As filed with the Securities and Exchange Commission on May 28, 1997
Registration Nos. 333- -01
333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
PFBI CAPITAL TRUST
PREMIER FINANCIAL BANCORP, INC.
(Exact Name of Registrants as Specified in their Charters)
Delaware Requested
Kentucky 6035 61-1206757
- ------------------------------ -------------------------- --------------------
(States or Other Jurisdictions (Primary Standard Industry (I.R.S. Employer
of Incorporation Classification Code Number) Identification Nos.)
or Organization)
120 N. Hamilton Street, Georgetown, Kentucky 40324
(502) 863-7500
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(Address, Including Zip Code, and Telephone Number, Including Area Code,
of Registrants' Principal Executive Offices)
Mr. J. Howell Kelly
President and Chief Executive Officer
Premier Financial Bancorp, Inc.
120 N. Hamilton Street, Georgetown, Kentucky 40324
(502) 863-7500
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(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)
Please send copies of all communications to:
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John J. Spidi, Esq. David W. Harper, Esq. Steven L. Kaplan, Esq.
MALIZIA, SPIDI, SLOANE & FISCH, P.C. 2450 Meidinger Tower ARNOLD & PORTER
1301 K Street, N.W., Suite 700 East Louisville, KY 40202 555 Twelfth Street,
Washington, D.C. 20005 Washington, D.C. 20004
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this registration statement becomes effective.
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If any of the securities being registered on this form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, check the following box [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If the delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box.[ ]
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CALCULATION OF REGISTRATION FEE
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Title of Each Class of Amount to be Proposed Proposed Maximum Amount of
Securities Being Registered Registered Offering Price Aggregate Offering Registration Fee
Price(1)
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_____% Preferred Securities of PFBI Capital
Trust (1) 1,150,000 $25.00 $28,750,000 $8,712.11
_____% Junior Subordinated Debentures of
Premier Financial Bancorp, Inc. (2)
Guarantee of Premier Financial Bancorp,
Inc. of certain obligations under the
Preferred Securities (3)
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(1) Estimated solely for the purpose of calculating the registration fee
exclusive of accrued interest and dividends, if any.
(2) The Junior Subordinated Debentures will be purchased by PFBI Capital Trust
with the proceeds of the sale of the Preferred Securities. Such securities
may later be distributed for no additional consideration to the holders of
the Preferred Securities upon the dissolution of the Trust and the
distribution of its assets.
(3) This Registration Statement is deemed to cover the Guarantee. Pursuant to
Rule 457(n) under the Securities Act, no separate registration fee is
payable for the Guarantee.
The prospectus contained in this Registration Statement will be used in
connection with the offering of the following securities: (1)______% Preferred
Securities of PFBI Capital Trust; (2)______% Junior Subordinated Debentures of
Premier Financial Bancorp, Inc.; and (3) a Guarantee of Premier Financial
Bancorp, Inc. of certain obligations under the Preferred Securities.
The registrants hereby amend this registration statement on such date or
dates as may be necessary to delay its effective date until the registrants
shall file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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SUBJECT TO COMPLETION, DATED MAY ___, 1997
PROSPECTUS
$25,000,000
PFBI Capital Trust
% Preferred Securities
(Liquidation Amount $25 per Preferred Security)
fully and unconditionally guaranteed, as described herein, by
Premier Financial Bancorp, Inc.
The Preferred Securities offered hereby represent preferred undivided
beneficial interests in the assets of PFBI Capital Trust, a statutory business
trust created under the laws of the State of Delaware (the "Issuer Trust").
Premier Financial Bancorp, Inc. (the "Company") will initially be the holder of
all of the beneficial interests represented by common securities of the Issuer
Trust (the "Common Securities" and, together with the Preferred Securities, the
"Trust Securities").
(Continued on next page)
SEE "RISK FACTORS" BEGINNING ON PAGE ____ HEREOF FOR CERTAIN INFORMATION
RELEVANT TO AN INVESTMENT IN THE PREFERRED SECURITIES.
THE SECURITIES OFFERED HEREBY ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF A
BANK AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY
OTHER INSURER OR GOVERNMENT AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
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Underwriting Proceeds to
Price to Public(1) Discount (2) Issuer Trust(3)(4)
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Per Preferred Security................... $25.00 (4) $25.00
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Total(5)................................. $25,000,000 (4) $25,000,000
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(1) Plus accrued Distributions, if any, from , 1997.
(2) The Company and the Issuer Trust have each agreed to indemnify the
Underwriters against certain liabilities under the Securities Act of 1933.
See "Underwriting."
(3) Before deduction of expenses payable by the Company estimated at $ .
(4) In view of the fact that the proceeds of the sale of the Preferred
Securities will be used to purchase the Junior Subordinated Debentures, the
Company has agreed to pay to the Underwriters, as compensation for
arranging the investment therein of such proceeds, $ per Preferred Security
(or $ in the aggregate). See "Underwriting."
(5) The Company has granted the Underwriters an option, exercisable within 30
days after the date of this Prospectus, to purchase up to an additional
$3,750,000 aggregate liquidation amount of the Preferred Securities on the
same terms as set forth above, solely to cover over-allotments, if any. If
such over-allotment option is exercised in full, the total Price to Public
and Proceeds to Issuer Trust will be $28,750,000 and $28,750,000,
respectively. See "Underwriting."
The Preferred Securities are offered by the Underwriters subject to
receipt and acceptance by them, prior sale and the Underwriters' right to reject
any order in whole or in part and to withdraw, cancel or modify the offer
without notice. It is expected that delivery of the Preferred Securities will be
made in book-entry form through the book-entry facilities of The Depository
Trust Company on or about , 1997, against payment therefor in immediately
available funds.
ADVEST, INC.
The date of this Prospectus is , 1997
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This Prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sales of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of such State.
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(cover page continued)
The Issuer Trust exists for the sole purpose of issuing the Trust Securities
and investing the proceeds thereof in % Junior Subordinated Deferrable
Interest Debentures (the "Junior Subordinated Debentures," and together
with
the Trust Securities, the "Securities") to be issued by the Company. The Junior
Subordinated Debentures will mature on , 2027 (the "Stated Maturity"). The
Preferred Securities will have a preference under certain circumstances over the
Common Securities with respect to cash distributions and amounts payable on
liquidation, redemption or otherwise. See "Description of Preferred Securities
- -- Subordination of Common Securities."
The Preferred Securities will be represented by one or more global
securities registered in the name of a nominee of The Depository Trust Company,
as depositary ("DTC"). Beneficial interests in the global securities will be
shown on, and transfer thereof will be effected only through, records maintained
by DTC and its participants. Except as described under "Description of Preferred
Securities," Preferred Securities in definitive form will not be issued and
owners of beneficial interests in the global securities will not be considered
holders of the Preferred Securities. Application has been made to include the
Preferred Securities in Nasdaq's National Market. Settlement for the Preferred
Securities will be made in immediately available funds. The Preferred Securities
will trade in DTC's Same-Day Funds Settlement System, and secondary market
trading activity for the Preferred Securities will therefore settle in
immediately available funds.
Holders of the Preferred Securities will be entitled to receive
preferential cumulative cash distributions accumulating from , 1997, and payable
quarterly in arrears on March 31, June 30, September 30 and December 31 of each
year commencing , 1997, at the annual rate of % of the Liquidation Amount of $25
per Preferred Security ("Distributions"). The Company has the right to defer
payment of interest on the Junior Subordinated Debentures at any time or from
time to time for a period not exceeding 20 consecutive quarterly periods with
respect to each deferral period (each, an "Extension Period"), provided that no
Extension Period may extend beyond the Stated Maturity of the Junior
Subordinated Debentures. No interest shall be due and payable during any
Extension Period, except at the end thereof. Upon the termination of any such
Extension Period and the payment of all amounts then due, the Company may elect
to begin a new Extension Period subject to the requirements set forth herein. If
interest payments on the Junior Subordinated Debentures are so deferred,
Distributions on the Preferred Securities will also be deferred and the Company
will not be permitted, subject to certain exceptions described herein, to
declare or pay any cash distributions with respect to the Company's capital
stock or with respect to debt securities of the Company that rank pari passu in
all respects with or junior to the Junior Subordinated Debentures. During an
Extension Period, interest on the Junior Subordinated Debentures will continue
to accrue (and the amount of Distributions to which holders of the Preferred
Securities are entitled will accumulate) at the rate of % per annum, compounded
quarterly, and holders of Preferred Securities will be required to accrue
interest income for United States federal income tax purposes. See "Description
of Junior Subordinated Debentures -- Option to Extend Interest Payment Period"
and "Certain Federal Income Tax Consequences -- Interest Income and Original
Issue Discount."
The Company has, through the Guarantee, the Trust Agreement, the Junior
Subordinated Debentures and the Junior Subordinated Indenture (each as defined
herein), taken together, fully, irrevocably and unconditionally guaranteed all
the Issuer Trust's obligations under the Preferred Securities as described
below. See "Relationship Among the Preferred Securities, the Junior Subordinated
Debentures and the Guarantee -- Full and Unconditional Guarantee." The Guarantee
of the Company guarantees the payment of Distributions and payments on
liquidation or redemption of the Preferred Securities, but only in each case to
the extent of funds held by the Issuer Trust, as described herein (the
"Guarantee"). See "Description of Guarantee." If the Company does not make
payments on the Junior Subordinated Debentures held by the Issuer Trust, the
Issuer Trust may have insufficient funds to pay Distributions on the Preferred
Securities. The Guarantee does not cover payment of Distributions when the
Issuer Trust does not have sufficient funds to pay such Distributions. In such
event, a holder of Preferred Securities may institute a legal proceeding
directly against the Company to enforce payment of such Distributions to such
holder. See "Description of Junior Subordinated Debentures -- Enforcement of
Certain Rights by Holders of Preferred Securities." The obligations of the
Company under the Guarantee and the Preferred Securities are subordinate and
2
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junior in right of payment to all Senior Indebtedness (as defined in
"Description of Junior Subordinated Debentures -- Subordination") of the
Company.
The Preferred Securities are subject to mandatory redemption (i) in
whole, but not in part, upon repayment of the Junior Subordinated Debentures at
Stated Maturity or, at the option of the Company, their earlier redemption in
whole upon the occurrence of a Tax Event, an Investment Company Event or a
Capital Treatment Event (each as defined herein) and (ii) in whole or in part at
any time on or after , 2002 contemporaneously with the optional redemption by
the Company of the Junior Subordinated Debentures in whole or in part. The
Junior ly Subordinated Debentures are redeemable prior to maturity at the option
of the Company (i) on or after , 2002, in whole at any time or in part from time
to time, or (ii) in whole, but not in part, at any time within 90 days ,
following the occurrence and continuation of a Tax Event, Investment Company
Event or Capital Treatment Event, , in each case at a redemption price set forth
herein, which includes the accrued and unpaid interest on the Junior ,
Subordinated Debentures so redeemed to the date fixed for redemption. The
ability of the Company to exercise its rights to redeem the Junior Subordinated
Debentures or to cause the redemption of the Preferred Securities prior to the
Stated Maturity may be subject to prior regulatory approval by the Board of
Governors of the Federal Reserve System (the "Federal Reserve"), if then
required under applicable Federal Reserve capital guidelines or policies. See
"Description of Junior Subordinated Debentures -- Redemption" and "Description
of Preferred Securities -- Liquidation Distribution Upon Dissolution."
The holders of the outstanding Common Securities have the right at any
time to dissolve the Issuer Trust and, after satisfaction of liabilities to
creditors of the Issuer Trust as provided by applicable law, to cause the Junior
Subordinated Debentures to be distributed to the holders of the Preferred
Securities and Common Securities in liquidation of the Issuer Trust. The ability
of the Company, as holder of the Common Securities, to dissolve the Issuer Trust
may be subject to prior regulatory approval of the Federal Reserve, if then
required under applicable Federal Reserve capital guidelines or policies. See
"Description of Preferred Securities -- Liquidation Distribution Upon
Dissolution."
In the event of the dissolution of the Issuer Trust, after satisfaction
of liabilities to creditors of the Issuer Trust as provided by applicable law,
the holders of the Preferred Securities will be entitled to receive a
Liquidation Amount of $25 per Preferred Security plus accumulated and unpaid
Distributions thereon to the date of payment, subject to certain exceptions,
which may be in the form of a distribution of such amount in Junior Subordinated
Debentures. See "Description of Preferred Securities -- Liquidation Distribution
Upon Dissolution."
The Junior Subordinated Debentures are unsecured and subordinated to all
Senior Indebtedness of the Company. See "Description of Junior Subordinated
Debentures -- Subordination."
Prospective purchasers must carefully consider the information set forth in
"Certain ERISA Considerations."
THE JUNIOR SUBORDINATED DEBENTURES ARE DIRECT AND UNSECURED OBLIGATIONS OF
THE COMPANY, DO NOT EVIDENCE DEPOSITS AND ARE NOT INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION OR ANY OTHER INSURER OR GOVERNMENT AGENCY.
3
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MAP
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN
TRANSACTIONS THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE
PREFERRED SECURITIES OFFERED HEREBY, INCLUDING OVER-ALLOTING SHARES OF THE
PREFERRED SECURITIES AND BIDDING FOR AND PURCHASING SUCH SHARES AT A LEVEL ABOVE
THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. FOR A DESCRIPTION OF
THESE ACTIVITIES, SEE "UNDERWRITING." SUCH STABILIZING TRANSACTIONS, IF
COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
4
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SUMMARY
The following summary is qualified in its entirety by the more detailed
information and consolidated financial statements and notes thereto appearing
elsewhere in this Prospectus. Unless otherwise indicated, all information in
this Prospectus is based on the assumption that the Underwriters (as defined
herein) will not exercise their over-allotment option.
THE COMPANY
The Company, a Kentucky corporation, is a bank holding company
headquartered in Georgetown, Kentucky with five banking subsidiaries (the
"Banks"). At March 31, 1997, the Company had total assets of $298.1 million,
total deposits of $239.9 million and total stockholders' equity of $40.4
million. The Banks' deposits are federally insured by the Federal Deposit
Insurance Corporation ("FDIC") through the Bank Insurance Fund ("BIF"). The
Company's principal business is to serve as a holding company for the Banks.
The Company was incorporated in 1991. The Company was organized in
connection with the reorganization of Citizens Deposit Bank and Trust Company,
Vanceburg, Kentucky (the "Vanceburg Bank") into a holding company structure. The
Vanceburg Bank is a banking corporation organized under the laws of Kentucky,
resulting from the merger in 1930 of Deposit Bank, chartered in 1894, with
Citizens Bank, chartered in 1903. In 1992, the Company acquired Bank of
Germantown, Germantown, Kentucky (the "Germantown Bank"), a banking corporation
organized under the laws of Kentucky in 1900. The Company in March, 1995
acquired Georgetown Bancorp, Inc. and its subsidiary, the Georgetown Trust
Company, Georgetown, Kentucky (the "Georgetown Bank"), a banking corporation
organized under the laws of Kentucky in 1988, and in October, 1995, Citizens
Bank, Sharpsburg, Kentucky (the "Sharpsburg Bank"), a banking corporation
organized under the laws of Kentucky in 1903. On July 1, 1996, the Company
acquired Farmers Deposit Bancorp, Eminence, Kentucky ("Eminence") and
indirectly, its commercial bank subsidiary, Farmers Deposit Bank (the "Eminence
Bank"). On May 28, 1997, the Company entered into an Agreement and Plan of
Merger ("Sabina Merger Agreement") with the Sabina Bank, an Ohio banking
corporation ("Sabina"). Pursuant to the Sabina Merger Agreement, Sabina will be
acquired by the Company in exchange for stock of the Company (the "Sabina
Acquisition"). Upon consummation of the Sabina Acquisition, Sabina will become a
wholly owned subsidiary of the Company. The Sabina Acquisition is conditioned
upon a representation from the accountants that it will qualify for pooling of
interests accounting treatment.
The Company focuses on providing quality community banking services to
individuals and small-to-medium sized businesses primarily in non-urban areas.
By seeking to provide such banking services in non-urban areas, the Company
believes that it can minimize the competitive effect of larger financial
institutions that typically are focused on large metropolitan areas. Through its
experience in acquiring its Banks, the Company has successfully developed and
implemented a strategy of combining community banks that retain their commitment
to local orientation and direction, while having the benefit of the Company's
capital for growth and staff assistance to promote safety, soundness and
regulatory compliance. The Banks are managed on a decentralized basis, offering
customers direct access to the Banks' presidents and other officers in an
environment conducive to friendly, informed and courteous service. This
decentralized approach also enables each Bank to offer local and timely
decision-making, that provides flexibility with respect to operating procedures
and credit policies, limited only by a framework of centralized risk controls
provided by the Company to promote prudent banking practices. Each Bank
maintains its community orientation by, among other things, having selected
members of its community as members of its board of directors, who assist in the
introduction of prospective customers to the Bank and in the development or
modification of products and services to meet customer needs. As a result of
developing sound banking relationships with their customers, through convenient
and personalized service, the Banks have been successful in funding loan demand
through growth in core deposits.
As of March 31, 1997, the Banks provided community banking services
through 12 locations in Central Kentucky. The Banks offer a wide variety of
consumer and commercial lending and deposit services. The loans offered by the
Banks include commercial, real estate, agricultural and consumer loans. The
Banks' range of deposit services include checking accounts, NOW accounts,
savings accounts, money market accounts, club accounts, individual retirement
accounts, certificates of deposit and overdraft protection. The Georgetown Bank,
the
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Eminence Bank, and the Vanceburg Bank also offer limited trust services and act
as executor,administrator, trustee and in various other fiduciary capacities.
Through Premier Data Services, Inc., the Company's data processing subsidiary,
the Company currently provides centralized data processing services to three of
the Banks as well as two non-affiliated banks.
The executive office of the Company is located at 120 N. Hamilton
Street, Georgetown, Kentucky 40324, and its telephone number is (502) 863-7500.
Financial Summary
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At or For the
Three Months
Ended
March 31, At or for the Years Ended December 31,
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1997 1996 1995 1994 1993 1992
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(Dollars in thousands)
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Net income........................... $ 1,158 $ 3,436 $ 2,156 $ 1,513 $ 1,351 $ 729
Total assets......................... 298,059 292,565 155,475 115,443 108,774 100,364
Net loans ........................... 223,092 217,587 113,064 81,276 74,450 65,159
Stockholders' equity................. 40,409 39,863 11,215 9,453 8,868 7,617
Return on average assets............. 1.59% 1.53% 1.69% 1.36% 1.23% 0.88%
Return on average equity............. 11.6% 12.2% 20.5% 16.4% 15.4% 10.0%
Net interest margin.................. 5.24% 5.32% 5.23% 5.41% 4.92% 5.27%
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PFBI CAPITAL TRUST
The Issuer Trust is a statutory business trust formed under Delaware law
pursuant to (i) a trust agreement, dated as of May 27, 1997, executed by the
Company, as Depositor, and Bankers Trust (Delaware), as Delaware Trustee, and
(ii) the filing of a Certificate of Trust with the Delaware Secretary of State
on May 27, 1997. Such initial trust agreement will be amended and restated in
its entirety (as so amended and restated, the "Trust Agreement"), as of the date
the Preferred Securities are initially issued. Two individuals will be selected
by the holder of the Common Securities to act as administrators with respect to
the Issuer Trust (the "Administrators"). The Company, while holder of the Common
Securities, intends to select two individuals who are employees or officers of
or affiliated with the Company to serve as Administrators. The Issuer Trust's
business and affairs are conducted by its Property Trustee, Delaware Trustee,
and two Administrators. The Issuer Trust exists for the exclusive purposes of
(i) issuing and selling the Preferred Securities and Common Securities, (ii)
using the proceeds from the sale of Preferred Securities and Common Securities
to acquire the Junior Subordinated Debentures issued by the Company and (iii)
engaging in only those other activities necessary, advisable or incidental
thereto (such as registering the transfer of the Preferred Securities).
Accordingly, the Junior Subordinated Debentures will be the sole assets of the
Issuer Trust and payments under the Junior Subordinated Debentures will be the
sole revenue of the Issuer Trust. All of the Common Securities will be owned by
the Company. The Common Securities will rank pari passu, and payments will be
made thereon pro rata, with the Preferred Securities, except that upon the
occurrence and during the continuance of an Event of Default under the Trust
Agreement resulting from an Event of Default under the Indenture, the rights of
the Company as holder of the Common Securities to payment in respect of
Distributions and payments upon liquidation, redemption or otherwise will be
subordinated to the rights of the holders of the Preferred Securities. The
Company will acquire Common Securities representing an aggregate liquidation
amount equal to 3% of the total capital of the Issuer Trust. The Issuer Trust
has a term of 31 years, but may terminate earlier as provided in the Trust
Agreement. The principal executive office of the Issuer Trust is 120 N. Hamilton
Street, Georgetown, Kentucky 40324, and its telephone number is (502) 863-7500.
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THE OFFERING
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Securities Offered............................ The $25,000,000 aggregate liquidation amount of Preferred
Securities offered hereby represents preferred undivided
beneficial interests in the Issuer Trust's assets, which will
consist solely of the Junior Subordinated Debentures. The Trust
has granted the Underwriters an option, exercisable within 30
days after the date of this Prospectus, to purchase up to an
additional $3,750,000 aggregate liquidation amount of Preferred
Securities at the offering price, solely to cover over-allotments,
if any.
Offering Price................................ $25 per Preferred Security (Liquidation Amount $25), plus
accumulated Distributions, if any, from , 1997.
The distributions payable on each Preferred Security will be
fixed at a rate per annum of % of the stated liquidation
Distributions................................. amount per Preferred Security, will be cumulative, will accrue
from , 1997, the date of issuance of the Preferred
Securities, and will be payable quarterly in arrears on March
31, June 30, September 30 and December 31 of each year,
commencing , 1997. See "Description of Preferred
Securities -- Distributions."
Junior Subordinated Debentures................ The Issuer Trust will invest the proceeds from the issuance of
the Preferred Securities and Common Securities in an equivalent
amount of % Junior Subordinated Debentures of the
Company. The Junior Subordinated Debentures will mature on
, 2027. The Junior Subordinated Debentures will
rank subordinate and junior in right of payment to all Senior
Indebtedness of the Company. In addition, the Company's
obligations under the Junior Subordinated Debentures will be
structurally subordinated to all existing and future
liabilities and obligations of its subsidiaries.
Guarantee..................................... Under the terms of the Guarantee, the Company has guaranteed
the payment of Distributions and payments on liquidation or
redemption of the Preferred Securities, but only in each case to
the extent of funds held by the Issuer Trust described herein.
The Company and the Issuer Trust believe that the obligations of
the Company under the Guarantee, the Trust Agreement, the
Junior Subordinated Debentures and the Junior Subordinated
Indenture taken together, fully, irrevocably and unconditionally
guarantee all of the Issuer Trust's obligations relating to the
Preferred Securities. The obligations of the Company under the
Guarantee and the Preferred Securities are subordinate and
junior in right of payment to all Senior Indebtedness. See
"Description of Guarantee."
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Right to Defer Interest....................... The Company has the right, at any time, to defer payments of
interest on the Junior Subordinated Debentures for a period not
exceeding 20 consecutive quarters; provided that no Extension
Period may extend beyond the Stated Maturity of the Junior
Subordinated Debentures. As a consequence of the Company's
extension of the interest payment period, quarterly Distributions
on the Preferred Securities will be deferred (though such
Distribution would continue to accrue with interest thereon
compounded quarterly, since interest will continue to accrue and
compound on the Junior Subordinated Debentures during any
such Extension Period). During an Extension Period, the
Company will be prohibited, subject to certain exceptions
described herein, from declaring or paying any cash
distributions with respect to its capital stock or debt securities
that rank pari passu with or junior to the Junior Subordinated
Debentures. Upon the termination of any Extension Period and
the payment of all amounts then due, the Company may
commence a new Extension Period, subject to the foregoing
requirements. See "Description of Junior Subordinated
Debentures -- Option to Extend Interest Payment Period."
Should an Extension Period occur, Preferred Security
holders will continue to include interest income (and de
minimis original issue discount, if any) for United
States federal income tax purposes. See "Certain Federal
Income Tax Consequences -- Interest Income and Original
Issue Discount."
Redemption.................................... The Preferred Securities are subject to mandatory redemption (i)
in whole, but not in part, at the Stated Maturity upon repayment
of the Junior Subordinated Debentures, (ii) in whole, but not in
part, contemporaneously with the optional redemption at any
time by the Company of the Junior Subordinated Debentures
upon the occurrence and continuation of a Tax Event,
Investment Company Event or Capital Treatment Event and (iii)
in whole or in part at any time on or after , 2002,
contemporaneously with the optional redemption by the
Company of the Junior Subordinated Debentures in whole or in
part, in each case at the applicable Redemption Price. See
"Description of Preferred Securities -- Redemption."
Liquidation of the Issuer Trust............... The Company, as holder of the Common Securities, has the
right at any time to dissolve the Issuer Trust and cause the
Junior Subordinated Debentures to be distributed to holders of
Preferred Securities in liquidation of the Issuer Trust, subject to
the Company having received prior approval of the Federal
Reserve to do so if then required under applicable capital
guidelines or policies of the Federal Reserve. See "Description
of Preferred Securities -- Liquidation Distribution Upon
Dissolution."
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Voting Rights................................. Generally, the holders of the Preferred Securities will not have
any voting rights. See "Description of Preferred Securities --
Voting Rights; Amendment of Trust Agreement" and "Risk
Factors Relating to the Offering -- Limited Voting Rights."
Use of Proceeds............................... The proceeds from the sale of the Preferred Securities
offered hereby will be used by the Issuer Trust to purchase
the Junior Subordinated Debentures issued by the Company. The proceeds
received by the Company from the sale of the Junior
Subordinated Debentures will be used for financing growth,
which may include branch acquisitions and/or acquisitions of
other financial institutions and/or financial services companies,
and for general corporate purposes. In addition, a portion of the
proceeds may be contributed through investments in or advances
to the Banks. The Trust Securities will qualify as Tier 1 or core
capital of the Company, subject to the 25% Capital Limitation
(as defined herein), under the risk-based capital guidelines of the
Federal Reserve. The portion of the Trust Securities that
exceeds the 25% Capital Limitation will qualify as Tier 2 or
supplementary capital of the Company. See "Use of Proceeds."
ERISA Considerations.......................... Prospective purchasers should consider the information set forth
under "Certain ERISA Considerations."
Nasdaq National Market Symbol................. Application has been made to have the Preferred Securities
approved for quotation on the Nasdaq National Market under the
symbol "PFBIP".
RISK FACTORS
Prospective investors should carefully consider the matters set forth
under "Risk Factors," beginning on page ____.
</TABLE>
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9
<PAGE>
================================================================================
SELECTED CONSOLIDATED FINANCIAL DATA
The following summary information regarding the Company should be read in
conjunction with the consolidated financial statements of the Company and notes
beginning on page F-1. Consolidated historical financial and other data
regarding the Company at or for the three months ended March 31, 1997 and 1996,
have been prepared by the Company without audit and may not be indicative of
results on an annualized basis or any other period. In the opinion of
management, all adjustments (consisting only of normal recurring accruals) that
are necessary for a fair presentation for such periods or dates have been made.
The consolidated selected financial data presented below has been retroactively
adjusted to reflect all prior stock splits effected in the form of share
dividends.
<TABLE>
<CAPTION>
At or for the Three
Months Ended
March 31, At or for the Years Ended December 31,
-------------------------- ---------------------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
----------- ------------ ---------- ---------- ---------- ----------- -----------
(In thousands except share data and ratios)
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings
Net interest income.............. $ 3,466 $ 1,821 $ 10,837 $ 6,023 $ 5,524 $ 4,938 $ 4,203
Provision for possible
loan losses.................... 184 73 575 86 207 170 325
Non-interest income.............. 559 319 1,484 825 684 733 592
Non-interest expense............. 2,183 1,397 6,793 4,493 4,005 3,640 3,375
-------- ------- ------- -------- ------- ------- -------
Income taxes..................... 500 172 1,517 113 483 510 366
-------- ------- ------- -------- ------- ------- -------
Net income..................... $ 1,158 $ 498 $ 3,436 $ 2,156 $ 1,513 $ 1,351 $ 729
======== ======= ======= ======== ======== ======= =======
Financial Position
Total assets..................... $298,059 $158,137 $292,565 $155,475 $115,443 $108,774 $100,364
Loans, net of unearned income.... 223,092 115,027 217,587 113,064 81,276 74,450 65,159
Allowance for loan losses........ 2,669 1,790 2,523 1,735 886 884 938
Goodwill......................... 5,456 242 5,490 248 - - -
Securities....................... 46,401 28,525 44,363 24,929 19,688 21,864 18,965
Deposits......................... 239,868 138,864 235,574 136,246 102,839 98,846 91,704
Other borrowings................. 15,263 1,399 14,976 1,502 - 119 230
Debt............................. - 5,000 - 5,000 1,500 - -
Stockholders' equity............. 40,409 11,365 39,863 11,215 9,453 8,868 7,617
Share Data
Net income....................... 0.28 0.26 1.05 1.13 0.80 0.72 0.39
Book value....................... 9.60 5.95 9.47 5.87 5.02 4.72 4.05
Cash dividend.................... 0.125 0.125 0.50 0.45 0.36 0.28 0.20
Ratios
Return on average assets......... 1.59% 1.27% 1.53% 1.69% 1.36% 1.23% 0.88%
Return on average equity......... 11.6% 17.7% 12.2% 20.5% 16.4% 15.4% 9.97%
Dividend payout.................. 45.4% 47.9% 52.9% 39.8% 45.0% 38.9% 51.3%
Stockholders' equity to total
assets at period-end........... 13.56% 7.19% 13.63% 7.21% 8.19% 8.15% 7.59%
Average stockholders' equity
to average total assets........ 13.65% 7.20% 12.52% 8.25% 8.27% 8.04% 8.80%
Capital Ratios
Equity to assets................. 13.56% 7.19% 13.63% 7.21% 8.19% 8.15% 7.59%
Tier 1 risk-based capital ratio.. 15.92% 9.67% 15.95% 9.47% 11.49% 10.87% 11.67%
Total risk-based capital ratio... 17.13% 11.22% 17.12% 10.72% 12.52% 11.90% 12.83%
Leverage ratio................... 12.25% 7.06% 12.04% 6.92% 8.42% 7.62% 7.46%
Ratios of Earnings to Fixed
Charges(1)
Excluding interest on
deposits......................
Including interest on deposits...
</TABLE>
- ---------------------
(1) The consolidated ratio of earnings to fixed charges has been computed by
dividing income before income taxes, cumulative effect of changes in
accounting principles and fixed charges by fixed charges. Fixed charges
represent all interest expense (ratios are presented both excluding and
including interest on deposits). There were no amortization of notes and
debentures expense nor any portion of net rental expense which was deemed
to be equivalent to interest on debt. Interest expense (other than on
deposits) includes interest on notes, federal funds purchased and
securities sold under agreements to repurchase, and other funds borrowed.
================================================================================
10
<PAGE>
RISK FACTORS
In addition to the other information in this Prospectus, the following
factors should be considered carefully in evaluating an investment in the
Preferred Securities offered by this Prospectus. Certain statements in this
Prospectus and documents incorporated herein by reference are forward-looking
and are identified by the use of forward-looking words or phrases such as
"intended," "will be positioned," "expects," is or are "expected,"
"anticipates," and "anticipated." These forward-looking statements are based on
the Company's current expectations. To the extent any of the information
contained in this Prospectus constitutes a "forward-looking statement" as
defined in Section 27A(i)(1) of the Securities Act, the risk factors set forth
below are cautionary statements identifying important factors that could cause
actual results to differ materially from those in the forward-looking statement.
RISK FACTORS RELATING TO THE OFFERING
Ranking of Subordinated Obligations Under the Guarantee and the Junior
Subordinated Debentures
The obligations of the Company under the Guarantee issued by the
Company for the benefit of the holders of Preferred Securities and under the
Junior Subordinated Debentures are subordinate and junior in right of payment to
all Senior Indebtedness. None of the Junior Subordinated Indenture, the
Guarantee or the Trust Agreement places any limitation on the amount of secured
or unsecured debt, including Senior Indebtedness, that may be incurred by the
Company. See "Description of Guarantee -- Status of the Guarantee" and
"Description of Junior Subordinated Debentures -- Subordination."
The ability of the Issuer Trust to pay amounts due on the Preferred
Securities is solely dependent upon the Company's making payments on the Junior
Subordinated Debentures as and when required.
Option to Extend Interest Payment Period; Tax Consequences
So long as no Event of Default (as defined in the Junior Subordinated
Indenture) has occurred and is continuing with respect to the Junior
Subordinated Debentures (a "Debenture Event of Default"), the Company has the
right under the Junior Subordinated Indenture to defer the payment of interest
on the Junior Subordinated Debentures at any time or from time to time for a
period not exceeding 20 consecutive quarterly periods with respect to each
Extension Period, provided that no Extension Period may extend beyond the Stated
Maturity of the Junior Subordinated Debentures. See "Description of Junior
Subordinated Debentures -- Debenture Events of Default." As a consequence of any
such deferral, quarterly Distributions on the Preferred Securities by the Issuer
Trust will be deferred during any such Extension Period. Distributions to which
holders of the Preferred Securities are entitled will accumulate additional
Distributions thereon during any Extension Period at the rate of % per annum,
compounded quarterly from the relevant payment date for such Distributions,
computed on the basis of a 360-day year of twelve 30-day months and the actual
days elapsed in a partial month in such period. Additional Distributions payable
for each full Distribution period will be computed by dividing the rate per
annum by four. The term "Distribution" as used herein shall include any such
additional Distributions. During any such Extension Period, the Company may not
(i) declare or pay any dividends or distributions on, or redeem, purchase,
acquire or make a liquidation payment with respect to, any of the Company's
capital stock or (ii) make any payment of principal of or interest or premium,
if any, on or repay, repurchase or redeem any debt securities of the Company
that rank pari passu in all respects with or junior in interest to the Junior
Subordinated Debentures (other than (a) repurchases, redemptions or other
acquisitions of shares of capital stock of the Company in connection with any
employment contract,
11
<PAGE>
benefit plan or other similar arrangement with or for the benefit of any one or
more employees, officers, directors or consultants, in connection with a
dividend reinvestment or stockholder stock purchase plan or in connection with
the issuance of capital stock of the Company (or securities convertible into or
exercisable for such capital stock) as consideration in an acquisition
transaction entered into prior to the applicable Extension Period, (b) as a
result of an exchange or conversion of any class or series of the Company's
capital stock (or any capital stock of a subsidiary of the Company) for any
class or series of the Company's capital stock or of any class or series of the
Company's indebtedness for any class or series of the Company's capital stock,
(c) the purchase of fractional interests in shares of the Company's capital
stock pursuant to the conversion or exchange provisions of such capital stock or
the security being converted or exchanged, (d) any declaration of a dividend in
connection with any stockholder's rights plan, or the issuance of rights, stock
or other property under any stockholder's rights plan, or the redemption or
repurchase of rights pursuant thereto, or (e) any dividend in the form of stock,
warrants, options or other rights where the dividend stock or the stock issuable
upon exercise of such warrants, options or other rights is the same stock as
that on which the dividend is being paid or ranks pari passu with or junior to
such stock). Prior to the termination of any such Extension Period, the Company
may further defer the payment of interest, provided that no Extension Period may
exceed 20 consecutive quarterly periods or extend beyond the Stated Maturity of
the Junior Subordinated Debentures. Upon the termination of any Extension Period
and the payment of all interest then accrued and unpaid (together with interest
thereon at the annual rate of %, compounded quarterly, to the extent permitted
by applicable law), the Company may elect to begin a new Extension Period
subject to the above conditions. No interest shall be due and payable during an
Extension Period, except at the end thereof. The Company must give the Issuer
Trustees notice of its election to begin an Extension Period at least one
Business Day prior to the earlier of (i) the date the Distributions on the
Preferred Securities would have been payable but for the election to begin such
Extension Period and (ii) the date the Property Trustee is required to give
notice to holders of the Preferred Securities of the record date or the date
such Distributions are payable, but in any event not less than one Business Day
prior to such record date. The Property Trustee will give notice of the
Company's election to begin a new Extension Period to the holders of the
Preferred Securities. Subject to the foregoing, there is no limitation on the
number of times that the Company may elect to begin an Extension Period. See
"Description of Preferred Securities -- Distributions" and "Description of
Junior Subordinated Debentures -- Option to Extend Interest Payment Period."
Should an Extension Period occur, a holder of Preferred Securities will
continue to accrue income (in the form of original issue discount ("OID")) for
United States federal income tax purposes in respect of its pro rata share of
the Junior Subordinated Debentures held by the Issuer Trust, which will include
a holder's pro rata share of both the stated interest and de minimis OID, if
any, on the Junior Subordinated Debentures. As a result, a holder of Preferred
Securities will include such OID in gross income for United States federal
income tax purposes in advance of the receipt of cash, and will not receive the
cash related to such income from the Issuer Trust if the holder disposes of the
Preferred Securities prior to the record date for the payment of Distributions.
See "Certain Federal Income Tax Consequences -- Interest Income and Original
Issue Discount" and "-- Sales of Preferred Securities."
The Company has no current intention of exercising its right to defer
payments of interest by extending the interest payment period on the Junior
Subordinated Debentures. However, should the Company elect to exercise such
right in the future, the market price of the Preferred Securities is likely to
be affected. A holder that disposes of his, her or its Preferred Securities
during an Extension Period, therefore, might not receive the same return on his,
her or its investment as a holder that continues to hold its Preferred
Securities. In addition, as a result of the existence of the Company's right to
defer
12
<PAGE>
interest payments, the market price of the Preferred Securities (which represent
preferred undivided beneficial interests in the assets of the Issuer Trust) may
be more volatile than the market prices of other securities on which original
issue discount or interest accrues that are not subject to such deferrals.
Tax Event, Investment Company Event or Capital Treatment Event Redemption
Upon the occurrence and during the continuation of a Tax Event,
Investment Company Event or Capital Treatment Event, the Company has the right
to redeem the Junior Subordinated Debentures in whole, but not in part, at any
time within 90 days following the occurrence of such Tax Event, Investment
Company Event or Capital Treatment Event and thereby cause a mandatory
redemption of the Preferred Securities. Any such redemption shall be at a price
equal to the liquidation amount of the Preferred Securities, together with
accumulated Distributions to but excluding the date fixed for redemption. The
ability of the Company to exercise its rights to redeem the Junior Subordinated
Debentures prior to the stated maturity may be subject to prior regulatory
approval by the Federal Reserve, if then required under applicable Federal
Reserve capital guidelines or policies. See "Description of Junior Subordinated
Debentures -- Redemption" and "Description of Preferred Securities --
Liquidation Distribution Upon Dissolution."
A "Tax Event" means the receipt by the Issuer Trust of an opinion of
counsel to the Company experienced in such matters to the effect that, as a
result of any amendment to, or change (including any announced prospective
change) in, the laws (or any regulations thereunder) of the United States or any
political subdivision or taxing authority thereof or therein, or as a result of
any official 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
of issuance of the Preferred Securities, there is more than an insubstantial
risk that (i) the Issuer Trust is, or will be within 90 days of the delivery of
such opinion, subject to United States federal income tax with respect to income
received or accrued on the Junior Subordinated Debentures, (ii) interest payable
by the Company on the Junior Subordinated Debentures is not, or within 90 days
of the delivery of such opinion will not be, deductible by the Company, in whole
or in part, for United States federal income tax purposes or (iii) the Issuer
Trust is, or will be within 90 days of the delivery of the opinion, subject to
more than a de minimis amount of other taxes, duties or other governmental
charges.
See "-- Possible Tax Law Changes Affecting the Preferred Securities"
and "Certain Federal Income Tax Consequences -- Proposed Tax Law Changes" for a
discussion of certain legislative proposals that, if adopted, could give rise to
a Tax Event, which may permit the Company to cause a redemption of the Preferred
Securities prior to , 2002.
"Investment Company Event" means the receipt by the Issuer Trust of an
opinion of counsel to the Company experienced in such matters to the effect
that, as a result of the occurrence of a change in law or regulation or a
written change (including any announced prospective change) in interpretation or
application of law or regulation by any legislative body, court, governmental
agency or regulatory authority, there is more than an insubstantial risk that
the Issuer Trust is or will be considered an "investment company" that is
required to be registered under the Investment Company Act of 1940, as amended
(the "Investment Company Act"), which change or prospective change becomes
effective or would become effective, as the case may be, on or after the date of
the issuance of the Preferred Securities.
13
<PAGE>
A "Capital Treatment Event" means the reasonable determination by the
Company that, as a result of the occurrence of any amendment to, or change
(including any announced prospective change) in, the laws (or any rules or
regulations thereunder) of the United States or any political subdivision
thereof or therein, or as a result of any official or administrative
pronouncement or action or judicial decision interpreting or applying such laws
or regulations, which amendment or change is effective or such pronouncement,
action or decision is announced on or after the date of issuance of the
Preferred Securities, there is more than an insubstantial risk that the Company
will not be entitled to treat an amount equal to the Liquidation Amount of the
Preferred Securities as "Tier 1 Capital" (or the then equivalent thereof) except
as otherwise restricted under the 25% Capital Limitation (as defined herein),
for purposes of the risk-based capital adequacy guidelines of the Federal
Reserve, as then in effect and applicable to the Company.
Exchange of Preferred Securities for Junior Subordinated Debentures
The holders of all the outstanding Common Securities have the right at
any time to dissolve the Issuer Trust and, after satisfaction of liabilities to
creditors of the Issuer Trust as provided by applicable law, cause the Junior
Subordinated Debentures to be distributed to the holders of the Preferred
Securities and Common Securities in liquidation of the Issuer Trust. The ability
of the Company, as holder of the Common Securities, to dissolve the Issuer Trust
may be subject to prior regulatory approval of the Federal Reserve, if then
required under applicable Federal Reserve capital guidelines or policies. See
"Description of Preferred Securities -- Liquidation Distribution Upon
Dissolution."
Under current United States federal income tax law and interpretations
and assuming, as expected, that the Issuer Trust will not be taxable as a
corporation, a distribution of the Junior Subordinated Debentures upon a
liquidation of the Issuer Trust will not be a taxable event to holders of the
Preferred Securities. However, if a Tax Event were to occur that would cause the
Issuer Trust to be subject to United States federal income tax with respect to
income received or accrued on the Junior Subordinated Debentures, a distribution
of the Junior Subordinated Debentures by the Issuer Trust would be a taxable
event to the Issuer Trust and the holders of the Preferred Securities. See
"Certain Federal Income Tax Consequences -- US Holders -- Receipt of Junior
Subordinated Debentures or Cash Upon Liquidation of the Issuer Trust."
Rights Under the Guarantee
Bankers Trust Company will act as the trustee under the Guarantee and
will hold the Guarantee for the benefit of the holders of the Preferred
Securities. Bankers Trust Company will also act as Debenture Trustee for the
Junior Subordinated Debentures and as Property Trustee under the Trust
Agreement. Bankers Trust (Delaware) will act as Delaware Trustee under the Trust
Agreement. The Guarantee guarantees to the holders of the Preferred Securities
the following payments, to the extent not paid by or on behalf of the Issuer
Trust: (i) any accumulated and unpaid Distributions required to be paid on the
Preferred Securities, to the extent that the Issuer Trust has funds on hand
available therefor at the payment date, (ii) the Redemption Price with respect
to any Preferred Securities called for redemption, to the extent that the Issuer
Trust has funds on hand available therefor at such time, and (iii) upon a
voluntary or involuntary dissolution, winding up or liquidation of the Issuer
Trust (unless the Junior Subordinated Debentures are distributed to holders of
the Preferred Securities), the lesser of (a) the aggregate of the Liquidation
Amount and all accumulated and unpaid Distributions to the date of payment, to
the extent that the Issuer Trust has funds on hand available therefor at such
time, and (b) the amount of assets of the Issuer Trust remaining available for
distribution to holders of the Preferred Securities on
14
<PAGE>
liquidation of the Issuer Trust. The Guarantee is subordinated as described
under "-- Ranking of Subordinated Obligations Under the Guarantee and the Junior
Subordinated Debentures" and "Description of Guarantee -- Status of the
Guarantee." The holders of not less than a majority in aggregate Liquidation
Amount of the outstanding Preferred Securities have the right to direct the
time, method and place of conducting any proceeding for any remedy available to
the Guarantee Trustee in respect of the Guarantee or to direct the exercise of
any trust power conferred upon the Guarantee Trustee under the Guarantee. Any
holder of the Preferred Securities may institute a legal proceeding directly
against the Company to enforce its rights under the Guarantee without first
instituting a legal proceeding against the Issuer Trust, the Guarantee Trustee
or any other person or entity.
If the Company were to default on its obligation to pay amounts payable
under the Junior Subordinated Debentures, the Issuer Trust may lack funds for
the payment of Distributions or amounts payable on redemption of the Preferred
Securities or otherwise, and, in such event, holders of the Preferred Securities
would not be able to rely upon the Guarantee for payment of such amounts.
Instead, if a Debenture Event of Default has occurred and is continuing and such
event is attributable to the failure of the Company to pay any amounts payable
in respect of the Junior Subordinated Debentures on the payment date on which
such payment is due and payable, then a holder of Preferred Securities may
institute a legal proceeding directly against the Company for enforcement of
payment to such holder of any amounts payable in respect of such Junior
Subordinated Debentures having a principal amount equal to the aggregate
Liquidation Amount of the Preferred Securities of such holder (a "Direct
Action"). In connection with such Direct Action, the Company will have a right
of set-off under the Junior Subordinated Indenture to the extent of any payment
made by the Company to such holder of Preferred Securities in the Direct Action.
Except as described herein, holders of Preferred Securities will not be able to
exercise directly any other remedy available to the holders of the Junior
Subordinated Debentures or assert directly any other rights in respect of the
Junior Subordinated Debentures. See "Description of Junior Subordinated
Debentures -- Enforcement of Certain Rights by Holders of Preferred Securities,"
"-- Debenture Events of Default" and "Description of Guarantee." The Trust
Agreement provides that each holder of Preferred Securities by acceptance
thereof agrees to the provisions of the Guarantee and the Junior Subordinated
Indenture.
Limited Voting Rights
Holders of Preferred Securities will have limited voting rights
relating generally to the modification of the Preferred Securities and the
Guarantee and the exercise of the Issuer Trust's rights as holder of Junior
Subordinated Debentures. Holders of Preferred Securities will not be entitled to
appoint, remove or replace the Property Trustee or the Delaware Trustee except
upon the occurrence of certain events specified in the Trust Agreement. The
Property Trustee and the holders of all the Common Securities may, subject to
certain conditions, amend the Trust Agreement without the consent of holders of
Preferred Securities to cure any ambiguity or make other provisions not
inconsistent with the Trust Agreement or to ensure that the Issuer Trust (i)
will not be taxable as a corporation for United States federal income tax
purposes, or (ii) will not be required to register as an "investment company"
under the Investment Company Act. See "Description of Preferred Securities --
Voting Rights; Amendment of Trust Agreement" and "-- Removal of Issuer Trustees;
Appointment of Successors."
Absence of Market
The Preferred Securities are a new issue of securities with no
established trading market. Application has been made to list the Preferred
Securities in the Nasdaq National Market, but one of the
15
<PAGE>
requirements for listing and continued listing is the presence of two market
makers for the Preferred Securities. The Company and the Issuer Trust have been
advised by Advest, Inc. that it intends to make a market in the Preferred
Securities. However, Advest, Inc. is not obligated to do so and such market
making may be interrupted or discontinued at any time without notice at the sole
discretion of Advest, Inc. Moreover, there can be no assurance of a second
market maker for the Preferred Securities. Accordingly, no assurance can be
given as to the development or liquidity of any market for the Preferred
Securities.
Market Prices
There can be no assurance as to the market prices for Preferred
Securities, or the market prices for Junior Subordinated Debentures that may be
distributed in exchange for Preferred Securities if a liquidation of the Issuer
Trust occurs. Accordingly, the Preferred Securities or the Junior Subordinated
Debentures that a holder of Preferred Securities may receive on liquidation of
the Issuer Trust may trade at a discount to the price that the investor paid to
purchase the Preferred Securities offered hereby. Because holders of Preferred
Securities may receive Junior Subordinated Debentures on termination of the
Issuer Trust, prospective purchasers of Preferred Securities are also making an
investment decision with regard to the Junior Subordinated Debentures and should
carefully review all the information regarding the Junior Subordinated
Debentures contained herein. See "Description of Junior Subordinated
Debentures."
Possible Tax Law Changes Affecting the Preferred Securities
On February 6, 1997, President Clinton released his budget proposals
for fiscal year 1998. One of the revenue provisions of those proposals would
generally deny interest deductions for interest on an instrument issued by a
corporation that has a maximum term of more than 15 years and that is not shown
as indebtedness on the separate balance sheet of the issuer or, where the
instrument is issued to a related party (other than a corporation), where the
holder or some other related party issues a related instrument that is not shown
as indebtedness on the issuer's consolidated balance sheet. If enacted as
proposed by the President, this provision would be effective for instruments
issued on or after the date of first action by a Congressional committee with
respect to the proposal. It is not clear from the President's proposals as to
what constitutes Congressional "committee action" with respect to this proposal.
If the provision were to apply to the Junior Subordinated Debentures, the
Company would be unable to deduct interest on the Junior Subordinated
Debentures. There can be no assurance, however, that future legislative
proposals or final legislation will not affect the ability of the Company to
deduct interest on the Junior Subordinated Debentures. Such a change could give
rise to a Tax Event, which may permit the Company to cause a redemption of the
Preferred Securities before , 2002. See "Description of Junior Subordinated
Debentures -- Redemption" and "Description of Preferred Securities --
Redemption." See also "Certain Federal Income Tax Consequences -- Proposed Tax
Law Changes." Under current law, the Company will be able to deduct interest on
the Junior Subordinated Debentures.
RISK FACTORS RELATING TO THE COMPANY
Status of the Company as a Bank Holding Company
The Company is a legal entity separate and distinct from the Banks,
although the principal source of the Company's cash revenues is dividends from
the Banks. The ability of the Company to pay the interest on, and principal of,
the Junior Subordinated Debentures will be significantly dependent on the
16
<PAGE>
ability of the Banks to pay dividends to the Company and the ability of the
Company to realize a return on its investments in amounts sufficient to service
the Company's debt obligations. Payment of dividends by the Banks is restricted
by various legal and regulatory limitations.
The right of the Company to participate in the assets of any subsidiary
upon the latter's liquidation, reorganization or otherwise (and thus the ability
of the holders of Preferred Securities to benefit indirectly from any such
distribution) will be subject to the claims of the subsidiaries' creditors,
which will take priority except to the extent that the Company may itself be a
creditor with a recognized claim. As of March 31, 1997, there existed no debt at
the Company level, although the subsidiaries had indebtedness and other
liabilities of approximately $257.6 million.
The Banks are also subject to restrictions under federal law which
limit the transfer of funds by them to the Company, whether in the form of
loans, extensions of credit, investments, asset purchases or otherwise. Such
transfers by the Banks to the Company or any nonbank subsidiary of the Company
are limited in amount to 10% of the bank's capital and surplus and, with respect
to the Company and all its nonbank subsidiaries, to an aggregate of 20% of the
bank's capital and surplus. Furthermore, such loans and extensions of credit are
required to be secured in specified amounts. Federal law also prohibits banks
from purchasing "low-quality" assets from affiliates.
Growth Strategy and Management Structure
The Company intends to continue its growth strategy which includes
acquisitions of commercial banks in non-urban areas. This strategy is focused
upon growth through acquisitions of community banks which retain their corporate
identity and are managed on a decentralized basis. There are risks associated
with the Company's acquisition strategy that could adversely affect net income.
These risks include, among others, inaccurately assessing the asset quality of a
particular institution being acquired, encountering greater than anticipated
costs of incorporating acquired businesses into the Company, and being unable to
deploy funds acquired in an acquisition profitably. In a decentralized
management structure there are risks regarding the Company's ability to manage
and control the subsidiary banks and the capabilities of subsidiary bank
management. There can be no assurance that the Company will be successful in
implementing, or will have the necessary regulatory capital or acquisition
opportunities to implement, its growth strategy. Moreover, the Company
anticipates that it will be in substantial competition with other financial
institutions for potential acquisition candidates.
Adequacy of Allowance for Loan Losses
The risk of loan losses varies with, among other things, general
economic conditions, the type of loan being made, the creditworthiness of the
borrower over the term of the loan and, in the case of a collateralized loan,
the value of the collateral for the loan. Management maintains an allowance for
loan losses based upon, among other things, historical experience, an evaluation
of economic conditions and regular review of delinquencies and loan portfolio
quality. Based upon such factors, management makes various assumptions and
judgments about the ultimate collectibility of the loan portfolio and provides
an allowance for loan losses based upon a percentage of the outstanding balances
and for specific loans when their ultimate collectibility is considered
questionable. If management's assumption and judgments prove to be incorrect and
the allowance for loan losses is inadequate to absorb future credit losses, or
if the bank regulatory authorities require any Bank to increase the allowance
for loan losses, such Bank's earnings could be significantly and adversely
affected. Because certain lending activities involve greater risks, the
percentage applied to specific loan types may vary.
17
<PAGE>
As of March 31, 1997, the allowance for loan losses was $2.7 million
which represented 1.2% of total loans, net of unearned income. Nonperforming
loans were $1.3 million and other nonperforming assets were $524,000, for total
nonperforming assets of $1.8 million as of March 31, 1997. The Company actively
manages its nonperforming loans in an effort to minimize credit losses and
monitors its asset quality to maintain an adequate allowance for loan losses.
Although management believes that its allowance for loan losses is adequate,
there can be no assurance that the allowance will prove sufficient to cover
future credit losses. Further, although management uses the best information
available to make determinations with respect to the allowance for loan losses,
future adjustments may be necessary if economic conditions differ substantially
from the assumptions used or if adverse developments arise with respect to the
Company's nonperforming or performing loans. Material additions to the Company's
allowance for loan losses would result in a decrease in the Company's net
income, possibly its capital, and could result in the inability to pay
dividends, among other adverse consequences. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
Other Safety and Soundness Regulations
There are a number of obligations and restrictions imposed on bank
holding companies and their depository institution subsidiaries by federal law
and regulatory policy that are designed to reduce potential loss exposure to the
depositors of such depository institutions and to the FDIC insurance funds in
the event the depository institution becomes in danger of default or in default.
For example, under a policy of the Federal Reserve with respect to bank holding
company operations, a bank holding company is required to serve as a source of
financial strength to its subsidiary depository institutions and to commit
resources to support such institutions in circumstances where it might not do so
otherwise. See "Supervision and Regulation." In addition, the "cross-guarantee"
provisions of federal law require insured depository institutions under common
control to reimburse the FDIC for any loss suffered or reasonably anticipated by
the federal deposit insurance funds as a result of the default of a commonly
controlled insured depository institution or for any assistance provided by the
FDIC to a commonly controlled insured depository institution in danger of
default. The FDIC may decline to enforce the cross-guarantee provision if it
determines that a waiver is in the best interests of the federal deposit
insurance funds. The FDIC's claim for a reimbursement is superior to claims of
shareholders of the insured depository institution or its holding company but is
subordinate to claims of depositors, secured creditors and holders of
subordinated debt (other than affiliates) of the commonly controlled insured
depository institution.
The federal banking agencies also have broad powers under current
federal law to take prompt corrective action to resolve problems of insured
depository institutions. The extent of these powers depends upon whether the
institution in questions is "well capitalized," "adequately capitalized,"
"undercapitalized," "significantly undercapitalized," or "critically
undercapitalized," as defined by the law. See "Supervision and Regulation." As
of March 31, 1997, the Company and each of the Banks were classified as "well
capitalized."
State regulatory authorities also have broad enforcement powers over
the Banks, including the power to impose fines and other civil and criminal
penalties, and to appoint a conservator in order to conserve the assets of any
such institution for the benefit of depositors and other creditors and has the
authority to take possession of a state bank in certain circumstances,
including, among other things, when it appears that such bank has violated its
charter or any applicable laws or is conducting its business in an unauthorized
or unsafe manner, or is in an unsafe or unsound condition to transact its
business or has an impairment of its capital stock.
18
<PAGE>
Effect of Interest Rate Fluctuations and Economic Conditions
The Company's consolidated results of operations depend to a large
extent on the level of its net interest income, which is the difference between
interest income from interest-earning assets (such as loans and investments) and
interest expense on interest-bearing liabilities (such as deposits and
borrowings). If interest-rate fluctuations cause its cost of funds to increase
faster than the yield on its interest-earning assets, net interest income will
be reduced. The Company measures its interest-rate risk using simulation, price
elasticity and gap analyses. The differences between an institution's
interest-rate sensitive assets and its interest-rate sensitive liabilities at a
point in time is its gap position. A negative gap indicates that cumulative
interest-rate sensitive liabilities exceed cumulative interest-rate sensitive
assets for that period. A positive gap indicates that cumulative interest-rate
sensitive assets exceed cumulative interest-rate sensitive liabilities for that
period.
Fluctuations in interest rates are not predictable or controllable. The
Company endeavors to structure its asset and liability management strategies to
mitigate the impact on net interest income of changes in market interest rates.
However, there can be no assurance that the Company will be able to manage
interest rate risk so as to avoid significant adverse effects in net interest
income. At March 31, 1997, the Company had a one year cumulative positive gap of
2.29%. This positive one year gap position may have a negative impact on
earnings in a declining interest rate environment. See "Management's Discussion
and Analysis of Results of Operations and Financial Condition -- Interest Rate
Sensitivity Analysis."
While the Company uses various monitors of interest-rate risk, it is
unable to predict future fluctuations in interest rates or the specific impact
thereof. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
Competition
Banking institutions operate in a highly competitive environment. The
Company competes with other commercial banks, credit unions, savings
institutions, finance companies, mortgage companies, mutual funds, and other
financial institutions, many of which have substantially greater financial
resources than the Company. Certain of these competitors offer products and
services that are not offered by the Company and certain competitors are not
subject to the same extensive laws and regulations as the Company. Federal and
state legislation and/or regulations also affect the Company's competitiveness
in the financial services business. It is impossible to predict the competitive
impact on the Company of certain federal and state legislation and/or
regulations relating to the banking industry and interstate banking. See
"Business of the Company" and "Supervision and Regulation."
Economic Conditions and Monetary Policy
The operating results of the Company will depend to a great extent upon
the rate differentials that result from the difference between the income it
receives from its loans, securities and other interest-earning assets and the
interest expense it pays on its deposits and other interest-bearing liabilities.
These rate differentials are highly sensitive to many factors beyond the control
of the Company, including general economic conditions and the policies of
various governmental and regulatory authorities, in particular the Federal
Reserve.
19
<PAGE>
Like other depository institutions, the Company is affected by the
monetary policies implemented by the Federal Reserve. A primary instrument of
monetary policy employed by the Federal Reserve is the restriction on the
expansion of the money supply through open market operations, including the
purchase and sale of government securities and the adjustment of reserve
requirements. These actions may at times result in significant fluctuations in
interest rates, which could have adverse effects on the operations of the
Company. In particular, the Company's ability to make loans and attract
deposits, as well as public demand for loans, could be adversely affected. See
"Supervision and Regulation -- Bank Regulation -- Effect of Government Monetary
Policies; Possible Further Legislation."
Local Economic Conditions
The success of the Company is dependent to a certain extent upon the
general economic conditions in the geographic markets served by the Banks.
Although the Company expects that economic conditions will be favorable in these
markets, no assurance can be given that favorable economic conditions will
prevail. Adverse changes in economic conditions in the geographic markets that
the Banks serve could result in lower lending activity, impair the Bank's
ability to collect existing loans, or otherwise have a negative effect on the
operating results and financial condition of the Company. See "Business of the
Company."
Government Regulation
The Company and the Banks each are subject to extensive state and
federal governmental supervision, regulation and control. Future legislation and
government policy could adversely affect the banking industry and the operations
of the Company and the Bank. See "Supervision and Regulation."
PFBI CAPITAL TRUST
The Issuer Trust is a statutory business trust created under Delaware
law pursuant to the filing of a Certificate of Trust with the Delaware Secretary
of State on May 27, 1997. The Issuer Trust will be governed by the Trust
Agreement among the Company, as Depositor, Bankers Trust (Delaware), as Delaware
Trustee, and Bankers Trust Company, as Property Trustee (together with the
Delaware Trustee, the "Issuer Trustees"). Two individuals will be selected by
the holder of the Common Securities to act as administrators with respect to the
Issuer Trust (the "Administrators"). The Company, while holder of the Common
Securities, intends to select two individuals who are employees or officers of
or affiliated with the Company to serve as the Administrators. See "Description
of Preferred Securities -- Miscellaneous." The Issuer Trust exists for the
exclusive purposes of (i) issuing and selling the Trust Securities, (ii) using
the proceeds from the sale of the Trust Securities to acquire the Junior
Subordinated Debentures and (iii) engaging in only those other activities
necessary, convenient or incidental thereto (such as registering the transfer of
the Trust Securities). Accordingly, the Junior Subordinated Debentures will be
the sole assets of the Issuer Trust, and payments under the Junior Subordinated
Debentures will be the sole source of revenue of the Issuer Trust.
All the Common Securities will initially be owned by the Company. The
Common Securities will rank pari passu, and payments will be made thereon pro
rata, with the Preferred Securities, except that upon the occurrence and during
the continuation of a Debenture Event of Default arising as a result of any
failure by the Company to pay any amounts in respect of the Junior Subordinated
Debentures when due, the rights of the holder of the Common Securities to
payment in respect of Distributions and Payments upon liquidation, redemption or
otherwise will be subordinated to the rights of the holders of
20
<PAGE>
the Preferred Securities. See "Description of Preferred Securities --
Subordination of Common Securities." The Company will acquire Common Securities
in an aggregate liquidation amount equal to 3% of the total capital of the
Issuer Trust. The Issuer Trust has a term of 31 years, but may terminate earlier
as provided in the Trust Agreement. The address of the Delaware Trustee is
Bankers Trust (Delaware), 1001 Jefferson Street, Wilmington, Delaware 19801,
telephone number (302) 576-3301. The address of the Property Trustee, the
Guarantee Trustee and the Debenture Trustee is Bankers Trust Company, Four
Albany Street, 4th Floor, New York, New York 10006, telephone number (212)
250-2500.
USE OF PROCEEDS
All the proceeds to the Issuer Trust from the sale of the Preferred
Securities will be invested by the Issuer Trust in the Junior Subordinated
Debentures. The proceeds from the sale of the Preferred Securities are expected
to qualify as Tier 1 or core capital with respect to the Company under the risk-
based capital guidelines established by the Federal Reserve, however capital
received from the proceeds of the sale of the Preferred Securities cannot
constitute more than 25% of the total Tier 1 capital of the Company (the "25%
Capital Limitation"). Amounts in excess of the 25% Capital Limitation will
constitute Tier 2, or supplementary capital, of the Company. The net proceeds to
be received by the Company from the sale of the Junior Subordinated Debentures
will be used for general corporate purposes which may include branch
acquisitions and/or acquisitions of other financial institutions. In addition, a
portion of the proceeds may be used to make contributions through investments in
or advances to the Banks. Pending any such use, the net proceeds may be invested
in short-to-medium-term obligations. The precise amounts and timing of the
application of proceeds will depend upon the funding requirements of the Company
and its subsidiaries and the availability of other funds.
THE SABINA ACQUISITION
On May 28, 1997, the Company entered into the Sabina Merger Agreement
with Sabina. Under the Sabina Merger Agreement, the Company will acquire all of
the outstanding shares of Sabina in exchange for 4.33 shares of Company common
stock per Sabina share of common stock resulting in the issuance of an aggregate
of 476,300 shares of Company common stock valued at approximately $7.8 million
at May 27, 1997. The Sabina Acquisition is conditioned upon a representation
from the accountants that it will qualify for pooling of interests accounting
treatment. Following consummation of the share exchange, Sabina will be a wholly
owned subsidiary of the Company. The executive management of Sabina and
substantially all of the directors of Sabina are expected to continue their
service in such positions following consummation of the share exchange. The
Sabina Merger Agreement is subject to several conditions precedent including,
among other things, the holders of not more than 10% of the issued and
outstanding shares of Sabina common stock shall have properly demanded appraisal
or dissenters rights, receipt of stockholder and regulatory approval and the
receipt of tax opinions to the effect that the Sabina Acquisition will be
treated for federal income tax purposes as a reorganization within the meaning
of Section 368(a) of the Internal Revenue Code of 1986, as amended. There can be
no assurance that all conditions precedent to consummation of the merger will
occur.
At March 31, 1997, Sabina had total assets of $36.9 million (including
net loans of $24.6 million), total liabilities of $32.4 million (including total
deposits of $32.0 million and long-term debt of $230,000) and total
stockholders' equity of $4.5 million.
21
<PAGE>
The Sabina Acquisition will enable the Company to affiliate with Sabina
and expand its business operations into Central Ohio. Sabina is located in
Clinton County, Ohio, approximately 65 miles northeast of Cincinnati, Ohio, and
approximately 45 miles southwest of Columbus, Ohio. Agriculture is the primary
industry within Clinton County. The Company also regards Sabina's customer base
as local and loyal, and its management, based upon prior results of operations,
as capable of continuing to manage Sabina on the decentralized basis on which
the Company's business strategy is based. See "Business of the Company."
CAPITALIZATION
The following table sets forth (i) the consolidated capitalization of
the Company at March 31, 1997, (ii) the consolidated capitalization of the
Company giving effect to the issuance of the Preferred Securities hereby offered
by PFBI Capital Trust and application by the Company of the net proceeds from
the corresponding sale of the Junior Subordinated Debentures to PFBI Capital
Trust as if the sale of the Preferred Securities had been consummated on March
31, 1997, and assuming the Underwriters' over-allotment was not exercised, and
(iii) the actual and pro forma capital ratios of the Company.
<TABLE>
<CAPTION>
(Unaudited)
As Adjusted
For the Sale of
Actual Preferred Securities
------ --------------------
(Dollars in thousands)
<S> <C> <C>
Guaranteed preferred beneficial interests in the Company's
subordinated debt (1)..................................... $ -- $25,000
STOCKHOLDERS' EQUITY:
Preferred stock no par value, 1,000,000 shares
authorized, none issued.................................... -- --
Common stock no par value, 10,000,000 shares
authorized; 4,209,090 outstanding.......................... 978 978
Surplus..................................................... 32,941 32,941
Net unrealized losses on securities available-for-sale...... (253) (253)
Retained earnings........................................... 6,743 6,743
------- -------
Total stockholders' equity.............................. 40,409 40,409
------- -------
Total capitalization........................................ $ 40,409 $65,409
======= ======
COMPANY CAPITAL RATIOS(2):
Equity to total assets...................................... 13.56% 20.20%
Tier 1 risk-based capital ratio(3).......................... 15.92 21.22
Total risk-based capital ratio.............................. 17.13 28.48
Leverage ratio ............................................. 12.25 15.02
</TABLE>
- -----------------------
(1) Preferred Securities representing beneficial interests in an
aggregate principal amount of $25,000,000 of the % Junior
Subordinated Debentures of the Company (not including the
$3,750,000 aggregate principal amount of
Junior Subordinated Debentures to be purchased in the event the
Underwriters exercise their over-allotment option). The Junior
Subordinated Debentures will mature on , 2027.
(2) The capital ratios, as adjusted, are computed including the total
estimated proceeds from the sale of the Preferred Securities, in a
manner consistent with Federal Reserve guidelines.
(3) Federal Reserve guidelines for calculation of Tier 1 capital limit the
amount of cumulative preferred stock which can be included in Tier 1
capital to 25% of total Tier 1 capital.
22
<PAGE>
ACCOUNTING TREATMENT
For financial reporting purposes, the Issuer Trust will be treated as
a subsidiary of the Company and, accordingly, the accounts of the Issuer Trust
will be included in the consolidated financial statements of the Company. The
Preferred Securities will be included in the consolidated balance sheets of the
Company and appropriate disclosures about the Preferred Securities, the
Guarantee and the Junior Subordinated Debentures will be included in the notes
to the consolidated financial statements of the Company. For financial reporting
purposes, Distributions on the Preferred Securities will be recorded in the
consolidated statements of income of the Company.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
This section presents a review of the Company's consolidated financial
condition and results of operations. Data is presented for both the Company and
its subsidiaries unless otherwise noted.
In addition to historical information, this discussion and analysis
contains forward-looking statements. The forward-looking statements contained
herein are subject to certain risks and uncertainties that could cause actual
results to differ materially from those projected in the forward-looking
statements. Important factors that might cause such a difference include, but
are not limited to, those discussed in this section entitled "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
Readers are cautioned not to place undue reliance on these forward-looking
statements, which reflect management's analysis only as of the date hereof. The
Company undertakes no obligation to publicly revise or update these
forward-looking statements to reflect events and circumstances that arise after
the date hereof.
In 1996, the Company continued to pursue its strategic plan to build a
network of independently managed community banks. For the year ended December
31, 1996, the Company posted record earnings. Net income rose 59.3% to $3.4
million from $2.2 million in 1995. Total assets nearly doubled to $292.6 million
from $155.5 million in 1995. Through earnings and a successful offering of
common stock, stockholders' equity increased to $39.9 million which was over 3.5
times the $11.2 million at year end 1995. Higher earnings were reported at each
subsidiary bank while the increase in total assets was split between internal
growth of $8.8 million, the acquisition of the Eminence Bank of $115.7 million
and net public offering proceeds of $12.6 million. The growth in stockholders'
equity was primarily due to the $27.1 million in public offering proceeds and
$1.6 million from growth in retained earnings.
Acquisitions
The Company's acquisition philosophy is to target community banks
primarily located in non- urban areas that are anticipated to have a favorable
impact on the Company's earnings in a reasonable amount of time. In evaluating
acquisition opportunities, the Company conducts due diligence to assess the
target's risk profile, earnings, and earnings potential. Desirable targets have
capable local management teams that are active in the community and maintain a
leadership position in terms of deposit share.
On May 28, 1997, the Company entered into the Sabina Merger Agreement
pursuant to which it will acquire Sabina in exchange for Company common stock.
The Sabina Acquisition is conditioned upon a representation from the accountants
that it will qualify for pooling of interests accounting treatment. See "The
Sabina Acquisition."
23
<PAGE>
On July 1, 1996, Farmers Deposit Bancorp of Eminence, Kentucky, and its
wholly owned subsidiary, Farmers Deposit Bank, were acquired in a cash
transaction that was accounted for as a purchase. At the acquisition date,
Eminence Bank had total assets of $107 million.
In 1995, the Company completed two acquisitions. On March 24, 1995, the
Company acquired Georgetown Bancorp, Inc. and its wholly owned subsidiary,
Georgetown Bank & Trust, Georgetown, Kentucky, in a business combination
accounted for as a pooling of interests. At the acquisition date, Georgetown
Bank had total assets of $21.1 million.
On October 31, 1995, the Company acquired all of the outstanding shares
of Citizens Bank of Sharpsburg, Kentucky, for cash. This combination was
accounted for as a purchase. At the acquisition date, the Sharpsburg Bank had
total assets of $19.8 million.
The significant financial data relative to the 1995 and 1996
acquisitions is set forth in Note 2 to the financial statements.
Results of Operations
Earnings Summary
Net income for the three months ended March 31, 1997, of $1.2 million
or $0.28 per share, was 132% higher than net income of $498,000 or $0.26 for the
three months ended March 31, 1996. This $660,000 increase in net income was
primarily due to the increase in average interest-earning assets of $127.4
million. The Company's asset growth is attributed to the additional capital from
the proceeds of the initial public stock offering in the second quarter of 1996,
and the acquisition of the Eminence Bank on July 1, 1996, in addition to the
continued growth of the Company's other commercial bank subsidiaries. The
primary component of the growth is an increase of $106.3 million in average
loans for the three-month period as compared to the corresponding three-month
period in 1996. The net interest margin was 5.24% for the first quarter of 1997
compared to a 5.19% in the first quarter of 1996 and 5.32% for the full year
1996. The return on stockholders' equity and return on average assets were 11.6%
and 1.59%, respectively, for the three months ended March 31, 1997, compared to
17.7% and 1.27%, respectively, for the same period in 1996. The decrease in the
return on equity is attributable to the additional $27 million net proceeds
received from the initial public offering in the second quarter of 1996.
The Company recorded net income for 1996 of $3.4 million, an increase of
59.3% over the $2.2 million for 1995, and an increase of approximately 230% over
net income of $1.5 million for 1994. Major factors contributing to the higher
net income were an increase of 79.9% in net interest income from $6.0 million in
1995 to $10.8 million in 1996, and an increase of $659,000 in non-interest
income to $1.5 million that was up 79.9% from the $825,000 for 1995. Partially
offsetting these increases were increases in loan loss provision of $489,000, up
from $86,000 in 1995, non-interest expense which rose $2.3 million to $6.8
million or 51.2% from $4.5 million in 1995 and an increase in income taxes of
$1.4 million to $1.5 million from $112,000 recorded in 1995. In 1995, income
taxes were substantially reduced as a result of the elimination of a $504,000
valuation allowance with respect to the deferred tax assets related to the
acquisition of the Georgetown Bank. Per share earnings in 1996 of $1.05 were
down $0.08 or 7.1% from the $1.13 recorded in 1995. The reduced level of per
share earnings was attributable to the 2.3 million increase in outstanding
shares as a result of the initial public offering of shares in the second
quarter of 1996.
24
<PAGE>
For the year ended December 31, 1995, net income of $2.2 million was
$643,000 or 42.5% above net income of $1.5 million for 1994. The increase in net
income in 1995 was primarily attributable to a $499,000 increase in net interest
income and reductions of $370,000 in income taxes and $121,000 in loan loss
provision that was partially offset by an increase of $488,000 in non-interest
expenses.
Net Interest Income
The Company's primary source of revenue is its net interest income,
which is the difference between the interest received on its earning assets and
the interest paid on the funds acquired to support those assets. Loans made to
businesses and individuals are the primary interest-earning assets, followed by
investment securities and federal funds sold in the inter-bank market. Deposits
are the primary interest-bearing liabilities used to support the
interest-earning assets. The level of net interest income is affected by both
the balances and mix of interest-earning assets and interest-bearing
liabilities, the changes in their corresponding yields and costs, by the volume
of interest-earning assets funded by noninterest-bearing deposits, and the level
of capital. The Company's long term objective is to manage this income to
provide the largest possible amount of income while balancing interest rate,
credit and liquidity risks.
Nontaxable income from loans and investment securities is presented on
a tax-equivalent basis whereby income exempt from tax has been adjusted upward
by an amount equivalent to the prevailing federal income taxes that would have
been paid if the income had been fully taxable. The discussion of factors
influencing net interest income that follows is based on taxable equivalent
data. In each of the three years, this adjustment is based on an assumed federal
income tax rate of 34%.
Average Consolidated Balance Sheets and Net Interest Analysis
The table below shows, for the periods indicated, the average
distribution of assets, liabilities and the interest earned or paid on those
items, together with the level of stockholders' equity, as well as the Company's
net interest spread and net interest margin. The net interest margin for the
first quarter of 1997 was 5.24% versus 5.32% for the year ended 1996, and the
spread declined to 4.37% in 1997 from 5.32% for the year ended December 31,
1996. The margin compression was partially offset by an increase in average
total loans to $218.9 million in the first quarter of 1997 versus $112.6 million
in the first uarter of 196 and 4164,321 for the ful year of 1996. assets to
$275.3 million from $210.4 million. The increase primarily reflects the full
impact of the Eminence Bank acquisition which was completed on July 1, 1996. In
1996, tax equivalent net interest income increased to $11.2 million from $6.2
million in 1995, an increase of $5.0 million or 79.7%. This increase was due to
an increase of $91.3 million or 76.7% in average earning assets and an increase
of $71.2 million or 68.9% in average interest-bearing liabilities. This growth
is primarily attributable to the acquisition of the Eminence Bank in mid-year
and the net proceeds in excess of the issuance costs from the Company's initial
public stock offering in the second quarter. Yield on interest-earning assets
for 1996 of 9.52% was essentially equivalent to the 9.50% yield in 1995 while
the cost of interest-bearing liabilities increased from 4.92% in 1995 to 5.07%
in 1996. The increased cost of interest-bearing liabilities reflected higher
rates paid on large money market deposits by the Eminence Bank. The net interest
spread for 1996 declined 13 basis points from 4.58% in 1995 to 4.45% while the
net interest margin, which measures net interest income as a percent of average
earning assets, increased from 5.23% in 1995 to 5.32% in 1996. The increase in
net interest margin is attributable to the higher levels of noninterest-bearing
deposits and capital supporting interest-earning assets which rose from 19.6% of
interest-earning assets in 1995 to 23.1% of interest-earning assets in
25
<PAGE>
1996. In 1995, net interest income was up $559,000 to $6.2 million from $5.7
million in 1994 due principally to an increase in average interest-earning
assets of $14.4 million. The favorable impact of the increase in net
interest-earning assets was partially offset by a decrease of 18 basis points in
the net interest margin to 5.23%.
