<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 23, 1997
REGISTRATION NO. 333-24781
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1
TO
FORM S-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
<TABLE>
<S> <C>
VECTRA BANKING CORPORATION VBC CAPITAL I
(Exact name of registrant as specified in its (Exact name of co-registrant as specified in its
charter) charter)
COLORADO DELAWARE
(State or other jurisdiction of incorporation or (State or other jurisdiction of incorporation or
organization) organization)
84-1087703 APPLIED FOR
(I.R.S. Employer Identification Number) (I.R.S. Employer Identification Number)
1650 SOUTH COLORADO BOULEVARD, SUITE 320 1650 SOUTH COLORADO BOULEVARD, SUITE 320
DENVER, COLORADO 80222 DENVER, COLORADO 80222
(303) 782-7440 (303) 782-7440
(Address including zip code, and telephone (Address including zip code, and telephone
number, including number, including
area code, of registrant's principal executive area code, of co-registrant's principal executive
offices) offices)
</TABLE>
GARY S. JUDD, PRESIDENT
1650 SOUTH COLORADO BOULEVARD, SUITE 320
DENVER, COLORADO 80222
(303) 782-7440
(Name, address including zip code, and telephone number including area code, of
agent for service)
Copies to:
<TABLE>
<S> <C>
REID A. GODBOLT, ESQ. ANDREW L. BLAIR, JR., ESQ.
JONES & KELLER, P.C. SHERMAN & HOWARD L.L.C.
1625 BROADWAY, SUITE 1600 633 17TH STREET, SUITE 3000
DENVER, COLORADO 80202 DENVER, COLORADO 80202
(303) 573-1600 (303) 297-2900
</TABLE>
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 the Registrant elects to deliver its latest annual report to security
holders, or a complete and legible facsimile thereof, pursuant to Item 11(a)(1)
of this Form, 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, check the following box and
list the Securities Act registration statement number of 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. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
==========================================================================================================================
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED(1) REGISTERED PER UNIT(1) PRICE REGISTRATION FEE
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
% Cumulative Capital Securities of VBC
Capital I................................. 700,000 $25.00 $17,500,000 $5,303
- --------------------------------------------------------------------------------------------------------------------------
% Junior Subordinated Debentures of
Vectra Banking Corporation................ (2) -- -- --
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Guarantee of Vectra Banking Corporation with
respect to the % Cumulative Capital
Securities(3)............................. (3) -- -- --
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Total Registration Fee...................... -- -- -- $5,303
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</TABLE>
(1) Estimated solely for the purpose of computing the registration fee pursuant
to Rule 457(a).
(2) The % Junior Subordinated Debentures (the "Junior Subordinated
Debentures") will be purchased by VBC Capital I ("VBC Capital") with the
proceeds of the sale of the % Cumulative Capital Securities (the "Capital
Securities"). The Junior Subordinated Debentures may later be distributed
for no additional consideration to the holders of the Capital Securities
upon VBC Capital's dissolution and the distribution of its assets.
(3) This Registration Statement is deemed to cover the Junior Subordinated
Debentures of Vectra Banking Corporation (the "Company"), the rights of
holders of the Junior Subordinated Debentures of the Company under the
Indenture, the rights of holders of the Capital Securities under the Trust
Agreement, the Guarantee, the Expense Agreement entered into by the Company
and certain backup undertakings as described herein. No separate
consideration will be received for the Guarantee or such backup
undertakings.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT THAT 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.
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<PAGE> 2
Information contained herein is subject to completion or amendment. A
Registration Statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor
may offers to buy be accepted prior to the time the Registration Statement
becomes effective. This Prospectus shall not constitute an offer to sell or
the solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws
of any such State.
SUBJECT TO COMPLETION, DATED , 1997
700,000 CAPITAL SECURITIES
VBC CAPITAL I
% CUMULATIVE CAPITAL SECURITIES
(LIQUIDATION AMOUNT $25 PER CAPITAL SECURITY)
FULLY AND UNCONDITIONALLY GUARANTEED, AS DESCRIBED HEREIN, BY
VECTRA BANKING CORPORATION
[VECTRA BANK LOGO]
The % Cumulative Capital Securities (the "Capital Securities") offered
hereby represent undivided beneficial interests in the assets of VBC Capital I,
a statutory business trust formed under the laws of the State of Delaware ("VBC
Capital"). Vectra Banking Corporation, a Colorado corporation (the "Company"),
will be the owner of all of the beneficial interests represented by common
securities of VBC Capital (the "Common Securities" and, collectively with the
Capital Securities, the "Trust Securities"). VBC Capital exists for the sole
purpose of issuing the Trust Securities and investing the proceeds thereof in
% Junior Subordinated Debentures (the "Junior Subordinated Debentures") to
be issued by the Company. 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 the Company 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). The Capital 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 the Company. See "Description of the Capital Securities --
Subordination of Common Securities of VBC Capital Held by the Company."
(Continued on next page)
---------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 11 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>
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PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC COMMISSION(1) VBC CAPITAL(2)(3)
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<S> <C> <C> <C>
Per Capital Security............................ $25.00 (2) $25.00
- ------------------------------------------------------------------------------------------------------------
Total........................................... $17,500,000 (2) $17,500,000
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</TABLE>
(1) The Company and VBC Capital have agreed to indemnify the Underwriters
against certain liabilities, including liabilities under the Securities Act
of 1933, as amended. See "Underwriting."
(2) In view of the fact that all of the proceeds of the sale of the Capital
Securities will be used to purchase the Junior Subordinated Debentures, the
Company has agreed to pay the Underwriters as compensation for arranging the
investment therein of such proceeds $ per Capital Security, or
$ in the aggregate. See "Underwriting."
(3) Before deducting offering expenses payable by the Company estimated at
$250,000.
---------------------
The Capital Securities are being offered 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 Capital 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.
DAIN BOSWORTH HOWE BARNES INVESTMENTS, INC.
Incorporated
The date of this Prospectus is , 1997
<PAGE> 3
Holders of the Capital Securities will be entitled to receive preferential
cumulative cash distributions accruing from the date of original issuance and
payable quarterly in arrears on the 15th day of April, July, October and January
of each year (subject to possible deferral as described below), commencing July
15, 1997, at the annual rate of % of the Liquidation Amount of $25 per Capital
Security ("Distributions"). The amount of each Distribution due with respect to
the Capital Securities will include amounts accrued through the date the
distribution payment is due. The Company 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, the Company 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 Capital Securities will also be
deferred and the Company will not be permitted, subject to certain exceptions
described herein, to declare or pay any cash distributions with respect to 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 Capital
Securities are entitled will accumulate) at the rate of % per annum,
compounded quarterly, and holders of the Capital 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
Extend Interest Payment Period" and "Certain Federal Income Tax
Consequences -- Interest Income and Original Issue Discount."
The Company has, through the Guarantee, Trust Agreement, Junior
Subordinated Debentures, Indenture and the Expense Agreement (each as defined
herein), taken together, fully, irrevocably and unconditionally guaranteed, on a
subordinated basis, all of VBC Capital's obligations under the Capital
Securities. See "Relationship Among the Capital Securities, the Junior
Subordinated Debentures and the Guarantee -- Full and Unconditional Guarantee."
Under the Guarantee, the Company guarantees the payment of Distributions by VBC
Capital and payments on liquidation of or redemption of the Capital Securities
(subordinate to the right to payment of Senior and Subordinated Debt of the
Company) to the extent of funds held by VBC Capital. The Guarantee does not
cover payment of Distributions when VBC Capital does not have sufficient funds
to pay such Distributions. See "Description of Guarantee." If the Company does
not make required payments on the Junior Subordinated Debentures held by VBC
Capital, VBC Capital will have insufficient funds to pay Distributions on the
Capital Securities. In such event, a holder of the Capital Securities may
institute a legal proceeding directly against the Company to enforce payment of
such Distributions to such holder. See "Description of Junior Subordinated
Debentures -- Enforcement of Certain Rights by Holders of the Capital
Securities." The obligations of the Company 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 the Company.
The Capital Securities are subject to mandatory redemption, in whole or in
part, upon repayment of the underlying Junior Subordinated Debentures at
maturity or to the extent of their earlier redemption in an amount equal to the
amount of Junior Subordinated Debentures maturing or being redeemed. The
redemption price will equal the aggregate liquidation preference of the Capital
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 the Company, 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 Capital Securities -- Redemption."
(Continued on next page)
2
<PAGE> 4
The Company will have the right at any time to terminate VBC Capital and
cause the Junior Subordinated Debentures to be distributed to the holders of the
Trust Securities in liquidation of VBC Capital, subject to the Company having
received prior approval of the Federal Reserve if required. See "Description of
the Capital Securities -- Redemption." The Junior Subordinated Debentures are
unsecured and subordinated to all Senior and Subordinated Debt, which
essentially consists of all debt of the Company. As of December 31, 1996, the
Company had approximately $4.1 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 the
Company can issue. See "Description of Junior Subordinated
Debentures -- Subordination."
In the event of the termination of VBC Capital, after satisfaction of
liabilities to creditors of VBC Capital as required by applicable law, the
holders of Capital Securities will be entitled to receive a liquidation amount
of $25 per Capital Security ("Liquidation Amount"), plus accumulated and unpaid
Distributions thereon through the date of distribution, which may be in the form
of a distribution of a Like Amount (as defined herein) of Junior Subordinated
Debentures, including accumulated and unpaid interest thereon equal to the
accumulated and unpaid Distributions on the Capital Securities through the date
of distribution. See "Description of the Capital Securities -- Liquidation
Distribution Upon Termination."
The Capital Securities have been approved for listing on the Nasdaq
National Market. Although each of the Underwriters has indicated an intention to
make a market in the Capital Securities, the Underwriters are not obligated to
do so, 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 Capital Securities. See "Risk Factors -- Absence of Existing
Public Market" and "Underwriting."
The Capital Securities will be represented by one or more global
certificates registered in the name of The Depository Trust Company (the
"Depositary") or its nominee. Beneficial interests in the Capital Securities
will be shown on, and transfers thereof will be effected only through, records
maintained by participants in the Depositary. Except as described herein, the
Capital 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 SUBORDINATED INDENTURE DATED
AS OF , 1997, AS AMENDED AND SUPPLEMENTED FROM TIME TO TIME, BETWEEN
THE COMPANY AND WILMINGTON TRUST COMPANY AS TRUSTEE (THE "INDENTURE TRUSTEE"),
UNDER WHICH THE JUNIOR SUBORDINATED DEBENTURES WILL BE ISSUED, AND (II) THE
"PROPERTY TRUSTEE" AND "DELAWARE TRUSTEE" UNDER THE TRUST AGREEMENT EXECUTED BY
THE COMPANY, AS DEPOSITOR, WILMINGTON TRUST COMPANY, AS TRUSTEE, AND THE
ADMINISTRATIVE TRUSTEES NAMED THEREIN, TO BE AMENDED AND RESTATED PURSUANT TO AN
AMENDED AND RESTATED TRUST AGREEMENT EXECUTED BY SUCH PARTIES (AS AMENDED AND
RESTATED, THE "TRUST AGREEMENT") MEANS WILMINGTON TRUST COMPANY.
---------------------
INFORMATION INCLUDED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS
INCLUDES "FORWARD LOOKING STATEMENTS," WHICH CAN BE IDENTIFIED BY THE USE OF
FORWARD-LOOKING TERMINOLOGY SUCH AS "MAY," "WILL," "EXPECT," "ANTICIPATE,"
"ESTIMATE," OR "CONTINUE," OR THE NEGATIVE THEREOF OR OTHER VARIATIONS THEREON
OR COMPARABLE TERMINOLOGY. THE STATEMENTS IN "RISK FACTORS" BEGINNING ON PAGE 11
OF THE PROSPECTUS AND OTHER STATEMENTS AND DISCLAIMERS IN THE PROSPECTUS
CONSTITUTE CAUTIONARY STATEMENTS IDENTIFYING IMPORTANT FACTORS, INCLUDING
CERTAIN RISKS AND UNCERTAINTIES, WITH RESPECT TO SUCH FORWARD-LOOKING STATEMENTS
THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE REFLECTED IN
SUCH FORWARD-LOOKING STATEMENTS.
3
<PAGE> 5
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-2 under the Securities Act of
1933, as amended (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 such Registration Statement, certain parts of which are
omitted in accordance with the rules and regulations of the Commission.
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Commission. Reports, proxy statements and other information filed by the Company
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,
proxy and information statements and other information regarding the Company may
be accessed. In addition, such reports, proxy statements and other information
can also be inspected at the offices of The Nasdaq Stock Market, 1735 K Street,
N.W., Washington, D.C. 20006.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following document filed by the Company with the Commission is
incorporated by reference in this Prospectus: the Company's Annual Report on
Form 10-K for the year ended December 31, 1996.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of this offering shall be deemed to be incorporated by reference
into this Prospectus and to be a part hereof from the date of filing of such
documents. Any statement contained herein or in a document incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed to constitute a part of this
Prospectus, except as so modified or superseded.
The Company will provide without charge to each person to whom a copy of
this Prospectus is delivered, upon the oral or written request of any such
person, a copy of all documents which are incorporated by reference in this
Prospectus, other than exhibits to such documents (unless such exhibits are
specifically incorporated by reference in such documents). Requests for such
copies should be directed to Ray L. Nash, Chief Financial Officer, Vectra
Banking Corporation, 1650 South Colorado Boulevard, Suite 320, Denver, Colorado
80222, telephone number (303) 782-7440.
---------------------
The Company furnishes its securityholders with an Annual Report containing
Consolidated Financial Statements audited by its independent certified public
accountants.
---------------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY EFFECT TRANSACTIONS
WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE CAPITAL SECURITIES ON THE
NASDAQ NATIONAL MARKET OR OTHERWISE, AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE
PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED
AT ANY TIME.
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<PAGE> 6
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and consolidated financial information appearing elsewhere in this
Prospectus or in the documents incorporated into this Prospectus by reference.
Unless the context clearly suggests otherwise, references to the Company include
the Company and its subsidiaries.
THE COMPANY
Vectra Banking Corporation (the "Company") is the second largest
independent Colorado-based bank holding company, with a total of 12 banking
locations serving the Denver/Boulder metropolitan area. Through its bank
subsidiary, Vectra Bank (the "Bank"), the Company provides a broad range of
banking products and services primarily to consumers and small to medium sized
businesses. The Company was founded in 1988 by two senior banking executives
who, together with a small group of investors, provided $9.8 million in initial
capital to the Company. The Company's initial objective was to acquire several
strategically located community banks and transform them into a banking system
that would provide a broad package of products and services to its customers and
growth potential to its shareholders. In 1989, the Company acquired its initial
eight locations having total assets of $156 million. Since that time, the
Company has grown significantly through a combination of internal growth and
acquisitions. At December 31, 1996, the Company had total assets of
approximately $562 million.
In November 1995, the Company completed a merger of First Denver
Corporation ("FDC"), a bank holding company whose primary operating subsidiary
was First National Bank of Denver, into the Company. This acquisition added
approximately $44 million in deposits and $17 million in loans. In June 1996,
the Company acquired Bank Land Company, a bank holding company whose primary
operating subsidiary was Southwest State Bank ("Southwest"). This acquisition
added approximately $96 million in deposits and $74 million in loans. The
addition of the FDC and Southwest banking locations has allowed the Company to
serve a broader base of households and businesses within its market and to
achieve growth in assets and revenue without a proportionate growth in expenses.
The Company intends to continue to pursue its growth strategy through a
combination of internal growth and acquisitions, with the goal of maintaining
and expanding a well-capitalized, customer-focused financial institution.
Management believes that the Company has the executive management team,
distribution network and operational systems support to achieve this goal.
Management also believes that increased consolidation and regulatory burdens are
likely to lead owners of community banks to explore the possibility of a
combination with a broader-based bank holding company such as the Company.
The Company's operating strategy is to continue to build a growing,
profitable community banking network. The principal elements of this strategy
are (i) focus on the financial service needs of consumers and small to medium
sized businesses by combining the elements of service traditionally found in
community banks with product lines typically found in large banks, (ii)
emphasize high quality customer service in all aspects of operations, (iii)
maintain high asset quality and (iv) achieve efficiencies through centralized
administrative and support functions.
The Company's principal executive office is located at 1650 South Colorado
Boulevard, Suite 320, Denver, Colorado 80222, and its telephone number is (303)
782-7440.
VBC CAPITAL
VBC 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 April 4, 1997. VBC Capital's
business and affairs are conducted by the Property Trustee, the Delaware Trustee
and three individual Administrative Trustees who are officers of the Company.
VBC 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 the Company, and (iii)
engaging in only
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<PAGE> 7
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 VBC Capital, and payments by
the Company under the Junior Subordinated Debentures and the Expense Agreement
will be the sole revenues of VBC Capital. The Company will acquire Common
Securities in an aggregate liquidation amount equal to 3% of the total
Liquidation Amount of the Capital Securities sold hereunder. All of the Common
Securities will be owned by the Company. The Common Securities will rank pari
passu, and payments will be made thereon pro rata, with the Capital 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 the Company 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 Capital
Securities. See "Description of the Capital Securities -- Subordination of
Common Securities of VBC Capital Held by the Company." VBC Capital has a term of
31 years, but may terminate earlier as provided in the Trust Agreement.
VBC Capital's principal executive offices are located at 1650 South
Colorado Boulevard, Suite 320, Denver, Colorado 80222, and its telephone number
is (303) 782-7440.
THE OFFERING
Capital Securities
issuer..................... VBC Capital
Securities offered......... 700,000 Capital Securities. The Capital Securities
represent undivided beneficial interests in VBC
Capital's assets, which will consist solely of the
Junior Subordinated Debentures and payments
thereunder.
Distributions.............. The Distributions payable on each Capital Security
will be fixed at a rate per annum of % of the
Liquidation Amount of $25 per Capital Security,
will be cumulative, will accrue from the date of
issuance of the Capital Securities, and will be
payable quarterly in arrears on the 15th day of
April, July, October and January of each year,
commencing on July 15, 1997 (subject to possible
deferral as described below). The amount of each
distribution due with respect to the Capital
Securities will include amounts accrued through the
date the distribution payment is due. See
"Description of the Capital
Securities -- Distributions."
Extension Periods.......... So long as no Debenture Event of Default (as
defined herein) has occurred and is continuing, the
Company 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 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. If interest
payments are so deferred, Distributions on the
Capital Securities will also be deferred and the
Company will not be permitted, subject to certain
exceptions described herein, to declare or pay any
cash distributions with respect to the Company's
capital stock or debt securities that rank pari
passu with or junior to the Junior Subordinated
Debentures. During an Extension Period,
Distributions will continue to accrue with income
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 Capital Securities
would be required to accrue income for United
States federal income tax purposes. See
"Description of Junior Subordinated
Debentures -- Option to Extend Interest Payment
Period" and "Certain Federal Income Tax
Consequences -- Interest Income and Original Issue
Discount."
6
<PAGE> 8
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 the
Company having received prior approval of the
Federal Reserve to do so if then required under
applicable capital guidelines or policies of the
Federal Reserve).
Redemption................. The Capital Securities are subject to mandatory
redemption upon repayment of the Junior
Subordinated Debentures at maturity or their
earlier redemption in an amount equal to the amount
of Junior Subordinated Debentures maturing or being
redeemed at a redemption price equal to the
aggregate Liquidation Amount of the Capital
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 the Company (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 Capital
Securities -- Redemption" and "Description of
Junior Subordinated Debentures -- Redemption."
Distribution of Junior
Subordinated
Debentures............... The Company has the right at any time to terminate
VBC Capital and cause the Junior Subordinated
Debentures to be distributed to holders of Capital
Securities in liquidation of VBC Capital, subject
to the Company 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 Capital
Securities -- Distribution of Junior Subordinated
Debentures."
Guarantee.................. Taken together, the Company's obligations under
various documents described herein, including the
Guarantee, provide a full guarantee on a
subordinated basis of payments by VBC Capital of
Distributions and other amounts due on the Capital
Securities. Under the Guarantee, the Company
guarantees the payment of Distributions by VBC
Capital and payments on liquidation of or
redemption of the Capital Securities (subordinate
to the right to payment of Senior and Subordinated
Debt of the Company, as defined herein) to the
extent of funds held by VBC Capital. If VBC Capital
has insufficient funds to pay Distributions on the
Capital Securities (i.e., if the Company has failed
to make required payments under the Junior
Subordinated Debentures), a holder of the Capital
Securities would have the right to institute a
legal proceeding directly against the Company to
enforce payment of such Distributions to such
holder. See "Description of Junior Subordinated
Debentures -- Enforcement of Certain Rights of
Holders of the Capital Securities," "Description of
Junior Subordinated Debentures -- Debenture Events
of Default" and "Description of Guarantee."
7
<PAGE> 9
Ranking.................... The Capital Securities will rank pari passu, and
payments thereon will be made pro rata, with the
Common Securities of VBC Capital held by the
Company, except as described under "Description of
the Capital Securities -- Subordination of Common
Securities of VBC Capital Held by the Company." The
obligations of the Company 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 December 31, 1996, the
aggregate outstanding Senior and Subordinated Debt
of the Company was approximately $4.1 million. In
addition, because the Company is a holding company,
all obligations of the Company relating to the
securities described herein will be effectively
subordinated to all existing and future liabilities
of the Company's subsidiaries, including the Bank.
The Company may cause additional capital securities
to be issued by trusts similar to VBC Capital in
the future, and there is no limit on the amount of
such securities that may be issued. In this event,
the Company's obligations under the junior
subordinated debentures to be issued to such other
trusts and the Company's guarantees of the payments
by such trusts will rank pari passu with the
Company's obligations under the Junior Subordinated
Debentures and the Guarantee, respectively.
Voting Rights.............. The holders of the Capital Securities will
generally have limited voting rights relating only
to the modification of the Capital Securities, the
dissolution, winding-up or termination of VBC
Capital and certain other matters described herein.
See "Description of the Capital Securities --
Voting Rights; Amendment of Trust Agreement."
Nasdaq National
Market Symbol............ VTRAO
Use of Proceeds............ The proceeds to VBC Capital from the sale of the
Capital Securities offered hereby will be invested
by VBC Capital in the Junior Subordinated
Debentures of the Company. The Company intends to
use the net proceeds from the issuance of the
Junior Subordinated Debentures for redemption of
its outstanding $.95 Series A Cumulative Preferred
Stock (approximately $8.3 million) and for general
corporate purposes, which may include without
limitation possible future acquisitions, funding
investments in, or extensions of credit to, the
Company's subsidiaries and repayment of existing
obligations. The Company expects the Capital
Securities to qualify as Tier 1 capital under the
capital guidelines of the Federal Reserve subject
to regulatory limitations. See "Use of Proceeds."
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<PAGE> 10
SELECTED FINANCIAL DATA
The following table sets forth certain selected financial data concerning
the Company. The selected financial data for each of the five years ended
December 31, 1996, is derived from the Consolidated Financial Statements of the
Company and related notes thereto, and should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations." In November 1995, the Company completed a merger of FDC into the
Company, which was accounted for as a pooling of interests. Accordingly, the
Consolidated Financial Statements reflect the Company and FDC combined for all
years presented. In June 1996, the Company acquired Southwest, which was
accounted for using purchase accounting. Accordingly, Southwest's balances and
results of operations have been included in the Consolidated Financial
Statements only from the date of acquisition forward. See Note 2 of Notes to
Consolidated Financial Statements.
<TABLE>
<CAPTION>
AT OR FOR THE YEAR ENDED DECEMBER 31,
----------------------------------------------------
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS:
Interest income................................... $ 37,957 $ 34,253 $ 28,543 $ 18,700 $ 17,385
Interest expense.................................. 15,230 16,330 11,172 5,912 6,044
Net interest income............................... 22,727 17,923 17,371 12,788 11,341
Provision for loan losses......................... 916 795 794 283 363
Other income...................................... 4,492 3,820 3,507 4,001 3,988
Other expenses.................................... 17,918 15,871 15,052 14,752 13,421
Net earnings...................................... 5,445 3,303 2,675 2,410 1,518
Net earnings available to common shareholders..... 4,271 2,538 2,096 2,404 1,498
BALANCE SHEET:
Total assets...................................... $561,811 $417,806 $462,314 $293,700 $262,625
Net loans......................................... 315,667 204,171 179,766 140,750 125,316
Securities available for sale and held to
maturity........................................ 181,258 171,198 235,086 112,277 93,182
Nonperforming assets(1)........................... 3,550 2,369 2,477 3,077 5,323
Deposits.......................................... 439,351 307,085 268,184 250,111 205,097
Shareholders' equity.............................. 45,435 30,185 23,593 17,353 15,048
PER SHARE:
Earnings per common share and common equivalent
share(2)........................................ $ 1.31 $ 0.79 $ 0.69 $ 0.95 $ 0.63
Earnings per common share assuming full
dilution(2)..................................... 1.26 0.78 0.69 0.95 0.63
Book value per pro forma fully converted common
share(3)........................................ 9.28 6.93 4.86 5.91 4.69
Tangible book value per pro forma fully converted
common share(3)................................. 7.30 6.84 4.86 5.91 4.69
KEY RATIOS:
Net interest margin............................... 5.20% 4.42% 4.66% 5.30% 5.71%
Net interest spread............................... 4.29 3.57 3.95 4.68 5.04
Return on average assets.......................... 1.13 0.75 0.66 0.88 0.65
Return on average common equity................... 15.74 13.41 12.65 15.37 11.61
Shareholders' equity to total assets.............. 8.09 7.22 5.10 5.91 5.73
Nonperforming assets to total assets.............. 0.63 0.57 0.54 1.05 2.03
Nonperforming loans to total loans................ 0.79 0.67 0.62 1.34 2.52
Allowance for loan losses to total loans.......... 1.32 1.21 1.10 1.62 1.63
Allowance for loan losses to nonperforming
loans........................................... 166.92 181.31 176.75 121.42 64.68
Ratio of earnings to fixed charges(4):
Excluding interest on deposits.................. 2.36x 1.54x 1.74x 2.20x 1.95x
Including interest on deposits.................. 1.49 1.28 1.41 1.28 1.24
</TABLE>
- ---------------
(1) Includes loans 90 days or more delinquent and still accruing interest,
nonaccrual loans, restructured loans and real estate and other assets
acquired by foreclosure.
(2) See Note 17 of Notes to Consolidated Financial Statements.
(3) Assumes the conversion of $10,971,000 of $100 Series A Convertible Preferred
Stock into 827,992 shares of common stock.
(4) For purposes of computing the ratio of earnings to fixed charges, earnings
represent earnings before income taxes, extraordinary items and fixed
charges. Fixed charges represent interest expense, including the interest
component of rental expense, and preferred stock dividends. Fixed charges
attributable to the preferred stock dividends are assumed to equal the
amount of pre-tax earnings that would be necessary to pay such dividends.
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<PAGE> 11
[VECTRA BANK LOGO]
BANKING LOCATIONS
[MAP OF BANKING LOCATIONS]
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<PAGE> 12
RISK FACTORS
Prospective investors should consider, among other things, the following
factors in connection with a decision to purchase the Capital Securities.
RANKING OF THE COMPANY'S OBLIGATIONS UNDER THE JUNIOR SUBORDINATED DEBENTURES
AND THE GUARANTEE
The ability of VBC Capital to pay amounts due to holders of the Capital
Securities is solely dependent upon the Company making payments on the Junior
Subordinated Debentures as and when required. All obligations of the Company
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 December 31, 1996, the aggregate outstanding Senior and
Subordinated Debt of the Company was approximately $4.1 million. None of the
Indenture, the Guarantee 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 the Company or its subsidiaries. Further, there is no
limitation on the Company's ability to issue additional junior subordinated
debentures in connection with any future offerings of capital securities, and
any such additional debentures would rank pari passu with the Junior
Subordinated Debentures.
In addition, because the Company is a holding company, all obligations of
the Company relating to the securities described herein will be effectively
subordinated to all existing and future liabilities of the Company's
subsidiaries, including the Bank. As a holding company, the right of the Company
to participate in any distribution of assets of any subsidiary upon such
subsidiary's liquidation or reorganization or otherwise (and thus the ability of
holders of the Capital Securities to benefit indirectly from such distribution)
is subject to the prior claims of creditors of that subsidiary, except to the
extent that the Company may itself be recognized as a creditor of that
subsidiary. Accordingly, holders of the Capital Securities should look only to
the assets of the Company, and not of its subsidiaries, for principal and
interest payments on the Junior Subordinated Debentures. See "Description of
Junior Subordinated Debentures -- Subordination" and "Description of
Guarantee -- Status of the Guarantee."
DEPENDENCE ON DIVIDENDS FROM SUBSIDIARY BANK
As a holding company, with the substantial majority of its assets
represented by its equity interest in the Bank, the Company's ability to pay
interest on the Junior Subordinated Debentures to VBC Capital (and consequently
VBC Capital's ability to pay Distributions on the Capital Securities and the
Company's ability to pay its obligations on the Guarantee) depends primarily
upon the cash dividends the Company receives from the Bank. Dividend payments
from the Bank are subject to regulatory limitations, generally based on current
and retained earnings, imposed by the various regulatory agencies with authority
over the Bank. Payment of dividends is also subject to regulatory restrictions
if such dividends would impair the capital of the Bank. Payment of Bank
dividends is also subject to its profitability, financial condition and capital
expenditures and other cash flow requirements. No assurance can be given that
the Bank will be able to pay dividends at past levels, or at all, in the future.
OPTION TO EXTEND INTEREST PAYMENT PERIOD; TAX CONSEQUENCES OF A DEFERRAL OF
INTEREST PAYMENTS
So long as no Debenture Event of Default (as defined herein) has occurred
and is continuing, the Company 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 a period not exceeding 20 consecutive quarters with respect to
each 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 Capital Securities by VBC Capital
will be deferred (and the amount of Distributions to which holders of the
Capital 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, the Company will be
prohibited from making certain payments or distributions with respect to the
Company's capital stock
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<PAGE> 13
(including dividends on or redemptions of common or preferred stock) and from
making certain payments with respect to any debt securities of the Company that
rank pari passu with or junior in interest to the Junior Subordinated
Debentures; however, the Company will not be restricted from (a) paying
dividends or distributions in common stock of the Company, (b) redeeming rights
or taking certain other actions under a stockholders' rights plan, if any, (c)
making payments under the Guarantee or (d) making 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. Further, during an
Extension Period, the Company would have the ability to continue to make
payments on Senior and Subordinated Debt. Prior to the termination of any
Extension Period, the Company 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), the Company may elect to
begin a new Extension Period subject to the above requirements. There is no
limitation on the number of times that the Company may elect to begin an
Extension Period. See "Description of the Capital Securities -- Distributions"
and "Description of Junior Subordinated Debentures -- Option to Extend Interest
Payment Period."
The Company believes the likelihood of it exercising its option to defer
payments of interest is remote since, among other things, exercising the option
would prevent the Company from declaring dividends or distributions on its
capital stock. Consequently, 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 Capital Securities will include interest in
taxable income under their own methods of accounting (i.e., cash or accrual). If
the Company exercises its right to defer payments of interest or if the Internal
Revenue Service successfully took the position that the exercise of such right
was not remote at the time of issuance of the Junior Subordinated Debentures,
original issue discount would arise, and the holders of Capital Securities would
be required to include their pro rata share of original issue discount in gross
income as it accrues for United States federal income tax purposes in advance of
the receipt of cash. See "Certain Federal Income Tax Consequences -- Potential
Extension of Interest Payment Period and Original Issue Discount." The Company
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 the Company elect to exercise its right to defer payments of
interest in the future, the market price of the Capital Securities is likely to
be adversely affected. A holder that disposes of such holder's Capital
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
Capital Securities.
TAX EVENT REDEMPTION, INVESTMENT COMPANY ACT 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), the Company has the right 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 Securities. The exercise of such right is subject to the
Company 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 Capital Securities -- Redemption."
A "Tax Event" means the receipt by the Company and VBC 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 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 pronouncement or decision is announced on or after the original issuance of
the Capital Securities, there is more than an insubstantial risk that (i) VBC
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
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<PAGE> 14
Subordinated Debentures, (ii) interest payable by the Company on the Junior
Subordinated Debentures is not, or within 90 days of such opinion, will not be,
deductible by the Company, in whole or in part, for United States federal income
tax purposes, or (iii) VBC Capital is, or will be within 90 days of the date of
the opinion, subject to more than a de minimis amount of other taxes, duties or
other governmental charges. See "-- Possible Tax Law Changes Affecting the
Capital Securities" below for a discussion of certain legislative proposals
that, if adopted, could give rise to a Tax Event, which may permit the Company
to cause a redemption of the Junior Subordinated Debentures (and therefore the
Capital Securities) prior to , 2002.
An "Investment Company Event" means the receipt by the Company and VBC
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, VBC Capital is or will be considered an
"investment company" that is required to be registered under the Investment
Company Act, which change becomes effective on or after the original issuance of
the Capital Securities.
A "Capital Treatment Event" means the reasonable determination by the
Company that, as a result of any amendment to, or change (including any proposed
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 proposed change, pronouncement or decision is announced on or after the
date of issuance of the Capital Securities under the Trust Agreement, there is
more than an insubstantial risk of impairment of the Company's ability to treat
the Capital 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 the Company.
POSSIBLE TAX LAW CHANGES AFFECTING THE CAPITAL SECURITIES
On February 6, 1997, the Clinton Administration submitted Revenue Proposals
(the "Proposals") to the 105th Congress. If enacted, the Proposals would
generally deny deductions for interest on an instrument issued by a publicly
traded corporation (a) that has a maximum weighted average maturity of more than
40 years or (b) has a maximum term of more than 15 years and that is not shown
as indebtedness on the separate balance sheet of the issuer or, where the
instrument is issued to a related party (other than a corporation), where the
holder or some other related party issues a related instrument that is not shown
as indebtedness on the issuer's consolidated balance sheet. For purposes of
determining the weighted average maturity or the term of an instrument, any
right to extend would be treated as exercised. The above-described provisions of
the Proposals are proposed to be effective generally for instruments issued on
or after the date of first Congressional committee action on the Proposals. If
either provision were to apply to the Junior Subordinated Debentures, the
Company would not be able to deduct interest on the Junior Subordinated
Debentures. If the proposed legislation is ultimately enacted and if the
effective date provision contained in the Proposals is followed, such
legislation would not apply to the Junior Subordinated Debentures. There can be
no assurance, however, that current or future legislative proposals or final
legislation will not adversely affect the ability of the Company to deduct
interest on the Junior Subordinated Debentures or otherwise affect the tax
treatment of the transaction described herein. Such a change could give rise to
a Tax Event, which may permit the Company, upon approval of the Federal Reserve
if then required under applicable capital guidelines or policies of the Federal
Reserve, to cause a redemption of the Capital Securities prior to ,
2002. See "Description of the Capital Securities -- Redemption -- Tax Event
Redemption" and "Description of the Junior Subordinated
Debentures -- Redemption." See also "Certain Federal Income Tax
Consequences -- Possible Tax Law Changes."
POSSIBLE DISTRIBUTION OF JUNIOR SUBORDINATED DEBENTURES TO HOLDERS OF CAPITAL
SECURITIES
The Company will have the right at any time to terminate VBC Capital and
cause the Junior Subordinated Debentures to be distributed to the holders of the
Capital Securities in liquidation of VBC Capital, subject to the receipt of any
required prior approval of the Federal Reserve. Because holders of the
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<PAGE> 15
Capital Securities may receive Junior Subordinated Debentures in liquidation of
VBC Capital and because Distributions are otherwise limited to payments on the
Junior Subordinated Debentures, prospective purchasers of the Capital Securities
are also making an investment decision with regard to the Junior Subordinated
Debentures and should carefully review all the information regarding the Junior
Subordinated Debentures contained herein. See "Description of the Capital
Securities -- Liquidation Distribution Upon Termination" and "Description of the
Junior Subordinated Debentures."
LIMITATIONS ON DIRECT ACTIONS AGAINST THE COMPANY AND ON RIGHTS UNDER THE
GUARANTEE
Under the Guarantee, the Company guarantees the payment of Distributions by
VBC Capital and payments on liquidation of or redemption of the Capital
Securities (subordinate to the right to payment of Senior and Subordinated Debt
of the Company) to the extent of funds held by VBC Capital. If VBC Capital has
insufficient funds to pay Distributions on the Capital Securities (i.e., if the
Company has failed to make required payments under the Junior Subordinated
Debentures), a holder of the Capital Securities would have the right to
institute a legal proceeding directly against the Company 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 Capital Securities of such holder (a "Direct Action").
Except as described herein, holders of the Capital 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.
Under the Guarantee, Wilmington Trust Company will act as indenture trustee
(the "Guarantee Trustee"). The holders of not less than a majority in aggregate
Liquidation Amount of the Capital Securities have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Guarantee Trustee in respect of the Guarantee or to direct the exercise of any
trust power conferred upon the Guarantee Trustee under the Guarantee Agreement.
Any holder of the Capital Securities may institute a legal proceeding directly
against the Company to enforce its rights under the Guarantee without first
instituting a legal proceeding against VBC Capital, the Guarantee Trustee or any
other person or entity. The Trust Agreement provides that each holder of the
Capital Securities by acceptance thereof agrees to the provisions of the
Guarantee Agreement and the Indenture. See "Description of Junior Subordinated
Debentures -- Enforcement of Certain Rights of Holders of Capital Securities"
and "-- Debenture Events of Default" and "Description of Guarantee."
LIMITED COVENANTS
The covenants in the Indenture are limited, and there are no covenants
relating to the Company in the Trust Agreement. As a result, neither the
Indenture nor the Trust Agreement protects holders of Junior Subordinated
Debentures, or Capital Securities, respectively, in the event of a material
adverse change in the Company's financial condition or results of operations or
limits the ability of the Company or any subsidiary to incur additional
indebtedness. Therefore, the provisions of these governing instruments should
not be considered a significant factor in evaluating whether the Company will be
able to comply with its obligations under the Junior Subordinated Debentures or
the Guarantee.
LIMITED VOTING RIGHTS
Holders of the Capital Securities will generally have limited voting rights
relating only to the modification of the Capital Securities and certain other
matters described herein. In the event that (i) there is a Debenture Event of
Default (as defined herein) with respect to the Junior Subordinated Debentures
(see "Description of the Junior Subordinated Debentures -- Events of Default"),
(ii) the Property Trustee fails to pay any Distribution on the Capital
Securities for 30 days (subject to deferral of Distributions as provided under
"Description of the Capital Securities -- Extension Periods"), (iii) the
Property Trustee fails to pay the redemption price on the Capital Securities
when due upon redemption, (iv) the Property Trustee fails to observe a covenant
in the Trust Agreement for the Capital Securities for 60 days after receiving a
Notice of Default, or (v) the Property Trustee is declared bankrupt or insolvent
and not replaced by the Company within 60 days, the holders of a majority of the
outstanding Capital Securities will be able to remove the
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<PAGE> 16
Property Trustee and the Indenture Trustee (but not the Administrative Trustees
who may only be removed by the Company as holder of the Common Securities). See
"Description of the Capital Securities -- Voting Rights; Amendment of the Trust
Agreement" and "-- Removal of Trustees."
ABSENCE OF EXISTING PUBLIC MARKET; MARKET PRICES
There is no existing market for the Capital Securities. An application is
pending for listing of the Capital Securities on the Nasdaq National Market
System. There can be no assurance that an active and liquid trading market for
the Capital Securities will develop or that a listing of the Capital Securities
will be available on Nasdaq. Although each Underwriter has informed VBC Capital
and the Company that such Underwriter intends to make a market in the Capital
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 Capital Securities. Future trading prices of the Capital
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. There can be no assurance as to the
market prices for the Capital Securities or the Junior Subordinated Debentures
that may be distributed in exchange for the Capital Securities if the Company
exercises its right to terminate VBC Capital. Accordingly, the Capital
Securities that an investor may purchase, or the Junior Subordinated Debentures
that a holder of the Capital Securities may receive in liquidation of VBC
Capital, may decline in value from the price that the investor paid to purchase
the Capital Securities offered hereby.
GROWTH AND ACQUISITION STRATEGIES
The Company has pursued and intends to continue to pursue an internal
growth strategy, the success of which will depend primarily on generating an
increasing level of loans and deposits at acceptable risk levels and terms
without proportionate increases in noninterest expenses. There can be no
assurance that the Company will be successful in implementing its internal
growth strategy. In addition, the Company has grown and may seek to grow by
acquiring other financial institutions. Any acquisitions will be subject to
regulatory approval, and there can be no assurance that the Company will obtain
such approvals. Although the Company does not have any signed contracts, letters
of intent or agreements in principle, the Company routinely solicits and reviews
acquisition opportunities and, at any given time, may have bids outstanding or
may be involved in discussions with the owners of financial institutions or
other parties relative to a particular financial institution. The Company may
not be successful in identifying further acquisition candidates, integrating
acquired institutions or preventing deposit erosion at acquired institutions.
Competition for acquisitions in the Company's market area is highly competitive,
and the Company may not be able to acquire other institutions on attractive
terms. Furthermore, the success of the growth strategy of the Company will
depend on maintaining sufficient regulatory capital levels and on continued
favorable economic conditions in the Denver/Boulder area.
MARKET VALUE OF INVESTMENTS; INTEREST RATE CEILINGS
Substantially all of the Company's securities investment portfolio has been
designated as available for sale pursuant to Statement of Financial Accounting
Standards No. 115 ("SFAS 115") relating to accounting for investments. SFAS 115
requires that unrealized gains and losses in the estimated value of the
available for sale portfolio (net of tax) be "marked to market" and reflected as
a separate item in shareholders' equity. At December 31, 1996, the Company
maintained approximately 32.2% of its assets in securities available for sale.
Shareholders' equity will continue to reflect the unrealized gains and losses
(net of tax) of these investments. There can be no assurance that the market
value of the Company's investment portfolio will not decline, causing a
corresponding decline in shareholders' equity.
Management believes that several factors will affect the market values of
the Company's investment portfolio. These include, but are not limited to,
changes in interest rates or expectations of changes, the degree of volatility
in the securities markets, inflation rates or expectations of inflation and the
slope of the interest rate yield curve. (The yield curve refers to the
differences between longer-term and shorter-term interest rates. A positively
sloped yield curve means shorter-term rates are lower than longer-term rates.)
Also, the passage
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<PAGE> 17
of time will affect the market values of the securities, in that the closer they
are to maturing, the closer the market price should be to par value. In addition
to the foregoing, there are other factors that impact specific categories of the
portfolio differently.
In addition, substantially all of the variable rate securities in the
investment portfolio of the Company are subject to interest rate ceilings. The
market values of these securities would likely decline, causing a corresponding
decline in shareholders' equity, if the coupon rates increased to the ceiling
levels or higher. This could also negatively impact net interest income
depending on corresponding changes in the cost of deposits and other
liabilities. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations."
ALLOWANCE FOR LOAN LOSSES
Inability of borrowers to repay loans can erode earnings and capital of
banks. Like all banks, the Company maintains an allowance for loan losses to
provide for loan defaults and nonperformance. The allowance is based on prior
experience with loan losses, as well as an evaluation of the risks in the
current portfolio, and is maintained at a level considered adequate by
management to absorb anticipated losses. The amount of future losses is
susceptible to changes in economic, operating and other conditions, including
changes in interest rates, that may be beyond management's control, and such
losses may exceed current estimates. At December 31, 1996, the Company had
nonperforming loans of $2.5 million and an allowance for loan losses of $4.2
million or 1.32% of total loans and 167% of nonperforming loans. There can be no
assurance that the Company's allowance for loan losses will be adequate to cover
actual losses. Future provisions for loan losses could materially and adversely
affect results of operations of the Company. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
ECONOMIC CONDITIONS AND IMPACT OF INTEREST RATES
Results of operations for financial institutions, including the Company,
may be materially and adversely affected by changes in prevailing economic
conditions, including declines in real estate values, rapid changes in interest
rates and the monetary and fiscal policies of the federal government. The
profitability of the Company is in part a function of the spread between the
interest rates earned on assets and the interest rates paid on deposits and
other interest-bearing liabilities, including advances from the Federal Home
Loan Bank ("FHLB"). A decrease in interest rate spreads would have a negative
effect on the net interest income and profitability of the Company, and there
can be no assurance that this spread will not decrease. Although economic
conditions in the market area of the Company have been generally stronger than
those in many other regions of the country, there can be no assurance that such
conditions will continue to prevail. Moreover, substantially all of the loans of
the Company are to individuals and businesses in the Denver/Boulder area, and
any decline in the economy of this market area could have an adverse impact on
the Company. There can be no assurance that positive trends or developments
discussed herein will continue or that negative trends or developments will not
have a material adverse effect on the Company. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
COMPETITIVE BANKING ENVIRONMENT
The banking business in Colorado is highly competitive. The Company
competes for loans and deposits with other local, regional and national
commercial banks, savings banks, savings and loan associations, finance
companies, money market funds, brokerage houses, credit unions and nonfinancial
institutions, many of which have substantially greater financial resources than
the Company. Interstate banking is permitted in Colorado. Currently, branch
banking in Colorado is allowed on a limited basis. After a phase-in period
ending July 1, 1997, full state-wide branch banking will be permitted. As a
result, management believes that the Company may experience greater competition
in its market area.
DEPENDENCE ON KEY PERSONNEL
The Company is highly dependent on the continued services of Gary S. Judd,
its President and Chief Executive Officer, Ray L. Nash, its Chief Financial
Officer, and other key management personnel. The
16
<PAGE> 18
Company does not have employment agreements with such persons, nor does it have
key person insurance on any of their lives. The loss of the services of these
persons could adversely affect the Company. See "Management."
GOVERNMENT REGULATION AND RECENT LEGISLATION
The Company and the Bank are subject to extensive federal and state
legislation, regulation and supervision which is intended primarily to protect
depositors and the Bank Insurance Fund, rather than investors. Recently enacted,
proposed and future legislation and regulations designed to strengthen the
banking industry have had and may continue to have a significant impact on the
banking industry. Although some of the legislative and regulatory changes may
benefit the Company and the Bank, others may increase their costs of doing
business or otherwise adversely affect them and create competitive advantages
for non-bank competitors.
USE OF PROCEEDS
All of the proceeds from the sale of Capital Securities will be invested by
VBC Capital in the Junior Subordinated Debentures. The net proceeds to the
Company from the sale of the Junior Subordinated Debentures of the Company are
estimated to be $16.3 million (net of estimated underwriting commission and
other estimated offering expenses). The Company intends to use the net proceeds
for redemption of the Company's outstanding $.95 Series A Cumulative Preferred
Stock (approximately $8.3 million) and for general corporate purposes, which may
include without limitation possible future acquisitions, funding investments in,
or extensions of credit to, the Company's subsidiaries, and repayment of
existing obligations. Although the Company does not have any signed contracts,
letters of intent or agreements in principle, the Company routinely solicits and
reviews acquisition opportunities and, at any given time, may have bids
outstanding or may be involved in discussions with the owners of financial
institutions or other parties relative to a particular financial institution.
Pending their application, the net proceeds may be invested in short-term
investment grade financial instruments.
The Company 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 securities having the
characteristics of the Capital Securities could be included as Tier 1 capital
for bank holding companies subject to certain limitations. See "Capitalization."
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 the Company with a cost-effective means of obtaining
capital for bank regulatory purposes.
ACCOUNTING TREATMENT
For financial reporting purposes, VBC Capital will be treated as a
subsidiary of the Company and, accordingly, the accounts of VBC Capital will be
included in the Consolidated Financial Statements of the Company. The Capital
Securities will be presented as a separate line item in the consolidated balance
sheets 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 Capital
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 Capital
Securities as interest expense in the consolidated statements of operations.
Future reports of the Company filed under the Exchange Act will include a
footnote to the financial statements stating that (i) VBC Capital is
wholly-owned, (ii) the sole assets of VBC Capital are the Junior Subordinated
Debentures (specifying the principal amount, interest rate and maturity date of
such Junior Subordinated Debentures), and (iii) the obligations of the Company
described herein, in the aggregate, constitute a full and unconditional
guarantee on a subordinated basis by the Company of the obligations of VBC
Capital under the Capital Securities. VBC Capital will not provide separate
reports under the Exchange Act.
17
<PAGE> 19
CAPITALIZATION
The following table sets forth the capitalization (including deposits) of
the Company at December 31, 1996 and as adjusted to give effect to the issuance
of the Capital Securities by VBC Capital in this offering and the use of
proceeds therefrom.
<TABLE>
<CAPTION>
DECEMBER 31, 1996
-----------------------
ACTUAL AS ADJUSTED
-------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Deposits.................................................... $439,351 $439,351
======== ========
Borrowings:
Advances from the Federal Home Loan Bank and federal funds
purchased.............................................. $ 59,700 $ 59,700
Securities and loans sold under agreements to
repurchase............................................. 10,733 10,733
Notes payable............................................. 4,050 4,050
-------- --------
Total borrowings.................................. $ 74,483 $ 74,483
======== ========
Company obligated mandatorily redeemable preferred
securities of subsidiary trust holding solely Junior
Subordinated Debentures(1)................................ $ -- $ 17,500
======== ========
Shareholders' equity:
Preferred stock, $.10 par value:
$.95 Series A Cumulative Preferred Stock; 805,000
shares issued and outstanding......................... $ 8,050 $ --
$100 Series A Convertible Preferred Stock; 109,709
shares issued and outstanding......................... 10,971 10,971
Common Stock, $.01 par value; 7,000,000 shares
authorized; 3,202,412 shares issued and outstanding... 32 32
Capital in excess of par value............................ 25,716 25,716
Retained earnings......................................... 4,441 4,200
Unrealized loss on securities available for sale, net of
income tax effect of $2,246............................ (3,775) (3,775)
-------- --------
Total shareholders' equity........................ $ 45,435 $ 37,114
======== ========
Consolidated regulatory capital ratios:
Total capital to risk-weighted assets..................... 11.6% 13.9%
Tier 1 capital to risk-weighted assets(2)................. 10.5 11.2
Tier 1 capital to tangible assets(2)...................... 7.0 7.5
</TABLE>
- ---------------
(1) The subsidiary trust is VBC Capital, a wholly-owned subsidiary of the
Company that will hold approximately $18.0 million principal amount of
Junior Subordinated Debentures issued by the Company to VBC Capital as its
sole asset. The Capital Securities are issued by VBC Capital. See
"Description of Junior Subordinated Debentures." The Company owns all of the
Common Securities of VBC Capital.
(2) The Capital Securities have been structured to qualify as Tier 1 capital.
However, the Capital Securities cannot be used to constitute, together with
outstanding cumulative preferred stock of the Company, more than 25% of the
Company's total Tier 1 capital. As adjusted for this offering, the Company's
Tier 1 capital as of December 31, 1996 would have been $43.9 million of
which $11.0 million would have been attributable to the Capital Securities.
Any future increases in other elements of the Company's Tier 1 capital,
including retained earnings, will allow the Company to include greater
portions of the Capital Securities offered hereby in Tier 1 capital.
18
<PAGE> 20
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
BUSINESS ENVIRONMENT AND RISK FACTORS
The following discussion should be read in conjunction with the
Consolidated Financial Statements and related notes included elsewhere herein.
The Company's future operating results may be affected by various trends and
factors which are beyond the Company's control. These include, among other
factors, the competitive banking environment in which the Company operates,
dependence on key personnel, changes in allowances for loan losses, risks
relating to the Company's growth strategy, changes in general economic
conditions and interest rates, rapid or unexpected changes in technologies and
other uncertain business conditions that affect the Company's business.
Accordingly, past results and trends may not be reliable indicators of future
results or trends.
With the exception of historical information, the matters discussed below
include forward-looking statements that involve risks and uncertainties. The
Company wishes to caution readers that a number of important factors discussed
herein, and in other reports filed with the Securities and Exchange Commission,
could affect the Company's actual results and cause actual results to differ
materially from those in the forward-looking statements.
OVERVIEW
The Company's net income is derived primarily from net interest income. Net
interest income is the difference between interest income, principally from
loans and investment securities, and interest expense, principally on customer
deposits and borrowings. Changes in net interest income result from changes in
volume, net interest spread and net interest margin. Volume refers to the
average dollar levels of interest-earning assets and interest-bearing
liabilities. Net interest spread refers to the difference between the average
yield on interest-earning assets and the average cost of interest-bearing
liabilities. Net interest margin refers to net interest income divided by
average interest-earning assets and is influenced by the level and relative mix
of interest-earning assets and interest-bearing liabilities.
One of the Company's strategies has been to leverage its capital to
maximize earnings capacity. In executing this strategy, the Company has borrowed
from the FHLB. These borrowings, which generally adjust monthly, have been used
to fund loan growth and to fund the purchase of additional adjustable rate
securities.
The Company's objectives are to increase loans as a percent of total assets
and to fund growth in its asset base with growth in deposits and equity to the
extent possible. However, the Company plans to maintain an appropriate level of
wholesale funding, including borrowings from the FHLB, as a means of enhancing
overall earnings and return on equity. In pursuing these objectives, the Company
expects overall yields on assets to increase -- since loans produce higher
yields than investments -- and further expects to minimize potential volatility
in the performance and market value of its investment portfolio as investments
become a smaller percent of total assets. The combination of internal growth and
the pooling of interests merger with FDC in 1995 and the acquisition of
Southwest in 1996 have allowed the Company to achieve progress towards these
objectives. The ratio of loans to total assets increased to 56.9% at the end of
1996 compared to 49.5% at the end of 1995 and 39.3% at the end of 1994.
Borrowings from the FHLB and other federal funds purchased decreased to 10.6% of
assets at the end of 1996 from 16.8% at the end of 1995 and 35.1% at the end of
1994. Net interest margin increased to 5.20% in 1996 compared to 4.42% in 1995
and 4.66% in 1994. See Note 2 of Notes to Consolidated Financial Statements.
19
<PAGE> 21
NET INTEREST INCOME
The following tables set forth information for the periods indicated with
regard to average balances of assets and liabilities, as well as the total
dollar amounts of interest income from interest-earning assets and interest
expense on interest-bearing liabilities, resultant yields or costs, net interest
income, net interest spread, net interest margin and the ratio of average
interest-earning assets to average interest-bearing liabilities for the Company.
These schedules have been adjusted to a fully taxable equivalent basis for 1996.
There were no adjustments for 1995 and 1994 related to tax-exempt interest as
such interest was not significant prior to 1996. In November 1995, FDC merged
with the Company in a pooling of interests. Accordingly, all financial
statements included herein reflect the Company and FDC as combined for all
periods presented. In June 1996, the Company acquired Southwest in a transaction
accounted for using purchase accounting. Accordingly, balances and results of
operations of Southwest have been included in the Company's financial statements
only from the date of acquisition forward.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------
1996 1995
--------------------------------- -------------------------------
INTEREST AVERAGE INTEREST AVERAGE
AVERAGE EARNED YIELD AVERAGE EARNED YIELD
BALANCE OR PAID OR COST BALANCE OR PAID OR COST
-------- -------- --------- -------- -------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Federal funds sold.......... $ 231 $ 12 5.25% $ 1,846 $ 113 6.12%
Investments................. 180,829 11,188 6.19 211,153 13,579 6.43
Investment in stock of the
Federal Home Loan Bank.... 4,554 294 6.46 7,003 428 6.11
Loans(1).................... 255,761 26,531 10.37 187,637 20,133 10.73
Allowance for loan losses... (3,313) -- -- (2,282) -- --
-------- ------- -------- -------
Total interest-earning
assets.............. 438,062 38,025 8.68 405,357 34,253 8.45
Noninterest-earning assets
Cash and due from banks... 21,229 15,549
Other..................... 23,801 19,283
-------- --------
Total assets.......... $483,092 $440,189
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
NOW and money market
accounts................ $ 78,227 $ 1,972 2.52% $ 65,715 $ 1,721 2.62%
Savings................... 117,270 4,930 4.20 87,072 3,846 4.42
Certificates of deposit:
Under $100,000.......... 56,243 3,089 5.49 41,445 2,305 5.56
$100,000 and over....... 20,461 1,132 5.53 11,345 638 5.62
-------- ------- -------- -------
Total interest-bearing
deposits............ 272,201 11,123 4.09 205,577 8,510 4.14
Advances from the Federal
Home Loan Bank and federal
funds purchased........... 64,743 3,547 5.48 123,083 7,483 6.08
Securities and loans sold
under agreements to
repurchase................ 7,565 352 4.65 4,899 240 4.90
Notes payable............... 2,573 208 8.08 1,076 97 9.01
-------- ------- -------- -------
Total interest-bearing
liabilities......... 347,082 15,230 4.39 334,635 16,330 4.88
Noninterest-bearing demand
accounts.................. 95,555 76,072
-------- --------
Total deposits and
interest-bearing
liabilities......... 442,637 410,707
Other noninterest-bearing
liabilities............... 2,672 2,499
-------- --------
Total liabilities..... 445,309 413,206
Shareholders' equity........ 37,783 26,983
-------- --------
Total liabilities and
shareholders'
equity.............. $483,092 $440,189
======== ========
Net interest income......... $22,795 $17,923
======= =======
Net interest spread......... 4.29% 3.57%
===== =====
Net interest margin......... 5.20% 4.42%
===== =====
Ratio of average
interest-earning assets to
average interest-bearing
liabilities................. 126% 121%
======== ========
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1994
--------------------------------
INTEREST AVERAGE
AVERAGE EARNED YIELD
BALANCE OR PAID OR COST
-------- -------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
ASSETS
Federal funds sold.......... $ 2,424 $ 98 4.05%
Investments................. 205,060 12,004 5.85
Investment in stock of the
Federal Home Loan Bank.... 6,765 398 5.88
Loans(1).................... 160,944 16,043 9.97
Allowance for loan losses... (2,145) -- --
-------- -------
Total interest-earning
assets.............. 373,048 28,543 7.65
Noninterest-earning assets
Cash and due from banks... 16,268
Other..................... 16,885
--------
Total assets.......... $406,201
========
LIABILITIES AND SHAREHOLDERS'
Deposits:
NOW and money market
accounts................ $ 70,884 $ 1,553 2.19%
Savings................... 83,521 2,979 3.57
Certificates of deposit:
Under $100,000.......... 19,996 695 3.48
$100,000 and over....... 7,669 289 3.77
-------- -------
Total interest-bearing
deposits............ 182,070 5,516 3.03
Advances from the Federal
Home Loan Bank and federal
funds purchased........... 114,989 5,420 4.71
Securities and loans sold
under agreements to
repurchase................ 3,333 116 3.48
Notes payable............... 1,357 120 8.84
-------- -------
Total interest-bearing
liabilities......... 301,749 11,172 3.70
Noninterest-bearing demand
accounts.................. 77,733
--------
Total deposits and
interest-bearing
liabilities......... 379,482
Other noninterest-bearing
liabilities............... 2,099
--------
Total liabilities..... 381,581
Shareholders' equity........ 24,620
--------
Total liabilities and
shareholders'
equity.............. $406,201
========
Net interest income......... $17,371
=======
Net interest spread......... 3.95%
===
Net interest margin......... 4.66%
===
Ratio of average
interest-earning assets to
average interest-bearing
liabilities................. 124%
========
</TABLE>
- ---------------
(1) Loans are net of unearned discount. Nonaccruals are included in average
loans outstanding. Loan fees are included in interest income as follows:
1996 -- $1,269,000; 1995 -- $1,225,000; 1994 -- $1,156,000.
20
<PAGE> 22
The following table illustrates, for the periods indicated, the changes in
the Company's net interest income due to changes in volume and changes in
interest rates. Changes in net interest income due to both volume and rate have
been included in the changes due to rate.
<TABLE>
<CAPTION>
1996 COMPARED TO 1995: 1995 COMPARED TO 1994:
INCREASE (DECREASE) IN INCREASE (DECREASE) IN
NET INTEREST INCOME NET INTEREST INCOME
DUE TO CHANGE IN DUE TO CHANGE IN
----------------------------- -----------------------------
VOLUME RATE TOTAL VOLUME RATE TOTAL
------- ------- ------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Federal funds sold........... $ (99) $ (2) $ (101) $ (23) $ 38 $ 15
Investments.................. (1,950) (441) (2,391) 357 1,218 1,575
Investment in stock of the
Federal Home Loan Bank.... (150) 16 (134) 14 16 30
Loans........................ 7,310 (912) 6,398 2,661 1,429 4,090
------- ------- ------- ------- ------- -------
Total
interest-earning
assets............. 5,112 (1,340) 3,772 3,009 2,701 5,710
------- ------- ------- ------- ------- -------
Interest-bearing liabilities:
NOW and money market
accounts.................. (328) 77 (251) 113 (281) (168)
Savings...................... (1,334) 250 (1,084) (127) (740) (867)
Certificates of deposit:
Under $100,000............ (823) 39 (784) (746) (864) (1,610)
$100,000 and over......... (513) 19 (494) (139) (210) (349)
Advances from the Federal
Home Loan Bank and federal
funds purchased........... 3,547 389 3,936 (382) (1,681) (2,063)
Securities and loans sold
under agreements to
repurchase................ (131) 19 (112) (55) (69) (124)
Notes payable................ (135) 24 (111) 25 (2) 23
------- ------- ------- ------- ------- -------
Total
interest-bearing
liabilities........ 283 817 1,100 (1,311) (3,847) (5,158)
------- ------- ------- ------- ------- -------
Net increase
(decrease) in net
interest
income............. $ 5,395 $ (523) $ 4,872 $ 1,698 $(1,146) $ 552
======= ======= ======= ======= ======= =======
</TABLE>
ASSET/LIABILITY MANAGEMENT
The Company's liquidity management objective is to ensure its ability to
satisfy cash flow requirements of depositors, borrowers and the Company's
operations. The Company has two basic sources of liquidity. The first is its
retail deposit base served by its banking offices. The Company has successfully
increased core deposits through its retail network by implementing deposit
programs and promotions directed at existing and potential customers and via the
acquisition of other banks. Average deposits increased by $86.1 million or 30.6%
in 1996 compared to 1995. Approximately $51.4 million of the increase relates to
the time weighted average of deposits acquired with the acquisition of Southwest
with the remaining $34.7 million representing internally generated growth.
The second source of liquidity is from borrowings, primarily from the FHLB.
This source is used regularly in the Company's cash management function both to
fund a portion of the investment portfolio and to manage the day-to-day
fluctuations in liquidity resulting from needs of depositors and borrowers. At
December 31, 1996, the Company had available approximately $88 million of unused
borrowing capacity, principally from the FHLB. The borrowing line from the FHLB
is collateralized by investments and loans. Sources of borrowing other than the
FHLB include unsecured federal funds purchase lines from three banks.
21
<PAGE> 23
Regular use of the FHLB as a liquidity management tool has enabled the Company
to hold federal funds sold to a low level without impairing its ability to
manage liquidity adequately. The Company anticipates that it will continue to
rely primarily upon customer deposits, FHLB borrowings, loan repayments, loan
sales and retained earnings to provide liquidity and will use funds so provided
primarily to make loans and to purchase investment securities.
The mismatch between maturities and interest rate sensitivities of assets
and liabilities results in interest rate risk. Rising and falling interest rate
environments can have various impacts on net interest income, depending on the
difference between the repricing of interest-earning assets and interest-bearing
liabilities, unscheduled repayments of loans and investments, early withdrawals
of deposits and other factors. The factor of most potential significance to
overall interest rate risk is basis risk which is the degree to which yields on
assets and costs of liabilities may adjust differently over time and in relation
to other interest rate changes.
The Company has focused on maintaining balance between interest rate
sensitive assets and liabilities and repricing frequencies. An important element
of this focus has been to emphasize variable rate loans and investments funded
by deposits and FHLB borrowings which also mature or reprice over short time
periods.
22
<PAGE> 24
The following table sets forth the estimated maturity or repricing, and the
resulting interest rate gap, of the Company's interest-earning assets and
interest-bearing liabilities at December 31, 1996. All amounts in the table are
based on contractual repricing schedules except for fixed rate mortgage-related
securities for which maturities are estimated based upon recent prepayment
experience and assumed future prepayment rates. Actual prepayment and withdrawal
experience may vary significantly from the assumptions reflected in the table.
