voting rights, if any, of such Trust Preferred Securities in addition to those
(if any) required by law, including the number of votes per Trust Preferred
Security and any requirement for the approval by the holders of such Trust
Preferred Securities, as a condition to specified action or amendments to the
applicable Declaration; (viii) the terms and conditions, if any, upon which
such Trust Preferred Securities may be converted into or exchanged for shares
of Common Stock or other Securities, including the conversion price per share
or conversion rate and the circumstances, if any, under which any such
conversion right shall expire; (ix) the terms and conditions, if any, upon
which the Junior Subordinated Debt Securities held by such Trust may be
distributed to holders of such Trust Preferred Securities; (x) if applicable,
any securities exchange upon which such Trust Preferred Securities shall be
listed; and (xi) any other relevant rights, preferences, privileges,
limitations or restrictions of such Trust Preferred Securities. All Trust
Preferred Securities offered hereby will be guaranteed by the Company to the
extent set forth below under "Description of Trust Preferred Securities
Guarantees." Certain United States federal income tax considerations
applicable to any offering of Trust Preferred Securities will be described in
the Prospectus Supplement relating thereto.
In connection with the issuance of Trust Preferred Securities by any Trust,
such Trust will issue one series of Trust Common Securities. The Declaration
of such Trust will authorize its Regular Trustees to issue on behalf of such
Trust one series of Trust Common Securities having such terms including
distributions, redemption,
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voting and liquidation rights or such restrictions as shall be set forth
therein. The terms of the Trust Common Securities of a Trust will be
substantially identical to the terms of the Trust Preferred Securities of such
Trust, and such Trust Common Securities will rank pari passu, and payments
will be made thereon pro rata, with such Trust Preferred Securities except
that, if an event of default under the Declaration occurs and is continuing,
the rights of the holders of such Trust Common Securities to payment in
respect of distributions and payments upon liquidation, redemption and
otherwise will be subordinated to the rights of the holders of such Trust
Preferred Securities. Except in certain limited circumstances, the Trust
Common Securities of a Trust will also carry the right to vote to appoint,
remove or replace any of the Trustees of such Trust. All of the Trust Common
Securities will be directly or indirectly owned by the Company.
In connection with the issuance of Trust Preferred Securities by a Trust,
such Trust will purchase a series of Junior Subordinated Debt Securities from
the Company. The ability of such Trust to make distributions and other
payments on such Trust Preferred Securities will depend upon the receipt by
such Trust of interest and other payments made by the Company on such Junior
Subordinated Debt Securities. Such Junior Subordinated Debt Securities will be
obligations exclusively of the Company and, because the Company is a holding
company substantially all of whose consolidated assets are held by its
subsidiaries, the cash flow of the Company and the consequent ability to
service its debt, including such Junior Subordinated Debt Securities, will be
dependent upon the results of operations of such subsidiaries and the
distribution of funds by such subsidiaries to the Company. In addition,
because the Company is a holding company, such Junior Subordinated Debt
Securities will be effectively subordinated to all existing and future
liabilities of the Company's subsidiaries. See "Description of Debt
Securities--Ranking of Debt Securities; Holding Company Structure."
