<PAGE> 1
Pursuant to Rule 424(b)(3)
Registration File No. 333-42836
333-42836-01
PROSPECTUS
----------
SKY FINANCIAL CAPITAL TRUST I
OFFER TO EXCHANGE ITS 9.34% CAPITAL SECURITIES, SERIES B
(LIQUIDATION AMOUNT $1,000 PER CAPITAL SECURITY)
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
FOR ANY AND ALL OF ITS OUTSTANDING 9.34% CAPITAL SECURITIES, SERIES A
(LIQUIDATION AMOUNT $1,000 PER CAPITAL SECURITY)
FULLY AND UNCONDITIONALLY GUARANTEED, TO THE EXTENT DESCRIBED IN THIS
PROSPECTUS, BY
[SKY FINANCIAL GROUP LOGO]
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME ON OCTOBER 31, 2000, UNLESS EXTENDED.
Sky Financial Capital Trust I is offering to exchange up to $60,000,000
aggregate liquidation amount of its 9.34% capital securities, Series B, for a
similar amount of its outstanding 9.34% capital securities, Series A. The Series
B Capital Securities are registered under the Securities Act of 1933. There is
currently $60,000,000 aggregate liquidation amount of the Series A Capital
Securities outstanding.
This prospectus and the letter of transmittal are first being mailed to
all holders of the Series A capital securities on or about September 25, 2000.
See "Risk Factors" beginning on page 11 to read about the risks that
you should consider in deciding whether to tender the 9.34% capital securities,
Series A in the exchange offer.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION OR REGULATOR HAS APPROVED OR DISAPPROVED THESE SECURITIES OR
DETERMINED THAT THIS PROSPECTUS IS ACCURATE OR COMPLETE. IT IS ILLEGAL FOR
ANYONE TO TELL YOU OTHERWISE.
The date of this prospectus is September 25, 2000
<PAGE> 2
WHERE YOU CAN FIND MORE INFORMATION
We have filed a registration statement on Form S-4 under the Securities
Act of 1933, as amended, to register with the Securities and Exchange Commission
the Series B capital securities to be issued in the exchange offer. This
prospectus is a part of that registration statement. As allowed by Securities
and Exchange Commission rules, this prospectus does not contain all of the
information that you can find in the registration statement or the exhibits to
the registration statement.
In addition, we are required to file annual, quarterly and current
reports, proxy statements, and other information with the Securities and
Exchange Commission. You may read and copy the registration statement and its
exhibits as well as any reports, statements, or other information that the
combined corporation files, at the Securities and Exchange Commission's Public
Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. Please call
the Securities and Exchange Commission at 1-800-SEC-0330 for further information
on the operation of the Public Reference Room. You can request copies of the
filed documents, upon payment of a duplicating fee, by writing to the Public
Reference Section of the Securities and Exchange Commission, 450 Fifth Street,
Room 1024, Washington, D.C. 20549. Our Securities and Exchange Commission
filings are also available to the public on the Securities and Exchange
Commission Internet site (HTTP://WWW.SEC.GOV). We do not expect that the Trust
will file reports, proxy statements and other information under the Exchange Act
with the Securities and Exchange Commission.
Our common stock is traded on the Nasdaq National Market under the
symbol "SKY." You may inspect the reports, proxy statements and other
information concerning us at the offices of the National Association of
Securities Dealers, Inc., 1735 K Street, N.W., Washington, D.C. 20006.
The following documents that we have filed with the Commission are
incorporated into this prospectus by reference:
- Sky Financial's Annual Report on Form 10-K for the year ended
December 31, 1999; and
- Sky Financial's Quarterly Reports on Form 10-Q for the quarters
ended March 31, 2000 and June 30, 2000.
All documents subsequently filed by us pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act after the date of this prospectus and
prior to the termination of the exchange offering prospectus shall be deemed to
be incorporated by reference into this prospectus and to be a part of this
prospectus from the date of filing of such document. Any statement contained in
this prospectus or in a document incorporated or deemed to be incorporated by
reference in this prospectus shall be deemed to be modified or superseded for
purposes of this prospectus to the extent that a statement contained in this
prospectus or in any other subsequently filed document which also is or is
deemed to be incorporated by reference in this prospectus modifies or supersedes
such statement. Any statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this prospectus.
You may obtain a copy of our filings with the Commission at no cost, by writing
or telephoning us at the following address:
W. Granger Souder, Jr.
Corporate Secretary
Sky Financial Group, Inc.
221 South Church Street
Bowling Green, Ohio 43402
When we refer to this prospectus, we mean not only this prospectus but
also any documents which are incorporated or deemed to be incorporated in this
prospectus by reference. 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 additional or different information.
This prospectus is used to offer and sell the exchange 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 this prospectus.
As used in this prospectus, "we" and "us" and "our" refer to Sky
Financial Group, Inc. and its consolidated subsidiaries, including Mid Am Bank,
Sky Bank and The Ohio Bank and our financial services subsidiaries, depending on
the context.
2
<PAGE> 3
SUMMARY
The following information is a summary of the significant terms of the
offering of our exchange capital securities. You should carefully read this
prospectus to understand fully the terms of the exchange capital securities, as
well as the tax and other considerations that are important to you in making a
decision about whether to exchange your capital securities. You should pay
special attention to the "Risk Factors" section beginning on page 16 of this
prospectus to determine whether an investment in the exchange capital securities
is appropriate for you.
SKY FINANCIAL GROUP, INC.
We are a registered bank holding company which resulted from the
October 2, 1998 merger of equals between Citizens Bancshares, Inc. and Mid Am,
Inc. We are a financial services company which has three bank subsidiaries with
a total of 205 banking centers and 149 ATMs located in Ohio, southern Michigan,
western Pennsylvania and West Virginia. We also own nine financial services
subsidiaries which engage in lines of business which are closely related to
banking. Based on total assets as of December 31, 1999, we were the seventh
largest bank holding company based in Ohio. Through our banking subsidiaries, we
offer a wide range of lending, depository, trust and related financial services
to individual and business customers. Through our financial subsidiaries, we
offer specialty lending, investment, trust, collection and related financial
services to individual and business customers.
Our corporate philosophy is to encourage our subsidiaries to operate as
locally-oriented, community-based financial service affiliates, augmented by
experienced, centralized support from us in selected critical areas. This local
market orientation is reflected in our bank subsidiaries' boards of directors
and branch banking centers, which generally have advisory boards comprised of
local business persons, professionals and other community representatives that
assist the banking centers in responding to local banking needs. Our bank
subsidiaries concentrate on customer service and business development, while
relying on our support in identifying operational areas that can be centralized
effectively without sacrificing the benefits of a local orientation.
Our market area is economically diverse, with a base of manufacturing,
service industries, transportation and agriculture, and is not dependent upon an
single industry or employer. Similarly, our customer base is diverse, and we and
our subsidiaries are not dependent upon any single industry or upon any single
customer.
Our strategic plan includes expansion, market diversification and
growth of our fee-based income through internal business formations, internal
growth and through acquisitions of financial institutions, branches and
financial service businesses.
SKY FINANCIAL CAPITAL TRUST I
Sky Financial Capital Trust I is a statutory business trust created
under Delaware law pursuant to a trust agreement and upon the filing of a
certificate of trust with the Delaware Secretary of State. The Trust's business
and affairs are conducted by the property trustee, the Delaware trustee and the
three individual administrative trustees (who are officers of Sky Financial).
The Trust exists for the exclusive purposes of:
- issuing and selling the original capital securities and the
exchange capital securities, collectively referred to as the
capital securities, and the common securities;
- using the proceeds from the sale of the capital securities and
the common securities to acquire the junior subordinated
debentures issued by Sky Financial; and
- engaging in only those other activities necessary, advisable or
incidental to the above.
The junior subordinated debentures will be the sole assets of the Trust, and
payments under the junior subordinated debentures will be the sole revenues of
the Trust.
All of the common securities of the Trust will be owned by Sky
Financial.
3
<PAGE> 4
THE EXCHANGE OFFER
WE ARE OFFERING TO EXCHANGE SERIES B CAPITAL SECURITIES FOR AN EQUAL AMOUNT OF
YOUR SERIES A CAPITAL SECURITIES.
We are offering to exchange up to $60,000,000 aggregate liquidation
amount of Series B capital securities, referred to as the exchange capital
securities, for an equal aggregate liquidation amount of Series A capital
securities, referred to as the original capital securities. You may exchange all
of your original capital securities, or less than all of them provided that they
have a liquidation amount of at least $100,000 (100 capital securities), or any
integral multiple of $1,000 (one capital security) in excess of $100,000. We are
making this exchange offer in order to satisfy our obligations under a
Registration Rights Agreement relating to your original capital securities. See
"The Exchange Offer" for a description of the procedures for tendering your
original capital securities.
THE EXCHANGE OFFER EXPIRES ON OCTOBER 31, 2000.
The exchange offer will expire at 5:00 p.m., New York City time, on
October 31, 2000, unless we extend it. See "The Exchange Offer - Expiration
Date; Extension; Amendments."
THERE ARE CONDITIONS TO THE EXCHANGE OFFER.
The exchange offer is subject to certain conditions, which we have the
discretion to waive. The exchange offer is not conditioned upon the tender of
any minimum liquidation amount of Series A capital securities. See "Exchange
Offer - Conditions to the Exchange Offer."
WE MAY MAKE CHANGES IN, OR IMPOSE REQUIREMENTS ON, THE EXCHANGE OFFER.
We reserve the right at any time and from time to time:
- to delay accepting the original capital securities for exchange;
- to end the exchange offer if specified conditions are not met;
- to extend the exchange offer and keep the original capital
securities tendered pursuant to the exchange offer, subject to
your right to withdraw your tendered original capital securities;
or
- to waive any condition or otherwise change the terms of the
exchange offer in any way.
See "The Exchange Offer - Terms of the Exchange Offer."
If you wish to exchange your original capital securities for exchange
capital securities, you will be required to represent that:
- you are not an affiliate of us or the Trust;
- you are acquiring exchange capital securities in the ordinary
course of your business;
- you have no arrangement or understanding with any person to
participate in a "distribution" within the meaning of the
Securities Act of such exchange capital securities; and
- you are not engaged in, and do not intend to engage in, a
"distribution" within the meaning of the Securities Act of such
exchange capital securities.
See "The Exchange Offer - Resales of Exchange Capital Securities."
THE TERMS OF THE EXCHANGE CAPITAL SECURITIES ARE NEARLY IDENTICAL TO THE
ORIGINAL CAPITAL SECURITIES.
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<PAGE> 5
We have registered up to $60,000,000 aggregate liquidation amount of
exchange capital securities under the Securities Act. The terms of the exchange
capital securities are the same as the terms of the original capital securities,
except that the exchange capital securities:
- have been registered under the Securities Act;
- will not be subject to certain transfer restrictions applicable
to the original capital securities; and
- will not provide for any increase in the distribution rate.
See "Description of Exchange Capital Securities."
YOU MAY WITHDRAW YOUR TENDER OF ORIGINAL CAPITAL SECURITIES AT ANY TIME BEFORE
THE EXPIRATION DATE.
You may withdraw your tender of original capital securities at any time
before the expiration date by delivering written notice of such withdrawal to
the exchange agent as described below under the caption "The Exchange Offer -
Withdrawal Rights."
YOU MUST FOLLOW SPECIFIED PROCEDURES FOR TENDERING ORIGINAL CAPITAL SECURITIES.
You must complete and sign a letter of transmittal and mail, fax or
hand deliver it, together with any other documents required by the letter of
transmittal, to the exchange agent, either with your original capital securities
or in compliance with the specified procedures for guaranteed delivery of
original capital securities. Certain brokers, dealers, commercial banks, trust
companies and other nominees may also effect tenders by book-entry transfer. If
your original capital securities are registered in the name of a broker, dealer,
commercial bank, trust company or other nominee, you should contact such person
promptly if you wish to tender your original capital securities pursuant to the
exchange offer. See "The Exchange Offer - Procedures for Tendering Exchange
Capital Securities."
YOU MAY SELL YOUR EXCHANGE CAPITAL SECURITIES WITHOUT RESTRICTION EXCEPT IN
CERTAIN CASES.
In making the exchange offer, we are relying on the position of the
staff of the Securities and Exchange Commission's Division of Corporation
Finance contained in certain interpretive letters addressed to third parties in
other transactions. However, we have not sought our own interpretive letter.
Therefore, there is no guarantee that the staff of the Securities and Exchange
Commission's Division of Corporation Finance would make a similar determination
regarding the exchange offer as it has in the interpretive letters to third
parties.
Unless you are a broker-dealer or an affiliate of us or the Trust, we
believe that you may sell or otherwise transfer exchange capital securities
issued to you pursuant to this exchange offer in exchange for your original
capital securities without further compliance with the registration and
prospectus delivery requirements of the Securities Act.
Note, however, that the Series B capital securities will be issued, and
may be transferred, only in blocks having a liquidation amount of not less than
$100,000 and multiples of $1,000 in excess of $100,000.
If you are a broker-dealer or an affiliate of us or the Trust, then you
shall be subject to further restrictions described in "The Exchange Offer -
Resales of Exchange Capital Securities."
Subject to limitations described in "The Exchange Offer - Resales of
Exchange Capital Securities," we have agreed that this prospectus, as it may be
changed or supplemented from time to time, may be used by you if you are a
participating broker-dealer in connection with resales of such exchange capital
securities. See "Plan of Distribution."
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<PAGE> 6
THE PROPERTY TRUSTEE WILL ACT AS EXCHANGE AGENT.
The exchange agent with respect to the exchange offer is the property
trustee of the Trust, Wilmington Trust Company. The address, telephone and
facsimile numbers of the exchange agent are listed in "The Exchange Offer -
Exchange Agent" and in the letter of transmittal.
WE WILL NOT RECEIVE ANY PROCEEDS FROM THE EXCHANGE OFFER.
Neither we nor the Trust will receive any cash proceeds from the
issuance of the exchange capital securities.
YOU SHOULD REVIEW THE INFORMATION ON FEDERAL INCOME TAX CONSEQUENCES AND ERISA
CONSIDERATIONS.
You should review carefully the information contained under the caption
"Certain Federal Income Tax Considerations" and "ERISA Considerations" before
tendering your Series A capital securities in the exchange offer.
SKY FINANCIAL GROUP, INC. WILL GUARANTEE PAYMENTS ON THE EXCHANGE CAPITAL
SECURITIES.
We will, on a subordinated basis, fully, irrevocably and
unconditionally guarantee:
- 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 junior subordinated debentures, the
Trust will not have sufficient funds to make payments on the capital securities.
Our guarantee does not assure the payment of distributions when the Trust does
not have sufficient funds to pay the distributions. Our obligations under the
guarantee are unsecured and are subordinated and junior to the payment of our
senior and subordinated debt and will be effectively subordinated to all of the
existing and future liabilities and obligations of our subsidiaries.
THERE IS NO MARKET FOR THE EXCHANGE CAPITAL SECURITIES.
The exchange capital securities will be a new issue of securities for
which there currently is no market. Accordingly, we cannot assure you that any
market will develop for the exchange capital securities. We do not intend to
seek a listing of the capital securities or, if issued, the exchange capital
securities, on any national securities exchange or on the Nasdaq Stock Market.
For more information, you should read "Plan of Distribution."
THE EXCHANGE CAPITAL SECURITIES HAVE BEEN RATED.
The exchange capital securities have been rated "baa1" by Moody's
Investors Service, "BB+" by Standard & Poor's, "BBB-" by Duff & Phelps Credit
Rating Co. and "BBB" by Thomson Financing Bank Watch. If another rating agent
were to rate the capital securities, such rating agency may assign a rating
different from the rating described above. A security rating is not a
recommendation to buy, sell or hold securities and may be subject to revision or
withdrawal at any time by the assigning rating organization.
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<PAGE> 7
SUMMARY SELECTED FINANCIAL DATA
The following selected consolidated financial data for the five years
ended December 31, 1999 is derived from our audited consolidated financial
statements. The financial data for the three-month periods ended March 31, 2000
and 1999 are derived from our unaudited financial statements. The unaudited
financial statements include all adjustments, consisting of normal recurring
accruals, which we consider necessary for a fair presentation of the financial
position and the results of operations for these periods. Operating results for
the six months ended June 30, 2000 are not necessarily indicative of the results
that may be expected for the entire year ending December 31, 2000. The data
should be read in conjunction with the consolidated financial statements,
related notes and other financial information incorporated by reference in this
prospectus.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
(Dollars in thousands, except shares, per share and ratio data)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF INCOME:
Interest income........................ $ 573,595 $ 575,695 $ 545,619 $ 515,699 $ 490,472
Interest expense....................... 269,950 285,912 266,656 246,421 235,980
------------ ------------- ------------ ------------ ------------
Net interest income.................... 303,645 289,783 278,963 269,278 254,492
Provision for credit losses............ 20,712 31,992 18,859 18,746 12,414
------------ ------------- ------------ ------------ ------------
Net interest income after provision
for credit losses................. 282,933 257,791 260,104 250,532 242,078
Other income........................... 124,342 124,550 108,316 85,591 63,993
Other expenses......................... 302,497 306,567 230,523 215,365 193,736
------------ ------------- ------------ ------------ ------------
Income before income taxes............. 104,778 75,774 137,897 120,758 112,335
Income taxes........................... 33,596 23,811 43,679 37,202 34,951
------------ ------------- ------------ ------------ ------------
Net income............................. $ 71,182 $ 51,963 $ 94,218 $ 83,556 $ 77,384
============ ============= ============ ============ ============
Net income available to common
Shareholders...................... $ 71,182 $ 51,963 $ 93,613 $ 81,149 $ 74,633
============ ============= ============ ============ ============
PER COMMON SHARE:(1)
Basic net income....................... $ 0.91 $ 0.67 $ 1.19 $ 1.04 $ 0.95
Diluted net income..................... 0.90 0.66 1.17 1.02 0.93
Cash dividends declared................ 0.77 0.59 0.46 0.35 0.21
Book value at year end................. 7.27 7.85 8.02 7.32 7.01
Weighted average shares outstanding
basic............................. 78,125,000 77,963,000 78,455,000 77,950,000 78,686,000
Weighted average shares outstanding
diluted.......................... 78,885,000 78,997,000 80,263,000 81,885,000 82,849,000
CONSOLIDATED STATEMENT OF
CONDITION (YEAR END):
Total assets........................... $ 8,063,756 $ 8,033,266 $ 7,267,164 $ 6,874,621 $ 6,547,273
Securities available for sale.......... 1,868,839 2,126,833 1,499,694 1,396,604 1,291,558
Securities held to maturity............ -- 23,910 381,209 450,662 424,811
Loans held for sale.................... 9,006 96,221 59,453 148,510 23,828
Loans, net of unearned income.......... 5,477,494 5,110,827 4,814,884 4,512,070 4,292,657
Allowance for credit losses............ 86,750 80,748 66,553 60,080 55,029
Deposits............................... 5,758,691 6,006,912 5,520,937 5,367,457 5,408,702
Debt and FHLB advances................. 964,557 665,906 556,826 280,989 290,021
Total shareholders' equity............. 566,331 611,713 632,865 602,133 588,138
</TABLE>
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<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
(Dollars in thousands, except ratio data)
<S> <C> <C> <C> <C> <C>
SELECTED FINANCIAL RATIOS:
Return on average assets(2) .............. 0.91% 0.68% 1.34% 1.25% 1.21%
Return on average shareholders' equity(3). 11.60 8.14 15.70 15.30 15.29
Dividend pay-out ratio................... 78.98 86.95 38.76 37.69 36.25
Net interest margin, fully taxable equivalent 4.28 4.16 4.30 4.38 4.34
Average loans to average deposits........ 91.01 86.29 88.13 84.49 82.56
Average shareholders' equity to average
assets.............................. 7.83 8.33 8.67 8.15 7.92
Allowance for credit losses to period end
loans............................... 1.58 1.58 1.38 1.33 1.28
Allowance for loan losses to total
nonperforming loans................. 445.10 517.75 404.45 309.10 252.69
Nonperforming loans to period end loans 0.36 0.31 0.34 0.43 0.51
Net charge-offs to average loans ........
0.28 0.36 0.26 0.31 0.26
RATIO OF EARNINGS TO FIXED CHARGES:(4)
Including interest on deposits............ 1.66 x 1.50 x 1.50 x 1.52 x 1.48 x
Excluding interest on deposits............ 3.45 3.15 3.38 3.49 4.11
---------------
</TABLE>
(1) Per share data has been restated to reflect all stock dividends and stock
splits.
(2) Excluding the effects of non-recurring charges and income, the return on
average assets was 1.58%, 1.29%, and 1.27% for the years ended December
31, 1999, 1998 and 1997, respectively.
(3) Excluding the effects of non-recurring charges and income, the return on
average equity was 20.18%, 15.54%, and 14.88% for the years ended December
31, 1999, 1998 and 1997, respectively.