26
<PAGE>
<TABLE>
<CAPTION>
For the Three Months Ended
March 31,
1997
----------------------------------------
Average Average
Balance Interest Rate
------------ ------------ -----------
<S> <C> <C> <C>
Assets:
Interest-earning assets:
U.S. Treasury and federal
agency securities(1)...... $ 26,649 $ 397 5.96%
States and municipal
obligations(1)(2).......... 14,441 312 8.64
Other securities (1)(2)...... 4,430 120 10.84
------------ ------------ -----
Total investment
securities.............. 45,520 829 7.28
Federal funds sold........... 10,864 145 5.34
Interest-bearing deposits
with banks................. - - -
Loans, net of unearned
income(2)(3)(4):
Commercial................. 98,594 2,475 10.04
Real estate mortgage....... 92,802 2,274 9.80
Installment................ 27,470 729 10.62
------------ ------------ -----
Total loans............. 218,866 5,478 10.01
Total interest-earning assets.. 275,250 6,452 9.38
Allowance for loan losses...... (2,603)
Cash and due from banks........ 6,041
Premises and equipment......... 4,058
Other assets................... 10,114
------------
Total assets................ 292,860
Liabilities:
Interest-bearing deposits:
NOW and money market....... 39,990 352 3.52
Savings.................... 25,984 228 3.51
Certificates of deposit
and other time deposits.. 146,604 2,064 5.63
------------ ------------ -----
Total interest-
bearing deposits.... 212,578 2,644 4.98
Other borrowings........... 5,733 74 5.16
FHLB advances.............. 8,916 126 5.65
Debt....................... - - -
------------ ------------ -----
Total interest-bearing
liabilities............... 227,227 2,844 5.01
Non-interest-bearing
demand deposits........... 23,347
Other liabilities........... 2,059
------------
Total liabilities...... 252,633
Stockholders' Equity: 40,227
Total liabilities and
stockholders' equity......... $ 292,860
===========
Net interest income (1)........ $ 3,608
===========
Net interest spread (1)........ 4.37%
====
Net interest margin (1)........ 5.24%
====
</TABLE>
<TABLE>
<CAPTION>
For the Years Ended December 31,
1996 1995 1994
------------------------------------- -------------------------------- -------------------------
Average Average Average Average Average Average
Balance Interest Rate Balance Interest Rate Balance Interest Rate
------------ ----------- ---------- ---------- --------- -------- ----------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Assets: (Dollars in thousands)
Interest-earning assets:
U.S. Treasury and federal
agency securities(1)...... $ 24,823 $ 1,449 5.84% $ 14,122 $ 786 5.57% $ 15,012 $ 736 4.90%
States and municipal
obligations(1)(2).......... 10,119 800 7.91 5,495 440 8.01 4,823 391 8.11
Other securities (1)(2)...... 3,573 385 10.78 2,499 277 11.08 1,400 116 8.29
------------ -------- ------ -------- --------- ------
Total investment
securities.............. 38,515 2,634 6.84 22,116 1,503 6.80 21,235 1,243 5.85
Federal funds sold........... 7,163 388 5.42 4,966 279 5.62 3,696 145 3.92
Interest-bearing deposits
with banks................. 376 19 5.05 436 35 8.03 396 15 3.79
Loans, net of unearned
income(2)(3)(4):
Commercial................. 83,163 8,405 10.11 55,040 5,624 10.22 48,590 4,627 9.52
Real estate mortgage....... 62,892 6,340 10.08 26,229 2,642 10.07 22,393 2,140 9.56
Installment................ 18,266 2,234 12.23 10,242 1,222 11.93 8,312 933 11.22
------------ -------- ------- --------- --------- -----
Total loans............. 164,321 16,979 10.33 91,511 9,488 10.37 79,295 7,700 9.71
Total interest-earning assets.. 210,375 20,020 9.52 119,029 11,305 9.50 104,622 9,103 8.70
Allowance for loan losses...... (2,164) (1,049) (963)
Cash and due from banks........ 5,834 4,073 4,295
Premises and equipment......... 2,813 1,689 1,309
Other assets................... 8,101 3,820 2,000
------------ ---------
Total assets................ 224,959 127,562 111,263
Liabilities:
Interest-bearing deposits:
NOW and money market....... 28,439 966 3.40 15,175 381 2.51 15,299 390 2.55
Savings.................... 19,286 574 2.98 15,009 434 2.89 17,796 524 2.95
Certificates of deposit
and other time deposits.. 117,390 6,737 5.74 69,040 3,953 5.73 55,932 2,470 4.42
------------ -------- -------- --------- --------- -------
Total interest-
bearing deposits.... 165,115 8,277 5.01 99,224 4,768 4.81 89,027 3,384 3.80
Other borrowings........... 3,582 184 5.14 400 16 4.00 302 16 5.30
FHLB advances.............. 3,660 208 5.68 713 44 6.17 179 10 5.58
Debt....................... 2,029 168 8.28 2,891 253 8.75 311 28 9.00
------------ -------- ---- ------------ -------- ---- --------- --------- -----
Total interest-bearing
liabilities............... 174,386 8,837 5.07 103,228 5,081 4.92 89,819 3,438 3.83
Non-interest-bearing
demand deposits........... 20,335 12,841 11,414
Other liabilities........... 2,064 974 828
------------ ------------ ---------
Total liabilities...... 196,785 117,043 102,061
Stockholders' Equity: 28,174 10,519 9,202
Total liabilities and
stockholders' equity......... $ 224,959 $ 127,562 $ 111,263
=========== =========== ========
Net interest income (1)........ $ 11,183 $ 6,224 $ 5,665
======= ======= ========
Net interest spread (1)........ 4.45% 4.58% 4.87%
==== ==== ====
Net interest margin (1)........ 5.32% 5.23% 5.41%
==== ==== ====
</TABLE>
- ----------------
(1) Yields are calculated on historical cost except for yields on marketable
equity securities which are calculated using fair value.
(2) Taxable - equivalent yields are calculated assuming a 34% federal income
tax rate.
(3) Includes loan fees, immaterial in amount, in both interest income and the
calculation of yield on loans.
(4) Includes loans on nonaccrual status.
27
<PAGE>
The accompanying analysis of changes in net interest income in the following
table shows the relationship of the volume and rate portions of these changes in
1996 and 1995.
Analysis of Changes in Net Interest Income
<TABLE>
<CAPTION>
1996 vs. 1995 1995 vs. 1994
Increase (decrease) due to change in Increase (decrease) due to change in
------------------------------------------ ----------------------------------------
Volume Rate Net Change Volume Rate Net Change
------ ---- ---------- ------ ---- ----------
(Dollars in thousands on a taxable equivalent basis)
Interest Income:
<S> <C> <C> <C> <C> <C> <C>
Loans................................. $7,526 $ (35) $7,491 $1,241 $547 $1,788
Investment securities................. 1,121 10 1,131 53 207 260
Federal funds sold ................... 119 (10) 109 59 75 134
Deposits with banks................... (4) (12) (16) 2 18 20
------ ---- ---- ------ --- -----
Total interest income............. $8,762 $ (47) $8,715 $1,355 $847 $2,202
----- ---- ----- ----- --- -----
Interest Expense:
Deposits -
NOW and money market................ $ 416 $ 169 $ 585 (3) (6) (9)
Savings............................. 127 13 140 (80) (10) (90)
Negotiable certificates of deposit.. 2,774 10 2,784 651 832 1,483
Other borrowings...................... 162 6 168 12 (1) 11
FHLB borrowings....................... 169 (5) 164 21 2 23
Debt.................................. (72) (13) (85) 226 (1) 225
----- ---- ----- ----- --- -----
Total interest expense............ 3,576 180 3,756 827 816 1,643
----- ---- ----- ----- --- -----
Net interest income............ $5,186 $(227) $4,959 $ 528 $ 31 $ 559
===== ==== ===== ===== === =====
</TABLE>
Provision and Allowance for Loan Losses
The Company maintains its allowance for loan losses (allowance) at a level
that is considered sufficient to absorb potential losses in the loan portfolio.
The allowance is increased by the provision for loan losses as well as
recoveries of previously charged-off loans, and is decreased by loan
charge-offs. The provision provides for current loan losses and maintains the
allowance at an adequate level commensurate with management's evaluation of the
risks inherent in the loan portfolio. Various factors are taken into
consideration when the Company determines the amount of the provision and the
adequacy of the allowance. Some of the factors include: past due and
nonperforming assets; specific internal analyses of loans requiring special
attention; the current level of regulatory classified and criticized assets and
the associated risk factors with each; and examinations and reviews by the
Company's independent accountants and internal loan review personnel.
The data collected from these sources is evaluated with regard to current
national and local economic trends, prior loss history, underlying collateral
values, credit concentrations, and industry risks. An estimate of potential
future loss on specific loans is developed in conjunction with an overall risk
evaluation of the total loan portfolio.
28
<PAGE>
The following table is a summary of the Company's loan loss experience for
each of the past five years.
Summary of Loan Loss Experience
<TABLE>
<CAPTION>
Three Months Ended
March 31, Years Ended December 31,
1997 1996 1995 1994 1993 1992
-------------------- -------------- -------------- ----------- ---------- ---------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Balance at beginning of period...... $ 2,523 $ 1,735 $ 886 $ 884 $ 938 $ 874
Balance of allowance for loan
losses of acquired subsidiaries at
acquisition date.................. - 812 803 - - 20
Amount charged off:
Commercial........................ 24 177 28 270 275 223
Real estate mortgage.............. - 68 19 5 21 33
Consumer.......................... 66 514 44 35 38 96
-------- -------- -------- -------- -------- --------
Total loans charged off......... 90 759 91 310 334 352
Recoveries on amounts previously charged off:
Commercial........................ 10 78 28 89 60 53
Real estate mortgage.............. - 4 2 5 38 -
Consumer.......................... 42 78 21 11 12 18
------- ------- ------- ------- ------- -------
Total recoveries................ 52 160 51 105 110 71
Net charge-offs..................... 38 599 40 205 224 281
Provision for loan losses........... 184 575 86 207 170 325
-------- -------- -------- -------- -------- --------
Balance at end of period............ $ 2,669 $ 2,523 $ 1,735 $ 886 $ 884 $ 938
======== ======== ======== ======== ======= ========
Total loans, net of unearned income:
Average........................... $218,866 $164,321 $ 91,511 $ 79,295 $ 74,477 $ 59,916
======= ======= ======= ======= ======= =======
At period end..................... $223,092 $217,587 $113,064 $ 81,276 $ 74,450 $ 65,159
======= ======= ======= ======= ======= =======
As a percentage of average loans:
Net charge-offs................... .02% .36% .04% .26% .30% .47%
Provision for loan losses......... .08% .35% .09% .26% .23% .54%
Allowance as a percentage of
year-end net loans................ 1.20% 1.16% 1.53% 1.09% 1.19% 1.44%
Allowance as a multiple of net
charge-offs....................... 70x 4x 43x 4x 4x 3x
</TABLE>
The provision for loan losses and net chargeoffs were $184,000 and $38,000,
respectively, for the first quarter of 1997, compared to $73,000 and $18,000,
respectively, for the first quarter of 1996. The increases in these amounts
primarily relate to the increase in average loans between the two periods. Total
nonperforming loans were $1.3 million at March 31, 1997, compared to $951,000 at
December 31, 1996. The allowance for loan losses at March 31, 1997, of 1.2% of
total loans was an increase from 1.16% of total loans at December 31, 1996. At
March 31, 1997, the allowance for loan losses was 203.2% of nonperforming loans
as compared to 265.3% at December 31, 1996.
The provision for loan losses for 1996 was $575,000 compared to $86,000 in
1995, an increase of $489,000. This increase resulted from loan growth including
the acquisition of the Eminence Bank and provisions made for possible loan
losses in connection with the establishment of a consumer finance subsidiary by
the Vanceburg Bank. In 1996, net charge-offs were $599,000 compared to $40,000
in
29
<PAGE>
1995, an increase of $559,000. This increase was primarily attributable to the
charge-off of loans acquired in the Sharpsburg Bank acquisition on October 31,
1995, that had been fully reserved at December 31, 1995 and the acquisition of
the Eminence Bank. At December 31, 1996, the Company's allowance for loan losses
was 1.16% of period-end loans compared to 1.53% at December 31, 1995.
Net charge-offs to average loans were .36% for the year 1996 compared to
.04% for the year 1995. At December 31, 1996, the Company's allowance for loan
losses totaled $2.5 million, representing an increase of $788,000 over the
amount reported at December 31, 1995. The allowance for loan losses was 265.3%
of nonperforming loans on December 31, 1996, compared to 147.0% at December 31,
1995. At year end 1996, nonperforming loans represented .44% of total
outstanding loans, down from .93% on December 31, 1995.
The provision for loan losses for 1995 was $86,000, down from $207,000 in
1994. Net charge-offs in 1995 were $40,000, down $165,000 from the $205,000
charged-off in 1994.
30
<PAGE>
The following table sets forth an allocation for the allowance for loan
losses by category of loan and a percentage distribution of the allowance
allocation. In making the allocation, consideration was given to such factors as
management's evaluation of risk in each category, current economic conditions
and charge-off experience. An allocation for the allowance for loan losses is an
estimate of the portion of the allowance that will be used to cover future
charge-offs in each major loan category, but it does not preclude any portion of
the allowance allocated to one type of loan being used to absorb losses of
another loan type.
Allocation of Allowance for Loan Losses
<TABLE>
<CAPTION>
At March 31, At December 31,
1997 1996 1995 1994 1993 1992
----------------- ----------------- ----------------- --------------------------------- ----------------
Amount % Amount % Amount % Amount % Amount % Amount %
-------- ------- ------ --------- ------ --------- ------ ------- ------ -------- ------ -------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial .......... $ 914 34.2% $ 948 37.6% $ 653 37.6% $ 537 60.6% $ 535 60.5% $ 581 61.9%
Real estate mortgage 1,179 44.2 1,082 42.9 563 32.5 160 18.1 126 14.3 131 14.0
Consumer ............ 548 20.5 464 18.4 396 22.8 99 11.2 120 13.6 118 12.6
Unallocated ......... 28 1.1 29 1.1 123 7.1 90 10.1 103 11.6 108 11.5
------ ------- ------ ------- ------ ------- ------ ------- ------ ------- ------ -------
Total ............. $2,669 100.0% $2,523 100.0% $1,735 100.0% $ 886 100.0% $ 884 100.0% $ 938 100.0%
====== ======= ====== ======= ====== ======= ====== ======= ====== ======= ====== =======
</TABLE>
31
<PAGE>
Non-Interest Income and Expenses
Non-interest income is a significant component of the Company's total
income. The Company continues to develop and enhance existing products and to
create new products in order to augment fee income as trends in the financial
services industry and the economic environment continue to put pressure on the
Company's ability to increase its net interest income. Non-interest income
includes deposit service charges, fees from data processing and trust services,
and fees and commissions from many other corporate and retail products.
Non-interest income increased $240,000 to $559,000 for the first three
months of 1997 compared to $319,000 for the first three months of 1996.
Non-interest income of $207,000 was recorded for the first quarter of 1997 at
the Eminence Bank, which was acquired in the second quarter of 1996, with the
balance of the growth attributed to overall growth and expansion of the
Company's business and its customer base. Non-interest income recorded in the
first quarter of 1996 included a non-recurring fee of $50,000 received in
connection with an exchange of an investment in preferred stock.
Non-interest income was $1.5 million in 1996, an increase of $659,000 or
79.9% over 1995. Excluding the Eminence Bank, non-interest income would have
been $1.2 million in 1996, an increase of $391,000, or 47.4% over 1995. Service
charges on deposit accounts rose $287,000 or 54% to $817,000 and insurance
commissions were up $153,000, nearly double the $156,000 for 1995. Other income
was up $212,000 to $357,000 and included fees received by Premier Data Services,
Inc. for data processing services to non-affiliated banks.
Non-interest income in 1995 of $825,000 was 20.6% above the 1994 level of
$684,000 as growth in service charge income of $134,000 or 33.8% and insurance
commissions of $64,000 or 70% more than offset a $76,000 reduction in investment
securities gains.
Non-interest expenses for the first quarter of 1997 totaled $2.2 million or
2.96% of average assets on an annualized basis compared to $1.4 million or 3.56%
of average assets for the same period of 1996. This increase in non-interest
expenses is attributed to the expansion of the Company's business, with $524,000
representing non-interest expenses incurred at the Eminence Bank. As a
percentage of average assets, non-interest expenses for the first quarter of
1997 were reduced by 16.7% as compared to the first quarter of 1996.
Non-interest expenses increased $2.3 million from $4.5 million in 1995 to
$6.8 million in 1996 or 51.2%. In 1995, non-interest expenses were 12.2% or
$487,000 higher than the 1994 level of $4.0 million. The significant increase in
non-interest expenses in 1996 is primarily related to the inclusion of the
Eminence Bank ($1.2 million) for half of the year and the Sharpsburg Bank for
the full year ($493,000) vs. two months in 1995.
Salaries and employee benefits, the largest component of non-interest
expense, of $3.8 million in 1996 were $1.5 million or 63.1% higher than 1995 and
represented 55.4% of total non-interest expense. This increase reflects the
inclusion of the Eminence Bank for half of the year and a full year of the
Sharpsburg Bank and the 34.4% increase in full time equivalent employees which
grew from 96 at year end 1995 to 129 at year end 1996, as well as from normal
increases in salary and benefit costs. The increase in full time equivalent
employees included 29 employees of the Eminence Bank. Salaries and employee
benefits for 1995 increased $327,000 or 16.5% compared to $2.0 million in 1994.
32
<PAGE>
Net occupancy and equipment expense for 1996 of $1.1 million was $211,000
or 24.6% higher than the $857,000 for 1995. The increase in net occupancy and
equipment expense included $111,000 related to the Eminence Bank. In 1995, net
occupancy and equipment expense increased $197,000 or 29.8% for the 1994 amount
of $660,000.
Other non-interest expenses, which is the second largest category of
non-interest expenses, of $1.3 million for 1996 was $510,000 or 63.4% above the
1995 level of $804,000. This increase reflects the addition of the Eminence Bank
which had other operating expenses of $347,000, the full year inclusion of the
Sharpsburg Bank, growth of the Company and inflationary increases, and expenses
in connection with the listing of the Company's common stock on the Nasdaq stock
market. Other non-interest expenses for 1995 were $44,000 or 5.8% higher than
the $760,000 recorded in 1994.
FDIC insurance expense decreased $92,000 to $32,000 in 1996 and had
decreased $98,000 in 1995. These decreases resulted from changes in the FDIC
insurance fund which substantially reduced insurance premiums for well
capitalized profitable commercial banks.
Legal and professional fees for 1996 totaled $189,000, an increase of
$49,000 or 35.0% from 1995 and a decrease of $95,000 or 40.4% between 1994 and
1995. The level of legal and professional fees generally varies with the level
and type of acquisitions completed during any year.
Amortization of goodwill was $197,000 in 1996 compared to $2,000 in 1995
and $0 in 1994. The increase in 1996 reflects the amortization of goodwill
generated in the acquisition of the Eminence Bank on July 1, 1996.
No acquisition expenses in 1996 were charged to expenses in 1996, while
acquisition expenses of $110,000 were charged to expenses in 1995 and $37,000 in
1994. Expenses related to acquisitions are charged to expenses in connection
with acquisitions accounted for as pooling of interests while expenses related
to acquisitions where purchase accounting is used are added to goodwill and
amortized over 15 years.
The Company continually seeks to develop fees and other income for services
provided while holding operating expenses to the minimum amount required to
provide quality service. In 1996, total net non-interest expenses as a percent
of average total assets were reduced to 2.36% from 2.87% in 1995 and 2.98% in
1994.
33
<PAGE>
The following table is a summary of non-interest income and expenses for
the periods indicated.
Non-Interest Income and Expenses
<TABLE>
<CAPTION>
For the Three Months Ended
March 31, For the Years Ended December 31,
-------------------------------- ----------------------------------------------------------
Increase Increase Increase
(decrease) (decrease) (decrease)
1997 vs. 1996 vs. 1995 vs.
1997 1996 1996 1996 1995 1995 1995 1994 1994
------- ------- ------------- -------- -------- ----------- ------- -------- ---------
(Dollars in thousands)
Non-Interest Income:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Service charges on deposit accounts. $ 232 $ 147 $ 85 $ 817 $ 530 $ 287 $ 530 $ 396 $ 134
Insurance income.................... 120 44 76 309 156 153 156 92 64
Investment securities gain (losses). - - - 1 (6) 7 (6) 70 (76)
Other.............................. 207 128 79 357 145 212 145 126 19
------ ------ ------ ------ ------ ------ ------ ------ ------
Total non-interest income........ 559 319 240 1,484 825 659 825 684 141
Non-Interest Expenses:
Salaries and employee benefits...... 1,228 817 411 3,765 2,309 1,456 2,309 1,982 327
Net occupancy and equipment......... 290 128 162 1,068 857 211 857 660 197
FDIC insurance...................... 6 13 (7) 32 124 (92) 124 222 (98)
Legal and professional.............. 49 31 18 189 140 49 140 235 (95)
Taxes, other than payroll,
property and income............... 84 39 45 228 146 82 146 109 37
Acquisition expenses................ - - - - 110 (110) 110 37 73
Amortization of goodwill............ 95 5 90 197 2 195 2 - 2
Other............................... 431 364 67 1,314 804 510 804 760 44
----- ----- ----- ----- ----- ----- ------ ------ ------
Total non-interest expenses....... $2,183 $1,397 $ 786 $6,793 $4,492 $2,301 $4,492 $4,005 $ 487
===== ===== ===== ===== ===== ===== ===== ===== =====
Net non-interest expenses as a
percent of average assets........... 2.22% 2.75% 2.36% 2.87% 2.87% 2.98%
</TABLE>
34
<PAGE>
Income Taxes
Income tax expense was $500,000 for the first quarter of 1997 compared to
$172,000 for the first quarter of 1996. Income tax expense for 1997 was higher
than 1996 as a result of higher income before taxes and a higher effective tax
rate. The effective tax rate for 1997 was 30.2% as compared to 25.7% for the
same period in 1996. This higher rate was primarily attributable to the
inclusion of amortization of goodwill recorded in connection with the Eminence
Bank acquisition which is non-deductible for tax purposes.
The Company recorded income tax expense for 1996 of $1.5 million, which
represented 30.6% of pre-tax income substantially above the $113,000 or 5.0% of
pre-tax income recorded in 1995. The lower 1995 income tax expense was
attributable primarily to the elimination of the valuation allowance of $504,000
for deferred tax assets at the Georgetown Bank. In 1994, tax expense of $483,000
or 24.2% of pre-tax income was recorded. No changes in the valuation allowance
for deferred tax assets were made in 1996.
Financial Condition
Lending Activities
Loans are the Company's primary use of financial resources and represent
the largest component of earning assets. The Company's loans are made
predominantly within the Banks' market areas and the portfolio is diversified.
Credit risk is inherent in each financial institution's loan and investment
portfolio. In an effort to minimize credit risk, each of the Banks follows a
credit administration program, including specific lending authorities for each
loan officer, a system of loan committees to review and approve loans, and a
loan review and credit quality rating system. These programs assist in the
evaluation of the quality of new loans and in the identification of problem or
potential problem credits and enable management to determine the adequacy of the
allowance for loan losses.
Total loans, net of unearned income, were $223.1 million at March 31,
1997, compared to $217.6 million at December 31, 1996, and averaged $218.9
million for the three months ended March 31, 1997. Total loans, net of unearned
income, averaged $164.3 million in 1996 compared with $91.5 million in 1995. At
year end 1996, loans net of unearned income totaled $217.6 million compared to
$113.1 million at December 31, 1995, an increase of $104.5 million. Of this
$104.5 million increase, $87.3 million is attributable to the acquisition of the
Eminence Bank and the remaining $17.2 million increase is due to a 15.2% growth
in loans at the other Banks.
35
<PAGE>
The following table presents a summary of the Company's loan portfolio by
category for each of the last five years. Other than the categories noted, there
is no concentration of loans in any industry greater than 5% in the portfolio.
The Company has no foreign loans or highly leveraged transactions in its loan
portfolio.
Loan Portfolio Composition
<TABLE>
<CAPTION>
March 31, December 31,
---------------- ----------------------------------------------------------------------------------------------
1997 % 1996 % 1995 % 1994 % 1993 % 1992 %
--------- ------ ---------- ------- --------- ------ ---------- ------ ---------- ------ --------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial,
secured by
real estate....... $ 60,214 26.7% $ 59,834 27.2% $ 39,357 34.6% $30,191 37.1% $28,808 38.5% $22,313 34.0%
Commercial,
other........... 37,388 16.6 33,908 15.4 17,889 15.7 16,782 20.6 14,404 19.2 15,585 23.7
Real estate
construction.... 3,315 1.5 4,138 1.9 2,119 1.9 1,822 2.2 881 1.2 708 1.1
Real estate
mortgage........ 78,595 34.9 76,600 34.9 32,678 28.7 21,700 26.6 20,259 27.1 16,340 24.9
Agricultural...... 9,731 4.3 10,050 4.6 5,216 4.6 1,073 1.3 992 1.3 1,217 1.9
Consumer.......... 35,504 15.8 33,751 15.4 16,087 14.1 9,647 11.9 9,252 12.4 9,167 13.9
Other............. 450 0.2 1,351 0.6 429 0.4 274 0.3 247 0.3 316 0.5
-------- ------ -------- ------ -------- ----- ------- ----- ------ ----- ------ ------
Total loans..... 225,197 100.0% 219,632 100.0% 113,775 100.0% 81,489 100.0% 74,843 100.0% 65,646 100.0%
===== ===== ===== ===== ===== =====
Less unearned
income........ 2,105 2,045 711 213 393 487
------- ------- ------ ------ ------ ------
Total loans
net of
unearned
income...... $223,092 $217,587 $113,064 $81,276 $74,450 $65,159
======= ======= ======= ====== ====== ======
</TABLE>
36
<PAGE>
Commercial loans generally are made to small-to-medium size businesses
located within a Bank's defined market area and typically are generally secured
by business assets and guarantees of the principal owners. Real estate mortgage
loans include residential properties and generally do not exceed 80% of the
value of the real property securing the loan, based on recent independent
appraisals. The Company's real estate mortgage loan portfolio primarily consists
of adjustable rate residential mortgage loans. The origination of these mortgage
loans can be more difficult in a low interest rate environment where there is a
significant demand for fixed rate mortgages. Consumer loans generally are made
to individuals living in a Bank's defined market area who are known to the
Bank's staff. Consumer loans are made for terms of up to seven years on a
secured or unsecured basis. While consumer loans generally provide the Company
with increased interest income, consumer loans may involve a greater risk of
default. Loss experience in all categories has remained low over the past five
years, with net charge offs being .36% of loans in 1996 and .04% in 1995. With
respect to consumer loans in particular, net charge offs for the year ended
December 31, 1996 were $436,000, or 1.38% of total consumer loans outstanding at
December 31, 1996, and $23,000 in 1995, or .14% of total consumer loans
outstanding at December 31, 1995. This increase is primarily attributable to the
loans acquired in the Eminence and Sharpsburg Bank acquisitions, which
acquisitions occurred in 1996 and 1995, respectively.
The following table sets forth the maturity distribution and interest
sensitivity of selected loan categories at December 31, 1996. Maturities are
based upon contractual terms. The Company's policy is to specifically review and
approve any loan renewed; no loans are automatically rolled over.
<TABLE>
<CAPTION>
One
Through Over
One Year Five Five Total
or Less Years Years Loans
------- ----- ----- -----
(Dollars in thousands)
<S> <C> <C> <C> <C>
Commercial, secured by real estate................. $16,763 $10,347 $32,724 $ 59,834
Commercial, other.................................. 22,679 8,183 3,046 33,908
Real estate construction........................... 4,107 - 31 4,138
Agricultural....................................... 6,641 1,783 1,626 10,050
------- ------- ------- --------
Total..................................... $50,190 $20,313 $37,427 $107,930
====== ====== ====== =======
Fixed rate loans................................... $21,311 $11,782 $12,931 $46,024
Floating rate loans................................ 26,992 9,234 25,680 61,906
------ ------- ------- --------
Total..................................... $48,303 $21,016 $38,611 $107,930
====== ====== ====== =======
</TABLE>
37
<PAGE>
Nonperforming assets
Nonperforming assets consist of loans on which interest is no longer
accrued, certain restructured loans where interest rate or other terms have been
renegotiated, accruing loans past due 90 days or more and real estate acquired
through foreclosure.
The Company discontinues the accrual of interest on loans that become
90 days past due as to principal or interest unless they are adequately secured
and in the process of collection. A loan remains in a nonaccrual status until
doubts concerning the collectibility no longer exist. A loan is classified as a
restructured loan when the interest rate is materially reduced or the term is
extended beyond the original maturity date because of the inability of the
borrower to service the loan under the original terms. Other real estate is
recorded at the lower of cost or fair value less estimated costs to sell.
38
<PAGE>
A summary of the components of nonperforming assets, including several
ratios using period-end data, is shown below:
Nonperforming Assets
<TABLE>
<CAPTION>
March 31, December 31,
--------- -----------------------------------------------
1997 1996 1995 1994 1993 1992
--------- ------ --------- ------- ------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Nonaccrual loans ................... $ 426 $ 423 $ 592 $ 46 $ 749 $ 473
Accruing loans which are
contractually past due
90 days or more .................. 887 528 456 219 407 291
Restructured loans ................. -- -- -- -- -- --
------ ------ ------ ------ ------ ------
Total nonperforming and
restructured loans ............. 1,313 951 1,048 265 1,156 764
Other real estate and in-substance
foreclosures ..................... 524 485 132 393 51 328
------ ------ ------ ------ ------
Total nonperforming and
restructured loans and
other real estate ............. $1,837 $1,436 $1,180 $ 658 $1,207 $1,092
====== ====== ====== ====== ====== ======
Nonperforming and restructured
loans as a percentage of net loans .59% .44% .93% .32% 1.55% 1.17%
Nonperforming and restructured
loans and other real estate
as a percentage of total assets .. .62% .49% .76% .57% 1.11% 1.09%
</TABLE>
39
<PAGE>
The above table reflects all loans where known information about the
possible credit problems of the borrower caused management to have doubts as to
the ability of borrowers to comply with the loan repayment terms. The Company is
unaware of any trends, events, uncertainties or current recommendations by
regulatory authorities that will have, or that are reasonably likely to have a
material adverse effect.
Nonaccrual loans at December 31, 1996, were $423,000 compared to
$592,000 at December 31, 1995 and $46,000 at December 31, 1994. The increase
from 1994 is due to the acquisition of the Sharpsburg Bank on October 31, 1995,
which accounted for all of the nonaccrual loans at December 31, 1996, and
$539,000 of the total at December 31, 1995. Total nonperforming assets at
December 31, 1996 were $1.4 million, an increase of $256,000 from the $1.2
million reported at December 31, 1995. Of the $1.4 million total nonperforming
assets at December 31, 1996, $329,000 relates to the Eminence Bank. Excluding
the Eminence Bank, total nonperforming assets decreased $73,000 from December
31, 1995, to December 31, 1996. Total nonperforming assets at December 31, 1995,
were $522,000 more than the year-end 1994 amount of $658,000.
The Company continues to follow its long-standing policy of not
engaging in international lending and not concentrating lending activity in any
one industry.
The following table reflects interest income on nonaccrual and
restructured loans for the periods indicated.
<TABLE>
<CAPTION>
Three Months Ended
March 31, Years Ended December 31,
------------------ --------------------------------------------------------------
1997 1996 1995 1994 1993 1992
------------------ ----------- ----------- ----------- ---------- ---------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Contractual interest............ $10 $64 $227 $9 $21 $50
Interest recognized............. - 2 22 - 6 3
</TABLE>
Investment Activities
The securities portfolio consists of debt and equity securities which
provide the Company with a long-term, relatively stable source of income.
Additionally, the investment portfolio provides a balance to interest rate and
credit risks in other categories of the balance sheet. The securities portfolio
is also used as a secondary source of liquidity by the Company. The Company has
classified all municipal securities and certain U. S. Treasury and Agency
securities as held to maturity based on management's positive intent and ability
to hold such securities to maturity. These municipal securities provide tax-free
income and are within management's guidelines with respect to credit risk and
market risk. The municipal securities have been issued principally by Kentucky
municipalities. The U. S. Treasury and Agency securities are held as a source of
stable, long-term income which can be used as collateral to secure municipal
deposits and repurchase agreements. All other investment securities are
classified as available for sale. The securities portfolio does not contain
significant holdings in mortgage-backed securities, collateralized mortgage
obligations or other mortgage-related derivative products and/or structured
notes.
40
<PAGE>
Securities as a percentage of average interest-earning assets decreased
from 20.3% in 1994 to 18.6% in 1995, 18.3% in 1996 and 16.5% in the first
quarter of 1997. At December 31, 1996, investment securities represented 15.7%
of interest-earning assets. These decreases in securities reflect management's
emphasis on originating higher yielding loans and placing a lesser reliance on
the securities portfolio for sources of income.
At March 31, 1997, and December 31, 1996 and 1995, the Company had an
investment in noncumulative perpetual preferred stock of First Guaranty Bank,
Hammond, Louisiana. The market value of this investment approximated its book
value which totaled $2.0 million at March 31, 1997, and December 31, 1996 and
1995. The dividend rate on the preferred stock is 2% in excess of the prime rate
as in effect from time to time. See "Certain Relationships and Related
Transactions."
The following tables present the carrying values and maturity
distribution of investment securities.
Carrying Value of Securities
<TABLE>
<CAPTION>
March 31, December 31,
------------------- ----------------------------------------
1997 1996 1995 1994
------------------- ------------- ------------- ----------
(Dollars in thousands)
<S> <C> <C> <C> <C>
U.S. Treasury and Federal agencies:
Available-for-sale.................. $18,361 $17,418 $13,153 $ 8,698
Held-to-maturity.................... 7,983 8,387 2,300 4,221
State and municipal obligations:
Available-for-sale.................. 1,716 1,621 - -
Held-to-maturity.................... 13,425 12,190 6,347 4,965
Equity securities:
Available-for-sale.................. 2,775 2,788 2,819 1,806
Held-to-maturity.................... - - - -
Other securities:
Available-for-sale.................. - - - -
Held-to-maturity.................... 387 416 18 -
Total securities:
Available-for-sale.................. 22,852 21,827 15,972 10,504
Held-to-maturity.................... 21,795 20,993 8,665 9,186
------ ------ ------ ------
Total................................. $44,647 $42,820 $24,637 $19,690
====== ====== ====== ======
</TABLE>
41
<PAGE>
Maturity Distribution of Securities
March 31, 1997
<TABLE>
<CAPTION>
One Five
Year Through Through Over
or Five Ten Ten Other Market
Less Years Years Years Securities Total Value
---- ----- ----- ----- ---------- ----- -----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury and Federal
agencies:
Available-for-sale.......... $ 7,800 $ 9,458 $ 1,329 $ - $ - $18,587 $18,361
Held-to-maturity............ 1,350 6,035 598 - - 7,983 7,975
State and municipal
obligations:
Available-for-sale.......... 350 1,333 - - - 1,683 1,716
Held-to-maturity............ 1,545 3,277 5,510 3,093 - 13,425 13,545
Other securities:
Available-for-sale.......... - - - - 2,900 2,900 2,775
Held-to-maturity............ - - - - 387 387 386
Total securities:
Available-for-sale.......... 8,150 10,791 1,329 - 2,900 23,170 22,852
Held-to-maturity............ 2,895 9,312 6,108 3,093 387 21,795 21,906
-------- ------ ------ ------ ------- ------ ------
Total......................... $11,045 $20,103 $ 7,437 $ 3,093 $ 3,287 $44,965 $44,758
====== ====== ====== ====== ====== ====== ======
Percent of total.............. 24.56% 44.71% 16.54% 6.88% 7.31% 100.00% 99.54%
Weighted average yield*....... 5.71% 6.01% 6.48% 5.94% 9.48% 6.26% 6.29%
</TABLE>
*The weighted average yields are calculated on historical cost on a non
tax-equivalent basis.
Deposit Activities
Managing the mix and repricing of deposit liabilities is an important
factor affecting the Company's ability to maximize its net interest margin. The
strategies used to manage interest-bearing deposit liabilities are designed to
adjust as the interest rate environment changes. In this regard, management of
the Company regularly assesses its funding needs, deposit pricing, and interest
rate outlooks.
For the three months ended March 31, 1997, total deposits averaged
$235.9 million. Total deposits averaged $185.5 million in 1996, a 65.5% increase
over 1995. Total deposits averaged $112.1 million in 1995, an increase of $11.6
million or 11.57% over 1994. Noninterest bearing deposits averaged 10.97% of
total deposits in 1996, compared to 11.5% in 1995 and 11.4% in 1994.
Deposits totaled $239.9 million at March 31, 1997, compared to $235.6
million at December 31, 1996, an increase of $4.3 million. At December 31, 1996,
deposits totaled $235.6 million, compared to $136.2 million at December 31,
1995, an increase of $99.3 million, or 72.9%. Of this $99.3 million increase,
$89.6 million is attributable to the acquisition of the Eminence Bank. Excluding
the Eminence Bank, deposits increased $9.7 million from December 31, 1995, to
December 31, 1996, representing a 7.1% increase.
42
<PAGE>
The table below provides information on the maturities of time deposits
of $100,000 or more at March 31, 1997 and December 31, 1996.
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
---- ----
(In thousands)
<S> <C> <C>
Maturing 3 months or less............................ $ 4,822 $ 9,891
Maturing over 3 months through 6 months.............. 4,921 3,791
Maturing over 6 months through 12 months............. 14,362 11,061
Maturing over 12 months.............................. 11,679 8,907
------ ------
Total........................................... $35,784 $33,650
====== ======
</TABLE>
43
<PAGE>
The following table sets forth the average amount of and average rate
paid on selected deposit categories during the three months ended March 31,
1997, and during the past three full years.
<TABLE>
<CAPTION>
For the Three Months Ended
March 31, For the Year Ended December 31,
--------------------- -----------------------------------------------------------------
1997 1996 1995 1994
--------------------- ------------------------------------------ ---------------------
Amount Rate (%) Amount Rate (%) Amount Rate (%) Amount Rate (%)
----------- -------- ---------- -------- --------- -------- --------- -----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Demand................................ $ 23,347 - % $ 20,335 - % $ 12,841 - % $11,414 - %
NOW and money market accounts......... 39,990 3.52 28,439 3.40 15,175 2.51 15,299 2.55
Savings............................... 25,984 3.51 19,286 2.98 15,009 2.89 17,796 2.95
Certificates of deposit and other time 146,604 5.63 117,390 5.74 69,040 5.73 55,932 4.42
------- ---- ------- ---- ------- ---- ------- ----
Total............................ $235,925 4.48% $185,450 4.46% $112,065 4.25% $100,441 3.37%
======= ===== ======= ===== ======= ===== ======= ====
</TABLE>
44
<PAGE>
Capital
On May 22, 1996, the Company completed its initial public offering of
2,000,000 common shares at an offering price of $13.00 per share and on June 19,
1996, the Company completed the sale of an additional 300,000 common shares
(which represented the Underwriters' over-allotment option) at a price of $13.00
per share. Total proceeds to the Company, net of the underwriting discount and
issuance costs, were $27.1 million. The net proceeds were used to retire
existing debt, $5.0 million, purchase the Eminence Bank, $12.6 million, and
retire the Eminence Bank's existing debt of $1.9 million. The remaining $7.6
million will be used to fund the future growth of the Company, including
additional acquisitions.
The Company's principal source of funds for dividend payments to
stockholders is dividends received from the Banks. Banking regulations limit the
amount of dividends that may be paid without prior approval of regulatory
agencies. Under these regulations, the amount of dividends that may be paid
without prior approval of regulatory agencies in any calendar year is limited to
the current year's net profits, as defined, combined with the retained net
profits of the preceding two years, subject to the capital requirement
limitations. During 1997, the Banks could, without prior approval, declare
dividends to the Company of approximately $2.7 million plus any 1997 net profits
retained to the date of the dividend declaration.
The Company's primary regulator, the Federal Reserve (which regulates
bank holding companies), has issued guidelines classifying and defining bank
holding company capital into the following components: (1) Tier 1 Capital, which
includes tangible stockholders' equity for common stock and certain qualifying
perpetual preferred stock, and (2) Tier 2 Capital, which includes a portion of
the allowance for loan losses, certain qualifying long-term debt and preferred
stock that does not qualify as Tier 1 Capital. The risk-based capital guidelines
require financial institutions to maintain specific defined credit risk factors
(risk-adjusted assets). As of March 31, 1997, the minimum Tier 1 and the
combined Tier 1 and Tier 2 capital ratios required by the Federal Reserve were
4% and 8%, respectively.
In addition to the risk-based capital guidelines discussed above, the
Federal Reserve requires that a bank holding company which meets that
regulator's highest performance and operating standards maintain a minimum
leverage ratio (Tier 1 capital as a percentage of tangible assets) of 3%. Those
bank holding companies anticipating significant growth are expected to maintain
a leverage ratio above the minimum ratio. Minimum leverage ratios for each
entity will be evaluated through the ongoing regulatory examination process.
Regulations have also been issued by the FDIC establishing similar risk- based
and leverage capital ratios which apply to each bank as a separate entity. See
"Supervision and Regulation -- Bank Regulation -- Regulatory Capital
Requirements."
The Company's capital ratios at March 31, 1997, and at December 31,
1996 and 1995, were as follows:
45
<PAGE>
<TABLE>
<CAPTION>
March 31, December 31,
----------------------- --------------------------------------
1997 1996 1995
----------------------- ----------------- ------------------
(Dollars in thousands)
<S> <C> <C> <C>
Stockholders' equity......................................... $ 40,409 $ 39,863 $ 11,215
Less disallowed amounts of goodwill and other intangibles.... (5,517) (5,554) (325)
Less disallowed amounts of deferred tax assets............... - - (210)
Add unrealized loss on securities available-for-sale......... 169 55 50
--------- --------- ---------
Tier 1 capital............................................... 35,061 34,364 10,730
Tier 2 capital adjustments:
Allowance for loan losses.................................. 2,669 2,522 1,416
------- ------- -------
Total capital................................................ $ 37,730 $ 36,886 $ 12,146
======= ======= =======
Total risk-weighted assets................................... $220,292 $215,438 $113,280
======= ======= =======
Tier 1 capital ratio......................................... 15.92% 15.95% 9.47%
Total capital ratio.......................................... 17.13% 17.12% 10.72%
Leverage ratio............................................... 12.25% 12.04% 6.92%
</TABLE>
Liquidity
Liquidity for a financial institution can be expressed in terms of
maintaining sufficient cash flows to meet both existing and unplanned
obligations in a cost effective manner. Adequate liquidity allows the Company to
meet the demands of both the borrower and the depositor on a timely basis, as
well as pursuing other business opportunities as they arise. Thus, liquidity
management embodies both an asset and liability aspect. Liquidity is maintained
through the Company's ability to convert assets into cash, manage the maturities
of liabilities and generate funds through the attraction of local deposits.
As part of its liquidity management, the Company maintains funding
relationships with the FHLB and other financial institutions, including approval
for a two year $20 million revolving line of credit available for both general
corporate purposes and future acquisitions. The Company prefers to manage its
liquidity requirements generally through the matching of maturities of assets
and liabilities.
The cash flow statements for the periods presented in the financial
statements provide an indication of the Company's sources and uses of cash as
well as an indication of the ability of the Company to maintain an adequate
level of liquidity. A discussion of the cash flow statements for 1996, 1995 and
1994 follows.
Net cash provided from operating activities was $5.2 million, $1.8
million and $1.1 million for the years ended December 31, 1996, 1995 and 1994,
respectively. The increases in net cash provided from operating activities was
primarily due to higher net income and increases in non-cash expenses over the
three year period.
Cash used in investing activities was $38.3 million, $19.1 million and
$6.6 million for the years ended December 31, 1996, 1995 and 1994, respectively.
Cash was used to fund net loan growth, the acquisition of the Eminence Bank, and
the acquisition of additional premises and equipment. The Company's policy is to
reinvest the proceeds from the sale, maturity and call of investment securities
into similar type investment securities if such proceeds are not required to
fund loans. In 1996, the Company received $10.6 million and $2.2 million from
sales, calls and maturities of securities available for sale and securities held
to maturity, respectively, and purchased $10.9 million and $2.7 million of
securities available for sale and securities held to maturity, respectively. In
1995, the Company received proceeds of $11.9 million and $2.2 million from
sales, calls and
46
<PAGE>
maturity of securities available for sale and securities held to maturity and
purchased $13.1 million and $1.7 million, respectively.
Cash provided from financing activities was $33.9 million, $18.6
million and $5.6 million for the years ended December 31, 1996, 1995 and 1994,
respectively. The cash provided from financing activities in 1996 included $27.1
million from the issuance of common stock - see "-- Capital." In 1995 and 1994,
the cash provided from financing activities was primarily attributable to
deposit growth and proceeds from debt and other borrowings.
Liquidity risk is the possibility that the Company may not be able to
meet its cash requirements. Management of liquidity risk includes maintenance of
adequate cash and sources of cash to fund operations and meet the needs of
borrowers, depositors and creditors. Liquidity must be maintained at a level
which is adequate but not excessive. Excess liquidity has a negative impact on
earnings resulting from the lower yields on short-term assets.
In addition to cash, cash equivalents and Federal funds sold, the
securities portfolio provides an important source of liquidity. The total of
securities maturing within one year along with cash, due from banks and Federal
funds sold totaled $26.7 million as of December 31, 1996. Additionally,
securities available-for-sale with maturities greater than one year and equity
securities totaled $15.8 million at December 31, 1996. These securities are
available to meet liquidity needs on a continuing basis.
To maintain a desired level of liquidity, the Company has several
sources of funds available. One is the cash flow generated daily from the Banks'
various loan portfolios in the form of principal and interest payments. Another
source is its deposit base. The Company maintains a relatively stable base of
customer deposits which has historically exhibited steady growth. This growth,
when combined with other sources, is expected to be adequate to meet its demand
for funds. Due to the nature of the markets served by the Banks, management
believes that the majority of certificates of deposit of $100,000 or more are no
more volatile than its core deposits. During a period of relatively stable
interest rates, these balances have remained relatively the same for 1996 and
1995. Certificates of deposits and other time deposits of $100,000 or more
represented approximately 14% and 15% of total deposits for 1996 and 1995,
respectively. A number of techniques are used to measure the liquidity position,
including the utilization of several ratios that are presented below.
These ratios are calculated based on annual averages for each year.
Liquidity Ratios
<TABLE>
<CAPTION>
For the Three Months
Ended March 31, For the Years Ended December 31,
--------------- ------------------------------------------
1997 1996 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Total loans/total deposits................... 92.77% 88.61% 81.66% 78.95%
Total loans/total deposits less float........ 94.13% 90.06% 83.30% 83.44%
Net short-term borrowings/total assets....... 4.22% 3.22% 0.87% 0.43%
</TABLE>
This analysis shows that the Company's loan to deposit ratios have
continued to increase due to increases in loan demand that exceed the increase
in deposit activity.
47
<PAGE>
Information regarding short-term borrowings for the periods indicated
is presented in the following table.
<TABLE>
<CAPTION>
For the Three
Months Ended For the Year Ended
March 31, December 31,
---------------------- ------------------------------------------------
1997 1996 1995 1994
---------------------- --------------- --------------- -------------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Federal funds purchased and repurchase agreements:
Balance at period end................................. $ 5,779 $ 5,599 $ 747 $ -
Weighted average rate at period end................... 5.18% 5.05% 3.25% -%
Average balance during the period..................... $ 5,733 $ 3,582 $ 400 $ 302
Weighted average rate during the period............... 5.16% 5.14% 3.85% 5.30%
Maximum month-end balance............................. $ 5,953 $ 6,496 $ 747 $ 650
Other short-term borrowings:
Balance at period end................................. $7,200 $7,055 $ 755 $ 755
Weighted average rate at period end................... 5.62% 5.57% 6.05% 5.53%
Average balance during the period..................... $ 6,614 $ 3,660 $ 713 $ 179
Weighted average rate during the period............... 5.64% 5.68% 6.17% 5.58%
Maximum month-end balance............................. $ 7,200 $ 8,555 $ 755 $ 755
Total short-term borrowings:
Balance at period end................................. $12,979 $12,654 $1,502 $ 755
Weighted average rate at period end................... 5.42% 5.34% 4.88% 5.53%
Average balance during the period..................... $12,347 $7,242 $1,113 $ 481
Weighted average rate during the period............... 5.42% 5.41% 5.34% 5.40%
Maximum month-end balance............................. $13,153 $15,051 $1,502 $1,405
</TABLE>
Substantially all federal funds purchased and repurchase agreements
mature in one business day. Other short-term borrowings principally represent
FHLB advances (with varying maturity dates), which are funding residential
mortgage and commercial loans.
Interest Rate Sensitivity
The interest spread and liability funding discussed above are directly
related to changes in asset and liability mixes, volumes, maturities and
repricing opportunities of interest-earning assets and interest-bearing
liabilities. Interest-sensitive assets and liabilities are those which are
subject to being repriced in the near term, including both floating or
adjustable rate instruments and instruments approaching maturity. The interest
sensitivity gap is the difference between total interest-sensitive assets and
total interest-sensitive liabilities. Interest rates on the Company's various
asset and liability categories do not respond uniformly to changing market
conditions. Interest rate risk is the degree to which interest rate fluctuations
in the marketplace can affect net interest income.
The need for interest sensitivity gap management is most critical in
times of a significant change in overall interest rates. Management generally
seeks to limit the exposure of the Company to interest rate fluctuations by
maintaining a relatively balanced mix of rate sensitive assets and liabilities
on a one-year time horizon. This mix is altered periodically depending upon
management's assessment of current business conditions and the interest rate
outlook.
48
<PAGE>
One tool which is used to monitor interest rate risk is the interest
sensitivity analysis as shown in the table below. This analysis reflects the
repricing characteristics of assets and liabilities over various time periods.
The gap indicates the level of assets and liabilities that are subject to
repricing over a given time period.
As shown by the interest rate sensitivity analysis as of March 31,
1997, the total amount of the Company's interest-earning assets repricing during
the first year is greater than the total amount of its interest-bearing
liabilities repricing during this period. This position, which is normally
termed a positive interest sensitivity gap, generally allows for enhanced net
interest income during periods of increasing interest rates. This positive gap
is within the Company's internal policy guidelines and is not expected to impact
significantly the Company's net interest income during a period of declining
interest rates.
The following table provides an analysis of the Company's interest rate
sensitivity at March 31, 1997.
<TABLE>
<CAPTION>
0 - 90 91 Days - 1 - 5 Over 5
Days 1 Year Years Years Total
---- ------ ----- ----- -----
(Dollars in thousands)
Assets:
<S> <C> <C> <C> <C> <C>
Loans, net of unearned income............. $58,963 $64,779 $54,901 $44,449 $223,092
Investment securities..................... 7,741 8,177 18,980 9,749 44,647
Federal funds sold........................ 8,285 - - - 8,285
------ -------- -------- -------- -------
Total earning assets.................... 74,989 72,956 73,881 54,198 276,024
Sources of Funds:
NOW, money market and savings............. 27,893 14,393 15,636 17,613 75,535
Time deposits............................. 26,508 72,160 56,019 5,437 160,124
Short-term borrowings..................... 679 - - 5,778 6,457
-------- -------- -------- ------ -------
Total interest-bearing deposits......... 55,080 86,553 71,655 28,828 242,116
Interest Sensitivity Gap:
For the period............................ $19,909 $(13,597) $ 2,226 $25,370 $ 33,908
====== ======= ====== ====== =======
Cumulative................................ $19,909 $ 6,312 $ 8,538 $33,908
====== ======= ====== ======
Cumulative as a percent
of earnings assets...................... 7.21% 2.29% 3.09% 12.28%
==== ==== ==== =====
</TABLE>
BUSINESS OF THE COMPANY
The Company is organized under the laws of the Commonwealth of Kentucky
and is registered as a bank holding company under the Bank Holding Company Act
of 1956, as amended ("BHCA"). The Company only conducts business through the
Banks and other direct or indirect subsidiaries.
When appropriate and economically advantageous, the Company centralizes
certain of the Banks' back office, support and investment functions in order to
achieve consistency and cost efficiency in the delivery of products and
services. The Company centrally provides services such as data processing,
operations support, accounting, loan review and compliance and internal auditing
to the Banks to enhance their ability to compete effectively. The Company also
provides overall direction in the areas of credit policy and administration,
strategic planning, marketing, investment portfolio management and other
financial and administrative services. Each Bank participates in product devel-
49
<PAGE>
opment by advising management of new products and services needed by their
customers and desirable changes to existing products and services.
Each of the Banks provides a wide range of retail and commercial
banking services, including commercial, real estate, agricultural and consumer
lending; depository and funds transfer services; collections; safe deposit
boxes; cash management services; and other services tailored for both
individuals and businesses. The Georgetown Bank, the Eminence Bank, and the
Vanceburg Bank also offer limited trust services and act as executor,
administrator, trustee and in various other fiduciary capacities. Through
Premier Data Services, Inc., the Company's data processing subsidiary, the
Company currently provides centralized data processing services to three of the
Banks as well as two non-affiliated banks.
The Banks' residential mortgage lending activities consist primarily of
loans for purchasing personal residences, or loans for commercial or consumer
purposes secured by residential mortgages. Consumer lending activities consist
of traditional forms of financing for automobile and personal loans.
The Banks' range of deposit services include checking accounts, NOW
accounts, savings accounts, money market accounts, club accounts, individual
retirement accounts, certificates of deposit and overdraft protection. Deposits
of the Banks are insured by the Bank Insurance Fund administered by the FDIC.
County Finance, Inc., a subsidiary of the Vanceburg Bank, is a consumer
loan company that provides secured and unsecured loans to customers who would
generally not qualify, due to credit experience or other factors, for loans at
that Bank.
Competition
The Banks encounter strong competition both in making loans and
attracting deposits. The deregulation of the banking industry and the widespread
enactment of state laws that permit multi-bank holding companies as well as the
availability of nationwide interstate banking has created a highly competitive
environment for financial services providers. In one or more aspects of its
business, each Bank competes with other commercial banks, savings and loan
associations, credit unions, finance companies, mutual funds, insurance
companies, brokerage and investment banking companies and other financial
intermediaries operating in its market and elsewhere, many of whom have
substantially greater financial and managerial resources. With respect to the
Georgetown Bank and the Ger- mantown Bank, primary competitors include large
bank holding companies having substantially greater resources that offer certain
services that these two Banks do not currently provide. Each Bank seeks to
minimize the competitive effect of larger financial institutions through a
community banking approach that emphasizes direct customer access to the Bank's
president and other officers in an environment conducive to friendly, informed
and courteous service.
Management believes that each Bank is well positioned to compete
successfully in its respective primary market area, although no assurances can
be given. Competition among financial institutions is based upon interest rates
offered on deposit accounts, interest rates charged on loans and other credit
and service charges, the quality and scope of the services rendered, the
convenience of the banking facilities and, in the case of loans to commercial
borrowers, relative lending limits. Management believes that the commitment of
its Banks to personal service, innovation and involvement in their respective
communities and primary market areas, as well as their commitment to quality
community banking service, are factors that contribute to their competitiveness.
50
<PAGE>
Personnel
As of March 31, 1997, the Company and its subsidiaries collectively had
approximately 135 full-time equivalent employees. These employees are not
represented by any collective bargaining unit. Relations between management and
employees are considered good.
Properties
The Company owns all the properties on which it conducts its business,
either directly or through subsidiaries.
The Vanceburg Bank, in addition to its main office at 400 Second
Street, Vanceburg, Kentucky, has four branch offices in Lewis County. The
Germantown Bank, with its main office on Highway 10 in Germantown, has no other
offices. The Georgetown Bank, in addition to its main office, has one branch in
Scott County. The Sharpsburg Bank, with its main office located on Main Street
in Sharpsburg, has no other offices, and the Eminence Bank with its main office
on Main Street in Eminence, Kentucky, also has two branches located in Henry
County.
Legal Proceedings
The Banks are respectively parties to legal actions that routinely
arise out of the normal course of the commercial banking business. In
management's opinion, the outcome of such matters, individually or in the
aggregate, will not have a material adverse impact on the results of operations
or financial position of the Company.
MANAGEMENT
Directors and Executive Officers
The Board of Directors of the Company is currently composed of seven
members, each of whom serves for a term of one year. Executive officers are
elected annually by the Board of Directors and serve at the Board's discretion.
51
<PAGE>
The following table sets forth information with respect to the
directors and executive officers of the Company.
<TABLE>
<CAPTION>
Current
Term as
Director/Executive Director Director
Officer Age Position Since Expires
- ------------------------------ --- ------------------------------------------ ----- -------
<S> <C> <C> <C> <C>
J. Howell Kelly 51 President and Chief Executive 1995 1998
Officer
Marshall T. Reynolds 60 Chairman of the Board 1996 1998
Gardner E. Daniel 61 Senior Vice President, Assistant 1995 1998
Secretary and Director
Toney Adkins 47 Director 1991 1998
Benjamin T. Pugh 48 Executive Vice President, 1991 1998
Treasurer and Director
Wilbur M. Jenkins 69 Director 1995 1998
E.V. Holder, Jr. 64 Secretary and Director 1991 1998
</TABLE>
Biographical Information
Directors and Executive Officers of the Company. The principal
occupation of each director and executive officer of the Company is set forth
below.
J. Howell Kelly became Chief Executive Officer of the Company in
January 1996, and President of the Company in February 1995. Mr. Kelly has been
a director of Cambridge Financial Services, Inc., Iselin, New Jersey, a
financial advisory and management consulting firm, since 1992. Prior to 1992,
Mr. Kelly was an independent consultant providing financial advice to financial
institutions, individuals and industrial corporations. From 1983 until December
1994, Mr. Kelly also served as a director of Banc One West Virginia, Inc. (or
its predecessor, Key Centurion Bancshares, Inc.) and served as Chairman of that
corporation's audit committee.
Benjamin T. Pugh assumed the positions of Executive Vice President and
Treasurer of the Company in January 1996. Prior to this, Mr. Pugh was Chief
Executive Officer of the Company and prior to February 1995, also its President.
He is also President and Chief Executive Officer of the Vanceburg Bank and the
Germantown Bank. Mr. Pugh is also Chairman of Premier Data Services, Inc.
Gardner E. Daniel became Senior Vice President of the Company in April
1995 and Assistant Secretary in January 1996. He has been a director of the
Company since April 1995. Mr. Daniel has served as President and Chief Executive
Officer of both the Georgetown Bank and the Sharpsburg Bank since April 1992 and
November 1995, respectively.
E. V. Holder, Jr. has been a Director, and has served as Secretary of
the Company since July 1991. Mr. Holder is an attorney.
Wilbur M. Jenkins has been a Director of the Company since April 1995.
Mr. Jenkins has been retired for over five years. He previously owned a cable
manufacturing business.
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<PAGE>
Toney K. Adkins has been a Director of the Company since July 1991. Mr.
Adkins has been employed by Champion Industries, Inc., a commercial printing and
office supplies business, since November 1995 where he is Vice President of
Administration. Prior to this, he was President of KYOWVA Corrugated, Inc.
Marshall T. Reynolds serves as the Company's Chairman of the Board.
From 1985 to November 1993, Mr. Reynolds also served as Chairman of the Board of
Directors of Banc One West Virginia, Inc. (or its predecessor, Key Centurion
Bancshares, Inc.). He is Chairman and Chief Executive Officer of Champion
Industries, Inc., a commercial printer and provider of office supplies.
53
<PAGE>
Executive Compensation
Summary Compensation Table. The following table summarizes compensation
earned in 1996, 1995 and 1994 by the Company's Chief Executive Officer and
certain of the Company's other executive officers who earned a salary and/or
bonus in 1996 that exceeded $100,000. Except as set forth below, no executive
officer had a salary and bonus during the year ended December 31, 1996, that
exceeded $100,000 for services rendered in all capacities to the Company.
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation
--------------------------------------------- -------------
Securities All Other
Name and Other Annual Underlying Compensation
Principal Position Year Salary Bonus Compensation(1) Options (#) (1)
- ------------------ ---- ------ ----- --------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
J. Howell Kelly 1996 $110,807 $36,000 $16,116 20,000 $9,105
President & CEO (2) 1995 82,385 36,000 5,325 -- --
Benjamin T. Pugh 1996 90,536 36,000 3,450 20,000 7,901
Executive President (3) 1995 82,500 36,000 3,600 -- 7,395
1994 80,000 30,000 2,700 -- 7,386
Gardner E. Daniel 1996 87,715 15,000 3,600 -- 6,414
Senior Vice President (4) 1995 83,178 15,000 2,100 -- --
1994 79,891 8,250 1,250 -- --
</TABLE>
- ---------------
(1) Employer contributions to the Company's Profit Sharing Plan.
(2) Mr. Kelly became President and Chief Executive Officer on February 14,
1995. The salary for 1995 includes $17,000 paid by the Vanceburg Bank
during the period of January 1, 1995 through April 30, 1995 for
services rendered to that bank subsidiary. Other annual compensation
includes $14,400 in director's fees paid by bank subsidiaries of the
Company, as well as personal use of a company automobile valued at
$1,716.
(3) Salary and bonus amounts for all years were paid by the Vanceburg Bank
for services rendered by Mr. Pugh as President and Chief Executive
Officer of that bank subsidiary. Other annual compensation includes
director's fees paid by bank subsidiaries of the Company.
(4) Salary and bonus amounts for all years were paid by the Georgetown Bank
for services rendered by Mr. Daniel as President and Chief Executive
Officer of that bank subsidiary. Other annual compensation includes
director's fees paid by bank subsidiaries of the Company.
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<PAGE>
Stock Option Plan. The following table contains certain information
with respect to stock options granted in 1996 under the Company's 1996 Employee
Stock Ownership Incentive Plan to the named executive officers.
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
Individual Grants
-----------------
Number of % of Total Potential Realizable Value at
Securities Options Assumed Rates of Stock Price
Underlying Granted to Exercise or Appreciation for Option Term
Options Employees in Base Price Expiration
Name Grant Date Granted (#)(1) Fiscal Year ($/Sh) Date (2) 5%(3) 10%(3)
---- ---------- -------------- ----------- ------ -------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
J. Howell Kelly 5/15/96 20,000 50% 13.00 5/15/07 $163,513 $414,373
Benjamin T. Pugh 5/15/96 20,000 50% 13.00 5/15/07 163,513 414,373
</TABLE>
- -----------------
(1) Options for 7,000 shares became exercisable on November 15, 1996, options
for an additional 7,000 shares became exercisable on April 1, 1997 and
options for an additional 2,000 shares will become exercisable on April 1,
1998, April 1, 1999 and April 1, 2000 if on such vesting dates the
individual remains employed with the Company (subject to earlier vesting in
circumstances of death, disability or a change in control of the Company).
(2) The stock options are subject to termination prior to their expiration date
in the event of termination of employment.
(3) The potential realizable value reflected in the table represents the
difference between (i) the price the Common Stock would attain at the end
of the option's 10-year term if the price appreciated from the date of the
stock option grant at a rate of 5% or 10% per year (as the case may be),
and (ii) the option exercise price. The amounts shown in the table are the
result of multiplying the amount described above by the number of options
granted to the respective individual on the applicable grant date.
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
# of Securities Value of Unexercised
Underlying In-the-Money
Shares Acquired on Unexercised Options Options at FY-End
Name Exercise (#) Value Realized ($) FY-End (#)(1) ($)(1)(2)
---- -------------- ------------------ -------------- ---------
<S> <C> <C> <C> <C>
J. Howell Kelly -- -- 20,000 20,000
Benjamin T. Pugh -- -- 20,000 20,000
</TABLE>
- ------------------
(1) Options covering 13,000 of these shares were unexercisable at fiscal
year-end.
(2) The value of each unexercised in-the-money stock option is equal to the
difference between $14 (the closing price of the Common Stock on December
31, 1996) and the exercise price of the stock option.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company's subsidiaries have made, and expect to make in the future,
to the extent permitted by applicable federal and state banking laws, bank loans
in the ordinary course of business to directors and officers of the Company and
its subsidiaries, and their affiliates and associates, on substantially the same
terms, including interest rates and collateral, as those prevailing at the time
for comparable transactions with other persons. In the opinion of the Company,
such loans do not involve more than a normal risk of collectibility or present
other unfavorable features. In addition, the Company's banking subsidiaries have
engaged, and in the future may engage, in transactions with such persons and
their affiliates and associates as a depositary of funds, transfer agent,
registrar, fiduciary and provider of other similar services.
55
<PAGE>
In June, 1995, the Company made a $1,000,000 investment in First
Guaranty Bank, Hammond, Louisiana ("First Guaranty"), a commercial bank in which
the Company's Chairman of the Board, Marshall T. Reynolds, beneficially owns
41.4% of that bank's outstanding common stock.
Mr. Reynolds also serves as a director of First Guaranty. The Company's
investment in First Guaranty was made through the purchase of 1,000 shares of
Series B Preferred Stock (the "Series B Stock"), which is non-voting, is not
convertible into common stock of First Guaranty, and has a non-cumulative
quarterly dividend preference (on a parity with Series A Preferred Stock) in a
per annum amount equal to two percent in excess of "prime rate" (as published in
THE WALL STREET JOURNAL during the quarter for which any dividend on common
stock of First Guaranty is paid). The Company has received a quarterly dividend
in the full amount of the dividend preference for each quarter during which the
Series B Stock has been held by it. The Company's purchase of the Series B Stock
was funded through a credit facility with an unaffiliated commercial bank
lender. Under that credit facility, the Company pays interest on the outstanding
principal balance at an annual rate equal to that lender's prime rate. In
January, 1996, the Company acquired an additional 1,000 shares of Series B Stock
(and in connection therewith received a $50,000 cash payment from First
Guaranty) in consideration of its exchanging 1,000 shares of Series A Preferred
Stock of First Guaranty purchased by the Company at an aggregate cost of
$1,000,000 in September, 1994. The purchase of the Series A Preferred Stock was
financed under the same credit facility described above that was used to
purchase the Series B Stock in 1995. The Company determined that it was in it
best interests to exchange its Series A Preferred Stock for an additional Series
B Stock because (i) it no longer viewed any conversion of the Series A Preferred
Stock for common stock of First Guaranty as a viable opportunity in view of the
Company's strategic growth plans, and it regarded as attractive the $50,000
payment offered by First Guaranty to encourage the Company to exchange the
Series A Preferred Stock, thereby eliminating the Company's ability to convert
such stock into common stock, and (ii) it determined that an increase in the
dividend preference to two percent in excess of prime rate (which preference the
Series B Stock has), as opposed to one percent in excess of prime rate (which
preference the Series A Preferred Stock has), provided a more favorable yield on
a tax equivalent basis in view of the Company's strategic growth plans and its
determination that any conversion of Series A Preferred Stock was not a likely
event in the foreseeable future. Mr. Reynolds was not Chairman of the Board or a
director of the Company at the times when the Company's Board of Directors
determined to purchase the Series B Stock or acquire additional Series B Stock
in exchange for its Series A Preferred Stock in First Guaranty.
During the years ended December 31, 1996, 1995 and 1994, the Company or
its subsidiaries have paid approximately $241,000, $65,000 and $53,000,
respectively, for commercial printing services and office supplies from Champion
Industries, Inc., Huntington, West Virginia, of which the Company's Chairman of
the board, Marshall T. Reynolds, is its President and Chief Executive Officer
and a principal shareholder. The Company or its subsidiaries have also paid to
Champion Industries, Inc. approximately $317,000, $223,000, and $185,000 in
1996, 1995 and 1994, respectively, to permit employees of the Company and its
subsidiaries to participate in that other corporation's medical benefit plan.
The Company believes that the above transactions are on terms substantially the
same, or at least as favorable to the Bank, as those that would be entered into
with a non-affiliate.
56
<PAGE>
SUPERVISION AND REGULATION
Introduction
Bank holding companies and banks are extensively regulated under both
federal and state law. The following information describes certain aspects of
that regulation applicable to the Company and the Banks, and does not purport to
be complete. The discussion is qualified in its entirety by reference to all
particular statutory or regulatory provisions.
The Company is a legal entity separate and distinct from the Banks.
Accordingly, the right of the Company, and consequently the right of creditors
and shareholders of the Company, to participate in any distribution of the
assets or earnings of the Banks is necessarily subject to the prior claims of
creditors of the Banks, except to the extent that claims of the Company in its
capacity as creditor may be recognized. The principal source of the Company's
revenue and cash flow is dividends from the Banks. There are, however, legal
limitations on the extent to which a subsidiary bank can finance or otherwise
supply funds to its parent holding company.
The Company
General. As a registered holding company, the Company is regulated
under the BHCA and is subject to supervision and regular inspection by the
Federal Reserve. The BHCA requires, among other things, the prior approval of
the Federal Reserve in any case where the Company proposes to (i) acquire all or
substantially all of the assets of any bank, (ii) acquire direct or indirect
ownership or control of more than 5 percent of the voting shares of any bank, or
(iii) merge or consolidate with any other bank holding company.
Acquisitions/Permissible Business Activities. The BHCA currently
permits bank holding companies from any state to acquire banks and bank holding
companies located in any other state, subject to certain conditions, including
certain nationwide- and state-imposed concentration limits. Effective June 1,
1997, the Banks will have the ability, subject to certain restrictions,
including state opt-out provisions, to acquire by acquisition or merger branches
outside its home state. The establishment of new interstate branches also will
be possible in those states with laws that expressly permit it. Interstate
branches will be subject to certain laws of the states in which they are
located. Competition may increase further as banks branch across state lines and
enter new markets.
Under the BHCA, the Company is prohibited, with certain exceptions,
from acquiring direct or indirect ownership or control of more than 5 percent of
any class of voting shares of any nonbanking corporation. Further, the Company
may not engage in any business other than managing and controlling banks or
furnishing certain specified services to subsidiaries, and may not acquire
voting control of nonbanking corporations except those corporations engaged in
businesses or furnishing services that the Federal Reserve deems to be closely
related to banking.
Source of Strength Policy. Under Federal Reserve policy, a bank holding
company is expected to serve as a source of financial strength to each of its
subsidiary banks and to commit resources to support each such bank. Consistent
with its "source of strength" policy for subsidiary banks, the Federal Reserve
has stated that, as a matter of prudent banking, a bank holding company
generally should not maintain a rate of cash dividends unless its net income
available to common shareholders has been sufficient to fund fully the
dividends, and the prospective rate of earnings
57
<PAGE>
retention appears to be consistent with the corporation's capital needs, asset
quality and overall financial condition.
Bank Regulation
The Banks are state-chartered banks and, other than the Vanceburg Bank
are not members of the Federal Reserve System. As such they are subject to the
primary federal supervision of the FDIC under the Federal Deposit Insurance Act
(the "FDIA"), as well as the supervision, regulation and examination of the
Kentucky Department of Financial Institutions (the "Department", and together
with the FDIC and the Federal Reserve, the "Regulatory Authorities"). The
Vanceburg Bank, as a member of the Federal Reserve System, is subject to the
primary federal supervision of the Federal Reserve. Prior approval of the
Regulatory Authorities is required for the Banks to establish or relocate a
branch office or to engage in any merger, consolidation or significant purchase
or sale of assets. In addition, the Banks are subject to numerous federal and
state laws and regulations which set forth specific restrictions and procedural
requirements with respect to the establishment of branches, investments,
interest rates on loans, credit practices, the disclosure of credit terms and
discrimination in credit transactions.
The Regulatory Authorities regularly examine the operations of the
respective Banks and their condition, including but not limited to capital
adequacy, reserves, loans, investments and management practices. These
examinations are for the protection of the Banks' depositors and the BIF and not
the Banks' stockholder. In addition, the Banks are required to furnish quarterly
and annual reports to the Regulatory Authorities. The Regulatory Authorities'
enforcement authority includes the power to remove officers and directors and
the authority to issue orders to prevent a bank from engaging in unsafe or
unsound practices or violating laws or regulations governing its business.
The Regulatory Authorities have adopted regulations regarding the
capital adequacy of banks subject to its primary supervision, which require such
banks to maintain specified minimum ratios of capital to total assets and
capital to risk-weighted assets. See "--Regulatory Capital Requirements."
Bank Dividends. Under the FDIA, the Banks are prohibited from declaring
or paying dividends or making any other capital distribution if, after that
distribution, they would fail to meet their regulatory capital requirements. At
March 31, 1997, the Banks met their regulatory capital requirements. The FDIC
also has authority to prohibit the payment of dividends by a bank when it
determines such payment to be an unsafe and unsound banking practice. The FDIC
may prohibit bank holding companies of banks which are deemed to be
"significantly undercapitalized" under the FDIA or which fail to properly submit
and implement capital restoration plans required thereby from paying dividends
or making other capital distributions without the permission of the FDIC.
Restrictions Upon Intercompany Transactions. The Banks are subject to
restrictions imposed by federal law on extensions of credit to, and certain
other transactions with, the Company and other affiliates. Such restrictions
prevent the Company and such other affiliates from borrowing from the Banks
unless the loans are secured by specified collateral, and require such
transactions to have terms comparable to terms of arms-length transactions with
third persons. Such secured loans and other transactions by each of the Banks
are generally limited in amount as to the Company and as to any other affiliate
to 10% of the Bank's capital and surplus and as to the Company and all other
affiliates to an aggregate of 20% of the Banks' capital and surplus. These
regulations and restrictions may limit the Company's ability to obtain funds
from the Banks for its cash needs, including funds for acquisitions and for
payment of dividends, interest and operating expenses.
58
<PAGE>
Deposit Insurance. Since the Banks are FDIC member institutions, their
respective deposits are currently insured to a maximum of $100,000 per depositor
through the BIF, administered by the FDIC, and the Banks are required to pay
semi-annual deposit insurance premium assessments to the FDIC.
The amount of FDIC assessments paid by individual insured depository
institutions is based on their relative risk as measured by regulatory capital
ratios and certain other factors.
Enforcement Powers. The bank regulatory agencies have broad discretion
to issue cease and desist orders if they determine that the Company or its Banks
are engaging in "unsafe or unsound banking practices." In addition, the federal
bank regulatory authorities are empowered to impose substantial civil money
penalties for violations of certain federal banking statutes and regulations,
violation of a fiduciary duty, or violation of a final or temporary cease and
desist order, among other things. Financial institutions, and directors,
officers, employees, controlling shareholders, agents, consultants, attorneys,
accountants, appraisers and others associated with a depository institution are
subject to the imposition of fines, penalties, and other enforcement actions
based upon the conduct of their relationships with the institution.
Under the FDIA, the FDIC may be appointed as a conservator or receiver
for a depository institution based upon a number of events and circumstances,
including: (i) consent by the board of directors of the institution; (ii)
cessation of the institution's status as an insured depository institution;
(iii) the institution is undercapitalized and has no reasonable prospect of
becoming adequately capitalized when required to do so, fails to submit an
acceptable capital plan or materially fails to implement an acceptable capital
plan; (iv) the institution is critically undercapitalized or otherwise has
substantially insufficient capital; (v) appointment of a conservator or receiver
by a state banking authority, such as the Department; (vii) the institution's
assets are less than its obligations to its creditors and others; (viii)
substantial dissipation in the institution's assets or earnings due to violation
of any statute or regulation or unsafe or unsound practice; (ix) a willful
violation of a cease and desist order that has become final; (x) an inability of
the institution to pay its obligations or meet its depositors' demands in the
normal course of business; or (xi) any concealment of the institution's books,
records or assets or refusal to submit to examination.
Under the FDIA, the FDIC as a conservator or receiver of a depository
institution has express authority to repudiate contracts with such institution
which it determines to be burdensome or if such repudiation will promote the
orderly administration of the institution's affairs. Certain "qualified
financial contracts", defined to include securities contracts, commodity
contracts, forward contracts, repurchase agreements, and swap agreements,
generally are excluded from the repudiation powers of the FDIC. The FDIC is also
given authority to enforce contracts made by a depository institution
notwithstanding any contractual provision providing for termination, default,
acceleration, or exercise of rights upon, or solely by reason of, insolvency or
the appointment of a conservator or receiver. Insured depository institutions
also are prohibited from entering into contracts for goods, products or services
which would adversely affect the safety and soundness of the institutions.
Regulatory Capital Requirements. The Federal Reserve and the FDIC have
established guidelines with respect to the maintenance of appropriate levels of
capital by bank holding companies and state-chartered banks that are not members
of the Federal Reserve System ("state non-member banks"), respectively. The
regulations impose two sets of capital adequacy requirements: minimum leverage
rules, which require bank holding companies and banks to maintain a specified
minimum ratio of capital to total assets, and risk-based capital rules, which
require the maintenance of specified minimum ratios of capital to
"risk-weighted" assets.
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<PAGE>
The regulations of the Federal Reserve and the FDIC require bank
holding companies and state non-member banks, respectively, to maintain a
minimum leverage ratio of "Tier 1 capital" (as defined in the risk-based capital
guidelines discussed in the following paragraphs) to total assets of 3.0%.
Although setting a minimum 3.0% leverage ratio, the capital regulations state
that only the strongest bank holding companies and banks, with composite
examination ratings of 1 under the rating system used by the federal bank
regulators, would be permitted to operate at or near such minimum level of
capital. All other bank holding companies and banks are expected to maintain a
leverage ratio of at least 1% to 2% above the minimum ratio, depending on the
assessment of an individual organization's capital adequacy by its primary
regulator. Any bank or bank holding company experiencing or anticipating
significant growth would be expected to maintain capital well above the minimum
levels. In addition, the Federal Reserve has indicated that whenever
appropriate, and in particular when a bank holding company is undertaking
expansion, seeking to engage in new activities or otherwise facing unusual or
abnormal risks, it will consider, on a case-by-case basis, the level of an
organization's ratio of tangible Tier 1 capital (after deducting all
intangibles) to total assets in making an overall assessment of capital.
The risk-based capital rules of the Federal Reserve and the FDIC
require bank holding companies and state non-member banks to maintain minimum
regulatory capital levels based upon a weighting of their assets and off-balance
sheet obligations according to risk. The risk-based capital rules have two basic
components: a Tier 1 or core capital requirement and a Tier 2 or supplementary
capital requirement. Tier 1 capital consists primarily of common stockholders'
equity, certain perpetual preferred stock (which must be noncumulative with
respect to banks), and minority interests in the equity accounts of consolidated
subsidiaries; less most intangible assets, primarily goodwill. Tier 2 capital
elements include, subject to certain limitations, the allowance for losses on
loans and leases; perpetual preferred stock that does not qualify for Tier 1 and
long-term preferred stock with an original maturity of at least 20 years from
issuance; hybrid capital instruments, including perpetual debt and mandatory
convertible securities; and subordinated debt and intermediate-term preferred
stock.
The risk-based capital regulations require all banks and bank holding
companies to maintain a minimum ratio of total capital to total risk-weighted
assets of 8%, with at least 4% as core capital. For the purpose of calculating
these ratios, (i) supplementary capital is limited to no more than 100% of core
capital, and (ii) the aggregate amount of certain types of supplementary capital
is limited. In addition, the risk-based capital regulations limit the allowance
for loan losses which may be included as capital to 1.25% of total risk-weighted
assets.