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF TRUST PREFERRED SECURITIES
If an event of default under the Declaration of any Trust occurs and is
continuing, then the holders of the Trust Preferred Securities of such Trust
would rely on the enforcement by the Property Trustee of such Trust of its
rights as a holder of the Junior Subordinated Debt Securities held by such
Trust against the Company. In addition, the holders of a majority in
liquidation amount of the Trust Preferred Securities of such Trust will have
the right to direct the time, method and place of conducting any proceeding
for any remedy available to such Property Trustee or to direct the exercise of
any trust or power conferred upon such Property Trustee under the Declaration
of such Trust, including the right to direct such Property Trustee to exercise
the remedies available to it as a holder of the Junior Subordinated Debt
Securities held by such Trust. If such Property Trustee fails to enforce its
rights under such Junior Subordinated Debt Securities, a holder of the Trust
Preferred Securities of such Trust, to the fullest extent permitted by law,
may institute a legal proceeding directly against the Company to enforce such
Property Trustee's rights under such Junior Subordinated Debt Securities
without first instituting any legal proceeding against such Property Trustee
or any other person or entity. Notwithstanding the foregoing, if an event of
default under the Declaration of such Trust has occurred and is continuing and
such event is attributable to the failure of the Company to pay the principal
of or premium or interest, if any, on such Junior Subordinated Debt Securities
on the date such principal, premium or interest, as the case may be, is
otherwise payable (or in the case of redemption, on the redemption date), then
a holder of the Trust Preferred Securities of such Trust may directly
institute a proceeding for enforcement of payment to such holder of the
principal, premium or interest, as the case may be, on such Junior
Subordinated Debt Securities having a principal amount equal to the aggregate
liquidation amount of the Trust Preferred Securities of such holder (a "Direct
Action") on or after the respective due date specified in such Junior
Subordinated Debt Securities. In connection with such Direct Action, the
Company will be subrogated to the rights of such holder of the Trust Preferred
Securities under the Declaration of such Trust to the extent of any payment
made by the Company to such holder of Trust Preferred Securities in such
Direct Action.
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DESCRIPTION OF TRUST PREFERRED SECURITIES GUARANTEES
Set forth below is a summary of information concerning the Preferred
Securities Guarantee Agreements (the "Trust Preferred Securities Guarantees")
which will be executed and delivered by the Company for the benefit of the
holders from time to time of Trust Preferred Securities of the respective
Trusts. Each Trust Preferred Securities Guarantee will be qualified as an
indenture under the Trust Indenture Act. A trustee whose name will be set
forth in the applicable Prospectus Supplement will act as the trustee (a
"Preferred Guarantee Trustee") under each Trust Preferred Securities Guarantee
for purposes of the Trust Indenture Act. The Company will enter into a
separate Trust Preferred Securities Guarantee in respect of the Trust
Preferred Securities of each Trust, and the Preferred Guarantee Trustees under
such Trust Preferred Securities Guarantees may be different. The forms of
Trust Preferred Securities Guarantee have been or will be filed or
incorporated by reference as an exhibit to the Registration Statement. The
terms of each Trust Preferred Securities Guarantee will be those set forth in
such Trust Preferred Securities Guarantee and those made part of such Trust
Preferred Securities Guarantee by the Trust Indenture Act. The summary of
certain provisions of the Trust Preferred Securities Guarantees set forth
below and in any Prospectus Supplement does not purport to be complete and is
subject to and qualified in its entirety by reference to all of the provisions
of the Trust Preferred Securities Guarantees, which provisions of the Trust
Preferred Securities Guarantees (including defined terms) are incorporated
herein by reference. Each Trust Preferred Securities Guarantee will be held by
the applicable Preferred Guarantee Trustee for the benefit of the holders of
the Trust Preferred Securities of the applicable Trust.
The following description of the Trust Preferred Securities Guarantees sets
forth certain general terms and provisions of the Trust Preferred Securities
Guarantee to which any Prospectus Supplement may relate. Certain other
specific terms of the applicable Trust Preferred Securities Guarantee will be
described in the applicable Prospectus Supplement. To the extent that any
particular terms of a Trust Preferred Securities Guarantee described in a
Prospectus Supplement differ from any of the terms described herein, then such
terms described herein shall be deemed to have been superseded by such
Prospectus Supplement.
