<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 14, 1997
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
FIRST INTERSTATE BANCSYSTEM, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
MONTANA 6711 81-0331430
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
------------------------
FIB CAPITAL TRUST
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 6719 81-6083709
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
------------------------
401 NORTH 31ST STREET
BILLINGS, MONTANA 59101
(406) 255-5300
(Address, including zip code, and telephone number, including area code, of each
registrant's principal executive offices)
------------------------------
TERRILL R. MOORE
SENIOR VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
FIRST INTERSTATE BANCSYSTEM, INC.
401 NORTH 31ST STREET
BILLINGS, MONTANA 59101
(406) 255-5300
(Name, address, including zip code, and telephone number, including area code,
of agent for service for each registrant)
------------------------
COPIES TO:
David G. Angerbauer, Esq. Elizabeth C. Hinck, Esq.
HOLLAND & HART LLP DORSEY & WHITNEY LLP
215 South State, Suite 500 220 South Sixth Street
Salt Lake City, Utah 84111 Minneapolis, Minnesota 55402
(801) 595-7800 (612) 340-2600
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
------------------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED PER UNIT(1) OFFERING PRICE(1) REGISTRATION FEE
<S> <C> <C> <C> <C>
% Cumulative Trust Preferred Securities
of FIB Capital Trust..................... 1,600,000 $25.00 $40,000,000.00 $12,121.21
% Junior Subordinated Deferrable
Interest Debentures of First Interstate
BancSystem, Inc.(2)...................... (2) N/A N/A N/A
Guarantee of First Interstate BancSystem,
Inc. with respect to Trust Preferred
Securities(3)............................ (3) N/A N/A N/A
Total Registration Fee..................... $12,121.21
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(a).
(2) The Junior Subordinated Deferrable Interest Debentures (the "Junior
Subordinated Debentures") will be purchased by FIB Capital Trust with the
proceeds of the sale of the Cumulative Trust Preferred Securities (the
"Trust Preferred Securities"). The Junior Subordinated Debentures may later
be distributed for no additional consideration to the holders of Trust
Preferred Securities upon the dissolution of FIB Capital Trust and the
distribution of its assets. No separate registration fee is payable with
respect to the Junior Subordinated Debentures pursuant to Rule 457(i).
(3) This Registration Statement is deemed to cover the Junior Subordinated
Debentures of First Interstate BancSystem, Inc. under the Indenture, the
rights of holders of Trust Preferred Securities of FIB Capital Trust under
the Trust Agreement and the rights of holders of Trust Preferred Securities
under the Guarantee and the Expense Agreement, which taken together, fully
and unconditionally, guarantee the obligations of FIB Capital Trust under
the Trust Preferred Securities. No separate consideration will be received
by First Interstate BancSystem, Inc. for the Guarantee. No separate
registration fee is payable with respect to the Guarantee pursuant to Rule
457(n).
------------------------
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION, DATED OCTOBER 14, 1997
1,600,000 TRUST PREFERRED SECURITIES
FIB CAPITAL TRUST
% CUMULATIVE TRUST PREFERRED SECURITIES
(LIQUIDATION AMOUNT $25 PER TRUST PREFERRED SECURITY)
FULLY AND UNCONDITIONALLY GUARANTEED, AS DESCRIBED HEREIN, BY
[LOGO] FIRST INTERSTATE BANCSYSTEM, INC.
------------
The % Cumulative Trust Preferred Securities (the "Trust Preferred
Securities") offered hereby represent undivided beneficial interests in the
assets of FIB Capital Trust, a statutory business trust formed under the laws of
the State of Delaware ("FIB Capital"). First Interstate BancSystem, Inc., a
Montana corporation ("First Interstate" or the "Company"), will be the owner of
all of the beneficial interests represented by common securities of FIB Capital
(the "Common Securities" and, collectively with the Trust Preferred Securities,
the "Trust Securities"). FIB Capital exists for the sole purpose of issuing the
Trust Securities and investing the proceeds thereof in the % Junior
Subordinated Deferrable Interest Debentures (the "Junior Subordinated
Debentures") to be issued by First Interstate. The Junior Subordinated
Debentures will mature on , 2027, which date may be shortened (such
date, as it may be shortened, the "Stated Maturity") to a date not earlier than
, 2002 if certain conditions are met (including First Interstate
having received prior approval of the Board of Governors of the Federal Reserve
System (the "Federal Reserve") to do so if then required under applicable
capital guidelines or policies of the Federal Reserve).
(CONTINUED ON NEXT PAGE)
SEE "RISK FACTORS" COMMENCING ON PAGE 11 HEREIN FOR A DISCUSSION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
---------------------
THESE SECURITIES ARE NOT SAVINGS ACCOUNTS OR DEPOSITS AND ARE NOT INSURED
BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, BY ANY OTHER
GOVERNMENTAL AGENCY, OR OTHERWISE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC COMMISSION(1) FIB CAPITAL(2)(3)
<S> <C> <C> <C>
Per Trust Preferred Security........................... $ (2) $
Total.................................................. $ (2) $
</TABLE>
(1) First Interstate and FIB Capital have agreed to indemnify the Underwriters
against certain liabilities, including liabilities under the Securities Act
of 1933, as amended (the "Securities Act"). See "Underwriting."
(2) In view of the fact that all of the proceeds of the sale of the Trust
Preferred Securities will be used to purchase the Junior Subordinated
Debentures, First Interstate has agreed to pay the Underwriters as
compensation for arranging the investment therein of such proceeds, $
per Trust Preferred Security, or $ in the aggregate. See
"Underwriting."
(3) Before deducting offering expenses payable by First Interstate estimated at
$400,000.
------------------------
The Trust Preferred Securities are offered for sale by the Underwriters
named herein subject to prior sale and when, as and if delivered to and accepted
by the Underwriters. It is expected that the Trust Preferred Securities will be
ready for delivery in book-entry form only through the facilities of The
Depository Trust Company in New York, New York, on or about , 1997,
against payment therefor in immediately available funds.
D.A. Davidson & Co.
THE DATE OF THIS PROSPECTUS IS , 1997
<PAGE>
(CONTINUED FROM PREVIOUS PAGE)
The Trust Preferred Securities will have a preference under certain
circumstances with respect to cash distributions and amounts payable on
liquidation, redemption or otherwise over the Common Securities, which will be
held by First Interstate. See "Description of the Trust Preferred
Securities--Subordination of Common Securities of FIB Capital Held by First
Interstate."
Holders of the Trust Preferred Securities will be entitled to receive
preferential cumulative cash distributions accruing from the date of original
issuance and payable quarterly in arrears on the last day of March, June,
September and December of each year (subject to possible deferral as described
below), commencing December 31, 1997, at the annual rate of % of the
Liquidation Amount of $25 per Trust Preferred Security ("Distributions"). The
amount of each Distribution due with respect to the Trust Preferred Securities
will include amounts accrued to, but excluding, the date the Distribution
payment is due. First Interstate will have the right to defer payments of
interest on the Junior Subordinated Debentures at any time or from time to time
for a period not exceeding 20 consecutive quarters with respect to each deferral
period (each, an "Extension Period"), provided that no Extension Period may
extend beyond the Stated Maturity of the Junior Subordinated Debentures. Upon
the termination of any such Extension Period and the payment of all amounts then
due, First Interstate may elect to begin a new Extension Period subject to the
requirements set forth herein. If interest payments on the Junior Subordinated
Debentures are so deferred, Distributions on the Trust Preferred Securities will
also be deferred and First Interstate will not be permitted, subject to certain
exceptions described herein, to declare or pay any cash distributions with
respect to its capital stock or to make any payment with respect to its debt
securities that rank PARI PASSU with or junior to the Junior Subordinated
Debentures. During an Extension Period, interest on the Junior Subordinated
Debentures will continue to accrue (and the amount of Distributions to which
holders of the Trust Preferred Securities are entitled will accumulate) at the
rate of % per annum, compounded quarterly and holders of the Trust Preferred
Securities will be required to accrue income and will be required to pay United
States federal income tax on that income. See "Description of Junior
Subordinated Debentures--Option to Defer Interest Payment Period" and "Certain
Federal Income Tax Consequences--Interest Income and Original Issue Discount."
First Interstate has, through the Guarantee Agreement, the Trust Agreement,
the Junior Subordinated Debentures, the Indenture and the Expense Agreement
(each as defined herein), taken together, fully, irrevocably and unconditionally
guaranteed all of FIB Capital's obligations under the Trust Preferred
Securities. See "Relationship Among the Trust Preferred Securities, the Junior
Subordinated Debentures and the Guarantee--Full and Unconditional Guarantee."
Under the Guarantee, First Interstate guarantees the payment of Distributions by
FIB Capital and payments on liquidation of or redemption of the Trust Preferred
Securities (subordinate to the right to payment of Senior and Subordinated Debt
of First Interstate, as defined herein) to the extent of funds held by FIB
Capital. The Guarantee does not cover payment of Distributions when FIB Capital
does not have sufficient funds to pay such Distributions. See "Description of
Guarantee." If First Interstate does not make required payments on the Junior
Subordinated Debentures held by FIB Capital, FIB Capital will have insufficient
funds to pay Distributions on the Trust Preferred Securities. In such event, a
holder of the Trust Preferred Securities may institute a legal proceeding
directly against First Interstate pursuant to the terms of the Indenture to
enforce payment of such Distributions to such holder. See "Description of Junior
Subordinated Debentures--Enforcement of Certain Rights by Holders of the Trust
Preferred Securities." The obligations of First Interstate under the Guarantee
and the Junior Subordinated Debentures are subordinate and junior in right of
payment to all Senior and Subordinated Debt (as defined in "Description of
Junior Subordinated Debentures--Subordination") of First Interstate.
The Trust Preferred Securities are subject to mandatory redemption, in whole
or in part, upon repayment of the Junior Subordinated Debentures at the Stated
Maturity or their earlier redemption in each case at a redemption price equal to
the aggregate liquidation preference of the Trust Preferred
(CONTINUED ON NEXT PAGE)
2
<PAGE>
(CONTINUED FROM PREVIOUS PAGE)
Securities plus any accumulated and unpaid Distributions thereon to the date of
redemption. The Junior Subordinated Debentures are redeemable prior to maturity
at the option of First Interstate, subject to any required prior approval of the
Federal Reserve, (i) on or after, 2002, in whole at any time or in part
from time to time, or (ii) at any time, in whole (but not in part), upon the
occurrence and continuation of a Tax Event, an Investment Company Event or a
Capital Treatment Event (each as defined herein), in each case at a redemption
price equal to the accrued and unpaid interest on the Junior Subordinated
Debentures to the date fixed for redemption, plus 100% of the principal amount
thereof. See "Description of the Trust Preferred Securities--Redemption."
First Interstate will have the right at any time to terminate FIB Capital
and cause a Like Amount (as defined herein) of the Junior Subordinated
Debentures to be distributed to the holders of Trust Preferred Securities in
liquidation of FIB Capital, subject to First Interstate having received prior
approval of the Federal Reserve if then required under applicable capital
guidelines or policies of the Federal Reserve. See "Description of the Trust
Preferred Securities--Liquidation Distribution upon Termination."
The Junior Subordinated Debentures are unsecured and subordinated to all
Senior and Subordinated Debt (as defined herein). As of June 30, 1997, First
Interstate had approximately $52.0 million aggregate principal amount of Senior
and Subordinated Debt outstanding. The terms of the Junior Subordinated
Debentures place no limitation on the amount of Senior and Subordinated Debt
that First Interstate can issue. See "Risk Factors--Ranking of First
Interstate's Obligations Under the Junior Subordinated Debentures and the
Guarantee" and "Description of Junior Subordinated Debentures--Subordination."
In the event of the termination of FIB Capital, after satisfaction of
liabilities to creditors of FIB Capital as required by applicable law, the
holders of Trust Preferred Securities will be entitled to receive a liquidation
amount of $25 per Trust Preferred Security ("Liquidation Amount"), plus
accumulated and unpaid Distributions thereon to the date of payment, which may
be in the form of a Distribution of such Like Amount of Junior Subordinated
Debentures, subject to certain exceptions. See "Description of the Trust
Preferred Securities--Liquidation Distribution Upon Termination."
The Company does not intend to list the Trust Preferred Securities on any
securities exchange or include them for quotation on The Nasdaq Stock Market.
Although the Underwriters have indicated an intention to make a market in the
Trust Preferred Securities, the Underwriters are not obligated to make a market
in the Trust Preferred Securities, and any market making may be discontinued at
any time at the sole discretion of such Underwriters. There can be no assurance
that a market will develop for the Trust Preferred Securities. See "Risk
Factors--Limited Trading Market; Market Prices" and "Underwriting."
The Trust Preferred Securities will be represented by one or more global
certificates registered in the name of The Depository Trust Company ("DTC") or
its nominee. Beneficial interests in the Trust Preferred Securities will be
shown on and transfers thereof will be effected only through, records maintained
by participants in DTC. Except as described herein, the Trust Preferred
Securities in certificate form will not be issued in exchange for global
certificates. See "Book-Entry Issuance."
AS USED HEREIN, (I) THE "INDENTURE" MEANS THE JUNIOR SUBORDINATED INDENTURE
DATED AS OF , 1997, AS AMENDED, BETWEEN FIRST INTERSTATE AND WILMINGTON
TRUST COMPANY, AS TRUSTEE (THE "INDENTURE TRUSTEE"), UNDER WHICH THE JUNIOR
SUBORDINATED DEBENTURES WILL BE ISSUED; (II) THE "TRUST AGREEMENT" MEANS THE
AMENDED AND RESTATED TRUST AGREEMENT RELATING TO FIB CAPITAL AMONG FIRST
INTERSTATE, AS DEPOSITOR, WILMINGTON TRUST COMPANY, AS PROPERTY TRUSTEE (THE
"PROPERTY TRUSTEE"), WILMINGTON TRUST COMPANY, AS DELAWARE TRUSTEE (THE
"DELAWARE TRUSTEE") AND THE ADMINISTRATIVE TRUSTEES NAMED THEREIN (COLLECTIVELY,
WITH THE PROPERTY TRUSTEE AND DELAWARE TRUSTEE, THE "ISSUER TRUSTEES" OR
INDIVIDUALLY, A "TRUSTEE"); (III) THE "GUARANTEE AGREEMENT" MEANS THE GUARANTEE
AGREEMENT RELATING TO THE GUARANTEE (AS DEFINED HEREIN) BETWEEN FIRST INTERSTATE
AND WILMINGTON TRUST COMPANY, AS GUARANTEE TRUSTEE; AND (IV) THE "EXPENSE
AGREEMENT" MEANS THE EXPENSE AGREEMENT BETWEEN FIRST INTERSTATE AND FIB CAPITAL.
3
<PAGE>
First Interstate BancSystem, Inc.
Banking Offices
[MAP of Montana and Wyoming depicting the banking offices in such states.]
The Company operates 31 banking offices in 23 communities throughout Montana
and Wyoming.
------------------------
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE TRUST PREFERRED
SECURITIES OFFERED HEREBY. SUCH TRANSACTIONS MAY INCLUDE STABILIZING, THE
PURCHASE OF SECURITIES TO COVER SYNDICATE SHORT POSITIONS AND THE IMPOSITION OF
PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
4
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO APPEARING
ELSEWHERE IN THIS PROSPECTUS. UNLESS THE CONTEXT CLEARLY SUGGESTS OTHERWISE,
REFERENCES TO "FIRST INTERSTATE" OR THE "COMPANY" INCLUDE FIRST INTERSTATE
BANCSYSTEM, INC. AND ITS SUBSIDIARIES. EXCEPT AS OTHERWISE INDICATED, THE
INFORMATION IN THIS PROSPECTUS REGARDING THE COMMON STOCK OF THE COMPANY GIVES
RETROACTIVE EFFECT TO A 4-FOR-1 STOCK SPLIT IN OCTOBER 1997. THIS PROSPECTUS
CONTAINS CERTAIN "FORWARD-LOOKING STATEMENTS" RELATING TO FUTURE EVENTS OR THE
FUTURE PERFORMANCE OF THE COMPANY. THESE STATEMENTS INVOLVE VARIOUS RISKS AND
UNCERTAINTIES. PROSPECTIVE INVESTORS ARE CAUTIONED THAT SUCH STATEMENTS ARE ONLY
PREDICTIONS AND THAT ACTUAL EVENTS OR RESULTS MAY DIFFER SIGNIFICANTLY FROM SUCH
PREDICTIONS. IN EVALUATING SUCH STATEMENTS, PROSPECTIVE INVESTORS SHOULD
SPECIFICALLY CONSIDER THE VARIOUS FACTORS IDENTIFIED IN THIS PROSPECTUS,
INCLUDING THE MATTERS SET FORTH UNDER THE CAPTION "RISK FACTORS," WHICH COULD
CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE INDICATED IN SUCH
FORWARD-LOOKING STATEMENTS.
THE COMPANY
First Interstate is a bank and savings and loan holding company
headquartered in Billings, Montana which operates 31 banking offices in 23
communities throughout Montana and Wyoming through its banking subsidiaries. At
June 30, 1997, the Company had assets of $2.1 billion, deposits of $1.7 billion
and total stockholders' equity of $153.9 million, making it the largest
independent banking organization headquartered in Montana or Wyoming.
First Interstate has three bank subsidiaries: First Interstate Bank in
Montana ("FIB Montana"), First Interstate Bank in Wyoming ("FIB Wyoming") and
First Interstate Bank, fsb in Hamilton, Montana ("First Interstate, fsb")
(collectively, the "Banks" and individually a "Bank"). FIB Montana, a Montana
chartered bank organized in 1916, has 20 banking offices in 14 Montana
communities, including Billings, Bozeman, Colstrip, Cut Bank, Eureka, Evergreen,
Gardiner, Great Falls, Hardin, Kalispell, Livingston, Miles City, Missoula and
Whitefish. FIB Wyoming, a Wyoming chartered bank organized in 1893, has ten
banking offices in eight Wyoming communities, including Buffalo, Casper,
Gillette, Greybull, Lander, Laramie, Riverton and Sheridan. First Interstate,
fsb, a federally chartered savings bank, was opened as a de novo savings bank in
December 1996, and currently has one banking office in Hamilton, Montana.
The Company, through the Banks, delivers a comprehensive range of consumer
and commercial banking services to individual and business customers. These
services include personal and business checking and savings accounts, time
deposits, individual retirement accounts, cash management, trust services and
commercial, consumer, real estate, agricultural and other loans. Additionally,
the Company operates a substantial data processing division that performs data
processing services for the Banks and 35 non-affiliated financial institutions
in Montana, Wyoming and Idaho. The Company also supports over 540 ATM locations
in 12 states, principally Montana, Wyoming, Idaho, Colorado and North Dakota.
The banking industry is presently undergoing change with respect to
regulatory matters, consolidation, changing consumer needs and economic and
market conditions. The Company believes that it can best address this changing
environment through its corporate "Strategic Vision." Through the Strategic
Vision, the Company emphasizes providing its customers full service commercial
banking at the local level using a personalized service approach, while serving
and strengthening the communities in which the Banks are located through
community service activities. The Company grants significant autonomy and
flexibility to the Banks in delivering and pricing products at the local level
in response to market considerations and customer needs. This flexibility and
autonomy enables the Banks to remain competitive and enhances the relationships
between the Banks and the customers they serve. The Company also emphasizes
accountability, however, by establishing performance and incentive standards for
the Banks which are tied to net income at the individual branch level. The
Company believes that this combination of autonomy and accountability allows the
Banks to provide a high level of personalized service to customers while
remaining attentive to financial performance.
5
<PAGE>
The Company's growth strategy includes growing internally and expanding into
new and complementary markets when appropriate opportunities arise. The
Company's internal growth strategy is to attract and retain customers by
providing personalized "high touch" service, increasing its offering of products
and services and cross-selling existing products and services. The Company
believes its ability to offer a complete package of consumer and commercial
banking products and services enhances First Interstate's image as a "one-stop"
banking organization. The Company has also grown in recent years by selectively
acquiring banks in additional markets in Montana and Wyoming. Since September
1996, the Company has acquired Mountain Bank of Whitefish ("FIB Whitefish"),
consisting of two branch locations, and two banks, consisting of six Montana and
Wyoming branch locations, previously operated by First Interstate Bancorp (the
"FIB Banks"). The Company is pursuing regulatory approval to open several new
branch offices in Montana and Wyoming. The Company believes that it will
continue to expand its presence in the Montana and Wyoming markets.
The Company was incorporated in Montana in 1971. The Company maintains its
principal executive offices at 401 North 31st Street, Billings, Montana 59101
and its telephone number is (406) 255-5300.
FIB CAPITAL TRUST
FIB Capital is a statutory business trust formed under Delaware law pursuant
to (i) the Trust Agreement and (ii) the filing of a Certificate of Trust with
the Delaware Secretary of State on October 1, 1997. FIB Capital's business and
affairs are conducted by the Property Trustee, the Delaware Trustee and two
individual Administrative Trustees who are officers of the Company. FIB Capital
exists for the exclusive purposes of (i) issuing and selling the Trust
Securities, (ii) using the proceeds from the sale of the Trust Securities to
acquire the Junior Subordinated Debentures issued by First Interstate and (iii)
engaging in only those other activities necessary, advisable or incidental
thereto (such as registering the transfer of the Trust Securities). Accordingly,
the Junior Subordinated Debentures will be the sole assets of FIB Capital and
payments by First Interstate under the Junior Subordinated Debentures and the
Expense Agreement will be the sole revenues of FIB Capital. All of the Common
Securities will be owned by First Interstate. The Common Securities will rank
PARI PASSU and payments will be made thereon pro rata, with the Trust Preferred
Securities, except that upon the occurrence and during the continuance of an
event of default under the Trust Agreement resulting from an event of default
under the Indenture, the rights of First Interstate as holder of the Common
Securities to payment in respect of Distributions and payments upon liquidation,
redemption or otherwise will be subordinated to the rights of the holders of the
Trust Preferred Securities. See "Description of the Trust Preferred
Securities--Subordination of Common Securities of FIB Capital Held by First
Interstate." First Interstate will acquire Common Securities in an aggregate
liquidation amount equal to 3.0% of the total capital of FIB Capital. FIB
Capital has a term of 31 years, but may terminate earlier as provided in the
Trust Agreement.
FIB Capital's principal offices are located at 401 North 31st Street,
Billings, Montana 59101 and its telephone number is (406) 255-5300.
6
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Issuer of Trust Preferred
Securities...................... FIB Capital
Securities offered................ 1,600,000 Trust Preferred Securities. The Trust
Preferred Securities represent undivided beneficial
interests in FIB Capital's assets, which will consist
solely of the Junior Subordinated Debentures and
payments thereunder.
Distributions..................... The Distributions payable on each Trust Preferred
Security will be fixed at a rate per annum of % of
the Liquidation Amount of $25 per Trust Preferred
Security, will be cumulative, will accrue from the date
of issuance of the Trust Preferred Securities, and will
be payable quarterly in arrears on the last day of
March, June, September and December of each year,
commencing on December 31, 1997 (subject to possible
deferral as described below). The amount of each
Distribution due with respect to the Trust Preferred
Securities will include amounts accrued to, but
excluding, the date the Distribution payment is due. See
"Description of the Trust Preferred Securities--
Distribution."
Extension periods................. So long as no Debenture Event of Default (as defined
herein) has occurred and is continuing, First Interstate
will have the right, at any time, to defer payments of
interest on the Junior Subordinated Debentures by
extending the interest payment period thereon for an
Extension Period, provided that no Extension Period may
extend beyond the Stated Maturity of the Junior
Subordinated Debentures. If interest payments are so
deferred, Distributions on the Trust Preferred
Securities will also be deferred and First Interstate
will not be permitted, subject to certain exceptions
described herein, to declare or pay any cash
distributions with respect to First Interstate's capital
stock or debt securities that rank PARI PASSU with or
junior to the Junior Subordinated Debentures. During an
Extension Period, Distributions will continue to
accumulate with interest thereon compounded quarterly.
Because interest would continue to accrue and compound
on the Junior Subordinated Debentures, to the extent
permitted by applicable law, holders of the Trust
Preferred Securities will be required to accrue income
for United States federal income tax purposes. See
"Description of Junior Subordinated Debentures--Option
to Defer Interest Payment Period" and "Certain Federal
Income Tax Consequences--Interest Income and Original
Issue Discount."
Maturity.......................... The Junior Subordinated Debentures will mature on
, 2027, which date may be shortened (such
date, as it may be shortened, the "Stated Maturity") to
a date not earlier than , 2002 if certain
conditions are met (including First Interstate having
received prior approval of the Federal Reserve to do so
if then required under applicable capital guidelines or
policies of the Federal Reserve).
</TABLE>
7
<PAGE>
<TABLE>
<S> <C>
Redemption........................ The Trust Preferred Securities are subject to mandatory
redemption upon repayment of the Junior Subordinated
Debentures at the Stated Maturity or their earlier
redemption in an amount equal to the amount of Junior
Subordinated Debentures maturing on or being redeemed at
a redemption price equal to the aggregate Liquidation
Amount of the Trust Preferred Securities plus
accumulated and unpaid Distributions thereon to the date
of redemption. Subject to Federal Reserve approval, if
then required under applicable capital guidelines or
policies of the Federal Reserve, the Junior Subordinated
Debentures are redeemable prior to maturity at the
option of First Interstate (i) on or after ,
2002 in whole at any time or in part from time to time,
or (ii) at any time, in whole (but not in part), upon
the occurrence and during the continuance of a Tax
Event, an Investment Company Event or a Capital
Treatment Event, in each case at a redemption price
equal to 100% of the principal amount of the Junior
Subordinated Debentures so redeemed, together with any
accrued but unpaid interest to the date fixed for
redemption. See "Description of the Trust Preferred
Securities-- Redemption" and "Description of Junior
Subordinated Debentures--Redemption."
Distribution of Junior
Subordinated Debentures......... First Interstate has the right at any time to terminate
FIB Capital and cause the Junior Subordinated Debentures
to be distributed to holders of Trust Preferred
Securities in liquidation of FIB Capital, subject to
First Interstate having received prior approval of the
Federal Reserve to do so if then required under
applicable capital guidelines or policies of the Federal
Reserve. See "Description of the Trust Preferred
Securities--Distribution of Junior Subordinated
Debentures."
Guarantee......................... Taken together, First Interstate's obligations under
various documents described herein, including the
Guarantee Agreement, provide a full guarantee of
payments by FIB Capital of Distributions and other
amounts due on the Trust Preferred Securities. Under the
Guarantee Agreement, First Interstate guarantees the
payment of Distributions by FIB Capital and payments on
liquidation of or redemption of the Trust Preferred
Securities (subordinate to the right to payment of
Senior and Subordinated Debt) to the extent of funds
held by FIB Capital. If FIB Capital has insufficient
funds to pay Distributions on the Trust Preferred
Securities (i.e., if First Interstate has failed to make
required payments under the Junior Subordinated
Debentures), a holder of the Trust Preferred Securities
would have the right to institute a legal proceeding
directly against First Interstate to enforce payment of
such Distributions to such holder. See "Description of
Junior Subordinated Debentures-- Enforcement of Certain
Rights by Holders of Trust Preferred Securities,"
"Description of Junior Subordinated Debentures-- Events
of Default and Description of Guarantee."
</TABLE>
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<TABLE>
<S> <C>
Ranking........................... The Trust Preferred Securities will rank PARI PASSU, and
payments thereon will be made pro rata, with the Common
Securities of FIB Capital held by First Interstate,
except as described under "Description of Trust
Preferred Securities-- Subordination of Common
Securities of FIB Capital held by First Interstate." The
obligations of First Interstate under the Guarantee, the
Junior Subordinated Debentures and other documents
described herein are unsecured and rank subordinate and
junior in right of payment to all current and future
Senior and Subordinated Debt, the amount of which is
unlimited. At June 30, 1997, the aggregate outstanding
Senior and Subordinated Debt of First Interstate was
approximately $52.0 million. In addition, because First
Interstate is a holding company, all obligations of
First Interstate relating to the securities described
herein will be effectively subordinated to all existing
and future liabilities of the Banks. First Interstate
may cause additional trust preferred securities to be
issued by trusts similar to FIB Capital in the future,
and there is no limit on the amount of such securities
that may be issued. In this event, First Interstate's
obligations under the Junior Subordinated Debentures to
be issued to such other trusts and First Interstate's
guarantees of the payments by such trusts will rank PARI
PASSU with First Interstate's obligations under the
Junior Subordinated Debentures and the Guarantee,
respectively.
Voting rights..................... The holders of Trust Preferred Securities will generally
have limited voting rights relating only to the
modification of the Trust Preferred Securities, the
dissolution, winding-up or termination of FIB Capital
and certain other matters described herein. See
"Description of Trust Preferred Securities--Voting
Rights; Amendment of the Trust Agreement."
Use of proceeds................... All of the proceeds from the sale of Trust Preferred
Securities will be invested by FIB Capital in the Junior
Subordinated Debentures. First Interstate intends to use
$20.0 million of the proceeds to redeem the outstanding
shares of the Company's noncumulative perpetual
preferred stock, subject to regulatory approval. The
Company intends to use the remaining proceeds to reduce
indebtedness outstanding under the Company's revolving
term loan. First Interstate expects the Trust Preferred
Securities to qualify as Tier 1 capital under the
capital guidelines of the Federal Reserve. See "Use of
Proceeds."
</TABLE>
RISK FACTORS
Prospective investors should carefully consider, among other things, the
discussion of various factors under the heading "Risk Factors" beginning on page
11 hereof.
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SUMMARY CONSOLIDATED FINANCIAL DATA
The following summary consolidated financial data has been derived from the
audited and unaudited consolidated financial statements of the Company. This
data should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and such consolidated financial
statements, including the notes thereto.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEARS ENDED DECEMBER 31,
-------------------- -----------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
--------- --------- --------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Interest income....................... $ 80,330 $ 52,854 $ 117,925 $ 98,970 $ 80,230 $ 77,154 $ 78,707
Interest expense...................... 34,373 22,551 50,019 41,946 28,451 27,078 31,989
--------- --------- --------- --------- --------- --------- ---------
Net interest income................... 45,957 30,303 67,906 57,024 51,779 50,076 46,718
Provision for loan losses............. 2,281 1,152 3,844 1,629 1,344 1,345 1,630
--------- --------- --------- --------- --------- --------- ---------
Net interest income after provision
for loan losses..................... 43,676 29,151 64,062 55,395 50,435 48,731 45,088
Other operating income................ 13,485 10,740 23,927 18,764 16,387 15,724 14,936
Other operating expenses.............. 35,987 23,207 53,395 45,978 41,227 39,686 37,985
--------- --------- --------- --------- --------- --------- ---------
Income before income taxes............ 21,174 16,684 34,594 28,181 25,595 24,769 22,039
Provision for income taxes............ 8,080 6,414 13,351 10,844 9,861 9,321 8,179
--------- --------- --------- --------- --------- --------- ---------
Net income............................ $ 13,094 $ 10,270 $ 21,243 $ 17,337 $ 15,734 $ 15,448 $ 13,860
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Net income applicable to common
stock............................... $ 12,247 $ 10,270 $ 20,818 $ 17,337 $ 15,734 $ 15,448 $ 13,860
Net income per common share........... $ 1.54 $ 1.31 $ 2.64 $ 2.21 $ 2.00 $ 1.96 $ 1.74
Dividends per common share............ $ 0.46 $ 0.38 $ 0.77 $ 0.48 $ 0.40 $ 0.34 $ 0.28
Weighted average common shares
outstanding......................... 7,936,708 7,802,892 7,881,024 7,843,644 7,850,188 7,891,160 7,984,244
BALANCE SHEET DATA (AT PERIOD END):
Total assets.......................... $2,131,351 $1,350,478 $2,063,837 $1,351,215 $1,134,105 $1,097,469 $1,022,392
Loans................................. 1,475,852 940,248 1,375,479 870,378 751,518 667,385 607,125
Allowance for loan losses............. 28,757 15,406 27,797 15,171 13,726 13,373 12,965
Investment securities................. 396,931 247,317 403,571 258,737 251,745 249,754 226,821
Deposits.............................. 1,673,035 1,082,487 1,679,424 1,099,069 939,857 936,793 900,465
Long-term debt........................ 56,184 10,234 64,667 15,867 5,449 6,853 5,254
Stockholders' equity.................. 153,925 115,547 146,061 109,366 95,272 84,163 71,852
OPERATING RATIOS:
Return on average assets.............. 1.27% 1.55% 1.41% 1.39% 1.44% 1.50% 1.43%
Return on average common stockholders'
equity.............................. 18.94% 18.30% 17.84% 16.98% 17.64% 19.97% 20.43%
Net interest margin................... 5.11% 5.19% 5.15% 5.19% 5.34% 5.51% 5.45%
Net interest spread................... 4.46% 4.52% 4.47% 4.45% 4.76% 4.98% 4.87%
Ratio of earnings to fixed charges
(1):
Excluding interest on deposits...... 4.85x 14.50x 8.74x 9.50x 12.34x 30.66x 20.25x
Including interest on deposits...... 1.59x 1.73x 1.68x 1.66x 1.87x 1.91x 1.69x
ASSET QUALITY RATIOS:
Non-performing assets to total loans
and OREO (2)........................ 0.95% 0.99% 1.20% 0.97% 0.94% 1.44% 2.84%
Allowance for loan losses to total
loans............................... 1.95% 1.64% 2.02% 1.74% 1.83% 2.00% 2.14%
Allowance for loan losses to
non-performing loans (3)............ 223.42% 191.19% 185.10% 213.74% 259.62% 205.49% 104.09%
Net charge-offs to average loans...... 0.09% 0.10% 0.17% 0.13% 0.14% 0.15% 0.15%
REGULATORY CAPITAL RATIOS:
Tier 1 capital to risk-weighted
assets.............................. 7.68% 10.48% 7.35% 10.40% 11.32% 10.96% 9.55%
Total capital to risk-weighted
assets.............................. 10.21% 11.73% 9.98% 11.65% 12.58% 12.22% 11.05%
Leverage ratio........................ 5.72% 7.89% 5.26% 7.28% 8.12% 7.26% 6.57%
</TABLE>
- ------------------------------
(1) For purposes of computing the ratio of earnings to fixed charges, earnings
represents income before income taxes and fixed charges. Fixed charges
represent interest expense and preferred stock dividends, which dividends
commenced in October 1996. Deposits include interest-bearing deposits and
repurchase agreements. Without including preferred stock dividends in fixed
charges and excluding interest on deposits, the ratio of earnings to fixed
charges for the six months ended June 30, 1997 and the year ended December
31, 1996 were 5.89x and 9.91x, respectively. Without including preferred
stock dividends in fixed charges and including interest on deposits, the
ratio of earnings to fixed charges for the six months ended June 30, 1997
and the year ended December 31, 1996 were 1.61x and 1.68x, respectively.
(2) For purposes of computing the ratio of non-performing assets to total loans
and other real estate owned ("OREO"), non-performing assets include
non-accrual loans, loans past due 90 days or more and still accruing,
restructured debt and other real estate owned.
(3) For purposes of computing the ratio of allowance for loan losses to
non-performing loans, non-performing loans include non-accrual loans, loans
past due 90 days or more and still accruing and restructured debt.
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RISK FACTORS
PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER, AMONG OTHER THINGS, THE
FOLLOWING FACTORS IN CONNECTION WITH A DECISION TO PURCHASE THE TRUST PREFERRED
SECURITIES.
RANKING OF FIRST INTERSTATE'S OBLIGATIONS UNDER THE JUNIOR SUBORDINATED
DEBENTURES AND THE GUARANTEE
All obligations of First Interstate under the Guarantee, the Junior
Subordinated Debentures and other documents described herein are unsecured and
rank subordinate and junior in right of payment to all current and future Senior
and Subordinated Debt, the amount of which is unlimited. At June 30, 1997, the
aggregate outstanding Senior and Subordinated Debt was approximately $52.0
million. In addition, because First Interstate is a holding company, all
obligations of First Interstate relating to the securities described herein will
be effectively subordinated to all existing and future liabilities of the
Company's subsidiaries, including the Banks. As a holding company, the right of
First Interstate 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 Trust Preferred Securities to benefit indirectly from such
distribution) is subject to the prior claims of creditors of that subsidiary,
except to the extent that First Interstate may itself be recognized as a
creditor of that subsidiary. Accordingly, the Junior Subordinated Debentures and
all obligations of First Interstate relating to the Trust Preferred Securities
will be effectively subordinated to all existing and future liabilities of the
Banks and holders of the Trust Preferred Securities should look only to the
assets of First Interstate, and not the Banks, for principal and interest
payments on the Junior Subordinated Debentures. None of the Indenture, the
Guarantee Agreement or the Trust Agreement places any limitation on the amount
of secured or unsecured debt, including Senior and Subordinated Debt, that may
be incurred by First Interstate or the Banks. Further, there is no limitation on
First Interstate's ability to issue additional debentures of like tenor with the
Junior Subordinated Debentures in connection with any further offerings of
cumulative trust preferred securities and such additional debentures would rank
PARI PASSU with the Junior Subordinated Debentures. See "Description of Junior
Subordinated Debentures--Subordination" and "Description of Guarantee--Status of
the Guarantee."
DEPENDENCE ON DIVIDENDS AND INTEREST PAYMENTS FROM THE BANKS
The ability of FIB Capital to pay amounts due on the Trust Preferred
Securities is solely dependent upon First Interstate making payments on the
Junior Subordinated Debentures as and when required. As a holding company
without significant assets other than its equity interest in the Banks, First
Interstate's ability to pay interest on the Junior Subordinated Debentures to
FIB Capital (and consequently FIB Capital's ability to pay Distributions on the
Trust Preferred Securities and First Interstate's ability to pay its obligations
under the Guarantee) depends in large part upon the cash dividends First
Interstate receives from the Banks. Dividend payments from the Banks are subject
to regulatory limitations, generally based on current and retained earnings,
imposed by the various regulatory agencies with authority over the respective
Banks. Payment of dividends is also subject to regulatory restrictions if such
dividends would impair the capital of the Banks. Payment of dividends by the
Banks is also subject to each respective Bank's profitability, financial
condition and capital expenditures and other cash flow requirements. No
assurance can be given that the Banks will be able to pay dividends at past
levels, or at all, in the future. See "Regulation and Supervision."
OPTION TO DEFER INTEREST PAYMENT PERIOD; TAX CONSEQUENCES OF A DEFERRAL OF
INTEREST PAYMENTS
So long as no Debenture Event of Default has occurred and is continuing,
First Interstate has the right under the Indenture to defer payment of interest
on the Junior Subordinated Debentures at any time or from time to time for an
Extension Period, provided that no Extension Period may extend beyond the Stated
Maturity of the Junior Subordinated Debentures. As a consequence of any such
deferral, quarterly Distributions on the Trust Preferred Securities by FIB
Capital will be deferred (and the amount of
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<PAGE>
Distributions to which holders of the Trust Preferred Securities are entitled
will accumulate additional amounts thereon at the rate of % per annum,
compounded quarterly, from the relevant payment date for such Distributions, to
the extent permitted by applicable law) during any such Extension Period. During
any such Extension Period, First Interstate will be prohibited from making
certain payments or distributions with respect to First Interstate's capital
stock (including dividends on or redemptions of common or preferred stock) and
from making certain payments with respect to any debt securities of First
Interstate that rank PARI PASSU with or junior in interest to the Junior
Subordinated Debentures. However, First Interstate will not be restricted from
(i) paying dividends or distributions in common stock of First Interstate, (ii)
redeeming rights or taking certain other actions under a stockholders' rights
plan, (iii) making payments under the Guarantee, or (iv) making purchases of
common stock related to the issuance of common stock or rights under any of
First Interstate's benefit plans for its directors, officers or employees.
Further, during an Extension Period, First Interstate would have the ability to
continue to make payments on Senior and Subordinated Debt. Prior to the
termination of any Extension Period, First Interstate may further extend such
Extension Period provided that such extension does not cause such Extension
Period to exceed 20 consecutive quarters or to extend beyond the Stated
Maturity. Upon the termination of any Extension Period and the payment of all
interest then accrued and unpaid (together with interest thereon at the annual
rate of %, compounded quarterly, to the extent permitted by applicable law),
First Interstate may elect to begin a new Extension Period subject to the above
requirements. There is no limitation on the number of times that First
Interstate may elect to begin an Extension Period prior to the Stated Maturity.
See "Description of the Trust Preferred Securities--Distributions" and
"Description of Junior Subordinated Debentures--Option to Defer Interest Payment
Period."
Because First Interstate believes the likelihood of it exercising its option
to defer payments of interest is remote, the Junior Subordinated Debentures will
be treated as issued without "original issue discount" for United States federal
income tax purposes. As a result, holders of Trust Preferred Securities will
include interest in taxable income under their own methods of accounting (i.e.,
cash or accrual). If First Interstate exercises its right to defer payments of
interest, the holders of Trust Preferred Securities will be required to include
their pro rata share of original issue discount in gross income as it accrues
for United States federal income tax (and possibly other) purposes in advance of
the receipt of cash. See "Certain Federal Income Tax Consequences--Interest
Income and Original Issue Discount." First Interstate has no current intention
of exercising its right to defer payments of interest by extending the interest
payment period on the Junior Subordinated Debentures. However, should First
Interstate elect to exercise its right to defer payments of interest in the
future, the market price of the Trust Preferred Securities is likely to be
adversely affected. A holder that disposes of such holder's Trust Preferred
Securities during an Extension Period, therefore, might not receive the same
return on such holder's investment as a holder that continues to hold the Trust
Preferred Securities.
TAX EVENT REDEMPTION, INVESTMENT COMPANY EVENT REDEMPTION OR CAPITAL TREATMENT
EVENT REDEMPTION
Upon the occurrence and during the continuation of a Tax Event, an
Investment Company Event or a Capital Treatment Event (whether occurring before
or after , 2002), First Interstate has the right, if certain
conditions are met, to redeem the Junior Subordinated Debentures in whole (but
not in part) at 100% of the principal amount together with accrued but unpaid
interest to the date fixed for redemption within 90 days following the
occurrence of such Tax Event, Investment Company Event or Capital Treatment
Event and therefore cause a mandatory redemption of the Trust Preferred
Securities. The exercise of such right is subject to First Interstate having
received prior approval of the Federal Reserve to do so if then required under
applicable guidelines or policies of the Federal Reserve. See "Description of
the Trust Preferred Securities--Redemption."
A "Tax Event" means the receipt by First Interstate and FIB Capital of an
opinion of counsel experienced in such matters to the effect that, as a result
of any amendment to, or change (including any
12
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announced prospective change) in, the laws (or any regulations thereunder) of
the United States or any political subdivision or taxing authority thereof or
therein, or as a result of any official administrative pronouncement or judicial
decision interpreting or applying such laws or regulations, which amendment or
change is effective or such prospective change, pronouncement or decision is
announced on or after the original issuance of the Trust Preferred Securities,
there is more than an insubstantial risk that (i) FIB Capital is, or will be
within 90 days of the date of such opinion, subject to United States federal
income tax with respect to income received or accrued on the Junior Subordinated
Debentures, (ii) interest payable by First Interstate on the Junior Subordinated
Debentures is not, or within 90 days of such opinion, will not be, deductible by
First Interstate, in whole or in part, for United States federal income tax
purposes, or (iii) FIB Capital is, or will be within 90 days of the date of the
opinion, subject to more than a de minimus amount of other taxes, duties or
other governmental charges.
An "Investment Company Event" means the receipt by First Interstate and FIB
Capital of an opinion of counsel experienced in such matters to the effect that,
as a result of any change in law or regulation or a change in interpretation or
application of law or regulation by any legislative body, court, governmental
agency or regulatory authority, FIB Capital is or will be considered an
"investment company" that is required to be registered under the Investment
Company Act of 1940, as amended (the "Investment Company Act"), which change
becomes effective on or after the original issuance of the Trust Preferred
Securities.
A "Capital Treatment Event" means the reasonable determination by First
Interstate that, as a result of any amendment to, or change (including any
announced prospective change) in, the laws (or any regulations thereunder) of
the United States or any political subdivision thereof or therein, or as a
result of any official or administrative pronouncement or action or judicial
decision interpreting or applying such laws or regulations, which amendment or
change is effective or such prospective change, pronouncement or decision is
announced on or after the date of issuance of the Trust Preferred Securities,
there is more than an insubstantial risk of impairment of First Interstate's
ability to treat the Trust Preferred Securities (or any substantial portion
thereof) as "Tier 1 capital" (or the then equivalent thereof) for purposes of
the capital adequacy guidelines of the Federal Reserve, as then in effect and
applicable to First Interstate.
POSSIBLE TAX LAW CHANGES AFFECTING THE TRUST PREFERRED SECURITIES
Congress and the Clinton Administration have from time to time considered
proposals that would deny an issuer a deduction for United States income tax
purposes for the payment of interest on instruments with characteristics similar
to the Junior Subordinated Debentures. Such proposals have been considered in
connection with recent legislation, including the recently enacted Taxpayer
Relief Act of 1997 (the "Relief Act"). Although no such proposals have been
included in the final provisions of recent legislation, including the Relief
Act, there can be no assurance that future legislation will not adversely affect
the tax treatment of the Junior Subordinated Debentures, potentially on a
retroactive basis. Such a change would give rise to a Tax Event which may permit
First Interstate, subject to approval of the Federal Reserve, to cause a
redemption of the Trust Preferred Securities by electing to prepay the Junior
Subordinated Debentures. See "Description of the Trust Preferred
Securities--Redemption," "Description of Junior Subordinated
Debentures--Redemption," and "Certain Federal Income Tax Consequences."
POSSIBLE DISTRIBUTION OF JUNIOR SUBORDINATED DEBENTURES TO HOLDERS OF TRUST
PREFERRED SECURITIES
First Interstate will have the right at any time to terminate FIB Capital
and, after satisfaction of liabilities to creditors of FIB Capital as required
by applicable law, cause the Junior Subordinated Debentures to be distributed to
the holders of the Trust Preferred Securities in liquidation of FIB Capital. The
exercise of such right is subject to First Interstate having received prior
approval of the Federal Reserve if then required under applicable capital
guidelines or policies of the Federal Reserve. Because holders of the Trust
Preferred Securities may receive Junior Subordinated Debentures in liquidation
of FIB Capital and because Distributions are otherwise limited to payments on
the Junior Subordinated
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Debentures, prospective purchasers of the Trust Preferred Securities are also
making an investment decision with regard to the Junior Subordinated Debentures
and should carefully review all information regarding the Junior Subordinated
Debentures contained herein. See "Description of the Trust Preferred
Securities--Liquidation Distribution upon Termination" and "Description of
Junior Subordinated Debentures."
Under current United States federal income tax law and interpretations and
assuming, as expected, FIB Capital is classified as a grantor trust for such
purposes, a distribution of the Junior Subordinated Debentures upon a
liquidation of FIB Capital should not be a taxable event to holders of the Trust
Preferred Securities. However, if a Tax Event were to occur which would cause
FIB Capital to be subject to United States federal income tax with respect to
income received or accrued on the Junior Subordinated Debentures, a distribution
of the Junior Subordinated Debentures by FIB Capital could be a taxable event to
FIB Capital and the holders of the Trust Preferred Securities. See "Certain
Federal Income Tax Consequences--Distribution of Junior Subordinated Debentures
to Holders of Trust Preferred Securities."
LIMITED TRADING MARKET; MARKET PRICES
The Company does not intend to list the Trust Preferred Securities on any
securities exchange or include them for quotation on The Nasdaq Stock Market.
There is no existing public market for the Trust Preferred Securities, and there
can be no assurance that an active or liquid trading market for the Trust
Preferred Securities will develop following this offering, or that, if such a
market does develop, it will continue. Although the Underwriters have informed
FIB Capital and the Company that the Underwriters intend to make a market in the
Trust Preferred Securities offered hereby, the Underwriters are not obligated to
do so and any such market making activity may be terminated at any time without
notice to the holders of the Trust Preferred Securities. Future trading prices
of the Trust Preferred Securities will depend on many factors including, among
other things, prevailing interest rates, the operating results and financial
condition of the Company and the market for similar securities. As a result of
the existence of First Interstate's right to defer interest payments on or,
subject to prior approval of the Federal Reserve if then required under
applicable capital guidelines or policies of the Federal Reserve, shorten the
Stated Maturity of the Junior Subordinated Debentures, the market price of the
Trust Preferred Securities may be more volatile than the market prices of debt
securities that are not subject to such optional deferrals or reduction in
maturity. There can be no assurance as to the market prices for the Trust
Preferred Securities or the Junior Subordinated Debentures that may be
distributed in exchange for the Trust Preferred Securities if First Interstate
exercises its right to terminate FIB Capital. Accordingly, the Trust Preferred
Securities that an investor may purchase, or the Junior Subordinated Debentures
that a holder of the Trust Preferred Securities may receive in liquidation of
FIB Capital, may trade at a discount from the price that the investor paid to
purchase the Trust Preferred Securities offered hereby.
SHORTENING OF STATED MATURITY OF JUNIOR SUBORDINATED DEBENTURES
First Interstate will have the right at any time to shorten the maturity of
the Junior Subordinated Debentures to a date not earlier than five years from
the date of issuance and thereby cause the Trust Preferred Securities to be
redeemed on such earlier date. The exercise of such right is subject to First
Interstate having received prior approval of the Federal Reserve if then
required under applicable capital guidelines or policies of the Federal Reserve.
See "Description of Junior Subordinated Debentures-- Redemption."
LIMITATIONS ON DIRECT ACTIONS AGAINST FIRST INTERSTATE AND ON RIGHTS UNDER THE
GUARANTEE
The Guarantee guarantees to the holders of the Trust Preferred Securities
the following payments, to the extent not paid by FIB Capital: (i) any
accumulated and unpaid Distributions required to be paid on the Trust Preferred
Securities, to the extent that FIB Capital has funds on hand available therefor
at such
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time, (ii) the redemption price with respect to any Trust Preferred Securities
called for redemption, to the extent that FIB Capital has funds on hand
available therefor at such time and (iii) upon a voluntary or involuntary
dissolution, winding-up or liquidation of FIB Capital (unless the Junior
Subordinated Debentures are distributed to holders of the Trust Preferred
Securities), the lesser of (a) the aggregate of the Liquidation Amount and all
accumulated and unpaid Distributions to the date of payment to the extent that
FIB Capital has funds on hand available therefor at such time (the "Liquidation
Distribution") and (b) the amount of assets of FIB Capital remaining available
for distribution to holders of the Trust Preferred Securities after satisfaction
of liabilities to creditors of FIB Capital as required by applicable law. The
holders of not less than a majority in aggregate liquidation amount of the Trust
Preferred Securities have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Guarantee Trustee (as
defined herein), in respect of the Guarantee or to direct the exercise of any
trust power conferred upon the Guarantee Trustee under the Guarantee Agreement.
Any holder of the Trust Preferred Securities may institute a legal proceeding
directly against First Interstate to enforce its rights under the Guarantee
without first instituting a legal proceeding against FIB Capital, the Guarantee
Trustee or any other person or entity. If First Interstate were to default on
its obligation to pay amounts payable under the Junior Subordinated Debentures,
FIB Capital would lack funds for the payment of Distributions or amounts payable
on redemption of the Trust Preferred Securities or otherwise and, in such event,
holders of the Trust Preferred Securities would not be able to rely upon the
Guarantee for payment of such amounts. Instead, in the event a Debenture Event
of Default shall have occurred and be continuing and such event is attributable
to the failure of First Interstate to pay interest on or principal of the Junior
Subordinated Debentures on the payment date on which such payment is due and
payable, then a holder of Trust Preferred Securities may institute a legal
proceeding directly against First Interstate for enforcement of payment to such
holder of the principal of or interest on such Junior Subordinated Debentures
having a principal amount equal to the aggregate Liquidation Amount of the Trust
Preferred Securities of such holder (a "Direct Action"). In connection with such
Direct Action, First Interstate will have a right of set-off under the Indenture
to the extent of any payment made by First Interstate to such holder of Trust
Preferred Securities in the Direct Action. Except as described herein, holders
of Trust Preferred Securities will not be able to exercise directly any other
remedy available to the holders of the Junior Subordinated Debentures or assert
directly any other rights in respect of the Junior Subordinated Debentures. See
"Description of Junior Subordinated Debentures--Enforcement of Certain Rights by
Holders of Trust Preferred Securities" and "Description of Guarantee." The Trust
Agreement provides that each holder of Trust Preferred Securities by acceptance
thereof agrees to the provisions of the Guarantee Agreement and the Indenture.
LIMITED COVENANTS
The covenants in the Indenture are limited and there are no covenants
relating to First Interstate in the Trust Agreement. As a result, neither the
Indenture nor the Trust Agreement protects holders of Junior Subordinated
Debentures, or Trust Preferred Securities, respectively, in the event of a
material adverse change in First Interstate's or the Banks' financial condition
or results of operations or limits the ability of First Interstate or any
Subsidiary to incur additional indebtedness. Therefore, the provisions of these
governing instruments should not be considered a significant factor in
evaluating whether First Interstate will be able to comply with its obligations
under the Junior Subordinated Debentures or the Guarantee.
LIMITED VOTING RIGHTS
Holders of Trust Preferred Securities will generally have limited voting
rights relating only to the modification of the Trust Preferred Securities, the
dissolution, winding-up or liquidation of FIB Capital and the exercise of FIB
Capital's rights as holder of the Junior Subordinated Debentures. Holders of
Trust Preferred Securities will not be entitled to vote to appoint, remove or
replace the Property Trustee or the Delaware Trustee as such voting rights are
vested exclusively in the holder of the Common Securities
15
<PAGE>
except upon the occurrence of certain events described herein. In no event will
the holders of the Trust Preferred Securities have the right to vote to appoint,
remove or replace the Administrative Trustees; such voting rights are vested
exclusively in the holder of the Common Securities. The Property Trustee, the
Administrative Trustees and First Interstate may amend the Trust Agreement
without the consent of holders of Trust Preferred Securities to ensure that FIB
Capital will be classified for United States federal income tax purposes as a
grantor trust or to ensure that FIB Capital will not be required to register as
an "investment company," even if such action adversely affects the interests of
such holders. See "Description of Trust Preferred Securities--Voting Rights;
Amendment of the Trust Agreement" and "--Removal of Trustees."
ABILITY OF THE COMPANY TO EXECUTE ITS BUSINESS STRATEGY
The financial performance and profitability of the Company will depend on
its ability to execute its business strategy and manage its possible future
growth. Although the Company believes that it has substantially integrated the
recently acquired banks into the Company's operations, there can be no assurance
that unforeseen issues relating to the assimilation or prior operations of these
banks, including the emergence of any material undisclosed liabilities in excess
of the Company's indemnification rights, will not materially adversely affect
the Company. In addition, any future acquisitions or other possible future
growth may present operating and other problems that could have a material
adverse effect on the Company's business, financial condition and results of
operations. The Company's financial performance will also depend on the
Company's ability to maintain profitable operations through implementation of
its Strategic Vision. Moreover, the Company's future performance is subject to a
number of factors beyond its control, including pending and future federal and
state banking legislation, regulatory changes, unforeseen litigation outcomes,
inflation, lending and deposit rate changes, interest rate fluctuations,
increased competition and economic conditions. Accordingly, there can be no
assurance that the Company will be able to continue the growth or maintain the
level of profitability it has recently experienced.
INTEREST RATE RISK
Banking companies' earnings depend largely on the relationship between the
yield on earning assets, primarily loans and investments, and the cost of funds,
primarily deposits and borrowings. This relationship, known as the interest rate
spread, is subject to fluctuation and is affected by economic and competitive
factors which influence interest rates, the volume and mix of interest-earning
assets and interest-bearing liabilities and the level of non-performing assets.
Fluctuations in interest rates affect the demand of customers for the Company's
products and services. The Company is subject to interest rate risk to the
degree that its interest-bearing liabilities reprice or mature more slowly or
more rapidly or on a different basis than its interest-earning assets.
Significant fluctuations in interest rates could have a material adverse effect
on the Company's business, financial condition and results of operations.
ECONOMIC CONDITIONS; LIMITED GEOGRAPHIC DIVERSIFICATION
The Company's operations are located in Montana and Wyoming. As a result of
the geographic concentration of its operations, the Company's results depend
largely upon economic conditions in these areas. The Company believes the
primary industries in Montana and Wyoming include agriculture, energy, mining,
timber processing, tourism, government services, education and medical services.
A deterioration in economic conditions in the Company's market areas could
adversely impact the quality of the Company's loan portfolio and the demand for
its products and services, and accordingly, could have a material adverse effect
on the Company's business, financial condition and results of operations.
GOVERNMENT REGULATION AND MONETARY POLICY
The Company and the banking industry are subject to extensive regulation and
supervision under federal and state laws and regulations. The restrictions
imposed by such laws and regulations limit the
16
<PAGE>
manner in which the Company conducts its banking business, undertakes new
investments and activities and obtains financing. This regulation is designed
primarily for the protection of the deposit insurance funds and consumers and
not to benefit holders of the Company's securities. Financial institution
regulation has been the subject of significant legislation in recent years and
may be the subject of further significant legislation in the future, none of
which is in the control of the Company. Significant new laws or changes in, or
repeals of, existing laws could have a material adverse effect on the Company's
business, financial condition and results of operations. Further, federal
monetary policy, particularly as implemented through the Federal Reserve System,
significantly affects credit conditions for the Company, and any unfavorable
change in these conditions could have a material adverse effect on the Company's
business, financial condition and results of operations. See "Regulation and
Supervision."
COMPETITION
The banking and financial services business in both Montana and Wyoming is
highly competitive. The increasingly competitive environment is a result
primarily of changes in regulation, changes in technology and product delivery
systems and the accelerating pace of consolidation among financial services
providers. The Banks compete for loans, deposits and customers for financial
services with other commercial banks, savings and loan associations, securities
and brokerage companies, mortgage companies, insurance companies, finance
companies, money market funds, credit unions and other nonbank financial
services providers. Several of these competitors are much larger in total assets
and capitalization, have greater access to capital markets and offer a broader
array of financial services than the Banks. Moreover, the Riegal-Neal Interstate
Banking and Branching Efficiency Act of 1994 (the "Banking and Branching Act")
has increased competition in the Banks' markets, particularly from larger,
multi-state banks. There can be no assurance that the Company will be able to
compete effectively in its markets. Furthermore, developments increasing the
nature or level of competition could have a material adverse effect on the
Company's business, financial condition and results of operations. See
"Business--Competition" and "Regulation and Supervision."
DEPENDENCE ON KEY PERSONNEL
The Company's success depends to a significant extent on the management
skills of its existing executive officers and directors, many of whom have held
officer and director positions with the Company for many years. The loss or
unavailability of any of its key executives, including Homer A. Scott, Jr.,
Chairman of the Board, Thomas W. Scott, President and Chief Executive Officer or
Terrill R. Moore, Senior Vice President, Chief Financial Officer and Secretary,
could have a material adverse effect on the Company's business, financial
condition and results of operations. See "Management."
CONTROL BY AFFILIATES
The directors and executive officers of the Company beneficially own
approximately 66% of the outstanding common stock of the Company. Many of these
directors and executive officers are members of the Scott family, which
collectively owns approximately 82% of the outstanding common stock. By virtue
of such ownership, these affiliates are able to control the election of
directors and the determination of the Company's business, including
transactions involving any merger, share exchange, sale of assets outside the
ordinary course of business and dissolution. Such affiliates are also able to
control decisions affecting the Trust Preferred Securities, including the
possible deferral of quarterly Distributions during an Extension Period. See
"Description of First Interstate Capital Stock" and "Security Ownership of
Certain Beneficial Owners and Management."
ASSET QUALITY
A significant source of risk for the Company arises from the possibility
that losses will be sustained by the Banks because borrowers, guarantors and
related parties may fail to perform in accordance with the
17
<PAGE>
terms of their loans. The Company has adopted underwriting and credit monitoring
procedures and credit policies, including the establishment and review of the
allowance for credit losses, that management believes are appropriate to
mitigate this risk by assessing the likelihood of nonperformance, tracking loan
performance and diversifying the Company's credit portfolio. Such policies and
procedures, however, may not prevent unexpected losses that could have a
material adverse effect on the Company's business, financial condition and
results of operations.
FORWARD-LOOKING STATEMENTS
Certain statements contained in this Prospectus, including, without
limitation, statements containing the words "believes," "anticipates,"
"intends," "expects" and words of similar import, constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. Such forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause the actual results, performance
or achievements of the Company to be materially different from any future
results, performance or achievements expressed or implied by such
forward-looking statements. Such factors include, among others, the following:
general economic and business conditions in those areas in which the Company
operates; demographic changes; competition; fluctuations in interest rates;
changes in business strategy or development plans; changes in governmental
regulation; credit quality; the availability of capital to fund the expected
expansion of the Company's business; and other factors referenced in this
Prospectus, including, without limitation, under the captions "Risk Factors,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business." Given these uncertainties, prospective investors are
cautioned not to place undue reliance on such forward-looking statements. The
Company disclaims any obligation to update any such factors or to publicly
announce the results of any revisions to any of the forward-looking statements
contained herein to reflect future events or developments.
18
<PAGE>
USE OF PROCEEDS
All of the proceeds from the sale of Trust Preferred Securities will be
invested by FIB Capital in the Junior Subordinated Debentures. First Interstate
intends to use $20.0 million of the proceeds from the sale of the Junior
Subordinated Debentures to FIB Capital to redeem the Company's outstanding
noncumulative perpetual preferred stock. The redemption is subject to regulatory
approval which the Company expects to obtain. The preferred stock provides for
cash dividends at the current annual rate of 8.53%. The Company intends to use
the remaining proceeds to reduce indebtedness outstanding under the Company's
revolving term loan. The loan bears interest at variable rates (7.55% weighted
average rate as of June 30, 1997), expires in December 2003, and is secured by
all of the outstanding capital stock of the Banks. As of June 30, 1997, the
amount outstanding under the revolving term loan was $31.2 million, with an
additional $8.8 million in borrowing capacity available thereunder. The Company
intends to use cash on hand to pay all underwriting commissions and offering
expenses, which are estimated to be approximately $ in the aggregate. See
"Management's Discussion And Analysis of Financial Condition and Results of
Operations--Financial Condition" and "Description of First Interstate Capital
Stock--Preferred Stock."
First Interstate is required by the Federal Reserve to maintain certain
levels of capital for bank regulatory purposes. On October 21, 1996, the Federal
Reserve announced that certain qualifying amounts of cumulative preferred
securities having the characteristics of the Trust Preferred Securities could be
included as Tier 1 capital for bank holding companies. Such Tier 1 capital
treatment, together with the Company's ability to deduct, for federal income tax
purposes, interest payable on the Junior Subordinated Debentures, will provide
First Interstate with a cost-effective means of obtaining capital for bank
regulatory purposes.
ACCOUNTING TREATMENT
For financial reporting purposes, FIB Capital will be treated as a
subsidiary of First Interstate and, accordingly, the accounts of FIB Capital
will be included in the consolidated financial statements of the Company. The
Trust Preferred Securities will be presented as a separate line item in the
consolidated balance sheet of the Company under the caption "Company Obligated
Mandatorily Redeemable Preferred Securities of Subsidiary Trust Holding Solely
Junior Subordinated Debentures," and appropriate disclosures about the Trust
Preferred Securities, the Guarantee and the Junior Subordinated Debentures will
be included in the notes to consolidated financial statements. For financial
reporting purposes, the Company will record Distributions payable on the Trust
Preferred Securities as an expense in the consolidated statements of operations.
Future reports of the Company filed under the Securities Exchange Act of
1934, as amended ("the Exchange Act"), will include a footnote to the financial
statements stating that (i) FIB Capital is wholly-owned, (ii) the sole assets of
FIB Capital are the Junior Subordinated Debentures (specifying the principal
amount, interest rate and maturity date of such Junior Subordinated Debentures)
and (iii) the back-up obligations, in the aggregate, constitute a full and
unconditional guarantee by First Interstate of the obligations of FIB Capital
under the Trust Preferred Securities. FIB Capital will not provide separate
reports under the Exchange Act.
19
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of June
30, 1997, and as adjusted to give effect to the issuance of the Trust Preferred
Securities by FIB Capital offered hereby and the intended application of the
proceeds therefrom. See "Use of Proceeds."
<TABLE>
<CAPTION>
JUNE 30, 1997
----------------------
AS
ACTUAL ADJUSTED
---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Long-term debt.......................................................................... $ 56,184(1) $ 36,184
Company obligated mandatorily redeemable trust preferred securities of subsidiary trust
holding solely junior subordinated debentures(1)...................................... -- 40,000
Stockholders' equity:...................................................................
Preferred stock, no par value: 100,000 shares authorized, 20,000 outstanding.......... 20,000 0
Common stock, no par value: 20,000,000 shares authorized, 7,888,644 outstanding....... 8,350 8,350
Unrealized gain on securities, available for sale, net................................ 370 370
Retained earnings..................................................................... 125,205 125,205
---------- ----------
Total stockholders' equity........................................................ 153,925 133,925
---------- ----------
Total capitalization.................................................................... $ 210,109 $ 210,109
---------- ----------
---------- ----------
</TABLE>
- ------------------------
(1) Includes approximately $52.0 million in Senior and Subordinated Debt and
$4.2 million in indebtedness of a subsidiary Bank.
(2) The subsidiary trust is FIB Capital, which will hold the Junior Subordinated
Debentures as its sole asset. The Trust Preferred Securities are issued by
FIB Capital. The sole assets of FIB Capital will consist of the $41,237,125
aggregate principal amount of Junior Subordinated Debentures issued by First
Interstate to FIB Capital. The Junior Subordinated Debentures will bear
interest at the rate of % per annum and will mature on , 2027
which date may be shortened to a date not earlier than , 2002 if
certain conditions are met. The Junior Subordinated Debentures are
redeemable prior to maturity at the option of First Interstate, subject to
any required prior approval of the Federal Reserve, (i) on or after
, 2002, in whole at any time or in part from time to time, or (ii)
at any time, in whole (but not in part), upon the occurrence and
continuation of a Tax Event, an Investment Company Event or a Capital
Treatment Event. See "Description of Junior Subordinated
Debentures--Redemption." First Interstate owns all of the Common Securities
of FIB Capital.
REGULATORY CAPITAL RATIOS
The following table sets forth the consolidated capital ratios of the
Company at June 30, 1997, and as adjusted to give effect to the issuance of the
Trust Preferred Securities by FIB Capital offered hereby and the intended
application of the proceeds therefrom. See "Use of Proceeds."
<TABLE>
<CAPTION>
JUNE 30, 1997
--------------------
AS
ACTUAL ADJUSTED
--------- ---------
<S> <C> <C>
Tier 1 risk-based capital................................................ 7.68% 8.92%
Total risk-based capital................................................. 10.21% 11.45%
Leverage ratio........................................................... 5.72% 6.65%
</TABLE>
20
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data with respect to the
Company's consolidated financial position as of December 31, 1996, and 1995 and
its results of operations for the fiscal years ended December 31, 1996, 1995,
and 1994, has been derived from the consolidated financial statements of the
Company appearing elsewhere in this Prospectus, which have been audited by KPMG
Peat Marwick LLP, independent certified public accountants. This data should be
read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and such consolidated financial statements,
including the notes thereto. The selected consolidated financial data with
respect to the Company's consolidated financial position as of December 31,
1994, 1993, and 1992, and its results of operations for the fiscal years ended
December 31, 1993, and 1992, has been derived from the audited consolidated
financial statements of the Company, which are not presented herein. The
selected consolidated financial data with respect to the Company's consolidated
financial position as of June 30, 1997, and 1996, and its results of operations
for the six-month periods ended June 30, 1997, and 1996, has been derived from
the unaudited consolidated financial statements of the Company which, in the
opinion of management, reflect all adjustments of a normal recurring nature
necessary for a fair presentation of the financial position and results of
operations for such periods. The results for the six months ended June 30, 1997,
are not necessarily indicative of the results to be expected for the entire
year.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, YEARS ENDED DECEMBER 31,
-------------------- -----------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
--------- --------- --------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Interest income.................................. $ 80,330 $ 52,854 $ 117,925 $ 98,970 $ 80,230 $ 77,154 $ 78,707
Interest expense................................. 34,373 22,551 50,019 41,946 28,451 27,078 31,989
--------- --------- --------- --------- --------- --------- ---------
Net interest income.............................. 45,957 30,303 67,906 57,024 51,779 50,076 46,718
Provision for loan losses........................ 2,281 1,152 3,844 1,629 1,344 1,345 1,630
--------- --------- --------- --------- --------- --------- ---------
Net interest income after provision for loan
losses......................................... 43,676 29,151 64,062 55,395 50,435 48,731 45,088
Other operating income........................... 13,485 10,740 23,927 18,764 16,387 15,724 14,936
Other operating expenses......................... 35,987 23,207 53,395 45,978 41,227 39,686 37,985
--------- --------- --------- --------- --------- --------- ---------
Income before income taxes....................... 21,174 16,684 34,594 28,181 25,595 24,769 22,039
Provision for income taxes....................... 8,080 6,414 13,351 10,844 9,861 9,321 8,179
--------- --------- --------- --------- --------- --------- ---------
Net income....................................... $ 13,094 $ 10,270 $ 21,243 $ 17,337 $ 15,734 $ 15,448 $ 13,860
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Net income applicable to common stock............ $ 12,247 $ 10,270 $ 20,818 $ 17,337 $ 15,734 $ 15,448 $ 13,860
Net income per common share...................... $ 1.54 $ 1.31 $ 2.64 $ 2.21 $ 2.00 $ 1.96 $ 1.74
Dividends per common share....................... $ 0.46 $ 0.38 $ 0.77 $ 0.48 $ 0.40 $ 0.34 $ 0.28
Weighted average common shares outstanding....... 7,936,708 7,802,892 7,881,024 7,843,644 7,850,188 7,891,160 7,984,244
BALANCE SHEET DATA (AT PERIOD END):
Total assets..................................... $2,131,351 $1,350,478 $2,063,837 $1,351,215 $1,134,105 $1,097,469 $1,022,392
Loans............................................ 1,475,852 940,248 1,375,479 870,378 751,518 667,385 607,125
Allowance for loan losses........................ 28,757 15,406 27,797 15,171 13,726 13,373 12,965
Investment securities............................ 396,931 247,317 403,571 258,737 251,745 249,754 226,821
Deposits......................................... 1,673,035 1,082,487 1,679,424 1,099,069 939,857 936,793 900,465
Long-term debt................................... 56,184 10,234 64,667 15,867 5,449 6,853 5,254
Stockholders' equity............................. 153,925 115,547 146,061 109,366 95,272 84,163 71,852
(CONTINUED ON NEXT PAGE)
</TABLE>
21
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
(CONTINUED FROM PREVIOUS PAGE)
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, YEARS ENDED DECEMBER 31,
-------------------- -----------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
--------- --------- --------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING RATIOS:
Return on average assets......................... 1.27% 1.55% 1.41% 1.39% 1.44% 1.50% 1.43%
Return on average common stockholders' equity.... 18.94% 18.30% 17.84% 16.98% 17.64% 19.97% 20.43%
Net interest margin.............................. 5.11% 5.19% 5.15% 5.19% 5.34% 5.51% 5.45%
Net interest spread.............................. 4.46% 4.52% 4.47% 4.45% 4.76% 4.98% 4.87%
Ratio of earnings to fixed charges(1):
Excluding interest on deposits................. 4.85x 14.50x 8.74x 9.50x 12.34x 30.66x 20.25x
Including interest on deposits................. 1.59x 1.73x 1.68x 1.66x 1.87x 1.91x 1.69x
ASSET QUALITY RATIOS:
Non-performing assets to total loans and
OREO(2)........................................ 0.95% 0.99% 1.20% 0.97% 0.94% 1.44% 2.84%
Allowance for loan losses to total loans......... 1.95% 1.64% 2.02% 1.74% 1.83% 2.00% 2.14%
Allowance for loan losses to non-performing
loans(3)....................................... 223.42% 191.19% 185.10% 213.74% 259.62% 205.49% 104.09%
Net charge-offs to average loans................. 0.09% 0.10% 0.17% 0.13% 0.14% 0.15% 0.15%
REGULATORY CAPITAL RATIOS:
Tier 1 capital to risk-weighted assets........... 7.68% 10.48% 7.35% 10.40% 11.32% 10.96% 9.55%
Total capital to risk-weighted assets............ 10.21% 11.73% 9.98% 11.65% 12.58% 12.22% 11.05%
Leverage ratio................................... 5.72% 7.89% 5.26% 7.28% 8.12% 7.26% 6.57%
</TABLE>
- ------------------------------
(1) For purposes of computing the ratio of earnings to fixed charges, earnings
represents income before income taxes and fixed charges. Fixed charges
represent interest expense and preferred stock dividends, which dividends
commenced in October 1996. Deposits include interest-bearing deposits and
repurchase agreements. Without including preferred stock dividends in fixed
charges and excluding interest on deposits, the ratio of earnings to fixed
charges for the six months ended June 30, 1997 and the year ended December
31, 1996 were 5.89x and 9.91x, respectively. Without including preferred
stock dividends in fixed charges and including interest on deposits, the
ratio of earnings to fixed charges for the six months ended June 30, 1997
and the year ended December 31, 1996 were 1.61x and 1.68x, respectively.
(2) For purposes of computing the ratio of non-performing assets to total loans
and OREO, non-performing assets include non-accrual loans, loans past due 90
days or more and still accruing, restructured debt and other real estate
owned.
(3) For purposes of computing the ratio of allowance for loan losses to
non-performing loans, non-performing loans include non-accrual loans, loans
past due 90 days or more and still accruing and restructured debt.
22
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The following discussion and analysis is intended to provide greater details
of the results of operations and financial condition of the Company. The
following discussion should be read in conjunction with the information under
"Selected Consolidated Financial Data" and the Company's consolidated financial
statements, including the notes thereto, and other financial data appearing
elsewhere in this Prospectus. Certain statements included in the following
discussion constitute "forward-looking statements" which involve various risks
and uncertainties. The Company's actual results may differ significantly from
those anticipated in such forward-looking statements. Factors that might cause
such a difference include, without limitation, the ability of the Company to
execute its business strategy, interest rate risk, economic conditions,
government regulation, competition and asset quality. For additional information
concerning these and other factors, see "Risk Factors."
The Company, through the Banks, operates 31 banking offices in 23
communities throughout Montana and Wyoming. The Company's income is derived
primarily from the net interest income and other operating income generated by
the Banks. Net interest income consists of the excess of interest income,
received primarily on customer loans and investment securities, over interest
expense, paid principally on customer deposits and indebtedness. Other operating
income primarily includes service charges on deposit accounts, data processing
fees and income from fiduciary activities.
The Company has continued to increase earnings during the periods reported
herein while expanding its operations. A majority of the Company's growth in
recent years has resulted from acquisitions of other banks. In October 1996, the
Company acquired First Interstate Bank of Montana, N.A. and First Interstate
Bank of Wyoming, N.A., which collectively included six branch banks (the "FIB
Banks"). In December 1996, the Company acquired Mountain Bank of Whitefish ("FIB
Whitefish"), which included two branch locations. Immediately prior to the
acquisitions, the FIB Banks had assets of $553.2 million and deposits of $423.9
million, and FIB Whitefish had assets of $66.9 million and deposits of $54.4
million. Prior to the acquisition, the FIB Banks were operated as branch
locations without independent administrative support, data processing and other
required services. In connection with the acquisition, the Company increased its
staffing at both the holding company and branch levels to provide the
administrative, data processing and other operational support to facilitate
integration and operation of such banks.
The acquisitions of the FIB Banks and FIB Whitefish (collectively, the
"Acquired Banks") were accounted for under the purchase method of accounting.
Amortization of goodwill resulting from such acquisitions total approximately
$2.1 million annually. The Company believes that the Acquired Banks have been
substantially integrated into the Company's operations.
RESULTS OF OPERATIONS
The Company's increased earnings and expansion of operations have been
effected through a successful combination of acquisitions and internal growth.
The internal growth experienced by the Company is reflected by an increased
volume of customer loans and deposits, without giving effect to such
acquisitions. The Company's internal growth has largely been accomplished
through its effective offering and promotion of competitively priced products
and services. See "Business--Growth Strategy." Net income increased 27.5% to
$13.1 million for the six months ended June 30, 1997 from $10.3 million for the
six months ended June 30, 1996. This increase resulted equally from internal
growth and earnings provided by the Acquired Banks. Without giving effect to the
Acquired Banks, management estimates that net income for the six months ended
June 30, 1997 would have been approximately $10.9 million. Net income increased
22.5% to $21.2 million in 1996 from $17.3 million in 1995, due principally to
internal growth.
23
<PAGE>
Net income increased 10.2% to $17.3 million in 1995 from $15.7 million in
1994. In 1995, the Company acquired Citizens BancShares, Inc. and First Park
County Bancshares, Inc. (collectively, the "Citizens and First Park Banks"),
which occurred in January and May, respectively, of such year. These banks had
aggregate assets of $102.9 million and aggregate deposits of $82.9 million
immediately prior to the acquisitions. The increase in the Company's net income
in 1995 from 1994 was due primarily to internal growth, together with earnings
resulting from the acquisitions of the Citizens and First Park Banks.
NET INTEREST INCOME
Net interest income is the largest source of the Company's operating income.
As discussed above, net interest income is derived from interest, dividends and
fees received from interest-earning assets, less interest expense incurred on
interest-bearing liabilities. Interest earning assets primarily include loans
and investment securities. Interest-bearing liabilities primarily include
deposits and various forms of indebtedness.
For the six months ended June 30, 1997, net interest income increased 51.7%
to $46.0 million from $30.3 million for the corresponding period in 1996. This
increase resulted primarily from the incremental net interest income provided by
the Acquired Banks. Without giving effect to the Acquired Banks, management
estimates the net interest income for the six months ended June 30, 1997 would
have been approximately $34.0 million.
Net interest income increased 19.1% to $67.9 million in 1996 from $57.0
million in 1995. This increase resulted primarily from the Acquired Banks and
from a higher volume of loans due to internal growth. Net interest income
provided by the Acquired Banks in 1996 was approximately $5.3 million.
In 1995, net interest income increased 10.1% to $57.0 million from $51.8
million in 1994. Of the increase, approximately $3.2 million was related to net
interest income generated by the Citizen and First Park Banks. The balance of
the increase was derived principally from internal expansion of loans and
deposits.
The following table presents, for the periods indicated, condensed average
balance sheet information for the Company, together with interest income and
yields earned on average interest-earning assets, and interest expense and rates
paid on average interest-bearing liabilities. Average balances are averaged
daily balances.
24
<PAGE>
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------
SIX MONTHS ENDED
JUNE 30, 1997 1996 1995
----------------------------------- --------------------------------- ---------
AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE
BALANCE INTEREST YIELD/ RATE BALANCE INTEREST YIELD/ RATE BALANCE
--------- ----------- ----------- --------- --------- ----------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans(1)............................. $1,412,513 $ 68,339 9.76% $1,014,901 $ 100,039 9.86% $ 837,288
U.S. and agencies securities......... 343,244 10,021 5.89% 244,314 13,951 5.71% 199,750
Federal funds sold................... 25,753 711 5.57% 25,462 1,342 5.27% 36,665
Other securities..................... 24,127 741 6.19% 21,868 1,392 6.37% 13,904
Tax exempt securities(2)............. 20,447 826 8.15% 19,100 1,575 8.25% 15,704
Interest-bearing deposits in banks... 3,517 97 5.56% 6,555 376 5.74% 6,276
--------- ----------- --------- --------- ---------
Total interest-earning assets.... 1,829,601 80,735 8.90% 1,332,200 118,675 8.91% 1,109,587
Noninterest-earning assets............. 233,537 173,888 134,912
--------- --------- ---------
Total assets..................... $2,063,138 $1,506,088 $1,244,499
--------- --------- ---------
--------- --------- ---------
Interest-bearing liabilities:
Demand deposits...................... $ 260,648 2,226 1.72% $ 210,153 4,489 2.14% $ 171,933
Savings deposits..................... 447,994 8,353 3.76% 301,003 11,305 3.76% 264,198
Time deposits........................ 604,888 16,891 5.63% 464,712 26,328 5.67% 380,117
Borrowings(3)........................ 183,937 4,415 4.84% 126,135 5,869 4.65% 97,799
Long-term debt....................... 63,087 2,488 7.95% 23,760 2,028 8.54% 13,147
--------- ----------- --------- --------- ---------
Total interest-bearing
liabilities.................... 1,560,554 34,373 4.44% 1,125,763 50,019 4.44% 927,194
--------- ----------- --------- --------- ---------
Noninterest-bearing deposits........... 331,652 242,117 203,258
Other noninterest-bearing
liabilities.......................... 21,614 16,487 11,961
Stockholders' equity................... 149,318 121,721 102,086
--------- --------- ---------
Total liabilities and
stockholders' equity........... $2,063,138 $1,506,088 $1,244,499
--------- --------- ---------
--------- --------- ---------
Net interest income.................... 46,362 68,656
Interest rate spread................... 4.46% 4.47%
Contribution of interest free funds.... 0.65% 0.68%
Net yield on interest-earnings
assets(4)............................ 5.11% 5.15%
Less FTE adjustments................... 405 750
----------- ---------
Net interest income per consolidated
statements of income................. $ 45,957 $ 67,906
----------- ---------
----------- ---------
<CAPTION>
1994
-----------------------------------
AVERAGE AVERAGE AVERAGE
INTEREST YIELD/ RATE BALANCE INTEREST YIELD/ RATE
----------- ----------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans(1)............................. $ 83,735 10.00% $ 705,690 $ 65,936 9.34%
U.S. and agencies securities......... 11,278 5.65% 218,012 11,853 5.44%
Federal funds sold................... 2,095 5.71% 27,994 1,193 4.26%
Other securities..................... 864 6.21% 12,599 926 7.35%
Tax exempt securities(2)............. 1,230 7.83% 8,133 522 6.42%
Interest-bearing deposits in banks... 372 5.93% 3,381 149 4.41%
-----------
Total interest-earning assets.... 99,574 8.97% 975,809 80,579 8.26%
Noninterest-earning assets............. 118,606
---------
Total assets..................... $1,094,415
---------
---------
Interest-bearing liabilities:
Demand deposits...................... 4,248 2.47% $ 163,318 3,487 2.14%
Savings deposits..................... 9,917 3.75% 265,521 8,071 3.04%
Time deposits........................ 21,733 5.72% 306,064 13,688 4.47%
Borrowings(3)........................ 4,866 4.98% 72,367 2,691 3.72%
Long-term debt....................... 1,182 8.99% 6,195 514 8.30%
----------- --------- -----------
Total interest-bearing
liabilities.................... 41,946 4.52% 813,465 28,451 3.50%
----------- --------- -----------
Noninterest-bearing deposits........... 181,885
Other noninterest-bearing
liabilities.......................... 9,855
Stockholders' equity................... 89,210
---------
Total liabilities and
stockholders' equity........... $1,094,415
---------
---------
Net interest income.................... 57,628 52,128
Interest rate spread................... 4.45% 4.76%
Contribution of interest free funds.... 0.74% 0.58%
Net yield on interest-earnings
assets(4)............................ 5.19% 5.34%
Less FTE adjustments................... 604 349
----------- -----------
Net interest income per consolidated
statements of income................. $ 57,024 $ 51,779
----------- -----------
----------- -----------
</TABLE>
- ------------------------------
(1) Average loan balances include non-accrual loans. Loan fees included in
interest income were $3.1 million, $5.0 million, $4.1 million, and $4.2
million for the six months ended June 30, 1997 and the years ended December
31, 1996, 1995 and 1994, respectively.
(2) Interest income and average rates for tax exempt securities are presented on
a fully-taxable equivalent basis.
(3) Includes interest on Federal funds purchased, securities sold under
repurchase agreements and other borrowed funds. Excludes long-term debt.
(4) Net yield on interest-earning assets during the period equals (i) the
difference between interest income on interest-earning assets and the
interest expense on interest-bearing liabilities, divided by (ii) average
interest-earning assets for the period.
25
<PAGE>
The most significant impact on the Company's net interest income between
periods is derived from the interaction of changes in the volume of and rates
earned or paid on interest-earning assets and interest-bearing liabilities. The
volume of loans, investment securities and other interest-earning assets,
compared to the volume of interest-bearing deposits and indebtedness, combined
with the spread, produces the changes in the net interest income between
periods.
The table below sets forth, for the periods indicated, a summary of the
changes in interest income and interest expense resulting from estimated changes
in average asset and liability balances (volume) and estimated changes in
average interest rates (rate). Changes which are not due solely to volume or
rate have been allocated to these categories based on the respective percent
changes in average volume and average rate as they compare to each other.
<TABLE>
<CAPTION>
YEAR ENDED
SIX MONTHS ENDED YEAR ENDED DECEMBER 31, 1995
JUNE 30, 1997 DECEMBER 31, 1996 COMPARED WITH
COMPARED WITH COMPARED WITH DECEMBER 31, 1994
JUNE 30, 1996 DECEMBER 31, 1995 FAVORABLE
FAVORABLE (UNFAVORABLE) FAVORABLE (UNFAVORABLE) (UNFAVORABLE)
------------------------------- ------------------------------- --------------------
VOLUME RATE NET VOLUME RATE NET VOLUME RATE
--------- --------- --------- --------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans................................ $ 25,613 $ (1,980) $ 23,633 $ 17,761 $ (1,457) $ 16,304 $ 12,291 $ 5,509
U.S. and agencies securities......... 3,404 353 3,757 2,518 155 2,673 (993) 418
Federal funds sold................... 177 (66) 111 (640) (113) (753) 369 533
Other securities..................... 93 (19) 74 495 33 528 96 (158)
Tax exempt securities(1)............. 30 (1) 29 266 (67) 199 486 (34)
Interest-bearing deposits in banks... (127) (1) (128) 17 (13) 4 128 95
--------- --------- --------- --------- --------- --------- --------- ---------
Total interest income............ 29,190 (1,714) 27,476 20,417 (1,462) 18,955 12,377 6,363
--------- --------- --------- --------- --------- --------- --------- ---------
Interest-bearing liabilities:
Demand deposits...................... 915 (660) 255 944 (703) 241 184 577
Savings deposits..................... 3,530 (205) 3,325 1,469 (81) 1,388 (23) 1,869
Time deposits........................ 4,997 (563) 4,434 4,647 (52) 4,595 3,320 4,725
Borrowings(2)........................ 1,890 (19) 1,909 1,318 (315) 1,003 1,267 908
Long-term debt....................... 1,941 (42) 1,899 906 (60) 846 625 43
--------- --------- --------- --------- --------- --------- --------- ---------
Total interest expense........... 13,273 (1,451) 11,822 9,284 (1,211) 8,073 5,373 8,122
--------- --------- --------- --------- --------- --------- --------- ---------
Increase (decrease) in net interest
income............................... $ 15,917 $ (263) $ 15,654 $ 11,133 $ (251) $ 10,882 $ 7,004 $ (1,759)
--------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- ---------
<CAPTION>
NET
---------
<S> <C>
Interest-earning assets:
Loans................................ $ 17,800
U.S. and agencies securities......... (575)
Federal funds sold................... 902
Other securities..................... (62)
Tax exempt securities(1)............. 452
Interest-bearing deposits in banks... 223
---------
Total interest income............ 18,740
---------
Interest-bearing liabilities:
Demand deposits...................... 761
Savings deposits..................... 1,846
Time deposits........................ 8,045
Borrowings(2)........................ 2,175
Long-term debt....................... 668
---------
Total interest expense........... 13,495
---------
Increase (decrease) in net interest
income............................... $ 5,245
---------
---------
</TABLE>
- ------------------------------
(1) Interest income and average rates for tax exempt securities are presented on
a fully-taxable equivalent basis.
(2) Includes interest on Federal funds purchased, securities sold under
repurchase agreements and other borrowed funds. Excludes long-term debt.
Interest income increased 52.0% to $80.3 million for the six months ended
June 30, 1997 from $52.9 million for the comparable period in 1996. This
increase was due primarily to the significant increase in loans, the Company's
highest yielding asset. Loan volume increases resulted principally from the
Acquired Banks. Without taking into account the Acquired Banks, interest income
for the six months ended June 30, 1997 would have been approximately $57.0
million. This increase generally reflects a higher volume of loans processed as
a result of the Company's promotional and customer development activities. The
yield on average interest-earning assets for the first half of 1997 was 8.90%
compared to 9.01% for the first half of 1996.
In 1996, interest income increased 19.2% to $117.9 million from $99.0
million in 1995. This increase resulted primarily from the Acquired Banks,
offset by a slight decrease of six basis points in the yield on average
interest-earning assets from 8.97% in 1995 to 8.91% in 1996.
Interest income increased 23.4% to $99.0 million in 1995 from $80.2 million
in 1994. This increase resulted primarily from the acquisitions of the Citizens
and First Park Banks and from internal growth
26
<PAGE>
reflected in a greater volume of customer loans. In addition, the yield on
average interest-earning assets increased 71 basis points to 8.97% in 1995 from
8.26% in 1994.
Customer loan fees, included in interest income, increased 20.7% to $3.1
million in the first half of 1997 from $2.6 million in the first half of 1996.
Loan fees related to the Acquired Banks for the six months ended June 30, 1997
were approximately $701,000. Loan fees increased 23.5% to $5.0 million in 1996
from $4.1 million in 1995. Loan fees decreased 3.4% to $4.1 million in 1995 from
$4.2 million in 1994. Customer loan fees included in 1996 and 1995 that resulted
from bank acquisitions were $136,000 and $131,000, respectively. The decline in
customer loan fees in 1995 was principally the result of reduced real estate
loan processing in the first half of 1995. However, new real estate loans and
refinancing of existing loans rebounded in the last half of 1995 and continued
through 1996 resulting in an increase in real estate loan fees of $402,000 in
1996 (of which only $31,000 was related to bank acquisitions). Loan fees for
other categories of loans also increased in 1996 from 1995. Agricultural loan
fees increased $33,000, of which $10,000 was related to bank acquisitions. The
most significant increases, however, were in commercial and consumer loan fees
which contributed over half the overall increase in loan fees from 1995 to 1996.
Interest expense increased 52.4% to $34.4 million for the six months ended
June 30, 1997 from $22.6 million for the comparable period in 1996. This
increase was due primarily to the customer deposits and indebtedness incurred in
connection with the Acquired Banks. Without the Acquired Banks, interest expense
would have increased approximately $1.2 million due to higher levels of interest
bearing liabilities associated with internal growth. The rate on average
interest-bearing liabilities of 4.44% in the first half of 1997 decreased 11
basis points from 4.55% for the first six months of 1996.
In 1996, interest expense increased 19.2% to $50.0 million in 1996 from
$41.9 million in 1995. The increase resulted primarily from the customer
deposits and indebtedness incurred with respect to the Acquired Banks, offset in
part by a slight decrease of eight basis points in the rate on average interest-
bearing liabilities from 4.52% in 1995 to 4.44% in 1996.
Interest expense increased 47.4% to $41.9 million in 1995 from $28.5 million
in 1994. This increase was due primarily to the acquisitions of the Citizens and
First Park Banks, coupled with an increase of 102 basis points in the rate on
average interest-bearing liabilities from 3.50% in 1994 to 4.52% in 1995.
PROVISION FOR LOAN LOSSES
The provision for loan losses creates an allowance for future loan losses.
The loan loss provision for each year is dependent on many factors, including
loan growth, net charge-offs, changes in the composition of the loan portfolio,
delinquencies, management's assessment of the quality of the loan portfolio, the
value of the underlying collateral on problem loans and the general economic
conditions in the Company's markets. The Company performs a monthly assessment
of the risk inherent in its loan portfolio, as well as a detailed review of each
asset determined to have identified weaknesses. Based on this analysis, which
includes reviewing historical loss trends, current economic conditions, industry
concentrations and specific reviews of assets classified with identified
weaknesses, the Company makes provisions for potential loan losses. Specific
allocations are made for loans where the probability of a loss can be defined
and reasonably determined, while the balance of the provisions for loan losses
are based on historical data, delinquency trends, economic conditions in the
Company's markets and industry averages. Annual fluctuation in the provision for
loan losses result from management's assessment of the adequacy of the allowance
for loan losses, and ultimate loan losses may vary from current estimates.
For the six months ended June 30, 1997, the provision for loan losses
increased 98.0% to $2.3 million from $1.2 million for the six months ended June
30, 1996. Of this increase, approximately $967,000 was attributable to the
Acquired Banks. The remaining increase resulted from higher loan volumes and an
increase in classified assets.
27
<PAGE>
The provision for loan losses increased 136.0% to $3.8 million in 1996 from
$1.6 million in 1995. Of the increase, approximately $500,000 was associated
with the various bank acquisitions described above. The remaining increase of
$1.7 million was due principally to higher loan volumes and an increase in non-
performing and classified assets. Non-performing loans, comprised of non-accrual
loans and accruing loans past due 90 days or more and restructured loans,
increased only slightly to 1.1% of loans outstanding at December 31, 1996 from
0.8% at December 31, 1995.
In 1995, the provision for loan losses increased 21.2% to $1.6 million from
$1.3 million in 1994. This increase resulted primarily from the acquisitions of
the Citizens and First Park Banks and higher loan volumes. Non-performing loans
were 0.8% of loans outstanding at December 31, 1995 compared to 0.7% at December
31, 1994.
For further information on non-performing and classified assets and the
allowance for loan losses, see "--Financial Condition--Non-Performing and
Classified Assets" herein.
OTHER OPERATING INCOME
The principal sources of other operating income include service charges on
deposit accounts, data processing fees, income from fiduciary activities,
comprised principally of fees earned on trust assets, and other service charges,
commissions and fees. Other operating income increased 25.6% to $13.5 million
for the first half of 1997 from $10.7 million for the first half of 1996. This
increase was attributable primarily to income provided by the Acquired Banks.
Without giving effect to the Acquired Banks, operating income from each of the
four principal categories showed increases for the six months ended June 30,
1997 over the comparable period in 1996. These increases, however, were
partially offset by one-time accounting adjustments, primarily with respect to
data processing fees, made in January 1996. Increases in other operating income
from 1994 to 1995 and from 1995 to 1996 were a function of changes in each of
the principal categories, as discussed below.
Service charges on deposit accounts increased 18.7% to $7.8 million in 1996
from $6.5 million in 1995. Of this increase, approximately $650,000 was
attributable to bank acquisitions, with the remainder resulting primarily from
increased overdraft fees. Service charges increased 11.0% to $6.5 million in
1995 from $5.9 million in 1994. This increase was primarily attributable to
increased transaction volumes associated with internal deposit growth and, to a
lesser extent, the acquisitions of the Citizens and First Park Banks.
As discussed above, increases in operating income from data processing
services for the six months ended June 30, 1997 compared to the first half of
1996 were more than offset by non-recurring accounting adjustments made in
January 1996. The Company serviced 542 locations in its ATM network at June 30,
1997 compared to 402 locations at June 30, 1996. Data processing fees increased
18.2% to $7.3 million in 1996 from $6.2 million in 1995 and 30.6% to $6.2
million in 1995 from $4.7 million in 1994. The increases in both years resulted
from a greater number of data processing customers using the Company's ATM
network and a corresponding increase in transaction volumes. Since 1995, the
Company's network expanded from 216 ATM locations at December 31, 1994 to 343
locations at year-end 1995, and to 477 locations at year-end 1996. Although
continued expansion of the Company's ATM network and increases in data
processing fees are expected to continue, the Company does not expect to
continue the rate of growth experienced in 1995 and 1996. There were no
increases in basic charges for data processing services in 1996 or 1995.
Income earned from fiduciary activities increased 20.7% to $3.2 million in
1996 from $2.6 million in 1995. Of this increase, approximately $243,000 was
attributable to trust services provided by the Acquired Banks, with the
remainder resulting from fee increases effected at year-end 1994 and increased
amounts under trust management due to the Company's expanded marketing of such
services in 1996 and 1995. Income from fiduciary activities was essentially
unchanged from 1994 to 1995.
28
<PAGE>
In addition to the principal categories discussed above, other income
increased 217.0% to $2.8 million in 1996 from $888,000 in 1995. This increase
was primarily attributable to the sale of certain merchant credit card
processing assets at a gain of $1.4 million in 1996. The sale included alignment
with a third-party credit card processing provider that has enhanced the
Company's ability to compete in this highly specialized area.
OTHER OPERATING EXPENSES
Other operating expenses increased 55.1% to $36.0 million for the six months
ended June 30, 1997 from $23.2 million for the six months ended June 30, 1996.
This increase resulted primarily from both direct and indirect expenses
attributable to the Acquired Banks. Direct expenses totaled approximately $10.8
million for the first half of 1997. A significant portion of the remaining
increase was due to various indirect expenses associated with the Company's need
to increase its data processing support and other operational services to the
FIB Banks which had been previously operated as dependent branch offices prior
to their acquisition by the Company. The increases in administrative personnel
and other resources to provide such support and services were necessary to
facilitate integration of such banks into the Company's operations. In addition,
goodwill associated with the acquisition of the FIB Banks, together with the FIB
Whitefish acquisition, resulted in increased amortization expense of
approximately $900,000 for the first six months of 1997.
In 1996, other operating expenses increased 16.1% to $53.4 million from
$46.0 million in 1995. Of this increase, approximately $6.4 million was
attributable to direct and indirect expenses resulting from the Acquired Banks
and the acquisitions of the Citizens and First Park Banks. Other operating
expenses increased 11.5% to $46.0 million in 1995 from $41.2 million in 1994.
Approximately $3.3 million of this increase was related to the acquisitions of
the Citizens and First Park Banks.
The following table sets forth the dollar amount and percentage change for
components of other operating expenses for the periods indicated.
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, YEARS ENDED DECEMBER 31,
--------------------------------- -----------------------------------------------------------
1997 CHANGE 1996 1996 CHANGE 1995 CHANGE 1994
--------- ----------- --------- --------- ------------ --------- ------------ ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Salaries, wages and
benefits.................... $ 18,034 43.6% $ 12,560 $ 27,531 16.2% $ 23,694 11.9% $ 21,179
Occupancy, net................ 3,081 51.0% 2,040 4,505 15.0% 3,916 10.4% 3,546
Furniture and equipment....... 3,754 36.5% 2,751 6,249 19.2% 5,244 15.1% 4,558
FDIC insurance................ 101 * 1 5 (99.6)% 1,127 (43.9)% 2,008
Amortization of intangible
assets...................... 1,313 225.0% 404 1,383 87.9% 736 150.3% 294
Other real estate expense
(income), net............... (115) (27.7) (159) (214) (63.5)% (586) 28.2% (457)
Other expenses................ 9,819 75.0% 5,610 13,936 17.6% 11,847 17.3% 10,099
--------- --------- --------- --------- ---------
Total other operating
expenses.................... $ 35,987 55.1% $ 23,207 $ 53,395 16.1% $ 45,978 11.5% $ 41,227
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
- ------------------------
* Not meaningful.
The increase in salaries, wages and benefits from the first half of 1996 to
the first half of 1997 and from 1995 to 1996 were due primarily to the direct
and indirect expense attributable to the bank acquisitions, as discussed above.
The indirect expenses were related particularly to the Company's data processing
division and bank operation centers. The remainder of the increases in salaries,
wages and benefits during these periods were principally inflationary in nature.
The increase in expenses from 1994 to
29
<PAGE>
1995 resulted primarily from the acquisitions of the Citizens and the First Park
Banks, and to a lesser extent, from additional staffing for the Company's data
processing division in 1995. The Company purchased an additional data service
center in Helena, Montana in 1994. Given the Company's increasing data
processing and transaction volumes, together with the expansion of its ATM
network, employee and related compensation expenses are expected to continue to
increase, but at a slower rate than has been experienced over the periods
presented.
Occupancy and furniture and equipment expenses have increased over the
periods primarily as a result of the additional facilities associated with the
bank acquisitions, the expansion of the ATM network and additional equipment
used in the data processing division. Furthermore, these expenses have increased
due to higher depreciation, maintenance and other costs related to the foregoing
items and various other computer hardware and software, including upgrades, used
in the Company's operations.
Federal Deposit Insurance Corporation ("FDIC") deposit insurance premiums
increased to $101,000 for the six months ended June 30, 1997 from $1,000 for the
comparable prior-year period. This increase resulted from an increase in FDIC
premium assessments effective January 1, 1997. The significant decreases in
premiums from 1994 to 1995 and from 1995 to 1996 were due to a substantial FDIC
rate reduction that became effective in June 1995, followed by an additional
decrease in 1996. The FDIC rates reflect the Company's "well-capitalized" rating
by the FDIC.
Amortization of intangible assets consists of goodwill resulting from the
various bank acquisitions. The significant increases in amortization expense
over the periods are due to such acquisitions.
Other real estate owned ("OREO") losses, including provisions for losses on
OREO, are included net of any gains on sales of OREO. Variations in net OREO
expense during the periods resulted principally from fluctuations in such gains.
Although gains on sales are expected to continue through the liquidation of
remaining OREO properties, these gains are anticipated to decline as the number
and value of OREO properties decrease. OREO expense is directly related to
prevailing economic conditions, and such expense could increase significantly
should an unfavorable shift occur in the economic conditions of the Company's
markets.
Other expenses primarily include advertising and public relations costs,
legal, audit and other professional fees, and office supply, postage and
telephone expenses. Other expenses increased during the first six months of 1997
over the comparable period in 1996 as a result of the direct and indirect costs
associated with the bank acquisitions. Exclusive of these costs, during the six
months ended June 30, 1997 compared to the six months ended June 30, 1996, other
expenses increased (i) approximately $484,000 due principally to consulting fees
associated with revision of the Company's employee job evaluation system and
accruals for financial planning activities, and (ii) approximately $588,000 due
primarily to increased costs resulting from growth in the Company's customer
deposit base. The increases in other expenses from 1994 to 1995 and from 1995 to
1996 were due primarily to the direct and indirect costs related to the bank
acquisitions.
INCOME TAX EXPENSE
The Company's effective federal tax rate was 33.2%, 33.3%, 33.1% and 33.3%
for the six months ended June 30, 1997 and the years ended December 31, 1996,
1995 and 1994, respectively. State income tax has applied only to pretax
earnings of entities operating within Montana. The Company's effective state tax
rate was 5.0%, 5.3%, 5.4% and 5.2% for the six months ended June 30, 1997 and
the years ended December 31, 1996, 1995 and 1994, respectively.
FINANCIAL CONDITION
Total assets increased 3.3% to $2,131.4 million as of June 30, 1997 from
$2,063.8 million as of December 31, 1996. This increase resulted primarily from
internal growth in the Company's loan portfolio
30
<PAGE>
funded by increases in Federal funds purchased, other borrowings and retained
earnings. Total assets increased 52.7% to $2,063.8 million as of December 31,
1996 from $1,351.2 million as of December 31, 1995. This increase was due
principally to the significant increases in loans and investment securities
provided by the bank acquisitions, funded by growth in deposits and increases in
indebtedness.
LOANS
Total loans increased 7.3% to $1,475.9 million as of June 30, 1997 from
$1,375.5 million as of December 31, 1996. As shown below, all categories of
loans showed increases in volumes during this period due to continued strong
economic conditions in the Company's markets, internal growth resulting from the
Company's marketing activities, and certain seasonal increases, particularly in
agricultural lending following traditional pay-downs during the fourth quarter.
The growth in loans during the first half of 1997 was slightly lower than the
growth rate during the first half of 1996 due primarily to a slowing in the
growth of consumer and real estate loans.
As of December 31, 1996, total loans increased 58.0% to $1,375.5 million
from $870.4 million as of December 31, 1995. This increase was attributable to
the growth in the loan portfolio provided by the Acquired Banks, and to a lesser
extent, internal growth which reflected continued favorable economic conditions.
The Company's loan portfolio consists of a mix of commercial, consumer, real
estate, agricultural and other loans, including fixed and variable rate loans.
Fluctuations in the loan portfolio are directly related to the economics of the
communities served by the Company. Thus, the Company's borrowers could be
adversely impacted by a downturn in these sectors of the economy which could
have a material adverse effect on the borrowers' abilities to repay their loans.
The following tables present the composition of the Company's loan portfolio
as of the dates indicated.
<TABLE>
<CAPTION>
AS OF
JUNE 30, AS OF DECEMBER 31,
---------------------- -----------------------------------------------------------------------------
1997 % 1996 % 1995 % 1994 % 1993
----------- --------- ----------- --------- --------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
LOANS
Commercial......... $ 525,088 35.6% $ 471,458 34.3% $ 311,982 35.9% $ 262,290 34.9% $ 241,535
Consumer........... 502,919 34.1% 484,865 35.3% 300,711 34.5% 277,367 36.9% 245,493
Real estate........ 276,696 18.7% 274,141 19.9% 142,097 16.3% 112,251 14.9% 92,906
Agricultural....... 166,392 11.3% 143,572 10.4% 113,827 13.1% 98,194 13.1% 85,059
Other loans........ 4,757 0.3% 1,443 0.1% 1,761 0.2% 1,416 0.2% 2,392
----------- --------- ----------- --------- --------- --------- --------- --------- ---------
Total............ 1,475,852 100.0% 1,375,479 100.0% 870,378 100.0% 751,518 100.0% 667,385
----------- --------- ----------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- ---------
Less allowance for
loan losses........ 28,757 27,797 15,171 13,726 13,373
----------- ----------- --------- --------- ---------
Net loans............ $ 1,447,095 $ 1,347,682 $ 855,207 $ 737,792 $ 654,012
----------- ----------- --------- --------- ---------
----------- ----------- --------- --------- ---------
Ratio of allowance to
total loans........ 1.95% 2.02% 1.74% 1.83% 2.00%
----------- ----------- --------- --------- ---------
----------- ----------- --------- --------- ---------
<CAPTION>
% 1992 %
--------- --------- ---------
<S> <C> <C> <C>
LOANS
Commercial......... 36.2% $ 224,715 37.0%
Consumer........... 36.8% 216,222 35.6%
Real estate........ 13.9% 90,671 14.9%
Agricultural....... 12.7% 73,898 12.2%
Other loans........ 0.4% 1,619 0.3%
--------- --------- ---------
Total............ 100.0% 607,125 100.0%
--------- --------- ---------
--------- ---------
Less allowance for
loan losses........ 12,965
---------
Net loans............ $ 594,160
---------
---------
Ratio of allowance to
total loans........ 2.14%
---------
---------
</TABLE>
31
<PAGE>
The following table presents the maturity distribution of the Company's loan
portfolio and the sensitivity of the loans to changes in interest rates as of
December 31, 1996. The Company believes there have been no material changes in
the maturity distribution or interest rate sensitivity with respect to the loan
portfolio as of June 30, 1997.
<TABLE>
<CAPTION>
WITHIN ONE ONE YEAR TO AFTER FIVE
YEAR FIVE YEARS YEARS TOTAL
---------- ----------- ---------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Commercial................................ $ 215,483 $ 186,458 $ 69,517 $ 471,458
Consumer.................................. 157,951 298,247 28,667 484,865
Real estate............................... 70,833 103,126 100,182 274,141
Agricultural.............................. 87,877 35,278 20,417 143,572
Other loans............................... 1,443 -- -- 1,443
---------- ----------- ---------- ------------
$ 533,587 $ 623,109 $ 218,783 $ 1,375,479
---------- ----------- ---------- ------------
---------- ----------- ---------- ------------
Loans at fixed interest rates............. $ 276,709 $ 505,102 $ 136,684 $ 918,495
Loans at variable interest rates.......... 250,056 118,007 82,099 450,162
Non-accrual loans......................... 6,822 -- -- 6,822
---------- ----------- ---------- ------------
$ 533,587 $ 623,109 $ 218,783 $ 1,375,479
---------- ----------- ---------- ------------
---------- ----------- ---------- ------------
</TABLE>
For additional information concerning the Company's loan portfolio and its
credit administration policies, see "Business--Lending Activities."
INVESTMENT SECURITIES
The Company's investment portfolio is managed to meet the Company's
liquidity needs and is utilized for pledging requirements for deposits of state
and political subdivisions and securities sold under repurchase agreements. The
portfolio is comprised of U.S. Treasury securities, U.S. government agency
securities, tax exempt securities, corporate securities, other mortgage-backed
securities, and other equity securities. Federal funds sold are additional
investments which are not classified as investment securities. Investment
securities classified as available-for-sale are recorded at fair market value,
while investment securities classified as held-to-maturity are recorded at cost.
Unrealized gains or losses, net of the deferred tax effect, are reported as
increases or decreases in stockholders' equity for available-for-sale
securities.
Investment securities remained relatively constant at $396.9 million as of
June 30, 1997, as compared to $403.6 million as of December 31, 1996. Investment
securities increased 56.0% to $403.6 million as of December 31, 1996 from $258.7
million as of December 31, 1994. This increase resulted from the substantial
investment securities held by the Acquired Banks at the time of acquisition. As
of December 31, 1996, there were no concentrations of investments greater than
10% of the Company's stockholders' equity in any individual security issuer,
other than the U.S. Treasury and U.S. Government agencies.
32
<PAGE>
The following table sets forth the book value, percentage of total
investment securities and average yield for the Company's investment securities
as of December 31, 1996. The Company believes there have been no material
changes in these items with respect to the investment securities as of June 30,
1997.
<TABLE>
<CAPTION>
% OF TOTAL
INVESTMENT AVERAGE
BOOK VALUE SECURITIES YIELD(1)
---------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
U.S. TREASURY SECURITIES
Maturing within one year...................................................... $ 49,368 5.26%
Maturing in one to five years................................................. 165,100 5.75%
----------
214,468
Mark-to-market adjustments on securities available-for-sale................... 153
----------
Total....................................................................... 214,621 53.18% 5.63%
---------- -----------
U.S. GOVERNMENT AGENCY SECURITIES
Maturing within one year...................................................... 50,639 5.51%
Maturing in one to five years................................................. 55,447 6.27%
Maturing in five to ten years................................................. 9,916 6.79%
Maturing after ten years...................................................... 28,517 6.67%
----------
144,519
Mark-to-market adjustments on securities available-for-sale................... 226
----------
Total....................................................................... 144,745 35.87% 6.11%
---------- -----------
TAX EXEMPT SECURITIES(1)
Maturing within one year...................................................... 1,927 6.67%
Maturing in one to five years................................................. 8,698 8.43%
Maturing in five to ten years................................................. 7,977 8.87%
Maturing after ten years...................................................... 908 10.02%
----------
19,510
Mark-to-market adjustments on securities available-for-sale................... 293
----------
Total....................................................................... 19,803 4.90% 8.38%
---------- -----------
CORPORATE SECURITIES
Maturing within one year...................................................... 1,591 5.65%
Maturing in one to five years................................................. 9,373 5.80%
Maturing after ten years...................................................... -- --
----------
10,964
----------
Mark-to-market adjustments on securities available-for-sale................... 2
----------
Total....................................................................... 10,966 2.72% 5.78%
---------- -----------
OTHER MORTGAGE-BACKED SECURITIES
Maturing in one to five years................................................. 1,652 5.48%
Maturing in five to ten years................................................. -- --
Maturing after ten years...................................................... 2,051 7.15%
----------
3,703
----------
Mark-to-market adjustments on securities available-for-sale................... 6
----------
Total....................................................................... 3,709 0.92% 6.40%
---------- -----------
EQUITY SECURITIES WITH NO STATED MATURITY 9,727 2.41% --
---------- -----------
Total....................................................................... $ 403,571 100.00% 5.81%
---------- -----------
---------- -----------
</TABLE>
- ------------------------
(1) Average yields have been calculated on a fully taxable basis.
33
<PAGE>
For additional information concerning investment securities, see Note 3 of
the Notes to Consolidated
Financial Statements included herein.
DEPOSITS
The Company emphasizes developing total client relationships with its
customers in order to increase its core deposit base, which is the Company's
primary funding source. The Company's deposits consist primarily of the
following interest bearing accounts: demand deposits, savings accounts, IRAs and
time deposits (CDs). In addition to deposits, the Company also uses repurchase
agreements with commercial depositors as a significant source of funding. As of
June 30, 1997, the Company had $129.5 million of repurchase agreements with
depositors. For additional information concerning the Company's deposits,
including its use of repurchase agreements, see "Business--Deposits."
Deposits remained essentially unchanged at $1,673.0 million as of June 30,
1997, as compared to $1,679.4 million as of December 31, 1996. Deposits
increased 52.8% to $1,679.4 as of December 31, 1996 from $1,099.1 million as of
December 31, 1995. This increase resulted principally from the deposits
maintained by the Acquired Banks. Excluding the effect of the Acquired Banks,
deposits showed modest growth in the second half of 1996 following a seasonal
slowdown in deposits during the first half of the year.
The following table sets forth the dollar amount, percentage of total
deposits and average rate paid for each category of deposits as of June 30,
1997.
<TABLE>
<CAPTION>
AVERAGE RATE PAID FOR
% OF TOTAL JANUARY 1, 1997 TO
AMOUNT DEPOSITS JUNE 30, 1997
------------ ----------- ---------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Non-interest bearing demand......................................... $ 353,189 21.11% --
Interest bearing:
Demand............................................................ 284,552 17.01% 1.72%
Savings........................................................... 410,038 24.51% 3.76%
IRAs.............................................................. 63,607 3.80% 5.71%
Time deposits, under $100......................................... 427,782 25.57% 5.65%
Time deposits, over $100.......................................... 133,867 8.00% 5.55%
------------ -----------
$ 1,673,035 100.00%
------------ -----------
------------ -----------
</TABLE>
For additional information concerning customer deposits as of December 31,
1996 and 1995, see Note 9 of the Notes to Consolidated Financial Statements.
NON-PERFORMING AND CLASSIFIED ASSETS
Federal regulations require that each financial institution classify its
assets on a regular basis. Management generally places loans on non-accrual when
they become 90 days past due, unless they are well secured and in the process of
collection. When a loan is placed on non-accrual status, any interest previously
accrued but not collected is reversed from income. Loans are charged off when
management determines that collection has become unlikely. Restructured loans
are those where the Company has granted a concession on the interest paid or
original repayment terms due to financial difficulties of the borrower. OREO
consists of real property acquired through foreclosure on the related collateral
underlying defaulted loans.
34
<PAGE>
The following tables sets forth information regarding non-performing assets
as of the dates indicated.
<TABLE>
<CAPTION>
AS OF AS OF DECEMBER 31,
JUNE 30, -----------------------------------------------------
1997 1996 1995 1994 1993 1992
--------- --------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Non-performing loans:
Non-accrual loans................................ $ 7,750 $ 6,822 $ 3,632 $ 3,134 $ 3,629 $ 5,496
Accruing loans past due 90 days or more.......... 3,769 6,432 1,711 534 1,353 2,940
Restructured loans............................... 1,352 1,763 1,755 1,619 1,526 4,020
--------- --------- --------- --------- --------- ---------
Total non-performing loans..................... 12,871 15,017 7,098 5,287 6,508 12,456
OREO............................................... 1,098 1,546 1,349 1,803 3,132 4,937
--------- --------- --------- --------- --------- ---------
Total non-performing assets........................ $ 13,969 $ 16,563 $ 8,447 $ 7,090 $ 9,640 $ 17,393
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
Non-performing assets to total loans and OREO...... 0.95% 1.20% 0.97% 0.94% 1.44% 2.84%
</TABLE>
Non-performing loans decreased 16.7% to $12.9 million as of June 30, 1997,
as compared to $15.0 million as of December 31, 1996. The increase in
non-performing loans as of December 31, 1995 to December 31, 1996 was due to the
non-performing loans held by the Acquired Banks, an increase in the loan
portfolio and a slight deterioration in the agricultural and consumer market
sector. Approximately $301,000, $405,000, $318,000, $296,000, $440,000 and
$691,000 of gross interest income would have been accrued if all loans on
non-accrual had been current in accordance with their original terms for the six
months ended June 30, 1997, and the years ended December 31, 1996, 1995, 1994,
1993 and 1992, respectively.
The Company records OREO at the lower of carrying value or fair value less
estimated costs to sell. Estimated losses that result from the ongoing periodic
valuation of these properties are charged to earnings with a provision for
losses on foreclosed property in the period in which they are identified.
The Company reviews and classifies its assets on a regular basis according
to three classifications: "Substandard," "Doubtful" and "Loss." Substandard
loans have one or more defined weaknesses and are characterized by the distinct
possibility that the Company will sustain some loss if the deficiencies are not
corrected. Doubtful loans have the weaknesses of substandard assets with the
additional characteristic that the weaknesses make collection or liquidation in
full on the basis of currently existing facts, conditions and values
questionable, and there is a high probability of partial loss. A loan classified
as a Loss loan is considered uncollectible.
The following table sets forth classified loans as of the dates indicated.
<TABLE>
<CAPTION>
AS OF AS OF DECEMBER 31,
JUNE 30, -------------------------------
1997 1996 1995 1994
--------- --------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Substandard....................................... $ 26,254 $ 19,994 $ 12,936 $ 10,101
Doubtful.......................................... 2,957 2,321 1,522 2,188
Loss.............................................. 3,174 2,264 2,229 2,228
--------- --------- --------- ---------
Total........................................... $ 32,385 $ 24,579 $ 16,687 $ 14,517
--------- --------- --------- ---------
--------- --------- --------- ---------
Classified loans to total loans................... 2.19% 1.79% 1.92% 1.93%
Allowance for loan losses to classified loans..... 88.80% 113.09% 90.92% 94.55%
</TABLE>
35
<PAGE>
With the exception of these classified loans, management is not aware of any
loans as of June 30, 1997 where the known credit problems of the borrowers would
cause management to have serious doubts as to the ability of such borrowers to
comply with their present loan repayment terms and which would result in such
loans being included in the non-performing asset table above at some future
date. Management cannot, however, predict the extent to which economic
conditions in the Company's market areas may worsen or the full impact such
conditions may have on the Company's loan portfolio. Accordingly, there can be
no assurances that other loans will not become 90 days or more past due, be
placed on non-accrual status or become restructured loans, in substance
foreclosures or OREO in the future.
ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses is established through a provision for loan
losses based on management's evaluation of risk inherent in its loan portfolio
and economic conditions in the Company's market areas. See "--Provision for Loan
Losses" herein. The allowance is increased by provisions charged against
earnings and reduced by net loan charge-offs. Loans are charged off when they
are deemed to be uncollectible; recoveries are generally recorded only when cash
payments are received.
The following table sets forth information concerning the Company's
allowance for loan losses as of the dates and for the years indicated.
<TABLE>
<CAPTION>
AS OF AND FOR THE YEARS ENDED DECEMBER 31,
------------------------------------------------------------
1996 1995 1994 1993 1992
------------ ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Balance as of January 1,........................... $ 15,171 $ 13,726 $ 13,373 $ 12,965 $ 12,257
Beginning allowances of Acquired Banks............. 10,553 917 -- -- --
Charge-offs:
Commercial....................................... 1,127 393 398 777 1,036
Consumer......................................... 2,384 1,679 1,425 1,035 1,113
Real estate...................................... 27 20 53 20 134
Agricultural..................................... 220 25 4 20 69
------------ ---------- ---------- ---------- ----------
Total charge-offs............................ 3,758 2,117 1,880 1,852 2,352
Recoveries:
Commercial....................................... 850 252 299 353 467
Consumer......................................... 974 557 472 455 491
Real estate...................................... 9 119 36 7 22
Agricultural..................................... 154 88 82 100 450
------------ ---------- ---------- ---------- ----------
Total recoveries............................. 1,987 1,016 889 915 1,430
------------ ---------- ---------- ---------- ----------
Net charge-offs.................................... 1,771 1,101 991 937 922
Provision for loan losses.......................... 3,844 1,629 1,344 1,345 1,630
------------ ---------- ---------- ---------- ----------
Balance at the end of period....................... $ 27,797 $ 15,171 $ 13,726 $ 13,373 $ 12,965
------------ ---------- ---------- ---------- ----------
------------ ---------- ---------- ---------- ----------
Period end loans................................... $ 1,375,479 $ 870,378 $ 751,518 $ 667,385 $ 607,125
Average loans...................................... $ 1,014,901 $ 837,288 $ 705,690 $ 641,411 $ 595,026
Net charge-offs to average loans................... 0.17% 0.13% 0.14% 0.15% 0.15%
Allowance to period end loans...................... 2.02% 1.74% 1.83% 2.00% 2.14%
</TABLE>
For the six months ended June 30, 1997, net charge-offs were $1.3 million
and the provision for loan losses was $2.3 million. These two line items show
increases from prior comparative periods due to the expanded loan portfolio
resulting primarily from the Acquired Banks. As of June 30, 1997, the allowance
for loan losses was $28.8 million, representing an increase of $960,000 from the
allowance as of December 31, 1996. For the first half of 1997, net charge-offs
to average loans were 0.09%, reflecting a slight
36
<PAGE>
decrease from prior periods. The allowance to period end loans was 1.95% as of
June 30, 1997, which represents a minor decrease from such percentage as of
December 31, 1996.
Management considers changes in the size and character of the loan
portfolio, changes in non-performing and past due loans, historical loan loss
experience, and the existing and prospective economic conditions when
determining the adequacy of the allowance for loan losses. Although management
believes that the allowance for loan losses is adequate to provide for both
potential losses and estimated inherent losses in the portfolio, future
provisions will be subject to continuing evaluations of the inherent risk in the
portfolio and if the economy declines or asset quality deteriorates, material
additional provisions could be required.
The following tables provide a summary of the allocation of the allowance
for loan losses for specific loan categories as of the dates indicated. The
allocations presented should not be interpreted as an indication that charges to
the allowance for loan losses will be incurred in these amounts or proportions,
or that the portion of the allowance allocated to each loan category represents
the total amount available for future losses that may occur within these
categories. The unallocated portion of the allowance for loan losses and the
total allowance is applicable to the entire loan portfolio.
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
----------------------------------------------------------------------------
AS OF JUNE 30,
1997 1996 1995 1994
------------------------ ------------------------ ------------------------ ------------------------
% OF % OF % OF % OF
ALLOCATED CATEGORY TO ALLOCATED CATEGORY TO ALLOCATED CATEGORY TO ALLOCATED CATEGORY TO
RESERVES TOTAL LOANS RESERVES TOTAL LOANS RESERVES TOTAL LOANS RESERVES TOTAL LOANS
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial............ $ 833 35.6% $ 594 34.3% $ 789 35.9% $ 791 34.9%
Consumer.............. 1,919 34.1% 1,280 35.3% 1,118 34.5% 1,154 36.9%
Real estate........... 74 18.7% -- 19.9% -- 16.3% 3 14.9%
Agricultural.......... 348 11.3% 390 10.4% 322 13.1% 280 13.1%
Other loans........... -- 0.3% -- 0.1% -- 0.2% -- 0.2%
----------- ----- ----------- ----- ----------- ----- ----------- -----
Total allocated....... 3,174 2,264 2,229 2,228
Unallocated........... 25,583 25,533 12,942 11,498
----------- ----------- ----------- -----------
Total................. $ 28,757 100.0% $ 27,797 100.0% $ 15,171 100.0% $ 13,726 100.0%
----------- ----- ----------- ----- ----------- ----- ----------- -----
----------- ----- ----------- ----- ----------- ----- ----------- -----
<CAPTION>
1993 1992
------------------------ ------------------------
% OF % OF
ALLOCATED CATEGORY TO ALLOCATED CATEGORY TO
RESERVES TOTAL LOANS RESERVES TOTAL LOANS
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Commercial............ $ 896 36.2% $ 1,445 37.0%
Consumer.............. 1,007 36.8% 915 35.6%
Real estate........... 23 13.9% 98 14.9%
Agricultural.......... 230 12.7% 315 12.2%
Other loans........... -- 0.4% -- 0.3%
----------- ----- ----------- -----
Total allocated....... 2,156 2,773
Unallocated........... 11,217 10,192
-----------
Total................. $ 13,373 100.0% $ 12,965 100.0%
----------- ----- ----------- -----
----------- ----- ----------- -----
</TABLE>
LIQUIDITY AND CASH FLOW
The objective of liquidity management is to maintain the Company's ability
to meet the day-to-day cash flow requirements of its customers who either wish
to withdraw funds or require funds to meet their credit needs. The Company must
manage its liquidity position to meet the needs of its customers, while
maintaining an appropriate balance between assets and liabilities to meet the
return on investment objectives of its stockholders. The Company monitors the
sources and uses of funds on a daily basis to maintain an acceptable liquidity
position, principally through deposit receipts and repayments; loan
originations, extensions and repayments; and management of investment
securities.
Net cash provided by operating activities, primarily representing net
interest income, totaled $18.2 million for the six months ended June 30, 1997,
$28.5 million for 1996, $27.7 million for 1995 and $15.9 million for 1994. Cash
used for investing activities totaled $87.5 million for the six months ended
June 30, 1997, $105.4 million for 1996, $79.1 million for 1995 and $92.8 million
for 1994. The funds used for investing activities primarily represent increases
in loans and investments in connection with acquisitions and internal growth for
each year reported.
Historically, the primary financing activity of the Company has been
deposits, retained earnings and borrowings. The Company's current liquidity
position is also supported by the management of its investment portfolio, which
provides a structured flow of maturing and reinvestable funds that could be
converted to cash, should the need arise. Maturing balances in the Company's
loan portfolio also provides options for cash flow management. The ability to
redeploy these funds is an important source of immediate
37
<PAGE>
to long-term liquidity. Additional sources of liquidity include Federal funds
lines, other borrowings and access to the capital markets.
As a holding company, First Interstate is a corporation separate and apart
from the Banks, and therefore, provides for its own liquidity. Substantially all
of First Interstate's revenues are obtained from interest received and dividends
declared and paid by the Banks. As of June 30, 1997, the Banks had approximately
$14.0 million available to be paid as dividends to First Interstate. There are
statutory and regulatory provisions that could limit the ability of the Banks to
pay dividends to First Interstate. See "Regulation and Supervision." Management
of First Interstate believes that such restrictions will not have an impact on
the ability of First Interstate to meet its ongoing cash obligations, including
those relating to the Junior Subordinated Debentures. As of June 30, 1997, the
Company did not have any material commitments for capital expenditures.
In connection with the acquisition of the FIB Banks, the Company obtained a
revolving term loan and issued subordinated notes and shares of noncumulative
perpetual preferred stock. The revolving term loan bears interest at variable
rates (7.55% weighted average rate as of June 30, 1997) and was issued by a
syndicate of banks led by First Security Bank, N.A. The loan expires in December
2003, and is secured by all of the outstanding capital stock of the Banks. The
available borrowing amount under the loan is reduced by $2.0 million on a
semi-annual basis. The loan contains various restrictions dealing with, among
other things, minimum capital ratios, the sale or issuance of capital stock and
the maximum amount of dividends. As of June 30, 1997, the amount outstanding
under the revolving term loan was $31.2 million, with an additional $8.8 million
in borrowing capacity available thereunder. The subordinated notes are held by
an institutional investor, bear interest at 7.5% per annum, are unsecured and
mature in increasing annual payments during the period from October 2002 to
October 2006. For additional information concerning the revolving term loan and
the subordinated notes, see Note 11 of the Notes to Consolidated Financial
Statements.
The noncumulative perpetual preferred stock consists of 20,000 outstanding
shares held by one institutional investor. The holder of the preferred stock is
entitled to receive, in any fiscal year, when and if declared by the Company's
Board of Directors, cash dividends at the rate of $85.30 per share through
September 2003, and thereafter at a variable rate equal to 250 basis points over
the high yield of the applicable U.S. Treasury Bill. Although the terms of the
preferred stock preclude redemptions prior to September 2003, the holder has
agreed to redemption, subject to regulatory approval, in connection with this
offering in exchange for a redemption premium of $500,000. For additional
information concerning the preferred stock, see Note 15 of the Notes to
Consolidated Financial Statements.
CAPITAL RESOURCES
Stockholders' equity increased 5.4% to $153.9 million as of June 30, 1997
from $146.1 million as of December 31, 1996. This increase resulted primarily
from an increase in retained earnings. Stockholders' equity increased 33.6% to
$146.1 million as of December 31, 1996 from $109.4 million as of December 31,
1995. This increase was due primarily to the issuance of the noncumulative
perpetual preferred stock, together with retained earnings. Stockholders' equity
is influenced primarily by earnings, dividends and, to a lesser extent, sales
and redemptions of common stock involving employees of the Company. For the six
months ended June 30, 1997 and the years ended December 31, 1996 and 1995, the
Company paid aggregate cash dividends to stockholders of $4.5 million, $6.5
million and $3.7 million, respectively.
A banking organization's total qualifying capital includes two components,
core capital (Tier 1 capital) and supplementary capital (Tier 2 capital). Core
capital, which must comprise at least half of total capital, includes common
stockholders' equity and qualifying perpetual preferred stock, less intangible
assets. Supplementary capital includes the allowance for loan losses (subject to
certain limitations), other perpetual preferred stock, certain other capital
instruments, and term subordinated debt.
As of December 31, 1996, the minimum risk-based capital requirements to be
considered adequately capitalized were 4.0% for core capital and 8.0% for total
capital. Federal banking regulators have also
38
<PAGE>
adopted leverage capital guidelines to supplement risk-based measures. The
leverage ratio is determined by dividing Tier 1 capital as defined under the
risk-based guidelines by average total assets (not risk-adjusted) for the
preceding quarter. The minimum leverage ratio is 3.0% although banking
organizations are expected to exceed that amount by 1.0%, 2.0% or more,
depending on their circumstances.
Pursuant to the Federal Deposit Insurance Corporation Improvement Act of
1991, the Federal Reserve, the Comptroller of the Currency and the FDIC have
adopted regulations setting forth a five-tier system for measuring the capital
adequacy of the financial institutions they supervise. The capital levels of the
Company as of June 30, 1997 and the two highest levels recognized under these
regulations are set forth below.
<TABLE>
<CAPTION>
REGULATORY REQUIREMENTS
--------------------------------------
WELL ADEQUATELY
COMPANY CAPITALIZED CAPITALIZED
----------- --------------- ---------------------
<S> <C> <C> <C>
Tier 1 risk-based capital.................. 7.68% 6.00% 4.00%
Total risk-based capital................... 10.21% 10.00% 8.00%
Leverage ratio............................. 5.72% 5.00% 4.00%
</TABLE>
At June 30, 1997, the Company's risk-based capital ratios were 7.68% for
Tier 1 risk-based capital and 10.21% for total risk based capital, compared to
7.35% and 9.98% as of December 31, 1996, respectively. The Company's leverage
ratio was 5.72% as of June 30, 1997, compared to 5.26% at December 31, 1996.
These ratios all met or exceeded the well-capitalized guidelines shown above. In
addition, at December 31, 1996, each of the Banks had levels of capital which
met or exceeded the well-capitalized guidelines. For additional information
concerning the capital levels of the Company, see Note 2 of the Notes to
Consolidated Financial Statements.
The Company believes that the proceeds from this offering, together with
other available resources, will provide adequate capital to support anticipated
growth while allowing the Company to remain well-capitalized under applicable
regulations. However, should growth exceed expectations or in the event an
acquisition opportunity arises to expand market share, it may be necessary for
the Company to raise additional capital through the sale of either debt or
equity securities. It is anticipated that any such debt securities would
constitute Senior and Subordinated Debt.
INTEREST RATE RISK MANAGEMENT
Interest rate risk management is a function of the repricing characteristics
of the Company's portfolio of assets and liabilities. Interest rate risk
management focuses on the maturity structure of assets and liabilities and their
repricing characteristics during periods of changes in market interest rates.
Effective interest rate risk management seeks to ensure that both assets and
liabilities respond to changes in interest rates within an acceptable time
frame, thereby minimizing the effect of interest rate movements on net interest
income. Interest rate sensitivity is measured as the difference between the
volumes of assets and liabilities in the Company's current portfolio that are
subject to repricing at various time horizons: three months or less, three to
twelve months, one to five years, over five years and on a cumulative basis. The
39
<PAGE>
differences are known as interest rate sensitivity gaps. The following table
shows interest rate sensitivity gaps for different intervals as of December 31,
1996.
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS ONE YEAR TO AFTER FIVE
OR LESS TO ONE YEAR FIVE YEARS YEARS TOTAL
------------- ------------- ----------- ---------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
INTEREST-EARNING ASSETS
Loans(1).................................. $ 497,593 $ 191,752 $ 535,595 $ 143,717 $ 1,368,657
Investment securities..................... 119,057 38,737 223,796 21,981 403,571
Interest-bearing deposit in bank.......... 6,545 -- -- -- 6,545
Federal funds sold........................ 4,945 -- -- -- 4,945
------------- ------------- ----------- ---------- ------------
Total interest-earning assets........... 628,140 230,489 759,391 165,698 1,783,718
------------- ------------- ----------- ---------- ------------
INTEREST-BEARING LIABILITIES(2)
Interest-bearing demand accounts.......... 316,964 -- -- -- 316,964
Savings deposits.......................... 396,845 -- -- -- 396,845
Time deposits, $100 or more............... 40,819 24,792 43,839 12,792 122,242
Other time deposits....................... 205,859 86,868 164,658 617 458,002
Federal funds purchased................... 13,450 -- -- -- 13,450
Securities sold under repurchase
agreements.............................. 129,137 -- -- -- 129,137
Other borrowed funds...................... 13,071 -- -- -- 13,071
Long-term debt............................ 16,726 22,960 710 24,271 64,667
------------- ------------- ----------- ---------- ------------
Total interest-bearing liabilities...... 1,132,871 134,620 209,207 37,680 1,514,378
------------- ------------- ----------- ---------- ------------
Rate gap.................................... $ (504,731) $ 95,869 $ 550,184 $ 128,018 $ 269,340
Cumulative rate gap......................... $ (504,731) $ (408,862) $ 141,322 $ 269,340
Cumulative rate gap as a percentage of total
interest-earning assets................... (28.2)% (22.8)% 7.9% 15.1%
</TABLE>
- ------------------------
(1) Does not include non-accrual loans of $6,822.
(2) Does not include non-interest bearing demand deposits of $385,371.
The foregoing table demonstrates that, as of December 31, 1996, the Company
had (i) a negative three month gap of $504.7 million or 28.2% of total
interest-earning assets, and (ii) a negative cumulative one year gap of $408.9
million or 22.8% of total interest-earning assets. As of June 30, 1997, the
Company had (i) a negative three month gap of $349.1 million or 18.5% of total
interest-earning assets, and (ii) a negative cumulative one year gap of $393.1
million or 20.8% of total interest-earning assets. In theory, this would
indicate that at June 30, 1997, $393.1 million more in liabilities than assets
would reprice if there was a change in interest rates over the next year. If
interest rates were to increase, the negative gap would tend to result in a
lower net interest margin. However, changes in the mix of earning assets or
supporting liabilities can either increase or decrease the net interest margin
without affecting interest rate sensitivity. In addition, the interest rate
spread between an asset and its supporting liability can remain the same, thus
impacting net interest income. This characteristic is referred to as a basis
risk and, generally, relates to the repricing characteristics of short-term
funding sources such as certificates of deposit.
Varying interest rate environments can create unexpected changes in
prepayment levels of assets and liabilities which are not reflected in the
interest sensitivity analysis table. These prepayments may have significant
effects on the Company's net interest margin. Because of these factors, an
interest sensitivity gap report may not provide a complete assessment of the
Company's exposure to changes in interest rates. Moreover, management believes
that notwithstanding the Company's negative gap position, which would indicate
that net interest margin would decline when rates rise, the Company's net
interest margin actually
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increases during rising rate periods due to the basis risk applicable to the
Company's interest-bearing liabilities.
Given the limitations associated with gap sensitivity analysis, the Company
also evaluates the impact of fluctuations in interest rates on net interest
margin through income statement simulation models and other analyses that
include various assumptions regarding the repricing relationship of assets and
liabilities, as well as anticipated changes in loan and deposit volumes over
differing rate environments. The Company attempts to maintain a mix of interest
earning assets and deposits such that no more than 5% of the net interest margin
will be at risk should interest rates vary one percent. However, there can be no
assurance as to the actual effect changes in interest rates will have on the
Company's net interest margin.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1996, the Financial Accounting Standards Board (the "FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 125, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishment of Liabilities."
This statement provides accounting and reporting standards for transfers and
servicing of financial assets and extinguishment of liabilities. The provisions
of SFAS No. 125 apply to transactions occurring after December 31, 1996. This
adoption has not had a material effect on the consolidated financial position or
results of operations of the Company.
In February 1997, the FASB issued SFAS No. 128, "Earnings per Share." This
statement simplifies the standards for computing earnings per share ("EPS") and
replaces the presentation of primary and fully diluted EPS with a presentation
of basic and fully diluted EPS on the face of the income statement for all
entities with complex capital structures. The provisions of SFAS No. 128 apply
to financial statements issued for periods ending after December 15, 1997.
Earlier adoption is not permitted. Management expects that adoption will not
have a material effect on the reported EPS of the Company.
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income," which establishes standards for reporting and displaying comprehensive
income and its components (revenues, expenses, gains and losses) in a full set
of general-purpose financial statements. This statement requires that all items
required to be recognized under accounting standards as components of
comprehensive income be reported in a financial statement that is displayed with
the same prominence as other financial statements. SFAS No. 130 is effective for
fiscal years beginning after December 15, 1997. Reclassification of financial
statements for earlier periods provided for comparative purposes is required.
Management expects that adoption will not have a material effect on the
consolidated financial position or results of operations of the Company.
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BUSINESS
THE COMPANY
First Interstate is a bank and savings and loan holding company which
operates 31 banking offices in 23 communities throughout Montana and Wyoming
through the Banks. The Company's headquarters are located in Billings, Montana.
At June 30, 1997, the Company had assets of $2.1 billion, deposits of $1.7
billion and total stockholders' equity of $153.9 million, making it the largest
independent banking organization headquartered in Montana or Wyoming.
As a holding company, First Interstate functions as a service organization
for each of the Banks. The Company provides general corporate guidance and
specialized services to the Banks through a wide range of banking and operating
policies and activities. These services include data processing, credit
administration, auditing, asset/liability management, investment analysis, human
resource management, marketing and planning coordination.
The Company is the licensee under a trademark license agreement between
Wells Fargo & Company and the Company granting it an exclusive, nontransferable
license to use the "First Interstate" name and logo in the states of Montana and
Wyoming with additional rights in selected other states.
The Company was incorporated in Montana in 1971, and in October 1997 changed
its name from "First Interstate BancSystem of Montana, Inc." to "First
Interstate BancSystem, Inc." The Company maintains its principal executive
offices at 401 North 31st Street, Billings, Montana 59101 and its telephone
number is (406) 255-5300.
COMMUNITY BANKING PHILOSOPHY
The Company's banking offices are located in communities with populations
generally ranging from approximately 5,000 to 70,000 people, but serve market
areas with greater populations because of the limited number of financial
institutions within a reasonable distance from the communities in which such
offices are located. The Company believes that these communities provide a
stable core deposit and funding base, as well as economic diversification across
a number of industries, including agriculture, energy, mining, timber
processing, tourism, government services, education and medical services.
The banking industry is presently undergoing change with respect to
regulatory matters, consolidation, changing consumer needs and economic and
market conditions. The Company believes that it can best address this changing
environment through its "Strategic Vision." Through the Strategic Vision, the
Company emphasizes providing its customers full service commercial and consumer
banking at a local level using a personalized service approach, while serving
and strengthening the communities in which the Banks are located through
community service activities.
The Company grants significant autonomy and flexibility to the Banks in
delivering and pricing products at the local level in response to market
considerations and customer needs. This flexibility and autonomy enables the
Banks to remain competitive and enhances the relationships between the Banks and
the customers they serve. The Company also emphasizes accountability, however,
by establishing performance and incentive standards for the Banks which are tied
to net income at the individual branch level. The Company believes that this
combination of autonomy and accountability allows the Banks to provide a high
level of personalized service to customers while remaining attentive to
financial performance.
GROWTH STRATEGY
The Company's growth strategy includes growing internally and expanding into
new and complementary markets when appropriate opportunities arise. The Company
believes it has in place an infrastructure that will allow for growth and yield
economies of scale on a going forward basis. The Company is pursuing
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regulatory approval to open several new branch offices in Montana and Wyoming.
The Company believes that it will continue to expand its presence in the Montana
and Wyoming markets.
INTERNAL GROWTH
The Company's internal growth strategy is to attract and retain customers by
providing personalized "high touch" service, increasing its offering of products
and services and cross-selling existing products and services. The Company
believes its ability to offer a complete package of consumer and commercial
banking products and services enhances First Interstate's image as a "one-stop"
banking organization. The Company creates awareness of its products and services
through various marketing and promotional efforts, including involvement in
community activities.
EXTERNAL GROWTH
The Company has grown in recent years by selectively acquiring banks in
additional markets in Montana and Wyoming. Since September 1996, the Company has
acquired FIB Whitefish and the FIB Banks. The Company considers acquisitions
which will enhance its existing position within a market, expand its presence
into complementary markets, or add capabilities or personnel that will enhance
the Company as a whole. The Company has a selective acquisition strategy in that
it principally considers those institutions with strong financial and managerial
resources already in place.
THE BANKS
The Company, through the Banks, delivers a comprehensive range of consumer
and commercial banking services to individual and business customers. These
services include personal and business checking and savings accounts, time
deposits, individual retirement accounts, cash management, trust services and
commercial, consumer, real estate, agriculture and other loans.
FIB Montana, a Montana chartered bank organized in 1916, has 20 banking
offices in 14 Montana communities, including Billings, Bozeman, Colstrip, Cut
Bank, Eureka, Evergreen, Gardiner, Great Falls, Hardin, Kalispell, Livingston,
Miles City, Missoula and Whitefish. These communities are home to a variety of
industries, including agriculture, mining, energy, timber processing, tourism,
government services, education and medical services, with a significant number
of small to medium sized businesses. As of June 30, 1997, FIB Montana held
assets and deposits totaling $1.4 billion and $1.1 billion, respectively. FIB
Montana is the largest independent bank headquartered in Montana. The Bank's
main office is located in Billings, Montana.
FIB Wyoming, a Wyoming chartered bank organized in 1893, has ten banking
offices in eight Wyoming communities, including Buffalo, Casper, Gillette,
Greybull, Lander, Laramie, Riverton and Sheridan. These communities are home to
a variety of industries, including energy, agriculture, mining, tourism,
government services, education and medical services with a significant number of
small to medium sized businesses. As of June 30, 1997, FIB Wyoming held assets
and deposits totaling $701.1 million and $601.4 million, respectively. The
Bank's main office is located in Sheridan, Wyoming.
First Interstate, fsb, a federally chartered savings bank, was opened as a
de novo federal savings bank in December 1996, and currently has one banking
office in Hamilton, Montana. The Company expects to merge First Interstate, fsb
with and into FIB Montana in the fourth quarter of 1997, subject to regulatory
approval. Following the merger, the Company expects that FIB Montana will
continue operating the First Interstate, fsb office in Hamilton, Montana as a
branch office and that the Company will deregister as a savings and loan holding
company. The Company believes that this merger will not materially alter the
Company's ongoing operations. As of June 30, 1997, First Interstate, fsb held
assets and deposits totaling $3.8 million and $1.9 million, respectively.
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ADMINISTRATION OF THE BANKS
Each of the Banks and their respective branches operate with a significant
level of autonomy and are responsible for day-to-day operations, the pricing of
loans and deposits, lending decisions and community relations. The Company also
emphasizes accountability, however, by establishing performance and incentive
standards for the Banks which are tied to net income at the individual branch
level. The Company provides general oversight and centralized services for the
Banks to enable them to serve their markets more effectively. These services
include data processing, credit administration, auditing, asset/liability
management, investment analysis, human resources management, marketing and
planning coordination. The Company continues to emphasize corporate
administration of functions which assist the Banks and their branches in more
effectively focusing on their respective markets and customers. Key among those
functions are the following:
DATA PROCESSING
The Company provides most of its and the Banks' data processing
requirements. These services, including general ledger, investment securities
management and loan and deposit processing, are performed through the use of
computer hardware which First Interstate owns and maintains and software which
it licenses. First Interstate also operates an extensive ATM network for the
benefit of the Banks' customers.
CREDIT ADMINISTRATION
The Company has established comprehensive credit policies which guide the
Banks' lending activities. These policies establish system-wide standards and
assist Bank management in the lending process. On the local level, the Banks are
granted significant autonomy and flexibility with respect to credit pricing
issues and lending decisions.
FINANCIAL AND ACCOUNTING
The Company provides all accounting services for the Banks, including
general ledger administration, internal and external reporting, asset/liability
management and investment portfolio analysis. In addition, the Company has
established policies regarding capital expenditures, asset/liability management
and capital management.
SUPPORT SERVICES
The Company provides the Banks with legal and compliance services, internal
auditing services, marketing services, planning coordination, personnel and
staffing support and various other services. The Company believes the
centralization of these services yields economies of scale, increases the
efficiency of the Banks and allows management of the Banks' branches to focus on
serving their market areas and customers.
LENDING ACTIVITIES
The Banks offer short and long-term commercial, consumer, real estate,
agricultural and other loans to individuals and small to medium sized businesses
in each of their market areas. The lending activities of the Banks and their
branches are guided by the Company's comprehensive lending and credit
guidelines. The Company believes that it is important to keep the credit
decision at the local branch level in order to enhance the speed and efficiency
with which the customer is served. While each loan must meet minimum
underwriting standards established in the Company's lending policy, lending
officers are granted certain levels of autonomy in approving and pricing loans.
The Company-established credit policies are intended to maximize the quality and
mix of loans, while also assuring that the Banks and their branches are
responsive to competitive issues and community needs in each market area. The
credit policies establish
44
<PAGE>
specific lending authorities to Bank officers, reflecting their individual
experience and level of authority, type of loan and collateral, and thresholds
at which loan requests must be approved at a committee level.
The Company oversees the lending activities of the Banks and is responsible
for monitoring general lending activities. Areas of oversight include the types
of loans, the mix of variable and fixed rate loans, delinquencies,
non-performing assets, classified loans and other credit information to evaluate
the risk within each Bank's loan portfolio and to recommend general reserve
percentages and specific reserve allocations.
The Company's loan portfolio is diversified across commercial, consumer,
real estate, agricultural and other loans, with a mix of fixed and variable rate
loans. Individual branches are granted autonomy with respect to product pricing,
which is significantly influenced by the markets in which the particular
branches are located.
COMMERCIAL LOANS
The Banks provide a mix of variable and fixed rate commercial loans. The
loans are typically made to small to medium sized manufacturing, wholesale,
retail and service businesses for working capital needs and business expansions.
As of June 30, 1997, 35.6% of the Company's loan portfolio was composed of
commercial loans. Commercial loans generally include lines of credit and loans
with maturities of five years or less. The loans are generally made with the
business operations as the primary source of repayment, but also include
collateralization by inventory, accounts receivable, equipment, real estate and/
or personal guarantees.
Unlike residential mortgage loans and consumer installment loans, which
generally are made on the basis of the borrower's ability to make repayment from
his or her employment and other income and which are secured by real property
whose value tends to be more easily ascertainable, commercial business loans
involve different risks and are typically made on the basis of the borrower's
ability to make repayment from the cash flow of the borrower's business. As a
result, the availability of funds for the repayment of commercial business loans
may be substantially dependent on the success of the business itself. Further,
the collateral securing the loans may depreciate over time, may be difficult to
appraise and may fluctuate in value based on the success of the business. The
Company attempts to limit these risks by employing underwriting and
documentation standards contained in written loan policies and procedures. These
policies and procedures are reviewed on an ongoing basis by management and
adherence to stated policies are monitored by credit administration.
CONSUMER LOANS
The Banks' consumer loans include personal automobile loans, home
improvement loans and equity lines of credit. The consumer loans are generally
secured by automobiles, boats and other types of personal property and are made
on an installment basis. The equity lines of credit are generally floating rate,
are reviewed annually and are secured by residential real estate. Over
two-thirds of the Company's consumer loans are indirect dealer paper which is
created when the Company advances money to dealers of consumer products who in
turn lend such money to consumers purchasing automobiles, boats and other
consumer goods. As of June 30, 1997, 34.1% of the Company's loan portfolio was
composed of consumer and personal loans.
REAL ESTATE LOANS
The Banks provide interim and permanent financing for both single-family and
multi-unit properties and medium term loans for commercial and industrial
buildings. The Banks originate variable and fixed rate real estate mortgages,
generally in accordance with the guidelines of the Federal National Mortgage
Association and the Federal Home Loan Mortgage Corporation. Loans originated in
accordance with these guidelines are referred to as "conforming loans" and loans
which do not meet these standards are
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<PAGE>
referred to as "non-conforming loans." The Company sells all conforming loans in
the secondary market, but generally retains its non-conforming loans. Real
estate loans are typically secured by first liens on the financed property. As
of June 30, 1997, 18.7% of the Company's loan portfolio was composed of real
estate loans, many of which are fixed rate loans, with maturities generally less
than 15 years.
AGRICULTURAL LOANS
Agricultural loans generally consist of short and medium-term loans and
lines of credit and are made to the large base of farm and ranch operations in
the Company's market areas. The Banks make agricultural loans in many of the
communities they serve, which are generally used for crops, livestock, buildings
and equipment, and general operating purposes. Agricultural loans are generally
secured by assets such as livestock or equipment and are repaid from the
operations of the farm or ranch. As of June 30, 1997, 11.3% of the Company's
loan portfolio was composed of agricultural loans. Agricultural loans generally
have maturities of five years or less, with operating lines lasting for one
production season.
DEPOSITS
Each of the Banks offers usual and customary depository products provided by
commercial banks, including personal and business checking accounts, savings
accounts and time deposits (including IRAs). Deposits at the Banks are insured
by the FDIC up to statutory limits. Local branch management is given relative
autonomy in determining the type, mix and pricing of the depository products
offered to customers, in an attempt to best compete in each Bank's particular
market, with corporate standards established at the Company level to determine
general guidelines and pricing. As of June 30, 1997, approximately 38.1%, 24.5%
and 37.4% of the Company's deposits consisted of demand, savings and time
deposits, respectively. The Company also has a significant number of repurchase
agreements primarily with commercial depositors. Under the repurchase
agreements, the Company sells, but does not transfer on its books or otherwise,
investment securities held by the Company to a customer under an agreement to
repurchase the investment security at a specified time or on demand.
OTHER OPERATIONS
In addition to the services mentioned above, the Company offers safe deposit
boxes, night depository services and wire transfers, among other things. The
Company also operates a substantial data processing division that performs data
processing services for the Banks and 35 non-affiliated financial institutions
in Montana, Wyoming and Idaho. The Company also provides support for over 540
ATM locations in 12 states, principally in Montana, Wyoming, Idaho, Colorado and
North Dakota.
The Company, through the Banks, offers a full range of fee-based trust
services to its individual, non-profit and corporate clients, including
corporate pension plans, individual retirements plans and 401(k) plans. Total
assets under management by the Company's trust operations totaled $565.0 million
at June 30, 1997.
COMPETITION
The banking and financial services business in both Montana and Wyoming is
highly competitive. The Banks compete for loans, deposits and customers for
financial services with other commercial banks, savings and loan associations,
securities and brokerage companies, mortgage companies, insurance companies,
finance companies, money market funds, credit unions and other nonbank financial
service providers. The Company competes in its markets on the basis of its
Strategic Vision philosophy, timely and responsive customer service and general
market presence. Several of the Company's competitors are much larger in total
assets and capitalization, have greater access to capital markets and offer a
broader array of financial services than the Banks. Moreover, the Banking and
Branching Act has increased competition in the Banks' markets, particularly from
larger, multi-state banks. See "Regulation and Supervision." The
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Company competes with several large, multi-state banks as well as numerous
smaller community banks. Principal competitors include Norwest Corporation, U.S.
Bancorp and Community First Bankshares, Inc. With respect to core deposits, the
Company believes it ranks second in market share to all other competitors in
each of Montana and Wyoming. See "Risk Factors--Competition."
PROPERTIES
The Company is the anchor tenant in a commercial building in which the
Company's principal executive offices are located in Billings, Montana. The
building is owned by a joint venture partnership in which FIB Montana is one of
the two partners, owning a 50% interest in the partnership. The Company and FIB
Montana lease space for operations in the building. The Company also leases
buildings in which five branches are located. All other branches are located in
Company-owned facilities. The Company believes its leased and owned facilities
are adequate for its present needs and anticipates future growth. See also Note
6 and Note 13 of the Notes to Consolidated Financial Statements.
EMPLOYEES
The Company employed approximately 950 full-time and 225 part-time employees
as of June 30, 1997. None of the Company's employees are covered by a collective
bargaining agreement. The Company considers its employee relations to be good.
LEGAL PROCEEDINGS
In the normal course of business, the Banks are named or threatened to be
named as defendants in various lawsuits. In the opinion of management, following
consultation with legal counsel, the pending lawsuits are without merit or, in
the event the plaintiff prevails, the ultimate liability or disposition thereof
will not have a material adverse effect on the Company's business, financial
condition or results of operations.
REGULATION AND SUPERVISION
Bank holding companies, savings and loan holding companies, commercial banks
and savings banks are subject to extensive regulation under both federal and
state law. See "Risk Factors--Government Regulation and Monetary Policy." Set
forth below is a summary description of certain laws which relate to the
regulation of First Interstate and the Banks. The description does not purport
to be complete and is qualified in its entirety by reference to the applicable
laws and regulations.
FIRST INTERSTATE
As a bank holding company, First Interstate is subject to regulation under
the Bank Holding Company Act of 1956, as amended (the "BHCA"), and to
supervision and regulation by the Federal Reserve. Also, as a savings and loan
holding company, First Interstate is subject to the Savings and Loan Holding
Company Act (the "SLHCA"), and to supervision and regulation by the Office of
Thrift Supervision (the "OTS").
The Federal Reserve may require that First Interstate terminate an activity
or terminate control of or liquidate or divest certain Banks if the Federal
Reserve believes such activity or control constitutes a significant risk to the
financial safety, soundness or stability of any of the Banks or is in violation
of the BHCA. The Federal Reserve also has the authority to regulate provisions
of certain bank holding company debt, including authority to impose interest
ceilings and reserve requirements on such debt. Under certain circumstances,
First Interstate must file written notice and obtain approval from the Federal
Reserve prior to purchasing or redeeming its equity securities, as is required
with respect to redemption of the Company's noncumulative perpetual preferred
stock. Further, First Interstate is required by the Federal Reserve to maintain
certain levels of capital. See "--Capital Standards" herein.
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First Interstate is required to obtain the prior approval of the Federal
Reserve for the acquisition of 5% or more of the outstanding shares of any class
of voting securities or substantially all of the assets of any bank or bank
holding company. Prior approval of the Federal Reserve is also required for the
merger or consolidation of First Interstate and another bank holding company.
First Interstate is prohibited by the BHCA, except in certain statutorily
prescribed instances, from acquiring direct or indirect ownership or control of
5% or more of the outstanding voting shares of any company that is not a bank or
bank holding company and from engaging directly or indirectly in activities
other than those of banking, managing or controlling banks or furnishing
services to its subsidiaries. However, First Interstate, subject to the prior
approval of the Federal Reserve, may engage in, or acquire shares of companies
engaged in, activities that are deemed by the Federal Reserve to be so closely
related to banking or managing or controlling banks as to be a proper incident
thereto. In making any such determination, the Federal Reserve may consider,
among other things, whether the performance of such activities by First
Interstate or an affiliate can reasonably be expected to produce benefits to the
public, such as greater convenience, increased competition or gains in
efficiency, that outweigh possible adverse effects, such as undue concentration
of resources, decreased or unfair competition, conflicts of interest or unsound
banking practices. The Federal Reserve is also empowered to differentiate
between activities commenced de novo and activities commenced by acquisition, in
whole or in part, of a going concern. On September 30, 1996, the Economic Growth
and Regulatory Paperwork Reduction Act of 1996 (the "1996 Budget Act")
eliminated the requirement that bank holding companies seek Federal Reserve
approval before engaging de novo in permissible nonbanking activities listed in
Regulation Y, which governs bank holding companies, if the holding company and
its lead depository institution are well-managed and Well-Capitalized (as
defined herein) and certain other criteria specified in the statute are met. For
purposes of determining the capital levels at which a bank holding company is
considered "Well-Capitalized" under the Budget Act and Regulation Y, the Federal
Reserve adopted, as a rule, risk-based capital ratios (on a consolidated basis)
that are the same as the levels set for determining that a state member bank is
Well Capitalized under the provisions established under the prompt corrective
action provisions of federal law. See "--Prompt Corrective Action and Other
Enforcement Mechanisms" herein.
Under Federal Reserve regulations, a bank holding company is required to
serve as a source of financial and managerial strength to its subsidiary banks
and may not conduct its operations in an unsafe or unsound manner. In addition,
it is the Federal Reserve's policy that in serving as a source of strength to
its subsidiary banks, a bank holding company should stand ready to use available
resources to provide adequate capital funds to its subsidiary banks during
periods of financial stress or adversity and should maintain the financial
flexibility and capital-raising capacity to obtain additional resources for
assisting its subsidiary banks. A bank holding company's failure to meet its
obligations to serve as a source of strength to its subsidiary banks will
generally be considered by the Federal Reserve to be an unsafe and unsound
banking practice or a violation of the Federal Reserve's regulations or both.
As a savings and loan holding company, the Company is subject to certain
limitations on its activities under the SLHCA and OTS regulations. The
limitations are generally similar to and, in some instances, less restrictive
than those applicable to the Company under the BHCA and Federal Reserve
regulations.
Upon merger of First Interstate, fsb with and into FIB Montana, the Company
will cease to be, and will deregister as, a savings and loan holding company.
THE BANKS
FIB Montana is subject to the supervision of and regular examination by, the
Federal Reserve and the State of Montana. FIB Wyoming is subject to the
supervision of and regular examination by, the FDIC and the State of Wyoming.
First Interstate, fsb, as a federally chartered savings bank, is subject to the
supervision of and regular examination by, the OTS. If any of the foregoing
regulatory agencies determine that the financial condition, capital resources,
asset quality, earning prospects, management, liquidity or
48
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other aspects of a Bank's operations are unsatisfactory or that the Bank or its
management is violating or has violated any law or regulation, various remedies
are available to such agencies. These remedies include the power to enjoin
"unsafe or unsound" practices, to require affirmative action to correct any
conditions resulting from any violation or practice, to issue an administrative
order that can be judicially enforced, to direct an increase in capital, to
restrict the growth of the Bank, to assess civil monetary penalties, to remove
officers and directors and ultimately to terminate a Bank's deposit insurance,
which would result in a revocation of the Bank's charter. None of the Banks has
been the subject of any such actions by their respective regulatory agencies.
The FDIC insures the deposits of the Banks in the manner and to the extent
provided by law. For this protection, the Banks pay a semiannual statutory
assessment. See "--Premiums for Deposit Insurance" herein.
Various requirements and restrictions under the laws of the states of
Montana and Wyoming and the United States affect the operations of the Banks.
State and federal statutes and regulations relate to many aspects of the Banks'
operations, including levels of capital, reserves against deposits, interest
rates payable on deposits, loans, investments, mergers and acquisitions,
borrowings, dividends, locations of branch offices and capital requirements.
RESTRICTIONS ON TRANSFERS OF FUNDS TO FIRST INTERSTATE AND THE BANKS
First Interstate is a legal entity separate and distinct from the Banks.
Statutory and regulatory limitations exist with respect to the amount of
dividends which may be paid to First Interstate by the Banks. Under Montana
banking law, FIB Montana may not declare dividends in any one calendar year in
excess of its net earnings of the preceding two years without giving notice to
the Montana Commissioner of Banking and Financial Institutions. As a Federal
Reserve member bank, FIB Montana may not, without the consent of the Federal
Reserve, declare dividends in a calendar year which, when aggregated with prior
dividends in that calendar year, exceed the calendar year net profits of FIB
Montana together with retained earnings for the prior two calendar years. Under
Wyoming banking law, FIB Wyoming may not, without the approval of the Wyoming
Banking Commissioner, declare dividends in any one calendar year in excess of
its net profits in the current year combined with retained net profits of the
preceding two years, less any required transfers to surplus or a fund for the
retirement of any preferred stock. In addition, there are restrictions under the
Company's debt instruments which prohibit dividends in certain circumstances.
The bank regulatory agencies also have authority to prohibit the Banks from
engaging in activities that, in their respective opinions, constitute unsafe or
unsound practices in conducting their business. It is possible, depending upon
the financial condition of the Bank in question and other factors, that the bank
regulatory agencies could assert that the payment of dividends or other payments
might, under some circumstances, be an unsafe or unsound practice. Further, the
bank regulatory agencies have established guidelines with respect to the
maintenance of appropriate levels of capital by banks or bank holding companies
under their jurisdiction. Compliance with the standards set forth in such
guidelines and the restrictions that are or may be imposed under the prompt
corrective action provisions of federal law could limit the amount of dividends
which the Banks or First Interstate may pay. See "--Prompt Corrective Action and
Other Enforcement Mechanisms" and "--Capital Standards" herein for a discussion
of these additional restrictions on capital distributions.
A large portion of First Interstate's revenues, including funds available
for the payment of interest on the Junior Subordinated Debentures, dividends and
operating expenses, are and will continue to be, dividends paid by the Banks.
The Banks are also subject to certain restrictions imposed by federal law on
any extensions of credit to, or the issuance of a guarantee or letter of credit
on behalf of, First Interstate or any affiliate of First Interstate, the
purchase of or investments in stock or other securities thereof, the taking of
such securities as collateral for loans and the purchase of assets of First
Interstate or the Banks. Such restrictions prevent
49
<PAGE>
First Interstate and the Banks from borrowing from the Banks unless the loans
are secured by marketable obligations or other acceptable collateral of
designated amounts. Further, such secured loans and investments by the Banks to
or in First Interstate are limited to 10% of the respective Bank's capital stock
and surplus (as defined by federal regulations) and such secured loans and
investments are limited, in the aggregate, to 20% of the respective Bank's
capital stock and surplus (as defined by federal regulations). Additional
restrictions on transactions with Banks may be imposed on the Banks by state or
federal regulations including under the prompt corrective action provisions of
federal law. See "--Prompt Corrective Action and Other Enforcement Mechanisms"
herein.
COMMON LIABILITY
Under federal law, a depository institution insured by the FDIC can be held
liable for any loss incurred by, or reasonably expected to be incurred by, the
FDIC in connection with the default of a commonly controlled FDIC-insured
depository institution or any assistance provided by the FDIC to a commonly
controlled FDIC-insured institution in danger of default. These provisions can
have the effect of making one Bank responsible for FDIC-insured losses at
another Bank.
EFFECT OF GOVERNMENT POLICIES AND LEGISLATION
Banking is a business that depends on rate differentials. In general, the
difference between the interest rate paid by the Banks on their deposits and
their other borrowings and the interest rate received by the Banks on loans
extended to their customers and on investment securities comprises a major
portion of the Banks' earnings. These rates are highly sensitive to many factors
that are beyond the control of the Banks. Accordingly, the earnings and
potential growth of the Banks are subject to the influence of domestic and
foreign economic conditions, including inflation, recession and unemployment.
The commercial banking business is not only affected by general economic
conditions but is also influenced by the monetary and fiscal policies of the
federal government and the policies of regulatory agencies, particularly the
Federal Reserve. The Federal Reserve implements national monetary policies (with
objectives such as curbing inflation and combating recession) by its open-market
operations in United States government securities, by adjusting the required
level of reserves for financial institutions subject to the Federal Reserve's
reserve requirements and by varying the discount rates applicable to borrowings
by depository institutions. The actions of the Federal Reserve in these areas
influence the growth of bank loans, investments and deposits and also affect
interest rates charged on loans and paid on deposits. The nature and impact of
any future changes in monetary policies cannot be predicted.
From time to time, legislation is enacted which has the effect of increasing
the cost of doing business, limiting or expanding permissible activities or
affecting the competitive balance between banks and other financial service
providers. Proposals to change the laws and regulations governing the operations
and taxation of banks, bank holding companies and other financial service
providers are frequently made in Congress, in the Montana and Wyoming
legislatures and before various bank regulatory and other professional agencies.
The likelihood of any major legislative changes and the impact such changes
might have on First Interstate or the Banks are impossible to predict.
CAPITAL STANDARDS
The Federal Reserve and the FDIC have adopted risk-based minimum capital
guidelines intended to provide a measure of capital that reflects the degree of
risk associated with a banking organization's operations for transactions
reported on the balance sheet as both assets and transactions, such as letters
of credit and recourse arrangements. Under these guidelines, nominal dollar
amounts of assets and credit equivalent amounts of off-balance sheet items are
multiplied by one of several risk adjustment percentages, which range from 0%
for assets with low credit risk, such as certain U.S. Treasury securities, to
100% for assets with high credit risk, such as commercial loans.
50
<PAGE>
A banking organization's risk-based capital ratios are obtained by dividing
its qualifying capital by its total risk-adjusted assets. The regulators measure
risk-adjusted assets, which include off-balance sheet items, against both total
qualifying capital (the sum of Tier 1 capital and limited amounts of Tier 2
capital (both as defined herein)) and Tier 1 capital. "Tier 1 capital" consists
of, among other things, (i) common stockholders' equity capital (including
common stock and related surplus and undivided profits); (ii) noncumulative
perpetual preferred stock (cumulative perpetual preferred stock for bank holding
companies), including any related surplus; and (iii) minority interests in
certain subsidiaries, less most intangible assets. "Tier 2 capital" may consist
of: (i) a limited amount of allowance for loan and lease losses ("ALLL"); (ii)
cumulative perpetual preferred stock; (iii) perpetual preferred stock, including
any related surplus; (iv) term subordinated debt and certain other instruments
with some characteristics of equity. The inclusion of elements of Tier 2 capital
is subject to certain other requirements and limitations of the federal banking
agencies. The federal banking agencies require a minimum ratio of qualifying
total capital to risk-adjusted assets of 8% and a minimum ratio of Tier 1
capital to risk-adjusted assets of 4%.
In addition to the risked-based guidelines, federal banking regulators
require banking organizations to maintain a minimum amount of Tier 1 capital to
total assets, referred to as the "leverage ratio." For a banking organization
rated in the highest of the five categories used by regulators to rate banking
organizations, the minimum leverage ratio of Tier 1 capital to total assets must
be at least 5%. See "--Prompt Corrective Action and Other Enforcement
Mechanisms." In addition to the uniform risk-based capital guidelines and
leverage ratios that apply across the industry, the regulators have the
discretion to set individual minimum capital requirements for specific
institutions at rates significantly above the minimum guidelines and ratios.
First Interstate and the Bank are all rated as Well Capitalized (as defined
below).
In June 1996, the federal banking agencies adopted a joint agency policy
statement to provide guidance on managing interest rate risk. These agencies
indicated that the adequacy and effectiveness of a bank's interest rate risk
management process and the level of its interest rate exposures are critical
factors in the agencies' evaluation of the bank's capital adequacy. A bank with
material weaknesses in its risk management process or high levels of exposure
relative to its capital will be directed by the agencies to take corrective
action. Such actions will include recommendations or directions to raise
additional capital, strengthen management expertise, improve management
information and measurement systems, reduce levels of exposure, or some
combination thereof depending upon the individual institution's circumstances.
This policy statement augments the August 1995 regulations adopted by the
federal banking agencies which addressed risk-based capital standards for
interest rate risk.
In December 1993, the federal banking agencies issued an interagency policy
statement on the ALLL which, among other things, established certain benchmark
ratios of loan loss reserves to classified assets. The benchmark set forth by
such policy statement is the sum of (a) assets classified loss; (b) 50% of
assets classified doubtful; (c) 15% of assets classified substandard; and (d)
estimated credit losses on other assets over the upcoming 12 months. This amount
is neither a "floor" nor a "safe harbor" level for an institution's ALLL.
Federally supervised banks and savings associations are currently required
to report deferred tax assets in accordance with SFAS No. 109. The federal
banking agencies issued final rules governing banks and bank holding companies,
which became effective April 1, 1995 and which limit the amount of deferred tax
assets that are allowable in computing an institution's regulatory capital.
Deferred tax assets that can be realized for taxes paid in prior carryback years
and from future reversals of existing taxable temporary differences are
generally not limited. Deferred tax assets that can only be realized through
future taxable earnings are limited for regulatory capital purposes to the
lesser of (i) the amount that can be realized within one year of the quarter-end
report date, based on projected taxable income for that year or (ii) 10% of Tier
1 capital. The amount of any deferred tax in excess of this limit would be
excluded from Tier 1 capital and total assets and regulatory capital
calculations.
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<PAGE>
Future changes in regulations or practices could further reduce the amount
of capital recognized for purposes of capital adequacy. Such a change could
affect the ability of the Banks to grow and could restrict the amount of
profits, if any, available for the payment of dividends. For information
concerning the capital ratios of First Interstate, see "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Financial
Condition--Capital Resources."
PROMPT CORRECTIVE ACTION AND OTHER ENFORCEMENT MECHANISMS
Federal law requires each federal banking agency to take prompt corrective
action to resolve problems of insured depository institutions, including,
without limitation, those institutions which fall below one or more prescribed
minimum capital ratios. In accordance with federal law, each federal banking
agency has promulgated regulations defining five categories in which an insured
depository institution will be placed, based on the level of its capital ratios.
The five categories are "Well Capitalized," "Adequately Capitalized,"
"Undercapitalized," "Significantly Undercapitalized" and "Critically
Undercapitalized." An insured depository institution will be classified in the
following categories based, in part, on the capital measures indicated below:
<TABLE>
<CAPTION>
WELL CAPITALIZED ADEQUATELY CAPITALIZED
<S> <C>
Total risk-based capital of at least Total risk-based capital of at least
10%; 8%;
Tier 1 risk-based capital of 6%; and Tier 1 risk-based capital of 4%; and
Leverage ratio of 5%. Leverage ratio of 4%.
UNDERCAPITALIZED SIGNIFICANTLY UNDERCAPITALIZED
Total risk-based capital less than
Total risk-based capital less than 8%; 6%;
Tier 1 risk-based capital less than 4%; Tier 1 risk-based capital less than
or 3%; or
Leverage ratio less than 4%. Leverage ratio less than 3%.
CRITICALLY UNDERCAPITALIZED
Tangible equity to total assets less
than 2%.
</TABLE>
An institution classified as Well Capitalized, Adequately Capitalized or
Undercapitalized may be treated as though it were in the next lower capital
category if the appropriate federal banking agency, after notice and opportunity
for hearing, determines that an unsafe or unsound condition or an unsafe or
unsound practice warrants such treatment. At each successive lower capital
category, an insured depository institution is subject to more restrictions. The
federal banking agencies, however, may not treat a Significantly
Undercapitalized institution as Critically Undercapitalized unless its capital
ratio actually warrants such treatment.
Insured depository institutions are prohibited from paying management fees
to any controlling persons or, with certain limited exceptions, making capital
distributions if after such transaction the institution would be
Undercapitalized. If an insured depository institution is Undercapitalized, it
will be closely monitored by the appropriate federal banking agency, subject to
asset growth restrictions and required to obtain prior regulatory approval for
acquisitions, branching and engaging in new lines of business. Any
Undercapitalized depository institution must submit an acceptable capital
restoration plan to the appropriate federal banking agency within 45 days after
receiving or being deemed to have received notice, that the institution is
Undercapitalized. The appropriate federal banking agency cannot accept a capital
plan unless, among other things, it determines that the plan: (i) specifies: (a)
the steps the institution will take to become Adequately Capitalized; (b) the
levels of capital to be attained during each year in which the plan will be in
effect; (c) how the institution will comply with the applicable restrictions or
requirements then in effect of the Federal Deposit Insurance Corporation
Improvement Act of 1991, as amended ("FDICIA"); and (d) the types and levels of
activities in which the institution will engage; (ii) is
52
<PAGE>
based on realistic assumptions and is likely to succeed in restoring the
depository institution's capital; and (iii) would not appreciably increase the
risk (including credit risk, interest-rate risk and other types of risk) to
which the institution is exposed. In addition, each company controlling an
Undercapitalized depository institution must guarantee that the institution will
comply with the capital plan until the depository institution has been
Adequately Capitalized on average during each of four consecutive calendar
quarters and must otherwise provide appropriate assurances of performance. The
aggregate liability of such guarantee is limited to the lesser of (i) an amount
equal to 5% of the depository institution's total assets at the time the
institution became Undercapitalized or (ii) the amount which is necessary to
bring the institution into compliance with all capital standards applicable to
such institution as of the time the institution fails to comply with its capital
restoration plan. Finally, the appropriate federal banking agency may impose any
of the additional restrictions or sanctions that it may impose on Significantly
Undercapitalized institutions if it determines that such action will further the
purpose of the prompt correction action provisions.
An insured depository institution that is Significantly Undercapitalized, or
is Undercapitalized and fails to submit, or in a material respect to implement,
an acceptable capital restoration plan, is subject to additional restrictions
and sanctions. These include, among other things: (i) a forced sale of voting
shares to raise capital or, if grounds exist for appointment of a receiver or
conservator, a forced merger; (ii) restrictions on transactions with affiliates;
(iii) further limitations on interest rates paid on deposits; (iv) further
restrictions on growth or required shrinkage; (v) modification or termination of
specified activities; (vi) replacement of directors or senior executive
officers; (vii) prohibitions on the receipt of deposits from correspondent
institutions; (viii) restrictions on capital distributions by the holding
companies of such institutions; (ix) required divestiture of subsidiaries by the
institution; or (x) other restrictions as determined by the appropriate federal
banking agency. Although the appropriate federal banking agency has discretion
to determine which of the foregoing restrictions or sanctions it will seek to
impose, it is required to: (i) force a sale of shares or obligations of the
bank, or require the bank to be acquired by or combine with another institution;
(ii) impose restrictions on affiliate transactions and (iii) impose restrictions
on rates paid on deposits, unless it determines that such actions would not
further the purpose of the prompt corrective action provisions. In addition,
without the prior written approval of the appropriate federal banking agency, a
Significantly Undercapitalized institution may not pay any bonus to its senior
executive officers or provide compensation to any of them at a rate that exceeds
such officer's average rate of base compensation during the 12 calendar months
preceding the month in which the institution became Undercapitalized.
Further restrictions and sanctions are required to be imposed on insured
depository institutions that are Critically Undercapitalized. For example, a
Critically Undercapitalized institution generally would be prohibited from
engaging in any material transaction other than in the ordinary course of
business without prior regulatory approval and could not, with certain
exceptions, make any payment of principal or interest on its subordinated debt
beginning 60 days after becoming Critically Undercapitalized. Most importantly,
however, except under limited circumstances, the appropriate federal banking
agency, not later than 90 days after an insured depository institution becomes
Critically Undercapitalized, is required to appoint a conservator or receiver
for the institution. The board of directors of an insured depository institution
would not be liable to the institution's stockholders or creditors for
consenting in good faith to the appointment of a receiver or conservator or to
an acquisition or merger as required by the regulator.
In addition to measures taken under the prompt corrective action provisions,
commercial banking organizations may be subject to potential enforcement actions
by the federal regulators for unsafe or unsound practices in conducting their
businesses or for violations of any law, rule, regulation or any condition
imposed in writing by the agency or any written agreement with the agency. See
"--Potential Enforcement Actions" herein.
53
<PAGE>
SAFETY AND SOUNDNESS STANDARDS
Effective July 1995, the federal banking agencies adopted final guidelines
establishing standards for safety and soundness, as required by the FDICIA.
These standards are designed to identify potential safety and soundness concerns
and ensure that action is taken to address those concerns before they pose a
risk to the deposit insurance funds. The standards relate to (i) internal
controls, information systems and internal audit systems; (ii) loan
documentation; (iii) credit underwriting; (iv) asset growth; (v) earnings; and
(vi) compensation, fees and benefits. If a federal banking agency determines
that an institution fails to meet any of these standards, the agency may require
the institution to submit to the agency an acceptable plan to achieve compliance
with the standard. If the institution fails to submit an acceptable plan within
the time allowed by the agency or fails in any material respect to implement an
accepted plan, the agency must, by order, require the institution to correct the
deficiency. Effective October 1, 1996, the federal banking agencies promulgated
safety and soundness regulations and accompanying interagency compliance
guidelines on asset quality and earnings standards. These new guidelines provide
six standards for establishing and maintaining a system to identify problem
assets and prevent those assets from deteriorating. The institution should: (i)
conduct periodic asset quality reviews to identify problem assets; (ii) estimate
the inherent losses in those assets and establish reserves that are sufficient
to absorb estimated losses; (iii) compare problem asset totals to capital; (iv)
take appropriate corrective action to resolve problem assets; (v) consider the
size and potential risks of material asset concentrations; and (vi) provide
periodic asset reports with adequate information for management and the board of
directors to assess the level of asset risk. These guidelines also set forth
standards for evaluating and monitoring earnings and for ensuring that earnings
are sufficient for the maintenance of adequate capital and reserves. If an
institution fails to comply with a safety and soundness standard, the
appropriate federal banking agency may require the institution to submit a
compliance plan. Failure to submit a compliance plan or to implement an accepted
plan may result in enforcement action.
PREMIUMS FOR DEPOSIT INSURANCE
The FDIC has adopted final regulations implementing a risk-based premium
system required by federal law, which establishes an assessment rate schedule
ranging from nothing to 27 cents per $100 of deposits applicable to members of
the Bank Insurance Fund ("BIF"). To determine the risk-based assessment for each
institution, the FDIC will categorize an institution as Well Capitalized,
Adequately Capitalized or Undercapitalized using the same standards used by the
FDIC for its prompt corrective action regulations. For purposes of assessing
FDIC premiums, an Undercapitalized institution will generally be one that does
not meet either a Well Capitalized or an Adequately Capitalized standard. The
FDIC will also assign each institution to one of three subgroups based upon
reviews by the institution's primary federal or state regulator, statistical
analyses of financial statements and other information relevant to evaluating
the risk posed by the institution. The three supervisory categories are:
financially sound with only a few minor weaknesses ("Group A"), demonstrates
weaknesses that could result in significant deterioration ("Group B") and poses
a substantial probability of loss ("Group C").
The BIF assessment rates are set forth below for institutions based on their
risk-based assessment categorization.
ASSESSMENT RATES EFFECTIVE JANUARY 1, 1996*
<TABLE>
<CAPTION>
GROUP A GROUP B GROUP C
------------- ------------- -------------
<S> <C> <C> <C>
Well Capitalized............................................... 0 3 17
Adequately Capitalized......................................... 3 10 24
Undercapitalized............................................... 10 24 27
</TABLE>
- ------------------------
* Assessment figures are expressed in terms of cents per $100 of deposits.
54
<PAGE>
The 1996 Budget Act capitalized the Savings Association Insurance Fund
("SAIF") through a special assessment on SAIF-insured deposits and which
required banks to share in part of the interest payments on the Financing
Corporation ("FICO") bonds which were issued to help fund the federal government
costs associated with the savings and loan crisis of the late 1980s. Effective
January 1, 1997, for FICO payments, SAIF-insured institutions, like First
Interstate, fsb, pay 3.2 cents per $100 in domestic deposits and BIF-insured
institutions, like the Banks, pay 0.64 cents per $100 in domestic deposits. Full
pro rata sharing of FICO interest payments takes effect on January 1, 2000.
The federal banking regulators are also authorized to prohibit depository
institutions and their holding companies from facilitating or encouraging the
shifting of deposits from SAIF to BIF for the purpose of evading thrift
assessment rates. The 1996 Budget Act also prohibits the FDIC from setting
premiums under the risk-based schedule above the amount needed to meet the
designated reserve ratio (currently 1.25%).
INTERSTATE BANKING AND BRANCHING
Under the Banking and Branching Act, a bank holding company may obtain
approval under the BHCA to acquire an existing bank located in another state
without regard to state law. A bank holding company is not permitted to make
such an acquisition if, upon consummation of the acquisition, it would control
(a) more than 10% of the total amount of deposits of insured depository
institutions in the United States or (b) 30% or more of the deposits in the
state in which the bank is located. A state may limit the percentage of total
deposits that may be held in that state by any one bank or bank holding company
if application of such limitation does not discriminate against out-of-state
banks or bank holding companies. An out-of-state bank holding company may not
acquire a state bank in existence for less than a minimum length of time that
may be prescribed by state law, except that a state may not impose more than a
five-year age requirement.
The Banking and Branching Act also permits, beginning as of June 1, 1997,
mergers of insured banks located in different states and conversion of the
branches of the acquired bank into branches of the resulting bank. Each state
may permit such combinations earlier than June 1, 1997 and may adopt legislation
to prohibit interstate mergers after that date in that state or in other states
by that state's banks. The same concentration limits discussed in the preceding
paragraph also apply to such mergers. The Banking and Branching Act also permits
a national or state bank to establish branches in a state other than its home
state if permitted by the laws of that state, subject to the same requirements
and conditions as for a merger transaction.
On March 20, 1997, the State of Montana enacted legislation which authorizes
de novo branching within the state by banks chartered under the laws of the
State of Montana. In the same legislation, Montana elected to "opt out" of full
interstate branching available under the Banking and Branching Act, thereby
precluding interstate branching in Montana until October 1, 2001. Nevertheless,
after the foregoing prohibition expires, competition in the Company's market
areas could increase significantly.
COMMUNITY REINVESTMENT ACT AND FAIR LENDING DEVELOPMENTS
The Banks are subject to certain fair lending requirements and reporting
obligations involving home mortgage lending operations and Community
Reinvestment Act ("CRA") activities. The CRA generally requires the federal
banking agencies to evaluate the record of a financial institution in meeting
the credit needs of its local communities, including low and moderate income
neighborhoods. In addition to substantial penalties and corrective measures that
may be required for a violation of certain fair lending laws, the federal
banking agencies may take compliance with such laws and CRA into account when
regulating and supervising other activities.
In May 1995, the federal banking agencies issued final regulations which
change the manner in which they measure a bank's compliance with its CRA
obligations. The final regulations adopt a performance-
55
<PAGE>
based evaluation system which bases CRA ratings on an institution's actual
lending, service and investment performance, rather than on the extent to which
the institution conducts needs assessments, documents community outreach
activities or complies with other procedural requirements.
In March 1994, the federal Interagency Task Force on Fair Lending issued a
policy statement on discrimination in lending. The policy statement describes
the three methods that federal agencies will use to prove discrimination: overt
evidence of discrimination, evidence of disparate treatment and evidence of
disparate impact.
In connection with its assessment of CRA performance, the appropriate bank
regulatory agency assigns a rating of "outstanding," "satisfactory," "needs to
improve" or "substantial noncompliance." Based on an examination conducted
during the first quarter of 1996, FIB Montana and FIB Wyoming were both rated
"satisfactory."
POTENTIAL ENFORCEMENT ACTIONS
Commercial banking organizations, such as the Banks and their
institution-affiliated parties, which include First Interstate, may be subject
to potential enforcement actions by the Federal Reserve and the FDIC for unsafe
or unsound practices in conducting their businesses or for violations of any
law, rule, regulation or any condition imposed in writing by the agency or any
written agreement with the agency. Enforcement actions may include the
imposition of a conservator or receiver, the issuance of a cease-and-desist
order that can be judicially enforced, the termination of insurance of deposits
(in the case of the Banks), the imposition of civil money penalties, the
issuance of directives to increase capital, the issuance of formal and informal
agreements, the issuance of removal and prohibition orders against institution
affiliated parties and the imposition of restrictions and sanctions under the
prompt corrective action provisions of the FDICIA. Additionally, a bank holding
company's inability to serve as a source of strength to its subsidiary banking
organizations could serve as an additional basis for a regulatory action against
such bank holding company. Neither First Interstate nor the Banks has been
subject to any such enforcement actions.
56
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth information concerning each of the directors
and executive officers of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION
- --------------------------------------- --- -------------------------------------------------------------------
<S> <C> <C>
Homer A. Scott, Jr..................... 62 Chairman of the Board
James R. Scott......................... 47 Vice Chairman of the Board
Thomas W. Scott........................ 53 President, Chief Executive Officer and Director
William H. Ruegamer(1)................. 53 Executive Vice President, Chief Operating Officer and Director
Terrill R. Moore....................... 45 Senior Vice President, Chief Financial Officer and Secretary
William G. Wilson...................... 58 Senior Vice President
Edward Garding......................... 48 Senior Vice President
Dan S. Scott........................... 66 Director
Randy Scott............................ 43 Director
Susan Scott Heyneman................... 58 Director
Joel Long.............................. 56 Director
James Haugh............................ 60 Director Nominee
</TABLE>
- ------------------------
(1) Mr. Ruegamer will resign from all positions with the Company effective
October 31, 1997.
HOMER A. SCOTT, JR. has been a director of First Interstate since 1971 and
the Chairman of the Board since 1988. Mr. Scott has served as a director of
Montana-Dakota Resources Group, Inc. since 1983. Mr. Scott is the brother of
James R. Scott, Thomas W. Scott, Dan S. Scott and Susan Scott Heyneman.
JAMES R. SCOTT has been a director of First Interstate since 1971 and the
Vice Chairman of the Board since January 1990. Currently, Mr. Scott is also
President of the First Interstate Bank Foundation. Mr. Scott is the brother of
Homer A. Scott, Jr., Thomas W. Scott, Dan S. Scott and Susan Scott Heyneman.
THOMAS W. SCOTT has been a director of First Interstate since 1971 and has
served as President and Chief Executive Officer of First Interstate since 1978.
Mr. Scott is the brother of Homer A. Scott, Jr., James R. Scott, Dan S. Scott
and Susan Scott Heyneman.
WILLIAM H. RUEGAMER has served as a director, the Executive Vice President
and Chief Operating Officer of First Interstate since 1988. Mr. Ruegamer will
resign from all positions with the Company effective October 31, 1997.
TERRILL R. MOORE has been a Senior Vice President, the Chief Financial
Officer and Secretary of First Interstate since November 1989, and served in
various finance and accounting positions within the Company since April 1979.
Mr. Moore was formerly a manager with KPMG Peat Marwick LLP.
WILLIAM G. WILSON has been a Senior Vice President of First Interstate since
1983. He was also Chief Financial Officer of First Interstate until November
1989.
EDWARD GARDING has been a Senior Vice President of First Interstate since
September 1996, and served in various management positions within the Company
since 1971.
DAN S. SCOTT has been a director of First Interstate since 1971. Mr. Scott
has served as President and General Manager of Padlock Ranch Co. and Flying V
Cattle Co. since 1970. Mr. Scott is the brother of Homer A. Scott, Jr., James R.
Scott, Thomas W. Scott and Susan Scott Heyneman.
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<PAGE>
RANDY SCOTT has been a director of First Interstate since August 1993. Mr.
Scott was a trust officer of FIB Montana's trust division from 1991 until 1996.
In total, Mr. Scott was employed by the Company for nineteen years. Mr. Scott is
the son of Dan S. Scott.
SUSAN SCOTT HEYNEMAN has been a director of First Interstate since March
1994. Ms. Heyneman served previously as a director of First Interstate, having
resigned in 1989 to pursue personal interests. With her husband, Ms. Heyneman
has been a co-owner of the Bench Ranch for more than five years. Ms. Heyneman is
the sister of Homer A. Scott, Jr., James R. Scott, Thomas W. Scott and Dan S.
Scott.
JOEL LONG has been a director of First Interstate since May 1996. Mr. Long
has been the owner and President of JTL Group, Inc., a construction firm doing
business in Montana and Wyoming, since 1990.
JAMES HAUGH is a director nominee of the Company who has been approved by
the Company's stockholders to serve as a director but has not yet been qualified
to do so. Mr. Haugh formed American Capital LLC, a financial consulting firm, in
October 1994 and has operated this firm since its inception. Prior to forming
American Capital LLC, Mr. Haugh was a partner in the accounting firm of KPMG
Peat Marwick LLP.
BOARD COMMITTEE
The Company's compensation committee is comprised of Homer A. Scott, Jr.,
James R. Scott, Dan S. Scott and Joel Long.
58
<PAGE>
EXECUTIVE COMPENSATION AND OTHER MATTERS
The following table sets forth data concerning the compensation received by
the Chief Executive Officer of First Interstate and four other executive
officers of First Interstate as of December 31, 1996, whose salary and bonus for
the year ended December 31, 1996, exceeded $100,000 in the aggregate. In all
cases, payment was for services in all capacities of First Interstate and the
Banks.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
<S> <C> <C> <C> <C> <C> <C>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
----------------------------------- ----------
NAME AND PRINCIPAL OTHER ANNUAL OPTIONS/ ALL OTHER
POSITION YEAR SALARY BONUS COMPENSATION(1) SARS COMPENSATION(2)
- ------------------------- --------- --------- --------- ------------- ---------- -------------
Thomas W. Scott ......... 1996 $ 206,000 $ 75,000 $ 7,200 -- $ 23,002
President and CEO 1995 200,000 63,000 7,200 -- 17,697
1994 194,000 60,000 7,200 -- 21,839
William H. Ruegamer ..... 1996 $ 190,000 $ 66,500 $ 199 1400/1400 $ 21,583
Executive Vice 1995 184,000 58,000 699 1400/1400 18,602
President
& COO 1994 173,500 55,000 167 1200/900 19,799
William G. Wilson ....... 1996 $ 102,000 $ 39,580 $ 7,200 600/600 $ 12,544
Senior Vice President 1995 99,000 27,720 7,200 800/800 12,597
1994 95,500 25,785 7,200 800/600 12,142
Edward Garding(3) ....... 1996 $ 106,730 $ 30,000 $ 20,860 800/800 $ 12,431
Senior Vice President 1995 NA NA NA NA NA
1994 NA NA NA NA NA
Terrill R. Moore ........ 1996 $ 86,684 $ 35,184 $ 7,200 800/800 $ 12,740
Senior Vice President & 1995 80,800 22,624 7,200 800/800 11,462
CFO 1994 77,800 21,006 7,200 800/600 10,324
</TABLE>
- ------------------------
(1) Other annual compensation principally relates to an auto allowance or the
value of personal usage of a Company-owned vehicle, except that Edward
Garding also received reimbursement of moving and related expenses
aggregating $13,660 in 1996.
(2) All other compensation includes (i) premiums paid by the Company on health
and life insurance policies, (ii) contributions by the Company to the
Company's noncontributory qualified profit sharing plan and (iii)
contributions by the Company to the Company's contributory qualified
employee savings plan, qualified under Section 401(k) of the Internal
Revenue Code of 1986, as amended (the "Code"). For the fiscal year ending
December 31, 1996, premiums on health and life insurance on behalf of Thomas
W. Scott, William H. Ruegamer, William G. Wilson, Edward Garding and Terrill
R. Moore were $3,307, $2,687, $2,687, $2,870 and $3,131, respectively. For
the fiscal year ending December 31, 1996, contributions to the Company's
profit sharing plan on behalf of Thomas W. Scott, William H. Ruegamer,
William G. Wilson, Edward Garding and Terrill R. Moore were $10,187, $9,396,
$5,044, $5,227 and $4,272, respectively. For the fiscal year ending December
31, 1996, contributions to the Company's employee savings plan on behalf of
Thomas W. Scott, William H. Ruegamer, William G. Wilson, Edward Garding and
Terrill R. Moore were $9,508, $9,500, $4,813, $4,334 and $5,337,
respectively.
(3) Not an executive officer of First Interstate prior to 1996.
59
<PAGE>
OPTION/SAR GRANTS TABLE
The following table provides information concerning grants of options to
purchase First Interstate
common stock, no par value (the "Common Stock"), and related stock appreciation
rights ("SARs") made during the year ended December 31, 1996, to the persons
named in the Summary Compensation Table.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
----------------------------------------------------- ANNUAL RATES OF
NUMBER OF PERCENT OF STOCK
SECURITIES TOTAL PRICE APPRECIATION
UNDERLYING OPTIONS/ SARS EXERCISE FOR
OPTIONS/ GRANTED TO OR BASE OPTION/SAR TERM
SARS EMPLOYEES IN PRICE EXPIRATION --------------------
NAME GRANTED FISCAL YEAR ($/SH) DATE 5% 10%
- ----------------------------- ------------ ------------- ----------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Thomas W. Scott.............. -- -- -- -- -- --
William H. Ruegamer.......... 1400/1400 8.43% 17.86 1/16/06 $ 31,441 $ 79,678
William G. Wilson............ 600/600 3.61% 17.86 1/16/06 $ 13,475 $ 34,148
Edward Garding............... 800/800 4.82% 17.86 1/16/06 $ 17,966 $ 45,530
Terrill R. Moore............. 800/800 4.82% 17.86 1/16/06 $ 17,966 $ 45,530
</TABLE>
The following table indicates the number and value of the stock options and
SARs exercised in 1996 and the number and value of unexercised stock options and
SARs as of December 31, 1996. All stock options and SARs are currently
exercisable.
AGGREGATED OPTION/SAR EXERCISES IN 1996 AND FISCAL YEAR-END VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED,
NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS AND
SHARES ACQUIRED VALUE OPTIONS/SARS HELD AT SARS AT DECEMBER 31,
NAME ON EXERCISE REALIZED DECEMBER 31, 1996 1996
- ------------------------------- ----------------- ------------- --------------------- ------------------------
<S> <C> <C> <C> <C>
Thomas W. Scott................ -- -- -- --
William H. Ruegamer............ 3,224 $ 75,095 11,488/7,444 $ 195,311
William G. Wilson.............. 608 $ 11,906 5,200/3,500 $ 79,679
Edward Garding................. 1,704 $ 39,690 8,140/5,070 $ 144,362
Terrill R. Moore............... 1,888 $ 43,976 7,476/4,738 $ 127,912
</TABLE>
TERMINATION OF EMPLOYMENT ARRANGEMENT
On August 25, 1997, the Company entered into an agreement with William H.
Ruegamer (the "Resignation Agreement"), pursuant to which Mr. Ruegamer and the
Company agreed that Mr. Ruegamer will resign from his employment with the
Company effective October 31, 1997. Under the Resignation Agreement, Mr.
Ruegamer agreed to release the Company from any potential claims, and the
Company agreed to provide Mr. Ruegamer (i) a 1997 performance bonus of $55,000,
(ii) the sum of $250,000, payable in 24 equal monthly installments, (iii) health
and dental insurance for Mr. Ruegamer and his spouse until October 31, 2001
(unless Mr. Ruegamer obtains other employment prior to that time), and (iv) a
term life insurance policy in the amount of $500,000 to be funded by the Company
for a period of 10 years. In consideration of Mr. Ruegamer agreeing not to
compete for a period of two years, the Company also agreed (i) to extend the
period in which the Company could repurchase any Common Stock owned by Mr.
Ruegamer, (ii) to extend the exercise period of stock options and SARs held by
Mr. Ruegamer, and (iii) to provide a lump-sum payment of $250,000 to Mr.
Ruegamer on November 1, 1999.
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<PAGE>
SURVIVOR INCOME BENEFIT
The Company has entered into survivor income agreements (the "Survivor
Agreements") with certain executive employees to encourage the executives to
remain employees of the Company. Under the Survivor Agreements, designated
beneficiaries are entitled to receive a survivor income benefit if the Company
owns a life insurance policy on the executive's life and the executive dies
before otherwise terminating employment with the Company. Pursuant to the
Survivor Agreements and addenda thereto, if the executive voluntarily terminates
employment after age sixty, the Survivor Agreement may convert to a split dollar
insurance agreement whereby the designated beneficiary is entitled to the death
proceeds of the life insurance policy less the cash surrender value of the
policy on the day before death. The Company has entered into this type of
Survivor Agreement with William H. Ruegamer, William G. Wilson and Edward
Garding.
STOCK OPTION AND STOCK APPRECIATION RIGHTS PLAN
The Company has a Stock Option and Stock Appreciation Rights Plan (the
"Plan") for key senior officers of the Company. The Plan provides for the
granting of stock options which are non-qualified under the Code and SARs in
tandem with such options. Each option granted under the Plan may be exercised
within a period of ten years from the date of grant. The Plan allows the holder
of the stock option granted under the Plan to surrender an exercisable stock
option in exchange for cash or shares of the Common Stock in an amount equal to
the appraised minority value of covered shares over the option price of such
shares.
COMPENSATION OF DIRECTORS
Directors who are members of the Scott family or who are executive officers
of the Company ("Inside Directors") are compensated for their services in the
form of a salary and bonus, as determined by the Compensation Committee of the
Board of Directors from time to time. Of the directors not named in the Summary
Compensation Table above, Homer A. Scott, Jr. was paid a salary of $99,000 in
each of 1996 and 1995 and a salary of $125,000 in 1994. He was also paid a bonus
of $15,000 in 1996, $4,000 in 1995 and $10,000 in 1994. James R. Scott was paid
a salary of $102,250 in each of 1996, 1995 and 1994 and a bonus of $15,000 in
1996, $10,000 in 1995 and $10,000 in 1994. In 1996, the Company also paid Dan S.
Scott a salary of $39,000 and a bonus of $15,000, and Randy Scott a salary of
$18,050. Non-Inside Directors, presently consisting of Joel Long, receive a $400
monthly retainer, $500 per board meeting attended and $250 for each committee
meeting attended.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Homer A. Scott, Jr., James R. Scott, Dan S. Scott, and Joel Long serve on
the Compensation Committee of the Board of Directors. With the exception of Joel
Long, all committee members were officers or employees receiving compensation
from First Interstate for services rendered. Homer A. Scott, Jr. and James R.
Scott were formerly officers of First Interstate.
INDEMNIFICATION
Officers and directors of First Interstate are entitled to indemnification
under the Montana Business Corporation Act and pursuant to a Resolution of the
Board of Directors dated January 12, 1987. A summary of the indemnification
provision in such resolution follows:
Pursuant to a resolution of the Board of Directors dated January 12, 1987,
and under the authority of Section 35-1-414 of the Montana Business Corporation
Act, the Company shall indemnify each director and officer of the Company
(including former officers and directors) and each agent of the Company serving
as a director or officer of a Bank, serving at the specific direction or request
of the Company (but only to the extent that such director, officer or agent is
not indemnified by the Bank or by insurance
61
<PAGE>
provided by the Company), against judgments, penalties, fines, settlements and
reasonable expenses actually and reasonably paid by such director, officer or
agent by reason of the fact that he or she is or was a director or officer of
the Company or such Bank, to the extent provided by and subject to the
limitations of the Montana Business Corporation Act.
CERTAIN RELATED TRANSACTIONS
First Interstate and the Banks have had, and expect to have in the future,
banking transactions in the ordinary course of business with related parties,
including business with directors, officers, stockholders and their associates,
on the same terms, including interest rates and collateral on loans, as those
prevailing at the same time for comparable transactions with unrelated persons
and that did not involve more than a normal risk of collectibility or present
other unfavorable features. Such transactions include correspondent banking
relationships with affiliated banks, and data processing servicing for
affiliated banks, in addition to other customary banking services. To the extent
that such transactions consisted of extensions of credit to Company executive
officers and directors and to certain members of the Scott family, such
extensions of credit were made in the ordinary course of business, were made on
substantially the same terms, including interest rates and collateral on loans,
as those prevailing at the same time for comparable transactions with unrelated
persons and did not involve more than a normal risk of collectibility or present
other unfavorable features. Loans to First Interstate's executive officers,
directors and their related interests represented approximately 6.0% of the
Company's stockholders' equity as of December 31, 1996. Loans to executive
officers, directors and related interests of officers and directors of First
Interstate and the Banks represented approximately 8.0% of the Company's
stockholders' equity as of December 31, 1996.
In January 1996, 78,824 shares of Common Stock were sold by certain
directors of the Company to 287 individual participants in the Company's 401(k)
Savings Plan. The total cash price was $1.41 million.
In June 1996, the Company sold 4,000 shares of Common Stock to each of James
Haugh, a director nominee of the Company, and Joel Long, a director of the
Company. The total cash price was $153,000.
In July 1996, 65,848 shares of Common Stock were sold by the Company to 353
individual participants in the Company's 401(k) Savings Plan. The total cash
price was $1.26 million. Further, in July 1996, 100,280 shares of Common Stock
were sold by the Company to certain officers, directors, director nominees and
employees. The total cash price was $1.92 million.
In July 1997, 78,072 shares of Common Stock were sold by the Company to
certain officers, directors, director nominees and employees. The total cash
price was $1.66 million.
In October 1997, 87,236 shares of Common Stock were sold by the Company to
403 individual participants in the Company's 401(k) Savings Plan. The total cash
price was $2.05 million.
From time to time the Company repurchases shares of Common Stock from
stockholders of the Company pursuant to stockholder repurchase agreements and
otherwise at the then appraised value thereof. In addition, the Company may
redeem shares of Common Stock from the Company's 401(k) Savings Plan on a
quarterly basis in accordance with the investment elections of the plan's
participants or in connection with distributions under the plan. For the six
months ended June 30, 1997 and the year ended December 31, 1996, the Company
redeemed shares of Common Stock from the Company's 401(k) Savings Plan in the
amount of $70,000 and $71,000, respectively.
The Company is the anchor tenant in a commercial building in which the
Company's principal executive offices are located in Billings, Montana. The
building is owned by a joint venture partnership in which FIB Montana is one of
the two partners, owning a 50% interest in the partnership. The other 50%
interest in the partnership is owned by a company in which Joel Long, a director
of the Company, owns beneficially an equity interest of approximately 33%.
Indebtedness of the partnership ($10.8 million as of December 31, 1997) is
recourse to the partners and guaranteed by the Company. The Company paid rent to
the partnership of $611,000, $814,000, $711,000 and $690,000 for the first six
months of 1997 and for 1996, 1995 and 1994, respectively.
62
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of October 1, 1997 with
respect to the beneficial ownership of the Common Stock for (i) each person who
is known by the Company to own beneficially more than 5% of the Common Stock,
(ii) each of the Company's directors and director nominees, (iii) each of the
executive officers named in the Summary Compensation Table, and (iv) all
directors and executive officers as a group. Unless otherwise indicated in the
notes to the table, all shares shown in the following table are owned both of
record and beneficially and each of the following parties has sole voting and
investment power with respect to such shares.
<TABLE>
<CAPTION>
NUMBER OF SHARES
BENEFICIALLY PERCENT
BENEFICIAL OWNER OWNED(1) BENEFICIALLY OWNED
- ---------------------------------------------------- -------------------- -------------------
<S> <C> <C>
James R. Scott(2) .................................. 1,367,816 17.02%
439 Grandview Blvd.
Billings, Montana 59102
Randy Scott(3) ..................................... 1,160,760 14.44%
521 Freedom Avenue
Billings, Montana 59105
Homer A. Scott, Jr.(4) ............................. 1,056,668 13.15%
122 Scott Drive
Sheridan, Wyoming 82801
Thomas W. Scott .................................... 773,778 9.63%
P.O. Box 30876
Billings, Montana 59107
Susan Scott Heyneman(5) ............................ 569,876 7.09%
P.O. Box 285
Fishtail, Montana 59028
FIB Montana(6) ..................................... 497,600 6.19%
P.O. Box 30918
Billings, Montana 59116
Dan S. Scott(7)..................................... 381,068 4.74%
William H. Ruegamer(8).............................. 40,696 0.51%
William G. Wilson(8)................................ 31,528 0.39%
Edward Garding(8)................................... 21,644 0.27%
Terrill R. Moore(8)................................. 17,992 0.22%
Joel Long........................................... 4,940 0.06%
All directors and executive officers as a group (11
persons)(8)....................................... 5,426,766 67.24%
</TABLE>
- ------------------------
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to the securities owned. Shares of Common
Stock subject to options currently exercisable or exercisable within 60 days
of October 1, 1997, are deemed outstanding for purposes of computing the
percentage of the person or entity holding such securities but are not
deemed outstanding for purposes of computing the percentage of any other
person or entity.
(2) Includes 560,068 shares owned beneficially as managing partner of J.S.
Investments Limited Partnership, 24,988 shares as trustee for John M.
Heyneman, Jr. and 24,988 shares as trustee for Thomas Scott Heyneman.
(3) Includes 1,119,792 shares owned beneficially as managing partner of Nbar5
Limited Partnership.
(4) Includes 88,816 shares owned beneficially as trustee for Riki Rae Scott
Davidson, 75,276 shares as trustee for Risa Kae Scott Brown and 88,824
shares as trustee for Rae Ann Scott Morse.
63
<PAGE>
(5) Includes 323,060 shares owned beneficially as general partner of Towanda
Investments, Limited Partnership.
(6) Includes 230,360 shares owned beneficially as trustee for Jonathan R. Scott,
229,420 shares as trustee for Julie Anne Scott, 35,200 shares as trustee for
James F. Heyneman and 2,620 shares as trustee for James R. Scott, Jr.
(7) Includes 48,960 shares owned beneficially as managing partner of Nbar5 A,
41,452 shares as managing partner of Nbar5 O, 37,700 shares as managing
partner of Nbar5 K, 33,944 shares as managing partner of Nbar5 S and 33,944
shares as managing partner of Nbar5 T.
(8) Includes options to purchase 10,784 shares, 6,000 shares, 7,956 shares and
7,292 shares held by William H. Ruegamer, William G. Wilson, Edward Garding
and Terrill R. Moore, respectively.
DESCRIPTION OF THE TRUST PREFERRED SECURITIES
The Trust Preferred Securities and the Common Securities will be issued
pursuant to the terms of the Trust Agreement. The Trust Agreement will be
qualified as an indenture under the Trust Indenture Act. Initially, Wilmington
Trust Company will be the Delaware Trustee and the Property Trustee and will act
as trustee for the purpose of complying with the Trust Indenture Act. The terms
of the Trust Preferred Securities will include those stated in the Trust
Agreement and those made part of the Trust Agreement by the Trust Indenture Act.
This summary of certain terms and provisions of the Trust Preferred Securities
and the Trust Agreement does not purport to be complete and is subject to, and
is qualified in its entirety by reference to, all the provisions of the Trust
Agreement, including the definitions therein of certain terms, and the Trust
Indenture Act. Wherever particular defined terms of the Trust Agreement (as
amended or supplemented from time to time) are referred to herein, such defined
terms are incorporated herein. The form of the Trust Agreement has been filed as
an exhibit to the Registration Statement of which this Prospectus forms a part.
GENERAL
Pursuant to the terms of the Trust Agreement, the Administrative Trustees on
behalf of FIB Capital will issue the Trust Securities. The Trust Preferred
Securities will represent preferred undivided beneficial interests in the assets
of FIB Capital and the holders thereof will be entitled to a preference in
certain circumstances with respect to Distributions and amounts payable on
redemption or liquidation over the Common Securities (which will be held by
First Interstate), as well as other benefits as described in the Trust
Agreement.
The Trust Preferred Securities will represent undivided beneficial ownership
interests in FIB Capital and the holders thereof will be entitled to a
preference in certain circumstances with respect to Distributions and amounts
payable on redemption or liquidation over Common Securities, as well as other
benefits enumerated in the Guarantee Agreement. The Trust Preferred Securities
will rank PARI PASSU, and payments will be made thereon pro rata, with the
Common Securities except as described under "Subordination of Common Securities
of FIB Capital Held by First Interstate" below.
Legal title to the Junior Subordinated Debentures will be held by the
Property Trustee in trust for the benefit of the holders of the Trust
Securities. The Guarantee Agreement executed by First Interstate for the benefit
of the holders of the Trust Preferred Securities will be a guarantee on a
subordinated basis and will not guarantee payment of Distributions or amounts
payable on redemption of the Trust Preferred Securities or on liquidation of the
Trust Preferred Securities if FIB Capital does not have funds on hand available
to make such payments. See "Description of Guarantee."
64
<PAGE>
DISTRIBUTIONS
PAYMENT OF DISTRIBUTIONS
Distributions on the Trust Preferred Securities will be payable at the
annual rate of % of the stated liquidation amount of $25 (the "Liquidation
Amount"), payable quarterly in arrears on the last day of March, June, September
and December in each year, commencing December 31, 1997, to the holders of the
Trust Preferred Securities on the relevant record dates (each date on which
Distributions are payable in accordance with the foregoing, a "Distribution
Date"). The amount of each Distribution due with respect to the Trust Preferred
Securities will include amounts accrued through the date the Distribution
payment is due. Distributions on the Trust Preferred Securities will be payable
to the holders thereof as they appear on the register of FIB Capital on the
relevant record date which, for so long as the Trust Preferred Securities remain
in book-entry form, will be one Business Day (as defined below) prior to the
relevant Distribution Date and, in the event the Trust Preferred Securities are
not in book-entry form, will be the first day of the month in which the relevant
Distribution Date occurs. Distributions will accumulate from the date of
original issuance. The first Distribution Date for the Trust Preferred
Securities will be December 31, 1997.
The amount of Distributions payable for any period will be computed on the
basis of a 360-day year of twelve 30-day months. In the event that any date on
which Distributions are payable on the Trust Preferred Securities is not a
Business Day, payment of the Distribution payable on such date will be made on
the next Business Day (and without any interest or other payment in respect to
any such delay) except that, if such Business Day is in the next succeeding
calendar year, payment of such Distribution shall be made on the immediately
preceding Business Day, in each case with the same force and effect as if made
on the date such payment was originally payable. As used in this Prospectus, a
"Business Day" shall mean any day other than a Saturday or a Sunday, or a day on
which banking institutions in the State of Montana are authorized or required by
law or executive order to remain closed or a day on which the corporate trust
office of the Property Trustee or the Indenture Trustee is closed for business.
The funds of FIB Capital available for distribution to holders of the Trust
Preferred Securities will be limited to payments by First Interstate under the
Junior Subordinated Debentures in which FIB Capital will invest the proceeds
from the issuance and sale of the Trust Preferred Securities. See "Description
of Junior Subordinated Debentures." If First Interstate does not make interest
payments on the Junior Subordinated Debentures, the Property Trustee will not
have funds available to pay Distributions on the Trust Preferred Securities. The
payment of Distributions (if and to the extent FIB Capital has funds legally
available for the payment of such Distributions and cash sufficient to make such
payments) is guaranteed by First Interstate. See "Description of Guarantee."
EXTENSION PERIOD
So long as no Debenture Event of Default has occurred and is continuing,
First Interstate has the right under the Indenture to defer the payment of
interest on the Junior Subordinated Debentures at any time or from time to time
for an Extension Period, provided that no Extension Period may extend beyond the
Stated Maturity of the Junior Subordinated Debentures. As a consequence of any
such election, quarterly Distributions on the Trust Preferred Securities will be
deferred by FIB Capital during any such Extension Period. Distributions to which
holders of Trust Preferred Securities are entitled will accumulate additional
amounts thereon at the rate per annum of % thereof, compounded quarterly from
the relevant Distribution Date, to the extent permitted under applicable law.
The term "Distributions" as used herein shall include any such additional
accumulated amounts. During any such Extension Period, First Interstate may not
(i) declare or pay any dividends or distributions on, or redeem, purchase,
acquire, or make a liquidation payment with respect to, any of First
Interstate's capital stock (which includes the Common Stock and preferred stock)
or (ii) make any payment of principal, interest or premium, if any, on or repay,
repurchase or redeem any debt securities of First Interstate that rank PARI
PASSU with or junior in interest to the Junior Subordinated Debentures or make
any guarantee payments with respect to any
65
<PAGE>
guarantee by First Interstate of the debt securities of any Bank if such
guarantee ranks PARI PASSU with or junior in interest to the Junior Subordinated
Debentures; provided, however, that First Interstate may (a) pay dividends on or
make distributions in the Common Stock, (b) declare a dividend in connection
with the implementation of a stockholders' rights plan, or issue stock under any
such plan in the future, or redeem or repurchase any such rights pursuant
thereto, (c) make payments under the Guarantee and (d) purchase Common Stock for
issuance of Common Stock or rights under any of First Interstate's benefit plans
for its directors, officers or employees. Prior to the termination of any such
Extension Period, First Interstate may further extend such Extension Period,
provided that such extension does not cause such Extension Period to exceed 20
consecutive quarters or extend beyond the Stated Maturity. Upon the termination
of any such Extension Period and the payment of all amounts then due, and
subject to the foregoing limitations, First Interstate may elect to begin a new
Extension Period. Subject to the foregoing, there is no limitation on the number
of times that First Interstate may elect to begin an Extension Period. First
Interstate has no current intention of exercising its right to defer payments of
interest by extending the interest payment period on the Junior Subordinated
Debentures.
REDEMPTION
MANDATORY REDEMPTION
Upon the repayment or redemption at any time, in whole or in part, of any
Junior Subordinated Debentures, the proceeds from such repayment or redemption
shall be applied by the Property Trustee to redeem a Like Amount of the Trust
Securities, upon not less than 30 nor more than 60 days' notice of a date of
redemption (the "Redemption Date"), at the Redemption Price (as defined below).
See "Description of Junior Subordinated Debentures--Redemption." If less than
all of the Junior Subordinated Debentures are to be repaid or redeemed on a
Redemption Date, then the proceeds from such repayment or redemption shall be
allocated to the redemption of the Trust Securities pro rata.
OPTIONAL REDEMPTION
First Interstate will have the right to redeem the Junior Subordinated
Debentures (i) on or after , 2002, in whole at any time or in part from
time to time at a redemption price equal to the accrued and unpaid interest on
the Junior Subordinated Debentures so redeemed to the date fixed for redemption,
plus 100% of the principal amount thereof, or (ii) at any time, in whole (but
not in part), upon the occurrence of a Tax Event, an Investment Company Event or
a Capital Treatment Event at a redemption price equal to the accrued and unpaid
interest on the Junior Subordinated Debentures so redeemed to the date fixed for
redemption, plus 100% of the principal amount thereof, in each case subject to
receipt of prior approval by the Federal Reserve if then required under
applicable capital guidelines or policies of the Federal Reserve. See
"Description of Junior Subordinated Debentures-- Redemption."
TAX EVENT REDEMPTION, INVESTMENT COMPANY EVENT REDEMPTION, CAPITAL TREATMENT
EVENT REDEMPTION OR DISTRIBUTION OF JUNIOR SUBORDINATED DEBENTURES
If a Tax Event, an Investment Company Event or a Capital Treatment Event
shall occur and be continuing, First Interstate has the right to redeem the
Junior Subordinated Debentures in whole (but not in part) and thereby cause a
mandatory redemption of the Trust Securities in whole (but not in part) at the
Redemption Price within 90 days following the occurrence of such Tax Event,
Investment Company Event or Capital Treatment Event, in each case subject to
receipt of prior approval by the Federal Reserve if then required under
applicable capital guidelines or policies of the Federal Reserve. In the event a
Tax Event, an Investment Company Event or Capital Treatment Event has occurred
and is continuing and First Interstate does not elect to redeem the Junior
Subordinated Debentures and thereby cause a mandatory redemption of the Trust
Securities or to liquidate FIB Capital and cause the Junior Subordinated
Debentures to be distributed to holders of the Trust Securities in liquidation
of FIB Capital as described
66
<PAGE>
below, such Trust Securities will remain outstanding and Additional Sums (as
defined below) may be payable on the Junior Subordinated Debentures.
DEFINITIONS
"Additional Sums" means the additional amounts as may be necessary to be
paid by First Interstate with respect to the Junior Subordinated Debentures in
order that the amount of Distributions then due and payable by FIB Capital on
the outstanding Trust Securities of FIB Capital shall not be reduced as a result
of any additional taxes, duties and other governmental charges to which FIB
Capital has become subject as a result of a Tax Event.
"Like Amount" means (i) with respect to a redemption of Trust Securities,
Trust Securities having a Liquidation Amount equal to that portion of the
principal amount of Junior Subordinated Debentures to be contemporaneously
redeemed in accordance with the Indenture, allocated to the Common Securities
and to the Trust Preferred Securities based upon the relative Liquidation
Amounts of such classes and the proceeds of which will be used to pay the
Redemption Price of such Trust Securities, and (ii) with respect to a
distribution of Junior Subordinated Debentures to holders of Trust Securities in
connection with a dissolution or liquidation of FIB Capital, Junior Subordinated
Debentures having a principal amount equal to the Liquidation Amount of the
Trust Securities of the holder to whom such Junior Subordinated Debentures are
distributed.
"Redemption Price" means, with respect to any Trust Security, the
Liquidation Amount plus accumulated and unpaid Distributions to the Redemption
Date, allocated on a pro rata basis (based on Liquidation Amounts) among the
Trust Securities.
DISTRIBUTION OF JUNIOR SUBORDINATED DEBENTURES
Subject to First Interstate and FIB Capital having received an opinion of
counsel to the effect that such distribution will not be a taxable event to the
holders of the Trust Preferred Securities and prior approval of the Federal
Reserve if so required under applicable capital guidelines or policies of the
Federal Reserve, First Interstate will have the right at any time to liquidate
FIB Capital and, after satisfaction of the liabilities of creditors of FIB
Capital as provided by applicable law, cause the Junior Subordinated Debentures
to be distributed to the holders of Trust Securities in liquidation of FIB
Capital. After the liquidation date fixed for any distribution of Junior
Subordinated Debentures for Trust Preferred Securities (i) such Trust Preferred
Securities will no longer be deemed to be outstanding, (ii) DTC or its nominee,
as the record holder of the Trust Preferred Securities, will receive a
registered global certificate or certificates representing the Junior
Subordinated Debentures to be delivered upon such distribution and (iii) any
certificates representing Trust Preferred Securities not held by DTC or its
nominee will be deemed to represent the Junior Subordinated Debentures having a
principal amount equal to the Liquidation Amount, and bearing accrued and unpaid
interest in an amount equal to the accrued and unpaid Distributions on the Trust
Preferred Securities until such certificates are presented to the Administrative
Trustees or their agent for transfer or reissuance.
There can be no assurance as to the market prices for the Trust Preferred
Securities or the Junior Subordinated Debentures that may be distributed in
exchange for the Trust Preferred Securities if a dissolution and liquidation of
FIB Capital were to occur. Accordingly, the Trust Preferred Securities that an
investor may purchase, or the Junior Subordinated Debentures that the investor
may receive on dissolution and liquidation of FIB Capital, may trade at a
discount to the price that the investor paid to purchase the Trust Preferred
Securities offered hereby.
REDEMPTION PROCEDURES
Trust Preferred Securities redeemed on each Redemption Date shall be
redeemed at the Redemption Price with the applicable proceeds from the
contemporaneous redemption of the Junior Subordinated Debentures. Redemptions of
the Trust Preferred Securities shall be made and the Redemption Price shall
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be payable on each Redemption Date only to the extent that FIB Capital has funds
on hand available for the payment of such Redemption Price. See "Subordination
of Common Securities of FIB Capital Held by First Interstate" herein and
"Description of Guarantee."
If FIB Capital gives a notice of redemption in respect of the Trust
Preferred Securities, then, by 12:00 noon, Montana time, on the Redemption Date,
to the extent funds are available, the Property Trustee will deposit with DTC
funds sufficient to pay the aggregate Redemption Price and will give DTC
irrevocable instructions and authority to pay the Redemption Price to the
holders of such Trust Preferred Securities. See "Book-Entry Issuance." If such
Trust Preferred Securities are no longer in book-entry form, the Property
Trustee, to the extent funds are available, will deposit with the paying agent
for such Trust Preferred Securities funds sufficient to pay the aggregate
Redemption Price and will give such paying agent irrevocable instructions and
authority to pay the Redemption Price to the holders thereof upon surrender of
their certificates evidencing such Trust Preferred Securities. Notwithstanding
the foregoing, Distributions payable on or prior to the Redemption Date shall be
payable to the holders of such Trust Preferred Securities on the relevant record
dates for the related Distribution Dates. If notice of redemption shall have
been given and funds deposited as required, then upon the date of such deposit,
all rights of the holders of the Trust Preferred Securities will cease, except
the right of the holders of the Trust Preferred Securities to receive the
applicable Redemption Price, but without interest on such Redemption Price, and
such Trust Preferred Securities will cease to be outstanding. If any date fixed
for redemption of such Trust Preferred Securities is not a Business Day, then
payment of the Redemption Price payable on such date will be made on the next
succeeding Business Day (and without any interest or other payment in respect of
any such delay), except that, if such Business Day falls in the next calendar
year, such payment will be made on the immediately preceding Business Day. In
the event that payment of the Redemption Price in respect of Trust Preferred
Securities called for redemption is improperly withheld or refused and not paid
either by FIB Capital or by First Interstate pursuant to the Guarantee,
Distributions on such Trust Preferred Securities will continue to accrue at the
then applicable rate, from the Redemption Date originally established by FIB
Capital for such Trust Preferred Securities to the date such Redemption Price is
actually paid, in which case the actual payment date will be the date fixed for
redemption for purposes of calculating the Redemption Price. See "Description of
Guarantee."
Subject to applicable law (including, without limitation, United States
federal securities law), First Interstate may at any time and from time to time
purchase outstanding Trust Preferred Securities by tender, in the open market or
by private agreement.
Payment of the Redemption Price on the Trust Preferred Securities and any
distribution of Junior Subordinated Debentures to holders of Trust Preferred
Securities shall be made to the applicable recordholders thereof as they appear
on the register of such Trust Preferred Securities on the relevant record date,
which date shall be one Business Day prior to the relevant Redemption Date or
Liquidation Date, as applicable; provided, however, that if any Trust Preferred
Securities are not in book-entry form, the relevant record date for such Trust
Preferred Securities shall be a date at least 15 days prior to the Redemption
Date or Liquidation Date, as applicable. In the case of a liquidation, the
record date shall be no more than 45 days before the Liquidation Date.
If less than all of the Trust Securities issued by FIB Capital are to be
redeemed on a Redemption Date, then the aggregate Redemption Price for such
Trust Securities to be redeemed shall be allocated pro rata to the Trust
Preferred Securities and Common Securities based upon the relative Liquidation
Amounts of such classes. The particular Trust Preferred Securities to be
redeemed shall be selected by the Property Trustee from the outstanding Trust
Preferred Securities not previously called for redemption, by such method as the
Property Trustee shall deem fair and appropriate and which may provide for the
selection for redemption of portions (equal to $25 or an integral multiple
thereof) of the Liquidation Amount of Trust Preferred Securities. The Property
Trustee shall promptly notify the security registrar in writing of the Trust
Preferred Securities selected for redemption and, in the case of any Trust
Preferred Securities selected for partial redemption, the Liquidation Amount
thereof to be redeemed. For all
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purposes of the Trust Agreement, unless the context otherwise requires, all
provisions relating to the redemption of Trust Preferred Securities shall relate
to the portion of the aggregate Liquidation Amount of Trust Preferred Securities
which has been or is to be redeemed.
Notice of any redemption will be mailed at least 30 days but not more than
60 days before the Redemption Date to each holder of Trust Securities at such
holder's registered address. Unless FIB Capital defaults in payment of the
applicable Redemption Price, on and after the Redemption Date, Distributions
will cease to accrue on such Trust Preferred Securities called for redemption.
SUBORDINATION OF COMMON SECURITIES OF FIB CAPITAL HELD BY FIRST INTERSTATE
Payment of Distributions on, and the Redemption Price of, the Trust
Preferred Securities and Common Securities, as applicable, shall be made pro
rata based on the Liquidation Amounts of the Trust Preferred Securities and
Common Securities; provided, however, that if on any Distribution Date or
Redemption Date a Debenture Event of Default shall have occurred and be
continuing, no payment of any Distribution on, or applicable Redemption Price
of, any of the Common Securities, and no other payment on account of the
redemption, liquidation or other acquisition of the Common Securities, shall be
made unless payment in full in cash of all accumulated and unpaid Distributions
on all of the outstanding Trust Preferred Securities for all Distribution
periods terminating on or prior thereto, or in the case of payment of the
applicable Redemption Price the full amount of such Redemption Price on all of
the outstanding Trust Preferred Securities then called for redemption, shall
have been made or provided for, and all funds available to the Property Trustee
shall first be applied to the payment in full in cash of all Distributions on,
or Redemption Price of, the Trust Preferred Securities then due and payable.
In the case of any Event of Default under the Trust Agreement resulting from
a Debenture Event of Default, First Interstate as holder of the Common
Securities will be deemed to have waived any right to act with respect to any
such Event of Default until the effect of all such Events of Default have been
cured, waived or otherwise eliminated. Until any such Events of Default have
been so cured, waived or otherwise eliminated, the Property Trustee shall act
solely on behalf of the holders of the Trust Preferred Securities and not on
behalf of First Interstate as holder of the Common Securities, and only the
holders of the Trust Preferred Securities will have the right to direct the
Property Trustee to act on their behalf.
LIQUIDATION DISTRIBUTION UPON TERMINATION
First Interstate will have the right at any time to terminate FIB Capital
and cause the Junior Subordinated Debentures to be distributed to the holders of
the Trust Preferred Securities. Such right is subject to First Interstate having
received prior approval of the Federal Reserve if then required under applicable
capital guidelines or policies of the Federal Reserve. See "Distribution of
Junior Subordinated Debentures."
In addition, pursuant to the Trust Agreement, FIB Capital shall
automatically terminate upon expiration of its term and shall earlier terminate
on the first to occur of: (i) certain events of bankruptcy, dissolution or
liquidation of First Interstate; (ii) the distribution of a Like Amount of the
Junior Subordinated Debentures to the holder of its Trust Securities, if First
Interstate, as Depositor, has delivered written direction to the Property
Trustee to terminate FIB Capital (which direction is optional and, except as
described above, wholly within the discretion of First Interstate, as
Depositor); (iii) redemption of all of the Trust Preferred Securities as
described under "Redemption--Mandatory Redemption;" (iv) expiration of the term
of FIB Capital; or (v) the entry of an order for the dissolution of FIB Capital
by a court of competent jurisdiction.
If an early termination occurs as described in clause (i), (ii), (iv) or (v)
above, FIB Capital shall be liquidated by the Trustees as expeditiously as the
Trustees determine to be possible by distributing, after satisfaction of
liabilities to creditors of FIB Capital as provided by applicable law, to the
holders of such Trust Securities a Like Amount of the Junior Subordinated
Debentures, unless such distribution is determined by the Property Trustee not
to be practical, in which event such holders will be entitled to
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receive out of the assets of FIB Capital available for distribution to holders,
after satisfaction of liabilities to creditors of FIB Capital as provided by
applicable law, an amount equal to, in the case of holders of Trust Preferred
Securities, the aggregate of the Liquidation Amount plus accrued and unpaid
Distributions thereon to the date of payment (such amount being the "Liquidation
Distribution"). If such Liquidation Distribution can be paid only in part
because FIB Capital has insufficient assets available to pay in full the
aggregate Liquidation Distribution, then the amounts payable directly by FIB
Capital on the Trust Preferred Securities shall be paid on a pro rata basis. The
holder(s) of the Common Securities will be entitled to receive distributions
upon any such liquidation pro rata with the holders of the Trust Preferred
Securities, except that if a Debenture Event of Default has occurred and is
continuing, the Trust Preferred Securities shall have a priority over the Common
Securities.
Under current United States federal income tax law and interpretations and
assuming, as expected, FIB Capital is treated as a grantor trust, a distribution
of the Junior Subordinated Debentures should not be a taxable event to holders
of the Trust Preferred Securities. Should there be a change in law, a change in
legal interpretation, a Tax Event or other circumstances, however, the
distribution could be a taxable event to holders of the Trust Preferred
Securities. See "Certain Federal Income Tax Consequences." If First Interstate
elects neither to redeem the Junior Subordinated Debentures prior to maturity
nor to liquidate FIB Capital and distribute the Junior Subordinated Debentures
to holders of the Trust Preferred Securities, the Trust Preferred Securities
will remain outstanding until the repayment of the Junior Subordinated
Debentures.
If First Interstate elects to liquidate FIB Capital and thereby causes the
Junior Subordinated Debentures to be distributed to holders of the Trust
Preferred Securities in liquidation of FIB Capital, First Interstate shall
continue to have the right to shorten the maturity of such Junior Subordinated
Debentures, subject to certain conditions. See "Description of Junior
Subordinated Debentures-- General."
EVENTS OF DEFAULT; NOTICE
Any one of the following events that has occurred and is continuing
constitutes an "Event of Default" under the Trust Agreement (an "Event of
Default") with respect to the Trust Preferred Securities (whatever the reason
for such Event of Default and whether it shall be voluntary or involuntary or be
effected by operation of law or pursuant to any judgment, decree or order of any
court or any order, rule or regulation of any administrative or governmental
body):
(i) the occurrence of a Debenture Event of Default (see "Description of
Junior Subordinated Debentures--Debenture Events of Default");
(ii) default by the Property Trustee in the payment of any Distribution
when it becomes due and payable, and continuation of such default for a
period of 30 days;
(iii) default by the Property Trustee in the payment of any Redemption
Price of any Trust Security when it becomes due and payable;
(iv) default in the performance, or breach, in any material respect, of
any covenant or warranty of the Trustees in the Trust Agreement (other than
a default or breach in the performance of a covenant or warranty which is
addressed in clause (ii) or (iii) above), and continuation of such default
or breach, for a period of 60 days after there has been given, by registered
or certified mail, to the defaulting Issuer Trustee or Trustees by the
holders of at least 25% in aggregate Liquidation Amount of the outstanding
Trust Preferred Securities, a written notice specifying such default or
breach and requiring it to be remedied and stating that such notice is a
"Notice of Default" under the Trust Agreement; or
(v) the occurrence of certain events of bankruptcy or insolvency with
respect to the Property Trustee and the failure by First Interstate to
appoint a successor Property Trustee within 60 days thereof.
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Within five Business Days after the occurrence of any Event of Default
actually known to the Property Trustee, the Property Trustee shall transmit
notice of such Event of Default to the holders of the Trust Preferred
Securities, the Administrative Trustees and First Interstate, as Depositor,
unless such Event of Default shall have been cured or waived. First Interstate
as Depositor and the Administrative Trustees are required to file annually with
the Property Trustee a certificate as to whether they are in compliance with all
the conditions and covenants applicable to them under the Trust Agreement.
If a Debenture Event of Default has occurred and is continuing, the Trust
Preferred Securities shall have a preference over the Common Securities upon
termination of FIB Capital as described above. See "Liquidation Distribution
upon Termination." Upon a Debenture Event of Default, unless the principal of
all the Junior Subordinated Debentures has already become due and payable,
either the Property Trustee or the holders of not less than 25% in aggregate
principal amount of the Junior Subordinated Debentures then outstanding may
declare all of the Junior Subordinated Debentures to be due and payable
immediately by giving notice in writing to First Interstate (and to the Property
Trustee, if notice is given by holders of the Junior Subordinated Debentures).
If the Property Trustee or the holders of the Junior Subordinated Debentures
fail to declare the principal of all of the Junior Subordinated Debentures due
and payable upon a Debenture Event of Default, the holders of at least 25% in
Liquidation Amount of the Trust Preferred Securities then outstanding shall have
the right to declare the Junior Subordinated Debentures immediately due and
payable. In either event, payment of principal and interest on the Junior
Subordinated Debentures shall remain subordinated to the extent provided in the
Indenture. In addition, holders of the Trust Preferred Securities have the right
in certain circumstances to bring a Direct Action (as defined herein). See
"Description of Junior Subordinated Debentures--Enforcement of Certain Rights by
Holders of Trust Preferred Securities."
REMOVAL OF TRUSTEES
Unless a Debenture Event of Default shall have occurred and be continuing,
any of the Property Trustee, the Delaware Trustee or the Administrative Trustees
may be removed at any time by the holder of the Common Securities. If a
Debenture Event of Default has occurred and is continuing, the Property Trustee
and the Delaware Trustee may be removed at such time by the holders of a
majority in Liquidation Amount of the outstanding Trust Preferred Securities. In
no event will the holders of the Trust Preferred Securities have the right to
vote to appoint, remove or replace the Administrative Trustees, which voting
rights are vested exclusively in First Interstate as the holder of the Common
Securities. No resignation or removal of a Trustee and no appointment of a
successor trustee shall be effective until the acceptance of appointment by the
successor trustee in accordance with the provisions of the Trust Agreement.
CO-TRUSTEES AND SEPARATE PROPERTY TRUSTEE
Unless an Event of Default shall have occurred and be continuing, at any
time or times, for the purpose of meeting the legal requirements of the Trust
Indenture Act or of any jurisdiction in which any part of Trust property may at
the time be located, First Interstate, as the holder of the Common Securities
and the Administrative Trustees shall have power to appoint one or more persons
either to act as a co-trustee, jointly with the Property Trustee, of all or any
part of such Trust property, or to act as separate trustee of any such property,
in either case with such powers as may be provided in the instrument of
appointment, and to vest in such person or persons in such capacity any
property, title, right or power deemed necessary or desirable, subject to the
provisions of the Trust Agreement. In case a Debenture Event of Default has
occurred and is continuing, the Property Trustee alone shall have power to make
such appointment.
MERGER OR CONSOLIDATION OF TRUSTEES
Any Person (as defined in the Trust Agreement) into which the Property
Trustee, the Delaware Trustee or any Administrative Trustee that is not a
natural person may be merged or converted or with which it may be consolidated,
or any Person resulting from any merger, conversion or consolidation to
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which such Issuer Trustee shall be a party, or any person succeeding to all or
substantially all the corporate trust business of such Issuer Trustee, shall be
the successor of such Issuer Trustee under the Trust Agreement, provided such
corporation shall be otherwise qualified and eligible.
MERGERS, CONSOLIDATIONS, AMALGAMATIONS OR REPLACEMENTS OF FIB CAPITAL
FIB Capital may not merge with or into, consolidate, amalgamate, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to any corporation or other Person, except as
described below. FIB Capital may, at the request of First Interstate, with the
consent of the Administrative Trustees and without the consent of the holders of
the Trust Preferred Securities, merge with or into, consolidate, amalgamate, or
be replaced by or convey, transfer or lease its properties and assets
substantially as an entirety to a trust organized as such under the laws of any
state; provided, that (i) such successor entity either (a) expressly assumes all
of the obligations of FIB Capital with respect to the Trust Preferred Securities
or (b) substitutes for the Trust Preferred Securities other securities having
substantially the same terms as the Trust Preferred Securities (the "Successor
Securities") so long as the Successor Securities rank the same as the Trust
Preferred Securities rank in priority with respect to distributions and payments
upon liquidation, redemption and otherwise, (ii) First Interstate expressly
appoints a trustee of such successor entity possessing the same powers and
duties as the Property Trustee as the holder of the Junior Subordinated
Debentures, (iii) the Successor Securities are listed, or any Successor
Securities will be listed upon notification of issuance, on any national
securities exchange or other organization on which the Trust Preferred
Securities are then listed, if any, (iv) such merger, consolidation,
amalgamation, conveyance, transfer or lease does not cause the Trust Preferred
Securities to be downgraded by any nationally recognized statistical rating
organization which gives ratings to the Trust Preferred Securities; (v) such
merger, consolidation, amalgamation, replacement, conveyance, transfer or lease
does not adversely affect the rights, preferences and privileges of the holders
of the Trust Preferred Securities (including any Successor Securities) in any
material respect, (vi) such successor entity has a purpose identical to that of
FIB Capital, (vii) the Successor Securities will be listed or traded on any
national securities exchange or other organization on which the Trust Preferred
Securities may then be listed, (viii) prior to such merger, consolidation,
amalgamation, replacement, conveyance, transfer or lease, First Interstate has
received an opinion from independent counsel to FIB Capital experienced in such
matters to the effect that (a) such merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease does not adversely affect the rights,
preferences and privileges of the holders of the Trust Preferred Securities
(including any Successor Securities) in any material respect, and (b) following
such merger, consolidation, amalgamation, replacement, conveyance, transfer or
lease, neither FIB Capital nor such successor entity will be required to
register as an investment company under the Investment Company Act and (ix)
First Interstate or any permitted successor or designee owns all of the common
securities of such successor entity and guarantees the obligations of such
successor entity under the Successor Securities at least to the extent provided
by the Guarantee. Notwithstanding the foregoing, FIB Capital shall not, except
with the consent of holders of 100% in Liquidation Amount of the Trust Preferred
Securities, consolidate, amalgamate, merge with or into, or be replaced by or
convey, transfer or lease its properties and assets substantially as an entirety
to any other entity or permit any other entity to consolidate, amalgamate, merge
with or into, or replace it if such consolidation, amalgamation, merger,
replacement, conveyance, transfer or lease would cause FIB Capital or the
successor entity to be classified as other than a grantor trust for United
States federal income tax purposes.
