<PAGE>
As filed with the Securities and Exchange Commission on July 8, 1999
Registration No. __________
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________________
FORM S-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
_________________________
NEW HAMPSHIRE THRIFT BANCSHARES, INC.
(Exact name of registrant as specified in its charter)
_________________________
Delaware 02-0430695
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
9 Main Street
Newport, New Hampshire 03773
(603) 863-0886
(Address, Including Zip Code, and Telephone Number, Including Area Code,
of Registrant's Principal Executive Offices)
_________________________
NHTB CAPITAL TRUST I
(Exact name of registrant as specified in its charter)
_________________________
Delaware Pending
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
c/o New Hampshire Thrift Bancshares, Inc.
9 Main Street
Newport, New Hampshire 03773
(603) 863-0886
(Address, Including Zip Code, and Telephone Number, Including Area Code,
of Registrant's Principal Executive Offices)
_________________________
Stephen W. Ensign
Vice Chairman of the Board, President and
Chief Executive Officer
New Hampshire Thrift Bancshares, Inc.
9 Main Street
Newport, New Hampshire 03773
(603) 863-0886
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
_________________________
Copies of communications to:
Richard A. Schaberg, Esq. Stephen J. Coukos, Esq.
Thacher Proffitt & Wood Sullivan & Worcester LLP
1700 Pennsylvania Avenue, N.W. One Post Office Square
Suite 800 Boston, MA 02109
Washington, DC 20006 (617) 338-2800
(202) 347-8400
_________________________
Approximate date of commencement of proposed sale to the public:
As soon as practicable after this Registration Statement becomes effective.
_________________________
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [_]
<PAGE>
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 (the "Securities Act"), other than securities offered only in connection
with dividend or interest reinvestment plans, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
_________________________
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
===========================================================================================================================
Amount Proposed Maximum Proposed Maximum Amount of
Title of Shares to be Offering Price Aggregate Offering Registration
to be Registered Registered Per Unit(1) Price (1) Fee
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Junior Subordinated Deferrable Interest
Debentures of New Hampshire Thrift
Bancshares, Inc.(2).......................... 1,750,000 $10.00 $17,500,000 $4,865
- ---------------------------------------------------------------------------------------------------------------------------
Capital Securities of NHTB Capital Trust I.... 1,750,000 $10.00 $17,500,000 N/A
- ---------------------------------------------------------------------------------------------------------------------------
The New Hampshire Thrift Bancshares,
Inc. Guarantee with respect to Capital N/A N/A N/A N/A
Securities(3)(4).............................
===========================================================================================================================
Total....................................................... 100% $17,500,000(5) $4,865
===========================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of computing the registration fee.
(2) The Junior Subordinated Deferrable Interest Debentures will be purchased by
NHTB Capital Trust I with the proceeds of the sale of the Capital
Securities.
(3) No separate consideration will be received for the New Hampshire Thrift
Bancshares, Inc. Guarantee.
(4) This Registration Statement is deemed to cover the Junior Subordinated
Deferrable Interest Debentures of New Hampshire Thrift Bancshares, Inc., the
rights of holders of Junior Subordinated Deferrable Interest Debentures of
New Hampshire Thrift Bancshares, Inc. under the Indenture, the rights of
holders of Capital Securities of NHTB Capital Trust I under the Trust
Agreement, the rights of holders of the Capital Securities under the
Guarantee, which, taken together, fully, irrevocably and unconditionally
guarantee all of the respective obligations of NHTB Capital Trust I under
the Capital Securities.
(5) Such amount represents the principal amount of Junior Subordinated
Deferrable Interest Debentures issued at their principal amount and the
issue price rather than the principal amount of Junior Subordinated
Deferrable Interest Debentures issued at an original issue discount. Such
amount also represents the initial public offering price of the Capital
Securities of NHTB Capital Trust I.
_________________________
The Registrants hereby amend this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrants
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
PRELIMINARY PROSPECTUS
Subject to Completion, dated , 1999
$17,500,000 Capital Securities
[LOGO] NHTB CAPITAL TRUST I
___% Capital Securities
fully guaranteed to the extent described in this prospectus by
New Hampshire Thrift Bancshares, Inc.
- -----------------------------------------------------------------------------
New Hampshire Thrift Bancshares, Inc.: We are a savings and loan
holding company that offers, through our subsidiary Lake Sunapee Bank, fsb, a
full range of community banking and related financial services to our customers
in west-central New Hampshire.
NHTB Capital Trust I: NHTB Capital Trust I is a subsidiary of New
Hampshire Thrift Bancshares, Inc. and a statutory business trust created under
Delaware law.
The Offering: In connection with this offering, the Trust will:
. sell capital securities to the public and common securities to us;
. use the proceeds from these sales to buy an equivalent principal
amount of % subordinated debentures due 2029 issued by us; and
. distribute the future cash payments it receives on the subordinated
debentures to the holders of the capital and common securities.
The capital securities represent preferred ownership interests in the
assets of the Trust.
Each capital security pays a cumulative quarterly distribution at the
annual rate of % of the $10.00 liquidation amount of each capital security,
beginning September 30, 1999.
Application has been made to have the capital securities listed on the
Nasdaq National Market under the symbol "NHTBP". If approved for listing, we
expect trading to commence within 30 days after the capital securities are first
issued.
The capital securities will be ready for delivery in book-entry form
only through The Depository Trust Company on or about , 1999.
We will sell our subordinated debentures to the Trust, which will be
its sole asset. We may defer interest payments on the subordinated debentures
from time to time for up to 20 consecutive quarterly periods. We may redeem the
subordinated debentures on or after 2004, and before , 2004 upon the
occurrence of a tax, investment company or bank regulatory event described in
this prospectus.
Investing in the capital securities involves certain risks which are
described in the "Risk Factors" section beginning on page of this prospectus.
You should read this prospectus carefully before you invest in the capital
securities.
Neither the SEC nor any state securities commission has approved or
disapproved of the capital securities or determined if this prospectus is
truthful or complete. Any representation to the contrary is a criminal offense.
The capital securities are not deposits or other obligations of a bank
or savings association and are not insured by the Federal Deposit Insurance
Corporation or any other governmental agency.
_________________________ ________________
Per capital security Total
Public Offering Price....... 17,500,000
Proceeds to the Trust.......
The Trust will use all proceeds to purchase the junior subordinated
debentures. We will pay all underwriting discounts and commissions, equal to
$0.35 per capital security, or $612,500 in total.
Tucker Anthony Cleary Gull
The date of this prospectus is _____________
<PAGE>
[MAP OF LOCATIONS INCLUDING NLT BRANCHES TO BE ACQUIRED]
2
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Forward-looking statements relating to
future performance or expectations.......................................................
Summary Information.........................................................................
Summary Selected Consolidated Financial
Data.....................................................................................
Risk Factors................................................................................
New Hampshire Thrift Bancshares, Inc........................................................
Management..................................................................................
NHTB Capital Trust I........................................................................
Use of Proceeds.............................................................................
Capitalization..............................................................................
Accounting Treatment........................................................................
Description of Capital Securities...........................................................
Description of Subordinated
Debentures...............................................................................
Description of Guarantee....................................................................
Relationship Among the Capital
Securities, the Subordinated
Debentures and the Guarantee.............................................................
Certain Federal Income Tax
Consequences.............................................................................
ERISA Considerations........................................................................
Underwriting................................................................................
Legal Opinions .............................................................................
Experts.....................................................................................
Where you can find more information .......................................................
Additional information we have incorporated
in the prospectus........................................................................
Annual Report on Form 10-KSB................................................................ A-1
Quarterly Report on Form 10-QSB............................................................. A-2
</TABLE>
3
<PAGE>
Forward-looking statements relating to future performance or expectations
We have used and incorporated by reference "forward-looking statements" in
this prospectus. Words such as "believes," "expects," "may," "will," "should,"
"projected," "contemplates" or "anticipates" may constitute forward-looking
statements. These statements are within the meaning of the Private Securities
Litigation Reform Act of 1995 and are subject to risks and uncertainties that
could cause our actual results to differ materially. We have used these
statements to describe our expectations and estimates in various areas,
including:
. our overall business conditions particularly in the markets in which
we operate,
. fiscal and monetary policy,
. the market for mortgage originations and purchases,
. year 2000 compliance issues,
. competitive products and pricing,
. credit risk management and
. changes in regulations affecting financial institutions.
Our actual results could vary materially from the future results covered in our
forward-looking statements. The statements in the "Risk Factors" section are
cautionary statements identifying important factors, including certain risks and
uncertainties, that could cause our results to vary materially from the future
results covered in such forward-looking statements. Other factors, such as the
general state of the United States economy, could also cause actual results to
vary materially from the future results covered in such forward-looking
statements. We disclaim any obligation to announce publicly future events or
developments that affect the forward-looking statements in this prospectus.
Certain persons participating in this offering may engage in transactions
that stabilize, maintain, or otherwise affect the price of the capital
securities being offered, including over-alloting shares of the capital
securities and bidding for and purchasing such securities at a level above that
which otherwise might prevail in the open market. For a description of these
activities, see "Underwriting." Such stabilizing transactions, if commenced, may
be discontinued at any time. In connection with this offering, certain
underwriters (and selling group members) may engage in passive market making
transactions in the capital securities on the Nasdaq National Market in
accordance with Rule 103 of Regulation M. See "Underwriting."
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations not contained in this prospectus in
connection with the offering of the preferred securities. If given or made, such
information or representations must not be relied upon as having been authorized
by us or the underwriters. This prospectus does not constitute an offer to sell,
or a solicitation of an offer to buy, the preferred securities in any
jurisdiction where, or to any person to whom, it is unlawful to make such offer
or solicitation. Neither the delivery of this prospectus nor any sale made
hereunder shall, under any circumstances, imply that there has not been any
change in the facts in this prospectus or our affairs since the date of this
prospectus.
4
<PAGE>
Summary Information
The following information is a summary of our business operations and the
major terms of the offering of capital securities. You should carefully read the
more detailed discussion and financial information appearing elsewhere or
incorporated in this prospectus before you decide to invest in the capital
securities. In this prospectus, references to "we," "us," "our" and "NHTB" are
to New Hampshire Thrift Bancshares, Inc.
New Hampshire Thrift Bancshares, Inc.
Overview
We are a Delaware chartered savings and loan holding company headquartered
in Newport, New Hampshire. We are regulated by the Office of Thrift Supervision
(the "OTS") of the United States Department of the Treasury. Through our wholly-
owned subsidiary, Lake Sunapee Bank, fsb (the "Bank"), we provide community
banking services to our principal market area, the Upper Valley-Kearsarge-Lake
Sunapee area of west-central New Hampshire, including the counties of Merrimack,
Sullivan, Hillsboro and Grafton. The Bank was originally chartered in 1868 and
presently operates as a federally-chartered stock savings bank through its main
office and eleven branch locations.
We provide a wide range of community banking products and services to
individuals and small- to medium-sized businesses located in our market area. We
are engaged principally in the business of attracting deposits from the general
public, borrowing funds and investing those deposits and funds in various types
of residential and commercial real estate loans, residential construction loans,
consumer loans, commercial loans, municipal loans and investment securities. In
addition, we offer our customers a range of services such as safe deposit box
rentals, money orders, wire transfers, drive-through teller facilities, ATMs,
telephone banking, debit cards and check imaging. We also provide trust
services, investment brokerage services and life insurance products through our
subsidiaries and through arrangements with third parties. We expect to offer our
customers PC banking services by the third quarter of this year.
We have grown to $317.6 million in assets and $275.4 million in deposits at
March 31, 1999. Our deposits are insured by the Savings Association Insurance
Fund of the Federal Deposit Insurance Corporation ("FDIC") up to FDIC limits
(generally $100,000 per depositor).
Our principal executive office is located at 9 Main Street, Newport, New
Hampshire 03773 and our telephone number is (603) 863-0886.
Business Strategy
We offer community banking products and services to individuals and small-
to medium-sized businesses in our market area. Our goal is to enhance our
regional presence by expanding our geographic market area and customer base
through selective acquisitions and branch expansion and by increasing the
financial services we provide our customers. The major components of our growth-
oriented community banking strategy are set forth below.
. Growth of Our Community Banking Franchise
. Becoming a Full-Service Financial Provider
. Providing Technologically Enhanced Products and Services
5
<PAGE>
. Controlled Growth Through Selective Acquisitions and Branch Expansion
. Efficient Capital Management and Consistent Shareholder Returns
Pending Acquisition of Three New London Trust, FSB Branches
On April 12, 1999, we announced the signing of a definitive agreement to
purchase three branches located in New London, Andover and Newbury, New
Hampshire from New London Trust, FSB. The transaction, which is subject to
regulatory approval, is currently expected to close in the fourth quarter of
1999. The Bank has filed the regulatory applications necessary to obtain the
required regulatory approvals.
Under the agreement, the Bank will acquire all of the deposits, certain
loans and certain other assets and liabilities related to the three branches. At
March 31, 1999, approximately $103.0 million in deposits and approximately $88.0
million in loans at the three branches would be acquired by us.
6
<PAGE>
NHTB Capital Trust I
We organized the Trust as a statutory Delaware business trust on [ ],
1999. The Trust will sell its capital securities to the public and its common
securities to us. The Trust will use all of the proceeds from the sale of the
capital securities and the common securities to buy our % subordinated
debentures due , 2029. The subordinated debentures have the same
financial terms as the capital securities. We are obligated to make interest
payments and other payments under the subordinated debentures to the Trust,
which the Trust will use to make distributions on the capital securities to you.
Our obligations under the subordinated debentures are unsecured and rank junior
to all of our other borrowings, except borrowings that by their terms rank equal
or junior to the capital securities. We will, on a subordinated basis, fully,
irrevocably and unconditionally guarantee the payment by the Trust of the
amounts that are required to be paid on the capital securities, to the extent
that the Trust has funds available for such payment.
The Trust intends to maintain its status as an entity that is not taxable
as a corporation for federal income tax purposes. The Trust has no separate
financial statements. The statements would not be material to you, because the
Trust has no independent operations. The Trust has a term of approximately 30
years, but may be dissolved earlier.
The Offering
Securities Offered............ The underwriter is offering 1,750,000 capital
securities each with a liquidation amount of
$10.00. Each capital security represents an
undivided preferred beneficial interest in
the assets of the Trust. Each capital
security that you own will entitle you to
receive quarterly distributions as described
in this prospectus.
The Offering Price............ The Trust is offering capital securities at a
price of $10.00 for each capital security.
Distributions................. If you purchase any capital securities, you
will be entitled to receive quarterly cash
distributions at an annual rate of % of the
liquidation amount of $10.00 for each capital
security. You will be entitled to be paid
distributions on March 31, June 30, September
30 and December 31 of each year, beginning
September 30, 1999. The amount of each
distribution will include amounts accrued up
to the date the distribution is due. The
distribution payable on September 30, 1999
will equal the amount accrued from ___, 1999
through September 29, 1999. These payments
are identical to the payments that we are
required to make under the subordinated
debentures.
Subordinated Debentures....... The Trust will invest the proceeds from the
issuance of the capital securities and the
common securities in an equivalent amount of
our % subordinated debentures.
Maturity...................... The subordinated debentures are scheduled to
mature on , 2029 unless we shorten the
maturity date. We will not shorten the
maturity date unless we have first received
any required regulatory approvals. The Trust
must redeem the capital securities when the
subordinated debentures are
7
<PAGE>
paid on the maturity date, or following any
earlier redemption of the subordinated
debentures.
We Have the Ability to Defer
Payment of your Distributions... We can, on one or more occasions, defer
interest payments on the subordinated
debentures for up to 20 consecutive quarters,
unless an event of default exists under the
subordinated debentures. We cannot defer
interest payments beyond , 2029, the
stated maturity date of the subordinated
debentures.
If we defer interest payments on the
subordinated debentures, the Trust will also
defer distributions on the capital
securities. During this deferral period, the
capital securities will still accumulate
distributions at an annual rate of % of
the liquidation amount of $10.00 for each
capital security. Additionally, any unpaid
distributions on the capital securities will
accumulate additional distributions at the
same rate, compounded quarterly, to the
extent permitted by law. If the Trust defers
your distributions, you will still be
required to accrue interest income and
include it in your gross income for United
States federal income tax purposes, even if
you are a cash basis taxpayer.
Our Guarantee of
the Capital Securities.......... We will fully, irrevocably and
unconditionally guarantee, on a subordinated
basis, to the extent that the Trust has funds
legally available to make the following
payment obligations:
. payment of distributions on the capital
securities,
. payments on liquidation of the Trust, and
. payments on maturity or earlier redemption
of the capital securities.
If we do not make a payment on the
subordinated debentures, the Trust will not
have sufficient funds to make payments on the
capital securities. Our guarantee does not
cover the payment of distributions when the
Trust does not have sufficient funds to pay
the distributions. Our obligations under the
guarantee and under the subordinated
debentures are unsecured and rank junior to
all of our other borrowings, except
borrowings that by their terms rank equal or
junior to the subordinated debentures.
8
<PAGE>
Redemption.................... The Trust will redeem the capital securities
when we pay the subordinated debentures at
maturity on , 2029. In addition, if we
redeem some or all of the subordinated
debentures before maturity, the Trust will
use the cash it receives from the redemption
of the subordinated debentures to redeem
proportionately an amount of capital
securities and common securities having an
aggregate liquidation amount (the number of
securities times $10.00) equal to the
aggregate principal amount of the
subordinated debentures that we redeem.
We can redeem some or all of the subordinated
debentures before , 2029 at their
principal amount plus any accrued and unpaid
interest to the date of redemption at any
time on or after , 2004.
We can redeem all of the subordinated
debentures before , 2029 at their principal
amount plus any accrued and unpaid interest
to the date of redemption at any time if
changes in the bank regulatory, investment
company or tax laws occur that would
adversely affect the status of the Trust, the
capital securities or the subordinated
debentures.
We may have to obtain regulatory approvals,
including the approval of the OTS, before we
redeem any subordinated debentures prior to
maturity.
Distribution of
Subordinated Debentures........ We have the right at any time to dissolve the
Trust and cause the subordinated debentures
to be distributed to holders of capital
securities in liquidation of the Trust,
subject to receiving prior approval of the
OTS to do so if we are then required under
applicable capital guidelines or policies of
the OTS. See "Description of Capital
Securities---Liquidation of the Trust and
Distribution of Subordinated Debentures."
Trustees of NHTB
Capital Trust I................ There are five trustees of the Trust.
Wilmington Trust Company will be the property
trustee, Wilmington Trust Company will be the
Delaware trustee and three individuals who
are employees of NHTB will be the
administrative trustees of the Trust.
As the sole holder of the common securities,
we can replace or remove any of the trustees.
However, if an event of default exists under
the trust agreement governing the Trust, only
the holders of a majority in aggregate
liquidation amount of the capital securities
would be able to remove and replace the
property trustee and the Delaware trustee. As
owner of all of the common securities, only
we can remove or replace the administrative
trustees. The duties
9
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and obligations of each trustee are governed
by the trust agreement.
Form of the Capital Securities
When They Are Issued........... The capital securities will be represented by
one or more global securities that will be
deposited with and registered in the name of
The Depository Trust Company, New York, New
York ("DTC") or its nominee. This means that
you will not receive a certificate for the
capital securities. We expect that the
capital securities will be ready for delivery
through DTC on or about , 1999.
Purchases of the Capital
Securities for an Employee
Benefit Plan.................. If you are purchasing the capital securities
for an employee benefit plan, you should read
"ERISA Considerations" for a discussion of
prohibited transactions and your fiduciary
duties.
Limited Voting Rights.......... If you purchase the capital securities, you
will have no voting rights, except in limited
circumstances. See "Description of Capital
Securities---Voting Rights; Amendment of
Trust Agreement."
Use of Proceeds................ All the proceeds to the Trust from the sale
of the capital securities and the common
securities will be invested by the Trust in
the subordinated debentures. Of the $17.5
million in proceeds, we will contribute
approximately $15.0 million to the Bank as
equity capital for the purpose of providing
additional capital to support the pending
acquisition of three branches of New London
Trust, FSB. The balance of the proceeds will
be used for:
. financing growth, which may include
expansion of the Bank's lending and
investment activities, one or more branch
acquisitions, acquisitions of other
financial institutions, or acquisitions of
other financial services companies;
. repurchases of our common stock; and
. general corporate purposes.
The offering of the capital securities is not
contingent upon consummation of the pending
branch acquisition. If the branch acquisition
is not consummated, we intend to use the
proceeds for expansion of the Bank's lending
and investment activities, additional stock
repurchases and for general corporate
purposes.
Listing of the Capital
Securities.................... Application has been made to have the capital
securities listed on the Nasdaq National
Market under the symbol "NHTBP." If approved
for listing, we expect trading to
10
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commence within 30 days after the capital
securities are first issued.
11
<PAGE>
Summary Selected Consolidated Financial Data
We have selected highlights from our consolidated financial data as of, and
for the quarters ended March 31, 1999 and 1998 and as of, and for the three
years ended December 31, 1998. You should read our consolidated financial
statements and related notes included in our annual report on Form 10-KSB for
the year ended December 31, 1998 and the quarterly report on Form 10-QSB for the
three months ended March 31, 1999, which we have attached to this prospectus as
Appendix A and Appendix B, respectively.
<TABLE>
<CAPTION>
-----------------------------------------
At or For the Three
Months Ended At or For the Years Ended December 31,
March 31,
------------ ------------ ------------ ------------ ------------
1999 1998 1998 1997 1996
(Dollars in thousands, excluding per share data)
<S> <C> <C> <C> <C> <C>
SELECTED FINANCIAL
CONDITION DATA:
Total assets.............................. $ 317,578 $ 320,592 $ 323,408 $ 317,989 $ 264,385
Loans receivable, net..................... 240,619 247,427 232,321 255,224 216,003
Securities available for
sale at fair value.................. 51,266 32,942 52,138 30,180 25,291
Other investments...................... 2,033 2,065 2,033 1,988 2,308
Total deposits............................ 275,442 272,307 282,049 271,227 213,959
Securities sold under agreements
to repurchase....................... 7,085 8,924 11,849 8,393 8,663
FHLB advances and other borrowings........ 3,848 10,177 - 10,546 20,174
Total shareholders' equity............. 27,604 25,940 27,780 25,563 19,194
SELECTED OPERATIONS DATA:
Total interest and dividend income........ $ 5,533 $ 5,814 $ 23,263 $ 23,386 $ 18,704
Total interest expense.................... 2,684 3,062 12,184 12,605 10,324
------------ ------------ ------------ ------------ ------------
Net interest income....................... 2,849 2,752 11,079 10,781 8,380
Provision for loan losses................. 30 15 120 932 1,661
------------ ------------ ------------ ------------ ------------
Net interest income after provision
for loan losses...................... 2,819 2,737 10,959 9,849 6,719
Other income.............................. 614 391 2,643 2,533 1,923
Other expenses............................ 2,403 2,090 8,880 8,398 7,745
------------ ------------ ------------ ------------ ------------
Income before income tax expense.......... 1,030 1,038 4,722 4,004 897
Income tax expense........................ 319 335 1,603 1,233 286
------------ ------------ ------------ ------------ ------------
Net income(1)............................. $ 711 $ 703 $ 3,119 $ 2,771 $ 611
============ ============ ============ ============ ============
PER SHARE DATA:
Basic earnings per share(1)............... $ 0.34 $ 0.34 $ 1.49 $ 1.36 $ 0.36
Diluted earnings per share(1)............. 0.34 0.33 1.47 1.33 0.35
Book value per share...................... 13.12 12.41 13.20 12.24 11.26
Dividends per share....................... 0.16 0.15 0.60 0.50 0.50
</TABLE>
(footnotes on next page)
<TABLE>
<CAPTION>
-----------------------------------------
At or For the Three
Months Ended At or For the Years Ended December 31,
March 31,
------------ ------------ ------------ ------------ ------------
1999 1998 1998 1997 1996
<S> <C> <C> <C> <C> <C>
PERFORMANCE RATIOS(2):
Return on average assets.............. 0.89% 0.88% 0.96% 0.88% 0.24%
Return on average equity.............. 10.54 10.81 11.76 11.44 3.15
Interest rate spread(2)............... 3.57 3.43 3.44 3.43 3.13
Interest rate margin(2)............... 3.80 3.67 3.69 3.67 3.44
</TABLE>
12
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<TABLE>
<S> <C> <C> <C> <C> <C>
Average interest-earning assets to
average interest-bearing liabilities.. 106.45 106.27 106.29 105.72 107.32
Efficiency ratio(3) (4)................... 70.30 66.54 65.44 65.70 74.98
EARNINGS TO FIXED CHARGES RATIOS(5):
Including interest on deposits............ 1.38x 1.34x 1.39x 1.32x 1.09x
Excluding interest on deposits............ 17.09x 7.65x 13.05x 5.02x 1.54x
BANK ASSET QUALITY RATIOS:
Nonperforming loans to total loans........ 0.96% 0.98% 0.85% 0.49% 0.75%
Allowance for loan losses to total loans.. 1.29 1.20 1.30 1.18 0.98
Allowance for loan losses to
nonperforming loans..................... 134.00 125.12 154.23 241.02 131.83
Net charge-offs to average loans(2)....... 0.00 0.02 0.03 0.35 0.63
CAPITAL RATIOS:
Stockholders' equity to total assets...... 8.69 8.09 8.59 8.04 7.26
Tier 1 risk-based capital ratio........... 11.60 11.65 12.03 11.12 11.81
Total risk-based capital ratio............ 12.19 12.54 12.63 11.86 12.00
Core capital (to tangible assets)......... 7.32 6.72 7.31 6.47 6.76
Tangible Capital (to tangible assets)..... 7.32 6.72 7.31 6.47 6.76
</TABLE>
_____________________
(1) Net income for 1996, excluding the one time special assessment charge of
$995,000 imposed to recapitalize the Savings Association Insurance Fund,
would have been $1,207,411, or $0.75 per basic share ($0.74 per share
diluted).
(2) Ratios are annualized for the three months ended March 31, 1999 and 1998.
(3) Ratios are calculated using fully tax equivalent (FTE) interest income.
(4) Equals other expenses divided by net interest income (FTE) plus other
income (excluding writedowns and net gains or losses on securities
transactions).
(5) For purposes of computing the ratios of earnings to fixed charges, earnings
represent income before income tax expense plus fixed charges. Fixed
charges represent one-third rent expense and total interest expense,
including and excluding interest on deposits.
13
<PAGE>
Risk Factors
An investment in the capital securities involves a number of risks.
Some of these risks relate to the capital securities and others relate to us. We
urge you to carefully consider this information, together with the other
information in this prospectus and in the documents that we have incorporated by
reference in this prospectus.
Risks related to your investment in the capital securities
We will depend primarily on any dividends we may receive from our subsidiaries
in making payments under the subordinated debentures, which could affect the
payments made to you under the capital securities
Because we are a savings and loan holding company, substantially all of
our operating assets are owned by the Bank. We rely primarily on dividends from
the Bank to pay principal and interest on our outstanding debt obligations and
corporate expenses. The board of directors of the Bank has the sole discretion
to declare and pay any dividends to us. In addition, the OTS limits all capital
distributions by the Bank directly or indirectly to us, including dividend
payments. Without prior approval, the Bank may not declare a dividend if the
total amount of all dividends declared by the Bank in any calendar year exceeds
the total of the Bank's retained net income for the current year and retained
net income for the preceding two years. Under federal law, the Bank cannot pay
any dividend if, after paying the dividend, the Bank will be "undercapitalized."
The OTS may declare a dividend payment to be unsafe and unsound even though the
Bank would continue to meet its capital requirements after the dividend. If the
Bank does not pay dividends to us and we are unable to make payments on the
subordinated debenture, the Trust will not be able to pay distributions and
other payments on the capital securities and the guarantee will not apply.
We cannot make payments under the guarantee or the subordinated debentures if we
default on our other obligations that are more senior
Our obligations under the guarantee issued for your benefit are
unsecured and rank
. junior to all of our other borrowings, except those borrowings
that by their terms are equal or junior to the guarantee;
. senior to our common stock.
This means that we cannot pay under the guarantee if we default on
payments of any of our other borrowings, unless, by their terms, those
borrowings are equal or junior to the guarantee. If we liquidate, go bankrupt or
dissolve, we would be able to pay under the guarantee only after we have paid
all our other liabilities that are senior to the guarantee.
Our obligations under the subordinated debentures are unsecured and
rank junior in priority to all of our senior indebtedness, which includes our
borrowings that are not by their terms equal or junior to the subordinated
debentures. If we default on a payment on our senior indebtedness, we cannot pay
principal or interest on the subordinated debentures. If we liquidate, go
bankrupt or dissolve, we would be able to pay the Trust under the subordinated
debentures only after we have made all payments on our senior indebtedness. As
of March 31, 1999, we did not have any senior indebtedness.
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<PAGE>
If we default on our obligations to pay principal or interest on the
subordinated debentures, the Trust will not have sufficient funds to make
distribution payments or liquidation payments on the capital securities. As a
result, you will not be able to rely upon our guarantee for payment of these
amounts. Instead, you or the property trustee may enforce the rights of the
Trust under the subordinated debentures against us. For more information, please
refer to "Description of Subordinated Debentures-Enforcement of Certain Rights
by Holders."
The capital securities, the guarantee, the subordinated debentures and
the indenture do not limit our ability or the ability of any subsidiary to incur
additional debt, including debt that is senior in priority of payment.
For more information on payments under the guarantee and the
subordinated debentures, you should refer to "Description of Guarantee-Status of
the Guarantee" and "Description of Subordinated Debentures-Subordination."
We may defer interest payments on the subordinated debentures which could have
adverse consequences to you
We have the right, at one or more times, unless an event of default
exists under the subordinated debentures, to defer interest payments on the
subordinated debentures for up to 20 consecutive quarters, but not beyond ,
2029. If we defer interest payments, the Trust will defer paying distributions
to you on your capital securities during the deferral period. However, during
this period, the capital securities would still accumulate distributions at the
rate of % per year, compounded quarterly, to the extent permitted by
law. During any deferral period, we will be prohibited from declaring or paying
cash dividends on our capital stock or from paying on or repaying, repurchasing
or redeeming any debt which ranks equal or junior to the subordinated
debentures. For more information, please refer to "Description of Capital
Securities-Distributions."
When any deferral period ends and we pay all interest then accrued and
unpaid on the subordinated debentures, we may elect to begin a new deferral
period. There is no limitation on the number of times that we may elect to begin
a deferral period. See "Description of Capital Securities-Distributions" and
"Description of Subordinated Debentures-Option to Extend Interest Payment Date."
If we exercise our right to defer payments of interest on the
subordinated debentures, you will be required to accrue income as original issue
discount (OID) in respect of the deferred stated interest allocable to your
capital securities for U.S. federal income tax purposes, which will be allocated
but not distributed to you. As a result, you will be required to recognize
income for United States federal income tax purposes before you receive any cash
and will not receive the cash related to this interest income from the Trust if
you dispose of your capital securities prior to the record date for the
distribution payment. For more information, you should read "Certain Federal
Income Tax Consequences-Interest Income and Original Issue Discount" and "-Sales
or Redemption of Capital Securities."
We do not currently intend to exercise our right to defer interest
payments on the subordinated debentures. However, if we exercise this right in
the future, the market price of the capital securities will probably be
affected. The capital securities may trade at a price that does not fully
reflect the value of accrued but unpaid interest on the subordinated debentures.
If you sell your capital securities during a deferral period, you may not
receive the same return on your investment as someone else who continues to hold
the capital securities.
15
<PAGE>
The guarantee covers payments only if the Trust has cash available
If we default on our obligations to pay principal or interest on the
subordinated debentures, the Trust will not have sufficient funds to make
distribution payments or liquidation payments on the capital securities. Because
our 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 subordinated debentures against us. For more information, please
refer to "Description of Subordinated Debenture-Enforcement of Certain Rights by
Holders."
The Trust may redeem the capital securities before , 2004 if a
special event occurs; you may be taxed on the redemption proceeds and you may
not be able to reinvest the redemption proceeds at the same or a higher rate of
return
If there are changes in the bank regulatory, investment company or tax
laws that would adversely affect the status of the Trust, the capital securities
or the subordinated debentures, we have the right to redeem the subordinated
debentures, in whole but not in part. Our redemption of the subordinated
debentures will cause the Trust to redeem the capital securities and the common
securities at a price equal to $10.00 per security plus any accrued and unpaid
distributions. Under current United States federal income tax law, the
redemption of the capital securities would be a taxable event to you. In
addition, depending upon capital market conditions at the time of such
redemption, you may not be able to reinvest the money you receive in the
redemption at a rate that is equal to or higher than the rate of return you
received on the capital securities. We may have to obtain regulatory approval,
including the approval of the OTS, before we redeem any subordinated debentures.
For more information, you should refer to "Description of Capital Securities-
Redemption."
If we distribute the subordinated debentures, there may be an adverse effect on
the trading market and trading price of your investment, and there may be
adverse tax effects
We may dissolve the Trust at any time and, after satisfying the
liabilities owed to the Trust's creditors under applicable law, the Trust will
distribute the subordinated debenture to you, as a holder of capital securities,
and us, as the holder of common securities.
If the trustees distribute the subordinated debentures to you, we will
use our best efforts to list the subordinated debentures on the Nasdaq National
Market. We cannot be sure that the subordinated debentures will be approved for
listing on Nasdaq or that a trading market will exist for the subordinated
debentures. Accordingly, the capital securities or the subordinated debentures
may trade at a discount from the price that an investor paid to purchase the
capital securities. Because holders of capital securities may receive
subordinated debentures in liquidation of the Trust and because distributions
are otherwise limited to payments on the subordinated debentures; prospective
purchasers of capital securities are also making an investment decision with
regard to the subordinated debentures and should carefully review all the
information regarding the subordinated debentures contained in this prospectus.
Under current United States federal income tax law, a distribution of
the subordinated debentures following the dissolution of the Trust would not be
a taxable event to you unless the distribution occurs at a time when the Trust
is treated as an association taxable as a corporation. However, any
distributions of cash for the subordinated debentures would be a taxable event
to you.
16
<PAGE>
You should refer to "Certain Federal Income Tax Considerations-Receipt of
Subordinated Debentures or Cash Upon Liquidation of the Trust" for more
information.
You will have limited voting rights
As a holder of capital securities, you will have limited voting rights.
You can vote only to modify the capital securities and to exercise the Trust's
rights as a holder of the subordinated debentures. In general, only we can
replace or remove any of the trustees. However, if an event of default exists
under the trust agreement, the holders of the capital securities may replace the
property trustee and the Delaware trustee.
We, along with the property trustee and the administrative trustees,
may amend the trust agreement without your consent even if these actions
adversely affect your interests, to ensure that the Trust:
(a) will not be classified as an association taxable as a corporation
for United States federal income tax purposes and
(b) will not be required to register as an "investment company" under
the Investment Company Act of 1940.
You will have no voting rights with respect to any matters submitted to
a vote of our stockholders. For more information on your voting rights, please
refer to "Description of Capital Securities-Voting Rights; Amendment of the
Trust Agreement" and "-Removal of Trustees."
The holders of the capital securities and the subordinated debentures are not
protected by covenants in the indenture and the trust agreement
Neither the indenture, which sets forth the terms of the subordinated
debentures, nor the trust agreement, which sets forth the terms of the capital
securities and the common securities, protects holders of the subordinated
debentures or the capital securities, respectively, in the event we experience
significant adverse changes in our financial condition or results of operations.
In addition, neither the indenture nor the trust agreement limits our ability or
the ability of any subsidiary to incur additional indebtedness. Therefore, the
provisions of these governing instruments should not be considered a significant
factor in evaluating whether we will be able to comply with our obligations
under the subordinated debentures or the guarantee.
Trading price may not reflect the full value of the capital securities
We cannot predict the market prices for the capital securities or the
subordinated debentures that may be distributed if we dissolve the Trust. The
capital securities or the subordinated debentures may trade at a discount from
the price that you paid for the capital securities and may trade at prices that
do not fully reflect the value of any accrued and unpaid interest on the
underlying subordinated debentures.
A holder who uses the accrual method of accounting for tax purposes
(and a cash method holder, if the subordinated debenture are deemed to have been
issued with OID) and who disposes of its capital securities between record
dates for payments of distributions) will be required to include accrued but
unpaid interest on the subordinated debentures through the date of disposition
in income as ordinary income (i.e., interest or, possibly, OID), and to add such
amount to its adjusted
17
<PAGE>
tax basis in its share of the underlying subordinated debentures deemed disposed
of. To the extent the selling price is less than the holder's adjusted tax basis
(which will include all accrued but unpaid interest), a holder will recognize a
capital loss. Subject to certain limited exceptions, capital losses cannot be
applied to offset ordinary income for United States federal income tax purposes.
See "Certain Federal Income Tax Considerations-Interest Income and Original
Issue Discount" and "-Sales or Redemptions of Capital Securities."
We have applied for the capital securities to be listed on the Nasdaq
National Market. Although the underwriter of the offering has indicated that it
intends to make a market in the capital securities, it is not obligated to do so
and may stop any market-making activities at any time without notice. We cannot
be sure that there will be a liquid trading market for the capital securities.
Risks related to NHTB
We may experience difficulties in managing our growth
As part of our general strategy we may continue to acquire banks and
businesses that we believe provide a strategic fit with our business. To the
extent that we do grow, we cannot assure you that we will be able to adequately
and profitably manage our growth. Acquiring other banks and businesses will
involve risks commonly associated with acquisitions, including:
. potential exposure to liabilities of banks and businesses we acquire;
. difficulty and expense of integrating the operations and personnel of
banks and businesses we acquire;
. potential disruption to our business;
. potential diversion of our management's time and attention;
. impairment of relationships with and the possible loss of key employees
and customers of the banks and businesses we acquire; and
. incurrence of amortization expense if we account for an acquisition as
a purchase.
The success of our internal growth strategy will depend primarily on
our ability to generate an increasing level of loans and deposits at acceptable
risk levels and on acceptable terms without significant increases in non-
interest expenses relative to revenues generated. There is no assurance that we
will be successful in implementing our internal growth strategy. Our financial
performance also depends, in part, on our ability to manage various portfolios
and our ability to successfully introduce additional financial products and
services. There can be no assurance that additional financial products and
services will be introduced or, if introduced, that such financial products and
services will be successful. Furthermore, the success of our growth strategy
will depend on maintaining sufficient regulatory capital levels and on economic
conditions.
18
<PAGE>
If we are unable to successfully compete for customers in our market area, our
financial condition and results of operations could be adversely affected
We face intense and increasing competition in making loans, attracting
deposits and providing other financial products and services. The market area in
which we operate, west-central New Hampshire, has numerous financial
institutions that we compete with for customers. Our competition for loans comes
principally from
. commercial banks, . mortgage banking companies,
. savings banks, . finance companies, and
. savings and loan associations, . credit unions.
Our competition for deposits comes principally from
. commercial banks, . brokerage firms,
. savings banks, . insurance companies,
. savings and loan associations, . money market mutual funds,
and
. credit unions, . mutual funds (such as
corporate and government
securities funds).
Many of these competitors have greater financial resources and name
recognition, more locations, more advanced technology and more financial
products to offer than we have. Our profitability depends on our continued
ability to attract new customers and compete in west-central New Hampshire. If
we are unable to successfully compete, our financial condition and results of
operations will be adversely affected.
Because we primarily serve west-central New Hampshire, a decline in the local
economy could lower our profitability
We serve the west-central New Hampshire counties of Merrimack,
Sullivan, Hillsboro, and Grafton with our main office and 11 branches. The level
of our profits depend on providing products and services to customers in this
local region. An increase in unemployment, a decrease in real estate values
or an increase in interest rates are among the factors that could weaken the
local economy. With a weaker local economy:
. customers may not want or need our products and services;
. borrowers may be unable to repay their loans;
. the value of the collateral securing our loans to borrowers may
decline; and
. the overall quality of our loan portfolio may decline.
Making mortgage loans is a significant source of our profits. If
customers in the local area do not want these loans, our profits may decrease.
Although we could make other investments, we may earn less revenue on these
investments than on loans. Also, our losses on loans may increase if borrowers
are unable to make payments on their loans.
19
<PAGE>
Our future profits will be affected by our ability to successfully integrate the
new branches to be acquired from New London Trust, FSB
The Bank has agreed, subject to regulatory approval, to purchase three
branches located in New London, Andover and Newbury, New Hampshire. Under the
agreement, the Bank will acquire all of the deposits and certain loans related
to the branches (approximately $103.0 million and 88.0 million, respectively, as
of March 31, 1999). The Bank's future profits will be affected by the Bank's
ability to retain the acquired deposits, to generate revenues from the new
locations, to manage the costs associated with the acquisition and to otherwise
successfully integrate the new branches into its operations.
Interest rate changes may reduce our profitability
To be profitable, we have to earn more money in interest income and fee
income than we pay as interest on deposits and other interest-bearing
liabilities and as other expenses. If interest rates fall, the amount of
interest we earn on loans, and investment securities may decrease more quickly
than the amount of interest we pay on deposits and other interest-bearing
liabilities. This would result in a decrease in our profitability.
Changes in the level or structure of interest rates also affect
. our ability to originate loans,
. the value of our loan and securities portfolios,
. our ability to realize gains from the sale of loans and
securities assets,
. the average life of our deposits and
. our ability to obtain deposits.
Fluctuations in interest rates will ultimately affect both the level of income
and expense we record on a large portion of the Bank's assets and liabilities,
and the market value of all interest-earning assets, other than interest-earning
assets that mature in the short term. The Bank's interest rate management
strategy is designed to stabilize net interest income and preserve capital over
a broad range of interest rate movements by matching the interest rate
sensitivity of assets and liabilities. Although we believe that our current mix
of loans, investment securities and deposits is reasonable, significant
fluctuations in interest rates may have a negative effect on our profitability.
In addition, we are assuming $103.0 million of deposit liabilities from
New London Trust, FSB and creating $17.5 million in interest-bearing liabilities
in connection with this offering. The assumption of these interest bearing
liabilities could affect our interest rate risk.
We cannot predict how changes in technology will affect our business
The financial services market, including banking services, is
increasingly affected by advances in technology, including developments in:
. telecommunications;
20
<PAGE>
. data processing;
. automation;
. Internet-based banking;
. telebanking; and
. debit cards and so-called "smart cards."
Our ability to compete successfully in the future will depend on whether
we can anticipate and respond to technological changes. To develop these and
other new technologies we will likely have to make additional capital
investments. Although we continually invest in new technology, we cannot assure
you that we will have sufficient resources or access to the necessary
proprietary technology to remain competitive in the future.
The year 2000 problem could hurt our operations and profits
We rely upon computers to conduct our daily business. If our computer
systems fail to recognize a date using "00" as the year 2000, we may be unable
to do our routine business and provide service to our customers. The failure of
the computer systems of parties we do business with or utilities, including the
electric and telephone companies, to recognize the year 2000 may also disrupt
our operations. For example, we may not be able to process withdrawals or
deposits, prepare account statements or engage in any of the transactions that
constitute our normal operations. Any one or more of these events could hurt our
profits.
We use a combination of purchased and contract-based software as well as
other third party vendors for many of our data processing needs. Our vendor has
modified or replaced many of its computer applications and systems necessary to
correct the year 2000 date issue. We have substantially completed testing these
modified applications and systems. Our internal assessment of potential computer
issues for the year 2000 has been substantially completed. Where potential
computer issues have been identified, the vendors have committed to definitive
dates to resolve such issues. We have established contingency plans for systems
for which year 2000 issues will not be corrected. If our vendors do not achieve
year 2000 compliance, our operations could be adversely affected.
The OTS, our primary federal bank regulator, along with the other
federal bank regulators, has identified the year 2000 issue as a substantive
area of examination for both regularly scheduled and special bank examinations.
Under regulatory guidelines issued by the banking regulators, we must
substantially complete our testing of both internally and externally supplied
systems and all renovations by June 30, 1999. Because of this review by the
banking regulatory agencies, if we do not become year 2000 compliant, we could
become subject to administrative remedies similar to those imposed on financial
institutions otherwise found not to be operating in a safe and sound manner,
including remedies available under prompt corrective action regulations.
There has been limited litigation filed against corporations regarding
the year 2000 problem and a corporation's compliance efforts. However, the law
in this area will probably continue to develop well into the new millennium. If
we experience a year 2000 failure, our exposure could be significant and
material, unless there is legislative action to limit year 2000 liability.
Legislation has been introduced in several jurisdictions regarding the year 2000
problem. However, we cannot be sure that legislation will be enacted in
jurisdictions where we do business that will limit any
21
<PAGE>
potential liability. Through March 31, 1999, we had incurred approximately
$49,908 in costs associated with achieving year 2000 compliance. We expect to
incur approximately $110,000 in additional costs to achieve year 2000 compliance
during 1999.
We may be adversely affected by changes in laws and regulations affecting the
financial services industry
The Bank is subject to extensive regulation and supervision as a
federal savings bank. The regulatory authorities have extensive discretion in
connection with their supervision and enforcement activities and their
examination policies, including the imposition of restrictions on the operation
of a bank, the classification of assets by an institution and requiring an
increase in a federal savings bank"s allowance for loan losses. Any change in
the regulatory structure or the applicable statutes or regulations, whether by
the regulators or Congress, could have a material effect on us, the Bank, and
our operations.
22
<PAGE>
NEW HAMPSHIRE THRIFT BANCSHARES, INC.
Overview
We are a Delaware chartered savings and loan holding company, regulated
by the Office of Thrift Supervision of the United States Department of Treasury
and headquartered in Newport, New Hampshire. Through our wholly-owned
subsidiary, Lake Sunapee Bank, fsb, we provide community banking services to our
principal market area, the Upper Valley-Kearsarge-Lake Sunapee area of west-
central New Hampshire, including the counties of Merrimack, Sullivan, Hillsboro
and Grafton. The Bank was originally chartered in 1868 and presently operates as
a federally-chartered stock savings bank through its main office and eleven
branch locations.
We provide a wide range of community banking products and services to
individuals and small- to medium-sized businesses located in our market area. We
are engaged principally in the business of attracting deposits from the general
public, borrowing funds and investing those deposits and funds in various types
of residential and commercial real estate loans, residential construction loans,
consumer loans, commercial loans, municipal loans and investment securities. In
addition, we offer our customers a range of services such as safe deposit box
rentals, money orders, wire transfers, drive-through teller facilities, ATMs,
telephone banking, debit cards and check imaging. We also provide trust
services, investment brokerage services and life insurance products through our
subsidiaries and through arrangements with third parties. We expect to offer our
customers PC banking services by the third quarter of this year.
We have grown to $317.6 million in assets and $275.4 million in deposits
at March 31, 1999. Our deposits are insured by the Savings Association Insurance
Fund of the Federal Deposit Insurance Corporation ("FDIC") up to FDIC limits
(generally $100,000 per depositor).
Our principal executive office is located at 9 Main Street, Newport,
New Hampshire 03773 and our telephone number is (603) 863-0886.
Business Strategy
The target customer base for our community banking products and services
is composed of the individuals and small- to medium-sized businesses in our
market area. Our goal is to enhance our regional presence by expanding our
geographic market area and customer base through selective acquisitions and
branch expansion and by increasing the financial services we provide our
customers. The major components of our growth-oriented community banking
strategy are set forth below.
. Growth of Our Community Banking Franchise
We strive to be the premier community-oriented bank in our market area.
Our focus is on developing long-term customer relationships, which we
believe is accomplished by providing personalized service, convenient
locations, and the flexibility to meet the needs of both individuals and
businesses. Over the past five years we have demonstrated a commitment
to grow our community banking franchise by expanding our deposit base
(from $194.5 million to $275.4 million during this period), acquiring
other whole institutions (such as Landmark Bank of Lebanon, New
Hampshire in 1997), establishing new branches and introducing products
and services that are attractive to retail customers (such as telephone
banking, debit cards and check imaging). Our "gateway strategy" seeks to
establish an initial checking account relationship with a new customer
and, thereafter, to
23
<PAGE>
provide other types of transaction accounts and expanded financial
services to the customer. As a result of this strategy, the Bank has
increased the number of our checking accounts by 32% over the last three
years. We believe the continued success of these core strategies for
retail growth will be a key component to our ability to continue to
expand our Franchise.
. Becoming a Full-Service Financial Provider
Unlike many traditional thrifts, we offer a full-range of deposit, loan,
trust, securities brokerage, insurance and other financial products and
services to our customers. We view these products and services as a
natural extension of our community banking franchise. Commencing with
the acquisition of Landmark Bank of Lebanon, New Hampshire in 1997, we
have adopted a strategy to become a more active business lender and to
achieve a greater diversification of assets on our balance sheet. We
offer small- to medium-sized businesses in our market area traditional
loan products and commercial services that enhance their ability to
compete effectively by giving business owners not only increased working
capital but also the financial means and capability to implement a
variety of modernization plans and operating efficiencies, such as
inventory controls, equipment upgrading and real estate acquisition and
plant construction projects. As a result of these efforts, our
commercial and commercial real estate loan portfolios have grown to
represent 18.5% of our loan portfolio at March 31, 1999. Because
commercial and commercial real estate loans typically carry a higher
yield than investment securities, we anticipate that continued growth in
these portfolios will further enhance our overall profitability. In
addition, we provide trust services, investment brokerage services and
life insurance products through our subsidiaries and through
arrangements with third parties. By becoming a full-service provider of
financial services, we have enhanced our ability to attract and retain
both retail and commercial customers in our market area.
. Providing Technologically Enhanced Products and Services
In order to adequately serve the needs of our customers, we must ensure
that our products and services are easily accessed by and effectively
delivered to our customers. In recent years, the increased use of
alternative delivery channels has simplified and reduced the costs of
financial transactions for consumers, businesses and financial
institutions. In addition to conducting financial transactions at branch
offices and through ATMs, customers are increasingly using telephone
banking services, online banking and bill processing services and
electronic funds transfer services. Our 24 hour Telebanker service
provides our customers with around the clock access to their accounts
through the use of a touch tone telephone. We also plan to introduce PC
banking services, which will give our customers the ability to access
their accounts and conduct online banking, bill payment and bill
presentment activities through their personal computers, in the third
quarter of 1999. In addition, we have added several new reporting and
servicing capabilities. Our new check imaging system, instituted in
1998, has substantially simplified record keeping for both us and our
customers, providing fully sorted and easy-to-store digital printouts of
all checks. This new digital check imaging system also offers further
flexibility and ease of use for customers by having this documentation
available in the form of CD-ROMs.
. Controlled Growth Through Selective Acquisitions and Branch Expansion
We have an established track record of capitalizing on strategic
opportunities for growth through acquisitions and branch expansion. On
January 22, 1997, we acquired Landmark Bank, a $57.8 million asset
commercial bank located in Lebanon, New Hampshire. In October, 1997 we
opened a de novo branch in Centerra Plaza, Lebanon, New Hampshire.
24
<PAGE>
Consistent with this strategy, on April 12, 1999, we agreed to acquire
three retail banking offices from New London Trust, FSB located in New
London, Andover and Newbury, New Hampshire. Our success in implementing
a strategy of controlled growth is reflected by the expansion of our
deposit base over the last five years from $194.5 million to $275.4
million. We will acquire all of the deposit liabilities and certain
loans associated with these offices (approximately $103.0 million and
$88.0 million, respectively, at March 31, 1999). We will continue to
consider selective acquisition and branch expansion opportunities as a
means for enhancing our regional presence, increasing market
penetration, expanding the scope of our financial services and achieving
improved operating and cost efficiencies. We will also continue to
evaluate our technology, operations and product offerings in connection
with our assessment of growth opportunities.
. Efficient Capital Management and Consistent Shareholder Returns
Our policy has always been to maintain our financial strength through
risk management, conservative loan underwriting standards, investment in
high grade assets and consistent earnings. We have made progress in
providing a more attractive return on equity over the past few years
primarily as a result of the growth of our loan portfolio and deposit
liabilities, increases in non-interest income and controlled growth of
non-interest expenses, while maintaining our commitment to capital
strength and asset quality. We have paid a cash dividend in each of the
40 consecutive quarters of our existence as a public company and, in
recent years, we have a history of increasing quarterly cash dividends
to enhance returns for our shareholders. Additionally, our Board of
Directors has recently authorized us to repurchase shares of our
outstanding common stock from time to time at prevailing market prices,
up to a maximum of 10% of the shares outstanding (approximately 210,428
shares in the aggregate). We expect that our stock repurchase program
will contribute to enhanced return on equity.
Pending Acquisition of Three New London Trust, FSB Branches
On April 12, 1999, we announced the signing of a definitive agreement to
purchase three branches located in New London, Andover and Newbury, New
Hampshire from New London Trust, FSB. The transaction, which is subject to
regulatory approval, is currently expected to close in the fourth quarter of
1999. The Bank has filed the regulatory applications necessary to obtain the
required regulatory approvals.
Under the agreement, the Bank will acquire all of the deposits, certain
loans and other assets and liabilities related to the three branches. At March
31, 1999, the total amount of deposits amounted to approximately $103.0 million
classified as follows:
<TABLE>
<CAPTION>
--------------------------- ---------------------------------
Amount Weighted Average
Interest Rate
(In thousands)
<S> <C> <C>
Demand deposits...................................... $ 25,026 0.80%
Money market......................................... 25,329 4.01
Savings deposits..................................... 9,107 2.54
Time deposits........................................ 43,615 5.02
---------------------------------------------------------------
Total deposits.................................... $ 103,077 3.53%
===============================================================
</TABLE>
25
<PAGE>
At March 31, 1999, the total amount of loans amounted to approximately
$88.0 million categorized as follows:
<TABLE>
<CAPTION>
-------------- ----------------
Amount Weighted Average
Interest Rate
<S> <C> <C>
Real estate loans
Conventional...................................... $ 47,393 7.59%
Construction...................................... 1,072 8.03
Consumer loans....................................... 6,202 8.44
Commercial and municipal loans....................... 33,538 8.86
-------------- --------
Total loans....................................... $ 88,205 8.14%
============== ========
</TABLE>
26
<PAGE>
MANAGEMENT
Set forth below is certain biographical information with respect to our
Directors and Executive Officers. Each of these persons has been engaged in the
principal occupation or employment specified for the past five years unless
otherwise noted.
Directors
LEONARD R. CASHMAN, age 56, a resident of Etna, New Hampshire, is an
owner and a partner of C.O.H. Properties, and owner, President and a Director of
C.O.H. Enterprises, Inc., and a partner in Etna Real Estate Associates. He is
also involved in the marketing of specialized group medical insurance products.
He was formerly Vice President and General Manager of P&C Foods, Inc. Mr.
Cashman has been a Director of NHTB since 1997.
STEPHEN W. ENSIGN, age 52, has been associated with the Bank in various
positions since 1971. He was elected President, Chief Operating Officer and
Director of the Bank in May 1987 and Director of NHTB in 1989. On January 1,
1992 he was elected NHTB's President and Chief Executive Officer. In 1997, Mr.
Ensign was elected Vice Chairman of the Board of Directors of both NHTB and the
Bank.
RALPH B. FIFIELD, JR., age 74, retired in 1995 from his position as
Executive Vice President of the Bank. From April 1987 to August 1990, Mr.
Fifield was employed as a regional president of BankEast Corporation, Hanover,
New Hampshire. Prior to that, he was a Senior Vice President at the First
National Bank of Boston where he retired after 37 years of service. He has
served as a Director of the Bank and NHTB since 1990.
JOHN A. KELLEY, Jr., age 69, is a retired building contractor from
Warner, New Hampshire, and is the owner of a commercial laundromat located in
Warner, New Hampshire. He has served as a Director of the Bank since 1975, and
NHTB since 1989.
JOHN J. KIERNAN, age 73, has been associated with the Bank since 1960.
He has served as a Director of the Bank since 1968 and was elected Chairman of
its Board in 1984. He has served as a Director and Chairman of the Board of NHTB
since 1989. Prior to his retirement on December 31, 1991, he served as Chief
Executive Officer of the Bank and as NHTB's President and Chief Executive
Officer. Mr. Kiernan is the father-in-law of Stephen R. Theroux.
PETER R. LOVELY, age 56, has been associated with the Bank since 1980.
In 1983, he formed the Bank's Brokerage Services Department and served as
Investment Manager of the Newport, New London, and Upper Valley offices of the
Bank until his retirement in 1998. He has served as a Director of the Bank since
1996.
DENNIS A. MORROW, age 62, is Sales Manager of Cote and Reney Lumber
Company in Grantham, New Hampshire, and has been associated with that firm for
20 years. He has served as a Director of the Bank since 1984 and NHTB since
1989.
JACK H. NELSON, age 54, a resident of Hanover, New Hampshire, is the
Chairman of the Board of Directors of North East Environmental Products Inc., a
manufacturer and distributor of water treatment equipment. Additionally, Mr.
Nelson is President of the Hanover Water Company. Mr. Nelson has been a Director
since 1997.
27
<PAGE>
PRISCILLA W. OHLER, age 74, has resided in New London, New Hampshire for
over 40 years. She is a volunteer in various state and community activities.
Mrs. Ohler has served as a Director of the Bank since 1981, and NHTB since 1989.
STEPHEN R. THEROUX, age 49, was elected Executive Vice President of the
Bank in May, 1987. He has served as a Director of the Bank since 1986. Mr.
Theroux is NHTB Executive Vice President and a Director of NHTB having served in
such capacities since 1989. Mr. Theroux has served as Chief Operating Officer of
the Bank since 1997. Mr. Theroux is the son-in-law of John J. Kiernan.
KENNETH D. WEED, age 72, is a partner of L.E. Weed & Sons, a cement
manufacturer located in Newport, New Hampshire. He has served as a Director of
the Bank since 1973, and NHTB since 1989.
JOSEPH B. WILLEY, age 57, is a resident of Norwich, Vermont. Mr. Willey
is a principal owner, the President and a Director of Pro-Cut International,
Inc., a company engaged in the manufacture, sale and export of automotive repair
products. He was previously a principal owner and a Vice President of Northern
States Tire Corporation. He has served as a Director of the Bank since 1997 and
a Director of NHTB since 1998.
Executive Officers Who are Not Directors
DARYL J. CADY, age 37, has been associated with the Bank since 1985 and
has served in various positions since that time. Ms. Cady was elected Senior
Vice President and the Chief Financial Officer of the Bank and NHTB in April,
1998. Ms. Cady is a certified public accountant, a member of the AICPA, and a
member of the Financial Managers Society.
NHTB Capital Trust I
We organized the Trust as a statutory business trust under Delaware law
pursuant to the trust agreement that we, as sponsor, and the trustees executed.
We, together with the trustees, filed a certificate of trust with the Delaware
Secretary of State on , 1999.
The Trust exists solely to:
. issue and sell the capital securities to the public and the
common securities to us;
. use the proceeds from the sale of the capital securities and
common securities to purchase our subordinated debentures, which
will be the only assets of the Trust;
. maintain its status as a grantor trust for federal income tax
purposes; and
. engage in other activities that are necessary or incidental to
these purposes.
We will purchase all of the common securities of the Trust. The common
securities will represent an aggregate liquidation amount equal to 3% of the
Trust's total capitalization. The capital securities will represent the
remaining 97% of the Trust's total capitalization. The common securities will
have terms substantially identical to the capital securities. However, if we
default on our payments under the subordinated debentures, the Trust will only
pay cash distributions and liquidation, redemption and other amounts payable to
us with respect to the common securities after it pays you these amounts on the
capital securities.
28
<PAGE>
The Trust has a term of approximately 30 years, but we may dissolve it
earlier as provided in the trust agreement. The trustees conduct the Trust's
business and affairs. We appoint each trustee. The trustees are:
. Wilmington Trust Company, as property trustee;
. Wilmington Trust Company, as Delaware trustee; and
. Three individuals who are our employees, as administrative
trustees.
As the sole holder of the common securities, we can replace or remove
any of the trustees. However, if an event of default exists under the trust
agreement, the holders of the capital securities with at least a majority of
aggregate liquidation amount of the capital securities will be able to remove
and replace the property trustee and the Delaware trustee. Only we, as owner of
all of the common securities, can remove or replace the administrative trustees.
The duties and obligations of each trustee are governed by the trust agreement.
We will pay all fees and expenses related to the Trust and the offering
of the capital securities, as well as all of the ongoing costs and expenses of
the Trust. We will not be responsible for the Trust"s obligations under the
capital securities, except as provided by our guarantee of the capital
securities.
The Trust has no separate financial statements. The statements would not
be material to you because the Trust has no independent operations.
The principal executive office of the Trust is c/o New Hampshire Thrift
Bancshares, Inc., 9 Main Street, P.O. Box 9, Newport, NH 03773 and its telephone
number is (603) 863-0886.
Use of Proceeds
All the proceeds to the Trust from the sale of the capital securities
and the common securities will be invested by the Trust in the subordinated
debentures. We expect to receive estimated net proceeds equal to $ million from
the sale of the subordinated debentures after commissions and other offering
expenses. Of the $ , we will contribute approximately $15.0 million to the Bank
as equity capital for the purpose of providing additional capital to support the
pending acquisition of three branches from New London Trust, FSB. We will retain
the balance of the proceeds for:
. financing growth, which may include expansion of our lending and
investment activities, one or more branch acquisitions,
acquisitions of other financial institutions, or acquisitions of
other financial services companies,
. repurchases of our common stock; and
. general corporate purposes.
The offering of the capital securities is not contingent upon consummation of
the pending branch acquisition. If the branch acquisition is not consummated, we
will use the proceeds for the expansion of our lending and investment
activities, additional stock repurchases and for general corporate purposes.
Capitalization
The following table presents our consolidated capitalization at
March 31, 1999 and as adjusted to show the effect of the completion of the
offering of the capital securities and the
29
<PAGE>
issuance of the subordinated debentures to the Trust. You should read this table
together with the consolidated financial statements and notes incorporated by
reference to our Annual Report on Form 10-KSB for the fiscal year ended December
31, 1998 and our Quarterly Report on Form 10-QSB for the three months ended
March 31, 1999 and the "Use of Proceeds" section in this prospectus.
<TABLE>
<CAPTION>
-------------------------------------------------------
At March 31, 1999
-----------------
As Adjusted
-------- -------------- ----------------
Securities Sale
Actual Securities Sale and Branch
Acquisition
(Dollars in thousands)
<S> <C> <C> <C>
Guaranteed preferred beneficial interest in our subordinated
debentures(1)............................................... $ - $ 17,500 $ 17,500
--------- ------------- -------------
Shareholders" equity:
Common stock, $.01 par value per share, 5,000,000 shares
authorized, 2,479,858 shares issued and 2,104,285
shares outstanding at March 31, 1999......................... 25 25 25
Paid-in capital............................................... 17,875 17,875 17,875
Retained earnings............................................. 12,457 12,457 12,457
Net unrealized loss on securities available for sale.......... (295) (295) (295)
Treasury stock, at cost (375,573 shares as of
March 31, 1999)............................................. (2,458) (2,458) (2,458)
--------- -------------- --------------
Total stockholders" equity................................. $ 27,604 $ 27,604 $ 27,604
--------- -------------- --------------
Total guaranteed preferred beneficial interest in our
subordinated debentures and shareholders" equity........... $ 27,604 $ 45,104 $ 45,104
========= ============== ==============
Capital ratios (2):
Tier 1 risk-based capital ratio(3)............................ 11.60% 19.16% 10.08%
Total risk-based capital ratio(3)............................. 12.19 19.76 10.84
Core capital (to tangible assets) ............................ 7.32 12.09 6.51
Tangible capital (to tangible assets) ........................ 7.32 12.09 6.51
</TABLE>
- --------------------
(1) The sole assets of the Trust, which we will treat as one of our
subsidiaries, will be $18.0 million aggregate principal amount of our
subordinated debentures, which will mature on , 2029. NHTB will own
all of the common securities issued by the Trust.
(2) Assumes that we will contribute $15.0 million of proceeds from the sale of
the capital securities to the Bank. The capital ratios, as adjusted,
are computed in a manner consistent with OTS guidelines.
(3) For purposes of the "as adjusted" risk-based capital ratios, the proceeds
from the securities offering were assumed to have a risk-weighting of
0% and the estimated net proceeds from the acquisition of the branches
from New London Trust, fsb and were assumed to have an average risk-
weighting consistent with the average risk-weighting for the Bank.
30
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 1999
(Dollars in thousands)
<TABLE>
<CAPTION>
-------------- ----------- ---------- ----------- --------------
Unaudited Capital Pro Forma Acquisition Pro Forma
NHTB at Securities After of NLT NHTB at
March 31, 1999 Issuance(1) Capital Branches(2) March 31, 1999
Securities
Issuance
<S> <C> <C> <C> <C> <C>
Assets
Cash and due from banks....................... $ 6,370 $ - $ 6,370 $ 850 $ 7,220
Federal funds sold............................ - 16,887 16,887 - 16,887
--------- -------- --------- -------- ---------
Cash and cash equivalents.................... 6,370 16,887 23,257 850 24,107
Securities available for sale, at fair value.. 51,266 - 51,266 - 51,266
Other investments ............................ 2,033 - 2,033 - 2,033
Loans receivable, net......................... 240,619 - 240,619 88,205 328,824
Accrued interest receivable................... 1,947 - 1,947 - 1,947
Premises and equipment, net................... 8,327 - 8,327 3,255 11,582
Investments in real estate.................... 528 - 528 - 528
Real estate owned and property
acquired in settlement of loans........... 687 - 687 - 687
Goodwill ..................................... 3,151 - 3,151 11,326 14,477
Other assets.................................. 2,650 613 3,263 3,170 6,433
--------- -------- --------- -------- ---------
Total assets.............................. $ 317,578 $ 17,500 $ 335,078 $ 106,806 $ 441,884
========= ======== ========= ========= =========
Liabilities, Guaranteed Preferred Beneficial
Interests in Our Junior Subordinated
Debentures and Shareholders' Equity
Total deposits................................ $ 275,442 $ - $ 275,442 $103,077 $ 378,519
Securities sold under agreements
to repurchase............................. 7,085 - 7,085 - 7,085
FHLB advances and other borrowings............ 3,848 - 3,848 - 3,848
Accrued expenses and other liabilities........ 3,599 3,599 3,729 7,328
--------- -------- --------- -------- ---------
Total liabilities......................... 289,974 - 289,974 106,806 396,780
--------- -------- --------- -------- ---------
Guaranteed preferred beneficial interests in.. - 17,500 17,500 - 17,500
--------- -------- --------- -------- ---------
Shareholders' equity:
Common stock............................. 25 - 25 - 25
Additional paid-in capital................ 17,875 - 17,875 - 17,875
Retained earnings......................... 12,457 - 12,457 - 12,457
Accumulated other comprehensive loss...... (295) - (295) - (295)
Treasury stock, at cost................... (2,458) - (2,458) - (2,458)
--------- -------- --------- -------- ---------
Total shareholders' equity............. 27,604 27,604 - 27,604
--------- -------- --------- -------- ---------
Total liabilities, guaranteed preferred
beneficial interests in our junior
subordinated debentures and
shareholders' equity.................. $ 317,578 $ 17,500 $ 335,078 $106,806 $ 441,884
========= ======== ========= ======== =========
</TABLE>
___________________________
(1) Represents the issuance of the capital securities, with the net proceeds
reflected as federal funds sold. The estimated offering costs of $613,000
will be included in other assets and amortized over the 30 year term of the
subordinated debentures.
(2) Represents, as of March 31, 1999, the assets to be acquired and the
liabilities to be assumed in the proposed acquisition of the three branches
from New London Trust, FSB. Since the assets acquired and liabilities
assumed do not constitute a business which has continuity, historical
financial statements are not available or relevant and are accordingly not
included herein. Loans and premises and equipment to be acquired
approximates the assets' fair value. The deposits assumed are all
considered to be at market rates and, accordingly, approximate fair value.
Intangible assets represents the tax deductible deposit premium of 10.26%
of the deposits assumed, including accrued interest payable, which will be
amortized over 15 years on a straight-line basis plus $750,000 in
transaction costs. The net cash received in the settlement of the
transaction has been shown as federal funds sold.
31
<PAGE>
Accounting Treatment
For financial reporting purposes, we will treat the Trust as our
subsidiary. We will include the Trust's accounts in our consolidated financial
statements. The capital securities will be presented as a separate line item in
our consolidated balance sheet under the caption "borrowed funds," and
appropriate disclosures about the capital securities, the guarantee and the
subordinated debentures will be included in the notes to our consolidated
financial statements. For financial reporting purposes, we will record
distributions payable on the capital securities as an expense in our
consolidated statements of income.
Description of Capital Securities
This summary describes the material provisions of the capital securities.
This description is not complete and you should refer to, the trust agreement,
including the definitions used in the trust agreement, and the Trust Indenture
Act for more information. We have filed the form of the trust agreement as an
exhibit to the registration statement of which this prospectus is a part.
General
The capital securities of the Trust will rank equal to, and payments made
on the capital securities will be made on a pro rata basis with, the common
securities of the Trust, except as described under "--Subordination of Common
Securities." The property trustee will have legal title to the subordinated
debentures and will hold them in trust for the benefit of you and the other
holders of the capital securities. Our guarantee for the benefit of the holders
of the capital securities will be a guarantee on a subordinated basis with
respect to the capital securities, but will not guarantee payment of
distributions or amounts payable on redemption or liquidation of the capital
securities when the Trust does not have funds legally available to pay
distributions or other amounts to the holders of the capital securities. You
should read "Description of Guarantee" for more information about our guarantee.
Distributions
The capital securities represent beneficial ownership interests in the
Trust. Distributions on the capital securities will be cumulative, and will
accumulate from the date that the capital securities are first issued.
Distributions will be made at the annual rate of % of the stated liquidation
amount of $10.00, payable quarterly in arrears on the distribution dates, which
are March 31, June 30, September 30 and December 31 of each year, to holders of
the capital securities on the relevant record dates. If the capital securities
are in book-entry form, the record dates will be one business day prior to the
relevant distribution date. If the capital securities are not in book-entry
form, record dates will be the 15th day of the month in which the distribution
is to be paid.
The first distribution date for the capital securities will be September
30, 1999. The period beginning on and including the date the capital securities
are first issued and ending on but excluding September 30, 1999, and each period
thereafter beginning on and including a distribution date and ending on but
excluding the next distribution date is a distribution period. The amount of
distributions payable for any distribution period will be based on a 360-day
year of twelve 30-day months.
If any distribution date would otherwise fall on a day that is not a
business day, the distribution date will be postponed to the next day that is a
business day without any additional payments for the delay, unless the
distribution would fall in the next calendar year, in which case the
distribution date
32
<PAGE>
will be the last business day of the calendar year. A business day means any day
other than a Saturday or a Sunday, or a day on which banks in New York, New York
or Wilmington, Delaware are authorized or required by law or executive order to
remain closed or a day on which the principal corporate trust office of the
property trustee is closed for business.
The Trust's revenue available for distribution to holders of the capital
securities will be limited to our payments to the Trust under our subordinated
debentures. For more information, please refer to "Description of Subordinated
Debentures --General." If we do not make interest payments on the subordinated
debentures, the property trustee will not have funds available to pay
distributions on the capital securities and on the common securities. We will
guarantee the payment of distributions if and to the extent that the Trust has
funds legally available to pay the distributions. You should read "Description
of Guarantee" for more information about the extent of our guarantee.
Option to Defer Interest Payments
As long as no event of default exists, we have the right under the
indenture to elect to defer the payment of interest on the subordinated
debentures, at any time or from time to time, for no more than 20 consecutive
quarters with respect to each deferral period, provided that no deferral period
will end on a date other than an interest payment date on the subordinated
debentures, or extend beyond , 2029, the maturity date of the
debentures. If we defer payments, the Trust will defer quarterly distributions
on the capital securities during a deferral period. During any deferral period
distributions will continue to accrue on the capital securities and on any
accrued and unpaid distributions, compounded quarterly from the relevant
distribution date at the applicable distribution rate, which will be equal to
the applicable interest rate on the subordinated debentures. The term
distributions includes any accumulated additional distributions.
Before the end of any deferral period, we may extend the deferral period,
as long as the extension does not cause the deferral period to exceed 20
consecutive quarters, or, to end on a date other than an interest payment date
or extend beyond , 2029. At the end of any deferral period and upon the
payment of all amounts then due obn any interest payment date, we may elect to
begin a new deferral period, subject to the above requirements. No interest
shall be due and payable during a deferral period until the deferral period
ends. We must give the property trustee, the administrative trustees and the
debenture trustee notice of our election to defer interest payments or to extend
a deferral period at least five business days before the earlier of:
. the date the distributions on the capital securities would have
been payable except for the election to begin a deferral period;
and
. the date the administrative trustees are required to give notice
to any securities exchange or automated quotation system or to
holders of the capital securities of the record date or the date
such distributions are payable, but in any event not less than
five business days prior to such record date.
There is no limitation on the number of times that we may elect to begin a
deferral period. Please refer to "Description of Subordinated Debentures--Option
to Extend Interest Payment Date" and "Certain Federal Income Tax Consequences--
Interest Income and Original Issue Discount."
During any deferral period, we may not:
. declare or pay any dividends or distributions on, or redeem,
purchase, acquire, or make a liquidation payment with respect
to, any of our capital stock;
33
<PAGE>
. make any payment of principal of, or interest or premium, if
any, on or repay, repurchase or redeem any debt securities that
rank equal or junior to the subordinated debentures; or
. make any guarantee payments with respect to any guarantee of the
debt securities of any subsidiary (including our guarantee of
the capital securities issued by NHTB Capital Trust I and other
similar guarantees) if such guarantee ranks equal or junior to
the subordinated debentures.
Notwithstanding the foregoing, during a deferral period we may make
the following payments:
(a) dividends or distributions in shares of, or options,
warrants or rights to subscribe for or purchase shares
of, our common stock,
(b) any declaration of a dividend in connection with the
implementation of a stockholders' rights plan, or the
issuance of rights, stock or other property under any
such plan in the future, or the redemption or
repurchase of any such rights pursuant thereto,
(c) payments under the guarantee,
(d) as a result of a reclassification of our capital stock
or the exchange or conversion of one class or series of
our capital stock or indebtedness for another class or
series of our capital stock,
(e) the purchase of fractional interests in shares of our
capital stock pursuant to the conversion or exchange
provisions of such capital stock or the security being
converted or exchanged and
(f) purchases of common stock related to the issuance of
common stock or rights under any of our benefit plans
for our directors, officers or employees or any of our
dividend reinvestment plans.
We do not currently intend to exercise our right to defer payments of
interest on the subordinated debentures. Our obligations under the guarantee to
make payments of distributions is limited to the extent that the Trust has funds
legally available to pay distributions. You should read "Description of
Guarantee" for more information about the extent of our guarantee.
Redemption
Upon repayment on , 2029 or prepayment, in whole or in part
prior to , 2029, of the subordinated debentures (other than following the
distribution of the subordinated debentures to you as a holder of the capital
securities and us, as the holder of the common securities), the property trustee
will apply the proceeds from the repayment or prepayment of the subordinated
debentures (as long as the property trustee has received written notice no later
than 45 days before the repayment) to redeem at the applicable redemption price
an amount of capital securities having an aggregate liquidation amount equal to
the principal amount of the subordinated debentures paid to the Trust. We will
give notice of any redemption between 30 and 60 days prior to the redemption
date.
34
<PAGE>
If we prepay less than all of the subordinated debentures on a
redemption date, then the property trustee will allocate the proceeds of the
prepayment on a pro rata basis among the capital securities and the common
securities. If a court of competent jurisdiction enters an order to dissolve the
Trust, the subordinated debentures will be subject to optional prepayment in
whole, but not in part, on or after , 2004.
We will have the right to prepay the subordinated debentures:
(1) in whole or in part, on or after , 2004; and
(2) in whole but not in part, at any time prior to March ,
2004, if there are changes in the bank regulatory, investment company or tax
laws that would adversely affect the status of the Trust, the capital securities
or the subordinated debentures.
We may have to obtain regulatory approval, including the approval of
the OTS, before we redeem any subordinated debentures.
Please refer to "Description of Subordinated Debentures--Optional
Prepayment" and "--Special Event Prepayment" for information on prepayment of
the subordinated debentures.
Liquidation of the Trust and Distribution of Subordinated Debentures
We, as holder of the outstanding common securities, will have the
right at any time to dissolve the Trust and, after satisfying the liabilities
owed to the Trust's creditors as required by applicable law, we will have the
right to distribute the subordinated debentures to the holders of the capital
securities and to us as holder of the common securities. Our right to dissolve
the Trust is subject to our receiving:
. an opinion of counsel to the effect that if we distribute the
subordinated debentures, the holders of the capital
securities will not experience a taxable event; and
. any required regulatory approval.
The Trust will automatically dissolve if:
(1) certain bankruptcy events occur, or we dissolve or liquidate;
(2) we distribute subordinated debentures having a principal
amount equal to the liquidation amount of the capital securities to holders of
the capital securities and we, as holder of the common securities, have given
written directions to the property trustee to dissolve the Trust (which
direction is at our option and, except as described above, wholly within our
discretion, as holder of the common securities);
(3) the Trust redeems all of the capital securities as described
under "--Redemption;"
(4) the Trust's term expires; or
(5) a court of competent jurisdiction enters an order for the
dissolution of the Trust.
If the Trust is dissolved as described in clause (1), (2), (4), or (5)
above, the Trust will be liquidated by the trustees as quickly as the trustees
determine to be possible by distributing to holders of the capital securities,
after satisfying the liabilities owed to the Trust's creditors as provided by
applicable law, subordinated debentures having a principal amount equal to the
35
<PAGE>
liquidation amount of the capital securities, unless the property trustee
determines that this distribution is not practicable. If the property trustee
determines that this distribution is not practicable, the holders of the capital
securities will be entitled to receive an amount equal to the aggregate in
liquidation amount plus accumulated and unpaid distributions on the capital
securities to the date of payment (such amount being the "liquidation
distribution") out of the assets of the Trust legally available for distribution
to holders, after satisfying the liabilities owed to the Trust's creditors as
provided by applicable law. If the liquidation distribution can be paid only in
part because the Trust has insufficient assets legally available to pay the full
amount of the liquidation distribution, or if a debenture event of default
exists, the capital securities will have a priority over the common securities.
For more information, please refer to "--Subordination of Common Securities."
After the liquidation date is fixed for any distribution of
subordinated debentures to holders of the capital securities:
(1) the capital securities and the common securities will no longer
be deemed to be outstanding;
(2) DTC or its nominee will receive in respect of each registered
global certificate representing capital securities and the common securities a
registered global certificate representing the subordinated debentures to be
delivered upon this distribution; and
(3) any certificates representing capital securities and the common
securities not held by DTC or its nominee will be deemed to represent
subordinated debentures having a principal amount equal to the liquidation
amount of those capital securities, and bearing accrued and unpaid interest in
an amount equal to the accumulated and unpaid distributions on those capital
securities until such certificates are presented to the administrative trustees
or their agent for cancellation, in which case we will issue to those holders,
and the Delaware trustee will authenticate, a certificate representing the
subordinated debentures.
We cannot assure you of the market prices for the capital securities
or the subordinated debentures that may be distributed to you in exchange for
the capital securities if a dissolution and liquidation of the Trust were to
occur. Accordingly, the capital securities that you purchase, or the
subordinated debentures that you may receive upon a dissolution and liquidation
of the Trust, may trade at a discount to the price that you paid to purchase the
capital securities offered by this prospectus
If we elect not to prepay the subordinated debentures prior to
maturity and either elect not to or we are unable to liquidate the Trust and
distribute the subordinated debentures to holders of the capital securities, the
capital securities will remain outstanding until the repayment of the
subordinated debentures on , 2029.
Redemption Procedures
If we redeem the subordinated debentures, the Trust will redeem
capital securities and the common securities at the applicable redemption price
with the proceeds that it receives from our redemption of the subordinated
debentures. Any redemption of capital securities and the common securities will
be made and the applicable redemption price will be payable on the redemption
date only to the extent that the Trust has funds legally available to pay the
applicable redemption price. For more information, you should refer to
"--Subordination of Common Securities."
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If the Trust gives a notice of redemption for the capital securities,
then, by 12:00 noon, New York City time, on the redemption date, to the extent
funds legally are available, with respect to:
. the capital securities held by DTC or its nominees, the
property trustee will deposit, or cause the paying agent to
deposit, irrevocably with DTC funds sufficient to pay the
applicable redemption price and will give DTC irrevocable
instructions and authority to pay the redemption price to the
holders of the capital securities. For more information, you
should refer to "--Form, Denomination, Book-Entry Procedures
and Transfer."
. the capital securities held in certificated form, the
property trustee will irrevocably deposit with the paying
agent funds sufficient to pay the applicable redemption price
and will give the paying agent irrevocable instructions and
authority to pay the applicable redemption price to the
holders upon surrender of their certificates evidencing the
capital securities. For more information, you should refer to
"--Payment and Paying Agency."
The paying agent will initially be the property trustee and any
co-paying agent chosen by the property trustee and acceptable to the
administrative trustees and us.
Notwithstanding the foregoing, distributions payable on or before the
redemption date will be payable to the holders of the capital securities on the
relevant record dates for the related distribution dates. If the Trust gives a
notice of redemption and funds are deposited as required, then upon the date of
the deposit, all rights of the holders of the capital securities called for
redemption will cease, except the right of the holders of the capital securities
to receive the applicable redemption price, without interest, and the capital
securities called to be redeemed will cease to be outstanding.
If any redemption date for the capital securities is not a business
day, then the applicable redemption price, without interest or any other payment
in respect of the delay, will be paid on the next business day, except that, if
the next business day falls in the next calendar year, the payment shall be made
on the last business day of the calendar year. If payment of the applicable
redemption price is improperly withheld or refused and not paid either by the
Trust or by us pursuant to the guarantee:
(1) distributions on the capital securities will continue to
accumulate at %, from the redemption date originally established by
the Trust to the date such applicable redemption price is actually paid; and
(2) the actual payment date will be the redemption date for purposes
of calculating the applicable redemption price.
Notice of any redemption will be mailed between 30 and 60 days before
the redemption date to each holder of capital securities at its registered
address. Unless we default in payment of the applicable redemption price on, or
in the repayment of, the subordinated debentures, on and after the redemption
date, distributions will cease to accrue on the capital securities called for
redemption.
Subject to applicable law (including, without limitation, U.S. federal
securities laws), we or our subsidiaries may at any time, and from time to time,
purchase outstanding capital securities in the open market or by private
agreement.
Subordination of Common Securities
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Payment of distributions on, and the redemption price of, the capital
securities and the common securities, as applicable, will generally be made on a
pro rata basis. However, if a debenture event of default exists on any
distribution or redemption date, no payment of any distribution on, or
applicable redemption price of, any of the common securities, and no other
payment on account of the redemption, liquidation or other acquisition of the
common securities, will be made unless payment in full in cash of all
accumulated and unpaid distributions on all of the outstanding capital
securities for all distribution periods terminating on or before the
distribution or redemption date, or payment of the applicable redemption price
is made in full. All funds available to the property trustee will first be
applied to the payment in full in cash of all distributions on, or redemption
price of, the capital securities then due and payable.
In the case of any event of default, we, as holder of all of the
common securities, will be deemed to have waived any right to act with respect
to the event of default until the effect of the event of default has been cured,
waived or otherwise eliminated. Until any event of default has been cured,
waived or otherwise eliminated, the property trustee will act solely on behalf
of the holders of the capital securities and not on our behalf, and only the
holders of the capital securities will have the right to direct the property
trustee to act on their behalf.
Events of Default; Notice
An event of default under the indenture constitutes an event of
default under the trust agreement. See "Description of Subordinated
Debentures--Debenture Events of Default."
The trust agreement provides that within five (5) business days after
any event of default actually known to the property trustee occurs, the property
trustee will give notice of the event of default to the holders of the capital
securities, the administrative trustees and to us, as sponsor, unless the event
of default has been cured or waived. We, as sponsor, and the administrative
trustees are required to file annually with the property trustee a certificate
as to whether we and the administrative trustees have complied with the
applicable conditions and covenants of the trust agreement.
If a debenture event of default exists, the capital securities will
have a preference over the common securities as described under "--Liquidation
of the Trust and Distribution of Subordinated Debentures" and "--Subordination
of Common Securities." An event of default does not entitle the holders of
capital securities to accelerate the maturity date of the capital securities.
Removal of Trustees
Unless a debenture event of default exists, we may remove the property
trustee and the Delaware trustee at any time. If a debenture event of default
exists, the property trustee and the Delaware trustee may be removed only by the
holders of a majority in liquidation amount of the outstanding capital
securities. In no event will the holders of the capital securities have the
right to vote to appoint, remove or replace the administrative trustees, because
these voting rights are vested exclusively in us as the holder of all of the
common securities. No resignation or removal of the property trustee or the
Delaware trustee and no appointment of a successor trustee shall be effective
until the acceptance of appointment by the successor trustee in accordance with
the trust agreement.
Merger or Consolidation of Issuer Trustees
If the property trustee, the Delaware trustee or any administrative
trustee that is not a natural person is merged, converted or consolidated into
another entity, or the property trustee is a
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party to a merger, conversion or consolidation which results in a new entity, or
an entity succeeds to all or substantially all of the corporate trust business
of the property trustee, the new entity shall be the successor of the respective
trustee under the trust agreement, provided that the entity is otherwise
qualified and eligible.
Mergers, Consolidations, Amalgamations or Replacements of the Trust
The Trust may not merge with or into, consolidate, amalgamate or be
replaced by, or convey, transfer or lease substantially all of its properties
and assets to any corporation or other entity, except as described below or as
otherwise described under "--Liquidation of the Trust and Distribution of
Subordinated Debentures." The Trust may, at our request, as sponsor, and with
the consent of the administrative trustees but without the consent of the
holders of the capital securities, merge with or into, consolidate, amalgamate
or be replaced by or convey, transfer or lease substantially all of its
properties and assets to a trust organized as such under the laws of any state;
provided, that:
(1) the successor either
(a) expressly assumes all of the obligations of the Trust
with respect to the capital securities and the common securities or
(b) substitutes securities for the capital securities and
the common securities that have substantially the same terms as the
capital securities and the common securities so long as the substitute
securities rank equal to the capital securities and the common
securities in priority with respect to distributions and payments upon
liquidation, redemption and otherwise;
(2) we appoint a trustee of the successor possessing the same
powers and duties as the property trustee with respect to the subordinated
debentures;
(3) the substitute securities are listed, or any substitute
securities will be listed upon notification of issuance, on any national
securities exchange or other organization on which the capital securities and
the common securities are then listed or quoted, if any;
(4) if the capital securities, substitute securities or
subordinated debentures are rated by any nationally recognized statistical
rating organization prior to such transaction, the transaction does not cause
any of those securities to be downgraded by the rating organization;
(5) the transaction does not adversely affect the rights,
preferences and privileges of the holders of the capital securities (including
any successor securities) in any material respect;
(6) the successor has a purpose substantially identical to that of
the Trust;
(7) prior to the transaction, we received an opinion from
independent counsel to the Trust experienced in such matters to the effect that
(a) the transaction does not adversely affect the rights,
preferences and privileges of the holders of the capital securities
(including any successor securities) in any material respect (other
than any dilution of such holders' interests in the new entity), and
(b) following the transaction, neither the Trust nor the
successor will be required to register as an investment company under
the Investment Company Act; and
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(8) we, or any permitted successor or assignee owns all of the
common securities of the successor and guarantees the obligations of the
successor under the substituted securities at least to the extent provided by
the guarantee and the common securities guarantee.
Notwithstanding the foregoing, the Trust shall not, except with the
consent of holders of 100% in liquidation amount of the capital securities,
consolidate, amalgamate, merge with or into, or be replaced by or convey,
transfer or lease its properties and assets as an entirety or substantially as
an entirety to, any other entity or permit any other entity to consolidate,
amalgamate, merge with or into, or replace it if the transaction would cause the
Trust or the successor to be classified as an association taxable as a
corporation for United States federal income tax purposes.
Voting Rights; Amendment of the Trust Agreement
Except as provided below and under "--Mergers, Consolidations,
Amalgamations or Replacements of the Trust" and "Description of
Guarantee--Amendments and Assignment" and as otherwise required by law and the
trust agreement, the holders of the capital securities will have no voting
rights.
We, as holder of the common securities, together with the property
trustee and the administrative trustees, may amend the trust agreement from time
to time, without the consent of the holders of the capital securities:
(1) to cure any ambiguity, correct or supplement any provisions in
the trust agreement that may be inconsistent with any other provision, or to
make any other provisions with respect to matters or questions arising under the
trust agreement, which are not inconsistent with the other provisions of the
trust agreement; or
(2) to modify, eliminate or add to any provisions of the trust
agreement as is necessary to ensure that at all times that any capital
securities are outstanding, the Trust will not be classified as an association
taxable as a corporation or to enable the Trust to qualify as a grantor trust,
in each case for United States federal income tax purposes, or to ensure that
the Trust will not be required to register as an investment company under the
Investment Company Act,
provided, however, that in the case of clause (1) the amendment would
not adversely affect in any material respect the interests of the holders of the
capital securities. Any amendments of the trust agreement pursuant to the
foregoing shall become effective when notice of the amendment is given to the
holders of the capital securities.
We, as holder of the common securities, together with the trustees,
may amend the trust agreement:
(1) with the consent of holders representing a majority (based
upon liquidation amount) of the outstanding capital securities; and
(2) upon receipt by the trustees of an opinion of counsel
experienced in such matters to the effect that the amendment or the exercise of
any power granted to the trustees in accordance with the amendment will not
affect the Trust's classification as an entity that is not taxable as a
corporation or as being a grantor trust for United States federal income tax
purposes or the Trust's exemption from status as an investment company under the
Investment Company Act,
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provided that, without the consent of each holder of capital securities, no
amendment may change the amount or timing of any distribution on the capital
securities and the common securities or otherwise adversely affect the amount of
any distribution required to be made in respect of the capital securities and
the common securities as of a specified date; or restrict the right of a holder
of capital securities and the common securities to sue for the enforcement of
any payment on or after the specified date.
So long as any subordinated debentures are held by the property trustee,
the trustees may not:
. direct the time, method and place of conducting any proceeding for any
remedy available to the debenture trustee, or execute any trust or
power conferred on the debenture trustee with respect to the
subordinated debentures;
. waive certain past defaults under the indenture;
. exercise any right to rescind or annul a declaration accelerating the
maturity of the principal of the subordinated debentures; or
. consent to any amendment, modification or termination of the indenture
or the subordinated debentures, where such consent shall be required,
without, in each case, obtaining the prior consent of the holders of a majority
in liquidation amount of all outstanding capital securities; provided, however,
that where a consent under the indenture would require the consent of each
holder of subordinated debentures affected by the amendment, modification or
termination, the property trustee will not give consent without the prior
approval of each holder of the capital securities.
The trustees shall not revoke any action previously authorized or approved
by a vote of the holders of the capital securities except by subsequent vote of
such holders. The property trustee shall notify each holder of capital
securities of any notice of default with respect to the subordinated debentures.
In addition to obtaining the approvals of the holders of the capital securities,
prior to taking any of the foregoing actions, the trustees shall obtain an
opinion of counsel experienced in such matters to the effect that the Trust will
not be classified as an association taxable as a corporation for United States
federal income tax purposes on account of such action.
Any required approval of holders of capital securities may be given at a
meeting of the holders convened for the purpose of approving the matter or
pursuant to written consent. The property trustee will cause a notice of any
meeting at which holders of capital securities are entitled to vote, or of any
matter upon which action by written consent of such holders has been taken, to
be given to each holder of record of capital securities in accordance with the
trust agreement.
No vote or consent of the holders of capital securities will be required
for the Trust to redeem and cancel the capital securities in accordance with the
trust agreement.
Notwithstanding that holders of the capital securities are entitled to vote
or consent under any of the circumstances described above, any of the capital
securities that are owned by us, the trustees or any of our or any trustee's
affiliates, shall, for purposes of such vote or consent, be treated as if they
were not outstanding.
Depositary Procedures
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DTC has advised the Trust and us that it is a limited-purpose trust company
organized under the laws of the State of New York, a member of the Federal
Reserve System, a "clearing corporation" within the meaning of the Uniform
Commercial Code and a "clearing agency" registered pursuant to the provisions of
Section 17A of the Exchange Act. DTC was created to hold securities for its
participating organizations (collectively, "participants") and to facilitate the
clearance and settlement of transactions in those securities between
participants through electronic book-entry changes in accounts of its
participants, to eliminate the need for physical movement of certificates.
Participants include securities brokers and dealers (including the
underwriters), banks, trust companies, clearing corporations and certain other
organizations. Indirect access to DTC's system is also available to banks,
brokers, dealers and trust companies that clear through or maintain a custodial
relationship with a participant, either directly or indirectly (collectively,
"indirect participants"). Persons who are not participants may beneficially own
securities held by or on behalf of DTC only through participants or indirect
participants. The ownership interest and transfer of ownership interest of each
actual purchaser of each security held by or on behalf of DTC are recorded on
the records of participants and indirect participants.
DTC also has advised the Trust and us that, pursuant to procedures
established by it, (1) upon deposit of the global capital securities, DTC will
credit the accounts of participants designated by the underwriters with portions
of the liquidation amount of the global capital securities and (2) ownership of
interests in the global capital securities will be shown on, and the transfer of
ownership of the global capital securities, will be effected only through
records maintained by DTC (with respect to participants) or by participants and
indirect participants (with respect to other owners of beneficial interests in
the global capital securities).
Registration of Capital Securities
The capital securities will be represented by one or more global
certificates registered in the name of DTC or its nominee. Beneficial interests
in the capital securities will be shown on, and transfers of the global capital
securities will be effected only through, records maintained by participants.
Except as described below, capital securities in certificated form will not be
issued in exchange for the global certificates. See "Exchange of Book-Entry
Capital Securities for Certificated Capital Securities."
You may hold your interests in the global capital security directly through
DTC if you are a participant, or indirectly through organizations that are
participants. All interests in a global capital security will be subject to the
procedures and requirements of DTC. The laws of some states require that certain
persons take physical delivery in certificated form of securities that they own.
Consequently, the ability to transfer beneficial interests in a global capital
security to those persons will be limited to that extent. Because DTC can act
only on behalf of participants, which in turn act on behalf of indirect
participants and certain banks, the ability of a person having beneficial
interests in a global capital security to pledge its interests to persons or
entities that do not participate in the DTC system, or otherwise take actions in
respect of its interests, may be affected by the lack of a physical certificate
evidencing its interests. For certain other restrictions on the transferability
of the capital securities, see "--Exchange of Book-Entry Capital Securities for
Certificated Capital Securities."
Payments on the global capital security registered in the name of DTC, or
its nominee, will be payable by the property trustee to DTC in its capacity as
the registered holder under the trust agreement. Under the terms of the trust
agreement, the property trustee will treat the persons in whose names the
capital securities, including the global capital securities, are registered as
the owners thereof for the purpose of receiving such payments and for any and
all other purposes
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whatsoever. Neither the property trustee nor any agent thereof has or will have
any responsibility or liability for:
. any aspect of DTC's records or any participant's or indirect
participant's records relating to, or payments made on account of,
beneficial ownership interests in the global capital securities, or
for maintaining, supervising or reviewing any of DTC's records or any
participant's or indirect participant's records relating to the
beneficial ownership interests in the global capital securities; or
. any other matter relating to the actions and practices of DTC or any
of its participants or indirect participants.
DTC has advised the Trust and us that its current practice, upon receipt of
any payment on the capital securities, is to credit the accounts of the relevant
participants with the payment on the payment date, in amounts proportionate to
their respective holdings in liquidation amount of the capital securities as
shown on the records of DTC unless DTC has reason to believe it will not receive
payment on the payment date. Payments by participants and indirect participants
to the beneficial owners of capital securities will be governed by standing
instructions and customary practices and will be the responsibility of
participants or indirect participants and will not be the responsibility of DTC,
the property trustee, the Trust or us. None of the Trust, NHTB nor the property
trustee will be liable for any delay by DTC or any of its participants or
indirect participants in identifying the beneficial owners of the capital
securities, and the Trust, NHTB and the property trustee may conclusively rely
on, and will be protected in relying on, instructions from DTC or its nominee
for all purposes.
Any secondary market trading activity in interests in the global capital
securities will settle in immediately available funds, subject in all cases to
the rules and procedures of DTC and its participants. Transfers between
participants in DTC will be effected in accordance with DTC's procedures, and
will settle in same-day funds.
DTC has advised the Trust and us that it will take any action permitted to
be taken by a holder of capital securities (including, without limitation,
presenting the capital securities for exchange as described below) only at the
direction of one or more participants who have an interest in DTC's global
capital securities in respect of the portion of the liquidation amount of the
capital securities as to which the participant or participants has or have given
direction. However, if an event of default exists under the trust agreement, DTC
reserves the right to exchange the global capital securities for legended
capital securities in certificated form and to distribute the certificated
capital securities to its participants.
We believe that the information in this section concerning DTC and its
book-entry system has been obtained from reliable sources, but we do not take
responsibility for the accuracy of this information.
Although DTC has agreed to the procedures described in this section to
facilitate transfers of interests in the global capital securities among
participants in DTC, DTC is not obligated to perform or to continue to perform
these procedures, and these procedures may be discontinued at any time. None of
the Trust, NHTB nor the property trustee will have any responsibility or
liability for any aspect of the performance by DTC or its participants or
indirect participants of any of their respective obligations under the rules and
procedures governing their operations or for maintaining, supervising or
reviewing any records relating to the global capital securities that are
maintained by DTC or any of its participants or indirect participants.
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Exchange of Book-Entry Capital Securities for Certificated Capital Securities
A global capital security can be exchanged for capital securities in
registered certificated form if:
(1) DTC notifies the Trust that it is unwilling or unable to continue as
depositary for the global capital security and the Trust fails to appoint a
successor depositary within 90 days of receipt of DTC's notice, or has ceased to
be a clearing agency registered under the Exchange Act and the Trust fails to
appoint a successor depositary within 90 days of becoming aware of this
condition;
(2) the Trust, in its sole discretion, elects to cause the capital
securities to be issued in certificated form; or
(3) an event of default, or any event which after notice or lapse of time
or both would be an event of default, exists under the trust agreement.
In addition, beneficial interests in a global capital security may be
exchanged by or on behalf of DTC for certificated capital securities upon
request by DTC, but only upon at least 20 days' prior written notice given to
the property trustee in accordance with DTC's customary procedures. In all
cases, certificated capital securities delivered in exchange for any global
capital security will be registered in the names, and issued in any approved
denominations, requested by or on behalf of DTC (in accordance with its
customary procedures).
Payment and Paying Agency
The Trust will make payments on the capital securities that are held in
global form to DTC, which will credit the relevant accounts at DTC on the
applicable distribution dates. The Trust will make payments on the capital
securities that are not held by DTC by mailing a check to the address of the
holder entitled to the payment as the holder's address appears on the register.
The paying agent will initially be the property trustee and any co-paying agent
chosen by the property trustee and acceptable to the administrative trustees and
us. The paying agent will be permitted to resign as paying agent upon 30 days'
notice to the property trustee, the administrative trustees and us. In the event
that the property trustee is no longer the paying agent, the administrative
trustees will appoint a successor (which must be a bank or trust company
acceptable to the administrative trustees and us) to act as paying agent.
Registrar and Transfer Agent
The property trustee will act as registrar and transfer agent for the
capital securities.
The Trust will register transfers of the capital securities without charge,
except for any tax or other governmental charges that may be imposed in
connection with any transfer or exchange. The Trust will not be required to have
the transfer of the capital securities registered after they have been called
for redemption.
Information Concerning the Property Trustee
Except if an event of default exists, the property trustee will undertake
to perform only the duties specifically set forth in the trust agreement. After
an event of default, the property trustee must exercise the same degree of care
and skill as a prudent person would exercise or use in the conduct of his or her
own affairs. Subject to this provision, the property trustee is not obligated to
exercise any of the powers vested in it by the trust agreement at the request of
any holder of capital
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securities, unless it is offered reasonable indemnity against the costs,
expenses and liabilities that it might incur. If no event of default exists and
the property trustee is required to decide between alternative causes of action,
construe ambiguous provisions in the trust agreement or is unsure of the
application of any provision of the trust agreement, and the matter is not one
on which holders of the capital securities or the common securities are entitled
under the trust agreement to vote, then the property trustee shall take such
action as directed by us and, if not directed, shall take such action as it
deems advisable and in the best interests of the holders of the capital
securities and will have no liability, except for its own bad faith, negligence
or willful misconduct.
Miscellaneous
The administrative trustees are authorized and directed to conduct the
affairs of and to operate the Trust in such a way that:
(1) The Trust will not be deemed to be an investment company required to
be registered under the Investment Company Act;
(2) The Trust will be classified as a grantor trust for United States
federal income tax purposes; and
(3) the subordinated debentures will be treated as our indebtedness for
United States federal income tax purposes.
We, together with the administrative trustees, are authorized to take any
action, not inconsistent with applicable law, the certificate of trust of the
Trust or the trust agreement, that we and the administrative trustees determine
in our discretion is necessary or desirable, as long as it does not materially
adversely affect the interests of the holders of the capital securities.
The trust agreement provides that holders of the capital securities have no
preemptive or similar rights to subscribe for any additional capital securities
and the issuance of capital securities is not subject to preemptive rights.
The Trust may not borrow money, issue debt, execute mortgages or pledge any
of its assets.
Description of Subordinated Debentures
This summary describes the material provisions of the subordinated
debentures. This description is not complete and you should refer to the
indenture and the Trust Indenture Act for more information. We have filed the
indenture as an exhibit to the registration statement of which this prospectus
is a part. Wilmington Trust Company will act as debenture trustee under the
indenture. The indenture is qualified under the Trust Indenture Act.
General
The Trust will invest the proceeds from the sale of the capital securities
and the common securities in the subordinated debentures issued by us. The
subordinated debentures will bear interest at the annual rate of % of the
principal amount of the subordinated debentures, payable quarterly in arrears on
interest payment dates of March 31, June 30, September 30 and December 31 of
each year and at maturity to the person in whose name each subordinated
debenture is registered at the close of business on the relevant record date.
The first interest payment date for the subordinated debentures will be
September 30, 1999. The period beginning on and including the date the
subordinated debentures are first issued and ending on but excluding September
30,
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1999, and each period beginning on and including an interest payment date and
ending on but excluding the next interest payment date, is an interest period.
We anticipate that, until the liquidation, if any, of the Trust, each
subordinated debenture will be held by the property trustee in trust for the
benefit of the holders of the capital securities. The amount of interest payable
for any interest period will be computed on the basis of a 360-day year of
twelve 30-day months. In the event that any interest payment date would
otherwise fall on a day that is not a business day, the interest payment date
will be postponed to the next business day (without any interest or other
payment due to the delay) unless it would fall in the next calendar year, in
which case the interest payment date shall be the last business day of the
calendar year.
Accrued interest that is not paid on the applicable interest payment date
will bear additional interest (to the extent permitted by law) at the rate of
% per annum, compounded quarterly from the relevant interest payment date.
The term "interest" as used in this prospectus includes quarterly interest
payments and interest on quarterly interest payments not paid on the applicable
interest payment date.
Notwithstanding anything to the contrary set forth above, if the maturity
date falls on a day that is not a business day, the payment of principal and
interest will be paid on the next business day, with the same force and effect
as if made on the maturity date, and no interest on such payments will accrue
from and after the maturity date.
The subordinated debentures will be issued as a series of subordinated
debentures under the indenture.
The subordinated debentures will mature on , 2029.
The subordinated debentures will rank equal to all of our other
subordinated debentures which have been or may be issued to other trusts
established by us, in each case similar to the Trust, and will be unsecured and
rank subordinate and junior to all indebtedness for money that we borrow to the
extent and in the manner set forth in the indenture. See "--Subordination."
We are a savings and loan holding company regulated by the OTS, and
substantially all of our operating assets are owned by the Bank. We are a legal
entity separate and distinct from our subsidiaries. Holders of subordinated
debentures should look only to us for payments on the subordinated debentures.
The principal sources of our income are dividends, interest and fees from the
Bank. We rely primarily on dividends from the Bank to meet our obligations for
payment of principal and interest on our outstanding debt obligations and
corporate expenses. Dividend payments from the Bank are subject to regulatory
limitations, generally based on current and retained earnings, imposed by the
various regulatory agencies with authority over the Bank. In addition to
regulatory restrictions on the payment of dividends, the Bank is subject to
restrictions imposed by federal law on any extensions of credit to us and other
affiliates of the Bank and on investments in stock or other securities of
affiliates. Also, as a savings and loan holding company, our right to receive
distributions from the Bank may be limited if the Bank is liquidated or
reorganized. For more information about these regulatory limits , you should
read "Risk Factors -- Risks related to your investment in the capital
securities-- We will depend primarily on any dividends we may receive from our
subsidiaries in making payments under the subordinated debentures, which could
affect the payments made to you under the capital securities."
The subordinated debentures will be effectively subordinated to all
existing and future liabilities of the Bank (including the Bank's deposit
liabilities) and all liabilities of any of our future
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subsidiaries. The indenture does not limit us or the Bank from incurring or
issuing other secured or unsecured debt, including senior indebtedness. See
"--Subordination."
Form, Registration and Transfer
If the subordinated debentures are distributed to the holders of the
capital securities, the subordinated debentures may be represented by one or
more global certificates registered in the name of Cede & Co., as the nominee of
DTC. The depositary arrangements for such subordinated debentures are expected
to be substantially similar to those in effect for the capital securities. For a
description of DTC and the terms of the depositary arrangements relating to
payments, transfers, voting rights, redemptions and other notices and other
matters, you should read "Description of Capital Securities -- Form,
Denomination, Book-Entry Procedures and Transfer."
Payment and Paying Agents
Payment of principal and interest on the subordinated debentures will be
made at the office of the debenture trustee in New York, New York or at the
office of such paying agent or paying agents as we may designate from time to
time, except that, at our option, payment of any interest may be made, except in
the case of subordinated debentures in global form:
. by check mailed to the address of the person or entity entitled to the
interest payment as such address shall appear in the register for the
subordinated debentures; or
. by transfer to an account maintained by the person or entity entitled
to the interest payment as specified in the register, provided that
proper transfer instructions have been received by the relevant record
date.
Payment of any interest on any subordinated debenture will be made to the
person or entity in whose name the subordinated debenture is registered at the
close of business on the record date for the interest payment date, except in
the case of defaulted interest. We may at any time designate additional paying
agents or rescind the designation of any paying agent; however we will always be
required to maintain a paying agent in each place of payment for the
subordinated debentures.
Any moneys deposited with the debenture trustee or any paying agent, or
then held by us, in trust for the payment of the principal or interest on any
subordinated debenture and remaining unclaimed for two years after such
principal or interest has become due and payable shall, at our request, be
repaid to us and the holder of the subordinated debenture shall thereafter look,
as a general unsecured creditor, only to us for payment.
Option to Extend Interest Payment Date
So long as no debenture event of default exists, we will have the right
under the indenture to defer the payment of interest on the subordinated
debentures, at any time and from time to time, for no more than 20 consecutive
quarters for each deferral period, provided that no deferral period shall end on
a date other than an interest payment date or extend beyond , 2029. At
the end of a deferral period, we must pay all interest then accrued and unpaid
(together with interest thereon at the rate of % per year, compounded
quarterly from the relevant interest payment date, to the extent permitted by
applicable law). During a deferral period, interest will continue to accrue, and
holders of the capital securities or, if the subordinated debentures have been
distributed to holders of the capital securities, holders of subordinated
debentures, will be required to include that deferred interest in gross income
for United States federal income tax purposes on an accrual method of accounting
prescribed by the Internal Revenue Code of 1986 (the "Code") and Treasury
regulation provisions on original
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issue discount prior to the receipt of cash attributable to that income. See
"Certain Federal Income Tax Consequences--Original Issue Discount."
During any such deferral period, we may not:
(1) declare or pay any dividends or distributions on, or redeem, purchase,
acquire, or make a liquidation payment with respect to, any of our capital
stock;
(2) make any payment of principal of, or interest or premium, if any, on
or repay, repurchase or redeem any of our debt securities that rank equal to or
junior to the subordinated debentures; or
(3) make any guarantee payments with respect to any guarantee by us of the
debt securities of any of our subsidiaries (including our guarantee of the
capital securities of the Trust and any other guarantees) if such guarantee
ranks equal or junior to the subordinated debentures other than
(a) dividends or distributions in shares of, or options, warrants or
rights to subscribe for or purchase shares of, our common stock;
(b) any declaration of a dividend in connection with the
implementation of a stockholders' rights plan, or the issuance of
rights, stock or other property under any such plan in the future, or
the redemption or repurchase of any rights pursuant thereto,
(c) payments under the guarantee,
(d) as a result of a reclassification of our capital stock or the
exchange or conversion of one class or series of our capital stock or
indebtedness for another class or series of our capital stock,
(e) the purchase of fractional interests in shares of our capital
stock pursuant to the conversion or exchange provisions of such
capital stock or the security being converted or exchanged and
(f) purchases of our common stock related to the issuance of common
stock or rights under any of our benefit plans for our directors,
officers or employees or any of our dividend reinvestment plans.
We do not currently intend to exercise our option to defer payments of
interest on the subordinated debentures.
Before the end of any deferral period, we may extend the deferral period,
as long as no event of default exists and the extension does not cause the
deferral period to exceed 20 consecutive quarterly periods, to end on a date
other than an interest payment date or to extend beyond , 2029. At the
end of any deferral period and upon the payment of all then accrued and unpaid
interest (together with interest thereon at the rate of % per year, compounded
quarterly, to the extent permitted by applicable law), we may elect to begin a
new deferral period, subject to the requirements set forth herein. No interest
shall be due and payable during a deferral period until the deferral period
ends. We must give the property trustee, the administrative trustees and the
debenture trustee notice of our election at least five business days before the
earlier of:
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. the date the distributions on the capital securities and the common
securities would have been payable except for the election to begin or
extend such deferral period;
. the date the administrative trustees are required to give notice to
any securities exchange or automated quotation system on which the
capital securities are listed or quoted or to holders of capital
securities of the record date for such distributions; or
. the date such distributions are payable, but at least five business
days prior to the record date.
The debenture trustee will notify holders of the capital securities of our
election to begin or extend a new deferral period.
There is no limit on the number of times that we may elect to begin a
deferral period.
Optional Prepayment
We may prepay the subordinated debentures, in whole or in part, at our
option on or after , 2004, subject to our receipt of any required
regulatory approval, at an optional prepayment price equal to 100% of the
principal amount of the subordinated debentures.
Special Event Prepayment
If there are changes in the bank regulatory, investment company or tax laws
that adversely affect the status of the Trust, the capital securities or the
subordinated debentures, we may, at our option, and subject to our receipt of
any required regulatory approval, prepay the subordinated debentures, in whole
but not in part, at any time within 90 days of the change in the law, at the
special event prepayment price. If we exercise our option to prepay the
subordinated debentures under these circumstances, then the proceeds of that
prepayment must be applied to redeem the capital securities at a prepayment
price equal to 100% of the principal amount of the subordinated debentures so
prepaid, plus, in each case, accrued and unpaid interest on the subordinated
debentures, if any, to the date of prepayment. See "Description of Capital
Securities--Redemption."
A change in the bank regulatory law means our receipt of an opinion of
independent bank regulatory counsel experienced in such matters to the effect
that, as a result of
. any amendment to, or change (including any announced prospective
change) in, any laws or regulations of the United States or any rules,
guidelines or policies of an applicable regulatory agency or authority
or
. any official administrative pronouncement or judicial decision
interpreting or applying such laws or regulations,
which amendment or change is effective or which pronouncement or decision is
announced on or after the date the capital securities and the common securities
are first issued, the capital securities do not constitute, or within 90 days of
the opinion will not constitute, Tier 1 Capital (or its then equivalent if we
were subject to such capital requirement).
A change in the investment company law means the receipt by us and the
Trust of an opinion of independent securities counsel experienced in such
matters to the effect that, as a result of
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. any amendment to, or change (including any announced prospective
change) in, any laws or regulations of the United States or any rules,
guidelines or policies of any applicable regulatory agency or
authority or
. any official administrative pronouncement or judicial decision
interpreting or applying such laws or regulations,
which amendment or change is effective or which pronouncement or decision is
announced on or after the date the capital securities are first issued, the
Trust is, or within 90 days of the date of the opinion will be, considered an
investment company that is required to be registered under the Investment
Company Act.
A change in tax law means the receipt by us and the Trust of an opinion of
independent tax counsel experienced in such matters to the effect that, as a
result of:
. any amendment to, or change (including any announced prospective
change) in, any laws or regulations of the United States or any
political subdivision or taxing authority thereof or therein or
. any official administrative pronouncement or judicial decision
interpreting or applying such laws or regulations,
which amendment or change is effective or which pronouncement or decision is
announced on or after the date the capital securities are first issued, there is
more than an insubstantial risk that:
. The Trust is, or will be within 90 days of the date of such opinion,
subject to United States federal income tax with respect to any income
received or accrued on the subordinated debentures;
. interest payable by us on the subordinated debentures is not, or
within 90 days of the date of such opinion will not be, deductible by
us, in whole or in part, for United States federal income tax
purposes; or
. The Trust is, or will be within 90 days of the date of such opinion,
subject to more than a de minimis amount of other taxes, duties or
other governmental charges.
We will mail any notice of prepayment between 30 and 60 days before the
prepayment date to each holder of subordinated debentures to be prepaid at its
registered address. Unless we default in payment of the prepayment price, on the
prepayment date interest shall cease to accrue on the subordinated debentures
called for prepayment.
If the Trust is required to pay any additional taxes, duties or other
governmental charges as a result of a change in the tax law, we will pay as
additional amounts on the subordinated debentures any amounts as may be
necessary in order that the amount of distributions then due and payable by the
Trust on the outstanding capital securities shall not be reduced as a result of
any additional sums, including taxes, duties or other governmental charges to
which the Trust has become subject as a result of a change in the tax law.
Certain Covenants by Us
We will also covenant that we will not:
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(1) declare or pay any dividends or distributions on, or redeem,
purchase, acquire or make a liquidation payment with respect to, any of our
capital stock;
(2) make any payment of principal of, or interest or premium, if
any, on or repay, repurchase or redeem any of our debt securities that rank
equal or junior to the subordinated debentures; or
(3) make any guarantee payments with respect to any of our
guarantees of the debt securities of any of our subsidiaries if such guarantee
ranks equal or junior to the subordinated debentures, other than
(a) dividends or distributions in shares of, or options,
warrants or rights to subscribe for or purchase shares of, our common stock,
(b) any declaration of a dividend in connection with the
implementation of a stockholders' rights plan, or the issuance of rights, stock
or other property under any such plan in the future, or the redemption or
repurchase of any such rights pursuant thereto,
(c) payments under the guarantee,
(d) as a result of a reclassification of our capital
stock or indebtedness or the exchange or conversion of one class or series of
our capital stock for another class or series of our capital stock,
(e) the purchase of fractional interests in shares of our
capital stock pursuant to the conversion or exchange provisions of such capital
stock or the security being converted or exchanged, and
(f) purchases of our common stock related to the issuance
of common stock or rights under any of our benefit plans for its directors,
officers or employees or any of our dividend reinvestment plans,
if at such time:
. we have actual knowledge that there is any event that is, or
with the giving of notice or the lapse of time, or both, would
be, a debenture event of default and that we have not taken
reasonable steps to cure;
. we are in default with respect to our payment of any
obligations under the guarantee; or
. we have given notice of our election to exercise our right to
defer interest payments on the subordinated debentures as
provided in the indenture and the deferral period, or any
extension of the deferral period, is continuing.
So long as the capital securities and common securities remain
outstanding, we also will covenant:
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. to maintain 100% direct or indirect ownership of the common
securities; provided, however, that any of our permitted
successors under the indenture may succeed to our ownership
of the common securities;
. to use commercially reasonable efforts to cause the Trust to
remain a business trust, except in connection with the
distribution of subordinated debentures to the holders of
capital securities in liquidation of the Trust, the
redemption of all of the capital securities, or certain
mergers, consolidations or amalgamations, each as permitted
by the trust agreement;
. to use commercially reasonable efforts to cause the Trust to
otherwise continue not to be classified as an association
taxable as a corporation and to be classified as a grantor
trust for United States federal income tax purposes;
. to use commercially reasonable efforts to cause each holder
of capital securities to be treated as owning an undivided
beneficial interest in the subordinated debentures; and
. to not cause, as sponsor of the Trust, or permit, as holder
of the common securities, the dissolution, winding-up or
liquidation of the Trust, except as provided in the trust
agreement.
Modification of Indenture
From time to time, we, together with the debenture trustee, may,
without the consent of the holders of subordinated debentures, amend the
indenture for specified purposes, including, among other things, curing
ambiguities, defects or inconsistencies, provided that any amendment in the
indenture does not materially adversely affect the interest of the holders of
subordinated debentures, and qualifying, or maintaining the qualification of,
the indenture under the Trust Indenture Act.
