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As filed with the Securities and Exchange Commission on November 30, 1999
Registration No. 333-90771
Registration No. 333-90771-01
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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PRE-EFFECTIVE AMENDMENT NO.1 TO
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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CNB FINANCIAL CORP. CNBF CAPITAL TRUST I
(Exact Name of Registrants as Specified in their Charters)
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NEW YORK DELAWARE
(State or other jurisdiction of incorporation or organization) (State or other jurisdiction of incorporation)
6022 6733
(Primary standard industrial classification code number) (Primary standard industrial classification code number)
22-3203747 16-6497113
(I.R.S. Employer Identification No.) (I.R.S. Employer Identification No.)
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24 CHURCH STREET, CANAJOHARIE, NEW YORK 13317, (518) 673-3243
(Address, including zip code, and telephone number, including area code,
of Registrants' principal executive offices)
--------------------------------------
DONALD L. BRASS
PRESIDENT AND CHIEF EXECUTIVE OFFICER
CNB FINANCIAL CORP.
24 CHURCH STREET
CANAJOHARIE, NEW YORK 13317
(518) 673-3243
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies To:
STEVEN KAPLAN, ESQ.
ARNOLD & PORTER
555 12TH STREET, N.W.
WASHINGTON, D.C. 20004
(202) 942-5998
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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 being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, 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 the earlier effective
registration statement for the same offering. |_|
If this form is a post-effective amendment filed pursuant to Rule 462(d) 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. |_|
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The information in this Prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This Prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
PRELIMINARY PROSPECTUS
Subject to Completion, Dated November 30, 1999
CNBF CAPITAL TRUST I
OFFER TO EXCHANGE
SERIES B FLOATING RATE CAPITAL SECURITIES
FOR ANY AND ALL OF ITS OUTSTANDING
SERIES A FLOATING RATE CAPITAL SECURITIES
FULLY AND UNCONDITIONALLY GUARANTEED AS DESCRIBED IN THIS PROSPECTUS BY
CNB FINANCIAL CORP.
- - Our offer to exchange expires 5:00 p.m., New York City time, on January
7, 2000, unless extended.
- - We are offering to exchange the following securities:
- Up to $18,000,000 aggregate liquidation amount Series B Floating Rate
Capital Securities of CNBF Capital Trust I for a similar amount of
outstanding Series A Floating Rate Capital Securities of CNBF Capital
Trust I.
- CNB Financial Corp.'s guarantee of the obligations of CNBF Capital
Trust I under the Series B Floating Rate Capital Securities for a
similar guarantee of the obligations of CNBF Capital Trust I under the
Series A Floating Rate Capital Securities.
- Up to $18,000,000 aggregate principal amount of Series B Floating Rate
Junior Subordinated Deferrable Interest Debentures of CNB Financial
Corp. for a similar amount of Series A Floating Rate Junior
Subordinated Deferrable Interest Debentures.
- - The terms of the Series B securities are substantially identical to the
terms of the Series A securities, except that:
- each of the Series B securities are registered under the Securities
Act of 1993 and do not have the same restrictions on transfer as the
Series A securities,
- the distribution rate on the Series B Floating Rate Capital Securities
will not have the potential to increase, and
- the Series B Floating Rate Junior Subordinated Deferrable Interest
Debentures will not be entitled to any liquidated damages.
PLEASE REFER TO "RISK FACTORS" BEGINNING ON PAGE 14 OF THIS PROSPECTUS
FOR IMPORTANT INFORMATION.
THE SECURITIES ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF A BANK OR SAVINGS
ASSOCIATION AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR
ANY OTHER GOVERNMENTAL AGENCY.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS , 1999.
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WHERE YOU CAN FIND MORE INFORMATION
CNB Financial Corp. files annual, quarterly and current reports, proxy
statements and other information with the Securities and Exchange Commission, or
SEC. You may read and copy any document that CNB Financial Corp. files with the
SEC at the following locations:
Public Reference Room New York Regional Office Chicago Regional Office
450 Fifth Street, N.W 7 World Trade Center Citicorp Center
Room 1024 Suite 1300 500 West Madison Avenue
Washington, D.C. 20549 New York, New York 10048 Suite 1400
Chicago, Illinois 60661
You may call the SEC at 1-800-SEC-0330 for further information on their
public reference rooms. The filings of CNB Financial Corp. with the SEC are also
available to the public from the web site maintained by the SEC at
"http://www.sec.gov". In addition, CNB Financial Corp. maintains a web site at
"http://www.canajocnb.com" that contains additional information about CNB
Financial Corp. and its business and operations. The common stock of CNB
Financial Corp. is listed on the Nasdaq National Market under the symbol "CNBF."
Information about CNB Financial Corp. also is available from the NASD, 1735 K
Street, N.W., Washington, D.C. 20006.
We have not included separate financial statements of the Trust in this
prospectus. We do not believe that such financial statements would be material
to holders of the capital securities, because the Trust is a newly-formed
special purpose entity, has no operating history or independent operations, is
not engaged in and does not propose to engage in any activity other than holding
as trust assets the junior subordinated debentures, issuing the capital
securities, issuing exchange securities and engaging in incidental activities,
and the obligations of the Trust under the capital securities are fully and
unconditionally guaranteed by us to the extent the Trust has funds available to
meet such obligations. You should read "CNBF Capital Trust I" for more
information concerning the Trust. In addition, we do not expect that the Trust
will file reports, proxy statements and other information with the SEC under the
Securities Exchange Act of 1934.
We have filed with the SEC a registration statement on Form S-4 under the
Securities Act with respect to the new securities to be issued in the exchange
offer. As allowed by SEC rules, this prospectus does not contain all the
information you can find in the registration statement or the exhibits filed
with the registration statement. Some parts of the registration statement are
omitted here in accordance with the SEC's rules and regulations. You should
review the registration statement and the exhibits filed with such registration
statement for further information regarding us and the new securities being
offered by this prospectus. The registration statement and its exhibits can be
read at the SEC web site or at the SEC offices listed above.
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ADDITIONAL INFORMATION WE HAVE INCORPORATED IN THE PROSPECTUS
The SEC allows us to "incorporate by reference" the information we file
with it, which means that we can disclose important information to you by
referring you to those documents that are considered part of this prospectus.
Information that we file with the SEC after the date of this prospectus will
automatically update and supersede this information. We incorporate by reference
the documents listed below and any future filings made with the SEC under
Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 by us
until our offering of securities has been completed.
- - Annual Report on Form 10-K for the year ended December 31, 1998, as
amended by Form 10-K/A.
- - Current Report on Form 8-K dated March 2, 1999.
- - Current Report on Form 8-K dated April 16, 1999.
- - Current Report on Form 8-K dated June 25, 1999.
- - Current Report on Form 8-K dated August 4, 1999.
- - Current Report on Form 8-K dated September 10, 1999.
- - Quarterly Reports on Form 10-Q for periods ended March 31, 1999,
June 30, 1999 and September 30, 1999.
You may obtain a copy of our filings with the SEC at no cost, by writing
or telephoning us at the following address:
CNB Financial Corp.
24 Church Street
Canajoharie, NY 13317
Attn: Holly C. Craver, Corporate Secretary
You should rely only on the information incorporated by reference or
provided in this prospectus. We have not authorized anyone else to provide you
with different information. You should not assume that the information in the
prospectus is accurate at any date other than the date indicated on the cover
page of this prospectus.
FORWARD-LOOKING STATEMENTS RELATING TO OUR FUTURE PERFORMANCE OR EXPECTATIONS
AND THAT OF THE CAPITAL SECURITIES
We have used and incorporated by reference "forward-looking statements" in
this prospectus. Words such as "believes," "expects," "may," "will," "should,"
"projected," "contemplates" or "anticipates" may constitute forward-looking
statements. These statements are within the meaning of the Private Securities
Litigation Reform Act of 1995 and are subject to risks and uncertainties that
could cause our actual results to differ materially. We have used these
statements to describe our expectations and estimates in various areas,
including:
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- Deterioration in local, regional, national or global economic
conditions which could result, among other things, in an increase in
loan delinquencies, a decrease in property values, or a change in the
housing turnover rate;
- Changes in market interest rates or changes in the speed at which
market interest rates change resulting in reduced margins;
- Changes in laws and regulations affecting the financial services
industry;
- Changes in competition and continued pricing pressures on loan and
deposit products;
- Changes in consumer preferences and customer borrowing, repayment,
investment and deposit practices;
- The effect of certain customers and vendors of critical systems or
services failing to adequately address issues relating to them
becoming Year 2000 compliant;
- The introduction, withdrawal, success and timing of business
initiatives and strategies, several of which are in early stages and
therefore susceptible to greater uncertainty than more mature
businesses;
- Risks related to our recent acquisition of five branches from Astoria
Federal Savings and Loan Association, including the ability to retain
deposits, generate revenues from the new locations, manage costs and
implement integration plans;
- CNB's ability to implement successfully our strategy to increase the
level of loans on our balance sheet at acceptable levels of risk;
- Changes in the banking industry including the consolidation resulting
from possible mergers of financial institutions; and
- Costs or difficulties related to the integration of the acquired
branches being greater than anticipated.
Our actual results could vary materially from the future results covered
in our forward-looking statements. The statements in the "Risk Factors" section
are additional cautionary statements identifying important factors, including
certain risks and uncertainties that could cause our results to vary materially
from the future results covered in such forward-looking statements. Other
factors, such as the general state of the United States economy, could also
cause actual results to vary materially from the future results covered in such
forward-looking statements. We disclaim any obligation to announce publicly
future events or developments that affect the forward-looking statements in this
prospectus.
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PROSPECTUS SUMMARY
This summary highlights selected information from this prospectus and may
not contain all information that is important to you. This prospectus includes
specific terms of the exchange offer, as well as information regarding our
business and detailed financial data. We encourage you to read this prospectus
in its entirety and the other documents referred to in this prospectus.
In this prospectus, when we refer to "we," "us" or "our," we are referring
to both CNB Financial Corp. and CNBF Capital Trust I. When we refer to "CNB," we
are referring to CNB Financial Corp. When refer to the "Trust," we are referring
to CNBF Capital Trust I.
In addition, when we refer to the "original capital securities," the
"original guarantee" or the "original junior subordinated debentures," we mean
the securities that were issued on August 6, 1999 and that are the subject of
this exchange offer. When we refer to "original securities," we mean,
collectively, the original capital securities, original guarantee and original
junior subordinated debentures.
When we refer to the "exchange capital securities," the "exchange
guarantee" or the "exchange junior subordinated debentures," we mean the
securities that, as part of this exchange offer, will be issued in exchange for
the original capital securities, the original guarantee and the original junior
subordinated debentures. When we refer to the "exchange securities," we mean,
collectively, the exchange capital securities, the exchange guarantee and the
exchange junior subordinated debentures.
When we refer simply to "capital securities," "guarantee" or "junior
subordinated debentures," we mean both the original securities issued on August
6, 1999 and the exchange securities that will be issued as part of this exchange
offer.
CNB FINANCIAL CORP.
CNB is a one-bank holding company headquartered in Canajoharie, New York.
Through its wholly-owned subsidiary, Central National Bank, Canajoharie (the
"Bank"), CNB provides comprehensive community banking services with its network
of twenty-seven branches and two financial service centers located in central
New York in the counties of Montgomery, Fulton, Herkimer, Otsego, Saratoga,
Schoharie, Schenectady and Chenango.
The Bank provides a wide range of services for individuals and small to
medium sized businesses primarily in its market area. Services include accepting
time, demand and savings deposits, and making secured and unsecured commercial,
real estate and consumer loans. The Bank also provides certain insurance, mutual
fund and annuity products to its customers through a third-party vendor. The
Bank's lending activities include residential and commercial real estate loans,
agricultural, commercial, and consumer loans, indirect lending for automobile
and manufactured housing dealers and lease financing for automobiles. Other
services the Bank
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offers include safe deposit boxes, travelers checks, money orders, wire
transfers, drive-thru facilities, 24-hour depositories, ATMs and trust services.
At September 30, 1999, CNB had assets of $858 million, deposits of $760
million, net loans of $417 million and stockholders' equity of $57 million.
CNB's principal executive office is located at 24 Church Street,
Canajoharie, New York 13317, and its telephone number is (518) 673-3243.
CNBF CAPITAL TRUST I
The Trust is a statutory business trust created under Delaware law. The
Trust's business and affairs are conducted by the property trustee, the Delaware
trustee and the three administrators of the Trust, who are officers of CNB. The
Trust exists exclusively to:
- - issue and sell the capital securities and the common securities,
- - use the proceeds from the sale of the capital securities and common
securities to purchase the junior subordinated debentures,
- - issue the exchange securities, and
- - engage in other activities that are necessary or incidental to these
purposes.
The junior subordinated debentures are the sole assets of the Trust.
Payments under the junior subordinated debentures are the sole revenue of the
Trust. All of the common securities issued by the Trust are owned by CNB.
THE EXCHANGE OFFER
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The Exchange Offer............ We are offering to exchange up to
$18,000,000 aggregate liquidation
amount of exchange capital securities
for an equal aggregate liquidation
amount of original capital securities.
You may exchange all of your original
capital securities or less than all of
them provided that the original capital
securities you exchange have a
liquidation amount of at least $100,000
(100 capital securities) or any
integral multiple of $1,000 (one
capital security) in excess of $100,000.
We are making this exchange offer in order to satisfy our
obligations under a registration rights agreement
relating to your original capital securities. Please
refer to "The Exchange Offer" for a description of the
procedures for
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tendering your original capital securities.
Expiration Date............... The exchange offer will expire at 5:00 p.m., New York
City time, on January 7, 2000, unless we extend it (in
which case the expiration date will be the latest date
and time to which we extend the exchange offer). Please
refer to "The Exchange Offer--Expiration Date; Extension;
Amendments" for additional information.
Conditions to the
Exchange Offer................ The exchange offer is subject to certain conditions,
which we have the discretion to waive. The exchange offer
is not conditioned upon the tender of any minimum
liquidation amount of original capital securities. Please
refer to "Exchange Offer--Conditions to the Exchange
Offer" for a description of these conditions.
Terms of the Exchange
Offer......................... We reserve the right, in our discretion
and subject to applicable law, at any
time and from time to time:
- to delay accepting the original
capital securities for exchange;
- to end the exchange offer if
certain specified conditions are
not satisfied;
- to extend the exchange offer and
keep all of the original capital
securities tendered pursuant to the
exchange offer, subject to your
right to withdraw your tendered
original capital securities; or
- to waive any condition or otherwise
change the terms of the exchange
offer in any way.
Please refer to "The Exchange
Offer--Terms of the Exchange Offer" for
additional information.
Withdrawal Rights............. You may withdraw your tender of
original capital securities at any time
before the expiration date by
delivering written notice of the
withdrawal to the exchange agent as
provided in the procedures described
below under the caption "The Exchange
Offer--Withdrawal Rights."
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Procedures for Tendering
Original Capital
Securities.................... You must complete and sign a letter of
transmittal and mail, fax or hand
deliver it, together with any other
documents required by the letter of
transmittal, to the exchange agent,
either with your original capital
securities or in compliance with the
specified procedures for guaranteed
delivery of original capital
securities. Certain brokers, dealers,
commercial banks, trust companies and
other nominees may also effect tenders
by book-entry transfer. If your
original capital securities are
registered in the name of a broker,
dealer, commercial bank, trust company
or other nominee, you should contact
that person promptly if you wish to
tender your original capital securities
pursuant to the exchange
offer. Please refer to "The Exchange
Offer--Procedures for Tendering Original
Capital Securities" for additional
information.
Please do not send your letter of
transmittal and certificates
representing your original capital
securities to us. You should only send
the documents to the exchange agent.
Resales of Exchange Capital
Securities.................... In making the exchange offer, we are
relying on the position of the staff of
the Securities and Exchange
Commission's Division of Corporation
Finance contained in certain
interpretive letters addressed to third
parties in other transactions. We have
not sought, however, our own
interpretive letter. Therefore, there
is no guarantee that the staff of the
Securities and Exchange Commission's
Division of Corporation Finance would
make a similar determination regarding
the exchange offer as it has in the
interpretive letters to third parties.
Unless you are a broker-dealer or an
affiliate of either CNB or the Trust,
we believe that you may sell or
otherwise transfer exchange capital
securities issued to you pursuant to
this exchange offer in exchange for
your original capital securities
without further compliance with the
registration and prospectus delivery
requirements of the Securities Act.
If you are a broker-dealer or an
affiliate of either CNB or the Trust,
then you will be subject to further
restrictions described in "The Exchange
Offer - Resale of Exchange
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Capital Securities."
Subject to limitations described in
"The Exchange Offer--Resale of Exchange
Capital Securities," we have agreed
that this prospectus, as it may be
changed or supplemented from time to
time, may be used if you are a
participating broker-dealer in
connection with resales of exchange
capital securities. Please refer to
"Plan of Distribution."
Exchange Agent................ The exchange agent with respect to the
exchange offer is Wilmington Trust
Company. The address, telephone and
facsimile numbers of the exchange agent
are listed in "The Exchange
Offer--Exchange Agent" and in the
letter of transmittal.
Certain United States
Federal Income Tax
Consequences; ERISA
Considerations........... You should review carefully the
information contained under the caption
"Certain Federal Income Tax
Considerations" and "ERISA
Considerations" before tendering your
original capital securities in the
exchange offer.
THE EXCHANGE CAPITAL SECURITIES
Securities Offered............ We have registered up to $18,000,000
aggregate liquidation amount of the
Trust's exchange capital securities
under the Securities Act. The terms of
the exchange capital securities are the
same as the terms of the original
capital securities, except that the
exchange capital securities:
- have been registered under the
Securities Act;
- will not be subject to certain
transfer restrictions applicable to
the original capital securities;
and
- will not provide for any increase
in the distribution rate.
Please refer to "Description of
Exchange Securities."
Distributions................. You will be entitled to receive
quarterly cash distributions at an
annual rate, reset quarterly, equal to
the three month LIBOR plus 275 basis
points, of the liquidation amount of
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$1,000 for each capital security. You
will be entitled to be paid
distributions on March 31, June 30,
September 30 and December 31 of each
year. The amount of each distribution
will include amounts accrued up to the
date the distribution is due. These
payments are identical to the payments
that CNB is required to make under the
junior subordinated debentures.
Extension Periods............. If no default has occurred and is
continuing, CNB will have the right, on
one or more occasions, to defer
interest payments on the exchange
junior subordinated debentures for up
to 20 consecutive quarters. CNB cannot
defer interest payments beyond
September 30, 2029, the stated maturity
date of the exchange junior
subordinated debentures.
If CNB defers interest payments on the
exchange junior subordinated
debentures, the Trust will also defer
distributions on the exchange capital
securities. During this deferral period
the exchange capital securities will
still accumulate distributions at an
annual rate, reset quarterly, equal to
the three month LIBOR plus 275 basis
points, of the liquidation amount of
$1,000 for each capital security. In
addition, any unpaid distributions on
the exchange capital securities will
accumulate additional distributions at
the same rate, compounded quarterly, to
the extent permitted by law. After the
end of any period in which CNB is
deferring interest payments, if CNB has
paid all deferred and current interest
under the exchange junior subordinated
debentures, CNB may defer interest
payments again. If the Trust defers
your distributions, you will still be
required to accrue interest income and
include it in your gross income for
U.S. federal income tax purposes, even
if you are a cash basis taxpayer.
Ranking....................... The exchange capital securities will
rank equally with the original capital
securities and the common securities of
the Trust except as described under
"Description of Exchange
Securities--Capital
Securities--Subordination of
Common Securities."
The exchange junior subordinated
debentures will rank equally with the
original junior subordinated debentures
and all other junior subordinated
debentures which are
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issued and sold to other trusts that
may be established by CNB similar to
the Trust. The exchange junior
subordinated debentures will be
unsecured and subordinate and junior in
right of payment as described in the
Indenture to all senior indebtedness of
CNB. See "Description of Exchange
Securities--Junior Subordinated
Debentures--Subordination."
The exchange guarantee will rank
equally with the original guarantee and
all other guarantees to be issued by
CNB with respect to capital securities
to be issued by other trusts that may
be established by CNB similar to the
Trust, and will constitute an unsecured
obligation of CNB and will rank
subordinate and junior in right of
payment as described in the guarantee
to all senior indebtedness. See
"Description of Exchange
Securities--Guarantee--General."
In addition, because CNB is a holding
company, the junior subordinated
debentures and the guarantee are
effectively subordinated to all
existing and future liabilities of
CNB's subsidiaries, including the
Bank's deposits.
Redemption.................... If CNB redeems some or all of the
junior subordinated debentures before
maturity, the Trust will use the cash
it receives from the redemption of
junior subordinated debentures to
redeem proportionately an amount of
capital securities and common
securities having an aggregate
liquidation amount equal to the
aggregate principal amount of junior
subordinated debentures that CNB
redeemed.
At any time on or after September 30,
2009, CNB may redeem some or all of the
junior subordinated debentures before
September 30, 2029 at their principal
amount plus any accrued and unpaid
interest to the date of redemption.
CNB may also redeem all of the junior
subordinated debentures before
September 30, 2029 at their principal
amount plus any accrued and unpaid
interest to the date of redemption at
any time if changes in the bank
regulatory, investment company or tax
laws occur that would adversely impact
the status of the Trust, the capital
securities or junior subordinated
debentures.
CNB may have to obtain regulatory approvals,
including
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the approval of the Federal Reserve Board, before it
redeems junior subordinated debentures prior to maturity.
See "Description of Exchange Securities--Capital
Securities--Redemption."
Transfer Restrictions......... The exchange capital securities will be
issued, and may be transferred, only in
blocks having a liquidation amount of
not less than $100,000 (100 capital
securities) and multiples of $1,000 in
excess of $100,000.
ERISA Considerations..... You should consider carefully the
restrictions on purchase described
under the caption "ERISA
Considerations."
Absence of Market for
the Exchange Capital
Securities.................... The exchange capital securities will be
a new issue of securities for which
there currently is no market.
Accordingly, we cannot assure you that
any market will develop for the
exchange capital securities. We do not
intend to apply for listing of the
exchange capital securities on any
securities exchange or for quotation
through the National Association of
Securities Dealers Automated Quotation
System. See "Plan of Distribution."
Risk Factors.................. You should consider carefully the "Risk
Factors" beginning on page 14.
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SUMMARY SELECTED CONSOLIDATED FINANCIAL DATA
We have selected highlights from CNB's consolidated financial data as of,
and for the nine months ended September 30, 1999 and 1998 and as of, and for
each of the five years ended December 31, 1998. You should read CNB's
consolidated financial statements and related notes for the year ended December
31, 1998 and for the nine months ended September 30, 1999.
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<CAPTION>
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AT OR FOR THE NINE
MONTHS ENDED
SEPTEMBER 30,
---------- -----------
1999 1998
(Dollars in thousands,
excluding per share data)
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SELECTED FINANCIAL
CONDITION DATA:
Total assets ...................................... $858,129 $696,958
Net loans receivable .............................. 416,875 363,158
Securities ........................................ 351,177 170,660
Deposits .......................................... 759,652 618,179
Borrowings ........................................ 15,119 14,595
Stockholders' equity .............................. 56,576 56,067
SELECTED OPERATIONS DATA:
Total interest and dividend income ................ $ 40,499 $ 39,078
Total interest expense ............................ 19,527 19,391
-------- --------
Net interest income ............................... 20,972 19,687
Provision for loan losses ......................... 1,060 610
-------- --------
Net interest income after provision for loan losses 19,912 19,077
Other income ...................................... 2,296 3,000
Other expenses .................................... 15,648 14,745
-------- --------
Income before income tax expense .................. 6,560 7,332
Income tax expense ................................ 1,756 1,904
-------- --------
Net income ........................................ $ 4,804 $ 5,428
======== ========
EARNINGS TO FIXED
CHARGES RATIOS(1):
Including interest on deposits .................... 1.34x 1.38x
Excluding interest on deposits .................... 6.41x 8.46x
PER SHARE DATA, ADJUSTED FOR STOCK SPLITS:
Basic earnings per share .......................... $ 0.63 $ 0.71
Diluted earnings per share ........................ 0.63 0.71
Dividends per share ............................... 0.25 0.22
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AT OR FOR THE YEARS ENDED DECEMBER 31,
---------- ------------- ----------- ------------ ------------
1998 1997 1996 1995 1994
(Dollars in thousands, excluding per share data)
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SELECTED FINANCIAL
CONDITION DATA:
Total assets ...................................... $711,088 $634,389 $586,075 $564,792 $484,497
Net loans receivable .............................. 372,569 338,332 312,876 308,154 283,534
Securities ........................................ 300,107 255,520 235,743 215,450 173,838
Deposits .......................................... 628,142 538,472 509,217 496,311 416,964
Borrowings ........................................ 19,181 35,164 21,824 14,583 22,611
Stockholders' equity .............................. 55,566 54,606 48,391 47,433 38,898
SELECTED OPERATIONS DATA:
Total interest and dividend income ................ $ 52,542 $ 48,635 $ 46,885 $ 43,615 $ 35,709
Total interest expense ............................ 26,158 22,722 21,754 20,088 13,540
-------- -------- -------- -------- --------
Net interest income ............................... 26,384 25,913 25,131 23,527 22,169
Provision for loan losses ......................... 773 275 635 965 1,600
-------- -------- -------- -------- --------
Net interest income after provision for loan losses 25,611 25,638 24,496 22,562 20,569
Other income ...................................... 4,530 3,774 3,178 2,745 1,673
Other expenses .................................... 19,854 18,511 17,779 16,254 14,723
-------- -------- -------- -------- --------
Income before income tax expense .................. 10,287 10,901 9,895 9,053 7,519
Income tax expense ................................ 2,606 3,235 2,738 2,481 2,230
-------- -------- -------- -------- --------
Net income ........................................ $ 7,681 $ 7,666 $ 7,157 $ 6,572 $ 5,289
======== ======== ======== ======== ========
EARNINGS TO FIXED
CHARGES RATIOS(1):
Including interest on deposits .................... 1.39x 1.48x 1.45x 1.45x 1.56x
Excluding interest on deposits .................... 9.24x 10.00x 9.96x 11.31x 9.81x
PER SHARE DATA, ADJUSTED FOR STOCK SPLITS:
Basic earnings per share .......................... $ 1.01 $ 0.99 $ 0.90 $ 0.82 $ 0.70
Diluted earnings per share ........................ 1.00 0.99 0.90 0.81 0.69
Dividends per share ............................... 0.33 0.30 0.27 0.24 0.22
</TABLE>
- ---------------------
(1) For purposes of computing the ratios of earnings to fixed charges, earnings
represent income before income tax expense plus fixed charges. Fixed charges
represent total interest expense, including and excluding interest on deposits.