VOTING RIGHTS; AMENDMENT OF THE TRUST AGREEMENT
Except as provided below and under "Description of Guarantee--Amendments and
Assignment" and as otherwise required by law and the Trust Agreement, the
holders of the Trust Preferred Securities will have no voting rights.
The Trust Agreement may be amended from time to time by First Interstate,
the Property Trustee and the Administrative Trustees, without the consent of the
holders of the Trust Securities, (i) to cure any
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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 shall
not be inconsistent with the other provisions of the Trust Agreement, or (ii) to
modify, eliminate or add to any provisions of the Trust Agreement to such extent
as shall be necessary to ensure that FIB Capital will be classified for United
States federal income tax purposes as a grantor trust at all times that any
Trust Securities are outstanding or to ensure that FIB Capital will not be
required to register as an "investment company" under the Investment Company
Act; provided, however, that in the case of clause (i), such action shall not
adversely affect in any material respect the interests of any holder of Trust
Securities, and any amendments of the Trust Agreement shall become effective
when notice thereof is given to the holders of the Trust Securities. The Trust
Agreement may be amended by the Issuer Trustees and First Interstate with (i)
the consent of holders representing not less than a majority of the aggregate
Liquidation Amount of the outstanding Trust Securities, and (ii) receipt by the
Issuer Trustees of an opinion of counsel to the effect that such amendment or
the exercise of any power granted to the Issuer Trustees in accordance with such
amendment will not affect FIB Capital's status as a grantor trust for United
States federal income tax purposes or FIB Capital's exemption from status as an
"investment company" under the Investment Company Act; provided that without the
consent of each holder of Trust Securities, the Trust Agreement may not be
amended to (i) change the amount or timing of any Distribution on the Trust
Securities or otherwise adversely affect the amount of any Distribution required
to be made in respect of the Trust Securities as of a specified date or (ii)
restrict the right of a holder of Trust Securities to institute suit for the
enforcement of any such payment on or after such date.
So long as any Junior Subordinated Debentures are held by the Property
Trustee, the Issuer Trustees shall not (i) direct the time, method and place of
conducting any proceeding for any remedy available to the Indenture Trustee, or
executing any trust or power conferred on the Property Trustee with respect to
the Junior Subordinated Debentures, (ii) waive any past default that is waivable
under the Indenture, (iii) exercise any right to rescind or annul a declaration
that the principal of all the Junior Subordinated Debentures shall be due and
payable or (iv) 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 approval of the holders of
a majority in aggregate Liquidation Amount of all outstanding Trust Preferred
Securities; provided, however, that where a consent under the Indenture would
require the consent of each holder of Junior Subordinated Debentures affected
thereby, no such consent shall be given by the Property Trustee without the
prior consent of each holder of the Trust Preferred Securities. The Issuer
Trustees shall not revoke any action previously authorized or approved by a vote
of the holders of the Trust Preferred Securities except by subsequent vote of
the holders of the Trust Preferred Securities. The Property Trustee shall notify
each holder of the Trust Preferred Securities of any notice of default with
respect to the Junior Subordinated Debentures. In addition to obtaining the
foregoing approvals of such holders of the Trust Preferred Securities, prior to
taking any of the foregoing actions, the Issuer Trustees shall obtain an opinion
of counsel experienced in such matters to the effect that FIB Capital will not
be classified as other than a grantor trust for United States federal income tax
purposes.
Any required approval of holders of the Trust Preferred Securities may be
given at a meeting of holders of Trust Preferred Securities convened for such
purpose or pursuant to written consent. The Property Trustee will cause a notice
of any meeting at which holders of the Trust Preferred 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 record of the Trust Preferred
Securities in the manner set forth in the Trust Agreement.
No vote or consent of the holders of the Trust Preferred Securities will be
required for FIB Capital to redeem and cancel the Trust Preferred Securities in
accordance with the Trust Agreement.
Notwithstanding that holders of the Trust Preferred Securities are entitled
to vote or consent under any of the circumstances described above, any of the
Trust Preferred Securities that are owned by First
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Interstate, the Trustees or any affiliate of First Interstate or any Trustee,
shall, for purposes of such vote or consent, be treated as if they were not
outstanding.
GLOBAL TRUST PREFERRED SECURITIES
The Trust Preferred Securities will be represented by one or more global
certificates registered in the name of DTC or its nominee ("Global Trust
Preferred Security"). Beneficial interests in the Trust Preferred Securities
will be shown on, and transfers thereof will be effected only through, records
maintained by participants in DTC. Except as described below, Trust Preferred
Securities in certificated form will not be issued in exchange for the global
certificates. See "Book-Entry Issuance."
A Global Trust Preferred Security shall be exchangeable for Trust Preferred
Securities registered in the names of persons other than DTC or its nominee only
if (i) DTC notifies First Interstate that it is unwilling or unable to continue
as a depositary for such Global Trust Preferred Security and no successor
depositary shall have been appointed, or if at any time DTC ceases to be a
clearing agency registered under the Exchange Act, at a time when DTC is
required to be so registered to act as such depositary, (ii) First Interstate in
its sole discretion determines that such Global Trust Preferred Security shall
be so exchangeable, or (iii) there shall have occurred and be continuing a
Debenture Event of Default. Any Global Trust Preferred Security that is
exchangeable pursuant to the preceding sentence shall be exchangeable for
definitive certificates registered in such names as DTC shall direct. It is
expected that such instructions will be based upon directions received by DTC
with respect to ownership of beneficial interests in such Global Trust Preferred
Security. If Trust Preferred Securities are issued in definitive form, such
Trust Preferred Securities will be in denominations of $25 and integral
multiples thereof and may be transferred or exchanged at the offices described
below.
Unless and until it is exchanged in whole or in part for the individual
Trust Preferred Securities represented thereby, a Global Trust Preferred
Security may not be transferred except as a whole by DTC to a nominee of DTC or
by a nominee of DTC to DTC or another nominee of DTC or by DTC or any nominee to
a successor depository or any nominee of such successor.
Payments on Trust Preferred Securities represented by a Global Trust
Preferred Security will be made to DTC, as the depositary for the Trust
Preferred Securities. If Trust Preferred Securities are issued in definitive
form, Distributions will be payable, the transfer of the Trust Preferred
Securities will be registrable, and Trust Preferred Securities will be
exchangeable for Trust Preferred Securities of other denominations of a like
aggregate Liquidation Amount, at the corporate office of the Property Trustee,
or at the offices of any paying agent or transfer agent appointed by the
Administrative Trustees, provided that payment of any Distribution may be made
at the option of the Administrative Trustees by check mailed to the address of
the persons entitled thereto or by wire transfer. In addition, if the Trust
Preferred Securities are issued in certificated form, the record dates for
payment of Distributions will be the first day of the month in which the
relevant Distribution Date occurs. For a description of the terms of the
depositary arrangements relating to payments, transfers, voting rights,
redemptions and other notices and other matters, see "Book-Entry Issuance."
Upon the issuance of a Global Trust Preferred Security and the deposit of
such Global Trust Preferred Security with or on behalf of DTC, DTC or its
nominee will credit, on its book-entry registration and transfer system, the
respective aggregate Liquidation Amounts of the individual Trust Preferred
Securities represented by such Global Trust Preferred Securities to the accounts
of record holders thereof (the "Participants"). Such accounts shall be
designated by the dealers, underwriters or agents with respect to such Trust
Preferred Securities. Ownership of beneficial interests in a Global Trust
Preferred Security will be limited to Participants or persons that may hold
interests through Participants. Ownership of beneficial interests in such Global
Trust Preferred Security will be shown on and the transfer of that ownership
will be effected only through, records maintained by DTC or its nominee (with
respect to interests of Participants) and the records of Participants (with
respect to interests of persons who hold through Participants). The laws of some
states require that certain purchasers of securities take physical delivery of
such securities in
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definitive form. Such limits and such laws may impair the ability to transfer
beneficial interests in a Global Trust Preferred Security.
So long as DTC for a Global Trust Preferred Security, or its nominee, is the
registered owners of such Global Trust Preferred Security, DTC or such nominee,
as the case may be, will be considered the sole owner or holder of the Trust
Preferred Securities represented by such Global Trust Preferred Security for all
purposes under the Trust Agreement governing such Trust Preferred Securities.
Except as provided below, owners of beneficial interests in a Global Trust
Preferred Security will not be entitled to have any of the individual Trust
Preferred Securities represented by such Global Trust Preferred Security
registered in their names, will not receive or be entitled to receive physical
delivery of any such Trust Preferred Securities in definitive form and will not
be considered the owners or holders thereof under the Trust Agreement.
None of First Interstate, the Property Trustee, any Paying Agent (as defined
below), or the Securities Registrar (defined below) for such Trust Preferred
Securities will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests of the Global Trust Preferred Security representing such Trust
Preferred Securities or for maintaining supervising or reviewing any records
relating to such beneficial ownership interests.
First Interstate expects that DTC or its nominee, upon receipt of any
payment of the Liquidation Amount or Distributions in respect of a permanent
Global Trust Preferred Security immediately will credit Participants' accounts
with payments in amounts proportionate to their respective beneficial interest
in the aggregate Liquidation Amount of such Global Trust Preferred Security as
shown on the records of DTC or its nominee. First Interstate also expects that
payments by Participants to owners of beneficial interests in such Global Trust
Preferred Security held through such Participants will be governed by standing
instructions and customary practices, as is now the case with securities held
for the accounts of customers in bearer form or registered in "street name."
Such payments will be the responsibility of such Participants.
If DTC or its nominee is at any time unwilling, unable or ineligible to
continue as depositary and a successor depositary is not appointed by First
Interstate within 90 days, FIB Capital will issue individual Trust Preferred
Securities in exchange for the Global Trust Preferred Security. In addition, FIB
Capital may at any time and in its sole discretion, subject to any limitations
described herein relating to such Trust Preferred Securities, determine not to
have any Trust Preferred Securities represented by one or more Global Trust
Preferred Securities and, in such event, will issue individual Trust Preferred
Securities in exchange for the Global Trust Preferred Security or Securities
representing the Trust Preferred Securities. Further, if FIB Capital so
specifies with respect to the Trust Preferred Securities, an owner of a
beneficial interest in a Global Trust Preferred Security representing Trust
Preferred Securities may, on terms acceptable to First Interstate, the Property
Trustee and DTC, receive individual Trust Preferred Securities in exchange for
such beneficial interests, subject to any limitations described herein. In any
such instance, an owner of a beneficial interest in a Global Trust Preferred
Security will be entitled to physical delivery of individual Trust Preferred
Securities represented by such Global Trust Preferred Security equal in
Liquidation Amount to such beneficial interest and to have such Trust Preferred
Securities registered in its name. Individual Trust Preferred Securities so
issued will be issued in denominations, unless otherwise specified by FIB
Capital, of $25 and integral multiples thereof.
PAYMENT AND PAYING AGENCY
Payments in respect of the Trust Preferred Securities shall be made to DTC,
which shall credit the relevant accounts at DTC on the applicable Distribution
Dates or, if any of the Trust Preferred Securities are not held by DTC, such
payments shall be made by check mailed to the address of the holder entitled
thereto as such address shall appear on the Register. The paying agent (the
"Paying Agent") shall initially be the Property Trustee and any co-paying agent
chosen by the Property Trustee and acceptable to the Administrative Trustees and
First Interstate. The Paying Agent shall be permitted to resign as Paying Agent
upon 30 days' written notice to the Property Trustee. If the Property Trustee
shall no longer be the
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Paying Agent, the Administrative Trustees shall appoint a successor (which shall
be a bank or trust company acceptable to the Administrative Trustees and First
Interstate) to act as Paying Agent.
REGISTRAR AND TRANSFER AGENT
The Property Trustee will act as registrar and transfer agent for the Trust
Preferred Securities. Registration of transfers of the Trust Preferred
Securities will be effected without charge by or on behalf of FIB Capital, but
upon payment of any tax or other governmental charges that may be imposed in
connection with any transfer or exchange. FIB Capital will not be required to
register or cause to be registered the transfer of the Trust Preferred
Securities after such Trust Preferred Securities have been called for
redemption.
INFORMATION CONCERNING THE PROPERTY TRUSTEE
The Property Trustee, other than upon the occurrence and during the
continuance of an Event of Default, undertakes to perform only such duties as
are specifically set forth in the Trust Agreement and, after such Event of
Default, must exercise the same degree of care and skill as a prudent person
would exercise or use in the conduct of his or her own affairs. Subject to this
provision, the Property Trustee is under no obligation to exercise any of the
powers vested in it by the Trust Agreement at the request of any holder of Trust
Preferred Securities unless it is offered reasonable indemnity against the
costs, expenses and liabilities that might be incurred thereby. If no Event of
Default has occurred and is continuing and the Property Trustee is required to
decide between alternative causes of action, construe ambiguous provisions in
the 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 Trust
Preferred Securities are entitled under the Trust Agreement to vote, then the
Property Trustee shall take such action as is directed by First Interstate and
if not so directed, shall take such action as it deems advisable and in the best
interests of the holders of the Trust Securities and will have no liability
except for its own bad faith, negligence or willful misconduct.
MISCELLANEOUS
The Administrative Trustees are authorized and directed to conduct the
affairs of and to operate FIB Capital in such a way that FIB Capital will not be
deemed to be an "investment company" required to be registered under the
Investment Company Act or classified as an association taxable as a corporation
for United States federal income tax purposes and so that the Junior
Subordinated Debentures will be treated as indebtedness of First Interstate for
United States federal income tax purposes. In this connection, First Interstate
and the Administrative Trustees are authorized to take any action, not
inconsistent with applicable law, the certificate of trust of FIB Capital or the
Trust Agreement, that First Interstate and the Administrative Trustees determine
in their discretion to be necessary or desirable for such purposes, as long as
such action does not materially adversely affect the interests of the holders of
the Trust Preferred Securities. Holders of the Trust Preferred Securities have
no preemptive or similar rights.
FIB Capital may not borrow money or issue debt or mortgage or pledge any of
its assets.
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DESCRIPTION OF JUNIOR SUBORDINATED DEBENTURES
The Junior Subordinated Debentures will be issued under the Indenture. The
following summary of the terms and provisions of the Junior Subordinated
Debentures and the Indenture does not purport to be complete and is subject to,
and is qualified in its entirety by reference to, the Indenture, which has been
filed as an exhibit to the Registration Statement of which this Prospectus forms
a part, and to the Trust Indenture Act. The Indenture is qualified under the
Trust Indenture Act. Whenever particular defined terms of the Indenture are
referred to herein, such defined terms are incorporated herein or therein by
reference.
Concurrently with the issuance of the Trust Preferred Securities, FIB
Capital will invest the proceeds thereof, together with the consideration paid
by First Interstate for the Common Securities, in Junior Subordinated Debentures
issued by First Interstate. The Junior Subordinated Debentures will be issued as
unsecured debt under the Indenture.
GENERAL
The Junior Subordinated Debentures will bear interest at the annual rate of
% of the principal amount thereof, payable quarterly in arrears on the last
day of March, June, September and December of each year (each, an "Interest
Payment Date"), commencing December 31, 1997, to the person in whose name each
Junior Subordinated Debenture is registered, subject to certain exceptions, at
the close of business on the Business Day next preceding such Interest Payment
Date. Notwithstanding the above, if either the (i) Junior Subordinated
Debentures are held by the Property Trustee and the Trust Preferred Securities
are no longer in book-entry only form or (ii) the Junior Subordinated Debentures
are not represented by a Global Subordinated Debenture (as defined herein), the
record date for such payment shall be the 15th day of the month in which such
payment is made. The amount of each interest payment due with respect to the
Junior Subordinated Debentures will include amounts accrued to but excluding the
date the interest payment is due. It is anticipated that, until the liquidation,
if any, of FIB Capital, each Junior Subordinated Debenture will be held in the
name of the Property Trustee in trust for the benefit of the holders of the
Trust Preferred Securities. The amount of interest payable for any period will
be computed on the basis of a 360-day year of twelve 30-day months. If any date
on which interest is payable on the Junior Subordinated Debentures is not a
Business Day, then payment of the interest payable on such date will be made on
the next Business Day (and without any interest or other payment in respect of
any such delay), except that, if such Business Day is in the next succeeding
calendar year, such payment shall be made on the immediately preceding Business
Day, in each case with the same force and effect as if made on the date such
payment was originally payable. Accrued interest that is not paid on the
applicable Interest Payment Date will bear additional interest on the amount
thereof (to the extent permitted by law) at the rate per annum of % thereof,
compounded quarterly. The term "interest" as used herein shall include quarterly
interest payments, interest on quarterly interest payments not paid on the
applicable Interest Payment Date and Additional Sums, as applicable.
The Junior Subordinated Debentures will mature on , 2027. Such
date may be shortened once at any time by First Interstate to any date not
earlier than , 2002, subject to First Interstate having received prior
approval of the Federal Reserve if then required under applicable capital
guidelines or policies of the Federal Reserve. If First Interstate elects to
shorten the Stated Maturity, it shall give notice to the Indenture Trustee, and
the Indenture Trustee shall give notice of such shortening to the holders of the
Junior Subordinated Debentures no less than 90 days prior to the effectiveness
thereof.
The Junior Subordinated Debentures will be unsecured and will rank junior
and be subordinate in right of payment to all Senior and Subordinated Debt of
First Interstate (as defined herein). Because First Interstate is a holding
company, the right of First Interstate to participate in any distribution of
assets of any of the subsidiaries, including the Banks, upon any such
subsidiaries' liquidation or reorganization or otherwise (and thus the ability
of holders of the Trust Preferred Securities to benefit indirectly from such
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distribution), is subject to the prior claims of creditors of that subsidiary,
except to the extent that First Interstate may itself be recognized as a
creditor of that subsidiary. Accordingly, the Junior Subordinated Debentures
will be effectively subordinated to all existing and future liabilities of the
subsidiaries, and holders of Junior Subordinated Debentures should look only to
the assets of First Interstate for payments on the Junior Subordinated
Debentures. The Indenture does not limit the incurrence or issuance of other
secured or unsecured debt of First Interstate, including Senior and Subordinated
Debt, whether under the Indenture or any existing or other indenture that First
Interstate may enter into in the future or otherwise. See "--Subordination."
OPTION TO DEFER INTEREST PAYMENT PERIOD
So long as no Debenture Event of Default has occurred and is continuing,
First Interstate has the right under the Indenture at any time during the term
of the Junior Subordinated Debentures to defer the payment of interest at any
time or from time to time for a period not exceeding 20 consecutive quarters
(each such period an "Extension Period"), provided that no Extension Period may
extend beyond the Stated Maturity. At the end of such Extension Period, First
Interstate must pay all interest then accrued and unpaid (together with interest
thereon at the annual rate of %, compounded quarterly, to the extent
permitted by applicable law). During an Extension Period, interest will continue
to accrue and holders of Junior Subordinated Debentures will be required to
accrue interest income for United States federal income tax purposes. See
"Certain Federal Income Tax Consequences--Interest Income and Original Issue
Discount."
During any such Extension Period, First Interstate may not (i) declare or
pay any dividends or distributions on, or redeem, purchase, acquire or make a
liquidation payment with respect to, any of First Interstate's capital stock or
(ii) make any payment of principal, interest or premium, if any, on or repay,
repurchase or redeem any debt securities of First Interstate (including other
Junior Subordinated Debentures) that rank PARI PASSU with or junior in interest
to the Junior Subordinated Debentures or (iii) make any guarantee payments with
respect to any guarantee by First Interstate of the debt securities of any Bank
if such guarantee ranks PARI PASSU with or junior in interest to the Junior
Subordinated Debentures (other than (a) dividends or distributions in Common
Stock, (b) any declaration of a dividend in connection with the implementation
of a stockholders' rights plan, or the issuance of stock under any such plan in
the future, or the redemption or repurchase of any such rights pursuant thereto,
(c) payments under the Guarantee, and (d) purchases of Common Stock related to
the issuance of Common Stock or rights under any of First Interstate's benefit
plans for its directors, officers or employees). Prior to the termination of any
such Extension Period, First Interstate may further extend such Extension
Period, provided that such extension does not cause such Extension Period to
exceed 20 consecutive quarters or extend beyond the Stated Maturity. Upon the
termination of any such Extension Period and the payment of all amounts then due
on any Interest Payment Date, First Interstate may elect to begin a new
Extension Period subject to the above requirements. No interest shall be due and
payable during an Extension Period, except at the end thereof. First Interstate
must give the Property Trustee, the Administrative Trustees and the Indenture
Trustee notice of its election of any Extension Period at least one Business Day
prior to the earlier of (i) the date the Distributions on the Trust Preferred
Securities would have been payable except for the election to begin or extend
such Extension Period or (ii) the date the Administrative Trustees are required
to give notice to the Nasdaq National Market or any applicable stock exchange or
automated quotation system on which the Trust Preferred Securities are then
listed or quoted or to the holders of the Trust Preferred Securities of the
record date or the date such Distributions are payable, but in any event not
less than one Business Day prior to such record date. The Indenture Trustee
shall give notice of First Interstate's election to begin or extend a new
Extension Period to the holders of the Trust Preferred Securities. There is no
limitation on the number of times that First Interstate may elect to begin an
Extension Period.
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Distributions on the Trust Preferred Securities will be deferred by FIB
Capital during any such Extension Period. See "Description of the Trust
Preferred Securities--Distributions." For a description of certain federal
income tax consequences and special considerations applicable to any such Junior
Subordinated Debentures, see "Certain Federal Income Tax Consequences."
ADDITIONAL SUMS
If FIB Capital is required to pay any additional taxes, duties or other
governmental charges as a result of a Tax Event, First Interstate will pay as
Additional Sums on the Junior Subordinated Debentures such amounts as shall be
required so that the Distributions payable by FIB Capital shall not be reduced
as a result of any such additional taxes, duties or other governmental charges.
REDEMPTION
Subject to First Interstate having received prior approval of the Federal
Reserve, if then required under applicable capital guidelines or policies of the
Federal Reserve, the Junior Subordinated Debentures are redeemable prior to
maturity at the option of First Interstate (i) on or after , 2002, in
whole at any time or in part from time to time, or (ii) at any time in whole
(but not in part), upon the occurrence and during the continuance of a Tax
Event, an Investment Company Event or a Capital Treatment Event, in each case at
a redemption price equal to the accrued and unpaid interest on the Junior
Subordinated Debentures so redeemed to the date fixed for redemption, plus 100%
of the principal amount thereof.
Notice of any redemption will be mailed at least 30 but not more than 60
days before the redemption date to each holder of Junior Subordinated Debentures
to be redeemed at such holder's registered address. Unless First Interstate
defaults in payment of the redemption price, on and after the redemption date
interest ceases to accrue on such Junior Subordinated Debentures or portions
thereof called for redemption.
If FIB Capital is required to pay additional taxes, duties or other
governmental charges as a result of a Tax Event, First Interstate will pay as
additional amounts on the Junior Subordinated Debentures the Additional Sums.
The Junior Subordinated Debentures will not be subject to any sinking fund.
DISTRIBUTION UPON LIQUIDATION
As described under "Description of the Trust Preferred
Securities--Liquidation Distribution Upon Termination," under certain
circumstances involving the termination of FIB Capital, the Junior Subordinated
Debentures may be distributed to the holders of the Trust Preferred Securities
in liquidation of FIB Capital after satisfaction of liabilities to creditors of
FIB Capital as provided by applicable law. If distributed to holders of the
Trust Preferred Securities in liquidation, the Junior Subordinated Debentures
will initially be issued in the form of one or more global securities and DTC,
or any successor depositary for the Trust Preferred Securities, will act as
depositary for the Junior Subordinated Debentures. It is anticipated that the
depositary arrangements for the Junior Subordinated Debentures would be
substantially identical to those in effect for the Trust Preferred Securities.
If the Junior Subordinated Debentures are distributed to the holders of Trust
Preferred Securities upon the liquidation of FIB Capital, First Interstate will
use its best efforts to list the Junior Subordinated Debentures on the Nasdaq
National Market or such other stock exchanges or automated quotation system, if
any, on which the Trust Preferred Securities are then listed or quoted. There
can be no assurance as to the market price of any Junior Subordinated Debentures
that may be distributed to the holders of Trust Preferred Securities.
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RESTRICTIONS ON CERTAIN PAYMENTS
If at any time (i) there shall have occurred any event of which First
Interstate has actual knowledge that (a) with the giving of notice or the lapse
of time, or both, would constitute a Debenture Event of Default and (b) in
respect of which First Interstate shall not have taken reasonable steps to cure,
(ii) First Interstate shall have given notice of its election of an Extension
Period as provided in the Indenture with respect to the Junior Subordinated
Debentures and shall not have rescinded such notice, or such Extension Period,
or any extension thereof, shall be continuing, or (iii) while the Junior
Subordinated Debentures are held by FIB Capital, First Interstate shall be in
default with respect to its payment of any obligation under the Guarantee, then
First Interstate will not (1) declare or pay any dividends or distributions on,
or redeem, purchase, acquire, or make a liquidation payment with respect to, any
of First Interstate's capital stock or (2) make any payment of principal,
interest or premium, if any, on or repay, repurchase or redeem any debt
securities of First Interstate (including other junior subordinated debentures
of like tenor to the Junior Subordinated Debentures) that rank PARI PASSU with
or junior in interest to the Junior Subordinated Debentures or make any
guarantee payments with respect to any guarantee by First Interstate of the debt
securities of any subsidiary of First Interstate if such guarantee ranks PARI
PASSU with or junior in interest to the Junior Subordinated Debentures (other
than (a) dividends or distributions in the Common Stock, (b) any declaration of
a dividend in connection with the implementation of a stockholder's rights plan,
or the issuance of stock under any such plan in the future or the redemption or
repurchase of any such rights pursuant thereto, (c) payments under the Guarantee
and (d) purchases of Common Stock related to issuance of Common Stock or rights
under any of First Interstate's benefit plans for its directors, officers or
employees).
SUBORDINATION
In the Indenture, First Interstate has covenanted and agreed that any Junior
Subordinated Debentures issued thereunder will be subordinate and junior in
right of payment to all Senior and Subordinated Debt to the extent provided in
the Indenture. Upon any payment or distribution of assets to creditors upon any
liquidation, dissolution, winding up, reorganization, assignment for the benefit
of creditors, marshaling of assets or any bankruptcy, insolvency, debt
restructuring or similar proceedings in connection with any insolvency or
bankruptcy proceeding of First Interstate, the holders of Senior and
Subordinated Debt (as defined herein) will first be entitled to receive payment
in full of principal of all Allocable Amounts (as defined below) on such Senior
and Subordinated Debt before the holders of Junior Subordinated Debentures will
be entitled to receive or retain any payment in respect thereof.
In the event of the acceleration of the maturity of any Junior Subordinated
Debentures, the holders of all Senior and Subordinated Debt outstanding at the
time of such acceleration will first be entitled to receive payment in full of
all amounts due thereon (including any amounts due upon acceleration) before the
holders of Junior Subordinated Debentures will be entitled to receive or retain
any payment in respect of the Junior Subordinated Debentures.
No payments on account of principal or interest, if any, in respect of the
Junior Subordinated Debentures may be made if there shall have occurred and be
continuing a default in any payment with respect to Senior and Subordinated Debt
or an event of default with respect to any Senior and Subordinated Debt
resulting in the acceleration of the maturity thereof, or if any judicial
proceeding shall be pending with respect to any such default.
"Allocable Amounts," when used with respect to any Senior and Subordinated
Debt, means all amounts due or to become due on such Senior and Subordinated
Debt less, if applicable, any amount which would have been paid to, and retained
by, the holders of such Senior and Subordinated Debt (whether as a result of the
receipt of payments by the holders of such Senior and Subordinated Debt from
First Interstate or any other obligor thereon or from any holders of, or trustee
in respect of, other indebtedness that is subordinate and junior in right of
payment to such Senior and Subordinated Debt
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pursuant to any provision of such indebtedness for the payment over of amounts
received on account of such indebtedness to the holders of such Senior and
Subordinated Debt or otherwise) but for the fact that such Senior and
Subordinated Debt is subordinated or junior in right of payment to (or subject
to a requirement that amounts received on such Senior and Subordinated Debt be
paid over to obligees on) trade accounts payable or accrued liabilities arising
in the ordinary course of business.
"Debt" means, with respect to any person, whether recourse is to all or a
portion of the assets of such person and whether or not contingent: (i) every
obligation of such person for money borrowed; (ii) every obligation of such
person evidenced by bonds, debentures, notes or other similar instruments,
including obligations incurred in connection with the acquisition of property,
assets or businesses; (iii) every reimbursement obligation of such person with
respect to letters of credit, bankers' acceptances or similar facilities issued
for the account of such person; (iv) every obligation of such person issued or
assumed as the deferred purchase price of property or services (but excluding
trade accounts payable or accrued liabilities arising in the ordinary course of
business); (v) every capital lease obligation of such person; (vi) all
indebtedness of such person whether incurred on or prior to the date of the
Indenture or thereafter incurred, for claims in respect of derivative products
including interest rate, foreign exchange rate and commodity forward contracts,
options and swaps and similar arrangements; and (vii) every obligation of the
type referred to in clauses (i) through (vi) of another person and all dividends
of another person the payment of which, in either case, such person has
guaranteed or is responsible or liable, directly or indirectly, as obligor or
otherwise.
"Senior and Subordinated Debt" means the principal of (and premium, if any)
and interest, if any (including interest accruing on or after the filing of any
petition in bankruptcy or for reorganization relating to First Interstate
whether or not such claim for post-petition interest is allowed in such
proceeding), on Debt of First Interstate whether incurred on or prior to the
date of the Indenture or thereafter incurred, unless, in the instrument creating
or evidencing such Debt or pursuant to which such Debt is outstanding, it is
provided that such obligations are not superior in right of payment to the
Junior Subordinated Debentures or to other Debt which is PARI PASSU with, or
subordinated to, the Junior Subordinated Debentures; provided, however, that
Senior and Subordinated Debt shall not be deemed to include (i) any Debt of
First Interstate which when incurred and without respect to any election under
section 1111(b) of the United States Bankruptcy Code of 1978, as amended, was
without recourse to First Interstate, (ii) any Debt of First Interstate to any
of the Banks, (iii) Debt to any employee of First Interstate, and (iv) any other
debt securities issued pursuant to the Indenture.
The Indenture places no limitation on the amount of additional Senior and
Subordinated Debt that may be incurred by First Interstate. First Interstate
expects from time to time to incur additional indebtedness constituting Senior
and Subordinated Debt.
DENOMINATIONS, REGISTRATION AND TRANSFER
The Junior Subordinated Debentures will be represented by global
certificates registered in the name of DTC or its nominee ("Global Subordinated
Debenture"). Beneficial interests in the Junior Subordinated Debentures will be
shown on, and transfers thereof will be effected only through, records
maintained by DTC. Except as described below, Junior Subordinated Debentures in
certificated form will not be issued in exchange for the Global Subordinated
Certificates. See "Book-Entry Issuance."
Unless and until a Global Subordinated Debenture is exchanged in whole or in
part for the individual Junior Subordinated Debentures represented thereby, it
may not be transferred except as a whole by DTC to a nominee of DTC or by a
nominee of DTC to DTC or another nominee of DTC or by DTC or any nominee to a
successor depository or any nominee of such successor.
A Global Subordinated Debenture shall be exchangeable for Junior
Subordinated Debentures registered in the names of persons other than DTC or its
nominee only if (i) DTC notifies First Interstate that it is unwilling or unable
to continue as a depositary for such Global Subordinated Debenture and no
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successor depositary shall have been appointed, or if at any time DTC ceases to
be a clearing agency registered under the Exchange Act, at a time when DTC is
required to be so registered to act as such depositary, (ii) First Interstate in
its sole discretion determines that such Global Subordinated Debenture shall be
so exchangeable or (iii) there shall have occurred and be continuing a Debenture
Event of Default with respect to such Global Subordinated Debenture. Any Global
Subordinated Debenture that is exchangeable pursuant to the preceding sentence
shall be exchangeable for definitive certificates registered in such names as
DTC shall direct. It is expected that such instructions will be based upon
directions received by DTC from its participants with respect to ownership of
beneficial interests in such Global Subordinated Debenture. If Junior
Subordinated Debentures are issued in definitive form, such Junior Subordinated
Debentures will be in denominations of $25 and integral multiples thereof and
may be transferred or exchanged at the offices described below.
Payments on Junior Subordinated Debentures represented by a Global
Subordinated Debenture will be made to DTC, as the depositary for the Junior
Subordinated Debentures. If Junior Subordinated Debentures are issued in
definitive form, principal and interest will be payable, the transfer of the
Junior Subordinated Debentures will be registrable and Junior Subordinated
Debentures will be exchangeable for Junior Subordinated Debentures of other
denominations of a like aggregate principal amount, at the corporate office of
the Indenture Trustee, or at the offices of any Paying Agent or transfer agent
appointed by First Interstate, provided that payment of interest may be made at
the option of First Interstate by check mailed to the address of the persons
entitled thereto or by wire transfer. In addition, if the Junior Subordinated
Debentures are issued in certificated form, the record dates for payment of
interest will be the first day of the month in which such payment is to be made.
For a description of DTC and the terms of the depositary arrangements relating
to payments, transfers, voting rights, redemptions and other notices and other
matters, see "Book-Entry Issuance."
First Interstate will appoint the Indenture Trustee as securities registrar
under the Indenture (the "Securities Registrar"). Junior Subordinated Debentures
may be presented for exchange as provided above, and may be presented for
registration of transfer (with the form of transfer endorsed thereon, or a
satisfactory written instrument of transfer, duly executed), at the office of
the Securities Registrar. First Interstate may at any time rescind the
designation of any such transfer agent or approve a change in the location
through which any such transfer agent acts, provided that First Interstate
maintains a transfer agent in the place of payment. First Interstate may at any
time designate additional transfer agents with respect to the Junior
Subordinated Debentures.
In the event of any redemption, neither First Interstate nor the Indenture
Trustee shall be required to (i) issue, register the transfer of or exchange
Junior Subordinated Debentures during a period beginning at the opening of
business 15 days before the day of selection for redemption of Junior
Subordinated Debentures and ending at the close of business on the day of
mailing of the relevant notice of redemption or (ii) transfer or exchange any
Junior Subordinated Debentures so selected for redemption, except, in the case
of any Junior Subordinated Debentures being redeemed in part, any portion
thereof not to be redeemed.
GLOBAL SUBORDINATED DEBENTURES
Upon the issuance of the Global Subordinated Debenture and the deposit of
such Global Subordinated Debenture with or on behalf of DTC, DTC or its nominee
will credit, on its book-entry registration and transfer system, the respective
principal amounts of the individual Junior Subordinated Debentures represented
by such Global Subordinated Debenture to the accounts of persons that have
accounts with DTC ("Debenture Participants"). Ownership of beneficial interests
in a Global Subordinated Debenture will be limited to Debenture Participants or
persons that may hold interests through Debenture Participants. Ownership of
beneficial interests in such Global Subordinated Debenture will be shown on, and
the transfer of that ownership will be effected only through, records maintained
by DTC or its nominee (with respect to interests of Debenture Participants) and
the records of Debenture Participants (with respect to
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interests of persons who hold through Debenture Participants). The laws of some
states require that certain purchasers of securities take physical delivery of
such securities in definitive form. Such limits and such laws may impair the
ability to transfer beneficial interests in a Global Subordinated Debenture.
So long as DTC, or its nominee, is the registered owner of such Global
Subordinated Debenture, DTC or such nominee, as the case may be, will be
considered the sole owner or holder of the Junior Subordinated Debentures
represented by such Global Subordinated Debenture for all purposes under the
Indenture. Except as provided below, owners of beneficial interests in a Global
Subordinated Debenture will not be entitled to have any of the individual Junior
Subordinated Debentures represented by such Global Subordinated Debenture
registered in their names, will not receive or be entitled to receive physical
delivery of any such Junior Subordinated Debentures in definitive form and will
not be considered the owners or holders thereof under the Indenture.
Payments of principal of and interest on individual Junior Subordinated
Debentures represented by a Global Subordinated Debenture registered in the name
of DTC or its nominee will be made to DTC or its nominee, as the case may be, as
the registered owner of the Global Subordinated Debenture representing such
Junior Subordinated Debentures. None of First Interstate, the Indenture Trustee,
any Paying Agent or the Securities Registrar for such Junior Subordinated
Debentures will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests of the Global Subordinated Debenture representing such Junior
Subordinated Debentures or for maintaining, supervising or reviewing any records
relating to such beneficial ownership interests.
First Interstate expects that DTC or its nominee, upon receipt of any
payment of principal or interest in respect of a permanent Global Subordinated
Debenture representing the Junior Subordinated Debentures, immediately will
credit Debenture Participants' accounts with payments in amounts proportionate
to their respective beneficial interest in the principal amount of the Global
Subordinated Debenture as shown on the records of DTC or its nominee. First
Interstate also expects that payments by Debenture Participants to owners of
beneficial interests in such Global Subordinated Debenture held through such
Debenture Participants will be governed by standing instructions and customary
practices, as is now the case with securities held for the accounts of customers
in bearer form or registered in "street name." Such payments will be the
responsibility of such Debenture Participants.
If DTC is at any time unwilling, unable or ineligible to continue as
depositary and a successor depositary is not appointed by First Interstate
within 90 days, First Interstate will issue individual Junior Subordinated
Debentures in exchange for the Global Subordinated Debenture. In addition, First
Interstate may at any time and in its sole discretion, determine not to have the
Junior Subordinated Debentures represented by one or more Global Subordinated
Debentures and, in such event, will issue individual Junior Subordinated
Debentures in exchange for the Global Subordinated Debenture. Further, if First
Interstate so specifies with respect to the Junior Subordinated Debentures, an
owner of a beneficial interest in a Global Subordinated Debenture may, on terms
acceptable to First Interstate, the Indenture Trustee and DTC, receive
individual Junior Subordinated Debentures in exchange for such beneficial
interests. In any such instance, an owner of a beneficial interest in a Global
Subordinated Debenture will be entitled to physical delivery of individual
Junior Subordinated Debentures equal in principal amount to such beneficial
interest and to have such Junior Subordinated Debentures registered in its name.
Individual Junior Subordinated Debentures so issued will be issued in
denominations, unless otherwise specified by First Interstate, of $25 and
integral multiples thereof.
PAYMENT AND PAYING AGENTS
Payment of principal of and any interest on the Junior Subordinated
Debentures will be made at the office of the Indenture Trustee, except that at
the option of First Interstate payment of any interest may be made (i) except in
the case of Global Junior Subordinated Debentures, by check mailed to the
address of the person entitled thereto as such address shall appear in the
securities register or (ii) by transfer to an
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account maintained by the person entitled thereto as specified in the securities
register, provided that proper transfer instructions have been received by the
regular record date. Payment of any interest on Junior Subordinated Debentures
will be made to the person in whose name such Junior Subordinated Debenture is
registered at the close of business on the regular record date for such
interest. First Interstate may at any time designate additional Paying Agents or
rescind the designation of any Paying Agent; however, First Interstate will at
all times be required to maintain a Paying Agent in each place of payment for
the Junior Subordinated Debentures. Any moneys deposited with the Indenture
Trustee or any Paying Agent, or then held by First Interstate in trust, for the
payment of the principal of or interest on the Junior Subordinated Debentures
and remaining unclaimed for two years after such principal or interest has
become due and payable shall, at the request of First Interstate, be repaid to
First Interstate and the holder of such Junior Subordinated Debenture shall
thereafter look, as a general unsecured creditor, only to First Interstate for
payment thereof.
MODIFICATION OF INDENTURE
From time to time First Interstate and the Indenture Trustee may, without
the consent of the holders of the Junior Subordinated Debentures, amend, waive
or supplement the Indenture for specified purposes, including, among other
things, curing ambiguities, defects or inconsistencies (provided that any such
action does not materially adversely affect the interests of the holders of the
Junior Subordinated Debentures or the Trust Preferred Securities so long as they
remain outstanding) and qualifying, or maintaining the qualification of, the
Indenture under the Trust Indenture Act. The Indenture contains provisions
permitting First Interstate and the Indenture Trustee, with the consent of the
holders of not less than a majority in principal amount of the outstanding
Junior Subordinated Debentures, to modify the Indenture in a manner affecting
the rights of the holders of the Junior Subordinated Debentures; provided, that
no such modification may, without the consent of the holder of each outstanding
Subordinated Debenture, (i) change the Stated Maturity of the Junior
Subordinated Debentures, or reduce the principal amount thereof, or reduce the
rate or extend the time of payment of interest thereon or (ii) reduce the
percentage of principal amount of Junior Subordinated Debentures, the holders of
which are required to consent to any such modification of the Indenture,
provided that so long as any of the Trust Preferred Securities remain
outstanding, no such modification may be made that adversely affects the holders
of such Trust Preferred Securities in any material respect, and no termination
of the Indenture may occur, and no waiver of any Debenture Event of Default or
compliance with any covenant under the Indenture may be effective, without the
prior consent of the holders of at least a majority of the aggregate Liquidation
Amount of the Trust Preferred Securities unless and until the principal of the
Junior Subordinated Debentures and all accrued and unpaid interest thereon have
been paid in full and certain other conditions are satisfied. Where a consent
under the Indenture would require the consent of each holder of Junior
Subordinated Debentures, no such consent shall be given by the Property Trustee
without the prior consent of each holder of Trust Preferred Securities.
DEBENTURE EVENTS OF DEFAULT
The Indenture provides that any one or more of the following described
events with respect to the Junior Subordinated Debentures that has occurred and
is continuing constitutes a "Debenture Event of Default" with respect to the
Junior Subordinated Debentures:
(i) failure for 30 days to pay any interest on the Junior Subordinated
Debentures when due (subject to the deferral of any due date in the case of
an Extension Period); or
(ii) failure to pay any principal on the Junior Subordinated Debentures
when due whether at maturity, upon redemption by declaration or otherwise;
or
(iii) failure to observe or perform in any material respect certain other
covenants contained in the Indenture for 90 days after written notice to
First Interstate from the Indenture Trustee or to First
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Interstate and the Indenture Trustee by the holders of at least 25% in
aggregate outstanding principal amount of the Junior Subordinated
Debentures; or
(iv) certain events in bankruptcy, insolvency or reorganization of First
Interstate.
The holders of a majority in aggregate outstanding principal amount of the
Junior Subordinated Debentures have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Indenture
Trustee. The Indenture Trustee or the holders of not less than 25% in aggregate
outstanding principal amount of the Junior Subordinated Debentures may declare
the principal due and payable immediately upon a Debenture Event of Default. If
the Indenture Trustee or such holders of Junior Subordinated Debentures fail to
make such declaration, the holders of at least 25% in aggregate Liquidation
Amount of the Trust Preferred Securities shall have such right. The holders of a
majority in aggregate outstanding principal amount of the Junior Subordinated
Debentures may annul such 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 Indenture Trustee.
Should the holders of the Junior Subordinated Debentures fail to annul such
declaration and waive such default, the holders of a majority in aggregate
Liquidation Amount of the Trust Preferred Securities shall have such right.
The holders of a majority in aggregate outstanding principal amount of
Junior Subordinated Debentures affected thereby 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 interest (unless such default has been cured and
a sum sufficient to pay all matured installments of interest and principal due
otherwise than by acceleration has been deposited with the Indenture 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.
If a Debenture Event of Default has occurred and is continuing, the Property
Trustee will have the right to declare the principal of and the interest on the
Junior Subordinated Debentures, and any other amounts payable under the
Indenture, to be forthwith due and payable and to enforce its other rights as a
creditor with respect to the Junior Subordinated Debentures.
First Interstate is required to file annually with the Indenture Trustee a
certificate as to whether First Interstate is in compliance with all the
conditions and covenants applicable to it under the Indenture.
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF TRUST PREFERRED SECURITIES
If a Debenture Event of Default has occurred and is continuing and is
attributable to the failure of First Interstate to pay interest or principal on
the Junior Subordinated Debentures on the date such interest or principal is
otherwise payable, a holder of Trust Preferred Securities may institute a legal
proceeding directly against First Interstate for enforcement of payment to such
holder of the principal of or interest on such Junior Subordinated Debentures
having a principal amount equal to the aggregate Liquidation Amount of the Trust
Preferred Securities of such holder ("Direct Action"). First Interstate may not
amend the Indenture to remove the foregoing right to bring a Direct Action
without the prior written consent of the holders of all of the Trust Preferred
Securities outstanding. If the right to bring a Direct Action is removed, FIB
Capital may become subject to the reporting obligations under the Exchange Act.
First Interstate shall have the right under the Indenture to set-off any payment
made to such holder of Trust Preferred Securities by First Interstate in
connection with a Direct Action.
The holders of the Trust Preferred Securities would not be able to exercise
directly any remedies other than those set forth in the preceding paragraph
available to the holders of the Junior Subordinated Debentures unless there
shall have been an Event of Default under the Trust Agreement. See "Description
of the Trust Preferred Securities--Events of Default; Notice."
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CONSOLIDATION, MERGER, SALE OF ASSETS AND OTHER TRANSACTIONS
The Indenture provides that First Interstate shall not consolidate with or
merge into any other Person or convey, transfer or lease its properties and
assets substantially as an entirety to any Person, and no Person shall
consolidate with or merge into First Interstate or convey, transfer or lease its
properties and assets substantially as an entirety to First Interstate, unless
(i) in case First Interstate consolidates with or merges into another Person or
conveys or transfers its properties and assets substantially as an entirety to
any Person, the successor Person is organized under the laws of the United
States or any state or the District of Columbia, and such successor Person
expressly assumes First Interstate's obligations on the Junior Subordinated
Debentures issued under the Indenture; (ii) immediately after giving effect
thereto, no Debenture Event of Default, and no event which, after notice or
lapse of time or both, would become a Debenture Event of Default, shall have
occurred and be continuing; (iii) such transaction is permitted under the Trust
Agreement and the Guarantee Agreement, and does not give rise to any breach or
violation of the Trust Agreement or Guarantee Agreement; and (iv) certain other
conditions as prescribed in the Indenture are met.
The general provisions of the Indenture do not afford holders of the Junior
Subordinated Debentures protection in the event of a highly leveraged or other
transaction involving First Interstate that may adversely affect holders of the
Junior Subordinated Debentures.
SATISFACTION AND DISCHARGE
The Indenture provides that when, among other things, all Junior
Subordinated Debentures not previously delivered to the Indenture Trustee for
cancellation (i) have become due and payable or (ii) will become due and payable
at their Stated Maturity within one year, and First Interstate deposits or
causes to be deposited with the Indenture Trustee trust funds, in trust, for the
purpose and in an amount in the currency or currencies in which the Junior
Subordinated Debentures are payable sufficient to pay and discharge the entire
indebtedness on the Junior Subordinated Debentures not previously delivered to
the Indenture Trustee for cancellation, for the principal and interest to the
date of the deposit or to the Stated Maturity, as the case may be, then the
Indenture will cease to be of further effect (except as to First Interstate's
obligations to pay all other sums due pursuant to the Indenture and to provide
the officers' certificates and opinions of counsel described therein), and First
Interstate will be deemed to have satisfied and discharged the Indenture.
COVENANTS OF FIRST INTERSTATE
First Interstate will covenant in the Indenture, as to the Junior
Subordinated Debentures, that if and so long as (i) FIB Capital is the holder of
all the Junior Subordinated Debentures, (ii) a Tax Event in respect of FIB
Capital has occurred and is continuing and (iii) First Interstate has elected,
and has not revoked such election, to pay Additional Sums (as defined under
"Description of the Trust Preferred Securities--Redemption") in respect of the
Trust Preferred Securities, First Interstate will pay to FIB Capital such
Additional Sums. First Interstate will also covenant, as to the Junior
Subordinated Debentures, (i) to maintain directly or indirectly 100% ownership
of the Common Securities, provided that certain successors which are permitted
pursuant to the Indenture may succeed to First Interstate's ownership of the
Common Securities, (ii) not to voluntarily terminate, wind up or liquidate FIB
Capital, except upon prior approval of the Federal Reserve if then so required
under applicable capital guidelines or policies of the Federal Reserve, and
except (a) in connection with a distribution of Junior Subordinated Debentures
to the holders of the Trust Preferred Securities in liquidation of FIB Capital
or (b) in connection with certain mergers, consolidations, or amalgamations
permitted by the Trust Agreement and (iii) to use its reasonable efforts,
consistent with the terms and provisions of the Trust Agreement, to cause FIB
Capital to remain classified as a grantor trust and not as an association
taxable as a corporation for United States federal income tax purposes.
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GOVERNING LAW
The Indenture and the Junior Subordinated Debentures will be governed by and
construed in accordance with the laws of the State of Montana.
INFORMATION CONCERNING THE INDENTURE TRUSTEE
The Indenture Trustee shall have and be subject to all the duties and
responsibilities specified with respect to an indenture trustee under the Trust
Indenture Act. Subject to such provisions, the Indenture Trustee is under no
obligation to exercise any of the powers vested in it by the Indenture at the
request of any holder of Junior Subordinated Debentures, unless offered
reasonable indemnity by such holder against the costs, expenses and liabilities
which might be incurred thereby. The Indenture Trustee is not required to expend
or risk its own funds or otherwise incur personal financial liability in the
performance of its duties if the Indenture Trustee reasonably believes that
repayment or adequate indemnity is not reasonably assured.
BOOK-ENTRY ISSUANCE
The Depository Trust Company will act as securities depositary for all of
the Trust Preferred Securities and the Junior Subordinated Debentures ("DTC").
The Trust Preferred Securities and the Junior Subordinated Debentures will be
issued only as fully-registered securities registered in the name of Cede & Co.
("DTC's nominee"). One or more fully-registered Global Trust Preferred
Securities and Global Subordinated Debentures will be issued and will be
deposited with DTC.
DTC is a limited purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
holds securities that its participants deposit with DTC. DTC also facilitates
the settlement among participants of securities transactions, such as transfers
and pledges, in deposited securities through electronic computerized book-entry
changes in participants' accounts, thereby eliminating the need for physical
movement of securities certificates. "Direct Participants" include securities
brokers and dealers, banks, trust companies, clearing corporations and certain
other organizations. DTC is owned by a number of its Direct Participants and by
the New York Stock Exchange, Inc., the American Stock Exchange, Inc., and the
National Association of Securities Dealers, Inc. Access to DTC system is also
available to others such as securities brokers and dealers, banks and trust
companies that clear through or maintain custodial relationships with Direct
Participants, either directly or indirectly ("Indirect Participants"). The rules
applicable to DTC and its participants are on file with the Commission.
Purchases of Trust Preferred Securities or Junior Subordinated Debentures
within the depositary system must be made by or through Direct Participants,
which will receive a credit for the Trust Preferred Securities or Junior
Subordinated Debentures on DTC's records. The ownership interest of each actual
purchaser of each Trust Preferred Securities and each Subordinated Debenture
("Beneficial Owner") is in turn to be recorded on the Direct and Indirect
Participants' records. Beneficial Owners will not receive written confirmation
from DTC of their purchases, but Beneficial Owners are expected to receive
written confirmations providing details of the transactions, as well as periodic
statements of their holdings, from the Direct or Indirect Participants through
which the Beneficial Owners purchased Trust Preferred Securities or Junior
Subordinated Debentures. Transfers of ownership interests in the Trust Preferred
Securities or Junior Subordinated Debentures are to be accomplished by entries
made on the books of participants acting on behalf of Beneficial Owners.
Beneficial Owners will not receive certificates representing their ownership
interests in Trust Preferred Securities or Junior Subordinated Debentures,
unless use of the book-entry system for the Trust Preferred Securities or Junior
Subordinated Debentures is discontinued.
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DTC has no knowledge of the actual Beneficial Owners; DTC's records reflect
only the identity of the Direct Participants to whose accounts such Trust
Preferred Securities or Junior Subordinated Debentures are credited, which may
or may not be the Beneficial Owners. The Direct Participants will remain
responsible for keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners and the voting
rights of Direct Participants, Indirect Participants and Beneficial Owners will
be governed by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time.
Redemption notices will be sent to DTC's nominee as the registered holder of
the Trust Preferred Securities or Junior Subordinated Debentures. If less than
all of the Trust Preferred Securities or the Junior Subordinated Debentures are
being redeemed, DTC will determine by lot or pro rata the amount of the Trust
Preferred Securities of each Direct Participant to be redeemed.
Although voting with respect to the Trust Preferred Securities or the Junior
Subordinated Debentures is limited to the holders of record of the Trust
Preferred Securities or Junior Subordinated Debentures, as applicable, in those
instances in which a vote is required, neither DTC nor DTC's nominee will itself
consent or vote with respect to Trust Preferred Securities or Junior
Subordinated Debentures. Under its usual procedures, DTC would mail an omnibus
proxy (the "Omnibus Proxy") to the relevant Trustee as soon as possible after
the record date. The Omnibus Proxy assigns the DTC's nominee's consenting or
voting rights to those Direct Participants to whose accounts such Trust
Preferred Securities or Junior Subordinated Debentures are credited on the
record date (identified in a listing attached to the Omnibus Proxy).
Distribution payments on the Trust Preferred Securities or the Junior
Subordinated Debentures will be made by the relevant Trustee to DTC. DTC's
practice is to credit Direct Participants' accounts on the relevant payment date
in accordance with their respective holdings shown on DTC's records unless DTC
has reason to believe that it will not receive payments on such payment date.
Payments by Direct or Indirect Participants to Beneficial Owners will be
governed by standing instructions and customary practices and will be the
responsibility of such Direct or Indirect Participant and not of DTC, the
relevant Trustee, FIB Capital or First Interstate, subject to any statutory or
regulatory requirements as may be in effect from time to time. Payment of
Distributions to DTC is the responsibility of the relevant Trustee, disbursement
of such payments to Direct Participants is the responsibility of DTC and
disbursements of such payments to the Beneficial Owners is the responsibility of
Direct and Indirect Participants.
DTC may discontinue providing its services as securities depositary with
respect to any of the Trust Preferred Securities or the Junior Subordinated
Debentures at any time by giving reasonable notice to the relevant Trustee and
First Interstate. If a successor securities depositary is not obtained,
definitive certificates representing Trust Preferred Securities or Junior
Subordinated Debenture are required to be printed and delivered. First
Interstate, at its option, may decide to discontinue use of the system of book-
entry transfers through DTC (or a successor depositary). After a Debenture Event
of Default, the holders of a majority in liquidation preference of Trust
Preferred Securities or aggregate principal amount of Junior Subordinated
Debentures may determine to discontinue the system of book-entry transfers
through DTC. In any such event, definitive certificates representing Trust
Preferred Securities or Junior Subordinated Debentures will be printed and
delivered.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that FIB Capital and First Interstate believe to
be accurate, but FIB Capital and First Interstate assume no responsibility for
the accuracy thereof. Neither FIB Capital nor First Interstate has any
responsibility for the performance by DTC or its Direct or Indirect Participants
of their respective obligations as described herein or under the rules and
procedures governing their respective operations.
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DESCRIPTION OF GUARANTEE
The Guarantee Agreement will be executed and delivered by First Interstate
concurrently with the issuance of the Trust Preferred Securities for the benefit
of the holders of the Trust Preferred Securities. Wilmington Trust Company will
act as Guarantee Trustee under the Guarantee Agreement for the purposes of
compliance with the Trust Indenture Act, and the Guarantee as described in this
section will be qualified as an Indenture under the Trust Indenture Act. The
following summary of certain provisions of the Guarantee does not purport to be
complete and is subject to, and qualified in its entirety by reference to, all
of the provisions of the Guarantee Agreement, including the definitions therein
of certain terms, and the Trust Indenture Act. The form of the Guarantee has
been filed as an exhibit to the Registration Statement of which this Prospectus
forms a part. The Guarantee Trustee will hold the Guarantee for the benefit of
the holders of the Trust Preferred Securities.
GENERAL
The Guarantee will be an irrevocable guarantee on a subordinated basis of
FIB Capital's obligations under the Trust Preferred Securities, but will apply
only to the extent that FIB Capital has funds sufficient to make such payments,
and is not a guarantee of collection.
First Interstate will irrevocably agree to pay in full on a subordinated
basis, to the extent set forth herein, the Guarantee Payments (as defined below)
to the holders of the Trust Preferred Securities, as and when due, regardless of
any defense, right of set-off or counterclaim that FIB Capital may have or
assert other than the defense of payment. The following payments with respect to
the Trust Preferred Securities, to the extent not paid by or on behalf of FIB
Capital (the "Guarantee Payments"), will be subject to the Guarantee: (i) any
accumulated and unpaid Distributions required to be paid on the Trust Preferred
Securities, to the extent that FIB Capital has funds on hand available therefor
at such time, (ii) the Redemption Price with respect to any Trust Preferred
Securities called for redemption, to the extent that FIB Capital has funds on
hand available therefor at such time, and (iii) upon a voluntary or involuntary
dissolution, winding up or liquidation of FIB Capital (unless the Junior
Subordinated Debentures are distributed to holders of the Trust Preferred
Securities), the lesser of (a) the Liquidation Distribution and (b) the amount
of assets of FIB Capital remaining available for distribution to holders of
Trust Preferred Securities after satisfaction of liabilities to creditors of FIB
Capital as required by law. First Interstate's obligation to make a Guarantee
Payment may be satisfied by direct payment of the required amounts by First
Interstate to the holders of the Trust Preferred Securities or by causing FIB
Capital to pay such amounts to such holders.
If First Interstate does not make interest payments on the Junior
Subordinated Debentures held by FIB Capital, FIB Capital will not be able to pay
Distributions and will not have funds legally available therefor. The Guarantee
will rank subordinate and junior in right of payment to all Senior and
Subordinated Debt. See "Status of the Guarantee" below. Because First Interstate
is a holding company, the right of First Interstate to participate in any
distribution of assets of any Bank upon such Bank's liquidation or
reorganization or otherwise, is subject to the prior claims of creditors of that
Bank, except to the extent First Interstate may itself be recognized as a
creditor of that Bank. Accordingly, First Interstate's obligations under the
Guarantee will be effectively subordinated to all existing and future
liabilities of the Banks, and claimants should look only to the assets of First
Interstate for payments thereunder. Except as otherwise described herein, the
Guarantee does not limit the incurrence or issuance of other secured or
unsecured debt of First Interstate, including Senior and Subordinated Debt
whether under the Indenture, any other indenture that First Interstate may enter
into in the future, or otherwise.
First Interstate has, through the Guarantee, the Guarantee Agreement, the
Trust Agreement, the Junior Subordinated Debentures, the Indenture and the
Expense Agreement, taken together, fully, irrevocably and unconditionally
guaranteed all of FIB Capital's obligations under the Trust Preferred
Securities. No single document standing alone or operating in conjunction with
fewer than all of the other
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documents constitutes the Guarantee. It is only the combined operation of these
documents that has the effect of providing a full, irrevocable and unconditional
guarantee of FIB Capital's obligations under the Trust Preferred Securities. See
"Relationship Among the Trust Preferred Securities, the Junior Subordinated
Debentures and the Guarantee."
STATUS OF THE GUARANTEE
The Guarantee will constitute an unsecured obligation of First Interstate
and will rank subordinate and junior in right of payment to all Senior and
Subordinated Debt in the same manner as the Junior Subordinated Debentures.
The Guarantee will constitute a guarantee of payment and not of collection.
For example, the guaranteed party may institute a legal proceeding directly
against First Interstate to enforce its rights under the Guarantee without first
instituting a legal proceeding against any other person or entity. The Guarantee
will be held for the benefit of the holders of the Trust Preferred Securities.
The Guarantee will not be discharged except by payment of the Guarantee Payments
in full to the extent not paid by FIB Capital or upon distribution to the
holders of the Trust Preferred Securities of the Junior Subordinated Debentures
to the holders of the Trust Preferred Securities. The Guarantee does not place a
limitation on the amount of additional Senior and Subordinated Debt that may be
incurred by First Interstate. First Interstate expects from time to time to
incur additional indebtedness constituting Senior and Subordinated Debt.
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes which do not materially adversely affect
the rights of holders of the Trust Preferred Securities (in which case no vote
will be required), the Guarantee Agreement may not be amended without the prior
approval of the holders of not less than a majority of the aggregate Liquidation
Amount of such outstanding Trust Preferred Securities. See "Description of the
Trust Preferred Securities--Voting Rights; Amendment of the Trust Agreement."
All guarantees and agreements contained in the Guarantee Agreement shall bind
the successors, assigns, receivers, trustees and representatives of First
Interstate and shall inure to the benefit of the holders of the Trust Preferred
Securities then outstanding.
EVENTS OF DEFAULT
An event of default under the Guarantee Agreement will occur upon the
failure of First Interstate to perform any of its payment or other obligations
thereunder. The holders of not less than a majority in aggregate Liquidation
Amount of the Trust Preferred Securities have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Guarantee Trustee in respect of the Guarantee or to direct the exercise of any
trust or power conferred upon the Guarantee Trustee under the Guarantee
Agreement. Any holder of the Trust Preferred Securities may institute a legal
proceeding directly against First Interstate to enforce its rights under the
Guarantee without first instituting a legal proceeding against FIB Capital, the
Guarantee Trustee or any other person or entity.
First Interstate, as guarantor, is required to file annually with the
Guarantee Trustee a certificate as to whether First Interstate is in compliance
with all the conditions and covenants applicable to it under the Guarantee
Agreement.
INFORMATION CONCERNING THE GUARANTEE TRUSTEE
The Guarantee Trustee, other than during the occurrence and continuance of a
default by First Interstate in performance of the Guarantee, undertakes to
perform only such duties as are specifically set forth in the Guarantee
Agreement and, after default with respect to the Guarantee, must exercise the
same degree of care and skill as a prudent person would exercise or use in the
conduct of his or her own affairs. Subject to this provision, the Guarantee
Trustee is under no obligation to exercise any of the
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powers vested in it by the Guarantee Agreement at the request of any holder of
the Trust Preferred Securities unless it is offered reasonable indemnity against
the costs, expenses and liabilities that might be incurred thereby.
TERMINATION OF THE GUARANTEE
The Guarantee will terminate and be of no further force and effect upon full
payment of the Redemption Price, upon full payment of the amounts payable upon
liquidation of FIB Capital or upon distribution of Junior Subordinated
Debentures to the holders of the Trust Preferred Securities. The Guarantee will
continue to be effective or will be reinstated, as the case may be, if at any
time any holder of the Trust Preferred Securities must restore payment of any
sums paid under the Trust Preferred Securities or the Guarantee.
GOVERNING LAW
The Guarantee Agreement will be governed by and construed in accordance with
the laws of the State of Montana.
THE EXPENSE AGREEMENT
Pursuant to the Expense Agreement entered into by First Interstate under the
Trust Agreement, First Interstate will irrevocably and unconditionally guarantee
to each person or entity to whom FIB Capital becomes indebted or liable, the
full payment of any costs, expenses or liabilities of FIB Capital, other than
obligations of FIB Capital to pay to the holders of the Trust Preferred
Securities or other similar interests in FIB Capital of the amounts due such
holders pursuant to the terms of the Trust Preferred Securities or such other
similar interests, as the case may be.
RELATIONSHIP AMONG THE TRUST PREFERRED SECURITIES, THE
JUNIOR SUBORDINATED DEBENTURES AND THE GUARANTEE
FULL AND UNCONDITIONAL GUARANTEE
Payments of Distributions and other amounts due on the Trust Preferred
Securities (to the extent FIB Capital has funds available for the payment of
such Distributions) are irrevocably guaranteed by First Interstate as and to the
extent set forth under "Description of Guarantee." Taken together, First
Interstate's obligations under the Junior Subordinated Debentures, the
Indenture, the Trust Agreement, the Expense Agreement, the Guarantee Agreement
and the Guarantee provide, in the aggregate, a full, irrevocable and
unconditional guarantee of payments of Distributions and other amounts due on
the Trust Preferred Securities. No single document standing alone or operating
in conjunction with fewer than all of the other documents constitutes the
Guarantee. It is only the combined operation of those documents that has the
effect of providing a full, irrevocable and unconditional guarantee of FIB
Capital's obligations under the Trust Preferred Securities. If and to the extent
that First Interstate does not make payments on the Junior Subordinated
Debentures, FIB Capital will not pay Distributions or other amounts due on the
Trust Preferred Securities. The Guarantee does not cover payment of
Distributions when FIB Capital does not have sufficient funds to pay such
Distributions. In such event, the remedy of a holder of the Trust Preferred
Securities is to institute a legal proceeding directly against First Interstate
for enforcement of payment of such Distributions to such holder. The obligations
of First Interstate under the Guarantee are subordinate and junior in right of
payment to all Senior and Subordinated Debt.
SUFFICIENCY OF PAYMENTS
As long as payments of interest and other payments are made when due on the
Junior Subordinated Debentures, such payments will be sufficient to cover
Distributions and other payments due on the Trust Preferred Securities,
primarily because: (i) the aggregate principal amount of the Junior Subordinated
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Debentures will be equal to the sum of the aggregate Liquidation Amount of the
Trust Preferred Securities and Common Securities; (ii) the interest rate and
interest and other payment dates on the Junior Subordinated Debentures will
match those with respect to the Trust Preferred Securities; (iii) First
Interstate shall pay for all and any costs, expenses and liabilities of FIB
Capital except FIB Capital's obligations to holders of Trust Preferred
Securities; and (iv) the Trust Agreement further provides that FIB Capital will
not engage in any activity that is not consistent with its limited purposes.
Notwithstanding anything to the contrary in the Indenture, First Interstate
has the right to set-off any payment it is otherwise required to make thereunder
with and to the extent First Interstate has theretofore made, or is concurrently
on the date of such payment making, a payment under the Guarantee.
ENFORCEMENT RIGHTS OF HOLDERS OF THE TRUST PREFERRED SECURITIES UNDER THE
GUARANTEE
A holder of any the Trust Preferred Securities may institute a legal
proceeding directly against First Interstate to enforce its rights under the
Guarantee without first instituting a legal proceeding against the Guarantee
Trustee, FIB Capital or any other person or entity.
A default or event of default under any Senior and Subordinated Debt would
not constitute a default or Event of Default. However, in the event of payment
defaults under, or acceleration of, Senior and Subordinated Debt, the
subordination provisions of the Indenture provide that no payments may be made
in respect of the Junior Subordinated Debentures until such Senior and
Subordinated Debt has been paid in full or any payment default thereunder has
been cured or waived. Failure to make required payments on Junior Subordinated
Debentures would constitute an Event of Default.
LIMITED PURPOSE OF FIB CAPITAL
The Trust Preferred Securities evidence a beneficial interest in FIB
Capital, and FIB Capital exists for the sole purpose of issuing the Trust
Securities and investing the proceeds thereof in Junior Subordinated Debentures.
A principal difference between the rights of a holder of the Trust Preferred
Securities and a holder of a Junior Subordinated Debenture is that a holder of a
Junior Subordinated Debenture is entitled to receive from First Interstate the
principal amount of and interest accrued on Junior Subordinated Debentures held,
while a holder of the Trust Preferred Securities is entitled to receive
Distributions from FIB Capital (or from First Interstate under the Guarantee) if
and to the extent FIB Capital has funds available for the payment of such
Distributions.
RIGHTS UPON TERMINATION
Upon any voluntary or involuntary termination, winding-up or liquidation of
FIB Capital involving the liquidation of the Junior Subordinated Debentures, the
holders of Trust Preferred Securities will be entitled to receive, out of assets
held by FIB Capital, the Liquidation Amount in cash. See "Description of the
Trust Preferred Securities--Liquidation Distribution Upon Termination." Upon any
voluntary or involuntary liquidation or bankruptcy of First Interstate, the
Property Trustee, as holder of the Junior Subordinated Debentures, would be a
subordinated creditor of First Interstate, subordinated in right of payment to
all Senior and Subordinated Debt as set forth in the Indenture, but entitled to
receive payment in full of principal and interest, before any stockholders of
First Interstate receive payments or distributions. Since First Interstate is
the guarantor under the Guarantee and has agreed to pay for all costs, expenses
and liabilities of FIB Capital (other than FIB Capital's obligations to the
holders of its Trust Preferred Securities), the positions of a holder of the
Trust Preferred Securities and a holder of Junior Subordinated Debentures
relative to other creditors and to stockholders of First Interstate in the event
of liquidation or bankruptcy of First Interstate are expected to be
substantially the same.
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CERTAIN FEDERAL INCOME TAX CONSEQUENCES
In the opinion of Holland & Hart LLP, counsel to the Company ("Counsel"),
the following summary accurately describes the material United States federal
income tax consequences that may be relevant to the purchase, ownership and
disposition of Trust Preferred Securities. Unless otherwise stated, this summary
deals only with Trust Preferred Securities held as capital assets by United
States Persons (defined below) who purchase the Trust Preferred Securities upon
original issuance at their original offering price. As used herein, a "United
States Person" means a person that is (i) a citizen or resident of the United
States, (ii) a corporation, partnership or other entity created or organized in
or under the laws of the United States or any political subdivision thereof,
(iii) an estate the income of which is subject to United States federal income
taxation regardless of its source, or (iv) a trust the income of which is
subject to United States federal income taxation regardless of its source;
provided, however, that for taxable years beginning after December 31, 1996 (or,
if a trustee so elects, for taxable years ending after August 20, 1996), a
"United States Person" shall include any trust if a court is able to exercise
primary supervision over the administration of such trust and one or more United
States fiduciaries have the authority to control all substantial decisions of
such trust. The tax treatment of holders may vary depending on their particular
situation. This summary does not address all the tax consequences that may be
relevant to a particular holder or to holders who may be subject to special tax
treatment, such as banks, real estate investment trusts, regulated investment
companies, insurance companies, dealers in securities or currencies, tax-exempt
investors or foreign investors. In addition, this summary does not include any
description of any alternative minimum tax consequences or the tax laws of any
state, local or foreign government that may be applicable to a holder of Trust
Preferred Securities. This summary is based on the Code, the Treasury
regulations promulgated thereunder (the "Regulations") and administrative and
judicial interpretations thereof, as of the date hereof, all of which are
subject to change, possibly on a retroactive basis.
The following discussion does not discuss the tax consequences that might be
relevant to persons that are not United States Persons ("non-United States
Persons"). Non-United States Persons should consult their own tax advisors as to
the specific United States federal income tax consequences of the purchase,
ownership and disposition of Trust Preferred Securities.
The authorities on which this summary is based are subject to various
interpretations and the opinions of Counsel are not binding on the Internal
Revenue Service ("Service") or the courts, either of which could take a contrary
position. Moreover, no rulings have been or will be sought from the Service with
respect to the transactions described herein. Accordingly, there can be no
assurance that the Service will not challenge the opinions expressed herein or
that a court would not sustain such a challenge. Nevertheless, Counsel has
advised that it is of the view that, if challenged, the opinions expressed
herein would be sustained by a court with jurisdiction in a properly presented
case.
HOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE TAX
CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE TRUST
PREFERRED SECURITIES, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL,
FOREIGN, AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN UNITED STATES
FEDERAL OR OTHER TAX LAWS. FOR A DISCUSSION OF THE POSSIBLE REDEMPTION OF THE
TRUST PREFERRED SECURITIES UPON THE OCCURRENCE OF CERTAIN TAX EVENTS, SEE
"DESCRIPTION OF THE TRUST PREFERRED SECURITIES--REDEMPTION."
CLASSIFICATION OF FIB CAPITAL
In connection with the issuance of the Trust Preferred Securities, Counsel
is of the opinion that, under current law and assuming compliance with the terms
of the Trust Agreement, and based on certain facts and assumptions, FIB Capital
will be classified as a grantor trust and not as an association taxable as a
corporation for United States federal income tax purposes. As a result, each
beneficial owner of the Trust Preferred Securities (a "Securityholder") will be
treated as owning an undivided beneficial interest in the Junior Subordinated
Debentures. Accordingly, each Securityholder will be required to include in its
gross income its pro rata share of the interest income or original issue
discount that is paid or accrued on the
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Junior Subordinated Debentures. See "Interest Income and Original Issue
Discount" herein. No amount included in income with respect to the Trust
Preferred Securities will be eligible for the dividends received deduction.
CLASSIFICATION OF THE JUNIOR SUBORDINATED DEBENTURES
The Company intends to take the position that the Junior Subordinated
Debentures will be classified for United States federal income tax purposes as
indebtedness of the Company under current law, and, by acceptance of a Trust
Preferred Security, each holder covenants to treat the Junior Subordinated
Debentures as indebtedness and the Trust Preferred Securities as evidence of an
indirect beneficial ownership interest in the Junior Subordinated Debentures. No
assurance can be given, however, that such position of the Company will not be
challenged by the Internal Revenue Service or, if challenged, that such a
challenge will not be successful. The remainder of this discussion assumes that
the Junior Subordinated Debentures will be classified for United States federal
income tax purposes as indebtedness of the Company.
INTEREST INCOME AND ORIGINAL ISSUE DISCOUNT
Except as set forth below, stated interest on the Junior Subordinated
Debentures generally will be included in income by a Securityholder at the time
such interest income is paid or accrued in accordance with such Securityholder's
regular method of tax accounting.
First Interstate believes that, under the applicable Regulations, the Junior
Subordinated Debentures will not be considered to have been issued with
"original issue discount" ("OID") within the meaning of Section 1273(a) of the
Code. If, however, First Interstate exercises its right to defer payments of
interest on the Junior Subordinated Debentures, the Junior Subordinated
Debentures will become OID instruments at such time and all Securityholders will
be required to accrue the stated interest on the Junior Subordinated Debentures
on a daily basis during the Extension Period, even though First Interstate will
not pay such interest until the end of the Extension Period, and even though
some Securityholders may use the cash method of tax accounting. Moreover,
thereafter the Junior Subordinated Debentures will be taxed as OID instruments
for as long as they remain outstanding. Thus, even after the end of the
Extension Period, all Securityholders would be required to continue to include
the stated interest on the Junior Subordinated Debentures in income on a daily
economic accrual basis, regardless of their method of tax accounting and in
advance of receipt of the cash attributable to such interest income. Under the
OID economic accrual rules, a Securityholder would accrue an amount of interest
income each year that approximates the stated interest payments called for under
the Junior Subordinated Debentures, and actual cash payments of interest on the
Junior Subordinated Debentures would not be reported separately as taxable
income.
The Regulations described above have not yet been addressed in any rulings
or other interpretations by the Service, and it is possible that the Service
could take a contrary position. If the Service were to assert successfully that
the stated interest on the Junior Subordinated Debentures was OID regardless of
whether First Interstate exercises its right to defer payments of interest on
such debentures, all Securityholders would be required to include such stated
interest in income on a daily economic accrual basis as described above.
DISTRIBUTION OF JUNIOR SUBORDINATED DEBENTURES TO HOLDERS OF TRUST PREFERRED
SECURITIES
Under current law, a distribution by FIB Capital of the Junior Subordinated
Debentures as described under the caption "Description of the Trust Preferred
Securities--Liquidation Distribution Upon Termination" will be non-taxable and
will result in the Securityholder receiving directly its pro rata share of the
Junior Subordinated Debentures previously held indirectly through FIB Capital,
with a holding period and aggregate tax basis equal to the holding period and
aggregate tax basis such Securityholder had in its Trust
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Preferred Securities before such distribution. If, however, the liquidation of
FIB Capital were to occur because FIB Capital is subject to United States
federal income tax with respect to income accrued or received on the Junior
Subordinated Debentures as a result of a Tax Event or otherwise, the
distribution of Junior Subordinated Debentures to Securityholders by FIB Capital
could be a taxable event to FIB Capital and each Securityholder, and a
Securityholder would recognize gain or loss as if the Securityholder had
exchanged its Trust Preferred Securities for the Junior Subordinated Debentures
it received upon the liquidation of FIB Capital. A Securityholder would
recognize interest income in respect of Junior Subordinated Debentures received
from FIB Capital in the manner described above under "Interest Income and
Original Issue Discount."
SALES OR REDEMPTION OF TRUST PREFERRED SECURITIES
Gain or loss will be recognized by a Securityholder on a sale of Trust
Preferred Securities (including a redemption for cash) in an amount equal to the
difference between the amount realized (which for this purpose, will exclude
amounts attributable to accrued interest or OID not previously included in
income) and the Securityholder's adjusted tax basis in the Trust Preferred
Securities sold or so redeemed. Gain or loss recognized by a Securityholder on
Trust Preferred Securities will generally be taxable as short-term, mid-term or
long-term capital gain or loss depending on whether the Trust Preferred
Securities have been held for less than 12 months, 12 months or more but less
than 18 months, or for 18 months or more, respectively. Amounts attributable to
accrued interest with respect to a Securityholder's pro rata share of the Junior
Subordinated Debentures not previously included in income will be taxable as
ordinary income.
BACKUP WITHHOLDING TAX AND INFORMATION REPORTING
The amount of OID accrued on the Trust Preferred Securities held of record
by United States Persons (other than corporations and other exempt
Securityholders), if any, will be reported to the Service. "Backup" withholding
at a rate of 31% will apply to payments of interest to non-exempt United States
Persons unless the Securityholder furnishes its taxpayer identification number
in the manner prescribed in applicable Treasury Regulations, certifies that such
number is correct, certifies as to no loss of exemption from backup withholding
and meets certain other conditions. Any amounts withheld from a Securityholder
under the backup withholding rules will be allowed as a refund or a credit
against such Securityholder's United States federal income tax liability,
provided the required information is furnished to the Service.
POSSIBLE TAX LAW CHANGES AFFECTING THE TRUST PREFERRED SECURITIES
There can be no assurance that future legislative proposals or final
legislation will not affect the ability of the Company to deduct interest on the
Junior Subordinated Debentures. Congress and the Clinton Administration have
from time to time considered proposals that would deny an issuer a deduction for
United States income tax purposes for the payment of interest on instruments
with characteristics similar to the Junior Subordinated Debentures. Such
proposals have been considered in connection with recent legislation, including
the recently enacted Taxpayer Relief Act of 1997 (the "Relief Act"). Although no
such proposals have been included in the final provisions of recent legislation,
including the Relief Act, there can be no assurance that future legislation will
not adversely affect the tax treatment of the Junior Subordinated Debentures,
potentially on a retroactive basis. Such a change could give rise to a Tax
Event, which may permit First Interstate to cause a redemption of the Trust
Preferred Securities. See "Description of the Trust Preferred
Securities--Redemption" and "Description of Junior Subordinated
Debentures--Redemption."
ERISA CONSIDERATIONS
Employee benefit plans that are subject to the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), or Section 4975 of the Code
("Employee Plans"), generally may purchase Trust Preferred Securities subject to
the investing fiduciary's determination that the investment in Trust
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Preferred Securities satisfies ERISA's fiduciary standards and other
requirements applicable to investments by the Employee Plan.
In any case, the Company and/or any of its affiliates may be considered a
"party in interest" (within the meaning of ERISA) or a "disqualified person"
(within the meaning of Section 4975 of the Code) with respect to certain
Employee Plans (generally, those Employee Plans maintained or sponsored by, or
contributed to by, any such persons with respect to which the Company or an
affiliate is a fiduciary or Employee Plans for which the Company or an affiliate
provide services). The acquisition and ownership of Trust Preferred Securities
by an Employee Plan (or by an individual retirement arrangement or other
Employee Plans described in Section 4975(e)(1) of the Code) with respect to
which the Company or any of its affiliates is considered a party in interest or
a disqualified person may constitute or result in a prohibited transaction under
ERISA or Section 4975 of the Code, unless such Trust Preferred Securities are
acquired pursuant to and in accordance with an applicable exemption.
As a result, Employee Plans with respect to which the Company or any of its
affiliates is a party in interest or a disqualified person should not acquire
Trust Preferred Securities unless such Trust Preferred Securities are acquired
pursuant to and in accordance with an applicable exemption. Any other Employee
Plans or other entities whose assets include Employee Plan assets subject to
ERISA or Section 4975 of the Code proposing to acquire Trust Preferred
Securities should consult with their own counsel.
DESCRIPTION OF FIRST INTERSTATE CAPITAL STOCK
The authorized capital stock of First Interstate consists of 20,000,000
shares of Common Stock, of which 8,038,336 shares were outstanding as of October
1, 1997, and 100,000 shares of preferred stock without par value, of which
20,000 shares were outstanding as of October 1, 1997. As of October 1, 1997, the
Common Stock was held of record by approximately 400 stockholders, including the
Company's 401(k) Savings Plan as trustee for shares held on behalf of 592
individual participants in such plan.
COMMON STOCK
Each share of the Common Stock is entitled to one vote in the election of
directors and in all other matters submitted to a vote of stockholders.
Accordingly, holders of a majority of the shares of Common Stock entitled to
vote in any election of directors may elect all of the directors standing for
election if they choose to do so, subject to the rights of holders of the
preferred stock. Voting for directors is non-cumulative.
Subject to the preferential rights of any preferred stock that may at the
time be outstanding, each share of Common Stock has an equal and ratable right
to receive dividends when, if and as declared by the Board of Directors out of
assets legally available therefor. In the event of a liquidation, dissolution or
winding up of First Interstate, the holders of Common Stock will be entitled to
share equally and ratably in the assets available for distribution after
payments to creditors and to the holders of any preferred stock that may at the
time be outstanding. Holders of Common Stock have no conversion rights or
preemptive or other rights to subscribe for any additional shares of Common
Stock or for other securities. All outstanding Common Stock is fully paid and
non-assessable.
DIVIDEND RESTRICTIONS
The holders of Common Stock will be entitled to dividends when, as and if
declared by First Interstate's Board of Directors out of funds legally available
therefor. Under the Company's revolving term loan, the Company is prohibited
from declaring or paying any dividends to common stockholders in excess of 33%
of net income for the immediately preceding year. The Company has also agreed
that the Banks will maintain ratios of tangible primary capital to tangible
primary assets not less than the ratios required by regulators or applicable law
or regulation, and that the Banks will at all times maintain capital at
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Adequately Capitalized levels. The loan restrictions limit the funds available
for the payment of dividends from the Banks to First Interstate and from First
Interstate to its stockholders.
Under Montana banking law, FIB Montana may not declare dividends in excess
of its net undivided earnings (as defined) less any required transfers to
surplus and may not declare a dividend larger than the previous two years' net
earnings unless prior notice is given to the Montana Commissioner of Banking and
Financial Institutions. As a FRB member bank, FIB Montana may not, without the
consent of the FRB, declare dividends in a calendar year which, when aggregated
with prior dividends in that calendar year, exceed the calendar year net profits
of FIB Montana together with retained earnings for the prior two calendar years.
Under Wyoming banking law, FIB Wyoming may not declare dividends without meeting
surplus fund requirements and may not, without the approval of the Wyoming
Banking Commissioner, declare dividends in any one calendar year in excess of
its net profits (as defined) in the current year combined with retained net
profits of the preceding two years, less any required transfers to surplus or to
a fund for the retirement of any preferred stock.
In addition, federal regulatory agencies (e.g., the FDIC, OTS and FRB) have
authority to prohibit a bank under their supervision from engaging in practices
which, in the opinion of the particular federal regulatory agency, are unsafe or
unsound or constitute violations of applicable law. For example, depending upon
the financial condition of a bank in question and other factors, the appropriate
federal regulatory agency could determine that the payment of dividends might
under some circumstances constitute an unsafe and unsound practice. Moreover,
each federal regulatory agency has established guidelines for the maintenance of
appropriate levels of capital for a bank under its supervision. Compliance with
the standards set forth in such guidelines could limit the amount of dividends
which First Interstate or any of the Banks could pay. See "Regulation and
Supervision."
Preferred stock is senior to Common Stock with respect to dividends. Before
any dividends on Common Stock can be paid or declared and set apart for payment,
First Interstate must: (i) comply with all conditions and restrictions of any
and all series of preferred stock for which dividends are noncumulative; (ii)
pay, or declare and set aside a sum sufficient for payment, of dividends, past
and current, on any and all series of preferred stock for which dividends are
cumulative; and (iii) satisfy all accrued sinking fund obligations, if any, of
any and all series of preferred stock.
PREFERRED STOCK
The authorized capital stock of First Interstate includes 100,000 shares of
preferred stock, of which 20,000 shares have been designated as noncumulative
perpetual preferred stock. The noncumulative perpetual preferred stock was
issued in October 1996 at a price of $1,000 per share, and is the only series of
preferred stock issued and outstanding. The holders of preferred stock are
entitled to the following preferences, powers and special rights: (i) in the
event of voluntary or involuntary liquidation, dissolution or winding up of the
affairs of First Interstate, holders of preferred stock are entitled to receive
$1,000 per share before any payments to holders of Common Stock; (ii) holders of
preferred stock are entitled to one vote per share, with a required super
majority vote of 66 2/3% of outstanding shares to take action, on the issuance
of any stock having dividend and liquidation rights in preference and priority
to the preferred stock and on the amendment of the Company's Articles of
Incorporation or the Certificate of Designation of the preferred stock having an
adverse affect on the rights of holders of preferred stock; (iii) holders of
preferred stock are entitled to payment of specified dividends when and as
declared by First Interstate's Board of Directors; (iv) holders of preferred
stock are entitled to elect two directors to First Interstate's Board of
Directors if full dividends are not paid for six quarters to holders of the
preferred stock, which right continues until full dividends have been paid for
four consecutive quarters. The preferred stock is not convertible and is not
redeemable prior to seven years from its issuance without consent of the holders
thereof and regulatory approval. In connection with the redemption of the
preferred stock, the Company has agreed to pay a redemption premium of $500,000.
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First Interstate's Board of Directors is authorized, without approval of the
holders of Common Stock, to provide for the issuance of additional preferred
stock from time to time in one or more series in such number and with such
designations, preferences, powers and other special rights as may be stated in
the resolution or resolutions providing for such preferred stock. First
Interstate's Board of Directors may cause First Interstate to issue preferred
stock with voting, conversion and other rights that could adversely affect the
holders of the Common Stock or make it more difficult to effect a change of
control of the Company.
In the event of any dissolution, liquidation or winding up of the affairs of
First Interstate, before any distribution or payment may be made to the holders
of Common Stock, the holders of preferred stock would be entitled to be paid in
full with the respective amounts fixed by First Interstate's Board of Directors
in the resolution or resolutions authorizing the issuance of such series,
together with a sum equal to the accrued and unpaid dividends thereon to the
date fixed for such distribution or payment. After payment in full of the amount
which the holders of preferred stock are entitled to receive, the remaining
assets of First Interstate would be distributed ratably to the holders of the
Common Stock. If the assets available are not sufficient to pay in full the
amount so payable to the holders of all outstanding preferred stock, the holders
of all series of such shares would share ratably in any distribution of assets
in proportion to the full amounts to which they would otherwise be respectively
entitled. The consolidation or merger of First Interstate into or with any other
corporation or corporations would not be deemed a liquidation, dissolution, or
winding up of the affairs of First Interstate.
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UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement,
FIB Capital has agreed to sell to each of the Underwriters named below (the
"Underwriters") for whom D.A. Davidson & Co. is acting as the representative
(the "Representative") and each of the Underwriters has severally agreed to
purchase from FIB Capital, the respective number of Trust Preferred Securities
set forth opposite its name below:
<TABLE>
<CAPTION>
NUMBER OF
TRUST PREFERRED
UNDERWRITERS SECURITIES
- --------------------------------------------------------------------- -----------------------
<S> <C>
D.A. Davidson & Co...................................................
----------
Total..........................................................
----------
----------
</TABLE>
In the Underwriting Agreement, the Underwriters have agreed, subject to the
terms and conditions set forth therein, to purchase all of the 1,600,000 Trust
Preferred Securities offered hereby if any such Trust Preferred Securities are
purchased.
The Representative has advised First Interstate and FIB Capital that the
Underwriters propose to offer the Trust Preferred Securities directly to the
public initially at the public offering price set forth on the cover page of
this Prospectus and to certain dealers at such price less a concession not in
excess of $ per Trust Preferred Security. The Underwriters may allow and such
dealers may reallow a concession not in excess of $ per Trust Preferred
Security to certain other brokers and dealers. After the public offering, the
public offering price, concession and reallowance and other selling terms may be
changed by the Underwriters.
In view of the fact that the proceeds from the sale of the Trust Preferred
Securities will be used to purchase the Junior Subordinated Debentures issued by
First Interstate, the Underwriting Agreement provides that First Interstate will
pay as compensation for the Representative's arranging the investment therein of
such proceeds an amount of $ per Trust Preferred Security.
First Interstate does not intend to list the Trust Preferred Securities on
any securities exchange or include them for quotation on The Nasdaq Stock
Market. Although the Underwriters have indicated an intention to make a market
in the Trust Preferred Securities, the Underwriters are not obligated to make a
market in the Trust Preferred Securities, and any market making may be
discontinued at any time in the sole discretion of the Underwriters. If the
Trust Preferred Securities are traded after the original issuance, they may
trade at a discount to their issue price.
Each of First Interstate and FIB Capital has agreed to indemnify the
Underwriters and their respective controlling persons against certain
liabilities, including liabilities under the Securities Act, or to contribute to
payments the Underwriters may be required to make in respect thereof.
The Representative has advised FIB Capital that the Underwriters do not
intend to confirm sales to any account over which they exercise discretionary
authority in excess of % of the number of Trust Preferred Securities offered
hereby. In connection with this offering, the Underwriters and selling group
members may engage in transactions that stabilize, maintain or otherwise affect
the price of the Trust Preferred Securities. Specifically, the Underwriters may
overallot the offering, creating a syndicate short position. The Underwriters
may bid for and purchase Trust Preferred Securities. These activities may
stabilize or maintain the market price of the Trust Preferred Securities above
independent market levels. The Underwriters are not required to engage in these
activities and may end these activities at any time.
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LEGAL MATTERS
Certain matters of Delaware law relating to the validity of the Trust
Preferred Securities, the enforceability of the Trust Agreement and the
formation of FIB Capital will be passed upon by Richards, Layton & Finger, P.A.,
Wilmington, Delaware, special counsel to First Interstate and FIB Capital. The
validity of the Guarantee and the Junior Subordinated Debentures will be passed
upon for the Company by Holland & Hart LLP, Salt Lake City, Utah, counsel to the
Company. Certain legal matters in connection with this offering will be passed
upon for the Underwriters by Dorsey & Whitney LLP, Minneapolis, Minnesota.
Holland & Hart LLP and Dorsey & Whitney LLP will rely on the opinions of
Richards, Layton & Finger, P.A., as to matters of Delaware law. Certain matters
relating to United States federal income tax considerations will be passed upon
for the Company by Holland & Hart LLP.
EXPERTS
The consolidated financial statements of the Company as of December 31,
1996, and 1995, and for each of the years in the three-year period ended
December 31, 1996, have been included in this Prospectus and in the Registration
Statement in reliance on the report of KPMG Peat Marwick LLP, independent
certified public accountants, appearing elsewhere herein, given on the authority
of said firm as experts in accounting and auditing.
ADDITIONAL INFORMATION
First Interstate and FIB Capital have jointly filed with the Securities and
Exchange Commission (the "Commission") a Registration Statement on Form S-1
(together with all amendments and exhibits thereto, the "Registration
Statement") under the Securities Act, with respect to the offering of the
securities offered hereby. This Prospectus does not contain all of the
information set forth in the Registration Statement, certain parts of which are
omitted in accordance with the rules and regulations of the Commission. For
further information with respect to the Company, FIB Capital and the securities
offered hereby, reference is made to the Registration Statement and the exhibits
and schedules filed as a part thereof or incorporated by reference therein,
which may be inspected at the public reference facilities of the Commission, at
the addresses set forth below. Statements made in this Prospectus concerning the
contents of any documents referred to herein are not necessarily complete, and
in each instance are qualified in all respects by reference to the copy of such
document filed as an exhibit to the Registration Statement.
First Interstate is subject to certain informational requirements of the
Exchange Act, and in accordance therewith files certain reports and other
information with the Commission. Reports and other information filed by First
Interstate can be inspected and copies of such material can be obtained at
prescribed rates from the Public Reference Section of the Commission, 450 Fifth
Street, N.W., Room 1024, Judiciary Plaza, Washington, D.C. 20549, and at the
following Regional Offices of the Commission: Chicago Regional Office, Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661; and New
York Regional Office, 7 World Trade Center, Suite 1300, New York, New York
10048. The Commission also maintains a Web site (http://www.sec.gov) at which
reports and other information regarding First Interstate may be accessed.
No separate financial statements of FIB Capital have been included herein.
First Interstate and FIB Capital do not consider such financial statements
material to holders of the Trust Preferred Securities because FIB Capital is a
newly formed special purpose entity, has no operating history or independent
operations and is not engaged in and does not propose to engage in any activity
other than holding as trust assets the Junior Subordinated Debentures and
issuing the Trust Securities. See "Prospectus Summary-- FIB Capital,"
"Description of the Trust Preferred Securities," "Description of Junior
Subordinated Debentures" and "Description of Guarantee."
The Company intends to furnish to the holders of the Trust Preferred
Securities annual reports containing financial statements audited by an
independent auditing firm and to make available quarterly reports for the first
three quarters of each fiscal year containing unaudited financial information.
100
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENT
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Independent Auditors' Report............................................................................... F-1
Consolidated Balance Sheets as of June 30, 1997 (unaudited) and December 31, 1996
and 1995................................................................................................. F-2
Consolidated Statements of Income for the six months ended June 30, 1997 and 1996 (unaudited) and for the
years ended December 31, 1996, 1995 and 1994............................................................. F-3
Consolidated Statements of Stockholders' Equity for the six months ended June 30, 1997 (unaudited) and for
the years ended December 31, 1996, 1995 and 1994......................................................... F-4
Consolidated Statements of Cash Flows for the six months ended June 30, 1997 and 1996 (unaudited) and for
the years ended December 31, 1996, 1995 and 1994......................................................... F-5
Notes to Consolidated Financial Statements................................................................. F-7
</TABLE>
101
<PAGE>
INDEPENDENT AUDITORS' REPORT
[LOGO]
The Board of Directors and Stockholders
First Interstate BancSystem, Inc.:
We have audited the accompanying consolidated balance sheets of First
Interstate BancSystem, Inc. and subsidiaries as of December 31, 1996 and 1995,
and the related consolidated statements of income, stockholders' equity, and
cash flows for each of the years in the three-year period ended December 31,
1996. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of First
Interstate BancSystem, Inc. and subsidiaries at December 31, 1996 and 1995, and
the results of their operations and their cash flows for each of the years in
the three-year period ended December 31, 1996 in conformity with generally
accepted accounting principles.
As discussed in note 1, the Company changed its method of accounting for
investment securities to adopt the provisions of the Financial Accounting
Standards Board's Statement on Financial Accounting Standards No. 115,
ACCOUNTING FOR CERTAIN INVESTMENTS IN DEBT AND EQUITY SECURITIES, effective
January 1, 1994.
KPMG Peat Marwick LLP
Billings, Montana
March 21, 1997, except as to note 20,
which is as of October 7, 1997
F-1
<PAGE>
FIRST INTERSTATE BANCSYSTEM, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1996 1995
JUNE 30, ------------ ------------
1997
------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Cash and due from banks................................... $ 130,362 160,962 98,622
Federal funds sold........................................ 19,275 4,945 44,420
Interest-bearing deposits in banks........................ 37 6,545 23,040
Investment securities:
Available-for-sale...................................... 83,479 124,502 65,790
Held-to-maturity........................................ 313,452 279,069 192,947
------------ ------------ ------------
396,931 403,571 258,737
------------ ------------ ------------
Loans..................................................... 1,475,852 1,375,479 870,378
Less allowance for loan losses............................ 28,757 27,797 15,171
------------ ------------ ------------
Net loans................................................. 1,447,095 1,347,682 855,207
------------ ------------ ------------
Premises and equipment, net............................... 58,976 58,183 32,540
Accrued interest receivable............................... 21,066 19,573 14,344
Goodwill and other intangibles, net of accumulated
amortization of $7,284 at June 30, 1997 (unaudited) and
$5,971 in 1996 and $4,594 in 1995....................... 34,160 39,010 10,221
Other real estate owned, net.............................. 1,098 1,546 1,349
Deferred tax asset........................................ 6,629 4,921 4,432
Other assets.............................................. 15,722 16,899 8,303
------------ ------------ ------------
$ 2,131,351 2,063,837 1,351,215
------------ ------------ ------------
------------ ------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Noninterest bearing..................................... $ 353,189 385,371 230,136
Interest bearing........................................ 1,319,846 1,294,053 868,933
------------ ------------ ------------
Total deposits............................................ 1,673,035 1,679,424 1,099,069
------------ ------------ ------------
Federal funds purchased................................... 61,900 13,450 3,125
Securities sold under repurchase agreements............... 129,538 129,137 104,898
Accounts payable and accrued expenses..................... 19,497 18,027 13,396
Other borrowed funds...................................... 37,272 13,071 5,494
Long-term debt............................................ 56,184 64,667 15,867
------------ ------------ ------------
Total liabilities......................................... 1,977,426 1,917,776 1,241,849
------------ ------------ ------------
Stockholders' equity:
Non-voting noncumulative 8.53% preferred stock without
par value; authorized 100,000 shares; issued and
outstanding 20,000 shares in 1996 and 1997............ 20,000 20,000 --
Common stock without par value; authorized 20,000,000
shares; issued and outstanding 7,888,644 shares in
1997, 7,913,072 shares in 1996 and 7,791,040 shares in
1995.................................................. 8,350 8,941 6,692
Retained earnings....................................... 125,205 116,613 102,281
Unrealized holding gain on investment securities
available-for-sale, net............................... 370 507 393
------------ ------------ ------------
Total stockholders' equity................................ 153,925 146,061 109,366
------------ ------------ ------------
$ 2,131,351 2,063,837 1,351,215
------------ ------------ ------------
------------ ------------ ------------
Book value per common share............................... $ 16.98 15.93 14.04
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-2
<PAGE>
FIRST INTERSTATE BANCSYSTEM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1996 1995 1994
SIX MONTHS ENDED JUNE --------- --------- ---------
30,
------------------------
1996
1997 -----------
----------- (UNAUDITED)
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Interest income:
Interest and fees on loans.......................... $ 68,233 44,600 99,882 83,577 65,778
Interest and dividends on investment securities:
Taxable........................................... 10,762 6,931 15,343 12,147 12,790
Exempt from Federal taxes......................... 527 498 982 783 331
Interest on deposits with banks..................... 97 225 376 368 35
Interest on Federal funds sold...................... 711 600 1,342 2,095 1,296
----------- ----------- --------- --------- ---------
Total interest income........................... 80,330 52,854 117,925 98,970 80,230
----------- ----------- --------- --------- ---------
Interest expense:
Interest on deposits................................ 27,470 19,456 42,122 35,898 25,246
Interest on Federal funds purchased................. 1,085 259 1,043 1,008 690
Interest on securities sold under repurchase
agreements........................................ 2,811 2,106 4,508 3,560 1,814
Interest on other borrowed funds.................... 519 141 318 298 187
Interest on long-term debt.......................... 2,488 589 2,028 1,182 514
----------- ----------- --------- --------- ---------
Total interest expense.......................... 34,373 22,551 50,019 41,946 28,451
----------- ----------- --------- --------- ---------
Net interest income............................. 45,957 30,303 67,906 57,024 51,779
Provision for loan losses............................. 2,281 1,152 3,844 1,629 1,344
----------- ----------- --------- --------- ---------
Net interest income after provision for loan
losses........................................ 43,676 29,151 64,062 55,395 50,435
Other operating income:
Income from fiduciary activities.................... 2,022 1,523 3,161 2,619 2,542
Service charges on deposit accounts................. 4,910 3,518 7,752 6,532 5,883
Data processing..................................... 3,667 3,822 7,324 6,196 4,746
Other service charges, commissions, and fees........ 1,939 1,293 2,857 2,535 2,268
Investment securities gains (losses), net........... 73 2 18 (6) 69
Other income........................................ 874 582 2,815 888 879
----------- ----------- --------- --------- ---------
Total other operating income.................... 13,485 10,740 23,927 18,764 16,387
----------- ----------- --------- --------- ---------
Other operating expenses:
Salaries and wages.................................. 14,202 9,897 21,789 18,917 16,565
Employee benefits................................... 3,832 2,663 5,742 4,777 4,614
Occupancy, net...................................... 3,081 2,040 4,505 3,916 3,546
Furniture and equipment............................. 3,754 2,751 6,249 5,244 4,558
Other real estate expense (income), net............. (115) (159) (214) (586) (457)
FDIC insurance...................................... 101 1 5 1,127 2,008
Other expenses...................................... 11,132 6,014 15,319 12,583 10,393
----------- ----------- --------- --------- ---------
Total other operating expenses.................. 35,987 23,207 53,395 45,978 41,227
----------- ----------- --------- --------- ---------
Income before income taxes............................ 21,174 16,684 34,594 28,181 25,595
Income tax expense.................................... 8,080 6,414 13,351 10,844 9,861
----------- ----------- --------- --------- ---------
Net income...................................... $ 13,094 10,270 21,243 17,337 15,734
----------- ----------- --------- --------- ---------
----------- ----------- --------- --------- ---------
Net income applicable to common stock................. $ 12,247 10,270 20,818 17,337 15,734
----------- ----------- --------- --------- ---------
----------- ----------- --------- --------- ---------
Net income per common share........................... $ 1.54 1.31 2.64 2.21 2.00
----------- ----------- --------- --------- ---------
----------- ----------- --------- --------- ---------
Weighted average common shares outstanding............ 7,936,708 7,802,892 7,881,024 7,843,644 7,850,188
----------- ----------- --------- --------- ---------
----------- ----------- --------- --------- ---------
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
FIRST INTERSTATE BANCSYSTEM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
UNREALIZED TOTAL
PREFERRED COMMON RETAINED HOLDING GAINS STOCKHOLDERS'
STOCK STOCK EARNINGS (LOSSES), NET EQUITY
----------- ----------- ----------- --------------- -------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1993........................ $ -- 8,119 76,044 -- 84,163
Effect of change in accounting for investment
securities January 1, 1994........................ -- -- -- 122 122
Common stock transactions:
69,932 shares retired............................. -- (950) -- -- (950)
28,056 shares issued.............................. -- 362 -- -- 362
Cash dividends declared ($0.40 per common share).... -- -- (3,101) -- (3,101)
Increase in unrealized loss on available-for-sale
investment securities, net........................ -- -- -- (1,058) (1,058)
Net income.......................................... -- -- 15,734 -- 15,734
----------- ----------- ----------- ------ -------------
Balance at December 31, 1994........................ -- 7,531 88,677 (936) 95,272
Common stock transactions:
72,524 shares retired............................. -- (1,197) -- -- (1,197)
26,908 shares issued.............................. -- 358 -- -- 358
Cash dividends declared ($0.48 per common share).... -- -- (3,733) -- (3,733)
Increase in unrealized gains on available-for-sale
investment securities, net........................ -- -- -- 1,329 1,329
Net income.......................................... -- -- 17,337 -- 17,337
----------- ----------- ----------- ------ -------------
Balance at December 31, 1995........................ -- 6,692 102,281 393 109,366
Preferred stock issuance:
20,000 shares issued.............................. 20,000 -- -- -- 20,000
Preferred stock issuance costs...................... -- -- (458) -- (458)
Common stock transactions:
65,808 shares retired............................. -- (1,229) -- -- (1,229)
187,840 shares issued............................. -- 3,478 -- -- 3,478
Cash dividends declared:
Common ($0.77 per share).......................... -- -- (6,028) -- (6,028)
Preferred (8.53%)................................. -- -- (425) -- (425)
Increase in unrealized gains on available-for-sale
investment securities, net........................ -- -- -- 114 114
Net income.......................................... -- -- 21,243 -- 21,243
----------- ----------- ----------- ------ -------------
Balance at December 31, 1996........................ 20,000 8,941 116,613 507 146,061
Common stock transactions, unaudited:
35,216 shares retired............................. -- (730) -- -- (730)
10,788 shares issued.............................. -- 139 -- -- 139
Cash dividends declared, unaudited:
Common ($0.46 per share).......................... -- -- (3,656) -- (3,656)
Preferred (8.53%)................................. -- -- (846) -- (846)
Increase in unrealized gains on available-for-sale
investment securities, net, unaudited............. -- -- -- (137) (137)
Net income, unaudited............................... -- -- 13,094 -- 13,094
----------- ----------- ----------- ------ -------------
Balance at June 30, 1997, unaudited................. $ 20,000 8,350 125,205 370 153,925
----------- ----------- ----------- ------ -------------
----------- ----------- ----------- ------ -------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
FIRST INTERSTATE BANCSYSTEM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS YEAR ENDED DECEMBER 31,
ENDED JUNE 30, --------------------------------
------------------------ 1996 1995 1994
1996 ---------- --------- ---------
-----------
1997 (UNAUDITED)
-----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income........................................ $ 13,094 10,270 21,243 17,337 15,734
Adjustments to reconcile net income to net cash
provided by operating activities:
Provisions for loan and other real estate
losses........................................ 2,277 1,152 3,823 1,601 1,354
Depreciation and amortization................... 4,153 2,239 5,654 4,272 3,612
Net premium amortization on investment
securities.................................... 289 614 591 1,111 1,688
Loss (gain) on sale of investments, net......... (73) (2) (18) 6 (69)
Gain on sale of other real estate owned......... (190) (218) (335) (527) (578)
(Gain) loss on sales of premises and
equipment..................................... (14) 1 (2) -- 13
Provision for deferred income taxes............. (1,655) (1,476) (528) 129 232
Increase in interest receivable................. (1,493) (1,344) (507) (1,828) (1,440)
Decrease (increase) in other assets............. 1,177 250 (1,767) 2,069 (4,621)
Increase (decrease) in accounts payable and
accrued expenses.............................. 615 (501) 394 3,553 7
----------- ----------- ---------- --------- ---------
Net cash provided by operating activities..... 18,180 10,985 28,548 27,723 15,932
----------- ----------- ---------- --------- ---------
Cash flows from investing activities:
Net change in interest-bearing deposits........... 6,508 22,007 16,495 (22,012) (1,028)
Purchases of investment securities:
Held-to-maturity................................ (333,219) (40,994) (200,361) (88,857) (73,771)
Available-for-sale.............................. (237) (11,509) (63,477) (12,254) (13,329)
Proceeds from maturities and paydowns of
investment securities:
Held-to-maturity................................ 298,953 53,773 150,313 116,267 70,497
Available-for-sale.............................. 9,579 8,754 62,460 12,901 11,437
Sales of investment securities:
Available-for-sale.............................. 31,158 -- 5,523 -- 117
Extensions of credit to customers, net of
repayments...................................... (99,191) (71,642) (98,142) (70,149) (86,118)
Recoveries on loans charged-off................... 1,652 649 1,987 1,016 889
Proceeds from sale of other real estate owned..... 879 482 1,121 1,236 1,942
Acquisitions of subsidiaries, net of cash and cash
equivalents acquired............................ -- -- 24,840 (10,465) --
Capital distribution from (contribution to)
building joint venture.......................... -- -- 150 (2,100) --
Capital expenditures, net......................... (3,619) (3,013) (6,324) (4,675) (3,391)
----------- ----------- ---------- --------- ---------
Net cash used in investing activities........... (87,537) (41,493) (105,415) (79,092) (92,755)
----------- ----------- ---------- --------- ---------
</TABLE>
F-5
<PAGE>
FIRST INTERSTATE BANCSYSTEM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS YEAR ENDED DECEMBER 31,
ENDED JUNE 30, --------------------------------
------------------------ 1996 1995 1994
1996 ---------- --------- ---------
-----------
(UNAUDITED)
1997
-----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from financing activities:
Net increase in deposits.......................... $ (6,389) (16,582) 56,674 76,354 3,064
Net increase (decrease) in federal funds and
repurchase agreements........................... 48,851 11,984 (15,938) 29,148 23,860
Advances (repayments) of other borrowed funds,
net............................................. 24,201 3,814 (871) (1,594) --
Borrowings of long-term debt...................... 1,750 424 66,939 13,484 122
Repayment of long-term debt....................... (10,233) (6,057) (22,410) (3,066) (1,526)
Proceeds from issuance of common stock............ 139 277 3,478 358 362
Proceeds from issuance of preferred stock, net of
issuance costs.................................. -- -- 19,542 -- --
Payments to retire common stock................... (730) (931) (1,229) (1,197) (950)
Dividends paid on common stock.................... (3,656) (2,957) (6,028) (3,733) (3,101)
Dividends paid on preferred stock................. (846) -- (425) -- --
----------- ----------- ---------- --------- ---------
Net cash provided by (used in) financing
activities.................................. 53,087 (10,028) 99,732 109,754 21,831
----------- ----------- ---------- --------- ---------
Net (decrease) increase in cash and cash
equivalents....................................... (16,270) (40,536) 22,865 58,385 (54,,992)
Cash and cash equivalents at beginning
of year........................................... 165,907 143,042 143,042 84,657 139,649
----------- ----------- ---------- --------- ---------
Cash and cash equivalents at end of period.......... $ 149,637 102,506 165,907 143,042 84,657
----------- ----------- ---------- --------- ---------
----------- ----------- ---------- --------- ---------
</TABLE>
Noncash Investing and Financing Activities--The Company transferred loans of
$668, $227 and $106 to other real estate owned in 1996, 1995 and 1994,
respectively. The Company transferred loans of $237 and $197 to other real
estate owned during the six months ended June 30, 1997 and 1996, respectively.
On January 1, 1994, the Company reclassified investment securities of $46,237 as
available-for-sale.
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
FIRST INTERSTATE BANCSYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company provides a full range of banking services to individual and
corporate customers through its bank and non-bank subsidiaries and their branch
offices throughout the states of Montana and Wyoming. The Company is subject to
competition from other financial institutions and financial service providers.
The Company is subject to the regulations of certain Federal and state agencies
and undergoes periodic examinations by those regulatory authorities. The
following is a summary of significant accounting policies utilized by the
Company:
PRINCIPLES OF CONSOLIDATION. The consolidated financial statements include
the accounts of First Interstate BancSystem, Inc. (Parent Company) and its
operating subsidiaries: First Interstate Bank in Montana, formerly known as
First Interstate Bank of Commerce in Montana (FIB Montana), First Interstate
Bank in Wyoming, formerly known as First Interstate Bank of Commerce in Wyoming
(FIB Wyoming), First Interstate Bank of Montana, N.A., First Interstate Bank of
Wyoming, N.A., Mountain Bank of Whitefish, doing business as First Interstate
Bank, First Interstate Bank, fsb and Commerce Financial, Inc. All material
intercompany transactions have been eliminated in consolidation.
BASIS OF PRESENTATION. The financial statements have been prepared in
conformity with generally accepted accounting principles. In preparing the
financial statements, management is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities as of the date of the
balance sheet and revenues and expenses for the period. Actual results could
differ significantly from those estimates.
Material estimates that are particularly susceptible to significant change
in the near-term relate to the determination of the allowance for loan losses
and the valuation of real estate acquired in connection with foreclosures or in
satisfaction of loans. In connection with the determination of the allowances
for loan losses and real estate owned, management obtains independent appraisals
for significant properties. Management believes that the allowances for losses
on loans and real estate owned are adequate. In addition, various regulatory
agencies, as an integral part of their examination process, periodically review
the allowances for losses on loans and real estate owned. While management uses
available information to recognize losses on loans and real estate owned, future
additions to the allowances may be necessary based on changes in economic
conditions which may affect the borrowers' ability to pay or regulatory
requirements.
In the opinion of management, the unaudited interim consolidated statements
contain all adjustments (all of which are of normal recurring nature) necessary
to present fairly the consolidated financial position at June 30, 1997 and the
results of consolidated operations and cash flows for each of the six month
periods ending June 30, 1997 and 1996, respectively.
In addition to purchasing and selling Federal funds for their own account,
the Company purchases and sells Federal funds as an agent. These and other
assets held in an agency or fiduciary capacity are not assets of the Company
and, accordingly, are not included in the accompanying consolidated financial
statements.
CASH AND CASH EQUIVALENTS. For purposes of reporting cash flows, cash and
cash equivalents include cash on hand, amounts due from banks and federal funds
sold for one day periods.
At December 31, 1996 the Company was required to have aggregate reserves in
the form of cash on hand and deposits with the Federal Reserve Bank of
approximately $16,060. Also, an additional $23,800
F-7
<PAGE>
FIRST INTERSTATE BANCSYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
compensating balance was maintained with the Federal Reserve Bank to mitigate
the payment of service charges for check clearing services.
INVESTMENT SECURITIES. In May 1993, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards ("SFAS") No. 115,
"Accounting for Certain Investments in Debt and Equity Securities". The Company
adopted the provisions of the statement as of January 1, 1994. There were no
cumulative adjustments to income as a result of adopting the statement, however,
the beginning balance of stockholders' equity was increased by $122 (which is
net of $66 in deferred income taxes) to reflect net unrealized gains on
securities classified as available-for-sale previously carried at the lower of
amortized cost or market. The Company's accounting policy for investment
securities is as follows:
TRADING ACCOUNT ASSETS
Trading account assets consist of debt and equity securities that are
bought and held principally for the purpose of selling them in the near term
and are reported at fair value, with unrealized gains and losses included in
earnings. The Company carried no trading account assets during 1996 and
1995.
INVESTMENT SECURITIES HELD-TO-MATURITY AND INVESTMENT SECURITIES
AVAILABLE-FOR-SALE
Management determines the appropriate classification of debt securities
at the time of purchase. Debt securities are classified as held-to-maturity
when the Company has the positive intent and ability to hold the securities
to maturity. Held-to-maturity securities are stated at amortized cost.
Debt securities not classified as held-to-maturity or trading account
assets are classified as available-for-sale. In addition, all equity
securities not classified as trading are classified as available-for-sale.
Available-for-sale securities are stated at fair value, with the unrealized
gains and losses, net of deferred taxes, reported as a separate component of
stockholders' equity.
The amortized cost of debt securities classified as held-to-maturity or
available-for-sale is adjusted for amortization of premiums over the estimated
average life of the security, accretion of discounts to maturity, or in the case
of mortgage-backed securities, over the estimated life of the security. Such
amortization and accretion is included in interest income with interest and
dividends. Realized gains and losses, and declines in value judged to be
other-than-temporary, are included in investment securities gains (losses). The
cost of securities sold is based on the specific identification method.
LOANS. Loans are reported at the principal amount outstanding. Interest is
calculated by using the simple interest method on the daily balance of the
principal amount outstanding.
Loans on which the accrual of interest has been discontinued are designated
as nonaccrual loans. Accrual of interest on loans is discontinued either when
reasonable doubt exists as to the full, timely collection of interest or
principal or when a loan becomes contractually past due by ninety days or more
with respect to interest or principal unless such past due loan is well secured
and in the process of collection. When a loan is placed on nonaccrual status,
interest previously accrued but not collected is reversed against current period
interest income. Interest accruals are resumed on such loans only when they are
brought fully current with respect to interest and principal and when, in the
judgement of management, the loans are estimated to be fully collectible as to
both principal and interest.
F-8
<PAGE>
FIRST INTERSTATE BANCSYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Renegotiated loans are those loans on which concessions in terms have been
granted because of a borrower's financial difficulty.
Significant loan origination fees, net of related costs, are recognized over
the lives of the related loans as an adjustment of yield.
ALLOWANCE FOR LOAN LOSSES. The allowance for loan losses is established
through a provision for loan losses which is charged to expense. Loans are
charged against the allowance for loan losses when management believes that the
collectibility of the principal is unlikely or, with respect to consumer
installment loans, according to an established delinquency schedule. The
allowance balance is an amount that management believes will be adequate to
absorb losses inherent in existing loans, leases and commitments to extend
credit, based on evaluations of the collectibility and prior loss experience of
loans, leases and commitments to extend credit. The evaluations take into
consideration such factors as changes in the nature and volume of the portfolio,
overall portfolio quality, loan concentrations, specific problem loans, leases
and commitments, and current and anticipated economic conditions that may affect
the borrowers' ability to pay.
The Company may also establish a reserve for losses on specific loans which
are deemed to be impaired. Groups of small balance homogeneous basis loans
(generally consumer loans) are evaluated for impairment collectively. A loan is
considered impaired when, based upon current information and events, it is
probable that the Company will be unable to collect, on a timely basis, all
principal and interest according to the contractual terms of the loan's original
agreement. When a specific loan is determined to be impaired, the allowance for
loan losses is increased through a charge to expense for the amount of the
impairment. The amount of the impairment is measured using cash flows discounted
at the loan's effective interest rate, except when it is determined that the
sole source of repayment for the loan is the operation or liquidation of the
underlying collateral. In such cases, the current value of the collateral,
reduced by anticipated selling costs, will be used to measure impairment instead
of discounted cash flows. The Company's impaired loans are those non-consumer
loans which are non-accrual or a troubled debt restructuring. Interest income is
recognized on impaired loans only to the extent that cash payments are received.