FDICIA also required the federal banking regulators to classify insured
depository institutions by capital levels and to take various prompt corrective
actions to resolve the problems of any institution that fails to satisfy the
capital standards. The FDIC has issued final regulations establishing these
capital levels and otherwise implementing FDICIA's prompt corrective action
provisions. Under FDICIA and these regulations, all institutions, regardless of
their capital levels, are restricted from making any capital distribution or
paying any management fees that would cause the institution to fail to satisfy
the minimum levels for any of its capital requirements.
Under the FDIC's prompt corrective action regulation, a
"well-capitalized" bank is one that is not subject to any regulatory order or
directive to meet any specific capital level and that has or exceeds the
following capital levels: a total risk-based capital ratio of 10%, a Tier 1
risk-based capital ratio of 6%, and a leverage ratio of 5%. An "adequately
capitalized" bank is one that does not qualify as "well-capitalized" but meets
or exceeds the following capital requirements: a total risk- based capital ratio
of 8%, a Tier 1 risk-based capital ratio of 4%, and a leverage ratio of either
(i)
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4% or (ii) 3% if the bank has the highest composite examination rating. A bank
not meeting these criteria will be treated as "undercapitalized," "significantly
undercapitalized," or "critically undercapitalized" depending on the extent to
which to which the bank's capital levels are below these standards. A bank that
falls within any of the three "undercapitalized" categories established by the
prompt corrective action regulation will be: (i) subject to increased monitoring
by the appropriate federal banking regulator; (ii) required to submit an
acceptable capital restoration plan within 45 days; (iii) subject to asset
growth limits; and (iv) required to obtain prior regulatory approval for
acquisitions, branching and new lines of businesses. The capital restoration
plan must include a guarantee by the institution's holding company that the
institution will comply with the plan until it has been adequately capitalized
on average for four consecutive quarters, under which the holding company would
be liable up to the lesser of 5% of the institution's total assets or the amount
necessary to bring the institution into capital compliance as of the date it
failed to comply with its capital restoration plan. A significantly
undercapitalized institution, as well as any undercapitalized institution that
did not submit an acceptable capital restoration plan, will be subject to
regulatory demands for recapitalization, broader application of restrictions on
transactions with affiliates, limitations on interest rates paid on deposits,
asset growth and other activities, possible replacement of directors and
officers, and restrictions on capital distributions by any bank holding company
controlling the institution.
Effect of Government Monetary Policies; Possible Further Legislation
The earnings of the Company, through the Banks, are and will be
affected by domestic and international economic conditions and the monetary and
fiscal policies of the United States and foreign governments and their agencies.
The Federal Reserve's monetary policies have had, and will probably
continue to have, an important impact on the operating results of commercial
banks through its power to implement national monetary policy in order, among
other things, to curb inflation or combat a recession. The Federal Reserve has a
major effect upon the levels of bank loans, investments and deposits through its
open market operations in United States Government securities and through its
regulation of, among other things, the discount rate on borrowings of banks and
the imposition of non-earning reserve requirements against member bank deposits.
It is not possible to predict the nature and impact of future changes in
monetary and fiscal policies.
From time to time, proposals are made in the United States Congress,
the Kentucky Legislature, and various bank regulatory authorities which would
alter the powers of, and place restrictions on, different types of banking
organizations. It is impossible to predict whether any of these proposals will
be adopted and any impact of such adoption on the business of the Company and
the Banks.
DESCRIPTION OF PREFERRED SECURITIES
Pursuant to the terms of the Trust Agreement for the Issuer Trust, the
Issuer Trustees on behalf of the Issuer Trust will issue the Preferred
Securities and the Common Securities. The Preferred Securities will represent
preferred undivided beneficial interests in the assets of the Issuer Trust and
the holders thereof will be entitled to a preference in certain circumstances
with respect to Distributions and amounts payable on redemption or liquidation
over the Common Securities, as well as other benefits as described in the Trust
Agreement. This summary of certain provisions of the Preferred Securities and
the Trust Agreement does not purport to be complete and is subject to, and
qualified in its entirety by reference to, all the provisions of the Trust
Agreement, including the
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<PAGE>
definitions therein of certain terms. Wherever particular defined terms of the
Trust Agreement are referred to herein, such defined terms are incorporated
herein by reference. A copy of the form of the Trust Agreement is available upon
request from the Issuer Trustees.
General
The Preferred Securities will be limited to $25,000,000 aggregate
Liquidation Amount outstanding (which amount may be increased by up to
$3,750,000 aggregate liquidation amount of referred Securities for exercise of
the Underwriters' over-allotment option). See "Underwriting." The Preferred
Securities will rank pari passu, and payments will be made thereon pro rata,
with the Common Securities except as described under "-- Subordination of Common
Securities." The Junior Subordinated Debentures will be registered in the name
of the Issuer Trust and held by the Property Trustee in trust for the benefit of
the holders of the Preferred Securities and Common Securities. The Guarantee
will be a guarantee on a subordinated basis with respect to the Preferred
Securities but will not guarantee payment of Distributions or amounts payable on
redemption or liquidation of such Preferred Securities when the Issuer Trust
does not have funds on hand available to make such payments. See "Description of
Guarantee."
Distributions
The Preferred Securities represent preferred undivided beneficial
interests in the assets of the Issuer Trust, and Distributions on each Preferred
Security will be payable at the annual rate of % of the stated Liquidation
Amount of $25, payable quarterly in arrears on March 31, June 30, September 30
and December 31 of each year (each a "Distribution Date"), to the holders of the
Preferred Securities at the close of business on 15th day of March, June,
September and December (whether or not a Business Day (as defined below)) next
preceding the relevant Distribution Date. Distributions on the Preferred
Securities will be cumulative. Distributions will accumulate from
, 1997. The first Distribution Date for the Preferred Securities will be ,
1997. The amount of Distributions payable for any period less than a full
Distribution period will be computed on the basis of a 360-day year of twelve
30-day months and the actual days elapsed in a partial month in such period.
Distributions payable for each full Distribution period will be computed by
dividing the rate per annum by four. If any date on which Distributions are
payable on the Preferred Securities is not a Business Day, then payment of the
Distributions payable on such date will be made on the next succeeding day that
is a Business Day (without any additional Distributions or other payment in
respect of any such delay), with the same force and effect as if made on the
date such payment was originally payable.
So long as no Debenture Event of Default has occurred and is
continuing, the Company has the right under the Junior Subordinated Indenture to
defer the payment of interest on the Junior Subordinated Debentures at any time
or from time to time for a period not exceeding 20 consecutive quarterly periods
with respect to each Extension Period, provided that no Extension Period may
extend beyond the Stated Maturity of the Junior Subordinated Debentures. As a
consequence of any such deferral, quarterly Distributions on the Preferred
Securities by the Issuer Trust will be deferred during any such Extension
Period. Distributions to which holders of the Preferred Securities are entitled
will accumulate additional Distributions thereon at the rate of % per annum,
compounded quarterly from the relevant payment date for such Distributions,
computed on the basis of a 360-day year of twelve 30-day months and the actual
days elapsed in a partial month in such period. Additional Distributions payable
for each full Distribution period will be computed by dividing the rate per
annum by four. The term "Distributions" as used herein shall include any such
additional Distributions. During any such Extension Period, the Company may not
(i) declare or pay
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any dividends or distributions on, or redeem, purchase, acquire or make a
liquidation payment with respect to, any of the Company's capital stock or (ii)
make any payment of principal of or interest or premium, if any, on or repay,
repurchase or redeem any debt securities of the Company that rank pari passu in
all respects with or junior in interest to the Junior Subordinated Debentures
(other than (a) repurchases, redemptions or other acquisitions of shares of
capital stock of the Company in connection with any employment contract, benefit
plan or other similar arrangement with or for the benefit of any one or more
employees, officers, directors or consultants, in connection with a dividend
reinvestment or stockholder stock purchase plan or in connection with the
issuance of capital stock of the Company (or securities convertible into or
exercisable for such capital stock) as consideration in an acquisition
transaction entered into prior to the applicable Extension Period, (b) as a
result of an exchange or conversion of any class or series of the Company's
capital stock (or any capital stock of a subsidiary of the Company) for any
class or series of the Company's capital stock or of any class or series of the
Company's indebtedness for any class or series of the Company's capital stock,
(c) the purchase of fractional interests in shares of the Company's capital
stock pursuant to the conversion or exchange provisions of such capital stock or
the security being converted or exchanged, (d) any declaration of a dividend in
connection with any stockholder's rights plan, or the issuance of rights, stock
or other property under any stockholder's rights plan, or the redemption or
repurchase of rights pursuant thereto, or (e) any dividend in the form of stock,
warrants, options or other rights where the dividend stock or the stock issuable
upon exercise of such warrants, options or other rights is the same stock as
that on which the dividend is being paid or ranks pari passu with or junior to
such stock). Prior to the termination of any such Extension Period, the Company
may further defer the payment of interest, provided that no Extension Period may
exceed 20 consecutive quarterly periods or extend beyond the Stated Maturity of
the Junior Subordinated Debentures. Upon the termination of any such Extension
Period and the payment of all amounts then due, the Company may elect to begin a
new Extension Period. No interest shall be due and payable during an Extension
Period, except at the end thereof. The Company must give the Issuer Trustees
notice of its election of such Extension Period at least one Business Day prior
to the earlier of (i) the date the Distributions on the Preferred Securities
would have been payable but for the election to begin such Extension Period and
(ii) the date the Property Trustee is required to give notice to holders of the
Preferred Securities of the record date or the date such Distributions are
payable, but in any event not less than one Business Day prior to such record
date. The Property Trustee will give notice of the Company's election to begin a
new Extension Period to the holders of the Preferred Securities. Subject to the
foregoing, there is no limitation on the number of times that the Company may
elect to begin an Extension Period. See "Description of Junior Subordinated
Debentures -- Option To Extend Interest Payment Period" and "Certain Federal
Income Tax Consequences -- Interest Income and Original Issue Discount."
The Company has no current intention of exercising its right to defer
payments of interest by extending the interest payment period on the Junior
Subordinated Debentures.
The revenue of the Issuer Trust available for distribution to holders
of the Preferred Securities will be limited to payments under the Junior
Subordinated Debentures in which the Issuer Trust will invest the proceeds from
the issuance and sale of the Preferred Securities. See "Description of Junior
Subordinated Debentures." If the Company does not make payments on the Junior
Subordinated Debentures, the Issuer Trust may not have funds available to pay
Distributions or other amounts payable on the Preferred Securities. The payment
of Distributions and other amounts payable on the Preferred Securities (if and
to the extent the Issuer Trust has funds legally available for and cash
sufficient to make such payments) is guaranteed by the Company on a limited
basis as set forth herein under "Description of Guarantee."
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Redemption
Upon the repayment or redemption, in whole or in part, of the Junior
Subordinated Debentures, whether at maturity or upon earlier redemption as
provided in the Junior Subordinated Indenture, the proceeds from such repayment
or redemption shall be applied by the Property Trustee to redeem a Like Amount
(as defined below) of the Preferred Securities, upon not less than 30 nor more
than 60 days' notice, at a redemption price (the "Redemption Price") equal to
the aggregate Liquidation Amount of such Preferred Securities plus accumulated
but unpaid Distributions thereon to the date of redemption (the "Redemption
Date") and the related amount of the premium, if any, paid by the Company upon
the concurrent redemption of such Junior Subordinated Debentures. See
"Description of Junior Subordinated Debentures -- Redemption." If less than all
the Junior Subordinated Debentures are to be repaid or redeemed on a Redemption
Date, then the proceeds from such repayment or redemption shall be allocated to
the redemption pro rata of the Preferred Securities and the Common Securities.
The amount of premium, if any, paid by the Company upon the redemption of all or
any part of the Junior Subordinated Debentures to be repaid or redeemed on a
Redemption Date shall be allocated to the redemption pro rata of the Preferred
Securities and the Common Securities.
The Company has the right to redeem the Junior Subordinated Debentures
(i) on or after , 2002, in whole at any time or in part from time to time, or
(ii) in whole, but not in part, at any time within 90 days following the
occurrence and during the continuation of a Tax Event, Investment Company Event
or Capital Treatment Event (each as defined below), in each case subject to
possible regulatory approval. See "-- Liquidation Distribution Upon
Dissolution." A redemption of the Junior Subordinated Debentures would cause a
mandatory redemption of a Like Amount of the Preferred Securities and Common
Securities at the Redemption Price.
"25% Capital Limitation" means the limitation imposed by the Federal
Reserve that the proceeds of certain qualifying securities like the Trust
Securities will qualify as Tier 1 capital of the issuer up to an amount not to
exceed 25% of the Issuer's Tier 1 capital, or any subsequent limitation adopted
by the Federal Reserve.
"Business Day" means a day other than (a) a Saturday or Sunday, (b) a
day on which banking institutions in the Commonwealth of Kentucky or the City of
New York are authorized or required by law or executive order to remain closed,
or (c) a day on which the Property Trustee's Corporate Trust Office or the
Corporate Trust Office of the Debenture Trustee is closed for business.
"Like Amount" means (i) with respect to a redemption of Trust
Securities, Trust Securities having a Liquidation Amount (as defined below)
equal to that portion of the principal amount of Junior Subordinated Debentures
to be contemporaneously redeemed in accordance with the Junior Subordinated
Indenture, allocated to the Common Securities and to the Preferred Securities
based upon the relative Liquidation Amounts of such classes and (ii) with
respect to a distribution of Junior Subordinated Debentures to holders of Trust
Securities in connection with a dissolution or liquidation of the Issuer Trust,
Junior Subordinated Debentures having a principal amount equal to the
Liquidation Amount of the Trust Securities of the holder to whom such Junior
Subordinated Debentures are distributed.
"Liquidation Amount" means the stated amount of $25 per Trust Security.
"Tax Event" means the receipt by the Issuer Trust of an opinion of
counsel to the Company experienced in such matters to the effect that, as a
result of any amendment to, or change (including
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any announced prospective change) in, the laws (or any regulations thereunder)
of the United States or any political subdivision or taxing authority thereof or
therein, or as a result of any official 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 of issuance of the Preferred Securities, there is
more than an insubstantial risk that (i) the Issuer Trust is, or will be within
90 days of the delivery of such opinion, subject to United States federal income
tax with respect to income received or accrued on the Junior Subordinated
Debentures, (ii) interest payable by the Company on the Junior Subordinated
Debentures is not, or within 90 days of the delivery of such opinion, will not
be, deductible by the Company, in whole or in part, for United States federal
income tax purposes or (iii) the Issuer Trust is, or will be within 90 days of
the delivery of such opinion, subject to more than a de minimis amount of other
taxes, duties or other governmental charges.
"Investment Company Event" means the receipt by the Issuer Trust of an
opinion of counsel to the Company experienced in such matters to the effect
that, as a result of the occurrence of a change in law or regulation or a
written change (including any announced prospective change) in interpretation or
application of law or regulation by any legislative body, court, governmental
agency or regulatory authority, there is more than an insubstantial risk that
the Issuer Trust is or will be considered an "investment company" that is
required to be registered under the Investment Company Act, which change or
prospective change becomes effective or would become effective, as the case may
be, on or after the date of the issuance of the Preferred Securities.
"Capital Treatment Event" means the reasonable determination by the
Company that, as a result of the occurrence of any amendment to, or change
(including any announced prospective change) in, the laws (or any rules or
regulations thereunder) of the United States or any political subdivision
thereof or therein, or as a result of any official or administrative
pronouncement or action or judicial decision interpreting or applying such laws
or regulations, which amendment or change is effective or such pronouncement,
action or decision is announced on or after the date of issuance of the
Preferred Securities, there is more than an insubstantial risk that the Company
will not be entitled to treat an amount equal to the Liquidation Amount of the
Preferred Securities as "Tier 1 Capital" (or the then equivalent thereof),
except as otherwise restricted under the 25% Capital Limitation, for purposes of
the risk-based capital adequacy guidelines of the Federal Reserve, as then in
effect and applicable to the Company.
If a Tax Event described in clause (i) or (iii) of the definition of
Tax Event above has occurred and is continuing and the Issuer Trust is the
holder of all the Junior Subordinated Debentures, the Company will pay
Additional Sums (as defined below), if any, on the Junior Subordinated
Debentures.
"Additional Sums" means the additional amounts as may be necessary in
order that the amount of Distributions then due and payable by the Issuer Trust
on the outstanding Preferred Securities and Common Securities of the Issuer
Trust will not be reduced as a result of any additional taxes, duties and other
governmental charges to which the Issuer Trust has become subject as a result of
a Tax Event.
Redemption Procedures
Preferred Securities redeemed on each Redemption Date shall be redeemed
at the Redemption Price with the applicable proceeds from the contemporaneous
redemption of the Junior Subordinated Debentures. Redemptions of the Preferred
Securities shall be made and the Redemption Price shall be
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payable on each Redemption Date only to the extent that the Issuer Trust has
funds on hand available for the payment of such Redemption Price. See also "--
Subordination of Common Securities."
If the Issuer Trust gives a notice of redemption in respect of the
Preferred Securities, then, by 12:00 noon, New York City time, on the Redemption
Date, to the extent funds are available, in the case of Preferred Securities
held in book-entry form, the Property Trustee will 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 Preferred Securities. With respect to Preferred Securities not
held in book-entry form, the Property Trustee, to the extent funds are
available, will irrevocably deposit with the paying agent for the Preferred
Securities funds sufficient to pay the applicable Redemption Price and will give
such paying agent irrevocable instructions and authority to pay the Redemption
Price to the holders thereof upon surrender of their certificates evidencing the
Preferred Securities. Notwithstanding the foregoing, Distributions payable on or
prior to the Redemption Date for any Preferred Securities called for redemption
shall be payable to the holders of the Preferred Securities on the relevant
record dates for the related Distribution Dates. If notice of redemption shall
have been given and funds deposited as required, then upon the date of such
deposit all rights of the holders of such Preferred Securities so called for
redemption will cease, except the right of the holders of such Preferred
Securities to receive the Redemption Price, but without interest on such
Redemption Price, and such Preferred Securities will cease to be outstanding. If
any date fixed for redemption of Preferred Securities is not a Business Day,
then payment of the Redemption Price payable on such date will be made on the
next succeeding day which is a Business Day (without any interest or other
payment in respect of any such delay), except that, if such Business Day falls
in the next calendar year, such payment will be made on the immediately
preceding Business Day. In the event that payment of the Redemption Price in
respect of Preferred Securities called for redemption is improperly withheld or
refused and not paid either by the Issuer Trust or by the Company pursuant to
the Guarantee as described under "Description of Guarantee," Distributions on
such Preferred Securities will continue to accumulate at the then applicable
rate, from the Redemption Date originally established by the Issuer Trust for
such Preferred Securities to the date such Redemption Price is actually paid, in
which case the actual payment date will be the date fixed for redemption for
purposes of calculating the Redemption Price.
Subject to applicable law (including, without limitation, United States
federal securities laws), the Company or its affiliates may at any time and from
time to time purchase outstanding Preferred Securities by tender, in the open
market or by private agreement, and may resell such securities.
If less than all the Preferred Securities and Common Securities are to
be redeemed on a Redemption Date, then the aggregate Liquidation Amount of such
Preferred Securities and Common Securities to be redeemed shall be allocated pro
rata to the Preferred Securities and the Common Securities based upon the
relative Liquidation Amounts of such classes. The particular Preferred
Securities to be redeemed shall be selected on a pro rata basis not more than 60
days prior to the Redemption Date by the Property Trustee from the outstanding
Preferred Securities not previously called for redemption, or if the Preferred
Securities are then held in the form of a Global Preferred Security (as defined
below), in accordance with DTC's customary procedures. The Property Trustee
shall promptly notify the securities registrar for the Trust Securities in
writing of the Preferred Securities selected for redemption and, in the case of
any Preferred Securities selected for partial redemption, the Liquidation Amount
thereof to be redeemed. For all purposes of the Trust Agreement, unless the
context otherwise requires, all provisions relating to the redemption of
Preferred Securities shall relate, in the case of any Preferred Securities
redeemed or to be redeemed only in part, to the portion of the aggregate
Liquidation Amount of Preferred Securities which has been or is to be redeemed.
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Notice of any redemption will be mailed at least 30 days but not more
than 60 days before the Redemption Date to each registered holder of Preferred
Securities to be redeemed at its address appearing on the securities register
for the Trust Securities. Unless the Company defaults in payment of the
Redemption Price on the Junior Subordinated Debentures, on and after the
Redemption Date interest will cease to accrue on the Junior Subordinated
Debentures or portions thereof (and, unless payment of the Redemption Price in
respect of the Preferred Securities is withheld or refused and not paid either
by the Issuer Trust or the Company pursuant to the Guarantee, Distributions will
cease to accumulate on the Preferred Securities or portions thereof) called for
redemption.
Subordination of Common Securities
Payment of Distributions on, and the Redemption Price of, and the
Liquidation Distribution in respect of, the Preferred Securities and Common
Securities, as applicable, shall be made pro rata based on the Liquidation
Amount of such Preferred Securities and Common Securities. However, if on any
Distribution Date or Redemption Date a Debenture Event of Default has occurred
and is continuing as a result of any failure by the Company to pay any amounts
in respect of the Junior Subordinated Debentures when due, no payment of any
Distribution on, or Redemption Price of, or Liquidation Distribution in respect
of, any of the Common Securities, and no other payment on account of the
redemption, liquidation or other acquisition of such Common Securities, shall be
made unless payment in full in cash of all accumulated and unpaid Distributions
on all the outstanding Preferred Securities for all Distribution periods
terminating on or prior thereto, or in the case of payment of the Redemption
Price the full amount of such Redemption Price on all the outstanding Preferred
Securities then called for redemption, shall have been made or provided for, and
all funds available to the Property Trustee shall first be applied to the
payment in full in cash of all Distributions on, or Redemption Price of, the
Preferred Securities then due and payable.
In the case of any Event of Default (as defined below) resulting from a
Debenture Event of Default, the holders of the Common Securities will be deemed
to have waived any right to act with respect to any such Event of Default under
the Trust Agreement until the effects of all such Events of Default with respect
to such Preferred Securities have been cured, waived or otherwise eliminated.
See "-- Events of Default; Notice" and "Description of Junior Subordinated
Debentures -- Debenture Events of Default." Until all such Events of Default
under the Trust Agreement with respect to the Preferred Securities have been so
cured, waived or otherwise eliminated, the Property Trustee will act solely on
behalf of the holders of the Preferred Securities and not on behalf of the
holders of the Common Securities, and only the holders of the Preferred
Securities will have the right to direct the Property Trustee to act on their
behalf.
Liquidation Distribution Upon Dissolution
The amount payable on the Preferred Securities in the event of any
liquidation of the Issuer Trust is $25 per Preferred Security plus accumulated
and unpaid Distributions, subject to certain exceptions, which may be in the
form of a distribution of such amount in Junior Subordinated Debentures.
The holders of all the outstanding Common Securities have the right at
any time to dissolve the Issuer Trust and, after satisfaction of liabilities to
creditors of the Issuer Trust as provided by applicable law, cause the Junior
Subordinated Debentures to be distributed to the holders of the Preferred
Securities and Common Securities in liquidation of the Issuer Trust.
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The Federal Reserve's risk-based capital guidelines currently provide
that redemptions of permanent equity or other capital instruments before stated
maturity could have a significant impact on a bank holding company's overall
capital structure and that any organization considering such a redemption should
consult with the Federal Reserve before redeeming any equity or capital
instrument prior to maturity if such redemption could have a material effect on
the level or composition of the organization's capital base (unless the equity
or capital instrument were redeemed with the proceeds of, or replaced by, a like
amount of a similar or higher quality capital instrument and the Federal Reserve
considers the organization's capital position to be fully adequate after the
redemption).
In the event the Company, while a holder of Common Securities,
dissolves the Issuer Trust prior to the stated maturity of the Preferred
Securities and the dissolution of the Issuer Trust is deemed to constitute the
redemption of capital instruments by the Federal Reserve under its risk-based
capital guidelines or policies, the dissolution of the Issuer Trust by the
Company may be subject to the prior approval of the Federal Reserve. Moreover,
any changes in applicable law or changes in the Federal Reserve's risk-based
capital guidelines or policies could impose a requirement on the Company that it
obtain the prior approval of the Federal Reserve to dissolve the Issuer Trust.
Pursuant to the Trust Agreement, the Issuer Trust will automatically
dissolve upon expiration of its term or, if earlier, will dissolve on the first
to occur of: (i) certain events of bankruptcy, dissolution or liquidation of the
Company or the holder of the Common Securities, (ii) the distribution of a Like
Amount of the Junior Subordinated Debentures to the holders of the Trust
Securities, if the holders of Common Securities have given written direction to
the Property Trustee to dissolve the Issuer Trust (which direction, subject to
the foregoing restrictions, is optional and wholly within the discretion of the
holders of Common Securities), (iii) the repayment of all the Preferred
Securities in connection with the redemption of all the Trust Securities as
described under "-- Redemption" and (iv) the entry of an order for the
dissolution of the Issuer Trust by a court of competent jurisdiction.
If dissolution of the Issuer Trust occurs as described in clause (i),
(ii) or (iv) above, the Issuer Trust will be liquidated by the Property Trustee
as expeditiously as the Property Trustee determines to be possible by
distributing, after satisfaction of liabilities to creditors of the Issuer Trust
as provided by applicable law, to the holders of such Trust Securities a Like
Amount of the Junior Subordinated Debentures, unless such distribution is not
practical, in which event such holders will be entitled to receive out of the
assets of the Issuer Trust available for distribution to holders, after
satisfaction of liabilities to creditors of the Issuer Trust as provided by
applicable law, an amount equal to, in the case of holders of Preferred
Securities, the aggregate of the Liquidation Amount plus accumulated and unpaid
Distributions thereon to the date of payment (such amount being the "Liquidation
Distribution"). If such Liquidation Distribution can be paid only in part
because the Issuer Trust has insufficient assets available to pay in full the
aggregate Liquidation Distribution, then the amounts payable directly by the
Issuer Trust on its Preferred Securities shall be paid on a pro rata basis. The
holders of the Common Securities will be entitled to receive distributions upon
any such liquidation pro rata with the holders of the Preferred Securities,
except that if a Debenture Event of Default has occurred and is continuing as a
result of any failure by the Company to pay any amounts in respect of the Junior
Subordinated Debentures when due, the Preferred Securities shall have a priority
over the Common Securities. See "-- Subordination of Common Securities."
After the liquidation date fixed for any distribution of Junior
Subordinated Debentures (i) the Preferred Securities will no longer be deemed to
be outstanding, (ii) DTC or its nominee, as the registered holder of Preferred
Securities, will receive a registered global certificate or certificates
representing the Junior Subordinated Debentures to be delivered upon such
distribution with respect to
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Preferred Securities held by DTC or its nominee and (iii) any certificates
representing the Preferred Securities not held by DTC or its nominee will be
deemed to represent the Junior Subordinated Debentures having a principal amount
equal to the stated Liquidation Amount of the Preferred Securities and bearing
accrued and unpaid interest in an amount equal to the accumulated and unpaid
Distributions on the Preferred Securities until such certificates are presented
to the security registrar for the Trust Securities for transfer or reissuance.
If the Company does not redeem the Junior Subordinated Debentures prior
to maturity and the Issuer Trust is not liquidated and the Junior Subordinated
Debentures are not distributed to holders of the Preferred Securities, the
Preferred Securities will remain outstanding until the repayment of the Junior
Subordinated Debentures and the distribution of the Liquidation Distribution to
the holders of the Preferred Securities.
There can be no assurance as to the market prices for the Preferred
Securities or the Junior Subordinated Debentures that may be distributed in
exchange for Preferred Securities if a dissolution and liquidation of the Issuer
Trust were to occur. Accordingly, the Preferred Securities that an investor may
purchase, or the Junior Subordinated Debentures that the investor may receive on
dissolution and liquidation of the Issuer Trust, may trade at a discount to the
price that the investor paid to purchase the Preferred Securities offered
hereby.
Events of Default; Notice
Any one of the following events constitutes an "Event of Default" under
the Trust Agreement (an "Event of Default") with respect to the Preferred
Securities (whatever the reason for such Event of Default and whether it is
voluntary or involuntary or be effected by operation of law or pursuant to any
judgment, decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(i) the occurrence of a Debenture Event of Default (see "Description of
Junior Subordinated Debentures -- Debenture Events of Default"); or
(ii) default by the Issuer Trust in the payment of any Distribution
when it becomes due and payable, and continuation of such default for a period
of 30 days; or
(iii) default by the Issuer Trust in the payment of any Redemption
Price of any Trust Security when it becomes due and payable; or
(iv) default in the performance, or breach, in any material respect, of
any covenant or warranty of the Issuer Trustees in the Trust Agreement (other
than a covenant or warranty a default in the performance of which or the breach
of which is dealt with in clause (ii) or (iii) above), and continuation of such
default or breach for a period of 60 days after there has been given, by
registered or certified mail, to the Issuer Trustees and the Company by the
holders of at least 25% in aggregate Liquidation Amount of the outstanding
Preferred Securities, a written notice specifying such default or breach and
requiring it to be remedied and stating that such notice is a "Notice of
Default" under the Trust Agreement; or
(v) the occurrence of certain events of bankruptcy or insolvency with
respect to the Property Trustee if a successor Property Trustee has not been
appointed within 90 days thereof.
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Within five Business Days after the occurrence of any Event of Default
actually known to the Property Trustee, the Property Trustee will transmit
notice of such Event of Default to the holders of Trust Securities and the
Administrators, unless such Event of Default has been cured or waived. The
Company, as Depositor, and the Administrators are required to file annually with
the Property Trustee a certificate as to whether or not they are in compliance
with all the conditions and covenants applicable to them under the Trust
Agreement.
If a Debenture Event of Default has occurred and is continuing as a
result of any failure by the Company to pay any amounts in respect of the Junior
Subordinated Debentures when due, the Preferred Securities will have a
preference over the Common Securities with respect to payments of any amounts in
respect of the Preferred Securities as described above. See "-- Subordination of
Common Securities," "-- Liquidation Distribution Upon Dissolution" and
"Description of Junior
Subordinated Debentures -- Debenture Events of Default."
Removal of Issuer Trustees; Appointment of Successors
The holders of at least a majority in aggregate Liquidation Amount of
the outstanding Preferred Securities may remove an Issuer Trustee for cause or,
if a Debenture Event of Default has occurred and is continuing, with or without
cause. If an Issuer Trustee is removed by the holders of the outstanding
Preferred Securities, the successor may be appointed by the holders of at least
25% in Liquidation Amount of Preferred Securities. If an Issuer Trustee resigns,
such Trustee will appoint its successor. If an Issuer Trustee fails to appoint a
successor, the holders of at least 25% in Liquidation Amount of the outstanding
Preferred Securities may appoint a successor. If a successor has not been
appointed by the holders, any holder of Preferred Securities or Common
Securities or the other Issuer Trustee may petition a court in the State of
Delaware to appoint a successor. Any Delaware Trustee must meet the applicable
requirements of Delaware law. Any Property Trustee must be a national or
state-chartered bank, and at the time of appointment have securities rated in
one of the three highest rating categories by a nationally recognized
statistical rating organization and have capital and surplus of at least
$50,000,000. No resignation or removal of an Issuer Trustee and no appointment
of a successor trustee shall be effective until the acceptance of appointment by
the successor trustee in accordance with the provisions of the Trust Agreement.
Merger or Consolidation of Issuer Trustees
Any entity into which the Property Trustee or the Delaware Trustee may
be merged or converted or with which it may be consolidated, or any entity
resulting from any merger, conversion or consolidation to which such Issuer
Trustee is a party, or any entity succeeding to all or substantially all the
corporate trust business of such Issuer Trustee, will be the successor of such
Issuer Trustee under the Trust Agreement, provided such entity is otherwise
qualified and eligible.
Mergers, Consolidations, Amalgamations or Replacements of the Issuer Trust
The Issuer Trust may not merge with or into, consolidate, amalgamate,
or be replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to, any entity, except as described below or as
otherwise set forth in the Trust Agreement. The Issuer Trust may, at the request
of the holders of the Common Securities and with the consent of the holders of
at least a majority in aggregate Liquidation Amount of the outstanding Preferred
Securities, merge with or into, consolidate, amalgamate, or be replaced by or
convey, transfer or lease its properties and assets substantially as an entirety
to a trust organized as such under the laws of any State, so long as (i) such
successor entity either (a) expressly assumes all the obligations of the Issuer
Trust with respect to the
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Preferred Securities or (b) substitutes for the Preferred Securities other
securities having substantially the same terms as the Preferred Securities (the
"Successor Securities") so long as the Successor Securities have the same
priority as the Preferred Securities with respect to distributions and payments
upon liquidation, redemption and otherwise, (ii) a trustee of such successor
entity, possessing the same powers and duties as the Property Trustee, is
appointed to hold the Junior Subordinated Debentures, (iii) such merger,
consolidation, amalgamation, replacement, conveyance, transfer or lease does not
cause the Preferred Securities (including any Successor Securities) to be
downgraded by any nationally recognized statistical rating organization, if then
rated, (iv) such merger, consolidation, amalgamation, replacement, conveyance,
transfer or lease does not adversely affect the rights, preferences and
privileges of the holders of the Preferred Securities (including any Successor
Securities) in any material respect, (v) such successor entity has a purpose
substantially identical to that of the Issuer Trust, (vi) prior to such merger,
consolidation, amalgamation, replacement, conveyance, transfer or lease, the
Issuer Trust has received an opinion from independent counsel experienced in
such matters to the effect that (a) such merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease does not adversely affect the rights,
preferences and privileges of the holders of the Preferred Securities (including
any Successor Securities) in any material respect and (b) following such merger,
consolidation, amalgamation, replacement, conveyance, transfer or lease, neither
the Issuer Trust nor such successor entity will be required to register as an
investment company under the Investment Company Act, and (vii) the Company or
any permitted successor or assignee owns all the common securities of such
successor entity and guarantees the obligations of such successor entity under
the Successor Securities at least to the extent provided by the Guarantee.
Notwithstanding the foregoing, the Issuer Trust may not, except with the consent
of holders of 100% in aggregate Liquidation Amount of the Preferred Securities,
consolidate, amalgamate, merge with or into, or be replaced by or convey,
transfer or lease its properties and assets substantially as an entirety to, any
other entity or permit any other entity to consolidate, amalgamate, merge with
or into, or replace it if such consolidation, amalgamation, merger, replacement,
conveyance, transfer or lease would cause the Issuer Trust or the successor
entity to be taxable as a corporation for United States federal income tax
purposes.
Voting Rights; Amendment of Trust Agreement
Except as provided above and under "-- Removal of Issuer Trustees;
Appointment of Successors" and "Description of Guarantee -- Amendments and
Assignment" and as otherwise required by law and the Trust Agreement, the
holders of the Preferred Securities will have no voting rights.
The Trust Agreement may be amended from time to time by the holders of
a majority of the Common Securities and the Property Trustee, without the
consent of the holders of the Preferred Securities, (i) to cure any ambiguity,
correct or supplement any provisions in the Trust Agreement that may be
inconsistent with any other provision, or to make any other provisions with
respect to matters or questions arising under the Trust Agreement, provided that
any such amendment does not adversely affect in any material respect the
interests of any holder of Trust Securities, or (ii) to modify, eliminate or add
to any provisions of the Trust Agreement to such extent as may be necessary to
ensure that the Issuer Trust will not be taxable as a corporation for United
States federal income tax purposes at any time that any Trust Securities are
outstanding or to ensure that the Issuer Trust will not be required to register
as an "investment company" under the Investment Company Act, and any amendments
of the Trust Agreement will become effective when notice of such amendment is
given to the holders of Trust Securities. The Trust Agreement may be amended by
the holders of a majority of the Common Securities and the Property Trustee with
(i) the consent of holders representing not less than a majority in aggregate
Liquidation Amount of the outstanding Preferred
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Securities and (ii) receipt by the Issuer Trustees of an opinion of counsel to
the effect that such amendment or the exercise of any power granted to the
Issuer Trustees in accordance with such amendment will not affect the Issuer
Trust's not being taxable as a corporation for United States federal income tax
purposes or the Issuer Trust's exemption from status as an "investment company"
under the Investment Company Act, except that, without the consent of each
holder of Trust Securities affected thereby, the Trust Agreement may not be
amended to (i) change the amount or timing of any Distribution on the Trust
Securities or otherwise adversely affect the amount of any Distribution required
to be made in respect of the Trust Securities as of a specified date or (ii)
restrict the right of a holder of Trust Securities to institute suit for the
enforcement of any such payment on or after such date.
So long as any Junior Subordinated Debentures are held by the Issuer
Trust, the Property Trustee will not (i) direct the time, method and place of
conducting any proceeding for any remedy available to the Debenture Trustee, or
execute any trust or power conferred on the Property Trustee with respect to the
Junior Subordinated Debentures, (ii) waive any past default that is waivable
under Section 5.13 of the Junior Subordinated Indenture, (iii) exercise any
right to rescind or annul a declaration that the Junior Subordinated Debentures
shall be due and payable or (iv) consent to any amendment, modification or
termination of the Junior Subordinated Indenture or the Junior Subordinated
Debentures, where such consent shall be required, without, in each case,
obtaining the prior approval of the holders of at least a majority in aggregate
Liquidation Amount of the outstanding Preferred Securities, except that, if a
consent under the Junior Subordinated Indenture would require the consent of
each holder of Junior Subordinated Debentures affected thereby, no such consent
will be given by the Property Trustee without the prior consent of each holder
of the Preferred Securities. The Property Trustee may not revoke any action
previously authorized or approved by a vote of the holders of the Preferred
Securities except by subsequent vote of the holders of the Preferred Securities.
The Property Trustee will notify each holder of Preferred Securities of any
notice of default with respect to the Junior Subordinated Debentures. In
addition to obtaining the foregoing approvals of the holders of the Preferred
Securities, before taking any of the foregoing actions, the Property Trustee
will obtain an opinion of counsel experienced in such matters to the effect that
the Issuer Trust will not be taxable as a corporation for United States federal
income tax purposes on account of such action.
Any required approval of holders of Preferred Securities may be given
at a meeting of holders of Preferred Securities convened for such purpose or
pursuant to written consent. The Property Trustee will cause a notice of any
meeting at which holders of Preferred Securities are entitled to vote, or of any
matter upon which action by written consent of such holders is to be taken, to
be given to each registered holder of Preferred Securities in the manner set
forth in the Trust Agreement.
No vote or consent of the holders of Preferred Securities will be
required to redeem and cancel Preferred Securities in accordance with the Trust
Agreement.
Notwithstanding that holders of Preferred Securities are entitled to
vote or consent under any of the circumstances described above, any of the
Preferred Securities that are owned by the Company, the Issuer Trustees or any
affiliate of the Company or any Issuer Trustees, will, for purposes of such vote
or consent, be treated as if they were not outstanding.
Expenses and Taxes
In the Indenture, the Company, as borrower, has agreed to pay all debts
and other obligations (other than with respect to the Preferred Securities) and
all costs and expenses of the Issuer Trust
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(including costs and expenses relating to the organization of the Issuer Trust,
the fees and expenses of the Issuer Trustees and the costs and expenses relating
to the operation of the Issuer Trust) and to pay any and all taxes and all costs
and expenses with respect thereto (other than United States withholding taxes)
to which the Issuer Trust might become subject. The foregoing obligations of the
Company under the Indenture are for the benefit of, and shall be enforceable by,
any person to whom any such debts, obligations, costs, expenses and taxes are
owed (a "Creditor") whether or not such Creditor has received notice thereof.
Any such Creditor may enforce such obligations of the Company directly against
the Company, and the Company has irrevocably waived any right or remedy to
require that any such Creditor take any action against the Issuer Trust or any
other person before proceeding against the Company. The Company has also agreed
in the Indenture to execute such additional agreements as may be necessary or
desirable to give full effect to the foregoing.
Book Entry, Delivery and Form
The Preferred Securities will be issued in the form of one or more
fully registered global securities which will be deposited with, or on behalf
of, DTC and registered in the name of DTC's nominee. Unless and until it is
exchangeable in whole or in part for the Preferred Securities in definitive
form, a global security may not be transferred except as a whole by DTC to a
nominee of DTC or by a nominee of DTC to DTC or another nominee of DTC or by DTC
or any such nominee to a successor of such Depository or a nominee of such
successor.
Ownership of beneficial interests in a global security will be limited
to persons that have accounts with DTC or its nominee ("Participants") or
persons that may hold interests through Participants. The Company expects that,
upon the issuance of a global security, DTC will credit, on its book-entry
registration and transfer system, the Participants' accounts with their
respective principal amounts of the Preferred Securities represented by such
global security. Ownership of beneficial interests in such global security will
be shown on, and the transfer of such ownership interests will be effected only
through, records maintained by DTC (with respect to interests of Participants)
and on the records of Participants (with respect to interests of Persons held
through Participants). Beneficial owners will not receive written confirmation
from DTC of their purchase, but are expected to receive written confirmations
from the Participants through which the beneficial owner entered into the
transaction. Transfers of ownership interests will be accomplished by entries on
the books of Participants acting on behalf of the beneficial owners.
So long as DTC, or its nominee, is the registered owner of a global
security, DTC or such nominee, as the case may be, will be considered the sole
owner or holder of the Preferred Securities represented by such global security
for all purposes under the Junior Subordinated Indenture. Except as provided
below, owners of beneficial interests in a global security will not be entitled
to receive physical delivery of the Preferred Securities in definitive form and
will not be considered the owners or holders thereof under the Junior
Subordinated Indenture. Accordingly, each person owning a beneficial interest in
such a global security must rely on the procedures of DTC and, if such person is
not a Participant, on the procedures of the Participant through which such
person owns its interest, to exercise any rights of a holder of Preferred
Securities under the Junior Subordinated Indenture. The Company understands
that, under DTC's existing practices, in the event that the Company requests any
action of holders, or an owner of a beneficial interest in such a global
security desires to take any action which a holder is entitled to take under the
Junior Subordinated Indenture, DTC would authorize the Participants holding the
relevant beneficial interests to take such action, and such Participants would
authorize beneficial owners owning through such Participants to take such action
or would otherwise act upon the instructions of beneficial owners owning through
them. Redemption notices will also be sent to DTC. If less than all of the
Preferred Securities are being redeemed, the
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Company understands that it is DTC's existing practice to determine by lot the
amount of the interest of each Participant to be redeemed.
Distributions on the Preferred Securities registered in the name of DTC
or its nominee will be made to DTC or its nominee, as the case may be, as the
registered owner of the global security representing such Preferred Securities.
None of the Company, the Issuer Trustees, the Administrators, any Paying Agent
or any other agent of the Company or the Issuer Trustees will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in the global
security for such Preferred Securities or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interests.
Disbursements of Distributions to Participants shall be the responsibility of
DTC. DTC's practice is to credit Participants' accounts on a payable date in
accordance with their respective holdings shown on DTC's records unless DTC has
reason to believe that it will not receive payment on the payable date. Payments
by Participants to beneficial owners will be governed by standing instructions
and customary practices, as is the case with securities held for the accounts of
customers in bearer form or registered in "street name," and will be the
responsibility of such Participant and not of DTC, the Company, the Issuer
Trustees, the Paying Agent or any other agent of the Company, subject to any
statutory or regulatory requirements as may be in effect from time to time.
DTC may discontinue providing its services as securities depository
with respect to the Preferred Securities at any time by giving reasonable notice
to the Company or the Issuer Trustees. If DTC notifies the Company that it is
unwilling to continue as such, or if it is unable to continue or ceases to be a
clearing agency registered under the Exchange Act and a successor depository is
not appointed by the Company within ninety days after receiving such notice or
becoming aware that DTC is no longer so registered, the Company will issue the
Preferred Securities in definitive form upon registration of transfer of, or in
exchange for, such global security. In addition, the Company may at any time and
in its sole discretion determine not to have the Preferred Securities
represented by one or more global securities and, in such event, will issue
Preferred Securities in definitive form in exchange for all of the global
securities representing such Preferred Securities.
DTC has advised the Company and the Issuer Trust as follows: DTC 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 Participants and to facilitate the clearance and
settlement of securities transactions between Participants through electronic
book entry changes to accounts of its Participants, thereby eliminating the need
for physical movement of certificates. Participants include securities brokers
and dealers (such as the Underwriter), banks, trust companies and clearing
corporations and may include certain other organizations. Certain of such
Participants (or their representatives), together with other entities, own DTC.
Indirect access to the DTC system is available to others such as banks, brokers,
dealers and trust companies that clear through, or maintain a custodial
relationship with a Participant, either directly or indirectly.
Same-Day Settlement and Payment
Settlement for the Preferred Securities will be made by the
Underwriters in immediately available funds.
Secondary trading in Preferred Securities of corporate issuers is
generally settled in clearinghouse or next-day funds. In contrast, the Preferred
Securities will trade in DTC's Same-Day
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Funds Settlement System, and secondary market trading activity in the Preferred
Securities will therefore be required by DTC to settle in immediately available
funds. No assurance can be given as to the effect, if any, of settlement in
immediately available funds on trading activity in the Preferred Securities.
Payment and Paying Agency
Payments in respect of the Preferred Securities will be made to DTC,
which will credit the relevant accounts at DTC on the applicable Distribution
Dates or, if the Preferred Securities are not held by DTC, such payments will be
made by check mailed to the address of the holder entitled thereto as such
address appears on the securities register for the Trust Securities. The paying
agent (the "Paying Agent") will initially be the Property Trustee and any
co-paying agent chosen by the Property Trustee and acceptable to the
Administrators. The Paying Agent will be permitted to resign as Paying Agent
upon 30 days' written notice to the Property Trustee and the Administrators. If
the Property Trustee is no longer the Paying Agent, the Property Trustee will
appoint a successor (which must be a bank or trust company reasonably acceptable
to the Administrators) to act as Paying Agent.
Registrar and Transfer Agent
The Property Trustee will act as registrar and transfer agent for the
Preferred Securities.
Registration of transfers of Preferred Securities will be effected
without charge by or on behalf of the Issuer Trust, but upon payment of any tax
or other governmental charges that may be imposed in connection with any
transfer or exchange. The Issuer Trust will not be required to register or cause
to be registered the transfer of the Preferred Securities after the Preferred
Securities have been called for redemption.
Information Concerning the Property Trustee
The Property Trustee, other than during the occurrence and continuance
of an Event of Default, undertakes to perform only such duties as are
specifically set forth in the Trust Agreement and, after such Event of Default,
must exercise the same degree of care and skill as a prudent person would
exercise or use in the conduct of his or her own affairs. Subject to this
provision, the Property Trustee is under no obligation to exercise any of the
powers vested in it by the Trust Agreement at the request of any holder of
Preferred Securities unless it is offered reasonable indemnity against the
costs, expenses and liabilities that might be incurred thereby.
For information concerning the relationships between Bankers Trust
Company, the Property Trustee, and the Company, see "Description of Junior
Subordinated Debentures -- Information Concerning the Debenture Trustee."
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Miscellaneous
The Administrators and the Property Trustee are authorized and directed
to conduct the affairs of and to operate the Issuer Trust in such a way that the
Issuer Trust will not be deemed to be an "investment company" required to be
registered under the Investment Company Act or taxable as a corporation for
United States federal income tax purposes and so that the Junior Subordinated
Debentures will be treated as indebtedness of the Company for United States
federal income tax purposes. In this connection, the Property Trustee and the
holders of Common Securities are authorized to take any action, not inconsistent
with applicable law, the certificate of trust of the Issuer Trust or the Trust
Agreement, that the Property Trustee and the holders of Common Securities
determine in their discretion to be necessary or desirable for such purposes, as
long as such action does not materially adversely affect the interests of the
holders of the Preferred Securities.
Holders of the Preferred Securities have no preemptive or similar
rights.
The Issuer Trust may not borrow money, issue debt or mortgage or pledge
any of its assets.
Governing Law
The Trust Agreement will be governed by and construed in accordance
with the laws of the State of Delaware.
DESCRIPTION OF JUNIOR SUBORDINATED DEBENTURES
The Junior Subordinated Debentures are to be issued under the Junior
Subordinated Indenture, under which Bankers Trust Company is acting as Debenture
Trustee. This summary of certain terms and provisions of the Junior Subordinated
Debentures and the Junior Subordinated Indenture does not purport to be complete
and is subject to, and is qualified in its entirety by reference to, all the
provisions of the Junior Subordinated Indenture, including the definitions
therein of certain terms. Whenever particular defined terms of the Junior
Subordinated Indenture (as amended or supplemented from time to time) are
referred to herein, such defined terms are incorporated herein by reference. A
copy of the form of Junior Subordinated Indenture is available from the
Debenture Trustee upon request.
General
Concurrently with the issuance of the Preferred Securities, the Issuer
Trust will invest the proceeds thereof, together with the consideration paid by
the Company for the Common Securities, in the Junior Subordinated Debentures
issued by the Company. The Junior Subordinated Debentures will bear interest,
accruing from , 1997, at the annual rate of % of the principal amount thereof,
payable quarterly in arrears on March 31, June 30, September 30 and December 31
of each year (each, an "Interest Payment Date"), commencing , 1997, to the
person in whose name each Junior Subordinated Debenture is registered at the
close of business on the 15th day of March, June, September or December (whether
or not a Business Day) next preceding such Interest Payment Date. It is
anticipated that, until the liquidation, if any, of the Issuer Trust, each
Junior Subordinated Debenture will be registered in the name of the Issuer Trust
and held by the Property Trustee in trust for the benefit of the holders of the
Trust Securities. The amount of interest payable for any period less than a full
interest period will be computed on the basis of a 360-day year of twelve 30-day
months and the actual days elapsed in a partial month in such period. The amount
of interest payable for any full interest period will be computed by dividing
the rate per annum by four.
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If any date on which interest is payable on the Junior Subordinated Debentures
is not a Business Day, then payment of the interest payable on such date will be
made on the next succeeding day that is a Business Day (without any interest or
other payment in respect of any such delay), with the same force and effect as
if made on the date such payment was originally payable. Accrued interest that
is not paid on the applicable Interest Payment Date will bear additional
interest on the amount thereof (to the extent permitted by law) at the rate per
annum of %, compounded quarterly and computed on the basis of a 360-day year of
twelve 30-day months and the actual days elapsed in a partial month in such
period. The amount of additional interest payable for any full interest period
will be computed by dividing the rate per annum by four. The term "interest" as
used herein includes quarterly interest payments, interest on quarterly interest
payments not paid on the applicable Interest Payment Date and Additional Sums
(as defined below), as applicable.
The Junior Subordinated Debentures will mature on , 2027.
The Junior Subordinated Debentures will be unsecured and will rank
junior and be subordinate in right of payment to all Senior Indebtedness of the
Company. The Junior Subordinated Debentures will not be subject to a sinking
fund. The Junior Subordinated Indenture does not limit the incurrence or
issuance of other secured or unsecured debt by the Company, including Senior
Indebtedness, whether under the Junior Subordinated Indenture or any existing or
other indenture that the Company may enter into in the future or otherwise. See
"-- Subordination."
Option to Extend Interest Payment Period
So long as no Debenture Event of Default has occurred and is
continuing, the Company has the right at any time during the term of the Junior
Subordinated Debentures to defer the payment of interest at any time or from
time to time for a period not exceeding 20 consecutive quarterly periods with
respect to each Extension Period, provided that no Extension Period may extend
beyond the Stated Maturity of the Junior Subordinated Debentures. During any
such Extension Period the Company shall have the right to make partial payments
of interest on any interest payment date. At the end of such Extension Period,
the Company must pay all interest then accrued and unpaid (together with
interest thereon at the annual rate of %, compounded quarterly and computed on
the basis of a 360-day year of twelve 30-day months and the actual days elapsed
in a partial month in such period, to the extent permitted by applicable law).
The amount of additional interest payable for any full interest period will be
computed by dividing the rate per annum by four. During an Extension Period,
interest will continue to accrue and holders of Junior Subordinated Debentures
(or holders of Preferred Securities while outstanding) will be required to
accrue interest income for United States federal income tax purposes. See
"Certain Federal Income Tax Consequences -- Interest Income and Original Issue
Discount."
During any such Extension Period, the Company may not (i) declare or
pay any dividends or distributions on, or redeem, purchase, acquire or make a
liquidation payment with respect to, any of the Company's capital stock or (ii)
make any payment of principal of or interest or premium, if any, on or repay,
repurchase or redeem any debt securities of the Company that rank pari passu in
all respects with or junior in interest to the Junior Subordinated Debentures
(other than (a) repurchases, redemptions or other acquisitions of shares of
capital stock of the Company in connection with any employment contract, benefit
plan or other similar arrangement with or for the benefit of any one or more
employees, officers, directors or consultants, in connection with a dividend
reinvestment or stockholder stock purchase plan or in connection with the
issuance of capital stock of the Company (or securities convertible into or
exercisable for such capital stock) as consideration in an acquisition
transaction entered into prior to the applicable Extension Period, (b) as a
result of an exchange or
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conversion of any class or series of the Company's capital stock (or any capital
stock of a subsidiary of the Company) for any class or series of the Company's
capital stock or of any class or series of the Company's indebtedness for any
class or series of the Company's capital stock, (c) the purchase of fractional
interests in shares of the Company's capital stock pursuant to the conversion or
exchange provisions of such capital stock or the security being converted or
exchanged, (d) any declaration of a dividend in connection with any
stockholder's rights plan, or the issuance of rights, stock or other property
under any stockholders rights plan, or the redemption or repurchase of rights
pursuant thereto, or (e) any dividend in the form of stock, warrants, options or
other rights where the dividend stock or the stock issuable upon exercise of
such warrants, options or other rights is the same stock as that on which the
dividend is being paid or ranks pari passu with or junior to such stock). Prior
to the termination of any such Extension Period, the Company may further defer
the payment of interest, provided that no Extension Period may exceed 20
consecutive quarterly periods or extend beyond the Stated Maturity of the Junior
Subordinated Debentures. Upon the termination of any such Extension Period and
the payment of all amounts then due, the Company may elect to begin a new
Extension Period subject to the above conditions. No interest shall be due and
payable during an Extension Period, except at the end thereof. The Company must
give the Issuer Trustees notice of its election of such Extension Period at
least one Business Day prior to the earlier of (i) the date the Distributions on
the Preferred Securities would have been payable but for the election to begin
such Extension Period and (ii) the date the Property Trustee is required to give
notice to holders of the Preferred Securities of the record date or the date
such Distributions are payable, but in any event not less than one Business Day
prior to such record date. The Property Trustee will give notice of the
Company's election to begin a new Extension Period to the holders of the
Preferred Securities. There is no limitation on the number of times that the
Company may elect to begin an Extension Period.
Redemption
The Junior Subordinated Debentures are redeemable prior to maturity at
the option of the Company (i) on or after , 2002, in whole at any time or in
part from time to time, or (ii) in whole, but not in part, at any time within 90
days following the occurrence and during the continuation of a Tax Event,
Investment Company Event or Capital Treatment Event (each as defined under
"Description of Preferred Securities -- Redemption"), in each case at the
redemption price described below. The proceeds of any such redemption will be
used by the Issuer Trust to redeem the Preferred Securities.
The Federal Reserve's risk-based capital guidelines, which are subject
to change, currently provide that redemptions of permanent equity or other
capital instruments before stated maturity could have a significant impact on a
bank holding company's overall capital structure and that any organization
considering such a redemption should consult with the Federal Reserve before
redeeming any equity or capital instrument prior to maturity if such redemption
could have a material effect on the level or composition of the organization's
capital base (unless the equity or capital instrument were redeemed with the
proceeds of, or replaced by, a like amount of a similar or higher quality
capital instrument and the Federal Reserve considers the organization's capital
position to be fully adequate after the redemption).
The redemption of the Junior Subordinated Debentures by the Company
prior to their Stated Maturity would constitute the redemption of capital
instruments under the Federal Reserve's current risk-based capital guidelines
and may be subject to the prior approval of the Federal Reserve. The redemption
of the Junior Subordinated Debentures also could be subject to the additional
prior approval of the Federal Reserve under its current risk-based capital
guidelines.
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The redemption price for Junior Subordinated Debentures is the
outstanding principal amount of the Junior Subordinated Debentures plus accrued
interest (including any Additional Interest or any Additional Sums) thereon to
but excluding the date fixed for redemption.
Additional Sums
The Company has covenanted in the Junior Subordinated Indenture that,
if and for so long as (i) the Issuer Trust is the holder of all Junior
Subordinated Debentures and (ii) the Issuer Trust is required to pay any
additional taxes, duties or other governmental charges as a result of a Tax
Event, the Company will pay as additional sums on the Junior Subordinated
Debentures such amounts as may be required so that the Distributions payable by
the Issuer Trust will not be reduced as a result of any such additional taxes,
duties or other governmental charges. See "Description of Preferred Securities
- -- Redemption."
Registration, Denomination and Transfer
The Junior Subordinated Debentures will initially be registered in the
name of the Issuer Trust. If the Junior Subordinated Debentures are distributed
to holders of Preferred Securities, it is anticipated that the depositary
arrangements for the Junior Subordinated Debentures will be substantially
identical to those in effect for the Preferred Securities. See "Description of
Preferred Securities -- Book Entry, Delivery and Form."
Although DTC has agreed to the procedures described above, it is under
no obligation to perform or continue to perform such procedures, and such
procedures may be discontinued at any time. If DTC is at any time unwilling or
unable to continue as depositary and a successor depositary is not appointed by
the Company within 90 days of receipt of notice from DTC to such effect, the
Company will cause the Junior Subordinated Debentures to be issued in definitive
form.
Payments on Junior Subordinated Debentures represented by a global
security will be made to Cede & Co., the nominee for DTC, as the registered
holder of the Junior Subordinated Debentures, as described under "Description of
Preferred Securities -- Book Entry, Delivery and Form." If Junior Subordinated
Debentures are issued in certificated form, principal and interest will be
payable, the transfer of the Junior Subordinated Debentures will be registrable,
and Junior Subordinated Debentures will be exchangeable for Junior Subordinated
Debentures of other authorized denominations of a like aggregate principal
amount, at the corporate trust office of the Debenture Trustee in New York, New
York or at the offices of any Paying Agent or transfer agent appointed by the
Company, provided that payment of interest may be made at the option of the
Company by check mailed to the address of the persons entitled thereto. However,
a holder of $1 million or more in aggregate principal amount of Junior
Subordinated Debentures may receive payments of interest (other than interest
payable at the Stated Maturity) by wire transfer of immediately available funds
upon written request to the Debenture Trustee not later than 15 calendar days
prior to the date on which the interest is payable.
Junior Subordinated Debentures will be exchangeable for other Junior
Subordinated Debentures of like tenor, of any authorized denominations, and of a
like aggregate principal amount.
Junior Subordinated Debentures may be presented for exchange as
provided above, and may be presented for registration of transfer (with the form
of transfer endorsed thereon, or a satisfactory written instrument of transfer,
duly executed), at the office of the securities registrar appointed under the
Junior Subordinated Debenture or at the office of any transfer agent designated
by the Company
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for such purpose without service charge and upon payment of any taxes and other
governmental charges as described in the Junior Subordinated Indenture. The
Company will appoint the Debenture Trustee as securities registrar under the
Junior Subordinated Indenture. The Company may at any time designate additional
transfer agents with respect to the Junior Subordinated Debentures.
In the event of any redemption, neither the Company nor the Debenture
Trustee shall be required to (i) issue, register the transfer of or exchange
Junior Subordinated Debentures during a period beginning at the opening of
business 15 days before the day of selection for redemption of the Junior
Subordinated Debentures to be redeemed and ending at the close of business on
the day of mailing of the relevant notice of redemption or (ii) transfer or
exchange any Junior Subordinated Debentures so selected for redemption, except,
in the case of any Junior Subordinated Debentures being redeemed in part, any
portion thereof not to be redeemed.
Any monies deposited with the Debenture Trustee or any paying agent, or
then held by the Company in trust, for the payment of the principal of (and
premium, if any) or interest on any Junior Subordinated Debenture and remaining
unclaimed for two years after such principal (and premium, if any) or interest
has become due and payable shall, at the request of the Company, be repaid to
the Company and the holder of such Junior Subordinated Debenture shall
thereafter look, as a general unsecured creditor, only to the Company for
payment thereof.
Restrictions on Certain Payments; Certain Covenants of the Company
The Company has covenanted that it will not (i) declare or pay any
dividends or distributions on, or redeem, purchase, acquire, or make a
liquidation payment with respect to, any of the Company's capital stock or (ii)
make any payment of principal of or interest or premium, if any, on or repay,
repurchase or redeem any debt securities of the Company that rank pari passu in
all respects with or junior in interest to the Junior Subordinated Debentures
(other than (a) repurchases, redemptions or other acquisitions of shares of
capital stock of the Company in connection with any employment contract, benefit
plan or other similar arrangement with or for the benefit of any one or more
employees, officers, directors or consultants, in connection with a dividend
reinvestment or stockholder stock purchase plan or in connection with the
issuance of capital stock of the Company (or securities convertible into or
exercisable for such capital stock) as consideration in an acquisition
transaction entered into prior to the applicable Extension Period or other event
referred to below, (b) as a result of an exchange or conversion of any class or
series of the Company's capital stock (or any capital stock of a subsidiary of
the Company) for any class or series of the Company's capital stock or of any
class or series of the Company's indebtedness for any class or series of the
Company's capital stock, (c) the purchase of fractional interests in shares of
the Company's capital stock pursuant to the conversion or exchange provisions of
such capital stock or the security being converted or exchanged, (d) any
declaration of a dividend in connection with any stockholder's rights plan, or
the issuance of rights, stock or other property under any stockholder's rights
plan, or the redemption or repurchase of rights pursuant thereto, or (e) any
dividend in the form of stock, warrants, options or other rights where the
dividend stock or the stock issuable upon exercise of such warrants, options or
other rights is the same stock as that on which the dividend is being paid or
ranks pari passu with or junior to such stock), if at such time (i) there has
occurred any event (a) of which the Company has actual knowledge that with the
giving of notice or the lapse of time, or both, would constitute a Debenture
Event of Default and (b) that the Company has not taken reasonable steps to
cure, (ii) if the Junior Subordinated Debentures are held by the Issuer Trust,
the Company is in default with respect to its payment of any obligations under
the Guarantee or (iii) the Company has given notice of its election of an
Extension Period as provided in the Junior Subordinated Indenture and has not
rescinded such notice, or such Extension Period, or any extension thereof, is
continuing.
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The Company has covenanted in the Junior Subordinated Indenture (i) to
continue to hold, directly or indirectly, 100% of the Common Securities,
provided that certain successors that are permitted pursuant to the Junior
Subordinated Indenture may succeed to the Company's ownership of the Common
Securities, (ii) as holder of the Common Securities, not to voluntarily
terminate, windup or liquidate the Issuer Trust, other than (a) in connection
with a distribution of Junior Subordinated Debentures to the holders of the
Preferred Securities in liquidation of the Issuer Trust or (b) in connection
with certain mergers, consolidations or amalgamations permitted by the Trust
Agreement and (iii) to use its reasonable efforts, consistent with the terms and
provisions of the Trust Agreement, to cause the Issuer Trust to continue not to
be taxable as a corporation for United States federal income tax purposes.
Modification of Junior Subordinated Indenture
From time to time, the Company and the Debenture Trustee may, without
the consent of any of the holders of the outstanding Junior Subordinated
Debentures, amend, waive or supplement the provisions of the Junior Subordinated
Indenture to: (1) evidence succession of another corporation or association to
the Company and the assumption by such person of the obligations of the Company
under the Junior Subordinated Debentures, (2) add further covenants,
restrictions or conditions for the protection of holders of the Junior
Subordinated Debentures, (3) cure ambiguities or correct the Junior Subordinated
Debentures in the case of defects or inconsistencies in the provisions thereof,
so long as any such cure or correction does not adversely affect the interest of
the holders of the Junior Subordinated Debentures in any material respect, (4)
change the terms of the Junior Subordinated Debentures to facilitate the
issuance of the Junior Subordinated Debentures in certificated or other
definitive form, (5) evidence or provide for the appointment of a successor
Debenture Trustee, or (6) qualify, or maintain the qualification of, the Junior
Subordinated Indentures under the Trust Indenture Act. The Junior Subordinated
Indenture contains provisions permitting the Company and the Debenture Trustee,
with the consent of the holders of not less than a majority in principal amount
of the Junior Subordinated Debentures, to modify the Junior Subordinated
Indenture in a manner affecting the rights of the holders of the Junior
Subordinated Debentures, except that no such modification may, without the
consent of the holder of each outstanding Junior Subordinated Debenture so
affected, (i) change the Stated Maturity of the Junior Subordinated Debentures,
or reduce the principal amount thereof, the rate of interest thereon or any
premium payable upon the redemption thereof, or change the place of payment
where, or the currency in which, any such amount is payable or impair the right
to institute suit for the enforcement of any Junior Subordinated Debenture or
(ii) reduce the percentage of principal amount of Junior Subordinated
Debentures, the holders of which are required to consent to any such
modification of the Junior Subordinated Indenture. Furthermore, so long as any
of the Preferred Securities remain outstanding, no such modification may be made
that adversely affects the holders of such Preferred Securities in any material
respect, and no termination of the Junior Subordinated Indenture may occur, and
no waiver of any Debenture Event of Default or compliance with any covenant
under the Junior Subordinated Indenture may be effective, without the prior
consent of the holders of at least a majority of the aggregate Liquidation
Amount of the outstanding Preferred Securities unless and until the principal of
(and premium, if any, on) the Junior Subordinated Debentures and all accrued and
unpaid interest thereon have been paid in full and certain other conditions are
satisfied.
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Debenture Events of Default
The Junior Subordinated Indenture provides that any one or more of the
following described events with respect to the Junior Subordinated Debentures
that has occurred and is continuing constitutes an "Event of Default" with
respect to the Junior Subordinated Debentures:
(i) failure to pay any interest on the Junior Subordinated Debentures when
due and continuance of such default for a period of 30 days (subject to
the deferral of any due date in the case of an Extension Period); or
(ii) failure to pay any principal of or premium, if any, on
the Junior Subordinated Debentures when due whether at the Stated
Maturity; or
(iii) failure to observe or perform in any material respect certain other
covenants contained in the Junior Subordinated Indenture for 90 days
after written notice to the Company from the Debenture Trustee or the
holders of at least 25% in aggregate outstanding principal amount of
the outstanding Junior Subordinated Debentures; or
(iv) the Company consents to the appointment of a receiver or other similar
official in any liquidation, insolvency or similar proceeding with
respect to the Company or all or substantially all its property.
For purposes of the Trust Agreement and this Prospectus, each such
Event of Default under the Junior Subordinated Debenture is referred to as a
"Debenture Event of Default." As described in "Description of Preferred
Securities -- Events of Default; Notice," the occurrence of a Debenture Event of
Default will also constitute an Event of Default in respect of the Trust
Securities.
The holders of at least a majority in aggregate principal amount of
outstanding Junior Subordinated Debentures have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Debenture Trustee. The Debenture Trustee or the holders of not less than 25% in
aggregate principal amount of outstanding Junior Subordinated Debentures may
declare the principal due and payable immediately upon a Debenture Event of
Default, and, should the Debenture Trustee or such holders of Junior
Subordinated Debentures fail to make such declaration, the holders of at least
25% in aggregate Liquidation Amount of the outstanding Preferred Securities
shall have such right. The holders of a majority in aggregate principal amount
of outstanding Junior Subordinated Debentures may annul such declaration and
waive the default if all defaults (other than the non-payment of the principal
of Junior Subordinated Debentures which has become due solely by such
acceleration) have 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. Should the holders of Junior
Subordinated Debentures fail to annul such declaration and waive such default,
the holders of a majority in aggregate Liquidation Amount of the outstanding
Preferred Securities shall have such right.
The holders of at least a majority in aggregate principal amount of the
outstanding Junior Subordinated Debentures affected thereby may, on behalf of
the holders of all the Junior Subordinated Debentures, waive any past default,
except a default in the payment of principal (or premium, if any) or interest
(unless such default has been cured and a sum sufficient to pay all matured
installments of interest and principal due otherwise than by acceleration has
been deposited with the Debenture Trustee) or a default in respect of a covenant
or provision which under the Junior Subordinated
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Indenture cannot be modified or amended without the consent of the holder of
each outstanding Junior Subordinated Debenture affected thereby. See "--
Modification of Junior Subordinated Indenture." The Company is required to file
annually with the Debenture Trustee a certificate as to whether or not the
Company is in compliance with all the conditions and covenants applicable to it
under the Junior Subordinated Indenture.
If a Debenture Event of Default occurs and is continuing, the Property
Trustee will have the right to declare the principal of and the interest on the
Junior Subordinated Debentures, and any other amounts payable under the Junior
Subordinated Indenture, to be forthwith due and payable and to enforce its other
rights as a creditor with respect to the Junior Subordinated Debentures.
Enforcement of Certain Rights by Holders of Preferred Securities
If a Debenture Event of Default has occurred and is continuing and such
event is attributable to the failure of the Company to pay any amounts payable
in respect of the Junior Subordinated Debentures on the date such amounts are
otherwise payable, a registered holder of Preferred Securities may institute a
Direct Action against the Company for enforcement of payment to such holder of
an amount equal to the amount payable in respect of Junior Subordinated
Debentures having a principal amount equal to the aggregate Liquidation Amount
of the Preferred Securities held by such holder. The Company may not amend the
Junior Subordinated Indenture to remove the foregoing right to bring a Direct
Action without the prior written consent of the holders of all the Preferred
Securities. The Company will have the right under the Junior Subordinated
Indenture to set-off any payment made to such holder of Preferred Securities by
the Company in connection with a Direct Action.
The holders of the Preferred Securities are not able to exercise
directly any remedies available to the holders of the Junior Subordinated
Debentures except under the circumstances described in the preceding paragraph.
See "Description of Preferred Securities -- Events of Default; Notice."
Consolidation, Merger, Sale of Assets and Other Transactions
The Junior Subordinated Indenture provides that the Company may not
consolidate with or merge into any other Person or convey, transfer or lease its
properties and assets substantially as an entirety to any Person, and no Person
may consolidate with or merge into the Company or convey, transfer or lease its
properties and assets substantially as an entirety to the Company, unless (i) if
the Company consolidates with or merges into another Person or conveys or
transfers its properties and assets substantially as an entirety to any Person,
the successor Person is organized under the laws of the United States or any
state or the District of Columbia, and such successor Person expressly assumes
the Company's obligations in respect of the Junior Subordinated Debentures; (ii)
immediately after giving effect thereto, no Debenture Event of Default, and no
event which, after notice or lapse of time or both, would constitute a Debenture
Event of Default, has occurred and is continuing; and (iii) certain other
conditions as prescribed in the Junior Subordinated Indenture are satisfied.
The provisions of the Junior Subordinated Indenture do not afford
holders of the Junior Subordinated Debentures protection in the event of a
highly leveraged or other transaction involving the Company that may adversely
affect holders of the Junior Subordinated Debentures.
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Satisfaction and Discharge
The Junior Subordinated Indenture provides that when, among other
things, all Junior Subordinated Debentures not previously delivered to the
Debenture Trustee for cancellation (i) have become due and payable, (ii) will
become due and payable at the Stated Maturity within one year, and the Company
deposits or causes to be deposited with the Debenture Trustee funds, in trust,
for the purpose and in an amount sufficient to pay and discharge the entire
indebtedness on the Junior Subordinated Debentures not previously delivered to
the Debenture Trustee for cancellation, for the principal (and premium, if any)
and interest to the date of the deposit or to the Stated Maturity, as the case
may be, then the Junior Subordinated Indenture will cease to be of further
effect (except as to the Company's obligations to pay all other sums due
pursuant to the Junior Subordinated Indenture and to provide the officers'
certificates and opinions of counsel described therein), and the Company will be
deemed to have satisfied and discharged the Junior Subordinated Indenture.
Subordination
The Junior Subordinated Debentures will be subordinate and junior in
right of payment, to the extent set forth in the Junior Subordinated Indenture,
to all Senior Indebtedness (as defined below) of the Company. If the Company
defaults in the payment of any principal, premium, if any, or interest, if any,
or any other amount payable on any Senior Indebtedness when the same becomes due
and payable, whether at maturity or at a date fixed for redemption or by
declaration of acceleration or otherwise, then, unless and until such default
has been cured or waived or has ceased to exist or all Senior Indebtedness has
been paid, no direct or indirect payment (in cash, property, securities, by
setoff or otherwise) may be made or agreed to be made on the Junior Subordinated
Debentures, or in respect of any redemption, repayment, retirement, purchase or
other acquisition of any of the Junior Subordinated Debentures.
As used herein, "Senior Indebtedness" means, whether recourse is to all
or a portion of the assets of the Company and whether or not contingent, (i)
every obligation of the Company for money borrowed; (ii) every obligation of the
Company evidenced by bonds, debentures, notes or other similar instruments,
including obligations incurred in connection with the acquisition of property,
assets or businesses; (iii) every reimbursement obligation of the Company with
respect to letters of credit, bankers' acceptances or similar facilities issued
for the account of the Company; (iv) every obligation of the Company issued or
assumed as the deferred purchase price of property or services (but excluding
trade accounts payable or accrued liabilities arising in the ordinary course of
business); (v) every capital lease obligation of the Company; (vi) every
obligation of the Company for claims (as defined in Section 101(4) of the United
States Bankruptcy Code of 1978, as amended) in respect of derivative products
such as interest and foreign exchange rate contracts, commodity contracts and
similar arrangements; and (vii) every obligation of the type referred to in
clauses (i) through (vi) of another person and all dividends of another person
the payment of which, in either case, the Company has guaranteed or is
responsible or liable, directly or indirectly, as obligor or otherwise; provided
that Senior Indebtedness shall not include (i) any obligations which, by their
terms, are expressly stated to rank pari passu in right of payment with, or to
not be superior in right of payment to, the Junior Subordinated Debentures, (ii)
any Senior Indebtedness of the Company which when incurred and without respect
to any election under Section 1111(b) of the United States Bankruptcy Code of
1978, as amended, was without recourse to the Company, (iii) any indebtedness of
the Company to any of its subsidiaries, (iv) indebtedness to any executive
officer or director of the Company, or (v) any indebtedness in respect of debt
securities issued to any trust, or a trustee of such trust, partnership or other
entity affiliated with the Company that is a financing entity of the Company in
connection with the issuance of such financing entity of securities that are
similar to the Preferred Securities.
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In the event of (i) certain events of bankruptcy, dissolution or
liquidation of the Company or the holder of the Common Securities, (ii) any
proceeding for the liquidation, dissolution or other winding up of the Company,
voluntary or involuntary, whether or not involving insolvency or bankruptcy
proceedings, (iii) any assignment by the Company for the benefit of creditors or
(iv) any other marshalling of the assets of the Company, all Senior Indebtedness
(including any interest thereon accruing after the commencement of any such
proceedings) shall first be paid in full before any payment or distribution,
whether in cash, securities or other property, shall be made on account of the
Junior Subordinated Debentures. In such event, any payment or distribution on
account of the Junior Subordinated Debentures, whether in cash, securities or
other property, that would otherwise (but for the subordination provisions) be
payable or deliverable in respect of the Junior Subordinated Debentures will be
paid or delivered directly to the holders of Senior Indebtedness in accordance
with the priorities then existing among such holders until all Senior
Indebtedness (including any interest thereon accruing after the commencement of
any such proceedings) has been paid in full.
In the event of any such proceeding, after payment in full of all sums
owing with respect to Senior Indebtedness, the holders of Junior Subordinated
Debentures, together with the holders of any obligations of the Company ranking
on a parity with the Junior Subordinated Debentures, will be entitled to be paid
from the remaining assets of the Company the amounts at the time due and owing
on the Junior Subordinated Debentures and such other obligations before any
payment or other distribution, whether in cash, property or otherwise, will be
made on account of any capital stock or obligations of the Company ranking
junior to the Junior Subordinated Debentures and such other obligations. If any
payment or distribution on account of the Junior Subordinated Debentures of any
character or any security, whether in cash, securities or other property is
received by any holder of any Junior Subordinated Debentures in contravention of
any of the terms hereof and before all the Senior Indebtedness has been paid in
full, such payment or distribution or security will be received in trust for the
benefit of, and must be paid over or delivered and transferred to, the holders
of the Senior Indebtedness at the time outstanding in accordance with the
priorities then existing among such holders for application to the payment of
all Senior Indebtedness remaining unpaid to the extent necessary to pay all such
Senior Indebtedness in full. By reason of such subordination, in the event of
the insolvency of the Company, holders of Senior Indebtedness may receive more,
ratably, and holders of the Junior Subordinated Debentures may receive less,
ratably, than the other creditors of the Company. Such subordination will not
prevent the occurrence of any Event of Default in respect of the Junior
Subordinated Debentures.
The Junior Subordinated Indenture places no limitation on the amount of
additional Senior Indebtedness that may be incurred by the Company. The Company
expects from time to time to incur additional indebtedness constituting Senior
Indebtedness.
Information Concerning the Debenture Trustee
The Debenture Trustee, other than during the occurrence and continuance
of a default by the Company in performance of its obligations under the Junior
Subordinated Debenture, is under no obligation to exercise any of the powers
vested in it by the Junior Subordinated Indenture at the request of any holder
of Junior Subordinated Debentures, unless offered reasonable indemnity by such
holder against the costs, expenses and liabilities that 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
if the Debenture Trustee reasonably believes that repayment or adequate
indemnity is not reasonably assured to it.
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Bankers Trust Company, the Debenture Trustee, may serve from time to
time as trustee under other indentures or trust agreements with the Company or
its subsidiaries relating to other issues of their securities. In addition, the
Company and certain of its affiliates may have other banking relationships with
Bankers Trust Company and its affiliates.
Governing Law
The Junior Subordinated Indenture and the Junior Subordinated Debentures
will be governed by and construed in accordance with the laws of the State of
New York.
DESCRIPTION OF GUARANTEE
The Guarantee will be executed and delivered by the Company
concurrently with the issuance of Preferred Securities by the Issuer Trust for
the benefit of the holders from time to time of the Preferred Securities.