13
<PAGE> 15
RISK FACTORS
You should carefully consider the following risk factors and the other
sections of this prospectus before making a decision to tender your original
capital securities for exchange. Some of these risks relate to your investment
in the capital securities and others relate to us. We urge you to consider
carefully this information, together with the other information in this
prospectus and in the documents that we have incorporated by reference in this
prospectus. You should consider all of these risk factors to be important.
Except where otherwise indicated, the following risk factors apply to both the
original capital securities and the exchange capital securities.
RISKS RELATED TO YOUR INVESTMENT IN THE CAPITAL SECURITIES
IF YOU DO NOT EXCHANGE YOUR ORIGINAL CAPITAL SECURITIES FOR EXCHANGE CAPITAL
SECURITIES, YOU WILL REMAIN SUBJECT TO TRANSFER RESTRICTIONS.
The original capital securities have not been registered under the
Securities Act or any state securities laws. As a result, the original capital
securities may not be offered, sold or otherwise transferred except in
compliance with the registration requirements of the Securities Act and any
applicable state securities laws, or in connection with an exemption from such
requirements.
Original capital securities that are not exchanged for exchange capital
securities in this exchange offer will continue to have a legend that describes
these transfer restrictions. In addition, after the exchange offer ends, holders
of original capital securities will not be entitled to any additional
distributions or any further registration rights under the registrations rights
agreement, except under limited circumstances. We do not intend to register any
original capital securities under the Securities Act which have not been
exchanged after the exchange offer ends (except for certain limited exceptions).
Original capital securities are likely to be less attractive to potential
purchasers than exchange capital securities.
Although the original capital securities have been designated for trading
in the Private Offerings, Resale and Trading through Automated Linkages, or
PORTAL, market, to the extent that original capital securities are tendered and
accepted in connection with the exchange offer, any trading market for original
capital securities which remain outstanding could be adversely affected.
CNB WILL DEPEND PRIMARILY ON ANY DIVIDENDS IT MAY RECEIVE FROM ITS SUBSIDIARIES
IN MAKING PAYMENTS UNDER THE JUNIOR SUBORDINATED DEBENTURES. CNB'S DEPENDENCE ON
DIVIDENDS FROM ITS SUBSIDIARIES COULD AFFECT THE PAYMENTS MADE TO YOU UNDER THE
CAPITAL SECURITIES.
Because CNB is a bank holding company, substantially all of its operating
assets are owned by the Bank. CNB relies primarily on dividends from the Bank to
pay principal and interest on its outstanding debt obligations and corporate
expenses. The board of directors of the Bank has the sole discretion to declare
and pay any dividends to CNB. In addition, the Office of the Comptroller of the
Currency, or OCC, limits all capital distributions by the Bank directly or
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<PAGE> 16
indirectly to CNB, including dividend payments. Without prior approval of the
OCC, the Bank may not declare a dividend if the total amount of all dividends
declared by the Bank in any calendar year exceeds the total of the Bank's
retained net income for the current year and retained net income for the
preceding two years. Under federal law, the Bank cannot pay any dividend if,
after paying the dividend, the Bank will be "undercapitalized." The OCC may
declare a dividend payment to be unsafe and unsound even though the Bank would
continue to meet its capital requirements after the dividend. If the Bank does
not pay dividends to CNB and CNB is unable to make payments on the junior
subordinated debentures, the Trust will not be able to pay distributions and
other payments on the capital securities and the guarantee will not apply.
CNB'S OBLIGATIONS UNDER THE GUARANTEE AND THE JUNIOR SUBORDINATED DEBENTURES ARE
SUBORDINATED TO MOST OF ITS OTHER CREDITORS.
CNB's obligations under the guarantee and the junior subordinated
debentures are unsecured and rank:
- junior in right of payment to all of CNB's existing and future senior
debt, subordinated debt and additional senior obligations, which
totaled $18 million at September 30, 1999; and
- senior to CNB's common stock.
Because CNB is a holding company, the creditors of CNB's subsidiaries also
will have priority over CNB and you in any distribution of the subsidiaries'
assets in a liquidation, reorganization or otherwise, except to the extent that
CNB is recognized as a creditor of its subsidiaries. Therefore, the junior
subordinated debentures will be effectively subordinated to all existing and
future liabilities of CNB's subsidiaries, and you should look only to CNB's
assets for payments on the junior subordinated debentures.
The capital securities, the guarantee, the junior subordinated debentures
and the indenture do not limit CNB's ability or the ability of any subsidiary to
incur additional debt, including debt that is senior in priority of payment.
For more information on payments under the guarantee and the junior
subordinated debentures, you should refer to "Description of Exchange
Securities--Guarantee--Status of the Guarantee" and "Description of Exchange
Securities--Junior Subordinated Debentures--Subordination."
CNB MAY DEFER INTEREST PAYMENTS ON THE JUNIOR SUBORDINATED DEBENTURES WHICH
COULD HAVE ADVERSE CONSEQUENCES TO YOU.
CNB has the right, at one or more times, unless an event of default exists
under the junior subordinated debentures, to defer interest payments on the
junior subordinated debentures for up to 20 consecutive quarters, but not beyond
September 30, 2029. If CNB defers interest payments, the Trust will defer paying
distributions to you on your capital securities during the
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<PAGE> 17
deferral period. During this period, however, the capital securities would still
accumulate distributions at the annual rate, reset quarterly, equal to the three
month LIBOR plus 275 basis points, to the extent permitted by law. During any
deferral period, CNB will be prohibited from declaring or paying cash dividends
on its capital stock or from paying on or repaying, repurchasing or redeeming
any debt which ranks equal or junior to the junior subordinated debentures. For
more information, please refer to "Description of Exchange Securities--Capital
Securities--Distributions."
When any deferral period ends and CNB pays all interest then accrued and
unpaid on the junior subordinated debentures, CNB may elect to begin a new
deferral period. There is no limitation on the number of times that CNB may
elect to begin a deferral period. You should read "Description of Exchange
Securities--Capital Securities--Distributions" and "Description of Exchange
Securities--Junior Subordinated Debentures--Option to Extend Interest Payment
Date" for more information.
If CNB exercises its right to defer payments of interest on the junior
subordinated debentures, you will be required to accrue income (as original
issue discount or OID) in respect of the deferred stated interest allocable to
your capital securities for United States federal income tax purposes, which
will be allocated but not distributed to you. As a result, you will be required
to recognize income for U.S. federal income tax purposes before you receive any
cash. You will not receive the cash related to this interest income from the
Trust if you dispose of your capital securities prior to the record date for the
distribution payment. For more information, you should read "Certain Federal
Income Tax Consequences--Interest Income and Original Issue Discount" and
"--Sales or Redemption of Capital Securities."
CNB does not currently intend to exercise its right to defer interest
payments on the junior subordinated debentures. If CNB, however, exercises this
right in the future, the market price of the capital securities will likely be
affected. The capital securities may trade at a price that does not fully
reflect the value of accrued but unpaid interest on the junior subordinated
debentures. As a result, if you sell your capital securities during a deferral
period, you may not receive the same return on your investment as someone else
who continues to hold the capital securities.
THE GUARANTEE COVERS PAYMENTS ONLY IF THE TRUST HAS CASH AVAILABLE.
If CNB defaults on its obligations to pay principal, premium or interest on
the junior subordinated debentures, the Trust will not have sufficient funds to
make distribution payments or liquidation payments on the capital securities.
Because CNB's guarantee does not cover payments when the Trust does not have
sufficient funds, you will not be able to rely upon the guarantee for payment of
these amounts. Instead, you or the property trustee may enforce the rights of
the Trust under the junior subordinated debentures against CNB. For more
information, please refer to "Description of Exchange Securities--Junior
Subordinated Debentures--Enforcement of Certain Rights by Holders."
16
<PAGE> 18
THE TRUST MAY REDEEM THE CAPITAL SECURITIES BEFORE SEPTEMBER 30, 2009 IF A
SPECIAL EVENT OCCURS. YOU MAY BE TAXED ON THE PROCEEDS AND YOU MAY NOT BE ABLE
TO REINVEST THE PROCEEDS AT THE SAME OR A HIGHER RATE OF RETURN.
If there are changes in the bank regulatory, investment company or tax laws
that would adversely affect the status of the Trust, the capital securities or
the junior subordinated debentures, CNB has the right to redeem the junior
subordinated debentures, in whole but not in part. CNB's redemption of the
junior subordinated debentures will cause the Trust to redeem the capital
securities and the common securities at a price equal to $1,000 per security
plus any accrued and unpaid distributions. Under current United States federal
income tax law, the redemption of the capital securities would be a taxable
event to you. In addition, you may not be able to reinvest the money you receive
in the redemption at a rate that is equal to or higher than the rate of return
you received on the capital securities. CNB may have to obtain regulatory
approval, including the approval of Federal Reserve Board, before CNB redeems
any junior subordinated debentures. For more information, you should refer to
"Description of Exchange Securities--Capital Securities--Redemption."
IF CNB DISTRIBUTES THE JUNIOR SUBORDINATED DEBENTURES, THERE MAY BE AN ADVERSE
EFFECT ON THE TRADING MARKET AND TRADING PRICE OF YOUR INVESTMENT, AND THERE MAY
BE ADVERSE TAX EFFECTS.
CNB may dissolve the Trust at any time and, after satisfying the
liabilities owed to the Trust's creditors under applicable law, the issuer
trustees will distribute the junior subordinated debentures to you, as a holder
of capital securities, and to CNB, as the holder of common securities.
If the issuer trustees distribute the junior subordinated debentures to
you, we cannot be sure that a trading market will exist for the junior
subordinated debentures. Accordingly, the capital securities or the junior
subordinated debentures may trade at a discount from the price that an investor
paid to purchase the capital securities. Because holders of capital securities
may receive junior subordinated debentures in liquidation of the Trust and
because distributions are otherwise limited to payments on the junior
subordinated debentures, prospective purchasers of capital securities are also
making an investment decision with regard to the junior subordinated debentures.
As a result, you should carefully review all the information regarding the
junior subordinated debentures contained in this prospectus.
Under current United States federal income tax law, a distribution of the
junior subordinated debentures following the dissolution of the Trust would not
be a taxable event to you unless the distribution occurs at a time when the
Trust is treated as an association taxable as a corporation. Any distributions
of cash for the junior subordinated debentures would, however, be a taxable
event to you. You should refer to "Certain Federal Income Tax
Considerations--Receipt of Junior Subordinated Debentures or Cash Upon
Liquidation of the Trust" for more information.
17
<PAGE> 19
YOU WILL HAVE LIMITED VOTING RIGHTS.
As a holder of capital securities, you will have limited voting rights. You
can vote only to modify the capital securities and to exercise the Trust's
rights as a holder of the junior subordinated debentures. In addition, the
holders of at least a majority in aggregate liquidation amount of the capital
securities can appoint or remove any of the issuer trustees for cause. If an
event of default exists under the trust agreement, the holders of the capital
securities with at least a majority of the aggregate liquidation amount of the
capital securities may appoint or remove the property trustee and the Delaware
trustee with or without cause.
CNB, as holder of the common securities, along with the property trustee,
may, subject to certain conditions, amend the trust agreement without your
consent even if these actions adversely affect your interests, to cure any
ambiguity or make other provisions not inconsistent with the trust agreement or
to ensure that the Trust:
- will not be classified as an association taxable as a corporation for
U.S. federal income tax purposes, and
- will not be required to register as an "investment company" under the
Investment Company Act of 1940.
You will have no voting rights with respect to any matters submitted to a
vote of CNB's stockholders. For more information on your voting rights, please
refer to "Description of Exchange Securities--Capital Securities--Voting Rights;
Amendment of the Trust Agreement" and "--Removal of Trustees."
THE HOLDERS OF THE CAPITAL SECURITIES AND THE JUNIOR SUBORDINATED DEBENTURES ARE
NOT PROTECTED BY COVENANTS IN THE INDENTURE AND THE TRUST AGREEMENT.
Neither the indenture, which sets forth the terms of the junior
subordinated debentures, nor the trust agreement, which sets forth the terms of
the capital securities and the common securities, protects holders of junior
subordinated debentures or the capital securities, respectively, in the event
CNB experiences significant adverse changes in its financial condition or
results of operations. In addition, neither the indenture nor the trust
agreement limits CNB's ability or the ability of any subsidiary to incur
additional indebtedness. Therefore, the provisions of these governing
instruments should not be considered a significant factor in evaluating whether
CNB will be able to comply with its obligations under the junior subordinated
debentures or the guarantee.
THE TRADING PRICE OF THE CAPITAL SECURITIES OR THE JUNIOR SUBORDINATED
DEBENTURES MAY NOT REFLECT THEIR FULL VALUE.
We cannot predict the market prices for the capital securities or the
junior subordinated debentures that may be distributed if CNB dissolves the
Trust. The capital securities or the junior subordinated debentures may trade at
a discount from the price that you paid for the capital securities. The capital
securities may be transferred only in blocks having a liquidation
18
<PAGE> 20
amount of not less than $100,000 (100 capital securities) and multiples of
$1,000 in excess thereof. You should read "Description of Exchange
Securities--Capital Securities--Restrictions on Transfer" and "Notice to
Investors" for more information concerning the transfer of capital securities.
The capital securities may trade at a price that does not fully reflect the
value of accrued but unpaid interest with respect to the underlying junior
subordinated debentures. A holder who uses the accrual method of accounting for
tax purposes (and a cash method holder, if the junior subordinated debentures
are deemed to have been issued with OID) and who disposes of its capital
securities between record dates for payments of distributions will be required
to include accrued but unpaid interest on the junior subordinated debentures
through the date of disposition in income as ordinary income (i.e., interest or,
possibly, OID), and to add such amount to its adjusted tax basis in its share of
the underlying junior subordinated debentures deemed disposed of. To the extent
the selling price is less than the holder's adjusted tax basis (which will
include all accrued but unpaid interest), a holder will recognize a capital
loss. Subject to certain limited exceptions, capital losses cannot be applied to
offset ordinary income for U.S. federal income tax purposes. You should read
"Certain Federal Income Tax Considerations--Interest Income and Original Issue
Discount" and "--Sales or Redemptions of Capital Securities" for more
information on the tax implications purchasing, holding and selling capital
securities.
THE ABSENCE OF A PUBLIC MARKET FOR THE CAPITAL SECURITIES MAY MAKE IT DIFFICULT
FOR YOU TO SELL YOUR CAPITAL SECURITIES AT AN ACCEPTABLE PRICE OR AT ALL.
The original capital securities have not been registered under the
Securities Act and will continue to be subject to restrictions on
transferability under the Securities Act and applicable state securities laws if
they are not exchanged for exchange capital securities. Although the exchange
capital securities generally may be resold or otherwise transferred by the
holders (who are not affiliates of CNB or the Trust) without compliance with the
registration requirements under the Securities Act, they will constitute a new
issue of securities with no established trading market. Capital securities may
be transferred by the holders thereof only in blocks having a liquidation amount
of not less than $100,000 (100 capital securities). We were advised by Ryan,
Beck & Co., the initial purchaser in connection with the offering of the
original capital securities, that Ryan, Beck & Co. intends to make a market in
the capital securities. However, Ryan, Beck & Co. is not obligated to do so and
any market-making activity with respect to the capital securities may be
discontinued at any time without notice. In addition, such market-making
activity will be subject to the limits imposed by the Securities Act and the
Exchange Act and may be limited during the exchange offer. Accordingly, no
assurance can be given that an active public or other market will develop for
the exchange capital securities or the original capital securities or as to the
liquidity of or the trading market for the exchange capital securities or the
original capital securities. If an active public market does not develop, the
market price and liquidity of the exchange capital securities may be adversely
affected. If a public trading market develops for the exchange capital
securities, future trading prices will depend on many factors, including, among
other things, prevailing interest rates, our results of operations and the
market for similar securities.
19
<PAGE> 21
THE INTEREST RATE TO BE PAID ON THE CAPITAL SECURITIES IS VARIABLE.
Because the interest rate to be paid on the capital securities is variable,
changes in interest rates may affect the value of your investment in the capital
securities. Significant decreases in interest rates would result in a
significant decrease in the interest income earned by you on the capital
securities.
RISKS RELATED TO CNB
CNB MAY EXPERIENCE DIFFICULTIES IN MANAGING ITS GROWTH.
As part of its general strategy CNB may acquire banks and businesses that
CNB believes provide a strategic fit with its business. CNB does not have a
history of growth by acquisitions. To the extent that CNB does grow, we cannot
assure you that CNB will be able to manage its growth adequately and profitably.
Acquiring other banks and businesses will involve risks commonly associated with
acquisitions, including:
- potential exposure to liabilities of banks and businesses that CNB
acquires;
- difficulty and expense of integrating the operations and personnel of
banks and businesses that CNB acquires;
- potential disruption to CNB's business;
- potential diversion of the time and attention of CNB's management;
- impairment of relationships with and the possible loss of key
employees and customers of the banks and businesses that CNB acquires;
and
- incurrence of amortization expense if CNB accounts for an acquisition
as a purchase.
The success of CNB's internal growth strategy will depend primarily on its
ability to generate an increasing level of loans and deposits at acceptable risk
levels and terms without significant increases in non-interest expenses relative
to revenues generated. There is no assurance that CNB will be successful in
implementing its internal growth strategy. CNB's financial performance also
depends, in part, on its ability to manage various portfolios and its ability
successfully to introduce additional financial products and services. There can
be no assurance that additional financial products and services will be
introduced or, if introduced, that such financial products and services will be
successful. Furthermore, the success of CNB's growth strategy will depend on
maintaining sufficient regulatory capital levels and on economic conditions.
20
<PAGE> 22
IF CNB IS UNABLE TO COMPETE SUCCESSFULLY FOR CUSTOMERS IN ITS MARKET AREA, ITS
CONSOLIDATED FINANCIAL CONDITION AND RESULTS OF OPERATIONS COULD BE ADVERSELY
AFFECTED.
CNB faces intense and increasing competition in making loans, attracting
deposits and providing other financial products and services. The market area in
which CNB operates, the New York counties of Montgomery, Fulton, Herkimer,
Otsego, Schoharie, Saratoga, Schenectady and Chenango, has numerous financial
institutions that CNB competes with for customers. CNB's competition for loans
comes principally from:
- commercial banks,
- savings banks,
- savings and loan associations,
- mortgage banking companies,
- finance companies, and
- credit unions.
CNB's competition for deposits comes principally from:
- commercial banks,
- savings banks,
- savings and loan associations,
- credit unions,
- brokerage firms,
- insurance companies,
- money market mutual funds, and
- mutual funds (such as corporate and government securities funds).
Many of these competitors have greater financial resources and name
recognition, more locations, more advanced technology and more financial
products to offer than CNB has. The intense competition in the market for
financial services has exerted pressure on the pricing of CNB's loan and deposit
products. CNB's profitability depends on its continued ability to retain
existing customers and to attract new customers and to make loans and attract
deposits on favorable terms. If CNB is unable to compete successfully for loans
and deposits on favorable terms, its financial condition and results of
operations will be adversely affected.
BECAUSE CNB PRIMARILY SERVES CENTRAL NEW YORK, A DECLINE IN THE LOCAL ECONOMY
COULD LOWER ITS PROFITABILITY.
CNB serves the central New York counties of Montgomery, Fulton, Herkimer,
Otsego, Saratoga, Schoharie, Schenectady and Chenango with twenty-seven branches
and two financial
21
<PAGE> 23
service centers. CNB's profits depend on providing products and services to
customers in this local region. An increase in unemployment, a decrease in real
estate values or an increase in interest rates are among the factors that could
weaken the local economy. With a weaker local economy:
- customers may not want or need CNB's products and services;
- borrowers may be unable to repay their loans;
- the value of the collateral securing CNB's loans to borrowers may
decline; and
- the overall quality of CNB's loan portfolio may decline.
Making mortgage loans, consumer loans, commercial loans and agricultural
loans is a significant source of CNB's profits. If customers in the local area
do not want these loans, CNB's profits may decrease. Although CNB could make
other investments, CNB may earn less revenue on these investments than on loans.
Also, CNB's losses on loans may increase if borrowers are unable to make
payments on their loans.
CNB'S CONCENTRATION OF CONSUMER LENDING IN MANUFACTURED HOUSING, AUTOMOBILE
LEASING AND AUTOMOBILE LENDING INCREASES THE CREDIT RISK OF ITS LOAN PORTFOLIO.
CNB's consumer lending activities focus on indirect financing provided
through manufactured housing and automobile dealers. At September 30, 1999,
approximately 13.4% of the Bank's total loan portfolio was concentrated in
manufactured housing loans, 15.8% was concentrated in lease financing on
automobiles and approximately 10.5% was concentrated in automobile loans.
Accordingly, a substantial portion of the loan portfolio is subject to the
general risks associated with consumer lending. Because competitive pressures
have reduced the rates CNB can charge for manufactured housing and indirect auto
lending, CNB is de-emphasizing these activities. However, CNB does not intend to
exit these businesses completely and thus CNB will continue to be subject to the
risks associated with these types of loans.
CNB'S FUTURE PROFITS WILL BE AFFECTED BY ITS ABILITY TO INTEGRATE
SUCCESSFULLY THE NEW BRANCHES ACQUIRED FROM ASTORIA FEDERAL SAVINGS AND LOAN
ASSOCIATION.
On August 27, 1999, the Bank purchased five branches located in the upstate
New York counties of Otsego and Chenango from Astoria Federal Savings and Loan
Association. Under the agreement, the Bank acquired all of the deposits related
to the branches (approximately $157 million as of June 30, 1999). The Bank's
future profits will be affected by the Bank's ability to retain the acquired
deposits, to generate revenues from the new locations, to manage the costs
associated with the acquisition and to otherwise successfully integrate the new
branches into its operations.
INTEREST RATE CHANGES MAY REDUCE CNB'S PROFITABILITY.
To be profitable CNB has to earn more money in interest and dividend income
and fee income than it pays as interest on deposits, other interest-bearing
liabilities and the capital
22
<PAGE> 24
securities and as other expenses. If interest rates fall, the amount of interest
CNB earns on loans and securities may decrease more quickly than the amount of
interest CNB pays on deposits, other interest bearing liabilities and the
capital securities. This would result in a decrease in its profitability.
Changes in the general level of interest rates also affect:
- CNB's ability to originate loans,
- the average life of CNB's loans,
- the value of CNB's loan and securities portfolios,
- CNB's ability to realize gains from the sale of loans and securities,
- the average life of CNB's deposits, and
- CNB's ability to obtain deposits.
Fluctuations in interest rates will ultimately affect both the level of
income and expense CNB records on a large portion of the Bank's assets and
liabilities, and the market value of all interest- earning assets, other than
interest-earning assets that mature in the short term. The Bank's interest rate
management strategy is designed to stabilize net interest income and preserve
capital over a broad range of interest rate movements by matching the interest
rate sensitivity of assets and liabilities. Although CNB believes that its
current mix of loans, securities and deposits is reasonable, significant
fluctuations in interest rates may have a negative effect on its profitability.
In addition, CNB assumed $157 million of deposit liabilities from Astoria
Federal Savings and Loan Association and created $18 million in interest bearing
liabilities in connection with the issuance of the original capital securities.
The assumption of these interest bearing liabilities could affect its interest
rate risk. Moreover, because the interest rate to be paid on the capital
securities is variable, significant increases in interest rates could have a
material adverse impact on CNB's operations.
CNB'S ALLOWANCE FOR LOAN LOSSES MAY NOT BE ADEQUATE TO COVER ACTUAL LOAN LOSSES.
As a lender, CNB is exposed to the risk that its customers will be unable
to repay their loans according to their terms and that any collateral securing
the payment of their loans may not be sufficient to assure repayment. Credit
losses are inherent in the lending business and could have a material adverse
effect on CNB's operating results.
CNB makes various assumptions and judgments about the collectability of its
loan portfolio and provides an allowance for inherent risk of losses based on a
number of factors. If its judgments are wrong, its allowance for loan losses may
not be sufficient to cover its loan losses. CNB may have to increase the
allowance in the future. Material additions to its allowance for loan losses
would decrease its net income.
23
<PAGE> 25
CNB CANNOT PREDICT HOW CHANGES IN TECHNOLOGY WILL IMPACT ITS BUSINESS.
The financial services market, including banking services, is increasingly
affected by advances in technology, including developments in:
- telecommunications;
- data processing;
- automation;
- Internet-based banking;
- telebanking; and
- debit cards and so-called "smart cards."
CNB's ability to compete successfully in the future will depend on whether
CNB can anticipate and respond to technological changes. To develop these and
other new technologies CNB will likely have to make additional capital
investments. Although CNB continually invests in new technology, we cannot
assure you that CNB will have sufficient resources or access to the necessary
proprietary technology to remain competitive in the future.
THE YEAR 2000 PROBLEM COULD HURT CNB'S OPERATIONS AND PROFITS.
CNB relies upon computers to conduct its daily business. If its computer
systems fail to recognize a date using "00" as the year 2000, CNB may be unable
to do its routine business and provide service to its customers. The failure of
the computer systems of parties CNB does business with or utilities, including
the electric and telephone companies, to recognize the year 2000 may also
disrupt its operations. For example, CNB may not be able to process withdrawals
or deposits, prepare account statements or engage in any of the transactions
that constitute its normal operations. This could hurt CNB's profits.