The indenture permits us and the debenture trustee, with the consent
of the holders of a majority in aggregate principal amount of subordinated
debentures, to modify the indenture in a manner affecting the rights of the
holders of the subordinated debentures; provided that no modification may,
without the consent of the holders of each outstanding subordinated debenture
affected:
. change the stated maturity date, or reduce the principal
amount, of the subordinated debentures,
. reduce the amount payable on prepayment or reduce the rate
or extend the time of payment of interest except pursuant to
our right under the indenture to defer the payment of
interest (see "--Option to Extend Interest Payment Date"),
. make the principal, or interest on the subordinated debentures
payable in any coin or currency other than that provided in the
subordinated debentures,
. impair or affect the right of any holder of subordinated
debentures to institute suit for the payment thereof, or
. reduce the percentage of the principal amount of the subordinated
debentures, the holders of which are required to consent to any
such modification.
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Debenture Events of Default
A "debenture event of default" is
. our failure for 30 days to pay any interest (including compounded
interest and additional sums, if any) on the subordinated
debentures or any other debentures when due (subject to the
deferral of any interest due date in the case of a deferral
period with respect to the subordinated debentures or other
debentures as the case may be); or
. our failure to pay any principal on the subordinated debentures
or any other debentures when due whether at maturity, upon
prepayment, by accelerating the maturity or otherwise; or
. our failure to observe or perform, in any material respect, any
other covenant contained in the indenture for 90 days after
written notice to us from the debenture trustee or to us and the
debenture trustee from the holders of at least 25% in aggregate
outstanding principal amount of subordinated debentures; or
. certain events related to our bankruptcy, insolvency or
reorganization.
The holders of a majority in aggregate outstanding principal amount of
the subordinated debentures have, subject to certain exceptions, the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the debenture trustee. The debenture trustee or the holders of not
less than 25% in aggregate outstanding principal amount of the subordinated
debentures may declare the principal due and payable immediately upon a
debenture event of default. The holders of a majority in aggregate outstanding
principal amount of the subordinated debentures may annul this declaration and
waive the default if the default (other than the non-payment of the principal of
the subordinated debentures which has become due solely by such acceleration)
has been cured and a sum sufficient to pay all matured installments of interest
and principal due otherwise than by acceleration has been deposited with the
debenture trustee.
The holders of a majority in aggregate outstanding principal amount of
the subordinated debentures affected may, on behalf of the holders of all the
subordinated debentures, waive any past default, except a default in the payment
of principal or interest (unless such default has been cured and a sum
sufficient to pay all matured installments of interest and principal due
otherwise than by acceleration has been deposited with the debenture trustee) or
a default in respect of a covenant or provision which under the indenture cannot
be modified or amended without the consent of the holder of each outstanding
subordinated debenture.
The indenture requires that we file with the debenture trustee a
certificate annually as to the absence of defaults specified under the
indenture.
The indenture provides that the debenture trustee may withhold notice
of a debenture event of default from the holders of the subordinated debentures
if the debenture trustee considers it in the interest of the holders to do so.
Enforcement of Certain Rights by Holders of Capital Securities
If a debenture event of default exists that is attributable to our
failure to pay the principal or interest (including compounded interest and
additional sums, if any) on the subordinated debentures on the due date, a
holder of capital securities may institute a direct action. We may not amend the
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indenture to remove this right to bring a direct action without the prior
written consent of the holders of all of the capital securities. Notwithstanding
any payments that we make to a holder of capital securities in connection with a
direct action, we shall remain obligated to pay the principal of or interest
(including compounded interest and additional sums, if any) on the subordinated
debentures, and we shall be subrogated to the rights of the holder of the
capital securities with respect to payments on the capital securities to the
extent that we make any payments to a holder in any direct action.
The holders of the capital securities will not be able to exercise
directly any remedies, other than those described in the above paragraph,
available to the holders of the subordinated debentures, unless an event of
default exists under the trust agreement. See "Description of Capital
Securities--Events of Default; Notice."
Consolidation, Merger, Sale of Assets and Other Transactions
The indenture provides that we will not consolidate with or merge into
any other person or convey, transfer or lease all or substantially all of our
properties to any person, and no person shall consolidate with or merge into us
or convey, transfer or lease all or substantially all of its properties to us,
unless:
. in case we consolidate with or merge into another person or
convey or transfer all or substantially all of our properties to
any person, the successor is organized under the laws of the
United States or any state or the District of Columbia, and the
successor expressly assumes our obligations under the indenture
with respect to the subordinated debentures;
. immediately after giving effect to the transaction, no debenture
event of default, and no event which, after notice or lapse of
time or both, would become a debenture event of default, exists;
and
. certain other conditions as prescribed in the indenture are met.
The general provisions of the indenture do not afford holders of the
subordinated debentures protection in the event of a highly leveraged or other
transaction that we may become involved in that may adversely affect holders of
the subordinated debentures.
Satisfaction and Discharge
The indenture provides that when, among other things,
. all subordinated debentures not previously delivered to the
debenture trustee for cancellation have become due and payable or
will become due and payable at maturity or called for prepayment
within one year, and
. we deposit or cause to be deposited with the debenture trustee
funds, in trust, for the purpose and in an amount sufficient to
pay and discharge the entire indebtedness on the subordinated
debentures not previously delivered to the debenture trustee for
cancellation, for the principal and interest (including
compounded interest and additional sums, if any) to the date of
the prepayment or to , 2029, as the case may be,
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then the indenture will cease to be of further effect (except as to our
obligations to pay all other sums due pursuant to the indenture and to provide
the officers' certificates and opinions of counsel), and we will be deemed to
have satisfied and discharged the indenture.
Subordination
We have promised that any subordinated debentures issued under the
indenture will be ranked junior to all senior indebtedness to the extent
provided in the indenture. Upon any payment or distribution of our assets to
creditors upon our liquidation, dissolution, winding up, reorganization,
assignment for the benefit of our creditors, marshaling of our assets or any
bankruptcy, insolvency, debt restructuring or similar proceedings in connection
with any insolvency or bankruptcy proceeding of us, the senior indebtedness must
be paid in full before the holders of the subordinated debentures will be
entitled to receive or retain any payment in respect thereof.
If the maturity of subordinated debentures is accelerated, the holders
of all senior indebtedness outstanding at such time will first be entitled to
receive payment in full of such senior indebtedness before the holders of
subordinated debentures will be entitled to receive or retain any payment in
respect of the principal or interest, if any, on the subordinated debentures.
No payments on account of principal or interest, if any, in respect of
the subordinated debentures may be made if there is a default in any payment
with respect to senior indebtedness, or an event of default exists with respect
to any senior indebtedness that accelerates the maturity of the senior
indebtedness, or if any judicial proceeding shall be pending with respect to the
default.
Indebtedness for money borrowed means any obligation of or any
obligation guaranteed by us, to repay borrowed money, whether or not evidenced
by bonds, debentures, notes or other written instruments; except that
indebtedness for money borrowed does not include trade accounts payable or
accrued liabilities arising in the ordinary course of business.
Indebtedness ranking on a parity with the subordinated debentures
means:
. indebtedness for money borrowed, whether outstanding on the date
the indenture is executed or created, assumed or incurred after
the date that the indenture is executed, to the extent the
indebtedness for money borrowed by its terms ranks equal to and
not prior to the subordinated debentures in the right of payment
upon the happening of our dissolution, winding-up, liquidation or
reorganization and
. all other debt securities, and guarantees in respect of those
debt securities, issued to any trust other than the Trust, or a
trustee of the trust, partnership or other entity affiliated with
us, that is our financing vehicle (a "financing entity"), in
connection with the issuance by the financing entity of equity
securities or other securities guaranteed by us pursuant to an
instrument that ranks equal to, with or junior to the guarantee,
including the guarantee issued with respect to the capital
securities of the Trust. The securing of any indebtedness
otherwise constituting indebtedness ranking on a parity with the
subordinated debentures shall not be deemed to prevent such
indebtedness from constituting indebtedness ranking on a parity
with the subordinated debentures.
Indebtedness ranking junior to the subordinated debentures means any
indebtedness for money borrowed, whether outstanding on the date the indenture
is executed or created, assumed or incurred after the date the indenture is
executed, to the extent the indebtedness for money borrowed by its terms ranks
junior to and not equal to or prior to the subordinated debentures (and any
other
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indebtedness ranking on a parity with the subordinated debentures) in right of
payment upon the happening of our dissolution or winding-up or liquidation or
reorganization. The securing of any indebtedness for money borrowed otherwise
constituting indebtedness ranking junior to the subordinated debentures shall
not be deemed to prevent the indebtedness for money borrowed from constituting
indebtedness ranking junior to the subordinated debentures.
Senior indebtedness means all indebtedness for money borrowed, whether
outstanding on the date the indenture is executed or created, assumed or
incurred after the date the indenture is executed, except indebtedness ranking
on a parity with the subordinated debentures or indebtedness ranking junior to
the subordinated debentures, and any deferrals, renewals or extensions of the
senior indebtedness.
For more information regarding the regulatory limitations applicable
to dividends and other payments by the Bank, you should read "Risk Factors--
Risks related to your investments in the capital securities -- We will depend
primarily on any dividends we may receive from our subsidiaries in making
payments under the subordinated debentures, which could affect the payments made
to you under the capital securities."
Governing Law
The indenture and the subordinated debentures will be governed by and
construed in accordance with the laws of the State of New York, without regard
to conflict of law principles.
Information Concerning the Debenture Trustee
The debenture trustee will have and be subject to all the duties and
responsibilities specified with respect to an indenture trustee under the Trust
Indenture Act. Subject to these provisions, the debenture trustee is not
obligated to exercise any of the powers vested in it by the indenture at the
request of any holder of subordinated debentures, unless offered reasonable
indemnity by the holder against the costs, expenses and liabilities which might
be incurred thereby. The debenture trustee is not required to expend or risk its
own funds or otherwise incur personal financial liability in the performance of
its duties under the indenture if the debenture trustee reasonably believes that
repayment or adequate indemnity is not reasonably assured to it.
Description of Guarantee
The guarantee will be executed and delivered by us at the same time as
the capital securities. Wilmington Trust Company will act as guarantee trustee
under the guarantee to comply with the Trust Indenture Act. The guarantee will
be qualified as an indenture under the Trust Indenture Act. This summary of the
material provisions of the guarantee is not complete and you should refer to the
guarantee and the Trust Indenture Act for more information. The form of the
guarantee has been filed as an exhibit to the registration statement of which
this prospectus is part. The guarantee trustee will hold the guarantee for the
benefit of the holders of the capital securities.
General
We will irrevocably agree to pay in full on a subordinated basis, to
the extent set forth herein, the payments with respect to the capital securities
to the extent not paid by the Trust. The payments that will be subject to the
guarantee are:
. any accumulated and unpaid distributions required to be paid on
the capital securities, to the extent that the Trust has funds
legally available at that time;
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. the applicable redemption price with respect to the capital
securities called for redemption, to the extent that the Trust
has funds legally available at that time; and
. upon a voluntary or involuntary dissolution, winding-up or
liquidation of the Trust (other than in connection with the
distribution of the subordinated debentures to holders of the
capital securities or the redemption of all capital securities),
the lesser of (a) the liquidation distribution, to the extent the
Trust has funds legally available at that time, and (b) the
amount of assets of the Trust remaining available for
distribution to holders of capital securities after satisfying
the liabilities owed to the Trust's creditors as required by
applicable law.
The guarantee will rank subordinate and junior to all senior
indebtedness to the extent provided in the guarantee. See "--Status of the
Guarantee." Our obligation to make a guarantee payment may be satisfied by our
direct payment of the required amounts to the holders of the capital securities
or by causing the Trust to pay these amounts to the holders of the capital
securities.
The guarantee will be an irrevocable guarantee on a subordinated basis
of the Trust's obligations under the capital securities, but will apply only to
the extent that the Trust has funds sufficient to make these payments. If we do
not make interest payments on the subordinated debentures held by, the Trust
will not be able to pay you distributions on the capital securities and will not
have funds legally available. Please refer to the "Relationship Among the
Capital Securities, the Subordinated Debentures and the Guarantee" section of
this prospectus. The guarantee does not limit us from incurring or issuing other
secured or unsecured debt, including senior indebtedness, whether under the
indenture, any other indenture that we may enter into in the future or
otherwise.
The holders of at least 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 guarantee trustee in
respect of our guarantee or to direct the exercise of any trust power conferred
upon the guarantee trustee under our guarantee. Any holder of the capital
securities may institute a legal proceeding directly against us to enforce their
rights under the guarantee without first instituting a legal proceeding against
the Trust, the guarantee trustee or any other person or entity.
If we default on our obligation to pay amounts payable under the
subordinated debentures, the Trust will lack funds for the payment of
distributions or amounts payable on redemption of the capital securities or
otherwise, and the holders of the capital securities will not be able to rely
upon the guarantee for payment of such amounts. Instead, if a debenture event of
default exists that is attributable to our failure to pay principal or interest
on the subordinated debentures on a payment date, then any holder of capital
securities may institute a direct action against us pursuant to the terms of the
indenture for enforcement of payment to that holder of the principal or interest
on such subordinated debentures having a principal amount equal to the aggregate
liquidation amount of the capital securities of that holder. In connection with
a direct action, we will have a right of set-off under the indenture to the
extent that we made any payment to the holder of capital securities in the
direct action. Except as described herein, holders of capital securities will
not be able to exercise directly any other remedy available to the holders of
the subordinated debentures or assert directly any other rights in respect of
the subordinated debentures. The trust agreement provides that each holder of
capital securities by accepting the capital securities agrees to the provisions
of the guarantee and the indenture.
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We will, through our guarantee, the trust agreement, the subordinated
debentures and the indenture, taken together, fully, irrevocably and
unconditionally guarantee all of the Trust's obligations under the capital
securities. No single document standing alone, or operating in conjunction with
fewer than all of the other documents, constitutes that guarantee. Only the
combined operation of these documents provides a full, irrevocable and
unconditional guarantee of the Trust's obligations under the capital securities.
You should refer to "Relationship Among the Capital Securities, the Subordinated
Debentures and the Guarantee" for more information about our guarantee.
Status of the Guarantee
Our guarantee will constitute an unsecured obligation and will rank
subordinate and junior to all senior indebtedness in the same manner as the
subordinated debentures. See "Description of Subordinated Debentures--
Subordination." In addition, because we are a savings and loan holding company,
our right to participate in any distribution of the Bank's assets upon the
Bank's liquidation or reorganization or otherwise is subject to the prior claims
of the Bank's creditors (including its depositors), except to the extent we may
be recognized as a creditor of the Bank. Accordingly, our obligations under the
guarantee effectively will be subordinated to all existing and future
liabilities of our present and future subsidiaries (including depositors of the
Bank). As a result, claimants should look only to our assets for payments under
the guarantee. See "Description of Subordinated Debentures--General."
Our guarantee will rank equal to all of our other guarantees with
respect to preferred beneficial interests issued by other trusts. Our guarantee
of the Trust's capital securities does not limit the amount of secured or
unsecured debt, including senior indebtedness, that we or any of our
subsidiaries may incur. We expect from time to time that we will incur
additional indebtedness and that our subsidiaries will also incur additional
liabilities. Our guarantee will constitute a guarantee of payment and not of
collection, enabling the guaranteed party to institute a legal proceeding
directly against us to enforce their rights under the guarantee without first
instituting a legal proceeding against any other person or entity. Our guarantee
will be held for the benefit of the holders of the capital securities. Our
guarantee will not be discharged, except by payment of the guarantee payments in
full to the extent that the Trust has not paid, or upon distribution of the
subordinated debentures to, the holders of the capital securities.
Events of Default
There will be an event of default under the guarantee if we fail to
perform any of our payment or other obligations under the guarantee; except that
with respect to a default in payment of any guarantee payment, we shall have
received notice of default and shall not have cured the default within 60 days
after receipt of the notice. The holders of at least a majority in liquidation
amount of the capital securities will have the right to direct the time, method
and place of conducting any proceeding for any remedy available to the guarantee
trustee in respect of our guarantee or to direct the exercise of any trust or
power conferred upon the guarantee trustee under our guarantee.
Any holder of the capital securities may institute a legal proceeding
directly against us to enforce the rights of the holders of the capital
securities under the guarantee without first instituting a legal proceeding
against the Trust, the guarantee trustee or any other person or entity.
We, as guarantor, will be required to file annually with the guarantee
trustee a certificate regarding our compliance with the applicable conditions
and covenants under our guarantee.
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Amendments and Assignment
Except with respect to any changes that do not materially adversely
affect the rights of holders of the capital securities (in which case no vote
will be required), the guarantee may not be amended without the prior approval
of the holders of a majority of the liquidation amount of such outstanding
capital securities. You should read "Description of Capital Securities--Voting
Rights; Amendment of the Trust Agreement" for more information about the manner
of obtaining the holders' approval. All guarantees and agreements contained in
the guarantee agreement shall bind our successors, assigns, receivers, trustees
and representatives and shall inure to the benefit of the holders of the capital
securities then outstanding.
Termination of the Guarantee
Our guarantee will terminate and be of no further force and effect
upon:
. full payment of the applicable redemption price of all outstanding
capital securities,
. full payment of the liquidation amount payable upon liquidation of the
Trust or
. distribution of subordinated debentures to the holders of the capital
securities.
Our guarantee will continue to be effective or will be reinstated, as
the case may be, if at any time any holder of the capital securities must
restore payment of any sums paid under the capital securities or the guarantee.
Information Concerning the Guarantee Trustee
The Delaware trustee shall act as the guarantee, except if we default
under the guarantee, and will undertake to perform only such duties as are
specifically set forth in the guarantee and, in case a default with respect to
the guarantee has occurred, must exercise the same degree of care and skill as a
prudent person would exercise or use in the conduct of his or her own affairs.
Subject to this provision, the guarantee trustee will not be obligated to
exercise any of the powers vested in it by the guarantee at the request of any
holder of the capital securities unless it is offered reasonable indemnity
against the costs, expenses and liabilities that it might incur.
Governing Law
The guarantee will be governed by and construed in accordance with the
laws of the State of New York, without regard to conflict of law principles.
Relationship among the Capital Securities, the
Subordinated Debentures and the Guarantee
Full and Unconditional Guarantee to the extent that the Trust has Funds Legally
Available to Pay Distributions
We will irrevocably guarantee payments of distributions and other
amounts due on the capital securities to the extent the Trust has funds legally
available to pay distributions as and to the extent set forth under "Description
of Guarantee." Taken together, our obligations under the subordinated
debentures, the indenture, the trust agreement and the guarantee will provide, a
full, irrevocable and unconditional guarantee of the Trust's payments of
distributions and other amounts due on the capital securities. No single
document standing alone or operating in conjunction with
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fewer than all of the other documents constitutes this guarantee. Only the
combined operation of these documents effectively provides a full, irrevocable
and unconditional guarantee of the Trust's obligations under the capital
securities.
If and to the extent that we do not make the required payments on the
subordinated debentures, the Trust will not have sufficient funds to make its
related payments, including distributions on the capital securities. Our
guarantee will not cover any payments when the Trust does not have sufficient
funds legally available to make those payments. Your remedy, as a holder of
capital securities, is to institute a direct action. Our obligations under the
guarantee will be subordinate and junior to all senior indebtedness.
Sufficiency of Payments
As long as we pay the interest and other payments when due on the
subordinated debentures, the Trust will have sufficient funds to cover
distributions and other payments due on the capital securities, primarily
because:
. the aggregate principal amount or prepayment price of the
subordinated debentures will equal the sum of the liquidation
amount or redemption price, as applicable, of the securities;
. the interest rate and interest payment dates and other payment
dates on the subordinated debentures will match the
distribution rate and distribution payment dates and other
payment dates for the capital securities;
. as sponsor, we will pay for all and any costs, expenses and
liabilities of the Trust, except for the Trust's obligations
to holders of capital securities; and
. the trust agreement also provides that the Trust is not
authorized to engage in any activity that is not consistent
with its limited purposes.
Enforcement Rights of Holders of Capital Securities
You, as holder of capital securities, may institute a legal proceeding
directly against us to enforce your rights under our guarantee without first
instituting a legal proceeding against the guarantee trustee, the Trust or any
other person or entity.
A default or event of default under any senior indebtedness would not
constitute a default or event of default under the trust agreement. However, if
there are payment defaults under, or accelerations of, senior indebtedness, the
subordination provisions of the indenture provide that we cannot make payments
in respect of the subordinated debentures until we have paid the senior
indebtedness in full or we have cured any payment default or a payment default
has been waived. Our failure to make required payments on subordinated
debentures would constitute an event of default under the trust agreement.
Limited Purpose of the Trust
The capital securities will represent beneficial interests in the
Trust, and the Trust exists for the sole purpose of issuing and selling the
capital securities, using the proceeds from the sale of the capital securities
to acquire our subordinated debentures and engaging in only those other
activities necessary, advisable or incidental thereto. A principal difference
between the rights of a holder of a capital security and a holder of a
subordinated debenture
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will be entitled to receive from us the principal amount and interest on
subordinated debentures held, while a holder of capital securities is entitled
to receive distributions from the Trust (or, in certain circumstances, from us
under our guarantee) if and to the extent the Trust has funds legally available
to pay the distributions.
Rights Upon Dissolution
Unless the subordinated debentures are distributed to holders of
securities, if the Trust is voluntarily or involuntarily dissolved, wound-up or
liquidated, after satisfying the liabilities owed to the Trust's creditors as
required by applicable law, the holders of the capital securities will be
entitled to receive, out of assets held by the Trust, the liquidation
distribution in cash. See "Description of Capital Securities--Liquidation of the
Trust and Distribution of Subordinated Debentures."
If we are voluntarily or involuntarily liquidated or bankrupted, the
property trustee, as holder of the subordinated debentures, would be one of our
subordinated creditors, subordinated in right of payment to all senior
indebtedness, but entitled to receive payment in full of principal and interest,
before any of our stockholders receive payments or distributions. Since we will
be the guarantor under the guarantee and will agree to pay all costs, expenses
and liabilities of the Trust (other than the Trust's obligations to the holders
of its capital securities), the positions of a holder of capital securities and
a holder of subordinated debentures relative to other creditors and to our
stockholders in the event of our liquidation or bankruptcy are expected to be
substantially the same.
Certain Federal Income Tax Consequences
General
In the opinion of Thacher Proffitt & Wood, special federal income tax
counsel to us and the Trust, the following describes the material United States
federal income tax consequences of the purchase, ownership and disposition of a
capital security.
This summary addresses only the tax consequences to a person that acquires
a capital security on its original issuance at its original issue price and that
holds the security as a capital asset. This summary does not address all tax
consequences that may be applicable to a beneficial owner of a capital security
and does not address the tax consequences to holders subject to special tax
regimes (like banks, thrifts, real estate investment trusts, regulated
investment companies, insurance companies, dealers in securities or currencies,
tax-exempt investors or persons that will hold a capital security as a position
in a "straddle," as part of a "synthetic security" or "hedge" or as part of a
"conversion transaction" or other integrated investment). This summary does not
include any description of any alternative minimum tax consequences or the tax
laws of any state or local government or of any foreign government that may
apply to a capital security. Except as noted below in the discussion of Non-U.S.
Holders, this discussion is addressed to a U.S. Holder, which is defined as a
beneficial owner of a capital security that, for U.S. federal income tax
purposes, is (or is treated as)
(1) a citizen or individual resident of the United States,
(2) a corporation or partnership (or entity treated for federal income tax
purposes as a corporation or partnership) created or organized in or
under the laws of the United States or any political subdivision
thereof,
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(3) an estate the income of which is includible in gross income for U.S.
federal income tax purposes without regard to its source, or
(4) a trust if a court within the United States is able to exercise
primary supervision over the administration of the trust and one or
more U.S. persons have the ability to control all substantial
decisions of the trust.
This summary does not address the tax consequences to any shareholder,
partner or beneficiary of a holder of a capital security. This summary is based
on the Code, Treasury regulations thereunder and the administrative and judicial
interpretations thereof, as of the date hereof, all of which are subject to
change, possibly on a retroactive basis. An opinion of Thacher Proffitt & Wood
is not binding on the Internal Revenue Service (the "IRS") or the courts. No
rulings have been or are expected to be sought from the IRS with respect to any
of the matters described herein. We can give no assurance that the opinions
expressed herein will not be challenged by the IRS or, if challenged, that the
challenge will not be successful.
Classification of the Subordinated Debentures
We intend to take the position that the subordinated debentures will be
classified for U.S. federal income tax purposes as our indebtedness. Thacher
Proffitt & Wood will render its opinion that, under then current law, based on
the representations, facts and assumptions set forth in this prospectus and
certain assumptions and qualifications referenced in the opinion, and assuming
full compliance with the terms of the indenture (and other relevant documents),
the subordinated debentures will be characterized for U.S. federal income tax
purposes as our indebtedness. We, together with the Trust and the holders of the
capital securities (by acceptance of a beneficial interest in a capital
security) will agree to treat the subordinated debentures as our indebtedness
for all U.S. federal income tax purposes. We cannot be sure that this position
will not be challenged by the IRS or, if challenged, that the challenge will not
be successful. The remainder of this discussion assumes that the subordinated
debentures will be classified as our indebtedness for U.S. federal income tax
purposes.
Classification of the Trust
In connection with the issuance of the capital securities, Thacher Proffitt
& Wood will render its opinion that, under then current law and assuming full
compliance with the terms of the trust agreement and the indenture (and certain
other documents), and based on certain facts and assumptions contained in that
opinion, the Trust will not be classified for U.S. federal income tax purposes
as an association taxable as a corporation. Accordingly, for U.S. federal income
tax purposes, the Trust will not be subject to U.S. federal income tax, and each
holder of a capital security will be required to include in its gross income any
interest (or accrued original issue discount) with respect to its allocable
share of the subordinated debentures.
Interest Income and Original Issue Discount
Under the indenture, we have the right to defer the payment of interest on
the subordinated debentures at any time or from time to time for one or more
deferral periods not exceeding 20 consecutive quarterly periods each, provided
that no deferral period shall end on a date other than an interest payment date
or extend beyond , 2029. By reason of that right, the Treasury regulations will
subject the subordinated debentures to the rules in the Code and Treasury
regulations on debt instruments issued with original issue discount (the "OID
Rules"), unless the indenture or subordinated debentures contain terms or
conditions that make the likelihood of exercise of the deferral option remote.
Under the Treasury regulations, a "remote" contingency that
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stated interest will not be timely paid will be ignored in determining whether a
debt instrument is issued with original issue discount. Although there is no
authority directly on point, we believe that the likelihood that we would
exercise our option to defer payments of interest is "remote" since exercising
that option would, among other things, prevent us from declaring dividends on
any class of our equity securities. Accordingly, we intend to take the position
that the subordinated debentures will not be considered to be issued with
original issue discount and, accordingly, stated interest on the subordinated
debentures generally will be taxable to a holder as ordinary income at the time
it is paid or accrued in accordance with such holder's method of accounting.
Under the Treasury regulations, if we were to exercise our option to defer
payments of interest, the subordinated debentures would at that time be treated
as issued with original issue discount, and all stated interest on the
subordinated debentures would thereafter be treated as original issue discount
as long as the subordinated debentures remain outstanding. If this occurred, all
of a holder's interest income with respect to the subordinated debentures would
thereafter be accounted for on an economic accrual basis regardless of such
holder's method of tax accounting, and actual distributions of stated interest
would not be reported as taxable income. Consequently, a holder of a capital
security would be required to include in gross income original issue discount
even though we would not make actual cash payments during a deferral period. The
amount of such includible original issue discount could be significant. Also,
under the Treasury regulations, if the option to defer the payment of interest
were determined not to be "remote," the subordinated debentures would be treated
as having been originally issued with original issue discount. In such event, a
holder would be required to include in gross income an amount of original issue
discount each taxable year that approximates the amount of interest that accrues
on the subordinated debentures at the stated interest rate, regardless of such
holder's method of tax accounting, and actual cash payments of interest on the
subordinated debentures would not be separately includible in gross income.
These Treasury regulations have not yet been addressed in any rulings or other
interpretations by the IRS, and it is possible that the IRS could take a
position contrary to the interpretation described herein.
Because income on the capital securities will constitute interest or
original issue discount, corporate holders of the capital securities will not be
entitled to a dividends-received deduction with respect to any income recognized
with respect to the capital securities.
Receipt of Subordinated Debentures or Cash Upon Liquidation of the Trust
We will have the right at any time to liquidate the Trust and cause the
subordinated debentures to be distributed to the holders of the capital
securities. Under current law, the liquidation of the Trust and the distribution
of the subordinated debentures to trust security holders, for U.S. federal
income tax purposes, would be treated as a nontaxable event to each holder, and
the aggregate tax basis of each holder in the subordinated debentures received
by such holder would be equal to the holder's aggregate tax basis in those
capital securities surrendered. A holder's holding period in the subordinated
debentures received in liquidation of the Trust would be no shorter than the
period during which the capital securities were held by that holder.
The subordinated debentures may be prepaid in cash, and the proceeds of
that prepayment would be distributed to holders in redemption of their capital
securities. Under current law, that redemption would constitute, for U.S.
federal income tax purposes, a taxable disposition of the redeemed capital
securities, the tax consequences of which are described below under "--Sales or
Redemptions of Capital Securities."
Sales or Redemptions of Capital Securities
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On a sale or redemption of a capital security for cash, a holder will
recognize gain or loss equal to the difference between its adjusted tax basis in
the capital security and the amount realized on the sale or redemption of that
capital security. If the rules regarding original issue discount do not apply, a
holder's adjusted basis in a capital security generally will be its initial
purchase price, and if the holder uses an accrual method of accounting, the
holder will have a basis in any accrued but unpaid interest. If the rules
regarding original issue discount apply, a holder's adjusted basis in a capital
security generally will be its initial purchase price increased by any original
issue discount previously included in the holder's gross income to the date of
disposition and decreased by any payments received on the capital security. Gain
or loss recognized on a sale or redemption of a capital security will be capital
gain or loss. Capital gain recognized by an individual in respect of a capital
security held for more than one year as of the date of sale or redemption is
subject to a maximum U.S. federal income tax rate of 20 percent.
The capital securities may trade at a price that discounts any accrued but
unpaid interest on the subordinated debentures. Therefore, the amount realized
by a holder who disposes of a capital security between distribution payment
dates and whose adjusted basis in the capital security has been increased by the
amount of any accrued but unpaid original issue discount (or interest) may be
less than the holder's adjusted basis in the capital security. A holder's basis
in a capital security could be increased either under the rules regarding
original issue discount or, if those rules do not apply, in the case of a holder
that uses an accrual method of accounting, under the accrual accounting rules.
In that case, the holder will recognize a capital loss. Subject to a limited
exception in the case of individual taxpayers, capital losses cannot be applied
to offset ordinary income for U.S. federal income tax purposes.
Non-U.S. Holders
For purposes of this discussion, a "Non-U.S. Holder" generally is any
corporation, individual, partnership, estate or trust that is not a U.S. Holder
for U.S. federal income tax purposes.
Under current U.S. federal income tax laws, subject to the discussion below
of backup withholding, payments by the Trust or any of its paying agents to a
Non-U.S. Holder will not be subject to U.S. federal withholding tax, provided
that (a) the Non-U.S. Holder does not own, actually or constructively, ten
percent or more of the total combined voting power of all classes of our stock
entitled to vote, (b) the Non-U.S. Holder is not a controlled foreign
corporation that is related to us through stock ownership, (c) the Non-U.S.
Holder is not a bank whose receipt of interest on the subordinated debentures is
described in Section 881(c)(3)(A) of the Code, and (d) either (A) the Non-U.S.
Holder certifies to the Trust or its agent, under penalties of perjury, that it
is not a U.S. 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 business (a "Financial Institution") and
holds the capital security in that capacity certifies to the Trust or its agent,
under penalties of perjury, that the statement has been received from the Non-
U.S. Holder by it or by a Financial Institution between it and the Non-U.S.
Holder and furnishes the Trust or its agent with a copy thereof. New Treasury
regulations provide alternative methods for satisfying the certification
requirements described in clause (1)(d), effective for certain payments made
after December 31, 2000.
If a Non-U.S. Holder is engaged in a trade or business in the United States
and interest on the capital securities (or the subordinated debentures) is
effectively connected with the conduct of that trade or business, the Non-U.S.
Holder, although exempt from the withholding tax discussed above, will be
subject to U.S. federal income tax on that interest on a net income basis in
generally the same manner as if it were a U.S. Holder. In addition, if such Non-
U.S. Holder is a foreign corporation, it may be subject to a branch profits tax
equal to 30% of its effectively connected
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earnings and profits that are repatriated or treated as repatriated. For this
purpose, the interest income would be included in the foreign corporation's
earnings and profits. In the case of a Non-U.S. Holder entitled to the benefits
of a tax treaty with the United States, the foregoing discussion generally
applies only if the Non-U.S. Holder is engaged in business in the United States
through a U.S. permanent establishment and the income on the subordinated
debentures is attributable to that permanent establishment within the meaning of
the treaty, and the rate of the branch profits tax may be limited to a rate
prescribed by the treaty for the withholding of tax on dividends. New final
Treasury regulations generally prescribe new methods for certifying that a Non-
U.S. Holder is exempt from the withholding of U.S. federal income tax by reason
of being engaged in trade or business in the United States.
Any gain recognized upon a sale or other disposition of capital securities
(or subordinated debentures) generally will not be subject to U.S. federal
income tax unless (1) the gain is, or is treated as, effectively connected with
a U.S. trade or business of the Non-U.S. Holder or (2) in the case of a Non-U.S.
Holder who is an individual, that individual is present in the United States for
183 days or more in the taxable year of the sale or other disposition, and
certain other conditions are met.
Backup Withholding Tax and Information Reporting
The amount of interest, including original issue discount, accrued on
capital securities held of record by U.S. persons (other than corporations and
other exempt holders) will be reported to the IRS. "Backup" withholding at a
rate of 31% will apply to payments of interest to non-exempt U.S. persons unless
the holder furnishes its taxpayer identification number in the manner prescribed
in applicable Treasury regulations, certifies that the number is correct,
certifies as to no loss of exemption from backup withholding and meets certain
other conditions.
Payment of the proceeds from the disposition of capital securities to or
through the United States office of a broker is subject to information reporting
and backup withholding unless the holder or beneficial owner establishes an
exemption from information reporting and backup withholding.
Non-U.S. Holders are generally exempt from the information reporting and
backup withholding rules but may be required to comply with certain
certification and identification requirements to prove their exemption.
Any amount withheld from a holder under the backup withholding rules will
be allowed as a refund or a credit against such holder's U.S. federal income tax
liability, provided the required information is furnished to the IRS.
It is anticipated that income on capital securities will be reported to
holders on Form 1099 and mailed to holders of capital securities by January 31
following each calendar year.
THE U.S. FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR
GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A HOLDER'S
PARTICULAR SITUATION. YOU SHOULD CONSULT YOUR TAX ADVISER WITH RESPECT TO THE
TAX CONSEQUENCES TO YOU OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF A CAPITAL
SECURITY, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN AND OTHER
TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN U.S. FEDERAL OR OTHER TAX LAWS.
ERISA Considerations
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The primary purpose of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA") is to protect the interests of participants in employee
benefit plans by mandating standards of conduct, obligations and
responsibilities for the people who serve as the fiduciaries of these plans. A
person will be considered to be a fiduciary with respect to an employee benefit
plan under ERISA to the extent that he or she exercises discretionary authority
over the management or the investment of the plan's assets. Accordingly, before
investing the assets of an employee benefit plan in capital securities, a
fiduciary will be required to determine whether the investment satisfies the
prudence and diversification requirements of ERISA and whether the investment,
itself, is permitted under the plan's governing documents.
Section 406 of ERISA and Section 4975 of the Code prohibit plans, as well
as individual retirement accounts and Keogh plans subject to Section 4975 of the
Code, from engaging in certain transactions involving "plan assets" with persons
who are "parties-in-interest" under ERISA or "disqualified persons" under the
Code with respect to the plan. Violation of the "prohibited transaction" rules
will result in the imposition of an excise tax or other liabilities on the
"parties-in-interest" or the "disqualified persons," as applicable, unless
exemptive relief is available under a statutory or administrative exemption.
Employee benefit plans that are governmental plans (as defined in Section 3(32)
of ERISA), certain church plans (as defined in Section 3(33) of ERISA) and
foreign plans (as described in Section 4(b)(4) of ERISA) are not subject to the
requirements of ERISA or Section 4975 of the Code; however, governmental plans
may be subject to similar provisions under applicable state laws.
The U.S. Department of Labor has issued special regulations governing
certain investments by employee benefits plans covered by ERISA. These
regulations are known as the "Plan Asset Regulations." Under these Regulations,
the assets of the Trust will be deemed to be the assets of the employee benefit
plan for purposes of ERISA and Section 4975 of the Code if the plan's assets are
used to acquire an equity interest in the Trust and no exception under the Plan
Asset Regulations applies to the transaction. An "equity interest" is defined in
the Plan Asset Regulations to specifically include a beneficial interest in a
trust such as the Trust.
The Plan Asset Regulations do, however, contain certain exceptions to this
general rule. Under one exception, the assets of the Trust will not be deemed to
be the "plan assets" of the investing plans if, at all times, less than 25% of
the value of each class of equity interest in the Trust is held by all employee
benefit plans, including, for this purpose, employee benefit plans not subject
to ERISA or Section 4975 of the Code, such as governmental, church and foreign
plans, and any other plans whose assets qualify as "plan assets" under the Plan
Asset Regulations (collectively, the "Benefit Plan Investors"). Alternatively,
the assets of the Trust will not be deemed to be "plan assets" of the investing
plans if the capital securities constitute "publicly-offered securities" within
the meaning of the Plan Asset Regulations. Potential employee benefit plan
investors should be aware that although these exceptions exist, we cannot give
plan investors any assurance that the capital securities held by Benefit Plan
Investors will be less than 25% of the total value of the capital securities
either at the completion of this offering or at any subsequent time. In
addition, no assurance can be given that the capital securities offered in this
Prospectus constitute "publicly-offered securities" within the meaning of the
Plan Asset Regulations. We will purchase and initially hold all of the common
securities of the Trust.
By operation of the Plan Asset Regulations, certain transactions involving
the Trust and an employee benefit plan may be deemed to constitute direct or
indirect prohibited transactions under ERISA and Section 4975 of the Code. A
direct or indirect prohibited transaction may occur if the assets of the Trust
are deemed to be the "plan assets" of the plan investing in the Trust. For
example, if we were a party- in-interest with respect to a plan (either directly
or by reason of its
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ownership of the Bank or other subsidiaries), an extension of credit between us
and the Trust (as represented by the subordinated debentures and the guarantee)
would occur which is likely to be prohibited by Section 406(a)(1)(B) of ERISA
and Section 4975(c)(1)(B) of the Code, unless exemptive relief is available. In
addition, if we qualify as a fiduciary with respect to the Trust as a result of
certain powers it holds under the Trust Indenture (such as the powers to remove
and replace the property trustee and the administrative trustees), it is
possible that the optional redemption or acceleration of the subordinated
debentures would be considered to be prohibited transactions under Section
406(b) of ERISA and Section 4975(c)(1)(E) of the Code. In order to avoid
engaging in these prohibited transactions, each investing plan, by purchasing
capital securities, will be deemed to have directed the Trust to invest in the
subordinated debentures and to have appointed the property trustee.
The DOL has issued five separate prohibited transaction class exemptions
("PTCEs") that may provide exemptive relief to an employee benefit plan for
direct or indirect prohibited transactions that may arise from the purchase or
holding of the capital securities. The available PTCE's include:
. PTCE 96-23 which may be applicable for certain transactions involving
in-house asset managers;
. PTCE 95-60 which may be applicable for certain transactions involving
insurance company general accounts;
. PTCE 91-38 which may be applicable for certain transactions involving
bank collective investment funds;
. PTCE 90-1 which may be applicable for certain transactions involving
insurance company separate accounts; and
. PTCE 84-14 which may be applicable for certain transactions involving
independent qualified asset managers.
Because the capital securities may be deemed to be equity interests in NHTB
for us of applying ERISA and Section 4975 of the Code, these capital securities
may not be purchased or held by any employee benefit plan ("Plan"), any entity
whose underlying assets include "plan assets" by reason of any plan's investment
in the entity (a "Plan Asset Entity") or any person investing the "plan assets"
of any plan, unless the purchaser or holder is exempt from all of ERISA's
prohibited transaction rules because of the relief provided under one of the
PTCE's identified above or another applicable exemption. Any purchaser or holder
of capital securities (or any interest in such securities) will be deemed to
have represented, through the fact of the purchase and holding of the capital
securities, that the purchaser either (a) is not a Plan or a Plan Asset Entity
and is not purchasing the capital securities on behalf of, or with the "plan
assets" of, any Plan or (b) is exempt from ERISA's prohibited transaction rules
because of the relief provided under PTCE 96-23, 95-60, 91-38, 90-1 or 84-14 or
another applicable exemption. If a Plan or Plan Asset Entity purchases or holds
capital securities and elects to rely on an exemption other than PTCE 96-23, 95-
60, 91-38, 90-1 or 84-14, we, together with the Trust, may require an opinion of
legal counsel or other satisfactory evidence that such exemption is available.
Due to the complexity of these rules and the penalties that may be imposed
on persons involved in non-exempt prohibited transactions, it is critical that
Plan fiduciaries consult with legal counsel regarding the consequences that may
result if the assets of the Trust are deemed to be the "plan assets" of the Plan
by operation of the Plan Asset Regulations and the exemptive relief, described
above, is not available.
67
<PAGE>
Underwriting
Subject to the terms and conditions set forth in the underwriting
agreement, dated , 1999, we, together with the Trust, have agreed that the
Trust will sell to Tucker Anthony Cleary Gull ("Tucker Cleary"), and Tucker
Cleary has agreed to purchase from the Trust, the respective number of capital
securities set forth opposite its name below:
Number of
Capital Securities
------------------
Tucker Anthony Cleary Gull 1,750,000
Total 1,750,000
=========
Under the terms and conditions of the underwriting agreement, Tucker Cleary
is committed to take and pay for all of the capital securities if any are taken.
Tucker Cleary proposes initially to offer the capital securities in part
directly to the public at the initial public offering price set forth on the
cover page of this prospectus. Tucker Cleary also proposes to offer the capital
securities in part to several securities dealers at the initial public offering
price less a concession of no more than $ for each capital security.
Tucker Cleary and dealers may allow and reallow, a concession of no more than $
for each capital security to other brokers and dealers. After the capital
securities are released for sale to the public, the initial public offering
price and other selling terms may from time to time be varied by Tucker Cleary.
Tucker Cleary will not execute any transaction in a discretionary account
without prior approval of the customer.
Because the proceeds from the sale of the capital securities will be used
to purchase our subordinated debentures, the underwriting agreement provides
that we will pay Tucker Cleary compensation for arranging the Trust's investment
in our subordinated debentures of $ for each capital security sold in the
offering.
Prior to the offering, there has been no public market for the capital
securities. Although Tucker Cleary has indicated to us and to the Trust 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
markets for the capital securities.
We, together with the Trust, have agreed to indemnify Tucker Cleary against
certain liabilities, including liabilities under the Securities Act.
Until the distribution of the capital securities is completed, rules of the
SEC (as defined herein) may limit the ability of Tucker Cleary to bid for and
purchase the capital securities. As an exception to these rules, Tucker Cleary
is permitted to engage in certain transactions that stabilize the price of the
capital securities. Such transactions consist of bids or purchases for the
purpose of pegging, fixing or maintaining the price of the capital securities.
68
<PAGE>
If Tucker Cleary creates a short position in the capital securities in
connection with the offering, i.e., if it sells a greater aggregate number of
capital securities than is set forth on the cover page of this prospectus,
Tucker Cleary may reduce the short position by purchasing capital securities in
the open market.
Tucker Cleary may also impose a penalty bid on certain selling group
members. This means that if Tucker Cleary purchases shares of capital securities
in the open market to reduce its short position or to stabilize the price of the
capital securities, it may reclaim the amount of the selling concession from the
selling group members who sold those shares as part of the offering.
In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of such purchases. The imposition of a penalty bid
might also have an effect on the price of a security to the extent that it were
to discourage resales of the security.
Neither we nor Tucker Cleary makes any representations 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. In addition, neither we nor
Tucker Cleary makes any representation that Tucker Cleary will engage in such
transactions or that such transactions, once commenced, will not be discontinued
without notice.
During a period of 180 days from the date of this Prospectus, neither the
Trust nor NHTB will, subject to certain exceptions, without the prior written
consent of Tucker Cleary, directly or indirectly, sell, offer to sell, grant any
option for sale of, or otherwise dispose of, any capital securities, any
security convertible into or exchangeable into or exercisable for capital
securities or the subordinated debentures or any debt securities substantially
similar to the subordinated debentures or equity securities substantially
similar to the capital securities (except for the subordinated debentures and
the capital securities offered hereby).
Because the National Association of Securities Dealers, Inc, (the "NASD")
is expected to view the Capital Securities as interests in a direct
participation program, the offering of the Capital Securities is being made in
compliance with the applicable provisions of Rule 2810 of the NASD's Conduct
Rules.
It is expected that delivery of the capital securities will be made in
book-entry form only through the facilities of DTC in New York, New York against
payment therefor on or about , 1999, as agreed upon by us, the Trust and
Tucker Cleary in accordance with Rule 15c6-1 under the Exchange Act.
Tucker Cleary or its affiliates have provided from time to time, and expect
to provide in the future, investment services to us and our affiliates, for
which Tucker Cleary or its affiliates have received or will receive customary
fees and commissions.
Legal Matters
Certain legal matters will be passed upon for us by Thacher Proffitt & Wood
and for the underwriters by Sullivan & Worcester LLP. Certain matters relating
to United States federal income tax considerations described in this prospectus
will be passed upon for us by Thacher Proffitt & Wood.
69
<PAGE>
Experts
Our consolidated financial statements as of December 31, 1998 and 1997, and
for each of the years in the three year period ended December 31, 1998,
incorporated in this prospectus by reference, have been incorporated in reliance
upon the report of Shatswell, MacLeod, & Company, P.C., independent auditors,
which is incorporated by reference in this prospectus and upon their authority
as experts in accounting and auditing.
Where you can find more information
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy any document in our public files
at the SEC's public reference rooms at 450 Fifth Street, N.W., Washington, D.C.
20549 and at the SEC's regional offices at 7 World Trade Center, 13/th/ Floor,
Suite 1300, New York, New York 10048 and Citicorp Center, 500 West Madison
Avenue, Suite 1400, Chicago, Illinois 60661. Please call the SEC at 1-800-SEC-
0330 for further information on the public reference rooms. Our SEC filings are
also available to the public from the SEC's web site at http://www.sec.gov
through the SEC's electronic data gathering, analysis and retrieval system,
EDGAR. Our common stock is listed on the Nasdaq National Market under the symbol
"NHTB." Information about us also is available from the NASD, 1735 K Street,
N.W., Washington, D.C. 20006.
This prospectus is part of a registration statement that we and the Trust
filed with the SEC. Because the SEC allows us to omit parts of the registration
statement from this prospectus, we did not include all the information in the
registration statement in this prospectus. You should review the registration
statement, including the exhibits, for additional information regarding the
Trust, the capital securities and us. The registration statement and its
exhibits may be inspected at the SEC's offices described in the previous
paragraph.
Additional information we have incorporated in the prospectus
The SEC allows us to "incorporate by reference" the information we file
with it, which means that we can disclose important information to you by
referring you to those documents that are considered part of this prospectus.
Information that we file with the SEC after the date of the registration
statement will automatically update and supersede this information. We
incorporate by reference the documents listed below and any future filings made
with the SEC under Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange
Act of 1934 by us (1) after the date of the filing of our registration statement
and prior to its effectiveness and (2) until our offering of securities has been
completed.
. Annual Report on Form 10-KSB for the year ended December 31, 1998.
. Quarterly Report on Form 10-QSB for the three months ended March 31,
1999.
. Current Report on Form 8-K dated April 27, 1999.
. Definitive Proxy Statement on Schedule 14A dated March 5, 1999.
For your convenience, we have attached a copy of our Annual Report on Form
10-KSB for the year ended December 31, 1998 (without exhibits), and the
Quarterly Report on Form 10-QSB for the three months ended March 31, 1999 to
this prospectus as Appendix A and B. You may obtain a copy of our filings with
the SEC at no cost, by writing or telephoning us at the following address:
70
<PAGE>
New Hampshire Thrift Bancshares, Inc.
Attention: Linda L. Oldham, Secretary
9 Main Street
P.O. Box 9
Newport, NH 03773
(603) 863-0886
You should rely only on the information incorporated by reference or
provided in this prospectus or any supplement. We have not authorized anyone
else to provide you with different information. This prospectus is an offer to
sell only the capital securities referred to in this prospectus, and only under
circumstances and in jurisdictions where it is lawful to do so. The information
contained in this prospectus is current only as of the date of the prospectus.
71
<PAGE>
Appendix A
A COMMITMENT TO TRADITIONAL VALUES
================================================================================
WITH A VISION FOR CONTINUED GROWTH
While we have the technological resources and banking expertise to
effectively serve our customers into the next millennium, we recognize the
importance of maintaining the traditional values established by our forefathers.
Since 1868, we've been committed to serving our customers by offering sound
financial advice and investment strategies to help stimulate personal and
regional growth.
Our success and long-term stability are the result of a commitment to local
residents and businesses. Our underlying philosophy remains as set by our
forefathers...hard work, initiative, perseverance, and one-on-one personal
associations.
A-1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Selected Financial Highlights............................................. 3
President's Letter........................................................ 4
Management's Discussion and Analysis...................................... 7
Report of Independent Auditors............................................ 20
Financial Statements...................................................... 21
Notes to Financial Statements............................................. 27
Form 10-KSB............................................................... 47
Board of Directors........................................................ 65
Officers and Managers..................................................... 65
Board of Advisors......................................................... 66
Shareholder Information................................................... 66
Information on Common Stock............................................... 66
</TABLE>
A-2
<PAGE>
_________________________________________________
SELECTED FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE PERIODS ENDED DECEMBER 31, 1998 1997 1996
- --------------------------------------------------------------------------------------------------------------------
($ in thousands, except per share data)
<S> <C> <C> <C>
Net Income $ 3,119 $ 2,771 $ 611
Earnings Per Common Share/1)/ $ 1.49 $ 1.36 $ .36
Earnings Per Common Share, Assuming Dilution/1)/ $ 1.47 $ 1.33 $ .35
Dividends Declared $ .60 $ .50 $ .50
Dividend Payout Ratio 40.27% 36.76% 138.89%
Return on Average Assets .96% .88% .24%
Return on Average Equity 11.76% 11.44% 3.15%
</TABLE>
<TABLE>
<C>
AS OF DECEMBER 31, 1998 1997 1996
- -------------------------------------------------------------------------------------------------------------------------
($ in thousands, except book value data)
<S> <C> <C> <C>
Total Assets $ 323,408 $ 317,989 $ 264,385
Total Deposits $ 282,049 $ 271,227 $ 213,959
Total Securities/(2) $ 54,171 $ 32,167 $ 27,599
Net Loans $ 232,321 $ 255,224 $ 216,003
Federal Home Loan Bank Advances $ - $ 10,246 $ 20,174
Shareholders's Equity/(3) $ 27,780 $ 25,563 $ 19,194
Book Value of Shares Outstanding $ 13.20 $ 12.24 $ 11.26
Average Equity to Average Assets 8.19% 7.67% 7.51%
Shares Outstanding 2,104,285 2,088,097 1,704,982
Number of Branch Locations 12 12 10
</TABLE>
(1) See Note 1 to Consolidated Financial Statements regarding earnings per
share.
(2) Shown at fair value.
(3) See Note 14 to Consolidated Financial Statements regarding the issuance of
common stock.
A-3
<PAGE>
______________________________________________________________________________
PRESIDENT'S LETTER
- -------------------
...a concerted and
- -------------------
continued emphasis
- -------------------
on the "community"
- -------------------
part of community
- -------------------
banking...
- -------------------
1998...our best year ever... brought record earnings to the Bank and
the Company amid a backdrop of an exceptionally high level of residential
mortgage loan production and a resulting rebalancing of our mix of assets. It is
a concerted and continued emphasis on the `community' part of community banking
that has been the enabling factor behind our 1998 results and the focus on our
efforts to further refine our primary business lines.....consumer banking at the
retail level, commercial services for our growing number of small business
customers, and direct access to an associated family of financial products that
include both trust and investment services and, now, life insurance.
RECORD EARNINGS
Consecutive quarterly record earnings throughout the year resulted in
consolidated net income for the year-ended December 31, 1998 of $3,118,750, or
$1.49 per share of common stock. This compares favorably to the net income of
$2,770,932, or $1.36 per share, that was reported for year-end 1997. Net asset
growth, impacted by the substantial volume of secondary-market mortgage loan
production, resulted in total assets at year-end of $323,407,769, as compared to
$317,988,962 at December 31, 1997. While this increase appears particularly
modest, it must be noted that slightly more than $10,000,000 in advances from
the Federal Home Loan Bank of Boston that were part of the 1997 year-end numbers
were retired during 1998. Complete financial details of the year-ended December
31, 1998 are more fully covered in the Management Discussion and Analysis
section that immediately follows this report.
SHAREHOLDER VALUE
Consistent with the generally accepted economic forecast of slower
growth in 1999, the stock market's concerns about the financial services
industry now appears to over-shadow, and discount, financial stocks, with the
market price for the Company's stock ending the year at $15.50 per share.
However, the contribution of net earnings for 1998, after the payment of
dividends, brought about another steady year-end increase to shareholder's
equity from $25,563,125 to $27,779,606 and a book value that rose by $.96, from
$12.24 to $13.20 per share. The fundamental strength of the Company was
acknowledged by the Board of Directors at their January 1999 meeting when the
regular quarterly cash dividend was raised from $.15 to $.16 per share. This
reflects an increase of 6.66% over the most current prior period.
PRIMARY BUSINESS
In responding to the financial performance pressures of margins,
expenses and growth, the Company's operating emphasis must continue to be
focused on the core business lines that are the life-blood of community banking.
The standard products and services that banking customers have come to
expect....checking and savings accounts....mortgage and consumer lending....and
small business lending...must now be complemented by trust services, investment
brokerage and insurance products. As the defining lines between financial
service providers becomes increasingly blurred, community banks find themselves
in an interesting position. The `personal' banking role that has long sustained
the success of our business is being attacked and rewarded at the same time.
Attacked by the very nature of a society that desires to get things the quickest
and easiest way and rewarded by that very same society that continues to
recognize an inherent and continuing value in the more personalized services of
community banks. It is our primary goal to foster and expand our relationship
end-points, and in turn our business, through a dedicated
A-4
<PAGE>
______________________________________________________________________________
PRESIDENT'S LETTER (continued)
commitment to customer service .....responsive, knowledgeable, and professional.
The ability to spread costs and lower efficiency ratios beyond a certain level
is limited at smaller institutions by the dynamics of scale and scope. It
becomes, then, an almost continuous undertaking to identify areas for increased
profitability, refine and implement new pricing strategies, further develop
cross-selling techniques, and broaden the access to funding sources.
CHALLENGES AND OPPORTUNITIES
The demographics of generational change present us with a fast-
changing and highly-competitive business environment. The customer patterns of
the `Traditionalist' generation are far afield from that of the `Baby-Boomers'
and, in-turn, the `Generation X-ers' and `Millennium Kids' that will soon come
into their own as a growing economic force. Priority must be given not just to
customer retention, but also to new customer cultivation and development.
Successfully building financial-service bridges from one generation to the next
will be a major part of our effort going forward. The design and delivery of
products and services to not just meet a financial need, but first attract and
then retain the customer will be essential for the longer-term. From our newest
`Skipper Account' holder (for those under age sixteen) to our more seasoned
depositors with their `Navigator Club' accounts, our energy remains focused on
building customer relationships. Having assembled an effective team of managers
and supervisors, we feel confident that a strong footing has been laid that will
allow us to become ever-more adaptive and flexible without losing sight of the
uniquely-local identity that is so vitally important to community banking.
FUNDAMENTALS AND TECHNOLOGY
Our existing network of branch offices have continued to bring us greater
marketplace presence as we further expanded our commercial lending capabilities
and, at the same time, witnessed an unprecedented volume of residential mortgage
loan production. With a net loan portfolio at year end 1998 down some $20
million over year end 1997, these numbers belie the record level of activity
that resulted in gross loan origination of more than $140 million. In fact,
recent statistics reveal that, in the combined markets we serve, the Bank was
clearly the leading lender for purchase-money mortgages with a substantially
dominant position over both other financial institutions and mortgage companies.
And, as seller/servicer of fixed-rate mortgages for the secondary market, our
off-balance sheet sold loan portfolio grew to nearly $130 million by year end
December 31, 1998. This was truly a remarkable year for our lending team.
Asset quality, despite this record volume, remains high and a
continued emphasis in the areas of audit and compliance are an important part of
our daily operations. The importance of maintaining a concentration of effort in
this area should not be diminished by the current level of generally robust
economic conditions. The economic expansion that blessed the decade of the
1990's can not last forever and, although no significant signs of concern are
yet discernible on the horizon, a measure of caution is not inappropriate as we
embark upon a new decade...a new century...and a new millennium.
With an eye on new products and services...and customer retention...
1998 saw the introduction of debit cards and check imaging. Both part
- ------------------
...building
- ------------------
financial-service
- ------------------
bridges from one
- ------------------
generation to the
- ------------------
next...
A-5
<PAGE>
_______________________________________________________________________________
PRESIDENT'S LETTER (continued)
- --------------------
...the Bank was
- --------------------
clearly the leading
- --------------------
lender for
- --------------------
purchase- money
- --------------------
mortgages... This
- --------------------
was truly a
- --------------------
remarkable year for
- --------------------
our lending team...
of our longer-term strategic technology plan, these were viewed as important
tools that enabled our customers to better access and manage their personal
finances. Future enhancements will await the new year as the issues of Year 2000
preparedness take front-stage across the country. For our part, Year 2000
planning started in 1996 and will continue as an action item for the Bank and
Company right through year end 1999. While the importance of this issue must be
not under-estimated, we have, to date, met all of our major targets and have had
our regulators from the Office of Thrift Supervision conduct both Phase I and
Phase II on-site Year 2000 examinations.
LOOKING AHEAD
As in the past, we continue to be fully committed to the principles of
community banking for the benefit of our customers, our communities and our
shareholders. The underlying value of our banking franchise is comprised of a
balance between a modest growth in assets and a consistent enhancement in
earnings. Our organizational structure and balance sheet mix are designed to
provide safety and soundness over the long-term. We envision future marketplace
expansions that will complement our existing operations and recognize that the
costs of certain near-term investments in both people and technology will result
in greater returns in the years ahead.
IN CLOSING
Failing to make mention of the tremendous effort of all our employees
during the year just past would be a great injustice. We are fortunate to have a
highly dedicated and committed group of professionals working at all levels of
the institution. This has, indeed, been an exceptional year for the Bank and the
Company that simply could not have been accomplished without their loyalty and
support. On behalf of our Board of Directors and management team, we would like
to express our sincere appreciation for the continued confidence that is
evidenced by customers and shareholders alike. It is our mission to provide
exceptional banking services of the highest quality.....both now and in the
future.... for the benefit of all our constituencies.
/s/ Stephen W. Ensign
Stephen W. Ensign
Vice Chairman of the Board,
President and Chief Executive Officer
A-6
<PAGE>
-----------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATION
GENERAL
New Hampshire Thrift Bancshares, Inc.'s (the "Company") profitability is
derived from its only subsidiary, Lake Sunapee Bank, fsb (the "Bank"). The
Bank's earnings are primarily generated from the difference between the yield on
its loans and investments and the cost of its deposit accounts and borrowings.
Loan origination fees, retail banking service fees, and gains on security
transactions supplement these core earnings.
In 1998, the Company earned $3,118,750, or $1.47 per common share, assuming
dilution, compared to $2,770,932, or $1.33 per common share, assuming dilution,
in 1997. The increase in earnings can be primarily attributed to the overall
increase in loan production, an increase in investment securities, and a
decrease in advances from the Federal Home Loan Bank. In 1998, the Bank
originated a record $142 million in loans. Favorable interest rates coupled with
a dedicated loan origination team and support staff allowed existing and new
customers to refinance or seek new funding more easily. The Bank sells fixed
rate loans into the secondary market and retains the servicing. As a result,
fees from loan originations, mortgage servicing rights, and gains on the sale of
loans increased 19.93%. The increase in investment securities resulted from a
strategy implemented to offset the decrease in interest earned on loans. In
addition, during 1998, the Bank was able to prepay all of its FHLB advances. By
increasing the interest earned on investment securities and decreasing its
interest expense on advances, net interest income increased 2.76%.
YEAR 2000
Many companies continue to undertake projects to address the Year 2000
(Y2K). Companies must determine potential costs and uncertainties based on a
number of factors, including its software and hardware and the nature of its
business. Companies must also coordinate with other entities with which they do
business. Lake Sunapee Bank, through its technology committee and an outside
consultant, has implemented many hardware and software changes in 1998, in an
effort to become Y2K compliant. During 1998, the Bank installed a new data
processing mainframe computer, upgraded its mainframe software, and installed a
new proof of deposit and check imaging system. All of these Y2K compliant
systems have been in operation throughout most of 1998.
Y2K testing has been on going and will continue throughout 1999. Based on a
review of internal practices and communications with third party processors, the
Bank does not expect to encounter significant difficulties in connection with
the transition to the Year 2000. The status of the Bank's `Year 2000 Action
Plan' is reported to its Board of Directors monthly. A $50,000 annual provision
has been established to cover Y2K related expenses. In conjunction with the
`Action Plan', the Bank has developed a `Business Continuity Plan'. This Plan is
designed to allow the Bank to operate should a system it relies on fail. As part
of the `Business Continuity Plan', the Bank has arranged for power generators
and designed a manual accounting system. It is unlikely the Bank will need to
utilize these systems, but nevertheless, they are being developed and tested.
The Bank is subject to regulatory review concerning the Year 2000 from its
primary regulator, The Office of Thrift Supervision (OTS). The Bank has been
examined twice as part of the OTS's program to ensure Y2K compliance.
In addition, monitoring and managing the year 2000 project has and will
likely continue to result in additional direct and indirect costs to the Bank.
Direct costs include potential charges by third party software vendors for
product enhancements, costs involved in testing software for year 2000
compliance, and any resulting costs for developing and implementing contingency
plans for critical software products not enhanced. Indirect costs will
principally consist of the time devoted by existing employees in monitoring
software vendor progress, testing enhanced software products and implementing
necessary contingency plans. Both direct and indirect costs of addressing the
Year 2000 Issue will be charged to earnings incurred. Such costs have not been
material to date.
FINANCIAL CONDITION
Total assets increased by $5,418,807, or 1.70% from $317,988,962 to
$323,407,769. The increase in total assets resulted primarily from an increase
in investment securities and federal funds sold. Total loans decreased from
$259,060,873 to $239,116,440, or 7.70%. The decrease in loans is primarily
attributed to a change in the mix of the Bank's loan portfolio. As interest
rates fell during 1998, many consumers refinanced their loans into fixed rate
instruments. In order to protect against interest rate risk, the Bank
A-7
<PAGE>
------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
sells fixed rate loans into the secondary market, retaining the servicing. To
offset the decrease in loans, the Bank invested proceeds from the sale of loans
into corporate bonds and government agency securities. As mentioned, this
practice also enabled the Bank to maintain its interest rate spread. The table
on page 16 illustrates the maturities of the loan portfolio at December 31,
1998. Real estate loans decreased by $17,569,384, or 8.37% from $209,951,326 to
$192,381,942. The net level of loans sold into the secondary market increased by
approximately $60 million. At December 31, 1998, the Bank had approximately $130
million in its servicing portfolio. The Bank expects to continue to sell fixed
rate loans into the secondary market in order to manage interest rate risk.
Adjustable rate mortgages comprise approximately 80% of the Bank's real
estate mortgage loan portfolio. This is consistent with prior years.
Total investment securities increased by $21,722,129, or 67.81% from
$32,033,122 to $53,755,251 (at amortized cost). As mentioned, the Bank used
proceeds from the sale of loans to purchase investment securities. This strategy
provided an increase in interest and dividends on investment of $1,067,737,
which primarily offset the $1,190,531 decrease in interest on loans. The Bank's
net unrealized gain of $415,501 at December 31, 1998 compares to $134,112 for
the same period in 1997. This change of $281,389 in market value reflects the
decrease in interest rates during 1998 and the resultant rise in bond values.
Real estate owned and property acquired in settlement of loans
increased by a net $154,000, or 29.84% to $670,153. The total reflects $315,153,
or 47.03% in market value for the remaining five lots at Blye Hill Landing in
Newbury, NH. During 1998, six real estate owned properties totaling $163,076, in
carrying value, were sold.
Deposits increased by $10,822,196, or 3.99% to $282,049,156 from
$271,226,960. During 1998, the Bank introduced the Navigator Club. Customers
with combined account balances of $5,000 or more are eligible to join. During
1998, the Bank opened approximately 1,500 of these accounts. Customers also took
advantage of the Bank's favorable Money Market Deposit Account interest rate. As
a result, this account increased 15% to approximately $27 million. During 1998,
Certificates of Deposit (CDs) decreased $12,000,676 from $133,097,650 to
$121,096,974. The decrease was primarily attributed to the maturity of brokered
and non-personal CD's that were acquired from Landmark Bank during 1997. Lake
Sunapee Bank elected not to renew these high costing brokered deposits. In
addition, 1998 was the final year for the `Apple' CD program the Bank offered 10
years ago. Still, many customers continued to place funds in CDs, with CDs
comprising 42.93% of total deposits versus 49.07% last year.
Advances from the Federal Home Loan Bank (FHLB) decreased by
$10,246,318, or 100.00% as the Bank used its increase in deposits and repurchase
agreements to prepay its FHLB advances in order to reduce interest expense.
Repurchase agreements increased $3,455,924 as businesses sought investment
alternatives through the Bank. The Bank was able to fund its loan production
through its growth in deposits and repurchase agreements.
LIQUIDITY AND CAPITAL RESOURCES
The Bank is required by its regulator, the OTS, to maintain a 4% ratio
of liquid assets to net withdrawable funds. At year-end 1998, the Bank's ratio
of 12.88% exceeded regulatory requirements for long-term liquidity.
The Bank's source of funds comes primarily from net deposit inflows,
loan amortizations, principal pay downs from loans, sold loan proceeds, and
advances from the FHLB. At December 31, 1998, the Bank had approximately $96
million in additional borrowing capacity from the FHLB.
At December 31, 1998, the Company's shareholders' equity totaled
$27,779,606, or 8.59% of total assets, compared to $25,563,125, or 8.04% at
year-end 1997. The increase of $2,216,481 reflects net income of $3,118,750, the
payment of $1,257,015 in common stock dividends, the cashless exchange of 4,650
shares of stock at an amount of $73,975, the exercise of 20,780 stock options in
the amount of $41,535, a gain of $156,406 on the sale of treasury stock, a tax
benefit on stock options of $58,064, and the change of $172,716 in net
unrealized holding gains on securities classified as available-for-sale. As
interest rates continued to move downward throughout 1998, the Bank's bond
portfolio increased in value.
During 1998, the Bank upstreamed $500,000 to its parent company New
Hampshire Thrift Bancshares, Inc. (NHTB). The purpose of the upstream was to
help offset the payment of dividends to NHTB shareholders.
A-8
<PAGE>
------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Net cash provided by operating activities increased $378,035 to
$3,225,318 in 1998 from $2,847,283 in 1997. The change in gains and losses on
other investments and deferred taxes accounted for the majority of the change.
Net cash flows used in investing activities decreased by $1,109,552
from negative $3,955,691 in 1997 to negative $2,846,139 in 1998. The change in
net cash flows used for securities activity of $18,787,981 was offset by a
decrease in loans held in portfolio of $19,847,490.
In 1998, net cash provided by financing activities was $2,598,753
compared to $3,412,285 in 1997. During 1998, the Bank made principal payments on
FHLB advances of $10,246,318 bringing the balance in FHLB advances to zero. Time
deposits decreased $12,000,676. The Bank was able to repay all of its FHLB
advances and cover its outflow of certificates of deposit by using cash inflows
of $26,278,796 provided by an increase in other deposits and repurchase
agreements.
The Bank expects to be able to fund loan demand and other investing
during 1999 by continuing to use funds provided from customer deposits, as well
as the FHLB's advance program. Management is not aware of any trends, events, or
uncertainties that will have or that are reasonably likely to have a material
effect in the Company's liquidity, capital resources or results of operations.
The Bank is required to maintain tangible, Tier I core, and risk-based
capital ratios of 1.50%, 3.00%, and 8.00%, respectively. As of December 31,
1998, the Bank's ratios were 7.31%, 7.31%, and 12.63%, respectively, well in
excess of the regulators' requirements.
Book value per share was $13.20 at December 31, 1998 versus $12.24 per
share at December 31, 1997. The change in the market value of the Bank's
investment security portfolio and the increase in paid-in capital and retained
earnings provided the increase in book value per share.
IMPACT OF INFLATION
The financial statements and related data presented elsewhere herein
are prepared in accordance with generally accepted accounting principles (GAAP)
which require the measurement of the Company's financial position and operating
results generally in terms of historical dollars and current market value, for
certain loans and investments, without considering changes in the relative
purchasing power of money over time due to inflation. The impact of inflation is
reflected in the increased cost of operations.
Unlike other companies, nearly all of the assets and liabilities of a
bank are monetary in nature. As a result, interest rates have a far greater
impact on a bank's performance than the effects of the general level of
inflation. Interest rates do not necessarily move in the same direction or to
the same extent as the price of goods and services, since such prices are
affected by inflation. In the current interest rate environment, liquidity and
the maturity structure of the Bank's assets and liabilities are important to the
maintenance of acceptable performance levels.
INTEREST RATE SENSITIVITY
The principal objective of the Bank's interest rate management function
is to evaluate the interest rate risk inherent in certain balance sheet accounts
and determine the appropriate level of risk given the Bank's business
strategies, operating environment, capital and liquidity requirements and
performance objectives and to manage the risk consistent with the Board of
Director's approved guidelines. The Bank's Board of Directors has established an
Asset/Liability Committee (ALCO) to review its asset/liability policies and
interest rate position monthly. Trends and interest rate positions are reported
to the Board of Directors quarterly.
Gap analysis is used to examine the extent to which assets and
liabilities are "rate sensitive". An assets or liability is said to be interest
rate sensitive within a specific time-period if it will mature or reprice within
that time. The interest rate sensitivity gap is defined as the difference
between the amount of interest-earning assets maturing or repricing within a
specified period of time and the amount of interest-bearing liabilities maturing
or repricing within the same specified period of time. The strategy of matching
rate sensitive assets with similar liabilities stabilizes profitability during
periods of interest rate fluctuations.
The Bank's one-year gap at December 31, 1998, was - 6.78%, (see the
table on page 11) compared to the December 31, 1997 gap of -7.28%. The Bank
continues to offer adjustable rate mortgages, which reprice at one, three, and
five-year intervals. In addition, the Bank sells fixed-rate mortgages into the
secondary market in order to minimize interest rate risk.
A-9
<PAGE>
------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
The Bank's gap, of approximately negative seven percent at December 31,
1998, means net interest income would increase if interest rates trended
downward. The opposite would occur if interest rates were to rise. Management
feels that maintaining the gap within ten points of the parity line provides
adequate protection against severe interest rate swings. In an effort to
maintain the gap within ten points of parity, the Bank may utilize the Federal
Home Loan Bank advance program to control the repricing of a segment of
liabilities.
As another part of its interest rate risk analysis, the Bank uses an
interest rate sensitivity model, which generates estimates of the change in the
Bank's net portfolio value (NPV) over a range of interest rate scenarios (see
the table on page 11). The OTS produces the data quarterly using its own model
and data submitted by the Bank.
NPV is the present value of expected cash flows from assets,
liabilities and off-balance sheet contracts. The NPV ratio, under any rate
scenario, is defined as the NPV in that scenario divided by the market value of
assets in the same scenario. Modeling changes requires making certain
assumptions, which may or may not reflect the manner in which actual yields and
costs respond to the changes in market interest rates. In this regard, the NPV
model assumes that the composition of the Bank's interest sensitive assets and
liabilities existing at the beginning of a period remain constant over the
period being measured and that a particular change in interest rates is
reflected uniformly across the yield curve. Accordingly, although the NPV
measurements and net interest income models provide an indication of the Bank's
interest rate risk exposure at a particular point in time, such measurements are
not intended to and do not provide a precise forecast of the effect of changes
in market rates on the Bank's net interest income and will likely differ from
actual results.
RESULTS OF OPERATIONS
NET INTEREST INCOME
Net interest income for the year ended December 31, 1998 increased by
$297,542, or 2.76%, to $11,078,822. This increase can be primarily attributed to
the decrease in interest expense on FHLB advances and the increased volume in
the Bank's investment portfolio.
Total interest income decreased by $122,794, or .53%, the decrease is
primarily related to the change in interest rates. Interest on loans decreased
$1,190,531 while interest and dividends on investments increased $1,067,737.
During 1998, the Bank's yield on interest earning assets decreased to 7.75% from
7.97% in 1997.
Total interest expense decreased $420,336, or 3.33%, with 129.21%
attributed to a volume related decrease in interest expense on borrowings. The
Bank's overall cost of funds decreased from 4.54% to 4.32% in 1998. The Bank's
average deposits as a percentage of total interest bearing liabilities increased
from 91.89% in 1997 to 93.22% in 1998. Total deposit costs in 1998 were 4.29%
versus 4.46% in 1997. This decrease was a result of lower balances in higher
costing instruments. As mentioned above, the Bank elected not to renew the
brokered CD's acquired from Landmark Bank, which matured in January of 1998.
FHLB advances typically are higher costing funding instruments. In an effort to
reduce the Bank's overall cost of funds, the Bank repaid all of its outstanding
advances as of December 31, 1998. During 1998, the Bank's cost of advances
decreased from 5.90% to 5.53%.
The Bank's interest rate spread, which represents the difference
between the weighted average yield on interest-earning assets and the weighted
average cost of interest-bearing liabilities, was 3.43% for both 1998 and 1997.
The Bank's net interest margin, representing net interest income as a percentage
of average interest-earning assets, increased slightly to 3.69% from 3.67%.
------------------------------------------------------------
The following table sets forth the average yield on loans and investments, the
average interest rate paid on deposits and borrowings, the interest rate spread,
and the net interest rate margin:
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Yield on loans 8.13% 8.20% 7.86% 7.71% 7.10%
Yield on investment securities 6.03% 6.23% 6.35% 6.53% 6.14%
Combined yield on loans and investments 7.75% 7.97% 7.67% 7.58% 7.00%
Cost of deposits 4.29% 4.46% 4.36% 4.27% 3.63%
Cost of other borrowed funds 5.53% 5.90% 5.86% 6.42% 4.29%
Combined cost of deposits and borrowings 4.32% 4.54% 4.54% 4.50% 3.67%
Interest rate spread 3.43% 3.43% 3.13% 3.08% 3.33%
Net interest margin 3.69% 3.67% 3.44% 3.42% 3.61%
</TABLE>
The following table shows the Bank's interest rate sensitivity (gap) table at
December 31, 1998:
A-10
<PAGE>
------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
<TABLE>
<CAPTION>
0-3 3-6 6 MONTHS- 1-3 BEYOND
MONTHS MONTHS 1 YEAR YEARS 3 YEARS TOTAL
---------------------------------------------------------------------------------------------------
($ in thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest earning assets:
Loans/(1)/ $ 24,659 $ 24,652 $ 51,288 $ 86,922 $ 49,745 $ 237,266
Investments and federal
funds sold 15,667 4,636 7,087 17,522 16,842 61,754
---------------------------------------------------------------------------------------------------
Total 40,326 29,288 58,375 104,444 66,587 299,020
---------------------------------------------------------------------------------------------------
Interest bearing liabilities:
Deposits 53,596 39,414 43,403 72,475 56,640 265,528
Repurchase agreements 11,849 - - - - 11,849
Borrowings - - - - - -
---------------------------------------------------------------------------------------------------
Total 65,445 39,414 43,403 72,475 56,640 277,377
---------------------------------------------------------------------------------------------------
Period sensitivity gap (25,119) (10,126) 14,972 31,969 9,947 21,643
Cumulative sensitivity gap $ (25,119) $ (35,245) $ (20,273) $ 11,696 $ 21,643
Cumulative sensitivity gap as a percentage
of interest-earning assets -8.40% -11.79% -6.78% 3.91% 7.24%
</TABLE>
Note: The Bank has used industry decay formulae in establishing repricing
periods for savings and NOW accounts.
(1) Excludes non accrual loans
The following table sets forth the Bank's NPV as of September 30, 1998 (the
latest NPV analysis prepared by the OTS), as calculated by the OTS.
<TABLE>
<CAPTION>
Change Net Portfolio Value NPV as % of PV Assets
in Rates $ Amount $ Change % Change NPV Ratio Change
- ---------------------- -------------------------------------------------- ----------------------------
<S> <C> <C> <C> <C> <C>
+400 bp.......... 21,300 - 7,706 -27% 6.59% -211 bp
+300 bp.......... 24,350 - 4,655 -16% 7.46% -125 bp
+200 bp.......... 26,727 - 2,278 - 8% 8.11% - 60 bp
+100 bp.......... 28,221 - 785 - 3% 8.51% - 20 bp
0 bp.......... 29,006 -- -- 8.71% --
- 100 bp.......... 29,712 706 + 2% 8.88% + 17 bp
- 200 bp.......... 30,987 1,982 + 7% 9.20% + 49 bp
- 300 bp.......... 33,492 4,486 +15% 9.84% +114 bp
- 400 bp.......... 36,682 7,676 +26% 10.65% +195 bp
</TABLE>
A-11
<PAGE>
_______________________________________________
MANAGEMENT'S DISCUSSION AND ANALSIS (continued)
The following table presents, for the periods indicated, the total dollar amount
of interest income from interest earning assets and the resultant yields as well
as the interest paid on interest bearing liabilities, and the resultant costs:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 1998 1997 1996
------------------------------ --------------------------------- ---------------------------------
AVERAGE/(1)/ YIELD/ AVERAGE/(1)/ YIELD/ AVERAGE/(1)/ YIELD/
BALANCE INTEREST COST BALANCE INTEREST COST BALANCE INTEREST COST
-------------------------------------- -------------------------------- --------------------------------
($ in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Assets:
Interest earning assets:
Loans/(2)/ $ 246,373 $ 20,023 8.13% $ 258,704 $ 21,214 8.20% $ 213,473 $ 16,776 7.86%
Investment securities and
other/(3)/ 53,732 3,240 6.03% 34,841 2,172 6.23% 30,348 1,928 6.35%
----------------------- ----------------------- -------------------------
Total interest earning
Assets 300,105 23,263 7.75% 293,545 23,386 7.97% 243,821 18,704 7.67%
----------------------- ----------------------- -------------------------
Non-interest earning assets
Cash 8,283 7,766 5,964
Other non-interest earning
assets/(4)/ 15,437 14,537 8,425
------------- ------------ --------------
Total non-interest earning
Assets 23,720 22,303 14,389
------------- ------------
Total $ 323,825 $ 315,848 $ 258,210
============= ============ ==============
Liabilities and Shareholders' Equity
Interest bearing liabilities:
Savings deposits $ 136,137 $ 3,233 2.37% $ 119,911 $ 3,159 2.63% $ 96,062 $ 2,607 2.71%
Time deposits 127,065 7,978 6.28% 135,224 8,214 6.07% 98,248 5,877 5.98%
Repurchase agreements 12,775 621 4.86% 5,989 257 4.29% 4,922 203 4.12%
Other borrowed funds 6,365 352 5.53% 16,535 975 5.90% 27,960 1,638 5.86%
----------------------- ----------------------- -------------------------
Total interest bearing
Liabilities 282,342 12,184 4.32% 277,659 12,605 4.54% 227,192 10,325 4.54%
----------------------- ----------------------- -------------------------
Non-interest bearing
Liabilities:
Demand deposits 11,672 10,406 6,983
Other 3,285 3,555 4,656
------------- ------------ --------------
Total non-interest bearing
Liabilities 14,957 13,961 11,639
------------- ------------ --------------
Shareholders' equity 26,526 24,228 19,379
------------- ------------
Total $ 323,825 $ 315,848 $ 258,210
============= ============ ==============
Net interest rate spread $ 11,079 3.44% $ 10,781 3.43% $ 8,379 3.13%
===================== =================== ====================
Net interest margin 3.69% 3.67% 3.44%
=========== =========== ==========
Ratio of interest-earning assets
to interest bearing
liabilities 106.29% 105.72% 107.32%
=========== =========== ==========
</TABLE>
/(1)/ Monthly average balances have been used for all periods. Management does
not believe that the use of month-end balances instead of daily average balances
caused any material difference in the information presented.
/(2)/ Loans include 90-day delinquent loans, which have been placed on a
non-accruing status. Management does not believe that including the 90-day
delinquent loans in loans caused any material difference in the information
presented.
/(3)/ Investment securities and other includes tax-exempt investment securities.
Management does not believe that including tax-exempt investment securities in
investment securities and other caused any material difference in the
information presented.
/(4)/ Other non-interest earning assets includes non-earning assets and real
estate owned.
A-12
<PAGE>
_______________________________________________
MANAGEMENT'S DISCUSSION AND ANALSIS (continued)
The following table sets forth, for the periods indicated, a summary of the
changes in interest earned and interest paid resulting from changes in volume
and rates. The net change attributable to changes in both volume and rate, which
cannot be segregated, has been allocated proportionately to the change due to
volume and the change due to rate.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998 VS. 1997
INCREASE (DECREASE)
DUE TO
VOLUME RATE TOTAL
----------------------------------------
($ in thousands)
<S> <C> <C> <C>
Interest income on loans $ (1,157) $ (34) $ (1,191)
Interest income on investments 1,178 (110) 1,068
---------------------------------------------
Total interest income 21 (144) (123)
---------------------------------------------
Interest expense on savings deposits 252 (178) 74
Interest expense on time deposits (371) 135 (236)
Interest expense on repurchase agreements 312 52 364
Interest expense on borrowings (805) 183 (622)
---------------------------------------------
Total interest expense (612) 192 (420)
---------------------------------------------
Net interest income $ 633 $ (336) $ 297
---------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997 VS. 1996
INCREASE (DECREASE)
DUE TO
VOLUME RATE TOTAL
----------------------------------------
($ in thousands)
<S> <C> <C> <C>
Interest income on loans $ 4,140 $ 298 $ 4,438
Interest income on investments 237 7 244
---------------------------------------------
Total interest income 4,377 305 4,682
---------------------------------------------
Interest expense on savings deposits 542 9 551
Interest expense on time deposits 2,784 (446) 2,338
Interest expense on repurchase agreements 297 (243) 54
Interest expense on borrowings (591) (72) (663)
---------------------------------------------
Total interest expense 3,032 (752) 2,280
---------------------------------------------
Net interest income $ 1,345 $ 1,057 $ 2,402
---------------------------------------------
</TABLE>
A-13
<PAGE>
_______________________________________________
MANAGEMENT'S DISCUSSION AND ANALSIS (continued)
PROVISION FOR LOAN LOSSES
The Bank considers many factors in determining the allowance for loan
losses. These include the risk and size characteristics of loans, the prior
years' loss experience, the levels of delinquencies, the prevailing economic
conditions, the number of foreclosures, unemployment rates, interest rates, and
the value of collateral securing the loans. No changes were made to the Bank's
procedures with respect to maintaining the loan loss allowances as a result of
any regulatory examinations.
Additionally, the Bank's commercial loan officers review the financial
condition of commercial loan customers on a monthly basis and perform visual
inspections of facilities and inventories. The Bank also has an internal audit
and compliance program. Results of the audit and compliance programs are
reported directly to the Audit Committee of the Bank's Board of Directors.
The allowance for loan losses at December 31, 1998 was $3,117,068,
compared to $3,061,451 at year-end 1997. The allowance in 1998 includes
$2,731,374 in general reserves as compared to $2,783,484 in 1997. During 1998,
the Bank had net charge-offs of $112,726 compared to $879,340 in 1997. Due to
the general improvement of the quality of the loan portfolio and a reduction in
risk, the provision for loan losses was reduced by $812,304 to $120,167 in 1998
from $932,471 in 1997. In addition, net charged-off loans during 1998 amounted
to 0.03% of average loans, as compared to 0.35% in 1997. The allowance
represented 1.30% of total loans at year-end 1998 versus 1.18% at year-end 1997.
The allowance for loan losses as a percentage of total non-performing
assets was 115.82% at December 31, 1998 compared to 171.40% at December 31,
1997. Please refer to Note 4 "Loans receivable", in the Consolidated Financial
Statements for information regarding SFAS No. 114 and 118.
Loans classified for regulatory purposes as loss, doubtful,
substandard or special mention do not result from trends or uncertainties which
the Bank reasonably expects will materially impact future operating results,
liquidity, or capital resources.
As of December 31, 1998 there were no other loans not included in the
tables below or discussed above where known information about the possible
credit problems of borrowers caused management to have doubts as to the ability
of the borrower to comply with present loan repayment terms and which may result
in disclosure of such loans in the future.
Total classified loans, excluding special mention, as of December 31,
1998 and 1997 were $5,356,046 and $4,859,402, respectively. Total non-performing
assets amounted to $2,691,366 and $1,786,107 for the respective years. As of
December 31, 1998, non-earning assets includes impaired loans. At December 31,
1998, loans classified as 90-day delinquent were $170,999 compared to $691,567
at December 31, 1997.
------------------------------------
The following table sets forth the breakdown of non-performing assets:
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
90 day delinquent loans/(1)/ $ 170,999 $ 691,567 $ 787,930 $ 1,144,293 $ 23,825
Non-earning assets/(2)/ 1,850,214 578,387 848,942 297,172 1,692,608
Real estate owned 670,153 516,153 707,026 984,185 1,504,880
----------------------------------------------------------------------------------------
Total non-performing assets $ 2,691,366 $ 1,786,107 $ 2,343,898 $ 2,425,650 $ 3,221,313
========================================================================================
Troubled debt restructured $ 114,110 $ 297,926 $ N/A $ 445,417 $ 2,337,058
========================================================================================
Impaired loans $ 1,850,214 $ 1,942,320 $ 1,188,183 $ N/A $ N/A
========================================================================================
</TABLE>
/(1)/ All loans 90 days or more delinquent are placed on a non-accruing status.
/(2)/ Loans considered to be uncollectible, pending foreclosure, or in
bankruptcy proceeding, are classified as impaired.
A-14
<PAGE>
_______________________________________________
MANAGEMENT'S DISCUSSION AND ANALSIS (continued)
The following table sets forth 90 day delinquent loans by category:
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Real estate loans -
Conventional $ 136,699 $ 679,356 $ 723,595 $ 1,132,475 $
Construction 23,825
Consumer loans 4,300 11,347 64,335 3,983
Commercial and municipal loans 30,000 636 7,835
Other loans 228
-------------------------------------------------------------------------------------------
Total $ 170,999 $ 691,567 $ 787,930 $ 1,144,293 $ 23,825
===========================================================================================
</TABLE>
The following table sets forth the allocation of the loan loss valuation
allowance and the percentage of loans in each category to total loans as of
December 31:
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Real estate loans -
Conventional $ 1,473,248 79% $ 1,561,632 80% $ 1,603,860 84% $ 687,547 83% $ 726,959 81%
Construction 122,587 2% 111,604 1% 83,750 201,257 1,598,266 2%
Collateral and
consumer loans 68,283 11% 59,225 11% 36,873 12% 8,067 12% 5,464 12%
Commercial and
municipal loans 1,007,256 8% 1,006,335 8% 294,034 4% 276,526 4% 422,196 4%
Impaired loans 385,694 322,655 139,509 654,663 1%
Other 60,000 1%
-----------------------------------------------------------------------------------------------------------
Valuation allowance $ 3,117,068 100% $ 3,061,451 100% $ 2,158,026 100% $ 1,828,060 100% $ 2,752,885 100%
===========================================================================================================
Valuation allowance
as a percentage of
total loans 1.30% 1.18% .98% .87% 1.38%
===========================================================================================================
</TABLE>
A-15
<PAGE>
________________________________________________
MANAGEMENTS'S DISCUSSION AND ANALYSIS (continued)
The following sets forth the maturities of the loan portfolio at December 31,
1998:
<TABLE>
<CAPTION>
ONE YEAR ONE THRU OVER
MATURITIES: OR LESS FIVE YEARS FIVE YEARS TOTAL
<S> <C> <C> <C> <C>
Real Estate Loans - $ 11,312,719 $ 26,672,876 $ 154,396,347 $ 192,381,942
------------------------------------------------------------------------------
Real Estate Loans with:
Predetermined interest rates 2,274,117 6,718,958 26,498,852 35,491,927
Adjustable interest rates 9,038,602 19,953,918 127,897,495 156,890,015
------------------------------------------------------------------------------
11,312,719 26,672,876 154,396,347 192,381,942
------------------------------------------------------------------------------
Collateral Loans - 11,323,445 5,692,281 3,319,704 20,335,430
------------------------------------------------------------------------------
Collateral Loans with:
Predetermined interest rates 10,200,594 3,915,236 828,940 14,944,770
Adjustable interest rates 1,122,851 1,777,045 2,490,764 5,390,660
------------------------------------------------------------------------------
11,323,445 5,692,281 3,319,704 20,335,430
------------------------------------------------------------------------------
Consumer Loans - 7,089,760 35,210 - 7,124,970
------------------------------------------------------------------------------
Consumer Loans with:
Predetermined interest rates 138,595 35,210 - 173,805
Adjustable interest rates 6,951,165 - - 6,951,165
------------------------------------------------------------------------------
7,089,760 35,210 - 7,124,970
------------------------------------------------------------------------------
Commercial/Municipal Loans- 6,024,903 7,460,892 5,771,945 19,257,740
------------------------------------------------------------------------------
Commercial/Municipal Loans with:
Predetermined interest rates 1,711,959 1,492,412 260,266 3,464,637
Adjustable interest rates 4,312,944 5,968,480 5,511,679 15,793,103
------------------------------------------------------------------------------
6,024,903 7,460,892 5,771,945 19,257,740
------------------------------------------------------------------------------
Other Loans - 4,493 7,701 4,164 16,358
------------------------------------------------------------------------------
Other Loans with:
Predetermined interest rates 3,652 3,732 - 7,384
Adjustable interest rates 841 3,969 4,164 8,974
------------------------------------------------------------------------------
4,493 7,701 4,164 16,358
------------------------------------------------------------------------------
TOTALS $ 35,755,320 $ 39,868,960 $ 163,492,160 $ 239,116,440
==============================================================================
</TABLE>
The preceding schedule includes $2,691,366 of non-performing loans and
$3,775,802 of loans held for sale, categorized within the respective loan types.
A-16
<PAGE>
________________________________________________
MANAGEMENTS'S DISCUSSION AND ANALYSIS (continued)
OTHER INCOME AND EXPENSE
Total non-interest income increased by $89,927, or 3.52% to $2,642,801.
Net gains on the sale of securities, loans and bank property totaled $531,946 at
year-end 1998 compared to $750,517 for the same period in 1997. The change was
primarily attributed to a $397,878, or 72.16% decrease in investment security
gains. In 1997, the Bank sold a majority of its one-sixth ownership in Charter
Trust Company. This transaction produced an after-tax gain of approximately
$300,000. Gains on the sale of loans were $371,991 in 1998 compared to $267,925
for 1997, an increase of 38.84%. The 23.33% increase in customer service fees
was primarily due to an increase in transaction-type accounts. Rental income
increased by 15.09% as the Bank leased some of its previously unoccupied
property.
Total operating expenses increased $481,731, or 5.74% to $8,879,742.
The increase was due to many factors. Salaries and benefits increased $175,481,
or 4.34% due to normal wage increases and rising health insurance costs.
Occupancy costs increased $155,466, or 9.82% as the Bank realized twelve months
of costs associated with its newest branch at Centerra Market Place. In
addition, depreciation costs increased approximately 22% during 1998 as new
computer hardware and software was capitalized as part of the Bank's Y2K
efforts. Outside services increased $150,374, or 30.74%. Included in outside
services is an increase of $34,309 for loan processing services that were
outsourced during 1998 and an increase in consulting fees of $61,160 as the Bank
hired a Y2K consultant and outsourced some of its internal audit functions.
IMPACT OF NEW ACCOUNTING STANDARDS
In July 1997, the FASB issued SFAS No. 130 "Reporting Comprehensive
Income." Statement No. 130 establishes standards for reporting and display of
comprehensive income and its components in a full set of general purpose
financial statements. The Statement is effective for fiscal years beginning
after December 15, 1997 with earlier application permitted.
In July 1997, the FASB issued SFAS No. 131 "Disclosure about Segments
of an Enterprise and Related Information." Statement No. 131 requires
disclosures for each segment that are similar to those required under current
standards with the addition of quarterly disclosure requirements and a finer
partitioning of geographic disclosures. The Statement is effective for fiscal
years beginning after December 15, 1997 with earlier application permitted.
In February 1998, the FASB issued SFAS No. 132 "Employers' Disclosures
about Pensions and Other Postretirement Benefits." Statement No. 132 revises
employers' disclosures about pension and other postretirement benefit plans. It
does not change the measurement or recognition of those plans. The Statement is
effective for fiscal years beginning after December 15, 1997.
In management's opinion, SFAS Nos. 130, 131, and 132 did not have a
material effect on the Bank's financial statements.
In June 1998, the FASB issued SFAS No. 133 "Accounting for Derivative
Instruments and Hedging Activities." Statement No. 132 establishes accounting
and reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts and for hedging activities. The
Statement is effective for all fiscal quarters of fiscal years beginning after
June 15, 1999.
In management's opinion, SFAS Nos. 133 when adopted will not have a
material effect on the Bank's financial statements.
ACCOUNTING FOR INCOME TAXES
The provision for income taxes for the years ended December 31, 1998,
1997 and 1996 includes net deferred income tax expense (benefit) of $364,723,
$(575,835), and $(120,481), respectively. These amounts were determined by the
deferred method in accordance with generally accepted accounting principles for
each year.
The Bank has provided deferred income taxes on the difference between
the provision for loan losses permitted for income tax purposes and the
provision recorded for financial reporting purposes.
COMPARISON OF YEARS ENDED DECEMBER 31, 1997 AND 1996
In 1997, the Company earned $2,770,932, or $1.33 per common share,
assuming dilution, compared to $610,711, or $.35, assuming dilution, per common
share in 1996. The increase in earnings was attributable to three factors. In
February 1997, Lake
A-17
<PAGE>
________________________________________________
MANAGEMENTS'S DISCUSSION AND ANALYSIS (continued)
Sunapee Bank completed its acquisition of Landmark Bank of Lebanon, NH. This
transaction increased the Bank's assets by approximately $52 million and
provided Lake Sunapee Bank with increased yields on its loan portfolio. As a
result, the Bank's net interest income increased 28.66%. Second, the Bank's
deposit insurance premium was approximately $850,000 less than 1996. This was
due to the Bank paying a one-time premium assessment in 1996 of $995,000 to the
Federal Deposits Insurance Corporation (FDIC). The payment was part of the
recapitalization of the savings association insurance fund (SAIF). Third, during
the third quarter of 1997, Lake Sunapee Bank sold a majority of its one-sixth
ownership in Charter Trust Company. This transaction produced an after-tax gain
of approximately $300,000.
FINANCIAL CONDITION
Total assets increased by $53,603,618, or 20.27% from $264,385,344 to
$317,988,962. Total loans increased from $218,461,279 to $258,386,923, or
18.27%. Real estate loans increased by $24,968,975, or 13.50% from $184,982,351
to $209,951,326. The Bank also increased the net level of loans sold into the
secondary market by approximately $20 million. At December 31, 1997, the Bank
had $71,551,925 in its servicing portfolio. The majority of the increases were
attributable to the acquisition of Landmark Bank.
Investments securities increased by $4,242,385, or 15.27% from
$27,790,737 to $32,033,122 (at amortized cost). The Bank's net unrealized gain
of $134,112 at December 31, 1997 compares to 1996's net unrealized loss of
$192,179. This change of $326,291 in market value reflects the decrease in
interest rates during 1997 and the resultant rise in bond values.
Real estate owned and property acquired in settlement of loans
decreased by $207,325, or 28.66% to $516,153. This total reflected $309,153, or
59.89%, in market value for the remaining five lots at Blye Hill Landing in
Newbury, NH. During 1997, twelve real estate owned properties totaling $537,389,
in carrying value were sold.
Deposits increased by $57,268,065, or 26.77% to $271,226,960 from
$213,958,895. The acquisition of Landmark Bank accounted for the majority of the
increase. In addition, customers took advantage of the Bank's favorable Money
Market rates. As a result, this account increased 111% to approximately $24
million. Customers continued to place funds in Certificates of Deposit (CDs)
with CDs comprising 49.10% of total deposits versus 49.89% last year. Total CDs
increased by $26,357,185, or 24.69% to $133,097,650.
Advances from the FHLB decreased by $9,927,707, or 49.21% to
$10,246,318 from $20,174,025. The Bank was able to fund its loan growth through
deposit growth and utilize excess funds to pay-down FHLB advances.
LIQUIDITY AND CAPITAL RESOURCES
The Bank is required by its regulator, the OTS, to maintain a 4% ratio
of liquid assets to net withdrawable funds. At year-end 1997, the Bank's ratio
of 12.81% exceeded regulatory requirements for long-term liquidity.
At December 31, 1997, the Company's shareholders' equity totaled
$25,563,125, or 8.04% of total assets, compared to $19,193,690, or 7.26% of
total assets at year-end 1996. The increase of $6,369,435 reflects net income of
$2,770,932, $3,931,801 as a result of the Landmark Bank acquisition, the payment
of $987,032 in common stock dividends, the cashless exchange of 13,928 shares of
stock at an amount of $255,316, the exercise of 64,525 stock options in the
amount of $209,706, a gain of $489,847 on the sale of treasury stock, and the
change of $209,497 in net unrealized holding gains on securities classified as
available-for-sale. As interest rates moved downward throughout 1997, the Bank's
bond portfolio increased in value.
During 1997, the Bank upstreamed $3,000,000 to its parent company New
Hampshire Thrift Bancshares, Inc. The purposes of the upstreams were to fund the
cash portion of the Landmark acquisition and to pay dividends to NHTB
shareholders.
Net cash provided by operating activities was $2,847,283 in 1997 versus
$3,985,360 in 1996. The decrease in accrued expenses and other liabilities
accounted for the majority of the change.
Net cash flows from investing activities amounted to negative
$3,955,691 in 1997 compared to negative $9,546,320 in 1996. The $3,315,519 net
change in security activity and the $9,862,090 change in loans, accounted for
the change.
In 1997, net cash provided by financing activities was $3,412,285
compared to $5,570,412 in 1996. The decrease in advances from the Federal Home
Loan Bank accounted for the majority of the change.
The Bank was able to fund loan demand and other investing during 1998
by using funds provided by customer deposits.
A-18
<PAGE>
________________________________________________
MANAGEMENTS'S DISCUSSION AND ANALYSIS (continued)
As part of the Financial Institution Reform, Recovery, and Enforcement
Act of 1989 (FIRREA), banks are required to maintain core capital, leverage
ratio, and total risk based capital of 1.50%, 3.00%, and 8.00%, respectively. As
of December 31, 1997,the Bank's ratios were 6.47%, 6.47%, and 11.86%,
respectively, well in excess of the regulators' requirements.
Book value per share was $12.24 at December 31, 1997 versus $11.26 per
share at December 31, 1996. The change in the market value of the Bank's
investment security portfolio and the increase in paid-in capital and retained
earnings provided the increase in book value per share.
NET INTEREST INCOME
Net interest income for the year ended December 31, 1997 increased by
$2,401,573, or 28.66%, to $10,781,280. The increase can be attributed to the
increased volume in the Bank's loan portfolio that resulted primarily from the
acquisition of Landmark Bank.
Total interest income increased by $4,681,733, or 25.03%, with 93.49%
attributed to the increase in volume, and 6.51% related to the change in
interest rates. During 1997, the Bank's yield on interest earning assets
increased to 7.97% from 7.67% in 1996.
Total interest expense increased $2,280,160, or 22.08%, with 145.88%
attributed to the increased volume in deposits. The Bank's overall cost of funds
remained the same at 4.54%. The Bank's average deposits as a percentage of total
interest bearing liabilities increased from 85.53% in 1996 to 91.89% in 1997.
Deposits' cost in 1997 was 4.46% versus 4.36% in 1996. This increase was a
result of an increase in higher costing deposits such as brokered CD's acquired
from Landmark Bank. These brokered CD's matured in January of 1998 and were not
renewed. Federal Home Loan Bank advances typically are higher costing funding
instruments. In an effort to reduce the Bank's overall cost of funds, the Bank
reduced its average balance in Federal Home Loan Bank advances during 1997 to
$16.5 million from $27.9 million in 1996 by paying off higher costing advances
as they came due. As a result, the Bank's spread increased to 3.43% at December
31, 1997 compared to 3.13% at December 31, 1996.
PROVISION FOR LOAN LOSSES
The allowance for loan losses at December 31, 1997 was $3,061,451,
compared to $2,158,026 at year-end 1996. The allowance in 1997 includes
$2,783,484 in general reserves as compared to $1,801,589 in 1996. During 1997,
the Bank had net charge-offs of $879,340 compared to $1,330,775 in 1996. Due to
the general improvement of the quality of the loan portfolio and a reduction in
risk, the provision for loan losses was reduced by $728,270 from $1,660,741 in
1996 to $932,471 in 1997. Net charged-off loans during 1997 amounted to 0.35% of
average loans, as compared to 0.63% in 1996. The allowance represented 1.18% of
total loans at year-end 1997 versus 0.98% at year-end 1996.
The allowance for loan losses as a percentage of non-performing assets
was 171.40% at December 31, 1997 compared to 92.07% at December 31, 1996.
Total classified loans, excluding special mention, as of December 31,
1997 and 1996 were $4,859,402 and $5,254,069, respectively. Total nonperforming
assets amounted to $1,786,107 and $2,343,898 for the respective years. At
December 31, 1997, loans classified as 90-day delinquent were $691,567 compared
to $787,930 at December 31, 1996.
OTHER INCOME AND EXPENSE
Total non-interest income increased by $629,635, or 32.74% to
$2,552,874. Net gains on the sale of securities and loans totaled $819,282. The
majority is attributable to the gain realized on the Charter Trust transaction.
Net losses on the sales of premises and equipment totaled $68,765 as the Bank
sold two investment properties.
Total operating expense increased $652,680, or 8.43% to $8,398,011. The
increase was primarily associated with the integration of Landmark Bank and
start-up costs associated with the Bank's newest office located in the Centerra
Marketplace. Additional staffing, occupancy and marketing expenses were realized
as the Bank expanded into these new locations.
A-19
<PAGE>
[LETTERHEAD OF SHATSWELL, MACLEOD & COMPANY, P.C. APPEARS HERE]
The Board of Directors
New Hampshire Thrift Bancshares, Inc.
Newport, New Hampshire
INDEPENDENT AUDITORS' REPORT
----------------------------
We have audited the accompanying consolidated statements of financial condition
of New Hampshire Thrift Bancshares, Inc. and Subsidiary as of December 31, 1998
and 1997 and the related consolidated statements of income, changes in
shareholders' equity, cash flows and comprehensive income for each of the years
in the three-year period ended December 31, 1998. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the 1998 and 1997 consolidated financial statements referred to
above present fairly, in all material respects, the consolidated financial
position of New Hampshire Thrift Bancshares, Inc. and Subsidiary as of December
31, 1998 and 1997 and the consolidated results of their operations and their
cash flows for each of the years in the three-year period ended December 31,
1998, in conformity with generally accepted accounting principles.
As discussed in Note 1 to the consolidated financial statements, the Company
adopted the provisions of the Financial Accounting Standards Board's Statement
of Financial Accounting Standards No. 123 "Accounting for Stock-Based
Compensation," effective January 1, 1996.
/s/ Shatswell, MacLeod & Company, P.C.
SHATSWELL, MacLEOD & COMPANY, P.C.
West Peabody, Massachusetts
January 25, 1999
A-20
<PAGE>
NEW HAMPSHIRE THRIFT BANCSHARES INC. AND SUBSIDIARY
---------------------------------------------------
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1998 1997
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 8,701,558 $ 9,196,626
Federal funds sold 7,583,000 4,110,000
---------------------------
Cash and cash equivalents 16,284,558 13,306,626
Securities available-for-sale 52,137,753 30,104,674
Securities held-to-maturity - 75,000
Other investments 2,032,999 1,987,560
Loans held-for-sale 3,775,802 673,950
Loans receivable, net 232,321,171 255,223,525
Accrued interest receivable 1,725,235 1,556,194
Bank premises and equipment, net 8,416,182 8,178,335
Investments in real estate 531,729 548,257
Real estate owned and property acquired in settlement of loans 670,153 516,153
Goodwill 3,213,028 3,460,184
Other assets 2,299,159 2,358,504
---------------------------
Total assets $323,407,769 $317,988,962
===========================
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Demand deposits $ 16,521,820 $ 15,105,900
Savings deposits 76,837,104 65,883,386
NOW and MMDA deposits 67,593,258 57,140,024
Time deposits 121,096,974 133,097,650
---------------------------
Total deposits 282,049,156 271,226,960
Other borrowed funds - 300,000
Securities sold under agreement to repurchase 11,849,116 8,393,192
Advances from Federal Home Loan Bank - 10,246,318
Accrued expenses and other liabilities 1,729,891 2,259,367
---------------------------
Total liabilities 295,628,163 292,425,837
---------------------------
SHAREHOLDERS' EQUITY
Preferred stock, $.01 par value per share: 2,500,000 shares authorized, - -
no shares issued or outstanding
Common stock, $.01 par value, per share: 5,000,000 shares authorized,
2,479,858 shares issued and 2,104,285 shares outstanding at
December 31, 1998 and 2,479,858 shares issued and 2,088,155 shares
outstanding at December 31, 1997 24,798 24,798
Paid-in capital 17,874,567 17,660,097
Retained earnings 12,082,784 10,221,049
Accumulated other comprehensive income 255,034 82,318
---------------------------
30,237,183 27,988,262
Treasury stock, at cost, 375,573 shares as of December 31, 1998 and
391,703 shares as of December 31, 1997 (2,457,577) (2,425,137)
---------------------------
Total shareholders' equity 27,779,606 25,563,125
---------------------------
Total liabilities and shareholders' equity $323,407,769 $317,988,962
===========================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
A-21
<PAGE>
NEW HAMPSHIRE THRIFT BANCSHARES INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31, 1998 1997 1996
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INTEREST INCOME
Interest on loans $20,023,493 $21,214,024 $16,775,792
Interest and dividends on investments 3,239,693 2,171,956 1,928,455
--------------------------------------
Total interest income 23,263,186 23,385,980 18,704,247
--------------------------------------
INTEREST EXPENSE
Interest on deposits:
Savings deposits 3,233,429 3,158,505 2,432,150
NOW accounts and MMDA deposits 621,132 256,717 615,849
Time deposits 7,977,963 8,214,548 5,638,679
--------------------------------------
Total interest on deposits 11,832,524 11,629,770 8,686,678
Interest on advances and other borrowed money 351,840 974,930 1,637,862
--------------------------------------
Total interest expense 12,184,364 12,604,700 10,324,540
--------------------------------------
Net interest income 11,078,822 10,781,280 8,379,707
PROVISION FOR LOAN LOSSES 120,167 932,471 1,660,741
--------------------------------------
Net interest income after provision for loan losses 10,958,655 9,848,809 6,718,966
--------------------------------------
OTHER INCOME
Loan origination fees 90,186 96,510 75,564
Customer service fees 1,558,886 1,263,989 1,190,726
Net gain (loss) on sale and writedowns of securities 153,479 551,357 (26,500)
Net gain (loss) on sale of premises, equipment and other
real estate owned 6,476 (68,765) 251,770
Net gain on sale of loans 371,991 267,925 51,716
Rental income 335,255 291,308 223,673
Brokerage service income 126,528 148,341 153,261
Other income - 2,209 3,029
--------------------------------------
Total other income 2,642,801 2,552,874 1,923,239
--------------------------------------
OTHER EXPENSES
Salaries and employee benefits 4,222,206 4,046,725 3,039,929
Occupancy expenses 1,738,055 1,582,589 1,242,216
Advertising and promotion 253,883 344,714 188,512
Depositors' insurance 139,214 123,487 1,448,801
Outside services 639,628 489,254 364,101
Provision for other real estate owned losses - - 229,970
Amortization of goodwill 247,156 242,271 -
Other expenses 1,639,600 1,568,971 1,231,802
--------------------------------------
Total other expenses 8,879,742 8,398,011 7,745,331
--------------------------------------
INCOME BEFORE PROVISION FOR INCOME TAXES 4,721,714 4,003,672 896,874
PROVISION FOR INCOME TAXES 1,602,964 1,232,740 286,163
--------------------------------------
NET INCOME $ 3,118,750 $ 2,770,932 $ 610,711
======================================
Earnings per common share $ 1.49 $ 1.36 $ .36
======================================
Earnings per common share, assuming dilution $ 1.47 $ 1.33 $ .35
======================================
Dividends declared per common share $ .60 $ .50 $ .50
======================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
A-22
<PAGE>
NEW HAMPSHIRE THRIFT BANCSHARES INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31, 1998 1997 1996
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCK
Balance, beginning of year $ 24,798 $ 21,473 $ 21,473
Shares issued in acquisition of Landmark Bank - 3,325 -
-----------------------------------------
Balance, end of year $ 24,798 $ 24,798 $ 21,473
=========================================
PAID-IN CAPITAL
Balance, beginning of year $17,660,097 $13,241,774 $13,160,382
Gain on issuance of treasury stock for the exercise
of stock options 156,406 489,847 81,392
Tax benefit for stock options 58,064 - -
Acquisition of Landmark Bank - 3,928,476 -
-----------------------------------------
Balance, end of year $17,874,567 $17,660,097 $13,241,774
=========================================
RETAINED EARNINGS
Balance, beginning of year $10,221,049 $ 8,437,149 $ 8,673,504
Net income 3,118,750 2,770,932 610,711
Cash dividends paid (1,257,015) (987,032) (847,066)
-----------------------------------------
Balance, end of year $12,082,784 $10,221,049 $ 8,437,149
=========================================
ACCUMULATED OTHER COMPREHENSIVE INCOME
Net unrealized holding gain (loss) on securities
available-for-sale
Balance, beginning of year $ 82,318 $ (127,179) $ 97,594
Net change 172,716 209,497 (224,773)
-----------------------------------------
Balance, end of year $ 255,034 $ 82,318 $ (127,179)
=========================================
TREASURY STOCK
Balance, beginning of year $(2,425,137) $(2,379,527) $(2,408,948)
Shares repurchased, (4,650 shares in 1998, 13,928 shares
in 1997 and 3,251 shares in 1996) (73,975) (255,316) (43,482)
Exercise of stock options, (20,780 shares in 1998, 64,525
shares in 1997 and 18,730 shares in 1996) 41,535 209,706 72,903
-----------------------------------------
Balance, end of year $(2,457,577) $(2,425,137) $(2,379,527)
=========================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
A-23
<PAGE>
NEW HAMPSHIRE THRIFT BANCSHARES INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
<TABLE>
<CAPTION>
For the years ended December 31,
1996
- ----
<S> <C>
Net income $ 610,711
Other comprehensive income
Net unrealized holding loss on
securities available-for-sale, net of tax
effect of $116,000 (224,773)
----------
Comprehensive income $ 385,938
==========
1997
- ----
Net income $2,770,932
Other comprehensive income
Net unrealized holding gain on
securities available-for-sale, net of tax
effect of $116,794 209,497
----------
Comprehensive income $2,980,429
==========
1998
- ----
Net income $3,118,750
Other comprehensive income
Net unrealized holding gain on
securities available-for-sale, net of tax
effect 172,716
----------
Comprehensive income $3,291,466
==========
Reclassification disclosure for the year ended December 31, 1998:
Net unrealized gains on available-for-sale securities $ 436,429
Less reclassification adjustment for realized gains in net income 155,040
----------
Other comprehensive income before income tax effect 281,389
Income tax expense (108,673)
----------
Other comprehensive income, net of tax $ 172,716
==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
A-24
<PAGE>
NEW HAMPSHIRE THRIFT BANCSHARES INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31, 1998 1997 1996
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 3,118,750 $ 2,770,932 $ 610,711
Depreciation and amortization 788,529 579,452 455,910
Amortization of goodwill 247,156 242,271 -
Loans originated for sale (73,567,590) (26,395,222) (14,233,140)
Proceeds from sales of loans 73,939,581 26,663,447 14,284,856
Gain from sales of loans (371,991) (267,925) (51,716)
(Gain) loss from sales of premises, equipment and other
real estate owned (6,476) 68,765 (251,770)
(Gain) loss from sales of debt securities available-for-sale
and writedowns (155,040) (62,010) 667
Loss from sales of equity securities available-for-sale
and writedowns, net - 10,653 25,833
(Gain) loss on sales of other investments 1,561 (500,000) -
Provision for other real estate owned losses - - 229,970
Writedowns of other real estate owned - - 144,350
Provision for loan losses 120,167 932,471 1,660,741
Deferred tax expense (benefit) 364,723 (575,835) (120,481)
(Increase) decrease in accrued interest and other assets (109,696) 178,486 861,580
Decrease in deferred loan origination fees, net (199,548) (121,484) (81,550)
Increase (decrease) in accrued expenses and other liabilities (944,808) (676,718) 449,399
------------------------------------------
Net cash provided by operating activities 3,225,318 2,847,283 3,985,360
------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales of premises and equipment 9,145 108,149 344,387
Proceeds from sales of other real estate owned 163,076 219,389 182,830
Capital expenditures - premises and equipment (890,414) (1,079,184) (316,986)
Capital expenditures - other real estate owned (6,000) (27,043) (25,188)
Proceeds from sales of debt securities available-for-sale 27,592,324 20,579,199 2,468,275
Proceeds from sales of equity securities available-for-sale - 1,192,719 450,642
Proceeds from sales of other investments 30,000 820,000 -
Principal reduction on securities held-to-maturity 75,000 25,000 52,778
Purchases of securities available-for-sale (50,877,553) (25,726,166) (9,063,424)
Maturities of securities available-for-sale 1,560,000 200,000 6,498,000
Purchases of other investments (77,000) - (5,000)
Net (increase) decrease in loans 19,527,107 (320,383) (10,182,473)
Recoveries of previously charged off loans 48,176 52,629 49,839
------------------------------------------
Net cash used in investing activities (2,846,139) (3,955,691) (9,546,320)
------------------------------------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
A-25
<PAGE>
NEW HAMPSHIRE THRIFT BANCSHARES INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Continued)
<TABLE>
<CAPTION>
1998 1997 1996
- ---------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
<S> <C> <C> <C>
Net increase in demand deposits, savings and NOW accounts 22,822,872 11,487,757 458,741
Net increase (decrease) in time deposits (12,000,676) (2,411,055) 13,529,233
Net increase (decrease) in repurchase agreements 3,455,924 (453,344) (890,089)
Advances from Federal Home Loan Bank - - 21,600,000
Principal payments of advances from Federal Home Loan Bank (10,246,318) (9,927,707) (28,362,143)
Net increase (decrease) in other borrowed funds (300,000) 295,000 (29,077)
Cash and cash equivalents of $7,559,731 acquired in the
acquisition of Landmark Bank, less cash of $2,275,000 paid
for the common stock of Landmark Bank and less $320,302
for acquisition costs - 4,964,429 -
Repurchase of treasury stock (73,975) (255,316) (43,482)
Dividends paid (1,257,015) (987,032) (847,066)
Proceeds from exercise of stock options 197,941 699,553 154,295
------------ ----------- ------------
Net cash provided by financing activities 2,598,753 3,412,285 5,570,412
------------ ----------- ------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 2,977,932 2,303,877 9,452
CASH AND CASH EQUIVALENTS, beginning of year 13,306,626 11,002,749 10,993,297
------------ ----------- ------------
CASH AND CASH EQUIVALENTS, end of year $ 16,284,558 $13,306,626 $ 11,002,749
============ =========== ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION
Interest paid $ 12,220,262 $12,750,892 $ 10,379,699
============ =========== ============
Income taxes paid $ 1,376,990 $ 1,545,183 $ 331,763
============ =========== ============
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING
AND FINANCING ACTIVITIES
Loans originated for sales of other real estate owned $ 130,000 $ 318,000 $ 207,500
============ =========== ============
Transfers from loans to real estate acquired through
foreclosure $ 434,600 $ 303,021 $ 478,755
============ =========== ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
A-26
<PAGE>
_______________________________________________________
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. Summary of significant accounting policies:
NATURE OF OPERATIONS - New Hampshire Thrift Bancshares, Inc. (Company) is a
savings association holding company headquartered in Newport, New Hampshire.