GENERAL
Pursuant to each Trust Preferred Securities Guarantee, the Company will
agree, to the extent set forth therein, to pay in full, to the holders of the
Trust Preferred Securities of the applicable Trust, the Guarantee Payments (as
defined herein) (except to the extent paid by such Trust), as and when due,
regardless of any defense, right of setoff or counterclaim which such Trust
may have or assert. The following payments with respect to the Trust Preferred
Securities of the applicable Trust, to the extent not paid by such Trust (the
"Guarantee Payments"), will be subject to the Trust Preferred Securities
Guarantee thereof (without duplication): (i) any accumulated and unpaid
distributions which are required to be paid on such Trust Preferred
Securities, to the extent such Trust shall have funds available therefor; (ii)
the redemption price (if any) set forth in the applicable Prospectus
Supplement (the "Redemption Price"), which will not be lower than the
liquidation amount, and all accumulated and unpaid distributions, to the
extent such Trust has funds available therefor, with respect to any such Trust
Preferred Securities called for redemption by such Trust and (iii) upon a
voluntary or involuntary dissolution, winding-up or termination of such Trust
(other than in connection with the distribution of Junior Subordinated Debt
Securities to the holders of its Trust Preferred Securities or the conversion
or redemption of all of its Trust Preferred Securities), the lesser of (a) the
aggregate of the liquidation amount and all accumulated and unpaid
distributions on its Trust Preferred Securities to the date of payment, to the
extent such Trust has funds available therefor, and (b) the amount of assets
of such Trust remaining available for distribution to holders of its Trust
Preferred Securities in liquidation of such 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 Trust Preferred Securities of the
applicable Trust or by causing such Trust to pay such amounts to such holders.
A Trust Preferred Securities Guarantee will not apply to any payment of
distributions on the Trust Preferred Securities of the applicable Trust except
to the extent such Trust shall have funds available therefor. If the Company
does not make interest payments on the Junior Subordinated Debt Securities
purchased by such Trust,
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such Trust will not pay distributions on the Trust Preferred Securities issued
by such Trust and will not have funds available therefor. A Trust Preferred
Securities Guarantee, when taken together with the Company's obligations under
the Junior Subordinated Debt Securities sold to the applicable Trust, the
Indenture relating to such Junior Subordinated Debt Securities and the
Declaration of such Trust, including the Company's obligations to pay certain
costs, expenses, debts and liabilities of such Trust (other than with respect
to its Trust Securities), will provide a full and unconditional guarantee on a
subordinated basis by the Company of payments due on the Trust Preferred
Securities of such Trust.
The Company will also agree separately to guarantee the obligations of each
Trust with respect to its Trust Common Securities (each, a "Trust Common
Securities Guarantee") to the same extent as the Trust Preferred Securities
Guarantee relating to the Trust Preferred Securities of such Trust, except
that upon an event of default under the Junior Subordinated Indenture pursuant
to which the Junior Subordinated Debt Securities held by such Trust were
issued, holders of such Trust Preferred Securities shall have priority over
holders of such Trust Common Securities with respect to distributions and
payments on liquidation, redemption or otherwise.
Certain covenants of the Company to be set forth in the Trust Preferred
Securities Guarantee relating to the Trust Preferred Securities of any Trust
will be described in the applicable Prospectus Supplement.
MODIFICATION OF THE TRUST PREFERRED SECURITIES GUARANTEES; ASSIGNMENT
Except with respect to any changes which do not materially adversely affect
the rights of holders of Trust Preferred Securities of the applicable Trust
(in which case no vote will be required), a Trust Preferred Securities
Guarantee may be amended only with the prior approval of the holders of not
less than a majority in liquidation amount of the outstanding Trust Preferred
Securities of such Trust. The manner of obtaining any such approval of holders
of such Trust Preferred Securities will be as set forth in an accompanying
Prospectus Supplement. All guarantees and agreements contained in a Trust
Preferred Securities Guarantee shall bind the successors, assigns, receivers,
trustees and representatives of the Company and shall inure to the benefit of
the holders of the Trust Preferred Securities of the applicable Trust then
outstanding.
TERMINATION
A Trust Preferred Securities Guarantee will terminate (a) upon full payment
of the redemption price of, plus accumulated and unpaid distributions on, all
Trust Preferred Securities of the applicable Trust, (b) upon distribution of
the Junior Subordinated Debt Securities held by such Trust to the holders of
its Trust Preferred Securities or the conversion, if applicable, of all of
such Trust Preferred Securities into Common Stock or other Securities, or (c)
upon full payment of the amounts payable in accordance with the Declaration of
such Trust upon liquidation of such Trust. A Trust Preferred Securities
Guarantee will continue to be effective or will be reinstated, as the case may
be, if at any time any holder of Trust Preferred Securities of the applicable
Trust must restore payment of any sums paid under the Trust Preferred
Securities of such Trust or such Trust Preferred Securities Guarantee.