The OCC, CNB's primary federal bank regulator, along with the other federal
bank regulators, has identified the year 2000 issue as a substantive area of
examination for both regularly scheduled and special bank examinations. Under
regulatory guidelines issued by the federal banking regulators, CNB must have
substantially completed its testing of both internally and externally supplied
systems and all renovations by June 30, 1999. Because of this oversight by the
federal bank regulatory agencies, if CNB does not become year 2000 compliant,
CNB could become subject to administrative remedies similar to those imposed on
financial institutions otherwise found not to be operating in a safe and sound
manner, including remedies available under prompt corrective action regulations.
Although CNB carefully considers the year 2000 readiness of its potential
commercial borrowers, the failure of any such borrowers to adequately address
the year 2000 issue could
24
<PAGE> 26
impact their ability to repay their loans. If its borrowers do not achieve year
2000 compliance and are unable to repay their loans, CNB's operations could be
adversely affected.
There has been limited litigation filed against corporations regarding the
year 2000 problem and a corporation's compliance efforts. However, the law in
this area will probably continue to develop well into the new millennium. If CNB
experiences a year 2000 failure, its exposure could be significant and material,
unless there is legislative action to limit year 2000 liability. Legislation has
been introduced in several jurisdictions regarding the year 2000 problem.
However, CNB cannot be sure that legislation will be enacted in jurisdictions
where CNB does business that will limit any potential liability.
WE MAY BE ADVERSELY AFFECTED BY CHANGES IN LAWS AND REGULATIONS AFFECTING THE
FINANCIAL SERVICES INDUSTRY.
The Bank is subject to extensive regulation and supervision as a national
bank. The regulatory authorities have extensive discretion in connection with
their supervision and enforcement activities and their examination policies,
including the imposition of restrictions on the operation of a bank, the
classification of assets by an institution and requiring an increase in a
national bank's allowance for loan losses. Any change in the regulatory
structure or the applicable statutes or regulations, whether by the regulators
or Congress, could have a material impact on CNB, the Bank, and its operations.
ACCOUNTING TREATMENT
For financial reporting purposes, CNB treats the Trust as its subsidiary.
CNB includes the Trust's accounts in its consolidated financial statements. The
capital securities are presented as a separate line item after liabilities and
before stockholders' equity in its consolidated balance sheet. Appropriate
disclosures about the capital securities, the guarantee and the junior
subordinated debentures are included in the notes to its consolidated financial
statements. For financial reporting purposes, since the capital securities are
not classified as debt, CNB records distributions payable on the capital
securities as a non-interest expense in its consolidated statements of income,
consistent with practice generally followed by issuers of this type of security.
CNBF CAPITAL TRUST I
CNB organized the Trust as a statutory business trust under Delaware law
pursuant to the trust agreement that CNB, as sponsor, and the trustees executed.
The issuer trustees filed a certificate of trust with the Delaware Secretary of
State on June 14, 1999.
The Trust exists solely to:
- issue and sell the original capital securities and the common
securities;
- use the proceeds from the sale of the original capital securities and
common securities to purchase the original junior subordinated
debentures;
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- fulfill its obligations under the registration rights agreement and
issue the exchange securities;
- maintain its status as a grantor trust for federal income tax
purposes; and
- engage in other activities that are necessary or incidental to these
purposes.
Accordingly, the junior subordinated debentures are the sole assets of the
Trust, and payments under the junior subordinated debentures are the sole source
of revenue of the Trust.
CNB purchased and will hold all of the common securities of the Trust. The
common securities represent an aggregate liquidation amount equal to
approximately 4% of the Trust's total capitalization. The capital securities
represent the remaining approximately 96% of the Trust's total capitalization.
The common securities have terms substantially identical to the capital
securities. However, if CNB defaults on its payments under the junior
subordinated debentures, the Trust will only pay cash distributions and
liquidation, redemption and other amounts payable to CNB with respect to the
common securities after it pays you these amounts on the capital securities.
The Trust has a term of approximately 30 years, but CNB may dissolve it
earlier as provided in the trust agreement. The issuer trustees conduct the
Trust's business and affairs. The issuer trustees are:
- Wilmington Trust Company, as property trustee;
- Wilmington Trust Company, as Delaware trustee; and
Three individuals who are CNB's employees are the administrators of the Trust.
The holders of at least a majority in aggregate liquidation amount of the
capital securities can replace or remove any of the issuer trustees for cause.
If an event of default exists under the trust agreement, the holders of the
capital securities with at least a majority of aggregate liquidation amount of
the capital securities can remove and replace the property trustee and the
Delaware trustee with or without cause. Only CNB, as owner of all of the common
securities, can remove or replace the administrators. The duties and obligations
of each trustee and the administrators are governed by the trust agreement.
CNB will pay all fees and expenses related to the Trust and the exchange
offer, as well as all of the ongoing costs and expenses of the Trust. CNB will
not be responsible for the Trust's obligations under the capital securities,
except as provided by its guarantee of the capital securities.
The Trust has no separate financial statements. The statements would not be
material to you because the Trust has no independent operations.
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The principal executive office of the Trust is c/o CNB, 24 Church Street,
Canajoharie, NY 13317 and its telephone number is (518) 673-3243.
THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
In connection with the sale of the original capital securities, CNB and the
Trust entered into the registration rights agreement with Ryan, Beck & Co., the
initial purchaser of the original capital securities, pursuant to which CNB and
the Trust agreed to file and to use their reasonable best efforts to cause to be
declared effective by the Securities and Exchange Commission a registration
statement with respect to the exchange of the original capital securities for
capital securities with terms identical in all material respects to the terms of
the original capital securities. A copy of the registration rights agreement has
been filed as an Exhibit to the registration statement of which this prospectus
is a part.
The exchange offer is being made to satisfy the contractual obligations of
CNB and the Trust under the registration rights agreement. The form and terms of
the exchange capital securities are the same as the form and terms of the
original capital securities except that the exchange capital securities:
- have been registered under the Securities Act and therefore will not
be subject to certain restrictions on transfer under federal and state
securities laws, and
- will not provide for any increase in their distribution rate.
The original capital securities provide that if a registration statement
relating to the exchange offer has not been filed by January 3, 2000 and
declared effective by February 2, 2000, the distribution rate borne by the
original capital securities will increase by 0.25% per annum until the exchange
offer is consummated. Upon consummation of the exchange offer, holders of
original capital securities will not be entitled to any increase in the
distribution rate thereon or any further registration rights under the
registration rights agreement. Please refer to "Risk Factors--Risks Related to
the Capital Securities and the Junior Subordinated Debentures--Consequences of a
Failure to Exchange Original Capital Securities."
The exchange offer is not being made to, and the Trust will not accept
tenders for exchange from, holders of original capital securities in any
jurisdiction in which the exchange offer or the acceptance thereof would not be
in compliance with the securities or blue sky laws of that jurisdiction.
Unless the context requires otherwise, the term "holder" with respect to
the exchange offer means any person in whose name the original capital
securities are registered on the books of the Trust or any other person who has
obtained a properly completed bond power from the registered holder, or any
participant in the DTC system whose name appears on a security position listing
as the holder of such original capital securities and who desires to deliver
such original capital securities by book-entry transfer at DTC.
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Pursuant to the exchange offer, CNB will exchange as soon as practicable
after the date hereof, the original guarantee for the exchange guarantee and the
original junior subordinated debentures, in an amount corresponding to the
original capital securities accepted for exchange, for a like aggregate
principal amount of the exchange junior subordinated debentures. The exchange
guarantee and the exchange junior subordinated debentures have been registered
under the Securities Act.
TERMS OF THE EXCHANGE OFFER
The Trust offers, upon the terms and subject to the conditions set forth in
this prospectus and in the accompanying letter of transmittal, to exchange up to
$18,000,000 aggregate liquidation amount of exchange capital securities for a
like aggregate liquidation amount of original capital securities properly
tendered on or prior to the expiration date and not properly withdrawn in
accordance with the procedures described below. The Trust will issue, promptly
after the expiration date, an aggregate liquidation amount of up to $18,000,000
of exchange capital securities in exchange for a like aggregate liquidation
amount of outstanding original capital securities tendered and accepted in
connection with the exchange offer. Holders may tender their original capital
securities in whole or in part in a liquidation amount of not less than $100,000
(100 capital securities) or any integral multiple of $1,000 liquidation amount
(one capital security) in excess of $100,000, provided that if any original
capital securities are tendered in exchange for part, the untendered liquidation
amount must be $100,000 or any integral multiple of $1,000 in excess of
$100,000.
The exchange offer is not conditioned upon any minimum liquidation amount
of original capital securities being tendered. As of the date of this
prospectus, $18,000,000 aggregate liquidation amount of the original capital
securities is outstanding.
Holders of original capital securities do not have any appraisal or
dissenters' rights in connection with the exchange offer. Original capital
securities which are not tendered for or are tendered but not accepted in
connection with the exchange offer will remain outstanding and be entitled to
the benefits of the trust agreement, but will not be entitled to any further
registration rights under the registration rights agreement. Please refer to
"Risk Factors--Risks Related to the Capital Securities and the Junior
Subordinated Debentures--Consequences of a Failure to Exchange Original Capital
Securities."
If any tendered original capital securities are not accepted for exchange
because of an invalid tender, the occurrence of certain other events set forth
herein or otherwise, certificates for any such unaccepted original capital
securities will be returned, without expense, to the tendering holder promptly
after the expiration date.
Holders who tender original capital securities in connection with the
exchange offer will not be required to pay brokerage commissions or fees or,
subject to the instructions in the letter of transmittal, transfer taxes with
respect to the exchange of original capital securities in connection with the
exchange offer. CNB will pay all charges and expenses, other than certain
applicable taxes described below, in connection with the exchange offer. You
should read "--Fees and Expenses" for additional information regarding fees and
expenses in connection with the exchange offer.
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Neither the Board of Directors of CNB nor any issuer trustee of the Trust
makes any recommendation to holders of original capital securities whether to
tender or refrain from tendering all or any portion of their original capital
securities pursuant to the exchange offer. In addition, no one has been
authorized to make any such recommendation. Holders of original capital
securities must make their own decision whether to tender pursuant to the
exchange offer and, if so, the aggregate amount of original capital securities
to tender based on such holders own financial position and requirements.
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The expiration date is 5:00 p.m., New York City time, on January 7, 2000,
unless the exchange offer is extended by CNB or the Trust (in which case the
expiration date shall be the latest date and time to which the exchange offer
is extended).
We expressly reserve the right in our sole and absolute discretion, subject
to applicable law, at any time and from time to time:
- to delay the acceptance of the original capital securities for
exchange,
- to terminate the exchange offer (whether or not any original capital
securities have previously been accepted for exchange) if we
determine, in our sole and absolute discretion, that any of the events
or conditions referred to under "--Conditions to the Exchange Offer"
have occurred or exist,
- to extend the expiration date of the exchange offer and retain all
original capital securities tendered pursuant to the exchange offer,
subject, however, to the right of holders of original capital
securities to withdraw their tendered original capital securities as
described under "--Withdrawal Rights," and
- to waive any condition or otherwise amend the terms of the exchange
offer in any respect.
If the exchange offer is amended in a manner determined by us to constitute
a material change, or if we waive a material condition of the exchange offer, we
will promptly disclose such amendment by means of a prospectus supplement that
will be distributed to the registered holders of the original capital
securities, and we will extend the exchange offer to the extent required by Rule
14e-1 under the Exchange Act.
Any such delay in acceptance, extension, termination or amendment will be
followed promptly by oral or written notice thereof to the exchange agent and by
making a public announcement thereof, and such announcement in the case of an
extension will be made no later than 9:00 a.m., New York City time, on the next
business day after the previously scheduled expiration date. Without limiting
the manner in which we may choose to make any public announcement and subject to
applicable law, we have no obligation to publish, advertise or otherwise
communicate any such public announcement other than by issuing a release to an
appropriate news agency.
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ACCEPTANCE FOR EXCHANGE AND ISSUANCE OF EXCHANGE CAPITAL SECURITIES
Upon the terms and subject to the conditions of the exchange offer, the
Trust will promptly after the expiration date exchange, and will issue to the
exchange agent, exchange capital securities for original capital securities
validly tendered and not withdrawn.
In all cases, delivery of exchange capital securities in exchange for
original capital securities tendered and accepted for exchange pursuant to the
exchange offer will be made only after timely receipt by the exchange agent of:
- original capital securities or a book-entry confirmation of a
book-entry transfer of original capital securities into the exchange
agent's account at DTC, including an agent's message if the tendering
holder has not delivered a letter of transmittal,
- the letter of transmittal (or facsimile thereof), properly completed
and duly executed, with any required signature guarantees, or (in the
case of a book-entry transfer) an agent's message in lieu of the
letter of transmittal, and
- any other documents required by the letter of transmittal.
The term "book-entry confirmation" means a timely confirmation of a
book-entry transfer of original capital securities into the exchange agent's
account at DTC. The term "agent's message" means a message, transmitted by DTC
to and received by the exchange agent and forming a part of a book-entry
confirmation, which states that DTC has received an express acknowledgment from
the tendering participant, which acknowledgment states that such participant has
received and agrees to be bound by the letter of transmittal and that we may
enforce such letter of transmittal against such participant.
Subject to the terms and conditions of the exchange offer, we will be
deemed to have accepted for exchange, and thereby exchanged, original capital
securities validly tendered and not withdrawn as, if and when the Trust gives
oral or written notice to the exchange agent of our acceptance of those original
capital securities for exchange pursuant to the exchange offer. The exchange
agent will act as agent for the Trust for the purpose of receiving tenders of
original capital securities, letters of transmittal and related documents, and
as agent for tendering holders for the purpose of receiving original capital
securities, letters of transmittal and related documents and transmitting
exchange capital securities to validly tendering holders. The exchange will be
made promptly after the expiration date. If, for any reason whatsoever,
acceptance for exchange or the exchange of any original capital securities
tendered pursuant to the exchange offer is delayed (whether before or after the
Trust's acceptance for exchange of original capital securities) or we extend the
exchange offer or are unable to accept for exchange or exchange original capital
securities tendered pursuant to the exchange offer, then, without prejudice to
our rights set forth herein, the exchange agent may, nevertheless, on our behalf
and subject to Rule 14e-1(c) under the Exchange Act, retain tendered original
capital securities and such original capital securities may not be withdrawn
except to the extent tendering holders are entitled to withdrawal rights as
described under "--Withdrawal Rights."
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Pursuant to the letter of transmittal or agent's message in lieu thereof, a
holder of original capital securities will warrant and agree in the letter of
transmittal that it has full power and authority to tender, exchange, sell,
assign and transfer original capital securities, that the Trust will acquire
good, marketable and unencumbered title to the tendered original capital
securities, free and clear of all liens, restrictions, charges and encumbrances,
and the original capital securities tendered for exchange are not subject to any
adverse claims or proxies. The holder also will warrant and agree that it will,
upon request, execute and deliver any additional documents deemed by CNB, the
Trust or the exchange agent to be necessary or desirable to complete the
exchange, sale, assignment and transfer of the original capital securities
tendered pursuant to the exchange offer.
PROCEDURES FOR TENDERING ORIGINAL CAPITAL SECURITIES
Valid Tender. Except as set forth below, in order for original capital
securities to be validly tendered pursuant to the exchange offer, a properly
completed and duly executed letter of transmittal (or facsimile thereof), with
any required signature guarantees, or (in the case of a book-entry transfer) an
agent's message in lieu of a letter of transmittal, and any other required
documents, must be received by the exchange agent at one of its addresses set
forth under "--Exchange Agent." In addition, either:
- tendered original capital securities must be received by the exchange
agent,
- the original capital securities must be tendered pursuant to the
procedures for book-entry transfer set forth below and a book-entry
confirmation, including an agent's message if the tendering holder has
not delivered a letter of transmittal, must be received by the
exchange agent, in each case on or prior to the expiration date, or
- the guaranteed delivery procedures set forth below must be complied
with.
If less than all of the original capital securities are tendered, a
tendering holder should fill in the amount of original capital securities being
tendered in the appropriate box on the letter of transmittal or so indicate in
an agent's message in lieu of the letter of transmittal and the untendered
liquidation amount must be $100,000 or any integral multiple of $1,000 in excess
of $100,000. The entire amount of original capital securities delivered to the
exchange agent will be deemed to have been tendered unless otherwise indicated.
The method of delivery of certificates, the letter of transmittal and all
other required documents is at the option and sole risk of the tendering holder,
and delivery will be deemed made only when actually received by the exchange
agent. If delivery is by mail, registered mail, return-receipt requested,
properly insured, or an overnight delivery service is recommended. In all cases,
sufficient time should be allowed to ensure a timely delivery.
Book-Entry Transfer. The exchange agent will establish an account with
respect to the original capital securities at DTC for purposes of the exchange
offer within two business days after the date of this prospectus. Any financial
institution that is a participant in DTC's book-entry transfer facility system
may make a book-entry delivery of the original capital securities by causing DTC
to transfer the original capital securities into the exchange agent's account at
DTC
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in accordance with DTC's procedures for transfers. However, although delivery of
original capital securities may be effected through book-entry transfer into the
exchange agent's account at DTC, the letter of transmittal (or facsimile
thereof), properly completed and duly executed, with any required signature
guarantees, or an agent's message in lieu of the letter of transmittal, and any
other required documents, must in any case be delivered to and received by the
exchange agent at its address set forth under "--Exchange Agent" on or prior to
the expiration date, or the guaranteed delivery procedure set forth below must
be complied with.
Delivery of documents to DTC in accordance with DTC's procedures does not
constitute delivery to the exchange agent.
Signature Guarantees. Certificates for the original capital securities need
not be endorsed and signature guarantees on the letter of transmittal are
unnecessary unless:
- a certificate for the original capital securities is registered in a
name other than that of the person surrendering the certificate or
- the holder completes the box entitled "Special Issuance Instructions"
or "Special Delivery Instructions" in the letter of transmittal.
In those cases, the certificates for original capital securities must be duly
endorsed or accompanied by a properly executed bond power, with the endorsement
or signature on the bond power and on the letter of transmittal guaranteed by a
firm or other entity identified in Rule 17Ad-15 under the Exchange Act as an
"eligible guarantor institution," including (as such terms are defined therein):
- a bank,
- a broker, dealer, municipal securities broker or dealer or government
securities broker or dealer,
- a credit union,
- a national securities exchange, registered securities association or
clearing agency,
- a savings association that is a participant in a Securities Transfer
Association (an "eligible institution"), unless surrendered on behalf
of such eligible institution. See Instruction 1 to the letter of
transmittal.
Guaranteed Delivery. If a holder desires to tender original capital
securities pursuant to the exchange offer and the certificates for such original
capital securities are not immediately available or time will not permit all
required documents to reach the exchange agent on or prior to the expiration
date, or the procedure for book-entry transfer cannot be completed on a timely
basis, the original capital securities may nevertheless be tendered, provided
that all of the following guaranteed delivery procedures are complied with:
- the tenders are made by or through an eligible institution;
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- a properly completed and duly executed Notice of Guaranteed Delivery,
substantially in the form accompanying the letter of transmittal, is
received by the exchange agent, as provided below, on or prior to the
expiration date; and
- the certificates (or a book-entry confirmation) representing all
tendered original capital securities, in proper form for transfer,
together with a properly completed and duly executed letter of
transmittal (or facsimile thereof), or agent's message in lieu
thereof, with any required signature guarantees and any other
documents required by the letter of transmittal, are received by the
exchange agent within three New York Stock Exchange trading days after
the date of execution of the Notice of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand, or transmitted
by facsimile or mail to the exchange agent and must include a guarantee by an
eligible institution in the form set forth in such notice.
Notwithstanding any other provision hereof, the delivery of exchange
capital securities in exchange for original capital securities tendered and
accepted for exchange pursuant to the exchange offer will in all cases be made
only after timely receipt by the exchange agent of original capital securities,
or of a book-entry confirmation with respect to such original capital
securities, and a properly completed and duly executed letter of transmittal (or
facsimile thereof), or agent's message in lieu thereof, together with any
required signature guarantees and any other documents required by the letter of
transmittal. Accordingly, the delivery of exchange capital securities might not
be made to all tendering holders at the same time, and will depend upon when
original capital securities, book-entry confirmations with respect to original
capital securities and other required documents are received by the exchange
agent.
Our acceptance for exchange of original capital securities tendered
pursuant to any of the procedures described above will constitute a binding
agreement between the tendering holder, CNB and the Trust upon the terms and
subject to the conditions of the exchange offer.
Determination of Validity. All questions as to the form of documents,
validity, eligibility (including time of receipt) and acceptance for exchange of
any tendered original capital securities will be determined by us, in our sole
discretion, whose determination shall be final and binding on all parties. We
reserve the absolute right, in our sole and absolute discretion, to reject any
and all tenders determined by us not to be in proper form or the acceptance of
which, or exchange for, may, in the opinion of our counsel, be unlawful. We also
reserve the absolute right, subject to applicable law, to waive any of the
conditions of the exchange offer as set forth under "--Conditions to the
Exchange Offer" or any condition or irregularity in any tender of original
capital securities of any particular holder whether or not similar conditions or
irregularities are waived in the case of other holders.
Our interpretation of the terms and conditions of the exchange offer
(including the letter of transmittal and the instructions thereto) will be final
and binding. No tender of original capital securities will be deemed to have
been validly made until all irregularities with respect to such tender have been
cured or waived. None of CNB, the Trust, any affiliates or assigns of CNB or
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the Trust, the exchange agent or any other person shall be under any duty to
give any notification of any irregularities in tenders or incur any liability
for failure to give any such notification.
If any letter of transmittal, endorsement, bond power, power of attorney or
any other document required by the letter of transmittal is signed by a trustee,
executor, administrator, guardian, attorney-in-fact, officer of a corporation or
other person acting in a fiduciary or representative capacity, such person
should so indicate when signing, and unless waived by us, proper evidence
satisfactory to us, in our sole discretion, of the person's authority to so act
must be submitted.
A beneficial owner of original capital securities that are held by or
registered in the name of a broker, dealer, commercial bank, trust company or
other nominee or custodian is urged to contact such entity promptly if such
beneficial holder wishes to participate in the exchange offer.
RESALE OF EXCHANGE CAPITAL SECURITIES
The Trust is making the exchange offer for the exchange capital securities
in reliance on the position of the staff of the Division of Corporation Finance
of the Securities and Exchange Commission as set forth in certain interpretive
letters addressed to third parties in other transactions. However, neither CNB
nor the Trust sought its own interpretive letter and there can be no assurance
that the staff of the Division of Corporation Finance of the Securities and
Exchange Commission would make a similar determination with respect to the
exchange offer as it has in such interpretive letters to third parties. Based on
these interpretations by the staff of the Division of Corporation Finance of the
Securities and Exchange Commission, and subject to the two immediately following
sentences, we believe that exchange capital securities issued pursuant to this
exchange offer in exchange for original capital securities may be offered for
resale, resold and otherwise transferred by a holder thereof (other than a
holder who is a broker-dealer) without further compliance with the registration
and prospectus delivery requirements of the Securities Act, provided that such
exchange capital securities are acquired in the ordinary course of the holder's
business and that the holder is not participating, and has no arrangement or
understanding with any person to participate, in a distribution (within the
meaning of the Securities Act) of the exchange capital securities. However, any
holder of original capital securities who is an affiliate of CNB or the Trust or
who intends to participate in the exchange offer for the purpose of distributing
exchange capital securities, or any broker-dealer who purchased original capital
securities from the Trust to resell pursuant to Rule 144A or any other available
exemption under the Securities Act:
- will not be able to rely on the interpretations of the staff of the
Division of Corporation Finance of the Securities and Exchange
Commission set forth in the above-mentioned interpretive letters,
- will not be permitted or entitled to tender such original capital
securities in the exchange offer, and
- must comply with the registration and prospectus delivery requirements
of the Securities Act in connection with any sale or other transfer of
such original capital securities, unless such sale is made pursuant to
an exemption from such requirements.
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In addition, as described below, participating broker-dealers must deliver
a prospectus meeting the requirements of the Securities Act in connection with
any resales of exchange capital securities.
Each holder of original capital securities who wishes to exchange original
capital securities for exchange capital securities in the exchange offer will be
required to represent that
- it is not an affiliate of CNB or the Trust,
- any exchange capital securities to be received by it are being
acquired in the ordinary course of its business,
- it has no arrangement or understanding with any person to participate
in a distribution (within the meaning of the Securities Act) of such
exchange capital securities, and
- if the holder is not a broker-dealer, such holder is not engaged in,
and does not intend to engage in, a distribution (within the meaning
of the Securities Act) of such exchange capital securities.
The letter of transmittal contains the foregoing representations. In addition,
we may require the holder, as a condition to the holder's eligibility to
participate in the exchange offer, to furnish to us (or our agent) in writing
information as to the number of "beneficial owners" (within the meaning of Rule
13d-3 under the Exchange Act) on behalf of whom the holder holds the capital
securities to be exchanged in the exchange offer. Each participating
broker-dealer will be deemed to have acknowledged by execution of the letter of
transmittal or delivery of an agent's message that it acquired the original
capital securities for its own account as the result of market-making activities
or other trading activities and must agree that it will deliver a prospectus
meeting the requirements of the Securities Act in connection with any resale of
such exchange capital securities. The letter of transmittal states that by so
acknowledging and by delivering a prospectus, a participating broker-dealer will
not be deemed to admit that it is an "underwriter" within the meaning of the
Securities Act. Based on the position taken by the staff of the Division of
Corporation Finance of the Securities and Exchange Commission in the
interpretive letters referred to above, we believe that participating
broker-dealers who acquired original capital securities for their own accounts
as a result of market-making activities or other trading activities may fulfill
their prospectus delivery requirements with respect to the exchange capital
securities received upon exchange of such original capital securities (other
than original capital securities which represent an unsold allotment from the
original sale of the original capital securities) with a prospectus meeting the
requirements of the Securities Act, which may be the prospectus prepared for an
exchange offer so long as it contains a description of the plan of distribution
with respect to the resale of such exchange capital securities. Accordingly,
this prospectus, as it may be amended or supplemented from
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time to time, may be used by a participating broker-dealer during the period
referred to below in connection with resales of exchange capital securities
received in exchange for original capital securities where such original capital
securities were acquired by the participating broker-dealer for its own account
as a result of market-making or other trading activities. Subject to certain
provisions set forth in the registration rights agreement, we have agreed that
this prospectus, as it may be amended or supplemented from time to time, may be
used by a participating broker-dealer in connection with resales of exchange
capital securities for a period ending 90-days after the expiration date
(subject to extension under certain limited circumstances described below) or,
if earlier, when all exchange capital securities have been disposed of by such
participating broker-dealer. Please refer to "Plan of Distribution." However, a
participating broker-dealer who intends to use this prospectus in connection
with the resale of exchange capital securities received in exchange for original
capital securities pursuant to the exchange offer must notify CNB or the Trust,
or cause CNB or the Trust to be notified, on or prior to the expiration date,
that it is a participating broker-dealer. The notice may be given in the space
provided for that purpose in the letter of transmittal or may be delivered to
the exchange agent at one of the addresses set forth herein under "--Exchange
Agent." Any person, including any participating broker-dealer, who is an
affiliate of CNB or the Trust may not rely on the interpretive letters and must
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any resale transaction.