The Company's subsidiary, Lake Sunapee Bank, fsb (Bank), a federal stock savings
bank operates twelve branches primarily in Grafton, Sullivan, and Merrimack
Counties in west central New Hampshire. Although the Company has a diversified
portfolio, a substantial portion of its debtors' abilities to honor their
contracts is dependent on the economic health of the region. Its primary source
of revenue is providing loans to customers who are predominately small and
middle-market businesses and individuals.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS - The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
PRINCIPLES OF CONSOLIDATION - The consolidated financial statements include
the accounts of the Company, the Bank, Lake Sunapee Group, Inc. (LSGI) which
owns and maintains all buildings, and Lake Sunapee Financial Services Corp.
(LSFSC) which was formed to handle the flow of funds from the brokerage and
trust services. LSGI and LSFSC are wholly-owned subsidiaries of the Bank. All
significant intercompany accounts and transactions have been eliminated in
consolidation.
CASH AND CASH EQUIVALENTS - For purposes of reporting cash flows, the
Company considers federal funds sold and due from banks to be cash equivalents.
SECURITIES AVAILABLE-FOR-SALE - Available-for-sale securities consist of
bonds, notes, debentures, and certain equity securities. Unrealized holding
gains and losses, net of tax, on available-for-sale securities are reported as a
net amount in a separate component of shareholders' equity until realized.
Gains and losses on the sale of available-for-sale securities are determined
using the specific-identification method. Declines that are other than
temporary in the fair value of individual available-for-sale securities below
their cost have resulted in write-downs of the individual securities to their
fair value. The related write-downs of $0, $68,750 and $728 have been included
in earnings as realized losses for the years ended 1998, 1997 and 1996,
respectively.
SECURITIES HELD-TO-MATURITY - Bonds, notes and debentures which the Company
has the positive intent and ability to hold to maturity are reported at cost,
adjusted for premiums and discounts recognized in interest income using the
interest method over the period to maturity. Declines that are other than
temporary in the fair value of individual held-to-maturity securities below
their cost result in write-downs of the individual securities to their fair
value. No write-downs have occurred for securities held-to-maturity.
OTHER INVESTMENTS - Other investments are investments which do not have
readily determinable fair values. These types of investments are reported at
cost and are evaluated for other than a temporary decline in value. Other than
temporary declines in value result in write-downs of the individual security.
No write-downs have occurred for securities which are classified as other
investments.
LOANS HELD-FOR-SALE - Mortgage loans originated and intended for sale in
the secondary market are carried at the lower of cost or estimated market value
in the aggregate. Net unrealized losses are recognized through a valuation
allowance by charges to income. No losses have been recorded.
A-27
<PAGE>
_______________________________________________________
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (continued)
LOANS RECEIVABLE - Loans receivable that management has the intent and
ability to hold until maturity or pay-off are reported at their outstanding
principal adjusted for any charge-offs, the allowance for loan losses, and any
deferred fees or costs on originated loans. Loan origination fees and certain
direct origination costs are capitalized and recognized as an adjustment to the
yield of the related loan. When the interest accrual is discontinued, all
unpaid accrued interest is reversed. The allowance for loan losses is increased
by charges to expense and decreased by charge-offs (net of recoveries).
Management's periodic evaluation of the adequacy of the allowance is an estimate
based on the Company's past loan loss experience, known and inherent risks in
the portfolio, adverse situations that may affect the borrower's ability to
repay, the estimated value of any underlying collateral, and current economic
conditions. This material estimate and the estimate of real estate acquired in
connection with foreclosures are particularly susceptible to significant change
in the near term. In connection with the determination of the allowance for
loan losses and the carrying value of real estate owned, management obtains
independent appraisals for significant properties to arrive at its evaluation.
Impaired loans are measured based on the present value of expected future
cash flows discounted at the loan's effective interest rate or, as a practical
expedient, at the loan's observable market price or the fair value of the
collateral, if the loan is collateral dependent. Interest income on impaired
loans is recognized on an accrual basis when the impaired loan is less than 90
days past due and has not been reclassified to non-accrual status. Interest
income on impaired loans over 90 days past due, and on loans placed on non-
accrual status, is recognized using a cash basis accounting method. Cash
receipts on impaired loans are recorded as both interest income and a reduction
in the impaired loan balance consistent with the terms of the underlying
contractual agreements.
A loan becomes impaired when it appears probable the Company will be unable
to collect all amounts due, including principal and interest, under the
contractual terms of the loan agreement. A loan is placed on non-accrual status
when it appears likely interest income will not be received. Non-accrual loans
are reviewed for possible impairment.
Impaired loans are written-down or charged-off when it has been determined
the asset has such little value that it no longer warrants remaining on the
books. The decision to charge-off is made on a case-by-case basis.
Factors considered by management in determining impairment include payment
status, net worth and collateral value. An insignificant payment delay or an
insignificant shortfall in payment does not in itself result in the review of a
loan for impairment. The Company reviews its loans for impairment on a loan-by-
loan basis. Homogeneous groups of loans such as consumer installment loans and
residential mortgage loans are collectively evaluated for impairment. The
Company does not review for impairment aggregations of loans that have risk
characteristics in common with other impaired loans. Substantially all of the
Company's loans that have been identified as impaired have been measured by the
fair value of existing collateral.
BANK PREMISES AND EQUIPMENT - Company premises and equipment are stated at
cost, less accumulated depreciation. Depreciation is computed using straight-
line and accelerated methods over the estimated useful lives of the assets.
Expenditures for replacements or major improvements are capitalized;
expenditures for normal maintenance and repairs are charged to expense as
incurred. Upon the sale or retirement of company premises and equipment, the
cost and accumulated depreciation are removed from the respective accounts and
any gain or loss is included in income.
A-28
<PAGE>
_______________________________________________________
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (continued)
INVESTMENT IN REAL ESTATE - Investment in real estate is carried at the
lower of cost or estimated fair value. The buildings are being depreciated over
their useful lives. The properties consist of a condominium that the Company
rents to the public and three buildings that the Company rents for commercial
purposes. Rental income is recorded in income when received and expenses for
maintaining these assets are charged to expense as incurred.
REAL ESTATE OWNED AND PROPERTY ACQUIRED IN SETTLEMENT OF LOANS - The
Company classifies loans as in-substance, repossessed or foreclosed if the
Company receives physical possession of the debtor's assets regardless of
whether formal foreclosure proceedings take place. At the time of foreclosure
or possession, the Company records the property at the lower of fair value minus
estimated costs to sell or the outstanding balance of the loan. All properties
are periodically reviewed and declines in the value of the property are charged
against income.
EARNINGS PER SHARE - In the year ended December 31, 1997, the Company
adopted Statement of Financial Accounting Standards No. 128 (SFAS No. 128)
"Earnings per Share" (EPS) issued by the Financial Accounting Standards Board.
SFAS No. 128 required restatement of 1996 EPS presented in accordance with SFAS
No. 128. This statement simplifies the standards for computing earnings per
share. It replaces the presentation of primary EPS with a presentation of Basic
EPS which excludes dilution and is computed by dividing income available to
common stockholders by the weighted-average number of common shares outstanding
for the period. Diluted EPS, if applicable, reflects the potential dilution
that could occur if securities or other contracts to issue common stock were
exercised or converted into common stock or resulted in the issuance of common
stock that then shared in the earnings of the entity. The adoption of SFAS No.
128 had no material effect on the Bank's 1997 financial statements and EPS for
1996 financial statements was restated in accordance with SFAS No. 128.
INCOME TAXES - Deferred income taxes are provided in amounts sufficient to
give effect to temporary differences between financial and tax reporting for
deferred loan origination fees, unrealized loss on securities available-for-
sale, provision for loan losses and depreciation.
FAIR VALUE OF FINANCIAL INSTRUMENTS - The following methods and assumptions
were used by the Company in estimating fair values of financial instruments as
disclosed herein:
Cash and short-term instruments - The carrying amounts of cash and short-term
instruments approximate their fair value.
Available-for-sale and held-to-maturity securities - Fair values for
available-for-sale securities, are based on quoted market prices. The
carrying values of held-to-maturity and other investments approximate fair
values.
Loans receivable - For variable-rate loans that reprice frequently and have
no significant change in credit risk, fair values are based on carrying
values. Fair values for all other loans are estimated using discounted cash
flow analyses, using interest rates currently being offered for loans with
similar terms to borrowers of similar credit quality. Fair values for
impaired loans are estimated using discounted cash flow analyses or
underlying collateral values, where applicable.
Loans held-for-sale - Fair values of loans held for sale are based on
estimated market values.
Deposit liabilities - The fair values disclosed for demand deposits are, by
definition, equal to the amount payable on demand at the reporting date (that
is, their carrying amounts). The carrying amounts of variable-rate, fixed
term money-market accounts and certificates of deposits (CD's) approximate
their fair values at the reporting date. Fair values for fixed-rate CD's are
estimated using a discounted cash flow calculation that applies interest
rates currently being offered on certificates to a schedule of aggregated
expected monthly maturities on time deposits.
A-29
<PAGE>
_______________________________________________________
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (continued)
Borrowings - The carrying amounts of securities sold under agreements to
repurchase and other borrowings approximate their fair values.
Federal Home Loan Bank Advances - Fair values for FHLB advances are estimated
using a discounted cash flow technique that applies interest rates currently
being offered on advances to a schedule of aggregated expected monthly
maturities on FHLB advances.
Accrued interest - The carrying amounts of accrued interest approximate their
fair values.
Off-balance sheet instruments - Fair values for loan commitments have not
been presented as the future revenue derived from such financial instruments
is not significant.
DEFERRED LOAN ORIGINATION FEES - Loan origination, commitment fees and
certain direct origination costs are deferred, and the net amount is being
amortized as an adjustment of the related loan's yield. The Company is
amortizing these amounts over the contractual life of the related loans.
STOCK BASED COMPENSATION - Prior to 1996, the Company recognized stock-
based compensation using the intrinsic value approach set forth in APB Opinion
No. 25. As of January 1, 1996, the Company had the option, under SFAS No. 123,
of changing its accounting method for stock-based compensation from the APB No.
25 method to the fair value method introduced in SFAS No. 123. The Company
elected to continue using the APB No. 25 method. Entities electing to continue
to follow the provisions of APB No. 25 must make pro forma disclosure of net
income and earnings per share, as if the fair value method of accounting defined
in SFAS No. 123 had been applied. The Company has made the pro forma
disclosures required by SFAS No. 123.
LOAN SERVICING - Effective January 1, 1996, the Company adopted Statement
of Financial Accounting Standards No. 122, (SFAS No. 122) "Accounting for
Mortgage Servicing Rights, an amendment of FASB Statement No. 65." Effective
January 1, 1997, the Company adopted Statement of Financial Accounting Standards
No. 125 (SFAS No. 125) which supersedes SFAS No. 122. These statements require
the Company to recognize as separate assets from their related loans the rights
to service mortgage loans for others, either through acquisition of those rights
or from the sale or securitization of loans with the servicing rights retained
on those loans, based on their relative fair values. To determine the fair
value of the servicing rights created, the Company uses the market prices under
comparable servicing sale contracts, when available, or alternatively uses a
valuation model that calculates the present value of future cash flows to
determine the fair value of the servicing rights. In using this valuation
method, the Company incorporates assumptions that market participants would use
in estimating future net servicing income, which includes estimates of the cost
of servicing loans, the discount rate, ancillary income, prepayment speeds and
default rates.
The cost of mortgage servicing rights is amortized on a straight-line basis
which has substantially the same effect as amortizing the rights in proportion
to, and over the period of, estimated net servicing revenues. Impairment of
mortgage servicing rights is assessed based on the fair value of those rights.
Fair values are estimated using discounted cash flows based on a current market
interest rate. For purposes of measuring impairment, the rights are stratified
based on the interest rate risk characteristics of the underlying loans. The
amount of impairment recognized is the amount by which the capitalized mortgage
servicing rights for a stratum exceed their fair value.
CONCENTRATION OF CREDIT RISK - Most of the Company's business activity is
with customers located within the state. There are no concentrations of credit
to borrowers that have similar economic characteristics. The majority of the
Company's loan portfolio is comprised of loans collateralized by real estate
located in the state of New Hampshire.
RECLASSIFICATIONS - Certain amounts in the 1997 and 1996 consolidated
financial statements have been reclassified to conform to the current year's
presentation.
A-30
<PAGE>
_______________________________________________________
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2. ACQUISITION OF LANDMARK BANK:
On July 26, 1996, the Company entered into an agreement and plan of
reorganization (the "Merger Agreement") with Landmark Bank. Pursuant to the
Merger Agreement, the Company acquired all of the outstanding shares of Landmark
Bank for total consideration of $7,030,974. The Merger Agreement was approved
by the shareholders of the Company, shareholders of Landmark Bank, and various
regulatory agencies. On January 22, 1997, the Company completed the acquisition
of Landmark Bank.
The purchase method of accounting was used to account for the merger.
Under the terms of the merger agreement, holders of Landmark Bank's stock
could elect to receive $12.00 in cash per share, or exchange their stock for
stock in the Company at a ratio of 1.1707 shares of the common stock of the
Company per Landmark share, subject to 60% of Landmark's stock being converted
to stock and 40% to cash.
Included in the total cost of acquiring Landmark Bank was $2,275,000
representing the fair value of the Company's shares issued to Landmark Bank
shareholders who elected to receive cash.
The results of operations of Landmark Bank from January 22, 1997 to
December 31, 1997 are included in the 1997 consolidated statement of income of
the Company.
Goodwill recorded in the acquisition transaction is being amortized over
fifteen years on the straight-line method.
Results of operations for 1997 as though the Company and Landmark Bank had
combined as of January 1, 1997 are not presented because the acquisition was so
close to the beginning of 1997.
Results of operations for 1996 as though the Company and Landmark Bank had
combined as of January 1, 1996 are as follows:
<TABLE>
<CAPTION>
<S> <C>
Net interest income after provision for loan losses $ 8,292,025
Noninterest income 2,324,330
-----------
Total 10,616,355
Noninterest expense 10,625,213
-----------
Loss before income taxes (8,858)
Income taxes 131,163
-----------
Net loss $ (140,021)
===========
Loss per common share $ (.07)
===========
</TABLE>
The above results of operations reflect adjustments of Landmark Bank's
financial statements to reflect purchase accounting adjustments, including
goodwill.
A-31
<PAGE>
_______________________________________________________
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3. SECURITIES:
The amortized cost and approximate market value of securities are
summarized as follows:
<TABLE>
<CAPTION>
December 31, 1998
-----------------
Gross Gross
Unrealized Unrealized
Fair Holding Holding Amortized
Value Gain Loss Cost
-------------------------------------------------
<S> <C> <C> <C> <C>
Available-for-sale:
Bonds and notes -
U. S. Treasury Notes $12,226,872 $163,412 $ - $12,063,460
U. S. Government, including agencies 14,398,276 24,132 64,521 14,438,665
Mortgage-backed securities 358,052 - 5,930 363,982
Other bonds and debentures 24,900,303 409,634 91,251 24,581,920
Equity securities 254,250 - 19,975 274,225
------------------------------------------------
Total available-for-sale 52,137,753 597,178 181,677 51,722,252
------------------------------------------------
Other investments:
Federal Home Loan Bank stock 1,938,000 - - 1,938,000
Other securities 94,999 - - 94,999
------------------------------------------------
Total other investments 2,032,999 - - 2,032,999
------------------------------------------------
Total securities $54,170,752 $597,178 $181,677 $53,755,251
================================================
</TABLE>
<TABLE>
<CAPTION>
December 31, 1997
-----------------
<S> <C> <C> <C> <C>
Held-to-maturity:
Bonds and notes -
Municipal bonds $ 75,000 $ - $ - $ 75,000
------------------------------------------------
Total held-to-maturity 75,000 - - 75,000
------------------------------------------------
Available-for-sale:
Bonds and notes -
U. S. Treasury Notes 20,196,281 119,295 10,726 20,087,712
U. S. Government, including agencies 3,777,080 9,681 1,721 3,769,120
Mortgage-backed securities 149,997 128 - 149,869
Other bonds and debentures 5,981,316 23,780 6,325 5,963,861
------------------------------------------------
Total available-for-sale 30,104,674 152,884 18,772 29,970,562
------------------------------------------------
Other investments:
Federal Home Loan Bank stock 1,861,000 - - 1,861,000
Other securities 126,560 - - 126,560
------------------------------------------------
Total other investments 1,987,560 - - 1,987,560
------------------------------------------------
Total securities $32,167,234 $152,884 $ 18,772 $32,033,122
================================================
</TABLE>
Gross gains of $161,193, $105,627 and $810, and gross losses of $6,153,
$36,097 and $807, were realized during 1998, 1997 and 1996, respectively, on
sales of available-for-sale debt securities. There were no sales of available-
for-sale equity securities during 1998. Gross gains of $63,164 and gross losses
of $10,277 were realized during 1997 on sales of available-for-sale equity
securities. Gross gains of $0 and $500,000 and gross losses of $1,561 and $0
were realized on sales of other investments during 1998 and 1997, respectively.
A-32
<PAGE>
_______________________________________________________
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3. SECURITIES: (continued)
Maturities of debt securities, excluding mortgage-backed securities,
classified as available-for-sale are as follows as of December 31, 1998:
<TABLE>
<CAPTION>
Weighted
Amortized Fair Average
Cost Value Yield
-----------------------------------
<S> <C> <C> <C>
U.S. Treasury Notes $ 1,015,966 $ 1,030,000 7.628%
Other bonds and debentures 695,365 697,008 7.309
------------------------
Total due in one year or less 1,711,331 1,727,008 7.592
------------------------
U.S. Treasury Notes 11,047,494 11,196,872 5.857
U.S. Government, including agencies 2,498,937 2,519,374 5.636
Other bonds and debentures 2,011,925 2,047,290 7.066
------------------------
Total due after one year through five years 15,558,356 15,763,536 6.045
------------------------
U.S. Government, including agencies 4,402,952 4,395,468 6.304
Other bonds and debentures 1,274,192 1,301,187 6.667
------------------------
Total due after five years through ten years 5,677,144 5,696,655 6.419
------------------------
U.S. Government, including agencies 7,536,776 7,483,434 6.918
Other bonds and debentures 20,600,438 20,854,818 7.267
------------------------
Total due after ten years 28,137,214 28,338,252 7.205
------------------------
$51,084,045 $51,525,451 7.109%
========================
</TABLE>
There were no issuers of securities whose aggregate book value exceeded 10%
of shareholders' equity as of December 31, 1998.
Securities, carried at $1,016,562 were pledged to secure the treasury, tax
and loan account as of
December 31, 1998.
NOTE 4. LOANS RECEIVABLE:
Loans receivable consisted of the following as of December 31:
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Real estate loans
Conventional $188,609,359 $207,311,314 $183,550,150 $175,130,966 $161,091,563
Construction 5,461,451 3,540,870 2,702,613 2,456,763 7,793,601
------------------------------------------------------------------------
194,070,810 210,852,184 186,252,763 177,587,729 168,885,164
Less - Unadvanced portion 1,688,868 900,858 1,270,412 1,434,258 2,841,500
------------------------------------------------------------------------
192,381,942 209,951,326 184,982,351 176,153,471 166,043,664
Collateral loans 20,335,430 20,635,457 20,574,710 19,524,706 18,776,523
Consumer loans 7,124,970 7,792,874 4,860,325 5,025,818 5,264,449
Commercial and municipal loans 19,257,740 20,026,574 8,352,789 9,301,028 8,066,390
Other loans 16,358 654,642 436,754 671,302 625,006
------------------------------------------------------------------------
Total loans 239,116,440 259,060,873 219,206,929 210,676,325 198,776,032
Less - Loans held for sale 3,775,802 673,950 745,650 3,095,971 3,753,657
------------------------------------------------------------------------
235,340,638 258,386,923 218,461,279 207,580,354 195,022,375
Allowance for loan losses (3,117,068) (3,061,451) (2,158,026) (1,828,060) (2,752,885)
Deferred loan origination costs
(fees), net 97,601 (101,947) (300,492) (382,042) (520,438)
------------------------------------------------------------------------
Loans receivable, net $232,321,171 $255,223,525 $216,002,761 $205,370,252 $191,749,052
========================================================================
</TABLE>
A-33
<PAGE>
___________________________________________________
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4. LOANS RECEIVABLE: (continued)
The following is a summary of activity in the allowance for loan loss
account for the years ended December 31:
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
--------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BALANCE, beginning of year $3,061,451 $2,158,026 $1,828,060 $2,752,885 $2,374,001
---------- ---------- ---------- ---------- ----------
Loans charged-off:
Real estate loans
Conventional 71,077 291,437 628,107 141,541 252,258
Construction 30,000 85,000 614,355 1,014,670 2,871
Collateral and consumer loans 2,229 226,710 36,721 25,568 612
Commercial and municipal loans 9,420 328,822 101,431 913,441 140,375
--------------------------------------------------------------
Total charged-off loans 112,726 931,969 1,380,614 2,095,220 396,116
--------------------------------------------------------------
Recoveries on loans:
Real estate loans
Conventional 28,549 6,786 19,063 3,300 11,666
Collateral and consumer loans 2,796 22,257 22,105 2,099 1,779
Commercial and municipal loans 16,831 23,586 8,671 1,286 -
--------------------------------------------------------------
Total recoveries 48,176 52,629 49,839 6,685 13,445
--------------------------------------------------------------
Net charged-off loans: 64,550 879,340 1,330,775 2,088,535 382,671
--------------------------------------------------------------
Balance relating to acquisition
of Landmark Bank: - 850,294 - - -
--------------------------------------------------------------
Provision for loan losses charged
to income: 120,167 932,471 1,660,741 1,163,710 761,555
--------------------------------------------------------------
BALANCE, end of year $3,117,068 $3,061,451 $2,158,026 $1,828,060 $2,752,885
==============================================================
Ratios of net charged-off loans during
the period to average loans
outstanding during the period .03% .35% .63% 1.02% .20%
==============================================================
</TABLE>
The Company had no extensions of credit to related parties in excess of 5%
of shareholders' equity at any time during the year ended December 31, 1998 and
1997. Certain directors and executive officers of the Bank and companies in
which they have significant ownership interest were customers of the Bank during
1998. Total loans to such persons and their companies amounted to $809,180 as
of December 31, 1998. During 1998 advances of $81,224 were made and repayments
totaled $400,931.
<TABLE>
<CAPTION>
Impaired loans as of December 31, 1998 1997
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Average recorded investment in impaired loans $1,925,907 $1,766,918
Recorded investment in impaired loans at December 31 $1,850,214 $1,942,320
Portion of valuation allowance allocated to impaired loans $ 385,694 $ 322,655
Net balance of impaired loans $1,464,520 $1,619,665
Interest income recognized on impaired loans $ 100,683 $ 84,154
Interest income on impaired loans on cash basis $ 100,683 $ 7,702
Recorded investment in impaired loans with related allowance for credit losses $1,676,226 $1,562,949
Recorded investment in impaired loans with no related allowance for credit losses $ 173,988 $ 379,371
</TABLE>
A-34
<PAGE>
___________________________________________________
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4. LOANS RECEIVABLE: (continued)
In addition to total loans previously shown, the Company services loans for
other financial institutions.
Participation loans are loans originated by the Company for a group of banks.
Sold loans are loans originated by the Company and sold to the secondary market.
The Company services these loans and remits the payments received to the buyer.
The Company specifically originates long-term, fixed-rate loans to sell. The
amount of loans sold and participated out which are serviced by the Company are
as follows as of December 31:
<TABLE>
<CAPTION>
1998 1997
-------------------------
<S> <C> <C>
Sold loans $128,115,971 $71,551,925
=========================
Participation loans $ 2,788,528 $ 4,601,826
========================
</TABLE>
Servicing assets of $798,758 and $374,533 wer e capitalized in 1998 and
1997, respectively. Amortization of servicing ass ets was $186,841 in 1998 and
$63,805 in 1997.
The fair value of servicing assets was $995,5 96 and $390,340 as of
December 31, 1998 and 1997, respectively. Following is an analysis of the
aggregate changes in the valuation allowances for servicing assets:
<TABLE>
<CAPTION>
1998 1997
-------------------
<S> <C> <C>
Balance, beginning of year $ 57,422 $ 0
Additions 72,116 57,422
------------------
Balance, end of year $129,538 $57,422
==================
</TABLE>
The Company has issued letters of credit and has approved lines of credit
loans to specific individuals and companies. The unused portions are as follows
as of December 31:
<TABLE>
<CAPTION>
1998 1997
-----------------------
<S> <C> <C>
Letters of credit $ 694,098 $ 665,850
=======================
Lines of credit $7,632,913 $16,187,526
=======================
</TABLE>
NOTE 5. BANK PREMISES AND EQUIPMENT:
Bank premises and equipment are shown on the consolidated statements of
financial condition at cost, net of accumulated depreciation, as follows as of
December 31:
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Land $ 1,043,586 $ 1,043,586
Landdings and premises 7,256,000 7,171,794
Furniture, fixtures and equipment 5,462,370 4,681,710
------------------------
13,761,956 12,897,090
Less - Accumulated depreciation 5,345,774 4,718,755
------------------------
$ 8,416,182 $ 8,178,335
========================
</TABLE>
NOTE 6. REAL ESTATE OWNED AND PROPERTY ACQUIRED:
As of December 31, 1998 and 1997, the Company owned property acquired by
foreclosure. The balances consisted of the following:
<TABLE>
<CAPTION>
1998 1997
-------------------
<S> <C> <C>
Residential real estate $ 72,000 $144,000
Commercial real estate 598,153 372,153
-------------------
$670,153 $516,153
===================
</TABLE>
A-35
<PAGE>
___________________________________________________
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6. REAL ESTATE OWNED AND PROPERTY ACQUIRED: (continued)
It is the policy of the Company, upon the acquisition of real estate by
foreclosure, to evaluate the condition of the property, make any appropriate or
necessary structural and/or cosmetic improvements and place the property as an
open listing with all area real estate agents. Company employees are also
encouraged to participate in the selling of these properties.
For 1998, 1997 and 1996, $70,646, $84,832 and $179,443, respectively, of
net operating cost of other real estate is included in net income.
NOTE 7. DEPOSITS:
Deposits consisted of the following as of December 31:
<TABLE>
<CAPTION>
1998 1997
-------------------------------------------
<S> <C> <C> <C> <C>
Checking accounts (non-interest-bearing) $ 16,521,820 5.9% $ 15,105,900 5.6%
NOW accounts 40,431,129 14.3 33,488,870 12.3
Ever-Ready Money Market 27,162,129 9.6 23,651,154 8.7
Regular savings accounts 13,146,531 4.7 7,901,726 2.9
Treasury savings accounts 63,608,465 22.6 57,915,167 21.4
Club deposits 82,108 .0 66,493 .0
------------------------------------------
160,952,182 57.1 138,129,310 50.9
------------------------------------------
Time deposits
2.00% - 2.99% 41,956 .0 250,790 .1
3.00% - 3.99% 1,912,878 .7 - -
4.00% - 4.99% 19,668,581 7.0 2,931,518 1.1
5.00% - 5.99% 84,160,709 29.8 98,425,330 36.3
6.00% - 6.99% 6,268,060 2.2 14,837,481 5.5
7.00% - 7.99% 9,044,790 3.2 14,461,393 5.3
8.00% - 8.99% - - 2,191,138 .8
------------------------------------------
121,096,974 42.9 133,097,650 49.1
------------------------------------------
$282,049,156 100.0% $271,226,960 100.0%
==========================================
</TABLE>
The following is a summary of maturities of time deposits as of December 31,
1998:
<TABLE>
<S> <C>
1999 $101,425,326
2000 14,993,066
2001 2,890,222
2002 766,317
2003 852,539
Thereafter 169,504
------------
$121,096,974
============
</TABLE>
As of December 31, 1998, time deposits include $13,810,657 of certificates
of deposit with a minimum balance of $100,000. Maturities of these certificates
are as follows:
<TABLE>
<S> <C>
Less than 3 months $ 3,187,364
Over 3 months and less than 6 months 4,068,224
Over 6 months and less than 12 months 4,731,903
Over 12 months 1,823,166
------------
$ 13,810,657
============
</TABLE>
A-36
<PAGE>
___________________________________________________
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8. SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE:
The purchasers of the securities under agreements to repurchase have agreed
to resell to the Company substantially identical securities at the maturities of
the agreements.
The maturity dates of the repurchase agreements are from January 15, 1999
to October 30, 1999 on the anniversary date of the repurchase agreement. The
securities are under control of the Bank.
NOTE 9. ADVANCES FROM FEDERAL HOME LOAN BANK:
Advances consisted of funds borrowed from the Federal Home Loan Bank of
Boston (FHLB).
These advances were secured by Federal Home Loan Bank stock (Note 2) and
unspecified first mortgage loans. The Company is able to borrow up to
$96,349,000 of Federal Home Loan Bank advances.
In addition to the above advances, the Company has credit available up to
$6,411,000 under a revolving loan agreement with the Federal Home Loan Bank.
There was no outstanding balance as of December 31, 1998. There was an
outstanding balance of $300,000 as of December 31, 1997. Interest is payable
monthly as funds are borrowed.
NOTE 10. INCOME TAXES:
The components of income tax expense are as follows for the years ended
December 31:
<TABLE>
<CAPTION>
1998 1997 1996
-----------------------------------
<S> <C> <C> <C>
Current tax expense $1,238,241 $1,808,575 $ 406,644
Deferred tax expense (benefit) 364,723 (575,835) (120,481)
-----------------------------------
Total income tax expense $1,602,964 $1,232,740 $ 286,163
===================================
</TABLE>
The reasons for the differences between the statutory federal income tax
rates and the effective tax rates are summarized as follows for the years ended
December 31:
<TABLE>
<CAPTION>
1998 1997 1996
-------------------
<S> <C> <C> <C>
Federal income tax at statutory rate 34.0% 34.0% 34.0%
Increase (decrease) in tax resulting from:
Tax-exempt income (.2) (.3) (1.6)
Dividends received deduction (.2) (.4) (3.0)
Goodwill amortization 1.8 2.1 -
Other, net (1.5) (4.6) 2.5
-------------------
33.9% 30.8% 31.9%
===================
</TABLE>
A-37
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10. INCOME TAXES: (continued)
The Company had gross deferred tax assets and gross deferred tax
liabilities as follows as of December 31:
<TABLE>
<CAPTION>
1998 1997
----------- ----------
<S> <C> <C>
Deferred tax assets:
Interest on non-performing loans $ 5,412 $ 11,598
Allowance for loan losses 930,260 953,119
Loan origination fees, net of costs - 39,371
Deferred compensation 20,011 -
Deferred retirement expense 10,443 -
Mark to market loans available-for-sale - 81
Accrued directors fees 34,005 29,564
---------- ----------
Gross deferred tax assets 1,000,131 1,033,733
---------- ----------
Deferred tax liabilities:
Deferred loan costs, net of fees 37,694 -
Prepaid pension 189,762 144,229
Accelerated depreciation 279,392 239,969
Mortgage servicing rights 346,088 137,617
Unrealized holding gain on securities available-for-sale 160,467 51,794
---------- ----------
Gross deferred tax liabilities 1,013,403 573,609
---------- ----------
Net deferred tax asset (liability) $ (13,272) $ 460,124
========== ==========
</TABLE>
Deferred tax assets as of December 31, 1998 have not been reduced by a
valuation allowance because management believes that it is more likely than not
that the full amount of deferred tax assets will be realized.
As of December 31, 1998, the Company had no operating loss and tax credit
carryover for tax purposes.
NOTE 11. STOCK COMPENSATION PLANS:
As of December 31, 1998, the Company had three fixed option, stock-based
compensation plans, which are described below. The Company has adopted the
disclosure only provisions of SFAS No. 123 "Accounting for Stock-Based
Compensation" but applies APB Opinion 25 and related Interpretations in
accounting for its plans. Accordingly, no compensation cost has been recognized
for its fixed stock option plans. Had compensation cost for the Company's
stock-based compensation plans been determined based on the fair value at the
grant dates for awards under those plans consistent with the method of FASB
Statement 123, the Company's net income and earnings per share would have been
reduced to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
1998 1997 1996
---------- ---------- --------
<S> <C> <C> <C> <C>
Net income As reported $3,118,750 $2,770,932 $610,711
Pro forma $2,876,087 $2,770,932 $500,828
Earnings per common share As reported $ 1.49 $ 1.36 $ .36
Pro forma $ 1.37 $ 1.36 $ .30
Earnings per common share, As reported $ 1.47 $ 1.33 $ .35
assuming dilution Pro forma $ 1.36 $ 1.33 $ .29
</TABLE>
Under the 1986 plan, the Company may grant options to its employees for up
to 57,880 additional shares of common stock. Under the 1987 plan, the Company
may grant options to its employees for up to 27,666 additional shares of common
stock. Under both plans, the exercise price of each option equals the market
price of the Company's stock on the date of grant and an option's maximum term
is 10 years. Options are exercisable immediately.
A-38
<PAGE>
NOTE 11. STOCK COMPENSATION PLANS: (continued)
On April 10, 1996, the shareholders approved the adoption of the "1996
Stock Option Plan." Under this plan, an amount equal to 10% of the issued and
outstanding common stock of the Company has been reserved for future issuance.
On December 2, 1996 48,000 options were granted from the 1996 stock option plan
at an exercise price of $12.50 per share, the fair market value on that date.
The fair value of each option was estimated on the date of grant using the
Black-Scholes option pricing model with the following weighted-average
assumptions:
<TABLE>
<CAPTION>
1998 1996
------------- -------------
<S> <C> <C>
Weighted risk-free interest rate 5.80% 6.37%
Weighted expected life 8 years 9 years
Weighted expected volatility 23.74% 17.33%
Weighted expected dividend yield 4.0% per year 5.0% per year
</TABLE>
No options were granted in 1997.
No modifications have been made to the terms of the option agreements.
A summary of the status of the Company's fixed stock option plans as of
December 31, 1998, 1997 and 1996 and changes during the years ending on those
dates is presented below:
<TABLE>
<CAPTION>
1998 1997 1996
----------------------------------------------------------------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at
beginning of year 75,435 $ 10.99 141,760 $ 10.34 62,590 $ 8.22
Granted 60,000 21.00 0 - 97,900 11.29
Exercised (20,780) 10.78 (64,525) 9.58 (18,730) 8.24
Forfeited - (1,800) 10.125 -
-------- ------- --------
Outstanding at
end of year 114,655 $ 16.27 75,435 $ 10.99 141,760 $10.34
======== ======= ========
Options exercisable
at year-end 114,655 75,435 141,760
Weighted-average
fair value of
options granted
during the year $ 4.82 N/A $ 1.84
</TABLE>
The following table summarizes information about fixed stock options
outstanding as of December 31, 1998:
Options Outstanding and Exercisable
----------------------------------------------------------
Number
Outstanding Remaining
Exercise Prices as of 12/31/98 Contractual Life
--------------- --------------- ----------------
$9.00 8,855 6 years
10.125 19,800 7 years
12.50 26,000 8 years
21.00 60,000 9 years
-------
114,655
-------
A-39
<PAGE>
__________________________________________
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12. EMPLOYEE BENEFIT PLANS:
Defined benefit pension plan - The Company has a defined benefit pension
plan covering substantially all full-time employees who have attained age 21 and
have completed one year of service. Annual contributions to the plan are based
on actuarial estimates.
The following tables set forth information about the plan as of December 31
and the years then ended:
<TABLE>
<CAPTION>
1998 1997
-----------------------
<S> <C> <C>
Change in projected benefit obligation:
Benefit obligation at beginning of year $1,636,696 $1,516,431
Service cost 148,182 91,465
Interest cost 124,942 112,553
Actuarial loss 253,262 93,031
Benefits paid (180,946) (176,784)
-----------------------
Benefit obligation at end of year 1,982,136 1,636,696
------------------------
Change in plan assets:
Plan assets at estimated fair value at beginning of year 1,852,640 1,636,404
Actual return on plan assets 179,212 229,694
Employer contribution 224,912 163,326
Benefits paid (180,946) (176,784)
-----------------------
Fair value of plan assets at end of year 2,075,818 1,852,640
-----------------------
Funded status 93,682 215,944
Unrecognized net actuarial loss 424,948 239,357
Unrecognized prior service cost (27,272) (29,965)
-----------------------
Prepaid benefit cost included in other assets $ 491,358 $ 425,336
=======================
</TABLE>
The weighted-average discount rate and rate of increase in future
compensation levels used in determining the actuarial present value of the
projected benefit obligation were 7% and 4% for 1998, and 7% and 3% for 1997 and
1996, respectively. The weighted-average expected long-term rate of return on
assets was 7% for 1998, 1997 and 1996.
Components of net periodic benefit cost:
<TABLE>
<CAPTION>
1998 1997 1996
---------------------------------
<S> <C> <C> <C>
Service cost $ 148,182 $ 91,465 $ 84,057
Interest cost on benefit obligation 124,942 112,553 109,326
Expected return on assets (135,624) (115,361) (97,664)
Amortization of prior service cost (2,693) (2,693) (2,693)
Recognized net actuarial cost 24,083 25,485 29,224
--------------------------------
Net periodic benefit cost $ 158,890 $ 111,449 $122,250
================================
</TABLE>
The amounts and types of securities of the Company included in plan assets
as of December 31, 1998 and 1997 consist of 7,500 shares of New Hampshire Thrift
Bancshares, Inc.
A-40
<PAGE>
__________________________________________
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12. EMPLOYEE BENEFIT PLANS: (continued)
Profit Sharing - Stock Ownership Plan - Lake Sunapee Bank, fsb, sponsors
a Profit Sharing - Stock Ownership Plan. Lake Sunapee Bank, fsb may elect, but
is not required, to make discretionary and/or matching contributions to the
Plan.
For 1998, 1997 and 1996, participating employees' contributions totaled
$170,048, $139,992 and $118,346, respectively. The Bank made a matching
contribution of $10,000 for 1998, $14,000 for 1997 and $10,000 for 1996. A
participant's retirement benefit will depend on the amount of the contributions
to the Plan together with the gains or losses on the investments.
NOTE 13. COMMITMENTS AND CONTINGENCIES:
In the normal course of business, the Company has outstanding various
commitments and contingent liabilities, such as legal claims, which are not
reflected in the consolidated financial statements. Management does not
anticipate any material loss as a result of these transactions. As of December
31, 1998, the Company had entered into commitments to fund loans totaling
$12,235,700. The majority of these loans will have fixed rates.
The following is a schedule, by interest rate, of loan commitments
outstanding as of December 31:
<TABLE>
<CAPTION>
1998 1997
---------------------------
<S> <C> <C>
5.00% - 5.99% $ 118,500 $ -
6.00% - 6.99% 7,930,600 2,187,875
7.00% - 7.99% 3,459,200 5,799,460
8.00% - 8.99% 662,400 240,000
9.00% - 9.99% - 74,000
10.00% - 10.99% 65,000 16,100
---------------------------
$12,235,700 $8,317,435
===========================
</TABLE>
As of December 31, 1998, the Company was obligated under non-cancelable
operating leases for bank premises expiring between 1999 and 2007. The total
minimum rental due in future periods under these existing agreements is as
follows as of December 31, 1998:
1999 $140,481
2000 103,656
2001 98,781
2002 98,781
2003 98,781
Years thereafter 262,784
--------
Total minimum lease payments $803,264
========
Certain leases contain provisions for escalation of minimum lease payments
contingent upon increases in real estate taxes and percentage increases in the
consumer price index. The total rental expense amounted to $141,456 and $96,481
for the years ended December 31, 1998 and 1997, respectively.
A-41
<PAGE>
__________________________________________
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 14. SHAREHOLDERS' EQUITY:
Liquidation account - On May 22, 1986, Lake Sunapee Bank, fsb received
approval from the Federal Home Loan Bank Board and converted from a federally-
chartered mutual savings bank to a federally-chartered stock savings bank. At
the time of conversion, the Bank established a liquidation account in an amount
of $4,292,510 (equal to the Bank's net worth as of the date of the latest
financial statement included in the final offering circular used in connection
with the conversion). The liquidation account will be maintained for the
benefit of eligible account holders who maintain their deposit accounts in the
Bank after conversion. In the event of a complete liquidation of the Bank
subsequent to conversion (and only in such event), each eligible account holder
will be entitled to receive a liquidation distribution from the liquidation
account before any liquidation distribution may be made with respect to capital
stock. The amount of the liquidation account is reduced to the extent that the
balances of eligible deposit accounts are reduced on any year-end closing date
subsequent to the conversion. Company management believes the balance in the
liquidation account would be immaterial to the consolidated financial statements
as of December 31, 1998.
Dividends - The Bank may not declare or pay a cash dividend on or purchase
any of its stock if the effect would be to reduce the net worth of the Bank
below either the amount of the liquidation account or the net worth requirements
of the banking regulators.
Treasury stock - On July 15, 1993, the Company announced a buy back program
whereby the Company intends to repurchase, on the open market, 10% of its
currently outstanding common stock. As of December 31, 1998, 103,854 shares
remained to be purchased from the 1993 buy back program.
Treasury stock is recorded at cost, as purchased. Treasury stock sold is
accounted for on a first-in, first-out basis.
Special bad debts deduction - In prior years, Lake Sunapee Bank, fsb, a
wholly-owned subsidiary of the Company, was allowed a special tax-basis under
certain provisions of the Internal Revenue Code. As a result, retained income
of Lake Sunapee Bank, fsb, as of December 31, 1998 includes approximately
$2,069,898 for which federal and state income taxes have not been provided. If
the Bank no longer qualifies as a bank as defined in certain provisions of the
Internal Revenue Code, this amount will be subject to recapture in taxable
income ratably over six (6) years, subject to a combined federal and state tax
rate of approximately 39%.
A-42
<PAGE>
_____________________________________________
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 15. EARNINGS PER SHARE (EPS)
Reconciliation of the numerators and the denominators of the basic and
diluted per share computations for net income are as follows:
<TABLE>
<CAPTION>
Income Shares Per-Share
(Numerator) (Denominator) Amount
----------- ------------- ---------
<S> <C> <C> <C>
Year ended December 31, 1998
Basic EPS
Net income and income available to common stockholders $3,118,750 2,095,305 $1.49
Effect of dilutive securities, options 26,128
-------------------------
Diluted EPS
Income available to common stockholders and assumed
conversions $3,118,750 2,121,433 $1.47
=========================
Year ended December 31, 1997
Basic EPS
Net income and income available to common stockholders $2,770,932 2,037,706 $1.36
Effect of dilutive securities, options 41,254
-------------------------
Diluted EPS
Income available to common stockholders and assumed
conversions $2,770,932 2,078,960 $1.33
=========================
Year ended December 31, 1996
Basic EPS
Net income and income available to common stockholders $ 610,711 1,694,410 $ .36
Effect of dilutive securities, options 28,573
-------------------------
Diluted EPS
Income available to common stockholders and assumed
conversion $ 610,711 1,722,983 $ .35
=========================
</TABLE>
NOTE 16. Regulatory matters:
The Company and the Bank are subject to various capital requirements
administered by their primary federal regulator, the Office of Thrift
Supervision (OTS). Failure to meet minimum regulatory requirements can initiate
mandatory, and possible additional discretionary actions by regulators, that if
undertaken, could have a direct material effect on the Company's and the
consolidated financial statements. Under the regulatory capital adequacy
guidelines and the regulatory framework for prompt corrective action, the Bank
must meet specific capital guidelines involving quantitative measures of the
Bank's assets, liabilities, and certain off-balance-sheet items as calculated
under regulatory accounting practices. The Bank's capital amounts and
classifications under the prompt corrective action guidelines are also subject
to qualitative judgments by the regulators about components, risk weightings and
other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios (set forth in the table
below) of total risk-based capital and Tier 1 capital to risk-weighted assets
(as defined in the regulations), Tier 1 capital to adjusted total assets (as
defined) and tangible capital to adjusted total assets (as defined).
Management believes, as of December 31, 1998, that the Bank meets all
capital requirements to which it is subject.
A-43
<PAGE>
NOTE 16. REGULATORY MATTERS: (continued)
As of December 31, 1998, the most recent notification from the Office of
Thrift Supervision categorized the Bank as well capitalized under the regulatory
frame work for prompt corrective action. To be categorized as well capitalized
the Bank must maintain minimum total risk-based, Tier 1 risk-based and Tier 1
leverage ratios as set forth in the table. There are no conditions or events
since that notification that management believes have changed the Bank's
category.
<TABLE>
<CAPTION>
To Be Well
Capitalized Under
For Capital Prompt Corrective
Actual Adequacy Purposes: Action Provisions:
------------------ ------------------- ------------------
Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- ------ -----
(Dollar amounts in Thousands)
<S> <C> <C> <C> <C> <C> <C>
As of December 31, 1998:
Total Capital (to Risk Weighted Assets) $24,571 12.63% $15,564 *8.0% $19,455 10.0%
Core Capital (to Adjusted Tangible Assets) 23,398 7.31 12,801 *4.0 16,002 5.0
Tangible Capital (to Tangible Assets) 23,398 7.31 4,801 *1.5 N/A N/A
Tier 1 Capital (to Risk Weighted Assets) 23,398 12.03 N/A N/A 11,673 6.0
As of December 31, 1997:
Total Capital (to Risk Weighted Assets) 21,611 11.86 14,577 *8.0 18,222 *10.0
Core Capital (to Adjusted Tangible Assets) 20,341 6.47 12,569 *4.0 15,711 *5.0
Tangible Capital (to Tangible Assets) 20,341 6.47 4,713 *1.5 N/A N/A
Tier 1 Capital (to Risk Weighted Assets) 20,341 11.12 N/A N/A 10,979 *16.0
</TABLE>
* Greater than and equal to
NOTE 17. FAIR VALUE OF FINANCIAL INSTRUMENTS:
The estimated fair values of the Company's financial instruments, all of
which are held or issued for purposes other than trading, were as follows
December 31:
<TABLE>
<CAPTION>
1998
-------------------------- --------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Financial assets:
Cash and cash equivalents $ 16,284,558 $ 16,284,558 $ 13,306,626 $ 13,306,626
Securities available-for-sale 52,137,753 52,137,753 30,104,674 30,104,674
Securities held-to-maturity - - 75,000 75,000
Other investments 2,032,999 2,032,999 1,987,560 1,987,560
Loans 232,321,171 235,730,000 255,223,525 256,938,000
Loans held-for-sale 3,775,802 3,775,802 673,950 673,950
Accrued interest receivable 1,725,235 1,725,235 1,556,194 1,556,194
Financial liabilities:
Regular savings, NOW, demand and
money market deposits 160,952,182 160,952,182 138,129,310 138,129,310
Time deposits 121,096,974 121,492,000 133,097,650 133,535,000
Other borrowed funds - - 300,000 300,000
Securities sold under agreements to repurchase 11,849,116 11,849,116 8,393,192 8,393,192
Advances from Federal Home Loan Bank - - 10,246,318 10,237,000
</TABLE>
The carrying amounts of financial instruments shown in the above table are
included in the consolidated statements of financial condition under the
indicated captions.
A-44
<PAGE>
_____________________________________________
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 17. FAIR VALUE OF FINANCIAL INSTRUMENTS: (continued)
The Company has no derivative financial instruments subject to the
provisions of SFAS No. 119 "Disclosure About Derivative Financial Instruments
and Fair Value of Financial Instruments." Accounting policies related to
financial instruments are described in Note 1.
NOTE 18. CONDENSED PARENT COMPANY FINANCIAL STATEMENTS:
The following are condensed statements of financial condition, income and
cash flows for New Hampshire Thrift Bancshares, Inc. ("Parent Company") for the
years ended December 31:
CONDENSED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
1998 1997
------------------------
ASSETS
<S> <C> <C>
Investment in subsidiary, Lake Sunapee Bank $26,932,719 $24,128,876
Advances to Lake Sunapee Bank 848,778 1,434,249
------------------------
Total assets $27,781,497 $25,563,125
========================
OTHER LIABILITY $ 1,891 $ -
SHAREHOLDERS' EQUITY 27,779,606 25,563,125
------------------------
Total liabilities and shareholders' equity $27,781,497 $25,563,125
========================
</TABLE>
CONDENSED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
<TABLE>
<CAPTION>
1998 1997 1996
--------------------------------------
<S> <C> <C> <C>
Dividends from subsidiary $ 500,000 $3,000,000 $1,000,000
Operating expenses 12,377 4,380 13,874
-------------------------------------
Income before equity in earnings of subsidiary 487,623 2,995,620 986,126
Equity in undistributed earnings (loss) of subsidiary 2,631,127 (224,688) (375,415)
-------------------------------------
Net income 3,118,750 2,770,932 610,711
Other comprehensive income, net of taxes
Unrealized holding gains (losses) on available-for-sale securities,
Lake Sunapee Bank 172,716 209,497 (224,773)
-------------------------------------
Comprehensive income $3,291,466 $2,980,429 $ 385,938
=====================================
</TABLE>
A-45
<PAGE>
_____________________________________________
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 18. Condensed parent company financial statements: (continued)
CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
1998 1997 1996
-------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 3,118,750 $ 2,770,932 $ 610,711
Increase in taxes payable 1,891 - -
Equity in undistributed (earnings) loss of subsidiary (2,631,127) 224,688 375,415
-------------------------------------
Net cash provided by operating activities 489,514 2,995,620 986,126
-------------------------------------
Cash flows from investing activities:
Additional investment in subsidiary - (81,547) -
Net change in advances to subsidiary 643,535 (96,278) (249,873)
-------------------------------------
Net cash provided by (used in) investing activities 643,535 (177,825) (249,873)
-------------------------------------
Cash flows from financing activities:
Proceeds from stock options exercised 197,941 699,553 154,295
Dividends paid (1,257,015) (987,032) (847,066)
Acquisition of Landmark Bank - (2,275,000) -
Repurchase of treasury stock (73,975) (255,316) (43,482)
-------------------------------------
Net cash used in financing activities (1,133,049) (2,817,795) (736,253)
-------------------------------------
Cash, end of year $ - $ - $ -
=========================== =========
</TABLE>
The Parent Only Statements of Changes in Shareholders' Equity are identical
to the Consolidated Statements of Changes in Shareholders' Equity for the years
ended December 31, 1998, 1997 and 1996, and therefore are not reprinted here.
A-46
<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
SEC Commission Number 17859
For the fiscal year ended:
DECEMBER 31, 1998
NEW HAMPSHIRE THRIFT BANCSHARES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 02-0430695
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
9 MAIN STREET, PO BOX 9
NEWPORT, NEW HAMPSHIRE 03773-0009
(Address)
Registrant's telephone number, including area code: (603) 863-0886
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $.01 PAR VALUE
Title of Class
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes X No _______
-----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-B is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. X
-----
The issuer's revenues for its most recent fiscal year were $25,905,987
The aggregate market value of the voting stock held by non-affiliates of the
registrant is between $32,016,752 and $31,016,229 based on a $16.00 average bid
and a $15.50 average asked price, respectively, as of December 31, 1998.
Number of shares of Common Stock Outstanding as of February 9, 1999 were
2,104,285
Transitional Small Business Disclosure Format. Yes _______ No X
-----
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NEW HAMPSHIRE THRIFT BANCSHARES, INC.
INDEX
<TABLE>
<S> <C>
PART I
Item 1. Business.............................................................................................. 49
Item 2. Properties............................................................................................ 60
Item 3. Legal Proceedings..................................................................................... 61
Item 4. Submission of Matters to a Vote of Security Holders................................................... 61
PART II
Item 5. Market for the Registrant's Common Stock and Related Stockholder Matters.............................. 61
Item 6. Management's Discussion and Analysis of Financial Condition and Results of Operations................. 61
Item 7. Financial Statements and Supplementary Information Report of Independent Auditors..................... 61
Consolidated Statements of Financial Condition........................................................ 61
Consolidated Statements of Income..................................................................... 61
Consolidated Statements of Changes in Shareholders' Equity............................................ 61
Consolidated Statements of Cash Flows................................................................. 61
Notes to Consolidated Financial Statements............................................................ 61
Item 8. Disagreements on Accounting and Financial Disclosure.................................................. 62
PART III
Item 9. Directors and Executive Officers of the Registrant.................................................... 62
Item 10. Executive Compensation................................................................................ 62
Item 11. Security Ownership of Certain Beneficial Owners and Management........................................ 62
Item 12. Certain Relationships and Related Transactions........................................................ 62
Item 13. Exhibits and Reports on Form 8-K Exhibits............................................................. 62
Reports on Form 8-K................................................................................... 63
Signatures............................................................................................ 64
</TABLE>
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PART I.
ITEM 1. BUSINESS
GENERAL
ORGANIZATION
New Hampshire Thrift Bancshares, Inc. (NHTB), a Delaware holding
company organized on July 5, 1989, is the parent company of Lake Sunapee Bank,
fsb (LSB), a federally chartered savings bank. The Bank was originally chartered
by the State of New Hampshire in 1868 as the Newport Savings Bank. The Bank
became a member of the Federal Deposit Insurance Corporation (FDIC) in 1959 and
a member of the Federal Home Loan Bank of Boston in 1978. On December 1, 1980,
the Bank was the first bank in the United States to convert from a
state-chartered mutual savings bank to a federally-chartered mutual savings bank
and its deposits became insured by the Federal Savings and Loan Insurance
Corporation (FSLIC). In 1981, the Bank changed its name to "Lake Sunapee Savings
Bank, fsb" and in 1994, refined its name to "Lake Sunapee Bank, fsb." In 1989,
as a result of the Financial Institution Reform, Recovery, and Enforcement Act
(FIRREA), the Bank's deposits were insured by the Savings Association Insurance
Fund (SAIF).
Lake Sunapee Bank, fsb is a thrift institution established for the
purposes of providing the public with a convenient and safe place to invest
funds, for the financing of housing, consumer-oriented products and commercial
loans, and for providing a variety of other consumer-oriented financial
services. The Bank is a full-service community institution promoting the ideals
of thrift, security, home ownership and financial independence for its
customers. The Bank's operations are conducted from its home office located in
Newport, New Hampshire and its branch offices located in Sunapee, New London,
Bradford, Grantham, Guild, Lebanon, West Lebanon, Hillsboro, and Andover, New
Hampshire. The Bank had assets of approximately $324 million as of December 31,
1998.
Through its subsidiary, Lake Sunapee Financial Services Corporation
(LSFSC), the Bank offers brokerage services to its customers.
MARKET AREA
The Bank's market area consists of west-central New Hampshire in the
counties of Merrimack, Sullivan, Hillsboro, and Grafton. This area is best known
for its recreational facilities and its resort/retirement environment. Within
the market area are two major ski areas, several lakes, retirement communities,
a four-season recreational development center designed to support 3,500
families, Colby Sawyer, New England, and Dartmouth Colleges and several
industrial manufacturing employers.
In addition to the year-round regional population, the Upper
Valley-Kearsarge-Lake Sunapee area has a sizable number of seasonal residents.
In 1990, a total of over 3,600 seasonal dwellings were listed by the Census
Bureau. Based on an occupancy rate of five persons per seasonal unit, the
regional seasonal population can be estimated to be over 18,000 persons.
LENDING ACTIVITIES
The Bank's loan portfolio totaled $239,116,440, including $3,775,802 of
loans held for sale at December 31, 1998, representing approximately 75% of
total assets. As of December 31, 1998, approximately 80% of the mortgage loan
portfolio had adjustable rates. As of December 31, 1998, the Bank had sold
$128,115,971 in fixed rate mortgage loans in an effort to meet customer demands
for fixed rate loans, minimize interest rate risk, and build a servicing
portfolio.
RESIDENTIAL LOANS. The Bank's loan origination team solicits
residential mortgage loans in the local real estate marketplace. Residential
borrowers are frequently referred to the Bank by its existing customers or real
estate agents. Generally, the Bank makes conventional mortgage loans (loans of
80% of value or less that are neither insured nor partially guaranteed by
government agencies) on one- to four-family owner occupied dwellings. The Bank
also makes residential loans up to 95% of the appraised value if the top 20% of
the loan is covered by private mortgage insurance. Residential mortgage loans
typically have terms up to 30 years and are amortized on a monthly basis with
principal and interest due each month. Currently, the Bank offers one-year,
three-year and five-year adjustable-rate mortgage loans and long-term fixed rate
loans. Borrowers may prepay loans at their option or refinance their loans on
terms agreeable to the
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Bank. The Bank's management believes that due to prepayments in connection with
refinancing and sales of property, the average length of the Bank's long-term
residential loans is approximately nine years.
Since the middle of the 1960's, the terms of conventional residential
mortgage loans granted by the Bank have contained a "due-on-sale" clause which
permits the Bank to accelerate the indebtedness of a loan upon the sale or other
disposition of the mortgaged property. Due-on-sale clauses are an important
means of increasing the turnover of mortgage loans in the Bank's portfolio.
CONSUMER LOANS. The Bank makes various types of secured and unsecured
consumer loans, including home improvement loans. The Bank offers loans secured
by automobiles, boats and other recreational vehicles. The Bank believes that
the shorter terms and the normally higher interest rates available on various
types of consumer loans is helpful in maintaining a more profitable spread
between the Bank's average loan yield and its cost of funds.
COMMERCIAL LOANS. The Bank offers commercial loans in accordance with
regulatory requirements. Under current regulation the bank is limited to 20% of
total assets. The Bank currently has approximately 8.50% commercial loans.
MUNICIPAL LOANS. The Bank's activity in the municipal lending market is
limited to those towns and school districts located within our primary lending
area and such loans are extended for the purposes of either tax anticipation,
building improvements or other capital spending requirements. Municipal lending
is considered to be an area of accommodation and part of the Bank's continuing
involvement with the communities it serves.
HOME EQUITY LOANS. The Bank provides Home Equity Loans secured by liens
on residential real estate located within the Bank's market area. These include
loans with regularly scheduled principal and interest payments as well as
revolving credit agreements. The interest rate on these loans is adjusted
quarterly and tied to the movement of the Prime Rate.
ORIGINATION, PURCHASE AND SALE OF LOANS
The primary lending activity of the Bank is the origination of
conventional loans (i.e., loans that are neither insured nor guaranteed in whole
or in part by governmental agencies) secured by first mortgage liens on
residential properties, principally single-family residences, substantially all
of which are located in the west-central area of New Hampshire.
The Bank appraises the security for each new loan made. Appraisals are
made for the Bank by qualified sub-contracted appraisers. The appraisal of the
real property upon which the Bank makes a mortgage loan is of particular
significance to the Bank in the event that the loan is foreclosed, since an
improper appraisal may contribute to a loss by or other financial detriment to
the Bank in the disposition of the loan.
Detailed applications for mortgage loans are verified through the use
of credit reports, financial statements and confirmations. Depending upon the
size of the loan involved, a varying number of senior officers of the Bank must
approve the application before the loan can be granted. At times, the Executive
Committee of the Bank is called together to review particularly large loans.
The Bank requires title certification on all first mortgage loans and
the borrower is required to maintain hazard insurance on the security property.
SERVICE CORPORATIONS
The Bank has an expanded service corporation authority because of its
conversion from a state-chartered mutual savings bank to a federal institution
in 1980. This authority, grandfathered in that conversion, permits the Bank to
invest 15% of its deposits, plus an amount of approximately $825,000, in service
corporation activities permitted by New Hampshire law. However, the first 3% of
these activities is subject to federal regulation and the remainder is subject
to state law. This permits a 3% investment in activities not permitted by state
law.
As of December 31, 1998, the Bank had two service corporations, the
Lake Sunapee Group, Inc., and the Lake Sunapee Financial Services Corporation.
The Lake Sunapee Group owns and maintains the Bank's buildings and investment
properties.
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COMPETITION
The Bank faces strong competition in the attraction of deposits. Its
most direct competition for deposits comes from the other thrifts and commercial
banks located in its primary market area. The Bank faces additional significant
competition for investors' funds from mutual funds and other corporate and
government securities.
The Bank competes for deposits principally by offering depositors a
wide variety of savings programs, a market rate of return, tax-deferred
retirement programs and other related services. The Bank does not rely upon any
individual, group or entity for a material portion of its deposits.
The Bank's competition for real estate loans comes from mortgage
banking companies, other thrift institutions and commercial banks. The Bank
competes for loan originations primarily through the interest rates and loan
fees it charges and the efficiency and quality of services it provides
borrowers, real estate brokers and builders. The Bank's competition for loans
varies from time to time depending upon the general availability of lendable
funds and credit, general and local economic conditions, current interest rate
levels, volatility in the mortgage markets and other factors which are not
readily predictable. During 1994, the Bank increased its outside origination
staff to four loan officers. These officers call on real estate agents, follow
leads, and are available seven days a week to service the mortgage loan market.
REGULATION
GENERAL
The Bank is subject to extensive regulation, examination, and
supervision by the OTS, as its chartering agency, and the FDIC, as its deposit
insurer. The Bank's deposit accounts are insured up to applicable limits by the
SAIF administered by the FDIC, and the Bank is a member of the FHLB of Boston.
The Bank must file reports with the OTS and the FDIC concerning its activities
and financial condition, and it must obtain regulatory approvals prior to
entering into certain transactions, such as mergers with, or acquisitions of
other depository institutions. The OTS and the FDIC conduct periodic
examinations to assess the Bank's compliance with various regulatory
requirements. This regulation and supervision establishes a comprehensive
framework of activities in which a savings association can engage and is
intended primarily for the protection of the insurance fund and depositors. The
Company, as a savings association holding company, is also required to file
certain reports with, and otherwise comply with, the rules and regulations of
the OTS and of the Securities and Exchange Commission (the "SEC") under the
federal securities laws.
The OTS and the FDIC have a significant discretion in connection with
their supervisory and enforcement activities and examination policies, including
policies with respect to the classification of assets and the establishment of
adequate loan loss reserves for regulatory purposes. Any change in such
policies, whether by the OTS, the FDIC or the Congress, could have a material
adverse impact on the Company, the Bank and the operations of both.
The following discussion is intended to be a summary of the material
statutes and regulations applicable to savings associations and their holding
companies, and it does not purport to be a comprehensive description of all such
statutes and regulations.
REGULATIONS OF FEDERAL SAVINGS ASSOCIATIONS
BUSINESS ACTIVITIES. The Bank derives its lending and investment powers
from the Home Owners' Loan Act, as amended (the "HOLA"), and the regulations of
the OTS thereunder. Under these laws and regulations, the Bank may invest in
mortgage loans secured by residential and commercial real estate, commercial and
consumer loans, certain types of debt securities, and certain other assets. The
Bank may also establish service corporations that may engage in activities not
otherwise permissible for the Bank, including certain real estate equity
investments and securities and insurance brokerage. These investment powers are
subject to various limitations, including (a) a prohibition against the
acquisition of any corporate debt security that is not rated in one of the four
highest rating categories; (b) a limit of 20% of an association's assets on the
aggregate amount of commercial loans; (d) a limit of 35% of an association's
assets on the aggregate amount of consumer loans and acquisitions of certain
debt securities; (e) a limit of 5% of assets or an association's capital on
certain construction loans made for the purpose of financing what is or is
expected to become residential property.
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LOANS TO BORROWER. Under the HOLA, savings associations are generally
subject to the same limits on loans to one borrower as are imposed on national
banks. Generally, under these limits, a savings association may not make a loan
or extend credit to a single or related group of borrowers in excess of 15% of
the association's unimpaired capital and surplus. Additional amounts may be
lent, not in excess of 10% of impaired capital and surplus, if such loans or
extensions of credit are fully secured by readily marketable collateral. Such
collateral is defined to include certain debt and equity securities and bullion
but generally does not include real estate. At December 31, 1998, the Bank's
regulatory limit on loans to one borrower was approximately $4.2 million. At
December 31, 1998, the Bank's largest aggregate amount of loans to one borrower
was $1,857,186, and the second largest borrower had an aggregate balance of
$1,836,455. The Bank is in compliance with all applicable limitations on loans
to one borrower.
QTL TEST. The HOLA requires a savings association to meet a qualified
thrift leader, or "QTL" test. Under the QTL test, a savings association is
required to maintain at least 65% of its "portfolio assets" in certain
"qualified thrift investments" in at least nine months of the most recent
12-month period. "Portfolio assets" means in general, an association's total
assets less the sum of (a) specified liquid assets up to 20% of total assets,
(b) certain intangibles, including goodwill and credit card and purchased
mortgage servicing rights, and (c) the value of property used to conduct the
association's business. "Qualified thrift investments" includes various types of
loans made for residential and housing purposed, investments related to such
purposes, including certain mortgage-backed and related securities, consumer
loans, small business loans, educational loans, and credit card loans. At
December 31, 1998, the Bank maintained 81.29% of its portfolio assets in
qualified thrift investments. The Bank had also met the QTL test in each of the
prior 12 months and was, therefore, a qualified thrift leader. A savings
association may also satisfy the QTL test by qualifying as a "domestic building
and loan association" as defined in the Internal Revenue Code of 1986.
A savings association that fails the QTL test must either operate under
certain restrictions on its activities or convert to a bank charter. The initial
restrictions include prohibitions against (a) engaging in any new activity not
permissible for a national bank, (b) paying dividends not permissible under
national bank regulations, (c) obtaining new advances from any federal Home Loan
Bank and (d) establishing any new branch office in a location not permissible
for a national bank in the association's home state. In addition, within one
year of the date that a savings association ceases to meet the QTL test, any
company controlling the association would have to register under, and become
subject to the requirements of, the Bank Holding Company Act of 1956, as amended
(the"BHC Act"). If the savings association does not requalify under the QTL test
within the three-year period after it failed the QTL test, it would be required
to terminate any activity and to dispose of any investment not permissible for a
national bank and would have to repay as promptly as possible any outstanding
advances from a Federal Home Loan Bank. A savings association that has failed
the QTL test may requalify under the QTL test and be free of such limitations,
but it may only do so once.
CAPITAL REQUIREMENTS. The OTS regulations require savings associations
to meet three minimum capital standards: a tangible capital to such adjusted
total assets as adjusted under the OTS regulations, a leverage ratio requirement
of 3% of core capital to such adjusted assets and a risk-based capital ratio
requirement of 8% of total risk-based capital to total risk-weighted assets. In
determining compliance with the risk-based capital requirement, a savings
association must compute its risk-weighted assets by multiplying its assets and
certain off balance sheet items by risk weights, which range from 0% for cash
and obligations issued by the United States Government or its agencies to 100%
for consumer and commercial loans, as assigned by the OTS capital regulation
based on the risks OTS believes are inherent in the type of asset. Tangible
capital is defined, generally, as common stockholders' equity (including
retained earnings), certain noncumulative perpetual preferred stock and related
earnings), certain noncumulative perpetual preferred stock and related earnings
and minority interests in equity accounts of fully consolidated subsidiaries,
less intangibles (other than certain purchased mortgage servicing rights) and
investments in and loans to subsidiaries engaged in activities not permissible
for a national bank. Core capital is defined similarly to tangible capital, but
core capital also includes certain qualifying supervisory goodwill and certain
purchased credit card relationships. Supplementary capital currency includes
cumulative and other perpetual preferred stock, mandatory convertible
securities, subordinated debt and intermediate preferred stock and the allowance
for loan and lease losses. The allowance for loan and lease losses includable in
supplementary capital is limited to a maximum of 1.25% of risk-weighted assets,
and the amount of supplementary capital that may be included as total capital
cannot exceed the amount of core capital. The OTS has promulgated a regulation
that requires a savings association with "above normal" interest rate risk, when
determining compliance with its risk-based capital requirement, to hold
additional capital to account for its "above normal" interest rate risk. Pending
resolution of related regulatory issues, the OTS has deferred enforcement of
this regulation. A savings association's assets as calculated in accordance with
guidelines set forth by the OTS. At the times when the 3 month Treasury bond
equivalent yield falls below 4% an association may compute its interest rate
risk on the basis of a decrease equal to one-half of that Treasury rate rather
than on the basis of 2%. A savings association whose measured interest rate risk
exposure exceeds 2% would be considered to have "above normal"
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risk. The interest rate risk and 2% multiplied by the estimated economic value o
the association's assets. That dollar amount is deducted from an association's
total capital in calculating compliance with its risk based capital requirement.
Any required deduction for interest rate risk becomes effective on the last day
of the third quarter following the reporting date of the association's financial
data on which the interest rate risk was computed. An institution with assets of
less than $300 million and risk-based capital ratio in excess of 12% is not
subject to the interest rate risk component, unless the OTS determines
otherwise. The rule also provides the Director of the OTS may waive or defer an
institution's interest rate risk component on a case-by case basis. The OTS has
indefinitely deferred the implementation of the interest rate component in the
computation of an institution's risk-based capital requirements. The OTS
continues to monitor the interest rate risk of individual institutions and
retains the right to impose additional capital requirements on individual
institutions. For information pertaining to capital requirements, please see
Note 16 of the Financial Statements.
LIMITATIONS ON CAPITAL DISTRIBUTIONS. OTS regulations currently impose
limitations upon capital distributions by savings associations, such as cash
dividends, payments to repurchase or otherwise acquire it shares, payments to
shareholders of another institution in a cash cut merger and other distributions
charged against capital. At least 30-days written notice must be given to the
OTS of a proposed capital distribution by a savings association, and capital
distributions in excess of specified earnings or by certain institutions are
subject to approval by the OTS. An association that has capital in excess of all
fully phased-in regulatory capital requirements before and after a proposed
capital distribution may, after prior notice but without the approval of the
OTS, make capital distributions during a calendar year equal to the greater of
(a) 100% of its net earnings to date during the calendar year plus the amount
that would reduce by its "surplus capital ratio" (the excess capital over its
fully phased-in capital requirements) at the beginning of the calendar year, or
(b) 75% of its net earnings for the previous four quarters. Any additional
capital distributions would require prior OTS approval. In addition, the OTS can
prohibit a proposed capital distribution, otherwise permissible under the
regulation, if the OTS has determined that the association is in need of more
than normal supervision or if it determines that a proposed distribution by an
association would constitute an unsafe or unsound practice. Furthermore, under
the OTS prompt corrective action regulations, the Bank would be prohibited from
making any capital distribution; the Bank failed to meet its minimum capital
requirements, as described above.
ASSESSMENTS. Savings associations are required by OTS regulators to pay
assessments to the OTS to find the operations of the OTS. The general
assessment, paid on a semiannual basis, is computed upon the savings
association's total assets, including consolidated subsidiaries, as reported in
the association's latest quarterly Thrift Financial Report. During July 1998,
the Bank paid the semiannual assessment of $40,959.
BRANCHING. Subject to certain limitations, the HOLA and the OTS
regulations permit federally chartered savings associations to establish
branches in any state of the United States. The authority to establish such
branches is available (a) in states that expressly authorize branches of savings
associations located in another state or (b) to an association that either
satisfies the "QTL" test for a qualified thrift leader or qualifies as a
"domestic building and loan association" under the Internal Revenue Code of
1986, which composes qualification requirements similar to those for a
"qualified thrift leader" under the HOLA. See "QTL" Test. The authority for a
federal savings association to establish an interstate branch network would
facilitate a geographic diversification of the association's activities. This
authority under the HOLA and the OTS regulations preempts any state law
purporting to regulate branching by federal savings associations.
COMMUNITY REINVESTMENT. Under the Community Reinvestment Act (the
"CRA"), as implemented by OTS regulations, a savings association has a
continuing and affirmative obligation consistent with its safe and sound
operation to help meet the credit needs of its entire community, including low
and moderate income neighborhoods. The CRA does not establish specific lending
requirements or programs for financial institutions nor does it limit an
institution's discretion to develop the types of products and services that it
believes are best suited to its particular community, consistent with the CRA.
The CRA requires the OTS, in connection with it examination of a savings
association, to asses the association's record of meeting the credit needs of
its community and to take such record into account in its evaluation of certain
applications by such association. The CRA also requires all institutions to make
public disclosure of their CRA ratings. The Bank received a "Satisfactory" CRA
rating in its most recent examinations.
In April 1995, the OTS and the other federal banking agencies adopted
amendments revising their CRA regulations. Among other things, the amended CRA
regulations substitute for the prior process-based assessment factors a new
evaluation system that would rate an institution based on its actual performance
in meeting community needs. In particular, the system will focus on three tests:
(a) a lending test, to evaluate the institution's record of making loans in its
assessment areas; (b) an investment test, to evaluate the institutions record of
investing in community
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development projects, affordable housing, and programs benefiting low or
moderate income individuals and businesses; and (c) a service test, to evaluate
the institution's delivery of services through its branches, ATMs and other
offices. The amended CRA regulations also clarify how an institution's CRA
performance would be considered in the application process.
TRANSACTIONS WITH RELATED PARTIES. The Bank's authority to engage in
transactions with its "affiliates" is limited by the OTS regulations and by
Sections 23A and 23B of the Federal Reserve Act (the "FRA"). In general, an
affiliate of the Bank is any company that controls the Bank or any other company
that is controlled by a company that controls the Bank or any other company that
is controlled by a company that controls the Bank, excluding the Banks'
subsidiaries other than those that are insured depository institutions. The OTS
regulations prohibit a savings association (a) from lending to any of its
affiliates that is engaged in activities that are not permissible for bank
holding companies under Section 4(c) at the BHC Act and (b) from purchasing the
securities of any affiliates other than a subsidiary. Section 23A limits the
aggregate amount of transactions with all affiliates to 20% of the savings
association's capital and surplus. Extensions of credit to affiliates are
required to be secured by collateral in an amount and of a type described in
Section 23A, and the purchase of low quality assets from affiliates is generally
prohibited. Section 23B provides that certain transactions with affiliates,
including loans and asset purchases, must be on terms and under circumstances,
including credit standards, that are substantially the same or at least as
favorable to the association as those prevailing at the time for comparable
transactions with nonaffiliated companies. In the absence of comparable
truncations, such truncations may only occur under terms and circumstances,
including credit standards, which in good faith would be offered to or would
apply to nonaffiliated companies.
The Bank's authority to extend credit to its directors, executive
officers, and 10% shareholders, as well as to entities controlled by such
persons, is currently governed by the requirements of Section 22(g) and 22(h) of
the FRA and Regulation O of the FRB thereunder. Among other things, these
provisions require that extensions of credit to insiders (a) be made on terms
that are substantially the same as, and follow credit underwriting procedures
that are not less stringent than, those prevailing for comparable transactions
with unaffiliated persons and that do not involve more than the normal risk of
repayment or present other unfavorable features and (b) not exceed certain
limitations on the amount of credit extended to such persons, individually and
in the aggregate, which limits are based, in part, on the amount of the
association's capital. In addition, extensions of credit in excess of certain
limits must be approved by the association's board of directors.
ENFORCEMENT. Under the Federal Deposit Insurance Act (the "FDIC Act),
the OTS has primary enforcement responsibility over savings associations and has
the authority to bring enforcement action against all "institution affiliated
parties," including any controlling stockholder, attorney, appraiser or
accountant who knowingly or recklessly participates in any violation of
applicable law or regulation or regulation or breach of fiduciary duty or
certain other wrongful actions that causes or is likely to cause more than a
minimal loss or other significant adverse effect on an insured savings
association. Civil penalties cover a wide range of violations and actions and
range from $5,000 for each day during which violations of law, regulations,
orders, and certain written agreements and conditions continue, up to $1 million
per day for such violations if the person obtained a substantial pecuniary gain
as a result of such violation or knowingly or recklessly caused a substantial
loss to the institution. Criminal penalties for certain financial institution
crimes include fines up to $1 million and imprisonment for up to 30 years. In
addition, regulators have substantial discretion to take enforcement action
against an institution that fails to comply with its regulatory requirements,
particularly with respect to its capital requirements. Possible enforcement
actions range from the imposition of a capital plan and capital directive to
receivership, conservatorship, of the termination of deposit insurance. Under
the FDI Act, the FDIC has the authority to recommend to the Director of OTS the
enforcement action be taken with respect to a particular savings association. If
action is not taken by the Director of OTS the enforcement action be taken with
respect to a particular savings association. If action is not taken by the
Director of the OTS, the FDIC has authority to take such action under certain
circumstances.
STANDARDS FOR SAFETY AND SOUNDNESS. Pursuant to the FDI Act, as amended
by FDICIA and the Riegle Community Development and Regulatory Improvement Act of
1994 (the "Community Development Act"), the OTS and the federal bank regulatory
agencies have adopted, a set of guidelines prescribing safety and soundness
standards pursuant to FDIC, as amended. The guidelines establish general
standards relating to internal controls and information systems, internal audit
systems, loan documentation, credit underwriting, interest rate exposure, asset
growth, asset quality, earnings standards, and compensation, fees and benefits.
In general, the guidelines require, among other things, appropriate systems and
practices to identify and manage the risks and exposures specified in the
guidelines. The guidelines prohibit excessive compensation as an unsafe and
unsound practice and describe compensation as excessive when the amounts paid
are unreasonable or disappropriate to the services performed by an executive
officer,
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employee, director or principal stockholder. In addition, the OTS adopted
regulations that authorize, but do not require, the OTS to order an institution
that has been given notice by the OTS that it is not satisfying any of such
safety and soundness standards to submit a compliance plan. If, after being so
notified, an institution fails to submit an acceptable compliance plan or fails
in any material respect to implement an accepted compliance plan, the OTS must
issue an order directing action to correct the deficiency and may issue an order
directing other actions of the types to which an undercapitalized association is
subject under the "prompt corrective action" provisions of FDICIA. If an
institution fails to comply with such an order, the OTS may seek to enforce such
order in judicial proceedings and to impose civil money penalties.
REAL ESTATE LENDING STANDARDS. The OTS and other federal banking
agencies adopted regulations to prescribe standards for extensions of credit
that (a) are secured by real estate or (b) are made for the purpose of financing
the construction of improvements on real estate. The OTS regulations require
each savings association to establish and maintain written internal real estate
lending standards that are consistent with safe and sound banking practices and
appropriate to the size of the association and the nature and scope of its real
estate lending activities. The standards also must be consistent with
accompanying OTS guidelines, which include loan-to-value ratios for the
different types of real estate loans. Associations are also permitted to make a
limited amount of loans that do not conform to proposed loan-to-value
limitations so long as such exemptions are reviewed and justified appropriately.
The guidelines also list a number of lending situations in which exceptions to
the loan-to-value standards are justified.
PROMPT CORRECTIVE REGULATORY ACTION. Under the OTS prompt corrective
action regulations, the OTS is required to take certain, and is authorized to
take other, supervisory actions against undercapitalized savings associations.
For this purpose, a savings association would be placed in one of five
categories based on the association's capital.
Generally, a savings association is treated as "well capitalized" if
its ratio of total risk-based capital to risk-weighted assets is at least 10.0%,
its ratio of Tier I capital to risk weighted assets is at least 6.0%, its ratio
of leverage (core) capital to adjusted total assets is at least 5.0%, and it is
not subject to any order or directive by the OTS to meet a specified capital
level. A savings association will be treated as "adequately capitalized" if its
ratio of total risk-based capital to risk-weighted assets is at least 8.0%, its
ratio of Tier I capital to risk weighted assets is at least 4.0%, and its ratio
of leverage (core) capital to adjusted total assets is at least 4.0%, (3.0%
leverage ratio if the association receives the highest rating on the CAMELS
financial institution rating system). A savings association that has a total
risk based capital to risk-weighted assets of less than 8.0% or a leverage
(core) ratio of or a Tier 1 capital ratio that is less than 4.0% (3.0% leverage
ratio if the association receives the highest rating on the CAMELS: financial
institutions rating system) is considered to be "undercapitalized." A savings
association that has a total risk based capital to risk-weighted assets of less
than 6.0% or a Tier 1 risk based capital ratio or a leverage (core) of less than
3.0% is considered to be "significantly undercapitalized". A savings association
that has tangible capital to assets ratio equal to or less than 2% is deemed to
be "critically undercapitalized." The elements of an association's capital for
purposes of the prompt corrective action regulations are defined generally as
they are under the regulations for minimum capital requirements.
The severity of the action authorized or required to be taken under the
prompt corrective action regulations increases as an association's capital
deteriorates within the three undercapitalized categories. All associations are
prohibited from paying dividends or other capital distributions or paying
management fees to any controlling person if, following such distribution, the
association would be undercapitalized. An undercapitalized association is
required to file a capital distribution or paying management fees to any
controlling person if, following such distribution, the association would be
undercapitalized. An undercapitalized association is required to file a capital
restoration plan within 45 days of the date the association receives notice that
it is within any of the three undercapitalized categories. The OTS is required
to monitor closely the condition of an undercapitalized association and to
restrict the asset growth, acquisitions, branching, and new lines of business of
such an association. Significantly undercapitalized associations are subject to
restrictions on compensation of senior executive officers; such an association.
Significantly undercapitalized associations are subject to restrictions on
compensation of senior executive officers; such an association may not, without
OTS consent, pay any bonus or provide compensation to any senior executive
officer at a rate exceeding the officer's average rate of compensation
(excluding bonuses, stock options and profit-sharing) during the 12 months
preceding the month when the association became undercapitalized. A
significantly undercapitalized association may also be subject, among other
things, to forced changes in the composition of its board of directors or senior
management, additional restrictions on transactions with affiliates,
restrictions on acceptance of deposits from correspondence associations, further
restrictions on asset growth, restrictions on rates paid on deposits, forced
termination or reduction of activities deemed risky, and any further operational
restrictions deemed necessary by the OTS.
A-55
<PAGE>
If one or more grounds exist for appointing a conserver or receiver for
an association, the OTS may require the association to issue additional debt or
stock, sell assets; be acquired by a depository association holding company or
combine with another depository association. The OTS and the FDIC have a broad
range of grounds under which they may appoint a receiver or conservator for an
insured depository association holding company or combine with another
depository association. The OTS and the FDIC have a broad range of grounds under
which they may appoint a receiver or conservator for an insured depository
association. Under FDICIA, the OTS is required to appoint a receiver (or with
the concurrence of the FDIC, a conservator) for a critically undercapitalized
association within 90 days after the association becomes critically
undercapitalized or, with the concurrence of the FDIC, to take such other action
that would better achieve the purposes of the prompt corrective action
provisions. Such alternative action can be renewed for successive 90-day
periods. However, if the association continues to be critically undercapitalized
on average during the quarter that begins 270 days after it first became
critically undercapitalized, a receiver must be appointed, unless the OTS makes
certain findings with which the FDIC concurs and the Director of the OTS and the
Chairman of the FDIC certify that the association is viable. In addition, an
association that is critically undercapitalized is subject to more severe
restrictions on its activities, and is prohibited, without prior approval of the
FDIC from, among other things, entering into certain material transactions or
paying interest on new or renewed liabilities at a rate that would significantly
increase the association's weighted average cost of funds.
When appropriate, the OTS can require corrective action by a savings
association holding company under the "prompt corrective action" provisions of
FDICIA.
INSURANCE OF DEPOSIT ACCOUNTS
The Bank is a member of the SAIF, and the Bank pays its deposit
insurance assessments to the SAIF. The FDIC also maintains another insurance
fund, the BIF, which primarily insures the deposits of banks and state chartered
savings banks.
Pursuant to FDICIA, the FDIC established a new risk-based assessment
system for determining the deposit insurance assessments to be paid by insured
depository institutions. Under the new assessment system, which began in 1993,
the FDIC assigns an institution to one of three capital categories based on the
institution's financial information of the reporting period ending seven months
before the assessment period. The three capital categories consist of (a)
well-capitalized, (b) adequately capitalized or (c) undercapitalized. The FDIC
also assigns an institution to one of three supervisory subcategories within
each capital group. The supervisory subgroup to which an institution is assigned
is based on a supervisory evaluation provided to the FDIC by the institution's
primary federal regulator and information that the FDIC determines to be
relevant to the institution's financial condition and the risk posed to the
deposit insurance funds. An institution's assessment rate depends on the capital
category and supervisory category to which it is assigned. Under the regulation,
there are nine assessment risk classifications (i.e., combinations of capital
groups and supervisory subgroups) to which different assessment rates are
applied. Assessment rates for both the BIF and the SAIF had ranged from 0% of
deposits for an institution in the highest category (i.e., well-capitalized and
financially sound, with no more than a few minor weaknesses) to 0.27% of
deposits for an institution in the lowest category (i.e., undercapitalized and
substantial supervisory concern).
On September 30, 1996, the Deposit Insurance Funds Act of 1996 (the
"1996 Act") was enacted into law, and it amended the FDI Act in several ways to
recapitalize the SAIF and reduce the disparity in the assessment rates for the
BIF and the SAIF. The 1996 Act authorized the FDIC to impose a special
assessment on all institutions with SAIF-assessable deposits in the amount
necessary to recapitalize the SAIF. As required by the Funds Act, the FDIC
imposed a special assessment of 65.7 basis points on SAIF-assessable deposits
held as of March 31, 1995. The special assessment was paid on November 27, 1996.
The special SAIF assessment was paid on November 27, 1996. The SAIF Special
Assessment paid by the Bank amounted to $994,025. The impact on operations net
of related tax effects; reduced reported earnings by approximately $350,000 for
the year ended December 31, 1996.
The 1996 Act also provides, that the FDIC cannot assess regular
insurance assessments for an insurance fund unless required to maintain or to
achieve the designated reserve ratio of 1.25%, except on those of its member
institutions that are not classified as "well capitalized" or that have been
found to have "moderately severe" or "unsatisfactory" financial, operational or
compliance weakness. The Bank has not been so classified by the FDIC or the OTS.
Accordingly, assuming that the designated reserve ratio is maintained by the BIF
and by the SAIF after the collection of the special SAIF assessment and the Bank
maintains its regulatory status, the Bank will have to pay substantially lower
regular assessments on its deposits compared to those paid in recent years.
A-56
<PAGE>
In addition, the 1996 Act expanded the assessment base for the payments
on the FICO bonds to include, beginning January 1, 1997, the deposits of both
BIF-and SAIF-insured institutions. Until December 31, 1999, or such earlier date
on which the last savings association ceases to exist, the rate of assessment
for BIF-assessable deposits shall be one-fifth of the rate imposed on SAIF-
assessable deposits. It has been estimated that the rate of assessments for the
payment of interest on the FICO bonds will be approximately 1.3 basis points for
BIF assessable deposits and approximately 6.4 basis points for SAIF-assessable
deposits beginning on January 1, 1997.
The 1996 Act also provides for the merger of the BIF and SAIF, with
such merger being conditioned upon the prior elimination of the thrift charter.
The Secretary of the Treasury is required to conduct a study of relevant factors
with respect to the development of a common charter for all insured depository
institutions and abolition of separate chargers for banks and thrift and to
report the Secretary's conclusions and findings to the Congress.
Under the FDI Act, insurance of deposits may be terminated by the FDIC
upon a finding that the institution has engaged in unsafe or unsound practices,
is in an unsafe or unsound condition to continue operations or has violated any
applicable law, regulation, rule, order or condition imposed by the FDIC or the
OTS. The management of the Bank does not know of any practice, condition, or
violation that might lead to termination of deposit insurance.
REGULATIONS OF SAVINGS ASSOCIATION HOLDING COMPANIES
NHTB is a non-diversified unitary savings association holding company
within the meaning of the HOLA. As such, NHTB is required to register with the
OTS and is subject to OTS regulations, examinations, supervision and reporting
requirements. In addition, the OTS has enforcement authority of NHTB and its
non-savings association subsidiaries, if any. Among other things, this authority
permits the OTS to restrict or prohibit activities that are determined to be a
serious risk to the financial safety, soundness, or stability of a subsidiary
savings association.
The HOLA prohibits a savings association holding company, directly or
indirectly, or through one or more subsidiaries, from acquiring another savings
association or holding company thereof, without prior written approval of the
OTS; acquiring or retaining, with certain exceptions, more than 5% of a
non-subsidiary savings association, a non-subsidiary holding company, or a
non-subsidiary company engaged in activities other than those permitted by the
HOLA; or acquiring or retaining control of a depository institution that is not
insured by the FDIC. In evaluating an application by a holding company to
acquire a savings association, the OTS must consider the financial and
managerial resources and future prospects of the company and savings association
involved, the effect of the acquisition on the risk to the insurance funds, the
convenience and needs of the community and competitive factors.
As a unitary savings association holding company, NHTB is not
restricted under existing laws as to the types of business activities in which
it may engage, provided that the Bank continues to satisfy the QTL test. See
"--Regulation of Federal Savings Associations--QTL Test" for a discussion of the
QTL requirements. Upon any non-supervisory acquisition by NHTB of another
savings association or savings bank that meets the QTL test and is deemed to be
a savings association by the OTS and that will be held as a separate subsidiary,
NHTB would become a multiple savings association holding company and would be
subject to limitations on the types of business activities in which it could
engage. The HOLA limits the activities of a multiple savings association holding
company and its non-insured association subsidiaries primarily to activities
permissible for bank holding companies under Section 4(c)(8) of the BHC Act,
subject to the prior approval of the OTS, and to other activities authorized by
OTS regulation.
The OTS is prohibited from approving any acquisition that would result
in a multiple savings association holding company controlling savings
associations in more than one state, subject to two exceptions: an acquisition
of a savings association in another state (a) in a supervisory transaction or
(b) pursuant to authority under the laws of the state of the association to be
acquired that specifically permit such acquisitions. The conditions imposed upon
interstate acquisitions by those states that have enacted authorizing
legislation vary. Some states impose conditions of reciprocity, which have the
effect of requiring that the laws of both the state in which the acquiring
holding company is located (as determined by the location of its subsidiary
savings association) and the state in which the association to be acquired is
located, have each enacted legislation allowing its savings associations to be
acquired to out-of-state holding companies on the condition that the laws of the
other state authorize such transactions on terms no more restrictive than those
imposed on the acquiror by the state of the target association. Some of these
states also impose regional limitations, which restrict such acquisitions to
states within a defined geographic region. Other states allow full nationwide
banking without any condition of reciprocity. Some states do not authorize
interstate acquisitions of savings associations.
A-57
<PAGE>
FEDERAL HOME LOAN BANK SYSTEM
The Bank is a member of the FHLB of Boston, which is one of the
regional Federal Home Loan Banks composing the Federal Home Loan Bank System.
Each Federal Home Loan Bank provides a central credit facility primarily for its
member institutions. The Bank, as a member of the FHLB of Boston, is required to
acquire and hold shares of capital stock in the FHLB of Boston in an amount at
least equal to the greater of 1% of the aggregate principal amount of its unpaid
residential mortgage loans and similar obligations at the beginning of each year
or 1/20 of its advances (borrowings) from the FHLB of Boston. The Bank was in
compliance with this requirement with an investment in the capital stock of the
FHLB of Boston at December 31, 1998, of $1.9 million. Any advance from a Federal
Home Loan Bank must be secured by specified types of collateral, and all
long-term advances may be obtained only for the purpose of providing funds for
residential housing finance.
The Federal Home Loan Banks are required to provide funds for the
resolution of insolvent thrifts and to contribute funds for affordable housing
programs. These requirements could reduce the amount of earnings that the
Federal Home Loan Banks can pay as dividends to their members and could also
result in the Federal Home Loan Banks imposing a higher rate of interest on
advances to their members. The Bank earned dividends on the FHLB of Boston
capital stock in amounts equal to $122,911, $119,109, and $120,506 during the
years ended December 31, 1998, 1997, and 1996, respectively. If dividends were
reduced, or interest on future Federal Home Loan Bank advances increased, the
Bank's net interest income would likely also be reduced.
LIQUIDITY
The Bank is required to maintain an average daily balance of liquid
assets (cash, certain time deposits, bankers' acceptances, specified United
States Government, state or federal agency obligations, shares of certain mutual
funds and certain corporate debt securities and commercial paper) equal to a
monthly average of not less than a specified percentage of its net withdrawable
deposit accounts plus short-term borrowings. This liquidity requirement may be
changed from time to time by the OTS to any amount within the range of 4% to 10%
depending upon economic conditions and the savings flows of member institutions,
and is currently 4%. Monetary penalties may be imposed for failure to meet these
liquidity requirements. The Bank's average long-term liquidity ratio for the
month ended December 31, 1998 was 12.88% which exceeded the applicable
requirements. The Bank has never been subject to monetary penalties for failure
to meet its liquidity requirements.
YEAR 2000
Certain computer equipment, computer programs and systems that are
controlled by computer programs were originally programmed with six digit dates
that provided only two digits for the calendar year. With the impending
millennium, these programs and computers will recognize "00" as the year 1900
rather than the year 2000. Therefore, if the problem is not adequately
addressed, this software could produce inaccurate or unpredictable results on
January 1, 2000. The Company, like most financial services providers, may be
significantly affected by the "Year 2000 Issue" due to the nature of financial
information. Software, hardware, and equipment both within and outside the
Company's direct control and with whom the Company electronically or
operationally interfaces (e.g. vendors providing credit bureau information) are
likely to be affected. As a result, many calculations which rely on the date
field information, such as interest, payment or due dates and other operating
functions, will generate results which could be significantly misstated.
Financial institution regulators have recently increased their focus
upon Year 2000 Issues, issuing guidance concerning the responsibilities of
senior management and directors. Year 2000 testing and certification is being
addressed as a key safety and soundness issue in conjunction with regulatory
exams. Each federal regulated financial institution is under a mandate to survey
its exposure, measure the risk and to prepare a plan in order to solve the Year
2000 Issue.
In order to address the Year 2000 Issue and to minimize its potential
adverse impact, management, in 1996, began the process to identify areas that
will be affected by the Year 2000 Issue assess its potential; impact on the
operations of the Bank, monitor the progress of third party software vendors in
addressing the matter, test changes provided by these vendors, and develop
contingency plans for any critical systems which are not effectively
reprogrammed.
A-58
<PAGE>
Because the Company outsources its data processing and item processing
operations, a significant component of the Year 2000 plan has been working with
external vendors to test and certify their systems as Year 2000 compliant. The
Company's vendors have surveyed their programs to inventory the necessary
changes and have upgraded and corrected the applicable computer programs and
replaced equipment so that the Company's information systems were Year 2000
compliant prior to the end of 1998. This will enable the Company to devote
substantial time to the testing of the upgraded systems prior to the arrival of
the millennium in order to comply with all applicable regulations.
TAXATION
A thrift institution organized in stock form which utilizes the bad
debt reserve method for bad debt will be subject to certain recapture taxes on
such reserves in the event it makes certain types of distributions to its
stockholders. Dividends may be paid out of appropriated retained income without
the imposition of any tax on an institution to the extent that the amounts paid
as dividends do not exceed such current and accumulated earnings and profits as
calculated for federal income tax purposes. Stock redemptions, dividends paid in
excess of an institution's current and accumulated earnings and profits as
calculated for tax purposes, and partial or complete liquidation distributions
made with respect to an institution's stock, however, are deemed under
applicable provisions of the Code to be made from the institution's bad debt
reserve, to the extent that such reserve exceeds the amount that could have been
accumulated under the actual experience method. In the event a thrift
institution makes a distribution that is treated as having been made from the
tax bad debt reserve, the distribution is treated as an after tax distribution
and the institution will be liable for tax on the gross amount before tax at the
then current tax rate. Amounts added to the bad debt reserves for federal income
tax purposes are also used by the Bank to meet the OTS reserve requirements
described under "Regulation-Insurance of Accounts."
The Bank's tax returns have been audited and accepted through December
31, 1996 by the Internal Revenue Service.
STATE INCOME TAX
The Bank is subject to an annual Business Profits Tax (BPT) imposed by
the State of New Hampshire at the rate of 7.00% of the total amount of federal
taxable income, less deductions for interest earned on United States government
securities. During 1993, the State of New Hampshire instituted a Business
Enterprise Tax (BET), which places a tax on certain expense items. Interest,
dividends, wages, benefits and pensions are taxed at a rate of 0.25%. Business
Enterprise Taxes are allowed as a credit against the Business Profits Tax.
Upon conversion to a holding company, NHTB became subject to a state
franchise tax imposed by Delaware. For the year ended 1998, the tax amounted to
$16,860.
At December 31, 1998, LSB had a total of 113 full-time employees and 21
part-time employees. These employees are not represented by collective
bargaining agents. LSB believes that its relationship with its employees is
good.
FEDERAL SECURITIES LAWS
The Company's common stock is registered with the SEC under Section 12
(g) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The
company is subject to information, proxy solicitation, insider trading
restrictions and other requirements of the Exchange Act.
A-59
<PAGE>
ITEM 2. PROPERTIES
The following table sets forth the location of the LSB offices and certain
additional information relating to these offices at December 31, 1998:
<TABLE>
<CAPTION>
YEAR NET BOOK VALUE EXPIRATION LEASE RENEWAL
LOCATION OPENED LEASED OWNED DATE OF LEASE OPTION
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Corporate Office
9 Main Street
Newport, NH 1868 $ 1,430,731
Guild Office
300 Sunapee Street
Newport, NH 1978 $ 99,741
Bradford Office
115 East Main Street
Bradford, NH 1975 $ 74,672
Grantham Office
165 Route 10 South
Grantham, NH 1980 $ 305,148.
Hanover Street Office
106 Hanover Street
Lebanon, NH 1997 $ 2,101,621.
Lebanon Office
200 Heater Road
Lebanon, NH 1986 $ 569,859
New London Office
24 Newport Road
New London, NH 1981 $ 394,329
Sunapee Office
565 Route 11
Sunapee, NH 1965 $ 82,938
Andover Office /(1)/
720 Main Street
Andover, NH 1987 $ 32,571
Centerra Office /(1)/
12 Centerra Pkwy.
Lebanon, NH 1997 $ 188,949 2007 5 Years
Hillsboro Office /(1)/
15 Antrim Road
Hillsboro, NH 1994 $ 17,123 2000 4 Years
West Lebanon Office /(1)/
83 Main Street
West Lebanon, NH 1994 $ 123,171 1999 15 Years
</TABLE>
/(1)/ Operating lease, value of improvements.
A-60
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
There is no material litigation pending in which the Company is a party or which
the property of the Company is subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to the security holders of the company during the
fourth quarter.
PART II.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
The following table shows the market range for the Company's Common Stock based
on reported sales prices on the NASDAQ Market System. New Hampshire Thrift
Bancshares, Inc. is traded under the symbol NHTB.
<TABLE>
<CAPTION>
PERIOD HIGH LOW
-----------------------------------------------------------------------
<S> <C> <C> <C>
1998 First Quarter $ 20 1/2 $ 17
Second Quarter 22 17 1/2
Third Quarter 18 3/4 12 7/8
Fourth Quarter 19 12
1997 First Quarter $ 12 3/4 $ 11 3/4
Second Quarter 15 1/2 11 3/4
Third Quarter 21 1/4 15 3/8
Fourth Quarter 22 3/4 18 1/4
</TABLE>
The bid quotations set forth above represent prices between dealers and do not
include retail mark-ups, mark-downs or commissions and may not represent actual
transactions. As of December 31, 1998, New Hampshire Thrift Bancshares, Inc. had
approximately 740 stockholders of record. The number of stockholders does not
reflect the number of persons or entities who held their stock in nominee or
"street" name through various brokerage firms.
The following table sets forth certain information regarding per share dividends
declared on the Company's Common Stock:
<TABLE>
<CAPTION>
1998 1997
------------------------
<S> <C> <C>
First Quarter $ .15 $ .125
Second Quarter .15 .125
Third Quarter .15 .125
Fourth Quarter .15 .125
</TABLE>
For information regarding limitations of the declaration and payment of
dividends by New Hampshire Thrift Bancshares, Inc., see Note 14 of the Notes to
Consolidated Financial Statements.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
OPERATING RESULTS
The information called for by this item is contained on pages 7 through 19 of
this document.
ITEM 7. FINANCIAL STATEMENTS
The report of independent accountants and the financial information called for
by this item are contained on pages 20 through 46 of this document.
A-61
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III.
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Certain information relating to directors and executive officers of the Company,
executive compensation, security ownership of certain beneficial owners and
management, and certain relationships and related transactions is incorporated
by reference herein from the Company's definitive proxy statement in connection
with its Annual Meeting of Shareholders to be held on April 8, 1999, which proxy
statement will be filed with the Securities and Exchange Commission not later
than 120 days after the close of the fiscal year.
ITEM 10. EXECUTIVE COMPENSATION
Certain information relating to directors and executive officers of the Company,
executive compensation, security ownership of certain beneficial owners and
management, and certain relationships and related transactions is incorporated
by reference herein from the Company's definitive proxy statement in connection
with its Annual Meeting of Shareholders to be held on April 8, 1999, which proxy
statement will be filed with the Securities and Exchange Commission not later
than 120 days after the close of the fiscal year.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Certain information relating to directors and executive officers of the Company,
executive compensation, security ownership of certain beneficial owners and
management, and certain relationships and related transactions is incorporated
by reference herein from the Company's definitive proxy statement in connection
with its Annual Meeting of Shareholders to be held on April 8, 1999, which proxy
statement will be filed with the Securities and Exchange Commission not later
than 120 days after the close of the fiscal year.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Certain information relating to directors and executive officers of the Company,
executive compensation, security ownership of certain beneficial owners and
management, and certain relationships and related transactions is incorporated
by reference herein from the Company's definitive proxy statement in connection
with its Annual Meeting of Shareholders to be held on April 8, 1999, which proxy
statement will be filed with the Securities and Exchange Commission not later
than 120 days after the close of the fiscal year.
ITEM 13. EXHIBITS, LISTS AND REPORTS ON FORM 8-K
The exhibits filed as a part of this Registration Statement are as
follows:
(a). LIST OF EXHIBITS. (Filed herewith unless otherwise noted.)
EXHIBIT NO. DESCRIPTION
- ----------- -----------
2.1 Agreement as Plan of Reorganization, dated
as of July 26, 1996, by and among New
Hampshire Thrift Bancshares, Inc. ("NHTB"),
Lake Sunapee Bank, fsb (the "Bank") and
Landmark Bank. ("Landmark"), including Annex
A, Agreement and Plan of Merger, dated as of
July 26, 1996, by and between Landmark and
the Bank, and joined in by NHTB (previously
filed as an Exhibit to the Company's Form
S-4 (No. 333-12645) filed with the
Securities and Exchange Commission (the
"Commission") on November 5, 1996 (the
"November 5, 1996 S-4"))
A-62
<PAGE>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
3.1 Amended and Restated Certificate of
Incorporation of NHTB (previously filed as
an exhibit to the November 5, 1996 S-4).
3.2 Amended and Restated Bylaws of NHTB.
4.1 Stock Certificate of New Hampshire Thrift
Bancshares, Inc. (previously filed as an
exhibit to the Company's Form S-4 (file No.
33-27192) filed with the Commission on March
1, 1989).
10.1 Profit Sharing-Stock Ownership Plan of Lake
Sunapee Bank, fsb (previously filed as an
exhibit to the November 5, 1996 S-4).
10.2 New Hampshire Thrift Bancshares, Inc. 1996
Stock Option Plan (previously filed as an
exhibit in the November 5, 1996 S-4).
10.3 Lake Sunapee Bank, fsb 1987 Incentive Stock
Option Plan (previously filed as an exhibit
to the Company's Form S-4 (file No.
33-27192), filed with the Commission on
March 1, 1989).
10.4 New Hampshire Thrift Bancshares, Inc. 1996
Incentive Stock Option Plan (previously
filed as an exhibit to the Company's Form S-
4 (file No. 33-27192), filed with the
Commission on March 1, 1989).
10.5 Employment Agreement between NHTB and
Stephen W. Ensign (previously filed as an
exhibit to the November 5, 1996 S-4).
10.6 Employment Agreement between the Bank and
Stephen R. Theroux (previously filed as an
exhibit to the November 5, 1996 S-4).
10.7 Stock Option Agreement, dated as of July 26,
1996, between NHTB and Landmark, (previously
filed as an exhibit to the November 5, 1996
S-4).
11.1 Computation of Per Share Earnings (see Note
1 to Consolidated Financial Statements).
16.1 Letter on Change in Certifying Accountant
(previously filed as an exhibit to the
Company's Current Report on Form 8-K dated
July 10, 1996).
21.1 Subsidiaries of the Company (previously
filed as an exhibit to the November 5, 1996
S-4).
27.1 Financial Data Schedule (submitted only with
filing in electronic format).
99.1 Proxy Statement for the 1997 Annual Meeting
of Shareholders of the Company (to be filed
pursuant to Rule 14a-6 under the Securities
and Exchange Act of 1934, as amended).
(b) REPORTS OF FORM 8-K.
None.
A-63
<PAGE>
__________
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
New Hampshire Thrift Bancshares, Inc.
By: /s/ John J. Kiernan Chairman of the Board March 11, 1999
-------------------
(John J. Kiernan)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Name Title Date
<S> <C> <C>
/s/ John J. Kiernan Chairman of the Board March 11, 1999
-------------------
(John J. Kiernan)
/s/ Stephen W. Ensign Vice Chairman of the Board, March 11, 1999
---------------------
(Stephen W. Ensign) President and Chief Executive Officer
/s/ Stephen R. Theroux Director, Executive Vice President March 11, 1999
----------------------
(Stephen R. Theroux) and Chief Operating Officer
/s/ Leonard R. Cashman Director March 11, 1999
----------------------
(Leonard R. Cashman)
/s/ Ralph B. Fifield, Jr. Director March 11, 1999
-------------------------
(Ralph B. Fifield, Jr.)
/s/ John A. Kelley, Jr. Director March 11, 1999
-----------------------
(John A. Kelley, Jr.)
/s/ Peter R. Lovely Director March 11, 1999
-------------------
(Peter R. Lovely)
/s/ Dennis A. Morrow Director March 11, 1999
--------------------
(Dennis A. Morrow)
/s/ Jack H. Nelson Director March 11, 1999
------------------
(Jack H. Nelson)
/s/ Priscilla W. Ohler Director March 11, 1999
----------------------
(Priscilla W. Ohler)
/s/ Kenneth D. Weed Director March 11, 1999
-------------------
(Kenneth D. Weed)
/s/ Joseph B. Willey Director March 11, 1999
--------------------
(Joseph B. Willey)
/s/ Daryl J. Cady Senior Vice President and March 11, 1999
-----------------
(Daryl J. Cady) Chief Financial Officer
(Principal Accounting Officer)
</TABLE>
A-64
<PAGE>
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------
NEW HAMPSHIRE THRIFT BANCSHARES, INC.
DIRECTORS OFFICERS
--------- --------
<S> <C> <C>
John J. Kiernan, Chairman John J. Kiernan Daryl J. Cady, CPA
Stephen W. Ensign, Vice Chairman Chairman of the Board Senior Vice President and
Stephen R. Theroux Chief Financial Officer
Leonard R. Cashman Stephen W. Ensign
Ralph B. Fifield, Jr. Vice Chairman of the Board, Linda L. Oldham
John A. Kelley, Jr. President and Chief Executive Senior Vice President and
Peter R. Lovely Officer Secretary
Dennis A. Morrow
Jack H. Nelson Stephen R. Theroux Sandra M. Blackington
Priscilla W. Ohler Executive Vice President and Assistant Secretary
Kenneth D. Weed Chief Operating Officer
Joseph B. Willey
----------------------------------------------------------------------------------------
LAKE SUNAPEE BANK, FSB
DIRECTORS
---------
John J. Kiernan, Chairman Robert C. O'Brien Erik C. Cinquemani
Stephen W. Ensign, Vice Chairman Loan Origination Commercial Lending
Stephen R. Theroux
Leonard R. Cashman Linda L. Oldham Frances E. Clow
Ralph B. Fifield, Jr. Shareholder Relations Human Resources
John E. Johannessen
John A. Kelley, Jr. VICE PRESIDENTS Stephen B. Ellis
---------------
Peter R. Lovely Douglas S. Baxter Loan Origination
Dennis A. Morrow Marketing
Jack H. Nelson Gail A. Fraser
Priscilla W. Ohler Colin S. Campbell Deposit Operations
Kenneth D. Weed Loan Origination
Joseph B. Willey Ann M. Howard
H. Bliss Dayton Retail Manager
EXECUTIVE OFFICERS Compliance and Internal Audit
------------------
John J. Kiernan Peter N. Jennings
Chairman of the Board Dana C. Favor Loan Origination
Loan Review
Stephen W. Ensign Sandra J. Luckury
Vice Chairman of the Board, Scott W. Laughinghouse Information Technology
President and Chief Executive Commercial Lending
Officer Arthur W. Phillips
William J. McIver Loan Review
Stephen R. Theroux Commercial Lending
Executive Vice President and Francetta Raymond
Chief Operating Officer Theodore M. Thompson Loan Operations
Commercial Lending
Sandra M. Blackington Louis A. Shelzi, Jr.
Assistant Secretary Scott B. Walters Commercial Lending
Commercial Lending
SENIOR VICE PRESIDENTS Terri G. Spanos
----------------------
Daryl J. Cady, CPA Sharon L. Whitaker Retail Manager
Chief Financial Officer Mortgage Lending
W. Grant MacEwan ASSISTANT VICE PRESIDENTS
-------------------------
Commercial Lending Richard G. Biron
Retail Manager
</TABLE>
A-65
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------ ----------------------------------------------------------------
BOARD OF ADVISORS SHAREHOLDER INFORMATION
<S> <C> <C>
Philip D. Allen/(1)/ Victor W. Laro CORPORATE HEADQUARTERS
Prunella O. Anastos Paul J. Linehan New Hampshire Thrift Bancshares, Inc.
Benjamin K. Barton Robert MacNeil 9 Main Street
Kenneth O. Barton Elizabeth W. Maiola PO Box 9
George O. Binzel Raymond A. Manning Newport, NH 03773-0009
William A. Bittinger John J. Marcotte Tel: 1-603-863-0886
Paul R. Boucher Jerry N. Mathis Fax: 1-603-863-9571
James F. Briggs Thomas F. McCormick
Robert S. Burgess J. David McCrillis TRANSFER AGENT
Walton W. Chadwick John C. McCrillis ChaseMellon Shareholder Services, L.L.C.
Earle W. Chandler Paul Olsen Overpeck Centre
F. Read Clarke Daniel P. O'Neill 85 Challenger Road
Jacqueline C. Cote Betty H. Ramspott Ridgefield Park, NJ 07660
Robert J. Cricenti David N. Reney Tel: Domestic Holders 1-800-851-9677
Richard F. Curtis Everett R. Reney Tel: Foreign Holders 1-201-329-8660
Ernest G. Dennis, Jr. Genelle M. Richards Tel: Hearing Impaired 1-800-231-5469
William J. Faccone, Sr. J. Barrie Sellers Website: www.chasemellon.com
Gordon B. Flint, Sr. Edwin G. Sielewicz
John W. Flynn, Jr. Fredric M. Smith INDEPENDENT AUDITORS
John W. Flynn, Sr. Herbert N. Smith Shatswell, MacLeod & Company, P.C.
Sam N. Hale Fred F. Stockwell 83 Pine Street
Sheffield J. Halsey Earl F. Strout West Peabody, MA 01960-3635
Louise K. Hastings James R. Therrien
Douglas J. Homan Janis H. Wallace
----------------------------------------------------------------
Rita M. Hurd James P. Wheeler INFORMATION ON COMMON STOCK
Lisa S. Hustis Bradford C. White
Alf E. Jacobson John W. Wiggins, Sr. The common stock is traded over-the-counter and
Robert B. Jennings Peter Wittman quoted on the NASDAQ National Market System
Michael D. Johnson Thomas B. Woodger under the symbol NHTB. There were approximately
Edward T. Kerrigan Michael J. Work 740 shareholders of record on December 31, 1998.
John J. Kiernan, Jr. (1)Honorary
The following table sets forth the Company's high And low prices
for the common stock as reported by NASDAQ for the periods
indicated:
1998 HIGH LOW
----------------------------------------------------------------
First Quarter $ 20 1/2 $ 17
Second Quarter 22 17 1/2
Third Quarter 18 3/4 12 7/8
Fourth Quarter 19 12
</TABLE>
This Annual Report has been written by the Bank's staff.
A-66
<PAGE>
Appendix B
FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For The Quarter Ended March 31, 1999
--------------
Commission File Number 0-17859
-------
NEW HAMPSHIRE THRIFT
BANCSHARES, INC.
(Exact name of registrant as specified in its charter)
State of Delaware 02-0430695
(State of Incorporation) (IRS Employer I.D. Number)
9 Main St., PO Box 9, Newport, NH 03773
(Address of principal executive offices) (Zip Code)
603-863-0886
(registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
The number of shares outstanding of each of the issuer's classes of common
stock, $.01 par value per share, as of May 4, 1999, was 2,104,285.
----------
Transitional small business disclosure format:
Yes No X
----- -----
B-1
<PAGE>
NEW HAMPSHIRE THRIFT BANCSHARES, INC.
INDEX TO FORM 10-QSB
<TABLE>
<CAPTION>
<S> <C>
PART I. FINANCIAL INFORMATION PAGE
Item 1 Financial Statements:
Consolidated Statements of
Financial Condition - 1
March 31, 1999 and December 31, 1998
Consolidated Statements of Income 2
For the Three Months Ended March 31, 1999 and 1998
Consolidated Statements of Cash Flows - 3
For the Three Months Ended March 31, 1999 and 1998
Notes To Consolidated Financial Statements - 5
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations - 6
Independent Accountants' Report 13
PART II. OTHER INFORMATION
Item 1 Legal Proceedings 14
Item 2 Changes in Securities 14
Item 3 Defaults Upon Senior Securities 14
Item 4 Submission of Matters to a Vote of Common Shareholders 14
Item 5 Other Information 14
Item 6 Exhibits and Reports on Form 8-K 14
Signatures 15
</TABLE>
B-2
<PAGE>
Part I. Item I. NEW HAMPSHIRE THRIFT BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
March 31, 1999 and December 31, 1998
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
--------------- ---------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 6,369,784 $ 8,701,558
Federal funds sold - 7,583,000
--------------- ---------------
Cash and cash equivalents 6,369,784 16,284,558
Securities available for sale 51,266,027 52,137,753
Other investments 2,032,999 2,032,999
Loans held for sale - 3,775,802
Loans receivable, net 240,618,954 232,321,171
Accrued interest receivable 1,946,539 1,725,235
Bank premises and equipment, net 8,327,446 8,416,182
Investments in real estate 527,922 531,729
Real estate owned and property acquired in settlement of loans 687,403 670,153
Goodwill 3,151,239 3,213,028
Other assets 2,649,658 2,299,159
--------------- ---------------
Total assets $ 317,577,971 $ 323,407,769
=============== ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Checking accounts (non-interest-bearing) $ 14,318,913 $ 16,521,820
Savings and interest-bearing checking accounts 143,535,766 144,430,362
Time deposits 117,587,036 121,096,974
--------------- ---------------
Total deposits 275,441,715 282,049,156
Other borrowed funds 848,000 -
Securities sold under agreements to repurchase 7,085,092 11,849,116
Advances from Federal Home Loan Bank 3,000,000 -
Accrued expenses and other liabilities 3,599,513 1,729,891
--------------- ---------------
Total liabilities 289,974,320 295,628,163
--------------- ---------------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY - -
Preferred stock, $.01 par value per share: 2,500,000 shares authorized,
no shares issued or outstanding
Common stock, $.01 par value per share: 5,000,000 shares authorized,
2,479,858 shares issued and 2,104,285 shares outstanding at
March 31, 1999 and December 31, 1998 24,798 24,798
Paid-in capital 17,874,567 17,874,567
Retained earnings 12,456,705 12,082,784
Net unrealized gain (loss) on securities available for sale (294,842) 255,034
--------------- ---------------
30,061,228 30,237,183
Treasury stock, at cost, 375,573 shares as of March 31, 1999
and December 31, 1998 (2,457,577) (2,457,577)
--------------- ---------------
Total shareholders' equity 27,603,651 27,779,606
--------------- ---------------
Total liabilities and shareholders' equity $ 317,577,971 $ 323,407,769
=============== ===============
</TABLE>
B-3
<PAGE>
NEW HAMPSHIRE THRIFT BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
For the Three Months Ended March 31, 1999 and 1998
(Unaudited)
<TABLE>
<CAPTION>
March 31, March 31,
1999 1998
----------------- -----------------
<S> <C> <C>
Interest income
Interest on loans $ 4,614,301 $ 5,227,961
Interest and dividends on investments 918,967 586,362
------------ ------------
Total interest income 5,533,268 5,814,323
------------ ------------
Interest expense
Interest on deposits 2,630,363 2,916,693
Interest on advances and other borrowed money 53,994 145,659
------------ ------------
Total interest expense 2,684,357 3,062,352
------------ ------------
Net interest income 2,848,911 2,751,971
Provision for loan losses 30,000 14,520
------------ ------------
Net interest income after provision for loan losses 2,818,911 2,737,451
------------ ------------
Other income
Loan origination and customer service fees 407,051 273,059
Net gain on sale of securities 45,409 2,066
Gain on sale of property acquired in settlement of loan 23 -
Net gain (loss) on sale of loans 40,229 (7,644)
Net gain on sale of bank property and equipment - 6,762
Rental income 85,512 79,360
Brokerage service income 35,405 37,219
------------ ------------
Total other income 613,629 390,822
------------ ------------
Other expenses
Salaries and employee benefits 1,201,526 928,042
Occupancy expenses 469,879 414,922
Advertising and promotion 83,083 75,622
Depositors' insurance 35,327 35,506
Outside services 125,277 139,170
Amortization of goodwill 61,789 61,789
Other expenses 426,003 435,396
------------ ------------
Total other expenses 2,402,884 2,090,447
------------ ------------
Income before provision for income taxes 1,029,656 1,037,826
Provision for income taxes 319,048 335,000
------------ ------------
Net income $ 710,608 $ 702,826
============ ============
Comprehensive net income $ 152,734 $ 662,429
============ ============
Earnings per common share, basic $ .34 $ .34
============ ============
Earnings per common share, assuming dilution $ .34 $ .33
============ ============
Dividends declared per common share $ .16 $ .15
============ ============
</TABLE>
The accompanying notes to consolidated financial statements are an
integral part of these statements.