(4) For purposes of computing the ratios of earnings to fixed charges,
earnings represent operating earnings, excluding non-recurring gains,
merger and restructuring expenses and non-recurring provisions for credit
losses plus fixed charges and total taxes based on operating income and
fixed charges. Fixed charges, excluding interest on deposits, include
interest expense (other than on deposits), one-third (the proportion
deemed representative of the interest factor) of rents, net of income from
subleases and capitalized interest. Fixed charges, including interest on
deposits, include all interest expense, one-third (the proportion deemed
representative of the interest factor) of rents, net of income from
subleases, and capitalized interest.
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<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
-------------------------
2000 1999
---- ----
(Dollars in thousands, except shares, per share and ratio data)
<S> <C> <C>
CONSOLIDATED STATEMENT OF INCOME:
Interest income..................................... $ 301,249 $ 281,377
Interest expense.................................... 149,507 132,546
-------------- -------------
Net interest income................................. 151,742 148,831
Provision for credit losses......................... 9,070 8,742
------------- ------------
Net interest income after provision for
credit losses.................................. 142,672 140,089
Other income........................................ 63,068 64,187
Other expenses...................................... 114,549 116,092
------------- ------------
Income before income taxes.......................... 91,191 88,184
Income taxes........................................ 28,586 27,665
------------- ------------
Net income.......................................... $ 62,605 $ 60,519
============= ============
Net income available to common
Shareholders................................... $ 62,605 $ 60,519
============= =============
PER COMMON SHARE: (1)
Basic net income.................................... $ 0.81 $ 0.77
Diluted net income.................................. 0.81 0.77
Weighted average shares outstanding
basic.......................................... 77,401,000 78,097,000
Weighted average shares outstanding
diluted........................................ 77,747,000 78,946,000
CONSOLIDATED STATEMENT OF
CONDITION (QUARTER END):
Total assets........................................ $ 8,110,986 $7,778,333
Securities available for sale....................... 1,830,734 1,976,981
Securities held to maturity......................... -0- -0-
Loans held for sale................................. 9,814 15,314
Loans, net of unearned income....................... 5,623,153 5,219,280
Allowance for credit losses......................... 88,018 82,459
Deposits............................................ 5,788,422 5,727,889
Debt and FHLB advances.............................. 864,631 657,785
Total shareholders' equity.......................... 574,058 619,269
</TABLE>
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<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
-------------------------
2000 1999
---- ----
(Dollars in thousands, except shares, per share and ratio data)
<S> <C> <C>
SELECTED FINANCIAL RATIOS:
Return on average assets............................... 1.58% 1.57%
Return on average shareholders' equity................. 21.91 19.54
Dividend pay-out ratio................................. 49.46 43.32
Net interest margin, fully taxable equivalent.......... 4.23 4.27
Average loans to average deposits...................... 96.72 87.97
Average shareholders' equity to average
assets............................................ 7.20 8.04
Allowance for credit losses to period end
loans............................................. 1.57 1.58
Allowance for loan losses to total
nonperforming loans............................... 492.99 504.46
Nonperforming loans to period end loans................ 0.32 0.31
Net charge-offs to average loans....................... 0.28 0.28
RATIO OF EARNINGS TO FIXED CHARGES:(2)
Including interest on deposits......................... 1.61 x 1.66 x
Excluding interest on deposits......................... 2.98 3.67
---------------
</TABLE>
(1) Per share data has been restated to reflect all stock dividends and stock
splits.
(2) For purposes of computing the ratios of earnings to fixed charges,
earnings represent operating earnings, excluding non-recurring gains,
merger and restructuring expenses and non-recurring provisions for credit
losses plus fixed charges and total taxes based on operating income and
fixed charges. Fixed charges, excluding interest on deposits, include
interest expense (other than on deposits), one-third (the proportion
deemed representative of the interest factor) of rents, net of income from
subleases and capitalized interest. Fixed charges, including interest on
deposits, include all interest expense, one-third (the proportion deemed
representative of the interest factor) of rents, net of income from
subleases, and capitalized interest.
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<PAGE> 11
RISK FACTORS
Prospective purchasers of the exchange capital securities should
carefully review the information contained elsewhere in, or incorporated by
reference in, this prospectus and should particularly consider the following
factors, which do not necessarily appear in the order of importance. Investors
should consider all of these factors to be important. Because holders of the
exchange capital securities may receive exchange debentures in exchange therefor
upon liquidation of the Trust, prospective purchasers of the exchange capital
securities are also making an investment decision with regard to the exchange
debentures and should carefully review all the information regarding the
exchange debentures contained in this prospectus.
RISKS RELATED TO YOUR INVESTMENT IN THE EXCHANGE CAPITAL SECURITIES
SKY FINANCIAL CANNOT MAKE PAYMENTS UNDER THE EXCHANGE GUARANTEE OR THE EXCHANGE
DEBENTURES IF SKY FINANCIAL DEFAULTS ON ITS OBLIGATIONS THAT ARE MORE SENIOR.
Our obligations under the exchange guarantee and the exchange
debentures are unsecured and rank:
- junior to all of our other borrowings, except those borrowings
that by their terms are equal or junior;
- junior to all of our subsidiaries' liabilities, including our
bank subsidiaries' deposit accounts; and
- senior to our common stock.
This means that we cannot pay under the exchange guarantee or the
exchange debentures if we default on payments of any of our other borrowings,
unless those borrowings are equal or junior to the exchange guarantee. In
addition, if the maturity of the exchange debentures is accelerated, we cannot
pay under the exchange guarantee or the exchange debentures until all of our
senior indebtedness is paid in full. Finally, if we liquidate, go bankrupt or
dissolve, we would be able to pay under the exchange guarantee and the exchange
debentures only after we have paid all of our liabilities that are senior to the
exchange guarantee.
For more information on payments under the exchange guarantee and the
exchange debentures, you should refer to "Description of Exchange Guarantee --
Status of the Exchange Guarantee" and "Description of Exchange Debentures --
Subordination."
BANKING LAWS AND REGULATIONS LIMIT SKY FINANCIAL'S ACCESS TO FUNDS, WHICH MAY
PREVENT SKY FINANCIAL FROM MAKING PAYMENTS UNDER THE EXCHANGE DEBENTURES AND THE
EXCHANGE GUARANTEE.
We are a registered bank holding company regulated by the Board of
Governors of the Federal Reserve System and our bank subsidiaries are regulated
by the Ohio Division of Financial Institutions (the Ohio Bank Regulator). We
rely primarily on dividends from our bank subsidiaries to meet our obligations,
to pay dividends to our common shareholders and to engage in share repurchase
programs, and will rely on such dividends to make payments on the exchange
debentures and under the exchange guarantee. The Ohio Bank Regulator limits all
capital distributions by our bank subsidiaries directly or indirectly to us,
including dividend payments.
We cannot assure you that our bank subsidiaries will be able to pay
dividends at past levels, or at all, in the future. See the section entitled
"Regulation and Supervision" in our Annual Report on Form 10-K for the year
ended December 31, 1999, which is incorporated in this prospectus by reference.
If we do not receive sufficient cash dividends or borrowings from our
bank subsidiaries, then it is unlikely that we will have sufficient funds to
make payments on the exchange debentures and the exchange guarantee, thereby
leaving insufficient funds for the Trust to make payments to you on the exchange
capital securities.
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<PAGE> 12
SKY FINANCIAL CAN DEFER INTEREST PAYMENTS ON THE EXCHANGE DEBENTURES, CAUSING
YOUR PAYMENTS UNDER THE EXCHANGE CAPITAL SECURITIES TO STOP, WHICH WILL HAVE TAX
CONSEQUENCES TO YOU AND MAY AFFECT THE MARKET PRICE OF THE EXCHANGE CAPITAL
SECURITIES.
We have the right, unless an event of default exists under the exchange
debentures, to defer interest payments on the exchange debentures for up to 10
consecutive semi-annual periods, but not beyond the maturity date. If we defer
interest payments, the Trust will defer paying distributions to you on your
exchange capital securities during the deferral period. During this time, we
will be prohibited from declaring or paying cash dividends on our common shares
and making payments on certain of our debt securities. For more information,
please refer to "Description of Exchange Capital Securities -- Distributions."
When any deferral period ends and we pay all interest then accrued and
unpaid on the exchange 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 Exchange Capital Securities --
Distributions" and "Description of Exchange Debentures -- Option to Extend
Interest Payment Date."
If we exercise our right to defer payments of interest on the exchange
debentures, you will be required to accrue income (as original issue discount)
in respect of the deferred stated interest allocable to your exchange capital
securities for federal income tax purposes, which will be allocated but not
distributed to you. As a result, you will be required to recognize income for
federal income tax purposes before you receive any cash. Furthermore, if you
dispose of your exchange capital securities prior to the record date for the
distribution payment, you will not receive, from the Trust, the cash related to
this interest income.
As a result of our right to defer interest payments, the market price
of the exchange capital securities, which represent preferred beneficial
interests in the assets of the Trust, may be more volatile than the market
prices of other securities that are not subject to such deferral options. We do
not currently intend to exercise our right to defer interest payments on the
exchange debentures. However, if we exercise this right in the future, the
market price of the exchange capital securities will probably be affected. The
exchange capital securities may trade at a price that does not fully reflect the
value of accrued but unpaid interest on the exchange debentures. If you sell
your exchange capital securities during a deferral period, you may not receive
the same return on your investment as someone who continues to hold the exchange
capital securities.
THE TRUST MAY REDEEM THE EXCHANGE CAPITAL SECURITIES PRIOR TO MAY 2010.
If there are changes in the bank regulatory, investment company or tax
laws prior to May 1, 2010 that would adversely affect the status of the Trust,
the exchange capital securities or the exchange debentures, we have the right to
redeem the exchange debentures. Our redemption of the exchange debentures will
cause the Trust to redeem the exchange capital securities prior to maturity on
May 1, 2030.
Our ability to cause the redemption of the exchange capital securities
under these circumstances is subject to us receiving all required regulatory
approvals. For more information concerning events which may cause the redemption
of the exchange debentures and prepayment of the exchange capital securities,
you should refer to "Description of the Exchange Capital Securities --
Redemption."
DISTRIBUTION OF EXCHANGE DEBENTURES MAY HAVE A POSSIBLE ADVERSE EFFECT ON
TRADING PRICE.
We have the right to dissolve the Trust at any time if such dissolution
and any distribution of the exchange debentures would not result in a taxable
event to the holders of the exchange capital securities. If we dissolve the
Trust, the Trust will be liquidated by distribution of the exchange debentures
to holders of the exchange capital securities and the common securities.
Under current federal income tax laws, a distribution of exchange
debentures to you on the dissolution of the Trust would not be a taxable event
to you. Nevertheless, if the Trust is classified for federal income tax purposes
as an association taxable as a corporation at the time it is dissolved, the
distribution of exchange debentures to you would be a taxable event. In
addition, if there is a change in law, a distribution of exchange debentures to
you on the dissolution of the Trust could also be a taxable event.
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<PAGE> 13
Your investment in the exchange capital securities may decrease in
value if the exchange debentures are distributed to you in liquidation of the
Trust. We cannot predict the liquidity of the market price or market prices for
the exchange debentures that may be distributed. The exchange debentures that
you receive upon a distribution, or the exchange capital securities you hold
pending such distribution, may trade at a discount to the price that you paid to
purchase the exchange capital securities.
Because you may receive the exchange debentures, you must also make an
investment decision with regard to the exchange debentures. Therefore, you
should carefully review all of the information regarding the exchange debentures
contained in this prospectus.
YOU WILL HAVE LIMITED VOTING RIGHTS.
As a holder of exchange capital securities, you will have limited
voting rights. You can vote only to modify the exchange capital securities or on
the removal of the property and Delaware trustees of the Trust in a limited
number of events.
You will not have any voting rights regarding Sky Financial or the
administrative trustees or with respect to any matters submitted to a vote of
our common shareholders. See "Description of Exchange Capital Securities --
Voting Rights; Amendment of the Trust Agreement" and "-- Removal of Issuer
Trustees" for more information on your limited voting rights.
TRADING CHARACTERISTICS OF THE EXCHANGE CAPITAL SECURITIES MAY CREATE ADVERSE
TAX CONSEQUENCES FOR YOU.
The exchange capital securities may trade at a price that does not
reflect the value of the accrued but unpaid interest on the underlying exchange
debentures. If you dispose of your exchange capital securities between the
record date and the payment date for payments on the exchange capital
securities, you may have adverse tax consequences. See "Certain Federal Income
Tax Consequences -- Interest Income and Original Issue Discount" and "-- Sales
or Redemptions of Exchange Capital Securities" for more information on possible
adverse tax consequences to you.
YOUR FAILURE TO EXCHANGE ORIGINAL CAPITAL SECURITIES MAY ADVERSELY AFFECT YOUR
ABILITY TO SELL SUCH SECURITIES.
The original capital securities have not been registered under the
Securities Act or any state securities laws and therefore may not be transferred
except in compliance with the registration requirements of the Securities Act
and any other applicable securities laws. Original capital securities which
remain outstanding after the consummation of the exchange offer will continue to
bear a legend reflecting such restrictions on transfer. In addition, upon
consummation of the exchange offer, holders of original capital securities which
remain outstanding will not be entitled to any rights to have such original
capital securities registered under the Securities Act or to any similar rights
under the registration rights agreement, subject to certain limited exceptions.
We and the Trust do not intend to register under the Securities Act any original
capital securities which remain outstanding after consummation of the exchange
offer, subject to such limited exceptions, if applicable. To the extent that
original capital securities are tendered and accepted in the exchange offer,
your ability to sell untendered original capital securities could be adversely
affected.
ABSENCE OF PUBLIC MARKET; RESTRICTIONS ON RESALE.
The original capital securities were issued to, and we believe such
securities are currently owed by, a relatively small number of beneficial
owners. The original capital securities have not been registered under the
Securities Act and are subject to restrictions on transferability if they are
not exchanged for the exchange capital securities. Although the exchange capital
securities may be resold or otherwise transferred by the holders, who are not
affiliates of Sky Financial or the Trust, without compliance with the
registration requirements under the Securities Act, they will constitute a new
issue of securities with no established trading market and will be transferable
only in blocks having a liquidation amount of not less than $100,000 (100
exchange capital securities).
If a public trading market develops, future trading prices of the
exchange capital securities will depend on many factors, including, among
others, prevailing interest rates, our operating results and the market for
similar securities. The initial purchaser has informed the Trust and us that it
intends to make a market in the capital securities. However, the initial
purchaser is not obligated to do so and any such activity may be terminated at
any
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<PAGE> 14
time without notice to the holders of the capital securities. In addition, any
market-making activity will be subject to the limits of the Securities Act and
may be limited during the pendency of the exchange offer. We cannot assure you
that an active public or other market will develop for the exchange capital
securities, or as to the liquidity of or the trading market for the exchange
capital securities. If an active public market does not develop, the market and
the liquidity of the exchange capital securities may be adversely affected. In
addition, neither we nor the Trust intend to apply for listing of the exchange
capital securities on any securities exchange or for quotation through the
Nasdaq Stock Market, Inc. See "Plan of Distribution."
Each broker-dealer that receives exchange capital securities for its
own account in exchange for original capital securities, where such original
capital securities were acquired by such broker-dealer as a result of
market-making activities or other trading activities, must acknowledge that it
will deliver a prospectus in connection with any resale or such exchange capital
securities. See "Plan of Distribution."
We are not obligated to notify you of defects or irregularities in the
exchange offer procedures.
RISKS RELATING TO SKY FINANCIAL AND ITS SUBSIDIARIES
OUR BUSINESS MAY BE ADVERSELY AFFECTED BY DOWNTURNS IN THE LOCAL ECONOMIES ON
WHICH WE DEPEND.
Our loan portfolio is concentrated in the northern Ohio, western
Pennsylvania and northern West Virginia regions. Our profits depend on providing
products and services to customers in these local regions. An increase in
unemployment, a decrease in real estate values or further increases in interest
rates could weaken the local economy. Weakness in our market area could depress
our earnings and consequently our financial condition because:
- customers may not want or need our products and services;
- borrowers may not be able to repay their loans;
- the value of the collateral securing our loans to borrowers may
decline; and
- the quality of our loan portfolio may decline.
DIFFICULTY IN INTEGRATING ACQUIRED BUSINESSES MAY ADVERSELY AFFECT OUR FUTURE
FINANCIAL RESULTS.
Managing growth through acquisitions is a difficult process that
includes integration and training of personnel, developing common products and
pricing, combining office and operations policies and procedures, data
processing conversions and various other matters. While we have completed four
acquisitions since October 31, 1998, we have not yet converted to a common data
processing system nor have we fully integrated various operating policies and
procedures. Additionally, we currently conduct business using multiple names and
charters. As such, we have not yet realized operating efficiencies available
from eliminating these redundancies and, as a result, our marketing and business
development activities are not as efficient as they might otherwise be.
Any future acquisitions or mergers by Sky Financial or its banking
subsidiaries are subject to approval by the appropriate federal and state
banking regulators. The banking regulators may deny, delay or condition their
approval of a proposed transaction.
We have grown, and intend to continue to grow, through acquisitions of
banks and other financial institutions. After these acquisitions, we may
experience adverse changes in results of operations of acquired entities,
unforeseen liabilities, asset quality problems of acquired entities, loss of key
personnel, loss of customers because of change of identity, difficulties in
integrating data processing and operational procedures and deterioration in
local economic conditions. These various acquisition risks can be heightened in
larger transactions.
We have taken steps to address the issues resulting from recent
acquisitions and have developed a plan to integrate acquired businesses.
However, we cannot assure you that we will be successful in implementing the
plan or in obtaining regulator approvals necessary as part of our plan.
Additionally, we may experience these issues in connection with future
acquisitions. These integration issues may result in disruption of service
and/or additional expense.
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<PAGE> 15
OUR BUSINESS MAY BE ADVERSELY AFFECTED IF WE FAIL TO EFFECTIVELY MANAGE OUR
CREDIT RISK.
Originating and underwriting loans are integral to the success of our
business. This business requires us to take "credit risk," which is the risk of
losing principal and interest income because borrowers fail to repay loans.
Collateral values and the ability of borrowers to repay their loans may
be affected at any time by factors such as:
- a downturn in the local economies in which we operate or the
national economy;
- a downturn in one or more of the business sectors in which our
customers operate; or
- a rapid increase in interest rates.
We have adopted underwriting and credit monitoring procedures and
credit policies, including the establishment and review of the allowance for
credit losses, that we believe are appropriate to minimize this risk by
assessing the likelihood of nonperformance, tracking loan performance and
diversifying our credit portfolio. Such policies and procedures, however, may
not prevent unexpected losses that could materially adversely affect our
business.
WE FACE COMPETITION FROM OTHER BANKS THAT MAY BE MORE TECHNOLOGICALLY ADVANCED
THAN WE ARE.
Changes in technology, mostly from the growing use of computers and
computer-based technology, pose competitive challenges to banks such as ours.
Large banking institutions typically offer on-line banking and other banking
products and services over the Internet, including deposit services and mortgage
loans, and have the ability to devote significant resources to developing and
maintaining such technology-based services. Other bank competitors, such as
brokerage houses, also offer competitive services on-line. Some new banking
competitors offer all of their services on-line. Customers who bank by computer
or by telephone need never set foot in a bank branch. Our high service
philosophy emphasizes face-to-face contact with tellers, loan officers and other
bank employees. We believe our personal approach to banking is a source of
strength, one that will remain popular in the non-metropolitan communities that
are our natural marketplace. However, customer preferences may change, and the
rapid growth of on-line banking could, at some point, render our personal,
branch-based approach obsolete. We have partially addressed this risk by
offering limited on-line banking services to our customers, and by continuing to
provide call center banking services. We cannot assure you, however, that these
efforts will be successful in preventing the loss of customers to competitors.
RISING INTEREST RATES MAY REDUCE OUR NET INCOME.
Our ability to make a profit, like that of most financial institutions,
substantially depends upon our net interest income, which is the difference
between the interest income we earn on our interest-earning assets (such as
loans) and the interest expense we pay on our interest-bearing liabilities (such
as deposits). Certain assets and liabilities, however, may react in different
degrees to changes in market interest rates. Further, interest rates on certain
types of assets and liabilities may lag behind changes in market interest rates.
Additionally, certain assets, such as adjustable rate mortgages, have features,
including payment and rate caps, which restrict changes in their interest rates.
Factors such as inflation, economic growth or recession, employment
levels, money supply, international disorders, instability in domestic and
foreign financial markets, and other factors beyond our control may affect
interest rates. Changes in market interest rates will also affect the level of
voluntary prepayments on our loans and the receipt of payments on our
mortgage-backed securities resulting in the receipt of proceeds that may be
reinvested at a lower rate than the loan or mortgage-backed security being
prepaid. Although we pursue an asset-liability management strategy designed to
control our risk from changes in market interest rates, changes in interest
rates could have a material adverse effect on our profitability.