In that regard, each participating broker-dealer who surrenders original
capital securities pursuant to the exchange offer will be deemed to have agreed,
by execution of the letter of transmittal or delivery of an agent's message in
lieu thereof, that, upon receipt of notice from CNB or the Trust of the
occurrence of any event or the discovery of any fact which makes any statement
contained or incorporated by reference in this prospectus untrue in any material
respect or which causes this prospectus to omit to state a material fact
necessary in order to make the statements contained or incorporated by reference
herein, in light of the circumstances under which they were made, not misleading
or of the occurrence of certain other events specified in the registration
rights agreement, such participating broker-dealer will suspend the sale of
exchange capital securities (or the exchange guarantee or the exchange junior
subordinated debentures, as applicable) pursuant to this prospectus until CNB or
the Trust has amended or supplemented this prospectus to correct such
misstatement or omission and has furnished copies of the amended or supplemented
prospectus to the participating broker-dealer or CNB or the Trust has given
notice that the sale of the exchange capital securities (or the exchange
guarantee or the exchange junior subordinated debentures, as applicable) may be
resumed, as the case may be. If CNB or the Trust gives notice to suspend the
sale of the exchange capital securities (or the exchange guarantee or the
exchange junior subordinated debentures, as applicable), it shall extend the
90-day period referred to above during which participating broker-dealers are
entitled to use this prospectus in connection with the resale of exchange
capital securities by the number of days during the period from and including
the date of the giving of such notice to and including the date when
participating broker-dealers shall have received copies of the amended or
supplemented prospectus necessary to permit resales of the exchange capital
securities or to and including the date on which CNB or the Trust has given
notice that the sale of exchange capital securities (or the exchange guarantee
or the exchange junior subordinated debentures, as applicable) may be resumed,
as the case may be.
WITHDRAWAL RIGHTS
Except as otherwise provided herein, tenders of original capital securities
may be withdrawn at any time on or prior to the expiration date. In order for a
withdrawal to be effective a telegram, telex, facsimile transmission or letter
of such notice of withdrawal must be timely received by the exchange agent at
one of its addresses set forth under "--Exchange
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Agent" on or prior to the expiration date. Any notice of withdrawal must specify
the name of the holder who tendered the original capital securities to be
withdrawn, the amount of original capital securities delivered for exchange and
a statement that the holder is withdrawing his election to have these original
capital securities exchanged. If original capital securities have been delivered
or otherwise identified to the exchange agent, then prior to the physical
release of such original capital securities, the tendering holder must submit
the certificate numbers shown on the particular original capital securities to
be withdrawn and the signature on the notice of withdrawal must be guaranteed by
an eligible institution, except in the case of original capital securities
tendered for the account of an eligible institution. If original capital
securities have been tendered pursuant to the procedures for book-entry transfer
set forth in "--Procedures for Tendering original capital securities," the
notice of withdrawal must specify the name and number of the account at DTC to
be credited with the withdrawal of original capital securities, in which case a
notice of withdrawal will be effective if delivered to the exchange agent by
written or facsimile transmission. Withdrawals of tenders of original capital
securities may not be rescinded. Original capital securities properly withdrawn
will not be deemed validly tendered for purposes of the exchange offer, but may
be retendered at any subsequent time on or prior to the expiration date by
following any of the procedures described above under "--Procedures for
Tendering Original Capital Securities."
All questions as to the validity, form and eligibility (including time of
receipt) of such withdrawal notices will be determined by us, in our sole
discretion, whose determination shall be final and binding on all parties. None
of CNB, the Trust, any affiliates or assigns of CNB or the Trust, the exchange
agent or any other person shall be under any duty to give any notification of
any irregularities in any notice of withdrawal or incur any liability for
failure to give any such notification. Any original capital securities which
have been tendered but which are withdrawn will be returned to the holder
thereof promptly after withdrawal.
DISTRIBUTIONS ON EXCHANGE CAPITAL SECURITIES
Distributions on the exchange capital securities are payable quarterly on
March 31, June 30, September 30 and December 31 of each year, at the annual
rate, reset quarterly, equal to the three-month LIBOR plus 275 basis points of
the liquidation amount to the holders of the exchange capital securities.
Distributions on the exchange capital securities will accumulate from the last
date on which a Distribution was paid on the original capital security
surrendered in exchange therefor, or if no distribution has been paid on such
capital security, from August 6, 1999, the date of the original issuance of the
original capital securities.
CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provisions of the exchange offer, or any
extension of the exchange offer, we will not be required to accept for exchange,
or to exchange, any original capital securities for any exchange capital
securities, and, as described below, may terminate the exchange offer (whether
or not any original capital securities have theretofore been accepted for
exchange) or may waive any conditions to or amend the exchange offer, if any of
the following conditions have occurred or exist:
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- there occurs a change in the current interpretation by the staff of
the Securities and Exchange Commission which permits the exchange
capital securities issued pursuant to the exchange offer in exchange
for original capital securities to be offered for resale, resold and
otherwise transferred by holders thereof (other than broker-dealers
and any such holder which is an affiliate of CNB or the Trust) without
compliance with the registration and prospectus delivery provisions of
the Securities Act, provided that the exchange capital securities are
acquired in the ordinary course of the holders' business and the
holders have no arrangement or understanding with any person to
participate in the distribution of the exchange capital securities; or
- any law, statute, rule or regulation has been adopted or enacted -
which, in the judgment of CNB or the Trust, would reasonably be
expected to impair its ability to proceed with the exchange offer;
- any action or proceeding has been instituted or threatened in any
court or by or before any governmental agency or body with respect to
the exchange offer which, in our judgment, would reasonably be
expected to impair the ability of the Trust or CNB to proceed with the
exchange offer;
- a banking moratorium has been declared by United States federal or New
York state authorities which, in our judgment, would reasonably be
expected to impair the ability of the Trust or CNB to proceed with the
exchange offer;
- trading on the New York Stock Exchange or generally in the United
States over-the-counter market has been suspended by order of the
Securities and Exchange Commission or any other governmental authority
which, in our judgment, would reasonably be expected to impair the
ability of the Trust or CNB to proceed with the exchange offer; or
- a stop order has been issued by the Securities and Exchange Commission
or any state securities authority suspending the effectiveness of the
Registration Statement or proceedings have been initiated or, to the
knowledge of CNB or the Trust, threatened for that purpose, or any
governmental approval which either CNB or the Trust shall, in its sole
discretion, deem necessary for the consummation of the exchange offer
as contemplated hereby has not been obtained.
If we determine in our sole and absolute discretion that any of the
foregoing events or conditions has occurred or exists, we may, subject to
applicable law, terminate the exchange offer (whether or not any original
capital securities have theretofore been accepted for exchange) or may waive any
condition or otherwise amend the terms of the exchange offer in any respect. If
the waiver or amendment constitutes a material change to the exchange offer, we
will promptly disclose the waiver or amendment by means of a prospectus
supplement that will be distributed to the registered holders of the original
capital securities and will extend the exchange offer to the extent required by
Rule 14e-1 under the Exchange Act.
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EXCHANGE AGENT
Wilmington Trust Company has been appointed as exchange agent for the
exchange offer. Delivery of the letters of transmittal and any other required
documents, questions, requests for assistance, and requests for additional
copies of this prospectus or of the letter of transmittal should be directed to
the exchange agent as follows:
By Registered or By Hand or Certified Mail Overnight Delivery
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, DE 19890-0001
Attn: Kristin F. Long
Corporate Trust Operations
Confirm by telephone or for
information call:
(302) 651-1562
Facsimile Transmission
(Eligible Institutions Only):
(302) 651-1079
Delivery to other than the above addresses or facsimile number will not
constitute a valid delivery.
FEES AND EXPENSES
CNB has agreed to pay the exchange agent reasonable and customary fees for
its services and will reimburse it for its reasonable out-of-pocket expenses in
connection with its services. CNB will also pay brokerage houses and other
custodians, nominees and fiduciaries the reasonable out-of-pocket expenses
incurred by them in forwarding copies of this prospectus and related documents
to the beneficial owners of original capital securities, and in handling or
tendering for their customers.
Holders who tender their original capital securities for exchange will not
be obligated to pay any transfer taxes in connection the exchange. If, however,
exchange capital securities are to be delivered to, or are to be issued in the
name of, any person other than the registered holder of the original capital
securities tendered, or if a transfer tax is imposed for any reason other than
the exchange of original capital securities in connection with the exchange
offer, then the amount of those transfer taxes (whether imposed on the
registered holder or any other persons) will be payable by the tendering holder.
If satisfactory evidence of payment of those taxes or exemption therefrom is not
submitted with the letter of transmittal, the amount of the transfer taxes will
be billed directly to the tendering holder.
Neither CNB nor the Trust will make any payment to brokers, dealers or
other nominees soliciting acceptances of the exchange offer.
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DESCRIPTION OF EXCHANGE SECURITIES
The terms of the exchange securities are identical in all material respects
to the terms of the original securities, except that:
- the original securities have not been registered under the Securities
Act, are subject to restrictions on transfer under federal and state
securities laws and are entitled to certain rights under the
registration rights agreement (which rights will terminate upon
consummation of the exchange offer),
- the exchange capital securities will not provide for any increase in
their distribution rate, and
- the exchange junior subordinated debentures will not provide for - any
increase in their interest rate.
As used in this prospectus:
- "indenture" means the Indenture, dated as of August 6, 1999, between
CNB Financial Corp. and Wilmington Trust Company, as debenture
trustee, relating to the junior subordinated debentures;
- "trust agreement" means the Amended and Restated Trust Agreement,
dated as of August 6, 1999, relating to the Trust by and among CNB, as
Sponsor, Wilmington Trust Company, as property trustee, Wilmington
Trust Company, as Delaware trustee, and the holders, from time to
time, of undivided beneficial interests in the assets of the Trust;
and
- "guarantee" means the Guarantee Agreement relating to the capital
securities between CNB Financial Corp. and Wilmington Trust Company,
as guarantee trustee.
Except where otherwise indicated, the following description applies to
both the exchange securities and the original securities.
CAPITAL SECURITIES
We have summarized the material terms and provisions of the capital
securities in this section. This summary is not complete and is subject to, and
qualified by, the trust agreement, including the definitions used in the trust
agreement. This summary is also subject to, and qualified by, the Trust
Indenture Act of 1939. The trust agreement will be subject to the Trust
Indenture Act upon consummation of the exchange offer. We encourage you to read
the trust agreement for additional information.
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General
The capital securities rank equal to, and payments made on the capital
securities will be made on a pro rata basis with, the common securities of the
Trust, except as described under "--Subordination of Common Securities." The
property trustee has legal title to the junior subordinated debentures and holds
them in trust for the benefit of you and the other holders of the capital
securities. CNB's guarantee for the benefit of the holders of the capital
securities is a guarantee on a subordinated basis with respect to the capital
securities, but does not guarantee payment of distributions or amounts payable
on redemption or liquidation of the capital securities when the Trust does not
have funds legally available to pay distributions or other amounts to the
holders of the capital securities. You should read "Description of Exchange
Securities--Guarantee" for more information about CNB's guarantee.
Distributions
The capital securities represent beneficial ownership interests in the
Trust. Distributions on the capital securities will be cumulative, and
accumulate from August 6, 1999. Distributions will be made at an annual rate,
reset quarterly, equal to the three month LIBOR plus 275 basis points, of the
stated liquidation amount of $1,000, payable quarterly in arrears on the
distribution dates, which are March 31, June 30, September 30 and December 31 of
each year, to holders of the capital securities on the relevant record dates. If
the capital securities are in book-entry form, the record dates will be one
business day prior to the relevant distribution date. If the capital securities
are not in book-entry form, record dates will be the 15th day of the month in
which the distribution is to be paid.
The first distribution date for the capital securities was September 30,
1999. Each period beginning on and including a distribution date and ending on
but excluding the next distribution date is a distribution period. The amount of
distributions payable for any distribution period will be based on the actual
number of days elapsed in such period and a 360-day year.
If any distribution date would otherwise fall on a day that is not a
business day, the distribution date will be postponed to the next day that is a
business day without any additional payments for the delay, unless the
distribution would fall in the next calendar year, in which case the
distribution date will be the last business day of the calendar year. A business
day means any day other than a Saturday or a Sunday, or a day on which banking
institutions in New York, New York, Wilmington, Delaware, or the State of New
York are authorized or required by law or executive order to remain closed or a
day on which the principal corporate trust office of the property trustee is
closed for business.
The Trust's revenue available for distribution to holders of the capital
securities is limited to CNB's payments to the Trust under the junior
subordinated debentures. For more information regarding the junior subordinated
debentures, please refer to "Description of Exchange Securities--Junior
Subordinated Debentures --General." If CNB 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 and on the common
securities. CNB guarantees the payment of distributions if and to the extent
that the Trust has funds legally
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available to pay the distributions. You should read "Description of Exchange
Securities--Guarantee" for more information about the extent of CNB's guarantee.
Determination of 3-Month LIBOR
On each determination date, the calculation agent will calculate the
distribution rate, based on 3-month LIBOR, for the distribution period
commencing on the second London Banking Day immediately following such
determination date. "3-month LIBOR" means, with respect to a distribution period
relating to a distribution date, the London interbank offered rate for
three-month, Eurodollar deposits determined in the following order of priority:
- the rate (expressed as a percentage per annum) for Eurodollar deposits
having a three-month maturity that appears on Telerate Page 3750 as of
11:00 a.m. (London time) on the related determination date;
- if such rate does not appear on Telerate Page 3750 as of 11:00 a.m.
(London time) on the related determination date, 3-month LIBOR will be
the arithmetic mean of the rates (expressed as percentages per annum)
for Eurodollar deposits having a three-month maturity that appear on
Reuters Monitor Money Rates Page LIBO ("Reuters Page LIBO") as of
11:00 a.m. (London time) on such determination date;
- if such rate does not appear on Reuters Page LIBO as of 11:00 a.m.
(London time) on the related determination date, the calculation agent
will request the principal London offices of four leading banks in the
London interbank market to provide such banks' offered quotations
(expressed as percentages per annum) to prime banks in the London
interbank market for Eurodollar deposits having a three-month maturity
as of 11:00 a.m. (London time) on such determination date. If at least
two quotations are provided, 3-month LIBOR will be the arithmetic mean
of such quotations;
- if fewer than two quotations are provided by the principal London
offices of leading banks in the London interbank market, the
calculation agent will request four major New York City banks to
provide such banks' offered quotations (expressed as percentages per
annum) to leading European banks for loans in Eurodollars as of 11:00
a.m. (London time) on such determination date. If at least two such
quotations are provided, 3-month LIBOR will be the arithmetic mean of
such quotations; and
- if fewer than two quotations are provided by major New York City
banks, 3-month LIBOR will be 3-month LIBOR determined with respect to
the distribution period immediately preceding such current
distribution period.
If the rate for Eurodollar deposits having a three-month maturity that
initially appears on Telerate Page 3750 or Reuters Page LIBO, as the case may
be, as of 11:00 a.m. (London time) on the related determination date is
superseded on Telerate Page 3750 or Reuters Page LIBO, as
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the case may be, by a corrected rate before 12:00 noon (London time) on such
determination date, the corrected rate as so substituted on the applicable page
will be the applicable 3-month LIBOR for such determination date.
As used in this prospectus:
"calculation agent" means Wilmington Trust Company;
"determination date" means the date that is two London Banking Days
preceding the first day of any period for which a distribution will be payable;
"London Banking Day" means a day on which dealings in deposits in U.S.
dollars are transacted in the London interbank market; and
"Telerate Page 3750" means the display designated as "Page 3750" on the Dow
Jones Telerate Service (or such other page as may replace Page 3750 on that
service or such other service or services as may be nominated by the British
Bankers' Association as the information vendor for the purpose of displaying
London interbank offered rates for U.S. dollar deposits).
All percentages resulting from any calculations on the capital securities
will be rounded, if necessary, to the nearest one hundred-thousandth of a
percentage point, with five one-millionths of a percentage point rounded upward
(e.g., 9.876545% (or .09876545) being rounded to 9.87655% (or .0987655)), and
all dollar amounts used in or resulting from such calculation will be rounded to
the nearest cent (with one-half cent being rounded upward).
On the determination date, the calculation agent will notify us and the
paying agent of the applicable distribution rate in effect for the related
distribution period. The calculation agent will, upon the request of the holder
of any capital securities, provide the distribution rate then in effect. All
calculations made by the calculation agent in the absence of manifest error will
be conclusive for all purposes and binding on us and the holders of the capital
securities.
Option to Defer Interest Payments
As long as no event of default exists, CNB has the right under the
indenture to elect to defer the payment of interest on the junior subordinated
debentures, at any time or from time to time, for no more than 20 consecutive
quarters with respect to each deferral period, provided that no deferral period
will end on a date other than an interest payment date on the junior
subordinated debentures, or extend beyond September 30, 2029, the maturity date
of the junior subordinated debentures. If CNB defers payments, the Trust will
defer quarterly distributions on the capital securities during the deferral
period. During any deferral period, distributions will continue to accrue on the
capital securities and on any accrued and unpaid distributions, compounded
quarterly from the relevant distribution date at the applicable distribution
rate, which will be equal to the applicable interest rate on the junior
subordinated debentures. The term distributions includes any accumulated
additional distributions.
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Before the end of any deferral period, CNB may extend the deferral period,
as long as the extension does not cause the deferral period to exceed 20
consecutive quarters, or, to end on a date other than an interest payment date
or extend beyond September 30, 2029. At the end of any deferral period and upon
the payment of all amounts then due on any interest payment date, CNB may elect
to begin a new deferral period, subject to the above requirements. The property
trustee will give notice of its election to begin a new deferral period to the
holders of the capital securities. No interest shall be due and payable during a
deferral period until the deferral period ends. CNB must give the property
trustee and the Delaware trustee notice of its election to defer interest
payments or to extend a deferral period at least one business day before the
earlier of:
- the date the distributions on the capital securities would have been
payable except for the election to begin a deferral period; and
- the date the property trustee is required to give notice to holders of
the capital securities of the record date or the date distributions
are payable, but in any event not less than one business day prior to
the record date.
There is no limitation on the number of times that CNB may elect to begin a
deferral period. Please refer to "Description of Exchange Securities--Junior
Subordinated Debentures--Option to Extend Interest Payment Date" and "Certain
Federal Income Tax Consequences--Interest Income and Original Issue Discount."
During any deferral period, CNB may not:
- declare or pay any dividends or distributions on, or redeem, purchase,
acquire, or make a liquidation payment with respect to, any of its
capital stock;
- make any payment of principal of, or interest or premium, if any, on
or repay, repurchase or redeem any of its debt securities that rank
equal or junior to the junior subordinated debentures; or
- make any guarantee payments with respect to any guarantee of the debt
securities of any subsidiary if such guarantee ranks equal or junior
to the junior subordinated debentures.
Notwithstanding the foregoing, during a deferral period CNB may make the
following payments:
- dividends or distributions in shares of, or options, warrants or
rights to subscribe for or purchase shares of, its capital stock,
- any declaration of a dividend in connection with the implementation of
a stockholders' rights plan, or the issuance of rights, stock or other
property under any stockholders' rights plan in the future, or the
redemption or repurchase of any rights pursuant thereto,
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- payments under the guarantee,
- as a result of a reclassification of its capital stock or the exchange
or conversion of one class or series of its capital stock or
indebtedness for another class or series of its capital stock,
- the purchase of fractional interests in shares of its capital stock
pursuant to the conversion or exchange provisions of the capital stock
or the security being converted or exchanged, and
- repurchases, redemptions or other acquisitions of shares of its
capital stock in connection with any employment contract, benefit plan
or similar arrangements with or for the benefit of any one or more of
its directors, officers, employees or consultants in connection with
any of its dividend reinvestment or shareholder stock purchase plans
or in connection with the issuance of its capital stock (or securities
convertible into or exercisable for such capital stock) as
consideration in an acquisition transaction entered into prior to the
applicable deferral period.
CNB does not currently intend to exercise its right to defer payments of
interest on the junior subordinated debentures. CNB's obligations under the
guarantee to make payments of distributions is limited to the extent that the
Trust has funds legally available to pay distributions. You should read
"Description of Exchange Securities--Guarantee" for more information about the
extent of CNB's guarantee.
Redemption
Upon repayment on September 30, 2029 or prepayment, in whole or in part
prior to September 30, 2029, of the junior subordinated debentures (other than
following the distribution of the junior subordinated debentures to you as a
holder of the capital securities and CNB, as the holder of the common
securities), the property trustee will apply the proceeds from the repayment or
prepayment of the junior subordinated debentures (as long as the property
trustee has received written notice no later than 45 days before the repayment)
to redeem at a redemption price equal to the liquidation amount, plus accrued
and unpaid distributions on the capital securities an amount of trust securities
having an aggregate liquidation amount equal to the principal amount of the
junior subordinated debentures paid to the Trust. CNB will give notice of any
redemption between 30 and 60 days prior to the redemption date.
If CNB prepays less than all of the junior subordinated debentures on a
redemption date, then the property trustee will allocate the proceeds of the
prepayment on a pro rata basis among the capital securities and the common
securities. If a court of competent jurisdiction enters an order to dissolve the
Trust, the junior subordinated debentures will be subject to optional prepayment
in whole, but not in part, on or after September 30, 2009.
CNB has the right to prepay the junior subordinated debentures:
- in whole or in part, on or after September 30, 2009; and
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- in whole but not in part, at any time prior to September 30, 2009, if
there are changes in the bank regulatory, investment company or tax
laws that, in the opinion of counsel experienced in such matters,
would adversely affect the status of the Trust, the capital
securities, the common securities or the junior subordinated
debentures.
CNB may have to obtain regulatory approval, including the approval of the
Federal Reserve Board, before CNB redeem any junior subordinated debentures.
Please refer to "Description of Exchange Securities--Junior Subordinated
Debentures--Optional Prepayment" and "--Special Event Prepayment" for
information on prepayment of the junior subordinated debentures.
Liquidation of the Trust and Distribution of Junior Subordinated Debentures
CNB, as holder of the outstanding common securities, has the right at any
time to dissolve the Trust and, after satisfying the liabilities owed to the
Trust's creditors as required by applicable law, CNB has the right to distribute
the junior subordinated debentures to the holders of the capital securities and
to CNB as holder of the common securities. CNB's right to dissolve the Trust is
subject to its receiving any required regulatory approval.
The Trust will automatically dissolve if:
- certain bankruptcy events occur with respect to CNB, or CNB dissolves
or liquidates;
- CNB distributes junior subordinated debentures having a principal
amount equal to the liquidation amount of the capital securities to
holders of the capital securities and CNB, as holder of the common
securities, has given written directions to the property trustee to
dissolve the Trust (which direction is at CNB's option and, except as
described above, wholly within its discretion, as sponsor);
- the Trust redeems all of the capital securities as described under
"--Redemption;"
- the Trust's term expires; or
- a court of competent jurisdiction enters an order for the dissolution
of the Trust.
If the Trust is dissolved as described above, the Trust will be
liquidated by the issuer trustees as quickly as the issuer trustees determine to
be possible by distributing to holders of the capital securities and the common
securities, after satisfying the liabilities owed to the Trust's creditors as
provided by applicable law, junior subordinated debentures having a principal
amount equal to the liquidation amount of the capital securities and the common
securities, unless the property trustee determines that this distribution is not
practicable. If the property
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trustee determines that this distribution is not practicable, the holders of the
capital securities and the common securities will be entitled to receive an
amount equal to the aggregate of the liquidation amount plus accumulated and
unpaid distributions on the capital securities and the common securities to the
date of payment (such amount being the "liquidation distribution") out of the
assets of the Trust legally available for distribution to holders, after
satisfying the liabilities owed to the Trust's creditors as provided by
applicable law. If the liquidation distribution can be paid only in part because
the Trust has insufficient assets legally available to pay the full amount of
the liquidation distribution, and if a debenture event of default exists, the
capital securities will have a priority over the common securities. For more
information, please refer to "--Subordination of Common Securities."
After the liquidation date is fixed for any distribution of junior
subordinated debentures to holders of the capital securities and the common
securities:
- the capital securities and the common securities will no longer be
deemed to be outstanding;
- DTC or its nominee will receive in respect of each registered global
certificate representing capital securities and the common securities
a registered global certificate representing the junior subordinated
debentures to be delivered upon this distribution; and
- any certificates representing capital securities and the common
securities not held by DTC or its nominee will be deemed to represent
junior subordinated debentures having a principal amount equal to the
liquidation amount of those capital securities and the common
securities, and bearing accrued and unpaid interest in an amount equal
to the accumulated and unpaid distributions on those capital
securities and the common securities until such certificates are
presented to the administrators or their agent for cancellation, in
which case CNB will issue to those holders, and the Delaware trustee
will authenticate, a certificate representing the junior subordinated
debentures.