<TABLE>
<CAPTION>
ESTIMATED MATURITY OR REPRICING AT DECEMBER 31, 1996
--------------------------------------------------------------------
THREE MONTHS
LESS THAN TO LESS THAN ONE TO OVER
THREE MONTHS ONE YEAR FIVE YEARS FIVE YEARS TOTAL
------------ ------------ ---------- ---------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Interest-earning assets:
Fixed-rate commercial loans.... $ 7,050 $ 10,500 $ 30,525 $ 10,082 $ 58,157
Fixed-rate consumer loans...... 3,042 13,906 42,817 19,413 79,178
Variable-rate commercial
loans....................... 159,879 -- -- -- 159,879
Variable-rate consumer loans... 21,067 381 1,243 -- 22,691
Investment securities.......... 125,266 29,734 35,418 471 190,889
Federal funds sold............. -- -- -- -- --
-------- -------- -------- -------- --------
Total interest-earning
assets............... 316,304 54,521 110,003 29,966 510,794
Interest-bearing liabilities:
NOW and MMA.................... 88,466 -- -- -- 88,466
Savings........................ 128,890 -- -- -- 128,890
Certificates of deposit under
$100,000.................... 8,491 39,388 16,993 -- 64,872
Certificates of deposit
$100,000 and over........... 6,319 25,497 2,594 -- 34,410
Advances from the Federal Home
Loan Bank and federal funds
purchased................... 59,700 -- -- -- 59,700
Other interest-bearing
liabilities................. 10,733 -- -- 4,050 14,783
-------- -------- -------- -------- --------
Total interest-bearing
liabilities.......... 302,599 64,885 19,587 4,050 391,121
-------- -------- -------- -------- --------
Interest rate gap................ $ 13,705 $(10,364) $ 90,416 $ 25,916 $119,673
======== ======== ======== ======== ========
Cumulative interest rate gap at
December 31, 1996.............. $ 13,705 $ 3,341 $ 93,757 $119,673
======== ======== ======== ========
Cumulative interest rate gap to
total assets................... 2.4% 0.6% 16.7% 21.3%
======== ======== ======== ========
</TABLE>
23
<PAGE> 25
The following table presents at December 31, 1996, loans by maturity in
each major category of the Company's portfolio. Actual maturities may differ
from the contractual maturities shown below as a result of renewals and
prepayments. Loan renewals are evaluated in the same manner as new credit
applications.
<TABLE>
<CAPTION>
DECEMBER 31, 1996
----------------------------------------------
LESS THAN ONE TO OVER
ONE YEAR FIVE YEARS FIVE YEARS TOTAL
--------- ---------- ---------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Commercial................................... $37,599 $ 31,841 $12,228 $ 81,668
Real estate -- mortgage...................... 32,881 76,675 65,872 175,428
Real estate -- construction.................. 21,110 1,677 470 23,257
Installment and revolving lines of credit.... 1,263 34,415 1,383 37,061
Loans held for sale.......................... 2,864 -- -- 2,864
------- -------- ------- --------
Total face amount of loans......... $95,717 $144,608 $79,953 320,278
======= ======== =======
Deferred loans fees, discounts and costs,
net........................................ (373)
--------
Total loans................................ $319,905
========
</TABLE>
Of the $224.6 million of loans that mature after one year, a total of
$102.8 million are fixed rate loans and $121.8 million are variable rate loans.
In addition to reviewing its gap position, the Company uses an interest
rate risk model to evaluate the potential impact that changes in interest rates
might have on earnings and the estimated market value of the Company's equity.
The Company has adopted profitability, liquidity and market valuation parameters
and objectives against which modeled results are measured. If projections, which
are updated at least quarterly, indicate unacceptable risk to achievement of
established parameters, management reviews the reasons and develops plans to
mitigate or minimize such risks.
At December 31, 1996, the Company had approximately $187.0 million of
assets (substantially all of its floating rate loans and $4.4 million of its
investments) and $74.5 million of liabilities (advances from FHLB and securities
and loans sold under agreements to repurchase) on which interest rates have
adjusted, generally within 30 days, in the direction of and by the approximate
magnitude of changes in the federal funds rate. Such assets and liabilities are
indexed to or closely tied to the prime rate or other short-term indices.
Management expects these assets and liabilities to continue to adjust in
reaction to future changes in the federal funds rate except that it is possible,
as has sometimes happened in previous cycles of changing interest rates, that
the prime rate may not change by the magnitude of all changes in the federal
funds rate. If the prime rate were to rise by a lesser degree than increases in
the federal funds rate or decline by more than the degree of declines in the
federal funds rate, the Company's net interest income would likely be negatively
impacted, at least temporarily.
Competitive pressures are significant in determining the rates paid on
interest-bearing deposits. In 1995 compared to 1994, the average cost of all
deposits increased by a larger percentage than the increase in average yield on
interest-earning assets. This was not the case, however, in 1996 when the
average cost of all deposits remained unchanged at 3.02% compared to 1995 while
the average yield on interest-earning assets increased 0.23%. The levels, mix
and cost of deposits are significant factors impacting overall net interest
income.
Net interest income is also impacted significantly by the levels and
maturities of fixed rate securities and loans and the levels of
noninterest-bearing deposits, other noninterest-bearing liabilities and
shareholders' equity. The Company's combined average of noninterest-bearing
deposits, other noninterest-bearing liabilities and shareholders' equity in 1996
totaled $136.0 million, up from $105.6 million in 1995 and totaled $170.7
million at December 31, 1996. At December 31, 1996, fixed rate loans and
investments totaled approximately $192 million. As these loans and investments
mature, they can either be replaced with variable rate loans or securities or
with then current market rate fixed rate loans or securities or the proceeds can
be used to reduce borrowings from the FHLB.
24
<PAGE> 26
INVESTING ACTIVITIES
During 1996, the Company focused attention on selected restructuring of its
investment portfolio with the objective of reducing the potential volatility to
market value changes and basis risk that might be caused by changes in interest
rates. Securities sold included fixed and variable rate collateralized mortgage
obligations ("CMOs") and certain other mortgage backed securities ("MBS").
Securities purchased were generally fixed rate obligations of U.S. government
agencies with maturities of three years or less, most of which are callable.
Certain variable rate CMOs and MBS were also purchased during 1996.
The Company's strategy of leveraging its capital to maximize earnings
capacity has been accomplished with borrowings from the FHLB. These borrowings,
which generally adjust monthly, are used as a wholesale funding source for the
purchase of additional adjustable rate securities, which also generally adjust
monthly, semiannually or annually. Average FHLB advances in 1996 of $64.7
million were down 47.4% from the $123 million average balance in 1995. In 1995,
the level of these activities was reduced compared to 1994 consistent with the
Company's objective of replacing investments with higher yielding loans and
replacing borrowings with customer deposits. Although the 1995 average FHLB
borrowings were up $8 million from the 1994 average, the balance at December 31,
1995 was reduced to $70 million from $162 million one year earlier. The
profitability of these activities increased during 1996 compared to 1995.
Evidence of such increase is the 0.24% decline in the average yield on
investments in 1996 from 1995 versus a larger 0.49% decrease in the average cost
of all interest-bearing liabilities. The significant flattening of the interest
rate yield curve during 1995 reduced the profitability of these investing
activities compared to 1994. The 1995 yield on investments increased only 0.58%
over 1994 while the cost of interest-bearing liabilities increased by 1.18%.
The following table summarizes certain information about the Company's
investment portfolio:
<TABLE>
<CAPTION>
DECEMBER 31, 1996 DECEMBER 31, 1995
---------------------------------------------------- -----------------------
EXCESS OF
UNREALIZED INTEREST RATE UNREALIZED
INDEX TO WHICH MARKET CAPS OVER ESTIMATED MARKET
COUPON ON AMORTIZED VALUE CURRENT AVERAGE AMORTIZED VALUE
DESCRIPTION SECURITY IS TIED COST ADJUSTMENTS COUPONS LIVES COST ADJUSTMENTS
----------- ---------------- --------- ----------- ------------- ---------- --------- -----------
(DOLLARS IN MILLIONS) (IN YEARS) (DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
CMO-Floating rate........ COFI $ 37.6 $(1.7) 3.5% 14.3 $ 44.3 $(1.1)
CMO-Floating rate........ 10 yr CMT 75.5 (3.6) 3.9 14.8 76.5 (3.5)
CMO-Floating rate........ 7 yr CMT 9.6 (0.1) 4.3 5.4 8.9 (0.1)
CMO-Floating rate........ 1 mo LIBOR 1.4 0.0 2.3 2.8 4.7 (0.1)
CMO-Fixed rate........... N.A. 7.4 (0.3) N.A. 2.3 13.1 (0.3)
MBS-Adjustable rate...... 6 mo LIBOR 4.9 0.1 3.3 5.0 -- --
MBS-Adjustable rate...... 1 yr CMT 3.9 0.0 2.6 3.7 2.4 0.1
FHLB Dual Indexed Notes.. (1) 5.8 (0.4) N.M. 6.5 5.8 (0.7)
FHLB Inverse Floating
Note.................... 3 mo LIBOR 5.0 (0.1) N.M. 1.8 5.0 (0.3)
U.S. Treasuries.......... N.A. 5.0 0.0 N.A. 1.5 5.0 0.0
SBA Guaranteed........... Prime 3.0 0.0 N.A. 2.0 4.3 0.1
Govt. Sponsored
Agencies................ N.A. 23.9 0.1 N.A. 3.0
Municipal Securities..... N.A. 2.5 0.0 N.A. 4.2
Other.................... 1.5 0.0 N.A. N.A. 6.2 0.1
------ ----- ------ -----
Total portfolio.......... $187.0 $(6.0) $176.2 $(5.8)
====== ===== ====== =====
<CAPTION>
DECEMBER 31, 1995
--------------------------
EXCESS OF
INTEREST RATE
CAPS OVER ESTIMATED
CURRENT AVERAGE
DESCRIPTION COUPONS LIVES
----------- ------------- ----------
(IN YEARS)
<S> <C> <C>
CMO-Floating rate........ 3.2% 10.6
CMO-Floating rate........ 4.3 13.5
CMO-Floating rate........ 4.8 5.7
CMO-Floating rate........ 3.0 2.8
CMO-Fixed rate........... N.A. 1.7
MBS-Adjustable rate...... -- --
MBS-Adjustable rate...... 4.0 5.0
FHLB Dual Indexed Notes.. N.M. 7.5
FHLB Inverse Floating
Note.................... N.M. 2.8
U.S. Treasuries.......... N.A. 1.5
SBA Guaranteed........... N.A. 3.4
Govt. Sponsored
Agencies................
Municipal Securities.....
Other.................... N.A. N.A.
Total portfolio..........
</TABLE>
The adjustable rate portion of the Company's investment portfolio at
December 31, 1996 is distributed as follows:
<TABLE>
<CAPTION>
BY INDEX BY ADJUSTMENT FREQUENCY LEGEND OF TERMS
-------- ----------------------- ---------------
<S> <C> <C> <C> <C>
10 yr CMT.......... 51% Monthly............ 83% CMO -- Collateralized Mortgage Obligation
COFI............... 26 Quarterly.......... 6 COFI -- FHLB 11th District cost-of-funds index
7 yr CMT........... 7 Semi-annually...... 9 CMT -- Index of constant maturing U.S. Treasury
Dual Index......... 4 Annually........... 2 securities
1 mo LIBOR......... 1 --- MBS -- Mortgage Backed Securities
3 mo LIBOR......... 3 Total.............. 100% LIBOR -- London Interbank Offered Rate Index
Prime.............. 2 === N.M. -- Not meaningful
1 yr CMT........... 3 N.A. -- Not applicable
Other.............. 3
---
Total.............. 100%
===
</TABLE>
- ---------------
(1) The coupon on these securities is set at the 10 year CMT less the six month
LIBOR plus 4.75%.
25
<PAGE> 27
Movements in COFI historically lag behind movements in other indices. For
example, the 10 year CMT and the 6 month LIBOR were at or near cyclical lows in
October of 1993 and reached cyclical highs in November or December of 1994. In
contrast, COFI reached its cyclical low in March of 1994 and its cyclical high
in June of 1995. As a result of the lagging character of COFI, the CMOs indexed
to it produced lower yields when interest rates were rising in 1994 than did
other floating rate securities. It is likely that COFI will continue to lag
other indices and that during times of falling interest rates it may provide
superior yields to other floating rate CMOs. Despite its lagging nature,
movements in COFI correspond reasonably well with changes in the Company's cost
of deposits. The market value of the COFI indexed CMOs is impacted by both their
yield relative to other securities and to their expected average lives. To
reduce the potential market value and yield volatility in its portfolio, the
Company sold approximately $15 million of COFI indexed CMOs in 1995 and another
$6 million in 1996.
Yields on the Company's CMOs indexed to the seven and 10 year CMT indices
fluctuate directly as such indices fluctuate. The averages for the 10 year CMT
index were 6.44%, 6.57% and 7.08% in 1996, 1995 and 1994, respectively. The
relative contribution of these securities to net interest income will generally
depend on the slope of the yield curve and their yields relative to the cost of
funds. Throughout 1995 there was relatively little change in the federal funds
rates but the seven and 10 year CMT indices declined significantly. This
resulted in a very flat or inverted yield curve compared to historical norms and
resulted in decreases in the contributions to net interest income from these two
classes of CMOs compared to 1994. During 1996, these two indices increased from
their levels at the end of 1995 as the yield curve regained some steepness. More
information on the impact on net interest income of a flat yield curve is
included in "Results of Operations" below. As a result of their lower yields
relative to other securities and their longer expected average lives, the market
values of the CMOs indexed to the seven and 10 year CMT at December 31, 1996
remained at levels similar to those at December 31, 1995. Historically, periods
of flat or inverted yield curves have not persisted for prolonged periods. If
the yield curve were to steepen, management believes that net interest income
would be positively impacted and that the market values of these CMOs might
increase.
All of the Company's CMOs are collateralized by fixed rate mortgages and
mortgage backed securities. The average lives of the CMOs fluctuate based on the
prepayment rates of the underlying mortgages. The significant increase in
interest rates in 1994 substantially reduced mortgage prepayment rates which
resulted in significant extensions in the expected average lives of most of the
CMOs.
Most of the current holdings of CMOs were purchased during 1993 and through
the first several months of 1994. The average yields earned on the major classes
of CMOs from then through December 31, 1996, were approximately 6.2% for those
indexed to the 10 year CMT, 6.4% for those indexed to the seven year CMT,
approximately 5.7% for those indexed to COFI and approximately 5.5% for fixed
rate CMOs. Yields on Treasury securities fluctuated during that time frame but,
for comparison purposes, using the average Treasury yields from June 30, 1993,
through April 30, 1994, when the majority of the CMOs were purchased,
investments in two, five or 10 year Treasury securities, if purchased at the
average yields available during such period, would have yielded approximately
4.3%, 5.25% or 5.9% respectively. Treasury security yields at December 31, 1996,
with two, five and 10 year maturities were 5.86%, 6.20% and 6.42% respectively.
The Company's investment portfolio includes $10.75 million face value of
notes issued by the FHLB which were purchased in 1993. The Company purchased
these notes because at the time of purchase they offered excellent yields, and
being United States agency securities, they provided the Company with needed
qualifying collateral to pledge for public deposits. With the increases in
interest rates that started in 1994, the market value of these securities
declined significantly as did their yields. The liquidity of these instruments
also decreased. Management concluded that the proceeds from the sale, at a loss,
of these securities could not have been reinvested in any other acceptable
investment which would have recouped the loss and provided the return to be
realized from continuing to hold these securities.
Of these notes, $5.75 million represent floating rate dual-indexed notes.
The coupon on these notes resets every six months to a rate equal to the 10 year
CMT less the six month LIBOR plus 4.75%. The coupon rate was 7.50% when issued,
4.94% at December 31, 1995 and 5.38% at December 31, 1996. A U. S. Treasury
security of approximately the same maturity was priced to yield approximately
6.3% at December 31, 1996.
26
<PAGE> 28
The coupon rate on these bonds decreases when the yield curve flattens or
becomes inverted and increases when the yield curve steepens. At December 31,
1996, the yield curve was flatter than average with the difference between the
10 year CMT and the six month LIBOR being only 0.70% compared to a 1.18% average
difference for the last 10 years. If the yield curve returned to its normal
shape of the last 10 years, these bonds would have approximately a 5.93% coupon.
These bonds perform best in both yield and market value when interest rates are
low and the yield curve is steep.
The other $5 million investment in FHLB notes was purchased in September
1993 and matures in September 1998. These notes yielded 5.375% during their
first year which ended in September 1994. Thereafter, the coupon resets
quarterly. For the second and third years, the coupon rate was set at 9% minus
the three month LIBOR. In years four (which started in September 1996) and five
the coupon rate is set at 11% minus the three month LIBOR. These notes may be
called by FHLB at any quarterly interest payment date. As a result of the
increase in interest rates in 1994, the coupon rate and market value of these
bonds declined significantly. At December 31, 1994, the coupon rate was 2.64%.
It increased to 3.31% at December 31, 1995, and was at 5.41% at December 31,
1996. With the increase in the coupon on this security and the proximity of its
maturity, its market value increased to 98.9% of par value at December 31, 1996,
compared to 94.5% one year earlier.
As indicated in the table above summarizing the investment portfolio of the
Company, substantially all of the Company's variable rate investments are
subject to interest rate caps. To the extent interest rates on securities
increased to or above the level of the caps, net interest income would likely be
negatively impacted depending on corresponding changes in the cost of deposits
and other liabilities.
Basis risk in the structure of the Company's assets and liabilities reduced
net interest margins during 1995 as a result of the significant flattening of
the yield curve. The Company's focus in 1995 and 1996 was to purchase
investments with shorter lives and, if variable rate, to purchase securities
indexed to shorter-term indices with less potential average life extension and
to sell certain investments that would reduce basis risk and market valuation
risk. A moderately steeper yield curve combined with the impacts of the
portfolio changes resulted in improved profitability of the investing activities
in 1996. Management believes its focus on holding a large proportion of its
portfolio in variable rate securities and on maintaining a balanced gap position
is in the Company's best long-term interest.
Substantially all of the Company's investment portfolio is held in the
available-for-sale classification. As a result, the Company reflects a
mark-to-market adjustment on its entire portfolio (net of taxes) in
shareholders' equity. Because of the series of interest rate increases in 1994,
the bond market suffered its most volatile year in decades. This contributed to
a substantial decline in the market values of the Company's investments during
1994. Market values improved since then and the unrealized losses on securities
available for sale decreased from 5.8% of the portfolio or a $7.7 million
adjustment against equity at December 31, 1994, to 3.1% of the portfolio or a
$3.8 million adjustment against equity at December 31, 1996. Management believes
that the Company's capital and liquidity are more than adequate to allow it to
continue to hold its investment portfolio. It also expects that the passage of
time and further restructuring of the portfolio will reduce its exposure to
market value and basis risk.
27
<PAGE> 29
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, selected
earnings and expense data and changes in such data.
<TABLE>
<CAPTION>
YEAR ENDED CHANGE: YEAR ENDED CHANGE: YEAR ENDED
DECEMBER 31, BETTER DECEMBER 31, BETTER DECEMBER 31,
1996 (WORSE) 1995 (WORSE) 1994
------------ ------- ------------ -------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Interest income........................... $ 37,957 $ 3,704 $ 34,253 $ 5,710 $ 28,543
Interest expense.......................... (15,230) 1,100 (16,330) (5,158) (11,172)
-------- ------- -------- ------- --------
Net interest income....................... 22,727 4,804 17,923 552 17,371
Provision for loan losses................. (916) (121) (795) (1) (794)
-------- ------- -------- ------- --------
Net interest income after provision for
loan losses............................. 21,811 4,683 17,128 551 16,577
Other income.............................. 4,493 673 3,820 313 3,507
Other expenses............................ (17,918) (2,047) (15,871) (819) (15,052)
-------- ------- -------- ------- --------
Earnings before income taxes and
cumulative effect of changes in
accounting.............................. 8,386 3,309 5,077 45 5,032
Income tax expense........................ (2,941) (1,167) (1,774) (954) (820)
-------- ------- -------- ------- --------
Earnings before cumulative effect of
changes in accounting................... 5,445 2,142 3,303 (909) 4,212
Cumulative effect of change in accounting
for goodwill............................ -- -- -- 1,537 (1,537)
-------- ------- -------- ------- --------
Net earnings.............................. $ 5,445 $ 2,142 $ 3,303 $ 628 $ 2,675
======== ======= ======== ======= ========
</TABLE>
1996 COMPARED TO 1995
On June 18, 1996, the Company completed the Southwest acquisition, which
was accounted for using purchase accounting. As a result, the Company's results
of operations and average balances included the Southwest balances only from the
date of acquisition through December 31, 1996.
Interest Income. Interest income increased $3.7 million to $38.0 million in
1996 from $34.3 million in 1995. This increase resulted primarily from an
increase of $32.7 million in average interest-earning assets to $438.1 million
in 1996 from $405.4 million in 1995. A shift in the mix of assets toward larger
loan balances as a percent of total interest-earning assets also contributed to
the increase. Average loans increased $68.1 million to $255.8 million in 1996
from $187.6 million in 1995 while average investments decreased $32.8 million to
$185.4 million in 1996 from $218.2 million in 1995. Approximately $39 million of
the increase in average loans was a result of the Southwest acquisition. These
asset mix changes are consistent with management's desire to continue the
expansion of the loan portfolio while allowing investments to decline as a
percent of total assets. Lower average yields on both loans and investments
partially offset the increases resulting from higher balances. The yields on
investments and loans in 1996 decreased by 0.24% and 0.36%, respectively,
compared to 1995. The Denver/Boulder marketplace in which the Company operates
has continued to offer good opportunities for expansion of the Company's
customer base and loan portfolio.
Interest Expense. Interest expense decreased $1.1 million to $15.2 million
in 1996 from $16.3 million in 1995. This decrease was the combined effect of a
decrease in the average cost of interest-bearing liabilities to 4.39% in 1996
from 4.88% in 1995, and a $12.4 million increase in average interest-bearing
liabilities to $347.1 million in 1996 from $334.6 million in 1995. Changes in
the relative mix of average interest-bearing liabilities included a $58.3
million decrease in average advances from the FHLB and an increase in average
interest-bearing deposits of $66.6 million. Approximately $51 million of the
average increase in total deposits resulted from the Southwest acquisition. The
cost of the Company's borrowings from the FHLB generally moves in direct
relationship to movements in the federal funds rate. The 0.60% decrease in the
1996 average from 1995 compares to a 0.50% average decrease in federal funds
rates in 1996 from 1995. Expansion of the
28
<PAGE> 30
depositor base provides added customer cross selling opportunities. The Company
expects to continue to supplement its deposit funding with borrowings to fund
loan demand and to finance its investment portfolio.
Net Interest Income. Net interest income increased $4.8 million in 1996
compared to 1995. Net interest margin increased to 5.20% in 1996 from 4.42% in
1995. The increase in net interest income resulted from the increase in
interest-earning assets and in the net interest margin. The principal reason for
the increase in net interest margin was that loans continued to increase in
total and as a percent of total assets. The average yield on loans is
significantly higher than the yield on investments. The acquisition of Southwest
contributed to the improvements in both total net interest income and in the
increase in the net interest margin. Prior to its acquisition, Southwest's net
interest margin exceeded 6%.
Some steepening of the interest rate yield curve in 1996 compared to 1995
has also contributed to the improvement in margins and total net interest
income. The yield curve refers to the difference between interest yields on
longer-term and shorter-term instruments. A flattening of the curve occurs when
the difference between such yields declines as it did from 1995 to 1996. At
December 31, 1995, the yield curve was very flat by historical norms with the
difference between the 10 year CMT index and the targeted overnight federal
funds rate being only 0.08% compared to 1.17% at December 31, 1996, to 2.32% at
December 31, 1994, and to approximately 1.50% over the last 10 years. A
flattening of the yield curve would likely contribute to lower net interest
income while a steepening of the yield curve would likely increase net interest
income. If the Company can continue to increase deposits at a cost less than
FHLB borrowings and/or increase loan balances, which have a higher yield than
investments, net interest income would likely increase.
Provision for Loan Losses. The $121,000 increase in 1996 over the 1995
provision reflects the general growth in the loan portfolio and management's
commitment to maintain an adequate allowance for loan losses.
Other Income. Other income increased $673,000 to $4.5 million in 1996 from
$3.8 million in 1995, principally as a result of a $616,000 increase in service
fees on deposit accounts, a $437,000 increase in gain on sales of loans
partially offset by a $328,000 increase in the net losses on sales of
securities, including a $154,000 loss on the transfer of $2 million of
securities to trading from available for sale. The Company's purchase of MacWest
Mortgage Company on June 30, 1995, which substantially increased mortgage
lending capacity, contributed to an increase in gain on sales of mortgage loans
by $369,000 to $897,000 in 1996 compared to $528,000 in 1995. A $67,000 increase
in gain on sales of SBA guaranteed loans to $544,000 in 1996 from $477,000 in
1995 accounted for substantially all the remaining increase in gain on sales of
loans. Both the mortgage and the SBA lending functions are important to the
Company and to the customers it serves, and management expects to continue its
emphasis on expanding these operations.
Other Expenses. Other expenses increased $2.0 million to $17.9 million in
1996 from $15.9 million in 1995. This increase consisted of increases of $1.8
million in salaries and employee benefits, $306,000 in occupancy, $202,000 in
amortization of intangible assets and $300,000 in other expenses partially
offset by decreases of $326,000 in professional fees and $317,000 in FDIC and
state bank assessments. The increase in salaries and employee benefits was
primarily due to the purchase of Southwest together with a full year's expense
for certain positions added to support the increased mortgage lending
activities, asset growth, pay increases and increased benefits expenses. The
decrease in professional fees was related to the First Denver acquisition and to
legal expenses it incurred prior to the merger in November 1995 related to
litigation which was decided in its favor. No such expenses were incurred in
1996. During 1995, the Company completed the amortization of intangible assets
acquired in connection with acquisitions it made in 1989. In 1996, the Company
began amortizing the intangible asset related to the Southwest acquisition. The
amortization is being recorded on a straight-line basis over 25 years with the
annual charge totaling approximately $320,000.
Income Tax Expense. Income tax expense for 1996 of $2.9 million is
approximately $187,000 less than the amount expected based on the combined
federal and state tax rate of 37.3%. This difference is primarily due to
reversal of a valuation allowance against deferred tax assets and interest
income from certain loans and life insurance policies that is not subject to
income taxes.
29
<PAGE> 31
Asset and Liability Growth. Total assets at December 31, 1996, of $562
million were 34% or $144 million higher than at December 31, 1995. This was
primarily a result of the purchase of Southwest and of the internally generated
increase in loans of approximately $40 million. The increase in loans not only
reflects the strong local economy but also the Company's success in adding to
its customer base. At December 31, 1996, deposits had increased 43% to $439
million from $307 million one year earlier. A $4.3 million increase in retained
earnings plus the issuance of $11 million of new convertible preferred stock in
connection with the Southwest acquisition resulted in a $15.2 million increase
in total shareholders' equity to $45.4 million at December 31, 1996 from $30.2
million one year earlier.
1995 COMPARED TO 1994
Interest Income. Interest income increased $5.7 million to $34.3 million in
1995 from $28.5 million in 1994. This increase resulted primarily from an
increase of $32.3 million in average interest-earning assets to $405.4 million
in 1995 from $373 million in 1994 combined with an overall increase in asset
yields resulting from interest rate increases. A shift in the mix of assets
toward larger loan balances as a percent of total interest-earning assets also
contributed to the increase. Average loans increased $26.2 million to $187.6
million in 1995 from $160.9 million in 1994 while average investments increased
$6.3 million to $218.2 million in 1995 from $211.8 million in 1994. In addition
to the volume changes, higher average interest rates in 1995 compared to 1994
also contributed to the increase in interest income.
Most of the Company's investments were in floating rate securities tied to
a variety of indices. The yield on investments in 1995 increased only 0.58%
compared to 1994 versus a 0.76% increase in loan yields. This is because,
despite increases in short-term interest rates resulting from increases in the
federal funds rate, some of the longer-term interest indices declined. The
Company's investments included approximately $85 million of floating rate
mortgage backed securities indexed to the seven and 10 year CMT indices. The
rally in the bond market during most of 1995 resulted in declines in Treasury
yields and in these two indices from 1994 levels. The average of the 10 year CMT
index declined to 6.57% in 1995 from 7.08% in the same period of 1994. The seven
year CMT index declined by a similar amount. This resulted in a decline in the
average yield on these securities by .5% which partially offset increases in the
yields of other investments resulting in the aforementioned 0.58% overall yield
increase.
Interest Expense. Interest expense increased $5.2 million to $16.3 million
in 1995 from $11.2 million in 1994. This increase was the combined effect of an
increase in the average cost of such liabilities to 4.88% in 1995 from 3.70% in
1994, and a $32.9 million increase in average interest-bearing liabilities to
$334.6 million in 1995 from $301.7 million in 1994. Changes in the relative mix
of average interest-bearing liabilities included an $8.1 million increase in
average advances from the FHLB and an increase in average interest-bearing
deposits of $23.5 million. The cost of the Company's borrowings from the FHLB
generally moves in direct relationship to movements in the federal funds rate.
The series of increases in the federal funds rate during 1994 through early 1995
resulted in an average national federal funds rate of 5.85% in 1995 compared to
4.24% in 1994. This 1.61% increase in the federal funds rate was the primary
reason for the 1.37% increase in the cost of FHLB borrowings between years.
During 1995, the Company focused on replacing FHLB borrowings with deposits
which have a lower average cost. At December 31, 1995, FHLB borrowings decreased
to $70.3 million from $162.2 million one year earlier. Expansion of the
depositor base not only adds deposits but also provides added customer cross
selling opportunities.
Net Interest Income. Net interest income increased $551,000 in 1995
compared to 1994. Net interest margin decreased to 4.42% in 1995 from 4.66% in
1994. The increase in net interest income resulted from the increase in
interest-earning assets largely offset by the decline in the net interest
margin. The principal reason for the decline in net interest margin was that the
cost of interest-bearing liabilities increased more than did the yield on
average interest-earning assets. Competition for deposits and higher general
interest rates drove up the cost of interest-bearing deposits in 1995. The
flattening of the interest rate yield curve in 1995 compared to 1994
significantly reduced net interest income from investing activities. The yield
curve refers to the difference between interest yields on longer-term and
shorter-term instruments. A flattening of the curve occurs when the difference
between such rates declines as it did from 1994 to 1995. At December 31, 1995,
the yield curve was very flat by historical norms with the difference between
the 10 year CMT index and the
30
<PAGE> 32
targeted federal funds rate being only 0.08% compared to 2.32% at December 31,
1994 and approximately 1.50% over the last 10 years.
Provision for Loan Losses. The 1995 provision for loan losses is intended
to reflect general growth in the loan portfolio and management's commitment to
maintain an adequate allowance for loan losses. There was no change from 1994 in
this provision.
Other Income. Other income increased $313,000 to $3.8 million in 1995 from
$3.5 million in 1994, principally as a result of a $422,000 increase in gain on
sales of loans. The Company's purchase of MacWest Mortgage Company on June 30,
1995, which substantially increased mortgage lending capacity, resulted in an
increase in gain on sales of mortgage loans by $336,000 to $528,000 in 1995
compared to $192,000 in 1994. A $101,000 increase in gain on sales of SBA loans
to $477,000 in 1995 from $376,000 in 1994 accounted for substantially all the
remaining increase in gain on sales of loans.
Other Expenses. Other expenses increased $819,000 to $15.9 million in 1995
from $15.1 million in 1994. This increase consisted of increases of $675,000 in
salaries and employee benefits, $353,000 in marketing and promotion, $178,000 in
professional fees and $214,000 of other net increases partially offset by
decreases of $319,000 in amortization of intangible assets and $282,000 in FDIC
premiums. The increase in salaries and employee benefits was primarily due to
certain positions added to support the increased mortgage lending activities,
asset growth, pay increases and increased benefits expenses. The increases in
marketing and promotion related largely to promotions aimed at increasing
deposit balances and also to promotions of loan products. Professional fees in
1995 include approximately $260,000 in legal expenses which FDC incurred related
to litigation which was decided in its favor prior to the acquisition. During
1994, the Company completed the amortization of intangible assets acquired in
connection with acquisitions in 1989. The 1995 amortization relates to
intangible assets arising from the acquisition of MacWest Mortgage Company.
Income Tax Expense. Income tax expense for 1995 of $1.8 million was
approximately $121,000 less than the amount expected based on the combined
federal and state tax rate of 37.3%. This difference is primarily due to the
reversal of a valuation allowance against deferred tax assets and to interest
income from certain loans and life insurance policies that is not subject to
income taxes partially offset by the accrual of income taxes from the surrender
and cancellation of certain life insurance policies. Compared to 1994, income
tax expense increased $950,000. The increase attributable to increased pre tax
earnings is only approximately $23,000. The majority of the increase is a result
of the reversal in 1994 of $1 million of valuation allowances held against
deferred tax assets.
Asset and Liability Growth. Total assets at December 31, 1995, of $418
million were 9.6% or $44.5 million lower than at December 31, 1994. This was
primarily a result of a $67.6 million reduction in investments partially offset
by a $24.9 million increase in loans. The increase in loans not only reflects
the strong local economy but also the Company's success in adding to its
customer base. At December 31, 1995, deposits increased 14.5% to $307 million
from $268 million one year earlier. These changes allowed the Company to reduce
borrowings from the FHLB to $70 million at December 31, 1995, from $162 million
one year earlier. A $2.5 million increase in retained earnings plus a $4 million
improvement in the unrealized loss on securities available for sale resulted in
a $6.6 million increase in total shareholders' equity to $30.2 million at
December 31, 1995 from $23.6 million one year earlier.
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<PAGE> 33
ALLOWANCE FOR LOAN LOSSES
The Company maintains its allowance for loan losses at a level considered
by management to be adequate to cover the risk of loss in the loan portfolio at
a particular point in time. Management's judgment as to whether additional
amounts should be added to the allowance in excess of the amount of loan losses
takes into consideration a number of factors, including losses experienced, the
status of problem loans and overall portfolio quality, regular examinations of
loan portfolios conducted by the Company's staff and by state and federal
supervisory authorities, and economic conditions.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1996 1995 1994
------ ------ -------
(IN THOUSANDS)
<S> <C> <C> <C>
Allowance for losses:
Beginning balance....................................... $2,493 $1,999 $ 2,324
Acquired through acquisition............................ 1,346 -- --
Provisions for loan losses.............................. 916 795 794
Recoveries.............................................. 142 259 173
Charge-offs............................................. (659) (560) (1,292)
------ ------ -------
Ending balance.......................................... $4,238 $2,493 $ 1,999
====== ====== =======
</TABLE>
Charge-offs during 1996 totaled $659,000 or .26% of average loans compared
to $560,000 or 0.30% of average loans in 1995 and $1.3 million or 0.80% of
average loans in 1994. Included in the 1994 charge-offs were two individual
loans totaling $669,000 or 52% of total charge-offs.
EFFECTS OF INFLATION AND CHANGING PRICES
Unlike most industrial companies, virtually all of the assets and
liabilities of a financial institution are monetary in nature. As a result,
interest rates generally have a more significant impact on a financial
institution's performance than inflation. Although interest rates do not
necessarily move in the same direction or to the same extent as the prices of
goods and services, increases in inflation generally have resulted in increased
interest rates. Over short periods of time interest rates may not move in the
same direction or magnitude as inflation.
NEW ACCOUNTING PRONOUNCEMENTS
The Company adopted Financial Accounting Standards (SFAS) No. 114,
Accounting by Creditors for Impairment of a Loan, and SFAS No. 118, Accounting
by Creditors for Impairment of a Loan -- Income Recognition and Disclosures
(collectively referred to as "SFAS 114") effective January 1, 1995. SFAS 114
requires that certain impaired loans be measured based on the present value of
expected cash flows discounted at the loan's original effective interest rate.
The adoption of this pronouncement did not have a material impact on the
Company. See Notes 1 and 6 of Notes to Consolidated Financial Statements.
In March 1995, the Financial Accounting Standards Board adopted SFAS No.
121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of. This Statement established accounting standards for
the impairment of long-lived assets, certain identifiable intangibles, and
goodwill related to those assets to be held and used and for long-lived assets
and certain identifiable intangibles to be disposed of. This Statement requires
that long-lived assets be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. The Company adopted this Statement on January 1, 1996, with no
material impact on its financial condition, results of operations or liquidity.
See Note 1 of Notes to Consolidated Financial Statements.
In October 1995, the Financial Accounting Standards Board adopted SFAS No.
123, Accounting for Stock-Based Compensation. This Statement establishes
financial accounting and reporting standards for stock-based employee
compensation plans. This Statement defines a fair value based method of
accounting for an employee stock option or similar equity instrument and
encourages all entities to adopt that method of
32
<PAGE> 34
accounting for all of their employee stock compensation plans. However, it also
allows an entity to continue to measure compensation cost for those plans using
the intrinsic value based method of accounting prescribed by APB Opinion No. 25,
Accounting for Stock Issued to Employees. Statement No. 123 requires that an
employer's financial statements include certain disclosures about stock-based
employee compensation arrangements regardless of the method used to account for
them. The Company adopted this Statement in 1996 and has elected to continue to
follow the provisions of APB Opinion No. 25 in accounting for stock-based
compensation. The required new disclosures are included in Note 11 of Notes to
Consolidated Financial Statements.
In June 1996, the Financial Accounting Standards Board adopted SFAS No.
125, Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities. This Statement provides accounting and reporting
standards for transfers and servicing of financial assets and extinguishments of
liabilities. Those standards are based on consistent application of a
financial-components approach that focuses on control. Under that approach,
after a transfer of financial assets, an entity recognizes the financial and
servicing assets it controls and the liabilities it has incurred, derecognizes
financial assets when control has been surrendered, and derecognizes liabilities
when extinguished. This Statement provides consistent standards for
distinguishing transfers of financial assets that are sales from transfers that
are secured borrowings. It requires that servicing assets and other retained
interests in the transferred assets be measured by allocating the previous
carrying amount between the assets sold, if any, and retained interests, if any,
based on their relative fair values at the date of the transfer. The Statement
will be effective for certain transfers and servicing of financial assets and
extinguishments of liabilities occurring after December 31, 1996. The Statement
will be effective for repurchase agreements, dollar-rolls, securities lending,
or similar transactions as of January 1, 1998. Management has not completed a
final determination of the expected impact of adopting this Statement but does
not believe its implementation will have a material impact on the Company.
33
<PAGE> 35
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
President, Chief Executive Officer and
Gary S. Judd....................... 56 Director
W. James Tozer, Jr................. 56 Director
Richard B. Tucker.................. 67 Director
Robert D. Greene................... 56 Director
James L. Rumsey.................... 64 Director
Robert A. Silverberg............... 62 Executive Vice President and Director
Mary Gittings Cronin............... 58 Director
Gary A. Mosko...................... 52 Executive Vice President and Director
Robert C. Barton................... 45 Mortgage Group President
J. Patrick McDuff.................. 48 Regional President of the Bank -- North Region
Michael Y. Meganck................. 45 Senior Credit Policy Officer
Ray L. Nash........................ 45 Chief Financial Officer
Joseph J. Wolf..................... 41 Regional President of the Bank -- South Region
</TABLE>
There are no family relationships among any of the executive officers and
directors of the Company.
Gary S. Judd has been President, Chief Executive Officer and a Director of
the Company since he and James Tozer founded it in March 1988. Mr. Judd has been
President of the Bank since July 1992. Mr. Judd's previous experience includes
over 16 years of employment with Citicorp and Citibank, N.A. in a broad range of
senior managerial positions both internationally and in the United States.
W. James Tozer, Jr. was a Director from March 1988 through August 1989, and
has been a Director since April 1991. For the last five years, Mr. Tozer has
been managing director of Vectra Management Group, an organization unrelated to
the Company which is involved in real estate development and management of
private investments. From April 1993 to December 1994, Mr. Tozer was President,
Chief Executive Officer and a Director of Lincolnshire Management, Inc., a New
York based investment firm. From July 1990 through March 1993 he served as an
advisor to financial institutions and managed private investments. Mr. Tozer's
previous financial service industry experience includes 20 years of senior
management positions at Marine Midland Bank, Prudential Securities, Inc. and
Citicorp/Citibank. Mr. Tozer serves as trustee of the Citizens Budget Commission
and the School for Field Studies. Mr. Tozer was also a director of Cobra
Industries, Inc. from April 1993 through October 1995. Cobra Industries filed
for reorganization under federal bankruptcy laws in October 1995 and is being
liquidated.
Richard B. Tucker has been a Director since August 1989. Mr. Tucker has
been Chairman of Custom Envelope Corporation, Denver, Colorado since 1980. From
1950 through 1977, Mr. Tucker was employed by PakWell Corp., ending his tenure
as President. Mr. Tucker is a board member of several civic organizations,
including Allied Jewish Federation, National Jewish Hospital, Shalom Park, Ocean
Journey Aquarium, and the Rose Community Foundation.
Robert D. Greene has been a Director since October 1989. Mr. Greene is a
business consultant. Mr. Greene retired from Safeway Foods in June 1993, ending
his 37-year tenure with that company as Senior Vice President and Division
Manager.
James L. Rumsey has been a Director since October 1989. Mr. Rumsey has been
an independent financial and management consultant since May 1990. From November
1985 through April 1990 Mr. Rumsey was President and Chief Executive Officer of
Scott Capital Corporation, Denver, Colorado, a private holding company. Prior
thereto, Mr. Rumsey held senior management positions with Spectrum Oil and Gas
Company, Outdoor Sports Industries, Inc. and Rio Grande Industries, Inc. Mr.
Rumsey is a general partner of
34
<PAGE> 36
Cheeseman Realty Associates, Ltd. and Evans Investment Associates, Ltd., two
privately held real estate partnerships.
Robert A. Silverberg has been Executive Vice President and a Director of
the Company since November 1995. From 1981 until joining the Company he was
Chairman of the Board of First Denver Corporation and First National Bank of
Denver. He is also a director of Vanguard Cellular Systems, Inc., a corporation
with a class of equity securities registered under the Securities Exchange Act
of 1934.
Mary Gittings Cronin has been a Director since November 1995. She has been
the Executive Director of The Piton Foundation, Denver, Colorado since 1977.
Gary A. Mosko has been Executive Vice President and a Director since June
1996. From 1974 until joining the Company he was a director and an executive
officer of Southwest State Bank, most recently, since 1983 as president and
chairman of the board of directors. He served as president and chairman of the
board of directors of Bank Land Co., the majority shareholder of Southwest State
Bank, from 1991 until he joined the Company.
Robert C. Barton has served as Mortgage Group President, Regional President
or Consumer Business Sector Head of the Bank since June 1989. From 1974 through
May 1989, Mr. Barton was employed by Citicorp in various positions, ending his
tenure as Senior Vice President for Citicorp Mortgage in the western United
States.
J. Patrick McDuff has been President of Vectra Bank of Boulder or Regional
President of the Bank since July 1987. Mr. McDuff serves as a director of Black
Hawk Gaming & Development Company, Inc., a Nasdaq National Market listed
company.
Michael Y. Meganck has been Senior Credit Policy Officer since May 1989. He
was self employed as a business consultant from 1986 until joining the Company.
Mr. Meganck worked with Crocker National Bank and Wells Fargo in various
capacities from 1978 to 1986.
Ray L. Nash has been Chief Financial Officer since July 1989. From March
1984 through June 1989, Mr. Nash was employed by WestAmerica Mortgage Company as
Vice President and Controller.
Joseph J. Wolf has served as Regional President of the Bank since December
1993. Mr. Wolf served as President of Vectra Bank of Denver from December 1991
until it was merged into the Bank in November 1993. From November 1981 through
January 1990, he was employed by United Banks, Denver, Colorado, ending his
employment as Vice President and Manager of Commercial Lending.
DESCRIPTION OF THE CAPITAL SECURITIES
The Capital 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
Capital 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 Capital 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 VBC Capital will issue the Capital Securities and the Common
Securities (collectively, the "Trust Securities"). The Capital Securities will
represent preferred undivided beneficial interests in the assets of VBC Capital
and the holders
35
<PAGE> 37
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 of VBC Capital (which will be held by the Company), as well as
other benefits as described in the Trust Agreement.
The Capital Securities will rank pari passu, and payments will be made
thereon pro rata, with the Common Securities of VBC Capital except as described
under "Subordination of Common Securities of VBC Capital Held by the Company"
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 executed by the Company for the benefit of the holders
of the Capital Securities (the "Guarantee") will be a guarantee on a
subordinated basis and will not guarantee payment of Distributions or amounts
payable on redemption of the Capital Securities or on liquidation of the Capital
Securities if VBC Capital does not have funds on hand available to make such
payments. See "Description of Guarantee."
DISTRIBUTIONS
Payment of Distributions. Distributions on the Capital Securities will be
payable at the annual rate of % of the stated Liquidation Amount of $25,
payable quarterly in arrears on the 15th day of April, July, October and January
in each year, commencing July 15, 1997 to the holders of the Capital 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 Capital Securities will include amounts
accrued through the date the Distribution is due. Distributions on the Capital
Securities will be payable to the holders thereof as they appear on the register
of VBC Capital on the relevant record date which, for so long as the Capital
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 Capital
Securities are not in book-entry form, will be the 1st 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 Capital
Securities will be July 15, 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 Capital 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" means any day other than a Saturday or a Sunday, or a day on which banking
institutions in the State of Colorado 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 VBC Capital available for distribution to holders of its
Capital Securities will be limited to payments by the Company under the Junior
Subordinated Debentures in which VBC Capital will invest the proceeds from the
issuance and sale of its Capital Securities. See "Description of Junior
Subordinated Debentures." If the Company does not make interest payments on the
Junior Subordinated Debentures, the Property Trustee will not have funds
available to pay Distributions on the Capital Securities. The payment of
Distributions (if and to the extent VBC Capital has funds legally available for
the payment of such Distributions and cash sufficient to make such payments) is
guaranteed by the Company. See "Description of Guarantee."
Extension Period. So long as no Debenture Event of Default has occurred and
is continuing, the Company has the right under the Indenture to defer the
payment of interest on the Junior Subordinated Debentures at any time or from
time to time for a period not exceeding 20 consecutive quarters with respect to
each such period (each, 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 Capital Securities will be deferred by VBC Capital during any such Extension
Period. Distributions to which holders of Capital Securities are entitled will
accumulate additional amounts thereon at
36
<PAGE> 38
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, the Company may not (i) declare or
pay any dividends or distributions on, or redeem, purchase, acquire, or make a
liquidation payment with respect to, any of the Company's capital stock (which
includes common 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 the Company 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 the Company of the debt securities of any subsidiary of the
Company 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 of the Company, (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 for issuance 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 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, the Company may elect to begin a new
Extension Period. Subject to the foregoing, there is no limitation on the number
of times that the Company may elect to begin an Extension Period.
The Company 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 of Capital Securities. 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 (as defined below) 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 of Junior Subordinated Debentures. The Company 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, the Company 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 (as defined below) 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 a Capital Treatment Event has occurred
and is continuing and the Company does not elect to redeem the Junior
Subordinated Debentures and thereby cause a mandatory redemption of the Trust
Securities or to liquidate
37
<PAGE> 39
VBC Capital and cause the Junior Subordinated Debentures to be distributed to
holders of the Trust Securities in liquidation of VBC Capital as described
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 the Company with respect to the Junior Subordinated Debentures in order
that the amount of Distributions then due and payable by VBC Capital on the
outstanding Trust Securities of VBC Capital shall not be reduced as a result of
any additional taxes, duties and other governmental charges to which VBC Capital
has become subject.
"Like Amount" means (i) with respect to a redemption of Trust Securities,
Trust Securities having a Liquidation Amount (as defined below) equal to that
portion of the principal amount of Junior Subordinated Debentures to be
contemporaneously redeemed in accordance with the Indenture, allocated to the
Common Securities and to the Capital 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 VBC 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.
"Liquidation Amount" means the stated amount of $25 per Trust Security.
"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, allocated on a pro rata basis (based on
Liquidation Amounts) among the Trust Securities.
DISTRIBUTION OF JUNIOR SUBORDINATED DEBENTURES
Subject to the Company having received prior approval of the Federal
Reserve if so required under applicable capital guidelines or policies of the
Federal Reserve, the Company will have the right at any time to liquidate VBC
Capital and, after satisfaction of the liabilities of creditors of VBC Capital
as provided by applicable law, cause the Junior Subordinated Debentures to be
distributed to the holders of Trust Securities in liquidation of VBC Capital.
After the liquidation date fixed for any distribution of Junior Subordinated
Debentures for Capital Securities (i) such Capital Securities will no longer be
deemed to be outstanding, (ii) the Depositary or its nominee, as the record
holder of the Capital 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 Capital
Securities not held by the Depositary or its nominee will be deemed to represent
the Junior Subordinated Debentures having a principal amount equal to the
Liquidation Amount of such Capital Securities, and bearing accrued and unpaid
interest in an amount equal to the accrued and unpaid Distributions on the
Capital 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 Capital
Securities or the Junior Subordinated Debentures that may be distributed in
exchange for the Capital Securities if a dissolution and liquidation of VBC
Capital were to occur. Accordingly, the Capital Securities that an investor may
purchase, or the Junior Subordinated Debentures that the investor may receive on
dissolution and liquidation of VBC Capital, may trade at a discount to the price
that the investor paid to purchase the Capital Securities offered hereby.
REDEMPTION PROCEDURES
Capital Securities redeemed on each Redemption Date will be redeemed at the
Redemption Price with the applicable proceeds from the contemporaneous
redemption of the Junior Subordinated Debentures. Redemptions of the Capital
Securities will be made and the Redemption Price will be payable on each
Redemption Date only to the extent that VBC Capital has funds on hand available
for the payment of such
38
<PAGE> 40
Redemption Price. See "-- Subordination of Common Securities of VBC Capital Held
by the Company" and "-- Guarantee."
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 VBC Capital defaults in payment of the
applicable Redemption Price, on and after the Redemption Date, Distributions
will cease to accrue on such Capital Securities called for redemption.
If VBC Capital gives a notice of redemption in respect of the Capital
Securities, then, by 12:00 noon, Denver time, on the Redemption Date, the
Property Trustee will pay the Redemption Price to the Depositary, as the record
holder of the Capital Securities, and the Depositary thereafter will credit the
Redemption Price to the Participants for whom it holds the Capital Securities.
See "Book-Entry Issuance." If such Capital 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 Capital 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 Capital Securities.
Notwithstanding the foregoing, Distributions payable on or prior to the
Redemption Date will be payable to the holders of such Capital Securities on the
relevant record dates for the related Distribution Dates. If notice of
redemption shall have been given and funds deposited as required, then upon the
date of such deposit, all rights of the holders of the Capital Securities will
cease, except the right of the holders of the Capital Securities to receive the
applicable Redemption Price, but without interest on such Redemption Price, and
such Capital Securities will cease to be outstanding. In the event that any date
fixed for redemption of such Capital 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 Capital Securities
called for redemption is improperly withheld or refused and not paid either by
VBC Capital or by the Company pursuant to the Guarantee, Distributions on such
Capital Securities will continue to accrue at the then applicable rate, from the
Redemption Date originally established by VBC Capital for such Capital
Securities to the date such Redemption Price is actually paid, in which case the
actual payment date will be the date fixed for redemption for purposes of
calculating the Redemption Price. See "Description of Guarantee."
Subject to applicable law (including, without limitation, United States
federal securities law), the Company may at any time and from time to time
purchase outstanding Capital Securities by tender, in the open market or by
private agreement.
Payment of the Redemption Price on the Capital Securities and any
distribution of Junior Subordinated Debentures to holders of Capital Securities
will be made to the applicable record holders thereof as they appear on the
register of such Capital Securities on the relevant record date, which date will
be one Business Day prior to the relevant Redemption Date or Liquidation Date,
as applicable; provided, however, that in the event that any Capital Securities
are not in book-entry form, the relevant record date for such Capital Securities
will 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 will be no
more than 45 days before the Liquidation Date.
If less than all of the Trust Securities issued by VBC Capital are to be
redeemed on a Redemption Date, then the aggregate Redemption Price for such
Trust Securities to be redeemed will be allocated pro rata to the Capital
Securities and Common Securities based upon the relative Liquidation Amounts of
such classes. The particular Capital Securities to be redeemed will be selected
by the Property Trustee from the outstanding Capital 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 Capital Securities. The Property Trustee shall promptly notify the
Trust Securities registrar in writing of the Capital Securities selected for
redemption and, in the case of any Capital Securities selected for partial
redemption, the Liquidation Amount thereof to be redeemed. For all purposes of
the Trust Agreement, unless the context otherwise requires, all provisions
39
<PAGE> 41
relating to the redemption of Capital Securities will relate to the portion of
the aggregate Liquidation Amount of Capital Securities which has been or is to
be redeemed.
SUBORDINATION OF COMMON SECURITIES OF VBC CAPITAL HELD BY THE COMPANY
Payment of Distributions on, and the Redemption Price of, the Capital
Securities and Common Securities, as applicable, shall be made pro rata based on
the Liquidation Amounts of the Capital 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
Capital 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 Capital Securities then called
for redemption, shall have been made or provided for, and all funds available to
the Property Trustee shall first be applied to the payment in full in cash of
all Distributions on, or Redemption Price of, the Capital Securities then due
and payable.
In the case of any Event of Default under the Trust Agreement resulting
from a Debenture Event of Default, the Company 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 effects 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 Capital Securities and not on behalf of
the Company as holder of the Common Securities, and only the holders of the
Capital Securities will have the right to direct the Property Trustee to act on
their behalf.
LIQUIDATION DISTRIBUTION UPON TERMINATION
The Company will have the right at any time to terminate VBC Capital and
cause the Junior Subordinated Debentures to be distributed to the holders of the
Capital Securities. Such right is subject to the Company 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" above.
In addition, pursuant to the Trust Agreement, VBC 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 the Company; (ii) delivery by the Company of written direction to
the Property Trustee to terminate VBC Capital (which direction is optional and
wholly within the discretion of the Company); (iii) redemption of all of the
Capital Securities as described under "Description of the Capital Securities --
Redemption -- Mandatory Redemption;" and (iv) the entry of an order for the
dissolution of VBC Capital by a court of competent jurisdiction.
If an early termination occurs as described in clause (i), (ii) or (iv)
above or upon the expiration of the term of VBC Capital, VBC 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 VBC
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 receive out of the assets of VBC Capital available
for distribution to holders, after satisfaction of liabilities to creditors of
VBC Capital as provided by applicable law, an amount equal to, in the case of
holders of Capital Securities, the aggregate of the Liquidation Amount of $25
per Trust Security 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 VBC Capital has insufficient
assets available to pay in full the aggregate Liquidation Distribution, then the
amounts payable directly by VBC Capital on the Capital Securities will 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
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Capital Securities, except that if a Debenture Event of Default has occurred and
is continuing, the Capital Securities will have a priority over the Common
Securities.
Under current United States federal income tax law and interpretations and
assuming, as expected, VBC Capital is treated as a grantor trust, a distribution
of the Junior Subordinated Debentures should not be a taxable event to holders
of the Capital Securities. Should there be a change in law, a change in legal
interpretation, a Tax Event or other circumstances, however, the distribution
could be a taxable event to holders of the Capital Securities. See "Certain
Federal Income Tax Consequences." If the Company elects neither to redeem the
Junior Subordinated Debentures prior to maturity nor to liquidate VBC Capital
and distribute the Junior Subordinated Debentures to holders of the Capital
Securities, the Capital Securities will remain outstanding until the repayment
of the Junior Subordinated Debentures.
If the Company elects to liquidate VBC Capital and thereby causes the
Junior Subordinated Debentures to be distributed to holders of the Capital
Securities in liquidation of VBC Capital, the Company will 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 Capital Securities and Common 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 under the Indenture (see
"Description of Junior Subordinated Debentures -- Debenture Events of Default");
or
(ii) default by the Trust in the payment of any Distribution when it
becomes due and payable, and continuation of such default for a period of 30
days; or
(iii) default by the Trust in the payment of any Redemption Price of any
Trust Security when it becomes due and payable; or
(iv) default in the performance, or breach, in any material respect, of any
covenant or warranty of the Property Trustee 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 Property Trustee by the holders of at least 25% in
aggregate Liquidation Amount of the outstanding Capital Securities, a written
notice specifying such default or breach and requiring it to be remedied and
stating that such notice is a "Notice of Default" under the Trust Agreement; or
(v) the occurrence of certain events of bankruptcy or insolvency with
respect to the Property Trustee and the failure by the Company to appoint a
successor Property Trustee within 60 days thereof.
Within five Business Days after the occurrence of any Event of Default
actually known to the Property Trustee, the Property Trustee will transmit
notice of such Event of Default to the holders of the Capital Securities, the
Administrative Trustees and the Company, unless such Event of Default shall have
been cured or waived. The Company 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 Capital
Securities will have a preference over the Common Securities upon termination of
VBC 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
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giving notice in writing to the Company (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 Capital Securities then outstanding will 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 will
remain subordinated to the extent provided in the Indenture. In addition,
holders of the Capital Securities have the right in certain circumstances to
bring a Direct Action (as defined below). See "Description of Junior
Subordinated Debentures -- Enforcement of Certain Rights by Holders of Capital
Securities."
REMOVAL OF TRUSTEES
Unless a Debenture Event of Default shall have occurred and be continuing,
any Trustee may be removed at any time by the holder of the Common Securities.
If a Debenture Event of Default has occurred and is continuing, the Property
Trustee and the Delaware Trustee may be removed at such time by the holders of a
majority in Liquidation Amount of the outstanding Capital Securities. In no
event will the holders of the Capital Securities have the right to vote to
appoint, remove or replace the Administrative Trustees, which voting rights are
vested exclusively in the Company as the holder of the Common Securities. No
resignation or removal of a Trustee and no appointment of a successor trustee
will 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, the Company, as the holder of the Common Securities, and
the Administrative Trustees will 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 will 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 which
such Trustee will be a party, or any person succeeding to all or substantially
all the corporate trust business of such Trustee, shall be the successor of such
Trustee under the Trust Agreement, provided such corporation shall be otherwise
qualified and eligible.
MERGERS, CONSOLIDATIONS, AMALGAMATIONS OR REPLACEMENTS OF VBC CAPITAL
VBC 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. VBC Capital may, at the request of the Company, with the
consent of the Administrative Trustees and without the consent of the holders of
the Capital Securities, merge with or into, consolidate, amalgamate, or be
replaced by or convey, transfer or lease 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 VBC Capital with respect to the Capital Securities or (b)
substitutes for the Capital Securities other securities having substantially the
same terms as the Capital Securities (the "Successor Securities") so long as the
Successor Securities rank the same as the Capital Securities rank in priority
with respect to distributions and payments upon liquidation, redemption and
otherwise, (ii) the Company expressly appoints a trustee of such successor
entity possessing the same powers
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and duties as the Property Trustee as the holder of the Junior Subordinated
Debentures, (iii) any such transaction does not adversely affect the rights,
preferences and privileges of the holders of the Capital Securities (including
any Successor Securities) in any material respect, (iv) such successor entity
has a purpose identical to that of VBC Capital, (v) the Successor Securities
will be listed or traded on any national securities exchange or other
organization on which the Capital Securities may then be listed, (vi) prior to
such a transaction, the Company has received an opinion from independent counsel
to VBC Capital experienced in such matters to the effect that (a) such
transaction does not adversely affect the rights, preferences and privileges of
the holders of the Capital Securities (including any Successor Securities) in
any material respect, and (b) following any such transaction, neither VBC
Capital nor such successor entity will be required to register as an investment
company under the Investment Company Act and (vii) the Company or any permitted
successor or 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, VBC Capital shall not, except with the consent of holders of 100% in
Liquidation Amount of the Capital Securities, enter into any such transaction,
or permit any other entity to consolidate, amalgamate, merge with or into, or
replace it if such transaction, would cause VBC 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 Capital Securities will have no voting rights.
The Trust Agreement may be amended from time to time by the Company, the
Property Trustee and the Administrative Trustees, without the consent of the
holders of the Trust Securities, (i) to cure any ambiguity, correct or
supplement any provisions in the Trust Agreement that may be inconsistent with
any other provision, or to make any other provisions with respect to matters or
questions arising under the Trust Agreement, 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 will be
necessary to ensure that VBC 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 VBC 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 Trustees and the Company (i) with the consent of holders representing not
less than a majority of the aggregate Liquidation Amount of the outstanding
Trust Securities, and (ii) upon 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 VBC Capital's status
as a grantor trust for United States federal income tax purposes or VBC
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 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 Capital
Securities;
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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 may be given by the Property Trustee without the prior consent of
each holder of the Capital Securities. The Trustees shall not revoke any action
previously authorized or approved by a vote of the holders of the Capital
Securities except by subsequent vote of the holders of the Capital Securities.
The Property Trustee will notify each holder of the Capital 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 Capital
Securities, prior to taking any of the foregoing actions, the Trustees shall
obtain an opinion of counsel experienced in such matters to the effect that VBC
Capital will not be classified as an association taxable as a corporation for
United States federal income tax purposes on account of such action.
Any required approval of holders of the Capital Securities may be given at
a meeting of holders of Capital Securities convened for such purpose or pursuant
to written consent. The Property Trustee will cause a notice of any meeting at
which holders of the Capital Securities are entitled to vote, or of any matter
upon which action by written consent of such holders is to be taken, to be given
to each holder of record of the Capital Securities in the manner set forth in
the Trust Agreement.
No vote or consent of the holders of the Capital Securities will be
required for VBC Capital to redeem and cancel the Capital Securities in
accordance with the Trust Agreement.
Notwithstanding that holders of the Capital Securities are entitled to vote
or consent under any of the circumstances described above, any of the Capital
Securities that are owned by the Company, the Trustees or any affiliate of the
Company or any Trustees, shall, for purposes of such vote or consent, be treated
as if they were not outstanding.
GLOBAL CAPITAL SECURITIES
The Capital Securities will be represented by one or more global
certificates registered in the name of the Depositary or its nominee ("Global
Capital Security"). Beneficial interests in the Capital Securities will be shown
on, and transfers thereof will be effected only through, records maintained by
participants in the Depositary. Except as described below, Capital Securities in
certificated form will not be issued in exchange for the global certificates.
See "Book-Entry Issuance."
A global security will be exchangeable for Capital Securities registered in
the names of persons other than the Depositary or its nominee only if (i) the
Depositary notifies the Company that it is unwilling or unable to continue as a
depositary for such global security and no successor depositary shall have been
appointed, or if at any time the Depositary ceases to be a clearing agency
registered under the Securities Exchange Act of 1934, as amended, at a time when
the Depositary is required to be so registered to act as such depositary, (ii)
the Company in its sole discretion determines that such global security shall be
so exchangeable, or (iii) there shall have occurred and be continuing an Event
of Default under the Indenture. Any global security that is exchangeable
pursuant to the preceding sentence shall be exchangeable for definitive
certificates registered in such names as the Depositary directs. It is expected
that such instructions will be based upon directions received by the Depositary
with respect to ownership of beneficial interests in such global security. In
the event that Capital Securities are issued in definitive form, they 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
Capital Securities represented thereby, such Global Capital Security may not be
transferred except as a whole by the Depositary to a nominee of such Depositary
or by a nominee of such Depositary to such Depositary or another nominee of such
Depositary or by the Depositary or any nominee to a successor Depositary or any
nominee of such successor.
Payments on Capital Securities represented by a global security will be
made to the Depositary, as the depositary for the Capital Securities. In the
event the Capital Securities are issued in definitive form, Distributions will
be payable, the transfer of the Capital Securities will be registrable, and
Capital Securities will be exchangeable for Capital Securities of other
denominations of a like aggregate Liquidation Amount, at
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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 Capital Securities are issued in certificated
form, the record dates for payment of Distributions will be the 1st 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 Capital Security, and the deposit of such
Global Capital Security with or on behalf of the Depositary, the Depositary or
its nominee will credit, on its book-entry registration and transfer system, the
respective aggregate Liquidation Amounts of the individual Capital Securities
represented by such Global Capital Security to persons that have accounts with
such Depositary ("Participants"). Such accounts shall be designated by the
dealers, underwriters or agents with respect to such Capital Securities.
Ownership of beneficial interests in a Global Capital Security will be limited
to Participants or persons that may hold interests through Participants.
Ownership of beneficial interests in such Global Capital Security will be shown
on, and the transfer of that ownership will be effected only through, records
maintained by the Depositary 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
definitive form. Such limits and such laws may impair the ability to transfer
beneficial interests in a Global Capital Security.