EVENTS OF DEFAULT
An event of default under a Trust Preferred Securities Guarantee will occur
upon (a) the failure of the Company to perform any of its payment or other
obligations thereunder or (b) if applicable, the failure by the Company to
deliver Common Stock or other applicable Securities upon an appropriate
election by the holder or holders of Trust Preferred Securities of the
applicable Trust to convert such Trust Preferred Securities into shares of
Common Stock or other applicable Securities, as the case may be.
The holders of a majority in liquidation amount of the Trust Preferred
Securities of the applicable Trust have the right to direct the time, method
and place of conducting any proceeding for any remedy available to the
applicable Preferred Guarantee Trustee in respect of the Trust Preferred
Securities Guarantee or to direct the exercise of any trust or power conferred
upon such Preferred Guarantee Trustee under such Trust Preferred
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Securities Guarantee. If such Preferred Guarantee Trustee fails to enforce
such Trust Preferred Securities Guarantee, any holder of Trust Preferred
Securities guaranteed thereby may institute a legal proceeding directly
against the Company to enforce such Preferred Guarantee Trustee's rights under
such Trust Preferred Securities Guarantee, without first instituting a legal
proceeding against the applicable Trust, such Preferred Guarantee Trustee or
any other person or entity. The Company will waive any right or remedy to
require that any action be brought first against the applicable Trust or any
other person or entity before proceeding directly against the Company.
STATUS OF THE TRUST PREFERRED SECURITIES GUARANTEES
Unless otherwise stated in the applicable Prospectus Supplement, each Trust
Preferred Securities Guarantee will constitute an unsecured obligation of the
Company and will rank (i) subordinate and junior in right of payment to all
other liabilities of the Company except any liabilities that may be pari passu
expressly by their terms and (ii) senior to capital stock. The terms of the
Trust Preferred Securities of each Trust will provide that each holder of such
Trust Preferred Securities by acceptance thereof agrees to the subordination
provisions and other terms of the Trust Preferred Securities Guarantee
relating thereto.
Each Trust Preferred Securities Guarantee will constitute a guarantee of
payment and not of collection (that is, the guaranteed party may institute a
legal proceeding directly against the guarantor to enforce its rights under
the guarantee without instituting a legal proceeding against any other person
or entity).
INFORMATION CONCERNING THE PREFERRED GUARANTEE TRUSTEES
Each Preferred Guarantee Trustee, prior to the occurrence of a default with
respect to the applicable Trust Preferred Securities Guarantee, will undertake
to perform only such duties as are specifically set forth in such Trust
Preferred Securities Guarantee and, after default, shall exercise the same
degree of care as a prudent individual would exercise in the conduct of his or
her own affairs. Subject to such provisions, a Preferred Guarantee Trustee is
under no obligation to exercise any of the powers vested in it by the
applicable Trust Preferred Securities Guarantee at the request of any holder
of the Trust Preferred Securities guaranteed thereby, unless offered
reasonable indemnity against the costs, expenses and liabilities which might
be incurred thereby.
PLAN OF DISTRIBUTION
The Company or either of the Trusts, as the case may be, may sell Securities
to one or more underwriters for public offering and sale by them or may sell
Securities through agents which solicit or receive offers on behalf of the
Company or such Trust, as the case may be, or through dealers or through a
combination of any such methods of sale, and the Company and the Trusts may
also sell Securities directly to investors. Any such underwriter or agent
involved in the offer and sale of Securities will be named in the applicable
Prospectus Supplement.