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<PAGE> 16
FORWARD LOOKING STATEMENTS
Some of the information presented or incorporated by reference into
this prospectus contains "forward-looking" statements within the meaning of the
Private Securities Litigation Reform Act of 1995, and may be identified by the
use of such words as "believe," "expect," "anticipate," "should," "planned,"
"estimated" and "potential." Examples of forward-looking statements include, but
are not limited to, estimates with respect to our financial condition, results
of operations and business that are subject to various factors which could cause
actual results to differ materially from these estimates. These factors include,
but are not limited to:
- economic conditions;
- volatility and direction of market interest rates;
- capital investment in, and operating results of, our non-banking business
ventures;
- governmental legislation and regulation;
- material unforeseen changes in the financial condition or results of
operations of our customers;
- customer reaction to, and unforeseen complications with respect to, our
restructuring or integration of acquisitions;
- unforeseen difficulties in realizing expected cost savings from
acquisitions;
- difficulties associated with data conversions in acquisitions or
migrations to a single platform system; and
- other risks identified from time to time in our public documents
on file with the Commission.
Our actual results could vary materially from the future results covered in our
forward-looking statements. The statements in the "Risk Factors" section of this
prospectus 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 may affect the forward-looking statements in
this prospectus.
USE OF PROCEEDS
Neither we nor the Trust will receive any cash proceeds from the
issuance of the exchange capital securities and the exchange guarantee. In
consideration for issuing the exchange capital securities in exchange for
original capital securities as described in this prospectus, the Trust will
receive original capital securities in like liquidation amount. The original
capital securities surrendered in exchange for the exchange capital securities
will be retired and canceled.
All of the proceeds from the sale by the Trust of its original capital
securities and common securities were invested by the Trust in the original
junior subordinated debentures. The net proceeds we received from the sale of
the $60,000,000 aggregate principal amount of our junior subordinated
debentures, Series A, also referred to as the original junior subordinated
debentures, were approximately $58.8 million, net of estimated commissions and
other estimated offering expenses.
We used all of the net proceeds to reduce outstanding borrowings under
our revolving line of credit with unaffiliated banks ($94.0 million as of
February 29, 2000 and $34.0 million as of March 31, 2000). Our revolving line of
credit matures on March 7, 2001 and interest on advances thereunder is payable
at either the financial institution's prime rate, a formula based on the London
Interbank Offering rate, or a formula based on the Federal Funds rate. We may
elect the interest rate method to be applied to amounts outstanding in $100,000
increments. Initially, we invested the net proceeds of the offering in
short-term liquid investments, including U.S. Government and Agency Securities
and repurchase agreements backed by U.S. Government and Agency Securities.
ACCOUNTING TREATMENT
For financial reporting purposes, the Trust is treated as our
subsidiary, and, accordingly, the accounts of the Trust are included in our
consolidated financial statements. The capital securities are presented as a
separate line item in our consolidated statements of financial condition or
related notes and appropriate disclosures about the capital securities, the
guarantee and the junior subordinated debentures are included in the notes to
consolidated
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financial statements. For financial reporting purposes, we will record
distributions paid or accrued on the capital securities as an interest expense
in the consolidated statements of income.
Future Annual Reports we file under the Exchange Act will include, to
the extent material, a footnote to the financial statements stating that:
- the Trust is wholly-owned;
- the sole assets of the Trust are the junior subordinated
debentures (specifying the principal amount, interest rate and
maturity date of such junior subordinated debentures); and
- our obligations under the trust agreement, the junior
subordinated debentures and related indenture and the original
guarantee and the exchange guarantee, collectively referred to
as the guarantees, in the aggregate, constitute a full and
unconditional guarantee by us of the obligations of the Trust
under the capital securities.
We expect that the Trust will not be required to provide separate
reports under the Exchange Act.
CAPITALIZATION
The following table sets forth our consolidated capitalization at June
30, 2000, and as adjusted to give effect to the issuance of the original capital
securities by the Trust and the corresponding sale of the junior subordinated
debentures to the Trust. Consummation of the exchange offer will have no effect
on such capitalization. You should read this table in conjunction with our
consolidated financial statements and related notes, which are incorporated by
reference into this prospectus.
<TABLE>
<CAPTION>
JUNE 30, 2000
--------------------------------
ACTUAL AS ADJUSTED
------ -----------
(Dollars in thousands)
----------------------
<S> <C> <C>
LONG-TERM BORROWINGS:
FHLB advances due beyond one year................ $ 487,422 $ 487,422
Repurchase agreements due beyond one year........ 172,500 172,500
Subordinated note due January 2008............... 50,000 50,000
Obligated manditorily redeemable capital securities
of subsidiary trust due February 2027........ 25,000 25,000
Obligated manditorily redeemable capital securities
of subsidiary trust due June 2027............ 23,600 23,600
Obligated manditorily redeemable capital securities
of subsidiary trust due May 2030(1) ......... -- 60,000
Capital lease and other obligations.............. 2,743 2,743
----------- -----------
Total long-term borrowings....................... $ 761,265 $ 821,265
=========== ==========
SHAREHOLDERS' EQUITY:
Common stock, no par value; 150,000,000 shares
authorized; 78,188,065 issued................ $ 571,271 $ 571,271
Treasury stock, at cost, 753,546 shares.......... (26,904) (26,904)
Unearned ESOP shares............................. (450) (450)
Accumulated other comprehensive income(2)........ (35,911) (35,911)
Retained earnings................................ 66,052 66,052
----------- -----------
Total shareholders' equity................... $ 574,058 $ 574,058
=========== ===========
Total capitalization......................... $ 1,335,323 $ 1,395,323
=========== ===========
</TABLE>
---------------------
(1) As described in this prospectus, the sole assets of the Trust, which is
our subsidiary, are the junior subordinated debentures, which mature on
May 1, 2030, unless redeemed prior to such date in accordance with their
terms. We own all of the common securities issued by the Trust.
(2) Includes only net unrealized loss on securities available for sale.
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SKY FINANCIAL GROUP, INC.
GENERAL
We are a financial services holding company which has three bank
subsidiaries with a total of 205 banking centers and 149 ATMs located in Ohio,
southern Michigan, western Pennsylvania and West Virginia. We also own nine
financial services subsidiaries which engage in lines of business closely
related to banking. Based on total assets as of December 31, 1999, we were the
seventh largest bank holding company based in Ohio. Through our banking
subsidiaries, we offer a wide range of lending, depository, trust, and related
financial services to individual and business customers.
Our corporate philosophy is to encourage our subsidiaries to operate as
locally-oriented, community-based financial service affiliates, augmented by
experienced, centralized support from us in selected critical areas. This local
market orientation is reflected in our bank subsidiaries' boards of directors
and branch banking centers, which generally have advisory boards comprised of
local business persons, professionals and other community representatives, that
assist the banking centers in responding to local banking needs. Our bank
subsidiaries concentrate on customer service and business development, while
relying upon our support in identifying operational areas that can be
effectively centralized without sacrificing the benefits of a local orientation.
Primary candidates for centralization are those functions which are not readily
visible to customers and those which are critical to risk management. Asset
quality review, data processing, loan and deposit processing, certain mortgage
banking activities, financial reporting, investment activities, internal audit,
compliance and funds management are among the functions which are managed at the
holding company level.
Our market areas are economically diverse, with a base of
manufacturing, service industries, transportation and agriculture, and are not
dependent upon any single industry or employer. Similarly, our customer base is
diverse, and we and our subsidiaries are not dependent upon any single industry
or upon any single customer.
Our strategic plan includes expansion, market diversification and
growth of our fee-based income through internal business formations, internal
growth and through acquisitions of financial institutions, branches and
financial service businesses. We seek acquisition partners with experienced
management, which have significant market presence or have potential for
improved profitability through financial management, economies of scale and
expanded services.
There is significant competition among commercial banks in our market
area. As a result of the deregulation of the financial services industry, we
also compete with other providers of financial services such as savings and loan
associations, credit unions, consumer finance companies, securities firms,
insurance companies, commercial finance and leasing companies, the mutual funds
industry, full service brokerage firms and discount brokerage firms. Some of our
competitors, including certain regional bank holding companies which have made
acquisitions in our market area, have substantially greater resources than we
do, and as such, may have higher lending limits and may offer other services not
available through our bank and non-bank subsidiaries. Our bank and non-bank
subsidiaries compete on the basis of rates of interest charged on loans, the
rates of interest paid for funds, the availability of services and the
responsiveness to the needs of their customers.
THE BANK SUBSIDIARIES
Sky Bank (formerly known as The Citizens Banking Company),
headquartered in Salineville, Ohio and owned by us since the formation of our
predecessor in 1982, was organized and chartered in 1902. Sky Bank had total
assets of $3.79 billion at December 31, 1999 (not including the assets of
Mahoning), and operates 91 banking centers in eastern Ohio, western Pennsylvania
and West Virginia. The Mahoning National Bank of Youngstown (Mahoning) was
acquired by us in 1999. Mahoning was merged into Sky Bank on April 14, 2000.
Mahoning had total assets of $832 million at December 31, 1999, and operated 21
banking centers in eastern Ohio.
Mid Am Bank, headquartered in Toledo, Ohio, was formed in 1952. With
total assets of $1.96 billion at December 31, 1999, it operates 55 banking
centers in northwest Ohio and southern Michigan.
The Ohio Bank (Ohio Bank), headquartered in Findlay, Ohio, was
organized in 1897. At December 31, 1999, Ohio Bank had total assets of $1.35
billion and 38 banking centers in central western Ohio.
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<PAGE> 19
THE FINANCIAL SERVICES SUBSIDIARIES
Sky Asset Management Services, Inc. (SAMSI) is our Florida-based
professional recovery services firm, formed in 1996 as a result of the merger of
two of our collection affiliates. SAMSI serves various governmental agencies,
retail, insurance and commercial clients primarily in the Southeastern United
States.
Sky Investments, Inc. (SII), located in Bryan, Ohio, is our
broker/dealer affiliate, which provides its customers investment services
throughout the United States through its 175 registered representatives. SII
also provides non-depository investment products to the customers of our bank
subsidiaries.
Sky Financial Solutions, Inc. (SFS) is our specialized medical
financing and leasing unit based in Columbus, Ohio. Beginning with its formation
in 1996, SFS has offered equipment and practice acquisition financing to medical
and dental professionals throughout the United States. SFS sells substantially
all of its financing originations to funding sources in the secondary market.
Mid Am Financial Services, Inc. (MAFSI) is our consumer finance company
headquartered in Indianapolis, Indiana. MAFSI engages in non-conforming
residential mortgage lending for customers with difficult financing needs, and
sells substantially all of its originations in the secondary market.
Effective January 1, 2000, we centralized our entire trust business
into a newly-chartered trust company, Sky Trust, N.A. (Sky Trust). To facilitate
the formation, the trust business of each bank affiliate and Mid Am Private
Trust (MAPT) was transferred to Sky Trust and MAPT was merged into Sky Trust.
Sky Trust is headquartered in Pepper Pike, Ohio.
Sky Technology Resources, Inc. (Sky Tech) is our data processing and
operations affiliate which, through its facilities in Bowling Green, Ohio and
East Liverpool, Ohio, provides comprehensive back-office services and support to
our affiliates.
Freedom Financial Life Insurance Company (Freedom), owned by us since
1985, was organized and chartered under the laws of the State of Arizona.
Freedom is a reinsurance company providing credit life and accident and health
insurance coverage to loan customers of the bank subsidiaries.
Freedom Express, Inc. (Express), owned by us since 1994, was chartered
in Ohio in 1984. Express is a courier company formed to transport papers and
documents between and among the states of Ohio, Pennsylvania and West Virginia.
REGULATION AND SUPERVISION
We are subject to the provisions of the Bank Holding Company Act of
1956, as amended (the Act), which requires a bank holding company to register
under the Act and to be subject to the regulations of the Board of Governors of
the Federal Reserve System (FRB). Pursuant to Federal Reserve policy, we are
expected to act as a source of financial strength to each of our subsidiary
banks and to commit resources to support such banks. As a bank holding company,
we are required to file with the Board of Governors an annual report and such
additional information as the Board of Governors may require pursuant to the
Act. The Act requires prior approval by the Board of Governors of the
acquisition by a bank holding company, or any subsidiary thereof, of more than
five percent (5%) of the voting stock or substantially all the assets of any
bank within the United States.
The Act also prohibits a bank holding company, with certain exceptions,
from acquiring more than five percent (5%) of the voting stock of any company
that is not a bank and from engaging in any business other than banking or
managing or controlling banks. The Board of Governors is also authorized to
approve, among other things, the ownership of shares by a bank holding company
in any company the activities of which the Board of Governors has determined to
be so closely related to banking or managing or controlling banks as to be a
proper incident thereto. Each of the non-banking activities conducted by us
through our financial services affiliates are activities which have been deemed
by the Board of Governors to be closely related to banking within the meaning of
the Act.
The Act and the regulations of the Board of Governors prohibit banks
from engaging in certain tie-in arrangements in connection with any extension of
credit, lease or sale of property, or furnishing of services. The
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<PAGE> 20
Act also imposes certain restrictions upon dealing by affiliated banks with the
holding company and among themselves including restrictions on interbank
borrowing and upon dealings in respect to the securities or obligations of the
holding company or other affiliates.
Sky Financial is a legal entity separate and distinct from its banking
and other subsidiaries. Most of Sky Financial's revenues result from dividends
paid to it by its bank subsidiaries. There are statutory and regulatory
requirements applicable to the payment of dividends by subsidiary banks as well
as by Sky Financial to its shareholders.
Our three bank subsidiaries, Sky Bank, Mid Am Bank and Ohio Bank are
all Ohio chartered banks and subject to supervision and regular examination by
the Ohio Division of Financial Institutions (DFI), and as members of the Federal
Reserve System, are subject to the applicable provisions of the Federal Reserve
Act. Our financial service subsidiaries are subject to various state and federal
regulatory bodies and licensing agencies. SII is subject to regulations of the
Federal Reserve Board, the Securities and Exchange Commission and supervision by
the National Association of Securities Dealers, as well as various state
securities and insurance regulatory agencies. SAMSI, MAFSI and SFS are subject
to various state licensing requirements and are subject to the regulations of
the Federal Reserve Board. Sky Financial, as a bank holding company, is subject
to supervision and regular examination by the Federal Reserve System. The
deposits of all banking subsidiaries of Sky Financial are insured by the Federal
Deposit Insurance Corporation, to the extent provided by law, and as such are
subject to the provisions of the Federal Deposit Insurance Act.
Each Ohio chartered banking association is required by law to obtain
the prior approval of the DFI for the declaration and payment of dividends if
the total of all dividends declared by the board of directors of such bank in
any year will exceed the total of: (i) such bank's net profits (as defined and
interpreted by regulation) for that year; plus (ii) the retained net profits (as
defined and interpreted by regulation) for the preceding two years.
The payment of dividends by us and our subsidiaries is also affected by
various regulatory requirements and policies, such as the requirement to
maintain capital at or above regulatory guidelines. In addition, if, in the
opinion of the applicable regulatory authority, a bank under its jurisdiction is
engaged in or is about to engage in an unsafe or unsound practice (which,
depending on the financial condition of the bank, could include the payment of
dividends), such authority may require, after notice and hearing, that such bank
cease and desist from such practice. The FRB and the DFI have each indicated
that paying dividends that deplete a bank's capital base to an inadequate level
should be an unsafe and unsound banking practice. The FRB, the DFI and the FDIC
have issued policy statements which provide that bank holding companies and
insured banks should generally only pay dividends out of current operating
earnings.
On November 12, 1999, President Clinton signed into law the
Gramm-Leach-Bliley Act which permits bank holding companies to become financial
holding companies and thereby affiliate with securities firms and insurance
companies and engage in other activities that are financial in nature. A bank
holding company may become a financial holding company if each of its subsidiary
banks is well capitalized under the Federal Deposit Insurance Corporation
Improvement Act prompt corrective action provisions, is well managed, and has at
least a satisfactory rating under the Community Reinvestment Act (CRA) by filing
a declaration that the bank holding company wishes to become a financial holding
company. No regulatory approval will be required for a financial holding company
to acquire a company, other than a bank or savings association, engaged in
activities that are financial in nature or incidental to activities that are
financial in nature, as determined by the Federal Reserve Board.
The Gramm-Leach-Bliley Act defines "financial in nature" to include
securities underwriting, dealing and market making; sponsoring mutual funds and
investment companies; insurance underwriting and agency; merchant banking
activities; and activities that the FRB has determined to be closely related to
banking. A financial subsidiary of a national bank or a state bank whose
deposits are insured by the Federal Deposit Insurance Corporation also may
engage, subject to limitations on investment, in activities that are financial
in nature, other than insurance underwriting, insurance company portfolio
investment, real estate development and real estate investment, if the bank is
well capitalized, well managed and has at least a satisfactory CRA rating.
Subsidiary banks of a financial holding company or national and insured state
banks with financial subsidiaries must continue to be well capitalized and well
managed in order to continue to engage in activities that are financial in
nature without regulatory actions or restrictions, which could include
divestiture of the financial in nature subsidiary or subsidiaries. In addition,
a financial holding company or a bank may not acquire a company that is engaged
in
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<PAGE> 21
activities that are financial-in-nature unless each of the subsidiary banks of
the financial holding company or the bank has a CRA rating of satisfactory or
better.
SKY FINANCIAL CAPITAL TRUST I
The Trust is a statutory business trust created under Delaware law
pursuant to a trust agreement and upon the filing of a certificate of trust with
the Delaware Secretary of State. The Trust exists for the exclusive purposes of:
- issuing and selling the capital securities and the common
securities;
- using the proceeds from the sale of the capital securities and
the common securities to acquire the junior subordinated
debentures issued by us; and
- engaging in only those other activities necessary, advisable
or incidental thereto, including the exchange offer.
The junior subordinated debentures will be the sole assets of the
Trust, and, accordingly, payments under the junior subordinated debentures will
be the sole revenues of the Trust. We own all of the common securities of the
Trust, which have an aggregate liquidation amount equal to at least 3% of the
total capital of the Trust. The common securities rank equal to, and payments
will be made thereon pro rata, with the capital securities, except that upon the
occurrence and continuance of an event of default under the trust agreement
resulting from an event of default under the junior subordinated debentures, our
rights as holder of the common securities to payments in respect of
distributions and payments upon liquidation, redemption or otherwise will be
subordinated to the rights of the holders of the capital securities. See
"Description of Exchange Capital Securities -- Subordination of Common
Securities."
The Trust has a term of approximately 35 years, but may dissolve
earlier as provided in its Amended and Restated Declaration of Trust, referred
to in this prospectus as the trust agreement. The Trust's business and affairs
are conducted by the issuer trustees, each of whom we appoint as holder of the
common securities. The issuer trustees for the Trust are Wilmington Trust
Company, as the property trustee and as the Delaware trustee, and three
administrative trustees who are our officers. For purposes of the Trust
Indenture Act of 1939, Wilmington Trust Company, as property trustee, acts as
sole trustee under the trust agreement. Wilmington Trust Company also acts as
trustee under the guarantee and the indenture. See "Description of Exchange
Guarantee" and "Description of Exchange Debentures."
The holder of the common securities of the Trust or, if an event of
default under the trust agreement has occurred and is continuing, the holders of
a majority in liquidation amount of the capital securities will be entitled to
appoint, remove or replace the property trustee and/or the Delaware trustee. In
no event will the holders of the capital securities have the right to vote to
appoint, remove or replace the administrative trustees; such voting rights will
be vested exclusively in the holder of the common securities. The duties and
obligations of each issuer trustee are governed by the trust agreement. As
issuer of the junior subordinated debentures, we will pay all fees, expenses,
debts and obligations (other than the payment of principal of, and premium and
interest on, the capital securities) related to the Trust and the offering of
the exchange capital securities and will pay, directly or indirectly, all
ongoing costs, expenses and liabilities of the Trust. The principal executive
office of the Trust is c/o Sky Financial Group, Inc., 221 South Church Street,
Bowling Green, Ohio 43402, and its telephone number is (419) 327-6300.
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THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
In connection with the sale of the original capital securities, we and
the Trust entered into the registration rights agreement with the initial
purchaser, under which we and the Trust agreed to file and to use our best
efforts to cause to become effective with the Commission a registration
statement with respect to the exchange of the original capital securities for
exchange capital securities with terms identical in all material respects to the
terms of the original capital securities. A copy of the registration rights
agreement has been filed as an exhibit to the registration statement of which
this prospectus is a part.
The exchange offer is being made to satisfy our and the Trust's
contractual obligations under the registration rights agreement. The form and
terms of the exchange capital securities are the same as the form and terms of
the original capital securities except that the exchange capital securities have
been registered under the Securities Act and will not provide for any increase
in the distribution rate and certain restrictions on transfer applicable to the
original capital securities. In that regard, the original capital securities
provide, among other things, that, if the Trust has not exchanged exchange
capital securities for all original capital securities validly tendered by the
45th day after the date on which the registration statement is declared
effective, the distribution rate borne by the original capital securities will
increase by 25 basis points per annum until the exchange offer is consummated.
Upon consummation of the exchange offer, holders of original capital securities
will not be entitled to any increase in the distribution rate on the original
capital securities or any further registration rights under the registration
rights agreement, except under limited circumstances. See "Risk Factors."
The exchange offer is not being made to, nor will the Trust accept
tenders for exchange from, holders of original capital securities in any
jurisdiction in which the exchange offer or its acceptance would not be in
compliance with the securities or blue sky laws of such jurisdiction.