So long as the Depositary for a Global Capital Security, or its nominee, is
the registered owner of such Global Capital Security, such Depositary or such
nominee, as the case may be, will be considered the sole owner or holder of the
Capital Securities represented by such Global Capital Security for all purposes
under the Trust Agreement governing such Capital Securities. Except as provided
below, owners of beneficial interests in a Global Capital Security will not be
entitled to have any of the individual Capital Securities represented by such
Global Capital Security registered in their names, will not receive or be
entitled to receive physical delivery of any such Capital Securities in
definitive form and will not be considered the owners or holders thereof under
the Trust Agreement.
None of the Company, the Property Trustee, any Paying Agent, or the
Securities Registrar (defined below) for such Capital 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 Capital
Security representing such Capital Securities or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interests.
The Company expects that the Depositary for Capital Securities or its
nominee, upon receipt of any payment of the Liquidation Amount or Distributions
in respect of a permanent Global Capital Security, immediately will credit
Participants' accounts with payments in amounts proportionate to their
respective beneficial interest in the aggregate Liquidation Amount of such
Global Capital Security as shown on the records of such Depositary or its
nominee. The Company also expects that payments by Participants to owners of
beneficial interests in such Global Capital 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 the Depositary for the Capital Securities is at any time unwilling,
unable or ineligible to continue as depositary and a successor depositary is not
appointed by the Company within 90 days, VBC Capital will issue individual
Capital Securities in exchange for the Global Capital Security. In addition, VBC
Capital may at any time and in its sole discretion, subject to any limitations
described herein relating to such Capital Securities, determine not to have any
Capital Securities represented by one or more Global Capital Securities and, in
such event, will issue individual Capital Securities in exchange for the Global
Capital Security or Securities representing the Capital Securities. Further, if
VBC Capital so specifies with respect to the Capital Securities, an owner of a
beneficial interest in a Global Capital Security representing Capital Securities
may, on terms acceptable to the Company, the Property Trustee and the Depositary
for such Global Capital
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Security, receive individual Capital 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 Capital Security will be entitled to
physical delivery of individual Capital Securities represented by such Global
Capital Security equal in Liquidation Amount to such beneficial interest and to
have such Capital Securities registered in its name. Individual Capital
Securities so issued will be issued in denominations, unless otherwise specified
by VBC Capital, of $25 and integral multiples thereof.
PAYMENT AND PAYING AGENCY
Payments in respect of the Capital Securities will be made to the
Depositary, which will credit the relevant accounts at the Depositary on the
applicable Distribution Dates or, if any of the Capital Securities are not held
by the Depositary, such payments will be made by check mailed to the address of
the holder entitled thereto as such address will appear on the Register. The
paying agent (the "Paying Agent") will initially be the Property Trustee and any
co-paying agent chosen by the Property Trustee and acceptable to the
Administrative Trustees and the Company. The Paying Agent will be permitted to
resign as Paying Agent upon 30 days' written notice to the Property Trustee and
the Company. In the event that the Property Trustee shall no longer be the
Paying Agent, the Administrative Trustees will appoint a successor (which shall
be a bank or trust company acceptable to the Administrative Trustees and the
Company) to act as Paying Agent.
REGISTRAR AND TRANSFER AGENT
The Property Trustee will act as registrar and transfer agent for the
Capital Securities. Registration of transfers of the Capital Securities will be
effected without charge by or on behalf of VBC Capital, but upon payment of any
tax or other governmental charges that may be imposed in connection with any
transfer or exchange. VBC Capital will not be required to register or cause to
be registered the transfer of the Capital Securities after such Capital
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
Capital 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 Capital Securities
are entitled under the Trust Agreement to vote, then the Property Trustee shall
take such action as is directed by the Company 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 VBC Capital in such a way that VBC 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 the Company for
United States federal income tax purposes. In this regard, the Company and the
Administrative Trustees are authorized to take any action, not inconsistent with
applicable law, the certificate of trust of VBC Capital or the Trust Agreement,
that the Company 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 related Capital
Securities. Holders of the Capital Securities have no preemptive or similar
rights.
VBC 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 Subordinated
Indenture, dated as of , 1997 (the "Indenture"), between the Company
and Wilmington Trust Company, as trustee (the "Indenture Trustee"). 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 Capital Securities, VBC Capital will
invest the proceeds thereof, together with the consideration paid by the Company
for the Common Securities, in Junior Subordinated Debentures issued by the
Company. 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 15th
day of April, July, October and January of each year (each, an "Interest Payment
Date"), commencing July 15, 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, in the event that either the (i) Junior Subordinated
Debentures are held by the Property Trustee and the Capital 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 1st 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 through the Interest
Payment Date. It is anticipated that, until the liquidation, if any, of VBC
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 Capital
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. In the event that 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 defined below), as
applicable.
The Junior Subordinated Debentures will mature on , 2027 (such
date, as it may be shortened as hereinafter described, the "Stated Maturity").
Such date may be shortened once at any time by the Company to any date not
earlier than , 2002, subject to the Company having received prior
approval of the Federal Reserve if then required under applicable capital
guidelines or policies of the Federal Reserve. In the event that the Company
elects to shorten the Stated Maturity of the Junior Subordinated Debentures, it
will give notice to the registered holders of the Junior Subordinated
Debentures, the Property Trustee and the Indenture Trustee of such shortening no
less than 90 days prior to the effectiveness thereof. The Property Trustee must
give notice to the holders of the Trust Securities of the shortening of the
Stated Maturity.
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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
the Company. Because the Company is a holding company, the right of the Company
to participate in any distribution of assets of any subsidiaries, including the
Bank, upon any such subsidiaries' liquidation or reorganization or otherwise
(and thus the ability of holders of the Capital Securities to benefit indirectly
from such distribution), is subject to the prior claims of creditors of that
subsidiary, except to the extent that the Company 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
Company's subsidiaries, and holders of Junior Subordinated Debentures should
look only to the assets of the Company for payments on the Junior Subordinated
Debentures. The Indenture does not limit the incurrence or issuance of other
secured or unsecured debt of the Company, including Senior and Subordinated
Debt, whether under the Indenture or any existing or other indenture that the
Company may enter into in the future or otherwise. See "Subordination" below.
OPTION TO EXTEND INTEREST PAYMENT PERIOD
So long as no Debenture Event of Default has occurred and is continuing,
the Company 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, 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). 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 -- Potential Extension of Interest Payment
Period and Original Issue Discount."
During any such Extension Period, the Company may not (i) declare or pay
any dividends or distributions on, or redeem, purchase, acquire, or make a
liquidation payment with respect to, any of the Company's capital stock or (ii)
make any payment of principal, interest or premium, if any, on or repay,
repurchase or redeem any debt securities of the Company (including other 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 the Company of the debt securities of any subsidiary of the
Company 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 of the Company, (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 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 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, 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 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 Capital 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
holders of the Capital Securities of the record date or the date such
Distributions are payable, but in any event not less than one Business Day prior
to such record date. The Indenture Trustee shall give notice of the Company's
election to begin or extend a new Extension Period the holders of the Capital
Securities. There is no limitation on the number of times that the Company may
elect to begin an Extension Period.
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ADDITIONAL SUMS
If VBC Capital is required to pay any additional taxes, duties or other
governmental charges as a result of a Tax Event, the Company will pay as
additional amounts on the Junior Subordinated Debentures such amounts
("Additional Sums") as shall be required so that the Distributions payable by
VBC Capital shall not be reduced as a result of any such additional taxes,
duties or other governmental charges.
REDEMPTION
Subject to the Company 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 the Company (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 days 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 the
Company 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.
The Junior Subordinated Debentures will not be subject to any sinking fund.
DISTRIBUTION UPON LIQUIDATION
As described under "Description of the Capital Securities -- Liquidation
Distribution Upon Termination," under certain circumstances involving the
termination of VBC Capital, the Junior Subordinated Debentures may be
distributed to the holders of the Capital Securities and Common Securities in
liquidation of VBC Capital after satisfaction of liabilities to creditors of VBC
Capital as provided by applicable law. If distributed to holders of the Capital
Securities in liquidation, the Junior Subordinated Debentures will initially be
issued in the form of one or more global securities and the Depositary, or any
successor depositary for the Capital 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 Capital Securities. If the Junior
Subordinated Debentures are distributed to the holders of Capital Securities
upon the liquidation of VBC Capital, there can be no assurance as to the market
price of any Junior Subordinated Debentures that may be distributed to the
holders of Capital Securities.
RESTRICTIONS ON CERTAIN PAYMENTS
If at any 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 a Debenture Event of Default and (b) in respect of which
the Company shall not have taken reasonable steps to cure, or (ii) the Company
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 VBC Capital, the Company shall be in default with respect to its payment of
any obligation under the Guarantee, then the Company 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 the Company'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 the Company (including other Junior
Subordinated Debt) 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 the Company of the debt securities of any subsidiary of the Company
if such guarantee ranks pari passu 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
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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 rights under any of the Company's benefit
plans for its directors, officers or employees).
SUBORDINATION
In the Indenture, the Company has agreed that any Junior Subordinated
Debentures 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 the Company, the
holders of Senior and Subordinated Debt will first be entitled to receive
payment in full of principal of (and premium, if any) and interest, if any, on
such Senior and Subordinated Debt before the holders of Junior Subordinated
Debentures will be entitled to receive or retain any payment in respect of the
principal of or interest, if any, on the Junior Subordinated Debentures.
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 principal of or interest, if any, on the Junior
Subordinated Debentures; provided, however, that holders of Subordinated Debt
shall not be entitled to receive payment of any such amounts to the extent that
such Subordinated Debt is by its terms subordinated to trade creditors.
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.
"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; and (vi) every
obligation of the type referred to in clauses (i) through (v) 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 the Company whether or
not such claim for post-petition interest is allowed in such proceeding), on
Debt, whether incurred on or prior to the date of the Indenture or thereafter
incurred, unless, in the instrument creating or evidencing the same or pursuant
to which the same is outstanding, it is provided that such obligations are not
superior in right of payment to the 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 the Company which when incurred and without
respect to any election under section 1111(b) of the United States Bankruptcy
Code of 1978, as amended, was without recourse to the Company, (ii) any Debt of
the Company to any of its subsidiaries, (iii) any Debt to any employee of the
Company, (iv) any Debt which by its terms is subordinated to trade accounts
payable or accrued liabilities arising in the ordinary course of business to the
extent that payments made to the holders of such Debt by the holders of the
Junior Subordinated Debentures as a result of the
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subordination provisions of the Indenture would be greater than they otherwise
would have been as a result of any obligation of such holders to pay amounts
over to the obligees on such trade accounts payable or accrued liabilities
arising in the ordinary course of business as a result of subordination
provisions to which such Debt is subject, (v) the Guarantee, and (vi) 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 the Company. The Company 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 the Depositary 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 the Depositary. Except as described below, Junior
Subordinated Debentures in certificated form will not be issued in exchange for
the global 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 the Depositary for such Global
Subordinated Debenture to a nominee of such Depositary or by a nominee of such
Depositary to such Depositary or another nominee of such Depositary or by the
Depositary or any nominee to a successor Depositary or any nominee of such
successor.
A global security shall be exchangeable for Junior Subordinated Debentures
registered in the names of persons other than the Depositary or its nominee only
if (i) the Depositary notifies the Company that it is unwilling or unable to
continue as a depositary for such global security and no successor depositary
shall have been appointed, or if at any time the Depositary ceases to be a
clearing agency registered under the Securities Exchange Act of 1934, as
amended, at a time when the Depositary is required to be so registered to act as
such depositary, (ii) the Company in its sole discretion determines that such
global security shall be so exchangeable or (iii) there shall have occurred and
be continuing an Event of Default under the Indenture with respect to such
global security. Any global security that is exchangeable pursuant to the
preceding sentence shall be exchangeable for definitive certificates registered
in such names as the Depositary shall direct. It is expected that such
instructions will be based upon directions received by the Depositary from its
Participants with respect to ownership of beneficial interests in such global
security. In the event that 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 security
will be made to the Depositary, as the depositary for the Junior Subordinated
Debentures. In the event 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
the Company, provided that payment of interest may be made at the option of the
Company by check mailed to the address of the persons entitled thereto 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 1st day
of the month in which such payment is to be made. For a description of the
Depositary and the terms of the depositary arrangements relating to payments,
transfers, voting rights, redemptions and other notices and other matters, see
"Book-Entry Issuance."
The Company 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. The Company may at any time rescind the designation of
any such registrar or approve a change in the location through which any
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such registrar acts, provided that the Company maintains a registrar in the
place of payment. The Company may at any time designate additional registrars
with respect to the Junior Subordinated Debentures.
In the event of any redemption, neither the Company 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 DEBENTURE
Upon the issuance of the Global Subordinated Debenture, and the deposit of
such Global Subordinated Debenture with or on behalf of the Depositary, the
Depositary for such Global Subordinated Debenture 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 Participants. Ownership of beneficial interests
in a Global Subordinated Debenture will be limited to Participants or persons
that may hold interests through 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 the applicable
Depositary 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 definitive form. Such
limits and such laws may impair the ability to transfer beneficial interests in
a Global Subordinated Debenture.
So long as the Depositary for a Global Subordinated Debenture, or its
nominee, is the registered owner of such Global Subordinated Debenture, such
Depositary 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 governing such
Junior Subordinated Debentures. 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 the Depositary or its nominee will be made to the Depositary or its nominee,
as the case may be, as the registered owner of the Global Subordinated Debenture
representing such Junior Subordinated Debentures. None of the Company, 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.
The Company expects that the Depositary or its nominee, upon receipt of any
payment of principal or interest in respect of the Global Subordinated Debenture
representing the Junior Subordinated Debentures, immediately will credit
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 such Depositary or its
nominee. The Company also expects that payments by Participants to owners of
beneficial interests in such Global Subordinated Debenture 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 the Depositary is at any time unwilling, unable or ineligible to
continue as depositary and a successor depositary is not appointed by the
Company within 90 days, the Company will issue individual Junior
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Subordinated Debentures in exchange for the Global Subordinated Debenture. In
addition, the Company 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 the Company so specifies with respect to the Junior Subordinated
Debentures, an owner of a beneficial interest in a Global Subordinated Debenture
representing the Junior Subordinated Debentures may, on terms acceptable to the
Company, the Indenture Trustee and the Depositary for such Global Subordinated
Debenture, 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 the Company, 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 the Company payment of any interest may be made (i) except in the
case of a Global Subordinated Debenture, 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 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. The Company may at any time designate additional
Paying Agents or rescind the designation of any Paying Agent; however, the
Company 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 the Company 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 the Company, be repaid to the Company and the holder of such Junior
Subordinated Debenture shall thereafter look, as a general unsecured creditor,
only to the Company for payment thereof.
MODIFICATION OF INDENTURE
From time to time the Company 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 Capital 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 the
Company 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 extend the time of payment of interest thereon
(except as described under "Description of Junior Subordinated
Debentures -- General" and "-- Option to Extend Interest Payment Period"), or
reduce the principal amount thereof or the rate 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 Capital Securities remain
outstanding, no such modification may be made that adversely affects the holders
of such Capital Securities in any material respect, and no termination of the
Indenture may occur, and no waiver of any Debenture Event of Default or
compliance with any covenant under the Indenture may be effective, without the
prior consent of the holders of at least a majority of the aggregate Liquidation
Amount of the Capital Securities unless and until the
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principal of the Junior Subordinated Debentures and all accrued and unpaid
interest thereon have been paid in full and certain other conditions are
satisfied.
DEBENTURE EVENTS OF DEFAULT
The Indenture provides that any one or more of the following described
events with respect to the 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 by the Company to observe or perform in any material respect
certain other covenants contained in the Indenture for 90 days after written
notice to the Company from the Indenture Trustee or to the Company 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 the
Company, including the voluntary commencement of bankruptcy proceedings, entry
of an order for relief against the Company in a bankruptcy proceeding,
appointment of a custodian over substantially all of the Company's property, a
general assignment for the benefit of creditors, or a court order for
liquidation of the Company.
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. 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 Capital Securities shall have such right. In case a
Debenture Event of Default shall occur and be continuing, the Property Trustee
will have the right to declare the principal of and the interest on such 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 such Junior Subordinated Debentures.
The Company is required to file annually with the Indenture Trustee a
certificate as to whether the Company is in compliance with all the conditions
and covenants applicable to it under the Indenture.
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF CAPITAL SECURITIES
If a Debenture Event of Default has occurred and is continuing and such
event is attributable to the failure of the Company to pay interest or principal
on the Junior Subordinated Debentures on the date such interest or principal is
otherwise payable, a holder of Capital Securities may institute a legal
proceeding directly against the Company 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
Capital Securities of such holder ("Direct Action"). If the right to bring a
Direct Action is removed, VBC Capital may become subject to the reporting
obligations under the Exchange Act. The Company shall have the right under the
Indenture to set-off any payment made to such holder of Capital Securities by
the Company in connection with a Direct Action.
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The holders of the Capital 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 Capital Securities -- Events of Default; Notice."
CONSOLIDATION, MERGER, SALE OF ASSETS AND OTHER TRANSACTIONS
The Indenture provides that 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 (i) in case the Company
consolidates with or merges into another Person or conveys or transfers its
properties and assets substantially as an entirety to any Person, the successor
Person is organized under the laws of the United States or any state or the
District of Columbia, and such successor Person expressly assumes the Company's
obligations 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; and (iii) certain other
conditions as prescribed in the Indenture are met.
The 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 the Company 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 the Company deposits or causes to
be deposited with the Indenture Trustee, in trust, funds 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 the Company's obligations to pay all
other sums due pursuant to the Indenture and to provide the officers'
certificates and opinions of counsel described therein), and the Company will be
deemed to have satisfied and discharged the Indenture.
GOVERNING LAW
The Indenture and the Junior Subordinated Debentures will be governed by
and construed in accordance with the laws of the State of Colorado.
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 to it.
COVENANTS OF THE COMPANY
The Company will covenant in the Indenture, as to the Junior Subordinated
Debentures, that if and so long as (i) VBC Capital is the holder of all such
Junior Subordinated Debentures, (ii) a Tax Event in respect of VBC Capital has
occurred and is continuing and (iii) the Company has elected, and has not
revoked such election, to pay Additional Sums (as defined under "Description of
the Capital Securities -- Redemption") in
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respect of the Capital Securities, the Company will pay to VBC Capital such
Additional Sums. The Company will also covenant, as to the Junior Subordinated
Debentures, (i) to maintain directly or indirectly 100% ownership of the Common
Securities of VBC Capital to which Junior Subordinated Debentures have been
issued, provided that certain successors which are permitted pursuant to the
Indenture may succeed to the Company's ownership of the Common Securities, (ii)
not to voluntarily terminate, wind up or liquidate VBC 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 Capital Securities in liquidation of VBC 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 VBC Capital to remain classified as
a grantor trust and not as an association taxable as a corporation for United
States federal income tax purposes.
BOOK-ENTRY ISSUANCE
The Depositary will act as securities depositary for all of the Capital
Securities and the Junior Subordinated Debentures. The Capital Securities and
the Junior Subordinated Debentures will be issued only as fully-registered
securities registered in the name of Cede & Co. (the Depositary's nominee). One
or more fully-registered global certificates will be issued for the Capital
Securities and the Junior Subordinated Debentures and will be deposited with the
Depositary.
The Depositary 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. The Depositary holds securities that its Participants deposit with the
Depositary. The Depositary 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. The Depositary
is owned by a number of its Direct Participants and by the New York Stock
Exchange, Inc., the American Stock Exchange, Inc. and the National Association
of Securities Dealers, Inc. Access to the Depositary 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
the Depositary and its Participants are on file with the Commission.
Purchases of Capital Securities or Junior Subordinated Debentures within
the Depositary system must be made by or through Direct Participants, which will
receive a credit for the Capital Securities or Junior Subordinated Debentures on
the Depositary's records. The ownership interest of each actual purchaser of
each Capital Security and each Junior 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 the
Depositary of their purchases, but Beneficial Owners are expected to receive
written confirmations providing details of the transactions, as well as periodic
statements of their holdings, from the Direct or Indirect Participants through
which the Beneficial Owners purchased Capital Securities or Junior Subordinated
Debentures. Transfers of ownership interests in the Capital 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 Capital
Securities or Junior Subordinated Debentures, except in the event that use of
the book-entry system for the or Junior Subordinated Debentures is discontinued.
The Depositary has no knowledge of the actual Beneficial Owners of the
Capital Securities or Junior Subordinated Debentures; the Depositary's records
reflect only the identity of the Direct Participants to whose accounts such
Capital Securities or Junior Subordinated Debentures are credited, which may or
may not be
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the Beneficial Owners. The Participants will remain responsible for keeping
account of their holdings on behalf of their customers.
Conveyance of notices and other communications by the Depositary 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 Cede & Co. as the registered holder of
the Capital Securities or Junior Subordinated Debentures. If less than all of
the Capital Securities or the Junior Subordinated Debentures are being redeemed,
the Depositary will determine by lot or pro rata the amount of the Capital
Securities of each Direct Participant to be redeemed.
Although voting with respect to the Capital Securities or the Junior
Subordinated Debentures is limited to the holders of record of the Capital
Securities or the Junior Subordinated Debentures, in those instances in which a
vote is required, neither the Depositary nor Cede & Co. will itself consent or
vote with respect to Capital Securities or Junior Subordinated Debentures. Under
its usual procedures, the Depositary would mail an omnibus proxy (the "Omnibus
Proxy") to the relevant Trustee as soon as possible after the record date. The
Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct
Participants to whose accounts such Capital Securities or Junior Subordinated
Debentures are credited on the record date (identified in a listing attached to
the Omnibus Proxy).
Distribution payments on the Capital Securities or the Junior Subordinated
Debentures will be made by the relevant Trustee to the Depositary. The
Depositary's practice is to credit Direct Participants' accounts on the relevant
payment date in accordance with their respective holdings shown on the
Depositary's records unless the Depositary has reason to believe that it will
not receive payments on such payment date. Payments by Participants to
Beneficial Owners will be governed by standing instructions and customary
practices and will be the responsibility of such Participant and not of the
Depositary, the relevant Trustee, VBC Capital or the Company, subject to any
statutory or regulatory requirements as may be in effect from time to time.
Payment of Distributions to the Depositary is the responsibility of the relevant
Trustee, disbursement of such payments to Direct Participants is the
responsibility of the Depositary, and disbursements of such payments to the
Beneficial Owners is the responsibility of Direct and Indirect Participants.
The Depositary may discontinue providing its services as securities
depositary with respect to any of the Capital Securities or the Junior
Subordinated Debentures at any time by giving reasonable notice to the relevant
Trustee and the Company. In the event that a successor securities depositary is
not obtained, definitive Capital Securities or Subordinated Debenture
certificates representing such Capital Securities or Junior Subordinated
Debentures are required to be printed and delivered. The Company, at its option,
may decide to discontinue use of the system of book-entry transfers through the
Depositary (or a successor depositary). After a Debenture Event of Default, the
holders of a majority in liquidation preference of Capital Securities or
aggregate principal amount of Junior Subordinated Debentures may determine to
discontinue the system of book-entry transfers through the Depositary. In any
such event, definitive certificates for such Capital Securities or Junior
Subordinated Debentures will be printed and delivered.
The information in this section concerning the Depositary and the
Depositary's book-entry system has been obtained from sources that VBC Capital
and the Company believe to be accurate, but VBC Capital and the Company assume
no responsibility for the accuracy thereof. Neither VBC Capital nor the Company
has any responsibility for the performance by the Depositary or its 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 Capital Securities Guarantee Agreement (the "Guarantee") will be
executed and delivered by the Company concurrently with the issuance of the
Capital Securities for the benefit of the holders of the Capital Securities.
Wilmington Trust Company will act as trustee under the Guarantee (the "Guarantee
Trustee") for the purposes of compliance with the Trust Indenture Act, and the
Guarantee will be qualified 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, 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 Capital
Securities.
GENERAL
The Guarantee will be an irrevocable guarantee on a subordinated basis of
all of VBC Capital's obligations under the Capital Securities, but will apply
only to the extent that VBC Capital has funds sufficient to make such payments,
and is not a guarantee of collection.
The Company will irrevocably agree to pay in full on a subordinated basis,
to the extent set forth herein, the Guarantee Payments (as defined below) to the
holders of the Capital Securities, as and when due, regardless of any defense,
right of set-off or counterclaim that VBC Capital may have or assert other than
the defense of payment. The following payments with respect to the Capital
Securities, to the extent not paid by or on behalf of VBC Capital (the
"Guarantee Payments"), will be subject to the Guarantee: (i) any accumulated and
unpaid Distributions required to be paid on the Capital Securities, to the
extent that VBC Capital has funds on hand available therefor at such time, (ii)
the Redemption Price with respect to any Capital Securities called for
redemption to the extent that VBC Capital has funds on hand available therefor
at such time, and (iii) upon a voluntary or involuntary dissolution, winding up
or liquidation of VBC Capital (unless the Junior Subordinated Debentures are
distributed to holders of the Capital Securities), the lesser of (a) the
Liquidation Distribution and (b) the amount of assets of VBC Capital remaining
available for distribution to holders of Capital Securities. The Company's
obligation to make a Guarantee Payment may be satisfied by direct payment of the
required amounts by the Company to the holders of the Capital Securities or by
causing VBC Capital to pay such amounts to such holders.
If the Company does not make interest payments on the Junior Subordinated
Debentures held by VBC Capital, VBC Capital will not be able to pay
Distributions on the Capital Securities and will not have funds legally
available therefor. The Guarantee will rank subordinate and junior in right of
payment to all Senior and Subordinated Debt of the Company. See "Status of the
Guarantee" below. Because the Company is a holding company, the right of the
Company to participate in any distribution of assets of any subsidiary upon such
subsidiary's liquidation or reorganization or otherwise, is subject to the prior
claims of creditors of that subsidiary, except to the extent the Company may
itself be recognized as a creditor of that subsidiary. Accordingly, the
Company's obligations under the Guarantee will be effectively subordinated to
all existing and future liabilities of the Company's subsidiaries, and claimants
should look only to the assets of the Company for payments thereunder. Except as
otherwise described herein, the Guarantee does not limit the incurrence or
issuance of other secured or unsecured debt of the Company, including Senior and
Subordinated Debt whether under the Indenture, any other indenture that the
Company may enter into in the future, or otherwise.
The Company has, through the Guarantee, the Trust Agreement, the Junior
Subordinated Debentures, the Indenture and the Expense Agreement, taken
together, fully, irrevocably and unconditionally guaranteed on a subordinated
basis all of VBC Capital's obligations under the Capital Securities. No single
document standing alone or operating in conjunction with fewer than all of the
other documents constitutes such guarantee. It is only the combined operation of
these documents that has the effect of providing a full, irrevocable and
unconditional guarantee on a subordinated basis of all of VBC Capital's
obligations under the Capital Securities. See "Relationship Among the Capital
Securities, the Junior Subordinated Debentures and the Guarantee."
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STATUS OF THE GUARANTEE
The Guarantee will constitute an unsecured obligation of the Company 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.
The guaranteed party may institute a legal proceeding directly against the
Company 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 Capital Securities. The Guarantee will not
be discharged except by payment of the Guarantee Payments in full to the extent
not paid by VBC Capital or upon distribution to the holders of the Capital
Securities of the Junior Subordinated Debentures to the holders of the Capital
Securities. The Guarantee does not place a limitation on the amount of
additional Senior and Subordinated Debt that may be incurred by the Company. The
Company 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 Capital Securities (in which case no vote will be
required), the Guarantee 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 Capital Securities. See "Description of the Capital
Securities -- Voting Rights; Amendment of Trust Agreement." All guarantees and
agreements contained in the Guarantee shall bind the successors, assigns,
receivers, trustees and representatives of the Company and shall inure to the
benefit of the holders of the Capital Securities then outstanding.
EVENTS OF DEFAULT
An event of default under the Guarantee will occur upon the failure of the
Company to perform any of its payment or other obligations thereunder. The
holders of not less than a majority in aggregate Liquidation Amount of the
Capital Securities have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Guarantee Trustee in
respect of the Guarantee or to direct the exercise of any trust or power
conferred upon the Guarantee Trustee under the Guarantee.
Any holder of the Capital Securities may institute a legal proceeding
directly against the Company to enforce its rights under the Guarantee without
first instituting a legal proceeding against VBC Capital, the Guarantee Trustee
or any other person or entity.
The Company, as guarantor, is required to file annually with the Guarantee
Trustee a certificate as to whether the Company is in compliance with all the
conditions and covenants applicable to it under the Guarantee.
INFORMATION CONCERNING THE GUARANTEE TRUSTEE
The Guarantee Trustee, other than during the occurrence and continuance of
a default by the Company in performance of the Guarantee, undertakes to perform
only such duties as are specifically set forth in the Guarantee 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 powers vested in it by the Guarantee at the request of
any holder of the Capital Securities unless it is offered reasonable indemnity
against the costs, expenses and liabilities that 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 of the Capital Securities, upon full
payment of the amounts payable upon liquidation of VBC Capital or upon
distribution of Junior Subordinated Debentures to the holders of the Capital
Securities. The Guarantee
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will continue to be effective or will be reinstated, as the case may be, if at
any time any holder of the Capital Securities must restore payment of any sums
paid under the Capital Securities or the Guarantee.
GOVERNING LAW
The Guarantee will be governed by and construed in accordance with the laws
of the State of Colorado.
THE EXPENSE AGREEMENT
Pursuant to the Agreement as to Expenses and Liabilities entered into by
the Company under the Trust Agreement (the "Expense Agreement"), the Company
will irrevocably and unconditionally guarantee to each person or entity to whom
VBC Capital becomes indebted or liable, the full payment of any costs, expenses
or liabilities of VBC Capital, other than obligations of VBC Capital to pay to
the holders of the Capital Securities or other similar interests in VBC Capital
of the amounts due such holders pursuant to the terms of the Capital Securities
or such other similar interests, as the case may be.
RELATIONSHIP AMONG THE CAPITAL SECURITIES, THE
JUNIOR SUBORDINATED DEBENTURES AND THE GUARANTEE
FULL AND UNCONDITIONAL GUARANTEE
Payments of Distributions and other amounts due on the Capital Securities
(to the extent VBC Capital has funds available for the payment of such
Distributions) are irrevocably guaranteed by the Company as and to the extent
set forth under "Description of Guarantee." Taken together, the Company's
obligations under the Junior Subordinated Debentures, the Indenture, the Trust
Agreement, the Expense Agreement and the Guarantee provide, in the aggregate, a
full, irrevocable and unconditional guarantee on a subordinated basis of
payments of Distributions and other amounts due on the Capital Securities. No
single document standing alone or operating in conjunction with fewer than all
of the other documents constitutes such guarantee. It is only the combined
operation of those documents that has the effect of providing a full,
irrevocable and unconditional guarantee on a subordinated basis of VBC Capital's
obligations under the Capital Securities. If and to the extent that the Company
does not make payments on the Junior Subordinated Debentures, VBC Capital will
not pay Distributions or other amounts due on the Capital Securities. The
Guarantee does not cover payment of Distributions when VBC Capital does not have
sufficient funds to pay such Distributions. In such event, the remedy of a
holder of the Capital Securities is to institute a legal proceeding directly
against the Company for enforcement of payment of such Distributions to such
holder. The obligations of the Company 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 Capital Securities, primarily
because: (i) the aggregate principal amount of the Junior Subordinated
Debentures will be equal to the sum of the aggregate Liquidation Amount of the
Capital Securities and Common Securities; (ii) the interest rate and interest
and other payment dates on the Junior Subordinated Debentures will match the
Distribution rate and Distribution and other payment dates for the Capital
Securities; (iii) the Company shall pay for all and any costs, expenses and
liabilities of VBC Capital except VBC Capital's obligations to holders of
Capital Securities; and (iv) the Trust Agreement further provides that VBC
Capital will not engage in any activity that is not consistent with the limited
purposes of VBC Capital.
Notwithstanding anything to the contrary in the Indenture, the Company has
the right to set-off any payment it is otherwise required to make thereunder
with and to the extent the Company has theretofore made, or is concurrently on
the date of such payment making, a payment under the Guarantee.
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ENFORCEMENT RIGHTS OF HOLDERS OF THE CAPITAL SECURITIES UNDER THE GUARANTEE
A holder of any the Capital Securities may institute a legal proceeding
directly against the Company to enforce its rights under the Guarantee without
first instituting a legal proceeding against the Guarantee Trustee, VBC Capital
or any other person or entity,
A default or event of default under any Senior and Subordinated Debt would
not constitute an 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 VBC CAPITAL
The Capital Securities evidence a beneficial interest in VBC Capital, and
VBC 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 Capital Securities and a holder
of a Subordinated Debenture is that a holder of a Subordinated Debenture is
entitled to receive from the Company the principal amount of and interest
accrued on Junior Subordinated Debentures held, while a holder of the Capital
Securities is entitled to receive Distributions from VBC Capital (or from the
Company under the Guarantee) if and to the extent VBC Capital has funds
available for the payment of such Distributions.
RIGHTS UPON TERMINATION
Upon any voluntary or involuntary termination, winding-up or liquidation of
VBC Capital involving the liquidation of the Junior Subordinated Debentures, the
holders of Capital Securities will be entitled to receive, out of assets held by
VBC Capital, the Liquidation Distribution in cash. See "Description of the
Capital Securities--Liquidation Distribution Upon Termination." Upon any
voluntary or involuntary liquidation or bankruptcy of the Company, the Property
Trustee, as holder of the Junior Subordinated Debentures, would be a
subordinated creditor of the Company, 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
the Company receive payments or distributions. Since the Company is the
guarantor under the Guarantee and has agreed to pay for all costs, expenses and
liabilities of VBC Capital (other than VBC Capital's obligations to the holders
of its Capital Securities), the positions of a holder of the Capital Securities
and a holder of Junior Subordinated Debentures relative to other creditors and
to stockholders of the Company in the event of liquidation or bankruptcy of the
Company are expected to be substantially the same.
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CERTAIN FEDERAL INCOME TAX CONSEQUENCES
In the opinion of Jones & Keller, P.C., 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 Capital Securities. Unless otherwise stated, this summary deals
only with Capital Securities held as capital assets by United States Persons
(defined below) who purchase the Capital 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 within the United States 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, foreign investors or persons
that will hold the Capital Securities as part of a position in a "straddle" or
as part of a "hedging" or other integrated transaction. 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 Capital Securities. This summary is based on the
Internal Revenue Code of 1986, as amended (the "Code"), the Treasury regulations
promulgated thereunder and administrative and judicial interpretations thereof,
as of the date hereof, all of which are subject to change, possibly on a
retroactive basis. Any such change could cause the tax consequences to vary
substantially from the consequences described below, possibly adversely
affecting an owner of Capital Securities.
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 Capital 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. It is therefore possible that
the federal income tax treatment of the purchase, ownership and disposition of
Capital Securities may differ from the treatment described below.
HOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE TAX
CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE CAPITAL
SECURITIES, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN, AND
OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN UNITED STATES FEDERAL OR
OTHER TAX LAWS. FOR A DISCUSSION OF THE POSSIBLE REDEMPTION OF THE CAPITAL
SECURITIES UPON THE OCCURRENCE OF CERTAIN TAX EVENTS, SEE "DESCRIPTION OF
CAPITAL SECURITIES -- REDEMPTION."
CLASSIFICATION OF VBC CAPITAL
In connection with the issuance of the Capital 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 contained in
such opinion, VBC 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
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owner of the Capital 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 Junior Subordinated Debentures. See "-- Interest Income
and Original Issue Discount." No amount included in income with respect to the
Capital Securities will be eligible for the dividends received deduction.
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 Capital
Security, each holder covenants to treat the Junior Subordinated Debentures as
indebtedness and the Capital 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
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.
The Company believes that, under the applicable Treasury 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. This is because under recently adopted amendments to the Treasury
regulations a "remote" contingency that stated interest will not be timely paid
will be ignored in determining whether a debt instrument is issued with OID. The
Company believes that the likelihood of exercising its option to defer payments
of interest is "remote" since, among other things, exercising this option would
prevent the Company from declaring dividends or distributions on its capital
stock. If, however, the Company 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 the Company 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 Treasury 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 the Company 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.
The Company does not anticipate that Additional Sums (as defined in the
Indenture) will be paid. However, if Additional Sums are paid, they will be
taxable to the Securityholder as ordinary income (generally as interest income).
63
<PAGE> 65
DISTRIBUTION OF JUNIOR SUBORDINATED DEBENTURES TO HOLDERS OF CAPITAL SECURITIES
Under current law, a distribution by VBC Capital of the Junior Subordinated
Debentures as described under the caption "Description of Capital
Securities -- Liquidation and 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 VBC
Capital, with a holding period and aggregate tax basis equal to the holding
period and aggregate tax basis such Securityholder had in its Capital Securities
before such distribution. If, however, the liquidation of VBC Capital were to
occur because VBC 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 VBC Capital would be a taxable event to VBC
Capital and each Securityholder, and a Securityholder would recognize gain or
loss as if the Securityholder had sold or exchanged its Capital Securities for
the Junior Subordinated Debentures it received upon the liquidation of VBC
Capital. See "-- Sales or Redemption of Capital Securities." A Securityholder
would recognize interest income in respect of Junior Subordinated Debentures
received from VBC Capital in the manner described above under "-- Interest
Income and Original Issue Discount."
SALES OR REDEMPTION OF CAPITAL SECURITIES
Gain or loss will be recognized by a Securityholder on a sale of Capital
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 Capital Securities
sold or so redeemed. A Securityholder's adjusted tax basis will be its initial
purchase price increased by any accrued OID previously included in such
Securityholder's gross income to the date of disposition and decreased by
payments (other than stated interest on the Junior Subordinated Debentures that
constitutes ordinary income at the time it is paid or accrued) received on the
Capital Securities. Gain or loss recognized by a Securityholder on Capital
Securities held for more than one year will generally be taxable as long-term
capital gain or loss. 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. Subject to
certain limited exceptions, capital losses generally cannot be applied to offset
ordinary income for United States federal income tax purposes.
BACKUP WITHHOLDING TAX AND INFORMATION REPORTING
The amount of interest paid or OID accrued, if any, on the Junior
Subordinated Debentures, beneficial ownership of which is reflected in the
Capital Securities held of record by United States Persons (other than
corporations and other exempt Securityholders), will be reported to the Service.
Generally, income on the Capital Securities will be reported to Securityholders
on Form 1099, which form should be mailed to Securityholders by January 31
following each calendar year. "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. Payment of the proceeds from
the disposition of Capital Securities to or through the United States office of
a broker is subject to information reporting and backup withholding unless the
Securityholder or beneficial owner establishes an exemption from information
reporting and backup withholding.
POSSIBLE TAX LAW CHANGES AFFECTING THE CAPITAL SECURITIES
On February 6, 1997, the Clinton Administration submitted Revenue Proposals
(the "Proposals") to the 105th Congress. If enacted, the Proposals would
generally deny deductions for interest on an instrument issued by a publicly
traded corporation (a) that has a maximum weighted average maturity of more than
40 years or (b) has a maximum term of more than 15 years and that is not shown
as indebtedness on the separate balance
64
<PAGE> 66
sheet of the issuer or, where the instrument is issued to a related party (other
than a corporation), where the holder or some other related party issues a
related instrument that is not shown as indebtedness on the issuer's
consolidated balance sheet. For purposes of determining the weighted average
maturity or the term of an instrument, any right to extend would be treated as
exercised. The above-described provisions of the Proposals are proposed to be
effective generally for instruments issued on or after the date of first
Congressional committee action on the Proposals. If either provision were to
apply to the Junior Subordinated Debentures, the Company would not be able to
deduct interest on the Junior Subordinated Debentures. If the proposed
legislation is ultimately enacted and if the effective date provision contained
in the Proposals is followed, such legislation would not apply to the Junior
Subordinated Debentures. There can be no assurance, however, that current or
future legislative proposals or final legislation will not adversely affect the
ability of the Company to deduct interest on the Junior Subordinated Debentures
or otherwise affect the tax treatment of the transaction described herein. Such
a change could give rise to a Tax Event, which may permit the Company, upon
approval of the Federal Reserve if then required under applicable capital
guidelines or policies of the Federal Reserve, to cause a redemption of the
Capital Securities prior to , 2002. See "Description of the Capital
Securities -- Redemption -- Tax Event Redemption" and "Description of the Junior
Subordinated Debentures -- Redemption."
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Underwriters named below have severally agreed to purchase from VBC Capital an
aggregate of 700,000 Capital Securities in the amounts set forth below opposite
their respective names.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER CAPITAL SECURITIES
----------- ------------------
<S> <C>
Dain Bosworth Incorporated.................................
Howe Barnes Investments, Inc...............................
-------
Total............................................ 700,000
=======
</TABLE>
The Underwriting Agreement provides that the Underwriters' obligations are
subject to conditions precedent and that the Underwriters are committed to
purchase all of the Capital Securities offered hereby if the Underwriters
purchase any Capital Securities.
The Underwriters have advised the Company and VBC Capital that they propose
to offer the Capital Securities to the public at the Price to Public set forth
on the cover page of this Prospectus and to selected dealers at such price less
a concession not in excess of $ per Capital Security. The Underwriters
may allow and such dealers may reallow a discount not in excess of $
per Capital Security to certain other brokers and dealers. After the offering,
the Price to Public, concession, discount, and other selling terms may be
changed by the Underwriters.
In view of the fact that all of the proceeds from the sale of the Capital
Securities will be used to purchase the Junior Subordinated Debentures, the
Underwriting Agreement provides that the Company will pay the Underwriters' as
compensation for arranging the investment therein of such proceeds, $
per Capital Security.
Each of the Company and VBC Capital has agreed to indemnify the
Underwriters and their controlling persons against certain liabilities,
including liabilities under the Securities Act of 1933, as amended, or to
contribute to payments the Underwriters may be required to make in respect
thereof.
The Underwriters have advised VBC Capital that they do not intend to
confirm any sales of Capital Securities to any discretionary accounts. In
connection with the offer and sale of the Capital Securities, the Underwriters
will comply with Rule 2810 under the NASD Conduct Rules.
Dain Bosworth Incorporated acted as the managing underwriter of the
Company's initial public offering in 1994. In connection with that offering,
Dain Bosworth Incorporated acquired (and continues to hold)
65
<PAGE> 67
warrants to purchase 20,000 shares of the Company's common stock at $10.20 per
share. Such warrants expire in March 1999.
LEGAL MATTERS
Certain matters of Delaware law relating to the validity of the Capital
Securities, the enforceability of the Trust Agreement and the formation of VBC
Capital will be passed upon by Richards, Layton & Finger, P.A., Wilmington,
Delaware, special Delaware counsel to the Company and VBC Capital. The validity
of the Guarantee and the Junior Subordinated Debentures will be passed upon for
the Company by Jones & Keller, P.C., Denver, Colorado, counsel to the Company.
Certain other legal matters regarding regulatory issues affecting the Company
will be passed upon for the Company to the Underwriters by Slivka Robinson
Waters & O'Dorsio, Denver, Colorado. Certain legal matters in connection with
this Offering will be passed upon for the Underwriters by Sherman & Howard
L.L.C., Denver, Colorado. Jones & Keller, P.C., and Sherman & Howard L.L.C. will
rely on the opinions of Richards, Layton & Finger as to matters of Delaware law.
Certain matters relating to United States federal income tax considerations will
be passed upon for the Company by Jones & Keller, P.C.
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 and incorporated herein by reference in reliance
upon the report of KPMG Peat Marwick LLP, independent certified public
accountants, appearing elsewhere and incorporated herein by reference, and upon
the authority of said firm as experts in accounting and auditing. The report of
KPMG Peat Marwick LLP refers to a change in the method of accounting for
goodwill in 1994.
66
<PAGE> 68
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report................................ F-2
Consolidated Balance Sheets................................. F-3
Consolidated Statements of Operations....................... F-4
Consolidated Statements of Shareholders' Equity............. F-5
Consolidated Statements of Cash Flows....................... F-6
Notes to Consolidated Financial Statements.................. F-7
</TABLE>
F-1
<PAGE> 69
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Vectra Banking Corporation:
We have audited the accompanying consolidated balance sheets of Vectra
Banking Corporation and subsidiaries as of December 31, 1996 and 1995, and the
related consolidated statements of operations, shareholders' 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 Vectra
Banking Corporation and subsidiaries as of 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 to the consolidated financial statements, a 1995
business combination accounted for as a pooling of interests included a company
which changed its method of accounting for goodwill during 1994 as a result of
the adoption of the provisions of Statement of Financial Accounting Standards
No. 72, Accounting for Certain Acquisitions of Banking or Thrift Institutions.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Denver, Colorado
January 31, 1997
F-2
<PAGE> 70
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1996 1995
--------- ---------
(IN THOUSANDS, EXCEPT
SHARE AMOUNTS)
<S> <C> <C>
Cash and due from banks (note 3)............................ $ 32,688 $ 17,320
Securities available for sale, at market value (notes 4, 5,
8 and 9).................................................. 180,995 170,384
Securities held to maturity, at cost (market value of $263
and $819 at December 31, 1996 and 1995, respectively)
(notes 4 and 8)........................................... 263 814
Investment in Federal Home Loan Bank stock (note 8)......... 3,610 5,173
Federal funds sold.......................................... -- 2,000
Loans (notes 6, 8 and 9).................................... 319,905 206,664
Less allowance for loan losses............................ (4,238) (2,493)
-------- --------
Net loans......................................... 315,667 204,171
Accrued interest receivable................................. 2,959 2,127
Real estate acquired by foreclosure, net.................... 955 919
Premises and equipment, net (notes 7 and 10)................ 11,949 10,575
Deferred income taxes, net (note 12)........................ 3,036 2,422
Goodwill, net (note 2)...................................... 7,975 284
Other assets................................................ 1,714 1,617
-------- --------
Total assets...................................... $561,811 $417,806
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Demand.................................................... $122,713 $ 80,058
NOW and money market...................................... 88,466 63,704
Savings................................................... 126,146 99,254
Time deposits under $100,000.............................. 67,617 49,511
Time deposits of $100,000 and over........................ 34,409 14,558
-------- --------
Total deposits.................................... 439,351 307,085
-------- --------
Securities and loans sold under agreements to repurchase
(note 9).................................................. 10,733 7,429
Advances from the Federal Home Loan
Bank and federal funds purchased (note 8)................. 59,700 70,345
Notes payable (note 10)..................................... 4,050 1,051
Accounts payable and other liabilities...................... 2,542 1,711
-------- --------
Total liabilities................................. 516,376 387,621
-------- --------
Shareholders' equity (notes 2 and 11):
Preferred stock, $.10 par value, 1,000,000 shares
authorized:
805,000 shares of Series A Cumulative Preferred issued
and outstanding (liquidation preference of $8,050).... 8,050 8,050
109,709 shares of $100 Series A Convertible Preferred
issued and outstanding (liquidation preference of
$10,971).............................................. 10,971 --
Common stock, $.01 par value: 7,000,000 shares authorized;
3,202,412 and 3,195,279 shares issued and outstanding
at December 31, 1996 and 1995, respectively............ 32 32
Capital in excess of par value............................ 25,716 25,572
Retained earnings......................................... 4,441 170
Unrealized loss on securities available for sale, net of
income tax effect of $2,246 and $2,194 at December 31,
1996 and 1995, respectively............................ (3,775) (3,639)
-------- --------
Total shareholders' equity........................ 45,435 30,185
-------- --------
Commitments and contingencies (note 14)
Total liabilities and shareholders' equity........ $561,811 $417,806
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE> 71
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------
1996 1995 1994
-------- -------- --------
(IN THOUSANDS, EXCEPT SHARE AND
PER SHARE AMOUNTS)
<S> <C> <C> <C>
Interest income:
Interest and fees on loans................................ $26,497 $20,133 $16,042
Interest on investments and federal funds sold............ 11,460 14,120 12,501
------- ------- -------
Total interest income.............................. 37,957 34,253 28,543
------- ------- -------
Interest expense:
Interest on deposits:
NOW, money market and savings accounts.................. 6,902 5,567 4,532
Time deposits under $100,000............................ 3,089 2,305 695
Time deposits of $100,000 and over...................... 1,132 638 289
Securities and loans sold under agreements to
repurchase.............................................. 352 240 116
Advances from the Federal Home Loan Bank and federal funds
purchased............................................... 3,547 7,483 5,420
Notes payable............................................. 208 97 120
------- ------- -------
Total interest expense............................. 15,230 16,330 11,172
------- ------- -------
Net interest income................................ 22,727 17,923 17,371
Provision for loan losses (note 6).......................... 916 795 794
------- ------- -------
Net interest income after provision for loan
losses........................................... 21,811 17,128 16,577
------- ------- -------
Other income:
Service fees on deposit accounts.......................... 3,231 2,615 2,690
Net gain on sales of loans................................ 1,441 1,004 582
Gain on sale of securities available for sale............. 118 467 44
Loss on sale of securities available for sale............. (312) (487) (38)
Loss on transfer of securities to trading from available
for sale................................................ (154) -- --
Other..................................................... 169 221 229
------- ------- -------
Total other income................................. 4,493 3,820 3,507
------- ------- -------
Other expenses:
Salaries and employee benefits............................ $10,228 $ 8,444 $ 7,769
Occupancy, net............................................ 2,655 2,349 2,220
Marketing and promotion................................... 1,147 1,205 852
Professional services..................................... 421 747 569
Printing, supplies and postage............................ 824 656 601
Credit quality including write downs of real estate
acquired by foreclosure................................. 404 533 494
Data processing........................................... 507 492 488
FDIC and state bank assessments........................... 66 383 665
Telephone................................................. 428 326 271
Amortization of intangible assets (note 2)................ 231 29 348
Other..................................................... 1,007 707 775
------- ------- -------
Total other expenses............................... 17,918 15,871 15,052
------- ------- -------
Earnings before income taxes and cumulative effect
of change in accounting.......................... 8,386 5,077 5,032
Income tax expense (note 12)................................ 2,941 1,774 820
------- ------- -------
Earnings before cumulative effect of change in
accounting....................................... 5,445 3,303 4,212
Cumulative effect of change in accounting for goodwill (note
1)........................................................ -- -- (1,537)
------- ------- -------
Net earnings....................................... 5,445 3,303 2,675
Preferred stock dividends (note 11)......................... 1,174 765 579
------- ------- -------
Net earnings available to common shareholders...... $ 4,271 $ 2,538 $ 2,096
======= ======= =======
Earnings per share (note 17):
Earnings before cumulative effect of change in
accounting.............................................. $ 1.31 $ .79 $ 1.20
Cumulative effect of change in accounting................. -- -- (.51)
------- ------- -------
Earnings per common share and common equivalent
share............................................ $ 1.31 $ .79 $ .69
======= ======= =======
Earnings per common share assuming full dilution... $ 1.26 $ .78 $ .69
======= ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 72
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
PREFERRED STOCK
------------------------------------------
NUMBER OF SHARES
-------------------------------- COMMON STOCK CAPITAL IN RETAINED
SERIES A ------------------ EXCESS OF EARNINGS
1989 SERIES A CONVERTIBLE AMOUNT SHARES AMOUNT PAR VALUE (DEFICIT)
------- -------- ----------- ------- --------- ------ ---------- ---------
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCES AT JANUARY 1, 1994..... 26,465 -- -- $ 477 2,538,479 $25 21,508 (4,464)
Redemption and cancellation of
preferred stock for cash
(note 11)..................... (25,080) -- -- (477) -- -- -- --
Common stock issued for cash in
initial public offering, net
of offering costs (note 11)... -- -- -- -- 923,770 9 6,412 --
Preferred stock issued for cash
in initial public offering,
net of offering costs (note
11)........................... -- 805,000 -- 8,050 -- -- -- --
Redemption and cancellation of
common stock for cash
(note 11)..................... -- -- -- -- (270,000) (2) (2,401) --
Exercise of common stock
options....................... -- -- -- -- 3,030 -- 20 --
Amortization of restricted stock
grants........................ -- -- -- -- -- -- 25 --
Dividends on preferred stock.... -- -- -- -- -- -- -- (579)
Cancellation of treasury
stock......................... (1,385) -- -- -- -- -- (18) --
Change in unrealized loss on
securities available for sale,
net of income tax effect...... -- -- -- -- -- -- -- --
Net earnings............ -- -- -- -- -- -- -- 2,675
------- ------- ------- ------- --------- --- ------ ------
BALANCES AT DECEMBER 31, 1994... -- 805,000 -- 8,050 3,195,279 32 25,546 (2,368)
Amortization of restricted stock
grants........................ -- -- -- -- -- -- 26 --
Dividends on preferred stock.... -- -- -- -- -- -- -- (765)
Change in unrealized loss on
securities available for sale,
net of income tax effect...... -- -- -- -- -- -- -- --
Net earnings............ -- -- -- -- -- -- -- 3,303
------- ------- ------- ------- --------- --- ------ ------
BALANCES AT DECEMBER 31, 1995... -- 805,000 -- 8,050 3,195,279 32 25,572 170
Preferred stock issued in
acquisition (notes 2 and
11)........................... -- -- 109,709 10,971 -- -- -- --
Exercise of common stock
options....................... -- -- -- -- 3,633 -- 35 --
Amortization of restricted stock
grants and issuance of
shares........................ -- -- -- -- 3,500 -- 11 --
Dividends on preferred stock.... -- -- -- -- -- -- -- (1,174)
Change in unrealized loss on
securities available for sale,
net of income tax effect...... -- -- -- -- -- -- -- --
Net earnings............ -- -- -- -- -- -- -- 5,445
Tax benefit of restricted stock
grants........................ -- -- -- -- -- -- 98 --
------- ------- ------- ------- --------- --- ------ ------
BALANCES AT DECEMBER 31, 1996... -- 805,000 109,709 $19,021 3,202,412 $32 25,716 4,441
======= ======= ======= ======= ========= === ====== ======
<CAPTION>
UNREALIZED
LOSS ON
SECURITIES
AVAILABLE TOTAL
FOR SALE, TREASURY SHAREHOLDERS'
NET STOCK EQUITY
---------- -------- -------------
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<S> <C> <C> <C>
BALANCES AT JANUARY 1, 1994..... (176) (17) 17,353
Redemption and cancellation of
preferred stock for cash
(note 11)..................... -- -- (477)
Common stock issued for cash in
initial public offering, net
of offering costs (note 11)... -- -- 6,421
Preferred stock issued for cash
in initial public offering,
net of offering costs (note
11)........................... -- -- 8,050
Redemption and cancellation of
common stock for cash
(note 11)..................... -- -- (2,403)
Exercise of common stock
options....................... -- -- 20
Amortization of restricted stock
grants........................ -- -- 25
Dividends on preferred stock.... -- (1) (580)
Cancellation of treasury
stock......................... -- 18 --
Change in unrealized loss on
securities available for sale,
net of income tax effect...... (7,491) -- (7,491)
Net earnings............ -- -- 2,675
------ --- ------
BALANCES AT DECEMBER 31, 1994... (7,667) -- 23,593
Amortization of restricted stock
grants........................ -- -- 26
Dividends on preferred stock.... -- -- (765)
Change in unrealized loss on
securities available for sale,
net of income tax effect...... 4,028 -- 4,028
Net earnings............ -- -- 3,303
------ --- ------
BALANCES AT DECEMBER 31, 1995... (3,639) -- 30,185
Preferred stock issued in
acquisition (notes 2 and
11)........................... -- -- 10,971
Exercise of common stock
options....................... -- -- 35
Amortization of restricted stock
grants and issuance of
shares........................ -- -- 11
Dividends on preferred stock.... -- -- (1,174)
Change in unrealized loss on
securities available for sale,
net of income tax effect...... (136) -- (136)
Net earnings............ -- -- 5,445
Tax benefit of restricted stock
grants........................ -- -- 98
------ --- ------
BALANCES AT DECEMBER 31, 1996... (3,775) -- 45,435
====== === ======
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 73
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------
1996 1995 1994
-------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from operating activities:
Interest received......................................... $ 37,875 $ 34,898 $ 27,311
Interest paid............................................. (15,344) (16,088) (11,109)
Fees and other income received............................ 4,845 2,836 2,899
Proceeds from sale of loans held for sale................. 45,802 21,562 20,503
Proceeds from sales of trading securities................. 1,989 -- --
Originations of loans held for sale....................... (44,758) (21,769) (19,805)
Payments to employees and suppliers....................... (17,031) (15,320) (13,967)
Income taxes paid......................................... (2,812) (1,710) (242)
-------- --------- ---------
Net cash provided by operating activities........... 10,566 4,349 5,590
-------- --------- ---------
Cash flows from investing activities, net of effects of
acquisitions:
Net loan originations and collections..................... (41,759) (24,310) (40,353)
Net assets acquired in business combinations, net of cash
acquired (note 2)....................................... (5,160) (306) --
Decrease (increase) in federal funds sold................. 13,900 (1,190) 2,620
Proceeds from sale of real estate acquired by
foreclosure............................................. 504 749 246
Purchase of premises and equipment........................ (906) (977) (577)
Purchase of securities available for sale................. (40,175) (6,007) (164,775)
Purchase of securities held to maturity................... -- (3,675) (10,820)
Purchase of Federal Home Loan Bank stock.................. (3,937) (258) (4,757)
Proceeds from sale of Federal Home Loan Bank stock........ 5,500 3,928 --
Proceeds from maturities of securities available for
sale.................................................... 16,074 6,666 15,857
Proceeds from maturities of securities held to maturity... 563 6,033 4,319
Proceeds from sale of securities available for sale....... 29,804 65,425 20,560
Other..................................................... 36 1,870 31
-------- --------- ---------
Net cash provided (used) by investing activities,
net of effects of acquisitions.................... (25,556) 47,948 (177,649)
-------- --------- ---------
Cash flows from financing activities:
Net increase in deposits.................................. 35,839 38,901 18,073
FHLB advances having maturities greater than three
months.................................................. -- 90,000 85,000
Repayment of FHLB advances having maturities greater than
three months............................................ (23,000) (117,000) (13,000)
Net increase (decrease) in other FHLB advances............ 12,355 (64,845) 70,690
Net increase in securities and loans sold under agreement
to repurchase........................................... 3,304 1,541 2,835
Proceeds from note payable................................ 4,050 -- --
Repayment of notes payable................................ (1,051) (58) (968)
Proceeds from issuance of common and preferred stock,
net..................................................... 35 -- 14,491
Common and preferred stock redemption..................... -- -- (2,881)
Preferred stock dividends................................. (1,174) (765) (579)
-------- --------- ---------
Net cash provided (used) by financing activities.... 30,358 (52,226) 173,661
-------- --------- ---------
Net increase in cash and due from banks............. 15,368 71 1,602
Cash and due from banks at beginning of year................ 17,320 17,249 15,647
-------- --------- ---------
Cash and due from banks at end of year...................... $ 32,688 $ 17,320 $ 17,249
======== ========= =========
Reconciliation of net earnings to net cash provided by
operating activities:
Net earnings.............................................. $ 5,445 $ 3,303 $ 2,675
Cumulative effect of change in accounting for goodwill.... -- -- 1,537
Provision for loan losses................................. 916 795 794
Net amortization of premiums and discounts on securities
and loans............................................... 110 33 20
Depreciation and amortization of premises and equipment... 1,074 923 892
Amortization of intangible assets......................... 231 29 348
Deferred income tax expense (benefit)..................... (464) 314 501
Decrease (increase) in accrued interest receivable........ (193) 613 (1,276)
Decrease (increase) in loans held for sale................ 1,044 (1,211) 116
Net change in other assets, accounts payable and other
liabilities............................................. 66 (486) 37
Net (gain) loss on sale or transfer of securities......... 348 20 (6)
Securities transferred to trading from available for
sale.................................................... 1,989 -- --
Other..................................................... -- 16 (48)
-------- --------- ---------
Net cash provided by operating activities........... $ 10,566 $ 4,349 $ 5,590
======== ========= =========
Supplemental schedule of noncash investing and financing
activities and other information:
Premises acquired in exchange for note payable and other
liabilities............................................. $ -- $ 262 $ --
======== ========= =========
Real estate acquired by foreclosure....................... $ 330 $ 321 $ 711
======== ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE> 74
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Summarized below are the significant accounting policies followed by Vectra
Banking Corporation and subsidiaries (Vectra or the Company) in the
determination of financial position, results of operations or cash flows.
Organization and Basis of Financial Statement Presentation
Vectra was organized March 23, 1988, under the laws of the State of
Colorado and has been engaged in the management and operation of financial
institutions located in the Denver/Boulder market area. The Company offers a
full range of loan and deposit products to local consumers and commercial
businesses.
The consolidated financial statements include the accounts of Vectra and
its subsidiaries. All significant intercompany accounts and transactions have
been eliminated in consolidation.
The preparation of the consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the consolidated
financial statements and the reported amounts of revenues and expenses during
the reporting periods. Actual results could differ from those estimates.
Securities
The Company accounts for securities in accordance with Statement of
Financial Accounting Standards (SFAS) No. 115, Accounting for Certain
Investments in Debt and Equity Securities (SFAS 115). SFAS 115 addresses the
accounting and reporting for all investments in debt securities and equity
securities that have readily determinable fair values. Under SFAS 115,
investments are classified into three categories and accounted for as follows:
Held-to-Maturity -- This category includes debt securities that the
Company has the positive intent and ability to hold to maturity. All
securities in this category are recorded at amortized historical cost.
Trading Securities -- These securities are purchased and sold for the
purpose of generating profits on short-term differences in market prices
and are recorded at fair value, with any unrealized gains and losses being
reflected in earnings.
Available-for-Sale -- These securities do not meet the classification
criteria for Held-to-Maturity or Trading Securities and are recorded at
fair value with any unrealized gains and losses, net of income tax effect,
being reflected as a separate component of shareholders' equity.
SFAS 115 does not affect the accounting for amortization of premiums and
accretion of discounts.
Securities held to maturity are recorded at cost and are adjusted for
amortization of premiums and accretion of discounts.
Amortization and accretion are computed using the estimated effective
interest method. Gains or losses on sales of securities are recognized upon
disposal. The adjusted cost of specific securities sold is used to compute
realized gains or losses.
Securities available for sale are recorded at fair value based upon quotes
from brokers who actively participate in the relevant securities' markets or
from other pricing services.
A substantial portion of Vectra's securities are collateralized mortgage
obligations and mortgage backed securities. These investments are usually
purchased at a premium or discount to their stated or par value. The yield on
these investments is impacted by changes in the prepayments of the mortgages
underlying the
F-7
<PAGE> 75
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
securities. When prepayments accelerate, premiums or discounts must be amortized
against interest income at an accelerated rate thereby changing the yield on the
securities. A substantial portion of Vectra's securities are guaranteed as to
the payment of principal and interest (but not premiums) by U.S. government
sponsored entities.
Loans and Interest Income
Interest on loans is accrued daily on the principal balance outstanding.
Unearned income, net of direct origination costs on loans, is recognized in
interest income over the terms of the loans using a method that approximates the
effective interest method. Loans on which payments are past due 90 days or more
are placed on nonaccrual status, unless both interest and principal are
adequately secured or the loans are in the process of renewal.
Loans held for sale are recorded at the lower of cost or market value.
Gains or losses on sales of loans are recognized based on the carrying amount or
allocated basis of the specific loans sold.
Impairment of Loans and Allowance for Loan Losses
Vectra's lending personnel are responsible for the continuous monitoring of
the quality of its loan portfolio. The loan portfolios are also monitored
monthly and examined by the Company's loan review personnel. These reviews
assist in the identification of potential and probable losses, and in the
determination of the level of the allowance for loan losses. The allowance for
loan losses is based primarily on management's estimates of possible loan losses
from these procedures and historical experience. These estimates involve
judgments and a certain level of subjectivity and may be adjusted in the future
depending on economic conditions.
The Company adopted SFAS No. 114, Accounting by Creditors for Impairment of
a Loan, and SFAS No. 118, Accounting by Creditors for Impairment of a
Loan -- Income Recognition and Disclosures, (collectively, SFAS 114) effective
January 1, 1995. SFAS 114 requires that certain impaired loans be measured based
on the present value of expected cash flows discounted at the loan's original
effective interest rate. As a practical expedient, impairment may be measured
based on the loan's observable market price or the fair value of the collateral
if the loan is collateral dependent. When the measure of the impaired loan is
less than the recorded investment in the loan, the impairment is recorded
through a valuation allowance.