We cannot assure you of the market prices for the capital securities or the
junior subordinated debentures that the issuer trustees may distribute to you in
exchange for the capital securities if a dissolution and liquidation of the
Trust were to occur. Accordingly, the capital securities that you purchase, or
the junior subordinated debentures that you may receive upon a dissolution and
liquidation of the Trust, may trade at a discount to the price that you paid to
purchase the capital securities.
If CNB elects not to prepay the junior subordinated debentures prior to
maturity and either elects not to or is unable to liquidate the Trust and
distribute the junior subordinated debentures to holders of the capital
securities and the common securities, the capital securities and the common
securities will remain outstanding until the repayment of the junior
subordinated debentures on September 30, 2029.
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Redemption Procedures
If CNB redeems the junior subordinated debentures, the Trust will redeem
capital securities and the common securities at the applicable redemption price
with the proceeds that it receives from its redemption of the junior
subordinated debentures. Any redemption of capital securities and the common
securities will be made and the applicable redemption price will be payable on
the redemption date only to the extent that the Trust has funds legally
available to pay the applicable redemption price. For more information, you
should refer to "--Subordination of Common Securities."
If the Trust gives a notice of redemption for the capital securities, then,
by 12:00 noon, New York City time, on the redemption date, to the extent funds
legally are available, with respect to:
- the capital securities held by DTC or its nominees, the property
trustee will deposit, or cause the paying agent to deposit,
irrevocably with DTC funds sufficient to pay the applicable redemption
price and will give DTC irrevocable instructions and authority to pay
the redemption price to the holders of the capital securities. For
more information, you should refer to "--Form, Denomination,
Book-Entry Procedures and Transfer."
- the capital securities held in certificated form, the property trustee
will irrevocably deposit with the paying agent funds sufficient to pay
the applicable redemption price and will give the paying agent
irrevocable instructions and authority to pay the applicable
redemption price to the holders upon surrender of their certificates
evidencing the capital securities. For more information, you should
refer to "--Payment and Paying Agency."
Notwithstanding the foregoing, distributions payable on or before the
redemption date will be payable to the holders of the capital securities on the
relevant record dates for the related distribution dates. If the Trust gives a
notice of redemption and funds are deposited as required, then upon the date of
the deposit, all rights of the holders of the capital securities called for
redemption will cease, except the right of the holders of the capital securities
to receive the applicable redemption price, without interest, and the capital
securities called to be redeemed will cease to be outstanding.
If any redemption date for the capital securities is not a business day,
then the applicable redemption price, without interest or any other payment in
respect of the delay, will be paid on the next business day, except that, if the
next business day falls in the next calendar year, the payment will be made on
the last business day of the calendar year. If payment of the applicable
redemption price is improperly withheld or refused and not paid either by the
Trust or by CNB pursuant to the guarantee:
- distributions on the capital securities will continue to accumulate at
the applicable rate from the redemption date originally established by
the Trust to the date such applicable redemption price is actually
paid; and
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- the actual payment date will be the redemption date for purposes of
calculating the applicable redemption price.
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 capital securities and the
common securities at its registered address. Unless CNB defaults in payment of
the applicable redemption price on, or in the repayment of, the junior
subordinated debentures, on and after the redemption date, distributions will
cease to accrue on the capital securities and the common securities called for
redemption.
Subject to applicable law (including, without limitation, U.S. federal
securities laws), CNB or its subsidiaries may at any time, and from time to
time, purchase outstanding capital securities in the open market or by private
agreement.
Subordination of Common Securities
Payment of distributions on, and the redemption price of, the capital
securities and the common securities, as applicable, will generally be made on a
pro rata basis. However, if a debenture event of default exists on any
distribution date or redemption date, no payment of any distribution on, or
applicable redemption price of, any of the common securities, and no other
payment on account of the redemption, liquidation or other acquisition of the
common securities, will be made unless payment in full in cash of all
accumulated and unpaid distributions on all of the outstanding capital
securities for all distribution periods terminating on or before the
distribution or redemption date, or payment of the applicable redemption price
is made in full. All funds available to the property trustee will first be
applied to the payment in full in cash of all distributions on, or redemption
price of, the capital securities then due and payable.
In the case of any event of default resulting from a debenture event of
default, CNB, as holder of all of the common securities, will be deemed to have
waived any right to act with respect to the event of default until the effect of
the event of default has been cured, waived or otherwise eliminated. Until any
event of default has been cured, waived or otherwise eliminated, the property
trustee will act solely on behalf of the holders of the capital securities and
not on its behalf, and only the holders of the capital securities will have the
right to direct the property trustee to act on their behalf.
Events of Default; Notice
An event of default under the indenture constitutes an event of default
under the trust agreement. Please refer to "Description of Exchange
Securities--Junior Subordinated Debentures--Debenture Events of Default" for
information regarding an event of default under the indenture.
The trust agreement provides that within five business days after any event
of default actually known to the property trustee occurs, the property trustee
will give notice of the event of default to the holders of the capital
securities, to the administrators and to us, as sponsor, unless
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the event of default has been cured or waived. CNB, as sponsor, and the
administrators are required to file annually with the property trustee a
certificate as to whether CNB and the administrators have complied with the
applicable conditions and covenants of the trust agreement.
If a debenture event of default exists as a result of any failure by CNB to
pay amounts in respect of the junior subordinated debentures when due, the
capital securities will have a preference over the common securities as
described under "--Liquidation of the Trust and Distribution of Junior
Subordinated Debentures" and "--Subordination of Common Securities." An event of
default does not entitle the holders of capital securities to accelerate the
maturity date of the capital securities.
Removal of Trustees
The holders of at least a majority in aggregate liquidation amount of the
capital securities may remove the property trustee and the Delaware trustee for
cause. If an event of default exists under the trust agreement, the holders of a
majority in liquidation amount of the outstanding capital securities may remove
the property trustee and the Delaware trustee with or without cause. In no event
will the holders of the capital securities have the right to vote to appoint,
remove or replace the administrators, because these voting rights are vested
exclusively in CNB as the holder of all of the common securities. No resignation
or removal of the property trustee or the Delaware trustee and no appointment of
a successor trustee shall be effective until the acceptance of appointment by
the successor trustee in accordance with the trust agreement.
Merger or Consolidation of Trustees
If the property trustee or the Delaware trustee is merged, converted or
consolidated into another entity, or the property trustee or the Delaware
trustee is a party to a merger, conversion or consolidation which results in a
new entity, or an entity succeeds to all or substantially all of the corporate
trust business of the property trustee, the new entity shall be the successor of
the respective trustee under the trust agreement, provided that the entity is
otherwise qualified and eligible.
Mergers, Consolidations, Amalgamations or Replacements of the Trust
The Trust may not merge with or into, consolidate, amalgamate or be
replaced by, or convey, transfer or lease substantially all of its properties
and assets to any corporation or other entity, except as described below or as
otherwise described under "--Liquidation of the Trust and Distribution of Junior
Subordinated Debentures." The Trust may, at CNB's request, as holder of the
common securities, and with the consent of a majority in liquidation amount of
the capital securities, merge with or into, consolidate, amalgamate or be
replaced by or convey, transfer or lease substantially all of its properties and
assets to a trust organized as such under the laws of any state; provided, that:
- the successor either:
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- expressly assumes all of the obligations of the Trust with
respect to the capital securities and the common securities, or
- substitutes securities for the capital securities and the common
securities that have substantially the same terms as the capital
securities and the common securities so long as the substitute
securities rank equal to the capital securities and the common
securities in priority with respect to distributions and payments
upon liquidation, redemption and otherwise;
- CNB appoints a trustee of the successor possessing the same powers and
duties as the property trustee with respect to the junior subordinated
debentures;
- the substitute securities are listed, or any substitute securities
will be listed upon notification of issuance, on any national
securities exchange or other organization on which the capital
securities and the common securities are then listed or quoted, if
any;
- if the capital securities, substitute securities or junior
subordinated debentures are rated by any nationally recognized
statistical rating organization prior to such transaction, the
transaction does not cause any of those securities to be downgraded by
the rating organization;
- the transaction does not adversely affect the rights, preferences and
privileges of the holders of the capital securities and the common
securities (including any successor securities) in any material
respect;
- the successor has a purpose substantially identical to that of the
Trust;
- prior to the transaction, CNB received an opinion from independent
counsel to the Trust experienced in such matters to the effect that:
- the transaction does not adversely affect the rights, preferences
and privileges of the holders of the capital securities and the
common securities (including any successor securities) in any
material respect (other than any dilution of such holders'
interests in the new entity), and
- following the transaction, neither the Trust nor the successor
will be required to register as an investment company under the
Investment Company Act; and
- CNB, or any permitted successor or assignee owns all of the common
securities of the successor and guarantees the obligations of the
successor under the substituted securities at least to the extent
provided by the guarantee.
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Notwithstanding the foregoing, the Trust shall not, except with the consent
of holders of 100% in liquidation amount of the capital securities and the
common securities, consolidate, amalgamate, merge with or into, or be replaced
by or convey, transfer or lease its properties and assets as an entirety or
substantially as an entirety to, any other entity or permit any other entity to
consolidate, amalgamate, merge with or into, or replace it if the transaction
would cause the Trust or the successor to be classified as an association
taxable as a corporation for U.S. federal income tax purposes.
Voting Rights; Amendment of the Trust Agreement
Except as provided below and under "--Mergers, Consolidations,
Amalgamations or Replacements of the Trust," "--Removal of Trustees," and
"Description of Exchange Securities--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.
CNB, as holder of the common securities, together with the issuer trustees,
may amend the trust agreement from time to time, without the consent of the
holders of the capital securities:
- to cure any ambiguity, correct or supplement any provisions in the
trust agreement that may be inconsistent with any other provision, or
to make any other provisions with respect to matters or questions
arising under the trust agreement, which are not inconsistent with the
other provisions of the trust agreement;
- to modify, eliminate or add to any provisions of the trust agreement
as is necessary to ensure that at all times that any capital
securities are outstanding, the Trust will not be classified as an
association taxable as a corporation or to enable the Trust to qualify
as a grantor trust, in each case for U.S. federal income tax purposes,
or to ensure that the Trust will not be required to register as an
investment company under the Investment Company Act; or
- to modify, eliminate or add any provisions of the trust agreement to
such extent as shall be necessary to enable the Trust or CNB to
conduct an exchange offer in the manner contemplated by the
registration rights agreement;
provided, however, that in the case of the first and third clauses above the
amendment would not adversely affect in any material respect the interests of
the holders of the capital securities. Any amendments of the trust agreement
pursuant to the foregoing shall become effective when notice of the amendment is
given to the holders of the capital securities.
CNB, as holder of the common securities, together with the issuer trustees,
may amend the trust agreement:
- with the consent of holders representing a majority (based upon
liquidation amount) of the outstanding capital securities; and
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- upon receipt by the issuer trustees of an opinion of counsel
experienced in such matters to the effect that the amendment or the
exercise of any power granted to the issuer trustees in accordance
with the amendment will not affect the Trust's status as a grantor
trust for U.S. federal income tax purposes or the Trust's exemption
from status as an investment company under the Investment Company Act,
provided that, without the consent of each holder of capital securities and
common securities, no amendment may change the amount or timing of any
distribution on, or the payment required to be made in respect of, the capital
securities and the common securities as of a specified date; or restrict the
right of a holder of capital securities and the common securities to sue for the
enforcement of any payment on or after the specified date.
So long as any junior subordinated debentures are held by the property
trustee, the issuer trustees may not:
- direct the time, method and place of conducting any proceeding for any
remedy available to the Delaware trustee, or execute any trust or
power conferred on the Delaware trustee with respect to the junior
subordinated debentures;
- waive certain past defaults under the indenture;
- exercise any right to rescind or annul a declaration accelerating the
maturity of the principal of the junior subordinated debentures; or
- consent to any amendment, modification or termination of the indenture
or the junior subordinated debentures, where such consent shall be
required,
without, in each case, obtaining the prior consent of the holders of a majority
in liquidation amount of all outstanding capital securities; provided, however,
that where a consent under the indenture would require the consent of each
holder of junior subordinated debentures affected by the amendment, modification
or termination, the property trustee will not give consent without the prior
approval of each holder of the capital securities.
The issuer trustees may 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. The property trustee will notify each holder of capital
securities of any notice of default with respect to the junior subordinated
debentures. In addition to obtaining the approvals of the holders of the capital
securities, prior to taking any of the foregoing actions, the issuer trustees
will obtain an opinion of counsel experienced in such matters to the effect that
the Trust will not be classified as an association taxable as a corporation for
U.S. federal income tax purposes on account of the action.
Any required approval of holders of capital securities may be given at a
meeting of the holders convened for the purpose of approving the matter or
pursuant to written consent. The property trustee will cause a notice of any
meeting at which holders of capital securities are
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entitled to vote, or of any matter upon which action by written consent of those
holders has been taken, to be given to each holder of record of capital
securities in accordance with the trust agreement.
No vote or consent of the holders of capital securities will be required
for the Trust to redeem and cancel the capital securities in accordance with the
trust agreement.
Notwithstanding that holders of the capital securities are entitled to vote
or consent under any of the circumstances described above, any of the capital
securities that are owned by CNB, the issuer trustees or any of CNB's or any
trustee's affiliates, shall, for purposes of such vote or consent, be treated as
if they were not outstanding.
Form, Denomination, Book-Entry Procedures and Transfer
The exchange capital securities may be issued in certificated form or as
one or more registered global capital securities.
In the event that capital securities are issued in certificated form, the
capital securities will be issued in blocks having a liquidation amount of not
less than $100,000 (100 capital securities) and multiples of $1,000 in excess
thereof and may be transferred or exchanged only in such blocks in the manner
and at the offices described below.
The global capital securities will be deposited upon issuance with the
property trustee as custodian for DTC, in Wilmington, Delaware, and registered
in the name of DTC or its nominee, in each case for credit to an account of a
direct or indirect participant in DTC as described below.
Except as set forth below, the global capital securities may be
transferred, in whole and not in part, only to another nominee of DTC or to a
successor of DTC or its nominee and only in amounts that would not cause a
holder to own less than 100 capital securities. Beneficial interests in the
global capital securities may not be exchanged for capital securities in
certificated form, except in the limited circumstances described below. Please
refer to "--Exchange of Book-Entry Capital Securities for Certificated Capital
Securities" for additional information.
Other exchange capital securities will be issued only in registered,
certificated (i.e., non-global) form. Other exchange capital securities may not
be exchanged for beneficial interests in any global capital securities, except
in the limited circumstances described below. Please refer to "--Exchange of
Certificated Capital Securities for Book-Entry Capital Securities" for
additional information.
Transfer of beneficial interests in the global capital securities will be
subject to the applicable rules and procedures of DTC and its direct or indirect
participants, which may change from time to time.
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Depository Procedures
DTC has advised us that it is a limited-purpose trust company organized
under the laws of the State of New York, a member of the Federal Reserve System,
a "clearing corporation" within the meaning of the Uniform Commercial Code and a
"clearing agency" registered pursuant to the provisions of Section 17A of the
Exchange Act. DTC was created to hold securities for its participating
organizations, or participants, and to facilitate the clearance and settlement
of transactions in those securities between participants through electronic
book-entry changes in accounts of its participants, to eliminate the need for
physical movement of certificates. Participants include securities brokers and
dealers, banks, trust companies, clearing corporations and certain other
organizations. Indirect access to DTC's system is also available indirect
participants. Indirect participants are banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a
participant, either directly or indirectly. Persons who are not participants may
beneficially own securities held by or on behalf of DTC only through
participants or indirect participants. The ownership interest and transfer of
ownership interest of each actual purchaser of each security held by or on
behalf of DTC are recorded on the records of participants and indirect
participants.
DTC also has advised us that, pursuant to procedures established by it:
- upon deposit of the global capital securities, DTC will credit the -
accounts of participants designated by the exchange agent with
portions of the liquidation amount of the global capital securities,
and
- ownership of interests in the global capital securities will be shown
on, and the transfer of ownership of the global capital securities,
will be effected only through records maintained by DTC (with respect
to participants) or by participants and indirect participants (with
respect to other owners of beneficial interests in the global capital
securities).
Registration of Capital Securities
The capital securities will be represented by one or more global
certificates registered in the name of DTC or its nominee. Beneficial interests
in the capital securities will be shown on, and transfers of the global capital
securities will be effected only through, records maintained by participants.
Except as described below, capital securities in certificated form will not be
issued in exchange for the global certificates. Please refer to "--Exchange of
Book-Entry Capital Securities for Certificated Capital Securities" for
additional information.
You may hold your interests in the global capital security directly through
DTC if you are a participant, or indirectly through organizations that are
participants. All interests in a global capital security will be subject to the
procedures and requirements of DTC. The laws of some states require that certain
persons take physical delivery in certificated form of securities that they own.
Consequently, the ability to transfer beneficial interests in a global capital
security to those persons will be limited to that extent. Because DTC can act
only on behalf of participants, which in turn act on behalf of indirect
participants and certain banks, the ability of a
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person having beneficial interests in a global capital security to pledge its
interests to persons or entities that do not participate in the DTC system, or
otherwise take actions in respect of its interests, may be affected by the lack
of a physical certificate evidencing its interests. For certain other
restrictions on the transferability of the capital securities, see "--Exchange
of Book-Entry Capital Securities for Certificated Capital Securities."
Payments on the global capital security registered in the name of DTC, or
its nominee, will be payable by the property trustee to DTC in its capacity as
the registered holder under the trust agreement. Under the terms of the trust
agreement, the property trustee will treat the persons in whose names the
capital securities, including the global capital securities, are registered as
the owners thereof for the purpose of receiving such payments and for any and
all other purposes whatsoever. Neither the property trustee nor any agent
thereof has or will have any responsibility or liability for:
- any aspect of DTC's records or any participant's or indirect
participant's records relating to, or payments made on account of,
beneficial ownership interests in the global capital securities, or
for maintaining, supervising or reviewing any of DTC's records or any
participant's or indirect participant's records relating to the
beneficial ownership interests in the global capital securities, or
- any other matter relating to the actions and practices of DTC or any
of its participants or indirect participants.
DTC has advised us that its current practice, upon receipt of any payment
on the capital securities, is to credit the accounts of the relevant
participants with the payment on the payment date, in amounts proportionate to
their respective holdings in liquidation amount of the capital securities as
shown on the records of DTC unless DTC has reason to believe it will not receive
payment on the payment date. Payments by participants and indirect participants
to the beneficial owners of capital securities will be governed by standing
instructions and customary practices and will be the responsibility of
participants or indirect participants and will not be the responsibility of DTC,
the property trustee, the Trust or CNB. None of the Trust, CNB nor the property
trustee will be liable for any delay by DTC or any of its participants or
indirect participants in identifying the beneficial owners of the capital
securities, and the Trust, CNB and the property trustee may conclusively rely
on, and will be protected in relying on, instructions from DTC or its nominee
for all purposes.
Any secondary market trading activity in interests in the global capital
securities will settle in immediately available funds, subject in all cases to
the rules and procedures of DTC and its participants. Transfers between
participants in DTC will be effected in accordance with DTC's procedures, and
will settle in same-day funds.
DTC has advised us that it will take any action permitted to be taken by a
holder of capital securities (including, without limitation, presenting the
capital securities for exchange as described below) only at the direction of one
or more participants who have an interest in DTC's global capital securities in
respect of the portion of the liquidation amount of the capital securities as to
which the participant or participants has or have given direction. However, if
an
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event of default exists under the trust agreement, DTC reserves the right to
exchange the global capital securities for legended capital securities in
certificated form and to distribute the certificated capital securities to its
participants.
We believe that the information in this section concerning DTC and its
book-entry system has been obtained from reliable sources, but we do not take
responsibility for the accuracy of this information.
Although DTC has agreed to the procedures described in this section to
facilitate transfers of interests in the global capital securities among
participants in DTC, DTC is not obligated to perform or to continue to perform
these procedures, and these procedures may be discontinued at any time. None of
the Trust, CNB nor the property trustee will have any responsibility or
liability for any aspect of the performance by DTC or its participants or
indirect participants of any of their respective obligations under the rules and
procedures governing their operations or for maintaining, supervising or
reviewing any records relating to the global capital securities that are
maintained by DTC or any of its participants or indirect participants.
Exchange of Book-Entry Capital Securities for Certificated Capital Securities
A global capital security can be exchanged for capital securities in
registered certificated form if:
- DTC notifies CNB that it is unwilling or unable to continue as
clearing agency for the global capital security and CNB fails to
appoint a successor clearing agency within 90 days of receipt of DTC's
notice, or has ceased to be a clearing agency registered under the
Exchange Act and CNB fails to appoint a successor depositary within 90
days of becoming aware of this condition;
- the Trust, in its sole discretion, elects to cause the capital
securities to be issued in certificated form; or
- a default or an event of default has occurred and is continuing.
In all cases, certificated capital securities delivered in exchange for any
global capital security will be registered in the names, and issued in any
approved denominations, requested by or on behalf of DTC (in accordance with its
customary procedures).
Payment and Paying Agency
The Trust will make payments on the capital securities that are held in
global form to DTC, which will credit the relevant accounts at DTC on the
applicable distribution dates. The Trust will make payments on the capital
securities that are not held by DTC by mailing a check to the address of the
holder entitled to the payment as the holder's address appears on the register.
The paying agent will initially be the property trustee and any co-paying agent
chosen by the property trustee and acceptable to the administrators and CNB. The
paying agent will be permitted to resign as paying agent upon 30 days' notice to
the property trustee, the
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administrators and CNB. In the event that the property trustee is no longer the
paying agent, the property trustee will appoint a successor (which must be a
bank or trust company acceptable to us) to act as paying agent.
Restrictions on Transfer
The capital securities may be transferred, only in blocks having a
liquidation amount of not less than $100,000 (100 capital securities) and
multiples of $1,000 in excess of $100,000. Any attempted sale, transfer or other
disposition of capital securities in a block having a liquidation amount of less
than $100,000 shall be deemed to be void and of no legal effect. Any such
purported transferee shall be deemed not to be the holder of the capital
securities for any purpose, including but not limited to the receipt of
distributions on the capital securities, and such purported transferee shall be
deemed to have no interest in the capital securities. You should read "Notice to
Investors" for additional information.
Registrar and Transfer Agent
The property trustee acts as registrar transfer agent and exchange agent
for the capital securities.
The registrar will register transfers of the capital securities without
charge, except for any tax or other governmental charges that may be imposed in
connection with any transfer or exchange. The Trust will not be required to have
the transfer of the capital securities registered after they have been called
for redemption.
Information Concerning the Property Trustee
Except if an event of default exists, the property trustee will undertake
to perform only the duties specifically set forth in the trust agreement. After
an event of default, the property trustee must exercise the same degree of care
and skill as a prudent person would exercise or use in the conduct of his or her
own affairs. Subject to this provision, the property trustee is not obligated to
exercise any of the powers vested in it by the trust agreement at the request of
any holder of capital securities and the common securities, unless it is offered
reasonable indemnity against the costs, expenses and liabilities that it might
incur. If no event of default exists and the property trustee is required to
decide between alternative causes of action, construe ambiguous provisions in
the trust agreement or is unsure of the application of any provision of the
trust agreement, and the matter is not one on which holders of the capital
securities or the common securities are entitled under the trust agreement to
vote, then the property trustee shall take such action as it deems advisable and
in the best interests of the holders of the capital securities and the common
securities and will have no liability, except for its own bad faith, negligence
or willful misconduct.
Miscellaneous
The administrators and the property trustee are authorized and directed to
conduct the affairs of and to operate the Trust in such a way that:
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- the Trust will not be deemed to be an investment company required to
be registered under the Investment Company Act;
- the Trust will be classified as a grantor trust for U.S. federal
income tax purposes; and
- the junior subordinated debentures will be treated as its indebtedness
for U.S. federal income tax purposes.
In connection with the foregoing, CNB, as holder of the common securities,
and the property trustee are authorized to take any action, not inconsistent
with applicable law, the certificate of trust of the Trust or the trust
agreement, that CNB and the property trustee determine in their discretion is
necessary or desirable for such purposes, as long as it does not materially
adversely affect the interests of the holders of the capital securities and the
common securities.
The trust agreement provides that
- holders of the capital securities and the common securities have no
preemptive or similar rights to subscribe for any additional capital
securities and common securities, and
- the issuance of capital securities and common securities is not
subject to preemptive rights.
The Trust may not borrow money, issue debt, execute mortgages or pledge any
of its assets.
JUNIOR SUBORDINATED DEBENTURES
The original junior subordinated debentures were, and the exchange junior
subordinated debentures will be, issued under an indenture, between CNB and
Wilmington Trust Company, acting as debenture trustee. Upon effectiveness of the
exchange offer registration statement, the indenture will be qualified under the
Trust Indenture Act. We have summarized the material terms and provisions of the
junior subordinated debentures and the indenture in this section. This summary
is not complete and is subject to, and qualified by, the indenture, including
the definitions used in the indenture. This summary is also subject to, and
qualified by, the Trust Indenture Act. The indenture will be subject to the
Trust Indenture Act upon consummation of the exchange offer. We encourage you to
read the indenture for additional information.
General
The Trust invested the proceeds from the sale of the capital securities and
the common securities in the junior subordinated debentures issued by CNB. The
junior subordinated debentures bear interest at the annual rate, reset
quarterly, equal to the three-month LIBOR plus
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275 basis points, of the principal amount of the junior subordinated debentures,
payable quarterly in arrears on interest payment dates of March 31, June 30,
September 30 and December 31 of each year and at maturity to the person in whose
name each junior subordinated debenture is registered at the close of business
on the relevant record date. The first interest payment date for the junior
subordinated debentures was September 30, 1999. Each period beginning on and
including an interest payment date and ending on but excluding the next interest
payment date is an interest period.