B-4
<PAGE>
NEW HAMPSHIRE THRIFT BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31,
1999 and 1998 (Unaudited )
<TABLE>
<CAPTION>
March 31, March 31,
1999 1998
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 710,608 $ 702,826
Depreciation and amortization 180,967 151,270
Amortization of goodwill 61,789 61,789
Loans originated for sale (13,245,698) (13,074,642)
Proceeds from sale of loans 13,285,927 13,066,998
(Gain) loss from sale of loans (40,229) 7,644
Gain from sale of debt securities available for sale (45,409) (2,066)
Gain from sale of bank premises and equipment - (6,762)
Provision for loan losses and other real estate owned losses 30,000 14,520
Gain on sale of property acquired in settlement of loan (23) -
(Increase) decrease in accrued interest and other assets (766,453) 252,585
Decrease in deferred loan fees (118,624) (9,693)
Increase in accrued expenses and other liabilities 2,215,599 984,631
-------------- ---------------
Net cash provided by operating activities 2,268,454 2,149,100
--------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (96,420) (190,771)
Proceeds from sale of bank premises and equipment 7,995 9,145
Proceeds from sale of debt securities available for sale 7,017,524 6,009,649
Purchase of securities available for sale (7,017,816) (9,421,750)
Purchase of Federal Home Loan Bank stock - (77,000)
Maturities of securities available for sale - 560,000
Net (increase) decrease in loans to customers (4,217,133) 4,736,593
(Increase) decrease in real estate owned (17,227) 84,762
--------------- ---------------
Net cash provided by (used in) investing activities (4,323,077) 1,710,628
--------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in deposits (6,607,441) 1,080,011
Net increase (decrease) in repurchase agreements (4,764,024) 530,852
Increase (decrease) in advances from Federal Home Loan Bank
and other borrowings 3,848,000 (369,160)
Dividends paid (336,686) (313,283)
Proceeds from exercise of stock options - 27,340
--------------- ---------------
Net cash provided by (used in) financing activities (7,860,151) 955,760
--------------- ---------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (9,914,774) 4,815,488
CASH AND CASH EQUIVALENTS, beginning of period 16,284,558 13,306,626
--------------- ---------------
CASH AND CASH EQUIVALENTS, end of period $ 6,369,784 $ 18,122,114
--------------- ---------------
</TABLE>
The accompanying notes to consolidated financial statements are an
integral part of these statements.
B-5
<PAGE>
NEW HAMPSHIRE THRIFT BANCSHARES, INC. AND
SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH
FLOWS -(continued) For the Three Months
Ended March 31, 1999 and 1998 (Unaudited )
<TABLE>
<CAPTION>
March 31, March 31,
1999 1998
----------------- -----------------
<S> <C> <C>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest on deposit accounts $ 2,646,650 $ 2,918,840
Interest on advances and other borrowed money 46,542 146,372
----------------- -----------------
Total interest paid $ 2,693,192 $ 3,065,212
----------------- -----------------
Income taxes, net $ 400 $ 400
----------------- -----------------
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND
FINANCING ACTIVITIES:
Transfers from loans to real estate acquired through foreclosure $ 17,250 $ 60,000
----------------- -----------------
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these statements.
B-6
<PAGE>
NEW HAMPSHIRE THRIFT BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1999 and December 31, 1998
Note A - Basis of Presentation
- ------------------------------
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and the instructions to Form 10-QSB and, accordingly, do
not include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of the
management of New Hampshire Thrift Bancshares, Inc., all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three months ended March 31, 1999 are
not necessarily indicative of the results that may be expected for the year
ending December 31, 1999.
Note B - Accounting Policies
- ----------------------------
The accounting principles followed by New Hampshire Thrift Bancshares, Inc. and
Subsidiary and the methods of applying these principles which materially affect
the determination of financial position, results of operations, or changes in
financial position are consistent with those used for the year 1998.
The consolidated financial statements of New Hampshire Thrift Bancshares, Inc.
include its wholly owned subsidiary, Lake Sunapee Bank, fsb, and its
subsidiaries Lake Sunapee Group, Inc., and Lake Sunapee Financial Services Corp.
All significant intercompany balances have been eliminated.
Note C - Subsequent Event
- -------------------------
On April 12, 1999, Lake Sunapee Bank, fsb signed a definitive agreement to
acquire three branch offices of New London Trust, New London, NH. Under the
terms of the agreement, Lake Sunapee Bank, fsb will acquire the Main Office of
New London Trust, as well as, the Andover and Newbury branches.
The transaction, which is subject to regulatory approval, is expected to
close during the fourth quarter of this year. This transaction will include
approximately $103 million in deposits and $88 million in loans. It is
anticipated that this in-market acquisition will increase Company assets to over
$440 million and be accretive to shareholders beginning in the year 2000.
B-7
<PAGE>
Part I. Item II.
NEW HAMPSHIRE THRIFT BANCSHARES, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
New Hampshire Thrift Bancshares, Inc. (The Company), a Delaware holding
company organized on July 5, 1989, is the parent company of Lake Sunapee Bank,
fsb (The Bank), a federally chartered savings bank. The Bank is a member of the
Federal Deposit Insurance Corporation (FDIC) and its deposits are insured
through the Savings Association Insurance Fund (SAIF). The Bank is regulated by
the Office of Thrift Supervision (OTS).
The Company's profitability is derived from its only subsidiary, Lake Sunapee
Bank, fsb. The Bank's earnings in turn are generated from the net income from
the yield on its loan and investment portfolios less the cost of its deposit
accounts and borrowings. These core revenues are supplemented by loan
origination fees, retail banking service fees, gains on the sale of investment
securities, and brokerage fees. The Bank passes its earnings to the Company to
the extent allowed by OTS regulations. Current regulations enable the Bank to
pay to the Company the higher of an amount equal to seventy-five per cent of the
Bank's prior four quarter earnings or up to fifty per cent of excess capital
plus total current year earnings. As of March 31, 1999, the Company had
$1,005,247 available, which it plans to use to continue its annual dividend
payout of $0.64 per share.
Year 2000
Many companies continue to undertake projects to address the Year 2000 (Y2K).
Companies have determined potential costs and uncertainties based on a number of
factors, including its software and hardware and the nature of its business.
Companies must also coordinate with other entities with which they do business.
Lake Sunapee Bank, through its technology committee and an outside consultant,
implemented many hardware and software changes during 1998, in an effort to
become Y2K compliant. During 1998, the Bank installed a new data processing
mainframe computer, upgraded its mainframe software, and installed a new proof
of deposit and check imaging system. All of these Y2K compliant systems were in
operation throughout most of 1998.
Y2K testing has been on going and will continue throughout 1999. Based on a
review of internal practices and communications with third party processors, the
Bank does not expect to encounter significant difficulties in connection with
the transition to the Year 2000. The status of the Bank's `Year 2000 Action
Plan' is reported to its Board of Directors monthly. A $50,000 annual provision
has been established to cover Y2K related expenses. In conjunction with the
`Action Plan', the Bank has developed a `Business Continuity Plan'. This Plan
is designed to allow the Bank to operate should a system it relies on fail. As
part of the `Business Continuity Plan', the Bank has purchased power generators
and designed a manual accounting system. It is unlikely the Bank will need to
utilize these systems, but nevertheless, they are developed and being tested.
The Bank is subject to regulatory review concerning the Year 2000 from its
primary regulator, The Office of Thrift Supervision (OTS). During 1998, the
Bank had both its Phase I and Phase II examinations. The Bank expects its final
Phase III exam within the next few weeks.
B-8
<PAGE>
NEW HAMPSHIRE THRIFT BANCSHARES, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
Monitoring and managing the Year 2000 project has and will likely continue to
result in additional direct and indirect costs to the Bank. Direct costs
include potential charges by third party software vendors for product
enhancements, costs involved in testing software for Year 2000 compliance, and
any resulting costs for developing and implementing contingency plans for
critical software products not enhanced. Indirect costs will principally
consist of the time devoted by existing employees in monitoring software vendor
progress, testing enhanced software products and implementing necessary
contingency plans. Both direct and indirect costs of addressing the Year 2000
Issue will be charged to earnings as incurred. Such costs have not been
material to date.
Financial Condition
During the first three months of 1999, total assets decreased by $5,829,798,
or 1.80% from $323,407,769 to $317,577,971. Cash and cash equivalents were used
to fund a $4.3 million increase in net portfolio loans and to cover seasonal
deposit outflows of $6.6 million resulting in a reduction in cash and cash
equivalents of approximately $9.9 million during the first three months of 1999.
Total gross loans increased $4,435,418 from $239,116,440 to $243,551,858, or
1.85%. During the first quarter of 1999, the Bank originated a record $35.6
million in loans, had pay-offs of approximately $17.6 million, normal
amortization of approximately $3.5 million and loans sold of approximately $13.2
million. Due to continued favorable fixed interest rates, many of the Bank's
variable rate loan customers refinanced into fixed rate products. The Bank sold
much of the fixed rate product into the secondary market, retaining the
servicing. Selling fixed rate loans into the secondary market helps protect the
Bank against interest rate risk and provides the Bank with a consistent fee
income stream. The proceeds from the sale of loans are then available to lend
back into the Bank's market area and to purchase investment securities. At
March 31, 1999, the Bank had $137,619,734 in its servicing portfolio. The Bank
expects to exceed $185 million in serviced loans by the end of 1999. The Bank
expects to continue to sell fixed rate loans into the secondary market in order
to manage interest rate risk. Market risk exposure during the production cycle
is managed through the use of secondary market forward commitments. At March
31, 1999, adjustable rate mortgages comprised approximately 80% of the Bank's
real estate mortgage loan portfolio. This is consistent with prior years.
As of March 31, 1999, total investment securities increased slightly by
$24,128, or .04% from $53,755,251 to $53,779,379 (at amortized cost). During
the first three months of 1999, the Bank purchased approximately $7.0 million of
investment securities to offset the calls and sales of securities that occurred
during that same time. The Bank continues to use proceeds from sold loans and
paid loans to purchase investment securities in order to increase yields,
thereby mitigating the reduction in the Bank's interest rate spread that might
otherwise occur. The Bank's net unrealized gain was $415,501 at December 31,
1998 compared to a net unrealized loss of $480,353 at March 31, 1999. This
change of $895,854 reflects the rise in interest rates during the first quarter
and the corresponding decrease in investment security market values.
Real estate owned and property acquired in settlement of loans increased by
$17,250, or 2.57% to $687,403. This total reflects $315,153 in market value for
the remaining five lots at Blye Hill Landing in Newbury, NH. There were no sales
of real estate property owned, during the first three months of 1999.
B-9
<PAGE>
NEW HAMPSHIRE THRIFT BANCSHARES, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
Deposits decreased by $6,607,441, or 2.34% to $275,441,715 from $282,049,156
at year-end. Non-interest bearing checking accounts decreased 13.33% as many
business customers settled seasonal transactions. Savings and interest-bearing
checking accounts decreased slightly by .62%. Certificates of deposit decreased
2.90% as many higher balance customers sought investment alternatives.
Securities sold under agreement to repurchase decreased by $4,764,024, to
$7,085,092 from $11,849,116. As mentioned above, many business customers settled
seasonal transactions during the first quarter of 1999. Repurchase agreements
are collateralized by the Bank's government and agency investment securities.
Overnight and long-term advances from the Federal Home Loan Bank (FHLB)
increased to $3,848,000 from zero at year-end. During the first three months of
1999, the Bank funded a net $4.2 million increase in loans and an $11.4 million
decrease in deposits and repurchase agreements using approximately $9.9 million
in cash and cash equivalents and $3.8 million from FHLB advances.
Accrued expenses and other liabilities increased $1,869,622, to $3,599,513
from $1,729,891. The majority of the increase was attributable to a $1 million
payable recorded for an investment security trade booked at the end of March
that settled in April.
Liquidity and Capital Resources
The Bank is required to maintain a 4% ratio of liquid assets to net
withdrawable funds. At March 31, 1999, the Bank's ratio of 9.61% exceeded
regulatory requirements for long-term liquidity.
The Bank's source of funds comes primarily from net deposit inflows, loan
amortizations, principal pay downs from loans, sold loan proceeds, and advances
from the FHLB. At March 31, 1999, the Bank had approximately $92,000,000 in
additional borrowing capacity from the FHLB.
At March 31, 1999, the Company's shareholders' equity totaled $27,603,651, or
8.69% of total assets, compared to $27,779,606, or 8.59% of total assets at
year-end 1998. The decrease of $175,955 reflects net income of $710,608, the
payment of $336,686 in common stock dividends and the change of $549,877 in the
net unrealized holding gain (loss) on securities classified as available-for-
sale. This change reflects the rise in interest rates during the first three
months of 1999 and the corresponding decrease in investment security market
values during the same period.
For the three months ended March 31, 1999, net cash provided by operating
activities was $2,268,454, versus $2,149,100 for the same period in 1998. A net
change in other assets and other liabilities accounted for the majority of the
change as accrued interest, other assets, accrued expenses and other liabilities
increased. A security purchased and booked as a payable at the end of the first
quarter was settled in April.
Net cash flows used in investing activities amounted to $4,323,077 for the
three months ended March 31, 1999, compared to net cash flows provided by
investing activities of $1,710,628 for the same period in 1998, a change of
approximately $6 million. A net increase in loans to customers used cash flows
of $4,217,133 compared to a decrease in loans that provided cash flows of
$4,736,593 for the same period in 1998. During the first three months of 1999,
purchases of investment securities were approximately $7.0 million and sales and
calls of investment securities were also $7.0 million. Investment security
activity during the first quarter of 1998 used net cash flows of approximately
$3.4 million.
B-10
<PAGE>
NEW HAMPSHIRE THRIFT BANCSHARES, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
At March 31, 1999, net cash flows used in financing activities was $7,860,151
compared to net cash provided by financing activities of $955,760 for the same
period in 1998, a change of approximately $8.8 million. A decrease in deposits
and repurchase agreements of $11,371,465 was partially offset by an increase in
advances from the FHLB and other borrowings of $3,848,000. During the same time
period in 1998, deposits and repurchase agreements increased $1,610,863 while
FHLB advances decreased $369,160.
The Bank expects to be able to fund loan demand and other investing during
1999 by continuing to use funds provided from customer deposits, as well as the
FHLB's advance program. Management is not aware of any trends, events, or
uncertainties that will have or that are reasonably likely to have a material
effect in the Company's liquidity, capital resources or results of operations.
Banks are required to maintain tangible capital, core leverage capital, and
total risk based capital of 1.50%, 4.00%, and 8.00%, respectively. As of March
31, 1999, the Bank's ratios were 7.32%, 7.32%, and 12.32%, respectively, well in
excess of the regulators' requirements.
Book value per share was $13.12 at March 31, 1999, versus $12.41 per share at
March 31, 1998. The increase in paid-in capital and retained earnings provided
the increase in book value per share.
Interest Rate Sensitivity
The principal objective of the Bank's interest rate management function is to
evaluate the interest rate risk inherent in certain balance sheet accounts and
determine the appropriate level of risk given the Bank's business strategies,
operating environment, capital and liquidity requirements and performance
objectives and to manage the risk consistent with the Board of Directors'
approved guidelines. The Bank's Board of Directors has established an
Asset/Liability Committee (ALCO) to review its asset/liability policies and
interest rate position monthly. Trends and interest rate positions are reported
to the Board of Directors quarterly.
Gap analysis is used to examine the extent to which assets and liabilities are
"rate sensitive". An asset or liability is said to be interest rate sensitive
within a specific time-period if it will mature or reprice within that time.
The interest rate sensitivity gap is defined as the difference between the
amount of interest-earning assets maturing or repricing within a specified
period of time and the amount of interest-bearing liabilities maturing or
repricing within the same specified period of time. The strategy of matching
rate sensitive assets with similar liabilities stabilizes profitability during
periods of interest rate fluctuations.
The Bank's one-year gap at March 31, 1999, was 6.42%, compared to the December
31, 1998 gap of 6.78%. The Bank continues to hold in portfolio adjustable rate
mortgages, which reprice at one, three, and five-year intervals. The Bank sells
fixed-rate mortgages into the secondary market in order to minimize interest
rate risk.
The Bank's gap, of approximately negative six percent at March 31, 1999, means
net interest income would increase if interest rates trended downward. The
opposite would occur if interest rates were to rise. Management feels that
maintaining the gap within ten points of the parity line provides adequate
protection against severe interest rate swings. In an effort to maintain the
gap within ten points of parity, the Bank may utilize the FHLB advance program
to control the repricing of a segment of liabilities.
B-11
<PAGE>
NEW HAMPSHIRE THRIFT BANCSHARES, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
As another part of its interest rate risk analysis, the Bank uses an interest
rate sensitivity model, which generates estimates of the change in the Bank's
net portfolio value (NPV) over a range of interest rate scenarios. The OTS
produces the data quarterly using its own model and data submitted by the Bank.
NPV is the present value of expected cash flows from assets, liabilities and
off-balance sheet contracts. The NPV ratio, under any rate scenario, is defined
as the NPV in that scenario divided by the market value of assets in the same
scenario. Modeling changes requires making certain assumptions, which may or
may not reflect the manner in which actual yields and costs respond to the
changes in market interest rates. In this regard, the NPV model assumes that
the composition of the Bank's interest sensitive assets and liabilities existing
at the beginning of a period remain constant over the period being measured and
that a particular change in interest rates is reflected uniformly across the
yield curve. Accordingly, although the NPV measurements and net interest income
models provide an indication of the Bank's interest rate risk exposure at a
particular point in time, such measurements are not intended to and do not
provide a precise forecast of the effect of changes in market rates on the
Bank's net interest income and will likely differ from actual results.
The following table sets forth the Bank's NPV as of December 31, 1998 (the
latest NPV analysis prepared by the OTS), as calculated by the OTS.
<TABLE>
<CAPTION>
Change Net Portfolio Value NPV as % of PV Assets
in Rates $ Amount $ Change % Change NPV Ratio Change
- ---------------- --------------------------------------------------- -------------------------------------
<S> <C> <C> <C> <C> <C> <C>
+400 bp .......... 18,272 -17,343 - 49% 5.81% - 489 bp
+300 bp .......... 23,397 -12,218 - 34% 7.32% - 339 bp
+200 bp .......... 28,105 - 7,511 - 21% 8.66% - 205 bp
+100 bp .......... 32,240 - 3,375 - 9% 9.80% - 91 bp
0 bp .......... 35,615 -- -- 10.70% --
- -100 bp .......... 38,660 3,045 + 9% 11.50% + 79 bp
- -200 bp .......... 42,441 6,826 + 19% 12.46% + 175 bp
- -300 bp .......... 48,474 12,859 + 36% 13.96% + 325 bp
- -400 bp .......... 56,124 20,508 + 58% 15.78% + 508 bp
</TABLE>
Allowance for Loan Losses and Asset Quality
The Bank considers many factors in determining the allowance for loan losses.
These include the risk and size characteristics of loans, the prior years' loss
experience, the levels of delinquencies, the prevailing economic conditions, the
number of foreclosures, unemployment rates, interest rates, and the value of
collateral securing the loans. No changes were made to the Bank's procedures
with respect to maintaining the loan loss allowances as a result of any
regulatory examinations.
Additionally, the Bank's commercial loan officers review the financial
condition of commercial loan customers on a regular basis and perform visual
inspections of facilities and inventories. The Bank also has an internal audit
and compliance program. Results of the audit and compliance programs are
reported directly to the Audit Committee of the Bank's Board of Directors.
B-12
<PAGE>
NEW HAMPSHIRE THRIFT BANCSHARES, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
The allowance for loan losses at March 31, 1999 was $3,149,129, compared to
$3,117,068 at year-end 1998. As of March 31, 1999, the allowance included
$2,763,435 in general reserves compared to $2,731,484 at year-end 1998. The
total allowance represented 1.29% of total loans at March 31, 1999 versus 1.30%
at year-end 1998. The allowance for loan losses as a percentage of non-
performing assets was 103.69% at March 31, 1999, compared to 115.82% at December
31, 1998. During the first three months of 1999, the Bank had net charge-offs
of $117 compared to $34,833 for the same period in 1998.
Loans classified for regulatory purposes as loss, doubtful, substandard or
special mention do not result from trends or uncertainties which the Bank
reasonably expects will materially impact future operating results, liquidity,
or capital resources. As of March 31, 1999, there were no other loans not
included in the table below or discussed where known information about the
possible credit problems of borrowers caused management to have doubts as to the
ability of the borrower to comply with present loan repayment terms and which
may result in disclosure of such loans in the future.
Total classified loans, excluding special mention, as of March 31, 1999 were
$5,198,223 compared to $5,356,046 at December 31, 1998. At March 31, 1999, loans
classified as 90 days delinquent were $1,290,849 compared to $170,999 at
December 31, 1998. At March 31, 1999, non-earning assets were $1,058,999
compared to $1,850,214 at year-end 1998. Total non-performing assets amounted to
$3,037,251 and $2,691,366, for March 31, 1999 and December 31, 1998,
respectively.
The following table shows the breakdown of non-performing assets and non-
performing assets as a percentage of total assets (dollars in thousands):
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
------------------------- -------------------------
<S> <C> <C> <C> <C>
90 day delinquent loans /1/ $ 1,291 0.41% $ 171 0.05%
Non-earning assets /2/ 1,059 0.33% 1,850 0.57%
Other real estate owned 687 0.22% 670 0.21%
------------------------- -------------------------
Total non-performing assets $ 3,037 0.96% $ 2,691 0.83%
------------------------- -------------------------
Troubled debt restructured $ - - $ 114 0.04%
========================= =========================
</TABLE>
/1/ All loans 90 days or more delinquent are placed on a non-accruing status.
/2/ Loans considered to be uncollectible, pending foreclosure, impaired, or in
bankruptcy proceeding, are placed on a non-earning status.
The following table sets forth the allocation of the loan loss valuation
allowance and the percentage of loans in each category to total loans (dollars
in thousands):
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
-------------------------- --------------------------
<S> <C> <C> <C> <C>
Real estate loans -
Conventional $ 1,485 79% $ 1,473 79%
Construction 125 1% 123 2%
Collateral and Consumer 76 12% 68 11%
Commercial and Municipal 1,011 8% 1,007 8%
Other loans 66 - 60 -
Impaired Loans 386 - 386 -
-------------------------- -------------------------
Valuation allowance $ 3,149 100% $ 3,117 100%
========================== ==========================
Total valuation allowance as a
percentage of total loans 1.29% 1.30%
================ ================
</TABLE>
B-13
<PAGE>
NEW HAMPSHIRE THRIFT BANCSHARES, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
Results of Operations
Net income for the three months ended March 31, 1999, was $710,608, or $0.34
per common share (assuming dilution) compared to $702,826, or $0.33 per common
share (assuming dilution) for the same period in 1998.
Net interest income increased $96,940, or 3.52%, from $2,751,971 for the
first three months of 1998 to $2,848,911 for the first three months of 1999.
The increase was due primarily to a decrease in the cost of deposits and a
decrease in the average outstanding balance of FHLB advances.
Total interest income for the quarter ended March 31, 1999 decreased by
$281,055, or 4.83%, to $5,533,268 from $5,814,323 for the same period in 1998.
For the three months ended March 31, 1999, interest on loans decreased $613,660,
or 11.74% to $4,614,301 from $5,227,961 for the same period in 1998. Total
loans held in portfolio decreased from $250,582,342 at March 31, 1998 to
$243,551,858 at March 31, 1999. The decrease in loan interest income was
primarily attributable to lower yields on loans and a decrease in loans held in
portfolio. As customers refinanced from variable rate into fixed rate loans,
the Bank sold the loans into the secondary market in order to reduce interest
rate risk. Fee income associated with the sales is recorded in other income.
Somewhat offsetting the decrease in interest on loans, was a $332,605 increase
in interest and dividends on investments. As mentioned above, proceeds from
sold loans may be used to purchase investment securities. Total investment
securities, including federal funds, increased $6,076,436 from $47,222,590 at
March 31, 1998 to $53,299,026 for the same period in 1999.
For the three months ended March 31, 1999, total interest expense decreased
$377,995, or 12.34%. The decrease was a result of lower interest expense
associated with deposits and FHLB advances. Higher balances in transaction-type
accounts and lower balances in certificates of deposit accounts reduced the
Bank's cost of deposits to 3.81% at March 31, 1999 from 4.27% for the same
period in 1998. At March 31, 1999, advances from FHLB and other borrowed funds
totaled $3,848,000 compared to $10,177,158 for the same period in 1998. During
the same period, the Bank's cost of advances fell to 4.05% from 4.33%.
Due to lower loan portfolio balances combined with management's assessment
that reserve levels are adequate, the provision for loan losses remained
consistent with 1998 levels. As of March 31, 1999, the net provision for loan
losses totaled $30,000 compared to $14,520 for the same period in 1998. The
total allowance represented 1.29% of total loans at March 31, 1999 versus 1.20%
for the same period in 1998.
For the quarter ended March 31, 1999, total other income increased by
$222,807, or 57.01% from $390,822 in 1998 to $613,629 for the same period in
1999. The change was primarily a result of a $133,992, or 49.07% increase in
loan origination and customer service fees. In addition, net gains on the sale
of loans accounted for $47,873 of the increase. As mentioned above, the Bank
originated a record $35.6 million of loans during the first quarter compared to
$26.9 for the same period in 1998 and sold $13.1 million.
Total operating expenses increased $312,437, or 14.95% for the three months
ended March 31, 1999. Additional staffing and occupancy costs were realized as
the Bank managed its increased loan volume through increased staffing and
outsourcing. The Bank also recorded additional depreciation expense associated
with system upgrades done throughout 1998.
B-14
<PAGE>
SHATSWELL, MacLEOD & COMPANY, P.C.
CERTIFIED PUBLIC ACCOUNTANTS
83 PINE STREET
WEST PEABODY, MASSACHUSETTS 01960-3635
TELEPHONE (978)535-0206
FACSIMILE (978)535-9908
The Board of Directors
New Hampshire Thrift Bancshares, Inc.
Newport, New Hampshire
Independent Accountants' Report
-------------------------------
We have reviewed the accompanying consolidated statement of financial condition
of New Hampshire Thrift Bancshares, Inc. and Subsidiary as of March 31, 1999,
and the related consolidated statements of income and cash flows for the three-
month period then ended. These consolidated financial statements are the
responsibility of the company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquires of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the consolidated statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying consolidated financial statements for them to be in
conformity with generally accepted accounting principles.
/s/ Shatswell, MacLeod & Company, P.C.
SHATSWELL, MACLEOD & COMPANY, P.C.
May 12, 1999
B-15
<PAGE>
PART II. NEW HAMPSHIRE THRIFT BANCSHARES, INC. AND SUBSIDIARY
OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
There is no material litigation pending in which the Company or its
subsidiary is a party or which the property of the Company or its
subsidiary is subject.
Item 2. Changes in Securities
---------------------
None
Item 3. Defaults Upon Senior Securities
-------------------------------
None
Item 4. Submission of Matters to a Vote of Common Shareholders
------------------------------------------------------
At the Annual Meeting of Shareholders held on April 8, 1999, the
following was voted:
Directors of New Hampshire Thrift Bancshares, Inc. were re-elected for
terms of three years, each expiring at the Annual Meeting 2002.
<TABLE>
<CAPTION>
For Withheld
- ------------------------------------------------------------------------
<S> <C> <C>
Leonard R. Cashman 1,680,822 30,776
Stephen W. Ensign 1,680,758 30,840
Dennis A. Morrow 1,680,322 31,276
Kenneth D. Weed 1,679,422 32,176
</TABLE>
The appointment of Shatswell, MacLeod & Company, P.C. as independent
auditors was ratified.
<TABLE>
<CAPTION>
For Against Withheld
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
1,687,251 7,310 10,912
</TABLE>
Item 5. Other Information
-----------------
None
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
A.) Exhibits:
Exhibit 10.8 Stock Purchase Agreement dated April 12, 1999
Exhibit 10.9 Purchase and Assumption Agreement dated April 12,
1999
Exhibit 10.10 Asset and Liability Allocation Agreement dated
April 12, 1999
Exhibit 27 Financial Data Schedules (EDGAR filing only)
B.) Reports on Form 8-K:
A report on Form 8-K was filed on April 27, 1999, reporting the signing
of an agreement for Lake Sunapee Bank to acquire three branch offices
of New London Trust Company.
B-16
<PAGE>
NEW HAMPSHIRE THRIFT BANCSHARES, INC. AND SUBSIDIARY
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NEW HAMPSHIRE THRIFT BANCSHARES, INC.
-------------------------------------
(Registrant)
Date: May 14, 1999 /s/ Stephen W. Ensign
-------------------- -------------------------------------------
Stephen W. Ensign
Vice Chairman of the Board, President
and Chief Executive Officer
Date: May 14, 1999 /s/ Stephen R. Theroux
-------------------- -------------------------------------------
Stephen R. Theroux
Executive Vice President and
Chief Operating Officer
Date: May 14, 1999 /s/ Daryl J. Cady
-------------------- -------------------------------------------
Daryl J. Cady
Senior Vice President and
Chief Financial Officer
(Principal Accounting Officer)
B-17
<PAGE>
================================================================================
No dealer, salesperson or other person is authorized to give any
information or to represent anything not contained in this prospectus. You must
not rely on any unauthorized information or representations. This prospectus is
an offer to sell only the securities offered hereby, but only under
circumstances where it is lawful to do so. The information contained in this
prospectus is current only as of its date. Neither the delivery of this
prospectus nor any sale made hereunder shall, under any circumstances, create
any implication that there has been no change in the affairs of New Hampshire
Thrift Bancshares, Inc. since the date hereof or that the information contained
herein is correct as of any time subsequent to the date of this prospectus.
[LOGO]
NHTB Capital Trust I
$17,500,000
% Capital Securities
Liquidation Amount $10 per Capital Security
Fully and unconditionally guaranteed,
to the extent described herein, by
New Hampshire Thrift Bancshares, Inc.
--------------------------
PROSPECTUS
--------------------------
TUCKER ANTHONY CLEARY GULL
, 1999
THESE SECURITIES ARE NOT DEPOSITS OR ACCOUNTS
AND ARE NOT FEDERALLY INSURED OR GUARANTEED
Until ________, 1999 or 25 days after the commencement of the offering of
capital securities, all dealers effecting transactions in the registered
securities, whether or not participating in this distribution, may be required
to deliver a prospectus. This is in addition to the obligation of dealers to
deliver a prospectus when acting as underwriters and with respect to their
unsold allotments or subscriptions.
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
-------------------------------------------
The Corporation will pay all of the expenses incurred in connection with
the offering described in this registration statement. Such expenses, other
than underwriting commissions and discounts, are estimated to be as follows:
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee................... $ 4,868
Legal fees and expenses............................................... 150,000
Underwriters' Management Fee.......................................... 50,000
Accounting fees and expenses.......................................... 30,000
Blue Sky fees and expenses............................................ 5,000
Printing and engraving fees........................................... 100,000
Fees and expenses of registrars, transfer agents, paying agents and
trustees............................................................. 10,000
Listing fees.......................................................... 13,750
NASD Fairness Fees.................................................... 3,500
Miscellaneous......................................................... 7,882
--------
Total........................................................... $375,000
========
</TABLE>
Item 15. Indemnification of Directors and Officers.
------------------------------------------
Section 145 of the Delaware General Corporation Law, inter alia, empowers a
Delaware corporation to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding (other than an action by or in the right of the corporation)
by reason of the fact that such person is or was a director, officer, employee
or agent of another corporation or other enterprise, against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit or proceeding if
he acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interest of the corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful. Similar indemnity is authorized for such person against expenses
(including attorneys' fees) actually and reasonably incurred in connection with
the defense or settlement of any such threatened, pending or completed action or
suit if such person acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of the corporation, and provided
further that (unless a court of competent jurisdiction otherwise provides) such
person shall not have been adjudged liable to the corporation. Any such
indemnification may be made only as authorized in each specific case upon a
determination by the stockholders or disinterested directors or by independent
legal counsel in a written opinion that indemnification is proper because the
indemnitee has met the applicable standard of conduct.
Section 145 further authorizes a corporation to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation or enterprise,
against any liability asserted against him, and incurred by him in any such
capacity, or arising out of his status as such, whether or not the corporation
would otherwise have the power to indemnify him under Section 145.
The Corporation's certificate of incorporation contains provisions
indemnifying directors and officers to the fullest extent permitted by law.
The Corporation has also entered into employment agreements with certain
executive officers, which agreements require that the Corporation maintain a
directors' and officers' liability policy for the benefit of such officers and
that the Corporation will indemnify such officers to the fullest extent
permitted by law.
The Corporation has obtained directors' and officers' liability insurance
policies which insure its directors and officers and the directors and officers
of its subsidiaries in certain instances.
The Amended and Restated Declaration of Trust (the "Declaration") for NHTB
Capital Trust I (the "Trust") provides that to the full extent permitted by law,
the Corporation shall indemnify any Administrative Trustee or affiliate of an
Administrative Trustee, any officers, directors, stockholders, members,
partners, employees or representatives or agents of any Administrative Trustee
or any employee or agent of the Trust or its affiliates (each, a "Company
Indemnified Person") who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than an action by or in
the right of any such Trust) by reason of the fact that he is or was a Company
Indemnified Person against expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding if he acted in good faith and in
a manner he reasonably believed to be in or not opposed to the best interests of
any such Trust, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The Declaration also
provides that to the full extent permitted by law, the Corporation shall
indemnify any Company Indemnified Person who was or is a party or is threatened
to be made a party to any threatened, pending or completed action or suit by or
in the right of any such trust to procure a judgment in its favor by reason of
the fact that he is or was a Company Indemnified Person against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if
II-1
<PAGE>
he acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of any such trust and except that no such
indemnification shall be made in respect of any claim, issue or matter as to
which such Company Indemnified Person shall have been adjudged to be liable to
the Trust unless and only to the extent that the Court of Chancery of Delaware
or the court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which such Court of Chancery or such other court
shall deem proper. The Declaration further provides that expenses (including
attorneys' fees) incurred by a Company Indemnified Person in defending a civil,
criminal, administrative or investigative action, suit or proceeding referred to
in the immediately preceding two sentences shall be paid by the Corporation in
advance of the final disposition of such action, suit or proceeding upon receipt
of an undertaking by or on behalf of such Company Indemnified Person to repay
such amount if it shall ultimately be determined that he is not entitled to be
indemnified by the Corporation as authorized in any such Declaration.
The Declaration for the Trust also provides that the Corporation shall
indemnify the Property Trustee and the Delaware Trustee, any affiliate of the
Property Trustee and the Delaware Trustee, and any officers, directors,
stockholders, members, partners, employees, representatives, nominees,
custodians or agents of the Property Trustee and the Delaware Trustee against
any loss, liability or expense incurred without negligence or bad faith on its
part, arising out of or in connection with the acceptance or administration of
the trust or trusts under the Trust, including the costs and expenses (including
reasonable legal fees and expenses) of defending itself against or investigating
any claim or liability in connection with the exercise or performance of any of
its powers or duties thereunder.
Item 16. Exhibits.
--------
Exhibit
Number Description
------ -----------
1.1 Form of Underwriting Agreement.
4.1 Certificate of Trust for NHTB Capital Trust I.
4.2 Declaration of Trust for NHTB Capital Trust I.
4.3 Form of Amended and Restated Declaration of Trust.
4.4 Form of Subordinated Debenture.
4.5 Form of Capital Security.
4.6 Form of Capital Securities Guarantee Agreement.
4.7 Form of Indenture.
5.1 Form of Opinion of Thacher Proffitt & Wood as to the
legality of the Capital Securities, Subordinated Debentures
and the Guarantee to be issued by the Corporation.
8.1 Form of Opinion of Thacher Proffitt & Wood as to certain tax
matters.*
10.1 Profit Sharing-Stock Ownership Plan of Lake Sunapee Bank,
fsb (previously filed as an exhibit to the Form S-4, filed
on November 5, 1996).
10.2 New Hampshire Thrift Bancshares, Inc. 1996 Stock Option Plan
(previously filed as an exhibit to the Form S-4, filed on
November 5, 1996).
10.3 Lake Sunapee Bank, fsb 1987 Incentive Stock Option Plan
(previously filed as an exhibit to the Company's Form S-4
(file no. 33-27192), filed on March 1, 1989).
10.4 New Hampshire Thrift Bancshares, Inc. 1996 Incentive Stock
Option Plan (previously filed as an exhibit to the Company's
Form S-4 (file no. 33-27192), filed on March 1, 1989).
10.5 Employment Agreement between New Hampshire Thrift
Bancshares, Inc. and Stephen W. Ensign (previously filed as
an exhibit to the Form S-4, filed on November 5, 1996).
10.6 Employment Agreement between New Hampshire Thrift
Bancshares, Inc. and Stephen R. Theroux (previously filed as
an exhibit to the Form S-4, filed on November 5, 1996).
10.7 Stock Option Agreement dated as of July 26, 1996, between
New Hampshire Thrift Bancshares, Inc. and Landmark
(previously filed as an exhibit to the Form S-4, filed on
November 5, 1996).
10.8 Stock Purchase Agreement dated April 12, 1999 (previously
filed as an exhibit to the Form 10-Q for the quarter ended
March 31, 1999).
10.9 Purchase and Assumption Agreement dated April 12, 1999
(previously filed as an exhibit to the May 14, 1999 Form 10-
Q for the quarter ended March 31, 1999).
10.10 Asset and Liability Allocation dated April 12, 1999
(previously filed as an exhibit to the May 14, 1999 Form 10-
Q for the quarter ended March 31, 1999).
II-2
<PAGE>
Exhibit
Number Description
------ -----------
23.1 Consent of Shatswell, MacLeod & Company, P.C.
23.2 Consent of Thacher Proffitt & Wood (included in Exhibit
5.1).
25.1 Form T-1 Statement of Eligibility of Wilmington Trust
Company to act as trustee under the Declaration of Trust of
NHTB Capital Trust I.*
25.2 Form T-1 Statement of Eligibility of Wilmington Trust
Company to act as trustee under the Indenture.*
25.3 Form T-1 Statement of Eligibility of Wilmington Trust
Company to act as trustee under the Guarantee for the
benefit of the holders of Capital Securities of NHTB Capital
Trust I.*
27.1 Financial Data Schedule.
* To be filed by amendment.
Item 17. Undertakings.
(a) Each of the undersigned registrants hereby undertakes that, for
purposes of determining any liability under the Securities Act of 1933, each
filing of a registrant's annual report pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(b) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers, and controlling
persons of each registrant pursuant to the foregoing provisions, or otherwise,
each registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act of 1933 and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by a registrant of expenses incurred or paid by a director, officer, or
controlling person of a registrant in the successful defense of any action, suit
or proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the respective registrant will,
unless in the opinion of counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
(c) The undersigned registrants hereby undertake to provide to the
Underwriters at the closing specified in the Underwriting Agreement,
certificates in such denominations and registered in such names as required by
the Underwriters to permit the prompt delivery to each purchaser.
(d) The undersigned registrants hereby undertake that:
(1) For the purpose of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus
filed as part of this registration statement in reliance upon
Rule 430A and contained in a form of prospectus filed by the
registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the
Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form
of prospectus shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial
bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-2 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Newport, State of New Hampshire, on July 6, 1999.
NEW HAMPSHIRE THRIFT
BANCSHARES, INC.
By: /s/ Stephen W. Ensign
------------------------
Stephen W. Ensign
President and Chief
Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below
hereby constitutes and appoints Stephen W. Ensign and Stephen R. Theroux, his
true and lawful attorneys-in-fact, each acting alone, with full powers of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any or all amendments, including any post-
effective amendments, to this registration statement, and to file the same, with
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
said attorneys-in-fact or their substitutes, each acting alone, may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ John J. Kiernan Chairman of the Board July 6, 1999
- ----------------------------------
John J. Kiernan
/s/ Stephen W. Ensign Vice Chairman of the Board, President July 6, 1999
- ----------------------------------
Stephen W. Ensign and Chief Executive Officer (Principal
executive officer)
/s/ Stephen R. Theroux Director, Executive Vice President July 6, 1999
- ----------------------------------
Stephen R. Theroux and Chief Operating Officer
/s/ Daryl J. Cady Senior Vice President and Chief July 6, 1999
- ----------------------------------
Daryl J. Cady Financial Officer (Principal
accounting officer)
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Ralph B. Fifield, Jr. Director July 6, 1999
- ------------------------------------
Ralph B. Fifield, Jr.
/s/ Leonard R. Cashman Director July 6, 1999
- ------------------------------------
Leonard R. Cashman
/s/ John A. Kelly, Jr. Director July 6, 1999
- ------------------------------------
John A. Kelly, Jr.
/s/ Peter R. Lovely Director July 6, 1999
- ------------------------------------
Peter R. Lovely
/s/ Dennis A. Morrow Director July 6, 1999
- ------------------------------------
Dennis A. Morrow
/s/ Jack H. Nelson Director July 6, 1999
- ------------------------------------
Jack H. Nelson
/s/ Priscilla W. Ohler Director July 6, 1999
- ------------------------------------
Priscilla W. Ohler
/s/ Kenneth D. Weed Director July 6, 1999
- ------------------------------------
Kenneth D. Weed
/s/ Joseph B. Willey Director July 6, 1999
- ------------------------------------
Joseph B. Willey
</TABLE>
II-5
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-2 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Newport, State of New Hampshire, on July 6, 1999.
NHTB CAPITAL TRUST I
By: /s/ Stephen W. Ensign
-------------------------------------
Stephen W. Ensign
Administrative Trustee
By: /s/ Stephen R. Theroux
-------------------------------------
Stephen R. Theroux
Administrative Trustee
By: /s/ Daryl J. Cady
-------------------------------------
Daryl J. Cady
Administrative Trustee
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints Stephen W. Ensign and Stephen R. Theroux,
his true and lawful attorneys-in-fact, each acting alone, with full powers of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any or all amendments, including any post-
effective amendments, to this registration statement, and to file the same, with
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
said attorneys-in-fact or their substitutes, each acting alone, may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Stephen W. Ensign Administrative Trustee July 6, 1999
- ------------------------------
Stephen W. Ensign
/s/ Stephen R. Theroux Administrative Trustee July 6, 1999
- ------------------------------
Stephen R. Theroux
/s/ Daryl J. Cady Administrative Trustee July 6, 1999
- ------------------------------
Daryl J. Cady
</TABLE>
II-6
<PAGE>
S&W Draft
Dated 6/23/99
EXHIBIT 1.1
1,750,000 PREFERRED SECURITIES
NHTB CAPITAL TRUST I
____% CUMULATIVE TRUST PREFERRED SECURITIES
(LIQUIDATION AMOUNT $10 PER PREFERRED SECURITY)
UNDERWRITING AGREEMENT
Boston, Massachusetts ________ __, 1999
TUCKER ANTHONY CLEARY GULL
One Beacon Street
Boston, Massachusetts 02108
Ladies and Gentlemen:
New Hampshire Thrift Bancshares, Inc., a Delaware corporation (the
"Company") and its financing subsidiary, NHTB Capital Trust I, a Delaware
business trust (the "Trust", and hereinafter together with the Company, the
"Offerors"), confirm their agreement with Tucker Anthony Cleary Gull ("Tucker
Cleary") and each of the other Underwriters, if any, named in Schedule A hereto
(collectively, the "Underwriters," which term shall also include any
Underwriters substituted as hereinafter provided in Section 11), for whom Tucker
Cleary is acting as representative (in such capacity, Tucker Cleary is herein
called the "Representative"), with respect to the sale by the Trust and the
purchase by the Underwriters, acting severally and not jointly, of an aggregate
of 1,750,000 of the Trust's ___% Cumulative Trust Preferred Securities, with a
liquidation amount of $10 per preferred security ("Preferred Securities"), to be
issued under the Trust Agreement (as defined in Section 2(d) hereof), the terms
of which are more fully described in the prospectus (as hereinafter defined)
(the aforementioned 1,750,000 Preferred Securities to be sold to the
Underwriters being referred to herein as the "Firm Preferred Securities"). The
words "you" and "your" as used herein refer to the Representative of the
Underwriters.
1. REPRESENTATIONS AND WARRANTIES OF THE OFFERORS.
The Offerors jointly and severally represent and warrant to, and agree
with, each of the Underwriters as of the date hereof, and as of the Closing
Date, as defined in Section 2(a) hereof, as follows:
<PAGE>
-2-
(a) A registration statement on Form S-2 (File No. - ) with
respect to the Firm Preferred Securities, the Guarantee (as defined in
Section 2(d) hereof) and $18,041,200 aggregate principal amount of
Debentures (as defined in Section 2(d) hereof), including a prospectus
subject to completion, has been prepared by the Offerors in conformity with
the requirements of the Securities Act of 1933, as amended (the "Act"), and
the applicable Rules and Regulations (as defined below) of the Securities
and Exchange Commission (the "Commission") and the Trust Indenture Act of
1939, as amended (the "Trust Indenture Act") and the rules and regulations
thereunder, and has been filed with the Commission; such amendments to such
registration statement, and such amended prospectuses subject to
completion, as may have been required prior to the date hereof have been
similarly prepared and filed with the Commission; and the Offerors will
file such additional amendments to such registration statement, and such
amended prospectuses subject to completion, as may hereafter be required.
Copies of such registration statement and each such amendment, each such
related prospectus subject to completion (collectively, the "Preliminary
Prospectuses" and individually, a "Preliminary Prospectus"), each document
incorporated by reference therein and each exhibit thereto have been
delivered to you. For purposes hereof, "Rules and Regulations" means the
rules and regulations adopted by the Commission under either the Act or the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), as
applicable. If the registration statement has been declared effective under
the Act by the Commission, the Company will prepare and promptly file with
the Commission, pursuant to subparagraph (1) or (4) of Rule 424(b) of the
Rules and Regulations under the Act or as part of a post-effective
amendment to the registration statement (including a final form of
prospectus), the information omitted from the registration statement
pursuant to Rule 430A(a) of the Rules and Regulations under the Act. If
the registration statement has not been declared effective under the Act by
the Commission, the Company will prepare and promptly file a further
amendment to the registration statement, including a final form of
prospectus. The term "Registration Statement" as hereinafter used in this
Agreement shall mean such registration statement, including financial
statements, schedules and exhibits in the form in which it became or
becomes effective (including, if the Company omitted information from the
registration statement pursuant to Rule 430A(a) of the Rules and
Regulations under the Act, the information deemed to be a part of the
registration statement at the time it became effective pursuant to Rule
430A(b) of the Rules and Regulations under the Act) and, in the event of
any amendment thereto after the effective date of such registration
statement, shall also mean (from and after the effectiveness of such
amendment) such registration statement as so amended, together with any
registration statement filed by the Company pursuant to Rule 462(b) under
the Act. The term "Prospectus" as used in this Agreement shall mean the
prospectus relating to the Firm Preferred Securities as included in such
registration statement at the time it became or becomes effective, except
that if any revised prospectus shall be provided to the Underwriters by the
Offerors for use in connection with the offering of the Firm Preferred
Securities that differs from the Prospectus on file with the Commission at
the time the registration statement became or becomes effective (whether or
not such revised
<PAGE>
-3-
prospectus is required to be filed with the Commission pursuant to Rule
424(b)(3) of the Rules and Regulations under the Act), the term
"Prospectus" shall refer to such revised prospectus from and after the time
it is first provided to the Underwriters for such use, together with the
term sheet or abbreviated term sheet filed with the Commission pursuant to
Rule 424(b)(7) under the Act. Any reference herein to the Registration
Statement, the Prospectus, any amendment or supplement thereto or any
Preliminary Prospectus shall be deemed to refer to and include the
documents incorporated by reference therein, and any reference herein to
the terms "amend," "amendment" or "supplement" with respect to the
Registration Statement or Prospectus shall be deemed to refer to and
include the filing of any document with the Commission deemed to be
incorporated by reference therein.
(b) Neither the Commission nor any state regulatory authority has issued
any order preventing or suspending the use of any Preliminary Prospectus,
at the time of filing thereof, or instituted proceedings for that purpose,
and each such Preliminary Prospectus, at the time of filing thereof, has
conformed in all material respects to the requirements of the Act and the
Rules and Regulations and, at the time of filing thereof, has not included
any untrue statement of a material fact or omitted to state any material
fact necessary to make the statements therein not misleading and at the
time the Registration Statement became or becomes effective and at all
times subsequent thereto up to and including the Closing Date (as
hereinafter defined), and during such longer period as the Prospectus may
be required to be delivered in connection with sales by an Underwriter or a
dealer, (i) the Registration Statement and Prospectus, and any amendments
or supplements thereto, contained and will contain all material information
required to be included therein by the Act and the Rules and Regulations
and conformed and will conform in all material respects to the requirements
of the Act and the Rules and Regulations and the Trust Indenture Act (and
the rules and regulations thereunder), and (ii) neither the Registration
Statement nor the Prospectus, nor any amendment or supplement thereto
included or will include any untrue statement of a material fact or omitted
or will omit to state any material fact required to be stated therein or
necessary to make the statements therein in light of the circumstances
under which they were made not misleading. The documents incorporated by
reference in the Registration Statement, the Prospectus, any amendment or
supplement thereto or any Preliminary Prospectus, when they became or
become effective under the Act or were or are filed with the Commission
under the Exchange Act, conformed or will conform in all material respects
with the requirements of the Act or the Exchange Act, as applicable, and
the Rules and Regulations, and as of the date any such document was or is
filed with the Commission under the Exchange Act such document did not, and
on the Closing Date and will not, omit to state a material fact required to
be stated therein or necessary to make the statements therein not
misleading.
(c) (i) The Company has been duly organized and is validly existing as a
corporation in good standing under the laws of the State of Delaware and is
duly registered as a savings and
<PAGE>
-4-
loan holding company under the Savings and Loan Holding Company Act, as
amended (the "SLHC Act"). Each of the subsidiaries of the Company
(collectively, the "Subsidiaries" and individually, a "Subsidiary") has
been duly organized and is validly existing in good standing under the laws
of its jurisdiction of organization. The Company and each of the
Subsidiaries are duly qualified and licensed as foreign corporations and in
good standing in each jurisdiction in which their respective operations
requires such qualification or licensing, except where the failure to be so
qualified would not have a material adverse effect on the condition,
financial or otherwise, or on the business affairs, position, prospects,
value, operation, properties, business or results of operation of the
Company and the Subsidiaries taken as a whole whether or not arising in the
ordinary course of business (a "Material Adverse Effect"). The Company and
each of the Subsidiaries have all requisite power and authority, and have
obtained any and all necessary authorizations, approvals, orders, licenses,
certificates, franchises and permits of and from all governmental or
regulatory officials and bodies to own or lease their respective properties
and conduct their respective businesses as described in the Prospectus
(collectively, "Government Approvals"), except where the failure to so
obtain any such Government Approval would not have a Material Adverse
Effect; the Company and each of the Subsidiaries are and have been doing
business in compliance with all such Government Approvals, except where the
failure to so comply would not have a Material Adverse Effect; and neither
the Company nor any of the Subsidiaries has received any notice of
proceedings relating to the revocation or modification of any such
Government Approvals. All of the outstanding shares of capital stock of
each of the Subsidiaries have been duly authorized and validly issued, are
fully paid and non-assessable and are owned by the Company free and clear
of all liens, encumbrances and security interests, and no options, warrants
or other rights to purchase, agreements or other obligations to issue or
other rights to convert any obligations into, or exchange any securities
for shares of capital stock of or ownership interests in any of the
Subsidiaries are outstanding. The Company's only depository institution
subsidiary is Lake Sunapee Bank FSB (the "Bank"). The deposit accounts of
the Bank are insured by the Savings Association Insurance Fund administered
by the Federal Deposit Insurance Corporation (the "FDIC") up to the maximum
amount provided by law and no proceedings for the modification, termination
or revocation of any such insurance are pending or threatened.
(ii) The Trust has been duly created and is validly existing as a
statutory business trust in good standing under the Delaware Business Trust
Act with the power and authority (trust and other) to issue and sell its
common securities (the "Common Securities") to the Company pursuant to the
Trust Agreement, to issue and sell the Firm Preferred Securities, to enter
into and perform its obligations under this Agreement and to consummate the
transactions herein contemplated; the Trust has conducted and will conduct
no business other than the transactions contemplated by this Agreement and
described in the Prospectus; the Trust is not a party to or bound by any
agreement or instrument other than this Agreement, the Trust Agreement and
the agreements and instruments contemplated by the Trust
<PAGE>
-5-
Agreement and described in the Prospectus; the Trust has no liabilities or
obligations other than those arising out of the transactions contemplated
by this Agreement and the Trust Agreement and described in the Prospectus;
the Trust is not a party to or subject to any action, suit or proceeding of
any nature; the Trust is not, and at the Closing Date will not be, to the
knowledge of the Offerors, classified as an association taxable as a
corporation for United States federal income tax purposes; and the Trust
is, and as of the Closing Date will be, treated as a consolidated
subsidiary of the Company pursuant to generally accepted accounting
principles.
(d) (i) The capital stock of the Company and the equity securities of the
Trust, the Debentures and the Guarantee conform to the description thereof
contained in the Prospectus (or, if the Prospectus is not in existence, the
most recent Preliminary Prospectus), and neither Offeror is a party to or
bound by any instrument, agreement or other arrangement (except as
disclosed in the Prospectus) providing for it to issue any capital stock,
rights, warrants, options or other securities, except for this Agreement.
All issued and outstanding shares of capital stock and equity securities of
each Offeror have been duly authorized and validly issued and are fully
paid and non-assessable and were not issued in violation of any preemptive
rights or other rights to subscribe for or purchase securities.
(ii) (A) The Trust has all requisite power and authority to issue,
sell and deliver the Firm Preferred Securities in accordance with and
upon the terms and conditions set forth in this Agreement, the Trust
Agreement, the Registration Statement and the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary
Prospectus). All corporate and trust action required to be taken by
the Offerors for the authorization, issuance, sale and delivery of the
Firm Preferred Securities in accordance with such terms and conditions
has been validly and sufficiently taken. The Firm Preferred
Securities, when delivered in accordance with this Agreement, will be
duly and validly issued and outstanding, will be fully paid and
nonassessable undivided beneficial interests in the assets of the
Trust, will be entitled to the benefits of the Trust Agreement, will
not be issued in violation of or subject to any preemptive or similar
rights, and will conform in all material respects to the description
thereof in the Registration Statement, the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary
Prospectus) and the Trust Agreement. None of the Firm Preferred
Securities, immediately prior to delivery, will be subject to any
security interest, lien, mortgage, pledge, encumbrance, restriction
upon voting or transfer, preemptive rights, claim, equity or other
title defect.
(B) The Debentures have been duly and validly authorized, and,
when duly and validly executed, authenticated and issued as provided
in the Indenture and delivered to the Trust pursuant to the Trust
Agreement, will constitute valid and legally binding obligations of
the Company entitled to the benefits of the Indenture
<PAGE>
-6-
and will conform in all material respects to the description thereof
contained in the Prospectus.
(C) The Guarantee has been duly and validly authorized, and,
when duly and validly executed and delivered to the guarantee trustee
for the benefit of the Trust, will constitute a valid and legally
binding obligation of the Company and will conform in all material
respects to the description thereof contained in the Prospectus.
[(D) The Agreement as to Expenses and Liabilities (the "Expense
Agreement") has been duly and validly authorized, and, when duly and
validly executed and delivered to the Company, will constitute a valid
and legally binding obligation of the Company and will conform in all
material respects to the description thereof contained in the
Prospectus.][Delete if no separate Expense Agreement will be used.]
(e) The audited and unaudited consolidated financial statements of the
Company, together with the notes and schedules thereto, included in the
Registration Statement, each Preliminary Prospectus and the Prospectus
fairly present the financial position and the results of operations,
changes in cash flows and changes in stockholders' equity of the Company at
the respective dates and for the respective periods to which they apply;
and each of such audited consolidated financial statements has been
prepared in conformity with generally accepted accounting principles and
the Rules and Regulations, consistently applied throughout the periods
involved, all adjustments necessary for a fair presentation of results for
such periods have been made and such unaudited consolidated financial
statements have been prepared on a basis substantially consistent with that
of such audited consolidated financial statements. Except as described in
the Prospectus, there has been no change or development involving a
Material Adverse Effect since the date of the consolidated financial
statements included in any of the Preliminary Prospectuses, the Prospectus
and the Registration Statement, and the outstanding debt, the property,
both tangible and intangible, and the business of the Company and each of
the Subsidiaries conform in all material respects to the descriptions
thereof contained in the Registration Statement and the Prospectus. The
summary and selected consolidated financial and statistical data included
in the Registration Statement and the Prospectus present fairly the
information shown therein or incorporated by reference and have been
compiled on a basis consistent with the unaudited and audited consolidated
financial statements included therein. The Company's internal accounting
controls are sufficient to cause the Company to comply with the Foreign
Corrupt Practices Act of 1977, as amended. Neither the Company nor any of
the Subsidiaries has any material contingent obligation which is not
disclosed in the Registration Statement.
<PAGE>
-7-
(f) Shatswell, McLeod & Company, P.C. ("SM&C"), whose reports are filed
with the Commission as a part of the Registration Statement, are
independent certified public accountants as required by the Act and the
Rules and Regulations.
(g) (i) the Company and each of the Subsidiaries have paid all federal,
state, local and foreign taxes for which they are respectively liable and
which are due and payable, including, but not limited to, withholding taxes
and amounts payable under Chapters 21 through 24 of the Internal Revenue
Code of 1986, as amended, and (ii) none of the Company or any Subsidiary
has any tax deficiency or claims outstanding, assessed or, to its
knowledge, proposed against it.
(h) No transfer tax, stamp duty or other similar tax is payable by or on
behalf of the Underwriters in connection with (i) the issuance by the Trust
of the Firm Preferred Securities, (ii) the purchase by the Underwriters of
the Firm Preferred Securities, or (iii) the consummation by the Offerors of
any of their respective obligations under this Agreement.
(i) The Offerors and each of the Subsidiaries maintain insurance of the
types and in the amounts which are adequate for their businesses, all of
which insurance is in full force and effect.
(j) Except as disclosed in the Prospectus, there is no action, suit,
proceeding, inquiry, investigation, litigation or governmental proceeding,
domestic or foreign, pending or, to the Offerors' knowledge, threatened
against (or currently existing or previously occurring facts or
circumstances that provide a basis for the same), or involving the
properties or business of the Offerors or any of the Subsidiaries, that (i)
questions the validity of the capital stock or equity securities of the
Offerors or this Agreement or of any action taken or to be taken by the
Offerors pursuant to or in connection with this Agreement, (ii) is required
to be disclosed in the Registration Statement that is not so disclosed (and
such proceedings, if any, as are summarized in the Registration Statement
are accurately summarized in all material respects), or (iii) would have a
Material Adverse Effect.
(k) Each of the Offerors has full legal right, power and authority to enter
into this Agreement and to consummate the transactions provided for herein
and therein; and this Agreement has been duly authorized, executed and
delivered by each of the Offerors. This Agreement, assuming it has been
duly authorized, executed and delivered by the Underwriters, constitutes a
legal, valid and binding agreement of the each of the Offerors enforceable
against each of the Offerors in accordance with its terms. Each of the
Indenture, the Trust Agreement, the Guarantee [and the Expense Agreement]
has been duly authorized by the Company, and, when executed and delivered
by the Company on the Closing Date, each of said agreements will constitute
a valid and legally binding obligation of the Company and will be
enforceable against the Company in accordance with its terms. Each
<PAGE>
-8-
of the Indenture, the Trust Agreement and the Guarantee has been duly
qualified under the Trust Indenture Act and will conform to the description
thereof contained in the Prospectus. The execution and delivery of this
Agreement by the Offerors, their performance hereunder, their consummation
of the transactions contemplated herein and the conduct of their business
and that of each of the Subsidiaries as described in the Registration
Statement, the Prospectus and any amendments or supplements thereto does
not and will not conflict with in any material respect or result in any
breach or violation of any of the material terms or provisions of, or
constitute a default under, or result in the creation or imposition of any
lien, charge, claim, encumbrance, pledge, security interest, defect or
other restriction on equity of any kind whatsoever upon, any property or
assets (tangible or intangible) of either Offeror or any of the
Subsidiaries, pursuant to the terms of (i) the corporate charter, operating
agreement or by-laws of the Company or any of the Subsidiaries or the Trust
Agreement, the Guarantee or the Indenture, (ii) any license, contract,
indenture, mortgage, deed of trust, voting trust agreement, stockholders
agreement, note, loan or credit agreement or any other agreement or
instrument to which either Offeror or any of the Subsidiaries is a party or
by which any of them is or may be bound or to which any of their respective
properties or assets (tangible or intangible) is or may be subject or (iii)
any statute, judgment, decree, order, rule or regulation applicable to
either Offeror or any of the Subsidiaries of any arbitrator, court,
regulatory body or administrative agency or other governmental agency or
body, domestic or foreign, having jurisdiction over either Offeror or any
of the Subsidiaries or any of their respective activities or properties.
(l) No consent, approval, authorization or order of, and no filing with,
any court, regulatory body, government agency or other body, domestic or
foreign, is required for the issuance of the Firm Preferred Securities
pursuant to the Prospectus and the Registration Statement, or the
performance of this Agreement, the Trust Agreement, the Guarantee or the
Indenture and the transactions contemplated thereby, except such as have
been or may be obtained under the Act, the Exchange Act or the Rules and
Regulations or may be required under state securities or Blue Sky laws in
connection with the Underwriters' purchase and distribution of the Firm
Preferred Securities.
(m) All executed agreements which are filed as exhibits to the Registration
Statement to which either Offeror or any of the Subsidiaries is a party or
by which any of them may be bound or to which any of their respective
assets, properties or businesses may be subject have been duly and validly
authorized, executed and delivered by such Offeror or such Subsidiaries,
and, assuming due authorization, execution and delivery by the other
parties thereto, constitute the legal, valid and binding agreements of such
Offeror and such Subsidiaries enforceable against such Offeror and such
Subsidiaries in accordance with their respective terms (except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application relating to
or affecting enforcement of creditors' rights and the application of
equitable principles in any
<PAGE>
action, legal or equitable, and except as rights to indemnity or
contribution may be limited by applicable law). The descriptions in the
Registration Statement of contracts and other documents are accurate in all
material respects and fairly present the information required to be shown
with respect thereto by Form S-2, and there are no contracts or other
documents that are required by the Act to be described in the Registration
Statement or filed as exhibits to the Registration Statements that are not
described or filed as required, and the exhibits that have been filed are
complete and correct copies of the documents of which they purport to be
copies.
(n) Subsequent to the respective dates as of which information is set forth
in the Registration Statement and Prospectus, and except as may otherwise
be indicated or contemplated herein or therein, neither Offeror nor any of
the Subsidiaries has (i) issued any securities or incurred any liability or
obligation, direct or contingent, for borrowed money, (ii) entered into any
transaction which could reasonably be expected to have a Material Adverse
Effect or (iii) declared or paid any dividend or made any other
distribution on or in respect of its capital stock or equity securities.
(o) Except as disclosed in the Registration Statement, (i) neither of the
Offerors is in violation of its corporate charter, bylaws or other
governing documents (including without limitation the Trust Agreement), and
(ii) no material default exists in the due performance and observance of
any term, covenant or condition of any license, contract, indenture,
mortgage, installment sale agreement, lease, deed of trust, voting trust
agreement, stockholders agreement, note, loan or credit agreement or any
other agreement or instrument evidencing an obligation for borrowed money,
or any other agreement or instrument to which either Offeror or any of the
Subsidiaries is a party or by which either Offeror or any of the
Subsidiaries may be bound or to which any of the property or assets
(tangible or intangible) of either Offeror or any of the Subsidiaries is
subject or affected.
(p) The Offerors and each of the Subsidiaries have a generally satisfactory
employer-employee relationship with their respective employees and are in
compliance with all federal, state, local, and, where applicable, foreign,
laws and regulations respecting employment and employment practices, terms
and conditions of employment and wages and hours, except where the failure
to so comply would not have a Material Adverse Effect. To the Offerors'
knowledge, there are no pending investigations involving the Offerors or
any of the Subsidiaries by the United States Department of Labor or any
other governmental agency responsible for the enforcement of such federal,
state, local or foreign laws and regulations. To the Offerors' knowledge,
there is no unfair labor practice charge or complaint against either
Offeror or any of the Subsidiaries pending before the National Labor
Relations Board or any strike, picketing, boycott, dispute, slowdown or
stoppage pending or threatened against or involving either Offeror or any
of the Subsidiaries, and no such strike, picketing, boycott, dispute,
slowdown or stoppage has ever occurred. No
-9-
<PAGE>
representation question exists respecting the employees of either Offeror
or any of the Subsidiaries, and no collective bargaining agreement or
modification thereof is currently being negotiated by either Offeror or any
of the Subsidiaries. There are no expired or existing collective bargaining
agreements of either Offeror or any of the Subsidiaries.
(q) Neither Offeror nor any of the Subsidiaries has incurred any liability
arising under or as a result of any breach of the provisions of the Act.
(r) Except as disclosed in the Prospectus, neither Offeror nor any of the
Subsidiaries maintains, sponsors or contributes to any program or
arrangement that is an "employee pension benefit plan," an "employee
welfare benefit plan," or a "multiemployer plan" (collectively, the "ERISA
Plans") as such terms are defined in Sections 3(2), 3(1) and 3(37),
respectively, of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"). With respect to any ERISA Plan that an Offeror or any
of the Subsidiaries, now or at any time previously, maintains or
contributes to, all applicable federal laws and regulations have been
complied with, except for such instances of noncompliance which, either
singly or in the aggregate, would not have a Material Adverse Effect.
Neither Offeror nor any of the Subsidiaries has ever completely or
partially withdrawn from a "multiemployer plan."
(s) The Offerors and the Subsidiaries have complied in all material
respects with all federal, state and local statutes, regulations,
ordinances and rules applicable to the ownership and operation of their
properties or the conduct of their businesses as described in and
contemplated by the Registration Statement and the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary Prospectus) and
as currently being conducted.
(t) Each Offeror maintains a system of internal accounting controls
sufficient to provide reasonable assurances that (i) transactions are
executed in accordance with management's general or specific authorization;
(ii) transactions are recorded as necessary to permit preparation of
financial statements in conformity with generally accepted accounting
principles and to maintain accountability for assets; (iii) access to
assets is permitted only in accordance with management's general or
specific authorization; and (iv) the recorded accountability for assets is
compared with existing assets at reasonable intervals and appropriate
action is taken with respect to any differences.
(u) The Offerors have not distributed and will not distribute prior to the
Closing Date any prospectus in connection with the Offering, other than a
Preliminary Prospectus, the Prospectus, the Registration Statement and the
other materials permitted by the 1933 Act and the 1933 Act Regulations and
reviewed by the Underwriters.
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<PAGE>
-11-
(v) No holders of any equity securities of the Offerors or of any options,
warrants or other convertible or exchangeable securities of the Offerors
exercisable for or convertible or exchangeable for equity securities of the
Offerors have the right (except as may have been waived) to include any
securities issued by the Company in the Registration Statement or any
registration statement to be filed by the Company within 180 days of the
date hereof or to require the Company or the Trust to file a registration
statement under the Act during such 180 day period.
(w) Neither Offeror has taken or will take, directly or indirectly (except
for any action that may be taken by the Underwriters), any action designed
to or which has constituted or which might reasonably be expected to cause
or result in, under the Exchange Act or otherwise, stabilization or
manipulation of the price of any security of either Offeror to facilitate
the sale or resale of the Firm Preferred Securities or otherwise.
(x) Except to the extent disclosed in the Prospectus, (i) the Offerors and
each of the Subsidiaries own or possess, or have a license or other right
to use, the patents, patent rights, licenses, inventions, copyrights, know-
how (including trade secrets and other unpatented and/or unpatentable
proprietary or confidential information, systems or procedures),
technology, trademarks, service marks and trade names, together with all
applications for any of the foregoing, currently used or held for use by
them in connection with their respective businesses, except where the
failure to own or possess, alone or in aggregate, would not have a Material
Adverse Effect on the Offerors, (ii) neither the Offerors nor any of the
Subsidiaries has received any notice of infringement of or conflict with
asserted rights of others with respect to any of the foregoing which has
not been finally resolved and (iii) except as set forth in the Registration
Statement, neither the Offerors nor any of the Subsidiaries is obligated or
under any liability whatsoever to make any material payments by way of
royalties, fees or otherwise to any owner or licensee of, or other claimant
to, any patent, patent right, license, invention, trademark, service mark,
trade name, copyright, know-how (including trade secrets and other
unpatented and/or unpatentable proprietary or confidential information,
systems or procedures), technology or other intangible asset, with respect
to the use thereof or in connection with the conduct of its business or
otherwise.
(y) The Offerors and each of the Subsidiaries have good and marketable
title to, or valid and enforceable leasehold estates in, all items of real
and personal property stated in the Prospectus (including the financial
statements included or incorporated by reference therein) to be owned or
leased by them, free and clear of all liens, charges, claims, encumbrances,
pledges, security interests, defects or other restrictions on equity of any
kind whatsoever, other than (i) those referred to in the Prospectus
(including such financial statements), (ii) liens for taxes not yet due and
payable and (iii) mechanics, materialmen, warehouse and other statutory
liens arising in the ordinary course of business which, either individually
or in the aggregate, do not have a Material Adverse Effect.
<PAGE>
-12-
(z) Except as described in the Prospectus under "Underwriting" and on the
cover page thereof, there are no claims, payments, issuances, arrangements
or understandings for services in the nature of a finder's or origination
fee with respect to the sale of the Firm Preferred Securities hereunder or
any other arrangements, agreements, understandings, payments or issuance
with respect to the Offerors or any of the Subsidiaries or any of their
respective officers, directors, employees or affiliates that may affect the
Underwriters' compensation, as determined by the National Association of
Securities Dealers, Inc. ("NASD").
(aa) The Preferred Securities have been approved for listing on the Nasdaq
Stock Market, Inc.'s National Market System (the "NASDAQ-NM") under the
symbol "[NHTBP]" subject to official notice of issuance.
(bb) The Company is not an "investment company" or an "affiliated person"
or "promoter" of, or "principal Underwriters" for, an "investment company",
as such terms are defined in the Investment Company Act of 1940, as amended
(the "1940 Act"), or subject to regulation under the 1940 Act.
(cc) Any certificate signed by any officer of either Offeror and delivered
to the Underwriters or to the Underwriters' Counsel (as hereinafter
defined) shall be deemed a representation and warranty by such Offeror to
the Underwriters as to the matters covered thereby.
(dd) There are no contractual encumbrances or restrictions or material
legal restrictions on the ability of any of the Subsidiaries (i) to pay
dividends or make any other distributions on its capital stock or to pay
any indebtedness owed to the Offerors, (ii) to make any loans or advances
to, or investments in, the Offerors or (iii) to transfer any of its
property or assets to the Offerors.
(ee) (i) Each of the Company and the Bank has adopted a plan (in each case
a "Year 2000 Plan") requiring testing, information-gathering and other
procedures to conform to the deadlines and material requirements and
guidelines applicable to it as a provider of services using Information
Technology and imposed by any federal or state governmental agency or
authority or the Federal Financial Institution Examination Counsel (the
"FFIEC") to cause such Information Technology to be Year 2000 Compliant
(such deadlines, material requirements and guidelines, as they may be in
effect from time to time, being referred to in this Agreement as the "Year
2000 Regulatory Requirements").
(ii) Each of the Company and the Bank has taken appropriate actions and has
committed the resources reasonably necessary or otherwise appropriate to
comply with its Year 2000
<PAGE>
-13-
Plan in a timely manner. Such actions (including the testing and
information-gathering procedures) have not produced any preliminary
findings or other results which would indicate that the Information
Technology will not be Year 2000 Compliant or that it will not be in
compliance with the Year 2000 Regulatory Requirements; and it has not
received any written notice or preliminary oral notice from any federal or
state governmental agency or authority or the FFIEC to one of its officers
or senior executive employees with respect to any adverse action against it
relating to Year 2000 Compliance.
(iii) For purposes of this Agreement, (A) "Information Technology" means
all computer software, computer hardware (whether general or specific
purpose) or other similar or related items of automated, computerized or
software systems that are used or relied on by the Company or the Bank, or
any of their respective Subsidiaries, in the conduct of their respective
businesses; and (B) "Year 2000 Compliant" means that the Information
Technology is designed to be used prior to, during and after the calendar
year 2000 A.D., and the Information Technology used during each such time
period will accurately receive, provide and process date/time data
(including calculating, comparing and sequencing) from, into and between
the 20th and 21st centuries, including the years 1999 and 2000 and leap-
year calculations, and will not malfunction, cease to function, or provide
invalid or incorrect results as a result of date/time data, to the extent
that any other information technology, used in combination with the
Information Technology, properly exchanges date/time data with it.
2. PURCHASE, SALE AND DELIVERY OF THE FIRM PREFERRED SECURITIES; DESCRIPTION
OF FIRM PREFERRED SECURITIES.
(a) On the basis of the representations, warranties and agreements herein
contained, and subject to the terms and conditions herein set forth, the
Offerors hereby agree that the Trust shall issue and sell the Firm
Preferred Securities to the several Underwriters, and each Underwriter,
severally and not jointly, agrees to purchase that number of Firm Preferred
Securities set forth in Schedule A opposite its name plus any additional
number of Firm Preferred Securities that such Underwriter may become
obligated purchase pursuant to the provisions of Section 11 hereof. The
time and date of payment for and delivery of the Firm Preferred Securities
is herein called the "Closing Date." Because the proceeds from the sale of
the Firm Preferred Securities will be used to purchase from the Company its
Subordinated Debentures (as described in the Prospectus), the Company shall
pay to the Underwriters a commission of [$_____] per Firm Preferred
Security purchased (the "Firm Preferred Securities Commission"). The price
of the Firm Preferred Securities shall be $10 per Preferred Security.
(b) Payment of the purchase price and Firm Preferred Securities Commission
for, and delivery of certificates for, the Firm Preferred Securities shall
be made on the Closing Date
<PAGE>
-14-
by wire transfer of immediately available funds, payable to the order of
the Trust, at the offices of Tucker Cleary at One Beacon Street, Boston,
Massachusetts, or at such other place as shall be agreed upon by the
Representative and the Offerors or, if mutually agreed to by the
Representative and the Offerors, by wire transfer, upon delivery of
certificates (in form and substance satisfactory to the Representative)
representing such securities to the Representative. Delivery and payment
for the Firm Preferred Securities shall be made at 10:00 a.m. (Eastern
Time) on the third business day following the public offering, or at such
other time and date as shall be agreed upon by the Representative and the
Trust. Certificates for the Firm Preferred Securities shall be in
definitive, fully registered form, shall bear no restrictive legends and
shall be in such denominations and registered in such names as the
Representative may request in writing at least two (2) business days prior
to the Closing Date. The certificates for the Firm Preferred Securities
shall be made available to the Representative at such office or such other
place as the Representative may designate for inspection and packaging not
later than 9:30 a.m. (Eastern Time) on the last business day prior to the
Closing Date.
(c) The Offerors propose that the Trust issue the Firm Preferred Securities
pursuant to an Amended and Restated Trust Agreement among The Wilmington
Trust Company, as Property Trustee, Wilmington Trust Company Delaware, as
Delaware Trustee, the Administrative Trustees named therein (collectively,
the "Trustees"), and the Company, in substantially the form heretofore
delivered to the Underwriters, said Agreement being hereinafter referred to
as the "Trust Agreement." In connection with the issuance of the Firm
Preferred Securities, the Company proposes (i) to issue its Subordinated
Debentures (the "Debentures") pursuant to an Indenture, dated as of
_________ __, 1999, between the Company and The Wilmington Trust Company,
as debenture trustee (the "Indenture") and (ii) to guarantee certain
payments on the Firm Preferred Securities pursuant to a Guarantee Agreement
between the Company and The Wilmington Trust Company, as guarantee trustee
(the "Guarantee"), to the extent described therein.
3. PUBLIC OFFERING OF THE FIRM PREFERRED SECURITIES.
As soon after the Registration Statement becomes effective as the
Underwriters deem advisable, the Underwriters shall make a public offering of
the Firm Preferred Securities at the price and upon the other terms set forth in
the Prospectus. The Underwriters may from time to time thereafter reduce the
public offering price and change the other selling terms, provided the proceeds
to the Trust shall not be reduced as a result of such reduction or change.
[BECAUSE THE NASD IS EXPECTED TO VIEW THE PREFERRED SECURITIES AS INTERESTS IN A
DIRECT PARTICIPATION PROGRAM, THE OFFERING OF THE PREFERRED SECURITIES IS BEING
MADE IN COMPLIANCE WITH THE APPLICABLE PROVISIONS OF RULE 2810 OF THE NASD'S
CONDUCT RULES.]
<PAGE>
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The Underwriters may reserve and sell such of the Firm Preferred Securities
purchased by the Underwriters as the Underwriters may elect to dealers chosen by
them (the "Selected Dealers") at the public offering price set forth in the
Prospectus less the applicable Selected Dealers' concessions set forth therein,
for re-offering by Selected Dealers to the public at the public offering price.
The Underwriters may allow, and Selected Dealers may re-allow, a concession set
forth in the Prospectus to certain other brokers and dealers.
4. COVENANTS OF THE COMPANY.
The Offerors jointly and severally agree with each of the Underwriters as
follows:
(a) The Offerors will use their best efforts to cause the Registration
Statement and any amendment thereof, if not effective at the time and date
that this Agreement is executed and delivered by the parties hereto, to
become effective as promptly as possible; they will notify the
Representative, promptly after they shall receive notice thereof, of the
time when the Registration Statement or any subsequent amendment to the
Registration Statement has become effective or any supplement to the
Prospectus has been filed; if the Offerors omitted information from the
Registration Statement at the time it was originally declared effective in
reliance upon Rule 430A(a), the Offerors will provide evidence satisfactory
to the Representative that the Prospectus contains such information and has
been filed, within the time period prescribed, with the Commission pursuant
to subparagraph (1) or (4) of Rule 424(b) of the Rules and Regulations
under the Act or as part of a post-effective amendment to such Registration
Statement as originally declared effective which is declared effective by
the Commission; if for any reason the filing of the final form of
Prospectus is required under Rule 424(b)(3) of the Rules and Regulations
under the Act, they will provide evidence satisfactory to the
Representative that the Prospectus contains such information and has been
filed with the Commission within the time period prescribed; they will
notify the Representative promptly of any request by the Commission for the
amending or supplementing of the Registration Statement or the Prospectus
or for additional information; promptly upon the Representative's request,
they will prepare and file with the Commission any amendments or
supplements to the Registration Statement or Prospectus which, in the
opinion of counsel for the Underwriters ("Underwriters' Counsel"), may be
necessary or advisable so as to comply with all applicable laws and
regulations (including, without limitation, Section 11 under the Act and
Rule 10b-5 under the Exchange Act) in connection with the distribution of
the Firm Preferred Securities by the Underwriters; they will promptly
prepare and file with the Commission, and promptly notify the
Representative of the filing of, any amendments or supplements to the
Registration Statement or Prospectus which may be necessary to correct any
statements or omissions, if, at any time when a prospectus relating to the
Firm Preferred Securities is required to be delivered under the Act, any
event shall have occurred as a result of which the Prospectus or any other
prospectus relating to the Firm Preferred Securities as then in effect
would include an untrue statement of a material
<PAGE>
-16-
fact or omit to state any material fact necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading; in case any Underwriter is required so as to comply with all
applicable laws and regulations (including, without limitation, Section 11
under the Act and Rule 10b-5 under the Exchange Act) to deliver a
prospectus nine months or more after the effective date of the Registration
Statement in connection with the sale of the Firm Preferred Securities,
they will prepare promptly upon request, but at the expense of the
Underwriters, such amendment or amendments to the Registration Statement
and such prospectus or prospectuses as may be necessary to permit
compliance with the requirements of Section 10(a)(3) of the Act; they will
file no amendment or supplement to the Registration Statement or Prospectus
(other than any document required to be filed under the Exchange Act that
upon filing is deemed incorporated therein by reference) which shall not
previously have been submitted to the Representative a reasonable time
prior to the proposed filing thereof or to which you shall reasonably
object in writing or which is not in compliance with the Act and the Rules
and Regulations under the Act and until the distribution of the Firm
Preferred Securities pursuant to the Prospectus has been completed, the
Offerors will furnish to the Representative at or prior to the filing
thereof a copy of any document that upon filing is deemed to be
incorporated by reference in the Registration Statement or Prospectus.
(b) The Offerors will advise the Representative, promptly after they shall
receive notice or obtain knowledge thereof, of the issuance of any stop
order by the Commission suspending the effectiveness of the Registration
Statement or of the initiation or threat of any proceeding for that
purpose; and they will promptly use their best efforts to prevent the
issuance of any stop order or to obtain their withdrawal at the earliest
possible moment if such stop order should be issued.
(c) The Offerors will use their best efforts to qualify the Firm Preferred
Securities for offering and sale under the securities laws of such
jurisdictions as the Representative may designate and to continue such
qualifications in effect for so long as may be required for the purposes of
the distribution of the Firm Preferred Securities, except that either
Offeror shall not be required in connection therewith or as a condition
thereof to qualify as a foreign corporation or to execute a general consent
to service of process in any jurisdiction. In each jurisdiction in which
the Firm Preferred Securities shall have been qualified as above provided,
the Offerors will make and file such statements and reports in each year as
are or may be reasonably required by the laws of such jurisdiction.
(d) The Offerors will furnish to the Representative, as soon as available,
copies of the Registration Statement (as filed in EDGAR format, including
exhibits, with the Commission's confirmation of filing), each Preliminary
Prospectus, the Prospectus and any amendment or supplements to such
documents, including any prospectus prepared to permit
<PAGE>
-17-
compliance with Section 10(a)(3) of the Act, all in such quantities as you
may from time to time reasonably request.
(e) The Offerors will make generally available to their security holders as
soon as practicable, but in any event not later than the 45th day following
the end of the fiscal quarter first occurring after the first anniversary
of the effective date of the Registration Statement, an earnings statement
(which will be in reasonable detail but need not be audited) complying with
the provisions of Section 11(a) of the Act and covering a twelve-month
period beginning after the effective date of the Registration Statement.
(f) For five years from the date hereof, the Offerors shall furnish to the
Representative copies of all reports and communications (financial or
otherwise) furnished by the Offerors to the holders of the Firm Preferred
Securities as a class, copies of all reports and financial statements filed
with or furnished to the Commission or with any national securities
exchange or the NASDAQ-NM and such other documents, reports and information
concerning the business and financial conditions of the Offerors as the
Representative may reasonably request. During such five year period the
Offerors' financial statements shall be on a consolidated basis to the
extent that the accounts of the Offerors and the Subsidiaries are
consolidated, and shall be accompanied by similar financial statements for
any Subsidiary which is not so consolidated.
(g) The Offerors will apply the net proceeds from the sale of the Firm
Preferred Securities being sold by it in the manner set forth under the
caption "Use of Proceeds" in the Prospectus.
(h) The Offerors will maintain a transfer agent and a registrar (which may
be the same entity as the transfer agent) for the Preferred Securities.
(i) If at any time during the 90-day period after the Registration
Statement becomes effective, any publication or event relating to or
affecting either Offeror shall occur as a result of which in your opinion
the market price of the Preferred Securities has been or is likely to be
materially affected (regardless of whether such publication or event
necessitates a supplement to or amendment of the Prospectus), the Offerors
will, after written notice from the Representative advising the Offerors to
the effect set forth above, forthwith prepare, consult with the
Representative concerning the substance of and disseminate a press release
or other public statement, reasonably satisfactory to the Representative,
responding to or commenting on such publication or event, consistent with
past practice.
(j) For a period ending 180 days from the date of the Prospectus, the
Offerors will not, without your prior written consent, directly or
indirectly, offer for sale, sell or agree to sell or otherwise dispose of
any Preferred Securities other than pursuant to this Agreement, any
<PAGE>
-18-
other beneficial interests in the assets of the Trust or any securities of
the Trust or the Company that are substantially similar to the Firm
Preferred Securities or the Debentures, including any guarantee of such
beneficial interests or substantially similar securities, or securities
convertible into or exchangeable for or that represent the right to receive
any such beneficial interest or substantially similar securities.
5. PAYMENT OF EXPENSES.
(a) Subject to Section 5(b), the Company hereby agrees to pay on the
Closing Date all expenses and fees (other than fees of Underwriters'
Counsel, except as provided in (iii), (v) and (vii) of this Section 5(a)
and Section 5(b) below) incident to the performance of the obligations of
the Offerors under this Agreement, including, without limitation, (i) the
fees and expenses of accountants and counsel for the Offerors; (ii) all
costs and expenses incurred in connection with the preparation,
duplication, printing, filing (including the filing fees of the
Commission), mailing (including postage with respect thereto) and delivery
of the Registration Statement, the Preliminary Prospectuses and the
Prospectus and any amendments and supplements thereto, including the cost
of all copies thereof supplied to the Representative in quantities as
hereinabove stated, (iii) all costs and expenses incurred in connection
with the printing, mailing and delivery of this Agreement, the Selected
Dealer Agreements, the Agreement Among Underwriters, Underwriters'
Questionnaires, Underwriters' Powers of Attorney and related documents,
including the cost of all copies thereof supplied to the Underwriters in
quantities as hereinabove stated, (iv) the printing, engraving, issuance
and delivery of the Firm Preferred Securities, including any transfer or
other taxes payable thereon, (v) the qualification of the Firm Preferred
Securities under state or foreign securities or Blue Sky laws, including
the costs of printing and mailing a Blue Sky Memorandum and any supplements
or amendments thereto and disbursements and fees of Underwriters' Counsel,
in connection therewith, (vi) fees and expenses of the Trust's transfer
agent, (vii) fees and expenses incurred in connection with the review by
the NASD of certain of the matters set forth in this Agreement, and (viii)
the fees and expenses incurred in connection with the listing of the Firm
Preferred Securities on the NASDAQ-NM and any other exchange.
(b) In connection with the Offering, the Offerors agree to reimburse the
Underwriters up to a limit of $75,000 for their out of pocket expenses
("Reimbursable Expenses"), including: (i) their out-of-pocket expenses in
connection with the Registration Statement and related documentation; (ii)
the cost of advertising the Offering; and (iii) the Underwriters' travel
and promotional expenses. To the extent the Reimbursable Expenses exceed
the $75,000 limit, the Underwriters will bear their own out-of-pocket
expenses.
(c) If this Agreement is terminated by the Representative in accordance
with the provisions of Section 6, Section 10(b) or Section 12, or if the
Offerors shall terminate this
<PAGE>
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Agreement under Section 10(a), unless the basis upon which the
Representative terminates this Agreement results from the default or
omission of any Underwriter, the Company shall reimburse and indemnify the
Underwriters for (i) all of their reasonable out-of-pocket expenses up to
$75,000, including the fees and disbursements of Underwriters' Counsel,
plus (ii) the Blue Sky fees and expenses identified in Section 5(a)(v)
above.
6. CONDITIONS OF THE UNDERWRITERS' OBLIGATIONS.
The obligations of the Underwriters hereunder shall be subject to the
continuing accuracy of the representations and warranties of the Offerors herein
as of the date hereof; the accuracy on and as of the Closing Date of the
statements of officers of the Offerors made pursuant to the provisions hereof;
and the performance by the Offerors on and as of the Closing Date of their
respective covenants and obligations hereunder and to the following further
conditions:
(a) The Registration Statement shall have become effective not later than
5:00 p.m., Eastern Time, on the date of this Agreement or such later date
and time as shall be consented to in writing by the Representative, and, at
the Closing Date no stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceedings for that
purpose shall have been instituted or shall be pending or contemplated by
the Commission and any request on the part of the Commission for additional
information shall have been complied with to the satisfaction of
Underwriters' Counsel. If the Offerors have elected to rely upon Rule 430A
of the Rules and Regulations under the Act, the price of the Firm Preferred
Securities and any other information previously omitted from the effective
Registration Statement pursuant to such Rule 430A shall have been
transmitted to the Commission for filing pursuant to Rule 424(b) of the
Rules and Regulations under the Act within the prescribed time period, and,
prior to the Closing Date, the Offerors shall have provided evidence
satisfactory to the Representative of such timely filing, or a post-
effective amendment providing such information shall have been promptly
filed and declared effective in accordance with the requirements of Rule
430A of the Rules and Regulations under the Act.
(b) The Representative shall not have advised the Offerors that the
Registration Statement, or any amendment thereto, contains an untrue
statement of fact that, in the Representative's opinion or in the opinion
of Underwriters' Counsel, is material, or omits to state a fact that, in
the Representative's opinion or in the opinion of Underwriters' Counsel, is
material and is required to be stated therein or is necessary to make the
statements therein not misleading, or that the Prospectus, or any
supplement thereto, contains an untrue statement of fact that, in the
Representative's opinion or in the opinion of Underwriters' Counsel, is
material, or omits to state a fact that, in the Representative's opinion or
in the opinion of Underwriters' Counsel, is material and is required to be
stated therein or is
<PAGE>
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necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading.
(c) On the Closing Date the Representative shall have received from
Underwriters' Counsel the favorable opinion to the effect that:
(i) the Preferred Securities conform in all material respects to the
description thereof contained in the Prospectus;
(ii) the Registration Statement is effective under the Act, and if
applicable, the filing of all pricing and other information has
been timely made in the appropriate form under Rule 430A of the
Rules and Regulations, and, to such counsel's knowledge, no stop
order suspending the effectiveness of the Registration Statement
has been issued, and no proceedings for that purpose have been
instituted or threatened by the Commission. Such counsel shall
state that such counsel has participated in conferences with
officers and other representatives of the Company, counsel for
the Company, representatives of the independent certified public
accountants for the Company and the Representative, at which
conferences the contents of the Registration Statement and the
Prospectus and related matters were discussed and, although such
counsel is not passing upon and does not assume any
responsibility for, nor has such counsel independently verified,
the accuracy, completeness or fairness of the statements
contained in the Registration Statement and Prospectus (except as
to matters referred to in subparagraph (i) above of this Section
6(c)), no facts have come to the attention of such counsel
(relying as to materiality to a large extent upon the opinions of
officers and other representatives of the Company) that lead them
to believe that either the Registration Statement or any
amendment thereto, at the time such Registration Statement or
amendment became effective or any Preliminary Prospectus (other
than information omitted pursuant to Rule 430A) or the Prospectus
or any amendment or supplement thereto as of the date of such
opinion contained or contains any untrue statement of a material
fact or omitted or omits to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading (it being understood that such counsel need express no
view with respect to the financial statements and schedules and
other financial and statistical data included in any Preliminary
Prospectus, the Registration Statement (including any exhibit
thereto) or the Prospectus or any amendment or supplement
thereto); and
<PAGE>
-21-
(iii) each of the Preliminary Prospectuses, the Registration
Statement and the Prospectus and any amendments or supplements
thereto (other than the financial statements and schedules,
related notes and other financial and statistical data included
therein, as to which no opinion need be rendered) comply as to
form in all material respects with the requirements of the Act
and the Rules and Regulations.
(d) (1) On the Closing Date the Underwriters shall have received the
favorable opinion of Thacher, Proffitt & Wood, counsel to the Offerors,
dated the Closing Date addressed to the Underwriters and in form and
substance reasonably satisfactory to Underwriters' Counsel, to the effect
that:
(i) (A) the Company and each of the Subsidiaries are duly
organized, validly existing and in good standing under the laws
of their respective jurisdictions of organization, (B) the
Company is duly registered as a savings and loan holding
company under the SLHC Act, and (C) the Company is duly
qualified as a foreign corporation and in good standing in
listed jurisdictions; all of the outstanding shares of capital
stock of each of the Subsidiaries have been duly authorized and
validly issued and are fully-paid and non-assessable and are
owned of record by the Company; the outstanding shares of
capital stock of the Subsidiaries are owned by the Company free
and clear of all liens, encumbrances and security interests
and, to such counsel's knowledge, no options, warrants or other
rights to purchase, agreements or other obligations to issue or
other rights to convert any obligations into, or exchange any
securities for, any shares of capital stock of or ownership
interests in any of the Subsidiaries are outstanding;
(ii) the Company and each of the Subsidiaries have the corporate
power to own, lease and operate their respective properties and
to conduct their respective businesses as described in the
Prospectus;
(iii) The capital stock, Debentures and Guarantee of the Company and
the equity securities of the Trust conform to the description
thereof contained in the Prospectus in all material respects.
The capital stock of the Company authorized and issued as of
________ __, 1999 is as set forth under the caption
"Capitalization" in the Prospectus, has been duly authorized
and validly issued, and is fully paid and nonassessable. To
such counsel's knowledge, there are no outstanding rights,
options or warrants to purchase, no other outstanding
securities convertible into or exchangeable for, and no
commitments, plans or arrangements to issue, any shares of
capital stock of the Company or equity securities of the Trust,
except as described in the
<PAGE>
-22-
Prospectus. To such counsel's knowledge, the Firm Preferred
Securities are not and will not be subject to any preemptive
rights under the Delaware General Corporation Law or similar
statutory rights. The issuance, sale and delivery of the Firm
Preferred Securities and Debentures in accordance with the terms
and conditions of this Agreement and the Indenture have been duly
authorized by all necessary actions of the Offerors. All of the
Firm Preferred Securities have been duly and validly authorized
and, when delivered in accordance with this Agreement will be
duly and validly issued, fully paid and nonassessable, and will
conform in all material respects to the description thereof in
the Registration Statement, the Prospectus and the Trust
Agreement; the certificates representing the Firm Preferred
Securities are in due and proper form; and the Firm Preferred
Securities have been approved for quotation on NASDAQ-NMS subject
to official notice of issuance. There are no preemptive or other
rights to subscribe for or to purchase, and no restrictions upon
the voting or transfer of, any shares of capital stock or equity
securities of the Offerors or the Subsidiaries pursuant to the
corporate charter, by-laws or other governing documents
(including, without limitation, the Trust Agreement) of the
Offerors or the Subsidiaries, or, to the best of such counsel's
knowledge, any agreement or other instrument to which either
Offeror or any of the Subsidiaries is a party or by which either
Offeror or any of the Subsidiaries may be bound. To the best of
such counsel's knowledge, holders of securities of the Offerors
either do not have any right that, if exercised, would require
the Offerors to cause such securities to be included in the
Registration Statement or any registration statement to be filed
by the Company within 180 days of the date hereof or to require
the Company to file a registration statement under the Act during
such 180 day period, or have waived such right.
(iv) the Registration Statement is effective under the Act, and, if
applicable, the filing of all pricing and other information has
been timely made in the appropriate form under Rule 430A of the
Rules and Regulations under the Act, and, to the best of such
counsel's knowledge, no stop order suspending the effectiveness
of the Registration Statement has been issued, and no proceedings
for that purpose have been instituted or, to such counsel's
knowledge, threatened by the Commission;
(v) the Registration Statement and the Prospectus and any amendment
or supplement thereto (other than the financial statements and
schedules, related notes and other financial and statistical data
included therein, as to which no opinion need be rendered) comply
as to form in all material respects with the requirements of the
Act and the Rules and Regulations under the Act; and to
<PAGE>
-23-
the best of such counsel's knowledge, there are no contracts,
agreements, leases or other documents of a character required
to be disclosed in the Registration Statement or Prospectus or
to be filed as exhibits to the Registration Statement that are
not so disclosed or filed;
(vi) (A) to such counsel's knowledge, there is not pending or
threatened against the Offerors or any of the Subsidiaries, or
involving any of their respective properties or businesses, any
action, suit, proceeding, inquiry, investigation, litigation or
governmental proceeding, domestic or foreign, that (y) is
required to be disclosed in the Registration Statement and is
not so disclosed (and such proceedings as are summarized in the
Registration Statement are accurately summarized in all
material respects), or (z) questions the validity of the
capital stock or equity securities of the Company or the Trust,
this Agreement, or any action taken or to be taken by the
Offerors pursuant to or in connection with this Agreement and
(B) no statute or regulation or legal or, to such counsel's
knowledge, governmental proceeding required to be described in
the Prospectus is not described as required;
(vii) the Offerors have all requisite corporate and trust power and
authority to enter into this Agreement and to consummate the
transactions provided for herein; and this Agreement has been
duly authorized, executed and delivered by the Offerors and
constitutes the legal, valid and binding obligation of the
Offerors enforceable in accordance with its terms. The
execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated herein and in the
Trust Agreement does not and will not result in any breach or
violation of any of the material terms or provisions of, or
constitute a default under, or result in the creation or
imposition of any lien, charge, claim, pledge, security
interest, or other encumbrance upon, any property or assets
(tangible or intangible) of the Offerors or any of the
Subsidiaries or the Firm Preferred Securities pursuant to the
terms of (A) the corporate charter, operating agreement or by-
laws, or other governing instrument (including without
limitation the Trust Agreement) of the Offerors or any of the
Subsidiaries, (B) to such counsel's knowledge, the Guarantee,
the Indenture, [the Expense Agreement], any voting trust
agreement or any stockholders agreement, or any indenture,
mortgage, deed of trust, note, loan or credit agreement or
other agreement or instrument known to such counsel to which
either of the Offerors or any of the Subsidiaries is a party or
by which any of them is or may be bound or to which any of
their respective properties or assets (tangible or intangible)
is or may be subject, or (C) any statute, rule or regulation
or, to such counsel's knowledge, any judgment, decree or order
applicable to either of the Offerors or any of the Subsidiaries
<PAGE>
-24-
of any arbitrator, court, regulatory body or administrative
agency or other governmental agency or body having
jurisdiction over either of the Offerors or any of the
Subsidiaries or any of their respective activities or
properties, the violation of which would have a Material
Adverse Effect;
(viii) each of the Indenture, the Trust Agreement and the Guarantee
has been duly qualified under the Trust Indenture Act, has
been duly authorized, executed and delivered by the Company,
and is a valid and legally binding obligation of the Company
enforceable in accordance with its terms;
(ix) the Debentures have been duly authorized, executed,
authenticated and delivered by the Company, are entitled to
the benefits of the Indenture and are legal, valid and binding
obligations of the Company enforceable against the Company in
accordance with their terms;
(X) [the Expense Agreement has been duly authorized, executed and
delivered by the Company, and is a valid and legally binding
obligation of the Company enforceable in accordance with its
terms;]
(xi) no consent, approval, authorization or order of, and no filing
with, any federal or state court, regulatory body, government
agency or other body (other than such as have been effected
under the Act and the Exchange Act and such as may be required
under Blue Sky or state securities laws or the rules of the
NASD in connection with the purchase and distribution of the
Firm Preferred Securities by the Underwriters, as to which no
opinion need be rendered) is required in connection with the
issuance of the Firm Preferred Securities pursuant to the
Prospectus and the Registration Statement, the performance of
this Agreement and the transactions contemplated hereby;
(xii) to such counsel's knowledge neither the Offerors nor any of
the Subsidiaries is in violation of any term or provision of
its corporate charter, operating agreement, or by-laws or
other governing instrument (including without limitation the
Trust Agreement);
(xiii) the statements in the Prospectus (or incorporated therein by
reference) under the captions "Regulation," "Description of
Capital," "Description of Debentures," "Description of
Guarantee," "Relationship Among the Capital Securities, the
Subordinated Debentures and the Guarantee," "Certain Federal
Income Tax Consequences," and "ERISA Considerations" have been
reviewed by such counsel, and insofar as they refer to
statements of law,
<PAGE>
-25-
descriptions of statutes, written contracts, or rules or
regulations, are correct in all material respects; and
(xiv) Except as set forth in the Prospectus, to the best of such
counsel's knowledge, there are no contractual encumbrances or
restrictions, or material legal restrictions required to be
described therein on the ability of the Subsidiaries (A) to
pay dividends or make any other distributions on their capital
stock or to pay indebtedness owed to the Offerors, (B) to make
any loans or advances to, or investments in, the Offerors or
(C) to transfer any of their property or assets to the
Offerors.
Such counsel shall state that such counsel has participated in conferences with
officers and other representatives of the Offerors and representatives of the
independent certified public accountants for the Offerors, at which conferences
the contents of the Registration Statement and the Prospectus and related
matters were discussed, and, although such counsel is not passing upon and does
not assume any responsibility for, nor has such counsel independently verified,
the accuracy, completeness or fairness of the statements contained in the
Registration Statement and Prospectus, no facts have come to the attention of
such counsel that lead them to believe that either the Registration Statement or
any amendment thereto, at any time such Registration Statement or amendment
became effective or any Preliminary Prospectus circulated by the Underwriters
(other than information omitted pursuant to Rule 430A as of the date of such
Preliminary Prospectus) or the Prospectus or any amendment or supplement thereto
as of the date of such opinion contained or contains any untrue statement of a
material fact or omitted or omits to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in light of
the circumstances under which they were made (it being understood that such
counsel need express no view with respect to the financial statements and
schedules, related notes, and other financial and statistical data included or
incorporated by reference in any Preliminary Prospectus circulated by the
Underwriters, the Registration Statement (including any exhibit thereto) or the
Prospectus or any amendment or supplement thereto).
The foregoing opinion may be limited to the laws of the State of New York, the
laws of the jurisdictions of incorporation of the Company and the Subsidiaries
and applicable United States federal law. In rendering the foregoing opinions,
counsel may rely, to the extent they deem such reliance proper, on the opinions
of other counsel as to matters governed by the laws of jurisdictions other than
the United States the State of New York and the Delaware General Corporation
Law. In rendering such opinions, such counsel may rely as to matters of fact,
to the extent they deem proper, on certificates and written statements of
responsible officers of the Offerors and the Subsidiaries and certificates or
other written statements of officers of departments of various jurisdictions
having custody of documents respecting the corporate existence or good standing
of the Company and the Subsidiaries, provided that copies of any such statements
or certificates shall be delivered to Underwriters' Counsel if requested. For
purposes of any of the opinions to be rendered by such
<PAGE>
-26-
counsel pursuant to this subsection (d) of Section 6, the term "to such
counsel's knowledge" shall mean, to the extent that such opinion relates to a
factual issue or to a mixed question of law and fact, that after examination of
documents in such counsel's files relating to the Offering and considering the
actual knowledge of the individual attorneys in such counsel's firm who have
given substantive attention to matters on behalf of the Offerors, such counsel
finds no reason to believe that any of such opinions is factually incorrect.
(2) Richards, Layton & Finger, P.A., special Delaware counsel to the
Offerors, shall have furnished to you their signed opinion, dated as of Closing
Date in form and substance satisfactory to Underwriters' Counsel, to the effect
that:
(i) The Trust has been duly created and is validly existing in good
standing as a business trust under the Delaware Business Trust
Act, 12 DEL. C. secs. 3801 ET SEQ. (the "Delaware Act"), with
the business trust power and authority to (a) own its property
and conduct its business as described in the Prospectus, (b)
execute and deliver, and perform its obligations under, this
Agreement and (c) issue and perform its obligations under the
Trust Preferred Securities.
(ii) The Trust Agreement constitutes a legal, valid and binding
obligation of the Company and the trustees of the Trust in
accordance with its terms.
(iii) Under the Trust Agreement and the Delaware Act, all necessary
trust action has been taken on the part of the Trust to duly
authorize the execution and delivery of this Agreement by the
Trust and the performance of its obligations hereunder.
(iv) The Firm Preferred Securities have been duly authorized for
issuance by the Trust Agreement and, when issued and delivered
in accordance with the terms of the Trust Agreement and this
Agreement and as described in the Prospectus, will be validly
issued and (subject to the terms of the Trust Agreement) fully
paid and non-assessable undivided beneficial interests in the
assets of the Trust. The holders of the Preferred Securities
will be entitled to the benefits of the Trust Agreement and
will be entitled to the same limitation of personal liability
extended to stockholders of private corporations for profit
organized under the Delaware General Corporation Law. Such
opinion may note that the holders of the Preferred Securities
may be required to make payment or provide indemnity or
security as set forth in the Trust Agreement.
(v) Under the Trust Agreement and the Delaware Act, the issuance of
the Preferred Securities is not subject to preemptive rights.
<PAGE>
-27-
(vi) The issuance and sale by the Trust of the Firm Preferred
Securities and the Common Securities, the execution, delivery and
performance by the Trust of this Agreement, and the consummation
by the Trust of the transactions contemplated by this Agreement
do not violate (a) any of the provisions of the Certificate of
Trust or the Trust Agreement or (b) any applicable Delaware law
or administrative regulation.
Such opinion may state that it is limited to the laws of the State of
Delaware and that the opinion expressed in paragraph (ii) above is subject to
the effect upon the Trust Agreement of (i) bankruptcy, insolvency, receivership,
liquidation, fraudulent conveyance, reorganization, moratorium and similar laws
of general applicability relating to or affecting creditors' rights and
remedies, (ii) general principles of equity (regardless of whether considered
and applied in a proceeding in equity or at law), and (iii) considerations of
public policy and the effect of applicable law relating to fiduciary duties.
(e) On or prior to the Closing Date Underwriters' Counsel shall have been
furnished such customary documents, certificates and opinions as they may
reasonably require for the purpose of enabling them to review or pass upon
the matters referred to in subsection (d) of this Section 6, or in order to
evidence the accuracy, completeness or satisfaction of any of the
representations, warranties or conditions of the Offerors herein contained.
(f) Prior to the Closing Date, (i) from the respective dates as of which
information is set forth in the Registration Statement and Prospectus,
there shall have been no developments that, individually or in the
aggregate, have had a Material Adverse Effect; (ii) there shall have been
no transaction, not in the ordinary course of business, entered into by
either of the Offerors or any of the Subsidiaries, from the latest date as
of which the financial condition of the Offerors and the Subsidiaries is
set forth in the Registration Statement and Prospectus, that, individually
or in the aggregate, has had a Material Adverse Effect; (iii) neither the
Offerors nor any of the Subsidiaries shall be in default under any
provision of any instrument relating to any of their respective outstanding
indebtedness;(iv) no material amount of the assets of the Offerors or any
of the Subsidiaries shall have been pledged or mortgaged, except as set
forth in the Registration Statement and Prospectus (including the exhibits
to the Registration Statement); (v) no action, suit or proceeding, at law
or in equity, shall have been pending or, to the knowledge of the Offerors,
threatened against the Offerors or any of the Subsidiaries, or affecting
any of their respective properties or businesses before or by any court or
federal, state or foreign commission, board or other administrative agency
wherein an unfavorable decision, ruling or finding would have a Material
Adverse Effect; and (vi) no stop order shall have been issued under the Act
and no proceedings therefor shall have been initiated, or, to the
Offerors's knowledge, threatened or contemplated by the Commission.
(g) At the Closing Date the Representative shall have received a
certificate of the Offerors signed by the principal executive officer and
by the chief financial officer of the
<PAGE>
-28-
Company and by the Administrative Trustees of the Trust, dated the Closing
Date, to the effect that each of such persons has carefully examined the
Registration Statement, the Prospectus and this Agreement and that:
(i) the representations and warranties of the applicable Offeror in
this Agreement are true and correct, as if made on and as of
the Closing Date, and the applicable Offeror has complied with
all agreements and covenants and satisfied all conditions
contained in this Agreement on its part to be performed or
satisfied at or prior to the Closing Date;
(ii) no stop order suspending the effectiveness of the Registration
Statement has been issued, and no proceedings for that purpose
have been instituted or are pending or, to the knowledge of
such officer, are threatened under the Act;
(iii) none of the Registration Statement, the Prospectus nor any
amendment or supplement thereto includes any untrue statement
of a material fact or omits to state any material fact required
to be stated therein or necessary to make the statements
therein not misleading and neither the Preliminary Prospectus
nor any supplement thereto included any untrue statement of a
material fact or omitted to state any material fact required to
be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not
misleading; and
(iv) subsequent to the respective dates as of which information is
given in the Registration and the Prospectus, neither the
Offerors nor any of the Subsidiaries has incurred up to and
including the Closing Date other than in the ordinary course of
their respective businesses, any material liabilities or
obligations, direct or contingent; the Offerors has not paid or
declared any dividends or other distributions on its capital or
equity securities; neither the Offerors nor any of the
Subsidiaries has entered into any transactions not in the
ordinary course of business; and there has not been any
material change in the capital stock or long-term debt or any
material increase in the short-term borrowings of the Offerors
or any of the Subsidiaries; neither the Offerors nor any of the
Subsidiaries has sustained any material loss or damage to its
property or assets, whether or not insured; there is no
litigation that is pending or, to the knowledge of such
officers, threatened against the Offerors or any of the
Subsidiaries that is required to be set forth in an amended or
supplemented Prospectus that has not been set forth; and there
has occurred no event required to be set forth in an amended or
supplemented Prospectus that has not been set forth.
<PAGE>
-29-
References to the Registration Statement and the Prospectus in this subsection
(g) are to such documents as amended and supplemented at the date of such
certificate.
(h) On the date of this Agreement, the Representative shall have received
a letter in form and substance satisfactory to the Representative and the
Underwriters' Counsel addressed to the Underwriters and dated the date of
this Agreement from SM&C and signed by such firm with respect to such
matters as shall have been specified to such firm by the Underwriters prior
to the date hereof. At the Closing Date, the Underwriters shall have
received from SM&C a letter, dated as of the Closing Date reaffirming the
statements made in the letter furnished by SM&C to the Underwriters
concurrently with the execution of this Agreement, such reaffirming letter
to be in form and substance satisfactory to the Underwriters and the
Underwriters' Counsel.
(i) On the Closing Date there shall have been duly tendered to the
Representative for the several Underwriters' accounts the appropriate
number of Firm Preferred Securities.
(j) No order suspending the sale of the Firm Preferred Securities in any
jurisdiction designated by the Representative pursuant to subsection (c) of
Section 4 hereof shall have been issued on the Closing Date, and no
proceedings for that purpose shall have been instituted or to the knowledge
of the Representative or the Offerors shall be contemplated.
(k) The Firm Preferred Securities delivered on the Closing Date shall have
been duly listed, subject to notice of official issuance, on the NASDAQ-NM.
(l) On the Closing Date, you shall have received duly executed
counterparts of the Trust Agreement, the Guarantee, the Indenture [and the
Expense Agreement].
(m) The NASD, upon review of the terms of the public offering of the Firm
Preferred Securities, shall not have objected to the Underwriters'
participation in such offering.
(n) Prior to the Closing Date, the Offerors shall have furnished to you
and Underwriters' Counsel all such other documents, certificates and
opinions as they have reasonably requested. If any condition to the
Underwriters' obligations hereunder to be fulfilled prior to or at the
Closing Date is not so fulfilled, the Underwriters may terminate this
Agreement or, if the Underwriters so elects, it may waive any such
conditions that have not been fulfilled or extend the time for their
fulfillment.
7. INDEMNIFICATION AND CONTRIBUTION.
(a) The Offerors jointly and severally agree to defend, indemnify and hold
harmless each Underwriter against any losses, claims, damages or
liabilities, joint or several, to which such Underwriter may become
subject, under the Act or otherwise, insofar as such losses, claims,
<PAGE>
-30-
damages or liabilities (or actions in respect thereof) arise out of or are
based upon any breach of any representation, warranty, agreement or
covenant of the Company or the Trust herein contained or any untrue
statement or alleged untrue statement of any material fact contained in the
Registration Statement, any Preliminary Prospectus, the Prospectus, or any
amendment or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein, in light of
the circumstances in which they were made, not misleading; and agrees to
reimburse each Underwriter subject to subsection (d) for any legal or other
expenses reasonably incurred by it in connection with investigating or
defending any such loss, claim, damage, liability or action; provided,
however, that the Offerors shall not be liable in any such case to the
extent that any such loss, claim, damage or liability arises out of or is
based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in the Registration Statement, such Preliminary
Prospectus or the Prospectus, or any such amendment or supplement, in
reliance upon and in conformity in all material respects with written
information furnished with respect to any Underwriters by such Underwriter
expressly for use in the Registration Statement, any Preliminary Prospectus
or the Prospectus or any amendment or supplement thereto, provided that
such written information or omissions only pertain to disclosures in the
Registration Statement, any preliminary Prospectus or the Prospectus or any
amendment or supplement thereto directly relating to the transactions
effected by the Underwriters in connection with this offering, and provided
further that the foregoing indemnity with respect to any Preliminary
Prospectus shall not inure to the benefit of any Underwriter (or to the
benefit of any person controlling such Underwriter) if such untrue
statement or omission or alleged untrue statement or omission made in any
Preliminary Prospectus is eliminated or remedied in the Prospectus and a
copy of the Prospectus has not been furnished to the person asserting any
such loss, claim, damage or liability at or prior to the written
confirmation of the sale of such Preferred Securities to such person.
The indemnity agreement in this Section 7(a) shall extend upon the same
terms and conditions to, and shall inure to the benefit of each person, if any,
who controls any Underwriter within the meaning of the Act. This indemnity
agreement shall be in addition to any liabilities which the Offerors may
otherwise have.
(b) Each Underwriter, severally and not jointly, agrees to indemnify and
hold harmless the Offerors to the same extent as the foregoing indemnity
from the Company to the Underwriters but only with respect to statements or
omissions, if any, made in the Registration Statement, any Preliminary
Prospectus or the Prospectus or any amendment or supplement thereto made in
reliance upon, and in conformity in all material respects with, written
information furnished with respect to any Underwriter by such Underwriter
expressly for use in the Registration Statement, any Preliminary Prospectus
or the
<PAGE>
-31-
Prospectus or the Prospectus or any amendment or supplement thereto
directly relating to the transactions effected by the Underwriters in
connection with this offering.
The indemnity agreement in this Section 7(b) shall extend upon the
same terms and conditions to, and shall inure to the benefit of, each
officer and director of the Company and the Trust who has signed the
Registration Statement, and each person, if any, who controls the Company
or the Trust within the meaning of the Act. This indemnity agreement shall
be in addition to any liabilities which each Underwriter may otherwise
have. For purposes of this Agreement, the Offerors acknowledge that the
statements with respect to the public offering of the Firm Preferred
Securities set forth under the heading "UNDERWRITING" and the stabilization
legend in the Prospectus and the last paragraph on the outside front cover
page of the Prospectus have been furnished by the Underwriters expressly
for use therein and constitute the only information furnished in writing by
or on behalf of the Underwriters for inclusion in the Prospectus.
(c) Promptly after receipt by an indemnified party under this Section 7 of
notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under
this Section 7, notify the indemnifying party in writing of the
commencement thereof but the omission so to notify the indemnifying party
will not relieve it from any liability which it may have to any indemnified
party under this Section 7 (except to the extent that the omissions of such
notice causes actual prejudice to the indemnifying party), or otherwise
than under this Section 7. In case any such action is brought against any
indemnified party, and it notified the indemnifying party of the
commencement thereof, the indemnifying party will be entitled to
participate therein, and to the extent that it may elect by written notice
delivered to the indemnified party promptly after receiving the aforesaid
notice from such indemnified party, to assume the defense thereof, with
counsel reasonably satisfactory to such indemnified party; provided,
however, if the defendants in any such action include both the indemnified
parties and the indemnifying party and counsel for the indemnified party
shall have reasonably concluded that there may be legal defenses available
to it and/or other indemnified parties which are different from or
additional to those available to the indemnifying party, the indemnified
party or parties shall have the right to select separate counsel reasonably
satisfactory to the indemnifying party or parties to assume such legal
defenses and to otherwise participate in the defense of such action on
behalf of such indemnified party or parties. Upon receipt of notice from
the indemnifying party to such indemnified party of its election so to
assume the defense of such action and approval by the indemnified party of
counsel, the indemnifying party will not be liable to such indemnified
party under this Section 7 for any legal or other expenses subsequently
incurred by such indemnified party in connection with the defense thereof
unless (i) the indemnified party shall have employed separate counsel in
accordance with the proviso to the next preceding sentence (it being
understood, however, that the indemnifying party shall not be liable for
the expenses of more than one separate counsel approved by the indemnifying
party, representing all the indemnified parties under Section 7(a), 7(b) or
7(c)
<PAGE>
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hereof who are parties to such action), (ii) the indemnifying party
shall not have employed counsel reasonably satisfactory to the indemnified
party to represent the indemnified party within a reasonable time after
notice of commencement of the action, or (iii) the indemnifying party has
authorized the employment of counsel for the indemnified party at the
expense of the indemnifying party. In no event shall any indemnifying
party be liable in respect of any amounts paid in settlement of any action
unless the indemnifying party shall have approved the terms of such
settlement; provided however that such consent shall not be unreasonably
withheld.