The Company's existing policies for evaluating the adequacy of the allowance for
loan losses and policies for discontinuing the accrual of interest on loans are
used to establish the basis for determining whether a loan is impaired.
GOODWILL AND OTHER INTANGIBLES. The excess of purchase price over the fair
value of net assets from acquisitions ("Goodwill") is being amortized using the
straight-line method over periods of primarily 15 to 25 years. The Company
assesses the recoverability of Goodwill by determining whether the unamortized
balance related to an acquisition can be recovered through undiscounted future
cash flows over the remaining amortization period.
Core deposit intangibles represent the intangible value of depositor
relationships resulting from deposit liabilities assumed in acquisitions and are
amortized using an accelerated method based on an estimated runoff of the
related deposits, not exceeding 10 years. Purchased mortgage servicing rights
("MSR") represent the value of purchased rights to service mortgage loans. The
MSR are amortized in proportion to and over the period of estimated net
servicing income not expected to exceed 12 years. MSR are evaluated for
impairment based on the MSR current fair value.
F-9
<PAGE>
FIRST INTERSTATE BANCSYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PREMISES AND EQUIPMENT. Buildings, furniture and equipment are stated at
cost less accumulated depreciation. Depreciation is provided over estimated
useful lives of 5 to 50 years for buildings and improvements and 3 to 15 years
for furniture and equipment using straight-line methods. Leasehold improvements
are amortized using straight-line methods over the shorter of the estimated
useful lives of the improvements or the terms of the related leases.
Consolidated depreciation expense was $4,182 in 1996, $3,541 in 1995 and $3,318
in 1994.
LONG-LIVED ASSETS. The Company adopted the provisions of SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets for Long-Lived Assets to Be
Disposed Of," on January 1, 1996. The statement requires long-lived assets and
certain identifiable intangibles (e.g. premises, Goodwill, core deposit
intangibles) be reviewed for impairment whenever events or changes in
circumstances indicate the carrying amount of an asset may not be recoverable.
An asset is deemed impaired if the sum of the expected future cash flows is less
than the carrying amount of the asset. The amount of the impairment loss is
based on the assets' fair value, which may be estimated by discounting the
expected future cash flows. The adoption of SFAS No. 121 did not have a material
impact on the Company's consolidated financial position or consolidated results
of operations.
OTHER REAL ESTATE OWNED. Real estate acquired in satisfaction of loans is
carried at the lower of the recorded investment in the property at the date of
foreclosure or its current fair value less selling cost ("Net Realizable
Value"). The value of the underlying loan is written down to the fair market
value of the real estate acquired by a charge to the allowance for loan losses,
if necessary, at the date of foreclosure. A provision to the real estate owned
valuation allowance is charged against other real estate expense for any current
or subsequent write-downs to Net Realizable Value. Operating expenses of such
properties, net of related income, and gains on sales are included in other real
estate expenses.
SELF-INSURANCE. The Company is self-insured with respect to employee
medical claims up to specified limits per claim. The Company has an accrual of
approximately $560 for estimated unsettled and incurred but not reported claims.
INCOME FROM FIDUCIARY ACTIVITIES. Consistent with industry practice, income
for trust services is recognized on the basis of cash received. However, use of
this method in lieu of accrual basis accounting does not materially affect
reported earnings.
INCOME TAXES. The Parent Company and its subsidiaries have elected to be
included in a consolidated Federal income tax return. For state income tax
purposes, the combined taxable income of the Parent Company and its subsidiaries
is apportioned between the states in which operations take place. Federal and
state income taxes attributable to the subsidiaries, computed on a separate
return basis, are paid to or received from the Parent Company.
Deferred tax assets and liabilities are reflected at currently enacted
income tax rates applicable to the period in which the deferred tax assets or
liabilities are expected to be realized or settled. As changes in tax laws or
rates are enacted, deferred tax assets and liabilities are adjusted through the
provision for income taxes.
PER SHARE DATA. Earnings per common share is calculated by dividing net
income less preferred stock dividends by the weighted average number of common
shares and common share equivalents outstanding
F-10
<PAGE>
FIRST INTERSTATE BANCSYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
during the period. Book value per common share is calculated by dividing total
stockholders' equity less preferred stock by the number of common shares
outstanding at the end of the year.
STOCK-BASED COMPENSATION. The Company adopted SFAS No. 123, "Accounting for
Stock-Based Compensation," as of January 1, 1996. SFAS No. 123 encourages all
entities to adopt a new method of accounting to measure compensation cost of all
employee stock compensation plans based on the estimated fair value of the award
at the date it is granted. Companies are, however, allowed to continue to
measure compensation cost for those stock-based employee compensation plans
using the intrinsic value-based method of accounting, which generally results in
compensation expense only when the exercise price is less than the fair value of
the underlying stock at the date of grant. Companies that elect to remain with
the intrinsic value method are required to disclose in a footnote to the
financial statements pro forma net income and earnings per share, as if the fair
value method of SFAS No. 123 had been adopted. The Company has elected to
continue accounting for stock-based employee compensation plans in accordance
with Accounting Principles Board No. 25 (see note 12).
RECLASSIFICATIONS. Certain reclassifications have been made to the 1995 and
1994 amounts to conform to the 1996 presentation.
(2) REGULATORY MATTERS
The Federal Reserve Board (FRB) and the Federal Deposit Insurance
Corporation (FDIC) have issued risk-based capital guidelines to more accurately
consider the credit risk inherent in the assets and off-balance-sheet activities
of a bank or bank holding company and their assessment of capital adequacy.
Under the guidelines, total capital has been redefined as core capital and
supplementary capital. Core capital consists primarily of stockholders' equity,
while supplementary capital consists primarily of the allowance for loan losses
(not to exceed 1.25% of risk weighted assets). Under the guidelines, all
intangible assets are to be excluded from the components of core capital. The
definition of assets has also been modified to include items on and off the
balance sheet, with each item being assigned a predefined credit "risk-weight".
At December 31, 1996, the Company's consolidated risk-based capital (core
plus supplementary) and core capital ratios, calculated in accordance with the
guidelines, were 10.0% and 7.4%, respectively.
In addition to the risk-based guidelines discussed above, the FRB and FDIC
also established a leverage ratio defined as core capital as a percentage of
average tangible assets. The Company's consolidated leverage ratio at December
31, 1996 was 5.3%.
The Federal Deposit Insurance Corporation Improvement Act (FDICIA), which
was enacted on December 19, 1992, substantially revises the bank regulatory and
funding provisions of the Federal Deposit Insurance Act and makes revisions to
several other federal banking statutes.
Among other things, FDICIA requires the federal banking agencies to
implement differing levels of oversight depending on the institution's capital
category, as defined in the regulations. A depository institution's capital
category will depend upon where its capital ratios are in relation to various
relevant capital measures, which include the risk-based capital and leverage
ratios. The capital categories represent minimum standards that will generally
be applied to all institutions. However, the regulatory agencies may impose
higher minimum standards on individual institutions or may downgrade an
institution at the
F-11
<PAGE>
FIRST INTERSTATE BANCSYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(2) REGULATORY MATTERS (CONTINUED)
applicable agency's discretion. FDICIA generally restricts a depository
institution from making any capital distribution (including payment of a
dividend) or paying any management fee to its holding company if the depository
institution would thereafter be undercapitalized (less than 8% total risk-based
capital or 4% core capital and 3% leverage). At December 31, 1996, the Company's
and bank subsidiaries' capital ratios meet or exceed the highest capital
category, which requires total risk-based capital of at least 10%, core capital
of at least 6% and a leverage ratio of at least 5%.
(3) INVESTMENT SECURITIES
The amortized cost and approximate market values of investment securities
are summarized as follows:
AVAILABLE-FOR-SALE
<TABLE>
<CAPTION>
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
DECEMBER 31, 1996 COST GAINS LOSSES VALUE
- ----------------------------------------------------------------- ---------- ------------- ------------- -----------
<S> <C> <C> <C> <C>
U.S. Treasury securities......................................... $ 45,272 153 -- 45,425
Obligations of U.S. Government agencies.......................... 54,919 340 (114) 55,145
States, county and municipal securities.......................... 7,717 295 (2) 8,010
Corporate securities............................................. 2,484 7 (5) 2,486
Other mortgage-backed securities................................. 3,703 16 (10) 3,709
Other securities................................................. 9,607 120 -- 9,727
---------- --- --- -----------
Total........................................................ $ 123,702 931 (131) 124,502
---------- --- --- -----------
---------- --- --- -----------
</TABLE>
HELD-TO-MATURITY
<TABLE>
<CAPTION>
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
DECEMBER 31, 1996 COST GAINS LOSSES VALUE
- ----------------------------------------------------------------- ---------- ------------- ------------- -----------
<S> <C> <C> <C> <C>
U.S. Treasury securities......................................... $ 169,196 445 (731) 168,910
Obligations of U.S. Government agencies.......................... 89,600 158 (179) 89,579
States, county and municipal securities.......................... 11,793 152 (12) 11,933
Corporate securities............................................. 8,480 1 (27) 8,454
---------- --- --- -----------
Total........................................................ $ 279,069 756 (949) 278,876
---------- --- --- -----------
---------- --- --- -----------
</TABLE>
Gross gains of $18 and no gross losses were realized on the sale of
available-for-sale securities in 1996.
F-12
<PAGE>
FIRST INTERSTATE BANCSYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(3) INVESTMENT SECURITIES (CONTINUED)
AVAILABLE-FOR-SALE
<TABLE>
<CAPTION>
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
DECEMBER 31, 1995 COST GAINS LOSSES VALUE
- ------------------------------------------------------------------ ----------- ------------- ------------- -----------
<S> <C> <C> <C> <C>
Obligations of U.S. Government agencies........................... $ 48,288 576 (163) 48,701
States, county and municipal securities........................... 7,392 382 (146) 7,628
Corporate securities.............................................. 808 -- (3) 805
Other mortgage-backed securities.................................. 3,206 12 (10) 3,208
Other securities.................................................. 5,448 14 (14) 5,448
----------- --- --- -----------
Total......................................................... $ 65,142 984 (336) 65,790
----------- --- --- -----------
----------- --- --- -----------
</TABLE>
HELD-TO-MATURITY
<TABLE>
<CAPTION>
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
DECEMBER 31, 1995 COST GAINS LOSSES VALUE
- ----------------------------------------------------------------- ---------- ------------- ------------- -----------
<S> <C> <C> <C> <C>
U.S. Treasury securities......................................... $ 121,086 248 (493) 120,841
Obligations of U.S. Government agencies.......................... 51,599 314 (137) 51,776
States, county and municipal securities.......................... 11,102 206 (34) 11,274
Corporate securities............................................. 9,160 7 (21) 9,146
---------- --- --- -----------
Total........................................................ $ 192,947 775 (685) 193,037
---------- --- --- -----------
---------- --- --- -----------
</TABLE>
Gross gains of $6 and gross losses of $12 were realized on the sale of
available-for-sale securities in 1995. Gross gains of $70 and gross losses of $1
were realized on the sale of securities in 1994.
Maturities of investment securities by contractual maturity at December 31,
1996 are shown below. Maturities of securities do not reflect rate repricing
opportunities present in many adjustable rate mortgage-backed and corporate
securities, nor do they reflect expected shorter maturities based upon early
prepayments of principal.
<TABLE>
<CAPTION>
AVAILABLE-FOR-SALE HELD-TO-MATURITY
------------------------ -------------------------
AMORTIZED ESTIMATED AMORTIZED ESTIMATED
DECEMBER 31, 1996 COST MARKET VALUE COST MARKET VALUE
- ------------------------------------------------------------- ---------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Within one year.............................................. $ 3,720 3,719 109,646 109,538
After one but within five years.............................. 68,523 68,809 159,029 158,868
After five years but within ten years........................ 11,277 11,557 5,150 5,239
After ten years.............................................. 26,301 26,410 619 620
---------- ------------ ----------- ------------
Total...................................................... 109,821 110,495 274,444 274,265
---------- ------------ ----------- ------------
Collateralized mortgage obligations and other................ 13,881 14,007 4,625 4,611
---------- ------------ ----------- ------------
Total...................................................... $ 123,702 124,502 279,069 278,876
---------- ------------ ----------- ------------
---------- ------------ ----------- ------------
</TABLE>
F-13
<PAGE>
FIRST INTERSTATE BANCSYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(3) INVESTMENT SECURITIES (CONTINUED)
There are no significant concentrations of investments at December 31, 1996
(greater than 10 percent of stockholders' equity) in any individual security
issuer, except for U.S. Government or agency-backed securities.
At December 31, 1996 and 1995, $18,148 and $15,028, respectively, of
variable rate securities are included in investment securities.
Investment securities with amortized cost of $263,459 and $182,976 at
December 31, 1996 and 1995, respectively, were pledged to secure public
deposits, securities sold under repurchase agreements and for other purposes
required or permitted by law. The approximate market value of securities pledged
at December 31, 1996 and 1995 was $263,608 and $182,970, respectively. All
securities sold under repurchase agreements are with customers and generally
mature on the next banking day. The Company retains possession of the underlying
securities sold under repurchase agreements.
(4) LOANS
Major categories and balances of loans included in the loan portfolios are
as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1996 1995
------------ ---------
<S> <C> <C>
Agricultural(1)...................................................... $ 143,572 113,827
Commercial(2)........................................................ 471,458 311,982
Real estate.......................................................... 274,141 142,097
Consumer(3).......................................................... 484,865 300,711
Other loans, including overdrafts.................................... 1,443 1,761
------------ ---------
Total loans.......................................................... $ 1,375,479 870,378
------------ ---------
------------ ---------
</TABLE>
- ------------------------
(1) Includes loans to agricultural customers secured by real estate of $52,689
and $43,826 at December 31, 1996 and 1995, respectively.
(2) Includes loans secured by commercial real estate properties of $198,570 and
$145,380 at December 31, 1996 and 1995, respectively.
(3) Includes loans secured by second mortgages on real estate of $74,607 and
$53,046 at December 31, 1996 and 1995, respectively.
At December 31, 1996, the Company had no concentrations of loans which
exceeded 10% of total loans other than the categories disclosed above. The
Company has no loans or loan commitments to highly leveraged companies.
Nonaccrual loans amounted to $6,822 and $3,632 at December 31, 1996 and
1995, respectively. If interest on nonaccrual loans had been accrued, such
income would have approximated $405 and $318, respectively. Loans contractually
past due ninety days or more aggregating $6,432 on December 31, 1996 and $1,711
on December 31, 1995 were on accrual status. Such loans are deemed adequately
secured and in the process of collection.
F-14
<PAGE>
FIRST INTERSTATE BANCSYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(4) LOANS (CONTINUED)
Included in the nonaccrual loans at December 31, 1996 and 1995 are $5,122
and $3,231, respectively, of loans which are considered impaired. Of this
amount, an impairment allowance of $436 and $407, respectively, is included in
the Company's allowance for loan losses. The average recorded investment in
impaired loans for the years ended December 31, 1996 and 1995 was approximately
$3,870 and $3,080, respectively. If interest on impaired loans had been accrued,
the amount of interest income on impaired loans during 1996 and 1995 would have
been approximately $357 and $283, respectively.
Also included in total loans at December 31, 1996 and 1995 are loans with a
carrying value of $1,763 and $1,755, respectively, the terms of which have been
modified in troubled debt restructurings. There were no nonaccrual loans
included in restructured debt at December 31, 1996. Restructured debt includes
nonaccrual loans of $15 at December 31, 1995. During the years then ended, the
recognized interest income on restructured loans approximated $158 and $161,
respectively. At December 31, 1996, there were no commitments to lend additional
funds to borrowers whose existing loans have been restructured or are classified
as nonaccrual.
Most of the Company's business activity is with customers within the state
of Montana and Wyoming. Loans where the customers or related collateral are out
of the Company's trade area are not significant and management's anticipated
credit losses arising from these transactions compare favorably with the
Company's credit loss experience on its loan portfolio as a whole.
Certain executive officers and directors of the Company and certain
corporations and individuals related to such persons, incurred indebtedness in
the form of loans, as customers, of approximately $11,474 at December 31, 1996
and $12,802 at December 31, 1995 (including outstanding loans of new executive
officers and directors in 1996). During 1996, new loans and advances on existing
loans of $2,700 were funded and repayments totaled $4,028. These loans were made
on substantially the same terms, including interest rates and collateral, as
those prevailing at the time for comparable risk of collectibility.
(5) ALLOWANCE FOR LOAN LOSSES
A summary of changes in the allowance for loan losses follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Balance at beginning of year.................................... $ 15,171 13,726 13,373
Allowance of acquired banks..................................... 10,553 917 --
Provision charged to operating expense.......................... 3,844 1,629 1,344
Less loans charged-off.......................................... (3,758) (2,117) (1,880)
Add back recoveries of loans previously charged-off............. 1,987 1,016 889
--------- --------- ---------
Balance at end of year.......................................... $ 27,797 15,171 13,726
--------- --------- ---------
--------- --------- ---------
</TABLE>
F-15
<PAGE>
FIRST INTERSTATE BANCSYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(6) PREMISES AND EQUIPMENT
Premises and equipment and related accumulated depreciation are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1996 1995
--------- ---------
<S> <C> <C>
Land..................................................................... $ 8,350 5,747
Buildings and improvements............................................... 53,609 33,032
Furniture and equipment.................................................. 24,689 20,406
--------- ---------
86,648 59,185
Less accumulated depreciation............................................ 28,465 26,645
--------- ---------
Premises and equipment, net.............................................. $ 58,183 32,540
--------- ---------
--------- ---------
</TABLE>
The Parent Company and a branch office lease premises from an affiliated
partnership (see note 13).
(7) OTHER REAL ESTATE OWNED
Other real estate owned (OREO) consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1996 1995
--------- ---------
<S> <C> <C>
Other real estate.......................................................... $ 2,057 1,903
Less allowance for OREO losses............................................. 511 554
--------- ---------
$ 1,546 1,349
--------- ---------
--------- ---------
</TABLE>
A summary of transactions in the allowance for OREO losses follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Balance at beginning of year....................................... $ 554 1,048 1,448
Provision (reversal) during the year............................... (21) (28) 10
Property writedowns................................................ (16) (449) (410)
Losses on sales.................................................... (6) (17) --
--------- --------- ---------
Balance at end of year............................................. $ 511 554 1,048
--------- --------- ---------
--------- --------- ---------
</TABLE>
F-16
<PAGE>
FIRST INTERSTATE BANCSYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(7) OTHER REAL ESTATE OWNED (CONTINUED)
The changes in the balance of other real estate for the years ending
December 31, 1996 and 1995 are summarized as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------
1996 1995
-------------------- --------------------
<S> <C> <C> <C> <C>
Balance, beginning of year............................... $ 1,903 2,851
Add other real estate of banks acquired.................. 294 --
Add transfers from loans................................. 668 227
Cash proceeds from sales................................. $ 1,121 1,236
Less gains on sales...................................... 335 527
--------- --------- --------- ---------
Net basis of OREO sold................................... (786) (709)
Property writedowns...................................... (22) (466)
--------- ---------
Balance, end of year..................................... $ 2,057 1,903
--------- ---------
--------- ---------
</TABLE>
(8) CASH SURRENDER VALUE OF LIFE INSURANCE
The Company maintains key-executive life insurance policies on certain
principal shareholders. Under the key-executive insurance, the Company receives
the cash surrender value if the policy is terminated, or receives all benefits
payable upon the death of the insured. The aggregate face amount of
key-executive insurance policies was $7,000 at December 31, 1996. Cash surrender
values are recorded net of outstanding policy loans, since the Company has no
current plans for repayment. Outstanding policy loans at December 31, 1996 and
1995 are $2,540 and $1,875, respectively. The net cash surrender value of key-
executive insurance policies included in other assets is $278 and $792 at
December 31, 1996 and 1995, respectively.
During 1994, the Company provided insurance contracts for certain key
officers. The net cash surrender value of these contracts is $1,365 and $1,218
at December 31, 1996 and 1995, respectively, and is included in other assets.
Upon retirement, the officers have the option of entering into a split-dollar
contract with the Company providing insurance coverage for the difference
between the Company's cash surrender value and the face amount of the policy.
(9) DEPOSITS
Deposits are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1996 1995
------------ ----------
<S> <C> <C>
Noninterest bearing demand......................................... $ 385,371 230,136
Interest bearing:
Demand........................................................... 316,964 180,742
Savings.......................................................... 396,845 263,062
Time, $100 and over.............................................. 122,242 90,257
Time, other...................................................... 458,002 334,872
------------ ----------
Total interest bearing........................................... 1,294,053 868,933
------------ ----------
$ 1,679,424 1,099,069
------------ ----------
------------ ----------
</TABLE>
F-17
<PAGE>
FIRST INTERSTATE BANCSYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(9) DEPOSITS (CONTINUED)
Maturities of time deposits of $100 or more are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
1996
------------
<S> <C>
Three months or less............................................................ $ 40,819
Three through six months........................................................ 24,792
Six months through twelve months................................................ 43,839
Over twelve months.............................................................. 12,792
------------
$ 122,242
------------
------------
</TABLE>
Interest expense on time deposits of $100 or more was $5,514, $4,581 and
$2,846 for the years ended December 31, 1996, 1995 and 1994, respectively.
(10) INCOME TAXES
Income tax expense (benefit) consists of the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Current:
Federal....................................................... $ 12,004 9,194 8,318
State......................................................... 1,875 1,521 1,311
--------- --------- ---------
13,879 10,715 9,629
--------- --------- ---------
Deferred:
Federal....................................................... (492) 134 214
State......................................................... (36) (5) 18
--------- --------- ---------
(528) 129 232
--------- --------- ---------
$ 13,351 10,844 9,861
--------- --------- ---------
--------- --------- ---------
</TABLE>
Total income tax expense differs from the amount computed by applying the
Federal income tax rate of 35 percent in 1996, 1995 and 1994 to income before
income taxes as a result of the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Tax expense at the statutory tax rate........................... $ 12,108 9,863 8,958
Increase (decrease) in tax resulting from:
Tax-exempt income............................................. (472) (374) (116)
State income tax, net of Federal income tax benefit........... 1,190 985 864
Amortization of nondeductible Goodwill........................ 318 289 137
Other, net.................................................... 207 81 18
--------- --------- ---------
$ 13,351 10,844 9,861
--------- --------- ---------
--------- --------- ---------
</TABLE>
F-18
<PAGE>
FIRST INTERSTATE BANCSYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(10) INCOME TAXES (CONTINUED)
The tax effects of temporary differences between the financial statement
carrying amounts and tax bases of assets and liabilities that give rise to
significant portions of the net deferred tax asset relate to the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1996 1995
--------- ---------
<S> <C> <C>
Deferred tax assets:
Loans, principally due to allowance for loan losses.................... $ 6,561 5,616
Other real estate owned, principally due to differences in bases....... 118 499
Employee benefits...................................................... 828 845
Other.................................................................. 45 --
--------- ---------
Net deferred tax assets.............................................. 7,552 6,960
Deferred tax liabilities:
Fixed assets, principally differences in bases and depreciation........ (926) (830)
Investment in joint venture partnership, principally due to differences
in depreciation of partnership assets................................ (904) (845)
Prepaid amounts........................................................ (138) (299)
Investment securities, principally differences in bases................ (370) (146)
Investment securities available-for-sale............................... (293) (254)
Other.................................................................. -- (154)
--------- ---------
Net deferred tax liabilities............................................. (2,631) (2,528)
--------- ---------
Net deferred income tax asset............................................ $ 4,921 4,432
--------- ---------
--------- ---------
</TABLE>
In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred tax
assets will not be realized. The ultimate realization of deferred tax assets is
dependent upon the existence of, or generation of, taxable income in the periods
which those temporary differences are deductible. Management considers the
scheduled reversal of deferred tax liabilities, taxes paid in carryback years,
projected future taxable income, and tax planning strategies in making this
assessment. Based upon the level of historical taxable income and projections
for future taxable income over the periods which the deferred tax assets are
deductible, at December 31, 1996 management continues to believe it is more
likely than not that the Company will realize the benefits of these deductible
differences.
F-19
<PAGE>
FIRST INTERSTATE BANCSYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(11) LONG-TERM DEBT AND OTHER BORROWED FUNDS
A summary of long-term debt follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1996 1995
--------- ---------
<S> <C> <C>
Parent Company:
Revolving term loan due December 31, 2003 at variable interest rates (7.53% weighted
average rate at December 31, 1996), with semi-annual reductions in overall credit line of
$2,000 each June 30 and December 31...................................................... $ 39,200 --
7.5% subordinated notes, unsecured, interest payable semi-annually, due in increasing
annual principal payments beginning October 1, 2002 in the amount of $3,400 with final
maturity on October 1, 2006.............................................................. 20,000 --
Various unsecured notes payable to former stockholders at various rates of 5.80% to 8.25%
due in annual installments aggregating $486, plus interest, through March 1999........... 1,196 1,117
Term notes payable to bank, refinanced in 1996............................................. -- 9,750
Subsidiaries:
Various notes payable to Federal Home Loan Bank of Seattle, interest due monthly at various
rates and maturities (weighted average rate of 6.52% at December 31, 1996)............... 4,271 --
Note payable to Federal Home Loan Bank of Seattle repaid in 1996........................... -- 5,000
--------- ---------
$ 64,667 15,867
--------- ---------
--------- ---------
</TABLE>
Maturities of long-term debt for the years ending December 31 follow:
<TABLE>
<S> <C>
1997............................................................... $ 1,686
1998............................................................... 4,419
1999............................................................... 4,642
2000............................................................... 4,096
2001............................................................... 4,000
Thereafter......................................................... 45,824
---------
$ 64,667
---------
---------
</TABLE>
The proceeds from issuance of the revolving term note, subordinated notes
and preferred stock (see note 15) were utilized to fund acquisitions (see note
18).
In connection with its borrowings, the Company has agreed to certain
restrictions dealing with, among other things, minimum capital ratios, the sale
or issuance of capital stock and the maximum amount of dividends.
F-20
<PAGE>
FIRST INTERSTATE BANCSYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(11) LONG-TERM DEBT AND OTHER BORROWED FUNDS (CONTINUED)
The Company has a revolving term loan with its primary lender in the amount
of $42,000 at December 31, 1996. The available borrowing amount is reduced by
$2,000 on a semi-annual basis commencing in June 1997. The revolving facility
requires an annual commitment fee of 0.15% on the unadvanced amount. The Company
may elect at various dates either prime or a Eurodollar rate plus 1.75%. The
term note payable is secured by 100% of the outstanding capital stock of the
Company's bank subsidiaries.
The notes payable to Federal Home Loan Bank of Seattle (FHLB) are secured by
FHLB stock, unencumbered residential real estate mortgages and certain
mortgage-backed securities.
The following is a summary of other borrowed funds, all of which mature
within one year:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1996 1995
--------- ---------
<S> <C> <C>
Interest bearing demand notes issued to the United States Treasury, secured by investment
securities................................................................................... $ 11,071 5,494
5.45% interest bearing demand note issued to Federal Home Loan Bank of Seattle secured by
unencumbered real estate mortgages and certain mortgages and certain mortgage-backed
securities................................................................................... 2,000 --
--------- ---------
$ 13,071 5,494
--------- ---------
--------- ---------
</TABLE>
The Company has Federal funds lines of credit with third parties amounting
to $50,000, subject to funds availability. The Company also has been approved
for participation in the Federal Home Loan Bank Cash management Advance Program
for borrowings up to approximately $39,500.
(12) EMPLOYEE BENEFIT PLANS
PROFIT SHARING PLAN. The Company has a noncontributory profit sharing plan.
To be eligible for the profit sharing plan, an employee must complete one year
of employment and 1,000 hours or more of service. Quarterly contributions are
determined by the Company's Board of Directors, but are not to exceed, on an
individual basis, the lesser of 25% of compensation or $30. Contributions to
this plan were $839, $685 and $620 in 1996, 1995 and 1994, respectively.
SAVINGS PLAN. In addition, the Company has a contributory employee savings
plan. Eligibility requirements for this plan are the same as those for the
profit sharing plan as discussed in the preceding paragraph. Employee
participation in the plan is at the option of the employee. The Company
contributes $1.25 for each $1.00 of employee contributions up to 4% of the
participating employee's compensation. The recorded expense related to this plan
was $814 in 1996, $703 in 1995 and $648 in 1994.
STOCK OPTION PLAN. The Company has a Nonqualified Stock Option and Stock
Appreciation Rights Plan for senior officers of the Company. All options and
stock appreciation rights ("SAR's") granted have an exercise price of book value
of the Company prior to 1993 and appraised value thereafter. Each option granted
under the Plan can be immediately exercised up to ten years from the date of
grant. SAR's are granted and exercised in tandem with options. The stock issued
in conjunction with the exercise of options
F-21
<PAGE>
FIRST INTERSTATE BANCSYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(12) EMPLOYEE BENEFIT PLANS (CONTINUED)
is subject to a shareholder agreement (see note 15). The consolidated expense
related to this plan was $72 in 1996, $170 in 1995 and $387 in 1994.
Information with respect to the Company's stock options and SAR's are as
follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------
1996 1995 1994
-------------------- -------------------- --------------------
OPTIONS SAR'S OPTIONS SAR'S OPTIONS SAR'S
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Outstanding, beginning of year................... 116,752 79,236 120,464 82,140 128,536 93,320
Granted.......................................... 16,600 16,600 16,500 16,500 15,400 11,552
Exercised........................................ (17,516) (17,516) (20,212) (19,404) (23,472) (22,732)
--------- --------- --------- --------- --------- ---------
Outstanding, end of year......................... 115,836 78,320 116,752 79,236 120,464 82,140
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
</TABLE>
Information with respect to the range of stock option exercise prices are as
follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------
1996 1995 1994
----------------- ----------------- -----------------
<S> <C> <C> <C>
Granted during year...................................... $ 17.86 - $17.86 $ 15.80 - $15.80 $ 12.40 - $12.40
Exercised during year.................................... $ 4.30 - $ 6.16 $ 4.30 - $ 5.88 $ 4.05 - $ 5.36
Outstanding, end of year................................. $ 4.56 - $17.86 $ 4.30 - $15.80 $ 4.30 - $12.40
</TABLE>
Stratification and additional detail regarding the options outstanding at
December 31, 1996 are as follows (all exercisable):
<TABLE>
<CAPTION>
EXERCISE NUMBER WEIGHTED-AVERAGE WEIGHTED-AVERAGE
PRICE RANGE OUTSTANDING REMAINING LIFE EXERCISE PRICE
- ----------------- ----------- ---------------- -----------------
<S> <C> <C> <C>
$4.56 - $7.61 50,936 2.97 years $ 6.13
$11.40 - $17.86 64,900 7.73 years 14.41
</TABLE>
The Company has elected to continue to measure compensation costs as
prescribed by APB Opinion No. 25 and, accordingly, does not recognize
compensation expense on the options granted where the exercise price is equal to
appraisal value at the date of grant. SFAS No. 123 requires the Company to
disclose pro forma information reflecting net income and earnings per share had
the Company elected to record compensation expense based on the fair value
method described in SFAS No. 123. The fair value of the options was estimated at
the grant date using a Black-Scholes option pricing model. Option valuation
models require the input of highly subjective assumptions. Because the Company's
common stock and stock options have characteristics significantly different from
listed securities and traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its stock options.
The following weighted-average assumptions were used in the valuation model:
risk-free interest rates of 5.65% and 7.78% in 1996 and 1995; dividend yield of
2.50% and 2.67% in 1996 and 1995; and expected life of options of 10 years in
both 1996 and 1995.
F-22
<PAGE>
FIRST INTERSTATE BANCSYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(12) EMPLOYEE BENEFIT PLANS (CONTINUED)
Pro forma disclosures, listed below, include options granted in 1996 and
1995 and are not likely to be representative of the pro forma disclosures for
future years. The estimated fair value of the options is expensed in the year
granted as all options are vested upon grant.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996 1995
- --------------------------------------------------------------------------------------------- --------- ---------
<S> <C> <C>
Pro forma net income......................................................................... $ 21,102 17,211
Pro forma net income applicable to common stock.............................................. 20,677 17,211
Pro forma earnings per common share.......................................................... 2.62 2.19
--------- ---------
--------- ---------
</TABLE>
(13) COMMITMENTS AND CONTINGENCIES
In the normal course of business, the Company is involved in various claims
and litigation. In the opinion of management, following consultation with legal
counsel, the ultimate liability or disposition thereof will not have a material
adverse effect on the consolidated financial condition or results of operations.
The Parent Company and the Billings office of FIB Montana are the anchor
tenants in a building owned by a joint venture partnership in which FIB Montana
is one of the two partners, and has a 50% partnership interest. The investment
in the partnership is accounted for using the equity method. Indebtedness of the
partnership in the amount of $10,827 at December 31, 1996 is recourse to the
partners. Total rents paid to the partnership were $814 in 1996, $711 in 1995
and $690 in 1994.
The Company also leases certain premises and equipment from third parties
under operating leases. Total rental expense to third parties was $1,019 in
1996, $1,425 in 1995 and $1,267 in 1994.
The total future minimum rental commitments required under operating leases
that have initial or remaining noncancellable lease terms in excess of one year
at December 31, 1996 are as follows:
<TABLE>
<CAPTION>
THIRD
PARTIES PARTNERSHIP TOTAL
--------- ------------- ---------
<S> <C> <C> <C>
For the year ending December 31:
1997......................................................... $ 328 814 1,142
1998......................................................... 273 814 1,087
1999......................................................... 268 814 1,082
2000......................................................... 196 814 1,010
2001......................................................... 171 814 985
Thereafter................................................... 1,476 3,053 4,529
--------- ----- ---------
$ 2,712 7,123 9,835
--------- ----- ---------
--------- ----- ---------
</TABLE>
In September 1983, the Company entered into a franchise agreement
("Franchise Agreement") with First Interstate Bancorp (Bancorp), a Los Angeles
based bank holding company which was acquired by Wells Fargo & Company April 1,
1996. Under the Franchise Agreement, the Company was Bancorp's exclusive
licensee in the states of Montana and Wyoming. On May 24, 1996, the Company
entered into a trademark license agreement granting the Company and its
subsidiaries an exclusive, nontransferable license to use the "First Interstate"
name and logo in the states of Montana, Wyoming, North Dakota,
F-23
<PAGE>
FIRST INTERSTATE BANCSYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(13) COMMITMENTS AND CONTINGENCIES (CONTINUED)
South Dakota and Nebraska. By mutual agreement of the parties, the franchise
agreement between the Company and Wells Fargo & Company was terminated.
(14) FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
The Company is a party to financial instruments with off-balance-sheet risk
in the normal course of business to meet the financing needs of its customers.
These financial instruments include commitments to extend credit and standby
letters of credit. These instruments involve, to varying degrees, elements of
credit and interest rate risk in excess of amounts recorded in the consolidated
balance sheet.
Standby letters of credit and financial guarantees written are conditional
commitments issued by the Company to guarantee the performance of a customer to
a third party. Most commitments extend less than two years. The credit risk
involved in issuing letters of credit is essentially the same as that involved
in extending loan facilities to customers. The Company holds various collateral
supporting those commitments for which collateral is deemed necessary.
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the commitment contract.
Commitments generally have fixed expiration dates or other termination clauses
and may require payment of a fee. Since many of the commitments are expected to
expire without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements. The Company evaluates each customer's
creditworthiness on a case-by-case basis. The amount of collateral obtained is
based on management's credit evaluation of the customer. Collateral held varies
but may include accounts receivable, inventory, property, plant and equipment,
and income-producing commercial properties.
The Company's exposure to credit loss in the event of nonperformance by the
other party to the financial instrument for commitments to extend credit and
standby letters of credit is represented by the contractual amount of those
instruments. At December 31, 1996, stand-by letters of credit in the amount of
$19,884, were outstanding. Commitments to extend credit to existing and new
borrowers approximated $284,259 at December 31, 1996, which includes $32,760 on
unused credit card lines.
(15) CAPITAL STOCK
On September 26, 1996 ("Issuance Date"), the Company issued 20,000 shares of
no par noncumulative perpetual preferred stock ("Preferred Stock") at a price of
$1,000. The holders of Preferred Stock are entitled to receive in any fiscal
year, when and if declared by the Company's Board of Directors, dividends in
cash at the rate of $85.30 per share, up to the seventh anniversary of the
Issuance Date. From and after the seventh anniversary of the Issuance Date, the
holders of Preferred Stock shall be entitled to receive in any fiscal year, when
and if declared by the Company's Board of Directors, dividends in cash at a
variable rate equal to 250 basis points over the high yield of the 30-day,
10-year or 30-year U.S. Treasury Bills. The Preferred Stock is not redeemable
prior to the seventh anniversary of the Issuance Date. The Company may, at its
option, redeem all or any part of the Preferred Stock at any time on or after
the seventh anniversary of the Issuance Date, subject to the approval of the
FRB, at a price of $1.00 per share, plus accrued but unpaid dividends to the
date fixed for redemption.
At December 31, 1996 nearly all shares of common stock held by shareholders
are subject to shareholder's agreements (Agreements). Under the Agreements, the
Company has a right of first refusal
F-24
<PAGE>
FIRST INTERSTATE BANCSYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(15) CAPITAL STOCK (CONTINUED)
to repurchase shares from the shareholder at minority interest appraised value
in the event of a proposed sale of shares to a third party, death, disability or
termination of employment. Additional shares purchased by officers, directors
and employees after 1993 are also subject to repurchase at the Company's
discretion.
(16) CONDENSED FINANCIAL INFORMATION (PARENT COMPANY ONLY)
Following is condensed financial information of First Interstate BancSystem,
Inc.:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1996 1995
---------- ----------
<S> <C> <C>
CONDENSED BALANCE SHEETS:
Assets:
Cash and cash equivalents............................................................... $ 2,905 1,890
Investment in subsidiaries, at equity:
FIB Montana........................................................................... 88,438 85,951
FIB Wyoming........................................................................... 29,196 28,145
First Interstate Bank of Montana, N.A.(1)............................................. 35,052 --
First Interstate Bank of Wyoming, N.A.(1)............................................. 38,909 --
Mountain Bank of Whitefish (doing business as First Interstate Bank)(1)............... 7,965 --
First Interstate Bank, fsb............................................................ 1,988 --
Non-bank subsidiary--Commerce Financial, Inc.......................................... 408 381
---------- ----------
Total investment in subsidiaries, at equity....................................... 201,956 114,477
Goodwill, net of accumulated amortization............................................... 2,633 2,927
Other assets............................................................................ 4,068 4,009
---------- ----------
$ 211,562 123,303
---------- ----------
---------- ----------
Liabilities and stockholders' equity:
Other liabilities....................................................................... $ 5,105 3,070
Long-term debt.......................................................................... 60,396 10,867
---------- ----------
65,501 13,937
Stockholders' equity.................................................................... 145,554 108,973
Unrealized gain on investment securities available-for-sale, net........................ 507 393
---------- ----------
$ 211,562 123,303
---------- ----------
---------- ----------
</TABLE>
- ------------------------
(1) See Note 18 for further information regarding this entity.
F-25
<PAGE>
FIRST INTERSTATE BANCSYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(16) CONDENSED FINANCIAL INFORMATION (PARENT COMPANY ONLY) (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
CONDENSED STATEMENTS OF INCOME:
Dividends from subsidiary banks................................................ $ 19,529 10,993 10,029
Interest on note receivable from non-bank subsidiary........................... 15 32 41
Other interest income.......................................................... 143 30 159
Other income, primarily management fees from subsidiaries...................... 1,788 1,508 1,513
--------- --------- ---------
Total income................................................................... 21,475 12,563 11,742
--------- --------- ---------
Salaries and benefits.......................................................... 2,627 2,370 2,378
Interest expense............................................................... 1,919 1,010 514
Other operating expenses, net.................................................. 2,612 1,835 1,506
--------- --------- ---------
Total expenses................................................................. 7,158 5,215 4,398
--------- --------- ---------
Data Division income, net of operating expenses................................ 1,990 1,667 1,307
--------- --------- ---------
Earnings before income tax benefits............................................ 16,307 9,015 8,651
Income tax benefit............................................................. 979 565 343
--------- --------- ---------
Income before undistributed earnings of subsidiaries........................... 17,286 9,580 8,994
--------- --------- ---------
Undistributed earnings of subsidiaries......................................... 3,957 7,757 6,740
--------- --------- ---------
Net income..................................................................... $ 21,243 17,337 15,734
--------- --------- ---------
--------- --------- ---------
CONDENSED STATEMENTS OF CASH FLOWS:
Cash flows from operating activities:
Net income................................................................... $ 21,243 17,337 15,734
Adjustments to reconcile net income to cash provided by operating activities:
Undistributed earnings of subsidiaries..................................... (3,957) (7,757) (6,740)
Depreciation and amortization.............................................. 311 312 306
Provision for deferred income taxes........................................ 11 348 177
Deposit on bank acquisition................................................ -- 250 (250)
Other, net................................................................. 802 967 (1,432)
--------- --------- ---------
Net cash provided by operating activities...................................... 18,410 11,457 7,795
--------- --------- ---------
Cash flows from investing activities:
Net decrease in advances to non-bank subsidiary.............................. 133 154 1,040
Purchase of investments...................................................... -- -- (8,959)
Maturities of investments.................................................... -- 7,500 2,512
Increase in premises and equipment........................................... (2) (1,095) (28)
Capitalization of de novo subsidiary......................................... (2,000) -- --
Acquisitions of subsidiaries, net............................................ (80,393) (17,478) --
--------- --------- ---------
Net cash used in investing activities.......................................... (82,262) (10,919) (5,435)
--------- --------- ---------
</TABLE>
F-26
<PAGE>
FIRST INTERSTATE BANCSYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(16) CONDENSED FINANCIAL INFORMATION (PARENT COMPANY ONLY) (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Cash flows from financing activities:
Borrowings of long-term debt................................................. $ 66,939 8,484 122
Repayments of long-term debt................................................. (17,410) (3,066) (1,526)
Dividends paid on common stock............................................... (6,028) (3,733) (3,101)
Redemptions of common stock.................................................. (1,229) (1,197) (950)
Issuance of common stock..................................................... 3,478 358 362
Proceeds from issuance of preferred stock, net of issuance costs............. 19,542 -- --
Dividends paid on preferred stock............................................ (425) -- --
--------- --------- ---------
Net cash provided by (used in) financing activities............................ 64,867 846 (5,093)
--------- --------- ---------
Net increase (decrease) in cash and cash equivalents........................... 1,015 1,384 (2,733)
Cash and cash equivalents, beginning of year................................... 1,890 506 3,239
--------- --------- ---------
Cash and cash equivalents, end of year......................................... $ 2,905 1,890 506
--------- --------- ---------
--------- --------- ---------
</TABLE>
NONCASH OPERATING, INVESTING AND FINANCING ACTIVITIES.
During 1996, the Parent Company transferred other assets of $1,014 to its
subsidiary, FIB Montana.
(17) DISCLOSURE ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, DISCLOSURES ABOUT FAIR
VALUE OF FINANCIAL INSTRUMENTS (Statement 107), requires the Company to disclose
the estimated fair values of its financial instruments. Most of the Company's
assets and liabilities are considered financial instruments. Many of the
Company's financial instruments lack an available trading market, and it is the
practice and intent of the Company to hold its financial instruments to
maturity. As a result, significant assumptions and present value calculations
were used in determining estimated fair values.
For financial instruments bearing a variable interest rate, it is presumed
that recorded book values are reasonable estimates of fair value. The methods
and significant assumptions used to estimate fair values for the various
financial instruments are set forth below.
CASH AND CASH EQUIVALENTS. Due to the liquid nature of the instruments,
the carrying value of due from banks and federal funds sold approximates
market value.
INTEREST-BEARING DEPOSITS IN BANK. Due to the short-term nature of the
instrument, the carrying value of the interest-bearing deposit in bank
approximates market value.
INVESTMENT SECURITIES. Fair values of investment securities are based
on quoted market prices or dealer quotes. If a quoted market price is not
available, fair value is estimated using quoted market prices for similar
securities.
LOANS. Fair values are estimated for portfolios of loans with similar
financial characteristics. Loans are segregated by type such as commercial,
real estate, and consumer. Each loan category is
F-27
<PAGE>
FIRST INTERSTATE BANCSYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(17) DISCLOSURE ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
further segmented into fixed and adjustable rate interest terms and by
performing and nonperforming categories.
The fair value of performing fixed rate loans is calculated by discounting
scheduled cash flows through estimated maturity using estimated market discount
rates that reflect the credit and interest rate risk inherent in the loan
category using the U.S. Treasury yield curve adjusted to bond equivalent yields.
The estimate of maturity is based on the Company's historical experience with
repayments for each loan classification, modified, as required, by an estimate
of the effect of current economic and lending conditions. For performing real
estate loans, fair value is estimated by discounting contractual cash flows
adjusted for prepayment estimates using discount rates based on secondary market
sources.
The fair value of adjustable rate loans was considered to be the carrying
value of these instruments due to the frequent repricing, provided there had
been no change in credit quality since origination.
DEPOSITS, FEDERAL FUNDS PURCHASED AND SECURITIES SOLD UNDER REPURCHASE
AGREEMENTS. The fair value of demand deposits, savings accounts, federal funds
purchased and securities sold under repurchase agreements is the amount payable
on demand at the reporting date, due to the liquid nature of the instruments and
the frequent repricing.
The fair value of fixed-maturity certificates of deposit is estimated using
external market rates currently offered for deposits with similar remaining
maturities.
OTHER BORROWED FUNDS AND LONG-TERM DEBT. The term note payable and
revolving term loan bear interest at a floating market rate and, as such, the
carrying amounts are deemed to reflect fair value. The carrying value of the
interest bearing demand notes to the United States Treasury is deemed an
approximation of fair value due to the frequent repayment and repricing at
market rates. Due to the recent issuance date of the subordinated notes and
relative stability of interest rates in the intervening period, book value is
estimated to approximate fair value.
COMMITMENTS TO EXTEND CREDIT AND STANDBY LETTERS OF CREDIT. The fair value
of commitments to extend credit can be estimated using the fees currently
charged to enter into similar agreements, taking into account the remaining
terms of the agreements and the present creditworthiness of the counterparties.
It is not practicable to estimate fair value because information is not readily
available to support estimates of fees which can be expected to be realized on
these instruments.
Loan fees for the year ended December 31, 1996 and 1995, including fees
charged for commitments to extend credit and standby letters of credit, were
approximately $4,981 and $4,070, respectively, of which a significant portion
related to real estate refinancing.
LIMITATIONS. Fair value estimates are made at a specific point in time,
based on relevant market information and information about the financial
instrument. These estimates do not reflect any premium or discount that could
result from offering for sale at one time the entire holdings of a particular
instrument. Because no market exists for a significant portion of the financial
instruments, fair value estimates are based on judgments regarding comparable
market interest rates, future expected loss experience, current economic
conditions, risk characteristics of various financial instruments, and other
factors. These estimates are subjective in nature and involve uncertainties and
matters of significant
F-28
<PAGE>
FIRST INTERSTATE BANCSYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(17) DISCLOSURE ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
judgment and therefore cannot be determined with precision. Changes in
assumptions could significantly affect the estimates.
Fair value estimates are based on existing on- and off-balance sheet
financial instruments without attempting to estimate the value of anticipated
future business and the value of assets and liabilities that are not considered
financial instruments. For example, the Company has a trust department and data
processing division that contribute net operating income annually. Neither
department is considered a financial instrument, and their value has not been
incorporated into the fair value estimates. Other significant assets that are
not considered financial instruments include the mortgage subsidiary, deferred
tax assets, and property and equipment. In addition, the tax effect of the
difference between the fair value and carrying value of financial instruments
can have a significant effect on fair value estimates and have not been
considered in the estimates.
A summary of the estimated fair values of financial instruments follows:
<TABLE>
<CAPTION>
1996 1995
-------------------------- --------------------------
CARRYING ESTIMATED CARRYING ESTIMATED
AS OF DECEMBER 31, AMOUNT FAIR VALUE AMOUNT FAIR VALUE
- --------------------------------------------------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Financial assets:
Cash and short-term investments........................ $ 172,452 172,452 166,082 166,082
Securities available-for-sale.......................... 124,502 124,502 65,790 65,790
Securities held-to-maturity............................ 279,069 278,876 192,947 193,037
Net loans.............................................. 1,347,682 1,344,336 855,207 863,480
------------ ------------ ------------ ------------
Total financial assets................................... $ 1,923,705 1,920,166 1,280,026 1,288,389
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Financial liabilities:
Total deposits, excluding certificates................. $ 1,099,180 1,099,180 673,940 673,940
Certificates of deposit................................ 580,244 587,718 425,129 434,190
Federal funds purchased................................ 13,450 13,450 3,125 3,125
Securities sold under repurchase agreements............ 129,137 129,137 104,898 104,898
Other borrowed funds................................... 13,071 13,071 5,494 5,494
Long-term debt......................................... 64,667 64,667 15,867 15,867
------------ ------------ ------------ ------------
Total financial liabilities.............................. $ 1,899,749 1,907,223 1,228,453 1,237,514
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
(18) ACQUISITIONS AND EXPANSION
FIRST CITIZENS BANK OF BOZEMAN. On January 3, 1995, the Company acquired
all of the outstanding ownership of Citizens BancShares, Inc. ("CBI") and its
bank subsidiary, First Citizens Bank of Bozeman ("FCB") for $8,606. The
historical carrying value of the net assets of CBI as of the acquisition date
were $3,724. The transaction was accounted for as a purchase and, accordingly,
the consolidated statement of income for the year ended December 31, 1995
includes CBI's results of operations since the date of the purchase. CBI was
subsequently dissolved and FCB became a branch of FIB Montana.
FIRST NATIONAL PARK BANK. On May 19, 1995, the Company acquired all of the
outstanding ownership of First Park County Bancshares, Inc. ("FPCBI") and its
bank subsidiary, First National Park Bank
F-29
<PAGE>
FIRST INTERSTATE BANCSYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(18) ACQUISITIONS AND EXPANSION (CONTINUED)
("FNPB") for $8,872. The historical carrying value of the net assets of FPCBI as
of the acquisition date were $5,269. The transaction was accounted for as a
purchase and, accordingly, the consolidated statement of income for the year
ended December 31, 1995 includes FPCBI's results of operations since the date of
the purchase. FPCBI was subsequently dissolved and FNPB became a branch of FIB
Montana.
FIRST INTERSTATE BANK, FSB. In November 1995, the Company filed an
application with the Office of Thrift Supervision for permission to form a de
novo savings bank in Hamilton, Montana. Upon approval, the Company capitalized
the savings bank at $2,000 and opened the bank on December 12, 1996.
FIRST INTERSTATE BANK OF MONTANA, N.A. AND FIRST INTERSTATE BANK OF WYOMING,
N.A. On October 1, 1996, the Company acquired all of the outstanding ownership
of First Interstate Bank of Montana, N.A. (FIBNA-MT) and First Interstate Bank
of Wyoming, N.A. (FIBNA-WY). The transaction was accounted for as a purchase
and, accordingly, the consolidated statement of income for the year ended
December 31, 1996 includes FIBNA-MT's and FIBNA-WY's results of operations since
the date of purchase.
MOUNTAIN BANK OF WHITEFISH. On December 18, 1996, the Company acquired all
of the outstanding ownership of Mountain Bank of Whitefish, now doing business
as First Interstate Bank of Whitefish (FIB-Whitefish). The transaction was
accounted for as a purchase and, accordingly, the consolidated statement of
income for the year ended December 31, 1996 includes FIB-Whitefish's results of
operations since the date of purchase.
The premiums paid over the historical carrying value of net assets at the
respective dates of purchase were as follows:
<TABLE>
<CAPTION>
FIBNA-MT FIBNA-WY FIB-WHITEFISH TOTAL
----------- ----------- ------------- ---------
<S> <C> <C> <C> <C>
Cash consideration paid......................................... $ 34,622 37,809 7,962 80,393
Historical net assets carrying value............................ 19,557 16,416 3,994 39,967
----------- ----------- ------ ---------
Premium paid over historical carrying value..................... $ 15,065 21,393 3,968 40,426
----------- ----------- ------ ---------
----------- ----------- ------ ---------
</TABLE>
The increase (decrease) in net asset values as a result of estimated fair
value adjustments are as follows:
<TABLE>
<CAPTION>
FIBNA-MT FIBNA-WY FIB-WHITEFISH TOTAL
----------- ----------- ------------- ---------
<S> <C> <C> <C> <C>
Intangible assets:
Core deposit intangible....................................... $ 3,920 4,309 -- 8,229
Mortgage servicing rights..................................... -- 1,122 -- 1,122
Goodwill...................................................... 7,392 9,850 3,573 20,815
----------- ----------- ------ ---------
Total intangible assets..................................... 11,312 15,281 3,573 30,166
----------- ----------- ------ ---------
Premises and equipment.......................................... 3,780 6,327 837 10,944
Investment securities........................................... (27) -- 13 (14)
Allowance for loan losses....................................... -- -- (455) (455)
Other liabilities............................................... -- (215) -- (215)
----------- ----------- ------ ---------
$ 15,065 21,393 3,968 40,426
----------- ----------- ------ ---------
----------- ----------- ------ ---------
</TABLE>
F-30
<PAGE>
FIRST INTERSTATE BANCSYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(18) ACQUISITIONS AND EXPANSION (CONTINUED)
The premium paid and estimated fair value adjustments have been "pushed
down" to the acquired entities. The preliminary allocation of purchase price is
subject to change as fair value estimates are finalized.
The estimated fair value of net assets at the acquisition dates are
summarized as follows:
<TABLE>
<CAPTION>
FIBNA-MT FIBNA-WY FIB-WHITEFISH TOTAL
----------- ----------- ------------- ---------
<S> <C> <C> <C> <C>
Cash and due from banks........................................ $ 20,712 24,990 4,132 49,834
Federal funds sold............................................. 16,791 32,708 5,900 55,399
Investment securities available-for-sale....................... 1,301 59,014 3,304 63,619
Investment securities held-to-maturity......................... 25,325 10,749 -- 36,074
Loans.......................................................... 191,010 172,576 47,799 411,385
Allowance for loan losses...................................... (2,983) (7,076) (494) (10,553)
Premises and equipment......................................... 8,534 11,934 3,181 23,649
Goodwill....................................................... 7,392 9,850 3,573 20,815
Other intangibles.............................................. 3,920 5,431 -- 9,351
Other assets................................................... 4,394 4,004 3,542 11,940
----------- ----------- ------------- ---------
276,396 324,180 70,937 671,513
----------- ----------- ------------- ---------
Deposits....................................................... 195,484 273,805 54,392 523,681
Federal funds purchased........................................ 41,653 8,849 -- 50,502
Other liabilities.............................................. 2,374 1,532 312 4,218
Borrowed funds................................................. 2,263 2,185 8,271 12,719
----------- ----------- ------------- ---------
241,774 286,371 62,975 591,120
----------- ----------- ------------- ---------
Cash consideration paid........................................ $ 34,622 37,809 7,962 80,393
----------- ----------- ------------- ---------
----------- ----------- ------------- ---------
</TABLE>
F-31
<PAGE>
FIRST INTERSTATE BANCSYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(18) ACQUISITIONS AND EXPANSION (CONTINUED)
The information below presents on a pro forma basis, amounts as if FIBNA-MT,
FIBNA-WY, and FIB-Whitefish had been acquired as of January 1, 1996 and 1995 for
each year presented.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER
31, (UNAUDITED)
---------------------
1996 1995
---------- ---------
<S> <C> <C>
Interest income............................................................................ $ 151,721 142,827
Interest expense........................................................................... 65,404 61,260
---------- ---------
Net interest income........................................................................ 86,317 81,567
Provision for loan losses.................................................................. 4,955 1,629
---------- ---------
Net interest income after provision for loan losses........................................ 81,362 79,938
Investment security transactions........................................................... 284 9
Noninterest income......................................................................... 29,988 26,982
Noninterest expense........................................................................ (71,027) (69,008)
---------- ---------
Income before income taxes................................................................. 40,607 37,921
Income taxes............................................................................... 15,836 14,387
---------- ---------
Pro forma net income....................................................................... $ 24,771 23,534
---------- ---------
---------- ---------
Pro forma net income per common share...................................................... $ 2.93 2.78
---------- ---------
---------- ---------
</TABLE>
The unaudited pro forma information above has been prepared for comparative
purposes only and does not purport to be indicative of the actual results that
would have occurred if the operations had been combined during the periods
presented nor is it intended to be a projection of future results.
(19) ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED
In 1996, the FASB issued SFAS No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities," which
provides guidance on accounting for transfers and servicing of financial assets,
recognition and measurement of servicing assets and liabilities, financial
assets subject to prepayment, secured borrowings and collateral, and
extinguishment of liabilities.
SFAS No. 125 generally requires the Company to recognize as separate assets
the rights to service mortgage loans for others, whether the servicing rights
are acquired through purchases or loan originations. Servicing rights are
initially recorded at fair value based upon the present value of estimated
future cash flows. Subsequently, the servicing rights are assessed for
impairment, with impairment losses recognized in the statement of income in the
period the impairment occurs. For purposes of performing the impairment
evaluation, the related portfolio must be stratified on the basis of certain
risk characteristics including loan type and note rate. SFAS No. 125 also
specifies that financial assets subject to prepayment, including loans that can
be contractually prepaid or otherwise settled in such a way that the holder
would not recover substantially all of its recorded investment, be measured like
debt securities available-for-sale or trading securities under SFAS No. 115. The
provisions of SFAS No. 125 apply prospectively to transactions occurring after
December 31, 1996. Management expects adoption will not have a material effect
on the consolidated financial position or results of operations of the Company.
F-32
<PAGE>
FIRST INTERSTATE BANCSYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(19) ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED (CONTINUED)
At December 31, 1996, the Company serviced loans for others with a principal
balance outstanding of approximately $140,000.
(20) PLAN OF RECAPITALIZATION
Effective October 7, 1997 the Company effected a four-for-one split of the
Company's existing common stock. New stock with no par value will be issued in
exchange for existing stock with no par value presently issued and outstanding.
The authorized number of common shares were increased from 5,000,000 to
20,000,000 to accomodate the stock split. All applicable share and per share
data have been retroactively adjusted to the resulting four-for-one stock split.
Also effective October 7, 1997 the Parent Company changed its name to "First
Interstate BancSystem, Inc."
F-33
<PAGE>
- ------------------------------------------------
------------------------------------------------
- ------------------------------------------------
------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY JURISDICTION IN WHICH SUCH
OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH
OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANYONE TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF.
--------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................................................ 5
Risk Factors.............................................................. 11
Use of Proceeds........................................................... 19
Accounting Treatment...................................................... 19
Capitalization............................................................ 20
Regulatory Capital Ratios................................................. 20
Selected Consolidated Financial Data...................................... 21
Management's Discussion and Analysis of Financial Condition and Results of
Operations.............................................................. 23
Business.................................................................. 42
Regulation and Supervision................................................ 47
Management................................................................ 57
Certain Related Transactions.............................................. 62
Security Ownership of Certain Beneficial Owners and Management............ 63
Description of the Trust Preferred Securities............................. 64
Description of Junior Subordinated Debentures............................. 77
Book Entry Issuance....................................................... 87
Description of Guarantee.................................................. 89
Relationship Among the Trust Preferred Securities, the Junior Subordinated
Debentures and the Guarantee............................................ 91
Certain Federal Income Tax Consequences................................... 93
Description of First Interstate Capital Stock............................. 96
Underwriting.............................................................. 99
Legal Matters............................................................. 100
Experts................................................................... 100
Additional Information.................................................... 100
Index to Consolidated Financial Statements................................ 101
</TABLE>
------------------------
UNTIL , 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
1,600,000 TRUST
PREFERRED SECURITIES
FIB CAPITAL TRUST
% CUMULATIVE TRUST PREFERRED SECURITIES
(LIQUIDATION AMOUNT $25 PER TRUST PREFERRED SECURITY)
FULLY AND UNCONDITIONALLY GUARANTEED,
AS DESCRIBED HEREIN, BY
[LOGO]
FIRST INTERSTATE
BANCSYSTEM, INC.
---------------------
PROSPECTUS
---------------------
D.A. Davidson & Co.
, 1997
- ------------------------------------------------
------------------------------------------------
- ------------------------------------------------
------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth all expenses, other than the underwriting
discounts and commissions, payable by the Registrant in connection with the sale
of the Trust Preferred Securities being registered hereby. All the amounts shown
are estimates except for the SEC and NASD fees.
<TABLE>
<S> <C>
SEC registration fee........................................... $12,121.21
NASD fee....................................................... 4,500.00
Blue sky qualification fee and expenses........................ 37,000.00
Printing expenses.............................................. 50,000.00
Legal fees and expenses........................................ 200,000.00
Accounting fees and expenses................................... 30,000.00
Trustee fee.................................................... 15,000.00
Miscellaneous.................................................. 51,378.79
----------
Total.................................................... $400,000.00
----------
----------
</TABLE>
ITEM 14. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
Officers and directors of First Interstate are entitled to indemnification
under the Montana Business Corporation Act and pursuant to a Resolution of the
Board of Directors dated January 12, 1987. A summary of the indemnification
provision in such resolution follows:
Pursuant to a resolution of the Board of Directors dated January 12, 1987,
and under the authority of Section 35-1-414 of the Montana Business Corporation
Act, the Company shall indemnify each director and officer of the Company
(including former officers and directors) and each agent of the Company serving
as a director or officer of a Bank, serving at the specific direction or request
of the Company (but only to the extent that such director, officer or agent is
not indemnified by the Bank or by insurance provided by the Company) against
judgments, penalties, fines, settlements and reasonable expenses actually and
reasonably paid by such director, officer or agent by reason of the fact that he
or she is or was a director or officer of the Company or such Bank, to the
extent provided by and subject to the limitations of the Montana Business
Corporation Act.
Under the Trust Agreement, First Interstate will agree to indemnify each of
the Trustees of FIB Capital or any predecessor for FIB Capital, and to hold each
Trustee harmless against any loss, damage, claims, liability or expense incurred
without negligence or bad faith on its part, arising out of or in connection
with the acceptance or administration of the Trust Agreement, including the
costs and expenses of defending itself against any claim or liability in
connection with the exercise or performance of any of its powers or duties under
the Trust Agreement.
Each of First Interstate and FIB Capital has agreed to indemnify the
Underwriters, and the Underwriters have agreed to indemnify each of First
Interstate and FIB Capital against certain civil liabilities, including
liabilities under the Securities Act. Reference is made to the Underwriting
Agreement filed as Exhibit 1.1 herewith.
II-1
<PAGE>
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
1. First Interstate has issued bonuses of Common Stock to certain key
officers of the Company in January 1997, and in January of each of the past
three years. The dates of issuance, total number of shares issued, per share
value, and dollar amount of Common Stock issued as officer bonuses are as
follows:
<TABLE>
<CAPTION>
TOTAL
DOLLAR
DATE NUMBER OF SHARES PER SHARE VALUE AMOUNT
- --------------------------------------------- ------------------- --------------- -----------
<S> <C> <C> <C>
January 1997................................. 4,036 $ 20.05 $ 80,932
January 1996................................. 3,396 $ 17.68 $ 60,033
January 1995................................. 3,456 $ 15.80 $ 54,605
January 1994................................. 4,584 $ 11.81 $ 54,149
</TABLE>
Exemption from registration of the Common Stock so issued was claimed
because no offer or sale thereof was made, as defined in Section 2(3) of the
Securities Act. The Common Stock was issued by First Interstate without any
election or decision of the officers of the Company to participate, and the
officers of the Company had no option to receive cash or other consideration in
lieu of stock.
2. First Interstate has issued stock options and stock appreciation rights
to key officers of the Company in January 1997, and in January of each of the
past three years, pursuant to the Plan. See "Management--Executive And Director
Compensation--Stock Option and Stock Appreciation Rights Plan." Exemption from
registration of the stock options and stock appreciation rights was claimed
because no offer or sale of the stock options or appreciation rights was made,
as defined in Section 2(3) of the Securities Act. The stock options and
appreciation rights were issued by First Interstate without any election or
decision of the officers to participate, and the officers had no option to
receive cash or other consideration in lieu of stock options and appreciation
rights. These transactions are also exempt under Section 4(2) of the Securities
Act. The stock options and stock appreciation rights were issued privately by
First Interstate only to key officers of the Company. The grantees in each case
were people generally familiar with the business, management and financial
information of the Company. Stock options and stock appreciation rights were
issued to 35 key officers in 1997, 35 key officers in 1996, 34 key officers in
1995 and 30 key officers in 1994.
3. On January 28, 1994, outstanding stock options were exercised for the
purchase of 9,084 shares of the Common Stock at an exercise price of $5.36, paid
in cash in each instance, for a total of $48,668. The options were exercised by
Company key officers who had received the options pursuant to the Plan.
On October 1, 1994, outstanding stock options were exercised for the
purchase of 5,168 shares of Common Stock at exercise prices ranging from $4.05
to $4.74, paid in cash, for a total of $22,241. The options were exercised by a
retiring key officer of the Company who had received the options pursuant to the
Plan.
On November 4, 1994, outstanding stock options were exercised for the
purchase of 9,220 shares of Common Stock at an exercise price of $4.05, paid in
cash in each instance, for a total of $37,295. The options were exercised by
Company key officers who had received the options pursuant to the Plan. The
number of key officers who exercised stock options in 1994 was 12.
On January 20 and 27, 1995, outstanding stock options were exercised for the
purchase of 20,212 shares of Common Stock at an exercise price of $12.37 per
share, paid in cash in each instance, for a total of $250,022. The options were
exercised by Company key officers who received the options pursuant to the Plan.
The number of key officers who exercised stock options in 1995 was eight.
On January 19, 1996, outstanding stock options were exercised for the
purchase of 11,380 shares of Common Stock at an exercise price of $4.30 per
share and 6,136 shares of Common Stock at an exercise price of $6.16 per share,
paid in cash in each instance, for a total of $86,701. The options were
exercised by
II-2
<PAGE>
Company key officers who received the options pursuant to the Plan. The number
of key officers who exercised stock options in 1996 was 15.
On January 13, 1997, outstanding stock options were exercised for the
purchase of 8,768 shares of Common Stock at an exercise price of $4.56 per share
paid in cash in each instance, for a total of $40,004. The options were
exercised by Company key officers who received the options pursuant to the Plan.
The number of key officers who exercised stock options in 1997 was seven.
Exemption from registration was claimed under Section 4(2) of the Securities
Act. The stock options exercised were privately offered and sold only to key
officers of the Company, who were familiar with the business, management and
financial information of the Company.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- --------- --------------------------------------------------------------------------------------------------------
<S> <C>
1.1 Form of Underwriting Agreement
3.1(1) Restated Articles of Incorporation of First Interstate dated February 27, 1986
3.2(2) Articles of Amendment to Restated Articles of Incorporation dated September 26, 1996
3.3(2) Articles of Amendment to Restated Articles of Incorporation dated September 26, 1996
3.4 Articles of Amendment to Restated Articles of Incorporation dated October 7, 1997
3.5(3) Bylaws of First Interstate
4.1(4) Specimen of common stock certificate of First Interstate
4.2(1) Stockholder's Agreement for non-Scott family members
4.3 Form of Junior Subordinated Indenture dated , 1997, to be entered into between First Interstate
and Wilmington Trust Company, as Indenture Trustee
4.4 Certificate of Trust of FIB Capital dated as of October 1, 1997
4.5 Trust Agreement of FIB Capital dated as of October 1, 1997
4.6 Form of Amended and Restated Trust Agreement of FIB Capital Trust
4.7 Form of Trust Preferred Certificate of FIB Capital (included as an exhibit to Exhibit 4.6)
4.8 Form of Common Securities Certificate of FIB Capital (included as an exhibit to Exhibit 4.6)
4.9 Form of Guarantee Agreement
4.10 Form of Agreement as to Expenses and Liabilities (included as an exhibit to Exhibit 4.6)
5.1* Opinion of Holland & Hart LLP
5.2* Opinion of Richards, Layton & Finger, P.A.
8.1* Opinion of Holland & Hart LLP as to certain federal income tax matters
10.1(2) Loan Agreement dated October 1, 1996, between First Interstate, as borrower, and First Security Bank,
N.A., Colorado National Bank, N.A. and Wells Fargo Bank, N.A.
10.2(2) Note Purchase Agreement dated August 30, 1996, between First Interstate and the Montana Board of
Investments
10.3(1) Lease Agreement Between Billings 401 Joint Venture and FIB Montana and addendum thereto
10.4(5) Savings and Profit Sharing Plan for Employees of First Interstate, as amended December 31, 1994
10.5(3) Amendment to the Saving and Profit Sharing Plan for Employees of First Interstate adopted September 21,
1995
10.6(3) First Amendment to Savings and Profit Sharing Plan for Employees of First Interstate
10.7(3) Second Amendment to Savings and Profit Sharing Plan for Employees of First Interstate
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- --------- --------------------------------------------------------------------------------------------------------
10.8(3) Third Amendment to Savings and Profit Sharing Plan for Employees of First Interstate
<S> <C>
10.9(3) Fourth Amendment to Savings and Profit Sharing Plan for Employees of First Interstate
10.10(1) Stock Option and Stock Appreciation Rights Plan of First Interstate, as amended
10.11(1) First Interstate Stockholders' Agreements with Scott family members
10.12(5) Amendment to First Interstate Stockholder's Agreement with Scott family members dated September 7, 1995
10.13(5) Credit Agreement between Billings 401 Joint Venture and Colorado National Bank dated as of September 26,
1995
10.14(3) Trademark License Agreement between Wells Fargo & Company and First Interstate
10.15*+ Resignation Agreement between First Interstate and William H. Ruegamer
12.1 Statement Regarding Computation of Ratio of Earnings to Fixed Charges
21.1 Subsidiaries of First Interstate
23.1 Consent of Holland & Hart LLP (included in Exhibits 5.1 and 8.1)
23.2 Consent of Richards, Layton & Finger, P.A. (included in Exhibit 5.2)
23.3 Consent of KPMG Peat Marwick LLP, Independent Certified Public Accountants
24.1 Power of Attorney (included on page II-6 hereof)
25.1 Form T-1 Statement re: Eligibility of Wilmington Trust Company to act as trustee under the Amended and
Restated Trust Agreement
25.2 Form T-1 Statement re: Eligibility of Wilmington Trust Company to act as trustee under the Guarantee
Agreement
25.3 Form T-1 Statement re: Eligibility of Wilmington Trust Company to act as trustee under the Junior
Subordinated Indenture
99.1* Consent of Director Nominee
</TABLE>
- ------------------------
* To be filed by amendment.
+ Management contract or compensatory plan.
(1) Incorporated by reference to the Registrant's Registration Statement on Form
S-1, No. 33-84540.
(2) Incorporated by reference to the Registrant's Form 8-K dated October 1,
1996.
(3) Incorporated by reference to the Registrant's Registration Statement on Form
S-1, No. 333-25633.
(4) Incorporated by reference to the Registrant's Registration Statement on Form
S-1, No. 333-3250.
(5) Incorporated by reference to the Post-Effective Amendment No. 2 to the
Registrant's Registration Statement on Form S-1, No. 33-84540.
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers, and controlling persons of each of the
Registrants pursuant to the provisions described in Item 14 or otherwise, each
of the Registrants has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by either Registrant of
expenses incurred or paid by a director, officer, or controlling person of such
Registrant in the successful defense of any action, suit, or proceeding) is
asserted by such director, officer, or controlling person in connection with the
securities being registered, each Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
II-4
<PAGE>
The undersigned Registrants hereby undertake to provide to the underwriters
at the closing specified in the Underwriting Agreement, certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
The undersigned Registrants hereby undertake that:
(1) for purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus as filed as part of the
registration statement in reliance upon Rule 430A and contained in the form
of prospectus filed by the Registrants pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of the
registration statement as of the time it was declared effective, and
(2) for the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial BONA FIDE offering thereof.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrants
have duly caused this Registration Statement to be signed on their behalf by the
undersigned, thereunto duly authorized, in the City of Billings, State of
Montana, on the 13th day of October, 1997.
<TABLE>
<S> <C> <C>
FIRST INTERSTATE BANCSYSTEM, INC.
By: /s/ THOMAS W. SCOTT
-----------------------------------------
Thomas W. Scott,
PRESIDENT AND CHIEF EXECUTIVE OFFICER
</TABLE>
<TABLE>
<S> <C> <C>
FIB CAPITAL TRUST
By: First Interstate BancSystem, Inc., as
Depositor
By: /s/ TERRILL R. MOORE
-----------------------------------------
Terrill R. Moore,
SENIOR VICE PRESIDENT,
CHIEF FINANCIAL OFFICER AND SECRETARY
</TABLE>
POWER OF ATTORNEY
Each person whose signature to this Registration Statement appears below
hereby constitutes and appoints Thomas W. Scott and Terrill R. Moore, and each
of them, as his or her true and lawful attorney-in-fact and agent, with full
power of substitution and resubstitution, for him or her and in his or her name,
place and stead, in any and all capacities, to sign any or all amendments
(including post-effective amendments) to this Registration Statement, and to
file the same, with all exhibits thereto, and all documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agent, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in connection therewith,
as fully to all intents and purposes as he or she might or could do in person,
hereby ratifying and confirming all that said attorney-in-fact and agent, or
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
II-6
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
/s/ HOMER A. SCOTT, JR. Chairman of the Board October 13, 1997
- ------------------------------
Homer A. Scott, Jr.
/s/ DAN S. SCOTT Director October 13, 1997
- ------------------------------
Dan S. Scott
/s/ JAMES R. SCOTT Vice Chairman of the Board October 13, 1997
- ------------------------------
James R. Scott
/s/ RANDY SCOTT Director October 13, 1997
- ------------------------------
Randy Scott
/s/ SUSAN SCOTT HEYNEMAN Director October 13, 1997
- ------------------------------
Susan Scott Heyneman
/s/ JOEL LONG Director October 13, 1997
- ------------------------------
Joel Long
/s/ THOMAS W. SCOTT President, Chief Executive October 13, 1997
- ------------------------------ Officer and Director
Thomas W. Scott (PRINCIPAL EXECUTIVE
OFFICER)
/s/ TERRILL R. MOORE Senior Vice President, October 13, 1997
- ------------------------------ Chief Financial Officer
Terrill R. Moore and Secretary (PRINCIPAL
FINANCIAL AND ACCOUNTING
OFFICER)
</TABLE>
II-7
<PAGE>
DRAFT 10/02/97
1,600,000 Trust Preferred Securities
FIB Capital Trust
% Cumulative Trust Preferred Securities
(Liquidation Preference of $25 per Trust Preferred Security)
Fully and Unconditionally Guaranteed by
First Interstate BancSystem, Inc.
UNDERWRITING AGREEMENT
, 1997
D. A. DAVIDSON & CO.
as Representative of the Several Underwriters
c/o D. A. Davidson & Co.
8 Third Street North
Davidson Building
Great Falls, Montana 59401
Ladies and Gentlemen:
First Interstate BancSystem, Inc., a Montana corporation (the
"Company"), as Depositor and as guarantor, and its fiduciary subsidiary, FIB
Capital Trust, a statutory business trust organized under the Delaware
Business Trust Act (the "Delaware Act") (the "Trust" and, together with the
Company, the "Offerors"), propose that the Trust issue and sell to the
several underwriters named in Schedule I hereto (each an "Underwriter" and
collectively the "Underwriters"), for which you are acting as representative
(the "Representative"), an aggregate of 1,600,000 of the Trust's _______%
Cumulative Trust Preferred Securities, with a liquidation preference of $25
per Trust Preferred Security (the "Trust Preferred Securities"), the terms of
which are more fully described in the Prospectus (as hereinafter defined).
The Offerors propose that the Trust issue the Trust Preferred Securities
pursuant to an Amended and Restated Trust Agreement among Wilmington Trust
Company, as Delaware Trustee and as Property Trustee, the administrative
trustees named therein (the "Administrative Trustees") and the Company (the
"Trust Agreement"). The Trust Preferred Securities will be guaranteed by the
Company with respect to distributions and payments upon liquidation,
redemption and otherwise (the "Guarantee") pursuant to a Guarantee Agreement
(the "Guarantee Agreement"), to be dated ____________, 1997, between the
Company and Wilmington Trust Company, as Guarantee Trustee (the "Guarantee
Trustee"), and entitled to the benefits of certain backup undertakings
described in the Prospectus with respect to the Company's agreement pursuant
to the Expense
<PAGE>
Agreement (as defined herein) to pay all expenses relating to administration
of the Trust.
The proceeds of the sale of the Trust Preferred Securities and the
common securities of the Trust (liquidation amount $25.00 per common security
(the "Common Securities")) will be used to purchase junior subordinated
deferrable interest debentures (the "Junior Subordinated Debentures") issued
by the Company pursuant to an Indenture (the "Indenture"), to be dated
___________, 1997, between the Company and Wilmington Trust Company, as
Debenture Trustee (the "Debenture Trustee").
The Offerors hereby confirm their agreement with respect to the sale
of the Trust Preferred Securities to the Underwriters.
As the Representative, you have advised the Offerors (i) that you
are authorized to enter into this Underwriting Agreement on behalf of the
Underwriters and (ii) that the Underwriters are willing, acting severally and
not jointly, to purchase the number of Trust Preferred Securities,
aggregating 1,600,000 in total, set forth opposite their respective names in
Schedule I.
1. REGISTRATION STATEMENT AND PROSPECTUS. A registration
statement on Form S-1 (File Nos. 333-_____) with respect to the Trust
Preferred Securities, the Guarantee and the Junior Subordinated Debentures,
including a preliminary form of prospectus, has been prepared by the Offerors
in conformity with the requirements of the Securities Act of 1933, as amended
(the "Act"), and the rules and regulations ("Rules and Regulations") of the
Securities and Exchange Commission (the "Commission") thereunder and the
Trust Indenture Act of 1939, as amended (the Trust Indenture Act") and the
rules and regulations thereunder and has been filed with the Commission; and,
if the Offerors have elected to rely upon Rule 462(b) of the Rules and
Regulations to increase the size of the offering registered under the Act,
the Offerors will prepare and file with the Commission a registration
statement with respect to such increase pursuant to Rule 462(b). Copies of
such registration statement(s) and amendments and each related preliminary
prospectus have been delivered to the Underwriters.
If the Offerors have elected not to rely upon Rule 430A of the Rules
and Regulations, the Offerors have prepared and will promptly file an
amendment to the registration statement and an amended prospectus (including
a term sheet meeting the requirements of Rule 434 of the Rules and
Regulations) if necessary to complete the Prospectus. If the Offerors have
elected to rely upon Rule 430A of the Rules and Regulations, they will
prepare and file a prospectus (or a term sheet meeting the requirements of
Rule 434) pursuant to Rule 424(b) that discloses the information previously
omitted from the prospectus in reliance upon Rule 430A. Such registration
statement, as amended at the time it is or was declared effective by
-2-
<PAGE>
the Commission, and, in the event of any amendment thereto after the
effective date and prior to the Closing Date (as hereinafter defined), such
registration statement as so amended (but only from and after the
effectiveness of such amendment), including a registration statement (if any)
filed pursuant to Rule 462(b) of the Rules and Regulations increasing the
size of the offering registered under the Act and information (if any) deemed
to be part of the registration statement at the time of effectiveness
pursuant to Rules 430A(b) and 434(d) of the Rules and Regulations, is
hereinafter called the "Registration Statement". The prospectus included in
the Registration Statement at the time it is or was declared effective by the
Commission and any related prospectus supplement or supplements specifically
relating to the Trust Preferred Securities, the Guarantee and the Junior
Subordinated Debentures as filed with or promptly hereafter filed with the
Commission pursuant to Rule 424(b) under the Act, is hereinafter called the
"Prospectus", except that if any prospectus (including any term sheet meeting
the requirements of Rule 434 of the Rules and Regulations provided by the
Offerors for use with a prospectus subject to completion within the meaning
of Rule 434 in order to meet the requirements of Section 10(a) of the Rules
and Regulations) filed by the Offerors with the Commission pursuant to Rule
424(b) (and Rule 434, if applicable) of the Rules and Regulations or any
other such prospectus provided to the Underwriters by the Offerors for use in
connection with the offering of the Trust Preferred Securities (whether or
not required to be filed by the Offerors with the Commission pursuant to Rule
424(b) of the Rules and Regulations) differs from the prospectus on file at
the time the Registration Statement is or was declared effective by the
Commission, the term "Prospectus" shall refer to such differing prospectus
(including any term sheet within the meaning of Rule 434 of the Rules and
Regulations) from and after the time such prospectus is filed with the
Commission or transmitted to the Commission for filing pursuant to such Rule
424(b) (and Rule 434, if applicable) or from and after the time it is first
provided to the Underwriters by the Offerors for such use. The term
"Preliminary Prospectus" as used herein means the preliminary prospectus
included in any Registration Statement prior to the time it becomes or became
effective under the Act and any prospectus subject to completion as described
in Rule 430A or 434 of the Rules and Regulations.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
(a) The Offerors represent and warrant to, and agree with, each of
the Underwriters as follows:
(i) No order preventing or suspending the use of any Preliminary
Prospectus has been issued by the Commission nor have any proceedings
been instituted or, to the best of the Company's knowledge, threatened
for that purpose. Each Preliminary Prospectus, at the time of filing
thereof, did not contain an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to
make the statements therein,
-3-
<PAGE>
in the light of the circumstances under which they were made, not
misleading; except that the foregoing shall not apply to statements in
or omissions from the Preliminary Prospectus in reliance upon, and in
conformity with, written information furnished to the Company by the
Representative on behalf of any Underwriter for use in the preparation
thereof.
(ii) As of the time the Registration Statement is or was declared
effective by the Commission, upon the filing or first delivery to the
Underwriters of the Prospectus and at the Closing Date (as hereinafter
defined), (A) the Registration Statement and Prospectus conformed or
will conform in all material respects to the requirements of the Act and
the Rules and Regulations and the Registration Statement and Prospectus
conformed or will conform in all material respects to the requirements
of the Trust Indenture Act and the rules and regulations thereunder, (B)
the Registration Statement did not or will not include an untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading, and (C) the Prospectus did not or will not include an untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in
light of the circumstances in which they are or were made, not
misleading; except that the foregoing shall not apply to (i) statements
in or omissions from any such document in reliance upon, and in
conformity with, written information furnished to the Offerors by the
Representative on behalf of any Underwriter specifically for use in the
preparation thereof and (ii) that part of the Registration Statement
which constitutes the Statement of Eligibility and Qualification ("Form
T-1") under the Trust Indenture Act. If the Registration Statement has
been declared effective by the Commission, no stop order suspending the
effectiveness of the Registration Statement has been issued, and no
proceeding for that purpose has been initiated or, to the Offeror's
knowledge, threatened by the Commission.
(iii) The documents of the Company incorporated by reference in
the Registration Statement and the Prospectus, when they were filed with
the Commission, conformed in all material respects to the requirements
of the Exchange Act and the rules and regulations of the Commission
thereunder, and none of such documents contained an untrue statement of
a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading; and any further documents so filed and incorporated by
reference in the Registration Statement and the Prospectus, when such
documents are filed with the Commission will conform in all material
respects to the requirements of the Exchange Act and the rules and
regulations of the Commission thereunder, and will not contain an untrue
statement of a material fact or omit to state a material fact
-4-
<PAGE>
required to be stated therein or necessary to make the statements
therein in light of the circumstances under which they were made, not
misleading; except that the foregoing shall not apply to statements in
or omissions from any such document in reliance upon, and in conformity
with, written information furnished to the Offerors by the
Representative on behalf of any Underwriter specifically for use in the
preparation thereof.
(iv) The consolidated financial statements of the Company and its
subsidiaries, together with the notes thereto, contained in or
incorporated by reference in the Registration Statement, Preliminary
Prospectus and Prospectus comply in all material respects with the
requirements of the Act, the Rules and Regulations and the Exchange Act
and fairly present the financial position of the Company and its
consolidated subsidiaries as of the dates indicated and the results of
operations and changes in financial position for the periods therein
specified; said consolidated financial statements have been prepared in
conformity with generally accepted accounting principles consistently
applied throughout the periods involved (except as otherwise stated in
the Registration Statement and Prospectus); and the supporting schedules
incorporated by reference in the Registration Statements present fairly
the information required to be stated therein. No other financial
statements or schedules are required to be included or incorporated by
reference in the Registration Statement or the Prospectus. The financial
information included in the Preliminary Prospectus and Prospectus under
the caption "Summary Consolidated Financial Data and Other Information"
presents fairly the information purported to be shown therein at the
dates and for the periods indicated.
(v) The Company has been duly organized and is validly existing
as a corporation under the laws of the State of Montana, is duly
registered as a bank holding company under the Bank Holding Company Act
of 1956, as amended, is registered as a savings and loan holding company
under Section 10 of the Home Owners' Loan Act, as amended, and is
qualified to do business and is in good standing as a foreign
corporation in each jurisdiction in which the ownership or leasing of
properties or the conduct of its business requires such qualification,
except where failure to be so qualified would not have a material
adverse effect upon the Company's business, condition (financial or
otherwise) or properties. Each subsidiary of the Company, has been duly
incorporated or organized and is in good standing under the laws of its
jurisdiction of incorporation or organization and is qualified to do
business and is in good standing as a foreign corporation in each
jurisdiction in which the ownership or leasing of properties or the
conduct of its business requires such qualification, except where
failure to be so qualified would not have a material adverse effect upon
the business, condition (financial or otherwise) or properties of the
Company and its subsidiaries, taken as a whole. The
-5-
<PAGE>
Company and its subsidiaries have all requisite power and authority
(corporate and other) to own its properties and conduct its business as
it is currently being carried on and as described in the Prospectus.
The Company owns all of the outstanding capital stock of the Company's
subsidiaries, free of any liens, claims charges or encumbrances. The
accounts of each subsidiary are insured by the Bank Insurance Fund of
the Federal Deposit Insurance Corporation (the "FDIC") up to the maximum
applicable amount in accordance with the rules and regulations of the
FDIC, and no proceedings for the termination or revocation of such
membership or insurance are pending, or, to the knowledge of the
Company, threatened.
(vi) KPMG Peat Marwick LLP, who certified the financial
statements and supporting schedules included or incorporated by
reference in the Registration Statement and the Prospectus, are
independent public accountants as required by the Act and the Rules and
Regulations.
(vii) The Trust has been duly created and is validly existing in
good standing as a business trust under the Delaware Act with full trust
power and authority to own property and to conduct its business as
described in the Registration Statement and Prospectus and to enter into
and perform its obligations under this Agreement, the Trust Preferred
Securities, the Common Securities and the Trust Agreement and is
authorized to do business in each jurisdiction in which such
qualification is required, except where the failure to so qualify would
not have a material adverse effect on the Company's condition (financial
or otherwise), earnings, business, prospects, assets, results of
operations or properties taken as a whole; the Trust has conducted and
will conduct no business other than the transactions contemplated by the
Trust Agreement and described in the Prospectus; the Trust is not a
party to or otherwise bound by any agreement other than those described
in the Prospectus; the Trust is and will be classified for United States
federal income tax purposes as a grantor trust and not as an association
taxable as a corporation; and the Trust is and will be treated as a
consolidated subsidiary of the Company pursuant to generally accepted
accounting principles.
(viii) Since the respective dates as of which information is given
in the Registration Statement and the Prospectus, and except as
otherwise disclosed therein or in the documents incorporated therein by
reference, (i) there has been no material adverse change in the
condition (financial or otherwise) of the Company, the Trust or its or
their subsidiaries, or in the financial results, business affairs or
business prospects of the Trust, the Company or its subsidiaries,
whether or not arising in the ordinary course of business, (ii) there
have been no transactions entered into by the Company, its subsidiaries
or the Trust which would materially affect the Company, the
-6-
<PAGE>
subsidiaries or the Trust, (iii) there has been no dividend or
distribution of any kind declared, paid or made by the Company on any
class of its capital stock or on any class of capital stock of a
subsidiary, except regular quarterly cash dividends declared by the
Board of Directors of the Company and paid by the Company in the
ordinary course of business in accordance with the dividend policy
established by the Board of Directors, (iv) neither the Company, the
Trust nor any subsidiary has incurred, other than in the ordinary course
of business, any material liabilities or obligations, direct or
contingent, and (v) there has not been (A) any change in the capital
stock of the Company or any subsidiary (except for options granted (or
the exercise thereof) pursuant to or shares of Common Stock issued
pursuant to the employee benefit plans of, or as compensation to the
directors of, the Company described in the documents incorporated by
reference in the Registration Statement), or any issuance of options,
warrants, convertible securities or other rights to purchase capital
stock of the Company or any subsidiary, or (B) any material increase in
the short-term or long-term debt (including capitalized lease
obligations) of the Company or any subsidiary, except indebtedness and
deposit liabilities incurred by the Bank in the ordinary course of its
banking business. Neither the Trust, the Company nor any of its
subsidiaries has any material contingent liabilities which are not
disclosed in the Prospectus or in the Registration Statement or in the
documents incorporated therein by reference.
(ix) Except as set forth in the Registration Statement, the
Preliminary Prospectus and the Prospectus or in the documents
incorporated therein by reference, there is not pending or, to the
knowledge of the Trust or the Company, threatened or contemplated, any
action, suit or proceeding to which the Trust, the Company or any
subsidiary of the Company is a party or to which either of their assets
may be subject, before or by any court or governmental agency, authority
or body, domestic or foreign, or any arbitrator, the disposition of
which could reasonably be expected to result in any material adverse
change in the condition (financial or otherwise) of the Trust, the
Company or its subsidiaries, taken as a whole, or in the financial
results, business affairs or business prospects of the Trust or the
Company and its subsidiaries, taken as a whole or the disposition of
which would materially and adversely affect the consummation of this
Agreement.
(x) There are no contracts or documents of the Trust, the
Company or any subsidiary of the Company that are required to be filed
or incorporated by reference as exhibits to the Registration Statement
by the Act or by the Rules and Regulations which contracts or documents
have not been so filed or incorporated by reference as required.
-7-
<PAGE>
(xi) The execution, delivery and performance by the Company
and/or the Trust, as the case may be, of this Agreement, the Indenture,
the Trust Agreement, the Guarantee Agreement and the Expense Agreement
and the consummation of the transactions contemplated hereby and
thereby, including the issuance, sale and delivery of the Trust
Preferred Securities by the Trust and the Junior Subordinated Debentures
by the Company, will not (A) result in a breach or violation of any of
the terms and provisions of, or constitute a default (or an event which
with notice or lapse of time, or both, would constitute a default)
under, or result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the Trust, the Company or any
of its subsidiaries pursuant to the terms of, any indenture, mortgage,
loan agreement, note, lease or other material agreement, instrument,
franchise, license or permit to which the Trust, the Company or any of
its subsidiaries is a party or by which any of such companies or their
respective properties or assets may be bound, or (B) violate any
judgment, decree, order, statute, rule or regulation of any court or any
public, governmental or regulatory agency or body having jurisdiction
over the Trust, the Company or any of its subsidiaries or any of their
respective properties or assets, which breaches, violations, defaults or
liens in the case of clause (A) and (B) would, in the aggregate, have a
material adverse effect on the Trust, the Company and its subsidiaries,
taken as a whole, and will not violate or conflict with any provision of
the articles of incorporation, charter, bylaws or other governing
documents of the Company or any of its subsidiaries or the Trust's Trust
Agreement or its certificate of trust filed with the state of Delaware
on ____________, 1997 (the "Certificate of Trust"). No consent,
approval, authorization, order or decree of any court or governmental or
regulatory agency or body having jurisdiction over the Trust, the
Company or any of their respective properties or assets is required for
the execution, delivery and performance of this Agreement, the
Indenture, the Trust Agreement, the Guarantee Agreement and the Expense
Agreement and the consummation of the transactions contemplated hereby
and thereby, except as may be required under state securities or Blue
Sky laws. Each of the Indenture, the Trust Agreement and the Guarantee
Agreement conform in all material respects to the descriptions thereof
contained in the Prospectus.
(xii) This Agreement has been duly and validly authorized,
executed and delivered by the Company and the Trust and is a valid and
binding obligation of the Company and the Trust, enforceable against the
Company and the Trust in accordance with its terms, except as
enforceability thereof may be limited by bankruptcy, insolvency,
reorganization or similar laws relating to or affecting the rights of
creditors generally and by equitable principles and except as
obligations of the Company and the Trust under the indemnification
provisions hereof may be limited under federal or state securities laws.
-8-
<PAGE>
(xiii) Each of the Company and the Trust has all requisite
corporate power and authority to execute, deliver and perform its
obligations under the Indenture, the Trust Agreement, the Guarantee
Agreement and the Expense Agreement. All necessary corporate
proceedings of the Company and the Trust have been duly taken to
authorize the execution, delivery and performance by each of the Company
and the Trust of the Indenture, the Trust Agreement, the Guarantee
Agreement and the Expense Agreement, as the case may be. The Indenture,
the Trust Agreement, the Guarantee Agreement and the Expense Agreement
have been duly authorized, and when executed and delivered by the
Company and/or the Trust, as the case may be, will be a valid and
binding obligation of the Company and/or the Trust, as the case may be,
enforceable against the Company and/or the Trust, as the case may be, in
accordance with its terms, except as enforceability thereof may be
limited by bankruptcy, insolvency, reorganization or similar laws
relating to or affecting the rights of creditors generally and by
equitable principles.
(xiv) The authorized capital stock of the Company is as set forth
under the caption "Capitalization" in the Prospectus. All of the
outstanding shares of capital stock have been duly authorized, validly
issued and are fully paid and nonassessable. Neither the filing of the
Registration Statement nor the offering or sale of the Trust Preferred
Securities or the Junior Subordinated Debentures, as contemplated by
this Agreement, gives rise to any rights, other than those which have
been waived or satisfied, for or relating to the registration of any
shares of capital stock or other securities of the Company. All of the
issued and outstanding shares of capital stock of each subsidiary of the
Company have been duly authorized, validly issued and are fully paid and
nonassessable.
(xv) The Junior Subordinated Debentures have been duly authorized
by the Company and at the Closing Date will have been duly executed by
the Company and, when authenticated in the manner provided for in the
Indenture and delivered against payment therefor as described in the
Prospectus, will constitute valid and binding obligations of the
Company, enforceable against the Company in accordance with their terms
except to the extent that enforcement thereof may be limited by
bankruptcy, insolvency, reorganization or similar laws affecting the
rights of creditors generally and subject to general principles of
equity, will be in the form contemplated by, and entitled to the
benefits of, the Indenture and will conform in all material respects to
the statements relating thereto in the Prospectus.
(xvi) The Common Securities have been duly authorized by the Trust
Agreement and, when issued and delivered by the Trust to the Company
-9-
<PAGE>
against payment therefor as described in the Registration Statement and
Prospectus, will be validly issued and (subject to the terms of the
Trust Agreement) fully paid and nonassessable undivided beneficial
interests in the assets of the Trust and will conform to all statements
relating thereto contained in the Prospectus; the issuance of the Common
Securities is not subject to preemptive or other similar rights; and at
the Closing Date all of the issued and outstanding Common Securities of
the Trust will be directly owned by the Company free and clear of any
security interest, mortgage, pledge, lien, encumbrance, claim or equity.
(xvii) The Trust Preferred Securities have been duly authorized by
the Trust Agreement and, when issued and delivered pursuant to this
Agreement against payment of the consideration set forth herein, will be
validly issued and fully paid and nonassessable undivided beneficial
interests in the Trust, will be entitled to the benefits of the Trust
Agreement and will in all material respects conform to the statements
relating thereto contained in the Prospectus; the issuance of the Trust
Preferred Securities is not subject to preemptive or other similar
rights; and holders of Trust Preferred Securities will be entitled to
the same limitation of personal liability under Delaware law as extended
to stockholders of private corporations for profit.
(xviii) The Indenture, the Trust Agreement, the Guarantee Agreement
and the Expense Agreement are in substantially the respective forms
filed as exhibits to the Registration Statement.
(xix) The Company's obligations under the Guarantee are
subordinated and junior in right of payment to all "Senior and
Subordinated Debt" (as defined in the Indenture) of the Company.
(xx) The Junior Subordinated Debentures are subordinate and
junior in right of payment to all "Senior and Subordinated Debt" of the
Company.
(xxi) Each of the Administrative Trustees of the Trust is an
employee of the Company and has been duly authorized by the Company to
execute and deliver the Trust Agreement.
(xxii) Neither the Company, the Trust nor any subsidiary of the
Company is in violation of any law, ordinance, governmental rule or
regulation or court decree to which it is subject nor has it failed to
obtain any license, certificate, permit, franchise or other governmental
authorization, registration, acceptance or approval necessary to the
ownership, leasing or operation of its property or to the conduct of its
business as it is currently being carried on and as described in the
Preliminary Prospectus or the Prospectus, which violation or failure to
obtain would have a material
-10-
<PAGE>
adverse effect on the condition (financial or otherwise) of the Company
and its subsidiaries, or on the financial results, business affairs or
business prospects of the Company and its subsidiaries, taken as a
whole.
(xxiii) Neither the Company nor any subsidiary of the Company is in
violation of its respective articles of incorporation, charter or bylaws
or other governing documents; the Trust is not in violation of its Trust
Agreement or its Certificate of Trust or other governing documents; none
of the Company, the Trust or any subsidiary of the Company is in
violation or default of any material obligation, agreement, covenant or
condition contained in any contract, license, indenture, mortgage, loan
agreement, note, lease or other agreement or instrument to which the
Company, the Trust or any such subsidiary is a party or by which it is
bound, or to which any of the property or assets of the Company, the
Trust or any such subsidiary is subject, where any such default, breach
or violation would have, individually or in the aggregate, a material
adverse effect on the Company and its subsidiaries, taken as a whole, or
on the performance of this Agreement, the Indenture, the Trust
Agreement, the Guarantee Agreement, the Expense Agreement, the Junior
Subordinated Debentures or the Trust Preferred Securities.
(xxiv) The Company and its subsidiaries have good title to all
properties owned by them that are material to the Company and its
subsidiaries, taken as a whole, in each case free and clear of all
liens, encumbrances and defects, except (i) as do not materially
interfere with the use made of such properties, (ii) referred to in the
Registration Statement, the Preliminary Prospectus and the Prospectus
(including the notes to the financial statements included or
incorporated by reference therein and the documents incorporated by
reference therein), or (iii) as could not reasonably be expected, singly
or in the aggregate, to have a material adverse effect on the business,
results of operations or condition (financial or otherwise) of the
Company and the subsidiaries, taken as a whole. The property held under
lease by the Company and its subsidiaries is held by them under valid,
subsisting and enforceable leases with only such exceptions with respect
to any particular lease as do not interfere in any material respect with
the conduct of the business of the Company or any subsidiary; each of
Company and its subsidiaries owns or possesses all patents, patent
applications, trademarks, service marks, trade names, trademark
registrations, service mark registrations, copyrights, licenses,
inventions, trade secrets and rights necessary for the conduct of the
business of the Company and its subsidiaries as currently carried on and
as described in the Registration Statement and Prospectus; except as
stated in the Registration Statement and Prospectus, to the best of the
Company's knowledge, no name which the Company or any subsidiary uses
and no other aspect of the business of the Company or any subsidiary
will involve or give rise to any infringement of, or license or
-11-
<PAGE>
similar fees for, any patents, patent applications, trademarks, service
marks, trade names, trademark registrations, service mark registrations,
copyrights, licenses, inventions, trade secrets or other similar rights
of others material to the business or prospects of the Company and its
subsidiaries, taken as a whole, and neither the Company nor any
subsidiary has received any notice alleging any such infringement or fee.
(xxv) The Company maintains insurance of the type and in the
amounts generally deemed adequate for its business and consistent with
insurance maintained by similar companies in similar businesses.
(xxvi) Each of the Trust and the Company has filed all federal,
state, local and foreign income and franchise tax returns required to be
filed and are not in default in the payment of any taxes which were
payable pursuant to said returns or any assessments with respect
thereto, other than any which the Company or any of its subsidiaries or
the Trust is contesting in good faith.
(xxvii) The Company, the Trust and each the subsidiaries of the
Company have all necessary consents, approvals, authorizations, orders,
registrations, qualifications, licenses and permits of and from all
public, regulatory or governmental agencies and bodies, material to the
ownership of their respective properties and conduct of their respective
businesses as now being conducted and as described in the Registration
Statement and the Prospectus, and no such consent, approval,
authorization, order, registration, qualification, license or permit
contains a materially burdensome restriction not adequately disclosed in
the Registration Statement and the Prospectus. The conduct of the
business of the Company, the Trust and each of the subsidiaries is in
compliance in all material respects with all applicable federal, state,
local and foreign laws and regulations, except where failure to be so in
compliance would not materially adversely affect the condition, business
or results of operation of the Company, the Trust and the subsidiaries
taken as a whole.
(xxviii) The Offerors have not distributed and will not distribute
any prospectus or other offering material in connection with the
offering and sale of the Trust Preferred Securities and the Common Stock
other than any Preliminary Prospectus or the Prospectus or other
materials permitted by the Act to be distributed by the Offerors.
(xxix) None of the Trust, the Company or any subsidiary is an
"investment company" or a company "controlled" by an "investment
company" within the meaning of the Investment Company Act of 1940, as
amended, or an "investment adviser" within the meaning of the Investment
Advisers Act of 1940, as amended.
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(xxx) Neither the Company, the Trust nor any of its officers,
directors (as defined in the Rules and Regulations) has taken or will
take, directly or indirectly, prior to the termination of the offering
contemplated by this Agreement, any action designed to stabilize or
manipulate the price of any security of the Company or the Trust, or
which has caused or resulted in, or which might in the future reasonably
be expected to cause or result in, stabilization or manipulation of the
price of any security of the Company or the Trust, to facilitate the
sale or resale of any of the Trust Preferred Securities.
(xxxi) Neither of the Offerors nor any of their affiliates is
presently doing business with the government of Cuba or with any person
or affiliate located in Cuba.
(xxxii) Each of the Company and its subsidiaries maintains a system
of internal accounting controls sufficient to provide reasonable
assurances that (i) transactions are executed in accordance with
management's general or specific authorization; (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain
accountability for assets; (iii) access to assets is permitted only in
accordance with management's general or specific authorization; and (iv)
the recorded accountability for assets is compared with existing assets
at reasonable intervals and appropriate action is taken with respect to
any differences.
(xxxiii) Other than as contemplated by this Agreement or described in
the Registration Statement, the Company has not incurred any liability
for any finder's or broker's fee or agent's commission in connection
with the execution and delivery of this Agreement or the consummation of
the transactions contemplated hereby.
(xxxiv) No report or application filed by the Company or any
subsidiary with the FRB, the Office of Thrift Supervision (the "OTS"),
[NAME OF MONTANA REGULATOR], the FDIC or other regulatory authority
having jurisdiction over it (each such report or application, together
with all exhibits thereto, a "Regulatory Report"), as of the date it was
filed, contained an untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make
the statements therein not misleading when made or failed to comply with
the applicable requirements of the FRB, the OTS, [NAME OF MONTANA
REGULATOR], the FDIC or such other regulatory authority (the "Banking
Regulators"), as the case may be. The Company and each subsidiary has
filed each Regulatory Report that it was required to file with any
Banking Regulator.
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(xxxv) The proceeds from the sale of the Trust Preferred Securities
will constitute "tier 1" capital (as defined in 12 C.F.R. Part 325) to
the maximum extent permitted by rules of the FRB.
(xxxvi) Each of the subsidiaries has properly administered, in all
respects material and which could reasonably be expected to be material
to the business, operations or financial condition of the Company and
its subsidiaries, taken as a whole, all accounts for which it acts as a
fiduciary, including but not limited to accounts for which it serves as
a trustee, agent, custodian, personal representative, guardian,
conservator or investment advisor, in accordance with the terms of the
governing documents and applicable state and federal law and regulation
and common law. Neither of the subsidiaries nor any director, officer or
employee of either subsidiary has committed any breach of trust with
respect to any such fiduciary account which is material to or could
reasonably be expected to be material to the general affairs, condition
(financial or otherwise), business, key personnel, property, prospects,
net worth or results of operations of the Company and its subsidiaries,
taken as a whole, and the accountings for each such fiduciary account
are true and correct in all material respects and accurately reflect the
assets of such fiduciary account in all material respects.
(xxxvii) The conditions for use of Form S-1, as set forth in the
General Instructions thereto, have been satisfied.
(xxxviii) Each of the Company and its subsidiaries is in compliance in
all material respects with all presently applicable provisions of the
Employee Retirement Income Security Act of 1974, as amended, including
the regulations and published interpretations thereunder ("ERISA"); no
"reportable event" (as defined in ERISA) has occurred with respect to
any "pension plan" (as defined in ERISA) which could have a material
adverse effect on the general affairs, management, financial position,
stockholders' equity or results of operations of the Company and its
subsidiaries for which the Company or any subsidiary would have any
liability; neither the Company nor any subsidiary has incurred or
expects to incur liability under (i) Title IV of ERISA with respect to
termination of, or withdrawal from, any "pension plan" or (ii) Sections
412 or 4971 of the Internal Revenue Code of 1986, as amended, including
the regulations and published interpretations thereunder (the "Code"),
in each case which could have a material adverse effect on the general
affairs, management, financial position, stockholders' equity or results
of operations of the Company and its subsidiaries, taken as a whole; and
each "pension plan" for which the Company or any subsidiary would have
any liability that is intended to be qualified under Section 501(a) of
the Code is so qualified in all material respects and nothing has
occurred, whether by action or by failure to act, which would cause the
loss of such
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qualification, except for such loss as would not have a material adverse
effect on the general affairs, management, financial position,
stockholders' equity or results of operations of the Company and its
subsidiaries, taken as a whole.
(xxxix) No hazardous substances, hazardous wastes, pollutants or
contaminants have been deposited or disposed of in, on or under the
properties of the Company or any subsidiary (including properties owned,
managed or controlled by a subsidiary in connection with its lending
operations) during the period in which the Company or any subsidiary has
owned, occupied, managed, controlled or operated such properties in
violation of any applicable law, ordinance, rule, regulation, order,
judgment, decree or permit or which would require remedial action under
any applicable law, ordinance, rule, regulation, order, judgment, decree
or permit, except for any violation or remedial action which would not
have, or could not be reasonably likely to have, singularly or in the
aggregate with all such violations or remedial actions, a material
adverse effect on the general affairs, condition (financial or
otherwise), business, key personnel, property, prospects, net worth or
results of operations of the Company and its subsidiaries, taken as a
whole.
(b) Any certificate signed by any officer of the Company or a trustee
of the Trust and delivered to the Representative or to counsel for the
Underwriters shall be deemed a representation and warranty by the Company to
each Underwriter as to the matters covered thereby.
3. PURCHASE, SALE AND DELIVERY OF TRUST PREFERRED SECURITIES;
ADVISORY FEE.
On the basis of the representations, warranties and agreements
herein contained, but subject to the terms and conditions herein set forth,
the Trust agrees to issue and sell to each of the Underwriters, and each of
the Underwriters agrees, severally and not jointly, to purchase from the
Trust, the respective number of Trust Preferred Securities set forth opposite
the name of each such Underwriter in Schedule I hereto. The purchase price
per Trust Preferred Security shall be $25.00 per share. As compensation to
the Underwriters for their commitments hereunder and in view of the fact that
the proceeds of the sale of the Trust Preferred Securities (together with the
entire proceeds from the sale by the Trust to the Company of the Common
Securities) will be used to purchase the Junior Subordinated Debentures, at
the Closing the Company hereby agrees to pay to the Representative, on behalf
of the several Underwriters, a commission of $______ per Trust Preferred
Security ($________ in the aggregate) delivered by the Trust hereunder at the
Closing Date.
The Trust Preferred Securities will be delivered by the Company to the
Representative against payment of the purchase price therefor by certified or
official bank check or wire transfer of same day funds payable to the Company at
the offices
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of D.A. Davidson & Co., 8 Third Street North, Great Falls, Montana 59401, or
such other location as may be mutually acceptable, at 9:00 a.m. Rocky
Mountain time on the third (or if the Trust Preferred Securities are priced,
as contemplated by Rule 15c6-1(c) under the Exchange Act, after 4:30 p.m.
Eastern time, on the fourth) full business day following the date hereof, or
at such other time and date as the Representative and the Company determine
pursuant to Rule 15c6-1(a) under the Exchange Act, such time and date of
delivery being herein referred to as the "Closing Date." Delivery of the
Trust Preferred Securities may be made by credit through full fast transfer
to the accounts at The Depository Trust Company designated by the
Representative. Certificates representing the Trust Preferred Securities, in
definitive form and in such denominations and registered in such names as the
Representative may request upon at least two business days' prior notice to
the Company shall be prepared and will be made available for checking and
packaging, not later than 10:30 a.m., Rocky Mountain time, on the business
day next preceding the Closing Date at the offices of D.A. Davidson & Co., 8
Third Street North, Great Falls, Montana 59401, or such other location as may
be mutually acceptable.
Nothing herein contained shall constitute any of the Underwriters an
unincorporated association or partner with any other Underwriter or with the
Offerors.
It is understood that you, on your own behalf and not as
Representative, may (but shall not be obligated to) make payment on behalf of
any Underwriter or Underwriters for the Trust Preferred Securities to be
purchased by such Underwriter or Underwriters. No such payment by you shall
relieve such Underwriter or Underwriters from any of its or their other
obligations hereunder.
4. COVENANTS.
(a) The Offerors jointly and severally covenant and agree with
the several Underwriters as follows:
(i) If the Registration Statement has not already been declared
effective by the Commission, the Company will use its best efforts to
cause the Registration Statement and any post-effective amendments
thereto to become effective as promptly as possible; the Company will
notify the Representative promptly, (i) of the time when the
Registration Statement or any post-effective amendment to the
Registration Statement has become effective, (ii) any supplement to the
Prospectus (including any term sheet within the meaning of Rule 434 of
the Rules and Regulations) has been filed, (iii) of the receipt of any
comments from the Commission, and (iv) of any request by the Commission
for any amendment or supplement to the Registration Statement or
Prospectus or additional information; if the Company has elected to rely
on Rule 430A of the Rules and Regulations, the Company will
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prepare and file a Prospectus (or term sheet within the meaning of Rule
434 of the Rules and Regulations) containing the information omitted
therefrom pursuant to Rule 430A of the Rules and Regulations with the
Commission within the time period required by, and otherwise in
accordance with the provisions of, Rules 424(b), 430A and 434, if
applicable, of the Rules and Regulations; if the Company has elected to
rely upon Rule 462(b) of the Rules and Regulations to increase the size
of the offering registered under the Act, the Company will prepare and
file a registration statement with respect to such increase with the
Commission within the time period required by, and otherwise in
accordance with the provisions of, Rule 462(b); the Offerors will
prepare and file with the Commission, promptly upon the Representative's
request, any amendments or supplements to the Registration Statement or
Prospectus (including any term sheet within the meaning of Rule 434 of
the Rules and Regulations) that, in the Representative's reasonable
opinion, may be necessary or advisable in connection with the
distribution of the Trust Preferred Securities; and the Offerors will
not file any amendment or supplement to the Registration Statement or
Prospectus (including any term sheet within the meaning of Rule 434 of
the Rules and Regulations) to which the Representative shall reasonably
object by notice to the Company after having been furnished a copy a
reasonable time prior to the filing.
(ii) The Offerors will advise the Representative, promptly after
they shall receive notice or obtain knowledge thereof, of the issuance
by the Commission of any stop order suspending the effectiveness of the
Registration Statement, of the suspension of the qualification of the
Trust Preferred Securities for offering or sale in any jurisdiction, or
of the initiation or threatening of any proceeding for any such purpose;
and the Offerors will promptly use their best efforts to prevent the
issuance of any stop order or to obtain its withdrawal if such a stop
order should be issued.
(iii) Within the time during which a prospectus (including any
term sheet within the meaning of Rule 434 of the Rules and Regulations)
relating to the Trust Preferred Securities is required to be delivered
under the Act, the Offerors will comply as far as they are able with all
requirements imposed upon them by the Act, as now and hereafter amended,
and by the Rules and Regulations, as from time to time in force, so far
as necessary to permit the continuance of sales of or dealings in the
Trust Preferred Securities as contemplated by the provisions hereof and
the Prospectus. If during such period any event occurs as a result of
which the Prospectus would include an untrue statement of a material
fact or omit to state a material fact necessary to make the statements
therein, in the light of the circumstances then existing, not
misleading, or if during such period it is necessary, in the written
opinion of counsel to the Underwriters, to amend the Registration
Statement or supplement the Prospectus to comply with the Act, the
Offerors will promptly
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notify the Representative and will amend the Registration Statement or
supplement the Prospectus (in form and substance reasonably satisfactory
to counsel for the Underwriters and at the expense of the Company) so as
to correct such statement or omission or effect such compliance.
(iv) The Offerors will use their best efforts to qualify the
Trust Preferred Securities for offering and sale under the applicable
securities laws of such states and other jurisdictions of the United
States as you may reasonably designate; provided that no such
qualification shall be required in any jurisdiction where, as a result
thereof, the Offerors would become subject to service of general process
or to qualification to do business as a foreign corporation. In each
jurisdiction in which the Trust Preferred Securities have been so
qualified, the Offerors will file such statements and reports as may be
required to be filed by it by the laws of such jurisdiction to continue
such qualification in effect for a period of not less than one year from
the effective date of the Registration Statement.
(v) The Offerors will furnish to the Underwriters copies of the
Registration Statement as originally filed (including all exhibits filed
therewith), a conformed copy of the Registration Statement as originally
filed and of each amendment thereto (without exhibits), each of the
Preliminary Prospectuses, the Prospectus, and all amendments and
supplements (including any term sheet within the meaning of Rule 434 of
the Rules and Regulations) to such documents, in each case as soon as
available and in such quantities as the Representative may from time to
time reasonably request.
(vi) For a period of five years commencing with the date hereof,
the Company will furnish to the Representative copies of all annual
reports, quarterly reports and current reports filed by the Company with
the Commission on Forms 10-K, 10-Q and 8-K, or such other similar forms
as may be designated by the Commission, and of such other documents,
proxy statements, reports and information as are furnished by the
Company to its stockholders generally.
(vii) The Company will make generally available to its security
holders and holders of the Trust Preferred Securities as soon as
practicable, but in any event not later than 18 months after the
"effective date of the Registration Statement" (as defined in Rule
158(c) of the Rules and Regulations), an earnings statement (which need
not be audited) complying with Section 11(a) of the Act and the Rules
and Regulations (including at the option of the Company Rule 158).
(viii) The Company, whether or not the transactions contemplated
hereunder are consummated or this Agreement is prevented from becoming
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effective under the provisions of Section 8(a) hereof or is terminated,
will pay or cause to be paid all costs and expenses incident to the
performance of the obligations of each Offeror hereunder, including,
without limitation, (A) all expenses (including transfer taxes allocated
to the respective transferees) incurred in connection with the issuance,
transfer and delivery of the Trust Preferred Securities, (B) all
expenses and fees (including, without limitation, fees and expenses of
each Offeror's accountants and counsel but, except as otherwise provided
below, not including fees of the Underwriters' counsel) in connection
with the preparation printing, filing, delivery, and shipping of the
Registration Statement, the Trust Preferred Securities, each Preliminary
Prospectus, the Prospectus, and the printing, delivery, and shipping of
this Agreement and other underwriting documents, including Blue Sky
Memoranda and any legal investment survey requested by the
Representative, and the Indenture, (C) all filing fees and fees and
disbursements of the Underwriters' counsel incurred in connection with
the qualification of the Trust Preferred Securities for offering and
sale by the Underwriters or by dealers under the securities or blue sky
laws of the states and other jurisdictions which the Representative
shall designate, (D) the fees and expenses of any transfer agent or
registrar, (E) the filing fees incident to any required review by the
National Association of Securities Dealers, Inc. ("NASD") of the terms
of the sale of the Securities, (F) listing fees, if any, (G) the fees
and expenses of the Debenture Trustee, including the fees and
disbursements of counsel for the Debenture Trustee in connection with
the Indenture and Junior Subordinated Debentures, (H) the fees and
expenses of the Property Trustee, including the fees and disbursements
of counsel for the Property Trustee in connection with the Trust
Agreement and the Certificate of Trust, (I) rating agency fees, if any,
and (J) all other costs and expenses incident to the performance of the
Offerors' obligations hereunder that are not otherwise specifically
provided for herein. If the sale of the Trust Preferred Securities
provided for herein is not consummated by reason of action by either
Offeror pursuant to Section 8(a) hereof which prevents this Agreement
from becoming effective, or by reason of any failure, refusal or
inability on the part of either Offeror to perform any agreement on its
part to be performed, or because any other condition of the
Underwriters' obligations hereunder required to be fulfilled by either
Offeror is not fulfilled (and such non-fulfillment is not due to the
Underwriters' actions or omissions), the Company will reimburse the
Underwriters for all out-of-pocket disbursements (including, without
limitation, reasonable fees and disbursements of counsel for the
Underwriters) incurred by the Underwriters in connection with their
investigation, preparing to market and marketing the Trust Preferred
Securities or in contemplation of performing their obligations
hereunder. Neither Offeror shall in any event be liable to any
Underwriter for loss of anticipated profits from the transactions
covered by this Agreement.