Bankers Trust Company will act as Guarantee Trustee under the Guarantee. This
summary of certain provisions of the Guarantee does not purport to be complete
and is subject to, and qualified in its entirety by reference to, all the
provisions of the Guarantee, including the definitions therein of certain terms.
A copy of the form of Guarantee is available upon request from the Guarantee
Trustee. The Guarantee Trustee will hold the Guarantee for the benefit of the
holders of the Preferred Securities.
General
The Company will irrevocably agree to pay in full on a subordinated
basis, to the extent set forth in the Guarantee and described herein, the
Guarantee Payments (as defined below) to the holders of the Preferred
Securities, as and when due, regardless of any defense, right of set-off or
counterclaim that the Issuer Trust may have or assert other than the defense of
payment. The following payments with respect to the Preferred Securities, to the
extent not paid by or on behalf of the Issuer Trust (the "Guarantee Payments"),
will be subject to the Guarantee: (i) any accrued and unpaid Distributions
required to be paid on such Preferred Securities, to the extent that the Issuer
Trust has funds on hand available therefor at such time, (ii) the Redemption
Price with respect to any Preferred Securities called for redemption, to the
extent that the Issuer Trust has funds on hand available therefor at such time,
and (iii) upon a voluntary or involuntary dissolution, termination, winding up
or liquidation of the Issuer Trust (unless the Junior Subordinated Debentures
are distributed to holders of the Preferred Securities), the lesser of (a) the
aggregate of the Liquidation Amount and all accumulated and unpaid Distributions
to the date of payment, to the extent that the Issuer Trust has funds on hand
available therefor at such time, and (b) the amount of assets of the Issuer
Trust remaining available for distribution to holders of the Preferred
Securities on liquidation of the Issuer Trust. The Company's obligation to make
a Guarantee Payment may be satisfied by direct payment of the required amounts
by the Company to the holders of the Preferred Securities or by causing the
Issuer Trust to pay such amounts to such holders.
The Guarantee will be an irrevocable guarantee of payment on a
subordinated basis of the Issuer Trust's obligations under the Preferred
Securities, but will apply only to the extent that the Issuer Trust has funds
sufficient to make such payments, and is not a guarantee of collection.
If the Company does not make payments on the Junior Subordinated
Debentures held by the Issuer Trust, the Issuer Trust will not be able to pay
any amounts payable in respect of the Preferred Securities and will not have
funds legally available therefor. The Guarantee will rank subordinate and junior
in right of payment to all Senior Indebtedness of the Company. See "-- Status of
the
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Guarantee." The Guarantee does not limit the incurrence or issuance of other
secured or unsecured debt of the Company, including Senior Indebtedness, whether
under the Junior Subordinated Indenture, any other indenture that the Company
may enter into in the future or otherwise.
The Company has, through the Guarantee, the Trust Agreement, the Junior
Subordinated Debentures and the Junior Subordinated Indenture, taken together,
fully, irrevocably and unconditionally guaranteed all the Issuer Trust's
obligations under the Preferred Securities on a subordinated basis. No single
document standing alone or operating in conjunction with fewer than all the
other documents constitutes such guarantee. It is only the combined operation of
these documents that has the effect of providing a full, irrevocable and
unconditional guarantee of the Issuer Trust's obligations in respect of the
Preferred Securities. See "Relationship Among the Preferred Securities, the
Junior Subordinated Debentures and the Guarantee."
Status of the Guarantee
The Guarantee will constitute an unsecured obligation of the Company
and will rank subordinate and junior in right of payment to all Senior
Indebtedness of the Company in the same manner as the Junior Subordinated
Debentures.
The Guarantee will constitute a guarantee of payment and not of
collection (i.e., the guaranteed party may institute a legal proceeding directly
against the Guarantor to enforce its rights under the Guarantee without first
instituting a legal proceeding against any other person or entity). The
Guarantee will be held by the Guarantee Trustee for the benefit of the holders
of the Preferred Securities. The Guarantee will not be discharged except by
payment of the Guarantee Payments in full to the extent not paid by the Issuer
Trust or distribution to the holders of the Preferred Securities of the Junior
Subordinated Debentures.
Amendments and Assignment
Except with respect to any changes which do not materially adversely
affect the rights of holders of the Preferred Securities (in which case no
consent will be required), the Guarantee may not be amended without the prior
approval of the holders of not less than a majority of the aggregate Liquidation
Amount of the outstanding Preferred Securities. The manner of obtaining any such
approval will be as set forth under "Description of Preferred Securities --
Voting Rights; Amendment of Trust Agreement." All guarantees and agreements
contained in the Guarantee shall bind the successors, assigns, receivers,
trustees and representatives of the Company and shall inure to the benefit of
the holders of the Preferred Securities then outstanding.
Events of Default
An event of default under the Guarantee will occur upon the failure of
the Company to perform any of its payment or other obligations thereunder, or to
perform any non-payment obligation if such non-payment default remains
unremedied for 30 days. The holders of not less than a majority in aggregate
Liquidation Amount of the outstanding Preferred Securities have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the Guarantee Trustee in respect of the Guarantee or to direct the
exercise of any trust or power conferred upon the Guarantee Trustee under the
Guarantee.
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Any registered holder of Preferred Securities may institute a legal
proceeding directly against the Company to enforce its rights under the
Guarantee without first instituting a legal proceeding against the Issuer Trust,
the Guarantee Trustee or any other person or entity.
The Company, as guarantor, is required to file annually with the
Guarantee Trustee a certificate as to whether or not the Company is in
compliance with all the conditions and covenants applicable to it under the
Guarantee.
Information Concerning the Guarantee Trustee
The Guarantee Trustee, other than during the occurrence and continuance
of a default by the Company in performance of the Guarantee, undertakes to
perform only such duties as are specifically set forth in the Guarantee and,
after the occurrence of an event of default with respect to the Guarantee, must
exercise the same degree of care and skill as a prudent person would exercise or
use in the conduct of his or her own affairs. Subject to this provision, the
Guarantee Trustee is under no obligation to exercise any of the powers vested in
it by the Guarantee at the request of any holder of the Preferred Securities
unless it is offered reasonable indemnity against the costs, expenses and
liabilities that might be incurred thereby.
For information concerning the relationship between Bankers Trust
Company, as Guarantee Trustee, and the Company, see "Description of Junior
Subordinated Debentures -- Information Concerning the Debenture Trustee."
Termination of the Guarantee
The Guarantee will terminate and be of no further force and effect upon
full payment of the Redemption Price of the Preferred Securities, upon full
payment of the amounts payable with respect to the Preferred Securities upon
liquidation of the Issuer Trust or upon distribution of Junior Subordinated
Debentures to the holders of the Preferred Securities in exchange for all of the
Preferred Securities. The Guarantee will continue to be effective or will be
reinstated, as the case may be, if at any time any holder of the Preferred
Securities must restore payment of any sums paid under the Preferred Securities
or the Guarantee.
Governing Law
The Guarantee will be governed by and construed in accordance with the
laws of the State of New York.
RELATIONSHIP AMONG THE PREFERRED SECURITIES, THE JUNIOR
SUBORDINATED DEBENTURES AND THE GUARANTEE
Full and Unconditional Guarantee
Payments of Distributions and other amounts due on the Preferred
Securities (to the extent the Issuer Trust has funds available for such payment)
are irrevocably guaranteed, on a subordinated basis, by the Company as and to
the extent set forth under "Description of Guarantee." Taken together, the
Company's obligations under the Junior Subordinated Debentures, the Junior
Subordinated Indenture, the Trust Agreement and the Guarantee provide, in the
aggregate, a full, irrevocable and unconditional guarantee of payments of
Distributions and other amounts due on the Preferred Securities. No single
document standing alone or operating in conjunction with fewer than
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all the other documents constitutes such guarantee. It is only the combined
operation of these documents that has the effect of providing a full,
irrevocable and unconditional guarantee of the Issuer Trust's obligations in
respect of the Preferred Securities. If and to the extent that the Company does
not make payments on the Junior Subordinated Debentures, the Issuer Trust will
not have sufficient funds to pay Distributions or other amounts due on the
Preferred Securities. The Guarantee does not cover payment of amounts payable
with respect to the Preferred Securities when the Issuer Trust does not have
sufficient funds to pay such amounts. In such event, the remedy of a holder of
the Preferred Securities is to institute a legal proceeding directly against the
Company for enforcement of payment of the Company's obligations under Junior
Subordinated Debentures having a principal amount equal to the Liquidation
Amount of the Preferred Securities held by such holder.
The obligations of the Company under the Junior Subordinated Debentures
and the Guarantee are subordinate and junior in right of payment to all Senior
Indebtedness.
Sufficiency of Payments
As long as payments are made when due on the Junior Subordinated
Debentures, such payments will be sufficient to cover Distributions and other
payments distributable on the Preferred Securities, primarily because (i) the
aggregate principal amount of the Junior Subordinated Debentures will be equal
to the sum of the aggregate stated Liquidation Amount of the Preferred
Securities and Common Securities; (ii) the interest rate and interest and other
payment dates on the Junior Subordinated Debentures will match the Distribution
rate, Distribution Dates and other payment dates for the Preferred Securities;
(iii) the Company will pay for any and all costs, expenses and liabilities of
the Issuer Trust except the Issuer Trust's obligations to holders of the Trust
Securities; and (iv) the Trust Agreement further provides that the Issuer Trust
will not engage in any activity that is not consistent with the limited purposes
of the Issuer Trust.
Notwithstanding anything to the contrary in the Junior Subordinated
Indenture, the Company has the right to set-off any payment it is otherwise
required to make thereunder against and to the extent the Company has
theretofore made, or is concurrently on the date of such payment making, a
payment under the Guarantee.
Enforcement Rights of Holders of Preferred Securities
A holder of any Preferred Security may institute a legal proceeding
directly against the Company to enforce its rights under the Guarantee without
first instituting a legal proceeding against the Guarantee Trustee, the Issuer
Trust or any other person or entity. See "Description of Guarantee."
A default or event of default under any Senior Indebtedness of the
Company would not constitute a default or Event of Default in respect of the
Preferred Securities. However, in the event of payment defaults under, or
acceleration of, Senior Indebtedness of the Company, the subordination
provisions of the Junior Subordinated Indenture provide that no payments may be
made in respect of the Junior Subordinated Debentures until such Senior
Indebtedness has been paid in full or any payment default thereunder has been
cured or waived. See "Description of Junior Subordinated Debentures --
Subordination."
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Limited Purpose of Issuer Trust
The Preferred Securities represent preferred undivided beneficial
interests in the assets of the Issuer Trust, and the Issuer Trust exists for the
sole purpose of issuing its Preferred Securities and Common Securities and
investing the proceeds thereof in Junior Subordinated Debentures. A principal
difference between the rights of a holder of a Preferred Security and a holder
of a Junior Subordinated Debenture is that a holder of a Junior Subordinated
Debenture is entitled to receive from the Company payments on Junior
Subordinated Debentures held, while a holder of Preferred Securities is entitled
to receive Distributions or other amounts distributable with respect to the
Preferred Securities from the Issuer Trust (or from the Company under the
Guarantee) only if and to the extent the Issuer Trust has funds available for
the payment of such Distributions.
Rights Upon Dissolution
Upon any voluntary or involuntary dissolution of the Issuer Trust,
other than any such dissolution involving the distribution of the Junior
Subordinated Debentures, after satisfaction of liabilities to creditors of the
Issuer Trust as required by applicable law, the holders of the Preferred
Securities will be entitled to receive, out of assets held by the Issuer Trust,
the Liquidation Distribution in cash. See "Description of Preferred Securities
- -- Liquidation Distribution Upon Dissolution." Upon any voluntary or involuntary
liquidation or bankruptcy of the Company, the Issuer Trust, as registered holder
of the Junior Subordinated Debentures, would be a subordinated creditor of the
Company, subordinated and junior in right of payment to all Senior Indebtedness
as set forth in the Junior Subordinated Indenture, but entitled to receive
payment in full of all amounts payable with respect to the Junior Subordinated
Debentures before any stockholders of the Company receive payments or
distributions. Since the Company is the guarantor under the Guarantee and has
agreed under the Junior Subordinated Indenture to pay for all costs, expenses
and liabilities of the Issuer Trust (other than the Issuer Trust's obligations
to the holders of the Trust Securities), the positions of a holder of the
Preferred Securities and a holder of such Junior Subordinated Debentures
relative to other creditors and to stockholders of the Company in the event of
liquidation or bankruptcy of the Company are expected to be substantially the
same.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
General
In the opinion of Malizia, Spidi, Sloane & Fisch, P.C., Washington,
D.C., in its capacity as special tax counsel to the Company ("Tax Counsel"), the
following discussion summarizes the material United States federal income tax
consequences of the purchase, ownership and disposition of the Preferred
Securities.
This summary is based on the Internal Revenue Code of 1986, as amended
(the "Code"), Treasury regulations thereunder, and administrative and judicial
interpretations thereof, each as of the date hereof, all of which are subject to
change, possibly on a retroactive basis. The authorities on which this summary
is based are subject to various interpretations, and the opinions of Tax Counsel
are not binding on the Internal Revenue Service (the "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 transactions described
herein. Accordingly, there can be no assurance that the IRS will not challenge
the opinions expressed herein or that a court would not sustain such a
challenge.
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Except as otherwise stated, this summary deals only with the Preferred
Securities held as a capital asset by a holder who or which (i) purchased the
Preferred Securities upon original issuance (an "Initial Holder") at their
original offering price and (ii) is a US Holder (as defined below). This summary
does not address all the tax consequences that may be relevant to a US Holder,
nor does it address the tax consequences, except as stated below, to holders
that are not US Holders ("Non-US Holders") or to holders that may be subject to
special tax treatment (such as banks, thrift institutions, real estate
investment trusts, regulated investment companies, insurance companies, brokers
and dealers in securities or currencies, other financial institutions,
tax-exempt organizations, persons holding the Preferred Securities as a position
in a "straddle," or as part of a "synthetic security," "hedging," as part of a
"conversion" or other integrated investment, persons having a functional
currency other than the U.S. Dollar and certain United States expatriates).
Further, this summary does not address (a) the income tax consequences to
shareholders in, or partners or beneficiaries of, a holder of the Preferred
Securities, (b) the United States federal alternative minimum tax consequences
of the purchase, ownership or disposition of the Preferred Securities, or (c)
any state, local or foreign tax consequences of the purchase, ownership and
disposition of Preferred Securities.
A "US Holder" is a holder of the Preferred Securities who or which is
(i) a citizen or individual resident (or is treated as a citizen or individual
resident) of the United States for income tax purposes, (ii) a corporation or
partnership created or organized (or treated as created or organized for income
tax purposes) in or under the laws of the United States or any political
subdivision thereof, (iii) an estate the income of which is includible in its
gross income for United States federal income tax purposes without regard to its
source, or (iv) a trust if (a) a court within the United States is able to
exercise primary supervision over the administration of the trust and (b) one or
more United States trustees have the authority to control all substantial
decisions of the trust.
HOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE TAX
CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE PREFERRED
SECURITIES, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN AND OTHER
TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN UNITED STATES FEDERAL OR OTHER
TAX LAWS.
US Holders
Characterization of the Issuer Trust. In connection with the issuance
of the Preferred Securities, Tax Counsel will render its opinion generally to
effect that, under then current law and based on the representations, facts and
assumptions set forth in this Prospectus, and assuming full compliance with the
terms of the Trust Agreement (and other relevant documents), and based on
certain assumptions and qualifications referenced in the opinion, the Issuer
Trust will be characterized for United States federal income tax purposes as a
grantor trust and will not be characterized as an association taxable as a
corporation. Accordingly, for United States federal income tax purposes, each
holder of the Preferred Securities generally will be considered the owner of an
undivided interest in the Junior Subordinated Debentures owned by the Issuer
Trust, and each US Holder will be required to include all income or gain
recognized for United States federal income tax purposes with respect to its
allocable share of the Junior Subordinated Debentures on its own income tax
return.
Characterization of the Junior Subordinated Debentures. The Company and
the Issuer Trust will agree to treat the Junior Subordinated Debentures as
indebtedness for all United States federal income tax purposes. In connection
with the issuance of the Junior Subordinated Debentures, Tax Counsel will render
its opinion generally to the effect that, under then current law and based on
the representations, facts and assumptions set forth in this Prospectus, and
assuming full compliance
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with the terms of the Junior Subordinated Indenture (and other relevant
documents) and based on certain assumptions and qualifications referenced in the
opinion, the Junior Subordinated Debentures will be characterized for United
States federal income tax purposes as debt of the Company.
Interest Income and Original Issue Discount. Under the terms of the
Junior Subordinated Debentures, the Company 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 under Section 1273 of
the Code provide that debt instruments like the Junior Subordinated Debentures
will not be considered issued with original issue discount ("OID") by reason of
the Company's ability to defer payments of interest if the likelihood of such
deferral is "remote."
The Company has concluded, and this discussion assumes, that, as of the
date of this Prospectus, the likelihood of deferring payments of interest under
the terms of the Junior Subordinated Debentures is "remote" within the meaning
of the applicable Treasury regulations, in part because exercising that option
would prevent the Company from declaring dividends on its stock and would
prevent the Company from making any payments with respect to debt securities
that rank pari passu with or junior to the Junior Subordinated Debentures.
Therefore, the Junior Subordinated Debentures should not be treated as issued
with OID by reason of the Company's deferral option. Rather, stated interest on
the Junior Subordinated Debentures will generally be taxable to a US Holder as
ordinary income when paid or accrued in accordance with that holder's method of
accounting for income tax purposes. It should be noted, however, that these
Treasury regulations have not yet been interpreted in any rulings or any other
published authorities of the IRS. Accordingly, it is possible that the IRS could
take a position contrary to the interpretation described herein.
In the event the Company exercises its option to defer payments of
interest, the Junior Subordinated Debentures would be treated as redeemed and
reissued for OID purposes and the sum of the remaining interest payments (and
any de minimis OID) on the Junior Subordinated Debentures would thereafter be
treated as OID, which would accrue, and be includible in a US Holder's taxable
income, on an economic accrual basis (regardless of the US Holder's 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.
(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, US Holders will include
OID in gross income in advance of the receipt of cash, and a US Holder which
disposes of a Preferred Security prior to the record date for payment of
distributions on the Junior Subordinated Debentures following that period will
be subject to income tax on OID accrued through the date of disposition (and not
previously included in income), but will not receive cash from the Issuer Trust
with respect to the OID.
If the possibility of the Company's exercise of 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. That OID would generally be includible in a US Holder's taxable
income, over the term of the Junior Subordinated Debentures, on an economic
accrual basis.
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Characterization of Income. Because the income underlying the Preferred
Securities will not be characterized as dividends for income tax purposes,
corporate holders of the Preferred Securities will not be entitled to a
dividends-received deduction for any income recognized with respect to the
Preferred Securities.
Market Discount and Bond Premium. Holders of the Preferred Securities
other than Initial Holders may be considered to have acquired their 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 Issuer Trust. Under certain circumstances described herein (See "Description
of the Preferred Securities-- Liquidation Distribution Upon Dissolution"), the
Issuer Trust may distribute the Junior Subordinated Debentures to holders in
exchange for the Preferred Securities and in liquidation of the Issuer Trust.
Except as discussed below, such a distribution would not be a taxable event for
United States federal income tax purposes, and each US Holder would have an
aggregate adjusted basis in its Junior Subordinated Debentures for United States
federal income tax purposes equal to such holder's aggregate adjusted basis in
its Preferred Securities. For United States federal income tax purposes, a US
Holder's holding period in the Junior Subordinated Debentures received in such a
liquidation of the Issuer Trust would include the period during which the
Preferred Securities were held by the holder. If, however, the relevant event is
a Tax Event which results in the Issuer Trust being treated as an association
taxable as a corporation, the distribution would likely constitute a taxable
event to US Holders of the Preferred Securities for United States federal income
tax purposes.
Under certain circumstances described herein (see "Description of the
Preferred Securities"), the Junior Subordinated Debentures may be redeemed for
cash and the proceeds of such redemption distributed to holders in redemption of
their Preferred Securities. Such a redemption would be taxable for United States
federal income tax purposes, and a US Holder would recognize gain or loss as if
it had sold the Preferred Securities for cash. See "--Sales of Preferred
Securities" below.
Sales of Preferred Securities. A US Holder that sells Preferred
Securities will recognize gain or loss equal to the difference between its
adjusted basis in the Preferred Securities and the amount realized on the sale
of such Preferred Securities. A US Holder's adjusted basis in the Preferred
Securities generally will be its initial purchase price, increased by OID
previously included (or currently includible) in such holder's gross income to
the date of disposition, and decreased by payments received on the Preferred
Securities (other than any interest received with respect to the period prior to
the effective date of the Company's first exercise of its option to defer
payments of interest). Any such gain or loss generally will be capital gain or
loss, and generally will be a long-term capital gain or loss if the Preferred
Securities have been held for more than one year prior to the date of
disposition.
A holder who disposes of his Preferred Securities between record dates
for payments of distributions thereon will be required to include accrued but
unpaid interest (or OID) on the Junior Subordinated Debentures through the date
of disposition in its taxable income for United States federal income tax
purposes (notwithstanding that the holder may receive a separate payment from
the purchaser with respect to accrued interest), and to deduct that amount from
the sales proceeds received (including the separate payment, if any, with
respect to accrued interest) for the Preferred Securities (or as to OID only, to
add such amount to such holder's adjusted tax basis in its Preferred
Securities). To the extent the selling price is less than the holder's adjusted
tax basis (which will include accrued but unpaid OID, if any), a holder will
recognize a capital loss. Subject to certain limited exceptions, capital losses
cannot be applied to offset ordinary income for United States federal income tax
purposes.
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Proposed Tax Law Changes
On February 6, 1997, President Clinton released his budget proposals
for fiscal year 1998. One of the tax proposals therein (the "Tax Proposal")
would generally deny corporate issuers a deduction for interest related to
certain debt obligations that have a maximum term in excess of 15 years and are
not shown as indebtedness on the separate balance sheet of the issuer or, where
the instrument is issued to a related party (other than a corporation), where
the holder of some other related party issues a related instrument that is not
shown as indebtedness on the issuer's consolidated balance sheet. As currently
drafted, the Tax Proposal would be effective generally for instruments issued on
or after the date of first Congressional committee action. Although it is not
clear from the President's proposals as to what constitutes Congressional
"committee action" with respect to the Tax Proposal, it appears that, as
drafted, the Tax Proposal would not apply retroactively to the Junior
Subordinated Debentures. However, the Company and the Issuer Trust have been
advised by Tax Counsel that, if the Tax Proposal (or similar legislation) is
enacted into law with retroactive effect with respect to the Junior Subordinated
Debentures, the Company would not be entitled to a deduction with respect to the
interest payable on the Junior Subordinated Debentures. There can be no
assurance that the Tax Proposal, if enacted, will not apply retroactively to the
Junior Subordinated Debentures or that other legislation enacted after the date
hereof will not otherwise adversely affect the ability of the Company to deduct
the interest payable on the Junior Subordinated Debentures. Accordingly, there
can be no assurance that a Tax Event will not occur. See "Description of
Preferred Securities -- Redemption."
Non-US Holders
The following discussion applies to a Non-US Holder.
Payments to a holder of a Preferred Security which is a Non-US Holder
will generally not be subject to withholding of income tax, provided that (a)
the beneficial owner of the Preferred Security does not (directly or indirectly,
actually or constructively) own 10% or more of the total combined voting power
of all classes of stock of the Company entitled to vote, (b) the beneficial
owner of the Preferred Security is not a controlled foreign corporation that is
related to the Company through stock ownership, and (c) either (i) the
beneficial owner of the Preferred Securities certifies to the Issuer Trust or
its agent, under penalties of perjury, that it is a Non-US Holder and provides
its name and address, or (ii) a securities clearing organization, bank or other
financial institution that holds customers' securities in the ordinary course of
its trade or business (a "Financial Institution"), and holds the Preferred
Security in such capacity, certifies to the Issuer Trust or its agent, under
penalties of perjury, that such a statement has been received from the
beneficial owner by it or by another Financial Institution between it and the
beneficial owner in the chain of ownership, and furnishes the Issuer Trust or
its agent with a copy thereof.
As discussed above (see "--Proposed Tax Law Changes"), changes in
legislation affecting the income tax consequences of the Junior Subordinated
Debentures are possible, and could adversely affect the ability of the Company
to deduct the interest payable on the Junior Subordinated Debentures. Moreover,
any such legislation could adversely affect Non-US Holders by characterizing
income derived from the Junior Subordinated Debentures as dividends, generally
subject to a 30% income tax (on a withholding basis) when paid to a Non-US
Holder, rather than as interest which, as discussed above, is generally exempt
from income tax in the hands of a Non-US Holder.
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A Non-US Holder of a Preferred Security will generally not be subject
to withholding of income tax on any gain realized upon the sale or other
disposition of a Preferred Security.
A Non-US Holder which holds the Preferred Securities in connection with
the active conduct of a United States trade or business will be subject to
income tax on all income and gains recognized with respect to its 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 Preferred Securities held by a
noncorporate US Holder within the United States. In addition, payments made on,
and payments of the proceeds from the sale of, the Preferred Securities to or
through the United States office of a broker are subject to information
reporting unless the holder thereof certifies as to its Non-United States status
or otherwise establishes an exemption from information reporting and backup
withholding. See "--Backup Withholding." Taxable income on the Preferred
Securities for a calendar year should be reported to US Holders on the
appropriate forms by the following January 31st.
Backup Withholding
Payments made on, and proceeds from the sale of, the Preferred
Securities may be subject to a "backup" withholding tax of 31% unless the holder
complies with certain identification or exemption requirements. Any amounts so
withheld will be allowed as a credit against the holder's 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 a particular holder of the purchase, ownership and disposition
of the Preferred Securities. Potential holders of the Preferred Securities are
urged to contact their own tax advisors to determine their particular tax
consequences.
CERTAIN ERISA CONSIDERATIONS
The Company and certain affiliates of the Company may each be
considered a "party in interest" within the meaning of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA") or a "disqualified person"
within the meaning of Section 4975 of the Code with respect to many employee
benefit plans ("Plans") that are subject to ERISA. The purchase of the Preferred
Securities by a Plan that is subject to the fiduciary responsibility provisions
of ERISA or the prohibited transaction provisions of Section 4975(e)(1) of the
Code and with respect to which the Company, or any affiliate of the Company is a
service provider (or otherwise is a party in interest or a disqualified person)
may constitute or result in a prohibited transaction under ERISA or Section 4975
of the Code, unless the Preferred Securities are acquired pursuant to and in
accordance with an applicable exemption. Any pension or other employee benefit
plan proposing to acquire any Preferred Securities should consult with its
counsel.
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement (the
"Underwriting Agreement") dated , 1997, among the Company, the Issuer Trust and
the underwriters named therein (the "Underwriters"), the Issuer Trust has agreed
to sell to the Underwriters, and the
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Underwriters have severally agreed to purchase from the Issuer Trust, the
following respective aggregate Liquidation Amount of Preferred Securities at the
public offering price less the underwriting discounts and commissions set forth
on the cover page of this Prospectus:
Liquidation Amount of
---------------------
Underwriter: Preferred Securities:
- ------------ ---------------------
Advest, Inc. $
----------
Total........................................ $25,000,000
==========
The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent and that the
Underwriters will purchase all of the Preferred Securities offered hereby if any
of such Preferred Securities are purchased.
The Company has been advised by the Underwriters that the Underwriters
propose to offer the Preferred Securities to the public at the public offering
price set forth on the cover page of this Prospectus and to certain dealers at
such price less a concession not in excess of $ per Preferred Security. The
Underwriters may allow, and such dealers may reallow, a concession not in excess
of $
per Preferred Security to certain other dealers. After the public offering,
the offering price and other selling terms may be changed by the Underwriters.
The Company has granted to the Underwriters an option, exercisable not
later than 30 days after the date of this Prospectus, to purchase up to an
additional $3,750,000 aggregate Liquidation Amount of the Preferred Securities
at the public offering price. To the extent that the Underwriters exercise such
option, the Company will be obligated, pursuant to the option, to sell such
Preferred Securities to the Underwriters. The Underwriters may exercise such
option only to cover over-allotments made in connection with the sale of the
Preferred Securities offered hereby. If purchased, the Underwriters will offer
such additional Preferred Securities on the same terms as those on which the
$25,000,000 aggregate Liquidation Amount of the Preferred Securities are being
offered.
In connection with the offering of the Preferred Securities, the
Underwriters and any selling group members and their respective affiliates may
engage in transactions effected in accordance with Rule 104 of the Securities
and Exchange Commission's Regulation M that are intended to stabilize, maintain
or otherwise affect the market price of the Preferred Securities. Such
transactions may include over-allotment transactions in which the Underwriters
create a short position for their own account by selling more Preferred
Securities than they are committed to purchase from the Issuer Trust. In such a
case, to cover all or part of the short position, the Underwriters may exercise
the over-allotment option described above or may purchase Preferred Securities
in the open market following completion of the initial offering of the Preferred
Securities. The Underwriters also may
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engage in stabilizing transactions in which they bid for, and purchase, shares
of the Preferred Securities at a level above that which might otherwise prevail
in the open market for the purpose of preventing or retarding a decline in the
market price of the Preferred Securities. The Underwriters also may reclaim any
selling concessions allowed to an Underwriter or dealer if the Underwriters
repurchase shares distributed by that Underwriter or dealer. Any of the
foregoing transactions may result in the maintenance of a price for the
Preferred Securities at a level above that which might otherwise prevail in the
open market. Neither the Company nor any of the Underwriters makes any
representation or prediction as to the direction or magnitude of any effect that
the transactions described above may have on the price of the Preferred
Securities. The Underwriters are not required to engage in any of the foregoing
transactions and, if commenced, such transactions may be discontinued at any
time without notice.
In view of the fact that the proceeds from the sale of the Preferred
Securities will be used to purchase the Junior Subordinated Debentures issued by
the Company, the Underwriting Agreement provides that the Company will pay as
compensation for the Underwriter's arranging the investment therein of such
proceeds an amount of $ per Preferred Security (or $ ($ if the over-allotment
option is exercised in full) in the aggregate) and an advisory fee equal to $
for the account of the Representative.
Because the National Association of Securities Dealers, Inc. ("NASD")
is expected to view the Preferred Securities as interests in a direct
participation program, the offering of the Preferred Securities is being made in
compliance with the applicable provisions of Rule 2810 of the NASD's Conduct
Rules.
The Preferred Securities are a new issue of securities with no
established trading market. The Company and the Issuer Trust have been advised
by the Underwriters that they intend to make a market in the Preferred
Securities. However, the Underwriters are not obligated to do so and such market
making may be interrupted or discontinued at any time without notice at the sole
discretion of each of the Underwriters. Application has been made by the Company
to list the Preferred Securities in the Nasdaq National Market, but one of the
requirements for listing and continuing listing is the presence of two market
makers for the Preferred Securities, and the presence of a second market maker
cannot be assured. Accordingly, no assurance can be given as to the development
or liquidity of any market for the Preferred Securities.
The Company and the Issuer Trust have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act.
The Underwriters may in the future perform various services to the
Company, including investment banking services, for which it has or may receive
customary fees for such services.
VALIDITY OF SECURITIES
The validity of the Guarantee and the Junior Subordinated Debentures
and certain tax matters will be passed upon for the Company by David W. Harper,
Esq., Louisville, Kentucky, general counsel to the Company and Malizia, Spidi,
Sloane & Fisch, P.C., Washington, D.C., special counsel to the Company and
certain legal matters will be passed upon for the Underwriters by Arnold &
Porter, Washington, D.C. and New York, New York. Certain matters of Delaware law
relating to the validity of the Preferred Securities, the enforceability of the
Trust Agreement and the creation of the Issuer Trust will be passed upon by
Richards, Layton & Finger, special Delaware counsel to the
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Company and the Issuer Trust. Malizia, Spidi, Sloane & Fisch, P.C. and
Arnold & Porter will rely as to certain matters of Kentucky law on the opinion
of David W. Harper, Esq. and will rely as to certain matters of Delaware law on
the opinion of Richards, Layton & Finger.
EXPERTS
The consolidated financial statements of the Company as of December 31,
1996 and 1995, and for the years ended December 31, 1996 and 1995, included in
this Prospectus have been audited by Eskew & Gresham, PSC, independent certified
public accountants, as stated in their report appearing in this Prospectus, or
in the Registration Statement of which this Prospectus forms a part, and have
been included in reliance upon such report of Eskew & Gresham, PSC given upon
their authority as experts in accounting and auditing. The consolidated
financial statements of the Company for the year ended December 31, 1994,
included in this Prospectus have been audited by McNeal, Williamson & Co.,
certified public accountants, as indicated in their report with respect thereto
and have been included herein in reliance upon the authority of said firm as
experts in giving said report.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith, files reports, proxy statements and other information with
the Commission. Such reports, proxy statements and other information can be
inspected and copied at the public reference facilities of the Commission at
Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the regional
offices of the Commission located at 7 World Trade Center, 13th Floor, Suite
1300, New York, New York 10048 and Suite 1400, Citicorp Center, 14th Floor, 500
West Madison Street, Chicago, Illinois 60661. Copies of such material can also
be obtained at prescribed rates by writing to the Public Reference Section of
the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. Such material
also may be accessed electronically by means of the Commission's home page on
the Internet at http://www.sec.gov. This Prospectus does not contain all the
information set forth in the Registration Statement and exhibits thereto, which
the Company has filed with the Commission under the Securities Act and to which
reference is hereby made.
No separate financial statements of the Issuer Trust have been included
or incorporated by reference herein. The Company and the Issuer Trust do not
consider that such financial statements would be material to holders of the
Preferred Securities because the Issuer Trust is a newly formed special purpose
entity, has no operating history or independent operations and is not engaged in
and does not propose to engage in any activity other than holding as trust
assets the Junior Subordinated Debentures and issuing the Trust Securities. See
"PFBI Capital Trust," "Description of Preferred Securities," "Description of
Junior Subordinated Debentures" and "Description of Guarantee." In addition, the
Company does not expect that the Issuer Trust will be filing reports under the
Exchange Act with the Commission.
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<PAGE>
PREMIER FINANCIAL BANCORP, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Reports of Independent Certified Public Accountants........................................................ F-
Consolidated Balance Sheets as of March 31, 1997 (unaudited), and as of December 31, 1996
and 1995................................................................................................... F-
Consolidated Statements of Income for the three months ended March 31, 1997 and 1996
(unaudited) and for each of the years in the three year period ended December 31, 1996..................... F-
Consolidated Statements of Stockholders' Equity for the three months ended March
31, 1997 (unaudited) and each of the years in the three year period ended
December 31, 1996.......................................................................................... F-
Consolidated Statements of Cash Flows for the three months ended March 31, 1997
and 1996 (unaudited) and for each of the years in the three year period
ended December 31, 1996.................................................................................... F-
Notes to Consolidated Financial Statements................................................................. F-
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
- ----------------------------
Board of Directors
Premier Financial Bancorp, Inc.
Georgetown, Kentucky
We have audited the accompanying consolidated balance sheets of Premier
Financial Bancorp, Inc. and Subsidiaries as of December 31, 1996 and 1995, and
the related consolidated statements of income, changes in stockholders' equity
and cash flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits. The consolidated
financial statements of Premier Financial Bancorp, Inc. and Subsidiaries for the
year ended December 31, 1994 were audited by other auditors whose report dated
February 10, 1995 expressed an unqualified opinion on those statements.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Premier
Financial Bancorp, Inc. and Subsidiaries as of December 31, 1996 and 1995 and
the results of their operations and their cash flows for the years then ended in
conformity with generally accepted accounting principles.
/s/ Eskew & Gresham, PSC
------------------------
Eskew & Gresham, PSC
Lexington, Kentucky
February 20, 1997
<PAGE>
Independent Auditors Report
To the Board of Directors and Stockholders of Premier Financial Bancorp, Inc.
and Subsidiaries:
We have audited the accompanying consolidated balance sheet of Premier Financial
Bancorp, Inc. and Subsidiaries as of December 31, 1994, and the related
consolidated statements of income, changes in stockholders' equity, and cash
flows for the year in the period ended December 31, 1994. These financial
statements are the responsibility of the company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinions.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Premier Financial
Bancorp, Inc. and Subsidiaries as of December 31, 1994, and the consolidated
results of their operations and their cash flows for the year in the period
ended December 31, 1994 in conformity with generally accepted accounting
principles.
As discussed in Note 1 to the consolidated financial statements, the Company
changed its method of accounting for investment securities in 1994.
/s/McNeal, Williamson & Co.
- ---------------------------
McNeal, Williamson & Co.
Logan, West Virginia
February 10, 1995
<PAGE>
PREMIER FINANCIAL BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
------------------ ---------------------------------------------
1997 1996 1995
------ ------ ----
(Unaudited)
<S> <C> <C> <C>
ASSETS:
Cash and due from banks......................................... $ 6,897,668 $ 7,134,025 $ 6,339,777
Federal funds sold.............................................. 8,285,000 10,635,000 6,340,000
Investment securities:
Available-for-sale............................................ 22,851,984 21,827,049 15,972,018
Held-to-maturity.............................................. 21,795,160 20,993,089 8,665,217
Loans........................................................... 225,196,647 219,631,723 113,775,359
Unearned income............................................... (2,104,894) (2,045,219) (710,653)
Allowance for loan losses..................................... (2,669,286) (2,522,502) (1,735,482)
------------ ------------ ------------
Net loans................................................... 220,422,467 215,064,002 111,329,224
Federal Home Loan Bank stock.................................... 1,754,300 1,542,900 291,300
Premises and equipment, net..................................... 4,314,611 3,800,331 2,129,049
Interest receivable............................................. 3,831,608 4,059,812 1,622,774
Real estate and other property acquired through foreclosure..... 524,383 485,003 131,661
Income taxes refundable......................................... - 12,346 152,938
Deferred income taxes........................................... 533,822 495,580 648,763
Goodwill........................................................ 5,456,066 5,490,210 247,799
Other assets.................................................... 1,391,639 1,025,337 1,604,119
----------- ----------- -----------
TOTAL ASSETS.................................................... $298,058,708 $292,564,684 $155,474,639
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Deposits:
Non-interest-bearing.......................................... $ 24,656,985 $ 25,031,198 $ 16,000,676
Time deposits, $100,000 and over.............................. 32,787,547 33,650,498 20,237,290
Other interest-bearing........................................ 182,423,053 176,892,272 100,008,471
----------- ----------- -----------
Total deposits.............................................. 239,867,585 235,573,968 136,246,437
Securities sold under agreements to repurchase.................. 5,779,432 5,599,420 747,118
Federal Home Loan Bank advances................................. 9,483,545 9,377,456 755,000
Interest payable................................................ 1,458,560 1,333,601 1,147,986
Income taxes payable............................................ 463,013 - -
Other liabilities............................................... 597,286 816,853 362,786
Debt............................................................ - - 5,000,000
----------- ----------- -----------
Total liabilities ............................................ 257,649,421 252,701,298 144,259,327
----------- ----------- -----------
Stockholders' Equity:
Preferred stock, no par value; 1,000,000 shares
authorized; none issued or outstanding ...................... - - -
Common stock, no par value; 10,000,000 shares
authorized; 4,209,090 shares at March 31, 1997 and
December 31, 1996 (954,545 shares at December 31, 977,545 977,545 954,545
1995) issued and outstanding.................................
Surplus......................................................... 32,940,927 32,940,927 5,897,585
Retained earnings .............................................. 6,743,081 6,111,715 4,493,184
Net unrealized losses on securities available-for-sale.......... (252,266) (166,801) (130,002)
----------- ----------- -----------
Total stockholders' equity.................................... 40,409,287 39,863,386 11,215,312
----------- ----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $298,058,708 $292,564,684 $155,474,639
=========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
PREMIER FINANCIAL BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ended
March 31, Year Ended December 31,
------------------------------ ----------------------------------------
1997 1996 1996 1995 1994
------ ------ ------ ------ ----
(Unaudited)
<S> <C> <C> <C> <C> <C>
INTEREST INCOME:
Loans, including fees.............................. $5,469,518 $2,948,735 $ 16,968,515 $ 9,487,756 $ 7,700,113
Investment securities-
Taxable.......................................... 414,668 313,495 1,620,651 903,515 827,449
Tax-exempt....................................... 239,029 83,469 672,405 397,404 274,612
Federal funds sold................................. 145,325 128,722 387,605 279,673 144,515
Other interest income.............................. 41,583 - 24,711 34,896 15,486
---------- ---------- ------------ ------------ ------------
Total interest income............................ 6,310,123 3,474,421 19,673,887 11,103,244 8,962,175
INTEREST EXPENSE:
Deposits......................................... 2,644,328 1,528,500 8,249,084 4,767,554 3,384,338
Other borrowings................................. 200,403 22,027 420,527 60,030 26,066
Debt............................................. - 103,125 167,413 252,999 28,006
--------- ---------- ------------ --------- -----------
Total interest expense......................... 2,844,731 1,653,652 8,837,024 5,080,583 3,438,410
--------- --------- ------------ ---------- -----------
Net interest income................................ 3,465,392 1,820,769 10,836,863 6,022,661 5,523,765
Provision for loan losses.......................... 183,605 72,500 574,831 85,950 207,000
--------- ---------- --------- ----------- -----------
Net interest income after provision for
loan losses.................................... 3,281,787 1,748,269 10,262,032 5,936,711 5,316,765
NON-INTEREST INCOME:
Service charges.................................. 231,235 147,105 816,594 530,178 395,835
Insurance commissions............................ 119,965 43,867 308,690 155,968 92,051
Investment securities gains (losses)............. - - 1,459 (6,026) 69,716
Other............................................ 207,381 127,663 357,447 145,108 126,820
--------- ---------- ------------ ------------ ------------
558,581 318,635 1,484,190 825,228 684,422
NON-INTEREST EXPENSES:
Salaries and employee benefits................... 1,228,207 817,181 3,764,716 2,309,307 1,982,111
Occupancy and equipment expenses................. 290,179 128,404 1,068,272 857,039 659,264
FDIC insurance................................... 6,081 12,624 31,558 123,965 222,142
Professional fees................................ 48,705 31,207 188,758 139,593 234,769
Taxes, other than payroll, property and income... 84,307 39,008 228,086 145,619 109,100
Acquisition expenses............................. - - - 110,296 37,139
Amortization of goodwill......................... 94,548 5,478 197,357 2,553 -
Other expenses................................... 431,078 363,195 1,314,185 804,093 760,002
--------- ---------- ------------ ---------- ----------
2,183,105 1,397,097 6,792,932 4,492,465 4,004,527
Income before income taxes......................... 1,657,263 669,807 4,953,290 2,269,474 1,996,660
Provision for income taxes......................... 499,761 171,496 1,517,714 112,992 483,213
--------- ---------- ----------- ---------- -----------
NET INCOME......................................... $1,157,502 $ 498,311 $ 3,435,576 $ 2,156,482 $ 1,513,447
========= ========= =========== =========== ===========
Primary earnings per share......................... $ .28 $ .26 $ 1.05 $ 1.13 $ .80
========= ========= =========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
PREMIER FINANCIAL BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For the Three Months Ended March 31, 1997 (Unaudited) and
For the Years Ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
Net
Unrealized Unrealized
Loss on Gain (Loss)
Common Stock Marketable on Securities
------------------------ Retained Equity Available-
Shares Amount Surplus Earnings Securities for-Sale Total
-------------- ---------- ------------ ------------ ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCES, January 1, 1994........... 752,080 $752,080 $5,959,425 $2,222,346 $ (65,388) $ - $8,868,463
Issuance of 125 shares of Georgetown
Bancorp, Inc. common stock........ 1,284 1,284 14,341 15,625
Cumulative effect of change in the
method of accounting for investment
securities........................ 175,595 175,595
Decrease in unrealized loss on
marketable equity securities...... 65,388 65,388
Net change in unrealized losses on
securities available-for-sale..... (645,881) (645,881)
Net income.......................... 1,513,447 1,513,447
Dividends ($.36 per share).......... (540,000) (540,000)
---------- ---------- ------------ ----------- ---------- --------- -----------
BALANCES, December 31, 1994 753,364 753,364 5,973,766 3,195,793 - (470,286) 9,452,637
Issuance of 1,000 shares of
Georgetown Bancorp, Inc.
common stock...................... 10,272 10,272 114,728 125,000
Net change in unrealized losses on
securities available-for-sale..... 340,284 340,284
5-for-4 common stock split.......... 190,909 190,909 (190,909)
Net income.......................... 2,156,482 2,156,482
Dividends ($.45 per share).......... (859,091) (859,091)
---------- ---------- ------------ ----------- ---------- ---------- ----------
BALANCES, December 31, 1995......... 954,545 954,545 5,897,585 4,493,184 - (130,002) 11,215,312
2-for-1 common stock split.......... 954,545
Issuance of 2,300,000 shares of
Premier Financial Bancorp,
Inc. common stock................. 2,300,000 23,000 27,043,342 27,066,342
Net change in unrealized losses on
securities available-for-sale..... (36,799) (36,799)
Net income.......................... 3,435,576 3,435,576
Dividends ($.50 per share).......... (1,817,045) (1,817,045)
---------- ---------- ------------ ---------- ---------- ---------- -----------
BALANCES, December 31, 1996......... 4,209,090 977,545 32,940,927 6,111,715 - (166,801) 39,863,386
Net income for three months ended
March 31, 1997 (unaudited)........ 1,157,502 1,157,502
Dividends ($.125 per share)......... (526,136) (526,136)
Net change in unrealized losses on
securities available-for-sale..... (85,465) (85,465)
---------- ---------- ---------- ----------- ---------- ---------- -----------
BALANCES, March 31, 1997
(unaudited)....................... 4,209,090 $ 977,545 $32,940,927 $6,743,081 $ - $ (252,266) $40,409,287
========= ========= ========== ========= ========== ========= ==========
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE>
PREMIER FINANCIAL BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended
March 31, Year Ended December 31,
------------------------------ -----------------------------------------
1997 1996 1996 1995 1994
------------ --------------- ------------- ------------- ------------
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C> <C> <C>
Net income............................................ $ 1,157,502 $ 498,311 $3,435,576 $2,156,482 $1,513,447
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation..................................... 78,806 42,389 264,362 218,178 164,796
Amortization, net................................ 127,742 5,478 188,367 24,338 6,681
Provision for loan losses........................ 183,605 72,500 574,831 85,950 207,000
Deferred income taxes............................ (1,004) 14,278 5361 (221,516) (85,323)
FHLB stock dividends............................. (26,200) (4,900) (38,900) (4,100) (900)
Investment securities losses (gains), net........ - - (1,459) 6,026 (69,716)
Changes in:
Interest receivable............................ 228,204 (69,863) (381,446) (120,900) 45,907
Other assets................................... (436,617) (61,125) 732,955 (397,836) (685,872)
Interest payable............................... 124,959 22,635 (200,975) 273,338 47,072
Other liabilities.............................. (219,567) (24,152) 391,015 54,384 (129,491)
Income taxes refundable........................ (12,346) 152,938 211,407 (261,102) 37,230
Income taxes payable........................... 463,013 4,285 - - -
---------- ---------- ----------- ----------- -----------
Net cash provided by operating activities.... 1,668,097 652,774 5,181,094 1,813,242 1,050,831
---------- ---------- --------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of deposits held in other banks.............. - - - - (523,609)
Proceeds from maturity of deposits held
in other banks...................................... - - - 523,609 -
Purchases of securities available-for-sale............ (1,800,625) (7,702,439) (10,886,829) (13,082,611) (5,637,170)
Proceeds from sales of securities available-
for-sale............................................ - 1,800,000 2,499,125 7,553,462 4,452,459
Proceeds from maturities and calls of securities
available-for-sale.................................. 650,000 1,600,000 8,100,125 4,350,000 3,300,000
Purchases of investment securities held-to-
maturity............................................ (1,148,426) (89,459) (2,741,799) (1,673,728) (1,081,135)
Proceeds from maturities and calls of
securities held-to-maturity......................... 350,751 - 2,241,255 1,212,544 723,045
Proceeds from sales of investment securities
held-to-maturity.................................... - 721,000 - 1,000,000 -
Purchases of FHLB stock............................... (185,200) - (723,800) (227,300) (59,000)
Net change in federal funds sold...................... 2,350,000 1,670,000 (2,945,000) (395,000) (108,000)
Proceeds from sale of real estate acquired
through foreclosure................................. - - 131,701 291,760 32,000
Net change in loans................................... (5,581,450) (1,980,471) (22,402,722) (16,725,288) (7,411,964)
Purchases of premises and equipment................... (593,086) (27,379) (972,976) (1,327,066) (391,664)
Proceeds from sale of premises and equipment.......... - - 20,085 437,132 73,685
Cash payment related to acquisition, net of
cash received....................................... - - (10,576,808) (999,742) -
---------- ---------- ----------- ----------- ------------
Net cash used in investing activities............. (5,958,036) (4,008,748) (38,257,643) (19,062,228) (6,631,353)
---------- ---------- ----------- ----------- ----------
</TABLE>
See notes to consolidated financial statements.
F-7
<PAGE>
PREMIER FINANCIAL BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
<TABLE>
<CAPTION>
Three Months Ended
March 31, Year Ended December 31,
------------------------------ ------------------------------------------
1997 1996 1996 1995 1994
------------ --------------- ------------ ------------- -------------
(Unaudited)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in deposits................................ $ 4,293,617 $ 2,617,244 $12,536,403 $15,134,179 $ 3,874,639
Advances from Federal Home Loan Bank.................. 1,000,000 - 6,800,000 - 755,000
Repayment of Federal Home Loan Bank advances.......... (893,911) - (2,067,206) - -
Debt proceeds......................................... - - - 3,500,000 1,500,000
Repayment of debt..................................... - - (6,850,000) - -
Net proceeds from issuance (repayment) of
agreements to repurchase securities................. 180,012 (103,118) (1,797,697) 747,118 -
Proceeds from issuance of common stock................ - - 27,066,342 125,000 -
Dividends paid........................................ (526,136) (238,637) (1,817,045) (859,091) (540,000)
---------- ----------- ---------- ---------- ---------
Net cash provided by financing activities........... 4,053,582 2,275,489 33,870,797 18,647,206 5,589,639
--------- ---------- ---------- ---------- ---------
Net (decrease) increase in cash and cash equivalents.. (236,357) (1,080,485) 794,248 1,398,220 9,117
Cash and cash equivalents at beginning of period...... 7,134,025 6,339,777 6,339,777 4,941,557 4,932,440
---------- ---------- ---------- ---------- ---------
CASH AND CASH EQUIVALENTS AT END
OF PERIOD............................................. $6,897,668 $5,259,292 $7,134,025 $6,339,777 $ 4,941,557
========= ========= ========= ========= ==========
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION:
Cash paid during the period for -
Interest.......................................... $ 2,719,772 $ 1,631,017 $ 9,037,999 $ 4,807,245 $ 3,391,338
Income taxes...................................... - - 990,000 644,234 698,027
SUPPLEMENTAL SCHEDULE OF NON-CASH
INVESTING ACTIVITIES:
Non-cash transfer from securities held-to-
maturity to securities available-for-sale......... - - - 500,000 12,036,169
Change in unrealized loss on marketable
equity securities................................. - - - - 65,388
Change in unrealized loss on securities
available-for-sale................................ (122,475) (154,212) (36,799) 340,284 (470,286)
Loans transferred to real estate acquired
through foreclosure............................... 39,380 - 80,849 16,000 382,675
</TABLE>
See notes to consolidated financial statements.
F-8
<PAGE>
PREMIER FINANCIAL BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. Basis of Presentation - The consolidated financial statements include
the accounts of Premier Financial Bancorp, Inc. (the Company) and its
wholly-owned subsidiaries, Georgetown Bancorp, Inc., Georgetown, Kentucky;
Citizens Deposit Bank & Trust, Vanceburg, Kentucky; Bank of Germantown,
Germantown, Kentucky; Citizens Bank, Sharpsburg, Kentucky; and Farmers Deposit
Bancorp, Eminence, Kentucky (the Banks). In addition, the Company has a data
processing service subsidiary, Premier Data Services, Inc., Vanceburg, Kentucky.
All material intercompany transactions and balances have been eliminated.
Certain prior year amounts have been reclassified to conform with 1996
presentations.
On March 24, 1995, the Company acquired Georgetown Bancorp, Inc. and its
wholly-owned subsidiary, Georgetown Bank and Trust Co., Georgetown, Kentucky, in
a business combination accounted for as a pooling of interests. The accompanying
consolidated financial statements for 1995 are based on the assumption that the
Companies were combined for the full year, and the financial statements of the
prior year have been restated to give effect to the combination as if it
occurred at the beginning of the earliest year presented.
B. Nature of Operations - The Banks operate under state bank charters and
provide full banking services, including trust services. As state banks, the
Banks are subject to regulation by the Kentucky Department of Financial
Institutions and the Federal Deposit Insurance Corporation (FDIC).
The Company is also subject to regulation by the Federal Reserve Bank.
C. Estimates in the Financial Statements - The preparation of financial
statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities, disclosure of contingent assets and liabilities at the
date of the financial statements, and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
D. Cash and Cash Equivalents - For purposes of reporting cash flows, cash
and cash equivalents include cash on hand and amounts due from banks.
E. Investment Securities - The Company classifies its investment
securities portfolio into three categories: trading, securities
available-for-sale and securities held-to-maturity. Fair value adjustments are
made to the securities based on their classification with the exception of the
held-to- maturity category. The Company has no investments classified as
trading.
Investment securities available-for-sale are carried at fair value.
Adjustments from amortized cost to fair value are recorded in stockholders'
equity, net of related income tax, under net unrealized gains (losses) on
securities available-for-sale. The adjustment is computed on the difference
between fair value and cost adjusted for amortization of premiums and accretion
of discounts which are recorded as adjustments to interest income using the
constant yield method.
Investment securities for which the Banks have the positive intent and
ability to hold to maturity are stated at cost, adjusted for amortization of
premiums and accretion of discounts which are recorded as adjustments to
interest income using the constant yield method.
Gains or losses on dispositions are based on the net proceeds and
adjusted carrying amount of the securities sold using the specific
identification method.
F-9
<PAGE>
F. Loans - Loans are stated at the amount of unpaid principal, reduced by
unearned income and an allowance for loan losses. Interest income on loans is
recognized on the accrual basis except for those loans in a nonaccrual income
status. The accrual of interest on impaired loans is discontinued when
management believes, after consideration of economic and business conditions and
collection efforts, that the borrowers' financial condition is such that
collection of interest is doubtful. When interest accrual is discontinued,
interest income is subsequently recognized only to the extent cash payments are
received.
The allowance for loan losses is established through a provision for loan
losses charged to expense. The allowance is an amount that management believes
will be adequate to absorb losses on existing loans that may become
uncollectible based on evaluations of the collectibility of loans and prior loan
loss experience. The evaluations take into consideration such factors as changes
in the nature and volume of the loan portfolio, overall portfolio quality,
review of specific problem loans, and current economic conditions that may
affect the borrowers' ability to pay. Loans are charged against the allowance
for loan losses when management believes that the collection of the principal is
unlikely.
The allowance for loan losses on impaired loans is determined using the
present value of estimated future cash flows of the loan, discounted at the
loan's effective interest rate or the fair value of the underlying collateral. A
loan is considered to be impaired when it is probable that all principal and
interest amounts will not be collected according to the loan contract. The
entire change in present value of expected cash flows is reported as provision
for loan losses in the same manner in which impairment initially was recognized
or as a reduction in the amount of provision for loan losses that otherwise
would be reported.
Certain loan origination fees and direct origination costs are
capitalized and recognized as an adjustment of the yield on the related loan.
G. Premises and Equipment - Premises and equipment are stated at cost
less accumulated depreciation. Depreciation is recorded principally by the
straight-line method over the estimated useful lives of the premises and
equipment.
H. Real Estate Acquired Through Foreclosure - Real estate acquired
through foreclosure is carried at the lower of the recorded investment in the
property or its fair value. The value of the underlying loan is written down to
the fair value of the real estate to be acquired by a charge to the allowance
for loan losses, if necessary. Any subsequent write-downs are charged to
operating expenses. Certain parcels of real estate are being leased to third
parties to offset holding period costs. Operating expenses of such properties,
net of related income, and gains and losses on their disposition are included in
other expenses.
I. Purchase Method of Accounting - Net assets of subsidiaries acquired in
purchase transactions are recorded at the fair value at the date of acquisition.
The excess of cost over net assets acquired is included in goodwill on the
consolidated balance sheets and is being amortized by the straight-line method
over fifteen years.
J. Income Taxes - The Company and its subsidiaries file a consolidated
federal income tax return. The Subsidiaries are charged or credited an amount
equal to the income tax that would have been applicable on a separate return
basis.
F-10
<PAGE>
The Company uses the liability method for computing deferred income
taxes. Under the liability method, deferred income taxes are based on the change
during the year in the deferred tax liability or asset established for the
expected future tax consequences of differences in the financial reporting and
tax bases of assets and liabilities. The differences relate principally to
premises and equipment, unrealized gains and losses on investment securities
available-for-sale, net operating loss carryforwards, changes in tax methods of
accounting, FHLB stock, and the allowance for loan losses.
K. Per Share Information - Primary earnings per share is computed by
dividing net income by the weighted average number of shares of common stock
outstanding and the number of shares of common stock which would be assumed
outstanding under the treasury-stock method.
L. Effect of New Accounting Standards - The Financial Accounting
Standards Board has issued Statement of Financial Accounting Standards (SFAS)
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of", which requires the recognition of a loss on impaired
assets when the carrying value of an asset exceeds its fair value and the
carrying amount of the asset may not be recoverable. The Statement was adopted
by the Company, as required, on January 1, 1996. The effect of adopting the new
guidance was not material to the Company's consolidated financial statements.
The Financial Accounting Standards Board has issued Statement of
Financial Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based
Compensation", which defines the methods of accounting available for employee
stock compensation plans. The Statement was adopted by the Company, as required,
on January 1, 1996. The effect of adopting the new guidance was not material to
the Company's consolidated financial statements.
The Financial Accounting Standards Board has issued Statement of
Financial Accounting Standards (SFAS) No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities", which
provides accounting and reporting guidance regarding various financial
instruments and related transactions. The Statement was effective for
transactions occurring after December 31, 1996 and was adopted by the Company,
as required, on January 1, 1997. The effect of adopting the new guidance was not
material to the Company's consolidated financial statements.
M. Marketing Expense - The Company charges all marketing expenses to
operations when incurred. No amounts have been established for any future
benefits relative to these expenditures.
F-11
<PAGE>
2. BUSINESS COMBINATIONS
On July 1, 1996, the Company acquired all of the outstanding shares of
Farmers Deposit Bancorp, Eminence, Kentucky (Farmers Deposit), a one-bank
holding company owning all of the shares of Farmers Deposit Bank, for cash. The
total acquisition cost was $12,588,000, which exceeded the fair value of
tangible net assets acquired by approximately $5,400,000. The combination was
accounted for as a purchase and the results of operations of Farmers Deposit are
included in the consolidated financial statements from July 1, 1996.
The major categories of assets acquired and liabilities assumed from
Farmers Deposit as of the acquisition date are as follows:
(In thousands)
Cash and due from banks...................... $ 2,011
Investment securities........................ 19,263
Net loans.................................... 81,988
Intangibles and other assets................. 9,035
Deposits..................................... 86,791
Other borrowings............................. 10,540
Debt......................................... 1,850
Other liabilities............................ 528
-------
Total acquisition cost..................... $12,588
======
Unaudited pro forma condensed results of operations for the years ended
December 31, 1996 and 1995, as though the above subsidiary had been acquired
January 1, 1995, in a debt financed transaction are listed below. The results
are not necessarily indicative of future consolidated operations.
Year Ended
December 31,
-------------------------------------
1996 1995
------------------ ----------------
(In thousands)
Net interest income after
provision for loan losses............ $11,062 $7,894
Other operating income................. 1,761 1,336
Other operating expenses............... 8,178 7,025
Net income............................. 3,202 2,133
Earnings per share..................... 0.97 1.12
F-12
<PAGE>
On October 31, 1995, the Company acquired all of the outstanding shares
of Citizens Bank of Sharpsburg, Kentucky, for cash. The total acquisition cost
was $1,496,387, which exceeded the fair value of tangible net assets acquired by
approximately $248,000. This combination was accounted for as a purchase and the
results of operations of Citizens Bank are included in the consolidated
financial statements from November 1, 1995.
The major categories of assets acquired and liabilities assumed from
Citizens Bank as of the acquisition date are as follows:
(In thousands)
Cash and due from banks...................... $ 497
Investment securities........................ 3,976
Net loans.................................... 14,316
Intangibles and other assets................. 1,365
Deposits..................................... 18,273
Other liabilities............................ 385
-------
Total acquisition cost................... $ 1,496
======
On March 24, 1995, the Company acquired Georgetown Bancorp, Inc. and its
wholly-owned subsidiary, Georgetown Bank and Trust, Georgetown, Kentucky, in a
business combination accounted for as a pooling of interests. All of the
outstanding shares of Georgetown Bancorp were exchanged for 409,090 shares, as
adjusted or subsequent stock splits, of the Company's common stock. The
accompanying consolidated financial statements for 1995 are based on the
assumption that the companies were combined for the full year, and financial
statements of prior years have been restated to give effect of the combination.
Georgetown Bancorp, Inc. had consolidated total assets of approximately
$20,930,000 at the date of acquisition.
3. RESTRICTIONS ON CASH AND DUE FROM BANKS
Included in cash and due from banks are certain non-interest-bearing
deposits that are held at the Federal Reserve or maintained in vault cash in
accordance with average balance requirements specified by the Federal Reserve
Board of Governors. The average balance requirement was $936,000 and $549,000 at
December 31, 1996 and 1995, respectively.
F-13
<PAGE>
4. INVESTMENT SECURITIES
Amortized cost and fair value of investment securities, by category, at
March 31, 1997, and December 31, 1996 and 1995, are as follows:
<TABLE>
<CAPTION>
March 31,
-----------------------------------------------------
1997
-----------------------------------------------------
Amortized Unrealized Unrealized
Cost Gains Losses Fair Value
--------- ---------- ------ ----------
(Unaudited)
Available-for-sale:
<S> <C> <C> <C> <C>
U.S. Treasury securities ... $ 3,696,319 $ 2,562 $ (8,409) $ 3,690,472
U.S. agency securities ..... 14,890,600 5,630 (224,978) 14,671,252
Obligations of states and
political subdivisions ... 1,682,715 35,662 (2,795) 1,715,582
Preferred stock ............ 2,000,000 -- -- 2,000,000
Other equity securities .... 900,007 -- (125,329) 774,678
----------- ----------- ----------- -----------
Total available-for-sale . $23,169,641 $ 43,854 $ (361,511) $22,851,984
=========== =========== =========== ===========
Held-to-maturity:
U.S. Treasury securities ... $ 1,855,451 $ 4,624 $ (6,075) $ 1,854,000
U.S. agency securities ..... 6,128,347 16,514 (23,256) 6,121,605
Obligations of states and
political subdivisions ... 13,424,612 215,102 (94,779) 13,544,935
Asset-backed securities .... 386,750 2,738 (4,158) 385,330
----------- ----------- ----------- -----------
Total held-to-maturity ... $21,795,160 $ 238,978 $ (128,268) $21,905,870
=========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
December 31,
--------------------------------------------------------------------------------------------------------------
1996 1995
------------------------------------------------------ -----------------------------------------------------
Amortized Unrealized Unrealized Amortized Unrealized Unrealized
Cost Gains Losses Fair Value Cost Gains Losses Fair Value
--------- ---------- ------ ---------- --------- ---------- ------ ----------
Available-
for-sale:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S.
Treasury
securities .... $ 4,097,702 $ 4,691 $ (8,566) $ 4,093,827 $ 2,546,872 $ 10,051 $ (1,241) $ 2,555,682
U.S.
agency
securities .... 13,440,767 40,445 (157,678) 13,323,534 10,680,473 17,575 (100,892) 10,597,156
Obligations
of states
and
political
subdivisions .. 1,583,755 39,797 (2,165) 1,621,387
Preferred
stock ......... 2,000,000 -- -- 2,000,000 2,000,000 -- -- 2,000,000
Other
equity
securities .... 900,007 -- (111,706) 788,301 900,000 -- (80,820) 819,180
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Total
available-
for-sale ...... $22,022,231 $ 84,933 $ (280,115) $21,827,049 $16,127,345 $ 27,626 $ (182,953) $15,972,018
=========== =========== =========== =========== =========== =========== =========== ===========
Held-to-
maturity:
U.S.
Treasury
securities .... $ 2,058,469 $ 5,787 $ (9,366) $ 2,054,890 $ -- $ -- $ -- $ --
U.S.
agency
securities .... 6,328,804 18,482 (26,209) 6,321,077 2,300,000 -- (41,110) 2,258,890
Obligations
of states
and
political
subdivisions .. 12,190,012 249,553 (59,327) 12,380,238 6,347,298 86,434 (45,521) 6,388,211
Asset-
backed
securities .... 415,804 3,933 (4,045) 415,692 17,919 560 -- 18,479
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Total
held-
to-
maturity .... $20,993,089 $ 277,755 $ (98,947) $21,171,897 $ 8,665,217 $ 86,994 $ (86,631) $ 8,665,580
=========== =========== =========== =========== =========== =========== =========== ===========
</TABLE>
F-14
<PAGE>
The amortized cost and fair value of investment securities at March 31,
1997, and December 31, 1996, by category and contractual maturity are shown
below. Expected maturities will differ from contractual maturities because
borrowers may have the right to call or prepay obligations with or without call
or prepayment penalties.
<TABLE>
<CAPTION>
March 31, 1997 December 31, 1996
-------------------------------------- --------------------------------------
Amortized Fair Amortized Fair
Cost Value Cost Value
------------------ ------------------ ------------------ ---------------
(Unaudited)
<S> <C> <C> <C> <C>
Available-for-sale:
Due in one year or less................... $ 8,150,114 $ 7,999,239 $ 5,984,146 $ 5,982,638
Due after one year through five years..... 10,790,306 10,756,744 10,343,229 10,281,226
Due after five years through ten years.... 1,329,214 1,321,323 2,794,849 2,774,884
Other securities.......................... 2,900,007 2,774,678 2,900,007 2,788,301
---------- ---------- ---------- ----------
Total available-for-sale................ $23,169,641 $22,851,984 $22,022,231 $21,827,049
========== ========== ========== ==========
Held-to-maturity:
Due in one year or less................... $ 2,895,218 $ 3,551,420 $ 2,981,261 $2,983,913
Due after one year through five years..... 9,311,678 8,799,129 9,615,010 9,665,471
Due after five years through ten years.... 6,107,875 6,125,611 5,852,879 5,953,674
Due after ten years....................... 3,093,639 3,044,380 2,128,135 2,153,147
Asset-backed securities................... 386,750 385,330 415,804 415,692
---------- ---------- ----------- -----------
Total held-to-maturity.................. $21,795,160 $21,905,870 $20,993,089 $21,171,897
========== ========== ========== ==========
</TABLE>
Proceeds from sales of investment securities during 1996, 1995 and 1994
were $2,499,125, $8,553,462 and $4,452,459, respectively. Gross gains of $70,
$25,650 and $73,990 and gross losses of $611, $31,676 and $4,274, respectively,
were realized on those sales. Proceeds from maturities and calls of investment
securities during 1996, 1995 and 1994 were $9,541,380, $5,562,544 and
$4,023,045, respectively. Gross gains of $2,000 and no losses were realized on
those calls during 1996. No gains or losses were realized on calls during 1995
and 1994.
During 1995, the Company sold a security classified as held-to-maturity,
with an amortized cost of $1,000,000 and a fair value of $1,000,000. The Company
was notified by the issuer that the security was being called. The Company
disposed of the security approximately five months prior to the call date in
order to utilize the funds for reinvestment.
During December, 1995, the Company made a one time transfer of
investment securities from held-to-maturity to available-for-sale of $500,000,
as allowed under the Financial Accounting Series Special Report, "A Guide to
Implementation of Statement 115", issued in November, 1995. The investments were
transferred at fair value at the date of transfer. This transfer did not have a
material effect on the Company's stockholders' equity.
At December 31, 1995, the Company's investment in noncumulative
perpetual preferred stock of First Guaranty Bank, Hammond, Louisiana, exceeded
10% of stockholders' equity. The market
F-15
<PAGE>
value of these investments approximates their book value which totaled
$2,000,000 at December 31, 1996 and 1995. The dividend rate on the preferred
stock is 2% over the prevailing prime rate.
Investment securities with an approximate carrying value of $23,836,619
and $8,015,000 at December 31, 1996 and 1995, respectively, were pledged to
secure public deposits, trust funds, securities sold under agreements to
repurchase and for other purposes as required or permitted by law.
5. LOANS
Major classifications of loans are summarized as follows:
<TABLE>
<CAPTION>
March 31, December 31,
------------------ ---------------------------------------
1997 1996 1995
------------------ ----------------- -------------------
(Unaudited)
(In thousands)
<S> <C> <C> <C>
Commercial, secured by real estate......... $ 60,214 $59,834 $39,357
Commercial, other.......................... 37,388 33,908 17,889
Real estate construction................... 3,315 4,138 2,119
Real estate mortgage....................... 78,595 76,600 32,678
Agricultural............................... 9,731 10,050 5,216
Consumer................................... 35,504 33,751 16,087
Other...................................... 450 1,351 429
------- -------- --------
225,197 219,632 113,775
Unearned interest.......................... (2,105) (2,045) (711)
Allowance for loan losses.................. (2,669) (2,523) (1,735)
------- ------- -------
$220,423 $215,064 $111,329
======= ======= =======
</TABLE>
F-16
<PAGE>
Certain directors and executive officers of the Banks, including their
immediate families and companies in which they have beneficial ownership, were
loan customers of the Banks during 1996 and 1995. Total loans to these persons
at December 31, 1996 and 1995 amounted to $3,726,218 and $4,067,191,
respectively. Such loans were made in the ordinary course of business at the
Banks' normal credit terms and interest rates. An analysis of the 1996 activity
with respect to all director and executive officer loans is as follows:
Balance, December 31, 1995...................... $4,067,191
Additions, including loans now
meeting disclosure requirements................ 1,821,817
Amounts collected, including loans
no longer meeting disclosure requirements...... (2,162,790)
---------
Balance, December 31, 1996...................... $3,726,218
=========
Changes in the allowance for loan losses were as follows:
<TABLE>
<CAPTION>
Three Months Ended
March 31, Year Ended December 31,
----------------------------------------- ---------------------------------------------------
1997 1996 1996 1995 1994
---------------------- ---------------- --------------- --------------- ----------------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Balance, beginning of
period....................... $2,522,502 $1,735,482 $1,735,482 $ 886,175 $884,079
Allowance related to
acquired subsidiaries........ - - 812,000 803,177 -
Loans charged off.............. (90,174) (80,472) (759,453) (91,212) (309,874)
Recoveries..................... 53,353 62,175 159,642 51,392 104,970
Provision for loan losses...... 183,605 72,500 574,831 85,950 207,000
---------- ---------- --------- --------- -------
Balance, end of period......... $2,669,286 $1,789,685 $2,522,502 $1,735,482 $886,175
========= ========= ========= ========= =======
</TABLE>
The Company's recorded investment in impaired loans was approximately
$565,305 and $886,000 at December 31, 1996 and 1995, respectively, as measured
using the value of the underlying collateral. Of those amounts, $272,799 and
$401,000 represent loans for which an allowance for loan losses, in the amount
of $180,159 and $101,000, respectively, has been established. The average
recorded investment of impaired loans was approximately $489,500 and $424,000
for the years ended December 31, 1996 and 1995, respectively. Interest income
recognized on impaired loans totaled approximately $2,000 and $26,000 for the
years ended December 31, 1996 and 1995, respectively, which represented actual
cash payments received on impaired loans.
F-17
<PAGE>
6. PREMISES AND EQUIPMENT
Premises and equipment are summarized as follows:
<TABLE>
<CAPTION>
March 31, December 31,
--------------------- --------------------------------------------
1997 1996 1995
--------------------- -------------------- ---------------------
(Unaudited)
<S> <C> <C> <C>
Land............................................... $1,073,750 $1,073,750 $ 223,118
Building and leasehold improvements................ 2,957,595 2,594,185 1,939,142
Furniture and equipment............................ 3,053,167 2,823,491 2,424,905
--------- --------- ---------
7,084,512 6,491,426 4,587,165
Less: accumulated depreciation.................... (2,769,901) (2,691,095) (2,458,116)
--------- --------- ---------
$4,314,611 $3,800,331 $2,129,049
========= ========= =========
</TABLE>
Depreciation expense was $264,362, $218,178 and $164,796 in 1996, 1995
and 1994, respectively.
7. DEPOSITS
At December 31, 1996, the scheduled maturities of time deposits are as
follows:
1997....................................... $101,148,226
1998....................................... 30,938,967
1999....................................... 11,479,698
2000....................................... 3,306,873
2001 and thereafter........................ 937,611
-----------
$147,811,375
===========
Certain directors and executive officers of the Banks and companies in
which they have beneficial ownership are deposit customers of the Banks. The
amount of these deposits was approximately $7,902,000 at December 31, 1996.
F-18
<PAGE>
8. SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE
Securities sold under agreements to repurchase generally mature within
one to ninety days from the transaction date. Information concerning securities
sold under agreements to repurchase is summarized as follows:
<TABLE>
<CAPTION>
March 31, December 31,
--------------------- -----------------------------------------
1997 1996 1995
--------------------- --------------- ----------------------
(Unaudited)
<S> <C> <C> <C>
Average balance during the year........................ $5,733,000 $3,582,000 $400,000
Average interest rate during the year.................. 5.12% 5.14% 3.85%
Maximum month-end balance during the year.............. $5,953,000 $6,495,743 $747,118
========= ========= =======
</TABLE>
U.S. Treasury and agency securities underlying the agreements are as
follows:
<TABLE>
<CAPTION>
March 31, December 31,
--------------------- ---------------------------------------------
1997 1996 1995
--------------------- -------------------- ----------------------
(Unaudited)
<S> <C> <C> <C>
Carrying value......................................... $6,034,265 $6,221,104 $861,377
Estimated fair value................................... 5,994,133 6,216,000 862,000
</TABLE>
9. FEDERAL HOME LOAN BANK ADVANCES
The Banks own stock of the Federal Home Loan Bank (FHLB) of Cincinnati,
Ohio. This stock allows the Banks to borrow advances from the FHLB which the
Banks use to fund long-term fixed rate mortgages.
At December 31, 1996 and 1995, $9,377,456 and $755,000, respectively,
represented the balance due on the above advances from the FHLB. All advances
are paid either on a monthly basis or at maturity, over remaining terms of one
to nineteen years, with interest rates ranging from 4.65% to 8.45%. Advances are
secured by the FHLB stock with a cost of $1,452,900, and all single family first
mortgage loans of the participating Banks. Scheduled principal payments due on
advances during the five years subsequent to December 31, 1996, are as follows:
1997 - $7,785,997; 1998 - $174,259; 1999 - $480,367; 2000 - $105,050; 2001 and
years thereafter - $831,783.
F-19
<PAGE>
10. DEBT
Debt consists of the following:
<TABLE>
<CAPTION>
December 31,
----------------------------------------
1996 1995
------------------ -------------------
<S> <C> <C>
Revolving note, $5,000,000 maximum limit, secured by
100% of the common stock of the subsidiary Banks,
interest at prime rate, payable monthly, principal due at
maturity, June 30, 1996.............................................. $ - $5,000,000
</TABLE>
The revolving note described above was paid off from proceeds of the
Company's initial public offering in May 1996.
11. LINE OF CREDIT
In February 1997, the Company received approval for a two year, $20
million revolving line of credit from a financial institution. The line of
credit is available for general corporate purposes, including acquisitions. The
credit agreement contains certain covenants and performance terms. The common
stock of the subsidiary banks is pledged to secure the revolving line of credit.
12. INCOME TAXES
The components of the provision for income taxes are as follows:
<TABLE>
<CAPTION>
Three Months Ended
March 31, Years Ended December 31,
------------------------------------------ -------------------------------------------------------
1997 1996 1996 1995 1994
-------------------- ------------------- ---------------- ---------------- -----------------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Current................... $500,765 $157,223 $1,512,353 $334,508 $568,536
Deferred.................. (1,004) 14,273 5,361 282,659 (92,463)
Change in valuation
allowance............... - - - (504,175) 7,140
--------- --------- ------------- ------- --------
$499,761 $171,496 $1,517,714 $112,992 $483,213
======= ======= ========= ======= =======
</TABLE>
The Company's deferred tax assets and liabilities at March 31, 1997 and
December 31, 1996 and 1995, are shown below. Based upon the level of historical
taxable income over the three years prior to December 31, 1995, and projections
for future taxable income over the three years subsequent to December 31, 1995,
in which deferred tax assets were expected to become deductible, management
believed it more likely than not that the Company would realize the benefits of
these deductible differences; therefore, no valuation allowance for the
realization of deferred tax assets was considered necessary at December 31,
1995. Additionally, no valuation allowance is considered necessary at December
31, 1996.
F-20
<PAGE>
<TABLE>
<CAPTION>
March 31, December 31,
--------------------- -----------------------------------------------
1997 1996 1995
--------------------- --------------------- -----------------------
(Unaudited)
<S> <C> <C> <C>
Deferred tax assets:
Allowance for loan losses................... $ 387,511 $337,871 $287,852
NOL carryforwards........................... 297,463 330,426 435,116
Unrealized loss on investment
securities................................ 65,620 28,382 25,325
Other....................................... 21,593 19,093 -
-------- -------- ----------
Total deferred tax assets................. 772,187 715,772 748,293
Deferred tax liabilities:
Change in accounting method................. (10,477) (12,874) (22,461)
Depreciation................................ (134,555) (127,755) (44,820)
Federal Home Loan Bank dividends............ (53,040) (43,520) (1,020)
Other....................................... (40,293) (36,043) (31,229)
-------- -------- -------
Total deferred tax liabilities............ (238,365) (220,192) (99,530)
-------- ------- -------
$ 533,822 $495,580 $648,763
======== ======= =======
</TABLE>
At December 31, 1996, two of the subsidiary Banks had net operating
loss carryforwards totaling approximately $972,000, which begin expiring in
2005. The utilization of these net operating loss carryforwards is subject to
limitations imposed by Section 382 of the Internal Revenue Code.