(d) In order to provide for just and equitable contribution in any action
in which a claim for indemnification is made pursuant to this Section 7 but
it is judicially determined (by the entry of a final judgment or decree by
a court of competent jurisdiction and the expiration of time to appeal or
the denial of the last right of appeal) that such indemnification may not
be enforced in such case notwithstanding the fact that this Section 7
provides for indemnification in such case, all the parties hereto shall
contribute to the aggregate losses, claims, damages or liabilities to which
they may be subject (after contribution from others) in such proportion so
that the Underwriters are responsible pro rata for the portion represented
by the percentage that the underwriting discount bears to the public
offering price, and the Offerors are responsible for the remaining portion,
provided, however, that (i) no Underwriter shall not be required to
contribute any amount in excess of the underwriting discount applicable to
the Preferred Securities purchased by such Underwriter and (ii) no person
guilty of a fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to a contribution from any person who
is not guilty of such fraudulent misrepresentation.
(e) The parties to this Agreement hereby acknowledge that they are
sophisticated business persons who were represented by counsel during the
negotiations regarding the provisions hereof including without limitation
the provisions of this Section 7, and are fully informed regarding such
provisions. They further acknowledge that the provisions of this Section 7
fairly allocate the risks in light of the ability of the parties to
investigate the Offerors and their business in order to assure that
adequate disclosure is made in the Registration Statement and Prospectus as
required by the Act and the Exchange Act. The parties are advised that
federal or state public policy, as interpreted by the courts in certain
jurisdictions, may be contrary to certain of the provisions of this Section
7, and the parties hereto hereby expressly waive and relinquish any right
or ability to assert such public policy as a defense to a claim under this
Section 7 and further agree not to attempt to assert any such defense.
8. REPRESENTATIONS AND AGREEMENTS TO SURVIVE DELIVERY.
All representations, warranties and agreements contained in this Agreement
or contained in certificates of officers of the Offerors submitted pursuant
thereto shall be deemed to be
<PAGE>
-33-
representations, warranties and agreements at the Closing Date, and such
representations, warranties and agreements, and the indemnity and contribution
agreements contained in Section 7 hereof, shall remain operative and in full
force and effect regardless of any investigation made by or on behalf of any
Underwriter, the Offerors or any controlling person, and shall survive
termination of this Agreement or the issuance or sale and delivery of the Firm
Preferred Securities to the Underwriters.
9. EFFECTIVE DATE.
This Agreement shall become effective at 9:30 a.m., Eastern Time, on the
date hereof, or at such earlier time after the Registration Statement becomes
effective as the Representative, in its sole discretion, shall release the Firm
Preferred Securities for the sale to the public, provided, however that the
provisions of Sections 5, 7 and 9 of this Agreement shall at all times be
effective. For purposes of this Section 9, the Firm Preferred Securities to be
purchased hereunder shall be deemed to have been so released upon the earlier of
dispatch by the Representative of telegrams to securities dealers releasing such
Firm Preferred Securities for offering or the release by the Representative for
publication of the first newspaper advertisement that is subsequently published
relating to the Firm Preferred Securities.
10. TERMINATION.
(a) Subject to subsection (d) of this Section 10, the Offerors may at any
time before this Agreement becomes effective in accordance with Section 9,
terminate this Agreement.
(b) Subject to subsection (d) of this Section 10, the Representative shall
have the right to terminate this Agreement, (i) if any calamitous domestic
or international event or act or occurrence has materially disrupted, or in
the Representative's opinion will in the immediate future materially
disrupt, general securities markets in the United States; or (ii) if
trading on the New York Stock Exchange, the NASDAQ-NM or in the over-the-
counter market shall have been suspended, or minimum or maximum prices for
trading shall have been fixed, or maximum ranges for prices for securities
shall have been required on the over-the-counter market by the NASD or by
order of the Commission or any other government authority having
jurisdiction; or (iii) if the United States shall have become involved in a
war or major hostilities; or (iv) if a banking moratorium has been declared
by the State of New York, the State of New Hampshire or any federal
authority; or (v) if a moratorium in foreign exchange trading has been
declared; or (vi) if the Company or the Trust shall have sustained a loss
material or substantial to the Company or the Trust by fire, flood,
accident, hurricane, earthquake, theft, sabotage or other calamity or
malicious act that, whether or not such loss shall have been insured, will,
in the Representative's reasonable opinion, make it inadvisable to proceed
with the delivery of the Firm Preferred Securities; or (vii) if there shall
have been a Material Adverse Effect.
<PAGE>
-34-
(c) If any party hereto elects to prevent this Agreement from becoming
effective or to terminate this Agreement as provided in this Section 10,
such party shall notify, on the same day as such election is made, the
other parties hereto in accordance with the provisions of Section 13
hereof.
(d) Notwithstanding any contrary provision contained in this Agreement, any
election hereunder or any termination of this Agreement (including, without
limitation, pursuant to Sections 11 and 12 hereof), and whether or not this
Agreement is otherwise carried out, the provisions of Sections 5, 7 and 9
shall not be in any way affected by such election or termination or failure
to carry out the terms of this Agreement or any part thereof.
11. SUBSTITUTION OF THE UNDERWRITERS.
If one or more of the Underwriters shall fail (otherwise than for a reason
sufficient to justify the termination of this Agreement under the provisions of
Section 6, Section 10 or Section 12 hereof) to purchase the Firm Preferred
Securities that it or they are obligated to purchase on such date under this
Agreement (the "Defaulted Securities"), the Representative shall use its best
efforts within 24 hours thereafter, to make arrangements for one or more of the
non-defaulting Underwriters, or any other underwriters, to purchase all, but not
less than all, of the Firm Securities in such amounts as may be agreed upon and
upon the terms herein set forth; if, however, the Representative shall not have
completed such arrangements within such 24 hour period, then:
(a) if the number of Defaulted Securities does not exceed 10% of the total
number of Firm Preferred Securities to be purchased on such date, the non-
defaulting Underwriters shall be obligated to purchase the full amount
thereof in the proportions that their respective underwriting obligations
hereunder bear to the underwriting obligations of all non-defaulting
Underwriters, or
(b) if the number of Defaulted Securities exceeds 10% of the total number
of Firm Preferred Securities and arrangements satisfactory to the
Representative for the purchase of the Defaulted Securities are not made
within 36 hours, this Agreement shall terminate without liability on the
part of any non-defaulting Underwriters. The Offerors may assist the
Representative in making such arrangements by procuring another party
satisfactory to the Representative to purchase the Defaulted Securities on
the terms set forth herein.
No action taken pursuant to this Section shall relieve any defaulting
Underwriter from liability in respect of any default by such Underwriter under
this Agreement.
In the event of any such default that does not result in a termination of
this Agreement, the Representative shall have the right to postpone the Closing
Date for a period not exceeding seven days in order to effect any required
changes in the Registration Statement or Prospectus or in any other documents or
arrangements.
<PAGE>
-35-
12. DEFAULT BY THE TRUST.
If the Trust shall fail at the Closing Date to sell and deliver the number
of Preferred Securities that it is obligated to sell hereunder on such date,
then this Agreement shall terminate without any liability on the part of any
non-defaulting party other than pursuant to Section 5 and Section 7 hereof. No
action taken pursuant to this Section shall relieve the Trust from liability, if
any, in respect of such default.
13. NOTICES.
All notices and communications hereunder may be mailed or transmitted by
any standard form of telecommunication and, except as herein otherwise
specifically provided, shall be in writing and shall be deemed to have been duly
given when delivered to a notice party hereto at the address specified herein or
at the address subsequently communicated in writing to the notice parties.
Notices to the Underwriters shall be directed to the Representative c/o Tucker
Anthony Cleary Gull, One Beacon Street, Boston, Massachusetts 02108, Attention:
Gregory W. Benning, Managing Director, with a copy to Stephen J. Coukos, Esq.,
Sullivan & Worcester LLP, One Post Office Square, Boston, Massachusetts 02109.
Notices to the Company or the Trust shall be directed to c/o New Hampshire
Thrift Bancshares, Inc., 9 Main Street, P.O. Box 9, Newport, New Hampshire
03773, with a copy to Richard A. Schaberg, Esq., Thatcher Proffitt & Wood, 1700
Pennsylvania Avenue, N.W., Washington, D.C. 20006. In each case a notice party
may change its address for notice hereunder by a written communication to the
other notice parties.
14. PARTIES.
This Agreement shall inure solely to the benefit of and shall be binding
upon, the Underwriters, the Offerors and the controlling persons, directors and
officers referred to in Section 7 hereof, and their respective successors, legal
representatives and assigns, and no other person shall have or be construed to
have any legal or equitable right, remedy or claim under or in respect of or by
virtue of this Agreement or any provisions herein contained. No purchaser of
Preferred Securities from any Underwriter shall be deemed to be a successor by
reason merely of such purchase.
15. CONSTRUCTION.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS WITHOUT GIVING
EFFECT TO THE CHOICE OF LAW OR CONFLICT OF LAWS PRINCIPLES.
16. COUNTERPARTS.
<PAGE>
-36-
This Agreement may be executed in any number of counterparts, each of which
shall be deemed to be an original, and all of which taken together shall be
deemed to be one and the same instrument.
17. ENTIRE AGREEMENT.
This Agreement and the Schedules hereto contain the entire agreement
between the parties hereto in connection with the subject matter hereof and
supersede all prior agreements, written or oral, with respect to such subject
matter.
18. AMENDMENT.
This Agreement and the Schedules hereto may not be amended, modified or
altered without the written agreement of the Offerors and the Underwriters. If
the foregoing correctly sets forth the understanding between the Underwriters
and the Offerors, please so indicate in the space provided below for that
purpose, whereupon this letter shall constitute a binding agreement among us.
Very truly yours,
NEW HAMPSHIRE THRIFT BANCSHARES, INC.
By:_________________________________________
Name:
Title:
NHTB CAPITAL TRUST I
By:_________________________________________
Name:
Title:
CONFIRMED AND ACCEPTED AS OF THE
DATE FIRST ABOVE WRITTEN:
TUCKER ANTHONY CLEARY GULL
<PAGE>
-37-
By:_________________________________________
Name:
Title:
<PAGE>
-38-
SCHEDULE A
NAME NUMBER OF FIRM PREFERRED SECURITIES
- ---- --------------------------------------------
Tucker Anthony Cleary Gull 1,750,000
Total 1,750,000
<PAGE>
Exhibit 4.1
CERTIFICATE OF TRUST OF
NHTB CAPITAL TRUST I
THIS Certificate of Trust of NHTB CAPITAL TRUST I (the "Trust") is
being duly executed and filed on behalf of the Trust by the undersigned, as
trustee, to form a business trust under the Delaware Business Trust Act (12
Del.C. (S) 3801 et seq.) (the "Act").
- ------ -- ---
1. Name. The name of the business trust formed by this Certificate
----
of Trust is NHTB Capital Trust I.
2. Delaware Trustee. The name and business address of the trustee
----------------
of the Trust in the State of Delaware are Wilmington Trust Company, 1100 North
Market Street, Wilmington, Delaware 19890-0001, Attention: Corporate Trust
Administration.
3. Effective Date. This Certificate of Trust shall be effective
--------------
upon filing with the Secretary of State.
IN WITNESS WHEREOF, the undersigned has duly executed this Certificate
of Trust in accordance with Section 3811(a)(1) of the Act..
WILMINGTON TRUST COMPANY, as trustee
By: /s/ Patricia A. Evans
------------------------
Name: Patricia A. Evans
Title: Financial Services Officer
<PAGE>
EXHIBIT 4.2
TRUST AGREEMENT, dated as of July 7, 1999, between NEW HAMPSHIRE
THRIFT BANCSHARES, INC., a Delaware corporation (the "Sponsor"), and WILMINGTON
TRUST COMPANY, a Delaware banking corporation, as trustee (the "Trustee"). The
Sponsor and the Trustee hereby agree as follows:
1. The trust created hereby shall be known as "NHTB Capital Trust
I," in which name the Trustee, or the Sponsor to the extent provided herein, may
conduct the business of the Trust, make and execute contracts, and sue and be
sued.
2. The Sponsor hereby assigns, transfers, conveys and sets over to
the Trustee the sum of $10. The Trustee hereby acknowledges receipt of such
amount in trust from the Sponsor, which amount shall constitute the initial
trust estate. The Trustee hereby declares that it will hold the trust estate in
trust for the Sponsor. It is the intention of the parties hereto that the Trust
created hereby constitute a business trust under Chapter 38 of Title 12 of the
Delaware Code, 12 Del. Code (S) 3801 et seq. (the "Business Trust Act"), and
-- ---
that this document constitute the governing instrument of the Trust. The
Trustee is hereby authorized and directed to execute and file a certificate of
trust in the office of the Secretary of State of the State of Delaware in the
form attached hereto. The Trust is hereby established by the Sponsor and the
Trustee for the purpose of (i) issuing capital securities ("Capital Securities")
representing undivided beneficial interests in the assets of the Trust in
exchange for cash and investing the proceeds thereof in Junior Subordinated
Deferrable Interest Debentures of the Sponsor (the "Debentures"), (ii) issuing
and selling common securities ("Common Securities" and, together with the
Capital Securities, "Trust Securities") representing undivided beneficial
interests in the assets of the Trust to the Sponsor in exchange for cash and
investing the proceeds thereof in additional Debentures and (iii) engaging in
such other activities as are necessary, convenient or incidental thereto.
3. Concurrent with the first issuance of any Trust Securities by the
Trust, the Sponsor and the Trustee intend to enter into an amended and restated
Trust Agreement, satisfactory to each such party, to provide for the
contemplated operation of the Trust created hereby and the issuance of the
Capital Securities and the Common Securities referred to therein. Prior to the
execution and delivery of such amended and restated Trust Agreement, the Trustee
shall not have any duty or obligation hereunder or with respect to the trust
estate.
4. The Sponsor and the Trustee hereby authorize and direct the
Sponsor, as the sponsor of the Trust, (i) to file with the Securities and
Exchange Commission (the "Commission") and execute, in each case on behalf of
the Trust, (a) the Registration Statement on Form S-3 (the "1933 Act
Registration Statement"), including any pre-effective or post-effective
amendments to the 1933 Act Registration Statement, relating to the registration
under the Securities Act of 1933, as amended, of the Capital Securities of the
Trust and possibly certain other securities and (b) a Registration Statement on
Form 8-A (the "1934 Act Registration Statement") (including all pre-effective
and post-effective amendments thereto) relating to the registration of the
Capital Securities of the Trust under the Securities Exchange Act of 1934, as
amended; (ii) to file with The Nasdaq National Market or any other national
stock exchange (each, an "Exchange") and execute on behalf of the Trust one or
more listing applications and all other applications, statements, certificates,
agreements and other instruments as shall be
<PAGE>
necessary or desirable to cause the Capital Securities to be listed on any of
the Exchanges; (iii) to file and execute on behalf of the Trust such
applications, reports, surety bonds, irrevocable consents, appointments of
attorney for service of process and other papers and documents as shall be
necessary or desirable to register the Capital Securities under the securities
or blue sky laws of such jurisdictions as the Sponsor, on behalf of the Trust,
may deem necessary or desirable; and (iv) to execute on behalf of the Trust that
certain Underwriting Agreement relating to the Capital Securities, among the
Trust, the Sponsor and the Underwriter named therein, substantially in the form
included as an exhibit to the 1933 Act Registration Statement. In connection
with the filings referred to above, the Sponsor hereby constitutes and appoints
Stephen W. Ensign and Stephen R. Theroux, and each of them, as its true and
lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for the Sponsor or in the Sponsor's name, place and stead, in
any and all capacities, to sign the 1933 Act Registration Statement, the 1934
Act Registration Statement and any and all amendments (including post-effective
amendments) to the 1933 Act Registration Statement and the 1934 Act Registration
Statement and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Commission, the Exchange and administrators of
state securities or blue sky laws, granting unto said attorneys-in-fact and
agents full power and authority to do and perform each and every act and thing
requisite and necessary to be done in connection therewith, as fully to all
intents and purposes as the Sponsor might or could to in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents or any of
them, or their respective substitute or substitutes, shall do or cause to be
done by virtue hereof.
5. This Trust Agreement may be executed in one or more counterparts.
6. The number of Trustees initially shall be one (1) and thereafter
the number of Trustees shall be such number as shall be fixed from time to time
by a written instrument signed by the Sponsor which may increase or decrease the
number of Trustees; provided, however, that the number of Trustees shall in no
-------- -------
event be less than one (1); and provided, further, however, that to the extent
-------- ------- -------
required by the Business Trust Act, one Trustee shall either be a natural person
who is a resident of the State of Delaware or, if not a natural person, an
entity which has its principal place of business in the State of Delaware and
meets any other requirements imposed by applicable law. Subject to the
foregoing, the Sponsor is entitled to appoint or remove without cause any
Trustee at any time. Any Trustee may resign upon 30 days prior notice to the
Sponsor.
7. The recitals contained in this Trust Agreement shall be taken as
statements of the Sponsor, and the Trustee does not assume any responsibility
for their correctness. The Trustee makes no representations as to the value or
condition of the property of the Trust or any part thereof. The Trustee makes
no representations as to the validity or sufficiency of this Trust Agreement.
8. (a) The Trustees (the "Fiduciary Indemnified Persons") shall
not be liable, responsible or accountable in damages or otherwise to the Trust,
the Sponsor or any holder of the Trust Securities (the Trust, the Sponsor and
any holder of the Trust Securities being a "Covered Person") for any loss,
damage or claim incurred by reason of any act or omission
-2-
<PAGE>
performed or omitted by the Fiduciary Indemnified Persons in good faith on
behalf of the Trust and in a manner the Fiduciary Indemnified Persons reasonably
believed to be within the scope of authority conferred on the Fiduciary
Indemnified Persons by this Trust Agreement or by law, except that the Fiduciary
Indemnified Persons shall be liable for any such loss, damage or claim incurred
by reason of the Fiduciary Indemnified Person's negligence or bad faith with
respect to such acts or omissions.
(b) The Fiduciary Indemnified Persons shall be fully protected in
relying in good faith upon the records of the Trust and upon such information,
opinions, reports or statements presented to the Trust by any person as to
matters the Fiduciary Indemnified Persons reasonably believes are within such
other person's professional or expert competence and who has been selected with
reasonable care by or on behalf of the Trust, including information, opinions,
reports or statements as to the value and amount of the assets, liabilities,
profits, losses, or any other facts pertinent to the existence and amount of
assets from which distributions to holders of Trust Securities might properly be
paid.
9. The Sponsor agrees, to the fullest extent permitted by applicable
law,
(a) to indemnify and hold harmless each Fiduciary Indemnified Person,
or any of its officers, directors, shareholders, employees, representatives or
agents, from and against any loss, damage, liability, tax, penalty, expense or
claim of any kind or nature whatsoever incurred by the Fiduciary Indemnified
Persons by reason of the creation, operation or termination of the Trust in a
manner the Fiduciary Indemnified Persons reasonably believed to be within the
scope of authority conferred on the Fiduciary Indemnified Persons by this Trust
Agreement, except that no Fiduciary Indemnified Persons shall be entitled to be
indemnified in respect of any loss, damage or claim incurred by the Fiduciary
Indemnified Persons by reason of negligence or willful misconduct with respect
to such acts or omissions; and
(b) to advance expenses (including legal fees) incurred by a
Fiduciary Indemnified Person in defending any claim, demand, action, suit or
proceeding shall, from time to time, prior to the final disposition of such
claim, demand, action, suit or proceeding, upon receipt by the Trust of an
undertaking by or on behalf of such Fiduciary Indemnified Persons to repay such
amount if it shall be determined that such Fiduciary Indemnified Person is not
entitled to be indemnified as authorized in the preceding subsection.
10. The provisions of Section 9 shall survive the termination of this
Trust Agreement or the earlier resignation or removal of the Fiduciary
Indemnified Persons.
11. The Trust may terminate without issuing any Trust Securities at
the election of the Sponsor.
12. This Trust Agreement and the rights of the parties hereunder
shall be governed by and interpreted in accordance with the laws of the State of
Delaware and all rights and remedies shall be governed by such laws without
regard to the principles of conflict of laws.
-3-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Trust
Agreement to be duly executed as of the day and year first above written.
NEW HAMPSHIRE THRIFT BANCSHARES, INC., as Sponsor
By: /s/ Stephen W. Ensign
----------------------------------------
Name: Stephen W. Ensign
Title: President and Chief Executive Officer
WILMINGTON TRUST COMPANY, as Trustee
By: /s/ Patricia A. Evans
----------------------------------------
Name: Patricia A. Evans
Title: Financial Services Officer
<PAGE>
EXHIBIT 4.3
================================================================================
AMENDED AND RESTATED DECLARATION OF TRUST
OF
NHTB CAPITAL TRUST I
Dated as of [_________], 1999
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I
INTERPRETATION AND DEFINITIONS
SECTION 1.1 Definitions....................................................... 2
-----------
ARTICLE II
TRUST INDENTURE ACT
SECTION 2.1 Trust Indenture Act; Application.................................. 9
--------------------------------
SECTION 2.2 Lists of Holders of Securities.................................... 9
------------------------------
SECTION 2.3 Reports by the Property Trustee................................... 10
-------------------------------
SECTION 2.4 Periodic Reports.................................................. 10
----------------
SECTION 2.5 Evidence of Compliance with Conditions Precedent.................. 10
------------------------------------------------
SECTION 2.6 Events of Default; Waiver......................................... 10
-------------------------
SECTION 2.7 Default; Notice................................................... 12
---------------
ARTICLE III
ORGANIZATION
SECTION 3.1 Name.............................................................. 13
----
SECTION 3.2 Office............................................................ 13
------
SECTION 3.3 Purpose........................................................... 13
-------
SECTION 3.4 Authority......................................................... 13
---------
SECTION 3.5 Title to Property of the Trust.................................... 13
------------------------------
SECTION 3.6 Powers and Duties of the Administrative Trustees.................. 14
------------------------------------------------
SECTION 3.7 Prohibition of Actions by the Trust and the Trustees.............. 16
----------------------------------------------------
SECTION 3.8 Powers and Duties of the Property Trustee......................... 17
-----------------------------------------
SECTION 3.9 Certain Duties and Responsibilities of the Property Trustee....... 19
-----------------------------------------------------------
SECTION 3.10 Certain Rights of Property Trustee................................ 21
----------------------------------
SECTION 3.11 Delaware Trustee.................................................. 23
----------------
SECTION 3.12 Execution of Documents............................................ 24
----------------------
SECTION 3.13 Not Responsible for Recitals or Issuance of Securities............ 24
------------------------------------------------------
SECTION 3.14 Duration of Trust................................................. 24
-----------------
SECTION 3.15 Mergers........................................................... 24
-------
ARTICLE IV
SPONSOR
SECTION 4.1 Sponsor's Purchase of Common Securities........................... 26
---------------------------------------
SECTION 4.2 Responsibilities of the Sponsor................................... 26
-------------------------------
SECTION 4.3 Right to Proceed.................................................. 27
----------------
SECTION 4.4 Right to Dissolve Trust........................................... 27
-----------------------
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
ARTICLE V
TRUSTEES
<S> <C>
SECTION 5.1 Number of Trustees; Appointment of Co-Trustee................ 27
---------------------------------------------
SECTION 5.2 Delaware Trustee............................................. 28
----------------
SECTION 5.3 Property Trustee; Eligibility................................ 28
-----------------------------
SECTION 5.4 Certain Qualifications of Administrative Trustees and
-----------------------------------------------------
Delaware Trustee Generally................................... 29
--------------------------
SECTION 5.5 Administrative Trustees...................................... 30
-----------------------
SECTION 5.6 Appointment, Removal and Resignation of Trustees............. 30
------------------------------------------------
SECTION 5.7 Vacancies among Trustees..................................... 32
------------------------
SECTION 5.8 Effect of Vacancies.......................................... 32
-------------------
SECTION 5.9 Meetings..................................................... 32
--------
SECTION 5.10 Delegation of Power.......................................... 33
------------------
SECTION 5.11 Merger, Conversion, Consolidation or Succession to Business.. 33
-----------------------------------------------------------
ARTICLE VI
DISTRIBUTIONS
SECTION 6.1 Distributions................................................ 33
-------------
ARTICLE VII
ISSUANCE OF SECURITIES
SECTION 7.1 General Provisions Regarding Securities...................... 34
---------------------------------------
SECTION 7.2 Issuance of Capital Securities and Common Securities......... 34
----------------------------------------------------
SECTION 7.3 The Trust Security Certificates.............................. 35
-------------------------------
SECTION 7.4 Execution and Delivery of Trust Security Certificates........ 35
-----------------------------------------------------
SECTION 7.5 Registrar, Paying Agent and Exchange Agent................... 35
------------------------------------------
SECTION 7.6 Registration of Transfer and Exchange of Capital
------------------------------------------------
Security Certificates........................................ 36
---------------------
SECTION 7.7 Book-Entry Capital Security Certificates; Common
------------------------------------------------
Security Certificate......................................... 36
--------------------
SECTION 7.8 Paying Agent to Hold Money in Trust.......................... 37
-----------------------------------
SECTION 7.9 Replacement Securities....................................... 37
----------------------
SECTION 7.10 Outstanding Capital Securities.............................. 38
-------------------------------
SECTION 7.11 Capital Securities in Treasury............................... 38
------------------------------
SECTION 7.12 Cancellation................................................. 38
------------
SECTION 7.13 CUSIP Numbers................................................ 38
-------------
ARTICLE VIII
DISSOLUTION OF TRUST
SECTION 8.1 Dissolution of Trust......................................... 39
--------------------
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
ARTICLE IX
TRANSFER OF INTERESTS
<S> <C>
SECTION 9.1 Transfer of Securities.................................... 40
----------------------
SECTION 9.2 Definitive Capital Security Certificates.................. 40
----------------------------------------
SECTION 9.3 Temporary Securities...................................... 42
--------------------
SECTION 9.4 Deemed Security Holders................................... 43
-----------------------
SECTION 9.5 Notices to Clearing Agency................................ 43
--------------------------
SECTION 9.6 Appointment of Successor Clearing Agency.................. 43
----------------------------------------
ARTICLE X
LIMITATION OF LIABILITY OF
HOLDERS OF SECURITIES, TRUSTEES OR OTHERS
SECTION 10.1 Liability................................................. 44
---------
SECTION 10.2 Exculpation............................................... 44
-----------
SECTION 10.3 Fiduciary Duty............................................ 45
--------------
SECTION 10.4 Indemnification........................................... 46
---------------
SECTION 10.5 Outside Businesses........................................ 48
------------------
ARTICLE XI
ACCOUNTING
SECTION 11.1 Fiscal Year............................................... 49
-----------
SECTION 11.2 Certain Accounting Matters................................ 49
--------------------------
SECTION 11.3 Banking................................................... 49
-------
SECTION 11.4 Withholding............................................... 50
-----------
ARTICLE XII
AMENDMENTS AND MEETINGS
SECTION 12.1 Amendments................................................ 50
----------
SECTION 12.2 Meetings of the Holders; Action by Written Consent........ 52
--------------------------------------------------
ARTICLE XIII
REPRESENTATIONS OF PROPERTY TRUSTEEAND
DELAWARE TRUSTEE
SECTION 13.1 Representations and Warranties of Property Trustee........ 53
--------------------------------------------------
SECTION 13.2 Representations and Warranties of Delaware Trustee........ 54
--------------------------------------------------
ARTICLE XIV
MISCELLANEOUS
SECTION 14.1 Notices................................................... 55
-------
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C>
SECTION 14.2 Governing Law.................................. 56
-------------
SECTION 14.3 Intention of the Parties....................... 56
------------------------
SECTION 14.4 Headings....................................... 57
--------
SECTION 14.5 Successors and Assigns......................... 57
----------------------
SECTION 14.6 Partial Enforceability......................... 57
----------------------
SECTION 14.7 Counterparts................................... 57
------------
TERMS OF
[_____]% Capital SECURITIES
[_____]% COMMON SECURITIES............................... I-1
EXHIBIT A-1
FORM OF CAPITAL SECURITY CERTIFICATE..................... A1-1
EXHIBIT A-2
FORM OF COMMON SECURITY CERTIFICATE...................... A2-1
</TABLE>
iv
<PAGE>
CROSS-REFERENCE TABLE*
Section of
Trust Indenture
Act of 1939, as Section of
amended Declaration
- --------------- -----------
310(a) ............................................. 5.3
310(b) ............................................. 5.3(c), 5.3(d)
311(a) ............................................. 2.2(b)
311(b) ............................................. 2.2(b)
312(a) ............................................. 2.2(a)
312(b) ............................................. 2.2(b)
313 ............................................. 2.3
314(a) ............................................. 2.4; 3.6(j)
314(c) ............................................. 2.5
315(a) ............................................. 3.9
315(b) ............................................. 2.7(a)
315(c) ............................................. 3.9(a)
315(d) ............................................. 3.9(b)
316(a) ............................................. 2.6
316(c) ............................................. 3.6(e)
317(a) ............................................. 3.8(e); 3.8(h)
317(b) ............................................. 3.8(i); 7.5
318 ............................................. 2.1
______________
* This Cross-Reference Table does not constitute part of this Declaration and
shall not affect the interpretation of any of its terms or provisions.
v
<PAGE>
AMENDED AND RESTATED
DECLARATION OF TRUST
OF
NHTB CAPITAL TRUST I
Dated as of [_________], 1999
AMENDED AND RESTATED DECLARATION OF TRUST ("Declaration") dated and
effective as of [_________], 1999, by and among the Trustees (as defined
herein), the Sponsor (as defined herein) and the Holders (as defined herein),
from time to time, of undivided beneficial interests in the assets of the Trust
to be issued pursuant to this Declaration;
WHEREAS, the Trustees and the Sponsor established NHTB Capital Trust I
(the "Trust"), a trust created under the Delaware Business Trust Act pursuant to
a Declaration dated as of [__________], 1999 (the "Original Declaration"), and a
Certificate of Trust filed with the Secretary of State of the State of Delaware
on [__________], 1999, for the sole purpose of issuing and selling certain
securities representing undivided beneficial interests in the assets of the
Trust, investing the proceeds thereof solely in certain Debentures of the
Debenture Issuer (each as hereinafter defined) with no power to vary that
investment, and engaging in only those activities necessary, advisable or
incidental thereto; and
WHEREAS, all of the Trustees and the Sponsor, by this Declaration,
amend and restate each and every term and provision of the Original Declaration;
and
WHEREAS, all of the Trustees and the Sponsor, by this Declaration,
ratify the actions of each Trustee taken prior to the date hereof;
NOW, THEREFORE, it being the intention of the parties hereto to
continue the Trust as a business trust under the Business Trust Act and that
this Declaration constitute the governing instrument of such business trust, the
Trustees declare that all assets contributed to the Trust will be held in trust
for the benefit of the holders, from time to time, of the securities
representing undivided beneficial interests in the assets of the Trust issued
hereunder, subject to the provisions of this Declaration and, in consideration
of the mutual covenants contained herein and other good and valuable
consideration, the receipt of which is hereby acknowledged, the parties,
intending to be legally bound hereby, agree as follows:
<PAGE>
ARTICLE I
INTERPRETATION AND DEFINITIONS
SECTION 1.1 Definitions.
-----------
Unless the context otherwise requires:
(a) Capitalized terms used in this Declaration but not defined
in the preamble above or elsewhere herein have the respective meanings assigned
to them in this Section 1.1;
(b) a term defined anywhere in this Declaration has the same
meaning throughout;
(c) all references to "the Declaration" or "this Declaration"
are to this Declaration and each Annex and Exhibit hereto, as modified,
supplemented or amended from time to time;
(d) all references in this Declaration to Articles and Sections
and Annexes and Exhibits are to Articles and Sections of and Annexes and
Exhibits to this Declaration unless otherwise specified;
(e) a term defined in the Trust Indenture Act has the same
meaning when used in this Declaration unless otherwise defined in this
Declaration or unless the context otherwise requires;
(f) a term defined in the Indenture (as defined herein) has the
same meaning when used in this Declaration unless otherwise defined in this
Declaration or the context otherwise requires; and
(g) a reference to the singular includes the plural and vice
versa.
"Administrative Trustee" has the meaning set forth in Section
----------------------
5.1.
"Affiliate" has the same meaning as given to that term in Rule
---------
405 under the Securities Act or any successor rule thereunder.
"Agent" means any Paying Agent, Registrar or Exchange Agent.
-----
"Authorized Officer" of a Person means any other Person that is
------------------
authorized to legally bind such former Person.
"Book-Entry Interest" means a beneficial interest in the Global
-------------------
Capital Security registered in the name of a Clearing Agency or its nominee,
ownership and transfers of which shall be maintained and made through book
entries by a Clearing Agency as described in Section 9.4.
2
<PAGE>
"Business Day" means any day other than a Saturday or a Sunday or
------------
a day on which banking institutions in Wilmington, Delaware, New York, New York
or Newport, New Hampshire are authorized or required by law or executive order
to remain closed.
"Business Trust Act" means Chapter 38 of Title 12 of the Delaware
------------------
Code, 12 Del. Code (S) 3801 et seq., as it may be amended from time to time, or
-------
any successor legislation.
"Capital Securities" has the meaning specified in Section 7.1(a).
------------------
"Capital Securities Guarantee" means the Capital Securities
----------------------------
Guarantee Agreement, dated as of the Closing Date, by New Hampshire Thrift
Bancshares, Inc. in respect of the Capital Securities.
"Capital Security Beneficial Owner" means, with respect to a
---------------------------------
Book-Entry Interest, a Person who is the beneficial owner of such Book-Entry
Interest, as reflected on the books of the Clearing Agency, or on the books of a
Person maintaining an account with such Clearing Agency (directly as a Clearing
Agency Participant or as an indirect participant, in each case in accordance
with the rules of such Clearing Agency).
"Capital Security Certificate" means a certificate evidencing
----------------------------
ownership of Capital Securities, substantially in the form attached as Exhibit
A-1.
"Clearing Agency" means an organization registered as a "Clearing
---------------
Agency" pursuant to Section 17A of the Exchange Act that is acting as depositary
for the Capital Securities and in whose name or in the name of a nominee of that
organization shall be registered a global certificate and which shall undertake
to effect book entry transfers and pledges of the Capital Securities.
"Clearing Agency Participant" means a broker, dealer, bank, other
---------------------------
financial institution or other Person for whom from time to time the Clearing
Agency effects book entry transfers and pledges of securities deposited with the
Clearing Agency.
"Closing Date" has the meaning specified in the Underwriting
------------
Agreement.
"Code" means the Internal Revenue Code of 1986, as amended from
----
time to time, or any successor legislation.
"Commission" means the United States Securities and Exchange
----------
Commission as from time to time constituted, or if at any time after the
execution of this Declaration such Commission is not existing and performing the
duties now assigned to it under applicable federal securities laws, then the
body performing such duties at such time.
"Common Securities" has the meaning specified in Section 7.1(a).
-----------------
3
<PAGE>
"Common Securities Guarantee" means the Common Securities
---------------------------
Guarantee Agreement, dated as of the Closing Date, entered into by New Hampshire
Thrift Bancshares, Inc., with respect to the Common Securities.
"Common Securities Subscription Agreement" means the Common
----------------------------------------
Securities Subscription Agreement, dated as of the Closing Date, between the
Trust and Haven Bancorp, Inc. relating to the Common Securities.
"Common Security Certificate" means a certificate evidencing
---------------------------
ownership of Common Securities, substantially in the form attached as Exhibit
A-2.
"Company Indemnified Person" means (a) any Administrative
--------------------------
Trustee; (b) any Affiliate of any Administrative Trustee; (c) any officers,
directors, shareholders, members, partners, employees, representatives or agents
of any Administrative Trustee; or (d) any officer, employee or agent of the
Trust or its Affiliates.
"Corporate Trust Office" means the office of the Property Trustee
----------------------
at which the corporate trust business of the Property Trustee shall, at any
particular time, be principally administered, which office at the date of
execution of this Declaration is located at Rodney Square North, 1100 Market
Street, Wilmington, Delaware 19890-0001, Attention: Corporate Trust
Administration, or at any other time at such other address as the Property
Trustee may designate from time to time by notice to the Holders.
"Covered Person" means: (a) any officer, director, shareholder,
--------------
partner, member, representative, employee or agent of (i) the Trust or (ii) the
Trust's Affiliates; and (b) any Holder of Securities.
"Debentures" means the [_____]% Junior Subordinated Deferrable
----------
Interest Debentures due [_________], 2029, of the Debenture Issuer issued
pursuant to the Indenture.
"Debenture Issuer" means New Hampshire Thrift Bancshares, Inc., a
----------------
Delaware corporation, or any successor entity resulting from any consolidation,
amalgamation, merger or other business combination, in its capacity as issuer of
the Debentures under the Indenture.
"Debenture Subscription Agreement" means the Debenture
--------------------------------
Subscription Agreement, dated as of the Closing Date, between the Debenture
Issuer and the Trust in respect of the Debentures.
"Debenture Trustee" means Wilmington Trust Company, a Delaware
-----------------
corporation, as trustee under the Indenture until a successor is appointed
thereunder, and thereafter means such successor trustee.
"Default" means an event, act or condition that with notice or
-------
lapse of time, or both, would constitute an Event of Default.
"Definitive Capital Securities" has the meaning set forth in
-----------------------------
Section 9.2.
4
<PAGE>
"Delaware Trustee" has the meaning set forth in Section 5.1.
----------------
"Direct Action" has the meaning set forth in Section 3.8(e).
-------------
"Distribution" means a distribution payable to Holders in accordance
------------
with Section 6.1.
"DTC" means The Depository Trust Company, the initial Clearing
---
Agency.
"Event of Default" with respect to the Securities means an Event of
----------------
Default (as defined in the Indenture) that has occurred and is continuing with
respect to the Debentures.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
------------
from time to time, or any successor legislation.
"Exchange Agent" has the meaning set forth in Section 7.5.
--------------
"Federal Reserve Board" means the Board of Governors of the Federal
---------------------
Reserve System.
"Fiduciary Indemnified Person" has the meaning set forth in Section
----------------------------
10.4(b).
"Firm Securities Closing Date" has the meaning specified in the
----------------------------
Underwriting Agreement.
"Fiscal Year" has the meaning set forth in Section 11.1.
-----------
"Global Capital Security'' means the Capital Security Certificate
-----------------------
issued to the Clearing Agency at Closing.
"Holder" means a Person in whose name a Security or Successor Security
------
is registered, such Person being a beneficial owner within the meaning of the
Business Trust Act.
"Indemnified Person" means a Company Indemnified Person or a
------------------
Fiduciary Indemnified Person.
"Indenture" means the Indenture, dated as of the Closing Date, between
---------
the Debenture Issuer and the Debenture Trustee, as amended from time to time.
"Initial Optional Redemption Date" has the meaning set forth in
--------------------------------
Section 4(b) of Annex I hereto.
"Investment Company" means an investment company as defined in the
------------------
Investment Company Act.
5
<PAGE>
"Investment Company Act" means the Investment Company Act of 1940, as
----------------------
amended from time to time, or any successor legislation.
"Investment Company Event" has the meaning set forth in Section 4(c)
------------------------
of Annex I hereto.
"Legal Action" has the meaning set forth in Section 3.6(g).
------------
"Like Amount" has the meaning set forth in Section 3 of Annex I
-----------
hereto.
"List of Holders" has the meaning set forth in Section 2.2(a).
---------------
"Majority in Liquidation Amount " means, with respect to the Trust
------------------------------
Securities, except as provided in the terms of the Capital Securities or by the
Trust Indenture Act, Holders of outstanding Trust Securities voting together as
a single class or, as the context may require, Holders of outstanding Capital
Securities or Holders of outstanding Common Securities voting separately as a
class, who are the record owners of more than 50% of the aggregate liquidation
amount (including the amount that would be paid on redemption, liquidation or
otherwise, plus accumulated and unpaid Distributions to the date upon which the
voting percentages are determined) of all outstanding Securities of the relevant
class.
"Officers" shall mean, with respect to any Person, including the
--------
Property Trustee and the Delaware Trustee, any of the Chairman of the Board, a
Vice Chairman, the Chief Executive Officer, the President, an Executive or
Senior Vice President, a Vice President, the Chief Financial Officer, the
Secretary or an Assistant Secretary and, with respect to the Property Trustee
and the Delaware Trustee, any Group Director.
"Officers' Certificate" means, with respect to any Person, a
---------------------
certificate signed by two Officers and delivered to the Delaware Trustee. Any
Officers' Certificate delivered by the Trust shall be signed by at least one
Administrative Trustee. Any Officers' Certificate delivered with respect to
compliance with a condition or covenant provided for in this Declaration shall
include:
(a) a statement that each officer signing the Certificate has read
the covenants or conditions and the definitions relating thereto;
(b) a brief statement of the nature and scope of the examination or
investigation undertaken by each officer in rendering the Certificate;
(c) a statement that each such officer has made such examination or
investigation as, in such officer's opinion, is necessary to enable such
officer to express an informed opinion as to whether or not such covenant
or condition has been complied with; and
(d) a statement as to whether or not, in the opinion of each such
officer, such condition or covenant has been complied with.
6
<PAGE>
"Opinion of Counsel" means a written opinion of counsel, who may be an
------------------
employee of the Sponsor, and who shall be acceptable to the Property Trustee.
"Option Securities Closing Date" has the meaning specified in the
------------------------------
Underwriting Agreement.
"Participants" has the meaning specified in Section 7.7(a).
------------
"Paying Agent" has the meaning specified in Section 7.5.
------------
"Payment Amount" has the meaning specified in Section 6.1.
--------------
"Person" means a legal person, including any individual, corporation,
------
estate, partnership, joint venture, association, joint stock company, limited
liability company, trust, unincorporated association, or government or any
agency or political subdivision thereof, or any other entity of whatever nature.
"PORTAL" has the meaning set forth in Section 3.6(b) (iii).
------
"Property Trustee" has the meaning set forth in Section 5.3(a).
----------------
"Property Trustee Account" has the meaning set forth in Section
------------------------
3.8(c)(i).
"Quorum" means a majority of the Administrative Trustees or, if there
------
are only two Administrative Trustees, both of them.
"Redemption Price" has the meaning set forth in Section 4(a) of
----------------
Annex I hereto.
"Registrar" has the meaning set forth in Section 7.5.
---------
"Registration Statement" has the meaning set forth in Section
----------------------
3.6(b).
"Regulatory Capital Event" has the meaning set forth in Section 4(c)
------------------------
of Annex I hereto.
"Related Party" means, with respect to the Sponsor, any direct or
-------------
indirect wholly owned subsidiary of the Sponsor or any other Person that owns,
directly or indirectly, 100% of the outstanding voting securities of the
Sponsor.
"Responsible Officer" means any officer within the Corporate Trust
-------------------
Office of the Property Trustee with direct responsibility for the administration
of this Declaration and also means, with respect to a particular corporate trust
matter, any other officer of the Property Trustee to whom such matter is
referred because of that officer's knowledge of and familiarity with the
particular subject.
7
<PAGE>
"Rule 3a-5" means Rule 3a-5 under the Investment Company Act, or any
---------
successor rule or regulation.
"Securities" or "Trust Securities" means the Common Securities and
---------- ----------------
the Capital Securities.
"Securities Act" means the Securities Act of 1933, as amended from
--------------
time to time, or any successor legislation.
"Securities Guarantees" means the Common Securities Guarantee and
---------------------
the Capital Securities Guarantee.
"Special Event" has the meaning set forth in Section 4(c) of Annex I
-------------
hereto.
"Sponsor" means New Hampshire Thrift Bancshares, Inc., a Delaware
-------
corporation, or any successor entity resulting from any merger, consolidation,
amalgamation or other business combination, in its capacity as sponsor of the
Trust.
"Successor Delaware Trustee" has the meaning set forth in Section
--------------------------
5.6(b)(ii).
"Successor Entity" has the meaning set forth in Section 3.15(b)(i).
----------------
"Successor Property Trustee" has the meaning set forth in Section
--------------------------
3.8(f)(ii).
"Successor Securities" has the meaning set forth in Section
--------------------
3.15(b)(i).
"Super Majority" has the meaning set forth in Section 2.6(a) (ii).
--------------
"Tax Event" has the meaning set forth in Section 4(c) of Annex I
---------
hereto.
"10% in Liquidation Amount" means, with respect to the Trust
-------------------------
Securities, except as provided in the terms of the Capital Securities or by the
Trust Indenture Act, Holders of outstanding Trust Securities voting together as
a single class or, as the context may require, Holders of outstanding Capital
Securities or Holders of outstanding Common Securities voting separately as a
class, who are the record owners of 10% or more of the aggregate liquidation
amount (including the amount that would be paid on redemption, liquidation or
otherwise, plus accumulated and unpaid Distributions to the date upon which the
voting percentages are determined) of all outstanding Securities of the relevant
class.
"Treasury Regulations" means the income tax regulations, including
--------------------
temporary and proposed regulations, promulgated under the Code by the United
States Treasury Department, as such regulations may be amended from time to time
(including corresponding provisions of succeeding regulations).
"Trust Indenture Act" means the Trust Indenture Act of 1939, as
-------------------
amended from time to time, or any successor legislation.
8
<PAGE>
"Trust Property" means (a) the Debentures, (b) any cash on deposit in
--------------
or owing to the Property Trustee Account and (c) all proceeds and rights in
respect of the foregoing and any other property and assets for the time being
held or deemed to be held by the Property Trustee pursuant to this Declaration.
"Trust Security Certificate" means any one of the Common Security
--------------------------
Certificates or the Capital Security Certificates.
"Trustee" or "Trustees" means each Person who has signed this
------- --------
Declaration as a trustee, so long as such Person shall continue as a trustee of
the Trust in accordance with the terms hereof, and all other Persons who may
from time to time be duly appointed, qualified and serving as Trustees in
accordance with the provisions hereof, and references herein to a Trustee or the
Trustees shall refer to such Person or Persons solely in their capacity as
trustees hereunder.
"Underwriting Agreement" means the Underwriting Agreement, dated
----------------------
[__________], 1999, by and among the Trust, the Debenture Issuer and the
Underwriters named therein, relating to the Capital Securities.
ARTICLE II
TRUST INDENTURE ACT
SECTION 2.1 Trust Indenture Act; Application.
--------------------------------
(a) This Declaration is subject to the provisions of the Trust
Indenture Act that are required to be part of this Declaration in order for this
Declaration to be qualified under the Trust Indenture Act and shall, to the
extent applicable, be governed by such provisions.
(b) The Property Trustee shall be the only Trustee that is a trustee
for the purposes of the Trust Indenture Act.
(c) If and to the extent that any provision of this Declaration
limits, qualifies or conflicts with the duties imposed by (S)(S) 310 to 317,
inclusive, of the Trust Indenture Act, such imposed duties shall control.
(d) The application of the Trust Indenture Act to this Declaration
shall not affect the nature of the Securities as equity securities representing
undivided beneficial interests in the assets of the Trust.
SECTION 2.2 Lists of Holders of Securities.
------------------------------
(a) Each of the Sponsor and the Administrative Trustees on behalf of
the Trust shall provide the Property Trustee, unless the Property Trustee is
Registrar for the Securities, (i) within 14 days after each record date for
payment of Distributions, a list, in such form as the Property Trustee may
reasonably require, of the names and addresses of the Holders ("List of
Holders") as of such record date, provided that, neither the Sponsor nor the
-------- ----
Administrative Trustees on behalf of the Trust shall be obligated to provide
such List of Holders at any time that the List of Holders does
9
<PAGE>
not differ from the most recent List of Holders given to the Property Trustee by
the Sponsor and the Administrative Trustees on behalf of the Trust, and (ii) at
any other time, within 30 days of receipt by the Trust of a written request for
a List of Holders as of a date no more than 14 days before such List of Holders
is given to the Property Trustee. The Property Trustee shall preserve, in as
current a form as is reasonably practicable, all information contained in Lists
of Holders given to it or which it receives in the capacity as Paying Agent (if
acting in such capacity), provided that the Property Trustee may destroy any
-------- ----
List of Holders previously given to it on receipt of a new List of Holders.
(b) The Property Trustee shall comply with its obligations under
(S)(S) 311(a), 311(b) and 312(b) of the Trust Indenture Act.
SECTION 2.3 Reports by the Property Trustee.
-------------------------------
Within 60 days after the date hereof, and no later than the
anniversary date hereof in each succeeding year, the Property Trustee shall
provide to the Holders of the Capital Securities such reports as are required by
(S) 313 of the Trust Indenture Act, if any, in the form and in the manner
provided by (S) 313 of the Trust Indenture Act. The Property Trustee shall also
comply with the requirements of (S) 313(d) of the Trust Indenture Act.
SECTION 2.4 Periodic Reports.
----------------
Each of the Sponsor and the Administrative Trustees on behalf of the
Trust shall provide to the Property Trustee, the Commission and the Holders,
such documents, reports and information as are required by (S) 314 (if any) of
the Trust Indenture Act and the compliance certificate required by (S) 314 of
the Trust Indenture Act in the form, in the manner and at the times required by
(S) 314 of the Trust Indenture Act.
SECTION 2.5 Evidence of Compliance with Conditions Precedent.
------------------------------------------------
Each of the Sponsor and the Administrative Trustees on behalf of the
Trust shall provide to the Property Trustee such evidence of compliance with any
conditions precedent provided for in this Declaration that relate to any of the
matters set forth in (S) 314(c) of the Trust Indenture Act. Any certificate or
opinion required to be given by an officer pursuant to (S) 314(c)(1) of the
Trust Indenture Act may be given in the form of an Officers' Certificate.
SECTION 2.6 Events of Default; Waiver.
-------------------------
(a) The Holders of a Majority in Liquidation Amount of Capital
Securities may, by vote, on behalf of the Holders of all of the Capital
Securities, waive any past Event of Default in respect of the Capital Securities
and its consequences, provided that, if the underlying Event of Default under
-------- ----
the Indenture:
(i) is not waivable under the Indenture, the Event of Default under
the Declaration shall also not be waivable; or
10
<PAGE>
(ii) requires the consent or vote of greater than a majority in
aggregate principal amount of the holders of the Debentures (a "Super
Majority") to be waived under the Indenture, the Event of Default
under the Declaration may only be waived by the vote of the Holders of
at least the proportion in aggregate liquidation amount of the Capital
Securities that the relevant Super Majority represents of the
aggregate principal amount of the Debentures outstanding.
The foregoing provisions of this Section 2.6(a) shall be in lieu of (S)
316(a)(1)(B) of the Trust Indenture Act, and such (S) 316(a)(1)(B) of the Trust
Indenture Act is hereby expressly excluded from this Declaration and the
Securities, as permitted by the Trust Indenture Act. Upon such waiver, any such
Event of Default shall cease to exist, and any Event of Default with respect to
the Capital Securities arising therefrom shall be deemed to have been cured, for
every purpose of this Declaration, but no such waiver shall extend to any
subsequent or other Default or an Event of Default with respect to the Capital
Securities or impair any right consequent thereon. Any waiver by the Holders of
the Capital Securities of an Event of Default with respect to the Capital
Securities shall also be deemed to constitute a waiver by the Holders of the
Common Securities of any such Event of Default with respect to the Common
Securities for all purposes of this Declaration without any further act, vote or
consent of the Holders of the Common Securities.
(b) The Holders of a Majority in Liquidation Amount of the Common
Securities may, by vote, on behalf of the Holders of all of the Common
Securities, waive any past Event of Default with respect to the Common
Securities and its consequences, provided that, if the underlying Event of
-------- ----
Default under the Indenture:
(i) is not waivable under the Indenture, except where the
Holders of the Common Securities are deemed to have waived such Event
of Default under the Declaration as provided below in this Section
2.6(b), the Event of Default under the Declaration shall also not be
waivable; or
(ii) requires the consent or vote of a Super Majority to be
waived, except where the Holders of the Common Securities are deemed
to have waived such Event of Default under the Declaration as provided
below in this Section 2.6(b), the Event of Default under the
Declaration may only be waived by the vote of the Holders of at least
the proportion in aggregate liquidation amount of the Common
Securities that the relevant Super Majority represents of the
aggregate principal amount of the Debentures outstanding;
provided further, each Holder of Common Securities will be deemed to have waived
- -------- -------
any such Event of Default and all Events of Default with respect to the Common
Securities and their consequences if all Events of Default with respect to the
Capital Securities have been cured, waived or otherwise eliminated, and until
such Events of Default 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 in accordance with the terms of the
Securities. The foregoing provisions of this Section 2.6(b) shall be in lieu of
(S)(S) 316(a)(1)(A) and 316(a)(1)(B) of the Trust Indenture Act, and such (S)(S)
316(a)(1)(A) and 316(a)(1)(B) of the Trust Indenture Act are hereby expressly
excluded from this
11
<PAGE>
Declaration and the Securities, as permitted by the Trust Indenture Act. Subject
to the foregoing provisions of this Section 2.6(b), upon such waiver, any such
Default shall cease to exist and any Event of Default with respect to the Common
Securities arising therefrom shall be deemed to have been cured for every
purpose of this Declaration, but no such waiver shall extend to any subsequent
or other Default or Event of Default with respect to the Common Securities or
impair any right consequent thereon.
(c) A waiver of an Event of Default under the Indenture by the
Property Trustee, at the direction of the Holders of the Capital Securities,
constitutes a waiver of the corresponding Event of Default under this
Declaration. The foregoing provisions of this Section 2.6(c) shall be in lieu of
(S) 316(a)(1)(B) of the Trust Indenture Act, and such (S) 316(a)(1)(B) of the
Trust Indenture Act is hereby expressly excluded from this Declaration and the
Securities, as permitted by the Trust Indenture Act.
SECTION 2.7 Default; Notice.
---------------
(a) The Property Trustee shall, within 90 days after a Responsible
Officer obtains actual knowledge of the occurrence of a Default with respect to
the Securities, transmit by mail, first class postage prepaid, to the Holders,
notices of all such Defaults, unless such Defaults have been cured before the
giving of such notice or previously waived; provided, however, that except in
-------- -------
the case of a Default arising from the nonpayment of principal of or interest
(including Compounded Interest and Additional Sums (as such terms are defined in
the Indenture), if any) on any of the Debentures , the Property Trustee shall be
protected in withholding such notice if and so long as a Responsible Officer in
good faith determines that the withholding of such notice is in the interests of
the Holders.
(b) The Property Trustee shall not be deemed to have knowledge of
any Default or Event of Default except:
(i) a Default or Event of Default under Sections 5.01(a) (other
than the payment of Compounded Interest and Additional Sums) and
5.01(b) of the Indenture; or
(ii) any Default or Event of Default as to which the Property
Trustee shall have received written notice or of which a Responsible
Officer charged with the administration of the Declaration shall have
actual knowledge.
(c) Within five Business Days after a Responsible Officer obtains
actual knowledge of the occurrence of any Event of Default, the Property Trustee
shall transmit notice of such Event of Default to the Holders of the Capital
Securities, the Administrative Trustees and the Sponsor, unless such Event of
Default shall have been cured or waived. The Sponsor and the Administrative
Trustees shall file annually with the Property Trustee a certification as to
whether or not they are in compliance with all the conditions and covenants
applicable to them under this Declaration.
12
<PAGE>
ARTICLE III
ORGANIZATION
SECTION 3.1 Name.
----
The Trust is named NHTB Capital Trust I as such name may be modified
from time to time by the Administrative Trustees following written notice to the
Delaware Trustee, the Property Trustee and the Holders. The Trust's activities
may be conducted under the name of the Trust or any other name deemed advisable
by the Administrative Trustees.
SECTION 3.2 Office.
------
The address of the principal office of the Trust is NHTB Capital Trust
I, c/o New Hampshire Thrift Bancshares, Inc., 9 Main Street, Newport, New
Hampshire 03773-0029. On ten Business Days' prior written notice to the
Delaware Trustee, the Property Trustee and the Holders of Securities, the
Administrative Trustees may designate another principal office.
SECTION 3.3 Purpose.
-------
The exclusive purposes and functions of the Trust are (a) to issue and
sell the Securities, (b) use the proceeds from the sale of the Securities to
acquire the Debentures, and (c) except as otherwise limited herein, to engage in
only those other activities necessary, advisable or incidental thereto,
including without limitation, those activities specified in Sections 3.6, 3.8,
3.9, 3.10, 3.11 and/or 3.12. The Trust shall not borrow money, issue debt or
reinvest proceeds derived from investments, mortgage or pledge any of its
assets, or otherwise undertake (or permit to be undertaken) any activity that
would cause the Trust not to be classified for United States federal income tax
purposes as a grantor trust.
SECTION 3.4 Authority.
---------
Subject to the limitations provided in this Declaration and to the
specific duties of the Property Trustee, the Administrative Trustees shall have
exclusive and complete authority to carry out the purposes of the Trust. An
action taken by one or more of the Administrative Trustees in accordance with
their powers shall constitute the act of and serve to bind the Trust and an
action taken by the Property Trustee on behalf of the Trust in accordance with
its powers shall constitute the act of and serve to bind the Trust. In dealing
with the Trustees acting on behalf of the Trust, no Person shall be required to
inquire into the authority of the Trustees to bind the Trust. Persons dealing
with the Trust are entitled to rely conclusively on the power and authority of
the Trustees as set forth in this Declaration.
SECTION 3.5 Title to Property of the Trust.
------------------------------
Except as provided in Section 3.8 with respect to the Debentures and
the Property Trustee Account or as otherwise provided in this Declaration, legal
title to all assets of the Trust shall
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be vested in the Trust. The Holders shall not have legal title to any part of
the assets of the Trust, but shall have an undivided beneficial interest in the
assets of the Trust.
SECTION 3.6 Powers and Duties of the Administrative Trustees.
------------------------------------------------
The Administrative Trustees acting individually or together shall have
the power, duty and authority, and are hereby authorized and directed, to cause
the Trust to engage in the following activities:
(a) to execute, enter into and deliver the Common Securities
Subscription Agreement and to execute, deliver, issue and sell the Securities in
accordance with this Declaration; provided, however, that (i) the Trust may
-------- -------
issue no more than one series of Capital Securities and no more than one series
of Common Securities, (ii) there shall be no interests in the Trust other than
the Securities, and (iii) the issuance of Securities shall be limited to a
simultaneous issuance of both Capital Securities and Common Securities on each
Closing Date;
(b) in connection with the issue and sale of the Capital Securities
at the direction of the Sponsor, to:
(i) prepare and execute, if necessary, one or more registration
statements including a prospectus and prospectus supplements and any
amendment thereto, in preliminary and final form, relating to the
offering and sale of the Capital Securities of the Trust under the
Securities Act, and such forms or filings as may be required under the
Securities Act, the Exchange Act or the Trust Indenture Act (each a
"Registration Statement") prepared by the Sponsor;
(ii) execute and file any documents prepared by the Sponsor, or
take any acts as determined by the Sponsor to be necessary in order to
qualify or register all or part of the Capital Securities in any State
in which the Sponsor has determined to qualify or register such
Capital Securities for sale;
(iii) execute and file an application, prepared by the Sponsor,
to permit the Capital Securities to trade or be quoted or listed in or
on the Private Offerings, Resales and Trading through Automated
Linkages ("PORTAL") Market or any other securities exchange, quotation
system or the Nasdaq Stock Market's National Market; and
(iv) execute and deliver the letters, documents, or instruments
with DTC and other Clearing Agencies relating to the Capital
Securities, and if required, execute and file with the Commission a
registration statement on Form 8-A, including any amendments thereto,
prepared by the Sponsor, relating to the registration of the Capital
Securities under Section 12(b) or 12(g) of the Exchange Act, as the
case may be.
(c) to execute, enter into and deliver the Debenture Subscription
Agreement and to acquire the Debentures with the proceeds of the sale of the
Capital Securities and the Common
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Securities; provided, however, that the Administrative Trustees shall cause
-------- -------
legal title to the Debentures to be held of record in the name of the Property
Trustee for the benefit of the Holders;
(d) to give the Sponsor and the Property Trustee prompt written
notice of the occurrence of a Special Event;
(e) to establish a record date with respect to all actions to be taken
hereunder that require a record date to be established, including and with
respect to, for the purposes of (S) 316(c) of the Trust Indenture Act,
Distributions, voting rights, redemptions and exchanges, and to issue relevant
notices to the Holders with respect to such actions and applicable record dates;
(f) to take all actions and perform such duties as may be required of
the Administrative Trustees pursuant to the terms of the Securities;
(g) to the fullest extent permitted by law, to bring or defend, pay,
collect, compromise, arbitrate, resort to legal action, or otherwise adjust
claims or demands of or against the Trust ("Legal Action"), unless pursuant to
Section 3.8(e), the Property Trustee has the exclusive power to bring such Legal
Action;
(h) to employ or otherwise engage employees, agents (who may be
designated as officers with titles), managers, contractors, advisors and
consultants and pay reasonable compensation for such services;
(i) to cause the Trust to comply with the Trust's obligations under
the Trust Indenture Act;
(j) to give the certificate required by (S) 314(a)(4) of the Trust
Indenture Act to the Property Trustee, which certificate may be executed by any
Administrative Trustee;
(k) to incur expenses that are necessary or incidental to carry out
any of the purposes of the Trust;
(l) to act as, or appoint another Person to act as, Registrar and
Exchange Agent for the Securities or to appoint a Paying Agent for the
Securities as provided in Section 7.5 except for such time as such power to
appoint a Paying Agent is vested in the Property Trustee;
(m) to give prompt written notice to the Property Trustee and to the
Holders of any notice received from the Debenture Issuer of its election to
defer payments of interest on the Debentures by extending the interest payment
period under the Indenture;
(n) to take all action that may be necessary or appropriate for the
preservation and the continuation of the Trust's valid existence, rights,
franchises and privileges as a statutory business trust under the laws of the
State of Delaware and of each other jurisdiction in which such existence is
necessary to protect the limited liability of the Holders or to enable the Trust
to effect the purposes for which the Trust was created;
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(o) to take any action, not inconsistent with this Declaration or
with applicable law, that the Administrative Trustees determine in their
discretion to be necessary or desirable in carrying out the activities of the
Trust as set out in this Section 3.6, including, but not limited to:
(i) causing the Trust not to be deemed to be an Investment
Company required to be registered under the Investment Company Act;
(ii) causing the Trust to continue not to be classified as an
association taxable as a corporation or causing the Trust to be
classified as a grantor trust, in each case for United States federal
income tax purposes; and
(iii) cooperating with the Debenture Issuer to ensure that the
Debentures will be treated as indebtedness of the Debenture Issuer for
United States federal income tax purposes;
(p) to take all action necessary to cause all applicable tax returns
and tax information reports that are required to be filed with respect to the
Trust to be duly prepared and filed by the Administrative Trustees, on behalf of
the Trust; and
(q) to execute and deliver all documents or instruments, perform all
duties and powers, and do all things for and on behalf of the Trust in all
matters necessary, advisable or incidental to the foregoing.
The Administrative Trustees must exercise the powers set forth in this
Section 3.6 in a manner that is consistent with the purposes and functions of
the Trust set out in Section 3.3, and the Administrative Trustees shall not take
any action that is inconsistent with the purposes and functions of the Trust set
forth in Section 3.3.
Subject to this Section 3.6, the Administrative Trustees shall have
none of the powers or the authority of the Property Trustee set forth in Section
3.8.
Any expenses incurred by the Administrative Trustees pursuant to this
Section 3.6 shall be reimbursed by the Debenture Issuer.
SECTION 3.7 Prohibition of Actions by the Trust and the Trustees.
----------------------------------------------------
The Trust shall not, and the Trustees (including the Property Trustee
and the Delaware Trustee) shall not, and the Administrative Trustees shall cause
the Trust not to, engage in any activity other than as required or authorized by
this Declaration. Notwithstanding any provision in this Declaration to the
contrary, the Trust shall not:
(i) invest any proceeds received by the Trust from holding the
Debentures, but shall distribute all such proceeds to Holders pursuant
to the terms of this Declaration and of the Securities;
(ii) acquire any assets other than as expressly provided herein;
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(iii) possess Trust Property for other than a Trust purpose or
execute any mortgage in respect of, or pledge, any Trust Property;
(iv) make any loans or incur any indebtedness other than loans
represented by the Debentures;
(v) possess any power or otherwise act in such a way as to
vary the Trust Property or the terms of the Securities in any way
whatsoever;
(vi) issue any securities or other evidences of beneficial
ownership of, or beneficial interest in, the Trust other than the
Securities;
(vii) other than as provided in this Declaration or Annex I
hereto, (A) direct the time, method and place of conducting any
proceeding with respect to any remedy available to the Debenture
Trustee, or exercising any trust or power conferred upon the Debenture
Trustee with respect to the Debentures, (B) waive any past default
that is waivable under the Indenture, or (C) exercise any right to
rescind or annul any declaration that the principal of all the
Debentures shall be due and payable; or
(viii) consent to any amendment, modification or termination of
the Indenture or the Debentures where such consent shall be required
unless the Trust shall have received an opinion of independent tax
counsel experienced in such matters to the effect that such amendment,
modification or termination will not cause more than an insubstantial
risk that the Trust will not be classified as a grantor trust for
United States federal income tax purposes.
SECTION 3.8 Powers and Duties of the Property Trustee.
-----------------------------------------
(a) The legal title to the Debentures shall be owned by and held of
record in the name of the Property Trustee in trust for the benefit of the Trust
and the Holders. The right, title and interest of the Property Trustee to the
Debentures shall vest automatically in each Person who may hereafter be
appointed as Property Trustee in accordance with Section 5.6. Such vesting and
cessation of title shall be effective whether or not conveyancing documents with
regard to the Debentures have been executed and delivered.
(b) The Property Trustee shall not transfer its right, title and
interest in the Debentures to the Administrative Trustees or to the Delaware
Trustee (if the Property Trustee does not also act as Delaware Trustee).
(c) The Property Trustee shall:
(i) establish and maintain a segregated non-interest bearing
trust account (the "Property Trustee Account") in the name of and
under the exclusive control of the Property Trustee on behalf of the
Holders and, upon the receipt of
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payments of funds made in respect of the Debentures held by the
Property Trustee, deposit such funds into the Property Trustee Account
and make payments or cause the Paying Agent to make payments to the
Holders from the Property Trustee Account in accordance with Section
6.1; funds in the Property Trustee Account shall be held uninvested
until disbursed in accordance with this Declaration; and the Property
Trustee Account shall be an account that is maintained with a banking
institution the rating on whose long-term unsecured indebtedness by a
"nationally recognized statistical rating organization," as that term
is defined for purposes of Rule 436(g)(2) under the Securities Act, is
at least equal to the rating assigned to the Capital Securities;
(ii) engage in such ministerial activities as shall be necessary
or appropriate to effect the redemption of the Securities to the
extent the Debentures are redeemed or mature; and
(iii) upon written notice of distribution issued by the
Administrative Trustees in accordance with the terms of the
Securities, engage in such ministerial activities as shall be
necessary or appropriate to effect the distribution of the Debentures
to Holders upon the occurrence of certain events.
(d) The Property Trustee shall take all actions and perform such
duties as may be specifically required of the Property Trustee pursuant to the
terms of this Declaration and the Securities.
(e) Subject to Section 3.9(a), the Property Trustee shall take any
Legal Action which arises out of or in connection with an Event of Default of
which a Responsible Officer has actual knowledge (other than in the case of
Events of Default under Sections 5.01(a) and 5.01(b) of the Indenture) or the
Property Trustee's duties and obligations under this Declaration or the Trust
Indenture Act may so require; and if the Property Trustee shall have failed to
take such Legal Action following a written request from the Holders, the Holders
of the Capital Securities may, to the fullest extent permitted by law, take such
Legal Action, to the same extent as if such Holders of Capital Securities held
an aggregate principal amount of Debentures equal to the aggregate liquidation
amount of such Capital Securities, without first proceeding against the Property
Trustee or the Trust; provided, however, that if an Event of Default has
-------- -------
occurred and is continuing and such event is attributable to the failure of the
Debenture Issuer to pay the principal of or interest (including Compounded
Interest and Additional Sums, if any) on the Debentures on the date such
principal or interest (including Compounded Interest and Additional Sums, if
any) is otherwise payable (or in the case of redemption, on the redemption
date), then a Holder of Capital Securities may directly institute a proceeding
for enforcement of payment to such Holder of the principal of or interest
(including Compounded Interest and Additional Sums, if any) on the Debentures
having a principal amount equal to the aggregate liquidation amount of the
Capital Securities of such Holder (a "Direct Action") on or after the respective
due date specified in the Debentures. In connection with such Direct Action, the
Holders of the Common Securities will be subrogated to the rights of such Holder
of Capital Securities to the extent of any payment made by the Debenture Issuer
to such Holder of Capital Securities in such Direct Action. Except as provided
in the preceding sentences, the Holders
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of Capital Securities will not be able to exercise directly any other remedy
available to the holders of the Debentures.
(f) The Property Trustee shall continue to serve as a Trustee until
either:
(i) the Trust has been completely liquidated and the proceeds of
the liquidation distributed to the Holders pursuant to the terms of
the Securities and this Declaration; or
(ii) a successor Property Trustee has been appointed and has
accepted that appointment in accordance with Section 5.6 (a "Successor
Property Trustee").
(g) The Property Trustee shall have the legal power to exercise all
of the rights, powers and privileges of a holder of Debentures under the
Indenture, and, if an Event of Default actually known to a Responsible Officer
(other than in the case of Events of Default under Sections 5.01(a) and 5.01(b)
of the Indenture) occurs and is continuing, the Property Trustee shall, for the
benefit of Holders, enforce its rights as holder of the Debentures subject to
the rights of the Holders pursuant to the terms of this Declaration and the
Securities.
(h) The Property Trustee shall be authorized to undertake any actions
set forth in (S) 317(a) of the Trust Indenture Act.
(i) For such time as the Property Trustee is the Paying Agent, the
Property Trustee may authorize one or more Persons to act as additional Paying
Agents and to pay Distributions, redemption payments or liquidation payments on
behalf of the Trust with respect to all Securities, and any such Paying Agent
shall comply with (S) 317(b) of the Trust Indenture Act. Any such additional
Paying Agent may be removed by the Property Trustee at any time the Property
Trustee remains as Paying Agent, and a successor Paying Agent or additional
Paying Agents may be (but are not required to be) appointed at any time by the
Property Trustee while the Property Trustee is acting as Paying Agent.
(j) Subject to this Section 3.8, the Property Trustee shall have none
of the duties, liabilities, powers or the authority of the Administrative
Trustees set forth in Section 3.6.
Notwithstanding anything expressed or implied to the contrary in this
Declaration or any Annex or Exhibit hereto, (i) the Property Trustee must
exercise the powers set forth in this Section 3.8 in a manner that is consistent
with the purposes and functions of the Trust set out in Section 3.3, and (ii)
the Property Trustee shall not take any action that is inconsistent with the
purposes and functions of the Trust set out in Section 3.3.
SECTION 3.9 Certain Duties and Responsibilities of the Property Trustee.
-----------------------------------------------------------
(a) The Property Trustee, before the occurrence of any Event of
Default (of which, other than in the case of Events of Default under Sections
5.01(a) and 5.01(b) of the Indenture, a Responsible Officer of the Property
Trustee has actual knowledge) and after the curing or waiving of all such Events
of Default that may have occurred, shall undertake to perform only
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such duties as are specifically set forth in this Declaration and in the
Securities, and no implied covenants shall be read into this Declaration against
the Property Trustee. In case an Event of Default has occurred (that has not
been cured or waived pursuant to Section 2.6) of which a Responsible Officer has
actual knowledge (other than in the case of Events of Default under Sections
5.01(a) and 5.01(b) of the Indenture), the Property Trustee shall exercise such
of the rights and powers vested in it by this Declaration, and use the same
degree of care and skill in their exercise, as a prudent person would exercise
or use under the circumstances in the conduct of his or her own affairs.
(b) No provision of this Declaration shall be construed to relieve
the Property Trustee from liability for its own negligent action, its own
negligent failure to act, or its own willful misconduct, except that:
(i) prior to the occurrence of an Event of Default (of which,
other than in the case of Events of Default under Sections 5.01(a) and
5.01(b) of the Indenture, a Responsible Officer of the Property
Trustee has actual knowledge) and after the curing or waiving of all
such Events of Default that may have occurred:
(A) the duties and obligations of the Property Trustee shall be
determined solely by the express provisions of this Declaration
and in the Securities, and the Property Trustee shall not be
liable except for the performance of such duties and obligations
as are specifically set forth in this Declaration and in the
Securities, and no implied covenants or obligations shall be read
into this Declaration against the Property Trustee; and
(B) in the absence of bad faith on the part of the Property
Trustee, the Property Trustee may conclusively rely, as to the
truth of the statements and the correctness of the opinions
expressed therein, upon any certificates or opinions furnished to
the Property Trustee and conforming to the requirements of this
Declaration; provided, however, that in the case of any such
-------- -------
certificates or opinions that by any provision hereof are
specifically required to be furnished to the Property Trustee,
the Property Trustee shall be under a duty to examine the same to
determine whether or not on their face they conform to the
requirements of this Declaration;
(ii) the Property Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer, unless it shall
be proved that the Property Trustee was negligent in ascertaining the
pertinent facts;
(iii) the Property Trustee shall not be liable with respect to
any action taken or omitted to be taken by it in good faith in
accordance with the direction of the Holders of a Majority in
Liquidation Amount of the Securities relating to 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 this Declaration;
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(iv) no provision of this Declaration shall require the
Property Trustee to expend or risk its own funds or otherwise incur
personal financial liability in the performance of any of its duties
or in the exercise of any of its rights or powers;
(v) the Property Trustee's sole duty with respect to the
custody, safekeeping and physical preservation of the Debentures and
the Property Trustee Account shall be to deal with such property in a
similar manner as the Property Trustee deals with similar property for
its own account, subject to the protections and limitations on
liability afforded to the Property Trustee under this Declaration and
the Trust Indenture Act;
(vi) the Property Trustee shall have no duty or liability for
or with respect to the value, genuineness, existence or sufficiency of
the Debentures or the payment of any taxes or assessments levied
thereon or in connection therewith;
(vii) the Property Trustee shall not be liable for any interest
on any money received by it except as it may otherwise agree in
writing with the Sponsor. Money held by the Property Trustee need not
be segregated from other funds held by it except in relation to the
Property Trustee Account maintained by the Property Trustee pursuant
to Section 3.8(c)(i) and except to the extent otherwise required by
law; and
(viii) the Property Trustee shall not be responsible for
monitoring the compliance by the Administrative Trustees or the
Sponsor with their respective duties under this Declaration, nor shall
the Property Trustee be liable for any default or misconduct of the
Administrative Trustees or the Sponsor.
SECTION 3.10 Certain Rights of Property Trustee.
----------------------------------
(a) Subject to the provisions of Section 3.9:
(i) the Property Trustee may conclusively rely and shall be
fully protected in acting or refraining from acting upon any
resolution, certificate, statement, instrument, opinion, report,
notice, request, direction, consent, order, bond, debenture, note,
other evidence of indebtedness or other paper or document believed by
it to be genuine and to have been signed, sent or presented by the
proper party or parties;
(ii) any direction or act of the Sponsor or the Administrative
Trustees contemplated by this Declaration may be sufficiently
evidenced by an Officers' Certificate;
(iii) whenever in the administration of this Declaration, the
Property Trustee shall deem it desirable that a matter be proved or
established before taking, suffering or omitting any action hereunder,
the Property Trustee (unless other evidence is herein specifically
prescribed) may, in the absence of bad faith
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on its part, request and conclusively rely upon an Officers'
Certificate which, upon receipt of such request, shall be promptly
delivered by the Sponsor or the Administrative Trustees;
(iv) the Property Trustee shall have no duty to see to any
recording, filing or registration of any instrument (including any
financing or continuation statement or any filing under tax or
securities laws) or any rerecording, refiling or registration thereof;
(v) the Property Trustee may consult with counsel or other
experts of its selection, and the advice or opinion of such counsel
and experts with respect to legal matters or advice within the scope
of such experts' area of expertise shall be full and complete
authorization and protection in respect of any action taken, suffered
or omitted by it hereunder in good faith and in accordance with such
advice or opinion; such counsel may be counsel to the Sponsor or any
of its Affiliates, and may include any of its employees; and the
Property Trustee shall have the right at any time to seek instructions
concerning the administration of this Declaration from any court of
competent jurisdiction;
(vi) the Property Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by this Declaration
at the request or direction of any Holder, unless such Holder shall
have provided to the Property Trustee security and indemnity,
reasonably satisfactory to the Property Trustee, against the costs,
expenses (including reasonable attorneys' fees and expenses and the
expenses of the Property Trustee's agents, nominees or custodians) and
liabilities that might be incurred by it in complying with such
request or direction, including such reasonable advances as may be
requested by the Property Trustee; provided, however, that, nothing
-------- -------
contained in this Section 3.10(a)(vi) shall be taken to relieve the
Property Trustee, upon the occurrence of an Event of Default (of
which, other than in the case of Events of Default under Sections
5.01(a) and 5.01(b) of the Indenture, a Responsible Officer of the
Property Trustee has actual knowledge), of its obligation to exercise
the rights and powers vested in it by this Declaration;
(vii) the Property Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice, request,
direction, consent, order, bond, debenture, note, other evidence of
indebtedness or other paper or document, but the Property Trustee, in
its discretion, may make such further inquiry or investigation into
such facts or matters as it may see fit;
(viii) the Property Trustee may execute any of the trusts or
powers hereunder or perform any duties hereunder either directly or by
or through agents, custodians, nominees or attorneys, and the Property
Trustee shall not be responsible for any misconduct or negligence on
the part of any agent or attorney appointed with due care by it
hereunder;
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(ix) any authorized or required action taken by the Property
Trustee or its agents hereunder shall bind the Trust and the Holders,
and the signature of the Property Trustee or its agents alone shall be
sufficient and effective to perform any such action, and no third
party shall be required to inquire as to the authority of the Property
Trustee to so act or as to its compliance with any of the terms and
provisions of this Declaration, both of which shall be conclusively
evidenced by the Property Trustee's or its agent's taking such action;
(x) whenever in the administration of this Declaration the
Property Trustee shall deem it desirable to receive instructions with
respect to enforcing any remedy or right or taking any other action
hereunder, the Property Trustee (i) may request instructions from the
Holders, which instructions may only be given by the Holders of the
same proportion in liquidation amount of the Securities as would be
entitled to direct the Property Trustee under the terms of the
Securities in respect of such remedy, right or action, (ii) may
refrain from enforcing such remedy or right or taking such other
action until such instructions are received, and (iii) shall be
protected in conclusively relying on or acting in accordance with such
instructions;
(xi) except as otherwise expressly provided by this Declaration,
the Property Trustee shall not be under any obligation to take any
action that is discretionary under the provisions of this Declaration;
and
(xii) the Property Trustee shall not be liable for any action
taken, suffered, or omitted to be taken by it in good faith, without
negligence or willful misconduct, and reasonably believed by it to be
authorized or within the discretion or rights or powers conferred upon
it by this Declaration.
(b) No provision of this Declaration shall be deemed to impose any
duty or obligation on the Property Trustee to perform any act or acts or
exercise any right, power, duty or obligation conferred or imposed on it, in any
jurisdiction in which it shall be illegal, or in which the Property Trustee
shall be unqualified or incompetent in accordance with applicable law, to
perform any such act or acts, or to exercise any such right, power, duty or
obligation. No permissive power or authority available to the Property Trustee
shall be construed to be a duty.
SECTION 3.11 Delaware Trustee.
----------------
Notwithstanding any other provision of this Declaration other than
Section 5.2, the Delaware Trustee shall not be entitled to exercise any powers,
nor shall the Delaware Trustee have any of the duties and responsibilities of
the Trustees described in this Declaration (except as required under the
Business Trust Act). Except as set forth in Section 5.2, the Delaware Trustee
shall be a Trustee for the sole and limited purpose of fulfilling the
requirements of (S) 3807 of the Business Trust Act. In the event the Delaware
Trustee shall at any time be required to take any action or perform any duty
hereunder, the Delaware Trustee shall be entitled to the benefits of Section
3.9(b)(ii) to (viii), inclusive, and Section 3.10. No implied covenants or
obligations shall be read into this Declaration against the Delaware Trustee.
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SECTION 3.12 Execution of Documents.
----------------------
Unless otherwise required by applicable law, each Administrative
Trustee, individually, is authorized to execute and deliver on behalf of the
Trust any documents, agreements, instruments or certificates that the
Administrative Trustees have the power and authority to execute pursuant to
Section 3.6.
SECTION 3.13 Not Responsible for Recitals or Issuance of Securities.
------------------------------------------------------
The recitals contained in this Declaration and the Securities shall be
taken as the statements of the Sponsor, and the Trustees do not assume any
responsibility for their correctness. The Trustees make no representations as to
the value or condition of the Trust Property or any part thereof. The Trustees
make no representations as to the validity or sufficiency of this Declaration or
the Securities.
SECTION 3.14 Duration of Trust.
-----------------
The Trust, unless dissolved pursuant to the provisions of Article VIII
hereof, shall have existence up to [___________], 2029.
SECTION 3.15 Mergers.
-------
(a) The Trust may not merge with or into, consolidate, amalgamate, or
be replaced by, or convey, transfer or lease its properties and assets as an
entirety or substantially as an entirety to any Person, except as described in
Section 3.15(b) and (c) and except with respect to the distribution of
Debentures to Holders pursuant to Section 8.1(a)(iii) of this Declaration or
Section 3 of Annex I.
(b) The Trust may, at the request of the Sponsor, with the consent of
the Administrative Trustees or, if there are more than two, a majority of the
Administrative Trustees and without the consent of the Holders, the Delaware
Trustee or the Property Trustee, merge with or into, consolidate, amalgamate, or
be replaced by, or convey, transfer or lease its properties and assets as an
entirety or substantially as an entirety to, a trust organized as such under the
laws of any State; provided that:
-------- ----
(i) such successor entity (the "Successor Entity") either:
(A) expressly assumes all of the obligations of the Trust under
the Securities; or
(B) substitutes for the Securities other securities having
substantially the same terms as the Securities (the "Successor
Securities") so long as the Successor Securities rank the same as
the Securities rank in priority with respect to Distributions and
payments upon liquidation, redemption and otherwise;
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(ii) the Sponsor expressly appoints a trustee of the Successor
Entity that possesses the same powers and duties as the Property
Trustee with respect to the Debentures;
(iii) the Successor Securities (excluding any securities
substituted for the Common Securities) are listed, quoted or included
for trading, or any Successor Securities will be listed, quoted or
included for trading upon notification of issuance, on any national
securities exchange or with any other organization on which the
Capital Securities are then listed, quoted or included;
(iv) such merger, consolidation, amalgamation, replacement,
conveyance, transfer or lease does not cause the Capital Securities
(including any Successor Securities) or the Debentures to be
downgraded by any nationally recognized statistical rating
organization that publishes a rating on the Capital Securities or the
Debentures;
(v) such merger, consolidation, amalgamation, replacement,
conveyance, transfer or lease does not adversely affect the rights,
preferences and privileges of the Holders (including the holders of
any Successor Securities) in any material respect (other than with
respect to any dilution of the interests of such Holders or holders,
as the case may be, in the Successor Entity);
(vi) the Successor Entity has a purpose substantially identical
to that of the Trust;
(vii) prior to such merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease, the Sponsor has received
an opinion of independent counsel to the Trust experienced in such
matters to the effect that:
(A) such merger, consolidation, amalgamation, replacement,
conveyance, transfer or lease does not adversely affect the
rights, preferences and privileges of the Holders (including the
holders of any Successor Securities) in any material respect
(other than with respect to any dilution of the interests of such
Holders or holders, as the case may be, in the Successor Entity);
(B) following such merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease, neither the Trust nor
the Successor Entity will be required to register as an
Investment Company; and
(C) following such merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease, the Trust (or the
Successor Entity) will continue not to be classified as an
association taxable as a corporation and will not be less likely
to be classified as a grantor trust for United States federal
income tax purposes;
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(viii) the Sponsor or any permitted successor or assignee owns
all of the common securities of the Successor Entity and guarantees
the obligations of the Successor Entity under the Successor Securities
at least to the extent provided by the Securities Guarantees; and
(ix) there shall have been furnished to the Property Trustee an
Officers' Certificate and an Opinion of Counsel, each to the effect
that all conditions precedent in this Declaration to such transaction
have been satisfied.
(c) Notwithstanding Section 3.15(b), the Trust shall not, except with
the consent of Holders of 100% in aggregate liquidation amount of the
Securities, consolidate, amalgamate, merge with or into, or be replaced by, or
convey, transfer or lease its properties and assets as an entirety or
substantially as an entirety to, any other Person or permit any other Person to
consolidate, amalgamate, merge with or into, or replace it if such
consolidation, amalgamation, merger, replacement, conveyance, transfer or lease
would cause the Trust or the Successor Entity not to be classified as a grantor
trust for United States federal income tax purposes.
ARTICLE IV
SPONSOR
SECTION 4.1 Sponsor's Purchase of Common Securities.
---------------------------------------
On each Closing Date, pursuant to the Common Securities Subscription
Agreement, the Sponsor will purchase all of the Common Securities then issued by
the Trust, in an amount equal to at least 3% of the total capital of the Trust,
at the same time as the Capital Securities are issued and sold.
SECTION 4.2 Responsibilities of the Sponsor.
-------------------------------
In connection with the issue and sale of the Capital Securities, the
Sponsor shall have the exclusive right and responsibility to engage in the
following activities:
(a) to prepare and file with the Commission the Registration
Statements and any amendments thereto, and the prospectus to be included
therein, in preliminary and final form, and to prepare for filing by the Trust
with the Commission any other necessary documents, including any amendments
thereto;
(b) to determine the States in which to take appropriate action to
qualify or register for sale all or part of the Capital Securities and to do any
and all such acts, other than actions which must be taken by the Trust, and
advise the Trust of actions it must take, and prepare for execution and filing
any documents to be executed and filed by the Trust, as the Sponsor deems
necessary or advisable in order to comply with the applicable laws of any such
States; and
(c) if deemed necessary or advisable by the Sponsor, to prepare for
filing by the Trust an application to permit the Capital Securities to trade or
be quoted or listed in or on the PORTAL market, or any other securities
exchange, quotation system or the Nasdaq Stock Market's
26
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National Market to prepare for filing by the Trust with the Commission a
registration statement on Form 8-A, including any amendments thereto, relating
to the registration of the Capital Securities under Section 12(b) or 12(g) of
the Exchange Act, as the case may be, including any amendments thereto; and to
negotiate the terms of, execute, enter into and deliver the Underwriting
Agreement.
SECTION 4.3 Right to Proceed.
----------------
The Sponsor acknowledges the rights of the Holders of Capital
Securities, in the event that a failure of the Trust to pay Distributions on the
Capital Securities is attributable to the failure of the Debenture Issuer to pay
the principal of or interest on the Debentures, to institute a proceeding
directly against the Debenture Issuer for enforcement of its payment obligations
in respect of the Debentures.
SECTION 4.4 Right to Dissolve Trust.
-----------------------
The Sponsor will have the right at any time to dissolve the Trust and,
after satisfaction of liabilities to creditors of the Trust as required by
applicable law, to cause the Debentures to be distributed to the Holders in
liquidation of the Trust. Such right is subject to the Sponsor's having received
(i) an Opinion of Counsel to the effect that such distribution will not cause
the Holders of Capital Securities to recognize gain or loss for United States
federal income tax purposes and (ii) all required regulatory approvals.
ARTICLE V
TRUSTEES
SECTION 5.1 Number of Trustees; Appointment of Co-Trustee.
---------------------------------------------
The number of Trustees initially shall be five (5), and:
(a) at any time before the issuance of any Securities, the Sponsor
may, by written instrument, increase or decrease the number of Trustees; and
(b) after the issuance of any Securities, the number of Trustees may
be increased or decreased by vote of the Holders of a Majority in Liquidation
Amount of the Common Securities voting as a class at a meeting of the Holders of
the Common Securities;
provided, however, that, the number of Trustees shall in no event be less than
- -------- -------
two (2); provided further that (1) one Trustee, in the case of a natural person,
-------- -------
shall be a person who is a resident of the State of Delaware or that, if not a
natural person, is an entity which has its principal place of business in the
State of Delaware (the "Delaware Trustee"); (2) there shall be at least one
Trustee who is an employee or officer of, or is affiliated with, the Sponsor (an
"Administrative Trustee"); and (3) one Trustee shall be the Property Trustee for
so long as this Declaration is required to qualify as an indenture under the
Trust Indenture Act, and such Trustee may also serve as Delaware Trustee if it
meets the applicable requirements. Notwithstanding the above, unless an Event of
Default shall have occurred and be continuing, at any time or times, for the
purpose of meeting the legal requirements of the Trust Indenture Act or of any
jurisdiction in which any part of the Trust Property may at the
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time be located, the Holders of a Majority in Liquidation Amount of the Common
Securities acting as a class at a meeting of the Holders of the Common
Securities, and the Administrative Trustees shall have power to appoint one or
more Persons either to act as a co-trustee, jointly with the Property Trustee,
of all or any part of the Trust Property, or to act as separate trustee of any
such property, in either case with such powers as may be provided in the
instrument of appointment, and to vest in such Person or Persons in such
capacity any property, title, right or power deemed necessary or desirable,
subject to the provisions of this Declaration. In case an Event of Default has
occurred and is continuing, the Property Trustee alone shall have power to make
any such appointment of a co-trustee.
SECTION 5.2 Delaware Trustee.
----------------
For so long as required by the Business Trust Act, the Delaware
Trustee shall be:
(a) a natural person who is a resident of the State of Delaware; or
(b) if not a natural person, an entity which has its principal place
of business in the State of Delaware, and otherwise meets the requirements of
applicable law,
provided, however, that, if the Property Trustee has its principal place of
- -------- -------
business in the State of Delaware and otherwise meets the requirements of
applicable law, then the Property Trustee shall also be the Delaware Trustee and
Section 3.11 shall have no application.
The initial Delaware Trustee shall be:
Wilmington Trust Company
Rodney Square North
1100 Market Street
Wilmington, Delaware 19890-0001
Attn.: Corporate Trust Administration
Telephone: (302) 651-1000
Telecopier:(302) 651-8882
SECTION 5.3 Property Trustee; Eligibility.
-----------------------------
(a) There shall at all times be one Trustee (the "Property Trustee")
which shall act as Property Trustee and which shall:
(i) not be an Affiliate of the Sponsor; and
(ii) be a corporation organized and doing business under the laws
of the United States of America or any State or Territory thereof or
of the District of Columbia, or a corporation or Person permitted by
the Commission to act as an indenture trustee under the Trust
Indenture Act, authorized under such laws to exercise corporate trust
powers, having a combined capital and surplus of at least fifty
million U.S. dollars ($50,000,000), and subject to supervision or
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examination by federal, state, territorial or District of Columbia
authority. If such corporation publishes reports of condition at least
annually, pursuant to law or to the requirements of the supervising or
examining authority referred to above, then for the purposes of this
Section 5.3(a)(ii), the combined capital and surplus of such
corporation shall be deemed to be its combined capital and surplus as
set forth in its most recent report of condition so published.
(b) If at any time the Property Trustee shall cease to be eligible to
so act under Section 5.3(a), the Property Trustee shall immediately resign in
the manner and with the effect set forth in Section 5.6(c).
(c) If the Property Trustee has or shall acquire any "conflicting
interest" within the meaning of (S) 310(b) of the Trust Indenture Act, the
Property Trustee and the Holder of the Common Securities (as if it were the
obligor referred to in (S) 310(b) of the Trust Indenture Act) shall in all
respects comply with the provisions of (S) 310(b) of the Trust Indenture Act.
(d) The Capital Securities Guarantee shall be deemed to be
specifically described in this Declaration for purposes of clause (i) of the
first proviso contained in (S) 310(b) of the Trust Indenture Act.
(e) The initial Property Trustee shall be:
Wilmington Trust Company
Rodney Square North
1100 Market Street
Wilmington, Delaware 19890-0001
Attn.: Corporate Trust Administration
Telephone: (302) 651-1000
Telecopier: (302) 651-8882
SECTION 5.4 Certain Qualifications of Administrative Trustees and Delaware
--------------------------------------------------------------
Trustee Generally.
-----------------
Each Administrative Trustee and the Delaware Trustee (unless the
Property Trustee also acts as Delaware Trustee) shall be either a natural person
who is at least 21 years of age or a legal entity that shall act through one or
more Authorized Officers.
SECTION 5.5 Administrative Trustees.
-----------------------
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The initial Administrative Trustees shall be:
Daryl J. Cady
Stephen W. Ensign
Stephen R. Theroux
c/o New Hampshire Thrift Bancshares, Inc.
9 Main Street
P.O. Box 29
Newport, New Hampshire 03773-0029
Telephone: (603) 863-5772
Telecopier: (603) 863-9571
Except as expressly set forth in this Declaration and except if a
meeting of the Administrative Trustees is called with respect to any matter over
which the Administrative Trustees have power to act, any power of the
Administrative Trustees may be exercised by, or with the consent of, any one
such Administrative Trustee.
SECTION 5.6 Appointment, Removal and Resignation of Trustees.
------------------------------------------------
(a) Subject to Section 5.6(b) hereof and to Section 6(b) of Annex I
hereto, Trustees may be appointed or removed without cause at any time:
(i) until the issuance of any Securities, by written instrument
executed by the Sponsor;
(ii) unless an Event of Default shall have occurred and be
continuing after the issuance of any Securities, by vote of the
Holders of a Majority in Liquidation Amount of the Common Securities
voting as a class at a meeting of the Holders of the Common
Securities; and
(iii) if an Event of Default shall have occurred and be
continuing after the issuance of the Securities, with respect to the
Property Trustee or the Delaware Trustee, by vote of Holders of a
Majority in Liquidation Amount of the Capital Securities voting as a
class at a meeting of Holders of the Capital Securities, and with
respect to the Administrative Trustees, in the manner set forth in
Section 5.6(a)(ii) hereof.
(b) (i) The Trustee that acts as Property Trustee shall not be
removed in accordance with Section 5.6(a) until a Successor Property Trustee has
been appointed and has accepted such appointment by written instrument executed
by such Successor Property Trustee and delivered to the removed Property
Trustee, the Administrative Trustees and the Sponsor; and
(ii) the Trustee that acts as Delaware Trustee shall not be
removed in accordance with Section 5.6(a) until a successor Trustee possessing
the qualifications to act as Delaware Trustee under Sections 5.2 and 5.4 (a
"Successor Delaware Trustee") has been appointed and has accepted such
appointment by written instrument executed by such Successor Delaware
30
<PAGE>
Trustee and delivered to the removed Delaware Trustee, the Property Trustee (if
the removed Delaware Trustee is not also the Property Trustee), the
Administrative Trustees and the Sponsor.
(c) A Trustee appointed to office shall hold office until his
successor shall have been appointed or until his death, removal or resignation.
Any Trustee may resign from office (without need for prior or subsequent
accounting) by an instrument in writing signed by the Trustee and delivered to
the other Trustees, the Sponsor and the Trust, which resignation shall take
effect upon such delivery or upon such later date as is specified therein;
provided, however, that:
- -------- -------
(i) No such resignation of the Trustee that acts as the Property
Trustee shall be effective:
(A) until a Successor Property Trustee has been appointed and
has accepted such appointment by instrument executed by such
Successor Property Trustee and delivered to the Trust, the
Sponsor, the Delaware Trustee (if the resigning Property Trustee
is not also the Delaware Trustee) and the resigning Property
Trustee; or
(B) until the assets of the Trust have been completely
liquidated and the proceeds thereof distributed to the Holders;
and
(ii) no such resignation of the Trustee that acts as the Delaware
Trustee shall be effective until a Successor Delaware Trustee has been
appointed and has accepted such appointment by instrument executed by
such Successor Delaware Trustee and delivered to the Trust, the
Property Trustee (if the resigning Delaware Trustee is not also the
Property Trustee), the Sponsor and the resigning Delaware Trustee.
(d) The Holders of the Common Securities or, if an Event of Default
shall have occurred and be continuing after the issuance of the Securities, the
Holders of the Capital Securities shall use their best efforts to promptly
appoint a Successor Property Trustee or Successor Delaware Trustee, as the case
may be, if the Property Trustee or the Delaware Trustee delivers an instrument
of resignation in accordance with this Section 5.6.
(e) If no Successor Property Trustee or Successor Delaware Trustee
shall have been appointed and accepted appointment as provided in this Section
5.6 within 60 days after delivery of an instrument of resignation or removal,
the Property Trustee or Delaware Trustee resigning or being removed, as
applicable, may petition any court of competent jurisdiction for appointment of
a Successor Property Trustee or Successor Delaware Trustee. Such court may
thereupon, after prescribing such notice, if any, as it may deem proper to
prescribe, appoint a Successor Property Trustee or Successor Delaware Trustee,
as the case may be.
(f) No Property Trustee or Delaware Trustee shall be liable for the
acts or omissions to act of any Successor Property Trustee or Successor Delaware
Trustee, as the case may be.
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(g) At the time of resignation or removal of the Property Trustee or
the Delaware Trustee, the Sponsor shall pay to such Trustee any amounts that may
be owed to such Trustee pursuant to Section 10.4.
(h) Any successor Delaware Trustee shall file an amendment to the
Certificate of Trust with the Secretary of State of the State of Delaware
identifying the name and principal place of business of such Successor Delaware
Trustee in the State of Delaware.
SECTION 5.7 Vacancies among Trustees.
------------------------
If a Trustee ceases to hold office for any reason and the number of
Trustees is not reduced pursuant to Section 5.1, or if the number of Trustees is
increased pursuant to Section 5.1, a vacancy shall occur. A resolution
certifying the existence of such vacancy by the Administrative Trustees or, if
there are more than two, a majority of the Administrative Trustees shall be
conclusive evidence of the existence of such vacancy. The vacancy shall be
filled with a Trustee appointed in accordance with Section 5.6.
SECTION 5.8 Effect of Vacancies.
-------------------
The death, resignation, retirement, removal, bankruptcy, dissolution,
liquidation, incompetence or incapacity to perform the duties of a Trustee shall
not operate to dissolve, liquidate or annul the Trust or to terminate this
Declaration. Whenever a vacancy in the number of Administrative Trustees shall
occur, until such vacancy is filled by the appointment of an Administrative
Trustee in accordance with Section 5.6, the Administrative Trustees in office,
regardless of their number, shall have all the powers granted to the
Administrative Trustees and shall discharge all the duties imposed upon the
Administrative Trustees by this Declaration.
SECTION 5.9 Meetings.
--------
If there is more than one Administrative Trustee, meetings of the
Administrative Trustees shall be held from time to time upon the call of any
Administrative Trustee. Regular meetings of the Administrative Trustees may be
held at a time and place fixed by resolution of the Administrative Trustees.
Notice of any in-person meetings of the Administrative Trustees shall be hand
delivered or otherwise delivered in writing (including by facsimile, with a hard
copy by overnight courier) not less than 24 hours before such meeting. Notice of
any telephonic meetings of the Administrative Trustees or any committee thereof
shall be hand delivered or otherwise delivered in writing (including by
facsimile, with a hard copy by overnight courier) not less than 24 hours before
a meeting. Notices shall contain a brief statement of the time, place and
anticipated purposes of the meeting. The presence (whether in person or by
telephone) of an Administrative Trustee at a meeting shall constitute a waiver
of notice of such meeting except where an Administrative Trustee attends a
meeting for the express purpose of objecting to the transaction of any activity
on the ground that the meeting has not been lawfully called or convened. Unless
provided otherwise in this Declaration, any action of the Administrative
Trustees may be taken at a meeting by vote of a majority of the Administrative
Trustees present (whether in person or by telephone) and eligible to vote with
respect to such matter, provided that, a Quorum is present, or without a meeting
-------- ----
by the unanimous written consent of the Administrative Trustees. In the event
there is only one
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Administrative Trustee, any and all action of such Administrative Trustee shall
be evidenced by a written consent of such Administrative Trustee.
SECTION 5.10 Delegation of Power.
-------------------
(a) Any Administrative Trustee may, by power of attorney consistent
with applicable law, delegate to any other natural person over the age of 21 his
or her power for the purpose of executing any documents contemplated in Section
3.6, including any Registration Statement or amendment thereto filed with the
Commission, or making any other governmental filing.
(b) The Administrative Trustees shall have power to delegate from
time to time to such of their number or to officers of the Trust the doing of
such things and the execution of such instruments either in the name of the
Trust or the names of the Administrative Trustees or otherwise as the
Administrative Trustees may deem expedient, to the extent such delegation is not
prohibited by applicable law or contrary to the provisions of this Declaration.
SECTION 5.11 Merger, Conversion, Consolidation or Succession to Business.
-----------------------------------------------------------
Any Person into which the Property Trustee or the Delaware Trustee or
any Administrative Trustee that is not a natural person, as the case may be, may
be merged or converted or with which it may be consolidated, or any Person
resulting from any merger, conversion or consolidation to which the Property
Trustee or the Delaware Trustee, as the case may be, shall be a party, or any
Person succeeding to all or substantially all the corporate trust business of
the Property Trustee or the Delaware Trustee, as the case may be, shall be the
successor of the Property Trustee or the Delaware Trustee, as the case may be,
hereunder, without the execution or filing of any paper or any further act on
the part of any of the parties hereto, provided such Person shall be otherwise
qualified and eligible under this Article and provided further that, in the case
of the Delaware Trustee, such Person shall file an amendment to the Certificate
of Trust with the Delaware Secretary of State as contemplated in Section 5.6(h).
ARTICLE VI
DISTRIBUTIONS
SECTION 6.1 Distributions.
-------------
Holders shall receive Distributions in accordance with the applicable
terms of the relevant Holder's Securities. If and to the extent that the
Debenture Issuer makes a payment of interest (including Compounded Interest and
Additional Sums) and/or principal on the Debentures held by the Property Trustee
(the amount of any such payment being a "Payment Amount"), the Property Trustee
shall and is directed, to the extent funds are available for that purpose, to
make a distribution (a "Distribution") of the Payment Amount to Holders in
accordance with the terms of the Securities.
33
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ARTICLE VII
ISSUANCE OF SECURITIES
SECTION 7.1 General Provisions Regarding Securities.
---------------------------------------
(a) The Administrative Trustees shall, on behalf of the Trust, issue
one class of capital securities representing preferred undivided beneficial
interests in the assets of the Trust having such terms as are set forth in Annex
I (the "Capital Securities") and one class of common securities representing
common undivided beneficial interests in the assets of the Trust having such
terms as are set forth in Annex I (the "Common Securities"). The Trust shall
issue no securities or other interests in the assets of the Trust other than the
Capital Securities and the Common Securities.
(b) The consideration received by the Trust for the issuance of the
Securities shall constitute a contribution to the capital of the Trust and shall
not constitute a loan to the Trust.
(c) Upon issuance of the Securities as provided in this Declaration,
the Securities so issued shall be deemed to be validly issued, fully paid and
nonassessable.
(d) Every Person, by virtue of having become a Holder or a Capital
Security Beneficial Owner in accordance with the terms of this Declaration,
shall be deemed to have expressly assented and agreed to the terms of, and shall
be bound by, this Declaration.
SECTION 7.2 Issuance of Capital Securities and Common Securities.
----------------------------------------------------
(a) As of [_________], 1999, the Sponsor, on behalf of the Trust and
pursuant to the Original Declaration, executed and delivered the Underwriting
Agreement. Contemporaneously with the execution and delivery of this
Declaration, an Administrative Trustee, on behalf of the Trust, shall execute in
accordance with Section 7.3 and deliver to the Underwriters named in the
Underwriting Agreement, Capital Security Certificates, registered in the name of
the nominee of the initial Clearing Agency, in an aggregate amount of 1,750,000
Capital Securities having an aggregate Liquidation Amount of $17,500,000,
against receipt of an aggregate purchase price of $17,500,000, which amount such
Administrative Trustee shall promptly deliver to the Property Trustee.
(b) Contemporaneously with the execution and delivery of this
Declaration, an Administrative Trustee, on behalf of the Trust, shall execute in
accordance with Section 7.3 and deliver to the Sponsor Common Security
Certificates, registered in the name of the Sponsor, in an aggregate amount of
46,400 Common Securities having an aggregate Liquidation Amount of $464,000
against payment by the Sponsor of an aggregate purchase price of $464,000, which
amount such Administrative Trustee shall promptly deliver to the Property
Trustee. Contemporaneously therewith, an Administrative Trustee, on behalf of
the Trust, shall subscribe to and purchase from the Sponsor Subordinated
Debentures , registered in the name of the Property Trustee and having an
aggregate principal amount equal to $18,041,200, and, in satisfaction of the
purchase price, the Property Trustee, on behalf of the Trust, shall deliver to
the Sponsor the sum of $18,041,200 (being
34
<PAGE>
the sum of the amounts delivered to the Property Trustee pursuant to (i) the
second sentence of Section 7.2(a) and (ii) the first sentence of this Section
7.2(b)).
SECTION 7.3 The Trust Security Certificates
-------------------------------
The Capital Security Certificates shall be issued in minimum
denominations of $10 Liquidation Amount and integral multiples of $10 in excess
thereof, and the Common Security Certificates shall be issued in denominations
of $10 Liquidation Amount and integral multiples thereof. The Trust Security
Certificates shall be executed on behalf of the Trust by manual or facsimile
signature of at least one Administrative Trustee. The Capital Security
Certificates shall be authenticated by the Property Trustee by manual signature
of an authorized signatory thereof. Trust Security Certificates bearing the
signatures of individuals who were, at the time when such signatures shall have
been affixed, authorized to sign on behalf of the Trust or the Property Trustee,
shall be validly issued and entitled to the benefits of this Declaration,
notwithstanding that such individuals or any of them shall have ceased to be so
authorized prior to the delivery of such Trust Security Certificates or did not
hold such offices at the date of delivery of such Trust Security Certificates.
A transferee of a Trust Security Certificate shall become a Holder, and shall be
entitled to the rights and subject to the obligations of a Holder hereunder,
upon due registration of such Trust Security Certificate in such transferee's
name pursuant to Sections 7.5, 7.7 and 9.2.
SECTION 7.4 Execution and Delivery of Trust Security Certificates
-----------------------------------------------------
On each Closing Date, the Administrative Trustees shall cause Trust
Security Certificates, in an aggregate Liquidation Amount as provided in Section
7.2, to be executed on behalf of the Trust, authenticated by the Property
Trustee and delivered to or upon the written order of the Sponsor, signed by its
chairman of the board, its president, any executive or senior vice president,
any managing director or any vice president, treasurer, assistant treasurer or
controller without further corporate action by the Sponsor, in authorized
denominations.
SECTION 7.5 Registrar, Paying Agent and Exchange Agent.
------------------------------------------
The Trust shall maintain in Wilmington, Delaware (i) an office or
agency where Capital Securities may be presented for registration of transfer
("Registrar"), (ii) an office or agency where Capital Securities may be
presented for payment ("Paying Agent") and (iii) an office or agency where
Securities may be presented for exchange ("Exchange Agent"). The Registrar shall
keep a register of the Capital Securities and of their transfer. The Trust may
appoint the Registrar, the Paying Agent and the Exchange Agent and may appoint
one or more co-registrars, one or more additional paying agents and one or more
additional Exchange Agents in such other locations as it shall determine. The
term "Registrar" includes any additional registrar, the term "Paying Agent"
includes any additional paying agent and the term "Exchange Agent" includes any
additional Exchange Agent. The Trust may change any Paying Agent, Registrar, co-
registrar or Exchange Agent without prior notice to any Holder. The Paying
Agent, Registrar and Exchange Agent shall be permitted to resign as Paying Agent
upon 30 days' written notice to the Property Trustee, the Administrative
Trustees and the Sponsor. The Trust shall notify the Property Trustee of the
name and address of any Agent not a party to this Declaration. If the Trust
fails to appoint or maintain another entity as Registrar, Paying Agent or
Exchange Agent, the Property Trustee shall act as such.
35
<PAGE>
The Trust or any of its Affiliates may act as Paying Agent, Registrar, or
Exchange Agent. The Trust shall act as Paying Agent, Registrar and Exchange
Agent for the Common Securities.
The Trust initially appoints the Property Trustee as Registrar, Paying
Agent and Exchange Agent for the Capital Securities.
SECTION 7.6 Registration of Transfer and Exchange of Capital Security
---------------------------------------------------------
Certificates
- ------------
Upon surrender for registration of transfer of any Capital Security
Certificate at the office or agency maintained pursuant to Section 7.5, the
Administrative Trustee, or any one of them shall execute on behalf of the Trust,
cause to be authenticated by the Property Trustee and deliver, in the name of
the designated transferee or transferees, one or more new Capital Security
Certificates in authorized denominations of a like aggregate Liquidation Amount
dated the date of execution by such Administrative Trustee or Trustees in
accordance with the requirements of Section 9.2(b).
At the option of a Holder, Capital Security Certificates may be
exchanged for other Capital Security Certificates in authorized denominations of
the same class and of a like aggregate Liquidation Amount upon surrender of the
Capital Security Certificates to be exchanged at the office or agency maintained
pursuant to Section 7.5.
Every Capital Security Certificate presented or surrendered for
registration of transfer or exchange shall be accompanied by a written
instrument of transfer in form satisfactory to an Administrative Trustee and the
Securities Registrar duly executed by the Holder or such Holder's attorney duly
authorized in writing. Each Capital Security Certificate surrendered for
registration of transfer or exchange shall be canceled and subsequently disposed
of by an Administrative Trustee or the Securities Registrar in accordance with
such Person's customary practice.
SECTION 7.7 Book-Entry Capital Security Certificates; Common Security
---------------------------------------------------------
Certificate
- -----------
(a) The Capital Security Certificates, upon original issuance, will be
issued in the form of a typewritten Capital Security Certificate or Certificates
representing Book-Entry Capital Security Certificates, to be delivered to The
Depository Trust Company, the initial Clearing Agency, by, or on behalf of, the
Trust. Such Capital Security Certificate or Certificates shall initially be
registered on the Securities Register in the name of Cede & Co., the nominee of
the initial Clearing Agency, and no Capital Securities Beneficial Owner will
receive a Definitive Capital Security Certificate representing such Capital
Securities Beneficial Owner's interest in such Capital Securities, except as
provided in Section 9.2. Unless and until Definitive Capital Security
Certificates have been issued to Capital Securities Beneficial Owners pursuant
to Section 9.2:
(i) the provisions of this Section 7.7(a) shall be in full
force and effect;
(ii) the Securities Registrar and the Trustees shall be entitled
to deal with the Clearing Agency for all purposes of this Declaration
relating to the Book-Entry Capital Security Certificates (including
the payment of the Liquidation Amount of and Distributions on the
Capital Securities evidenced by
36
<PAGE>
Book-Entry Capital Security Certificates and the giving of
instructions or directions to Capital Securities Beneficial Owners of
Capital Securities evidenced by Book-Entry Capital Security
Certificates) as the sole Holder of Capital Securities evidenced by
Book-Entry Capital Security Certificates and shall have no obligations
to the Capital Securities Beneficial Owners thereof;
(ii) to the extent that the provisions of this Section 7.7
conflict with any other provisions of this Declaration, the provisions
of this Section 7.7 shall control; and
(iv) the rights of the Capital Securities Beneficial Owners of
the Book-Entry Capital Security Certificates shall be exercised only
through the Clearing Agency and shall be limited to those established
by law and agreements between such Capital Securities Beneficial
Owners and the Clearing Agency and/or members of, or participants in,
the Clearing Agency ("Participants"). Unless and until Definitive
Capital Security Certificates are issued pursuant to Section 9.2, the
initial Clearing Agency will make book-entry transfers among the
Clearing Agency Participants and receive and transmit payments on the
Capital Securities to such Clearing Agency Participants.
(b) A Common Security Certificate representing the Common Securities
shall be issued to the Sponsor on each Closing Date in the form of a definitive
Common Security Certificate.
SECTION 7.8 Paying Agent to Hold Money in Trust.
-----------------------------------
The Trust shall require each Paying Agent other than the Property
Trustee to agree in writing that the Paying Agent will hold in trust for the
benefit of Holders or the Property Trustee all money held by the Paying Agent
for the payment of liquidation amounts or Distributions, and will notify the
Property Trustee if there are insufficient funds for such purpose. While any
such insufficiency continues, the Property Trustee may require a Paying Agent to
pay all money held by it to the Property Trustee. The Trust at any time may
require a Paying Agent to pay all money held by it to the Property Trustee and
to account for any money disbursed by it. Upon payment over to the Property
Trustee, the Paying Agent (if other than the Trust or an Affiliate of the Trust)
shall have no further liability for the money. If the Trust or the Sponsor or an
Affiliate of the Trust or the Sponsor acts as Paying Agent, it shall segregate
and hold in a separate trust fund for the benefit of the Holders all money held
by it as Paying Agent.
SECTION 7.9 Replacement Securities.
----------------------
If a Holder claims that a Security owned by it has been lost,
destroyed or wrongfully taken or if such Security is mutilated and is
surrendered to the Trust or in the case of the Capital Securities to the
Property Trustee, an Administrative Trustee shall execute and the Property
Trustee shall authenticate and make available for delivery a replacement
Security if the Property Trustee's requirements are met. An indemnity bond must
be provided by the Holder which, in the judgment of the Property Trustee, is
sufficient to protect the Trustees, the Sponsor, the Trust or any
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authenticating agent from any loss which any of them may suffer if a Security is
replaced. The Trust may charge such Holder for its expenses in replacing a
Security.
SECTION 7.10 Outstanding Capital Securities.
------------------------------
The Capital Securities outstanding at any time are all the Capital
Securities authenticated by the Property Trustee except for those canceled by
it, those delivered to it for cancellation, and those described in this Section
as not outstanding.
If a Capital Security is replaced, paid or purchased pursuant to
Section 7.9 hereof, it ceases to be outstanding unless the Property Trustee
receives proof satisfactory to it that the replaced, paid or purchased Capital
Security is held by a bona fide purchaser.
If Capital Securities are considered paid in accordance with the
terms of this Declaration, they cease to be outstanding and Distributions on
them shall cease to accumulate.
A Capital Security does not cease to be outstanding because one of
the Trust, the Sponsor or an Affiliate of the Sponsor holds the Security.
SECTION 7.11 Capital Securities in Treasury.
------------------------------
In determining whether the Holders of the required amount of
Securities have concurred in any direction, waiver or consent, Capital
Securities owned by the Trust, the Sponsor or an Affiliate of the Sponsor, as
the case may be, shall be disregarded and deemed not to be outstanding, except
that for the purposes of determining whether the Property Trustee shall be fully
protected in relying on any such direction, waiver or consent, only Securities
which the Property Trustee actually knows are so owned shall be so disregarded.
SECTION 7.12 Cancellation.
------------
The Trust at any time may deliver Capital Securities to the Property
Trustee for cancellation. The Registrar, Paying Agent and Exchange Agent shall
forward to the Property Trustee any Capital Securities surrendered to them for
registration of transfer, redemption, exchange or payment. The Property Trustee
shall promptly cancel all Capital Securities surrendered for registration of
transfer, redemption, exchange, payment, replacement or cancellation and shall
dispose of canceled Capital Securities in accordance with its customary
procedures unless the Trust otherwise directs in writing. The Trust may not
issue new Capital Securities to replace Capital Securities that it has paid or
that have been delivered to the Property Trustee for cancellation or that any
Holder has exchanged.
SECTION 7.13 CUSIP Numbers.
-------------
The Trust in issuing the Capital Securities may use "CUSIP" numbers
(if then generally in use), and, if so, the Property Trustee shall use "CUSIP"
numbers in notices of redemption as a convenience to Holders of Capital
Securities; provided that, any such notice may state that no representation is
-------- ----
made as to the correctness of such numbers either as printed on the
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Capital Securities or as contained in any notice of a redemption and that
reliance may be placed only on the other identification numbers printed on the
Capital Securities, and any such redemption shall not be affected by any defect
in or omission of such numbers. The Sponsor will promptly notify the Property
Trustee of any change in the CUSIP numbers.
ARTICLE VIII
DISSOLUTION OF TRUST
SECTION 8.1 Dissolution of Trust.
--------------------
(a) The Trust shall automatically dissolve:
(i) upon the bankruptcy of the Sponsor;
(ii) upon the filing of a certificate of dissolution or
liquidation or its equivalent with respect to the Sponsor; or the
revocation of the Sponsor's charter and the expiration of 90 days
after the date of revocation without a reinstatement thereof;
(iii) following the distribution of a Like Amount of the
Debentures to the Holders, provided that, the Property Trustee has
-------------
received written notice from the Sponsor directing the Property
Trustee to dissolve the Trust (which direction is optional, and except
as otherwise expressly provided below, within the discretion of the
Sponsor), and provided, further, that such direction and such
-------- -------
distribution is conditioned on (a) the receipt by the Sponsor of any
and all required regulatory approvals, and (b) the Sponsor's receipt
and delivery to the Administrative Trustees of an opinion of
independent tax counsel experienced in such matters to the effect that
the Holders of the Capital Securities will not recognize any gain or
loss for United States federal income tax purposes as a result of the
dissolution of the Trust and the distribution of Debentures ;
(iv) upon the entry of a decree of judicial dissolution of the
Trust by a court of competent jurisdiction;
(v) when all of the Securities shall have been called for
redemption and the amounts necessary for redemption thereof shall have
been paid to the Holders in accordance with the terms of the
Securities;
(vi) upon the redemption or repayment of the Debentures or at
such time as no Debentures are outstanding; or
(vii) the expiration of the term of the Trust provided in Section
3.14.