We anticipate that, until the liquidation, if any, of the Trust, each
junior subordinated debenture will be held by the property trustee in trust for
the benefit of the holders of the capital securities. The amount of interest
payable for any interest period will be computed on the basis of the actual
number of days elapsed in such period and a 360-day year. In the event that any
interest payment date would otherwise fall on a day that is not a business day,
the interest payment date will be postponed to the next business day (without
any interest or other payment due to the delay) unless it would fall in the next
calendar year, in which case the interest payment date shall be the last
business day of the calendar year.
Accrued interest that is not paid on the applicable interest payment date
will bear additional interest (to the extent permitted by law) at the applicable
periodic interest rate, compounded quarterly from the relevant interest payment
date. The term "interest" as used in this prospectus includes quarterly interest
payments and interest on quarterly interest payments not paid on the applicable
interest payment date.
Notwithstanding anything to the contrary set forth above, if the maturity
date falls on a day that is not a business day, the payment of principal and
interest will be paid on the next business day, with the same force and effect
as if made on the maturity date, and no interest on such payments will accrue
from and after the maturity date.
The junior subordinated debentures will mature on September 30, 2029.
The junior subordinated debentures rank equal to all of CNB's other junior
subordinated debentures which may be issued to other trusts established by CNB,
in each case similar to the Trust, and are unsecured and rank subordinate and
junior to all indebtedness for money that CNB borrows to the extent and in the
manner set forth in the indenture. Please refer to "--Subordination" for
additional information concerning the subordination of the junior subordinated
debentures.
The junior subordinated debentures are effectively subordinated to all
existing and future liabilities of the Bank (including the Bank's deposit
liabilities) and Central Asset Management, Inc. and all liabilities of any of
its future subsidiaries. The indenture does not limit CNB, the Bank or Central
Asset Management, Inc. from incurring or issuing other secured or unsecured
debt, including senior indebtedness. Please refer to "--Subordination" for
additional information concerning the subordination of the junior subordinated
debentures.
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Form, Registration and Transfer
If the junior subordinated debentures are distributed to the holders of the
capital securities and the common securities, the junior subordinated debentures
may be represented by one or more global certificates registered in the name of
DTC or its nominee. The depositary arrangements for such junior subordinated
debentures are expected to be substantially similar to those in effect for the
capital securities. For a description of DTC and the terms of the depositary
arrangements relating to payments, transfers, voting rights, redemptions and
other notices and other matters, you should read "Description of Exchange
Securities--Capital Securities--Form, Denomination, Book-Entry Procedures and
Transfer."
Payment and Paying Agents
Payment of principal of (and premium, if any) and interest on the junior
subordinated debentures will be made at the office of the debenture trustee in
New York, New York or at the office of such paying agent or paying agents as CNB
may designate from time to time, except that, at its option, payment of any
interest may be made, except in the case of junior subordinated debentures in
global form:
- by check mailed to the address of the person or entity entitled to the
interest payment as such address shall appear in the register for the
junior subordinated debentures; or
- by transfer to an account maintained by the person or entity entitled
to the interest payment as specified in the register, provided that
proper transfer instructions have been received by the relevant record
date.
Payment of any interest on any junior subordinated debenture will be made
to the person or entity in whose name the subordinated debenture is registered
at the close of business on the record date for the interest payment date,
except in the case of defaulted interest. CNB may at any time designate
additional paying agents or rescind the designation of any paying agent; however
CNB will always be required to maintain a paying agent in each place of payment
for the junior subordinated debentures.
Any moneys deposited with the debenture trustee or any paying agent, or
then held by CNB, in trust for the payment of the principal of (or premium, if
any) or interest on any junior subordinated debentures and remaining unclaimed
for two years after such principal (or premium, if any) or interest has become
due and payable shall, at its request, be repaid to CNB and the holder of the
junior subordinated debentures shall thereafter look, as a general unsecured
creditor, only to CNB for payment.
Option to Extend Interest Payment Date
So long as no debenture event of default exists, CNB has the right under
the indenture to defer the payment of interest on the junior subordinated
debentures, at any time and from time to time, for no more than 20 consecutive
quarters for each deferral period, provided that no deferral
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period shall end on a date other than an interest payment date or extend beyond
September 30, 2029. At the end of a deferral period, CNB must pay all interest
then accrued and unpaid (together with interest thereon at the applicable
periodic interest rate, compounded quarterly from the relevant interest payment
date, to the extent permitted by applicable law). During a deferral period,
interest will continue to accrue, and holders of the capital securities and the
common securities or, if the junior subordinated debentures have been
distributed to holders of the capital securities and the common securities,
holders of junior subordinated debentures, will be required to include that
deferred interest in gross income for U.S. federal income tax purposes on an
accrual method of accounting prescribed by the Code and Treasury regulation
provisions on original issue discount prior to the receipt of cash attributable
to that income. You should read "Certain Federal Income Tax
Consequences--Interest Income and Original Issue Discount" for additional
information regarding the tax consequences of a deferral.
During any such deferral period, CNB may not:
- declare or pay any dividends or distributions on, or redeem, purchase,
acquire, or make a liquidation payment with respect to, any of its
capital stock;
- make any payment of principal of, or interest or premium, if any, on
or repay, repurchase or redeem any of its debt securities that rank
equal or junior to the junior subordinated debentures; or
- make any guarantee payments with respect to any guarantee by CNB of
the debt securities of any of its subsidiaries if such guarantee ranks
equal or junior to the junior subordinated debentures.
Notwithstanding the foregoing, during a deferral period CNB may make the
following payments:
- dividends or distributions in shares of, or options, warrants or
rights to subscribe for or purchase shares of, its capital stock,
- any declaration of a dividend in connection with the implementation of
a stockholders' rights plan, or the issuance of rights, stock or other
property under any such plan in the future, or the redemption or
repurchase of any rights pursuant thereto,
- payments under the guarantee,
- as a result of a reclassification of its capital stock or the exchange
or conversion of one class or series of its capital stock or
indebtedness for another class or series of its capital stock,
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- the purchase of fractional interests in shares of its capital stock
pursuant to the conversion or exchange provisions of such capital
stock or the security being converted or exchanged, and
- repurchases, redemptions or other acquisitions of shares of its
capital stock in connection with any employment contract, benefit
plans or similar arrangements with or for the benefit of any one or
more of its directors, officers, employees or consultants in
connection with any of its dividend reinvestment or shareholder stock
purchase plans or in connection with the issuance of its capital stock
(or securities convertible into or exercisable for such capital stock)
as consideration in an acquisition transaction entered into prior to
the applicable deferral period.
CNB does not currently intend to exercise its option to defer payments of
interest on the junior subordinated debentures.
Before the end of any deferral period, CNB may extend the deferral period,
as long as no event of default exists and the extension does not cause the
deferral period to exceed 20 consecutive quarterly periods, to end on a date
other than an interest payment date or to extend beyond September 30, 2029. At
the end of any deferral period and upon the payment of all then accrued and
unpaid interest (together with interest thereon at the applicable periodic
interest rate, compounded quarterly, to the extent permitted by applicable law),
CNB may elect to begin a new deferral period, subject to the requirements set
forth herein. No interest shall be due and payable during a deferral period
until the deferral period ends. CNB must give the property trustee and the
debenture trustee notice of its election at least one business day before the
earlier of:
- the date the distributions on the capital securities and the common
securities would have been payable except for the election to begin or
extend such deferral period;
- the date the property trustee is required to give notice to holders of
capital securities of the record date for such distributions; or
- the date such distributions are payable, but in any event at least one
business day prior to the record date.
The property trustee will notify holders of the capital securities of CNB's
election to begin or extend a new deferral period.
There is no limit on the number of times that CNB may elect to begin a
deferral period.
Optional Prepayment
CNB may prepay the junior subordinated debentures at its option on or after
September 30, 2009, in whole at any time or in part from time to time, subject
to its receipt of any required
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regulatory approval, at an optional prepayment price equal to 100% of the
principal amount of the junior subordinated debentures plus any accrued and
unpaid interest.
Special Event Prepayment
If there are changes in the bank regulatory, investment company or tax laws
that adversely affect the status of the Trust, the capital securities or the
junior subordinated debentures, CNB may, at its option, and subject to its
receipt of any required regulatory approval, prepay the junior subordinated
debentures, in whole but not in part, at any time within 90 days of the change
in the law, at the special event prepayment price equal to 100% of the principal
amount of the junior subordinated debentures plus any accrued and unpaid
interest. If CNB exercises its option to prepay the junior subordinated
debentures under these circumstances, then the proceeds of that prepayment must
be applied by the Trust to redeem the capital securities and the common
securities at a prepayment price equal to 100% of the principal amount of the
junior subordinated debentures so prepaid, plus, in each case, accrued and
unpaid interest on the junior subordinated debentures, if any, to the date of
prepayment. Please refer to "Description of Capital Securities--Redemption."
A change in the bank regulatory law means CNB's receipt of an opinion of
independent bank regulatory counsel experienced in such matters to the effect
that, as a result of:
- any amendment to, or change (including any announced prospective
change) in, any laws or regulations of the United States or any rules,
guidelines or policies of an applicable regulatory agency or
authority, or
- any official or administrative pronouncement or action or judicial
decision interpreting or applying such laws or regulations,
which amendment or change is effective or which pronouncement or decision is
announced on or after the date the capital securities and the common securities
are first issued, there is more than an insubstantial risk that CNB will not be
entitled to treat an amount equal to the liquidation amount of the capital
securities as Tier 1 Capital (or its then equivalent if CNB were subject to the
capital requirement).
A change in the investment company law means the receipt by 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, any laws or regulations of the United States or any rules,
guidelines or policies of any applicable regulatory agency or
authority, or
- any official or administrative pronouncement or action or judicial
decision interpreting or applying such laws or regulations,
which amendment or change is effective or which pronouncement or decision is
announced on or after the date the capital securities and the common securities
are first issued, there is more than
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an insubstantial risk that the Trust is, or will be, considered an investment
company that is required to be registered under the Investment Company Act.
A change in tax law means the receipt by the Trust of an opinion of
independent counsel experienced in such matters to the effect that, as a result
of:
- any amendment to, or change (including any announced prospective
change) in, any laws or regulations of the United States or any
political subdivision or taxing authority thereof or therein, or
- any official or administrative pronouncement or action or judicial
decision interpreting or applying such laws or regulations,
which amendment or change is effective or which pronouncement or decision is
announced on or after the date the capital securities and the common securities
are first issued, there is more than an insubstantial risk that:
- the Trust is, or will be within 90 days of the date of delivery of
such opinion, subject to U.S. federal income tax with respect to any
income received or accrued on the junior subordinated debentures;
- interest payable by CNB on the junior subordinated debentures is not,
or within 90 days of the date of delivery of such opinion will not be,
deductible by CNB, in whole or in part, for U.S. federal income tax
purposes; or
- the Trust is, or will be within 90 days of the date of delivery of
such opinion, subject to more than a de minimis amount of other taxes,
duties or other governmental charges.
CNB will mail any notice of prepayment between 30 and 60 days before the
prepayment date to each holder of junior subordinated debentures to be prepaid
at its registered address. Unless CNB defaults in payment of the prepayment
price, on the prepayment date interest shall cease to accrue on the junior
subordinated debentures called for prepayment.
If and for so long as the Trust is the holder of all junior subordinated
debentures and the Trust is required to pay any additional taxes, duties or
other governmental charges as a result of a change in the tax law, CNB will pay
as additional amounts on the junior subordinated debentures any amounts as may
be necessary in order that the amount of distributions then due and payable by
the Trust on the outstanding capital securities and the common securities shall
not be reduced as a result of any additional sums, including taxes, duties or
other governmental charges to which the Trust has become subject as a result of
a change in the tax law.
Certain Covenants by CNB
CNB has also covenanted that CNB will not:
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- declare or pay any dividends or distributions on, or redeem, purchase,
acquire or make a liquidation payment with respect to, any of its
capital stock;
- make any payment of principal of, or interest or premium, if any, on
or repay, repurchase or redeem any of its debt securities that rank
equal or junior to the junior subordinated debentures; or
- make any guarantee payments with respect to any guarantee by CNB of
the debt securities of any of its subsidiaries if such guarantee ranks
equal or junior to the junior subordinated debentures;
if at such time:
- CNB has actual knowledge that there is any event that is, or with the
giving of notice or the lapse of time, or both, would be, a debenture
event of default and that CNB has not taken reasonable steps to cure;
- if the junior subordinated debentures are held by the Trust, CNB is in
default with respect to its payment of any obligations under the
guarantee; or
- CNB has given notice of its election to exercise its right to defer
interest payments on the junior subordinated debentures as provided in
the indenture and the deferral period, or any extension of the
deferral period, is continuing.
Notwithstanding the foregoing, CNB may make the following payments:
- dividends or distributions in shares of, or options, warrants or
rights to subscribe for or purchase shares of, its capital stock,
- any declaration of a dividend in connection with the implementation of
a stockholders' rights plan, or the issuance of rights, stock or other
property under the plan in the future, or the redemption or repurchase
of any rights pursuant to to stockholders' rights plan,
- payments under the guarantee,
- as a result of a reclassification of its capital stock or the exchange
or conversion of one class or series of its capital stock or
indebtedness for another class or series of its capital stock,
- the purchase of fractional interests in shares of its capital stock
pursuant to the conversion or exchange provisions of such capital
stock or the security being converted or exchanged, and
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- repurchases, redemptions or other acquisitions of shares of its
capital stock in connection with any employment contract, benefit plan
or similar arrangements with or for the benefit of any one or more of
its directors, officers, employees or consultants in connection with
any of its dividend reinvestment or shareholder stock purchase plans
or in connection with the issuance of its capital stock (or securities
convertible into or exercisable for such capital stock) as
consideration in an acquisition transaction entered into prior to the
applicable deferral period.
So long as the capital securities and the common securities remain
outstanding, CNB has also covenanted:
- to maintain 100% direct or indirect ownership of the common
securities; provided, however, that any of its permitted successors
under the indenture may succeed to its ownership of the common
securities;
- to use commercially reasonable efforts to cause the Trust to remain a
business trust, except in connection with the distribution of junior
subordinated debentures to the holders of capital securities and the
common securities in liquidation of the Trust, the redemption of all
of the capital securities and the common securities, or certain
mergers, consolidations or amalgamations, each as permitted by the
trust agreement; and
- to use commercially reasonable efforts to cause the Trust to otherwise
continue not to be classified as an association taxable as a
corporation and to be classified as a grantor trust for U.S. federal
income tax purposes.
Modification of Indenture
From time to time and at any time, CNB, together with the debenture
trustee, may, without the consent of the holders of junior subordinated
debentures, amend, waive or supplement the indenture for specified purposes,
including, among other things:
- curing ambiguities, defects or inconsistencies, provided that such
amendment in the indenture does not materially adversely affect the
interest of the holders of junior subordinated debentures, and
- qualifying, or maintaining the qualification of, the indenture under
the Trust Indenture Act.
The indenture permits CNB and the debenture trustee, with the consent of
the holders of a majority in aggregate principal amount of junior subordinated
debentures, to modify the indenture in a manner affecting the rights of the
holders of the junior subordinated debentures; provided that no modification
may, without the consent of the holders of each outstanding subordinated
debenture affected:
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- change the stated maturity date, or reduce the principal amount, of
the junior subordinated debentures,
- reduce the amount payable on prepayment or reduce the rate or extend
the time of payment of interest except pursuant to its right under the
indenture to defer the payment of interest (please refer to "--Option
to Extend Interest Payment Date"),
- make the principal of, (or premium, if any) or interest on, the junior
subordinated debentures payable in any coin or currency other than
that provided in the junior subordinated debentures,
- impair or affect the right of any holder of junior subordinated
debentures to institute suit for the payment thereof, or
- reduce the percentage of the principal amount of the junior
subordinated debentures, the holders of which are required to consent
to any such modification.
Debenture Events of Default
A "debenture event of default" is
- CNB's failure for 30 days to pay any interest (including compounded
interest and additional sums, if any) on the junior subordinated
debentures or any other debentures (about which a responsible officer
of the debenture trustee has actual knowledge) when due (subject to
the deferral of any interest due date in the case of a deferral period
with respect to the junior subordinated debentures or other debentures
as the case may be); or
- CNB's failure to pay any principal or premium, if any, on the junior
subordinated debentures or any other debentures (about which a
responsible officer of the debenture trustee has actual knowledge)
when due, whether at maturity, upon prepayment, by accelerating the
maturity or otherwise; or
- CNB's failure to observe or perform, in any material respect, any
other covenant contained in the indenture (other than a covenant, the
breach of which is specifically dealt with in the indenture) for 90
days after written notice to CNB from the debenture trustee or to CNB
and the debenture trustee from the holders of at least 25% in
aggregate outstanding principal amount of junior subordinated
debentures; or
- certain events related to CNB's bankruptcy, insolvency or
reorganization.
The holders of a majority in aggregate outstanding principal amount of the
junior subordinated debentures have, subject to certain exceptions, the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the debenture trustee. The
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debenture 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 this declaration and waive the default if the default
(other than the non-payment of the principal of the junior subordinated
debentures which has become due solely by such acceleration) has been cured and
a sum sufficient to pay all matured installments of interest and principal due
otherwise than by acceleration has been deposited with the debenture trustee. If
the holders of the junior subordinated debentures fail to annul the declaration
and waive the default, the holders of a majority in aggregate liquidation amount
of the capital securities shall have the right to annul the declaration and
waive the default.
The holders of a majority in aggregate outstanding principal amount of the
junior subordinated debentures affected may, on behalf of the holders of all the
junior subordinated debentures, waive any past default, except a default in the
payment of principal (or premium, if any) or interest (unless such default has
been cured and a sum sufficient to pay all matured installments of interest and
principal (and premium, if any) due otherwise than by acceleration has been
deposited with the debenture trustee) or a default in respect of a covenant or
provision which under the indenture cannot be modified or amended without the
consent of the holder of each outstanding junior subordinated debenture affected
thereby.
The indenture requires that CNB file with the debenture trustee a
certificate annually as to the absence of defaults specified under the
indenture.
The indenture provides that the debenture trustee may withhold notice of a
debenture event of default from the holders of the junior subordinated
debentures if the debenture trustee considers it in the interest of the holders
to withhold the notice.
Enforcement of Certain Rights by Holders of Capital Securities
If a debenture event of default exists that is attributable to CNB's
failure to pay the principal of (or premium, if any) or interest (including
compounded interest and additional sums, if any) on the junior subordinated
debentures on the due date, a registered holder of capital securities may
institute a legal proceeding directly against CNB for enforcement of payment to
that holder of an amount equal to the amount payable in respect of the junior
subordinated debentures having a principal amount equal to the aggregate
liquidation amount of the capital securities held by that holder. CNB may not
amend the indenture to remove this right to bring a direct action without the
prior written consent of the holders of all of the capital securities.
Notwithstanding any payments that CNB makes to a holder of capital securities in
connection with a direct action, CNB shall remain obligated to pay the principal
of (or premium, if any) or interest (including compounded interest and
additional sums, if any) on the junior subordinated debentures, and CNB shall be
subrogated to the rights of such holder of the capital securities; provided that
CNB has the right under the indenture to set off any payment made to that holder
of the capital securities by CNB in connection with any direct action.
The holders of the capital securities will not be able to exercise directly
any remedies, other than those described in the above paragraph, available to
the holders of the junior
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subordinated debentures, unless an event of default exists under the trust
agreement. For additional information, please refer to "Description of Exchange
Securities--Capital Securities--Events of Default; Notice."
Consolidation, Merger, Sale of Assets and Other Transactions
The indenture provides that CNB will not consolidate with or merge into any
other person or convey, transfer or lease all or substantially all of its
properties to any person, and no person shall consolidate with or merge into CNB
or convey, transfer or lease all or substantially all of its properties to CNB,
unless:
- in case CNB consolidates with or merge into another person or conveys
or transfers all or substantially all of its properties to any person,
the successor is organized under the laws of the United States or any
state or the District of Columbia, and the successor expressly assumes
CNB's obligations under the indenture with respect to the junior
subordinated debentures; provided, however, that nothing in the
indenture shall be deemed to restrict or prohibit, and no supplemental
indenture shall be required in the case of the merger of a bank (as
defined below) with and into a bank or CNB, the consolidation of banks
into a bank or CNB, or the sale or other disposition of all or
substantially all of the assets of any bank to another bank or CNB,
if, in any such case in which CNB is not the surviving, resulting or
acquiring entity, CNB would own, directly or indirectly, at least 80%
of the voting securities of the bank (and of any other bank any voting
securities of which are owned, directly or indirectly, by the bank)
surviving this merger, resulting from the consolidation of acquiring
the assets;
- immediately after giving effect to the transaction, no debenture event
of default, and no event which, after notice or lapse of time or both,
would become a debenture event of default, exists; and
- certain other conditions as prescribed in the indenture are met.
For purposes of the first bullet point above, the term "bank" means each of:
- any banking subsidiary of CNB the consolidated assets of which
constitute 20% or more of its consolidated assets and its consolidated
subsidiaries;
- any other banking subsidiary designated as a bank pursuant to a board
resolution and set forth in an officers' certificate delivered to the
trustee; and
- any subsidiary of CNB that owns, directly or indirectly, any voting
securities, or options, warrants or rights to subscribe for or
purchase voting securities, of any bank under the first and second
bullet points above and in the case of all three bullet points above
their respective successors (whether by consolidation, merger,
conversion transfer of substantially all their assets and business or
otherwise) so
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long as this successor is a banking subsidiary (in the case of the
first and second bullet point or a subsidiary (in the case of the
third bullet point) of CNB.
The general provisions of the indenture do not afford holders of the junior
subordinated debentures protection in the event of a highly leveraged or other
transaction that CNB may become involved in 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
Delaware trustee for cancellation have become due and payable or will
become due and payable at maturity or called for prepayment within one
year, and
- CNB deposits or causes to be deposited with the Delaware trustee
funds, in trust, for the purpose and in an amount sufficient to pay
and discharge the entire indebtedness on the junior subordinated
debentures not previously delivered to the Delaware trustee for
cancellation, for the principal (and premium, if any) and interest
(including compounded interest and additional sums, if any) to the
date of the prepayment or to September 30, 2029, as the case may be,
then the indenture will cease to be of further effect (except as to CNB's
obligations to pay all other sums due pursuant to the indenture and to provide
the officers' certificates and opinions of counsel), and CNB will be deemed to
have satisfied and discharged the indenture.
Subordination
CNB has promised that any junior subordinated debentures issued under the
indenture will rank junior to all senior indebtedness to the extent provided in
the indenture. Upon any payment or distribution of CNB's assets to creditors
upon its liquidation, dissolution, winding up, reorganization, assignment for
the benefit of its creditors, marshaling of its assets or any bankruptcy,
insolvency, debt restructuring or similar proceedings in connection with any
insolvency or bankruptcy proceeding of CNB, the senior indebtedness must be paid
in full before the holders of the junior subordinated debentures will be
entitled to receive or retain any payment in respect thereof.
If the maturity of junior subordinated debentures is accelerated, the
holders of all senior indebtedness outstanding at such time will first be
entitled to receive payment in full of the senior indebtedness before the
holders of junior subordinated debentures will be entitled to receive or retain
any payment in respect of the principal of (or premium, if any) or interest, if
any, on the junior subordinated debentures.
No payments on account of principal (or premium, if any) or interest, if
any, in respect of the junior subordinated debentures may be made if there is a
default in any payment with respect to senior indebtedness, or an event of
default exists with respect to any senior indebtedness that
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accelerates the maturity of the senior indebtedness, or if any judicial
proceeding shall be pending with respect to the default.
Indebtedness for money borrowed means any obligation of or any obligation
guaranteed by CNB to repay borrowed money, whether or not evidenced by bonds,
debentures, notes or other written instruments; except that indebtedness for
money borrowed does not include trade accounts payable or accrued liabilities
arising in the ordinary course of business.
Indebtedness ranking on a parity with the junior subordinated debentures
means:
- indebtedness for money borrowed, whether outstanding on the date the
indenture is executed or created, assumed or incurred after the date
that the indenture is executed, to the extent the indebtedness for
money borrowed by its terms ranks equal to and not prior to the junior
subordinated debentures in the right of payment upon the happening of
its dissolution, winding-up, liquidation or reorganization and
- all other debt securities, and guarantees in respect of those debt
securities, issued to any trust other than the Trust, or a trustee of
the trust, partnership or other entity affiliated with CNB, that is
CNB's financing vehicle, in connection with the issuance by the
financing vehicle of equity securities or other securities guaranteed
by CNB pursuant to an instrument that ranks equal to, with or junior
to the guarantee. The securing of any indebtedness otherwise
constituting indebtedness ranking on a parity with the junior
subordinated debentures shall not be deemed to prevent such
indebtedness from constituting indebtedness ranking on a parity with
the junior subordinated debentures.
Indebtedness ranking junior to the junior subordinated debentures means any
indebtedness for money borrowed, whether outstanding on the date the indenture
is executed or created, assumed or incurred after the date the indenture is
executed, to the extent the indebtedness for money borrowed by its terms ranks
junior to and not equal to or prior to the junior subordinated debentures (and
any other indebtedness ranking on a parity with the junior subordinated
debentures) in right of payment upon the happening of CNB's dissolution or
winding-up or liquidation or reorganization. The securing of any indebtedness
for money borrowed otherwise constituting indebtedness ranking junior to the
junior subordinated debentures shall not be deemed to prevent the indebtedness
for money borrowed from constituting indebtedness ranking junior to the junior
subordinated debentures.
Senior indebtedness means all indebtedness for money borrowed, whether
outstanding on the date the indenture is executed or created, assumed or
incurred after the date the indenture is executed, except indebtedness ranking
on a parity with the junior subordinated debentures or indebtedness ranking
junior to the junior subordinated debentures, and any deferrals, renewals or
extensions of the senior indebtedness.
CNB is a bank holding company and almost all of the operating assets of CNB
are owned by the Bank and Central Asset Management, Inc. CNB relies primarily on
dividends from the
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Bank to meet its obligations for payment of principal and interest on its
outstanding debt obligations and corporate expenses. CNB is a legal entity
separate and distinct from the Bank. Holders of junior subordinated debentures
should look only to CNB for payments on the junior subordinated debentures.