Unless the context requires otherwise, the term "holder" with respect
to the exchange offer means any person in whose name the original capital
securities are registered on the books of the Trust or any other person who has
obtained a properly completed bond power from the registered holder, or any
person whose original capital securities are held of record by DTC who desires
to deliver such original capital securities by book-entry transfer at DTC.
Under the exchange offer, we will exchange as soon as practicable after
the date of this prospectus the original guarantee for the exchange guarantee
and the original junior subordinated debentures, in an amount corresponding to
the original capital securities accepted for exchange, for a like aggregate
principal amount of the exchange debentures. The exchange guarantee and exchange
debentures have been registered under the Securities Act.
TERMS OF THE EXCHANGE OFFER
The Trust hereby offers, upon the terms and subject to the conditions
set forth in this prospectus and in the accompanying letter of transmittal, to
exchange up to $60,000,000 aggregate liquidation amount of exchange capital
securities for a like aggregate liquidation amount of original capital
securities properly tendered on or prior to the expiration date and not properly
withdrawn in accordance with the procedures described below. Promptly after the
expiration date, the Trust will issue an aggregate liquidation amount of up to
$60,000,000 of exchange capital securities in exchange for a like principal
amount of outstanding original capital securities tendered and accepted in
connection with the exchange offer. Holders may tender their original capital
securities in whole or in part in a liquidation amount of not less than $100,000
(100 capital securities) or any integral multiple of $1,000 liquidation amount
(one capital security) in excess of $100,000.
The exchange offer is not conditioned upon any minimum liquidation
amount of original capital securities being tendered. As of the date of this
prospectus, $60,000,000 aggregate liquidation amount of the original capital
securities is outstanding.
Holders of original capital securities do not have any appraisal or
dissenters' rights in connection with the exchange offer. Original capital
securities which are not tendered for or are tendered but not accepted in
connection with the exchange offer will remain outstanding and be entitled to
the benefits of the trust agreement, but will not be
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entitled to any further registration rights under the registration rights
agreement, except under limited circumstances. See "Risk Factors" and
"Description of Original Capital Securities."
If any tendered original capital securities are not accepted for
exchange because of an invalid tender, the occurrence of certain other events
set forth in this prospectus or otherwise, certificates for any such unaccepted
original capital securities will be returned, without expense, to the tendering
holder promptly after the expiration date.
Holders who tender original capital securities in connection with the
exchange offer will not be required to pay brokerage commissions or fees or,
subject to the instructions in the letter of transmittal, transfer taxes with
respect to the exchange of original capital securities in connection with the
exchange offer. We will pay all charges and expenses, other than certain
applicable taxes described below, in connection with the exchange offer. See "--
Fees and Expenses."
Neither we, nor our Board of Directors nor any issuer trustee of the
Trust makes any recommendation to you as to whether to tender or refrain from
tendering all or any portion of your original capital securities pursuant to the
exchange offer. In addition, no one has been authorized to make any such
recommendation. You must make your own decisions whether to tender pursuant to
the exchange offer and, if so, the aggregate amount of original capital
securities to tender based on your own financial positions and requirements.
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "expiration date" means 5:00 p.m., New York City time, on
October 31, 2000, unless we or the Trust extends the exchange offer, in which
case the term "expiration date" shall mean the latest date and time to which the
exchange offer is extended.
We and the Trust expressly reserve the right in our sole and absolute
discretion, subject to applicable law, at any time and from time to time:
- to delay the acceptance of the original capital securities for
exchange;
- to terminate the exchange offer, whether or not any original
capital securities have theretofore been accepted for
exchange, if the Trust determines, in its sole and absolute
discretion, that any of the events or conditions referred to
under "-- Conditions to the Exchange Offer" have occurred or
exist or have not been satisfied;
- to extend the expiration date of the exchange offer and retain
all original capital securities tendered under the exchange
offer, subject, however, to the right of holders of original
capital securities to withdraw their tendered original capital
securities as described under "-- Withdrawal Rights;" and
- to waive any condition or otherwise amend the terms of the
exchange offer in any respect.
If the exchange offer is amended in a manner determined by us and the Trust to
constitute a material change, of if we and the Trust waive a material condition
of the exchange offer, we and the Trust shall promptly disclose such amendment
by means of a prospectus supplement that will be distributed to the holders of
the original capital securities, and we and the Trust will extend the exchange
offer to the extent required by Rule 14e-1 under the Exchange Act.
Any such delay in acceptance, extension, termination or amendment will
be followed promptly by oral or written notice to the exchange agent and by
making a public announcement, and such announcement in the case of an extension
will be made no later than 9:00 a.m., New York City time, on the next business
day after the previously scheduled expiration date. Without limiting the manner
in which we and the Trust may choose to make any public announcement and subject
to applicable law, we and the Trust shall have no obligation to publish,
advertise or otherwise communicate any such public announcement other than by
issuing a release to an appropriate news agency.
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ACCEPTANCE FOR EXCHANGE AND ISSUANCE OF EXCHANGE CAPITAL SECURITIES
Upon the terms and subject to the conditions of the exchange offer, the
Trust will exchange, and will issue to the exchange agent, exchange capital
securities for original capital securities validly tendered and not withdrawn
promptly after the expiration date.
In all cases, delivery of exchange capital securities in exchange for
original capital securities tendered and accepted for exchange under the
exchange offer will be made only after timely receipt by the exchange agent of:
- the book-entry confirmation described below under "--
Procedures for Tendering Original Capital Securities -
Book-Entry Transfer" or
- certificates representing such original capital securities,
the letter of transmittal (or facsimile thereof), properly
completed and duly executed, with any required signature
guarantees, and any other documents required by the letter of
transmittal.
Subject to the terms and conditions of the exchange offer, the Trust
will be deemed to have accepted for exchange, and thereby exchanged, original
capital securities validly tendered and not withdrawn as, if and when the Trust
gives oral or written notice to the exchange agent of the Trust's acceptance of
such original capital securities for exchange under the exchange offer. The
exchange agent will act as agent for the Trust for the purpose of receiving
tenders of book-entry confirmations or certificates representing original
capital securities, letters of transmittal and related documents, and as agent
for tendering holders for the purpose of receiving book-entry confirmations or
certificates representing original capital securities, letters of transmittal
and related documents and transmitting exchange capital securities to validly
tendering holders. Such exchange will be made promptly after the expiration
date. If for any reason whatsoever, acceptance for exchange or the exchange of
any original capital securities tendered pursuant to the exchange offer is
delayed, whether before or after the Trust's acceptance for exchange of original
capital securities, or the Trust extends the exchange offer or is unable to
accept for exchange or exchange original capital securities tendered under the
exchange offer, then, without prejudice to the Trust's rights set forth in this
prospectus, the exchange agent may, nevertheless, on behalf of the Trust and
subject to Rule 14e-1(c) under the Exchange Act, retain tendered original
capital securities and such original capital securities may not be withdrawn
except to the extent tendering holders are entitled to withdrawal rights as
described under "-- Withdrawal Rights."
In accordance with the letter of transmittal, a holder of original
capital securities will warrant and agree that it has full power and authority
to tender, exchange, sell, assign and transfer the original capital securities,
that the Trust will acquire good, marketable and unencumbered title to the
tendered original capital securities, free and clear of all liens, restrictions,
charges and encumbrances, and the original capital securities tendered for
exchange are not subject to any adverse claims or proxies. Such holder also will
warrant and agree that it will, upon request, execute and deliver any additional
documents deemed by the Trust or the exchange agent to be necessary or desirable
to complete the exchange, sale, assignment and transfer of the original capital
securities tendered under the exchange offer. Tendering holders of original
capital securities that use ATOP will, by so doing, acknowledge that they are
bound by the terms of the letter of transmittal.
PROCEDURES FOR TENDERING ORIGINAL CAPITAL SECURITIES
Valid Tender. Except as set forth in this prospectus, in order for
original capital securities to be validly tendered under the exchange offer, a
properly completed and duly executed letter of transmittal (or facsimile
thereof), with any required signature guarantees and any other required
documents, must be received by the exchange agent at its address set forth under
"--Exchange Agent," and, in addition, one of the following:
- tendered original capital securities must be received by the
exchange agent;
- such original capital securities must be tendered pursuant to
the procedures for book-entry transfer set forth in this
prospectus and a book-entry confirmation must be received by
the exchange agent, in each case on or prior to the expiration
date; or
- the guaranteed delivery procedures set forth in this
prospectus must be complied with.
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If less than all of the original capital securities are tendered, a
tendering holder should fill in the amount of original capital securities being
tendered in the appropriate box on the letter of transmittal or so indicate in
an agent's message in lieu of the letter of transmittal. The entire amount of
original capital securities delivered to the exchange agent will be deemed to
have been tendered unless otherwise indicated.
The method of delivery of the book-entry confirmations or certificates,
the letter of transmittal and all other required documents is at the option and
sole risk of the tendering holder, and delivery will be deemed made only when
actually received by the exchange agent. If delivery is by mail, we recommend
using registered mail, return receipt requested, properly insured, or an
overnight delivery service. In all cases, sufficient time should be allowed to
ensure timely delivery.
Book-Entry Transfer. For purposes of the exchange offer, the exchange
agent will establish an account with respect to the original capital securities
at DTC as soon as practicable. Any tendering financial institution that is a
participant in DTC's book-entry transfer facility system must make a book-entry
delivery of the original capital securities by causing DTC to transfer such
original capital securities into the exchange agent's account at DTC in
accordance with DTC's ATOP procedures for transfers. A tendering financial
institution using ATOP should transmit its acceptance to DTC on or prior to the
expiration date, or comply with the guaranteed delivery procedures set forth
below. DTC will verify such acceptance, execute a book-entry transfer of the
tendered original capital securities into the exchange agent's account at DTC
and then send to the exchange agent confirmation of such book-entry transfer,
including an agent's message confirming that DTC has received an express
acknowledgment from such tendering financial institution that it has received
and agrees to be bound by the letter of transmittal and that we and the Trust
may enforce the letter of transmittal against such holder, book-entry
confirmation.
A beneficial owner of original capital securities that are held by or
registered in the name of a broker, dealer, commercial bank, trust company or
other nominee or custodian is urged to contact such entity promptly if such
beneficial owner wishes to participate in the exchange offer.
Certificates. If the tender is not made through ATOP, certificates
representing original capital securities, as well as the letter of transmittal,
or facsimile thereof, properly completed and duly executed, with any required
signature guarantees, and any other required documents required by the letter of
transmittal, must be received by the exchange agent at its address set forth
under "-- Exchange Agent" on or prior to the expiration date in order for such
tender to be effective, or the guaranteed delivery procedure set forth herein
must be complied with.
If less than all of the original capital securities are tendered, a
tendering holder should fill in the amount of original capital securities being
tendered in the appropriate box on the letter of transmittal. The entire amount
of original capital securities delivered to the exchange agent will be deemed to
have been tendered unless otherwise indicated.
Signature Guarantees. Certificates for the original capital securities
need not be endorsed and signature guarantees on the letter of transmittal are
unnecessary unless:
- a certificate for the original capital securities is
registered in a name other than that of the person
surrendering the certificate; or
- the holder completes the box entitled "Special Issuance
Instructions" or "Special Delivery Instructions" in the letter
of transmittal.
In the case of the above conditions, such certificates for original capital
securities must be duly endorsed or accompanied by a properly executed bond
power, with the endorsement or signature on the bond power and on the letter of
transmittal guaranteed by a firm or other entity identified in Rule 17Ad-15
under the Exchange Act as an "eligible guarantor institution," including (as
such terms are defined therein): (a) a bank; (b) a broker, dealer, municipal
securities broker or dealer or government securities broker or dealer; (c) a
credit union; (d) a national securities exchange, registered securities
association or clearing agency; or (e) a savings association that is a
participant in a Securities Transfer Association, an eligible institution,
unless surrendered on behalf of such eligible institution. See Instruction 1 to
the letter of transmittal.
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Delivery. The method of delivery of the book-entry confirmation or
certificates representing tendered original capital securities, the letter of
transmittal, and all other required documents is at the option and sole risk of
the tendering holder, and delivery will be deemed made only when actually
received by the exchange agent. If delivery is by mail, registered mail, return
receipt requested, properly insured, or an overnight delivery service is
recommended. In all cases, sufficient time should be allowed to ensure timely
delivery.
Notwithstanding any other provision hereof, the delivery of exchange
capital securities in exchange for original capital securities tendered and
accepted for exchange pursuant to the exchange offer will in all cases be made
only after timely receipt by the exchange agent of:
- a book-entry confirmation with respect to such original
capital securities; or
- certificates representing original capital securities and a
properly completed and duly executed letter of transmittal, or
facsimile thereof, together with any required signature
guarantees and any other documents required by the letter of
transmittal.
Accordingly, the delivery of exchange capital securities might not be made to
all tendering holders at the same time, and will depend upon when book-entry
confirmations with respect to original capital securities or certificates
representing original capital securities and other required documents are
received by the exchange agent.
Delivery of documents to DTC in accordance with DTC's procedures does
not constitute delivery to the exchange agent.
Guaranteed Delivery. If a holder desires to tender original capital
securities under the exchange offer and the certificates for such original
capital securities are not immediately available or time will not permit all
required documents to reach the exchange agent on or prior to the expiration
date, or the procedure for book-entry transfer cannot be completed on a timely
basis, such original capital securities may nevertheless be tendered, provided
that all of the following guaranteed delivery procedures are complied with:
- such tenders are made by or through an eligible institution;
- properly completed and duly executed notice to the exchange
agent guaranteeing delivery to the exchange agent of either
certificates representing original capital securities or a
book-entry confirmation in compliance with the requirements
set forth in this prospectus, the notice of guaranteed
delivery, substantially in the form accompanying the letter of
transmittal, is received by the exchange agent, as provided
herein, on or prior to the expiration date; and
- a book-entry confirmation or the certificates representing all
tendered original capital securities, in proper form for
transfer, together with a properly completed and duly executed
letter of transmittal, or facsimile thereof, with any required
signature guarantees and any other documents required by the
letter of transmittal, are, in any case, received by the
exchange agent within three Nasdaq National market trading
days after the date of execution of such notice of guaranteed
delivery.
The notice of guaranteed delivery may be delivered by hand, or
transmitted by facsimile or mail to the exchange agent and must include a
guarantee by an eligible institution in the form set forth in such notice.
The Trust's acceptance for exchange of original capital securities
tendered in compliance with any of the procedures described above will
constitute a binding agreement between the tendering holder and the Trust upon
the terms and subject to the conditions of the exchange offer.
Determination of Validity. We and the Trust will decide or resolve all
questions as to the form of documents, validity, eligibility, including time of
receipt, and acceptance for exchange of any tendered original capital
securities, in our sole discretion, and the determination shall be final and
binding on all parties. We and the Trust reserve the absolute right, in our sole
and absolute discretion, to reject any and all tenders which we determine not to
be in proper form or the acceptance of which, or exchange for which, may, in the
opinion of counsel to us and the Trust, be unlawful. We and the Trust also
reserve the absolute right, subject to applicable law, to waive any of the
conditions of the exchange offer as set forth under "-- Conditions to the
Exchange Offer" or any condition or
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irregularity in any tender of original capital securities of any particular
holder whether or not similar conditions or irregularities are waived in the
case of other holders.
The Trust's and our interpretation of the terms and conditions of the
exchange offer, including the letter of transmittal and the instructions
thereto, will be final and binding. No tender of original capital securities
will be deemed to have been validly made until all irregularities with respect
to such tender have been cured or waived. Neither we, nor the Trust, any
affiliates or assigns of us or the Trust, the exchange agent or any other person
shall be under any duty to give any notification of any irregularities in
tenders or incur any liability for failure to give any such notification.
If any letter of transmittal, endorsement, bond power, power of
attorney, or any other document required by the letter of transmittal is signed
by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or representative capacity,
such person should so indicate when signing, and unless waived by us and the
Trust, proper evidence satisfactory to us and the Trust, in our sole discretion,
of such person's authority to so act must be submitted.
RESALES OF EXCHANGE CAPITAL SECURITIES
The Trust is making the exchange offer for the exchange capital
securities in reliance on the position of the staff of the Commission as set
forth in certain interpretive letters addressed to third parties in other
transactions. However, neither we nor the Trust sought our own interpretive
letter and there can be no assurance that the staff of the Commission would make
a similar determination with respect to the exchange offer as it has in such
interpretive letters to third parties. Based on these interpretations by the
staff of the Commission, and subject to the two immediately following sentences,
we and the Trust believe that exchange capital securities issued under this
exchange offer in exchange for original capital securities may be offered for
resale, resold and otherwise transferred by a holder, other than a holder who is
a broker-dealer, without further compliance with the registration and prospectus
delivery requirements of the Securities Act, provided that such exchange capital
securities are acquired in the ordinary course of such holder's business and
that such holder is not participating, and has no arrangement or understanding
with any person to participate, in a distribution, within the meaning of the
Securities Act, of such exchange capital securities. However, any holder of
original capital securities who is an affiliate of us or the Trust or who
intends to participate in the exchange offer for the purpose of distributing
exchange capital securities, or any broker-dealer who purchased original capital
securities from the Trust to resell pursuant to Rule 144A or any other available
exemption under the Securities Act:
- will not be able to rely on the interpretations of the staff
of the Division of Corporation Finance of the Commission set
forth in the above-mentioned interpretive letters;
- will not be permitted or entitled to tender such original
capital securities in the exchange offer; and
- must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any sale
or other transfer of such original capital securities or, if
distributed, junior subordinated debentures, unless such sale
is made in reliance on an exemption from such requirements.
In addition, as described below, if any broker-dealer holds original capital
securities acquired for its own account as a result of market-making or other
trading activities and exchanges such original capital securities for exchange
capital securities, then such broker-dealer must deliver a prospectus meeting
the requirements of the Securities Act in connection with any resales of such
exchange capital securities.
Each holder of original capital securities who wishes to exchange
original capital securities for exchange capital securities in the exchange
offer will be required to represent that:
- it is not an affiliate of us or the Trust;
- any exchange capital securities to be received by it are being
acquired in the ordinary course of its business;
- it has no arrangement or understanding with any person to
participate in a distribution, within the meaning of the
Securities Act, of such exchange capital securities; and
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- if such holder is not a broker-dealer, such holder is not
engaged in, and does not intend to engage in, a distribution,
within the meaning of the Securities Act, of such exchange
capital securities.
We and the Trust may require such holder, as a condition to such
holder's eligibility to participate in the exchange offer, to furnish to us and
the Trust (or an agent thereof) in writing information as to the number of
"beneficial owners," within the meaning of Rule 13d-3 under the Exchange Act, on
behalf of whom such holder holds the capital securities to be exchanged in the
exchange offer. Each broker-dealer that receives exchange capital securities for
its own account as a result of market-making activities or other trading
activities must agree that it will deliver a prospectus meeting the requirements
of the Securities Act in connection with any resale of such exchange capital
securities. The letter of transmittal states that by so acknowledging and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it is
an underwriter within the meaning of the Securities Act. Based on the position
taken by the staff of the Commission in the interpretive letters referred to
above, we and the Trust believe that participating broker-dealers who acquired
original capital securities for their own accounts as a result of market-making
activities or other trading activities may fulfill their prospectus delivery
requirements with respect to the exchange capital securities received upon
exchange of such original capital securities, other than original capital
securities which represent an unsold allotment from the initial sale of the
original capital securities, with a prospectus meeting the requirements of the
Securities Act, which may be the prospectus prepared for an exchange offer so
long as it contains a description of the plan of distribution with respect to
the resale of such exchange capital securities. Accordingly, this prospectus, as
it may be amended or supplemented from time to time, may be used by a
participating broker-dealer during the period referred to below in connection
with resales of exchange capital securities received in exchange for original
capital securities where such original capital securities where acquired by such
participating broker-dealer for its own account as a result of market-making or
other trading activities. Subject to certain provisions set forth in the
registration rights agreement, we and the Trust have agreed that this
prospectus, as it may be amended or supplemented from time to time, may be used
by a participating broker-dealer in connection with resales of such exchange
capital securities for a period ending 90 days after the expiration date,
subject to extension under certain limited circumstances described below, or, if
earlier, when all such exchange capital securities have been disposed of by such
participating broker-dealer. See "Plan of Distribution." However, a
participating broker-dealer who intends to use this prospectus in connection
with the resale of exchange capital securities received in exchange for original
capital securities pursuant to the exchange offer must notify us or the Trust,
or cause us or the Trust to be notified, on or prior to the expiration date,
that it is a participating broker-dealer. Such notice may be given in the space
provided for that purpose in the letter of transmittal or may be delivered to
the exchange agent at the address set forth herein under "-- Exchange Agent."
Any participating broker-dealer who is an affiliate of us or the Trust may not
rely on such interpretive letters and must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
resale transaction.