The Company had previously measured the allowance for loan losses using
methods similar to those prescribed in SFAS 114. Accordingly, the adoption of
SFAS 114 did not result in any additional allowance for loan losses as of
January 1, 1995.
State and federal regulatory agencies, as an integral part of their
examination process, periodically review Vectra's loans and allowance for loan
losses. Such agencies may require the Company to record additional provisions
for losses based upon their evaluation of information available at the time of
their examinations.
Real Estate and Other Assets Acquired by Foreclosure including In-Substance
Foreclosures
Real estate and other assets acquired in satisfaction of indebtedness and
loans accounted for as in-substance foreclosures are recorded at the lower of
estimated fair value or the loan amount. Fair value is determined primarily
based on independent appraisals. Loan losses arising in connection with the
acquisition of such property are charged against the allowance for loan losses.
Subsequent declines in value are charged to operating expense.
Costs incurred in connection with improvements to the properties are
capitalized until such costs result in an amount equal to fair value. In
accordance with SFAS 114, a loan is classified as an in-substance foreclosure
only when the Company has taken possession of the collateral regardless of
whether formal repossession has taken place. At December 31, 1996 and 1995,
loans accounted for as in-substance foreclosures were not significant.
F-8
<PAGE> 76
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Expenses of holding foreclosed property, including operating and selling
expenses, net of rental income, are generally charged against operations as
incurred. Gains and losses on disposition of these properties are recognized in
the year in which the sales occur.
Premises and Equipment
Land, buildings, leasehold improvements, and furniture and equipment are
recorded at cost, less accumulated depreciation and amortization. The provision
for depreciation and amortization is computed using the straight-line method
over the estimated useful lives of the assets, or the lease term for leasehold
improvements. Lives generally range from 3 to 7 years for furniture and
equipment and 25 to 30 years for buildings and improvements.
Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of
The Company adopted the provisions of SFAS No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of
(SFAS 121), on January 1, 1996. SFAS 121 requires that long-lived assets and
certain identifiable intangibles be reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future net cash flows expected
to be generated by the assets. Assets to be disposed of are reported at the
lower of the carrying amount or fair value less costs to sell. Adoption of SFAS
121 did not have a significant impact on the Company's financial position,
results of operations, or liquidity.
Change in Accounting
In connection with the acquisition of First National Bank of Denver by
First Denver Corporation (FDC) (see note 2) in October 1981, goodwill in the
amount of $2,196,000 was recorded by FDC. The goodwill was primarily the result
of the fair value of liabilities assumed exceeding the fair value of
identifiable assets acquired, and was originally being amortized using the
straight-line method over 40 years. During 1994, FDC changed its method of
accounting for goodwill through the adoption of the provisions of SFAS No. 72,
Accounting for Certain Acquisitions of Banking or Thrift Institutions (SFAS 72),
as provided by Emerging Issues Task Force Issue No. 89-19, Accounting for a
Change in Goodwill Amortization for Business Combinations Initiated Prior to the
Effective Date of FASB Statement No. 72. SFAS 72 requires that goodwill
resulting from the fair value of liabilities assumed exceeding the fair value of
identifiable assets acquired be amortized using the interest method over a
period no longer than the discount on the long-term interest-bearing assets
acquired. Accordingly, under SFAS 72, the aforementioned goodwill would be
completely amortized prior to January 1, 1994.
The cumulative effect of this change in accounting, which was applied as of
January 1, 1994, was a decrease in net earnings of $1,537,000. The cumulative
effect of the change in accounting was not tax-effected, as the amortization of
the goodwill was not deductible for tax purposes. The effect of the change in
1994 was not significant and pro forma net earnings for 1994, assuming the
change in accounting was applied retroactively, are not significantly different
from Vectra's historical net earnings.
Income Taxes
The Company accounts for income taxes under the provisions of SFAS No. 109,
Accounting for Income Taxes (SFAS 109), which prescribes the use of the asset
and liability method of accounting for deferred income taxes.
Shareholders' Equity and Earnings Per Share
Primary earnings per common share and common equivalent share is computed
by dividing net earnings available to common shareholders by the weighted
average number of common shares and common equivalent
F-9
<PAGE> 77
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
shares outstanding during the period, adjusted for the shares issued in
connection with the business combination with FDC discussed in note 2. Earnings
per common share assuming full dilution is computed by dividing net earnings
less the dividends on the Series A Cumulative Preferred Stock by the sum of
weighted average common shares and common equivalent shares outstanding plus the
weighted average of other dilutive securities assumed to have been outstanding.
Reclassifications
Certain 1995 and 1994 amounts have been reclassified to conform to the 1996
presentation.
(2) BUSINESS COMBINATIONS
Effective November 13, 1995, Vectra acquired all of the outstanding common
stock of FDC in exchange for 508,889 shares of Vectra common stock. The
combination has been accounted for as a pooling of interests and, accordingly,
the accompanying consolidated financial statements reflect the combined
financial condition, results of operations and cash flows of Vectra and FDC as
of and for all periods presented. In addition, shares issued in connection with
the combination have been included as issued and outstanding in 1995 and 1994.
On June 18, 1996, the Company acquired Southwest State Bank (Southwest) and
its parent Bank Land Company for $22.23 million consisting of $10.97 million in
a new issue of $100 Series A Convertible Preferred Stock and $11.26 million
cash. Southwest was a commercial bank operating at a single location in Denver.
The acquisition has been accounted for by the purchase method and, accordingly,
the results of operations of Southwest have been included in Vectra's
consolidated financial statements from June 18, 1996. The excess of the purchase
price over the fair value of the identifiable assets acquired of $7.93 million
has been recorded as goodwill and is being amortized using the straight-line
method over 25 years.
The following unaudited pro forma financial information presents the
combined results of operations of Vectra and Southwest as if the acquisition had
occurred as of January 1, 1996 and 1995, after giving effect to certain
adjustments, including amortization of goodwill. The pro forma financial
information does not necessarily reflect the results of operations that would
have occurred had Vectra and Southwest been combined during the periods.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1996 1995
--------- ---------
(UNAUDITED, AMOUNTS
IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C>
Net interest income......................................... $25,256 $23,890
======= =======
Provision for loan losses................................... $ 1,413 $ 930
======= =======
Net earnings................................................ $ 5,663 $ 4,851
======= =======
Earnings per common share and common equivalent share....... $ 1.26 $ 1.03
======= =======
Earnings per common share assuming full dilution............ $ 1.20 $ 1.01
======= =======
</TABLE>
During 1995, the Company acquired the net assets of MacWest Mortgage, a
mortgage origination operation, for total cash consideration of approximately
$300,000. The acquisition was accounted for using the purchase method.
(3) CASH AND DUE FROM BANKS
The Federal Reserve Board requires banks to maintain reserve balances
composed of cash on hand and balances maintained at the Federal Reserve Bank.
These reserve balances are based primarily on deposit levels and totaled
approximately $6,732,000 and $3,345,000 at December 31, 1996 and 1995.
F-10
<PAGE> 78
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(4) SECURITIES
Securities classified as available for sale at December 31, 1996, are
summarized as follows:
<TABLE>
<CAPTION>
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
--------- ---------- ---------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
U.S. Treasuries............................... $ 4,967 $ 8 $ (3) $ 4,972
U.S. Government sponsored entities (note 5)... 35,621 123 (466) 35,278
Municipal securities.......................... 2,449 14 (2) 2,461
Collateralized mortgage obligations........... 131,533 5 (5,810) 125,728
Mortgage backed securities.................... 8,812 78 -- 8,890
SBA loan pools................................ 2,164 33 -- 2,197
Other......................................... 1,469 -- -- 1,469
-------- ---- ------- --------
$187,015.. $261 $(6,281) $180,995
======== ==== ======= ========
</TABLE>
Securities classified as held to maturity at December 31, 1996, which
primarily mature beyond ten years, are summarized as follows:
<TABLE>
<CAPTION>
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
--------- ---------- ---------- ------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Private placement bonds.......................... $200 $-- $-- 200
Asset-backed receivables......................... 63 -- -- 63
---- --- --- ----
$263 $-- $-- $263
==== === === ====
</TABLE>
Securities classified as available for sale at December 31, 1995, are
summarized as follows:
<TABLE>
<CAPTION>
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
--------- ---------- ---------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
U.S. Treasuries............................ $ 5,032 $ 9 $ -- $ 5,041
U.S. Government sponsored entities (note
5)....................................... 12,377 4 (969) 11,412
Collateralized mortgage obligations........ 147,508 108 (5,174) 142,442
Mortgage-backed securities................. 6,183 126 (4) 6,305
SBA loan pools............................. 4,290 69 -- 4,359
Other...................................... 825 -- -- 825
-------- ---- ------- --------
$176,215 $316 $(6,147) $170,384
======== ==== ======= ========
</TABLE>
Securities classified as held to maturity at December 31, 1995, are
summarized as follows:
<TABLE>
<CAPTION>
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
--------- ---------- ---------- ------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Private placement bonds....................... $415 $-- $-- $415
Asset-backed receivables...................... 399 5 -- 404
---- --- --- ----
$814 $ 5 $-- $819
==== === === ====
</TABLE>
During 1996 the Company transferred $2.0 million of securities classified
as available for sale into trading classifications.
Securities with a carrying value of approximately $35.2 million and $10.7
million at December 31, 1996 and 1995, respectively, were pledged to secure
public and trust deposits and securities sold under agreements
F-11
<PAGE> 79
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
to repurchase. Securities with a carrying value of approximately $144.1 million
and $165.1 million at December 31, 1996 and 1995, respectively, were pledged to
secure FHLB advances.
The following summary of securities available for sale at December 31, 1996
provides information on expected maturities as well as the amount of fixed and
variable rate securities:
<TABLE>
<CAPTION>
AMORTIZED COSTS
----------------------------------------
FIXED VARIABLE MARKET
RATE RATE TOTAL VALUE
------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Within one year......................... $ 7,602 $ 7,716 $ 15,318 $ 15,858
One to five years....................... 30,248 15,663 45,911 45,659
Five to ten years....................... 778 27,401 28,179 27,065
Over ten years.......................... 1,393 96,214 97,607 92,413
------- -------- -------- --------
$40,021 $146,994 $187,015 $180,995
======= ======== ======== ========
</TABLE>
The maturities of mortgage-related and other amortizing securities included
in the preceding schedule were estimated based on recent prepayment experience
and expected future prepayment rates. Most of the Company's securities are
variable rate securities, which have interest reset dates that range from
monthly to annually with monthly being the most prevalent.
Substantially all of the Company's variable rate securities are subject to
interest rate ceilings. At December 31, 1996, the excess of the rate ceilings
over the current rates ranged from 2% to 5%, with the majority of the excesses
being in the 3% to 4.5% range over current rates. The market values of these
securities would likely decline if the current rates increased to the ceiling
levels or higher. Accordingly, the Company may be subject to market value risk
if interest rates increase significantly. Because substantially all of the
securities are issued or backed by U.S. government agencies, management believes
that the credit risk associated with the portfolio is minimal.
(5) DERIVATIVE FINANCIAL INSTRUMENTS
Under SFAS 119, Disclosure about Derivative Financial Instruments and Fair
Value of Financial Instruments, a derivative is defined as a futures, forward,
interest rate swap, or option contract, or other financial instrument with
similar characteristics. Examples of other financial instruments with
characteristics similar to option contracts include interest rate caps or floors
and fixed-rate loan commitments. This definition excludes all on-balance sheet
receivables and payables, including those that derive their values or
contractually required cash flows from the price of some other security or
index, such as mortgage backed securities, interest-only and principal-only
obligations, and indexed debt instruments. Management has identified the
following securities held at December 31, 1996 and 1995 that it believes qualify
as derivatives, as defined in SFAS 119:
<TABLE>
<CAPTION>
DECEMBER 31, 1996
INTEREST FREQUENCY ------------------------------
ISSUER/ PURCHASE MATURITY UNDERLYING RATE OF RATE FACE CURRENT MARKET UNREALIZED
DESCRIPTION DATE DATE INDEX CAP/FLOOR CHANGES VALUE COUPON VALUE LOSS
----------- -------- -------- ------------- --------- --------- ------- ------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FHLB
structured notes.... 6/93 6/97 dual-indexed 24%/0% 6 months $ 5,750 5.38% $ 5,348 (403)
FHLB
structured notes.... 9/93 9/98 3 month-LIBOR 24%/0% Quarterly 5,000 5.41% 4,948 (52)
------- ------- -----
Total......... $10,750 $10,296 (454)
<CAPTION>
DECEMBER 31, 1995
-----------------------------
ISSUER/ CURRENT MARKET UNREALIZED
DESCRIPTION COUPON VALUE LOSS
----------- ------- ------ ----------
<S> <C> <C> <C>
FHLB
structured notes.... 4.94% $5,060 (690)
FHLB
structured notes.... 3.31% 4,725 (275)
------ -----
Total......... $9,785 (965)
</TABLE>
It is the Company's current intention to hold these notes to maturity,
unless market conditions change that would warrant sale. The Company classifies
these securities as available for sale which are reported at estimated market
value.
F-12
<PAGE> 80
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(6) LOANS
Loans at December 31, consist of the following :
<TABLE>
<CAPTION>
1996 1995
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Commercial.................................................. $ 81,668 $ 58,272
Real estate -- mortgage:
Commercial................................................ 110,093 51,175
Home equity loans......................................... 20,659 23,438
Consumer second and first mortgage........................ 44,676 26,985
Residential real estate -- construction..................... 23,257 21,818
Installment and revolving lines of credit................... 37,061 21,452
Loans held for sale......................................... 2,864 3,916
-------- --------
Total face amount of loans........................ 320,278 207,056
Deferred fees, discounts, and costs, net.................... (373) (392)
-------- --------
Carrying value of loans................................... 319,905 206,664
Less allowance for loan losses.............................. (4,238) (2,493)
-------- --------
Net loans......................................... $315,667 $204,171
======== ========
</TABLE>
The principal balance of loans on which the accrual of interest had been
discontinued totaled $1,247,000, $1,292,000 and $829,000 at December 31, 1996,
1995 and 1994, respectively. If interest on these loans had been accrued, such
income would have amounted to approximately $62,000, $85,000 and $71,000 for the
years ended December 31, 1996, 1995 and 1994, respectively.
Substantially all loans are to borrowers located in Vectra's Denver/Boulder
market area. Commercial loan borrowers are generally small to medium-sized
corporations, partnerships and sole proprietors in a wide variety of businesses.
Loans to individuals are both secured and unsecured. Real estate secured loans
are fixed or variable rate and include both amortizing and revolving line of
credit loans.
Commercial real estate loans include loans made to commercial customers
where the collateral for the loan is, among other things, real estate owned by
the business or its owners. Accordingly, certain of these loans can be
characterized as loans for commercial purposes other than to finance real estate
which are secured by real estate.
Loans held for sale consist of mortgage loans and guaranteed portions of
Small Business Administration guaranteed loans which are generally sold within
30 days. Market value equals or exceeds carrying value for these loans.
Loans totaling $44,406,000 and $34,033,000 at December 31, 1996 and 1995,
respectively, were pledged to secure public and trust deposits, FHLB advances
and loans sold under agreements to repurchase.
Transactions in the allowance for loan losses for the years ended December
31, 1996, 1995 and 1994 were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------ ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
Allowance for loan losses at beginning of year........... $2,493 $1,999 $2,324
Acquired through acquisition............................. 1,346 -- --
Provision for losses..................................... 916 795 794
Loans charged off........................................ (659) (560) (1,292)
Recoveries............................................... 142 259 173
------ ------ ------
Allowance for loan losses at end of year................. $4,238 $2,493 $1,999
====== ====== ======
</TABLE>
F-13
<PAGE> 81
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
As of December 31, 1996 and 1995, the Company's recorded investment in
impaired loans was approximately $1,270,000 and $1,350,000, respectively. The
related valuation allowance calculated under SFAS 114 totaled approximately
$178,000 and $139,000, respectively and is included in the allowance for loan
losses above. The average recorded investment in impaired loans for the years
ended December 31, 1996 and 1995, was $1,440,000 and $985,000, respectively.
Interest recorded on impaired loans for the years ended December 31, 1996
and 1995 was $110,000 and $29,000, respectively.
(7) PREMISES AND EQUIPMENT
Premises and equipment at December 31, is summarized as follows:
<TABLE>
<CAPTION>
1996 1995
------- -------
(IN THOUSANDS)
<S> <C> <C>
Land........................................................ $ 3,280 $ 3,171
Buildings................................................... 6,917 5,715
Leasehold improvements...................................... 2,146 2,046
Furniture and equipment..................................... 7,135 6,136
------- -------
19,478 17,068
Less accumulated depreciation and amortization.............. (7,529) (6,493)
------- -------
Premises and equipment, net............................... $11,949 $10,575
======= =======
</TABLE>
Depreciation expense totaled $1,074,000, $923,000 and $892,000 for the
years ended December 31, 1996, 1995 and 1994, respectively.
(8) ADVANCES FROM THE FEDERAL HOME LOAN BANK AND FEDERAL FUNDS PURCHASED
Vectra's subsidiary bank is a member of the Federal Home Loan Bank of
Topeka (FHLB). Membership in the FHLB offers several benefits to the Company
including the ability to obtain advances which can be used as part of the
overall mix of funding for Vectra's loan and investing activities. Advances are
available with maturities varying from one day to ten years. All advances are
secured by securities and loans which have been pledged under blanket pledges.
In addition, the Company has agreements with three other banks whereby the
Company may purchase up to $12,500,000 of federal funds. Balances, maturities
and interest rates of the advances at December 31, are as follows:
<TABLE>
<CAPTION>
1996 1995
------------------- --------------------
INTEREST INTEREST
AMOUNT RATES AMOUNT RATES
------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Fixed rate:
Overnight borrowings from FHLB............. $23,700 7.15% $ 11,345 6.15%
Federal funds purchased.................... 1,000 6.26 1,000 5.80
Due in 60 days or less..................... 35,000 5.35 -- --
Variable rate due in less than one year,
resets monthly at rates indexed to one
month London Interbank Offered Rate........ -- -- 58,000 5.98
------- --------
Total at end of year............... $59,700 6.08% $ 70,345 6.00%
======= ==== ======== ====
Average borrowings outstanding for the
year....................................... $64,743 $123,083
======= ========
Weighted average interest rate for the
year....................................... 5.48% 6.08%
==== ====
Maximum borrowings outstanding at any
month-end during the year.................. $78,700 $167,500
======= ========
</TABLE>
F-14
<PAGE> 82
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The advance availability, usage, and related collateral for FHLB advances
at December 31, 1996, is summarized as follows (in thousands):
<TABLE>
<S> <C>
Total advances available.................................... $146,797
Balances outstanding........................................ (58,700)
--------
Balances available and unused............................. $ 88,097
========
Book value of assets pledged as collateral:
Securities................................................ $144,101
Investment in FHLB stock.................................. 3,610
Loans..................................................... 44,406
--------
$192,117
========
</TABLE>
Vectra has the right to substitute other acceptable collateral for the
securities and loans pledged as collateral for the advances. The Company is
required to purchase and hold stock in the FHLB to maintain membership and to
obtain advances. The amount of stock required to be held is generally based upon
the portion of Vectra's mortgage related assets to total assets as well as the
amount of advances outstanding. The FHLB paid dividends quarterly during 1996 at
a rate of approximately 6.50%. FHLB stock has always been redeemable at the
preset price of $100 per share; however, there can be no assurance that this
redemption feature and value will continue.
(9) SECURITIES AND LOANS SOLD UNDER AGREEMENTS TO REPURCHASE
Securities and loans sold under agreements to repurchase are used to fund
the purchase of securities and origination of loans and to provide collateral to
customers for funds placed with Vectra. The securities and loans which are
subject to the agreements with customers are under the control of the Company
and are segregated in safekeeping accounts at Vectra's correspondent banks.
Vectra has the right to substitute securities and loans at its discretion. The
interest rate paid to customers under these agreements is not related to the
coupon rate of the securities sold, but rather is a function of the rate earned
on Vectra's federal funds sold and the amount of each customer's balance with
Vectra. The balances outstanding under these agreements may fluctuate daily. The
average rate paid under these agreements was 4.65%, 4.87% and 3.48% during the
years ended December 31, 1996, 1995 and 1994, respectively. The carrying value
of loans and securities available for sale under these agreements was
$16,015,000, $7,462,000 and $6,329,000 at December 31, 1996, 1995 and 1994,
respectively. The highest month-end balances during 1996, 1995 and 1994 were
$10,733,000, $7,429,000 and $5,888,000, respectively, and the average balances
were $7,565,000, $4,899,000 and $3,333,000, respectively.
F-15
<PAGE> 83
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(10) NOTES PAYABLE
Notes payable at December 31 consist of the following:
<TABLE>
<CAPTION>
1996 1995
------ ------
(IN THOUSANDS)
<S> <C> <C>
Note payable to bank, collateralized by common stock of
Vectra Bank, interest payable quarterly based on WSJ prime
minus 0.5%. The entire unpaid balance matures on June 28,
1997. The loan commitment from the lender indicates that
the loan may be renewed annually for a total term of ten
years based on the financial condition of the Company,
with annual principal reductions of $450,000 starting at
the end of the second year. .............................. $4,050 $ --
Note payable to bank, collateralized by real property
(occupied by a subsidiary bank) with a net carrying value
of $987,000 at December 31, 1995. Paid in full in
1996. .................................................... -- 1,051
------ ------
$4,050 $1,051
====== ======
</TABLE>
(11) SHAREHOLDERS' EQUITY
(a) Initial public offering
During 1994, the Company issued 923,770 shares of common stock and 805,000
shares of Series A cumulative preferred stock for proceeds of approximately
$14,471,000, net of offering costs, in an initial public offering.
In connection with the initial public offering, the Company purchased and
retired 270,000 shares of common stock from an existing shareholder for
$2,403,000, with a portion of the proceeds from the offering.
(b) Preferred stock
The $100 Series A Convertible Preferred Stock (Convertible Preferred) is
entitled to receive quarterly dividends, if declared, at the annual rate of $7
per share. In the event of any liquidation of the Company, the holders of the
Convertible Preferred will be entitled to a preferential distribution out of the
assets of the Company of $100 per share plus an amount equal to all accumulated
and unpaid dividends thereon on a pari passu basis with the holders of the
Cumulative Preferred stock. Attached to the shares of Convertible Preferred are
Contingent Warrants which give the holders of the Cumulative Preferred the right
to receive Company common stock to compensate for dividends on the Cumulative
Preferred if they are not declared and paid.
The Company may require the redemption of the Convertible Preferred shares
on or after June 19, 1999, at a redemption price starting at $103.50 for the
first year starting June 19, 1999, and declining over a seven year period to
$100 per share. Notwithstanding the Company's rights to require redemption, the
holders of the Convertible Preferred shall have 30 days after the receipt of a
notice of redemption in which they may elect to instead convert their shares of
Convertible Preferred into Company common stock in accordance with their
conversion rights. As a condition for the Company exercising its right to
require redemption during the two-year period starting June 19, 1999, the
Company's common stock must be trading at no less than $13.72 per share.
Holders of the Convertible Preferred stock may, at their option, convert
all or any part of their Convertible Preferred stock into Company common stock
at a conversion price of $13.25 per common share, or approximately 7.55 shares
of common stock for each share of Convertible Preferred stock. Conversion of all
Convertible Preferred shares would result in the issuance of approximately
828,000 shares of common stock.
The Series A Cumulative Preferred Stock (Cumulative Preferred) is entitled
to receive a cumulative quarterly dividend at the annual rate of $.95 per share.
In the event of any liquidation or change in control of
F-16
<PAGE> 84
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
the Company, the holders of the Cumulative Preferred will be entitled to a
preferential distribution of $10.00 per share ($8,050,000), plus all accumulated
and unpaid dividends.
The Cumulative Preferred will not be redeemable before March 31, 1997,
except upon change in control of the Company.
On or after March 31, 1997, the Cumulative Preferred will be redeemable at
the option of the Company, subject to prior regulatory approval, for cash, in
whole or in part, at the following redemption prices per share, plus, in each
case an amount equal to accumulated and unpaid dividends, if redeemed during the
twelve-month period ending on and including March 30, in each of the following
years:
<TABLE>
<CAPTION>
REDEMPTION PRICE
PER SHARE
----------------
<S> <C>
1998........................................................ $10.30
1999........................................................ 10.15
2000 and thereafter......................................... 10.00
</TABLE>
The 1989 preferred stock was redeemed in 1994 for approximately $477,000
with a portion of the proceeds from the initial public offering.
(c) Employees equity incentive plan
In March 1994, the Company adopted an employees equity incentive plan under
which options for the purchase of common stock are granted to its key employees
including officers and directors who are employees of Vectra. Stock option terms
under this plan may be adjusted at the discretion of the Board of Directors. The
plan has authorized 450,000 option shares of common stock. The options
outstanding under this plan expire ten years from the date of grant. One-third
of these options became exercisable at the date of grant with an additional
one-third becoming exercisable on each of the first two anniversaries of the
date granted. Upon any change in control of Vectra, options outstanding become
fully vested and exercisable.
Activity under this plan is as follows:
<TABLE>
<CAPTION>
NUMBER WEIGHTED-AVERAGE
OF SHARES EXERCISE PRICE
--------- ----------------
<S> <C> <C>
Balance at December 31, 1993................................ -- --
Granted................................................... 95,000 $ 8.50
Balance at December 31, 1994................................ 95,000 8.50
Granted................................................... 20,500 11.04
Balance at December 31, 1995................................ 115,500 8.95
Granted................................................... 2,000 12.00
Exercised................................................. (3,333) 10.00
Forfeited................................................. (1,667) 10.00
Balance at December 31, 1996................................ 112,500 8.96
=======
</TABLE>
At December 31, 1996, the range of exercise prices and the weighted-average
remaining contractual life of outstanding options was $8.50 -- $12.00 and 7.2
years, respectively.
At December 31, 1996, 1995 and 1994, the number of options exercisable was
106,000, 70,167 and 31,667, respectively, and weighted-average exercise price of
those options was $8.80, $8.78 and $8.50, respectively.
F-17
<PAGE> 85
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(d) Outside directors' stock option plan
In March 1994, the Company also implemented an outside directors stock
option plan that grants options for the purchase of common stock to the
Company's directors who are not employees of Vectra. All outside directors were
immediately granted options to purchase 3,000 shares at the current market price
with an additional 1,500 shares to be granted for each subsequent year of
service. Options issued under this plan become exercisable in the same manner as
those issued under the employees equity incentive plan and expire five years
from the date of grant.
Activity under this plan is as follows:
<TABLE>
<CAPTION>
NUMBER WEIGHTED-AVERAGE
OF SHARES EXERCISE PRICE
--------- ----------------
<S> <C> <C>
Balance at December 31, 1993................................ -- --
Granted................................................... 12,000 $ 8.50
------
Balance at December 31, 1994................................ 12,000 8.50
Granted................................................... 6,000 9.63
------
Balance at December 31, 1995................................ 18,000 8.88
Granted................................................... 7,500 13.13
------
Balance at December 31, 1996................................ 25,500 10.13
======
</TABLE>
At December 31, 1996, the range of exercise prices and the weighted-average
remaining contractual life of outstanding options was $8.50 -- $13.13 and 3.1
years, respectively.
At December 31, 1996, 1995 and 1994, the number of options exercisable was
18,500, 10,000 and 4,000, respectively, and weighted-average exercise price of
those options was $9.59, $9.08 and $8.50, respectively.
(e) Nonqualified stock option plan
The Company had a 1989 nonqualified stock option plan (the 1989 Plan) which
permitted Vectra to grant options for the purchase of common stock to selected
key employees at no less than estimated fair value on the date of grant.
Options outstanding under this plan vested 20% on June 30, 1994 and an
additional 20% on each June 30 thereafter until the options are fully vested on
June 30, 1998. The options vest fully in the event of a change of control of the
Company. In 1994, the 1989 Plan was terminated.
Activity under this plan is as follows:
<TABLE>
<CAPTION>
NUMBER WEIGHTED-AVERAGE
OF SHARES EXERCISE PRICE
--------- ----------------
<S> <C> <C>
Balance at December 31, 1993................................ 50,530 $ 6.67
Exercised................................................. (3,030) 6.60
Forfeited................................................. (1,000) 10.00
------
Balance at December 31, 1994................................ 46,500 6.60
------
Balance at December 31, 1995................................ 46,500 6.60
Exercised................................................. (300) 6.60
Forfeited................................................. (200) 6.60
------
Balance at December 31, 1996................................ 46,000 6.60
======
</TABLE>
At December 31, 1996, the exercise price and the weighted-average remaining
contractual life of outstanding options was $6.60 and 2.5 years, respectively.
F-18
<PAGE> 86
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
At December 31, 1996, 1995 and 1994, the number of options exercisable was
27,600, 18,600 and 9,300, respectively, and weighted-average exercise price of
those options was $6.60.
(f) Accounting for stock options
During 1996, the Company adopted SFAS No. 123, Accounting for Stock-Based
Compensation (SFAS 123), which provides an alternative to APB Opinion No. 25,
Accounting for Stock Issued to Employees (Opinion No. 25), in accounting for
stock-based compensation issued to employees. The Statement allows for a fair
value based method of accounting for employee stock options and similar equity
instruments. However, for companies that continue to account for stock-based
compensation arrangements under Opinion No. 25, SFAS 123 requires disclosure of
the pro forma effect on net income and earnings per share, if presented, as if
the fair value based method of accounting defined in SFAS 123 had been applied.
The Company will continue to use the accounting prescribed by Opinion No. 25,
and provide the required disclosures of SFAS 123.
The per share weighted-average fair value of stock options granted during
1996 and 1995 was $4.05 and $4.01 on the dates of grant using the Black Scholes
option-pricing model with the following weighted-average assumptions:
1996 -- risk-free interest rate of 6.0% and an expected life of 3.4 years;
1995 -- risk-free interest rate of 6.1% and an expected life of 4.6 years, and
expected volatility of 32%. It was assumed in both years that no dividends will
be paid.
As noted above, the Company applies the intrinsic value method in
accounting for its equity incentive plans and, accordingly, no compensation cost
has been recognized for such plans in the financial statements. Had the Company
determined compensation cost based on the fair value at the grant date for its
stock options, the Company's net earnings would have been reduced to the pro
forma amounts indicated below:
<TABLE>
<CAPTION>
1996 1995
--------- ---------
(IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C>
Net earnings:
As reported............................................... $5,445 $3,303
Pro forma................................................. 5,380 3,282
Earnings per common share assuming full dilution:
As reported............................................... $ 1.26 $ 0.78
Pro forma................................................. 1.24 0.78
</TABLE>
The effects of applying SFAS 123 for providing pro forma disclosures may
not be representative of the effects on reported net earnings for future years.
(g) Restricted stock program
During 1992, Vectra adopted a restricted stock program under which 30,000
shares of restricted common stock were sold to certain employees at a price of
$.01 per share. The shares vested over a four-year period which ended in 1996.
Vectra recorded compensation expense over the vesting period equal to the
difference between the fair value of shares at the time the program was adopted
and sales proceeds.
(h) Underwriter's warrant
In connection with its initial public offering, Vectra sold to its
underwriter a warrant to purchase 20,000 shares of common stock. The warrant is
exercisable at $10.20 per share of common stock and expires in March 1999.
F-19
<PAGE> 87
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(12) INCOME TAXES
Income tax expense (benefit) for the years ended December 31, consists of
the following:
<TABLE>
<CAPTION>
1996 1995 1994
------ ------ ----
(IN THOUSANDS)
<S> <C> <C> <C>
Current tax expense:
Federal.................................................. $3,077 $1,245 $319
State.................................................... 328 215 --
------ ------ ----
Total current expense............................ 3,405 1,460 319
------ ------ ----
Deferred tax expense (benefit):
Federal.................................................. (403) 272 403
State.................................................... (61) 42 98
------ ------ ----
Total deferred expense (benefit)................. (464) 314 501
------ ------ ----
Total income tax expense......................... $2,941 $1,774 $820
====== ====== ====
</TABLE>
Income tax expense differs from the amounts computed by applying the U.S.
federal statutory rate to earnings before income taxes and cumulative effect of
change in accounting for the years ended December 31, as a result of the
following:
<TABLE>
<CAPTION>
1996 1995 1994
------------- ------------- ---------------
AMOUNT % AMOUNT % AMOUNT %
------ ---- ------ ---- ------- -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Expected federal tax expense........... $2,851 34.0% $1,726 34.0% $ 1,711 34.0%
State taxes, net of federal benefit.... 277 3.3 169 3.3 161 3.2
Tax exempt interest.................... (104) (1.3) -- -- -- --
Goodwill amortization.................. 64 0.8 -- -- -- --
Decrease in valuation allowance on
deferred taxes....................... (95) (1.1) (209) (4.1) (1,000) (19.9)
Other.................................. (52) (0.6) 88 1.7 (52) (1.0)
------ ---- ------ ---- ------- -----
$2,941 35.1% $1,774 34.9% $ 820 16.3%
====== ==== ====== ==== ======= =====
</TABLE>
Temporary differences between financial statement carrying amounts and tax
bases of assets and liabilities that result in significant portions of Vectra's
deferred tax asset at December 31, are as follows:
<TABLE>
<CAPTION>
1996 1995
------ ------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Unrealized loss on securities available for sale.......... $2,246 $2,194
Net operating loss carryforwards.......................... 225 272
Loans, primarily due to differences in accounting for loan
losses................................................. 722 119
Other..................................................... 211 73
------ ------
Deferred tax asset..................................... 3,404 2,658
Less valuation allowance.................................. (141) (236)
------ ------
Deferred tax asset, net of valuation allowance......... 3,263 2,422
Deferred tax liabilities:
Premises and equipment, primarily due to differences in
original cost basis and depreciation................... (227) --
------ ------
Net deferred tax asset............................ $3,036 $2,422
====== ======
</TABLE>
F-20
<PAGE> 88
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The valuation allowance recorded at December 31, 1996, was determined based
upon management's estimate of future taxable income and Vectra's ability to
utilize existing net operating loss carryforwards, certain of which are subject
to limitations as to their use to offset such taxable income and the recovery or
realization of unrealized losses on securities. In the opinion of management,
the Company is more likely than not to realize the net deferred tax asset.
At December 31, 1996, Vectra has net operating loss carryforwards for
federal and state income tax purposes of approximately $520,000 which are
available to offset future taxable income through 2004. Vectra also has
approximately $960,000 of additional net operating loss carryforwards for state
income tax purposes which are available to offset future taxable income through
2009. These net operating loss carryforwards are subject to separate return
limitations and "ownership change" limitations, as that term is defined in
Section 382 of the Internal Revenue Code.
(13) RELATED PARTY TRANSACTIONS
Vectra has entered into transactions with its shareholders, directors,
officers and other affiliates. In the opinion of management, such transactions
have been entered into under terms and rates substantially the same as those
offered by Vectra in the ordinary course of business.
(14) COMMITMENTS AND CONTINGENCIES
(a) Lease Commitments
Future minimum rental payments and lease income receipts under
noncancelable operating leases for premises and equipment, expiring at various
dates through 2067, are as follows:
<TABLE>
<CAPTION>
RENTAL RENTAL
PAYMENTS RECEIPTS
-------- --------
(IN THOUSANDS)
<S> <C> <C>
1997........................................................ $ 530 $ 191
1998........................................................ 458 31
1999........................................................ 271 47
2000........................................................ 224 38
2001........................................................ 91 42
Thereafter.................................................. 1,943 660
------ ------
Total minimum..................................... $3,517 $1,059
====== ======
</TABLE>
Total rent expense for all operating leases, including equipment leases,
was $605,000, $774,000 and $705,000 for the years ended December 31, 1996, 1995
and 1994, respectively.
(b) Commitments to Extend Credit
In the normal course of business, the subsidiary bank enters into
commitments to extend credit. The following outstanding commitments at December
31, 1996, which are generally secured and at market rates of interest, are not
reflected in the accompanying financial statements (in thousands):
<TABLE>
<S> <C>
Commitments on lines of credit.............................. $85,628
Outstanding letters of credit............................... 4,214
-------
$89,842
=======
</TABLE>
Commitments to extend credit and outstanding letters of credit are
evaluated for losses by management in a similar manner to existing loans and
real estate acquired by foreclosure.
F-21
<PAGE> 89
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(c) Litigation
Vectra is involved in various litigation matters arising in the normal
course of business. In the opinion of management and Vectra's legal counsel, the
ultimate resolution of these matters will not have a significant adverse effect
on the financial condition or results of operations of the Company.
(15) DISCLOSURES OF FAIR VALUE OF FINANCIAL INSTRUMENTS
SFAS No. 107, Disclosures About Fair Value of Financial Instruments, (SFAS
107) requires that Vectra disclose estimated fair values for its financial
instruments. Fair value estimates, methods, and assumptions for Vectra's
financial instruments are as set forth below, and a summary of the carrying
values and fair values of the Company's financial instruments at December 31,
are as follows:
<TABLE>
<CAPTION>
1996 1995
--------------------- ---------------------
CARRYING ESTIMATED CARRYING ESTIMATED
VALUE FAIR VALUE VALUE FAIR VALUE
-------- ---------- -------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Financial assets:
Cash and due from banks.................. $ 32,688 $ 32,688 $ 17,320 $ 17,320
Securities available for sale:
Structured notes (see note 5)......... 10,296 10,296 9,785 9,785
Other................................. 170,699 170,699 160,599 160,599
Securities held to maturity.............. 263 263 814 819
Investment in FHLB stock................. 3,610 3,610 5,173 5,173
Federal funds sold....................... -- -- 2,000 2,000
Loans.................................... 315,667 322,861 204,171 209,198
Financial liabilities:
Deposits................................. 439,351 439,351 307,085 307,085
Other liabilities........................ 77,025 77,025 80,612 80,612
</TABLE>
(a) Cash and Due From Banks and Federal Funds Sold
The carrying amounts of these instruments are reasonable estimates of fair
value, due to the relatively short period to maturity of these investments.
(b) Securities
The fair value of securities available for sale and securities held to
maturity is estimated based on market quotations received from securities
dealers from whom Vectra normally purchases and sells securities and from other
independent sources. Such estimates of market value are included in note 4.
(c) Investment in Federal Home Loan Bank Stock
The carrying amount of this investment represents a reasonable estimate of
fair value since the stock can only be purchased from or sold to the FHLB, as
discussed in note 8.
(d) Loans
Fair value of loans is estimated in accordance with SFAS 107 for portfolios
of loans with similar financial characteristics. Loans are segregated by type
such as commercial, consumer and mortgages. Each loan category is further
segmented into fixed and adjustable rate interest terms and by performing and
nonperforming categories. Fair value of fixed rate loans is calculated by
discounting cash flows through the estimated maturity based on the Company's
expected experience with repayments for each loan classification. The estimated
market discount rates used in the calculations represent loan rates offered by
the Company on similar types of loans. Adjustable rate loans are segmented into
the two categories of home equity and all other
F-22
<PAGE> 90
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
adjustable rate loans. Home equity loans generate a higher premium in the loan
secondary market than other adjustable rate loans, which is reflected in the
calculation of the fair market value for these types of loans. All other
performing adjustable rate loans are valued at 1% over the carrying value based
on consideration of average lives and contributions to net earnings of such
loans. The fair market values of all consumer loans were verified with
independent loan brokers.
A summary of carrying value and estimated fair value of loans at December
31 is as follows:
<TABLE>
<CAPTION>
1996 1995
--------------------- ---------------------
CARRYING ESTIMATED CARRYING ESTIMATED
VALUE FAIR VALUE VALUE FAIR VALUE
-------- ---------- -------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Loans...................................... $317,041 $319,824 $202,748 $205,231
Loans held for sale........................ 2,864 3,037 3,916 3,967
Allowance for loan losses.................. (4,238) -- (2,493) --
-------- -------- -------- --------
Net loans........................ $315,667 $322,861 $204,171 $209,198
======== ======== ======== ========
</TABLE>
(e) Deposits and Other Liabilities
The fair values of deposits with no stated maturity, such as demand
deposits, NOW and money market accounts and savings are equal to the amounts
payable on demand as included in the accompanying consolidated balance sheets.
The fair value of certificates of deposit is also estimated to be equal to the
amounts included in the accompanying consolidated balance sheets because the
majority of such certificates are of short duration and are at rates
substantially the same as current market rates. The estimated fair values of
advances from the FHLB and of securities and loans sold under agreements to
repurchase are also equal to carrying values because of their short durations or
repricing frequencies. Notes payable carrying values are estimated to
approximate fair values because they are annually renewable and bear interest at
market rates adjustable whenever prime rate changes.
(f) Off-Balance Sheet Financial Instruments
Commitments to extend credit represent the principal category of
off-balance sheet financial instruments. The fair value of these commitments,
based on fees currently charged for similar commitments, is not significant.
Fair value estimates are made at a specific point in time, based on
relevant market information and information about the financial instrument.
These estimates are subjective in nature and involve matters of significant
judgment and therefore cannot be determined with precision. Changes in
assumptions could significantly affect the estimates.
(16) REGULATORY CAPITAL REQUIREMENTS
Vectra is subject to regulations of certain state and federal agencies,
including periodic examinations by those regulatory agencies. Federal
regulations provide for supervisory action at institutions based on their
capital levels as measured by three capital ratios: Tier 1 leverage, Tier 1
risk-based, and total risk-based capital. Based on these capital measures, each
banking institution falls into one of five regulatory capital categories: well
capitalized, adequately capitalized, undercapitalized, significantly
undercapitalized, and critically undercapitalized. At December 31, 1996,
Vectra's Tier 1 leverage, Tier 1 risk-based and total risk-based capital were
6.98%, 10.50% and 11.58%, respectively, which places Vectra in the well
capitalized category.
F-23
<PAGE> 91
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(17) EARNINGS PER SHARE CALCULATIONS
In addition to its common stock, Vectra's capital structure includes
several other components that impact the calculation of earnings per share.
Common stock equivalents consist of the number of common shares issuable upon
the exercise of the options and warrants when the market price of the common
stock exceeds the exercise prices, reduced by the number of common shares that
are assumed to have been purchased with the proceeds from the exercise of the
stock options and warrants. Those purchases were assumed to have been made at
the average price of the common stock during that part of the year when the
market price of the common stock exceeded the exercise prices.
Other dilutive securities consist of the 828,000 shares of common stock
issuable upon conversion of the $100 Series A Convertible Preferred stock. The
weighted average outstanding shares of these securities is calculated assuming
the conversion occurred on June 18, 1996, when the shares of $100 Series A
Convertible Preferred stock were issued.
The calculation of primary and fully diluted earnings per share is set
forth in the following table:
<TABLE>
<CAPTION>
1996 1995 1994
------ ------ ------
(IN THOUSANDS EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C> <C>
Net earnings............................................. $5,445 $3,303 $2,675
Less dividends on Series A Cumulative Preferred stock.... (765) (765) (579)
------ ------ ------
Earnings available for calculation of earnings per share
assuming full dilution................................. 4,680 2,538 2,096
Less dividends on $100 Series A Convertible Preferred
stock.................................................. (409) -- --
------ ------ ------
Earnings available to common shareholders................ $4,271 $2,538 $2,096
====== ====== ======
Weighted average shares outstanding:
Common shares.......................................... 3,198 3,195 3,023
Common equivalent shares............................... 73 39 36
------ ------ ------
Total common and common equivalent shares...... 3,270 3,234 3,059
Other dilutive securities.............................. 443 -- --
------ ------ ------
Total assuming full dilution................... 3,714 3,234 3,059
====== ====== ======
Earnings per common share and common share equivalent.... $ 1.31 $ 0.79 $ 0.69
====== ====== ======
Earnings per common share assuming full dilution......... $ 1.26 $ 0.78 $ 0.69
====== ====== ======
</TABLE>
F-24
<PAGE> 92
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(18) CONDENSED FINANCIAL INFORMATION FOR PARENT COMPANY
Condensed financial information for the parent company only, Vectra Banking
Corporation, is as follows:
CONDENSED BALANCE SHEET INFORMATION
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1996 1995
------- -------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Cash...................................................... $ 199 $ 304
Investment in bank subsidiaries........................... 47,778 29,219
Investment in other subsidiaries.......................... 987 (58)
Other assets.............................................. 14 787
------- -------
Total assets...................................... $48,978 $30,252
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Other liabilities......................................... $ 3,543 $ 67
Shareholders' equity...................................... 45,435 30,185
------- -------
Total liabilities and shareholders' equity........ $48,978 $30,252
======= =======
</TABLE>
CONDENSED OPERATIONS INFORMATION
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------
1996 1995 1994
------ ------ -------
(IN THOUSANDS)
<S> <C> <C> <C>
Operating income:
Management fees....................................... $ -- $ 600 $ 336
Other................................................. 14 18 46
------ ------ -------
Total operating income........................ 14 618 382
------ ------ -------
Operating expenses:
Salaries and employee benefits........................ 11 328 340
Occupancy expenses.................................... -- 74 62
Interest expense...................................... 162 -- 18
Amortization of intangible asset...................... -- -- 312
Other................................................. 607 534 310
------ ------ -------
Total operating expenses...................... 780 936 1,042
------ ------ -------
Loss before income taxes, equity in earnings of
subsidiaries and cumulative effect of change in
accounting......................................... (766) (318) (660)
Income tax benefit...................................... 196 156 470
------ ------ -------
Loss before equity in earnings of subsidiaries and
cumulative effect of change in accounting.......... (570) (162) (190)
Equity in earnings of subsidiaries...................... 6,015 3,465 4,402
Cumulative effect of change in accounting for
goodwill.............................................. -- -- (1,537)
------ ------ -------
Net earnings.................................. $5,445 $3,303 $ 2,675
====== ====== =======
</TABLE>
F-25
<PAGE> 93
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED CASH FLOW INFORMATION
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1996 1995 1994
-------- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings...................................... $ 5,445 $ 3,303 $ 2,675
Equity in earnings of subsidiaries................ (6,015) (3,465) (4,402)
Cumulative effect of change in accounting......... -- -- 1,537
Depreciation and amortization..................... -- -- 312
Net decrease (increase) in other operating assets
and liabilities................................ 177 (210) (90)
-------- ------- --------
Net cash provided (used) by operating
activities.............................. (393) (372) 32
-------- ------- --------
Cash flows from investing activities:
Dividends received from bank subsidiaries......... 1,400 1,052 353
Capital contribution to subsidiaries.............. (15,021) -- (10,000)
Other............................................. 27 -- (165)
-------- ------- --------
Net cash provided (used) by investing activities.... (13,594) 1,052 (9,812)
-------- ------- --------
Net cash provided (used) by financing activities.... 13,882 (764) 10,103
-------- ------- --------
Net increase (decrease) in cash........... (105) (84) 323
Cash at beginning of year........................... 304 388 65
-------- ------- --------
Cash at end of year................................. $ 199 $ 304 $ 388
======== ======= ========
</TABLE>
F-26
<PAGE> 94
(This page intentionally left blank)
<PAGE> 95
(This page intentionally left blank)
<PAGE> 96
======================================================
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS, AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY
SINCE THE DATE HEREOF OR THE INFORMATION HEREIN OR INCORPORATED BY REFERENCE
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF THIS PROSPECTUS. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR A SOLICITATION OF AN OFFER TO BUY BY
ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED
OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO
SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information................. 4
Incorporation of Certain Documents by
Reference........................... 4
Prospectus Summary.................... 5
Selected Financial Data............... 9
Risk Factors.......................... 11
Use of Proceeds....................... 17
Accounting Treatment.................. 17
Capitalization........................ 18
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 19
Management............................ 34
Description of the Capital
Securities.......................... 35
Description of Junior Subordinated
Debentures.......................... 47
Book-Entry Issuance................... 56
Description of Guarantee.............. 58
Relationship Among the Capital
Securities, the Junior Subordinated
Debentures and the Guarantee........ 60
Certain Federal Income Tax
Consequences........................ 62
Underwriting.......................... 65
Legal Matters......................... 66
Experts............................... 66
Index to Financial Statements......... F-1
</TABLE>
======================================================
======================================================
700,000 CAPITAL SECURITIES
VBC CAPITAL I
% CUMULATIVE CAPITAL SECURITIES
(LIQUIDATION AMOUNT $25 PER CAPITAL SECURITY)
FULLY AND UNCONDITIONALLY GUARANTEED,
AS DESCRIBED HEREIN, BY
VECTRA BANKING CORPORATION
[VECTRA BANK LOGO]
-------------------------
P R O S P E C T U S
-------------------------
DAIN BOSWORTH
Incorporated
HOWE BARNES
INVESTMENTS, INC.
, 1997
======================================================
<PAGE> 97
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee......... $ 5,303
NASD fee.................................................... 6,500
Nasdaq fees................................................. 8,500
Trustees' fees and expenses................................. 12,000
Legal fees and expenses..................................... 90,000
Blue Sky fees and expenses.................................. --
Accounting fees and expenses................................ 25,000
Printing expenses........................................... 85,000
Miscellaneous expenses...................................... 17,697
--------
Total............................................. $250,000
========
</TABLE>
All of the above items except the registration fee are estimated.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article 109 of Title Seven of the Colorado Revised Statutes enables a
Colorado corporation to indemnify its officers, directors, employees and agents
against liabilities, damages, costs and expenses for which they are liable if:
(i) in their Official Capacities (as defined by this statute) if they acted in
good faith and had no reasonable basis to believe their conduct was not in the
best interest of the Registrant; (ii) in all other cases, that their conduct was
at least not opposed to the Registrant's best interests; and (iii) in the case
of any criminal proceeding, they had no reasonable cause to believe their
conduct was unlawful.
Article XVI of Registrant's Articles of Incorporation limits the liability
of directors to the full extent provided by Colorado law.
Article VIII of the Registrant's Bylaws provides indemnification to
officers, directors, employees and agents to the fullest extent provided by
Colorado law.
ITEM 16. EXHIBITS
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
1.1 -- Form of Underwriting Agreement(1).
2.1 -- Agreement and Plan of Merger Dated as of the 26th Day of
December, 1995 and amended as of April 3, 1996 Among
Vectra Banking Corporation, Vectra Bank, Bank Land Co.
and Southwest State Bank(2).
3.1 -- Amended and Restated Articles of Incorporation of Vectra
Banking Corporation(3).
3.2 -- Bylaws of Vectra Banking Corporation(3).
4.1 -- Form of Subordinated Indenture dated , 1997
to be entered into between the Registrant and Wilmington
Trust Company, as Indenture Trustee(10).
4.2 -- Form of Junior Subordinated Debenture (included as an
exhibit to Exhibit 4.1).
4.3 -- Certificate of Trust of VBC Capital I(1).
4.4 -- Trust Agreement of VBC Capital I dated as of April 4,
1997(1).
4.5 -- Form of Amended and Restated Trust Agreement of VBC
Capital I, to be dated , 1997(10).
</TABLE>
II-1
<PAGE> 98
<TABLE>
<C> <S>
4.6 -- Form of Capital Security Certificate of VBC Capital I (included as an exhibit to
Exhibit 4.5).
4.7 -- Form of Capital Securities Guarantee Agreement(10).
4.8 -- Form of Agreement as to Expenses and Liabilities (included as an exhibit to Exhibit
4.5).
5.1 -- Opinion of Jones & Keller, P.C.(1).
5.2 -- Opinion and Consent of Richards, Layton & Finger, P.A.(1).
8.1 -- Opinion of Jones & Keller, P.C., as to certain federal income tax matters(1).
10.1 -- Employees' Equity Incentive Plan(3).
10.2 -- Nonemployee Directors' Stock Option Plan(3).
10.3 -- Non-Statutory Stock Option Plan(3).
10.4 -- Incentive Stock Purchase Plan(3).
10.5 -- Colorado Building Lease dated September 5, 1995 by and between Colorado Building Group,
Vectra Banking Corporation and Vectra Bank of Boulder, Suite 225, 1919 14th Street,
Boulder, Colorado(8)
10.6 -- Promissory Note dated October 18, 1985 between Wadsworth Building Corporation and the
City of Wheat Ridge(3).
10.7 -- Advance, Pledge and Security Agreement dated April 9, 1991 between The Federal Home
Loan Bank of Topeka and Vectra Bank(3).
10.9 -- Lease dated October 1, 1991 by and between First Energy Properties, Inc. and Vectra
Bank of Thornton for Mission Trace Shopping Center(3).
10.10 -- Lease -- 6000 Greenwood Plaza Boulevard(7).
10.11 -- Colorado Building Lease dated June 1, 1982 by and between Colorado Building Group and
National Bank of the Rockies in Boulder for 1919 14th Street, Suite 111(9).
10.12 -- Ground Lease dated October 21, 1991 by and between Community Plaza, L.P. and Vectra
Bank of Boulder for North Broadway Street, Boulder, Colorado, and Amendment(4).
10.13 -- Office Building Lease dated April 14, 1988 by and between Denver Place Associates
Limited Partnership and National Bank of the Rockies in Denver for 999 18th Street(3).
10.14 -- Lease dated May 1, 1991 between Equity Management, Inc. and Vectra Bank for 6901 South
Pierce Street, Littleton, Colorado(3), and Amendment No. 1(9).
10.15 -- 401(k) Plan(3).
10.17 -- Incentive Stock Purchase Agreement -- Restricted Stock Program(3).
10.18 -- Data Processing Hardware and Software Lease Agreement(3).
10.19 -- Loan Agreement -- Wheat Ridge Building(3).
10.20 -- Agreement and Plan of Merger dated November 22, 1994 by and between First Denver
Corporation and Vectra Banking Corporation(5).
10.21 -- Agreement Between Vectra Banking Corporation and Robert A. Silverberg(5).
10.22 -- Agency Agreement -- Bankers' Bank of the West and Policy for Federal Funds Purchase(5).
10.23 -- Employment and Noncompetition Agreement -- Gary A. Mosko (as included as part of
Exhibit 2.1 above).
10.24 -- Boatmen's First National Bank of Kansas City Loan Commitment(4).
</TABLE>
II-2
<PAGE> 99
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
10.25 -- Bankers' Bank of the West -- Federal Funds Purchase Line(1).
10.26 -- Boatmen's First National Bank of Kansas City -- Federal Funds Agency Agreement(1).
10.27 -- Centennial Bank -- Federal Funds Sale and Purchase Agreement(1).
10.28 -- Ground Lease -- H. Alfred Krogh; Western National Bank of Denver(1).
10.29 -- Ground Lease -- Helen Marie Purse; Western National Bank of Denver(1).
10.30 -- Memorandum of Assignment and Assumption of Lease Agreement and Consent -- Vectra Bank,
fka First National Bank of Denver; Taco Caliente, Inc.; Santa Fe Concession, Inc.(1).
11.1 -- Statement re Computation of per Share Earnings -- see Note 17 of Notes to Consolidated
Financial Statements.
12.1 -- Statement re Computation of Ratios(1).
23.1 -- Consent of KPMG Peat Marwick LLP(1).
23.2 -- Consent of Jones & Keller, P.C. (included in Exhibit 5.1 above).
23.3 -- Consent of Richards, Layton & Finger, P.A. (included in Exhibit 5.2 above).
24.1 -- A power of attorney is set forth on the signature page of this Registration Statement.
25.1 -- Form T-1 Statement of Eligibility of Wilmington Trust Company to act as trustee under
the Subordinated Indenture(1).
25.2 -- Form T-1 Statement of Eligibility of Wilmington Trust Company to act as trustee under
the Amended and Restated Trust Agreement(1).
25.3 -- Form T-1 Statement of Eligibility of Wilmington Trust Company to act as trustee under
the Capital Securities Guarantee Agreement(1).
</TABLE>
- ---------------
(1) Previously filed with this Registration Statement.
(2) Incorporated by reference to Exhibit of same number to the Registrant's
Registration Statement on Form S-4 (File No. 333-3248) as declared
effective by the Securities and Exchange Commission on June 4, 1996.
(3) Incorporated by reference to Exhibit of same number to the Registrant's
Registration Statement on Form SB-2 (File No. 33-74724) as declared
effective by the Securities and Exchange Commission on March 24, 1994.
(4) Incorporated herein by reference to Exhibit of the same number to the
Registrant's Annual Report on Form 10-K for the Fiscal Year Ended December
31, 1996.
(5) Incorporated by reference to Exhibit of the same number to the Registrant's
Registration Statement on Form S-4 (File No. 33-88064) as declared
effective by the Securities and Exchange Commission on February 13, 1995.
(6) To be filed by Amendment.
(7) Incorporated herein by reference to Exhibit of the same number to the
Registrant's Annual Report on Form 10-K for the Fiscal Year Ended December
31, 1995.
(8) Incorporated herein by reference to Exhibit 10.10 of the Registrant's
Annual Report on Form 10-K For the Fiscal Year Ended December 31, 1996.
(9) Incorporated by reference to Exhibit of same number to the Registrant's
Registration Statement on Form SB-2 (File No. 33-74724) as declared
effective by the Securities and Exchange Commission on March 24, 1994, and
incorporated herein by reference to Exhibit of the same number to the
Registrant's Annual Report on Form 10-K for the Fiscal Year Ended December
31, 1996.
(10) Filed herewith.
II-3
<PAGE> 100
ITEM 17. UNDERTAKINGS
(b) The Registrant hereby undertakes that, for purposes of determining any
liability under the Securities Act of 1933, each filing of the Registrant's
annual report pursuant to section 13(a) or section 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(h) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the 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 Act and will be governed by the final adjudication of
such issue.
(i) The Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of a registration statement in reliance upon Rule 430A and contained in the
form of prospectus filed by Registrant 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.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-4
<PAGE> 101
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-2 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Denver, State of Colorado, on this 23rd day of April,
1997.
VECTRA BANKING CORPORATION
By: /s/ GARY S. JUDD
----------------------------------
Gary S. Judd,
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<C> <S> <C>
/s/ GARY S. JUDD Director, President and Chief April 23, 1997
- ----------------------------------------------------- Executive Officer (Principal
Gary S. Judd Executive Officer)
* Director April 23, 1997
- -----------------------------------------------------
Mary Gittings Cronin
* Director April 23, 1997
- -----------------------------------------------------
Robert D. Greene
* Director April 23, 1997
- -----------------------------------------------------
Gary A. Mosko
* Director April 23, 1997
- -----------------------------------------------------
James L. Rumsey
* Director April 23, 1997
- -----------------------------------------------------
Robert A. Silverberg
* Director April 23, 1997
- -----------------------------------------------------
W. James Tozer, Jr.
* Director April 23, 1997
- -----------------------------------------------------
Richard B. Tucker
/s/ RAY L. NASH Principal Financial and Accounting April 23, 1997
- ----------------------------------------------------- Officer
Ray L. Nash
*By: /s/ RAY L. NASH
------------------------------------------------
Ray L. Nash,
Attorney-in-fact
</TABLE>
II-5
<PAGE> 102
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
-------------- -----------
<C> <S>
1.1 -- Form of Underwriting Agreement(1).
2.1 -- Agreement and Plan of Merger Dated as of the 26th Day of
December, 1995 and amended as of April 3, 1996 Among
Vectra Banking Corporation, Vectra Bank, Bank Land Co.
and Southwest State Bank(2).
3.1 -- Amended and Restated Articles of Incorporation of Vectra
Banking Corporation(3).
3.2 -- Bylaws of Vectra Banking Corporation(3).
4.1 -- Form of Subordinated Indenture dated , 1997
to be entered into between the Registrant and Wilmington
Trust Company, as Indenture Trustee(10).
4.2 -- Form of Junior Subordinated Debenture (included as an
exhibit to Exhibit 4.1).
4.3 -- Certificate of Trust of VBC Capital I(1).
4.4 -- Trust Agreement of VBC Capital I dated as of April 4,
1997(1).
4.5 -- Form of Amended and Restated Trust Agreement of VBC
Capital I, to be dated , 1997(10).
4.6 -- Form of Capital Security Certificate of VBC Capital I
(included as an exhibit to Exhibit 4.5).
4.7 -- Form of Capital Securities Guarantee Agreement(10).
4.8 -- Form of Agreement as to Expenses and Liabilities
(included as an exhibit to Exhibit 4.5).
5.1 -- Opinion of Jones & Keller, P.C.(1).
5.2 -- Opinion and Consent of Richards, Layton & Finger,
P.A.(1).
8.1 -- Opinion of Jones & Keller, P.C., as to certain federal
income tax matters(1).
10.1 -- Employees' Equity Incentive Plan(3).
10.2 -- Nonemployee Directors' Stock Option Plan(3).
10.3 -- Non-Statutory Stock Option Plan(3).
10.4 -- Incentive Stock Purchase Plan(3).
10.5 -- Colorado Building Lease dated September 5, 1995 by and
between Colorado Building Group, Vectra Banking
Corporation and Vectra Bank of Boulder, Suite 225, 1919
14th Street, Boulder, Colorado(8)
10.6 -- Promissory Note dated October 18, 1985 between Wadsworth
Building Corporation and the City of Wheat Ridge(3).
10.7 -- Advance, Pledge and Security Agreement dated April 9,
1991 between The Federal Home Loan Bank of Topeka and
Vectra Bank(3).
10.9 -- Lease dated October 1, 1991 by and between First Energy
Properties, Inc. and Vectra Bank of Thornton for Mission
Trace Shopping Center(3).
10.10 -- Lease -- 6000 Greenwood Plaza Boulevard(7).
10.11 -- Colorado Building Lease dated June 1, 1982 by and between
Colorado Building Group and National Bank of the Rockies
in Boulder for 1919 14th Street, Suite 111(9).
10.12 -- Ground Lease dated October 21, 1991 by and between
Community Plaza, L.P. and Vectra Bank of Boulder for
North Broadway Street, Boulder, Colorado, and
Amendment(4).
</TABLE>
<PAGE> 103
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
-------------- -----------
<C> <S>
10.13 -- Office Building Lease dated April 14, 1988 by and between
Denver Place Associates Limited Partnership and National
Bank of the Rockies in Denver for 999 18th Street(3).
10.14 -- Lease dated May 1, 1991 between Equity Management, Inc.
and Vectra Bank for 6901 South Pierce Street, Littleton,
Colorado(3), and Amendment No. 1(9).
10.15 -- 401(k) Plan(3).
10.17 -- Incentive Stock Purchase Agreement -- Restricted Stock
Program(3).
10.18 -- Data Processing Hardware and Software Lease Agreement(3).
10.19 -- Loan Agreement -- Wheat Ridge Building(3).
10.20 -- Agreement and Plan of Merger dated November 22, 1994 by
and between First Denver Corporation and Vectra Banking
Corporation(5).
10.21 -- Agreement Between Vectra Banking Corporation and Robert
A. Silverberg(5).
10.22 -- Agency Agreement -- Bankers' Bank of the West and Policy
for Federal Funds Purchase(5).
10.23 -- Employment and Noncompetition Agreement -- Gary A. Mosko
(as included as part of Exhibit 2.1 above).
10.24 -- Boatmen's First National Bank of Kansas City Loan
Commitment(4).
10.25 -- Bankers' Bank of the West -- Federal Funds Purchase
Line(1).
10.26 -- Boatmen's First National Bank of Kansas City -- Federal
Funds Agency Agreement(1).
10.27 -- Centennial Bank -- Federal Funds Sale and Purchase
Agreement(1).
10.28 -- Ground Lease -- H. Alfred Krogh; Western National Bank of
Denver(1).
10.29 -- Ground Lease -- Helen Marie Purse; Western National Bank
of Denver(1).
10.30 -- Memorandum of Assignment and Assumption of Lease
Agreement and Consent -- Vectra Bank, fka First National
Bank of Denver; Taco Caliente, Inc.; Santa Fe Concession,
Inc.(1).
11.1 -- Statement re Computation of per Share Earnings -- see
Note 17 of Notes to Consolidated Financial Statements.
12.1 -- Statement re Computation of Ratios(1).
23.1 -- Consent of KPMG Peat Marwick LLP(1).
23.2 -- Consent of Jones & Keller, P.C. (included in Exhibit 5.1
above).
23.3 -- Consent of Richards, Layton & Finger, P.A. (included in
Exhibit 5.2 above).
24.1 -- A power of attorney is set forth on the signature page of
this Registration Statement.
25.1 -- Form T-1 Statement of Eligibility of Wilmington Trust
Company to act as trustee under the Subordinated
Indenture(1).
25.2 -- Form T-1 Statement of Eligibility of Wilmington Trust
Company to act as trustee under the Amended and Restated
Trust Agreement(1).
25.3 -- Form T-1 Statement of Eligibility of Wilmington Trust
Company to act as trustee under the Capital Securities
Guarantee Agreement(1).