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(ix) The Offerors will apply the net proceeds from the sale of
the Trust Preferred Securities and the Common Securities to be sold by
the Trust, and the Company will apply the proceeds from the sale of the
Junior Subordinated Debentures, for the purposes set forth in the
Prospectus under the caption "Use of Proceeds."
(x) The Offerors have not taken and will not take, directly or
indirectly, any action designed to or which might reasonably be expected
to cause or result in, or which has constituted, the stabilization or
manipulation of the price of any security of either Offeror to
facilitate the sale or resale of the Trust Preferred Securities, and has
not effected any sales of Common Stock which are required to be
disclosed in response to Item 701 of Regulation S-K under the Act which
have not been so disclosed in the Registration Statement.
(xi) Neither Offeror will incur any liability for any finder's
or broker's fee or agent's commission in connection with the execution
and delivery of this Agreement or the consummation of the transactions
contemplated hereby.
(xii) The Offerors will inform the Florida Department of Banking
and Finance at any time prior to the consummation of the distribution of
the Trust Preferred Securities by the Underwriters if either of them
commence engaging in business with the government of Cuba or with any
person or affiliate located in Cuba. Such information will be provided
within 90 days after the commencement thereof or after a change occurs
with respect to previously reported information.
(xii) The Offerors will not claim the benefit of any usury laws
against any holder of the Trust Preferred Securities.
5. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The obligations of the
Underwriters hereunder are subject to the accuracy, as of the date hereof and
at the Closing Date (as if made at the Closing Date), of and compliance with
all representations, warranties and agreements of the Offerors contained
herein, to the performance by each Offeror of its obligations hereunder and
to the following additional conditions:
(a) The Registration Statement shall have become effective not
later than 5:00 p.m., Rocky Mountain time, on the date of this Agreement, or
such later time and date as the Underwriters shall approve and all filings
required by Rules 424, 430A and 434 of the Rules and Regulations shall have
been timely made; no stop order suspending the effectiveness of the
Registration Statement or any
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amendment thereof shall have been issued and no proceedings for the issuance
of such an order shall have been initiated or threatened; and any request of
the Commission for additional information (to be included in the Registration
Statement or the Prospectus or otherwise) shall have been complied with to
the Representative's reasonable satisfaction.
(b) The Representative shall not have advised the Company or the
Trust that the Registration Statement or the Prospectus, or any amendment
thereof or supplement thereto (including any term sheet within the meaning of
Rule 434 of the Rules and Regulations), contains an untrue statement of fact
which, in the Representative's reasonable opinion, is material, or omits to
state a fact which, in the Representative's reasonable opinion, is material
and is required to be stated therein or necessary to make the statements
therein not misleading, and such misstatement or omission has not been
corrected.
(c) Except as contemplated in the Prospectus or the Registration
Statement, subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus, none of the Trust,
the Company or any subsidiary of the Company shall have incurred any material
liabilities or obligations, direct or contingent, or entered into any
material transactions, or declared or paid any dividends or made any
distribution of any kind with respect to its capital stock, except regular
quarterly cash dividends declared by the Board of Directors of the Company
and paid by the Company in the ordinary course of business in accordance with
the dividend policy established by the Board of Directors; and there shall
not have been any change in the capital stock (except for options granted (or
the exercise thereof) pursuant to or shares of Common Stock issued pursuant
to any employee benefit plan of, or as compensation to the directors as
discussed in the Registration Statement or the Prospectus), or any material
change in the short-term or long-term debt, including capitalized lease
obligations (except such increases as are incurred in the ordinary course of
business and are not material to the condition, financial or otherwise, of
the Company and its subsidiaries considered as a whole), of the Company or
its subsidiaries, or any issuance of options, warrants, convertible
securities or other rights to purchase the capital stock of the Company or
any of its subsidiaries (except for securities granted pursuant to the
Company's employee benefit plans), or any material adverse change in
condition (financial or otherwise), financial results, business affairs or
business prospects of the Trust or the Company and its subsidiaries, taken as
a whole, that, in the Representative's judgment, makes it impractical or
inadvisable to offer or deliver the Trust Preferred Securities on the terms
and in the manner contemplated in the Prospectus.
(d) On the Closing Date, there shall have been furnished to the
Representative the opinion of Holland & Hart LLP, counsel for the Company,
dated the Closing Date and addressed to the Underwriters, to the effect that:
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(i) Each of the Company and its subsidiaries has been duly
organized and is validly existing as a corporation in good standing
under the laws of its jurisdiction of incorporation or organization.
The Company is duly registered as a bank holding company under the Bank
Holding Company Act of 1956, as amended and as a savings and loan
holding company under Section 10 of the Home Owner's Act, as amended
("HOLA"). Each of the Company and its subsidiaries has the corporate
power and authority to own its properties and conduct its business as
currently being carried on and as described in the Registration
Statement and Prospectus, and is duly qualified to do business as a
foreign corporation and is in good standing in each jurisdiction in
which its ownership or lease of property or the conduct of its business
makes such qualification necessary and in which the failure to so
qualify would have a material adverse effect upon the business,
condition (financial or otherwise) or properties of the Company and its
subsidiaries, taken as a whole.
(ii) All of the issued and outstanding shares of the capital
stock of the Company is set forth in the Prospectus under the caption
"Capitalization" and have been duly authorized and validly issued and
are fully paid and nonassessable.
(iii) All of the issued and outstanding shares of capital stock of
each subsidiary have been duly and validly authorized and issued and are
fully paid and nonassessable. All of such shares of the subsidiaries
are owned by the Company free and clear of all perfected liens and, to
the best of such counsel's knowledge, other liens, encumbrances,
equities, claims, security interests, voting trusts or other defects of
title whatsoever.
(iv) All of the issued and outstanding Common Securities of the
Trust are owned by the Company, free and clear of any security interest,
mortgage, pledge, lien, encumbrance, claim or equitable right.
(v) The statements in the Prospectus under the caption
"Description of the Trust Preferred Securities", "Description of Junior
Subordinated Debentures", "Description of Guarantee", "Relationship
Among the Trust Preferred Securities, the Junior Subordinated Debentures
and the Guarantee", and "Description of First Interstate Capital Stock,"
insofar as such statements constitute matters of law applicable to the
Offerors or summaries of documents, fairly present the information
required to be included therein in all material respects.
(vi) Each of the Trust Agreement, the Indenture and the Guarantee
Agreement has been duly qualified under the Trust Indenture Act.
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(vii) The Junior Subordinated Debentures are in the form
contemplated by the Indenture, have been duly authorized, executed and
delivered by the Company and, when authenticated by the Debenture
Trustee in the manner provided for in the Indenture and delivered
against payment therefor, will constitute valid and binding obligations
of the Company, enforceable against the Company in accordance with their
terms, except to the extent that enforcement thereof may be limited by
bankruptcy, insolvency, reorganization or similar laws affecting the
rights of creditors generally and subject to general principles of
equity.
(viii) The Junior Subordinated Debentures are subordinate and
junior in right of payment to all Senior and Subordinated Debt (as
defined in the Indenture) of the Company.
(ix) Neither the Company nor the Trust is an "investment company"
or a company "controlled" by an "investment company" within the meaning
of the 1940 Act.
(x) The statements set forth in the Prospectus under the caption
"Certain Federal Income Tax Consequences" constitute an accurate summary
of the matters addressed therein, based upon current law and the
assumptions stated or referred to therein.
(xi) Under current law, the Trust will be classified for United
States federal income tax purposes as a grantor trust and not as an
association taxable as a corporation; accordingly, for United States
federal income tax purposes each beneficial owner of Trust Preferred
Securities will be treated as owning an undivided beneficial interest in
the Junior Subordinated Debentures, and stated interest on the Junior
Subordinated Debentures generally will be included in income by a holder
of Trust Preferred Securities at the time such interest income is paid
or accrued in accordance with such holder's regular method of tax
accounting.
(xii) For federal income tax purposes, (a) the Junior Subordinated
Debentures will constitute indebtedness of the Company and (b) the
interest on the Junior Subordinated Debentures will be deductible by the
Company on an economic accrual basis in accordance with Section 163(e)
of the Internal Revenue Code of 1986, as amended, and Treasury
Regulation Section 1.163-7.
(xiii) To the actual knowledge of such counsel, the Trust is not
required to be authorized to do business in any other jurisdiction and
the Trust is not a party to or otherwise bound by any agreement other
than those described in the Prospectus.
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(xiv) The Trust Agreement has been duly authorized, executed and
delivered by the Company and the Administrative Trustees.
(xv) The Registration Statement has become effective under the
Act and, to the actual knowledge of such counsel, no stop order
suspending the effectiveness of the Registration Statement has been
issued and no proceeding for that purpose has been instituted or
threatened by the Commission. The Prospectus has been filed in the
manner and within the time period required by Rule 424(b) of the Act.
(xvi) The descriptions in the Registration Statement and
Prospectus of statutes, legal and governmental proceedings or rulings,
contracts and other documents are accurate in all material respects and
fairly present the information required to be shown; and such counsel
does not know of any statutes or legal or governmental proceedings
required to be described in the Prospectus that are not described as
required, or of any contracts or documents of a character required to be
described in the Registration Statement or Prospectus or included as
exhibits to the Registration Statement that are not described or
included as required.
(xvii) To the actual knowledge of such counsel, there is no action,
suit or proceeding before or by any federal court or federal
governmental agency or body, domestic or foreign, or any arbitrator, now
pending or threatened in writing against or affecting the Company, the
Trust or any subsidiary which is required to be disclosed in the
Registration Statement (other than as disclosed therein or in documents
incorporated by reference therein), and other than those which
individually or in the aggregate would not have a material adverse
effect on the Company and its subsidiaries, taken as a whole, or which
would not materially and adversely affect the consummation of this
Agreement.
(xviii) To the best of such counsel's knowledge, no holders of
securities of the Company have rights which have not been waived to the
registration of shares of common stock of the Company or other
securities, because of the filing of the Registration Statement by the
Company or the offering contemplated hereby.
(xix) The documents incorporated by reference in the Registration
Statement and the Prospectus (other than the financial statements, notes
to the financial statements, other financial data, statistical data and
related schedules therein, as to which such counsel need express no
opinion), when they were filed with the Commission, complied as to form
in all material
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respects with the requirements of the Exchange Act and the Rules and
Regulations.
(xx) The Company has full corporate power and authority and the
Trust has full trust power and authority to enter into this Agreement,
the Indenture, the Trust Agreement, the Guarantee Agreement and the
Expense Agreement to which it is a party and to issue the Junior
Subordinated Debentures and Trust Preferred Securities, as the case may
be, and to effect the transactions contemplated by this Agreement, the
Indenture, the Trust Agreement, the Guarantee Agreement and the Expense
Agreement to which it is a party. This Agreement has been duly
authorized, executed and delivered by the Company, and each of the
Indenture, the Trust Agreement, the Guarantee Agreement and the Expense
Agreement has been duly authorized, executed and delivered by the
Company and constitutes a valid, legal and binding obligation of the
Company enforceable in accordance with its terms (except as rights to
indemnity hereunder may be limited by federal or state securities laws
and except as such enforceability may be limited by bankruptcy,
insolvency, reorganization or similar laws affecting the rights of
creditors generally and subject to general principles of equity). The
execution, delivery and performance of this Agreement, the Indenture,
the Trust Agreement, the Guarantee Agreement, the Trust Preferred
Securities, the Common Securities, the Junior Subordinated Debentures
and the Guarantee and the consummation of the transactions herein or
therein contemplated will not result in a breach or violation of any of
the terms and provisions of, or constitute a default under, (A) any
statute, rule or regulation of the United States or the State of
Montana, or any rule or regulation of any Banking Regulator, or (B) any
agreement or instrument know to such counsel to which the Company or the
Trust is a party or by which either is bound or to which any of their
property is subject which agreement or instrument is material to the
Company and its subsidiaries, taken as a whole, or (C) the charter or
bylaws of the Company or any subsidiary, or the Trust's Certificate, or
(D) any order or decree known to such counsel of any court, governmental
agency or body or Banking Regulator having jurisdiction over the
Company, any subsidiary or the Trust or any of its respective
properties, except for any breach, violation or default which would not
have a material adverse effect on the Company and its subsidiaries,
taken as a whole, or the ability of the Company or the Trust to perform
its obligations hereunder; and no consent, approval, authorization or
order of, or filing with, any court or governmental agency or body is
required for the execution, delivery and performance of this Agreement,
the Indenture, the Trust Agreement, the Guarantee Agreement, the Expense
Agreement, the Trust Preferred Securities, the Junior Subordinated
Debentures, or the Guarantee or for the consummation of the transactions
contemplated hereby or thereby, including the issuance or sale of the
Junior Subordinated Debentures by the Company and the Common
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Securities and Trust Preferred Securities by the Trust, except (a) such
as may be required under the Act, which has been obtained, or under
state securities or blue sky laws, and (b) the qualification of the
Trust Agreement, the Guarantee Agreement and the Indenture under the
Trust Indenture Act and the rules and regulations thereunder.
(xxi) The Registration Statement and the Prospectus, and any
amendment thereof or supplement thereto (including any term sheet within
the meaning of Rule 434 of the Rules and Regulations), comply as to form
in all material respects with the requirements of the Act and the Rules
and Regulations.
Such counsel shall also include a statement to the effect that on
the basis of conferences with officers of the Company, examination of
documents referred to in the Registration Statement and Prospectus and such
other procedures as such counsel deemed appropriate, nothing has come to the
attention of such counsel that causes such counsel to believe that the
Registration Statement or any amendment thereof, at the time such
Registration Statement became effective and as of the Closing Date (including
any Registration Statement filed under Rule 462(b) of the Rules and
Regulations), contained any untrue statement of a material fact or omitted to
state any material fact required to be stated therein or necessary to make
the statements therein not misleading or that the Prospectus (as of their
respective dates and as of the Closing Date), as amended or supplemented,
includes any untrue statement of material fact or omits to state a material
fact necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading; it being understood that such
counsel need express no opinion as to the financial statements or other
financial data included in any of the documents mentioned in this clause.
In rendering such opinion such counsel may rely (i) as to matters of
law other than Montana and federal law, upon the opinion or opinions of local
counsel provided that the extent of such reliance is specified in such
opinion and that such counsel shall state that such opinion or opinions of
local counsel are satisfactory to them and that they believe they and the
Underwriters are justified in relying thereon and (ii) as to matters of fact,
to the extent such counsel deems reasonable upon certificates of officers of
the Company and its subsidiaries and of public officials provided that the
extent of such reliance is specified in such opinion.
(e) On the Closing Date, there shall have been furnished to the
Representative the favorable opinion, dated as of Closing Date, of Richards,
Layton & Finger, counsel to Wilmington Trust Company, as Property Trustee
under the Trust Agreement, Debenture Trustee under the Indenture, and
Guarantee Trustee under the Guarantee Agreement, in form and substance
satisfactory to counsel for the Underwriters, to the effect that:
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(i) Wilmington Trust Company is duly incorporated and is validly
existing in good standing as a banking corporation under the laws of the
State of Delaware.
(ii) Wilmington Trust Company has the power and authority to
execute, deliver and perform its obligations under the Trust Agreement,
the Indenture and the Guarantee Agreement.
(iii) Each of the Trust Agreement, the Indenture and the Guarantee
Agreement have been duly authorized, executed and delivered by
Wilmington Trust Company and constitutes a legal, valid and binding
obligation of Wilmington Trust Company, enforceable against Wilmington
Trust Company, in accordance with its terms.
(iv) The execution, delivery and performance by Wilmington Trust
Company of the Trust Agreement, the Indenture and the Guarantee
Agreement do not conflict with or constitute a breach of the charter or
by-laws of Wilmington Trust Company.
(v) No consent, approval or authorization of, or registration
with or notice to, any governmental authority or agency of the State of
Delaware or the United States of America governing the banking or trust
powers of Wilmington Trust Company is required for the execution,
delivery or performance by Wilmington Trust Company of the Trust
Agreement, the Indenture and the Guarantee Agreement.
(f) On the Closing Date, there shall have been furnished to the
Representative the favorable opinion, dated as of Closing Date, of Richards,
Layton & Finger, as special Delaware counsel for the Offerors, in form and
substance satisfactory to counsel for the Underwriters, to the effect that:
(i) The Trust has been duly created and is validly existing in
good standing as a business trust under the Delaware Act, and all
filings required as of the date hereof under the Delaware Act with
respect to the creation and valid existence of the Trust as a business
trust have been made.
(ii) Under the Trust Agreement and the Delaware Act, the Trust
has the trust power and authority to own property and to conduct its
business, all as described in the Prospectus.
(iii) The Trust Agreement constitutes a valid and binding
obligation of the Company and each of the Property Trustee, the Delaware
Trustee and the Administrative Trustees, and is enforceable against the
Company and
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each of the Property Trustee, the Delaware Trustee and the
Administrative Trustees, in accordance with its terms.
(iv) Under the Trust Agreement and the Delaware Act, the Trust
has the trust power and authority (i) to execute and deliver, and to
perform its obligations under, this Agreement, and (ii) to issue, and to
perform its obligations under, the Trust Preferred Securities and the
Common Securities.
(v) Under the Trust Agreement and the Delaware Act, the
execution and delivery by the Trust of this Agreement, and the
performance by the Trust of its obligations under this Agreement, have
been duly authorized by all necessary trust action on the part of the
Trust.
(vi) Under the Delaware Act, the certificate attached to the
Trust Agreement as Exhibit E is an appropriate form of certificate to
evidence ownership of the Trust Preferred Securities. The Trust
Preferred Securities and the Common Securities have been duly authorized
by the Trust Agreement and are duly and validly issued and, subject to
the qualifications hereinafter expressed in this paragraph (vi), the
Trust Preferred Securities are fully paid and non-assessable undivided
beneficial interests in the assets of the Trust. The respective holders
of the Trust Preferred Securities, as beneficial owners of the Trust,
will be entitled to the same limitation of personal liability extended
to stockholders of private corporations for profit organized under the
General Corporation Law of the State of Delaware. We note that the
respective holders of the Trust Preferred Securities and the Common
Securities may be obligated, pursuant to the Trust Agreement, to make
certain payments under the Trust Agreement.
(vii) Under the Trust Agreement and the Delaware Act, the issuance
of the Trust Preferred Securities and the Common Securities is not
subject to preemptive or similar rights.
(viii) The issuance and sale by the Trust of the Trust Preferred
Securities and the Common Securities, the purchase by the Trust of the
Junior Subordinated Debentures, the execution, delivery and performance
by the Trust of this Agreement and the Guarantee Agreement, the
consummation by the Trust of the transactions contemplated by this
Agreement and compliance by the Trust with its obligations under this
Agreement do not violate (a) any of the provisions of the Certificate of
Trust or the Trust Agreement, or (b) any applicable Delaware law or
Delaware administrative regulation.
(g) On the Closing Date, there shall have been furnished such opinion
or opinions from Dorsey & Whitney LLP, counsel for the Underwriters,
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dated the Closing Date and addressed to the Underwriters, with respect to the
formation of the Company, the validity of the Trust Preferred Securities, the
Indenture, the Guarantee Agreement, this Agreement, the Registration
Statement, the Prospectus and other related matters as the Underwriters may
reasonably request, and such counsel shall have received such papers and
information as they request to enable them to pass upon such matters.
(h) On the Closing Date the Representative shall have received a
letter from KPMG Peat Marwick LLP, independent certified public accountants,
dated the Closing Date and addressed to the Underwriters, in form and
substance satisfactory to the Representative, confirming that they are
independent public accountants within the meaning of the Act and the Rules
and Regulations and are in compliance with the applicable requirements
relating to the qualifications of accountants under Rule 241 of Regulation
S-X of the Commission, and stating, as of the date of such letter (or, with
respect to matters involving changes or developments since the respective
dates as of which specified financial information is given in the Prospectus,
as of a date not more than five days prior to the date of such letter), the
conclusions and findings of each said firm with respect to the financial
information and other matters covered by its letter delivered to the
Representative concurrently with the execution of this Agreement, and the
effect of the letter so to be delivered on the Closing Date shall be to
confirm the conclusions and findings set forth in such prior letter.
(i) On the Closing Date, there shall have been furnished to the
Representative, a certificate, dated the Closing Date and addressed to the
Underwriters, signed by the President or the Chief Executive Officer and by a
Vice President, Secretary and Treasurer of the Company, to the effect that:
(i) The representations and warranties of the Company in this
Agreement are true and correct, in all material respects, as if made at
and as of the Closing Date, and the Offerors have complied with all the
agreements and satisfied all the conditions on its part to be performed
or satisfied at or prior to the Closing Date;
(ii) No stop order or other order suspending the effectiveness of
the Registration Statement or any amendment thereof or the qualification
of the Trust Preferred Securities for offering or sale has been issued,
and no proceeding for that purpose has been instituted or, to the best
of their knowledge, is contemplated by the Commission or any state or
regulatory body: and
(iii) The signers of said certificate have carefully examined the
Registration Statement and the Prospectus, and (A) such documents
contain all statements and information required to be included therein,
the
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Registration Statement, or any amendment thereof, does not contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading, and the Prospectus does not include any untrue
statement of material fact or omit to state a material fact necessary to
make the statements therein, in light of the circumstances under which
they were made, not misleading, (B) since the effective date of the
Registration Statement, there has occurred no event required to be set
forth in an amended or supplemented prospectus which has not been so set
forth, (C) subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus, neither the
Trust, the Company nor any of its subsidiaries has incurred any material
liabilities or obligations, direct or contingent, or entered into any
material transactions, not in the ordinary course of business, or
declared or paid any dividends or made any distribution of any kind with
respect to its capital stock (except regular quarterly cash dividends
declared by the Board of Directors of the Company and paid by the
Company in the ordinary course of business in accordance with the
dividend policy established by the Board of Directors), and, except as
disclosed in the Prospectus, there has not been any change in the
capital stock of the Company or any subsidiary (except for options
granted (or the exercise thereof) pursuant to or shares of Common Stock
issued pursuant to the employee benefit plans of, or as compensation to
the directors disclosed in the Registration Statement or Prospectus), or
any issuance of options, warrants, convertible securities or other
rights to purchase capital stock of the Company or any subsidiary, or
any material increase in the short-term or long-term debt (including
capitalized lease obligations) of the Company or any subsidiary, or any
material adverse change, in condition (financial or otherwise) of the
Company and its subsidiaries, taken as a whole, or in the financial
results or business affairs of the Company and its subsidiaries, taken
as a whole, and the Company has not sustained any material loss or
damage to its property or material interference with its business
whether or not any of the foregoing is insured, and (D) except as stated
in the Registration Statement and the Prospectus, there is not pending,
or, to the knowledge of the Company or the Trust, threatened or
contemplated, any action, suit or proceeding to which the Trust, the
Company or any of its subsidiaries is a party before or by any court or
governmental agency, authority or body, or any arbitrator, which might
result in any material adverse change in the condition (financial or
otherwise) of the Company and its subsidiaries, taken as a whole, or in
the financial results or business affairs of the Company and its
subsidiaries, taken as a whole.
(j) On the Closing Date, there shall have been furnished to the
Representative a certificate, dated the Closing Date and addressed to
the Underwriters, signed by the Administrative Trustees, to the effect
that:
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(i) The representations and warranties of the Trust in this
Agreement are true and correct, in all material respects, as if made at
and as of the Closing Date, and the Trust has complied with all the
agreements and satisfied all the conditions on its part to be performed
or satisfied at or prior to the Closing Date;
(ii) No stop order or other order suspending the effectiveness of
the Registration Statement or any amendment thereof or the qualification
of the Trust Preferred Securities for offering or sale has been issued,
and no proceeding for that purpose has been instituted or, to the best
of their knowledge, is contemplated by the Commission or any state or
regulatory body; and
(iii) The signers of said certificate have carefully examined the
Registration Statement and the Prospectus, and any amendments thereof or
supplements thereto (including any term sheet within the meaning of Rule
434 of the Rules and Regulations), and (a) such documents contain all
statements and information required to be included therein, the
Registration Statement, or any amendment thereof, does not contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading, and the Prospectus, as amended or supplemented,
does not include any untrue statement of material fact or omit to state
a material fact necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading, (B) since
the effective date of the Registration Statement, there has occurred no
event required to be set forth in an amended or supplemented prospectus
which has not been so set forth, (C) subsequent to the respective dates
as of which information is given in the Registration Statement and the
Prospectus, the Trust has not incurred any material liabilities or
obligations, direct or contingent, or entered into any material
transactions, not in the ordinary course of business, or declared or
paid any dividends or made any distribution of any kind with respect to
its trust preferred securities, and except as disclosed in the
Prospectus, there has not been any change in the trust preferred
securities, or any material change in the short-term or long-term debt,
or any issuance of options, warrants, convertible securities or other
rights to purchase the preferred securities, of the Trust or any
material adverse change in the condition (financial or otherwise) of the
Trust, or in the financial results or business affairs of the Trust, and
the Trust has not sustained any material loss or damage to its property
or material interference with its business, whether or not any of the
foregoing is insured, and (D) except as stated in the Registration
Statement and the Prospectus, there is not pending, or, to the knowledge
of the Trust, threatened or contemplated, any action, suit or proceeding
to which the Trust is a party before or by any court or governmental
agency, authority or body, or
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any arbitrator, which might result in any material adverse change in the
condition (financial or otherwise), business or results of operations of
the Trust.
(k) The Company shall have furnished to the Representative and to
the Underwriters' counsel such additional documents, certificates and
evidence as the Representative or they may have reasonably requested.
All such opinions, certificates, letters and other documents will be
in compliance with the provisions hereof only if they are satisfactory in
form and substance to the Representative and the Underwriters' counsel.
6. INDEMNIFICATION AND CONTRIBUTION.
(a) The Offerors agree, jointly and severally, to indemnify and
hold harmless each Underwriter against any losses, claims, damages,
liabilities or expenses, joint or several, to which such Underwriter may
become subject, under the Act or otherwise (including in settlement of any
litigation if such settlement is effected with the written consent of the
Company and the Trust), insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in
the Registration Statement, any Preliminary Prospectus, the Prospectus, or
arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, and will reimburse the Underwriters
for any legal or other expenses reasonably incurred by it in connection with
investigating or defending against such loss, claim, damage, liability or
action; provided, however, that the Offerors shall not be liable in any such
case to the extent that any such loss, claim, damage, liability or action
arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in the Registration Statement,
any Preliminary Prospectus, the Prospectus, in reliance upon and in
conformity with written information furnished to the Offerors by the
Representative on behalf of the Underwriters specifically for use in the
preparation thereof; and provided further that the Offerors shall not be
liable to any Underwriter under the indemnity agreement in this subsection
(a) with respect to any Preliminary Prospectus to the extent that any such
loss, claim, damage or liability of such Underwriter results from the fact
that such Underwriter sold Trust Preferred Securities to a person to whom
there was not sent or given, at or prior to the written confirmation of such
sale, a copy of the Prospectus or a copy of the Prospectus as then amended or
supplemented in any case where such delivery is required by the Act if the
Offerors have previously furnished copies thereof to such Underwriter and the
loss, claim, damage or liability of such Underwriter results from an untrue
statement or omission of a material fact contained in the Preliminary
Prospectus or
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the Prospectus, as the case may be, which was corrected in the Prospectus (or
the Prospectus as amended or supplemented).
(b) Each Underwriter agrees, severally but not jointly, to
indemnify and hold harmless the Company and the Trust against any losses,
claims, damages or liabilities to which the Company and the Trust may become
subject, under the Act or otherwise (including in settlement of any
litigation, if such settlement is effected with the written consent of the
Underwriters), insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon an untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement, any Preliminary Prospectus, the Prospectus, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, in each case to the extent, but only to
the extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was made in the Registration Statement, any
Preliminary Prospectus, the Prospectus, in reliance upon and in conformity
with written information furnished to the Company by the Representative on
behalf of such Underwriter, specifically for use in the preparation thereof,
and will reimburse the Company and the Trust for any legal or other expenses
reasonably incurred by the Company and the Trust in connection with
investigating or defending against any such loss, claim, damage, liability or
action.
(c) The Company agrees to indemnify the Trust against all loss,
liability, claim, damage and expense whatsoever, which may become due from
the Trust under subsection (a).
(d) Promptly after receipt by an indemnified party under subsection
(a) or (b) above of notice of the commencement of any action, such
indemnified party shall, if a claim in respect thereof is to be made against
the indemnifying party under such subsection, notify the indemnifying party
in writing of the commencement thereof; but the omission so to notify the
indemnifying party shall not relieve the indemnifying party from any
liability that it may have to any indemnified party. In case any such action
shall be brought against any indemnified party, and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party shall
be entitled to participate in, and, to the extent that it shall wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel satisfactory to such indemnified party, and after
notice from the indemnifying party to such indemnified party of the
indemnifying party's election so to assume the defense thereof, the
indemnifying party shall not be liable to such indemnified party under such
subsection for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than
reasonable costs of investigation; provided, however, that if, in the sole
judgment of the indemnified party, it is advisable for the indemnified party
to be represented by separate counsel other than counsel for the indemnified
party,
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the indemnified party shall have the right to employ a single counsel to
represent the indemnified party, in which event the reasonable fees and
expenses of such separate counsel shall be borne by the indemnifying party.
An indemnifying party shall not be obligated under any settlement agreement
relating to any action under this Section 6 to which it has not agreed in
writing.
(e) If the indemnification provided for in this Section 6 is
unavailable or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above, then each indemnifying party shall contribute to
the amount paid or payable by such indemnified party as a result of the
losses, claims, damages or liabilities referred to in subsection (a) or (b)
above, (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company or the Trust on the one hand and the
Underwriters on the other from the offering of the Trust Preferred Securities
or (ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault
of the Company and the Trust on the one hand and the Underwriters on the
other in connection with the statements or omissions that resulted in such
losses, claims, damages or liabilities, as well as any other relevant
equitable considerations. The relative benefits received by the Company and
the Trust on the one hand and the Underwriters on the other shall be deemed
to be in the same proportion as the total net proceeds from the offering
(before deducting expenses) received by the Company bear to the total
underwriting discounts and commissions received by the Underwriters, in each
case as set forth in the table on the cover page of the Prospectus. The
relative fault shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company, the Trust or the Underwriters and the parties'
relevant intent, knowledge, access to information and opportunity to correct
or prevent such untrue statement or omission. The Company, the Trust and the
Underwriters agree that it would not be just and equitable if contributions
pursuant to this subsection (e) were to be determined by pro rata allocation
or by any other method of allocation which does not take account of the
equitable considerations referred to in the first sentence of this subsection
(e). The amount paid by an indemnified party as a result of the losses,
claims, damages or liabilities referred to in the first sentence of this
subsection (e) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with
investigating or defending against any action or claim which is the subject
of this subsection (e). Notwithstanding the provisions of this subsection
(e), no Underwriter shall be required to contribute any amount in excess of
the amount by which the total price at which the Trust Preferred Securities
underwritten by it and distributed to the public were offered to the public
exceeds the amount of any damages that the Underwriter has otherwise been
required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent
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misrepresentation (within the meaning of Section 11 (f) of the Act) shall be
entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Underwriters' obligations in this
paragraph (d) to contribute are several in proportion to their respective
underwriting obligations and not joint.
(f) The obligations of the Company under this Section 6 shall be in
addition to any liability which the Company and the Trust may otherwise have
and shall extend, upon the same terms and conditions, to each person, if any,
who controls any Underwriter within the meaning of the Act; and the
obligations of the Underwriters under this Section 6 shall be in addition to
any liability that the respective Underwriters may otherwise have and shall
extend, upon the same terms and conditions, to each director of the Company
(including any person who, with his or her consent, is named in the
Registration Statement as about to become a director of the Company), to each
officer of the Company who has signed the Registration Statement and to each
person, if any, who controls the Company or the Trust within the meaning of
the Act.
7. REPRESENTATIONS AND AGREEMENTS TO SURVIVE DELIVERY. All
representations, warranties, and agreements of the Offerors herein or in
certificates delivered pursuant hereto, and the agreements of the Offerors
and the Underwriters contained in Section 6 hereof shall remain operative and
in full force and effect regardless of any investigation made by or on behalf
of any Underwriter or any controlling person thereof, or the Company or any
of its officers, directors, or controlling persons or the Trust or any if its
trustees, or controlling persons and shall survive delivery of, and payment
for, the Trust Preferred Securities to and by the Underwriters hereunder.
8. EFFECTIVE DATE OF THIS AGREEMENT AND TERMINATION.
(a) This Agreement shall become effective at 10:00 a.m., Rocky
Mountain time, on the first full business day following the effective date of
the Registration Statement, or at such earlier time after the effective time of
the Registration Statement as the Representative in its discretion shall first
release the Trust Preferred Securities for sale to the public; provided, that if
the Registration Statement is effective at the time this Agreement is executed,
this Agreement shall become effective at such time as the Representative in its
discretion shall first release the Trust Preferred Securities for sale to the
public. For the purpose of this Section, the Trust Preferred Securities shall
be deemed to have been released for sale to the public upon release by the
Representative of the publication of a newspaper advertisement relating thereto
or upon release by the Representative of telexes offering the Trust Preferred
Securities for sale to securities dealers, whichever shall first occur. By
giving notice as hereinafter specified before the time this Agreement becomes
effective, the Representative, the Trust or the Company may prevent this
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Agreement from becoming effective without liability of any party to any other
party, except that the provisions of Section 4(a)(viii) and Section 6 hereof
shall at all times be effective.
(b) The Representative shall have the right to terminate this
Agreement, by notice as hereinafter specified, at any time at or prior to
the Closing Date (i) if there has been, since the date of this Agreement or
since the respective dates as of which information is given in the
Registration Statement, any material adverse change in the condition
(financial or otherwise) of the Company, or in the financial results,
business affairs or business prospects of the Company, whether or not arising
in the ordinary course of business, or (ii) if either Offeror shall have
failed, refused or been unable, at or prior to such Closing Date, to perform
any agreement on its part to be performed hereunder, or (iii) if any other
condition of the Underwriters' obligations hereunder required to be fulfilled
by the Offerors is not fulfilled, or (iv) if there has occurred any material
adverse change in the financial markets in the United States or any outbreak
or the escalation of major hostilities involving the United States or the
declaration by the United States of a national emergency, war, or other
calamity or crisis, the effect of which is such as to make it, in the
Representative's reasonable judgment, impracticable or inadvisable to market
the Trust Preferred Securities or to enforce contracts for the sale of the
Trust Preferred Securities, or (v) if trading in the Trust Preferred
Securities has been suspended by the Commission, or if trading generally on
either the American Stock Exchange or the New York Stock Exchange has been
suspended, or minimum or maximum prices for trading have been fixed, or
maximum ranges for prices for securities have been required, by either of
said Exchanges or by order of the Commission or any other governmental
authority, or if a banking moratorium has been declared by either Federal or
Montana authorities. If this Agreement is terminated pursuant to this Section
8(b), such termination shall be without liability of any party to any other
party except that the provisions of Section 4(a)(viii) and Section 6 hereof
shall at all times be effective.
(c) If the Representative elect to prevent this Agreement from
becoming effective or to terminate this Agreement as provided in this
Section, the Company shall be notified promptly by the Representative by
telephone or telegram, confirmed by letter. If the Trust or the Company
elects to prevent this Agreement from becoming effective, the Representative
shall be notified by the Trust or the Company by telephone or telegram,
confirmed by letter.
9. DEFAULT BY THE COMPANY. If the Trust shall fail at the Closing Date
to sell and deliver the number of Trust Preferred Securities which it is
obligated to sell hereunder or the Company fails to deliver the number of
Junior Subordinated Debentures required to be delivered pursuant to the Trust
Agreement, then this Agreement shall terminate without any liability on the
part of any non-defaulting
-36-
<PAGE>
party. No action taken pursuant to this Section shall relieve the Trust or
the Company so defaulting from liability, if any, in respect of such default.
10. DEFAULT BY THE UNDERWRITERS
(a) If any Underwriter shall default in its obligation to purchase
the Trust Preferred Securities which it has agreed to purchase hereunder, the
Representative may in its discretion arrange for it or another party or other
parties to purchase such Trust Preferred Securities on the terms contained
herein. If within thirty-six hours after such default by any Underwriter,
the Representative does not arrange for the purchase of such Trust Preferred
Securities, then the Company and the Trust shall be entitled to a further
period of thirty-six hours within which to procure another party or other
parties satisfactory to the Representative to purchase such Trust Preferred
Securities on such terms. In the event that, within the respective
prescribed periods, the Representative notifies the Company and the Trust
that it has so arranged for the purchase of such Trust Preferred Securities,
or the Company and the Trust notify the Representative that it has so
arranged for the purchase of such Trust Preferred Securities, the
Representative or the Company and the Trust shall have the right to postpone
the Closing Date for a period of not more than seven days, in order to effect
whatever changes may thereby be made necessary in the Registration Statement
or the Prospectus, or in any other documents or arrangements, and the Company
and the Trust agree to file promptly any amendments to the Registration
Statement or the Prospectus which in the opinion of the Representative may
thereby be made necessary. The term "Underwriter" as used in this Agreement
shall include any person substituted under this Section with like effect as
if such person had originally been a party to this Agreement with respect to
such Trust Preferred Securities.
(b) If, after giving effect to any arrangements for the purchase of the
Trust Preferred Securities of a defaulting Underwriter or Underwriters by the
Representative and the Company and the Trust as provided in subsection (a)
above, the aggregate principal amount of such Trust Preferred Securities
which remains unpurchased does not exceed one-eleventh of the aggregate
principal amount of all the Trust Preferred Securities to be purchased, then
the Company and the Trust shall have the right to require the non-defaulting
Underwriters to purchase the number of Trust Preferred Securities which such
Underwriter agreed to purchase hereunder and, in addition, to require the
non-defaulting Underwriters to purchase its pro rata share (based on the
aggregate principal amount of Trust Preferred Securities which such
Underwriter agreed to purchase hereunder) of the Trust Preferred Securities
of such defaulting Underwriter or Underwriters for which such arrangements
have not been made; but nothing herein shall relieve the defaulting
Underwriter from liability for its default.
-37-
<PAGE>
(c) If, after giving effect to any arrangements for the purchase of the
Trust Preferred Securities of a defaulting Underwriter or Underwriters by the
Representative and the Company and the Trust as provided in subsection (a)
above, the aggregate principal amount of such Trust Preferred Securities
which remains unpurchased exceeds one-eleventh of the aggregate principal
amount of all the Trust Preferred Securities to be purchased, or if the
Company and the Trust shall not exercise the right described in subsection
(b) above to require non-defaulting Underwriters to purchase Trust Preferred
Securities of the defaulting Underwriter or Underwriters, then this Agreement
shall thereupon terminate, without liability on the part of any
non-defaulting Underwriter or the Company or the Trust, except for the
expenses to be borne by the Company and the Underwriters as provided in
Section 4(a)(viii) hereof and the indemnity and contribution agreements in
Section 6 hereof; but nothing herein shall relieve a defaulting Underwriter
from liability for its default.
11. INFORMATION FURNISHED BY UNDERWRITERS. The statements set forth in
the last paragraph of the cover page and under the caption "Underwriting" in
any Preliminary Prospectus and in the Prospectus constitute the written
information furnished by the Representative on behalf of the Underwriters
referred to in Section 2 and Section 6 hereof.
12. NOTICES. Except as otherwise provided herein, all communications
hereunder shall be in writing or by telegraph and, if to the Underwriters,
shall be mailed, telegraphed or delivered to the Underwriters, c/o D. A.
Davidson & Co., 8 Third Street North, Great Falls, Montana 59401, Attention:
Syndicate Department; if to the Company, shall be mailed, telegraphed or
delivered to it at First Interstate BancSystem, Inc., 401 North 31st Street,
Billings, Montana 59116, Attention: Chief Executive Officer; if to the Trust,
shall be mailed, telegraphed or delivered to it c/o First Interstate
BancSystem, Inc., 401 North 31st Street, Billings, Montana 59116, Attention:
Chief Executive Officer. All notices given by telegram shall be promptly
confirmed by letter. Any notice to the Trust shall also be copied to the
Company at the address previously stated, Attention: Chief Executive Officer.
Any party to this Agreement may change such address for notices by sending
to the parties to this Agreement written notice of a new address for such
purpose.
13. PERSONS ENTITLED TO BENEFIT OF AGREEMENT. This Agreement shall
inure to the benefit of and be binding upon the parties hereto and their
respective successors and assigns and the controlling persons, officers and
directors referred to in Section 6. Nothing in this Agreement is intended or
shall be construed to give to any other person, firm or corporation any legal
or equitable remedy or claim under or in respect of this Agreement or any
provision herein contained. The term "successors and assigns" as herein used
shall not include any purchaser, as such purchaser, of any of the Trust
Preferred Securities from the Underwriters.
-38-
<PAGE>
14. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Montana.
[Signature Page Follows]
-39-
<PAGE>
Please sign and return to the Company the enclosed duplicates of this
letter whereupon this letter will become a binding agreement between the
Company and the Underwriters in accordance with its terms.
Very truly yours,
FIRST INTERSTATE BANCSYSTEM, INC.,
By
-------------------------------------
FIB CAPITAL TRUST
By
-------------------------------------
Accepted as of the date hereof.
D. A. DAVIDSON & CO., for itself and as
Representative of the several Underwriters
referred to in this Agreement
By:
--------------------------------
Authorized Signatory
-40-
<PAGE>
SCHEDULE I
Total Number of
Trust Preferred Securities
Underwriter to be Purchased
----------- ---------------------------
D. A. Davidson & Co.............................. $
[NAME OF UW].....................................
Total................................... $
<PAGE>
ARTICLES OF AMENDMENT OF THE
RESTATED ARTICLES OF INCORPORATION OF
FIRST INTERSTATE BANCSYSTEM OF MONTANA, INC.
1. The name of the corporation is First Interstate BancSystem of
Montana, Inc.
2. Article I is amended to read in its entirety as follows:
The name of the corporation is First Interstate BancSystem, Inc.
3. Article IV is hereby amended to increase the number of authorized
Common Shares from 5,000,000 shares to 20,000,000 shares, without par value.
4. A new Article IX is amended to the Restated Articles of
Incorporation to read in its entirety as follows:
Cumulative voting in the election of directors shall not be
permitted with respect to the Corporation.
5. Each of the foregoing amendments was adopted by the Board of
Directors of the Company and approved by the vote of the shareholders at a
shareholders meeting held on May 22, 1997. On the day of the meeting and at
the time of the vote, there were 1,973,472 shares of Corporation Common
Shares issued and outstanding and entitled to vote. Of the 1,973,472
outstanding shares, 1,449,965 shares were voted in favor of the foregoing
amendments and 0 shares were voted against the amendments, with 523,507
shares abstaining or not present. No other class or series of Corporation
common or preferred shares were entitled to vote and no class was entitled to
vote as a group.
6. The vote of the shareholders was sufficient to approve the
amendments as required by governing law, including, without limitation, as
required by Montana Code Annotated Section 35-1-227 and Section 35-1-531
(1995).
7. The Articles of Amendment are effective upon filing with the Montana
Secretary of State.
DATED as of October 7, 1997.
FIRST INTERSTATE BANCSYSTEM, INC.
F/K/A FIRST INTERSTATE BANCSYSTEM OF
MONTANA, INC.
By: /s/ Thomas W. Scott
-----------------------------------
Its President
ATTEST:
By: /s/ Terrill R. Moore
-------------------------
Its: Secretary
<PAGE>
- -------------------------------------------------------------------------------
JUNIOR SUBORDINATED INDENTURE
BY
FIRST INTERSTATE BANCSYSTEM, INC.,
TO
WILMINGTON TRUST COMPANY,
TRUSTEE
DATED AS OF _________, 1997
___% JUNIOR SUBORDINATED DEFERRABLE
INTEREST DEBENTURES
DUE __________, 2027
- -------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Article I Definitions And Other Provisions of General Application ........ 1
Section 1.1. Definitions ............................................. 1
Section 1.2. Compliance Certificate and Opinions ..................... 9
Section 1.3. Forms of Documents Delivered to Trustee ................. 10
Section 1.4. Acts of Holders ......................................... 11
Section 1.5. Notices, Etc ............................................ 13
Section 1.6. Notice to Holders; Waiver ............................... 13
Section 1.7. Conflict with Trust Indenture Act ....................... 13
Section 1.8. Effect of Headings and Table of Contents ................ 14
Section 1.9. Successors and Assigns .................................. 14
Section 1.10. Separability Clause ..................................... 14
Section 1.11. Benefits of Indenture ................................... 14
Section 1.12. Governing Law ........................................... 14
Section 1.13. Non-Business Days ....................................... 14
Article II Security Forms ................................................ 15
Section 2.1. Forms Generally ......................................... 15
Section 2.2. Form of Face of Security ................................ 15
Section 2.3. Form of Reverse of Security ............................. 18
Section 2.4. Additional Provisions Required in Global Security ....... 21
Section 2.5. Form of Trustee's Certificate of Authentication ......... 21
Article III The Securities ............................................... 21
Section 3.1. Title and Terms ......................................... 21
Section 3.2. Execution, Authentication, Delivery and Dating .......... 24
Section 3.3. Temporary Securities .................................... 25
Section 3.4. Registration, Transfer and Exchange ..................... 25
Section 3.5. Mutilated, Destroyed, Lost and Stolen Securities ........ 27
Section 3.6. Payment of Interest; Interest Rights Preserved .......... 28
Section 3.7. Persons Deemed Owners ................................... 29
Section 3.8. Cancellation ............................................ 29
Section 3.9. Computation of Interest ................................. 29
Section 3.10. Deferrals of Interest Payment Dates ..................... 30
Section 3.11. Right of Set-Off ........................................ 31
Section 3.12. Agreed Tax Treatment .................................... 31
Section 3.13. Shortening of Stated Maturity ........................... 31
Section 3.14. CUSIP Numbers ........................................... 31
i
<PAGE>
Article IV Satisfaction And Discharge ................................. 32
Section 4.1. Satisfaction and Discharge of Indenture ................. 32
Section 4.2. Application of Trust Money .............................. 33
Article V Remedies ....................................................... 33
Section 5.1. Events of Default ....................................... 33
Section 5.2. Acceleration of Maturity; Rescission and Annulment ...... 34
Section 5.3. Collection of Indebtedness and Suits for
Enforcement by Trustee .................................. 35
Section 5.4. Trustee May File Proofs of Claim ........................ 36
Section 5.5. Trustee May Enforce Claim Without
Possession of Securities ................................ 37
Section 5.6. Application of Money Collected .......................... 37
Section 5.7. Limitation on Suits ..................................... 37
Section 5.8. Unconditional Right of Holders to
Receive Principal, Premium and Interest;
Direct Action by Holders of Trust Preferred Securities .. 38
Section 5.9. Restoration of Rights and Remedies ...................... 38
Section 5.10. Rights and Remedies Cumulative .......................... 39
Section 5.11. Delay or Omission Not Waiver ............................ 39
Section 5.12. Control by Holders ...................................... 39
Section 5.13. Waiver of Past Defaults ................................. 40
Section 5.14. Undertaking for Costs ................................... 40
Section 5.15. Waiver of Usury, Stay or Extension Laws ................. 40
Article VI The Trustee ................................................... 41
Section 6.1. Certain Duties and Responsibilities ..................... 41
Section 6.2. Notice of Defaults ...................................... 42
Section 6.3. Certain Rights of Trustee ............................... 42
Section 6.4. Not Responsible for Recitals or Issuance of Securities .. 43
Section 6.5. May Hold Securities ..................................... 43
Section 6.6. Money Held in Trust ..................................... 43
Section 6.7. Compensation and Reimbursement .......................... 44
Section 6.8. Disqualification; Conflicting Interests ................. 44
Section 6.9. Corporate Trustee Required; Eligibility ................. 44
Section 6.10. Resignation and Removal; Appointment of Successor ....... 45
Section 6.11. Acceptance of Appointment by Successor .................. 46
Section 6.12. Merger, Conversion, Consolidation
or Succession to Business ............................... 47
Section 6.13. Preferential Collection of Claims Against Company ....... 48
Section 6.14. Appointment of Authenticating Agent ..................... 48
Article VII Holders' Lists and Reports by Trustee and Company ............ 49
Section 7.1. Company to Furnish Trustee Names
and Addresses of Holders ................................ 49
ii
<PAGE>
Section 7.2. Preservation of Information, Communications to Holders .. 50
Section 7.3. Reports by Trustee ...................................... 50
Section 7.4. Reports by Company ...................................... 51
Article VIII Consolidation, Merger, Conveyance, Transfer or Lease ....... 51
Section 8.1. Company May Consolidate, Etc ............................ 51
Section 8.2. Successor Corporation Substituted ....................... 52
Article IX Supplemental Indentures .................................... 53
Section 9.1. Supplemental Indentures Without Consent of Holders ...... 53
Section 9.2. Supplemental Indentures with Consent of Holders ......... 53
Section 9.3. Execution of Supplemental Indentures .................... 55
Section 9.4. Effect of Supplemental Indentures ....................... 55
Section 9.5. Conformity with Trust Indenture Act ..................... 55
Section 9.6. Reference in Securities to Supplemental Indentures ...... 55
Article X Covenants ...................................................... 55
Section 10.1. Payment of Principal, Premium and Interest .............. 55
Section 10.2. Maintenance of Office or Agency ......................... 55
Section 10.3. Money for Security Payments to be Held in Trust ......... 56
Section 10.4. Statement as to Compliance .............................. 57
Section 10.5. Waiver of Certain Covenants ............................. 58
Section 10.6. Additional Sums ......................................... 58
Section 10.7. Additional Covenants .................................... 58
Article XI Redemption of Securities ................................... 59
Section 11.1. Applicability of This Article ........................... 59
Section 11.2. Election to Redeem; Notice to Trustee ................... 60
Section 11.3. Selection of Securities to be Redeemed .................. 60
Section 11.4. Notice of Redemption .................................... 60
Section 11.5. Deposit of Redemption Price ............................. 61
Section 11.6. Payment of Securities Called for Redemption ............. 61
Section 11.7. Right of Redemption of Securities
Initially Issued to the Trust ........................... 62
Article XII Subordination of Securities ................................ 62
Section 12.1. Securities Subordinate to Senior and Subordinated Debt .. 62
Section 12.2. Payment over of Proceeds upon Dissolution, Etc .......... 62
Section 12.3. Prior Payment to Senior and Subordinated Debt upon
Acceleration of Securities .............................. 64
Section 12.4. No Payment When Senior and Subordinated Debt in Default . 64
Section 12.5. Payment Permitted If No Default ......................... 65
iii
<PAGE>
Section 12.6. Subrogation to Rights of Holders of Senior
and Subordinated Debt ................................... 65
Section 12.7. Provisions Solely to Define Relative Rights ............. 66
Section 12.8. Trustee to Effectuate Subordination ..................... 66
Section 12.9. No Waiver of Subordination Provisions ................... 66
Section 12.10. Notice to Trustee ....................................... 67
Section 12.11. Reliance on Judicial Order
or Certificate of Liquidating Agent ..................... 67
Section 12.12. Trustee Not Fiduciary for Holders of Senior
and Subordinated Debt ................................... 68
Section 12.13. Rights of Trustee as Holder of Senior and
Subordinated Debt; Preservation of Trustee's Rights ..... 68
Section 12.14. Article Applicable to Paying Agents ..................... 68
Section 12.15. Certain Conversions or Exchanges Deemed Payment ......... 68
iv
<PAGE>
ANNEXES
Annex A Guarantee Agreement
Annex B Trust Agreement
Annex C Amended and Restated Trust Agreement
v
<PAGE>
FIRST INTERSTATE BANCSYSTEM, INC.
Reconciliation and tie between the Trust Indenture Act of 1939 (including
cross-references to provisions of Sections 310 to and including 317 which,
pursuant to Section 318(c) of the Trust Indenture Act of 1939, as amended by
the Trust Reform Act of 1990, are a part of and govern the Indenture whether
or not physically contained therein) and the Junior Subordinated Indenture,
dated as of ______, 1997.
Trust Indenture Indenture
Act Section Section
--------------- ---------
310 (a) (1), (2) and (5) .................... Not Applicable
(a) (3) ................................. Not Applicable
(a) (4) ................................. Not Applicable
(b) ..................................... 6.8; 6.10
(c) ..................................... Not Applicable
311 (b) ..................................... 7.3(a) (2)
312 (a) ..................................... 7.1
......................................... 7.2(a)
(b) ..................................... 7.2(b)
(c) ..................................... 7.2(c)
313 (a) ..................................... 7.3(a)
(b) ..................................... 7.3(b)
(c) ..................................... 7.3(a), 7.3(b)
(d) ..................................... 7.3(c)
314 (a) (1), (2) and (3) .................... 7.4
(a) (4) ................................. 10.5
(b) ..................................... Not Applicable
(c) (1) ................................. 1.2
(c) (2) ................................. 1.2
(c) (3) ................................. Not Applicable
(d) ..................................... Not Applicable
(e) ..................................... 1.2
(f) ..................................... Not Applicable
vi
<PAGE>
315 (a) ..................................... 6.1(a)
(b) ..................................... 6.2
......................................... 7.3(a) (6)
(c) ..................................... 6.1(b)
(d) ..................................... 6.1 (c)
(d) (1) ................................. 6.1(a) (1)
(d) (2) ................................. 6.1(c) (2)
(d) (3) ................................. 6.1(c) (3)
(e) ..................................... 5.14
316 (a) ..................................... 1.1
(a) (1) (A) ............................. 5.12
(a) (1) (B) ............................. 5.13
(a) (2) ................................. Not Applicable
(b) ..................................... 5.8
(c) ..................................... 1.4(f)
317 (a) (1) ................................. 5.3
(a) (2) ................................. 5.4
(b) ..................................... 10.3
318 (a) ..................................... 1.7
- -------------
Note: This reconciliation and tie shall not, for any purpose, be deemed to be
a part of the Junior Subordinated Indenture.
vii
<PAGE>
JUNIOR SUBORDINATED INDENTURE
JUNIOR SUBORDINATED INDENTURE, dated as of _________ , 1997, between
FIRST INTERSTATE BANCSYSTEM, INC., a Montana corporation (hereinafter called
the "Company"), having its principal office at 401 North 31st Street,
Billings, MT 59101, and WILMINGTON TRUST COMPANY, a Delaware banking
corporation, as Trustee (hereinafter called the "Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the execution and delivery of this
Indenture to provide for the issuance from time to time of its ____% Junior
Subordinated Deferrable Interest Debentures, due __________, 2027 (hereinafter
called the "Securities"), as hereinafter provided, which Securities will be
issued to evidence loans made to the Company of the proceeds from the
issuance by FIB Capital Trust (the "Trust"), a business trust formed under
the laws of the State of Delaware, of the Trust Preferred Securities
(Liquidation Amount $25 per Trust Preferred Security) (the "Trust Preferred
Securities") and common interests in such Trust (the "Common Securities" and,
collectively with the Trust Preferred Securities, the "Trust Securities"),
and to provide the terms and conditions upon which the Securities are to be
authenticated, issued and delivered.
All things necessary to make the Securities, when executed by the
Company and authenticated and delivered hereunder and duly issued by the
Company, the valid obligations of the Company, and to make this Indenture a
valid agreement of the Company, in accordance with their and its terms, have
been done.
NOW THEREFORE, THIS INDENTURE WITNESSETH: For and in consideration of
the premises and the purchase of the Securities by the Holders thereof, it is
mutually covenanted and agreed, for the equal and proportionate benefit of
all Holders of the Securities, as follows:
ARTICLE I
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
Section 1.1. DEFINITIONS.
For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:
(1) The terms defined in this Article have the meanings assigned to them
in this Article, and include the plural as well as the singular;
(2) All other terms used herein which are defined in the Trust Indenture
Act, either directly or by reference therein, have the meanings assigned to
them therein;
<PAGE>
(3) All accounting terms not otherwise defined herein have the meanings
assigned to them in accordance with generally accepted accounting principles,
and the term "generally accepted accounting principles" with respect to any
computation required or permitted hereunder shall mean such accounting
principles which are generally accepted at the date or time of such
computation; provided, that when two or more principles are so generally
accepted, it shall mean that set of principles consistent with those in use
by the Company; and
(4) The words "herein," "hereof" and "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any particular
Article, Section or other subdivision.
"1940 Act" means the Investment Company Act of 1940, as amended.
"Act" when used with respect to any Holder has the meaning specified in
Section 1.4.
"Additional Interest" means the interest, if any, that shall accrue on
any interest on the Securities the payment of which has not been made on the
applicable Interest Payment Date and which shall accrue at the rate per annum
specified or determined as specified in such Security.
"Additional Sums" has the meaning specified in Section 10.6.
"Additional Taxes" means the sum of any additional taxes, duties and
other governmental charges to which the Trust has become subject from time to
time as a result of a Tax Event.
"Administrative Trustee" means, in respect of the Trust, each Person
identified as an "Administrative Trustee" or an "Administrative Agent" in the
Trust Agreement, solely in such Person's capacity as Administrative Trustee
or an Administrative Agent, as the case may be, of such Trust under such
Trust Agreement and not in such Person's individual capacity, or any
successor administrative trustee or successor administrative agent, as the
case may be, appointed as therein provided.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person; provided, however, that the Trust shall
not be deemed to be an Affiliate of the Company. For the purposes of this
definition, "control" when used with respect to any specified Person means
the power to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract
or otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Allocable Amounts," when used with respect to any Senior and
Subordinated Debt, means all amounts due or to become due on such Senior and
Subordinated Debt less, if applicable, any amount which would have been paid
to, and retained by, the
2
<PAGE>
holders of such Senior and Subordinated Debt (whether as a result of the
receipt of payments by the holders of such Senior and Subordinated Debt from
the Company or any other obligor thereon or from any holders of, or trustee
in respect of, other indebtedness that is subordinate and junior in right of
payment to such Senior and Subordinated Debt pursuant to any provision of
such indebtedness for the payment over of amounts received on account of such
indebtedness to the holders of such Senior and Subordinated Debt or
otherwise) but for the fact that such Senior and Subordinated Debt is
subordinate or junior in right of payment to (or subject to a requirement
that amounts received on such Senior and Subordinated Debt be paid over to
obligees on) trade accounts payable or accrued liabilities arising in the
ordinary course of business.
"Authenticating Agent" means any Person authorized by the Trustee
pursuant to Section 6.14 to act on behalf of the Trustee to authenticate the
Securities.
"Board of Directors" means either the board of directors of the Company
or any committee of that board duly authorized to act hereunder.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly adopted
by the Board of Directors, or such committee of the Board of Directors or
officers of the Company to which authority to act on behalf of the Board of
Directors has been delegated, and to be in full force and effect on the date
of such certification, and delivered to the Trustee.
"Business Day" means any day other than (i) a Saturday or Sunday, (ii) a
day on which banking institutions in the State of Montana are authorized or
required by law or executive order to remain closed or (iii) a day on which
the Corporate Trust Office of the Trustee is closed for business.
"Capital Treatment Event" means the reasonable determination by the
Company that, as a result of any amendment to, or change (including any
prospective change) in, the laws (or any regulations thereunder) of the
United States or any political subdivision thereof or therein, or as a result
of any official or administrative pronouncement or action or judicial
decision interpreting or applying such laws or regulations, which amendment
or change is effective or such prospective change, pronouncement or decision
is announced on or after the date of issuance of the Trust Preferred
Securities, there is more than an insubstantial risk of impairment of the
Company's ability to treat the Trust Preferred Securities (or any substantial
portion thereof) as "Tier I Capital" (or the then equivalent thereof) for
purposes of the capital adequacy guidelines of the Federal Reserve, as then
in effect and applicable to the Company.
"Commission" means the Securities and Exchange Commission, as from time
to time constituted, created under the Exchange Act, or if at any time after
the execution of this instrument such Commission is not existing and
performing the duties now assigned to it under the Trust Indenture Act, then
the body performing such duties on such date.
3
<PAGE>
"Common Securities" has the meaning specified in the first recital of
this Indenture.
"Common Stock" means the common stock, without par value, of the Company.
"Company" means the Person named as the "Company" in the first paragraph
of this instrument until a successor corporation shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Company" shall mean such successor corporation.
"Company Request" and "Company Order" mean, respectively, the written
request or order signed in the name of the Company by the Chairman of the
Board of Directors, the Vice Chairman of the Board of Directors, its
President or a Vice President, and by its Treasurer, an Assistant Treasurer,
its Secretary or an Assistant Secretary of the Company, and delivered to the
Trustee.
"Corporate Trust Office" means the principal office of the Trustee at
which at any particular time its corporate trust business shall be
administered.
"Corporation" includes a corporation, association, company, joint-stock
company or business trust.
"Debt" means, with respect to any Person, whether recourse is to all or a
portion of the assets of such Person and whether or not contingent, (i) every
obligation of such Person for money borrowed; (ii) every obligation of such
Person evidenced by bonds, debentures, notes or other similar instruments,
including obligations incurred in connection with the acquisition of
property, assets or businesses; (iii) every reimbursement obligation of such
Person with respect to letters of credit, bankers' acceptances or similar
facilities issued for the account of such Person; (iv) every obligation of
such Person issued or assumed as the deferred purchase price of property or
services (but excluding trade accounts payable or accrued liabilities arising
in the ordinary course of business); (v) every capital lease obligation of
such Person; (vi) all indebtedness of such Person whether incurred on or
prior to the date of this Indenture or thereafter incurred, for claims in
respect of derivative products, including interest rate, foreign exchange
rate and commodity forward contracts, options and swaps and similar
arrangements; and (vii) every obligation of the type referred to in clauses
(i) through (vi) of another Person and all dividends of another Person the
payment of which, in either case, such Person has guaranteed or is
responsible or liable for, directly or indirectly, as obligor or otherwise.
"Defaulted Interest" has the meaning specified in Section 3.6.
"Depositary" means, with respect to the Securities issuable or issued in
whole or in part in the form of one or more Global Securities, The Depository
Trust Company of New York (or any successor thereto).
4
<PAGE>
"Discount Security" means any security which provides for an amount less
than the principal amount thereof to be due and payable upon a declaration of
acceleration of the Maturity thereof pursuant to Section 5.2.
"Distributions," means amounts payable in respect of such Trust
Securities as provided in the Trust Agreement and referred to therein as
"Distributions."
"Dollar" or "U.S. $" means the currency of the United States of America
that, as at the time of payment, is legal tender for the payment of public
and private debts.
"Event of Default" has the meaning specified in Article V.
"Exchange Act" means the Securities Exchange Act of 1934 and any statute
successor thereto, in each case as amended from time to time.
"Extension Period" has the meaning specified in Section 3.1(d).
"Federal Reserve" has the meaning specified in Section 3.1(f).
"Global Security" means a Security in the form prescribed in Section 2.4
evidencing all or part of the Securities, issued to the Depositary or its
nominee, and registered in the name of such Depositary or its nominee.
"Guarantee" means the guarantee by the Company of Distributions on the
Trust Preferred Securities to the extent provided in the Guarantee Agreement.
"Guarantee Agreement" means the Guarantee Agreement substantially in the
form attached hereto as Annex A, as amended from time to time.
"Holder" means a Person in whose name a Security is registered in the
Securities Register.
"Indenture" means this instrument as originally executed or as it may
from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof.
"Interest Payment Date" means the Stated Maturity of an installment of
interest on such Securities.
"Investment Company Event" means the receipt by the Trust of an Opinion
of Counsel, rendered by a law firm experienced in such matters, to the effect
that, as a result of change in law or regulation or a change in
interpretation or application of law or regulation by any legislative body,
court, governmental agency or regulatory authority, such Trust is or will be
considered an "investment company" that is required to be registered under
the 1940 Act, which change becomes effective on or after the date of original
issuance of the Trust Preferred Securities.
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"Junior Subordinated Payment" has the meaning specified in Section 12.2.
"Maturity" when used with respect to a Security, means the date on which
the principal of such Security becomes due and payable as therein or herein
provided, whether at the Stated Maturity or by declaration of acceleration,
call for redemption or otherwise.
"Notice of Default" means a written notice of the kind specified in
Section 5.1(3).
"Officers' Certificate" means a certificate signed by the Chairman of the
Board of Directors, a Vice Chairman of the Board of Directors, the President
or a Vice President, and by the Treasurer, an Assistant Treasurer, the
Secretary or an Assistant Secretary of the Company, and delivered to the
Trustee.
"Opinion of Counsel" means a written opinion of counsel, who may be
counsel for the Company, and who shall be acceptable to the Trustee.
"Original Issue Date" means the date of issuance specified as such in a
Security.
"Outstanding" means as of the date of determination, all Securities
theretofore authenticated and delivered under this Indenture, except:
(i) Securities theretofore canceled by the Trustee or delivered
to the Trustee for cancellation;
(ii) Securities for whose payment money in the necessary amount
has been theretofore deposited with the Trustee or any Paying Agent in
trust for the Holders of such Securities; and
(iii) Securities in substitution for or in lieu of which other
Securities have been authenticated and delivered or which have been paid
pursuant to Section 3.6, unless proof satisfactory to the Trustee is
presented that any such Securities are held by Holders in whose hands such
Securities are valid, binding and legal obligations of the Company;
provided, however, that in determining whether the Holders of the requisite
principal amount of Outstanding Securities have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, Securities
owned by the Company or any other obligor upon the Securities or any
Affiliate of the Company or such other obligor shall be disregarded and
deemed not to be Outstanding, except that, in determining whether the Trustee
shall be protected in relying upon any such request, demand, authorization,
direction, notice, consent or waiver, only Securities which the Trustee knows
to be so owned shall be so disregarded. Securities so owned which have been
pledged in good faith may be regarded as Outstanding if the pledgee
establishes to the satisfaction of the Trustee the pledgee's right so to act
with respect to such Securities and that the pledgee is not the Company or
any other obligor upon the Securities or any Affiliate of the Company or such
other obligor. Upon the written request of the Trustee,
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the Company shall furnish to the Trustee promptly an Officers' Certificate
listing and identifying all Securities, if any, known by the Company to be
owned or held by or for the account of the Company, or any other obligor on
the Securities or any Affiliate of the Company or such obligor, and, subject
to the provisions of Section 6.1, the Trustee shall be entitled to accept
such Officers' Certificate as conclusive evidence of the facts therein set
forth and of the fact that all Securities not listed therein are Outstanding
for the purpose of any such determination.
"Paying Agent" means the Trustee or any Person authorized by the Company
to pay) the principal of or interest on any Securities on behalf of the
Company.
"Person" means any individual, corporation, partnership, joint venture,
trust, unincorporated organization or government or any agency or political
subdivision thereof.
"Place of Payment" means the place or places where the principal of (and
premium, if any) and interest on the Securities are payable pursuant to
Sections 3.1 and 3.11.
"Predecessor Security" of any particular Security means every previous
Security evidencing all or a portion of the same debt as that evidenced by
such particular Security; and, for the purposes of this definition, any
security authenticated and delivered under Section 3.6 in lieu of a lost,
destroyed or stolen Security shall be deemed to evidence the same debt as the
lost, destroyed or stolen Security.
"Proceeding" has the meaning specified in Section 12.2.
"Property Trustee" means the commercial bank or trust company identified
as the "Property Trustee" in the Trust Agreement, solely in its capacity as
Property Trustee of the Trust under such Trust Agreement and not in its
individual capacity, or its successor in interest in such capacity, or any
successor property trustee appointed as therein provided.
"Redemption Date," when used with respect to any Security to be redeemed,
means the date fixed for such redemption by or pursuant to this Indenture.
"Redemption Price," when used with respect to any Security to be
redeemed, means an amount equal to the accrued and unpaid interest on the
Securities so redeemed to the Redemption Date, plus 100% of the principal
amount thereof.
"Regular Record Date" for the interest payable on any Interest Payment
Date means, (i) in the case of Securities represented by one or more Global
Securities, the Business Day next preceding such Interest Payment Date and
(ii) in the case of Securities not represented by one or more Global
Securities, the date which is fifteen days next preceding such Interest
Payment Date (whether or not a Business Day).
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"Responsible Officer" when used with respect to the Trustee means any
officer of the Trustee assigned by the Trustee from time to time to
administer its corporate trust matters.
"Securities" or "Security" means any securities or security, as the case
may be, authenticated and delivered under this Indenture.
"Securities Register" and "Securities Registrar" have the respective
meanings specified in Section 3.5.
"Senior and Subordinated Debt" means the principal of (and premium, if
any) and interest, if any (including interest accruing on or after the filing
of any petition in bankruptcy or for reorganization relating to the Company
whether or not such claim for post-petition interest is allowed in such
proceeding), on Debt of the Company, whether incurred on or prior to the date
of this Indenture or thereafter incurred, unless, in the instrument creating
or evidencing the same or pursuant to which the same is outstanding, it is
provided that such obligations are not superior in right of payment to the
Securities, provided, however, that Senior and Subordinated Debt shall not be
deemed to include (a) any Debt of the Company which, when incurred and
without respect to any election under Section 1111(b) of the Bankruptcy
Reform Act of 1978, as amended, was without recourse to the Company, (b) any
Debt of the Company to any of its Subsidiaries, (c) Debt to any employee of
the Company and (d) any Securities.
"Special Record Date" for the payment of any Defaulted Interest means a
date fixed by the Trustee pursuant to Section 3.6.
"Stated Maturity" when used with respect to a Security or any
installment of principal thereof or interest thereon means the date specified
pursuant to the terms of such Security and this Indenture as the date on
which the principal of such Security or such installment of interest is due
and payable, in the case of such principal, as such date may be shortened or
extended as provided pursuant to the terms of such Security and this
Indenture.
"Subsidiary" means a corporation more than 50% of the outstanding voting
stock of which is owned, directly or indirectly, by the Company or by one or
more other Subsidiaries, or by the Company and one or more other
Subsidiaries. For purposes of this definition, "voting stock" means stock
which ordinarily has voting power for the election of directors, whether at
all times or only so long as no senior class of stock has such voting power
by reason of any contingency.
"Tax Event" means the receipt by the Company and the Trust of an Opinion
of Counsel (as defined in the Trust Agreement) experienced in such matters to
the effect that, as a result of any amendment to, or change (including any
announced prospective change) in, the laws (or any regulations thereunder) of
the United States or any political subdivision or taxing authority thereof or
therein, or as a result of any official administrative pronouncement or
judicial decision interpreting or applying such laws or
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regulations, which amendment or change is effective or such prospective
change, pronouncement or decision is announced on or after the date of
issuance of the Trust Preferred Securities, there is more than an
insubstantial risk that (i) the Trust is, or will be within 90 days of the
date of such Opinion of Counsel, subject to United States Federal income tax
with respect to income received or accrued on the Securities, (ii) interest
payable by the Company on the Securities is not, or within 90 days of the
date of such Opinion of Counsel, will not be, deductible by the Company, in
whole or in part, for United States Federal income tax purposes or (iii) the
Trust is, or will be within 90 days of the date of such Opinion of Counsel,
subject to more than a de minimis amount of other taxes, duties or other
governmental charges.
"Trust" has the meaning specified in the first recital of this Indenture.
"Trust Agreement" means the Trust Agreement substantially in the form
attached hereto as Annex B, as amended by the form of Amended and Restated
Trust Agreement substantially in the form attached hereto as Annex C, in each
case as amended from time to time.
"Trustee" means the Person named as the "Trustee" in the first paragraph
of this instrument until a successor Trustee shall have become such pursuant
to the applicable provisions of this Indenture, and thereafter "Trustee"
shall mean or include each Person who is then a Trustee hereunder.
"Trust Indenture Act" means the Trust Indenture Act of 1939 (15 U.S.C.
Sections 77aaa-77bbb), as amended and as in effect on the date as of this
Indenture, except as provided in Section 9.5.
"Trust Preferred Securities" has the meaning specified in the first
recital of this Indenture.
"Trust Securities" has the meaning specified in the first recital of this
Indenture.
"Vice President" when used with respect to the Company, means any duly
appointed vice president, whether or not designated by a number or a word or
words added before or after the title "vice president."
Section 1.2. COMPLIANCE CERTIFICATE AND OPINIONS.
Upon any application or request by the Company to the Trustee to take any
action under any provision of this Indenture, the Company shall furnish to
the Trustee an Officers' Certificate stating that all conditions precedent
(including covenants, compliance with which constitutes a condition
precedent), if any, provided for in this Indenture relating to the proposed
action have been complied with and an Opinion of Counsel stating that in the
opinion of such counsel all such conditions precedent (including covenants
compliance with which constitute a condition precedent), if any, have been
complied with, except that in the case of any such application or request as
to which the furnishing of such documents is specifically required by any
provision of this
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Indenture relating to such particular application or request, no additional
certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance with a condition
or covenant provided for in this Indenture (other than the certificates
provided pursuant to Section 10.4) shall include:
(1) a statement that each individual signing such certificate or opinion
has read such covenant or condition and the definitions herein relating
thereto;
(2) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of each such individual, he has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or condition
has been complied with; and
(4) a statement as to whether, in the opinion of each such individual,
such condition or covenant has been complied with.
Section 1.3. FORMS OF DOCUMENTS DELIVERED TO TRUSTEE.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and
one or more other such Persons as to other matters, and any such Person may
certify or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or
representations with respect to matters upon which his certificate or opinion
is based are erroneous. Any such certificate or Opinion of Counsel may be
based, insofar as it relates to factual matters, upon a certificate or
opinion of, or representations by, an officer or officers of the Company
stating that the information with respect to such factual matters is in the
possession of the Company, unless such counsel knows, or in the exercise of
reasonable care should know, that the certificate or opinion or
representations with respect to such matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
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Section 1.4. ACTS OF HOLDERS.
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Indenture to be given to or taken by
Holders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by an agent
or proxy duly appointed in writing; and, except as herein otherwise expressly
provided, such action shall become effective when such instrument or
instruments is or are delivered to the Trustee, and, where it is hereby
expressly required, to the Company. Such instrument or instruments (and the
action embodied therein and evidenced thereby) are herein sometimes referred
to as the "Act" of the Holders signing such instrument or instruments. Proof
of execution of any such instrument or of a writing appointing any such agent
shall be sufficient for any purpose of this Indenture and (subject to Section
6.1) conclusive in favor of the Trustee and the Company, if made in the
manner provided in this Section.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by the certificate of any notary public or other officer
authorized by law to take acknowledgments of deeds, certifying that the
individual signing such instrument or writing acknowledged to him the
execution thereof. Where such execution is by a Person acting in other than
his individual capacity, such certificate or affidavit shall also constitute
sufficient proof of his authority.
(c) The fact and date of the execution by any Person of any such
instrument or writing, or the authority of the Person executing the same, may
also be proved in any other manner which the Trustee deems sufficient and in
accordance with such reasonable rules as the Trustee may determine.
(d) The ownership of Securities shall be proved by the Securities
Register.
(e) Any request, demand, authorization, direction, notice, consent,
waiver or other action by the Holder of a Security shall bind every future
Holder of such Security and the Holder of every Security issued upon the
transfer thereof or in exchange therefor or in lieu thereof in respect of
anything done or suffered to be done by the Trustee or the Company in
reliance thereon, whether or not notation of such action is made upon such
Security.
(f) The Company may set any day as a record date for the purpose of
determining the Holders of Outstanding Securities entitled to give, make or
take any request, demand, authorization, direction, notice, consent, waiver
or other action provided or permitted by this Indenture to be given, made or
taken by Holders of Securities, provided that the Company may not set a
record date for, and the provisions of this paragraph shall not apply with
respect to, the giving or making of any notice, declaration, request or
direction referred to in the next paragraph. If any record date is set
pursuant to this paragraph, the Holders of Outstanding Securities on such
record date, and no other Holders, shall be entitled to take the relevant
action, whether or not
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such Holders remain Holders after such record date, provided that no such
action shall be effective hereunder unless taken on or prior to the
applicable Expiration Date by Holders of the requisite principal amount of
Outstanding Securities on such record date. Nothing in this paragraph shall
be construed to prevent the Company from setting a new record date for any
action for which a record date has previously been set pursuant to this
paragraph (whereupon the record date previously set shall automatically and
with no action by any Person be canceled and of no effect), and nothing in
this paragraph shall be construed to render ineffective any action taken by
Holders of the requisite principal amount of Outstanding Securities on the
date such action is taken. Promptly after any record date is set pursuant to
this paragraph, the Company, at its own expense, shall cause notice of such
record date, the proposed action by Holders and the applicable Expiration
Date to be given to the Trustee in writing and to each Holder of Securities
in the manner set forth in Section 1.6.
The Trustee may set any day as a record date for the purpose of
determining the Holders of Outstanding Securities entitled to join in the
giving or making of (i) any Notice of Default, (ii) any declaration of
acceleration referred to in Section 5.2, (iii) any request to institute
proceedings referred to in Section 5.7(2) or (iv) any direction referred to
in Section 5.12. If any record date is set pursuant to this paragraph, the
Holders of Outstanding Securities on such record date, and no other Holders,
shall be entitled to join in such notice, declaration, request or direction,
whether or not such Holders remain Holders after such record date, provided
that no such action shall be effective hereunder unless taken on or prior to
the applicable Expiration Date by Holders of the requisite principal amount
of Outstanding Securities on such record date. Nothing in this paragraph
shall be construed to prevent the Trustee from setting a new record date for
any action for which a record date has previously been set pursuant to this
paragraph (whereupon the record date previously set shall automatically and
with no action by any Person be canceled and of no effect), and nothing in
this paragraph shall be construed to render ineffective any action taken by
Holders of the requisite principal amount of Outstanding Securities on the
date such action is taken. Promptly after any record date is set pursuant to
this paragraph, the Trustee, at the Company's expense, shall cause notice of
such record date, the proposed action by Holders and the applicable
Expiration Date to be given to the Company in writing and to each Holder of
Securities in the manner set forth in Section 1.6.
With respect to any record date set pursuant to this Section, the party
hereto which sets such record dates may designate any day as the "Expiration
Date" and from time to time may change the Expiration Date to any earlier or
later day, provided that no such change shall be effective unless notice of
the proposed new Expiration Date is given to the other party hereto in
writing, and to each Holder of Securities in the manner set forth in Section
10.6, on or prior to the existing Expiration Date. If an Expiration Date is
not designated with respect to any record date set pursuant to this Section,
the party hereto which set such record date shall be deemed to have initially
designated the 180th day after such record date as the Expiration Date with
respect thereto, subject to its right to change the Expiration Date as
provided in this paragraph. Notwithstanding the
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foregoing, no Expiration Date shall be later than the 180th day after the
applicable record date.
(g) Without limiting the foregoing, a Holder entitled hereunder to take
any action hereunder with regard to Security may do so with regard to all or
any part of the principal amount of such Security or by one or more duly
appointed agents each of which may do so pursuant to such appointment with
regard to all or any part of such principal amount.
Section 1.5. NOTICES, ETC., TO TRUSTEE AND COMPANY.
Any request, demand, authorization, direction, notice, consent, waiver or
Act of Holders or other document provided or permitted by this Indenture to
be made upon, given or furnished to, or filed with,
(1) the Trustee by any Holder, any holder of Trust Preferred Securities
or the Company shall be sufficient for every purpose hereunder if made,
given, furnished or filed in writing to or with the Trustee at its Corporate
Trust office, or
(2) the Company by the Trustee, any Holder or any holder of Trust
Preferred Securities shall be sufficient for every purpose (except as
otherwise provided in Section 5.1) hereunder if in writing and mailed, first
class, postage prepaid, to the Company, addressed to it at the address of its
principal office specified in the first paragraph of this instrument or at
any other address previously furnished in writing to the Trustee by the
Company.
Section 1.6. NOTICE TO HOLDERS; WAIVER.
Where this Indenture provides for notice to Holders of any event, such
notice shall be sufficiently given (unless otherwise herein expressly
provided) if in writing and mailed, first class postage prepaid, to each
Holder affected by such event, at the address of such Holder as it appears in
the Securities Register, not later than the latest date, and not earlier than
the earliest date, prescribed for the giving of such notice. In any case
where notice to Holders is given by mail, neither the failure to mail such
notice, nor any defect in any notice so mailed, to any particular Holder
shall affect the sufficiency of such notice with respect to other Holders.
Where this Indenture provides for notice in any manner, such notice may be
waived in writing by the Person entitled to receive such notice, either
before or after the event, and such waiver shall be the equivalent of such
notice. Waivers of notice by Holders shall be filed with the Trustee, but
such filing shall not be a condition precedent to the validity of any action
taken in reliance upon such waiver.
Section 1.7. CONFLICT WITH TRUST INDENTURE ACT.
If any provision of this Indenture limits, qualifies or conflicts with
the duties imposed by any of Sections 310 to 317, inclusive, of the Trust
Indenture Act through operation of Section 318(c) thereof, such imposed
duties shall control.
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Section 1.8. EFFECT OF HEADINGS AND TABLE OF CONTENTS.
The Article and Section headings herein and the Table of Contents are for
convenience only and shall not affect the construction hereof.
Section 1.9. SUCCESSORS AND ASSIGNS.
All covenants and agreements in this Indenture by the Company shall bind
its successors and assigns, whether so expressed or not.
Section 1.10. SEPARABILITY CLAUSE.
In case any provision in this Indenture or in the Securities shall be
invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
Section 1.11. BENEFITS OF INDENTURE.
Nothing in this Indenture or in the Securities, express or implied, shall
give to any Person, other than the parties hereto and their successors and
assigns, the Holders of Senior and Subordinated Debt, the Holders of the
Securities and, to the extent expressly provided in Sections 5.2, 5.8, 5.9,
5.11, 5.13, 9.1 and 9.2, the holders of Trust Preferred Securities, any
benefit or any legal or equitable right, remedy or claim under this
Indenture.
Section 1.12. GOVERNING LAW.
This Indenture and the Securities shall be governed by and construed in
accordance with the laws of the State of Montana, without regard to conflicts
of laws principles thereof.
Section 1.13. NON-BUSINESS DAYS.
In any case where any Interest Payment Date, Redemption Date or Stated
Maturity of any Security shall not be a Business Day, then (notwithstanding
any other provision of this Indenture or the Securities) payment of interest
or principal (and premium, if any) need not be made on such date, but may be
made on the next succeeding Business Day (and no interest shall accrue for
the period from and after such Interest Payment Date, Redemption Date or
Stated Maturity, as the case may be, until such next succeeding Business Day
except that, if such Business Day is in the next succeeding calendar year,
such payment shall be made on the immediately preceding Business Day (in each
case with the same force and effect as if made on the Interest Payment Date
or Redemption Date or at the Stated Maturity)).
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ARTICLE II
SECURITY FORMS
Section 2.1. FORMS GENERALLY.
The Securities shall be in substantially the form set forth in this
Article with such appropriate insertions, omissions, substitutions and other
variations as are required or permitted by this Indenture and may have such
letters, numbers or other marks of identification and such legends or
endorsements placed thereon as may be required to comply with applicable tax
laws or the rules of any securities exchange or as may, consistently
herewith, be determined by the officers executing such securities, as
evidenced by their execution of the Securities.
The Trustee's certificates of authentication shall be substantially in
the form set forth in this Article.
The definitive Securities shall be printed, lithographed or engraved or
produced by any combination of these methods, if required by any securities
exchange on which the Securities may be listed, on a steel engraved border or
steel engraved borders or may be produced in any other manner permitted by
the rules of any securities exchange on which the Securities may be listed,
all as determined by the officers executing such Securities, as evidenced by
their execution of such securities.
Section 2.2. FORM OF FACE OF SECURITY.
FIRST INTERSTATE BANCSYSTEM, INC.
__% Junior Subordinated Deferrable Interest Debenture due _____________, 2027
Registered No.: Principal Amount: $41,237,000
CUSIP No.:
First Interstate BancSystem, Inc., a corporation organized and existing
under the laws of Montana (hereinafter called the "Company," which term
includes any successor corporation under the Indenture hereinafter referred
to), for value received, hereby promises to pay to ______________, or
registered assigns, the principal sum of $41,237,100 Dollars on ____________,
2027; provided that the Company may shorten the Stated Maturity of the
principal of this Security to a date not earlier than _________, 2002. The
Company further promises to pay interest on said principal sum from
_____________ or from the most recent interest payment date (each such date,
an "Interest Payment Date") on which interest has been paid or duly provided
for, quarterly (subject to deferral as set forth herein) in arrears on the
last day of _______, ______, _______ and __________ of each year commencing
_______________ at the rate of
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____% per annum, until the principal hereof shall have become due and
payable, plus Additional Interest, if any, until the principal hereof is paid
or duly provided for or made available for payment and on any overdue
principal and (without duplication and to the extent that payment of such
interest is enforceable under applicable law) on any overdue installment of
interest at the rate of ____% per annum, compounded quarterly. The amount of
interest payable for any period shall be computed on the basis of twelve
30-day months and a 360-day year. The amount of interest payable for any
partial period shall be computed on the basis of the number of days elapsed
in a 360-day year of twelve 30-day months. In the event that any date on
which interest is payable on this Security is not a Business Day, then a
payment of the interest payable on such date will be made on the next
succeeding day which is a Business Day (and without any interest or other
payment in respect of any such delay), except that, if such Business Day is
in the next calendar year, such payment shall be made on the immediately
preceding Business Day, in each case with the same force and effect as if
made on the date the payment was originally payable. A "Business Day" shall
mean any day other than a Saturday or Sunday, or a day on which banking
institutions in the State of Montana are authorized or required by law or
executive order to remain closed or on a day on which the Corporate Trust
Office of the Property Trustee or the Indenture Trustee under the Trust
Agreement (hereinafter referred to) for the Trust is closed for business.
The interest installment so payable, and punctually paid or duly provided
for, on any Interest Payment Date will, as provided in the Indenture, be paid
to the Person in whose name this Security (or one or more Predecessor
Securities) is registered at the close of business on the Regular Record Date
for such interest installment, which shall be the next Business Day preceding
such Interest Payment Date next preceding such Interest Payment Date. Any
such interest installment not so punctually paid or duly provided for shall
forthwith cease to be payable to the Holder on such Regular Record Date and
may either be paid to the Person in whose name this Security (or one or more
Predecessor Securities) is registered at the close of business on a Special
Record Date for the payment of such Defaulted Interest to be fixed by the
Trustee, notice whereof shall be given to Holders of Securities not less than
10 days prior to such Special Record Date, or be paid at any time in any
other lawful manner not inconsistent with the requirements of any securities
exchange on which the Securities may be listed, and upon such notice as may
be required by such exchange, all as more fully provided in said Indenture.
So long as no Event of Default has occurred and is continuing, the
Company shall have the right at any time during the term of this Security to
defer payment of interest on this Security, at any time or from time to time,
for up to 20 consecutive quarterly interest payment periods with respect to
each deferral period (each an "Extension Period"), (during which Extension
Periods the Company shall have the right to make partial payments of interest
on any Interest Payment Date, and at the end of which the Company shall pay
all interest then accrued and unpaid (together with Additional Interest
thereon to the extent permitted by applicable law)); provided, however, that
no Extension Period shall extend beyond the Stated Maturity of the principal
of this Security; provided, further, that during any such Extension Period,
the Company shall not, and shall not permit any Subsidiary of the Company to,
(i) declare or pay any
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dividends or distributions on, or redeem, purchase, acquire or make a
liquidation payment with respect to, any of the Company's capital stock
(which includes common and preferred stock), or (ii) make any payment of
principal of or interest or premium, if any, on or repay, repurchase or
redeem any debt security of the Company that ranks PARI PASSU with or junior
in interest to this Security, or (iii) make any guarantee payments with
respect to any guarantee by the Company of the debt securities of any
Subsidiaries of the Company (if such guarantee ranks PARI PASSU in all
respects with or junior in interest to this Security (other than (a)
dividends or distributions in capital stock of the Company (which includes
common and preferred stock), (b) any declaration of a dividend in connection
with the implementation of a stockholders' rights plan, or the issuance of
stock under any such plan in the future or the redemption or repurchase of
any such rights pursuant thereto, (c) payments under the Guarantee, and (d)
purchases of Common Stock related to the issuance of Common Stock or rights
under any of the Company's benefit plans for its directors, officers or
employees or related to the issuance of common stock (or securities
convertible into or exchangeable for common stock) as consideration in an
acquisition transaction)). Prior to the termination of any such Extension
Period, the Company may further extend such Extension Period, provided that
such extension does not cause such Extension Period to exceed 20 consecutive
interest payment periods or to extend beyond the Stated Maturity. Upon the
termination of any such Extension Period and upon the payment of all amounts
then due on any Interest Payment Date, and subject to the foregoing
limitation, the Company may elect to begin a new Extension Period. No
interest shall be due and payable during an Extension Period except at the
end thereof. The Company shall give the Trustee, the Property Trustee and the
Administrative Trustees notice of its election to begin any Extension Period
at least one Business Day prior to the earlier of (i) the date on which
Distributions on the Trust Preferred Securities would be payable except for
the election to begin such Extension Period, or (ii) the date the
Administrative Trustees are required to give notice to the OTC Bulletin Board
or other applicable stock exchange or automated quotation system on which the
Trust Preferred Securities are then listed or quoted or to holders of such
Trust Preferred Securities of the record date or (iii) the date such
Distributions are payable, but in any event not less than one Business Day
prior to such record date. The Trustee shall give notice of the Company's
election to begin a new Extension Period to the holders of the Trust
Preferred Securities. There is no limitation on the number of times that the
Company may elect to begin an Extension Period prior to the Stated Maturity.
Payment of the principal of (and premium, if any) and interest on this
Security will be made at the office or agency of the Trustee or at the office
of such paying agent or paying agents as the Company may designate from time
to time, maintained for that purpose in the United States, in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts; provided, however, that at
the option of the Company payment of interest may be made (i) by check mailed
to the address of the Person entitled thereto as such address shall appear in
the Securities Register or (ii) by transfer to an account maintained by the
person entitled
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thereto, in immediately available funds, at such place and to such account as
may be designated by the Person entitled thereto as specified in the
Securities Register.
The indebtedness evidenced by this Security is, to the extent provided in
the Indenture, unsecured and will rank junior and subordinate and subject in
right of payments to the prior payment in full of all Senior and Subordinated
Debt, and this Security is issued subject to the provisions of the Indenture
with respect thereto. Each Holder of this Security, by accepting the same,
(a) agrees to and shall be bound by such provisions, (b) authorizes and
directs the Trustee on his behalf to take such actions as may be necessary or
appropriate to effectuate the subordination so provided and (c) appoints the
Trustee his attorney-in-fact for any and all such purposes. Each Holder
hereof, by his acceptance hereof, waives all notice of the acceptance of the
subordination provisions contained herein and in the Indenture by each holder
of Senior and Subordinated Debt, whether now outstanding or hereafter
incurred, and waives reliance by each such holder upon said provisions.
Reference is hereby made to the further provisions of this Security set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by the
Trustee referred to on the reverse hereof by manual signature, this Security
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal.
FIRST INTERSTATE BANCSYSTEM, INC.
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
Attest:
- ------------------------------------
[Secretary or Assistant Secretary]
Section 2.3. FORM OF REVERSE OF SECURITY.
This Security is one of a duly authorized issue of securities of the
Company (herein called the "Securities"), issued under a Junior Subordinated
Indenture, dated as of ________, 1997 (herein called the "Indenture"),
between the Company and Wilmington Trust Company, as Trustee (herein called
the "Trustee," which term includes any successor trustee under the
Indenture), to which Indenture and all indentures supplemental thereto
reference is hereby made for a statement of the respective rights,
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limitations of rights, duties and immunities thereunder of the Trustee, the
Company and the Holders of the Securities, and of the terms upon which the
Securities are, and are to be, authenticated and delivered. This Security is
limited in aggregate principal amount to $41,237,100.
All terms used in this Security that are defined in the Indenture and in
the Amended and Restated Trust Agreement, dated as of __________ ___, 1997,
(the "Trust Agreement"), for FIB Capital Trust among the Company, as
Depositor, and the Trustees named therein, shall have the meanings assigned
to them in the Indenture or the Trust Agreement, as the case may be.
The Company may at any time, at its option, on or after ________, 2002,
and subject to the terms and conditions of Article XI of the Indenture, and
subject to the Company having received prior approval of the Board of
Governors of the Federal Reserve System (the "Federal Reserve") if then
required under applicable capital guidelines or policies of the Federal
Reserve redeem this Security in whole at any time or in part from time to
time, without premium or penalty, at a redemption price equal to the accrued
and unpaid interest on the Security so redeemed to the Redemption Date, plus
100% of the principal amount thereof.
Upon the occurrence and during the continuation of a Tax Event,
Investment Company Event or Capital Treatment Event, the Company may, at its
option, at any time within 90 days of the occurrence of such Tax Event,
Investment Company Event or Capital Treatment Event redeem this Security, in
whole but not in part, subject to the provisions of Section 11.7 and the
other provisions of Article XI of the Indenture, at a redemption price equal
to the accrued and unpaid interest on the Security so redeemed to the
Redemption Date, plus 100% of the principal amount thereof.
In the event of redemption of this Security in part only, a new Security
or Securities for the portion hereof not redeemed will be issued in the name
of the Holder hereof upon the cancellation hereof.
The Indenture contains provisions for satisfaction and discharge of the
entire indebtedness of this Security upon compliance by the Company with
certain conditions set forth in the Indenture.
The Indenture permits, with certain exceptions as therein provided, the
Company and the Trustee at any time to enter into a supplemental indenture or
indentures for the purpose of modifying in any manner the rights and
obligations of the Company and of the Holders of the Securities, with the
consent of the Holders of not less than a majority in principal amount of the
Outstanding Securities. The Indenture also contains provisions permitting
Holders of specified percentages in principal amount of the Securities at the
time Outstanding, on behalf of the Holders of all Securities, to waive
compliance by the Company with certain provisions of the Indenture and
certain past defaults under the Indenture and their consequences. Any such
consent or waiver by the Holder of this Security shall be conclusive and
binding upon such Holder and upon all future Holders of
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this Security and of any Security issued upon the registration of transfer
hereof or in exchange herefor or in lieu hereof, whether or not notation of
such consent or waiver is made upon this Security.
As provided in and subject to the provisions of the Indenture, if an
Event of Default occurs and is continuing, then and in every such case the
Trustee or the Holders of not less than 25% in principal amount of the
Outstanding Securities may declare the principal amount of all the Securities
to be due and payable immediately, by a notice in writing to the Company (and
to the Trustee if given by Holders), provided that, if upon an Event of
Default, the Trustee or the Holders of not less than 25% in principal amount
of the Outstanding Securities fails to declare the principal of all the
Securities to be immediately due and payable, the holders of at least 25% in
aggregate Liquidation Amount of the Trust Preferred Securities then
outstanding shall have such right by a notice in writing to the Company and
the Trustee; and upon any such declaration the principal amount of and the
accrued interest (including any Additional Interest) on all the Securities
shall become immediately due and payable, provided that the payment of
principal and interest (including any Additional Interest) on such Securities
shall remain subordinated to the extent provided in Article XIII of the
Indenture.
No reference herein to the Indenture and no provision of this Security or
of the Indenture shall alter or impair the obligation of the Company, which
is absolute and unconditional, to pay the principal of (and premium, if any)
and interest on this Security at the times, place and rate, and in the coin
or currency, herein prescribed.
As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Security is registrable in the Securities
Register, upon surrender of this Security for registration of transfer at the
office or agency of the Company maintained under Section 10.2 of the
Indenture duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to the Company and the Securities Registrar
duly executed by, the Holder hereof or his attorney duly authorized in
writing, and thereupon one or more new Securities, of authorized
denominations and for the same aggregate principal amount, will be issued to
the designated transferee or transferees. No service charge shall be made
for any such registration of transfer or exchange, but the Company may
require payment of a sum sufficient to cover any tax or other governmental
charge payable in connection therewith.
Prior to due presentment of this Security for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may
treat the Person in whose name this Security is registered as the owner
hereof for all purposes, whether or not this Security be overdue, and neither
the Company, the Trustee nor any such agent shall be affected by notice to
the contrary.
The Securities are issuable only in registered form without coupons in
denominations of minimum denominations of $25 and any integral multiples of
$25 in excess thereof. As provided in the Indenture and subject to certain
limitations therein set
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<PAGE>
forth, Securities are exchangeable for a like aggregate principal amount of
Securities of a different authorized denomination, as requested by the Holder
surrendering the same.
The Company and, by its acceptance of this Security or a beneficial
interest therein, the Holder of, and any Person that acquires a beneficial
interest in, this Security agree that for United States Federal, state and
local tax purposes it is intended that this Security constitute indebtedness.
THE INDENTURE AND THIS SECURITY SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF MONTANA WITHOUT REGARD TO CONFLICTS
OF LAWS PRINCIPLES THEREOF.
Section 2.4. ADDITIONAL PROVISIONS REQUIRED IN GLOBAL SECURITY.
Any Global Security issued hereunder shall, in addition to the provisions
contained in Sections 2.2 and 2.3, bear a legend in substantially the
following form:
"THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A
NOMINEE OF A DEPOSITARY. THIS SECURITY IS EXCHANGEABLE FOR SECURITIES
REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITARY OR ITS NOMINEE
ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE AND MAY NOT BE
TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE
DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER
NOMINEE OF THE DEPOSITARY."
Section 2.5. FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION.
This is one of the Securities referred to in the within mentioned
Indenture.
Dated:
WILMINGTON TRUST COMPANY
as Trustee
By:
-----------------------------
Authorized Officer
ARTICLE III
THE SECURITIES
Section 3.1. TITLE AND TERMS.
(a) The Securities shall bear the title "___% Junior Subordinated
Deferrable Interest Debentures Due ___, 2027."
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(b) The aggregate principal amount the Securities to be issued under
this Indenture shall be limited to $41,237,100 (except for Securities
authenticated and delivered upon registration of, transfer of, or in exchange
for, or in lieu of, other Securities pursuant to Sections 3.3, 3.4, 3.5, 9.6
or 11.7 of this Indenture and except for Securities which, pursuant to
Section 3.2 of this Indenture, are deemed never to have been authenticated
and delivered thereunder).
(c) The date on which the principal of the Securities is due and payable
shall be _____________, 2027.
(d) The Securities shall bear interest at the rate of ___% per annum
(based upon a 360-day year of twelve 30-day months), from and including
______, 1997, or from and including the most recent Interest Payment Date to
which interest has been paid or duly provided for, as the case may be,
payable quarterly in arrears on the 15th day of March, June, September and
December in each year, commencing December 15, 1997, until the principal
thereof is paid or made available for payment. Each such March 15, June 15,
September 15 or December 15 shall be an "Interest Payment Date" for the
Securities, and the Business Day next preceding an Interest Payment Date
shall be the "Regular Record Date" for the interest payable on such Interest
Payment Date. Accrued interest that is not paid on such applicable Interest
Payment Date will bear additional interest on the amount thereof (to the
extent permitted by law) at a rate per annum of ___% thereof compounded
quarterly.
In addition, so long as no Event of Default with respect to the
Securities has occurred or is continuing, the Company has the right under
this Indenture at any time during the term of such Securities to defer the
payment of interest at any time or from time to time for a period not
exceeding 20 consecutive quarterly periods (each such period an "Extension
Period"), provided that no Extension Period may extend beyond the Stated
Maturity. At the end of such Extension Period, the Company must pay all
interest then accrued and unpaid (together with interest thereon at the
annual rate of ___%, compounded quarterly, to the extent permitted by
applicable law).
(e) Principal of (and premium, if any) and interest on the Securities
will be payable, and, except as provided in Section 3.5 of this Indenture
with respect to a Global Security (as defined below), the transfer of the
Securities will be registrable and Securities will be exchangeable for
Securities bearing identical terms and provisions at the corporate trust
office of Wilmington Trust Company, in the City of New York, New York.
(f) The Securities will be redeemable in whole at any time and in part
from time to time, at the option of the Company at any time on or after
_________, 2002, subject to the Company having received prior approval of the
Board of Governors of the Federal Reserve System (the "Federal Reserve"), at
a redemption price equal to the accrued and unpaid interest on the Securities
so redeemed to the date fixed for redemption, plus 100% of the principal
amount thereof.
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In addition, upon the occurrence of a Capital Treatment Event, an
Investment Company Event or a Tax Event the Company may, at its option and
subject to receipt of prior approval of the Federal Reserve if then required
under applicable capital guidelines or policies of the Federal Reserve,
prepay the Securities in whole (but not in part) at any time within 90 days
of the occurrence of such Capital Treatment Event, Investment Company Event
or Tax Event, at a redemption price equal to the accrued and unpaid interest
on the Securities so redeemed to the date fixed for redemption, plus 100% of
the principal amount thereof.
(g) The Company shall not be obligated to prepay, repay or purchase any
Securities pursuant to any sinking fund, amortization or analogous provisions
or at the option of the Holder.
(h) The Securities will be issued only in fully registered form and the
authorized minimum denomination of the Securities shall be $25 and any
integral multiple of $25 in excess thereof.
(i) The Securities shall be denominated, and payments of principal of (and
premium, if any) and interest on the Securities will be payable, in United
States dollars.
(j) The Securities shall be subject to the Events of Default specified in
Section 5.1, paragraphs (1) through (5), of this Indenture.
(k) The portion of the principal amount of the Securities which shall be
payable upon declaration of acceleration of maturity thereof shall not be
other than the principal amount thereof, provided, that, if such acceleration
is declared by the Holders of at least 25% in aggregate liquidation amount of
the Trust Preferred Securities then outstanding, then, upon such declaration
of acceleration, the Securities which shall be payable shall be the principal
amount thereof plus accrued interest (including any Additional Interest).
(l) The Securities will be issued in fully registered form, without
coupons. The Securities will not be issued in bearer form.
(m) The amount of payments of principal of and any premium or interest on
the Securities will not be determined with reference to an index.
(n) The Securities shall not be issued in the form of a temporary Global
Security (as defined below).
(o) The Securities will initially be in certificated form registered in
the name of the name of Wilmington Trust Company, as Property Trustee (the
"Certificated Securities"). The Securities may, in the sole discretion of
the Company, be deposited with, and on behalf of, The Depository Trust
Company, New York, New York, as Depositary, and will be represented by a
global security (a "Global Security") registered in the name of a nominee of
the Depositary. If, and so long as the Depositary or its nominee is the
registered holder of any Global Security, the Depositary or its nominee, as
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<PAGE>
the case may be, will be considered the sole Holder of the Securities
represented by such Global Security for all purposes under the Indenture and
the Securities. The Certificated Securities or the Global Securities, as the
case may be, shall bear no legends.
(p) The Trustee shall be Paying Agent.
(q) The Securities will not be convertible into any other securities or
property of the Company.
(r) The Securities are subordinate and subject in right of payment to the
prior payment in full of all amounts then due and payable in respect of all
Senior and Subordinated Debt, as provided in Article VIII.
Section 3.2. EXECUTION, AUTHENTICATION, DELIVERY AND DATING.
The Securities shall be executed on behalf of the Company by its President
or one of its Vice Presidents under its corporate seal reproduced or
impressed thereon and attested by its Secretary or one of its Assistant
Secretaries. The signature of any of these officers on the Securities may be
manual or facsimile.
Securities bearing the manual or facsimile signatures of individuals who
were at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Securities or did
not hold such offices at the date of such Securities. At any time and from
time to time after the execution and delivery of this Indenture, the Company
may deliver Securities executed by the Company to the Trustee for
authentication, together with a Company Order for the authentication and
delivery of such Securities, and the Trustee in accordance with the Company
Order shall authenticate and deliver such Securities. In connection with any
Company Order for authentication, an Officers' Certificate and Opinion of
Counsel pursuant to Section 1.2 shall not be required.
Each Security shall be dated the date of its authentication.
No Security shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose, unless there appears on such Security a
certificate of authentication substantially in the form provided for herein
executed by the Trustee by the manual signature of one of its authorized
officers, and such certificate upon any Security shall be conclusive
evidence, and the only evidence, that such Security has been duly
authenticated and delivered hereunder. Notwithstanding the foregoing, if any
Security shall have been authenticated and delivered hereunder but never
issued and sold by the Company, and the Company shall deliver such Security
to the Trustee for cancellation as provided in Section 3.8, for all purposes
of this Indenture such Security shall be deemed never to have been
authenticated and delivered hereunder and shall never be entitled to the
benefits of this Indenture.
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<PAGE>
Section 3.3. TEMPORARY SECURITIES.
Pending the preparation of definitive Securities, the Company may execute,
and upon Company Order the Trustee shall authenticate and deliver, temporary
Securities which are printed, lithographed, typewritten, mimeographed or
otherwise produced, in any denomination, substantially of the tenor of the
definitive Securities in lieu of which they are issued and with such
appropriate insertions, omissions, substitutions and other variations as the
officers executing such Securities may determine, as evidenced by their
execution of such Securities.
If temporary Securities are issued, the Company will cause definitive
Securities to be prepared without unreasonable delay. After the preparation
of definitive Securities, the temporary Securities shall be exchangeable for
definitive Securities upon surrender of the temporary Securities at the
office or agency of the Company designated for that purpose without charge to
the Holder. Upon surrender for cancellation of any one or more temporary
Securities, the Company shall execute and the Trustee shall authenticate and
deliver in exchange therefor one or more definitive Securities of authorized
denominations having the same Original Issue Date and Stated Maturity and
having the same terms as such temporary Securities. Until so exchanged, the
temporary Securities shall in all respects be entitled to the same benefits
under this Indenture as definitive Securities.
Section 3.4. REGISTRATION, TRANSFER AND EXCHANGE.
The Company shall cause to be kept at the Corporate Trust Office of the
Trustee a register in which, subject to such reasonable regulations as it may
prescribe, the Company shall provide for the registration of Securities and
of transfers of Securities. Such register is herein sometimes referred to as
the "Securities Register." The Trustee is hereby appointed "Securities
Registrar" for the purpose of registering Securities and transfers of
Securities as herein provided.
Upon surrender for registration of transfer of a Security at the office or
agency of the Company designated for that purpose the Company shall execute,
and the Trustee shall authenticate and deliver, in the name of the designated
transferee or transferees, one or more new Securities of any authorized
denominations, of a like aggregate principal amount, of the same Original
Issue Date and Stated Maturity and having the same terms.
At the option of the Holder, Securities may be exchanged for other
Securities of any authorized denominations, of a like aggregate principal
amount, of the same Original Issue Date and Stated Maturity and having the
same terms, upon surrender of the Securities to be exchanged at such office
or agency. Whenever any securities are so surrendered for exchange, the
Company shall execute, and the Trustee shall authenticate and deliver, the
Securities which the Holder making the exchange is entitled to receive.
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<PAGE>
All Securities issued upon any transfer or exchange of Securities shall be
the valid obligations of the Company, evidencing the same debt, and entitled
to the same benefits under this Indenture, as the Securities surrendered upon
such transfer or exchange.
Every Security presented or surrendered for transfer or exchange shall (if
so required by the Company or the Securities Registrar) be duly endorsed, or
be accompanied by a written instrument of transfer in form satisfactory to
the Company and the Securities Registrar, duly executed by the Holder thereof
or his attorney duly authorized in writing.
No service charge shall be made to a Holder for any transfer or exchange
of Securities, but the Company may require payment of a sum sufficient to
cover any tax or other governmental charge that may be imposed in connection
with any transfer or exchange of Securities.
No service charge shall be made to a Holder for any transfer or exchange
of Securities, but the Company may require payment of a sum sufficient to
cover any tax or other governmental charge that may be imposed in connection
with any transfer or exchange of Securities.
The provisions of Clauses (1), (2), (3) and (4) below shall apply only to
Global Securities:
(1) Each Global Security authenticated under this Indenture shall be
registered in the name of the Depositary designated for such Global Security
or a nominee thereof and delivered to such Depositary or a nominee thereof or
custodian therefor, and each such Global Security shall constitute a single
Security for all purposes of this Indenture.
(2) Notwithstanding any other provision in this Indenture, no Global
Security may be exchanged in whole or in part for Securities registered, and
no transfer of a Global Security in whole or in part may be registered, in
the name of any Person other than the Depositary for such Global Security or
a nominee thereof unless (A) such Depositary (i) has notified the Company
that it is unwilling or unable to continue as Depositary for such Global
Security or (ii) has ceased to be a clearing agency registered under the
Exchange Act at a time when the Depositary is required to be so registered to
act as depositary, in each case unless the Company has approved a successor
Depositary within 90 days, (B) there shall have occurred and be continuing an
Event of Default with respect to such Global Security, (C) the Company in its
sole discretion determines that such Global Security will be so exchangeable
or transferable or (D) there shall exist such circumstances, if any, in
addition to or in lieu of the foregoing as have been specified for this
purpose as contemplated by Section 3.1.
(3) Subject to Clause (2) above, any exchange of a Global Security for
other Securities may be made in whole or in part, and all Securities issued
in exchange for a Global Security or any portion thereof shall be registered
in such names as the Depositary for such Global Security shall direct.
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<PAGE>
(4) Every Security authenticated and delivered upon registration of
transfer of, or in exchange for or in lieu of, a Global Security or any
portion thereof, whether pursuant to this Section, Sections 3.3, 3.5, 9.6 or
11.6 or otherwise, shall be authenticated and delivered in the form of, and
shall be, a Global Security, unless such Security is registered in the name
of a Person other than the Depositary for such Global Security or a nominee
thereof.
Neither the Company nor the Trustee shall be required, pursuant to the
provisions of this Section, (a) to issue, transfer or exchange any Security
during a period beginning at the opening of business 15 days before the day
of selection for redemption of Securities pursuant to Article XI and ending
at the close of business on the day of mailing of notice of redemption or (b)
to transfer or exchange any Security so selected for redemption in whole or
in part, except, in the case of any Security to be redeemed in part, any
portion thereof not to be redeemed.
Section 3.5. MUTILATED, DESTROYED, LOST AND STOLEN SECURITIES.
If any mutilated Security is surrendered to the Trustee together with such
security or indemnity as may be required by the Company or the Trustee to
save each of them harmless, the Company shall execute and the Trustee shall
authenticate and deliver in exchange therefor a new Security of like tenor
and principal amount, having the same Original Issue Date and Stated
Maturity, and bearing a number not contemporaneously outstanding.
If there shall be delivered to the Company and to the Trustee (i) evidence
to their satisfaction of the destruction, loss or theft of any Security, and
(ii) such security or indemnity as may be required by them to save each of
them harmless, then, in the absence of notice to the Company or the Trustee
that such Security has been acquired by a bona fide purchaser, the Company
shall execute and upon its request the Trustee shall authenticate and
deliver, in lieu of any such destroyed, lost or stolen Security, a new
Security of like tenor and principal amount, having the same Original Issue
Date and Stated Maturity as such destroyed, lost or stolen Security, and
bearing a number not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Security has become
or is about to become due and payable, the Company in its discretion may,
instead of issuing a new Security, pay such Security.
Upon the issuance of any new Security under this Section, the Company may
require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Security issued pursuant to this Section in lieu of any
destroyed, lost or stolen Security shall constitute an original additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Security shall be at any time
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<PAGE>
enforceable by anyone, and shall be entitled to all the benefits of this
Indenture equally and proportionately with any and all other Securities duly
issued hereunder.
The provisions of this Section 3.5 are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the
replacement or payment of mutilated, destroyed, lost or stolen Securities.
Section 3.6. PAYMENT OF INTEREST; INTEREST RIGHTS PRESERVED.
Interest on any Security which is payable, and is punctually paid or duly
provided for, on any Interest Payment Date, shall be paid to the Person in
whose name that Security (or one or more Predecessor Securities) is
registered at the close of business on the Regular Record Date, except that,
unless otherwise provided in the Securities, interest payable on the Stated
Maturity of the principal of a Security shall be paid to the Person to whom
principal is paid. The initial payment of interest on any Security which is
issued between a Regular Record Date and the related Interest Payment Date
shall be payable as provided in such Security.
Any interest on any Security which is payable, but is not timely paid or
duly provided for, on any Interest Payment Date (herein called "Defaulted
Interest"), shall forthwith cease to be payable to the registered Holder on
the relevant Regular Record Date by virtue of having been such Holder, and
such Defaulted Interest may be paid by the Company, at its election in each
case, as provided in Clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted Interest to the
Persons in whose names the Securities (or their respective Predecessor
Securities) are registered at the close of business on a Special Record Date
for the payment of such Defaulted Interest, which shall be fixed in the
following manner. The Company shall notify the Trustee in writing of the
amount of Defaulted Interest proposed to be paid on each Security and the
date of the proposed payment, and at the same time the Company shall deposit
with the Trustee an amount of money equal to the aggregate amount proposed to
be paid in respect of such Defaulted Interest or shall make arrangements
satisfactory to the Trustee for such deposit prior to the date of the
proposed payment, such money when deposited to be held in trust for the
benefit of the Persons entitled to such Defaulted Interest as in this Clause
provided. Thereupon, the Trustee shall fix a Special Record Date for the
payment of such Defaulted Interest which shall be not more than 15 days and
not less than 10 days prior to the date of the proposed payment and not less
than 10 days after the receipt by the Trustee of the notice of the proposed
payment. The Trustee shall promptly notify the Company of such Special
Record Date and, in the name and at the expense of the Company, shall cause
notice of the proposed payment of such Defaulted Interest and the Special
Record Date therefor to be mailed, first class, postage prepaid, to each
Holder of any Securities at the address of such Holder as it appears in the
Securities Register not less than 10 days prior to such Special Record Date.
The Trustee may, in its discretion, in the name and at the expense of the
Company, cause a similar notice to be published at least once in a newspaper,
customarily published in the English language on each Business Day and of
general
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circulation in the state of Montana, but such publication shall not be a
condition precedent to the establishment of such Special Record Date. Notice
of the proposed payment of such Defaulted Interest and the Special Record
Date therefor having been mailed as aforesaid, such Defaulted Interest shall
be paid to the Persons in whose names the Securities (or their respective
Predecessor Securities) are registered on such Special Record Date and shall
no longer be payable pursuant to the following Clause (2).
(2) The Company may make payment of any Defaulted Interest in any other
lawful manner not inconsistent with the requirements of any securities
exchange on which the Securities may be listed and, upon such notice as may
be required by such exchange (or by the Trustee if the Securities are not
listed), if, after notice given by the Company to the Trustee of the proposed
payment pursuant to this Clause, such payment shall be deemed practicable by
the Trustee.
Subject to the foregoing provisions of this Section 3.6, each Security
delivered under this Indenture upon transfer of or in exchange for or in lieu
of any other Security shall carry the rights to interest accrued and unpaid,
and to accrue, which were carried by such other Security.
Section 3.7. PERSONS DEEMED OWNERS.
The Company, the Trustee and any agent of the Company or the Trustee may
treat the Person in whose name any Security is registered as the owner of
such Security for the purpose of receiving payment of principal of and
(subject to Section 3.6) any interest on such Security and for all other
purposes whatsoever, whether or not such Security be overdue, and neither the
Company, the Trustee nor any agent of the Company or the Trustee shall be
affected by notice to the contrary.
Section 3.8. CANCELLATION.
All Securities surrendered for payment, redemption, transfer or exchange
shall, if surrendered to any Person other than the Trustee, be delivered to
the Trustee, and any such Securities and Securities surrendered directly to
the Trustee for any such purpose shall be promptly canceled by it. The
Company may at any time deliver to the Trustee for cancellation any
Securities previously authenticated and delivered hereunder which the Company
may have acquired in any manner whatsoever, and all Securities so delivered
shall be promptly canceled by the Trustee. No Securities shall be
authenticated in lieu of or in exchange for any Securities canceled as
provided in this Section, except as expressly permitted by this Indenture.
All canceled Securities shall be destroyed by the Trustee and the Trustee
shall deliver to the Company a certificate of such destruction.
Section 3.9. COMPUTATION OF INTEREST.
Interest on the Securities for any period shall be computed on the basis
of a 360-day year of twelve 30-day months and interest on the Securities for
any partial period
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shall be computed on the basis of the number of days elapsed in a 360-day
year of twelve 30-day months.
Section 3.10. DEFERRALS OF INTEREST PAYMENT DATES.
So long as no Event of Default has occurred and is continuing, the Company
shall have the right, at any time during the term of the Securities, from
time to time to defer the payment of interest on such Securities, at any time
or from time to time, for up to 20 consecutive quarterly interest payment
periods with respect to each deferral period (each, an "Extension Period")
during which Extension Periods the Company shall have the right to make
partial payments of interest on any Interest Payment Date. No Extension
Period shall end on a date other than an Interest Payment Date. At the end of
any such Extension Period the Company shall pay all interest then accrued and
unpaid on the Securities (together with Additional Interest thereon, if any,
at the rate specified for the Securities to the extent permitted by
applicable law); provided, however, that no Extension Period shall extend
beyond the Stated Maturity of the principal of the Securities; provided,
further, that during any such Extension Period, the Company shall not, and
shall not permit any Subsidiary to, (i) declare or pay any dividends or
distributions on, or redeem, purchase, acquire or make a liquidation payment
with respect to, any of the Company's capital stock (which includes common
and preferred stock), or (ii) make any payment of principal of or interest or
premium, if any, on or repay, repurchase or redeem any debt securities of the
Company that ranks PARI PASSU in all respects with or junior in interest to
the Securities or make any guarantee payments with respect to any guarantee
by the Company of the debt securities of any Subsidiary of the Company if
such guarantee ranks PARI PASSU in all respects with or junior in interest to
the Securities (other than (a) dividends or distributions in capital stock of
the Company (which includes common and preferred stock), (b) any declaration
of a dividend in connection with the implementation of a stockholders' rights
plan, or the redemption or repurchase of any such rights pursuant thereto,
(c) payments under the Guarantee, and (d) purchases of Common Stock related
to the issuance of Common Stock or rights under any of the Company's benefit
plans for its directors, officers or employees). Prior to the termination of
any such Extension Period, the Company may further extend such Extension
Period, provided that such extension does not cause such Extension Period to
extend beyond the Stated Maturity of the principal of such Securities. Upon
termination of any Extension Period and upon the payment of all accrued and
unpaid interest and any Additional Interest then due on any Interest Payment
Date, the Company may elect to begin a new Extension Period, subject to the
above requirements. No interest shall be due and payable during an Extension
Period, except at the end thereof. The Company shall give the Trustee, the
Property Trustee and the Administrative Trustees notice of its election of
any Extension Period (or an extension thereof) at least one Business Day
prior to the earlier of (i) the next succeeding date on which Distributions
on the Trust Preferred Securities would be payable except for the election to
begin or extend such Extension Period or (ii) the date the Administrative
Trustees are required to give notice to the OTC Bulletin Board or other
applicable stock exchange or automated quotation system on which the Trust
Preferred Securities are then listed or quoted or to holders of such Trust
Preferred Securities of the record date
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or (iii) the date such Distributions are payable, but in any event not less
than one Business Day prior to such record date. The Trustee shall give
notice of the Company's election to begin a new Extension Period to the
holders of the Securities. There is no limitation on the number of times
that the Company may elect to begin an Extension Period prior to the Stated
Maturity.