Each participating broker-dealer who surrenders original capital
securities under the exchange offer will be deemed to have agreed, by execution
of the letter of transmittal, that upon receipt of notice from us or the Trust
of the occurrence of any event or the discovery of:
- any fact which makes any statement contained or incorporated
by reference in this prospectus untrue in any material
respect;
- any fact which causes this prospectus to omit to state a
material fact necessary in order to make the statements
contained or incorporated by reference herein, in light of the
circumstances under which they were made, not misleading; or
- the occurrence of certain other events specified in the
registration rights agreement,
such participating broker-dealer will suspend the sale of exchange capital
securities, or the exchange guarantee or the exchange debentures, as applicable,
pursuant to this prospectus until we or the Trust has amended or supplemented
this prospectus to correct such misstatement or omission and has furnished
copies of the amended and supplemented prospectus to such participating
broker-dealer, or we or the Trust has given notice that the sale of the exchange
capital securities, or the exchange guarantee or the exchange debentures, as
applicable, may be resumed, as the case may be.
If we or the Trust gives such notice to suspend the sale of the
exchange capital securities, or the exchange guarantee or the exchange
debentures, as applicable, the 90-day period referred to above shall be extended
during
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which participating broker-dealers are entitled to use this prospectus in
connection with the resale of exchange capital securities by the number of days
during the period from and including the date of the giving of such notice to
and including the date when participating broker-dealers shall have received
copies of the amended or supplemented prospectus necessary to permit resales of
the exchange capital securities or to and including the date on which we or the
Trust has given notice that the sale of exchange capital securities, or the
exchange guarantee or the exchange debentures, as applicable, may be resumed, as
the case may be.
WITHDRAWAL RIGHTS
Except as otherwise provided in this prospectus, tenders of original
capital securities may be withdrawn at any time on or prior to the expiration
date.
In order for a withdrawal to be effective, a written or facsimile
transmission of such notice of withdrawal must be timely received by the
exchange agent at the address set forth under "-- Exchange Agent" on or prior to
the expiration date. Any such notice of withdrawal must specify the name of the
person who tendered the original capital securities to be withdrawn, the
aggregate principal amount of original capital securities to be withdrawn, and,
name of the registered holder of the original capital securities as set forth on
such certificates if different from that of the person who tendered such
original capital securities. If certificates representing original capital
securities have been delivered or otherwise identified to the exchange agent,
then prior to the physical release of such certificates, the tendering holder
must submit the serial numbers shown on the particular certificates to be
withdrawn and the signature on the notice of withdrawal must be guaranteed by an
eligible institution, except in the case of original capital securities tendered
for the account of an eligible institution. If original capital securities have
been tendered in accordance with the procedures for book-entry transfer set
forth in "-- Procedures for Tendering Original Capital Securities -- Book-Entry
Transfer," the notice of withdrawal must specify the name and number of the
account at DTC to be credited with the withdrawal of original capital
securities. Withdrawals of tenders of original capital securities may not be
rescinded. Original capital securities properly withdrawn will not be deemed
validly tendered for the purposes of the exchange offer, but may be retendered
at any subsequent time on or prior to the expiration date by following any of
the procedures described above under "-- Procedures for Tendering Original
Capital Securities."
All questions as to the validity, form and eligibility, including time
of receipt, of such withdrawal notices will be determined by us and Trust, in
our sole discretion, whose determination shall be final and binding on all
parties. Neither we, the Trust, any affiliates or assigns of us or the Trust,
the exchange agent nor any other person shall be under any duty to give any
notification of any irregularities in any notice of withdrawal or incur any
liability for failure to give any such notification. Any original capital
securities which have been tendered but which are withdrawn will be returned to
the holder thereof promptly after withdrawal.
DISTRIBUTIONS ON EXCHANGE CAPITAL SECURITIES
Holders of exchange capital securities whose original capital
securities are accepted for exchange will be entitled to receive cumulative cash
distributions arising from the payment of interest on the exchange debentures at
the annual rate of 9.34% of the liquidation amount of $1,000 per exchange
capital security, accumulating from March 31, 2000 and will be payable
semi-annually in arrears on May 1st and November 1st of each year, beginning on
November 1, 2000. The record dates will be the 15th day of the month immediately
preceding the month in which the relevant payment occurs. In the event the
exchange offer is consummated prior to the first record date, October 15, 2000,
each exchange capital security will pay cumulative distributions from and after
March 31, 2000 and no distributions will be paid on any original capital
security tendered for an exchange capital security. However, in the event the
exchange offer is consummated after October 15, 2000, distributions will be paid
on the original capital securities accumulated from and after March 31, 2000
through November 1, 2000, and distributions will be paid on the exchange capital
securities from and after November 1, 2000. The amount of each distribution with
respect to the capital securities will include amounts accrued up to, but
excluding the date the distribution is due. Because of the foregoing procedures
regarding distributions, the amount of the distributions received by holders
whose original capital securities are accepted for exchange will not be affected
by the exchange.
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CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provisions of the exchange offer, or any
extension of the exchange offer, we and the Trust will not be required to accept
for exchange, or to exchange, any original capital securities for any exchange
capital securities, and, as described below, may terminate the exchange offer
(whether or not any original capital securities have theretofore been accepted
for exchange) or waive any conditions to or amend the exchange offer, if any of
the following conditions have occurred or exists or have not been satisfied:
- there shall occur a change in the current interpretation by
the staff of the Commission which permits the exchange
capital securities issued pursuant to the exchange offer in
exchange for original capital securities to be offered for
resale, resold and otherwise transferred by holders, other
than broker-dealers and any such holder which is an
affiliate of us or the Trust within the meaning of Rule 405
under the Securities Act, without compliance with the
registration and prospectus delivery provisions of the
Securities Act, provided that such exchange capital
securities are acquired in the ordinary course of such
holders' business and such holders have no arrangement or
understanding with any person to participate in the
distribution of such exchange capital securities;
- any law, statute, rule or regulation shall have been adopted
or enacted which, in the judgment of us or the Trust, would
reasonably be expected to impair its ability to proceed with
the exchange offer;
- a stop order shall have been issued by the Commission or any
state securities authority suspending the effectiveness of the
registration statement, or proceedings shall have been
initiated or, to the knowledge of us or the Trust, threatened
for the purpose, or any governmental approval has not been
obtained, which approval we or the Trust shall, in its sole
discretion, deem necessary for the consummation of the
exchange offer as contemplated hereby; or
- we determine in good faith that there is a reasonable
likelihood that, or a material uncertainty exists as to
whether, consummation of the exchange offer would result in an
adverse tax consequence to the Trust or us.
EXCHANGE AGENT
Wilmington Trust Company, as property trustee of the Trust, has been
appointed as Exchange Agent for the exchange offer. Delivery of the letters of
transmittal and any other required documents, questions, requests for
assistance, and requests for additional copies of this prospectus or of the
letter of transmittal should be directed to the exchange agent as follows:
By Hand, Overnight Delivery, Registered or Certified Mail:
Wilmington Trust Company, as Exchange Agent
Rodney Square North
1100 North Market Street
Wilmington, DE 19890
Attention: Corporate Trust Administration -
Sky Financial Capital I Trust Exchange Offer
Confirm by Telephone: (302) 651-1000
Facsimile Transmission: (302) 651-8882
(Eligible Institutions Only)
Delivery to another address other than the above address or facsimile
number will not constitute a valid delivery.
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FEES AND EXPENSES
We have agreed to pay the exchange agent reasonable and customary fees
for its services and will reimburse it for its reasonable out-of-pocket expenses
in connection with the exchange offer. We will also pay brokerage houses and
other custodians, nominees and fiduciaries the reasonable out-of-pocket expenses
incurred by them in forwarding copies of this prospectus and related documents
to the beneficial owners of original capital securities, and in handing or
tendering for their customers.
Holders who tender their original capital securities for exchange will
not be obligated to pay any transfer taxes in connection therewith. If, however,
exchange capital securities are to be delivered to, or are to be issued in the
name of, any person other than the registered holder of the original capital
securities tendered, or if a transfer tax is imposed for any reason other than
the exchange of original capital securities in connection with the exchange
offer, then the amount of any such transfer taxes, whether imposed on the
registered holder or any other persons, will be payable by the tendering holder.
Neither we nor the Trust will make any payment to brokers, dealers or
other nominees soliciting acceptances of the exchange offer.
DESCRIPTION OF EXCHANGE CAPITAL SECURITIES
Under the terms of the trust agreement, the issuer trustees on behalf
of the Trust will issue the exchange capital securities. The exchange capital
securities will represent beneficial interests in the Trust and their holders
will be entitled to a preference over the common securities in certain
circumstances with respect to distributions and amounts payable on redemption of
the trust securities or liquidation of the Trust. See "-- Subordination of
Common Securities." The trust agreement will be qualified under the Trust
Indenture Act of 1939, as amended, referred to as the Trust Indenture Act. This
summary describes the material provisions of the exchange capital securities. It
is not complete and is subject to, and qualified by, the trust agreement,
including the definitions used in the trust agreement, and the Trust Indenture
Act. We have incorporated the definitions used in the trust agreement in this
prospectus. You can receive a complete copy of the form of trust agreement by
requesting a copy from us.
GENERAL
The exchange capital securities will represent preferred undivided
beneficial interests in the assets of the Trust. As a holder of exchange capital
securities, you will be entitled to a preference over the common securities in
certain circumstances with respect to distributions and amounts payable on
redemption of the exchange capital securities or liquidation of the Trust, as
described under "-- Subordination of Common Securities."
The exchange capital securities have been rated "baal" by Moody's
Investors Service, "BB+" by Standard & Poor's, "BBB-" by Duff & Phelps Credit
Rating Co. and "BBB" by Thomson Financial BankWatch. See "Ratings."
The exchange capital securities will be limited to $60.0 million
aggregate liquidation amount at any one time outstanding. The exchange capital
securities will rank equal to, and payments will be made on a pro rata basis
with, the common securities, except as described under "-- Subordination of
Common Securities." Additionally, the exchange capital securities will rank
equal to the two outstanding issues of exchange capital securities which
aggregate $46.8 million as of December 31, 1999. The property trustee will have
legal title to the junior subordinated debentures and will hold them in trust
for the benefit of you and the other holders of the exchange capital securities.
Our guarantee for the benefit of the holders of the exchange capital securities
will be a guarantee on a subordinated basis with respect to the exchange capital
securities, but will not guarantee payment of distributions or amounts payable
on redemption of the exchange capital securities or liquidation of the Trust
when the Trust does not have funds legally available for such payments. You
should read "Description of Guarantee" for more information about our guarantee.
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DISTRIBUTIONS
Distributions on the exchange capital securities will be cumulative,
and will accumulate from March 31, 2000. Distributions will be payable at the
annual rate of 9.34% of the stated liquidation amount, payable semi-annually in
arrears on the distribution dates, which are May 1st and November 1st of each
year, commencing November 1, 2000, to the holders of the exchange capital
securities on the relevant record dates. In the event the exchange offer is
consummated prior to the first record date, October 15, 2000, each exchange
capital security will pay cumulative distributions from and after March 31, 2000
and no distributions will be paid on any original capital security tendered for
an exchange capital security. However, in the event the exchange offer is
consummated after October 15, 2000, distributions will be paid on the original
capital securities accumulated from and after March 31, 2000 through November 1,
2000, and distributions will be paid on the exchange capital securities from and
after November 1, 2000. The amount of distributions will be paid on each
distribution with respect to the capital securities will include amounts accrued
to, but excluding, the date the distribution is due. Because of the foregoing
procedures regarding distributions, the amount of the distributions received by
holders whose original capital securities are accepted for exchange will not be
affected by the exchange. 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 required payment will be made on the next 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 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 banking institutions in New York, New
York, Bowling Green, Ohio or Wilmington, Delaware are authorized or required by
law or executive order to remain closed.
The Trust's revenue available for distribution to holders of the
capital securities will be limited to our payments to the Trust under our
exchange debentures. For more information, please refer to "Description of
Exchange Debentures -- General." If we do not make interest payments on the
exchange debentures, the property trustee will not have funds available to pay
distributions on the capital securities. Our guarantee only covers 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 Exchange Guarantee"
for more information about the extent of our guarantee.
OPTION TO DEFER INTEREST PAYMENTS
As long as no event of default under the exchange debentures exists, we
have the right under the indenture to elect to defer the payment of interest on
the exchange debentures, at any time or from time to time, for no more that 10
consecutive semi-annual periods, provided that no deferral period will end on a
date other than an interest payment date, or extend beyond the maturity date of
the junior subordinated debentures. If we defer payments, the Trust will defer
semi-annual distributions on the capital securities during the deferral period.
During any deferral period, distributions will continue to accumulate on the
exchange capital securities and on any accumulated and unpaid distributions,
compounded semi-annually from the relevant distribution date at the applicable
distribution rate, which will be equal to the applicable interest rate on the
exchange 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 10
consecutive semi-annual periods or to end on a date other than an interest
payment date or extend beyond the maturity date. At the end of any deferral
period and upon the payment of all amounts then due on 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.
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There is no limitation on the number of times that we may elect to
begin a deferral period. Please refer to "Description of Exchange 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;
- 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 exchange debentures; or
- make any guarantee payments with respect to any guarantee of
the debt securities of any of our subsidiaries if such
guarantee ranks equal or junior to the exchange debentures.
Notwithstanding the foregoing, during a deferral period the following
is permitted:
- a payment of dividends or distributions in shares of, or
options, warrants or rights to subscribe for or purchase
shares of, our common shares;
- a declaration of a dividend in connection with the
implementation of a shareholders' 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;
- a payment under the guarantee;
- a reclassification of our capital stock into other capital
stock or the exchange or conversion of one class or series of
our capital stock for another class or series of our capital
stock;
- the purchase of fractional interests in shares of our capital
stock pursuant to the conversion or exchange provisions of
such capital stock or the security being converted or
exchanged; and
- the purchase of common shares related to the issuance of
common shares or rights under any of our benefit plans for our
directors, officers or employees or our dividend reinvestment
plan.
We do not currently intend to exercise our right to defer payments of
interest on the exchange debentures.
REDEMPTION
Upon repayment at maturity on May 1, 2030 or prepayment, in whole or in
part prior to May 1, 2030, of the junior subordinated debentures (other than
following the distribution of the exchange debentures to you as a holder of the
exchange 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
junior 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 for capital securities and common securities having
an aggregate liquidation amount equal to the principal amount of the junior
subordinated debentures paid to the Trust. The Trust will give notice of any
redemption of capital securities between 30 to 60 days prior to the redemption
date.
If we prepay less than all of the junior subordinated debentures on the
stated maturity date or 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.
We will have the right to prepay the exchange debentures:
- in whole or in part, on or after May 1, 2010; and
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- in whole but not in part, at any time, 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 junior subordinated debentures.
We may have to obtain regulatory approval, including the approval of
the Ohio Division of Financial Institutions, before we redeem any junior
subordinated debentures. Please refer to "Description of Exchange Debentures --
Optional Prepayment" and "-- Special Event Prepayment" for information on
prepayment of the exchange debentures.
LIQUIDATION OF THE TRUST AND DISTRIBUTION OF EXCHANGE DEBENTURES
We 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 exchange debentures to
the holders of the exchange 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
exchange debentures, the holders of the exchange capital
securities will not experience a taxable event; and
- all required regulatory approvals.
The Trust will automatically dissolve if:
- certain bankruptcy events occur, or we dissolve or liquidate;
- we distribute junior subordinated debentures having a
principal amount equal to the liquidation amount of the
capital securities and the common securities to holders of
such securities and we, as sponsor, 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 sponsor);
- the Trust redeems all of the capital securities and common
securities in accordance with their terms;
- the Trust's term expires; or
- a court of competent jurisdiction enters an order for the
dissolution of the Trust.
If the Trust is dissolved for any of the above reasons, except for a
redemption of all capital securities and the common securities, it will be
liquidated by the administrative trustees as quickly as they determine to be
possible by distributing to holders of the capital securities and the common
securities, after satisfying the liabilities owed to the Trust's creditors, as
provided by applicable law, junior subordinated debentures having a principal
amount equal to the liquidation amount of the capital securities and the common
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 of the 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
an event of default under the junior subordinated debentures 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 junior
subordinated debentures to holders of the capital securities:
- the capital securities will no longer be deemed to be
outstanding;
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- DTC or its nominee will receive in respect of each registered
global certificate representing capital securities a
registered global certificate representing the junior
subordinated debentures to be delivered upon this
distribution; and
- any certificates representing capital securities not held by
DTC or its nominee will be deemed to represent junior
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 debenture
trustee will authenticate, a certificate representing the
junior subordinated debentures.
We cannot assure you of the market prices for the exchange capital
securities or the exchange debentures that may be distributed to you in exchange
for the exchange capital securities if a dissolution and liquidation of the
Trust were to occur. Accordingly, the exchange capital securities that you
purchase, or the exchange 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 exchange capital securities.
If we elect not to prepay the exchange debentures prior to maturity and
either elect not to or we are unable to liquidate the Trust and distribute the
exchange debentures to holders of the exchange capital securities, the exchange
capital securities will remain outstanding until the repayment of the exchange
debentures on May 1, 2030.
REDEMPTION PROCEDURES
If we redeem the exchange debentures, the Trust will redeem exchange
capital securities at the applicable redemption price with the proceeds that it
receives from our redemption of the exchange debentures. Any redemption of
exchange capital 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."
If the Trust gives a notice of redemption for the exchange 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 exchange 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. For more information, you should
refer to "-- Form, Denomination, Book-Entry Procedures and
Transfers."
- the exchange 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
exchange 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 exchange capital
securities on the relevant record dates for the related distribution dates.
Notice of any redemption will be mailed between 30 and 60 days before the
redemption date to each holder of exchange capital securities at its registered
address.
If any redemption date for the exchange 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 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 exchange capital
securities called for redemption will
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cease, except the right of the holders of the exchange capital securities to
receive the applicable redemption price, without interest, and the exchange
capital securities called to be redeemed will cease to be outstanding.
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:
- distributions on the exchange capital securities will continue
to accumulate from the redemption date originally established
by the Trust to the date such applicable redemption price is
actually paid; and
- the actual payment date will be the redemption date for
purposes of calculating the applicable redemption price.
Unless we default in payment of the applicable redemption price on, or
in the repayment of, the exchange debentures, on and after the redemption date,
distributions will cease to accrue on the exchange capital securities called for
redemption.
Subject to applicable law, including, without limitation, federal
securities laws, we or our subsidiaries may at any time, and from time to time,
purchase outstanding exchange capital securities in the open market or by
private agreement.
SUBORDINATION OF COMMON SECURITIES
Payment of distributions on, the redemption price of, and the
liquidation distribution for, the capital securities and the common securities,
as applicable, will generally be made on a pro rata basis. However, if an event
of default under the junior subordinated debentures exists on any distribution,
redemption or liquidation date, no payment of any distribution on, or applicable
redemption price of, or liquidation distribution for, 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, redemption or liquidation date, or payment of the applicable
redemption price or liquidation distribution 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, or liquidation
distribution for, the capital securities then due and payable.
In the case of any event of default under the trust agreement, 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 junior subordinated debentures
constitutes an event of default under the trust agreement. See "Description of
Exchange Debentures -- Debenture Events of Default."
The trust agreement provides that within ten (10) 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 an event of default under the junior subordinated debentures exists,
the capital securities will have a preference over the common securities as
described under "-- Liquidation of the Trust and Distribution of Exchange
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 exchange capital securities prior to May 1, 2030.
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REMOVAL OF ISSUER TRUSTEES
Unless an event of default under the junior subordinated debentures
exists, we may remove the property trustee and the Delaware trustee at any time.
If an event of default under the junior subordinated debentures 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 or the Delaware trustee is a 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 or the Delaware 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 all or 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 Exchange Debentures." The Trust may, at our request, as sponsor,
and with the consent of the administrative trustees (but without the consent of
the property trustee, the Delaware Trustee or the holders of the capital
securities), merge with or into, consolidate, amalgamate or be replaced by or
convey, transfer or lease all or substantially all of its properties and assets
to a trust organized as such under the laws of any state; provided, that:
- the successor either:
(i) expressly assumes all of the obligations of the Trust
with respect to the capital securities; or
(ii) substitutes securities for the capital securities
that have substantially the same terms as the capital
securities so long as the substitute securities rank
equal to the capital securities in priority with
respect to distributions and payments upon
liquidation, redemption and otherwise;
- we appoint a trustee of the successor possessing the same
powers and duties as the property trustee with respect to the
debentures;
- 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 exchange capital securities are then listed or
quoted, if any;
- if the capital securities, substitute securities or junior
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 any such rating organization;
- 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;
- the successor has a purpose substantially identical to that of
the Trust;
- prior to the transaction, we receive an opinion from
independent counsel to the Trust experienced in such matters
to the effect that:
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(i) 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);
(ii) following the transaction, neither the Trust nor the
successor will be required to register as an
investment company under the Investment Company Act;
and
(iii) the Trust continues to be, and any successor will be,
classified as a grantor trust for U. S. federal
income tax purpose, and
- we, or any permitted successor or assignee, own all of the
common securities of the successor and guarantee the
obligations of the successor under the substitute securities
at least to the extent provided by our guarantee and the
common securities guarantee.