</TABLE>
- ---------------
(1) Previously filed with this Registration Statement.
(2) Incorporated by reference to Exhibit of same number to the Registrant's
Registration Statement on Form S-4 (File No. 333-3248) as declared
effective by the Securities and Exchange Commission on June 4, 1996.
<PAGE> 104
(3) Incorporated by reference to Exhibit of same number to the Registrant's
Registration Statement on Form SB-2 (File No. 33-74724) as declared
effective by the Securities and Exchange Commission on March 24, 1994.
(4) Incorporated herein by reference to Exhibit of the same number to the
Registrant's Annual Report on Form 10-K for the Fiscal Year Ended December
31, 1996.
(5) Incorporated by reference to Exhibit of the same number to the Registrant's
Registration Statement on Form S-4 (File No. 33-88064) as declared
effective by the Securities and Exchange Commission on February 13, 1995.
(6) To be filed by Amendment.
(7) Incorporated herein by reference to Exhibit of the same number to the
Registrant's Annual Report on Form 10-K for the Fiscal Year Ended December
31, 1995.
(8) Incorporated herein by reference to Exhibit 10.10 of the Registrant's
Annual Report on Form 10-K For the Fiscal Year Ended December 31, 1996.
(9) Incorporated by reference to Exhibit of same number to the Registrant's
Registration Statement on Form SB-2 (File No. 33-74724) as declared
effective by the Securities and Exchange Commission on March 24, 1994, and
incorporated herein by reference to Exhibit of the same number to the
Registrant's Annual Report on Form 10-K for the Fiscal Year Ended December
31, 1996.
(10) Filed herewith.
<PAGE> 1
EXHIBIT 4.1
VECTRA BANKING CORPORATION
AS ISSUER
TO
WILMINGTON TRUST COMPANY,
AS TRUSTEE
SUBORDINATED INDENTURE
DATED AS OF _____________, 1997
____% Junior Subordinated Debentures
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I
DEFINITIONS 1
ARTICLE II
DESCRIPTION, TERMS, CONDITIONS, REGISTRATION AND EXCHANGE OF
THE JUNIOR SUBORDINATED DEBENTURES 7
2.1 Designation and Principal Amount 7
2.2 Maturity 7
2.3 Form and Payment 8
2.4 Global Subordinated Debenture 8
2.5 Interest 9
2.6 Execution, Authentication, Delivery and Dating 9
2.7 Registration and Transfer 10
2.8 Mutilated, Destroyed, Lost and Stolen Junior Subordinated Debentures 11
ARTICLE III
REDEMPTION OF JUNIOR SUBORDINATED DEBENTURES 11
3.1 Redemption 11
3.2 Special Event Redemption 11
3.3 Optional Redemption by Company 12
3.4 Notice of Redemption 12
3.5 Payment upon Redemption 13
3.6 No Sinking Fund 13
ARTICLE IV
EXTENSION OF INTEREST PAYMENT PERIOD 13
4.1 Extension of Interest Payment Period 13
4.2 Notice of Extension 14
4.3 Limitation of Transactions During Extension 14
ARTICLE V
PARTICULAR COVENANTS OF THE COMPANY 14
5.1 Payment of Principal and Interest 14
5.2 Maintenance of Agency 14
5.3 Paying Agents 15
5.4 Appointment to Fill Vacancy in Office of Trustee 15
5.5 Compliance with Consolidation Provisions 16
5.6 Restrictions on Certain Payments 16
5.7 Covenants as to the Trust 16
ARTICLE VI
SECURITYHOLDERS' LISTS AND REPORTS 16
6.1 Company to Furnish Trustee Names and Addresses of Securityholders 16
6.2 Preservation of Information; Communications with Securityholders 17
6.3 Reports by the Company 17
6.4 Reports by the Trustee 17
</TABLE>
4.1-i
<PAGE> 3
<TABLE>
<S> <C>
ARTICLE VII
REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS ON EVENT OF DEFAULT 18
7.1 Events of Default 18
7.2 Collection of Indebtedness and Suits for Enforcement by Trustee 19
7.3 Application of Moneys Collected 20
7.4 Limitation on Suits 20
7.5 Rights and Remedies Cumulative; Delay or Omission Not Waiver 21
7.6 Control by Securityholders 21
7.7 Undertaking to Pay Costs 22
ARTICLE VIII
FORM OF JUNIOR SUBORDINATED DEBENTURE AND ORIGINAL ISSUE 22
8.1 Form of Junior Subordinated Debenture 22
8.2 Original Issue of Junior Subordinated Debentures 22
ARTICLE IX
CONCERNING THE TRUSTEE 22
9.1 Certain Duties and Responsibilities of the Trustee 23
9.2 Certain Rights of Trustee 23
9.3 Trustee Not Responsible for Recitals or Issuance of the Junior Subordinated Debentures 24
9.4 May Hold Junior Subordinated Debentures 24
9.5 Moneys Held in Trust 24
9.6 Compensation and Reimbursement 24
9.7 Reliance on Officers' Certificate 25
9.8 Disqualification; Conflicting Interests 25
9.9 Corporate Trustee Required; Eligibility 25
9.10 Resignation and Removal; Appointment of Successor 25
9.11 Acceptance of Appointment by Successor 26
9.12 Merger, Conversion, Consolidation or Succession to Business 27
9.13 Preferential Collection of Claims Against the Company 27
9.14 Appointment of Authenticating Agent 27
ARTICLE X
CONCERNING THE SECURITYHOLDERS 28
10.1 Evidence of Action by Securityholders 28
10.2 Proof of Execution by Securityholders 29
10.3 Who May Be Deemed Owners 29
10.4 Certain Junior Subordinated Debentures Owned by Company Disregarded 29
10.5 Actions Binding on Future Securityholders 29
ARTICLE XI
SUPPLEMENTAL INDENTURES 30
11.1 Supplemental Indentures Without the Consent of Securityholders 30
11.2 Supplemental Indentures with Consent of Securityholders 31
11.3 Effect of Supplemental Indentures 31
11.4 Junior Subordinated Debentures Affected by Supplemental Indentures 31
11.5 Execution of Supplemental Indentures 31
ARTICLE XII
SUCCESSOR CORPORATION 32
12.1 Company May Consolidate, Etc. 32
</TABLE>
4.1-ii
<PAGE> 4
<TABLE>
<S> <C>
12.2 Successor Substituted 32
12.3 Evidence of Consolidation, Etc., to Trustee 32
ARTICLE XIII
SATISFACTION AND DISCHARGE 32
13.1 Satisfaction and Discharge of Indenture 32
13.2 Discharge of Obligations 33
13.3 Deposited Moneys to Be Held in Trust 33
13.4 Payment of Monies Held by Paying Agents 33
13.5 Repayment to Company 33
ARTICLE XIV
IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND DIRECTORS 33
14.1 No Recourse 33
ARTICLE XV
MISCELLANEOUS PROVISIONS 34
15.1 Effect on Successors and Assigns 34
15.2 Actions by Successor 34
15.3 Surrender of Company Powers 34
15.4 Notices 34
15.5 Governing Law 34
15.6 Treatment of Junior Subordinated Debentures as Debt 34
15.7 Compliance Certificates and Opinions 34
15.8 Payments on Business Days 35
15.9 Conflict with Trust Indenture Act 35
15.10 Counterparts 35
15.11 Separability 35
15.12 Assignment 35
15.13 Acknowledgment of Rights 35
ARTICLE XVI
SUBORDINATION OF JUNIOR SUBORDINATED DEBENTURES 36
16.1 Agreement to Subordinate 36
16.2 Default on Senior and Subordinated Debt 36
16.3 Liquidation; Dissolution; Bankruptcy 36
16.4 Subrogation 37
16.5 Trustee to Effectuate Subordination 38
16.6 Notice by the Company 38
16.7 Rights of the Trustee; Holders of Senior and Subordinated Debt 39
16.8 Subordination May Not Be Impaired 39
</TABLE>
4.1-iii
<PAGE> 5
VECTRA BANKING CORPORATION
RECONCILIATION AND TIE BETWEEN TRUST INDENTURE ACT OF 1939, AS AMENDED,
AND SUBORDINATED INDENTURE, DATED AS OF __________, 1997
<TABLE>
<CAPTION>
Trust Indenture Act Section Subordinated Indenture Section
- --------------------------- ------------------------------
<S> <C> <C>
Section 310 15.9
Section 310 (b) 9.8
Section 311 15.9
Section 311 (a) 9.13
(b) 9.13
Section 312 15.9
Section 312 (b) 6.2
Section 313 15.9
Section 313 (a) 6.4
(b) 6.4
(c) 6.4
Section 314 15.9
Section 315 15.9
Section 316 15.9
Section 317 15.9
</TABLE>
- -------------
NOTE: This reconciliation and tie shall not, for any purpose, be deemed to
be a part of the Subordinated Indenture.
4.1-iv
<PAGE> 6
SUBORDINATED INDENTURE (the "Indenture"), dated as of ___________,
1997, between Vectra Banking Corporation, a Colorado corporation (the "Company")
and Wilmington Trust Company, a Delaware banking corporation, as trustee (the
"Trustee");
WHEREAS, for its lawful corporate purposes, the Company has duly
authorized the execution and delivery of this Indenture to provide for the
issuance of its securities to be known as its _____ % Junior Subordinated
Debentures due 2027 (hereinafter referred to as the "Junior Subordinated
Debentures"), the form and substance of such Junior Subordinated Debentures and
the terms, provisions and conditions thereof to be set forth as provided in
this Indenture; and
WHEREAS, VBC Capital I, a Delaware statutory business trust (the
"Trust"), has offered to the public $12,500.00 aggregate liquidation amount of
its ___% Cumulative Capital Securities (the "Capital Securities"), representing
undivided beneficial interests in the assets of the Trust and proposes to
invest the proceeds from such offering, together with the proceeds of the
issuance and sale by the Trust to the Company of $541,250 aggregate liquidation
amount of its ___% Common Securities, in $18,041,250 aggregate principal amount
of the Junior Subordinated Debentures; and
WHEREAS, the Company has requested that the Trustee execute and
deliver this Indenture and all requirements necessary to make this Indenture a
valid instrument in accordance with its terms, and to make the Junior
Subordinated Debentures, when executed by the Company and authenticated and
delivered by the Trustee, the valid obligations of the Company; and
WHEREAS, to provide the terms and conditions upon which the Junior
Subordinated Debentures are to be authenticated, issued and delivered, the
Company has duly authorized the execution and delivery of this Indenture; and
WHEREAS, all things necessary to make this Indenture a valid agreement
of the Company, in accordance with its terms, have been done.
NOW, THEREFORE, in consideration of the premises and the purchase of
the Junior Subordinated Debentures by the holders thereof, it is mutually
covenanted and agreed as follows for the equal and ratable benefit of the
holders of Junior Subordinated Debentures:
ARTICLE I
DEFINITIONS
The terms defined in this Section (except as in this Indenture
otherwise expressly provided or unless the context otherwise requires) for all
purposes of this Indenture and of any indenture supplemental hereto shall have
the respective meanings specified in this Section and shall include the plural
as well as the singular. All other terms used in this Indenture that are
defined in the Trust Indenture Act of 1939, as amended, or that are by
reference in said Trust Indenture Act defined in the Securities Act of 1933, as
amended (except as herein otherwise expressly provided or unless the context
otherwise requires), shall have the meanings assigned to such terms in said
Trust Indenture Act and in said Securities Act as in force at the date of the
execution of this Indenture.
"Accelerated Maturity Date" means, if the Company elects to accelerate
the Maturity Date in accordance with Section 2.2 the date selected by the
Company which is prior to the Scheduled Maturity Date, but is after
____________, 2002.
"Additional Sums" shall have the meaning set forth in Section 2.5(c).
"Administrative Trustees" has the meaning set forth in the Trust
Agreement.
4.1-1
<PAGE> 7
"Affiliate" means, with respect to a specified Person, (a) any Person
directly or indirectly owning, controlling or holding with power to vote 10% or
more of the outstanding voting securities or other ownership interests of the
specified Person, (b) any Person 10% or more of whose outstanding voting
securities or other ownership interests are directly or indirectly owned,
controlled or held with power to vote by the specified Person, (c) any Person
directly or indirectly controlling, controlled by, or under common control with
the specified Person, (d) a partnership in which the specified Person is a
general partner, (e) any officer or director of the specified Person, and (f)
if the specified Person is an individual, any entity of which the specified
Person is an officer, director or general partner.
"Authenticating Agent" means an authenticating agent with respect to
the Junior Subordinated Debentures appointed by the Trustee pursuant to Section
9.14.
"Bankruptcy Law" means Title 11, U.S. Code, or any similar federal or
state law for the relief of debtors.
"Board of Directors" means the Board of Directors of the Company or
any duly authorized committee of such Board.
"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 and to be in full force and effect on the date of such
certification.
"Business Day" means any day other than a day on which Federal or
State banking institutions in the State of Colorado are authorized or obligated
by law, executive order or regulation to close or a day on which the Trustee is
closed.
"Capital Securities" means undivided beneficial interests in the
assets of the Trust which rank pari passu with Common Securities issued by the
Trust; provided, however, that upon the occurrence of an Event of Default, the
rights of holders of Common Securities to payment in respect of Distributions
and payments upon liquidation, redemption and otherwise are subordinated to the
rights of holders of Capital Securities.
"Capital Securities Certificate" has the meaning set forth in the
Trust Agreement.
"Capital Securities Guarantee" means any guarantee that the Company
may enter into with the Property Trustee or other Persons that operates
directly or indirectly for the benefit of holders of Capital Securities of the
Trust.
"Capital Treatment Event" means the reasonable determination by the
Company that, as a result of any amendment to, or change (including any
proposed 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 proposed change, pronouncement or decision is announced on or
after the date of issuance of the Capital Securities under the Trust Agreement,
there is more than an insubstantial risk of impairment of the Company's ability
to treat the Capital 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.
"Certificate" means a certificate signed by the principal executive
officer, the principal financial officer or the principal accounting officer of
the Company. The Certificate need not comply with the provisions of Section
15.7.
"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 Indenture such Commission is not existing and
4.1-2
<PAGE> 8
performing the duties now assigned to it under the Trust Indenture Act, then
the body performing such duties at such time.
"Common Securities" means undivided beneficial interests in the assets
of the Trust which rank pari passu with Capital Securities issued by the Trust;
provided, however, that upon the occurrence of an Event of Default, the rights
of holders of Common Securities to payment in respect of Distributions and
payments upon liquidation, redemption and otherwise are subordinated to the
rights of holders of Capital Securities.
"Company" means Vectra Banking Corporation, a corporation duly
organized and existing under the laws of the State of Colorado, and, subject to
the provisions of Article Twelve, shall also include its successors and
assigns.
"Compounded Interest" shall have the meaning set forth in Section 4.1.
"Corporate Trust Office" means the office of the Trustee at which, at
any particular time, its corporate trust business shall be principally
administered, which office at the date hereof is located at Rodney Square
North, 1100 North Market Street, Wilmington, Delaware 19890-0001, Attention:
Corporate Trust Administration.
"Coupon Rate" shall have the meaning set forth in Section 2.5(a).
"Custodian" means any receiver, trustee, assignee, liquidator, or
similar official under any Bankruptcy Law.
"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; and (vi) every
obligation of the type referred to in clauses (i) through (v) of another Person
and all dividends of another Person the payment of which, in either case, such
Person has guaranteed or for which such Person is responsible or liable,
directly or indirectly, as obligor or otherwise.
"Default" means any event, act or condition that with notice or lapse
of time, or both, would constitute an Event of Default.
"Deferred Interest" shall have the meaning set forth in Section 4.1.
"Depositary" means, with respect to Junior Subordinated Debentures
issued as a Global Subordinated Debenture, The Depository Trust Company, New
York, New York, another clearing agency, or any successor registered as a
clearing agency under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), or other applicable statute or regulation, which, in each
case, shall be designated by the Company pursuant to either Section 2.1 or 2.4.
"Dissolution Event" means that as a result of the occurrence and
continuation of a Special Event, the Trust is to be dissolved in accordance
with the Trust Agreement and the Junior Subordinated Debentures held by the
Property Trustee are to be distributed to the holders of the Trust Securities
issued by the Trust pro rata in accordance with the Trust Agreement.
"Distributions" shall have the meaning set forth in the Trust
Agreement.
4.1-3
<PAGE> 9
"Event of Default" means any event specified in Section 7.1, continued
for the period of time, if any, therein designated.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Extended Interest Payment Period" shall have the meaning set forth in
Section 4.1.
"Federal Reserve" means the Board of Governors of the Federal Reserve
System.
"Global Subordinated Debenture" means a Junior Subordinated Debenture
executed by the Company and delivered by the Trustee to the Depositary or
pursuant to the Depositary's instruction, all in accordance with this
Indenture, which shall be registered in the name of the Depositary or its
nominee.
"Governmental Obligations" means securities that are (i) direct
obligations of the United States of America for the payment of which its full
faith and credit is pledged or (ii) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States
of America, the payment of which is unconditionally guaranteed as a full faith
and credit obligation by the United States of America that, in either case, are
not callable or redeemable at the option of the issuer thereof, and shall also
include a depositary receipt issued by a bank (as defined in Section 3(a)(2) of
the Securities Act of 1933, as amended) as custodian with respect to any such
Governmental Obligation or a specific payment of principal of or interest on
any such Governmental Obligation held by such custodian for the account of the
holder of such depositary receipt; provided, however, that (except as required
by law) such custodian is not authorized to make any deduction from the amount
payable to the holder of such depositary receipt from any amount received by
the custodian in respect of the Governmental Obligation or the specific payment
of principal of or interest on the Governmental Obligation evidenced by such
depositary receipt.
"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.
"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 in accordance with the terms hereof.
"Interest Payment Date," when used with respect to any installment of
interest on the Junior Subordinated Debentures, means the date specified in the
Junior Subordinated Debenture as the fixed date on which an installment of
interest with respect to the Junior Subordinated Debentures is due and payable.
"Investment Company Act" means the Investment Company Act of 1940, as
amended.
"Investment Company Event" means the receipt by the Company and the
Trust of an Opinion of Counsel experienced in such matters to the effect that,
as a result of the occurrence of a change in law or regulation or a change in
interpretation or application of law or regulation by any legislative body,
court, governmental agency or regulatory authority (a "Change in Investment
Company Act Law"), the Trust is or will be considered an "investment company"
that is required to be registered under the Investment Company Act, which
Change in Investment Company Act Law becomes effective on or after the date of
original issuance of the Capital Securities under the Trust Agreement.
"Junior Subordinated Debentures" means the ___% Junior Subordinated
Debentures due 2027 authenticated and delivered under this Indenture.
"Liquidation Amount" means the stated amount of $25 per Trust
Security.
"Maturity Date" shall have the meaning set forth in Section 2.2.
4.1-4
<PAGE> 10
"Non Book-Entry Capital Securities" shall have the meaning set forth
in Section 2.4(a).
"Officers' Certificate" means a certificate signed by the President or
a Vice President and by the Chief Financial Officer or the Controller or an
Assistant Controller or the Secretary or an Assistant Secretary of the Company
that is delivered to the Trustee in accordance with the terms hereof. Each
such certificate shall include the statements provided for in Section 15.7, if
and to the extent required by the provisions thereof.
"Opinion of Counsel" means an opinion in writing of legal counsel, who
may be an employee of or counsel for the Company, that is delivered to the
Trustee in accordance with the terms hereof. Each such opinion shall include
the statements provided for in Section 15.7, if and to the extent required by
the provisions thereof.
"Outstanding," when used with reference to Junior Subordinated
Debentures means, subject to the provisions of Section 10.4, as of any
particular time, all Junior Subordinated Debentures theretofore authenticated
and delivered by the Trustee under this Indenture, except (a) Junior
Subordinated Debentures theretofore canceled by the Trustee or any paying
agent, or delivered to the Trustee or any paying agent for cancellation or that
have previously been canceled; (b) Junior Subordinated Debentures or portions
thereof for the payment or redemption of which moneys or Governmental
Obligations in the necessary amount shall have been deposited in trust with the
Trustee or with any paying agent (other than the Company) or shall have been
set aside and segregated in trust by the Company (if the Company shall act as
its own paying agent); provided, however, that if such Junior Subordinated
Debentures or portions of such Junior Subordinated Debentures are to be
redeemed prior to the maturity thereof, notice of such redemption shall have
been given as provided in Article Three, or provision satisfactory to the
Trustee shall have been made for giving such notice; and (c) Junior
Subordinated Debentures in lieu of or in substitution for which other Junior
Subordinated Debentures shall have been authenticated and delivered pursuant to
the terms of Section 2.8.
"Person" means any individual, corporation, partnership, joint
venture, joint-stock company, unincorporated organization or government or any
agency or political subdivision thereof.
"Predecessor Junior Subordinated Debenture" means every previous
Junior Subordinated Debenture evidencing all or a portion of the same debt as
that evidenced by such particular Junior Subordinated Debenture; and, for the
purposes of this definition, any Junior Subordinated Debenture authenticated
and delivered under Section 2.8 in lieu of a lost, destroyed or stolen Junior
Subordinated Debenture shall be deemed to evidence the same debt as the lost,
destroyed or stolen Junior Subordinated Debenture.
"Property Trustee" has the meaning set forth in the Trust Agreement.
"Redemption Price" means the amount equal to 100% of the principal
amount of Junior Subordinated Debentures to be redeemed plus any accrued and
unpaid interest thereon to the date of the redemption of such Junior
Subordinated Debentures.
"Responsible Officer" when used with respect to the Trustee means the
Chairman of the Board of Directors, the President, any Vice President, the
Secretary, the Treasurer, any trust officer, any corporate trust officer or any
other officer or assistant officer of the Trustee customarily performing
functions similar to those performed by the Persons who at the time shall be
such officers, respectively, or to whom any corporate trust matter is referred
because of his or her knowledge of and familiarity with the particular subject.
"Scheduled Maturity Date" means __________, 2027.
"Securities Register" and "Securities Registrar" have the respective
meanings specified in Section 2.7.
4.1-5
<PAGE> 11
"Securityholder," "Holder," of Securities," "Registered
Holder," or other similar term, means the Person or Persons in whose name or
names a particular Junior Subordinated Debentures shall be registered in the
Securities Register.
"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
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 the
Company which when incurred and without respect to any election under section
1111(b) of the United States Bankruptcy Code of 1978, as amended, was without
recourse to the Company, (ii) any Debt of the Company to any of its
Subsidiaries, (iii) any Debt to any employee of the Company, (iv) any Debt
which, by its terms, is subordinated to any trade accounts payable or accrued
liabilities arising in the ordinary course of business to the extent that
payments made to the holders of such Debt by the holders of the Junior
Subordinated Debentures as a result of the subordination provisions, of this
Indenture would be greater than they otherwise would have been as a result of
any obligation of such holder to pay amounts over to the obligees on such trade
accounts payabale or accrued liabilities arising in the ordinary course of
business as a result of subordination provisions to which such Debt is subject,
(v) the Capital Securities Guarantee, and (vi) any other debt securities issued
pursuant to this Indenture.
"Special Event" means a Tax Event, an Investment Company Event or a
Capital Treatment Event.
"Subsidiary" means, with respect to any Person, (i) any corporation at
least a majority of whose outstanding Voting Stock shall at the time be owned,
directly or indirectly, by such Person, or by one or more of its Subsidiaries,
or by such Person and one or more of its Subsidiaries, (ii) any general
partnership, joint venture or similar entity, at least a majority of whose
outstanding partnership or similar interests shall at the time be owned by such
Person, or by one or more of its Subsidiaries, or by such Person and one or
more of its Subsidiaries and (iii) any limited partnership of which such Person
or any of its Subsidiaries is a general partner.
"Tax Event" means the receipt by the Company and the Trust of an
Opinion of Counsel experienced in such matters to the effect that, as a result
of any amendment to, or change (including any announced prospective change) in,
the laws (or any regulations thereunder) of the United States or any political
subdivision or taxing authority thereof or therein, or as a result of any
official administrative pronouncement or judicial decision interpreting or
applying such laws or regulations, which amendment or change is effective or
which pronouncement or decision is announced on or after the date of issuance
of the Junior Subordinated Debentures there is more than an insubstantial risk
that (i) interest payable by the Company on the Junior Subordinated Debentures
is not, or within 90 days after 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; (ii) the Trust is, or will be within 90 days after the
date of such Opinion of Counsel, subject to United States federal income tax
with respect to income received or accrued on the Junior Subordinated
Debentures, or (iii) the Trust is, or will be within 90 days after the date of
such Opinion of Counsel, subject to more than a de minimis amount of other
taxes, duties, assessments or other governmental charges.
"Trust" means VBC Capital I, a Delaware statutory business trust
created for the purpose of issuing Trust Securities in connection with the
issuance of Junior Subordinated Debentures under this Indenture.
"Trust Agreement" means the Amended and Restated Trust Agreement,
dated as of ____________, 1997, of the Trust.
4.1-6
<PAGE> 12
"Trustee" means Wilmington Trust Company and, subject to the
provisions of Article Nine, shall also include its successors and assigns, and,
if at any time there is more than one Person acting in such capacity hereunder,
"Trustee" shall mean each such Person.
"Trust Indenture Act," means the Trust Indenture Act of 1939 as in
force at the date of execution of this Indenture; 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 Securities" means Common Securities and Capital Securities of
the Trust.
"Voting Stock," as applied to stock of any Person, means shares,
interests, participations or other equivalents in the equity interest (however
designated) in such Person having ordinary voting power for the election of a
majority of the directors (or the equivalent) of such Person, other than
shares, interests, participations or other equivalents having such power only
by reason of the occurrence of a contingency.
ARTICLE II
DESCRIPTION, TERMS, CONDITIONS, REGISTRATION AND
EXCHANGE OF THE JUNIOR SUBORDINATED DEBENTURES
2.1 DESIGNATION AND PRINCIPAL AMOUNT. There is hereby authorized
a series of Securities designated the "___% Junior Subordinated Debentures due
2027," limited in aggregate principal amount to $18,041,250, which amount
shall be as set forth in any written order of the Company for the
authentication and delivery of Junior Subordinated Debentures pursuant to
Section 8.2 of this Indenture.
2.2 MATURITY.
(a) The Maturity Date will be either:
(i) the Scheduled Maturity Date; or
(ii) if the Company elects to accelerate the Maturity Date
to be a date prior to the Scheduled Maturity Date in accordance with
Section 2.2(b), the Accelerated Maturity Date.
(b) The Company may, at any time before the day which is 90 days
before the Scheduled Maturity Date, elect to shorten the Maturity Date only
once to the Accelerated Maturity Date, provided that the Company has received
the prior approval of the Federal Reserve if then required under applicable
capital guidelines or policies of the Federal Reserve.
(c) If the Company elects to accelerate the Maturity Date in
accordance with Section 2.2(b), the Company shall give notice to the Registered
Holders of the Junior Subordinated Debentures, the Property Trustee and the
Trustee of the acceleration of the Maturity Date and the Accelerated Maturity
Date at least 90 days before the Accelerated Maturity Date.
2.3 FORM AND PAYMENT. Except as provided in Section 2.4, the
Junior Subordinated Debentures shall be issued in fully registered certificated
form without interest coupons. Principal and interest on the Junior
Subordinated Debentures issued in certificated form will be payable, the
transfer of such Junior Subordinated Debentures will be registrable and such
Junior Subordinated Debentures will be exchangeable for Junior Subordinated
Debentures bearing identical terms and provisions at the office or agency of
the Trustee; provided, however, that payment of interest may be made at the
option of the Company by check mailed to the Holder at such address as shall
appear in the Securities Register. Notwithstanding the foregoing, so long as
the Holder of any Junior Subordinated Debentures is the Property Trustee, the
payment of the principal of and interest (including Compounded
4.1-7
<PAGE> 13
Interest and Additional Sums, if any) on such Junior Subordinated Debentures
held by the Property Trustee will be made at such place and to such account as
may be designated by the Property Trustee.
2.4 GLOBAL SUBORDINATED DEBENTURE.
(a) In connection with a Dissolution Event,
(i) the Junior Subordinated Debentures in certificated
form may be presented to the Trustee by the Property Trustee in
exchange for a Global Subordinated Debenture in an aggregate principal
amount equal to the aggregate principal amount of all outstanding
Junior Subordinated Debentures (a "Global Subordinated Debenture"), to
be registered in the name of the Depositary, or its nominee, and
delivered by the Trustee to the Depositary for crediting to the
accounts of its participants pursuant to the instructions of the
Administrative Trustees. The Company upon any such presentation shall
execute a Global Subordinated Debenture in such aggregate principal
amount and deliver the same to the Trustee for authentication and
delivery in accordance with this Indenture. Payments on the Junior
Subordinated Debentures issued as a Global Subordinated Debenture will
be made to the Depositary; and
(ii) if any Capital Securities are held in non book-entry
certificated form, the Junior Subordinated Debentures in certificated
form may be presented to the Trustee by the Property Trustee and any
Capital Securities Certificate which represents Capital Securities
other than Capital Securities held by the Depositary or its nominee
("Non Book-Entry Capital Securities") will be deemed to represent
beneficial interests in Junior Subordinated Debentures presented to
the Trustee by the Property Trustee having an aggregate principal
amount equal to the aggregate Liquidation Amount of the Non Book-Entry
Capital Securities until such Capital Securities Certificates are
presented to the Securities Registrar for transfer or reissuance at
which time such Capital Securities Certificates will be canceled and a
Junior Subordinated Debenture, registered in the name of the holder of
the Capital Securities Certificate or the transferee of the holder of
such Capital Securities Certificate, as the case may be, with an
aggregate principal amount equal to the aggregate Liquidation Amount
of the Capital Securities Certificate canceled, will be executed by
the Company and delivered to the Trustee for authentication and
delivery in accordance with this Indenture. On issue of such Junior
Subordinated Debentures, Junior Subordinated Debentures with an
equivalent aggregate principal amount that were presented by the
Property Trustee to the Trustee will be deemed to have been canceled.
(b) A Global Subordinated Debenture may be transferred, in whole
but not in part, only to another nominee of the Depositary, or to a successor
Depositary selected or approved by the Company or to a nominee of such
successor Depositary.
(c) If at any time the Depositary notifies the Company that it is
unwilling or unable to continue as Depositary or if at any time the Depositary
for such series shall no longer be registered or in good standing under the
Exchange Act or other applicable statute or regulation, and a successor
Depositary for such series is not appointed by the Company within 90 days after
the Company receives such notice or becomes aware of such condition, as the
case may be, the Company will execute, and the Trustee, upon written notice
from the Company, will authenticate and deliver the Junior Subordinated
Debentures in definitive registered form without coupons, in authorized
denominations, and in an aggregate principal amount equal to the principal
amount of the Global Subordinated Debenture in exchange for such Global
Subordinated Debenture. In addition, the Company may at any time determine
that the Junior Subordinated Debentures shall no longer be represented by a
Global Subordinated Debenture. In such event the Company will execute, and the
Trustee, upon receipt of an Officers' Certificate evidencing such determination
by the Company, will authenticate and deliver the Junior Subordinated
Debentures in definitive registered form without coupons, in authorized
denominations, and in an aggregate principal amount equal to the principal
amount of the Global Subordinated Debenture in exchange for such Global
Subordinated Debenture. Upon the exchange of the Global Subordinated Debenture
for such Junior Subordinated Debentures in
4.1-8
<PAGE> 14
definitive registered form without coupons, in authorized denominations, the
Global Subordinated Debenture shall be canceled by the Trustee. Such Junior
Subordinated Debentures in definitive registered form issued in exchange for
the Global Subordinated Debenture shall be registered in such names and in such
authorized denominations as the Depositary, pursuant to instructions from its
direct or indirect participants or otherwise, shall instruct the Trustee. The
Trustee shall deliver such Junior Subordinated Debentures to the Depositary for
delivery to the Persons in whose names such Junior Subordinated Debentures are
so registered.
2.5 INTEREST.
(a) Each Junior Subordinated Debenture will bear interest at the
rate of ___% per annum (the "Coupon Rate") from the original date of issuance
until the principal thereof becomes due and payable, and on any overdue
principal and (to the extent that payment of such interest is enforceable under
applicable law) on any overdue installment of interest at the Coupon Rate,
compounded quarterly, payable (subject to the provisions of Article Four)
quarterly in arrears on the 15th day of April, July, October, and January in
each year (each, an "Interest Payment Date"), commencing on July 15, 1997, to
the Person in whose name such Junior Subordinated Debenture or any Predecessor
Junior Subordinated Debenture is registered at the close of business on the
regular record date for such interest installment, which, in respect of (i)
Junior Subordinated Debentures of which the Property Trustee is the Holder and
the Capital Securities are in book-entry only form or (ii) a Global
Subordinated Debenture, shall be the close of business on the Business Day next
preceding that Interest Payment Date. Notwithstanding the foregoing sentence,
if (i) the Junior Subordinated Debentures are held by the Property Trustee and
the Capital Securities are no longer in book-entry only form or (ii) the Junior
Subordinated Debentures are not represented by a Global Subordinated Debenture,
the record date for such interest installment shall be the 1st day of the month
in which such payment is to be made. The amount of each interest payment due
with respect to the Junior Subordinated Debentures will include amounts accrued
through the date the interest payment is due.
(b) The amount of interest payable for any period will be computed
on the basis of a 360-day year of twelve 30-day months. Except as provided in
the following sentence, the amount of interest payable for any period shorter
than a full quarterly period for which interest is computed will be computed on
the basis of the actual number of days elapsed in such a quarterly period. In
the event that any date on which interest is payable on the Junior Subordinated
Debentures is not a Business Day, then payment of 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 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 such date.
(c) If, at any time while the Property Trustee is the Holder of
any Junior Subordinated Debentures, the Trust or the Property Trustee is
required to pay any taxes, duties, assessments or governmental charges of
whatever nature (other than withholding taxes) imposed by the United States, or
any other taxing authority, then, in any case, the Company will pay as
additional interest ("Additional Sums") on the Junior Subordinated Debentures
held by the Property Trustee such additional amounts as shall be required so
that the net amounts received and retained by the Trust and the Property
Trustee after paying such taxes, duties, assessments or other governmental
charges will be equal to the amounts the Trust and the Property Trustee would
have received had no such taxes, duties, assessments or other government
charges been imposed.
2.6 EXECUTION, AUTHENTICATION, DELIVERY AND DATING. The Junior
Subordinated Debentures shall be executed on behalf of the Company by its
President or any Vice President and attested by its Secretary or Assistant
Secretary. The signature of any of these officers on the Junior Subordinated
Debentures may be manual or facsimile.
Junior Subordinated Debentures 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
4.1-9
<PAGE> 15
them have ceased to hold such offices prior to the authentication and delivery
of such Junior Subordinated Debentures or did not hold such offices at the date
of such Junior Subordinated Debentures.
At any time and from time to time after the execution and delivery of
this Indenture, the Company may deliver Junior Subordinated Debentures executed
by the Company to the Trustee for authentication, together with a Company order
for the authentication and delivery of such Junior Subordinated Debentures.
The Trustee in accordance with such Company order shall authenticate and
deliver such Junior Subordinated Debentures as in this Indenture provided and
not otherwise.
Upon the initial issuance, each Junior Subordinated Debenture shall be
dated ___________, 1997, and thereafter Junior Subordinated Debentures issued
hereunder shall be dated the date of their authentication.
No Junior Subordinated Debenture shall be entitled to any benefit
under this Indenture or be valid or obligatory for any purpose unless there
appears on such Junior Subordinated Debenture a certificate of authentication
substantially in the form provided for herein executed by the Trustee by manual
signature, and such certificate upon any Junior Subordinated Debenture shall be
conclusive evidence, and the only evidence, that such Junior Subordinated
Debenture has been duly authenticated and delivered hereunder and is entitled
to the benefits of this Indenture.
2.7 REGISTRATION AND TRANSFER. The Company shall cause to be kept
at the Corporate Trust Office of the Trustee a register (the register
maintained in such office or any other office or agency pursuant to Section 5.2
being herein sometimes referred to as the "Securities Register") in which,
subject to such reasonable regulations as it may prescribe, the Company shall
provide for the registration of the Junior Subordinated Debentures and
transfers of the Junior Subordinated Debentures. The Trustee is hereby
appointed "Securities Registrar" for the purpose of registering the Junior
Subordinated Debentures and transfers of the Junior Subordinated Debentures as
herein provided.
Upon surrender for registration of transfer of any Junior Subordinated
Debenture at an office or agency of the Company designated pursuant to Section
5.2 for such purpose, the Company shall execute, and the Trustee shall
authenticate and deliver, in the name of the designated transferee or
transferees, a new Junior Subordinated Debenture of the authorized
denomination.
All Junior Subordinated Debentures issued upon any registration of
transfer of Junior Subordinated Debentures shall be valid obligations of the
Company, evidencing the same debt and entitled to the same benefits under this
Indenture as the Junior Subordinated Debentures surrendered upon such
registration of transfer.
Every Junior Subordinated Debenture presented or surrendered for
registration of transfer shall be duly endorsed for transfer (if so required by
the Company or the Trustee), or shall 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 such Holder's attorney duly authorized in
writing.
No service charge shall be made for any registration of transfer of
Junior Subordinated Debentures, 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 registration of transfer of Junior Subordinated Debentures.
The Company shall not be required to issue or register the transfer of
any Junior Subordinated Debenture during a period beginning at the opening of
business 15 days before the day of the mailing of a notice of redemption of
Junior Subordinated Debentures selected for redemption pursuant to Article
Three and ending at the close of business on the day of such mailing.
4.1-10
<PAGE> 16
2.8 MUTILATED, DESTROYED, LOST AND STOLEN JUNIOR SUBORDINATED
DEBENTURES. If any mutilated Junior Subordinated Debenture is surrendered to
the Trustee, the Company shall execute and the Trustee shall authenticate and
deliver in exchange therefor a new Junior Subordinated Debenture of like tenor
and principal amount and bearing a number not contemporaneously outstanding.
If there shall be delivered to the Company and the Trustee (i)
evidence to their satisfaction of the destruction, loss or theft of any Junior
Subordinated Debenture 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 Junior Subordinated Debenture 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 Junior Subordinated Debenture, a new Junior
Subordinated Debenture of like tenor and principal amount and bearing a number
not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Junior
Subordinated Debenture has become or is about to become due and payable, the
Company in its discretion may, instead of issuing a new Junior Subordinated
Debenture, pay such Junior Subordinated Debenture.
Upon the issuance of any new Junior Subordinated Debenture 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 Junior Subordinated Debenture issued pursuant to this
Section in lieu of any destroyed, lost or stolen Junior Subordinated Debenture
shall constitute an original additional contractual obligation of the Company,
whether or not the destroyed, lost or stolen Junior Subordinated Debenture
shall be at any time enforceable by anyone, and shall be entitled to all of the
benefits of this Indenture.
The provisions of this Section 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 Junior
Subordinated Debentures.
ARTICLE III
REDEMPTION OF JUNIOR SUBORDINATED DEBENTURES
3.1 REDEMPTION. Subject to the Company having received prior
approval of the Federal Reserve, if then required under the applicable capital
guidelines or policies of the Federal Reserve, the Company may redeem the
Junior Subordinated Debentures in accordance with this Article Three.
3.2 SPECIAL EVENT REDEMPTION. Subject to the Company having
received the prior approval of the Federal Reserve, if then required under the
applicable capital guidelines or policies of the Federal Reserve, if a Special
Event has occurred and is continuing, then, notwithstanding Section 3.3, the
Company shall have the right upon not less than 30 days nor more than 60 days
notice to the Holders of the Junior Subordinated Debentures to redeem the
Junior Subordinated Debentures, in whole but not in part, for cash within 90
days following the occurrence of such Special Event (the "90-Day Period") at
the Redemption Price, provided that if at the time there is available to the
Company the opportunity to eliminate, within the 90-Day Period, the Tax Event
by taking some ministerial action ("Ministerial Action"), such as filing a form
or making an election, or pursuing some other similar reasonable measure which
has no adverse effect on the Company, the Trust or the Holders of the Trust
Securities issued by the Trust, the Company shall pursue such Ministerial
Action in lieu of redemption, and, provided, further, that the Company shall
have no right to redeem the Junior Subordinated Debentures while the Trust is
pursuing any Ministerial Action to eliminate the Tax Event. The Redemption
Price shall be paid prior to 2:00 p.m., Denver time, on the date of such
redemption or such earlier time as the Company determines, provided
4.1-11
<PAGE> 17
that the Company shall deposit with the Trustee an amount sufficient to pay the
Redemption Price by 12:00 noon, Denver time, on the date such Redemption Price
is to be paid.
3.3 OPTIONAL REDEMPTION BY COMPANY.
(a) Except as otherwise may be specified in this Indenture, the
Company shall have the right to redeem the Junior Subordinated Debentures, in
whole or in part, from time to time, on or after ____________, 2002, at the
Redemption Price. Any redemption pursuant to this Section 3.3 will be made
upon not less than 30 days nor more than 60 days notice to the Holders of the
Junior Subordinated Debentures, at the Redemption Price. If the Junior
Subordinated Debentures are only partially redeemed pursuant to this Section
3.3, the Junior Subordinated Debentures will be redeemed pro rata or by lot or
by any other method utilized by the Trustee; provided, that if at the time of
redemption the Junior Subordinated Debentures are registered as a Global
Subordinated Debenture, the Depositary shall determine, in accordance with its
procedures, the principal amount of such Junior Subordinated Debentures held by
each Holder of Junior Subordinated Debentures to be redeemed. The Redemption
Price shall be paid prior to 2:00 p.m., Denver time, on the date of such
redemption or at such earlier time as the Company determines provided that the
Company shall deposit with the Trustee an amount sufficient to pay the
Redemption Price by 12:00 noon, Denver time, on the date such Redemption Price
is to be paid.
(b) If a partial redemption of the Junior Subordinated Debentures
would result in the delisting of the Capital Securities issued by the Trust
from the Nasdaq National Market or any national securities exchange or other
organization on which the Capital Securities may then be listed, if any, the
Company shall not be permitted to effect such partial redemption and may only
redeem the Junior Subordinated Debentures in whole.
3.4 NOTICE OF REDEMPTION.
(a) In case the Company shall desire to exercise such right to
redeem all or, as the case may be, a portion of the Junior Subordinated
Debentures in accordance with the right reserved so to do, the Company shall,
or shall cause the Trustee to, give notice of such redemption to Holders of the
Junior Subordinated Debentures to be redeemed by mailing, first class postage
prepaid, a notice of such redemption not less than 30 days and not more than 60
days before the date fixed for redemption to such Holders at their last
addresses as they shall appear upon the Securities Register. Any notice that
is mailed in the manner herein provided shall be conclusively presumed to have
been duly given, whether or not the Registered Holder receives the notice. In
any case, failure duly to give such notice to the Holder of any Junior
Subordinated Debenture designated for redemption in whole or in part, or any
defect in the notice, shall not affect the validity of the proceedings for the
redemption of any other Junior Subordinated Debentures. In the case of any
redemption of Junior Subordinated Debentures prior to the expiration of any
restriction on such redemption provided elsewhere in this Indenture, the
Company shall furnish the Trustee with an Officers' Certificate evidencing
compliance with any such restriction.
Each such notice of redemption shall specify the date fixed for
redemption and the Redemption Price, and shall state that payment of the
Redemption Price of such Junior Subordinated Debentures to be redeemed will be
made at the office or agency of the Company in Denver, Colorado, upon
presentation and surrender of such Junior Subordinated Debentures, that
interest accrued to the date fixed for redemption will be paid as specified in
said notice, that from and after said date interest will cease to accrue. If
less than all the Junior Subordinated Debentures are to be redeemed, the notice
to the Holders of Junior Subordinated Debentures to be redeemed in whole or in
part shall specify the particular Junior Subordinated Debentures to be so
redeemed. In case any Junior Subordinated Debenture is to be redeemed in part
only, the notice that relates to such Junior Subordinated Debenture shall state
the portion of the principal amount thereof to be redeemed, and shall state
that on and after the redemption date, upon surrender of such Junior
Subordinated Debenture, a new Junior Subordinated Debenture or Junior
Subordinated Debentures in principal amount equal to the unredeemed portion
thereof shall be issued to the Holder.
4.1-12
<PAGE> 18
(b) If less than all the Junior Subordinated Debentures are to be
redeemed, the Company shall give the Trustee at least 45 days' notice in
advance of the date fixed for redemption as to the aggregate principal amount
of Junior Subordinated Debentures to be redeemed, and thereupon the Trustee
shall select, by lot or in such other manner as it shall deem appropriate and
fair in its discretion and that may provide for the selection of a portion or
portions (equal to twenty-five U.S. dollars ($25) or any integral multiple
thereof), the Junior Subordinated Debentures to be redeemed and shall
thereafter promptly notify the Company in writing of the numbers of the Junior
Subordinated Debentures to be redeemed, in whole or in part.
The Company may, if and whenever it shall so elect, by delivery of
instructions signed on its behalf by its President or any Vice President,
instruct the Trustee or any paying agent to call all or any part of the Junior
Subordinated Debentures for redemption and to give notice of redemption in the
manner set forth in this Section, such notice to be in the name of the Company
or in the name of the Trustee or the paying agent, as the Trustee or such
paying agent may deem advisable. In any case in which notice of redemption is
to be given by the Trustee or any such paying agent, the Company shall deliver
or cause to be delivered to, or permit to remain with, the Trustee or such
paying agent, as the case may be, such Securities Register, transfer books or
other records, or suitable copies or extracts therefrom, sufficient to enable
the Trustee or such paying agent to give any notice by mail that may be
required under the provisions of this Section.
3.5 PAYMENT UPON REDEMPTION.
(a) If the giving of notice of redemption shall have been
completed as above provided, the Junior Subordinated Debentures or portions of
Junior Subordinated Debentures to be redeemed specified in such notice shall
become due and payable on the date and at the place stated in such notice at
the Redemption Price (which includes interest accrued to the date fixed for
redemption) and interest on such Junior Subordinated Debentures or portions of
Junior Subordinated Debentures shall cease to accrue on and after the date
fixed for redemption, unless the Company shall default in the payment of such
Redemption Price with respect to any such Junior Subordinated Debentures or
portions thereof. On presentation and surrender of such Junior Subordinated
Debentures on or after the date fixed for redemption at the place of payment
specified in the notice, such Junior Subordinated Debentures shall be paid and
redeemed at the Redemption Price (which includes the interest accrued thereon
to the date fixed for redemption) (but if the date fixed for redemption is an
Interest Payment Date, the interest installment payable on such date shall be
payable to the Registered Holder at the close of business on the applicable
record date pursuant to Section 2.5(a)).
(b) Upon presentation of any Junior Subordinated Debenture that is
to be redeemed in part only, the Company shall execute and the Trustee shall
authenticate and the office or agency where the Junior Subordinated Debenture
is presented shall deliver to the Holder thereof, at the expense of the
Company, a new Junior Subordinated Debenture or Junior Subordinated Debentures
of authorized denominations in principal amount equal to the unredeemed portion
of the Junior Subordinated Debenture so presented.
3.6 NO SINKING FUND. The Junior Subordinated Debentures are not
entitled to the benefit of any sinking fund.
ARTICLE IV
EXTENSION OF INTEREST PAYMENT PERIOD
4.1 EXTENSION OF INTEREST PAYMENT PERIOD. So long as no Event of
Default has occurred and is continuing, the Company shall have the right, at
any time and from time to time during the term of the Junior Subordinated
Debentures, to defer payments of interest by extending the interest payment
period of such Junior Subordinated Debentures for a period not exceeding 20
consecutive quarters (the "Extended Interest Payment Period"), during which
Extended Interest Payment Period no interest shall be due and payable; provided
that no Extended Interest Payment Period may extend beyond the Maturity Date.
To the extent permitted by applicable law,
4.1-13
<PAGE> 19
interest, the payment of which has been deferred because of the extension of
the interest payment period pursuant to this Section 4.1, will bear interest
thereon at the Coupon Rate compounded quarterly for each quarter of the
Extended Interest Payment Period ("Compounded Interest"). At the end of the
Extended Interest Payment Period, the Company shall pay all interest accrued
and unpaid on the Junior Subordinated Debentures, including any Additional Sums
and Compounded Interest (together, "Deferred Interest") that shall be payable
to the Holders of the Junior Subordinated Debentures in whose names the Junior
Subordinated Debentures are registered in the Securities Register on the first
record date for the Interest Payment Date coinciding with the end of the
Extended Interest Payment Period. Before the termination of any Extended
Interest Payment Period, the Company may further extend such period, provided
that such period together with all such further extensions thereof shall not
exceed 20 consecutive quarters, or extend beyond the Maturity Date. Upon the
termination of any Extended Interest Payment Period and upon the payment of all
Deferred Interest then due, the Company may commence a new Extended Interest
Payment Period, subject to the foregoing requirements. No interest shall be
due and payable during an Extended Interest Payment Period, except at the end
thereof, but the Company may prepay at any time all or any portion of the
interest accrued during an Extended Interest Payment Period.
4.2 NOTICE OF EXTENSION.
(a) If the Property Trustee is the only Registered Holder of the
Junior Subordinated Debentures at the time the Company selects an Extended
Interest Payment Period, the Company shall give written notice to the
Administrative Trustees, the Property Trustee and the Trustee of its selection
of such Extended Interest Payment Period one Business Day before the earlier of
(i) the next succeeding date on which Distributions are payable, or (ii) the
date the Trust is required to give notice of the record date, or the date such
Distributions are payable, to the Capital Securities holders or to the Nasdaq
National Market or other applicable self regulatory organization, if any, but
in any event at least one Business Day before such record date.
(b) If the Property Trustee is not the only Holder of the Junior
Subordinated Debentures at the time the Company selects an Extended Interest
Payment Period, the Company shall give the Holders of the Junior Subordinated
Debentures and the Trustee written notice of its selection of such Extended
Interest Payment Period at least one Business Day before the earlier of (i) the
next succeeding Interest Payment Date, or (ii) the date the Company is required
to give notice of the record or payment date of such interest payment to the
Holders of the Junior Subordinated Debentures or to the Nasdaq National Market
or other applicable self regulatory organization, if any.
(c) The quarter in which any notice is given pursuant to paragraph
(a) or paragraph (b) of this Section 4.2 shall be counted as one of the 20
quarters permitted in the maximum Extended Interest Payment Period permitted
under Section 4.1.
4.3 LIMITATION OF TRANSACTIONS DURING EXTENSION. If: (i) the
Company shall exercise its right to defer payment of interest as provided in
Section 4.1; or (ii) there shall have occurred any Event of Default, then the
Company shall be subject to the restrictions on payments set forth under
Section 5.6.
ARTICLE V
PARTICULAR COVENANTS OF THE COMPANY
5.1 PAYMENT OF PRINCIPAL AND INTEREST. The Company will duly and
punctually pay or cause to be paid the principal of and interest on the Junior
Subordinated Debentures at the time and place and in the manner provided herein
and established with respect to such Junior Subordinated Debentures.
5.2 MAINTENANCE OF AGENCY. So long as any Junior Subordinated
Debentures remain Outstanding, the Company agrees to maintain an office or
agency in Denver, Colorado, or at such other location or locations as may be
designated as provided in this Section 5.2, where (i) Junior Subordinated
Debentures may be
4.1-14
<PAGE> 20
presented for payment, (ii) Junior Subordinated Debentures may be presented as
hereinabove authorized for registration of transfer and exchange, and (iii)
notices and demands to or upon the Company in respect of the Junior
Subordinated Debentures and this Indenture may be given or served, such
designation to continue with respect to such office or agency until the Company
shall, by written notice signed by its President or a Vice President and
delivered to the Trustee, designate some other office or agency for such
purposes or any of them. If at any time the Company shall fail to maintain any
such required office or agency or shall fail to furnish the Trustee with the
address thereof, such presentations, 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, notices and
demands.
5.3 PAYING AGENTS.
(a) If the Company shall appoint one or more paying agents for the
Junior Subordinated Debentures, other than the Trustee, the Company will cause
each such paying agent to execute and deliver to the Trustee an instrument in
which such agent shall agree with the Trustee, subject to the provisions of
this Section:
(i) that it will hold all sums held by it as such agent
for the payment of the principal of or interest on the Junior
Subordinated Debentures (whether such sums have been paid to it by
the Company or by any other obligor) in trust for the benefit of the
Persons entitled thereto;
(ii) that it will give the Trustee notice of any failure
by the Company (or by any other obligor) to make any payment of the
principal of or interest on the Junior Subordinated Debentures when
the same shall be due and payable;
(iii) that it will, at any time during the continuance of
any failure referred to in the preceding paragraph (a)(ii) above, upon
the written request of the Trustee, forthwith pay to the Trustee all
sums so held in trust by such paying agent; and
(iv) that it will perform all other duties of paying agent
as set forth in this Indenture.
(b) If the Company shall act as its own paying agent with respect
to the Junior Subordinated Debentures, it will on or before each due date of
the principal of or interest on Junior Subordinated Debentures, set aside,
segregate and hold in trust for the benefit of the Persons entitled thereto a
sum sufficient to pay such principal 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 such action, or any failure (by it or
any other obligor) to take such action. Whenever the Company shall have one or
more paying agents for the Junior Subordinated Debentures, it will, prior to
each due date of the principal of or interest on the Junior Subordinated
Debentures, deposit with the paying agent a sum sufficient to pay the principal
or interest so becoming due, such sum to be held in trust for the benefit of
the Persons entitled to such principal or interest, and (unless such paying
agent is the Trustee) the Company will promptly notify the Trustee of this
action or failure so to act.
(c) Notwithstanding anything in this Section to the contrary, (i)
the agreement to hold sums in trust as provided in this Section is subject to
the provisions of Section 13.5, and (ii) 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 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 terms and conditions 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.
5.4 APPOINTMENT TO FILL VACANCY IN OFFICE OF TRUSTEE. The
Company, whenever necessary to avoid or fill a vacancy in the office of
Trustee, will appoint, in the manner provided in Section 9.10, a Trustee, so
that there shall at all times be a Trustee hereunder.
4.1-15
<PAGE> 21
5.5 COMPLIANCE WITH CONSOLIDATION PROVISIONS. The Company will
not, while any of the Junior Subordinated Debentures remain Outstanding,
consolidate with, or merge into, or merge into itself, or sell or convey all or
substantially all of its property to any other company unless the provisions of
Article Twelve hereof are complied with.
5.6 RESTRICTIONS ON CERTAIN PAYMENTS. If at any 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 to which the Company shall not have
taken reasonable steps to cure, or (ii) the Company shall have given notice of
its election of an Extended Interest Payment Period as provided herein with
respect to the Junior Subordinated Debentures and shall not have rescinded such
notice, or such Extended Interest Payment Period, or any extension thereof,
shall be continuing; or (iii) while the Junior Subordinated Debentures are held
by the Trust, the Company shall be in default with respect to its payment of
any obligation under the Capital Securities Guarantee, then the Company 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 the Company'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 the Company
(including 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 the Company of the debt securities of
any Subsidiary of the Company if such guarantee ranks pari passu 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 shareholders' rights plan, or the issuance of
stock under any such plan in the future or the redemption or repurchase of any
such rights pursuant thereto, (c) payments under the Capital Securities
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).
5.7 COVENANTS AS TO THE TRUST. For so long as the Trust
Securities of the Trust remain outstanding, the Company will (i) maintain 100%
direct or indirect ownership of the Common Securities of the Trust; provided,
however, that any permitted successor of the Company under this Indenture may
succeed to the Company's ownership of the Common Securities, (ii) use its
reasonable efforts to cause the Trust (a) to remain a business trust, except
in connection with a distribution of Junior Subordinated Debentures, the
redemption of all of the Trust Securities of the Trust or certain mergers,
consolidations or amalgamations, each as permitted by the Trust Agreement, and
(b) to otherwise continue not to be treated as an association taxable as a
corporation or partnership for United States federal income tax purposes and
(iii) to use its reasonable efforts to cause each Holder of Trust Securities
to be treated as owning an individual beneficial interest in the Junior
Subordinated Debentures.
If the Junior Subordinated Debentures are to be issued as a Global
Subordinated Debenture in connection with the distribution of the Junior
Subordinated Debentures to the holders of the Capital Securities issued by the
Trust upon a Dissolution Event, the Company will use its best efforts to list
such Junior Subordinated Debentures on the Nasdaq National Market or on such
other exchange as the Capital Securities may then be listed.
ARTICLE VI
SECURITYHOLDERS' LISTS AND REPORTS
BY THE COMPANY AND THE TRUSTEE
6.1 COMPANY TO FURNISH TRUSTEE NAMES AND ADDRESSES OF
SECURITYHOLDERS. The Company will furnish or cause to be furnished to the
Trustee (a) on each regular record date (as defined in Section 2.5(a)) a list,
in such form as the Trustee may reasonably require, of the names and addresses
of the Holders as of such regular record date, provided that the Company shall
not be obligated to furnish or cause to furnish such list at any time that the
list shall not differ in any respect from the most recent list furnished to the
Trustee by the Company 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
4.1-16
<PAGE> 22
such list is furnished; provided, however, that, in either case, no such list
need be furnished if the Trustee shall be the Securities Registrar.
6.2 PRESERVATION OF INFORMATION; COMMUNICATIONS WITH
SECURITYHOLDERS.
(a) The Trustee shall preserve, in as current a form as is
reasonably practicable, all information as to the names and addresses of the
Holders contained in the most recent list furnished to it as provided in
Section 6.1 and as to the names and addresses of Holders received by the
Trustee in its capacity as Securities Registrar (if acting in such capacity).
(b) The Trustee may destroy any list furnished to it as provided
in Section 6.1 upon receipt of a new list so furnished.
(c) Securityholders may communicate as provided in Section 312(b)
of the Trust Indenture Act with other Securityholders with respect to their
rights under this Indenture or under the Junior Subordinated Debentures.
6.3 REPORTS BY THE COMPANY.
(a) The Company covenants and agrees to file with the Trustee,
within 15 days after the Company is required to file the same with the
Commission, copies of the annual reports and of the information, documents and
other reports (or copies of such portions of any of the foregoing as the
Commission may from time to time by rules and regulations prescribe) that the
Company may be required to file with the Commission pursuant to Section 13 or
Section 15(d) of the Exchange Act; or, if the Company is not required to file
information, documents or reports pursuant to either of such sections, then to
file with the Trustee and the Commission, in accordance with the rules and
regulations prescribed from time to time by the Commission, such of the
supplementary and periodic information, documents and reports that may be
required pursuant to any applicable rules and regulations of the Commission.
(b) The Company covenants and agrees to file with the Trustee and
the Commission, in accordance with the rules and regulations prescribed from to
time by the Commission, such additional information, documents and reports with
respect to compliance by the Company with the conditions and covenants provided
for in this Indenture as may be required from time to time by such rules and
regulations.
(c) The Company covenants and agrees to transmit by mail,
first-class postage prepaid, or reputable over-night delivery service that
provides for evidence of receipt, to the Securityholders, as their names and
addresses appear upon the Securities Register, within 30 days after the filing
thereof with the Trustee, such summaries of any information, documents and
reports required to be filed by the Company pursuant to subsections (a) and (b)
of this Section as may be required by rules and regulations prescribed from
time to time by the Commission.
6.4 REPORTS BY THE TRUSTEE.
(a) On or before __________ in each year in which any of the
Junior Subordinated Debentures are Outstanding, the Trustee shall transmit by
mail, first class postage prepaid, to the Securityholders, as their names and
addresses appear upon the Securities Register, a brief report dated as of the
preceding __________, if and to the extent required under Section 313(a) of the
Trust Indenture Act.
(b) The Trustee shall comply with Section 313(b) and 313(c) of the
Trust Indenture Act.
(c) A copy of each such report shall, at the time of such
transmission to Securityholders, be filed by the Trustee with the Company, and
also with the Commission.
4.1-17
<PAGE> 23
ARTICLE VII
REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS ON EVENT OF DEFAULT
7.1 EVENTS OF DEFAULT.
(a) Whenever used herein, "Event of Default" means any one or more
of the following events that has occurred and is continuing:
(i) the Company defaults in the payment of any
installment of interest upon any of the Junior Subordinated
Debentures, as and when the same shall become due and payable, and
continuance of such default for a period of 30 days; provided,
however, that a valid extension of an interest payment period by the
Company in accordance with the terms of this Indenture shall not
constitute a default in the payment of interest for this purpose;
(ii) the Company defaults in the payment of the principal
of any of the Junior Subordinated Debentures as and when the same
shall become due and payable whether at maturity, upon redemption, by
declaration or otherwise;
(iii) the Company fails to observe or perform any other of
its covenants or agreements hereunder with respect to the Junior
Subordinated Debentures for a period of 90 days after the date on
which written notice of such failure, requiring the same to be
remedied and stating that such notice is a "Notice of Default"
hereunder, shall have been given to the Company by the Trustee, by
registered or certified mail, or to the Company and the Trustee by the
Holders of at least 25% in principal amount of the Junior Subordinated
Debentures at the time Outstanding;
(iv) the Company pursuant to or within the meaning of any
Bankruptcy Law (1) commences a voluntary case, (2) consents to the
entry of an order for relief against it in an involuntary case, (3)
consents to the appointment of a custodian of it or for all or
substantially all of its property or (4) makes a general assignment
for the benefit of its creditors;
(v) a court of competent jurisdiction enters an order
under any Bankruptcy Law that (1) is for relief against the Company in
an involuntary case, (2) appoints a custodian of the Company for all
or substantially all of its property, or (3) orders the liquidation of
the Company, and the order or decree remains unstayed and in effect
for 90 days; or
(vi) in the event Junior Subordinated Debentures are
issued to the Trust or a trustee of the Trust in connection with the
issuance of Trust Securities by the Trust, the Trust shall have
voluntarily or involuntarily dissolved, wound-up its business or
otherwise terminated its existence, except in connection with (1) the
distribution of Junior Subordinated Debentures to holders of Trust
Securities in liquidation of their interests in the Trust, (2) the
redemption of all of the outstanding Trust Securities of the Trust or
(3) certain mergers, consolidations or amalgamations, each as
permitted by the Trust Agreement.
(b) In each and every such case, unless the principal of all the
Junior Subordinated Debentures shall have already become due and payable,
either the Trustee or the Holders of not less than 25% in aggregate principal
amount of the Junior Subordinated Debentures then Outstanding hereunder, by
notice in writing to the Company (and to the Trustee if given by such
Securityholders) may declare the principal of all the Junior Subordinated
Debentures to be due and payable immediately, and upon any such declaration the
same shall become and shall be immediately due and payable, notwithstanding
anything contained in this Indenture or in the Junior Subordinated Debentures
to the contrary.
4.1-18
<PAGE> 24
(c) At any time after the principal of the Junior Subordinated
Debentures shall have been so declared due and payable, and before any judgment
or decree for the payment of the moneys due shall have been obtained or entered
as hereinafter provided, the Holders of a majority in aggregate principal
amount of the Junior Subordinated Debentures then Outstanding, by written
notice to the Company and the Trustee, may rescind and annul such declaration
and its consequences if: (i) the Company has paid or deposited with the Trustee
a sum sufficient to pay all matured installments of interest upon all the
Junior Subordinated Debentures and the principal of any and all Junior
Subordinated Debentures that shall have become due otherwise than by
acceleration (with interest upon such principal and, to the extent that such
payment is enforceable under applicable law, upon overdue installments of
interest, at the rate per annum expressed in the Junior Subordinated Debentures
to the date of such payment or deposit) and the amount payable to the Trustee
under Section 9.6, and (ii) any and all Events of Default under this Indenture,
other than the nonpayment of principal on Junior Subordinated Debentures that
shall not have become due by their terms shall have been remedied or waived as
provided in Section 7.6. Should the Holders fail to annul such declaration and
waive such default, then the holders of a majority in aggregate Liquidation
Amount of the Capital Securities shall have such right.
No such rescission and annulment shall extend to or shall affect any
subsequent default or impair any right consequent thereon.
(d) In case the Trustee shall have proceeded to enforce any right
with respect to Junior Subordinated Debentures under this Indenture and such
proceedings shall have been discontinued or abandoned because of such
rescission or annulment or for any other reason or shall have been determined
adversely to the Trustee, then and in every such case the Company and the
Trustee shall be restored respectively to their former positions and rights
hereunder, and all rights, remedies and powers of the Company and the Trustee
shall continue as though no such proceedings had been taken.