F-21
<PAGE>
An analysis of the differences between the effective tax rates and the
statutory U.S. federal income tax rate is as follows:
<TABLE>
<CAPTION>
Three Months Ended
March 31, Year Ended December 31,
-------------------- ----------------------------------------------------------------
1997 1996 1996 1995 1994
---------- -------- --------------------- ------------------- --------------------
(Unaudited)
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. federal income tax rate .... $ 564 $ 228 $ 1,684 34.0% $ 772 34.0% $ 679 34.0%
Changes from the statutory rate:
Tax-exempt investment income .. (81) (40) (240) (4.8) (141) (6.2) (100) (5.0)
Non-deductible interest expense
related to carrying tax-
exempt investments .......... 9 5 28 0.5 15 0.7 12 0.6
Tax credits ................... (18) (18) (70) (1.4) (69) (3.0) (18) (0.9)
Change in valuation allowance . - - - - (504) (22.2) 7 0.3
Goodwill amortization ......... 32 2 67 1.3 1 - - -
Other ......................... (6) (5) 49 1.0 39 1.7 (97) (4.8)
------- ------- ------- ------ ------- ------ ------- ------
$ 500 $ 172 $ 1,518 30.6% $ 113 5.0% $ 483 24.2%
======= ======= ======= ====== ======= ====== ======= ======
</TABLE>
Income taxes (benefits) applicable to investment securities gains
(losses) were $496, $(2,049) and $23,703 for 1996, 1995 and 1994, respectively.
13. OPERATING LEASE COMMITMENTS
The Company has entered into lease agreements for certain premises and
equipment.
Future minimum lease payments under the leases during the five years
subsequent to December 31, 1996, are as follows:
1997.................. $ 149,179
1998.................. 145,496
1999.................. 142,865
2000.................. 138,600
2001.................. -
Total rental expense incurred amounted to approximately $156,091, $19,000
and $80,000 in 1996, 1995 and 1994, respectively.
14. EMPLOYEE BENEFIT PLANS
The Company has qualified profit sharing plans which cover
substantially all employees. Profit sharing contributions are at the discretion
of the Company's Board of Directors. Profit sharing contributions were $171,500,
$103,744 and $88,730 in 1996, 1995 and 1994, respectively.
On March 15, 1996, the shareholders approved adoption of the Premier
Financial Bancorp, Inc. 1996 Employee Stock Ownership Incentive Plan (the Plan),
whereby certain employees of the Company are eligible to receive incentive stock
options under the Plan. The Plan is accounted for in accordance with Accounting
Principles Board Opinion (APB) No. 25, "Accounting for Stock Issued to
Employees", and related interpretations. Under the Plan, a maximum of 100,000
shares, as adjusted for the 2-for-1 stock split effective March 20, 1996, of the
Company's common stock may be issued through the exercise of these incentive
stock options. The option price is the fair market value of the Company's shares
at the date of the grant. The options are exercisable ten years from the date of
grant. At December 31, 1996, the Company had granted options to certain key
employees to
F-22
<PAGE>
purchase 40,000 shares at an option price of $13.00 per share, of which 14,000
are currently eligible for exercise.
Although the Company has elected to follow APB No. 25, Statement of
Financial Accounting Standards (SFAS) No. 123, "Accounting for Stock Based
Compensation" requires pro forma disclosure of net income and earnings per share
as if the Company had accounted for its employee stock options under that
Statement. The fair value of each option grant was estimated on the grant date
using an option-pricing model.
Under SFAS No. 123, compensation cost is recognized in the amount of
the estimated fair value of the options and amortized to expense over the
options' vesting period. The pro forma effect on 1996 net income and earnings
per share of this statement are as follows:
Net income:
As reported........................ $ 3,435,576
Pro forma.......................... 3,410,628
Primary earnings per share:
As reported........................ $1.05
Pro forma.......................... 1.04
15. RELATED PARTY TRANSACTIONS
During the years ended December 31, 1996, 1995 and 1994, the Company
paid approximately $241,000, $65,000 and $53,000, respectively, for printing and
supplies from a company affiliated by common ownership. The Company also paid
this affiliate approximately $317,000, $223,000 and $185,000 in 1996, 1995 and
1994, respectively, to permit the Company's employees to participate in its
employee medical benefit plan.
The Company has purchased and currently holds noncumulative perpetual
preferred stock with a carrying value of $2,000,000 in a bank in Louisiana
controlled by the Company's largest shareholder. The dividend rate on the
preferred stock is 2% over the prevailing prime rate.
16. DIVIDEND LIMITATIONS
The Company's principal source of funds for dividend payments is
dividends received from the subsidiary Banks. Banking regulations limit the
amount of dividends that may be paid without prior approval of regulatory
agencies. Under these regulations, the amount of dividends that may be paid in
any calendar year is limited to the current year's net profits, as defined,
combined with the retained net profits of the preceding two years, subject to
the capital requirements as defined below. During 1997, the Banks could, without
prior approval, declare dividends of approximately $2,764,000 plus any 1997 net
profits retained to the date of the dividend declaration.
F-23
<PAGE>
17. STOCKHOLDERS' EQUITY
On May 22, 1996, the Company completed its initial public offering by
selling 2,000,000 common shares at an offering price of $13.00 per share and on
June 19, 1996, the Company completed the sale of an additional 300,000 common
shares (which represented the Underwriters' over-allotment option) at a price of
$13.00 per share. Total proceeds to the Company, net of the underwriting
discount and issuance costs, were $27,066,342.
On March 15, 1996, the shareholders approved a 2-for-1 stock split
effective March 29, 1996, in the form of a dividend of the Company's common
stock to shareholders of record on February 22, 1996. Additionally, the
shareholders approved an increase in the number of common stock shares
authorized from 1,800,000 to 10,000,000, approved a change in the par value of
the common shares from $1 to no par value and approved the authorization of
1,000,000 preferred shares, without par value.
On September 12, 1995, the Board of Directors approved a 5-for-4 stock
split effective September 30, 1995, in the form of a dividend of the Company's
common stock to shareholders of record on September 15, 1995. All references in
the accompanying financial statements to the number of average shares and per
share data have been restated to reflect the stock splits except for the number
of shares issued and outstanding at December 31, 1995, as reflected on the
consolidated balance sheets.
18. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair
value of each class of financial instruments for which it is practicable to
estimate that value:
Cash and Cash Equivalents - For these short-term instruments, the
carrying amount is a reasonable estimate of fair value.
Federal Funds Sold - For these short-term instruments, the carrying
amount is a reasonable estimate of fair value.
Investment Securities - For investment securities, fair values are
based on quoted market prices or dealer quotes.
Loans - Fair value is estimated by discounting the future cash flows
using the current rates at which similar loans would be made to
borrowers with similar credit ratings and for the same remaining
maturities.
Federal Home Loan Bank Stock - For FHLB stock, carrying value is
a reasonable estimate of fair value.
Deposit Liabilities - The fair value of demand deposits, savings
accounts, and certain money market deposits is the amount payable on
demand at the reporting date. The fair value of fixed-maturity
certificates of deposit is estimated by discounting future cash flows
using the rates currently offered for deposits of similar remaining
maturities.
Securities Sold Under Agreements to Repurchase - For these short-term
instruments, the carrying amount is a reasonable estimate of fair
value.
F-24
<PAGE>
Federal Home Loan Bank Advances - Rates currently available to the
company for advances with similar terms and remaining maturities are
used to estimate fair value of existing debt.
Debt - The carrying value of variable rate borrowed funds is a
reasonable estimate of fair value.
Commitments to Extend Credit and Standby Letters of Credit -
Commitments to extend credit and standby letters of credit represent
agreements to lend to a customer at the market rate when the loan is
extended, thus the commitments and letters of credit are not considered
to have fair value.
The fair values of the Company's financial instruments at December 31,
1996 and 1995 are as follows:
<TABLE>
<CAPTION>
1996 1995
------------------------------------------- ---------------------------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
------------------ --------------- --------------------- ---------------------
<S> <C> <C> <C> <C>
Financial assets:
Cash and cash equivalents............ $ 7,134,025 $ 7,134,000 $ 6,339,777 $ 6,340,000
Federal funds sold................... 10,635,000 10,635,000 6,340,000 6,340,000
Investment securities................ 42,820,138 42,704,000 24,637,235 24,638,000
Federal Home Loan Bank
stock............................... 1,542,900 1,543,000 291,300 291,000
Loans................................ 217,586,504 217,618,000 113,064,706 114,631,000
Less: allowance for loan
losses.............................. (2,522,502) (2,523,000) (1,735,482) (1,735,000)
---------- ---------- ---------- ----------
277,196,065 277,111,000 148,937,536 150,505,000
Financial liabilities:
Deposits............................. 235,573,968 237,354,000 136,246,437 137,729,000
Securities sold under
agreements to repurchase........... 5,599,420 5,604,000 747,118 747,000
Federal Home Loan Bank
advances............................ 9,377,456 9,412,000 755,000 755,000
Debt................................. - - 5,000,000 5,000,000
----------- ----------- ----------- -----------
$250,550,844 $252,370,000 $142,748,555 $144,231,000
=========== =========== =========== ===========
</TABLE>
F-25
<PAGE>
19. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
The Banks are parties to financial instruments with off-balance sheet
risk in the normal course of business to meet the financing needs of their
customers. These financial instruments include standby letters of credit and
commitments to extend credit in the form of unused lines of credit. The Banks
use the same credit policies in making commitments and conditional obligations
as they do for on-balance sheet instruments.
At March 31, 1997 and December 31, 1996 and 1995, the Banks had the
following financial instruments whose approximate contract amounts represent
credit risk:
<TABLE>
<CAPTION>
At At
March 31, December 31,
--------------------- --------------------------------------------
1997 1996 1995
--------------------- --------------------- --------------------
(Unaudited)
<S> <C> <C> <C>
Standby letters of credit................. $ 1,480,000 $ 1,081,875 $ 953,900
Commitments to extend credit.............. 12,976,000 9,667,341 4,571,904
</TABLE>
Standby letters of credit represent conditional commitments issued by
the Banks to guarantee the performance of a third party. The credit risk
involved in issuing these letters of credit is essentially the same as the risk
involved in extending loans to customers.
Commitments to extend credit are agreements to lend to a customer as
long as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination clauses
and may require payment of a fee. The Banks evaluate each customer's
creditworthiness on a case-by-case basis. Since some of the commitments are
expected to expire without being drawn upon, the total commitment amounts do not
necessarily represent future cash requirements. Collateral held varies but may
include accounts receivable, inventory, property and equipment, and income
producing properties.
20. CONCENTRATION OF CREDIT RISK
The Banks grant residential, commercial and consumer related loans to
customers primarily located in Lewis, Bracken, Scott, Bath, Henry and adjoining
counties in Kentucky. Although they have diverse loan portfolios, a substantial
portion of their debtors' ability to perform is somewhat dependent on the
economic conditions of the counties in which they operate.
21. LEGAL PROCEEDINGS
Legal proceedings involving the Company and its subsidiaries
periodically arise in the ordinary course of business, including claims by
debtors and their related interests against the Company's subsidiaries following
initial collection proceedings. These legal proceedings sometimes can involve
claims for substantial damages. At December 31, 1996, management is unaware of
any legal proceedings, of which the ultimate result would have a material
adverse effect upon the consolidated financial statements of the Company.
F-26
<PAGE>
22. REGULATORY MATTERS
The Company and the subsidiary Banks are subject to various regulatory
capital requirements administered by the federal banking agencies. Failure to
meet minimum capital requirements can initiate certain mandatory and possibly
additional discretionary actions by regulators that, if undertaken, could have a
direct material effect on the Company's financial statements. Under capital
adequacy guidelines and the regulatory framework for prompt corrective action,
the Company and the Banks must meet specific guidelines that involve
quantitative measures of their assets, liabilities, and certain
off-balance-sheet items as calculated under regulatory accounting practices. The
capital amounts and classifications are also subject to qualitative judgments by
the regulators about components, risk weightings, and other factors.
Quantitative measures established by regulation to ensure capital
adequacy require the Company and Banks to maintain minimum amounts and ratios
(set forth in the table below) of total and Tier 1 capital (as defined in the
regulations) to risk-weighted assets (as defined), and of Tier 1 capital (as
defined) to average assets (as defined). Management believes, as of December 31,
1996, the Company and the Banks meet all capital adequacy requirements to which
they are subject.
As of December 31, 1996, the most recent notification from the Federal
Reserve Bank categorized the Company as well capitalized under the regulatory
framework for prompt corrective action. To be categorized as well capitalized,
the Company must maintain minimum total risk-based, Tier 1 risk-based and Tier 1
leverage ratios as set forth in the following table. There are no conditions or
events since that notification that management believes have changed the
Company's category.
F-27
<PAGE>
The Company's and the Banks' capital amounts and ratios as of March 31,
1997, are presented in the table below.
<TABLE>
<CAPTION>
To Be Well
Capitalized
Under Prompt
For Capital Corrective
Actual Adequacy Purposes Action Provisions
------------------------------ ----------------------------- ---------------------------
Amount Ratio Amount Ratio Amount Ratio
----------- -------- ------------ --------- ------------- --------
(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Total Capital
(to Risk-Weighted Assets):
Consolidated................. $37,731,000 17.13% $17,623,000 8.0% $22,029,000 10.0%
Citizens Deposit Bank........ 8,493,000 12.40 5,478,000 8.0 6,848,000 10.0
Farmers Deposit Bank......... 11,414,000 13.43 6,818,000 8.0 8,522,000 10.0
Georgetown Bancorp........... 4,191,000 14.63 2,292,000 8.0 2,865,000 10.0
Citizens Bank................ 2,501,000 14.92 1,341,000 8.0 1,676,000 10.0
Bank of Germantown........... 2,203,000 15.79 1,116,000 8.0 1,396,000 10.0
Tier 1 Capital
(to Risk-Weighted Assets):
Consolidated................. 35,061,000 15.92 8,812,000 4.0 13,218,000 6.0
Citizens Deposit Bank........ 7,763,000 11.34 2,739,000 4.0 4,109,000 6.0
Farmers Deposit Bank......... 10,469,000 12.28 3,409,000 4.0 5,113,000 6.0
Georgetown Bancorp........... 3,889,000 13.58 1,146,000 4.0 1,719,000 6.0
Citizens Bank................ 2,288,000 13.65 670,000 4.0 1,006,000 6.0
Bank of Germantown........... 2,027,000 14.52 558,000 4.0 837,000 6.0
Tier 1 Capital
(to Average Assets):
Consolidated................. 35,061,000 12.25 11,650,000 4.0 14,562,000 5.0
Citizens Deposit Bank........ 7,763,000 8.74 3,553,000 4.0 4,442,000 5.0
Farmers Deposit Bank......... 10,469,000 9.28 4,514,000 4.0 5,643,000 5.0
Georgetown Bancorp........... 3,889,000 9.67 1,608,000 4.0 2,010,000 5.0
Citizens Bank................ 2,288,000 9.12 1,003,000 4.0 1,254,000 5.0
Bank of Germantown........... 2,027,000 9.98 812,000 4.0 1,015,000 5.0
</TABLE>
F-28
<PAGE>
The Company's and the Banks' capital amounts and ratios as of December
31, 1996, are presented in the table below.
<TABLE>
<CAPTION>
To Be Well
Capitalized
Under Prompt
For Capital Corrective
Actual Adequacy Purposes Action Provisions
------------------------------ ----------------------------- ---------------------------
Amount Ratio Amount Ratio Amount Ratio
-------------- ----------- ------------ --------- ------------- --------
<S> <C> <C> <C> <C> <C> <C>
Total Capital
(to Risk-Weighted Assets):
Consolidated..................... $36,887,000 17.12% $17,235,000 8.0% $21,544,000 10.0%
Citizens Deposit Bank............ 8,085,000 11.75 5,505,000 8.0 6,882,000 10.0
Farmers Deposit Bank............. 10,878,000 13.20 7,012,000 8.0 8,765,000 10.0
Georgetown Bancorp............... 4,007,000 15.38 2,084,000 8.0 2,605,000 10.0
Citizens Bank.................... 2,335,000 14.64 1,276,000 8.0 1,596,000 10.0
Bank of Germantown............... 2,102,000 15.75 1,068,000 8.0 1,334,000 10.0
Tier 1 Capital
(to Risk-Weighted Assets):
Consolidated..................... 34,364,000 15.95 8,618,000 4.0 12,926,000 6.0
Citizens Deposit Bank............ 7,375,000 10.72 2,753,000 4.0 4,129,000 6.0
Farmers Deposit Bank............. 10,003,000 12.14 3,506,000 4.0 5,259,000 6.0
Georgetown Bancorp............... 3,724,000 14.29 1,042,000 4.0 1,563,000 6.0
Citizens Bank.................... 2,136,000 13.39 638,000 4.0 957,000 6.0
Bank of Germantown............... 1,940,000 14.54 534,000 4.0 801,000 6.0
Tier 1 Capital
(to Average Assets):
Consolidated..................... 34,364,000 12.04 11,704,000 4.0 14,631,000 5.0
Citizens Deposit Bank............ 7,375,000 8.73 3,379,000 4.0 4,223,000 5.0
Farmers Deposit Bank............. 10,003,000 8.95 4,685,000 4.0 5,857,000 5.0
Georgetown Bancorp............... 3,724,000 10.51 1,417,000 4.0 1,771,000 5.0
Citizens Bank.................... 2,136,000 8.88 937,000 4.0 1,216,000 5.0
Bank of Germantown............... 1,940,000 9.86 787,000 4.0 984,000 5.0
</TABLE>
F-29
<PAGE>
23. PARENT COMPANY FINANCIAL STATEMENTS
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
------------------ ---------------------------------------
1997 1996 1995
------------------ ------------------ ------------------
(Unaudited)
<S> <C> <C> <C>
Assets:
Cash......................................................... $ 1,729,565 $ 1,653,723 $ 361,651
Interest-bearing deposits in subsidiary banks................ 2,996,675 4,047,000 -
--------- ---------- ----------
Total cash and cash equivalents............................ 4,726,240 5,700,723 361,651
Investment in subsidiaries................................... 32,108,926 30,988,028 12,952,170
Other investments............................................ 2,000,000 2,000,000 2,000,000
Premises and equipment....................................... 1,561,537 1,186,609 596,639
Other assets................................................. 171,458 114,219 400,133
-------- ---------- ----------
Total Assets............................................... $40,568,161 $39,989,579 $16,310,593
========== ========== ==========
Liabilities and Stockholders' Equity:
Debt......................................................... $ - $ - $ 5,000,000
Other liabilities............................................ 158,874 126,193 95,281
---------- ---------- ----------
Total liabilities.......................................... 158,874 126,193 5,095,281
Stockholders' equity:
Preferred stock, no par value; 1,000,000 shares
authorized; none issued or outstanding................... - - -
Common stock, no par value; 10,000,000 shares
authorized; 4,209,090 shares in 1996 (954,545
shares in 1995) issued and outstanding................... 977,545 977,545 954,545
Surplus.................................................... 32,940,927 32,940,927 5,897,585
Retained earnings.......................................... 6,743,081 6,111,715 4,493,184
Net unrealized losses on securities available-for-sale..... (252,266) (166,801) (130,002)
---------- ---------- ----------
Total stockholders' equity............................... 40,409,287 39,863,386 11,215,312
---------- ---------- ----------
Total Liabilities and Stockholders' Equity................... $40,568,161 $39,989,579 $16,310,593
========== ========== ==========
</TABLE>
F-30
<PAGE>
CONDENSED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
For the Three
Months Ended For the Years Ended
March 31, December 31,
----------------- -----------------------------------------------------------
1997 1996 1995 1994
----------------- ------------------ ------------------ -------------------
(Unaudited)
<S> <C> <C> <C> <C>
Income:
Dividends from subsidiary banks.............. $ - $ 596,745 $1,825,000 $ 553,002
Other income................................. 100,026 433,674 176,794 28,671
--------- --------- --------- ---------
Total income............................... 100,026 1,030,419 2,001,794 581,673
Expenses:
Interest expense............................. - 167,413 252,999 28,006
Other expenses............................... 184,429 472,558 341,627 127,315
--------- --------- --------- ---------
Total expenses............................. 184,429 639,971 594,626 155,321
Income before income taxes and equity in
undistributed income of subsidiaries......... (84,403) 390,448 1,407,168 426,352
Applicable income tax benefits................. 40,627 95,222 178,065 30,157
--------- --------- --------- ---------
Income before equity in undistributed income
of subsidiaries.............................. (43,776) 485,670 1,585,233 456,509
Equity in undistributed income of subsidiaries. 1,201,278 2,949,906 571,249 1,056,938
--------- --------- --------- ---------
Net Income................................. $1,157,502 $3,435,576 $2,156,482 $1,513,447
========= ========= ========= =========
</TABLE>
F-31
<PAGE>
CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Three
Months Ended For the Years Ended
March 31, December 31,
------------------- ------------------------------------------------------
1997 1996 1995 1994
------------------- ------------------ --------------- ----------------
(Unaudited)
<S> <C> <C> <C> <C>
Cash Flows from Operating Activities:
Net income......................................... $1,157,502 $ 3,435,576 $ 2,156,482 $ 1,513,447
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation..................................... 8,540 27,704 10,632 -
Equity in undistributed income of subsidiaries... (1,201,278) (2,949,906) (571,249) (1,056,938)
Change in other assets........................... (57,239) 285,914 (258,633) (16,866)
Change in other liabilities...................... 32,681 30,912 88,681 6,600
---------- ----------- ---------- ----------
Net cash provided by (used in)
operating activities......................... (59,794) 830,200 1,425,913 446,243
---------- ----------- ---------- ----------
Cash Flows from Investing Activities:
Purchase of subsidiary banks....................... - (12,622,751) (1,496,387) -
Capital contributed to subsidiaries................ (5,085) (2,500,000) (1,401,000) -
Purchase of other investments...................... - - (500,000) (1,500,000)
Purchase of premises and equipment................. (383,468) (617,674) (607,341) -
--------- ----------- ---------- -----------
Net cash used in investing activities............ (388,553) (15,740,425) (4,004,728) (1,500,000)
Cash Flows from Financing Activities:
Dividends paid..................................... (526,136) (1,817,045) (859,091) (540,000)
Proceeds from issuance of common stock............. - 27,066,342 - -
Proceeds from debt................................. - - 3,500,000 1,500,000
Repayment of debt.................................. - (5,000,000) - -
----------- ----------- ------------- -------------
Net cash provided by (used in)
financing activities........................... (526,136) 20,249,297 2,640,909 960,000
----------- ---------- ---------- -----------
Net increase (decrease) in cash and
cash equivalents................................... (974,483) 5,339,072 62,094 (93,757)
Cash and cash equivalents at beginning of period..... 5,700,723 361,651 299,557 393,314
--------- ---------- ----------- -----------
Cash and cash equivalents at end of period........... $4,726,240 $ 5,700,723 $ 361,651 $ 299,557
========= ========== =========== ==========
</TABLE>
F-32
<PAGE>
<TABLE>
<CAPTION>
==================================================== ===================================================
<S> <C>
No person has been authorized in connection
with the offering made hereby to give any
information or to make any representation
not contained in this prospectus and, if given
or made, such information or representation
must not be relied upon as having been
authorized by the company or any
underwriter. This prospectus does not
constitute an offer to sell or a solicitation of
any offer to buy any of the securities offered
hereby to any person or by anyone in any $25,000,000
jurisdiction in which it is unlawful to make
such offer or solicitation. Neither the
delivery of this prospectus nor any sale made PFBI CAPITAL TRUST
hereunder shall, under any circumstances,
create any implication that the information
contained herein is correct as of any date % Preferred Securities
subsequent to the date hereof. (Liquidation Amount $25 per
Preferred Security)
TABLE OF CONTENTS guaranteed, as described herein, by
PAGE
Summary......................................... PREMIER FINANCIAL
Selected Consolidated Financial Data BANCORP, INC.
Risk Factors....................................
PFBI Capital Trust..............................
Use of Proceeds.................................
The Target Acquisition..........................
Capitalization.................................. -------------------
Accounting Treatment............................ PROSPECTUS
Management's Discussion and Analysis -------------------
of Financial Condition and Results
of Operations.................................
Business of the Company
Management......................................
Supervision and Regulation Advest, Inc.
Certain Relationships and Related
Transactions..................................
Description of Preferred Securities
Description of Junior Subordinated , 1997
Debentures....................................
Description of Guarantee........................
Relationship Among the Preferred
Securities, the Junior Subordinated
Debentures and the Guarantee
Certain Federal Income Tax
Consequences..................................
Certain ERISA Considerations
Underwriting....................................
Validity of Securities..........................
Experts.........................................
Available Information...........................
Financial Statements............................ F-
==================================================== ===================================================
</TABLE>
PART II: INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
* Registration Fees....................................... $ 8,700
* Legal Services.......................................... 150,000
* Printing and Engraving.................................. 25,000
* Nasdaq Listing Fees..................................... 10,600
* Accounting Fees......................................... 15,000
* Trustee Fees and Expenses............................... 20,000
* Blue Sky Fees and Expenses.............................. 5,000
* Miscellaneous........................................... 5,700
---------
* TOTAL................................................... $ 240,000
=========
Item 14. Indemnification of Directors and Officers.
Sections 271B.8-500 to 8-580 of the Kentucky Business Corporation Act
provide that an officer, director, employee or agent may be indemnified by the
Company from and against expenses, judgments, fines, settlements and other
amounts actually and reasonably incurred in connection with any threatened,
pending or completed action, suit or proceeding (whether civil, criminal,
administrative or investigative, and whether formal or informal) in which such
person is involved by reason of such person's position with the Company,
provided that a determination has been made (by a majority vote of a quorum
consisting of directors who were not parties to such proceeding, or if such a
quorum is not obtainable, by majority vote of a committee duly designated by the
board of directors (in which designation directors who are parties may
participate) consisting only of two or more directors not at the time parties to
the proceeding, or by special legal counsel, or by the shareholders, excluding
those shares owned or voted under the control of directors who are parties to
the proceeding) that such person acted in good faith and in a manner that such
person reasonably believes to be in, or not opposed to, the best interests of
the Company. Such person may not be indemnified if the person has been adjudged
liable in connection with a proceeding by (or in the right of) the corporation
in which such person was held liable to the corporation, or in connection with a
proceeding in which such person was adjudged liable to the company on the basis
that personal benefit was improperly received by him.
Provisions regarding indemnification of directors, officers, employees
or agents of the Company are contained in the Company's Articles of
Incorporation.
Under a directors' and officers' liability insurance policy, directors
and officers of the Company are insured against certain liabilities, including
certain liabilities under the Securities Act of 1933, as amended.
<PAGE>
Item 15. Recent Sales of Unregistered Securities.
There have been no sales of securities by the Company during the past
three years that were not registered under the Securities Act of 1933.
Item 16. Exhibits and Financial Statement Schedules:
The financial statements and exhibits filed as part of this
Registration Statement are as follows:
(a) List of Exhibits:
<TABLE>
<CAPTION>
<S> <C> <C>
1.1 Form of Underwriting Agreement.*
3.1 Articles of Incorporation of Premier Financial Bancorp, Inc. (the "Company")
(included as Exhibits 3.1 and 3.2 to the Company's Registration Statement on
Form S-1, Registration No. 333-1702, as amended, filed with the Securities and
Exchange Commission and incorporated herein by reference).
3.2 Bylaws of Premier Financial Bancorp, Inc. (included as Exhibit 3.2 to the
Company's Registration Statement on Form S-1, Registration No. 333-1702, filed
on February 28, 1996, with the Securities and Exchange Commission and
incorporated herein by reference).
4.1 Form of Junior Subordinated Indenture.
4.2 Form of Junior Subordinated Debenture Certificate.
4.3 Form of Trust Agreement.
4.4 Form of Amended and Restated Trust Agreement.
4.5 Form of Preferred Security.
4.6 Form of Guarantee.
5.1 Opinion of Richards, Layton & Finger.*
5.2 Opinion of Malizia, Spidi, Sloane, & Fisch, P.C.*
8.1 Tax Opinion of Malizia, Spidi, Sloane, & Fisch, P.C.*
10.1 Amended and Restated Preferred Stock Purchase Agreement
dated as of September 29, 1994, between First Guaranty Bank,
Hammon, Louisiana, and the Company (included as Exhibit 10.3
to the Company's Registration Statement on Form S-1,
Registration No. 333-1702, filed on February 28, 1996, with
the Securities and Exchange Commission and incorporated
herein by reference).
10.2 Employment Agreement dated March 16, 1992, between
Georgetown Bank & Trust Company and Gardner E. Daniel
(included as Exhibit 10.4 to the Company's Registration
Statement on Form S-1, Registration No. 333-1702, filed on
February 28, 1996, with the Securities and Exchange
Commission and incorporated herein by reference).
10.3 Deferred Compensation Agreement dated December 17, 1992,
between Georgetown Bank & Trust Company and Gardner E.
Daniel (included as Exhibit 10.5 to the Company's
Registration Statement on Form S-1, Registration No.
333-1702, filed on February 28, 1996, with the Securities
and Exchange Commission and incorporated herein by
reference).
10.4 Premier Financial Bancorp, Inc. 1996 Employee Stock
Ownership Incentive Plan (included as Exhibit 10.6 to the
Company's Registration Statement on Form S-1, Registration
No. 333-1702, filed on February 28, 1996, with the
Securities and Exchange Commission and incorporated herein
by reference).
23.1 Consent of Eskew & Gresham, P.S.C.
23.2 Consent of McNeal, Williamson & Co.
23.3 Consent of Richards, Layton & Finger (included in Exhibit 5.1).
23.4 Consent of Malizia, Spidi, Sloane & Fisch, P.C. (included in Exhibit 5.2).
25.1 Statement of Eligibility under the Trust Indenture Act of
1939, as amended, of Bankers Trust Company, as trustee under
the Junior Subordinated Indenture, the Amended and Restated
Trust Agreement and the Guarantee Agreement relating to PFBI
Capital Trust.*
(b) Financial Statements Schedules **
</TABLE>
* To be filed by amendment.
** All schedules are omitted because they are not required or applicable or
the required information is shown in the financial statements or the
notes thereto.
Item 17. Undertakings
Each of the undersigned Registrants hereby undertake:
(1) That, for purposes of determining any liability under the Securities
Act of 1933, as amended, the information omitted from the form of prospectus
filed as part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrants pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part
of this registration statement as of the time it was declared effective.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, as amended, each post-effective amendment that contains
a form of prospectus shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(3) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the registrants pursuant to the foregoing provisions, 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
Securities Act, and is therefore, unenforceable. In the event that a claim for
indemnification against liabilities (other than the payment by the 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, officer or controlling person in connection with the
securities being registered, the registrants will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the questions whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in Georgetown, Kentucky,
as of May 28, 1997.
PREMIER FINANCIAL BANCORP, INC.
By: /s/J. Howell Kelly
-----------------------------------------
J. Howell Kelly
President and Chief Executive Officer
(Duly Authorized Representative)
Pursuant to the requirements of the Securities Act of 1933, as amended,
this registration statement has been signed below by the following persons in
the capacities indicated as of May 28, 1997.
/s/J. Howell Kelly /s/Marshall T. Reynolds
- ------------------------------------- -----------------------------
J. Howell Kelly Marshall T. Reynolds
President and Chief Executive Officer Chairman of the Board
(Principal Executive, Financial and
Accounting Officer)
/s/Toney K. Adkins /s/E.V. Holder, Jr.
- ------------------------------------- -----------------------------
Toney K. Adkins E. V. Holder, Jr.
Director Secretary and Director
/s/Wilbur M. Jenkins
- ------------------------------------- -----------------------------
Gardner E. Daniel Wilbur M. Jenkins
Senior Vice President, Director
Assistant Secretary and Director
/s/Benjamin T. Pugh
- -------------------------------------
Benjamin T. Pugh
Executive Vice President, Treasurer and Director
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Act of 1933, as
amended, the Registrant has duly caused this Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in Georgetown,
Kentucky, as of May 28, 1997.
PFBI CAPITAL TRUST
By: PREMIER FINANCIAL BANCORP, INC.
as Depositor
By: /s/J. Howell Kelly
-------------------------------------------
J. Howell Kelly
President and Chief Executive Officer
<PAGE>
As filed with the Securities and Exchange Commission on May 28, 1997
Registration Nos. 333- 01
333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
EXHIBITS TO
FORM S-1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
PFBI CAPITAL TRUST
PREMIER FINANCIAL BANCORP, INC.
(Exact Name of Registrants as Specified in their Charters)
Delaware Requested
Kentucky 6035 61-1206757
- ------------------------------ -------------------------- --------------------
(States or Other Jurisdictions (Primary Standard Industry (I.R.S. Employer
of Incorporation Classification Code Number) Identification Nos.)
or Organization)
120 N. Hamilton Street, Georgetown, Kentucky 40324
(502) 863-7500
------------------------------------------------------------------------
(Address, Including Zip Code, and Telephone Number, Including Area Code,
of Registrants' Principal Executive Offices)
Mr. J. Howell Kelly
President and Chief Executive Officer
Premier Financial Bancorp, Inc.
120 N. Hamilton Street, Georgetown, Kentucky 40324
(502) 863-7500
- --------------------------------------------------------------------------------
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)
Please send copies of all communications to:
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John J. Spidi, Esq. David W. Harper, Esq. Steven L. Kaplan, Esq.
MALIZIA, SPIDI, SLOANE & FISCH, P.C. 2450 Meidinger Tower ARNOLD & PORTER
1301 K Street, N.W., Suite 700 East Louisville, KY 40202 555 Twelfth Street,
Washington, D.C. 20005 Washington, D.C. 20004
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this registration statement becomes
effective.
<PAGE>
INDEX TO EXHIBITS TO FORM S-1
The financial statements and exhibits filed as part of this
Registration Statement are as follows:
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(a) List of Exhibits:
1.1 Form of Underwriting Agreement.
3.1 Articles of Incorporation of Premier Financial Bancorp, Inc. (the "Company")
(included as Exhibits 3.1 and 3.2 to the Company's Registration Statement on
Form S-1, Registration No. 333-1702, as amended, filed with the Securities and
Exchange Commission and incorporated herein by reference).
3.2 Bylaws of Premier Financial Bancorp, Inc. (included as Exhibit 3.2 to the
Company's Registration Statement on Form S-1, Registration No. 333-1702, filed
on February 28, 1996, with the Securities and Exchange Commission and
incorporated herein by reference).
4.1 Form of Junior Subordinated Indenture.
4.2 Form of Junior Subordinated Debenture Certificate.
4.3 Form of Trust Agreement.
4.4 Form of Amended and Restated Trust Agreement.
4.5 Form of Preferred Security.
4.6 Form of Guarantee.
5.1 Opinion of Richards, Layton & Finger.*
5.2 Opinion of Malizia, Spidi, Sloane, & Fisch, P.C.*
8.1 Tax Opinion of Malizia, Spidi, Sloane, & Fisch, P.C.*
10.1 Amended and Restated Preferred Stock Purchase Agreement
dated as of September 29, 1994, between First Guaranty
Bank, Hammon, Louisiana, and the Company (included as
Exhibit 10.3 to the Company's Registration Statement on
Form S-1, Registration No. 333-1702, filed on February 28,
1996, with the Securities and Exchange Commission and
incorporated herein by reference).
10.2 Employment Agreement dated March 16, 1992, between
Georgetown Bank & Trust Company and Gardner E. Daniel
(included as Exhibit 10.4 to the Company's Registration
Statement on Form S-1, Registration No. 333-1702, filed on
February 28, 1996, with the Securities and Exchange
Commission and incorporated herein by reference).
10.3 Deferred Compensation Agreement dated December 17, 1992,
between Georgetown Bank & Trust Company and Gardner E.
Daniel (included as Exhibit 10.5 to the Company's
Registration Statement on Form S-1, Registration No.
333-1702, filed on February 28, 1996, with the Securities
and Exchange Commission and incorporated herein by
reference).
10.4 Premier Financial Bancorp, Inc. 1996 Employee Stock Ownership Incentive Plan
(included as Exhibit 10.6 to the Company's Registration Statement on Form S-1,
Registration No. 333-1702, filed on February 28, 1996, with the Securities and
Exchange Commission and incorporated herein by reference).
23.1 Consent of Eskew & Gresham, P.S.C.
23.2 Consent of McNeal, Williamson & Co.
23.3 Consent of Richards, Layton & Finger (included in Exhibit 5.1).
23.4 Consent of Malizia, Spidi, Sloane & Fisch, P.C. (included in Exhibit 5.2).
25.1 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of
Bankers Trust Company, as trustee under the Junior Subordinated Indenture, the
Amended and Restated Trust Agreement and the Guarantee Agreement relating
to PFBI Capital Trust.*
</TABLE>
<PAGE>
(b) Financial Statements Schedules **
* To be filed by amendment.
** All schedules are omitted because they are not required or
applicable or the required information is shown in the financial
statements or the notes thereto.
Exhibit 3.2
Exhibit 4.1
<PAGE>
================================================================================
JUNIOR SUBORDINATED INDENTURE
Between
PREMIER FINANCIAL BANCORP, INC.
and
BANKERS TRUST COMPANY
(as Trustee)
dated as of
__________ __, 1997
================================================================================
<PAGE>
PFBI CAPITAL TRUST
Certain Sections of this Junior Subordinated Indenture relating
to Sections 310 through 318 of the
Trust Indenture Act of 1939:
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Trust Indenture Junior Subordinated
Act Section Indenture Section
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<S> <C> <C>
Section 310(a)(1)............................................ 6.9
(a)(2)....................................... 6.9
(a)(3)....................................... Not Applicable
(a)(4)....................................... Not Applicable
(a)(5)....................................... 6.9
(b).......................................... 6.8, 6.10
Section 311(a)............................................... 6.13
(b).......................................... 6.13
(b)(2)....................................... 7.3(a)
Section 312(a)............................................... 7.1, 7.2(a)
(b).......................................... 7.2(b)
(c).......................................... 7.2(c)
Section 313(a)............................................... 7.3(a)
(a)(4)....................................... 7.3(a)
(b).......................................... 7.3(b)
(c).......................................... 7.3(a)
(d).......................................... 7.3(c)
Section 314(a)............................................... 7.4
(b).......................................... 7.4
(c)(1)....................................... 1.2
(c)(2)....................................... 1.2
(c)(3)....................................... Not Applicable
(e).......................................... 1.2
Section 315(a)............................................... 6.1(a)
(b).......................................... 6.2, 7.3
(c).......................................... 6.1(b)
(d).......................................... 6.1(c)
(e).......................................... 5.14
Section 316(a)............................................... 5.12
(a)(1)(A).................................... 5.12
(a)(1)(B).................................... 5.13
(a)(2)....................................... Not Applicable
(b).......................................... 5.8
(c).......................................... 1.4(f)
Section 317(a)(1)............................................ 5.3
(a)(2)....................................... 5.4
(b).......................................... 10.3
Section 318(a)............................................... 1.7
</TABLE>
Note:This reconciliation and tie shall not, for any purpose, be deemed to be a
part of the Indenture.
<PAGE>
TABLE OF CONTENTS
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ARTICLE I. DEFINITIONS AND OTHER PROVISIONS OF
GENERAL APPLICATION........................................ 1
SECTION 1.1. Definitions................................................ 1
SECTION 1.2. Compliance Certificate and Opinions........................ 10
SECTION 1.3. Forms of Documents Delivered to Trustee.................... 10
SECTION 1.4. Acts of Holders............................................ 11
SECTION 1.5. Notices, Etc. to Trustee and Company....................... 12
SECTION 1.6. Notice to Holders; Waiver.................................. 13
SECTION 1.7. Conflict with Trust Indenture Act.......................... 13
SECTION 1.8. Effect of Headings and Table of Contents................... 13
SECTION 1.9. Successors and Assigns..................................... 13
SECTION 1.10. Separability Clause........................................ 13
SECTION 1.11. Benefits of Indenture...................................... 14
SECTION 1.12. Governing Law.............................................. 14
SECTION 1.13. Non-Business Days.......................................... 14
ARTICLE II. SECURITY FORMS............................................. 14
SECTION 2.1. Forms Generally............................................ 14
SECTION 2.2. Form of Face of Security................................... 15
SECTION 2.3. Form of Reverse of Security................................ 18
SECTION 2.4. Additional Provisions Required in Global
Security................................................... 21
SECTION 2.5. Form of Trustee's Certificate of Authentication............ 21
ARTICLE III. THE SECURITIES............................................. 22
SECTION 3.1. Title and Terms............................................ 22
SECTION 3.2. Denominations.............................................. 22
SECTION 3.3. Execution, Authentication, Delivery
and Dating................................................. 22
SECTION 3.4. Temporary Securities....................................... 24
SECTION 3.5. Global Securities.......................................... 24
SECTION 3.6. Registration, Transfer and Exchange
Generally; Certain Transfers and
Exchanges; Securities Act Legends.......................... 25
SECTION 3.7. Mutilated, Lost and Stolen Securities...................... 26
SECTION 3.8. Payment of Interest and Additional
Interest; Interest Rights Preserved........................ 27
SECTION 3.9. Persons Deemed Owners...................................... 28
SECTION 3.10. Cancellation............................................... 28
SECTION 3.11. Computation of Interest.................................... 29
SECTION 3.12. Deferrals of Interest Payment Dates........................ 29
SECTION 3.13. Right of Set-Off........................................... 30
SECTION 3.14. Agreed Tax Treatment....................................... 30
SECTION 3.15. CUSIP Numbers.............................................. 30
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ARTICLE IV. SATISFACTION AND DISCHARGE................................. 30
SECTION 4.1. Satisfaction and Discharge of Indenture.................... 30
SECTION 4.2. Application of Trust Money................................. 31
ARTICLE V. REMEDIES................................................... 32
SECTION 5.1. Events of Default.......................................... 32
SECTION 5.2. Acceleration of Maturity; Rescission
and Annulment.............................................. 32
SECTION 5.3. Collection of Indebtedness and Suits
for Enforcement by Trustee................................. 33
SECTION 5.4. Trustee May File Proofs of Claim........................... 34
SECTION 5.5. Trustee May Enforce Claim Without
Possession of Securities................................... 35
SECTION 5.6. Application of Money Collected............................. 35
SECTION 5.7. Limitation on Suits........................................ 35
SECTION 5.8. Unconditional Right of Holders to
Receive Principal, Premium and
Interest; Direct Action by Holders
of Preferred Securities.................................... 36
SECTION 5.9. Restoration of Rights and Remedies......................... 36
SECTION 5.10. Rights and Remedies Cumulative............................. 36
SECTION 5.11. Delay or Omission Not Waiver............................... 36
SECTION 5.12. Control by Holders......................................... 37
SECTION 5.13. Waiver of Past Defaults.................................... 37
SECTION 5.14. Undertaking for Costs...................................... 37
SECTION 5.15. Waiver of Usury, Stay or Extension Laws.................... 38
ARTICLE VI. THE TRUSTEE................................................ 38
SECTION 6.1. Certain Duties and Responsibilities........................ 38
SECTION 6.2. Notice of Defaults......................................... 39
SECTION 6.3. Certain Rights of Trustee.................................. 39
SECTION 6.4. Not Responsible for Recitals or
Issuance of Securities..................................... 40
SECTION 6.5. May Hold Securities........................................ 40
SECTION 6.6. Money Held in Trust........................................ 40
SECTION 6.7. Compensation and Reimbursements............................ 41
SECTION 6.8. Disqualification; Conflicting
Interests.................................................. 41
SECTION 6.9. Corporate Trustee Required;
Eligibility................................................ 42
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<PAGE>
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SECTION 6.10. Resignation and Removal; Appointment
of Successor............................................... 42
SECTION 6.11. Acceptance of Appointment by
Successor.................................................. 43
SECTION 6.12. Merger, Conversion, Consolidation or
Succession to Business..................................... 44
SECTION 6.13. Preferential Collection of Claims Against
Company.................................................... 44
SECTION 6.14. Appointment of Authenticating Agent........................ 44
ARTICLE VII. HOLDER'S LISTS AND REPORTS BY TRUSTEE,
PAYING AGENT AND COMPANY................................... 46
SECTION 7.1. Company to Furnish Trustee Names and
Addresses of Holders....................................... 46
SECTION 7.2. Preservation of Information,
Communications to Holders ................................. 46
SECTION 7.3. Reports by Trustee and Paying Agent........................ 46
SECTION 7.4. Reports by Company......................................... 47
ARTICLE VIII. CONSOLIDATION, MERGER, CONVEYANCE,
TRANSFER OR LEASE.......................................... 47
SECTION 8.1. Company May Consolidate, Etc., Only
on Certain Terms........................................... 47
SECTION 8.2. Successor Company Substituted.............................. 48
ARTICLE IX. SUPPLEMENTAL INDENTURES.................................... 48
SECTION 9.1. Supplemental Indentures Without Consent
of Holders................................................. 48
SECTION 9.2. Supplemental Indentures With Consent of
Holders.................................................... 49
SECTION 9.3. Execution of Supplemental Indentures....................... 50
SECTION 9.4. Effect of Supplemental Indentures.......................... 50
SECTION 9.5. Conformity with Trust Indenture Act........................ 50
SECTION 9.6. Reference in Securities to Supplemental
Indentures................................................. 50
ARTICLE X. COVENANTS.................................................. 51
SECTION 10.1. Payment of Principal, Premium and Interest................. 51
SECTION 10.2. Maintenance of Office or Agency............................ 51
SECTION 10.3. Money for Security Payments to be Held in
Trust...................................................... 51
SECTION 10.4. Statement as to Compliance................................. 52
SECTION 10.5. Waiver of Certain Covenants................................ 53
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SECTION 10.6. Additional Sums............................................ 53
SECTION 10.7. Additional Covenants....................................... 53
SECTION 10.8. Original Issue Discount.................................... 54
ARTICLE XI. REDEMPTION OF SECURITIES................................... 54
SECTION 11.1. Applicability of This Article.............................. 54
SECTION 11.2. Election to Redeem; Notice to Trustee...................... 55
SECTION 11.3. Selection of Securities to be Redeemed..................... 55
SECTION 11.4. Notice of Redemption....................................... 55
SECTION 11.5. Deposit of Redemption Price................................ 56
SECTION 11.6. Payment of Securities Called for
Redemption................................................. 56
SECTION 11.7. Right of Redemption of Securities
Initially Issued to the Issuer Trust....................... 57
ARTICLE XII. SINKING FUNDS.............................................. 57
ARTICLE XIII. SUBORDINATION OF SECURITIES................................ 57
SECTION 13.1. Securities Subordinate to Senior
Indebtedness............................................... 57
SECTION 13.2. No Payment When Senior Indebtedness
in Default; Payment Over of Proceeds
Upon Dissolution, Etc...................................... 57
SECTION 13.3 Payment Permitted If No Default............................ 59
SECTION 13.4. Subrogation to Rights of Holders of
Senior Indebtedness........................................ 59
SECTION 13.5. Provisions Solely to Define Relative
Rights..................................................... 59
SECTION 13.6. Trustee to Effectuate Subordination........................ 60
SECTION 13.7. No Waiver of Subordination Provisions...................... 60
SECTION 13.8. Notice to Trustee.......................................... 60
SECTION 13.9. Reliance on Judicial Order or
Certificate of Liquidating Agent........................... 61
SECTION 13.10. Trustee Not Fiduciary for Holders of
Senior Indebtedness........................................ 61
SECTION 13.11. Rights of Trustee as Holder of Senior
Indebtedness; Preservation of Trustee's
Rights..................................................... 61
SECTION 13.12. Article Applicable to Paying Agents........................ 61
SECTION 13.13. Certain Conversions or Exchanges
Deemed Payment............................................. 61
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<PAGE>
JUNIOR SUBORDINATED INDENTURE
-----------------------------
THIS JUNIOR SUBORDINATED INDENTURE, dated as of __________ __, 1997,
between PREMIER FINANCIAL BANCORP, INC., a Kentucky Corporation (the "Company"),
having its principal office at 120 N. Hamilton Street, Georgetown, Kentucky
40324, and BANKERS TRUST COMPANY, as Trustee, having its principal office at
Four Albany Street, 4th Floor, New York, New York 10006 (the "Trustee").
RECITALS OF THE COMPANY
WHEREAS, the Company has duly authorized the execution and delivery of
this Indenture to provide for the issuance of its unsecured junior subordinated
debentures due _______________, 2027 (hereinafter called the "Securities") of
substantially the tenor hereinafter provided, including Securities issued to
evidence loans made to the Company from the proceeds from the issuance from time
to time by PFBI Capital Trust, a Delaware business trust (the "Issuer Trust") of
undivided preferred beneficial interests in the assets of such Issuer Trust (the
"Preferred Securities") and common undivided interests in the assets of such
Issuer Trust (the "Common Securities" and, collectively with the Preferred
Securities, the "Trust Securities"), and to provide the terms and conditions
upon which the Securities are to be authenticated, issued and delivered; and
WHEREAS, all things necessary to make this Indenture a valid agreement of
the Company, in accordance with its terms, have been done.
NOW THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the
Securities by the Holders (as such term is defined in Section 1.1 hereof)
thereof, it is mutually covenanted and agreed, for the equal and proportionate
benefit of all Holders of the Securities or of any series thereof, and intending
to be legally bound hereby, as follows:
ARTICLE I
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 1.1. Definitions.
For all purposes of this Indenture, except as otherwise expressly provided
or unless the context otherwise requires:
(1) The terms defined in this Article have the meanings assigned to them
in this Article, and include the plural as well as the singular;
(2) All other terms used herein that are defined in the Trust Indenture
Act, either directly or by reference therein, have the meanings assigned to them
therein;
(3) The words "include", "includes" and "including" shall be deemed to be
followed by the phrase "without limitation";
<PAGE>
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(4) All accounting terms not otherwise defined herein have the meanings
assigned to them in accordance with generally accepted accounting principles as
in effect at the time of computation;
(5) Whenever the context may require, any gender shall be deemed to include
the other;
(6) Unless the context otherwise requires, any reference to an "Article" or
a "Section" refers to an Article or a Section, as the case may be, of this
Indenture; and
(7) The words "hereby", "herein", "hereof" and "hereunder" and other words
of similar import refer to this Indenture as a whole and not to any particular
Article, Section or other subdivision.
"25% Capital Limitation" means the limitation imposed by the Federal
Reserve that the proceeds of certain qualifying securities like the Trust
Securities will qualify as Tier 1 capital of the issuer up to an amount not to
exceed 25% of the Issuer's Tier 1 capital, or any subsequent limitation adopted
by the Federal Reserve.
"Act" when used with respect to any Holder has the meaning specified in
Section 1.4.
"Additional Interest" means the interest, if any, that shall accrue on any
interest on the Securities of any series the payment of which has not been made
on the applicable Interest Payment Date and which shall accrue at the rate per
annum specified or determined as specified in such Security.
"Additional Sums" has the meaning specified in Section 10.6.
"Additional Taxes" means any additional taxes, duties and other
governmental charges to which the Issuer Trust has become subject from time to
time as a result of a Tax Event.
"Administrator" means, in respect of the Issuer Trust, each Person
appointed in accordance with the Trust Agreement, solely in such Person's
capacity as Administrator of the Issuer Trust and not in such Person's
individual capacity, or any successor Administrator appointed as therein
provided.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Agent Member" means any member of, or participant in, the Depositary.
<PAGE>
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"Applicable Procedures" means, with respect to any transfer or transaction
involving a Global Security or beneficial interest therein, the rules and
procedures of the Depositary for such Global Security, in each case to the
extent applicable to such transaction and as in effect from time to time.
"Authenticating Agent" means any Person authorized by the Trustee pursuant
to Section 6.14 to act on behalf of the Trustee to authenticate Securities.
"Board of Directors" means the board of directors of the Company or the
Executive Committee of the board of directors of the Company (or any other
committee of the board of directors of the Company performing similar functions)
or, for purposes of this Indenture, a committee designated by the board of
directors of the Company (or such committee), comprised of two or more members
of the board of directors of the Company or officers of the Company, or both.
"Board Resolution" means a copy of a resolution certified by the Secretary
or any Assistant Secretary of the Company to have been duly adopted by the Board
of Directors, or such committee of the Board of Directors or officers of the
Company to which authority to act on behalf of the Board of Directors has been
delegated, and to be in full force and effect on the date of such certification,
and delivered to the Trustee.
"Business Day" means any day other than (i) a Saturday or Sunday, (ii) a
day on which banking institutions in the Commonwealth of Kentucky or the City of
New York are authorized or required by law or executive order to remain closed,
or (iii) a day on which the Corporate Trust Office of the Trustee, or, with
respect to the Securities initially issued to the Issuer Trust, the "Corporate
Trust Office" (as defined in the Trust Agreement) of the Property Trustee or the
Delaware Trustee under the Trust Agreement, is closed for business.
"Capital Treatment Event" means, in respect of the Issuer Trust, the
reasonable determination by the Company that, as a result of the occurrence of
any amendment to, or change (including any announced prospective change) in, the
laws (or any rules or regulations thereunder) of the United States or any
political subdivision thereof or therein, or as a result of any official or
administrative pronouncement or action or judicial decision interpreting or
applying such laws or regulations, which amendment or change is effective or
such pronouncement, action or decision is announced on or after the date of the
issuance of the Preferred Securities of the Issuer Trust, there is more than an
insubstantial risk that the Company will not be entitled to treat an amount
equal to the Liquidation Amount (as such term is defined in the Trust Agreement)
of such Preferred Securities as "Tier 1 Capital" (or the then equivalent
thereof), except as otherwise restricted under the 25% Capital Limitation, for
purposes of the risk-based capital adequacy guidelines of the Board of Governors
of the Federal Reserve System, as then in effect and applicable to the Company.
"Commission" means the Securities and Exchange Commission, as from time to
time constituted, created under the Exchange Act, or, if at any time after the
execution of this instrument such Commission is not existing and performing the
duties now assigned to it under the Trust Indenture Act, then the body
performing such duties on such date.
"Common Securities" has the meaning specified in the first recital of this
Indenture.
<PAGE>
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"Common Stock" means the common stock, no par value per share, of the
Company.
"Company" means the Person named as the "Company" in the first paragraph
of this instrument until a successor entity shall have become such pursuant to
the applicable provisions of this Indenture, and thereafter "Company" shall mean
such successor entity.
"Company Request" and "Company Order" mean, respectively, the written
request or order signed in the name of the Company by any Chairman of the Board
of Directors, any Vice Chairman of the Board of Directors, its President or a
Vice President, and by its Chief Financial Officer, its Treasurer, its Secretary
or an Assistant Secretary, and delivered to the Trustee.
"Corporate Trust Office" means the principal office of the Trustee at
which at any particular time its corporate trust business shall be administered.
"Creditor" has the meaning specified in Section 6.7.
"Defaulted Interest" has the meaning specified in Section 3.8.
"Delaware Trustee" means, with respect to the Issuer Trust, the Person
identified as the "Delaware Trustee" in the Trust Agreement, solely in its
capacity as Delaware Trustee of the Issuer Trust under the Trust Agreement and
not in its individual capacity, or its successor in interest in such capacity,
or any successor Delaware trustee appointed as therein provided.
"Depositary" means, with respect to the Securities issuable or issued in
whole or in part in the form of one or more Global Securities, the Person
designated as Depositary by the Company pursuant to Section 3.1 (or any
successor thereto).
"Discount Security" means any security that provides for an amount less
than the principal amount thereof to be due and payable upon a declaration of
acceleration of the Maturity thereof pursuant to Section 5.2.
"Dollar" or "$" means the currency of the United States of America that,
as at the time of payment, is legal tender for the payment of public and private
debts.
The term "entity" includes a bank, corporation, association, company,
limited liability company, joint-stock company or business trust.
"Event of Default," has the meaning specified in Article V.
"Exchange Act" means the Securities Exchange Act of 1934 and any statute
successor thereto, in each case as amended from time to time.
"Expiration Date" has the meaning specified in Section 1.4.
"Extension Period" has the meaning specified in Section 3.12.
"Global Security" means a Security in the form prescribed in Section 2.4
evidencing all or part of the Securities, issued to the Depositary or its
nominee, and registered in the name of such Depositary or its nominee.
<PAGE>
- 5 -
"Guarantee" means, with respect to the Issuer Trust, the Guarantee
Agreement, dated __________ __, 1997, executed by the Company for the benefit of
the Holders of the Preferred Securities issued by the Issuer Trust as modified,
amended or supplemented from time to time.
"Holder" means a Person in whose name a Security is registered in the
Securities Register.
"Indenture" means this instrument as originally executed or as it may from
time to time be supplemented or amended by one or more indentures supplemental
hereto entered into pursuant to the applicable provisions hereof.
"Institutional Accredited Investor" means an institutional accredited
investor within the meaning of Rule 501(a)(1), (2), (3) or (7) of Regulation D
under the Securities Act.
"Interest Payment Date" means the Stated Maturity of an installment of
interest on such Securities.
"Investment Company Act" means the Investment Company Act of 1940 and any
statute successor thereto, in each case as amended from time to time.
"Investment Company Event" means the receipt by the Issuer Trust of an
Opinion of Counsel (as defined in the Trust Agreement) experienced in such
matters to the effect that, as a result of the occurrence of a change in law or
regulation or a written change (including any announced prospective change) in
interpretation or application of law or regulation by any legislative body,
court, governmental agency or regulatory authority, there is more than an
insubstantial risk that the Issuer Trust is or will be considered an "investment
company" that is required to be registered under the Investment Company Act,
which change or prospective change becomes effective or would become effective,
as the case may be, on or after the date of the issuance of the Preferred
Securities of the Issuer Trust.
"Issuer Trust" has the meaning specified in the first recital of this
Indenture.
"Maturity" when used with respect to any Security means the date on which
the principal of such Security becomes due and payable as therein or herein
provided, whether at the Stated Maturity or by declaration of acceleration, call
for redemption or otherwise.
"Notice of Default" means a written notice of the kind specified in
Section 5.1(3).
"Officers' Certificate" means, with respect to any Person, a certificate
signed by the Chairman, Chief Executive Officer, President or a Vice President,
and by the Treasurer, an Associate Treasurer, an Assistant Treasurer, the
Secretary or an Assistant Secretary of such Person, and delivered to the
Trustee. Any Officers' Certificate delivered with respect to compliance with a
condition or covenant provided for in this Indenture shall include;
(a) a statement by each officer signing the
Officers' Certificate that such officer has read the covenant or condition and
the definitions relating thereto;
(b) a brief statement of the nature and scope of
the examination or investigation undertaken by such officer in rendering the
Officers' Certificate;
<PAGE>
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(c) a statement that such officer has made such
examination or investigation as, in such officer's opinion, is necessary to
enable such officer to express an informed opinion as to whether or not such
covenant or condition has been complied with; and
(d) a statement as to whether, in the opinion of
such officer, such condition or covenant has been complied with;
provided, however, that the Officers' Certificate delivered pursuant to the
provisions of Section 10.4 hereof shall comply with the provisions of Section
314 of the Trust Indenture Act.
"Opinion of Counsel" means a written opinion of counsel, who may be
counsel for or an employee of the Company or any Affiliate of the Company.
"Original Issue Date" means the date of issuance specified as such in each
Security.
"Outstanding" means, when used in reference to any Securities, as of the
date of determination, all Securities theretofore authenticated and delivered
under this Indenture, except:
(i) Securities theretofore canceled by the Trustee
or delivered to the Trustee for cancellation;
(ii) Securities for whose payment money in the
necessary amount has been theretofore deposited with the Trustee or any Paying
Agent in trust for the Holders of such Securities; and
(iii) Securities in substitution for or in lieu of
which other Securities have been authenticated and delivered or that have been
paid pursuant to Section 3.6, unless proof satisfactory to the Trustee is
presented that any such Securities are held by Holders in whose hands such
Securities are valid, binding and legal obligations of the Company;
provided, however, that in determining whether the Holders of the
requisite principal amount of Outstanding Securities have given any
request, demand, authorization, direction, notice, consent or waiver
hereunder, Securities owned by the Company or any other obligor upon the
Securities or any Affiliate of the Company or such other obligor (other
than, for the avoidance of doubt, the Issuer Trust to which Securities of
the applicable series were initially issued) shall be disregarded and
deemed not to be Outstanding, except that, in determining whether the
Trustee shall be protected in relying upon any such request, demand,
authorization, direction, notice, consent or waiver, only Securities that
the Trustee knows to be so owned shall be so disregarded. Securities so
owned that have been pledged in good faith may be regarded as Outstanding
if the pledgee establishes to the satisfaction of the Trustee the
pledgee's right so to act with respect to such Securities and that the
pledgee is not the Company or any other obligor upon the Securities or any
Affiliate of the Company or such other obligor (other than, for the
avoidance of doubt, the Issuer Trust). Upon the written request of the
Trustee, the Company shall furnish to the Trustee promptly an Officers'
Certificate listing and identifying all Securities, if any, known by the
Company to be owned or held by or for the account of the Company, or any
other obligor on the Securities or any Affiliate of the Company or such
obligor (other than, for the avoidance of doubt, the Issuer Trust), and,
subject to the provisions of Section 6.1, the Trustee shall be entitled to
accept such Officers' Certificate as conclusive evidence of the facts
therein set forth and of the fact that all Securities not listed therein
are Outstanding for the purpose of any such determination.
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"Paying Agent" means the Trustee or any Person authorized by the Company
to pay the principal of (or premium, if any) or interest on, or other amounts in
respect of any Securities on behalf of the Company.
"Person" means any individual, corporation, partnership, joint venture,
trust, unincorporated organization or government or any agency or political
subdivision thereof.
"Place of Payment" means, with respect to the Securities, the place or
places where the principal of (and premium, if any) and interest on the
Securities are payable pursuant to Section 3.1.
"Predecessor Security" of any particular Security means every previous
Security evidencing all or a portion of the same debt as that evidenced by such
particular Security. For the purposes of this definition, any security
authenticated and delivered under Section 3.7 in lieu of a mutilated, destroyed,
lost or stolen Security shall be deemed to evidence the same debt as the
mutilated, destroyed, lost or stolen Security.
"Preferred Securities" has the meaning specified in the first recital of
this Indenture.
"Proceeding" has the meaning specified in Section 13.2.
"Property Trustee" means, with respect to the Issuer Trust, the Person
identified as the "Property Trustee" in the Trust Agreement, solely in its
capacity as Property Trustee of the Issuer Trust under the Trust Agreement and
not in its individual capacity, or its successor in interest in such capacity,
or any successor property trustee appointed as therein provided.
"Redemption Date", when used with respect to any Security to be redeemed,
means the date fixed for such redemption by or pursuant to this Indenture or the
terms of such Security.
"Redemption Price", when used with respect to any Security to be redeemed,
means the price at which it is to be redeemed pursuant to this Indenture.
"Regular Record Date" for the interest payable on any Interest Payment
Date with respect to the Securities means, unless otherwise provided pursuant to
Section 3.1 with respect to the Securities, the close of business on March 15,
June 15, September 15 or December 15 next preceding such Interest Payment Date
(whether or not a Business Day).
"Responsible Officer", when used with respect to the Property Trustee
means any officer assigned to the Corporate Trust Office, including any managing
director, vice president, assistant vice president, assistant treasurer,
assistant secretary or any other officer of the Trustee customarily performing
functions similar to those performed by any of the above designated officers and
having direct responsibility for the administration of this Indenture, and also,
with respect to a particular matter, any other officer to whom such matter is
referred because of such officer's knowledge of and familiarity with the
particular subject.
"Restricted Security" means each Security required pursuant to Section
3.6(b) to bear a Restricted Securities Legend.
"Restricted Securities Certificate" means a certificate substantially in
the form set forth in Annex A.
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"Restricted Securities Legend" means a legend substantially in the form of
the legend required in the form of Security set forth in Section 2.2 to be
placed upon a Restricted Security.
"Rights Plan" means any plan of the Company providing for the issuance by
the Company to all holders of its Common Stock, no par value per share, of
rights entitling the holders thereof to subscribe for or purchase shares of any
class or series of capital stock of the Company which rights (i) are deemed to
be transferred with such shares of such Common Stock, (ii) are not exercisable,
and (iii) are also issued in respect of future issuances of such Common Stock,
in each case until the occurrence of a specified event or events.
"Securities" or "Security" means any debt securities or debt security, as
the case may be, authenticated and delivered under this Indenture.
"Securities Act" means the Securities Act of 1933, as modified, amended or
supplemented from time to time.
"Securities Register" and "Securities Registrar" have the respective
meanings specified in Section 3.6.
"Senior Indebtedness" means, whether recourse is to all or a portion of
the assets of the Company and whether or not contingent, (i) every obligation of
the Company for money borrowed; (ii) every obligation of the Company evidenced
by bonds, debentures, notes or other similar instruments, including obligations
incurred in connection with the acquisition of property, assets or businesses;
(iii) every reimbursement obligation of the Company with respect to letters of
credit, bankers' acceptances or similar facilities issued for the account of the
Company; (iv) every obligation of the Company issued or assumed as the deferred
purchase price of property or services (but excluding trade accounts payable or
accrued liabilities arising in the ordinary course of business); (v) every
capital lease obligation of the Company; (vi) every obligation of the Company
for claims (as defined in Section 101(4) of the United States Bankruptcy Code of
1978, as amended) in respect of derivative products such as interest and foreign
exchange rate contracts, commodity contracts and similar arrangements; and (vii)
every obligation of the type referred to in clauses (i) through (vi) of another
person and all dividends of another person the payment of which, in either case,
the Company has guaranteed or is responsible or liable, directly or indirectly,
as obligor or otherwise; without limiting the generality of the foregoing,
Senior Indebtedness shall include the Company's 8.5% Redeemable Subordinated
Debentures due November 1, 1998. Senior Indebtedness shall not include (i) any
obligations which, by their terms, are expressly stated to rank pari passu in
right of payment with, or to not be superior in right of payment to, the Junior
Subordinated Debentures, (ii) any Senior Indebtedness of the Company which when
incurred and without respect to any election under Section 1111(b) of the United
States Bankruptcy Code of 1978, as amended, was without recourse to the Company,
(iii) any indebtedness of the Company to any of its subsidiaries, (iv)
indebtedness to any executive officer or director of the Company, or (v) any
indebtedness in respect of debt securities issued to any trust, or a trustee of
such trust, partnership or other entity affiliated with the Company that is a
financing entity of the Company in connection with the issuance of such
financing entity of securities that are similar to the Preferred Securities.
"Special Record Date" for the payment of any Defaulted Interest means a
date fixed by the Trustee pursuant to Section 3.8.
"Stated Maturity", when used with respect to any Security or any
installment of principal thereof or interest thereon, means the date specified
pursuant to the terms of such Security as the fixed date on which the principal
of such Security or such installment of principal or interest is due
<PAGE>
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and payable, as such date may, in the case of such principal, be shortened or
extended as provided pursuant to the terms of such Security and this Indenture.
"Subsidiary" means an entity more than 50% of the outstanding voting stock
of which is owned, directly or indirectly, by the Company or by one or more
other Subsidiaries, or by the Company and one or more other Subsidiaries. For
purposes of this definition, "voting stock" means stock that ordinarily has
voting power for the election of directors, whether at all times or only so long
as no senior class of stock has such voting power by reason of any contingency.
"Successor Security" of any particular Security means every Security
issued after, and evidencing all or a portion of the same debt as that evidenced
by, such particular Security; and, for the purposes of this definition, any
Security authenticated and delivered under Section 3.7 in exchange for or in
lieu of a mutilated, destroyed, lost or stolen Security shall be deemed to
evidence the same debt as the mutilated, destroyed, lost or stolen Security.
"Tax Event" means the receipt by the Issuer Trust of an Opinion of Counsel
(as defined in the Trust Agreement) experienced in such matters to the effect
that, as a result of any amendment to, or change (including any announced
prospective change) in, the laws (or any regulations thereunder) of the United
States or any political subdivision or taxing authority thereof or therein, or
as a result of any official 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 of issuance of the Preferred Securities of the Issuer
Trust, there is more than an insubstantial risk that (i) the Issuer Trust is, or
will be within 90 days of the delivery of such Opinion of Counsel, subject to
United States federal income tax with respect to income received or accrued on
the corresponding series of Securities issued by the Company to the Issuer
Trust, (ii) interest payable by the Company on the Securities is not, or within
90 days of the delivery of such Opinion of Counsel will not be, deductible by
the Company, in whole or in part, for United States federal income tax purposes,
or (iii) the Issuer Trust is, or will be within 90 days of the delivery of such
Opinion of Counsel, subject to more than a de minimis amount of other taxes,
duties or other governmental charges.
"Trust Agreement" means the Amended and Restated Trust Agreement, dated as
of __________ __, 1997, as amended, modified or supplemented from time to time,
among the trustees of the Issuer Trust named therein, the Company, as depositor,
and the holders from time to time of undivided beneficial ownership interests in
the assets of the Issuer Trust.
"Trustee" means the Person named as the "Trustee" in the first paragraph
of this Indenture, solely in its capacity as such and not in its individual
capacity, until a successor Trustee shall have become such pursuant to the
applicable provisions of this Indenture, and thereafter "Trustee" shall mean or
include each Person who is then a Trustee hereunder and, if at any time there is
more than one such Person, "Trustee" as used with respect to the Securities
shall mean the Trustee with respect to Securities.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as modified,
amended or supplemented from time to time, except as provided in Section 9.5.
"Trust Securities" has the meaning specified in the first recital of this
Indenture.
"Vice President," when used with respect to the Company, means any duly
appointed vice president, whether or not designated by a number or a word or
words added before or after the title "vice president."
<PAGE>
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SECTION 1.2. Compliance Certificate and Opinions.
Upon any application or request by the Company to the Trustee to take any
action under any provision of this Indenture, the Company shall furnish to the
Trustee an Officers' Certificate stating that all conditions precedent
(including covenants compliance with which constitutes a condition precedent),
if any, provided for in this Indenture relating to the proposed action have been
complied with and an Opinion of Counsel stating that, in the opinion of such
counsel, all such conditions precedent (including covenants compliance with
which constitutes a condition precedent), if any, have been complied with,
except that in the case of any such application or request as to which the
furnishing of such documents is specifically required by any provision of this
Indenture relating to such particular application or request, no additional
certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance with a condition
or covenant provided for in this Indenture (other than the certificates provided
pursuant to Section 10.4) shall include:
(1) a statement by each individual signing such
certificate or opinion that such individual has read such covenant or condition
and the definitions herein relating thereto;
(2) a brief statement as to the nature and scope
of the examination or investigation upon which the statements or opinions of
such individual contained in such certificate or opinion are based;
(3) a statement that, in the opinion of such
individual, he or she has made such examination or investigation as is necessary
to enable him or her to express an informed opinion as to whether or not such
covenant or condition has been complied with; and
(4) a statement as to whether, in the opinion of
such individual, such condition or covenant has been complied with.
SECTION 1.3. Forms of Documents Delivered to Trustee.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to matters upon which his or her certificate or opinion is based
are erroneous. Any such certificate or Opinion of Counsel may be based, insofar
as it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company stating that the
information with respect to such factual matters is in the possession of the
Company, unless such counsel knows, or in the exercise of reasonable care should
know, that the certificate or opinion or representations with respect to such
matters are erroneous.
<PAGE>
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Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions, or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
SECTION 1.4. Acts of Holders.
(a) Any request, demand, authorization, direction, notice, consent, waiver
or other action provided by this Indenture to be given to or taken by Holders
may be embodied in and evidenced by one or more instruments of substantially
similar tenor signed by such Holders in person or by an agent duly appointed in
writing; and, except as herein otherwise expressly provided, such action shall
become effective when such instrument or instruments is or are delivered to the
Trustee, and, where it is hereby expressly required, to the Company. Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Holders signing
such instrument or instruments. Proof of execution of any such instrument or of
a writing appointing any such agent shall be sufficient for any purpose of this
Indenture and (subject to Section 6.1) conclusive in favor of the Trustee and
the Company, if made in the manner provided in this Section.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by the certificate of any notary public or other officer authorized
by law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him or her the execution thereof.
Where such execution is by a Person acting in other than his or her individual
capacity, such certificate or affidavit shall also constitute sufficient proof
of his or her authority.
(c) The fact and date of the execution by any Person of any such
instrument or writing, or the authority of the Person executing the same, may
also be provided in any other manner that the Trustee deems sufficient and in
accordance with such reasonable rules as the Trustee may determine.
(d) The ownership of Securities shall be proved by the Securities
Register.
(e) Any request, demand, authorization, direction, notice, consent, waiver
or other action by the Holder of any Security shall bind every future Holder of
the same Security and the Holder of every Security issued upon the transfer
thereof or in exchange therefor or in lieu thereof in respect of anything done
or suffered to be done by the Trustee or the Company in reliance thereon,
whether or not notation of such action is made upon such Security.
(f) The Company may set any day as a record date for the purpose of
determining the Holders of Outstanding Securities entitled to give, make or take
any request, demand, authorization, direction, notice, consent, waiver or other
action provided or permitted by this Indenture to be given, made or taken by
Holders of Securities, provided that the Company may not set a record date for,
and the provisions of this paragraph shall not apply with respect to, the giving
or making of any notice, declaration, request or direction referred to in the
next succeeding paragraph. If any record date is set pursuant to this paragraph,
the Holders of Outstanding Securities on such record date, and no other Holders,
shall be entitled to take the relevant action, whether or not such Holders
remain Holders after such record date, provided that no such action shall be
effective hereunder unless taken on or prior to the applicable Expiration Date
(as defined below) by Holders of the requisite principal amount of Outstanding
Securities on such record date. Nothing in this paragraph shall be construed to
prevent the Company from setting a new record date for any action for which a
record date has previously been set pursuant to this paragraph (whereupon the
record date previously set shall automatically and with no action by any Person
be cancelled and of no effect), and nothing in this
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paragraph shall be construed to render ineffective any action taken by Holders
of the requisite principal amount of Outstanding Securities on the date such
action is taken. Promptly after any record date is set pursuant to this
paragraph, the Company, at its own expense, shall cause notice of such record
date, the proposed action by Holders and the applicable Expiration Date to be
given to the Trustee in writing and to each Holder of Securities in the manner
set forth in Section 1.6.
The Trustee may set any day as a record date for the purpose of
determining the Holders of Outstanding Securities entitled to join in the giving
or making of (i) any Notice of Default, (ii) any declaration of acceleration
referred to in Section 5.2, (iii) any request to institute proceedings referred
to in Section 5.7(2), or (iv) any direction referred to in Section 5.12, in each
case with respect to Securities. If any record date is set pursuant to this
paragraph, the Holders of Outstanding Securities on such record date, and no
other Holders, shall be entitled to join in such notice, declaration, request or
direction, whether or not such Holders remain Holders after such record date,
provided that no such action shall be effective hereunder unless taken on or
prior to the applicable Expiration Date by Holders of the requisite principal
amount of Outstanding Securities on such record date. Nothing in this paragraph
shall be construed to prevent the Trustee from setting a new record date for any
action for which a record date has previously been set pursuant to this
paragraph (whereupon the record date previously set shall automatically and with
no action by any Person be cancelled and of no effect) and nothing in this
paragraph shall be construed to render ineffective any action taken by Holders
of the requisite principal amount of Outstanding Securities on the date such
action is taken. Promptly after any record date is set pursuant to this
paragraph, the Trustee, at the Company's expense, shall cause notice of such
record date, the proposed action by Holders and the applicable Expiration Date
to be given to the Company in writing and to each Holder of Securities in the
manner set forth in Section 1.6.
With respect to any record date set pursuant to this Section, the party
hereto that sets such record date may designate any day as the "Expiration Date"
and from time to time may change the Expiration Date to any earlier or later
day, provided that no such change shall be effective unless notice of the
proposed new Expiration Date is given to the other party hereto in writing, and
to each Holder of Securities in the manner set forth in Section 1.6 on or prior
to the existing Expiration Date. If an Expiration Date is not designated with
respect to any record date set pursuant to this Section, the party hereto that
set such record date shall be deemed to have initially designated the 180th day
after such record date as the Expiration Date with respect thereto, subject to
its right to change the Expiration Date as provided in this paragraph.
Notwithstanding the foregoing, no Expiration Date shall be later than the 180th
day after the applicable record date.
(g) Without limiting the foregoing, a Holder entitled hereunder to take
any action hereunder with regard to any particular Security may do so with
regard to all or any part of the principal amount of such Security or by one or
more duly appointed agents each of which may do so pursuant to such appointment
with regard to all or any part of such principal amount.
SECTION 1.5. Notices, Etc. to Trustee and Company.
Any request, demand, authorization, direction, notice, consent, waiver or
Act of Holders or other document provided or permitted by this Indenture to be
made upon, given or furnished to, or filed with,
(1) the Trustee by any Holder, any holder of
Preferred Securities or the Company shall be sufficient for every purpose
hereunder if made, given, furnished or filed in writing to or with the Trustee
at its Corporate Trust Office, or
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(2) the Company by the Trustee, any Holder or any
holder of Preferred Securities shall be sufficient for every purpose (except as
otherwise provided in Section 5.1) hereunder if in writing and mailed, first
class, postage prepaid, to the Company addressed to it at the address of its
principal office specified in the first paragraph of this instrument or at any
other address previously furnished in writing to the Trustee by the Company.
SECTION 1.6. Notice to Holders; Waiver.
Where this Indenture provides for notice to Holders of any event, such
notice shall be sufficiently given (unless otherwise herein expressly provided)
if in writing and mailed, first class postage prepaid, to each Holder affected
by such event, at the address of such Holder as it appears in the Securities
Register, not later than the latest date, and not earlier than the earliest
date, prescribed for the giving of such notice. If, by reason of the suspension
of or irregularities in regular mail services or for any other reason, it shall
be impossible or impracticable to mail notice of any event to Holders when said
notice is required to be given pursuant to any provision of this Indenture or of
the Securities, then any manner of giving such notice as shall be satisfactory
to the Trustee shall be deemed to be a sufficient giving of such notice. In any
case where notice to Holders is given by mail, neither the failure to mail such
notice, nor any defect in any notice so mailed, to any particular Holder shall
affect the sufficiency of such notice with respect to other Holders. Where this
Indenture provides for notice in any manner, such notice may be waived in
writing by the Person entitled to receive such notice, either before or after
the event, and such waiver shall be the equivalent of such notice. Waivers of
notice by Holders shall be filed with the Trustee, but such filing shall not be
a condition precedent to the validity of any action taken in reliance upon such
waiver.