Underwriters may offer and sell the Securities at a fixed price or prices,
which may be changed, or from time to time at market prices prevailing at the
time of sale, at prices related to such prevailing market prices or at
negotiated prices. The Company or the Trusts, as the case may be, may, from
time to time, authorize agents acting on a best or reasonable efforts basis to
solicit or receive offers to purchase the Securities upon the terms and
conditions as are set forth in the applicable Prospectus Supplement. In
connection with the sale of Securities, underwriters or agents may be deemed
to have received compensation from the Company or the applicable Trust, as the
case may be, in the form of underwriting discounts or commissions or other
underwriting compensation and may also receive commissions from purchasers of
Securities for whom they may act as agents. Underwriters may sell Securities
to or through dealers, and such dealers may receive compensation in the form
of discounts, concessions or commissions from the underwriters and/or
commissions from the purchasers for whom they may act as agent.
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Any compensation paid by the Company or the applicable Trust to underwriters
or agents in connection with the offering of Securities, and any discounts,
concessions or commissions allowed by underwriters to participating dealers,
will be set forth in the applicable Prospectus Supplement. Underwriters,
dealers and agents participating in a distribution of the Securities
(including agents only soliciting or receiving offers to purchase Securities
on behalf of the Company or the applicable Trust) may be deemed to be
underwriters, and any discounts, commissions or other underwriting
compensation received by them and any profit realized by them on resale of
Securities may be deemed to be underwriting discounts and commissions.
Under agreements which may be entered into by the Company or the applicable
Trust, as the case may be, underwriters, dealers and agents who participate in
the distribution of Securities may be entitled to indemnification against
certain liabilities, including liabilities under the Securities Act.
If so indicated in the applicable Prospectus Supplement, the Company may
authorize underwriters or other persons acting as the Company's agents to
solicit offers by certain institutions to purchase Securities from the Company
pursuant to contracts providing for payment and delivery on a future date.
Institutions with which such contracts may be made include commercial and
savings banks, insurance companies, pension funds, investment companies,
educational and charitable institutions and others, but in all cases such
institutions must be approved by the Company. The obligations of any
institutional purchaser under any such contract will not be subject to any
conditions except (i) the purchase by such institution of the Securities
covered by such contract shall not at the time of delivery be prohibited under
the laws of the jurisdiction to which such institution is subject, and (ii) if
such Securities are being sold to underwriters, the Company shall have sold to
such underwriters the total principal amount of such Securities less the
principal amount thereof covered by delayed delivery contracts.
Certain of the underwriters, dealers or agents and their affiliates may
engage in transactions with and perform services for the Company in the
ordinary course of business.
LEGAL MATTERS
Certain legal matters in connection with the offering made hereby will be
passed upon for the Company by Robert J. Flax, Executive Vice President,
General Counsel and Secretary of the Company, and by Silver, Freedman & Taff,
L.L.P., Washington, D.C. As of June 30, 1998, Mr. Flax owned 4,090 shares of
Common Stock and held options to acquire 83,500 additional shares of Common
Stock. The validity of the Trust Preferred Securities will be passed upon for
the Company and the Trusts by Richards, Layton & Finger, Wilmington, Delaware.
Counsel for any underwriters or agents will be named in the Prospectus
Supplement.
EXPERTS
The consolidated financial statements of the Company incorporated in this
Prospectus by reference from the Company's Annual Report on Form 10-K for the
year ended December 31, 1997 have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their report dated January 26, 1998, which
is incorporated herein by reference, and have been so incorporated in reliance
upon the report of such firm given upon their authority as experts in
accounting and auditing.
The consolidated financial statements of AFEH and EurekaBank as of December
31, 1997 and 1996, and for each of the years in the three-year period ended
December 31, 1997 have been incorporated by reference herein and in the
prospectus/registration statement in reliance upon the report of KPMG Peat
Marwick LLP, independent auditors, incorporated by reference herein and in the
prospectus/registration statement, and upon the authority of said firm as
experts in accounting and auditing. The report of KPMG Peat Marwick LLP with
respect to the consolidated financial statements of AFEH and EurekaBank as of
December 31, 1997 refers to the consummation of a Merger between AFEH and
EurekaBank and the Company effective January 2, 1998.
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