7.2 COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY
TRUSTEE.
(a) The Company covenants that (i) in case it shall default in the
payment of any installment of interest on any of the Junior Subordinated
Debentures as and when the same shall have become due and payable, and such
default shall have continued for a period of 90 Business Days, or (ii) in case
it shall default in the payment of the principal of any of the Junior
Subordinated Debentures when the same shall have become due and payable,
whether upon maturity of the Junior Subordinated Debentures or upon redemption
or upon declaration or otherwise, then, upon demand of the Trustee, the Company
will pay to the Trustee, for the benefit of the Holders of the Junior
Subordinated Debentures, the whole amount that then shall have become due and
payable on all such Junior Subordinated Debentures for principal or interest,
or both, as the case may be, with interest upon the overdue principal and (to
the extent that payment of such interest is enforceable under applicable law
and, if the Junior Subordinated Debentures are held by the Trust or a trustee
of the Trust, without duplication of any other amounts paid by the Trust or
trustee in respect thereof) upon overdue installments of interest at the rate
per annum expressed in the Junior Subordinated Debentures; and, in addition
thereto, such further amount as shall be sufficient to cover the costs and
expenses of collection, and the amount payable to the Trustee under Section
9.6.
(b) If the Company shall fail to pay such amounts forthwith upon
such demand, the Trustee, in its own name and as trustee of an express trust,
shall be entitled and empowered to institute any action or proceedings at law
or in equity for the collection of the sums so due and unpaid, and may
prosecute any such action or proceeding to judgment or final decree, and may
enforce any such judgment or final decree against the Company or other obligor
upon the Junior Subordinated Debentures and collect the moneys adjudged or
decreed to be payable in the manner provided by law out of the property of the
Company or other obligor upon the Junior Subordinated Debentures, wherever
situated.
(c) In case of any receivership, insolvency, liquidation,
bankruptcy, reorganization, readjustment, arrangement, composition or judicial
proceedings affecting the Company or the creditors or property of either, the
4.1-19
<PAGE> 25
Trustee shall have power to intervene in such proceedings and take any action
therein that may be permitted by the court and shall (except as may be
otherwise provided by law) be entitled to file such proofs of claim and other
papers and documents as may be necessary or advisable in order to have the
claims of the Trustee and of the Holders of Junior Subordinated Debentures
allowed for the entire amount due and payable by the Company under this
Indenture at the date of institution of such proceedings and for any additional
amount that may become due and payable by the Company after such date, and to
collect and receive any moneys or other property payable or deliverable on any
such claim, and to distribute the same after the deduction of the amount
payable to the Trustee under Section 9.6; and any receiver, assignee or trustee
in bankruptcy or reorganization is hereby authorized by each of the Holders to
make such payments to the Trustee, and, in the event that the Trustee shall
consent to the making of such payments directly to such Securityholders, to pay
to the Trustee any amount due it under Section 9.6.
(d) All rights of action and of asserting claims under this
Indenture may be enforced by the Trustee without the possession of any of the
Junior Subordinated Debentures, or the production thereof at any trial or other
proceeding relative thereto, and any such suit or 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 payment to the Trustee of
any amounts due under Section 9.6, be for the ratable benefit of the Holders of
the Junior Subordinated Debentures.
In case of an Event of Default hereunder, the Trustee may in its
discretion proceed to protect and enforce the rights vested in it by this
Indenture by such appropriate judicial proceedings as the Trustee shall deem
most effectual to protect and enforce any of such rights, either at law or in
equity or in bankruptcy or otherwise, whether for the specific enforcement of
any covenant or agreement contained in this Indenture or in aid of the exercise
of any power granted in this Indenture, or to enforce any other legal or
equitable right vested in the Trustee by this Indenture or by law.
Nothing contained herein shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Securityholder any
plan of reorganization, arrangement, adjustment or composition affecting the
Junior Subordinated Debentures or the rights of any Holder thereof or to
authorize the Trustee to vote in respect of the claim of any Securityholder in
any such proceeding.
7.3 APPLICATION OF MONEYS COLLECTED. Any moneys collected by the
Trustee pursuant to this Article with respect to the Junior Subordinated
Debentures shall be applied in the following order, at the date or dates fixed
by the Trustee and, in case of the distribution of such moneys on account of
principal or interest, upon presentation of the Junior Subordinated Debentures,
and notation thereon the payment, if only partially paid, and upon surrender
thereof if fully paid:
FIRST: To the payment of costs and expenses of collection and of all
amounts payable to the Trustee under Section 9.6;
SECOND: To the payment of all Senior and Subordinated Debt of the
Company if and to the extent required by Article Sixteen; and
THIRD: To the payment of the amounts then due and unpaid upon Junior
Subordinated Debentures for principal and 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
Junior Subordinated Debentures for principal and interest, respectively.
7.4 LIMITATION ON SUITS. No Holder shall have any right by virtue
of or by availing any provision of this Indenture to institute any suit, action
or proceeding in equity or at law upon or under or with respect to this
Indenture or for the appointment of a receiver or trustee, or for any other
remedy hereunder, unless (i) such Holder previously shall have given to the
Trustee written notice of an Event of Default and of the continuance thereof;
(ii) the Holders of not less than 25% in aggregate principal amount of the
Junior Subordinated Debentures then
4.1-20
<PAGE> 26
Outstanding shall have made written request upon the Trustee to institute such
action, suit or proceeding in its own name as trustee hereunder; (iii) such
Holder or Holders shall have offered to the Trustee such reasonable indemnity
as it may require against the costs, expenses and liabilities to be incurred
therein or thereby; and (iv) the Trustee for 60 days after its receipt of such
notice, request and offer of indemnity shall have failed to institute any such
action, suit or proceeding; and (v) during such 60 day period, the Holders of a
majority in principal amount of the Junior Subordinated Debentures do not give
the Trustee a direction inconsistent with the request.
Notwithstanding any other provisions of this Indenture to the
contrary, the right of any Holder to receive payment of the principal of and
interest on the Junior Subordinated Debentures on or after the respective due
dates (or in the case of redemption, on the redemption date), or to institute
suit for the enforcement of any such payment on or after such respective dates
or redemption date, shall not be impaired or affected without the consent of
such Holder; and by accepting a Junior Subordinated Debenture hereunder it is
expressly understood, intended and covenanted by the Holder thereof with every
other such Holder and the Trustee, that no one or more Holders shall have any
right in any manner whatsoever by virtue of or by availing any provision of
this Indenture to affect, disturb or prejudice the rights of any other Holders,
or to obtain or seek to obtain priority over or preference to any such other
Holders, or to enforce any right under this Indenture, except in the manner
herein provided and for the equal, ratable and common benefit of all Holders of
Junior Subordinated Debentures. For the protection and enforcement of the
provisions of this Section, each and every Securityholder and the Trustee shall
be entitled to such relief as can be given either at law or in equity.
7.5 RIGHTS AND REMEDIES CUMULATIVE; DELAY OR OMISSION NOT WAIVER.
(a) Except as otherwise provided in Section 7.2, all powers and
remedies given by this Article to the Trustee or to the Securityholders shall,
to the extent permitted by law, be deemed cumulative and not exclusive of any
other powers and remedies available to the Trustee or the Holders of the Junior
Subordinated Debentures, by judicial proceedings or otherwise, to enforce the
performance or observance of the covenants and agreements contained in this
Indenture or otherwise established with respect to such Junior Subordinated
Debentures.
(b) No delay or omission of the Trustee or of any Holder of any of
the Junior Subordinated Debentures to exercise any right or power accruing upon
any Event of Default occurring and continuing as aforesaid shall impair any
such right or power, or shall be construed to be a waiver of any such default
or on acquiescence therein; and, subject to the provisions of Section 7.4,
every power and remedy given by this Article or by law to the Trustee or the
Securityholders may be exercised from time to time, and as often as shall be
deemed expedient, by the Trustee or by the Securityholders.
7.6 CONTROL BY SECURITYHOLDERS. The Holders of a majority in
aggregate principal amount of the Junior Subordinated Debentures at the time
Outstanding, determined in accordance with Section 10.4, 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, however, that such direction shall not be in conflict
with any rule of law or with this Indenture. Subject to the provisions of
Section 9.1, the Trustee shall have the right to decline to follow any such
direction if the Trustee in good faith shall, by a Responsible Officer or
Officers of the Trustee, determine that the proceeding so directed would
involve the Trustee in personal liability. The Holders of a majority in
aggregate principal amount of the Junior Subordinated Debentures at the time
Outstanding affected thereby, determined in accordance with Section 10.4, may
on behalf of the Holders of all of the Junior Subordinated Debentures waive any
past default in the performance of any of the covenants contained herein and
its consequences, except (i) a default in the payment of the principal of or
interest on any of the Junior Subordinated Debentures as and when the same
shall become due by its terms otherwise than by acceleration (unless such
default has been cured and a sum sufficient to pay all matured installments of
interest and principal has been deposited with the Trustee in accordance with
Section 7.1(c)), (ii) a default in the covenants contained in Section 5.6 or
(iii) in respect of a covenant or provision hereof which under Article Eleven
cannot be modified or amended without the consent of the Holder of each
Outstanding Junior Subordinated Debenture affected; provided, however,
4.1-21
<PAGE> 27
that if the Junior Subordinated Debentures are held by the Trust or a Trustee
of the Trust, such waiver or modification to such waiver shall not be effective
until the Holders of a majority in Liquidation Amount of Trust Securities of
the Trust shall have consented to such waiver or modification to such waiver;
provided further, that if the consent of the Holder of each Outstanding Junior
Subordinated Debenture is required, such waiver shall not be effective until
each Holder of the Trust Securities of the Trust shall have consented to such
waiver. Upon any such waiver, the default covered thereby shall be deemed to
be cured for all purposes of this Indenture and the Company, the Trustee and
the Holders of the Junior Subordinated Debentures shall be restored to their
former positions and rights hereunder, respectively; but no such waiver shall
extend to any subsequent or other default or impair any right consequent
thereon.
7.7 UNDERTAKING TO PAY COSTS. All parties to this Indenture
agree, and each Holder of any Junior Subordinated Debentures by such Holder's
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 Securityholder, or group of
Securityholders, holding more than 10% in aggregate principal amount of the
Outstanding Junior Subordinated Debentures, or to any suit instituted by any
Securityholder for the enforcement of the payment of the principal of or
interest on the Junior Subordinated Debentures on or after the due dates
thereof.
ARTICLE VIII
FORM OF JUNIOR SUBORDINATED DEBENTURE AND ORIGINAL ISSUE
8.1 FORM OF JUNIOR SUBORDINATED DEBENTURE. The Junior
Subordinated Debenture and the Trustee's Certificate of Authentication to be
endorsed thereon are to be substantially in the forms contained as Exhibit A to
this Indenture, attached hereto and incorporated herein by reference.
8.2 ORIGINAL ISSUE OF JUNIOR SUBORDINATED DEBENTURES. Junior
Subordinated Debentures in the aggregate principal amount of $18,041,250 may,
upon execution of this Indenture, be executed by the Company and delivered to
the Trustee for authentication, and the Trustee shall thereupon authenticate
and deliver the Junior Subordinated Debentures to or upon the written order of
the Company, signed by its Chairman, its Vice Chairman, its President, any Vice
President or its Chief Financial Officer, without any further action by the
Company.
ARTICLE IX
CONCERNING THE TRUSTEE
9.1 CERTAIN DUTIES AND RESPONSIBILITIES OF THE TRUSTEE.
(a) The Trustee, prior to the occurrence of an Event of Default
and after the curing of all Events of Default that may have occurred, shall
undertake to perform with respect to the Junior Subordinated Debentures such
duties and only such duties as are specifically set forth in this Indenture,
and no implied covenants shall be read into this Indenture against the Trustee.
In case an Event of Default has occurred (that has not been cured or waived),
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 man would exercise or use under the circumstances in the conduct of his
own affairs.
(b) 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:
4.1-22
<PAGE> 28
(i) prior to the occurrence of an Event of Default and
after the curing or waiving of all such Events of Default that may
have occurred:
(1) the duties and obligations of the Trustee
shall be determined solely by the express provisions of this
Indenture, and the Trustee shall not be liable except for the
performance of such duties and obligations as are specifically
set forth in this Indenture, and no implied covenants or
obligations shall be read into this Indenture against the
Trustee; and
(2) in the absence of bad faith on the part of
the Trustee, the 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 Trustee and conforming to the requirements of this
Indenture; but in the case of any such certificates or
opinions that by any provision 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 requirement of this Indenture;
(ii) the Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer or Responsible
Officers of the Trustee, unless it shall be proved that the Trustee
was negligent in ascertaining the pertinent facts;
(iii) 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 the Holders of not less than a majority in
principal amount of the Junior Subordinated Debentures at the time
Outstanding 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; and
(iv) none of the provisions contained in this Indenture
shall require the 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 there is
reasonable ground for believing that the repayment of such funds or
liability is not reasonably assured to it under the terms of this
Indenture or adequate indemnity against such risk is not reasonably
assured to it.
9.2 CERTAIN RIGHTS OF TRUSTEE. Except as otherwise provided in
Section 9.1:
(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, consent, order, approval, bond, 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, direction, order or demand of the Company
mentioned herein shall be sufficiently evidenced by a Board Resolution or an
instrument signed in the name of the Company by the President or any Vice
President and by the Secretary or an Assistant Secretary or the Chief Financial
Officer thereof (unless other evidence in respect thereof is specifically
prescribed herein);
(c) The Trustee may consult with counsel and the written advice of
such counsel or any Opinion of Counsel shall be full and complete authorization
and protection in respect of any action taken or suffered or omitted hereunder
in good faith and in reliance thereon;
(d) The Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Indenture at the request, order or
direction of any of the Securityholders, pursuant to the provisions of this
Indenture, unless such Securityholders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and liabilities
that may be incurred therein or thereby; nothing contained herein shall,
however, relieve the Trustee of the obligation, upon the occurrence of an Event
of Default (that has not been cured or waived) to exercise
4.1-23
<PAGE> 29
such of the rights and powers vested in it by this Indenture, and to use the
same degree of care and skill in their exercise as a prudent man would exercise
or use under the circumstances in the conduct of his own affairs;
(e) The Trustee shall not be liable for any action taken or
omitted to be taken by it in good faith and believed by it to be authorized or
within the discretion or rights or powers conferred upon it by this Indenture;
(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, consent, order, approval, bond,
security, or other papers or documents, unless requested in writing so to do by
the Holders of not less than a majority in principal amount of the Outstanding
Junior Subordinated Debentures (determined as provided in Section 10.4);
provided, however, that if the payment within a reasonable time to the Trustee
of the costs, expenses or liabilities likely to be incurred by it in the making
of such investigation is, in the opinion of the Trustee, not reasonably assured
to the Trustee by the security afforded to it by the terms of this Indenture,
the Trustee may require reasonable indemnity against such costs, expenses or
liabilities as a condition to so proceeding. The reasonable expense of every
such examination shall be paid by the Company or, if paid by the Trustee, shall
be repaid by the Company upon demand; 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.
9.3 TRUSTEE NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF THE JUNIOR
SUBORDINATED DEBENTURES.
(a) The recitals contained herein and in the Junior Subordinated
Debentures shall be taken as the statements of the Company and the Trustee
assumes no responsibility for the correctness of the same.
(b) The Trustee makes no representations as to the validity or
sufficiency of this Indenture or of the Junior Subordinated Debentures.
(c) The Trustee shall not be accountable for the use or
application by the Company of any of the Junior Subordinated Debentures or of
the proceeds of such Junior Subordinated Debentures, or for the use or
application of any moneys paid over by the Trustee in accordance with any
provision of this Indenture, or for the use or application of any moneys
received by any paying agent other than the Trustee.
9.4 MAY HOLD JUNIOR SUBORDINATED DEBENTURES. The Trustee or any
paying agent or Securities Registrar, in its individual or any other capacity,
may become the owner or pledgee of Junior Subordinated Debentures with the same
rights it would have if it were not Trustee, paying agent or Securities
Registrar.
9.5 MONEYS HELD IN TRUST. Subject to the provisions of Section
13.5, all moneys received by the Trustee shall, until used or applied as herein
provided, be held in trust for the purposes for which they were received, but
need not be segregated from other funds except to the extent required by law.
The Trustee shall be under no liability for interest on any moneys received by
it hereunder except such as it may agree with the Company to pay thereon.
9.6 COMPENSATION AND REIMBURSEMENT.
(a) The Company covenants and agrees to pay to the Trustee, and
the Trustee shall be entitled to, such reasonable compensation (which shall not
be limited by any provision of law in regard to the compensation of a trustee
of an express trust), as the Company and the Trustee may from time to time
agree in writing, for all services rendered by it in the execution of the
trusts hereby created and in the exercise and performance of any of the powers
4.1-24
<PAGE> 30
and duties hereunder of the Trustee, and, except as otherwise expressly
provided herein, the Company will pay or reimburse the Trustee upon its
request for all reasonable expenses, disbursements and advances incurred or
made by the Trustee in accordance with any of the provisions of this Indenture
(including the reasonable compensation and the expenses and disbursements of
its counsel and of all Persons not regularly in its employ) except any such
expense, disbursement or advance as may arise from its negligence or bad
faith. The Company also covenants to indemnify the Trustee (and its officers,
agents, directors and employees) for, and to hold it harmless against, any
loss, liability or expense incurred without negligence or bad faith on the
part of the Trustee and arising out of or in connection with the acceptance or
administration of this trust, including the costs and expenses of defending
itself against any claim of liability in the premises.
(b) The obligations of the Company under this Section to
compensate and indemnify the Trustee and to pay or reimburse the Trustee for
expenses, disbursements and advances shall constitute additional indebtedness
hereunder. Such additional indebtedness shall be secured by a lien prior to
that of the Junior Subordinated Debentures upon all property and funds held or
collected by the Trustee as such, except funds held in trust for the benefit of
the Holders of the Junior Subordinated Debentures.
9.7 RELIANCE ON OFFICERS' CERTIFICATE. Except as otherwise
provided in Section 9.1, whenever in the administration of the provisions of
this Indenture the Trustee shall deem it necessary or desirable that a matter
be proved or established prior to taking or suffering or omitting to take any
action hereunder, such matter (unless other evidence in respect thereof be
herein specifically prescribed) may, in the absence of negligence or bad faith
on the part of the Trustee, be deemed to be conclusively proved and established
by an Officers' Certificate delivered to the Trustee and such certificate, in
the absence of negligence or bad faith on the part of the Trustee, shall be
full warrant to the Trustee for any action taken, suffered or omitted to be
taken by it under the provisions of this Indenture upon the faith thereof.
9.8 DISQUALIFICATION; CONFLICTING INTERESTS. If the Trustee has
or shall acquire any "conflicting interest" within the meaning of Section
310(b) of the Trust Indenture Act, the Trustee and the Company shall in all
respects comply with the provisions of Section 310(b) of the Trust Indenture
Act.
9.9 CORPORATE TRUSTEE REQUIRED; ELIGIBILITY. There shall at all
times be a Trustee with respect to the Junior Subordinated Debentures issued
hereunder which shall at all times be a corporation organized and doing
business under the laws of the United States of America or any State or
Territory thereof or of the District of Columbia, or a corporation or other
Person permitted to act as trustee by the Commission, authorized under such
laws to exercise corporate trust powers, having a combined capital and surplus
of at least $50,000,000, and subject to supervision or examination by Federal,
State, Territorial, or District of Columbia authority. If such corporation
publishes reports of condition at least annually, pursuant to law or to the
requirements of the aforesaid supervising or examining authority, then for the
purposes of this Section, 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. The Company may not, nor may any
Person directly or indirectly controlling, controlled by, or under common
control with the Company, serve as Trustee. In case at any time the Trustee
shall cease to be eligible in accordance with the provisions of this Section,
the Trustee shall resign immediately in the manner and with the effect
specified in Section 9.10.
9.10 RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR.
(a) The Trustee, or any successor hereafter appointed, may at any
time resign by giving written notice thereof to the Company and by transmitting
notice of resignation by mail, first-class postage prepaid, to the
Securityholders, as their names and addresses appear upon the Securities
Register. Upon receiving such notice of resignation, the Company shall
promptly appoint a successor trustee by written instrument, in duplicate,
executed by order of the Board of Directors, one copy of which instrument shall
be delivered to the resigning Trustee and one copy to the successor trustee.
If no successor trustee shall have been so appointed and have accepted
appointment
4.1-25
<PAGE> 31
within 30 days after the mailing of such notice of resignation, the resigning
Trustee may petition any court of competent jurisdiction for the appointment of
a successor trustee, or any Securityholder who has been a bona fide Holder of
Junior Subordinated Debentures for at least six months may, subject to the
provisions of Section 7.7, on behalf of such Securityholder and all other
Holders, petition any such court for the appointment of a successor trustee.
Such court may thereupon, after such notice, if any, as it may deem proper and
prescribe, appoint a successor trustee.
(b) In case at any time any one of the following shall occur:
(i) the Trustee shall fail to comply with the provisions
of Section 9.8 after written request therefor by the Company or by any
Securityholder who has been a bona fide Holder of Junior Subordinated
Debentures for at least six months; or
(ii) the Trustee shall cease to be eligible in accordance
with the provisions of Section 9.9 and shall fail to resign after
written request therefor by the Company or by any such Securityholder;
or
(iii) the Trustee shall become incapable of acting, or
shall be adjudged a bankrupt or insolvent, or commence a voluntary
bankruptcy proceeding, or a receiver of the Trustee or of its property
shall be appointed or consented to, 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, the Company may remove the Trustee and appoint a
successor trustee by written instrument, in duplicate, executed by order of the
Board of Directors, one copy of which instrument shall be delivered to the
Trustee so removed and one copy to the successor trustee, or, subject to the
provisions of Section 7.7, unless the Trustee's duty to resign is stayed as
provided herein, any Securityholder who has been a bona fide Holder of Junior
Subordinated Debentures for at least six months may, on behalf of that Holder
and all other Holders, petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor trustee. Such court
may thereupon after such notice, if any, as it may deem proper and prescribe,
remove the Trustee and appoint a successor trustee.
(c) The Holders of a majority in aggregate principal amount of the
Junior Subordinated Debentures at the time Outstanding may at any time remove
the Trustee by so notifying the Trustee and the Company and may appoint a
successor Trustee with the consent of the Company.
(d) Any resignation or removal of the Trustee and appointment of a
successor trustee pursuant to any of the provisions of this Section shall
become effective upon acceptance of appointment by the successor trustee as
provided in Section 9.11.
9.11 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 deliver to such successor trustee all property and money held by
such retiring Trustee hereunder.
4.1-26
<PAGE> 32
(b) 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 such rights, powers and trusts
referred to in paragraph (a) of this Section.
(c) 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.
(d) Upon acceptance of appointment by a successor trustee as
provided in this Section, the Company shall transmit notice of the succession
of such trustee hereunder by mail, first-class postage prepaid, to the
Securityholders, as their names and addresses appear upon the Securities
Register. If the Company fails to transmit such notice within ten days after
acceptance of appointment by the successor trustee, the successor trustee shall
cause such notice to be transmitted at the expense of the Company.
9.12 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 the corporate trust business of the Trustee, shall be
the successor of the Trustee hereunder, provided that such corporation shall be
qualified and eligible under the provisions of this Article Nine, without the
execution or filing of any paper or any further act on the part of any of the
parties hereto, anything herein to the contrary notwithstanding. In case any
Junior Subordinated Debentures 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 Junior Subordinated Debentures so authenticated with the same
effect as if such successor Trustee had itself authenticated such Junior
Subordinated Debentures.
9.13 PREFERENTIAL COLLECTION OF CLAIMS AGAINST THE COMPANY. The
Trustee shall comply with Section 311(a) of the Trust Indenture Act, excluding
any creditor relationship described in Section 311(b) of the Trust Indenture
Act. A Trustee who has resigned or been removed shall be subject to Section
311(a) of the Trust Indenture Act to the extent included therein.
9.14 APPOINTMENT OF AUTHENTICATING AGENT. At any time when any of
the Junior Subordinated Debentures remain Outstanding, the Trustee may appoint
an Authenticating Agent or Agents which shall be authorized to act on behalf of
the Trustee to authenticate Junior Subordinated Debentures issued upon original
issuance, exchange, registration of transfer or partial redemption thereof or
pursuant to Section 2.8, and Junior Subordinated Debentures 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 Junior Subordinated Debentures 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 and a certificate
of authentication executed 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, any State thereof or the District of Columbia,
authorized under such laws to act as Authenticating Agent, having a combined
capital and surplus of not less than $10,000,000 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 such supervision or examining authority, for the purposes of
this Section, 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,
such Authenticating Agent shall resign immediately in the manner and with the
effect specified in this Section.
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
4.1-27
<PAGE> 33
Authenticating Agent shall be a party, or any corporation succeeding to the
corporate agency or corporate trust business of an Authenticating Agent, shall
continue to be an Authenticating Agent, 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.
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
notice of resignation or upon such termination, or in case at any time such
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, the Trustee may appoint a successor Authenticating
Agent which shall be acceptable to the Company and shall mail written notice of
such appointment by first-class mail, postage prepaid, to all Securityholders
as their names and addresses appear in the Securities Register. 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 the like effect as if originally named as an Authenticating Agent herein.
No successor Authenticating Agent shall be appointed unless eligible under the
provisions of this Section.
The Trustee agrees to pay to each Authenticating Agent from time to
time reasonable compensation for its services under this Section, and the
Trustee shall be entitled to be reimbursed for such payments, subject to the
provisions of Section 9.6.
If an appointment is made pursuant to this Section, the Junior
Subordinated Debentures may have endorsed thereon, in lieu of the form of
certificate of authentication set forth in Section 8.1, a certificate of
authentication in the following form:
"This is one of the Junior Subordinated Debentures described in the
within mentioned Indenture."
--------------------------------------
As Trustee
By:
-----------------------------------
As Authenticating Agent
By:
-----------------------------------
Authorized Signature
ARTICLE X
CONCERNING THE SECURITYHOLDERS
10.1 EVIDENCE OF ACTION BY SECURITYHOLDERS. Whenever in this
Indenture it is provided that the Holders of a majority or specified percentage
in aggregate principal amount of the Junior Subordinated Debentures may take
any action (including the making of any demand or request, the giving of any
notice, consent or waiver or the taking of any other action), the fact that at
the time of taking any such action the Holders of such majority or specified
percentage have joined therein may be evidenced by any instrument or any number
of instruments of similar tenor executed by such Holders in Person or by agent
or proxy appointed in writing.
If the Company shall solicit from the Securityholders any request,
demand, authorization, direction, notice, consent, waiver or other action, the
Company may, at its option, as evidenced by an Officers' Certificate, fix in
advance a record date for the determination of Securityholders entitled to give
such request, demand, authorization,
4.1-28
<PAGE> 34
direction, notice, consent, waiver or other action, but the Company shall have
no obligation to do so. If such a record date is fixed, such request, demand,
authorization, direction, notice, consent, waiver or other action may be given
before or after the record date, but only the Securityholders of record at the
close of business on the record date shall be deemed to be Securityholders for
the purposes of determining whether Securityholders of the requisite proportion
of Outstanding Junior Subordinated Debentures have authorized or agreed or
consented to such request, demand, authorization, direction, notice, consent,
waiver or other action, and for that purpose the Outstanding Junior
Subordinated Debentures shall be computed as of the record date; provided,
however, that no such authorization, agreement or consent by such
Securityholders on the record date shall be deemed effective unless it shall
become effective pursuant to the provisions of this Indenture not later than
six months after the record date.
10.2 PROOF OF EXECUTION BY SECURITYHOLDERS. Subject to the
provisions of Section 6.1, proof of the execution of any instrument by a
Securityholder (such proof will not require notarization) or his agent or proxy
and proof of the holding by any Person of any of the Junior Subordinated
Debentures shall be sufficient if made in the following manner:
(a) The fact and date of the execution by any such Person of any
instrument may be proved in any reasonable manner acceptable to the Trustee.
(b) The ownership of Junior Subordinated Debentures shall be
proved by the Securities Register or by a certificate of the Securities
Registrar thereof.
(c) The Trustee may require such additional proof of any matter
referred to in this Section as it shall deem necessary.
10.3 WHO MAY BE DEEMED OWNERS. Prior to the due presentment for
registration of transfer of any Junior Subordinated Debenture, the Company, the
Trustee, any paying agent and any Securities Registrar may deem and treat the
Person in whose name such Junior Subordinated Debenture shall be registered
upon the books of the Company as the absolute owner of such Junior Subordinated
Debenture (whether or not such Junior Subordinated Debenture shall be overdue
and notwithstanding any notice of ownership or writing thereon made by anyone
other than the Securities Registrar) for the purpose of receiving payment of or
on account of the principal of and (subject to Section 2.3) interest on such
Junior Subordinated Debenture and for all other purposes; and neither the
Company nor the Trustee nor any paying agent nor any Securities Registrar shall
be affected by any notice to the contrary.
10.4 CERTAIN JUNIOR SUBORDINATED DEBENTURES OWNED BY COMPANY
DISREGARDED. In determining whether the Holders of the requisite aggregate
principal amount of Junior Subordinated Debentures have concurred in any
direction, consent or waiver under this Indenture, the Junior Subordinated
Debentures that are owned by the Company or any other obligor on the Junior
Subordinated Debentures or by any Person directly or indirectly controlling or
controlled by or under common control with the Company or any other obligor on
the Junior Subordinated Debentures shall be disregarded and deemed not to be
Outstanding for the purpose of any such determination, except that for the
purpose of determining whether the Trustee shall be protected in relying on any
such direction, consent or waiver, only Junior Subordinated Debentures that the
Trustee actually knows are so owned shall be so disregarded. The Junior
Subordinated Debentures so owned that have been pledged in good faith may be
regarded as Outstanding for the purposes of this Section, if the pledgee shall
establish to the satisfaction of the Trustee the pledgee's right with respect
to such Junior Subordinated Debentures and that the pledgee is not a Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with the Company or any such other obligor. In case of a
dispute as to such right, any decision by the Trustee taken upon the advice of
counsel shall be full protection to the Trustee.
10.5 ACTIONS BINDING ON FUTURE SECURITYHOLDERS. At any time prior
to (but not after) the evidencing to the Trustee, as provided in Section 10.1,
of the taking of any action by the Holders of the majority or
4.1-29
<PAGE> 35
percentage in aggregate principal amount of the Junior Subordinated Debentures
specified in this Indenture in connection with such action, any Holder who is
shown by the evidence to have consented to such action may, by filing written
notice with the Trustee, and upon proof of holding as provided in Section 10.2,
revoke such action so far as concerns such Holder's Junior Subordinated
Debentures. Except as aforesaid any such action taken by the Holder shall be
conclusive and binding upon such Holder and upon all future Holders and owners
of such Holder's Junior Subordinated Debentures, and of any Junior Subordinated
Debentures issued in exchange therefor, on registration of transfer thereof or
in place thereof, irrespective of whether or not any notation in regard thereto
is made upon such Junior Subordinated Debentures. Any action taken by the
Holders of the majority or percentage in aggregate principal amount of the
Junior Subordinated Debentures specified in this Indenture in connection with
such action shall be conclusively binding upon the Company, the Trustee and the
Holders of all the Junior Subordinated Debentures.
ARTICLE XI
SUPPLEMENTAL INDENTURES
11.1 SUPPLEMENTAL INDENTURES WITHOUT THE CONSENT OF
SECURITYHOLDERS. In addition to any supplemental indenture otherwise
authorized by this Indenture, the Company and the Trustee may from time to time
and at any time enter into an indenture or indentures supplemental hereto
(which shall conform to the provisions of the Trust Indenture Act as then in
effect), without the consent of the Securityholders, for one or more of the
following purposes:
(a) to cure any ambiguity, defect, or inconsistency herein, or in
the Junior Subordinated Debentures, provided that any such action does not
materially adversely affect the interests of the Holders or the holders of the
Capital Securities so long as they remain outstanding;
(b) to comply with Article Twelve;
(c) to provide for uncertificated Junior Subordinated Debentures
in addition to or in place of certificated Junior Subordinated Debentures;
(d) to add to the covenants of the Company for the benefit of the
Holders or to surrender any right or power herein conferred upon the Company;
(e) to add to, delete from, or revise the conditions, limitations,
and restrictions on the authorized amount, terms, or purposes of issue,
authentication, and delivery of Junior Subordinated Debentures, as herein set
forth;
(f) to make any change that does not adversely affect the rights
of any Securityholder in any material respect; or
(g) to establish the form of any certifications required to be
furnished pursuant to the terms of this Indenture or to add to the rights of
the Holders.
The Trustee is hereby authorized to join with the Company in the
execution of any such supplemental indenture, and to make any further
appropriate agreements and stipulations that may be therein contained, but the
Trustee shall not be obligated to enter into any such supplemental indenture
that affects the Trustee's own rights, duties or immunities under this
Indenture or otherwise.
Any supplemental indenture authorized by the provisions of this
Section may be executed by the Company and the Trustee without the consent of
the Holders of any of the Junior Subordinated Debentures at the time
Outstanding, notwithstanding any of the provisions of Section 11.2.
4.1-30
<PAGE> 36
11.2 SUPPLEMENTAL INDENTURES WITH CONSENT OF SECURITYHOLDERS. With
the consent (evidenced as provided in Section 10.1) of the Holders of not less
than a majority in aggregate principal amount of the Junior Subordinated
Debentures at the time Outstanding, the Company, when authorized by Board
Resolutions, and the Trustee may from time to time and at any time enter into
an indenture or indentures supplemental hereto (which shall conform to the
provisions of the Trust Indenture Act as then in effect) for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions of this Indenture or of any supplemental indenture or of modifying
in any manner not covered by Section 11.1 the rights of the Holders of the
Junior Subordinated Debentures under this Indenture; provided, however, that no
such supplemental indenture shall without the consent of the Holders of each
Junior Subordinated Debenture then Outstanding, (i) change (except as expressly
provided herein pursuant to Section 2.2) the stated maturity of the Junior
Subordinated Debentures, or reduce the principal amount thereof, or reduce the
rate or extend (except as expressly provided herein pursuant to Section 4.1)
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 supplemental indenture; provided, further, that
if the Junior Subordinated Debentures are held by the Trust or a trustee of the
Trust, such supplemental indenture shall not be effective until the holders of
a majority in aggregate Liquidation Amount of Capital Securities shall have
consented to such supplemental indenture; provided further, that if the consent
of the Holder of each Outstanding Junior Subordinated Debenture is required,
such supplemental indenture shall not be effective until each Holder of the
Trust Securities shall have consented to such supplemental indenture.
It shall not be necessary for the consent of the Securityholders to
approve the particular form of any proposed supplemental indenture, but it
shall be sufficient if such consent shall approve the substance thereof.
11.3 EFFECT OF SUPPLEMENTAL INDENTURES. Upon the execution of any
supplemental indenture pursuant to the provisions of this Article or of Section
12.1, this Indenture shall be and be deemed to be modified and amended in
accordance therewith.
11.4 JUNIOR SUBORDINATED DEBENTURES AFFECTED BY SUPPLEMENTAL
INDENTURES. Junior Subordinated Debentures, affected by a supplemental
indenture, authenticated and delivered after the execution of such supplemental
indenture pursuant to the provisions of this Article or of Section 12.1, may
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 Junior
Subordinated Debentures so modified as to conform, in the opinion of the Board
of Directors, to any modification of this Indenture contained in any such
supplemental indenture may be prepared by the Company, authenticated by the
Trustee and delivered in exchange for the Junior Subordinated Debentures then
Outstanding.
11.5 EXECUTION OF SUPPLEMENTAL INDENTURES. Upon the request of the
Company, accompanied by Board Resolutions authorizing the execution of any such
supplemental indenture, and upon the filing with the Trustee of evidence of the
consent of Securityholders required to consent thereto as aforesaid, the
Trustee shall join with the Company in the execution of such supplemental
indenture unless such supplemental indenture affects the Trustee's own rights,
duties or immunities under this Indenture or otherwise, in which case the
Trustee may in its discretion but shall not be obligated to enter into such
supplemental indenture. The Trustee, subject to the provisions of Section 9.1,
may receive an Opinion of Counsel as conclusive evidence that any supplemental
indenture executed pursuant to this Article is authorized or permitted by, and
conforms to, the terms of this Article and that it is proper for the Trustee
under the provisions of this Article to join in the execution thereof.
Promptly after the execution by the Company and the Trustee of any
supplemental indenture pursuant to the provisions of this Section, the Trustee
shall transmit by mail, first-class postage prepaid, a notice, setting forth in
general terms the substance of such supplemental indenture, to the
Securityholders as their names and addresses appear upon the Securities
Register. Any failure of the Trustee to mail such notice, or any defect
therein, shall not, however, in any way impair or affect the validity of any
such supplemental indenture.
4.1-31
<PAGE> 37
ARTICLE XII
SUCCESSOR CORPORATION
12.1 COMPANY MAY CONSOLIDATE, ETC. 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 (i) in case the Company consolidates with or merges into another Person
or conveys or transfers its properties and assets substantially as an entirety
to any Person, the successor Person is organized under the laws of the United
States or any state or the District of Columbia, and such successor Person
expressly assumes the Company's obligations on the Junior Subordinated
Debentures issued under this Indenture; (ii) 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 occurred and be
continuing; and (iii) such successor Person expressly assumes the due and
punctual performance and observance of all the covenants and conditions of this
Indenture to be kept and performed by the Company by executing and delivering a
supplemental indenture in form and substance satisfactory to the Trustee.
12.2 SUCCESSOR SUBSTITUTED.
(a) In case of any such consolidation, merger, sale, conveyance,
transfer or other disposition and upon the assumption by the successor Person
by supplemental indenture, executed and delivered to the Trustee and
satisfactory in form to the Trustee, of the due and punctual payment of the
principal of and interest on all of the Junior Subordinated Debentures
Outstanding and the due and punctual performance of all of the covenants and
conditions of this Indenture to be performed by the Company, such successor
Person shall succeed to and be substituted for the Company, with the same
effect as if it had been named as the Company herein, and thereupon the
predecessor corporation shall be relieved of all obligations and covenants
under this Indenture and the Junior Subordinated Debentures.
(b) In case of any such consolidation, merger, sale, conveyance,
transfer or other disposition such changes in phraseology and form (but not in
substance) may be made in the Junior Subordinated Debentures thereafter to be
issued as may be appropriate.
12.3 EVIDENCE OF CONSOLIDATION, ETC., TO TRUSTEE. The Trustee,
subject to the provisions of Section 9.1, may receive an Opinion of Counsel as
conclusive evidence that any such consolidation, merger, sale, conveyance,
transfer or other disposition, and any such assumption, comply with the
provisions of this Article.
ARTICLE XIII
SATISFACTION AND DISCHARGE
13.1 SATISFACTION AND DISCHARGE OF INDENTURE. If at any time: (a)
the Company shall have delivered to the Trustee for cancellation all Junior
Subordinated Debentures theretofore authenticated (other than any Junior
Subordinated Debentures that shall have been destroyed, lost or stolen and that
shall have been replaced or paid as provided in Section 2.8) and Junior
Subordinated Debentures for whose payment money or Governmental Obligations
have theretofore been deposited in trust or segregated and held in trust by the
Company (and thereupon repaid to the Company or discharged from such trust, as
provided in Section 13.5); or (b) all such Junior Subordinated Debentures not
theretofore delivered to the Trustee for cancellation shall have become due and
payable, or are by their terms to become due and payable within one year or are
to be called for redemption within one year under arrangements satisfactory to
the Trustee for the giving of notice of redemption, and the Company shall
deposit or cause to be deposited with the Trustee as trust funds the entire
amount in moneys or Governmental Obligations sufficient or a combination
thereof sufficient, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee, to pay at maturity or upon redemption all Junior
Subordinated Debentures not theretofore delivered to the Trustee for
cancellation, including
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<PAGE> 38
principal and interest due or to become due to such date of maturity or date
fixed for redemption, as the case may be, and if the Company shall also pay or
cause to be paid all other sums payable hereunder by the Company; then this
Indenture shall thereupon cease to be of further effect except for the
provisions of Sections 2.2, 2.3, 2.4, 2.5, 4.1, 4.2, 4.3 and 9.10, that shall
survive until the date of maturity or redemption date, as the case may be, and
Sections 9.6 and 13.5, that shall survive to such date and thereafter, and the
Trustee, on demand of the Company and at the cost and expense of the Company,
shall execute proper instruments acknowledging satisfaction of and discharging
this Indenture.
13.2 DISCHARGE OF OBLIGATIONS. If at any time all such Junior
Subordinated Debentures not theretofore delivered to the Trustee for
cancellation or that have not become due and payable as described in Section
13.1 shall have been paid by the Company by depositing irrevocably with the
Trustee, as trust, funds moneys or an amount of Governmental Obligations
sufficient to pay at maturity or upon redemption all such Junior Subordinated
Debentures not theretofore delivered to the Trustee for cancellation, including
principal and interest due or to become due to such date of maturity or date
fixed for redemption, as the case may be, and if the Company shall also pay or
cause to be paid all other sums payable hereunder by the Company, then after
the date such moneys or Governmental Obligations, as the case may be, are
deposited with the Trustee the obligations of the Company under this Indenture
shall cease to be of further effect except for the provisions of Sections 2.2,
2.3, 2.4, 2.5, 4.1, 4.2, 4.3, 9.6, 9.10 and 13.5 hereof that shall survive
until such Junior Subordinated Debentures shall mature and be paid. Thereafter,
Sections 9.6 and 13.5 shall survive.
13.3 DEPOSITED MONEYS TO BE HELD IN TRUST. All monies or
Governmental Obligations deposited with the Trustee pursuant to Sections 13.1
or 13.2 shall be held in trust and shall be available for payment as due,
either directly or through any paying agent (including the Company acting as
its own paying agent), to the Holders of the Junior Subordinated Debentures for
the payment or redemption of which such moneys or Governmental Obligations have
been deposited with the Trustee.
13.4 PAYMENT OF MONIES HELD BY PAYING AGENTS. In connection with
the satisfaction and discharge of this Indenture all moneys or Governmental
Obligations then held by any paying agent under the provisions of this
Indenture shall, upon demand of the Company, be paid to the Trustee and
thereupon such paying agent shall be released from all further liability with
respect to such moneys or Governmental Obligations.
13.5 REPAYMENT TO COMPANY. Any monies or Governmental Obligations
deposited with any paying agent or the Trustee, or then held by the Company in
trust for payment of principal of or interest on the Junior Subordinated
Debentures that are not applied but remain unclaimed by the Holders of such
Junior Subordinated Debentures for at least two years after the date upon which
the principal of or interest on such Junior Subordinated Debentures shall have
respectively become due and payable, shall be repaid to the Company on
____________ of each year or (if then held by the Company) shall be discharged
from such trust; and thereupon the paying agent and the Trustee shall be
released from all further liability with respect to such moneys or Governmental
Obligations, and the Holder of any of the Junior Subordinated Debentures
entitled to receive such payment shall thereafter, as an unsecured general
creditor, look only to the Company for the payment thereof.
ARTICLE XIV
IMMUNITY OF INCORPORATORS,
STOCKHOLDERS, OFFICERS AND DIRECTORS
14.1 NO RECOURSE. No recourse under or upon any obligation,
covenant or agreement of this Indenture, or of any Junior Subordinated
Debenture, or for any claim based thereon or otherwise in respect thereof,
shall be had against any incorporator, stockholder, officer or director as
such, past, present or future, of the Company or of any predecessor or
successor corporation, either directly or through the Company or any such
predecessor or successor corporation, whether by virtue of any constitution,
statute or rule of law, or by the enforcement of any assessment or penalty or
otherwise; it being expressly understood that this Indenture and the
obligations issued
4.1-33
<PAGE> 39
hereunder are solely corporate obligations, and that no such personal liability
whatever shall attach to, or is or shall be incurred by, the incorporators,
stockholders, officers or directors as such, of the Company or of any
predecessor or successor corporation, or any of them, because of the creation
of the indebtedness hereby authorized, or under or by reason of the
obligations, covenants or agreements contained in this Indenture or in any of
the Junior Subordinated Debentures or implied therefrom; and that any and all
such personal liability of every name and nature, either at common law or in
equity or by constitution or statute, of, and any and all such rights and
claims against, every such incorporator, stockholder, officer or director as
such, because of the creation of the indebtedness hereby authorized, or under
or by reason of the obligations, covenants or agreements contained in this
Indenture or in any of the Junior Subordinated Debentures or implied therefrom,
are hereby expressly waived and released as a condition of, and as a
consideration for, the execution of this Indenture and the issuance of such
Junior Subordinated Debentures.
ARTICLE XV
MISCELLANEOUS PROVISIONS
15.1 EFFECT ON SUCCESSORS AND ASSIGNS. All the covenants,
stipulations, promises and agreements in this Indenture contained by or on
behalf of the Company or the Trustee shall bind their respective successors and
assigns, whether so expressed or not.
15.2 ACTIONS BY SUCCESSOR. Any act or proceeding by any provision
of this Indenture authorized or required to be done or performed by any board,
committee or officer of the Company shall and may be done and performed with
like force and effect by the corresponding board, committee or officer of any
corporation that shall at the time be the lawful sole successor of the Company.
15.3 SURRENDER OF COMPANY POWERS. The Company by instrument in
writing executed by authority of 2/3 (two-thirds) of its Board of Directors and
delivered to the Trustee may surrender any of the powers reserved to the
Company, and thereupon such power so surrendered shall terminate both as to the
Company and as to any successor corporation.
15.4 NOTICES. Except as otherwise expressly provided herein any
notice or demand that by any provision of this Indenture is required or
permitted to be given or served by the Trustee or by the Holders of Junior
Subordinated Debentures to or on the Company may be given or served by being
deposited first-class postage prepaid in a post-office letterbox addressed
(until another address is filed in writing by the Company with the Trustee), as
follows: c/o Vectra Banking Corporation, 1650 South Colorado Boulevard, Suite
320, Denver, Colorado 80222, Attention: Chief Financial Officer. Any notice,
election, request or demand by the Company or any Securityholder to or upon the
Trustee shall be deemed to have been sufficiently given or made, for all
purposes, if given or made in writing at the Corporate Trust Office of the
Trustee.
15.5 GOVERNING LAW. This Indenture and each Junior Subordinated
Debenture shall be deemed to be a contract made under the internal laws of the
State of Colorado and for all purposes shall be construed in accordance with
the laws of said State, provided that the immunities and the standard of care
of the Trustee shall be governed by Delaware law.
15.6 TREATMENT OF JUNIOR SUBORDINATED DEBENTURES AS DEBT. It is
intended that the Junior Subordinated Debentures will be treated as
indebtedness and not as equity for federal income tax purposes. The provisions
of this Indenture shall be interpreted to further this intention.
15.7 COMPLIANCE CERTIFICATES AND OPINIONS.
(a) Upon any application or demand by the Company to the Trustee
to take any action under any of the provisions of this Indenture, the Company
shall furnish to the Trustee an Officers' Certificate stating that all
conditions precedent provided for in this Indenture relating to the proposed
action have been complied with and an
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<PAGE> 40
Opinion of Counsel stating that in the opinion of such counsel all such
conditions precedent have been complied with, except that in the case of any
such application or demand as to which the furnishing of such documents is
specifically required by any provision of this Indenture relating to such
particular application or demand, no additional certificate or opinion need be
furnished.
(b) Every certificate or opinion delivered to the Trustee with
respect to compliance with a condition or covenant in this Indenture shall
include (1) a statement that the Person making such certificate or opinion has
read such covenant or condition; (2) a brief statement as to the nature and
scope of the examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based; (3) a statement that, in
the opinion of such Person, such Person has made such examination or
investigation as is necessary to enable such Person 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 or not, in the opinion of such Person, such
condition or covenant has been complied with.
15.8 PAYMENTS ON BUSINESS DAYS. In any case where the date of
maturity of interest or principal of the Junior Subordinated Debentures or the
date of redemption of the Junior Subordinated Debentures shall not be a
Business Day, then payment of interest or principal will be made on the next
succeeding Business Day (without any additional 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.
15.9 CONFLICT WITH TRUST INDENTURE ACT. If and to the extent that
any provision of this Indenture limits, qualifies or conflicts with the duties
imposed by Sections 310 to 317, inclusive, of the Trust Indenture Act, such
imposed duties shall control.
15.10 COUNTERPARTS. This Indenture may be executed in any number of
counterparts, each of which shall be an original, but such counterparts shall
together constitute but one and the same instrument.
15.11 SEPARABILITY. In case any one or more of the provisions
contained in this Indenture or in the Junior Subordinated Debentures shall for
any reason be held to be invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other
provisions of this Indenture or of the Junior Subordinated Debentures, but this
Indenture and the Junior Subordinated Debentures shall be construed as if such
invalid or illegal or unenforceable provision had never been contained herein
or therein.
15.12 ASSIGNMENT. The Company will have the right at all times to
assign any of its respective rights or obligations under this Indenture to a
direct or indirect wholly-owned Subsidiary of the Company, provided that, in
the event of any such assignment, the Company will remain liable for all such
obligations. Subject to the foregoing, this Indenture is binding upon and
inures to the benefit of the parties thereto and their respective successors
and assigns. This Indenture may not otherwise be assigned by the parties
hereto.
15.13 ACKNOWLEDGMENT OF RIGHTS. The Company acknowledges that, with
respect to any Junior Subordinated Debentures held by the Trust or a trustee of
the Trust, if the Property Trustee of the Trust fails to enforce its rights
under this Indenture as the Holder of the Junior Subordinated Debentures held
as the assets of the Trust, any holder of Capital Securities may institute
legal proceedings directly against the Company to enforce such Property
Trustee's rights under this Indenture without first instituting any legal
proceedings against such Property Trustee or any other Person or entity.
Notwithstanding the foregoing, if an Event of Default has occurred and is
continuing and such event is attributable to the failure of the Company to pay
interest or principal on the Junior Subordinated Debentures on the date such
interest or principal is otherwise payable (or in the case of redemption, on
the redemption date), the Company acknowledges that a holder of Capital
Securities may directly institute a proceeding for enforcement of payment to
such holder of the principal of or interest on the Junior Subordinated
Debentures having a principal amount equal to the aggregate Liquidation Amount
of the Capital Securities of such holder on or
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<PAGE> 41
after the respective due date specified in the Junior Subordinated Debentures.
This Section 15.13 may not be amended without the prior written consent of the
holders of all of the Capital Securities.
ARTICLE XVI
SUBORDINATION OF JUNIOR SUBORDINATED DEBENTURES
16.1 AGREEMENT TO SUBORDINATE. The Company covenants and agrees,
and each Holder of Junior Subordinated Debentures issued hereunder by such
Holder's acceptance thereof likewise covenants and agrees, that all Junior
Subordinated Debentures shall be issued subject to the provisions of this
Article Sixteen; and each Holder, whether upon original issue or upon transfer
or assignment thereof, accepts and agrees to be bound by such provisions.
The payment by the Company of the principal of and interest on all
Junior Subordinated Debentures issued hereunder shall, to the extent and in the
manner hereinafter set forth, be subordinated and junior in right of payment to
the prior payment in full of all Senior and Subordinated Debt, whether
outstanding at the date of this Indenture or thereafter incurred.
No provision of this Article Sixteen shall prevent the occurrence of
any default or Event of Default hereunder.
16.2 DEFAULT ON SENIOR AND SUBORDINATED DEBT. In the event and
during the continuation of any default by the Company in the payment of
principal, premium, interest or any other payment due on any Senior and
Subordinated Debt of the Company or in the event that the maturity of any
Senior and Subordinated Debt of the Company has been accelerated because of a
default, then, in either case, no payment shall be made by the Company with
respect to the principal of or interest on the Junior Subordinated Debentures.
In the event that, notwithstanding the foregoing, any payment shall be
received by the Trustee when such payment is prohibited by the preceding
paragraph of this Section 16.2, such payment shall be held in trust for the
benefit of, and shall be paid over or delivered to, the holders of Senior and
Subordinated Debt or their respective representatives, or to the trustee or
trustees under any indenture pursuant to which any of such Senior and
Subordinated Debt may have been issued, as their respective interests may
appear, but only to the extent that the holders of the Senior and Subordinated
Debt (or their representative or representatives or a trustee) notify the
Trustee in writing within 90 days of such payment of the amounts then due and
owing on the Senior and Subordinated Debt and only the amounts specified in
such notice to the Trustee shall be paid to the holders of Senior and
Subordinated Debt.
16.3 LIQUIDATION; DISSOLUTION; BANKRUPTCY. Upon any payment by the
Company or distribution of assets of the Company of any kind or character,
whether in cash, property or securities, to creditors upon any dissolution or
winding-up or liquidation or reorganization of the Company, whether voluntary
or involuntary or in bankruptcy, insolvency, receivership or other proceedings,
all amounts due upon all Senior and Subordinated Debt of the Company shall
first be paid in full, or payment thereof provided for in money in accordance
with its terms, before any payment is made by the Company on account of the
principal or interest on the Junior Subordinated Debentures; and upon any such
dissolution or winding-up or liquidation or reorganization, any payment by the
Company, or distribution of assets of the Company of any kind or character,
whether in cash, property or securities, to which the Holders or the Trustee
would be entitled to receive from the Company, except for the provisions of
this Article Sixteen, shall be paid by the Company or by any receiver, trustee
in bankruptcy, liquidating trustee, agent or other Person making such payment
or distribution, or by the Holders or by the Trustee under the Indenture if
received by them or it, directly to the holders of Senior and Subordinated Debt
of the Company (pro rata to such holders on the basis of the respective amounts
of Senior and Subordinated Debt held by such holders, as calculated by the
Company) or their representative or representatives, or to the trustee or
trustees under any indenture pursuant to which any instruments evidencing such
Senior and Subordinated Debt may have been issued, as their
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<PAGE> 42
respective interests may appear, to the extent necessary to pay such Senior and
Subordinated Debt in full, in money or money's worth, after giving effect to
any concurrent payment or distribution to or for the holders of such Senior and
Subordinated Debt, before any payment or distribution is made to the Holders or
to the Trustee.
In the event that, notwithstanding the foregoing, any payment or
distribution of assets of the Company of any kind or character, whether in
cash, property or securities, prohibited by the foregoing, shall be received by
the Trustee before all Senior and Subordinated Debt of the Company is paid in
full, or provision is made for such payment in money in accordance with its
terms, such payment or distribution shall be held in trust for the benefit of
and shall be paid over or delivered to the holders of such Senior and
Subordinated Debt or their representative or representatives, or to the trustee
or trustees under any indenture pursuant to which any instruments evidencing
such Senior and Subordinated Debt may have been issued, and their respective
interests may appear, as calculated by the Company, for application to the
payment of all Senior and Subordinated Debt of the Company, as the case may be,
remaining unpaid to the extent necessary to pay such Senior and Subordinated
Debt in full in money in accordance with its terms, after giving effect to any
concurrent payment or distribution to or for the benefit of the holders of such
Senior and Subordinated Debt.
For purposes of this Article Sixteen, the words "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, the
payment of which is subordinated at least to the extent provided in this
Article Sixteen with respect to the Junior Subordinated Debentures to the
payment of all Senior and Subordinated Debt of the Company, as the case may be,
that may at the time be outstanding, provided that (i) such Senior and
Subordinated Debt is assumed by the new corporation, if any, resulting from any
such reorganization or readjustment, and (ii) the rights of the holders of such
Senior and Subordinated Debt are not, without the consent of such holders,
altered by such reorganization or readjustment. The consolidation of the
Company with, or the merger of the Company into, another corporation or the
liquidation or dissolution of the Company following the conveyance or transfer
of its property as an entirety, or substantially as an entirety, to another
corporation upon the terms and conditions provided for in Article Twelve of
this Indenture shall not be deemed a dissolution, winding-up, liquidation or
reorganization for the purposes of this Section 16.3 if such other corporation
shall, as a part of such consolidation, merger, conveyance or transfer, comply
with the conditions stated in Article Twelve of this Indenture. Nothing in
Section 16.2 or in this Section 16.3 shall apply to claims of, or payments to,
the Trustee under or pursuant to Section 9.6 of this Indenture.
16.4 SUBROGATION. Subject to the payment in full of all Senior and
Subordinated Debt of the Company, the rights of the Holders of the Junior
Subordinated Debentures shall be subrogated to the rights of the holders of
such Senior and Subordinated Debt to receive payments or distributions of cash,
property or securities of the Company, as the case may be, applicable to such
Senior and Subordinated Debt until the principal of and interest on the Junior
Subordinated Debentures shall be paid in full; and, for the purposes of such
subrogation, no payments or distributions to the holders of such Senior and
Subordinated Debt of any cash, property or securities to which the Holders of
the Junior Subordinated Debentures or the Trustee would be entitled except for
the provisions of this Article Sixteen, and no payment over pursuant to the
provisions of this Article Sixteen to or for the benefit of the holders of such
Senior and Subordinated Debt by Holders of the Junior Subordinated Debentures
or the Trustee, shall, as between the Company, its creditors other than holders
of Senior and Subordinated Debt of the Company, and the Holders of the Junior
Subordinated Debentures, be deemed to be a payment by the Company to or on
account of such Senior and Subordinated Debt. It is understood that the
provisions of this Article Sixteen are and are intended solely for the purposes
of defining the relative rights of the Holders of the Junior Subordinated
Debentures, on the one hand, and the holders of such Senior and Subordinated
Debt on the other hand.
Nothing contained in this Article Sixteen or elsewhere in this
Indenture or in the Junior Subordinated Debentures is intended to or shall
impair, as between the Company, its creditors other than the holders of Senior
and Subordinated Debt of the Company, and the Holders of the Junior
Subordinated Debentures, the obligation of the Company, which is absolute and
unconditional, to pay to the Holders of the Junior Subordinated Debentures the
4.1-37
<PAGE> 43
principal of and interest on the Junior Subordinated Debentures as and when the
same shall become due and payable in accordance with their terms, or is
intended to or shall affect the relative rights of the Holders of the Junior
Subordinated Debentures and creditors of the Company, other than the holders of
Senior and Subordinated Debt of the Company, nor shall anything herein or
therein prevent the Trustee or the Holder of any Junior Subordinated Debenture
from exercising all remedies otherwise permitted by applicable law upon default
under this Indenture, subject to the rights, if any, under this Article Sixteen
of the holders of such Senior and Subordinated Debt in respect of cash,
property or securities of the Company, as the case may be, received upon the
exercise of any such remedy.
Upon any payment or distribution of assets of the Company referred to
in this Article Sixteen, the Trustee, subject to the provisions of Section 9.1,
and the Holders of the Junior Subordinated Debentures shall be entitled to
conclusively rely upon any order or decree made by any court of competent
jurisdiction in which such dissolution, winding-up, liquidation or
reorganization proceedings are pending, or a certificate of the receiver,
trustee in bankruptcy, liquidation trustee, agent or other Person making such
payment or distribution, delivered to the Trustee or to the Holders of the
Junior Subordinated Debentures, for the purposes of ascertaining the Persons
entitled to participate in such distribution, the holders of Senior and
Subordinated Debt and other indebtedness of the Company, as the case may be,
the amount thereof or payable thereon, the amount or amounts paid or
distributed thereon and all other facts pertinent thereto or to this Article
Sixteen.
16.5 TRUSTEE TO EFFECTUATE SUBORDINATION. Each Holder of Junior
Subordinated Debentures by such Holder's acceptance thereof authorizes and
directs the Trustee on such Holder's behalf to take such action as may be
necessary or appropriate to effectuate the subordination provided in this
Article Sixteen and appoints the Trustee such Holder's attorney-in-fact for any
and all such purposes.
16.6 NOTICE BY THE COMPANY. The Company shall give prompt written
notice to a Responsible Officer of the Trustee of any fact known to the Company
that would prohibit the making of any payment of monies to or by the Trustee in
respect of the Junior Subordinated Debentures pursuant to the provisions of
this Article Sixteen. Notwithstanding the provisions of this Article Sixteen
or any other provision of this Indenture, the Trustee shall not be charged with
knowledge of the existence of any facts that would prohibit the making of any
payment of monies to or by the Trustee in respect of the Junior Subordinated
Debentures pursuant to the provisions of this Article Sixteen, unless and until
a Responsible Officer of the Trustee shall have received written notice thereof
from the Company or a holder or holders of Senior and Subordinated Debt or from
any trustee therefor; and before the receipt of any such written notice, the
Trustee, subject to the provisions of Section 9.1, shall be entitled in all
respects to assume that no such facts exist; provided, however, that if the
Trustee shall not have received the notice provided for in this Section 16.6 at
least two Business Days prior to the date upon which by the terms hereof any
money may become payable for any purpose (including, without limitation, the
payment of the principal of or interest on any Junior Subordinated Debenture),
then, anything herein contained to the contrary notwithstanding, the Trustee
shall have full power and authority to receive such money and to apply the same
to the purposes for which they were received, and shall not be affected by any
notice to the contrary that may be received by it within two Business Days
prior to such date.
The Trustee, subject to the provisions of Section 9.1, shall be
entitled to conclusively rely on the delivery to it of a written notice by a
Person representing himself to be a holder of Senior and Subordinated Debt of
the Company (or a trustee on behalf of such holder), to establish that such
notice has been given by a holder of such Senior and Subordinated Debt or a
trustee on behalf of any such holder or holders. 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 such Senior and Subordinated Debt to
participate in any payment or distribution pursuant to this Article Sixteen,
the Trustee may request such Person to furnish evidence to the reasonable
satisfaction of the Trustee as to the amount of such 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 Sixteen, 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.
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<PAGE> 44
16.7 RIGHTS OF THE TRUSTEE; HOLDERS OF SENIOR AND SUBORDINATED
DEBT. The Trustee in its individual capacity shall be entitled to all the
rights set forth in this Article Sixteen in respect of any Senior and
Subordinated Debt at any time 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.
With respect to the holders of Senior and Subordinated Debt of the
Company, the Trustee undertakes to perform or to observe only such of its
covenants and obligations as are specifically set forth in this Article
Sixteen, and no implied covenants or obligations with respect to the holders of
such Senior and Subordinated Debt shall be read into this Indenture against the
Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the
holders of such Senior and Subordinated Debt and, subject to the provisions of
Section 9.1, the Trustee shall not be liable to any holder of such Senior and
Subordinated Debt if it shall pay over or deliver to Holders of Junior
Subordinated Debentures, the Company or any other Person money or assets to
which any holder of such Senior and Subordinated Debt shall be entitled by
virtue of this Article Sixteen or otherwise.
16.8 SUBORDINATION MAY NOT BE IMPAIRED. No right of any present or
future holder of any Senior and Subordinated Debt of the Company 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 otherwise
be charged with.
Without in any way limiting the generality of the foregoing paragraph,
the holders of Senior and Subordinated Debt of the Company may, at any time and
from time to time, without the consent of or notice to the Trustee or the
Holders of the Junior Subordinated Debentures, without incurring responsibility
to the Holders of the Junior Subordinated Debentures and without impairing or
releasing the subordination provided in this Article Sixteen or the
obligations hereunder of the Holders of the Junior Subordinated Debentures to
the holders of such 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, such Senior and Subordinated Debt, or
otherwise amend or supplement in any manner such Senior and Subordinated Debt
or any instrument evidencing the same or any agreement under which such Senior
and Subordinated Debt is outstanding; (ii) sell, exchange, release or otherwise
deal with any property pledged, mortgaged or otherwise securing such Senior and
Subordinated Debt; (iii) release any Person liable in any manner for the
collection of such Senior and Subordinated Debt; and (iv) exercise or refrain
from exercising any rights against the Company and any other Person.
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed as of the day and year first above written.
VECTRA BANKING CORPORATION
By:
-----------------------------------------
Name: Gary S. Judd
Title: President and Chief Executive Officer
WILMINGTON TRUST COMPANY, AS TRUSTEE
By:
-----------------------------------------
Name:
--------------------------------------
Title:
--------------------------------------
4.1-39
<PAGE> 45
STATE OF COLORADO )
) ss:
CITY AND COUNTY OF DENVER )
On the _______ day of ____________, 1997, before me personally came
Gary S. Judd, to me known, who, being by me duly sworn, did depose and say that
he is the President and Chief Executive Officer of VECTRA BANKING CORPORATION,
one of the corporations described in and which executed the above instrument;
and that he signed his name thereto on behalf of said corporation by authority
of the Board of Directors of said corporation.