SECTION 1.7. Conflict with Trust Indenture Act.
If any provision hereof limits, qualifies or conflicts with a provision of
the Trust Indenture Act that is required thereunder to be a part of and govern
this Indenture, the provision of the Trust Indenture Act shall control. If any
provision of this Indenture modifies or excludes any provision of the Trust
Indenture Act that may be so modified or excluded, the latter provision shall be
deemed to apply to this Indenture as so modified or to be excluded, as the case
may be.
SECTION 1.8. Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of Contents are for
convenience only and shall not affect the construction hereof.
SECTION 1.9. Successors and Assigns.
All covenants and agreements in this Indenture by the Company shall bind
its successors and assigns, whether so expressed or not.
SECTION 1.10. Separability Clause.
If any provision in this Indenture or in the Securities shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
<PAGE>
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SECTION 1.11. Benefits of Indenture.
Nothing in this Indenture or in the Securities, express or implied, shall
give to any Person, other than the parties hereto and their successors and
assigns, the holders of Senior Indebtedness, the Holders of the Securities and,
to the extent expressly provided in Sections 5.2, 5.8, 5.9, 5.11, 5.13, 9.1 and
9.2, the holders of Preferred Securities, any benefit or any legal or equitable
right, remedy or claim under this Indenture.
SECTION 1.12. Governing Law.
THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
SECTION 1.13. Non-Business Days.
If any Interest Payment Date, Redemption Date or Stated Maturity of any
Security shall not be a Business Day, then (notwithstanding any other provision
of this Indenture or the Securities) payment of interest or principal (and
premium, if any) or other amounts in respect of such Security need not be made
on such date, but may be made on the next succeeding Business Day (and no
interest shall accrue in respect of the amounts whose payment is so delayed for
the period from and after such Interest Payment Date, Redemption Date or Stated
Maturity, as the case may be, until such next succeeding Business Day) except
that, if such Business Day is in the next succeeding calendar year, such payment
shall be made on the immediately preceding Business Day (in each case with the
same force and effect as if made on the Interest Payment Date or Redemption Date
or at the Stated Maturity).
ARTICLE II
SECURITY FORMS
SECTION 2.1. Forms Generally.
The Securities and the Trustee's certificate of authentication shall be in
substantially the forms set forth in this Article, or in such other form or
forms as shall be established by or pursuant to a Board Resolution or in one or
more indentures supplemental hereto, in each case with such appropriate
insertions, omissions, substitutions and other variations as are required or
permitted by this Indenture and may have such letters, numbers or other marks of
identification and such legends or endorsements placed thereon as may be
required to comply with applicable tax laws or the rules of any securities
exchange or as may, consistently herewith, be determined by the officers
executing such securities, as evidenced by their execution of the Securities. If
the form of Securities is established by action taken pursuant to a Board
Resolution, a copy of an appropriate record of such action shall be certified by
the Secretary or an Assistant Secretary of the Company and delivered to the
Trustee at or prior to the delivery of the Company Order contemplated by Section
3.3 with respect to the authentication and delivery of such Securities.
The Trustee's certificates of authentication shall be substantially in the
form set forth in this Article.
The definitive Securities shall be printed, lithographed or engraved or
produced by any combination of these methods, if required by any securities
exchange on which the Securities may be listed, on a steel engraved border or
steel engraved borders or may be produced in any other manner
<PAGE>
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permitted by the rules of any securities exchange on which the Securities may be
listed, all as determined by the officers executing such Securities, as
evidenced by their execution of such Securities.
Securities distributed to holders of Global Preferred Securities (as
defined in the Trust Agreement) upon the dissolution of the Issuer Trust shall
be distributed in the form of one or more Global Securities registered in the
name of a Depositary or its nominee, and deposited with the Securities
Registrar, as custodian for such Depositary, or with such Depositary, for credit
by the Depositary to the respective accounts of the beneficial owners of the
Securities represented thereby (or such other accounts as they may direct).
Securities distributed to holders of Preferred Securities other than Global
Preferred Securities upon the dissolution of the Issuer Trust shall not be
issued in the form of a Global Security or any other form intended to facilitate
book-entry trading in beneficial interests in such Securities.
SECTION 2.2. Form of Face of Security.
PREMIER FINANCIAL BANCORP, INC.
_____% Junior Subordinated Deferrable Interest Debentures due ______, 2027
[If the Security is a Restricted Security, insert -- THE SECURITIES
EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT") AND MAY NOT BE OFFERED, SOLD, PLEDGED OR
OTHERWISE TRANSFERRED EXCEPT (A) BY ANY INITIAL INVESTOR THAT IS NOT A QUALIFIED
INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT,
(I) TO A PERSON WHO THE TRANSFEROR REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A
QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
144A, (II) IN AN OFFSHORE TRANSACTION COMPLYING WITH THE PROVISIONS OF RULE 903
OR RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, OR (III) PURSUANT TO AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144
THEREUNDER (IF AVAILABLE), OR (B) BY AN INITIAL INVESTOR THAT IS A QUALIFIED
INSTITUTIONAL BUYER OR BY ANY SUBSEQUENT INVESTOR, AS SET FORTH IN (A) ABOVE
AND, IN ADDITION, TO AN INSTITUTIONAL ACCREDITED INVESTOR IN A TRANSACTION
EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, AND, IN EACH
CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF THE STATES AND OTHER
JURISDICTIONS OF THE UNITED STATES. THE HOLDER OF THIS SECURITY AGREES THAT IT
WILL COMPLY WITH THE FOREGOING RESTRICTIONS. SECURITIES OWNED BY AN INITIAL
INVESTOR THAT IS NOT A QUALIFIED INSTITUTIONAL BUYER MAY NOT BE HELD IN GLOBAL
FORM AND MAY NOT BE TRANSFERRED WITHOUT CERTIFICATION THAT THE TRANSFER COMPLIES
WITH THE FOREGOING RESTRICTIONS, AS PROVIDED IN THE INDENTURE REFERRED TO BELOW.
NO REPRESENTATION CAN BE MADE AS TO THE AVAILABILITY OF THE EXEMPTION PROVIDED
BY RULE 144 FOR RESALES OF THE SECURITIES.]
No. $
PREMIER FINANCIAL BANCORP, INC., a Kentucky corporation (hereinafter
called the "Company", which term includes any successor Person under the
Indenture hereinafter referred to), for value received, hereby promises to pay
to PFBI Capital Trust, or registered assigns, the principal
<PAGE>
- 16 -
sum of _________ Dollars on ____________, 2027, or such other principal amount
represented hereby as may be set forth in the records of the Securities
Registrar hereinafter referred to in accordance with the Indenture. The Company
further promises to pay interest on said principal from __________ __, 1997, or
from the most recent Interest Payment Date to which interest has been paid or
duly provided for, quarterly (subject to deferral as set forth herein) in
arrears on March 31, June 30, September 30 and December 31 of each year,
commencing __________ __, 1997 at the rate of _____% per annum, together with
Additional Sums, if any, as provided in Section 10.6 of the Indenture, until the
principal hereof is paid or duly provided for or made available for payment;
provided that any overdue principal, premium or Additional Sums and any overdue
installment of interest shall bear Additional Interest at the rate of _____% per
annum (to the extent that the payment of such interest shall be legally
enforceable), compounded quarterly from the dates such amounts are due until
they are paid or made available for payment, and such interest shall be payable
on demand. The amount of interest payable for any period less than a full
interest period shall be computed on the basis of a 360-day year of twelve
30-day months and the actual days elapsed in a partial month in such period. The
amount of interest payable for any full interest period shall be computed by
dividing the applicable rate per annum by four. The interest so payable, and
punctually paid or duly provided for, on any Interest Payment Date will, as
provided in the Indenture, be paid to the Person in whose name this Security (or
one or more Predecessor Securities) is registered at the close of business on
the Regular Record Date for such interest installment, which shall be the 15th
day of March, June, September and December (whether or not a Business Day), as
the case may be, next preceding such Interest Payment Date. Any such interest
not so punctually paid or duly provided for shall forthwith cease to be payable
to the Holder on such Regular Record Date and may either be paid to the Person
in whose name this Security (or one or more Predecessor Securities) is
registered at the close of business on a Special Record Date for the payment of
such Defaulted Interest to be fixed by the Trustee, notice whereof shall be
given to Holders of Securities of this series not less than 10 days prior to
such Special Record Date, or be paid at any time in any other lawful manner not
inconsistent with the requirements of any securities exchange on which the
Securities may be listed, and upon such notice as may be required by such
exchange, all as more fully provided in said Indenture.
So long as no Event of Default has occurred and is continuing, the Company
shall have the right, at any time during the term of this Security, from time to
time to defer the payment of interest on this Security for up to 20 consecutive
quarterly interest payment periods with respect to each deferral period (each an
"Extension Period"), during which Extension Periods the Company shall have the
right to make partial payments of interest on any Interest Payment Date, and at
the end of which the Company shall pay all interest then accrued and unpaid
including Additional Interest, as provided below; provided however, that no
Extension Period shall extend beyond the Stated Maturity of the principal of
this Security, as then in effect, and no such Extension Period may end on a date
other than an Interest Payment Date; and provided further, however, that during
any such Extension Period, the Company shall not (i) declare or pay any
dividends or distributions on, or redeem, purchase, acquire or make a
liquidation payment with respect to, any of the Company's capital stock, or (ii)
make any payment of principal of or interest or premium, if any, on or repay,
repurchase or redeem any debt securities of the Company that rank pari passu in
all respects with or junior in interest to this Security (other than (a)
repurchases, redemptions or other acquisitions of shares of capital stock of the
Company in connection with any employment contract, benefit plan or other
similar arrangement with or for the benefit of any one or more employees,
officers, directors or consultants, in connection with a dividend reinvestment
or stockholder stock purchase plan or in connection with the issuance of capital
stock of the Company (or securities convertible into or exercisable for such
capital stock) as consideration in an acquisition transaction entered into prior
to the applicable Extension Period, (b) as a result of an exchange or conversion
of any class or series of the Company's capital stock (or any capital stock of a
Subsidiary of the Company) for any class or series of the Company's capital
stock or of any class or series of the Company's indebtedness for any
<PAGE>
- 17 -
class or series of the Company's capital stock, (c) the purchase of fractional
interests in shares of the Company's capital stock pursuant to the conversion or
exchange provisions of such capital stock or the security being converted or
exchanged, (d) any declaration of a dividend in connection with any Rights Plan,
or the issuance of rights, stock or other property under any Rights Plan, or the
redemption or repurchase of rights pursuant thereto, or (e) any dividend in the
form of stock, warrants, options or other rights where the dividend stock or the
stock issuable upon exercise of such warrants, options or other rights is the
same stock as that on which the dividend is being paid or ranks pari passu with
or junior to such stock). Prior to the termination of any such Extension Period,
the Company may further defer the payment of interest, provided that no
Extension Period shall exceed 20 consecutive quarterly interest payment periods,
extend beyond the Stated Maturity of the principal of this Security or end on a
date other than an Interest Payment Date. Upon the termination of any such
Extension Period and upon the payment of all accrued and unpaid interest and any
Additional Interest then due on any Interest Payment Date, the Company may elect
to begin a new Extension Period, subject to the above conditions. No interest
shall be due and payable during an Extension Period, except at the end thereof,
but each installment of interest that would otherwise have been due and payable
during such Extension Period shall bear Additional Interest (to the extent that
the payment of such interest shall be legally enforceable) at the rate of _____%
per annum, compounded quarterly and calculated as set forth in the first
paragraph of this Security, from the date on which such amounts would otherwise
have been due and payable until paid or made available for payment. The Company
shall give the Holder of this Security and the Trustee notice of its election to
begin any Extension Period at least one Business Day prior to the next
succeeding Interest Payment Date on which interest on this Security would be
payable but for such deferral or so long as such securities are held by PFBI
Capital Trust, at least one Business Day prior to the earlier of (i) the next
succeeding date on which Distributions on the Preferred Securities of the Issuer
Trust would be payable but for such deferral, and (ii) the date on which the
Property Trustee of the Issuer Trust is required to give notice to holders of
such Preferred Securities of the record date or the date such Distributions are
payable, but in any event not less than one Business Day prior to such record
date.
Payment of the principal of (and premium, if any) and interest on this
Security will be made at the office or agency of the Company maintained for that
purpose in the United States, in such coin or currency of the United States of
America as at the time of payment is legal tender for payment of public and
private debts; provided however, that at the option of the Company payment of
interest may be made (i) by check mailed to the address of the Person entitled
thereto as such address shall appear in the Securities Register, or (ii) if to a
Holder of $1,000,000 or more in aggregate principal amount of this Security, by
wire transfer in immediately available funds upon written request to the Trustee
not later than 15 calendar days prior to the date on which the interest is
payable.
The indebtedness evidenced by this Security is, to the extent provided in
the Indenture, subordinate and subject in right of payments to the prior payment
in full of all Senior Indebtedness, and this Security is issued subject to the
provisions of the Indenture with respect thereto. Each Holder of this Security,
by accepting the same, (a) agrees to and shall be bound by such provisions, (b)
authorizes and directs the Trustee on his or her behalf to take such actions as
may be necessary or appropriate to effectuate the subordination so provided, and
(c) appoints the Trustee his or her attorney-in-fact for any and all such
purposes. Each Holder hereof, by his or her acceptance hereof, waives all notice
of the acceptance of the subordination provisions contained herein and in the
Indenture by each holder of Senior Indebtedness, whether now outstanding or
hereafter incurred, and waives reliance by each such holder upon said
provisions.
Reference is hereby made to the further provisions of this Security set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
<PAGE>
- 18 -
Unless the certificate of authentication hereon has been executed by the
Trustee referred to on the reverse hereof by manual signature, this Security
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal.
PREMIER FINANCIAL BANCORP, INC.
By:
----------------------------------
Name:
Title:
Attest:
- --------------------------------------
Secretary or Assistant Secretary
SECTION 2.3. Form of Reverse of Security.
This Security is one of a duly authorized issue of securities of the
Company (herein called the "Securities"), issued and to be issued under the
Junior Subordinated Indenture, dated as of __________ __, 1997 (herein called
the "Indenture"), between the Company and Bankers Trust Company, as Trustee
(herein called the "Trustee", which term includes any successor trustee under
the Indenture), to which Indenture and all indentures supplemental thereto
reference is hereby made for a statement of the respective rights, limitations
of rights, duties and immunities thereunder of the Company, the Trustee, the
holders of Senior Indebtedness and the Holders of the Securities, and of the
terms upon which the Securities are, and are to be, authenticated and delivered.
This security is one of the series designated on the face hereof, limited in
aggregate principal amount to $ .
All terms used in this Security that are defined in the Indenture or in
the Amended and Restated Trust Agreement dated as of __________ __, 1997 (as
modified, amended or supplemented from time to time the "Trust Agreement"),
relating to PFBI Capital Trust (the "Issuer Trust") among the Company, as
Depositor, the Trustees named therein and the Holders from time to time of the
Trust Securities issued pursuant thereto shall have the meanings assigned to
them in the Indenture or the Trust Agreement, as the case may be.
The Company has the right to redeem this Security (i) on or after
___________, 2002 in whole at any time or in part from time to time, or (ii) in
whole (but not in part), at any time within 90 days following the occurrence and
during the continuation of a Tax Event, Investment Company Event, or Capital
Treatment Event, in each case at the Redemption Price described below, and
subject to possible regulatory approval. The Redemption Price shall equal 100%
of the principal amount hereof being redeemed, together with accrued interest to
but excluding the date fixed for redemption.
<PAGE>
- 19 -
In the event of redemption of this Security in part only, a new Security
or Securities for the unredeemed portion hereof will be issued in the name of
the Holder hereof upon the cancellation hereof.
[If applicable, insert--The Indenture contains provisions for defeasance
at any time [of the entire indebtedness of this Security] [or] [certain
restrictive covenants and Events of Default with respect to this Security] [, in
each case] upon compliance by the Company with certain conditions set forth in
the Indenture.]
The Indenture permits, with certain exceptions as therein provided, the
Company and the Trustee at any time to enter into a supplemental indenture or
indentures for the purpose of modifying in any manner the rights and obligations
of the Company and of the Holders of the Securities, with the consent of the
Holders of not less than a majority in principal amount of the Outstanding
Securities to be affected by such supplemental indenture. The Indenture also
contains provisions permitting Holders of specified percentages in principal
amount of the Securities at the time Outstanding, on behalf of the Holders of
all Securities, to waive compliance by the Company with certain provisions of
the Indenture and certain past defaults under the Indenture and their
consequences. Any such consent or waiver by the Holder of this Security shall be
conclusive and binding upon such Holder and upon all future Holders of this
Security and of any Security issued upon the registration of transfer hereof or
in exchange herefor or in lieu hereof, whether or not notation of such consent
or waiver is made upon this Security.
[If the Security is not a Discount Security, insert--As provided in and
subject to the provisions of the Indenture, if an Event of Default with respect
to the Securities at the time Outstanding occurs and is continuing, then and in
every such case the Trustee or the Holders of not less than 25% in aggregate
principal amount of the Outstanding Securities may declare the principal amount
of all the Securities to be due and payable immediately, by a notice in writing
to the Company (and to the Trustee if given by Holders), provided that, if upon
an Event of Default, the Trustee or such Holders fail to declare the principal
of all the Outstanding Securities to be immediately due and payable, the holders
of at least 25% in aggregate Liquidation Amount of the Preferred Securities then
outstanding shall have the right to make such declaration by a notice in writing
to the Company and the Trustee; and upon any such declaration the principal
amount of and the accrued interest (including any Additional Interest) on all
the Securities shall become immediately due and payable, provided that the
payment of principal and interest (including any Additional Interest) on such
Securities shall remain subordinated to the extent provided in Article XIII of
the Indenture.]
[If the Security is a Discount Security, insert--As provided in and
subject to the provisions of the Indenture, if an Event of Default with respect
to the Securities at the time Outstanding occurs and is continuing, then and in
every such case the Trustee or the Holders of not less than 25% in aggregate
principal amount of the Outstanding Securities may declare an amount of
principal of the Securities to be due and payable immediately, by a notice in
writing to the Company (and to the Trustee if given by Holders), provided that,
if upon an Event of Default, the Trustee or such Holders fail to declare such
principal amount of the Outstanding Securities to be immediately due and
payable, the Holders of at least 25% in aggregate Liquidation Amount of the
Preferred Securities then outstanding shall have the right to make such
declaration by a notice in writing to the Company and the Trustee. The principal
amount payable upon such acceleration shall be equal to [insert formula for
determining the amount]. Upon any such declaration, such amount of the principal
of and the accrued interest (including any Additional Interest) on all the
Securities shall become immediately due and payable, provided that the payment
of such principal and interest (including any Additional Interest) on all the
Securities shall remain subordinated to the extent provided in Article XIII of
the Indenture. Upon payment (i) of the amount of principal so declared due and
payable and (ii) of
<PAGE>
- 20 -
interest on any overdue principal, premium and interest (in each case to the
extent that the payment of such interest shall be legally enforceable), all of
the Company's obligations in respect of the payment of the principal of and
premium and interest, if any, on this Security shall terminate.]
No reference herein to the Indenture and no provision of this Security or
of the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of (and premium, if any) and
interest (including Additional Interest) on this Security at the times, place
and rate, and in the coin or currency, herein prescribed.
As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Security is registrable in the Securities
Register, upon surrender of this Security for registration of transfer at the
office or agency of the Company maintained under Section 10.2 of the Indenture
for such purpose, duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to the Company and the Securities Registrar duly
executed by, the Holder hereof or such Holder's attorney duly authorized in
writing, and thereupon one or more new Securities, of like tenor, of authorized
denominations and for the same aggregate principal amount, will be issued to the
designated transferee or transferees.
As provided in the Indenture and subject to certain limitations therein
set forth, Securities are exchangeable for a like aggregate principal amount of
Securities and of like tenor of a different authorized denomination, as
requested by the Holder surrendering the same.
No service charge shall be made for any such registration of transfer or
exchange, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Security for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name this Security is registered as the owner hereof for all
purposes, whether or not this Security be overdue, and neither the Company, the
Trustee nor any such agent shall be affected by notice to the contrary.
The Company and, by its acceptance of this Security or a beneficial
interest therein, the Holder of, and any Person that acquires a beneficial
interest in, this Security agrees that for United States federal, state and
local tax purposes it is intended that this Security constitute indebtedness.
THIS SECURITY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK.
THIS SECURITY IS A DIRECT AND UNSECURED OBLIGATION OF THE COMPANY, DOES
NOT EVIDENCE DEPOSITS AND IS NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION OR ANY OTHER INSURER OR GOVERNMENT AGENCY.
<PAGE>
- 21 -
SECTION 2.4. Additional Provisions Required in Global Security.
Unless otherwise specified as contemplated by Section 3.1, any Global
Security issued hereunder shall, in addition to the provisions contained in
Sections 2.2 and 2.3, bear a legend in substantially the following form:
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE
MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE
NAME OF A DEPOSITARY OR A NOMINEE OF A DEPOSITARY. THIS SECURITY IS
EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN
THE DEPOSITARY OR ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED
IN THE INDENTURE AND MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE
DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE
DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY, EXCEPT
IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE.
SECTION 2.5. Form of Trustee's Certificate of Authentication.
The Trustee's certificates of authentication shall be in substantially the
following form:
This is one of the Securities referred to in the within-mentioned
Indenture.
Dated: BANKERS TRUST COMPANY,
--------------------- as Trustee
By:
---------------------------
Authorized Signatory
<PAGE>
- 22 -
ARTICLE III
THE SECURITIES
SECTION 3.1. Title and Terms.
The aggregate principal amount of Securities that may be authenticated and
delivered under this Indenture is $____________.
The Securities' Stated Maturity shall be ______________, 2027.
The Securities, established pursuant to a Board Resolution, shall bear
interest at a per annum rate equal to _____% from __________ __, 1997 or from
the most recent Interest Payment Date to which interest has been paid or duly
provided for, as the case may be, payable quarterly (subject to deferral as set
forth in Section 3.12), in arrears, on March 31, June 30, September 30 and
December 31 of each year, commencing __________ __, 1997, until the principal
thereof is paid or made available for payment. Interest will compound quarterly
and will accrue at a per annum rate equal to _____% to the extent permitted by
applicable law, on any interest installment in arrears for more than one
quarterly period or during an extension of an interest payment period as set
forth below in Section 3.12.
The principal of and interest on the Securities shall be payable at the
office or agency of the Paying Agent in the United States maintained for such
purpose and at any other office or agency maintained by the Company for such
purpose in such coin or currency of the United States of America as at the time
of payment is legal tender for payment of public and private debts; provided,
however, that at the option of the Company payment of interest may be made (i)
by check mailed to the address of the Person entitled thereto as such address
shall appear in the Security Register or (ii) by wire transfer in immediately
available funds at such place and to such account as may be designated by the
Person entitled thereto as specified in the Security Register.
Securities shall be issuable in whole or in part in the form of one or
more Global Securities and, in such case, the Depositary for such Global
Securities shall be The Depository Trust Company.
The securities shall be subordinated in right of payment to Senior
Indebtedness as provided in Article XIII.
SECTION 3.2. Denominations.
The Securities shall be in registered form without coupons and shall be
issuable in denominations of $25 and any integral multiple thereof.
SECTION 3.3. Execution, Authentication, Delivery and Dating.
The Securities shall be executed on behalf of the Company by its Chairman
of the Board, its Vice Chairman of the Board, its President or one of its Vice
Presidents, under its corporate seal reproduced or impressed thereon and
attested by its Secretary or one of its Assistant Secretaries. The signature of
any of these officers on the Securities may be manual or facsimile.
Securities bearing the manual or facsimile signatures of individuals who
were at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Securities or did not
hold such offices at the date of such Securities. At any time and from time to
time after the
<PAGE>
- 23 -
execution and delivery of this Indenture, the Company may deliver Securities
executed by the Company to the Trustee for authentication, together with a
Company Order for the authentication and delivery of such Securities, and the
Trustee in accordance with the Company Order shall authenticate and deliver such
Securities. If the form or terms of the Securities have been established by or
pursuant to one or more Board Resolutions as permitted by Sections 2.1 and 3.1,
in authenticating such Securities, and accepting the additional responsibilities
under this Indenture in relation to such Securities, the Trustee shall be
entitled to receive, and (subject to Section 6.1) shall be fully protected in
relying upon, an Opinion of Counsel stating,
(1) if the form of such Securities has been established by or pursuant to
Board Resolution as permitted by Section 2.1, that such form has been
established in conformity with the provisions of this Indenture;
(2) if the terms of such Securities have been established by or pursuant
to Board Resolution as permitted by Section 3.1, that such terms have been
established in conformity with the provisions of this Indenture; and
(3) that such Securities, when authenticated and delivered by the Trustee
and issued by the Company in the manner and subject to any conditions
specified in such Opinion of Counsel, will constitute valid and legally
binding obligations of the Company enforceable in accordance with their
terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights and to general equity
principles.
If such form or terms have been so established, the Trustee shall not be
required to authenticate such Securities if the issue of such Securities
pursuant to this Indenture will affect the Trustee's own rights, duties or
immunities under the Securities and this Indenture or otherwise in a manner that
is not reasonably acceptable to the Trustee.
Notwithstanding the provisions of Section 3.1 and the preceding paragraph,
if all Securities are not to be originally issued at one time, it shall not be
necessary to deliver the Officers' Certificate otherwise required pursuant to
Section 3.1 or the Company Order and Opinion of Counsel otherwise required
pursuant to such preceding paragraph at or prior to the authentication of each
Security if such documents are delivered at or prior to the authentication upon
original issuance of the first Security to be issued.
Each Security shall be dated the date of its authentication.
No Security shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose, unless there appears on such Security a
certificate of authentication substantially in the form provided for herein
executed by the Trustee by the manual signature of one of its authorized
officers, and such certificate upon any Security shall be conclusive evidence,
and the only evidence, that such security has been duly authenticated and
delivered hereunder. Notwithstanding the foregoing, if any Security shall have
been authenticated and delivered hereunder but never issued and sold by the
Company, and the Company shall deliver such Security to the Trustee for
cancellation as provided in Section 3.10, for all purposes of this Indenture
such Security shall be deemed never to have been authenticated and delivered
hereunder and shall never be entitled to the benefits of this Indenture.
<PAGE>
- 24 -
SECTION 3.4. Temporary Securities.
Pending the preparation of definitive Securities, the Company may execute,
and upon receipt of a Company Order the Trustee shall authenticate and deliver,
temporary Securities that are printed, lithographed, typewritten, mimeographed
or otherwise produced, in any denomination, substantially of the tenor of the
definitive Securities in lieu of which they are issued and with such appropriate
insertions, omissions, substitutions and other variations as the officers
executing such Securities may determine, as evidenced by their execution of such
Securities.
If temporary Securities are issued, the Company will cause definitive
Securities to be prepared without unreasonable delay. After the preparation of
definitive Securities, the temporary Securities shall be exchangeable for
definitive Securities upon surrender of the temporary Securities at the office
or agency of the Company designated for that purpose without charge to the
Holder. Upon surrender for cancellation of any one or more temporary Securities,
the Company shall execute and the Trustee shall authenticate and deliver in
exchange therefor one or more definitive securities, of any authorized
denominations having the same Original Issue Date and Stated Maturity and having
the same terms as such temporary Securities. Until so exchanged, the temporary
Securities shall in all respects be entitled to the same benefits under this
Indenture as definitive Securities.
SECTION 3.5. Global Securities.
(a) Each Global Security issued under this Indenture shall be registered
in the name of the Depositary designated by the Company for such Global Security
or a nominee thereof and delivered to such Depositary or a nominee thereof or
custodian therefor, and each such Global Security shall constitute a single
Security for all purposes of this Indenture.
(b) Notwithstanding any other provision in this Indenture, no Global
Security may be exchanged in whole or in part for Securities registered, and no
transfer of a Global Security in whole or in part may be registered, in the name
of any Person other than the Depositary for such Global Security or a nominee
thereof unless (i) such Depositary advises the Trustee in writing that such
Depositary is no longer willing or able to properly discharge its
responsibilities as Depositary with respect to such Global Security, and the
Company is unable to locate a qualified successor, (ii) the Company executes and
delivers to the Trustee a Company Order stating that the Company elects to
terminate the book-entry system through the Depositary, or (iii) there shall
have occurred and be continuing an Event of Default.
(c) If any Global Security is to be exchanged for other Securities or
cancelled in whole, it shall be surrendered by or on behalf of the Depositary or
its nominee to the Securities Registrar for exchange or cancellation as provided
in this Article III. If any Global Security is to be exchanged for other
Securities or cancelled in part, or if another Security is to be exchanged in
whole or in part for a beneficial interest in any Global Security, then either
(i) such Global Security shall be so surrendered for exchange or cancellation as
provided in this Article III or (ii) the principal amount thereof shall be
reduced, or increased by an amount equal to the portion thereof to be so
exchanged or cancelled, or equal to the principal amount of such other Security
to be so exchanged for a beneficial interest therein, as the case may be, by
means of an appropriate adjustment made on the records of the Securities
Registrar, whereupon the Trustee, in accordance with the Applicable Procedures,
shall instruct the Depositary or its authorized representative to make a
corresponding adjustment to its records. Upon any such surrender or adjustment
of a Global Security by the Depositary, accompanied by registration
instructions, the Trustee shall, subject to Section 3.6(b) and as otherwise
provided in this Article III, authenticate and deliver any Securities issuable
in exchange for such Global Security (or any portion thereof) in accordance with
the instructions of the
<PAGE>
- 25 -
Depositary. The Trustee shall not be liable for any delay in delivery of such
instructions and may conclusively rely on, and shall be fully protected in
relying on, such instructions.
(d) Every Security authenticated and delivered upon registration of
transfer of, or in exchange for or in lieu of, a Global Security or any portion
thereof, whether pursuant to this Article III, Section 9.6 or 11.6 or otherwise,
shall be authenticated and delivered in the form of, and shall be, a Global
Security, unless such Security is registered in the name of a Person other than
the Depositary for such Global Security or a nominee thereof.
(e) The Depositary or its nominee, as the registered owner of a Global
Security, shall be the Holder of such Global Security for all purposes under
this Indenture and the Securities, and owners of beneficial interests in a
Global Security shall hold such interests pursuant to the Applicable Procedures.
Accordingly, any such owner's beneficial interest in a Global Security shall be
shown only on, and the transfer of such interest shall be effected only through,
records maintained by the Depositary or its nominee or agent. Neither the
Trustee nor the Securities Registrar shall have any liability in respect of any
transfers effected by the Depositary.
(f) The rights of owners of beneficial interests in a Global Security
shall be exercised only through the Depositary and shall be limited to those
established by law and agreements between such owners and the Depositary and/or
its Agent Members.
SECTION 3.6. Registration, Transfer and Exchange Generally; Certain
Transfers and Exchanges; Securities Act Legends.
(a) The Company shall cause to be kept at the Corporate Trust Office of
the Trustee a register in which, subject to such reasonable regulations as it
may prescribe, the Company shall provide for the registration of Securities and
transfers of Securities. Such register is herein sometimes referred to as the
"Securities Register." The Trustee is hereby appointed "Securities Registrar"
for the purpose of registering Securities and transfers of Securities as herein
provided.
Upon surrender for registration of transfer of any Security at the offices
or agencies of the Company designated for that purpose, the Company shall
execute, and the Trustee shall authenticate and deliver, in the name of the
designated transferee or transferees, one or more new Securities of any
authorized denominations of like tenor and aggregate principal amount.
At the option of the Holder, Securities may be exchanged for other
Securities of any authorized denominations, of like tenor and aggregate
principal amount upon surrender of the Securities to be exchanged at such office
or agency. Whenever any securities are so surrendered for exchange, the Company
shall execute, and the Trustee shall authenticate and deliver, the Securities
that the Holder making the exchange is entitled to receive.
All Securities issued upon any transfer or exchange of Securities shall be
the valid obligations of the Company, evidencing the same debt, and entitled to
the same benefits under this Indenture, as the Securities surrendered upon such
transfer or exchange.
Every Security presented or surrendered for transfer or exchange shall (if
so required by the Company or the Trustee) be duly endorsed, or be accompanied
by a written instrument of transfer in form satisfactory to the Company and the
Securities Registrar, duly executed by the Holder thereof or such Holder's
attorney duly authorized in writing.
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No service charge shall be made to a Holder for any transfer or exchange
of Securities, but the Company may require payment of a sum sufficient to cover
any tax or other governmental charge that may be imposed in connection with any
transfer or exchange of Securities.
Neither the Company nor the Trustee shall be required, pursuant to the
provisions of this Section, (i) to issue, register the transfer of or exchange
any Security during a period beginning at the opening of business 15 days before
the day of selection for redemption of Securities pursuant to Article XI and
ending at the close of business on the day of mailing of the notice of
redemption, or (ii) to register the transfer of or exchange any Security so
selected for redemption in whole or in part, except, in the case of any such
Security to be redeemed in part, any portion thereof not to be redeemed.
(b) Certain Transfers and Exchanges. Notwithstanding any other provision
of this Indenture, transfers and exchanges of Securities and beneficial
interests in a Global Security shall be made only in accordance with this
Section 3.6(b).
(i) Restricted Non-Global Security to Global Security. If the Holder of a
Restricted Security (other than a Global Security) wishes at any time to
transfer all or any portion of such Security to a Person who wishes to
take delivery thereof in the form of a beneficial interest in a Global
Security, such transfer may be effected only in accordance with the
provisions of this clause (b)(i) and subject to the Applicable Procedures.
Upon receipt by the Securities Registrar of (A) such Security as provided
in Section 3.6(a) and instructions satisfactory to the Securities
Registrar directing that a beneficial interest in the Global Security in a
specified principal amount not greater than the principal amount of such
Security be credited to a specified Agent Member's account and (B) a
Restricted Securities Certificate duly executed by such Holder or such
Holder's attorney duly authorized in writing, then the Securities
Registrar shall cancel such Security (and issue a new Security in respect
of any untransferred portion thereof) so provided in Section 3.6(a) and
increase the aggregate principal amount of the Global Security by the
specified principal amount as provided in Section 3.5(c).
(ii) Non-Global Security to Non-Global Security. A Security that is not a
Global Security may be transferred, in whole or in part, to a Person who
takes delivery in the form of another Security that is not a Global
Security as provided in Section 3.6(a), provided that if the Security to
be transferred in whole or in part is a Restricted Security, the
Securities Registrar shall have received a Restricted Securities
Certificate duly executed by the transferor Holder or such Holder's
attorney duly authorized in writing.
(iii) Exchanges Between Global Security and Non-Global Security. A
beneficial interest in a Global Security may be exchanged for a Security
that is not a Global Security as provided in Section 3.5.
(iv) Certain Initial Transfers of Non-Global Securities. In the case of
Securities initially issued other than in global form, an initial transfer
or exchange of such Securities that does not involve any change in
beneficial ownership may be made to an Institutional Accredited Investor
or Investors as if such transfer or exchange were not an initial transfer
or exchange; provided that written certification shall be provided by the
transferee and transferor of such Securities to the Securities Registrar
that such transfer or exchange does not involve a change in beneficial
ownership.
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SECTION 3.7. Mutilated, Lost and Stolen Securities.
If any mutilated Security is surrendered to the Trustee together with such
security or indemnity as may be required by the Company or the Trustee to save
each of them harmless, the Company shall execute and the Trustee shall
authenticate and deliver in exchange therefor a new Security, of like tenor and
aggregate principal amount, bearing the same legends, and bearing a number not
contemporaneously outstanding.
If there shall be delivered to the Company and to the Trustee (i) evidence
to their satisfaction of the destruction, loss or theft of any Security, and
(ii) such security or indemnity as may be required by them to save each of them
harmless, then, in the absence of notice to the Company or the Trustee that such
Security has been acquired by a bona fide purchaser, the Company shall execute
and upon its request the Trustee shall authenticate and deliver, in lieu of any
such destroyed, lost or stolen Security, a new Security, of like tenor and
aggregate principal amount and bearing the same legends as such destroyed, lost
or stolen Security, and bearing a number not contemporaneously outstanding.
If any such mutilated, destroyed, lost or stolen Security has become or is
about to become due and payable, the Company in its discretion may, instead of
issuing a new Security, pay such Security.
Upon the issuance of any new Security under this Section 3.7, the Company
may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Security issued pursuant to this Section in lieu of any
destroyed, lost or stolen Security shall constitute an original additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Security shall be at any time enforceable by anyone, and shall be
entitled to all the benefits of this Indenture equally and proportionately with
any and all other Securities duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities.
SECTION 3.8. Payment of Interest and Additional Interest; Interest Rights
Preserved.
Interest and Additional Interest on any Security that is payable, and is
punctually paid or duly provided for, on any Interest Payment Date, shall be
paid to the Person in whose name that Security (or one or more Predecessor
Securities) is registered at the close of business on the Regular Record Date
for such interest in respect of Securities, except that, unless otherwise
provided in the Securities, interest payable on the Stated Maturity of the
principal of a Security shall be paid to the Person to whom principal is paid.
The initial payment of interest on any Security that is issued between a Regular
Record Date and the related Interest Payment Date shall be payable as provided
in such Security or in the Board Resolution pursuant to Section 3.1 with respect
to the Securities.
Any interest on any Security that is due and payable, but is not timely
paid or duly provided for, on any Interest Payment Date for Securities (herein
called "Defaulted Interest"), shall forthwith cease to be payable to the
registered Holder on the relevant Regular Record Date by virtue of having been
such Holder, and such Defaulted Interest may be paid by the Company, at its
election in each case, as provided in clause (1) or (2) below:
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(1) The Company may elect to make payment of any Defaulted Interest to the
Persons in whose names the Securities in respect of which interest is in
default (or their respective Predecessor Securities) are registered at the
close of business on a Special Record Date for the payment of such
Defaulted Interest, which shall be fixed in the following manner. The
Company shall notify the Trustee in writing of the amount of Defaulted
Interest proposed to be paid on each Security and the date of the proposed
payment, and which shall be fixed at the same time the Company shall
deposit with the Trustee an amount of money equal to the aggregate amount
proposed to be paid in respect of such Defaulted Interest or shall make
arrangements satisfactory to the Trustee for such deposit prior to the
date of the proposed payment, such money when deposited to be held in
trust for the benefit of the Persons entitled to such Defaulted Interest
as in this clause provided. Thereupon, the Trustee shall fix a Special
Record Date for the payment of such Defaulted Interest, which shall be not
more than 15 days and not less than 10 days prior to the date of the
proposed payment and not less than 10 days after the receipt by the
Trustee of the notice of the proposed payment. The Trustee shall promptly
notify the Company of such Special Record Date and, in the name and at the
expense of the Company, shall cause notice of the proposed payment of such
Defaulted Interest and the Special Record Date therefor to be mailed,
first class, postage prepaid, to each Holder of a Security at the address
of such Holder as it appears in the Securities Register not less than 10
days prior to such Special Record Date. The Trustee may, in its
discretion, in the name and at the expense of the Company, cause a similar
notice to be published at least once in a newspaper, customarily published
in the English language on each Business Day and of general circulation in
the Borough of Manhattan, The City of New York, but such publication shall
not be a condition precedent to the establishment of such Special Record
Date. Notice of the proposed payment of such Defaulted Interest and the
Special Record Date therefor having been mailed as aforesaid, such
Defaulted Interest shall be paid to the Persons in whose names the
Securities (or their respective Predecessor Securities) are registered on
such Special Record Date and shall no longer be payable pursuant to the
following clause (2).
(2) The Company may make payment of any Defaulted Interest in any other
lawful manner not inconsistent with the requirements of any securities
exchange on which the Securities in respect of which interest is in
default may be listed and, upon such notice as may be required by such
exchange (or by the Trustee if the Securities are not listed), if, after
notice given by the Company to the Trustee of the proposed payment
pursuant to this clause 2, such payment shall be deemed practicable by the
Trustee.
Subject to the foregoing provisions of this Section, each Security
delivered under this Indenture upon transfer of or in exchange for or in
lieu of any other Security shall carry the rights to interest accrued and
unpaid, and to accrue interest, that were carried by such other Security.
SECTION 3.9. Persons Deemed Owners.
The Company, the Trustee and any agent of the Company or the Trustee shall
treat the Person in whose name any Security is registered as the owner of such
Security for the purpose of receiving payment of principal of and (subject to
Section 3.8) any interest on such Security and for all other purposes
whatsoever, whether or not such Security be overdue, and neither the Company,
the Trustee nor any agent of the Company or the Trustee shall be affected by
notice to the contrary.
No holder of any beneficial interest in any Global Security held on its
behalf by a Depositary shall have any rights under this Indenture with respect
to such Global Security, and such Depositary may be treated by the Company, the
Trustee and any agent of the Company or the Trustee as the owner of such Global
Security for all purposes whatsoever. Notwithstanding the foregoing, nothing
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herein shall prevent the Company, the Trustee or any agent of the Company or the
Trustee from giving effect to any written certification, proxy or other
authorization furnished by a Depositary or impair, as between a Depositary and
such holders of beneficial interests, the operation of customary practices
governing the exercise of the rights of the Depositary (or its nominee) as
Holder of any Security.
SECTION 3.10. Cancellation.
All Securities surrendered for payment, redemption, transfer or exchange
shall, if surrendered to any Person other than the Trustee, be delivered to the
Trustee, and any such Securities and Securities surrendered directly to the
Trustee for any such purpose shall be promptly canceled by it. The Company may
at any time deliver to the Trustee for cancellation any Securities previously
authenticated and delivered hereunder that the Company may have acquired in any
manner whatsoever, and all Securities so delivered shall be promptly canceled by
the Trustee. No Securities shall be authenticated in lieu of or in exchange for
any Securities canceled as provided in this Section, except as expressly
permitted by this Indenture. All canceled Securities shall be destroyed by the
Trustee and the Trustee shall deliver to the Company a certificate of such
destruction.
SECTION 3.11. Computation of Interest.
Interest on the Securities for any period shall be computed on the basis
of a 360-day year of twelve 30-day months and the actual number of days elapsed
in any partial month in such period, and interest on the Securities for a full
period shall be computed by dividing the rate per annum by the number of
interest periods that together constitute a full twelve months.
SECTION 3.12. Deferrals of Interest Payment Dates.
So long as no Event of Default has occurred and is continuing, the Company
shall have the right, at any time during the term of the Securities, from time
to time to defer the payment of interest on such Securities for such period or
periods (each an "Extension Period") not to exceed the number of consecutive
quarterly periods that equal five years with respect to each Extension Period,
during which Extension Periods the Company shall have the right to make partial
payments of interest on any Interest Payment Date. No Extension Period shall end
on a date other than an Interest Payment Date. At the end of any such Extension
Period, the Company shall pay all interest then accrued and unpaid on the
Securities (together with Additional Interest thereon, if any, at the rate
specified for the Securities to the extent permitted by applicable law);
provided, however, that no Extension Period shall extend beyond the Stated
Maturity of the principal of the Securities; and provided further, however,
that, during any such Extension Period, the Company shall not (i) declare or pay
any dividends or distributions on, or redeem, purchase, acquire or make a
liquidation payment with respect to, any of the Company's capital stock, or (ii)
make any payment of principal of or interest or premium, if any, on or repay,
repurchase or redeem any debt securities of the Company that rank pari passu in
all respects with or junior in interest to the Securities (other than (a)
repurchases, redemptions or other acquisitions of shares of capital stock of the
Company in connection with any employment contract, benefit plan or other
similar arrangement with or for the benefit of any one or more employees,
officers, directors or consultants, in connection with a dividend reinvestment
or stockholder stock purchase plan or in connection with the issuance of capital
stock of the Company (or securities convertible into or exercisable for such
capital stock) as consideration in an acquisition transaction entered into prior
to the applicable Extension Period, (b) as a result of an exchange or conversion
of any class or series of the Company's capital stock (or any capital stock of a
Subsidiary of the Company) for any class or series of the Company's capital
stock or of any class or series of the Company's indebtedness for any class or
series of the Company's capital stock, (c) the purchase of
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fractional interests in shares of the Company's capital stock pursuant to the
conversion or exchange provisions of such capital stock or the security being
converted or exchanged, (d) any declaration of a dividend in connection with any
Rights Plan, or the issuance of rights, stock or other property under any Rights
Plan, or the redemption or repurchase of rights pursuant thereto, or (e) any
dividend in the form of stock, warrants, options or other rights where the
dividend stock or the stock issuable upon exercise of such warrants, options or
other rights is the same stock as that on which the dividend is being paid or
ranks pari passu with or junior to such stock). Prior to the termination of any
such Extension Period, the Company may further defer the payment of interest,
provided that no Event of Default has occurred and is continuing and provided
further, that no Extension Period shall exceed the period or periods specified
in such Securities, extend beyond the Stated Maturity of the principal of such
Securities or end on a date other than an Interest Payment Date. Upon the
termination of any such Extension Period and upon the payment of all accrued and
unpaid interest and any Additional Interest then due on any Interest Payment
Date, the Company may elect to begin a new Extension Period, subject to the
above conditions. No interest or Additional Interest shall be due and payable
during an Extension Period, except at the end thereof, but each installment of
interest that would otherwise have been due and payable during such Extension
Period shall bear Additional Interest. The Company shall give the Holders of the
Securities and the Trustee notice of its election to begin any such Extension
Period at least one Business Day prior to the next succeeding Interest Payment
Date on which interest on Securities would be payable but for such deferral or,
with respect to any Securities issued to the Issuer Trust, so long as any such
Securities are held by the Issuer Trust, at least one Business Day prior to the
earlier of (i) the next succeeding date on which Distributions on the Preferred
Securities of the Issuer Trust would be payable but for such deferral, and (ii)
the date on which the Property Trustee of the Issuer Trust is required to give
notice to holders of such Preferred Securities of the record date or the date
such Distributions are payable, but in any event not less than one Business Day
prior to such record date.
The Trustee shall promptly give notice of the Company's election to begin
any such Extension Period to the Holders of the Outstanding Securities.
SECTION 3.13. Right of Set-Off.
With respect to the Securities initially issued to the Issuer Trust,
notwithstanding anything to the contrary herein, the Company shall have the
right to set off any payment it is otherwise required to make in respect of any
such Security to the extent the Company has theretofore made, or is concurrently
on the date of such payment making, a payment under the Guarantee relating to
such Security or to a holder of Preferred Securities pursuant to an action
undertaken under Section 5.8 of this Indenture.
SECTION 3.14. Agreed Tax Treatment.
Each Security issued hereunder shall provide that the Company and, by its
acceptance of a Security or a beneficial interest therein, the Holder of, and
any Person that acquires a beneficial interest in, such Security agree that for
United States federal, state and local tax purposes it is intended that such
Security constitutes indebtedness.
SECTION 3.15. CUSIP Numbers.
The Company, in issuing the Securities, may use "CUSIP" numbers (if then
generally in use), and, if so, the Trustee shall use "CUSIP" numbers in notice
of redemption and other similar or related materials as a convenience to
Holders; provided that any such notice or other materials may state that no
representation is made as to the correctness of such numbers either as printed
on the
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Securities or as contained in any notice of redemption or other materials and
that reliance may be placed only on the other identification numbers printed on
the Securities, and any such redemption shall not be affected by any defect in
or omission of such numbers.
ARTICLE IV
SATISFACTION AND DISCHARGE
SECTION 4.1. Satisfaction and Discharge of Indenture.
This Indenture shall, upon Company Request, cease to be of further effect
(except as to any surviving rights of registration of transfer or exchange of
Securities herein expressly provided for and as otherwise provided in this
Section 4.1) and the Trustee, on demand of and at the expense of the Company,
shall execute proper instruments acknowledging satisfaction and discharge of
this Indenture, when
(1) either
(A) all Securities theretofore authenticated and delivered (other
than (i) Securities that have been destroyed, lost or stolen and that have
been replaced or paid as provided in Section 3.7 and (ii) Securities for
whose payment money has theretofore been deposited in trust or segregated
and held in trust by the Company and thereafter repaid to the Company or
discharged from such trust, as provided in Section 10.3) have been
delivered to the Trustee for cancellation; or
(B) all such Securities not theretofore delivered to the Trustee
for cancellation
(i) have become due and payable, or
(ii) will become due and payable at their Stated Maturity
within one year of the date of deposit, or
(iii) are to be called for redemption within one year under
arrangements satisfactory to the Trustee for the giving of notice of
redemption by the Trustee in the name, and at the expense, of the
Company,and the Company, in the case of subclause (B)(i), (ii) or
(iii) above, has deposited or caused to be deposited with the
Trustee as trust funds in trust for such purpose an amount in the
currency or currencies in which the Securities are payable
sufficient to pay and discharge the entire indebtedness on such
Securities not theretofore delivered to the Trustee for
cancellation, for the principal (and premium, if any) and interest
(including any Additional Interest) to the date of such deposit (in
the case of Securities that have become due and payable) or to the
Stated Maturity or Redemption Date, as the case may be;
(2) the Company has paid or caused to be paid all other sums payable
hereunder by the Company; and
(3) the Company has delivered to the Trustee an Officers' Certificate and
an Opinion of Counsel each stating that all conditions precedent herein
provided for relating to the satisfaction and discharge of this Indenture
have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 6.7, the
obligations of the Company to any Authenticating Agent
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under Section 6.14 and, if money shall have been deposited with the
Trustee pursuant to subclause (B) of clause (1) of this Section, the
obligations of the Trustee under Section 4.2 and the last paragraph of
Section 10.3 shall survive.
SECTION 4.2. Application of Trust Money.
Subject to the provisions of the last paragraph of Section 10.3, all money
deposited with the Trustee pursuant to Section 4.1 shall be held in trust and
applied by the Trustee, in accordance with the provisions of the Securities and
this Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Persons entitled thereto, of the principal (and premium, if
any) and interest and Additional Interest for the payment of which such money or
obligations have been deposited with or received by the Trustee.
ARTICLE V
REMEDIES
SECTION 5.1. Events of Default.
"Event of Default", wherever used herein with respect to the Securities,
means any one of the following events (whatever the reason for such Event of
Default and whether it shall be voluntary or involuntary or be effected by
operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):
(1) default in the payment of any interest upon any Security,
including any Additional Interest in respect thereof, when it becomes due
and payable and continuance of such default for a period of 30 days
(subject to the deferral of any due date in the case of an Extension
Period); or
(2) default in the payment of the principal of (or premium, if any,
on) any Security at its Stated Maturity; or
(3) failure on the part of the Company duly to observe or perform
any other of the covenants or agreements on the part of the Company in the
Securities or in this Indenture for a period of 90 days after the date on
which written notice of such failure, requiring the Company to remedy the
same, shall have been given to the Company by the Trustee by registered or
certified mail or to the Company and the Trustee by the Holders of at
least 25% in aggregate principal amount of the Outstanding Securities; or
(4) the occurrence of the appointment of a receiver or other similar
official in any liquidation, insolvency or similar proceeding with respect
to the Company or all or substantially all of its property; or a court or
other governmental agency shall enter a decree or order appointing a
receiver or similar official and such decree or order shall remain
unstayed and undischarged for a period of 60 days; or
(5) any other Event of Default provided with respect to the
Securities.
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SECTION 5.2. Acceleration of Maturity; Rescission and Annulment.
If an Event of Default (other than an Event of Default specified in
Section 5.1(4)) with respect to Securities at the time Outstanding occurs and is
continuing, then, and in every such case, the Trustee or the Holders of not less
than 25% in aggregate principal amount of the Outstanding Securities may declare
the principal amount (or, if the Securities are Discount Securities, such
portion of the principal amount as may be specified in the terms) of all the
Securities to be due and payable immediately, by a notice in writing to the
Company (and to the Trustee if given by Holders), provided that, if, upon an
Event of Default, the Trustee or the Holders of not less than 25% in principal
amount of the Outstanding Securities fail to declare the principal of all the
Outstanding Securities to be immediately due and payable, the holders of at
least 25% in aggregate Liquidation Amount (as defined in the Trust Agreement) of
the Preferred Securities issued by the Issuer Trust then outstanding shall have
the right to make such declaration by a notice in writing to the Company and the
Trustee; and upon any such declaration such principal amount (or specified
portion thereof) of and the accrued interest (including any Additional Interest)
on all the Securities shall become immediately due and payable. If an Event of
Default specified in Section 5.1(4) with respect to Securities at the time
Outstanding occurs, the principal amount of all the Securities (or, if the
Securities are Discount Securities, such portion of the principal amount of such
Securities as may be specified by the terms) shall automatically, and without
any declaration or other action on the part of the Trustee or any Holder, become
immediately due and payable. Payment of principal and interest (including any
Additional Interest) on such Securities shall remain subordinated to the extent
provided in Article XIII notwithstanding that such amount shall become
immediately due and payable as herein provided.
At any time after such a declaration of acceleration with respect to the
Securities has been made and before a judgment or decree for payment of the
money due has been obtained by the Trustee as hereinafter in this Article
provided, the Holders of a majority in aggregate principal amount of the
Outstanding Securities, by written notice to the Company and the Trustee, may
rescind and annul such declaration and its consequences if:
(1) the Company has paid or deposited with the Trustee a sum sufficient to
pay:
(A) all overdue installments of interest on all Securities;
(B) any accrued Additional Interest on all Securities;
(C) the principal of (and premium, if any, on) any Securities that
have become due otherwise than by such declaration of acceleration and
interest and Additional Interest thereon at the rate borne by the
Securities; and
(D) all sums paid or advanced by the Trustee hereunder and the
reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel; and
(2) all Events of Default with respect to Securities, other than the
non-payment of the principal of Securities that has become due solely by
such acceleration, have been cured or waived as provided in Section 5.13.
If the Holders of Securities fail to annul such declaration and waive such
default, the holders of a majority in aggregate Liquidation Amount (as defined
in the Trust Agreement) of Preferred Securities issued by the Issuer Trust then
outstanding shall also have the right to rescind and annul
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such declaration and its consequences by written notice to the Company and the
Trustee, subject to the satisfaction of the conditions set forth in clauses (1)
and (2) above of this section 5.2.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
SECTION 5.3 Collection of Indebtedness and Suits for Enforcement by
Trustee.
The Company covenants that if:
(1) default is made in the payment of any installment of interest
(including any Additional Interest) on any Security when such interest
becomes due and payable and such default continues for a period of 30
days, or
(2) default is made in the payment of the principal of (and premium,
if any, on) any Security at the Stated Maturity thereof, the Company will,
upon demand of the Trustee, pay to the Trustee, for the benefit of the
Holders of the Securities, the whole amount then due and payable on the
Securities for principal (and premium, if any) and interest (including any
Additional Interest), and, in addition thereto, all amounts owing the
Trustee under Section 6.7.
If the Company fails to pay such amounts forthwith upon such demand, the
Trustee, in its own name and as trustee of an express trust, may institute a
judicial proceeding for the collection of the sums so due and unpaid, and may
prosecute such proceeding to judgment or final decree, and may enforce the same
against the Company or any other obligor upon such Securities and collect the
monies adjudged or decreed to be payable in the manner provided by law out of
the property of the Company or any other obligor upon the Securities, wherever
situated.
If an Event of Default with respect to Securities occurs and is
continuing, the Trustee may in its discretion proceed to protect and enforce its
rights and the rights of the Holders of Securities by such appropriate judicial
proceedings as the Trustee shall deem most effectual to protect and enforce any
such rights, whether for the specific enforcement of any covenant or agreement
in this Indenture or in aid of the exercise of any power granted herein, or to
enforce any other proper remedy.
SECTION 5.4. Trustee May File Proofs of Claim.
In case of any receivership, insolvency, liquidation, bankruptcy,
reorganization, arrangement, adjustment, composition or other judicial or
administrative proceeding relative to the Company or any other obligor upon the
Securities or the property of the Company or of such other obligor or their
creditors,
(a) the Trustee (irrespective of whether the principal of the Securities
shall then be due and payable as therein expressed or by declaration or
otherwise and irrespective of whether the Trustee shall have made any demand on
the Company for the payment of overdue principal (and premium, if any) or
interest (including any Additional Interest)) shall be entitled and empowered,
by intervention in such proceeding or otherwise,
(i) to file and prove a claim for the whole amount of principal (and
premium, if any) and interest (including any Additional Interest) owing
and unpaid in respect to the Securities and to file such other papers or
documents as may be necessary or advisable and to take any and all actions
as are authorized under the Trust Indenture Act in order to have the
claims of
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the Holders and any predecessor to the Trustee under Section 6.7 allowed
in any such judicial or administrative proceedings; and
(ii) in particular, the Trustee shall be authorized to collect and
receive any monies or other property payable or deliverable on any such
claims and to distribute the same in accordance with Section 5.6; and
(b) any custodian, receiver, assignee, trustee, liquidator, sequestrator,
conservator (or other similar official) in any such judicial or administrative
proceeding is hereby authorized by each Holder to make such payments to the
Trustee for distribution in accordance with Section 5.6, and in the event that
the Trustee shall consent to the making of such payments directly to the
Holders, to pay to the Trustee any amount due to it and any predecessor Trustee
under Section 6.7.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Securities
or the rights of any Holder thereof, or to authorize the Trustee to vote in
respect of the claim of any Holder in any such proceeding; provided, however,
that the Trustee may, on behalf of the Holders, vote for the election of a
trustee in bankruptcy or similar official and be a member of a creditors' or
other similar committee.
SECTION 5.5. Trustee May Enforce Claim Without Possession of Securities.
All rights of action and claims under this Indenture or the Securities may
be prosecuted and enforced by the Trustee without the possession of any of the
Securities or the production thereof in any proceeding relating thereto, and any
such proceeding instituted by the Trustee shall be brought in its own name as
trustee of an express trust, and any recovery of judgment shall, subject to
Article XIII and after provision for the payment of all the amounts owing the
Trustee and any predecessor Trustee under Section 6.7, its agents and counsel,
be for the ratable benefit of the Holders of the Securities in respect of which
such judgment has been recovered.
SECTION 5.6. Application of Money Collected.
Any money or property collected or to be applied by the Trustee with
respect to the Securities pursuant to this Article shall be applied in the
following order, at the date or dates fixed by the Trustee and, in case of the
distribution of such money or property on account of principal (or premium, if
any) or interest (including any Additional Interest), upon presentation of the
Securities and the notation thereon of the payment if only partially paid and
upon surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee and any predecessor
Trustee under Section 6.7;
SECOND: Subject to Article XIII, to the payment of the amounts then due
and unpaid upon Securities for principal (and premium, if any) and interest
(including any Additional Interest) in respect of which or for the benefit of
which such money has been collected, ratably, without preference or priority of
any kind, according to the amounts due and payable on such Securities for
principal (and premium, if any) and interest (including any Additional
Interest), respectively; and
THIRD: The balance, if any, to the Person or Persons entitled thereto.
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SECTION 5.7. Limitation on Suits.
Subject to Section 5.8, no Holder of any Securities shall have any right
to institute any proceeding, judicial or otherwise, with respect to this
Indenture or for the appointment of a receiver, assignee, trustee, liquidator,
sequestrator (or other similar official) or for any other remedy hereunder,
unless:
(1) such Holder has previously given written notice to the Trustee
of a continuing Event of Default with respect to the Securities;
(2) the Holders of not less than 25% in aggregate principal amount
of the Outstanding Securities shall have made written request to the
Trustee to institute proceedings in respect of such Event of Default in
its own name as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee reasonable
indemnity against the costs, expenses and liabilities to be incurred in
compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such
proceeding; and
(5) no direction inconsistent with such written request has been
given to the Trustee during such 60-day period by the Holders of a
majority in aggregate principal amount of the Outstanding Securities; it
being understood and intended that no one or more of such Holders shall
have any right in any manner whatever by virtue of, or by availing itself
of, any provision of this Indenture to affect, disturb or prejudice the
rights of any other Holders of Securities, or to obtain or to seek to
obtain priority or preference over any other of such Holders or to enforce
any right under this Indenture, except in the manner herein provided and
for the equal and ratable benefit of all such Holders.
SECTION 5.8. Unconditional Right of Holders to Receive Principal, Premium
and Interest; Direct Action by Holders of Preferred
Securities.
Notwithstanding any other provision in this Indenture, the Holder of any
Security shall have the right, which is absolute and unconditional, to receive
payment of the principal of (and premium, if any) and (subject to Sections 3.8
and 3.12) interest (including any Additional Interest) on such Security on the
Stated Maturity (or in the case of redemption, on the Redemption Date) and to
institute suit for the enforcement of any such payment, and such right shall not
be impaired without the consent of such Holder. Any registered holder of the
Preferred Securities issued by the Issuer Trust shall have the right, upon the
occurrence of an Event of Default described in Section 5.1(1) or 5.1(2), to
institute a suit directly against the Company for enforcement of payment to such
holder of principal of (premium, if any) and (subject to Sections 3.8 and 3.12)
interest (including any Additional Interest) on the Securities having a
principal amount equal to the aggregate Liquidation Amount (as defined in the
Trust Agreement) of such Preferred Securities held by such holder.
SECTION 5.9. Restoration of Rights and Remedies.
If the Trustee, any Holder or any holder of Preferred Securities issued by
the Issuer Trust has instituted any proceeding to enforce any right or remedy
under this Indenture and such proceeding has been discontinued or abandoned for
any reason, or has been determined adversely to the Trustee, such Holder or such
holder of Preferred Securities, then, and in every such case, the Company, the
Trustee, such Holders and such holder of Preferred Securities shall, subject to
any determination in
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such proceeding, be restored severally and respectively to their former
positions hereunder, and thereafter all rights and remedies of the Trustee, such
Holder and such holder of Preferred Securities shall continue as though no such
proceeding had been instituted.
SECTION 5.10. Rights and Remedies Cumulative.
Except as otherwise provided in the last paragraph of Section 3.7, no
right or remedy herein conferred upon or reserved to the Trustee or the Holders
is intended to be exclusive of any other right or remedy, and every right and
remedy shall, to the extent permitted by law, be cumulative and in addition to
every other right and remedy given hereunder or now or hereafter existing at law
or in equity or otherwise. The assertion or employment of any right or remedy
hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.
SECTION 5.11. Delay or Omission Not Waiver.
No delay or omission of the Trustee, any Holder of any Security with
respect to the Securities or any holder of any Preferred Security to exercise
any right or remedy accruing upon any Event of Default with respect to the
Securities shall impair any such right or remedy or constitute a waiver of any
such Event of Default or an acquiescence therein.
Every right and remedy given by this Article or by law to the Trustee or
to the Holders and the right and remedy given to the holders of Preferred
Securities by Section 5.8 may be exercised from time to time, and as often as
may be deemed expedient, by the Trustee, the Holders or the holders of Preferred
Securities, as the case may be.
SECTION 5.12. Control by Holders.
The Holders of not less than a majority in aggregate principal amount of
the Outstanding Securities shall have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on the Trustee, with respect to the
Securities, provided that:
(1) such direction shall not be in conflict with any rule of law
or with this Indenture,
(2) the Trustee may take any other action deemed proper by the
Trustee that is not inconsistent with such direction, and
(3) subject to the provisions of Section 6.1, the Trustee shall have
the right to decline to follow such direction if a Responsible Officer or
Officers of the Trustee shall, in good faith, determine that the
proceeding so directed would be unjustly prejudicial to the Holders not
joining in any such direction or would involve the Trustee in personal
liability.
SECTION 5.13. Waiver of Past Defaults.
The Holders of not less than a majority in aggregate principal amount of
the Outstanding Securities affected thereby and, the holders of a majority in
aggregate Liquidation Amount (as defined in the Trust Agreement) of the
Preferred Securities issued by the Issuer Trust may waive any past default
hereunder and its consequences except a default:
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(1) in the payment of the principal of (or premium, if any) or
interest (including any Additional Interest) on any Security (unless such
default has been cured and the Company has paid to or deposited with the
Trustee a sum sufficient to pay all matured installments of interest
(including Additional Interest) and all principal of (and premium, if any,
on) all Securities due otherwise than by acceleration), or
(2) in respect of a covenant or provision hereof that under Article
IX cannot be modified or amended without the consent of each Holder of any
Outstanding Security affected.
Any such waiver shall be deemed to be on behalf of the Holders of all the
Securities, or in the case of waiver by holders of Preferred Securities issued
by the Issuer Trust, by all holders of Preferred Securities issued by the Issuer
Trust.
Upon any such waiver, such default shall cease to exist, and any Event of
Default arising therefrom shall be deemed to have been cured, for every purpose
of this Indenture, but no such waiver shall extend to any subsequent or other
default or impair any right consequent thereon.
SECTION 5.14. Undertaking for Costs.
All parties to this Indenture agree, and each Holder of any Security by
his acceptance thereof shall be deemed to have agreed, that any court may, in
its discretion, require, in any suit for the enforcement of any right or remedy
under this Indenture, or in any suit against the Trustee for any action taken or
omitted by it as Trustee, the filing by any party litigant in such suit of an
undertaking to pay the costs of such suit, and that such court may, in its
discretion, assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in such suit, having due regard to the merits and
good faith of the claims or defenses made by such party litigant, but the
provisions of this Section shall not apply to any suit instituted by the
Trustee, to any suit instituted by any Holder, or group of Holders, holding in
the aggregate more than 10% in aggregate principal amount of the Outstanding
Securities, or to any suit instituted by any Holder for the enforcement of the
payment of the principal of (or premium, if any) or interest (including any
Additional Interest) on any Security on or after the Stated Maturity.
SECTION 5.15. Waiver of Usury, Stay or Extension Laws.
The Company covenants (to the extent that it may lawfully do so) that it
will not at any time insist upon, or plead, or in any manner whatsoever claim or
take the benefit or advantage of, any usury, stay or extension law wherever
enacted, now or at any time hereafter in force, which may affect the covenants
or the performance of this Indenture; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such
law, and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.
ARTICLE VI
THE TRUSTEE
SECTION 6.1. Certain Duties and Responsibilities.
(a) Except during the continuance of an Event of Default,
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(1) the Trustee undertakes to perform such duties and only such
duties as are specifically set forth in this Indenture, and no implied
covenants or obligations shall be read into this Indenture against the
Trustee; and
(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness
of the opinions expressed therein, upon certificates or opinions furnished
to the Trustee and conforming to the requirements of this Indenture, but
in the case of any such certificates or opinions that by any provisions
hereof are specifically required to be furnished to the Trustee, the
Trustee shall be under a duty to examine the same to determine whether or
not they conform to the requirements of this Indenture.
(b) In case an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in their exercise, as a
prudent person would exercise or use under the circumstances in the conduct of
his or her own affairs.
(c) No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act or its own willful misconduct except that
(1) this subsection shall not be construed to limit the effect of
subsection (a) of this Section;
(2) the Trustee shall not be liable for any error of judgment made
in good faith by a Responsible Officer, unless it shall be proved that the
Trustee was negligent in ascertaining the pertinent facts; and
(3) the Trustee shall not be liable with respect to any action taken
or omitted to be taken by it in good faith in accordance with the
direction of Holders pursuant to Section 5.12 relating to the time, method
and place of conducting any proceeding for any remedy available to the
Trustee, or exercising any trust or power conferred upon the Trustee,
under this Indenture with respect to the Securities.
(d) No provision of this Indenture shall require the Trustee to expend or
risk its own funds or otherwise incur any financial liability in the performance
of any of its duties hereunder, or in the exercise of any of its rights or
powers, if there shall be reasonable grounds for believing that repayment of
such funds or adequate indemnity against such risk or liability is not
reasonably assured to it.
(e) Whether or not therein expressly so provided, every provision of this
Indenture relating to the conduct or affecting the liability of or affording
protection to the Trustee shall be subject to the provisions of this Section.
SECTION 6.2. Notice of Defaults.
Within 90 days after actual knowledge by a Responsible Officer of the
Trustee of the occurrence of any default hereunder with respect to the
Securities, the Trustee shall transmit by mail to all Holders of Securities, as
their names and addresses appear in the Securities Register, notice of such
default, unless such default shall have been cured or waived; provided, however,
that, except in the case of a default in the payment of the principal of (or
premium, if any) or interest (including any
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Additional Interest) on any Security, the Trustee shall be protected in
withholding such notice if and so long as the board of directors, the executive
committee or a trust committee of directors and/or Responsible Officers of the
Trustee in good faith determines that the withholding of such notice is in the
interests of the Holders of Securities; and provided further, that, in the case
of any default of the character specified in Section 5.1(3), no such notice to
Holders of Securities shall be given until at least 30 days after the occurrence
thereof. For the purpose of this Section, the term "default" means any event
that is, or after notice or lapse of time or both would become, an Event of
Default with respect to the Securities.
SECTION 6.3. Certain Rights of Trustee.
Subject to the provisions of Section 6.1:
(a) the Trustee may rely and shall be protected in acting or refraining
from acting upon any resolution, certificate, statement, instrument, opinion,
report, notice, request, direction, consent, order, bond, debenture, Security or
other paper or document believed by it to be genuine and to have been signed or
presented by the proper party or parties;
(b) any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Request or Company Order and any resolution
of the Board of Directors may be sufficiently evidenced by a Board Resolution;
(c) whenever in the administration of this Indenture the Trustee shall
deem it desirable that a matter be proved or established prior to taking,
suffering or omitting any action hereunder, the Trustee (unless other evidence
be herein specifically prescribed) may, in the absence of bad faith on its part,
rely upon an Officers' Certificate;
(d) the Trustee may consult with counsel of its choice and the advice of
such counsel or any Opinion of Counsel shall be full and complete authorization
and protection in respect of any action taken, suffered or omitted by it
hereunder in good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of the rights
or powers vested in it by this Indenture at the request or direction of any of
the Holders pursuant to this Indenture, unless such Holders shall have offered
to the Trustee reasonable security or indemnity against the costs, expenses and
liabilities that might be incurred by it in compliance with such request or
direction;
(f) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, indenture,
Security or other paper or document, but the Trustee in its discretion may make
such inquiry or investigation into such facts or matters as it may see fit, and,
if the Trustee shall determine to make such inquiry or investigation, it shall
be entitled to examine the books, records and premises of the Company,
personally or by agent or attorney; and
(g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by it
hereunder.
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SECTION 6.4. Not Responsible for Recitals or Issuance of Securities.
The recitals contained herein and in the Securities, except the Trustee's
certificates of authentication, shall be taken as the statements of the Company,
and neither the Trustee nor any Authenticating Agent assumes any responsibility
for their correctness. The Trustee makes no representations as to the validity
or sufficiency of this Indenture or of the Securities. Neither the Trustee nor
any Authenticating Agent shall be accountable for the use or application by the
Company of the Securities or the proceeds thereof.
SECTION 6.5. May Hold Securities.
The Trustee, any Authenticating Agent, any Paying Agent, any Securities
Registrar or any other agent of the Company, in its individual or any other
capacity, may become the owner or pledgee of Securities and, subject to Sections
6.8 and 6.13, may otherwise deal with the Company with the same rights it would
have if it were not Trustee, Authenticating Agent, Paying Agent, Securities
Registrar or such other agent.
SECTION 6.6. Money Held in Trust.
Money held by the Trustee in trust hereunder need not be segregated from
other funds except to the extent required by law. The Trustee shall be under no
liability for interest on any money received by it hereunder except as otherwise
agreed with the Company.
SECTION 6.7. Compensation and Reimbursement.
(a) The Company agrees to pay to the Trustee from time to time reasonable
compensation for all services rendered by it hereunder in such amounts as the
Company and the Trustee shall agree from time to time (which compensation shall
not be limited by any provision of law in regard to the compensation of a
trustee of an express trust).
(b) The Company agrees to reimburse the Trustee upon its request for all
reasonable expenses, disbursements and advances incurred or made by the Trustee
in accordance with any provision of this Indenture (including the reasonable
compensation and the expenses and disbursements of its agents and counsel),
except any such expense disbursement or advance as may be attributable to its
negligence or bad faith.
(c) Since the Issuer Trust is being formed solely to facilitate an
investment in the Preferred Securities, the Company, as Holder of the Common
Securities, hereby covenants to pay all debts and obligations (other than with
respect to the Preferred Securities and the Common Securities) and all
reasonable costs and expenses of the Issuer Trust (including without limitation
all costs and expenses relating to the organization of the Issuer Trust, the
fees and expenses of the trustees and all reasonable costs and expenses relating
to the operation of the Issuer Trust) and to pay any and all taxes, duties,
assessments or governmental charges of whatever nature (other than withholding
taxes) imposed on the Issuer Trust by the United States, or any taxing
authority, so that the net amounts received and retained by the Issuer Trust and
the Property Trustee after paying such expenses will be equal to the amounts the
Issuer Trust and the Property Trustee would have received had no such costs or
expenses been incurred by or imposed on the Issuer Trust. The foregoing
obligations of the Company are for the benefit of, and shall be enforceable by,
any person to whom any such debts, obligations, costs, expenses and taxes are
owed (each, a "Creditor") whether or not such Creditor has received notice
thereof. Any such Creditor may enforce such obligations directly against the
Company, and the Company irrevocably waives any right or remedy to require that
any such Creditor take any action
<PAGE>
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against the Issuer Trust or any other person before proceeding against the
Company. The Company shall execute such additional agreements as may be
necessary or desirable to give full effect to the foregoing.
(d) The Company shall indemnify the Trustee, its directors, officers,
employees and agents for, and hold them harmless against, any loss, liability or
expense (including the reasonable compensation and the expenses and
disbursements of its agents and counsel) incurred without negligence or bad
faith, arising out of or in connection with the acceptance or administration of
this trust or the performance of its duties hereunder, including the reasonable
costs and expenses of defending against any claim or liability in connection
with the exercise or performance of any of its powers or duties hereunder. This
indemnification shall survive the termination of this Indenture or the
resignation or removal of the Trustee.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 5.1(4) occurs, the expenses and the compensation
for the services are intended to constitute expenses of administration under the
Bankruptcy Reform Act of 1978 or any successor statute.
SECTION 6.8. Disqualification; Conflicting Interests.
The Trustee for the Securities issued hereunder shall be subject to the
provisions of Section 310(b) of the Trust Indenture Act. Nothing herein shall
prevent the Trustee from filing with the Commission the application referred to
in the second to last paragraph of said Section 310(b).
SECTION 6.9. Corporate Trustee Required; Eligibility.
There shall at all times be a Trustee hereunder which shall be:
(a) an entity organized and doing business under the laws of the United
States of America or of any state or territory thereof or of the District of
Columbia, authorized under such laws to exercise corporate trust powers and
subject to supervision or examination by federal, state, territorial or District
of Columbia authority, or
(b) an entity or other Person organized and doing business under the laws
of a foreign government that is permitted to act as Trustee pursuant to a rule,
regulation or order of the Commission, authorized under such laws to exercise
corporate trust powers, and subject to supervision or examination by authority
of such foreign government or a political subdivision thereof substantially
equivalent to supervision or examination applicable to United States
institutional trustees; in either case having a combined capital and surplus of
at least $50,000,000, subject to supervision or examination by federal or state
authority. If such entity publishes reports of condition at least annually,
pursuant to law or to the requirements of the aforesaid supervising or examining
authority, then, for the purposes of this Section, the combined capital and
surplus of such entity shall be deemed to be its combined capital and surplus as
set forth in its most recent report of condition so published. If at any time
the Trustee shall cease to be eligible in accordance with the provisions of this
Section, it shall resign immediately in the manner and with the effect
hereinafter specified in this Article. Neither the Company nor any Person
directly or indirectly controlling, controlled by or under common control with
the Company shall serve as Trustee for the Securities issued hereunder.
<PAGE>
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SECTION 6.10. Resignation and Removal; Appointment of Successor.
(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee under Section 6.11.
(b) The Trustee may resign at any time with respect to the Securities by
giving written notice thereof to the Company. If an instrument of acceptance by
a successor Trustee shall not have been delivered to the Trustee within 30 days
after the giving of such notice of resignation, the resigning Trustee may
petition any court of competent jurisdiction for the appointment of a successor
Trustee.
(c) The Trustee may be removed at any time with respect to the Securities
by Act of the Holders of a majority in aggregate principal amount of the
Outstanding Securities, delivered to the Trustee and to the Company.
(d) If at any time:
(1) the Trustee shall fail to comply with Section 6.8 after written
request therefor by the Company or by any Holder who has been a bona fide
Holder of a Security for at least six months, or
(2) the Trustee shall cease to be eligible under Section 6.9 and
shall fail to resign after written request therefor by the Company or by
any such Holder, or
(3) the Trustee shall become incapable of acting or shall be
adjudged a bankrupt or insolvent or a receiver of the Trustee or of its
property shall be appointed or any public officer shall take charge or
control of the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation;
then, in any such case, (i) the Company, acting pursuant to the authority of a
Board Resolution, may remove the Trustee with respect to the Securities issued
hereunder, or (ii) subject to Section 5.14, any Holder who has been a bona fide
Holder of a Security for at least six months may, on behalf of such Holder and
all others similarly situated, petition any court of competent jurisdiction for
the removal of the Trustee with respect to the Securities issued hereunder and
the appointment of a successor Trustee or Trustees.
(e) If the Trustee shall resign, be removed or become incapable of acting,
or if a vacancy shall occur in the office of Trustee for any cause with respect
to the Securities, the Company, by a Board Resolution, shall promptly appoint a
successor Trustee with respect to the Securities. If, within one year after such
resignation, removal or incapability, or the occurrence of such vacancy, a
successor Trustee with respect to the Securities shall be appointed by Act of
the Holders of a majority in aggregate principal amount of the Outstanding
Securities delivered to the Company and the retiring Trustee, the successor
Trustee so appointed shall, forthwith upon its acceptance of such appointment,
become the successor Trustee with respect to the Securities and supersede the
successor Trustee appointed by the Company. If no successor Trustee with respect
to the Securities shall have been so appointed by the Company or the Holders and
accepted appointment in the manner hereinafter provided, any Holder who has been
a bona fide Holder of a Security for at least six months may, subject to Section
5.14, on behalf of such Holder and all others similarly situated, petition any
court of competent jurisdiction for the appointment of a successor Trustee with
respect to the Securities.