Notwithstanding the foregoing, the Trust may 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 all or substantially all 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
not to be classified as a grantor trust for 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 Exchange
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, 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, 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;
- 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 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; or
- modify, eliminate or add any provisions of the trust agreement
as is necessary to enable us or the Trust to conduct an
exchange offer in the manner contemplated by the registration
rights agreement;
provided, however, that 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 exchange capital
securities.
We, together with the property trustee and the administrative trustees,
may amend the trust agreement:
- with the consent of holders of a majority in liquidation
amount of the outstanding capital securities; and
- upon receipt by the property trustee and the administrative
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 property trustee and the administrative
trustees 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.
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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 or otherwise adversely affect the amount of any distribution required
to be made in respect of the capital securities as of a specified date; change
any of the prepayment provisions; or restrict the right of a holder of capital
securities to sue for the enforcement of any payment on or after the specified
date.
So long as the property trustee holds any junior subordinated
debentures, 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 junior 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 junior
subordinated debentures; or
- consent to any amendment, modification or termination of the
indenture or the junior 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 junior subordinated debentures affected by the amendment, modification
or termination, the property trustee will not give its consent without the prior
approval of each holder of the capital securities.
The trustees will 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 junior
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 U.S. 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 is to be taken, to
be given to each holder 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 Trust, the trustees or any
affiliates thereof shall, for purposes of such vote or consent, be treated as if
they were not outstanding.
FORM, DENOMINATION, BOOK-ENTRY PROCEDURES AND TRANSFER
The exchange capital securities initially will be represented by one or
more exchange capital securities in registered, global form (collectively, the
global capital securities). The global capital securities will be deposited upon
issuance with the property trustee as custodian for DTC, in Wilmington,
Delaware, and registered in the name of DTC or its nominee, in each case for
credit to an account of a direct or indirect participant in DTC as described in
this prospectus.
In the event that exchange capital securities are issued in
certificated form, the exchange capital securities will be in blocks having a
liquidation amount of not less than $100,000 (100 exchange capital securities)
and may be transferred or exchanged only in such blocks in the manner described
in this prospectus.
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Except as set forth in this prospectus, the global capital securities
may be transferred, in whole and not in part, only to another nominee of DTC or
to a successor of DTC or its nominee and only in amounts that would not cause a
holder to own less than 100 exchange capital securities. Beneficial interests in
the global capital securities may not be exchanged for exchange capital
securities in certificated form, except in the limited circumstances described
below. See "-- Exchange of Book-Entry Capital Securities for Certificated
Capital Securities."
DEPOSITARY PROCEDURES
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 initial
purchaser), 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, upon deposit of the global capital securities:
- DTC will credit the accounts of participants designated by the
initial purchaser with the designated liquidation amount of
the global capital securities, and
- ownership of beneficial 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).
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" and "-- Exchange of Certificated Capital
Securities for Book-Entry Capital Securities."
Except as described below, owners of beneficial interests in the global
capital securities will not have exchange capital securities registered in their
name, will not receive physical delivery of exchange capital securities in
certificated form and will not be considered the registered owners or holders
thereof under the trust agreement for any purpose.
Payments 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 whatsoever. Neither the property trustee nor any agent
thereof has or will have any responsibility or liability for:
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- 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 exchange 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
exchange 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 exchange
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 us, the Trust or 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 exchange capital securities, and we,
the Trust 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 exchange capital securities (including, without
limitation, presenting the exchange 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 exchange 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 exchange capital securities in certificated form and to
distribute the certificated exchange 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
us, the Trust or 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.
EXCHANGE OF BOOK-ENTRY CAPITAL SECURITIES FOR CERTIFICATED CAPITAL SECURITIES
A global capital security is exchangeable for exchange capital
securities in registered certificated form if:
- 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 DTC 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;
- we, in our sole discretion, elect to cause the exchange
capital securities to be issued in certificated form; or
- 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.
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In addition, beneficial interests in a global capital security will be
exchanged by or on behalf of DTC for certificated exchange capital securities
upon request by DTC, but only upon at least 20 days' prior written notice given
to the property trustee in accordance with DTC's customary procedures. In all
cases, certificated exchange capital securities delivered in exchange for any
global capital security 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 any global capital security to DTC,
which will credit the relevant accounts at DTC on the applicable distribution
dates. The Trust will make payments on the exchange 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 to us) to act as paying agent.
RESTRICTIONS ON TRANSFER
The exchange capital securities will be issued, and may be transferred,
only in blocks having a liquidation amount of not less than $100,000 (100
exchange capital securities) and multiples of $1,000 in excess thereof. Any
attempted sale, transfer or other disposition of exchange capital securities in
a block having a liquidation amount of less than $100,000 will be deemed to be
void and of no legal effect whatsoever. Any such purported transferee will be
deemed not to be the holder of such exchange capital securities for any purpose,
including but not limited to the receipt of distributions on such exchange
capital securities, and such purported transferee will be deemed to have no
interest whatsoever in such exchange capital securities.
REGISTRAR AND TRANSFER AGENT
The property trustee will act as registrar and transfer agent for the
exchange capital securities.
The Trust will register transfers of the exchange 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 exchange capital securities registered
after they have been called for redemption.
INFORMATION CONCERNING THE PROPERTY TRUSTEE
Except if an event of default exists under the trust agreement, the
property trustee will undertake to perform only the duties specifically set
forth in the trust agreement. While an event of default exists, the property
trustee must exercise the same degree of care and skill as a prudent person
would exercise or use in the conduct of its 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 exchange
capital 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
or to 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 exchange 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 exchange 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 so that:
- the Trust will not be deemed to be an investment company
required to be registered under the Investment Company Act;
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- the Trust will be classified as a grantor trust for federal
income tax purposes; and
- the exchange debentures will be treated as our indebtedness
for 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
or similar rights.
The Trust may not borrow money, issue debt, execute mortgages or pledge
any of its assets.
GOVERNING LAW
The trust agreement and capital securities will be governed by and
construed in accordance with the laws of the State of Delaware, without regard
to conflict of law principles.
DESCRIPTION OF EXCHANGE DEBENTURES
This summary describes the material provisions of the exchange
debentures. It is not complete and is subject to, and qualified in its entirety
by, the indenture. The indenture will be qualified under the Trust Indenture
Act.. We have incorporated the definitions used in the indenture in this
prospectus. You can obtain a copy of the indenture by requesting it from Sky
Financial. Wilmington Trust Company will act as debenture trustee under the
indenture.
GENERAL
The Trust invested the proceeds from the sale of the capital securities
and the common securities in the original junior subordinated debentures issued
by us. The original junior subordinated debentures bear interest at the annual
rate of 9.34% of the principal amount of the original junior subordinated
debentures, payable semi-annually in arrears on interest payment dates of May
1st and November 1st of each year to the person in whose name each original
junior subordinated debentures is registered at the close of business on the
relevant record date. The exchange debentures will have terms identical in all
material respects to the original junior subordinated debentures, except that
the exchange debentures will not have certain terms with respect to transfer
restrictions under the Securities Act and will not provide for any liquidated
damages. The first interest payment date for the exchange debentures will be
November 1, 2000. The period beginning on and including the date the exchange
debentures are first issued and ending on, but excluding, November 1, 2000 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
junior 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.
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 9.34% per year, compounded semi-annually, from the last interest payment date
for which interest was paid. The term "interest" as used in this prospectus
includes semi-annual interest payments and interest on semi-annual interest
payments not paid on the applicable interest payment date.
Notwithstanding anything to the contrary above, if the stated maturity
date or date of earlier redemption falls on a day that is not a business day,
the payment of principal, premium, if any, and interest will be paid on the next
business day, with the same force and effect as if made on such date, and no
interest on such payments will accrue from and after such date.
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The exchange debentures will be issued as a series of exchange
deferrable interest debentures under the indenture.
The exchange debentures will mature on May 1, 2030, unless redeemed
prior thereto in accordance with the terms discussed below.
The exchange debentures have been rated "baa1" by Moody's Investors
Service, "BB+" by Standard & Poor's, "BBB-" by Duff & Phelps Credit Rating Co.
and "BBB" by Thomson Financial BankWatch. See "Ratings."
The junior 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 of our senior indebtedness to the extent and
in the manner set forth in the indenture. See "-- Subordination." At December
31, 1999, we had other junior subordinated debentures that totaled $48.6 million
and rank equal to the exchange debentures.
We are a registered bank holding company regulated by the Federal
Reserve Board and our bank subsidiaries are regulated by the Ohio Divisions of
Financial Institutions (referred to as the Ohio Bank Regulator). We rely
primarily on dividends from our bank subsidiaries to meet our obligations for
payment of corporate expenses, to pay cash dividends to our common and preferred
stockholders and to engage in share repurchase programs, and will rely on such
dividends to pay principal, premium and interest on the exchange debentures and
make payments under the exchange guarantee. The Ohio Bank Regulator limits all
capital distributions by our bank subsidiaries directly or indirectly to us,
including dividend payments. Each bank subsidiary is required by law to obtain
the prior approval of the Ohio Bank Regulator for the declaration and payment of
dividends if the total of all dividends declared by the board of directors of
such bank will exceed the total of:
- such bank's net profits (as defined and interpreted by
regulation) for that year, plus
- the retained net profits (as defined and interpreted by
regulation) for the preceding two years.
The payment of dividends by us and our subsidiaries is also affected by
various regulatory requirements and policies, such as the requirement to
maintain capital at or above regulatory guidelines. In addition, if, in the
opinion of the applicable regulatory authority, a bank under its jurisdiction is
engaged in or is about to engage in an unsafe or unsound practice (which,
depending upon the financial condition of the bank, could include payment of
dividends), such authority may require, after notice and hearing, that such bank
cease and desist from such practice. The Federal Reserve Board and the Ohio Bank
Regulator have each indicated that paying dividends that deplete a bank's
capital base to an inadequate level would be an unsafe and unsound banking
practice. The Federal Reserve Board, Ohio Bank Regulator and Federal Deposit
Insurance Corporation have issued policy statements which provide that bank
holding companies and insured banks should generally only pay dividends out of
current operating earnings.
At December 31, 1999, we had approximately $40.6 million available for
the payment of dividends to us without further approval from the Ohio Bank
Regulator.
We cannot assure you that our bank subsidiaries will be able to pay
dividends at past levels, or at all, in the future. See the section entitled
"Regulation and Supervision" in our Annual Report on Form 10-K for the year
ended December 31, 1999, which is incorporated in this prospectus by reference.
In addition to regulatory restrictions on the payment of dividends, the
Bank Holding Company Act of 1956, as amended, imposes certain restrictions upon
dealing by affiliated banks with the holding company and among themselves
including restrictions on interbank borrowing and upon dealings in respect of
the securities or obligations of the holding company or other affiliates.
If we do not receive cash dividends or borrowings from our bank
subsidiaries in an amount adequate to pay the interest on the exchange
debentures, then it is unlikely that we will have sufficient funds to make
payments on the exchange debentures and the exchange guarantee. If we do not
make payments of the exchange debentures, then the Trust will not have
sufficient funds to make payments to you on the exchange capital securities.
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Because we are a bank holding company, our right to participate in any
distribution of assets of any subsidiary, upon such subsidiary's liquidation or
reorganization or otherwise (and thus the ability of holders of the exchange
capital securities to benefit indirectly from such distribution), is subject to
the prior claims of creditors of that subsidiary (including depositors, in the
case of the bank subsidiaries), except to the extent that we may be recognized
as a creditor of that subsidiary. At December 31, 1999, our subsidiaries had
total liabilities, including deposits, of $7.5 billion. Furthermore, the junior
subordinated debentures will rank equal to all other junior subordinated
debentures. Accordingly, the exchange debentures will be effectively
subordinated to all existing and future liabilities of our subsidiaries
(including the bank subsidiaries' deposit liabilities) and all liabilities of
any of our future subsidiaries. The indenture does not limit the incurrence or
issuance of other secured or unsecured debt by us or any subsidiary, including
senior indebtedness. See "-- Subordination." At December 31, 1999, we had senior
debt totaling $134 million.
FORM, REGISTRATION AND TRANSFER
If the exchange debentures are distributed to the holders of the
exchange capital securities, the exchange 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 exchange debentures are expected to
be substantially similar to those in effect for the exchange 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 Exchange Capital Securities -- Form,
Denomination, Book-Entry Procedures and Transfer."
PAYMENT AND PAYING AGENTS
Payment of principal of (and premium, if any) and interest on the
exchange debentures will be made at the office of the debenture trustee in
Wilmington, Delaware 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 exchange 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 exchange 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 exchange debenture will be made to the
person or entity in whose name the exchange 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 exchange 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 of (or premium, if
any) or interest on any exchange debenture and remaining unclaimed for two years
after such principal (or premium, if any) or interest has become due and payable
shall, at our request, be repaid to us and the holder of the exchange debenture
shall thereafter look, as a general unsecured creditor, only to us for payment.
OPTION TO EXTEND INTEREST PAYMENT DATE
So long as no event of default under the junior subordinated debentures
exists, we will have the right under the indenture to defer the payment of
interest on the junior subordinated debentures, at any time and from time to
time, for no more than 10 consecutive semi-annual periods, provided that no
deferral period shall end on a date other than an interest payment date or
extend beyond the maturity date. At the end of a deferral period, we must pay
all interest then accrued and unpaid (together with interest thereon at the rate
of 9.34% per year, compounded semi-annually from the last interest payment date
to which interest was paid, to the extent permitted by applicable law).
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During a deferral period, interest will continue to accrue, and holders of the
exchange capital securities or, if the exchange debentures have been
distributed to holders of the exchange capital securities, holders of exchange
debentures, will be required to include that deferred interest in gross income
for federal income tax purposes on an accrual method of accounting prescribed
by the Code and Treasury regulation provisions on original issue discount prior
to the receipt of cash attributable to that income. See "Certain Federal Income
Tax Consequences -- Interest Income and Original Issue Discount."
During any such 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;
- 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 exchange
debentures; or
- 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 exchange capital securities of
the Trust and any other guarantees) if such guarantee ranks
equal or junior to the junior subordinated debentures other
than:
(i) dividends or distributions in shares of, or options,
warrants or rights to subscribe for or purchase
shares of, our common stock;
(ii) any declaration of a dividend in connection with the
implementation of a shareholders' rights plan, or the
issuance of stock under any such plan in the future,
or the redemption or repurchase of any rights
pursuant thereto;
(iii) payments under the guarantees;
(iv) as a result of a reclassification of our capital
stock or the exchange or conversion of one class or
series of our capital stock for another class or
series of our capital stock;
(v) 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
(vi) purchases of our common shares related to the
issuance of common shares or rights under any of our
benefit plans for our directors, officers or
employees or any of our dividend reinvestment plans.
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 10 consecutive semi-annual periods, to end on a
date other than an interest payment date or to extend beyond the maturity date.
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 9.34% per year,
compounded semi-annually, to the extent permitted by applicable law), we may
elect to begin a new deferral period, subject to the requirements set forth in
this prospectus. No interest will 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:
- the date the distributions on the capital securities would
have been payable, except for the election to begin or extend
such deferral period; or
- the date the administrative trustees are required to give
notice to any securities exchange or automated quotation
system on which the exchange 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 in any event not less than five business days
prior to such record date.
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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.
We do not currently intend to exercise our option to defer payments of
interest on the junior subordinated debentures.
OPTIONAL PREPAYMENT
The junior subordinated debentures will be prepayable, in whole or in
part, at our option on or after May 1, 2010, subject to our receipt of any
required regulatory approval, at an optional prepayment price equal to the
percentage of the outstanding principal amount of the junior subordinated
debentures specified below, plus, in each case, accrued and unpaid interest on
the junior subordinated debentures, if any, to the date of prepayment if
redeemed during the 12-month period beginning May 1 of the years indicated
below:
YEAR PERCENTAGE
---- ----------
2010............................................. 104.670%
2011............................................. 104.203%
2012............................................. 103.736%
2013............................................. 103.269%
2014............................................. 102.802%
2015............................................. 102.335%
2016............................................. 101.868%
2017............................................. 101.401%
2018............................................. 100.934%
2019............................................. 100.467%
2020 and thereafter.............................. 100.000%
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 junior subordinated debentures, we may, at our option and at any time,
subject to our receipt of any required regulatory approval, prepay the junior
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. The special event
prepayment price will be an amount equal to the greater of:
- 100% of the principal amount of the junior subordinated
debentures, or
- the sum, as determined by a quotation agent referred to below,
of the present values of the remaining scheduled payments of
principal and interest on the junior subordinated debentures
from the prepayment date to the stated maturity date,
discounted to the prepayment date on a semi-annual basis
(assuming a 360-day year consisting of twelve 30-day months)
at the adjusted treasury rate,
plus, in the case of each of the above scenarios, accrued and unpaid interest
and liquidated damages, if any, to the date of prepayment.
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:
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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 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 are first issued, the
exchange 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:
- 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 federal income tax with respect to any
income received or accrued on the junior subordinated
debentures;
- interest payable by us on the junior subordinated debentures
is not, or within 90 days of the date of such opinion will not
be, deductible by us, in whole or in part, for 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.
Adjusted treasury rate means, with respect to a prepayment date, the
rate per annum equal to:
- the yield, under the heading which represents the average for
the immediately prior week, appearing in the most recently
published statistical release designated "H.15 (519)" or any
successor publication which is published weekly by the Federal
Reserve Board and which established yields on actively traded
United States Treasury securities adjusted to constant
maturity under the caption "Treasury Constant Maturities," for
the maturity corresponding to the remaining life, defined
below (if no maturity is within three months before or three
months after the maturity corresponding to the remaining life,
yields for the two published maturities most closely
corresponding to the remaining life shall be determined, and
the adjusted treasury rate
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shall be interpolated or extrapolated from such yields on a
straight-line basis, rounding to the nearest month), or
- if such release (or any successor release) is not published
during the week preceding the calculation date or does not
contain such yields, the rate per annum equal to the
semi-annual equivalent yield to maturity of the comparable
treasury issue, calculated using a price for the comparable
treasury issue (expressed as a percentage of its principal
amount) equal to the comparable treasury price for such
prepayment date,
plus: 281 basis points.
Comparable treasury issue means the United States Treasury security
selected by the quotation agent (defined below) having a maturity comparable to
the remaining life of the junior subordinated debentures that would be utilized,
at the time of selection and in accordance with customary financial practice, in
pricing new issues of corporate debt securities of comparable maturity to the
remaining life. If no United States Treasury security has a maturity which is
within a period from three months before to three months after the remaining
life, the two most closely corresponding United States Treasury securities, as
selected by the quotation agent, shall be used as the comparable treasury issue,
and the adjusted treasury rate shall be interpolated or extrapolated on a
straight-line basis, rounding to the nearest month, using such securities.
Comparable treasury price means, with respect to a prepayment date:
- the average of three reference treasury dealer quotations for
such prepayment date, after excluding the highest and lowest
such reference treasury dealer quotations, or
- if the quotation agent obtains fewer than five such reference
treasury dealer quotations, the average of all such reference
treasury dealer quotations.
Quotation agent means the reference treasury dealer appointed by us.
Reference treasury dealer means a nationally recognized U.S. Government
securities dealer in New York, New York selected by us.
Reference treasury dealer quotations means, with respect to each
reference treasury dealer and the prepayment date, the average, as determined by
the debenture trustee, of the bid and asked prices for the comparable treasury
issue (expressed in each case as a percentage of its principal amount) quoted in
writing to the debenture trustee by such reference treasury dealer at 5:00 p.m.,
New York time, on the third business day preceding such prepayment date.
Remaining life means the term of the junior subordinated debentures
from the prepayment date to the stated maturity date.
We will mail any notice of prepayment between 30 and 60 days before the
prepayment date to each holder of exchange 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 exchange 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 junior 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 OF SKY FINANCIAL
We will covenant that we will 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;
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- 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 junior
subordinated debentures; or
- 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 junior
subordinated debentures, other than:
(i) dividends or distributions in shares of, or options,
warrants or rights to subscribe for or purchase
shares of, our common shares;
(ii) any declaration of a dividend in connection with the
implementation of a shareholders' 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;
(iii) payments under the guarantees;
(iv) as a result of a reclassification of our capital
stock or the exchange or conversion of one class or
series of our capital stock for another class or
series of our capital stock;
(v) 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
(vi) purchases of our common shares related to the
issuance of common shares 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, an event of default under the junior subordinated
debentures and that we have not taken reasonable steps to
cure;
- we are in default with respect to our payment obligations
under the guarantees; or
- we have given notice of our election to exercise our right to
defer interest payments on the junior 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 remain outstanding, we also will
covenant:
- to directly or indirectly 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 junior 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 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 junior subordinated debentures; and
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- 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 junior subordinated debentures, amend the
indenture for specified purposes, including, among other things, curing
ambiguities, defects or inconsistencies or enabling us and the Trust to conduct
an exchange offer as contemplated by the registration rights agreement, provided
that any amendment to the indenture does not materially adversely affect the
interest of the holders of junior 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 junior subordinated
debentures, to modify the indenture in a manner affecting the rights of the
holders of the junior subordinated debentures; provided that no modification
may, without the consent of the holders of each outstanding junior subordinated
debenture affected:
- change the stated maturity date, or reduce the principal
amount, of the junior 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.