Witness my hand and official seal:
---------------------------------------------
Notary Public
My Commission Expires:
-----------------------
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/she is the _______________________ of WILMINGTON TRUST COMPANY,
one of the corporations described in and which executed the above instrument;
and that he/she signed his/her name thereto on behalf of said corporation by
authority of the Board of Directors of said corporation.
Witness my hand and official seal:
---------------------------------------------
Notary Public
My Commission Expires:
-----------------------
4.1-40
<PAGE> 46
EXHIBIT A
(FORM OF FACE OF JUNIOR SUBORDINATED DEBENTURE)
This Junior Subordinated Debenture is a Global Subordinated Debenture
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 Junior
Subordinated Debenture is exchangeable for Junior Subordinated Debentures
registered in the name of a person other than the Depositary or its nominee
only in the limited circumstances described in the Indenture, and no transfer
of this Junior Subordinated Debenture (other than a transfer of this Junior
Subordinated Debenture 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) may be registered except in such limited
circumstances.
Unless this Junior Subordinated Debenture is presented by an
authorized representative of Wilmington Trust Company (Rodney Square North,
1100 North Market Street, Wilmington, Delaware 19890-0001) to the issuer or its
agent for registration of transfer, exchange or payment, and any Junior
Subordinated Debenture issued is registered in the name of Cede & Co. or such
other name as requested by an authorized representative of Wilmington Trust
Company (and any payment hereon is made to Cede & Co. or to such other entity
as is requested by an authorized representative of Wilmington Trust Company),
ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY
PERSON IS WRONGFUL inasmuch the registered owner hereof, Cede & Co., has an
interest herein.
Register Principal Amount:
Registered No. $ 18,041,250
------------------------
CUSIP No. 922398AA0
4.1A-1
<PAGE> 47
VECTRA BANKING CORPORATION
___% JUNIOR SUBORDINATED DEBENTURE
DUE ___________, 2027
Vectra Banking Corporation, a Colorado corporation (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 _____________ Dollars ($___________)
on ____________, 2027 (which date may be shortened as provided in the
Indenture, the "Stated Maturity"), and to pay interest on said principal sum
from ___________, 1997, or from the most recent interest payment date (each
such date, an "Interest Payment Date") to which interest has been paid or duly
provided for, quarterly (subject to deferral as set forth herein) in arrears on
the 15th day of April, July, October, and January in each year commencing July
15, 1997, at the rate of ___% per annum until the principal hereof shall have
become due and payable, and on any overdue principal and (without duplication
and to the extent that payment of such interest is enforceable under applicable
law) on any overdue installment of interest at the same rate per annum
compounded quarterly. The amount of each interest payment due with respect to
the Junior Subordinated Debentures will include amounts accrued through the
date the interest payment is due. The amount of interest payable on any
Interest Payment Date shall be computed on the basis of a 360-day year of
twelve 30-day months. In the event that any date on which interest is payable
on this Junior Subordinated Debenture is not a Business Day, (as defined in the
indenture), then payment of interest payable on such date will be made on the
next succeeding day that is a Business Day (and without any interest or other
payment in respect of any such delay), except that, if such Business Day is in
the next succeeding calendar year, such payment shall be made on the
immediately preceding business day, in each case with the same force and effect
as if made on such date. 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 Junior Subordinated
Debenture (or one or more Predecessor Junior Subordinated Debentures, as
defined in the Indenture) is registered at the close of business on the regular
record date for such interest installment, which shall be the close of business
on the business day next preceding such Interest Payment Date unless otherwise
provided in the Indenture. The principal of and the interest on this Junior
Subordinated Debenture shall be payable at the office or agency of the Trustee
(as defined in the Indenture) maintained for that purpose in any coin or
currency of the United States of America that at the time of payment is legal
tender for payment of public and private debts; provided, however, that payment
of interest may be made at the option of the Company by check mailed to the
Registered Holder (as defined in the Indenture) at such address as shall appear
in the Securities Register (as defined in the Indenture). Notwithstanding the
foregoing, so long as the Holder of this Junior Subordinated Debenture is the
Property Trustee (as defined in the Indenture), the payment of the principal of
and interest on this Junior Subordinated Debenture will be made at such place
and to such account as may be designated by the Property Trustee.
The Stated Maturity may be shortened at any time by the Company to any
date not earlier than ____________, 2002, subject to the Company having
received prior approval of the Federal Reserve (as defined in the Indenture) if
then required under applicable capital guidelines or policies of the Federal
Reserve.
The indebtedness evidenced by this Junior Subordinated Debenture is,
to the extent provided in the Indenture, subordinate and junior in right of
payment to the prior payment in full of all Senior and Subordinated Debt (as
defined in the Indenture), and this Junior Subordinated Debenture is issued
subject to the provisions of the Indenture with respect thereto. Each Holder
of this Junior Subordinated Debenture, by accepting the same, (a) agrees to and
shall be bound by such provisions, (b) authorizes and directs the Trustee on
his or her behalf to take such action as may be necessary or appropriate to
acknowledge or effectuate the subordination so provided and (c) appoints the
Trustee his or her attorney-in-fact for any and all such purposes. Each Holder
hereof, by his or her acceptance hereof, hereby 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.
4.1A-2
<PAGE> 48
This Junior Subordinated Debenture shall not be entitled to any
benefit under the Indenture, be valid or become obligatory for any purpose
until the Certificate of Authentication hereon shall have been signed by or on
behalf of the Trustee.
The provisions of this Junior Subordinated Debenture are continued on
the reverse side hereof and such continued provisions shall for all purposes
have the same effect as though fully set forth at this place.
IN WITNESS WHEREOF, the Company has caused this instrument to be
executed.
Dated: VECTRA BANKING CORPORATION
-----------------------
By:
-----------------------------------------
Name: Gary S. Judd
Title: President and Chief Executive Officer
ATTEST:
By:
-------------------------------------------
Name: Ray L. Nash
Title: Secretary
4.1A-3
<PAGE> 49
[FORM OF CERTIFICATE OF AUTHENTICATION]
CERTIFICATE OF AUTHENTICATION
This is one of the Junior Subordinated Debentures described in the
within-mentioned Indenture.
Dated: WILMINGTON TRUST COMPANY, as Trustee
-----------------------
By:
-----------------------------------
Authorized Signature
4.1A-4
<PAGE> 50
[FORM OF REVERSE OF JUNIOR SUBORDINATED DEBENTURE]
_____% JUNIOR SUBORDINATED DEBENTURE
(CONTINUED)
This Junior Subordinated Debenture is one of the junior subordinated
debentures of the Company (herein sometimes referred to as the "Junior
Subordinated Debentures"), specified in the Indenture, all issued under and
pursuant to a Subordinated Indenture dated as of ____________, 1997 (the
"Indenture") duly executed and delivered between the Company and Wilmington
Trust Company, as Trustee (the "Trustee"), to which Indenture reference is
hereby made for a description of the rights, limitations of rights,
obligations, duties and immunities thereunder of the Trustee, the Company and
the Holders of the Junior Subordinated Debentures. The Junior Subordinated
Debentures are limited in aggregate principal amount as specified in the
Indenture.
Because of the occurrence and continuation of a Special Event (as
defined in the Indenture), in certain circumstances, this Junior Subordinated
Debenture may become due and payable at the option of the Company at the
principal amount together with any interest accrued thereon (the "Redemption
Price"). The Redemption Price shall be paid prior to 2:00 p.m. Denver,
Colorado Time on the date of such redemption or at such earlier time as the
Company determines.
The Company shall have the right to redeem this Junior Subordinated
Debenture at the option of the Company, in whole or in part, from time to time,
on or after ____________, 2002, at a redemption price equal to 100% of the
principal amount to be redeemed plus any accrued but unpaid interest thereon to
the date of such redemption. Any redemption pursuant to this paragraph will be
made upon not less than 30 days nor more than 60 days notice. If the Junior
Subordinated Debentures are only partially redeemed by the Company pursuant to
this paragraph, the Junior Subordinated Debentures will be redeemed pro rata or
by lot or by any other method utilized by the Trustee; provided that if, at the
time of redemption, the Junior Subordinated Debentures are registered as a
Global Subordinated Debenture (as defined in the Indenture), the Depositary (as
defined in the Indenture) shall determine the principal amount of such Junior
Subordinated Debentures held by each Junior Subordinated Debenture Holder to be
redeemed in accordance with its procedures.
In the event of redemption of this Junior Subordinated Debenture in
part only, a new Junior Subordinated Debenture for the unredeemed portion
hereof will be issued in the name of the Holder hereof upon the cancellation
hereof.
In case an Event of Default (as defined in the Indenture), shall have
occurred and be continuing, the principal of all of the Junior Subordinated
Debentures may be declared, and upon such declaration shall become, due and
payable, in the manner, with the effect and subject to the conditions provided
in the Indenture.
The Indenture contains provisions permitting the Company and the
Trustee, with the consent of the Holders of not less than a majority in
aggregate principal amount of the Junior Subordinated Debentures at the time
Outstanding, as defined in the Indenture, to execute supplemental indentures
for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of the Indenture or of any supplemental
indenture or of modifying in any manner the rights of the Holders of the Junior
Subordinated Debentures; provided, however, that no such supplemental indenture
shall (i) change the stated maturity of the Junior Subordinated Debentures
except as provided in the Indenture, or reduce the principal amount thereof, or
reduce the rate or extend the time of payment of interest thereon, without the
consent of the Holder of each Junior Subordinated Debenture so affected, or
(ii) reduce the aforesaid percentage of Junior Subordinated Debentures, the
Holders of which are required to consent to any such supplemental indenture,
without the consent of the Holders of each Junior Subordinated Debenture then
Outstanding and affected thereby. The Indenture also contains provisions
permitting the Holders of a majority in aggregate principal amount of the
Junior Subordinated Debentures at the time Outstanding, on behalf of all of the
Holders of the Junior Subordinated Debentures, to waive any past default in the
performance of any of the covenants
4.1A-5
<PAGE> 51
contained in the Indenture, or established pursuant to the Indenture, and its
consequences, except a default in the payment of the principal of or interest
on any of the Junior Subordinated Debentures. Any such consent or waiver by
the registered Holder of this Junior Subordinated Debenture (unless revoked as
provided in the Indenture) shall be conclusive and binding upon such Holder and
upon all future Holders and owners of this Junior Subordinated Debenture and of
any Junior Subordinated Debenture issued in exchange herefor or in place hereof
(whether by registration of transfer or otherwise), irrespective of whether or
not any notation of such consent or waiver is made upon this Junior
Subordinated Debenture.
No reference herein to the Indenture and no provision of this Junior
Subordinated Debenture or of the Indenture shall alter or impair the obligation
of the Company, which is absolute and unconditional, to pay the principal of
and interest on this Junior Subordinated Debenture at the time and place and at
the rate and in the money herein prescribed.
The Company shall have the right at any time during the term of the
Junior Subordinated Debentures and from time to time to extend the interest
payment period of such Junior Subordinated Debentures for up to 20 consecutive
quarters (an "Extended Interest Payment Period"), at the end of which period
the Company shall pay all interest then accrued and unpaid (together with
interest thereon at the rate specified for the Junior Subordinated Debentures
to the extent that payment of such interest is enforceable under applicable
law). Before the termination of any such Extended Interest Payment Period, the
Company may further extend such Extended Interest Payment Period, provided that
such Extended Interest Payment Period together with all such further extensions
thereof shall not exceed 20 consecutive quarters or extend beyond the Stated
Maturity. At the termination of any such Extended Interest Payment Period and
upon the payment of all accrued and unpaid interest and any additional amounts
then due, the Company may commence a new Extended Interest Payment Period.
The Company has agreed that if at any 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 to which the Company shall not have taken reasonable
steps to cure, or (ii) the Company shall have given notice of its election of
an Extended Interest Payment Period as provided herein and shall not have
rescinded such notice, or such Extended Interest Payment Period, or any
extension thereof, shall be continuing; or (iii) while the Junior Subordinated
Debentures are held by the Trust, the Company shall be in default with respect
to its payment of any obligation under the Capital Securities Guarantee, then
the Company 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 the Company'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
the Company (including 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 the Company of the debt
securities of any subsidiary of the Company if such guarantee ranks pari passu
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 shareholders' rights plan, or the
issuance of stock under any such plan in the future or the redemption or
repurchase of any such rights pursuant thereto, (c) payments under the Capital
Securities 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).
As provided in the Indenture and subject to certain limitations
therein set forth, this Junior Subordinated Debenture is transferable by the
registered Holder hereof on the Securities Register of the Company, upon
surrender of this Junior Subordinated Debenture for registration of transfer at
the office or agency of the Trustee accompanied by a written instrument or
instruments of transfer in form satisfactory to the Company or the Trustee duly
executed by the registered Holder hereof or such Holder's attorney duly
authorized in writing, and thereupon one or more new Junior Subordinated
Debentures of authorized denominations and for the same aggregate principal
amount will be issued to the designated transferee or transferees. No service
charge will be made for any such transfer, but the
4.1A-6
<PAGE> 52
Company may require payment of a sum sufficient to cover any tax or other
governmental charge payable in relation thereto.
Prior to due presentment for registration of transfer of this Junior
Subordinated Debenture, the Company, the Trustee, any paying agent and the
Securities Registrar (as defined in the Indenture) may deem and treat the
Registered Holder hereof as the absolute owner hereof (whether or not this
Junior Subordinated Debenture shall be overdue and notwithstanding any notice
of ownership or writing hereon made by anyone other than the Securities
Registrar) for the purpose of receiving payment of or on account of the
principal hereof and interest due hereon and for all other purposes, and
neither the Company nor the Trustee nor any paying agent nor any Securities
Registrar shall be affected by any notice to the contrary.
No recourse shall be had for the payment of the principal of or the
interest on this Junior Subordinated Debenture, or for any claim based hereon,
or otherwise in respect hereof, or based on or in respect of the Indenture,
against any incorporator, stockholder, officer or director, past, present or
future, as such, of the Company or of any predecessor or successor corporation,
whether by virtue of any constitution, statute or rule of law, or by the
enforcement of any assessment or penalty or otherwise, all such liability
being, by the acceptance hereof and as part of the consideration for the
issuance hereof, expressly waived and released.
The Junior Subordinated Debentures are issuable only in registered
form without coupons in denominations of $25 and any integral multiple thereof.
This Global Subordinated Debenture is exchangeable for Junior Subordinated
Debentures in definitive form only under certain limited circumstances set
forth in the Indenture. Junior Subordinated Debentures so issued are issuable
only in registered form without coupons in denominations of $25 and any
integral multiple thereof.
All terms used in this Junior Subordinated Debenture that are defined
in the Indenture shall have the meanings assigned to them in the Indenture.
4.1A-7
<PAGE> 53
EXHIBIT 4.3
CERTIFICATE OF TRUST
OF
VBC CAPITAL I
This Certificate of Trust of VBC CAPITAL I (the "Trust"), dated April
4, 1997, is being duly executed and filed by Wilmington Trust Company, a
Delaware banking corporation, as trustee, 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 VBC Capital I.
2. DELAWARE TRUSTEE. The name and business address of the trustee of the
Trust in the State of Delaware is Wilmington Trust Company, Rodney Square
North, 1100 North Market Street, Wilmington, Delaware 19890-0001, Attn:
Corporate Trust Administration.
3. EFFECTIVE DATE. This Certificate of Trust shall be effective upon its
filing.
IN WITNESS WHEREOF, the undersigned, being the trustee of the Trust,
has executed this Certificate of Trust as of the date first above written.
WILMINGTON TRUST COMPANY,
as Trustee
By:
-----------------------------------
Name:
Title:
4.3-1
<PAGE> 54
EXHIBIT 4.4
TRUST AGREEMENT
TRUST AGREEMENT, dated as of April 4, 1997, by and between Vectra
Banking Corporation, a Colorado corporation, as "Depositor," and Wilmington
Trust Company, a Delaware banking corporation, as "Trustee."
Section 1. The Trust. The trust created hereby shall be known as VBC
Capital I (the "Trust") in which name the Trustee, or the Depositor to the
extent provided herein, may conduct the business of the Trust, make and execute
contracts, and sue and be sued.
Section 2. The Trust Estate. The Depositor hereby assigns,
transfers, conveys and sets over to the Trustee the sum of $10.00. The Trustee
hereby acknowledges receipt of such amount in trust from the Depositor, which
amount shall constitute the initial trust estate. The Trustee hereby declares
that it will hold the trust estate in trust for the Depositor. 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 Trustee is hereby
authorized and directed to execute and file a certificate of trust with the
Delaware Secretary of State in accordance with the provisions of the Business
Trust Act.
Section 3. Amended and Restated Trust Agreement. The Depositor, the
Trustee and certain other parties will enter into an amended and restated Trust
Agreement, satisfactory to each such party and substantially in the form to be
included as an exhibit to the 1933 Act Registration Statement (as defined
below), to provide for the contemplated operation of the Trust created hereby
and the issuance of the Capital Securities (as defined below) and common
securities of the Trust to be referred to therein. Prior to the execution and
delivery of such amended and restated Trust Agreement, the Trustee shall not
have any duty or obligation hereunder or with respect to the trust estate,
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.
Section 4. Certain Authorizations. The Depositor and the Trustee
hereby authorize and direct the Depositor, as the sponsor of the Trust, (i) to
file with the Securities and Exchange Commission (the "Commission") and
execute, in each case on behalf of the Trust, (a) the Registration Statement on
Form S-2 (the "1933 Act Registration Statement"), including any pre-effective
or post-effective amendments to such 1933 Act Registration Statement (including
the prospectus and exhibits contained therein), relating to the registration
under the Securities Act of 1933, as amended, of the preferred securities of
the Trust (the "Capital Securities") and certain other securities of the
Depositor and (b) a Registration Statement on Form 8-A (the "1934 Act
Registration Statement") (including all pre-effective and post-effective
amendments thereto) relating to the registration of the Capital Securities of
the Trust under the Securities Exchange Act of 1934, as amended; (ii) to file
with the National Association of Securities Dealers, Inc. (the "NASD") and
execute on behalf of the Trust a listing application or applications and all
other applications, statements, certificates, agreements and other instruments
as shall be necessary or desirable to cause the Capital Securities to be listed
on 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 the Depositor, on behalf of the Trust, may deem necessary or desirable to
register the Capital Securities under the securities or "Blue Sky" laws; and
(iv) to execute on behalf of the Trust such Underwriting Agreements with one or
more underwriters relating to the offering of the Capital Securities as the
Depositor, on behalf of the Trust, may deem necessary or desirable. In the
event that any filing referred to in clauses (i), (ii) and (iii) above is
required by the rules and regulations of the Commission, the NASD or state
securities or "Blue Sky" laws to be executed on behalf of the Trust by a
Trustee, the Depositor and any Trustee appointed pursuant to Section 6 hereof
are hereby authorized to join in any such filing and to execute on behalf of
the Trust any and all of the foregoing.
Section 5. Counterparts. This Trust Agreement may be executed in one
or more counterparts, each of which shall be deemed an original but all of
which together shall constitute one and the same instrument.
4.4-1
<PAGE> 55
Section 6. Trustee. The number of Trustees initially shall be one
and thereafter the number of Trustees shall be such number as shall be fixed
from time to time by a written instrument signed by the Depositor, which may
increase or decrease the number of Trustees; provided, however, that to the
extent required by the Business Trust Act, one Trustee shall be either a
natural person who is a resident of the State of Delaware or, if not a natural
person, an entity which has its principal place of business in the State of
Delaware and otherwise meets the requirements of applicable Delaware law.
Subject to the foregoing, the Depositor is entitled to appoint or remove
without cause any Trustee at any time. The Trustee may resign upon thirty
days' prior notice to the Depositor.
Section 7. Governing Law. This Trust Agreement shall be governed by,
and construed in accordance with, the laws of the State of Delaware (without
regard to conflicts of law of 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.
VECTRA BANKING CORPORATION
as Depositor
By:
-----------------------------------------
Name: Tracie L. Davis
Title: Director of Financial and Reporting
and Analysis
WILMINGTON TRUST COMPANY,
as Trustee
By:
-----------------------------------------
Name:
Title:
4.4-2
<PAGE> 1
EXHIBIT 4.5
VBC CAPITAL I
AMENDED AND RESTATED
TRUST AGREEMENT
AMONG
VECTRA BANKING CORPORATION, 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> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
ARTICLE I. 1
DEFINED TERMS 1
SECTION 101. DEFINITIONS 1
ARTICLE II.
ESTABLISHMENT OF THE TRUST 8
SECTION 201. NAME 8
SECTION 202. OFFICE OF THE DELAWARE TRUSTEE; PRINCIPAL PLACE OF BUSINESS 8
SECTION 203. INITIAL CONTRIBUTION OF TRUST PROPERTY; ORGANIZATIONAL
EXPENSES 8
SECTION 204. ISSUANCE OF THE CAPITAL SECURITIES 8
SECTION 205. ISSUANCE OF THE COMMON SECURITIES; SUBSCRIPTION AND
PURCHASE OF JUNIOR SUBORDINATED DEBENTURES 9
SECTION 206. DECLARATION OF TRUST 9
SECTION 207. AUTHORIZATION TO ENTER INTO CERTAIN TRANSACTIONS 9
SECTION 208. ASSETS OF TRUST 12
SECTION 209. TITLE TO TRUST PROPERTY 12
ARTICLE III.
PAYMENT ACCOUNT 12
SECTION 301. PAYMENT ACCOUNT 12
ARTICLE IV.
DISTRIBUTIONS; REDEMPTION 12
SECTION 401. DISTRIBUTIONS 12
SECTION 402. REDEMPTION 13
SECTION 403. SUBORDINATION OF COMMON SECURITIES 15
SECTION 404. PAYMENT PROCEDURES 15
SECTION 405. TAX RETURNS AND REPORTS 15
SECTION 406. PAYMENT OF TAXES, DUTIES, ETC. OF THE TRUST 15
SECTION 407. PAYMENTS UNDER INDENTURE 15
ARTICLE V.
TRUST SECURITIES CERTIFICATES 16
SECTION 501. INITIAL OWNERSHIP 16
SECTION 502. THE TRUST SECURITIES CERTIFICATES 16
SECTION 503. EXECUTION AND DELIVERY OF TRUST SECURITIES CERTIFICATES 16
SECTION 504. REGISTRATION OF TRANSFER AND EXCHANGE OF CAPITAL
SECURITIES CERTIFICATES 16
SECTION 505. MUTILATED, DESTROYED, LOST OR STOLEN TRUST SECURITIES
CERTIFICATES 17
SECTION 506. PERSONS DEEMED SECURITYHOLDERS 17
SECTION 507. ACCESS TO LIST OF SECURITYHOLDERS' NAMES AND ADDRESSES 17
SECTION 508. MAINTENANCE OF OFFICE OR AGENCY 17
SECTION 509. APPOINTMENT OF PAYING AGENT 18
SECTION 510. OWNERSHIP OF COMMON SECURITIES BY DEPOSITOR 18
SECTION 511. BOOK-ENTRY CAPITAL SECURITIES CERTIFICATES; COMMON
SECURITIES CERTIFICATE 18
</TABLE>
4.5-i
<PAGE> 3
<TABLE>
<S> <C>
SECTION 512. NOTICES TO CLEARING AGENCY 19
SECTION 513. DEFINITIVE CAPITAL SECURITIES CERTIFICATES 19
SECTION 514. RIGHTS OF SECURITYHOLDERS 19
ARTICLE VI.
ACTS OF SECURITYHOLDERS; MEETINGS; VOTING 20
SECTION 601. LIMITATIONS ON VOTING RIGHTS 20
SECTION 602. NOTICE OF MEETINGS 21
SECTION 603. MEETINGS OF HOLDERS OF CAPITAL SECURITIES 21
SECTION 604. VOTING RIGHTS 21
SECTION 605. PROXIES, ETC. 21
SECTION 606. SECURITYHOLDER ACTION BY WRITTEN CONSENT 22
SECTION 607. RECORD DATE FOR VOTING AND OTHER PURPOSES 22
SECTION 608. ACTS OF SECURITYHOLDERS 22
SECTION 609. INSPECTION OF RECORDS 23
ARTICLE VII.
REPRESENTATIONS AND WARRANTIES 23
SECTION 701. REPRESENTATIONS AND WARRANTIES OF THE BANK AND THE
PROPERTY TRUSTEE 23
SECTION 702. REPRESENTATIONS AND WARRANTIES OF THE DELAWARE BANK
AND THE DELAWARE TRUSTEE 24
SECTION 703. REPRESENTATIONS AND WARRANTIES OF DEPOSITOR 24
ARTICLE VIII.
THE TRUSTEES 25
SECTION 801. CERTAIN DUTIES AND RESPONSIBILITIES 25
SECTION 802. CERTAIN NOTICES 26
SECTION 803. CERTAIN RIGHTS OF PROPERTY TRUSTEE 26
SECTION 804. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF SECURITIES 28
SECTION 805. MAY HOLD SECURITIES 28
SECTION 806. COMPENSATION; INDEMNITY; FEES 28
SECTION 807. CORPORATE PROPERTY TRUSTEE REQUIRED; ELIGIBILITY OF TRUSTEES 28
SECTION 808. CONFLICTING INTERESTS 29
SECTION 809. CO-TRUSTEES AND SEPARATE TRUSTEE 29
SECTION 810. RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR 30
SECTION 811. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR 31
SECTION 812. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS 31
SECTION 813. PREFERENTIAL COLLECTION OF CLAIMS AGAINST DEPOSITOR OR TRUST 32
SECTION 814. REPORTS BY PROPERTY TRUSTEE 32
SECTION 815. REPORTS TO THE PROPERTY TRUSTEE 32
SECTION 816. EVIDENCE OF COMPLIANCE WITH CONDITIONS PRECEDENT 32
SECTION 817. NUMBER OF TRUSTEES 32
SECTION 818. DELEGATION OF POWER 33
SECTION 819. VOTING 33
ARTICLE IX.
TERMINATION, LIQUIDATION AND MERGER 33
SECTION 901. TERMINATION UPON EXPIRATION DATE 33
SECTION 902. EARLY TERMINATION 33
SECTION 903. TERMINATION 33
</TABLE>
4.5-ii
<PAGE> 4
<TABLE>
<S> <C>
SECTION 904. LIQUIDATION 34
SECTION 905. MERGERS, CONSOLIDATIONS, AMALGAMATIONS OR REPLACEMENTS
OF THE TRUST 35
ARTICLE X.
MISCELLANEOUS PROVISIONS 36
SECTION 1001. LIMITATION OF RIGHTS OF SECURITYHOLDERS 36
SECTION 1002. AMENDMENT 36
SECTION 1003. SEPARABILITY 37
SECTION 1004. GOVERNING LAW 37
SECTION 1005. PAYMENTS DUE ON NON-BUSINESS DAY 37
SECTION 1006. SUCCESSORS 37
SECTION 1007. HEADINGS 37
SECTION 1008. REPORTS, NOTICES AND DEMANDS 37
SECTION 1009. AGREEMENT NOT TO PETITION 38
SECTION 1010. TRUST INDENTURE ACT; CONFLICT WITH TRUST INDENTURE ACT 38
SECTION 1011. ACCEPTANCE OF TERMS OF TRUST AGREEMENT, GUARANTEE
AND INDENTURE 38
Exhibit A Certificate of Trust
Exhibit B Form of Certificate Depository Agreement
Exhibit C Form of Common Securities Certificate
Exhibit D Form of Expense Agreement
Exhibit E Form of Capital Securities Certificate
</TABLE>
4.5-iii
<PAGE> 5
AMENDED AND RESTATED TRUST AGREEMENT, dated as of ______, 1997, among
(i) Vectra Banking Corporation, a Colorado corporation (including any
successors or assigns, the "Depositor"), (ii) Wilmington Trust Company, a
Delaware banking corporation duly organized and existing under the laws of the
State of Delaware, as property trustee (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 duly
organized and existing under the laws of the State of Delaware, as Delaware
trustee (the "Delaware Trustee," and, in its separate corporate capacity and
not in its capacity as Delaware Trustee, the "Delaware Bank"), (iv) Gary S.
Judd, an individual, and Ray L. Nash, an individual, and Tracie L. Davis, an
individual, each of whose address is c/o Vectra Banking Corporation (each an
"Administrative Trustee" and collectively the "Administrative Trustees") (the
Property Trustee, the Delaware Trustee and the Administrative Trustees referred
to collectively as the "Trustees") and (v) the several Holders, as hereinafter
defined.
WITNESSETH:
WHEREAS, the Depositor and the Delaware Trustee have heretofore duly
declared and established a business trust pursuant to the Delaware Business
Trust Act by the entering into of that certain Trust Agreement, dated as of
April 4, 1997 (the "Original Trust Agreement"), and by the execution and
filing by the Delaware Trustee with the Secretary of State of the State of
Delaware of the Certificate of Trust, filed on April 4, 1997, the form of which
is attached as EXHIBIT A; and
WHEREAS, the Depositor and the Delaware Trustee 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 Capital
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 Junior Subordinated Debentures, (iv) the appointment of the
Property Trustee, and (v) 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:
ARTICLE I.
DEFINED TERMS
SECTION 101. 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.
4.5-1
<PAGE> 6
"Accelerated Maturity Date" has the meaning set forth in Section 2.2
of the Indenture.
"Act" has the meaning specified in Section 608.
"Additional Amount" means, with respect to Trust Securities of a given
Liquidation Amount and/or a given period, the amount of additional interest
accrued on interest in arrears and paid by the Depositor on a Like Amount of
Junior Subordinated Debentures for such period.
"Additional Sums" has the meaning specified in Section 2.5 of the
Indenture.
"Administrative Trustee" means each of Gary S. Judd, Ray L. Nash, and
Tracie L. Davis, 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 Administrative 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.
"Bankruptcy Event" means, with respect to any Person:
(a) the entry of a decree or order by a court having jurisdiction
in the premises adjudging such Person a bankrupt or insolvent, or approving as
properly filed a petition seeking liquidation or reorganization of or in
respect of such Person under the Federal Bankruptcy Code or any other similar
applicable Federal or State law, and the continuance of any such decree or
order unvacated and unstayed for a period of 90 days; or the commencement of an
involuntary case under the Federal Bankruptcy Code in respect of such Person,
which shall continue undismissed for a period of 90 days or entry of an order
for relief in such case; or the entry of a decree or order of a court having
jurisdiction in the premises for the appointment on the ground of insolvency or
bankruptcy of a receiver, custodian, liquidator, trustee or assignee in
bankruptcy or insolvency of such Person or of its property, or for the winding
up or liquidation of its affairs, and such decree or order shall have remained
in force unvacated and unstayed for a period of 90 days; or
(b) the institution by such Person of proceedings to be
adjudicated a voluntary bankrupt, or the consent by such Person to the filing
of a bankruptcy proceeding against it, or the filing by such Person of a
petition or answer or consent seeking liquidation or reorganization under the
Federal Bankruptcy Code or other similar applicable Federal or State law, or
the consent by such Person to the filing of any such petition or to the
appointment on the ground of insolvency or bankruptcy of a receiver or
custodian or liquidator or trustee or assignee in bankruptcy or insolvency of
such Person or of its property, or such Person shall make a general assignment
for the benefit of creditors.
"Bankruptcy Laws" has the meaning specified in Section 1009.
"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 Trustee.
4.5-2
<PAGE> 7
"Book-Entry Capital Securities Certificates" means certificates
representing Capital Securities issued in global, fully registered form to the
Clearing Agency as described in Section 511.
"Business Day" means a day other than (a) a Saturday or Sunday, (b) a
day on which banking institutions in the State of Colorado are authorized or
required by law or executive order to remain closed, or (c) a day on which the
Property Trustee's Corporate Trust Office or the Corporate Trust Office of the
Debenture Trustee is closed for business.
"Capital Security" means an undivided beneficial interest in the
assets of the Trust, designated "____% Cumulative Capital Securities," 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.
"Capital Securities Certificate" means a certificate evidencing
ownership of Capital Securities, substantially in the form attached as EXHIBIT
E.
"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, 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 Securities Exchange Act of 1934, as
amended. The Depositary 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.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the Securities and Exchange Commission, as from
time to time constituted, created under the Securities Exchange Act of 1934, as
amended, or, if at any time after the execution of this Trust Agreement 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 a common 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 the principal corporate trust office of
the Property Trustee located at Rodney Square North, 1100 North Market Street,
Wilmington, Delaware, 19890-0001, Attn: Corporate Trust Administration.
"Debenture Event of Default" means an "Event of Default" as defined in
the Indenture.
4.5-3
<PAGE> 8
"Debenture Redemption Date" means, with respect to any Junior
Subordinated Debentures to be redeemed under the Indenture, the date fixed for
redemption under the Indenture.
"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.
"Definitive Capital Securities Certificates" means either or both (as
the context requires) of (a) Capital Securities Certificates issued as
Book-Entry Capital Securities Certificates as provided in Section 511(a), and
(b) Capital Securities Certificates issued in certificated, fully registered
form as provided in Section 513.
"Delaware Bank" has the meaning specified in the preamble to this
Trust Agreement.
"Delaware Business Trust Act" means Chapter 38 of Title 12 of the
Delaware Code, 12 Delaware Code Sections 3801 et. seq. as it may be amended
from time to time.
"Delaware Trustee" means the commercial bank or trust company
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 Delaware 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 401(a).
"Distributions" means amounts payable in respect of the Trust
Securities as provided in Section 401.
"Event of Default" means any one of the following events that shall
have occurred and be continuing (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; or
(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
(c) default by the Trust in the payment of any Redemption Price of
any Trust Security when it becomes due and payable; or
(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 of
which or the 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 Amount of the
Outstanding Capital Securities a written notice specifying such default or
breach and requiring it to be remedied and stating that such notice is a
"Notice of Default" 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.
4.5-4
<PAGE> 9
"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 901.
"Extension Period" means the "Extended Interest Payment Period" as
defined in the Indenture.
"Global Subordinated Debenture" has the meaning specified in the
Indenture.
"Guarantee" means the Capital Securities 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 Capital Securities, as amended from time to
time.
"Holder" means a Securityholder.
"Indenture" means the Subordinated Indenture, dated as of __________,
1997, between the Depositor and the Debenture Trustee, as trustee, as amended
or supplemented from time to time.
"Investment Company Act" means the Investment Company Act of 1940, as
amended.
"Investment Company Event" means the receipt by the Depositor and the
Trust of an Opinion of Counsel experienced in such matters to the effect that,
as a result of the occurrence of a change in law or regulation or a change in
interpretation or application of law or regulation by any legislative body,
court, governmental agency or regulatory authority (a "Change in Investment
Company Act Law"), the Trust is or will be considered an "investment company"
that is required to be registered under the Investment Company Act, which
Change in Investment Company Act Law becomes effective on or after the date of
original issuance of the Capital Securities under this Trust Agreement.
"Junior Subordinated Debentures" means the $18,041,250 aggregate
principal amount of the Depositor's ____% Junior Subordinated Debentures due
2027, issued pursuant to the Indenture.
"Lien" means any lien, pledge, charge, encumbrance, mortgage, deed of
trust, adverse ownership interest, 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 Junior Subordinated Debentures to be contemporaneously redeemed in
accordance with the Indenture and the proceeds of which will be used to pay the
Redemption Price of such Trust Securities and (b) with respect to a
distribution of Junior Subordinated Debentures to Holders of Trust Securities
in connection with a termination or liquidation of the Trust, 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.
"Liquidation Amount" means the stated amount of $25 per Trust
Security.
"Liquidation Date" means the date on which Junior Subordinated
Debentures are to be distributed to Holders of Trust Securities in connection
with a termination and liquidation of the Trust pursuant to Section 904(a).
"Liquidation Distribution" has the meaning specified in Section
904(d).
"Maturity Date" has the meaning set forth in Section 2.2 of the
Indenture.
4.5-5
<PAGE> 10
"Officers' Certificate" means a certificate signed by the President or
a Vice President and by the Chief Financial Officer or the Controller or an
Assistant Controller or 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 816 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 Capital Securities, means, as
of the date of determination, all Capital Securities theretofore executed and
delivered under this Trust Agreement, except:
(a) Capital Securities theretofore canceled by the Property
Trustee or delivered to the Property Trustee for cancellation;
(b) Capital 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 Capital Securities; provided that,
if such Capital Securities are to be redeemed, notice of such redemption has
been duly given pursuant to this Trust Agreement; and
(c) Capital Securities which have been paid or in exchange for or
in lieu of which other Capital Securities have been executed and delivered
pursuant to Sections 504, 505, 511 and 513; provided, however, that in
determining whether the Holders of the requisite Liquidation Amount of the
Outstanding Capital Securities have given any request, demand, authorization,
direction, notice, consent or waiver hereunder, Capital 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 (i) in determining
whether any Trustee shall be protected in relying upon any such request,
demand, authorization, direction, notice, consent or waiver, only Capital
Securities that such Trustee knows to be so owned shall be so disregarded and
(ii) the foregoing shall not apply at any time when all of the Outstanding
Capital Securities are owned by the Depositor, one or more of the Trustees
and/or any such Affiliate. Capital 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 as to such
Capital Securities so owned.
"Owner" means each Person who is the beneficial owner of a Book-Entry
Capital Securities Certificate as reflected in the records of the Clearing
Agency or, if a Clearing Agency Participant is not the Owner, then as reflected
4.5-6
<PAGE> 11
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 509 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 Junior Subordinated Debentures will be held and from which the
Property Trustee shall make payments to the Securityholders in accordance with
Sections 401 and 402.
"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.
"Property Trustee" means the commercial bank or trust company
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 Maturity Date
of the Junior Subordinated Debentures shall be a Redemption Date for a Like
Amount of Trust Securities.
"Redemption Price" means, with respect to any Trust Security to be
redeemed, the Liquidation Amount of such Trust Security, plus accumulated and
unpaid Distributions to the Redemption Date allocated on a pro rata basis
(based on Liquidation Amounts) among the Trust Securities to be redeemed.
"Relevant Trustee" shall have the meaning specified in Section 810.
"Securities Register" and "Securities Registrar" have the respective
meanings specified in Section 504.
"Securityholder" means a Person in whose name a Trust Security or
Securities is registered in the Securities Register; any such Person is a
beneficial owner within the meaning of the Delaware Business Trust Act.
"Tax Event" means the receipt by the Depositor or the Trust of an
Opinion of Counsel experienced in such matters to the effect that, as a result
of any amendment to, or change (including any announced prospective change) in,
the laws (or any regulations thereunder) of the United States or any political
subdivision or taxing authority thereof or therein, or as a result of any
official administrative pronouncement or judicial decision interpreting or
applying such laws or regulations, which amendment or change is effective or
which pronouncement or decision is announced on or after the date of issuance
of the Capital Securities under this Trust Agreement, or the Junior
Subordinated Debentures under the Indenture, as the case may be, there is more
than an insubstantial risk that (i) the Trust is, or will be within 90 days
after the date of such Opinion of Counsel, subject to United States federal
income tax with respect to income received or accrued on the Junior
Subordinated Debentures, (ii) interest payable by the Depositor on the Junior
Subordinated Debentures is not, or within 90 days after the date of such
Opinion of Counsel will not be, deductible by the Depositor, in whole or in
part, for United States federal income tax purposes or (iii) the Trust is, or
will be within 90 days after the date of such Opinion of Counsel, subject to
more than a de minimis amount of other taxes, duties, assessments or other
governmental charges.
"Trust" means the Delaware business trust created and continued hereby
and identified on the cover page to this Trust Agreement.
4.5-7
<PAGE> 12
"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 all exhibits hereto, including, 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 Trust Agreement 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 Junior Subordinated 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 Capital
Securities.
"Trust Securities Certificate" means any one of the Common Securities
Certificates or the Capital Securities Certificates.
"Trustee" or "Trustees" means, individually or collectively, any of
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 Underwriters named
therein.
ARTICLE II.
ESTABLISHMENT OF THE TRUST
SECTION 201. NAME. The Trust created and continued hereby shall be
known as "VBC Capital I," 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 engage in the
transactions contemplated hereby, make and execute contracts and other
instruments on behalf of the Trust and sue and be sued.
SECTION 202. 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 Administration, or such other address in the State
of 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 Vectra Banking Corporation, 1650 South Colorado Boulevard, Suite 320,
Denver, Colorado 80222.
SECTION 203. INITIAL CONTRIBUTION OF TRUST PROPERTY; ORGANIZATIONAL
EXPENSES. The Trustees acknowledge 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 204. ISSUANCE OF THE CAPITAL SECURITIES. On ____________,
1997, the Depositor and an Administrative Trustee, on behalf of the Trust and
pursuant to the Original Trust Agreement, executed and delivered the
Underwriting Agreement. Contemporaneously with the execution and delivery of
this Trust Agreement,
4.5-8
<PAGE> 13
an Administrative Trustee, on behalf of the Trust, shall execute in accordance
with Section 502 and deliver, in accordance with the Underwriting Agreement,
Capital Securities Certificates, registered in the name of the nominee of the
initial Clearing Agency, in an aggregate amount of Capital Securities having an
aggregate Liquidation Amount of $17,500,000 against receipt of the aggregate
purchase price of such Capital Securities of $17,500,000, which amount such
Administrative Trustee shall promptly deliver to the Property Trustee.
SECTION 205. ISSUANCE OF THE COMMON SECURITIES; SUBSCRIPTION AND
PURCHASE OF JUNIOR SUBORDINATED 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 502 and deliver
to the Depositor Common Securities Certificates, registered in the name of the
Depositor, in an aggregate amount of Common Securities having an aggregate
Liquidation Amount of $541,250 against payment by the Depositor of such
amount. Contemporaneously therewith, an Administrative Trustee, on behalf of
the Trust, shall subscribe to and purchase from the Depositor Junior
Subordinated Debentures, registered in the name of the Property Trustee on
behalf of the Trust and having an aggregate principal amount equal to
$541,250, and, in satisfaction of the purchase price for such Junior
Subordinated Debentures, the Property Trustee, on behalf of the Trust, shall
deliver to the Depositor the sum of $541,250.
SECTION 206. 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 Junior Subordinated Debentures, and (b)
to engage in those activities necessary, convenient 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 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 207. AUTHORIZATION TO ENTER INTO CERTAIN TRANSACTIONS.
(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 Article VIII, and in accordance
with the following provisions (i) and (ii), the Administrative Trustees shall
have the authority to enter into all transactions and agreements determined by
the Administrative Trustees to be appropriate in exercising the authority,
express or implied, otherwise granted to the Administrative 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,
acting singly or jointly, 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 or documents as may be necessary or
desirable in connection with the purposes and function of the
Trust;
(C) assisting in the registration of the Capital
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;
4.5-9
<PAGE> 14
(D) assisting in the listing of the Capital
Securities upon the Nasdaq National Market or such securities
exchange or exchanges as shall be determined by the Depositor
and, if required, the registration of the Capital Securities
under the Securities Exchange Act of 1934, as amended, 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 Junior Subordinated 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) 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;
(H) to take all action that may be necessary or
appropriate for the preservation and the continuation of the
Trust's valid existence, rights, franchises and privileges as
a statutory business trust under the laws of the State of
Delaware and of each other jurisdiction in which such
existence is necessary to protect the limited liability of the
Holders of the Capital Securities or to enable the Trust to
effect the purposes for which the Trust was created; and
(I) the taking of any action incidental to the
foregoing as the Administrative 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 Junior Subordinated
Debentures;
(C) the collection of interest, principal and any
other payments made in respect of the Junior Subordinated
Debentures in the Payment Account;
(D) the distribution of amounts owed to the
Securityholders in respect of the Trust Securities in
accordance with the terms of this Trust Agreement;
(E) the exercise of all of the rights, powers and
privileges of a holder of the Junior Subordinated Debentures;
(F) the sending of notices of default and other
information regarding the Trust Securities and the Junior
Subordinated 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;
4.5-10
<PAGE> 15
(H) to the extent provided in this Trust
Agreement, the winding up of the affairs of and liquidation of
the Trust;
(I) after an Event of Default 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
207(a)(ii), the Property Trustee shall have none of the
duties, liabilities, powers or the authority of the
Administrative Trustees set forth in Section 207(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 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 Capital
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 Capital
Securities and the Junior Subordinated Debentures, 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
Capital Securities and to do any and all such acts, other than actions
which must be taken by or on behalf of the Trust, and advise the
Trustees of actions they must take on behalf of the Trust, and prepare
for execution and filing 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 Nasdaq National Market
or a national stock exchange or other organizations for listing upon
notice of issuance of any Capital Securities and to file or cause an
Administrative Trustee to file thereafter with such exchange or
organization such notifications and documents as may be necessary from
time to time;
(iv) if required, 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
Capital Securities under Section 12(b) or 12(g) of the Exchange Act,
including any amendments thereto;
4.5-11
<PAGE> 16
(v) the negotiation of the terms of, and the execution
and delivery of, the Underwriting Agreement providing for the sale of
the Capital Securities; and
(vi) the taking of any other actions necessary or
desirable to carry out any of the foregoing activities.
(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 Investment Company
Act, will be classified as a "grantor trust" and not 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 the Depositor
for United States federal income tax purposes. In this connection, subject to
Section 1002, the Depositor and the Administrative Trustees are authorized to
take any action, not inconsistent with applicable law or this Trust Agreement,
that each of the Depositor and the Administrative Trustees determines in their
discretion to be necessary or desirable for such purposes.
SECTION 208. ASSETS OF TRUST. The assets of the Trust shall consist
of the Trust Property.
SECTION 209. 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 Securityholders in accordance with this Trust Agreement.
ARTICLE III.
PAYMENT ACCOUNT
SECTION 301. 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 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 Junior Subordinated Debentures.
Amounts held in the Payment Account shall not be invested by the Property
Trustee pending distribution thereof.
ARTICLE IV.
DISTRIBUTIONS; REDEMPTION
SECTION 401. DISTRIBUTIONS.
(a) 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 accumulate from __________,
1997, and, except during any Extension Period with respect to the Junior
Subordinated Debentures, shall be payable quarterly in arrears on the 15th day
of April, July, October, and January in each year, commencing July 15, 1997.
The amount of each Distribution due with respect to the Trust Securities will
include amounts accrued through the date the Distribution payment is due. If
any date on which a Distribution is otherwise payable on the Trust Securities
4.5-12
<PAGE> 17
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 401(a) a "Distribution Date").
(b) The Trust Securities represent undivided beneficial interests
in the Trust Property, and, as a practical matter, the 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. During any Extension Period with respect to the Junior
Subordinated Debentures, Distributions on the Capital Securities will be
deferred for a period equal to the Extension Period. The amount of
Distributions payable for any period shall include the Additional Amounts, if
any.
(c) Distributions on the Trust Securities shall be made by the
Property Trustee solely 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
immediately available in the Payment Account for the payment of such
Distributions.
(d) 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 Capital Securities do not remain in book-entry-only
form, the relevant record date shall be the 1st day of the month in which the
relevant Distribution Date occurs.
SECTION 402. REDEMPTION.
(a) On each Debenture Redemption Date and on the Maturity Date of
the Junior Subordinated Debentures, the Trust will be required to redeem 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 Securities Register. The
Property Trustee shall have no responsibility for the accuracy of any CUSIP
number contained in such notice. 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 aggregate 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 accumulate 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 Junior Subordinated Debentures. Redemptions of the Trust
Securities shall be made and the Redemption Price shall be payable on each
Redemption Date only to the extent
4.5-13
<PAGE> 18
that the Trust has immediately available 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 Capital Securities, then, by 12:00 noon, Denver time, on the
Redemption Date, subject to Section 402(c), the Property Trustee will, so long
as the Capital Securities are in book-entry-only form, deposit with the
Clearing Agency for the Capital Securities funds sufficient to pay the
applicable Redemption Price and will give such Clearing Agency irrevocable
instructions and authority to pay the Redemption Price to the Holders thereof.
If the Capital Securities are no longer in book-entry-only form, the Property
Trustee, subject to Section 402(c), will 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 Capital 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 Securities
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, but
without interest on such Redemption Price, 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 accumulate, 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 record 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 the relevant Redemption Date; provided, however, that in
the event that the Capital 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 403(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 Capital Securities. The particular Capital Securities to be redeemed shall
be selected not more than 60 days prior to the Redemption Date by the Property
Trustee from the outstanding Capital Securities not previously called for
redemption, by such method (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 Capital Securities of a
denomination larger than $25. The Property Trustee shall promptly notify the
Securities Registrar in writing of the Capital Securities selected for
redemption and, in the case of any Capital 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 Capital Securities shall relate, in the case of
any Capital Securities redeemed or to be redeemed only in part, to the portion
of the Liquidation Amount of Capital Securities which has been or is to be
redeemed.
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<PAGE> 19
SECTION 403. 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 402(f), pro rata among the Common
Securities and the Capital 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 Capital Securities for all
Distribution periods terminating on or prior thereto, or in the case of payment
of the Redemption Price the full amount of such Redemption Price on all
Outstanding Capital Securities then called for redemption, 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,
Capital Securities then due and payable.
(b) In the case of the occurrence of any Event of Default
resulting from a 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 Capital Securities shall have been cured, waived or
otherwise eliminated. Until any such Event of Default under this Trust
Agreement with respect to the Capital Securities shall have been so cured,
waived or otherwise eliminated, the Property Trustee shall act solely on behalf
of the Holders of the Capital Securities and not the Holder of the Common
Securities, and only the Holders of the Capital Securities will have the right
to direct the Property Trustee to act on their behalf.
SECTION 404. PAYMENT PROCEDURES. Payments of Distributions
(including Additional Amounts, if applicable) in respect of the Capital
Securities shall be made by check mailed to the address of the Person entitled
thereto as such address shall appear on the Securities Register or, if the
Capital Securities are held by a Clearing Agency, such Distributions shall be
made to the Clearing Agency in immediately available funds, which shall credit
the relevant Persons' accounts at such Clearing Agency on the applicable
Distribution Dates. Payments in respect of the Common Securities shall be made
in such manner as shall be mutually agreed between the Property Trustee and the
Holder of the Common Securities.
SECTION 405. 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 furnished to such
Securityholder or the information required to be provided on such form. The
Administrative Trustees shall provide the Depositor with a copy of all such
returns and reports promptly after such filing or furnishing. The Property
Trustee 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 406. PAYMENT OF TAXES, DUTIES, ETC. OF THE TRUST. Upon
receipt under the Junior Subordinated Debentures of Additional Sums, the
Property Trustee, at the direction of an Administrative Trustee or the
Depositor, 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 407. PAYMENTS UNDER INDENTURE. Any amount payable hereunder
to any Holder of Capital Securities shall be reduced by the amount of any
corresponding payment such Holder has directly received under the Indenture
pursuant to Section 514(b) or (c) hereof.
4.5-15
<PAGE> 20
ARTICLE V.
TRUST SECURITIES CERTIFICATES
SECTION 501. INITIAL OWNERSHIP. Upon the creation of the Trust and
the contribution by the Depositor pursuant to Section 203 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.
SECTION 502. THE TRUST SECURITIES CERTIFICATES. The Capital
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 of $25 in excess 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 504, 511
and 513.
SECTION 503. EXECUTION AND DELIVERY OF TRUST SECURITIES CERTIFICATES.
On the Closing Date, the Administrative Trustees shall cause Trust Securities
Certificates, in an aggregate Liquidation Amount as provided in Sections 204
and 205, to be executed on behalf of the Trust by at least one of the
Administrative Trustees and delivered to or upon the written order of the
Depositor, signed by its President, any Vice President or the Chief Financial
Officer without further corporate action by the Depositor, in authorized
denominations.
SECTION 504. REGISTRATION OF TRANSFER AND EXCHANGE OF CAPITAL SECURITIES
CERTIFICATES. The Depositor shall keep or cause to be kept, at the office or
agency maintained pursuant to Section 508, a register or registers for the
purpose of registering Trust Securities Certificates and transfers and
exchanges of Capital Securities Certificates (herein referred to as 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 Capital Securities
Certificates and Common Securities Certificates (subject to Section 510 in the
case of the Common Securities Certificates) and registration of transfers and
exchanges of Capital Securities Certificates as herein provided. The Property
Trustee shall be the initial Securities Registrar.
Upon surrender for registration of transfer of any Capital Securities
Certificate at the office or agency maintained pursuant to Section 508, 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 Capital
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 Capital Securities that have been called for redemption. At
the option of a Holder, Capital Securities Certificates may be exchanged for
other Capital Securities Certificates in authorized denominations of the same
class and of a like aggregate Liquidation Amount upon surrender of the Capital
Securities Certificates to be exchanged at the office or agency maintained
pursuant to Section 508.
Every Capital Securities Certificate presented or surrendered for
registration of transfer or exchange shall be accompanied by a written
instrument of transfer in form satisfactory to the Property Trustee and the
Securities Registrar duly executed by the Holder or such Holder's attorney duly
authorized in writing. Each Capital Securities Certificate surrendered for
registration of transfer or exchange shall be canceled and subsequently
disposed of by
4.5-16
<PAGE> 21
the Property Trustee in accordance with its customary practice. The Trust shall
not be required to (i) issue, register the transfer of, or exchange any Capital
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 Capital
Securities called for redemption and ending at the close of business on the day
of such mailing or (ii) register the transfer of or exchange any Capital
Securities so selected for redemption, in whole or in part, except the
unredeemed portion of any such Capital Securities being redeemed in part.
No service charge shall be made for any registration of transfer or
exchange of Capital 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 Capital
Securities Certificates.
SECTION 505. 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.
SECTION 506. PERSONS DEEMED SECURITYHOLDERS. The Trustees, the
Paying Agent and 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 507. 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
15 and July 15 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 regular record date (as provided in Section 401(d)) 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
Securityholders 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 508. MAINTENANCE OF OFFICE OR AGENCY. The Administrative
Trustees shall maintain an office or offices or agency or agencies where
Capital 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
4.5-17
<PAGE> 22
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 19890-0001, Attn:
Corporate Trust Administration, 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 509. 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 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 801, 803 and
806 shall apply to the Property Trustee also in its role as Paying Agent, for
so long as the Property Trustee 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 510. OWNERSHIP OF COMMON SECURITIES BY DEPOSITOR. On the
Closing Date, the Depositor shall acquire and retain beneficial and record
ownership of the Common Securities. To the fullest extent permitted by law,
any attempted transfer of the Common Securities (other than a transfer in
connection with a merger or consolidation of the Depositor into another
corporation pursuant to Section 12.1 of the Indenture) 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 511. BOOK-ENTRY CAPITAL SECURITIES CERTIFICATES; COMMON
SECURITIES CERTIFICATE.
(a) The Capital Securities Certificates, upon original issuance,
will be issued in the form of a typewritten Capital Securities Certificate or
Certificates representing Book-Entry Capital Securities Certificates, to be
delivered to or held on behalf of The Depository Trust Company, the initial
Clearing Agency, by, or on behalf of, the Trust. Such Book-Entry Capital
Securities Certificate or Certificates shall initially be registered on the
Securities Register in the name of Cede & Co., the nominee of the initial
Clearing Agency, and no beneficial owner will receive a Definitive Capital
Securities Certificate representing such beneficial owner's interest in such
Capital Securities, except as provided in Section 513. Unless and until
Definitive Capital Securities Certificates have been issued to beneficial
owners pursuant to Section 513:
(i) the provisions of this Section 511(a) shall be in
full force and effect;
4.5-18
<PAGE> 23
(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 Capital
Securities Certificates (including the payment of the Liquidation
Amount of and Distributions on the Book-Entry Capital Securities) as
the sole Holder of Book-Entry Capital Securities and shall have no
obligations to the Owners thereof;
(iii) to the extent that the provisions of this Section 511
conflict with any other provisions of this Trust Agreement, the
provisions of this Section 511 shall control; and
(iv) the rights of the Owners of the Book-Entry Capital
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 Capital Securities Certificates are issued
pursuant to Section 513, the initial Clearing Agency will make
book-entry transfers among the Clearing Agency Participants and will
receive and transmit payments on the Capital Securities to such
Clearing Agency Participants. Any Clearing Agency designated pursuant
hereto will not be deemed an agent of the Trustees 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 512. 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 Capital Securities Certificates shall have been
issued to Owners pursuant to Section 513, 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.
SECTION 513. DEFINITIVE CAPITAL 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
Capital 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
Capital 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 interests of the Owners of Capital Securities
Certificates, then the Property Trustee shall notify the Clearing Agency, and
the Clearing Agency shall notify all Owners of Capital Securities Certificates,
of the occurrence of any such event and of the availability of the Definitive
Capital Securities Certificates to Owners of such class or classes, as
applicable, requesting the same. Upon surrender to the Property Trustee of the
typewritten Capital Securities Certificate or Certificates representing the
Book-Entry Capital Securities Certificates by the Clearing Agency, accompanied
by registration instructions, the Administrative Trustees, or any one of them,
shall execute the Definitive Capital 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 Capital Securities Certificates,
the Trustees shall recognize the Holders of the Definitive Capital Securities
Certificates as Securityholders. The Definitive Capital 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 514. 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 209,
and the Securityholders shall not have any right or title therein other than
the
4.5-19
<PAGE> 24
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. When issued and
delivered to Holders of the Capital Securities against payment of the purchase
price therefor, the Capital Securities will be fully paid and nonassessable
interests in the Trust. The Holders of the Capital 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.
(b) For so long as any Capital 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 Junior Subordinated
Debentures fail to declare the principal of all of the Junior Subordinated
Debentures to be immediately due and payable, the Holders of at least 25% in
Liquidation Amount of the Capital 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 Junior Subordinated Debentures shall become immediately due and
payable, provided that the payment of principal and interest on such Junior
Subordinated Debentures shall remain subordinated to the extent provided in the
Indenture. If, as a result of a Debenture Event of Default, the Debenture
Trustee or the holders of not less than 25% in aggregate outstanding principal
amount of the Junior Subordinated Debentures have declared the Junior
Subordinated Debentures due and payable and if such default has been cured and
a sum sufficient to pay all matured installments due (otherwise than by
acceleration) under the Junior Subordinated Debentures has been deposited with
the Debenture Trustee, then (if the holders of not less than a majority in
aggregate outstanding principal amount of Junior Subordinated Debentures have
not annulled such declaration and waived such default) the Holders of a
majority in aggregate Liquidation Amount of the Capital Securities may annul
such declaration and waive such default.
(c) For so long as any Capital Securities remain outstanding, upon
a Debenture Event of Default arising from the failure to pay interest or
principal on the Junior Subordinated Debentures, the Holders of any Capital
Securities then Outstanding shall, to the fullest extent permitted by law, have
the right to directly institute proceedings for enforcement of payment to such
Holders of principal of or interest on the Junior Subordinated Debentures
having a principal amount equal to the Liquidation Amount of the Capital
Securities of such Holders.
ARTICLE VI.
ACTS OF SECURITYHOLDERS; MEETINGS; VOTING
SECTION 601. LIMITATIONS ON VOTING RIGHTS.
(a) Except as provided in this Section, in Sections 514, 810 and
1002 and in the Indenture and as otherwise required by law, no Holder of
Capital 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 Junior Subordinated 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 Junior Subordinated Debentures, (ii) waive any past default which is
waivable under Article Seven of 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 at least a majority in
Liquidation Amount of all Outstanding Capital Securities; provided, however,
that where a
4.5-20
<PAGE> 25
consent under the Indenture would require the consent of each holder of
outstanding Junior Subordinated Debentures affected thereby, no such consent
shall be given by the Property Trustee without the prior written consent of
each Holder of Capital Securities. The Trustees shall not revoke any action
previously authorized or approved by a vote of the Holders of the Outstanding
Capital Securities, except by a subsequent vote of the Holders of the
Outstanding Capital Securities. The Property Trustee shall notify each Holder
of the Outstanding Capital Securities of any notice of default received from
the Debenture Trustee with respect to the Junior Subordinated Debentures. In
addition to obtaining the foregoing approvals of the Holders of the Capital
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 the Trust will continue to be classified as a
grantor trust and not as an association taxable as a corporation for United
States federal income tax purposes on account of such action.
(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 Capital 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 Capital 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 Capital Securities. No amendment to this
Trust Agreement may be made if, as a result of such amendment, the Trust would
cease to be classified as a grantor trust or would be classified as an
association taxable as a corporation for United States federal income tax
purposes.
SECTION 602. NOTICE OF MEETINGS. Notice of all meetings of the
Holders of Capital Securities, stating the time, place and purpose of the
meeting, shall be given by the Property Trustee pursuant to Section 1008 to
each Holder of Capital Securities of record, at such Securityholder's
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 603. MEETINGS OF HOLDERS OF CAPITAL SECURITIES. No annual
meeting of Securityholders is required to be held. The Administrative
Trustees, however, shall call a meeting of Securityholders to vote on any
matter upon the written request of the Holders of 25% of the Outstanding
Capital Securities (based upon their aggregate Liquidation Amount) and the
Administrative Trustees or the Property Trustee may, at any time in their
discretion, call a meeting of Holders of the Capital Securities to vote on any
matters as to which the Holders of the Capital Securities are entitled to vote.
Holders of record of 50% of the Outstanding Capital Securities (based
upon their aggregate Liquidation Amount), present in person or by proxy, shall
constitute a quorum at any meeting of such Securityholders.
If a quorum is present at a meeting, an affirmative vote by the
Holders of record present, in person or by proxy, holding more than a majority
of the Capital Securities (based upon their aggregate Liquidation Amount) held
by the Holders of Capital Securities of record present, either in person or by
proxy, at such meeting shall constitute the action of the Holders of the
Capital Securities, unless this Trust Agreement requires a greater number of
affirmative votes.
SECTION 604. 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 605. 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. When Trust Securities are held jointly
4.5-21
<PAGE> 26
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 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 606. 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 607. 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 any 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 608. 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 801) 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 or her the execution thereof.
Where such execution is by a signer acting in a capacity other than such
signer's individual capacity, such certificate or affidavit shall also
constitute sufficient proof of such signer's authority. The fact and date of
the execution of any such instrument or writing, or the authority of the Person
executing the same, may also be proved in any other manner which any Trustee
receiving the same deems sufficient.
The ownership of Capital 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
4.5-22
<PAGE> 27
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.
A Holder of Capital Securities 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 609. 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 701. REPRESENTATIONS AND WARRANTIES OF THE BANK AND THE PROPERTY
TRUSTEE. The Bank, in its separate corporate capacity and as Property Trustee,
as of the date hereof, and each successor Property Trustee at the time of the
successor Property Trustee's acceptance of its appointment as Property Trustee
hereunder (the term "Bank" being used hereafter in this Article VII to refer to
such successor Property Trustee in its separate corporate capacity and as
Property Trustee), hereby represents and warrants (as applicable) for the
benefit of the Depositor and the Securityholders that:
(a) the Bank is a Delaware banking corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware;
(b) the Bank 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) this Trust Agreement has been duly authorized, executed and
delivered by the Bank and constitutes the valid and legally binding agreement
of the Bank enforceable against it 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;
(d) the execution, delivery and performance by the Bank of this
Trust Agreement has been duly authorized by all necessary corporate or other
action on the part of the Bank and does not require any approval of the
stockholders of the Bank and such execution, delivery and performance will not
(i) violate the Bank's charter or by-laws, (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 Bank 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 or trust powers of the Bank, or any order, judgment or
decree applicable to the Bank;
(e) neither the authorization, execution or delivery by the Bank
of this Trust Agreement nor the consummation of any of the transactions by the
Bank contemplated herein or therein requires the 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 law of
the State of Delaware governing the banking or trust powers of the Bank; and
4.5-23
<PAGE> 28
(f) there are no proceedings pending or, to the best of the Bank's
knowledge, threatened against or affecting the Bank 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 Bank to enter
into or perform its obligations as one of the Trustees under this Trust
Agreement.