(b) As soon as is practicable upon completion of winding up of the
Trust following the occurrence of an event referred to in Section 8.1(a) and the
satisfaction of creditors of the Trust in accordance with applicable law, the
Administrative Trustees shall terminate the Trust
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by filing a certificate of cancellation with the Secretary of State of the State
of Delaware in accordance with the Business Trust Act.
(c) The provisions of Section 3.9 and Article X shall survive the
dissolution of the Trust.
ARTICLE IX
TRANSFER OF INTERESTS
SECTION 9.1 Transfer of Securities.
----------------------
(a) Securities may only be transferred, in whole or in part, in
accordance with the terms and conditions set forth in this Declaration and in
the terms of the Securities. To the fullest extent permitted by law, any
transfer or purported transfer of any Security not made in accordance with this
Declaration shall be null and void.
(b) Subject to this Article IX, Capital Securities may only be
transferred, in whole or in part, in accordance with the terms and conditions
set forth in this Declaration. To the fullest extent permitted by law, any
transfer or purported transfer of any Security not made in accordance with this
Declaration shall be null and void.
(c) For so long as the Securities remain outstanding, the Sponsor
agrees (i) not to transfer ownership of the Common Securities of the Trust,
provided that any permitted successor of the Sponsor under the Indenture may
succeed to the Sponsor's ownership of the Common Securities, (ii) not to cause,
as Sponsor of the Trust, or to permit, as Holder of the Common Securities, the
dissolution, winding-up or liquidation of the Trust, except as provided in this
Declaration and (iii) to use its best efforts to cause the Trust (a) to remain a
business trust, except in connection with the distribution of Debentures to the
Holders in liquidation of the Trust, the redemption of all of the Securities, or
certain mergers, consolidations or amalgamations, each as permitted by this
Declaration, and (b) not to be classified as an association taxable as a
corporation and to be classified as a grantor trust for United States federal
income tax purposes.
SECTION 9.2 Definitive Capital Security Certificates
----------------------------------------
(a) If (i) the Sponsor advises the Trustees in writing that the
Clearing Agency is no longer willing or able to properly discharge its
responsibilities with respect to the Capital Security Certificates, and the
Sponsor is unable to locate a qualified successor, (ii) the Sponsor at its
option advises the Trustees in writing that it elects to terminate the book-
entry system through the Clearing Agency or (iii) after the occurrence of an
Event of Default, Capital Securities Beneficial Owners representing beneficial
interests aggregating at least a majority of the Liquidation Amount advise the
Administrative Trustees in writing that the continuation of a book-entry system
through the Clearing Agency is no longer in the best interest of the Capital
Securities Beneficial Owners, then the Administrative Trustees shall notify the
other Trustees and the Clearing Agency, and the Clearing Agency, in accordance
with its customary rules and procedures, shall notify all Clearing Agency
Participants for whom it holds Capital Securities of the occurrence of any such
event and of the availability of the Definitive Capital Security Certificates to
Capital Securities Beneficial Owners
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of such class or classes, as applicable, requesting the same. Upon surrender to
the Administrative Trustees of the typewritten Capital Security Certificate or
Certificates representing the Book-Entry Capital Security Certificates by the
Clearing Agency, accompanied by registration instructions, the Administrative
Trustees, or any one of them, shall execute the Definitive Capital Security
Certificates in accordance with the instructions of the Clearing Agency or, if
executed on behalf of the Trust by facsimile, countersigned by a transfer agent
or its agent. Neither the Registrar nor the Trustees shall be liable for any
delay in delivery of such instructions and may conclusively rely on, and shall
be fully protected in relying on, such instructions. Upon the issuance of
Definitive Capital Security Certificates, the Trustees shall recognize the
Holders of the Definitive Capital Security Certificates as Holders. The
Definitive Capital Security Certificates shall be typewritten, printed,
lithographed or engraved or may be produced in any other manner as is reasonably
acceptable to the Administrative Trustees that meets the requirements of any
stock exchange or automated quotation system on which the Capital Securities are
then listed or approved for trading, as evidenced by the execution thereof by
the Administrative Trustees or any one of them.
(b) Obligations with Respect to Transfers and Exchanges of Capital
--------------------------------------------------------------
Securities.
- ----------
(i) To permit registrations of transfers and exchanges, the
Trust shall execute and the Property Trustee shall authenticate
Definitive Capital Securities and the Global Capital Security at the
Registrar's or co-registrar's request in accordance with the terms of
this Declaration.
(ii) Registrations of transfers or exchanges will be effected
without charge, but only upon payment (with such indemnity as the
Trust or the Sponsor may require) in respect of any tax or other
governmental charge that may be imposed in relation to it.
(iii) The Registrar or co-registrar shall not be required to
register the transfer of or exchange of (a) Capital Securities during
a period beginning at the opening of business 15 days before the day
of mailing of a notice of redemption or any notice of selection of
Capital Securities for redemption and ending at the close of business
on the day of such mailing or (b) any Capital Security so selected for
redemption in whole or in part, except the unredeemed portion of any
Capital Security being redeemed in part.
(iv) Prior to the due presentation for registration of transfer
of any Capital Security, the Trust, the Property Trustee, the Paying
Agent, the Registrar or any co-registrar may deem and treat the Person
in whose name a Capital Security is registered as the absolute owner
of such Capital Security for the purpose of receiving Distributions on
such Capital Security and for all other purposes whatsoever, and none
of the Trust, the Property Trustee, the Paying Agent, the Registrar or
any co-registrar shall be affected by notice to the contrary.
(v) All Capital Securities issued upon any registration of
transfer or exchange pursuant to the terms of this Declaration shall
evidence the same
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security and shall be entitled to the same benefits under this
Declaration as the Capital Securities surrendered upon such
registration of transfer or exchange.
(c) No Obligation of the Property Trustee.
-------------------------------------
(i) The Property Trustee shall have no responsibility or
obligation to any Capital Security Beneficial Owner, a Participant in
the Clearing Agency or other Person with respect to the accuracy of
the records of the Clearing Agency or its nominee or of any
Participant thereof, with respect to any ownership interest in the
Capital Securities or with respect to the delivery to any Participant,
beneficial owner or other Person (other than the Clearing Agency) of
any notice (including any notice of redemption) or the payment of any
amount, under or with respect to such Capital Securities. All notices
and communications to be given to the Holders and all payments to be
made to Holders under the Capital Securities shall be given or made
only to or upon the order of the registered Holders (which shall be
the Clearing Agency or its nominee in the case of the Global Capital
Security). The rights of Capital Security Beneficial Owners shall be
exercised only through the Clearing Agency subject to the applicable
rules and procedures of the Clearing Agency. The Property Trustee may
conclusively rely and shall be fully protected in relying upon
information furnished by the Clearing Agency or any agent thereof with
respect to its Participants and any Capital Security Beneficial
Owners.
(ii) The Property Trustee and the Registrar shall have no
obligation or duty to monitor, determine or inquire as to compliance
with any restrictions on transfer imposed under this Declaration or
under applicable law with respect to any transfer of any interest in
any Capital Security (including any transfers between or among
Clearing Agency Participants or Capital Security Beneficial Owners)
other than to require delivery of such certificates and other
documentation or evidence as are expressly required by, and to do so
if and when expressly required by, the terms of this Declaration, and
to examine the same to determine substantial compliance as to form
with the express requirements hereof.
SECTION 9.3 Temporary Securities.
--------------------
(a) Until Definitive Capital Securities are ready for delivery, the
Trust may prepare and, in the case of the Capital Securities, the Property
Trustee shall authenticate temporary Securities. Temporary Securities shall be
substantially in the form of Definitive Capital Securities, but may have
variations that the Trust considers appropriate for temporary Securities.
Without unreasonable delay, the Trust shall prepare and, in the case of the
Capital Securities, the Property Trustee shall authenticate Definitive Capital
Securities in exchange for temporary Securities.
(b) The Global Capital Security deposited with the Clearing Agency or
with the Property Trustee as custodian for the Clearing Agency shall be
transferred to the beneficial owners thereof in the form of Definitive Capital
Securities only if such transfer complies with Section 9.2
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and (i) the Clearing Agency notifies the Sponsor that it is unwilling or unable
to continue as Clearing Agency for such Global Capital Security or if at any
time such Clearing Agency ceases to be a "clearing agency" registered under the
Exchange Act, and, in each case, a clearing agency is not appointed by the
Sponsor within 90 days of receipt of such notice or of becoming aware of such
condition, (ii) a Default or an Event of Default has occurred and is continuing
or (iii) the Trust at its sole discretion elects to cause the issuance of
Definitive Capital Securities.
(c) Any Global Capital Security that is transferable to the beneficial
owners thereof in the form of Definitive Capital Securities shall be surrendered
by the Clearing Agency to the Property Trustee to be so transferred, in whole or
from time to time in part, without charge, and the Property Trustee shall
authenticate and make available for delivery, upon such transfer of each portion
of such Global Capital Security, an equal aggregate liquidation amount of
Securities of authorized denominations in the form of Definitive Capital
Securities. Any portion of the Global Capital Security transferred pursuant to
this Section shall be registered in such names as the Clearing Agency shall
direct.
(d) Subject to the provisions of Section 9.3(c), the Holder of the
Global Capital Security may grant proxies and otherwise authorize any Person,
including Participants and Persons that may hold interests through Participants,
to take any action which such Holder is entitled to take under this Declaration
or the Securities.
(e) In the event of the occurrence of any of the events specified in
Section 7.9(b), the Trust will promptly make available to the Property Trustee a
reasonable supply of certificated Capital Securities in fully registered form
without distribution coupons.
SECTION 9.4 Deemed Security Holders.
-----------------------
The Trustees may treat the Person in whose name any Security shall be
registered on the books and records of the Trust as the sole owner and Holder of
such Security for purposes of receiving Distributions and for all other purposes
whatsoever and, accordingly, shall not be bound to recognize any equitable or
other claim to or interest in such Security on the part of any Person, whether
or not the Trust shall have actual or other notice thereof.
SECTION 9.5 Notices to Clearing Agency.
--------------------------
Whenever a notice or other communication to the Capital Security
Holders is required to be given by a Trustee under this Declaration, such
Trustee shall give all such notices and communications specified herein to be
given to the Holder of the Global Capital Security to the Clearing Agency and
shall have no notice obligations to the Capital Security Beneficial Owners.
SECTION 9.6 Appointment of Successor Clearing Agency.
----------------------------------------
If any Clearing Agency elects to discontinue its services as
securities depositary with respect to the Capital Securities, the Administrative
Trustees may, in their sole discretion, appoint a successor Clearing Agency with
respect to such Capital Securities.
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ARTICLE X
LIMITATION OF LIABILITY OF
HOLDERS OF SECURITIES, TRUSTEES OR OTHERS
SECTION 10.1 Liability.
---------
(a) Except as expressly set forth in this Declaration, the Securities
Guarantees and the terms of the Securities, the Sponsor shall not be:
(i) personally liable for the return of any portion of the
capital contributions (or any return thereon) of the Holders which
shall be made solely from assets of the Trust; and
(ii) required to pay to the Trust or to any Holder any deficit
upon dissolution of the Trust or otherwise.
(b) The Sponsor shall be liable for all of the debts and obligations
of the Trust (other than in respect of the Securities) to the extent not
satisfied out of the Trust's assets.
(c) Pursuant to (S) 3803(a) of the Business Trust Act, the Holders
shall be entitled to the same limitation of personal liability extended to
stockholders of private corporations for profit organized under the General
Corporation Law of the State of Delaware.
SECTION 10.2 Exculpation.
-----------
(a) No Indemnified Person shall be liable, responsible or accountable
in damages or otherwise to the Trust or any Covered Person for any loss, damage
or claim incurred by reason of any act or omission performed or omitted by such
Indemnified Person in good faith on behalf of the Trust and in a manner such
Indemnified Person reasonably believed to be within the scope of the authority
conferred on such Indemnified Person by this Declaration or by law, except that
an Indemnified Person shall be liable for any such loss, damage or claim
incurred by reason of such Indemnified Person's gross negligence (or in the case
of the Property Trustee or the Delaware Trustee, negligence) or willful
misconduct with respect to such acts or omissions.
(b) An Indemnified Person shall be fully protected in relying in good
faith upon the records of the Trust and upon such information, opinions, reports
or statements presented to the Trust by any Person as to matters the Indemnified
Person reasonably believes are within such other Person's professional or expert
competence and who has been selected with reasonable care by or on behalf of the
Trust, including information, opinions, reports or statements as to the value
and amount of the assets, liabilities, profits, losses, or any other facts
pertinent to the existence and amount of assets from which Distributions to
Holders might properly be paid.
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SECTION 10.3 Fiduciary Duty.
--------------
(a) To the extent that, at law or in equity, an Indemnified Person has
duties (including fiduciary duties) and liabilities relating thereto to the
Trust or to any other Covered Person, an Indemnified Person acting under this
Declaration shall not be liable to the Trust or to any other Covered Person for
its good faith reliance on the provisions of this Declaration. The provisions of
this Declaration, to the extent that they restrict the duties and liabilities of
an Indemnified Person otherwise existing at law or in equity (other than the
duties imposed on the Property Trustee under the Trust Indenture Act), are
agreed by the parties hereto to replace such other duties and liabilities of
such Indemnified Person.
(b) Unless otherwise expressly provided herein:
(i) whenever a conflict of interest exists or arises between
any Covered Person and any Indemnified Person, or
(ii) whenever this Declaration or any other agreement
contemplated herein or therein provides that an Indemnified Person
shall act in a manner that is, or provides terms that are, fair and
reasonable to the Trust or any Holder of Securities,
the Indemnified Person shall resolve such conflict of interest, take such action
or provide such terms, considering in each case the relative interest of each
party (including its own interest) to such conflict, agreement, transaction or
situation and the benefits and burdens relating to such interests, any customary
or accepted industry practices, and any applicable generally accepted accounting
practices or principles. In the absence of bad faith by the Indemnified Person,
the resolution, action or term so made, taken or provided by the Indemnified
Person shall not constitute a breach of this Declaration or any other agreement
contemplated herein or of any duty or obligation of the Indemnified Person at
law or in equity or otherwise.
(c) Whenever in this Declaration an Indemnified Person is permitted
or required to make a decision:
(i) in its "discretion" or under a grant of similar authority,
the Indemnified Person shall be entitled to consider such interests
and factors as it desires, including its own interests, and shall have
no duty or obligation to give any consideration to any interest of or
factors affecting the Trust or any other Person; or
(ii) in its "good faith" or under another express standard, the
Indemnified Person shall act under such express standard and shall not
be subject to any other or different standard imposed by this
Declaration or by applicable law.
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SECTION 10.4 Indemnification.
---------------
(a) (i) The Sponsor shall indemnify, to the full extent permitted
by law, any Company Indemnified Person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (other than
an action by or in the right of the Trust) by reason of the fact that he is or
was a Company Indemnified Person, against expenses (including attorneys' fees
and expenses), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit or proceeding if
he acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Trust, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his conduct was
unlawful. The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the Company Indemnified Person
did not act in good faith and in a manner which he reasonably believed to be in
or not opposed to the best interests of the Trust, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that his conduct
was unlawful.
(ii) The Sponsor shall indemnify, to the full extent permitted
by law, any Company Indemnified Person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action or suit by or in
the right of the Trust to procure a judgment in its favor by reason of the fact
that he is or was a Company Indemnified Person against expenses (including
attorneys' fees and expenses) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the Trust and except that no such indemnification shall be
made in respect of any claim, issue or matter as to which such Company
Indemnified Person shall have been adjudged to be liable to the Trust unless and
only to the extent that the Court of Chancery of Delaware or the court in which
such action or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all the circumstances of the case,
such Person is fairly and reasonably entitled to indemnity for such expenses
which such Court of Chancery or such other court shall deem proper.
(iii) To the extent that a Company Indemnified Person shall be
successful on the merits or otherwise (including dismissal of an action without
prejudice or the settlement of an action without admission of liability) in
defense of any action, suit or proceeding referred to in paragraphs (i) and (ii)
of this Section 10.4(a), or in defense of any claim, issue or matter therein, he
shall be indemnified, to the full extent permitted by law, against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith.
(iv) Any indemnification under paragraphs (i) and (ii) of this
Section 10.4(a) (unless ordered by a court) shall be made by the Sponsor only as
authorized in the specific case upon a determination that indemnification of the
Company Indemnified Person is proper in the circumstances because he has met the
applicable standard of conduct set forth in paragraphs (i) and (ii). Such
determination shall be made (1) by the Administrative Trustees by a majority
vote of a Quorum consisting of such Administrative Trustees who were not parties
to such action, suit or proceeding, (2) if such a Quorum is not obtainable, or,
even if obtainable, if a Quorum of
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disinterested Administrative Trustees so directs, by independent legal counsel
in a written opinion, or (3) by the Common Security Holder of the Trust.
(v) Expenses (including attorneys' fees and expenses) incurred
by a Company Indemnified Person in defending a civil, criminal, administrative
or investigative action, suit or proceeding referred to in paragraphs (i) and
(ii) of this Section 10.4(a) shall be paid by the Sponsor in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such Company Indemnified Person to repay such
amount if it shall ultimately be determined that he is not entitled to be
indemnified by the Sponsor as authorized in this Section 10.4(a).
Notwithstanding the foregoing, no advance shall be made by the Sponsor if a
determination is reasonably and promptly made (i) by the Administrative Trustees
by a majority vote of a Quorum of disinterested Administrative Trustees, (ii) if
such a Quorum is not obtainable, or, even if obtainable, if a Quorum of
disinterested Administrative Trustees so directs, by independent legal counsel
in a written opinion or (iii) by the Common Security Holder of the Trust, that,
based upon the facts known to the Administrative Trustees, counsel or the Common
Security Holder at the time such determination is made, such Company Indemnified
Person acted in bad faith or in a manner that the Common Security Holder did not
believe to be in or not opposed to the best interests of the Trust, or, with
respect to any criminal proceeding, that such Company Indemnified Person
believed or had reasonable cause to believe his conduct was unlawful. In no
event shall any advance be made in instances where the Administrative Trustees,
independent legal counsel or Common Security Holder reasonably determine that a
Company Indemnified Person deliberately breached his duty to the Trust or its
Common or Capital Security Holders.
(vi) The indemnification and advancement of expenses provided
by, or granted pursuant to, the other paragraphs of this Section 10.4(a) shall
not be deemed exclusive of any other rights to which those seeking
indemnification and advancement of expenses may be entitled under any agreement,
vote of stockholders or disinterested directors of the Sponsor or Capital
Security Holders of the Trust or otherwise, both as to action in his official
capacity and as to action in another capacity while holding such office. All
rights to indemnification under this Section 10.4(a) shall be deemed to be
provided by a contract between the Sponsor and each Company Indemnified Person
who serves in such capacity at any time while this Section 10.4(a) is in effect.
Any repeal or modification of this Section 10.4(a) shall not affect any rights
or obligations then existing.
(vii) The Sponsor or the Trust may purchase and maintain
insurance on behalf of any person who is or was a Company Indemnified Person
against any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the Debenture
Issuer would have the power to indemnify him against such liability under the
provisions of this Section 10.4(a).
(viii) For purposes of this Section 10.4(a), references to "the
Trust" shall include, in addition to the resulting or surviving entity, any
constituent entity (including any constituent of a constituent) absorbed in a
consolidation or merger, so that any person who is or was a director, trustee,
officer or employee of such constituent entity, or is or was serving at the
request of such constituent entity as a director, trustee, officer, employee or
agent of another entity, shall stand in the same position under the provisions
of this Section 10.4(a) with respect to the resulting
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or surviving entity as he would have with respect to such constituent entity if
its separate existence had continued.
(ix) The indemnification and advancement of expenses provided
by, or granted pursuant to, this Section 10.4(a) shall, unless otherwise
provided when authorized or ratified, continue as to a Person who has ceased to
be a Company Indemnified Person and shall inure to the benefit of the heirs,
executors and administrators of such a Person.
(b) The Sponsor agrees to indemnify the (i) Property Trustee, (ii) the
Delaware Trustee, (iii) any Affiliate of the Property Trustee or the Delaware
Trustee, and (iv) any officers, directors, shareholders, members, partners,
employees, representatives, custodians, nominees or agents of the Property
Trustee or the Delaware Trustee (each of the Persons in (i) through (iv),
including the Property Trustee and the Delaware Trustee in their respective
individual capacities, being referred to as a "Fiduciary Indemnified Person")
for, and to hold each Fiduciary Indemnified Person harmless against, any and all
loss, liability, damage, action, suit, claim or expense including taxes (other
than taxes based on the income of such Fiduciary Indemnified Person) of any kind
and nature whatsoever incurred without negligence or bad faith on the part of
such Fiduciary Indemnified Person, arising out of or in connection with the
acceptance or administration of the trust or trusts hereunder, including the
costs and expenses (including reasonable legal fees and expenses) of defending
against or investigating any claim or liability in connection with the exercise
or performance of any of the powers or duties of such Fiduciary Indemnified
Person hereunder. The obligation to indemnify as set forth in this Section
10.4(b) shall survive the resignation or removal of the Property Trustee or the
Delaware Trustee and the satisfaction and discharge of this Declaration.
(c) The Sponsor agrees to pay the Property Trustee and the Delaware
Trustee, from time to time, such compensation for all services rendered by the
Property Trustee and the Delaware Trustee hereunder as may be mutually agreed
upon in writing by the Sponsor and the Property Trustee or the Delaware Trustee,
as the case may be, and, except as otherwise expressly provided herein, to
reimburse the Property Trustee and the Delaware Trustee upon its or their
request for all reasonable expenses (including legal fees and expenses),
disbursements and advances incurred or made by the Property Trustee or the
Delaware Trustee, as the case may be, in accordance with the provisions of this
Declaration, except any such expense, disbursement or advance as may be
attributable to its or their negligence or bad faith.
SECTION 10.5 Outside Businesses.
------------------
Any Covered Person, the Sponsor, the Delaware Trustee and the Property
Trustee (subject to Section 5.3(c)) may engage in or possess an interest in
other business ventures of any nature or description, independently or with
others, similar or dissimilar to the business of the Trust, and the Trust and
the Holders shall have no rights by virtue of this Declaration in and to such
independent ventures or the income or profits derived therefrom, and the pursuit
of any such venture, even if competitive with the business of the Trust, shall
not be deemed wrongful or improper. No Covered Person, the Sponsor, the Delaware
Trustee, or the Property Trustee shall be obligated to present any particular
investment or other opportunity to the Trust even if such opportunity is of a
character that, if presented to the Trust, could be taken by the Trust, and any
Covered Person, the
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Sponsor, the Delaware Trustee and the Property Trustee shall have the right to
take for its own account (individually or as a partner or fiduciary) or to
recommend to others any such particular investment or other opportunity. Any
Covered Person, the Delaware Trustee and the Property Trustee may engage or be
interested in any financial or other transaction with the Sponsor or any
Affiliate of the Sponsor, or may act as depositary for, trustee or agent for, or
act on any committee or body of holders of, securities or other obligations of
the Sponsor or its Affiliates.
ARTICLE XI
ACCOUNTING
SECTION 11.1 Fiscal Year.
-----------
The fiscal year ("Fiscal Year") of the Trust shall be the calendar
year, or such other year as is required by the Code.
SECTION 11.2 Certain Accounting Matters.
--------------------------
(a) At all times during the existence of the Trust, the Administrative
Trustees shall keep, or cause to be kept, full books of account, records and
supporting documents, which shall reflect in reasonable detail each transaction
of the Trust. The books of account shall be maintained on the accrual method of
accounting, in accordance with generally accepted accounting principles,
consistently applied. The Trust shall use the accrual method of accounting for
United States federal income tax purposes. The books of account and the records
of the Trust shall be examined by and reported upon as of the end of each Fiscal
Year of the Trust by a firm of independent certified public accountants selected
by the Administrative Trustees.
(b) The Administrative Trustees shall cause to be duly prepared and
delivered to each of the Holders any annual United States federal income tax
information statements required by the Code, containing such information with
regard to the Securities held by each Holder as is required by the Code and the
Treasury Regulations. Notwithstanding any right under the Code to deliver any
such statement at a later date, the Administrative Trustees shall endeavor to
deliver all such information statements within 30 days after the end of each
Fiscal Year of the Trust.
(c) The Administrative Trustees shall cause to be duly prepared and
filed with the appropriate taxing authority, an annual United States federal
income tax return, on a Form 1041 or such other form required by United States
federal income tax law, and any other annual income tax returns required to be
filed by the Administrative Trustees on behalf of the Trust with any state or
local taxing authority.
SECTION 11.3 Banking.
-------
The Trust may maintain one or more bank accounts in the name and for
the sole benefit of the Trust; provided, however, that all payments of funds in
-------- -------
respect of the Debentures held by the Property Trustee shall be made directly to
the Property Trustee Account and no other funds of the Trust shall be deposited
in the Property Trustee Account. The sole signatories for such
49
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accounts shall be designated by the Administrative Trustees; provided, however,
-------- -------
that the Property Trustee shall designate the signatories for the Property
Trustee Account.
SECTION 11.4 Withholding.
-----------
The Trust and the Administrative Trustees shall comply with all
withholding requirements under United States federal, state and local law and
under foreign law. The Trust shall request, and the Holders shall provide to the
Trust, such forms or certificates as are necessary to establish an exemption
from withholding with respect to each Holder, and any representations and forms
as shall reasonably be requested by the Trust to assist it in determining the
extent of, and in fulfilling, its withholding obligations. The Administrative
Trustees shall cause to be filed required forms with applicable jurisdictions
and, unless an exemption from withholding is properly established by a Holder,
shall remit amounts withheld with respect to the Holder to applicable
jurisdictions. To the extent that the Trust is required to withhold and pay over
any amounts to any authority with respect to Distributions or allocations to any
Holder, the amount withheld shall be deemed to be a Distribution in the amount
of the withholding to the Holder. In the event of any claim of excess
withholding, Holders shall be limited to an action against the applicable
jurisdiction. If the amount required to be withheld was not withheld from actual
Distributions made, the Trust may reduce subsequent Distributions by the amount
of such withholding.
ARTICLE XII
AMENDMENTS AND MEETINGS
SECTION 12.1 Amendments.
----------
(a) Except as otherwise provided in this Declaration (including
Section 7 of Annex I hereto) or by any applicable terms of the Securities, this
Declaration may only be amended by a written instrument approved and executed
by:
(i) the Sponsor and the Administrative Trustees (or, if there
are more than two Administrative Trustees, a majority of the
Administrative Trustees);
(ii) if the amendment affects the rights, powers, duties,
obligations or immunities of the Property Trustee, the Property
Trustee; and
(iii) if the amendment affects the rights, powers, duties,
obligations or immunities of the Delaware Trustee, the Delaware
Trustee.
(b) No amendment shall be made, and any such purported amendment shall
be void and ineffective:
(i) unless, in the case of any proposed amendment, the Property
Trustee shall have first received an Officers' Certificate from each
of the Trust and the Sponsor that such amendment is permitted by, and
conforms to, the terms of this Declaration (including the terms of the
Securities);
50
<PAGE>
(ii) unless, in the case of any proposed amendment which affects
the rights, powers, duties, obligations or immunities of the Property
Trustee, the Property Trustee shall have first received:
(A) an Officers' Certificate from each of the Trust and the
Sponsor that such amendment is permitted by, and conforms to, the
terms of this Declaration (including the terms of the Securities);
and
(B) an Opinion of Counsel (who may be counsel to the Sponsor or
the Trust) that such amendment is permitted by, and conforms to,
the terms of this Declaration (including the terms of the
Securities) and that all conditions precedent to the execution and
delivery of such amendment have been satisfied;
provided, however, that the Property Trustee and the Delaware Trustee shall not
- -------- -------
be required to sign any such amendment which affects its own rights, duties,
warranties or indemnification; and
(iii) to the extent the result of such amendment would be to:
(A) cause the Trust to fail to continue not to be classified as an
association taxable as a corporation or to be less likely to be
classified as a grantor trust, in each case for purposes of United
States federal income taxation;
(B) reduce or otherwise adversely affect the powers of the
Property Trustee in contravention of the Trust Indenture Act; or
(C) cause the Trust to be deemed to be an Investment Company
required to be registered under the Investment Company Act.
(c) At such time after the Trust has issued any Securities that remain
outstanding, any amendment that would adversely affect the rights, privileges or
preferences of any Holder (other than an amendment pursuant to (g)(ii) below)
may be effected only with such additional requirements as may be set forth in
the terms of such Securities;
(d) Section 10.1(c) and this Section 12.1 shall not be amended without
the consent of all of the Holders;
(e) Article Four shall not be amended without the consent of the
Holders of a Majority in Liquidation Amount of the Common Securities;
(f) The rights of the Holders of the Common Securities under Article V
to increase or decrease the number of, and appoint and remove Trustees shall not
be amended without the consent of the Holders of a Majority in Liquidation
Amount of the Common Securities; and
(g) Notwithstanding Section 12.1(c), this Declaration may be amended
without the consent of the Holders to:
51
<PAGE>
(i) cure any ambiguity, correct or supplement any provision in
this Declaration that may be inconsistent with any other provision of
this Declaration or to make any other provisions with respect to
matters or questions arising under this Declaration which shall not be
inconsistent with the other provisions of the Declaration; and
(ii) 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 at all times that any Securities are outstanding or
to ensure that the Trust will not be required to register as an
Investment Company under the Investment Company Act.
provided, however, that in the case of clause (i) above, such action shall not
- -------- -------
adversely affect in any material respect the interests of the Holders, and any
such amendments of this Declaration shall become effective when notice thereof
is given to the Holders.
SECTION 12.2 Meetings of the Holders; Action by Written Consent.
--------------------------------------------------
(a) Meetings of the Holders of any class of Securities may be called
at any time by the Administrative Trustees (or as provided in the terms of the
Securities) to consider and act on any matter on which Holders of such class of
Securities are entitled to act under the terms of this Declaration, the terms of
the Securities or the rules of any stock exchange on which the Capital
Securities are listed or admitted for trading. The Administrative Trustees shall
call a meeting of the Holders of such class if directed to do so by the Holders
of at least 10% in Liquidation Amount of such class of Securities. Such
direction shall be given by delivering to the Administrative Trustees one or
more notices in writing stating that the signing Holders wish to call a meeting
and indicating the general or specific purpose for which the meeting is to be
called. Any Holders calling a meeting shall specify in writing the Capital
Security or Common Security Certificates held by the Holders exercising the
right to call a meeting and only those Securities specified shall be counted for
purposes of determining whether the required percentage set forth in the second
sentence of this paragraph has been met.
(b) Except to the extent otherwise provided in the terms of the
Securities, the following provisions shall apply to meetings of Holders:
(i) notice of any such meeting shall be given to all the
Holders having a right to vote thereat at least seven days and not
more than 60 days before the date of such meeting. Whenever a vote,
consent or approval of the Holders is permitted or required under this
Declaration or the rules of any stock exchange on which the Capital
Securities are listed or admitted for trading, such vote, consent or
approval may be given at a meeting of the Holders; any action that may
be taken at a meeting of the Holders may be taken without a meeting if
a consent in writing setting forth the action so taken is signed by
the Holders owning not less than the minimum amount of Securities in
liquidation amount that would be necessary to authorize or take such
action at a meeting at which all
52
<PAGE>
Holders having a right to vote thereon were present and voting; prompt
notice of the taking of action without a meeting shall be given to the
Holders entitled to vote who have not consented in writing; and the
Administrative Trustees may specify that any written ballot submitted
to the Security Holder for the purpose of taking any action without a
meeting shall be returned to the Trust within the time specified by
the Administrative Trustees;
(ii) each Holder may authorize any Person to act for it by proxy
on all matters in which a Holder is entitled to participate, including
waiving notice of any meeting, or voting or participating at a
meeting; no proxy shall be valid after the expiration of eleven months
from the date thereof unless otherwise provided in the proxy; every
proxy shall be revocable at the pleasure of the Holder executing it;
and, except as otherwise provided herein, all matters relating to the
giving, voting or validity of proxies shall be governed by the General
Corporation Law of the State of Delaware relating to proxies, and
judicial interpretations thereunder, as if the Trust were a Delaware
corporation and the Holders were stockholders of a Delaware
corporation;
(iii) each meeting of the Holders shall be conducted by the
Administrative Trustees or by such other Person that the
Administrative Trustees may designate; and
(iv) unless the Business Trust Act, this Declaration, the terms
of the Securities, the Trust Indenture Act or the listing rules of any
stock exchange on which the Capital Securities are then listed or
trading, otherwise provides, the Administrative Trustees, in their
sole discretion, shall establish all other provisions relating to
meetings of Holders, including notice of the time, place or purpose of
any meeting at which any matter is to be voted on by any Holders,
waiver of any such notice, action by consent without a meeting, the
establishment of a record date, quorum requirements, voting in person
or by proxy or any other matter with respect to the exercise of any
such right to vote.
ARTICLE XIII
REPRESENTATIONS OF PROPERTY TRUSTEE
AND DELAWARE TRUSTEE
SECTION 13.1 Representations and Warranties of Property Trustee.
--------------------------------------------------
The Trustee that acts as initial Property Trustee represents and
warrants to the Trust and to the Sponsor at the date of this Declaration, and
each Successor Property Trustee represents and warrants to the Trust and the
Sponsor at the time of the Successor Property Trustee's acceptance of its
appointment as Property Trustee that:
(a) the Property Trustee is a banking corporation, a national banking
association or a bank or trust company, duly organized, validly existing and in
good standing under the laws of
53
<PAGE>
the jurisdiction of its incorporation, with corporate power and authority to
execute and deliver, and to carry out and perform its obligations under the
terms of, this Declaration;
(b) the execution, delivery and performance by the Property Trustee of
this Declaration has been duly authorized by all necessary corporate action on
the part of the Property Trustee; and this Declaration has been duly executed
and delivered by the Property Trustee and under Delaware law (excluding any
securities laws) constitutes a legal, valid and binding obligation of the
Property Trustee, enforceable against it in accordance with its terms, subject
to applicable bankruptcy, reorganization, moratorium, insolvency, and other
similar laws affecting creditors' rights generally and to general principles of
equity and the discretion of the court (regardless of whether the enforcement of
such remedies is considered in a proceeding in equity or at law);
(c) the execution, delivery and performance of this Declaration by the
Property Trustee does not conflict with or constitute a breach of the charter or
by-laws of the Property Trustee; and
(d) no consent, approval or authorization of, or registration with or
notice to, any federal or Delaware banking authority governing the trust powers
of the Property Trustee is required for the execution, delivery or performance
by the Property Trustee of this Declaration.
SECTION 13.2 Representations and Warranties of Delaware Trustee.
--------------------------------------------------
The Trustee that acts as initial Delaware Trustee represents and
warrants to the Trust and to the Sponsor at the date of this Declaration, and
each Successor Delaware Trustee represents and warrants to the Trust and the
Sponsor at the time of the Successor Delaware Trustee's acceptance of its
appointment as Delaware Trustee that:
(a) the Delaware Trustee is a banking corporation, duly organized,
validly existing and in good standing under the laws of the State of Delaware,
with corporate power and authority to execute and deliver, and to carry out and
perform its obligations under the terms of, this Declaration;
(b) the execution, delivery and performance by the Delaware Trustee of
this Declaration has been duly authorized by all necessary corporate action on
the part of the Delaware Trustee; and this Declaration has been duly executed
and delivered by the Delaware Trustee and under Delaware law (excluding any
securities laws) constitutes a legal, valid and binding obligation of the
Delaware Trustee, enforceable against it in accordance with its terms, subject
to applicable bankruptcy, reorganization, moratorium, insolvency, and other
similar laws affecting creditors' rights generally and to general principles of
equity and the discretion of the court (regardless of whether the enforcement of
such remedies is considered in a proceeding in equity or at law);
(c) the execution, delivery and performance of this Declaration by the
Delaware Trustee does not conflict with or constitute a breach of the charter or
by-laws of the Delaware Trustee; and
54
<PAGE>
(d) no consent, approval or authorization of, or registration with or
notice to, any federal or Delaware banking authority governing the trust powers
of the Delaware Trustee is required for the execution, delivery or performance
by the Delaware Trustee of this Declaration; and
(e) the Delaware Trustee is a natural person who is a resident of the
State of Delaware or, if not a natural person, an entity which has its principal
place of business in the State of Delaware, and is a Person that satisfies for
the Trust Section 3807(a) of the Business Trust Act.
ARTICLE XIV
MISCELLANEOUS
SECTION 14.1 Notices.
-------
All notices provided for in this Declaration shall be in writing, duly
signed by the party giving such notice, and shall be delivered, telecopied or
mailed by first class mail, overnight courier service or confirmed telecopy, as
follows:
(a) if given to the Trust, in care of the Administrative Trustees at
the Trust's mailing address set forth below (or such other address as the Trust
may give notice of to the Property Trustee, the Delaware Trustee and the
Holders):
NHTB Capital Trust I
c/o New Hampshire Thrift Bancshares, Inc.
9 Main Street
P.O. Box 29
Newport, New Hampshire 03773-0029
Attn.: Daryl J. Cady
Telephone: (603) 863-5772
Telecopier: (603) 863-9571
(b) if given to the Delaware Trustee, at the mailing address set forth
below (or such other address as the Delaware Trustee may give notice of to the
Property Trustee and the Holders):
Wilmington Trust Company
Rodney Square North
1100 Market Street
Wilmington, Delaware 19890-0001
Attn.: Corporate Trust Administration
Telephone: (302) 651-1000
Telecopier: (302) 651-8882
(c) if given to the Property Trustee, at the Property Trustee's
mailing address set forth below (or such other address as the Property Trustee
may give notice of to the Delaware Trustee and the Holders):
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<PAGE>
Wilmington Trust Company
Rodney Square North
1100 Market Street
Wilmington, Delaware 19890-0001
Attn.: Corporate Trust Administration
Telephone: (302) 651-1000
Telecopier: (302) 651-8882
(d) if given to the Holder of the Common Securities, at the mailing
address of the Sponsor set forth below (or such other address as the Holder of
the Common Securities may give notice to the Trust):
New Hampshire Thrift Bancshares, Inc.
9 Main Street
P.O. Box 29
Newport, New Hampshire 03773-0029
Attn.: Daryl J. Cady
Telephone: (603) 863-5722
Telecopier: (516) 863-9571
(e) if given to any other Holder, at the address set forth on the
books and records of the Trust.
All such notices shall be deemed to have been given when received in
person, telecopied with receipt confirmed, or mailed by first class mail,
postage prepaid except that if a notice or other document is refused delivery or
cannot be delivered because of a changed address of which no notice was given,
such notice or other document shall be deemed to have been delivered on the date
of such refusal or inability to deliver.
SECTION 14.2 Governing Law.
-------------
This Declaration and the rights of the parties hereunder shall be
governed by and construed in accordance with the laws of the State of New York
without regard to conflict of laws principles thereof.
SECTION 14.3 Intention of the Parties.
------------------------
It is the intention of the parties hereto that the Trust be classified
for United States federal income tax purposes as a grantor trust and that no
election be made to have the Trust classified as an association taxable as a
corporation for United States federal income tax purposes. The provisions of
this Declaration shall be interpreted to further this intention of the parties.
56
<PAGE>
SECTION 14.4 Headings.
--------
Headings contained in this Declaration are inserted for convenience of
reference only and do not affect the interpretation of this Declaration or any
provision hereof.
SECTION 14.5 Successors and Assigns.
----------------------
Whenever in this Declaration any of the parties hereto is named or
referred to, the successors and assigns of such party shall be deemed to be
included, and all covenants and agreements in this Declaration by the Sponsor
and the Trustees shall bind and inure to the benefit of their respective
successors and assigns, whether or not so expressed.
SECTION 14.6 Partial Enforceability.
----------------------
If any provision of this Declaration, or the application of such
provision to any Person or circumstance, shall be held invalid, the remainder of
this Declaration, or the application of such provision to Persons or
circumstances other than those to which it is held invalid, shall not be
affected thereby.
SECTION 14.7 Counterparts.
------------
This Declaration may contain more than one counterpart of the
signature page and this Declaration may be executed by the affixing of the
signature of each of the Trustees to one or more of such counterpart signature
pages. All of such counterpart signature pages shall be read as though one, and
they shall have the same force and effect as though all of the signers had
signed a single signature page.
57
<PAGE>
IN WITNESS WHEREOF, the undersigned has caused these presents to be
executed as of the day and year first above written.
__________________________________________________
Daryl J. Cady
as Administrative Trustee
__________________________________________________
Stephen W. Ensign
as Administrative Trustee
__________________________________________________
Stephen R. Theroux
as Administrative Trustee
WILMINGTON TRUST COMPANY
as Delaware Trustee
By:_______________________________________________
Name:
Title:
WILMINGTON TRUST COMPANY
as Property Trustee
By:_______________________________________________
Name:
Title:
NEW HAMPSHIRE THRIFT BANCSHARES, INC.
as Sponsor and Debenture Issuer
By:_______________________________________________
Name:
Title:
<PAGE>
ANNEX I
TERMS OF
[_____]% CAPITAL SECURITIES
[_____]% COMMON SECURITIES
Pursuant to Section 7.1 of the Amended and Restated Declaration, dated
as of [_________], 1999 (as amended from time to time, the "Declaration"), the
designation, rights, privileges, restrictions, preferences and other terms and
provisions of the Securities are set out below (each capitalized term used but
not defined herein has the meaning set forth in the Declaration or, if not
defined in such Declaration, as defined in the Registration Statement referred
to below):
1. Designation and Number.
----------------------
(a) Capital Securities. 1,750,000 Capital Securities of the Trust
-------------------
with an aggregate liquidation amount with respect to the assets of the Trust of
Seventeen Million Five Hundred Thousand Dollars ($17,500,000) and with a
liquidation amount with respect to the assets of the Trust of Ten Dollars ($10)
(the "Liquidation Amount") per security, are hereby designated for the purposes
of identification only as "[_____]% Capital Securities" (the "Capital
Securities"). The certificates evidencing the Capital Securities shall be
substantially in the form of Exhibit A-1 to the Declaration, with such changes
and additions thereto or deletions therefrom as may be required by ordinary
usage, custom or practice or to conform to the rules of any exchange or
quotation system on or in which the Capital Securities are listed, traded or
quoted.
(b) Common Securities. 54,124 Common Securities of the Trust with an
-----------------
aggregate liquidation amount with respect to the assets of the Trust of
Fifty Four Thousand One Hundred Twenty Four Dollars ($54,124) and a Liquidation
Amount with respect to the assets of the Trust of Ten Dollars ($10) per
security, are hereby designated for the purposes of identification only as
"[_____]% Common Securities" (the "Common Securities"). The certificates
evidencing the Common Securities shall be substantially in the form of Exhibit
A-2 to the Declaration, with such changes and additions thereto or deletions
therefrom as may be required by ordinary usage, custom or practice.
2. Distributions.
-------------
(a) Distributions on each Security will be payable at a fixed rate per
annum of [_____]% (the "Coupon Rate") of the liquidation amount of $10 per
Security, such rate being the rate of interest payable on the Debentures to be
held by the Property Trustee. Distributions in arrears for more than one
quarterly period will bear additional Distributions thereon compounded quarterly
at the Coupon Rate (to the extent permitted by applicable law). The term
"Distributions," as used herein, includes distributions of any and all such
interest, if any, payable unless otherwise stated. A Distribution is payable
only to the extent that payments are made in respect of the Debentures held by
the Property Trustee and to the extent the Property Trustee has funds legally
available therefor.
I-1
<PAGE>
(b) Distributions on the Securities will be cumulative, will
accumulate from the most recent date to which Distributions have been paid or,
if no Distributions have been paid, from [_________], 1999 and will be payable
quarterly in arrears on March 31, June 30, September 30 and December 31 of each
year, commencing September 30, 1999 (each, a "Distribution Date"), except as
otherwise described below. Distributions will be computed on the basis of a 360-
day year consisting of twelve 30-day months. As long as no Event of Default has
occurred and is continuing under the Indenture, the Debenture Issuer has the
right under the Indenture to defer payments of interest by extending the
interest payment period at any time and from time to time on the Debentures for
a period not exceeding 20 consecutive quarterly periods, including the first
such quarterly period during such period (each an "Extension Period"), during
which Extension Period no interest shall be due and payable on the Debentures,
provided that no Extension Period shall end on a date other than an Interest
Payment Date for the Debentures or extend beyond the Maturity Date of the
Debentures. As a consequence of such deferral, Distributions will also be
deferred. Notwithstanding such deferral, Distributions will continue to
accumulate with additional Distributions thereon (to the extent permitted by
applicable law but not at a rate greater than the rate at which interest is then
accruing on the Debentures ) at the Coupon Rate compounded quarterly during any
such Extension Period. Prior to the termination of any such Extension Period,
the Debenture Issuer may further defer payments of interest by further extending
such Extension Period, provided that such extension does not cause such
Extension Period, together with all such previous and further extensions within
such Extension Period, to exceed 20 consecutive quarterly periods, including the
first quarterly period during such Extension Period, end on a date other than an
Interest Payment Date for the Debentures or extend beyond the Maturity Date of
the Debentures. Upon the termination of any Extension Period and the payment of
all amounts then due, the Debenture Issuer may commence a new Extension Period,
subject to the above requirements.
(c) Distributions on the Securities will be payable to the Holders
thereof as they appear on the books and records of the Trust on the close of
business one Business Day prior to the relevant Distribution Date for Capital
Securities in book-entry form and the 15/th/ day of the month in which the
relevant Distribution Date occurs for Capital Securities not in book-entry form,
which Distribution Dates correspond to the Interest Payment Dates for the
Debentures. Subject to any applicable laws and regulations and the provisions of
the Declaration, each such payment in respect of the Capital Securities will be
made as described in the Prospectus, dated [__________], 1999 of the Debenture
Issuer and the Trust relating to the Securities and the Debentures. The relevant
record dates for the Common Securities shall be the same as the record dates for
the Capital Securities. Distributions payable on any Securities that are not
punctually paid on any Distribution Date, as a result of the Debenture Issuer
having failed to make a payment under the Debentures , will cease to be payable
to the Holder on the relevant record date, and such defaulted Distribution will
instead be payable to the Person in whose name such Securities are registered on
the special record date or other specified date determined in accordance with
the Indenture. If any date on which Distributions are payable on the Securities
is not a Business Day, then payment of the Distributions payable on such date
will be made on the next succeeding day that is a Business Day (and without any
interest or other payment in respect of any such delay), unless it would thereby
fall in the next calendar year, in which event such date will be the immediately
preceding Business Day with the same force and effect as if made on such date.
I-2
<PAGE>
(d) Payments of Distributions (including Additional Amounts, if
applicable) in respect of the Capital Securities shall be made by check mailed
to the address of the Person entitled thereto as such address shall appear on
the Securities Register or, if the Capital Securities are held by a Clearing
Agency, such Distributions shall be made to the Clearing Agency in immediately
available funds, which shall credit the relevant Persons' accounts at such
Clearing Agency on the applicable Distribution Dates. Payments in respect of the
Common Securities shall be made in such manner as shall be mutually agreed in
writing between the Property Trustee and the Common Security Holder.
(e) In the event that there is any money or other property held by or
for the Trust that is not accounted for hereunder, such property shall be
distributed Pro Rata (as defined herein) among the Holders.
3. Liquidation Distribution Upon Dissolution.
-----------------------------------------
In the event of any dissolution of the Trust, the Trust shall be
liquidated by the Trustees as expeditiously as the Trustees determine to be
possible by distributing to the Holders, after satisfaction of liabilities to
creditors of the Trust as provided by applicable law, a Like Amount (as defined
below) of the Debentures, unless such distribution is determined by the Property
Trustee not to be practicable, in which event such Holders will be entitled to
receive out of the assets of the Trust legally available for distribution to
Holders, after satisfaction of liabilities to creditors of the Trust as provided
by applicable law, an amount equal to the aggregate of the liquidation amount of
$10 per Security plus accumulated and unpaid Distributions thereon to the date
of payment (such amount being the "Liquidation Distribution").
"Like Amount" means (i) with respect to a redemption of the
Securities, Securities having a Liquidation Amount equal to the principal amount
of Debentures to be paid in accordance with their terms and (ii) with respect to
a distribution of Debentures upon the liquidation of the Trust, Debentures
having a principal amount equal to the Liquidation Amount of the Securities of
the Holder to whom such Debentures are distributed.
If, upon any such liquidation, the Liquidation Distribution can be
paid only in part because the Trust has insufficient assets legally available to
pay in full the aggregate Liquidation Distribution, then the amounts payable
directly by the Trust on the Securities shall be paid on a Pro Rata basis.
4. Redemption and Distribution.
---------------------------
(a) Upon the repayment of the Debentures in whole or in part, at
maturity or otherwise (either at the option of the Debenture Issuer or pursuant
to a Special Event, as described below), the proceeds from such repayment shall
be simultaneously applied by the Property Trustee (subject to the Property
Trustee having received written notice no later than 45 days prior to such
repayment) to redeem a Like Amount of the Securities at a redemption price equal
to 100% of the principal of, plus accrued and unpaid interest (including
Compounded Interest and Additional Sums, if any, thereon to the date of
redemption on the Debentures being so paid or redeemed (the
I-3
<PAGE>
"Redemption Price"). Holders will be given not less than 30 nor more than 60
days' prior written notice of such redemption.
(b) The Debenture Issuer shall have the right (subject to the
conditions in the Indenture) to elect to redeem the Debentures, in whole or in
part, at any time on or after [_________], 2004 (the "Initial Optional
Redemption Date"), and, simultaneous with such redemption, to cause a Like
Amount of the Securities to be redeemed by the Trust at the Redemption Price on
a Pro Rata basis.
In the case of an optional redemption, if fewer than all the
outstanding Securities are to be so redeemed, the Common Securities and the
Capital Securities shall be redeemed Pro Rata, and the Capital Securities to be
redeemed will be determined as described in Section 4(f)(ii) below. Upon the
entry of an order for the dissolution of the Trust by a court of competent
jurisdiction, the Debentures thereafter will be subject to optional redemption,
in whole, but not in part, on or after the Initial Optional Redemption Date.
(c) If at any time an Investment Company Event, a Regulatory Capital
Event or a Tax Event (each as defined below, and each a "Special Event") occurs,
the Debenture Issuer shall have the right (subject to the conditions set forth
in the Indenture) at any time prior to the Initial Optional Redemption Date,
upon not less than 30 days' nor more than 60 days' notice, to redeem the
Debentures in whole, but not in part, within the 90 days following the
occurrence of such Special Event (the "90 Day Period"), and, simultaneous with
such redemption, to cause a Like Amount of the Securities to be redeemed by the
Trust at the Redemption Price on a Pro Rata basis.
"Investment Company Event" shall mean the receipt by the Debenture
Issuer and the Trust of an opinion of independent securities counsel experienced
in such matters 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 rules, guidelines or policies
of any applicable regulatory authority for the Debenture Issuer or (b) any
official administrative pronouncement or judicial decision interpreting or
applying such laws or regulations, which amendment or change is effective or
which pronouncement or decision is announced on or after the date of original
issuance of the Securities, the Trust is, or within 90 days of the date of such
opinion will be, considered an Investment Company that is required to be
registered under the Investment Company Act.
A "Tax Event" shall occur upon receipt by the Debenture Issuer and the
Trust of an opinion of independent tax counsel experienced in such matters to
the effect that, as a result of any amendment to, or change (including any
announced prospective change) in, the laws or any regulations thereunder of the
United States or any political subdivision or taxing authority thereof or
therein, or as a result of any official administrative pronouncement or judicial
decision interpreting or applying such laws or regulations, which amendment or
change is effective or which pronouncement or decision is announced on or after
the date of original issuance of the Securities, there is more than an
insubstantial risk that (i) the Trust is, or will be within 90 days of the date
of such opinion, subject to United States federal income tax with respect to
income received or accrued on the Debentures, (ii) the interest payable by the
Debenture Issuer on the Debentures is not, or within 90 days of the date of such
opinion will not be, deductible by the Debenture Issuer, in whole
I-4
<PAGE>
or in part, for United States federal income tax purposes, or (iii) the Trust
is, or will be within 90 days of the date of such opinion, subject to more than
a de minimis amount of other taxes, duties or other governmental charges.
"Regulatory Capital Event" shall mean the receipt by the Debenture
Issuer and the Trust of an opinion of independent bank regulatory counsel
experienced in such matters 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 rules, guidelines or
policies of an applicable regulatory authority for the Debenture Issuer or (b)
any official administrative pronouncement or judicial decision interpreting or
applying such laws or regulations, which amendment or change is effective or
which pronouncement or decision is announced on or after [____________], 1999,
the Capital Securities do not constitute, or within 180 days of the date of such
opinion will not constitute, Tier 1 Capital (or its then equivalent if the
Sponsor were subject to such capital requirement) applied as if the Debenture
Issuer (or its successors) were a bank holding company for purposes of capital
adequacy guidelines of the Federal Reserve Board (or any successor regulatory
authority with jurisdiction over bank holding companies), or any capital
adequacy guidelines as then in effect and applicable to the Debenture Issuer;
provided, however, that the distribution of the Debentures in connection with
- -------- -------
the liquidation of the Trust by the Debenture Issuer shall not in and of itself
constitute a Regulatory Capital Event.
(d) On and from the date fixed by the Trustees for any distribution of
Debentures and liquidation of the Trust: (i) the Securities will no longer be
deemed to be outstanding, (ii) the Clearing Agency or its nominee (or any
successor Clearing Agency or its nominee), as the 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 Securities not held by the Clearing Agency or its
nominee (or any successor Clearing Agency or its nominee) will be deemed to
represent beneficial interests in a Like Amount of Debentures until such
certificates are presented to the Debenture Issuer or its agent for transfer or
reissue.
(e) The Trust may not redeem fewer than all the outstanding Securities
unless all accumulated and unpaid Distributions have been paid on all Securities
for all quarterly Distribution periods terminating on or before the date of
redemption.
(f) The procedure with respect to redemptions or distributions of
Securities shall be as follows:
(i) Notice of any redemption of, or notice of distribution of Debentures
in exchange for, the Securities (a "Redemption/Distribution Notice") will be
given by the Trust by mail to each Holder to be redeemed or exchanged not fewer
than 30 nor more than 60 days before the date fixed for redemption or exchange
thereof which, in the case of a redemption, will be the date fixed for
redemption of the Debentures. For purposes of the calculation of the date of
redemption or exchange and the dates on which notices are given pursuant to this
Section 4(f)(i), a Redemption/Distribution Notice shall be deemed to be given on
the day such notice is first mailed by first-class mail, postage prepaid, to
Holders. Each Redemption/Distribution Notice shall be addressed to the Holders
at the address of each such Holder appearing in the books and records of the
Trust. No defect in the
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<PAGE>
Redemption/Distribution Notice or in the mailing of either thereof with respect
to any Holder shall affect the validity of the redemption or exchange
proceedings with respect to any other Holder.
(ii) In the event that fewer than all the outstanding Securities are to be
redeemed, the particular Securities to be redeemed shall be selected on a Pro
Rata basis or by such other method (including, without limitation, by lot)
deemed fair and appropriate by the Property Trustee (based upon Liquidation
Amounts) not more than 60 nor less than 30 days prior to the date fixed for
redemption from the outstanding Securities not previously called for redemption;
provided, however, that any such redemption may be made on the basis of the
aggregate Liquidation Amount of Securities held by each Holder thereof and may
be made by making such adjustments as the Trust deems fair and appropriate in
order that fractional Securities shall not thereafter remain outstanding. With
respect to Capital Securities registered in the name of and held of record by
the Clearing Agency or its nominee (or any successor Clearing Agency or its
nominee) or any nominee, the distribution of the proceeds of such redemption
will be made to the Clearing Agency and disbursed by such Clearing Agency in
accordance with the procedures applied by such agency or nominee.
(iii) If Securities are to be redeemed and the Trust gives a
Redemption/Distribution Notice (which notice will be irrevocable), then (A) with
respect to Capital Securities issued in book-entry form, by 12:00 noon, New York
City time, on the redemption date, provided that the Debenture Issuer has paid
the Property Trustee a sufficient amount of cash in connection with the related
redemption or maturity of the Debentures by 10:00 a.m., New York City time, on
the Maturity Date or the date of redemption, as the case requires, the Property
Trustee will deposit irrevocably with the Clearing Agency or its nominee (or
successor Clearing Agency or its nominee) immediately available funds sufficient
to pay the applicable Redemption Price with respect to such Capital Securities
and will give the Clearing Agency irrevocable instructions and authority to pay
the Redemption Price to the relevant Clearing Agency Participants, and (B) with
respect to Capital Securities issued in certificated form and Common Securities,
provided that the Debenture Issuer has paid the Property Trustee a sufficient
amount of cash in connection with the related redemption or maturity of the
Debentures, the Property Trustee will irrevocably deposit with the paying agent
for the Capital Securities (if other than the Property Trustee) funds sufficient
to pay the applicable Redemption Price to the Holders by check mailed to the
address of the relevant Holder appearing on the books and records of the Trust
on the redemption date, and provided, further, that any such payment shall
become due only upon surrender by the Holder of the related certificated Capital
Securities. If a Redemption/Distribution Notice shall have been given and funds
deposited as required, if applicable, then immediately prior to the close of
business on the date of such deposit, or on the redemption date, as applicable,
Distributions will cease to accumulate on the Securities so called for
redemption and all rights of Holders so called for redemption will cease, except
the right of the Holders of such Securities to receive the Redemption Price, but
without interest on such Redemption Price, and such Securities shall cease to be
outstanding.
(iv) Payment of accumulated and unpaid Distributions on the Redemption
Date of the Securities will be subject to the rights of Holders at the close of
business on a regular record date in respect of a Distribution Date occurring on
or prior to such Redemption Date.
Neither the Administrative Trustees nor the Trust shall be required
to register or cause to be registered the transfer of (i) any Securities
beginning at the opening of business 15 days before
I-6
<PAGE>
the day of mailing of a notice of redemption or any notice of selection of
Securities for redemption or (ii) any Securities selected for redemption except
the unredeemed portion of any Security being redeemed. If any date fixed for
redemption of Securities is not a Business Day, then payment of the Redemption
Price payable on such date will be made on the next succeeding day that is a
Business Day (and without any interest or other payment with respect to any such
delay), unless it would thereby fall in the next calendar year, in which event
such date will be the immediately preceding Business Day with the same force and
effect as if made on such date. If payment of the Redemption Price with respect
to any Securities is improperly withheld or refused and not paid either by the
Property Trustee or by the Sponsor as guarantor pursuant to the relevant
Securities Guarantee, Distributions on such Securities will continue to
accumulate from the original redemption date to the actual 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.
(v) Redemption/Distribution Notices shall be sent by the Property Trustee
on behalf of the Trust to (A) with respect to Capital Securities issued in book-
entry form, the Clearing Agency or its nominee (or any successor Clearing Agency
or its nominee), (B) with respect to Capital Securities issued in certificated
form, to the Holders thereof, and (C) with respect to the Common Securities, to
the Holders thereof.
(vi) Subject to the foregoing and applicable law (including, without
limitation, United States federal securities laws and banking laws), the Sponsor
or any of 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.
5. Voting Rights - Capital Securities.
----------------------------------
(a) Except as provided under Sections 5(b), 6(b) and 7 and as
otherwise required by law and the Declaration, the Holders of the Capital
Securities will have no voting rights.
(b) So long as any Debentures are held by the Property Trustee, the
Trustees shall not (i) direct the time, method and place of conducting any
proceeding for any remedy available to the Debenture Trustee or executing any
trust or power conferred on such Debenture Trustee with respect to the
Debentures, (ii) waive any past default that is waivable under Section 5.07 of
the Indenture, (iii) exercise any right to rescind or annul a declaration of
acceleration of the maturity of the principal of the Debentures or (iv) consent
to any amendment, modification or termination of the Indenture or the
Debentures, where such consent shall be required, without, in each case,
obtaining the prior approval of the Holders of a Majority in Liquidation Amount
of all outstanding Capital Securities; provided, however, that where a consent
under the Indenture would require the consent of each holder of Debentures
affected thereby, no such consent shall be given by the Property Trustee without
the prior approval of each Holder of the Capital Securities. The Trustees shall
not revoke any action previously authorized or approved by a vote of the Holders
of the Capital Securities except by subsequent vote of such Holders. The
Property Trustee shall notify each Holder of Capital Securities of any notice of
default with respect to the Debentures. In addition to obtaining the foregoing
approvals of such Holders of the Capital Securities, prior to taking any of the
foregoing actions, the Trustees shall obtain an opinion of counsel experienced
in such matters to the effect that the Trust will continue not to be classified
as an association taxable as a corporation or be less likely
I-7
<PAGE>
to be classified as a grantor trust, in each case for United States federal
income tax purposes, after taking any such action into account.
If an Event of Default under the Declaration has occurred and is
continuing and such event is attributable to the failure of the Debenture Issuer
to pay principal of or interest on the Debentures on the due date (or, in the
case of redemption, on the redemption date), then a Holder of Capital Securities
may institute a proceeding directly against the Debenture Issuer for enforcement
of payment to such Holder of the principal of or interest on a Like Amount of
Debentures (a "Direct Action") on or after the respective due date specified in
the Debentures. In connection with such Direct Action, the Common Securities
Holder will be subordinated to the rights of the Holders of Capital Securities
to the extent of any payment made by the Debenture Issuer to such Holder of
Capital Securities in such Direct Action. Except as provided in the second
preceding sentence, and, except as set forth in the first sentence of Section
3.8(e) of the Declaration, the Holders of Capital Securities will not be able to
exercise directly any other remedy available to the holders of the Debentures.
Any 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 Securities in the Trust or
pursuant to written consent. The Property Trustee will cause a notice of any
meeting at which Holders of Capital Securities are entitled to vote to be mailed
to each Holder of record of Capital Securities. Each such notice will include a
statement setting forth (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 consent.
No vote or consent of the Holders of the Capital Securities will be
required for the Trust to redeem and cancel Capital Securities or to distribute
the Debentures in accordance with the Declaration and the terms of the
Securities.
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 by the Sponsor or any Affiliate of the Sponsor
shall not be entitled to vote or consent and shall, for purposes of such vote or
consent, be treated as if they were not outstanding.
6. Voting Rights - Common Securities.
---------------------------------
(a) Except as provided under Sections 6(b), 6(c) and 7 or as
otherwise required by law and the Declaration, the Holders of the Common
Securities will have no voting rights.
(b) Unless a Debenture Event of Default shall have occurred and be
continuing, any Trustee may be removed at any time by the Holder of the Common
Securities. If a Debenture Event of Default has occurred and is continuing, the
Property Trustee and the Delaware Trustee may be removed at such time by the
Holders of a Majority in Liquidation Amount of the outstanding Capital
Securities. In no event will the Holders of the Capital Securities have the
right to vote to appoint, remove or replace the Administrative Trustees, which
voting rights are vested exclusively
I-8
<PAGE>
in the Sponsor as the Holder of the Common Securities. No resignation or removal
of a Trustee and no appointment of a successor trustee shall be effective until
the acceptance of appointment by the successor trustee in accordance with the
provisions of the Declaration.
(c) So long as any Debentures are held by the Property Trustee, the
Trustees shall not (i) direct the time, method and place of conducting any
proceeding for any remedy available to the Debenture Trustee, or executing any
trust or power conferred on such Debenture Trustee with respect to the
Debentures, (ii) waive any past default that is waivable under Section 5.07 of
the Indenture, (iii) exercise any right to rescind or annul a declaration of
acceleration of the maturity of the principal of the Debentures or (iv) consent
to any amendment, modification or termination of the Indenture or the
Debentures, where such consent shall be required, without, in each case,
obtaining the prior approval of the Holders of a Majority in Liquidation Amount
of all outstanding Common Securities; provided, however, that where a consent
under the Indenture would require the consent of each holder of Debentures
affected thereby, no such consent shall be given by the Property Trustee without
the prior approval of each Holder of the Common Securities. The Trustees shall
not revoke any action previously authorized or approved by a vote of the Holders
of the Common Securities except by subsequent vote of such Holders. The Property
Trustee shall notify each Holder of Common Securities of any notice of default
with respect to the Debentures. In addition to obtaining the foregoing approvals
of such Holders of the Common Securities, prior to taking any of the foregoing
actions, the Trustees shall obtain an opinion of counsel experienced in such
matters to the effect that the Trust will continue not to be classified as an
association taxable as a corporation or to be less likely to be classified as a
grantor trust, in each case for United States federal income tax purposes, after
taking any such action into account.
If an Event of Default under the Declaration has occurred and is
continuing and such event is attributable to the failure of the Debenture Issuer
to pay principal of or interest on the Debentures on the due date (or in the
case of redemption, on the redemption date), then a Holder of Common Securities
may institute a Direct Action directly against the Debenture Issuer for
enforcement of payment to such Holder of the principal of or interest on a Like
Amount of Debentures on or after the respective due date specified in the
Debentures. In connection with such Direct Action, the rights of the Common
Securities Holder will be subordinated to the rights of the Holders of Capital
Securities in respect of any payment from the Debenture Issuer in such Direct
Action. Except as provided in the second preceding sentence, the Holders of
Common Securities will not be able to exercise directly any other remedy
available to the holders of the Debentures.
Any approval or direction of Holders of Common Securities may be given
at a separate meeting of Holders of Common Securities convened for such purpose,
at a meeting of all of the Holders of Securities in the Trust or pursuant to
written consent. The Administrative Trustees will cause a notice of any meeting
at which Holders of Common Securities are entitled to vote, or of any matter
upon which action by written consent of such Holders is to be taken, to be
mailed to each Holder of record of Common Securities. Each such notice will
include a statement setting forth (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.
I-9
<PAGE>
No vote or consent of the Holders of the Common Securities will be
required for the Trust to redeem and cancel Common Securities or to distribute
the Debentures in accordance with the Declaration and the terms of the
Securities.
7. Amendments to Declaration.
-------------------------
In addition to the requirements set forth in Section 12.1 of the
Declaration, the Declaration may be amended from time to time by the Sponsor,
the Property Trustee and the Administrative Trustees without the consent of the
Holders (i) to cure any ambiguity, correct or supplement any provisions in the
Declaration that may be inconsistent with any other provisions, 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 (ii) to modify, eliminate or add to any provisions of the
Declaration to such extent as shall be necessary to ensure that the Trust will
not be classified as an association taxable as a corporation and will not be
less likely to be classified as a grantor trust, in each case for United States
federal income tax purposes, at all times that any Securities are outstanding or
to ensure that the Trust will not be required to register as an Investment
Company under the Investment Company Act; provided, however, that in the case of
an amendment pursuant to clause (i) above, such action shall not adversely
affect in any material respect the interests of any Holder, and any such
amendments of the Declaration shall become effective when notice thereof is
given to the Holders. The Declaration may also be amended by the Trustees and
the Sponsor with (i) the consent of Holders representing a Majority in
Liquidation Amount of all outstanding Securities, and (ii) receipt by the
Trustees of an Opinion of Counsel to the effect that such amendment or the
exercise of any power granted to the Trustees in accordance with such amendment
will not affect the Trust's status as not an association taxable as a
corporation or as a grantor trust for United States federal income tax purposes
or the Trust's exemption from status as an Investment Company under the
Investment Company Act; provided, however, that, without the consent of each
Holder of Trust Securities, the Declaration may not be amended to (i) change the
amount or timing of any Distribution on, or the payment required to be made in
respect of, the Trust Securities as of a specified date or (ii) restrict the
right of a Holder of Trust Securities to institute suit for the enforcement of
any such payment on or after such date.
8. Pro Rata.
--------
A reference in these terms of the Securities to any payment,
distribution or treatment as being "Pro Rata" shall mean pro rata to each Holder
according to the aggregate liquidation amount of the Securities held by such
Holder in relation to the aggregate liquidation amount of all Securities
outstanding unless, in relation to a payment, an Event of Default under the
Declaration has occurred and is continuing, in which case any funds available to
make such payment shall be paid first to each Holder of the Capital Securities
pro rata according to the aggregate liquidation amount of Capital Securities
held by such Holder relative to the aggregate liquidation amount of all Capital
Securities outstanding and then, only after satisfaction of all amounts owed to
the Holders of the Capital Securities, to each Holder of Common Securities pro
rata according to the aggregate liquidation amount of Common Securities held by
such Holder relative to the aggregate liquidation amount of all Common
Securities outstanding.
I-10
<PAGE>
9. Ranking.
-------
The Capital Securities rank pari passu with the Common Securities and
payment thereon shall be made Pro Rata with the Common Securities, except that,
if an Event of Default under the Declaration occurs and is continuing, no
payments in respect of Distributions on, or payments upon liquidation,
redemption or otherwise with respect to, the Common Securities shall be made
until the Holders of the Capital Securities shall be paid in full the
Distributions, Redemption Price, Liquidation Distribution and any other payments
to which they are entitled at such time.
10. Acceptance of Capital Securities Guarantee, Common Securities
-------------------------------------------------------------
Guarantee, Indenture and Debentures.
- ------------------------------------
Each Holder of Capital Securities and Common Securities, by the
acceptance thereof, agrees to the provisions of the Capital Securities
Guarantee, the Common Securities Guarantee, the Indenture and the Debentures, as
applicable, including the subordination provisions therein.
11. No Preemptive Rights.
--------------------
Neither the issuance of Capital Securities nor the issuance of Common
Securities is subject to preemptive or other similar rights. The Holders shall
have no preemptive or similar rights to subscribe for any additional securities.
12. Miscellaneous.
-------------
These terms constitute a part of the Declaration.
The Sponsor will provide a copy of the Declaration, the Capital
Securities Guarantee or the Common Securities Guarantee, as applicable, and the
Indenture (including any supplemental indenture) to a Holder without charge upon
written request to the Trust at its principal place of business.
EXHIBIT A-1
FORM OF CAPITAL SECURITY CERTIFICATE
[FORM OF FACE OF SECURITY]
THIS CAPITAL SECURITY IS A GLOBAL CAPITAL SECURITY WITHIN THE MEANING
OF THE DECLARATION HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF THE
DEPOSITORY TRUST COMPANY (THE "CLEARING AGENCY") OR A NOMINEE OF THE CLEARING
AGENCY. THIS CAPITAL SECURITY IS EXCHANGEABLE FOR CAPITAL SECURITIES REGISTERED
IN THE NAME OF A PERSON OTHER THAN THE CLEARING AGENCY OR ITS NOMINEE ONLY IN
THE LIMITED CIRCUMSTANCES DESCRIBED IN THE DECLARATION, AND NO TRANSFER OF THIS
CAPITAL SECURITY (OTHER THAN A TRANSFER OF THIS CAPITAL SECURITY AS A WHOLE BY
THE CLEARING AGENCY TO A NOMINEE OF THE CLEARING AGENCY OR
A1-1
<PAGE>
BY A NOMINEE OF THE CLEARING AGENCY TO THE CLEARING AGENCY OR ANOTHER NOMINEE OF
THE CLEARING AGENCY) MAY BE REGISTERED EXCEPT IN LIMITED CIRCUMSTANCES.
UNLESS THIS CAPITAL SECURITY IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE CLEARING AGENCY TO THE TRUST OR ITS AGENT FOR REGISTRATION
OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CAPITAL SECURITY ISSUED IS REGISTERED
IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE CLEARING AGENCY AND ANY PAYMENT HEREON IS MADE TO CEDE &
CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO
ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN.
A1-2
<PAGE>
Certificate Number: Aggregate Liquidation
Amount: $17,500,000
CUSIP Number:
Certificate Evidencing Capital Securities
of
NHTB Capital Trust I
[_____]% Capital Securities
(liquidation amount $10 per Capital Security)
NHTB Capital Trust I, a statutory business trust created under the
laws of the State of Delaware (the "Trust"), hereby certifies that Cede & Co.
(the "Holder") is the registered owner of 1,750,000 Capital Securities of the
Trust]/1/ [the aggregate number of Capital Securities of the Trust specified in
Schedule A hereto]/2/ representing undivided preferred beneficial interests in
the assets of the Trust designated the [_____]% Capital Securities, (liquidation
amount $10 per Capital Security) (the "Capital Securities"). The Capital
Securities are transferable on the books and records of the Trust, in person or
by a duly authorized attorney, upon surrender of this certificate duly endorsed
and in proper form for transfer. The designation, rights, privileges,
restrictions, preferences and other terms and provisions of the Capital
Securities represented hereby are issued and shall in all respects be subject to
the provisions of the Amended and Restated Declaration of the Trust, dated as of
[_________], 1999, as the same may be amended from time to time (the
"Declaration"), including the designation of the terms of the Capital Securities
as set forth in Annex I to the Declaration. Capitalized terms used but not
defined herein shall have the meaning given them in the Declaration. The Sponsor
will provide a copy of the Declaration, the Capital Securities Guarantee and the
Indenture (including any supplemental indenture) to a Holder without charge upon
written request to the Trust at its principal place of business.
Upon receipt of this Certificate, the Holder is bound by the
Declaration and is entitled to the benefits thereunder and to the benefits of
the Capital Securities Guarantee to the extent provided therein.
By acceptance hereof, the Holder agrees, for United States federal
income tax purposes, to treat the Debentures as indebtedness and the Capital
Securities as evidence of indirect beneficial ownership in the Debentures.
_______________________
/1/ Insert in Definitive Capital Securities only.
/2/ Insert in Global Capital Securities only.
A1-3
<PAGE>
IN WITNESS WHEREOF, the Trust has executed this certificate this _____
day of _______________, 1999.
NHTB CAPITAL TRUST I
By:_______________________________________
Name:
Administrative Trustee
PROPERTY TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the [_____]% Capital Securities of NHTB Capital Trust I
referred to in the within-mentioned Declaration.
Dated: _____________, 1999
WILMINGTON TRUST COMPANY,
not in its individual capacity but solely
as Property Trustee
By:_______________________________________
Authorized Signatory
A1-4
<PAGE>
[FORM OF REVERSE OF SECURITY]
Distributions on each Capital Security will be payable at a fixed rate per
annum of [_____]% (the "Coupon Rate") of the liquidation amount of $10 per
Capital Security, such rate being the rate of interest payable on the Debentures
to be held by the Property Trustee. Distributions in arrears for more than one
quarterly period will bear interest thereon compounded quarterly at the Coupon
Rate (to the extent permitted by applicable law). The term "Distributions," as
used herein, includes such cash distributions and any and all such interest, if
any, payable unless otherwise stated. A Distribution is payable only to the
extent that payments are made in respect of the Debentures held by the Property
Trustee and to the extent the Property Trustee has funds legally available
therefor.
Distributions on the Capital Securities will be cumulative, will
accumulate from the most recent date to which Distributions have been paid or,
if no Distributions have been paid, from [_________], 1999 and will be payable
quarterly in arrears, on March 31, June 30, September 30 and December 31 of each
year, commencing September 30, 1999, except as otherwise described below.
Distributions will be computed on the basis of a 360-day year consisting of
twelve 30-day months. As long as no Event of Default has occurred and is
continuing under the Indenture, the Debenture Issuer has the right under the
Indenture to defer payments of interest by extending the interest payment period
at any time and from time to time on the Debentures for a period not exceeding
20 consecutive calendar quarterly periods, including the first such quarterly
period during such extension period (each an "Extension Period"), provided that
-------- ----
no Extension Period shall end on a date other than an Interest Payment Date for
the Debentures or extend beyond the Maturity Date of the Debentures. As a
consequence of such deferral, Distributions will also be deferred.
Notwithstanding such deferral, quarterly Distributions will continue to
accumulate with interest thereon (to the extent permitted by applicable law, but
not at a rate exceeding the rate of interest then accruing on the Debentures)
at the Coupon Rate compounded quarterly during any such Extension Period. Prior
to the termination of any Extension Period, the Debenture Issuer may further
defer payments of interest by further extending such Extension Period; provided
--------
that such Extension Period, together with all such previous and further
- ----
extensions within such Extension Period, may not (i) exceed 20 consecutive
quarterly periods, including the first quarterly period during such Extension
Period, (ii) end on a date other than an Interest Payment Date for the
Debentures or (iii) extend beyond the Maturity Date of the Debentures. Payments
of accumulated Distributions will be payable to Holders as they appear on the
books and records of the Trust on the record date immediately preceding the end
of the Extension Period. Upon the termination of any Extension Period and the
payment of all amounts then due, the Debenture Issuer may commence a new
Extension Period, subject to the above requirements.
A1-5
<PAGE>
Subject to receipt by the Sponsor of any and all required regulatory
approvals and to certain other conditions set forth in the Declaration and the
Indenture, the Property Trustee may, at the direction of the Sponsor, at any
time dissolve the Trust and, after satisfaction of liabilities to creditors of
the Trust as provided by applicable law, cause the Debentures to be distributed
to the Holders of the Securities in liquidation of the Trust or, simultaneously
with any redemption of the Debentures, cause a Like Amount of the Securities to
be redeemed by the Trust.
The Capital Securities shall be redeemable as provided in the
Declaration.
A1-6
<PAGE>
--------------------
ASSIGNMENT
--------------------
FOR VALUE RECEIVED, the undersigned hereby assigns and transfers this Capital
Security Certificate to:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Assignee's social security or tax identification number)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Address and zip code of assignee)
and irrevocably appoints
________________________________________________________________________________
________________________________________________________________________________
__________________________________________________________________________ agent
to transfer this Capital Security Certificate on the books of the Trust. The
agent may substitute another to act for him or her.
Date:_________________
Signature:____________________________________________
(Sign exactly as your name appears on the other side of
this Capital Security Certificate)
Signature Guarantee:__________________________________
__________________________
Signature must be guaranteed by an "eligible guarantor institution" that
is a bank, stockbroker, savings and loan association or credit union
meeting the requirements of the Registrar, which requirements include
membership or participation in the Securities Transfer Agents Medallion
Program ("STAMP") or such other "signature guarantee program" as may be
determined by the Registrar in addition to, or in substitution for, STAMP,
all in accordance with the Securities Exchange Act of 1934, as amended.
A1-7
<PAGE>
EXHIBIT A-2
FORM OF COMMON SECURITY CERTIFICATE
THIS COMMON SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS OR ANY
OTHER APPLICABLE SECURITIES LAW. NEITHER THIS COMMON SECURITY NOR ANY INTEREST
OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED,
ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR
UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS COMMON SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO
OFFER, SELL OR OTHERWISE TRANSFER THIS COMMON SECURITY, PRIOR TO THE DATE (THE
"RESALE RESTRICTION TERMINATION DATE") WHICH IS TWO YEARS AFTER THE LATER OF THE
ORIGINAL ISSUANCE DATE HEREOF AND THE LAST DATE ON WHICH NEW HAMPSHIRE THRIFT
BANCSHARES, INC. (THE "CORPORATION") OR ANY "AFFILIATE" OF THE CORPORATION WAS
THE OWNER OF THIS COMMON SECURITY (OR ANY PREDECESSOR OF THIS COMMON SECURITY)
ONLY (A) TO THE CORPORATION, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS
BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, OR (C) PURSUANT TO ANY OTHER
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS UNDER THE SECURITIES ACT,
SUBJECT TO THE RIGHT OF NHTB CAPITAL TRUST I (THE "TRUST") AND THE CORPORATION
PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (I) PURSUANT TO CLAUSE (D) OR (E) TO
REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATIONS AND/OR OTHER
INFORMATION SATISFACTORY TO EACH OF THEM, AND TO REQUIRE THAT THE TRANSFEROR
DELIVER TO THE TRUST A LETTER FROM THE TRANSFEREE. SUBSTANTIALLY TO THE EFFECT
THAT SUCH HOLDER FURTHER AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS
COMMON SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS
LEGEND.
A2-1
<PAGE>
Certificate Evidencing Common Securities
of
NHTB Capital Trust I
[_____]% Common Securities
(liquidation amount $10 per Common Security)
NHTB Capital Trust I, a statutory business trust created under the
laws of the State of Delaware (the "Trust"), hereby certifies that New Hampshire
Thrift Bancshares, Inc. (the "Holder") is the registered owner of 54,124 Common
Securities of the Trust representing undivided beneficial interests in the
assets of the Trust designated the [_____]% Common Securities, (liquidation
amount $10 per Common Security) (the "Common Securities"). Subject to the terms
of the Declaration (as defined below), the Common Securities are transferable on
the books and records of the Trust, in person or by a duly authorized attorney,
upon surrender of this Certificate duly endorsed and in proper form for
transfer. The designation, rights, privileges, restrictions, preferences and
other terms and provisions of the Common Securities represented hereby are
issued and shall in all respects be subject to the provisions of the Amended and
Restated Declaration of the Trust dated as of [_________], 1999, as the same may
be amended from time to time (the "Declaration"), including the designation of
the terms of the Common Securities as set forth in Annex I to the Declaration.
Capitalized terms used but not defined herein shall have the meaning given them
in the Declaration. The Sponsor will provide a copy of the Declaration, the
Common Securities Guarantee and the Indenture (including any supplemental
indenture) to a Holder without charge upon written request to the Trust at its
principal place of business.
Upon receipt of this Certificate, the Holder is bound by the
Declaration and is entitled to the benefits thereunder and to the benefits of
the Common Securities Guarantee to the extent provided therein.
By acceptance hereof, the Holder agrees to treat, for United States
federal income tax purposes, the Debentures as indebtedness and the Common
Securities as evidence of indirect beneficial ownership in the Debentures.
IN WITNESS WHEREOF, the Trust has executed this certificate this
_________ day of _____________, 1999.
NHTB CAPITAL TRUST I
By:____________________________________
Name:
Administrative Trustee
A2-2
<PAGE>
[FORM OF REVERSE OF SECURITY]
Distributions on each Common Security will be payable at a fixed rate per
annum of [_____]% (the "Coupon Rate") of the liquidation amount of $10 per
Common Security, such rate being the rate of interest payable on the Debentures
to be held by the Property Trustee. Distributions in arrears for more than one
quarterly period will bear interest thereon compounded quarterly at the Coupon
Rate (to the extent permitted by applicable law). The term "Distributions," as
used herein, includes such cash distributions and any and all such interest
payable unless otherwise stated. A Distribution is payable only to the extent
that payments are made in respect of the Debentures held by the Property Trustee
and to the extent the Property Trustee has funds legally available therefor.
Distributions on the Common Securities will be cumulative, will accrue from
the most recent date to which Distributions have been paid or, if no
Distributions have been paid, from [_________], 1999 and will be payable
quarterly in arrears, on March 31, June 30, September 30 and December 31 of each
year, commencing September 30, 1999, except as otherwise described below.
Distributions will be computed on the basis of a 360-day year with twelve months
of 30 days each. As long as no Event of Default has occurred and is continuing
under the Indenture, the Debenture Issuer has the right under the Indenture to
defer payments of interest by extending the interest payment period at any time
and from time to time on the Debentures for a period not exceeding 20
consecutive calendar quarterly periods, including the first such quarterly
period during such extension period (each an "Extension Period"), provided that
-------- ----
no Extension Period shall end on a date other than an Interest Payment Date for
the Debentures or extend beyond the Maturity Date of the Debentures. As a
consequence of such deferral, Distributions will also be deferred.
Notwithstanding such deferral, quarterly Distributions will continue to
accumulate with interest thereon (to the extent permitted by applicable law, but
not at a rate exceeding the rate of interest then accruing on the Debentures) at
the Coupon Rate compounded quarterly during any such Extension Period. Prior to
the termination of any Extension Period, the Debenture Issuer may further defer
payments of interest by further extending such Extension Period; provided that
-------- ----
such Extension Period, together with all such previous and further extensions
within such Extension Period, may not (i) exceed 20 consecutive quarterly
periods, including the first quarterly period during such Extension Period, (ii)
end on a date other than an Interest Payment Date for the Debentures or (iii)
extend beyond the Maturity Date of the Debentures. Payments of accrued
Distributions will be payable to Holders as they appear on the books and records
of the Trust on the record date immediately preceding the end of the Extension
Period. Upon the termination of any Extension Period and the payment of all
amounts then due, the Debenture Issuer may commence a new Extension Period,
subject to the above requirements.
Subject to the receipt by the Sponsor of any and all required regulatory
approvals and to certain other conditions set forth in the Declaration and the
Indenture, the Property Trustee may, at the direction of the Sponsor, at any
time dissolve the Trust and cause the Debentures to be distributed to the
Holders of the Securities in liquidation of the Trust or, simultaneously with
any redemption of the Debentures, cause a Like Amount of the Securities to be
redeemed by the Trust.
The Common Securities shall be redeemable as provided in the Declaration.
Under certain circumstances, the rights of the holders of the Common
Securities shall be subordinate to the rights of the holders of the Capital
Securities, as provided in the Declaration.
A2-3
<PAGE>
EXHIBIT 4.4
SUBORDINATED DEBENTURE CERTIFICATE
NEW HAMPSHIRE THRIFT BANCSHARES, INC.
CUSIP No.:
$17,500,000
Certificate No.
[______]% JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURE
DUE [__________], 2029
New Hampshire Thrift Bancshares, Inc., a Delaware corporation (the
"Corporation," which term includes any successor Person under the Indenture
hereinafter referred to), for value received, hereby promises to pay to NHTB
Capital Trust I or its registered assigns, the principal sum of $17,500,000
(Seventeen Million Five Hundred Thousand Dollars) on [__________], 2029 (the
"Maturity Date"), unless previously prepaid, and to pay interest on the
outstanding principal amount hereof from [_______], 1999, or from the most
recent interest payment date (each such date, an "Interest Payment Date") to
which interest has been paid or duly provided for, quarterly (subject to
deferral as set forth herein) in arrears on March 31, June 30, September 30 and
December 31 of each year, commencing [__________], 1999 at the rate of [______]%
per annum until the principal hereof shall have become due and payable, and on
any overdue principal and (without duplication and to the extent that payment of
such interest is enforceable under applicable law) on any overdue installment of
interest at the same rate per annum compounded quarterly ("Compounded
Interest"). The amount of interest payable on any Interest Payment Date shall be
computed on the basis of a 360-day year consisting of twelve 30-day months. In
the event that any date on which the principal of `or interest on this Security
is payable is not a Business Day (as defined in the Indenture), then the payment
payable on such date will be made on the next succeeding day that is a Business
Day, except that if such next succeeding Business Day falls in the next
succeeding calendar year such payment shall be made on the immediately preceding
Business Day (and without any interest or other payment in respect of any such
delay), with the same force and effect as if made on such date. Pursuant to the
Indenture, in certain circumstances the Corporation will be required to pay
Additional Sums (as defined in the Indenture) with respect to this Security.
The interest installment so payable, and punctually paid or duly provided
for, on any Interest Payment Date will, as provided in the Indenture, be paid to
the Person in whose name this Security (or one or more Predecessor Securities,
as defined in said Indenture) is registered at the close of business on the
regular record date for such interest installment, which shall be one Business
Day prior to the relevant Interest Payment Date for Global Securities and the
15/th/ day of the month in which the relevant Interest Payment Date falls for
Definitive Securities. Any such interest installment not punctually paid or
duly provided for shall forthwith cease to be payable to the holders on such
regular record date and may be paid to the Person in whose name this Security
(or one or more Predecessor Securities) is registered at the close of business
on a special record date to be fixed by the Debenture Trustee for the payment of
such defaulted interest, notice whereof shall be given to the holders of
Securities not less than 10 days prior to such special record date, or may be
paid at any time in any other lawful manner not inconsistent with the
requirements of any securities
<PAGE>
exchange on which the Securities may be listed, and upon such notice as may be
required by such exchange, all as more fully provided in the Indenture.
The principal of and interest (including Compounded Interest and Additional
Sums, if any) on this Security shall be payable at the office or agency of the
Debenture Trustee maintained for that purpose in any coin or currency of the
United States of America that at the time of payment is legal tender for payment
of public and private debts; provided, however, that payment of interest may be
-------- -------
made at the option of the Corporation by (i) check mailed to the holder at such
address as shall appear in the Security Register or (ii) transfer to an account
maintained by the Person entitled thereto, provided that proper written transfer
instructions have been received by the relevant record date. Notwithstanding
the foregoing, so long as the holder of this Security is the Property Trustee of
NHTB Capital Trust I, the payment of the principal of and interest (including
Compounded Interest and Additional Sums, if any) on this Security will be made
at such place and to such account as may be designated by such Property Trustee.
The indebtedness evidenced by this Security is, to the extent provided in
the Indenture, subordinate and junior in right of payment to the prior payment
in full of all Senior Indebtedness, and this Security is issued subject to the
provisions of the Indenture with respect thereto. Each holder of this Security,
by accepting the same, (a) agrees to and shall be bound by such provisions, (b)
authorizes and directs the Debenture Trustee on his or her behalf to take such
action as may be necessary or appropriate to acknowledge or effectuate the
subordination so provided and (c) appoints the Debenture Trustee his or her
attorney-in-fact for any and all such purposes. Each holder hereof, by his or
her acceptance hereof, hereby waives all notice of the acceptance of the
subordination provisions contained herein and in the Indenture by each holder of
Senior Indebtedness, whether now outstanding or hereafter incurred, and waives
reliance by each such holder upon said provisions.
This Security shall not be entitled to any benefit under the Indenture or
be valid or become obligatory for any purpose until the Certificate of
Authentication hereon shall have been signed by or on behalf of the Debenture
Trustee.
The provisions of this Security are continued on the reverse side hereof
and such provisions shall for all purposes have the same effect as though fully
set forth at this place.
-2-
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this instrument to be duly
executed and sealed this ___ day of _________, 1999.
NEW HAMPSHIRE THRIFT BANCSHARES, INC.
By:___________________________________
Name:
Title:
Attest:
By:___________________________
Name:
Title:
CERTIFICATE OF AUTHENTICATION
This is one of the [______]% Junior Subordinated Deferrable Interest
Debentures of NEW HAMPSHIRE THRIFT BANCSHARES, INC. referred to in the within-
mentioned Indenture.
WILMINGTON TRUST COMPANY, not in its
individual capacity but solely as Debenture
Trustee
Dated:__________________ By:___________________________________
Authorized Signatory
-3-
<PAGE>
REVERSE OF SECURITY
This Security is one of the Securities of the Corporation (herein sometimes
referred to as the "Securities"), specified in the Indenture, all issued or to
be issued under and pursuant to an Indenture, dated as of [________], 1999 (the
"Indenture"), duly executed and delivered between the Corporation and Wilmington
Trust Company, as Debenture Trustee (the "Debenture Trustee"), to which
Indenture reference is hereby made for a description of the rights, limitations
of rights, obligations, duties and immunities thereunder of the Debenture
Trustee, the Corporation and the holders of the Securities.
Upon the occurrence and continuation of a Special Event (as defined in the
Indenture), the Corporation shall have the right, at any time within 90 days
following the occurrence of such Special Event, to prepay this Security in whole
(but not in part) at the Prepayment Price. "Prepayment Price" shall mean, with
respect to any prepayment of the Securities, an amount equal to 100% of the
principal amount of the Securities to be prepaid plus any accrued and unpaid
interest thereon (including Compounded Interest and Additional Sums, if any) to
the date of such prepayment.
In addition, the Corporation shall have the right to prepay this Security,
in whole or in part, at any time on or after the Initial Optional Redemption
Date (an "Optional Prepayment"), at the Prepayment Price plus accrued and unpaid
interest thereon (including Compounded Interest and Additional Sums, if any) to
the date of such prepayment.
The Prepayment Price shall be paid prior to 12:00 noon, New York City time,
on the date of such prepayment or at such earlier time as the Corporation
determines, provided, that the Corporation shall deposit with the Debenture
--------
Trustee an amount sufficient to pay the applicable Prepayment Price by 10:00
a.m., New York City time, on the date such Prepayment Price is to be paid. Any
prepayment pursuant to this paragraph will be made upon not less than 30 days
nor more than 60 days' prior written notice.
If the Securities are only partially prepaid by the Corporation pursuant to
an Optional Prepayment, the particular Securities to be prepaid shall be
selected on a pro rata basis from the outstanding Securities not previously
called for prepayment; provided, however, that with respect to Securityholders
-------- -------
that would be required to hold Securities with an aggregate principal amount of
less than $10 but more than an aggregate principal amount of zero as a result of
such pro rata prepayment, the Corporation shall prepay Securities of each such
Securityholder so that after such prepayment such Securityholder shall hold
Securities either with an aggregate principal amount of at least $10 or such
Securityholder no longer holds any Securities and shall use such method
(including, without limitation, by lot) as the Corporation shall deem fair and
appropriate; provided, further, that any such proration may be made on the basis
-------- -------
of the aggregate principal amount of Securities held by each Securityholder
thereof and may be made by making such adjustments as the Corporation deems fair
and appropriate in order that only Securities in denominations of $10 or
integral multiples thereof shall be prepaid. In the event of prepayment of this
Security in part only, a new Security or Securities for the portion hereof that
has not been prepaid will be issued in the name of the holder hereof upon the
cancellation hereof.
-4-
<PAGE>
Notwithstanding the foregoing, any prepayment of Securities by the
Corporation shall be subject to the receipt of any and all required regulatory
approvals.
In case an Event of Default (as defined in the Indenture) shall have
occurred and be continuing, the principal of all of the Securities may be
declared, and upon such declaration shall become, due and payable, in the
manner, with the effect and subject to the conditions provided in the Indenture.
The Indenture contains provisions permitting the Corporation and the
Debenture Trustee, with the consent of the holders of a majority in aggregate
principal amount of the Securities at the time outstanding (as defined in the
Indenture), to execute supplemental indentures for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
the Indenture or of modifying in any manner the rights of the holders of the
Securities; provided, however, that no such supplemental indenture shall,
-------- -------
without the consent of each holder of Securities then outstanding and affected
thereby, (i) change the Maturity Date of any Security, or reduce the rate or
extend the time of payment of interest thereon (subject to Article XVI of the
Indenture), or reduce the principal amount thereof, or change any of the
prepayment provisions or make the principal thereof or any interest thereon
payable in any coin or currency other than U.S. dollars, or impair or affect the
right of any holder of Securities to institute suit for payment thereof, or (ii)
reduce the aforesaid percentage of Securities the holders of which are required
to consent to any such supplemental indenture. The Indenture also contains
provisions permitting the holders of a majority in aggregate principal amount of
the Securities at the time outstanding affected thereby, on behalf of all of the
holders of the Securities, to waive any past default in the performance of any
of the covenants contained in the Indenture, or established pursuant to the
Indenture, and its consequences, except a default in the payment of the
principal of or interest on any of the Securities or a default in respect of any
covenant or provision under which the Indenture cannot be modified or amended
without the consent of each holder of Securities then outstanding. Any such
consent or waiver by the holder of this Security (unless revoked as provided in
the Indenture) shall be conclusive and binding upon such holder and upon all
future holders and owners of this Security and of any Security issued in
exchange herefor or in place hereof (whether by registration of transfer or
otherwise), irrespective of whether or not any notation of such consent or
waiver is made upon this Security.
No reference herein to the Indenture and no provision of this Security or
of the Indenture shall alter or impair the obligation of the Corporation, which
is absolute and unconditional, to pay the principal of and interest (including
Compounded Interest and Additional Sums, if any) on this Security at the time
and place and at the rate and in the money herein prescribed.
So long as no Event of Default shall have occurred and be continuing, the
Corporation shall have the right, at any time and from time to time during the
term of the Securities, to defer payments of interest by extending the interest
payment period (an "Extended Interest Payment Period") of such Securities for a
period not (i) exceeding 20 consecutive quarterly periods, including the first
such quarterly period during such extension period, (ii) extending beyond the
Maturity Date of the Securities or (iii) ending on a date other than an Interest
Payment Date, at the end of which period the Corporation shall pay all interest
then accrued and unpaid (together with interest thereon at the rate specified
for the Securities to the extent that payment of such interest is enforceable
under applicable law). Before the termination of any such Extended Interest
Payment Period, the
-5-
<PAGE>
Corporation may further defer payments of interest by further extending such
Extended Interest Payment Period, provided that such Extended Interest Payment
--------
Period, together with all such previous and further extensions within such
Extended Interest Payment Period, (i) shall not exceed 20 consecutive quarterly
periods including the first quarterly period during such Extended Interest
Payment Period, (ii) shall not end on any date other than an Interest Payment
Date, and (iii) shall not extend beyond the Maturity Date of the Securities.
Upon the termination of any such Extended Interest Payment Period and the
payment of all accrued and unpaid interest and any additional amounts then due,
the Corporation may commence a new Extended Interest Payment Period, subject to
the foregoing requirements. No interest shall be due and payable during an
Extended Interest Payment Period, except at the end thereof, but the Corporation
may prepay at any time all or any portion of the interest accrued during an
Extended Interest Payment Period.
The Corporation has agreed that if (1) there shall have occurred any event
of which the Corporation has actual knowledge that (a) is, or with the giving of
notice or the lapse of time, or both, would constitute, an Event of Default and
(b) in respect of which the Corporation shall not have taken reasonable steps to
cure, (2) if the Securities are held by the Property Trustee of NHTB Capital
Trust I, the Corporation shall be in default with respect to its payment of any
obligations under the Capital Securities Guarantee or (3) the Corporation shall
have given notice of its election to exercise its right to commence an Extended
Interest Payment Period, and shall not have rescinded such Notice, and such
Extended Interest Payment Period or any extension thereof shall have commenced
and be continuing, it will not (i) declare or pay any dividends or distributions
on, or redeem, purchase, acquire, or make a liquidation payment with respect to,
any of the Corporation's capital stock, (ii) make any payment of principal of or
interest on or premium, if any, on or repay, repurchase or redeem any debt
securities (including other Debentures) of the Corporation that rank pari passu
with or junior in right of payment to the Securities or (iii) make any guarantee
payments with respect to any guarantee by the Corporation of the debt securities
of any Subsidiary of the Corporation (including Other Guarantees) if such
guarantee ranks pari passu with or junior in right of payment to the Securities
(other than (a) dividends or distributions of Corporation's capital stock (which
includes Common Stock and preferred stock), (b) any declaration of a dividend in
connection with the implementation of a stockholders' rights plan, or the
issuance of stock under any such plan in the future, or the redemption or
repurchase of any such rights pursuant thereto, (c) payments under the Capital
Securities Guarantee, as defined in the Indenture, (d) as a result of a
reclassification of the Corporation's capital stock or the exchange or
conversion of one class or series of the Corporation's capital stock for another
class or series of the Corporation's capital stock, (e) the purchase of
fractional interests in shares of the Corporation's capital stock pursuant to
the conversion or exchange provisions of such capital stock or the security
being converted or exchanged, and (f) purchases of Common Stock related to the
issuance of Common Stock or rights under any of the Corporation's benefit or
compensation plans for its directors, officers or employees or any of the
Corporation's dividend reinvestment plans).
Subject to (i) the Corporation having received any required regulatory
approvals and (ii) the Administrative Trustees of NHTB Capital Trust I having
received an opinion of counsel to the effect that such distribution will not
cause the holders of Capital Securities to recognize gain or loss for federal
income tax purposes, the Corporation will have the right at any time to
liquidate the Trust and, after satisfaction of liabilities of creditors of the
Trust as required by applicable law, to cause the Securities to be distributed
to the holders of the Trust Securities in liquidation of the Trust.
-6-
<PAGE>
The Securities are issuable only in registered form without coupons in
minimum denominations of $10 and multiples of $10 in excess thereof. As
provided in the Indenture and subject to the transfer restrictions limitations
as may be contained herein and therein from time to time, this Security is
transferable by the holder hereof on the Security Register of the Corporation,
upon surrender of this Security for registration of transfer at the office or
agency of the Corporation in Wilmington, Delaware accompanied by a written
instrument or instruments of transfer in form satisfactory to the Corporation or
the Debenture Trustee duly executed by the holder hereof or his or her attorney
duly authorized in writing, and thereupon one or more new Securities of
authorized denominations and for the same aggregate principal amount will be
issued to the designated transferee or transferees. No service charge will be
made for any such registration of transfer, but the Corporation may require
payment of a sum sufficient to cover any tax or other governmental charge
payable in relation thereto.
Prior to due presentment for registration of transfer of this Security, the
Corporation, the Debenture Trustee, any authenticating agent, any paying agent,
any transfer agent and the security registrar may deem and treat the holder
hereof as the absolute owner hereof (whether or not this Security shall be
overdue and notwithstanding any notice of ownership or writing hereon made by
anyone other than the security registrar for the Securities) for the purpose of
receiving payment of or on account of the principal hereof and (subject to the
Indenture) interest due hereon and for all other purposes, and neither the
Corporation nor the Debenture Trustee nor any authenticating agent nor any
paying agent nor any transfer agent nor any security registrar shall be affected
by any notice to the contrary.
No recourse shall be had for the payment of the principal of or interest
(including Compounded Interest and Additional Sums, if any) on this Security, or
for any claim based hereon, or otherwise in respect hereof, or based on or in
respect of the Indenture, against any incorporator, stockholder, employee,
officer or director, past, present or future, as such, of the Corporation or of
any predecessor or successor Person, whether by virtue of any constitution,
statute or rule of law, or by the enforcement of any assessment or penalty or
otherwise, all such liability being, by the acceptance hereof and as part of the
consideration for the issuance hereof, expressly waived and released.
All terms used in this Security that are defined in the Indenture shall
have the meanings assigned to them in the Indenture.
THE INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF
LAW PRINCIPLES THEREOF.
-7-
<PAGE>
EXHIBIT 4.5
CAPITAL SECURITY CERTIFICATE
THIS CAPITAL SECURITY IS A GLOBAL CAPITAL SECURITY WITHIN THE MEANING
OF THE DECLARATION HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF THE
DEPOSITORY TRUST COMPANY (THE "CLEARING AGENCY") OR A NOMINEE OF THE CLEARING
AGENCY. THIS CAPITAL SECURITY IS EXCHANGEABLE FOR CAPITAL SECURITIES REGISTERED
IN THE NAME OF A PERSON OTHER THAN THE CLEARING AGENCY OR ITS NOMINEE ONLY IN
THE LIMITED CIRCUMSTANCES DESCRIBED IN THE DECLARATION, AND NO TRANSFER OF THIS
CAPITAL SECURITY (OTHER THAN A TRANSFER OF THIS CAPITAL SECURITY AS A WHOLE BY
THE CLEARING AGENCY TO A NOMINEE OF THE CLEARING AGENCY OR BY A NOMINEE OF THE
CLEARING AGENCY TO THE CLEARING AGENCY OR ANOTHER NOMINEE OF THE CLEARING
AGENCY) MAY BE REGISTERED EXCEPT IN LIMITED CIRCUMSTANCES.
UNLESS THIS CAPITAL SECURITY IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE CLEARING AGENCY TO THE TRUST OR ITS AGENT FOR REGISTRATION
OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CAPITAL SECURITY ISSUED IS REGISTERED
IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE CLEARING AGENCY AND ANY PAYMENT HEREON IS MADE TO CEDE &
CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO
ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN.
<PAGE>
Certificate Number: Aggregate Liquidation
Amount: $17,500,000
CUSIP Number:
Certificate Evidencing Capital Securities
of
NHTB Capital Trust I
[_____]% Capital Securities
(liquidation amount $10 per Capital Security)
NHTB Capital Trust I, a statutory business trust created under the
laws of the State of Delaware (the "Trust"), hereby certifies that Cede & Co.
(the "Holder") is the registered owner of 17,500,000 Capital Securities of the
Trust]/1/ [the aggregate number of Capital Securities of the Trust specified in
Schedule A hereto]/2/ representing undivided preferred beneficial interests in
the assets of the Trust designated the [_____]% Capital Securities, (liquidation
amount $10 per Capital Security) (the "Capital Securities"). The Capital
Securities are transferable on the books and records of the Trust, in person or
by a duly authorized attorney, upon surrender of this certificate duly endorsed
and in proper form for transfer. The designation, rights, privileges,
restrictions, preferences and other terms and provisions of the Capital
Securities represented hereby are issued and shall in all respects be subject to
the provisions of the Amended and Restated Declaration of the Trust, dated as of
[_________], 1999, as the same may be amended from time to time (the
"Declaration"), including the designation of the terms of the Capital Securities
as set forth in Annex I to the Declaration. Capitalized terms used but not
defined herein shall have the meaning given them in the Declaration. The Sponsor
will provide a copy of the Declaration, the Capital Securities Guarantee and the
Indenture (including any supplemental indenture) to a Holder without charge upon
written request to the Trust at its principal place of business.
Upon receipt of this Certificate, the Holder is bound by the
Declaration and is entitled to the benefits thereunder and to the benefits of
the Capital Securities Guarantee to the extent provided therein.
By acceptance hereof, the Holder agrees, for United States federal
income tax purposes, to treat the Debentures as indebtedness and the Capital
Securities as evidence of indirect beneficial ownership in the Debentures.
________________________
/1/ Insert in Definitive Capital Securities only.
/2/ Insert in Global Capital Securities only.
-2-
<PAGE>
IN WITNESS WHEREOF, the Trust has executed this certificate this _____
day of _______________, 1999.
NHTB Capital Trust I
By:_________________________________
Name:
Administrative Trustee
PROPERTY TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the [_____]% Capital Securities of NHTB Capital Trust I
referred to in the within-mentioned Declaration.
Dated: _____________, 1999
WILMINGTON TRUST COMPANY,
not in its individual capacity but solely
as Property Trustee
By:_____________________________
Authorized Signatory
-3-
<PAGE>
REVERSE OF SECURITY
Distributions on each Capital Security will be payable at a fixed rate per
annum of [_____]% (the "Coupon Rate") of the liquidation amount of $10 per
Capital Security, such rate being the rate of interest payable on the Debentures
to be held by the Property Trustee. Distributions in arrears for more than one
quarterly period will bear interest thereon compounded quarterly at the Coupon
Rate (to the extent permitted by applicable law). The term "Distributions," as
used herein, includes such cash distributions and any and all such interest, if
any, payable unless otherwise stated. A Distribution is payable only to the
extent that payments are made in respect of the Debentures held by the Property
Trustee and to the extent the Property Trustee has funds legally available
therefor.
Distributions on the Capital Securities will be cumulative, will
accumulate from the most recent date to which Distributions have been paid or,
if no Distributions have been paid, from [_________], 1999 and will be payable
quarterly in arrears, on March 31, June 30, September 30 and December 31 of each
year, commencing [_________], 1999, except as otherwise described below.
Distributions will be computed on the basis of a 360-day year consisting of
twelve 30-day months. As long as no Event of Default has occurred and is
continuing under the Indenture, the Debenture Issuer has the right under the
Indenture to defer payments of interest by extending the interest payment period
at any time and from time to time on the Debentures for a period not exceeding
20 consecutive calendar quarterly periods, including the first such quarterly
period during such extension period (each an "Extension Period"), provided that
-------- ----
no Extension Period shall end on a date other than an Interest Payment Date for
the Debentures or extend beyond the Maturity Date of the Debentures. As a
consequence of such deferral, Distributions will also be deferred.
Notwithstanding such deferral, quarterly Distributions will continue to
accumulate with interest thereon (to the extent permitted by applicable law, but
not at a rate exceeding the rate of interest then accruing on the Debentures) at
the Coupon Rate compounded quarterly during any such Extension Period. Prior to
the termination of any Extension Period, the Debenture Issuer may further defer
payments of interest by further extending such Extension Period; provided that
-------- ----
such Extension Period, together with all such previous and further extensions
within such Extension Period, may not (i) exceed 20 consecutive quarterly
periods, including the first quarterly period during such Extension Period, (ii)
end on a date other than an Interest Payment Date for the Debentures or (iii)
extend beyond the Maturity Date of the Debentures. Payments of accumulated
Distributions will be payable to Holders as they appear on the books and records
of the Trust on the record date immediately preceding the end of the Extension
Period. Upon the termination of any Extension Period and the payment of all
amounts then due, the Debenture Issuer may commence a new Extension Period,
subject to the above requirements.
Subject to receipt by the Sponsor of any and all required regulatory
approvals and to certain other conditions set forth in the Declaration and the
Indenture, the Property Trustee may, at the direction of the Sponsor, at any
time dissolve the Trust and, after satisfaction of liabilities to creditors of
the Trust as provided by applicable law, cause the Debentures to be distributed
to the Holders of the Securities in liquidation of the Trust or, simultaneously
with any redemption of the Debentures, cause a Like Amount of the Securities to
be redeemed by the Trust.
The Capital Securities shall be redeemable as provided in the
Declaration.
-4-
<PAGE>
_______________________
ASSIGNMENT
_______________________
FOR VALUE RECEIVED, the undersigned hereby assigns and transfers this Capital
Security Certificate to:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Assignee's social security or tax identification number)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Address and zip code of assignee)
and irrevocably appoints
________________________________________________________________________________
________________________________________________________________________________
_______________________________________________________________________ agent
to transfer this Capital Security Certificate on the books of the Trust. The
agent may substitute another to act for him or her.
Date:__________
Signature:__________________________________________________________
(Sign exactly as your name appears on the other side of this Capital Security
Certificate)
Signature Guarantee:________________________________________________
______________________
Signature must be guaranteed by an "eligible guarantor institution" that
is a bank, stockbroker, savings and loan association or credit union
meeting the requirements of the Registrar, which requirements include
membership or participation in the Securities Transfer Agents Medallion
Program ("STAMP") or such other "signature guarantee program" as may be
determined by the Registrar in addition to, or in substitution for, STAMP,
all in accordance with the Securities Exchange Act of 1934, as amended.
-5-
<PAGE>
EXHIBIT 4.6
==================================================================
CAPITAL SECURITIES GUARANTEE AGREEMENT
NEW HAMPSHIRE THRIFT BANCSHARES, INC.
Dated as of [_______], 1999
==================================================================
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
ARTICLE I
IDEFINITIONS AND INTERPRETATION
<S> <C>
SECTION 1.1 Definitions and Interpretation............................................................... 2
ARTICLE II
TRUST INDENTURE ACT
SECTION 2.1 Trust Indenture Act; Application............................................................. 5
SECTION 2.2 Lists of Holders of Securities............................................................... 5
SECTION 2.3 Reports by the Capital Securities Guarantee Trustee.......................................... 5
SECTION 2.4 Periodic Reports to the Capital Securities Guarantee Trustee................................. 6
SECTION 2.5 Evidence of Compliance with Conditions Precedent............................................. 6
SECTION 2.6 Waiver of Events of Default.................................................................. 6
SECTION 2.7 Notice of Events of Default.................................................................. 6
SECTION 2.8 Conflicting Interests........................................................................ 7
ARTICLE III
POWERS, DUTIES AND RIGHTS OF
CAPITAL SECURITIES GUARANTEE TRUSTEE
SECTION 3.1 Powers and Duties of the Capital Securities Guarantee Trustee................................ 7
SECTION 3.2 Certain Rights of the Capital Securities Guarantee Trustee................................... 8
SECTION 3.3 Not Responsible for Recitals or Issuance of the Capital Securities Guarantee................. 10
ARTICLE IV
CAPITAL SECURITIES GUARANTEE TRUSTEE
SECTION 4.1 Capital Securities Guarantee Trustee; Eligibility............................................ 11
SECTION 4.2 Appointment, Removal and Resignation of the Capital Securities Guarantee Trustee............. 11
ARTICLE V
GUARANTEE
SECTION 5.1 Guarantee.................................................................................... 12
SECTION 5.2 Waiver of Notice and Demand.................................................................. 12
SECTION 5.3 Obligations Not Affected..................................................................... 12
SECTION 5.4 Rights of Holders............................................................................ 13
SECTION 5.5 Guarantee of Payment......................................................................... 14
</TABLE>
(i)
<PAGE>
<TABLE>
Page
----
<S> <C>
SECTION 5.6 Subrogation............................................ 14
SECTION 5.7 Independent Obligations................................ 14
ARTICLE VI
LIMITATION OF TRANSACTIONS; SUBORDINATION
SECTION 6.1 Limitation of Transactions............................. 14
SECTION 6.2 Ranking................................................ 15
ARTICLE VII
TERMINATION
SECTION 7.1 Termination............................................ 15
ARTICLE VIII
INDEMNIFICATION
SECTION 8.1 Exculpation............................................ 15
SECTION 8.2 Compensation and Indemnification....................... 16
ARTICLE IX
MISCELLANEOUS
SECTION 9.1 Successors and Assigns................................. 16
SECTION 9.2 Amendments............................................. 16
SECTION 9.3 Notices................................................ 17
SECTION 9.4 Benefit................................................ 18
SECTION 9.5 Governing Law.......................................... 18
</TABLE>
(ii)
<PAGE>
CROSS REFERENCE TABLE
<TABLE>
<CAPTION>
Section of Trust
Indenture Act of Section of Guarantee
1939, as amended Agreement
- ---------------- ---------
<S> <C>
310(a) 4.1(a)
310(b) 4.1(c), 2.8
310(c) Inapplicable
311(a) 2.2(b)
311(b) 2.2(b)
311(c) Inapplicable
312(a) 2.2(a)
312(b) 2.2(b)
313 2.3
314(a) 2.4
314(b) Inapplicable
314(c) 2.5
314(d) Inapplicable
314(e) 1.1, 2.5, 3.2
314(f) 2.1, 3.2
315(a) 3.1(d)
315(b) 2.7
315(c) 3.1(c)
315(d) 3.1(d)
316(a) 1.1, 2.6, 5.4
316(b) 5.3
316(c) 9.2
317(a) Inapplicable
317(b) Inapplicable
318(a) 2.1(a)
318(c) 2.1(b)
</TABLE>
_______________
* This Cross-Reference Table does not constitute part of this Guarantee
Agreement and shall not affect the interpretation of any of its terms or
provisions.
(iii)
<PAGE>
CAPITAL SECURITIES GUARANTEE AGREEMENT
This CAPITAL SECURITIES GUARANTEE AGREEMENT (the "Capital Securities
Guarantee"), dated as of [________], 1999, is executed and delivered by NEW
HAMPSHIRE THRIFT BANCSHARES, INC., a Delaware corporation (the "Guarantor"), and
WILMINGTON TRUST COMPANY, a Delaware corporation, as trustee (the "Capital
Securities Guarantee Trustee" or "Trustee"), for the benefit of the Holders (as
defined herein), from time to time, of the Capital Securities (as defined
herein) of NHTB CAPITAL TRUST I, a Delaware statutory business trust (the
"Issuer").
WHEREAS, pursuant to an Amended and Restated Declaration of Trust (the
"Declaration"), dated as of [_________], 1999, by and among the trustees of the
Issuer named therein, the Guarantor, as sponsor, and the Holders, from time to
time, of undivided beneficial interests in the assets of the Issuer, the Issuer
is issuing capital securities, having a liquidation amount of $10 per capital
security, such capital securities being designated the [_______]% Capital
Securities (the "Capital Securities").
WHEREAS, as incentive for the Holders to purchase the Capital Securities,
the Guarantor desires irrevocably and unconditionally to agree, to the extent
set forth in this Capital Securities Guarantee, to pay the Guarantee Payments
(as defined herein) to the Holders of the Capital Securities, and the Guarantor
agrees to make certain other payments on the terms and conditions set forth
herein.
WHEREAS, the Guarantor is also executing and delivering the Common
Securities Guarantee Agreement, dated as of [__________], 1999 (the "Common
Securities Guarantee"), for the benefit of the holders of the Common Securities
(as defined herein), the terms of which provide that if an Event of Default (as
defined in the Declaration) has occurred and is continuing, the rights of
holders of the Common Securities to receive Guarantee Payments under the Common
Securities Guarantee are subordinated, to the extent and in the manner set forth
in the Common Securities Guarantee, to the rights of Holders of the Capital
Securities to receive Guarantee Payments under this Capital Securities
Guarantee.
NOW, THEREFORE, in consideration of the purchase by each Holder of the
Capital Securities, which purchase the Guarantor hereby acknowledges shall
benefit the Guarantor, the Guarantor executes and delivers this Capital
Securities Guarantee for the benefit of such Holders.
<PAGE>
ARTICLE I
DEFINITIONS AND INTERPRETATION
SECTION 1.1 Definitions and Interpretation
------------------------------
In this Capital Securities Guarantee, unless the context otherwise
requires:
(a) capitalized terms used in this Capital Securities Guarantee but not
defined in the preamble above have the respective meanings assigned to them in
this Section 1.1;
(b) terms defined in the Declaration as at the date of execution of this
Capital Securities Guarantee have the same meaning when used in this Capital
Securities Guarantee unless otherwise defined in this Capital Securities
Guarantee,
(c) a term defined anywhere in this Capital Securities Guarantee has the
same meaning throughout;
(d) all references to "the Capital Securities Guarantee" or "this Capital
Securities Guarantee" are references to this Capital Securities Guarantee as
modified, supplemented or amended from time to time;
(e) all references in this Capital Securities Guarantee to Articles and
Sections references are to Articles and Sections of this Capital Securities
Guarantee, unless otherwise specified;
(f) a term defined in the Trust Indenture Act has the same meaning when
used in this Capital Securities Guarantee, unless otherwise defined in this
Capital Securities Guarantee or unless the context otherwise requires; and
(g) a reference to the singular includes the plural and vice versa.
"Affiliate" has the same meaning as given to that term in Rule 405 under
---------
the Securities Act of 1933, as amended, or any successor rule thereunder.