The Trustee shall promptly give notice of the Company's election to begin
any such Extension Period to the Holders of the Outstanding Securities.
Section 3.11. RIGHT OF SET-OFF.
With respect to the Securities, notwithstanding anything to the contrary
in the Indenture, the Company shall have the right to set-off any payment it
is otherwise required to make thereunder in respect of any Security to the
extent the Company has theretofore made, or is concurrently on the date of
such payment making, a payment under the Guarantee Agreement or under Section
5.8 of the Indenture.
Section 3.12. AGREED TAX TREATMENT.
Each Security issued hereunder shall provide that the Company and, by its
acceptance of a Security or a beneficial interest therein, the Holder of, and
any Person that acquires a beneficial interest in, such Security agree that
for United States Federal, state and local tax purposes it is intended that
such Security constitute indebtedness.
Section 3.13. SHORTENING OF STATED MATURITY.
The Company shall have the right to shorten the Stated Maturity of the
principal of the Securities at any time to any date not earlier than the
first date on which the Company has the right to redeem the Securities.
Section 3.14. CUSIP NUMBERS.
The Company in issuing the Securities may use "CUSIP" numbers (if then
generally in use), and, if so, the Trustee shall use "CUSIP" numbers in
notices of redemption as a convenience to Holders; provided that any such
notice may state that no representation is made as to the correctness of such
numbers either as printed on the Securities or as contained in any notice of
a redemption and that reliance may be placed only on the other identification
numbers printed on the Securities, and any such redemption shall not be
affected by any defect in or omission of such numbers.
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ARTICLE IV
SATISFACTION AND DISCHARGE
Section 4.1. SATISFACTION AND DISCHARGE OF INDENTURE.
This Indenture shall, upon Company Request, cease to be of further effect
(except as to any surviving rights of registration of transfer or exchange of
Securities herein expressly provided for and as otherwise provided in this
Section 4.1) and the Trustee, on demand of and at the expense of the Company,
shall execute proper instruments acknowledging satisfaction and discharge of
this Indenture, when
(1) either
(A) all Securities theretofore authenticated and delivered (other than (i)
Securities which have been destroyed, lost or stolen and which have been
replaced or paid as provided in Section 3.5 and (ii) Securities for whose
payment money has theretofore been deposited in trust or segregated and held
in trust by the Company and thereafter repaid to the Company or discharged
from such trust, as provided in Section 10.3) have been delivered to the
Trustee for cancellation; or
(B) all such Securities not theretofore delivered to the Trustee for
cancellation
(i) have become due and payable, or
(ii) will become due and payable at their Stated Maturity within one
year of the date of deposit, or
(iii) are to be called for redemption within one year under arrangements
satisfactory to the Trustee for the giving of notice of redemption by the
Trustee in the name, and at the expense, of the Company,
and the Company, in the case of Clause (B) (i), (ii) or (iii) above, has
deposited or caused to be deposited with the Trustee as trust funds in trust
for such purpose an amount in the currency or currencies in which the
Securities are payable sufficient to pay and discharge the entire
indebtedness on such Securities not theretofore delivered to the Trustee for
cancellation, for principal (and premium, if any) and interest (including any
Additional Interest) to the date of such deposit (in the case of Securities
which have become due and payable) or to the Stated Maturity or Redemption
Date, as the case may be;
(2) the Company has paid or caused to be paid all other sums payable
hereunder by the Company; and
(3) the Company has delivered to the Trustee an Officers' Certificate and
an Opinion of Counsel each stating that all conditions precedent herein
provided for relating to the satisfaction and discharge of this Indenture
have been complied with.
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Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 6.7, the obligations
of the Trustee to any Authenticating Agent under Section 6.14 and, if money
shall have been deposited with the Trustee pursuant to subclause (B) of
clause (1) of this Section, the obligations of the Trustee under Section 4.2
and the last paragraph of Section 10.3 shall survive.
Section 4.2. APPLICATION OF TRUST MONEY.
Subject to the provisions of the last paragraph of Section 10.3, all money
deposited with the Trustee pursuant to Section 4.1 shall be held in trust and
applied by the Trustee, in accordance with the provisions of the Securities
and this Indenture, to the payment, either directly or through any Paying
Agent (including the Company acting as its own Paying Agent) as the Trustee
may determine, to the Persons entitled thereto, of the principal (and
premium, if any) and interest for the payment of which such money or
obligations have been deposited with or received by the Trustee.
ARTICLE V
REMEDIES
Section 5.1. EVENTS OF DEFAULT.
"Event of Default", wherever used herein, means any one of the following
events (whatever the reason for such Event of Default and whether it shall be
voluntary or involuntary or be effected by operation of law or pursuant to
any judgment, decree or order of any court or any order, rule or regulation
of any administrative or governmental body):
(1) default in the payment of any interest upon any Security, including
any Additional Interest in respect thereof, when it becomes due and payable,
and continuance of such default for a period of 30 days (subject to the
deferral of any due date in the case of an Extension Period); or
(2) default in the payment of the principal of (or premium, if any, on)
any Security at its Maturity; or
(3) default in the performance, or breach, in any material respect, of any
covenant or warranty of the Company in this Indenture (other than a covenant
or warranty a default in the performance of which or the breach of which is
elsewhere in this Section 5.1 specifically dealt with), and continuance of
such default or breach for a period of 60 days after there has been given, by
registered or certified mail, to the Company by the Trustee or to the Company
and the Trustee by the Holders of at least 25% in principal amount of the
Outstanding Securities a written notice specifying such default or breach and
requiring it to be remedied; or
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(4) the entry of a decree or order by a court having jurisdiction in the
premises adjudging the Company a bankrupt or insolvent, or approving as
properly filed a petition seeking reorganization, arrangement, adjustment or
composition of or in respect of the Company under any applicable Federal or
State bankruptcy, insolvency, reorganization or other similar law, or
appointing a receiver, liquidator, assignee, trustee, sequestrator (or other
similar official) of the Company or of any substantial part of its property
or ordering the winding up or liquidation of its affairs, and the continuance
of any such decree or order unstayed and in effect for a period of 60
consecutive days; or
(5) the institution by the Company of proceedings to be adjudicated a
bankrupt or insolvent, or the consent by it to the institution of bankruptcy
or insolvency proceedings against it, or the filing by it of a petition or
answer or consent seeking reorganization or relief under any applicable
Federal or State bankruptcy, insolvency, reorganization or other similar law,
or the consent by it to the filing of any such petition or to the appointment
of a receiver, liquidator, assignee, trustee, sequestrator (or other similar
official) of the Company or of any substantial part of its property, or the
making by it of an assignment for the benefit for creditors, or the admission
by it in writing of its inability to pay its debts generally as they become
due and its willingness to be adjudicated a bankrupt, or the taking of
corporate action by the Company in furtherance of any such action.
Section 5.2. ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT.
If an Event of Default (other than an Event of Default specified in
Section 5.1(4) or 5.1(5)) occurs and is continuing, then and in every such
case the Trustee or the Holders of not less than 25% in principal amount of
the Outstanding Securities may declare the principal amount of all the
Securities to be due and payable immediately, by a notice in writing to the
Company (and to the Trustee if given by Holders), provided that, if, upon an
Event of Default, the Trustee or the Holders of not less than 25% in
principal amount of the Outstanding Securities fail to declare the principal
of all the Securities to be immediately due and payable, the holders of at
least 25% in aggregate liquidation amount of the Trust Preferred Securities
then outstanding shall have such right by a notice in writing to the Company
and the Trustee; and upon any such declaration such principal amount (or
specified portion thereof) of and the accrued interest (including any
Additional Interest) on all the Securities shall become immediately due and
payable. Payment of principal and interest (including any Additional
Interest) on such Securities shall remain subordinated to the extent provided
in Article XII notwithstanding that such amount shall become immediately due
and payable as herein provided. If an Event of Default specified in Section
5.1(4) or 5.1(5) occurs, the principal amount of all the Securities shall
(or, if the Securities shall automatically, and without any declaration or
other action on the part of the Trustee or any Holder), become immediately
due and payable.
At any time after such a declaration of acceleration has been made and
before a judgment or decree for payment of the money due has been obtained by
the Trustee as hereinafter in this Article provided, the Holders of a
majority in principal amount of the
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Outstanding Securities, by written notice to the Company and the Trustee, may
rescind and annul such declaration and its consequences if:
(1) the Company has paid or deposited with the Trustee a sum sufficient to
pay:
(A) all overdue installments of interest (including any Additional
Interest) on all Securities,
(B) the principal of (and premium, if any, on) any Securities which have
become due otherwise than by such declaration of acceleration and interest
thereon at the rate borne by the Securities, and
(C) all sums paid or advanced by the Trustee hereunder and the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel; and
(2) all Events of Default, other than the non-payment of the principal of
Securities which has become due solely by such acceleration, have been cured
or waived as provided in Section 5.13.
The holders of a majority in aggregate Liquidation Amount (as defined in
the Trust Agreement) of Trust Preferred Securities shall also have the right
to rescind and annul such declaration and its consequences by written notice
to the Company and the Trustee subject to the satisfaction of the conditions
set forth in Clauses (1) and (2) above of this Section 5.2.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
Section 5.3. COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY TRUSTEE.
The Company covenants that if:
(1) default is made in the payment of any installment of interest
(including any Additional Interest) on any Security when such interest
becomes due and payable and such default continues for a period of 30 days, or
(2) default is made in the payment of the principal of (and premium, if
any, on) any Security at the Maturity thereof,
the Company will, upon demand of the Trustee, pay to the Trustee, for the
benefit of the Holders of such Securities, the whole amount then due and
payable on such Securities for principal (and premium, if any) and interest
(including any Additional Interest); and, in addition thereto, all amounts
owing the Trustee under Section 6.7.
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If the Company fails to pay such amounts forthwith upon such demand, the
Trustee, in its own name and as trustee of an express trust, may institute a
judicial proceeding for the collection of the sums so due and unpaid, and may
prosecute such proceeding to judgment or final decree, and may enforce the
same against the Company or any other obligor upon the Securities and collect
the moneys adjudged or decreed to be payable in the manner provided by law
out of the property of the Company or any other obligor upon the Securities,
wherever situated.
If an Event of Default occurs and is continuing, the Trustee may in its
discretion proceed to protect and enforce its rights and the rights of the
Holders of Securities by such appropriate judicial proceedings as the Trustee
shall deem most effectual to protect and enforce any such rights, whether for
the specific enforcement of any covenant or agreement in this Indenture or in
aid of the exercise of any power granted herein, or to enforce any other
proper remedy.
Section 5.4. TRUSTEE MAY FILE PROOFS OF CLAIM.
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial proceeding relative to the Company or any other obligor upon the
Securities or the property of the Company or of such other obligor or their
creditors,
(a) the Trustee (irrespective of whether the principal of the Securities
shall then be due and payable as therein expressed or by declaration or
otherwise and irrespective of whether the Trustee shall have made any demand
on the Company for the payment of overdue principal (and premium, if any) or
interest (including any Additional Interest)) shall be entitled and
empowered, by intervention in such proceeding or otherwise,
(i) to file and prove a claim for the whole amount of principal (and
premium, if any) and interest (including any Additional Interest) owing and
unpaid in respect to the Securities and to file such other papers or
documents as may be necessary or advisable and to take any and all actions as
are authorized under the Trust Indenture Act in order to have the claims of
the Holders and any predecessor to the Trustee under Section 6.7 allowed in
any such judicial proceedings; and
(ii) in particular, the Trustee shall be authorized to collect and
receive any moneys or other property payable or deliverable on any such
claims and to distribute the same in accordance with Section 5.6; and
(b) any custodian, receiver, assignee, trustee, liquidator, sequestrator
(or other similar official) in any such judicial proceeding is hereby
authorized by each Holder to make such payments to the Trustee for
distribution in accordance with Section 5.6, and in the event that the
Trustee shall consent to the making of such payments directly to the Holders,
to pay to the Trustee any amount due to it and any predecessor Trustee under
Section 6.7.
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Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan
of reorganization, arrangement, adjustment or composition affecting the
Securities or the rights of any Holder thereof, or to authorize the Trustee
to vote in respect of the claim of any Holder in any such proceeding;
provided, however, that the Trustee may, on behalf of the Holders, vote for
the election of a trustee in bankruptcy or similar official and be a member
of a creditors' or other similar committee.
Section 5.5. TRUSTEE MAY ENFORCE CLAIM WITHOUT POSSESSION OF SECURITIES.
All rights of action and claims under this Indenture or the Securities may
be prosecuted and enforced by the Trustee without the possession of any of
the Securities or the production thereof in any proceeding relating thereto,
and any such proceeding instituted by the Trustee shall be brought in its own
name as trustee of an express trust, and any recovery of judgment shall,
after provision for the payment of all the amounts owing the Trustee and any
predecessor Trustee under Section 6.7, its agents and counsel, be for the
ratable benefit of the Holders of the Securities in respect of which such
judgment has been recovered.
Section 5.6. APPLICATION OF MONEY COLLECTED.
Any money or property collected or to be applied by the Trustee pursuant
to this Article shall be applied in the following order, at the date or dates
fixed by the Trustee and, in case of the distribution of such money or
property on account of principal (or premium, if any) or interest (including
any Additional Interest), upon presentation of the Securities and the
notation thereon of the payment if only partially paid and upon surrender
thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee and any predecessor
Trustee under Section 6.7;
SECOND: Subject to Article XII, to the payment of the amounts then due
and unpaid upon such Securities for principal (and premium, if any) and
interest (including any Additional Interest), in respect of which or for the
benefit of which such money has been collected, ratably, without preference
or priority of any kind, according to the amounts due and payable on such
Securities for principal (and premium, if any) and interest (including any
Additional Interest), respectively; and
THIRD: The balance, if any, to the Person or Persons entitled thereto.
Section 5.7. LIMITATION ON SUITS.
No Holder of any Security shall have any right to institute any
proceeding, judicial or otherwise, with respect to this Indenture or for the
appointment of a receiver, assignee, trustee, liquidator, sequestrator (or
other similar official) or for any other remedy hereunder, unless:
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(1) such Holder has previously given written notice to the Trustee of a
continuing Event of Default;
(2) the Holders of not less than 25% in principal amount of the
Outstanding Securities shall have made written request to the Trustee to
institute proceedings in respect of such Event of Default in its own name as
Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee reasonable
indemnity against the costs, expenses and liabilities to be incurred in
compliance with such request:
(4) the Trustee for 60 days after its receipt of such notice, request and
offer of indemnity has failed to institute any such proceeding; and
(5) no direction inconsistent with such written request has been given to
the Trustee during such 60-day period by the Holders of a majority in
principal amount of the Outstanding Securities;
it being understood and intended that no one or more of such Holders shall
have any right in any manner whatever by virtue of, or by availing itself of,
any provision of this Indenture to affect, disturb or prejudice the rights of
any other Holders of Securities, or to obtain or to seek to obtain priority
or preference over any other of such Holders or to enforce any right under
this Indenture, except in the manner herein provided and for the equal and
ratable benefit of all such Holders.
Section 5.8. UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE PRINCIPAL, PREMIUM AND
INTEREST; DIRECT ACTION BY HOLDERS OF TRUST PREFERRED SECURITIES.
Notwithstanding any other provision in this Indenture, the Holder of any
Security shall have the right which is absolute and unconditional to receive
payment of the principal of (and premium, if any) and (subject to Section
3.6) interest (including any Additional Interest) on such Security on the
respective Stated Maturities expressed in such Security (or, in the case of
redemption, on the Redemption Date) and to institute suit for the enforcement
of any such payment, and such right shall not be impaired without the consent
of such Holder. Any holder of Trust Preferred Securities shall have the
right, upon the occurrence of an Event of Default described in Section 5.1(1)
or 5.1(2), to institute a suit directly against the Company for enforcement
of payment to such holder of principal of (premium, if any) and (subject to
Section 3.6) interest (including any Additional Interest) on the Securities
having a principal amount equal to the aggregate Liquidation Amount (as
defined in the Trust Agreement) of such Trust Preferred Securities held by
such holder.
Section 5.9. RESTORATION OF RIGHTS AND REMEDIES.
If the Trustee, any Holder or any holder of Trust Preferred Securities
has instituted any proceeding to enforce any right or remedy under this
Indenture and such proceeding has been discontinued or abandoned for any
reason, or has been determined
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adversely to the Trustee, such Holder or such holder of Trust Preferred
Securities, then and in every such case the Company, the Trustee, the Holders
and such holder of Trust Preferred Securities shall, subject to any
determination in such proceeding, be restored severally and respectively to
their former positions hereunder, and thereafter all rights and remedies of
the Trustee, the Holders and the holders of Trust Preferred Securities shall
continue as though no such proceeding had been instituted.
Section 5.10. RIGHTS AND REMEDIES CUMULATIVE.
Except as otherwise provided in the last paragraph of Section 3.5, no
right or remedy herein conferred upon or reserved to the Trustee or to the
Holders is intended to be exclusive of any other right or remedy, and every
right and remedy shall, to the extent permitted by law, be cumulative and in
addition to every other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or employment of
any right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
Section 5.11. DELAY OR OMISSION NOT WAIVER.
No delay or omission of the Trustee, any Holder of any Security or any
holder of any Preferred Security to exercise any right or remedy accruing
upon any Event of Default shall impair any such right or remedy or constitute
a waiver of any such Event of Default or an acquiescence therein.
Every right and remedy given by this Article or by law to the Trustee or
to the Holders and the right and remedy given to the holders of Trust
Preferred Securities by Section 5.8 may be exercised from time to time, and
as often as may be deemed expedient, by the Trustee, the Holders or the
holders of Trust Preferred Securities, as the case may be.
Section 5.12. CONTROL BY HOLDERS.
The Holders of a majority in principal amount of the Outstanding
Securities shall have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on the Trustee provided that:
(1) such direction shall not be in conflict with any rule of law or with
this Indenture,
(2) the Trustee may take any other action deemed proper by the Trustee
which is not inconsistent with such direction, and
(3) subject to the provisions of Section 6.1, the Trustee shall have the
right to decline to follow such direction if a Responsible Officer or
Officers of the Trustee shall, in good faith, determine that the proceeding
so directed would be unjustly prejudicial to
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the Holders not joining in any such direction or would involve the Trustee in
personal liability.
Section 5.13. WAIVER OF PAST DEFAULTS.
The Holders of not less than a majority in principal amount of the
Outstanding Securities and, the holders of Trust Preferred Securities may
waive any past default hereunder and its consequences except a default:
(1) in the payment of the principal of (or premium, if any) or interest
(including any Additional Interest) on any Security, or
(2) in respect of a covenant or provision hereof which under Article IX
cannot be modified or amended without the consent of the Holder of each
Outstanding Security affected.
Any such waiver shall be deemed to be on behalf of the Holders of all the
Securities or, in the case of a waiver by holders of Trust Preferred
Securities, by all holders of Trust Preferred Securities.
Upon any such waiver, such default shall cease to exist, and any Event of
Default arising therefrom shall be deemed to have been cured, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent
or other default or impair any right consequent thereon.
Section 5.14. UNDERTAKING FOR COSTS.
All parties to this Indenture agree, and each Holder of any Security by
his acceptance thereof shall be deemed to have agreed, that any court may in
its discretion require, in any suit for the enforcement of any right or
remedy under this Indenture, or in any suit against the Trustee for any
action taken or omitted by it as Trustee, the filing by any party litigant in
such suit of an undertaking to pay the costs of such suit, and that such
court may in its discretion assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in such suit, having due regard
to the merits and good faith of the claims or defenses made by such party
litigant; but the provisions of this Section shall not apply to any suit
instituted by the Trustee, to any suit instituted by any Holder, or group of
Holders, holding in the aggregate more than 10% in principal amount of the
Outstanding Securities, or to any suit instituted by any Holder for the
enforcement of the payment of the principal of (or premium, if any) or
interest (including any Additional Interest) on any Security on or after the
respective Stated Maturities expressed in such Security.
Section 5.15. WAIVER OF USURY, STAY OR EXTENSION LAWS.
The Company covenants (to the extent that it may lawfully do so) that it
will not at any time insist upon, or plead, or in any manner whatsoever claim
or take the benefit or advantage of, any usury, stay or extension law
wherever enacted, now or at any time
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hereafter in force, which may affect the covenants or the performance of this
Indenture; and the Company (to the extent that it may lawfully do so) hereby
expressly waives all benefit or advantage of any such law, and covenants that
it will not hinder, delay or impede the execution of any power herein granted
to the Trustee, but will suffer and permit the execution of every such power
as though no such law had been enacted.
ARTICLE VI
THE TRUSTEE
Section 6.1. CERTAIN DUTIES AND RESPONSIBILITIES.
(a) Except during the continuance of an Event of Default;
(1) the Trustee undertakes to perform such duties and only such
duties as are specifically set forth in this Indenture, and no implied
covenants or obligations shall be read into this Indenture against the
Trustee; and
(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture; but in the
case of any such certificates or opinions which by any provisions hereof are
specifically required to be furnished to the Trustee, the Trustee shall be
under a duty to examine the same to determine whether or not they conform to
the requirements of this Indenture.
(b) In case an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in their exercise, as a
prudent person would exercise or use under the circumstances in the conduct
of his own affairs.
(c) No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent
failure to act, or its own willful misconduct except that:
(1) this Subsection shall not be construed to limit the effect of
Subsection (a) of this Section;
(2) the Trustee shall not be liable for any error of judgment made
in good faith by a Responsible Officer, unless it shall be proved that the
Trustee was negligent in ascertaining the pertinent facts; and
(3) the Trustee shall not be liable with respect to any action
taken or omitted to be taken by it in good faith in accordance with the
direction of Holders pursuant to Section 5.12 relating to the time, method
and place of conducting any proceeding for any remedy available to the
Trustee, or exercising any trust or power conferred upon the Trustee, under
this Indenture.
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(d) No provision of this Indenture shall require the Trustee to expend
or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder, or in the exercise of any of its
rights or powers, if there shall be reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or liability
is not reasonably assured to it.
(e) Whether or not therein expressly so provided, every provision of
this Indenture relating to the conduct or affecting the liability of or
affording protection to the Trustee shall be subject to the provisions of
this Section 6.1.
Section 6.2. NOTICE OF DEFAULTS.
Within 90 days after actual knowledge by a Responsible Officer of the
Trustee of the occurrence of any default hereunder, the Trustee shall
transmit by mail to all Holders of Securities, as their names and addresses
appear in the Securities Register, notice of such default, unless such
default shall have been cured or waived; provided, however, that, except in
the case of a default in the payment of the principal of (or premium, if any)
or interest (including any Additional Interest) on any Security, the Trustee
shall be protected in withholding such notice if and so long as the board of
directors, the executive committee or a trust committee of directors and/or
Responsible Officers of the Trustee in good faith determines that the
withholding of such notice is in the interests of the Holders of Securities;
and provided, further, that, in the case of any default of the character
specified in Section 5.1(3), no such notice to Holders of Securities shall be
given until at least 30 days after the occurrence thereof. For the purpose
of this Section, the term "default" means any event which is, or after notice
or lapse of time or both would become, an Event of Default.
Section 6.3. CERTAIN RIGHTS OF TRUSTEE.
Subject to the provisions of Section 6.1:
(a) the Trustee may rely and shall be protected in acting or refraining
from acting upon any resolution, certificate, statement, instrument, opinion,
report, notice, request, direction, consent, order, bond, debenture, Security
or other paper or document believed by it to be genuine and to have been
signed or presented by the proper party or parties;
(b) any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Request or Company Order and any
resolution of the Board of Directors may be sufficiently evidenced by a Board
Resolution;
(c) whenever in the administration of this Indenture the Trustee shall
deem it desirable that a matter be proved or established prior to taking,
suffering or omitting any action hereunder, the Trustee (unless other
evidence be herein specifically prescribed) may, in the absence of bad faith
on its part, rely upon an Officers' Certificate;
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(d) the Trustee may consult with counsel and the advice of such counsel
or any Opinion of Counsel shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted by it
hereunder in good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction
of any of the Holders pursuant to this Indenture, unless such Holders shall
have offered to the Trustee reasonable security or indemnity against the
costs, expenses and liabilities which might be incurred by it in compliance
with such request or direction;
(f) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, indenture, Security or other paper or document, but the Trustee in its
discretion may make such inquiry or investigation into such facts or matters
as it may see fit, and, if the Trustee shall determine to make such inquiry
or investigation, it shall be entitled to examine the books, records and
premises of the Company, personally or by agent or attorney; and
(g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by it
hereunder.
Section 6.4. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF SECURITIES.
The recitals contained herein and in the Securities, except the Trustee's
certificates of authentication, shall be taken as the statements of the
Company, and neither the Trustee nor any Authenticating Agent assumes any
responsibility for their correctness. The Trustee makes no representations
as to the validity or sufficiency of this Indenture or of the Securities.
Neither the Trustee nor any Authenticating Agent shall be accountable for the
use or application by the Company of the Securities or the proceeds thereof.
Section 6.5. MAY HOLD SECURITIES.
The Trustee, any Authenticating Agent, any Paying Agent, any Securities
Registrar or any other agent of the Company, in its individual or any other
capacity, may become the owner or pledgee of Securities and, subject to
Sections 6.8 and 6.13, may otherwise deal with the Company with the same
rights it would have if it were not Trustee, Authenticating Agent, Paying
Agent, Securities Registrar or such other agent.
Section 6.6. MONEY HELD IN TRUST.
Money held by the Trustee in trust hereunder need not be segregated from
other funds except to the extent required by law. The Trustee shall be under
no liability for
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interest on any money received by it hereunder except as otherwise agreed
with the Company.
Section 6.7. COMPENSATION AND REIMBURSEMENT.
The Company agrees:
(1) to pay to the Trustee from time to time compensation for all
services rendered by it hereunder in such amounts as the Company and the
Trustee shall agree from time to time (which compensation shall not be
limited by any provision of law in regard to the compensation of a trustee of
an express trust);
(2) to reimburse the Trustee upon its request for all reasonable
expenses, disbursements and advances incurred or made by the Trustee in
accordance with any provision of this Indenture (including the reasonable
compensation and the expenses and disbursements of its agents and counsel),
except any such expense, disbursement or advance as may be attributable to
its negligence or bad faith; and
(3) to indemnify the Trustee for, and to hold it harmless against, any
loss, liability or expense (including the reasonable compensation and the
expenses and disbursements of its agents and counsel) incurred without
negligence or bad faith, arising out of or in connection with the acceptance
or administration of this trust or the performance of its duties hereunder,
including the costs and expenses of defending itself against any claim or
liability in connection with the exercise or performance of any of its powers
or duties hereunder. This indemnification shall survive the termination of
this Agreement.
To secure the Company's payment obligations in this Section 6.7, the
Company and the Holders agree that the Trustee shall have a lien prior to the
Securities on all money or property held or collected by the Trustee. Such
lien shall survive the satisfaction and discharge of this Indenture.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 5.1(4) or (5) occurs, the expenses and the
compensation for the services are intended to constitute expenses of
administration under the Bankruptcy Reform Act of 1978 or any successor
statute.
Section 6.8. DISQUALIFICATION; CONFLICTING INTERESTS.
The Trustee for the Securities issued hereunder shall be subject to the
provisions of Section 310(b) of the Trust Indenture Act. Nothing herein
shall prevent the Trustee from filing with the Commission the application
referred to in the second to last paragraph of said Section 301(b).
Section 6.9. CORPORATE TRUSTEE REQUIRED; ELIGIBILITY.
There shall at all times be a Trustee hereunder which shall be:
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(a) a corporation organized and doing business under the laws of the
United States of America or of any State or Territory or the District of
Columbia, authorized under such laws to exercise corporate trust powers and
subject to supervision or examination by Federal, State, Territorial or
District of Columbia authority, or
(b) a corporation or other Person organized and doing business under the
laws of a foreign government that is permitted to act as Trustee pursuant to
a rule, regulation or order of the Commission, authorized under such laws to
exercise corporate trust powers, and subject to supervision or examination by
authority of such foreign government or a political subdivision thereof
substantially equivalent to supervision or examination applicable to United
States institutional trustees,
in either case having a combined capital and surplus of at least $50,000,000,
subject to supervision or examination by Federal or State authority. If such
corporation publishes reports of condition at least annually, pursuant to law
or to the requirements of the aforesaid supervising or examining authority,
then, for the purposes of this Section 6.9, the combined capital and surplus
of such corporation shall be deemed to be its combined capital and surplus as
set forth in its most recent report of condition so published. If at any
time the Trustee shall cease to be eligible in accordance with the provisions
of this Section 6.9, it shall resign immediately in the manner and with the
effect hereinafter specified in this Article VI. Neither the Company nor any
Person directly or indirectly controlling, controlled by or under common
control with the Company shall serve as Trustee for the Securities issued
hereunder.
Section 6.10. RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR.
(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article VI shall become effective until
the acceptance of appointment by the successor Trustee under Section 6.11.
(b) The Trustee may resign at any time by giving written notice thereof
to the Company. If an instrument of acceptance by a successor Trustee shall
not have been delivered to the Trustee within 30 days after the giving of
such notice of resignation, the resigning Trustee may petition any court of
competent jurisdiction for the appointment of a successor Trustee.
(c) The Trustee may be removed at any time by Act of the Holders of a
majority in principal amount of the Outstanding Securities, delivered to the
Trustee and to the Company.
(d) If at any time:
(1) the Trustee shall fail to comply with Section 6.8 after written
request therefor by the Company or by any Holder who has been a bona fide
Holder of a Security for at least six months, or
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(2) the Trustee shall cease to be eligible under Section 6.9 and
shall fail to resign after written request therefor by the Company or by any
such Holder, or
(3) the Trustee shall become incapable of acting or shall be
adjudged a bankrupt or insolvent or a receiver of the Trustee or of its
property shall be appointed or any public officer shall take charge or
control of the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation,
then, in any such case, (i) the Company, acting pursuant to the authority of
a Board Resolution, may remove the Trustee with respect to all Securities, or
(ii) subject to Section 5.14, any Holder who has been a bona fide Holder of a
Security for at least six months may, on behalf of himself and all others
similarly situated, petition any court of competent jurisdiction for the
removal of the Trustee with respect to all Securities and the appointment of
a successor Trustee or Trustees.
(e) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any cause,
the Company, by a Board Resolution, shall promptly appoint a successor
Trustee. If, within one year after such resignation, removal or
incapability, or the occurrence of such vacancy, a successor Trustee shall be
appointed by Act of the Holders of a majority in principal amount of the
Outstanding Securities delivered to the Company and the retiring Trustee, the
successor Trustee so appointed shall, forthwith upon its acceptance of such
appointment, become the successor Trustee and supersede the successor Trustee
appointed by the Company. If no successor Trustee shall have been so
appointed by the Company or the Holders and accepted appointment in the
manner hereinafter provided, any Holder who has been a bona fide Holder of a
Security for at least six months may, subject to Section 5.14, on behalf of
himself and all others similarly situated, petition any court of competent
jurisdiction for the appointment of a successor Trustee with respect to the
Securities.
(f) The Company shall give notice of each resignation and each removal
of the Trustee and each appointment of a successor Trustee by mailing written
notice of such event by first-class mail, postage prepaid, to the Holders of
Securities as their names and addresses appear in the Securities Register.
Each notice shall include the name of the successor Trustee and the address
of its Corporate Trust Office.
Section 6.11. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR.
(a) In case of the appointment hereunder of a successor Trustee, every
such successor Trustee so appointed shall execute, acknowledge and deliver to
the Company and to the retiring Trustee an instrument accepting such
appointment, and thereupon the resignation or removal of the retiring Trustee
shall become effective and such successor Trustee, without any further act,
deed or conveyance, shall become vested with all the rights, powers, trusts
and duties of the retiring Trustee; but, on the request of the Company or the
successor Trustee, such retiring Trustee shall, upon payment of its charges,
execute and deliver an instrument transferring to such successor Trustee all
the rights, powers and trusts of the retiring Trustee and shall duly assign,
transfer and
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deliver to such successor Trustee all property and money held by such
retiring Trustee hereunder.
(b) In case of the appointment hereunder of a successor Trustee, the
Company, the retiring Trustee and each successor Trustee shall execute and
deliver an indenture supplemental hereto wherein each successor Trustee shall
accept such appointment and which (1) shall contain such provisions as shall
be necessary or desirable to transfer and confirm to, and to vest in, each
successor Trustee all the rights, powers, trusts and duties of the retiring
Trustee, (2) if the retiring Trustee is not retiring with respect to all
Securities, shall contain such provisions as shall be deemed necessary or
desirable to confirm that all the rights, powers, trusts and duties of the
retiring Trustee as to which the retiring Trustee is not retiring shall
continue to be vested in the retiring Trustee, and (3) shall add to or change
any of the provisions of this Indenture as shall be necessary to provide for
or facilitate the administration of the trusts hereunder by more than one
Trustee, it being understood that nothing herein or in such supplemental
indenture shall constitute such Trustees co-trustees of the same trust and
that each such Trustee shall be trustee of a trust or trusts hereunder
separate and apart from any trust or trusts hereunder administered by any
other such Trustee and upon the execution and delivery of such supplemental
indenture the resignation or removal of the retiring Trustee shall become
effective to the extent provided therein and each such successor Trustee,
without any further act, deed or conveyance, shall become vested with all the
rights, powers, trusts, and duties of the retiring Trustee; but, on request
of the Company or any successor Trustee, such retiring Trustee shall duly
assign, transfer and deliver to such successor Trustee all property and money
held by such retiring Trustee hereunder.
(c) Upon request of any such successor Trustee, the Company shall
execute any and all instruments for more fully and certainly vesting in and
confirming to such successor Trustee all rights, powers and trusts referred
to in paragraph (a) or (b) of this Section 6.11, as the case may be.
(d) No successor Trustee shall accept its appointment unless at the time
of such acceptance such successor Trustee shall be qualified and eligible
under this Article VI.
Section 6.12. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS.
Any corporation into which the Trustee may be merged or converted or with
which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all of the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder,
provided such corporation shall be otherwise qualified and eligible under
this Article VI, without the execution or filing of any paper or any further
act on the part of any of the parties hereto. In case any Securities shall
have been authenticated, but not delivered, by the Trustee then in office,
any successor by merger, conversion or consolidation to such authenticating
Trustee may adopt such authentication and deliver the Securities so
authenticated, and in case any Securities shall
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not have been authenticated, any successor to the Trustee may authenticate
such Securities either in the name of any predecessor Trustee or in the name
of such successor Trustee, and in all cases the certificate of authentication
shall have the full force which it is provided anywhere in the Securities or
in this Indenture that the certificate of the Trustee shall have.
Section 6.13. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.
If and when the Trustee shall be or become a creditor of the Company (or
any other obligor upon the Securities), the Trustee shall be subject to the
provisions of the Trust Indenture Act regarding the collection of claims
against the Company (or any such other obligor).
Section 6.14. APPOINTMENT OF AUTHENTICATING AGENT.
The Trustee may appoint an Authenticating Agent or Agents which shall be
authorized to act on behalf of the Trustee to authenticate Securities issued
upon original issue and upon exchange, registration of transfer or partial
redemption thereof or pursuant to Section 3.5, and Securities so
authenticated shall be entitled to the benefits of this Indenture and shall
be valid and obligatory for all purposes as if authenticated by the Trustee
hereunder. Wherever reference is made in this Indenture to the
authentication and delivery of Securities by the Trustee or the Trustee's
certificate of authentication, such reference shall be deemed to include
authentication and delivery on behalf of the Trustee by an Authenticating
Agent. Each Authenticating Agent shall be acceptable to the Company and
shall at all times be a corporation organized and doing business under the
laws of the United States of America, or of any State or Territory or the
District of Columbia, authorized under such laws to act as Authenticating
Agent, having a combined capital and surplus of not less than $50,000,000 and
subject to supervision or examination by Federal or State authority. If such
Authenticating Agent publishes reports of condition at least annually,
pursuant to law or to the requirements of said supervising or examining
authority, then for the purposes of this Section 6.14 the combined capital
and surplus of such Authenticating Agent shall be deemed to be its combined
capital and surplus as set forth in its most recent report of condition so
published. If at any time an Authenticating Agent shall cease to be eligible
in accordance with the provisions of this Section 6.14, such Authenticating
Agent shall resign immediately in the manner and with the effect specified in
this Section 6.14.
Any corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which such Authenticating
Agent shall be a party, or any corporation succeeding to all or substantially
all of the corporate trust business of an Authenticating Agent shall be the
successor Authenticating Agent hereunder, provided such corporation shall be
otherwise eligible under this Section, without the execution or filing of any
paper or any further act on the part of the Trustee or the Authenticating
Agent.
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An Authenticating Agent may resign at any time by giving written notice
thereof to the Trustee and to the Company. The Trustee may at any time
terminate the agency of an Authenticating Agent by giving written notice
thereof to such Authenticating Agent and to the Company. Upon receiving such
a notice of resignation or upon such a termination, or in case at any time
such Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section 6.14, the Trustee may appoint a successor
Authenticating Agent which shall be acceptable to the Company and shall give
notice of such appointment in the manner provided in Section 1.6 to all
Holders of Securities. Any successor Authenticating Agent upon acceptance of
its appointment hereunder shall become vested with all the rights, powers and
duties of its predecessor hereunder, with like effect as if originally named
as an Authenticating Agent. No successor Authenticating Agent shall be
appointed unless eligible under the provision of this Section 6.14.
The Trustee agrees to pay to each Authenticating Agent from time to time
reasonable compensation for its services under this Section 6.14, and the
Trustee shall be entitled to be reimbursed for such payments, subject to the
provisions of Section 6.7.
If an appointment is made pursuant to this Section 6.14, the Securities
may have endorsed thereon, in addition to the Trustee's certificate of
authentication, an alternative certificate of authentication in the following
form:
This is one of the Securities referred to in the within mentioned
Indenture.
Dated:
WILMINGTON TRUST COMPANY
As Trustee
By:
-------------------------------
As Authenticating Agent
By:
-------------------------------
Authorized Officer
ARTICLE VII
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
Section 7.1. COMPANY TO FURNISH TRUSTEE NAMES AND ADDRESSES OF HOLDERS.
The Company will furnish or cause to be furnished to the Trustee:
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(a) semi-annually, not more than 15 days after January 15 and July 15 in
each year, a list, in such form as the Trustee may reasonably require, of the
names and addresses of the Holders as of January 1 and July 1 of such year,
and
(b) at such other times as the Trustee may request in writing, within 30
days after the receipt by the Company of any such request, a list of similar
form and content as of a date not more than 15 days prior to the time such
list is furnished,
excluding from any such list names and addresses received by the Trustee in
its capacity as Securities Registrar.
Section 7.2. PRESERVATION OF INFORMATION, COMMUNICATIONS TO HOLDERS.
(a) The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of Holders contained in the most recent
list furnished to the Trustee as provided in Section 7.1 and the names and
addresses of Holders received by the Trustee in its capacity as Securities
Registrar. The Trustee may destroy any list furnished to it as provided in
Section 7.1 upon receipt of a new list so furnished.
(b) The rights of Holders to communicate with other Holders with respect
to their rights under this Indenture or under the Securities, and the
corresponding rights and privileges of the Trustee, shall be as provided in
the Trust Indenture Act.
(c) Every Holder of Securities, by receiving and holding the same,
agrees with the Company and the Trustee that neither the Company nor the
Trustee nor any agent of either of them shall be held accountable by reason
of the disclosure of information as to the names and addresses of the Holders
made pursuant to the Trust Indenture Act.
Section 7.3. REPORTS BY TRUSTEE.
(a) The Trustee shall transmit to Holders such reports concerning the
Trustee and its actions under this Indenture as may be required pursuant to
the Trust Indenture Act, at the times and in the manner provided pursuant
thereto.
(b) Reports so required to be transmitted at stated intervals of not
more than 12 months shall be transmitted no later than July 15 in each
calendar year, commencing with the first July 15 after the first issuance of
Securities under this Indenture.
(c) A copy of each such report shall, at the time of such transmission
to Holders, be filed by the Trustee with each stock exchange upon which any
Securities are listed and also with the Commission. The Company will notify
the Trustee when any Securities are listed on any stock exchange.
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Section 7.4. REPORTS BY COMPANY.
The Company shall file with the Trustee and with the Commission, and
transmit to Holders, such information, documents and other reports, and such
summaries thereof, as may be required pursuant to the Trust Indenture Act at
the times and in the manner provided in the Trust Indenture Act; provided
that any such information, documents or reports required to be filed with the
Commission pursuant to Section 13 or Section 15(d) of the Exchange Act shall
be filed with the Trustee within 15 days after the same is required to be
filed with the Commission. Notwithstanding that the Company may not be
required to remain subject to the reporting requirements of Section 13 or
15(d) of the Exchange Act, the Company shall continue to file with the
Commission and provide the Trustee with the annual reports and the
information, documents and other reports which are specified in Sections 13
and 15(d) of the Exchange Act. The Company also shall comply with the other
provisions of Trust Indenture Act Section 314(a).
ARTICLE VIII
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
Section 8.1. COMPANY MAY CONSOLIDATE, ETC., ONLY ON CERTAIN TERMS.
The Company shall not consolidate with or merge into any other Person or
convey, transfer or lease its properties and assets substantially as an
entirety to any Person, and no Person shall consolidate with or merge into
the Company or convey, transfer or lease its properties and assets
substantially as an entirety to the Company, unless:
(1) in case the Company shall consolidate with or merge into another
Person or convey, transfer or lease its properties and assets substantially
as an entirety to any Person, the corporation formed by such consolidation or
into which the Company is merged or the Person which acquires by conveyance
or transfer, or which leases, the properties and assets of the Company
substantially as an entirety shall be a corporation, partnership or trust
organized and existing under the laws of the United States of America or any
State or the District of Columbia, and shall expressly assume, by an
indenture supplemental hereto, executed and delivered to the Trustee, in form
satisfactory to the Trustee, the due and punctual payment of the principal of
(and premium, if any) and interest (including any Additional Interest) on all
the Securities and the performance of every covenant of this Indenture on the
part of the Company to be performed or observed;
(2) immediately after giving effect to such transaction, no Event of
Default, and no event which, after notice or lapse of time, or both, would
become an Event of Default, shall have happened and be continuing;
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(3) such consolidation, merger, conveyance, transfer or lease is
permitted under the Trust Agreement and the Guarantee and does not give rise
to any breach or violation of the Trust Agreement or the Guarantee; and
(4) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that such consolidation, merger,
conveyance, transfer or lease and any such supplemental indenture comply with
this Article and that all conditions precedent herein provided for relating
to such transaction have been complied with; and the Trustee, subject to
Section 6.1, may rely upon such Officers' Certificate and Opinion of Counsel
as conclusive evidence that such transaction complies with this Section 8.1.
Section 8.2. SUCCESSOR CORPORATION SUBSTITUTED.
Upon any consolidation or merger by the Company with or into any other
Person, or any conveyance, transfer or lease by the Company of its properties
and assets substantially as an entirety to any Person in accordance with
Section 8.1, the successor corporation formed by such consolidation or into
which the Company is merged or to which such conveyance, transfer or lease is
made shall succeed to, and be substituted for, and may exercise every right
and power of, the Company under this Indenture with the same effect as if
such successor Person had been named as the Company herein; and in the event
of any such conveyance, transfer or lease the Company shall be discharged
from all obligations and covenants under the Indenture and the Securities and
may be dissolved and liquidated.
Such successor Person may cause to be signed, and may issue either in its
own name or in the name of the Company, any or all of the Securities issuable
hereunder which theretofore shall not have been signed by the Company and
delivered to the Trustee; and, upon the order of such successor Person
instead of the Company and subject to all the terms, conditions and
limitations in this Indenture prescribed, the Trustee shall authenticate and
shall deliver any Securities which previously shall have been signed and
delivered by the officers of the Company to the Trustee for authentication
pursuant to such provisions and any Securities which such successor Person
thereafter shall cause to be signed and delivered to the Trustee on its
behalf for the purpose pursuant to such provisions. All the Securities so
issued shall in all respects have the same legal rank and benefit under this
Indenture as the Securities theretofore or thereafter issued in accordance
with the terms of this Indenture as though all of such Securities had been
issued at the date of the execution hereof.
In case of any such consolidation, merger, sale, conveyance or lease, such
changes in phraseology and form may be made in the Securities thereafter to
be issued as may be appropriate.
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ARTICLE IX
SUPPLEMENTAL INDENTURES
Section 9.1. SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF HOLDERS.
Without the consent of any Holders, the Company, when authorized by a
Board Resolution, and the Trustee, at any time and from time to time, may
enter into one or more indentures supplemental hereto, in form satisfactory
to the Trustee, for any of the following purposes:
(1) to evidence the succession of another Person to the Company, and the
assumption by any such successor of the covenants of the Company herein and
in the Securities contained;
(2) to convey, transfer, assign, mortgage or pledge any property to or
with the Trustee or to surrender any right or power herein conferred upon the
Company;
(3) to add to the covenants of the Company for the benefit of the
Holders of Securities, or to surrender any right or power herein conferred
upon the Company;
(4) to cure any ambiguity, to correct or supplement any provision herein
which may be defective or inconsistent with any other provision herein, or to
make any other provisions with respect to matters or questions arising under
this Indenture, provided that such action pursuant to this clause (4) shall
not adversely affect the interest of the Holders of Securities in any
material respect or, for so long as any of the Trust Preferred Securities
shall remain outstanding, the holders of such Trust Preferred Securities;
(5) to evidence and provide for the acceptance of appointment hereunder
by a successor Trustee and to add to or change any of the provisions of this
Indenture as shall be necessary to provide for or facilitate the
administration of the trusts hereunder by more than one Trustee, pursuant to
the requirements of Section 6.11(b); or
(6) to comply with the requirements of the Commission in order to effect
or maintain the qualification of this Indenture under the Trust Indenture Act.
Section 9.2. SUPPLEMENTAL INDENTURES WITH CONSENT OF HOLDERS.
With the consent of the Holders of not less than a majority in principal
amount of the Outstanding Securities, by Act of said Holders delivered to the
Company and the Trustee, the Company, when authorized by a Board Resolution,
and the Trustee may enter into an indenture or indentures supplemental hereto
for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of this Indenture or of modifying in any
manner the rights of the Holders of Securities under this Indenture;
provided, however, that no such supplemental indenture shall, without the
consent of the Holder of each Outstanding Security affected thereby,
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(1) except to the extent permitted by Sections 3.10 or 3.13 with respect
to the deferral of the payment of interest on the Securities or the
shortening of the Stated Maturity of the Securities, change the Stated
Maturity of the principal of, or any installment of interest (including any
Additional Interest) on, any Security, or reduce the principal amount thereof
or the rate of interest thereon or reduce any premium payable upon the
redemption thereof, or change the place of payment where, or the coin or
currency in which, any Security or interest thereon is payable, or impair the
right to institute suit for the enforcement of any such payment on or after
the Stated Maturity thereof (or, in the case of redemption, on or after the
Redemption Date), or
(2) reduce the percentage in principal amount of the Outstanding
Securities, the consent of whose Holders is required for any such
supplemental indenture, or the consent of whose Holders is required for any
waiver (of compliance with certain provisions of this Indenture or certain
defaults hereunder and their consequences) provided for in this Indenture, or
(3) modify any of the provisions of this Section, Section 5.13 or
Section 10.5, except to increase any such percentage or to provide that
certain other provisions of this Indenture cannot be modified or waived
without the consent of the Holder of each Security affected thereby; or
(4) modify the provisions in Article XII of this Indenture with respect
to the subordination of Outstanding Securities in a manner adverse to the
Holders thereof;
provided, further, that, so long as any of the Trust Preferred Securities
remains outstanding, (i) no such amendment shall be made that adversely
affects the holders of such Trust Preferred Securities in any material
respect, and no termination of this Indenture shall occur, and no waiver of
any Event of Default or compliance with any covenant under this Indenture
shall be effective, without the prior consent of the holders of at least a
majority of the aggregate liquidation preference of such Trust Preferred
Securities then outstanding unless and until the principal (and premium, if
any) of the Securities and all accrued and, subject to Section 3.6, unpaid
interest (including any Additional Interest) thereon have been paid in full
and (ii) no amendment shall be made to Section 5.8 of this Indenture that
would impair the rights of the holders of Trust Preferred Securities provided
therein without the prior consent of the holders of each Preferred Security
then outstanding unless and until the principal (and premium, if any) of the
Securities and all accrued and (subject to Section 3.6) unpaid interest
(including any Additional Interest) thereon have been paid in full.
It shall not be necessary for any Act of Holders under this Section to
approve the particular form of any proposed supplemental indenture, but it
shall be sufficient if such Act shall approve the substance thereof.
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Section 9.3. EXECUTION OF SUPPLEMENTAL INDENTURES.
In executing or accepting any supplemental indenture permitted by this
Article or the modifications thereby of Securities previously created by this
Indenture, the Trustee shall be entitled to receive, and (subject to Section
6.1) shall be fully protected in relying upon, an Officers' Certificate and
an Opinion of Counsel stating that the execution of such supplemental
indenture is authorized or permitted by this Indenture, and that all
conditions precedent have been complied with. The Trustee may, but shall not
be obligated to, enter into any such supplemental indenture which affects the
Trustee's own rights, duties or immunities under this Indenture or otherwise.
Section 9.4. EFFECT OF SUPPLEMENTAL INDENTURES.
Upon the execution of any supplemental indenture under this Article IX,
this Indenture shall be modified in accordance therewith, and such
supplemental indenture shall form a part of this Indenture for all purposes;
and every Holder of Securities theretofore or thereafter authenticated and
delivered hereunder shall be bound thereby.
Section 9.5. CONFORMITY WITH TRUST INDENTURE ACT.
Every supplemental indenture executed pursuant to this Article IX shall
conform to the requirements of the Trust Indenture Act as then in effect.
Section 9.6. REFERENCE IN SECURITIES TO SUPPLEMENTAL INDENTURES.
Securities authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article IX may, and shall if required
by the Company, bear a notation in form approved by the Company as to any
matter provided for in such supplemental indenture. If the Company shall so
determine, new Securities so modified as to conform, in the opinion of the
Company, to any such supplemental indenture may be prepared and executed by
the Company and authenticated and delivered by the Trustee in exchange for
Outstanding Securities.
ARTICLE X
COVENANTS
Section 10.1. PAYMENT OF PRINCIPAL, PREMIUM AND INTEREST.
The Company covenants and agrees that it will duly and punctually pay
the principal of (and premium, if any) and interest on the Securities in
accordance with the terms of such Securities and this Indenture.
Section 10.2. MAINTENANCE OF OFFICE OR AGENCY.
The Company will maintain in each Place of Payment, an office or agency
where Securities may be presented or surrendered for payment and an office or
agency where
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Securities may be surrendered for transfer or exchange and where notices and
demands to or upon the Company in respect of the Securities and this
Indenture may be served. The Company initially appoints the Trustee, acting
through its Corporate Trust Office, as its agent for said purposes. The
Company will give prompt written notice to the Trustee of any change in the
location of any such office or agency. If at any time the Company shall fail
to maintain such office or agency or shall fail to furnish the Trustee with
the address thereof, such presentations, surrenders, notices and demands may
be made or served at the Corporate Trust Office of the Trustee, and the
Company hereby appoints the Trustee as its agent to receive all such
presentations, surrenders, notices and demands.
The Company may also from time to time designate one or more other
offices or agencies where the Securities may be presented or surrendered for
any or all of such purposes, and may from time to time rescind such
designations; provided, however, that no such designation or rescission shall
in any manner relieve the Company of its obligation to maintain an office or
agency in each Place of Payment for such purposes. The Company will give
prompt written notice to the Trustee of any such designation and any change
in the location of any such office or agency.
Section 10.3. MONEY FOR SECURITY PAYMENTS TO BE HELD IN TRUST.
If the Company shall at any time act as its own Paying Agent, it will,
on or before each due date of the principal of (and premium, if any) or
interest on any of the Securities, segregate and hold in trust for the
benefit of the Persons entitled thereto a sum sufficient to pay the principal
(and premium, if any) or interest so becoming due until such sums shall be
paid to such Persons or otherwise disposed of as herein provided, and will
promptly notify the Trustee of its failure so to act.
Whenever the Company shall have one or more Paying Agents, it will,
prior to 10:00 a.m. Rocky Mountain time, on each due date of the principal of
or interest on any Securities, deposit with a Paying Agent a sum sufficient
to pay the principal (and premium, if any) or interest so becoming due, such
sum to be held in trust for the benefit of the Persons entitled to such
principal and premium (if any) or interest, and (unless such Paying Agent is
the Trustee) the Company will promptly notify the Trustee of its failure so
to act.
The Company will cause each Paying Agent other than the Trustee to
execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree with the Trustee, subject to the provisions of this Section 10.3,
that such Paying Agent will:
(1) hold all sums held by it for the payment of the principal of (and
premium, if any) or interest on Securities in trust for the benefit of the
Persons entitled thereto until such sums shall be paid to such Persons or
otherwise disposed of as herein provided;
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(2) give the Trustee notice of any default by the Company (or any other
obligor upon the Securities) in the making of any payment of principal (and
premium, if any) or interest:
(3) at any time during the continuance of any such default, upon the
written request of the Trustee, forthwith pay to the Trustee all sums so held
in trust by such Paying Agent; and
(4) comply with the provisions of the Trust Indenture Act applicable to
it as a Paying Agent.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay,
or by Company Order direct any Paying Agent to pay, to the Trustee all sums
held in trust by the Company or such Paying Agent, such sums to be held by
the Trustee upon the same trusts as those upon which such sums were held by
the Company or such Paying Agent; and, upon such payment by any Paying Agent
to the Trustee, such Paying Agent shall be released from all further
liability with respect to such money.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of (and premium, if
any) or interest on any Security and remaining unclaimed for two years after
such principal (and premium, if any) or interest has become due and payable
shall (unless otherwise required by mandatory provision of applicable escheat
or abandoned or unclaimed property law) be paid on Company Request to the
Company, or (if then held by the Company) shall (unless otherwise required by
mandatory provision of applicable escheat or abandoned or unclaimed property
law) be discharged from such trust; and the Holder of such Security shall
thereafter, as an unsecured general creditor, look only to the Company for
payment thereof, and all liability of the Trustee or such Paying Agent with
respect to such trust money, and all liability of the Company as trustee
thereof, shall thereupon cease; provided, however, that the Trustee or such
Paying Agent, before being required to make any such repayment, may at the
expense of the Company cause to be published once, in a newspaper published
in the English language, customarily published on each Business Day and of
general circulation in the state of Montana, notice that such money remains
unclaimed and that, after a date specified therein, which shall not be less
than 30 days from the date of such publication, any unclaimed balance of such
money then remaining will be repaid to the Company.
Section 10.4. STATEMENT AS TO COMPLIANCE.
The Company shall deliver to the Trustee, within 120 days after the end
of each calendar year of the Company ending after the date hereof, an
Officers' Certificate covering the preceding calendar year, stating whether
or not to the best knowledge of the signers thereof the Company is in default
in the performance, observance or fulfillment of or compliance with any of
the terms, provisions, covenants and conditions of this Indenture, and if the
Company shall be in default, specifying all such defaults and
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the nature and status thereof of which they may have knowledge. For the
purpose of this Section 10.4, compliance shall be determined without regard
to any grace period or requirement of notice provided pursuant to the terms
of this Indenture.
Section 10.5. WAIVER OF CERTAIN COVENANTS.
The Company may omit in any particular instance to comply with any
covenant or condition provided pursuant to Sections 3.1, 9.1(3), or 9.1(4),
if before or after the time for such compliance the Holders of at least a
majority in principal amount of the Outstanding Securities shall, by Act of
such Holders, either waive such compliance in such instance or generally
waive compliance with such covenant or condition, but no such waiver shall
extend to or affect such covenant or condition except to the extent so
expressly waived, and, until such waiver shall become effective, the
obligations of the Company in respect of any such covenant or condition shall
remain in full force and effect.
Section 10.6. ADDITIONAL SUMS.
So long as no Event of Default has occurred and is continuing, in the
event that (i) the Trust is the Holder of all of the Outstanding Securities,
(ii) a Tax Event shall have occurred and be continuing and (iii) the Company
shall not have (A) redeemed the Securities pursuant to Section 11.7(b) or (B)
terminated the Trust pursuant to Section 9.2(b) of the Trust Agreement, the
Company shall pay to the Trust (and its permitted successors or assigns under
the Trust Agreement) for so long as the Trust (or its permitted successor or
assignee) is the registered holder of any Securities, such additional amounts
as may be necessary in order that the amount of Distributions (including any
Additional Amounts (as defined in the Trust Agreement)) then due and payable
by the Trust on the Trust Preferred Securities and Common Securities that at
any time remain outstanding in accordance with the terms thereof shall not be
reduced as a result of any Additional Taxes (the "Additional Sums"). Whenever
in this Indenture or the Securities there is a reference in any context to
the payment of principal of or interest on the Securities, such mention shall
be deemed to include mention of the payments of the Additional Sums provided
for in this paragraph to the extent that, in such context, Additional Sums
are, were or would be payable in respect thereof pursuant to the provisions
of this paragraph and express mention of the payment of Additional Sums (if
applicable) in any provisions hereof shall not be construed as excluding
Additional Sums in those provisions hereof where such express mention is not
made; provided, however, that the deferral of the payment of interest
pursuant to Section 3.10 or the Securities shall not defer the payment of any
Additional Sums that may be due and payable.
Section 10.7. ADDITIONAL COVENANTS.
The Company covenants and agrees with each Holder of Securities that it
shall not, and it shall not permit any Subsidiary of the Company to, (a)
declare or pay any dividends or distributions on, or redeem purchase, acquire
or make a liquidation payment with respect to, any shares of the Company's
capital stock (which includes common and
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preferred stock), or (b) make any payment of principal of or interest or
premium, if any, on or repay, repurchase or redeem any debt securities of the
Company that rank PARI PASSU in all respects with or junior in interest to
the Securities or make any guarantee payments with respect to any guarantee
by the Company of debt securities of any subsidiary of the Company if such
guarantee ranks PARI PASSU in all respects with or junior in interest to the
Securities (other than (w) dividends or distributions in capital stock of the
Company (which includes common and preferred stock), (x) any declaration of a
dividend in connection with the implementation of a rights plan or the
redemption or repurchase of any such rights pursuant thereto, (y) payments
under the Guarantee, and (z) purchases of Common Stock related to the
issuance of Common Stock or rights under any of the Company's benefit plans
for its directors, officers or employees or related to the issuance of Common
Stock (or securities convertible into or exchangeable for common stock) as
consideration in an acquisition transaction) if at such time (i) there shall
have occurred any event of which the Company has actual knowledge that (A)
with the giving of notice or the lapse of time or both, would constitute an
Event of Default and (B) in respect of which the Company shall not have taken
reasonable steps to cure, (ii) the Company shall be in default with respect
to its payment of any obligations under the Guarantee or (iii) the Company
shall have given notice of its election to begin an Extension Period as
provided herein and shall not have rescinded such notice, or such Extension
Period, or any extension thereof, shall be continuing.
The Company also covenants with each Holder of Securities (i) to
maintain directly or indirectly 100% ownership of the Common Securities of
the Trust; provided, however, that any permitted successor of the Company
hereunder may succeed to the Company's ownership of such Common Securities,
(ii) not to voluntarily terminate, wind-up or liquidate the Trust, except (a)
in connection with a distribution of the Securities to the holders of Trust
Securities in liquidation of the Trust or (b) in connection with certain
mergers, consolidations or amalgamations permitted by the Trust Agreement,
and (iii) to use its reasonable efforts, consistent with the terms and
provisions of the Trust Agreement, to cause the Trust to remain classified as
a grantor trust and not an association taxable as a corporation for United
States federal income tax purposes.
ARTICLE XI
REDEMPTION OF SECURITIES
Section 11.1. APPLICABILITY OF THIS ARTICLE.
Redemption of Securities (whether by operation of a sinking fund or
otherwise) as permitted or required by any form of Security issued pursuant
to this Indenture shall be made in accordance with such form of Security and
this Article; provided, however, that if any provision of any such form of
Security shall conflict with any provision of this Article, the provision of
such form of Security shall govern. Except as otherwise set forth in the
form of Security, each Security shall be subject to partial redemption only
in the amount of $25 or integral multiples of $25 in excess thereof.
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Section 11.2. ELECTION TO REDEEM; NOTICE TO TRUSTEE.
The election of the Company to redeem any Securities shall be evidenced
by or pursuant to a Board Resolution. In case of any redemption at the
election of the Company of less than all of the Securities and having the
same terms, the Company shall, not less than 30 nor more than 60 days prior
to the Redemption Date (unless a shorter notice shall be satisfactory to the
Trustee), notify the Trustee of such date and of the principal amount of
Securities to be redeemed. In the case of any redemption of Securities prior
to the expiration of any restriction on such redemption provided in the terms
of such Securities, the Company shall furnish the Trustee with an Officers'
Certificate and an Opinion of Counsel evidencing compliance with such
restriction.
Section 11.3. SELECTION OF SECURITIES TO BE REDEEMED.
If less than all the Securities are to be redeemed (unless all the
Securities of a specified tenor are to be redeemed or unless such redemption
affects only a single Security), the particular Securities to be redeemed
shall be selected not more than 60 days prior to the Redemption Date by the
Trustee, from the Outstanding Securities not previously called for
redemption, by such method as the Trustee shall deem fair and appropriate and
which may provide for the selection for redemption of a portion of the
principal amount of any Security, provided that the portion of the principal
amount of any Security not redeemed shall be in an authorized denomination
(which shall not be less than the minimum authorized denomination) for such
Security. If less than all the Securities of a specified tenor are to be
redeemed (unless such redemption affects only a single Security), the
particular Securities to be redeemed shall be selected not more than 60 days
prior to the Redemption Date by the Trustee, from the Outstanding Securities
of such specified tenor not previously called for redemption in accordance
with the preceding sentence.
The Trustee shall promptly notify the Company in writing of the
Securities selected for partial redemption and the principal amount thereof
to be redeemed. For all purposes of this Indenture, unless the context
otherwise requires, all provisions relating to the redemption of Securities
shall relate, in the case of any Security redeemed or to be redeemed only in
part, to the portion of the principal amount of such Security which has been
or is to be redeemed. If the Company shall so direct, Securities registered
in the name of the Company, any Affiliate or any Subsidiary thereof shall not
be included in the Securities selected for redemption.
Section 11.4. NOTICE OF REDEMPTION.
Notice of redemption shall be given by first-class mail, postage prepaid,
mailed not later than the thirtieth day, and not earlier than the sixtieth
day, prior to the Redemption Date, to each Holder of Securities to be
redeemed, at the address of such Holder as it appears in the Securities
Register.
With respect to Securities to be redeemed, each notice of redemption
shall state:
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(a) the Redemption Date;
(b) the Redemption Price;
(c) if less than all Outstanding Securities are to be redeemed, the
identification (and, in the case of partial redemption, the respective
principal amounts) of the particular Securities to be redeemed;
(d) that on the Redemption Date, the Redemption Price will become due
and payable upon each such Security or portion thereof, and that interest
thereon, if any, shall cease to accrue on and after said date;
(e) the place or places where such Securities are to be surrendered for
payment of the Redemption Price; and
(f) that the redemption is for a sinking fund, if such is the case.
Notice of redemption of Securities to be redeemed at the election of the
Company shall be given by the Company or, at the Company's request, by the
Trustee in the name and at the expense of the Company and shall not be
irrevocable. The notice if mailed in the manner herein provided shall be
conclusively presumed to have been duly given, whether or not the Holder
receives such notice. In any case, a failure to give such notice by mail or
any defect in the notice to the Holder of any Security designated for
redemption as a whole or in part shall not affect the validity of the
proceedings for the redemption of any other Security.
Section 11.5. DEPOSIT OF REDEMPTION PRICE.
Prior to 10:00 a.m. Rocky Mountain time, on the Redemption Date
specified in the notice of redemption given as provided in Section 11.4, the
Company will deposit with the Trustee or with one or more Paying Agents (or
if the Company is acting as its own Paying Agent, the Company will segregate
and hold in trust as provided in Section 10.3) an amount of money sufficient
to pay the Redemption Price of, and any accrued interest (including
Additional Interest) on, all the Securities which are to be redeemed on that
date.
Section 11.6. PAYMENT OF SECURITIES CALLED FOR REDEMPTION.
If any notice of redemption has been given as provided in Section 11.4,
the Securities or portion of Securities with respect to which such notice has
been given shall become due and payable on the date and at the place or
places stated in such notice at the applicable Redemption Price. On
presentation and surrender of such Securities at a Place of Payment in said
notice specified, the said securities or the specified portions thereof shall
be paid and redeemed by the Company at the applicable Redemption Price,
together with accrued interest (including any Additional Interest) to the
Redemption Date; provided, however, that, unless otherwise specified as
contemplated by Section 3.1, installments of interest whose Stated Maturity
is on or prior to the
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Redemption Date will be payable to the Holders of such Securities, or one or
more Predecessor Securities, registered as such at the close of business on
the relevant Record Dates according to their terms and the provisions of
Section 3.6.
Upon presentation of any Security redeemed in part only, the Company
shall execute and the Trustee shall authenticate and deliver to the Holder
thereof, at the expense of the Company, a new Security or Securities, of
authorized denominations, in aggregate principal amount equal to the portion
of the Security not redeemed so presented and having the same Original Issue
Date, Stated Maturity and terms. If a Global Security is so surrendered,
such new Security will also be a new Global Security.
If any Security called for redemption shall not be so paid upon
surrender thereof for redemption, the principal of and premium, if any, on
such Security shall, until paid, bear interest from the Redemption Date at
the rate prescribed therefor in the Security.
Section 11.7. RIGHT OF REDEMPTION OF SECURITIES INITIALLY ISSUED TO THE
TRUST.
The Company, at its option, may redeem such Securities (i) on or after
the date five years after the Original Issue Date of such Securities, in
whole at any time or in part from time to time, or (ii) upon the occurrence
and during the continuation of a Tax Event, Investment Company Event, or
Capital Treatment Event, at any time within 90 days following the occurrence
of such Tax Event, Investment Company Event or Capital Treatment Event, in
whole (but not in part), in each case at a Redemption Price equal to 100% of
the principal amount thereof.
ARTICLE XII
SUBORDINATION OF SECURITIES
Section 12.1. SECURITIES SUBORDINATE TO SENIOR AND SUBORDINATED DEBT.
The Company covenants and agrees, and each Holder of a Security, by its
acceptance thereof, likewise covenants and agrees, that, to the extent and in
the manner hereinafter set forth in this Article XII, the payment of the
principal of (and premium, if any) and interest (including any Additional
Interest) on each and all of the Securities are hereby expressly made
subordinate and subject in right of payment to the prior payment in full of
all amounts then due and payable in respect of all Senior and Subordinated
Debt.
Section 12.2. PAYMENT OVER OF PROCEEDS UPON DISSOLUTION, ETC.
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial proceeding relative to the Company (each such event, if any, herein
sometimes referred to as a "Proceeding"), then the holders of Senior and
Subordinated Debt shall be entitled to receive payment in full of Allocable
Amounts of such Senior and Subordinated Debt, or provision shall be made for
such payment in cash or cash equivalents or otherwise in a
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manner satisfactory to the holders of Senior and Subordinated Debt, before
the Holders of the Securities are entitled to receive or retain any payment
or distribution of any kind or character, whether in cash, property or
securities (including any payment or distribution which may be payable or
deliverable by reason of the payment of any other Debt of the Company
subordinated to the payment of the Securities, such payment or distribution
being hereinafter referred to as a "Junior Subordinated Payment"), on account
of principal of (or premium, if any) or interest (including any Additional
Interest) on the Securities or on account of the purchase or other
acquisition of Securities by the Company or any Subsidiary and to that end
the holders of Senior and Subordinated Debt shall be entitled to receive, for
application to the payment thereof, any payment or distribution of any kind
or character, whether in cash, property or securities, including any Junior
Subordinated Payment, which may be payable or deliverable in respect of the
Securities in any such Proceeding.
In the event that, notwithstanding the foregoing provisions of this
Section 12.2, the Trustee or the Holder of any Security shall have received
any payment or distribution of assets of the Company of any kind or
character, whether in cash, property or securities, including any Junior
Subordinated Payment, before all Allocable Amounts of all Senior and
Subordinated Debt are paid in full or payment thereof is provided for in cash
or cash equivalents or otherwise in a manner satisfactory to the holders of
Senior and Subordinated Debt, and if such fact shall, at or prior to the time
of such payment or distribution, have been made known to the Trustee or, as
the case may be, such Holder, then and in such event such payment or
distribution shall be paid over or delivered forthwith to the trustee in
bankruptcy, receiver, liquidating trustee, custodian, assignee, agent or
other Person making payment or distribution of assets of the Company for
application to the payment of all Allocable Amounts of all Senior and
Subordinated Debt remaining unpaid, to the extent necessary to pay all
Allocable Amounts of all Senior and Subordinated Debt in full, after giving
effect to any concurrent payment or distribution to or for the holders of
Senior and Subordinated Debt.
For purposes of this Article XII only, the words "any payment or
distribution of any kind or character, whether in cash, property or
securities" shall not be deemed to include shares of stock of the Company as
reorganized or readjusted, or securities of the Company or any other
corporation provided for by a plan of reorganization or readjustment which
securities are subordinated in right of payment to all then outstanding
Senior and Subordinated Debt to substantially the same extent as the
Securities are so subordinated as provided in this Article XII. The
consolidation of the Company with, or the merger of the Company into, another
Person or the liquidation or dissolution of the Company following the sale of
all or substantially all of its properties and assets as an entirety to
another Person upon the terms and conditions set forth in Article VIII shall
not be deemed a Proceeding for the purposes of this Section 12.2 if the
Person formed by such consolidation or into which the Company is merged or
the Person which acquires by sale such properties and assets as an entirety,
as the case may be, shall, as a part of such consolidation, merger, or sale
comply with the conditions set forth in Article VIII.
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Section 12.3. PRIOR PAYMENT TO SENIOR AND SUBORDINATED DEBT UPON
ACCELERATION OF SECURITIES.
In the event that any Securities are declared due and payable before
their Stated Maturity, then and in such event the holders of the Senior and
Subordinated Debt outstanding at the time such Securities so become due and
payable shall be entitled to receive payment in full of all Allocable Amounts
due on or in respect of such Senior and Subordinated Debt (including any
amounts due upon acceleration), or provision shall be made for such payment
in cash or cash equivalents or otherwise in a manner satisfactory to the
holders of Senior and Subordinated Debt, before the Holders of the Securities
are entitled to receive any payment or distribution of any kind or character,
whether in cash, properties or securities (including any Junior Subordinated
Payment) by the Company on account of the principal of (or premium, if any)
or interest (including any Additional Interest) on the Securities or on
account of the purchase or other acquisition of Securities by the Company or
any Subsidiary.
In the event that, notwithstanding the foregoing, the Company shall make
any payment to the Trustee or the Holder of any Security prohibited by the
foregoing provisions of this Section 12.3, and if such fact shall, at or
prior to the time of such payment, have been made known to the Trustee or, as
the case may be, such Holder, then and in such event such payment shall be
paid over and delivered forthwith to the Company.
The provisions of this Section 12.3 shall not apply to any payment with
respect to which Section 12.2 would be applicable.
Section 12.4. NO PAYMENT WHEN SENIOR AND SUBORDINATED DEBT IN DEFAULT.
(a) (i) In the event and during the continuation of any default in the
payment of principal of (or premium, if any) or interest on any Senior and
Subordinated Debt, or in the event that any event of default with respect to
any Senior and Subordinated Debt shall have occurred and be continuing and
shall have resulted in such Senior and Subordinated Debt becoming or being
declared due and payable prior to the date on which it would otherwise have
become due and payable, unless and until such event of default shall have
been cured or waived or shall have ceased to exist and such acceleration
shall have been rescinded or annulled, or (ii) in the event any judicial
proceeding shall be pending with respect to any such default in payment or
such event or default, then no payment or distribution of any kind or
character, whether in cash, properties or securities (including any Junior
Subordinated Payment) shall be made by the Company on account of principal of
(or premium, if any) or interest (including any Additional Interest), if any,
on the Securities or on account of the purchase or other acquisition of
Securities by the Company or any Subsidiary, in each case unless and until
all Allocable Amounts of such Senior and Subordinated Debt are paid in full.
In the event that, notwithstanding the foregoing, the Company shall make
any payment to the Trustee or the Holder of any Security prohibited by the
foregoing
64
<PAGE>
provisions of this Section 12.4, and if such fact shall, at or prior to the
time of such payment, have been made known to the Trustee or, as the case may
be, such Holder, then and in such event such payment shall be paid over and
delivered forthwith to the Company.
The provisions of this Section 12.4 shall not apply to any payment with
respect to which Section 12.2 would be applicable.
Section 12.5. PAYMENT PERMITTED IF NO DEFAULT.
Nothing contained in this Article XII or elsewhere in this Indenture or
in any of the Securities shall prevent (a) the Company, at any time except
during the pendency of any Proceeding referred to in Section 12.2 or under
the conditions described in Sections 12.3 and 12.4, from making payments at
any time of principal of (and premium, if any) or interest (including
Additional Interest) on the Securities, or (b) the application by the Trustee
of any money deposited with it hereunder to the payment of or on account of
the principal of (and premium, if any) or interest (including any Additional
Interest) on the Securities or the retention of such payment by the Holders,
if, at the time of such application by the Trustee, it did not have knowledge
that such payment would have been prohibited by the provisions of this
Article XII.
Section 12.6. SUBROGATION TO RIGHTS OF HOLDERS OF SENIOR AND SUBORDINATED
DEBT.
Subject to the payment in full of all amounts due or to become due on
all Senior and Subordinated Debt, or the provision for such payment in cash
or cash equivalents or otherwise in a manner satisfactory to the holders of
Senior and Subordinated Debt, the Holders of the Securities shall be
subrogated to the extent of the payments or distributions made to the holders
of such Senior and Subordinated Debt pursuant to the provisions of this
Article XII (equally and ratably with the holders of all indebtedness of the
Company which by its express terms is subordinated to Senior and Subordinated
Debt of the Company to substantially the same extent as the Securities are
subordinated to the Senior and Subordinated Debt and is entitled to like
rights of subrogation by reason of any payments or distributions made to
holders of such Senior and Subordinated Debt) to the rights of the holders of
such Senior and Subordinated Debt to receive payments and distributions of
cash, property and securities applicable to the Senior and Subordinated Debt
until the principal of (and premium, if any) and interest on the Securities
shall be paid in full. For purposes of such subrogation, no payments or
distributions to the holders of the Senior and Subordinated Debt of any cash,
property or securities to which the Holders of the Securities or the Trustee
would be entitled except for the provisions of this Article, and no payments
over pursuant to the provisions of this Article XII to the holders of Senior
and Subordinated Debt by Holders of the Securities or the Trustee, shall, as
among the Company, its creditors other than holders of Senior and
Subordinated Debt, and the Holders of the Securities, be deemed to be a
payment or distribution by the Company to or on account of the Senior and
Subordinated Debt.
65
<PAGE>
Section 12.7. PROVISIONS SOLELY TO DEFINE RELATIVE RIGHTS.
The provisions of this Article XII are and are intended solely for the
purpose of defining the relative rights of the Holders of the Securities on
the one hand and the holders of Senior and Subordinated Debt on the other
hand. Nothing contained in this Article XII or elsewhere in this Indenture
or in the Securities is intended to or shall (a) impair, as between the
Company and the Holders of the Securities, the obligations of the Company,
which are absolute and unconditional, to pay to the Holders of the Securities
the principal of (and premium, if any) and interest (including any Additional
Interest) on the Securities as and when the same shall become due and payable
in accordance with their terms; or (b) affect the relative rights against the
Company of the Holders of the Securities and creditors of the Company other
than their rights in relation to the holders of Senior and Subordinated Debt;
or (c) prevent the Trustee or the Holder of any Security from exercising all
remedies otherwise permitted by applicable law upon default under this
Indenture including, without limitation, filing and voting claims in any
Proceeding, subject to the rights, if any, under this Article XII of the
holders of Senior and Subordinated Debt to receive cash, property and
securities otherwise payable or deliverable to the Trustee or such Holder.
Section 12.8. TRUSTEE TO EFFECTUATE SUBORDINATION.
Each Holder of a Security by his or her acceptance thereof authorizes
and directs the Trustee on his or her behalf to take such action as may be
necessary or appropriate to acknowledge or effectuate the subordination
provided in this Article XII and appoints the Trustee his or her
attorney-in-fact for any and all such purposes.
Section 12.9. NO WAIVER OF SUBORDINATION PROVISIONS.
No right of any present or future holder of any Senior and Subordinated
Debt to enforce subordination as herein provided shall at any time in any way
be prejudiced or impaired by any act or failure to act on the part of the
Company or by any act or failure to act, in good faith, by any such holder,
or by any noncompliance by the Company with the terms, provisions and
covenants of this Indenture, regardless of any knowledge thereof that any
such holder may have or be otherwise charged with.
Without in any way limiting the generality of the immediately preceding
paragraph, the holders of Senior and Subordinated Debt may, at any time and
from to time, without the consent of or notice to the Trustee or the Holders
of the Securities, without incurring responsibility to the Holders of the
Securities and without impairing or releasing the subordination provided in
this Article or the obligations hereunder of the Holders of the Securities to
the holders of Senior and Subordinated Debt, do any one or more of the
following: (i) change the manner, place or terms of payment or extend the
time of payment of, or renew or alter, Senior and Subordinated Debt, or
otherwise amend or supplement in any manner Senior and Subordinated Debt or
any instrument evidencing the same or any agreement under which Senior and
Subordinated Debt is outstanding; (ii) sell, exchange, release or otherwise
deal with any property pledged,
66
<PAGE>
mortgaged or otherwise securing Senior and Subordinated Debt; (iii) release
any Person liable in any manner for the collection of Senior and Subordinated
Debt; and (iv) exercise or refrain from exercising any rights against the
Company and any other Person.
Section 12.10. NOTICE TO TRUSTEE.
The Company shall give prompt written notice to the Trustee of any fact
known to the Company which would prohibit the making of any payment to or by
the Trustee in respect of the Securities. Notwithstanding the provisions of
this Article XII or any other provision of this Indenture, the Trustee shall
not be charged with knowledge of the existence of any facts which would
prohibit the making of any payment to or by the Trustee in respect of the
Securities, unless and until the Trustee shall have received written notice
thereof from the Company or a holder of Senior and Subordinated Debt or from
any trustee, agent or representative therefor; provided, however, that if the
Trustee shall not have received the notice provided for in this Section 12.10
at least two Business Days prior to the date upon which by the terms hereof
any monies may become payable for any purpose (including, without limitation,
the payment of the principal of (and premium, if any) or interest (including
any Additional Interest) on any Security), then, anything herein contained to
the contrary notwithstanding, the Trustee shall have full power and authority
to receive such monies and to apply the same to the purpose for which they
were received and shall not be affected by any notice to the contrary which
may be received by it within two Business Days prior to such date.
Subject to the provisions of Section 6.1, the Trustee shall be entitled
to rely on the delivery to it of a written notice by a Person representing
himself to be a holder of Senior and Subordinated Debt (or a trustee
therefor) to establish that such notice has been given by a holder of Senior
and Subordinated Debt (or a trustee therefor). In the event that the Trustee
determines in good faith that further evidence is required with respect to
the right of any Person as a holder of Senior and Subordinated Debt to
participate in any payment or distribution pursuant to this Article, the
Trustee may request such Person to furnish evidence to the reasonable
satisfaction of the Trustee as to the amount of Senior and Subordinated Debt
held by such Person, the extent to which such Person is entitled to
participate in such payment or distribution and any other facts pertinent to
the rights of such Person under this Article, and if such evidence is not
furnished, the Trustee may defer any payment to such Person pending judicial
determination as to the right of such Person to receive such payment.
Section 12.11. RELIANCE ON JUDICIAL ORDER OR CERTIFICATE OF LIQUIDATING AGENT.
Upon any payment or distribution of assets of the Company referred to in
this Article XII, the Trustee, subject to the provisions of Section 6.1, and
the Holders of the Securities shall be entitled to rely upon any order or
decree entered by any court of competent jurisdiction in which such
Proceeding is pending, or a certificate of the trustee in bankruptcy,
receiver, liquidating trustee, custodian, assignee for the benefit of
creditors, agent or other Person making such payment or distribution,
delivered to the Trustee or to the Holders of Securities, for the purpose of
ascertaining the Persons
67
<PAGE>
entitled to participate in such payment or distribution, the holders of the
Senior and Subordinated Debt and other indebtedness of the Company, the
amount thereof or payable thereon, the amount or amounts paid or distributed
thereon and all other facts pertinent thereto or to this Article XII.
Section 12.12. TRUSTEE NOT FIDUCIARY FOR HOLDERS OF SENIOR AND SUBORDINATED
DEBT.
The Trustee, in its capacity as trustee under this Indenture, shall not
be deemed to owe any fiduciary duty to the holders of Senior and Subordinated
Debt and shall not be liable to any such holders if it shall in good faith
mistakenly pay over or distribute to Holders of Securities or to the Company
or to any other Person cash, property or securities to which any holders of
Senior and Subordinated Debt shall be entitled by virtue of this Article or
otherwise.
Section 12.13. RIGHTS OF TRUSTEE AS HOLDER OF SENIOR AND SUBORDINATED DEBT;
PRESERVATION OF TRUSTEE'S RIGHTS.
The Trustee in its individual capacity shall be entitled to all the
rights set forth in this Article XII with respect to any Senior and
Subordinated Debt which may at any time be held by it, to the same extent as
any other holder of Senior and Subordinated Debt, and nothing in this
Indenture shall deprive the Trustee of any of its rights as such holder.
Section 12.14. ARTICLE APPLICABLE TO PAYING AGENTS.
In case at any time any Paying Agent other than the Trustee shall have
been appointed by the Company and be then acting hereunder, the term
"Trustee" as used in this Article XII shall in such case (unless the context
otherwise requires) be construed as extending to and including such Paying
Agent within its meaning as fully for all intents and purposes as if such
Paying Agent were named in this Article XII in addition to or in place of the
Trustee.
Section 12.15. CERTAIN CONVERSIONS OR EXCHANGES DEEMED PAYMENT.
For the purposes of this Article XII only, (a) the issuance and delivery
of junior securities upon conversion or exchange of Securities shall not be
deemed to constitute a payment or distribution on account of the principal of
(or premium, if any) or interest (including any Additional Interest) on
Securities or on account of the purchase or other acquisition of Securities,
and (b) the payment, issuance or delivery of cash, property or securities
(other than junior securities) upon conversion or exchange of a Security
shall be deemed to constitute payment on account of the principal of such
security. For the purposes of this Section 12.15, the term "junior
securities" means (i) shares of any stock of any class of the Company and
(ii) securities of the Company which are subordinated in right of payment to
all Senior and Subordinated Debt which may be outstanding at the time of
issuance or delivery of such securities to substantially the same extent as,
or to a greater extent than, the Securities are so subordinated as provided
in this Article XII.
* * * *
68
<PAGE>
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, and their respective corporate seals to be hereunto affixed
and attested, all as of the day and year first above written.
FIRST INTERSTATE BANCSYSTEM, INC.
By:
---------------------------------
Name:
---------------------------------
Title:
---------------------------------
Attest:
-----------------------------
Its:
--------------------------------
WILMINGTON TRUST COMPANY
as Trustee
By:
---------------------------------
Name:
---------------------------------
Title:
---------------------------------
Attest:
-----------------------------
Its:
--------------------------------
69
<PAGE>
STATE OF _____________ )
) SS.
COUNTY OF )
On the ____ day of _________, 1997 before me personally
came______________ to me known, who, being by me duly sworn, did depose and
say that he is ____________ of FIRST INTERSTATE BANCSYSTEM, INC., one of the
corporations described in and which executed the foregoing instrument; that
he knows the seal of said corporation; that the seal affixed to said
instrument is such corporate seal; and that he signed his name thereto by
authority of the Board of Directors of said corporation.
[SEAL]
----------------------------------------
Notary Public
STATE OF DELAWARE )
) SS.
COUNTY OF )
On the _____ day of _________, 1997 before me personally
came________________________ to me known, who, being by me duly sworn, did
depose and say that he is __________________ of WILMINGTON TRUST COMPANY one
of the corporations described in and which executed the foregoing instrument;
that he knows the seal of said corporation; that the seal affixed to said
instrument is such corporate seal; and that he signed his name thereto by
authority of the Board of Directors of said corporation.
[SEAL]
----------------------------------------
Notary Public
<PAGE>
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE
PAGE 1
----------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO
HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
BUSINESS TRUST REGISTRATION OF "FIB CAPITAL TRUST", FILED IN THIS OFFICE ON
THE FIRST DAY OF OCTOBER, A.D. 1997, AT 9 O'CLOCK A.M.
[SEAl] /s/ Edward J. Freel
---------------------------------------
EDWARD J. FREEL, SECRETARY OF STATE
AUTHENTICATION: 8681341
DATE: 10-01-97
<PAGE>
CERTIFICATE OF TRUST
OF
FIB CAPITAL TRUST
THIS Certificate of Trust of FIB Capital Trust (the "TRUST"), dated as
of October 1, 1997, is being duly executed and filed by the undersigned, as
trustees, to form a business trust under the Delaware Business Trust Act (12
DEL. C Section 3801, ET SEQ.).
1. NAME. The name of the business trust formed hereby is FIB Capital
Trust.
2. DELAWARE TRUSTEE. The name and business address of the trustee of the
Trust with a principal place of business in the State of Delaware are
Wilmington Trust Company, Rodney Square North, 1100 North Market Street,
Wilmington, New Castle County, Delaware 19890-0001.
3. EFFECTIVE DATE. This Certificate of Trust shall be effective upon
filing.
IN WITNESS WHEREOF, the undersigned, being the trustees of the Trust,
have executed this Certificate of Trust as of the date first-above written.
WILMINGTON TRUST COMPANY,
as Trustee
By: /s/ Patricia A. Evans
-----------------------
Name: Patricia A. Evans
Title: Financial Services Officer
TERRILL R. MOORE, as Trustee
/s/ Terrill R. Moore
--------------------------
<PAGE>
TRUST AGREEMENT
OF
FIB CAPITAL TRUST
THIS TRUST AGREEMENT is made as of October 1, 1997 (this "Trust
Agreement"), by and among First Interstate Bancsystem, Inc., as Depositor
(the "Depositor"), and Wilmington Trust Company, as trustee (the "Delaware
Trustee"), and Terrill R. Moore, as trustee (the "Administrative Trustee" and
jointly with the Delaware Trustee, the "Trustees"). The Depositor and the
Trustees hereby agree as follows:
1. The trust created hereby shall be known as "FIB Capital Trust" (the
"Trust"), in which name the Trustees or the Depositor, to the extent provided
herein, may conduct the business of the Trust, make and execute contracts,
and sue and be sued.
2. The Depositor hereby assigns, transfers, conveys and sets over to
the Trust the sum of $10. It is the intention of the parties hereto that the
Trust created hereby constitute a business trust under Chapter 38 of Title 12
of the Delaware Code, 12 DEL.C SECTION 3801, ET SEQ. (the "Business Trust
Act"), and that this document constitute the governing instrument of the
Trust. The Trustees are hereby authorized and directed to execute and file a
certificate of trust with the Delaware Secretary of State in such form as the
Trustees may approve.
3. An amended and restated Trust Agreement satisfactory to each party
to it and substantially in the form to be included as an exhibit to the 1933
Registration Statement (as herein defined), or in such other form as the
parties thereto may approve, will be entered into to provide for the
contemplated operation of the Trust created hereby and the issuance of the
Preferred or Capital Securities and Common Securities referred to therein.
Prior to the execution and delivery of such amended and restated Trust
Agreement, the Trustees shall not have any duty or obligation hereunder or
with respect of the trust estate, except as otherwise required by applicable
law or as may be necessary to obtain prior to such execution and delivery any
licenses, consents or approvals required by applicable law or otherwise.
Notwithstanding the foregoing, the Trustees may take all actions deemed
proper as are necessary to effect the transactions contemplated herein.
4. The Depositor, as the depositor of the Trust, is hereby authorized
(i) to file with the Securities and Exchange Commission (the "Commission")
and to execute, in the case of the 1933 Act Registration Statement and 1934
Act Registration Statement (as herein defined), on behalf of the Trust, (a) a
Registration Statement (the "1933 Act Registration Statement"), including
pre-effective or post-effective amendments to such Registration Statement,
relating to the registration under the Securities Act of 1933, as amended
(the "1933 Act"), of the Preferred or Capital Securities of the Trust, (b)
any preliminary prospectus or prospectus or supplement thereto relating to
the Capital or Preferred Securities required to be filed pursuant to the 1933
Act, and (c) a Registration Statement on Form 8-A or other appropriate form
(the "1934 Act Registration Statement") (including all pre-effective and
post-effective amendments thereto) relating to the registration of
the Preferred or Capital Securities of the Trust under the Securities
<PAGE>
Exchange Act of 1934, as amended; (ii) to file with the New York Stock
Exchange or other exchange, or the National Association of Securities Dealers
("NASD"), and execute on behalf of the Trust a listing application and all
other applications, statements, certificates, agreements and other
instruments as shall be necessary or desirable to cause the Preferred or
Capital Securities to be listed on the New York Stock Exchange or such other
exchange, or the NASD's Nasdaq National Market; (iii) to file and execute on
behalf of the Trust such applications, reports, surety bonds, irrevocable
consents, appointments of attorney for service of process and other papers
and documents as shall be necessary or desirable to register the Preferred or
Capital Securities under the securities or "Blue Sky" laws of such
jurisdictions as the Depositor, on behalf of the Trust, may deem necessary or
desirable, and (iv) to execute, deliver and perform on behalf of the Trust an
underwriting agreement with the Depositor and the underwriter or underwriters
of the Preferred or Capital Securities of the Trust. In the event that any
filing referred to in clauses (i)-(iii) above is required by the rules and
regulations of the Commission, the New York Stock Exchange or other exchange,
NASD, or state securities or Blue Sky laws to be executed on behalf of the
Trust by the Trustees, the Trustees, in their capacities as trustees of the
Trust, are hereby authorized and directed to join in any such filing and to
execute on behalf of the Trust any and all of the foregoing, it being
understood that the Trustees, in their capacities as trustees of the Trust,
shall not be required to join in any such filing or execute on behalf of the
Trust any such document unless required by the rules and regulations of the
Commission, the New York Stock Exchange or other exchange, NASD, or state
securities or Blue Sky laws. In connection with all of the foregoing, the
Trustees, solely in their capacities as trustees of the Trust, and the
Depositor hereby constitute and appoint Terrill R. Moore as his, her or its,
as the case may be, true and lawful attorney-in-fact and agent with full
power of substitution and resubstitution for the Depositor or in the
Depositor's name, place and stead, in any and all capacities, to sign any and
all amendments (including all pre-effective and post-effective amendments) to
the 1933 Act Registration Statement and the 1934 Act Registration Statement
and to file the same, with all exhibits thereto, and any other documents in
connection therewith, with the Commission, granting unto said
attorney-in-fact and agent full power and authority to do and perform each
and every act and thing requisite and necessary to be done in connection
therewith, as fully to all intents and purposes as the Depositor might or
could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent or his respective substitute or substitutes, shall
do or cause to be done by virtue hereof.
5. This Trust Agreement may be executed in one or more counterparts.
6. The number of trustees of the Trust initially shall be two and
thereafter the number of trustees of the Trust shall be such number as shall
be fixed from time to time by a written instrument signed by the Depositor
which may increase or decrease the number of trustees of the Trust; provided,
however, that to the extent required by the Business Trust Act, one trustee
of the Trust shall either be a natural person who is a resident of the State
of Delaware or, if not a natural person, an entity which has its principal
place of business in the State of Delaware. Subject to the foregoing, the
Depositor is entitled to appoint or remove without cause any trustee of the
Trust at any time. Any trustee of the Trust may resign upon thirty days'
prior notice to the Depositor.
-2-
<PAGE>
7. This Trust Agreement shall be governed by, and construed in
accordance with, the laws of the State of Delaware (with regard to conflict
of laws principles).
IN WITNESS WHEREOF, the parties hereto have caused this Trust Agreement
to be duly executed as of the day and year first above written.
FIRST INTERSTATE BANCSYSTEM, INC.,
as Depositor
By /s/ Terrill R. Moore
---------------------------------
Name: Terrill R. Moore
Title: Senior Vice President and
Chief Financial Officer
WILMINGTON TRUST COMPANY,
as Delaware Trustee
By /s/ Patricia A. Evans
---------------------------------
Name: Patricia A. Evans
Title: Financial Services Officer
TERRILL R. MOORE,
as Administrative Trustee
/s/ Terrill R. Moore
---------------------------------
-3-
<PAGE>
----------------------------------------------------------------------
AMENDED AND RESTATED
TRUST AGREEMENT
AMONG
FIRST INTERSTATE BANCSYSTEM, INC.,
AS DEPOSITOR,
WILMINGTON TRUST COMPANY,
AS PROPERTY TRUSTEE,
WILMINGTON TRUST COMPANY,
AS DELAWARE TRUSTEE,
AND
THE ADMINISTRATIVE TRUSTEES NAMED HEREIN
DATED AS OF ______________, 1997
----------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Article I. Defined Terms.................................................... 2
Section 1.1 Definitions................................................ 2
Article II. Establishment of the Trust...................................... 10
Section 2.1 Name....................................................... 10
Section 2.2 Office of the Delaware Trustee; Principal Place of
Business.................................................. 10
Section 2.3 Initial Contribution of Trust Property; Organizational
Expenses.................................................. 11
Section 2.4 Issuance of the Preferred Securities....................... 11
Section 2.5 Issuance of the Common Securities; Subscription and
Purchase of Debentures.................................... 11
Section 2.6 Declaration of Trust....................................... 11
Section 2.7 Declaration of Trust....................................... 12
Section 2.8 Assets of Trust............................................ 16
Section 2.9 Title to Trust Property.................................... 16
Article III. Payment Account................................................ 16
Section 3.1 Payment Account............................................ 16
Article IV. Distributions; Redemption....................................... 17
Section 4.1 Distributions.............................................. 17
Section 4.2 Redemption................................................. 18
Section 4.3 Subordination of Common Securities......................... 20
Section 4.4 Payment Procedures......................................... 21
Section 4.5 Tax Returns and Reports.................................... 21
Section 4.6 Payment of Taxes, Duties, Etc.............................. 21
Section 4.7 Payments under Indenture or Pursuant to Direct Actions..... 21
Article V. Trust Securities Certificates.................................... 21
i
<PAGE>
Section 5.1 Initial Ownership.......................................... 21
Section 5.2 The Trust Preferred Securities Certificates................ 22
Section 5.3 Execution and Delivery of Trust Preferred Securities
Certificates.............................................. 22
Section 5.4 Registration of Transfer and Exchange of Preferred
Securities Certificates................................... 22
Section 5.5 Mutilated, Destroyed, Lost or Stolen Trust Preferred
Securities Certificates................................... 23
Section 5.6 Persons Deemed Securityholders............................. 24
Section 5.7 Access to List of Securityholders' Names and Addresses..... 24
Section 5.8 Maintenance of Office or Agency............................ 24
Section 5.9 Appointment of Paying Agent................................ 24
Section 5.10 Ownership of Common Securities by Depositor................ 25
Section 5.11 Book Entry Preferred Securities Certificates; Common
Securities Certificate.................................... 25
Section 5.12 Notices to Clearing Agency................................. 26
Section 5.13 Definitive Preferred Securities Certificates............... 27
Section 5.14 Rights of Securityholders.................................. 27
Article VI. Acts of Securityholders; Meetings; Voting....................... 29
Section 6.1 Limitations on Voting Rights............................... 29
Section 6.2 Notice of Meetings......................................... 31
Section 6.3 Meetings of Preferred Securityholders...................... 31
Section 6.4 Voting Rights.............................................. 31
Section 6.5 Proxies, etc............................................... 31
Section 6.6 Securityholder Action by Written Consent................... 32
Section 6.7 Record Date for Voting and Other Purposes.................. 32
Section 6.8 Acts of Securityholders.................................... 32
ii
<PAGE>
Section 6.9 Inspection of Records...................................... 33
Article VII. Representations and Warranties................................. 33
Section 7.1 Representations and Warranties of the Property Trustee
and the Delaware Trustee.................................. 33
Section 7.2 Representations and Warranties of Depositor................ 35
Article VIII. The Trustees.................................................. 35
Section 8.1 Certain Duties and Responsibilities........................ 35
Section 8.2 Certain Notices............................................ 37
Section 8.3 Certain Rights of Property Trustee......................... 37
Section 8.4 Not Responsible for Recitals or Issuance of Securities..... 40
Section 8.5 May Hold Securities........................................ 40
Section 8.6 Compensation; Indemnity; Fees.............................. 40
Section 8.7 Corporate Property Trustee Required; Eligibility of
Trustees.................................................. 41
Section 8.8 Conflicting Interests...................................... 42
Section 8.9 Co-Trustees and Separate Trustee........................... 42
Section 8.10 Resignation and Removal; Appointment of Successor.......... 43
Section 8.11 Acceptance of Appointment by Successor..................... 45
Section 8.12 Merger, Conversion, Consolidation or Successions to
Business.................................................. 46
Section 8.13 Preferential Collection of Claims Against Depositor or
Trust..................................................... 46
Section 8.14 Reports by Property Trustee................................ 47
Section 8.15 Reports to the Property Trustee............................ 48
Section 8.16 Evidence of Compliance with Conditions Precedent........... 48
Section 8.17 Number of Trustees......................................... 48
Section 8.18 Delegation of Power........................................ 48
iii
<PAGE>
Section 8.19 Voting..................................................... 49
Article IX. Termination, Liquidation and Merger............................. 49
Section 9.1 Termination Upon Expiration Date........................... 49
Section 9.2 Early Termination.......................................... 49
Section 9.3 Termination................................................ 49
Section 9.4 Liquidation................................................ 50
Section 9.5 Mergers, Consolidations, Amalgamations or Replacements
of the Trust.............................................. 51
Article X. Miscellaneous Provisions......................................... 52
Section 10.1 Limitation of Rights of Securityholders................... 52
Section 10.2 Amendment................................................. 53
Section 10.3 Separability.............................................. 54
Section 10.4 Governing Law............................................. 54
Section 10.5 Payments Due on Non-Business Day.......................... 54
Section 10.6 Successors................................................ 54
Section 10.7 Headings.................................................. 54
Section 10.8 Reports, Notices and Demands.............................. 55
Section 10.9 Agreement Not to Petition................................. 55
Section 10.10 Trust Indenture Act; Conflict with Trust Indenture Act.... 56
Section 10.11 Acceptance of Terms of Trust Agreement, Guarantee and
Indenture................................................ 56
iv
<PAGE>
EXHIBIT A................................................................... 61
EXHIBIT B................................................................... 63
EXHIBIT C................................................................... 69
EXHIBIT D................................................................... 71
EXHIBIT E................................................................... 75
<PAGE>
FIB CAPITAL TRUST
Certain Sections of This Trust Agreement Relating to
Section 310 through 318 of the
Trust Indenture Act of 1939:
<TABLE>
<CAPTION>
Trust Indenture Act Trust Agreement Section
Section
<S> <C>
310(a)(1) 8.7
310(a)(2) 8.7
310(a)(3) 8.7
310(a)(4) 2.7(a)(ii)
310(b) Inapplicable
311(a) 8.13
311(b) 8.13
312(a) 5.7
312(b) 5.7
312(c) 5.7
313(a) 8.14(a)
313(a)(4) 8.14(b)
313(b) 8.14(b)
313(c) 10.8
313(d) 8.14(c)
314(a) 8.15
314(b) Not Applicable
314(c)(1) 8.16
314(c)(2) Not Applicable
314(d) Not Applicable
314(e) 1.1, 8.16
315(a) 8.1(a), 8.3(a)
315(b) 8.2, 10.8
315(c) 8.1(a)
315(d) 8.1, 8.3
315(e) Not Applicable
316(a) Not Applicable
316(a)(1)(A) Not Applicable
316(a)(1)(B) Not Applicable
316(a)(2) Not Applicable
316(b) 5.14
316(c) 6.7
317(a)(1) Not Applicable
317(a)(2) Not Applicable
317(b) 5.9
318(a) 10.10
</TABLE>
Note: This reconciliation and tie sheet shall not, for any purpose, be
deemed to be a part of the Trust Agreement.
vi
<PAGE>
AMENDED AND RESTATED TRUST AGREEMENT
THIS AMENDED AND RESTATED TRUST AGREEMENT (this "Trust Agreement"), dated
as of ___________, 1997, among (i) FIRST INTERSTATE BANCSYSTEM, INC., a
Montana corporation (including any successors or assigns, the "Depositor"),
(ii) WILMINGTON TRUST COMPANY, a Delaware banking corporation organized and
existing under the laws of the State of Delaware, as property trustee (in
such capacity, the "Property Trustee" and, in its separate corporate capacity
and not in its capacity as Property Trustee, the "Bank"), (iii) WILMINGTON
TRUST COMPANY, a Delaware banking corporation organized and existing under
the laws of the State of Delaware, as Delaware trustee (the "Delaware
Trustee"), (iv) _______________, an individual, _________________, an
individual, and ___________________, an individual, each of whose address is
c/o First Interstate BancSystem, Inc. (each an "Administrative Trustee" and
collectively the "Administrative Trustees") (the Property Trustee, the
Delaware Trustee and the Administrative Trustees are referred to collectively
herein as the "Trustees") and (v) the several Holders, as hereinafter
defined.
WITNESSETH
WHEREAS, the Depositor, the Property Trustee and the Delaware Trustee
have heretofore duly declared and established a business trust pursuant to
the Delaware Business Trust Act by entering into that certain Trust
Agreement, dated as of _____ __, 199_ (the "Original Trust Agreement"), and
by the execution and filing by the Property Trustee and the Delaware Trustee
with the Secretary of State of the State of Delaware of the Certificate of
Trust, filed on _________ __, 199_, attached as Exhibit A; and
WHEREAS, the Depositor and the Trustees desire to amend and restate the
Original Trust Agreement in its entirety as set forth herein to provide for,
among other things, (i) the issuance of the Common Securities by the Trust to
the Depositor, (ii) the issuance and sale of the Preferred Securities by the
Trust pursuant to the Underwriting Agreement; (iii) the acquisition by the
Trust from the Depositor of all of the right, title and interest in the
Debentures and (iv) the appointment of the Administrative Trustees;
NOW THEREFORE, in consideration of the agreements and obligations set
forth herein and for other good and valuable consideration, the sufficiency
of which is hereby acknowledged, each party, for the benefit of the other
parties and for the benefit of the Securityholders, hereby amends and
restates the Original Trust Agreement in its entirety and agrees as follows:
<PAGE>
ARTICLE I.
DEFINED TERMS
Section 1.1 DEFINITIONS. For all purposes of this Trust Agreement,
except as otherwise expressly provided or unless the context otherwise
requires:
(a) the terms defined in this Article have the meanings assigned to
them in this Article and include the plural as well as the singular;
(b) all other terms used herein that are defined in the Trust
Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein;
(c) unless the context otherwise requires, any reference to an
"Article" or a "Section" refers to an Article or a Section, as the case may
be, of this Trust Agreement; and
(d) the words "herein," "hereof" and "hereunder" and other words of
similar import refer to this Trust Agreement as a whole and not to any
particular Article, Section or other subdivision.
"Act" has the meaning specified in Section 6.8.
"Additional Amount" means, with respect to Trust Securities of a given
Liquidation Amount and/or a given period, the amount of Additional Interest
(as defined in the Indenture) paid by the Depositor on a Like Amount of
Debentures for such period.
"Additional Sums" has the meaning specified in Section 10.6 of the
Indenture.
"Administrative Trustee" means each of the Persons identified as an
"Administrative Trustee" in the preamble to this Trust Agreement solely in
such Person's capacity as Administrative Trustee of the Trust formed and
continued hereunder and not in such Person's individual capacity, or such
Administrative Trustee's successor in interest in such capacity, or any
successor trustee appointed as herein provided.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Bank" has the meaning specified in the preamble to this Trust Agreement.
2
<PAGE>
"Bankruptcy Event" means, with respect to any Person: the entry of a
decree or order by a court having jurisdiction in the premises judging such
Person a bankrupt or insolvent, or approving as properly filed a petition
seeking reorganization, arrangement, adjudication or composition of or in
respect of such Person under any applicable Bankruptcy Law, or appointing a
receiver, liquidator, assignee, trustee, sequestrator (or other similar
official) of such Person or of any substantial part of its property or
ordering the winding up or liquidation of its affairs, and the continuance of
any such decree or order unstayed and in effect for a period of 90
consecutive days; or
(e) the institution by such Person of proceedings to be adjudicated
a bankrupt or insolvent, or the consent by it to the institution of
bankruptcy or insolvency proceedings against it, or the filing by it of a
petition or answer or consent seeking reorganization or relief under any
applicable Bankruptcy Law, or the consent by it to the filing of any such
petition or to the appointment of a receiver, liquidator, assignee, trustee,
sequestrator (or similar official) of such Person or of any substantial part
of its property, or the making by it of an assignment for the benefit of
creditors, or the admission by it in writing of its inability to pay its
debts generally as they become due and its willingness to be adjudicated a
bankrupt, or the taking of corporate action by such Person in furtherance of
any such action.
"Bankruptcy Law" means any Federal or state bankruptcy, insolvency,
reorganization or similar law.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Depositor to have been duly
adopted by the Depositor's Board of Directors, or such committee of the Board
of Directors or officers of the Depositor to which authority to act on behalf
of the Board of Directors has been delegated, and to be in full force and
effect on the date of such certification, and delivered to the appropriate
Trustees.
"Book-Entry Preferred Securities Certificates" means a beneficial
interest in the Preferred Securities Certificates, ownership and transfers of
which shall be made through book entries by a Clearing Agency as described in
Section 5.11.
"Business Day" means a day other than (a) a Saturday or Sunday, (b) a day
on which banking institutions in the State of Montana are authorized or
required by law or executive order to remain closed, or (c) a day on which
the Property Trustee's Corporate Trust Office or the Debenture Trustee's
Corporate Trust Office is closed for business.
"Certificate Depository Agreement" means the agreement among the Trust,
the Depositor and The Depository Trust Company, as the initial Clearing
Agency, dated as of the Closing Date, relating to the Trust Securities
Certificates,
3
<PAGE>
substantially in the form attached as Exhibit B, as the same may be amended
and supplemented from time to time.
"Certificate of Trust" means the certificate of trust filed with the
Secretary of State of the State of Delaware with Respect to the Trust, as
amended or restated from time to time.
"Clearing Agency" means an organization registered as a "clearing agency"
pursuant to Section 17A of the Exchange Act. The Depository Trust Company
will be the initial Clearing Agency.
"Clearing Agency Participant" means a broker, dealer, bank, other
financial institution or other Person for whom from time to time a Clearing
Agency effects book-entry transfers and pledges of securities deposited with
the Clearing Agency.
"Closing Date" means the date of execution and delivery of this Trust
Agreement.
"Commission" means the Securities and Exchange Commission, as from time
to time constituted, created under the Exchange Act, as amended, or, if at
any time after the execution of this instrument such Commission is not
existing and performing the duties now assigned to it under the Trust
Indenture Act, then the body performing such duties at such time.
"Common Security" means an undivided beneficial interest in the assets of
the Trust, having a Liquidation Amount of $25 and having the rights provided
therefor in this Trust Agreement, including the right to receive
Distributions and a Liquidation Distribution as provided herein.
"Common Securities Certificate" means a certificate evidencing ownership
of Common Securities, substantially in the form attached as Exhibit C.
"Corporate Trust Office" means (i) when used with respect to the Property
Trustee, the principal office of the Property Trustee located at Rodney
Square North, 1100 North Market Street, Wilmington, Delaware 19890,
Attention: Corporate Trust Administration, and (ii) when used with respect to
the Debenture Trustee, the principal office of the Debenture Trustee located
at Rodney Square North, 1100 North Market Street, Wilmington, Delaware
19890, Attention: ___________.
"Debenture Event of Default" means an "Event of Default" as defined in
the Indenture.
"Debenture Redemption Date" means, with respect to any Debentures to be
redeemed under the Indenture, the date fixed for redemption under the
Indenture.
4
<PAGE>
"Debenture Trustee" means Wilmington Trust Company, a Delaware banking
corporation organized under the laws of the State of Delaware and any
successor thereto, as trustee under the Indenture.
"Debentures" means the aggregate principal amount of the Depositor's ___%
Junior Subordinated Deferrable Interest Debentures, issued pursuant to the
Indenture.
"Definitive Preferred Securities Certificates" means either or both (as
the context requires) of (a) Preferred Securities Certificates issued as
Book-Entry Preferred Securities Certificate as provided in Section 5.11(a)
and (b) Preferred Securities Certificates issued in certificated, fully
registered form as provided in Section 5.13.
"Delaware Business Trust Act" means Chapter 38 of Title 12 of the
Delaware Code, 12 Del. C. 3801, et seq., as it may be amended from time to
time.
"Delaware Trustee" means the Person identified as the "Delaware Trustee"
in the preamble to this Trust Agreement solely in its capacity as Delaware
Trustee of the Trust formed and continued hereunder and not in its individual
capacity, or its successor in interest in such capacity, or any successor
trustee appointed as herein provided.
"Depositor" has the meaning specified in the preamble to this Trust
Agreement.
"Distribution Date" has the meaning specified in Section 4.1(a).
"Distributions" means amounts payable in respect of the Trust Securities
as provided in Section 4.1.
"Early Termination Event" has the meaning specified in Section 9.2.
"Event of Default" means any one of the following events (whatever the
reason for such Event of Default and whether it shall be voluntary or
involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(a) the occurrence of a Debenture Event of Default;
(b) default by the Trust in the payment of any Distribution when it
becomes due and payable, and continuation of such default for a period of 30
days; or
5
<PAGE>
(c) default by the Trust in the payment of any Redemption Price of
any Trust Security when it becomes due and payable;
(d) default in the performance, or breach, in any material respect,
of any covenant or warranty of the Property Trustee in this Trust Agreement
(other than a covenant or warranty a default in the performance or breach of
which is dealt with in clause (b) or (c) above) and continuation of such
default or breach for a period of 60 days after there has been given, by
registered or certified mail, to the defaulting Property Trustee by the
Holders of at least 25% in aggregate liquidation preference of the
Outstanding Preferred Securities a written notice specifying such default or
breach and requiring it to be remedied and stating that such notice is a
"Notice of Default" hereunder; or
(e) the occurrence of a Bankruptcy Event with respect to the
Property Trustee and the failure by the Depositor to appoint a successor
Property Trustee within 60 days thereof.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Expense Agreement" means the Agreement as to Expenses and Liabilities
between the Depositor and the Trust, substantially in the form attached as
Exhibit D, as amended from time to time.
"Expiration Date" has the meaning specified in Section 9.1.
"Guarantee" means the Guarantee Agreement executed and delivered by the
Depositor and Wilmington Trust Company, as trustee, contemporaneously with
the execution and delivery of this Trust Agreement, for the benefit of the
holders of the Preferred Securities, as amended from time to time.
"Holder" means a Securityholder.
"Indenture" means the Junior Subordinated Indenture, dated as of
_________, 1997, between the Depositor and the Debenture Trustee, as trustee,
as amended or supplemented from time to time.
"Lien" means any lien, pledge, charge, encumbrance, mortgage, deed of
trust, adverse ownership interest, adverse claim, hypothecation, assignment,
security interest or preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever.
"Like Amount" means (a) with respect to a redemption of Trust Securities,
Trust Securities having a Liquidation Amount equal to the principal amount of
Debentures to be contemporaneously redeemed in accordance with the Indenture
the proceeds of which will be used to pay the Redemption Price of such Trust
Securities, and (b) with respect to a distribution of Debentures to Holders
of Trust Securities in connection with a dissolution or liquidation of the
Trust,
6
<PAGE>
Debentures having a principal amount equal to the Liquidation Amount of the
Trust Securities of the Holder to whom such Debentures are distributed.
"Liquidation Amount" means the stated amount of $25 per Trust Security.
"Liquidation Date" means the date on which Debentures are to be
distributed to Holders of Trust Securities in connection with a termination and
liquidation of the Trust pursuant to Section 9.4(a).
"Liquidation Distribution" has the meaning specified in Section 9.4(d).
"1940 Act" means the Investment Company Act of 1940, as amended.
"Officers' Certificate" means a certificate signed by the Chairman and
Chief Executive Officer, President or a Vice President, and by the Treasurer,
an Associate Treasurer, an Assistant Treasurer, the Controller, the Secretary
or an Assistant Secretary, of the Depositor, and delivered to the appropriate
Trustee. One of the officers signing an Officers' Certificate given pursuant
to Section 8.16 shall be the principal executive, financial or accounting
officer of the Depositor. Any Officers' Certificate delivered with respect to
compliance with a condition or covenant provided for in this Trust Agreement
shall include:
(a) a statement that each officer signing the Officers' Certificate
has read the covenant or condition and the definitions relating thereto;
(b) a brief statement of the nature and scope of the examination or
investigation undertaken by each officer in rendering the Officers'
Certificate;
(c) a statement that each such officer has made such examination or
investigation as, in such officer's opinion, is necessary to enable such
officer to express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(d) a statement as to whether, in the opinion of each such officer,
such condition or covenant has been complied with.
"Opinion of Counsel" means a written opinion of counsel, who may be
counsel for the Trust, the Property Trustee, the Delaware Trustee or the
Depositor, but not an employee of any thereof, and who shall be reasonably
acceptable to the Property Trustee.
"Original Trust Agreement" has the meaning specified in the recitals to
this Trust Agreement.
"Outstanding," when used with respect to Trust Securities, means, as of
the date of determination, all Trust Securities theretofore executed and
delivered under this Trust Agreement, except:
7
<PAGE>
(a) Trust Securities theretofore canceled by the Property Trustee
or delivered to the Property Trustee for cancellation;
(b) Trust Securities for whose payment or redemption money in the
necessary amount has been theretofore deposited with the Property Trustee or
any Paying Agent for the Holders of such Trust Securities; provided that, if
such Trust Securities are to be redeemed, notice of such redemption has been
duly given pursuant to this Trust Agreement; and
(c) Trust Securities which have been paid or in exchange for or in
lieu of which other Preferred Securities have been executed and delivered
pursuant to Sections 5.4, 5.5, 5.11 and 5.13; provided, however, that in
determining whether the Holders of the requisite Liquidation Amount of the
Outstanding Preferred Securities have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, Preferred
Securities owned by the Depositor, any Trustee or any Affiliate of the
Depositor or any Trustee shall be disregarded and deemed not to be
Outstanding, except that (a) in determining whether any Trustee shall be
protected in relying upon any such request, demand, authorization, direction,
notice, consent or waiver, only Preferred Securities that such Trustee knows
to be so owned shall be so disregarded and (b) the foregoing shall not apply
at any time when all of the outstanding Preferred Securities are owned by the
Depositor, one or more of the Trustees and/or any such Affiliate. Preferred
Securities so owned which have been pledged in good faith may be regarded as
Outstanding if the pledgee establishes to the satisfaction of the
Administrative Trustees the pledgee's right so to act with respect to such
Preferred Securities and that the pledgee is not the Depositor or any
Affiliate of the Depositor.
"Owner" means each Person who is the beneficial owner of a Book-Entry
Preferred Securities Certificate as reflected in the records of the Clearing
Agency or, if a Clearing Agency Participant is not the Owner, then as
reflected in the records of a Person maintaining an account with such
Clearing Agency (directly or indirectly, in accordance with the rules of such
Clearing Agency).
"Paying Agent" means any paying agent or co-paying agent appointed
pursuant to Section 5.9 and shall initially be the Bank.
"Payment Account" means a segregated non-interest-bearing corporate trust
account maintained by the Property Trustee with the Bank in its trust
department for the benefit of the Securityholders in which all amounts paid
in respect of the Debentures will be held and from which the Property
Trustee, through the Paying Agent, shall make payments to the Securityholders
in accordance with Sections 4.1 and 4.2.
8
<PAGE>
"Person" means any individual, corporation, partnership, joint venture,
trust, limited liability company or corporation, unincorporated organization
or government or any agency or political subdivision thereof.