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(f) The Company shall give notice of each resignation and each removal of
the Trustee with respect to the Securities and each appointment of a successor
Trustee with respect to the Securities by mailing written notice of such event
by first-class mail, postage prepaid, to the Holders of Securities as their
names and addresses appear in the Securities Register. Each notice shall include
the name of the successor Trustee with respect to the Securities and the address
of its Corporate Trust Office.
SECTION 6.11. Acceptance of Appointment by Successor.
(a) In case of the appointment hereunder of a successor Trustee with
respect to all Securities, every such successor Trustee so appointed shall
execute, acknowledge and deliver to the Company and to the retiring Trustee an
instrument accepting such appointment, and thereupon the resignation or removal
of the retiring Trustee shall become effective and such successor Trustee,
without any further act, deed or conveyance, shall become vested with all the
rights, powers, trusts and duties of the retiring Trustee; but, on the request
of the Company or the successor Trustee, such retiring Trustee shall, upon
payment of its charges, execute and deliver an instrument transferring to such
successor Trustee all the rights, powers and trusts of the retiring Trustee and
shall duly assign, transfer and deliver to such successor Trustee all property
and money held by such retiring Trustee hereunder.
(b) Upon request of any such successor Trustee, the Company shall execute
any and all instruments for more fully and certainly vesting in and confirming
to such successor Trustee all rights, powers and trusts referred to in paragraph
(a) of this Section.
(c) No successor Trustee shall accept its appointment unless, at the time
of such acceptance, such successor Trustee shall be qualified and eligible under
this Article.
SECTION 6.12. Merger, Conversion, Consolidation or Succession to Business.
Any entity into which the Trustee may be merged or converted or with which
it may be consolidated, or any entity resulting from any merger, conversion or
consolidation to which the Trustee shall be a party, or any entity succeeding to
all or substantially all of the corporate trust business of the Trustee, shall
be the successor of the Trustee hereunder, provided such entity shall be
otherwise qualified and eligible under this Article, without the execution or
filing of any paper or any further act on the part of any of the parties hereto.
In case any Securities shall have been authenticated, but not delivered, by the
Trustee then in office, any successor by merger, conversion or consolidation to
such authenticating Trustee may adopt such authentication and deliver the
Securities so authenticated, and in case any Securities shall not have been
authenticated, any successor to the Trustee may authenticate such Securities
either in the name of any predecessor Trustee or in the name of such successor
Trustee, and in all cases the certificate of authentication shall have the full
force which it is provided anywhere in the Securities or in this Indenture that
the certificate of the Trustee shall have.
SECTION 6.13. Preferential Collection of Claims Against Company.
If and when the Trustee shall be or become a creditor of the Company (or
any other obligor upon the Securities), the Trustee shall be subject to the
provisions of the Trust Indenture Act regarding the collection of claims against
the Company (or any such other obligor).
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SECTION 6.14. Appointment of Authenticating Agent.
The Trustee may appoint an Authenticating Agent or Agents with respect to
the Securities, which shall be authorized to act on behalf of the Trustee to
authenticate Securities issued upon original issue and upon exchange,
registration of transfer or partial redemption thereof or pursuant to Section
3.6, and Securities so authenticated shall be entitled to the benefits of this
Indenture and shall be valid and obligatory for all purposes as if authenticated
by the Trustee hereunder. Wherever reference is made in this Indenture to the
authentication and delivery of Securities by the Trustee or the Trustee's
certificate of authentication, such reference shall be deemed to include
authentication and delivery on behalf of the Trustee by an Authenticating Agent.
Each Authenticating Agent shall be acceptable to the Company and shall at all
times be an entity organized and doing business under the laws of the United
States of America, or of any state or territory thereof or of the District of
Columbia, authorized under such laws to act as Authenticating Agent, having a
combined capital and surplus of not less than $50,000,000 and subject to
supervision or examination by federal or state authority. If such Authenticating
Agent publishes reports of condition at least annually, pursuant to law or to
the requirements of said supervising or examining authority, then for the
purposes of this Section the combined capital and surplus of such Authenticating
Agent shall be deemed to be its combined capital and surplus as set forth in its
most recent report of condition so published. If at any time an Authenticating
Agent shall cease to be eligible in accordance with the provisions of this
Section, such Authenticating Agent shall resign immediately in the manner and
with the effect specified in this Section.
Any entity into which an Authenticating Agent may be merged or converted
or with which it may be consolidated, or any entity resulting from any merger,
conversion or consolidation to which such Authenticating Agent shall be a party,
or any entity succeeding to all or substantially all of the corporate trust
business of an Authenticating Agent shall be the successor Authenticating Agent
hereunder, provided such entity shall be otherwise eligible under this Section,
without the execution or filing of any paper or any further act on the part of
the Trustee or the Authenticating Agent.
An Authenticating Agent may resign at any time by giving written notice
thereof to the Trustee and to the Company. The Trustee may at any time terminate
the agency of an Authenticating Agent by giving written notice thereof to such
Authenticating Agent and to the Company. Upon receiving such a notice of
resignation or upon such a termination, or in case at any time such
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, the Trustee may appoint a successor Authenticating
Agent, which shall be acceptable to the Company and shall give notice of such
appointment in the manner provided in Section 1.6 to all Holders of Securities.
Any successor Authenticating Agent upon acceptance hereunder shall become vested
with all the rights, powers and duties of its predecessor hereunder, with like
effect as if originally named as an Authenticating Agent. No successor
Authenticating Agent shall be appointed unless eligible under the provision of
this Section.
The Company agrees to pay to each Authenticating Agent from time to time
reasonable compensation for its services under this Section, and the Trustee
shall be entitled to be reimbursed for such payment, subject to the provisions
of Section 6.7.
If an appointment is made pursuant to this Section, the Securities may
have endorsed thereon, in addition to the Trustee's certificate of
authentication, an alternative certificate of authentication in the following
form:
<PAGE>
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This is one of the Securities referred to in the within mentioned
Indenture.
Dated: BANKERS TRUST COMPANY,
------------------------------ as Trustee
By:
---------------------------------
As Authenticating Agent
Name:
Title:
By:
---------------------------------
As Authenticating Agent
Name:
Title:
ARTICLE VII
HOLDER'S LISTS AND REPORTS BY TRUSTEE,
PAYING AGENT AND COMPANY
SECTION 7.1. Company to Furnish Trustee Names and Addresses of Holders.
The Company will furnish or cause to be furnished to the Trustee:
(a) quarterly, not more than 15 days after March 15, June 15, September
15, and December 15 in each year, a list, in such form as the Trustee may
reasonably require, of the names and addresses of the Holders as of such dates,
excluding from any such list names and addresses received by the Trustee in its
capacity as Securities Registrar, and
(b) at such other times as the Trustee may request in writing, within 30
days after the receipt by the Company of any such request, a list of similar
form and content as of a date not more than 15 days prior to the time such list
is furnished, excluding from any such list names and addresses received by the
Trustee in its capacity as Securities Registrar.
SECTION 7.2. Preservation of Information, Communications to Holders.
(a) The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of Holders contained in the most recent
list furnished to the Trustee as provided in Section 7.1 and the names and
addresses of Holders received by the Trustee in its capacity as Securities
Registrar. The Trustee may destroy any list furnished to it as provided in
Section 7.1 upon receipt of a new list so furnished.
(b) The rights of Holders to communicate with other Holders with respect
to their rights under this Indenture or under the Securities, and the
corresponding rights and privileges of the Trustee, shall be as provided in the
Trust Indenture Act.
(c) Every Holder of Securities, by receiving and holding the same, agrees
with the Company and the Trustee that neither the Company nor the Trustee nor
any agent of either of them shall be
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held accountable by reason of the disclosure of information as to the names and
addresses of the Holders made pursuant to the Trust Indenture Act.
SECTION 7.3. Reports by Trustee and Paying Agent.
(a) The Trustee shall transmit to Holders such reports concerning the
Trustee and its actions under this Indenture as may be required pursuant to the
Trust Indenture Act, at the times and in the manner provided pursuant thereto.
(b) Reports so required to be transmitted at stated intervals of not more
than 12 months shall be transmitted within 60 days of January 31 in each
calendar year, commencing with the first January 31 after the issuance of
Securities under this Indenture.
(c) A copy of each such report shall, at the time of such transmission to
Holders, be filed by the Trustee with each securities exchange upon which any
Securities are listed and also with the Commission. The Company will notify the
Trustee when any Securities are listed on any securities exchange.
(d) The Paying Agent shall comply with all withholding, backup
withholding, tax and information reporting requirements under the Internal
Revenue Code of 1986, as amended, and the Treasury Regulations issued thereunder
with respect to payments on, or with respect to, the Securities.
SECTION 7.4. Reports by Company.
The Company shall file or cause to be filed with the Trustee and with the
Commission, and transmit to Holders, such information, documents and other
reports, and such summaries thereof, as may be required pursuant to the Trust
Indenture Act at the times and in the manner provided in the Trust Indenture
Act. In the case of information, documents or reports required to be filed with
the Commission pursuant to Section 13(a) or Section 15(d) of the Exchange Act,
the Company shall file or cause the filing of such information documents or
reports with the Trustee within 15 days after the same is required to be filed
with the Commission.
ARTICLE VIII
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
SECTION 8.1. Company May Consolidate, Etc., Only on Certain Terms.
The Company shall not consolidate with or merge into any other Person or
convey, transfer or lease its properties and assets substantially as an entirety
to any Person, and no Person shall consolidate with or merge into the Company or
convey, transfer or lease its properties and assets substantially as an entirety
to the Company, unless:
(1) If the Company shall consolidate with or merge into another
Person or convey, transfer or lease its properties and assets
substantially as an entirety to any Person, the entity formed by such
consolidation or into which the Company is merged or the Person that
acquires by conveyance or transfer, or that leases, the properties and
assets of the Company substantially as an entirety shall be an entity
organized and existing under the laws of the United States of America or
any state thereof or the District of Columbia and shall expressly assume,
by an indenture supplemental hereto, executed and delivered to the
Trustee, in form satisfactory to the
<PAGE>
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Trustee, the due and punctual payment of the principal of (and premium, if
any), and interest (including any Additional Interest) on all the
Securities of every series and the performance of every covenant of this
Indenture on the part of the Company to be performed or observed;
(2) immediately after giving effect to such transaction, no Event of
Default, and no event that, after notice or lapse of time, or both, would
constitute an Event of Default, shall have occurred and be continuing; and
(3) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such
consolidation, merger, conveyance, transfer or lease and any such
supplemental indenture comply with this Article and that all conditions
precedent herein provided for relating to such transaction have been
complied with and, in the case of a transaction subject to this Section
8.1 but not requiring a supplemental indenture under paragraph (1) of this
Section 8.1, an Officer's Certificate or Opinion of Counsel to the effect
that the surviving, resulting or successor entity is legally bound by the
Indenture and the Securities; and the Trustee, subject to Section 6.1, may
rely upon such Officers' Certificates and Opinions of Counsel as
conclusive evidence that such transaction complies with this Section 8.1.
SECTION 8.2. Successor Company Substituted.
Upon any consolidation or merger by the Company with or into any other
Person, or any conveyance, transfer or lease by the Company of its properties
and assets substantially as an entirety to any Person in accordance with Section
8.1, the successor entity formed by such consolidation or into which the Company
is merged or to which such conveyance, transfer or lease is made shall succeed
to, and be substituted for, and may exercise every right and power of, the
Company under this Indenture with the same effect as if such successor Person
had been named as the Company herein; and in the event of any such conveyance,
transfer or lease the Company shall be discharged from all obligations and
covenants under the Indenture and the Securities.
Such successor Person may cause to be executed, and may issue either in
its own name or in the name of the Company, any or all of the Securities
issuable hereunder that theretofore shall not have been signed by the Company
and delivered to the Trustee; and, upon the order of such successor Person
instead of the Company and subject to all the terms, conditions and limitations
in this Indenture prescribed, the Trustee shall authenticate and shall deliver
any Securities that previously shall have been signed and delivered by the
officers of the Company to the Trustee for authentication pursuant to such
provisions and any Securities that such successor Person thereafter shall cause
to be executed and delivered to the Trustee on its behalf for the purpose
pursuant to such provisions. All the Securities so issued shall in all respects
have the same legal rank and benefit under this Indenture as the Securities
theretofore or thereafter issued in accordance with the terms of this Indenture.
In case of any such consolidation, merger, sale, conveyance or lease, such
changes in phraseology and form may be made in the Securities thereafter to be
issued as may be appropriate.
<PAGE>
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ARTICLE IX
SUPPLEMENTAL INDENTURES
SECTION 9.1. Supplemental Indentures Without Consent of Holders.
Without the consent of any Holders, the Company, when authorized by a
Board Resolution, and the Trustee, at any time and from time to time, may amend
or waive any provision of this Indenture or enter into one or more indentures
supplemental hereto, in form satisfactory to the Trustee, for any of the
following purposes:
(1) to evidence the succession of another Person to the Company, and the
assumption by any such successor of the covenants of the Company herein and in
the Securities contained; or
(2) to convey, transfer, assign, mortgage or pledge any property to or
with the Trustee or to surrender any right or power herein conferred upon the
Company; or
(3) to facilitate the issuance of Securities in certificated or other
definitive form; or
(4) to add to the covenants of the Company for the benefit of the Holders
of the Securities or to surrender any right or power herein conferred upon the
Company; or
(5) to add any additional Events of Default for the benefit of the Holders
of the Securities; or
(6) to change or eliminate any of the provisions of this Indenture,
provided that any such change or elimination shall not apply to any Outstanding
Securities; or
(7) to cure any ambiguity, to correct or supplement any provision herein
that may be defective or inconsistent with any other provision herein, or to
make any other provisions with respect to matters or questions arising under
this Indenture, provided that such action pursuant to this clause (7) shall not
adversely affect the interest of the Holders of Securities in any material
respect or, in the case of the Securities issued to the Issuer Trust and for so
long as any of the Preferred Securities issued by the Issuer Trust shall remain
outstanding, the holders of such Preferred Securities; or
(8) to evidence and provide for the acceptance of appointment hereunder by
a successor Trustee with respect to the Securities and to add to or change any
of the provisions of this Indenture as shall be necessary to provide for or
facilitate the administration of the trusts hereunder by more than one Trustee,
pursuant to the requirements of Section 6.11(b); or
(9) to comply with the requirements of the Commission in order to effect
or maintain the qualification of this Indenture under the Trust Indenture Act.
SECTION 9.2. Supplemental Indentures with Consent of Holders.
With the consent of the Holders of not less than a majority in aggregate
principal amount of the Outstanding Securities affected by such supplemental
indenture, by Act of said Holders delivered to the Company and the Trustee, the
Company, when authorized by a Board Resolution, and the Trustee may enter into
an indenture or indentures supplemental hereto for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
this Indenture or of modifying in any manner the rights of the Holders of
Securities under this Indenture; provided,
<PAGE>
- 50 -
however, that no such supplemental indenture shall, without the consent of the
Holder of each Outstanding Security affected thereby,
(1) change the Stated Maturity of the principal of, or any
installment of interest (including any Additional Interest) on, any
Security, or reduce the principal amount thereof or the rate of interest
thereon or any premium payable upon the redemption thereof, or reduce the
amount of principal of a Discount Security that would be due and payable
upon a declaration of acceleration of the Stated Maturity thereof pursuant
to Section 5.2, or change the place of payment where, or the coin or
currency in which, any Security or interest thereon is payable, or impair
the right to institute suit for the enforcement of any such payment on or
after the Stated Maturity thereof (or, in the case of redemption, on or
after the Redemption Date), or
(2) reduce the percentage in aggregate principal amount of the
Outstanding Securities, the consent of whose Holders is required for any
such supplemental indenture, or the consent of whose Holders is required
for any waiver (of compliance with certain provisions of this Indenture or
certain defaults hereunder and their consequences) provided for in this
Indenture, or
(3) modify any of the provisions of this Section, Section 5.13 or
Section 10.5, except to increase any such percentage or to provide that
certain other provisions of this Indenture cannot be modified or waived
without the consent of the Holder of each Security affected thereby;
provided, further, that, in the case of the Securities issued to the
Issuer Trust, so long as any of the Preferred Securities issued by the
Issuer Trust remains outstanding, (i) no such amendment shall be made that
adversely affects the holders of such Preferred Securities in any material
respect, and no termination of this Indenture shall occur, and no waiver
of any Event of Default or compliance with any covenant under this
Indenture shall be effective, without the prior consent of the holders of
at least a majority of the aggregate Liquidation Amount (as defined in the
Trust Agreement) of such Preferred Securities then outstanding unless and
until the principal of (and premium, if any, on) the Securities and all
accrued and (subject to Section 3.8) unpaid interest (including any
Additional Interest) thereon have been paid in full, and (ii) no amendment
shall be made to Section 5.8 of this Indenture that would impair the
rights of the holders of Preferred Securities issued by the Issuer Trust
provided therein without the prior consent of the holders of each such
Preferred Security then outstanding unless and until the principal of (and
premium, if any, on) the Securities of such series and all accrued and
(subject to Section 3.8) unpaid interest (including any Additional
Interest) thereon have been paid in full.
It shall not be necessary for any Act of Holders under this Section to
approve the particular form of any proposed supplemental indenture, but it shall
be sufficient if such Act shall approve the substance thereof.
SECTION 9.3. Execution of Supplemental Indentures.
In executing or accepting the additional trusts created by any
supplemental indenture permitted by this Article or the modifications thereby of
the trusts created by this Indenture, the Trustee shall be entitled to receive,
and (subject to Section 6.1) shall be fully protected in relying upon, an
Officers' Certificate and an Opinion of Counsel stating that the execution of
such supplemental indenture is authorized or permitted by this Indenture, and
that all conditions precedent herein provided for relating to such action have
been complied with. The Trustee may, but shall not be obligated to,
<PAGE>
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enter into any such supplemental indenture that affects the Trustee's own
rights, duties or immunities under this Indenture or otherwise.
SECTION 9.4. Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this Article, this
Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of Securities theretofore or thereafter authenticated and delivered hereunder
shall be bound thereby.
SECTION 9.5. Conformity with Trust Indenture Act.
Every supplemental indenture executed pursuant to this Article shall
conform to the requirements of the Trust Indenture Act as then in effect.
SECTION 9.6. Reference in Securities to Supplemental Indentures.
Securities authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall if required by
the Company, bear a notation in form approved by the Company as to any matter
provided for in such supplemental indenture. If the Company shall so determine,
new Securities so modified as to conform, in the opinion of the Company, to any
such supplemental indenture may be prepared and executed by the Company and
authenticated and delivered by the Trustee in exchange for Outstanding
Securities.
ARTICLE X
COVENANTS
SECTION 10.1. Payment of Principal, Premium and Interest.
The Company covenants and agrees for the benefit of the Securities that it
will duly and punctually pay the principal of (and premium, if any) and interest
(including any Additional Interest) on the Securities in accordance with the
terms of such Securities and this Indenture.
SECTION 10.2. Maintenance of Office or Agency.
The Company will maintain in each Place of Payment an office or agency
where Securities may be presented or surrendered for payment, where Securities
may be surrendered for registration of transfer or exchange and where notices
and demands to or upon the Company in respect of the Securities and this
Indenture may be served. The Company initially appoints the Trustee, acting
through its Corporate Trust Office, as its agent for said purposes. The Company
will give prompt written notice to the Trustee of any change in the location of
any such office or agency. If at any time the Company shall fail to maintain
such office or agency or shall fail to furnish the Trustee with the address
thereof, such presentations, surrenders, notices and demands may be made or
served at the Corporate Trust Office of the Trustee, and the Company hereby
appoints the Trustee as its agent to receive all such presentations, surrenders,
notices and demands.
The Company may also from time to time designate one or more other offices
or agencies where the Securities may be presented or surrendered for any or all
of such purposes, and may from time to time rescind such designations; provided,
however, that no such designation or rescission shall in any manner relieve the
Company of its obligation to maintain an office or agency in each Place of
<PAGE>
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Payment for Securities for such purposes. The Company will give prompt written
notice to the Trustee of any such designation and any change in the location of
any such office or agency.
SECTION 10.3. Money for Security Payments to be Held in Trust.
If the Company shall at any time act as its own Paying Agent with respect
to the Securities, it will, on or before each due date of the principal of (and
premium, if any) or interest (including Additional Interest) on any of the
Securities, segregate and hold in trust for the benefit of the Persons entitled
thereto a sum sufficient to pay the principal (and premium, if any) or interest
(including Additional Interest) so becoming due until such sums shall be paid to
such Persons or otherwise disposed of as herein provided, and will promptly
notify the Trustee of its failure so to act.
Whenever the Company shall have one or more Paying Agents, it will, prior
to 10:00 a.m., New York City time, on each due date of the principal of (or
premium, if any) or interest, including Additional Interest on any Securities,
deposit with a Paying Agent a sum sufficient to pay the principal (and premium,
if any) or interest, including Additional Interest so becoming due, such sum to
be held in trust for the benefit of the Persons entitled to such principal (and
premium, if any) or interest, including Additional Interest, and (unless such
Paying Agent is the Trustee) the Company will promptly notify the Trustee of its
failure so to act.
The Company will cause each Paying Agent other than the Trustee to execute
and deliver to the Trustee an instrument in which such Paying Agent shall agree
with the Trustee, subject to the provisions of this Section, that such Paying
Agent will:
(1) hold all sums held by it for the payment of the principal of (and
premium, if any, or interest (including Additional Interest) on the Securities
in trust for the benefit of the Persons entitled thereto until such sums shall
be paid to such Persons or otherwise disposed of as herein provided;
(2) give the Trustee notice of any default by the Company (or any other
obligor upon such Securities) in the making of any payment of principal (and
premium, if any) or interest (or Additional Interest) in respect of any
Security;
(3) at any time during the continuance of any default with respect to the
Securities, upon the written request of the Trustee, forthwith pay to the
Trustee all sums so held in trust by such Paying Agent; and
(4) comply with the provisions of the Trust Indenture Act applicable to
it as a Paying Agent.
The Company may, at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held in
trust by the Company or such Paying Agent, such sums to be held by the Trustee
upon the same trusts as those upon which such sums were held by the Company or
such Paying Agent; and, upon such payment by any Paying Agent to the Trustee,
such Paying Agent shall be released from all further liability with respect to
such money.
Any money deposited with the Trustee or any Paying Agent, or then held by
the Company in trust for the payment of the principal of (and premium, if any)
or interest (including Additional Interest) on any Security and remaining
unclaimed for two years after such principal (and premium, if any) or interest
(including Additional Interest) has become due and payable shall (unless
otherwise required by mandatory provision of applicable escheat or abandoned or
unclaimed property law) be paid on Company Request to the Company, or (if then
held by the Company) shall (unless otherwise
<PAGE>
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required by mandatory provision of applicable escheat or abandoned or unclaimed
property law) be discharged from such trust; and the Holder of such Security
shall thereafter, as an unsecured general creditor, look only to the Company for
payment thereof, and all liability of the Trustee or such Paying Agent with
respect to such trust money, and all liability of the Company as trustee
thereof, shall thereupon cease; provided, however, that the Trustee or such
Paying Agent, before being required to make any such repayment, may at the
expense of the Company cause to be published once, in a newspaper published in
the English language, customarily published on each Business Day and of general
circulation in the Borough of Manhattan, the City of New York, notice that such
money remains unclaimed and that, after a date specified therein, which shall
not be less than 30 days from the date of such publication, any unclaimed
balance of such money then remaining will be repaid to the Company.
SECTION 10.4. Statement as to Compliance.
The Company shall deliver to the Trustee, within 120 days after the end of
each fiscal year of the Company ending after the date hereof, an Officers'
Certificate covering the preceding calendar year, stating whether or not to the
best knowledge of the signers thereof of the Company is in default in the
performance, observance or fulfillment of or compliance with any of the terms,
provisions, covenants and conditions of this Indenture, and if the Company shall
be in default, specifying all such defaults and the nature and status thereof of
which they may have knowledge. For the purpose of this Section 10.4, compliance
shall be determined without regard to any grace period or requirement of notice
provided pursuant to the terms of this Indenture.
SECTION 10.5. Waiver of Certain Covenants.
Subject to the rights of holders of Preferred Securities specified in
Section 9.2, if any, the Company may omit in any particular instance to comply
with any covenant or condition provided pursuant to Section 3.1, 9.1(3) or
9.1(4) with respect to the Securities, if before or after the time for such
compliance the Holders of at least a majority in aggregate principal amount of
the Outstanding Securities shall, by Act of such Holders, either waive such
compliance in such instance or generally waive compliance with such covenant or
condition, but no such waiver shall extend to or affect such covenant or
condition except to the extent so expressly waived, and, until such waiver shall
become effective, the obligations of the Company in respect of any such covenant
or condition shall remain in full force and effect.
SECTION 10.6. Additional Sums.
So long as no Event of Default has occurred and is continuing and except
as otherwise specified as contemplated by Section 2.1 or Section 3.1, if (i) the
Issuer Trust is the Holder of all of the Outstanding Securities, and (ii) a Tax
Event described in clause (i) or (iii) of the definition of "Tax Event" in
Section 1.1 hereof has occurred and is continuing in respect of the Issuer
Trust, the Company shall pay the Issuer Trust (and its permitted successors or
assigns under the Trust Agreement) for so long as the Issuer Trust (or its
permitted successor or assignee) is the registered holder of the Outstanding
Securities, such additional sums as may be necessary in order that the amount of
Distributions (including any Additional Amounts (as defined in the Trust
Agreement)) then due and payable by the Issuer Trust on the Preferred Securities
and Common Securities that at any time remain outstanding in accordance with the
terms thereof shall not be reduced as a result of such Additional Taxes (the
"Additional Sums"). Whenever in this Indenture or the Securities there is a
reference in any context to the payment of principal of or interest on the
Securities, such mention shall be deemed to include mention of the payments of
the Additional Sums provided for in this paragraph to the extent that, in such
context, Additional Sums are, were or would be payable in
<PAGE>
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respect thereof pursuant to the provisions of this paragraph and express mention
of the payment of Additional Sums (if applicable) in any provisions hereof shall
not be construed as excluding Additional Sums in those provisions hereof where
such express mention is not made; provided, however, that the deferral of the
payment of interest pursuant to Section 3.12 or the Securities shall not defer
the payment of any Additional Sums that may be due and payable.
SECTION 10.7. Additional Covenants.
The Company covenants and agrees with each Holder of Securities that it
shall not (x) declare or pay any dividends or distributions on, or redeem
purchase, acquire or make a liquidation payment with respect to, any shares of
the Company's capital stock, or (y) make any payment of principal of or interest
or premium, if any, on or repay, repurchase or redeem any debt securities of the
Company that rank pari passu in all respects with or junior in interest to the
Securities (other than (a) repurchases, redemptions or other acquisitions of
shares of capital stock of the Company in connection with any employment
contract, benefit plan or other similar arrangement with or for the benefit of
any one or more employees, officers, directors or consultants, in connection
with a dividend reinvestment or stockholder stock purchase plan or in connection
with the issuance of capital stock of the Company (or securities convertible
into or exercisable for such capital stock) as consideration in an acquisition
transaction entered into prior to the applicable Extension Period or other event
referred to below, (b) as a result of an exchange or conversion of any class or
series of the Company's capital stock (or any capital stock of a Subsidiary of
the Company) for any class or series of the Company's capital stock or of any
class or series of the Company's indebtedness for any class or series of the
Company's capital stock, (c) the purchase of fractional interests in shares of
the Company's capital stock pursuant to the conversion or exchange provisions of
such capital stock or the security being converted or exchanged, (d) any
declaration of a dividend in connection with any Rights Plan, or the issuance of
rights, stock or other property under any Rights Plan, or the redemption or
repurchase of rights pursuant thereto, or (e) any dividend in the form of stock,
warrants, options or other rights where the dividend stock or the stock issuable
upon exercise of such warrants, options or other rights is the same stock as
that on which the dividend is being paid or ranks pari passu with or junior to
such stock) if at such time (i) there shall have occurred any event (A) of which
the Company has actual knowledge that with the giving of notice or the lapse of
time, or both, would constitute an Event of Default with respect to the
Securities, and (B) which the Company shall not have taken reasonable steps to
cure, (ii) if the Securities are held by the Issuer Trust, the Company shall be
in default with respect to its payment of any obligations under the Guarantee
relating to the Preferred Securities issued by the Issuer Trust, or (iii) the
Company shall have given notice of its election to begin an Extension Period
with respect to the Securities as provided herein and shall not have rescinded
such notice, or such Extension Period, or any extension thereof, shall be
continuing.
The Company also covenants with each Holder of Securities issued to the
Issuer Trust (i) to hold, directly or indirectly, 100% of the Common Securities
of the Issuer Trust, provided that any permitted successor of the Company as
provided under Section 8.2 may succeed to the Company's ownership of such Common
Securities, (ii) as holder of such Common Securities, not to voluntarily
terminate, windup or liquidate the Issuer Trust, other than (a) in connection
with a distribution of the Securities to the holders of the Preferred Securities
in liquidation of the Issuer Trust, or (b) in connection with certain mergers,
consolidations or amalgamations permitted by the Trust Agreement, and (iii) to
use its reasonable efforts, consistent with the terms and provisions of the
Trust Agreement, to cause the Issuer Trust to continue not to be taxable as a
corporation for United States federal income tax purposes.
<PAGE>
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SECTION 10.8. Original Issue Discount.
On or before December 15 of each year during which any Securities are
outstanding, the Company shall furnish to each Paying Agent such information as
may be reasonably requested by each Paying Agent in order that each Paying Agent
may prepare the information which it is required to report for such year on
Internal Revenue Service Forms 1096 and 1099 pursuant to Section 6049 of the
Internal Revenue Code of 1986, as amended. Such information shall include the
amount of original issue discount includible in income for each authorized
minimum denomination of principal amount at Stated Maturity of outstanding
Securities during such year.
ARTICLE XI
REDEMPTION OF SECURITIES
SECTION 11.1. Applicability of This Article.
Redemption of Securities as permitted or required by any form of Security
issued pursuant to this Indenture shall be made in accordance with such form of
Security and this Article; provided, however, that, if any provision of any such
form of Security shall conflict with any provision of this Article, the
provision of such form of Security shall govern.
SECTION 11.2. Election to Redeem; Notice to Trustee.
The election of the Company to redeem any Securities shall be evidenced by
or pursuant to a Board Resolution. In case of any redemption at the election of
the Company, the Company shall, not less than 30 nor more than 60 days prior to
the Redemption Date (unless a shorter notice shall be satisfactory to the
Trustee), notify the Trustee and, in the case of Securities held by the Issuer
Trust, the Property Trustee under the Trust Agreement, of such date and of the
principal amount of Securities to be redeemed and provide the additional
information required to be included in the notice or notices contemplated by
Section 11.4; provided that, for so long as such Securities are held by the
Issuer Trust, such notice shall be given not less than 45 nor more than 75 days
prior to such Redemption Date (unless a shorter notice shall be satisfactory to
the Property Trustee under the Trust Agreement). In the case of any redemption
of Securities prior to the expiration of any restriction on such redemption
provided in the terms of such Securities, the Company shall furnish the Trustee
with an Officers' Certificate and an Opinion of Counsel evidencing compliance
with such restriction.
SECTION 11.3. Selection of Securities to be Redeemed.
If less than all the Securities are to be redeemed, the particular
Securities to be redeemed shall be selected not more than 60 days prior to the
Redemption Date by the Trustee, from the Outstanding Securities not previously
called for redemption, by such method as the Trustee shall deem fair and
appropriate and which may provide for the selection for redemption of a portion
of the principal amount of any Security, provided that the unredeemed portion of
the principal amount of any Security shall be in an authorized denomination
(which shall not be less than the minimum authorized denomination) for such
Security.
The Trustee shall promptly notify the Company in writing of the Securities
selected for partial redemption and the principal amount thereof to be redeemed.
For all purposes of this Indenture, unless the context otherwise requires, all
provisions relating to the redemption of Securities shall relate, in the case of
any Security redeemed or to be redeemed only in part, to the portion of the
principal amount of such Security that has been or is to be redeemed.
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SECTION 11.4. Notice of Redemption.
Notice of redemption shall be given by first-class mail, postage prepaid,
mailed not later than the thirtieth day, and not earlier than the sixtieth day,
prior to the Redemption Date, to each Holder of Securities to be redeemed, at
the address of such Holder as it appears in the Securities Register.
With respect to Securities to be redeemed, each notice of redemption shall
state:
(a) the Redemption Date;
(b) the Redemption Price or, if the Redemption Price cannot be calculated
prior to the time the notice is required to be sent, the estimate of the
Redemption Price provided pursuant to the Indenture together with a statement
that it is an estimate and that the actual Redemption Price will be calculated
on the third Business Day prior to the Redemption Date (if such an estimate of
the Redemption Price is given, a subsequent notice shall be given as set forth
above setting forth the Redemption Price promptly following the calculation
thereof);
(c) if less than all Outstanding Securities are to be redeemed, the
identification (and, in the case of partial redemption, the respective principal
amounts) of the particular Securities to be redeemed;
(d) that, on the Redemption Date, the Redemption Price will become due and
payable upon each such Security or portion thereof, and that interest thereon,
if any, shall cease to accrue on and after said date;
(e) the place or places where such Securities are to be surrendered for
payment of the Redemption Price;
(f) such other provisions as may be required in respect of the terms of
the Securities; and
(g) that the redemption is for a sinking fund, if such is the case.
Notice of redemption of Securities to be redeemed at the election of the
Company shall be given by the Company or, at the Company's request, by the
Trustee in the name and at the expense of the Company and shall be irrevocable.
The notice, if mailed in the manner provided above, shall be conclusively
presumed to have been duly given, whether or not the Holder receives such
notice. In any case, a failure to give such notice by mail or any defect in the
notice to the Holder of any Security designated for redemption as a whole or in
part shall not affect the validity of the proceedings for the redemption of any
other Security.
SECTION 11.5. Deposit of Redemption Price.
Prior to 10:00 a.m., New York City time, on the Redemption Date specified
in the notice of redemption given as provided in Section 11.4, the Company will
deposit with the Trustee or with one or more Paying Agents (or if the Company is
acting as its own Paying Agent, the Company will segregate and hold in trust as
provided in Section 10.3) an amount of money sufficient to pay the Redemption
Price of, and any accrued interest (including Additional Interest) on, all the
Securities (or portions thereof) that are to be redeemed on that date.
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SECTION 11.6. Payment of Securities Called for Redemption.
If any notice of redemption has been given as provided in Section 11.4,
the Securities or portion of Securities with respect to which such notice has
been given shall become due and payable on the date and at the place or places
stated in such notice at the applicable Redemption Price, together with accrued
interest (including any Additional Interest) to the Redemption Date. On
presentation and surrender of such Securities at a Place of Payment in said
notice specified, the said Securities or the specified portions thereof shall be
paid and redeemed by the Company at the applicable Redemption Price, together
with accrued interest (including any Additional Interest) to the Redemption
Date; provided, however, that, installments of interest (including Additional
Interest) whose Stated Maturity is on or prior to the Redemption Date will be
payable to the Holders of such Securities, or one or more Predecessor
Securities, registered as such at the close of business on the relevant record
dates according to their terms and the provisions of Section 3.8.
Upon presentation of any Security redeemed in part only, the Company shall
execute and the Trustee shall authenticate and deliver to the Holder thereof, at
the expense of the Company, a new Security or Securities, of authorized
denominations, in aggregate principal amount equal to the unredeemed portion of
the Security so presented and having the same Original Issue Date, Stated
Maturity and terms.
If any Security called for redemption shall not be so paid under surrender
thereof for redemption, the principal of and premium, if any, on such Security
shall, until paid, bear interest from the Redemption Date at the rate prescribed
therefor in the Security.
SECTION 11.7. Right of Redemption of Securities Initially Issued to the
Issuer Trust.
The Company, at its option, may redeem such Securities (i) on or after
______________, 2002, in whole at any time or in part from time to time, or (ii)
upon the occurrence and during the continuation of a Tax Event, an Investment
Company Event or a Capital Treatment Event, at any time within 90 days following
the occurrence and during the continuation of such Tax Event, Investment Company
Event or Capital Treatment Event, in whole (but not in part), in each case at a
Redemption Price specified in such Security, together with accrued interest
(including Additional Interest) to the Redemption Date.
If less than all the Securities are to be redeemed, the aggregate
principal amount of such Securities remaining Outstanding after giving effect to
such redemption shall be sufficient to satisfy any provisions of the Trust
Agreement.
ARTICLE XII
SINKING FUNDS
Except as may be provided in any supplemental or amended indenture, no
sinking fund shall be established or maintained for the retirement of
Securities.
ARTICLE XIII
SUBORDINATION OF SECURITIES
SECTION 13.1. Securities Subordinate to Senior Indebtedness.
The Company covenants and agrees, and each Holder of a Security, by its
acceptance thereof, likewise covenants and agrees, that, to the extent and in
the manner hereinafter set forth in this
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Article, the payment of the principal of (and premium, if any) and interest
(including any Additional Interest) on each and all of the Securities are hereby
expressly made subordinate and subject in right of payment to the prior payment
in full of all Senior Indebtedness.
SECTION 13.2. No Payment When Senior Indebtedness in Default; Payment Over
of Proceeds Upon Dissolution, Etc.
If the Company shall default in the payment of any principal of (or
premium, if any) or interest on any Senior Indebtedness when the same becomes
due and payable, whether at maturity or at a date fixed for prepayment or by
declaration of acceleration or otherwise, then, upon written notice of such
default to the Company by the holders of Senior Indebtedness or any trustee
therefor, unless and until such default shall have been cured or waived or shall
have ceased to exist, no direct or indirect payment (in cash, property,
securities, by set-off or otherwise) shall be made or agreed to be made on
account of the principal of (or premium, if any) or interest (including
Additional Interest) on any of the Securities, or in respect of any redemption,
repayment, retirement, purchase or other acquisition of any of the Securities.
In the event of (i) any insolvency, bankruptcy, receivership, liquidation,
reorganization, readjustment, composition or other similar proceeding relating
to the Company, its creditors or its property, (ii) any proceeding for the
liquidation, dissolution or other winding up of the Company, voluntary or
involuntary, whether or not involving insolvency or bankruptcy proceedings,
(iii) any assignment by the Company for the benefit of creditors or (iv) any
other marshalling of the assets of the Company (each such event, if any, herein
sometimes referred to as a "Proceeding"), all Senior Indebtedness (including any
interest thereon accruing after the commencement of any such proceedings) shall
first be paid in full before any payment or distribution, whether in cash,
securities or other property, shall be made to any Holder on account thereof.
Any payment or distribution, whether in cash, securities or other property
(other than securities of the Company or any other entity provided for by a plan
of reorganization or readjustment, the payment of which is subordinate, at least
to the extent provided in these subordination provisions with respect to the
indebtedness evidenced by the Securities, to the payment of all Senior
Indebtedness at the time outstanding and to any securities issued in respect
thereof under any such plan of reorganization or readjustment), which would
otherwise (but for these subordination provisions) be payable or deliverable in
respect of the Securities shall be paid or delivered directly to the holders of
Senior Indebtedness in accordance with the priorities then existing among such
holders until all Senior Indebtedness (including any interest thereon accruing
after the commencement of any Proceeding) shall have been paid in full.
In the event of any Proceeding, after payment in full of all sums owing
with respect to Senior Indebtedness, the Holders of the Securities, together
with the holders of any obligations of the Company ranking on a parity with the
Securities, shall be entitled to be paid from the remaining assets of the
Company the amounts at the time due and owing on account of unpaid principal of
(and premium, if any) and interest on the Securities and such other obligations
before any payment or other distribution, whether in cash, property or
otherwise, shall be made on account of any capital stock or any obligations of
the Company ranking junior to the Securities, and such other obligations. If,
notwithstanding the foregoing, any payment or distribution of any character or
any security, whether in cash, securities or other property (other than
securities of the Company or any other entity provided for by a plan of
reorganization or readjustment the payment of which is subordinate, at least to
the extent provided in these subordination provisions with respect to the
indebtedness evidenced by the Securities, to the payment of all Senior
Indebtedness at the time outstanding and to any securities issued in respect
thereof under any plan of reorganization or readjustment), shall be received by
the Trustee or any Holder in contravention of any of the terms hereof and before
all Senior Indebtedness shall have been paid in full, such payment or
distribution or security shall be received in trust for the
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benefit of, and shall be paid over or delivered and transferred to, the holders
of the Senior Indebtedness at the time outstanding in accordance with the
priorities then existing among such holders for application to the payment of
all Senior Indebtedness remaining unpaid, to the extent necessary to pay all
such Senior Indebtedness in full. In the event of the failure of the Trustee or
any Holder to endorse or assign any such payment, distribution or security, each
holder of Senior Indebtedness is hereby irrevocably authorized to endorse or
assign the same.
The Trustee and the Holders shall take such action (including, without
limitation, the delivery of this Indenture to an agent for the holders of Senior
Indebtedness or consent to the filing of a financing statement with respect
hereto) as may, in the opinion of counsel designated by the holders of a
majority in principal amount of the Senior Indebtedness at the time outstanding,
be necessary or appropriate to assure the effectiveness of the subordination
effected by these provisions.
The provisions of this Section 13.2 shall not impair any rights,
interests, remedies or powers of any secured creditor of the Company in respect
of any security interest the creation of which is not prohibited by the
provisions of this Indenture.
The securing of any obligations of the Company, otherwise ranking on a
parity with the Securities or ranking junior to the Securities shall not be
deemed to prevent such obligations from constituting, respectively, obligations
ranking on a parity with the Securities or ranking junior to the Securities.
SECTION 13.3. Payment Permitted If No Default.
Nothing contained in this Article or elsewhere in this Indenture or in any
of the Securities shall prevent (a) the Company, at any time, except during the
pendency of the conditions described in the first paragraph of Section 13.2 or
of any Proceeding referred to in Section 13.2, from making payments at any time
of principal of (and premium, if any) or interest (including Additional
Interest) on the Securities, or (b) the application by the Trustee of any monies
deposited with it hereunder to the payment of or on account of the principal of
(and premium, if any) or interest (including any Additional Interest) on the
Securities or the retention of such payment by the Holders, if, at the time of
such application by the Trustee, it did not have knowledge that such payment
would have been prohibited by the provisions of this Article.
SECTION 13.4. Subrogation to Rights of Holders of Senior Indebtedness.
Subject to the payment in full of all amounts due or to become due on all
Senior Indebtedness, or the provision for such payment in cash or cash
equivalents or otherwise in a manner satisfactory to the holders of Senior
Indebtedness, the Holders of the Securities shall be subrogated to the extent of
the payments or distributions made to the holders of such Senior Indebtedness
pursuant to the provisions of this Article (equally and ratably with the holders
of all indebtedness of the Company that by its express terms is subordinated to
Senior Indebtedness of the Company to substantially the same extent as the
Securities are subordinated to the Senior Indebtedness and is entitled to like
rights of subrogation by reason of any payments or distributions made to holders
of such Senior Indebtedness) to the rights of the holders of such Senior
Indebtedness to receive payments and distributions of cash, property and
securities applicable to the Senior Indebtedness until the principal of (and
premium if any) and interest (including Additional Interest) on the Securities
shall be paid in full. For purposes of such subrogation, no payments or
distributions to the holders of the Senior Indebtedness of any cash, property or
securities to which the Holders of the Securities or the Trustee would be
entitled except for the provisions of this Article, and no payments over
pursuant to the provisions of this Article to the holders of Senior Indebtedness
by Holders of the Securities or the
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Trustee, shall, as among the Company, its creditors other than holders of Senior
Indebtedness, and the Holders of the Securities, be deemed to be a payment or
distribution by the Company to or on account of the Senior Indebtedness.
SECTION 13.5. Provisions Solely to Define Relative Rights.
The provisions of this Article are and are intended solely for the purpose
of defining the relative rights of the Holders of the Securities on the one hand
and the holders of Senior Indebtedness on the other hand. Nothing contained in
this Article or elsewhere in this Indenture or in the Securities is intended to
or shall (a) impair, as between the Company and the Holders of the Securities,
the obligations of the Company, which are absolute and unconditional, to pay to
the Holders of the Securities the principal of (and premium, if any) and
interest (including any Additional Interest) on the Securities as and when the
same shall become due and payable in accordance with their terms; or (b) affect
the relative rights against the Company of the Holders of the Securities and
creditors of the Company other than their rights in relation to the holders of
Senior Indebtedness; or (c) prevent the Trustee or the Holder of any Security
(or to the extent expressly provided herein, the holder of any Preferred
Security) from exercising all remedies otherwise permitted by applicable law
upon default under this Indenture, including filing and voting claims in any
Proceeding, subject to the rights, if any, under this Article of the holders of
Senior Indebtedness to receive cash, property and securities otherwise payable
or deliverable to the Trustee or such Holder.
SECTION 13.6. Trustee to Effectuate Subordination.
Each Holder of a Security by his or her acceptance thereof authorizes and
directs the Trustee on his or her behalf to take such action as may be necessary
or appropriate to acknowledge or effectuate the subordination provided in this
Article and appoints the Trustee his or her attorney-in-fact for any and all
such purposes.
SECTION 13.7. No Waiver of Subordination Provisions.
No right of any present or future holder of any Senior Indebtedness to
enforce subordination as herein provided shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of the Company
or by any act or failure to act, in good faith, by any such holder, or by any
noncompliance by the Company with the terms, provisions and covenants of this
Indenture, regardless of any knowledge thereof that any such holder may have or
be otherwise charged with.
Without in any way limiting the generality of the immediately preceding
paragraph, the holders of Senior Indebtedness may, at any time and from time to
time, without the consent of or notice to the Trustee or the Holders of the
Securities, without incurring responsibility to such Holders of the Securities
and without impairing or releasing the subordination provided in this Article or
the obligations hereunder of such Holders of the Securities to the holders of
Senior Indebtedness, do any one or more of the following: (i) change the manner,
place or terms of payment or extent the time of payment of, or renew or alter,
Senior Indebtedness, or otherwise amend or supplement in any manner Senior
Indebtedness or any instrument evidencing the same or any agreement under which
Senior Indebtedness is outstanding; (ii) sell, exchange, release or otherwise
deal with any property pledged, mortgaged or otherwise securing Senior
Indebtedness; (iii) release any Person liable in any manner for the collection
of Senior Indebtedness; and (iv) exercise or refrain from exercising any rights
against the Company and any other Person.
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SECTION 13.8. Notice to Trustee.
The Company shall give prompt written notice to a Responsible Officer of
the Trustee of any fact known to the Company that would prohibit the making of
any payment to or by the Trustee in respect of the Securities. Notwithstanding
the provisions of this Article or any other provision of this Indenture, the
Trustee shall not be charged with knowledge of the existence of any facts that
would prohibit the making of any payment to or by the Trustee in respect of the
Securities, unless and until the Trustee shall have received written notice
thereof from the Company or a holder of Senior Indebtedness or from any trustee,
agent or representative therefor; provided, however, that if the Trustee shall
not have received the notice provided for in this Section at least two Business
Days prior to the date upon which by the terms hereof any monies may become
payable for any purpose (including, the payment of the principal of (and
premium, if any, on) or interest (including any Additional Interest) on any
Security), then, anything herein contained to the contrary notwithstanding, the
Trustee shall have full power and authority to receive such monies and to apply
the same to the purpose for which they were received and shall not be affected
by any notice to the contrary that may be received by it within two Business
Days prior to such date.
Subject to the provisions of Section 6.1, the Trustee shall be entitled to
rely on the delivery to it of a written notice by a Person representing himself
or herself to be a holder of Senior Indebtedness (or a trustee or
attorney-in-fact therefor) to establish that such notice has been given by a
holder of Senior Indebtedness (or a trustee or attorney-in-fact therefor). In
the event that the Trustee determines in good faith that further evidence is
required with respect to the right of any Person as a holder of Senior
Indebtedness to participate in any payment or distribution pursuant to this
Article, the Trustee may request such Person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness
held by such Person, the extent to which such Person is entitled to participate
in such payment or distribution and any other facts pertinent to the rights of
such Person under this Article, and if such evidence is not furnished, the
Trustee may defer any payment to such Person pending judicial determination as
to the right of such Person to receive such payment.
SECTION 13.9. Reliance on Judicial Order or Certificate of Liquidating
Agent.
Upon any payment or distribution of assets of the Company referred to in
this Article, the Trustee, subject to the provisions of Section 6.1, and the
Holders of the Securities shall be entitled to rely upon any order or decree
entered by any court of competent jurisdiction in which such Proceeding is
pending, or a certificate of the trustee in bankruptcy, receiver, conservator,
liquidating trustee, custodian, assignee for the benefit of creditors, agent or
other Person making such payment or distribution, delivered to the Trustee or to
the Holders of Securities, for the purpose of ascertaining the Persons entitled
to participate in such payment or distribution, the holders of the Senior
Indebtedness and other indebtedness of the Company, the amount thereof or
payable thereon, the amount or amounts paid or distributed thereon and all other
facts pertinent thereto or to this Article.
SECTION 13.10. Trustee Not Fiduciary for Holders of Senior Indebtedness.
The Trustee, in its capacity as trustee under this Indenture, shall not be
deemed to owe any fiduciary duty to the holders of Senior Indebtedness and shall
not be liable to any such holders if it shall in good faith mistakenly pay over
or distribute to Holders of Securities or to the Company or to any other Person
cash, property or securities to which any holders of Senior Indebtedness shall
be entitled by virtue of this Article or otherwise.
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SECTION 13.11. Rights of Trustee as Holder of Senior Indebtedness;
Preservation of Trustee's Rights.
The Trustee in its individual capacity shall be entitled to all the rights
set forth in this Article with respect to any Senior Indebtedness that may at
any time be held by it, to the same extent as any other holder of Senior
Indebtedness, and nothing in this Indenture shall deprive the Trustee of any of
its rights as such holder.
SECTION 13.12. Article Applicable to Paying Agents.
In case at any time any Paying Agent other than the Trustee shall have
been appointed by the Company and be then acting hereunder, the term "Trustee"
as used in this Article shall in such case (unless the context otherwise
requires) be construed as extending to and including such Paying Agent within
its meaning as fully for all intents and purposes as if such Paying Agent were
named in this Article in addition to or in place of the Trustee.
SECTION 13.13. Certain Conversions or Exchanges Deemed Payment.
For purposes of this Article only, (a) the issuance and delivery of junior
securities upon conversion or exchange of Securities shall not be deemed to
constitute a payment or distribution on account of the principal of (or premium,
if any, on) or interest (including any Additional Interest) on such Securities
or on account of the purchase or other acquisition of such Securities, and (b)
the payment, issuance or delivery of cash, property or securities (other than
junior securities) upon conversion or exchange of a Security shall be deemed to
constitute payment on account of the principal of such security. For the
purposes of this Section, the term "junior securities" means (i) shares of any
stock of any class of the Company, and (ii) securities of the Company that are
subordinated in right of payment to all Senior Indebtedness that may be
outstanding at the time of issuance or delivery of such securities to
substantially the same extent as, or to a greater extent than, the Securities
are so subordinated as provided in this Article.
* * * *
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
[Remainder of page left intentionally blank; signatures appear on following
page.]
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IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.
Attest: PREMIER FINANCIAL BANCORP, INC.
By:
------------------------------------
Name:
Title:
Attest: BANKERS TRUST COMPANY, as
Trustee
By:
------------------------------------
Name:
Title:
Exhibit 4.2
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PREMIER FINANCIAL BANCORP, INC.
_____% Junior Subordinated Deferrable Interest Debentures due ________ __, 2027
No. P- CUSIP NO. $
PREMIER FINANCIAL BANCORP, INC., a Kentucky corporation (hereinafter
called the "Company", which term includes any successor Person under the
Indenture hereinafter referred to), for value received, hereby promises to pay
to PFBI Capital Trust, or registered assigns, the principal sum of
_____________________ Dollars on ___________________, 2027, or such other
principal amount represented hereby as may be set forth in the records of the
Securities Registrar hereinafter referred to in accordance with the Indenture.
The Company further promises to pay interest on said principal from __________
__, 1997, or from the most recent Interest Payment Date to which interest has
been paid or duly provided for, quarterly (subject to deferral as set forth
herein) in arrears on March 31, June 30, September 30 and December 31 of each
year, commencing __________ __, 1997 at the rate of _____% per annum, together
with Additional Sums, if any, as provided in Section 10.6 of the Indenture,
until the principal hereof is paid or duly provided for or made available for
payment; provided that any overdue principal, premium or Additional Sums and any
overdue installment of interest shall bear Additional Interest at the rate of
_____% per annum (to the extent that the payment of such interest shall be
legally enforceable), compounded quarterly from the dates such amounts are due
until they are paid or made available for payment, and such interest shall be
payable on demand. The amount of interest payable for any period less than a
full interest period shall be computed on the basis of a 360-day year of twelve
30-day months and the actual days elapsed in a partial month in such period. The
amount of interest payable for any full interest period shall be computed by
dividing the applicable rate per annum by four. The interest so payable, and
punctually paid or duly provided for, on any Interest Payment Date will, as
provided in the Indenture, be paid to the Person in whose name this Security (or
one or more Predecessor Securities) is registered at the close of business on
the Regular Record Date for such interest installment, which shall be the 15th
day of March, June, September and December (whether or not a Business Day), as
the case may be, next preceding such Interest Payment Date. Any such interest
not so punctually paid or duly provided for shall forthwith cease to be payable
to the Holder on such Regular Record Date and may either be paid to the Person
in whose name this Security (or one or more Predecessor Securities) is
registered at the close of business on a Special Record Date for the payment of
such Defaulted Interest to be fixed by the Trustee, notice whereof shall be
given to Holders of Securities of this series not less than 10 days prior to
such Special Record Date, or be paid at any time in any other lawful manner not
inconsistent with the requirements of any securities exchange on which the
Securities may be listed, and upon such notice as may be required by such
exchange, all as more fully provided in said Indenture.
So long as no Event of Default has occurred and is continuing, the
Company shall have the right, at any time during the term of this Security, from
time to time to defer the payment of interest on this Security for up to 20
consecutive quarterly interest payment periods with respect to each deferral
period (each an "Extension Period"), during which Extension Periods the Company
shall have the right to make partial payments of interest on any Interest
Payment Date, and at the end of which the Company shall pay all interest then
accrued and unpaid including Additional Interest, as provided below; provided,
however, that no Extension Period shall extend beyond the Stated Maturity of the
principal of this Security, as then in effect, and no such Extension Period may
end on a date other than an Interest Payment Date; and provided further,
however, that during any such Extension Period, the Company shall not (i)
declare or pay any dividends or distributions on, or redeem, purchase, acquire
or make a liquidation payment with respect to, any of the Company's capital
stock, or (ii) make any payment of
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principal of or interest or premium, if any, on or repay, repurchase or redeem
any debt securities of the Company that rank pari passu in all respects with or
junior in interest to this Security (other than (a) repurchases, redemptions or
other acquisitions of shares of capital stock of the Company in connection with
any employment contract, benefit plan or other similar arrangement with or for
the benefit of any one or more employees, officers, directors or consultants, in
connection with a dividend reinvestment or stockholder stock purchase plan or in
connection with the issuance of capital stock of the Company (or securities
convertible into or exercisable for such capital stock) as consideration in an
acquisition transaction entered into prior to the applicable Extension Period,
(b) as a result of an exchange or conversion of any class or series of the
Company's capital stock (or any capital stock of a Subsidiary of the Company)
for any class or series of the Company's capital stock or of any class or series
of the Company's indebtedness for any class or series of the Company's capital
stock, (c) the purchase of fractional interests in shares of the Company's
capital stock pursuant to the conversion or exchange provisions of such capital
stock or the security being converted or exchanged, (d) any declaration of a
dividend in connection with any Rights Plan, or the issuance of rights, stock or
other property under any Rights Plan, or the redemption or repurchase of rights
pursuant thereto, or (e) any dividend in the form of stock, warrants, options or
other rights where the dividend stock or the stock issuable upon exercise of
such warrants, options or other rights is the same stock as that on which the
dividend is being paid or ranks pari passu with or junior to such stock). Prior
to the termination of any such Extension Period, the Company may further defer
the payment of interest, provided that no Extension Period shall exceed 20
consecutive quarterly interest payment periods, extend beyond the Stated
Maturity of the principal of this Security or end on a date other than an
Interest Payment Date. Upon the termination of any such Extension Period and
upon the payment of all accrued and unpaid interest and any Additional Interest
then due on any Interest Payment Date, the Company may elect to begin a new
Extension Period, subject to the above conditions. No interest shall be due and
payable during an Extension Period, except at the end thereof, but each
installment of interest that would otherwise have been due and payable during
such Extension Period shall bear Additional Interest (to the extent that the
payment of such interest shall be legally enforceable) at the rate of _____% per
annum, compounded quarterly and calculated as set forth in the first paragraph
of this Security, from the date on which such amounts would otherwise have been
due and payable until paid or made available for payment. The Company shall give
the Holder of this Security and the Trustee notice of its election to begin any
Extension Period at least one Business Day prior to the next succeeding Interest
Payment Date on which interest on this Security would be payable but for such
deferral or so long as such securities are held by PFBI Capital Trust, at least
one Business Day prior to the earlier of (i) the next succeeding date on which
Distributions on the Preferred Securities of the Issuer Trust would be payable
but for such deferral, and (ii) the date on which the Property Trustee of the
Issuer Trust is required to give notice to holders of such Preferred Securities
of the record date or the date such Distributions are payable, but in any event
not less than one Business Day prior to such record date.
Payment of the principal of (and premium, if any) and interest on this
Security will be made at the office or agency of the Company maintained for that
purpose in the United States, in such coin or currency of the United States of
America as at the time of payment is legal tender for payment of public and
private debts; provided, however, that at the option of the Company payment of
interest may be made (i) by check mailed to the address of the Person entitled
thereto as such address shall appear in the Securities Register, or (ii) if to a
Holder of $1,000,000 or more in aggregate principal amount of this Security, by
wire transfer in immediately available funds upon written request to the Trustee
not later than 15 calendar days prior to the date on which the interest is
payable.
The indebtedness evidenced by this Security is, to the extent provided
in the Indenture, subordinate and subject in right of payments to the prior
payment in full of all Senior Indebtedness, and
<PAGE>
this Security is issued subject to the provisions of the Indenture with respect
thereto. Each Holder of this Security, by accepting the same, (a) agrees to and
shall be bound by such provisions, (b) authorizes and directs the Trustee on his
or her behalf to take such actions as may be necessary or appropriate to
effectuate the subordination so provided, and (c) appoints the Trustee his or
her attorney-in-fact for any and all such purposes. Each Holder hereof, by his
or her acceptance hereof, waives all notice of the acceptance of the
subordination provisions contained herein and in the Indenture by each holder of
Senior Indebtedness, whether now outstanding or hereafter incurred, and waives
reliance by each such holder upon said provisions.
Reference is hereby made to the further provisions of this Security set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by the
Trustee referred to on the reverse hereof by manual signature, this Security
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal.
PREMIER FINANCIAL BANCORP, INC.
By:
---------------------------------------
Name:
Title:
Attest:
- -------------------------------------------
Secretary or Assistant Secretary
This is one of the Securities of the series designated therein referred
to in the within-mentioned Indenture.
Dated: , 1997 BANKERS TRUST COMPANY,
--------- as Trustee
By:
--------------------------------------------
Authorized Signatory
<PAGE>
[Reverse of Security]
This Security is one of a duly authorized issue of securities of the
Company (herein called the "Securities"), issued and to be issued in one or more
series under the Junior Subordinated Indenture, dated as of __________ __, 1997
(herein called the "Indenture"), between the Company and Bankers Trust Company,
as Trustee (herein called the "Trustee", which term includes any successor
trustee under the Indenture), to which Indenture and all indentures supplemental
thereto reference is hereby made for a statement of the respective rights,
limitations of rights, duties and immunities thereunder of the Company, the
Trustee, the holders of Senior Indebtedness and the Holders of the Securities,
and of the terms upon which the Securities are, and are to be, authenticated and
delivered. This Security is one of the series designated on the face hereof,
limited in aggregate principal amount to $____________.
All terms used in this Security that are defined in the Indenture or
in the Amended and Restated Trust Agreement dated as of __________ __, 1997 (as
modified, amended or supplemented from time to time the "Trust Agreement"),
relating to PFBI Capital Trust the ("Issuer Trust") among the Company, as
Depositor, the Trustees named therein and the Holders from time to time of the
Trust Securities issued pursuant thereto shall have the meanings assigned to
them in the Indenture or the Trust Agreement, as the case may be.
The Company has the right to redeem this Security (i) on or after
___________________, 2002 in whole at any time or in part from time to time, or
(ii) in whole (but not in part), at any time within 90 days following the
occurrence and during the continuation of a Tax Event, Investment Company Event,
or Capital Treatment Event, in each case at the Redemption Price described
below, and subject to possible regulatory approval. The Redemption Price shall
equal 100% of the principal amount hereof being redeemed, together with accrued
interest to but excluding the date fixed for redemption.
In the event of redemption of this Security in part only, a new Security
or Securities of this series for the unredeemed portion hereof will be issued in
the name of the Holder hereof upon the cancellation hereof.
The Indenture permits, with certain exceptions as therein provided, the
Company and the Trustee at any time to enter into a supplemental indenture or
indentures for the purpose of modifying in any manner the rights and obligations
of the Company and of the Holders of the Securities, with the consent of the
Holders of not less than a majority in principal amount of the Outstanding
Securities of each series to be affected by such supplemental indenture. The
Indenture also contains provisions permitting Holders of specified percentages
in principal amount of the Securities of each series at the time Outstanding, on
behalf of the Holders of all Securities of such series, to waive compliance by
the Company with certain provisions of the Indenture and certain past defaults
under the Indenture and their consequences. Any such consent or waiver by the
Holder of this Security shall be conclusive and binding upon such Holder and
upon all future Holders of this Security and of any Security issued upon the
registration of transfer hereof or in exchange herefor or in lieu hereof,
whether or not notation of such consent or waiver is made upon this Security.
As provided in and subject to the provisions of the Indenture, if an
Event of Default with respect to the Securities of this series at the time
Outstanding occurs and is continuing, then and in every such case the Trustee or
the Holders of not less than 25% in aggregate principal amount of the
Outstanding Securities of this series may declare the principal amount of all
the Securities of this series to be due and payable immediately, by a notice in
writing to the Company (and to the Trustee if given by Holders), provided that,
if upon an Event of Default, the Trustee or such Holders fail to declare the
principal of
<PAGE>
all the Outstanding Securities of this series to be immediately due and payable,
the holders of at least 25% in aggregate Liquidation Amount of the Preferred
Securities then outstanding shall have the right to make such declaration by a
notice in writing to the Company and the Trustee; and upon any such declaration
the principal amount of and the accrued interest (including any Additional
Interest) on all the Securities of this series shall become immediately due and
payable, provided that the payment of principal and interest (including any
Additional Interest) on such Securities shall remain subordinated to the extent
provided in Article XIII of the Indenture.
No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the obligation of the Company, which
is absolute and unconditional, to pay the principal of (and premium, if any) and
interest (including Additional Interest) on this Security at the times, place
and rate, and in the coin or currency, herein prescribed.
As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Security is registrable in the Securities
Register, upon surrender of this Security for registration of transfer at the
office or agency of the Company maintained under Section 10.2 of the Indenture
for such purpose, duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to the Company and the Securities Registrar duly
executed by, the Holder hereof or such Holder's attorney duly authorized in
writing, and thereupon one or more new Securities of this series, of like tenor,
of authorized denominations and for the same aggregate principal amount, will be
issued to the designated transferee or transferees.
As provided in the Indenture and subject to certain limitations therein
set forth, Securities of this series are exchangeable for a like aggregate
principal amount of Securities of this series and of like tenor of a different
authorized denomination, as requested by the Holder surrendering the same.
No service charge shall be made for any such registration of transfer or
exchange, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Security for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name this Security is registered as the owner hereof for all
purposes, whether or not this Security be overdue, and neither the Company, the
Trustee nor any such agent shall be affected by notice to the contrary.
The Company and, by its acceptance of this Security or a beneficial
interest therein, the Holder of, and any Person that acquires a beneficial
interest in, this Security agrees that for United States federal, state and
local tax purposes it is intended that this Security constitute indebtedness.
THIS SECURITY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK.
THIS SECURITY IS A DIRECT AND UNSECURED OBLIGATION OF THE COMPANY, DOES
NOT EVIDENCE DEPOSITS AND IS NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION OR ANY OTHER INSURER OR GOVERNMENT AGENCY.
Exhibit 4.3
<PAGE>
TRUST AGREEMENT
This TRUST AGREEMENT, dated as of May 27, 1997 (the "Trust Agreement"),
among (i) PREMIER FINANCIAL BANCORP, INC., a Kentucky corporation (the
"Depositor"), and (ii) BANKERS TRUST (DELAWARE), a Delaware banking corporation
(the "Trustee"). The Depositor and the Trustee hereby agree as follows:
1. The trust created hereby (the "Trust") shall be known as "PFBI
Capital Trust" in which name the Trustee, or the Depositor to the extent
provided herein, may engage in the transactions contemplated hereby, make and
execute contracts, and sue and be sued.
2. The Depositor hereby assigns, transfers conveys and sets over to the
Trustee the sum of $1. The Trustee hereby acknowledges receipt of such amount in
trust from the Depositor, which amount shall constitute the initial trust
estate. The Trustee hereby declares that it will hold the trust estate in trust
for the Depositor. It is the intention of the parties hereto that the Trust
created hereby constitute a business trust under Chapter 38 of Title 12 of the
Delaware Code, 12 Del. C. Section 3801, et seq. (the "Business Trust Act"), and
that this document constitutes the governing instrument of the Trust. The
Trustee is hereby authorized and directed to execute and file a certificate of
trust with the Delaware Secretary of State in accordance with the provisions of
the Business Trust Act.
3. The Depositor and the Trustee will enter into an amended and
restated Trust Agreement, satisfactory to each such party and substantially in
the form included as an exhibit to the 1933 Act Registration Statement (as
defined below), to provide for the contemplated operation of the Trust created
hereby and the issuance of the Preferred Securities and Common Securities
referred to therein. Prior to the execution and delivery of such amended and
restated Trust Agreement, the Trustee shall not have any duty or obligation
hereunder or with respect to the trust estate, except as otherwise required by
applicable law or as may be necessary to obtain, prior to such execution and
delivery, any licenses, consents or approvals required by applicable law or
otherwise.
4. The Depositor and the Trustee hereby authorize and direct the
Depositor, as the sponsor of the Trust, (i) to file with the Securities and
Exchange Commission (the "Commission") and execute, in each case on behalf of
the Trust, (a) the Registration Statement on Form S-1 (the "1933 Act
Registration Statement"), including any pre-effective or post-effective
amendments to the 1933 Act Registration Statement, relating to the registration
under the Securities Act of 1933, as amended, of the Preferred Securities of the
Trust and possibly certain other securities and (b) a Registration Statement on
Form 8-A (the "1934 Act Registration Statement") (including all pre-effective
and post-effective amendments thereto) relating to the registration of the
Preferred Securities of the Trust under the Securities Exchange Act of 1934, as
amended; (ii) to file with The Nasdaq National Market or any national stock
exchange (each, an "Exchange") and execute on behalf of the Trust one or more
listing applications and all other applications, statements, certificates,
agreements and other instruments as shall be necessary or desirable to cause the
Preferred Securities to be listed on any of the Exchanges; (iii) to file and
execute on behalf of the Trust such applications, reports, surety bonds,
irrevocable consents, appointments of attorney for service of process and other
papers and documents as shall be necessary or desirable to register the
Preferred Securities under the securities or blue sky laws of such jurisdictions
as the Depositor, on behalf of the Trust, may deem necessary or desirable and
(iv) to execute on behalf of the Trust that certain
<PAGE>
Underwriting Agreement relating to the Preferred Securities, among the
Trust, the Depositor and the Underwriters named therein, substantially in the
form included as an exhibit to the 1933 Act Registration Statement. In
connection with the filings referred to above, the Depositor hereby constitutes
and appoints J. Howell Kelly and ____________, and each of them, as its true and
lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for the Depositor or in the Depositor's name, place and stead,
in any and all capacities, to sign any and all amendments (including
post-effective amendments) to the 1933 Act Registration Statement and the 1934
Act Registration Statement and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Commission, the Exchange and
administrators of state securities or blue sky laws, granting unto said
attorneys-in-fact and agents full power and authority to do and perform each and
every act and thing requisite and necessary to be done in connection therewith,
as fully to all intents and purposes as the Depositor might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or any of them, or their respective substitute or substitutes, shall do
or cause to be done by virtue hereof.
5. This Trust Agreement may be executed in one or more counterparts.
6. The number of Trustees initially shall be one (1) and thereafter the
number of Trustees shall be such number as shall be fixed from time to time by a
written instrument signed by the Depositor which may increase or decrease the
number of Trustees; provided, however, that to the extent required by the
Business Trust Act, one Trustee shall either be a natural person who is a
resident of the State of Delaware or, if not a natural person, an entity which
has its principal place of business in the State of Delaware and otherwise meets
the requirements of applicable Delaware law. Subject to the foregoing, the
Depositor is entitled to appoint or remove without cause any Trustee at any
time. The Trustees may resign upon thirty (30) days' prior notice to the
Depositor.
7. This Trust Agreement shall be governed by, and construed in
accordance with, the laws of the State of Delaware (without regard to conflict
of laws principles.)
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Trust
Agreement to be duly executed as of the day and year first above written.
PREMIER FINANCIAL BANCORP, INC.
as Depositor
By: /s/J. Howell Kelly
--------------------------------
Name: J. Howell Kelly
Title: President and Chief Executive
Officer
BANKERS TRUST (DELAWARE),
as Trustee
By: /s/M. Lisa Wilkins
--------------------------------
Name: M. Lisa Wilkins
Title: Assistant Secretary
<PAGE>
CERTIFICATE OF TRUST
OF
PFBI CAPITAL TRUST
This Certificate of Trust is being executed as of May __,
1997, for the purpose of organizing a business trust pursuant to the Delaware
Business Trust Act, 12 Del. C. Sections 3801 et seq. (the "Act").
The undersigned hereby certifies as follows:
1. Name. The name of the business trust is "PFBI Capital
Trust" (the "Trust").
2. Delaware Trustee. The name and business address of the
Delaware resident trustee of the Trust meeting the requirements of Section 3807
of the Act are as follows:
Bankers Trust (Delaware)
1001 Jefferson Street
Suite 550
Wilmington, Delaware 19801
3. Effective. This Certificate of Trust shall be effective
immediately upon filing in the Office of the Secretary of State of the State of
Delaware.
IN WITNESS WHEREOF, the undersigned, being all of the
trustees of the Trust, have duly executed this Certificate of Trust as of the
day and year first above written.
BANKERS TRUST (DELAWARE)
as Delaware Trustee
By:
-----------------------------------------
Name: M. Lisa Wilkins
Title: Assistant Secretary
Exhibit 4.4
<PAGE>
AMENDED AND RESTATED
TRUST AGREEMENT
among
PREMIER FINANCIAL BANCORP, INC.
BANKERS TRUST COMPANY
as Property Trustee,
and
BANKERS TRUST (DELAWARE),
as Delaware Trustee
Dated as of __________ __, 1997
PFBI CAPITAL TRUST
<PAGE>
PFBI CAPITAL TRUST
Certain Sections of this Trust Agreement relating to
Sections 310 through 318 of the
Trust Indenture Act of 1939:
<TABLE>
<CAPTION>
Trust Indenture Trust Agreement
Section Section
- --------------- ---------------
<S> <C> <C>
Section 310(a)(1)................................. 8.7
(a)(2)................................. 8.7
(a)(3)................................. 8.9
(a)(4)................................. 2.7(a)(ii)
(b).................................... 8.8, 10.10(b)
Section 311(a).................................... 8.13, 10.10(b)
(b).................................... 8.13, 10.10(b)
Section 312(a).................................... 10.10(b)
(b).................................... 10.10(b), (f)
(c).................................... 5.7
Section 313(a).................................... 8.15(a)
(a)(4)................................. 10.10(c)
(b).................................... 8.15(c), 10.10(c)
(c).................................... 10.8, 10.10(c)
(d).................................... 10.10(c)
Section 314(a).................................... 8.16, 10.10(d)
(b).................................... Not Applicable
(c)(1)................................. 8.17, 10.10(d), (e)
(c)(2)................................. 8.17, 10.10(d), (e)
(c)(3)................................. 8.17, 10.10(d), (e)
(e).................................... 8.17, 10.10(e)
Section 315(a).................................... 8.1(d)
(b).................................... 8.2
(c).................................... 8.1(c)
(d).................................... 8.1(d)
(e).................................... Not Applicable
Section 316(a).................................... Not Applicable
(a)(1)(A).............................. Not Applicable
(a)(1)(B).............................. Not Applicable
(a)(2)................................. Not Applicable
(b).................................... 5.13
(c).................................... 6.7
Section 317(a)(1)................................. Not Applicable
(a)(2)................................. 8.14
(b).................................... 5.10
Section 318(a).................................... 10.10(a)
</TABLE>
Note: This reconciliation and tie shall not, for any purpose, be deemed to be a
part of the Trust Agreement.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C> <C>
ARTICLE I. DEFINED TERMS
SECTION 1.1. Definitions............................................ 1
ARTICLE II. CONTINUATION OF THE ISSUER TRUST
SECTION 2.1. Name................................................... 10
SECTION 2.2. Office of the Delaware Trustee;
Principal Place of Business.......................... 10
SECTION 2.3. Initial Contribution of Trust Property,
Organizational Expenses.............................. 10
SECTION 2.4. Issuance of the Preferred Securities................... 10
SECTION 2.5. Issuance of the Common Securities;
Subscription and Purchase of Junior
Subordinated Debentures.............................. 11
SECTION 2.6. Declaration of Trust................................... 11
SECTION 2.7. Authorization to Enter into Certain
Transactions......................................... 12
SECTION 2.8. Assets of Trust........................................ 14
SECTION 2.9. Title to Trust Property................................ 14
ARTICLE III. PAYMENT ACCOUNT
SECTION 3.1. Payment Account........................................ 14
ARTICLE IV. DISTRIBUTIONS; REDEMPTION
SECTION 4.1. Distributions.......................................... 15
SECTION 4.2. Redemption............................................. 16
SECTION 4.3. Subordination of Common Securities..................... 17
SECTION 4.4. Payment Procedures..................................... 18
SECTION 4.5. Tax Returns and Reports................................ 18
SECTION 4.6. Payment of Taxes, Duties, Etc.
of the Issuer Trust.................................. 19
SECTION 4.7. Payments under Indenture or Pursuant
to Direct Actions.................................... 19
SECTION 4.8. Liability of the Holder of Common
Securities........................................... 19
ARTICLE V. TRUST SECURITIES CERTIFICATES
SECTION 5.1. Initial Ownership...................................... 19
SECTION 5.2. The Trust Securities Certificates...................... 19
SECTION 5.3. Execution and Delivery of Trust
Securities Certificates................................ 20
SECTION 5.4. Global Preferred Security.............................. 20
SECTION 5.5. Registration of Transfer and Exchange
Generally; Certain Transfers and
Exchanges; Preferred Securities
Certificates......................................... 21
</TABLE>
- i -
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C> <C> <C>
SECTION 5.6. Mutilated, Destroyed, Lost or Stolen
Trust Securities Certificates........................ 22
SECTION 5.7. Persons Deemed Holders................................. 22
SECTION 5.8. Access to List of Holders'
Names and Addresses.................................... 23
SECTION 5.9. Maintenance of Office or Agency........................ 23
SECTION 5.10. Appointment of Paying Agent............................ 23
SECTION 5.11. Ownership of Common Securities
by Depositor......................................... 23
SECTION 5.12. Notices to Clearing Agency............................. 24
SECTION 5.13. Rights of Holders...................................... 24
ARTICLE VI. ACTS OF HOLDERS; MEETINGS; VOTING
SECTION 6.1. Limitations on Holder's Voting
Rights.............................................. 26
SECTION 6.2. Notice of Meetings..................................... 26
SECTION 6.3. Meetings of Holders.................................... 27
SECTION 6.4. Voting Rights.......................................... 27
SECTION 6.5. Proxies, etc........................................... 27
SECTION 6.6. Holder Action by Written Consent....................... 27
SECTION 6.7 Record Date for Voting and Other
Purposes............................................. 27
SECTION 6.8. Acts of Holders........................................ 28
SECTION 6.9. Inspection of Records.................................. 29
ARTICLE VII. REPRESENTATIONS AND WARRANTIES
SECTION 7.1. Representations and Warranties
of the Property Trustee and
the Delaware Trustee................................. 29
SECTION 7.2. Representations and Warranties of
Depositor............................................ 30
ARTICLE VIII. THE ISSUER TRUSTEES; THE ADMINISTRATORS
SECTION 8.1. Certain Duties and Responsibilities.................... 30
SECTION 8.2. Certain Notices........................................ 32
SECTION 8.3. Certain Rights of Property Trustee..................... 33
SECTION 8.4. Not Responsible for Recitals
or Issuance of Securities............................ 34
SECTION 8.5. May Hold Securities.................................... 34
SECTION 8.6. Compensation; Indemnity; Fees.......................... 34
SECTION 8.7. Corporate Property Trustee Required;
Eligibility of Trustees and
Administrators....................................... 35
</TABLE>
- ii -
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C> <C> <C>
SECTION 8.8. Conflicting Interests.................................. 36
SECTION 8.9. Co-Trustees and Separate Trustee....................... 36
SECTION 8.10. Resignation and Removal; Appointment
of Successor......................................... 37
SECTION 8.11. Acceptance of Appointment by
Successor.............................................. 38
SECTION 8.12. Merger, Conversion, Consolidation or
Succession to Business............................... 38
SECTION 8.13. Preferential Collection of Claims
Against Depositor or Issuer Trust.................... 38
SECTION 8.14. Trustee May File Proofs of Claim....................... 38
SECTION 8.15. Reports by Property Trustee............................ 39
SECTION 8.16. Reports to the Property Trustee........................ 39
SECTION 8.17. Evidence of Compliance with Conditions
Precedent............................................ 40
SECTION 8.18. Number of Issuer Trustees.............................. 40
SECTION 8.19. Delegation of Power.................................... 40
SECTION 8.20. Appointment of Administrators.......................... 40
ARTICLE IX. DISSOLUTION, LIQUIDATION AND MERGER
SECTION 9.1. Dissolution Upon Expiration Date....................... 41
SECTION 9.2. Early Termination...................................... 41
SECTION 9.3. Dissolution............................................ 41
SECTION 9.4. Liquidation............................................ 42
SECTION 9.5. Mergers, Consolidations, Amalgamations
or Replacements of the Issuer Trust.................. 43
ARTICLE X. MISCELLANEOUS PROVISIONS
SECTION 10.1. Limitation of Rights of Holders........................ 44
SECTION 10.2. Amendment.............................................. 44
SECTION 10.3. Separability........................................... 45
SECTION 10.4. Governing Law.......................................... 45
SECTION 10.5. Payments Due on Non-Business Day....................... 45
SECTION 10.6. Successors............................................. 45
SECTION 10.7. Headings............................................... 45
SECTION 10.8. Reports, Notices and Demands........................... 45
SECTION 10.9. Agreement Not to Petition.............................. 46
SECTION 10.10. Trust Indenture Act; Conflict with
Trust Indenture Act.................................. 46
SECTION 10.11. Acceptance of Terms of Trust Agreement,
Guarantee and Indenture.............................. 48
</TABLE>
- iii -
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Exhibit A Certificate of Trust
Exhibit B Form of Certificate Depositary Agreement
Exhibit C Form of Common Securities Certificate
Exhibit D Form of Preferred Securities Certificate
</TABLE>
- iv -
<PAGE>
AGREEMENT
Amended and Restated Trust Agreement, dated as of ____________ 1997,
among (i) Premier Financial Bancorp, Inc., a Kentucky corporation (including any
successors or assigns, the "Depositor"), (ii) Bankers Trust Company, a New York
banking corporation, as property trustee, (in such capacity, the "Property
Trustee" and, in its separate corporate capacity and not in its capacity as
Property Trustee, the "Bank"), and (iii) Bankers Trust (Delaware), a Delaware
banking corporation, as Delaware trustee (the "Delaware Trustee") (the Property
Trustee and the Delaware Trustee are referred to collectively herein as the
"Issuer Trustees") and (iv) the several Holders, as hereinafter defined.