Refer to "-- Option to Extend Interest Payment Date" for
additional information;
- change any of the prepayment provisions;
- make the principal of, (or premium, if any) or interest on,
the junior subordinated debentures payable in any coin or
currency other than that provided in the junior subordinated
debentures;
- impair or affect the right of any holder of junior
subordinated debentures to institute suit for the payment
thereof; or
- reduce the percentage of the principal amount of the junior
subordinated debentures, the holders of which are required to
consent to any such modification.
EVENTS OF DEFAULT UNDER THE EXCHANGE DEBENTURES
An event of default under the junior subordinated debentures means:
- our failure for 30 days to pay any interest (including
compounded interest and additional sums, if any) or liquidated
damages, if any, on the junior subordinated debentures or any
other similar debentures when due (subject to the deferral of
any interest due date in the case of a deferral period with
respect to the exchange debentures or other similar
debentures, as the case may be);
- our failure to pay any principal or premium, if any, on the
junior subordinated debentures or any other similar debentures
when due, whether at maturity, upon prepayment, by
accelerating the maturity or otherwise;
- 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 exchange debentures;
or
- certain events related to our bankruptcy, insolvency or
reorganization.
The holders of a majority in aggregate outstanding principal amount of
the junior 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
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outstanding principal amount of the junior subordinated debentures may declare
the principal due and payable immediately upon an event of default under the
junior subordinated debentures. The holders of a majority in aggregate
outstanding principal amount of the junior subordinated debentures may annul
this declaration and waive the default if the default (other than the
non-payment of the principal of the junior subordinated debentures which has
become due solely by such acceleration) has been cured and a sum sufficient to
pay all matured installments of interest and principal due otherwise than by
acceleration has been deposited with the debenture trustee.
The holders of a majority in aggregate outstanding principal amount of
the junior subordinated debentures affected may, on behalf of the holders of all
the junior subordinated debentures, waive any past default, except a default in
the payment of principal (or premium, if any) or interest (including compounded
interest and additional sums, if any) or liquidated damages, if any (unless such
default has been cured and a sum sufficient to pay all matured installments of
interest and principal (and premium, if any) due otherwise than by acceleration
has been deposited with the debenture trustee) or a default in respect of a
covenant or provision which under the indenture cannot be modified or amended
without the consent of the holder of each outstanding junior subordinated
debenture.
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 junior subordinated
debentures if the debenture trustee considers it in the interest of the holders
to do so.
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF EXCHANGE CAPITAL SECURITIES
If an event of default under the junior subordinated debentures exists
that is attributable to our failure to pay the principal of (or premium, if any)
or interest (including compounded interest and additional sums, if any) or
liquidated damages, if any, on the exchange debentures on the due date, a holder
of exchange capital securities may institute a direct action against us. We may
not amend the 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 exchange capital
securities in connection with a direct action, we shall remain obligated to pay
the principal of (and premium, if any) and interest on the exchange debentures,
and we shall be subrogated to the rights of the holder of the exchange capital
securities with respect to payments on the exchange capital securities to the
extent that we make any payments to a holder in any direct action.
The holders of the exchange 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 exchange debentures, unless an event
of default exists under the trust agreement. See "Description of Exchange
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 junior subordinated debentures;
- immediately after giving effect to the transaction, no event
of default under the junior subordinated debentures, and no
event which, after notice or lapse of time or both, would
become an event of default under the junior subordinated
debentures, exists; and
- certain other conditions as prescribed in the indenture are
met.
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The general provisions of the indenture do not afford holders of the
exchange 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 exchange debentures.
SATISFACTION AND DISCHARGE
The indenture provides that when, among other things,
- all junior subordinated debentures not previously delivered to
the debenture trustee for cancellation 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 junior
subordinated debentures not previously delivered to the
debenture trustee for cancellation, for the principal (and
premium, if any) and interest (including compounded interest
and additional sums, if any) to the date of the prepayment or
to May 1, 2030, as the case may be,
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 of our junior subordinated debentures issued
under the indenture will rank junior to all of our 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 involving us, the allocable amounts
in respect of the senior indebtedness must be paid in full before the holders of
the junior subordinated debentures will be entitled to receive or retain any
payment in respect thereof.
If the maturity of junior subordinated debentures is accelerated, the
holders of all senior indebtedness outstanding at such time will first be
entitled to receive payment in full of the allocable amounts in respect of such
senior indebtedness before the holders of junior subordinated debentures will be
entitled to receive or retain any payment in respect of the principal of (or
premium, if any) or interest, if any, on the junior subordinated debentures.
No payments on account of principal (or premium, if any) or interest,
if any, in respect of the junior subordinated debentures may be made if there is
a default in any payment of the allocable amounts in respect of the senior
indebtedness, or an event of default exists with respect to any such allocable
amounts that accelerate the maturity of such senior indebtedness, or if any
judicial proceeding shall be pending with respect to the default.
Allocable amounts, when used with respect to any senior indebtedness,
means all amounts due or to become due on such senior indebtedness less, if
applicable, any amount which would have been paid to, and retained by, the
holders of such senior indebtedness (whether as a result of the receipt of
payments by the holders of such senior indebtedness from us or any other obligor
thereon or from any holders of, or trustee in respect of, other indebtedness
that is subordinate and junior in right of payment to such senior indebtedness
pursuant to any provision of such indebtedness for the payment over of amounts
received on account of such indebtedness to the holders of such senior
indebtedness or otherwise) but for the fact that such senior indebtedness is
subordinate or junior in right of payment to (or subject to a requirement that
amounts received on such senior indebtedness be paid over to obligees on) trade
accounts payable or accrued liabilities arising in the ordinary course of
business.
Indebtedness for money borrowed means any of our obligations, 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.
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Indebtedness ranking on a parity with the junior 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 exchange debentures in the right of
payment upon the happening of our dissolution, winding-up,
liquidation or reorganization;
- 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 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
with or junior to the guarantees; and
- the securing of any indebtedness otherwise constituting
indebtedness ranking on a parity with the junior subordinated
debentures shall not be deemed to prevent such indebtedness
from constituting indebtedness ranking on a parity with the
junior subordinated debentures.
Indebtedness ranking junior to the junior 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 with or prior to the junior subordinated
debentures (and any other indebtedness ranking on a parity with the exchange
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
junior subordinated debentures shall not be deemed to prevent such indebtedness
for money borrowed from constituting indebtedness ranking junior to the junior
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 junior subordinated debentures or indebtedness ranking
junior to the junior subordinated debentures, and any deferrals, renewals or
extensions of the senior indebtedness.
We are a bank holding company regulated by the Federal Reserve Board,
the Ohio Bank Regulator and the Federal Deposit Insurance Corporation, and a
significant portion of our operating assets are owned by bank subsidiaries. We
rely primarily on dividends from our bank subsidiaries to meet our obligations
for payment of principal and interest on our outstanding debt obligations and
corporate expenses. We are a legal entity separate and distinct from our
subsidiaries. Holders of exchange debentures should look only to us for payments
on the exchange debentures. There are regulatory limitations on the payment of
dividends directly or indirectly to us from our bank subsidiaries. In addition,
our bank subsidiaries are subject to certain restrictions imposed by federal law
on any extensions of credit to, and certain other transactions with, us and
certain other affiliates, and on investments in stock or other securities
thereof. See "Regulation and Supervision" for a discussion of these dividend and
borrowing restrictions. Accordingly, the exchange debentures will be effectively
subordinated to all existing and future liabilities of our subsidiaries.
Because we are a bank holding company, our right to participate in any
distribution of assets of any subsidiary upon such subsidiary's liquidation or
reorganization or otherwise (and thus the ability of holders of the exchange
capital securities to benefit indirectly from such distribution), is subject to
the prior claims of creditors of that subsidiary (including depositors, in the
case of our bank subsidiaries), except to the extent we may be recognized as a
creditor of any such bank subsidiary. At December 31, 1999, our subsidiaries had
total liabilities, including deposits, of approximately $7.5 billion.
Furthermore, the junior subordinated debentures will rank equal to all other
junior subordinated debentures. Accordingly, the exchange debentures will be
effectively subordinated to all existing and future liabilities of our
subsidiaries (including our bank subsidiaries' deposit liabilities) and all
liabilities of any of our future subsidiaries. The indenture does not limit the
incurrence or issuance of other secured or unsecured debt of us or any
subsidiary, including senior indebtedness. See "Description of Exchange
Debentures -- Subordination." At December 31, 1999, we had senior debt totaling
$134 million.
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RESTRICTIONS ON TRANSFER
The exchange debentures will be issued and may be transferred only in
blocks having an aggregate principal amount of not less than $100,000 (100
exchange debentures) and multiples of $1,000 in excess thereof. Any attempted
transfer of exchange debentures in a block having an aggregate principal amount
of less than $100,000 will be deemed to be void and of no legal effect
whatsoever. Any such purported transferee shall be deemed not to be the holder
of such exchange debentures for any purpose, including but not limited to the
receipt of payments on such exchange debentures, and such purported transferee
shall be deemed to have no interest whatsoever in such exchange debentures.
GOVERNING LAW
The indenture and the exchange 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
Following the exchange offer and the qualification of the indenture
under the Trust Indenture Act, 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 such 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 exchange 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.
DESCRIPTION OF EXCHANGE GUARANTEE
We will execute and deliver the exchange guarantee at the same time the
exchange capital securities are issued. The exchange guarantee will be qualified
as an indenture under the Trust Indenture Act. The terms of the exchange
guarantee are identical in all material respects to the terms of the original
guarantee. This summary of the material provisions of the exchange guarantee is
not complete and is subject to, and qualified in its entirety by, the exchange
guarantee and the Trust Indenture Act. The guarantee trustee will hold the
exchange guarantee for the benefit of the holders of the exchange capital
securities. You can obtain a copy of the exchange guarantee by requesting it
from us. Wilmington Trust Company will act as guarantee trustee under the
exchange guarantee.
GENERAL
We will irrevocably agree to pay in full on a subordinated basis, to
the extent set forth in this prospectus, the following payments with respect to
the exchange capital securities to the extent not paid by the Trust:
- any accumulated and unpaid distributions required to be paid
on the exchange capital securities, to the extent that the
Trust has funds legally available at that time;
- the applicable redemption price with respect to the exchange
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 exchange 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 exchange capital
securities after satisfying the liabilities owed to the
Trust's creditors as required by applicable law.
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The exchange guarantee will rank subordinate and junior to all senior
indebtedness to the extent provided in the exchange guarantee and equal to all
other guarantees outstanding or created in the future. 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 exchange capital
securities or by causing the Trust to pay these amounts to the holders of the
exchange capital securities.
The exchange guarantee will be an irrevocable exchange guarantee on a
subordinated basis of the Trust's obligations under the exchange capital
securities, but will apply only to the extent that the Trust has funds
sufficient to make these payments. If we do not make payments on the exchange
debentures held by the Trust, then it will not be able to make the related
payments to you on the exchange capital securities and will not have funds
legally available. Please refer to the "Relationship among the Exchange Capital
Securities, the Exchange Debentures and the Exchange Guarantee" section of this
prospectus.
The holders of a majority in aggregate liquidation amount of the
exchange capital securities have the right to direct the time, method and place
of conducting any proceeding for any remedy available to the guarantee trustee
in respect of our guarantee or to direct the exercise of any trust power
conferred upon the guarantee trustee under our guarantee. If the guarantee
trustee fails to enforce the exchange guarantee, any holder of the exchange
capital securities may institute a legal proceeding directly against us to
enforce their rights under the exchange 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
exchange debentures, the Trust will lack funds for the payment of distributions
or amounts payable on redemption of the exchange capital securities or
otherwise, and the holders of the exchange capital securities will not be able
to rely upon the exchange guarantee for payment of such amounts. Instead, if an
event of default under the exchange debentures exists that is attributable to
our failure to pay principal of (or premium, if any) or interest on the exchange
debentures on a payment date, then any holder of exchange 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 of (or premium, if any)
or interest on such exchange debentures having a principal amount equal to the
aggregate liquidation amount of the exchange 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 exchange
capital securities in the direct action. Except as described in this prospectus,
holders of exchange capital securities will not be able to exercise directly any
other remedy available to the holders of the exchange debentures or assert
directly any other rights in respect of the exchange debentures. The trust
agreement provides that each holder of exchange capital securities, by accepting
the exchange capital securities, agrees to the provisions of the exchange
guarantee and the indenture.
We will, through our guarantee, the trust agreement, the exchange
debentures and the indenture, taken together, fully, irrevocably and
unconditionally guarantee all of the Trust's obligations under the exchange
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
exchange capital securities. You should refer to "Relationship among the
Exchange Capital Securities, the Exchange Debentures and the Exchange Guarantee"
for more information about our guarantee.
STATUS OF THE EXCHANGE GUARANTEE
Our guarantee will constitute an unsecured obligation and will rank
subordinate and junior to all senior indebtedness in the same manner as the
exchange debentures. See "Description of Exchange Debentures -- Subordination."
In addition, because we are a holding company, our right to participate in any
distribution of the assets of our subsidiaries, including our bank subsidiaries,
upon their liquidation or reorganization or otherwise is subject to the prior
claims of their creditors (including our bank subsidiaries' depositors), except
to the extent we may be recognized as their creditor. Accordingly, our
obligations under the exchange guarantee effectively will be subordinated to all
existing and future liabilities of our present and future subsidiaries
(including depositors of our bank subsidiaries). As a result, claimants should
look only to our assets for payments under the exchange guarantee. See
"Description of Exchange 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 exchange capital securities does not limit the amount of secured
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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 exchange guarantee without
first instituting a legal proceeding against any other person or entity. Our
exchange guarantee will not be discharged, except by payment of the exchange
guarantee payments in full to the extent that the Trust has not paid, or upon
distribution of the exchange debentures to, the holders of the exchange capital
securities.
EVENTS OF DEFAULT
There will be an event of default under the exchange guarantee if we
fail to perform any of our payment or other obligations under the exchange
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. 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.
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes that do not materially adversely
affect the rights of holders of the exchange capital securities (in which case
no approval will be required), the exchange 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 Exchange
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 exchange guarantee shall bind our successors,
assigns, receivers, trustees and representatives and shall inure to the benefit
of the holders of the exchange capital securities then outstanding.
TERMINATION OF THE EXCHANGE GUARANTEE
Our guarantee will terminate and be of no further force and effect
upon:
- full payment of the applicable redemption price of all
outstanding exchange capital securities;
- full payment of the liquidation amount payable upon
liquidation of the Trust; or
- distribution of exchange debentures to the holders of the
exchange 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 exchange capital securities
must restore payment of any sums paid under the exchange capital securities or
the exchange guarantee.
GOVERNING LAW
The exchange guarantee will be governed by and construed in accordance
with the laws of the State of New York, without regard to conflict of law
principles.
INFORMATION CONCERNING THE GUARANTEE TRUSTEE
The guarantee trustee, except if we default under the exchange
guarantee, will undertake to perform only such duties as are specifically set
forth in the exchange guarantee and, in case a default with respect to the
exchange guarantee has occurred, must exercise the same degree of care and skill
as a prudent person would exercise or use in the conduct of its own affairs.
Subject to this provision, the guarantee trustee will not be obligated to
exercise any of the powers vested in it by the exchange guarantee at the request
of any holder of the exchange capital securities unless it is offered reasonable
indemnity against the costs, expenses and liabilities that it might incur.
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DESCRIPTION OF ORIGINAL SECURITIES
We refer to the original capital securities, the original guarantee and
the original junior subordinated debentures collectively as the original
securities and refer to the exchange capital securities, the exchange guarantee
and the exchange debentures collectively as the exchange securities.
The terms of the original securities are identical in all materials
respects to the exchange securities, except that:
- original securities have not been registered under the
Securities Act, are subject to certain restrictions on
transfer and are entitled to certain rights under the
applicable registration rights agreement, which rights will
terminate upon consummation of the exchange offer, except
under limited circumstances;
- the exchange capital securities will not provide for any
increase in the distribution rate; and
- the exchange debentures will not provide for any liquidated
damages.
The original securities provide that, if a registration statement
relating to the exchange offer is not declared effective by the Commission on or
prior to the 180th date after the issue date, liquidated damages shall accrue on
the principal amount of the original junior subordinated debentures, and
additional distributions shall accumulate on the liquidation amount of the
original capital securities, each at a rate of 25 basis points per annum. In
addition, the original capital securities provide that, if the Trust has not
exchanged exchange capital securities for all original capital securities
validly tendered by the 45th day after the date on which the registration
statement is declared effective, the distribution rate borne by the original
capital securities will increase by 25 basis points per annum for the period
from the occurrence of such event until such time as the exchange offer has been
consummated. The exchange securities are not, and upon consummation of the
exchange offer, the original securities will not be, entitled to any such
additional interest or distributions. Accordingly, holders of original capital
securities should review the information set forth under "Risk Factors - Your
failure to exchange original capital securities may adversely affect your
ability to sell such securities" and "Description of Exchange Capital
Securities."
RELATIONSHIP AMONG THE EXCHANGE CAPITAL SECURITIES, THE
EXCHANGE DEBENTURES AND THE EXCHANGE GUARANTEE
FULL AND UNCONDITIONAL GUARANTEE
We will irrevocably guarantee payments of distributions and other
amounts due on the exchange capital securities to the extent the Trust has funds
legally available to pay such amounts as and to the extent set forth under
"Description of Exchange Guarantee." Taken together, our obligations under the
exchange debentures, the indenture, the trust agreement and the exchange
guarantee will provide a full, irrevocable and unconditional guarantee of the
Trust's payments of distributions and other amounts due on the exchange capital
securities. No single document standing alone or operating in conjunction with
fewer than all 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 exchange
capital securities.
If and to the extent that we do not make the required payments on the
exchange debentures, the Trust will not have sufficient funds to make its
related payments, including distributions on the exchange 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 exchange capital securities, is to institute a direct action against
us. Our obligations under the exchange 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
exchange debentures, the Trust will have sufficient funds to cover distributions
and other payments due on the exchange capital securities, primarily because:
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- the aggregate principal amount or prepayment price of the
exchange debentures will equal the aggregate liquidation
amount or redemption price, as applicable, of the exchange
capital securities;
- the interest rate and interest payment dates and other payment
dates on the exchange debentures will match the distribution
rate and distribution dates and other payment dates for the
exchange 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 exchange 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 EXCHANGE CAPITAL SECURITIES
You, as holder of exchange 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, allocable amounts in
respect of senior indebtedness, the subordination provisions of the indenture
provide that we cannot make payments in respect of the exchange debentures until
we have paid such allocable amounts in full or we have cured any payment default
or a payment default has been waived. Our failure to make required payments on
exchange debentures would constitute an event of default under the trust
agreement.
LIMITED PURPOSE OF THE TRUST
The exchange capital securities will represent beneficial interests in
the Trust, and the Trust exists for the sole purpose of issuing and selling the
capital securities and the common securities, using the proceeds from the sale
of the capital securities and the common securities to acquire our junior
subordinated debentures and engaging in only those other activities necessary,
advisable or incidental thereto. A principal difference between the rights of a
holder of an exchange capital security and a holder of an exchange debenture is
that a holder of an exchange debenture will be entitled to receive from us the
principal of (and premium, if any) and interest on exchange debentures held,
while a holder of exchange 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 exchange debentures are distributed to holders of the
exchange capital 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 exchange
capital securities will be entitled to receive, out of assets held by the Trust,
the liquidation distribution in cash. See "Description of Exchange Capital
Securities -- Liquidation of the Trust and Distribution of Exchange Debentures."
If we are voluntarily or involuntarily liquidated or bankrupted, the
property trustee, as holder of the exchange 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 premium,
if any) and interest, before any of our shareholders receive payments or
distributions. Since we will be the guarantor under the exchange 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 exchange capital securities), the
positions of a holder of exchange capital securities and a holder of exchange
debentures relative to other creditors and to our shareholders in the event of
our liquidation or bankruptcy are expected to be substantially the same.
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CERTAIN FEDERAL INCOME TAX CONSEQUENCES
In the opinion of Squire, Sanders & Dempsey L.L.P., special federal
income tax counsel to us and the Trust, the following describes the material
federal income tax consequences of the purchase, ownership and disposition of a
capital security.
This summary is based on the Internal Revenue Code of 1986, as amended
(the Code), Treasury regulations thereunder, and administrative and judicial
interpretations thereof, each as of the date hereof, all of which are subject to
change, possibly on a retroactive basis. The authorities on which this general
summary is based are subject to various interpretations, and any statement
expressed herein is not binding on the IRS or the courts, either of which could
take a contrary position. Squire, Sanders & Dempsey L.L.P. has issued its
opinion as to certain issues discussed herein; however, the opinion of Squire,
Sanders & Dempsey L.L.P. is not binding on the IRS or on the courts. Moreover,
no rulings have been or will be sought from the IRS with respect to the
transactions described herein. Accordingly, there can be no assurance that the
IRS will not challenge the statements expressed herein or that a court would not
sustain such a challenge.