"Preferred Security" means an undivided beneficial interest in the
assets of the Trust, having a Liquidation Amount of $25 and having the rights
provided therefor in this Trust Agreement, including the right to receive
Distributions and a Liquidation Distribution as provided herein.
"Preferred Securities Certificate" means a certificate evidencing
ownership of Preferred Securities, substantially in the form attached as
Exhibit E.
"Property Trustee" means the Person identified as the "Property Trustee"
in the preamble to this Trust Agreement solely in its capacity as Property
Trustee of the Trust heretofore formed and continued hereunder and not in its
individual capacity, or its successor in interest in such capacity, or any
successor property trustee appointed as herein provided.
"Redemption Date" means, with respect to any Trust Security to be
redeemed, the date fixed for such redemption by or pursuant to this Trust
Agreement; provided that each Debenture Redemption Date and the stated
maturity of the Debentures shall be a Redemption Date for a Like Amount of
Trust Securities.
"Redemption Price" means, with respect to any Trust Security, the
Liquidation Amount of such Trust Security, plus accumulated and unpaid
Distributions to the Redemption Date, plus the related amount of the premium,
if any, paid by the Depositor upon the concurrent redemption of a Like Amount
of Debentures, allocated on a pro rata basis (based on Liquidation Amounts)
among the Trust Securities.
"Relevant Trustee" shall have the meaning specified in Section 8.10.
"Securities Register" and "Securities Registrar" have the respective
meanings specified in Section 5.4.
"Securityholder" means a Person in whose name a Trust Security is
registered in the Securities Register; any such Person shall be deemed to be
a beneficial owner within the meaning of the Delaware Business Trust Act;
provided, however, that in determining whether the Holders of the requisite
amount of Preferred Securities have voted on any matter provided for in this
Trust Agreement, then for the purpose of any such determination, so long as
Definitive Preferred Securities Certificates have not been issued, the term
Securityholders or Holders as used herein shall refer to the Owners.
"Trust" means the Delaware business trust created and continued hereby
and identified on the cover page to this Trust Agreement.
9
<PAGE>
"Trust Agreement" means this Amended and Restated Trust Agreement, as
the same may be modified, amended or supplemented in accordance with the
applicable provisions hereof, including (i) all exhibits hereto and (ii) for
all purposes of this Trust Agreement and any such modification, amendment or
supplement, the provisions of the Trust Indenture Act that are deemed to be a
part of and govern this Trust Agreement and any such modification, amendment
or supplement, respectively.
"Trust Indenture Act" means the Trust Indenture Act of 1939 as in force
at the date as of which this instrument was executed; provided, however, that
in the event the Trust Indenture Act of 1939 is amended after such date,
"Trust Indenture Act" means, to the extent required by any such amendment,
the Trust Indenture Act of 1939 as so amended.
"Trust Property" means (a) the Debentures, (b) the rights of the
Property Trustee under the Guarantee, (c) any cash on deposit in, or owing
to, the Payment Account and (d) all proceeds and rights in respect of the
foregoing and any other property and assets for the time being held or deemed
to be held by the Property Trustee pursuant to the trusts of this Trust
Agreement.
"Trust Security" means any one of the Common Securities or the Preferred
Securities.
"Trust Securities Certificate" means any one of the Common Securities
Certificates or the Preferred Securities Certificates.
"Trustees" mean, collectively, the Property Trustee, the Delaware
Trustee and the Administrative Trustees.
"Underwriting Agreement" means the Underwriting Agreement, dated as of
__________, 1997, among the Trust, the Depositor and the underwriter(s) named
therein.
ARTICLE II.
ESTABLISHMENT OF THE TRUST
Section 2.1 NAME. The Trust continued hereby shall be known as "FIB
Capital Trust," as such name may be modified from time to time by the
Administrative Trustees following written notice to the Holders of Trust
Securities and the other Trustees, in which name the Trustees may conduct the
business of the Trust, make and execute contracts and other instruments on
behalf of the Trust and sue and be sued.
Section 2.2 OFFICE OF THE DELAWARE TRUSTEE; PRINCIPAL PLACE OF BUSINESS.
The address of the Delaware Trustee in the State of Delaware is c/o
Wilmington Trust Company, 1100 North Market Street, Wilmington, Delaware
19890, Attention: Corporate Trust Administrator, or such other address in the
State of
10
<PAGE>
Delaware as the Delaware Trustee may designate by written notice to the
Securityholders and the Depositor. The principal executive office of the
Trust is c/o First Interstate BancSystem, Inc., 401 North 31st Street,
Billings, MT 59101.
Section 2.3 INITIAL CONTRIBUTION OF TRUST PROPERTY; ORGANIZATIONAL
EXPENSES. The Trustees acknowledges receipt in trust from the Depositor in
connection with the Original Trust Agreement of the sum of $10, which
constituted the initial Trust Property. The Depositor shall pay
organizational expenses of the Trust as they arise or shall, upon request of
any Trustee, promptly reimburse such Trustee for any such expenses paid by
such Trustee. The Depositor shall make no claim upon the Trust Property for
the payment of such expenses.
Section 2.4 ISSUANCE OF THE PREFERRED SECURITIES. On __________ , 1997,
the Depositor and an Administrative Trustee, on behalf of the Trust and
pursuant to the Original Trust Agreement, shall execute and deliver the
Underwriting Agreement. Contemporaneously with the execution and delivery of
this Trust Agreement, an Administrative Trustee, on behalf of the Trust,
shall execute in accordance with Section 5.2 and deliver to the
Underwriter(s) named in the Underwriting Agreement Preferred Securities
Certificates, registered in the name of the nominee of the initial Clearing
Agency, in an aggregate amount of 1,600,000 Preferred Securities having an
aggregate Liquidation Amount of $40,000,000, against receipt of such
aggregate purchase price of such Preferred Securities of $40,000,000, which
amount the Administrative Trustee shall promptly deliver to the Property
Trustee.
Section 2.5 ISSUANCE OF THE COMMON SECURITIES; SUBSCRIPTION AND PURCHASE
OF DEBENTURES. Contemporaneously with the execution and delivery of this
Trust Agreement, an Administrative Trustee, on behalf of the Trust, shall
execute in accordance with Section 5.2 and deliver to the Depositor Common
Securities Certificates, registered in the name of the Depositor, in an
aggregate amount of 49,484 Common Securities having an aggregate Liquidation
Amount of $1,237,100 against payment by the Depositor of such amount, which
amount such Administrative Trustee shall promptly deliver to the Property
Trustee. Contemporaneously therewith, an Administrative Trustee, on behalf of
the Trust, shall subscribe to and purchase from the Depositor Debentures,
registered in the name of the Trust and having an aggregate principal amount
equal to $41,237,100, and, in satisfaction of the purchase price for such
Debentures, the Property Trustee, on behalf of the Trust, shall deliver to
the Depositor the sum of $41,237,100 (being the sum of the amounts delivered
to the Property Trustee pursuant to (i) the second sentence of Section 2.4
and (ii) the first sentence of this Section 2.5).
Section 2.6 PURPOSES; DECLARATION OF TRUST. The exclusive purposes and
functions of the Trust are (a) to issue and sell Trust Securities and use the
proceeds from such sale to acquire the Debentures, and (b) to engage in those
11
<PAGE>
activities necessary, advisable or incidental thereto. The Depositor hereby
appoints the Trustees as trustees of the Trust, to have all the rights,
powers and duties to the extent set forth herein, and the Trustees hereby
accept such appointment. The Property Trustee hereby declares that it will
hold the Trust Property in trust upon and subject to the conditions set forth
herein for the benefit of the Trust and the Securityholders. The
Administrative Trustees shall have all rights, powers and duties set forth
herein and in accordance with applicable law with respect to accomplishing
the purposes of the Trust. The Delaware Trustee shall not be entitled to
exercise any powers, nor shall the Delaware Trustee have any of the duties
and responsibilities, of the Property Trustee or the Administrative Trustees
set forth herein. The Delaware Trustee shall be one of the Trustees of the
Trust for the sole and limited purpose of fulfilling the requirements of
Section 3807 of the Delaware Business Trust Act.
Section 2.7 DECLARATION OF TRUST; AUTHORITY.
(a) The Trustees shall conduct the affairs of the Trust in
accordance with the terms of this Trust Agreement. Subject to the
limitations set forth in paragraph (b) of this Section and Section 2.6, and
in accordance with the following provisions (i) and (ii), the Trustees shall
have the authority to enter into all transactions and agreements determined
by the Trustees to be appropriate in exercising the authority, express or
implied, otherwise granted to the Trustees under this Trust Agreement, and to
perform all acts in furtherance thereof, including without limitation, the
following:
(i) As among the Trustees, each Administrative Trustee shall
have the power and authority to act on behalf of the Trust with respect to
the following matters:
(A) the issuance and sale of the Trust Securities;
(B) to cause the Trust to enter into, and to execute,
deliver and perform on behalf of the Trust, the Expense Agreement and
the Certificate Depository Agreement and such other agreements as may
be necessary or desirable in connection with the purposes and function
of the Trust;
(C) assisting in the registration of the Preferred
Securities under the Securities Act of 1933, as amended, and under
state securities or blue sky laws, and the qualification of this Trust
Agreement as a trust indenture under the Trust Indenture Act;
(D) assisting in the listing of the Preferred Securities
upon such securities exchange or exchanges as shall be determined by
the Depositor and the registration of the Preferred Securities under
the Securities Exchange Act of 1934, as amended,
12
<PAGE>
and the preparation and filing of all periodic and other reports
and other documents pursuant to the foregoing;
(E) the sending of notices (other than notices of
default) and other information regarding the Trust Securities and the
Debentures to the Securityholders in accordance with this Trust
Agreement;
(F) the appointment of a Paying Agent, authenticating
agent and Securities Registrar in accordance with this Trust
Agreement;
(G) registering transfer of the Trust Securities in
accordance with this Trust Agreement;
(H) to the extent provided in this Trust Agreement, the
winding up of the affairs of and liquidation of the Trust and the
preparation, execution and filing of the certificate of cancellation
with the Secretary of State of the State of Delaware;
(I) unless otherwise determined by the Depositor, the
Property Trustee or the Administrative Trustees, or as otherwise
required by the Delaware Business Trust Act or the Trust Indenture
Act, to execute on behalf of the Trust (either acting alone or
together with any or all of the Administrative Trustees) any documents
that the Administrative Trustees have the power to execute pursuant to
this Trust Agreement; and
(J) the taking of any action incidental to the foregoing
as the Trustees may from time to time determine is necessary or
advisable to give effect to the terms of this Trust Agreement for the
benefit of the Securityholders (without consideration of the effect of
any such action on any particular Securityholder).
(ii) As among the Trustees, the Property Trustee shall have
the power, duty and authority to act on behalf of the Trust with respect to
the following matters:
(A) the establishment of the Payment Account;
(B) the receipt of the Debentures;
(C) the collection of interest, principal and any other
payments made in respect of the Debentures in the Payment Account;
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<PAGE>
(D) the distribution through the Paying Agent of amounts
owed to the Securityholders in respect of the Trust Securities;
(E) the exercise of all of the rights, powers and
privileges of a holder of the Debentures;
(F) the sending of notices of default and other
information regarding the Trust Securities and the Debentures to the
Securityholders in accordance with this Trust Agreement;
(G) the distribution of the Trust Property in accordance
with the terms of this Trust Agreement;
(H) to the extent provided in this Trust Agreement, the
winding up of the affairs of and liquidation of the Trust and the
preparation, execution and filing of the certificate of cancellation
with the Secretary of State of the State of Delaware;
(I) after an Event of Default (other than under paragraph
(b), (c), (d) or (e) of the definition of such term if such Event of
Default is by or with respect to the Property Trustee) the taking of
any action incidental to the foregoing as the Property Trustee may
from time to time determine is necessary or advisable to give effect
to the terms of this Trust Agreement and protect and conserve the
Trust Property for the benefit of the Securityholders (without
consideration of the effect of any such action on any particular
Securityholder);
(J) so long as the Property Trustee is the Securities
Registrar, registering transfers of the Trust Securities in accordance
with this Trust Agreement; and
(K) except as otherwise provided in this Section
2.7(a)(ii), the Property Trustee shall have none of the duties,
liabilities, powers or the authority of the Administrative Trustees
set forth in Section 2.7(a)(i).
(b) So long as this Trust Agreement remains in effect, the Trust
(or the Trustees acting on behalf of the Trust) shall not undertake any
business, activities or transaction except as expressly provided herein or
contemplated hereby. In particular, the Trustees shall not (i) acquire any
investments or engage in any activities not authorized by this Trust
Agreement, (ii) sell, assign, transfer, exchange, mortgage, pledge, set-off
or otherwise dispose of any of the Trust Property or interests therein,
including to Securityholders, except as expressly provided herein, (iii) take
any action that would cause the Trust to fail or cease to
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qualify as a "grantor trust" for United States Federal income tax purposes,
(iv) incur any indebtedness for borrowed money or issue any other debt or (v)
take or consent to any action that would result in the placement of a Lien on
any of the Trust Property. The Administrative Trustees shall defend all
claims and demands of all Persons at any time claiming any Lien on any of the
Trust Property adverse to the interest of the Trust or the Securityholders in
their capacity as Securityholders.
(c) In connection with the issue and sale of the Preferred
Securities, the Depositor shall have the right and responsibility to assist
the Trust with respect to, or effect on behalf of the Trust, the following
(and any actions taken by the Depositor in furtherance of the following prior
to the date of this Trust Agreement are hereby ratified and confirmed in all
respects):
(i) the preparation and filing by the Trust with the
Commission and the execution on behalf of the Trust of a registration
statement on the appropriate form in relation to the Preferred Securities,
including any amendments thereto;
(ii) the determination of the States in which to take
appropriate action to qualify or register for sale all or part of the
Preferred Securities and the determination of any and all such acts, other
than actions which must be taken by or on behalf of the Trust, and the
advice to the Trustees of actions they must take on behalf of the Trust,
and the preparation for execution and filing of any documents to be
executed and filed by the Trust or on behalf of the Trust, as the Depositor
deems necessary or advisable in order to comply with the applicable laws of
any such States;
(iii) the preparation for filing by the Trust and execution on
behalf of the Trust of an application to the New York Stock Exchange or any
other national stock exchange or the Nasdaq National Market for listing
upon notice of issuance of any Preferred Securities;
(iv) the preparation for filing by the Trust with the
Commission and the execution on behalf of the Trust of a registration
statement on Form 8-A relating to the registration of the Preferred
Securities under Section 12(b) or 12(g) of the Exchange Act, including any
amendments thereto;
(v) the negotiation of the terms of, and the execution and
delivery of, the Underwriting Agreement providing for the sale of the
Preferred Securities; and
(vi) the taking of any other actions necessary or desirable to
carry out any of the foregoing activities.
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(d) Notwithstanding anything herein to the contrary, the
Administrative Trustees are authorized and directed to conduct the affairs of
the Trust and to operate the Trust so that the Trust will not be deemed to be
an "investment company" required to be registered under the 1940 Act, or fail
to be classified as a grantor trust for United States Federal income tax
purposes and so that the Debentures will be treated as indebtedness of the
Depositor for United States Federal income tax purposes. In this connection,
the Depositor and the Administrative Trustees are authorized to take any
action, not inconsistent with applicable law, the Certificate of Trust or
this Trust Agreement, that each of the Depositor and any Administrative
Trustee determines in its discretion to be necessary or desirable for such
purposes, as long as such action does not adversely affect in any material
respect the interests of the holders of the Preferred Securities.
Section 2.8 ASSETS OF TRUST. The assets of the Trust shall consist of
the Trust Property.
Section 2.9 TITLE TO TRUST PROPERTY. Legal title to all Trust Property
shall be vested at all times in the Property Trustee (in its capacity as
such) and shall be held and administered by the Property Trustee for the
benefit of the Trust and the Securityholders in accordance with this Trust
Agreement.
ARTICLE III.
PAYMENT ACCOUNT
Section 3.1 PAYMENT ACCOUNT.
(a) On or prior to the Closing Date, the Property Trustee shall
establish the Payment Account. The Property Trustee and any agent of the
Property Trustee shall have exclusive control and sole right of withdrawal
with respect to the Payment Account for the purpose of making deposits in and
withdrawals from the Payment Account in accordance with this Trust Agreement.
All monies and other property deposited or held from time to time in the
Payment Account shall be held by the Property Trustee in the Payment Account
for the exclusive benefit of the Securityholders and for distribution as
herein provided, including (and subject to) any priority of payments provided
for herein.
(b) The Property Trustee shall deposit in the Payment Account,
promptly upon receipt, all payments of principal of or interest on, and any
other payments or proceeds with respect to, the Debentures. Amounts held in
the Payment Account shall not be invested by the Property Trustee pending
distribution thereof.
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ARTICLE IV.
DISTRIBUTIONS; REDEMPTION
Section 4.1 DISTRIBUTIONS.
(a) The Trust Securities represent undivided beneficial interests
in the Trust Property, and Distributions (including of Additional Amounts)
will be made on the Trust Securities at the rate and on the dates that
payments of interest (including of Additional Interest, as defined in the
Indenture) are made on the Debentures. Accordingly:
(i) Distributions on the Trust Securities shall be cumulative,
and will accumulate whether or not there are funds of the Trust available
for the payment of Distributions. Distributions shall accrue from
____________, 1997, and, except in the event (and to the extent) that the
Depositor exercises its right to defer the payment of interest on the
Debentures pursuant to the Indenture, shall be payable quarterly in arrears
on March 31, June 30, September 30 and December 31 of each year, commencing
on December 15, 1997. If any date on which a Distribution is otherwise
payable on the Trust Securities is not a Business Day, then the payment of
such Distribution shall be made on the next succeeding day that is a
Business Day (and without any interest or other payment in respect of any
such delay) except that, if such Business Day is in the next succeeding
calendar year, payment of such Distribution shall be made on the
immediately preceding Business Day, in each case with the same force and
effect as if made on such date (each date on which distributions are
payable in accordance with this Section 4.1(a), a "Distribution Date").
(ii) Assuming payments of interest on the Debentures are made
when due (and before giving effect to Additional Amounts, if applicable),
Distributions on the Trust Securities shall be payable at a rate of ___%
per annum of the Liquidation Amount of the Trust Securities. The amount of
Distributions payable for any full period shall be computed on the basis of
a 360-day year of twelve 30-day months. The amount of Distributions for
any partial period shall be computed on the basis of the number of days
elapsed in a 360-day year of twelve 30-day months. The amount of
Distributions payable for any period shall include the Additional Amounts,
if any.
(iii) Distributions on the Trust Securities shall be made by
the Property Trustee from the Payment Account and shall be payable on each
Distribution Date only to the extent that the Trust has funds then on hand
and available in the Payment Account for the payment of such Distributions.
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(b) Distributions on the Trust Securities with respect to a
Distribution Date shall be payable to the Holders thereof as they appear on
the Securities Register for the Trust Securities on the relevant record date,
which shall be one Business Day prior to such Distribution Date; provided,
however, that in the event that the Preferred Securities do not remain in
book- entry-only form, the relevant record date shall be the date 15 days
prior to the relevant Distribution Date.
Section 4.2 REDEMPTION.
(a) On each Debenture Redemption Date and on the stated maturity of
the Debentures, the Trust will be required to redeem, subject to Section 4.3,
a Like Amount of Trust Securities at the Redemption Price.
(b) Notice of redemption shall be given by the Property Trustee by
first-class mail, postage prepaid, mailed not less than 30 nor more than 60
days prior to the Redemption Date to each Holder of Trust Securities to be
redeemed, at such Holder's address appearing in the Security Register. All
notices of redemption shall state:
(i) the Redemption Date;
(ii) the Redemption Price;
(iii) the CUSIP number;
(iv) if less than all the Outstanding Trust Securities are to
be redeemed, the identification and the total Liquidation Amount of the
particular Trust Securities to be redeemed; and
(v) that on the Redemption Date the Redemption Price will
become due and payable upon each such Trust Security to be redeemed and that
Distributions thereon will cease to accrue on and after said date.
(c) The Trust Securities redeemed on each Redemption Date shall be
redeemed at the Redemption Price with the proceeds from the contemporaneous
redemption of Debentures. Redemptions of the Trust Securities shall be made
and the Redemption Price shall be payable on each Redemption Date only to the
extent that the Trust has funds then on hand and available in the Payment
Account for the payment of such Redemption Price.
(d) If the Property Trustee gives a notice of redemption in respect
of any Preferred Securities, then, by 12:00 noon, Rocky Mountain time, on the
Redemption Date, subject to Section 4.2(c), with respect to Preferred
Securities held in book-entry form, the Property Trustee will irrevocably
deposit with the Clearing Agency for the Preferred Securities funds
sufficient to pay the applicable Redemption Price and will give such Clearing
Agency irrevocable
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instructions and authority to pay the Redemption Price to the holders
thereof. With respect to Preferred Securities held in certificated form, the
Property Trustee, subject to Section 4.2(c), 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
Redemption Price to the Holders thereof upon surrender of their Preferred
Securities Certificates. Notwithstanding the foregoing, Distributions payable
on or prior to the Redemption Date for any Trust Securities called for
redemption shall be payable to the Holders of such Trust Securities as they
appear on the Register for the Trust Securities on the relevant record dates
for the related Distribution Dates. If notice of redemption shall have been
given and funds deposited as required, then upon the date of such deposit,
all rights of Securityholders holding Trust Securities so called for
redemption will cease, except the right of such Securityholders to receive
the Redemption Price and any Distribution payable on or prior to the
Redemption Date, but without interest, and such Securities will cease to be
outstanding. In the event that any date on which any Redemption Price is
payable is not a Business Day, then payment of the Redemption Price payable
on such date will be made on the next succeeding day that is a Business Day
(and without any interest or other payment in respect of any such delay),
except that, if such Business Day falls in the next calendar year, such
payment will be made on the immediately preceding Business Day, in each case,
with the same force and effect as if made on such date. In the event that
payment of the Redemption Price in respect of any Trust Securities called for
redemption is improperly withheld or refused and not paid either by the Trust
or by the Depositor pursuant to the Guarantee, Distributions on such Trust
Securities will continue to accrue, at the then applicable rate, from the
Redemption Date originally established by the Trust for such Trust Securities
to the date such Redemption Price is actually paid, in which case the actual
payment date will be the date fixed for redemption for purposes of
calculating the Redemption Price.
(e) Payment of the Redemption Price on the Trust Securities shall
be made to the recordholders thereof as they appear on the Securities
Register for the Trust Securities on the relevant record date, which shall be
one Business Day prior to the relevant Redemption Date; provided, however,
that in the event that the Preferred Securities do not remain in
book-entry-only form, the relevant record date shall be the date fifteen days
prior to the relevant Redemption Date.
(f) Subject to Section 4.3(a), if less than all the Outstanding
Trust Securities are to be redeemed on a Redemption Date, then the aggregate
Liquidation Amount of Trust Securities to be redeemed shall be allocated on a
pro rata basis (based on Liquidation Amounts) among the Common Securities and
the Preferred Securities. The particular Preferred Securities to be redeemed
shall be selected on a pro rata basis (based upon Liquidation Amounts) not
more than 60 days prior to the Redemption Date by the Property Trustee from
the Outstanding Preferred Securities not previously called for redemption, by
such method
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(including, without limitation, by lot) as the Property Trustee shall deem
fair and appropriate and which may provide for the selection for redemption
of portions (equal to $25 or an integral multiple of $25 in excess thereof)
of the Liquidation Amount of Preferred Securities of a denomination larger
than $25. The Property Trustee shall promptly notify the Security Registrar
in writing of the Preferred Securities selected for redemption and, in the
case of any Preferred Securities selected for partial redemption, the
Liquidation Amount thereof to be redeemed. For all purposes of this Trust
Agreement, unless the context otherwise requires, all provisions relating to
the redemption of Preferred Securities shall relate, in the case of any
Preferred Securities redeemed or to be redeemed only in part, to the portion
of the Liquidation Amount of Preferred Securities that has been or is to be
redeemed.
Section 4.3 SUBORDINATION OF COMMON SECURITIES.
(a) Payment of Distributions (including Additional Amounts, if
applicable) on, and the Redemption Price of, the Trust Securities, as
applicable, shall be made, subject to Section 4.2(f), pro rata among the
Common Securities and the Preferred Securities based on the Liquidation
Amount of the Trust Securities; provided, however, that if on any
Distribution Date or Redemption Date any Event of Default resulting from a
Debenture Event of Default shall have occurred and be continuing, no payment
of any Distribution (including Additional Amounts, if applicable) on, or
Redemption Price of, any Common Security, and no other payment on account of
the redemption, liquidation or other acquisition of Common Securities, shall
be made unless payment in full in cash of all accumulated and unpaid
Distributions (including Additional Amounts, if applicable) on all
Outstanding Preferred Securities for all Distribution periods terminating on
or prior thereto, or in the case of payment of the Redemption Price the full
amount of such Redemption Price on all Outstanding Preferred Securities,
shall have been made or provided for, and all funds immediately available to
the Property Trustee shall first be applied to the payment in full in cash of
all Distributions (including Additional Amounts, if applicable) on, or the
Redemption Price of, Preferred Securities then due and payable.
(b) In the case of the occurrence of any Event of Default resulting
from any Debenture Event of Default, the Holder of Common Securities will be
deemed to have waived any right to act with respect to any such Event of
Default under this Trust Agreement until the effect of all such Events of
Default with respect to the Preferred Securities have been cured, waived or
otherwise eliminated. Until any such Event of Default under this Trust
Agreement with respect to the Preferred Securities has been so cured, waived
or otherwise eliminated, the Property Trustee shall act solely on behalf of
the Holders of the Preferred Securities and not the Holder of the Common
Securities, and only the Holders of the Preferred Securities will have the
right to direct the Property Trustee to act on their behalf.
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Section 4.4 PAYMENT PROCEDURES. Payments of Distributions (including
Additional Amounts, if applicable) in respect of the Preferred Securities
shall be made by check mailed to the address of the Person entitled thereto
as such address shall appear on the Securities Register or, if the Preferred
Securities are held by a Clearing Agency, such Distributions shall be made to
the Clearing Agency in immediately available funds, which shall credit the
relevant Persons' accounts at such Clearing Agency on the applicable
Distribution Dates. Payments in respect of the Common Securities shall be
made in such manner as shall be mutually agreed between the Property Trustee
and the Common Securityholder.
Section 4.5 TAX RETURNS AND REPORTS. The Administrative Trustees shall
prepare (or cause to be prepared), at the Depositor's expense, and file all
United States Federal, state and local tax and information returns and
reports required to be filed by or in respect of the Trust. In this regard,
the Administrative Trustees shall (a) prepare and file (or cause to be
prepared and filed) the appropriate Internal Revenue Service form required to
be filed in respect of the Trust in each taxable year of the Trust and (b)
prepare and furnish (or cause to be prepared and furnished) to each
Securityholder the appropriate Internal Revenue Service form required to be
provided on such form. The Administrative Trustees shall provide the
Depositor and the Property Trustee with a copy of all such returns and
reports promptly after such filing or furnishing. The Trustees shall comply
with United States Federal withholding and backup withholding tax laws and
information reporting requirements with respect to any payments to
Securityholders under the Trust Securities.
Section 4.6 PAYMENT OF TAXES, DUTIES, ETC. OF THE TRUST. Upon receipt
under the Debentures of Additional Sums, the Property Trustee shall promptly
pay any taxes, duties or governmental charges of whatsoever nature (other
than withholding taxes) imposed on the Trust by the United States or any
other taxing authority.
Section 4.7 PAYMENTS UNDER INDENTURE OR PURSUANT TO DIRECT ACTIONS. Any
amount payable hereunder to any Holder of Preferred Securities (and any Owner
with respect thereto) shall be reduced by the amount of any corresponding
payment such Holder (and Owner) has directly received pursuant to Section 5.8
of the Indenture or Section 5.14 of this Trust Agreement.
ARTICLE V.
TRUST SECURITIES CERTIFICATES
Section 5.1 INITIAL OWNERSHIP. Upon the formation of the Trust and the
contribution by the Depositor pursuant to Section 2.3 and until the issuance
of the Trust Securities, and at any time during which no Trust Securities are
outstanding, the Depositor shall be the sole beneficial owner of the Trust.
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Section 5.2 THE TRUST SECURITIES CERTIFICATES. The Preferred Securities
Certificates shall be issued in minimum denominations of $25 Liquidation
Amount and integral multiples of $25 in excess thereof, and the Common
Securities Certificates shall be issued in denominations of $25 Liquidation
Amount and integral multiples thereof. The Trust Securities Certificates
shall be executed on behalf of the Trust by manual signature of at least one
Administrative Trustee. Trust Securities Certificates bearing the manual
signatures of individuals who were, at the time when such signatures shall
have been affixed, authorized to sign on behalf of the Trust, shall be
validly issued and entitled to the benefits of this Trust Agreement,
notwithstanding that such individuals or any of them shall have ceased to be
so authorized prior to the delivery of such Trust Securities Certificates or
did not hold such offices at the date of delivery of such Trust Securities
Certificates. A transferee of a Trust Securities Certificate shall become a
Securityholder, and shall be entitled to the rights and subject to the
obligations of a Securityholder hereunder, upon due registration of such
Trust Securities Certificate in such transferee's name pursuant to Sections
5.4, 5.11 and 5.13.
Section 5.3 EXECUTION AND DELIVERY OF TRUST SECURITIES CERTIFICATES. At
the Closing Date, the Administrative Trustees shall cause Trust Securities
Certificates, in an aggregate Liquidation Amount as provided in Section 2.4,
to be executed on behalf of the Trust and delivered to or upon the written
order of the Depositor, signed by its chairman of the board, its president,
any executive vice president or any vice president, treasurer or assistant
treasurer or controller without further corporate action by the Depositor, in
authorized denominations.
Section 5.4 REGISTRATION OF TRANSFER AND EXCHANGE OF PREFERRED
SECURITIES CERTIFICATES. The Depositor shall keep or cause to be kept, at
the office or agency maintained pursuant to Section 5.8, a register or
registers for the purpose of registering Trust Securities Certificates and
transfers and exchanges of Preferred Securities Certificates (the "Securities
Register") in which, the registrar designated by the Depositor (the
"Securities Registrar"), subject to such reasonable regulations as it may
prescribe, shall provide for the registration of Preferred Securities
Certificates and Common Securities Certificates (subject to Section 5.10 in
the case of the Common Securities Certificates) and registration of transfers
and exchanges of Preferred Securities Certificates as herein provided. The
Bank shall be the initial Securities Registrar.
Upon surrender for registration of transfer of any Preferred Securities
Certificate at the office or agency maintained pursuant to Section 5.8, the
Administrative Trustees or any one of them shall execute and deliver, in the
name of the designated transferee or transferees, one or more new Preferred
Securities Certificates in authorized denominations of a like aggregate
Liquidation Amount dated the date of execution by such Administrative Trustee
or Trustees.
The Securities Registrar shall not be required to register the transfer
of any Preferred Securities that have been called for redemption. At the
option of a
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Holder, Preferred Securities Certificates may be exchanged for other
Preferred Securities Certificates in authorized denominations of the same
class and of a like aggregate Liquidation Amount upon surrender of the
Preferred Securities Certificates to be exchanged at the office or agency
maintained pursuant to Section 5.8.
Every Preferred Securities Certificate presented or surrendered for
registration of transfer or exchange shall be accompanied by a written
instrument of transfer in form satisfactory to an Administrative Trustee and
the Securities Registrar duly executed by the Holder or his attorney duly
authorized in writing. Each Preferred Securities Certificate surrendered for
registration of transfer or exchange shall be canceled and subsequently
disposed of by an Administrative Trustee in accordance with such Person's
customary practice. The Trust shall not be required to (i) issue, register
the transfer of or exchange any Preferred Securities during a period
beginning at the opening of business 15 calendar days before the date of
mailing of a notice of redemption of any Preferred Securities called for
redemption and ending at the close business on the day of such mailing or
(ii) register the transfer of or exchange any Preferred Securities so
selected for redemption, in whole or in part, except the unredeemed portion
of any such Preferred Securities being redeemed in part.
No service charge shall be made for any registration of transfer or
exchange of Preferred Securities Certificates, but the Securities Registrar
may require payment of a sum sufficient to cover any tax or governmental
charge that may be imposed in connection with any transfer or exchange of
Preferred Securities Certificates.
Section 5.5 MUTILATED, DESTROYED, LOST OR STOLEN TRUST SECURITIES
CERTIFICATES. If (a) any mutilated Trust Securities Certificate shall be
surrendered to the Securities Registrar, or if the Securities Registrar shall
receive evidence to its satisfaction of the destruction, loss or theft of any
Trust Securities Certificate and (b) there shall be delivered to the
Securities Registrar and the Administrative Trustees such security or
indemnity as may be required by them to save each of them harmless, then in
the absence of notice that such Trust Securities Certificate shall have been
acquired by a bona fide purchaser, the Administrative Trustees, or any one of
them, on behalf of the Trust shall execute and make available for delivery,
in exchange for or in lieu of any such mutilated, destroyed, lost or stolen
Trust Securities Certificate, a new Trust Securities Certificate of like
class, tenor and denomination. In connection with the issuance of any new
Trust Securities Certificate under this Section, the Administrative Trustees
or the Securities Registrar may require the payment of a sum sufficient to
cover any tax or other governmental charge that may be imposed in connection
therewith. Any duplicate Trust Securities Certificate issued pursuant to
this Section shall constitute conclusive evidence of an undivided beneficial
interest in the assets of the Trust, as if originally issued, whether or not
the lost, stolen or destroyed Trust Securities Certificate shall be found at
any time.
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Section 5.6 PERSONS DEEMED SECURITYHOLDERS. The Trustees or the
Securities Registrar shall treat the Person in whose name any Trust
Securities Certificate shall be registered in the Securities Register as the
owner of such Trust Securities Certificate for the purpose of receiving
Distributions and for all other purposes whatsoever, and neither the Trustees
nor the Securities Registrar shall be bound by any notice to the contrary.
Section 5.7 ACCESS TO LIST OF SECURITYHOLDERS' NAMES AND ADDRESSES. At
any time when the Property Trustee is not also acting as the Securities
Registrar, the Administrative Trustees or the Depositor shall furnish or
cause to be furnished to the Property Trustee (a) semi-annually on or before
January 1 and July 1 in each year, a list, in such form as the Property
Trustee may reasonably require, of the names and addresses of the
Securityholders as of the most recent Record Date and (b) promptly after
receipt by any Administrative Trustee or the Depositor of a request therefor
from the Property Trustee, such other information as the Property Trustee may
reasonably require in order to enable the Property Trustee to discharge its
obligations under this Trust Agreement, in each case to the extent such
information is in the possession or control of the Administrative Trustees or
the Depositor and is not identical to a previously supplied list or has not
otherwise been received by the Property Trustee in its capacity as Securities
Registrar. The rights of Securityholders to communicate with other Security
holders with respect to their rights under this Trust Agreement or under the
Trust Securities, and the corresponding rights of the Trustee shall be as
provided in the Trust Indenture Act. Each Holder, by receiving and holding a
Trust Securities Certificate, and each Owner shall be deemed to have agreed
not to hold the Depositor, the Property Trustee or the Administrative
Trustees accountable by reason of the disclosure of its name and address,
regardless of the source from which such information was derived.
Section 5.8 MAINTENANCE OF OFFICE OR AGENCY. The Administrative
Trustees shall maintain an office or offices or agency or agencies where
Preferred Securities Certificates may be surrendered for registration of
transfer or exchange and where notices and demands to or upon the Trustees in
respect of the Trust Securities Certificates may be served. The
Administrative Trustees initially designate the principal corporate trust
office of the Property Trustee, Rodney Square North, 1100 North Market
Street, Wilmington, Delaware 19890, Attention: Corporate Trust Administrator,
as the principal corporate trust office for such purposes. The
Administrative Trustees shall give prompt written notice to the Depositor and
to the Securityholders of any change in the location of the Securities
Register or any such office or agency.
Section 5.9 APPOINTMENT OF PAYING AGENT. The Paying Agent shall make
Distributions to Securityholders from the Payment Account and shall report
the amounts of such Distributions to the Property Trustee and the
Administrative Trustees. Any Paying Agent shall have the revocable power to
withdraw funds from the Payment Account for the purpose of making the
Distributions referred to
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above. The Administrative Trustees may revoke such power and remove the
Paying Agent if such Trustees determine in their sole discretion that the
Paying Agent shall have failed to perform its obligations under this Trust
Agreement in any material respect. The Paying Agent shall initially be the
Property Trustee, and any co-paying agent chosen by the Property Trustee, and
acceptable to the Administrative Trustees and the Depositor. Any Person
acting as Paying Agent shall be permitted to resign as Paying Agent upon 30
days' written notice to the Administrative Trustees, the Property Trustee and
the Depositor. In the event that the Property Trustee shall no longer be the
Paying Agent or a successor Paying Agent shall resign or its authority to act
be revoked, the Administrative Trustees shall appoint a successor that is
acceptable to the Property Trustee and the Depositor to act as Paying Agent
(which shall be a bank or trust company). The Administrative Trustees shall
cause such successor Paying Agent or any additional Paying Agent appointed by
the Administrative Trustees to execute and deliver to the Trustees an
instrument in which such successor Paying Agent or additional Paying Agent
shall agree with the Trustees that as Paying Agent, such successor Paying
Agent or additional Paying Agent will hold all sums, if any, held by it for
payment to the Securityholders in trust for the benefit of the
Securityholders entitled thereto until such sums shall be paid to such
Securityholders. The Paying Agent shall return all unclaimed funds to the
Property Trustee and upon removal of a Paying Agent such Paying Agent shall
also return all funds in its possession to the Property Trustee. The
provisions of Sections 8.1, 8.3 and 8.6 herein shall apply to the Bank also
in its role as Paying Agent, for so long as the Bank shall act as Paying
Agent and, to the extent applicable, to any other paying agent appointed
hereunder. Any reference in this Agreement to the Paying Agent shall include
any co-paying agent unless the context requires otherwise.
Section 5.10 OWNERSHIP OF COMMON SECURITIES BY DEPOSITOR. At the
Closing Date, the Depositor shall acquire and retain beneficial and record
ownership of the Common Securities. To the fullest extent permitted by law,
other than a transfer in connection with a consolidation or merger of the
Depositor into another corporation, or any conveyance, transfer or lease by
the Depositor of its properties and assets substantially as an entirety to
any Person, pursuant to Section 8.1 of the Indenture, any attempted transfer
of the Common Securities shall be void. The Administrative Trustees shall
cause each Common Securities Certificate issued to the Depositor to contain a
legend stating "THIS CERTIFICATE IS NOT TRANSFERABLE".
Section 5.11 BOOK ENTRY PREFERRED SECURITIES CERTIFICATES; COMMON
SECURITIES CERTIFICATE.
(a) The Preferred Securities Certificates, upon original
issuance, will be issued in the form of a typewritten Preferred Securities
Certificate or Certificates representing Book-Entry Preferred Securities
Certificates, to be delivered to The Depository Trust Company, the initial
Clearing Agency, by, or on behalf of, the Trust. Such Preferred Securities
Certificate or Certificates shall
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initially be registered on the Securities Register in the name of Cede & Co.,
the nominee of the initial Clearing Agency, and no Owner will receive a
Definitive Preferred Securities Certificate representing such Owner's
interest in such Preferred Securities, except as provided in Section 5.13.
Unless and until Definitive Preferred Securities Certificates have been
issued to Owners pursuant to Section 5.13:
(i) the provisions of this Section 5.11(a) shall be in full
force and effect;
(ii) the Securities Registrar, the Paying Agent and the
Trustees shall be entitled to deal with the Clearing Agency for all purposes
of this Trust Agreement relating to the Book-Entry Preferred Securities
Certificates (including the payment of the Liquidation Amount of and
Distributions on the Preferred Securities evidenced by Book-Entry Preferred
Securities Certificates) the Book-Entry Preferred Securities Certificates and
shall have no obligations to the Owners thereof;
(iii) to the extent that the provisions of this Section 5.11
conflict with any other provisions of this Trust Agreement, the provisions of
this Section 5.11 shall control; and
(iv) the rights of the Owners of the Book-Entry Preferred
Securities Certificates shall be exercised only through the Clearing Agency
and shall be limited to those established by law and agreements between such
Owners and the Clearing Agency and/or the Clearing Agency Participants.
Pursuant to the Certificate Depository Agreement, unless and until Definitive
Preferred Securities Certificates are issued pursuant to Section 5.13, the
initial Clearing Agency will make book-entry transfers among the Clearing
Agency Participants and receive and transmit payments on the Preferred
Securities to such Clearing Agency Participants. Any Clearing Agency
designated pursuant here to will not be deemed an agent of the Trustee for
any purpose.
(b) A single Common Securities Certificate representing the
Common Securities shall be issued to the Depositor in the form of a
definitive Common Securities Certificate.
Section 5.12 NOTICES TO CLEARING AGENCY. To the extent that a notice or
other communication to the Owners is required under this Trust Agreement,
unless and until Definitive Preferred Securities Certificates shall have been
issued to Owners pursuant to Section 5.13, the Trustees shall give all such
notices and communications specified herein to be given to Owners to the
Clearing Agency and shall have no obligations to the Owners.
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Section 5.13 Definitive Preferred Securities Certificates. If (a) the
Depositor advises the Trustees in writing that the Clearing Agency is no
longer willing or able to properly discharge its responsibilities with
respect to the Preferred Securities Certificates, and the Depositor is unable
to locate a qualified successor, (b) the Depositor at its option advises the
Trustees in writing that it elects to terminate the book-entry system through
the Clearing Agency or (c) after the occurrence of a Debenture Event of
Default, Owners of Preferred Securities Certificates representing beneficial
interests aggregating at least a majority of the Liquidation Amount advise
the Property Trustee in writing that the continuation of a book-entry system
through the Clearing Agency is no longer in the best interest of the Owners
of Preferred Securities Certificates, then the Property Trustee shall notify
the Clearing Agency and the Clearing Agency shall notify all Owners of
Preferred Securities Certificates and the other Trustees of the occurrence of
any such event and of the availability of the Definitive Preferred Securities
Certificates to Owners of such class or classes, as applicable, requesting
the same. Upon surrender to the Property Trustee of the typewritten
Preferred Securities Certificate or Certificates representing the Book Entry
Preferred Securities Certificates by the Clearing Agency, accompanied by
registration instructions, the Administrative Trustees, or any one of them,
shall execute the Definitive Preferred Securities Certificates in accordance
with the instructions of the Clearing Agency. Neither the Securities
Registrar nor the Trustees shall be liable for any delay in delivery of such
instructions and may conclusively rely on, and shall be protected in relying
on, such instructions. Upon the issuance of Definitive Preferred Securities
Certificates, the Trustees shall recognize the Holders of the Definitive
Preferred Securities Certificates as Securityholders. The Definitive
Preferred Securities Certificates shall be printed, lithographed or engraved
or may be produced in any other manner as is reasonably acceptable to the
Administrative Trustees, as evidenced by the execution thereof by the
Administrative Trustees or any one of them.
Section 5.14 RIGHTS OF SECURITYHOLDERS.
(a) The legal title to the Trust Property is vested exclusively
in the Property Trustee (in its capacity as such) in accordance with Section
2.9, and the Securityholders shall not have any right or title therein other
than the undivided beneficial interest in the assets of the Trust conferred
by their Trust Securities and they shall have no right to call for any
partition or division of property, profits or rights of the Trust except as
described below. The Trust Securities shall be personal property giving only
the rights specifically set forth therein and in this Trust Agreement. The
Trust Securities shall have no preemptive or similar rights and when issued
and delivered to Securityholders against payment of the purchase price
therefor will be fully paid and nonassessable by the Trust. The Holders of
the Trust Securities, in their capacities as such, shall be entitled to the
same limitation of personal liability extended to stockholders of private
corporations for profit organized under the General Corporation Law of the
State of Delaware.
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(b) For so long as any Preferred Securities remain Outstanding,
if, upon a Debenture Event of Default, the Debenture Trustee fails or the
holders of not less than 25% in principal amount of the outstanding
Debentures fail to declare the principal of all of the Debentures to be
immediately due and payable, the Holders of at least 25% in Liquidation
Amount of the Preferred Securities then Outstanding shall have such right by
a notice in writing to the Depositor and the Debenture Trustee; and upon any
such declaration such principal amount of and the accrued interest on all of
the Debentures shall become immediately due and payable, provided that the
payment of principal and interest on such Debentures shall remain
subordinated to the extent provided in the Indenture.
At any time after such a declaration of acceleration with respect to the
Debentures has been made and before a judgment or decree for payment of the
money due has been obtained by the Debenture Trustee as in the Indenture
provided, the Holders of a majority in Liquidation Amount of the Preferred
Securities, by written notice to the Property Trustee, the Depositor and the
Debenture Trustee, may rescind and annul such declaration and its
consequences if:
(i) the Depositor has paid or deposited with the Debenture
Trustee a sum sufficient to pay
(A) all overdue installments of interest (including
any Additional Interest (as defined in the Indenture)) on all of the
Debentures,
(B) the principal of (and premium, if any, on) any
Debentures which have become due otherwise than by such declaration of
acceleration and interest thereon at the rate borne by the Debentures, and
(C) all sums paid or advanced by the Debenture
Trustee under the Indenture and the reasonable compensation, expenses,
disbursements and advances of the Debenture Trustee and the Property Trustee,
their agents and counsel; and
(ii) all Events of Default with respect to the Debentures,
other than the non-payment of the principal of the Debentures which has
become due solely by such acceleration, have been cured or waived as provided
in Section 5.13 of the Indenture.
The holders of a majority in aggregate Liquidation Amount of the Preferred
Securities may, on behalf of the Holders of all the Preferred Securities,
waive any past default under the Indenture, except a default in the payment
of principal or interest (unless such default has been cured and a sum
sufficient to pay all matured installments of interest and principal due
otherwise than by acceleration
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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 Debenture. No such
rescission shall affect any subsequent default or impair any right consequent
thereon.
Upon receipt by the Property Trustee of written notice declaring such an
acceleration, or rescission and annulment thereof, by Holders of the
Preferred Securities all or part of which is represented by Book-Entry
Preferred Securities Certificates, a record date shall be established for
determining Holders of Outstanding Preferred Securities entitled to join in
such notice, which record date shall be at the close of business on the day
the Property Trustee receives such notice. The Holders on such record date,
or their duly designated proxies, and only such Persons, shall be entitled to
join in such notice, whether or not such Holders remain Holders after such
record date; provided, that, unless such declaration of acceleration, or
rescission and annulment, as the case may be, shall have become effective by
virtue of the requisite percentage having joined in such notice prior to the
day which is 90 days after such record date, such notice of declaration of
acceleration, or rescission and annulment, as the case may be, shall
automatically and without further action by any Holder be canceled and of no
further effect. Nothing in this paragraph shall prevent a Holder, or a proxy
of a Holder, from giving, after expiration of such 90-day period, a new
written notice of declaration of acceleration, or rescission and annulment
thereof, as the case may be, that is identical to a written notice which has
been canceled pursuant to the proviso to the preceding sentence, in which
event a new record date shall be established pursuant to the provisions of
this Section 5.14(b).
(c) For so long as any Preferred Securities remain Outstanding,
to the fullest extent permitted by law and subject to the terms of this Trust
Agreement and the Indenture, upon a Debenture Event of Default specified in
Section 5.1(1) or 5.1(2) of the Indenture, any Holder of Preferred Securities
shall have the right to institute a proceeding directly against the
Depositor, pursuant to Section 5.8 of the Indenture, for enforcement of
payment to such Holder of the principal amount of or interest on Debentures
having a principal amount equal to the Liquidation Amount of the Preferred
Securities of such Holder (a "Direct Action"). Except as set forth in
Section 5.14(b) and this Section 5.14(c), the Holders of Preferred Securities
shall have no right to exercise directly any right or remedy available to the
holders of, or in respect of, the Debentures.
ARTICLE VI.
ACTS OF SECURITYHOLDERS; MEETINGS; VOTING
Section 6.1 LIMITATIONS ON VOTING RIGHTS.
(a) Except as provided in this Section, in Sections 5.14, 8.10
and 10.2 and in the Indenture and as otherwise required by law, no Holder of
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Preferred Securities shall have any right to vote or in any manner otherwise
control the administration, operation and management of the Trust or the
obligations of the parties hereto, nor shall anything herein set forth, or
contained in the terms of the Trust Securities Certificates, be construed so
as to constitute the Securityholders from time to time as partners or members
of an association.
(b) So long as any Debentures are held by the Property Trustee,
the Trustees shall not (i) direct the time, method and place of conducting
any proceeding for any remedy available to the Debenture Trustee, or
executing any trust or power conferred on the Debenture Trustee with respect
to such Debentures, (ii) waive any past default which is waivable under
Section 5.13 of the Indenture, (iii) exercise any right to rescind or annul a
declaration that the principal of all the Debentures shall be due and payable
or (iv) consent to any amendment, modification or termination of the
Indenture or the Debentures, where such consent shall be required, without,
in each case, obtaining the prior approval of the Holders of at least a
majority in Liquidation Amount of all Outstanding Preferred Securities;
provided, however, that where a consent under the Indenture would require the
consent of each Holder of Debentures affected thereby, no such consent shall
be given by the Property Trustee without the prior written consent of each
Holder of Preferred Securities. The Trustees shall not revoke any action
previously authorized or approved by a vote of the Holders of Preferred
Securities, except by a subsequent vote of the Holders of Preferred
Securities. The Property Trustee shall notify all Holders of the Preferred
Securities of any notice of default received from the Debenture Trustee with
respect to the Debentures. In addition to obtaining the foregoing approvals
of the Holders of the Preferred Securities, prior to taking any of the
foregoing actions, the Trustees shall, at the expense of the Depositor,
obtain an Opinion of Counsel experienced in such matters to the effect that
such action shall not cause the Trust to fail to be classified as a grantor
trust for United States Federal income tax purposes.
(c) If any proposed amendment to the Trust Agreement provides
for, or the Trustees otherwise propose to effect, (i) any action that would
adversely affect in any material respect the powers, preferences or special
rights of the Preferred Securities, whether by way of amendment to the Trust
Agreement or otherwise, or (ii) the dissolution, winding-up or termination of
the Trust, other than pursuant to the terms of this Trust Agreement, then the
Holders of Outstanding Preferred Securities as a class will be entitled to
vote on such amendment or proposal and such amendment or proposal shall not
be effective except with the approval of the Holders of at least a majority
in Liquidation Amount of the Outstanding Preferred Securities.
Notwithstanding any other provision of this Trust Agreement, no amendment to
this Trust Agreement may be made if, as a result of such amendment, it would
cause the Trust to fail to be classified as a grantor trust for United States
Federal income tax purposes.
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Section 6.2 NOTICE OF MEETINGS. Notice of all meetings of the
Preferred Securityholders, stating the time, place and purpose of the
meeting, shall be given by the Property Trustee pursuant to Section 10.8 to
each Preferred Securityholder of record, at his registered address, at least
15 days and not more than 90 days before the meeting. At any such meeting,
any business properly before the meeting may be so considered whether or not
stated in the notice of the meeting. Any adjourned meeting may be held as
adjourned without further notice.
Section 6.3 MEETINGS OF PREFERRED SECURITYHOLDERS. No annual meeting of
Securityholders is required to be held. The Administrative Trustees,
however, shall call a meeting of Preferred Securityholders to vote on any
matter upon the written request of Holders of record of 25% of the
Outstanding Preferred Securities (based upon their Liquidation Amount) and
the Administrative Trustees or the Property Trustee may, at any time in their
discretion, call a meeting of Preferred Securityholders to vote on any
matters as to which Preferred Securityholders are entitled to vote.
Holders of record of 50% of the Outstanding Preferred Securities (based
upon their Liquidation Amount), present in person or by proxy, shall
constitute a quorum at any meeting of Securityholders.
If a quorum is present at a meeting, an affirmative vote by the Preferred
Securityholders of record present, in person or by proxy, holding more than a
majority of the Preferred Securities (based upon their Liquidation Amount)
held by the Preferred Securityholders of record present, either in person or
by proxy, at such meeting shall constitute the action of the Preferred
Securityholders, unless this Trust Agreement requires a greater number of
affirmative votes.
Section 6.4 VOTING RIGHTS. Securityholders shall be entitled to one
vote for each $25 of Liquidation Amount represented by their Trust Securities
in respect of any matter as to which such Securityholders are entitled to
vote. Section 6.5 Proxies, Etc. At any meeting of Securityholders, any
Securityholder entitled to vote thereat may vote by proxy, provided that no
proxy shall be voted at any meeting unless it shall have been placed on file
with the Administrative Trustees, or with such other officer or agent of the
Trust as the Administrative Trustees may direct, for verification prior to
the time at which such vote shall be taken. Pursuant to a resolution of the
Property Trustee, proxies may be solicited in the name of the Property
Trustee or one or more officers of the Property Trustee. Only
Securityholders of record shall be entitled to vote. When Trust Securities
are held jointly by several persons, any one of them may vote at any meeting
in person or by proxy in respect of such Trust Securities, but if more than
one of them shall be present at such meeting in person or by proxy, and such
joint owners or their proxies so present disagree as to any vote to be cast,
such vote shall not be received in respect of such Trust Securities. A proxy
purporting to be executed by or on behalf of a Securityholder shall be deemed
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valid unless challenged at or prior to its exercise, and the burden of
proving invalidity shall rest on the challenger. No proxy shall be valid
more than three years after its date of execution.
Section 6.6 SECURITYHOLDER ACTION BY WRITTEN CONSENT. Any action which
may be taken by Securityholders at a meeting may be taken without a meeting
if Securityholders holding more than a majority of all Outstanding Trust
Securities (based upon their aggregate Liquidation Amount) entitled to vote
in respect of such action (or such larger proportion thereof as shall be
required by any express provision of this Trust Agreement) shall consent to
the action in writing (based upon their aggregate Liquidation Amount).
Section 6.7 RECORD DATE FOR VOTING AND OTHER PURPOSES For the purposes
of determining the Securityholders who are entitled to notice of and to vote
at any meeting or by written consent, or to participate in any Distribution
on the Trust Securities in respect of which a record date is not otherwise
provided for in this Trust Agreement, or for the purpose of any other action,
the Administrative Trustees may from time to time fix a date, not more than
90 days prior to the date of any meeting of Securityholders or the payment of
a Distribution or other action, as the case may be, as a record date for the
determination of the identity of the Securityholders of record for such
purposes.
Section 6.8 ACTS OF SECURITYHOLDERS. Any request, demand,
authorization, direction, notice, consent, waiver or other action provided or
permitted by this Trust Agreement to be given, made or taken by
Securityholders or Owners may be embodied in and evidenced by one or more
instruments of substantially similar tenor signed by such Securityholders or
Owners in person or by an agent duly appointed in writing; and, except as
otherwise expressly provided herein, such action shall become effective when
such instrument or instruments are delivered to an Administrative Trustee.
Such instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Securityholders
or Owners signing such instrument or instruments. Proof of execution of any
such instrument or of a writing appointing any such agent shall be sufficient
for any purpose of this Trust Agreement and (subject to Section 8.1)
conclusive in favor of the Trustees, if made in the manner provided in this
Section.
The fact and date of the execution by any Person of any such instrument
or writing may be proved by the affidavit of a witness of such execution or
by a certificate of a notary public or other officer authorized by law to
take acknowledgments of deeds, certifying that the individual signing such
instrument or writing acknowledged to him the execution thereof. Where such
execution is by a signer acting in a capacity other than his individual
capacity, such certificate or affidavit shall also constitute sufficient
proof of his authority. The fact and date of the execution of any such
instrument or writing, or the authority of the
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Person executing the same, may also be proved in any other manner which any
Trustee receiving the same deems sufficient.
The ownership of Preferred Securities shall be proved by the Securities
Register.
Any request, demand, authorization, direction, notice, consent, waiver
or other Act of the Securityholder of any Trust Security shall bind every
future Securityholder of the same Trust Security and the Securityholder of
every Trust Security issued upon the registration of transfer thereof or in
exchange therefor or in lieu thereof in respect of anything done, omitted or
suffered to be done by the Trustees or the Trust in reliance thereon, whether
or not notation of such action is made upon such Trust Security.
Without limiting the foregoing, a Securityholder entitled hereunder to
take any action hereunder with regard to any particular Trust Security may do
so with regard to all or any part of the Liquidation Amount of such Trust
Security or by one or more duly appointed agents each of which may do so
pursuant to such appointment with regard to all or any part of such
liquidation amount.
If any dispute shall arise between the Securityholders and the
Administrative Trustees or among such Securityholders or Trustees with
respect to the authenticity, validity or binding nature of any request,
demand, authorization, direction, consent, waiver or other Act of such
Securityholder or Trustee under this Article VI, then the determination of
such matter by the Property Trustee shall be conclusive with respect to such
matter.
A Securityholder may institute a legal proceeding directly against the
Depositor under the Guarantee to enforce its rights under the Guarantee
without first instituting a legal proceeding against the Guarantee Trustee
(as defined in the Guarantee), the Trust or any Person.
Section 6.9 INSPECTION OF RECORDS. Upon reasonable notice to the
Administrative Trustees and the Property Trustee, the records of the Trust
shall be open to inspection by Securityholders during normal business hours
for any purpose reasonably related to such Securityholder's interest as a
Securityholder.
ARTICLE VII.
REPRESENTATIONS AND WARRANTIES
Section 7.1 REPRESENTATIONS AND WARRANTIES OF THE PROPERTY TRUSTEE AND
THE DELAWARE TRUSTEE. The Property Trustee and the Delaware Trustee, each
severally on behalf of and as to itself, hereby represents and warrants for
the benefit of the Depositor and the Securityholders that:
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(a) the Property Trustee is a Delaware banking corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware;
(b) the Property Trustee has full corporate power, authority
and legal right to execute, deliver and perform its obligations under this
Trust Agreement and has taken all necessary action to authorize the
execution, delivery and performance by it of this Trust Agreement;
(c) the Delaware Trustee is a Delaware corporation duly
organized, validly existing and in good standing in the State of Delaware;
(d) the Delaware Trustee has full corporate power, authority
and legal right to execute, deliver and perform its obligations under this
Trust Agreement and has taken all necessary action to authorize the
execution, delivery and performance by it of this Trust Agreement;
(e) this Trust Agreement has been duly authorized, executed and
delivered by the Property Trustee and the Delaware Trustee and constitutes
the valid and legally binding agreement of each of the Property Trustee and
the Delaware Trustee enforceable against each of them in accordance with its
terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability relating
to or affecting creditors' rights and to general equity principles;
(f) the execution, delivery and performance of this Trust
Agreement has been duly authorized by all necessary corporate or other action
on the part of the Property Trustee and the Delaware Trustee and does not
require any approval of stockholders of the Property Trustee and the Delaware
Trustee and such execution, delivery and performance will not (i) violate the
Charter or By-laws of the Property Trustee or the Delaware Trustee, (ii)
violate any provision of, or constitute, with or without notice or lapse of
time, a default under, or result in the creation or imposition of, any Lien
on any properties included in the Trust Property pursuant to the provisions
of, any indenture, mortgage, credit agreement, license or other agreement or
instrument to which the Property Trustee or the Delaware Trustee is a party
or by which it is bound, or (iii) violate any law, governmental rule or
regulation of the United States or the State of Delaware, as the case may be,
governing the banking, trust or general powers of the Property Trustee or the
Delaware Trustee (as appropriate in context) or any order, judgment or decree
applicable to the Property Trustee or the Delaware Trustee;
(g) neither the authorization, execution or delivery by the
Property Trustee or the Delaware Trustee of this Trust Agreement nor the
consummation of any of the transactions by the Property Trustee or the
Delaware Trustee (as appropriate in context) contemplated herein or therein
requires the
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consent or approval of, the giving of notice to, the registration with or the
taking of any other action with respect to any governmental authority or
agency under any existing Federal law governing the banking, trust or general
powers of the Property Trustee or the Delaware Trustee, as the case may be,
under the laws of the United States or the State of Delaware; and
(h) there are no proceedings pending or, to the best of each of
the Property Trustee's and the Delaware Trustee's knowledge, threatened
against or affecting the Property Trustee or the Delaware Trustee in any
court or before any governmental authority, agency or arbitration board or
tribunal which, individually or in the aggregate, would materially and
adversely affect the Trust or would question the right, power and authority
of the Property Trustee or the Delaware Trustee, as the case may be, to enter
into or perform its obligations as one of the Trustees under this Trust
Agreement.
Section 7.2 REPRESENTATIONS AND WARRANTIES OF DEPOSITOR.
The Depositor hereby represents and warrants for the benefit of the
Securityholders that:
(a) the Trust Securities Certificates issued at the Closing
Date on behalf of the Trust have been duly authorized and will have been,
duly and validly executed, issued and delivered by the Trustees pursuant to
the terms and provisions of, and in accordance with the requirements of, this
Trust Agreement and the Securityholders will be, as of each such date,
entitled to the benefits of this Trust Agreement; and
(b) there are no taxes, fees or other governmental charges
payable by the Trust (or the Trustees on behalf of the Trust) under the laws
of the State of Delaware or any political subdivision thereof in connection
with the execution, delivery and performance by the Bank, the Property
Trustee or the Delaware Trustee, as the case may be, of this Trust Agreement.
ARTICLE VIII.
THE TRUSTEES
Section 8.1 CERTAIN DUTIES AND RESPONSIBILITIES.
(a) The duties and responsibilities of the Trustees shall be as
provided by this Trust Agreement and, in the case of the Property Trustee, by
the Trust Indenture Act. Notwithstanding the foregoing, no provision of this
Trust Agreement shall require the Trustees to expend or risk their own funds
or otherwise incur any financial liability in the performance of any of their
duties hereunder, or in the exercise of any of their rights or powers, if
they shall have reasonable grounds for believing that repayment of such funds
or adequate indemnity against such risk or liability is not reasonably
assured to it. Whether or
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not therein expressly so provided, every provision of this Trust Agreement
relating to the conduct or affecting the liability of or affording protection
to the Trustees shall be subject to the provisions of this Section. Nothing
in this Trust Agreement shall be construed to release an Administrative
Trustee from liability for its own gross negligent action, its own gross
negligent failure to act, or its own willful misconduct. To the extent that,
at law or in equity, an Administrative Trustee has duties (including
fiduciary duties) and liabilities relating thereto to the Trust or to the
Securityholders, such Administrative Trustee shall not be liable to the Trust
or to any Securityholder for such Trustee's good faith reliance on the
provisions of this Trust Agreement. The provisions of this Trust Agreement,
to the extent that they restrict the duties and liabilities of the
Administrative Trustees otherwise existing at law or in equity, are agreed by
the Depositor and the Securityholders to replace such other duties and
liabilities of the Administrative Trustees.
(b) All payments made by the Property Trustee or a Paying Agent
in respect of the Trust Securities shall be made only from the revenue and
proceeds from the Trust Property and only to the extent that there shall be
sufficient revenue or proceeds from the Trust Property to enable the Property
Trustee or a Paying Agent to make payments in accordance with the terms
hereof. Each Securityholder, by its acceptance of a Trust Security, agrees
that it will look solely to the revenue and proceeds from the Trust Property
to the extent legally available for distribution to it as herein provided and
that the Trustees are not personally liable to it for any amount
distributable in respect of any Trust Security or for any other liability in
respect of any Trust Security. This Section 8.1(b) does not limit the
liability of the Trustees expressly set forth elsewhere in this Trust
Agreement or, in the case of the Property Trustee, in the Trust Indenture
Act.
(c) No provision of this Trust Agreement shall be construed to
relieve the Property Trustee from liability for its own negligent action, its
own negligent failure to act, or its own willful misconduct, except that:
(i) the Property Trustee shall not be liable for any
error of judgment made in good faith by an authorized officer of the Property
Trustee, unless it shall be proved that the Property Trustee was negligent in
ascertaining the pertinent facts;
(ii) the Property Trustee shall not be liable with respect
to any action taken or omitted to be taken by it in good faith in accordance
with the direction of the Holders of not less than a majority in Liquidation
Amount of the Trust Securities relating to the time, method and place of
conducting any proceeding for any remedy available to the Property Trustee,
or exercising any trust or power conferred upon the Property Trustee under
this Trust Agreement;
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(iii) the Property Trustee's sole duty with respect to the
custody, safe keeping and physical preservation of the Debentures and the
Payment Account shall be to deal with such Property in a similar manner as
the Property Trustee deals with similar property for its own account, subject
to the protections and limitations on liability afforded to the Property
Trustee under this Trust Agreement and the Trust Indenture Act;
(iv) the Property Trustee shall not be liable for any
interest on any money received by it except as it may otherwise agree with
the Depositor; and money held by the Property Trustee need not be segregated
from other funds held by it except in relation to the Payment Account
maintained by the Property Trustee pursuant to Section 3.1 and except to the
extent otherwise required by law; and
(v) the Property Trustee shall not be responsible for
monitoring the compliance by the Administrative Trustees or the Depositor
with their respective duties under this Trust Agreement, nor shall the
Property Trustee be liable for the default or misconduct of the
Administrative Trustees or the Depositor.
Section 8.2 CERTAIN NOTICES.
(a) Within five Business Days after the occurrence of any Event
of Default actually known to the Property Trustee, the Property Trustee shall
transmit, in the manner and to the extent provided in Section 10.8, notice of
such Event of Default to the Securityholders, the Administrative Trustees and
the Depositor, unless the Event of Default shall have been cured or waived.
For purposes of this Section the term "Event of Default" means any event that
is, or after notice or lapse of time or both would become, and Event of
Default.
(b) The Administrative Trustees shall transmit, to the
Securityholders in the manner and to the extent provided in Section 10.8,
notice of the Depositor's election to begin or further extend an Extension
Period on the Debentures (unless such election shall have been revoked)
within the time specified for transmitting such notice to the holders of the
Debentures pursuant to the Indenture as originally executed.
Section 8.3 CERTAIN RIGHTS OF PROPERTY TRUSTEE. Subject to the
provisions of Section 8.1:
(a) the Property Trustee may rely and shall be protected in
acting or refraining from acting in good faith upon any resolution, Opinion
of Counsel, certificate, written representation of a Holder or transferee,
certificate of auditors or any other certificate, statement, instrument,
opinion, report, notice, request, consent, order, appraisal, bond, debenture,
note, other evidence of indebtedness
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or other paper or document believed by it to be genuine and to have been
signed or presented by the proper party or parties;
(b) if (i) in performing its duties under this Trust Agreement
the Property Trustee is required to decide between alternative courses of
action or (ii) in construing any of the provisions of this Trust Agreement
the Property Trustee finds the same ambiguous or inconsistent with any other
provisions contained herein or (iii) the Property Trustee is unsure of the
application of any provision of this Trust Agreement, then, except as to any
matter as to which the Preferred Securityholders are entitled to vote under
the terms of this Trust Agreement, the Property Trustee shall deliver a
notice to the Depositor requesting written instructions of the Depositor as
to the course of action to be taken and the Property Trustee shall take such
action, or refrain from taking such action, as the Property Trustee shall be
instructed in writing to take, or to refrain from taking, by the Depositor;
provided, however, that if the Property Trustee does not receive such
instructions of the Depositor within ten Business Days after it has delivered
such notice, or such reasonably shorter period of time set forth in such
notice (which to the extent practicable shall not be less than two Business
Days), it may, but shall be under no duty to, take or refrain from taking
such action not inconsistent with this Trust Agreement as it shall deem
advisable and in the best interests of the Securityholders, in which event
the Property Trustee shall have no liability except for its own bad faith,
negligence or willful misconduct;
(c) any direction or act of the Depositor or the Administrative
Trustees contemplated by this Trust Agreement shall be sufficiently evidenced
by an Officers' Certificate;
(d) whenever in the administration of this Trust Agreement, the
Property Trustee shall deem it desirable that a matter be established before
undertaking, suffering or omitting any action hereunder, the Property Trustee
(unless other evidence is herein specifically prescribed) may, in the absence
of bad faith on its part, request and rely upon an Officers' Certificate
which, upon receipt of such request, shall be promptly delivered by the
Depositor or the Administrative Trustees;
(e) the Property Trustee shall have no duty to see to any
recording, filing or registration of any instrument (including any financing
or continuation statement or any filing under tax or securities laws) or any
rerecording, refiling or registration thereof;
(f) the Property Trustee may consult with counsel (which
counsel may be counsel to the Depositor or any of its Affiliates, and may
include any of its employees) and the advice of such counsel shall be full
and complete authorization and protection in respect of any action taken,
suffered or omitted by it hereunder in good faith and in reliance thereon and
in accordance with such advice, such counsel may be counsel to the Depositor
or any of its Affiliates, and
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may include any of its employees; the Property Trustee shall have the right
at any time to seek instructions concerning the administration of this Trust
Agreement from any court of competent jurisdiction;
(g) the Property Trustee shall be under no obligation to exercise
any of the rights or powers vested in it by this Trust Agreement at the
request or direction of any of the Securityholders pursuant to this Trust
Agreement, unless such Securityholders shall have offered to the Property
Trustee reasonable security or indemnity against the costs, expenses and
liabilities which might be incurred by it in compliance with such request or
direction;
(h) the Property Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice, request,
consent, order, approval, bond, debenture, note or other evidence of
indebtedness or other paper or document, unless requested in writing to do so
by one or more Securityholders, but the Property Trustee may make such
further inquiry or investigation into such facts or matters as it may see
fit;
(i) the Property Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through
its agents or attorneys, provided that the Property Trustee shall be
responsible for its own negligence or recklessness with respect to selection
of any agent or attorney appointed by it hereunder;
(j) whenever in the administration of this Trust Agreement the
Property Trustee shall deem it desirable to receive instructions with respect
to enforcing any remedy or right or taking any other action hereunder the
Property Trustee (i) may request instructions from the Holders of the Trust
Securities which instructions may only be given by the Holders of the same
proportion in Liquidation Amount of the Trust Securities as would be entitled
to direct the Property Trustee under the terms of the Trust Securities in
respect of such remedy, right or action, (ii) may refrain from enforcing such
remedy or right or taking such other action until such instructions are
received, and (iii) shall be protected in acting in accordance with such
instructions; and
(k) except as otherwise expressly provided by this Trust Agreement,
the Property Trustee shall not be under any obligation to take any action
that is discretionary under the provisions of this Trust Agreement.
No provision of this Trust Agreement shall be deemed to impose any duty
or obligation on the Property Trustee to perform any act or acts or exercise
any right, power, duty or obligation conferred or imposed on it, in any
jurisdiction in which it shall be illegal, or in which the Property Trustee
shall be unqualified or incompetent in accordance with applicable law, to
perform any such act or acts, or
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to exercise any such right, power, duty or obligation. No permissive power or
authority available to the Property Trustee shall be construed to be a duty.
Section 8.4 NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF SECURITIES. The
recitals contained herein and in the Trust Securities Certificates shall be
taken as the statements of the Trust, and the Trustees do not assume any
responsibility for their correctness. The Trustees shall not be accountable
for the use or application by the Depositor of the proceeds of the
Debentures.
Section 8.5 MAY HOLD SECURITIES. Except as provided in the definition
of the term "Outstanding" in Article I, any Trustee or any other agent of any
Trustee or the Trust, in its individual or any other capacity, may become the
owner or pledgee of Trust Securities and, subject to Sections 8.8 and 8.13,
may otherwise deal with the Trust with the same rights it would have if it
were not a Trustee or such other agent.
Section 8.6 COMPENSATION; INDEMNITY; FEES. The Depositor agrees:
(a) to pay to the Trustees from time to time reasonable
compensation for all services rendered by them hereunder (which compensation
shall not be limited by any provision of law in regard to the compensation of
a trustee of an express trust) as specified in a separate agreement between
any of the Trustees and the Depositor;
(b) except as otherwise expressly provided herein, to reimburse the
Trustees upon request for all reasonable expenses, disbursements and advances
incurred or made by the Trustees in accordance with any provision of this
Trust Agreement (including the reasonable compensation and the expenses and
disbursements of its agents and counsel), except any such expense,
disbursement or advance as may be attributable to its negligence, bad faith
or willfulness; and
(c) to the fullest extent permitted by applicable law, to indemnify
and hold harmless (i) each Trustee, (ii) any Affiliate of any Trustee, (iii)
any officer, director, shareholder, employee, representative or agent of any
Trustee, and (iv) any employee or agent of the Trust or its Affiliates,
(referred to herein as an "Indemnified Person") from and against any loss,
damage, liability, tax, penalty, expense or claim of any kind or nature
whatsoever incurred by such Indemnified Person by reason of the creation,
operation or termination of the Trust or any act or omission performed or
omitted by such Indemnified Person in good faith on behalf of the Trust and
in a manner such Indemnified Person reasonably believed to be within the
scope of authority conferred on such Indemnified Person by this Trust
Agreement, except that no Indemnified Person shall be entitled to be
indemnified in respect of any loss, damage or claim incurred by such
Indemnified Person by reason of negligence, bad faith or willful misconduct
with respect to such acts or omissions.
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The provisions of this Section 8.6 shall survive the termination of this
Trust Agreement.
No Trustee may claim any lien or charge on any Trust Property as a
result of any amount due pursuant to this Section 8.6.
The Depositor and any Trustee may engage in or possess an interest in
other business ventures of any nature or description, independently or with
others, similar or dissimilar to the business of the Trust, and the Trust and
the Holders of Trust Securities shall have no rights by virtue of this Trust
Agreement in and to such independent ventures or the income or profits
derived therefrom, and the pursuit of any such venture, even if competitive
with the business of the Trust, shall not be deemed wrongful or improper.
Neither the Depositor, nor any Trustee, shall be obligated to present any
particular investment or other opportunity to the Trust even if such
opportunity is of a character that, if presented to the Trust, could be taken
by the Trust, and the Depositor or any Trustee shall have the right to take
for its own account (individually or as a partner or fiduciary) or to
recommend to others any such particular investment or other opportunity. Any
Trustee may engage or be interested in any financial or other transaction
with the Depositor or any Affiliate of the Depositor, or may act as
depository for, trustee or agent for, or act on any committee or body of
holders of, securities or other obligations of the Depositor or its
Affiliates.
Section 8.7 CORPORATE PROPERTY TRUSTEE REQUIRED; ELIGIBILITY OF TRUSTEES.
(a) There shall at all times be a Property Trustee hereunder with
respect to the Trust Securities. The Property Trustee shall be a Person that
is eligible pursuant to the Trust Indenture Act to act as such and has a
combined capital and surplus of at least $50,000,000. If any such Person
publishes reports of condition at least annually, pursuant to law or to the
requirements of its supervising or examining authority, then for the purposes
of this Section, the combined capital and surplus of such Person shall be
deemed to be its combined capital and surplus as set forth in its most recent
report of condition so published. If at any time the Property Trustee with
respect to the Trust Securities shall cease to be eligible in accordance with
the provisions of this Section, it shall resign immediately in the manner and
with the effect hereinafter specified in this Article.
(b) There shall at all times be one or more Administrative Trustees
hereunder with respect to the Trust Securities. Each Administrative Trustee
shall be either a natural person who is at least 21 years of age or a legal
entity that shall act through one or more persons authorized to bind that
entity.
(c) There shall at all times be a Delaware Trustee with respect to
the Trust Securities. The Delaware Trustee shall either be (i) a natural
person who is at least 21 years of age and a resident of the State of
Delaware or (ii) a legal entity with its principal place of business in the
State of Delaware and that
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otherwise meets the requirements of applicable Delaware law that shall act
through one or more persons authorized to bind such entity.
Section 8.8 CONFLICTING INTERESTS. If the Property Trustee has or shall
acquire a conflicting interest within the meaning of the Trust Indenture Act,
the Property Trustee shall either eliminate such interest or resign, to the
extent and in the manner provided by, and subject to the provisions of, the
Trust Indenture Act and this Trust Agreement.
Section 8.9 CO-TRUSTEES AND SEPARATE TRUSTEE. Unless an Event of
Default shall have occurred and be continuing, at any time or times, for the
purpose of meeting the legal requirements of the Trust Indenture Act or of
any jurisdiction in which any part of the Trust Property may at the time be
located, the Depositor and the Administrative Trustees, by agreed action of
the majority of such Trustees, shall have power to appoint, and upon the
written request of the Administrative Trustees, the Depositor shall for such
purpose join with the Administrative Trustees in the execution, delivery, and
performance of all instruments and agreements necessary or proper to appoint,
one or more Persons approved by the Property Trustee either to act as
co-trustee, jointly with the Property Trustee, of all or any part of such Trust
Property, or to the extent required by law to act as separate trustee of any
such property, in either case with such powers as may be provided in the
instrument of appointment, and to vest in such Person or Persons in the
capacity aforesaid, any property, title, right or power deemed necessary or
desirable, subject to the other provisions of this Section. If the Depositor
does not join in such appointment within 15 days after the receipt by it of a
request so to do, or in case a Debenture Event of Default has occurred and is
continuing, the Property Trustee alone shall have power to make such
appointment. Any co-trustee or separate trustee appointed pursuant to this
Section shall either be (i) a natural person who is at least 21 years of age
and a resident of the United States or (ii) a legal entity with its principal
place of business in the United States that shall act through one or more
persons authorized to bind such entity.
Should any written instrument from the Depositor be required by any
co-trustee or separate trustee so appointed for more fully confirming to such
co-trustee or separate trustee such property, title, right, or power, any
and all such instruments shall, on request, be executed, acknowledged and
delivered by the Depositor.
Every co-trustee or separate trustee shall, to the extent permitted by
law, but to such extent only, be appointed subject to the following terms,
namely:
(a) The Trust Securities shall be executed and delivered and all
rights, powers, duties, and obligations hereunder in respect of the custody
of securities, cash and other personal property held by, or required to be
deposited
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or pledged with, the Trustees specified hereunder shall be exercised solely
by such Trustees and not by such co-trustee or separate trustee.
(b) The rights, powers, duties, and obligations hereby conferred or
imposed upon the Property Trustee in respect of any property covered by such
appointment shall be conferred or imposed upon and exercised or performed by
the Property Trustee or by the Property Trustee and such co-trustee or
separate trustee jointly, as shall be provided in the instrument appointing
such co-trustee or separate trustee, except to the extent that under any law
of any jurisdiction in which any particular act is to be performed, the
Property Trustee shall be incompetent or unqualified to perform such act, in
which event such rights, powers, duties and obligations shall be exercised
and performed by such co-trustee or separate trustee.
(c) The Property Trustee at any time, by an instrument in writing
executed by it, with the written concurrence of the Depositor, may accept the
resignation of or remove any co-trustee or separate trustee appointed under
this Section, and, in case a Debenture Event of Default has occurred and is
continuing, the Property Trustee shall have power to accept the resignation
of, or remove, any such co-trustee or separate trustee without the
concurrence of the Depositor. Upon the written request of the Property
Trustee, the Depositor shall join with the Property Trustee in the execution,
delivery and performance of all instruments and agreements necessary or
proper to effectuate such resignation or removal. A successor to any
co-trustee or separate trustee so resigned or removed may be appointed in the
manner provided in this Section.
(d) No co-trustee or separate trustee hereunder shall be personally
liable by reason of any act or omission of the Property Trustee or any other
trustee hereunder.
(e) The Property Trustee shall not be liable by reason of any act
of a co-trustee or separate trustee.
(f) Any Act of Holders delivered to the Property Trustee shall be
deemed to have been delivered to each such co-trustee and separate trustee.
Section 8.10 RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR. No
resignation or removal of any Trustee (the "Relevant Trustee") and no
appointment of a successor Trustee pursuant to this Article shall become
effective until the acceptance of appointment by the successor Trustee in
accordance with the applicable requirements of Section 8.11.
Subject to the immediately preceding paragraph, the Relevant Trustee may
resign at any time by giving written notice thereof to the Securityholders.
If the instrument of acceptance by the successor Trustee required by Section
8.11 shall not have been delivered to the Relevant Trustee within 30 days
after the giving of
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such notice of resignation, the Relevant Trustee may petition, at the expense
of the Trust, any court of competent jurisdiction for the appointment of a
successor Relevant Trustee.
Unless a Debenture Event of Default shall have occurred and be
continuing, any Trustee may be removed at any time by Act of the Common
Securityholder. If a Debenture Event of Default shall have occurred and be
continuing, the Property Trustee or the Delaware Trustee, or both of them,
may be removed at such time by Act of the Holders of a majority in
Liquidation Amount of the Preferred Securities, delivered to the Relevant
Trustee (in its individual capacity and on behalf of the Trust). In no event
will the Holders of the Preferred Securities have the right to vote to
appoint, remove or replace the Administrative Trustee. An Administrative
Trustee may be removed by the Common Securityholder at any time.
If any Trustee shall resign, be removed or become incapable of acting as
Trustee, or if a vacancy shall occur in the office of any Trustee for any
cause, at a time when no Debenture Event of Default shall have occurred and
be continuing, the Common Securityholder, by Act of the Common Securityholder
delivered to the retiring Trustee, shall promptly appoint a successor Trustee
or Trustees, and the retiring Trustee shall comply with the applicable
requirements of Section 8.11. If the Property Trustee or the Delaware Trustee
shall resign, be removed or become incapable of continuing to act as the
Property Trustee or the Delaware Trustee, as the case may be, at a time when
a Debenture Event of Default shall have occurred and be continuing, the
Preferred Securityholders, by Act of the Securityholders of a majority in
Liquidation Amount of the Preferred Securities then Outstanding delivered to
the retiring Relevant Trustee, shall promptly appoint a successor Relevant
Trustee or Trustees, and such successor Trustee shall comply with the
applicable requirements of Section 8.11. If an Administrative Trustee shall
resign, be removed or become incapable of acting as Administrative Trustee,
at a time when a Debenture Event of Default shall have occurred and be
continuing, the Common Securityholder by Act of the Common Securityholder
delivered to the Administrative Trustee shall promptly appoint a successor
Administrative Trustee or Administrative Trustees and such successor
Administrative Trustee or Trustees shall comply with the applicable
requirements of Section 8.11. If no successor Relevant Trustee shall have
been so appointed by the Common Securityholder or the Preferred
Securityholders and accepted appointment in the manner required by Section
8.11, any Securityholder who has been a Securityholder of Trust Securities
for at least six months may, on behalf of himself and all others similarly
situated, petition any court of competent jurisdiction for the appointment of
a successor Relevant Trustee.
The Property Trustee shall give notice of each resignation and each
removal of a Trustee and each appointment of a successor Trustee to all
Securityholders in the manner provided in Section 10.8 and shall give notice
to
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the Depositor. Each notice shall include the name of the successor Relevant
Trustee and the address of its Corporate Trust Office if it is the Property
Trustee.
Notwithstanding the foregoing or any other provision of this Trust
Agreement, in the event any Administrative Trustee or a Delaware Trustee who
is a natural person dies or becomes, in the opinion of the Depositor,
incompetent or incapacitated, the vacancy created by such death, incompetence
or incapacity may be filled by (a) the unanimous act of the remaining
Administrative Trustees if there are at least two of them or (b) otherwise by
the Depositor (with the successor in each case being a Person who satisfies
the eligibility requirement for Administrative Trustees or Delaware Trustee,
as the case may be, set forth in Section 8.7).
Section 8.11 ACCEPTANCE OF APPOINTMENT BY SUCCESSOR. In case of the
appointment hereunder of a successor Trustee such successor Trustee so
appointed shall execute, acknowledge and deliver to the Trust and to the
retiring Trustee an instrument accepting such appointment, and thereupon the
resignation or removal of the retiring Trustee shall become effective and
such successor Trustee, without any further act, deed or conveyance, shall
become vested with all the rights, powers, trusts and duties of the retiring
Trustee; but, on the request of the Depositor or the successor Trustee, such
retiring Trustee shall, upon payment of its charges, execute and deliver an
instrument transferring to such successor Trustee all the rights, powers and
trusts of the retiring Trustee and if the Property Trustee is the resigning
Trustee shall duly assign, transfer and deliver to the successor Trustee all
property and money held by such retiring Property Trustee hereunder.
In case of the appointment hereunder of a successor Relevant Trustee,
the retiring Relevant Trustee and each successor Relevant Trustee with
respect to the Trust Securities shall execute and deliver an amendment hereto
wherein each successor Relevant Trustee shall accept such appointment and
which (a) shall contain such provisions as shall be necessary or desirable to
transfer and confirm to, and to vest in, each successor Relevant Trustee all
the rights, powers, trusts and duties of the retiring Relevant Trustee with
respect to the Trust Securities and the Trust and (b) shall add to or change
any of the provisions of this Trust Agreement as shall be necessary to
provide for or facilitate the administration of the Trust by more than one
Relevant Trustee, it being understood that nothing herein or in such
amendment shall constitute such Relevant Trustees co-trustees and upon the
execution and delivery of such amendment the resignation or removal of the
retiring Relevant Trustee shall become effective to the extent provided
therein and each such successor Relevant Trustee, without any further act,
deed or conveyance, shall become vested with all the rights, powers, trusts
and duties of the retiring Relevant Trustee; but, on request of the Trust or
any successor Relevant Trustee such retiring Relevant Trustee shall duly
assign, transfer and deliver to such successor Relevant Trustee all Trust
Property, all
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proceeds thereof and money held by such retiring Relevant Trustee hereunder
with respect to the Trust Securities and the Trust.
Upon request of any such successor Relevant Trustee, the Trust shall
execute any and all instruments for more fully and certainly vesting in and
confirming to such successor Relevant Trustee all such rights, powers and
trusts referred to in the first or second preceding paragraph, as the case
may be.
No successor Relevant Trustee shall accept its appointment unless at the
time of such acceptance such successor Relevant Trustee shall be qualified
and eligible under this Article.
Section 8.12 MERGER, CONVERSION, CONSOLIDATION OR SUCCESSIONS TO
BUSINESS. Any Person into which the Property Trustee or the Delaware Trustee
may be merged or converted or with which it may be consolidated, or any
corporation resulting from any merger, conversion or consolidation to which
such Relevant Trustee shall be a party, or any corporation succeeding to all
or substantially all the corporate trust business of such Relevant Trustee,
shall be the successor of such Relevant Trustee hereunder, provided such
corporation shall be otherwise qualified and eligible under this Article,
without the execution or filing of any paper or any further act on the part
of any of the parties hereto.
Section 8.13 PREFERENTIAL COLLECTION OF CLAIMS AGAINST DEPOSITOR OR
TRUST. In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
similar judicial proceeding relative to the Trust or any other obligor upon
the Trust Securities or the property of the Trust or of such other obligor or
their creditors, the Property Trustee (irrespective of whether any
Distributions on the Trust Securities shall then be due and payable as
therein expressed or by declaration or otherwise and irrespective of whether
the Property Trustee shall have made any demand on the Trust for the payment
of any past due Distributions) shall be entitled and empowered, to the
fullest extent permitted by law, by intervention in such proceeding or
otherwise:
(a) to file and prove a claim for the whole amount of any
Distributions owing and unpaid in respect of the Trust Securities and to file
such other papers or documents as may be necessary or advisable in order to
have the claims of the Property Trustee (including any claim for the
reasonable compensation, expenses, disbursements and advances of the Property
Trustee, its agents and counsel) and of the Holders allowed in such judicial
proceeding, and
(b) to collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute the same; and any custodian,
receiver, assignee, trustee, liquidator, sequestrator or other similar
official in any such judicial proceeding is hereby authorized by each Holder
to make such payments to the Property Trustee and, in the event the Property
Trustee shall
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consent to the making of such payments directly to the Holders, to pay to the
Property Trustee any amount due it for the reasonable compensation, expenses,
disbursements and advances of the Property Trustee, its agents and counsel,
and any other amounts due the Property Trustee.
Nothing herein contained shall be deemed to authorize the Property
Trustee to authorize or consent to or accept or adopt on behalf of any Holder
any plan of reorganization, arrangement adjustment or compensation affecting
the Trust Securities or the rights of any Holder thereof or to authorize the
Property Trustee to vote in respect of the claim of any Holder in any such
proceeding.
Section 8.14 REPORTS BY PROPERTY TRUSTEE.
(a) Not later than _______ of each year commencing with_________ ,
1997, the Property Trustee shall transmit to all Securityholders in
accordance with Section 10.8, and to the Depositor, a brief report dated as
of the immediately preceding December 31 with respect to:
(i) its eligibility under Section 8.7 or, in lieu thereof, if
to the best of its knowledge it has continued to be eligible under said
Section, a written statement to such effect;
(ii) a statement that the Property Trustee has complied with
all of its obligations under this Trust Agreement during the twelve-month
period (or, in the case of the initial report, the period since the Closing
Date) ending with such December 31 or, if the Property Trustee has not
complied in any material respect with such obligations, a description of such
noncompliance; and
(iii) any change in the property and funds in its possession as
Property Trustee since the date of its last report and any action taken by
the Property Trustee in the performance of its duties hereunder which it has
not previously reported and which in its opinion materially affects the Trust
Securities.
(b) In addition the Property Trustee shall transmit to
Securityholders such reports concerning the Property Trustee and its actions
under this Trust Agreement as may be required pursuant to the Trust Indenture
Act at the times and in the manner provided pursuant thereto.
(c) A copy of each such report shall, at the time of such
transmission to Holders, be filed by the Property Trustee with each national
stock exchange, the OTC Bulletin Board or such other interdealer quotation
system or self-regulatory organization upon which the Preferred Securities
are listed or traded, with the Commission and with the Depositor.
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Section 8.15 REPORTS TO THE PROPERTY TRUSTEE. The Depositor and the
Administrative Trustees on behalf of the Trust shall provide to the Property
Trustee such documents, reports and information as required by Section 314 of
the Trust Indenture Act (if any) and the compliance certificate required by
Section 314(a) of the Trust Indenture Act in the form, in the manner and at
the times required by Section 314 of the Trust Indenture Act.
Section 8.16 EVIDENCE OF COMPLIANCE WITH CONDITIONS PRECEDENT. Each of
the Depositor and the Administrative Trustees on behalf of the Trust shall
provide to the Property Trustee such evidence of compliance with any
conditions precedent, if any, provided for in this Trust Agreement that
relate to any of the matters set forth in Section 314 (c) of the Trust
Indenture Act. Any certificate or opinion required to be given by an officer
pursuant to Section 314(c)(1) of the Trust Indenture Act shall be given in
the form of an Officers' Certificate.
Section 8.17 NUMBER OF TRUSTEES.
(a) The number of Trustees shall be five (5) provided that the
Holder of all of the Common Securities by written instrument may increase or
decrease the number of Administrative Trustees. The Property Trustee and the
Delaware Trustee may be the same Person.
(b) If a Trustee ceases to hold office for any reason and the
number of Administrative Trustees is not reduced pursuant to Section 8.17(a),
or if the number of Trustees is increased pursuant to Section 8.17(a), a
vacancy shall occur. The vacancy shall be filled with a Trustee appointed in
accordance with Section 8.10.
(c) The death, resignation, retirement, removal, bankruptcy,
incompetence or incapacity to perform the duties of a Trustee shall not
operate to annul the Trust. Whenever a vacancy in the number of
Administrative Trustees shall occur, until such vacancy is filled by the
appointment of an Administrative Trustee in accordance with Section 8.10, the
Administrative Trustees in office, regardless of their number (and
notwithstanding any other provision of this Agreement), shall have all the
powers granted to the Administrative Trustees and shall discharge all the
duties imposed upon the Administrative Trustees by this Trust Agreement.
Section 8.18 DELEGATION OF POWER.
(a) Any Administrative Trustee may, by power of attorney consistent
with applicable law, delegate to any other natural person over the age of 21
his or her power for the purpose of executing any documents contemplated in
Section 2.7(a), including any registration statement or amendment thereto
filed with the Commission, or making any other governmental filing; and
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(b) The Administrative Trustees shall have power to delegate from
time to time to such of their number or to the Depositor the doing of such
things and the execution of such instruments either in the name of the Trust
or the names of the Administrative Trustees or otherwise as the
Administrative Trustees may deem expedient, to the extent such delegation is
not prohibited by applicable law or contrary to the provisions of this Trust
Agreement, as set forth herein.
Section 8.19 VOTING. Except as otherwise provided in this Trust
Agreement, the consent or approval of the Administrative Trustees shall
require consent or approval by not less than a majority of the Administrative
Trustees, unless there are only two, in which case both must consent.
ARTICLE IX.
TERMINATION, LIQUIDATION AND MERGER
Section 9.1 TERMINATION UPON EXPIRATION DATE. Unless terminated
earlier, the Trust shall automatically terminate on December 31, 2___ (the
"Expiration Date"), following the distribution of the Trust Property in
accordance with Section 9.4.
Section 9.2 EARLY TERMINATION. The first to occur of any of the
following events is an "Early Termination Event":
(a) the occurrence of a Bankruptcy Event in respect of, or the
dissolution or liquidation of, the Depositor;
(b) the written direction to the Property Trustee from the
Depositor at any time to terminate the Trust and distribute Debentures to
Securityholders in exchange for a Like Amount of the Preferred Securities
(which direction is optional and wholly within the discretion of the
Depositor);
(c) the redemption of all of the Preferred Securities in connection
with the redemption of all the Debentures; and
(d) the entry of an order for dissolution of the Trust by a court
of competent jurisdiction.
Section 9.3 TERMINATION. The respective obligations and
responsibilities of the Trustees and the Trust created and continued hereby
shall terminate upon the latest to occur of the following: (a) the
distribution by the Property Trustee to Securityholders upon the liquidation
of the Trust pursuant to Section 9.4, or upon the redemption of all of the
Trust Securities pursuant to Section 4.2, of all amounts required to be
distributed hereunder upon the final payment of the Trust Securities; (b) the
payment of any expenses owed by the Trust; (c) the discharge of all
administrative duties of the Administrative Trustees, including the
performance of any tax reporting obligations with respect to the Trust or the
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Securityholders; and (d) the filing of a Certificate of Cancellation by the
Administrative Trustee under the Business Trust Act.
Section 9.4 LIQUIDATION.
(a) If an Early Termination Event specified in clause (a), (b) or
(d) of Section 9.2 occurs or upon the Expiration Date, the Trust shall be
liquidated by the Trustees as expeditiously as the Trustees determine to be
possible by distributing, after satisfaction of liabilities to creditors of
the Trust as provided by applicable law, to each Securityholder a Like Amount
of Debentures, subject to Section 9.4(d). Notice of liquidation shall be
given by the Property Trustee by first-class mail, postage prepaid mailed not
later than 30 nor more than 60 days prior to the Liquidation Date to each
Holder of Trust Securities at such Holder's address appearing in the
Securities Register. All notices of liquidation shall:
(i) state the Liquidation Date;
(ii) state that from and after the Liquidation Date, the Trust
Securities will no longer be deemed to be Outstanding and any Trust
Securities Certificates not surrendered for exchange will be deemed to
represent a Like Amount of Debentures; and
(iii) provide such information with respect to the mechanics by
which Holders may exchange Trust Securities Certificates for certificates
representing the Like Amount of the Debentures, or if Section 9.4(d) applies
receive a Liquidation Distribution, as the Administrative Trustees or the
Property Trustee shall deem appropriate.
(b) Except where Section 9.2(c) or 9.4(d) applies, in order to
effect the liquidation of the Trust and distribution of the Debentures to
Securityholders, the Administrative Trustees shall establish a record date
for such distribution (which shall be not more than 45 days prior to the
Liquidation Date) and, either itself acting as exchange agent or through the
appointment of a separate exchange agent, shall establish such procedures as
it shall deem appropriate to effect the distribution of Debentures in
exchange for the Outstanding Trust Securities Certificates.
(c) Except where Section 9.2(c) or 9.4(d) applies, after the
Liquidation Date, (i) the Trust Securities will no longer be deemed to be
Outstanding, (ii) certificates representing a Like Amount of Debentures will
be issued to holders of Trust Securities Certificates, upon surrender of such
certificates to the Administrative Trustees or their agent for exchange,
(iii) the Depositor shall use its best efforts to have the Debentures listed
on the New York Stock Exchange or on such other exchange, interdealer
quotation system or self-regulatory organization as the Preferred Securities
are then listed, (iv) any Trust
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Securities Certificates not so surrendered for exchange will be deemed to
represent a Like Amount of Debentures, accruing interest at the rate provided
for in the Debentures from the last Distribution Date on which a Distribution
was made on such Trust Securities Certificates until such certificates are so
surrendered (and until such certificates are so surrendered, no payments of
interest or principal will be made to Holders of Debentures represented by
such certificates) and (v) all rights of Securityholders holding Trust
Securities will cease, except the right of such Securityholders to receive a
Like Amount of Debentures upon surrender of Trust Securities Certificates.
(d) In the event that, notwithstanding the other provisions of this
Section 9.4, whether because of an order for dissolution entered by a court
of competent jurisdiction or otherwise, distribution of the Debentures in the
manner provided herein is determined by the Property Trustee not to be
practical, the Trust Property shall be liquidated, and the Trust shall be
dissolved, wound-up or terminated, by the Property Trustee in such manner as
the Property Trustee determines. In such event, on the date of the
dissolution, winding-up or other termination of the Trust, Securityholders
will be entitled to receive out of the assets of the Trust available for
distribution to Securityholders, after satisfaction of liabilities to
creditors of the Trust as provided by applicable law, an amount equal to the
Liquidation Amount per Trust Security plus accumulated and unpaid
Distributions thereon to the date of payment (such amount being the
"Liquidation Distribution"). If, upon any such dissolution, winding up or
termination, the Liquidation Distribution can be paid only in part because
the Trust has insufficient assets available to pay in full the aggregate
Liquidation Distribution, then, subject to the next succeeding sentence, the
amounts payable by the Trust on the Trust Securities shall be paid on a pro
rata basis (based upon Liquidation Amounts). The holder of the Common
Securities will be entitled to receive Liquidation Distributions upon any
such dissolution, winding-up or termination pro rata (determined as
aforesaid) with Holders of Preferred Securities, except that, if a Debenture
Event of Default has occurred and is continuing, Holders of the Preferred
Securities shall have a priority over the Holders of Common Securities.
Section 9.5 MERGERS, CONSOLIDATIONS, AMALGAMATIONS OR REPLACEMENTS OF
THE TRUST. The Trust may not merge with or into, consolidate, amalgamate, or
be replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to any corporation or other body, except
pursuant to this Section 9.5. At the request of the Depositor, with the
consent of the Administrative Trustees and without the consent of the Holders
of the Preferred Securities, the Property Trustee or the Delaware Trustee,
the Trust may merge with or into, consolidate, amalgamate, or be replaced by
or convey, transfer or lease its properties and assets substantially as an
entirety to a trust organized as such under the laws of any State; provided,
that (i) such successor entity either (a) expressly assumes all of the
obligations of the Trust with respect to the Preferred Securities or (b)
substitutes for the Preferred Securities other securities having
substantially the same terms as the Preferred Securities (the "Successor
Securities") so long as the
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Successor Securities rank the same as the Preferred Securities rank in
priority with respect to distributions and payments upon liquidation,
redemption and otherwise, (ii) the Depositor expressly appoints a trustee of
such successor entity possessing the same powers and duties as the Property
Trustee as the holder of the Debentures, (iii) the Successor Securities are
listed or traded, or any Successor Securities will be listed upon
notification of issuance, on any national securities exchange or other
organization on which the Preferred Securities are then listed or traded, if
any, (iv) such merger, consolidation, amalgamation, replacement, conveyance,
transfer or lease does not cause the Preferred Securities (including any
Successor Securities) to be downgraded by any nationally recognized
statistical rating organization, (v) such merger, consolidation,
amalgamation, replacement, conveyance, transfer or lease does not adversely
affect the rights, preferences and privileges of the holders of the Preferred
Securities (including any Successor Securities) in any material respect, (vi)
such successor entity has a purpose identical to that of the Trust, (vii)
prior to such merger, consolidation, amalgamation, replacement, conveyance,
transfer or lease, the Depositor has received an Opinion of Counsel to the
effect that (a) such merger, consolidation, amalgamation, replacement,
conveyance, transfer or lease does not adversely affect the rights,
preferences and privileges of the holders of the Preferred Securities
(including any Successor Securities) in any material respect, and (b)
following such merger, consolidation, amalgamation, replacement, conveyance,
transfer or lease, neither the Trust nor such successor entity will be
required to register as an investment company under the 1940 Act and (viii)
the Depositor owns all of the Common Securities of such successor entity and
guarantees the obligations of such successor entity under the Successor
Securities at least to the extent provided by the Guarantee. Notwithstanding
the foregoing, the Trust shall not, except with the consent of holders of
100% in Liquidation Amount of the Preferred Securities, consolidate,
amalgamate, merge with or into, or be replaced by or convey, transfer or
lease its properties and assets substantially as an entirety to any other
entity or permit any other entity to consolidate, amalgamate, merge with or
into, or replace it if such consolidation, amalgamation, merger, replacement,
conveyance, transfer or lease would cause the Trust or the successor entity
to be classified as other than a grantor trust for United States Federal
income tax purposes. See Prospectus description.
ARTICLE X.
MISCELLANEOUS PROVISIONS
Section 10.1 LIMITATION OF RIGHTS OF SECURITYHOLDERS. The death or
incapacity of any person having an interest, beneficial or otherwise, in
Trust Securities shall not operate to terminate this Trust Agreement, nor
entitle the legal representatives or heirs of such person or any
Securityholder for such person, to claim an accounting, take any action or
bring any proceeding in any court for a partition or winding up of the
arrangements contemplated hereby, nor otherwise affect the rights,
obligations and liabilities of the parties hereto or any of them.
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Section 10.2 AMENDMENT.
(a) This Trust Agreement may be amended from time to time by the
Property Trustee, the Administrative Trustees and the Depositor, without the
consent of any Securityholders, (i) to cure any ambiguity, correct or
supplement any provision herein which may be inconsistent with any other
provision herein, or to make any other provisions with respect to matters or
questions arising under this Trust Agreement, which shall not be inconsistent
with the other provisions of this Trust Agreement, or (ii) to modify,
eliminate or add to any provisions of this Trust Agreement to such extent as
shall be necessary to ensure that the Trust will be classified for United
States Federal income tax purposes as a grantor trust at all times that any
Trust Securities are outstanding or to ensure that the Trust will not be
required to register as an investment company under the 1940 Act; provided,
however, that in the case of clause (i), such action shall not adversely
affect in any material respect the interests of any Securityholder, and any
amendments of this Trust Agreement shall become effective when notice thereof
is given to the Securityholders.
(b) Except as provided in Section 10.2(c) hereof, any provision of
this Trust Agreement may be amended by the Trustees and the Depositor with
(i) the consent of Trust Securityholders representing not less than a
majority (based upon Liquidation Amounts) of the Trust Securities then
Outstanding and (ii) receipt by the Trustees of an Opinion of Counsel to the
effect that such amendment or the exercise of any power granted to the
Trustees in accordance with such amendment will not affect the Trust's status
as a grantor trust for United States Federal income tax purposes or the
Trust's exemption from status of an investment company under the 1940 Act.
(c) In addition to and notwithstanding any other provision in this
Trust Agreement, without the consent of each affected Securityholder (such
consent being obtained in accordance with Section 6.3 or 6.6 hereof), this
Trust Agreement may not be amended to (i) change the amount or timing of any
Distribution on the Trust Securities or otherwise adversely affect the amount
of any Distribution required to be made in respect of the Trust Securities as
of a specified date or (ii) restrict the right of a Securityholder to
institute suit for the enforcement of any such payment on or after such date;
notwithstanding any other provision herein, without the unanimous consent of
the Securityholders (such consent being obtained in accordance with Section
6.3 or 6.6 hereof), this paragraph (c) of this Section 10.2 may not be
amended.
(d) Notwithstanding any other provisions of this Trust Agreement,
no Trustee shall enter into or consent to any amendment to this Trust
Agreement which would cause the Trust to fail or cease to qualify for the
exemption from status of an investment company under the 1940 Act or fail or
cease to be classified as a grantor trust for United States Federal income
tax purposes.
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(e) Notwithstanding anything in this Trust Agreement to the
contrary, without the consent of the Depositor, this Trust Agreement may not
be amended in a manner which imposes any additional obligation on the
Depositor.
(f) In the event that any amendment to this Trust Agreement is
made, the Administrative Trustees shall promptly provide to the Depositor a
copy of such amendment.
(g) Neither the Property Trustee nor the Delaware Trustee shall be
required to enter into any amendment to this Trust Agreement which affects
its own rights, duties or immunities under this Trust Agreement. The
Property Trustee shall be entitled to receive an Opinion of Counsel and an
Officers' Certificate stating that any amendment to this Trust Agreement is
in compliance with this Trust Agreement.
Section 10.3 SEPARABILITY. In case any provision in this Trust
Agreement or in the Trust Securities Certificates shall be invalid, illegal
or unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
Section 10.4 GOVERNING LAW. THIS TRUST AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF EACH OF THE SECURITYHOLDERS, THE TRUST AND THE TRUSTEES WITH
RESPECT TO THIS TRUST AGREEMENT AND THE TRUST PREFERRED SECURITIES SHALL BE
CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF
DELAWARE (WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES).
Section 10.5 PAYMENTS DUE ON NON-BUSINESS DAY. If the date fixed for
any payment on any Trust Security shall be a day that is not a Business Day,
then such payment need not be made on such date but may be made on the next
succeeding day that is a Business Day (except as otherwise provided in
Sections 4.1(a) and 4.2(d)), with the same force and effect as though made on
the date fixed for such payment, and no interest shall accrue thereon for the
period after such date.
Section 10.6 SUCCESSORS. This Trust Agreement shall be binding upon and
shall inure to the benefit of any successor to the Depositor, the Trust or
the Relevant Trustee, including any successor by operation of law. Except in
connection with a consolidation, merger or sale involving the Depositor that
is permitted under Article Eight of the Indenture and pursuant to which the
assignee agrees in writing to perform the Depositor's obligations hereunder,
the Depositor shall not assign its obligations hereunder.
Section 10.7 HEADINGS. The Article and Section headings are for
convenience only and shall not affect the construction of this Trust
Agreement.
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Section 10.8 REPORTS, NOTICES AND DEMANDS Any report, notice, demand or
other communication which by any provision of this Trust Agreement is
required or permitted to be given or served to or upon any Securityholder or
the Depositor may be given or served in writing by deposit thereof,
first-class postage prepaid, in the United States mail, hand delivery or
facsimile transmission, in each case, addressed, (a) in the case of a
Preferred Securityholder, to such Preferred Securityholder as such
Securityholder's name and address may appear on the Securities Register; and
(b) in the case of the Common Securityholder or the Depositor, to First
Interstate BancSystem, Inc., 401 North 31st Street, Billings, MT 59101,
Attention:______________. Any notice to Preferred Securityholders shall also
be given to such owners as have, within two years preceding the giving of
such notice, filed their names and addresses with the Property Trustee for
that purpose. Such notice, demand or other communication to or upon a
Securityholder shall be deemed to have been sufficiently given or made, for
all purposes, upon hand delivery, mailing or transmission.
Any notice, demand or other communication which by any provision of this
Trust Agreement is required or permitted to be given or served to or upon the
Trust, the Property Trustee, the Delaware Trustee or the Administrative
Trustees shall be given in writing addressed (until another address is
published by the Trust) as follows: (a) with respect to the Property Trustee
to Wilmington Trust Company, Rodney Square North, 1100 North Market Street,
Wilmington , Delaware 19890, Attention: Corporate Trust Administration; (b)
with respect to the Delaware Trustee, to Wilmington Trust Company, Rodney
Square North, 1100 North Market Street, Wilmington, Delaware 19890; and (c)
with respect to the Administrative Trustees, to them at the address above for
notices to the Depositor, marked "Attention Administrative Trustees of FIB
Capital Trust." Such notice, demand or other communication to or upon the
Trust or the Property Trustee shall be deemed to have been sufficiently given
or made only upon actual receipt of the writing by the Trust or the Property
Trustee.
Section 10.9 AGREEMENT NOT TO PETITION. Each of the Trustees and the
Depositor agree for the benefit of the Securityholders that, until at least
one year and one day after the Trust has been terminated in accordance with
Article IX, they shall not file, or join in the filing of, a petition against
the Trust under any Bankruptcy Laws or otherwise join in the commencement of
any proceeding against the Trust under any Bankruptcy Law. In the event the
Depositor takes action in violation of this Section 10.9, the Property
Trustee agrees, for the benefit of Securityholders, that at the expense of
the Depositor, it shall file an answer with the bankruptcy court or otherwise
properly contest the filing of such petition by the Depositor against the
Trust or the commencement of such action and raise the defense that the
Depositor has agreed in writing not to take such action and should be stopped
and precluded therefrom and such other defenses, if any, as counsel for the
Trustee or the Trust may assert. The provisions of this Section 10.9 shall
survive the termination of this Trust Agreement.
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Section 10.10 TRUST INDENTURE ACT; CONFLICT WITH TRUST INDENTURE ACT.
(a) This Trust Agreement is subject to the provisions of the Trust
Indenture Act that are required to be part of this Trust Agreement and shall,
to the extent applicable, be governed by such provisions.
(b) The Property Trustee shall be the only Trustee which is a trustee
for the purposes of the Trust Indenture Act.
(c) If any provision hereof limits, qualifies or conflicts with another
provision hereof which is required to be included in this Trust Agreement by
any of the provisions of the Trust Indenture Act, such required provision
shall control. If any provision of this Trust Agreement modifies or excludes
any provision of the Trust Indenture Act which may be so modified or
excluded, the latter provision shall be deemed to apply to this Trust
Agreement as so modified or excluded, as the case may be.
(d) The application of the Trust Indenture Act to this Trust Agreement
shall not affect the nature of the Securities as equity securities
representing undivided beneficial interests in the assets of the Trust.
Section 10.11 ACCEPTANCE OF TERMS OF TRUST AGREEMENT, GUARANTEE AND
INDENTURE. THE RECEIPT AND ACCEPTANCE OF A TRUST SECURITY OR ANY INTEREST
THEREIN BY OR ON BEHALF OF A SECURITYHOLDER OR ANY BENEFICIAL OWNER, WITHOUT
ANY SIGNATURE OR FURTHER MANIFESTATION OF ASSENT, SHALL CONSTITUTE THE
UNCONDITIONAL ACCEPTANCE BY THE SECURITYHOLDER AND ALL OTHERS HAVING A
BENEFICIAL INTEREST IN SUCH TRUST SECURITY OF ALL THE TERMS AND PROVISIONS OF
THIS TRUST AGREEMENT AND AGREEMENT TO THE SUBORDINATION PROVISIONS AND OTHER
TERMS OF THE GUARANTEE AND THE INDENTURE, AND SHALL CONSTITUTE THE AGREEMENT
OF THE TRUST, SUCH SECURITYHOLDER AND SUCH OTHERS THAT THE TERMS AND
PROVISIONS OF THIS TRUST AGREEMENT SHALL BE BINDING, OPERATIVE AND EFFECTIVE
AS BETWEEN THE TRUST AND SUCH SECURITYHOLDER AND SUCH OTHERS.
FIRST INTERSTATE BANCSYSTEM,
INC.
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
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WILMINGTON TRUST COMPANY,
as Property Trustee
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
WILMINGTON TRUST COMPANY,
as Delaware Trustee
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
------------------------------------
Name:
-------------------------------
as Administrative Trustee
------------------------------------
Name:
-------------------------------
as Administrative Trustee
------------------------------------
Name:
-------------------------------
as Administrative Trustee
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EXHIBIT A
CERTIFICATE OF TRUST
OF
FIB CAPITAL TRUST
This Certificate of Trust of FIB Capital Trust (the "Trust") dated
_________________,1997, is being duly executed and filed by the undersigned,
as trustees, to form a business trust under the Delaware Business Trust Act
(12 Del. C. ((S)) 3801 et seq.).
1. Name. The name of the business trust being formed hereby is FIB
Capital Trust.
2. Delaware Trustee. The name and business address of the trustee of the
Trust in the State of Delaware are Wilmington Trust Company, Rodney Square
North, 1100 North Market Street, Wilmington, Delaware 19890, Attention:
Corporate Trust Administrator.
3. Effective Date. This Certificate of Trust shall be effective upon its
filing.
IN WITNESS WHEREOF, the undersigned, being the trustees of the Trust, have
executed this Certificate of Trust as of the date first above written.
WILMINGTON TRUST COMPANY,
as Trustee
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
------------------------------------
Name:
-------------------------------
Administrative Trustee
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------------------------------------
Name:
-------------------------------
Administrative Trustee
------------------------------------
Name:
-------------------------------
Administrative Trustee
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EXHIBIT B
The Depository Trust Company,
55 Water Street, 49th Floor,
New York, New York 10041-0099
____________, 1997
Attention:
General Counsel's Office
Re: FIB Capital Trust ___% Cumulative Trust Preferred Securities
Ladies and Gentlemen:
The purpose of this letter is to set forth certain matters relating to the
issuance and deposit with The Depository Trust Company ("DTC") of the FIB
Capital Trust ___% Cumulative Trust Preferred Securities, (the "Trust
Preferred Securities"), of FIB Capital Trust, a Delaware business trust (the
"Issuer"), formed pursuant to an Amended and Restated Trust Agreement between
First Interstate BancSystem, Inc. ("First Interstate BancSystem"), and
Wilmington Trust Company, as Property Trustee, Wilmington Trust Company, as
Delaware Trustee, and the Administrative Trustees named therein. The payment
of distributions on the Trust Preferred Securities, and payments due upon
liquidation of the Issuer or redemption of the Trust Preferred Securities, to
the extent the Issuer has funds available for the payment thereof are
guaranteed by First Interstate BancSystem to the extent set forth in a
Guarantee Agreement dated ________, 1997, by First Interstate BancSystem and
Wilmington Trust Company, as guarantee trustee, with respect to the Trust
Preferred Securities. First Interstate BancSystem and the Issuer propose to
sell the Trust Preferred Securities to certain Underwriter(s) (the
"Underwriter(s)") pursuant to an Underwriting Agreement dated __________,
1997 by and among the Underwriter(s), the Issuer and Depositor and the
Underwriter(s) wish to take delivery of the Trust Preferred Securities
through DTC. Wilmington Trust Company is acting as transfer agent and
registrar with respect to the Trust Preferred Securities (the "Transfer Agent
and Registrar").
To induce DTC to accept the Trust Preferred Securities as eligible for
deposit at DTC, and to act in accordance with DTC's rules with respect to the
Trust Preferred Securities, the Issuer, the Transfer Agent and Registrar and
DTC agree among each other as follows:
1. Prior to the closing of the sale of the Trust Preferred Securities to
the Underwriter(s), which is expected to occur on or about __________, 1997,
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there shall be deposited with DTC one or more global certificates
(individually and collectively, the "Global Certificate") registered in the
name of DTC's Trust Preferred Securities nominee, ________, representing an
aggregate of Trust Preferred Securities and bearing the following legend:
Unless this certificate is presented by an authorized
representative of The Depository Trust Company, a New York
corporation ("DTC"), to the Issuer or its agent for
registration of transfer, exchange, or payment, and any
certificate issued is registered in the name of _________ or in
such other name as is requested by an authorized representative
of DTC (and any payment is made to _________ or to such other
entity as is requested by an authorized representative of DTC),
ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the
registered owner hereof, ______, has an interest herein.
2. The Amended and Restated Trust Agreement of the Issuer provides for the
voting by holders of the Trust Preferred Securities under certain limited
circumstances. The Issuer shall establish a record date for such purposes
and shall, to the extent possible, give DTC notice of such record date not
less than 15 calendar days in advance of such record date.
3. In the event of a stock split, conversion, recapitalization,
reorganization or any other similar transaction resulting in the cancellation
of all or any part of the Trust Preferred Securities outstanding, the Issuer
or the Transfer Agent and Registrar shall send DTC a notice of such event at
least five business days prior to the effective date of such event.
4. In the event of distribution on, or an offering or issuance of rights
with respect to, the Trust Preferred Securities outstanding, the Issuer or
the Transfer Agent and Registrar shall send DTC a notice specifying: (a) the
amount of and conditions, if any, applicable to the payment of any such
distribution or any such offering or issuance of rights; (b) any applicable
expiration or deadline date, or any date by which any action on the part of
the holders of Trust Preferred Securities is required; and (c) the date any
required notice is to be mailed by or on behalf of the Issuer to holders of
Trust Preferred Securities or published by or on behalf of the Issuer
(whether by mail or publication, the "Publication Date"). Such notice shall
be sent to DTC by a secure means (e.g., legible telecopy, registered or
certified mail, overnight delivery) in a timely manner designed to assure
that such notice is in DTC's possession no later than the close of business
on the business day before the Publication Date. The Issuer or the Transfer
Agent and Registrar will forward such notice either in a separate secure
transmission for
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each CUSIP number or in a secure transmission of multiple CUSIP numbers (if
applicable) that includes a manifest or list of each CUSIP number submitted
in that transmission. (The party sending such notice shall have a method to
verify subsequently the use of such means and the timeliness of such notice.)
The Publication Date shall be not less than 30 calendar days nor more than 60
calendar days prior to the payment of any such distribution or any such
offering or issuance of rights with respect to the Trust Preferred
Securities. After establishing the amount of payment to be made on the Trust
Preferred Securities, the Issuer or the Transfer Agent and Registrar will
notify DTC's Dividend Department of such payment five business days prior to
payment date. Notices to DTC's Dividend Department by telecopy shall be sent
to (212) 709-1723. Such notices by mail or by any other means shall be sent
to:
Manager, Announcements
Dividend Department
The Depository Trust Company
7 Hanover Square, 23rd Floor
New York, New York 10004-2695
The Issuer or the Transfer Agent and Registrar shall confirm DTC's receipt of
such telecopy by telephoning the Dividend Department at (212) 709-1270.