"Business Day" shall mean any day other than a Saturday or a Sunday, or a
------------
day on which banking institutions in Wilmington, Delaware, New York, New York or
Newport, New Hampshire are authorized or required by law or executive order to
remain closed.
"Capital Securities Guarantee Trustee" shall mean Wilmington Trust Company
------------------------------------
as Trustee under the Capital Securities Guarantee, until a Successor Capital
Securities Guarantee Trustee has been appointed and has accepted such
appointment pursuant to the terms of this Capital Securities Guarantee, and
thereafter means each such Successor Capital Securities Guarantee Trustee.
"Common Securities" shall mean the securities representing common undivided
-----------------
beneficial interests in the assets of the Issuer.
"Corporate Trust Office" shall mean the office of the Capital Securities
----------------------
Guarantee Trustee at which the corporate trust business of the Capital
Securities Guarantee Trustee shall, at any particular time, be principally
administered, which office at the date of execution of this Agreement
-2-
<PAGE>
is located at Rodney Square North, 1100 Market Street, Wilmington, Delaware
19890-0001, Attention: Corporate Trust Administration, or at any other time at
such other address as the Capital Securities Guarantee Trustee may designate
from time to time by notice to the Issuer.
"Covered Person" shall mean any Holder or beneficial owner of the Capital
--------------
Securities.
"Debentures" shall mean the series of subordinated debt securities of the
----------
Guarantor designated the [_____]% Junior Subordinated Deferrable Interest
Debentures due [________], 2029, held by the Property Trustee (as defined in the
Declaration) of the Issuer.
"Event of Default" shall mean a default by the Guarantor on any of its
----------------
payment or other obligations under this Capital Securities Guarantee; provided,
--------
however, that, except with respect to default in respect of any Guarantee
- -------
Payment, no default by the Guarantor hereunder shall constitute an Event of
Default unless the Guarantor shall have received written notice of the default
and shall not have cured such default within 60 days after receipt thereof.
"Guarantee Payments" shall mean the following payments or distributions,
------------------
without duplication, with respect to the Capital Securities, to the extent not
paid or made by or on behalf of the Issuer: (i) any accumulated and unpaid
Distributions (as defined in the Declaration) that are required to be paid on
such Capital Securities, to the extent the Issuer has funds legally available
therefor at such time, (ii) the redemption price, including all accumulated and
unpaid Distributions to the date of redemption (the "Redemption Price"), to the
extent the Issuer has funds legally available therefor at such time, with
respect to any Capital Securities called for redemption, and (iii) upon a
voluntary or involuntary dissolution, winding up or liquidation of the Issuer
(other than in connection with the distribution of Debentures to the Holders in
exchange for Capital Securities or in connection with the redemption of the
Capital Securities, in each case as provided in the Declaration), the lesser of
(a) the aggregate of the liquidation amount and all accumulated and unpaid
Distributions on the Capital Securities to the date of payment, to the extent
the Issuer has funds legally available therefor at such time, and (b) the amount
of assets of the Issuer remaining available for distribution to Holders after
satisfaction of liabilities to creditors of the Issuer as required by applicable
law (in either case, the "Liquidation Distribution"). If an Event of Default has
occurred and is continuing, no Guarantee Payments under the Common Securities
Guarantee with respect to the Common Securities or any guarantee payment under
any Other Common Securities Guarantee shall be made until the Holders of the
Capital Securities shall be paid in full the Guarantee Payments to which they
are entitled under this Capital Securities Guarantee.
"Holder" shall mean any holder, as registered on the books and records of
------
the Issuer, of any Capital Securities; provided, however, that, in determining
-------- -------
whether the holders of the requisite percentage of Capital Securities have given
any request, notice, consent or waiver hereunder, "Holder" shall not include the
Guarantor or any Person actually known to a Responsible Officer of the Capital
Securities Guarantee Trustee to be an Affiliate of the Guarantor.
"Indemnified Person" shall mean the Capital Securities Guarantee Trustee
------------------
(including in its individual capacity), any Affiliate of the Capital Securities
Guarantee Trustee, or any officers, directors, shareholders, members, partners,
employees, representatives, nominees, custodians or agents of the Capital
Securities Guarantee Trustee.
"Indenture" shall mean the Indenture, dated as of [________], 1999, between
---------
New Hampshire Thrift Bancshares, Inc., as issuer of Debentures (the "Debenture
Issuer"), and
-3-
<PAGE>
Wilmington Trust Company, as trustee, pursuant to which the Debentures are to be
issued to the Property Trustee of the Issuer.
"Majority in Liquidation Amount of the Capital Securities" shall mean,
--------------------------------------------------------
except as provided by the Trust Indenture Act, a vote by Holder(s) of the
Capital Securities, voting separately as a class, of more than 50% of the
aggregate liquidation amount (including the amount that would be paid on
redemption, liquidation or otherwise, plus accumulated and unpaid Distributions
to the date upon which the voting percentages are determined) of all outstanding
Capital Securities.
"Officers' Certificate" shall mean, with respect to any Person, a
---------------------
certificate signed by the Chairman of the Board, the Chief Executive Officer,
the President, an Executive or Senior Vice President, a Vice President or the
Chief Financial Officer and the Secretary or an Assistant Secretary. Any
Officers' Certificate delivered with respect to compliance with a condition or
covenant provided for in this Capital Securities Guarantee shall include:
(a) a statement that each officer signing the Officers' Certificate has
read the covenants or conditions and the definitions relating thereto;
(b) a statement that each such officer has made such examination or
investigation as, in such officer's opinion, is necessary to enable such officer
to express an informed opinion as to whether or not such covenant or condition
has been complied with; and
(c) a statement as to whether or not, in the opinion of each such officer,
such condition or covenant has been complied with.
"Other Common Securities Guarantees" shall have the same meaning as "Other
----------------------------------
Guarantees" in the Common Securities Guarantee.
"Other Debentures" shall mean all junior subordinated debentures, other
----------------
than the Debentures, issued by the Guarantor, from time to time, and sold to
trusts other than the Issuer to be established by the Guarantor (if any), in
each case similar to the Issuer.
"Other Guarantees" shall mean all guarantees, other than this Capital
----------------
Securities Guarantee, issued or to be issued by the Guarantor with respect to
capital securities (if any) similar to the Capital Securities, issued by trusts
other than the Issuer established or to be established by the Guarantor (if
any), in each case similar to the Issuer.
"Person" shall mean a legal person, including any individual, corporation,
------
estate, partnership, joint venture, association, joint stock company, limited
liability company, trust, unincorporated association, or government or any
agency or political subdivision thereof, or any other entity of whatever nature.
"Responsible Officer" shall mean, with respect to a Person, any officer
-------------------
with direct responsibility for the administration of any matters relating to
this Capital Securities Guarantee.
"Successor Capital Securities Guarantee Trustee" shall mean a successor
----------------------------------------------
Capital Securities Guarantee Trustee possessing the qualifications to act as
Capital Securities Guarantee Trustee under Section 4.1.
-4-
<PAGE>
"Trust Indenture Act" shall mean the Trust Indenture Act of 1939, as
-------------------
amended.
"Trust Securities" shall mean the Common Securities and the Capital
----------------
Securities.
ARTICLE II
TRUST INDENTURE ACT
SECTION 2.1 Trust Indenture Act; Application
--------------------------------
(a) This Capital Securities Guarantee is subject to the provisions of the
Trust Indenture Act that are required to be part of this Capital Securities
Guarantee and shall, to the extent applicable, be governed by such provisions.
(b) If and to the extent that any provision of this Capital Securities
Guarantee limits, qualifies or conflicts with the duties imposed by Sections 310
to 317, inclusive, of the Trust Indenture Act, such imposed duties shall
control. If any provision of this Capital Securities Guarantee modifies or
excludes any provision of the Trust Indenture Act that may be so modified or
excluded, the modified or excluded provision of the Trust Indenture Act shall be
deemed to apply to this Capital Securities Guarantee as so modified or excluded,
as the case may be.
SECTION 2.2 Lists of Holders of Securities
------------------------------
(a) The Guarantor shall provide the Capital Securities Guarantee Trustee
(unless the Capital Securities Guarantee Trustee is otherwise the registrar of
the Capital Securities) with a list, in such form as the Capital Securities
Guarantee Trustee may reasonably require, of the names and addresses of the
Holders of the Capital Securities ("List of Holders") as of such date, (i)
within fourteen (14) days after each record date for payment of Distributions
(as defined in the Declaration), and (ii) at any other time within 30 days of
receipt by the Guarantor of a written request for a List of Holders as of a date
no more than 14 days before such List of Holders is given to the Capital
Securities Guarantee Trustee; provided, however, that the Guarantor shall not be
-------- -------
obligated to provide such List of Holders at any time the List of Holders does
not differ from the most recent List of Holders given to the Capital Securities
Guarantee Trustee by the Guarantor. The Capital Securities Guarantee Trustee may
destroy any List of Holders previously given to it upon receipt of a new List of
Holders.
(b) The Capital Securities Guarantee Trustee shall comply with its
obligations under Sections 31l(a), 31l(b) and Section 312(b) of the Trust
Indenture Act.
SECTION 2.3 Reports by the Capital Securities Guarantee Trustee
---------------------------------------------------
Within 60 days after May 15 and December 15 of each year, commencing
December 15, 1999, the Capital Securities Guarantee Trustee shall provide to the
Holders of the Capital Securities such reports as are required by Section 313 of
the Trust Indenture Act, if any, in the form and in the manner provided by
Section 313 of the Trust Indenture Act. The Capital Securities Guarantee Trustee
shall also comply with the requirements of Section 313(d) of the Trust Indenture
Act.
-5-
<PAGE>
SECTION 2.4 Periodic Reports to the Capital Securities Guarantee Trustee
------------------------------------------------------------
The Guarantor shall provide to the Capital Securities Guarantee Trustee,
the Securities and Exchange Commission and the Holders such documents, reports
and information as are required by Section 314 of the Trust Indenture Act (if
any) and the compliance certificate required by Section 314 of the Trust
Indenture Act in the form, in the manner and at the times required by Section
314 of the Trust Indenture Act. Delivery of such reports, information and
documents to the Capital Securities Guarantee Trustee is for informational
purposes only, and the Capital Securities Guarantee Trustee's receipt of such
shall not constitute constructive notice of any information contained therein or
determinable from information contained therein, including the Guarantor's
compliance with any of its covenants hereunder (as to which the Capital
Securities Guarantee Trustee is entitled to rely exclusively on Officers'
Certificates).
SECTION 2.5 Evidence of Compliance with Conditions Precedent
------------------------------------------------
The Guarantor shall provide to the Capital Securities Guarantee Trustee
such evidence of compliance with the conditions precedent, if any, provided for
in this Capital Securities Guarantee that relate to any of the matters set forth
in Section 314(c) of the Trust Indenture Act. Any certificate or opinion
required to be given by an officer pursuant to Section 314(c)(1) may be given in
the form of an Officers' Certificate.
SECTION 2.6 Waiver of Events of Default
---------------------------
The Holders of a Majority in Liquidation Amount of the Capital Securities
may, by vote, on behalf of the Holders of all of the Capital Securities, waive
any past Event of Default and its consequences. Upon such waiver, any such Event
of Default shall cease to exist, and any Event of Default arising therefrom
shall be deemed to have been cured, for every purpose of this Capital Securities
Guarantee, but no such waiver shall extend to any subsequent or other default or
Event of Default or impair any right consequent thereon.
SECTION 2.7 Notice of Events of Default
---------------------------
(a) The Capital Securities Guarantee Trustee shall, within 10 Business Days
after the occurrence of an Event of Default with respect to this Capital
Securities Guarantee actually known to a Responsible Officer of the Capital
Securities Guarantee Trustee, transmit by mail, first class postage prepaid, to
all Holders of the Capital Securities, notices of all such Events of Default,
unless such Events of Default have been cured before the giving of such notice;
provided, however, that, except in the case of an Event of Default arising from
- -------- -------
the non-payment of any Guarantee Payment, the Capital Securities Guarantee
Trustee shall be protected in withholding such notice if and so long as a
Responsible Officer of the Capital Securities Guarantee Trustee in good faith
determines that the withholding of such notice is in the interests of the
Holders of the Capital Securities.
(b) The Capital Securities Guarantee Trustee shall not be deemed to have
knowledge of any Event of Default unless the Capital Securities Guarantee
Trustee shall have received written notice, or a Responsible Officer of the
Capital Securities Guarantee Trustee charged with the administration of the
Declaration shall have obtained actual knowledge, of such Event of Default.
-6-
<PAGE>
SECTION 2.8 Conflicting Interests
---------------------
The Declaration shall be deemed to be specifically described in this
Capital Securities Guarantee for the purposes of clause (i) of the first proviso
contained in Section 310(b) of the Trust Indenture Act.
ARTICLE III
POWERS, DUTIES AND RIGHTS OF
CAPITAL SECURITIES GUARANTEE TRUSTEE
SECTION 3.1 Powers and Duties of the Capital Securities Guarantee Trustee
-------------------------------------------------------------
(a) This Capital Securities Guarantee shall be held by the Capital
Securities Guarantee Trustee for the benefit of the Holders of the Capital
Securities, and the Capital Securities Guarantee Trustee shall not transfer this
Capital Securities Guarantee to any Person except a Holder of the Capital
Securities exercising his or her rights pursuant to Section 5.4(b) or to a
Successor Capital Securities Guarantee Trustee on acceptance by such Successor
Capital Securities Guarantee Trustee of its appointment to act as Successor
Capital Securities Guarantee Trustee. The right, title and interest of the
Capital Securities Guarantee Trustee shall automatically vest in any Successor
Capital Securities Guarantee Trustee, and such vesting and succession of title
shall be effective whether or not conveyancing documents have been executed and
delivered pursuant to the appointment of such Successor Capital Securities
Guarantee Trustee.
(b) If an Event of Default actually known to a Responsible Officer of the
Capital Securities Guarantee Trustee has occurred and is continuing, the Capital
Securities Guarantee Trustee shall enforce this Capital Securities Guarantee for
the benefit of the Holders of the Capital Securities.
(c) The Capital Securities Guarantee Trustee, before the occurrence of any
Event of Default (of which, other than a default in respect of any Guarantee
Payment, a Responsible Officer of the Property Trustee has actual knowledge) and
after the curing of all such Events of Default that may have occurred, shall
undertake to perform only such duties as are specifically set forth in this
Capital Securities Guarantee, and no implied covenants or obligations shall be
read into this Capital Securities Guarantee against the Capital Securities
Guarantee Trustee. In case an Event of Default has occurred (that has not been
cured or waived pursuant to Section 2.6) and is actually known to a Responsible
Officer of the Capital Securities Guarantee Trustee, the Capital Securities
Guarantee Trustee shall exercise such of the rights and powers vested in it by
this Capital Securities Guarantee, and use the same degree of care and skill in
its exercise thereof, as a prudent person would exercise or use under the
circumstances in the conduct of his or her own affairs.
(d) No provision of this Capital Securities Guarantee shall be construed to
relieve the Capital Securities Guarantee Trustee from liability for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(i) prior to the occurrence of any Event of Default (of which, other
than a default in respect of any Guarantee Payment, a Responsible Officer
of the Property Trustee
-7-
<PAGE>
actual knowledge) and after the curing or waiving of all such Events of
Default that may have occurred:
(A) the duties and obligations of the Capital Securities Guarantee
Trustee shall be determined solely by the express provisions of this
Capital Securities Guarantee, and the Capital Securities Guarantee Trustee
shall not be liable except for the performance of such duties and
obligations as are specifically set forth in this Capital Securities
Guarantee, and no implied covenants or obligations shall be read into this
Capital Securities Guarantee against the Capital Securities Guarantee
Trustee; and
(B) in the absence of bad faith on the part of the Capital
Securities Guarantee Trustee, the Capital Securities Guarantee Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon any certificates or opinions furnished
to the Capital Securities Guarantee Trustee and conforming to the
requirements of this Capital Securities Guarantee; provided, however, that
-------- -------
in the case of any such certificates or opinions that by any provision
hereof are specifically required to be furnished to the Capital Securities
Guarantee Trustee, the Capital Securities Guarantee Trustee shall be under
a duty to examine the same to determine whether or not on their face they
conform to the requirements of this Capital Securities Guarantee;
(ii) the Capital Securities Guarantee Trustee shall not be liable for
any errors of judgment made in good faith by a Responsible Officer of the
Capital Securities Guarantee Trustee, unless it shall be proved that the
Capital Securities Guarantee Trustee or such Responsible Officer was
negligent in ascertaining the pertinent facts upon which such judgment was
made;
(iii) the Capital Securities Guarantee Trustee shall not be liable
with respect to any actions taken or omitted to be taken by it in good
faith in accordance with the direction of the Holders of a Majority in
Liquidation Amount of the Capital Securities relating to the time, method
and place of conducting any proceeding for any remedy available to the
Capital Securities Guarantee Trustee, or exercising any trust or power
conferred upon the Capital Securities Guarantee Trustee under this Capital
Securities Guarantee; and
(iv) no provision of this Capital Securities Guarantee shall require
the Capital Securities Guarantee Trustee to expend or risk its own funds or
otherwise incur personal financial liability in the performance of any of
its duties or in the exercise of any of its rights or powers, if the
Capital Securities Guarantee Trustee shall have reasonable grounds for
believing that the repayment of such funds or liability is not reasonably
assured to it under the terms of this Capital Securities Guarantee or
indemnity, reasonably satisfactory to the Capital Securities Guarantee
Trustee, against such risk or liability is not reasonably assured to it.
SECTION 3.2 Certain Rights of the Capital Securities Guarantee Trustee
----------------------------------------------------------
(a) Subject to the provisions of Section 3.1:
(i) the Capital Securities Guarantee Trustee may conclusively rely,
and shall be fully protected in acting or refraining from acting, upon any
resolution, certificate, statement, instrument, opinion, report, notice,
request, direction, consent, order, bond, debenture, note,
-8-
<PAGE>
other evidence of indebtedness or other paper or document believed by it to
be genuine and to have been signed, sent or presented by the proper party
or parties;
(ii) any direction or act of the Guarantor contemplated by this
Capital Securities Guarantee may be sufficiently evidenced by an Officers'
Certificate;
(iii) whenever, in the administration of this Capital Securities
Guarantee, the Capital Securities Guarantee Trustee shall deem it desirable
that a matter be proved or established before taking, suffering or omitting
any action hereunder, the Capital Securities Guarantee Trustee (unless
other evidence is herein specifically prescribed) may, in the absence of
bad faith on its part, request and conclusively rely upon an Officers'
Certificate, which, upon receipt of such request, shall be promptly
delivered by the Guarantor;
(iv) the Capital Securities Guarantee Trustee shall have no duty to
see to any recording, filing or registration of any instrument or other
document (or any rerecording, refiling or registration thereof);
(v) the Capital Securities Guarantee Trustee may consult with
counsel of its selection, and the advice or opinion of such counsel with
respect to legal matters shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted by it
hereunder in good faith and in accordance with such advice or opinion; and
such counsel may be counsel to the Guarantor or any of its Affiliates and
may include any of its employees; the Capital Securities Guarantee Trustee
shall have the right at any time to seek instructions concerning the
administration of this Capital Securities Guarantee from any court of
competent jurisdiction;
(vi) the Capital Securities Guarantee Trustee shall be under no
obligation to exercise any of the rights or powers vested in it by this
Capital Securities Guarantee at the request or direction of any Holder,
unless such Holder shall have provided to the Capital Securities Guarantee
Trustee such security and indemnity, reasonably satisfactory to the Capital
Securities Guarantee Trustee, against the costs, expenses (including
attorneys' fees and expenses and the expenses of the Capital Securities
Guarantee Trustee's agents, nominees or custodians) and liabilities that
might be incurred by it in complying with such request or direction,
including such reasonable advances as may be requested by the Capital
Securities Guarantee Trustee, provided, however, that nothing contained in
-------- -------
this Section 3.2(a)(vi) shall be taken to relieve the Capital Securities
Guarantee Trustee, upon the occurrence of an Event of Default, of its
obligation to exercise the rights and powers vested in it by this Capital
Securities Guarantee;
(vii) the Capital Securities Guarantee Trustee shall have no
obligation to make any investigation into the facts or matters stated in
any resolution, certificate, statement, instrument, opinion, report,
notice, request, direction, consent, order, bond, debenture, note, other
evidence of indebtedness or other paper or document, but the Capital
Securities Guarantee Trustee, in its discretion, may make such further
inquiry or investigation into such facts or matters as it may see fit;
(viii) the Capital Securities Guarantee Trustee may execute any of
the trusts or powers hereunder or perform any duties hereunder either
directly or by or through agents, nominees, custodians or attorneys, and
the Capital Securities Guarantee Trustee shall not
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<PAGE>
be responsible for any misconduct or negligence on the part of any such
person appointed with due care by it hereunder;
(ix) any action taken by the Capital Securities Guarantee Trustee or
its agents hereunder shall bind the Holders of the Capital Securities, and
the signature of the Capital Securities Guarantee Trustee or its agents
alone shall be sufficient and effective to perform any such action; and no
third party shall be required to inquire as to the authority of the Capital
Securities Guarantee Trustee to so act or as to its compliance with any of
the terms and provisions of this Capital Securities Guarantee, both of
which shall be conclusively evidenced by the Capital Securities Guarantee
Trustee's or its agent's taking such action;
(x) whenever in the administration of this Capital Securities
Guarantee the Capital Securities Guarantee Trustee shall deem it desirable
to receive instructions with respect to enforcing any remedy or right or
taking any other action hereunder, the Capital Securities Guarantee Trustee
(i) may request instructions from the Holders of a Majority in Liquidation
Amount of the Capital Securities, (ii) may refrain from enforcing such
remedy or right or taking such other action until such instructions are
received, and (iii) shall be protected in conclusively relying on or acting
in accordance with such instructions; and
(xi) the Capital Securities Guarantee Trustee shall not be liable for
any action taken, suffered, or omitted to be taken by it in good faith,
without negligence, and reasonably believed by it to be authorized or
within the discretion or rights or powers conferred upon it by this Capital
Securities Guarantee.
(b) No provision of this Capital Securities Guarantee shall be deemed to
impose any duty or obligation on the Capital Securities Guarantee Trustee to
perform any act or acts or exercise any right, power, duty or obligation
conferred or imposed on it in any jurisdiction in which it shall be illegal, or
in which the Capital Securities Guarantee Trustee shall be unqualified or
incompetent in accordance with applicable law, to perform any such act or acts
or to exercise any such right, power, duty or obligation. No permissive power or
authority available to the Capital Securities Guarantee Trustee shall be
construed to be a duty.
SECTION 3.3 Not Responsible for Recitals or Issuance of the
-----------------------------------------------
Capital Securities Guarantee
----------------------------
The recitals contained in this Capital Securities Guarantee shall be taken
as the statements of the Guarantor, and the Capital Securities Guarantee Trustee
does not assume any responsibility for their correctness. The Capital Securities
Guarantee Trustee makes no representation as to the validity or sufficiency of
this Capital Securities Guarantee.
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<PAGE>
ARTICLE IV
CAPITAL SECURITIES GUARANTEE TRUSTEE
SECTION 4.1 Capital Securities Guarantee Trustee; Eligibility
-------------------------------------------------
(a) There shall at all times be a Capital Securities Guarantee Trustee that
shall
(i) not be an Affiliate of the Guarantor; and
(ii) be a corporation or other Person organized and doing business
under the laws of the United States of America or any state or territory
thereof or of the District of Columbia, or a corporation or other Person
permitted by the Securities and Exchange Commission to act as an indenture
trustee under the Trust Indenture Act, authorized under such laws to
exercise corporate trust powers, having a combined capital and surplus of
at least fifty million U.S. dollars ($50,000,000), and subject to
supervision or examination by federal, state, territorial or District of
Columbia authority; it being understood that if such corporation or other
Person publishes reports of condition at least annually, pursuant to law or
to the requirements of the supervising or examining authority referred to
above, then, for the purposes of this Section 4.1(a)(ii) and to the extent
permitted by the Trust Indenture Act, the combined capital and surplus of
such corporation shall be deemed to be its combined capital and surplus as
set forth in its most recent report of condition so published.
(b) If at any time the Capital Securities Guarantee Trustee shall cease to
be eligible to so act under Section 4.1(a), the Capital Securities Guarantee
Trustee shall immediately resign in the manner and with the effect set out in
Section 4.2(c).
(c) If the Capital Securities Guarantee Trustee has or shall acquire any
"conflicting interest" within the meaning of Section 310(b) of the Trust
Indenture Act, the Capital Securities Guarantee Trustee and Guarantor shall in
all respects comply with the provisions of Section 310(b) of the Trust Indenture
Act.
SECTION 4.2 Appointment, Removal and Resignation of the Capital
---------------------------------------------------
Securities Guarantee Trustee
----------------------------
(a) Subject to Section 4.2(b), the Capital Securities Guarantee Trustee may
be appointed or removed without cause at any time by the Guarantor except during
an Event of Default.
(b) The Capital Securities Guarantee Trustee shall not be removed in
accordance with Section 4.2(a) until a Successor Capital Securities Guarantee
Trustee has been appointed and has accepted such appointment by written
instrument executed by such Successor Capital Securities Guarantee Trustee and
delivered to the Guarantor.
(c) The Capital Securities Guarantee Trustee shall hold office until a
Successor Capital Securities Guarantee Trustee shall have been appointed or
until its removal or resignation. The Capital Securities Guarantee Trustee may
resign from office (without need for prior or subsequent accounting) by an
instrument in writing executed by the Capital Securities Guarantee Trustee and
delivered to the Guarantor, which resignation shall not take effect until a
Successor Capital
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<PAGE>
Securities Guarantee Trustee has been appointed and has accepted such
appointment by instrument in writing executed by such Successor Capital
Securities Guarantee Trustee and delivered to the Guarantor and the resigning
Capital Securities Guarantee Trustee.
(d) If no Successor Capital Securities Guarantee Trustee shall have been
appointed and accepted appointment as provided in this Section 4.2 within 60
days after delivery of an instrument of removal or resignation, the Capital
Securities Guarantee Trustee resigning or being removed may petition any court
of competent jurisdiction for appointment of a Successor Capital Securities
Guarantee Trustee. Such court may thereupon, after prescribing such notice, if
any, as it may deem proper, appoint a Successor Capital Securities Guarantee
Trustee.
(e) No Capital Securities Guarantee Trustee shall be liable for the acts or
omissions to act of any Successor Capital Securities Guarantee Trustee.
(f) Upon termination of this Capital Securities Guarantee or removal or
resignation of the Capital Securities Guarantee Trustee pursuant to this Section
4.2, the Guarantor shall pay to the Capital Securities Guarantee Trustee all
amounts due to the Capital Securities Guarantee Trustee accrued to the date of
such termination, removal or resignation.
ARTICLE V
GUARANTEE
SECTION 5.1 Guarantee
---------
The Guarantor irrevocably and unconditionally agrees to pay in full to the
Holders the Guarantee Payments (without duplication of amounts theretofore paid
by the Issuer), as and when due, regardless of any defense, right of set-off or
counterclaim that the Issuer may have or assert. The Guarantor's obligation to
make a Guarantee Payment may be satisfied by direct payment of the required
amounts by the Guarantor to the Holders or by causing the Issuer to pay such
amounts to the Holders.
SECTION 5.2 Waiver of Notice and Demand
---------------------------
The Guarantor hereby waives notice of acceptance of this Capital Securities
Guarantee and of any liability to which it applies or may apply, presentment,
demand for payment, any right to require a proceeding first against the Issuer
or any other Person before proceeding against the Guarantor, protest, notice of
nonpayment, notice of dishonor, notice of redemption and all other notices and
demands.
SECTION 5.3 Obligations Not Affected
------------------------
The obligations, covenants, agreements and duties of the Guarantor under
this Capital Securities Guarantee shall in no way be affected or impaired by
reason of the happening from time to time of any of the following:
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<PAGE>
(a) the release or waiver, by operation of law or otherwise, of the
performance or observance by the Issuer of any express or implied agreement,
covenant, term or condition relating to the Capital Securities to be performed
or observed by the Issuer;
(b) the extension of time for the payment by the Issuer of all or any
portion of the Distributions, Redemption Price, Liquidation Distribution or any
other sums payable under the terms of the Capital Securities or the extension of
time for the performance of any other obligation under, arising out of, or in
connection with, the Capital Securities;
(c) any failure, omission, delay or lack of diligence on the part of the
Holders to enforce, assert or exercise any right, privilege, power or remedy
conferred on the Holders pursuant to the terms of the Capital Securities, or any
action on the part of the Issuer granting indulgence or extension of any kind;
(d) the voluntary or involuntary liquidation, dissolution, sale of any
collateral, receivership, insolvency, bankruptcy, assignment for the benefit of
creditors, reorganization, arrangement, composition or readjustment of debt of,
or other similar proceedings affecting, the Issuer or any of the assets of the
Issuer;
(e) any invalidity of, or defect or deficiency in, the Capital Securities;
(f) the settlement or compromise of any obligation guaranteed hereby or
hereby incurred;
(g) any other circumstance whatsoever that might otherwise constitute a
legal or equitable discharge or defense of a guarantor;
it being the intent of this Section 5.3 that the obligations of the Guarantor
with respect to the Guarantee Payments shall be absolute and unconditional under
any and all circumstances.
There shall be no obligation of the Holders to give notice to, or obtain
consent of, the Guarantor with respect to the happening of any of the foregoing.
SECTION 5.4 Rights of Holders
-----------------
(a) The Holders of a Majority in 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 Capital Securities Guarantee Trustee
in respect of this Capital Securities Guarantee or exercising any trust or power
conferred upon the Capital Securities Guarantee Trustee under this Capital
Securities Guarantee.
(b) If the Capital Securities Guarantee Trustee fails to enforce this
Capital Securities Guarantee, any Holder of the Capital Securities may institute
a legal proceeding directly against the Guarantor to enforce the Capital
Securities Guarantee Trustee's rights under this Capital Securities Guarantee,
without first instituting a legal proceeding against the Issuer, the Capital
Securities Guarantee Trustee or any other person or entity. The Guarantor waives
any right or remedy to require that any action be brought first against the
Issuer or any other person or entity before proceeding directly against the
Guarantor.
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<PAGE>
SECTION 5.5 Guarantee of Payment
--------------------
This Capital Securities Guarantee creates a guarantee of payment and not of
collection.
SECTION 5.6 Subrogation
-----------
The Guarantor shall be subrogated to all (if any) rights of the Holders of
Capital Securities against the Issuer in respect of any amounts paid to such
Holders by the Guarantor under this Capital Securities Guarantee; provided,
--------
however, that the Guarantor shall not (except to the extent required by
- -------
mandatory provisions of law) be entitled to enforce or exercise any right that
it may acquire by way of subrogation or any indemnity, reimbursement or other
agreement, in all cases as a result of payment under this Capital Securities
Guarantee, if, at the time of any such payment, any amounts are due and unpaid
under this Capital Securities Guarantee. If any amount shall be paid to the
Guarantor in violation of the preceding sentence, the Guarantor agrees to hold
such amount in trust for the Holders and to pay over such amount to the Holders.
SECTION 5.7 Independent Obligations
-----------------------
The Guarantor acknowledges that its obligations hereunder are independent
of the obligations of the Issuer with respect to the Capital Securities, and
that the Guarantor shall be liable as principal and as debtor hereunder to make
Guarantee Payments pursuant to the terms of this Capital Securities Guarantee
notwithstanding the occurrence of any event referred to in subsections (a)
through (g), inclusive, of Section 5.3 hereof.
ARTICLE VI
LIMITATION OF TRANSACTIONS; SUBORDINATION
SECTION 6.1 Limitation of Transactions
--------------------------
So long as any Capital Securities remain outstanding, if (l) there shall
have occurred any event of which the Guarantor has actual knowledge that (A) is
a Default or Event of Default (each as defined in the Indenture) and (B) in
respect of which the Guarantor shall not have taken reasonable steps to cure,
(2) if the Debentures are held by the Property Trustee, the Guarantor shall be
in default with respect to its payment of any obligations under this Capital
Securities Guarantee or (3) the Guarantor shall have given notice of its
election of the exercise of its right to commence an Extended Interest Payment
Period as provided in the Indenture and shall not have rescinded such notice,
and such Extended Interest Payment Period, or an extension thereof, shall have
commenced and be continuing, the Guarantor shall not (i) declare or pay any
dividends or distributions on, or redeem, purchase, acquire, or make a
liquidation payment with respect to, any of the Guarantor's capital stock, (ii)
make any payment of principal of, or interest or premium, if any, on or repay,
repurchase or redeem any debt securities of the Guarantor (including Other
Debentures) that rank pari passu with or junior in right of payment to the
Debentures or (iii) make any guarantee payments with respect to any guarantee by
the Guarantor of the debt securities of any subsidiary of the Guarantor
(including Other Guarantees) if such guarantee ranks pari passu with or junior
in right of payment to the Debentures (other than (a) dividends or distributions
in shares of, or options, warrants, rights to subscribe for or purchase shares
of, common stock of the Guarantor, (b) any declaration of a dividend in
connection with the implementation of a stockholders' rights plan, or the
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<PAGE>
issuance of stock under any such plan in the future, or the redemption or
repurchase of any such rights pursuant thereto, (c) payments under this Capital
Securities Guarantee, (d) as a result of a reclassification of the Guarantor's
capital stock or the exchange or the conversion of one class or series of the
Guarantor's capital stock for another class or series of the Guarantor's capital
stock, (e) the purchase of fractional interests in shares of the Guarantor's
capital stock pursuant to the conversion or exchange provisions of such capital
stock or the security being converted or exchanged, and (f) purchases of common
stock related to the issuance of common stock or rights under any of the
Guarantor's benefit or compensation plans for its directors, officers or
employees or any of the Guarantor's dividend reinvestment plans).
SECTION 6.2 Ranking
-------
This Capital Securities Guarantee will constitute an unsecured obligation
of the Guarantor and will rank (i) subordinate and junior in right of payment to
Senior Indebtedness (as defined in the Indenture), to the same extent and in the
same manner that the Debentures are subordinated to Senior Indebtedness pursuant
to the Indenture, it being understood that the terms of Article XV of the
Indenture shall apply to the obligations of the Guarantor under this Capital
Securities Guarantee as if such Article XV were set forth herein in full, (ii)
pari passu with the most senior preferred or preference stock now or hereafter
issued by the Guarantor, any Other Guarantee and, except to the extent set forth
therein, the Common Securities Guarantee, any Other Common Securities Guarantee,
and any guarantee now or hereafter entered into by the Guarantor in respect of
any preferred or preference stock of any Affiliate of the Guarantor, and (iii)
senior to the Guarantor's common stock.
ARTICLE VII
TERMINATION
SECTION 7.1 Termination
-----------
This Capital Securities Guarantee shall terminate and be of no further
force or effect upon (i) full payment of the Redemption Price of all Capital
Securities or (ii) the dissolution, winding up or liquidation of the Issuer,
immediately following the full payment of the amounts payable in accordance with
the Declaration or the distribution of all of the Debentures to the holders of
the Trust Securities (as defined in the Declaration). Notwithstanding the
foregoing, this Capital Securities Guarantee will continue to be effective or
will be reinstated, as the case may be, if at any time any Holder of the Capital
Securities must restore payment of any sums paid under the Capital Securities or
under this Capital Securities Guarantee.
ARTICLE VII
INDEMNIFICATION
SECTION 8.1 Exculpation
-----------
(a) No Indemnified Person shall be liable, responsible or accountable in
damages or otherwise to the Guarantor or any Covered Person for any loss, damage
or claim incurred by reason of any act or omission performed or omitted by such
Indemnified Person in good faith in accordance with this Capital Securities
Guarantee and in a manner that such Indemnified Person reasonably
-15-
<PAGE>
believed to be within the scope of the authority conferred on such Indemnified
Person by this Capital Securities Guarantee or by law, except that an
Indemnified Person shall be liable for any such loss, damage or claim incurred
by reason of such Indemnified Person's negligence or willful misconduct with
respect to such acts or omissions.
(b) An Indemnified Person shall be fully protected in relying in good faith
upon the records of the Guarantor and upon such information, opinions, reports
or statements presented to the Guarantor by any Person as to matters the
Indemnified Person reasonably believes are within such other Person's
professional or expert competence and who has been selected with reasonable care
by or on behalf of the Guarantor, including information, opinions, reports or
statements as to the value and amount of the assets, liabilities, profits,
losses, or any other facts pertinent to the existence and amount of assets from
which Distributions to Holders of the Capital Securities might properly be paid.
SECTION 8.2 Compensation and Indemnification
--------------------------------
The Guarantor agrees to pay to the Capital Securities Guarantee Trustee
such compensation for its services as shall be mutually agreed upon by the
Guarantor and the Capital Securities Guarantee Trustee. The Guarantor shall
reimburse the Capital Securities Guarantee Trustee upon request for all
reasonable out-of-pocket expenses incurred by it, including the reasonable
compensation and expenses of the Capital Securities Guarantee Trustee's agents
and counsel, except any expense as may be attributable to the negligence or bad
faith of the Capital Securities Guarantee Trustee.
The Guarantor agrees to indemnify each Indemnified Person for, and to hold
each Indemnified Person harmless against, any and all loss, liability, damage,
action, suit, claim or expense incurred without negligence or bad faith on its
part, arising out of or in connection with the acceptance or administration of
the trust or trusts hereunder, including the costs and expenses (including
reasonable legal fees and expenses) of defending itself against, or
investigating, any claim or liability in connection with the exercise or
performance of any of its powers or duties hereunder. The provisions of this
Section 8.2 shall survive the termination of this Capital Securities Guarantee
and shall survive the resignation or removal of the Capital Securities Guarantee
Trustee.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1 Successors and Assigns
----------------------
All guarantees and agreements contained in this Capital Securities
Guarantee shall bind the successors, assigns, receivers, trustees and
representatives of the Guarantor and shall inure to the benefit of the Holders
of the Capital Securities then outstanding.
SECTION 9.2 Amendments
----------
Except with respect to any changes that do not materially adversely affect
the rights of Holders of the Capital Securities (in which case no consent of
such Holders will be required), this Capital Securities Guarantee may only be
amended with the prior approval of the Holders of a Majority in Liquidation
Amount of the Capital Securities. The provisions of Section 12.2 of the
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<PAGE>
Declaration with respect to meetings of Holders of the Trust Securities apply to
the giving of such approval. This Capital Securities Guarantee may not be
amended, and no amendment hereof that affects the Capital Securities Guarantee
Trustee's rights, duties or immunities hereunder or otherwise, shall be
effective, unless such amendment is executed by the Capital Securities Guarantee
Trustee (which shall have no obligation to execute any such amendment, but may
do so in its sole discretion).
SECTION 9.3 Notices
-------
All notices provided for in this Capital Securities Guarantee shall be in
writing, duly signed by the party giving such notice, and shall be delivered,
telecopied or mailed by first class mail, as follows:
(a) If given to the Issuer, in care of the Administrative Trustees at the
Issuer's mailing address set forth below (or such other address as the Issuer
may give notice of to the Capital Securities Guarantee Trustee and the Holders
of the Capital Securities):
NHTB CAPITAL TRUST I
c/o New Hampshire Thrift Bancshares, Inc.
9 Main Street
P.O. Box 29
Newport, New Hampshire 03773-0029
Attention: Daryl J. Cady
Telephone: (603) 863-5772
Telecopier: (603) 863-9571
(b) If given to the Capital Securities Guarantee Trustee, at the Capital
Securities Guarantee Trustee's mailing address set forth below (or such other
address as the Capital Securities Guarantee Trustee may give notice of to the
Holders of the Capital Securities):
Wilmington Trust Company
Rodney Square North
1100 Market Street
Wilmington, Delaware 19890-0001
Attention: Corporate Trust Administration
Telephone: (302) 651-1000
Telecopier: (302) 651-8882
(c) If given to the Guarantor, at the Guarantor's mailing address set forth
below (or such other address as the Guarantor may give notice of to the Capital
Securities Guarantee Trustee and the Holders of the Capital Securities):
NEW HAMPSHIRE THRIFT BANCSHARES, INC.
9 Main Street
P.O. Box 29
Newport, New Hampshire 03773-0029
Attention: Daryl J. Cady
Telephone: (603) 863-5772
Telecopier: (603) 863-9571
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<PAGE>
(d) If given to any Holder of the Capital Securities, at the address set
forth on the books and records of the Issuer.
All such notices shall be deemed to have been given when received in
person, telecopied with receipt confirmed, or mailed by first class mail,
postage prepaid except that if a notice or other document is refused delivery or
cannot be delivered because of a changed address of which no notice was given,
such notice or other document shall be deemed to have been delivered on the date
of such refusal or inability to deliver.
SECTION 9.4 Benefit
-------
This Capital Securities Guarantee is solely for the benefit of the Holders
of the Capital Securities and, subject to Section 3.1(a), is not separately
transferable from the Capital Securities.
SECTION 9.5 Governing Law
-------------
THIS CAPITAL SECURITIES GUARANTEE SHALL BE DEEMED TO BE A CONTRACT MADE
UNDER THE LAWS OF THE STATE OF NEW YORK, AND FOR ALL PURPOSES SHALL BE GOVERNED
BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
NEW YORK WITHOUT REGARD TO CONFLICT OF LAW PRINCIPLES THEREOF.
This Capital Securities Guarantee is executed as of the day and year first
above written.
NEW HAMPSHIRE THRIFT BANCSHARES, INC.
as Guarantor
By:__________________________________________
Stephen W. Ensign
President and Chief Executive Officer
WILMINGTON TRUST COMPANY,
as Capital Securities Guarantee Trustee
By:__________________________________________
Name:
Title:
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<PAGE>
EXHIBIT 4.7
- --------------------------------------------------------------------------------
NEW HAMPSHIRE THRIFT BANCSHARES, INC.
__________________________
__________________________
INDENTURE
Dated as of [__________], 1999
__________________________
WILMINGTON TRUST COMPANY,
as Debenture Trustee
__________________________
JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURES
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<S> <C>
ARTICLE I
DEFINITIONS
SECTION 1.01 Definitions............................................... 1
SECTION 1.02 Business Day Certificate.................................. 9
ARTICLE II
SECURITIES
SECTION 2.01 Forms Generally........................................... 9
SECTION 2.02 Execution and Authentication.............................. 9
SECTION 2.03 Form and Payment.......................................... 9
SECTION 2.04 Global Security........................................... 10
SECTION 2.05 Interest.................................................. 11
SECTION 2.06 Transfer and Exchange..................................... 12
SECTION 2.07 Replacement Securities.................................... 13
SECTION 2.08 Temporary Securities...................................... 13
SECTION 2.09 Cancellation.............................................. 14
SECTION 2.10 Defaulted Interest........................................ 14
SECTION 2.11 CUSIP Numbers............................................. 15
ARTICLE III
PARTICULAR COVENANTS OF THE CORPORATION
SECTION 3.01 Payment of Principal and Interest......................... 15
SECTION 3.02 Offices for Notices and Payments, etc..................... 15
SECTION 3.03 Appointments to Fill Vacancies in Debenture Trustee's
Office.................................................... 16
SECTION 3.04 Provision as to Paying Agent.............................. 16
SECTION 3.05 Certificate to Debenture Trustee.......................... 16
SECTION 3.06 Compliance with Consolidation Provisions.................. 17
SECTION 3.07 Limitation on Dividends................................... 17
SECTION 3.08 Covenants as to NHTB Capital Trust I...................... 18
SECTION 3.09 Payment of Expenses....................................... 18
SECTION 3.10 Payment Upon Resignation or Removal....................... 19
</TABLE>
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<PAGE>
ARTICLE IV
LIST OF SECURITYHOLDERS AND REPORTS BY THE
CORPORATION AND THE DEBENTURE TRUSTEE
<TABLE>
<S> <C>
SECTION 4.01 List of Securityholders................................... 19
SECTION 4.02 Preservation and Disclosure of Lists...................... 19
SECTION 4.03 Reports by the Corporation................................ 21
SECTION 4.04 Reports by the Debenture Trustee.......................... 21
ARTICLE V
REMEDIES OF THE DEBENTURE TRUSTEE AND
SECURITYHOLDERS UPON EVENT OF DEFAULT
SECTION 5.01 Events of Default......................................... 22
SECTION 5.02 Payment of Securities on Default; Suit Therefor........... 24
SECTION 5.03 Application of Moneys Collected by Debenture Trustee...... 25
SECTION 5.04 Proceedings by Securityholders............................ 26
SECTION 5.05 Proceedings by Debenture Trustee.......................... 26
SECTION 5.06 Remedies Cumulative and Continuing........................ 27
SECTION 5.07 Direction of Proceedings and Waiver of Defaults by
Majority of Securityholders.............................. 27
SECTION 5.08 Notice of Defaults........................................ 28
SECTION 5.09 Undertaking to Pay Costs.................................. 28
ARTICLE VI
CONCERNING THE DEBENTURE TRUSTEE
SECTION 6.01 Duties and Responsibilities of Debenture Trustee.......... 29
SECTION 6.02 Reliance on Documents, Opinions, etc...................... 30
SECTION 6.03 No Responsibility for Recitals, etc....................... 32
SECTION 6.04 Debenture Trustee, Authenticating Agent, Paying Agents,
Transfer Agents and Registrar May Own Securities......... 32
SECTION 6.05 Moneys to be Held in Trust................................ 32
SECTION 6.06 Compensation and Expenses of Debenture Trustee............ 32
SECTION 6.07 Officers' Certificate as Evidence......................... 33
SECTION 6.08 Conflicting Interest of Debenture Trustee................. 33
SECTION 6.09 Eligibility of Debenture Trustee.......................... 33
SECTION 6.10 Resignation or Removal of Debenture Trustee............... 34
SECTION 6.11 Acceptance by Successor Debenture Trustee................. 35
SECTION 6.12 Succession by Merger, etc................................. 36
SECTION 6.13 Limitation on Rights of Debenture Trustee as a Creditor... 36
SECTION 6.14 Authenticating Agents..................................... 36
</TABLE>
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<PAGE>
ARTICLE VII
CONCERNING THE SECURITYHOLDERS
<TABLE>
<S> <C>
SECTION 7.01 Action by Securityholders................................. 37
SECTION 7.02 Proof of Execution by Securityholders..................... 38
SECTION 7.03 Who Are Deemed Absolute Owners............................ 38
SECTION 7.04 Securities Owned by Corporation Deemed Not Outstanding.... 39
SECTION 7.05 Revocation of Consents; Future Holders Bound.............. 39
ARTICLE VIII
MEETINGS OF SECURITYHOLDERS
SECTION 8.01 Purposes of Meetings...................................... 39
SECTION 8.02 Call of Meetings by Debenture Trustee..................... 40
SECTION 8.03 Call of Meetings by Corporation or Securityholders........ 40
SECTION 8.04 Qualifications for Voting................................. 40
SECTION 8.05 Regulations............................................... 41
SECTION 8.06 Voting.................................................... 41
ARTICLE IX
AMENDMENTS
SECTION 9.01 Without Consent of Securityholders........................ 42
SECTION 9.02 With Consent of Securityholders........................... 43
SECTION 9.03 Compliance with Trust Indenture Act; Effect of Supplemental
Indentures............................................... 44
SECTION 9.04 Notation on Securities.................................... 44
SECTION 9.05 Evidence of Compliance of Supplemental Indenture to be
Furnished to Debenture Trustee........................... 44
ARTICLE X
CONSOLIDATION, MERGER, SALE, CONVEYANCE, TRANSFER AND LEASE
SECTION 10.01 Corporation May Consolidate, etc., on Certain Terms...... 45
SECTION 10.02 Successor Person to be Substituted for Corporation....... 45
SECTION 10.03 Opinion of Counsel to be Given Debenture Trustee......... 46
ARTICLE XI
SATISFACTION AND DISCHARGE OF INDENTURE
SECTION 11.01 Discharge of Indenture................................... 46
SECTION 11.02 Deposited Moneys and U.S. Government Obligations to be Held
in Trust by Debenture Trustee........................... 47
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
SECTION 11.03 Reinstatement............................................ 47
SECTION 11.04 Paying Agent to Repay Moneys Held........................ 47
SECTION 11.05 Return of Unclaimed Moneys............................... 47
SECTION 11.06 Defeasance Upon Deposit of Moneys or U.S. Government
Obligations............................................. 48
ARTICLE XII
IMMUNITY OF INCORPORATORS, STOCKHOLDERS,
OFFICERS AND DIRECTORS
SECTION 12.01 Indenture and Securities Solely Corporate Obligations.... 49
ARTICLE XIII
MISCELLANEOUS PROVISIONS
SECTION 13.01 Successors............................................... 49
SECTION 13.02 Official Acts by Successor Corporation................... 49
SECTION 13.03 Surrender of Corporation Powers.......................... 50
SECTION 13.04 Addresses for Notices, etc............................... 50
SECTION 13.05 Governing Law............................................ 50
SECTION 13.06 Evidence of Compliance with Conditions Precedent......... 50
SECTION 13.07 Business Days............................................ 51
SECTION 13.08 Trust Indenture Act to Control........................... 51
SECTION 13.09 Table of Contents, Headings, etc......................... 51
SECTION 13.10 Execution in Counterparts................................ 51
SECTION 13.11 Separability............................................. 51
SECTION 13.12 Assignment............................................... 51
SECTION 13.13 Acknowledgment of Rights................................. 52
ARTICLE XIV
PREPAYMENT OF SECURITIES;NO SINKING FUND
SECTION 14.01 Special Event Prepayment................................. 52
SECTION 14.02 Optional Prepayment by Corporation....................... 52
SECTION 14.03 No Sinking Fund.......................................... 53
SECTION 14.04 Notice of Prepayment; Selection of Securities............ 53
SECTION 14.05 Payment of Securities Called for Prepayment.............. 54
ARTICLE XV
SUBORDINATION OF SECURITIES
SECTION 15.01 Agreement to Subordinate................................. 54
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
SECTION 15.02 Default on Senior Indebtedness........................... 55
SECTION 15.03 Liquidation; Dissolution; Bankruptcy..................... 55
SECTION 15.04 Subrogation.............................................. 56
SECTION 15.05 Debenture Trustee to Effectuate Subordination............ 57
SECTION 15.06 Notice by the Corporation................................ 57
SECTION 15.07 Rights of the Debenture Trustee; Holders of Senior
Indebtedness............................................ 58
SECTION 15.08 Subordination May Not Be Impaired........................ 59
ARTICLE XVI
EXTENSION OF INTEREST PAYMENT PERIOD
SECTION 16.01 Extension of Interest Payment Period..................... 59
SECTION 16.02 Notice of Extension...................................... 60
</TABLE>
TESTIMONIUM
SIGNATURES
EXHIBIT A
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<PAGE>
Tie Sheet of provisions of Trust Indenture Act of 1939 with Indenture dated
as of [________], 1999 between New Hampshire Thrift Bancshares, Inc. and
Wilmington Trust Company, as Debenture Trustee:
<TABLE>
<CAPTION>
ACT SECTION INDENTURE SECTION
<S> <C>
310(a)(1)................................ 6.09
(a)(2)................................ 6.09
310(a)(3)................................ N/A
(a)(4)................................ N/A
310(a)(5)................................ 6.09, 6.10, 6.11
310(b)................................... N/A
310(c)................................... 6.13
311(a) and (b)........................... N/A
311(c)................................... N/A
312(a)................................... 4.01(a), 4.02(a)
312(b) and (c)........................... 4.02(b), 4.04(c)
313(a)................................... 4.04(a)
313(b)................................... 4.04(a)
313(b)(2)................................ 4.04(a)
313(c)................................... 4.04(a)
313(d)................................... 4.04(b)
314(a)................................... 4.03
314(b)................................... N/A
314(c)(1) and (2)........................ 6.07, 13.06, 13.06
314(c)(3)................................ N/A
314(d)................................... N/A
314(e)................................... 6.07, 13.06
314(f)................................... N/A
315(a)(c) and (d)........................ 6.01
315(b)................................... 5.08
315(e)................................... 5.09
316(a)(1)................................ 5.07
316(a)(2)................................ N/A
316(a) last sentence..................... 9.02
316(b)................................... 9.02
317(a)................................... 5.05
317(b)................................... 6.05
318...................................... 13.08
</TABLE>
________________
THIS TIE-SHEET IS NOT PART OF THE INDENTURE AS EXECUTED.
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<PAGE>
THIS INDENTURE, dated as of [_________], 1999, between New Hampshire Thrift
Bancshares, Inc., a Delaware corporation (hereinafter called the "Corporation"),
and Wilmington Trust Company, a Delaware corporation, as debenture trustee
(hereinafter sometimes called the "Debenture Trustee").
W I T N E S S E T H :
In consideration of the premises, and the purchase of the Securities (as
defined below) by the holders thereof, the Corporation covenants and agrees with
the Debenture Trustee for the equal and proportionate benefit of the respective
holders from time to time of the Securities, as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01 Definitions.
-----------
The terms defined in this Section 1.01 (except as herein otherwise
expressly provided or unless the context otherwise requires) for all purposes of
this Indenture shall have the respective meanings specified in this Section
1.01. All other terms used in this Indenture which are defined in the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act"), or which are by
reference therein defined in the Securities Act of 1933, as amended (the
"Securities Act"), shall (except as herein otherwise expressly provided or
unless the context otherwise requires) have the meanings assigned to such terms
in said Trust Indenture Act and in said Securities Act as in force at the date
of this Indenture as originally executed. The following terms have the meanings
given to them in the Declaration: (i) Clearing Agency; (ii) Delaware Trustee;
(iii) Property Trustee; (iv) Administrative Trustees; (v) Capital Securities;
(vi) Direct Action; (vii) Capital Securities Guarantee; (viii) Distributions;
and (ix) Underwriters. All accounting terms used herein and not expressly
defined shall have the meanings assigned to such terms in accordance with
generally accepted accounting principles, and the term "generally accepted
accounting principles" means such accounting principles as are generally
accepted at the time of any computation. The words "herein," "hereof" and
"hereunder" and other words of similar import refer to this Indenture as a whole
and not to any particular Article, Section or other subdivision. Headings are
used for convenience of reference only and do not affect interpretation. The
singular includes the plural and vice versa.
"Additional Sums" shall have the meaning set forth in Section 2.05(c).
"Affiliate" shall have the meaning given to that term in Rule 405 under the
Securities Act or any successor rule thereunder.
"Authenticating Agent" shall mean any agent or agents of the Debenture
Trustee which at the time shall be appointed and acting pursuant to Section
6.14.
"Bankruptcy Law" shall mean Title 11, U.S. Code, or any similar federal or
state law for the relief of debtors.
<PAGE>
"Board of Directors " shall mean either the Board of Directors of the
Corporation or any duly authorized committee of that board.
"Board Resolution" shall mean a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Corporation to have been duly adopted
by the Board of Directors and to be in full force and effect on the date of such
certification, and delivered to the Debenture Trustee.
"Book-Entry Capital Securities" shall have the meaning set forth in Section
2.04(a)(i).
"Business Day" shall mean, with respect to any series of Securities, any
day other than a Saturday or a Sunday or a day on which banking institutions in
Wilmington, Delaware, New York, New York or Newport, New Hampshire are
authorized or required by law or executive order to remain closed.
"Capital Securities" shall mean undivided beneficial interests in the
assets of the Trust which are designated as "[______]% Capital Securities" and
rank pari passu with the Common Securities issued by the Trust; provided,
--------
however, that if an Event of Default has occurred and is continuing, no payments
- -------
in respect of Distributions on, or payments upon liquidation, redemption or
otherwise with respect to, the Common Securities shall be made until the holders
of the Capital Securities shall be paid in full the Distributions and the
liquidation, redemption and other payments to which they are entitled.
"Capital Securities Guarantee" shall mean any guarantee agreement that the
Corporation may enter into with Wilmington Trust Company or other Persons that
operates directly or indirectly for the benefit of holders of Capital Securities
of NHTB Capital Trust I and shall include the Capital Securities Guarantee with
respect to the Capital Securities.
"Commission" shall mean the Securities and Exchange Commission, as from
time to time constituted, created under the Exchange Act, or if at any time
after the execution of this Indenture such Commission is not existing and
performing the duties now assigned to it under the Trust Indenture Act, then the
body performing such duties at such time.
"Common Securities" shall mean undivided beneficial interests in the assets
of the Trust which are designated as "[______]% Common Securities," and rank
pari passu with Capital Securities issued by the Trust; provided, however, that
-------- -------
if an Event of Default has occurred and is continuing, no payments in respect of
Distributions on, or payments upon liquidation, redemption or otherwise with
respect to, the Common Securities shall be made until the holders of the Capital
Securities shall be paid in full the Distributions and the liquidation,
redemption and other payments to which they are then entitled.
"Common Securities Guarantee" shall mean any guarantee that the Corporation
may enter into that operates directly or indirectly for the benefit of holders
of Common Securities.
"Common Stock" shall mean the Common Stock, par value $0.01 per share, of
the Corporation or any other class of stock resulting from changes or
reclassifications of such Common
-2-
<PAGE>
Stock consisting solely of changes in par value, or from par value to no par
value, or from no par value to par value.
"Compounded Interest" shall have the meaning set forth in Section 16.01.
"Corporation" shall mean the person identified as the "Corporation" in the
preamble to this Indenture and, subject to the provisions of Article X, shall
also include its successors and assigns.
"Corporation Request" or "Corporation Order" shall mean a written request
or order signed in the name of the Corporation by an Officer and delivered to
the Debenture Trustee.
"Custodian" shall mean any receiver, trustee, assignee, liquidator, or
similar official under any Bankruptcy Law.
"Debenture Trustee" shall mean the Person identified as "Debenture Trustee"
in the preamble to this Indenture and, subject to the provisions of Article VI
hereof, shall also include its successors and assigns.
"Declaration" shall mean the Amended and Restated Declaration of Trust of
the Trust, dated as of [________], 1999, by and among the Trustees (as defined
therein), the Corporation, as sponsor, and the holders from time to time of
undivided beneficial interests in the assets of the Trust, as amended from time
to time.
"Default" shall mean any event, act or condition that with notice or lapse
of time, or both, would constitute an Event of Default.
"Defaulted Interest" shall have the meaning set forth in Section 2.10.
"Deferred Interest" shall have the meaning set forth in Section 16.01.
"Definitive Securities" shall mean those securities issued in fully
registered certificated form not otherwise in global form.
"Depositary" shall mean, with respect to the Securities for which the
Corporation shall determine that such Securities will be issued as a Global
Security, The Depository Trust Company, New York, New York, or another clearing
agency, or any successor registered as a clearing agency pursuant to Section 17A
of the Exchange Act or other applicable statute or regulation, which, in each
case, shall be designated by the Corporation pursuant to Section 2.04(d).
"Dissolution Event" shall mean any event resulting in the dissolution of
the Trust pursuant to the Declaration, and the distribution of the Securities
held by the Property Trustee to the holders of the Trust Securities issued by
the Trust pro rata in accordance with the Declaration.
"Event of Default" shall mean any event specified in Section 5.01,
continued for the period of time, if any, and after the giving of the notice, if
any, therein designated.
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<PAGE>
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"Extended Interest Payment Period" shall have the meaning set forth in
Section 16.01.
"Federal Reserve" shall mean the Board of Governors of the Federal Reserve
System.
"Global Security" shall mean, with respect to the Securities, a Security
executed by the Corporation and delivered by the Debenture Trustee to the
Depositary or pursuant to the Depositary's instruction, or if no instructions
are received then held by the Property Trustee, all in accordance with this
Indenture, which Security shall be registered in the name of the Depositary or
its nominee.
"Indebtedness for Money Borrowed" shall mean any obligation of, or any
obligation guaranteed by, the Corporation for the repayment of borrowed money,
whether or not evidenced by bonds, debentures, notes or other written
instruments; provided, however, that Indebtedness for Money Borrowed shall not
-------- -------
include trade accounts payable or accrued liabilities arising in the ordinary
course of business.
"Indebtedness Ranking on a Parity with the Securities" shall mean (i)
Indebtedness for Money Borrowed, whether outstanding on the date of execution of
this Indenture or hereafter created, assumed or incurred, to the extent such
indebtedness specifically by its terms ranks pari passu with and not prior to
the Securities in the right of payment upon the happening of the dissolution,
winding-up, liquidation or reorganization of the Corporation and (ii) all other
debt securities, and guarantees in respect of those debt securities, issued to
any trust other than the Trust, or a trustee of such trust, partnership or other
entity affiliated with the Corporation, that is a financing vehicle of the
Corporation (a "financing entity") in connection with the issuance by such
financing entity of equity securities or other securities guaranteed by the
Corporation pursuant to an instrument that ranks pari passu with or junior in
right of payment to the Capital Securities Guarantee. The securing of any
Indebtedness for Money Borrowed otherwise constituting Indebtedness Ranking on a
Parity with the Securities shall not be deemed to prevent such Indebtedness for
Money Borrowed from constituting Indebtedness Ranking on a Parity with the
Securities.
"Indebtedness Ranking Junior to the Securities" shall mean any Indebtedness
for Money Borrowed, whether outstanding on the date of execution of this
Indenture or hereafter created, assumed or incurred, to the extent such
indebtedness specifically by its terms ranks junior to and not pari passu with
or prior to the Securities (and any other Indebtedness Ranking on a Parity with
the Securities) in right of payment upon the happening of the dissolution or
winding-up or liquidation or reorganization of the Corporation. The securing of
any Indebtedness for Money Borrowed otherwise constituting Indebtedness on
Parity with the Securities or Indebtedness Ranking Junior to the Securities, as
the case may be, shall not be deemed to prevent such Indebtedness for Money
Borrowed from constituting Indebtedness on Parity with the Securities or
Indebtedness Ranking Junior to the Securities, as the case may be.
"Indenture" shall mean this instrument as originally executed or, if
amended as herein provided, as so amended.
-4-
<PAGE>
"Initial Optional Redemption Date" shall mean [__________], 2004.
"Interest Payment Date" shall have the meaning set forth in Section
2.05(a).
"Investment Company" shall mean an investment company as defined in the
Investment Company Act.
"Investment Company Act" shall mean the Investment Company Act of 1940, as
amended from time to time, or any successor legislation.
"Investment Company Event" shall mean the receipt by the Debenture Issuer
and the Trust of an opinion of independent securities counsel experienced in
such matters 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 rules, guidelines or policies of any
applicable regulatory authority for the Debenture Issuer or (b) any official
administrative pronouncement or judicial decision interpreting or applying such
laws or regulations, which amendment or change is effective or which
pronouncement or decision is announced on or after the date of original issuance
of the Securities, the Trust is, or within 90 days of the date of such opinion
will be, considered an investment company that is required to be registered
under the Investment Company Act.
"Like Amount" shall mean (i) with respect to a redemption of the Trust
Securities, Trust Securities having a liquidation amount equal to the principal
amount of Securities to be paid in accordance with their terms and (ii) with
respect to a distribution of Securities upon the liquidation of the Trust,
Securities having a principal amount equal to the liquidation amount of the
Trust Securities of the holder to whom Securities are distributed.
"Maturity Date" shall mean [__________], 2029.
"Non Book-Entry Capital Securities" shall have the meaning set forth in
Section 2.04(a)(ii).
"Officers" shall mean any of the Chairman of the Board, a Vice Chairman,
the Chief Executive Officer, the President, an Executive or Senior Vice
President, a Vice President, the Chief Financial Officer, the Group Director,
the Secretary or an Assistant Secretary of the Corporation.
"Officers' Certificate" shall mean a certificate signed by two Officers and
delivered to the Debenture Trustee.
"Opinion of Counsel" shall mean a written opinion of counsel, who may be an
employee of the Corporation, and who shall be reasonably acceptable to the
Debenture Trustee.
"Other Debentures" shall mean all junior subordinated debentures other than
the Securities issued by the Corporation from time to time and sold to trusts
other than the Trust to be established by the Corporation (if any), in each case
similar to the Trust.
-5-
<PAGE>
"Other Guarantees" shall mean all guarantees, other than the Capital
Securities Guarantee issued by the Corporation with respect to preferred
beneficial interests (if any) issued by trusts to be established by the
Corporation (if any), other than the Trust, in each case similar to the Trust.
The term "outstanding" when used with reference to the Securities, shall
mean, subject to the provisions of Section 7.04, as of any particular time, all
Securities authenticated and delivered by the Debenture Trustee or the
Authenticating Agent under this Indenture, except
(a) Securities theretofore canceled by the Debenture Trustee or the
Authenticating Agent or delivered to the Debenture Trustee for
cancellation;
(b) Securities, or portions thereof, for the payment or prepayment of
which moneys in the necessary amount shall have been deposited in
trust with the Debenture Trustee or with any paying agent (other
than the Corporation) or shall have been set aside and segregated
in trust by the Corporation (if the Corporation shall act as its
own paying agent); provided that, if such Securities, or portions
thereof, are to be prepaid prior to maturity thereof, notice of
such prepayment shall have been given as set forth in Article XIV
or provision satisfactory to the Debenture Trustee shall have been
made for giving such notice; and
(c) Securities in lieu of or in substitution for which other
Securities shall have been authenticated and delivered pursuant to
the terms of Section 2.07 unless proof satisfactory to the
Corporation and the Debenture Trustee is presented that any such
Securities are held by bona fide holders in due course.
"Person" shall mean any individual, corporation, estate, partnership, joint
venture, association, joint-stock company, limited liability company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"Predecessor Security" of any particular Security shall mean every previous
Security evidencing all or a portion of the same debt as that evidenced by such
particular Security; and, for the purposes of this definition, any Security
authenticated and delivered under Section 2.07 in lieu of a lost, destroyed or
stolen Security shall be deemed to evidence the same debt as the lost, destroyed
or stolen Security.
"Prepayment Price" shall mean the prepayment price of the Debentures equal
to 100% of the principal amount of the Debentures to be prepaid plus any accrued
and unpaid interest (including Compounded Interest and Additional Sums, if any,
thereon to the date of prepayment).
"Principal Office of the Debenture Trustee," or other similar term, shall
mean the principal office of the Debenture Trustee at which at any particular
time its corporate trust business shall be administered, which office at the
date of the execution of this Indenture is located at Rodney Square North, 1100
Market Street, Wilmington, Delaware 19890-0001, Attention: Corporate Trust
Administration, or at any other time at such other address as the Debenture
Trustee may designate from time to time by notice to the Issuer.
-6-
<PAGE>
"Regulatory Capital Event" shall mean the receipt by the Corporation and
the Trust of an opinion of independent bank regulatory counsel experienced in
such matters 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 rules, guidelines or policies of an
applicable regulatory authority for the Debenture Issuer or (b) any official
administrative pronouncement or judicial decision interpreting or applying such
laws or regulations, which amendment or change is effective or which
pronouncement or decision is announced on or after the date of original issuance
of the Securities, the Capital Securities do not constitute, or within 180 days
of the date of such opinion will not constitute, Tier 1 Capital (or its then
equivalent if the Debenture Issuer were subject to such capital requirement)
applied as if the Debenture Issuer (or its successors) were a bank holding
company for purposes of capital adequacy guidelines of the Federal Reserve Board
(or any successor regulatory authority with jurisdiction over bank holding
companies), or any capital adequacy guidelines as then in effect and applicable
to the Debenture Issuer; provided, however, that the distribution of the
-------- -------
Securities in connection with the liquidation of the Trust by the Corporation
shall not in and of itself constitute a Regulatory Capital Event.
"Responsible Officer" shall mean, when used with respect to the Debenture
Trustee, any officer within the Principal Office of the Debenture Trustee,
including any Vice President, Managing Director, Assistant Vice President,
Secretary, Assistant Secretary, Treasurer or Assistant Treasurer or any other
officer of the Debenture Trustee customarily performing functions similar to
those performed by any of the above designated officers and also, with respect
to a particular matter, any other officer to whom such matter is referred
because of such officer's knowledge of and familiarity with the particular
subject.
"Securities" shall mean the Corporation's [______]% Junior Subordinated
Deferrable Interest Debentures due [__________], 2029, as authenticated and
issued under this Indenture.
"Securityholder," "holder of Securities," or other similar terms, shall
mean any Person in whose name at the time a particular Security is registered in
the Security Register kept by the Corporation or the Debenture Trustee for that
purpose in accordance with the terms of this Indenture.
"Security Register" shall mean (i) prior to a Dissolution Event, the list
of holders provided to the Debenture Trustee pursuant to Section 4.01, and (ii)
following a Dissolution Event, any security register maintained by a security
registrar for the Securities appointed by the Corporation following the
execution of a supplemental indenture providing for transfer procedures as
provided for in Section 2.05(a).
"Senior Indebtedness" shall mean all Indebtedness for Money Borrowed,
whether outstanding on the date of execution of this Indenture or hereafter
created, assumed or incurred, except Indebtedness Ranking on a Parity with the
Securities or Indebtedness Ranking Junior to the Securities, and any deferrals,
renewals or extensions of such Senior Indebtedness.
"Special Event" shall mean an Investment Company Event, a Regulatory
Capital Event or a Tax Event, as the context requires.
-7-
<PAGE>
"Subsidiary" shall mean with respect to any Person, (i) any corporation at
least a majority of the outstanding voting stock of which is owned, directly or
indirectly, by such Person or by one or more of its Subsidiaries, or by such
Person and one or more of its Subsidiaries, (ii) any general partnership, joint
venture, limited liability company or similar entity, at least a majority of
whose outstanding partnership, membership or similar interests shall at the time
be owned by such Person or by one or more of its Subsidiaries, or by such Person
and one or more of its Subsidiaries and (iii) any limited partnership of which
such Person or any of its Subsidiaries is a general partner. For the purposes of
this definition, "voting stock" means shares, interests, participations or other
equivalents in the equity interest (however designated) in such Person having
ordinary voting power for the election of a majority of the directors (or the
equivalent) of such Person, other than shares, interests, participations or
other equivalents having such power only by reason of the occurrence of a
contingency.
"Tax Event" shall mean the receipt by the Trust and the Corporation of an
opinion of independent tax counsel experienced in such matters to the effect
that, as a result of any amendment to, or change (including any announced
prospective change) in, the laws or any regulations thereunder of the United
States or any political subdivision or taxing authority thereof or therein, or
as a result of any official administrative pronouncement or judicial decision
interpreting or applying such laws or regulations, which amendment or change is
effective or which pronouncement or decision is announced on or after the date
of original issuance of the Securities, there is more than an insubstantial risk
that (i) the Trust is, or will be within 90 days of the date of such opinion,
subject to United States federal income tax with respect to income received or
accrued on the Securities, (ii) the interest payable by the Corporation on the
Securities is not, or within 90 days of the date of such opinion will not be,
deductible by the Corporation, in whole or in part, for United States federal
income tax purposes or (iii) the Trust is, or will be within 90 days of the date
of such opinion, subject to more than a de minimis amount of other taxes, duties
or other governmental charges.
"Trust" shall mean NHTB Capital Trust I, a Delaware business trust created
for the purpose of issuing its undivided beneficial interests in connection with
the issuance of Securities under this Indenture.
"Trust Indenture Act" shall mean the Trust Indenture Act of 1939 as in
force and effect at the date of execution of the Indenture, except as provided
in Section 9.03.
"Trust Securities" shall mean, collectively, the Capital Securities and the
Common Securities.
"Underwriting Agreement" shall mean the Underwriting Agreement, dated as of
[_______], 1999, by and among the Corporation, the Trust and the Underwriters
named therein.
"U.S. Government Obligations" shall mean securities that are (i) direct
obligations of the United States of America for the payment of which its full
faith and credit is pledged or (ii) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America the payment of which is unconditionally guaranteed as a full faith and
credit obligation by the United States of America, which, in either case under
clauses (i) or (ii), are not callable or prepayable at the option of the issuer
thereof, and shall also include a depository receipt issued by a bank or trust
company as custodian with respect to any such U.S. Government
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<PAGE>
Obligation or a specific payment of interest on or principal of any such U.S.
Government Obligation held by such custodian for the account of the holder of a
depository receipt, provided that (except as required by law) such custodian is
not authorized to make any deduction with respect to the amount payable to the
holder of such depository receipt from any amount received by the custodian in
respect of the U.S. Government Obligation or the specific payment of interest on
or principal of the U.S. Government Obligation evidenced by such depository
receipt.
SECTION 1.02 Business Day Certificate.
------------------------
On the date of execution and delivery of this Indenture (with respect to
the remainder of calendar year 1999) and within 15 days prior to the end of each
calendar year while this Indenture remains in effect (with respect to succeeding
calendar years), the Corporation shall deliver to the Debenture Trustee an
Officers' Certificate specifying the days on which banking institutions or trust
companies in Wilmington, Delaware, New York, New York or Newport, New Hampshire
are then authorized or obligated by law or executive order to remain closed.
ARTICLE II
SECURITIES
SECTION 2.01 Forms Generally.
---------------
The Securities and the Debenture Trustee's certificate of authentication
shall be substantially in the form of Exhibit A hereto, the terms of which are
incorporated in and made a part of this Indenture. The Securities may have
notations, legends or endorsements required by law, stock exchange rule,
agreements to which the Corporation is subject or usage. Each Security shall be
dated the date of its authentication.
SECTION 2.02 Execution and Authentication.
----------------------------
An Officer shall sign the Securities for the Corporation by manual or
facsimile signature. If an Officer whose signature is on a Security no longer
holds that office at the time the Security is authenticated, the Security shall
nevertheless be valid.
A Security shall not be valid until authenticated by the manual signature
of the Debenture Trustee. The signature of the Debenture Trustee shall be
conclusive evidence that the Security has been authenticated under this
Indenture.
The Debenture Trustee shall, upon a Corporation Order, authenticate for
original issue up to, and the aggregate principal amount of Securities
outstanding at any time may not exceed, $17,500,000 aggregate principal amount
of the Securities, except as provided in Sections 2.06, 2.07, 2.08 and 14.05.
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<PAGE>
SECTION 2.03 Form and Payment.
----------------
Except as provided in Section 2.04, the Securities shall be issued in fully
registered certificated form without interest coupons. Principal of and interest
on the Securities issued in certificated form will be payable, the transfer of
such Securities will be registrable and such Securities will be exchangeable for
Securities bearing identical terms and provisions, at the office or agency of
the Corporation maintained for such purpose under Section 3.02; provided,
--------
however, that payments of interest may be made at the option of the Corporation
- -------
(i) by check mailed to the holder at such address as shall appear in the
Security Register, or (ii) by transfer to an account maintained by the Person
entitled thereto, provided that proper transfer instructions have been received
in writing by the relevant record date. Notwithstanding the foregoing, so long
as the holder of any Securities is the Property Trustee, the payment of the
principal of and interest (including Compounded Interest and Additional Sums, if
any) on such Securities held by the Property Trustee will be made at such place
and to such account as may be designated by the Property Trustee.
SECTION 2.04 Global Security.
---------------
(a) In connection with a Dissolution Event,
(i) if any Capital Securities are held in book-entry form ("Book-
Entry Capital Securities"), a Like Amount of Definitive Securities shall be
presented to the Debenture Trustee (if an arrangement with the Depositary has
been maintained) by the Property Trustee in exchange for one or more Global
Securities (as may be required pursuant to Section 2.06), to be registered in
the name of the Depositary, or its nominee, and delivered by the Debenture
Trustee to the Depositary for crediting to the accounts of its participants
pursuant to the instructions of the Administrative Trustees; the Corporation
upon any such presentation shall execute one or more Global Securities in such
aggregate principal amount and deliver the same to the Debenture Trustee for
authentication and delivery in accordance with this Indenture; and payments on
the Securities issued as a Global Security will be made to the Depositary; and
(ii) if any Capital Securities are held in certificated form, the
related Definitive Securities may be presented to the Debenture Trustee by the
Property Trustee, and any Capital Security certificates which represent Capital
Securities other than Book-Entry Capital Securities ("Non Book-Entry Capital
Securities") will be deemed to represent beneficial interests in Securities
presented to the Debenture Trustee by the Property Trustee having an aggregate
principal amount equal to the aggregate liquidation amount of the Non Book-Entry
Capital Securities until such Capital Security certificates are presented to the
security registrar for the Securities for transfer or reissuance, at which time
such Capital Security certificates will be canceled, and a Security in a Like
Amount, registered in the name of the holder of the Capital Security certificate
or the transferee of the holder of such Capital Security certificate, as the
case may be, will be executed by the Corporation and delivered to the Debenture
Trustee for authentication and delivery in accordance with this Indenture; and
upon the issuance of such Securities, Securities with an equivalent aggregate
principal amount that were presented by the Property Trustee to the Debenture
Trustee will be canceled.
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(b) The Global Securities shall represent the aggregate amount of
outstanding Securities from time to time endorsed thereon; provided, however,
-------- -------
that the aggregate principal amount of outstanding Securities represented
thereby may from time to time be reduced or increased, as appropriate, to
reflect exchanges and prepayments. Any endorsement of a Global Security to
reflect the amount of any increase or decrease in the aggregate principal amount
of outstanding Securities represented thereby shall be made by the Debenture
Trustee, in accordance with instructions given by the Corporation as required by
this Section 2.04.
(c) The Global Securities may be transferred, in whole but not in part,
only to the Depositary, to another nominee of the Depositary, or to a successor
Depositary selected or approved by the Corporation or to a nominee of such
successor Depositary.
(d) If at any time the Depositary notifies the Corporation that it is
unwilling or unable to continue as Depositary or the Depositary has ceased to be
a Clearing Agency registered under the Exchange Act, and, in each case, a
successor Depositary is not appointed by the Corporation within 90 days after
the Corporation receives such notice or becomes aware of such condition, as the
case may be, the Corporation will execute, and the Debenture Trustee, upon
receipt of a Corporation Order, will authenticate and make available for
delivery the Definitive Securities, in authorized denominations, and in an
aggregate principal amount equal to the principal amount of the Global Security,
in exchange for such Global Security. If there is a Default or an Event of
Default, the Depositary shall have the right to exchange the Global Securities
for Definitive Securities. In addition, the Corporation may at any time
determine that the Securities shall no longer be represented by a Global
Security. In the event of such an Event of Default or such a determination, the
Corporation shall execute, and subject to Section 2.06, the Debenture Trustee,
upon receipt of an Officers' Certificate evidencing such determination by the
Corporation and a Corporation Order, will authenticate and make available for
delivery the Definitive Securities, in authorized denominations, and in an
aggregate principal amount equal to the principal amount of the Global Security,
in exchange for such Global Security. Upon the exchange of the Global Security
for such Definitive Securities, in authorized denominations, the Global Security
shall be canceled by the Debenture Trustee. Such Definitive Securities issued in
exchange for the Global Security shall be registered in such names and in such
authorized denominations as the Depositary, pursuant to instructions from its
direct or indirect participants or otherwise, shall instruct the Debenture
Trustee. The Debenture Trustee shall deliver such Definitive Securities to the
Depositary for delivery to the Persons in whose names such Definitive Securities
are so registered.
SECTION 2.05 Interest.
--------
(a) Each Security will bear interest, at the rate of [______]% per annum
(the "Coupon Rate"), from the most recent date to which interest has been paid
or duly provided for or, if no interest has been paid or duly provided for, from
[_________], 1999, until the principal thereof becomes due and payable, and at
the Coupon Rate on any overdue principal and (to the extent that payment of such
interest is enforceable under applicable law) on any overdue installment of
interest, compounded quarterly, payable (subject to the provisions of Article
XVI) quarterly in arrears on March 31, June 30, September 30 and December 31, of
each year (each, an "Interest Payment Date"), commencing September 30, 1999, to
the Person in whose name such Security or any predecessor Security is registered
at the close of business on the regular record date for such interest
installment,
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which shall be one Business Day prior to the relevant Interest Payment Date for
Global Securities and the 15/th/ day of the month in which the relevant Interest
Payment Date falls for Definitive Securities.
(b) The amount of interest payable on any Interest Payment Date shall be
computed on the basis of a 360-day year consisting of twelve 30-day months.
(c) During such time as the Property Trustee is the holder of any
Securities, the Corporation shall pay any additional amounts on the Securities
as may be necessary in order that the amount of Distributions then due and
payable by the Trust on the outstanding Trust Securities shall not be reduced as
a result of any additional taxes, duties and other governmental charges to which
the Trust has become subject as a result of a Tax Event ("Additional Sums").
SECTION 2.06 Transfer and Exchange.
---------------------
(a) Transfer Restrictions.
---------------------
(i) The Securities may not be transferred except in compliance with
the legend contained in Exhibit A unless otherwise determined by the Corporation
in accordance with applicable law. Upon any distribution of the Securities
following a Dissolution Event, the Corporation and the Debenture Trustee shall
enter into a supplemental indenture pursuant to Section 9.01 to provide for the
transfer procedures with respect to the Securities substantially similar to
those contained in the Declaration to the extent applicable in the circumstances
existing at such time.
(ii) The Securities will be issued and may be transferred only in
blocks having an aggregate principal amount of not less than $10 and in
multiples of $10 in excess thereof. Any attempted transfer of the Securities in
a block having an aggregate principal amount of less than $10 shall be deemed to
be voided and of no legal effect whatsoever. Any such purported transferee shall
be deemed not to be a holder of such Securities for any purpose, including, but
not limited to the receipt of payments on such Securities, and such purported
transferee shall be deemed to have no interest whatsoever in such Securities.
(b) General Provisions Relating to Transfers and Exchanges. To permit
------------------------------------------------------
registrations of transfers and exchanges, the Corporation shall execute and the
Debenture Trustee shall authenticate Definitive Securities and Global Securities
at the request of the security registrar for the Securities. All Definitive
Securities and Global Securities issued upon any registration of transfer or
exchange of Definitive Securities or Global Securities shall be the valid
obligations of the Corporation, evidencing the same debt, and entitled to the
same benefits under this Indenture, as the Definitive Securities or Global
Securities surrendered upon such registration of transfer or exchange.
No service charge shall be made to a holder for any registration of
transfer or exchange, but the Corporation may require payment of a sum
sufficient to cover any transfer tax or similar governmental charge payable in
connection therewith.
The Corporation shall not be required to: (i) issue, register the transfer
of or exchange Securities during a period beginning at the opening of business
15 days before the day of mailing of
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<PAGE>
a notice of prepayment or any notice of selection of Securities for prepayment
under Article XIV hereof and ending at the close of business on the day of such
mailing; or (ii) register the transfer of or exchange any Security so selected
for prepayment in whole or in part, except the nonprepaid portion of any
Security being prepaid in part.
Prior to due presentment for the registration of a transfer of any
Security, the Debenture Trustee, the Corporation and any agent of the Debenture
Trustee or the Corporation may deem and treat the Person in whose name any
Security is registered as the absolute owner of such Security for the purpose of
receiving payment of principal of and interest on such Securities, and none of
the Debenture Trustee, the Corporation or any agents of the Debenture Trustee or
the Corporation shall be affected by notice to the contrary.
SECTION 2.07 Replacement Securities.
----------------------
If any mutilated Security is surrendered to the Debenture Trustee, or the
Corporation and the Debenture Trustee receive evidence to their satisfaction of
the destruction, loss or theft of any Security, the Corporation shall issue and
the Debenture Trustee shall authenticate a replacement Security if the Debenture
Trustee's requirements for replacements of Securities are met. An indemnity bond
must be supplied by the holder that is sufficient in the judgment of the
Debenture Trustee and the Corporation to protect the Corporation, the Debenture
Trustee, any agent thereof or any authenticating agent from any loss that any of
them may suffer if a Security is replaced. The Corporation or the Debenture
Trustee may charge for its expenses in replacing a Security.
Every replacement Security is an obligation of the Corporation and shall be
entitled to all of the benefits of this Indenture equally and proportionately
with all other Securities duly issued hereunder.
SECTION 2.08 Temporary Securities.
--------------------
Pending the preparation of Definitive Securities, the Corporation may
execute, and upon Corporation Order the Debenture Trustee shall authenticate and
make available for delivery, temporary Securities that are printed,
lithographed, typewritten, mimeographed or otherwise reproduced, in any
authorized denomination, substantially of the tenor of the Definitive Securities
in lieu of which they are issued and with such appropriate insertions,
omissions, substitutions and other variations as the Officers executing such
Securities may determine, as conclusively evidenced by their execution of such
Securities.
If temporary Securities are issued, the Corporation shall cause Definitive
Securities to be prepared without unreasonable delay. The Definitive Securities
shall be printed, lithographed or engraved, or provided by any combination
thereof, or in any other manner permitted by the rules and regulations of any
applicable securities exchange, all as determined by the Officers executing such
Definitive Securities. After the preparation of Definitive Securities, the
temporary Securities shall be exchangeable for Definitive Securities upon
surrender of the temporary Securities at the office or agency maintained by the
Corporation for such purpose pursuant to Section 3.02 hereof, without charge to
the holder thereof. Upon surrender for cancellation of any one or more temporary
Securities, the Corporation shall execute, and the Debenture Trustee shall
authenticate and make
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<PAGE>
available for delivery, in exchange therefor the same aggregate principal amount
of Definitive Securities of authorized denominations. Until so exchanged, the
temporary Securities shall in all respects be entitled to the same benefits
under this Indenture as Definitive Securities.
SECTION 2.09 Cancellation.
------------
The Corporation at any time may deliver Securities to the Debenture Trustee
for cancellation. The Debenture Trustee and no one else shall cancel all
Securities surrendered for registration of transfer, exchange, payment,
replacement or cancellation and shall return such canceled Securities to the
Corporation. The Corporation may not issue new Securities to replace Securities
that have been prepaid or paid or that have been delivered to the Debenture
Trustee for cancellation.
SECTION 2.10 Defaulted Interest.
------------------
Any interest on any Security that is payable, but is not punctually paid or
duly provided for, on any Interest Payment Date (herein called "Defaulted
Interest") shall forthwith cease to be payable to the holder on the relevant
regular record date by virtue of having been such holder; and such Defaulted
Interest shall be paid by the Corporation, at its election, as provided in
clause (a) or clause (b) below:
(a) The Corporation may make payment of any Defaulted Interest on
Securities to the Persons in whose names such Securities (or their
respective Predecessor Securities) are registered at the close of business
on a special record date for the payment of such Defaulted Interest, which
shall be fixed in the following manner: the Corporation shall notify the
Debenture Trustee in writing of the amount of Defaulted Interest proposed
to be paid on each such Security and the date of the proposed payment, and
at the same time the Corporation shall deposit with the Debenture Trustee
an amount of money equal to the aggregate amount proposed to be paid in
respect of such Defaulted Interest or shall make arrangements satisfactory
to the Debenture Trustee for such deposit prior to the date of the proposed
payment, such money when deposited to be held in trust for the benefit of
the Persons entitled to such Defaulted Interest as in this clause provided.
Thereupon, the Debenture Trustee shall fix a special record date for the
payment of such Defaulted Interest which shall not be more than 15 nor less
than 10 days prior to the date of the proposed payment and not less than 10
days after the receipt by the Debenture Trustee of the notice of the
proposed payment. The Debenture Trustee shall promptly notify the
Corporation of such special record date and, in the name and at the expense
of the Corporation, shall cause notice of the proposed payment of such
Defaulted Interest and the special record date therefor to be mailed, first
class postage prepaid, to each Securityholder at his or her address as it
appears in the Security Register, not less than 10 days prior to such
special record date. Notice of the proposed payment of such Defaulted
Interest and the special record date therefor having been mailed as
aforesaid, such Defaulted Interest shall be paid to the Persons in whose
names such Securities (or their respective Predecessor Securities) are
registered on such special record date and shall be no longer payable
pursuant to the following clause (b).
(b) The Corporation may make payment of any Defaulted Interest on any
Securities in any other lawful manner not inconsistent with the
requirements of any securities
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<PAGE>
exchange on which such Securities may be listed, and upon such notice as
may be required by such exchange, if, after notice given by the Corporation
to the Debenture Trustee of the proposed payment pursuant to this clause,
such manner of payment shall be deemed practicable by the Debenture
Trustee.
SECTION 2.11 CUSIP Numbers.
-------------
The Corporation in issuing the Securities may use "CUSIP" numbers (if then
generally in use), and, if so, the Debenture Trustee shall use "CUSIP" numbers
in notices of prepayment as a convenience to Securityholders; provided, however,
-------- -------
that any such notice may state that no representation is made as to the
correctness of such numbers either as printed on the Securities or as contained
in any notice of a prepayment and that reliance may be placed only on the other
identification numbers printed on the Securities, and any such prepayment shall
not be affected by any defect in or omission of such numbers. The Corporation
will promptly notify the Debenture Trustee of any change in the CUSIP numbers.
ARTICLE III
PARTICULAR COVENANTS OF THE CORPORATION
SECTION 3.01 Payment of Principal and Interest.
---------------------------------
The Corporation covenants and agrees for the benefit of the holders of the
Securities that it will duly and punctually pay or cause to be paid the
principal of and interest on the Securities at the place, at the respective
times and in the manner provided herein. The Corporation further covenants to
pay any and all amounts due in respect of the Securities, including, without
limitation, Additional Sums, as may be required pursuant to Section 2.05(c) and
Compounded Interest, as may be required pursuant to Section 16.01.
SECTION 3.02 Offices for Notices and Payments, etc.
-------------------------------------
So long as any of the Securities remain outstanding, the Corporation will
maintain in Wilmington, Delaware, an office or agency where the Securities may
be presented for payment, an office or agency where the Securities may be
presented for registration of transfer and for exchange as in this Indenture
provided and an office or agency where notices and demands to or upon the
Corporation in respect of the Securities or this Indenture may be served. The
Corporation will give to the Debenture Trustee written notice of the location of
any such office or agency and of any change of location thereof. Until
otherwise designated from time to time by the Corporation in a notice to the
Debenture Trustee, any such office or agency for all of the above purposes shall
be the Principal Office of the Debenture Trustee. In case the Corporation shall
fail to maintain any such office or agency in Wilmington, Delaware, or shall
fail to give such notice of the location or of any change in the location
thereof, presentations and demands may be made and notices may be served at the
Principal Office of the Debenture Trustee.
In addition to any such office or agency, the Corporation may from time to
time designate one or more offices or agencies outside Wilmington, Delaware,
where the Securities may be
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<PAGE>
presented for payment, for registration of transfer and for exchange and where
notices and demands to or upon the Corporation in respect of the Securities or
this Indenture may be served in the manner provided in this Indenture, and the
Corporation may from time to time rescind such designation, as the Corporation
may deem desirable or expedient; provided, however, that no such designation or
-------- -------
rescission shall in any manner relieve the Corporation of its obligation to
maintain any such office or agency in Wilmington, Delaware, for the purposes
above mentioned. The Corporation will give to the Debenture Trustee prompt
written notice of any such designation or rescission thereof.
SECTION 3.03 Appointments to Fill Vacancies in Debenture Trustee's Office.
------------------------------------------------------------
The Corporation, whenever necessary to avoid or fill a vacancy in the
office of Debenture Trustee, will appoint, in the manner provided in Section
6.10, a Debenture Trustee, so that there shall at all times be a Debenture
Trustee hereunder.
SECTION 3.04 Provision as to Paying Agent.
----------------------------
(a) If the Corporation shall appoint a paying agent other than the
Debenture Trustee with respect to the Securities, it will cause such paying
agent to execute and deliver to the Debenture Trustee an instrument in which
such agent shall agree with the Debenture Trustee, subject to the provisions of
this Section 3.04,
(1) that it will hold all sums held by it as such agent for the
payment of the principal of or interest on the Securities
(whether such sums have been paid to it by the Corporation or by
any other obligor on the Securities) in trust for the benefit of
the holders of the Securities; and
(2) that it will give the Debenture Trustee notice of any failure by
the Corporation (or by any other obligor on the Securities) to
make any payment of the principal of or interest (including
Additional Sums and Compounded Interest, if any) on the
Securities when the same shall be due and payable.
(b) If the Corporation shall act as its own paying agent, it will, on or
before each due date of the principal of or interest on the Securities, set
aside, segregate and hold in trust for the benefit of the holders of the
Securities a sum sufficient to pay such principal or interest so becoming due
and will notify the Debenture Trustee of any failure to take such action and of
any failure by the Corporation (or by any other obligor under the Securities) to
make any payment of the principal of or interest on the Securities when the same
shall become due and payable.
(c) Anything in this Section 3.04 to the contrary notwithstanding, the
Corporation may, at any time, for the purpose of obtaining a satisfaction and
discharge with respect to the Securities hereunder, or for any other reason, pay
or cause to be paid to the Debenture Trustee all sums payable with respect to
the Securities, such sums to be held by the Debenture Trustee upon the trusts
herein contained.
(d) Anything in this Section 3.04 to the contrary notwithstanding, the
agreement to hold sums in trust as provided in this Section 3.04 is subject to
Sections 11.03 and 11.04.
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<PAGE>
SECTION 3.05 Certificate to Debenture Trustee.
--------------------------------
The Corporation will deliver to the Debenture Trustee on or before 120 days
after the end of each fiscal year of the Corporation, commencing with the first
fiscal year ending after the date hereof, so long as Securities are outstanding
hereunder, an Officers' Certificate, one of the signers of which shall be the
principal executive, principal financial or principal accounting officer of the
Corporation, stating that in the course of the performance by the signers of
their duties as officers of the Corporation they would normally have knowledge
of any Default by the Corporation in the performance of any covenants contained
herein, stating whether or not they have knowledge of any such Default and, if
so, specifying each such Default of which the signers have knowledge, the nature
thereof and the action, if any, the Corporation intends to undertake as a result
of such Default.
SECTION 3.06 Compliance with Consolidation Provisions.
----------------------------------------
The Corporation will not, while any of the Securities remain outstanding,
consolidate with, or merge into, or merge into itself, or sell or convey all or
substantially all of its property to any other Person unless the provisions of
Article X hereof are complied with.
SECTION 3.07 Limitation on Dividends.
-----------------------
If (1) there shall have occurred any event of which the Corporation has
actual knowledge that (a) is a Default or an Event of Default and (b) in respect
of which the Corporation shall not have taken reasonable steps to cure, (2) if
the Securities are held by the Property Trustee, the Corporation shall be in
default with respect to its payment of any obligations under the Capital
Securities Guarantee or (3) the Corporation shall have given notice of its
election to exercise its right to commence an Extended Interest Payment Period
and shall not have rescinded such notice, and such Extended Interest Payment
Period or any extension thereof shall have commenced and be continuing, the
Corporation will not (i) declare or pay any dividends or distributions on, or
redeem, purchase, acquire, or make a liquidation payment with respect to, any of
the Corporation's capital stock, (ii) make any payment of principal of or
interest on or repay, repurchase or redeem any debt securities of the
Corporation (including Other Debentures) that rank pari passu with or junior in
right of payment to the Securities or (iii) make any guarantee payments with
respect to any guarantee (other than the Capital Securities Guarantee) by the
Corporation of the debt securities of any Subsidiary of the Corporation
(including Other Guarantees) if such guarantee ranks pari passu with or junior
in right of payment to the Securities (other than (a) dividends or distributions
in shares of, or options, warrants or rights to subscribe for or purchase shares
of, Common Stock), (b) any declaration of a dividend in connection with the
implementation of a stockholders' rights plan, or the issuance of stock under
any such plan in the future, or the redemption or repurchase of any such rights
pursuant thereto, (c) as a result of a reclassification of the Corporation's
capital stock or the exchange or conversion of one class or series of the
Corporation's capital stock for another class or series of the Corporation's
capital stock, (d) the purchase of fractional interests in shares of the
Corporation's capital stock pursuant to the conversion or exchange provisions of
such capital stock or the security being converted or exchanged and (e)
purchases of Common Stock related to the issuance of Common Stock or rights
under any of the Corporation's benefit or compensation plans for its directors,
officers or employees or any of the Corporation's dividend reinvestment plans).
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<PAGE>
SECTION 3.08 Covenants as to NHTB Capital Trust I
------------------------------------
In the event Securities are issued to the Trust or a trustee of such Trust
in connection with the issuance of Trust Securities by the Trust, for so long as
such Trust Securities remain outstanding, the Corporation (i) will maintain 100%
direct or indirect ownership of the Common Securities of the Trust; provided,
--------
however, that any successor of the Corporation, permitted pursuant to Article X,
- -------
may succeed to the Corporation's ownership of such Common Securities, (ii) will
use commercially reasonable efforts to cause the Trust (a) to remain a business
trust, except in connection with a distribution of Securities to the holders of
Trust Securities in liquidation of the Trust, the redemption of all of the Trust
Securities of the Trust, or certain mergers, consolidations or amalgamations,
each as permitted by the Declaration, and (b) not to be classified as an
association taxable as a corporation and to be classified as a grantor trust, in
each case for United States federal income tax purposes, (iii) will use
commercially reasonable efforts to cause each holder of the Trust Securities to
be treated as owning an undivided beneficial interest in the Securities and (iv)
will not cause, as sponsor of the Trust, or permit, as holder of the Common
Securities, the dissolution, winding-up or liquidation of the Trust, except as
provided in the Declaration.
SECTION 3.09 Payment of Expenses.
-------------------
In connection with the offering, sale and issuance of the Securities to the
Trust and in connection with the sale of the Trust Securities by the Trust, the
Corporation, in its capacity as borrower with respect to the Securities, shall:
(a) pay all costs and expenses relating to the offering, sale and issuance
of the Securities and compensation of the Debenture Trustee in
accordance with the provisions of Section 6.06;
(b) pay all costs and expenses of the Trust, including, but not limited
to, costs and expenses relating to the organization of the Trust, the
registration, offering, sale and issuance of the Trust Securities
(including commissions payable to the Underwriters pursuant to the
Underwriting Agreement in connection therewith), the fees and expenses
of the Property Trustee and the Delaware Trustee, the costs and
expenses relating to the operation of the Trust, including without
limitation, costs and expenses of accountants, attorneys, statistical
or bookkeeping services, expenses for printing and engraving and
computing or accounting equipment, paying agent(s), registrar(s),
transfer agent(s), duplicating, travel and telephone and other
telecommunications expenses and costs and expenses incurred in
connection with the acquisition, financing, and disposition of assets
of the Trust;
(c) be primarily and fully liable for any indemnification obligations
arising with respect to the Declaration;
(d) pay any and all taxes (other than United States withholding taxes
attributable to the Trust or its assets) and all liabilities, costs
and expenses with respect to such taxes of the Trust; and
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(e) pay all other fees, expenses, debts and obligations (other than in
respect of the Trust Securities) related to the Trust.
SECTION 3.10 Payment Upon Resignation or Removal.
-----------------------------------
Upon termination of this Indenture or the removal or resignation of the
Debenture Trustee, unless otherwise stated, the Corporation shall pay to the
Debenture Trustee all amounts accrued and owing to the Debenture Trustee to the
date of such termination, removal or resignation. Upon termination of the
Declaration or the removal or resignation of the Delaware Trustee or the
Property Trustee, as the case may be, pursuant to Section 5.7 of the
Declaration, the Corporation shall pay to the Delaware Trustee or the Property
Trustee, as the case may be, all amounts accrued and owing to such trustee(s) to
the date of such termination, removal or resignation.
ARTICLE IV
LIST OF SECURITYHOLDERS AND REPORTS BY THE
CORPORATION AND THE DEBENTURE TRUSTEE
SECTION 4.01 List of Securityholders.
-----------------------
The Corporation covenants and agrees that it will furnish or cause to be
furnished to the Debenture Trustee:
(a) on a quarterly basis on each regular record date for the Securities, a
list, in such form as the Debenture Trustee may reasonably require, of
the names and addresses of the Securityholders as of such record date;
and
(b) at such other times as the Debenture Trustee may request in writing,
within 30 days after the receipt by the Corporation, of any such
request, a list of similar form and content as of a date not more than
15 days prior to the time such list is furnished,
except that, no such lists need be furnished so long as the Debenture Trustee is
in possession thereof by reason of its acting as security registrar for the
Securities.
SECTION 4.02 Preservation and Disclosure of Lists.
------------------------------------
(a) The Debenture Trustee shall preserve, in as current a form as is
reasonably practicable, all information as to the names and addresses of the
holders of the Securities (1) contained in the most recent list furnished to it
as provided in Section 4.01 or (2) received by it in the capacity of security
registrar (if so acting) hereunder. The Debenture Trustee may destroy any list
furnished to it as provided in Section 4.01 upon receipt of a new list so
furnished.
(b) In case three or more holders of Securities (hereinafter referred to
as "applicants") apply in writing to the Debenture Trustee and furnish to the
Debenture Trustee reasonable proof that each such applicant has owned a Security
for a period of at least six months preceding the date of such application, and
such application states that the applicants desire to communicate with other
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holders of Securities or with holders of all Securities with respect to their
rights under this Indenture and is accompanied by a copy of the form of proxy or
other communication which such applicants propose to transmit, then the
Debenture Trustee shall within five Business Days after the receipt of such
application, at its election, either:
(1) afford such applicants access to the information preserved at the
time by the Debenture Trustee in accordance with the provisions
of subsection (a) of this Section 4.02, or
(2) inform such applicants as to the approximate number of holders of
all Securities whose names and addresses appear in the
information preserved at the time by the Debenture Trustee in
accordance with the provisions of subsection (a) of this Section
4.02, and as to the approximate cost of mailing to such
Securityholders the form of proxy or other communication, if any,
specified in such application.
If the Debenture Trustee shall elect not to afford such applicants access
to such information, the Debenture Trustee shall, upon the written request of
such applicants, mail to each Securityholder whose name and address appear in
the information preserved at the time by the Debenture Trustee in accordance
with the provisions of subsection (a) of this Section 4.02 a copy of the form of
proxy or other communication which is specified in such request with reasonable
promptness after a tender to the Debenture Trustee of the material to be mailed
and of payment, or provision for the payment, of the reasonable expenses of
mailing, unless within five Business Days after such tender, the Debenture
Trustee shall mail to such applicants and file with the Commission, together
with a copy of the material to be mailed, a written statement to the effect
that, in the opinion of the Debenture Trustee, such mailing would be contrary to
the best interests of the holders of Securities or would be in violation of
applicable law. Such written statement shall specify the basis of such opinion.
If the Commission, after opportunity for a hearing upon the objections specified
in the written statement so filed, shall enter an order refusing to sustain any
of such objections or if, after the entry of an order sustaining one or more of
such objections, the Commission shall find, after notice and opportunity for
hearing, that all the objections so sustained have been met and shall enter an
order so declaring, the Debenture Trustee shall mail copies of such material to
all such Securityholders with reasonable promptness after the entry of such
order and the renewal of such tender; otherwise the Debenture Trustee shall be
relieved of any obligation or duty to such applicants respecting their
application.
(c) Each and every holder of Securities, by receiving and holding the
same, agrees with the Corporation and the Debenture Trustee that neither the
Corporation nor the Debenture Trustee nor any paying agent shall be held
accountable by reason of the disclosure of any such information as to the names
and addresses of the holders of Securities in accordance with the provisions of
subsection (b) of this Section 4.02, regardless of the source from which such
information was derived, and that the Debenture Trustee shall not be held
accountable by reason of mailing any material pursuant to a request made under
said subsection (b).
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SECTION 4.03 Reports by the Corporation.
--------------------------
(a) The Corporation covenants and agrees to file with the Debenture
Trustee, within 15 days after the date on which the Corporation is required to
file the same with the Commission, copies of the annual reports and of the
information, documents and other reports (or copies of such portions of any of
the foregoing as said Commission may from time to time by rules and regulations
prescribe) which the Corporation may be required to file with the Commission
pursuant to Section 13 or Section 15(d) of the Exchange Act; or, if the
Corporation is not required to file information, documents or reports pursuant
to either of such sections, then to provide to the Debenture Trustee, such of
the supplementary and periodic information, documents and reports which would
have been required pursuant to Section 13 of the Exchange Act in respect of a
security listed and registered on a national securities exchange as may be
prescribed from time to time in such rules and regulations. The Corporation also
covenants and agrees to comply with the provisions of Section 314(a) of the
Trust Indenture Act.
(b) The Corporation covenants and agrees to file with the Debenture
Trustee and the Commission, in accordance with the rules and regulations
prescribed from time to time by said Commission, such additional information,
documents and reports with respect to compliance by the Corporation with the
conditions and covenants provided for in this Indenture as may be required from
time to time by such rules and regulations.
(c) The Corporation covenants and agrees to transmit by mail to all
holders of Securities, as the names and addresses of such holders appear upon
the Security Register, within 30 days after the filing thereof with the
Debenture Trustee, such summaries of any information, documents and reports
required to be filed by the Corporation pursuant to subsections (a) and (b) of
this Section 4.03 as may be required by rules and regulations prescribed from
time to time by the Commission.
(d) Delivery of such reports, information and documents to the Debenture
Trustee is for informational purposes only and the Debenture Trustee's receipt
of such shall not constitute constructive notice of any information contained
therein or determinable from information contained therein, including the
Corporation's compliance with any of its covenants hereunder (as to which the
Debenture Trustee is entitled to rely exclusively on Officers' Certificates).
SECTION 4.04 Reports by the Debenture Trustee.
--------------------------------
(a) The Debenture Trustee shall transmit to Securityholders such reports
concerning the Debenture Trustee and its actions under this Indenture as may be
required pursuant to the Trust Indenture Act at the times and in the manner
provided pursuant thereto. If required by Section 313(a) of the Trust Indenture
Act, the Debenture Trustee shall, within 60 days after [____________,_____], and
no later than [_______________] in each succeeding year, deliver to
Securityholders a brief report, dated as of each such date which complies with
the provisions of such Section 313(a).
(b) A copy of each such report shall, at the time of such transmission to
Securityholders, be filed by the Debenture Trustee with each stock exchange, if
any, upon which the Securities are
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listed, with the Commission and with the Corporation. The Corporation will
promptly notify the Debenture Trustee when the Securities are listed on any
stock exchange.
ARTICLE V
REMEDIES OF THE DEBENTURE TRUSTEE AND
SECURITYHOLDERS UPON EVENT OF DEFAULT
SECTION 5.01 Events of Default.
-----------------
One or more of the following events of default shall constitute an Event of
Default hereunder (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):
(a) default in the payment of any interest (including Compounded Interest
and Additional Sums, if any) on the Securities or any Other Debentures
(about which a Responsible Officer of the Debenture Trustee has actual
knowledge) when due, and continuance of such default for a period of
30 days; provided, however, that a valid extension of an interest
-------- -------
payment period by the Corporation in accordance with the terms hereof
or thereof shall not constitute a default in the payment of interest
for this purpose; or
(b) default in the payment of any principal of the Securities or any Other
Debentures (about which a Responsible Officer of the Debenture Trustee
has actual knowledge) when due, whether at maturity, upon prepayment,
by declaration of acceleration of maturity or otherwise; or
(c) default in the performance, or breach in any material respect, of any
covenant or warranty of the Corporation in this Indenture (other than
a covenant or warranty a default in whose performance or whose breach
is elsewhere in this Section specifically dealt with), and continuance
of such default or breach for a period of 90 days after there has been
given, by registered or certified mail, to the Corporation by the
Debenture Trustee or to the Corporation and the Debenture Trustee by
the holders of at least 25% in aggregate principal amount of the
outstanding 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" hereunder; or
(d) a court having jurisdiction in the premises shall enter a decree or
order for relief in respect of the Corporation in an involuntary case
under any applicable bankruptcy, insolvency or other similar law now
or hereafter in effect, or appointing a receiver, liquidator,
assignee, custodian, trustee, sequestrator (or similar official) of
the Corporation or for any substantial part of its property, or
ordering the winding-up or liquidation of its affairs and such decree
or order shall remain unstayed and in effect for a period of 90
consecutive days; or
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<PAGE>
(e) the Corporation shall commence a voluntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in
effect, shall consent to the entry of an order for relief in an
involuntary case under any such law, or shall consent to the
appointment of or taking possession by a receiver, liquidator,
assignee, trustee, custodian, sequestrator (or other similar official)
of the Corporation or of any substantial part of its property, or
shall make any general assignment for the benefit of creditors, or
shall fail generally to pay its debts as they become due.
If an Event of Default with respect to Securities at the time outstanding
occurs and is continuing, then in every such case the Debenture Trustee or the
holders of not less than 25% in aggregate principal amount of the Securities
then outstanding may declare the principal amount of all Securities to be due
and payable immediately, by a notice in writing to the Corporation (and to the
Debenture Trustee if given by the holders of the outstanding Securities), and
upon any such declaration the same shall become immediately due and payable.
The foregoing provisions, however, are subject to the condition that if, at
any time after the principal of the Securities shall have been so declared due
and payable, and before any judgment or decree for the payment of the moneys due
shall have been obtained or entered as hereinafter provided, (i) the Corporation
shall pay or shall deposit with the Debenture Trustee a sum sufficient to pay
(A) all matured installments of interest (including Compounded Interest and
Additional Sums, if any) on all the Securities and the principal of any and all
Securities which shall have become due otherwise than by acceleration (with
interest upon such principal and, to the extent that payment of such interest is
enforceable under applicable law, on overdue installments of interest, at the
same rate as the rate of interest specified in the Securities to the date of
such payment or deposit) and (B) such amount as shall be sufficient to cover
compensation and expenses due to the Debenture Trustee and each predecessor
Debenture Trustee, their respective agents, attorneys and counsel, pursuant to
Section 6.06, and (ii) any and all Events of Default under the Indenture, other
than the non-payment of the principal of the Securities which shall have become
due solely by such declaration of acceleration, shall have been cured, waived or
otherwise remedied as provided herein, then, in every such case, the holders of
a majority in aggregate principal amount of the Securities then outstanding, by
written notice to the Corporation and to the Debenture Trustee, may rescind and
annul such declaration and its consequences, but no such waiver or rescission
and annulment shall extend to or shall affect any subsequent default or shall
impair any right consequent thereon.
In case the Debenture Trustee shall have proceeded to enforce any right
under this Indenture and such proceedings shall have been discontinued or
abandoned because of such rescission or annulment or for any other reason or
shall have been determined adversely to the Debenture Trustee, then and in every
such case the Corporation, the Debenture Trustee and the holders of the
Securities shall be restored respectively to their several positions and rights
hereunder, and all rights, remedies and powers of the Corporation, the Debenture
Trustee and the holders of the Securities shall continue as though no such
proceeding had been taken.
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<PAGE>
SECTION 5.02 Payment of Securities on Default; Suit Therefor.
-----------------------------------------------
The Corporation covenants that (a) in case default shall be made in the
payment of any installment of interest (including Compounded Interest and
Additional Sums, if any) on any of the Securities as and when the same shall
become due and payable, and such default shall have continued for a period of 30
days, or (b) in case default shall be made in the payment of the principal of
any of the Securities as and when the same shall have become due and payable,
whether at maturity of the Securities or upon prepayment or by declaration or
otherwise, then, upon demand of the Debenture Trustee, the Corporation will pay
to the Debenture Trustee, for the benefit of the holders of the Securities, the
whole amount that then shall have become due and payable on all such Securities
for principal or interest (including Compounded Interest and Additional Sums, if
any) or both, as the case may be, with interest upon the overdue principal and
(to the extent that payment of such interest is enforceable under applicable law
and, if the Securities are held by the Trust or a trustee of such Trust, without
duplication of any other amounts paid by the Trust or a trustee in respect
thereof) upon the overdue installments of interest (including Compounded
Interest and Additional Sums, if any) at the rate borne by the Securities; and,
in addition thereto, such further amount as shall be sufficient to cover the
costs and expenses of collection, including reasonable compensation to the
Debenture Trustee, its agents, attorneys and counsel, and any other amount due
to the Debenture Trustee pursuant to Section 6.06.
In case the Corporation shall fail forthwith to pay such amounts upon such
demand, the Debenture Trustee, in its own name and as trustee of an express
trust, shall be entitled and empowered to institute any actions or proceedings
at law or in equity for the collection of the sums so due and unpaid, and may
prosecute any such action or proceeding to judgment or final decree, and may
enforce any such judgment or final decree against the Corporation or any other
obligor on the Securities and collect in the manner provided by law out of the
property of the Corporation or any other obligor on the Securities, wherever
situated, the moneys adjudged or decreed to be payable.
In case there shall be pending proceedings for the bankruptcy or for the
reorganization of the Corporation or any other obligor on the Securities under
Title 11, United States Code, or any other applicable law, or in case a receiver
or trustee shall have been appointed for the property of the Corporation or such
other obligor, or in the case of any other similar judicial proceedings relative
to the Corporation or other obligor upon the Securities, or to the creditors or
property of the Corporation or such other obligor, the Debenture Trustee,
irrespective of whether the principal of the Securities shall then be due and
payable as therein expressed or by declaration or otherwise and irrespective of
whether the Debenture Trustee shall have made any demand pursuant to the
provisions of this Section 5.02, shall be entitled and empowered, by
intervention in such proceedings or otherwise, to file and prove a claim or
claims for the whole amount of principal and interest owing and unpaid in
respect of the Securities and, in case of any judicial proceedings, to file such
proofs of claim and other papers or documents as may be necessary or advisable
in order to have the claims of the Debenture Trustee (including any claim for
amounts due to the Debenture Trustee pursuant to Section 6.06) and of the
Securityholders allowed in such judicial proceedings relative to the Corporation
or any other obligor on the Securities, or to the creditors or property of the
Corporation or such other obligor, unless prohibited by applicable law and
regulations, to vote on behalf of the holders of the Securities in any election
of a trustee or a standby trustee in arrangement, reorganization, liquidation or
other bankruptcy or insolvency proceedings or person performing
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<PAGE>
similar functions in comparable proceedings, and to collect and receive any
moneys or other property payable or deliverable on any such claims, and to
distribute the same after the deduction of its charges and expenses; and any
receiver, assignee or trustee in bankruptcy or reorganization is hereby
authorized by each of the Securityholders to make such payments to the Debenture
Trustee, and, in the event that the Debenture Trustee shall consent to the
making of such payments directly to the Securityholders, to pay to the Debenture
Trustee such amounts as shall be sufficient to cover reasonable compensation to,
and expenses of, the Debenture Trustee, each predecessor Debenture Trustee and
their respective agents, attorneys and counsel, and all other amounts due to the
Debenture Trustee pursuant to Section 6.06.
Nothing herein contained shall be construed to authorize the Debenture
Trustee to authorize or consent to or accept or adopt on behalf of any
Securityholder any plan of reorganization, arrangement, adjustment or
composition affecting the Securities or the rights of any holder thereof or to
authorize the Debenture Trustee to vote in respect of the claim of any
Securityholder in any such proceeding.
All rights of action and of asserting claims under this Indenture, or under
any of the Securities, may be enforced by the Debenture Trustee without the
possession of any of the Securities, or the production thereof on any trial or
other proceeding relative thereto, and any such suit or proceeding instituted by
the Debenture Trustee shall be brought in its own name as trustee of an express
trust, and any recovery of judgment shall be for the ratable benefit of the
holders of the Securities.
In any proceedings brought by the Debenture Trustee (and also any
proceedings involving the interpretation of any provision of this Indenture to
which the Debenture Trustee shall be a party), the Debenture Trustee shall be
held to represent all the holders of the Securities, and it shall not be
necessary to make any holders of the Securities parties to any such proceedings.
SECTION 5.03 Application of Moneys Collected by Debenture Trustee.
----------------------------------------------------
Any moneys collected by the Debenture Trustee shall be applied in the
following order, at the date or dates fixed by the Debenture Trustee for the
distribution of such moneys, upon presentation of the Securities in respect of
which moneys have been collected, and stamping thereon the payment, if only
partially paid, and upon surrender thereof if fully paid:
First: To the payment of costs and expenses of collection applicable to the
Securities and all other amounts due to the Debenture Trustee under Section
6.06;
Second: To the payment of all Senior Indebtedness of the Corporation if and
to the extent required by Article XV;
Third: To the payment of the amounts then due and unpaid upon Securities
for principal of and interest (including Compounded Interest and Additional
Sums, if any) on the Securities, in respect of which or for the benefit of which
money has been collected, ratably, without preference of priority of any kind,
according to the amounts due on such Securities for principal and interest,
respectively; and
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Fourth: To the Corporation.
SECTION 5.04 Proceedings by Securityholders.
------------------------------
No holder of any Security shall have any right by virtue of or by availing
of any provision of this Indenture to institute any suit, action or proceeding
in equity or at law upon or under or with respect to this Indenture or for the
appointment of a receiver or trustee, or for any other remedy hereunder, unless
such holder previously shall have given to the Debenture Trustee written notice
of an Event of Default and of the continuance thereof with respect to the
Securities specifying such Event of Default, as hereinbefore provided, and
unless also the holders of not less than 25% in aggregate principal amount of
the Securities then outstanding shall have made written request upon the
Debenture Trustee to institute such action, suit or proceeding in its own name
as Debenture Trustee hereunder and shall have offered to the Debenture Trustee
such reasonable indemnity as it may require against the costs, expenses and
liabilities to be incurred therein or thereby, and the Debenture Trustee for 60
days after its receipt of such notice, request and offer of indemnity shall have
failed to institute any such action, suit or proceeding, it being understood and
intended, and being expressly covenanted by the taker and holder of every
Security with every other taker and holder and the Debenture Trustee, that no
one or more holders of Securities shall have any right in any manner whatever by
virtue of or by availing of any provision of this Indenture to affect, disturb
or prejudice the rights of any other holder of Securities, or to obtain or seek
to obtain priority over or preference to any other such holder, or to enforce
any right under this Indenture, except in the manner herein provided and for the
equal, ratable and common benefit of all holders of Securities.