There are regulatory limitations on the payment of dividends directly or
indirectly to CNB from its subsidiaries. In addition, the Bank is subject to
certain restrictions imposed by federal law on any extensions of credit to, and
certain other transactions with, CNB and certain other affiliates, and on
investments in stock or other securities thereof. These restrictions prevent CNB
and the other affiliates from borrowing from the Bank unless the loans are
secured by various types of collateral. Further, the secured loans, other
transactions and investments by the Bank are generally limited in amount as to
CNB and as to each of the other affiliates to 10% of the Bank's capital and
surplus and as to CNB and all of the other affiliates to an aggregate of 20% of
the Bank's capital and surplus. Accordingly, the junior subordinated debentures
will be effectively subordinated to all existing and future liabilities of CNB's
subsidiaries.
Because CNB is a bank holding company, the right of CNB to participate in
any distribution of assets of any subsidiary upon the subsidiary's liquidation
or reorganization or otherwise (and thus the ability of holders of the capital
securities to benefit indirectly from the distribution), is subject to the prior
claims of creditors of that subsidiary (including depositors, in the case of the
Bank), except to the extent CNB may itself be recognized as a creditor of that
subsidiary. At September 30, 1999, the Bank had total liabilities (excluding
liabilities owed to CNB) of $783 million. Accordingly, the junior subordinated
debentures will be effectively subordinated to all existing and future
liabilities of CNB's subsidiary (including the Bank's deposit liabilities) and
all liabilities of any future subsidiaries of CNB. The indenture does not limit
the incurrence or issuance of other secured or unsecured debt of CNB or any
subsidiary, including senior indebtedness.
For more information regarding the regulatory limitations applicable to
dividends and other payments by the Bank, you should read "Risk Factors--Risks
related to your investments in the capital securities--CNB will depend primarily
on any dividends CNB may receive from its subsidiaries in making payments under
the junior subordinated debentures, which could affect the payments made to you
under the capital securities."
Restrictions on Transfer
The junior subordinated debentures were issued and may be transferred only
in blocks having an aggregate principal amount of not less than $100,000 (100
junior subordinated debentures) and multiples of $1,000 in excess thereof. Any
attempted transfer of junior subordinated debentures in a block having an
aggregate principal amount of less than $100,000 shall be deemed to be void and
of no legal effect. Any purported transferee shall be deemed not to be the
holder of the junior subordinated debentures for any purpose, including but not
limited to the receipt of payments on the junior subordinated debentures, and
the purported transferee shall be deemed to have no interest in the junior
subordinated debentures.
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Governing Law
The indenture and the junior subordinated debentures are governed by and
construed in accordance with the laws of the State of New York, without regard
to conflict of law principles.
Information Concerning the Debenture Trustee
Following the exchange offer and the qualifications of the indenture under
the Trust Indenture Act, the debenture trustee will have and be subject to all
the duties and responsibilities specified with respect to an indenture trustee
under the Trust Indenture Act. Subject to those provisions, the debenture
trustee is not obligated to exercise any of the powers vested in it by the
indenture at the request of any holder of junior subordinated debentures, unless
offered reasonable indemnity by the holder against the costs, expenses and
liabilities which might be incurred thereby. The debenture trustee is not
required to expend or risk its own funds or otherwise incur personal financial
liability in the performance of its duties under the indenture if the debenture
trustee reasonably believes that repayment or adequate indemnity is not
reasonably assured to it.
GUARANTEE
The original guarantee was executed and delivered by CNB at the same time
as the Trust's issuance of original capital securities. The Wilmington Trust
Company will act as guarantee trustee under the guarantee to comply with the
Trust Indenture Act. The guarantee trustee holds the guarantee for the benefit
of the holders of the capital securities.
We have summarized the material terms and provisions of the guarantee in
this section. This summary is not complete and is subject to, and qualified by,
the guarantee, including the definitions used in the guarantee. This summary is
also subject to, and qualified by, the Trust Indenture Act. The guarantee will
be subject to the Trust Indenture Act upon consummation of the exchange offer.
We encourage you to read the guarantee for additional information.
General
CNB has irrevocably agreed to pay in full on a subordinated basis, to the
extent set forth herein, the payments with respect to the capital securities to
the extent not paid by the Trust. The payments that will be subject to the
guarantee are:
- any accumulated and unpaid distributions required to be paid on the
capital securities, to the extent that the Trust has funds legally
available at that time;
- the applicable redemption price with respect to the capital securities
called for redemption, to the extent that the Trust has funds legally
available at that time; and
- upon a voluntary or involuntary dissolution, winding-up or liquidation
of the Trust (other than in connection with the distribution of the
junior subordinated debentures to holders of the capital securities or
the redemption of all capital
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securities), the lesser of the liquidation distribution, to the extent
the Trust has funds legally available at that time, and the amount of
assets of the Trust remaining available for distribution to holders of
capital securities after satisfying the liabilities owed to the
Trust's creditors as required by applicable law.
The guarantee ranks subordinate and junior to all senior indebtedness to
the extent provided in the guarantee. Please refer to "--Status of the
Guarantee" for information regarding the subordination of the guarantee. CNB's
obligation to make a guarantee payment may be satisfied by its direct payment of
the required amounts to the holders of the capital securities or by causing the
Trust to pay these amounts to the holders of the capital securities.
The guarantee is an irrevocable guarantee on a subordinated basis of the
Trust's obligations under the capital securities, but will apply only to the
extent that the Trust has funds sufficient to make these payments. If CNB does
not make interest payments on the junior subordinated debentures held by the
Trust, the Trust will not be able to pay you distributions on the capital
securities and will not have funds legally available. Please refer to the
"Description of the Exchange Securities - Relationship Among the Capital
Securities, the Junior Subordinated Debentures and the Guarantee" section of
this prospectus. The guarantee does not limit CNB from incurring or issuing
other secured or unsecured debt, including senior indebtedness, whether under
the indenture, any other indenture that CNB may enter into in the future or
otherwise.
The holders of at least a majority in aggregate liquidation amount of the
capital securities have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the guarantee trustee in
respect of CNB's guarantee or to direct the exercise of any trust or power
conferred upon the guarantee trustee under CNB's guarantee. Any holder of the
capital securities may institute a legal proceeding directly against CNB to
enforce their rights under the guarantee without first instituting a legal
proceeding against the Trust, the guarantee trustee or any other person or
entity.
If CNB defaults on its obligation to pay amounts payable under the junior
subordinated debentures, the Trust will lack funds for the payment of
distributions or amounts payable on redemption of the capital securities or
otherwise, and the holders of the capital securities will not be able to rely
upon the guarantee for payment of such amounts. Instead, if a debenture event of
default exists that is attributable to CNB's failure to pay principal of (or
premium, if any) or interest on the junior subordinated debentures on a payment
date, then any holder of capital securities may institute a direct action
against CNB pursuant to the terms of the indenture for enforcement of payment to
that holder of the principal of (or premium, if any) or interest on the junior
subordinated debentures having a principal amount equal to the aggregate
liquidation amount of the capital securities of that holder. In connection with
a direct action, CNB will have a right of set-off under the indenture to the
extent that CNB made any payment to the holder of capital securities in the
direct action. Except as described herein, holders of capital securities will
not be able to exercise directly any other remedy available to the holders of
the junior subordinated debentures or assert directly any other rights in
respect of the junior subordinated debentures. The trust agreement provides that
each holder of capital securities and the common
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securities by accepting the capital securities and the common securities agrees
to the provisions of the guarantee and the indenture.
CNB has, through its guarantee, the trust agreement, the junior
subordinated debentures and the indenture, taken together, fully, irrevocably
and unconditionally guaranteed all of the Trust's obligations under the capital
securities. No single document standing alone, or operating in conjunction with
fewer than all of the other documents, constitutes that guarantee. Only the
combined operation of these documents provides a full, irrevocable and
unconditional guarantee of the Trust's obligations under the capital securities.
You should refer to "Description of Exchange Securities--Relationship Among the
Capital Securities, the Junior Subordinated Debentures and the Guarantee" for
more information about CNB's guarantee.
Status of the Guarantee
CNB's guarantee constitutes an unsecured obligation and ranks subordinate
and junior to all senior indebtedness in the same manner as the junior
subordinated debentures. Please refer to "Description of Exchange
Securities--Junior Subordinated Debentures--Subordination." In addition, because
CNB is a holding company, its right to participate in any distribution of the
Bank's assets upon the Bank's liquidation or reorganization or otherwise is
subject to the prior claims of the Bank's creditors (including its depositors),
except to the extent CNB may be recognized as a creditor of the Bank.
Accordingly, CNB's obligations under the guarantee effectively are subordinated
to all existing and future liabilities of its present and future subsidiaries
(including depositors of the Bank). As a result, claimants should look only to
CNB's assets for payments under the guarantee.
CNB's guarantee of the Trust's capital securities does not limit the amount
of secured or unsecured debt, including senior indebtedness, that CNB or any of
its subsidiaries may incur. CNB expects from time to time that CNB will incur
additional indebtedness and that its subsidiaries will also incur additional
liabilities. CNB's guarantee constitutes a guarantee of payment and not of
collection, enabling the guaranteed party to institute a legal proceeding
directly against CNB to enforce their rights under the guarantee without first
instituting a legal proceeding against any other person or entity. CNB's
guarantee is held for the benefit of the holders of the capital securities.
CNB's guarantee will not be discharged, except by payment of the guarantee
payments in full to the extent that the Trust has not paid, or upon distribution
of the junior subordinated debentures to, the holders of the capital securities.
Events of Default
There will be an event of default under the guarantee if CNB fails to
perform any of its payment or other obligations under the guarantee; provided,
however, that except with respect to a default in payment of any guarantee
payment, CNB shall have received notice of default and shall not have cured the
default within 60 days after receipt of the notice. The holders of at least a
majority in liquidation amount of the capital securities will have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the guarantee trustee in respect of CNB's guarantee or to direct
the exercise of any trust or power conferred upon the guarantee trustee under
CNB's guarantee.
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Any holder of the capital securities may institute a legal proceeding
directly against CNB to enforce the rights of the holders of the capital
securities under the guarantee without first instituting a legal proceeding
against the Trust, the guarantee trustee or any other person or entity.
CNB, as guarantor, will be required to file annually with the guarantee
trustee a certificate regarding its compliance with the applicable conditions
and covenants under its guarantee.
Amendments and Assignment
Except with respect to any changes that do not materially adversely affect
the rights of holders of the capital securities (in which case no vote will be
required), the guarantee may not be amended without the prior approval of the
holders of a majority of the liquidation amount of such outstanding capital
securities. You should read "Description of Exchange Securities--Capital
Securities--Voting Rights; Amendment of the Trust Agreement" for more
information about the manner of obtaining the holders' approval. All guarantees
and agreements contained in the guarantee agreement shall bind CNB's successors,
assigns, receivers, issuer trustees and representatives and shall inure to the
benefit of the holders of the capital securities then outstanding.
Termination of the Guarantee
CNB's guarantee will terminate and be of no further force and effect upon:
- full payment of the redemption price of the capital securities;
- dissolution, winding up or liquidation of the Trust, immediately
following the full payment of the amounts payable in accordance with
the trust agreement; or
- distribution of junior subordinated debentures to the holders of the
capital securities.
CNB's guarantee will continue to be effective or will be reinstated, as the
case may be, if at any time any holder of the capital securities must restore
payment of any sums paid under the capital securities or the guarantee.
Information Concerning the Guarantee Trustee
The Delaware trustee will act as the guarantee trustee and, except if CNB
defaults under the guarantee, will undertake to perform only such duties as are
specifically set forth in the guarantee. In case a default with respect to the
guarantee has occurred, 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 will not be obligated
to exercise any of the powers vested in it by the guarantee at the request of
any holder
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of the capital securities unless it is offered reasonable indemnity against the
costs, expenses and liabilities that it might incur.
Governing Law
The guarantee is governed by and construed in accordance with the laws of
the State of New York, without regard to conflict of law principles.
RELATIONSHIP AMONG THE CAPITAL SECURITIES, THE JUNIOR SUBORDINATED DEBENTURES
AND THE GUARANTEE
Full and Unconditional Guarantee to the extent that the Trust has Funds Legally
Available to Pay Distributions
CNB has irrevocably guaranteed payments of distributions and other amounts
due on the capital securities to the extent the Trust has funds legally
available to pay distributions as and to the extent set forth under "Description
of Exchange Securities--Guarantee." Taken together, CNB's obligations under the
junior subordinated debentures, the indenture, the trust agreement and the
guarantee provide, a full, irrevocable and unconditional guarantee of the
Trust's payments of distributions and other amounts due on the capital
securities. No single document standing alone or operating in conjunction with
fewer than all of the other documents constitutes this guarantee. Only the
combined operation of these documents effectively provides a full, irrevocable
and unconditional guarantee of the Trust's obligations under the capital
securities.
If and to the extent that CNB does not make the required payments on the
junior subordinated debentures, the Trust will not have sufficient funds to make
its related payments, including distributions on the capital securities. CNB's
guarantee does not cover any payments when the Trust does not have sufficient
funds legally available to make those payments. Your remedy, as a holder of
capital securities, is to institute a direct action. CNB's obligations under the
guarantee are subordinate and junior to all senior indebtedness.
Sufficiency of Payments
As long as CNB pays the interest and other payments when due on the junior
subordinated debentures, the Trust will have sufficient funds to cover
distributions and other payments due on the capital securities, primarily
because:
- the aggregate principal amount or prepayment price of the junior
subordinated debentures will equal the sum of the liquidation amount
or redemption price, as applicable, of the capital securities and the
common securities;
- the interest rate and interest payment dates and other payment dates
on the junior subordinated debentures will match the distribution rate
and distribution payment dates and other payment dates for the capital
securities and the common securities;
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- as sponsor, CNB will pay for all and any costs, expenses and
liabilities of the Trust, except for the Trust's obligations to
holders of capital securities and the common securities; and
- the trust agreement also provides that the Trust is not authorized to
engage in any activity that is not consistent with its limited
purposes.
Enforcement Rights of Holders of Capital Securities
You, as holder of capital securities, may institute a legal proceeding
directly against CNB to enforce your rights under CNB's guarantee without first
instituting a legal proceeding against the guarantee trustee, the Trust or any
other person or entity.
A default or event of default under any senior indebtedness would not
constitute a default or event of default under the trust agreement. However, if
there are payment defaults under, or accelerations of, senior indebtedness, the
subordination provisions of the indenture provide that CNB cannot make payments
in respect of the junior subordinated debentures until CNB has paid the senior
indebtedness in full or CNB has cured any payment default or a payment default
has been waived. CNB's failure to make required payments on junior subordinated
debentures would constitute an event of default under the trust agreement.
Limited Purpose of the Trust
The capital securities represent preferred beneficial interests in the
Trust, and the Trust exists solely to:
- issue and sell the capital securities and the common securities;
- use the proceeds from the sale of the capital securities and common
securities to purchase CNB's junior subordinated debentures;
- fulfill its obligations under the registration rights agreement and
issue the exchange securities;
- maintain its status as a grantor trust for federal income tax
purposes; and
- engage in other activities that are necessary or incidental to these
purposes.
A principal difference between the rights of a holder of a capital security and
a holder of a junior subordinated debenture is that a holder of a junior
subordinated debenture will be entitled to receive from CNB the principal amount
of (and premium, if any) and interest on junior subordinated debentures held,
while a holder of capital securities is entitled to receive distributions from
the Trust (or, in certain circumstances, from CNB under its guarantee) if and to
the extent the Trust has funds legally available to pay the distributions.
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Rights Upon Dissolution
Unless the junior subordinated debentures are distributed to holders of the
capital securities and the common securities, if the Trust is voluntarily or
involuntarily dissolved, wound-up or liquidated, after satisfying the
liabilities owed to the Trust's creditors as required by applicable law, the
holders of the capital securities and the common securities will be entitled to
receive, out of assets held by the Trust, the liquidation distribution in cash.
You should review the information in "Description of Exchange
Securities--Capital Securities--Liquidation of the Trust and Distribution of
Exchange Securities--Junior Subordinated Debentures" for additional information.
If CNB is voluntarily or involuntarily liquidated or bankrupted, the
property trustee, as holder of the junior subordinated debentures, would be one
of its subordinated creditors, the property trustee would be subordinated in
right of payment to all senior indebtedness, but entitled to receive payment in
full of principal (and premium, if any) and interest, before any of its
stockholders receive payments or distributions. Since CNB is the guarantor under
the guarantee and has agreed to pay all costs, expenses and liabilities of the
Trust (other than the Trust's obligations to the holders of its capital
securities and the common securities), the positions of a holder of capital
securities and a holder of junior subordinated debentures relative to other
creditors and to CNB's stockholders in the event of its liquidation or
bankruptcy are expected to be substantially the same.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
GENERAL
The capital securities and payments on the capital securities generally are
subject to taxation. Therefore, you should consider the tax consequences of
owning and receiving payments on the capital securities before acquiring them.
We have engaged Arnold & Porter as special tax counsel to review the
following discussion. They have given us their written legal opinion that the
discussion correctly describes the principal aspects of the United States
federal tax treatment of beneficial owners of capital securities.
The following discussion is general and may not apply to your particular
circumstances for any of the following (or other) reasons:
- This summary is based on federal tax laws in effect as of the date of
this prospectus. Changes to any of these laws after this date may
affect the tax consequences described below.
- This summary discusses only capital securities you acquire at original
issuance at the original offering price and hold as capital assets
(within the meaning of federal tax law). It does not discuss all of
the tax consequences that may be relevant to Owners who are subject to
special rules, such as banks, thrift
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institutions, real estate investment trusts, regulated investment
companies, insurance companies, brokers and dealers in securities or
currencies, certain securities traders, tax-exempt organizations and
certain other financial institutions. This discussion also does not
discuss tax consequences that may be relevant to you in light of the
your particular circumstances, such as your holding a capital security
as a position in a straddle, hedging, conversion or other integrated
investment.
This summary does not address:
- the income tax consequences to stockholders in, or partners or
beneficiaries of, a holder of capital securities;
- the United States alternative minimum tax consequences of purchasing,
owning and disposing of capital securities; or
- any state, local or foreign tax consequences of purchasing, owning and
disposing of capital securities.
The authorities on which this summary is based are subject to various
interpretations, and the opinions of our tax counsel are not binding on the
Internal Revenue Service, or IRS, or the courts, either of which could take a
contrary position. Moreover, no rulings have been or will be sought from the IRS
with respect to the transaction described herein. Accordingly, we cannot assure
you that the IRS will not challenge the opinion expressed herein or that a court
would not sustain such a challenge.
WE ADVISE YOU TO CONSULT YOUR OWN TAX ADVISORS REGARDING THE TAX
CONSEQUENCES OF PARTICIPATING IN THE EXCHANGE OFFER AND OF OWNING AND DISPOSING
OF THE CAPITAL SECURITIES BECAUSE THE FOLLOWING DISCUSSION MAY NOT APPLY TO YOU.
EXCHANGE OF CAPITAL SECURITIES
The exchange of original capital securities for exchange capital securities
should not be a taxable event to holders for United States federal income tax
purposes. The exchange of original capital securities for exchange capital
securities pursuant to the exchange offer should not be treated as an "exchange"
for United States federal income tax purposes because the exchange capital
securities should not be considered to differ materially in kind or extent from
the original capital securities and because the exchange will occur by operation
of the terms of the original capital securities. If, however, the exchange of
the original capital securities for the exchange capital securities were treated
as an exchange for United States federal income tax purposes, such exchange
should constitute a recapitalization for federal income tax purposes.
Accordingly, the exchange capital securities should have the same issue price as
the original capital securities, and a holder should have the same adjusted tax
basis and holding period in the exchange capital securities as the holder had in
the original capital securities immediately before the exchange.
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U.S. HOLDERS
For purposes of the following discussion, a "U.S. Holder" means:
- a citizen or individual resident of the United States;
- a corporation or partnership created or organized in or under the laws
of the United States or any political subdivision thereof;
- an estate the income of which is includible in its gross income for
U.S. federal income tax purposes without regard to its source; or
- a trust if a court within the United States is able to exercise
primary supervision over its administration and at least one United
States person has the authority to control all substantial decisions
of the trust.
CHARACTERIZATION OF THE TRUST
Before the capital securities were issued, our tax counsel gave an opinion
that:
- under then current law and based on the representations, facts and
assumptions set forth in this prospectus,
- assuming full compliance with the terms of the trust agreement (and
other relevant documents), and
- based on certain assumption and qualifications referred to in the
opinion,
the Trust will be characterized for United States federal income tax purposes as
a grantor trust. Accordingly, for United States federal income tax purposes,
you, as a U.S. Holder, will be considered the owner of an undivided interest in
the junior subordinated debentures owned by the Trust, and you will be required
to include all income or gain recognized for United States federal income tax
purposes with respect to your share of the junior subordinated debentures on
your income tax return.
CHARACTERIZATION OF THE JUNIOR SUBORDINATED DEBENTURES
We have taken the position that, under current law, the junior subordinated
debentures are its debt for United States federal income tax purposes. Arnold &
Porter rendered its opinion that, under then current law, based on the
representations, facts and assumptions set forth in this prospectus and certain
assumptions and qualifications referenced in the opinion, and assuming full
compliance with the terms of the indenture (and other relevant documents), the
junior subordinated debentures will be characterized for United States federal
income tax purposes as indebtedness. CNB, along with the Trust and you (by
acceptance of a beneficial interest in a capital security) agree to treat the
junior subordinated debentures as its debt and the capital securities as
evidence of a beneficial ownership interest in the Trust. We cannot assure you,
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however, that the opinion will not be challenged by the IRS or, if challenged,
that a challenge will not be successful. The remainder of this discussion
assumes that the junior subordinated debentures will be classified as its debt
for United States federal income tax purposes.
INTEREST INCOME AND ORIGINAL ISSUE DISCOUNT
Under the terms of the junior subordinated debentures, CNB has the ability
to defer payments of interest from time to time by extending the interest
payment period for a period not exceeding 20 consecutive quarterly periods, but
not beyond the maturity of the junior subordinated debentures. Treasury
regulations provide that debt instruments like the junior subordinated
debentures will not be considered issued with original issue discount, or OID,
even if their issuer can defer payments of interest if the likelihood of any
deferral is "remote."
We have concluded, and this discussion assumes, that, as of the date the
junior subordinated debentures were issued and as of the date of this
prospectus, the likelihood of CNB deferring payments of interest was and is
"remote" within the meaning of the applicable Treasury regulations. This
conclusion is based in part on the fact that exercising that option would
prevent CNB from declaring dividends on its common stock and would prevent CNB
from making any payments with respect to debt securities that rank equally with
or subordinate to the junior subordinated debentures. Therefore, the junior
subordinated debentures should not be treated as issued with OID by reason of
CNB's deferral option. Rather, you will be taxed on stated interest on the
junior subordinated debentures when it is paid or accrued in accordance with
your method of accounting for income tax purposes. You should note, however,
that no published rulings or any other published authorities of the IRS have
addressed this issue. Accordingly, it is possible that the IRS could take a
position contrary to the interpretation described herein.
If CNB exercises its option to defer payments of interest, the junior
subordinated debentures would be treated as redeemed and reissued for OID
purposes. The sum of the remaining interest payments (and any de minimis OID) on
the junior subordinated debentures would thereafter be treated as OID. The OID
would accrue, and be includible in your taxable income (regardless of your
method of accounting for income tax purposes) over the remaining term of the
junior subordinated debentures (including any period of interest deferral),
without regard to the timing of payments under the junior subordinated
debentures. The accrual of OID on the junior subordinated debentures would be
determined by treating the reissued junior subordinated debentures as if they
had a fixed interest rate equal to their variable rate on the date they are
reissued and an issue price equal to their adjusted issue price on that date.
The amount of OID in each period would first be calculated on an economic
accrual basis based on the fixed interest rate. The OID accrual would be
adjusted (up or down) based on the actual accrual of interest on the junior
subordinated debentures during each period. Subsequent distributions of interest
on the junior subordinated debentures generally would not be taxable. The amount
of OID that would accrue in any period would generally equal the amount of
interest that accrued on the junior subordinated debentures in that period at
the stated interest rate. Consequently, during any period of interest deferral,
you will include OID in gross income in advance of the receipt of cash, and if
you dispose of a capital security prior to the record date for payment of
distributions on the junior subordinated debentures following that period, you
will be subject to
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income tax on OID accrued through the date of disposition (and not previously
included in income), but you will not receive cash from the Trust with respect
to the OID.
If the possibility of CNB's exercising its option to defer payments of
interest is not remote, the junior subordinated debentures would be treated as
initially issued with OID in an amount equal to the aggregate stated interest
(plus any de minimis OID) over the term of the junior subordinated debentures.
You would include that OID in your taxable income, over the term of the junior
subordinated debentures, as described above.
CHARACTERIZATION OF INCOME
Because the income underlying the capital securities will not be
characterized as dividends for income tax purposes, if you are a corporate
holder of the capital securities you will not be entitled to a dividends
received deduction for any income you recognize with respect to the capital
securities.
MARKET DISCOUNT AND BOND PREMIUM
Under certain circumstances, you may be considered to have acquired your
undivided interests in the junior subordinated debentures with market discount
or acquisition premium (as each phrase is defined for United States federal
income tax purposes).
RECEIPT OF JUNIOR SUBORDINATED DEBENTURES OR CASH UPON LIQUIDATION OF THE TRUST
Under certain circumstances described above in "Description of Exchange
Securities--Capital Securities--Liquidation of Trust and Distribution of Junior
Subordinated Debentures," the Trust may distribute the junior subordinated
debentures to you in exchange for your capital securities and in liquidation of
the Trust. Except as discussed below, such a distribution would not be a taxable
event for United States federal income tax purposes, and you would have an
aggregate adjusted basis in the junior subordinated debentures you receive for
United States federal income tax purposes equal to your aggregate adjusted basis
in your capital securities. For United States federal income tax purposes, your
holding period in the junior subordinated debentures you receive in such a
liquidation of the Trust would include the period during which you held the
capital securities. If, however, the distribution is made at a time when Trust
is treated as an association taxable as a corporation, the distribution would
likely constitute a taxable event to you for United States federal income tax
purposes.