SECTION 702. REPRESENTATIONS AND WARRANTIES OF THE DELAWARE BANK AND
THE DELAWARE TRUSTEE. The Delaware Bank in its corporate capacity and as
Delaware Trustee, as of the date hereof, and each successor Delaware Trustee at
the time of the successor Delaware Trustee's acceptance of its appointment as
Delaware Trustee hereunder (the term "Delaware Bank" being used hereafter in
this Article VIII to refer to such successor Delaware Trustee in its separate
corporate capacity and as Delaware Trustee), hereby represents and warrants (as
applicable) for the benefit of the Depositor and the Securityholders that:
(a) the Delaware Bank is a Delaware banking corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware;
(b) the Delaware Bank 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) this Trust Agreement has been duly authorized, executed and
delivered by the Delaware Bank and constitutes the valid and legally binding
agreement of the Delaware Bank enforceable against it 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;
(d) the execution, delivery and performance by the Delaware Bank
of this Trust Agreement has been duly authorized by all necessary corporate or
other action on the part of the Delaware Bank and does not require any approval
of the stockholders of the Delaware Bank and such execution, delivery and
performance will not (i) violate the Delaware Bank's charter or by-laws, (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 Delaware Bank 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 or trust
powers of the Delaware Bank, or any order, judgment or decree applicable to the
Delaware Bank;
(e) neither the authorization, execution or delivery by the
Delaware Bank of this Trust Agreement nor the consummation of any of the
transactions by the Delaware Bank contemplated herein or therein requires the
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 law of the State of Delaware governing the banking or
trust powers of the Delaware Bank; and
(f) there are no proceedings pending or, to the best of the
Delaware Bank's knowledge, threatened against or affecting the Delaware Bank 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 Delaware Bank to enter into or perform its obligations as one of the
Trustees under this Trust Agreement.
SECTION 703. REPRESENTATIONS AND WARRANTIES OF DEPOSITOR. The
Depositor hereby represents and warrants for the benefit of the Securityholders
that:
(a) the Trust Securities Certificates issued on 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 Administrative Trustees
4.5-24
<PAGE> 29
pursuant to the terms and provisions of, and in accordance with the
requirements of, this Trust Agreement and the Securityholders will be, as of
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, the
Delaware Bank or the Delaware Trustee, as the case may be, of this Trust
Agreement.
ARTICLE VIII.
THE TRUSTEES
SECTION 801. 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. No Administrative Trustee nor the Delaware Trustee shall be liable for
such Trustee's acts or omissions hereunder except as a result of such Trustee's
own gross negligence or willful misconduct. The Property Trustee's liability
shall be determined under the Trust Indenture Act. Whether or 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. To the extent that, at law
or in equity, the Delaware Trustee or an Administrative Trustee has duties
(including fiduciary duties) and liabilities relating thereto to the Trust or
to the Securityholders, the Delaware Trustee or 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 Delaware Trustee or 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 Delaware
Trustee and 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 such Securityholder's acceptance of a Trust Security,
agrees that such Securityholder will look solely to the revenue and proceeds
from the Trust Property to the extent legally available for distribution to
such Securityholder as herein provided and that the Trustees are not personally
liable to such Securityholder for any amount distributable in respect of any
Trust Security or for any other liability in respect of any Trust Security.
This Section 801(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
4.5-25
<PAGE> 30
proceeding for any remedy available to the Property Trustee, or
exercising any trust or power conferred upon the Property Trustee
under this Trust Agreement;
(iii) the Property Trustee's sole duty with respect to the
custody, safe keeping and physical preservation of the Junior
Subordinated 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
301 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 negligence, default or
misconduct of the Administrative Trustees or the Depositor.
SECTION 802. 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 1008, notice of
such Event of Default to the Securityholders, the Administrative Trustees and
the Depositor, unless such 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, an Event of Default.
(b) The Administrative Trustees shall transmit, to the
Securityholders in the manner and to the extent provided in Section 1008,
notice of the Depositor's election to begin or further extend an Extension
Period on the Junior Subordinated Debentures (unless such election shall have
been revoked) within the time specified for transmitting such notice to the
holders of the Junior Subordinated Debentures pursuant to the Indenture as
originally executed.
(c) In the event the Depositor elects to accelerate the Maturity
Date in accordance with Section 2.2 of the Indenture, the Property Trustee
shall give notice to each Holder of Trust Securities of the acceleration of the
Maturity Date and the Accelerated Maturity Date not later than five Business
Days after the Property Trustee receives the notice provided in Section 2.2(c)
of the Indenture.
SECTION 803. CERTAIN RIGHTS OF PROPERTY TRUSTEE. Subject to the
provisions of Section 801:
(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 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 other provisions
contained herein or (iii) the Property Trustee
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is unsure of the application of any provision of this Trust Agreement, then,
except as to any matter as to which the Holders of the Capital Securities 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 10 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 conclusively rely upon an Officer's
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 reregistration thereof;
(f) the Property Trustee may consult with counsel of its choice
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 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
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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 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 804. 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 Junior
Subordinated Debentures.
SECTION 805. MAY HOLD SECURITIES. 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 808 and 813
and except as provided in the definition of the term "Outstanding" in Article
I, may otherwise deal with the Trust with the same rights it would have if it
were not a Trustee or such other agent.
SECTION 806. 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);
(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 such Trustee's negligence,
bad faith or willful misconduct (or, in the case of the Administrative Trustees
or the Delaware Trustee, any such expense, disbursement or advance as may be
attributable to its, his or her gross negligence, bad faith or willful
misconduct); and
(c) to indemnify each of the Trustees or any predecessor Trustee
for, and to hold the Trustees harmless against, any loss, damage, claim,
liability, penalty or expense incurred without negligence or bad faith on its
part, arising out of or in connection with the acceptance or administration of
this 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 hereunder, except any such cost or expense as
may be attributable to such Trustee's negligence, bad faith or willful
misconduct (or, in the case of the Administrative Trustees or the Delaware
Trustee, any such cost or expense as may be attributable to its, his or her
gross negligence, bad faith or willful misconduct).
No Trustee may claim any Lien on any Trust Property as a result of any
amount due pursuant to this Section 806.
SECTION 807. 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
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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 otherwise meets the requirements of applicable Delaware law
that shall act through one or more persons authorized to bind such entity.
SECTION 808. 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 809. 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 shall have power to
appoint, and upon the written request of the Property Trustee, the Depositor
and the Administrative Trustees shall for such purpose join with the Property
Trustee 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 and the Administrative Trustees do not join in such
appointment within 15 days after the receipt by them 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 or pledged with, the Trustees specified hereunder, shall be
exercised, solely by such Trustees and not by such co-trustee or separate
trustee.
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<PAGE> 34
(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
809.
(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 810. 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 811.
Subject to the immediately preceding paragraph, the Relevant Trustee
may resign at any time with respect to the Trust Securities by giving written
notice thereof to the Securityholders. If the instrument of acceptance by the
successor Trustee required by Section 811 shall not have been delivered to the
Relevant Trustee within 30 days after the giving of such notice of resignation,
the Relevant Trustee may petition, at the expense of the Depositor, any court
of competent jurisdiction for the appointment of a successor Trustee with
respect to the Trust Securities.
Unless a Debenture Event of Default shall have occurred and be
continuing, any Trustee may be removed at any time by Act of the Holder of the
Common Securities. 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 Capital Securities, delivered to such Relevant Trustee (in its
individual capacity and on behalf of the Trust). An Administrative Trustee may
be removed by the Holder of the Common Securities at any time. In no event
will the Holders of the Capital Securities have the right to vote to appoint,
remove or replace the Administrative Trustees.
If the Relevant Trustee shall resign, be removed or become incapable
of acting as Trustee, or if a vacancy shall occur in the office of such Relevant
Trustee for any cause, at a time when no Debenture Event of Default shall have
occurred and be continuing, the Holder of the Common Securities, by Act of the
Holder of the Common Securities delivered to the retiring Relevant Trustee,
shall promptly appoint a successor Trustee or Trustees with respect to the
Trust Securities and the Trust, and the successor Trustee shall comply with the
applicable requirements of Section 811. 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
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is continuing, the Holders of the Capital Securities by Act of the Holders of a
majority in Liquidation Amount of the Capital Securities then Outstanding
delivered to the retiring Relevant Trustee, shall promptly appoint a successor
Trustee or Trustees with respect to the Trust Securities and the Trust, and such
successor Trustee shall comply with the applicable requirements of Section 811.
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 Holder of the Common Securities, by
Act of the Holder of the Common Securities delivered to an Administrative
Trustee, shall promptly appoint a successor Administrative Trustee or
Administrative Trustees with respect to the Trust Securities and the Trust, and
such successor Administrative Trustee or Administrative Trustees shall comply
with the applicable requirements of Section 811. If no successor Trustee with
respect to the Trust Securities shall have been so appointed by the Holder of
the Common Securities or the Holders of the Capital Securities and accepted
appointment in the manner required by Section 811, any Securityholder who has
been a Securityholder of for at least six months may, on behalf of such
Securityholder and all others similarly situated, petition a court of competent
jurisdiction for the appointment of a successor Trustee with respect to the
Trust Securities.
The Property Trustee shall give notice of each resignation and each
removal of a Relevant Trustee and each appointment of a successor Trustee to all
Securityholders in the manner provided in Section 1008 and shall give notice to
the Depositor. Each notice shall include the name of the successor Trustee and
the address of its Corporate Trust office if it is the Property Trustee.
Subject to 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 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 the Delaware Trustee, as the case may be, set
forth in Section 807).
SECTION 811. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR. In case of the
appointment hereunder of a successor Trustee with respect to the Trust
Securities and the Trust, the retiring Relevant Trustee and each successor
Trustee with respect to the Trust Securities shall execute and deliver an
instrument hereto wherein each successor Trustee shall accept such appointment
and which 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 Relevant Trustee with respect to the
Trust Securities and the Trust, and upon the execution and delivery of such
instrument, the resignation or removal of the retiring Relevant 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 Relevant Trustee with respect
to the Trust Securities and the Trust; but, on request of the Trust or any
successor Trustee such retiring Relevant Trustee shall duly assign, transfer and
deliver to such successor Trustee all Trust Property, all 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 Trustee, the Trust shall execute
any and all instruments for more fully and certainly vesting in and confirming
to such successor Trustee all such rights, powers and trusts referred to in the
immediately preceding paragraph, as the case may be.
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.
SECTION 812. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO
BUSINESS. Any Person 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,
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conversion or consolidation to which such Trustee shall be a party, or any
corporation succeeding to all or substantially all the corporate trust business
of such Trustee, shall be the successor of such Trustee hereunder, provided such
Person 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 813. PREFERENTIAL COLLECTION OF CLAIMS AGAINST DEPOSITOR OR
TRUST. If and when the Property Trustee or the Delaware Trustee shall be or
become a creditor of the Depositor or the Trust (or any other obligor upon the
Junior Subordinated Debentures or the Trust Securities), the Property Trustee
or the Delaware Trustee, as the case may be, shall be subject to and shall take
all actions necessary in order to comply with the provisions of the Trust
Indenture Act regarding the collection of claims against the Depositor or Trust
(or any such other obligor).
SECTION 814. 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 1008, and to the Depositor, a brief report dated as
of the preceding _________ with respect to:
(i) its eligibility under Section 807 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; and
(ii) 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
securities exchange or other organization upon which the Trust Securities may
be listed, with the Commission and with the Depositor.
SECTION 815. 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 816. 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 the 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 817. NUMBER OF TRUSTEES.
(a) The number of Trustees shall be five, provided that the Holder
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.
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<PAGE> 37
(b) If a Trustee ceases to hold office for any reason and the
number of Administrative Trustees is not reduced pursuant to Section 817(a), or
if the number of Trustees is increased pursuant to Section 817(a), a vacancy
shall occur. The vacancy shall be filled with a Trustee appointed in
accordance with Section 810.
(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 810, 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 818. 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 207(a)(i); and
(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 the Trust, as set forth herein.
SECTION 819. 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 901. TERMINATION UPON EXPIRATION DATE. Unless earlier
dissolved, the Trust shall automatically dissolve on _____________, 2028 (the
"Expiration Date") subject to distribution of the Trust Property in accordance
with Section 904.
SECTION 902. 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) delivery of written direction to the Property Trustee by the
Depositor at any time (which direction is wholly optional and within the
discretion of the Depositor) to dissolve the Trust and distribute the Junior
Subordinated Debentures to Securityholders in exchange for the Capital
Securities in accordance with Section 904;
(c) the redemption of all of the Capital Securities in connection
with the redemption of all of the Junior Subordinated Debentures; and
(d) an order for dissolution of the Trust shall have been entered
by a court of competent jurisdiction.
SECTION 903. 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
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<PAGE> 38
the Property Trustee to Securityholders upon the liquidation of the Trust
pursuant to Section 904, or upon the redemption of all of the Trust Securities
pursuant to Section 402, 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 Securityholders, and (d) the
filing of a certificate of cancellation by the Administrative Trustee under the
Delaware Business Trust Act.
SECTION 904. LIQUIDATION.
(a) If an Early Termination Event specified in clause (a), (b), or
(d) of Section 902 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
Junior Subordinated Debentures, subject to Section 904(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 Junior Subordinated Debentures;
and
(iii) provide such information with respect to the
mechanics by which Holders may exchange Trust Securities certificates
for Junior Subordinated Debentures, or if Section 904(d) applies
receive a Liquidation Distribution, as the Administrative Trustees or
the Property Trustee shall deem appropriate.
(b) Except where Section 902(c) or 904(d) applies, in order to
effect the liquidation of the Trust and distribution of the Junior Subordinated
Debentures to Securityholders, the Property Trustee 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 Junior Subordinated
Debentures in exchange for the Outstanding Trust Securities Certificates.
(c) Except where Section 902(c) or 904(d) applies, after the
Liquidation Date, (i) the Trust Securities will no longer be deemed to be
Outstanding, (ii) certificates (or, at the election of the Depositor a Global
Subordinated Debenture, subject to the provisions of the Indenture)
representing a Like Amount of Junior Subordinated 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 reasonable efforts to have the Junior Subordinated Debentures
listed on the Nasdaq National Market or on such other securities exchange or
other organization as the Capital Securities may then be listed or traded,
(iv) any Trust Securities Certificates not so surrendered for exchange will be
deemed to represent a Like Amount of Junior Subordinated Debentures, accruing
interest at the rate provided for in the Junior Subordinated 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 Trust Securities Certificates with respect to such Junior
Subordinated Debentures) and (v) all rights of Securityholders holding Trust
Securities will cease, except the right of such Securityholders to receive
Junior Subordinated Debentures upon surrender of Trust Securities Certificates.
(d) In the event that, notwithstanding the other provisions of
this Section 904, whether because of an order for dissolution entered by a
court of competent jurisdiction or otherwise, distribution of the Junior
Subordinated
4.5-34
<PAGE> 39
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 Capital Securities, except that, if a
Debenture Event of Default has occurred and is continuing, the Capital
Securities shall have a priority over the Common Securities.
SECTION 905. 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 Person, except
pursuant to this Section 905. At the request of the Depositor, with the
consent of the Administrative Trustees and without the consent of the Holders
of the Capital Securities, the Property Trustee or the Delaware Trustee, the
Trust may merge with or into, consolidate, amalgamate, 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 Capital Securities or (b)
substitutes for the Capital Securities other securities having substantially
the same terms as the Capital Securities (the "Successor Securities") so long
as the Successor Securities rank the same as the Capital Securities rank 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 substantially the same powers and duties as
the Property Trustee as the holder of the Junior Subordinated Debentures, (iii)
such merger, consolidation, amalgamation, replacement, conveyance, transfer or
lease does not adversely affect the rights, preferences and privileges of the
Holders of the Capital Securities (including any Successor Securities) in any
material respect, (iv) such successor entity has a purpose identical to that of
the Trust, (v) the Successor Securities will be listed or traded on any
national securities exchange or other organization on which the Capital
Securities may then be listed, (vi) prior to such merger, consolidation,
amalgamation, replacement, conveyance, transfer or lease, the Depositor has
received an Opinion of Counsel 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 Capital Securities (including any Successor Securities) in
any material respect, and (b) following such merger, consolidation,
amalgamation, replacement, conveyance, transfer or lease, neither the Trust nor
such successor entity will be required to register as an "investment company"
under the Investment Company Act and (vii) the 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 Capital
Securities, consolidate, amalgamate, merge with or into, or be replaced by or
convey, transfer or lease its properties and assets substantially as an
entirety to any other Person or permit any other Person to consolidate,
amalgamate, merge with or into, or replace it, if such consolidation,
amalgamation, merger or replacement would cause the Trust or the successor
entity to be classified as other than a grantor trust for United States federal
income tax purposes.
4.5-35
<PAGE> 40
ARTICLE X.
MISCELLANEOUS PROVISIONS
SECTION 1001. 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, 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.
SECTION 1002. AMENDMENT.
(a) This Trust Agreement may be amended from time to time by the
Trustees and the Depositor, without the consent of any Securityholders, (i) as
provided in Section 811 with respect to acceptance of appointment by a
successor Trustee, (ii) to cure any ambiguity, correct or supplement any
provision herein or therein which may be inconsistent with any other provision
herein or therein, or to make any other provisions with respect to matters or
questions arising under this Trust Agreement, that shall not be inconsistent
with the other provisions of this Trust Agreement, or (iii) 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 Investment Company
Act; provided, however, that in the case of clause (ii), 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 601(c) or Section 1002(c)
hereof, any provision of this Trust Agreement may be amended by the Trustees
and the Depositor (i) with the consent of Securityholders representing not less
than a majority (based upon Liquidation Amounts) of the Trust Securities then
Outstanding and (ii) upon 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 Investment Company
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 603 or 606 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 603
or 606 hereof), this paragraph (c) of this Section 1002 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 Investment Company Act or to fail
or cease to be classified as a grantor trust for United States federal income
tax purposes.
(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
4.5-36
<PAGE> 41
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 1003. 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 1004. 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 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 1005. 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 which is a Business Day (except as otherwise provided in
Sections 401(a) and 402(d)), with the same force and effect as though made on
the date fixed for such payment, and no Distribution shall accumulate thereon
for the period after such date.
SECTION 1006. 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(s), including any successor by operation of law. Except
in connection with a consolidation, merger or sale involving the Depositor that
is permitted under Article Twelve 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 1007. HEADINGS. The Article and Section headings are for
convenience only and shall not affect the construction of this Trust Agreement.
SECTION 1008. 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 Holder of Capital
Securities, to such Securityholder as such Securityholder's name and address
may appear on the Securities Register; and (b) in the case of the Holder of the
Common Securities or the Depositor, to Vectra Banking Corporation, 1650 South
Colorado Boulevard, Suite 320, Denver, Colorado 80222; Attention: Chief
Financial Officer; Facsimile No.: (303) 759-5017. Any notice to the Holders of
the Capital Securities 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 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 19890-0001,
Attention: Corporate Trust Administration; (b) with respect to the Delaware
Trustee, to Wilmington Trust Company, Rodney Square North, 1100 North Market
Street, Wilmington, Delaware 19890-0001, Attention: Corporate Trust
Administration; and (c) with respect to the Administrative Trustees, to them at
the address above for notices to the Depositor, marked "Attention:
Administrative Trustees of VBC Capital I 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.
4.5-37
<PAGE> 42
SECTION 1009. 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, insolvency, reorganization or other similar law
(including, without limitation, the United States Bankruptcy Code)
(collectively, "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 1009, the Property Trustee
agrees, for the benefit of Securityholders, that at the expense of the
Depositor (which expense shall be paid prior to the filing), 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. The provisions
of this Section 1009 shall survive the termination of this Trust Agreement.
SECTION 1010. 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 to be 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 Trust Securities as equity
securities representing undivided beneficial interests in the assets of the
Trust.
SECTION 1011. ACCEPTANCE OF TERMS OF TRUST AGREEMENT, GUARANTEE AND
INDENTURE.
4.5-38
<PAGE> 43
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.
VECTRA BANKING CORPORATION,
as Depositor
By
------------------------------------------
Gary S. Judd, President and Chief
Executive Officer
WILMINGTON TRUST COMPANY,
as Property Trustee
By:
------------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
WILMINGTON TRUST COMPANY,
as Delaware Trustee
By:
------------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
---------------------------------------------
Gary S. Judd, As Administrative Trustee
---------------------------------------------
Ray L. Nash, As Administrative Trustee
---------------------------------------------
Tracie L. Davis, As Administrative Trustee
4.5-39
<PAGE> 44
EXHIBIT C
THIS CERTIFICATE IS NOT TRANSFERABLE
CERTIFICATE NUMBER NUMBER OF SECURITIES
21,650
CERTIFICATE EVIDENCING COMMON SECURITIES
OF
VBC CAPITAL I
___% Common Securities
(liquidation amount $25 per Common Security)
VBC CAPITAL I, a statutory business trust created under the laws of
the State of Delaware (the "Trust"), hereby certifies that Vectra Banking
Corporation (the "Holder") is the registered owner of Twenty One Thousand Six
Hundred Fifty (21,650) securities of the Trust representing undivided
beneficial interests in the assets of the Trust and designated the ____ %
Common Securities (liquidation amount $25 per Common Security) (the "Common
Securities"). In accordance with Section 510 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 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.
VBC CAPITAL I
By:
------------------------------------
Name:
----------------------------------
Administrative Trustee
4.5C-1
<PAGE> 45
EXHIBIT D
AGREEMENT AS TO EXPENSES AND LIABILITIES
AGREEMENT dated as of __________, 1997, between Vectra Banking
Corporation, a Colorado corporation (the "Company"), and VBC Capital I, a
Delaware business trust (the "Trust").
WHEREAS, the Trust intends to issue its Common Securities (the "Common
Securities") to, and receive ___% Junior Subordinated Debentures due 2027 (the
"Junior Subordinated Debentures") from, the Company and to issue and sell __%
Cumulative Capital Securities (the "Capital 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"); and
WHEREAS, the Company will directly or indirectly own all of the Common
Securities of the Trust and will issue the Junior Subordinated Debentures.
NOW, THEREFORE, in consideration of the purchase by each holder of the
Capital Securities, which purchase the Company hereby agrees shall benefit the
Company and which purchase the Company acknowledges will be made in reliance
upon the execution and delivery of this Agreement, the Company, including in
its capacity as holder of the Common Securities, and the Trust hereby agree as
follows:
ARTICLE I
SECTION 1.1. GUARANTEE BY THE COMPANY. Subject to the terms and
conditions hereof, the Company, including in its capacity as holder of the
Common Securities, 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 Capital Securities or other
similar interests in the Trust the amounts due such holders pursuant to the
terms of the Capital 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 Capital
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 Capital Securities or any
Beneficiary must restore payment of any sums paid under the Capital Securities,
under any Obligation, under the Capital Securities Guarantee Agreement dated
the date hereof by the Company and Wilmington Trust Company 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. The Company hereby waives notice of
acceptance of this Agreement and of any Obligation to which it applies or may
apply, and the Company 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 the Company 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:
4.5D-1
<PAGE> 46
(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.
The Beneficiaries shall not be obligated to give notice to, or obtain
the consent of, the Company with respect to the happening of any of the
foregoing.
SECTION 1.5. ENFORCEMENT. A Beneficiary may enforce this Agreement
directly against the Company, and the Company waives any right or remedy to
require that any action be brought against the Trust or any other person or
entity before proceeding against the Company.
ARTICLE II
SECTION 2.1. BINDING EFFECT. All guarantees and agreements contained
in this Agreement shall bind the successors, assigns, receivers, trustees and
representatives of the Company and shall inure to the benefit of the
Beneficiaries.
SECTION 2.2. AMENDMENT. So long as there remains any Beneficiary or
any Capital Securities are outstanding, this Agreement shall not be modified or
amended in any manner adverse to such Beneficiary or to the holders of the
Capital Securities.
SECTION 2.3. NOTICES. Any notice, request or other communication
required or permitted to be given hereunder shall be given in writing by
delivering the same 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):
VBC Capital I
c/o Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, DE 19890-0001
Facsimile No.: (302) 651-1576
Attention: Corporate Trust Administration
Vectra Banking Corporation
1650 South Colorado Boulevard, Suite 320
Denver, Colorado 80222
Facsimile No.: (303) 759-5017
Attention: Chief Financial Officer
SECTION 2.4. GOVERNING LAW. This Agreement shall be governed by and
construed and interpreted in accordance with the laws of the State of Colorado
(without regard to conflict of laws principles).
4.5D-2
<PAGE> 47
THIS AGREEMENT is executed as of the day and year first above written.
VECTRA BANKING CORPORATION,
By ------------------------------------------
Gary S. Judd, President and Chief
Executive Officer
VBC CAPITAL I
By:
------------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
4.5D-3
<PAGE> 48
EXHIBIT E
This Capital Security is a Book-Entry Capital Securities Certificate
within the meaning of the Trust Agreement hereinafter referred to and is
registered in the name of The Depository Trust Company, a New York corporation
(the "Depositary" or the "Depository Trust Company") or a nominee of the
Depositary. This Capital Security is exchangeable for Capital Securities
registered in the name of a person other than the Depositary or its nominee
only in the limited circumstances described in the Trust Agreement (as defined
below) and no transfer of this Capital Security (other than a transfer of this
Capital Security 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) may be registered except in limited circumstances.
Unless this Capital Security is presented by an authorized
representative of the Depositary to VBC Capital I or its agent for registration
of transfer, exchange or payment, and any Capital Security issued is registered
in the name of Cede & Co., or such other name as requested by an authorized
representative of the Depositary (and any payment hereon is made to Cede & Co.
or to such other entity as is requested by an authorized representative of the
Depository), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY
OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede &
Co. has an interest herein.
Certificate Number Number of Capital Securities
700,000
CUSIP NO.
Certificate Evidencing Capital Securities
of
VBC Capital I
___% Cumulative Capital Securities
(liquidation amount $25 per Capital Security)
VBC CAPITAL I, a statutory business trust created under the laws of
the State of Delaware (the "Trust"), hereby certifies that Cede & Co. (the
"Holder") is the registered owner of Seven Hundred Thousand (700,000) preferred
securities of the Trust representing undivided beneficial interests in the
assets of the Trust and designated the ____ % Cumulative Capital Securities
(liquidation amount $25 per Capital Security) (the "Capital Securities"). The
Capital Securities are transferable on the books and records of the Trust, in
person or by a duly authorized attorney, upon surrender of this certificate
duly endorsed and in proper form for transfer as provided in Section 504 of the
Trust Agreement (as defined below). The designations, rights, privileges,
restrictions, preferences, and other terms and provisions of the Capital
Securities are set forth in, and this certificate and the Capital Securities
represented hereby are issued and shall in all respects be subject to the terms
and provisions of, the Amended and Restated Trust Agreement of the 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 Capital
Securities as set forth therein. The Holder is entitled to the benefits of the
Capital Securities Guarantee Agreement entered into by Vectra Banking
Corporation, a Colorado 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.
4.5E-1
<PAGE> 49
IN WITNESS WHEREOF, one of the Administrative Trustees of the Trust
has executed this certificate this ____ day of ____________, 1997.
VBC CAPITAL I
By:
------------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
4.5E-2
<PAGE> 1
EXHIBIT 4.7
CAPITAL SECURITIES GUARANTEE AGREEMENT
VECTRA BANKING CORPORATION
AND
WILMINGTON TRUST COMPANY
DATED: ____________, 1997
<PAGE> 2
TABLE OF CONTENTS
[TO BE UPDATED UPON FINALIZATION]
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I - DEFINITIONS AND INTERPRETATION 1
SECTION 1.1 Definitions and Interpretation 1
ARTICLE II - TRUST INDENTURE ACT 4
SECTION 2.1 Trust Indenture Act; Application 4
SECTION 2.2 Lists of Holders of Securities 4
SECTION 2.3 Reports by the Capital Guarantee Trustee 4
SECTION 2.4 Periodic Reports to Capital 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 5
ARTICLE III - POWERS, DUTIES AND RIGHTS OF CAPITAL GUARANTEE TRUSTEE 5
SECTION 3.1 Powers and Duties of the Capital Guarantee Trustee 5
SECTION 3.2 Certain Rights of Capital Guarantee Trustee 7
SECTION 3.3 Not Responsible for Recitals or Issuance of Guarantee 8
ARTICLE IV - CAPITAL GUARANTEE TRUSTEE 8
SECTION 4.1 Capital Guarantee Trustee; Eligibility 8
SECTION 4.2 Appointment, Removal and Resignation of Capital Guarantee
Trustees 9
ARTICLE V - Guarantee 9
SECTION 5.1 Guarantee 9
SECTION 5.2 Waiver of Notice and Demand 9
SECTION 5.3 Obligations Not Affected 9
SECTION 5.4 Rights of Holders 10
</TABLE>
4.7-i
<PAGE> 3
<TABLE>
<S> <C>
SECTION 5.5 Guarantee of Payment 10
SECTION 5.6 Subrogation 10
SECTION 5.7 Independent Obligations 11
ARTICLE VI - LIMITATION OF TRANSACTIONS; SUBORDINATION 11
SECTION 6.1 Limitation of Transactions 11
SECTION 6.2 Ranking 11
ARTICLE VII - TERMINATION 11
SECTION 7.1 Termination 11
ARTICLE VIII - INDEMNIFICATION 11
SECTION 8.1 Exculpation 11
SECTION 8.2 Indemnification 12
ARTICLE IX - MISCELLANEOUS 12
SECTION 9.1 Successors and Assigns 12
SECTION 9.2 Amendments 12
SECTION 9.3 Notices 12
SECTION 9.4 Benefit 13
SECTION 9.5 Governing Law 13
</TABLE>
4.7-ii
<PAGE> 4
CROSS REFERENCE TABLE
<TABLE>
<CAPTION>
Section of Trust Section of
Indenture Act of Guarantee
1939, as Amended Agreement
---------------- ---------
<S> <C>
310(a) 4.1(a)
310(b) 4.1(c), 2.8
310(c) Inapplicable
311(a) 2.2(b)
311(b) 2.2(b)
311(c) Inapplicable
312(a) 2.2(a)
312(b) 2.2(b)
313 2.3
314(a) 2.4
314(b) Inapplicable
314(c) 2.5
314(d) Inapplicable
314(e) 1.1, 2.5, 3.2
314(f) 2.1, 3.2
315(a) 3.1(d)
315(b) 2.7
315(c) 3.1
315(d) 3.1(d)
316(a) 1.1, 3.6, 5.4
316(b) 5.3
316(c) 8.2
317(a) Inapplicable
317(b) Inapplicable
318(a) 2.1(b)
318(b) 2.1
318(c) 2.1(a)
</TABLE>
4.7-iii
<PAGE> 5
CAPITAL SECURITIES GUARANTEE AGREEMENT
This GUARANTEE AGREEMENT (the "Capital Securities Guarantee"), dated
as of ______, 1997, is executed and delivered by Vectra Banking Corporation, a
Colorado corporation (the "Guarantor"), and Wilmington Trust Company, as
trustee (the "Capital Guarantee Trustee"), for the benefit of the Holders (as
defined herein) from time to time of the Capital Securities (as defined herein)
of VBC Capital I, a Delaware statutory business trust ("VBC Capital").
WHEREAS, pursuant to an Amended and Restated Trust Agreement (the
"Trust Agreement") dated as of _________, 1997 among the trustees of VBC
Capital named therein, the Guarantor, as sponsor, and the holders from time to
time of undivided beneficial interests in the assets of VBC Capital, VBC
Capital is issuing on the date hereof 700,000 preferred securities, having an
aggregate liquidation amount of $17,500,000 designated the _____% Cumulative
Capital Securities (the "Capital Securities"); and
WHEREAS, as incentive for the Holders to purchase the Capital
Securities, the Guarantor desires irrevocably and unconditionally to agree, to
the extent set forth in this Capital Securities Guarantee, to pay to the
Holders of the Capital 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
Capital Securities, which purchase the Guarantor hereby agrees shall benefit
the Guarantor, the Guarantor executes and delivers this Capital Securities
Guarantee for the benefit of the Holders.
ARTICLE I
DEFINITIONS AND INTERPRETATION
SECTION 1.1 DEFINITIONS AND INTERPRETATION. In this Capital
Securities Guarantee, unless the context otherwise requires:
(a) capitalized terms used in this Capital Securities Guarantee
but not defined in the preamble above have the respective meanings assigned to
them in this Section 1.1;
(b) a term defined anywhere in this Capital Securities Guarantee
has the same meaning throughout;
(c) all references to "the Capital Securities Guarantee" or "this
Capital Securities Guarantee" are to this Capital Securities Guarantee as
modified, supplemented or amended from time to time;
(d) all references in this Capital Securities Guarantee to
Articles and Sections are to Articles and Sections of this Capital Securities
Guarantee, unless otherwise specified;
(e) a term defined in the Trust Indenture Act has the same meaning
when used in this Capital Securities Guarantee, unless otherwise defined in
this Capital Securities Guarantee or unless the context otherwise requires; and
(f) a reference to the singular includes the plural and vice
versa.
"Affiliate" has the same meaning as given to that term in Rule 405 of
the Securities Act of 1933, as amended, or any successor rule thereunder.
4.7-1
<PAGE> 6
"Business Day" means any day other than (a) a Saturday or Sunday, (b)
a day on which banking institutions in the State of Colorado are authorized or
required by law or executive order to remain closed, or (c) a day on which the
Capital Guarantee Trustee's Corporate Trust Office is closed for business.
"Capital Guarantee Trustee" means Wilmington Trust Company, until a
Successor Capital Guarantee Trustee has been appointed and has accepted such
appointment pursuant to the terms of this Capital Securities Guarantee and
thereafter means each such Successor Capital Guarantee Trustee.
"Corporate Trust Office" means the office of the Capital Guarantee
Trustee at which the corporate trust business of the Capital Guarantee Trustee
shall, at any particular time, be principally administered, which office at the
date of execution of this Agreement is located at Rodney Square North, 1100
North Market Street, Wilmington, Delaware 19890-0001, Attn: Corporate Trust
Administration.
"Covered Person" means any Holder or beneficial owner of Capital
Securities.
"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; and (vi) every
obligation of the type referred to in clauses (i) through (v) of another person
and all dividends of another person the payment of which, in either case, such
person has guaranteed or for which such person is responsible or liable,
directly or indirectly, as obligor or otherwise.
"Event of Default" means a default by the Guarantor on any of its
payment or other obligations under this Capital Securities Guarantee.
"Guarantee Payments" means the following payments or distributions,
without duplication, with respect to the Capital Securities, to the extent not
paid or made by VBC Capital: (i) any accrued and unpaid Distributions (as
defined in the Trust Agreement) that are required to be paid on such Capital
Securities to the extent VBC Capital shall have funds available therefor, (ii)
the redemption price, including all accrued and unpaid Distributions to the
date of redemption (the "Redemption Price") to the extent VBC Capital has funds
available therefor, with respect to any Capital Securities called for
redemption by VBC Capital, and (iii) upon a voluntary or involuntary
dissolution, winding-up or termination of VBC Capital (other than in connection
with the distribution of Junior Subordinated Debentures to the Holders in
exchange for Capital Securities as provided in the Trust Agreement), the lesser
of (a) the aggregate of the liquidation amount and all accrued and unpaid
Distributions on the Capital Securities to the date of payment, to the extent
VBC Capital shall have funds available therefor, and (b) the amount of assets
of VBC Capital remaining available for distribution to Holders in liquidation
of VBC Capital (in either case, the "Liquidation Distribution").
"Holder" shall mean any holder, as registered on the books and records
of VBC Capital of any Capital Securities; provided, however, that, in
determining whether the holders of the requisite percentage of Capital
Securities have given any request, notice, consent or waiver hereunder,
"Holder" shall not include the Guarantor or any Affiliate of the Guarantor.
"Indemnified Person" means the Capital Guarantee Trustee, any
Affiliate of the Capital Guarantee Trustee, or any officers, directors,
shareholders, members, partners, employees, representatives, nominees,
custodians or agents of the Capital Guarantee Trustee.
4.7-2
<PAGE> 7
"Indenture" means the Subordinated Indenture dated as of
_______________, 1997, among the Guarantor (the "Debenture Issuer") and
Wilmington Trust Company, as trustee, and any indenture supplemental thereto
pursuant to which the Junior Subordinated Debentures are to be issued to the
Property Trustee (as defined in the Trust Agreement) of VBC Capital.
"Junior Subordinated Debentures" means the series of junior
subordinated deferrable interest debt securities of the Guarantor designated
the ___% Junior Subordinated Debentures due 2027 held by the Property Trustee
of VBC Capital.
"Majority in liquidation amount of the Capital Securities" means,
except as provided by the Trust Indenture Act, a vote by Holders of Capital
Securities, voting separately as a class, of more than 50% of the liquidation
amount (including the stated amount that would be paid on redemption,
liquidation or otherwise, plus accrued and unpaid Distributions to the date
upon which the voting percentages are determined) of all Capital Securities.
"Officers' Certificate" means, with respect to any Person, a
certificate signed by two Authorized Officers of such Person. Any Officers'
Certificate delivered with respect to compliance with a condition or covenant
provided for in this Capital Securities Guarantee shall include:
(a) a statement that each officer signing the Officers'
Certificate has read the covenant or condition and the definition 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.
"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 Capital Guarantee
Trustee, any officer within the Corporate Trust Office of the Capital Guarantee
Trustee, including any vice-president, any assistant vice-president, any
assistant secretary, the treasurer, any assistant treasurer or other officer of
the Corporate Trust Office of the Capital Guarantee Trustee customarily
performing functions similar to those performed by any of the above designated
officers 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.
"Successor Capital Guarantee Trustee" means a successor Capital
Guarantee Trustee possessing the qualifications to act as Capital Guarantee
Trustee under Section 4.1.
"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 Guarantor
whether or not such claim for post-petition interest is allowed in such
proceeding), on Debt of the Guarantor, whether incurred on or prior to the date
of the Indenture or thereafter incurred, unless, in the instrument creating or
evidencing the same or pursuant to which the same is outstanding, it is
provided that such obligations are not superior in right of payment to the
Capital Securities Guarantee or to other Debt which is pari passu with, or
subordinated to, the Capital Securities Guarantee; provided, however, that
Senior and Subordinated Debt shall not be deemed to include
4.7-3
<PAGE> 8
(i) any Debt of the Guarantor which when incurred and without respect to any
election under section 1111(b) of the United States Bankruptcy Code of 1978, as
amended, was without recourse to the Guarantor, (ii) any Debt of the Guarantor
to any of its subsidiaries, (iii) any Debt to any employee of the Guarantor,
(iv) any Debt which by its terms is subordinated to trade accounts payable or
accrued liabilities arising in the ordinary course of business to the extent
that payments made to the holders of such Debt by the holders of the Junior
Subordinated Debentures as a result of the subordination provisions of the
Indenture would be greater than they otherwise would have been as a result of
any obligation of such holders to pay amounts over to the obligees on such
trade accounts payable or accrued liabilities arising in the ordinary course
of business as a result of the subordination provisions to which such Debt is
subject, (v) the Junior Subordinated Debentures, and (vi) any other debt
securities issued pursuant to the Indenture.
"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 Capital Securities Guarantee is subject to the provisions
of the Trust Indenture Act that are required to be part of this Capital
Securities Guarantee and shall, to the extent applicable, be governed by such
provisions; and
(b) If and to the extent that any provision of this Capital
Securities Guarantee limits, qualifies or conflicts with the duties imposed by
Sections 310 to 317, inclusive, of the Trust Indenture Act, such imposed duties
shall control.
SECTION 2.2 LISTS OF HOLDERS OF SECURITIES.
(a) The Guarantor shall provide the Capital Guarantee Trustee with
a list, in such form as the Capital Guarantee Trustee may reasonably require,
of the names and addresses of the Holders of the Capital Securities ("List of
Holders") (i) on or before January 15 and July 15 of each year, and (ii) at any
other time within 30 days of receipt by the Guarantor of a written request for
a List of Holders, as of a date no more than 14 days before such List of
Holders is given to the Capital Guarantee Trustee provided, that the Guarantor
shall not be obligated to provide such List of Holders at any time the List of
Holders does not differ from the most recent List of Holders given to the
Capital Guarantee Trustee by the Guarantor. The Capital Guarantee Trustee may
destroy any List of Holders previously given to it on receipt of a new List of
Holders.
(b) The Capital Guarantee Trustee shall comply with its
obligations under Sections 311(a), 311(b) and Section 312(b) of the Trust
Indenture Act.
SECTION 2.3 REPORTS BY THE CAPITAL GUARANTEE TRUSTEE. On or before
July 15 of each year, the Capital Guarantee Trustee shall provide to the
Holders of the Capital Securities such reports as are required by Section 313
of the Trust Indenture Act, if any, in the form and in the manner provided by
Section 313 of the Trust Indenture Act. The Capital Guarantee Trustee shall
also comply with the requirements of Section 313(d) of the Trust Indenture Act.
4.7-4
<PAGE> 9
SECTION 2.4 PERIODIC REPORTS TO CAPITAL GUARANTEE TRUSTEE. The
Guarantor shall provide to the Capital Guarantee 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 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 Capital Guarantee Trustee such evidence of
compliance with the conditions precedent, if any, provided for in this Capital
Securities Guarantee that relate to any of the matters set forth in Section
314(c) of the Trust Indenture Act. Any certificate or opinion required to be
given by an officer pursuant to Section 314(c)(1) may be given in the form of
an Officers' Certificate.
SECTION 2.6 EVENTS OF DEFAULT; WAIVER. The Holders of a Majority in
liquidation amount of Capital Securities may, by vote, on behalf of the Holders
of all of the Capital Securities, waive any past Event of Default and its
consequences. Upon such waiver, any such Event of Default shall cease to
exist, and any Event of Default arising therefrom shall be deemed to have been
cured, for every purpose of this Capital Securities Guarantee, but no such
waiver shall extend to any subsequent or other default or Event of Default or
impair any right consequent thereon.
SECTION 2.7 EVENT OF DEFAULT; NOTICE.
(a) The Capital Guarantee Trustee shall, within 90 days after the
occurrence of an Event of Default, transmit by mail, first class postage
prepaid, to the Holders of the Capital Securities, notices of all Events of
Default actually known to a Responsible Officer of the Capital Guarantee
Trustee, unless such defaults have been cured before the giving of such notice,
provided, that, the Capital Guarantee Trustee shall be protected in withholding
such notice if and so long as a Responsible Officer of the Capital Guarantee
Trustee in good faith determines that the withholding of such notice is in the
interests of the Holders of the Capital Securities.
(b) The Capital Guarantee Trustee shall not be deemed to have
knowledge of any Event of Default unless the Capital Guarantee Trustee shall
have received a properly addressed written notice, or of which a Responsible
Officer of the Capital Guarantee Trustee charged with the administration of the
Trust Agreement shall have obtained actual knowledge.
SECTION 2.8 CONFLICTING INTERESTS. The Trust Agreement shall be
deemed to be specifically described in this Capital Securities Guarantee for
the purposes of clause (i) of the first proviso contained in Section 310(b) of
the Trust Indenture Act.
ARTICLE III
POWERS, DUTIES AND RIGHTS OF
CAPITAL GUARANTEE TRUSTEE
SECTION 3.1 POWERS AND DUTIES OF THE CAPITAL GUARANTEE TRUSTEE.
(a) This Capital Securities Guarantee shall be held by the Capital
Guarantee Trustee for the benefit of the Holders of the Capital Securities, and
the Capital Guarantee Trustee shall not transfer this Capital Securities
Guarantee to any Person except a Holder of Capital Securities exercising such
Holder's rights pursuant to Section 5.4(b) or to a Successor Capital Guarantee
Trustee on acceptance by such Successor Capital Guarantee Trustee of its
appointment to act as Successor Capital Guarantee Trustee. The right, title and
interest of the Capital Guarantee Trustee shall automatically vest in any
Successor Capital Guarantee Trustee, 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 Capital Guarantee
Trustee.
4.7-5
<PAGE> 10
(b) If an Event of Default actually known to a Responsible Officer
of the Capital Guarantee Trustee has occurred and is continuing, the Capital
Guarantee Trustee shall enforce this Capital Securities Guarantee for the
benefit of the Holders of the Capital Securities.
(c) The Capital 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 Capital Securities Guarantee, and no implied covenants shall be
read into this Capital Securities Guarantee against the Capital Guarantee
Trustee. In case an Event of Default has occurred (that has not been cured or
waived pursuant to Section 2.6) and is actually known to a Responsible Officer
of the Capital Guarantee Trustee, the Capital Guarantee Trustee shall exercise
such of the rights and powers vested in it by this Capital Securities
Guarantee, and use the same degree of care and skill in its exercise thereof,
as a prudent person would exercise or use under the circumstances in the
conduct of such person's own affairs.
(d) No provision of this Capital Securities Guarantee shall be
construed to relieve the Capital Guarantee Trustee from liability for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(i) prior to the occurrence of any Event of Default and
after the curing or waiving of all such Events of Default that may
have occurred:
(A) the duties and obligations of the Capital
Guarantee Trustee shall be determined solely by the express
provisions of this Capital Securities Guarantee, and the
Capital Guarantee Trustee shall not be liable except for the
performance of such duties and obligations as are
specifically set forth in this Capital Securities Guarantee,
and no implied covenants or obligations shall be read into
this Capital Securities Guarantee against the Capital
Guarantee Trustee; and
(B) in the absence of bad faith on the part of
the Capital Guarantee Trustee, the Capital Guarantee Trustee
may conclusively rely, as to the truth of the statements and
the correctness of the opinions expressed therein, upon any
certificates or opinions furnished to the Capital Guarantee
Trustee and conforming to the requirements of this Capital
Securities Guarantee; but in the case of any such certificates
or opinions that by any provision hereof are specifically
required to be furnished to the Capital Guarantee Trustee, the
Capital Guarantee Trustee shall be under a duty to examine the
same to determine whether or not they conform to the
requirements of this Capital Securities Guarantee;
(ii) the Capital Guarantee Trustee shall not be liable for
any error of judgment made in good faith by a Responsible Officer of
the Capital Guarantee Trustee, unless it shall be proved that the
Capital Guarantee Trustee was negligent in ascertaining the pertinent
facts upon which such judgment was made;
(iii) the Capital 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 Capital Securities relating to
the time, method and place of conducting any proceeding for any remedy
available to the Capital Guarantee Trustee, or exercising any trust or
power conferred upon the Capital Guarantee Trustee under this Capital
Securities Guarantee; and
(iv) no provision of this Capital Securities Guarantee
shall require the Capital Guarantee Trustee to expend or risk its own
funds or otherwise incur personal financial liability in the
performance of any of its duties or in the exercise of any of its
rights or powers if the Capital Guarantee Trustee shall have
reasonable grounds for believing that the repayment of such funds or
liability is not reasonably assured to it under the terms of this
Capital Securities Guarantee or indemnity, reasonably satisfactory to
the Capital Guarantee Trustee, against such risk or liability is not
reasonably assured to it.
4.7-6
<PAGE> 11
SECTION 3.2 CERTAIN RIGHTS OF CAPITAL GUARANTEE TRUSTEE.
(a) Subject to the provisions of Section 3.1:
(i) The Capital Guarantee Trustee may conclusively rely
upon, and shall be fully protected in acting or refraining from acting
upon, any resolution, certificate, statement, instrument, opinion,
report, notice, request, direction, consent, order, bond, debenture,
note, other evidence of indebtedness or other paper or document
believed by it to be genuine and to have been signed, sent or
presented by the proper party or parties.
(ii) Any direction or act of the Guarantor contemplated by
this Capital Securities Guarantee shall be sufficiently evidenced by
an Officers' Certificate.
(iii) Whenever, in the administration of this Capital
Securities Guarantee, the Capital Guarantee Trustee shall deem it
desirable that a matter be proved or established before taking,
suffering or omitting any action hereunder, the Capital Guarantee
Trustee (unless other evidence is herein specifically prescribed) may,
in the absence of bad faith on its part, request and conclusively rely
upon an Officers' Certificate which, upon receipt of such request,
shall be promptly delivered by the Guarantor.
(iv) The Capital Guarantee Trustee shall have no duty to
see to any recording, filing or registration of any instrument (or any
rerecording, refiling or registration thereof).
(v) The Capital Guarantee Trustee may consult with
counsel, and the written advice or opinion of such counsel with
respect to legal matters shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted by it
hereunder in good faith and in accordance with such advice or opinion.
Such counsel may be counsel to the Guarantor or any of its Affiliates
and may include any of its employees. The Capital Guarantee Trustee
shall have the right at any time to seek instructions concerning the
administration of this Capital Securities Guarantee from any court of
competent jurisdiction.
(vi) The Capital Guarantee Trustee shall be under no
obligation to exercise any of the rights or powers vested in it by
this Capital Securities Guarantee at the request or direction of any
Holder, unless such Holder shall have provided to the Capital
Guarantee Trustee such security and indemnity, reasonably satisfactory
to the Capital Guarantee Trustee, against the costs, expenses
(including attorneys' fees and expenses and the expenses of the
Capital Guarantee Trustee's agents, nominees or custodians) and
liabilities that might be incurred by it in complying with such
request or direction, including such reasonable advances as may be
requested by the Capital Guarantee Trustee; provided that, nothing
contained in this Section 3.2(a)(vi) shall be taken to relieve the
Capital Guarantee Trustee, upon the occurrence of an Event of Default,
of its obligation to exercise the rights and powers vested in it by
this Capital Securities Guarantee.
(vii) The Capital 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
Capital Guarantee Trustee, in its discretion, may make such further
inquiry or investigation into such facts or matters as it may see fit.
(viii) The Capital Guarantee Trustee may execute any of the
trusts or powers hereunder or perform any duties hereunder either
directly or by or through agents, nominees, custodians or attorneys,
and the Capital Guarantee 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.
4.7-7
<PAGE> 12
(ix) Any action taken by the Capital Guarantee Trustee or
its agents hereunder shall bind the Holders of the Capital Securities,
and the signature of the Capital Guarantee Trustee or its agents alone
shall be sufficient and effective to perform any such action. No
third party shall be required to inquire as to the authority of the
Capital Guarantee Trustee to so act or as to its compliance with any
of the terms and provisions of this Capital Securities Guarantee, both
of which shall be conclusively evidenced by the Capital Guarantee
Trustee's or its agent's taking such action.
(x) Whenever in the administration of this Capital
Securities Guarantee the Capital Guarantee Trustee shall deem it
desirable to receive instructions with respect to enforcing any remedy
or right or taking any other action hereunder, the Capital Guarantee
Trustee (i) may request instructions from the Holders of a Majority in
liquidation amount of the Capital Securities, (ii) may refrain from
enforcing such remedy or right or taking such other action until such
instructions are received, and (iii) shall be protected in
conclusively relying on or acting in accordance with such
instructions.
(b) No provision of this Capital Securities Guarantee shall be
deemed to impose any duty or obligation on the Capital Guarantee Trustee to
perform any act or acts or exercise any right, power, duty or obligation
conferred or imposed on it in any jurisdiction in which it shall be illegal, or
in which the Capital Guarantee Trustee shall be unqualified or incompetent in
accordance with applicable law, to perform any such act or acts or to exercise
any such right, power, duty or obligation. No permissive power or authority
available to the Capital Guarantee Trustee shall be construed to be a duty.
SECTION 3.3 NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF GUARANTEE.
The recitals contained in this Capital Securities Guarantee shall be taken as
the statements of the Guarantor, and the Capital Guarantee Trustee does not
assume any responsibility for their correctness. The Capital Guarantee Trustee
makes no representation as to the validity or sufficiency of this Capital
Securities Guarantee.
ARTICLE IV
CAPITAL GUARANTEE TRUSTEE
SECTION 4.1 CAPITAL GUARANTEE TRUSTEE; ELIGIBILITY.
(a) There shall at all times be a Capital Guarantee Trustee which
shall:
(i) not be an Affiliate of the Guarantor; and
(ii) be a corporation organized and doing business under
the laws of the United States of America or any State or Territory
thereof or of the District of Columbia, or a corporation or Person
permitted by the Securities and Exchange Commission to act as an
institutional trustee under the Trust Indenture Act, authorized under
such laws to exercise corporate trust powers, having a combined
capital and surplus of at least $50,000,000, and subject to
supervision or examination by Federal, State, Territorial or District
of Columbia authority. If such corporation publishes reports of
condition at least annually, pursuant to law or to the requirements of
the supervising or examining authority referred to above, then, for
the purposes of this Section 4.1(a)(ii), the combined capital and
surplus of such corporation shall be deemed to be its combined capital
and surplus as set forth in its most recent report of condition so
published.
(b) If at any time the Capital Guarantee Trustee shall cease to be
eligible to so act under Section 4.1(a), the Capital Guarantee Trustee shall
immediately resign in the manner and with the effect set out in Section 4.2(c).
(c) If the Capital Guarantee Trustee has or shall acquire any
"conflicting interest" within the meaning of Section 310(b) of the Trust
Indenture Act, the Capital Guarantee Trustee and Guarantor shall in all
respects comply with the provisions of Section 310(b) of the Trust Indenture
Act.
4.7-8
<PAGE> 13
SECTION 4.2 APPOINTMENT, REMOVAL AND RESIGNATION OF CAPITAL GUARANTEE
TRUSTEES.
(a) Subject to Section 4.2(b), the Capital Guarantee Trustee may
be appointed or removed without cause at any time by the Guarantor.
(b) The Capital Guarantee Trustee shall not be removed in
accordance with Section 4.2(a) until a Successor Capital Guarantee Trustee has
been appointed and has accepted such appointment by written instrument executed
by such Successor Capital Guarantee Trustee and delivered to the Guarantor.
(c) The Capital Guarantee Trustee appointed to office shall hold
office until a Successor Capital Guarantee Trustee shall have been appointed or
until its removal or resignation. The Capital Guarantee Trustee may resign
from office (without need for prior or subsequent accounting) by an instrument
in writing executed by the Capital Guarantee Trustee and delivered to the
Guarantor, which resignation shall not take effect until a Successor Capital
Guarantee Trustee has been appointed and has accepted such appointment by
instrument in writing executed by such Successor Capital Guarantee Trustee and
delivered to the Guarantor and the resigning Capital Guarantee Trustee.
(d) If no Successor Capital 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 Capital Guarantee Trustee may petition any court of competent
jurisdiction for appointment of a Successor Capital Guarantee Trustee. Such
court may thereupon, after prescribing such notice, if any, as it may deem
proper, appoint a Successor Capital Guarantee Trustee.
(e) No Capital Guarantee Trustee shall be liable for the acts or
omissions to act of any Successor Capital Guarantee Trustee.
(f) Upon termination of this Capital Securities Guarantee or
removal or resignation of the Capital Guarantee Trustee pursuant to this
Section 4.2, the Guarantor shall pay to the Capital Guarantee Trustee all
amounts accrued to the date of such termination, removal or resignation.
ARTICLE V
GUARANTEE
SECTION 5.1 GUARANTEE. The Guarantor irrevocably and unconditionally
agrees to pay in full to the Holders the Guarantee Payments (without
duplication of amounts theretofore paid by VBC Capital), as and when due,
regardless of any defense, right of set-off or counterclaim that VBC Capital
may have or assert. The Guarantor's obligation to make a Guarantee Payment may
be satisfied by direct payment of the required amounts by the Guarantor to the
Holders or by causing VBC Capital to pay such amounts to the Holders.
SECTION 5.2 WAIVER OF NOTICE AND DEMAND. The Guarantor hereby waives
notice of acceptance of this Capital Securities Guarantee and of any liability
to which it applies or may apply, presentment, demand for payment, any right to
require a proceeding first against VBC Capital or any other Person before
proceeding against the Guarantor, protest, notice of nonpayment, notice of
dishonor, notice of redemption and all other notices and demands.
SECTION 5.3 OBLIGATIONS NOT AFFECTED. The obligations, covenants,
agreements and duties of the Guarantor under this Capital Securities Guarantee
shall in no way be affected or impaired by reason of the happening from time to
time of any of the following:
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<PAGE> 14
(a) the release or waiver, by operation of law or otherwise, of
the performance or observance by VBC Capital of any express or implied
agreement, covenant, term or condition relating to the Capital Securities to be
performed or observed by VBC Capital;
(b) the extension of time for the payment by VBC Capital of all or
any portion of the Distributions, Redemption Price, Liquidation Distribution or
any other sums payable under the terms of the Capital Securities or the
extension of time for the performance of any other obligation under, arising
out of, or in connection with, the Capital Securities (other than an extension
of time for payment of Distributions, Redemption Price, Liquidation
Distribution or other sum payable that results from the extension of any
interest payment period on the Junior Subordinated Debentures or any extension
of the maturity date of the Junior Subordinated Debentures permitted by the
Indenture);
(c) any failure, omission, delay or lack of diligence on the part
of the Holders to enforce, assert or exercise any right, privilege, power or
remedy conferred on the Holders pursuant to the terms of the Capital
Securities, or any action on the part of VBC Capital 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, VBC Capital or any of the
assets of VBC Capital;
(e) any invalidity of, or defect or deficiency in, the Capital
Securities;
(f) the settlement or compromise of any obligation guarantied
hereby or hereby incurred; or
(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 consent of, the Guarantor with respect to the happening of any of the
foregoing.
SECTION 5.4 RIGHTS OF HOLDERS.
(a) The Holders of a Majority in liquidation amount of the Capital
Securities have the right to direct the time, method and place of conducting of
any proceeding for any remedy available to the Capital Guarantee Trustee in
respect of this Capital Securities Guarantee or exercising any trust or power
conferred upon the Capital Guarantee Trustee under this Capital Securities
Guarantee.
(b) Any Holder of Capital Securities may institute a legal
proceeding directly against the Guarantor to enforce its rights under this
Capital Securities Guarantee, without first instituting a legal proceeding
against VBC Capital, the Capital Guarantee Trustee or any other Person.
SECTION 5.5 GUARANTEE OF PAYMENT. This Capital Securities Guarantee
creates a Guarantee of payment and not of collection.
SECTION 5.6 SUBROGATION. The Guarantor shall be subrogated to all
(if any) rights of the Holders of Capital Securities against VBC Capital in
respect of any amounts paid to such Holders by the Guarantor under this Capital
Securities Guarantee; provided, however, that the Guarantor shall not (except
to the extent required by mandatory provisions of law) be entitled to enforce
or exercise any right that it may acquire by way of subrogation or any
indemnity, reimbursement or other agreement, in all cases as a result of
payment under this Capital Securities Guarantee, if, at the time of any such
payment, any amounts are due and unpaid under this Capital Securities
4.7-10
<PAGE> 15
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 VBC Capital
with respect to the Capital Securities, and that the Guarantor shall be liable
as principal and as debtor hereunder to make Guarantee Payments pursuant to the
terms of this Capital Securities Guarantee notwithstanding the occurrence of
any event referred to in subsections (a) through (g), inclusive, of Section
5.3.
ARTICLE VI
LIMITATION OF TRANSACTIONS; SUBORDINATION
SECTION 6.1 LIMITATION OF TRANSACTIONS. So long as any Capital
Securities remain outstanding, if there shall have occurred and be continuing
an Event of Default or an event of default under the Trust Agreement, then (a)
the Guarantor shall not declare or pay any dividend or distributions on, or
redeem, purchase, acquire, or make a liquidation payment with respect to, any
of its capital stock, (b) the Guarantor shall not make any payment of interest,
principal or premium, if any, on or repay, repurchase or redeem any debt
securities issued by the Guarantor (including other Junior Subordinated
Debentures) which rank pari passu with or junior in interest to the Junior
Subordinated Debentures or (c) the Guarantor shall not make any guarantee
payments with respect to any guarantee by the guarantor of the debt securities
of any subsidiary of the Guarantor if such guarantee ranks pari passu 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 shareholders' rights plan, or the issuance of
stock under any such plan in the future or the redemption or repurchase of any
such rights pursuant thereto, (c) payments under this Capital Securities
Guarantee and (d) purchases of common stock related to the issuances of common
stock or rights under any of the Guarantor's benefit plans for its directors,
officers or employees).
SECTION 6.2 RANKING. This Capital Securities Guarantee will
constitute an unsecured obligation of the Guarantor and will rank subordinate
and junior in right of payment to all Senior and Subordinated Debt of the
Guarantor.
ARTICLE VII
TERMINATION
SECTION 7.1 TERMINATION. This Capital Securities Guarantee shall
terminate upon (i) full payment of the Redemption Price of all Capital
Securities, (ii) upon full payment of the amounts payable in accordance with
the Trust Agreement upon liquidation of VBC Capital or (iii) upon distribution
of the Junior Subordinated Debentures to the Holders of the Capital Securities.
Notwithstanding the foregoing, this Capital Securities Guarantee will continue
to be effective or will be reinstated, as the case may be, if at any time any
Holder of Capital Securities must restore payment of any sums paid under the
Capital Securities or under this Capital Securities Guarantee.
ARTICLE VIII
INDEMNIFICATION
SECTION 8.1 EXCULPATION.
(a) No Indemnified Person shall be liable, responsible or
accountable in damages or otherwise to the Guarantor or any Covered Person for
any loss, damage or claim incurred by reason of any act or omission performed
or omitted by such Indemnified Person in good faith in accordance with this
Capital Securities Guarantee and in a manner that such Indemnified Person
reasonably believed to be within the scope of the authority conferred on such
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<PAGE> 16
Indemnified Person by this Capital Securities Guarantee or by law, except that
an Indemnified Person shall be liable for any such loss, damage or claim
incurred by reason of such Indemnified Person's negligence or willful
misconduct with respect to such acts or omissions.
(b) An Indemnified Person shall be fully protected in relying in
good faith upon the records of the Guarantor and upon such information,
opinions, reports or statements presented to the Guarantor by any Person as to
matters the Indemnified Person reasonably believes are within such other
Person's professional or expert competence and who has been selected with
reasonable care by or on behalf of the Guarantor, including information,
opinions, reports or statements as to the value and amount of the assets,
liabilities, profits, losses, or any other facts pertinent to the existence and
amount of assets from which Distributions to Holders of Capital Securities
might properly be paid.
SECTION 8.2 INDEMNIFICATION. The Guarantor agrees to indemnify each
Indemnified Person for, and to hold each Indemnified Person harmless against,
any loss, liability or expense incurred without negligence or bad faith on its
part, arising out of or in connection with the acceptance or administration of
the trust or trusts hereunder, including the costs and expenses (including
reasonable legal fees and expenses) of defending itself against, or
investigating, any claim or liability in connection with the exercise or
performance of any of its powers or duties hereunder. The obligation to
indemnify as set forth in this Section 8.2 shall survive the termination of
this Capital Securities Guarantee.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1 SUCCESSORS AND ASSIGNS. All guaranties and agreements
contained in this Capital Securities Guarantee shall bind the successors,
assigns, receivers, trustees and representatives of the Guarantor and shall
inure to the benefit of the Holders of the Capital Securities then outstanding.
SECTION 9.2 AMENDMENTS. Except with respect to any changes that do
not materially adversely affect the rights of Holders (in which case no consent
of Holders will be required), this Capital Securities Guarantee may only be
amended with the prior approval of the Holders of at least a Majority in
liquidation amount of the Capital Securities. The provisions of Article VI of
the Trust Agreement with respect to meetings of Holders of the Securities apply
to the giving of such approval.
SECTION 9.3 NOTICES. All notices provided for in this Capital
Securities Guarantee shall be in writing, duly signed by the party giving such
notice, and shall be delivered, telecopied or mailed by registered or certified
mail, as follows:
(a) If given to the Capital Guarantee Trustee, at the Capital
Guarantee Trustee's mailing address set forth below (or such other address as
the Capital Guarantee Trustee may give notice of to the Holders of the Capital
Securities):
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, DE 19890-0001
Attention: Corporate Trust Administration
(b) If given to the Guarantor, at the Guarantor's mailing address
set forth below (or such other address as the Guarantor may give notice of to
the Holders of the Capital Securities):
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<PAGE> 17
Vectra Banking Corporation
1650 South Colorado Boulevard, Suite 320
Denver, Colorado 80222
Attention: Chief Financial Officer
(c) If given to any Holder of Capital Securities, at the address
set forth on the books and records of VBC Capital.
All such notices shall be deemed to have been given when received in
person, telecopied with receipt confirmed, or mailed by first class mail,
postage prepaid except that if a notice or other document is refused delivery
or cannot be delivered because of a changed address of which no notice was
given, such notice or other document shall be deemed to have been delivered on
the date of such refusal or inability to deliver.
SECTION 9.4 BENEFIT. This Capital Securities Guarantee is solely for
the benefit of the Holders of the Capital Securities and, subject to Section
3.1(a), is not separately transferable from the Capital Securities.
SECTION 9.5. GOVERNING LAW. THIS CAPITAL SECURITIES GUARANTEE SHALL
BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF COLORADO; PROVIDED THAT THE IMMUNITIES AND THE STANDARD OF CARE OF
THE TRUSTEE SHALL BE GOVERNED BY DELAWARE LAW.
THIS CAPITAL SECURITIES GUARANTEE is executed as of the day and year
first above written.
VECTRA BANKING CORPORATION,
as Guarantor
By
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Gary S. Judd, President and Chief
Executive Officer
WILMINGTON TRUST COMPANY,
As Capital Guarantee Trustee
By:
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Name:
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Title:
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