Notwithstanding any other provisions in this Indenture, however, the right
of any holder of any Security to receive payment of the principal of and
interest on (including Compounded Interest and Additional Sums, if any) on such
Security, on or after the same shall have become due and payable, or to
institute suit for the enforcement of any such payment, shall not be impaired or
affected without the consent of such holder, and by accepting a Security
hereunder it is expressly understood, intended and covenanted by the taker and
holder of every Security with every other such taker and holder and the
Debenture Trustee, that no one or more holders of Securities shall have any
right in any manner whatsoever by virtue or by availing of any provision of this
Indenture to affect, disturb or prejudice the rights of the holders of any other
Securities, or to obtain or seek to obtain priority over or preference to any
other such holder, or to enforce any right under this Indenture, except in the
manner herein provided and for the equal, ratable and common benefit of all
holders of Securities. For the protection and enforcement of the provisions of
this Section, each and every Securityholder and the Debenture Trustee shall be
entitled to such relief as can be given either at law or in equity.
The Corporation and the Debenture Trustee acknowledge that pursuant to the
Declaration, the holders of Capital Securities are entitled, in the
circumstances and subject to the limitations set forth therein, to commence a
Direct Action with respect to any Event of Default referred to in clause (a) or
(b) of Section 5.01.
SECTION 5.05 Proceedings by Debenture Trustee.
--------------------------------
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In case an Event of Default occurs with respect to Securities and is
continuing, the Debenture Trustee may in its discretion proceed to protect and
enforce the rights vested in it by this Indenture by such appropriate judicial
proceedings as the Debenture Trustee shall deem most effectual to protect and
enforce any of such rights, either by suit in equity or by action at law or by
proceeding in bankruptcy or otherwise, whether for the specific enforcement of
any covenant or agreement contained in this Indenture or in aid of the exercise
of any power granted in this Indenture, or to enforce any other legal or
equitable right vested in the Debenture Trustee by this Indenture or by law.
SECTION 5.06 Remedies Cumulative and Continuing.
----------------------------------
All powers and remedies given by this Article V to the Debenture Trustee or
to the Securityholders shall, to the extent permitted by law, be deemed
cumulative and not exclusive of any other powers and remedies available to the
Debenture Trustee or the holders of the Securities, by judicial proceedings or
otherwise, to enforce the performance or observance of the covenants and
agreements contained in this Indenture or otherwise established with respect to
the Securities, and no delay or omission of the Debenture Trustee or of any
holder of any of the Securities to exercise any right or power accruing upon any
Event of Default occurring and continuing as aforesaid shall impair any such
right or power, or shall be construed to be a waiver of any such default or an
acquiescence therein; and, subject to the provisions of Section 5.04, every
power and remedy given by this Article V or by law to the Debenture Trustee or
to the Securityholders may be exercised from time to time, and as often as shall
be deemed expedient, by the Debenture Trustee or by the Securityholders.
SECTION 5.07 Direction of Proceedings and Waiver of Defaults by Majority
-----------------------------------------------------------
of Securityholders.
- ------------------
The holders of a majority in aggregate principal amount of the Securities
at the time outstanding shall have the right to direct the time, method, and
place of conducting any proceeding for any remedy available to the Debenture
Trustee, or exercising any trust or power conferred on the Debenture Trustee;
provided, however, that (subject to the provisions of Section 6.01) the
- -------- -------
Debenture Trustee shall have the right to decline to follow any such direction
if the Debenture Trustee shall determine that the action so directed would be
unjustly prejudicial to the holders not taking part in such direction or if the
Debenture Trustee being advised by counsel determines that the action or
proceeding so directed may not lawfully be taken or if the Debenture Trustee in
good faith by one of its Responsible Officers shall determine that the action or
proceedings so directed would involve the Debenture Trustee in personal
liability. Prior to any declaration accelerating the maturity of the
Securities, the holders of a majority in aggregate principal amount of the
Securities at the time outstanding may on behalf of the holders of all of the
Securities waive any past Default or Event of Default and its consequences
except a Default (a) in the payment of principal of or interest on (including
Compounded Interest and Additional Sums, if any) any of the Securities (unless
such default has been cured and a sum sufficient to pay all matured installments
of interest (including Compounded Interest and Additional Sums, if any) and
principal due otherwise than by acceleration has been deposited with the
Debenture Trustee) or (b) in respect of covenants or provisions hereof which
cannot be modified or amended without the consent of the holder of each Security
affected; provided, however, that if the Securities are held by the Property
-------- -------
Trustee, such waiver or modification to such waiver shall not be effective until
the holders of a majority in aggregate
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liquidation amount of Trust Securities shall have consented to such waiver or
modification to such waiver; provided, further, that if the consent of the
-------- -------
holder of each outstanding Security is required, such waiver shall not be
effective until each holder of the Trust Securities shall have consented to such
waiver. Upon any such waiver, the Default covered thereby shall be deemed to be
cured for all purposes of this Indenture and the Corporation, the Debenture
Trustee and the holders of the Securities shall be restored to their former
positions and rights hereunder, respectively; but no such waiver shall extend to
any subsequent or other Default or impair any right consequent thereon. Whenever
any Default or Event of Default hereunder shall have been waived as permitted by
this Section 5.07, said Default or Event of Default shall for all purposes of
the Securities and this Indenture be deemed to have been cured and to be not
continuing.
SECTION 5.08 Notice of Defaults.
------------------
(a) The Debenture Trustee shall, within 90 days after the occurrence of a
Default with respect to the Securities actually known to a Responsible Officer
of the Debenture Trustee, mail to all Securityholders, as the names and
addresses of such holders appear upon the Security Register, notice of all such
Defaults, unless such Default shall have been cured before the giving of such
notice (the term "Default" for the purpose of this Section 5.08 being hereby
defined to be any of the events specified in clauses (a), (b), (c), (d) and (e)
of Section 5.01, not including periods of grace, if any, provided for therein,
and irrespective of the giving of written notice specified in clause (c) of
Section 5.01); provided, however, that, except in the case of Default in the
-------- -------
payment of the principal of or interest (including Compounded Interest or
Additional Sums, if any) on any of the Securities, the Debenture Trustee shall
be protected in withholding such notice if and so long as the board of
directors, the executive committee, or a trust committee of directors and/or
Responsible Officers of the Debenture Trustee in good faith determines that the
withholding of such notice is in the interests of the Securityholders; provided,
--------
further, that in the case of any Default of the character specified in Section
- -------
5.01(c), no such notice to Securityholders shall be given until at least 60 days
after the occurrence thereof, but shall be given within 90 days after such
occurrence.
(b) Within five Business Days of a Responsible Officer of the Debenture
Trustee receiving actual knowledge of an Event of Default, the Debenture Trustee
shall transmit notice of such Event of Default to all Securityholders as their
names and addresses appear on the Security Register, unless such Event of
Default shall have been cured or waived.
SECTION 5.09 Undertaking to Pay Costs.
------------------------
All parties to this Indenture agree, and each holder of any Security by its
acceptance thereof shall be deemed to have agreed, that any court may in its
discretion require, in any suit for the enforcement of any right or remedy under
this Indenture, or in any suit against the Debenture Trustee for any action
taken or omitted by it as Debenture Trustee, the filing by any party litigant in
such suit of an undertaking to pay the costs of such suit, and that such court
may in its discretion assess reasonable costs, including reasonable attorneys'
fees and expenses, against any party litigant in such suit, having due regard to
the merits and good faith of the claims or defenses made by such party litigant;
but the provisions of this Section 5.09 shall not apply to any suit instituted
by the Debenture Trustee, to any suit instituted by any Securityholder, or group
of Securityholders, holding in the aggregate more than 10% in aggregate
principal amount of the Securities outstanding, or to any suit
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instituted by any Securityholder for the enforcement of the payment of the
principal of or interest (including Compounded Interest and Additional Sums, if
any) on any Security against the Corporation on or after the same shall have
become due and payable.
ARTICLE VI
CONCERNING THE DEBENTURE TRUSTEE
SECTION 6.01 Duties and Responsibilities of Debenture Trustee.
------------------------------------------------
With respect to the holders of the Securities issued hereunder, the
Debenture Trustee, prior to the occurrence of an Event of Default (which, other
than in the case of Sections 5.01(a) and 5.01(b) hereof, is actually known to a
Responsible Officer of the Debenture Trustee) and after the curing or waiving of
all such Events of Default which may have occurred, undertakes to perform such
duties and only such duties as are specifically set forth in this Indenture. In
case an Event of Default (which, other than in the case of Sections 5.01(a) and
5.01(b) hereof, is actually known to a Responsible Officer of the Debenture
Trustee) has occurred (which has not been cured or waived), the Debenture
Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in their exercise as a
prudent person would exercise or use under the circumstances in the conduct of
his or her own affairs.
No provision of this Indenture shall be construed to relieve the Debenture
Trustee from liability for its own negligent action, its own negligent failure
to act or its own willful misconduct, except that:
(a) prior to the occurrence of an Event of Default (which, other than in
the case of Sections 5.01(a) and 5.01(b) hereof, is actually known to
a Responsible Officer of the Debenture Trustee) and after the curing
or waiving of all such Events of Default which may have occurred,
(1) the duties and obligations of the Debenture Trustee shall be
determined solely by the express provisions of this Indenture,
and the Debenture Trustee shall not be liable except for the
performance of such duties and obligations as are specifically
set forth in this Indenture, and no implied covenants or
obligations shall be read into this Indenture against the
Debenture Trustee; and
(2) in the absence of bad faith on the part of the Debenture Trustee,
the Debenture Trustee may conclusively rely, as to the truth of
the statements and the correctness of the opinions expressed
therein, upon any certificates or opinions furnished to the
Debenture Trustee and conforming to the requirements of this
Indenture; but, in the case of any such certificates or opinions
which by any provision hereof are specifically required to be
furnished to the Debenture Trustee, the Debenture Trustee shall
be under a duty to examine the same to determine whether or not
they conform to the requirements of this Indenture;
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(b) the Debenture Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer or Responsible Officers,
unless it shall be proved that the Debenture Trustee was negligent in
ascertaining the pertinent facts; and
(c) the Debenture Trustee shall not be liable with respect to any action
taken or omitted to be taken by it in good faith in accordance with
the direction of the Securityholders pursuant to Section 5.07,
relating to the time, method and place of conducting any proceeding
for any remedy available to the Debenture Trustee, or exercising any
trust or power conferred upon the Debenture Trustee, under this
Indenture.
None of the provisions contained in this Indenture shall require the
Debenture Trustee to expend or risk its own funds or otherwise incur personal
financial liability in the performance of any of its duties or in the exercise
of any of its rights or powers, if it reasonably believes that the repayment of
such funds or liability is not reasonably assured to it under the terms of this
Indenture or adequate indemnity against such risk is not reasonably assured to
it.
SECTION 6.02 Reliance on Documents, Opinions, etc.
------------------------------------
Except as otherwise provided in Section 6.01:
(a) the Debenture Trustee may conclusively rely and shall be fully
protected in acting or refraining from acting upon any resolution,
certificate, statement, instrument, opinion, report, notice, request,
consent, order, bond, note, debenture or other paper or document
believed by it to be genuine and to have been signed or presented by
the proper party or parties;
(b) any request, direction, order or demand of the Corporation mentioned
herein may be sufficiently evidenced by an Officers' Certificate
(unless other evidence in respect thereof be herein specifically
prescribed); and any Board Resolution may be evidenced to the
Debenture Trustee by a copy thereof certified by the Secretary or an
Assistant Secretary of the Corporation;
(c) the Debenture Trustee may consult with counsel of its selection and
any advice or Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken or
suffered or omitted by it hereunder in good faith and in accordance
with such advice or Opinion of Counsel;
(d) the Debenture Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Indenture at the request,
order or direction of any of the Securityholders, pursuant to the
provisions of this Indenture, unless such Securityholders shall have
offered to the Debenture Trustee reasonable and sufficient security or
indemnity against the costs, expenses and liabilities which may be
incurred therein or thereby;
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(e) the Debenture Trustee shall not be liable for any action taken or
omitted by it in good faith and believed by it to be authorized or
within the discretion or rights or powers conferred upon it by this
Indenture; nothing contained herein shall, however, relieve the
Debenture Trustee of the obligation, upon the occurrence of an Event
of Default (which, other than in the case of Sections 5.01(a) and
5.01(b) hereof, is actually known to a Responsible Officer of the
Debenture Trustee) (that has not been cured or waived), to exercise
such of the rights and powers vested in it by this Indenture, and to
use the same degree of care and skill in their exercise as a prudent
person would exercise or use under the circumstances in the conduct of
his or her own affairs;
(f) the Debenture Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, consent,
order, approval, bond, debenture, coupon or other paper or document,
unless requested in writing to do so by the holders of a majority in
aggregate principal amount of the outstanding Securities; provided,
--------
however, that if the payment within a reasonable time to the Debenture
-------
Trustee of the costs, expenses or liabilities likely to be incurred by
it in the making of such investigation is, in the opinion of the
Debenture Trustee, not reasonably assured to the Debenture Trustee by
the security afforded to it by the terms of this Indenture, the
Debenture Trustee may require reasonable indemnity against such
expense or liability as a condition to so proceeding;
(g) the Debenture Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or
through agents (including any Authenticating Agent) or attorneys, and
the Debenture Trustee shall not be responsible for any misconduct or
negligence on the part of any such agent or attorney appointed by it
with due care;
(h) the Debenture Trustee shall not be charged with knowledge of any
Default or Event of Default unless (1) such Default or Event of
Default falls within Section 5.01(a) (other than a default with
respect to the payment of Compounded Interest or Additional Sums) or
Section 5.01(b) of the Indenture, (2) a Responsible Officer shall have
actual knowledge of such Default or Event of Default or (3) written
notice of such Default or Event of Default shall have been given to
the Debenture Trustee by the Corporation or any other obligor on the
Securities or by any holder of the Securities; and
(i) the Debenture Trustee shall not be liable for any action taken,
suffered or omitted by it in good faith, without negligence or willful
misconduct and believed by it to be authorized or within the
discretion or rights or powers conferred upon it by this Indenture.
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SECTION 6.03 No Responsibility for Recitals, etc.
-----------------------------------
The recitals contained herein and in the Securities (except in the
certificate of authentication of the Debenture Trustee or the Authenticating
Agent) shall be taken as the statements of the Corporation, and the Debenture
Trustee and the Authenticating Agent assume no responsibility for the
correctness of the same. The Debenture Trustee and the Authenticating Agent
make no representations as to the validity or sufficiency of this Indenture or
of the Securities. The Debenture Trustee and the Authenticating Agent shall not
be accountable for the use or application by the Corporation of any Securities
or the proceeds of any Securities authenticated and delivered by the Debenture
Trustee or the Authenticating Agent in conformity with the provisions of this
Indenture.
SECTION 6.04 Debenture Trustee, Authenticating Agent, Paying Agents,
-------------------------------------------------------
Transfer Agents and Registrar May Own Securities.
- ------------------------------------------------
The Debenture Trustee or any Authenticating Agent or any paying agent or
any transfer agent or any security registrar for the Securities, in its
individual or any other capacity, may become the owner or pledgee of Securities
with the same rights it would have if it were not Debenture Trustee,
Authenticating Agent, paying agent, transfer agent or security registrar for the
Securities.
SECTION 6.05 Moneys to be Held in Trust.
--------------------------
Subject to the provisions of Section 11.04, all moneys received by the
Debenture Trustee or any paying agent shall, until used or applied as herein
provided, be held in trust for the purpose for which they were received, but
need not be segregated from other funds except to the extent required by law.
The Debenture Trustee and any paying agent shall be under no liability for
interest on any money received by it hereunder except as otherwise agreed in
writing with the Corporation. So long as no Event of Default shall have
occurred and be continuing, all interest allowed on any such moneys shall be
paid from time to time upon the written order of the Corporation, signed by an
Officer thereof.
SECTION 6.06 Compensation and Expenses of Debenture Trustee.
----------------------------------------------
The Corporation, as issuer of Securities under this Indenture, covenants
and agrees to pay to the Debenture Trustee from time to time, and the Debenture
Trustee shall be entitled to, such compensation as shall be agreed to in writing
between the Corporation and the Debenture Trustee (which shall not be limited by
any provision of law in regard to the compensation of a trustee of an express
trust), and the Corporation will pay or reimburse the Debenture Trustee upon its
request for all reasonable expenses, disbursements and advances incurred or made
by the Debenture Trustee in accordance with any of the provisions of this
Indenture (including the reasonable compensation and the expenses and
disbursements of its counsel and of all persons not regularly in its employ),
except any such expense, disbursement or advance as may arise from its
negligence or bad faith. The Corporation also covenants to indemnify each of
the Debenture Trustee (including in its individual capacity) and any predecessor
Debenture Trustee (and its officers, agents, directors and employees) for, and
to hold it harmless against, any and all loss, damage, claim, liability or
expense including taxes (other than taxes based on the income of the Debenture
Trustee) incurred without negligence or bad faith on the part of the Debenture
Trustee and arising out of or in connection with the
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acceptance or administration of this trust, including the costs and expenses of
defending itself against any claim of liability. The obligations of the
Corporation under this Section 6.06 to compensate and indemnify the Debenture
Trustee and to pay or reimburse the Debenture Trustee for expenses,
disbursements and advances shall constitute additional indebtedness hereunder.
Such additional indebtedness shall be secured by a lien prior to that of the
Securities upon all property and funds held or collected by the Debenture
Trustee as such, except funds held in trust for the benefit of the holders of
particular Securities.
When the Debenture Trustee incurs expenses or renders services in
connection with an Event of Default specified in Section 5.01(d) or Section
5.01(e), the expenses (including the reasonable charges and expenses of its
counsel) and the compensation for its services are intended to constitute
expenses of administration under any applicable federal or state bankruptcy,
insolvency or other similar law.
The provisions of this Section shall survive the resignation or removal of
the Debenture Trustee and the defeasance or other termination of this Indenture.
SECTION 6.07 Officers' Certificate as Evidence.
---------------------------------
Except as otherwise provided in Sections 6.01 and 6.02, whenever in the
administration of the provisions of this Indenture the Debenture Trustee shall
deem it necessary or desirable that a matter be proved or established prior to
taking or omitting any action hereunder, such matter (unless other evidence in
respect thereof is herein specifically prescribed) may, in the absence of
negligence or bad faith on the part of the Debenture Trustee, be deemed to be
conclusively proved and established by an Officers' Certificate delivered to the
Debenture Trustee, and such Officers' Certificate, in the absence of negligence
or bad faith on the part of the Debenture Trustee, shall be full warrant to the
Debenture Trustee for any action taken or omitted by it under the provisions of
this Indenture upon the faith thereof.
SECTION 6.08 Conflicting Interest of Debenture Trustee.
-----------------------------------------
If the Debenture Trustee has or shall acquire any "conflicting interest"
within the meaning of Section 310(b) of the Trust Indenture Act, the Debenture
Trustee and the Corporation shall in all respects comply with the provisions of
Section 310(b) of the Trust Indenture Act.
SECTION 6.09 Eligibility of Debenture Trustee.
--------------------------------
The Debenture Trustee hereunder shall at all times be a corporation
organized and doing business under the laws of the United States of America or
any state or territory thereof or of the District of Columbia, or a corporation
or other Person permitted to act as trustee by the Commission authorized under
such laws to exercise corporate trust powers, having a combined capital and
surplus of at least fifty million U.S. dollars ($50,000,000) and subject to
supervision or examination by federal, state, territorial, or District of
Columbia authority. If such corporation publishes reports of condition at least
annually, pursuant to law or to the requirements of the aforesaid supervising or
examining authority, then for the purposes of this Section 6.09 the combined
capital and surplus of
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such corporation shall be deemed to be its combined capital and surplus as set
forth in its most recent report of condition so published.
The Corporation may not, nor may any Person directly or indirectly
controlling, controlled by, or under common control with the Corporation, serve
as Debenture Trustee.
In case at any time the Debenture Trustee shall cease to be eligible in
accordance with the provisions of this Section 6.09, the Debenture Trustee shall
resign immediately in the manner and with the effect specified in Section 6.10.
SECTION 6.10 Resignation or Removal of Debenture Trustee.
-------------------------------------------
(a) The Debenture Trustee, or any trustee or trustees hereafter appointed,
may at any time resign by giving written notice of such resignation to the
Corporation and by mailing notice thereof to the holders of the Securities at
their addresses as they shall appear on the Security Register. Upon receiving
such notice of resignation, the Corporation shall promptly appoint a successor
trustee or trustees by written instrument, in duplicate, one copy of which
instrument shall be delivered to the resigning Debenture Trustee and one copy to
the successor trustee. If no successor trustee shall have been so appointed and
have accepted appointment within 60 days after the mailing of such notice of
resignation to the affected Securityholders, the resigning Debenture Trustee may
petition any court of competent jurisdiction for the appointment of a successor
trustee, or any Securityholder who has been a bona fide holder of a Security for
at least six months may, subject to the provisions of Section 5.09, on behalf of
himself and all others similarly situated, petition any such court for the
appointment of a successor trustee. Such court may thereupon, after such
notice, if any, as it may deem proper and prescribe, appoint a successor
trustee.
(b) In case at any time any of the following shall occur:
(1) the Debenture Trustee shall fail to comply with the provisions of
Section 6.08 after written request therefor by the Corporation or
by any Securityholder who has been a bona fide holder of a
Security or Securities for at least six months, or
(2) the Debenture Trustee shall cease to be eligible in accordance
with the provisions of Section 6.09 and shall fail to resign
after written request therefor by the Corporation or by any such
Securityholder, or
(3) the Debenture Trustee shall become incapable of acting, or shall
be adjudged a bankrupt or insolvent, or a receiver of the
Debenture Trustee or of its property shall be appointed, or any
public officer shall take charge or control of the Debenture
Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation,
then, in any such case, the Corporation may remove the Debenture Trustee and
appoint a successor trustee by written instrument, in duplicate, one copy of
which instrument shall be delivered to the Debenture Trustee so removed and one
copy to the successor trustee, or, subject to the provisions
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of Section 5.09, any Securityholder who has been a bona fide holder of a
Security for at least six months may, on behalf of himself and all others
similarly situated, petition any court of competent jurisdiction for the removal
of the Debenture Trustee and the appointment of a successor trustee. Such court
may thereupon, after such notice, if any, as it may deem proper and prescribe,
remove the Debenture Trustee and appoint a successor trustee.
(c) The holders of a majority in aggregate principal amount of the
Securities at the time outstanding may at any time remove the Debenture Trustee
and nominate a successor trustee, which shall be deemed appointed as successor
trustee unless within 10 days after written notification of such nomination the
Corporation objects thereto, or if no successor trustee shall have been so
appointed and shall have accepted appointment within 30 days after such removal,
in which case the Debenture Trustee so removed or any Securityholder, upon the
terms and conditions and otherwise as in subsection (a) of this Section 6.10
provided, may petition any court of competent jurisdiction for an appointment of
a successor trustee.
(d) Any resignation or removal of the Debenture Trustee and appointment of
a successor trustee pursuant to any of the provisions of this Section 6.10 shall
become effective upon acceptance of appointment by the successor trustee as
provided in Section 6.11.
(e) The Corporation shall pay the Debenture Trustee all amounts owed to
such Debenture Trustee pursuant to this Indenture upon the resignation or
removal of the Debenture Trustee.
SECTION 6.11 Acceptance by Successor Debenture Trustee.
-----------------------------------------
Any successor trustee appointed as provided in Section 6.10 shall execute,
acknowledge and deliver to the Corporation and to its predecessor trustee an
instrument accepting such appointment hereunder, and thereupon the resignation
or removal of the retiring trustee shall become effective and such successor
trustee, without any further act, deed or conveyance, shall become vested with
all the rights, powers, duties and obligations of its predecessor hereunder,
with like effect as if originally named as trustee herein; but, nevertheless, on
the written request of the Corporation or of the successor trustee, the trustee
ceasing to act shall, upon payment of all amounts then due it pursuant to the
provisions of Section 6.06, execute and deliver an instrument transferring to
such successor trustee all the rights and powers of the trustee so ceasing to
act and shall duly assign, transfer and deliver to such successor trustee all
property and money held by such retiring trustee thereunder. Upon request of
any such successor trustee, the Corporation shall execute any and all
instruments in writing for more fully and certainly vesting in and confirming to
such successor trustee all such rights and powers. Any trustee ceasing to act
shall, nevertheless, retain a lien upon all property or funds held or collected
by such trustee to secure any amounts then due it pursuant to the provisions of
Section 6.06.
No successor trustee shall accept appointment as provided in this Section
6.11 unless at the time of such acceptance such successor trustee shall be
qualified under the provisions of Section 6.08 and eligible under the provisions
of Section 6.09.
Upon acceptance of appointment by a successor trustee as provided in this
Section 6.11, the Corporation shall mail notice of the succession of such
trustee hereunder to the holders of Securities
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at their addresses as they shall appear on the Security Register. If the
Corporation fails to mail such notice within 10 days after the acceptance of
appointment by the successor trustee, the successor trustee shall cause such
notice to be mailed at the expense of the Corporation.
SECTION 6.12 Succession by Merger, etc.
-------------------------
Any corporation into which the Debenture Trustee may be merged or converted
or with which it may be consolidated, or any corporation resulting from any
merger, conversion or consolidation to which the Debenture Trustee shall be a
party, or any corporation succeeding to all or substantially all of the
corporate trust business of the Debenture Trustee, shall be the successor of the
Debenture Trustee hereunder without the execution or filing of any paper or any
further act on the part of any of the parties hereto.
In case any Securities shall have been authenticated but not delivered at
the time such successor to the Debenture Trustee shall succeed to the trusts
created by this Indenture, any such successor to the Debenture Trustee may adopt
the certificate of authentication of any predecessor trustee, and deliver such
Securities so authenticated; and in case at that time any of the Securities
shall not have been authenticated, any successor to the Debenture Trustee may
authenticate such Securities either in the name of any predecessor hereunder or
in the name of the successor trustee; and in all such cases such certificates
shall have the full force which the Securities or this Indenture elsewhere
provides that the certificate of the Debenture Trustee shall have; provided,
--------
however, that the right to adopt the certificate of authentication of any
- -------
predecessor Debenture Trustee or authenticate Securities in the name of any
predecessor Debenture Trustee shall apply only to its successor or successors by
merger, conversion or consolidation.
SECTION 6.13 Limitation on Rights of Debenture Trustee as a Creditor.
-------------------------------------------------------
The Debenture Trustee shall comply with Section 311(a) of the Trust
Indenture Act, excluding any creditor relationship described in Section 311(b)
of the Trust Indenture Act. A Debenture Trustee who has resigned or been
removed shall be subject to Section 311(a) of the Trust Indenture Act to the
extent included therein.
SECTION 6.14 Authenticating Agents.
---------------------
There may be one or more Authenticating Agents appointed by the Debenture
Trustee upon the request of the Corporation with power to act on its behalf and
subject to its direction in the authentication and delivery of Securities issued
upon exchange or transfer thereof as fully to all intents and purposes as though
any such Authenticating Agent had been expressly authorized to authenticate and
deliver Securities; provided, however, that the Debenture Trustee shall have no
-------- -------
liability to the Corporation for any acts or omissions of the Authenticating
Agent with respect to the authentication and delivery of Securities. Any such
Authenticating Agent shall at all times be a corporation organized and doing
business under the laws of the United States or of any state or territory
thereof or of the District of Columbia authorized under such laws to act as
Authenticating Agent, having a combined capital and surplus of at least
$5,000,000 and being subject to supervision or examination by federal, state,
territorial or District of Columbia authority. If such corporation publishes
reports of condition at least annually pursuant to law or the requirements of
such authority,
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then for the purposes of this Section 6.14 the combined capital and surplus of
such corporation shall be deemed to be its combined capital and surplus as set
forth in its most recent report of condition so published. If at any time an
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, it shall resign immediately in the manner and with
the effect herein specified in this Section.
Any corporation into which any Authenticating Agent may be merged or with
which it may be consolidated, or any corporation resulting from any merger or
consolidation to which any Authenticating Agent shall be a party, or any
corporation succeeding to the corporate trust business of any Authenticating
Agent, shall be the successor of such Authenticating Agent hereunder, if such
successor corporation is otherwise eligible under this Section 6.14 without the
execution or filing of any paper or any further act on the part of the parties
hereto or such Authenticating Agent.
Any Authenticating Agent may at any time resign by giving written notice of
resignation to the Debenture Trustee and to the Corporation. The Debenture
Trustee may at any time terminate the agency of any Authenticating Agent by
giving written notice of termination to such Authenticating Agent and to the
Corporation. Upon receiving such a notice of resignation or upon such a
termination, or in case at any time any Authenticating Agent shall cease to be
eligible under this Section 6.14, the Debenture Trustee may, and upon the
request of the Corporation shall, promptly appoint a successor Authenticating
Agent eligible under this Section 6.14, shall give written notice of such
appointment to the Corporation and shall mail notice of such appointment to all
Securityholders as the names and addresses of such holders appear on the
Security Register. Any successor Authenticating Agent upon acceptance of its
appointment hereunder shall become vested with all rights, powers, duties and
responsibilities of its predecessor hereunder, with like effect as if originally
named as Authenticating Agent herein.
The Corporation, as issuer of the Securities, agrees to pay to any
Authenticating Agent from time to time reasonable compensation for its services.
Any Authenticating Agent shall have no responsibility or liability for any
action taken by it as such in accordance with the directions of the Debenture
Trustee.
ARTICLE VII
CONCERNING THE SECURITYHOLDERS
SECTION 7.01 Action by Securityholders.
-------------------------
Whenever in this Indenture it is provided that the holders of a specified
percentage in aggregate principal amount of the Securities may take any action
(including the making of any demand or request, the giving of any notice,
consent or waiver or the taking of any other action), the fact that at the time
of taking any such action the holders of such specified percentage have joined
therein may be evidenced (a) by any instrument (including by way of electronic
transmission) or any number of instruments of similar tenor executed by such
Securityholders in person or by agent or proxy appointed in writing, or (b) by
the record of such holders of Securities voting in favor thereof at any meeting
of such Securityholders duly called and held in accordance with the provisions
of
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Article VIII, or (c) by a combination of such instrument or instruments and
any such record of such a meeting of such Securityholders.
If the Corporation shall solicit from the Securityholders any request,
demand, authorization, direction, notice, consent, waiver or other action, the
Corporation may, at its option, as evidenced by an Officers' Certificate, fix in
advance a record date for the determination of Securityholders entitled to give
such request, demand, authorization, direction, notice, consent, waiver or other
action, but the Corporation shall have no obligation to do so. If such a record
date is fixed, such request, demand, authorization, direction, notice, consent,
waiver or other action may be given before or after the record date, but only
the Securityholders of record at the close of business on the record date shall
be deemed to be Securityholders for the purposes of determining whether
Securityholders of the requisite proportion of outstanding Securities have
authorized or agreed or consented to such request, demand, authorization,
direction, notice, consent, waiver or other action, and for that purpose the
outstanding Securities shall be computed as of the record date; provided,
--------
however, that no such authorization, agreement or consent by such
- -------
Securityholders on the record date shall be deemed effective unless it shall
become effective pursuant to the provisions of this Indenture not later than six
months after the record date.
SECTION 7.02 Proof of Execution by Securityholders.
-------------------------------------
Subject to the provisions of Sections 6.01, 6.02 and 8.05, proof of the
execution of any instrument by a Securityholder or his agent or proxy shall be
sufficient if made in accordance with such reasonable rules and regulations as
may be prescribed by the Debenture Trustee or in such manner as shall be
satisfactory to the Debenture Trustee. The ownership of Securities shall be
proved by the Security Register or by a certificate of the security registrar
for the Securities. The Debenture Trustee may require such additional proof of
any matter referred to in this Section as it shall deem necessary.
The record of any Securityholders' meeting shall be proved in the manner
provided in Section 8.06.
SECTION 7.03 Who Are Deemed Absolute Owners.
------------------------------
Prior to due presentment for registration of transfer of any Security, the
Corporation, the Debenture Trustee, any Authenticating Agent, any paying agent,
any transfer agent and any security registrar for the Securities may deem the
person in whose name such Security shall be registered upon the Security
Register to be, and may treat him as, the absolute owner of such Security
(whether or not such Security shall be overdue) for the purpose of receiving
payment of or on account of the principal of and (subject to Section 2.05)
interest on such Security and for all other purposes; and neither the
Corporation nor the Debenture Trustee nor any Authenticating Agent nor any
paying agent nor any transfer agent nor any security registrar for the
Securities shall be affected by any notice to the contrary. All such payments
so made to any holder for the time being or upon his order shall be valid and,
to the extent of the sum or sums so paid, effectual to satisfy and discharge the
liability for moneys payable upon any such Security.
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SECTION 7.04 Securities Owned by Corporation Deemed Not Outstanding.
------------------------------------------------------
In determining whether the holders of the requisite aggregate principal
amount of Securities have concurred in any direction, consent or waiver under
this Indenture, Securities that are owned by the Corporation or any other
obligor on the Securities or by any Person directly or indirectly controlling or
controlled by or under direct or indirect common control with the Corporation or
any other obligor on the Securities shall be disregarded and deemed not to be
outstanding for the purpose of any such determination; provided, however, that
-------- -------
for the purposes of determining whether the Debenture Trustee shall be protected
in relying on any such direction, consent or waiver, only Securities which a
Responsible Officer of the Debenture Trustee actually knows are so owned shall
be so disregarded. Securities so owned which have been pledged in good faith
may be regarded as outstanding for the purposes of this Section 7.04 if the
pledgee shall establish to the satisfaction of the Debenture Trustee the
pledgee's right to vote such Securities and that the pledgee is not the
Corporation or any such other obligor or Person directly or indirectly
controlling or controlled by or under direct or indirect common control with the
Corporation or any such other obligor. In the case of a dispute as to such
right, any decision by the Debenture Trustee taken upon the advice of counsel
shall be full protection to the Debenture Trustee.
SECTION 7.05 Revocation of Consents; Future Holders Bound.
--------------------------------------------
At any time prior to (but not after) the evidencing to the Debenture
Trustee, as provided in Section 7.01, of the taking of any action by the holders
of the percentage in aggregate principal amount of the Securities specified in
this Indenture in connection with such action, any holder of a Security (or any
Security issued in whole or in part in exchange or substitution therefor),
subject to Section 7.01, the serial number of which is shown by the evidence to
be included in the group of Securities the holders of which have consented to
such action, may, by filing written notice with the Debenture Trustee at its
principal office and upon proof of holding as provided in Section 7.02, revoke
such action so far as concerns such Security (or so far as concerns the
principal amount represented by any exchanged or substituted Security). Except
as aforesaid, any such action taken by the holder of any Security shall be
conclusive and binding upon such holder and upon all future holders and owners
of such Security, and of any Security issued in exchange or substitution
therefor, irrespective of whether or not any notation in regard thereto is made
upon such Security or any Security issued in exchange or substitution therefor.
ARTICLE VII
MEETINGS OF SECURITYHOLDERS
SECTION 8.01 Purposes of Meetings.
--------------------
A meeting of Securityholders may be called at any time and from time to
time pursuant to the provisions of this Article VIII for any of the following
purposes:
(a) to give any notice to the Corporation or to the Debenture Trustee, or
to give any directions to the Debenture Trustee, or to consent to the
waiving of any Default
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hereunder and its consequences, or to take any other action authorized
to be taken by Securityholders pursuant to any of the provisions of
Article V;
(b) to remove the Debenture Trustee and nominate a successor trustee
pursuant to the provisions of Article VI;
(c) to consent to the execution of an indenture or indentures supplemental
hereto pursuant to the provisions of Section 9.02; or
(d) to take any other action authorized to be taken by or on behalf of the
holders of any specified aggregate principal amount of such Securities
under any other provision of this Indenture or under applicable law.
SECTION 8.02 Call of Meetings by Debenture Trustee.
-------------------------------------
The Debenture Trustee may at any time call a meeting of Securityholders to
take any action specified in Section 8.01, to be held at such time and at such
place in Wilmington, Delaware or Newport New Hampshire, as the Debenture Trustee
shall determine. Notice of every meeting of the Securityholders, setting forth
the time and the place of such meeting and in general terms the action proposed
to be taken at such meeting, shall be mailed to holders of Securities at their
addresses as they shall appear on the Security Register. Such notice shall be
mailed not less than 20 nor more than 180 days prior to the date fixed for the
meeting.
SECTION 8.03 Call of Meetings by Corporation or Securityholders.
--------------------------------------------------
In case at any time the Corporation, pursuant to a resolution of the Board
of Directors, or the holders of at least 10% in aggregate principal amount of
the Securities then outstanding, shall have requested the Debenture Trustee to
call a meeting of Securityholders, by written request setting forth in
reasonable detail the action proposed to be taken at the meeting, and the
Debenture Trustee shall not have mailed the notice of such meeting within 20
days after receipt of such request, then the Corporation or such Securityholders
may determine the time and the place in Wilmington, Delaware or Newport, New
Hampshire for such meeting and may call such meeting to take any action
authorized in Section 8.01, by mailing notice thereof as provided in Section
8.02.
SECTION 8.04 Qualifications for Voting.
-------------------------
To be entitled to vote at any meeting of Securityholders, a Person shall be
(a) a holder of one or more Securities or (b) a Person appointed by an
instrument in writing as proxy by a holder of one or more Securities. The only
Persons who shall be entitled to be present or to speak at any meeting of
Securityholders shall be the Persons entitled to vote at such meeting and their
counsel and any representatives of the Debenture Trustee and its counsel and any
representatives of the Corporation and its counsel.
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SECTION 8.05 Regulations.
-----------
Notwithstanding any other provisions of this Indenture, the Debenture
Trustee may make such reasonable regulations as it may deem advisable for any
meeting of Securityholders, in regard to proof of the holding of Securities and
of the appointment of proxies, and in regard to the appointment and duties of
inspectors of votes, the submission and examination of proxies, certificates and
other evidence of the right to vote, and such other matters concerning the
conduct of the meeting as it shall think fit.
The Debenture Trustee shall, by an instrument in writing, appoint a
temporary chairman of the meeting, unless the meeting shall have been called by
the Corporation or by Securityholders as provided in Section 8.03, in which case
the Corporation or the Securityholders calling the meeting, as the case may be,
shall in like manner appoint a temporary chairman. A permanent chairman and a
permanent secretary of the meeting shall be elected by majority vote of the
meeting.
Subject to the provisions of Section 8.04, at any meeting each holder of
Securities or proxy therefor shall be entitled to one vote for each $10
principal amount of Securities held or represented by him; provided, however,
-------- -------
that no vote shall be cast or counted at any meeting in respect of any Security
challenged as not outstanding and ruled by the chairman of the meeting to be not
outstanding. The chairman of the meeting shall have no right to vote other than
by virtue of Securities held by him or instruments in writing as aforesaid duly
designating him as the person to vote on behalf of other Securityholders. Any
meeting of Securityholders duly called pursuant to the provisions of Section
8.02 or 8.03 may be adjourned from time to time by a majority of those present,
and the meeting may be held as so adjourned without further notice.
SECTION 8.06 Voting.
------
The vote upon any resolution submitted to any meeting of holders of
Securities shall be by written ballots on which shall be subscribed the
signatures of such holders or of their representatives by proxy and the serial
number or numbers of the Securities held or represented by them. The permanent
chairman of the meeting shall appoint two inspectors of votes who shall count
all votes cast at the meeting for or against any resolution and who shall make
and file with the secretary of the meeting their verified written reports in
triplicate of all votes cast at the meeting. A record in duplicate of the
proceedings of each meeting of Securityholders shall be prepared by the
secretary of the meeting and there shall be attached to said record the original
reports of the inspectors of votes on any vote by ballot taken thereat and
affidavits by one or more persons having knowledge of the facts setting forth a
copy of the notice of the meeting and showing that said notice was mailed as
provided in Section 8.02. The record shall show the serial numbers of the
Securities voting in favor of or against any resolution. The record shall be
signed and verified by the affidavits of the permanent chairman and secretary of
the meeting and one of the duplicates shall be delivered to the Corporation and
the other to the Debenture Trustee to be preserved by the Debenture Trustee, the
latter to have attached thereto the ballots voted at the meeting. Any record so
signed and verified shall be conclusive evidence of the matters therein stated.
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ARTICLE IX
AMENDMENTS
SECTION 9.01 Without Consent of Securityholders.
----------------------------------
The Corporation and the Debenture Trustee may from time to time and at any
time amend this Indenture, without the consent of the Securityholders, for one
or more of the following purposes:
(a) to evidence the succession of another Person to the Corporation, or
successive successions, and the assumption by the successor Person of
the covenants, agreements and obligations of the Corporation pursuant
to Article X hereof;
(b) to add to the covenants of the Corporation such further covenants,
restrictions or conditions for the protection of the Securityholders
as the Board of Directors and the Debenture Trustee shall consider to
be for the protection of the Securityholders, and to make the
occurrence, or the occurrence and continuance, of a default in any of
such additional covenants, restrictions or conditions a Default or an
Event of Default permitting the enforcement of all or any of the
remedies provided in this Indenture as herein set forth; provided,
--------
however, that in respect of any such additional covenant, restriction
-------
or condition such amendment may provide for a particular period of
grace after default (which period may be shorter or longer than that
allowed in the case of other defaults) or may provide for an immediate
enforcement upon such default or may limit the remedies available to
the Debenture Trustee upon such default;
(c) to cure any ambiguity or to correct or supplement any provision
contained herein or in any supplemental indenture which may be
defective or inconsistent with any other provision contained herein or
in any supplemental indenture; or to make such other provisions in
regard to matters or questions arising under this Indenture, provided
that any such action shall not materially adversely affect the
interests of the holders of the Securities;
(d) to evidence and provide for the acceptance of appointment hereunder by
a successor trustee with respect to the Securities;
(e) to make provision for transfer procedures, certification, book-entry
provisions, the form of restricted securities legends, if any, to be
placed on Securities, and all other matters required pursuant to
Section 2.06 or otherwise necessary, desirable or appropriate in
connection with the issuance of Securities to holders of Capital
Securities in the event of a distribution of Securities by the Trust
following a Dissolution Event, provided that any such action shall not
materially adversely affect the interests of the holders of the
Securities;
(f) to qualify or maintain qualification of this Indenture under the Trust
Indenture Act; or
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(g) to make any change that does not adversely affect the rights of any
Securityholder in any material respect.
The Debenture Trustee is hereby authorized to join with the Corporation in
the execution of any supplemental indenture to effect such amendment, to make
any further appropriate agreements and stipulations which may be therein
contained and to accept the conveyance, transfer and assignment of any property
thereunder, but the Debenture Trustee shall not be obligated to, but may in its
discretion, enter into any such supplemental indenture which affects the
Debenture Trustee's own rights, duties or immunities under this Indenture or
otherwise.
Any amendment to this Indenture authorized by the provisions of this
Section 9.01 may be executed by the Corporation and the Debenture Trustee
without the consent of the holders of any of the Securities at the time
outstanding, notwithstanding any of the provisions of Section 9.02.
SECTION 9.02 With Consent of Securityholders.
-------------------------------
With the consent (evidenced as provided in Section 7.01) of the holders of
a majority in aggregate principal amount of the Securities at the time
outstanding, the Corporation, when authorized by a Board Resolution, and the
Debenture Trustee may from time to time and at any time amend this Indenture for
the purpose of adding any provisions to or changing in any manner or eliminating
any of the provisions of this Indenture or of modifying in any manner the rights
of the holders of the Securities; provided, however, that no such amendment
-------- -------
shall, without the consent of the holders of each Security then outstanding and
affected thereby (i) change the Maturity Date of any Security, or reduce the
rate or extend the time of payment of interest thereon (except as contemplated
by Article XVI), or reduce the principal amount thereof, or change any
prepayment provisions, or make the principal thereof or any interest thereon
payable in any coin or currency other than U.S. dollars, or impair or affect the
right of any Securityholder to institute suit for payment thereof, or (ii)
reduce the aforesaid percentage of Securities, the holders of which are required
to consent to any such amendment to the Indenture; provided, however, that if
-------- -------
the Securities are held by the Trust, such amendment shall not be effective
until the holders of a majority in liquidation amount of Trust Securities shall
have consented to such amendment; provided, further, that if the consent of the
-------- -------
holder of each outstanding Security is required, such amendment shall not be
effective until each holder of the Trust Securities shall have consented to such
amendment.
Upon the request of the Corporation accompanied by a copy of a resolution
of the Board of Directors certified by its Secretary or Assistant Secretary
authorizing the execution of any supplemental indenture effecting such
amendment, and upon the filing with the Debenture Trustee of evidence of the
consent of Securityholders as aforesaid, the Debenture Trustee shall join with
the Corporation in the execution of such supplemental indenture unless such
supplemental indenture affects the Debenture Trustee's own rights, duties or
immunities under this Indenture or otherwise, in which case the Debenture
Trustee may in its discretion, but shall not be obligated to, enter into such
supplemental indenture.
Promptly after the execution by the Corporation and the Debenture Trustee
of any supplemental indenture pursuant to the provisions of this Section, the
Debenture Trustee shall transmit by mail, first class postage prepaid, a notice,
prepared by the Corporation, setting forth in
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general terms the substance of such supplemental indenture, to the
Securityholders as their names and addresses appear upon the Security Register.
Any failure of the Debenture Trustee to mail such notice, or any defect therein,
shall not, however, in any way impair or affect the validity of any such
supplemental indenture.
It shall not be necessary for the consent of the Securityholders under this
Section 9.02 to approve the particular form of any proposed supplemental
indenture, but it shall be sufficient if such consent shall approve the
substance thereof.
SECTION 9.03 Compliance with Trust Indenture Act; Effect of Supplemental
-----------------------------------------------------------
Indentures.
- ----------
Any supplemental indenture executed pursuant to the provisions of this
Article IX shall comply with the Trust Indenture Act. Upon the execution of any
supplemental indenture pursuant to the provisions of this Article IX, this
Indenture shall be and be deemed to be modified and amended in accordance
therewith and the respective rights, limitations of rights, obligations, duties
and immunities under this Indenture of the Debenture Trustee, the Corporation
and the holders of Securities shall thereafter be determined, exercised and
enforced hereunder subject in all respects to such modifications and amendments,
and all the terms and conditions of any such supplemental indenture shall be and
be deemed to be part of the terms and conditions of this Indenture for any and
all purposes.
SECTION 9.04 Notation on Securities.
----------------------
Securities authenticated and delivered after the execution of any
supplemental indenture pursuant to the provisions of this Article IX may bear a
notation in form approved by the Debenture Trustee as to any matter provided for
in such supplemental indenture. If the Corporation or the Debenture Trustee
shall so determine, new Securities so modified as to conform, in the opinion of
the Debenture Trustee and the Board of Directors, to any modification of this
Indenture contained in any such supplemental indenture may be prepared and
executed by the Corporation, authenticated by the Debenture Trustee or the
Authenticating Agent and delivered in exchange for the Securities then
outstanding.
SECTION 9.05 Evidence of Compliance of Supplemental Indenture to be
------------------------------------------------------
Furnished to Debenture Trustee.
- ------------------------------
The Debenture Trustee, subject to the provisions of Sections 6.01 and 6.02,
may receive an Officers' Certificate and an Opinion of Counsel as conclusive
evidence that any supplemental indenture executed pursuant hereto is authorized
by and complies with the requirements of this Article IX and this Indenture.
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ARTICLE X
CONSOLIDATION, MERGER, SALE, CONVEYANCE, TRANSFER AND LEASE
SECTION 10.01 Corporation May Consolidate, etc., on Certain Terms.
---------------------------------------------------
Nothing contained in this Indenture or in any of the Securities shall
prevent any consolidation or merger of the Corporation with or into any other
Person (whether or not affiliated with the Corporation, as the case may be), or
successive consolidations or mergers in which the Corporation or its successor
or successors, as the case may be, shall be a party or parties, or shall prevent
any sale, conveyance, transfer or lease of the property of the Corporation, or
its successor or successors as the case may be, as an entirety, or substantially
as an entirety, to any other Person (whether or not affiliated with the
Corporation, or its successor or successors, as the case may be) authorized to
acquire and operate the same, provided that (a) the Corporation is the surviving
--------
Person, or the Person formed by or surviving any such consolidation or merger
(if other than the Corporation) or to which such sale, conveyance, transfer or
lease of property is made is a Person organized and existing under the laws of
the United States or any State thereof or the District of Columbia, and (b) if
the Corporation is not the surviving Person, upon any such consolidation,
merger, sale, conveyance, transfer or lease, the due and punctual payment of the
principal of and interest on the Securities according to their tenor and the due
and punctual performance and observance of all the covenants and conditions of
this Indenture to be kept or performed by the Corporation shall be expressly
assumed by the surviving Person, by supplemental indenture (which shall conform
to the provisions of the Trust Indenture Act as then in effect) satisfactory in
form to the Debenture Trustee executed and delivered to the Debenture Trustee by
the Person formed by such consolidation, or into which the Corporation shall
have been merged, or by the Person which shall have acquired such property, as
the case may be, and (c) after giving effect to such consolidation, merger,
sale, conveyance, transfer or lease, no Default or Event of Default shall have
occurred and be continuing.
SECTION 10.02 Successor Person to be Substituted for Corporation.
--------------------------------------------------
In case of any such consolidation, merger, sale, conveyance, transfer or
lease, and upon the assumption by the successor corporation, by supplemental
indenture, executed and delivered to the Debenture Trustee and satisfactory in
form to the Debenture Trustee, of the obligation of due and punctual payment of
the principal of and interest on all of the Securities and the due and punctual
performance and observance of all of the covenants and conditions of this
Indenture to be performed or observed by the Corporation, such successor Person
shall succeed to and be substituted for the Corporation, with the same effect as
if it had been named herein as a party hereto, and the Corporation thereupon
shall be relieved of any further liability or obligation hereunder or upon the
Securities. Such successor Person thereupon may cause to be signed, and may
issue either in its own name or in the name of the Corporation, any or all of
the Securities issuable hereunder which theretofore shall not have been signed
by the Corporation and delivered to the Debenture Trustee or the Authenticating
Agent; and, upon the order of such successor Person instead of the Corporation
and subject to all the terms, conditions and limitations in this Indenture
prescribed, the Debenture Trustee or the Authenticating Agent shall authenticate
and deliver any Securities which previously shall have been signed and delivered
by any Officer of the Corporation to the Debenture Trustee or the Authenticating
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Agent for authentication, and any Securities which such successor Person
thereafter shall cause to be signed and delivered to the Debenture Trustee or
the Authenticating Agent for that purpose. All the Securities so issued shall in
all respects have the same legal rank and benefit under this Indenture as the
Securities theretofore or thereafter issued in accordance with the terms of this
Indenture as though all of such Securities had been issued at the date of the
execution hereof.
SECTION 10.03 Opinion of Counsel to be Given Debenture Trustee.
------------------------------------------------
The Debenture Trustee, subject to the provisions of Sections 6.01 and 6.02,
may receive an Opinion of Counsel as conclusive evidence that any consolidation,
merger, sale, conveyance, transfer or lease, and any assumption, permitted or
required by the terms of this Article X is authorized by and complies with the
provisions of this Article X and this Indenture.
ARTICLE XI
SATISFACTION AND DISCHARGE OF INDENTURE
SECTION 11.01 Discharge of Indenture.
----------------------
When (a) the Corporation shall deliver to the Debenture Trustee for
cancellation all Securities theretofore authenticated (other than any Securities
which shall have been destroyed, lost or stolen and which shall have been
replaced as provided in Section 2.07) and not theretofore canceled, or (b) all
the Securities not theretofore canceled or delivered to the Debenture Trustee
for cancellation shall have become due and payable, or are by their terms to
become due and payable within one year or are to be called for prepayment within
one year under arrangements satisfactory to the Debenture Trustee for the giving
of notice of prepayment, and the Corporation shall deposit with the Debenture
Trustee, in trust, funds sufficient to pay on the Maturity Date or upon
prepayment all of the Securities (other than any Securities which shall have
been destroyed, lost or stolen and which shall have been replaced as provided in
Section 2.07) not theretofore canceled or delivered to the Debenture Trustee for
cancellation, including principal and interest (including Compounded Interest
and Additional Sums, if any) due or to become due to the Maturity Date or
prepayment date, as the case may be, but excluding, however, the amount of any
moneys for the payment of principal of or interest (including Compounded
Interest and Additional Sums, if any) on the Securities (1) theretofore repaid
to the Corporation in accordance with the provisions of Section 11.04, or (2)
paid to any State or to the District of Columbia pursuant to its unclaimed
property or similar laws, and if, in either case the Corporation shall also pay
or cause to be paid all other sums payable hereunder by the Corporation, then
this Indenture shall cease to be of further effect except for the provisions of
Sections 2.02, 2.06, 2.07, 3.01, 3.02, 3.04, 6.06, 6.10 and 11.04 hereof, which
shall survive until such Securities shall mature and be paid. Thereafter,
Sections 6.06, 6.10 and 11.04 shall survive, and the Debenture Trustee, on
demand of the Corporation accompanied by any Officers' Certificate and an
Opinion of Counsel and at the cost and expense of the Corporation, shall execute
proper instruments acknowledging satisfaction of and discharging this Indenture;
the Corporation, however, hereby agrees to reimburse the Debenture Trustee for
any costs or expenses thereafter reasonably and properly incurred by the
Debenture Trustee in connection with this Indenture or the Securities.
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SECTION 11.02 Deposited Moneys and U.S. Government Obligations to be Held in
--------------------------------------------------------------
Trust by Debenture Trustee.
- --------------------------
Subject to the provisions of Section 11.04, all moneys and U.S. Government
Obligations deposited with the Debenture Trustee pursuant to Sections 11.01 or
11.05 shall be held in trust and applied by it to the payment, either directly
or through any paying agent (including the Corporation if acting as its own
paying agent), to the holders of the particular Securities for the payment of
which such moneys or U.S. Government Obligations have been deposited with the
Debenture Trustee, of all sums due and to become due thereon for principal and
interest.
The Corporation shall pay and indemnify the Debenture Trustee against any
tax, fee or other charge imposed on or assessed against the U.S. Governmental
Obligations deposited pursuant to Section 11.05 or the principal and interest
received in respect thereof other than any such tax, fee or other charge which
by law is for the account of the holders of outstanding Securities.
SECTION 11.03 Reinstatement.
-------------
If the Debenture Trustee is unable to apply any money in accordance with
Section 11.02 by reason of any order or judgment or any court or governmental
authority enjoining, restraining or otherwise prohibiting such application, then
the Corporation's obligations under the Securities of such series shall be
revived and reinstated as though no deposit had occurred pursuant to this
Article XI until such time as the Debenture Trustee is permitted to apply all
such money in accordance with Section 11.02, provided, however, that if the
-------- -------
Corporation makes any payment of principal of or interest on any such Security
following reinstatement of its obligations, the Corporation shall be subrogated
to the rights of the Securityholders of such Securities to receive such payment
from money held by the Debenture Trustee.
SECTION 11.04 Paying Agent to Repay Moneys Held.
---------------------------------
Upon the satisfaction and discharge of this Indenture all moneys then held
by any paying agent of the Securities (other than the Debenture Trustee) shall,
upon written demand of the Corporation, be repaid to it or paid to the Debenture
Trustee, and thereupon such paying agent shall be released from all further
liability with respect to such moneys.
SECTION 11.05 Return of Unclaimed Moneys.
--------------------------
Any moneys deposited with or paid to the Debenture Trustee or any paying
agent for payment of the principal of or interest (including Compounded Interest
and Additional Sums, if any) on Securities and not applied but remaining
unclaimed by the holders of Securities for two years after the date upon which
the principal of or interest (including Compounded Interest and Additional Sums,
if any) on such Securities, as the case may be, shall have become due and
payable, shall be repaid to the Corporation by the Debenture Trustee or such
paying agent; and the holder of any of the Securities shall thereafter look only
to the Corporation for any payment which such holder may be entitled to collect
and all liability of the Debenture Trustee or such paying agent with respect to
such moneys shall thereupon cease.
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SECTION 11.06 Defeasance Upon Deposit of Moneys or U.S. Government
----------------------------------------------------
Obligations.
- -----------
The Corporation shall be deemed to have been Discharged (as defined below)
from its obligations with respect to the Securities on the 91st day after the
applicable conditions set forth below have been satisfied:
(a) the Corporation shall have deposited or caused to be deposited
irrevocably with the Debenture Trustee or the Defeasance Agent (as
defined below) as trust funds in trust, specifically pledged as
security for, and dedicated solely to, the benefit of the holders of
the Securities (i) cash in an amount, or (ii) non-callable U.S.
Government Obligations, without reinvestment thereof, which through
the payment of interest and principal in respect thereof in accordance
with their terms will provide, not later than one day before the due
date of any payment, money in an amount, or (iii) a combination of (i)
and (ii), sufficient, in the opinion (with respect to (ii) and (iii))
of a nationally recognized firm of independent public accountants
expressed in a written certification thereof delivered to the
Debenture Trustee and the Defeasance Agent, if any, to pay and
discharge each installment of principal of and interest on the
outstanding Securities on the dates such installments of principal and
interest are due;
(b) if the Securities are then listed on any national securities exchange,
the Corporation shall have delivered to the Debenture Trustee and the
Defeasance Agent, if any, an Opinion of Counsel to the effect that the
exercise of the option under this Section 11.05 would not cause such
Securities to be delisted from such exchange;
(c) no Default or Event of Default with respect to the Securities shall
have occurred and be continuing on the date of such deposit; and
(d) the Corporation shall have delivered to the Debenture Trustee and the
Defeasance Agent, if any, an Opinion of Counsel to the effect that
holders of the Securities will not recognize income, gain or loss for
United States federal income tax purposes as a result of the exercise
of the option under this Section 11.05 and will be subject to United
States federal income tax on the same amount and in the same manner
and at the same times as would have been the case if such option had
not been exercised.
"Discharged" means that the Corporation shall be deemed to have paid and
discharged the entire indebtedness represented by, and obligations under, the
Securities and to have satisfied all the obligations under this Indenture
relating to the Securities (and the Debenture Trustee, at the expense of the
Corporation, shall execute proper instruments acknowledging the same), except
(1) the rights of holders of Securities to receive, from the trust fund
described in clause (a) above, payment of the principal of and the interest on
the Securities when such payments are due; (2) the Corporation's obligations
with respect to the Securities under Sections 2.06, 2.07, 5.02 and 11.04; and
(3) the rights, powers, trusts, duties and immunities of the Debenture Trustee
hereunder.
"Defeasance Agent" means another financial institution which is eligible to
act as Debenture Trustee hereunder and which assumes all of the obligations of
the Debenture Trustee necessary to
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enable the Debenture Trustee to act hereunder. In the event such a Defeasance
Agent is appointed pursuant to this Section, the following conditions shall
apply:
(1) the Debenture Trustee shall have approval rights over the document
appointing such Defeasance Agent and the document setting forth such
Defeasance Agent's rights and responsibilities; and
(2) the Defeasance Agent shall provide verification to the Debenture
Trustee acknowledging receipt of sufficient money and/or U.S.
Government Obligations to meet the applicable conditions set forth in
this Section 11.05.
ARTICLE XII
IMMUNITY OF INCORPORATORS, STOCKHOLDERS,
OFFICERS AND DIRECTORS
SECTION 12.01 Indenture and Securities Solely Corporate Obligations.
-----------------------------------------------------
No recourse for the payment of the principal of or interest (including
Compounded Interest and Additional Sums, if any) on any Security, or for any
claim based thereon or otherwise in respect thereof, and no recourse under or
upon any obligation, covenant or agreement of the Corporation in this Indenture,
or in any Security, or because of the creation of any indebtedness represented
thereby, shall be had against any incorporator, stockholder, employee, officer
or director, as such, past, present or future, of the Corporation or of any
successor Person to the Corporation, either directly or through the Corporation
or any successor Person to the Corporation, whether by virtue of any
constitution, statute or rule of law, or by the enforcement of any assessment or
penalty or otherwise; it being expressly understood that all such liability is
hereby expressly waived and released as a condition of, and as a consideration
for, the execution of this Indenture and the issuance of the Securities.
ARTICLE XII
MISCELLANEOUS PROVISIONS
SECTION 13.01 Successors.
----------
All of the covenants, stipulations, promises and agreements of the
Corporation contained in this Indenture shall also bind the Corporation's
successors and assigns whether so expressed or not.
SECTION 13.02 Official Acts by Successor Corporation.
--------------------------------------
Any act or proceeding that, by any provision of this Indenture, is
authorized or required to be done or performed by any board, committee or
officer of the Corporation shall and may be done and performed with like force
and effect by the like board, committee or officer of any corporation that shall
at the time be the lawful sole successor of the Corporation.
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SECTION 13.03 Surrender of Corporation Powers.
-------------------------------
The Corporation by instrument in writing executed by authority of 2/3 (two-
thirds) of its Board of Directors and delivered to the Debenture Trustee may
surrender any of the powers reserved to the Corporation hereunder, and thereupon
such power so surrendered shall terminate both as to the Corporation, as the
case may be, and as to any successor Person.
SECTION 13.04 Addresses for Notices, etc.
--------------------------
Any notice or demand which by any provision of this Indenture is required
or permitted to be given or served by the Debenture Trustee or by the holders of
Securities on the Corporation may be given or served by being deposited postage
prepaid by first class mail, registered or certified mail, overnight courier
service or conformed telecopy addressed (until another address is filed by the
Corporation with the Debenture Trustee for the purpose) to New Hampshire Thrift
Bancshares, Inc. 9 Main Street, Newport, New Hampshire, 03773-0029, (603) 863-
5772, Attention: Chief Financial Officer. Any notice, direction, request or
demand by any Securityholder to or upon the Debenture Trustee shall be deemed to
have been sufficiently given or made, for all purposes, if given or made in
writing at the office of Wilmington Trust Company, Rodney Square North, 1100
Market Street, Wilmington, Delaware 19890-0001, Attention: Corporate Trust
Administration (unless another address is provided by the Debenture Trustee to
the Corporation for such purpose). Any notice or communication to a
Securityholder shall be mailed by first class mail to his or her address shown
on the Security Register kept by the security registrar for the Securities.
SECTION 13.05 Governing Law.
-------------
This Indenture and each Security shall be deemed to be a contract made
under the laws of the State of New York, and for all purposes shall be governed
by and construed in accordance with the laws of said State without regard to
conflict of law principles thereof.
SECTION 13.06 Evidence of Compliance with Conditions Precedent.
------------------------------------------------
Upon any application or demand by the Corporation to the Debenture Trustee
to take any action under any of the provisions of this Indenture, the
Corporation shall furnish to the Debenture Trustee an Officers' Certificate
stating that in the opinion of the signers all conditions precedent, if any,
provided for in this Indenture relating to the proposed action have been
complied with and an Opinion of Counsel stating that, in the opinion of such
counsel, all such conditions precedent have been complied with.
Each certificate or opinion provided for in this Indenture and delivered to
the Debenture Trustee with respect to compliance with a condition or covenant
provided for in this Indenture (except certificates delivered pursuant to
Section 3.05) shall include (1) a statement that the Person making such
certificate or opinion has read such covenant or condition; (2) a brief
statement as to the nature and scope of the examination or investigation upon
which the statements or opinions contained in such certificate or opinion are
based; (3) a statement that, in the opinion of such Person, he has made such
examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
complied with; and (4) a statement
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as to whether or not, in the opinion of such person, such condition or covenant
has been complied with.
SECTION 13.07 Business Days.
-------------
In any case where the date of payment of principal of or interest on the
Securities is not a Business Day, the payment of such principal of or interest
on the Securities will not be made on such date but will be made on the next
succeeding Business Day, except if such Business Day is in the next succeeding
calendar year, such payment will be made on the immediately preceding Business
Day, with the same force and effect as if made on the original date of payment,
and no interest shall accrue for the period from and after such date.
SECTION 13.08 Trust Indenture Act to Control.
------------------------------
If and to the extent that any provision of this Indenture limits, qualifies
or conflicts with the duties imposed by Sections 310 to 318, inclusive, of the
Trust Indenture Act, such imposed duties shall control.
SECTION 13.09 Table of Contents, Headings, etc.
--------------------------------
The table of contents and the titles and headings of the articles and
sections of this Indenture have been inserted for convenience of reference only,
are not to be considered a part hereof, and shall in no way modify or restrict
any of the terms or provisions hereof.
SECTION 13.10 Execution in Counterparts.
-------------------------
This Indenture may be executed in any number of counterparts, each of which
shall be an original, but such counterparts shall together constitute but one
and the same instrument.
SECTION 13.11 Separability.
------------
In case any one or more of the provisions contained in this Indenture or in
the Securities shall for any reason be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provisions of this Indenture or of the Securities,
but this Indenture and the Securities shall be construed as if such invalid or
illegal or unenforceable provision had never been contained herein or therein.
SECTION 13.12 Assignment.
----------
The Corporation will have the right at all times to assign any of its
respective rights or obligations under this Indenture to a direct or indirect
wholly owned Subsidiary of the Corporation, provided that, in the event of any
such assignment, the Corporation will remain liable for all such obligations.
Subject to the foregoing, this Indenture is binding upon and inures to the
benefit of the parties thereto and their respective successors and assigns.
This Indenture may not otherwise be assigned by the parties thereto.
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SECTION 13.13 Acknowledgment of Rights.
------------------------
The Corporation acknowledges that, with respect to any Securities held by
the Trust or a trustee of such Trust, if the Property Trustee of such Trust
fails to enforce its rights under this Indenture as the holder of the Securities
held as the assets of the Trust, any holder of Capital Securities may institute
legal proceedings directly against the Corporation to enforce such Property
Trustee's rights under this Indenture without first instituting any legal
proceedings against such Property Trustee or any other person or entity.
Notwithstanding the foregoing, if an Event of Default has occurred and is
continuing and such event is attributable to the failure of the Corporation to
pay principal of or interest on the Securities when due, the Corporation
acknowledges that a holder of Capital Securities may directly institute a
proceeding for enforcement of payment to such holder of the principal of or
interest on the Securities 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 Securities.
ARTICLE XIV
PREPAYMENT OF SECURITIES;
NO SINKING FUND
SECTION 14.01 Special Event Prepayment.
------------------------
If, prior to the Maturity Date, a Special Event has occurred and is
continuing, then notwithstanding Section 14.02(a) but subject to Section
14.02(c), the Corporation shall have the right, at any time within 90 days
following the occurrence of such Special Event, upon (i) not more than 30 days
written notice to the Debenture Trustee and (ii) not less than 30 days nor more
than 60 days' written notice to the Securityholders, to prepay the Securities,
in whole (but not in part), at the Prepayment Price. The Prepayment Price shall
be paid prior to 12:00 noon, New York City time, on the date of such prepayment
or such earlier time as the Corporation determines, provided that the
-------- ----
Corporation shall deposit with the Debenture Trustee an amount sufficient to pay
the Prepayment Price by 10:00 a.m., New York City time, on the date such
Prepayment Price is to be paid.
SECTION 14.02 Optional Prepayment by Corporation.
----------------------------------
(a) Subject to Sections 14.02(b) and (c), the Corporation shall have the
right to prepay the Securities, in whole or in part, at any time on or after the
Initial Optional Redemption Date, upon not less than 30 days nor more than 60
days' written notice at the Prepayment Price.
If the Securities are only partially prepaid pursuant to this Section
14.02, the Securities to be prepaid shall be selected on a pro rata basis not
more than 60 days prior to the date fixed for prepayment from the outstanding
Securities not previously called for prepayment; provided, however, that with
-------- -------
respect to Securityholders that would be required to hold Securities with an
aggregate principal amount of less than $10 but more than an aggregate principal
amount of zero as a result of such pro rata prepayment, the Corporation shall
prepay Securities of each such
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Securityholder so that after such prepayment such Securityholder shall hold
Securities either with an aggregate principal amount of at least $10 or such
Securityholder no longer holds any Securities, and shall use such method
(including, without limitation, by lot) as the Corporation shall deem fair and
appropriate; provided, further, that any such proration may be made on the basis
-------- -------
of the aggregate principal amount of Securities held by each Securityholder and
may be made by making such adjustments as the Corporation deems fair and
appropriate in order that only Securities in denominations of $10 or integral
multiples thereof shall be prepaid. The Prepayment Price shall be paid prior to
12:00 noon, New York City time, on the date of such prepayment or at such
earlier time as the Corporation determines, provided that the Corporation shall
--------
deposit with the Debenture Trustee an amount sufficient to pay the Prepayment
Price by 10:00 a.m., New York City time, on the date such Prepayment Price is to
be paid.
(b) Notwithstanding the first sentence of Section 14.02(a), upon the entry
of an order for dissolution of the Trust by a court of competent jurisdiction,
the Securities thereafter will be subject to optional prepayment, in whole only,
but not in part, on or after the Initial Optional Redemption Date, at the
Optional Prepayment Price and otherwise in accordance with this Article XIV.
(c) Any prepayment of Securities pursuant to Section 14.01 or Section
14.02 shall be subject to the Corporation obtaining any and all required
regulatory approvals.
SECTION 14.03 No Sinking Fund.
---------------
The Securities are not entitled to the benefit of any sinking fund.
SECTION 14.04 Notice of Prepayment; Selection of Securities.
---------------------------------------------
In case the Corporation shall desire to exercise the right to prepay all,
or, as the case may be, any part of the Securities in accordance with their
terms, it shall fix a date for prepayment and shall mail a notice of such
prepayment at least 30 and not more than 60 days prior to the date fixed for
prepayment to the holders of Securities to be so prepaid as a whole or in part
at their last addresses as the same appear on the Security Register. Such
mailing shall be by first class mail. The notice if mailed in the manner herein
provided shall be conclusively presumed to have been duly given, whether or not
the holder receives such notice. In any case, failure to give such notice by
mail or any defect in the notice to the holder of any Security designated for
prepayment as a whole or in part shall not affect the validity of the
proceedings for the prepayment of any other Security.
Each such notice of prepayment shall specify the CUSIP number of the
Securities to be prepaid, the date fixed for prepayment, the Prepayment Price at
which the Securities are to be prepaid (or the method by which such Prepayment
Price is to be calculated), the place or places of payment where payment will be
made upon presentation and surrender of the Securities, that interest accrued to
the date fixed for prepayment will be paid as specified in said notice, and that
on and after said date interest thereon or on the portions thereof to be prepaid
will cease to accrue. If less than all the Securities are to be prepaid, the
notice of prepayment shall specify the numbers of the Securities to be prepaid.
In case any Security is to be prepaid in part only, the notice of prepayment
shall state the portion of the principal amount thereof to be prepaid and shall
state that on and after the date fixed for prepayment, upon surrender of such
Security, a new Security or Securities in principal
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amount equal to the portion thereof that has not been prepaid will be issued.
By 10:00 a.m., New York City time, on the prepayment date specified in the
notice of prepayment given as provided in this Section, the Corporation will
deposit with the Debenture Trustee or with one or more paying agents an amount
of money sufficient to prepay on the prepayment date all the Securities so
called for prepayment at the Prepayment Price.
SECTION 14.05 Payment of Securities Called for Prepayment.
-------------------------------------------
If notice of prepayment has been given as provided in Section 14.04, the
Securities or portions of Securities with respect to which such notice has been
given shall become due and payable on the date and at the place or places stated
in such notice at the Prepayment Price, (subject to the rights of holders of
Securities at the close of business on a regular record date in respect of an
Interest Payment Date occurring on or prior to the prepayment date) and on and
after said date (unless the Corporation shall default in the payment of such
Securities at the Prepayment Price, interest (including Compounded Interest and
Additional Sums, if any) on the Securities or portions of Securities so called
for prepayment shall cease to accrue. On presentation and surrender of such
Securities at a place of payment specified in said notice, the said Securities
or the specified portions thereof shall be paid and prepaid by the Corporation
at the applicable Prepayment Price (subject to the rights of holders of
Securities on the close of business on a regular record date in respect of an
Interest Payment Date occurring on or prior to the prepayment date).
Upon presentation of any Security prepaid in part only, the Corporation
shall execute and the Debenture Trustee shall authenticate and make available
for delivery to the holder thereof, at the expense of the Corporation, a new
Security or Securities of authorized denominations, in principal amount equal to
the portion of the Security so presented that has not been prepaid.
ARTICLE XV
SUBORDINATION OF SECURITIES
SECTION 15.01 Agreement to Subordinate
------------------------
The Corporation covenants and agrees, and each holder of Securities issued
hereunder likewise covenants and agrees, that the Securities shall be issued
subject to the provisions of this Article XV; and each holder of a Security,
whether upon original issue or upon transfer or assignment thereof, accepts and
agrees to be bound by such provisions.
The payment by the Corporation of the principal of and interest (including
Compounded Interest and Additional Sums, if any) on all Securities issued
hereunder shall, to the extent and in the manner hereinafter set forth, be
subordinated and junior in right of payment to all Senior Indebtedness, whether
outstanding at the date of this Indenture or thereafter incurred.
No provision of this Article XV shall prevent the occurrence of any Default
or Event of Default hereunder.
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SECTION 15.02 Default on Senior Indebtedness.
------------------------------
In the event and during the continuation of any default by the Corporation
in the payment of principal, premium, interest or any other payment due on any
Senior Indebtedness, or in the event that the maturity of any Senior
Indebtedness has been accelerated because of a default, then, in either case, no
payment shall be made by the Corporation with respect to the principal
(including prepayment payments) of or interest on the Securities (including
Compounded Interest and Additional Sums, if any, or any other amounts which may
be due on the Securities pursuant to the terms hereof or thereof).
In the event of the acceleration of the maturity of the Securities, then no
payment shall be made by the Corporation with respect to the principal
(including prepayment payments) of or interest on the Securities (including
Compounded Interest and Additional Sums, if any, or any other amounts which may
be due on the Securities pursuant to the terms hereof or thereof) until the
holders of all Senior Indebtedness outstanding at the time of such acceleration
shall receive payment in full (or amounts sufficient to make such payment have
been irrevocably deposited or placed in trust for the sole benefit of the
holders of the Senior Indebtedness) of such Senior Indebtedness (including any
amounts due upon acceleration).
In the event that, notwithstanding the foregoing, any payment is received
by the Debenture Trustee, or any Securityholder, when such payment is prohibited
by the preceding paragraphs of this Section 15.02, such payment shall be held in
trust for the benefit of, and shall be paid over or delivered by the Debenture
Trustee (if the Notice requested by Section 15.06 has been received by the
Debenture Trustee) or by any Securityholder, to the holders of Senior
Indebtedness or their respective representatives, or to the trustee or trustees
under any indenture pursuant to which any of such Senior Indebtedness may have
been issued, as their respective interests may appear, but only to the extent
that the holders of the Senior Indebtedness (or their representative or
representatives or a trustee) notify the Debenture Trustee in writing within 90
days of such payment of the amounts then due and owing on such Senior
Indebtedness, and only the amounts specified in such notice to the Debenture
Trustee shall be paid to the holders of such Senior Indebtedness.
SECTION 15.03 Liquidation; Dissolution; Bankruptcy.
------------------------------------
Upon any payment by the Corporation or distribution of assets of the
Corporation of any kind or character, whether in cash, property or securities,
to creditors upon any dissolution, winding-up, liquidation or reorganization of
the Corporation, whether voluntary or involuntary or in bankruptcy, insolvency,
receivership or other proceedings, the holders of all Senior Indebtedness of the
Corporation will first be entitled to receive payment in full of such Senior
Indebtedness, before any payment is made by the Corporation on account of the
principal of or interest on the Securities (including Compounded Interest and
Additional Sums (if any) or any other amounts which may be due on the Securities
pursuant to the terms hereof or thereof); and upon any such dissolution,
winding-up, liquidation or reorganization, any payment by the Corporation, or
distribution of assets of the Corporation of any kind or character, whether in
cash, property or securities, which the Securityholders or the Debenture Trustee
would be entitled to receive from the Corporation, except for the provisions of
this Article XV, shall be paid by the Corporation or by any receiver, trustee in
bankruptcy, liquidating trustee, agent or other Person making such payment or
distribution, or by the Securityholders or by the Debenture Trustee under the
Indenture if received by them or it, directly to the holders of Senior
Indebtedness of the Corporation (pro rata to such holders on the basis of the
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respective amounts of Senior Indebtedness held by such holders, as calculated by
the Corporation) or their representative or representatives, or to the trustee
or trustees under any indenture pursuant to which any instruments evidencing
such Senior Indebtedness may have been issued, as their respective interests may
appear, to the extent necessary to pay all such Senior Indebtedness in full, in
money or moneys worth, after giving effect to any concurrent payment or
distribution to or for the holders of such Senior Indebtedness, before any
payment or distribution is made to the Securityholders or to the Debenture
Trustee.
In the event that, notwithstanding the foregoing, any payment or
distribution of assets of the Corporation of any kind or character prohibited by
the foregoing, whether in cash, property or securities, shall be received by the
Debenture Trustee, or any Securityholder, before all Senior Indebtedness is paid
in full, or provision is made for such payment in money in accordance with its
terms, such payment or distribution shall be held in trust for the benefit of
and shall be paid over or delivered by the Debenture Trustee (if the Notice
requested by Section 15.06 has been received by the Debenture Trustee) or by any
Securityholder, to the holders of such Senior Indebtedness or their
representative or representatives, or to the trustee or trustees under any
indenture pursuant to which any instruments evidencing such Senior Indebtedness
may have been issued, as their respective interests may appear, as calculated by
the Corporation, for application to the payment of all Senior Indebtedness
remaining unpaid to the extent necessary to pay all such Senior Indebtedness in
full in money in accordance with its terms, after giving effect to any
concurrent payment or distribution to or for the benefit of the holders of such
Senior Indebtedness.
For purposes of this Article XV, the words "cash, property or securities"
shall not be deemed to include shares of stock of the Corporation as reorganized
or readjusted, or securities of the Corporation or any other corporation
provided for by a plan of reorganization or readjustment, the payment of which
is subordinated at least to the extent provided in this Article XV with respect
to the Securities to the payment of Senior Indebtedness that may at the time be
outstanding, provided that (i) such Senior Indebtedness is assumed by the new
--------
corporation, if any, resulting from any such reorganization or readjustment, and
(ii) the rights of the holders of such Senior Indebtedness are not, without the
consent of such holders, altered by such reorganization or readjustment. The
consolidation of the Corporation with, or the merger of the Corporation into,
another Person or the liquidation or dissolution of the Corporation following
the sale, conveyance, transfer or lease of its property as an entirety, or
substantially as an entirety, to another Person upon the terms and conditions
provided for in Article X of this Indenture shall not be deemed a dissolution,
winding-up, liquidation or reorganization for the purposes of this Section 15.03
if such other Person shall, as a part of such consolidation, merger, sale,
conveyance, transfer or lease, comply with the conditions stated in Article X of
this Indenture. Nothing in Section 15.02 or in this Section 15.03 shall apply
to claims of, or payments to, the Debenture Trustee under or pursuant to Section
6.06 of this Indenture.
SECTION 15.04 Subrogation.
-----------
Subject to the payment in full of all Senior Indebtedness, the rights of
the Securityholders shall be subrogated to the rights of the holders of such
Senior Indebtedness to receive payments or distributions of cash, property or
securities of the Corporation, as the case may be, applicable to such Senior
Indebtedness until the principal of and interest on the Securities shall be paid
in full; and, for the purposes of such subrogation, no payments or distributions
to the holders of such Senior Indebtedness of any cash, property or securities
to which the Securityholders or the Debenture
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Trustee would be entitled except for the provisions of this Article XV, and no
payment over pursuant to the provisions of this Article XV to or for the benefit
of the holders of such Senior Indebtedness by Securityholders or the Debenture
Trustee, shall, as between the Corporation, its creditors other than holders of
Senior Indebtedness of the Corporation, and the holders of the Securities, be
deemed to be a payment by the Corporation to or on account of such Senior
Indebtedness. It is understood that the provisions of this Article XV are and
are intended solely for the purposes of defining the relative rights of the
holders of the Securities, on the one hand, and the holders of such Senior
Indebtedness on the other hand.
Nothing contained in this Article XV or elsewhere in this Indenture or in
the Securities is intended to or shall impair, as between the Corporation, its
creditors other than the holders of Senior Indebtedness of the Corporation, and
the holders of the Securities, the obligation of the Corporation, which is
absolute and unconditional, to pay to the holders of the Securities the
principal of and interest (including Compounded Interest and Additional Sums, if
any) on the Securities as and when the same shall become due and payable in
accordance with their terms, or is intended to or shall affect the relative
rights of the holders of the Securities and creditors of the Corporation, as the
case may be, other than the holders of Senior Indebtedness of the Corporation,
as the case may be, nor shall anything herein or therein prevent the Debenture
Trustee or the holder of any Security from exercising all remedies otherwise
permitted by applicable law upon default under this Indenture, subject to the
rights, if any, under this Article XV of the holders of such Senior Indebtedness
in respect of cash, property or securities of the Corporation, as the case may
be, received upon the exercise of any such remedy.
SECTION 15.05 Debenture Trustee to Effectuate Subordination.
---------------------------------------------
Each Securityholder, by such Securityholder's acceptance thereof,
authorizes and directs the Debenture Trustee on such Securityholder's behalf to
take such action (as the Debenture Trustee, in its discretion, deems necessary
or appropriate, upon instruction or otherwise) to effectuate the subordination
provided in this Article XV and appoints the Debenture Trustee such
Securityholder's attorney-in-fact for any and all such purposes.
SECTION 15.06 Notice by the Corporation.
-------------------------
The Corporation shall give prompt written notice to a Responsible Officer
of the Debenture Trustee of any fact known to the Corporation that would
prohibit the making of any payment of monies to or by the Debenture Trustee in
respect of the Securities pursuant to the provisions of this Article XV.
Notwithstanding the provisions of this Article XV or any other provision of this
Indenture, the Debenture Trustee shall not be charged with knowledge of the
existence of any facts that would prohibit the making of any payment of monies
to or by the Debenture Trustee in respect of the Securities pursuant to the
provisions of this Article XV, unless and until a Responsible Officer of the
Debenture Trustee shall have received written notice thereof from the
Corporation or a holder or holders of Senior Indebtedness or from any trustee
therefor; and before the receipt of any such written notice, the Debenture
Trustee, subject to the provisions of Article VI of this Indenture, shall be
entitled in all respects to assume that no such facts exist; provided, however,
-------- -------
that if the Debenture Trustee shall not have received the notice provided for in
this Section 15.06 at least two Business Days prior to the date upon which, by
the terms hereof, any money may become payable for any
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purpose (including, without limitation, the payment of the principal of or
interest (including Compounded Interest and Additional Sums, if any) on any
Security), then, anything herein contained to the contrary notwithstanding, the
Debenture Trustee shall have full power and authority to receive such money and
to apply the same to the purposes for which they were received, and shall not be
affected by any notice to the contrary that may be received by it within two
Business Days prior to such date.
The Debenture Trustee, subject to the provisions of Article VI of this
Indenture, shall be entitled to conclusively rely on a written notice delivered
to it by a Person representing himself to be a holder of Senior Indebtedness of
the Corporation (or a trustee on behalf of such holder), as the case may be, to
establish that such notice has been given by a holder of such Senior
Indebtedness or a trustee on behalf of any such holder or holders. In the event
that the Debenture Trustee determines in good faith that further evidence is
required with respect to the right of any Person as a holder of such Senior
Indebtedness to participate in any payment or distribution pursuant to this
Article XV, the Debenture Trustee may request such Person to furnish evidence to
the reasonable satisfaction of the Debenture Trustee as to the amount of such
Senior Indebtedness held by such Person, the extent to which such Person is
entitled to participate in such payment or distribution and any other facts
pertinent to the rights of such Person under this Article XV, and, if such
evidence is not furnished, the Debenture Trustee may defer any payment to such
Person pending judicial determination as to the right of such Person to receive
such payment.
Upon any payment or distribution of assets of the Corporation referred to
in this Article XV, the Debenture Trustee, subject to the provisions of Article
VI of this Indenture, and the Securityholders shall be entitled to conclusively
rely upon any order or decree entered by any court of competent jurisdiction in
which such insolvency, bankruptcy, receivership, liquidation, reorganization,
dissolution, winding-up or similar case or proceeding is pending, or a
certificate of the trustee in bankruptcy, liquidating trustee, custodian,
receiver, assignee for the benefit of creditors, agent or other person making
such payment or distribution, delivered to the Debenture Trustee or to the
Securityholders, for the purpose of ascertaining the persons entitled to
participate in such payment or distribution, the holders of Senior Indebtedness
and other indebtedness of the Corporation, the amount thereof or payable
thereon, the amount or amounts paid or distributed thereon and all other facts
pertinent thereto or to this Article XV.
SECTION 15.07 Rights of the Debenture Trustee; Holders of Senior
--------------------------------------------------
Indebtedness.
- ------------
The Debenture Trustee in its individual capacity shall be entitled to all
the rights set forth in this Article XV in respect of any Senior Indebtedness at
any time held by it, to the same extent as any other holder of Senior
Indebtedness, and nothing in this Indenture shall deprive the Debenture Trustee
of any of its rights as such holder.
With respect to the holders of Senior Indebtedness of the Corporation, the
Debenture Trustee undertakes to perform or to observe only such of its covenants
and obligations as are specifically set forth in this Article XV, and no implied
covenants or obligations with respect to the holders of such Senior Indebtedness
shall be read into this Indenture against the Debenture Trustee. The Debenture
Trustee shall not be deemed to owe any fiduciary duty to the holders of such
Senior Indebtedness and, subject to the provisions of Article VI of this
Indenture, the Debenture Trustee shall not be
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liable to any holder of such Senior Indebtedness if it shall pay over or deliver
to Securityholders, the Corporation or any other Person money or assets to which
any holder of such Senior Indebtedness shall be entitled by virtue of this
Article XV or otherwise.
Nothing in this Article XV shall apply to claims of, or payments to, the
Debenture Trustee under or pursuant to Section 6.06.
SECTION 15.08 Subordination May Not Be Impaired.
---------------------------------
No right of any present or future holder of any Senior Indebtedness of the
Corporation to enforce subordination as herein provided shall at any time in any
way be prejudiced or impaired by any act or failure to act on the part of the
Corporation, as the case may be, or by any act or failure to act, in good faith,
by any such holder, or by any noncompliance by the Corporation, as the case may
be, with the terms, provisions and covenants of this Indenture, regardless of
any knowledge thereof that any such holder may have or otherwise be charged
with.
Without in any way limiting the generality of the foregoing paragraph, the
holders of Senior Indebtedness of the Corporation may, at any time and from time
to time, without the consent of or notice to the Debenture Trustee or the
Securityholders, without incurring responsibility to the Securityholders and
without impairing or releasing the subordination provided in this Article XV or
the obligations hereunder of the holders of the Securities to the holders of
such Senior Indebtedness, do any one or more of the following: (i) change the
manner, place or terms of payment or extend the time of payment of, or renew or
alter, such Senior Indebtedness, or otherwise amend or supplement in any manner
such Senior Indebtedness or any instrument evidencing the same or any agreement
under which such Senior Indebtedness is outstanding; (ii) sell, exchange,
release or otherwise deal with any property pledged, mortgaged or otherwise
securing such Senior Indebtedness; (iii) release any Person liable in any manner
for the collection of such Senior Indebtedness; and (iv) exercise or refrain
from exercising any rights against the Corporation, as the case may be, and any
other Person.
ARTICLE XVI
EXTENSION OF INTEREST PAYMENT PERIOD
SECTION 16.01 Extension of Interest Payment Period.
------------------------------------
So long as no Event of Default has occurred and is continuing, the
Corporation shall have the right, at any time and from time to time during the
term of the Securities, to defer payments of interest by extending the interest
payment period of such Securities for a period not exceeding 20 consecutive
quarterly periods, including the first such quarterly period during such
extension period (the "Extended Interest Payment Period"), during which Extended
Interest Payment Period no interest shall be due and payable, provided that no
--------
Extended Interest Payment Period shall end on a date other than an Interest
Payment Date or extend beyond the Maturity Date. To the extent permitted by
applicable law, interest, the payment of which has been deferred because of the
extension of the interest payment period pursuant to this Section 16.01, will
bear interest thereon at the applicable periodic Coupon Rate compounded
quarterly for each quarterly period during the Extended Interest Payment Period
("Compounded Interest"). At the end of the Extended Interest
-59-
<PAGE>
Payment Period, the Corporation shall pay all interest accrued and unpaid on the
Securities, including any Additional Sums and Compounded Interest (together,
"Deferred Interest"), that shall be payable to the holders of the Securities in
whose names the Securities are registered in the Security Register on the record
date immediately preceding the end of the Extended Interest Payment Period.
Before the termination of any Extended Interest Payment Period, the Corporation
may further defer payments of interest by further extending such Extended
Interest Payment Period, provided that such Extended Interest Payment Period,
--------
together with all such previous and further extensions within such Extended
Interest Payment Period, shall not (i) exceed 20 consecutive quarterly periods,
including the first such quarterly period during such Extended Interest Payment
Period, (ii) end on a date other than an Interest Payment Date or (iii) extend
beyond the Maturity Date of the Securities. Upon the termination of any Extended
Interest Payment Period and the payment of all amounts then due, the Corporation
may commence a new Extended Interest Payment Period, subject to the foregoing
requirements. No interest shall be due and payable during an Extended Interest
Payment Period, except at the end thereof, but the Corporation may prepay at any
time all or any portion of the interest accrued during an Extended Interest
Payment Period.
SECTION 16.02 Notice of Extension.
-------------------
(a) If the Property Trustee is the only holder of the Securities at the
time the Corporation elects to commence an Extended Interest Payment Period, the
Corporation shall give written notice to the Administrative Trustees, the
Property Trustee and the Debenture Trustee of its election to commence such
Extended Interest Payment Period at least five Business Days before the earlier
of (i) the next succeeding date on which Distributions on the Trust Securities
would have been payable, and (ii) the date the Property Trustee is required to
give notice of the record date, or the date such Distributions are payable, to
any national securities exchange or to holders of the Capital Securities, but in
any event at least five Business Days before such record date.
(b) If the Property Trustee is not the only holder of the Securities at the
time the Corporation elects to commence an Extended Interest Payment Period, the
Corporation shall give the holders of the Securities and the Debenture Trustee
written notice of its election of such Extended Interest Payment Period at least
10 Business Days before the earlier of (i) the next succeeding Interest Payment
Date, and (ii) the date the Debenture Trustee is required to give notice of the
record or payment date of such interest payment to any national securities
exchange.
(c) The quarterly period in which any notice is given pursuant to
paragraphs (a) or (b) of this Section 16.02 shall be counted as one of the 20
quarterly periods permitted in the maximum Extended Interest Payment Period
permitted under Section 16.01.
Wilmington Trust Company hereby accepts the trusts in this Indenture
declared and provided, upon the terms and conditions hereinabove set forth.
-60-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed by their respective officers thereunto duly authorized, as of
the day and year first above written.
NEW HAMPSHIRE THRIFT BANCSHARES, INC.
By: __________________________________________
Stephen W. Ensign
President and Chief Executive Officer
WILMINGTON TRUST COMPANY,
as Debenture Trustee
By: __________________________________________
Name:
Title:
<PAGE>
EXHIBIT A
---------
(FORM OF FACE OF SECURITY)
[IF THIS SECURITY IS A GLOBAL SECURITY INSERT: THIS SECURITY IS A GLOBAL
SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS
REGISTERED IN THE NAME OF THE DEPOSITORY TRUST COMPANY ("DTC") OR A NOMINEE OF
DTC. THIS SECURITY IS EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A
PERSON OTHER THAN DTC OR ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED
IN THE INDENTURE, AND NO TRANSFER OF THIS SECURITY (OTHER THAN A TRANSFER OF
THIS SECURITY AS A WHOLE BY DTC TO A NOMINEE OF DTC OR BY A NOMINEE OF DTC TO
DTC OR ANOTHER NOMINEE OF DTC) MAY BE REGISTERED EXCEPT IN LIMITED
CIRCUMSTANCES.
UNLESS THIS SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF DTC TO
THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND
ANY SECURITY ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER
NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON
IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL IN AS MUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.]
A-1
<PAGE>
NEW HAMPSHIRE THRIFT BANCSHARES, INC.
CUSIP No.:
$17,500,0000
Certificate No.
[______]% JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURE
DUE [__________], 2029
New Hampshire Thrift Bancshares, Inc., a Delaware corporation (the
"Corporation," which term includes any successor Person under the Indenture
hereinafter referred to), for value received, hereby promises to pay to NHTB
Capital Trust I or its registered assigns, the principal sum of $17,500,000
(Seventeen Million Five Hundred Thousand Dollars) on [__________], 2029 (the
"Maturity Date"), unless previously prepaid, and to pay interest on the
outstanding principal amount hereof from [_______], 1999, or from the most
recent interest payment date (each such date, an "Interest Payment Date") to
which interest has been paid or duly provided for, quarterly (subject to
deferral as set forth herein) in arrears on March 31, June 30, September 30 and
December 31 of each year, commencing September 30, 1999 at the rate of [______]%
per annum until the principal hereof shall have become due and payable, and on
any overdue principal and (without duplication and to the extent that payment of
such interest is enforceable under applicable law) on any overdue installment of
interest at the same rate per annum compounded quarterly ("Compounded
Interest"). The amount of interest payable on any Interest Payment Date shall be
computed on the basis of a 360-day year consisting of twelve 30-day months. In
the event that any date on which the principal of or interest on this Security
is payable is not a Business Day (as defined in the Indenture), then the payment
payable on such date will be made on the next succeeding day that is a Business
Day, except that if such next succeeding Business Day falls in the next
succeeding calendar year such payment shall be made on the immediately preceding
Business Day (and without any interest or other payment in respect of any such
delay), with the same force and effect as if made on such date. Pursuant to the
Indenture, in certain circumstances the Corporation will be required to pay
Additional Sums (as defined in the Indenture) with respect to this Security.
The interest installment so payable, and punctually paid or duly provided
for, on any Interest Payment Date will, as provided in the Indenture, be paid to
the Person in whose name this Security (or one or more Predecessor Securities,
as defined in said Indenture) is registered at the close of business on the
regular record date for such interest installment, which shall be one Business
Day prior to the relevant Interest Payment Date for Global Securities and the
15/th/ day of the month in which the relevant Interest Payment Date falls for
Definitive Securities. Any such interest installment not punctually paid or
duly provided for shall forthwith cease to be payable to the holders on such
regular record date and may be paid to the Person in whose name this Security
(or one or more Predecessor Securities) is registered at the close of business
on a special record date to be fixed by the Debenture Trustee for the payment of
such defaulted interest, notice whereof shall be given to the holders of
Securities not less than 10 days prior to such special record date, or may be
paid at any time in any other lawful manner not inconsistent with the
requirements of any securities
A-2
<PAGE>
exchange on which the Securities may be listed, and upon such notice as may be
required by such exchange, all as more fully provided in the Indenture.
The principal of and interest (including Compounded Interest and Additional
Sums, if any) on this Security shall be payable at the office or agency of the
Debenture Trustee maintained for that purpose in any coin or currency of the
United States of America that at the time of payment is legal tender for payment
of public and private debts; provided, however, that payment of interest may be
-------- -------
made at the option of the Corporation by (i) check mailed to the holder at such
address as shall appear in the Security Register or (ii) transfer to an account
maintained by the Person entitled thereto, provided that proper written transfer
instructions have been received by the relevant record date. Notwithstanding
the foregoing, so long as the holder of this Security is the Property Trustee of
NHTB Capital Trust I, the payment of the principal of and interest (including
Compounded Interest and Additional Sums, if any) on this Security will be made
at such place and to such account as may be designated by such Property Trustee.
The indebtedness evidenced by this Security is, to the extent provided in
the Indenture, subordinate and junior in right of payment to the prior payment
in full of all Senior Indebtedness, and this Security is issued subject to the
provisions of the Indenture with respect thereto. Each holder of this Security,
by accepting the same, (a) agrees to and shall be bound by such provisions, (b)
authorizes and directs the Debenture Trustee on his or her behalf to take such
action as may be necessary or appropriate to acknowledge or effectuate the
subordination so provided and (c) appoints the Debenture Trustee his or her
attorney-in-fact for any and all such purposes. Each holder hereof, by his or
her acceptance hereof, hereby waives all notice of the acceptance of the
subordination provisions contained herein and in the Indenture by each holder of
Senior Indebtedness, whether now outstanding or hereafter incurred, and waives
reliance by each such holder upon said provisions.
This Security shall not be entitled to any benefit under the Indenture or
be valid or become obligatory for any purpose until the Certificate of
Authentication hereon shall have been signed by or on behalf of the Debenture
Trustee.
The provisions of this Security are continued on the reverse side hereof
and such provisions shall for all purposes have the same effect as though fully
set forth at this place.
A-3
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this instrument to be duly
executed and sealed this ___ day of _________, 1999.
NEW HAMPSHIRE THRIFT BANCSHARES, INC.
By:___________________________________
Name:
Title:
Attest:
By:___________________________
Name:
Title:
CERTIFICATE OF AUTHENTICATION
This is one of the [______]% Junior Subordinated Deferrable Interest
Debentures of NEW HAMPSHIRE THRIFT BANCSHARES, INC. referred to in the within-
mentioned Indenture.
WILMINGTON TRUST COMPANY,
not in its individual capacity but solely as
Debenture Trustee
Dated: By:___________________________________
Authorized Signatory
A-4
<PAGE>
(FORM OF REVERSE OF SECURITY)
This Security is one of the Securities of the Corporation (herein sometimes
referred to as the "Securities"), specified in the Indenture, all issued or to
be issued under and pursuant to an Indenture, dated as of [________], 1999 (the
"Indenture"), duly executed and delivered between the Corporation and Wilmington
Trust Company, as Debenture Trustee (the "Debenture Trustee"), to which
Indenture reference is hereby made for a description of the rights, limitations
of rights, obligations, duties and immunities thereunder of the Debenture
Trustee, the Corporation and the holders of the Securities.
Upon the occurrence and continuation of a Special Event (as defined in the
Indenture), the Corporation shall have the right, at any time within 90 days
following the occurrence of such Special Event, to prepay this Security in whole
(but not in part) at the Prepayment Price. "Prepayment Price" shall mean, with
respect to any prepayment of the Securities, an amount equal to 100% of the
principal amount of the Securities to be prepaid plus any accrued and unpaid
interest thereon (including Compounded Interest and Additional Sums, if any) to
the date of such prepayment.
In addition, the Corporation shall have the right to prepay this Security,
in whole or in part, at any time on or after the Initial Optional Redemption
Date (an "Optional Prepayment"), at the Prepayment Price plus accrued and unpaid
interest thereon (including Compounded Interest and Additional Sums, if any) to
the date of such prepayment.
The Prepayment Price shall be paid prior to 12:00 noon, New York City time,
on the date of such prepayment or at such earlier time as the Corporation
determines, provided, that the Corporation shall deposit with the Debenture
--------
Trustee an amount sufficient to pay the applicable Prepayment Price by 10:00
a.m., New York City time, on the date such Prepayment Price is to be paid. Any
prepayment pursuant to this paragraph will be made upon not less than 30 days
nor more than 60 days' prior written notice.
If the Securities are only partially prepaid by the Corporation pursuant to
an Optional Prepayment, the particular Securities to be prepaid shall be
selected on a pro rata basis from the outstanding Securities not previously
called for prepayment; provided, however, that with respect to Securityholders
-------- -------
that would be required to hold Securities with an aggregate principal amount of
less than $10 but more than an aggregate principal amount of zero as a result of
such pro rata prepayment, the Corporation shall prepay Securities of each such
Securityholder so that after such prepayment such Securityholder shall hold
Securities either with an aggregate principal amount of at least $10 or such
Securityholder no longer holds any Securities and shall use such method
(including, without limitation, by lot) as the Corporation shall deem fair and
appropriate; provided, further, that any such proration may be made on the basis
-------- -------
of the aggregate principal amount of Securities held by each Securityholder
thereof and may be made by making such adjustments as the Corporation deems fair
and appropriate in order that only Securities in denominations of $10 or
integral multiples thereof shall be prepaid. In the event of prepayment of this
Security in part only, a new Security or Securities for the portion hereof that
has not been prepaid will be issued in the name of the holder hereof upon the
cancellation hereof.
A-5
<PAGE>
Notwithstanding the foregoing, any prepayment of Securities by the
Corporation shall be subject to the receipt of any and all required regulatory
approvals.
In case an Event of Default (as defined in the Indenture) shall have
occurred and be continuing, the principal of all of the Securities may be
declared, and upon such declaration shall become, due and payable, in the
manner, with the effect and subject to the conditions provided in the Indenture.
The Indenture contains provisions permitting the Corporation and the
Debenture Trustee, with the consent of the holders of a majority in aggregate
principal amount of the Securities at the time outstanding (as defined in the
Indenture), to execute supplemental indentures for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
the Indenture or of modifying in any manner the rights of the holders of the
Securities; provided, however, that no such supplemental indenture shall,
-------- -------
without the consent of each holder of Securities then outstanding and affected
thereby, (i) change the Maturity Date of any Security, or reduce the rate or
extend the time of payment of interest thereon (subject to Article XVI of the
Indenture), or reduce the principal amount thereof, or change any of the
prepayment provisions or make the principal thereof or any interest thereon
payable in any coin or currency other than U.S. dollars, or impair or affect the
right of any holder of Securities to institute suit for payment thereof, or (ii)
reduce the aforesaid percentage of Securities the holders of which are required
to consent to any such supplemental indenture. The Indenture also contains
provisions permitting the holders of a majority in aggregate principal amount of
the Securities at the time outstanding affected thereby, on behalf of all of the
holders of the Securities, to waive any past default in the performance of any
of the covenants contained in the Indenture, or established pursuant to the
Indenture, and its consequences, except a default in the payment of the
principal of or interest on any of the Securities or a default in respect of any
covenant or provision under which the Indenture cannot be modified or amended
without the consent of each holder of Securities then outstanding. Any such
consent or waiver by the holder of this Security (unless revoked as provided in
the Indenture) shall be conclusive and binding upon such holder and upon all
future holders and owners of this Security and of any Security issued in
exchange herefor or in place hereof (whether by registration of transfer or
otherwise), irrespective of whether or not any notation of such consent or
waiver is made upon this Security.
No reference herein to the Indenture and no provision of this Security or
of the Indenture shall alter or impair the obligation of the Corporation, which
is absolute and unconditional, to pay the principal of and interest (including
Compounded Interest and Additional Sums, if any) on this Security at the time
and place and at the rate and in the money herein prescribed.
So long as no Event of Default shall have occurred and be continuing, the
Corporation shall have the right, at any time and from time to time during the
term of the Securities, to defer payments of interest by extending the interest
payment period (an "Extended Interest Payment Period") of such Securities for a
period not (i) exceeding 20 consecutive quarterly periods, including the first
such quarterly period during such extension period, (ii) extending beyond the
Maturity Date of the Securities or (iii) ending on a date other than an Interest
Payment Date, at the end of which period the Corporation shall pay all interest
then accrued and unpaid (together with interest thereon at the rate specified
for the Securities to the extent that payment of such interest is enforceable
under applicable law). Before the termination of any such Extended Interest
Payment Period, the
A-6
<PAGE>
Corporation may further defer payments of interest by further extending such
Extended Interest Payment Period, provided that such Extended Interest Payment
Period, together with all such previous and further extensions within such
Extended Interest Payment Period, (i) shall not exceed 20 consecutive quarterly
periods including the first quarterly period during such Extended Interest
Payment Period, (ii) shall not end on any date other than an Interest Payment
Date, and (iii) shall not extend beyond the Maturity Date of the Securities.
Upon the termination of any such Extended Interest Payment Period and the
payment of all accrued and unpaid interest and any additional amounts then due,
the Corporation may commence a new Extended Interest Payment Period, subject to
the foregoing requirements. No interest shall be due and payable during an
Extended Interest Payment Period, except at the end thereof, but the Corporation
may prepay at any time all or any portion of the interest accrued during an
Extended Interest Payment Period.
The Corporation has agreed that if (1) there shall have occurred any event
of which the Corporation has actual knowledge that (a) is, or with the giving of
notice or the lapse of time, or both, would constitute, an Event of Default and
(b) in respect of which the Corporation shall not have taken reasonable steps to
cure, (2) if the Securities are held by the Property Trustee of NHTB Capital
Trust I, the Corporation shall be in default with respect to its payment of any
obligations under the Capital Securities Guarantee or (3) the Corporation shall
have given notice of its election to exercise its right to commence an Extended
Interest Payment Period, and shall not have rescinded such Notice, and such
Extended Interest Payment Period or any extension thereof shall have commenced
and be continuing, it will not (i) declare or pay any dividends or distributions
on, or redeem, purchase, acquire, or make a liquidation payment with respect to,
any of the Corporation's capital stock, (ii) make any payment of principal of or
interest on or repay, repurchase or redeem any debt securities (including other
Debentures) of the Corporation that rank pari passu with or junior in right of
payment to the Securities or (iii) make any guarantee payments with respect to
any guarantee by the Corporation of the debt securities of any Subsidiary of the
Corporation (including Other Guarantees) if such guarantee ranks pari passu with
or junior in right of payment to the Securities (other than (a) dividends or
distributions of Corporation's capital stock (which includes Common Stock and
preferred stock), (b) any declaration of a dividend in connection with the
implementation of a stockholders' rights plan, or the issuance of stock under
any such plan in the future, or the redemption or repurchase of any such rights
pursuant thereto, (c) payments under the Capital Securities Guarantee, as
defined in the Indenture, (d) as a result of a reclassification of the
Corporation's capital stock or the exchange or conversion of one class or series
of the Corporation's capital stock for another class or series of the
Corporation's capital stock, (e) the purchase of fractional interests in shares
of the Corporation's capital stock pursuant to the conversion or exchange
provisions of such capital stock or the security being converted or exchanged,
and (f) purchases of Common Stock related to the issuance of Common Stock or
rights under any of the Corporation's benefit or compensation plans for its
directors, officers or employees or any of the Corporation's dividend
reinvestment plans).
Subject to (i) the Corporation having received any required regulatory
approvals and (ii) the Administrative Trustees of NHTB Capital Trust I having
received an opinion of counsel to the effect that such distribution will not
cause the holders of Capital Securities to recognize gain or loss for federal
income tax purposes, the Corporation will have the right at any time to
liquidate the Trust and, after satisfaction of liabilities of creditors of the
Trust as required by applicable law, to cause the Securities to be distributed
to the holders of the Trust Securities in liquidation of the Trust.
A-7
<PAGE>
The Securities are issuable only in registered form without coupons in
minimum denominations of $10 and multiples of $10 in excess thereof. As
provided in the Indenture and subject to the transfer restrictions limitations
as may be contained herein and therein from time to time, this Security is
transferable by the holder hereof on the Security Register of the Corporation,
upon surrender of this Security for registration of transfer at the office or
agency of the Corporation in Wilmington, Delaware accompanied by a written
instrument or instruments of transfer in form satisfactory to the Corporation or
the Debenture Trustee duly executed by the holder hereof or his or her attorney
duly authorized in writing, and thereupon one or more new Securities of
authorized denominations and for the same aggregate principal amount will be
issued to the designated transferee or transferees. No service charge will be
made for any such registration of transfer, but the Corporation may require
payment of a sum sufficient to cover any tax or other governmental charge
payable in relation thereto.
Prior to due presentment for registration of transfer of this Security, the
Corporation, the Debenture Trustee, any authenticating agent, any paying agent,
any transfer agent and the security registrar may deem and treat the holder
hereof as the absolute owner hereof (whether or not this Security shall be
overdue and notwithstanding any notice of ownership or writing hereon made by
anyone other than the security registrar for the Securities) for the purpose of
receiving payment of or on account of the principal hereof and (subject to the
Indenture) interest due hereon and for all other purposes, and neither the
Corporation nor the Debenture Trustee nor any authenticating agent nor any
paying agent nor any transfer agent nor any security registrar shall be affected
by any notice to the contrary.
No recourse shall be had for the payment of the principal of or interest
(including Compounded Interest and Additional Sums, if any) on this Security, or
for any claim based hereon, or otherwise in respect hereof, or based on or in
respect of the Indenture, against any incorporator, stockholder, employee,
officer or director, past, present or future, as such, of the Corporation or of
any predecessor or successor Person, whether by virtue of any constitution,
statute or rule of law, or by the enforcement of any assessment or penalty or
otherwise, all such liability being, by the acceptance hereof and as part of the
consideration for the issuance hereof, expressly waived and released.
All terms used in this Security that are defined in the Indenture shall
have the meanings assigned to them in the Indenture.
THE INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF
LAW PRINCIPLES THEREOF.
A-8
<PAGE>
EXHIBIT 5.1
July _____, 1999
New Hampshire Thrift Bancshares, Inc.
9 Main Street, PO Box 29
Newport, New Hampshire 03773-0029
Ladies and Gentlemen:
We have acted as counsel to New Hampshire Thrift Bancshares, Inc., a
Delaware corporation (the "Company"), and NHTB Capital Trust I, a Delaware
business trust (the "Trust"), in connection with the preparation of the
Registration Statement on Form S-2 (the "Registration Statement") filed by the
Company and the Trust with respect to the registration under the Securities Act
of 1933, as amended (the "Act"), of (i) up to $1,750,000 of the Trust's Capital
Securities, liquidation amount of $10 per capital security (the "Capital
Securities"), (ii) the guarantee by the Company of the Capital Securities, with
respect to distributions and payments upon liquidation, redemption and otherwise
(the "Guarantee") and (iii) up to $17,500,000 principal amount of Junior
Subordinated Deferrable Interest Debentures due 2029 (the "Junior Subordinated
Debentures") to be issued by the Company. In rendering the opinions set forth
below, we do not express any opinion concerning law other than the federal law
of the United States and the corporate law of the State of Delaware.
In connection with these opinions, we have reviewed originals or copies,
certified or otherwise identified to our satisfaction, of the following
documents:
(i) the Registration Statement, as filed by the Company and the Trust
with the Securities and Exchange Commission (the "Commission") on July 7, 1999,
as amended;
(ii) the certificate of trust filed with the Secretary of State of the
State of Delaware on July 7, 1999;
(iii) the form of Amended and Restated Declaration of Trust (the
"Declaration"), by and among Wilmington Trust Company, as property trustee (the
"Property Trustee"), Wilmington Trust Company, as Delaware trustee, the Company,
as sponsor, and Daryl J. Cady, Stephen W. Ensign and Stephen R. Theroux, as
administrative trustees;
<PAGE>
New Hampshire Thrift Bancshares, Inc.
July _____, 1999
Page 2.
(iv) the form of certificate evidencing the Capital Securities;
(v) the form of Indenture (the "Indenture"), by and between Wilmington
Trust Company, as indenture trustee, and the Company pursuant to which the
Company will issue the Junior Subordinated Debentures;
(vi) the form of certificate evidencing the Junior Subordinated
Debentures;
(vii) the form of Guarantee;
(viii) the Certificate of Incorporation, as amended, and the Bylaws, as
amended, of the Company; and
(ix) resolutions adopted by the Board of Directors of the Company in
connection with the issuance of the Guarantee and the Junior Subordinated
Debentures.
We have also examined originals or copies, certified or otherwise
identified to our satisfaction, of such other documents, corporate records and
other instruments, and have examined such matters of law, as we have deemed
necessary or advisable for purposes of rendering the opinions set forth herein.
As to matters of fact, we have examined and relied upon the information relating
to Company and the Trust contained in the Registration Statement and, where we
have deemed appropriate, representations or certificates of officers or other
representatives of the Company and the Trust, the trustees and public officials.
We have assumed the authenticity of all documents submitted to us as originals,
the genuineness of all signatures, the legal capacity of natural persons and the
conformity to the originals of all documents submitted to us as copies. In
making our examination of any documents, we have assumed that all parties other
than the Company and the Trust had the corporate power and authority to enter
into and perform all obligations thereunder, and, as to such parties, we have
also assumed the due authorization by all requisite action, the due execution
and delivery of such documents and the validity and binding effect and
enforceability thereof.
Based on the foregoing, and subject to the limitations, qualifications,
exceptions and assumptions set forth herein, we are of the opinion that:
1. The Capital Securities have been duly authorized, and, when (i) the
Declaration and the Indenture have been duly executed and delivered and
qualified under the Trust Indenture Act of 1939, as amended (the "Trust
Indenture Act"), and (ii) the Capital Securities are issued and sold in
accordance with the Registration Statement and the Declaration, the Capital
Securities will be fully paid and non-assessable undivided beneficial interests
in the assets of the Trust, subject to the qualifications set forth in this and
in the following paragraph, and entitle the holders thereof to the benefits of
the Declaration, except as rights to indemnity and contribution thereunder may
be limited under applicable law, and subject to the qualifications that (a)
enforcement thereof may be limited by bankruptcy, insolvency, receivership,
reorganization, liquidation, voidable preference, moratorium or other laws
(including the laws of fraudulent conveyance and transfer) or judicial decisions
affecting the enforcement of creditors' rights generally or the reorganization
of financial institutions and (b) the enforceability of the Trust's obligations
thereunder is subject to general
<PAGE>
New Hampshire Thrift Bancshares, Inc.
July ______, 1999
Page 3.
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law) and to the effect of certain laws and judicial
decisions upon the availability and enforceability of certain remedies,
including the remedies of specific performance and self-help.
The holders of the Capital Securities will be entitled to the same
limitation of personal liability extended to stockholders of private
corporations for profit organized under the General Corporation Law of the State
of Delaware. The holders of the Capital Securities may be obligated, pursuant
to the Declaration, to (a) provide indemnity and/or security in connection with,
and pay taxes or governmental charges arising from, transfers of Capital
Securities and the issuance of replacement Capital Securities and (b) provide
security and indemnity in connection with requests of or directions to the
Property Trustee to exercise its rights and powers under the Declaration.
2. The Guarantee has been duly authorized, and, when (i) the Declaration
and the Indenture have been duly executed and delivered and qualified under the
Trust Indenture Act and (ii) the Guarantee is issued by the Company as
contemplated in the Registration Statement, the Guarantee will constitute a
valid and binding agreement of the Company in favor of the holders of the
Capital Securities, enforceable against the Company in accordance with its
terms, except as rights to indemnity and contribution thereunder may be limited
under applicable law, and subject to the qualifications that (a) enforcement
thereof may be limited by bankruptcy, insolvency, receivership, reorganization,
liquidation, voidable preference, moratorium or other laws (including the laws
of fraudulent conveyance and transfer) or judicial decisions affecting the
enforcement of creditors' rights generally or the reorganization of financial
institutions, and (b) the enforceability of the Company's obligations thereunder
is subject to general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law) and to the
effect of certain laws and judicial decisions upon the availability and
enforceability of certain remedies, including the remedies of specific
performance and self-help.
3. The Junior Subordinated Debentures have been duly authorized, and, when
(i) the Declaration and the Indenture have been duly executed and delivered and
qualified under the Trust Indenture Act and (ii) the Junior Subordinated
Debentures are issued and sold in accordance with the Registration Statement and
the Indenture, the Junior Subordinated Debentures will constitute valid and
binding obligations of the Company, enforceable against the Company in
accordance with their terms, except as rights to indemnity and contribution
thereunder may be limited under applicable law, and subject to the
qualifications that (a) enforcement thereof may be limited by bankruptcy,
insolvency, receivership, reorganization, liquidation, voidable preference,
moratorium or other laws (including the laws of fraudulent conveyance and
transfer) or judicial decisions affecting the enforcement of creditors' rights
generally or the reorganization of financial institutions, and (b) the
enforceability of the Company's obligations thereunder is subject to general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law) and to the effect of certain laws and judicial
decisions upon the availability and enforceability of certain remedies,
including the remedies of specific performance and self-help.
In rendering the opinions set forth above, we have not passed upon and do
not purport to pass upon the application of securities or "blue-sky" laws of any
jurisdiction (except federal securities laws).
<PAGE>
New Hampshire Thrift Bancshares, Inc.
July ______, 1999
Page 4.
This opinion is given solely for the benefit of the Company, the Trust and
investors who purchase the Capital Securities pursuant to the Registration
Statement and may not be relied upon by any other person or entity, nor quoted
in whole or in part, or otherwise referred to in any document without our
express written consent.
We consent to the filing of this opinion as an Exhibit to the Registration
Statement. We also consent to the reference to our firm under the heading
"Validity of Securities" in the Prospectus which forms a part of the
Registration Statement.
Very truly yours,
Thacher Proffitt & Wood
By:____________________________
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We consent to the incorporation by reference in the registration statement
on Form S-2 of NHTB Capital Trust I of our report dated January 25, 1999,
relating to the consolidated balance sheets of New Hampshire Thrift Bancshares,
Inc. and Subsidiary as of December 31, 1998 and 1997, and the related
consolidated statements of income, changes in the stockholders' equity and cash
flows for each of the years in the three-year period ended December 31, 1998,
which report is included in the December 31, 1998 annual report on Form 10-KSB
of New Hampshire Thrift Bancshares, Inc.
/s/ Shatswell, MacLeod & Company, P.C.
SHATSWELL, MacLEOD & COMPANY, P.C.
West Peabody, Massachusetts
July 2, 1999