5. In the event of a redemption by the Issuer of the Trust Preferred
Securities, notice specifying the terms of the redemption and the Publication
Date of such notice shall be sent by the Issuer or the Transfer Agent and
Registrar to DTC not less than 30 calendar days prior to such event by a
secure means in the manner set forth in paragraph 4. Such redemption notice
shall be sent to DTC's Call Notification Department at (516) 227-4164 or
(516) 227-4190, and receipt of such notice shall be confirmed by telephoning
(516) 227-4070. Notice by mail or by any other means shall be sent to:
Call Notification Department
The Depository Trust Company
711 Stewart Avenue
Garden City, New York 11530-4719
6. In the event of any invitation to tender the Trust Preferred
Securities, notice specifying the terms of the tender and the Publication
Date of such notice shall be sent by the Issuer or the Transfer Agent and
Registrar to DTC by a secure means and in a timely manner as described in
paragraph 4. Notices to DTC pursuant to this paragraph and notices of other
corporate actions (including mandatory tenders, exchanges and capital
changes) shall be sent, unless notification to another department is
expressly provided for herein, by telecopy to DTC's Reorganization Department
at (212) 709-1093 or (212) 709-1094 and
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receipt of such notice shall be confirmed by telephoning (212) 709-6884, or
by mail or any other means to:
Manager, Reorganization Department
Reorganization Window
The Depository Trust Company
7 Hanover Square, 23rd Floor
New York, New York 10004-2695
7. All notices and payment advices sent to DTC shall contain the CUSIP
number or numbers of the Trust Preferred Securities and the accompanying
designation of the Trust Preferred Securities, which, as of the date of this
letter, is "FIB Capital Trust ___% Cumulative Trust Preferred Securities."
8. Distribution payments or other cash payments with respect to the Trust
Preferred Securities evidenced by the Global Certificate shall be received by
________, as nominee of DTC, or its registered assigns in next day funds on
each payment date (or in accordance with existing arrangements between the
Issuer or the Transfer Agent and Registrar and DTC). Such payments shall be
made payable to the order of _______, and shall be addressed as follows:
NDFS Redemption Department
The Depository Trust Company
7 Hanover Square, 23rd Floor
New York, New York 10004-2695
9. DTC may by prior written notice direct the Issuer and the Transfer
Agent and Registrar to use any other telecopy number or address of DTC as the
number or address to which notices or payments may be sent.
10. In the event of a conversion, redemption, or any other similar
transaction (e.g., tender made and accepted in response to the Issuer's or
the Transfer Agent and Registrar's invitation) necessitating a reduction in
the aggregate number of Trust Preferred Securities outstanding evidenced by
Global Certificates, DTC, in its discretion: (a) may request the Issuer or
the Transfer Agent and Registrar to issue and countersign a new Global
Certificate; or (b) may make an appropriate notation on the Global
Certificate indicating the date and amount of such reduction.
11. DTC may discontinue its services as a securities depository with
respect to the Trust Preferred Securities at any time by giving at least 90
days' prior written notice to the Issuer and the Transfer Agent and Registrar
(at which time DTC will confirm with the Issuer or the Transfer Agent and
Registrar the aggregate number of Trust Preferred Securities deposited with
it) and discharging its responsibilities with respect thereto under
applicable law. Under such circumstances, the Issuer may determine to make
alternative arrangements for
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book-entry settlement for the Trust Preferred Securities, make available one
or more separate global certificates evidencing Trust Preferred Securities to
any Participant having Trust Preferred Securities credited to its DTC
account, or issue definitive Trust Preferred Securities to the beneficial
holders thereof, and in any such case, DTC agrees to cooperate fully with the
Issuer and the Transfer Agent and Registrar, and to return the Global
Certificate, duly endorsed for transfer as directed by the Issuer or the
Transfer Agent and Registrar, together with any other documents of transfer
reasonably requested by the Issuer or the Transfer Agent and Registrar.
12. In the event that the Issuer determines that beneficial owners of
Trust Preferred Securities shall be able to obtain definitive Trust Preferred
Securities, the Issuer or the Transfer Agent and Registrar shall notify DTC
of the availability of certificates. In such event, the Issuer or the
Transfer Agent and Registrar shall issue, transfer and exchange certificates
in appropriate amounts, as required by DTC and others, and DTC agrees to
cooperate fully with the Issuer and the Transfer Agent and Registrar and to
return the Global Certificate, duly endorsed for transfer as directed by the
Issuer or the Transfer Agent and Registrar, together with any other documents
of transfer reasonably requested by the Issuer or the Transfer Agent and
Registrar.
13. This letter may be executed in any number of counterparts, each of
which when so executed shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same instrument.
Nothing herein shall be deemed to require the Transfer Agent and Registrar to
advance funds on behalf of FIB Capital Trust.
Very truly yours,
FIB CAPITAL TRUST
(as Issuer)
Wilmington Trust Company,
as Trustee
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
(As Transfer Agent and Registrar)
64
<PAGE>
WILMINGTON TRUST COMPANY, as
Trustee
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
Received and Accepted:
THE DEPOSITORY TRUST
COMPANY
By:
---------------------------------
Authorized Officer
65
<PAGE>
EXHIBIT C
THIS CERTIFICATE IS NOT TRANSFERABLE
CERTIFICATE NUMBER C-1 NUMBER OF COMMON SECURITIES
CERTIFICATE EVIDENCING COMMON SECURITIES
OF
FIB CAPITAL TRUST
___% COMMON SECURITIES
(LIQUIDATION AMOUNT $25 PER COMMON SECURITY)
FIB Capital Trust, a statutory business trust formed under the laws of the
State of Delaware (the "Trust"), hereby certifies that First Interstate
BancSystem, Inc. (the "Holder"), is the registered owner of ( ) common
securities of the Trust representing beneficial interests of the Trust and
designated the ___% Common Securities (liquidation amount $25 per Common
Security) (the "Common Securities"). In accordance with Section 5.10 of the
Trust Agreement (as defined below) the Common Securities are not transferable
and any attempted transfer hereof shall be void. The designations, rights,
privileges, restrictions, preferences and other terms and provisions of the
Common Securities are set forth in, and this certificate and the Common
Securities represented hereby are issued and shall in all respects be subject
to the terms and provisions of, the Amended and Restated Trust Agreement of
the Trust dated as of __________,1997, as the same may be amended from time
to time (the "Trust Agreement") including the designation of the terms of
the Common Securities as set forth therein. The Trust will furnish a copy of
the Trust Agreement to the Holder without charge upon written request to the
Trust at its principal place of business or registered office.
Upon receipt of this certificate, the Holder is bound by the Trust
Agreement and is entitled to the benefits thereunder.
IN WITNESS WHEREOF, one of the Administrative Trustees of the Trust has
executed this certificate this _____ day of _______________,1997.
FIB CAPITAL TRUST
By:
---------------------------------
Name:
-------------------------------
Administrative Trustee
66
<PAGE>
EXHIBIT D
AGREEMENT AS TO EXPENSES AND LIABILITIES
AGREEMENT AS TO EXPENSES AND LIABILITIES (this "Agreement"), dated as of ,
1997, between First Interstate BancSystem, Inc., a Montana corporation
("FIB"), and FIB Capital Trust, a Delaware business trust (the "Trust").
WHEREAS, the Trust intends to issue its Common Securities (the "Common
Securities") to and receive Debentures from FIB and to issue and sell ____%
Cumulative Trust Preferred Securities (the "Trust Preferred Securities") with
such powers, preferences and special rights and restrictions as are set forth
in the Amended and Restated Trust Agreement of the Trust dated as of _______,
1997, as the same may be amended from time to time (the "Trust Agreement");
WHEREAS, FIB will directly or indirectly own all of the Common Securities
of the Trust and will issue the Debentures;
NOW, THEREFORE, in consideration of the purchase by each holder of the
Trust Preferred Securities, which purchase FIB hereby agrees shall benefit
FIB and which purchase FIB acknowledges will be made in reliance upon the
execution and delivery of this Agreement, FIB and Trust hereby agree as
follows:
ARTICLE I
AGREEMENT
Section 1.1 GUARANTEE BY FIB. Subject to the terms and conditions hereof,
FIB hereby irrevocably and unconditionally guarantees to each person or
entity to whom the Trust is now or hereafter becomes indebted or liable (the
"Beneficiaries") the full payment, when and as due, of any and all
Obligations (as hereinafter defined) to such Beneficiaries. As used herein,
"Obligations" means any costs, expenses or liabilities of the Trust, other
than obligations of the Trust to pay to holders of any Trust Preferred
Securities or other similar interests in the Trust the amounts due such
holders pursuant to the terms of the Trust Preferred Securities or such other
similar interests, as the case may be. This Agreement is intended to be for
the benefit of, and to be enforceable by, all such Beneficiaries, whether or
not such Beneficiaries have received notice hereof.
Section 1.2 TERM OF AGREEMENT. This Agreement shall terminate and be of
no further force and effect upon the later of (a) the date on which full
payment has been made of all amounts payable to all holders of all the Trust
Preferred Securities (whether upon redemption, liquidation, exchange or
otherwise) and (b) the date on which there are no Beneficiaries remaining;
provided, however, that this Agreement shall continue to be effective or
shall be reinstated, as the case may be, if at any time any holder of Trust
Preferred Securities or any Beneficiary
67
<PAGE>
must restore payment of any sums paid under the Trust Preferred Securities,
under any Obligation, under the Guarantee Agreement dated the date hereof by
FIB and Wilmington Trust Company, a Delaware banking corporation, as
guarantee trustee or under this Agreement for any reason whatsoever. This
Agreement is continuing, irrevocable, unconditional and absolute.
Section 1.3 WAIVER OF NOTICE. FIB hereby waives notice of acceptance of
this Agreement and of any Obligation to which it applies or may apply, and
FIB hereby waives presentment, demand for payment, protest, notice of
nonpayment, notice of dishonor, notice of redemption and all other notices
and demands.
Section 1.4 NO IMPAIRMENT. The obligations, covenants, agreements and
duties of FIB under this Agreement shall in no way be affected or impaired by
reason of the happening from time to time of any of the following:
(a) the extension of time for the payment by the Trust of all or any
portion of the Obligations or for the performance of any other obligation
under, arising out of, or in connection with, the obligations;
(b) any failure, omission, delay or lack of diligence on the part of
the Beneficiaries to enforce, assert or exercise any right, privilege, power
or remedy conferred on the Beneficiaries with respect to the Obligations or
any action on the part of the Trust granting indulgence or extension of any
kind; or
(c) the voluntary or involuntary liquidation, dissolution, sale of
any collateral, receivership, insolvency, bankruptcy, assignment for the
benefit of creditors, reorganization, arrangement, composition or
readjustment of debt of, or other similar proceedings affecting, the Trust or
any of the assets of the Trust.
There shall be no obligation of the Beneficiaries to give notice to, or
obtain the consent of, FIB with respect to the happening of any of the
foregoing.
Section 1.5 ENFORCEMENT. A Beneficiary may enforce this Agreement
directly against FIB and FIB waives any right or remedy to require that any
action be brought against the Trust or any other person or entity before
proceeding against FIB.
Section 1.6 SUBROGATION. FIB shall be subrogated to all (if any) rights
of the Trust in respect of any amounts paid to the Beneficiaries by FIB under
this Agreement; provided, however, that FIB shall not (except to the extent
required by mandatory provisions of law) be entitled to enforce or exercise
any rights which it may acquire by way of subrogation or any indemnity,
reimbursement or other agreement, in all cases as a result of payment under
this Agreement, if, at the time of any such payment, any amounts are due and
unpaid under this Agreement.
68
<PAGE>
ARTICLE II
BINDING EFFECT
Section 1.7 BINDING EFFECT. All guarantees and agreements contained in
this Agreement shall bind the successors, assigns, receivers, trustees and
representatives of FIB and shall inure to the benefit of the Beneficiaries.
Section 1.8 AMENDMENT. So long as there remains any Beneficiary or any
Trust Preferred Securities of any series are outstanding, this Agreement
shall not be modified or amended in any manner adverse to such Beneficiary or
to the holders of the Trust Preferred Securities.
Section 1.9 NOTICES. Any notice, request or other communication required
or permitted to be given hereunder shall be given in writing by delivering
the same against receipt therefor by facsimile transmission (confirmed by
mail), telex or by registered or certified mail, addressed as follows (and if
so given, shall be deemed given when mailed or upon receipt of an
answer-back, if sent by telex):
FIB Capital Trust
------------------------------------
------------------------------------
------------------------------------
Attention:
--------------------------
First Interstate BancSystem, Inc.
------------------------------------
------------------------------------
------------------------------------
Attention:
--------------------------
Section 1.10 THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF _______________
(WITHOUT REGARD TO CONFLICT OF LAW PRINCIPLES).
69
<PAGE>
IN WITNESS WHEREOF, this Agreement is executed as of the day and year
first above written.
FIRST INTERSTATE BANCSYSTEM,
INC.
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
FIB CAPITAL TRUST
By:
---------------------------------
Name:
-------------------------------
Administrative Trustee
70
<PAGE>
EXHIBIT E
This Preferred Security is a Global Certificate within the meaning of the
Trust Agreement hereinafter referred to and is registered in the name of The
Depository Trust Company (the "Depository") or a nominee of the Depository.
This Preferred Security is exchangeable for Trust Preferred Securities
registered in the name of a person other than the Depository or its nominee
only in the limited circumstances described in the Trust Agreement and no
transfer of this Preferred Security (other than a transfer of this Preferred
Security as a whole by the Depository to a nominee of the Depository or by a
nominee of the Depository to the Depository or another nominee of the
Depository) may be registered except in limited circumstances.
Unless this Preferred Security is presented by an authorized
representative of The Depository Trust Company (55 Water Street, New York) to
FIB Capital Trust or its agent for registration of transfer, exchange or
payment, and any Preferred Security issued is registered in the name of
______ or such other name as requested by an authorized representative of The
Depository Trust Company and any payment hereon is made to _______, ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY A PERSON IS
WRONGFUL inasmuch as the registered owner hereof, _______, has an interest
herein.
CERTIFICATE NUMBER P-___ NUMBER OF TRUST PREFERRED
SECURITIES
CUSIP NO.
CERTIFICATE EVIDENCING TRUST PREFERRED SECURITIES
OF
FIB CAPITAL TRUST
___% CUMULATIVE TRUST PREFERRED SECURITIES,
SERIES
(LIQUIDATION AMOUNT $25 PER PREFERRED SECURITY)
FIB Capital Trust, a statutory business trust formed under the laws of the
State of Delaware (the "Trust"), hereby certifies that (the "Holder") is the
registered owner of ( ) Trust Preferred Securities of the Trust
representing an undivided beneficial interest in the assets of the Trust and
designated the FIB Capital Trust ___% Cumulative Trust Preferred Securities,
(liquidation amount $25 per Preferred Security) (the "Trust Preferred
Securities"). The Trust
71
<PAGE>
Preferred Securities are transferable on the books and records of the Trust,
in person or by a duly authorized attorney, upon surrender of this
certificate duly endorsed and in proper form for transfer as provided in
Section 5.4 of the Trust Agreement (as defined below). The designations,
rights, privileges, restrictions, preferences and other terms and provisions
of the Trust Preferred Securities are set forth in, and this certificate and
the Trust Preferred Securities represented hereby are issued and shall in all
respects be subject to the terms and provisions of, the Amended and Restated
Trust Agreement of the Trust dated as of ____________, 1997, as the same may
be amended from time to time (the "Trust Agreement") including the
designation of the terms of Trust Preferred Securities as set forth therein.
The Holder is entitled to the benefits of the Guarantee Agreement entered
into by First Interstate BancSystem, Inc., a Montana corporation, and
Wilmington Trust Company, as guarantee trustee, dated as of ____________,
1997, (the "Guarantee"), to the extent provided therein. The Trust will
furnish a copy of the Trust Agreement and the Guarantee to the Holder without
charge upon written request to the Trust at its principal place of business
or registered office.
Upon receipt of this certificate, the Holder is bound by the Trust
Agreement and is entitled to the benefits thereunder.
In Witness Whereof, one of the Administrative Trustees of the Trust has
executed this certificate this day of , 1997.
FIB CAPITAL TRUST
By:
---------------------------------
Name:
-------------------------------
Administrative Trustee
72
<PAGE>
ASSIGNMENT
For Value Received, the undersigned assigns and transfers this Preferred
Security to:
(Insert assignee's social security or tax identification number)
(Insert address and zip code of assignee) and irrevocably appoints agent
to transfer this Preferred Security Certificate on the books of the Trust.
The agent may substitute another to act for him or her.
73
<PAGE>
- -------------------------------------------------------------------------------
GUARANTEE AGREEMENT
BETWEEN
FIRST INTERSTATE BANCSYSTEM, INC.,
AS GUARANTOR,
AND
WILMINGTON TRUST COMPANY,
AS TRUSTEE
DATED AS OF _______________________, 1997
- ------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
----
Article I. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . 2
Article II. Trust Indenture Act. . . . . . . . . . . . . . . . . . . . . . 4
Section 2.1 Trust Indenture Act; Application. . . . . . . . . . . . . . 4
Section 2.2 List of Holders . . . . . . . . . . . . . . . . . . . . . . 4
Section 2.3 Reports by the Guarantee Trustee. . . . . . . . . . . . . . 5
Section 2.4 Periodic Reports to the Guarantee Trustee . . . . . . . . . 5
Section 2.5 Evidence of Compliance with Conditions Precedent. . . . . . 5
Section 2.6 Events of Default; Waiver . . . . . . . . . . . . . . . . . 5
Section 2.7 Event of Default; Notice. . . . . . . . . . . . . . . . . . 5
Section 2.8 Conflicting Interests . . . . . . . . . . . . . . . . . . . 6
Article III. Powers, Duties and Rights of the Guarantee Trustee. . . . . . 6
Section 3.1 Powers and Duties of the Guarantee Trustee. . . . . . . . . 6
Section 3.2 Certain Rights of Guarantee Trustee . . . . . . . . . . . . 7
Section 3.3 Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . 9
Article IV. Guarantee Trustee. . . . . . . . . . . . . . . . . . . . . . . 9
Section 4.1 Guarantee Trustee: Eligibility . . . . . . . . . . . . . . 9
Section 4.2 Appointment, Removal and Resignation of the Guarantee Trustee 10
Article V. Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 5.1 Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 5.2 Waiver of Notice and Demand . . . . . . . . . . . . . . . . 11
Section 5.3 Obligations Not Affected. . . . . . . . . . . . . . . . . . 11
Section 5.4 Rights of Holders . . . . . . . . . . . . . . . . . . . . . 12
Section 5.5 Guarantee of Payment. . . . . . . . . . . . . . . . . . . . 12
Section 5.6 Subrogation . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 5.7 Independent Obligations . . . . . . . . . . . . . . . . . . 12
Article VI. Covenants and Subordination. . . . . . . . . . . . . . . . . . 13
Section 6.1 Subordination . . . . . . . . . . . . . . . . . . . . . . . 13
Section 6.2 Pari Passu Guarantees . . . . . . . . . . . . . . . . . . . 13
Article VII. Consolidation, Merger, Conveyance, Transfer or Lease. . . . . 13
Section 7.1 Guarantor May Consolidate, Etc., Only on Certain Terms. . . 13
Section 7.2 Successor Guarantor Substituted . . . . . . . . . . . . . . 14
Article VIII. Termination. . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 8.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . 14
Article IX. Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . 14
i
<PAGE>
Section 9.1 Successors and Assigns. . . . . . . . . . . . . . . . . . . 14
Section 9.2 Amendments. . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 9.3 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 9.4 Benefit . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 9.5 Interpretation. . . . . . . . . . . . . . . . . . . . . . . 16
Section 9.6 Governing Law . . . . . . . . . . . . . . . . . . . . . . . 16
Section 9.7 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . 17
ii
<PAGE>
CROSS-REFERENCE TABLE*
Section of Trust Section of
Indenture Act of 1939, as amended Guarantee Agreement
- --------------------------------- -------------------
310(a). . . . . . . . . . . . . . . . . . 4.1(a)
310(b). . . . . . . . . . . . . . . . . . 2.8, 4.1(c)
310(c). . . . . . . . . . . . . . . . . . Inapplicable
311(a). . . . . . . . . . . . . . . . . . 2.2(b)
311(b). . . . . . . . . . . . . . . . . . 2.2(b)
311(c). . . . . . . . . . . . . . . . . . Inapplicable
312(b). . . . . . . . . . . . . . . . . . 2.2(b)
313 . . . . . . . . . . . . . . . . . . 2.3
314(a). . . . . . . . . . . . . . . . . . 2.4
314(b). . . . . . . . . . . . . . . . . . Inapplicable
314(c). . . . . . . . . . . . . . . . . . 2.5
314(d). . . . . . . . . . . . . . . . . . Inapplicable
316(c). . . . . . . . . . . . . . . . . . 9.2
317(a). . . . . . . . . . . . . . . . . . Inapplicable
317(b). . . . . . . . . . . . . . . . . . Inapplicable
318(a). . . . . . . . . . . . . . . . . . 2.1(b)
318(b). . . . . . . . . . . . . . . . . . 2.1
318(c). . . . . . . . . . . . . . . . . . 2.1(a)
* This Cross-Reference Table does not constitute part of the Guarantee Agreement
and shall not affect the interpretation of any of its terms or provisions.
iii
<PAGE>
GUARANTEE AGREEMENT
This GUARANTEE AGREEMENT dated as of _______________, 1997, is executed
and delivered by FIRST INTERSTATE BANCSYSTEM, INC. a Montana corporation (the
"Guarantor"), having its principal office at 401 North 31st Street, Billings,
MT 59101, and WILMINGTON TRUST COMPANY a Delaware banking corporation, as
trustee (the "Guarantee Trustee"), for the benefit of the Holders from time
to time of the Trust Preferred Securities (as defined herein) of FIB Capital
Trust, a Delaware statutory business trust (the "Trust").
WHEREAS, pursuant to a Trust Agreement, dated as of _______________,
1997 (the "Trust Agreement"), among the Guarantor, as Depositor, Wilmington
Trust Company as Property Trustee, Wilmington Trust Company, as Delaware
Trustee, and the Administrative Trustees named therein and the Holders from
time to time of undivided beneficial interests in the assets of the Trust,
the Trust issued $40,000,000 aggregate Liquidation Amount (as defined in the
Trust Agreement) of its _____% Cumulative Trust Preferred Securities,
Liquidation Amount $25 per Trust Preferred Security (the "Trust Preferred
Securities"), representing preferred undivided beneficial interests in the
assets of the Trust and having the terms set forth in the Trust Agreement;
WHEREAS, the Trust Preferred Securities will be issued by the Trust and
the proceeds thereof, together with the proceeds from the issuance of the
Trust's Common Securities (as defined below), will be used to purchase the
Debentures (as defined in the Trust Agreement) of the Guarantor which was
deposited with Wilmington Trust Company, as Property Trustee under the Trust
Agreement, as assets of the Trust; and
WHEREAS, as an incentive for the Holders to purchase the Trust Preferred
Securities, the Guarantor desires irrevocably and unconditionally to agree,
to the extent set forth herein, to pay to the Holders of the Trust Preferred
Securities the Guarantee Payments (as defined herein) and to make certain
other payments on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the purchase by each Holder of
Trust Preferred Securities, which purchase the Guarantor hereby agrees shall
benefit the Guarantor, the Guarantor executes and delivers this Guarantee
Agreement and pursuant to Section 5.1 hereof extends the Guarantee for the
benefit of the Holders from time to time of the Trust Preferred Securities
<PAGE>
ARTICLE I.
DEFINITIONS
Section 1.1 DEFINITIONS.
As used in this Guarantee Agreement, the terms set forth below shall,
unless the context otherwise requires, have the following meanings.
Capitalized or otherwise defined terms used but not otherwise defined herein
shall have the meanings assigned to such terms in the Trust Agreement and the
Indenture (as defined herein), each as in effect on the date hereof.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person; provided, however, that an Affiliate of
the Guarantor shall not be deemed to be an Affiliate of the Trust. For the
purposes of this definition, "control" when used with respect to any
specified Person means the power to direct the management and policies of
such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Board of Directors" means either the board of directors of the
Guarantor or any committee of that board duly authorized to act hereunder.
"Common Securities" means the securities representing common undivided
beneficial interests in the assets of the Trust.
"Event of Default" means a default by the Guarantor on any of its
payment or other obligations under this Guarantee Agreement; provided,
however, that, except with respect to a default in payment of any Guarantee
Payments, the Guarantor shall have received notice of default and shall not
have cured such default within 60 days after receipt of such notice.
"Guarantee" has the meaning set forth in Section 5.1.
"Guarantee Payments" means the following payments or distributions,
without duplication, with respect to the Trust Preferred Securities, to the
extent not paid or made by or on behalf of the Trust: (i) any accrued and
unpaid Distributions (as defined in the Trust Agreement) required to be paid
on the Trust Preferred Securities, to the extent the Trust shall have funds
on hand available therefor at such time, (ii) the applicable Redemption Price
(as defined in the Trust Agreement), to the extent the Trust shall have funds
on hand available therefor at such time, and (iii) upon a voluntary or
involuntary termination, winding up or liquidation of the Trust, unless
Debentures are distributed to the Holders, the lesser of (a) the aggregate of
the Liquidation Distribution (as defined in the Trust Agreement) and (b) the
amount of assets of the Trust remaining available for
2
<PAGE>
distribution to Holders of Trust Preferred Securities after satisfaction of
liabilities to creditors of the Trust as required by applicable law.
"Guarantee Trustee" means Wilmington Trust Company, until a Successor
Guarantee Trustee has been appointed and has accepted such appointment
pursuant to the terms of this Guarantee Agreement, and thereafter means each
such Successor Guarantee Trustee.
"Holder" means any holder, as registered on the books and records of the
Trust, of any Trust Preferred Securities; provided, however, that in
determining whether the holders of the requisite percentage of Trust
Preferred Securities have given any request, notice, consent or waiver
hereunder, "Holder" shall not include the Guarantor, the Guarantee Trustee,
or any Affiliate of the Guarantor or the Guarantee Trustee.
"Indenture" means the Junior Subordinated Indenture dated as of
__________, 1997, between the Guarantor and Wilmington Trust Company, as
trustee, as supplemented and amended from time to time.
"List of Holders" has the meaning specified in Section 2.2(a).
"Majority in Liquidation Amount of the Trust Preferred Securities"
means, except as provided by the Trust Indenture Act, a vote by the
Holder(s), voting separately as a class, of more than 50% of the Liquidation
Amount of all then outstanding Trust Preferred Securities issued by the
Trust.
"Officers' Certificate" means, with respect to any Person, a
certificate signed by the Chairman or a Vice Chairman of the Board of
Directors of such Person or the President or a Vice President of such Person,
and by the Treasurer, an Assistant Treasurer, the Secretary or an Assistant
Secretary of such Person, and delivered to the Guarantee Trustee. Any
Officers' Certificate delivered with respect to compliance with a condition
or covenant provided for in this Guarantee Agreement shall include:
(a) a statement that each officer signing the Officers' Certificate
has read the covenant or condition and the definitions relating thereto;
(b) a brief statement of the nature and scope of the examination or
investigation undertaken by each officer in rendering the Officers'
Certificate;
(c) a statement that each officer has made such examination or
investigation as, in such officer's opinion, is necessary to enable such
officer to express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(d) a statement as to whether, in the opinion of each officer, such
condition or covenant has been complied with.
3
<PAGE>
"Other Guarantees" mean any guarantees similar to the Guarantee issued,
from time to time, by the Guarantor on behalf of holders of preferred trust
interests issued by one or more business trusts, similar to the Trust.
"Person" means a legal person, including any individual, corporation,
estate, partnership, joint venture, association, joint stock company, limited
liability company, trust, unincorporated association, or government or any
agency or political subdivision thereof, or any other entity of whatever
nature.
"Responsible Officer" means, with respect to the Guarantee Trustee, any
officer of the Corporate Trust Department of the Guarantee Trustee and also
means, with respect to a particular corporate trust matter, any other officer
to whom such matter is referred because of that officer's knowledge of and
familiarity with the particular subject.
"Securities Act" means the Securities Act of 1933, as amended.
"Successor Guarantee Trustee" means a successor Guarantee Trustee
possessing the qualifications to act as Guarantee Trustee under Section 4.1.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as amended.
ARTICLE II.
TRUST INDENTURE ACT
Section 2.1 TRUST INDENTURE ACT; APPLICATION.
(a) This Guarantee Agreement is subject to the provisions of
the Trust Indenture Act that are required to be part of this Guarantee
Agreement and shall, to the extent applicable, be governed by such
provisions.
(b) If and to the extent that any provision of this Guarantee
Agreement limits, qualifies or conflicts with the duties imposed by Sections
310 to 317, inclusive, of the Trust Indenture Act, such imposed duties shall
control.
Section 2.2 LIST OF HOLDERS.
(a) The Guarantor shall furnish or cause to be furnished to the
Guarantee Trustee (a) semiannually, on or before January 15 and July 15 of
each year, a list, in such form as the Guarantee Trustee may reasonably
require, of the names and addresses of the Holders ("List of Holders") as of
a date not more than 15 days prior to the delivery thereof, and (b) at such
other times as the Guarantee Trustee may request in writing, within 30 days
after the receipt by the Guarantor of any such request, a List of Holders as
of a date not more than 15 days prior to the time such list is furnished, in
each case to the extent such information is in the possession or control of
the Guarantor and is not identical to a previously supplied list of Holders
or has not otherwise been
4
<PAGE>
received by the Guarantee Trustee in its capacity as such. The Guarantee
Trustee may destroy any List of Holders previously given to it on receipt of
a new List of Holders.
(b) The Guarantee Trustee shall comply with its obligations under
Section 311(a), Section 311(b) and Section 312(b) of the Trust Indenture Act.
Section 2.3 REPORTS BY THE GUARANTEE TRUSTEE.
Not later than July 15 of each year, commencing ___________, 1998, the
Guarantee Trustee shall provide to the Holders such reports as are required
by Section 313 of the Trust Indenture Act, if any, in the form and in the
manner provided by Section 313 of the Trust Indenture Act. The Guarantee
Trustee shall also comply with the requirements of Section 313(d) of the
Trust Indenture Act.
Section 2.4 PERIODIC REPORTS TO THE GUARANTEE TRUSTEE.
The Guarantor shall provide to the
Guarantee Trustee, the Securities and Exchange Commission and the Holders
such documents, reports and information, if any, as required by Section 314
of the Trust Indenture Act and the compliance certificate required by Section
314 of the Trust Indenture Act, in the form, in the manner and at the times
required by Section 314 of the Trust Indenture Act.
Section 2.5 EVIDENCE OF COMPLIANCE WITH CONDITIONS PRECEDENT.
The Guarantor shall provide to the Guarantee Trustee, on an annual
basis, such evidence of compliance with such conditions precedent, if any,
provided for in this Guarantee Agreement that relate to any of the matters
set forth in Section 314(c) of the Trust Indenture Act. Any certificate or
opinion required to be given by an officer pursuant to Section 314(c)(1) may
be given in the form of an Officers' Certificate.
Section 2.6 EVENTS OF DEFAULT; WAIVER.
The Holders of a Majority in Liquidation Amount of the Trust Preferred
Securities may, by vote, on behalf of the Holders, waive any past Event of
Default and its consequences. Upon such waiver, any such Event of Default
shall cease to exist, and any Event of Default arising therefrom shall be
deemed to have been cured, for every purpose of this Guarantee Agreement, but
no such waiver shall extend to any subsequent or other default or Event of
Default or impair any right consequent therefrom.
Section 2.7 EVENT OF DEFAULT; NOTICE.
(a) The Guarantee Trustee shall, within 90 days after the
occurrence of an Event of Default, transmit by mail, first class postage
prepaid, to the Holders, notices of all Events of Default known to the
Guarantee Trustee, unless such defaults have been cured before the giving of
such notice, provided, that, except in the case of a default in the payment
of a Guarantee Payment, the Guarantee Trustee shall be protected in
withholding such notice if and so long as the Board of Directors, the
executive
5
<PAGE>
committee or a trust committee of directors and/or Responsible Officers of
the Guarantee Trustee in good faith determines that the withholding of such
notice is in the interests of the Holders.
(b) The Guarantee Trustee shall not be deemed to have knowledge
of any Event of Default unless the Guarantee Trustee shall have received
written notice, or a Responsible Officer charged with the administration of
this Guarantee Agreement shall have obtained written notice, of such Event of
Default.
Section 2.8 CONFLICTING INTERESTS.
The Trust Agreement shall be deemed to be specifically described in this
Guarantee Agreement for the purposes of clause (i) of the first proviso
contained in Section 310(b) of the Trust Indenture Act.
ARTICLE III.
POWERS, DUTIES AND RIGHTS OF THE GUARANTEE TRUSTEE
Section 3.1 POWERS AND DUTIES OF THE GUARANTEE TRUSTEE.
(a) This Guarantee shall be held by the Guarantee Trustee for
the benefit of the Holders, and the Guarantee Trustee shall not transfer this
Guarantee to any Person except to a Holder exercising his or her rights
pursuant to Section 7.1 or to a Successor Guarantee Trustee on acceptance by
such Successor Guarantee Trustee of its appointment to act as Successor
Guarantee Trustee. The right, title and interest of the Guarantee Trustee
shall automatically vest in any Successor Guarantee Trustee, upon acceptance
by such Successor Guarantee Trustee of its appointment hereunder, and such
vesting and cessation of title shall be effective whether or not conveyancing
documents have been executed and delivered pursuant to the appointment of
such Successor Guarantee Trustee.
(b) If an Event of Default has occurred and is continuing, the
Guarantee Trustee shall enforce this Guarantee for the benefit of the
Holders.
(c) The Guarantee Trustee, before the occurrence of any Event
of Default and after the curing of all Events of Default that may have
occurred, shall undertake to perform only such duties as are specifically set
forth in this Guarantee Agreement, and no implied covenants shall be read
into this Guarantee Agreement against the Guarantee Trustee. In case an Event
of Default has occurred (that has not been cured or waived pursuant to
Section 2.6), the Guarantee Trustee shall exercise such of the rights and
powers vested in it by this Guarantee Agreement, and use the same degree of
care and skill in its exercise thereof, as a prudent person would exercise or
use under the circumstances in the conduct of his or her own affairs.
(d) No provision of this Guarantee Agreement shall be construed
to relieve the Guarantee Trustee from liability for its own negligent action,
its own negligent failure to act or its own willful misconduct, except that:
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(i) prior to the occurrence of any Event of Default and
after the curing or waiving of all such Events of Default that may have
occurred:
(A) the duties and obligations of the Guarantee
Trustee shall be determined solely by the express provisions of this
Guarantee Agreement, and the Guarantee Trustee shall not be liable except for
the performance of such duties and obligations as are specifically set forth
in this Guarantee Agreement; and
(B) in the absence of bad faith on the part of the
Guarantee Trustee, the Guarantee Trustee may conclusively rely, as to the
truth of the statements and the correctness of the opinions expressed
therein, upon any certificates or opinions furnished to the Guarantee Trustee
and conforming to the requirements of this Guarantee Agreement; but in the
case of any such certificates or opinions that by any provision hereof or of
the Trust Indenture Act are specifically required to be furnished to the
Guarantee Trustee, the Guarantee Trustee shall be under a duty to examine the
same to determine whether or not they conform to the requirements of this
Guarantee Agreement;
(ii) the Guarantee Trustee shall not be liable for any
error of judgment made in good faith by a Responsible Officer of the
Guarantee Trustee, unless it shall be proved that the Guarantee Trustee was
negligent in ascertaining the pertinent facts upon which such judgment was
made;
(iii) the Guarantee Trustee shall not be liable with
respect to any action taken or omitted to be taken by it in good faith in
accordance with the direction of the Holders of not less than a Majority in
Liquidation Amount of the Trust Preferred Securities relating to the time,
method and place of conducting any proceeding for any remedy available to the
Guarantee Trustee, or exercising any trust or power conferred upon the
Guarantee Trustee under this Guarantee Agreement; and
(iv) no provision of this Guarantee Agreement shall
require the Guarantee Trustee to expend or risk its own funds or otherwise
incur personal financial liability in the performance of any of its duties or
in the exercise of any of its rights or powers, if the Guarantee Trustee
shall have reasonable grounds for believing that the repayment of such funds
or liability is not reasonably assured to it under the terms of this
Guarantee Agreement or adequate indemnity against such risk or liability is
not reasonably assured to it.
Section 3.2 CERTAIN RIGHTS OF GUARANTEE TRUSTEE.
(a) Subject to the provisions of Section 3.1:
(i) The Guarantee Trustee may rely and shall be fully
protected in acting or refraining from acting upon any resolution,
certificate, statement, instrument, opinion, report, notice, request,
direction, consent, order, bond, debenture, note, other
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evidence of indebtedness or other paper or document reasonably believed by it
to be genuine and to have been signed, sent or presented by the proper party
or parties.
(ii) Any direction or act of the Guarantor contemplated by
this Guarantee Agreement shall be sufficiently evidenced by an Officers'
Certificate unless otherwise prescribed herein.
(iii) Whenever, in the administration of this Guarantee
Agreement, the Guarantee Trustee shall deem it desirable that a matter be
proved or established before taking, suffering or omitting to take any action
hereunder, the Guarantee Trustee (unless other evidence is herein
specifically prescribed) may, in the absence of bad faith on its part,
request and rely upon an Officers' Certificate which, upon receipt of such
request from the Guarantee Trustee, shall be promptly delivered by the
Guarantor.
(iv) The Guarantee Trustee may consult with legal
counsel, and the written advice or opinion of such legal counsel with respect
to legal matters shall be full and complete authorization and protection in
respect of any action taken, suffered or omitted to be taken by it hereunder
in good faith and in accordance with such advice or opinion. Such legal
counsel may be legal counsel to the Guarantor or any of its Affiliates and
may be one of its employees. The Guarantee Trustee shall have the right at
any time to seek instructions concerning the administration of this Guarantee
Agreement from any court of competent jurisdiction.
(v) The Guarantee Trustee shall be under no obligation
to exercise any of the rights or powers vested in it by this Guarantee
Agreement at the request or direction of any Holder, unless such Holder shall
have provided to the Guarantee Trustee such adequate security and indemnity
as would satisfy a reasonable person in the position of the Guarantee
Trustee, against the costs, expenses (including attorneys' fees and expenses)
and liabilities that might be incurred by it in complying with such request
or direction, including such reasonable advances as may be requested by the
Guarantee Trustee; provided that, nothing contained in this Section 3.2(a)(v)
shall be taken to relieve the Guarantee Trustee, upon the occurrence of an
Event of Default, of its obligation to exercise the rights and powers vested
in it by this Guarantee Agreement.
(vi) The Guarantee Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice, request,
direction, consent, order, bond, debenture, note, other evidence of
indebtedness or other paper or document, but the Guarantee Trustee, in its
discretion, may make such further inquiry or investigation into such facts or
matters as it may see fit.
(vii) The Guarantee Trustee may execute any of the trusts
or powers hereunder or perform any duties hereunder either directly or by or
through its agents or attorneys, and the Guarantee Trustee shall not be
responsible for any
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<PAGE>
misconduct or negligence on the part of any such agent or attorney appointed
with due care by it hereunder.
(viii) Whenever in the administration of this Guarantee
Agreement the Guarantee Trustee shall deem it desirable to receive
instructions with respect to enforcing any remedy or right or taking any
other action hereunder, the Guarantee Trustee (A) may request instructions
from the Holders, (B) may refrain from enforcing such remedy or right or
taking such other action until such instructions are received and (C) shall
be protected in acting in accordance with such instructions.
(b) No provision of this Guarantee Agreement shall be deemed to
impose any duty or obligation on the Guarantee Trustee to perform any act or
acts or exercise any right, power, duty or obligation conferred or imposed on
it in any jurisdiction in which it shall be illegal, or in which the
Guarantee Trustee shall be unqualified or incompetent in accordance with
applicable law, to perform any such act or acts or to exercise any such
right, power, duty or obligation. No permissive power or authority available
to the Guarantee Trustee shall be construed to be a duty to act in accordance
with such power and authority.
Section 3.3 INDEMNITY.
The Guarantor agrees to indemnify the Guarantee Trustee for, and to hold
it harmless against, any loss, liability or expense incurred without
negligence or bad faith on the part of the Guarantee Trustee, arising out of
or in connection with the acceptance or administration of this Guarantee
Agreement, including the costs and expenses of defending itself against any
claim or liability in connection with the exercise or performance of any of
its powers or duties hereunder.
ARTICLE IV.
GUARANTEE TRUSTEE
Section 4.1 GUARANTEE TRUSTEE: ELIGIBILITY.
(a) There shall at all times be a Guarantee Trustee which
shall:
(i) not be an Affiliate of the Guarantor; and
(ii) be a Person that is eligible pursuant to the Trust
Indenture Act to act as such and has a combined capital and surplus of at
least $50,000,000, and shall be a corporation meeting the requirements of
Section 310(a) of the Trust Indenture Act. If such corporation publishes
reports of condition at least annually, pursuant to law or to the
requirements of the supervising or examining authority, then, for the
purposes of this Section 4.1(a)(ii) and to the extent permitted by the Trust
Indenture Act, the combined capital and surplus of such corporation shall be
deemed to be its combined capital and surplus as set forth in its most recent
report of condition so published.
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(b) If at any time the Guarantee Trustee shall cease to be
eligible to so act under Section 4.1(a), the Guarantee Trustee shall
immediately resign in the manner and with the effect set out in Section
4.2(c).
(c) If the Guarantee Trustee has or shall acquire any
"conflicting interest" within the meaning of Section 310(b) of the Trust
Indenture Act, the Guarantee Trustee and Guarantor shall in all respects
comply with the provisions of Section 310(b) of the Trust Indenture Act.
Section 4.2 APPOINTMENT, REMOVAL AND RESIGNATION OF THE GUARANTEE
TRUSTEE.
(a) Subject to Section 4.2(b), the Guarantee Trustee may be
appointed or removed without cause at any time by the Guarantor.
(b) The Guarantee Trustee shall not be removed until a
Successor Guarantee Trustee has been appointed and has accepted such
appointment by written instrument executed by such Successor Guarantee
Trustee and delivered to the Guarantor.
(c) The Guarantee Trustee appointed hereunder shall hold office
until a Successor Guarantee Trustee shall have been appointed or until its
removal or resignation. The Guarantee Trustee may resign from office
(without need for prior or subsequent accounting) by an instrument in writing
executed by the Guarantee Trustee and delivered to the Guarantor, which
resignation shall not take effect until a Successor Guarantee Trustee has
been appointed and has accepted such appointment by instrument in writing
executed by such Successor Guarantee Trustee and delivered to the Guarantor
and the resigning Guarantee Trustee.
(d) If no Successor Guarantee Trustee shall have been appointed
and accepted appointment as provided in this Section 4.2 within 60 days after
delivery to the Guarantor of an instrument of resignation, the resigning
Guarantee Trustee may petition, at the expense of the Guarantor, any court of
competent jurisdiction for appointment of a Successor Guarantee Trustee.
Such court may thereupon, after prescribing such notice, if any, as it may
deem proper, appoint a Successor Guarantee Trustee.
ARTICLE V.
GUARANTEE
Section 5.1 GUARANTEE.
The Guarantor irrevocably and unconditionally agrees to pay in full on a
subordinated basis to the Holders the Guarantee Payments (without duplication
of amounts theretofore paid by or on behalf of the Trust), as and when due,
regardless of any defense, right of set-off or counterclaim which the Trust
may have or assert other than the defense of payment (the "Guarantee"). The
Guarantor's obligation to make a
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Guarantee Payment may be satisfied by direct payment of the required amounts
by the Guarantor to the Holders or by causing the Trust to pay such amounts
to the Holders.
Section 5.2 WAIVER OF NOTICE AND DEMAND.
The Guarantor hereby waives (i) notice of acceptance of the Guarantee
and of any liability to which it applies or may apply, (ii) presentment,
(iii) demand for payment, (iv) any right to require a proceeding first
against the Guarantee Trustee, Trust or any other Person before proceeding
against the Guarantor, (v) protest, (vi) notice of nonpayment, (vii) notice
of dishonor, (viii) notice of redemption and (ix) all other notices and
demands.
Section 5.3 OBLIGATIONS NOT AFFECTED.
The obligations, covenants, agreements and duties of the Guarantor under
this Guarantee Agreement shall in no way be affected or impaired by reason of
the happening from time to time of any of the following:
(a) the release or waiver, by operation of law or otherwise, of
the performance or observance by the Trust of any express or implied
agreement, covenant, term or condition relating to the Trust Preferred
Securities to be performed or observed by the Trust;
(b) the extension of time for the payment by the Trust of all
or any portion of the Distributions (other than an extension of time for
payment of Distributions that results from the extension of any interest
payment period on the Debentures as provided in the Indenture), Redemption
Price, Liquidation Distribution or any other sums payable under the terms of
the Trust Preferred Securities or the extension of time for the performance
of any other obligation under, arising out of, or in connection with, the
Trust Preferred Securities;
(c) any failure, omission, delay or lack of diligence on the
part of the Holders to enforce, assert or exercise any right, privilege,
power or remedy conferred on the Holders pursuant to the terms of the Trust
Preferred Securities, or any action on the part of the Trust granting
indulgence or extension of any kind;
(d) the voluntary or involuntary liquidation, dissolution, sale
of any collateral, receivership, insolvency, bankruptcy, assignment for the
benefit of creditors, reorganization, arrangement, composition or
readjustment of debt of, or other similar proceedings affecting, the Trust or
any of the assets of the Trust;
(e) any invalidity of, or defect or deficiency in, the Trust
Preferred Securities;
(f) the settlement or compromise of any obligation guaranteed
hereby or hereby incurred; or
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(g) any other circumstance whatsoever that might otherwise
constitute a legal or equitable discharge or defense of a guarantor, it being
the intent of this Section 5.3 that the obligations of the Guarantor
hereunder shall be absolute and unconditional under any and all circumstances.
There shall be no obligation of the Holders to give notice to, or obtain the
consent of, the Guarantor with respect to the happening of any of the
foregoing.
Section 5.4 RIGHTS OF HOLDERS.
The Guarantor expressly acknowledges that: (i) this Guarantee will be
deposited with the Guarantee Trustee to be held for the benefit of the
Holders; (ii) the Guarantee Trustee has the right to enforce this Guarantee
on behalf of the Holders; (iii) the Holders of a Majority in Liquidation
Amount of the Trust Preferred Securities have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Guarantee Trustee in respect of this Guarantee Agreement or exercising any
trust or power conferred upon the Guarantee Trustee under this Guarantee
Agreement; and (iv) any Holder may institute a legal proceeding directly
against the Guarantor to enforce its rights under this Guarantee Agreement,
without first instituting a legal proceeding against the Guarantee Trustee,
the Trust or any other Person.
Section 5.5 GUARANTEE OF PAYMENT.
This Guarantee creates a guarantee of payment and not of collection.
This Guarantee will not be discharged except by payment of the Guarantee
Payments in full (without duplication of amounts theretofore paid by the
Trust) or upon distribution of Debentures to Holders as provided in the Trust
Agreement.
Section 5.6 SUBROGATION.
The Guarantor shall be subrogated to all (if any) rights of the Holders
against the Trust in respect of any amounts paid to the Holders by the
Guarantor under this Guarantee Agreement and shall have the right to waive
payment by the Trust pursuant to Section 5.1; provided, however, that the
Guarantor shall not (except to the extent required by mandatory provisions of
law) be entitled to enforce or exercise any rights which it may acquire by
way of subrogation or any indemnity, reimbursement or other agreement, in all
cases as a result of payment under this Guarantee, if, at the time of any
such payment, any amounts are due and unpaid under this Guarantee. If any
amount shall be paid to the Guarantor in violation of the preceding sentence,
the Guarantor agrees to hold such amount in trust for the Holders and to pay
over such amount to the Holders.
Section 5.7 INDEPENDENT OBLIGATIONS.
The Guarantor acknowledges that its obligations hereunder are
independent of the obligations of the Trust with respect to the Trust
Preferred Securities and that the
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Guarantor shall be liable as principal and as debtor hereunder to make
Guarantee Payments pursuant to the terms of this Guarantee Agreement
notwithstanding the occurrence of any event referred to in subsections (a)
through (g), inclusive, of Section 5.3 hereof.
ARTICLE VI.
COVENANTS AND SUBORDINATION
Section 6.1 SUBORDINATION.
The obligations of the Guarantor under this Guarantee will constitute
unsecured obligations of the Guarantor and will rank subordinate and junior
in right of payment to all Senior and Subordinated Debt (as defined in the
Indenture) in the same manner as Debentures (as defined in the Trust
Agreement).
Section 6.2 PARI PASSU GUARANTEES.
The obligations of the Guarantor under this Guarantee shall rank pari
passu with the obligations of the Guarantor under all Other Guarantees.
ARTICLE VII.
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
Section 7.1 GUARANTOR MAY CONSOLIDATE, ETC., ONLY ON CERTAIN TERMS.
The Guarantor shall not consolidate with or merge into any other Person
or convey, transfer or lease its properties and assets substantially as an
entirety to any Person, and no Person shall consolidate with or merge into
the Guarantor or convey, transfer or lease its properties and assets
substantially as an entirety to the Guarantor, unless:
(a) in case the Guarantor shall consolidate with or merge into
another Person or convey, transfer or lease its properties and assets
substantially as an entirety to any Person, the Person formed by such
consolidation or into which the Guarantor is merged or the Person which
acquires by conveyance or transfer, or which leases, the properties and
assets of the Guarantor substantially as an entirety shall be a corporation,
partnership or trust organized and existing under the laws of the United
States of America or any State or the District of Columbia, and shall
expressly assume the Guarantor's obligations under this Guarantee;
(b) immediately after giving effect thereto, no Event of
Default, and no event which, after notice or lapse of time, or both, would
become an Event of Default, shall have happened and be continuing;
(c) such consolidation, merger, conveyance, transfer or lease
is permitted under the Trust Agreement and the Indenture and does not give
rise to any breach or violation of the Trust Agreement or the Indenture; and
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(d) the Guarantor has delivered to the Guarantee Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that such
consolidation, merger, conveyance, transfer or lease and assumption of the
Guarantor's obligations under this Guarantee Agreement comply with this
Article and that all conditions precedent herein provided for relating to
such transaction have been complied with; and the Guarantee Trustee, subject
to Section 3.1 hereof, may rely upon such Officers' Certificate and Opinion
of Counsel as conclusive evidence that such transaction complies with this
Section 7.1.
Section 7.2 SUCCESSOR GUARANTOR SUBSTITUTED.
Upon any consolidation or merger by the Guarantor with or into any other
Person, or any conveyance, transfer or lease by the Guarantor of its
properties and assets substantially as an entirety to any Person in
accordance with Section 7.1, the successor Person formed by such
consolidation or into which the Guarantor is merged or to which such
conveyance, transfer or lease is made shall succeed to, and be substituted
for, and may exercise every right and power of, the Guarantor under this
Guarantee Agreement with the same effect as if such successor Person had been
named as the Guarantor herein; and in the event of any such conveyance,
transfer or lease the Guarantor shall be discharged from all obligations and
covenants under this Guarantee Agreement.
ARTICLE VIII.
TERMINATION
Section 8.1 TERMINATION.
This Guarantee Agreement shall terminate and be of no further force and
effect upon the earliest of (i) full payment of the applicable Redemption
Price of all Trust Preferred Securities, (ii) the distribution of Debentures
to the Holders in exchange for all of the Trust Preferred Securities or (iii)
full payment of the amounts payable in accordance with the Trust Agreement
upon liquidation of the Trust. Notwithstanding the foregoing clauses (i)
through (iii), this Guarantee Agreement will continue to be effective or will
be reinstated if it has been terminated pursuant to one of such clauses (i)
through (iii), as the case may be, if at any time any Holder must restore
payment of any sums paid with respect to Trust Preferred Securities or this
Guarantee Agreement.
ARTICLE IX.
MISCELLANEOUS
Section 9.1 SUCCESSORS AND ASSIGNS.
All guarantees and agreements contained in this Guarantee Agreement
shall bind the successors, assigns, receivers, trustees and representatives
of the Guarantor and shall inure to the benefit of the Holders of the Trust
Preferred Securities then outstanding. Except in connection with a
consolidation, merger or sale involving the Guarantor that is
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permitted under Article VII hereof and Article VIII of the Indenture, the
Guarantor shall not assign its obligations hereunder.
Section 9.2 AMENDMENTS.
Except with respect to any changes which do not adversely affect the
rights of the Holders in any material respect (in which case no vote will be
required), this Guarantee Agreement may not be amended without the prior
approval of the Holders of not less than a Majority in Liquidation Amount of
the Trust Preferred Securities. The provisions of Article VI of the Trust
Agreement concerning meetings of the Holders shall apply to the giving of
such approval.
Section 9.3 Notices.
Any notice, request or other communication required or permitted to be
given hereunder shall be in writing, duly signed by the party giving such
notice, and delivered, telecopied or mailed by first class mail as follows:
(a) if given to the Guarantor, to the address set forth below
or such other address, facsimile number or to the attention of such other
Person as the Guarantor may give notice to the Holders:
First Interstate BancSystem, Inc.
401 North 31st Street
Billings, Montana 59101
Facsimile No.:
Attention:
(b) if given to the Trust, in care of the Guarantee Trustee, at
the Trust's (and the Guarantee Trustee's) address set forth below or such
other address as the Guarantee Trustee on behalf of the Trust may give notice
to the Holders:
FIB Capital Trust
c/o First Interstate BancSystem, Inc.
401 North 31st Street
Billings, Montana 59101
Facsimile No.:
Attention:
with a copy to:
Wilmington Trust Company
1100 North Market
Wilmington, Delaware 19890
Facsimile No.: (302) 651-1000
Attention: Corporate Trust Administration
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(c) if given to any Holder, at the address set forth on the
books and records of the Trust.
All notices hereunder shall be deemed to have been given when received
in person, telecopied with receipt confirmed, or mailed by first class mail,
postage prepaid, except that if a notice or other document is refused
delivery or cannot be delivered because of a changed address of which no
notice was given, such notice or other document shall be deemed to have been
delivered on the date of such refusal or inability to deliver.
Section 9.4 BENEFIT.
This Guarantee is solely for the benefit of the Holders and is not
separately transferable from the Trust Preferred Securities.
Section 9.5 INTERPRETATION.
In this Guarantee Agreement, unless the context otherwise requires:
(a) capitalized terms used in this Guarantee Agreement but not
defined in the preamble hereto have the respective meanings assigned to them
in Section 1.1;
(b) a term defined anywhere in this Guarantee Agreement has the
same meaning throughout;
(c) all references to "the Guarantee Agreement" or "this
Guarantee Agreement" are to this Guarantee Agreement as modified,
supplemented or amended from time to time;
(d) all references in this Guarantee Agreement to Articles and
Sections are to Articles and Sections of this Guarantee Agreement unless
otherwise specified;
(e) a term defined in the Trust Indenture Act has the same
meaning when used in this Guarantee Agreement unless otherwise defined in
this Guarantee Agreement or unless the context otherwise requires;
(f) a reference to the singular includes the plural and vice
versa; and
(g) the masculine, feminine or neuter genders used herein shall
include the masculine, feminine and neuter genders.
Section 9.6 GOVERNING LAW.
THIS GUARANTEE AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE
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STATE OF MONTANA WITHOUT REGARD TO THE CONFLICT OF LAW PRINCIPLES THEREOF.
Section 9.7 COUNTERPARTS. This instrument may be executed in any
number of counterparts, each of which so executed shall be deemed to be an
original, but all such counterparts shall together constitute but one and the
same instrument.
[The Remainder of this Page Intentionally Left Blank.]
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THIS GUARANTEE AGREEMENT is executed as of the day and year first above
written.
FIRST INTERSTATE BANCSYSTEM, INC.
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
WILMINGTON TRUST COMPANY,
as Guarantee Trustee
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
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EXHIBIT 12.1
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES(1)
<TABLE>
<CAPTION>
SIX MONTHS YEAR ENDED DECEMBER 31,
ENDED JUNE -----------------------------------------------------
1997 30, 1996 1996 1995 1994 1993 1992
--------- ----------- --------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings
1. Net income from operations before tax.......... 13,094 10,270 21,243 17,337 15,734 15,448 13,860
2. Applicable income taxes........................ 8,080 6,414 13,351 10,844 9,661 9,321 8,179
--------- ----------- --------- --------- --------- --------- ---------
3. Income before taxes (1 + 2).................... 21,174 16,684 34,594 28,181 25,595 24,769 22,039
--------- ----------- --------- --------- --------- --------- ---------
--------- ----------- --------- --------- --------- --------- ---------
4. Fixed charges:
a.Interest expense excluding interest on
deposits....................................... 4,092 989 3,389 2,488 1,391 835 1,145
b.Portion of rents representative of interest.... 237 247 492 829 866 -- --
c.Preferred stock dividends including pre-tax
effect......................................... 1,169 -- 589 -- -- -- --
--------- ----------- --------- --------- --------- --------- ---------
d.Fixed charges excluding interest on deposits
(4a + 4b + 4c)................................. 5,498 1,236 4,470 3,317 2,257 835 1,145
e. Interest on deposits.......................... 30,281 21,562 46,630 39,458 27,060 26,243 30,844
--------- ----------- --------- --------- --------- --------- ---------
f.Fixed charges including interest on deposits
(4d + 4e)...................................... 35,779 22,798 51,000 42,775 29,817 27,078 31,939
--------- ----------- --------- --------- --------- --------- ---------
--------- ----------- --------- --------- --------- --------- ---------
5. Earnings excluding interest on deposits (3 +
4d).............................................. 26,672 17,920 39,064 31,498 27,852 25,604 23,184
6. Earnings including interest on deposits (3 +
4f).............................................. 56,953 39,482 85,694 70,956 54,912 51,847 54,028
7. Fixed charges excluding interest on deposits
(4d)............................................. 5,498 1,236 4,470 3,317 2,257 835 1,145
8. Fixed charges including interest on deposits
(4f)............................................. 35,779 22,798 51,100 42,775 29,817 27,078 31,989
Ratio of Earnings to Fixed Charges:
9. Excluding interest on deposits
(line 5/line7)................................... 4.85x 14.50x 8.74x 9.50x 12.34x 30.66x 20.25x
10. Including interest on deposits
(line 6/line 8).................................. 1.59x 1.73x 1.68x 1.66x 1.87x 1.91x 1.69x
</TABLE>
- ------------------------
(1) For purposes of computing the ratio of earnings to fixed charges, earnings
represents income before income taxes and fixed charges. Fixed charges
represent interest expense and preferred stock dividends, which dividends
commenced in October 1996. Deposits include interest-bearing deposits and
repurchase agreements. Without including preferred stock dividends in fixed
charges and excluding interest on deposits, the ratio of earnings to fixed
charges for the six months ended June 30, 1997 and the year ended December
31, 1996 were 5.89x and 9.91x, respectively. Without including preferred
stock dividends in fixed charges and including interest on deposits, the
ratio of earnings to fixed charges for the six months ended June 30, 1997
and the year ended December 31, 1996 were 1.61x and 1.68x, respectively.
<PAGE>
EXHIBIT 21.1
SUBSIDIARIES OF FIRST INTERSTATE BANCSYSTEM, INC.
<TABLE>
<CAPTION>
STATE OF INCORPORATION
OR JURISDICTION OF
SUBSIDIARY ORGANIZATION BUSINESS NAME
- ------------------------------------------------ ---------------------------- -----------------------------
<S> <C> <C>
First Interstate Bank(1) Montana First Interstate Bank
(formerly known as First Interstate Bank of
Commerce)
First Interstate Bank(2) Wyoming First Interstate Bank
(formerly known as First Interstate Bank of
Commerce)
First Interstate Bank, fsb United States of America First Interstate Bank
Commerce Financial, Inc. Montana Commerce Financial, Inc.
</TABLE>
- ------------------------
(1) In June 1997, First Interstate Bank of Montana, N.A. and Mountain Bank of
Whitefish, Montana (doing business as First Interstate Bank), prior
subsidiaries of First Interstate BancSystem, Inc., were merged with and into
this subsidiary.
(2) In June 1997, First Interstate Bank of Wyoming, N.A., a prior subsidiary of
First Interstate BancSystem, Inc., was merged with and into this subsidiary.
<PAGE>
EXHIBIT 23.3
INDEPENDENT ACCOUNTANTS' CONSENT
The Board of Directors
First Interstate BancSystem, Inc.:
We consent to the use of our report included herein and to the references to
our firm under the headings "Selected Consolidated Financial Data" and "Experts"
in the prospectus. Our report refers to a change in the method of accounting for
investment securities.
/s/ KPMG PEAT MARWICK LLP
Billings, Montana
October 13, 1997
Registration No.
------------------------
------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2)
---
WILMINGTON TRUST COMPANY
(Exact name of trustee as specified in its charter)
Delaware 51-0055023
(State of incorporation) (I.R.S. employer identification no.)
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
(Address of principal executive offices)
Cynthia L. Corliss
Vice President and Trust Counsel
Wilmington Trust Company
Rodney Square North
Wilmington, Delaware 19890
(302) 651-8516
(Name, address and telephone number of agent for service)
FIRST INTERSTATE BANCSYSTEM, INC.
FIB CAPITAL TRUST
(Exact name of obligor as specified in its charter)
Montana 81-0331430
Delaware Applied For
(State of incorporation) (I.R.S. employer identification no.)
401 North 31st Street
Billings, Montana 59101
(Address of principal executive offices) (Zip Code)
___% Cumulative Trust Preferred Securities of FIB Capital Trust
(Title of the indenture securities)
------------------------
------------------------
<PAGE>
ITEM 1. GENERAL INFORMATION.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority
to which it is subject.
Federal Deposit Insurance Co. State Bank Commissioner
Five Penn Center Dover, Delaware
Suite #2901
Philadelphia, PA
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR.
If the obligor is an affiliate of the trustee, describe each
affiliation:
Based upon an examination of the books and records of the trustee and
upon information furnished by the obligor, the obligor is not an affiliate
of the trustee.
ITEM 3. LIST OF EXHIBITS.
List below all exhibits filed as part of this Statement of
Eligibility and Qualification.
A. Copy of the Charter of Wilmington Trust Company, which includes the
certificate of authority of Wilmington Trust Company to commence
business and the authorization of Wilmington Trust Company to exercise
corporate trust powers.
B. Copy of By-Laws of Wilmington Trust Company.
C. Consent of Wilmington Trust Company required by Section 321(b) of
Trust Indenture Act.
D. Copy of most recent Report of Condition of Wilmington Trust Company.
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, Wilmington Trust Company, a corporation organized and
existing under the laws of Delaware, has duly caused this Statement of
Eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of Wilmington and State of Delaware on the 10th day
of October, 1997.
<PAGE>
WILMINGTON TRUST COMPANY
[SEAL]
Attest: /s/ W. Chris Sponenberg By: /s/ Emmett R. Harmon
------------------------------- -------------------------------
Assistant Secretary Name: Emmett R. Harmon
Title: Vice President
<PAGE>
EXHIBIT A
AMENDED CHARTER
WILMINGTON TRUST COMPANY
WILMINGTON, DELAWARE
As existing on May 9, 1987
<PAGE>
AMENDED CHARTER
OR
ACT OF INCORPORATION
OF
WILMINGTON TRUST COMPANY
WILMINGTON TRUST COMPANY, originally incorporated by an Act of the General
Assembly of the State of Delaware, entitled "An Act to Incorporate the Delaware
Guarantee and Trust Company", approved March 2, A.D. 1901, and the name of which
company was changed to "WILMINGTON TRUST COMPANY" by an amendment filed in the
Office of the Secretary of State on March 18, A.D. 1903, and the Charter or Act
of Incorporation of which company has been from time to time amended and changed
by merger agreements pursuant to the corporation law for state banks and trust
companies of the State of Delaware, does hereby alter and amend its Charter or
Act of Incorporation so that the same as so altered and amended shall in its
entirety read as follows:
FIRST: - The name of this corporation is WILMINGTON TRUST COMPANY.
SECOND: - The location of its principal office in the State of Delaware is
at Rodney Square North, in the City of Wilmington, County of New Castle;
the name of its resident agent is WILMINGTON TRUST COMPANY whose address is
Rodney Square North, in said City. In addition to such principal office,
the said corporation maintains and operates branch offices in the City of
Newark, New Castle County, Delaware, the Town of Newport, New Castle
County, Delaware, at Claymont, New Castle County, Delaware, at Greenville,
New Castle County Delaware, and at Milford Cross Roads, New Castle County,
Delaware, and shall be empowered to open, maintain and operate branch
offices at Ninth and Shipley Streets, 418 Delaware Avenue, 2120 Market
Street, and 3605 Market Street, all in the City of Wilmington, New Castle
County, Delaware, and such other branch offices or places of business as
may be authorized from time to time by the agency or agencies of the
government of the State of Delaware empowered to confer such authority.
THIRD: - (a) The nature of the business and the objects and purposes
proposed to be transacted, promoted or carried on by this Corporation are
to do any or all of the things herein mentioned as fully and to the same
extent as natural persons might or could do and in any part of the world,
viz.:
(1) To sue and be sued, complain and defend in any Court of law or
equity and to make and use a common seal, and alter the seal at
pleasure, to hold, purchase, convey, mortgage or otherwise deal in
real and personal estate and property, and to appoint such officers
and agents as the business of the
<PAGE>
Corporation shall require, to make by-laws not inconsistent with
the Constitution or laws of the United States or of this State, to
discount bills, notes or other evidences of debt, to receive
deposits of money, or securities for money, to buy gold and silver
bullion and foreign coins, to buy and sell bills of exchange, and
generally to use, exercise and enjoy all the powers, rights,
privileges and franchises incident to a corporation which are
proper or necessary for the transaction of the business of the
Corporation hereby created.
(2) To insure titles to real and personal property, or any estate or
interests therein, and to guarantee the holder of such property, real
or personal, against any claim or claims, adverse to his interest
therein, and to prepare and give certificates of title for any lands
or premises in the State of Delaware, or elsewhere.
(3) To act as factor, agent, broker or attorney in the receipt,
collection, custody, investment and management of funds, and the
purchase, sale, management and disposal of property of all
descriptions, and to prepare and execute all papers which may be
necessary or proper in such business.
(4) To prepare and draw agreements, contracts, deeds, leases,
conveyances, mortgages, bonds and legal papers of every description,
and to carry on the business of conveyancing in all its branches.
(5) To receive upon deposit for safekeeping money, jewelry, plate,
deeds, bonds and any and all other personal property of every sort and
kind, from executors, administrators, guardians, public officers,
courts, receivers, assignees, trustees, and from all fiduciaries, and
from all other persons and individuals, and from all corporations
whether state, municipal, corporate or private, and to rent boxes,
safes, vaults and other receptacles for such property.
(6) To act as agent or otherwise for the purpose of registering,
issuing, certificating, countersigning, transferring or underwriting
the stock, bonds or other obligations of any corporation, association,
state or municipality, and may receive and manage any sinking fund
therefor on such terms as may be agreed upon between the two parties,
and in like manner may act as Treasurer of any corporation or
municipality.
(7) To act as Trustee under any deed of trust, mortgage, bond or
other instrument issued by any state, municipality, body politic,
corporation, association or person, either alone or in conjunction
with any other person or persons, corporation or corporations.
(8) To guarantee the validity, performance or effect of any contract
or agreement, and the fidelity of persons holding places of
responsibility or trust; to become surety for any person, or persons,
for the faithful performance of any
<PAGE>
trust, office, duty, contract or agreement, either by itself or in
conjunction with any other person, or persons, corporation, or
corporations, or in like manner become surety upon any bond,
recognizance, obligation, judgment, suit, order, or decree to be
entered in any court of record within the State of Delaware or
elsewhere, or which may now or hereafter be required by any law,
judge, officer or court in the State of Delaware or elsewhere.
(9) To act by any and every method of appointment as trustee, trustee
in bankruptcy, receiver, assignee, assignee in bankruptcy, executor,
administrator, guardian, bailee, or in any other trust capacity in the
receiving, holding, managing, and disposing of any and all estates and
property, real, personal or mixed, and to be appointed as such
trustee, trustee in bankruptcy, receiver, assignee, assignee in
bankruptcy, executor, administrator, guardian or bailee by any
persons, corporations, court, officer, or authority, in the State of
Delaware or elsewhere; and whenever this Corporation is so appointed
by any person, corporation, court, officer or authority such trustee,
trustee in bankruptcy, receiver, assignee, assignee in bankruptcy,
executor, administrator, guardian, bailee, or in any other trust
capacity, it shall not be required to give bond with surety, but its
capital stock shall be taken and held as security for the performance
of the duties devolving upon it by such appointment.
(10) And for its care, management and trouble, and the exercise of
any of its powers hereby given, or for the performance of any of the
duties which it may undertake or be called upon to perform, or for the
assumption of any responsibility the said Corporation may be entitled
to receive a proper compensation.
(11) To purchase, receive, hold and own bonds, mortgages, debentures,
shares of capital stock, and other securities, obligations, contracts
and evidences of indebtedness, of any private, public or municipal
corporation within and without the State of Delaware, or of the
Government of the United States, or of any state, territory, colony,
or possession thereof, or of any foreign government or country; to
receive, collect, receipt for, and dispose of interest, dividends and
income upon and from any of the bonds, mortgages, debentures, notes,
shares of capital stock, securities, obligations, contracts, evidences
of indebtedness and other property held and owned by it, and to
exercise in respect of all such bonds, mortgages, debentures, notes,
shares of capital stock, securities, obligations, contracts, evidences
of indebtedness and other property, any and all the rights, powers and
privileges of individual owners thereof, including the right to vote
thereon; to invest and deal in and with any of the moneys of the
Corporation upon such securities and in such manner as it may think
fit and proper, and from time to time to vary or realize such
investments; to issue bonds and secure the same by pledges or deeds of
trust or mortgages of or upon the whole or any part of the property
held or owned by the Corporation, and to sell and pledge such bonds,
as and when the Board of Directors shall determine,
<PAGE>
and in the promotion of its said corporate business of investment
and to the extent authorized by law, to lease, purchase, hold,
sell, assign, transfer, pledge, mortgage and convey real and
personal property of any name and nature and any estate or
interest therein.
(b) In furtherance of, and not in limitation, of the powers conferred by
the laws of the State of Delaware, it is hereby expressly provided that the
said Corporation shall also have the following powers:
(1) To do any or all of the things herein set forth, to the same
extent as natural persons might or could do, and in any part of the
world.
(2) To acquire the good will, rights, property and franchises and to
undertake the whole or any part of the assets and liabilities of any
person, firm, association or corporation, and to pay for the same in
cash, stock of this Corporation, bonds or otherwise; to hold or in any
manner to dispose of the whole or any part of the property so
purchased; to conduct in any lawful manner the whole or any part of
any business so acquired, and to exercise all the powers necessary or
convenient in and about the conduct and management of such business.
(3) To take, hold, own, deal in, mortgage or otherwise lien, and to
lease, sell, exchange, transfer, or in any manner whatever dispose of
property, real, personal or mixed, wherever situated.
(4) To enter into, make, perform and carry out contracts of every
kind with any person, firm, association or corporation, and, without
limit as to amount, to draw, make, accept, endorse, discount, execute
and issue promissory notes, drafts, bills of exchange, warrants,
bonds, debentures, and other negotiable or transferable instruments.
(5) To have one or more offices, to carry on all or any of its
operations and businesses, without restriction to the same extent as
natural persons might or could do, to purchase or otherwise acquire,
to hold, own, to mortgage, sell, convey or otherwise dispose of, real
and personal property, of every class and description, in any State,
District, Territory or Colony of the United States, and in any foreign
country or place.
(6) It is the intention that the objects, purposes and powers
specified and clauses contained in this paragraph shall (except where
otherwise expressed in said paragraph) be nowise limited or restricted
by reference to or inference from the terms of any other clause of
this or any other paragraph in this charter, but that the objects,
purposes and powers specified in each of the clauses of this paragraph
shall be regarded as independent objects, purposes and powers.
<PAGE>
FOURTH: - (a) The total number of shares of all classes of stock which the
Corporation shall have authority to issue is forty-one million (41,000,000)
shares, consisting of:
(1) One million (1,000,000) shares of Preferred stock, par value
$10.00 per share (hereinafter referred to as "Preferred Stock"); and
(2) Forty million (40,000,000) shares of Common Stock, par value
$1.00 per share (hereinafter referred to as "Common Stock").
(b) Shares of Preferred Stock may be issued from time to time in one or
more series as may from time to time be determined by the Board of
Directors each of said series to be distinctly designated. All shares of
any one series of Preferred Stock shall be alike in every particular,
except that there may be different dates from which dividends, if any,
thereon shall be cumulative, if made cumulative. The voting powers and the
preferences and relative, participating, optional and other special rights
of each such series, and the qualifications, limitations or restrictions
thereof, if any, may differ from those of any and all other series at any
time outstanding; and, subject to the provisions of subparagraph 1 of
Paragraph (c) of this Article FOURTH, the Board of Directors of the
Corporation is hereby expressly granted authority to fix by resolution or
resolutions adopted prior to the issuance of any shares of a particular
series of Preferred Stock, the voting powers and the designations,
preferences and relative, optional and other special rights, and the
qualifications, limitations and restrictions of such series, including, but
without limiting the generality of the foregoing, the following:
(1) The distinctive designation of, and the number of shares of
Preferred Stock which shall constitute such series, which number may
be increased (except where otherwise provided by the Board of
Directors) or decreased (but not below the number of shares thereof
then outstanding) from time to time by like action of the Board of
Directors;
(2) The rate and times at which, and the terms and conditions on
which, dividends, if any, on Preferred Stock of such series shall be
paid, the extent of the preference or relation, if any, of such
dividends to the dividends payable on any other class or classes, or
series of the same or other class of stock and whether such dividends
shall be cumulative or non-cumulative;
(3) The right, if any, of the holders of Preferred Stock of such
series to convert the same into or exchange the same for, shares of
any other class or classes or of any series of the same or any other
class or classes of stock of the Corporation and the terms and
conditions of such conversion or exchange;
(4) Whether or not Preferred Stock of such series shall be subject to
redemption, and the redemption price or prices and the time or times
at which, and the terms and conditions on which, Preferred Stock of
such series may be redeemed.
<PAGE>
(5) The rights, if any, of the holders of Preferred Stock of such
series upon the voluntary or involuntary liquidation, merger,
consolidation, distribution or sale of assets, dissolution or
winding-up, of the Corporation.
(6) The terms of the sinking fund or redemption or purchase account,
if any, to be provided for the Preferred Stock of such series; and
(7) The voting powers, if any, of the holders of such series of
Preferred Stock which may, without limiting the generality of the
foregoing include the right, voting as a series or by itself or
together with other series of Preferred Stock or all series of
Preferred Stock as a class, to elect one or more directors of the
Corporation if there shall have been a default in the payment of
dividends on any one or more series of Preferred Stock or under such
circumstances and on such conditions as the Board of Directors may
determine.
(c) (1) After the requirements with respect to preferential dividends on
the Preferred Stock (fixed in accordance with the provisions of section (b)
of this Article FOURTH), if any, shall have been met and after the
Corporation shall have complied with all the requirements, if any, with
respect to the setting aside of sums as sinking funds or redemption or
purchase accounts (fixed in accordance with the provisions of section (b)
of this Article FOURTH), and subject further to any conditions which may be
fixed in accordance with the provisions of section (b) of this Article
FOURTH, then and not otherwise the holders of Common Stock shall be
entitled to receive such dividends as may be declared from time to time by
the Board of Directors.
(2) After distribution in full of the preferential amount, if any,
(fixed in accordance with the provisions of section (b) of this
Article FOURTH), to be distributed to the holders of Preferred Stock
in the event of voluntary or involuntary liquidation, distribution or
sale of assets, dissolution or winding-up, of the Corporation, the
holders of the Common Stock shall be entitled to receive all of the
remaining assets of the Corporation, tangible and intangible, of
whatever kind available for distribution to stockholders ratably in
proportion to the number of shares of Common Stock held by them
respectively.
(3) Except as may otherwise be required by law or by the provisions
of such resolution or resolutions as may be adopted by the Board of
Directors pursuant to section (b) of this Article FOURTH, each holder
of Common Stock shall have one vote in respect of each share of Common
Stock held on all matters voted upon by the stockholders.
(d) No holder of any of the shares of any class or series of stock or of
options, warrants or other rights to purchase shares of any class or series
of stock or of other securities of the Corporation shall have any
preemptive right to purchase or subscribe for any unissued stock of any
class or series or any additional shares of any class or
<PAGE>
series to be issued by reason of any increase of the authorized capital
stock of the Corporation of any class or series, or bonds, certificates
of indebtedness, debentures or other securities convertible into or
exchangeable for stock of the Corporation of any class or series, or
carrying any right to purchase stock of any class or series, but any
such unissued stock, additional authorized issue of shares of any class
or series of stock or securities convertible into or exchangeable for
stock, or carrying any right to purchase stock, may be issued and
disposed of pursuant to resolution of the Board of Directors to such
persons, firms, corporations or associations, whether such holders or
others, and upon such terms as may be deemed advisable by the Board of
Directors in the exercise of its sole discretion.
(e) The relative powers, preferences and rights of each series of
Preferred Stock in relation to the relative powers, preferences and rights
of each other series of Preferred Stock shall, in each case, be as fixed
from time to time by the Board of Directors in the resolution or
resolutions adopted pursuant to authority granted in section (b) of this
Article FOURTH and the consent, by class or series vote or otherwise, of
the holders of such of the series of Preferred Stock as are from time to
time outstanding shall not be required for the issuance by the Board of
Directors of any other series of Preferred Stock whether or not the powers,
preferences and rights of such other series shall be fixed by the Board of
Directors as senior to, or on a parity with, the powers, preferences and
rights of such outstanding series, or any of them; provided, however, that
the Board of Directors may provide in the resolution or resolutions as to
any series of Preferred Stock adopted pursuant to section (b) of this
Article FOURTH that the consent of the holders of a majority (or such
greater proportion as shall be therein fixed) of the outstanding shares of
such series voting thereon shall be required for the issuance of any or all
other series of Preferred Stock.
(f) Subject to the provisions of section (e), shares of any series of
Preferred Stock may be issued from time to time as the Board of Directors
of the Corporation shall determine and on such terms and for such
consideration as shall be fixed by the Board of Directors.
(g) Shares of Common Stock may be issued from time to time as the Board of
Directors of the Corporation shall determine and on such terms and for such
consideration as shall be fixed by the Board of Directors.
(h) The authorized amount of shares of Common Stock and of Preferred Stock
may, without a class or series vote, be increased or decreased from time to
time by the affirmative vote of the holders of a majority of the stock of
the Corporation entitled to vote thereon.
FIFTH: - (a) The business and affairs of the Corporation shall be
conducted and managed by a Board of Directors. The number of directors
constituting the entire Board shall be not less than five nor more than
twenty-five as fixed from time to time by vote of a majority of the whole
Board, provided, however, that the number of
<PAGE>
directors shall not be reduced so as to shorten the term of any director
at the time in office, and provided further, that the number of
directors constituting the whole Board shall be twenty-four until
otherwise fixed by a majority of the whole Board.
(b) The Board of Directors shall be divided into three classes, as nearly
equal in number as the then total number of directors constituting the
whole Board permits, with the term of office of one class expiring each
year. At the annual meeting of stockholders in 1982, directors of the
first class shall be elected to hold office for a term expiring at the next
succeeding annual meeting, directors of the second class shall be elected
to hold office for a term expiring at the second succeeding annual meeting
and directors of the third class shall be elected to hold office for a term
expiring at the third succeeding annual meeting. Any vacancies in the
Board of Directors for any reason, and any newly created directorships
resulting from any increase in the directors, may be filled by the Board of
Directors, acting by a majority of the directors then in office, although
less than a quorum, and any directors so chosen shall hold office until the
next annual election of directors. At such election, the stockholders
shall elect a successor to such director to hold office until the next
election of the class for which such director shall have been chosen and
until his successor shall be elected and qualified. No decrease in the
number of directors shall shorten the term of any incumbent director.
(c) Notwithstanding any other provisions of this Charter or Act of
Incorporation or the By-Laws of the Corporation (and notwithstanding the
fact that some lesser percentage may be specified by law, this Charter or
Act of Incorporation or the By-Laws of the Corporation), any director or
the entire Board of Directors of the Corporation may be removed at any time
without cause, but only by the affirmative vote of the holders of
two-thirds or more of the outstanding shares of capital stock of the
Corporation entitled to vote generally in the election of directors
(considered for this purpose as one class) cast at a meeting of the
stockholders called for that purpose.
(d) Nominations for the election of directors may be made by the Board of
Directors or by any stockholder entitled to vote for the election of
directors. Such nominations shall be made by notice in writing, delivered
or mailed by first class United States mail, postage prepaid, to the
Secretary of the Corporation not less than 14 days nor more than 50 days
prior to any meeting of the stockholders called for the election of
directors; provided, however, that if less than 21 days' notice of the
meeting is given to stockholders, such written notice shall be delivered or
mailed, as prescribed, to the Secretary of the Corporation not later than
the close of the seventh day following the day on which notice of the
meeting was mailed to stockholders. Notice of nominations which are
proposed by the Board of Directors shall be given by the Chairman on behalf
of the Board.
(e) Each notice under subsection (d) shall set forth (i) the name, age,
business address and, if known, residence address of each nominee proposed
in such notice, (ii) the principal occupation or employment of such nominee
and (iii) the number of shares of
<PAGE>
stock of the Corporation which are beneficially owned by each such nominee.
(f) The Chairman of the meeting may, if the facts warrant, determine and
declare to the meeting that a nomination was not made in accordance with
the foregoing procedure, and if he should so determine, he shall so declare
to the meeting and the defective nomination shall be disregarded.
(g) No action required to be taken or which may be taken at any annual or
special meeting of stockholders of the Corporation may be taken without a
meeting, and the power of stockholders to consent in writing, without a
meeting, to the taking of any action is specifically denied.
SIXTH: - The Directors shall choose such officers, agent and servants as
may be provided in the By-Laws as they may from time to time find necessary
or proper.
SEVENTH: - The Corporation hereby created is hereby given the same powers,
rights and privileges as may be conferred upon corporations organized under
the Act entitled "An Act Providing a General Corporation Law", approved
March 10, 1899, as from time to time amended.
EIGHTH: - This Act shall be deemed and taken to be a private Act.
NINTH: - This Corporation is to have perpetual existence.
TENTH: - The Board of Directors, by resolution passed by a majority of the
whole Board, may designate any of their number to constitute an Executive
Committee, which Committee, to the extent provided in said resolution, or
in the By-Laws of the Company, shall have and may exercise all of the
powers of the Board of Directors in the management of the business and
affairs of the Corporation, and shall have power to authorize the seal of
the Corporation to be affixed to all papers which may require it.
ELEVENTH: - The private property of the stockholders shall not be liable
for the payment of corporate debts to any extent whatever.
TWELFTH: - The Corporation may transact business in any part of the world.
THIRTEENTH: - The Board of Directors of the Corporation is expressly
authorized to make, alter or repeal the By-Laws of the Corporation by a
vote of the majority of the entire Board. The stockholders may make, alter
or repeal any By-Law whether or not adopted by them, provided however, that
any such additional By-Laws, alterations or repeal may be adopted only by
the affirmative vote of the holders of two-thirds or more of the
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors (considered for this purpose as one
class).
FOURTEENTH: - Meetings of the Directors may be held outside
<PAGE>
of the State of Delaware at such places as may be from time to time
designated by the Board, and the Directors may keep the books of the
Company outside of the State of Delaware at such places as may be from time
to time designated by them.
FIFTEENTH: - (a) In addition to any affirmative vote required by law, and
except as otherwise expressly provided in sections (b) and (c) of this
Article FIFTEENTH:
(A) any merger or consolidation of the Corporation or any Subsidiary
(as hereinafter defined) with or into (i) any Interested Stockholder
(as hereinafter defined) or (ii) any other corporation (whether or not
itself an Interested Stockholder), which, after such merger or
consolidation, would be an Affiliate (as hereinafter defined) of an
Interested Stockholder, or
(B) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or a series of related transactions)
to or with any Interested Stockholder or any Affiliate of any
Interested Stockholder of any assets of the Corporation or any
Subsidiary having an aggregate fair market value of $1,000,000 or
more, or
(C) the issuance or transfer by the Corporation or any Subsidiary (in
one transaction or a series of related transactions) of any securities
of the Corporation or any Subsidiary to any Interested Stockholder or
any Affiliate of any Interested Stockholder in exchange for cash,
securities or other property (or a combination thereof) having an
aggregate fair market value of $1,000,000 or more, or
(D) the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation, or
(E) any reclassification of securities (including any reverse stock
split), or recapitalization of the Corporation, or any merger or
consolidation of the Corporation with any of its Subsidiaries or any
similar transaction (whether or not with or into or otherwise
involving an Interested Stockholder) which has the effect, directly or
indirectly, of increasing the proportionate share of the outstanding
shares of any class of equity or convertible securities of the
Corporation or any Subsidiary which is directly or indirectly owned by
any Interested Stockholder, or any Affiliate of any Interested
Stockholder,
shall require the affirmative vote of the holders of at least two-thirds of the
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors, considered for the purpose of this
Article FIFTEENTH as one class ("Voting Shares"). Such affirmative vote shall
be required notwithstanding the fact that no vote may be required, or that some
lesser percentage may be specified, by law or in any agreement with any national
securities exchange or otherwise.
<PAGE>
(2) The term "business combination" as used in this Article
FIFTEENTH shall mean any transaction which is referred to any one
or more of clauses (A) through (E) of paragraph 1 of the section
(a).
(b) The provisions of section (a) of this Article FIFTEENTH shall not
be applicable to any particular business combination and such business
combination shall require only such affirmative vote as is required by
law and any other provisions of the Charter or Act of Incorporation of
By-Laws if such business combination has been approved by a majority
of the whole Board.
(c) For the purposes of this Article FIFTEENTH:
(1) A "person" shall mean any individual firm, corporation or other
entity.
(2) "Interested Stockholder" shall mean, in respect of any business
combination, any person (other than the Corporation or any Subsidiary) who
or which as of the record date for the determination of stockholders
entitled to notice of and to vote on such business combination, or
immediately prior to the consummation of any such transaction:
(A) is the beneficial owner, directly or indirectly, of more than 10%
of the Voting Shares, or
(B) is an Affiliate of the Corporation and at any time within two
years prior thereto was the beneficial owner, directly or indirectly,
of not less than 10% of the then outstanding voting Shares, or
(C) is an assignee of or has otherwise succeeded in any share of
capital stock of the Corporation which were at any time within two
years prior thereto beneficially owned by any Interested Stockholder,
and such assignment or succession shall have occurred in the course of
a transaction or series of transactions not involving a public
offering within the meaning of the Securities Act of 1933.
(3) A person shall be the "beneficial owner" of any Voting Shares:
(A) which such person or any of its Affiliates and Associates (as
hereafter defined) beneficially own, directly or indirectly, or
(B) which such person or any of its Affiliates or Associates has (i)
the right to acquire (whether such right is exercisable immediately or
only after the passage of time), pursuant to any agreement,
arrangement or understanding or upon the exercise of conversion
rights, exchange rights, warrants or options, or otherwise, or (ii)
the right to vote pursuant to any agreement, arrangement or
understanding, or
<PAGE>
(C) which are beneficially owned, directly or indirectly, by any
other person with which such first mentioned person or any of its
Affiliates or Associates has any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or
disposing of any shares of capital stock of the Corporation.
(4) The outstanding Voting Shares shall include shares deemed owned
through application of paragraph (3) above but shall not include any other
Voting Shares which may be issuable pursuant to any agreement, or upon
exercise of conversion rights, warrants or options or otherwise.
(5) "Affiliate" and "Associate" shall have the respective meanings given
those terms in Rule 12b-2 of the General Rules and Regulations under the
Securities Exchange Act of 1934, as in effect on December 31, 1981.
(6) "Subsidiary" shall mean any corporation of which a majority of any
class of equity security (as defined in Rule 3a11-1 of the General Rules
and Regulations under the Securities Exchange Act of 1934, as in effect in
December 31, 1981) is owned, directly or indirectly, by the Corporation;
provided, however, that for the purposes of the definition of Investment
Stockholder set forth in paragraph (2) of this section (c), the term
"Subsidiary" shall mean only a corporation of which a majority of each
class of equity security is owned, directly or indirectly, by the
Corporation.
(d) majority of the directors shall have the power and duty to
determine for the purposes of this Article FIFTEENTH on the basis of
information known to them, (1) the number of Voting Shares
beneficially owned by any person (2) whether a person is an Affiliate
or Associate of another, (3) whether a person has an agreement,
arrangement or understanding with another as to the matters referred
to in paragraph (3) of section (c), or (4) whether the assets subject
to any business combination or the consideration received for the
issuance or transfer of securities by the Corporation, or any
Subsidiary has an aggregate fair market value of $1,00,000 or more.
(e) Nothing contained in this Article FIFTEENTH shall be construed to
relieve any Interested Stockholder from any fiduciary obligation
imposed by law.
SIXTEENTH: Notwithstanding any other provision of this Charter or Act of
Incorporation or the By-Laws of the Corporation (and in addition to any
other vote that may be required by law, this Charter or Act of
Incorporation by the By-Laws), the affirmative vote of the holders of at
least two-thirds of the outstanding shares of the capital stock of the
Corporation entitled to vote generally in the election of directors
(considered for this purpose as one class) shall be required to amend,
alter or repeal any provision of Articles FIFTH, THIRTEENTH, FIFTEENTH or
SIXTEENTH of this Charter or Act of Incorporation.
<PAGE>
SEVENTEENTH: (a) a Director of this Corporation shall not be liable to the
Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a Director, except to the extent such exemption from
liability or limitation thereof is not permitted under the Delaware General
Corporation Laws as the same exists or may hereafter be amended.
(b) Any repeal or modification of the foregoing paragraph shall not
adversely affect any right or protection of a Director of the
Corporation existing hereunder with respect to any act or omission
occurring prior to the time of such repeal or modification."
<PAGE>
EXHIBIT B
BY-LAWS
WILMINGTON TRUST COMPANY
WILMINGTON, DELAWARE
AS EXISTING ON JANUARY 16, 1997
<PAGE>
BY-LAWS OF WILMINGTON TRUST COMPANY
ARTICLE I
STOCKHOLDERS' MEETINGS
Section 1. The Annual Meeting of Stockholders shall be held on the third
Thursday in April each year at the principal office at the Company or at such
other date, time, or place as may be designated by resolution by the Board of
Directors.
Section 2. Special meetings of all stockholders may be called at any time
by the Board of Directors, the Chairman of the Board or the President.
Section 3. Notice of all meetings of the stockholders shall be given by
mailing to each stockholder at least ten (10) days before said meeting, at his
last known address, a written or printed notice fixing the time and place of
such meeting.
Section 4. A majority in the amount of the capital stock of the Company
issued and outstanding on the record date, as herein determined, shall
constitute a quorum at all meetings of stockholders for the transaction of any
business, but the holders of a small number of shares may adjourn, from time to
time, without further notice, until a quorum is secured. At each annual or
special meeting of stockholders, each stockholder shall be entitled to one vote,
either in person or by proxy, for each shares of stock registered in the
stockholder's name on the books of the Company on the record date for any such
meeting as determined herein.
ARTICLE II
DIRECTORS
Section 1. The number and classification of the Board of Directors shall
be as set forth in the Charter of the Bank.
Section 2. No person who has attained the age of seventy-two (72) years
shall be nominated for election to the Board of Directors of the Company,
provided, however, that this limitation shall not apply to any person who was
serving as director of the Company on September 16, 1971.
Section 3. The class of Directors so elected shall hold office for three
years or until their successors are elected and qualified.
Section 4. The affairs and business of the Company shall be managed and
conducted by the Board of Directors.
<PAGE>
Section 5. The Board of Directors shall meet at the principal office of
the Company or elsewhere in its discretion at such times to be determined by a
majority of its members, or at the call of the Chairman of the Board of
Directors or the President.
Section 6. Special meetings of the Board of Directors may be called at any
time by the Chairman of the Board of Directors or by the President, and shall be
called upon the written request of a majority of the directors.
Section 7. A majority of the directors elected and qualified shall be
necessary to constitute a quorum for the transaction of business at any meeting
of the Board of Directors.
Section 8. Written notice shall be sent by mail to each director of any
special meeting of the Board of Directors, and of any change in the time or
place of any regular meeting, stating the time and place of such meeting, which
shall be mailed not less than two days before the time of holding such meeting.
Section 9. In the event of the death, resignation, removal, inability to
act, or disqualification of any director, the Board of Directors, although less
than a quorum, shall have the right to elect the successor who shall hold office
for the remainder of the full term of the class of directors in which the
vacancy occurred, and until such director's successor shall have been duly
elected and qualified.
Section 10. The Board of Directors at its first meeting after its election
by the stockholders shall appoint an Executive Committee, a Trust Committee, an
Audit Committee and a Compensation Committee, and shall elect from its own
members a Chairman of the Board of Directors and a President who may be the same
person. The Board of Directors shall also elect at such meeting a Secretary and
a Treasurer, who may be the same person, may appoint at any time such other
committees and elect or appoint such other officers as it may deem advisable.
The Board of Directors may also elect at such meeting one or more Associate
Directors.
Section 11. The Board of Directors may at any time remove, with or without
cause, any member of any Committee appointed by it or any associate director or
officer elected by it and may appoint or elect his successor.
Section 12. The Board of Directors may designate an officer to be in
charge of such of the departments or division of the Company as it may deem
advisable.
ARTICLE III
COMMITTEES
<PAGE>
Section I. Executive Committee
(A) The Executive Committee shall be composed of not more than
nine members who shall be selected by the Board of Directors from its own
members and who shall hold office during the pleasure of the Board.
(B) The Executive Committee shall have all the powers of the
Board of Directors when it is not in session to transact all business for and in
behalf of the Company that may be brought before it.
(C) The Executive Committee shall meet at the principal office
of the Company or elsewhere in its discretion at such times to be determined by
a majority of its members, or at the call of the Chairman of the Executive
Committee or at the call of the Chairman of the Board of Directors. The
majority of its members shall be necessary to constitute a quorum for the
transaction of business. Special meetings of the Executive Committee may be
held at any time when a quorum is present.
(D) Minutes of each meeting of the Executive Committee shall
be kept and submitted to the Board of Directors at its next meeting.
(E) The Executive Committee shall advise and superintend all
investments that may be made of the funds of the Company, and shall direct the
disposal of the same, in accordance with such rules and regulations as the Board
of Directors from time to time make.
(F) In the event of a state of disaster of sufficient severity
to prevent the conduct and management of the affairs and business of the Company
by its directors and officers as contemplated by these By-Laws any two available
members of the Executive Committee as constituted immediately prior to such
disaster shall constitute a quorum of that Committee for the full conduct and
management of the affairs and business of the Company in accordance with the
provisions of Article III of these By-Laws; and if less than three members of
the Trust Committee is constituted immediately prior to such disaster shall be
available for the transaction of its business, such Executive Committee shall
also be empowered to exercise all of the powers reserved to the Trust Committee
under Article III Section 2 hereof. In the event of the unavailability, at such
time, of a minimum of two members of such Executive Committee, any three
available directors shall constitute the Executive Committee for the full
conduct and management of the affairs and business of the Company in accordance
with the foregoing provisions of this Section. This By-Law shall be subject to
implementation by Resolutions of the Board of Directors presently existing or
hereafter passed from time to time for that purpose, and any provisions of these
By-Laws (other than this Section) and any resolutions which are contrary to the
provisions of this Section or to the provisions of any such implementary
Resolutions shall be suspended during such a disaster period until it shall be
determined by any
<PAGE>
interim Executive Committee acting under this section that it shall be to the
advantage of the Company to resume the conduct and management of its affairs
and business under all of the other provisions of these By-Laws.
<PAGE>
Section 2. Trust Committee
(A) The Trust Committee shall be composed of not more than
thirteen members who shall be selected by the Board of Directors, a majority of
whom shall be members of the Board of Directors and who shall hold office during
the pleasure of the Board.
(B) The Trust Committee shall have general supervision over
the Trust Department and the investment of trust funds, in all matters, however,
being subject to the approval of the Board of Directors.
(C) The Trust Committee shall meet at the principal office of
the Company or elsewhere in its discretion at such times to be determined by a
majority of its members or at the call of its chairman. A majority of its
members shall be necessary to constitute a quorum for the transaction of
business.
(D) Minutes of each meeting of the Trust Committee shall be
kept and promptly submitted to the Board of Directors.
(E) The Trust Committee shall have the power to appoint
Committees and/or designate officers or employees of the Company to whom
supervision over the investment of trust funds may be delegated when the Trust
Committee is not in session.
Section 3. Audit Committee
(A) The Audit Committee shall be composed of five members who
shall be selected by the Board of Directors from its own members, none of whom
shall be an officer of the Company, and shall hold office at the pleasure of the
Board.
(B) The Audit Committee shall have general supervision over
the Audit Division in all matters however subject to the approval of the Board
of Directors; it shall consider all matters brought to its attention by the
officer in charge of the Audit Division, review all reports of examination of
the Company made by any governmental agency or such independent auditor employed
for that purpose, and make such recommendations to the Board of Directors with
respect thereto or with respect to any other matters pertaining to auditing the
Company as it shall deem desirable.
(C) The Audit Committee shall meet whenever and wherever the
majority of its members shall deem it to be proper for the transaction of its
business, and a majority of its Committee shall constitute a quorum.
<PAGE>
Section 4. Compensation Committee
(A) The Compensation Committee shall be composed of not more
than five (5) members who shall be selected by the Board of Directors from its
own members who are not officers of the Company and who shall hold office during
the pleasure of the Board.
(B) The Compensation Committee shall in general advise upon
all matters of policy concerning the Company brought to its attention by the
management and from time to time review the management of the Company, major
organizational matters, including salaries and employee benefits and
specifically shall administer the Executive Incentive Compensation Plan.
(C) Meetings of the Compensation Committee may be called at
any time by the Chairman of the Compensation Committee, the Chairman of the
Board of Directors, or the President of the Company.
Section 5. Associate Directors
(A) Any person who has served as a director may be elected by
the Board of Directors as an associate director, to serve during the pleasure of
the Board.
(B) An associate director shall be entitled to attend all
directors meetings and participate in the discussion of all matters brought to
the Board, with the exception that he would have no right to vote. An associate
director will be eligible for appointment to Committees of the Company, with the
exception of the Executive Committee, Audit Committee and Compensation
Committee, which must be comprised solely of active directors.
Section 6. Absence or Disqualification of Any Member of a Committee
(A) In the absence or disqualification of any member of any
Committee created under Article III of the By-Laws of this Company, the member
or members thereof present at any meeting and not disqualified from voting,
whether or not he or they constitute a quorum, may unanimously appoint another
member of the Board of Directors to act at the meeting in the place of any such
absence or disqualified member.
ARTICLE IV
OFFICERS
Section 1. The Chairman of the Board of Directors shall preside at all
meetings
<PAGE>
of the Board and shall have such further authority and powers and shall
perform such duties as the Board of Directors may from time to time confer
and direct. He shall also exercise such powers and perform such duties as
may from time to time be agreed upon between himself and the President of the
Company.
Section 2. THE VICE CHAIRMAN OF THE BOARD. The Vice Chairman of the Board
of Directors shall preside at all meetings of the Board of Directors at which
the Chairman of the Board shall not be present and shall have such further
authority and powers and shall perform such duties as the Board of Directors or
the Chairman of the Board may from time to time confer and direct.
Section 3. The President shall have the powers and duties pertaining to
the office of the President conferred or imposed upon him by statute or assigned
to him by the Board of Directors in the absence of the Chairman of the Board the
President shall have the powers and duties of the Chairman of the Board.
Section 4. The Chairman of the Board of Directors or the President as
designated by the Board of Directors, shall carry into effect all legal
directions of the Executive Committee and of the Board of Directors, and shall
at all times exercise general supervision over the interest, affairs and
operations of the Company and perform all duties incident to his office.
Section 5. There may be one or more Vice Presidents, however denominated
by the Board of Directors, who may at any time perform all the duties of the
Chairman of the Board of Directors and/or the President and such other powers
and duties as may from time to time be assigned to them by the Board of
Directors, the Executive Committee, the Chairman of the Board or the President
and by the officer in charge of the department or division to which they are
assigned.
Section 6. The Secretary shall attend to the giving of notice of meetings
of the stockholders and the Board of Directors, as well as the Committees
thereof, to the keeping of accurate minutes of all such meetings and to
recording the same in the minute books of the Company. In addition to the other
notice requirements of these By-Laws and as may be practicable under the
circumstances, all such notices shall be in writing and mailed well in advance
of the scheduled date of any other meeting. He shall have custody of the
corporate seal and shall affix the same to any documents requiring such
corporate seal and to attest the same.
Section 7. The Treasurer shall have general supervision over all assets
and liabilities of the Company. He shall be custodian of and responsible for
all monies, funds and valuables of the Company and for the keeping of proper
records of the evidence of property or indebtedness and of all the transactions
of the Company. He shall have general supervision of the expenditures of the
Company and shall report to the Board of Directors at each regular meeting of
the condition of the Company, and
<PAGE>
perform such other duties as may be assigned to him from time to time by the
Board of Directors of the Executive Committee.
Section 8. There may be a Controller who shall exercise general
supervision over the internal operations of the Company, including accounting,
and shall render to the Board of Directors at appropriate times a report
relating to the general condition and internal operations of the Company.
There may be one or more subordinate accounting or controller officers
however denominated, who may perform the duties of the Controller and such
duties as may be prescribed by the Controller.
Section 9. The officer designated by the Board of Directors to be in
charge of the Audit Division of the Company with such title as the Board of
Directors shall prescribe, shall report to and be directly responsible only to
the Board of Directors.
There shall be an Auditor and there may be one or more Audit Officers,
however denominated, who may perform all the duties of the Auditor and such
duties as may be prescribed by the officer in charge of the Audit Division.
Section 10. There may be one or more officers, subordinate in rank to all
Vice Presidents with such functional titles as shall be determined from time to
time by the Board of Directors, who shall ex officio hold the office Assistant
Secretary of this Company and who may perform such duties as may be prescribed
by the officer in charge of the department or division to whom they are
assigned.
Section 11. The powers and duties of all other officers of the Company
shall be those usually pertaining to their respective offices, subject to the
direction of the Board of Directors, the Executive Committee, Chairman of the
Board of Directors or the President and the officer in charge of the department
or division to which they are assigned.
ARTICLE V
STOCK AND STOCK CERTIFICATES
Section 1. Shares of stock shall be transferrable on the books of the
Company and a transfer book shall be kept in which all transfers of stock shall
be recorded.
Section 2. Certificate of stock shall bear the signature of the President
or any Vice President, however denominated by the Board of Directors and
countersigned by the Secretary or Treasurer or an Assistant Secretary, and the
seal of the corporation shall be engraved thereon. Each certificate shall
recite that the stock represented thereby is transferrable only upon the books
of the Company by the holder thereof or
<PAGE>
his attorney, upon surrender of the certificate properly endorsed. Any
certificate of stock surrendered to the Company shall be cancelled at the
time of transfer, and before a new certificate or certificates shall be
issued in lieu thereof. Duplicate certificates of stock shall be issued only
upon giving such security as may be satisfactory to the Board of Directors or
the Executive Committee.
Section 3. The Board of Directors of the Company is authorized to fix in
advance a record date for the determination of the stockholders entitled to
notice of, and to vote at, any meeting of stockholders and any adjournment
thereof, or entitled to receive payment of any dividend, or to any allotment or
rights, or to exercise any rights in respect of any change, conversion or
exchange of capital stock, or in connection with obtaining the consent of
stockholders for any purpose, which record date shall not be more than 60 nor
less than 10 days proceeding the date of any meeting of stockholders or the date
for the payment of any dividend, or the date for the allotment of rights, or the
date when any change or conversion or exchange of capital stock shall go into
effect, or a date in connection with obtaining such consent.
ARTICLE VI
SEAL
Section 1. The corporate seal of the Company shall be in the following
form:
Between two concentric circles the words
"Wilmington Trust Company" within the inner
circle the words "Wilmington, Delaware."
ARTICLE VII
FISCAL YEAR
Section 1. The fiscal year of the Company shall be the calendar year.
ARTICLE VIII
EXECUTION OF INSTRUMENTS OF THE COMPANY
Section 1. The Chairman of the Board, the President or any Vice President,
however denominated by the Board of Directors, shall have full power and
authority to enter into, make, sign, execute, acknowledge and/or deliver and the
Secretary or any Assistant Secretary shall have full power and authority to
attest and affix the corporate seal of the Company to any and all deeds,
conveyances, assignments, releases, contracts, agreements, bonds, notes,
mortgages and all other instruments incident to the business of this Company or
in acting as executor, administrator, guardian, trustee,
<PAGE>
agent or in any other fiduciary or representative capacity by any and every
method of appointment or by whatever person, corporation, court officer or
authority in the State of Delaware, or elsewhere, without any specific
authority, ratification, approval or confirmation by the Board of Directors
or the Executive Committee, and any and all such instruments shall have the
same force and validity as though expressly authorized by the Board of
Directors and/or the Executive Committee.
ARTICLE IX
COMPENSATION OF DIRECTORS AND MEMBERS OF COMMITTEES
Section 1. Directors and associate directors of the Company, other than
salaried officers of the Company, shall be paid such reasonable honoraria or
fees for attending meetings of the Board of Directors as the Board of Directors
may from time to time determine. Directors and associate directors who serve as
members of committees, other than salaried employees of the Company, shall be
paid such reasonable honoraria or fees for services as members of committees as
the Board of Directors shall from time to time determine and directors and
associate directors may be employed by the Company for such special services as
the Board of Directors may from time to time determine and shall be paid for
such special services so performed reasonable compensation as may be determined
by the Board of Directors.
ARTICLE X
INDEMNIFICATION
Section 1. (A) The Corporation shall indemnify and hold harmless, to the
fullest extent permitted by applicable law as it presently exists or may
hereafter be amended, any person who was or is made or is threatened to be made
a party or is otherwise involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative (a "proceeding") by reason of
the fact that he, or a person for whom he is the legal representative, is or was
a director, officer, employee or agent of the Corporation or is or was serving
at the request of the Corporation as a director, officer, employee, fiduciary or
agent of another corporation or of a partnership, joint venture, trust,
enterprise or non-profit entity, including service with respect to employee
benefit plans, against all liability and loss suffered and expenses reasonably
incurred by such person. The Corporation shall indemnify a person in connection
with a proceeding initiated by such person only if the proceeding was authorized
by the Board of Directors of the Corporation.
(B) The Corporation shall pay the expenses incurred in
defending any proceeding in advance of its final disposition, PROVIDED, HOWEVER,
that the payment of expenses incurred by a Director officer in his capacity as a
Director or officer in advance of the final disposition of the proceeding shall
be made only upon receipt of an
<PAGE>
undertaking by the Director or officer to repay all amounts advanced if it
should be ultimately determined that the Director or officer is not entitled
to be indemnified under this Article or otherwise.
(C) If a claim for indemnification or payment of expenses,
under this Article X is not paid in full within ninety days after a written
claim therefor has been received by the Corporation the claimant may file suit
to recover the unpaid amount of such claim and, if successful in whole or in
part, shall be entitled to be paid the expense of prosecuting such claim. In
any such action the Corporation shall have the burden of proving that the
claimant was not entitled to the requested indemnification of payment of
expenses under applicable law.
(D) The rights conferred on any person by this Article X shall
not be exclusive of any other rights which such person may have or hereafter
acquire under any statute, provision of the Charter or Act of Incorporation,
these By-Laws, agreement, vote of stockholders or disinterested Directors or
otherwise.
(E) Any repeal or modification of the foregoing provisions of
this Article X shall not adversely affect any right or protection hereunder of
any person in respect of any act or omission occurring prior to the time of such
repeal or modification.
ARTICLE XI
AMENDMENTS TO THE BY-LAWS
Section 1. These By-Laws may be altered, amended or repealed, in whole or
in part, and any new By-Law or By-Laws adopted at any regular or special meeting
of the Board of Directors by a vote of the majority of all the members of the
Board of Directors then in office.
<PAGE>
EXHIBIT C
SECTION 321(b) CONSENT
Pursuant to Section 321(b) of the Trust Indenture Act of 1939, as amended,
Wilmington Trust Company hereby consents that reports of examinations by
Federal, State, Territorial or District authorities may be furnished by such
authorities to the Securities and Exchange Commission upon requests therefor.
WILMINGTON TRUST COMPANY
Dated: October 10, 1997 By: /s/ Emmett R. Harmon
--------------------------------
Name: Emmett R. Harmon
Title: Vice President
<PAGE>
EXHIBIT D
NOTICE
This from is intended to assist state nonmember banks and savings
banks with state publication requirements. It has not been approved by
any state banking authorities. Refer to your appropriate state banking
authorities for your state publication requirements.
REPORT OF CONDITION
Consolidating domestic subsidiaries of the
WILMINGTON TRUST COMPANY of WILMINGTON
- ---------------------------- --------------
Name of Bank City
in the State of DELAWARE, at the close of business on June 30, 1997.
ASSETS
<TABLE>
<CAPTION>
Thousands of dollars
<S> <C>
Cash and balances due from depositary institutions:
Noninterest-bearing balances and currency and coins ............. 208,942
Interest-bearing balances ........................................ 0
Held-to-maturity securities ............................................... 403,700
Available-for-sale securities ............................................. 905,200
Federal funds sold and securities purchased under agreements to resell..... 151,700
Loans and lease financing receivables:
Loans and leases, net of unearned income .............. 3,816,484
LESS: Allowance for loan and lease losses ............. 54,535
LESS: Allocated transfer risk reserve ................. 0
Loans and leases, net of unearned income, allowance, and reserve . 3,761,949
Assets held in trading accounts ........................................... 0
Premises and fixed assets (including capitalized leases) .................. 95,762
Other real estate owned ................................................... 1,751
Investments in unconsolidated subsidiaries and associated companies........ 42
Customers' liability to this bank on acceptances outstanding .............. 0
Intangible assets ......................................................... 3,572
Other assets .............................................................. 108,295
Total assets .............................................................. 5,640,913
CONTINUED ON NEXT PAGE
<PAGE>
LIABILITIES
Deposits:
In domestic offices ....................................................... 3,864,774
Noninterest-bearing ................................ 875,081
Interest-bearing ................................... 2,989,693
Federal funds purchased and Securities sold under agreements to
repurchase ............................................................ 337,784
Demand notes issued to the U.S. Treasury................................... 95,000
Trading liabilities (from Schedule RC-D) .................................. 0
Other borrowed money: ..................................................... --
With original maturity of one year or less .................... 775,000
With original maturity of more than one year .................. 43,000
Bank's liability on acceptances executed and outstanding .................. 0
Subordinated notes and debentures ......................................... 0
Other liabilities (from Schedule RC-G) .................................... 84,197
Total liabilities ......................................................... 5,199,755
EQUITY CAPITAL
Perpetual preferred stock and related surplus ............................. 0
Common Stock .............................................................. 500
Surplus (exclude all surplus related to preferred stock)................... 62,118
Undivided profits and capital reserves .................................... 376,212
Net unrealized holding gains (losses) on available-for-sale securities .... (2,328)
Total equity capital....................................................... 441,158
Total liabilities, limited-life preferred stock, and equity capital ....... 5,640,913
</TABLE>
<PAGE>
Registration No.
------------------------
------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2)
----
WILMINGTON TRUST COMPANY
(Exact name of trustee as specified in its charter)
Delaware 51-0055023
(State of incorporation) (I.R.S. employer identification no.)
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
(Address of principal executive offices)
Cynthia L. Corliss
Vice President and Trust Counsel
Wilmington Trust Company
Rodney Square North
Wilmington, Delaware 19890
(302) 651-8516
(Name, address and telephone number of agent for service)
FIRST INTERSTATE BANCSYSTEM, INC.
(Exact name of obligor as specified in its charter)
Montana 81-0331430
(State of incorporation) (I.R.S. employer identification no.)
401 North 31st Street
Billings, Montana 59101
(Address of principal executive offices) (Zip Code)
Guarantee of First Interstate BancSystem, Inc.
with respect to Trust Preferred Securities
(Title of the indenture securities)
------------------------
------------------------
<PAGE>
ITEM 1. GENERAL INFORMATION.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority
to which it is subject.
Federal Deposit Insurance Co. State Bank Commissioner
Five Penn Center Dover, Delaware
Suite #2901
Philadelphia, PA
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR.
If the obligor is an affiliate of the trustee, describe each
affiliation:
Based upon an examination of the books and records of the trustee and
upon information furnished by the obligor, the obligor is not an affiliate
of the trustee.
ITEM 3. LIST OF EXHIBITS.
List below all exhibits filed as part of this Statement of
Eligibility and Qualification.
A. Copy of the Charter of Wilmington Trust Company, which includes the
certificate of authority of Wilmington Trust Company to commence
business and the authorization of Wilmington Trust Company to exercise
corporate trust powers (incorporated by reference to Exhibit A to
Exhibit 25.1).
B. Copy of By-Laws of Wilmington Trust Company (incorporated by
reference to Exhibit B to Exhibit 25.1).
C. Consent of Wilmington Trust Company required by Section 321(b) of
Trust Indenture Act.
D. Copy of most recent Report of Condition of Wilmington Trust Company
(incorporated by reference to Exhibit D to Exhibit 25.1).
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, Wilmington Trust Company, a corporation organized and
existing under the laws of Delaware, has duly caused this Statement of
Eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of Wilmington and State of Delaware on the 10th day
of October, 1997.
<PAGE>
WILMINGTON TRUST COMPANY
[SEAL]
Attest: /s/ W. Chris Sponenberg By: /s/ Emmett R. Harmon
---------------------------- ----------------------------
Assistant Secretary Name: Emmett R. Harmon
Title: Vice President
<PAGE>
EXHIBIT C
SECTION 321(b) CONSENT
Pursuant to Section 321(b) of the Trust Indenture Act of 1939, as amended,
Wilmington Trust Company hereby consents that reports of examinations by
Federal, State, Territorial or District authorities may be furnished by such
authorities to the Securities and Exchange Commission upon requests therefor.
WILMINGTON TRUST COMPANY
Dated: October 10, 1997 By: /s/ Emmett R. Harmon
----------------------------
Name:
Title: Vice President
<PAGE>
Registration No.
------------------------
------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2)
----
WILMINGTON TRUST COMPANY
(Exact name of trustee as specified in its charter)
Delaware 51-0055023
(State of incorporation) (I.R.S. employer identification no.)
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
(Address of principal executive offices)
Cynthia L. Corliss
Vice President and Trust Counsel
Wilmington Trust Company
Rodney Square North
Wilmington, Delaware 19890
(302) 651-8516
(Name, address and telephone number of agent for service)
FIRST INTERSTATE BANCSYSTEM, INC.
(Exact name of obligor as specified in its charter)
Montana 81-0331430
(State of incorporation) (I.R.S. employer identification no.)
401 North 31st Street
Billings, Montana 59101
(Address of principal executive offices) (Zip Code)
___% Junior Subordinated Deferrable Interest Debentures
of First Interstate Bancsystem, Inc.
(Title of the indenture securities)
------------------------
------------------------
<PAGE>
ITEM 1. GENERAL INFORMATION.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority
to which it is subject.
Federal Deposit Insurance Co. State Bank Commissioner
Five Penn Center Dover, Delaware
Suite #2901
Philadelphia, PA
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR.
If the obligor is an affiliate of the trustee, describe each
affiliation:
Based upon an examination of the books and records of the trustee and
upon information furnished by the obligor, the obligor is not an affiliate
of the trustee.
ITEM 3. LIST OF EXHIBITS.
List below all exhibits filed as part of this Statement of
Eligibility and Qualification.
A. Copy of the Charter of Wilmington Trust Company, which includes the
certificate of authority of Wilmington Trust Company to commence
business and the authorization of Wilmington Trust Company to exercise
corporate trust powers (incorporated by reference to Exhibit A to
Exhibit 25.1).
B. Copy of By-Laws of Wilmington Trust Company (incorporated by
reference to Exhibit B to Exhibit 25.1).
C. Consent of Wilmington Trust Company required by Section 321(b) of
Trust Indenture Act.
D. Copy of most recent Report of Condition of Wilmington Trust Company
(incorporated by reference to Exhibit D to Exhibit 25.1).
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, Wilmington Trust Company, a corporation organized and
existing under the laws of Delaware, has duly caused this Statement of
Eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of Wilmington and State of Delaware on the 10th day
of October, 1997.
<PAGE>
WILMINGTON TRUST COMPANY
[SEAL]
Attest: /s/ W. Chris Sponenberg By: /s/ Emmett R. Harmon
---------------------------- ----------------------------
Assistant Secretary Name: Emmett R. Harmon
Title: Vice President
<PAGE>
EXHIBIT C
SECTION 321(b) CONSENT
Pursuant to Section 321(b) of the Trust Indenture Act of 1939, as amended,
Wilmington Trust Company hereby consents that reports of examinations by
Federal, State, Territorial or District authorities may be furnished by such
authorities to the Securities and Exchange Commission upon requests therefor.
WILMINGTON TRUST COMPANY
Dated: October 10, 1997 By: /s/ Emmett R. Harmon
----------------------------
Name: Emmett R. Harmon
Title: Vice President