Under certain circumstances described herein in "Description of Exchange
Securities--Junior Subordinated Debentures - Special Event Prepayment", CNB may
redeem junior subordinated debentures for cash and distribute the proceeds of
the redemption to you in redemption of your capital securities. The redemption
would be taxable for United States federal income tax purposes, and you would
recognize gain or loss as if you had sold the capital securities for cash.
Please refer to "Sales of Capital Securities" below.
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SALES OF CAPITAL SECURITIES
If you sell capital securities, you will recognize gain or loss equal to
the difference between your adjusted basis in the capital securities and the
amount realized on the sale of such capital securities. Your adjusted basis in
the capital securities generally will be the initial purchase price, increased
by OID previously included (or currently includible) in your gross income to the
date of disposition, and decreased by payments received on the capital
securities (other than any interest received with respect to the period prior to
the effective date CNB first exercise its option to defer payments of interest).
Any gain or loss generally will be capital gain or loss, and generally will be a
long-term capital gain or loss if you have held the capital securities for more
than one year prior to the date of disposition.
If you dispose of your capital securities between record dates for payments
of distributions thereon, you will be required to include accrued but unpaid
interest (or OID) on the junior subordinated debentures through the date of
disposition in your taxable income for United States federal income tax purposes
(notwithstanding that you may receive a separate payment from the purchaser with
respect to accrued interest). You may deduct that amount from the sales proceeds
received (including the separate payment, if any, with respect to accrued
interest) for the capital securities (or as to OID only, to add such amount to
your adjusted tax basis in the capital securities). To the extent the selling
price is less than your adjusted tax basis (which will include accrued but
unpaid OID if any), you will recognize a capital loss. Subject to certain
limited exceptions, capital losses cannot be applied to offset ordinary income
for United States federal income tax purposes.
NON U.S. HOLDERS
The following discussion applies to you if you are not a U.S. Holder as
described above.
Payments to you, as a non-U.S. Holder, on a capital security generally will
not be subject to withholding of income tax, provided that:
- you did not (directly or indirectly, actually or constructively) own
10% or more of the total combined voting power of all classes of its
stock entitled to vote;
- you are not a controlled foreign corporation that is related to CNB
through stock ownership; and
- either you certify to the Trust or its agent under penalties of
perjury, that you are not a U.S. Holder and provide your name and
address, or a securities clearing organization, bank or other
financial institution that holds customers' securities in the ordinary
course of its trade or business, and holds the capital security in
such capacity, certifies to the Trust or its agent, under penalties of
perjury, that it requires and has received such a statement from you
or another financial institution between it and you in the chain of
ownership, and furnishes the Trust or its agent with a copy of the
statement.
85
<PAGE> 87
It is possible that changes in the law affecting the income tax
consequences of the junior subordinated debentures could adversely affect CNB's
ability to deduct interest payable on the junior subordinated debentures. Those
changes could also cause the junior subordinated debentures to be classified as
CNB's equity (rather than its debt) for United States federal income tax
purposes. This might cause the income derived from the junior subordinated
debentures to be characterized as dividends, generally subject to a 30% income
tax (on a withholding basis) when paid to you if you are not a U.S. Holder,
rather than as interest which, as discussed above generally is exempt from
income tax in the hands of a person who is not a U.S. Holder.
You, as a non-U.S. Holder, will generally not be subject to withholding of
income tax on any gain realized upon the sale or other disposition of a capital
security.
If you hold the capital securities in connection with the active conduct of
a United States trade or business, you will be subject to income tax on all
income and gains recognized with respect to your proportionate share of the
junior subordinated debentures.
INFORMATION REPORTING
In general, information reporting requirements will apply to payments made
on, and proceeds from the sale of, the capital securities held by a noncorporate
U.S. Holder within the United States. In addition, payments made on, and
payments of the proceeds from the sale of, the capital securities to or through
the United States office of a broker are subject to information reporting unless
you certify as to your non-U.S. Holder status or otherwise establish an
exemption from information reporting and backup withholding. Please refer to
"Backup Withholding." Taxable income on the capital securities for a calendar
year should be reported to U.S. Holders on the appropriate forms by the
following January 31st.
BACKUP WITHHOLDING
Payments made on, and proceeds from the sale of, the capital securities may
be subject to a "backup" withholding tax of 31% unless you comply with certain
identification or exemption requirements. Any amounts so withheld will be
allowed as a credit against your income tax liability, or refunded, provided the
required information is provided to the IRS.
THE PRECEDING DISCUSSION IS ONLY A SUMMARY AND DOES NOT ADDRESS THE
CONSEQUENCES TO PARTICULAR PERSON OF PARTICIPATING IN THE EXCHANGE OFFER AND OF
THE OWNERSHIP AND DISPOSITION OF THE CAPITAL SECURITIES. POTENTIAL PURCHASERS OF
THE CAPITAL SECURITIES ARE URGED TO CONTACT THEIR OWN TAX ADVISORS TO DETERMINE
THEIR PARTICULAR TAX CONSEQUENCES.
CERTAIN ERISA CONSIDERATIONS
The Employee Retirement Income Security Act of 1974, as amended ("ERISA")
is a comprehensive federal law that applies to privately sponsored employee
benefit plans. Among ERISA's purposes is to protect the interests of
participants in employee benefit plans subject to ERISA ("Plans") by mandating
standards of conduct, obligations and responsibilities for the
86
<PAGE> 88
people who serve as the fiduciaries of such Plans. In general, under ERISA, a
person will be considered to be a fiduciary with respect to a Plan to the extent
that he or she exercises discretionary authority over the management or the
investment of the Plan's assets. Before investing the assets of an employee
benefit plan in capital securities, a fiduciary should consider, among other
things, whether the investment satisfies the prudence and diversification
requirements of ERISA, whether the investment, itself, is permitted under the
Plan's governing documents and ERISA's "prohibited transaction" rules.
Section 406 of ERISA and Section 4975 of the Code prohibit Plans, as well
as individual retirement accounts and Keogh plans subject to Section 4975 of the
Code (also "Plans"), from engaging in certain transactions involving "plan
assets" with persons who are "parties-in-interest" under ERISA or "disqualified
persons" under the Code with respect to the Plan ("Parties-in-Interest").
Violation of the "prohibited transaction" rules may result in the imposition of
an excise tax or other liabilities on "Parties-in-Interest" unless exemptive
relief is available under a statutory or administrative exemption. Employee
benefit plans that are governmental plans (as defined in Section 3(32) of
ERISA), certain church plans (as defined in Section 3(33) of ERISA) and foreign
plans (as described in Section 4(b)(4) of ERISA) are not subject to the
requirements of ERISA or Section 4975 of the Code; however, governmental plans
may be subject to similar provisions under applicable state laws.
The U.S. Department of Labor has issued regulations governing what
constitutes "plan assets" under ERISA (the "Plan Asset Regulations"). The Plan
Asset Regulations provide that, as a general rule, the underlying assets and
properties of corporations, partnerships, trusts and certain other entities in
which a Plan makes an equity investment will be deemed, for purposes of ERISA,
to be assets of the investing Plan, unless certain exceptions apply. As a
result, under these Regulations, the assets of the Trust will be deemed to be
the assets of the investing Plans for purposes of ERISA and Section 4975 of the
Code if the capital securities constitute an equity interest in the Trust under
the Plan Asset Regulations and no exception under the Plan Asset Regulations
applies. An "equity interest" is defined in the Plan Asset Regulations to
specifically include a beneficial interest in a trust.
Pursuant to an exception contained in the Plan Asset Regulations, the
assets of the Trust will not be deemed to be "plan assets" of investing Plans
if, immediately after the most recent acquisition of an equity interest in the
Trust, less than 25% of the value of each class of equity interests in the Trust
is held by Plans, certain other employee benefit plans and entities holding
assets deemed to be "plan assets" ("Benefit Plan Investors"). No assurance can
be given that the value of the exchange capital securities held by Benefit Plan
Investors will be less than 25% of the total value of such securities at the
completion of the exchange offer or thereafter, and no monitoring or other
measures will be taken with respect to the satisfaction of the conditions of
this exception. Thus, the conditions of the exception may not be satisfied. All
of the common securities are held by CNB.
Under another exception contained in the Plan Asset Regulations, if the
exchange capital securities were to qualify as "publicly offered securities,"
the assets of the Trust would not be deemed to be "plan assets." The exchange
capital securities would qualify as "publicly offered securities" if, among
other things, they are offered pursuant to an effective registration statement,
87
<PAGE> 89
are owned by 100 or more investors independent of the issuer and each other at
the time of the offering, and are subsequently registered under the Exchange
Act. It is expected that the 100 investor requirement will not be satisfied and
that the exchange capital securities will not be registered under the Exchange
Act.
There can be no assurance that any of the exceptions set forth in the Plan
Assets Regulation will apply to the exchange capital securities and, as a
result, an investing Plan's assets could be considered to include an undivided
interest in the junior subordinated debentures held by the Trust. In the event
that assets of the Trust are considered to be assets of an investing Plan, the
property trustee, the Delaware trustee, CNB and/or other persons, in providing
services with respect to the junior subordinated debentures, could be considered
fiduciaries to such Plan and subject to the fiduciary responsibility provisions
of Title I of ERISA. In addition, certain transactions involving the Trust
and/or the capital securities could be deemed to constitute direct or indirect
prohibited transactions under ERISA and Section 4975 of the Code with respect to
a Plan. For example, if CNB is a Party-in-Interest with respect to an investing
Plan (either directly or by reason of its ownership of the Bank), extensions of
credit between CNB and the Trust (as represented by the junior subordinated
debentures and the guarantee) would likely be prohibited by Section 406(a)(1)(B)
of ERISA and Section 4975(c)(1)(B) of the Code.
The DOL has issued five separate prohibited transaction class exemptions
("PTCEs") that may provide exemptive relief to an employee benefit plan for
direct or indirect prohibited transactions that may arise from the purchase or
holding of the capital securities. The available PTCEs include:
- PTCE 96-23 which may be applicable for certain transactions involving
in-house asset managers;
- PTCE 95-60 which may be applicable for certain transactions involving
insurance company general accounts;
- PTCE 91-38 which may be applicable for certain transactions involving
bank collective investment funds;
- PTCE 90-1 which may be applicable for certain transactions involving
insurance company separate accounts; and
- PTCE 84-14 which may be applicable for certain transactions involving
independent qualified asset managers.
Because of ERISA's and the Code's prohibited transaction rules, the capital
securities may not be purchased or held by any Plan, any entity whose underlying
assets include "plan assets" by reason of any Plan's investment in the entity (a
"Plan Asset Entity") or any person investing the "plan assets" of any Plan,
unless such purchase or holding is covered by relief provided under one of the
PTCEs identified above or another applicable exemption. A purchaser or holder of
the capital securities or any interest therein that is a Plan or a Plan Asset
Entity or that is purchasing such securities on behalf of or with "plan assets"
of any Plan will be deemed
88
<PAGE> 90
to have represented by its purchase and holding thereof that: (a) the purchase
and holding of the capital securities is covered by the exemptive relief
provided by PTCE 96-23, 95-60, 91-38, 90-1 or 84-14 or another applicable
exemption; (b) CNB and the administrators are not "fiduciaries" within the
meaning of Section 3(21) of ERISA and the regulations thereunder, with respect
to such person's interest in the capital securities or the junior subordinated
debentures; and (c) in purchasing the capital securities such person approves
the purchase of the junior subordinated debentures and the appointment of the
property trustee and the Delaware trustee. If a Plan or Plan Asset Entity
purchases or holds capital securities and elects to rely on an exemption other
than PTCE 96-23, 95-60, 91-38, 90-1 or 84-14, CNB, together with the Trust, may
require an opinion of legal counsel or other satisfactory evidence that such
exemption is available.
The discussion herein of ERISA is general in nature and is not intended to
be all inclusive. Any fiduciary of a Plan, governmental plan or church plan
considering an investment in the capital securities should consult with its
legal advisors regarding the consequences of such an investment.
PLAN OF DISTRIBUTION
Each broker-dealer that receives exchange capital securities for its own
account in connection with the exchange offer must acknowledge that it will
deliver a prospectus in connection with any resale of such exchange capital
securities. This prospectus, as it may be amended or supplemented from time to
time, may be used by participating broker-dealers during the period referred to
below in connection with resales of exchange capital securities received in
exchange for original capital securities if such original capital securities
were acquired by such participating broker-dealers for their own accounts as a
result of market-making activities or other trading activities. CNB and the
Trust have agreed that this prospectus, as it may be amended or supplemented
from time to time, may be used by a participating broker-dealer in connection
with resales of such exchange capital securities for a period ending 90 days
after the expiration date (subject to extension under certain limited
circumstances described herein) or, if earlier, when all such exchange capital
securities have been disposed of by such participating broker-dealer. However, a
participating broker-dealer who intends to use this prospectus in connection
with the resale of exchange capital securities received in exchange for original
capital securities pursuant to the exchange offer must notify CNB or the Trust,
or cause CNB or the Trust to be notified, on or prior to the expiration date,
that it is a participating broker-dealer. Such notice may be given in the space
provided for that purpose in the letter of transmittal or may be delivered to
the exchange agent at one of the addresses set forth herein under "The Exchange
Offer--Exchange Agent." Please refer to "The Exchange Offer--Resales of Exchange
Capital Securities" for additional information.
CNB or the Trust will not receive any cash proceeds from the issuance of
the exchange capital securities offered hereby, exchange capital securities
received by broker-dealers for their own accounts in connection with the
exchange offer may be sold from time to time in one or more transactions in the
over-the-counter market, in negotiated transactions, through the writing of
options on the exchange capital securities or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or at negotiated prices. Any such resale may be
made directly to purchasers or to or through
89
<PAGE> 91
brokers or dealers who may receive compensation in the form of commissions or
concessions from any such broker-dealer and/or the purchasers of any such
exchange capital securities.
Any broker-dealer that resells exchange capital securities that were
received by it for its own account in connection with the exchange offer and any
broker or dealer that participates in a distribution of such exchange capital
securities may be deemed to be an "underwriter" within the meaning of the
Securities Act, and any profit on any such resale of exchange capital securities
and any commissions or concessions received by any such persons may be deemed to
be underwriting compensation under the Securities Act. The letter of transmittal
states that by acknowledging that it will deliver and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
VALIDITY OF EXCHANGE SECURITIES
Certain matters of Delaware law relating to the validity of the exchange
capital securities and the creation of the Trust will be passed upon on behalf
of the Trust by Richards, Layton & Finger, special Delaware counsel to the Trust
and CNB. The validity of the exchange guarantee and the exchange junior
subordinated debentures will be passed upon for CNB by Arnold & Porter. Certain
matters relating to United States federal income tax considerations will be
passed upon for CNB by Arnold & Porter. Arnold & Porter will rely as to certain
matters of Delaware law on the opinion of Richards, Layton & Finger.
INDEPENDENT AUDITORS
The consolidated financial statements of CNB and subsidiaries as of
December 31, 1998 and 1997, and for the years ended December 31, 1998 and 1997,
included in CNB's Annual Report on Form 10-K for the year ended December 31,
1998, and incorporated by reference in this prospectus, have been audited by
KPMG LLP, independent certified public accountants. Such consolidated financial
statements have been included in reliance upon the report of KPMG LLP.
The consolidated statements of income, changes in stockholders' equity, and
cash flows of CNB and subsidiaries for the year ended December 31, 1996,
included in CNB's Annual Report on Form 10-K for the year ended December 31,
1998, have been audited by PricewaterhouseCoopers, LLP independent certified
public accountants, to the extent and for the periods indicated in their report
thereon. Such consolidated financial statements have been included in reliance
upon the report of PricewaterhouseCoopers, LLP.
90
<PAGE> 92
================================================================================
You should rely only on the information contained in this prospectus or that we
have referred you to. We have not authorized anyone to provide you with
information that is different. The information in this prospectus may to be
accurate beyond the date indicated below, regardless of when this prospectus is
delivered or when the securities described in this prospectus are sold. This
prospectus is not an offer to sell these securities and it is not soliciting an
offer to buy these securities in any state where the offer or sale is not
permitted.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Where You Can Find More Information................ 2
Additional Information We Have Incorporated in the
Prospectus......................................... 3
Forward-looking Statements Relating to Our Future
Performance and Expectations
and that of the Capital Securities............. 3
Summary Information................................ 5
Summary Selected Consolidated Financial Data....... 13
Risk Factors....................................... 14
Accounting Treatment............................... 25
CNBF Capital Trust I............................... 25
The Exchange Offer................................. 27
Description of the Exchange Securities............. 40
Certain Federal Income Tax Considerations.......... 80
Certain ERISA Considerations....................... 86
Plan of Distribution............................... 89
Validity of Exchange Securities.................... 90
Independent Auditors............................... 90
</TABLE>
================================================================================
================================================================================
$18,000,000
CNBF CAPITAL TRUST I
Series B Floating Rate Capital Securities
for any and all of its outstanding
Series A Floating Rate Capital Securities
fully and unconditionally
guaranteed, as described herein, by
CNB FINANCIAL CORP.
------------------------
PROSPECTUS
------------------------
, 1999
================================================================================
<PAGE> 93
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
Under Sections 721 through 725 of the Business Corporation Law of the State
of New York (the "BCL"), CNB has broad powers to indemnify its directors,
officers and other employees. Section 726 of the BCL permits the purchase of
insurance to indemnify a corporation or its officers and directors to the extent
permitted. As permitted by Section 721 of the BCL, CNB's By-laws provide that
CNB shall indemnify its officers and directors, as such, against all judgments,
fines, amounts paid in settlement and reasonable expenses, including attorney's
fees actually and necessarily incurred in connection with the defense or appeal
of any such action or proceeding, and against any other amounts, expenses and
fees similarly incurred. This right of indemnification includes the right of a
director or officer to receive payment from CNB for expenses incurred in
defending or appealing such action or proceeding in advance of its final
disposition upon receipt of an undertaking by or on behalf of such officer or
director to repay such amount if and to the extent that it is ultimately
determined that such officer or director is not entitled to indemnification.
Notwithstanding the preceding, the By-laws provide that CNB will indemnify a
director or officer only upon a finding by the Board of Directors (or the
shareholders, as appropriate) that there has been no judgment or other final
adjudication adverse to the director or officer which establishes that his acts
were committed in bad faith or were the result of active or deliberate
dishonesty and were material to the cause of action so adjudicated, or that he
personally gained in fact a financial profit or the advantage to which he was
not legally entitled. CNB has also entered into indemnity agreements with its
officers and directors. CNB also has purchased directors' and officers'
liability insurance.
Under the trust agreement, CNB has agreed to indemnify each of the trustees
of the Trust, and to hold each trustee harmless against any expenses, judgments,
fines and amounts paid in settlement actually and reasonably incurred by the
trustee in connection with any action arising by reason of the fact that it is
or was a trustee if the trustee acted in good faith. This indemnification of the
trustees generally includes each trustee's costs and expenses of defending
itself against any action in connection with the exercise or performance of any
of its powers or duties under the trust agreement.
Item 21. Exhibits.
The exhibits listed on the Exhibit Index beginning on page II-7 of this
Registration Statement are filed herewith or are incorporated herein by
reference to other filings.
II-1
<PAGE> 94
Item 22. Undertakings
A. Each of the undersigned Registrants hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this
Registration Statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of this
Registration Statement (or the most recent
post-effective amendment thereof) which,
individually or in the aggregate, represent a
fundamental change in the information set forth in
the Registration Statement. Notwithstanding the
foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of
securities offered would not exceed that which was
registered) and any deviation from the low or high
end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price
represent no more than a 20% change in the maximum
aggregate offering price set forth in the
"Calculation of Registration Fee" table in the
effective registration statement; and
(iii) To include any material information with respect to
the plan of distribution not previously disclosed
in the Registration Statement or any material
change to such information in the Registration
Statement.
Provided, however, that paragraphs (i) and (ii) do not apply if the information
required to be included in a post-effective amendment by those paragraphs is
contained in periodic reports filed by the Registrants pursuant to Section 13 or
Section 15(d) of the Securities Exchange Act of 1934, that are incorporated by
reference in the Registration Statement.
(2) That, for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective
amendment 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.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered that
remain unsold at the termination of the offering.
B. Each of the undersigned Registrants hereby undertakes that, for the
purposes of determining any liability under the Securities Act of
1933, each filing of a
II-2
<PAGE> 95
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 this Registration Statement shall be
deemed to be a new registration statement relating to the securities
offered herein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
C. Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the undersigned Registrants pursuant to the
provisions described in Item 20, or otherwise, the Registrants have
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 undersigned Registrants of expenses incurred or paid
by a director, officer or controlling person of the Registrants in
the successful defense of any action, suit or proceeding) is asserted
by such director, the Registrants will, unless in the opinion of
their counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of whether
such indemnification by the Registrants is against public policy as
expressed in the Act and will be governed by the final adjudication
of such issue.
D. Each of the undersigned Registrants hereby undertakes to respond to
requests for information that is incorporated by reference into the
prospectus pursuant to Items 4, 10(b), 11, or 13 of this form, within
one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt
means. This includes information contained in documents filed
subsequent to the effective date of the Registration Statement
through the date of responding to the request.
E. Each of the undersigned Registrants hereby undertakes to supply by
means of a post-effective amendment all information concerning a
transaction, and the company being acquired involved therein, that
was not the subject of and included in the Registration Statement
when it became effective.
II-3
<PAGE> 96
SIGNATURES
Pursuant to the requirements of the Securities Act, CNB Financial Corp. has
duly caused this Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in Canajoharie, New York
on November 24, 1999.
CNB Financial Corp.
By: /s/ Donald L. Brass
--------------------------------
Donald L. Brass, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Act, this Amendment to the
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
November 24, 1999 /s/ Donald L. Brass
--------------------------------
Donald L. Brass
President, Chief Executive Officer and
Director
(Principal Executive Officer)
November 24, 1999 /s/ Peter J. Corso
---------------------------------
Peter J. Corso, Chief Financial Officer
(Principal Accounting and Financial
Officer)
November 24, 1999 /s/ VanNess D. Robinson*
---------------------------------
VanNess D. Robinson
Director
November 24, 1999 /s/ J. Carl Barbic*
---------------------------------
J. Carl Barbic
Director
II-4
<PAGE> 97
November 24, 1999 /s/ David J. Nolan*
---------------------------------
David J. Nolan
Director
November 24, 1999 /s/ Joseph A. Santangelo*
---------------------------------
Joseph A. Santangelo
Director
November 24, 1999 /s/ John P. Woods, Jr*
---------------------------------
John P. Woods, Jr.
Director
*By /s/ Peter J. Corso
---------------------------------
Peter J. Corso
Attorney-in-Fact
II-5
<PAGE> 98
Pursuant to the requirements of the Securities Act, CNBF Capital Trust I
has duly caused this Amendment to the Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in Canajoharie, New
York on the dates indicated.
November 24, 1999 /s/ Donald L. Brass
---------------------------------
Donald L. Brass
Administrator
November 24, 1999 /s/ Peter J. Corso
---------------------------------
Peter J. Corso
Administrator
November 24, 1999 /s/ Stephen E. Souky
---------------------------------
Stephen E. Souky
Administrator
II-6
<PAGE> 99
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description Method of Filing
- ----------- ----------- ----------------
<S> <C> <C>
3.1 Amended and Restated Articles of Incorporated herein by
Incorporation of CNB reference to Exhibit B to the
Registration Statement on
Form S-4 (No. 33-45522) filed
March 4, 1992
3.2 Bylaws of CNB Incorporated herein by
reference to Exhibit C to the
Registration Statement on
Form S-4 (No. 33-45522);
filed March 4, 1992
4.1 Indenture of CNB relating to the Junior Previously Filed
Subordinated Debentures
4.2 Form of Certificate of Exchange Junior Previously Filed
Subordinated Debenture
4.3 Certificate of Trust of CNBF Capital Trust I Previously Filed
4.4 Amended and Restated Trust Agreement of Previously Filed
CNBF Capital Trust I
4.5 Form of Exchange Capital Security Previously Filed
Certificate
4.6 Form of Exchange Guarantee of CNB relating Previously Filed
to the Exchange Capital Securities
4.7 Registration Rights Agreement among CNB, Previously Filed
CNBF Capital Trust I and Ryan, Beck & Co.,
Inc.
5.1 Opinion and consent of Arnold & Porter as Previously Filed
to legality of the Exchange Junior
Subordinated Debentures and the Exchange
Guarantee to be issued by CNB
5.2 Opinion and consent of Richards, Layton & Previously Filed
Finger as to the legality of the Exchange
Capital Securities to be issued by CNBF
Capital Trust I
8 Opinion of Arnold & Porter as to certain Previously Filed
federal income tax matters
23.1 Consent of KPMG LLP Previously Filed
</TABLE>
II-7
<PAGE> 100
<TABLE>
<S> <C> <C>
23.2 Consent of PricewaterhouseCoopers, LLP Previously Filed
23.3 Consent of Arnold & Porter Previously Filed
23.4 Consent of Richards, Layton & Finger Previously Filed
24 Power of Attorney of certain directors of Previously Filed
CNB
25.1 Form T-1 Statement of Eligibility of Previously Filed
Wilmington Trust Company to act as trustee
under the Indenture
25.2 Form T-1 Statement of Eligibility of Previously Filed
Wilmington Trust Company to act as trustee
under the Amended and Restated Trust
Agreement of CNBF Capital Trust I
25.3 Form T-1 Statement of Eligibility of Previously Filed
Wilmington Trust Company under the
Exchange Guarantee for the benefit of the
holders of Exchange Capital Securities of
CNBF Capital Trust I
99.1 Form of Letter of Transmittal Previously Filed
99.2 Form of Notice of Guaranteed Delivery Previously Filed
99.3 Form of Exchange Agent Agreement Previously Filed
</TABLE>
II-8