This summary addresses only the tax consequences to a person that
acquires an exchange capital security pursuant to the exchange offer 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 an exchange capital
security and does not address the tax consequences to holders subject to special
tax regimes (such as banks, thrifts, real estate investment trusts, regulated
investment companies, insurance companies, dealers in securities or currencies,
tax-exempt investors or persons that will hold an exchange 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). 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 an exchange capital
security that, for federal income tax purposes, is (or is treated as):
- a citizen or individual resident of the United States;
- 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
state (including the District of Columbia) or other political
subdivision thereof;
- an estate, the income of which is includible in gross income
for federal income tax purposes without regard to its source;
or
- a trust if a court within the United States is able to
exercise primary supervision over 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 stockholder,
partner or beneficiary of a holder of an exchange capital security. 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 the purchase, ownership, and disposition of an exchange capital
security.
Prospective investors are advised to consult with their own tax
advisors with respect to the tax consequences to them of the purchase, ownership
and disposition of the capital securities, including the tax consequences under
state, local, foreign, and other tax laws and possible effects of changes in
United States federal or other tax laws.
EXCHANGE OF CAPITAL SECURITIES
The exchange of the original capital securities for exchange capital
securities pursuant to the exchange offer should not be treated as an exchange
for federal income tax purposes and, therefore, should not be a taxable event to
holders for federal income tax purposes, because the exchange capital securities
should not be considered to differ materially in kind or extent from the
original capital securities and because the exchange will occur by operation of
the terms of the capital securities. If the exchange were treated as an exchange
for federal income tax purposes, such exchange should constitute a
recapitalization for federal income tax purposes. Accordingly, the exchange
capital securities should have the same issue price as the original capital
securities, and a holder should
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have the same adjusted tax basis and holding period in the exchange capital
securities as the holder had in the original capital securities immediately
before the exchange.
CLASSIFICATION OF THE JUNIOR SUBORDINATED DEBENTURES
We intend to take the position that, and Squire, Sanders & Dempsey
L.L.P. will issue its opinion that, under current law the junior subordinated
debentures will be classified for federal income tax purposes as our
indebtedness. We, together with the Trust and the holders of the exchange
capital securities (by acceptance of a beneficial interest in an exchange
capital security) will agree to treat the exchange debentures as our
indebtedness for all 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
exchange debentures will be classified as our indebtedness for federal income
tax purposes.
CLASSIFICATION OF THE TRUST
In connection with the issuance of the original capital securities,
Squire, Sanders & Dempsey L.L.P. rendered its opinion that, under 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 is classified for federal
income tax purposes as a grantor trust and not as an association taxable as a
corporation. Accordingly, for federal income tax purposes, the Trust is not
subject to federal income tax, and each holder of a capital security will be
required to include in its gross income any interest income (including any
original issue discount) and gain with respect to its allocable share of the
junior subordinated debentures.
ORIGINAL ISSUE DISCOUNT
Under the indenture, we have the right to defer the payment of interest
on the junior subordinated debentures at any time or from time to time for one
or more deferral periods not exceeding 10 consecutive semi-annual periods each,
provided that no deferral period shall end on a date other than an interest
payment date or extend beyond May 1, 2030. By reason of that right, the Treasury
regulations will subject the junior subordinated debentures to the rules in the
Code and Treasury regulations on debt instruments issued with original issue
discount, unless the indenture or junior 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 stated
interest will not be timely paid will be ignored in determining whether a debt
instrument is issued with original issue discount. We believe that the
likelihood that we would exercise our option to defer payments of interest is
"remote" because exercising that option would, among other things, prevent us
from (a) declaring dividends on any class of our equity securities, or (b)
making 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 junior subordinated debentures. Based on this conclusion and in
the absence of any specific definition of "remote" in the applicable Treasury
regulations, we intend to take the position that the junior subordinated
debentures will not be considered to be issued with original issue discount
unless we exercise our option to extend the interest payment period. As a
result, stated interest on the junior 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 instead of under the daily
economic accrual rules for original issue discount instruments. Because of the
factual nature of this issue, Squire, Sanders & Dempsey L.L.P. will not issue an
opinion as to whether the likelihood that the option to defer payment of
interest is remote.
Under the Treasury regulations, if we were to exercise our option to
defer payments of interest, the junior subordinated debentures would at that
time be treated as issued with original issue discount, and all stated interest
on the junior subordinated debentures would thereafter be treated as original
issue discount as long as the junior subordinated debentures remain outstanding.
If this occurred, all of a holder's interest income with respect to the junior
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
junior 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
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accrues on the junior subordinated debentures at the stated interest rate,
regardless of such holder's method of tax accounting, and actual cash payments
of interest on the junior subordinated debenture would not be separately
includible in gross income.
CHARACTERIZATION OF INCOME
Because income with respect to ownership of the capital securities will
constitute interest income 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 JUNIOR SUBORDINATED DEBENTURE OR CASH UPON LIQUIDATION OF THE TRUST
We will have the right at any time to liquidate the Trust and cause the
junior subordinated debentures to be distributed to the holders of the trust
securities. Under current law, the liquidation of the Trust and the distribution
of the junior subordinated debentures to trust security holders, for federal
income tax purposes, would be treated as a nontaxable event to each holder, and
the aggregate tax basis in the junior subordinated debentures received by such
holder would be equal to the holder's aggregate tax basis in its capital
securities surrendered. A holder's holding period in the junior 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 junior subordinated debentures may be redeemed for cash, and the
proceeds of such redemption would be distributed to holders in redemption of
their capital securities. Under current law, that redemption would constitute,
for 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
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. To the extent of any accrued but unpaid interest, the amount
realized on the sale of such capital securities will be treated as ordinary
income. 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. Any gain or loss
recognized on a sale or redemption of a capital security generally will be a
capital gain or loss. The highest marginal individual federal income tax rate
(which applies to ordinary income and gain from sales or exchanges of capital
assets held for one year or less) is 39.6 percent. 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 federal income tax rate
of 20 percent. All net capital gain of a corporate taxpayer is subject to tax at
ordinary corporate income tax rates of up to 35 percent.
The capital securities may trade at a price that discounts any accrued
but unpaid interest on the junior 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 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 federal income tax purposes.
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Under current 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 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 junior subordinated debentures is described in
Section 881(c)(3)(A) of the Code, (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, and (e) the
securities are issued in registered form. New Treasury regulations provides
alternative methods for satisfying the certification requirements described in
clause (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 junior 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 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 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 junior 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 federal income tax by reason of being
engaged in trade or business or the United States.
Any gain recognized upon a sale or other disposition of capital
securities (or junior subordinated debentures) generally will not be subject to
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 credit against such holder'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 (or any successor form) and mailed to holders of capital
securities by January 31 following each calendar year.
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THE 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 FEDERAL OR OTHER TAX LAWS.
ERISA CONSIDERATIONS
GENERAL
In evaluating the purchase of capital securities, a fiduciary of a
qualified profit-sharing, pension or stock bonus plan, including a plan for
self-employed individuals and their employees or any other employee benefit plan
subject to the Employee Retirement Income Security Act of 1974, as amended
(ERISA), a collective investment fund or separate account in which such plans
invest and any other investor using assets that are treated as assets of an
employee benefit plan subject to ERISA (each, a Plan and collectively, Plans)
should consider:
- whether the ownership of capital securities is in accordance
with the documents and instruments governing such Plan;
- whether the ownership of capital securities is solely in the
interest of Plan participants and beneficiaries and otherwise
consistent with the fiduciary's responsibilities and in
compliance with the requirements of Part 4 of Title I of
ERISA, including, in particular, the diversification,
prudence and liquidity requirements of Section 404 of ERISA
and the prohibited transaction provisions of Section 406 of
ERISA and Section 4975 of the Code;
- whether the assets of the Trust are treated as assets of the
Plan; and
- the need to value the assets of the Plan annually.
In addition, the fiduciary of an individual retirement arrangement
under 408 of the Code (an IRA) considering the purchase of capital securities
should consider whether the ownership of the capital securities would result in
a non-exempt prohibited transaction under Section 4975 of the Code.
Governmental plans and certain church plans (each as defined under
ERISA) are not subject to the prohibited transaction rules. Such plans may,
however, be subject to federal, state or local laws or regulations which may
affect their investment in the capital securities. Any fiduciary of such a
governmental or church plan considering an investment in the capital securities
should determine the need for, and the availability, if necessary, of any
exemptive relief under such laws or regulations.
The fiduciary investment considerations summarized below provide a
general discussion that does not include all of the fiduciary investment
considerations relevant to Plans and, where indicated, IRAs. This summary is
based on the current provisions of ERISA and the Code and regulations and
rulings thereunder, and may be changed (perhaps adversely and with retroactive
effect) by future legislative, administrative or judicial action.
PLANS AND IRAS THAT ARE PROSPECTIVE PURCHASERS OF CAPITAL SECURITIES
SHOULD CONSULT WITH AND RELY UPON THEIR OWN ADVISORS IN EVALUATING THESE MATTERS
IN LIGHT OF THEIR OWN PARTICULAR CIRCUMSTANCES.
PLAN ASSET REGULATION
Under Department of Labor regulations governing what constitutes the
assets of a plan or IRA (Plan Assets) for purposes of ERISA and the related
prohibited transaction provisions of the Code (the "Plan Asset Regulation," 29
C.F.R. Sec. 2510.3-101), when a Plan or IRA acquires an equity interest in
another entity, and such interest does not represent a "publicly offered
security" nor a security issued by an investment company registered under the
1940 Act, the Plan's assets include both the equity interest and an undivided
interest in each of the underlying assets of the entity, unless it is
established either that the entity is an operating company or that equity
participation in the entity by "benefit plan investors," as defined in the Plan
Asset Regulation, is not "significant."
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For purposes of the Plan Asset Regulation, the Trust will be neither an
investment company nor an operating company.
Under the Plan Asset Regulation, equity participation by benefit plan
investors will not be considered "significant" on any date only if immediately
after the most recent acquisition of the capital securities, the aggregate
interest in the capital securities held by benefit plan investors will be less
than 25% of the aggregate outstanding principal amount of the capital
securities. Although it is possible that the equity participation by benefit
plan investors on any date will not be "significant" for purposes of the Plan
Asset Regulation, such a result cannot be assured. Consequently, if Plans, IRAs
or investors using assets of Plans purchase the capital securities, the Trust's
assets could be deemed to be "plan assets" of such Plans and/or IRAs for
purposes of the fiduciary responsibility provisions of ERISA and the prohibited
transactions rules of ERISA and the Code. Under ERISA and the Code, any person
who exercises any authority or control respecting the management or disposition
of the assets of a Plan or IRA is considered to be a fiduciary of such Plan or
IRA. The property trustee of the Trust could therefore become a fiduciary of the
Plans and IRAs that invest in the capital securities and be subject to the
general fiduciary requirements of ERISA in exercising its authority with respect
to the management of the assets of the Trust. However, the property trustee will
have only limited discretionary authority with respect to the Trust assets and
the remaining functions and responsibilities performed by the property trustee
will be for the most part custodial and ministerial in nature.
PROHIBITED TRANSACTIONS
The Trust, Sky Financial (the obligor with respect to the junior
subordinated debentures held by the Trust) and their affiliates or the property
trustee may be a party in interest or a disqualified person with respect to a
Plan or IRA investing in the capital securities. Therefore, such investment by a
Plan or IRA may give rise to a prohibited transaction. Consequently, before
investing in the capital securities or acquiring junior subordinated debentures,
any person who is, or who is acquiring such securities for, or on behalf of, a
Plan or IRA should determine that either a statutory or an administrative
exemption from the prohibited transaction rules discussed below or otherwise
available is applicable to such investment in the capital securities, or that
such investment in, or acquisition of, such securities will not result in a
non-exempt prohibited transaction.
The statutory or administrative exemptions from the prohibited
transaction rules under ERISA and the Code which may be available to a Plan or
IRA, which is investing in the capital securities include the following
(collectively referred to as the "ERISA Investor Exemptions"):
- Prohibited Transaction Class Exemption (PTCE) 90-1, regarding
investments by insurance company pooled separate accounts;
- PTCE 91-38, regarding investments by bank collective
investment funds;
- PTCE 84-14, regarding transactions effected by qualified
professional asset managers;
- PTCE 96-23, regarding transactions effected by in-house asset
managers; and
- PTCE 95-60, regarding investments by insurance company general
accounts.
No person who is, or who in acquiring capital securities is using the
assets of, a Plan or IRA may acquire capital securities unless one of the ERISA
Investor Exemptions or another applicable exemption is available to the Plan or
IRA, or such acquisition or holding of the capital securities will not result in
a non-exempt Prohibited Transaction. The acquisition of the capital securities
by any person who is, or who in acquiring such capital securities is using the
assets of, a Plan or IRA shall be deemed to constitute a representation by such
person to the trustee of the Trust, Sky Financial and the initial purchaser
either that:
- it is not a Plan, IRA, trustee or other person acting on
behalf of a Plan or IRA or other person or entity using the
assets of any Plan or IRA to finance such purchase; or
- such acquisition will not result in a prohibited transaction
under Section 406 of ERISA or Section 4975 of the Code for
which there is no applicable statutory or administrative
exemption.
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In the case of capital securities delivered in certificated form, the
purchaser will be required to make such representation, in writing, to the
trustee of the Trust, Sky Financial and the initial purchaser.
THE DISCUSSION OF ERISA IN THIS PROSPECTUS IS GENERAL IN NATURE AND IS
NOT INTENDED TO BE ALL INCLUSIVE. ANY FIDUCIARY OF A PLAN, IRA, GOVERNMENTAL
PLAN OR CHURCH PLAN CONSIDERING AN INVESTMENT IN THE CAPITAL SECURITIES SHOULD
CONSULT WITH ITS LEGAL ADVISORS REGARDING THE CONSEQUENCES OF SUCH INVESTMENT
AND CONSIDER WHETHER THE PLAN OR IRA CAN MAKE THE REPRESENTATIONS NOTED ABOVE.
FURTHER, THE SALE OF INVESTMENTS TO PLANS AND IRAS IS IN NO RESPECT A
REPRESENTATION BY THE TRUST, SKY FINANCIAL, THE PROPERTY TRUSTEE, THE INITIAL
PURCHASER OR ANY OTHER PERSON ASSOCIATED WITH THE SALE OF THE CAPITAL SECURITIES
THAT SUCH SECURITIES MEET ALL RELEVANT LEGAL REQUIREMENTS WITH RESPECT TO
INVESTMENTS BY PLANS AND IRAS GENERALLY OR ANY PARTICULAR PLAN, OR THAT SUCH
SECURITIES ARE OTHERWISE APPROPRIATE FOR PLANS AND IRAS GENERALLY OR ANY
PARTICULAR PLAN.
ANY PURCHASER PROPOSING TO ACQUIRE CAPITAL SECURITIES WITH ASSETS OF
ANY PLAN OR IRA SHOULD CONSULT WITH ITS COUNSEL.
PLAN OF DISTRIBUTION
Each broker-dealer that receives exchange capital securities for its
own account pursuant to the exchange offer must acknowledge that it will deliver
a prospectus in connection with any resale of such exchange capital securities.
This prospectus, as it may be amended or supplemented from time to time, may be
used by a broker-dealer in connection with resales of exchange capital
securities received in exchange for original capital securities where such
original capital securities were acquired by such broker-dealer as a result of
market-making activities or other trading activities. The Trust and we have
agreed that, starting on the expiration date and ending on the close of business
on the 90th day following the expiration date, it will make this prospectus, as
amended or supplemented, available to any broker-dealer for use in connection
with any such resale. In addition, for a period of 90 days after the expiration
date, all dealers effecting transactions in the exchange securities may be
required to deliver a prospectus.
The Trust and we will not receive any proceeds from any sale of
exchange capital securities by broker-dealers. Exchange capital securities
received by broker-dealers for their own account pursuant to the exchange offer
may be sold from time to time in one or more transactions, in the
over-the-counter market, in negotiated transactions, through the writing of
options on the exchange capital securities or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or at negotiated prices. Any such resale may be
made directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such exchange capital securities. Any
broker-dealer that resells exchange capital securities that were received by it
for its own account pursuant to the exchange offer and any broker or dealer that
participates in a distribution of such exchange capital securities may be deemed
to be an underwriter within the meaning of the Securities Act and any profit of
any such resale of exchange capital securities and any commissions or
concessions received by any such persons may be deemed to be underwriting
compensation under the Securities Act. The letter of transmittal states that by
acknowledging that it will deliver and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an underwriter within the
meaning of the Securities Act.
For a period of 90 days after the expiration date, the Trust and we
will promptly send additional copies of this prospectus and any amendment or
supplement to this prospectus to any broker-dealer that requests such documents
in the letter of transmittal. The Trust and we have agreed to pay all expenses
incident to the exchange offer, including the expenses of one counsel for the
holders of the capital securities, other than commissions or concessions of any
brokers or dealers and will indemnify the holders of the exchange capital
securities, including any broker-dealers, against certain liabilities, including
liabilities under the Securities Act.
LEGAL MATTERS
The validity of the exchange capital securities, the exchange guarantee
and the exchange debentures will be passed upon for us by Squire, Sanders &
Dempsey L.L.P. Certain matters of Delaware law relating to the validity of the
exchange capital securities will be passed upon on behalf of the Trust and us by
Richards, Layton & Finger,
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P.A., special Delaware counsel to the Trust and us. Certain matters relating to
United States federal income tax considerations will be passed upon for us by
Squire, Sanders & Dempsey L.L.P., special tax counsel to us.
RATINGS
The exchange capital securities have been rated "baa1" by Moody's
Investors Service, "BB+" by Standard & Poor's, "BBB-" by Duff & Phelps Credit
Rating Co. and "BBB" by Thomson Financial BankWatch. The rating process
addresses the structural and legal aspects associated with the exchange capital
securities. In the event that the ratings initially assigned to the exchange
capital securities are subsequently lowered for any reason, no person or entity
is obligated to provide any additional credit support or credit enhancement with
respect to the exchange capital securities.
We have not requested that any rating agency rate the exchange capital
securities other than as stated above. If another rating agency were to rate the
exchange capital securities, such rating agency may assign a rating different
from the ratings described above. Each security rating should be evaluated
independently of any other security rating. A security rating is not a
recommendation to buy, sell or hold securities and may be subject to revision or
withdrawal at any time by the assigning rating organization.
INDEPENDENT AUDITORS
The consolidated financial statements included in our Annual Report on
Form 10-K for the year ended December 31, 1999, and incorporated by reference in
this prospectus and in the Registration Statement, have been audited by Crowe,
Chizek and Company LLP, independent auditors, to the extent and for the periods
indicated in their report thereon. Such financial statements have been included
in reliance upon the report of Crowe, Chizek and Company LLP incorporated by
reference herein.
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YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS OR THAT TO
WHICH WE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
ANY ADDITIONAL OR DIFFERENT INFORMATION THAT IS DIFFERENT. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL, OR THE SOLICITATION OF AN OFFER TO BUY, ANY OF
THE SECURITIES OFFERED HEREBY TO ANY PERSON IN ANY SKY FINANCIAL CAPITAL
JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION WOULD TRUST I BE UNLAWFUL. THE
AFFAIRS OF SKY FINANCIAL OR THE TRUST MAY CHANGE AFTER THE DATE OF THIS
PROSPECTUS. DELIVERY OF THIS PROSPECTUS AND THE SALES OF SECURITIES MADE
HEREUNDER DOES NOT MEAN OTHERWISE.
TABLE OF CONTENTS
PAGE
----
Where You Can Find More Information...................2
Summary...............................................3
Summary Selected Financial Data.......................7
Risk Factors.........................................11
Forward Looking Statements...........................16
Use of Proceeds......................................16
Accounting Treatment.................................16
Capitalization.......................................17
Sky Financial Group, Inc.............................18
Regulation and Supervision...........................19
Sky Financial Capital Trust I........................21
The Exchange Offer...................................22
Description of Exchange Capital Securities...........31
Description of Exchange Debentures...................43
Description of Exchange Guarantee....................55
Description of Original Securities...................58
Relationship Among the Exchange Capital
Securities, the Exchange Debentures and
the Exchange Guarantee...........................58
Certain Federal Income Tax Consequences..............60
ERISA Considerations.................................64
Plan of Distribution.................................66
Legal Matters........................................66
Ratings..............................................67
Independent Auditors.................................67
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SKY FINANCIAL CAPITAL
TRUST I
OFFER TO EXCHANGE ITS 9.34%
CAPITAL SECURITIES, SERIES B
(LIQUIDATION AMOUNT $1,000 PER EXCHANGE CAPITAL SECURITY)
WHICH HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933
FOR ANY AND ALL OF ITS OUTSTANDING 9.34%
CAPITAL SECURITIES, SERIES A
(LIQUIDATION AMOUNT $1,000 PER ORIGINAL CAPITAL SECURITY)
FULLY AND UNCONDITIONALLY
GUARANTEED, AS DESCRIBED
IN THIS PROSPECTUS, BY
[SKY FINANCIAL LOGO]
--------------------------------------------------------------------------------
PROSPECTUS
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SEPTEMBER 25, 2000
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