WITNESSETH
WHEREAS, the Depositor and the Delaware Trustee have heretofore duly
declared and established a business trust pursuant to the Delaware Business
Trust Act by the entering into a certain Trust Agreement, dated as of May ____,
1997 (the "Original Trust Agreement"), and by the execution and filing by the
Delaware Trustee with the Secretary of State of the State of Delaware of the
Certificate of Trust, filed on May _____, 1997 (the "Certificate of Trust"),
attached as Exhibit A; and
WHEREAS, the Depositor and the Delaware Trustee desire to amend and
restate the Original Trust Agreement in its entirety as set forth herein to
provide for, among other things, (i) the issuance of the Common Securities by
the Issuer Trust to the Depositor, (ii) the issuance and sale of the Preferred
Securities by the Issuer Trust pursuant to the Underwriting Agreement, (iii) the
acquisition by the Issuer Trust from the Depositor of all of the right, title
and interest in the Junior Subordinated Debentures, and (iv) the appointment of
the Property Trustee and the Administrators.
NOW THEREFORE, in consideration of the agreements and obligations set
forth herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, each party, for the benefit of the
other parties and for the benefit of the Holders, hereby amends and restates the
Original Trust Agreement in its entirety and agrees, intending to be legally
bound, as follows:
ARTICLE I
DEFINED TERMS
SECTION 1.1. Definitions.
For all purposes of this Trust Agreement, except as otherwise
expressly provided or unless the context otherwise requires:
(a) The terms defined in this Article have the meanings assigned to
them in this Article and include the plural as well as the singular;
(b) All other terms used herein that are defined in the Trust
Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein;
(c) The words "include," "includes" and "including" shall be deemed
to be followed by the phrase "without limitation";
(d) All accounting terms used but not defined herein have the
meanings assigned to them in accordance with United States generally accepted
accounting principles as in effect at the time of computation;
<PAGE>
- 2 -
(e) Unless the context otherwise requires, any reference to an
"Article" or a "Section" refers to an Article or a Section, as the case may be,
of this Trust Agreement;
(f) The words "herein", "hereof" and "hereunder" and other words of
similar import refer to this Trust Agreement as a whole and not to any
particular Article, Section or other subdivision; and
(g) all references to the date the Preferred Securities were
originally issued shall refer to the date the Preferred Securities were
originally issued.
"Act" has the meaning specified in Section 6.8.
"Additional Amount" means, with respect to Trust Securities of a
given Liquidation Amount and/or a given period, the amount of Additional
Interest (as defined in the Indenture) paid by the Depositor on a Like Amount of
Debentures for such period.
"Additional Sums" has the meaning specified in Section 10.6 of the
Indenture.
"Administrators" means each Person appointed in accordance with
Section 8.20 solely in such Person's capacity as Administrator of the Issuer
Trust heretofore formed and continued hereunder and not in such Person's
individual capacity, or any successor Administrator appointed as herein
provided; with the initial Administrator being J. Howell Kelly.
"Affiliate" of any specified Person means any other Person directly
or indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Applicable Procedures" means, with respect to any transfer or
transaction involving a Global Preferred Security or beneficial interest
therein, the rules and procedures of the Depositary for such Preferred Security,
in each case to the extent applicable to such transaction and as in effect from
time to time.
"Bank" has the meaning specified in the preamble to this Trust
Agreement.
"Bankruptcy Event" means, with respect to any Person:
(a) the entry of a decree or order by a court having jurisdiction in
the premises judging such Person a bankrupt or insolvent, or approving as
properly filed a petition seeking reorganization, arrangement, adjudication or
composition of or in respect of such Person under any applicable federal or
State bankruptcy, insolvency, reorganization or other similar law, or appointing
a receiver, liquidator, assignee, trustee, sequestrator (or other similar
official) of such Person or of any substantial part of its property or ordering
the winding up or liquidation of its affairs, and the continuance of any such
decree or order unstayed and in effect for a period of 60 consecutive days; or
(b) the institution by such Person of proceedings to be adjudicated a
bankrupt or insolvent, or the consent by it to the institution of bankruptcy or
insolvency proceedings against it, or the filing by it of a petition or answer
or consent seeking reorganization or relief under any applicable federal or
State bankruptcy, insolvency, reorganization or other similar law, or the
consent by it to the filing of any such petition or to the appointment of a
receiver, liquidator, assignee, trustee, sequestrator (or similar official) of
such Person or of any substantial part of its property or the making by it of an
assignment for the benefit of creditors, or the admission by it in writing of
its inability to pay its debts generally as they
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become due and its willingness to be adjudicated a bankrupt, or the taking of
corporate action by such Person in furtherance of any such action.
"Bankruptcy Laws" has the meaning specified in Section 10.9.
"Board of Directors" means the board of directors of the Depositor or
the Executive Committee of the board of directors of the Depositor (or any other
committee of the board of directors of the Depositor performing similar
functions) or a committee designated by the board of directors of the Depositor
(or any such committee), comprised of two or more members of the board of
directors of the Depositor or officers of the Depositor, or both.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Depositor to have been duly adopted
by the Depositor's Board of Directors, or such committee of the Board of
Directors or officers of the Depositor to which authority to act on behalf of
the Board of Directors has been delegated, and to be in full force and effect on
the date of such certification, and delivered to the Issuer Trustees.
"Business Day" means a day other than (a) a Saturday or Sunday, (b) a
day on which banking institutions in the Commonwealth of Kentucky or in the City
of New York, are authorized or required by law or executive order to remain
closed or (c) a day on which the Property Trustee's Corporate Trust Office or
the Delaware Trustee's Corporate Trust Office or the Corporate Trust Office of
the Debenture Trustee is closed for business.
"Capital Treatment Event" means, in respect of any Issuer Trust, the
reasonable determination by the Depositor that, as a result of the occurrence of
any amendment to, or change (including any announced prospective change) in, the
laws (or any rules or regulations thereunder) of the United States or any
political subdivision thereof or therein, or as a result of any official or
administrative pronouncement or action or judicial decision interpreting or
applying such laws or regulations, which amendment or change is effective or
such pronouncement, action or decision is announced on or after the date of the
issuance of the Preferred Securities of such Issuer Trust, there is more than an
insubstantial risk that the Depositor will not be entitled to treat an amount
equal to the Liquidation Amount of such Preferred Securities as "Tier 1 Capital"
(or the then equivalent thereof) for purposes of the risk-based capital adequacy
guidelines of the Board of Governors of the Federal Reserve System, as then in
effect and applicable to the Depositor, provided, however that it shall not be
deemed to be a Capital Treatment Event if the Depositor is not entitled to treat
the aggregate amount of the Liquidation Amount of such Preferred Securities as
"Tier 1 Capital" due to the restriction imposed by the Federal Reserve that no
more than 25% of Tier 1 Capital can consist of perpetual preferred stock.
"Certificate Depositary Agreement" means the agreement among the
Issuer Trust, the Depositor and the Depository Trust Company ("DTC"), as the
initial Clearing Agency, dated as of the Closing Date, substantially in the form
attached as Exhibit B, as the same may be amended and supplemented from time to
time.
"Certificate of Trust" has the meaning specified in the preamble to
this Trust Agreement.
"Clearing Agency" means an organization registered as a "clearing
agency" pursuant to Section 17A of the Securities Exchange Act of 1934, as
amended. DTC shall be the initial Clearing Agency.
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"Clearing Agency Participant" means a broker, dealer, bank, other
financial institution or other Person for whom from time to time a Clearing
Agency effects book-entry transfers and pledges of securities deposited with the
Clearing Agency.
"Closing Date" means the Time of Delivery for the Firm Securities,
which date is also the date of execution and delivery of this Trust Agreement.
"Code" means the Internal Revenue Code of 1986, as amended or any
successor statute, in each case as amended from time to time.
"Commission" means the Securities and Exchange Commission, as from
time to time constituted, created under the Exchange Act or, if at any time
after the execution of this instrument such Commission is not existing and
performing the duties now assigned to it under the Trust Indenture Act, then the
body performing such duties at such time.
"Common Securities Certificate" means a certificate evidencing
ownership of Common Securities, substantially in the form attached as Exhibit C.
"Common Security" means an undivided beneficial interest in the
assets of the Issuer Trust, having a Liquidation Amount of $25 and having the
rights provided therefor in this Trust Agreement, including the right to receive
Distributions and a Liquidation Distribution as provided herein.
"Corporate Trust Office" means the principal office of the Property
Trustee located in the City of New York, New York, which at the time of the
execution of this Trust Agreement is located at Four Albany Street, New York,
New York 10006; Attention: Corporate Trust and Agency Group - Corporate Market
Services.
"Debenture Event of Default" means an "Event of Default" as defined
in the Indenture.
"Debenture Redemption Date" means, with respect to any Debentures to
be redeemed under the Indenture, the date fixed for redemption of such
Debentures under the Indenture.
"Debenture Trustee" means Bankers Trust Company, a New York banking
corporation and any successor.
"Delaware Business Trust Act" means Chapter 38 of Title 12 of the
Delaware Code, 12 Del. C. 3801, et seq., as it may be amended from time to time.
"Delaware Trustee" means the corporation identified as the "Delaware
Trustee" in the preamble to this Trust Agreement solely in its capacity as
Delaware Trustee of the Issuer Trust continued hereunder and not in its
individual capacity, or its successor in interest in such capacity, or any
successor trustee appointed as herein provided.
"Depositary" means the Depository Trust Company or any successor
thereto.
"Depositor" has the meaning specified in the preamble to this Trust
Agreement.
"Distribution Date" has the meaning specified in Section 4.1(a).
"Distributions" means amounts payable in respect of the Trust
Securities as provided in Section 4.1.
"DTC" means the Depository Trust Company.
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"Early Termination Event" has the meaning specified in Section 9.2.
"Event of Default" means any one of the following events (whatever
the reason for such Event of Default and whether it shall be voluntary or
involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(a) the occurrence of a Debenture Event of Default; or
(b) default by the Issuer Trust in the payment of any Distribution
when it becomes due and payable, and continuation of such default for a period
of 30 days; or
(c) default by the Issuer Trust in the payment of any Redemption
Price of any Trust Security when it becomes due and payable; or
(d) default in the performance, or breach, in any material respect,
of any covenant or warranty of the Issuer Trustees in this Trust Agreement
(other than a covenant or warranty a default in the performance of which or the
breach of which is dealt with in clause (b) or (c) above) and continuation of
such default or breach for a period of 60 days after there has been given, by
registered or certified mail, to the Issuer Trustees and the Depositor by the
Holders of at least 25% in aggregate Liquidation Amount of the Outstanding
Preferred Securities, a written notice specifying such default or breach and
requiring it to be remedied and stating that such notice is a "Notice of
Default" hereunder; or
(e) the occurrence of any Bankruptcy Event with respect to the
Property Trustee or all or substantially all of its property if a successor
Property Trustee has not been appointed within a period of 90 days thereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and any successor statute thereto, in each case as amended from time to
time.
"Expiration Date" has the meaning specified in Section 9.1.
"Firm Securities" means an aggregate Liquidation Amount of
$25,000,000 of the Issuer Trust's _____% preferred securities.
"Global Preferred Securities Certificate" means a Preferred
Securities Certificate evidencing ownership of Global Preferred Securities.
"Global Preferred Security" means a Preferred Security, the ownership
and transfers of which shall be made through book entries by a Clearing Agency
as described in Section 5.4.
"Guarantee Agreement" means the Guarantee Agreement executed and
delivered by the Depositor and Bankers Trust Company, as trustee,
contemporaneously with the execution and delivery of this Trust Agreement, for
the benefit of the holders of the Preferred Securities, as amended from time to
time.
"Holder" means a Person in whose name a Trust Security or Trust
Securities is registered in the Securities Register; any such Person shall be
deemed to be a beneficial owner within the meaning of the Delaware Business
Trust Act.
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"Indenture" means the Junior Subordinated Indenture, dated as of
__________ __, 1997, between the Depositor and the Debenture Trustee (as amended
or supplemented from time to time) relating to the issuance of the Junior
Subordinated Debentures.
"Investment Company Act" means the Investment Company Act of 1940, as
amended or any successor statute, in each case as amended from time to time.
"Investment Company Event" means the receipt by the Issuer Trust of
an Opinion of Counsel experienced in such matters to the effect that, as a
result of the occurrence of a change in law or regulation or a written change
(including any announced prospective change) in interpretation or application of
law or regulation by any legislative body, court, governmental agency or
regulatory authority, there is more than an insubstantial risk that the Issuer
Trust is or will be considered an "investment company" that is required to be
registered under the Investment Company Act, which change or prospective change
becomes effective or would become effective, as the case may be, on or after the
date of the issuance of the Preferred Securities.
"Issuer Trust" means PFBI Capital Trust.
"Issuer Trustees" means, collectively, the Property Trustee and the
Delaware Trustee.
"Junior Subordinated Debentures" means the aggregate principal amount
of the Depositor's _____% junior subordinated deferrable interest debentures,
due ____________, 2027, issued pursuant to the Indenture.
"Lien" means any lien, pledge, charge, encumbrance, mortgage, deed of
trust, adverse ownership interest, hypothecation, assignment, security interest
or preference, priority or other security agreement or preferential arrangement
of any kind or nature whatsoever.
"Like Amount" means (a) with respect to a redemption of Trust
Securities, Trust Securities having a Liquidation Amount equal to that portion
of the principal amount of Junior Subordinated Debentures to be
contemporaneously redeemed in accordance with the Indenture, allocated to the
Common Securities and to the Preferred Securities based upon the relative
Liquidation Amounts of such classes and (b) with respect to a distribution of
Junior Subordinated Debentures to Holders of Trust Securities in connection with
a dissolution or liquidation of the Issuer Trust, Junior Subordinated Debentures
having a principal amount equal to the Liquidation Amount of the Trust
Securities of the Holder to whom such Junior Subordinated Debentures are
distributed.
"Liquidation Amount" means the stated amount of $25 per Trust
Security.
"Liquidation Date" means the date on which Junior Subordinated
Debentures are to be distributed to Holders of Trust Securities in connection
with a dissolution and liquidation of the Issuer Trust pursuant to Section 9.4.
"Liquidation Distribution" has the meaning specified in Section
9.4(d).
"Majority in Liquidation Amount of the Preferred Securities" or
"Majority in Liquidation Amount of the Common Securities" means, except as
provided by the Trust Indenture Act, Preferred Securities or Common Securities,
as the case may be, representing more than 50% of the aggregate Liquidation
Amount of all then Outstanding Preferred Securities or Common Securities, as the
case may be.
"Officers' Certificate" means a certificate signed by the Chairman of
the Board, Chief Executive Officer, President or Vice President, and by the
Chief Financial Officer, the Treasurer, an
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Assistant Treasurer, the Secretary or an Assistant Secretary, of the Depositor,
and delivered to the party provided herein. Any Officers' Certificate delivered
with respect to compliance with a condition or covenant provided for in this
Trust Agreement shall include:
(a) a statement by each officer signing the Officers' Certificate
that such officer has read the covenant or condition and the definitions
relating thereto;
(b) a brief statement of the nature and scope of the examination or
investigation undertaken by such officer in rendering the Officers' Certificate;
(c) a statement that such officer has made such examination or
investigation as, in such officer's opinion, is necessary to enable such officer
to express an informed opinion as to whether or not such covenant or condition
has been complied with; and
(d) a statement as to whether, in the opinion of each such officer,
such condition or covenant has been complied with.
"Opinion of Counsel" means a written opinion of counsel, who may be
counsel for or an employee of the Depositor or any Affiliate of the Depositor.
"Option Closing Date" shall have the meaning provided in the
Underwriting Agreement.
"Option Securities" means an aggregate Liquidation Amount of
$3,750,000 of the Issuer Trust's _____% preferred securities, issuable to the
Underwriters, at its option, exercisable within 30 days after the date of the
Prospectus, solely to cover over-allotments, if any.
"Original Trust Agreement" has the meaning specified in the preamble
to this Trust
Agreement.
"Outstanding," with respect to Trust Securities, means, as of the
date of determination, all Trust Securities theretofore executed and delivered
under this Trust Agreement, except:
(a) Trust Securities theretofore canceled by the Property Trustee or
delivered to the Property Trustee for cancellation;
(b) Trust Securities for whose payment or redemption money in the
necessary amount has been theretofore deposited with the Property Trustee or any
Paying Agent for the Holders of such Preferred Securities, provided that if such
Trust Securities are to be redeemed, notice of such redemption has been duly
given pursuant to this Trust Agreement; and
(c) Trust Securities which have been paid or in exchange for or in
lieu of which other Trust Securities have been executed and delivered pursuant
to Sections 5.4, 5.5, 5.6 and 5.13; provided, however, that in determining
whether the Holders of the requisite Liquidation Amount of the Outstanding
Preferred Securities have given any request, demand, authorization, direction,
notice, consent or waiver hereunder, Preferred Securities owned by the
Depositor, any Issuer Trustee, any Administrator or any Affiliate of the
Depositor shall be disregarded and deemed not to be Outstanding, except that (a)
in determining whether any Issuer Trustee shall be protected in relying upon any
such request, demand, authorization, direction, notice, consent or waiver, only
Preferred Securities that such Issuer Trustee or such Administrator, as the case
may be, knows to be so owned shall be so disregarded and (b) the foregoing shall
not apply at any time when all of the outstanding Preferred Securities are owned
by the Depositor, one or more of the Issuer Trustees, one or more of the
Administrators and/or any such
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Affiliate. Preferred Securities so owned which have been pledged in good faith
may be regarded as Outstanding if the pledgee establishes to the satisfaction of
the Administrators the pledgee's right so to act with respect to such Preferred
Securities and that the pledgee is not the Depositor or any Affiliate of the
Depositor.
"Owner" means each Person who is the beneficial owner of Global
Preferred Securities as reflected in the records of the Clearing Agency or, if a
Clearing Agency Participant is not the Owner, then as reflected in the records
of a Person maintaining an account with such Clearing Agency, directly or
indirectly, in accordance with the rules of such Clearing Agency.
"Paying Agent" means any paying agent or co-paying agent appointed
pursuant to Section 5.10 and shall initially be the Property Trustee.
"Payment Account" means a segregated non-interest-bearing corporate
trust account maintained by the Property Trustee with the Property Trustee in
its trust department for the benefit of the Holders in which all amounts paid in
respect of the Junior Subordinated Debentures will be held and from which the
Property Trustee, through the Paying Agent, shall make payments to the Holders
in accordance with Sections 4.1 and 4.2.
"Person" means a legal person, including any individual, corporation,
estate, partnership, joint venture, association, joint stock company, company,
limited liability company, trust, unincorporated organization or government or
any agency or political subdivision thereof, or any other entity of whatever
nature.
"Preferred Securities Certificate" means a certificate evidencing
ownership of Preferred Securities, substantially in the form attached as Exhibit
D.
"Preferred Security" means a Firm Security or an Option Security,
each constituting a preferred undivided beneficial interest in the assets of the
Issuer Trust, having a Liquidation Amount of $25 and having the rights provided
therefor in this Trust Agreement, including the right to receive Distributions
and a Liquidation Distribution as provided herein.
"Property Trustee" means the Person identified as the "Property
Trustee" in the preamble to this Trust Agreement solely in its capacity as
Property Trustee of the Issuer Trust formed and continued hereunder and not in
its individual capacity, or its successor in interest in such capacity, or any
successor property trustee appointed as herein provided.
"Redemption Date" means, with respect to any Trust Security to be
redeemed, the date fixed for such redemption by or pursuant to this Trust
Agreement; provided that each Junior Subordinated Debenture Redemption Date and
the stated maturity of the Junior Subordinated Debentures shall be a Redemption
Date for a Like Amount of Trust Securities, including but not limited to any
date of redemption pursuant to the occurrence of any Special Event.
"Redemption Price" means with respect to a redemption of any Trust
Security, the Liquidation Amount of such Trust Security, together with
accumulated but unpaid Distributions to but excluding the date fixed for
redemption, plus the related amount of the premium, if any, paid by the
Depositor upon the concurrent redemption of a Like Amount of Junior Subordinated
Debentures.
"Relevant Trustee" has the meaning specified in Section 8.10.
"Responsible Officer" when used with respect to the Property Trustee
means any officer assigned to the Corporate Trust Office, including any managing
director, vice president, assistant vice president, assistant treasurer,
assistant secretary or any other officer of the Property Trustee customarily
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performing functions similar to those performed by any of the above designated
officers and having direct responsibility for the administration of the
Indenture, and also, with respect to a particular matter, any other officer to
whom such matter is referred because of such officer's knowledge of and
familiarity with the particular subject.
"Securities Act" means the Securities Act of 1933, as amended, and
any successor statute thereto, in each case as amended from time to time.
"Securities Register" and "Securities Registrar" have the respective
meanings specified in Section 5.5.
"Special Event" means any Tax Event, Capital Treatment Event or
Investment Company
Event.
"Successor Preferred Securities" of any particular Preferred
Securities Certificate means every Preferred Securities Certificate issued
after, and evidencing all or a portion of the same beneficial interest in the
Issuer Trust as that evidenced by, such particular Preferred Securities
Certificate; and, for the purposes of this definition, any Preferred Securities
Certificate executed and delivered under Section 5.6 in exchange for or in lieu
of a mutilated, destroyed, lost or stolen Preferred Securities Certificate shall
be deemed to evidence the same beneficial interest in the Issuer Trust as the
mutilated, destroyed, lost or stolen Preferred Securities Certificate.
"Tax Event" means the receipt by the Issuer Trust of an Opinion of
Counsel experienced in such matters to the effect that, as a result of any
amendment to, or change (including any announced prospective change) in, the
laws (or any regulations thereunder) of the United States or any political
subdivision or taxing authority thereof or therein, or as a result of any
official or administrative pronouncement or action or judicial decision
interpreting or applying such laws or regulations, which amendment or change is
effective or which pronouncement, action or decision is announced on or after
the date of issuance of the Preferred Securities, there is more than an
insubstantial risk that (i) the Issuer Trust is, or will be within 90 days of
the delivery of such Opinion of Counsel, subject to United States federal income
tax with respect to income received or accrued on the Junior Subordinated
Debentures, (ii) interest payable by the Depositor on the Junior Subordinated
Debentures is not, or within 90 days of the delivery of such Opinion of Counsel
will not be, deductible by the Depositor, in whole or in part, for United States
federal income tax purposes, or (iii) the Issuer Trust is, or will be within 90
days of the delivery of such Opinion of Counsel, subject to more than a de
minimis amount of other taxes, duties or other governmental changes.
"Time of Delivery" means 9:00 a.m. Eastern Standard Time, either (i)
with respect to the Firm Securities or Common Securities, on the fourth Business
Day (unless postponed in accordance with the provisions of Section ____ of the
Underwriting Agreement) following the date of execution of the Underwriting
Agreement, or such other time not later than ten Business Days after such date
as shall be agreed upon by the Underwriters, the Issuer Trust and the Company,
or (ii) with respect to the Option Securities, the Option Closing Date.
"Trust Agreement" means this Amended and Restated Trust Agreement, as
the same may be modified, amended or supplemented in accordance with the
applicable provisions hereof, including (i) all Exhibits hereto, and (ii) for
all purposes of this Amended and Restated Trust Agreement any such modification,
amendment or supplement, the provisions of the Trust Indenture Act that are
deemed to be a part of and govern this Amended and Restated Trust Agreement and
any modification, amendment or supplement, respectively.
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"Trust Indenture Act" means the Trust Indenture Act of 1939 or any
successor statute, in each case as amended from time to time.
"Trust Property" means (a) the Junior Subordinated Debentures, (b)
any cash on deposit in, or owing to, the Payment Account, and (c) all proceeds
and rights in respect of the foregoing and any other property and assets for the
time being held or deemed to be held by the Property Trustee pursuant to the
trusts of this Trust Agreement.
"Trust Securities Certificate" means any one of the Common Securities
Certificates or the Preferred Securities Certificates.
"Trust Security" means any one of the Common Securities or the
Preferred Securities.
"Underwriters" has the meaning specified in the Underwriting
Agreement.
"Underwriting Agreement" means the Underwriting Agreement, dated as
of __________ __, 1997, among the Issuer Trust, the Depositor and the
Underwriters, as the same may be amended from time to time.
ARTICLE II
CONTINUATION OF THE ISSUER TRUST
SECTION 2.1. Name.
The Issuer Trust continued hereby shall be known as "PFBI Capital
Trust", as such name may be modified from time to time by the Administrators
following written notice to the Holders of Trust Securities and the other Issuer
Trustees, in which name the Administrators and the Issuer Trustees may engage in
the transactions contemplated hereby, make and execute contracts and other
instruments on behalf of the Issuer Trust and sue and be sued.
SECTION 2.2. Office of the Delaware Trustee; Principal Place of
Business.
The address of the Delaware Trustee in the State of Delaware is
Bankers Trust (Delaware), 1001 Jefferson Street, Suite 550, Wilmington, DE
19801, Attention: Lisa Wilkins, or such other address in the State of Delaware
as the Delaware Trustee may designate by written notice to the Holders and the
Depositor. The principal executive office of the Issuer Trust is in care of
Premier Financial Bancorp, Inc., 120 N. Hamilton Street, Georgetown, Kentucky
40324, Attention: Office of the Secretary.
SECTION 2.3. Initial Contribution of Trust Property, Organizational
Expenses.
The Property Trustee acknowledges receipt in trust from the Depositor
in connection with this Trust Agreement of the sum of $10, which constitutes the
initial Trust Property. The Depositor shall pay all organizational expenses of
the Issuer Trust as they arise or shall, upon request of any Issuer Trustee,
promptly reimburse such Issuer Trustee for any such reasonable expenses paid by
such Issuer Trustee. The Depositor shall make no claim upon the Trust Property
for the payment of such expenses.
SECTION 2.4. Issuance of the Preferred Securities.
On __________ __, 1997, the Depositor, both on its own behalf and on
behalf of the Issuer Trust pursuant to the Original Trust Agreement, executed
and delivered the Underwriting Agreement. Contemporaneously with the execution
and delivery of this Trust Agreement, an Administrator, on behalf
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of the Issuer Trust, shall manually execute in accordance with Section 5.3 and
the Property Trustee shall authenticate in accordance with Section 5.3 and
deliver to the Underwriters, Firm Securities Certificates, registered in the
names requested by the Underwriters, in an aggregate amount of ____________ Firm
Securities having an aggregate Liquidation Amount of $____________, against
receipt of the aggregate purchase price of such Preferred Securities of
$____________, by the Property Trustee. At the option of the Underwriters,
within 30 days of the date of the Prospectus, and solely for the purpose of
covering an over-allotment, if any, an Administrator, on behalf of the Issuer
Trust, shall manually execute in accordance with Section 5.3 and the Property
Trustee shall authenticate in accordance with Section 5.4 and deliver to the
Underwriters, Option Securities Certificates, registered in the names requested
by the Underwriters, up to ____________ Option Securities having an aggregate
Liquidation Amount of up to $____________, against receipt of the aggregate
purchase price of such Option Securities of up to $____________, by the Property
Trustee.
SECTION 2.5. Issuance of the Common Securities; Subscription and
Purchase of Junior Subordinated Debentures.
Contemporaneously with the execution and delivery of this Trust
Agreement, an Administrator, on behalf of the Issuer Trust, shall manually
execute in accordance with Section 5.2 and deliver to the Depositor Common
Securities Certificates, registered in the name of the Depositor, in an
aggregate amount of ____________ Common Securities having an aggregate
Liquidation Amount of $____________ against receipt by the Property Trustee of
the aggregate purchase price of such Common Securities of $____________ by the
Property Trustee. In the event of any exercise of an over-allotment option
requiring issuance of additional Preferred Securities Certificates, as described
in Section 2.4 above, a proportionate number of additional Common Securities
Certificates, with corresponding aggregate Liquidation Amount, shall be
delivered to the Depositor. Contemporaneously with the executions, and
deliveries of Common Securities Certificates and any Preferred Securities
Certificates, an Administrator, on behalf of the Issuer Trust, shall subscribe
for and purchase from the Depositor corresponding amounts of Junior Subordinated
Debentures, registered in the name of the Property Trustee and having an
aggregate principal amount equal to $____________, plus, in the event of any
exercise of the over-allotment option (i) a corresponding additional number of
Junior Subordinated Debentures not exceeding an aggregate principal amount of
$____________ and (ii) a corresponding number of Junior Subordinated Debentures
not exceeding an aggregate principal amount equal to the aggregate Liquidation
Amount of Common Securities issued pursuant to such exercise of an
over-allotment option; and, in satisfaction of the purchase price for such
Junior Subordinated Debentures, the Property Trustee, on behalf of the Issuer
Trust, shall deliver to the Depositor the sum of $____________, plus any
corresponding over-allotment option amount (being the sum of the amounts
delivered to the Property Trustee pursuant to (i) the second sentence of Section
2.4, and (ii) the first and second sentences of this Section 2.5) and receive on
behalf of the Issuer Trust the Junior Subordinated Debentures.
SECTION 2.6. Declaration of Trust.
The exclusive purposes and functions of the Issuer Trust are to (a)
issue and sell Trust Securities and use the proceeds from such sale to acquire
the Junior Subordinated Debentures, and (b) engage in only those other
activities necessary or incidental thereto. The Depositor hereby appoints the
Issuer Trustees as trustees of the Issuer Trust, to have all the rights, powers
and duties to the extent set forth herein, and the Issuer Trustees hereby accept
such appointment. The Property Trustee hereby declares that it will hold the
Trust Property in trust upon and subject to the conditions set forth herein for
the benefit of the Issuer Trust and the Holders. The Depositor hereby appoints
the Administrators (as agents of the Issuer Trust), with such Administrators
having all rights, powers and duties set forth herein with respect to
accomplishing the purposes of the Issuer Trust, and the Administrators hereby
accept such appointment, provided, however, that it is the intent of the parties
hereto that such
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Administrators shall not be trustees or fiduciaries with respect to the Issuer
Trust and this Agreement shall be construed in a manner consistent with such
intent. The Property Trustee shall have the right and power to perform those
duties assigned to the Administrators. The Delaware Trustee shall not be
entitled to exercise any powers, nor shall the Delaware Trustee have any of the
duties and responsibilities, of the Property Trustee or the Administrators set
forth herein. The Delaware Trustee shall be one of the trustees of the Issuer
Trust for the sole and limited purpose of fulfilling the requirements of Section
3807 of the Delaware Business Trust Act and for taking such actions as are
required to be taken by a Delaware Trustee under the Delaware Business Trust
Act.
SECTION 2.7. Authorization to Enter into Certain Transactions.
(a) The Issuer Trustees and the Administrators shall conduct the
affairs of the Issuer Trust in accordance with the terms of this Trust
Agreement. Subject to the limitations set forth in paragraph (b) of this Section
and in accordance with the following provisions (i), (ii) and (iii), the Issuer
Trustees and the Administrators shall act as follows:
(i) Each Administrator shall have the power and authority to act on
behalf of the Issuer Trust with respect to the following:
(A) the compliance with the Underwriting Agreement regarding
the issuance and sale of the Trust Securities;
(B) the compliance with the Securities Act, applicable state
securities or blue sky laws, and the Trust Indenture Act;
(C) the listing of the Preferred Securities upon such
securities exchange or exchanges or upon the Nasdaq National Market
as shall be determined by the Depositor, with the registration of the
Preferred Securities under the Exchange Act, if required, and the
preparation and filing of all periodic and other reports and other
documents pursuant to the foregoing;
(D) the application for a taxpayer identification number for
the Issuer Trust;
(E) the preparation of a registration statement and a
prospectus in relation to the Preferred Securities, including any
amendments thereto and the taking of any action necessary or
desirable to sell the Preferred Securities in a transaction or series
of transactions subject to the registration requirements of the
Securities Act; and
(F) any action incidental to the foregoing as necessary or
advisable to give effect to the terms of this Trust Agreement.
(ii) The Property Trustee shall have the power and authority to act
on behalf of the Issuer Trust with respect to the following matters:
(A) the establishment of the Payment Account;
(B) the receipt of the Junior Subordinated Debentures;
(C) the receipt and collection of interest, principal and any
other payments made in respect of the Junior Subordinated Debentures
in the Payment Account;
(D) the distribution of amounts owed to the Holders in respect
of the Trust Securities;
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(E) the exercise of all of the rights, powers and privileges
of a holder of the Junior Subordinated Debentures;
(F) the sending of notices of default and other information
regarding the Trust Securities and the Junior Subordinated Debentures
to the Holders in accordance with this Trust Agreement;
(G) the distribution of the Trust Property in accordance with
the terms of this Trust Agreement;
(H) to the extent provided in this Trust Agreement, the
winding up of the affairs of and liquidation of the Issuer Trust and
the preparation, execution and filing of the certificate of
cancellation with the Secretary of State of the State of Delaware;
and
(I) after an Event of Default (other than under paragraph (b),
(c) or (d) of the definition of such term if such Event of Default is
by or with respect to the Property Trustee), comply with the
provisions of this Trust Agreement and take any action to give effect
to the terms of this Trust Agreement and protect and conserve the
Trust Property for the benefit of the Holders (without consideration
of the effect of any such action on any particular Holder); provided,
however, that nothing in this Section 2.7(a)(ii) shall require the
Property Trustee to take any action that is not otherwise required in
this Trust Agreement.
(b) So long as this Trust Agreement remains in effect, the Issuer
Trust (or the Issuer Trustees or Administrators acting on behalf of the Issuer
Trust) shall not undertake any business, activities or transaction except as
expressly provided herein or contemplated hereby. In particular, neither the
Issuer Trustees nor the Administrators shall (i) acquire any investments or
engage in any activities not authorized by this Trust Agreement, (ii) sell,
assign, transfer, exchange, mortgage, pledge, set-off or otherwise dispose of
any of the Trust Property or interests therein, including to Holders, except as
expressly provided herein, (iii) take any action that would reasonably be
expected to cause the Issuer Trust to become taxable as a corporation for United
States federal income tax purposes, (iv) incur any indebtedness for borrowed
money or issue any other debt, or (v) take or consent to any action that would
result in the placement of a Lien on any of the Trust Property. The Property
Trustee shall defend all claims and demands of all Persons at any time claiming
any Lien on any of the Trust Property adverse to the interest of the Issuer
Trust or the Holders in their capacity as Holders.
(c) In connection with the issue and sale of the Preferred
Securities, the Depositor shall have the power and authority to assist the
Issuer Trust with respect to, or effect on behalf of the Issuer Trust, the
following (and any actions taken by the Depositor in furtherance of the
following prior to the date of this Trust Agreement are hereby ratified and
confirmed in all respects):
(i) the preparation by the Issuer Trust of, and the execution
and delivery of, a registration statement, and a prospectus in
relation to the Preferred Securities, including any amendments
thereto and the taking of any action necessary or desirable to sell
the Preferred Securities in a transaction or a series of transactions
subject to the registration requirements of the Securities Act;
(ii) the determination of the States in which to take
appropriate action to qualify or register for sale all or part of the
Preferred Securities and the determination of any and all such acts,
other than actions that must be taken by or on behalf of the Issuer
Trust, and the advice to the Issuer Trustees of actions they must
take on behalf of the Issuer Trust, and the preparation for execution
and filing of any documents to be executed and filed by the Issuer
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Trust or on behalf of the Issuer Trust, as the Depositor deems
necessary or advisable in order to comply with the applicable laws of
any such States in connection with the sale of the Preferred
Securities;
(iii) the negotiation of the terms of, and the execution and
delivery of, the Underwriting Agreement providing for the sale of the
Preferred Securities;
(iv) the taking of any other actions necessary or desirable to
carry out any of the foregoing activities; and
(v) compliance with the listing requirements of the Preferred
Securities upon such securities exchange or exchanges, or upon the
Nasdaq National Market, as shall be determined by the Depositor, the
registration of the Preferred Securities under the Exchange Act, if
required, and the preparation and filing of all periodic and other
reports and other documents pursuant to the foregoing.
(d) Notwithstanding anything herein to the contrary, the
Administrators and the Property Trustee are authorized and directed to conduct
the affairs of the Issuer Trust and to operate the Issuer Trust so that the
Issuer Trust will not be deemed to be an "investment company" required to be
registered under the Investment Company Act, and will not be taxable as a
corporation for the United States federal income tax purposes and so that the
Junior Subordinated Debentures will be treated as indebtedness of the Depositor
for United States income tax purposes. In this connection, the Property Trustee,
the Administrators and the Holders of Common Securities are authorized to take
any action, not inconsistent with applicable law, the Certificate of Trust or
this Trust Agreement, that the Property Trustee, the Administrators and Holders
of Common Securities determine in their discretion to be necessary or desirable
for such purposes, as long as such action does not adversely affect in any
material respect the interests of the holders of the Outstanding Preferred
Securities. In no event shall the Administrators or the Issuer Trustees be
liable to the Issuer Trust or the Holders for any failure to comply with this
section that results from a change in law or regulations or in the
interpretation thereof.
SECTION 2.8. Assets of Trust.
The assets of the Issuer Trust shall consist solely of the Trust
Property.
SECTION 2.9. Title to Trust Property.
Legal title to all Trust Property shall be vested at all times in the
Property Trustee (in its capacity as such) and shall be held and administered by
the Property Trustee for the benefit of the Issuer Trust and the Holders in
accordance with this Trust Agreement.
ARTICLE III
PAYMENT ACCOUNT
SECTION 3.1. Payment Account.
(a) On or prior to the Closing Date, the Property Trustee shall
establish the Payment Account. The Property Trustee and its agents shall have
exclusive control and sole right of withdrawal with respect to the Payment
Account for the purpose of making deposits in and withdrawals from the Payment
Account in accordance with this Trust Agreement. All monies and other property
deposited or held from time to time in the Payment Account shall be held by the
Property Trustee in the Payment Account for the exclusive benefit of the Holders
and for distribution as herein provided, including (and subject to) any priority
of payments provided for herein.
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(b) The Property Trustee shall deposit in the Payment Account,
promptly upon receipt, all payments of principal of or interest on, and any
other payments or proceeds with respect to, the Junior Subordinated Debentures.
Amounts held in the Payment Account shall not be invested by the Property
Trustee pending distribution thereof.
ARTICLE IV
DISTRIBUTIONS; REDEMPTION
SECTION 4.1. Distributions.
(a) The Trust Securities represent undivided beneficial interests in
the Trust Property, and Distributions (including Distributions of Additional
Amounts) will be made on the Trust Securities at the rate and on the dates that
payments of interest (including payments of Additional Interest, as defined in
the Indenture) are made on the Junior Subordinated Debentures. Accordingly:
(i) Distributions on the Trust Securities shall be cumulative
and will accumulate whether or not there are funds of the Issuer
Trust available for the payment of Distributions. Distributions shall
accumulate from __________ __, 1997, and, except in the event (and to
the extent) that the Depositor exercises its right to defer the
payment of interest on the Debentures pursuant to the Indenture,
shall be payable quarterly in arrears on March 31, June 30, September
30 and December 31 of each year, commencing on __________ __, 1997.
If any date on which a Distribution is otherwise payable on the Trust
Securities is not a Business Day, then the payment of such
Distribution shall be made on the next succeeding day that is a
Business Day (without any interest or other payment in respect of any
such delay), with the same force and effect as if made on the date on
which such payment was originally payable (each date on which
distributions are payable in accordance with this Section 4.1(a), a
"Distribution Date").
(ii) The Trust Securities shall be entitled to Distributions
payable at a rate of _____% per annum of the Liquidation Amount of
the Trust Securities. The amount of Distributions payable for any
period less than a full Distribution period shall be computed on the
basis of a 360-day year of twelve 30-day months and the actual number
of days elapsed in a partial month in a period. Distributions payable
for each full Distribution period will be computed by dividing the
rate per annum by four. The amount of Distributions payable for any
period shall include any Additional Amounts in respect of such
period.
(iii) So long as no Debenture Event of Default has occurred
and is continuing, the Depositor 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 a period not exceeding 20
consecutive quarterly periods (an "Extension Period"), provided that
no Extension Period may extend beyond ______, 2027. As a consequence
of any such deferral, quarterly Distributions on the Trust Securities
by the Trust will also be deferred (and the amount of Distributions
to which Holders of the Trust Securities are entitled will accumulate
additional Distributions thereon at the rate per annum of _____% per
annum, compounded quarterly) from the relevant payment date for such
Distributions, computed on the basis of a 360- day year of twelve
30-day months and the actual days elapsed in a partial month in such
period. Additional Distributions payable for each full Distribution
period will be computed by dividing
<PAGE>
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the rate per annum by four (4). The term "Distributions" as used in
Section 4.1 shall include any such additional Distributions provided
pursuant to this Section 4.1(a)(iii).
(iv) Distributions on the Trust Securities shall be made by
the Property Trustee from the Payment Account and shall be payable on
each Distribution Date only to the extent that the Issuer Trust has
funds then on hand and available in the Payment Account for the
payment of such Distributions.
(b) Distributions on the Trust Securities with respect to a
Distribution Date shall be payable to the Holders thereof as they appear on the
Securities Register for the Trust Securities at the close of business on the
relevant record date, which shall be at the close of business on the 15th day of
March, June, September or December (whether or not a Business Day).
SECTION 4.2. Redemption.
(a) On each Junior Subordinated Debenture Redemption Date and on the
stated maturity of the Junior Subordinated Debentures, the Issuer Trust will be
required to redeem a Like Amount of Trust Securities at the Redemption Price.
(b) Notice of redemption shall be given by the Property Trustee by
first-class mail, postage prepaid, mailed not less than 30 nor more than 60 days
prior to the Redemption Date to each Holder of Trust Securities to be redeemed,
at such Holder's address appearing in the Security Register. All notices of
redemption shall state:
(i) the Redemption Date;
(ii) the Redemption Price, or if the Redemption Price cannot
be calculated prior to the time the notice is required to be sent,
the estimate of the Redemption Price provided pursuant to the
Indenture together with a statement that it is an estimate and that
the actual Redemption Price will be calculated on the third Business
Day prior to the Redemption Date (and if an estimate is provided, a
further notice shall be sent of the actual Redemption Price on the
date, or as soon as practicable thereafter, that notice of such
actual Redemption Price is received pursuant to the Indenture);
(iii) the CUSIP number or CUSIP numbers of the Preferred
Securities affected;
(iv) if less than all the Outstanding Trust Securities are to
be redeemed, the identification and the total Liquidation Amount of
the particular Trust Securities to be redeemed;
(v) that on the Redemption Date the Redemption Price will
become due and payable upon each such Trust Security to be redeemed
and that Distributions thereon will cease to accumulate on and after
said date, except as provided in Section 4.2(d) below; and
(vi) the place or places where Trust Securities are to be
surrendered for the payment of the Redemption Price.
The Issuer Trust in issuing the Trust Securities shall use "CUSIP"
numbers, and the Property Trustee shall indicate the "CUSIP" numbers of the
Trust Securities in notices of redemption and related materials as a convenience
to Holders; provided that any such notice may state that no representation is
made as to the correctness of such numbers either as printed on the Trust
Securities or as contained in any notice of redemption and related material.
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(c) The Trust Securities redeemed on each Redemption Date shall be
redeemed at the Redemption Price with the applicable proceeds from the
contemporaneous redemption of Junior Subordinated Debentures. Redemptions of the
Trust Securities shall be made and the Redemption Price shall be payable on each
Redemption Date only to the extent that the Issuer Trust has funds then on hand
and available in the Payment Account for the payment of such Redemption Price.
(d) If the Property Trustee gives a notice of redemption in respect
of any Preferred Securities, then, by 12:00 noon, New York City time, on the
Redemption Date, subject to Section 4.2(c), the Property Trustee will, with
respect to Preferred Securities held in global form, irrevocably deposit with
the Clearing Agency for such Preferred Securities, to the extent available
therefor, funds sufficient to pay the applicable Redemption Price and will give
such Clearing Agency irrevocable instructions and authority to pay the
Redemption Price to the Holders of the Preferred Securities. With respect to
Preferred Securities that are not held in global form, the Property Trustee,
subject to Section 4.2(c), will irrevocably deposit with the Paying Agent, to
the extent available therefor, funds sufficient to pay the applicable Redemption
Price and will give the Paying Agent irrevocable instructions and authority to
pay the Redemption Price to the Holder of the Preferred Securities upon
surrender of their Preferred Securities Certificates. Notwithstanding the
foregoing, Distributions payable on or prior to the Redemption Date for any
Trust Securities called for redemption shall be payable to the Holders of such
Trust Securities as they appear on the Register for the Trust Securities on the
relevant record dates for the related Distribution Dates. If notice of
redemption shall have been given and funds deposited as required, then, upon the
date of such deposit, all rights of Holders holding Trust Securities so called
for redemption will cease, except the right of such Holders to receive the
Redemption Price and any Distribution payable in respect of the Trust Securities
on or prior to the Redemption Date, but without interest, and such Securities
will cease to be Outstanding. In the event that any date on which any applicable
Redemption Price is payable is not a Business Day, then payment of the
applicable Redemption Price payable on such date will be made on the next
succeeding day that is a Business Day (and without any interest or other payment
in respect of any such delay), except that, if such Business Day falls in the
next calendar year, such payment will be made on the immediately preceding
Business Day, in each case, with the same force and effect as if made on such
date. In the event that payment of the Redemption Price in respect of any Trust
Securities called for redemption is improperly withheld or refused and not paid
either by the Issuer Trust or by the Depositor pursuant to the Guarantee
Agreement, Distributions on such Trust Securities will continue to accumulate,
as set forth in Section 4.1, from the Redemption Date originally established by
the Issuer Trust for such Trust Securities to the date such applicable
Redemption Price is actually paid, in which case the actual payment date will be
the date fixed for redemption for purposes of calculating the applicable
Redemption Price.
(e) Subject to Section 4.3(a), if less than all the Outstanding Trust
Securities are to be redeemed on a Redemption Date, then the particular
Preferred Securities to be redeemed shall be selected not more than 60 days
prior to the Redemption Date by the Property Trustee from the Outstanding
Preferred Securities not previously called for redemption in such a manner as
the Property Trustee shall deem fair and appropriate.
SECTION 4.3. Subordination of Common Securities.
(a) Payment of Distributions (including Additional Amounts, if
applicable) on, the Redemption Price of, and the Liquidation Distribution in
respect of, the Trust Securities, as applicable, shall be made, subject to
Section 4.2(e), pro rata among the Common Securities and the Preferred
Securities based on the Liquidation Amount of such Trust Securities; provided,
however, that if on any Distribution Date or Redemption Date any Event of
Default resulting from a Debenture Event of Default in Section 5.1(1) or 5.1(2)
of the Indenture shall have occurred and be continuing, no payment of any
Distribution (including any Additional Amounts) on, Redemption Price of, or
Liquidation Distribution
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in respect of, any Common Security, and no other payment on account of the
redemption, liquidation or other acquisition of Common Securities, shall be made
unless payment in full in cash of all accumulated and unpaid Distributions
(including any Additional Amounts) on all Outstanding Preferred Securities for
all Distribution periods terminating on or prior thereto, or, in the case of
payment of the Redemption Price, the full amount of such Redemption Price on all
Outstanding Preferred Securities then called for redemption, or in the case of
payment of the Liquidation Distribution the full amount of such Liquidation
Distribution on all Outstanding Preferred Securities, shall have been made or
provided for, and all funds immediately available to the Property Trustee shall
first be applied to the payment in full in cash of all Distributions (including
any Additional Amounts) on, or the Redemption Price of, Preferred Securities
then due and payable. The existence of an Event of Default does not entitle the
Holders of Preferred Securities to accelerate the maturity thereof.
(b) In the case of the occurrence of any Event of Default resulting
from any Debenture Event of Default, the Holder of the Common Securities shall
have no right to act with respect to any such Event of Default under this Trust
Agreement until the effects of all such Events of Default with respect to the
Preferred Securities have been cured, waived or otherwise eliminated. Until all
such Events of Default under this Trust Agreement with respect to the Preferred
Securities have been so cured, waived or otherwise eliminated, the Property
Trustee shall act solely on behalf of the Holders of the Preferred Securities
and not on behalf of the Holder of the Common Securities, and only the Holders
of the Preferred Securities will have the right to direct the Property Trustee
to act on their behalf.
SECTION 4.4. Payment Procedures.
Payments of Distributions (including any Additional Amounts) in
respect of the Preferred Securities shall be made by check mailed to the address
of the Person entitled thereto as such address shall appear on the Securities
Register or, if the Preferred Securities are held by a Clearing Agency, such
Distributions shall be made to the Clearing Agency in immediately available
funds, which will credit the relevant accounts on the applicable Distribution
Dates. Payments of Distributions to Holders of $1,000,000 or more in aggregate
Liquidation Amount of Preferred Securities may be made by wire transfer of
immediately available funds upon written request of such Holder of Preferred
Securities to the Securities Registrar not later than 15 calendar days prior to
the date on which the Distribution is payable. Payments in respect of the Common
Securities shall be made in such manner as shall be mutually agreed between the
Property Trustee and the Holder of the Common Securities.
SECTION 4.5. Tax Returns and Reports.
The Administrators shall prepare (or cause to be prepared), at the
Depositor's expense, and file all United States federal, state and local tax and
information returns and reports required to be filed by or in respect of the
Issuer Trust. In this regard, the Administrators shall (a) prepare and file (or
cause to be prepared and filed) all Internal Revenue Service forms required to
be filed in respect of the Issuer Trust in each taxable year of the Issuer Trust
and (b) prepare and furnish (or cause to be prepared and furnished) to each
Holder all Internal Revenue Service forms required to be provided by the Issuer
Trust. The Administrators shall provide the Depositor and the Property Trustee
with a copy of all such returns and reports promptly after such filing or
furnishing. The Issuer Trustees and the Administrators shall comply with United
States federal withholding and backup withholding tax laws and information
reporting requirements with respect to any payments to Holders under the Trust
Securities.
On or before December 15 of each year during which any Preferred
Securities are outstanding, the Administrators shall furnish to the Paying Agent
such information as may be reasonably requested by the Property Trustee in order
that the Property Trustee may prepare the information which it is required to
report for such year on Internal Revenue Service Forms 1096 and 1099 pursuant to
Section 6049 of the Internal Revenue Code of 1986, as amended. Such information
shall include the amount of original issue discount includible in income for
each outstanding Preferred Security during such year.
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SECTION 4.6. Payment of Taxes; Duties, Etc. of the Issuer Trust.
Upon receipt under the Junior Subordinated Debentures of Additional
Sums, the Property Trustee shall promptly pay any taxes, duties or governmental
charges of whatsoever nature (other than withholding taxes) imposed on the
Issuer Trust by the United States or any other taxing authority.
SECTION 4.7. Payments under Indenture or Pursuant to Direct Actions.
Any amount payable hereunder to any Holder of Preferred Securities
shall be reduced by the amount of any corresponding payment such Holder has
directly received pursuant to Section 5.8 of the Indenture or Section 5.13 of
this Trust Agreement.
SECTION 4.8. Liability of the Holder of Common Securities.
The Holder of Common Securities shall be liable for the debts and
obligations of the Issuer Trust as set forth in Section 6.7 of the Indenture
regarding allocation of expenses.
ARTICLE V
TRUST SECURITIES CERTIFICATES
SECTION 5.1. Initial Ownership.
Upon the formation of the Issuer Trust and the contribution by the
Depositor pursuant to Section 2.3 and until the issuance of the Trust
Securities, and at any time during which no Trust Securities are outstanding,
the Depositor shall be the sole beneficial owner of the Issuer Trust.
SECTION 5.2. The Trust Securities Certificates.
(a) The Trust Securities Certificates shall be executed on behalf of
the Issuer Trust by manual or facsimile signature of at least one Administrator
except as provided in Section 5.3. Trust Securities Certificates bearing the
signatures of individuals who were, at the time when such signatures shall have
been affixed, authorized to sign on behalf of the Issuer Trust, shall be validly
issued and entitled to the benefits of this Trust Agreement, notwithstanding
that such individuals or any of them shall have ceased to be so authorized prior
to the delivery of such Trust Securities Certificates or did not hold such
offices at the date of delivery of such Trust Securities Certificates. A
transferee of a Trust Securities Certificate shall become a Holder, and shall be
entitled to the rights and subject to the obligations of a Holder hereunder,
upon due registration of such Trust Securities Certificate in such transferee's
name pursuant to Section 5.5.
(b) Upon their original issuance, Preferred Securities Certificates
shall be issued in the form of one or more fully registered Global Preferred
Securities Certificates which will be deposited with or on behalf of the
Depositary and registered in the name of the Depositary's nominee. Unless and
until it is exchangeable in whole or in part for the Preferred Securities in
definitive form, a global security may not be transferred except as a whole by
the Depositary to a nominee of the Depositary or by a nominee of the Depositary
to the Depositary or another nominee of the Depositary or by the Depositary or
any such nominee to a successor of such Depositary or a nominee of such
successor.
(c) A single Common Securities Certificate representing the Common
Securities shall be issued to the Depositor in the form of a definitive Common
Securities Certificate.
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SECTION 5.3. Execution and Delivery of Trust Securities Certificates.
At the Time of Delivery, the Administrators shall cause Trust
Securities Certificates, in an aggregate Liquidation Amount as provided in
Sections 2.4 and 2.5, to be executed on behalf of the Issuer Trust and delivered
to the Property Trustee and upon such delivery the Property Trustee shall
countersign and register such Trust Securities Certificates and deliver such
Trust Securities Certificates upon the written order of the Depositor, executed
by two authorized officers thereof, without further corporate action by the
Depositor, in authorized denominations.
SECTION 5.4. Global Preferred Security.
(a) Any Global Preferred Security issued under this Trust Agreement
shall be registered in the name of the nominee of the Clearing Agency and
delivered to such custodian therefor, and such Global Preferred Security shall
constitute a single Preferred Security for all purposes of this Trust Agreement.
(b) Notwithstanding any other provision in this Trust Agreement, a
Global Preferred Security may not be exchanged in whole or in part for Preferred
Securities registered, and no transfer of the Global Preferred Security in whole
or in part may be registered, in the name of any Person other than the Clearing
Agency for such Global Preferred Security, or its nominee thereof unless (i)
such Clearing Agency advises the Property Trustee in writing that such Clearing
Agency is no longer willing or able to properly discharge its responsibilities
as Clearing Agency with respect to such Global Preferred Security, and the
Depositor is unable to locate a qualified successor, (ii) the Issuer Trust at
its option advises the Depositary in writing that it elects to terminate the
book-entry system through the Clearing Agency, or (iii) there shall have
occurred and be continuing an Event of Default.
(c) If a Preferred Security is to be exchanged in whole or in part
for a beneficial interest in a Global Preferred Security, then either (i) such
Global Preferred Security shall be so surrendered for exchange or cancellation
as provided in this Article V or (ii) the Liquidation Amount thereof shall be
reduced or increased by an amount equal to the portion thereof to be so
exchanged or cancelled, or equal to the Liquidation Amount of such other
Preferred Security to be so exchanged for a beneficial interest therein, as the
case may be, by means of an appropriate adjustment made on the records of the
Security Registrar, whereupon the Property Trustee, in accordance with the
Applicable Procedures, shall instruct the Clearing Agency or its authorized
representative to make a corresponding adjustment to its records. Upon any such
surrender or adjustment of a Global Preferred Security by the Clearing Agency,
accompanied by registration instructions, the Administrators shall execute and
the Property Trustee shall, subject to Section 5.4(b) and as otherwise provided
in this Article V, countersign, register and deliver any Preferred Securities
issuable in exchange for such Global Preferred Security (or any portion thereof)
in accordance with the instructions of the Clearing Agency. The Property Trustee
shall not be liable for any delay in delivery of such instructions and may
conclusively rely on, and shall be fully protected in relying on, such
instructions.
(d) Every Preferred Security countersigned, registered and delivered
upon registration of transfer of, or in exchange for or in lieu of, a Global
Preferred Security or any portion thereof, whether pursuant to this Article V or
Article IV or otherwise, shall be authenticated and delivered in the form of,
and shall be, a Global Preferred Security, unless such Global Preferred Security
is registered in the name of a Person other than the Clearing Agency for such
Global Preferred Security or a nominee thereof.
(e) The Clearing Agency or its nominee, as the registered owner of a
Global Preferred Security, shall be considered the Holder of the Preferred
Securities represented by such Global Preferred Security for all purposes under
this Trust Agreement and the Preferred Securities, and owners of beneficial
interests in such Global Preferred Security shall hold such interests pursuant
to the Applicable Procedures and, except as otherwise provided herein, shall not
be entitled to receive physical delivery
<PAGE>
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of any such Preferred Securities in definitive form and shall not be considered
the Holders thereof under this Trust Agreement. Accordingly, any such owner's
beneficial interest in the Global Preferred Security shall be shown only on, and
the transfer of such interest shall be effected only through, records maintained
by the Clearing Agency or its nominee. Neither the Property Trustee, the
Securities Registrar nor the Depositor shall have any liability in respect of
any transfers effected by the Clearing Agency.
(f) The rights of owners of beneficial interests in a Global
Preferred Security shall be exercised only through the Clearing Agency and shall
be limited to those established by law and agreements between such owners and
the Clearing Agency.
SECTION 5.5. Registration of Transfer and Exchange Generally; Certain
Transfers and Exchanges; Preferred Securities Certificates.
(a) The Property Trustee shall keep or cause to be kept at its
Corporate Trust Office a register or registers for the purpose of registering
Preferred Securities Certificates and transfers and exchanges of Preferred
Securities Certificates in which the registrar and transfer agent with respect
to the Preferred Securities (the "Securities Registrar"), subject to such
reasonable regulations as it may prescribe, shall provide for the registration
of Preferred Securities Certificates and Common Securities Certificates (subject
to Section 5.11 in the case of Common Securities Certificates) and registration
of transfers and exchanges of Preferred Securities Certificates as herein
provided. Such register is herein sometimes referred to as the "Securities
Register." The Property Trustee is hereby appointed "Securities Registrar" for
the purpose of registering Preferred Securities and transfers of Preferred
Securities as herein provided.
Upon surrender for registration of transfer of any Preferred Security
at the offices or agencies of the Property Trustee designated for that purpose,
the Administrators and the Property Trustee shall execute, countersign, register
and deliver, in the name of the designated transferee or transferees, one or
more new Preferred Securities of the same series of any authorized denominations
of like tenor and aggregate principal amount and bearing such legends as may be
required by this Trust Agreement.
At the option of the Holder, Preferred Securities may be exchanged
for other Preferred Securities of any authorized denominations, of like tenor
and aggregate Liquidation Amount and bearing such legends as may be required by
this Trust Agreement, upon surrender of the Preferred Securities to be exchanged
at such office or agency. Whenever any securities are so surrendered for
exchange, the Administrators shall execute and the Property Trustee shall
countersign, register and deliver the Preferred Securities that the Holder
making the exchange is entitled to receive.
All Preferred Securities issued upon any transfer or exchange of
Preferred Securities shall be the valid obligations of the Issuer Trust,
evidencing the same debt, and entitled to the same benefits under this Trust
Agreement, as the Preferred Securities surrendered upon such transfer or
exchange.
Every Preferred Security presented or surrendered for transfer or
exchange shall (if so required by the Property Trustee) be duly endorsed, or be
accompanied by a written instrument of transfer in form satisfactory to the
Property Trustee and the Securities Registrar, duly executed by the Holder
thereof or such Holder's attorney duly authorized in writing.
No service charge shall be made to a Holder for any transfer or
exchange of Preferred Securities, but the Property Trustee may require payment
of a sum sufficient to cover any tax or other governmental charge that may be
imposed in connection with any transfer or exchange of Preferred Securities.
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Neither the Issuer Trust nor the Property Trustee shall be required,
pursuant to the provisions of this Section, (i) to issue, register the transfer
of or exchange any Preferred Security during a period beginning at the opening
of business 15 days before the day of selection for redemption of Preferred
Securities pursuant to Article IV and ending at the close of business on the day
of mailing of the notice of redemption, or (ii) to register the transfer of or
exchange any Preferred Security so selected for redemption in whole or in part,
except, in the case of any such Preferred Security to be redeemed in part, any
portion thereof not to be redeemed.
(b) Certain Transfers and Exchanges. Trust Securities may only be
transferred, in whole or in part, in accordance with the terms and conditions
set forth in this Trust Agreement. Any transfer or purported transfer of any
Trust Security not made in accordance with this Trust Agreement shall be null
and void.
(i) Non Global Security to Non Global Security. A Trust
Security that is not a Global Preferred Security may be transferred,
in whole or in part, to a Person who takes delivery in the form of
another Trust Security that is not a Global Security as provided in
Section 5.5(a).
(ii) Free Transferability. Subject to this Section 5.5,
Preferred Securities shall be freely transferable.
(iii) Exchanges Between Global Preferred Security and
Non-Global Preferred Security. A beneficial interest in a Global
Preferred Security may be exchanged for a Preferred Security that is
not a Global Preferred Security as provided in Section 5.4.
SECTION 5.6. Mutilated, Destroyed, Lost or Stolen Trust Securities
Certificates.
If (a) any mutilated Trust Securities Certificate shall be
surrendered to the Securities Registrar, or if the Securities Registrar shall
receive evidence to its satisfaction of the destruction, loss or theft of any
Trust Securities Certificate and (b) there shall be delivered to the Securities
Registrar and the Administrators such security or indemnity as may be required
by them to save each of them harmless, then in the absence of notice that such
Trust Securities Certificate shall have been acquired by a bona fide purchaser,
the Administrators, or any one of them, on behalf of the Issuer Trust shall
execute and make available for delivery, and the Property Trustee shall
countersign and register, in exchange for or in lieu of any such mutilated,
destroyed, lost or stolen Trust Securities Certificate, a new Trust Securities
Certificate of like class, tenor and denomination. In connection with the
issuance of any new Trust Securities Certificate under this Section, the
Administrators or the Securities Registrar may require the payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection therewith. Any duplicate Trust Securities Certificate issued pursuant
to this Section shall constitute conclusive evidence of an undivided beneficial
interest in the assets of the Issuer Trust corresponding to that evidenced by
the lost, stolen or destroyed Trust Certificate, as if originally issued,
whether or not the lost, stolen or destroyed Trust Securities Certificate shall
be found at any time.
SECTION 5.7. Persons Deemed Holders.
The Issuer Trustees, the Securities Registrar or the Depositor shall
treat the Person in whose name any Trust Securities are issued as the owner of
such Trust Securities for the purpose of receiving Distributions and for all
other purposes whatsoever, and none of the Issuer Trustees, the Administrators,
the Securities Registrar nor the Depositor shall be bound by any notice to the
contrary.
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SECTION 5.8. Access to List of Holders' Names and Addresses.
Each Holder and each Owner shall be deemed to have agreed not to hold
the Depositor, the Property Trustee, or the Administrators accountable by reason
of the disclosure of its name and address, regardless of the source from which
such information was derived.
SECTION 5.9. Maintenance of Office or Agency.
The Property Trustee shall designate, with the consent of the
Administrators, which consent shall not be unreasonably withheld, an office or
offices or agency or agencies where Preferred Securities Certificates may be
surrendered for registration of transfer or exchange and where notices and
demands to or upon the Issuer Trustees in respect of the Trust Securities
Certificates may be served. The Property Trustee initially designates its
Corporate Trust Office at 123 Washington Street, New York, NY 10006, Attention:
Corporate Trust and Agency Group - Corporate Market Services, as its corporate
trust office for such purposes. The Property Trustee shall give prompt written
notice to the Depositor, the Administrators and to the Holders of any change in
the location of the Securities Register or any such office or agency.
SECTION 5.10. Appointment of Paying Agent.
The Paying Agent shall make Distributions to Holders from the Payment
Account and shall report the amounts of such Distributions to the Property
Trustee and the Administrators. Any Paying Agent shall have the revocable power
to withdraw funds from the Payment Account solely for the purpose of making the
Distributions referred to above. The Property Trustee may revoke such power and
remove any Paying Agent in its sole discretion. The Paying Agent shall initially
be the Property Trustee. Any Person acting as Paying Agent shall be permitted to
resign as Paying Agent upon 30 days' written notice to the Administrators, and
the Property Trustee. In the event that the Property Trustee shall no longer be
the Paying Agent or a successor Paying Agent shall resign or its authority to
act be revoked, the Property Trustee shall appoint a successor (which shall be a
bank or trust company) that is reasonably acceptable to the Administrators to
act as Paying Agent. Such successor Paying Agent or any additional Paying Agent
appointed by the Administrators shall execute and deliver to the Issuer Trustees
an instrument in which such successor Paying Agent or additional Paying Agent
shall agree with the Issuer Trustees that as Paying Agent, such successor Paying
Agent or additional Paying Agent will hold all sums, if any, held by it for
payment to the Holders in trust for the benefit of the Holders entitled thereto
until such sums shall be paid to such Holders. The Paying Agent shall return all
unclaimed funds to the Property Trustee and upon removal of a Paying Agent such
Paying Agent shall also return all funds in its possession to the Property
Trustee. The provisions of Sections 8.1, 8.3 and 8.6 herein shall apply to the
Bank also in its role as Paying Agent, for so long as the Bank shall act as
Paying Agent and, to the extent applicable, to any other paying agent appointed
hereunder. Any reference in this Trust Agreement to the Paying Agent shall
include any co-paying agent chosen by the Property Trustee unless the context
requires otherwise.
SECTION 5.11. Ownership of Common Securities by Depositor.
At each Time of Delivery, the Depositor shall acquire and retain
beneficial and record ownership of the Common Securities except (i) in
connection with a consolidation or merger of the Depositor into another
corporation or any conveyance, transfer or lease by the Depositor of its
properties and assets substantially as an entirety to any Person, pursuant to
Section 8.1 of the Indenture, or (ii) a transfer to an Affiliate of the
Depositor in compliance with applicable law (including the Securities Act and
applicable state securities and blue sky laws). To the fullest extent permitted
by law, any attempted transfer of the Common Securities shall be void. The
Administrators shall cause each Common Securities
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Certificate issued to the Depositor to contain a legend stating "THIS
CERTIFICATE IS NOT TRANSFERABLE EXCEPT TO A SUCCESSOR IN INTEREST TO THE
DEPOSITOR OR AN AFFILIATE OF THE DEPOSITOR IN COMPLIANCE WITH APPLICABLE LAW AND
SECTION 5.11 OF THE TRUST AGREEMENT."
SECTION 5.12. Notices to Clearing Agency.
To the extent that a notice or other communication to the Holders is
required under this Trust Agreement, for so long as Preferred Securities are
represented by a Global Preferred Securities Certificate, the Administrators and
the Issuer Trustees shall give all such notices and communications specified
herein to be given to the Clearing Agency, and shall have no obligations to the
Owners.
SECTION 5.13. Rights of Holders.
(a) The legal title to the Trust Property is vested exclusively in
the Property Trustee (in its capacity as such) in accordance with Section 2.9,
and the Holders shall not have any right or title therein other than the
undivided beneficial interest in the assets of the Issuer Trust conferred by
their Trust Securities and they shall have no right to call for any partition or
division of property, profits or rights of the Issuer Trust except as described
below. The Trust Securities shall be personal property giving only the rights
specifically set forth therein and in this Trust Agreement. The Trust Securities
shall have no preemptive or similar rights and when issued and delivered to
Holders against payment of the purchase price therefor will be fully paid and
nonassessable by the Issuer Trust. Subject to Section 4.8 hereof the Holders of
the Trust Securities, in their capacities as such, shall be entitled to the same
limitation of personal liability extended to stockholders of private
corporations for profit organized under the General Corporation Law of the State
of Delaware.
(b) For so long as any Preferred Securities remain Outstanding, if,
upon a Debenture Event of Default, the Debenture Trustee fails or the holders of
not less than 25% in principal amount of the outstanding Junior Subordinated
Debentures fail to declare the principal of all of the Junior Subordinated
Debentures to be immediately due and payable, the Holders of at least 25% in
Liquidation Amount of the Preferred Securities then Outstanding shall have such
right to make such declaration by a notice in writing to the Property Trustee,
the Depositor and the Debenture Trustee.
At any time after such a declaration of acceleration with respect to
the Junior Subordinated Debentures has been made and before a judgment or decree
for payment of the money due has been obtained by the Debenture Trustee as
provided in the Indenture, the Holders of a majority in Liquidation Amount of
the Preferred Securities, by written notice to the Property Trustee, the
Depositor and the Debenture Trustee, may rescind and annul such declaration and
its consequences if:
(i) the Depositor has paid or deposited with the Debenture
Trustee a sum sufficient to pay
(A) all overdue installments of interest on all of the
Junior Subordinated
Debentures,
(B) any accrued Additional Interest on all of the
Junior Subordinated Debentures,
(C) the principal of (and premium, if any, on) any
Junior Subordinated Debentures which have become due otherwise
than by such declaration of acceleration and interest and
Additional Interest thereon at the rate borne by the Junior
Subordinated Debentures, and
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(D) all sums paid or advanced by the Debenture Trustee
under the Indenture and the reasonable compensation, expenses,
disbursements and advances of the Debenture Trustee and the
Property Trustee, their agents and counsel; and
(ii) all Events of Default with respect to the Junior
Subordinated Debentures, other than the non-payment of the
principal of the Junior Subordinated Debentures which has
become due solely by such acceleration, have been cured or
waived as provided in Section 5.13 of the Indenture.
If the Property Trustee fails to annul any such declaration and waive
such default, the Holders of at least a Majority in Liquidation Amount of the
Preferred Securities shall also have the right to rescind and annul such
declaration and its consequences by written notice to the Depositor, the
Property Trustee and the Debenture Trustee, subject to the satisfaction of the
conditions set forth in Clause (i) and (ii) of this Section 5.13.
The Holders of at least a Majority in Liquidation Amount of the
Preferred Securities may, on behalf of the Holders of all the Preferred
Securities, waive any past default under the Indenture, except a default in the
payment of principal or interest (unless such default has been cured and a sum
sufficient to pay all matured installments of interest and principal due
otherwise than by acceleration 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 Debentures. No such rescission shall affect any subsequent
default or impair any right consequent thereon.
Upon receipt by the Property Trustee of written notice declaring such
an acceleration, or rescission and annulment thereof, by Holders of the
Preferred Securities all or part of which is represented by Global Preferred
Securities, a record date shall be established for determining Holders of
Outstanding Preferred Securities entitled to join in such notice, which record
date shall be at the close of business on the day the Property Trustee receives
such notice. The Holders on such record date, or their duly designated proxies,
and only such Persons, shall be entitled to join in such notice, whether or not
such Holders remain Holders after such record date; provided, that, unless such
declaration of acceleration, or rescission and annulment, as the case may be,
shall have become effective by virtue of the requisite percentage having joined
in such notice prior to the day which is 90 days after such record date, such
notice of declaration of acceleration, or rescission and annulment, as the case
may be, shall automatically and without further action by any Holder be canceled
and of no further effect. Nothing in this paragraph shall prevent a Holder, or a
proxy of a Holder, from giving, after expiration of such 90-day period, a new
written notice of declaration of acceleration, or rescission and annulment
thereof, as the case may be, that is identical to a written notice which has
been canceled pursuant to the proviso to the preceding sentence, in which event
a new record date shall be established pursuant to the provisions of this
Section 5.13(b).
(c) For so long as any Preferred Securities remain Outstanding, to
the fullest extent permitted by law and subject to the terms of this Trust
Agreement and the Indenture, upon a Debenture Event of Default specified in
Section 5.1(1) or 5.1(2) of the Indenture, any Holder of Preferred Securities
shall have the right to institute a proceeding directly against the Depositor,
pursuant to Section 5.9 of the Indenture, for enforcement of payment to such
Holder of the principal amount of or interest on Junior Subordinated Debentures
having an aggregate principal amount equal to the aggregate Liquidation Amount
of the Preferred Securities of such Holder (a "Direct Action"). Except as set
forth in Sections 5.13(b) and 5.13 (c), the Holders of Preferred Securities
shall have no right to exercise directly any right or remedy available to the
holders of, or in respect of, the Junior Subordinated Debentures.
<PAGE>
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ARTICLE VI
ACTS OF HOLDERS; MEETINGS; VOTING
SECTION 6.1. Limitations on Holder's Voting Rights.
(a) Except as provided in this Trust Agreement and in the Indenture
and as otherwise required by law, no Holder of Preferred Securities shall have
any right to vote or in any manner otherwise control the administration,
operation and management of the Issuer Trust or the obligations of the parties
hereto, nor shall anything herein set forth or contained in the terms of the
Trust Securities Certificates be construed so as to constitute the Holders from
time to time as members of an association.
(b) So long as any Junior Subordinated Debentures are held by the
Property Trustee on behalf of the Issuer Trust, the Property Trustee shall not
(i) direct the time, method and place of conducting any proceeding for any
remedy available to the Debenture Trustee, or executing any trust or power
conferred on the Property Trustee with respect to such Junior Subordinated
Debentures, (ii) waive any past default that may be waived under Section 5.13 of
the Indenture, (iii) exercise any right to rescind or annul a declaration that
the principal of all the Junior Subordinated Debentures shall be due and payable
or (iv) consent to any amendment, modification or termination of the Indenture
or the Junior Subordinated Debentures, where such consent shall be required,
without, in each case, obtaining the prior approval of the Holders of at least a
Majority in Liquidation Amount of the Preferred Securities, provided, however,
that where a consent under the Indenture would require the consent of each
Holder of Junior Subordinated Debentures affected thereby, no such consent shall
be given by the Property Trustee without the prior written consent of each
Holder of Preferred Securities. The Property Trustee shall not revoke any action
previously authorized or approved by a vote of the Holders of Preferred
Securities, except by a subsequent vote of the Holders of Preferred Securities.
The Property Trustee shall notify all Holders of the Preferred Securities of any
notice of default received with respect to the Junior Subordinated Debentures.
In addition to obtaining the foregoing approvals of the Holders of the Preferred
Securities, prior to taking any of the foregoing actions, the Issuer Trustees
shall, at the expense of the Depositor, obtain an Opinion of Counsel experienced
in such matters to the effect that such action will not cause the Issuer Trust
to be taxable as a corporation for United States federal income tax purposes.
(c) If any proposed amendment to the Trust Agreement provides for, or
the Issuer Trust otherwise proposes to effect, (i) any action that would
adversely affect in any material respect the interests, powers, preferences or
special rights of the Preferred Securities, whether by way of amendment to the
Trust Agreement or otherwise, or (ii) the dissolution of the Issuer Trust, other
than pursuant to the terms of this Trust Agreement, then the Holders of
Outstanding Trust Securities as a class will be entitled to vote on such
amendment or proposal and such amendment or proposal shall not be effective
except with the approval of the Holders of at least a Majority in Liquidation
Amount of the Preferred Securities. Notwithstanding any other provision of this
Trust Agreement, no amendment to this Trust Agreement may be made if, as a
result of such amendment, it would cause the Issuer Trust to be taxable as a
corporation for United States federal income tax purposes.
SECTION 6.2. Notice of Meetings.
Notice of all meetings of the Holders, stating the time, place and
purpose of the meeting, shall be given by the Property Trustee pursuant to
Section 10.8 to each Holder of record, at his registered address, at least 15
days and not more than 90 days before the meeting. At any such meeting, any
business properly before the meeting may be so considered whether or not stated
in the notice of the meeting. Any adjourned meeting may be held as adjourned
without further notice.
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SECTION 6.3. Meetings of Holders.
No annual meeting of Holders is required to be held. The Property
Trustee, however, shall call a meeting of Holders to vote on any matter upon the
written request of the Holders of record of 25% of the aggregate Liquidation
Amount of the Preferred Securities and the Administrators or the Property
Trustee may, at any time in their discretion, call a meeting of Holders of
Preferred Securities to vote on any matters as to which Holders are entitled to
vote.
Holders of at least a Majority in Liquidation Amount of the Preferred
Securities, present in person or represented by proxy, shall constitute a quorum
at any meeting of Holders of the Preferred Securities.
If a quorum is present at a meeting, an affirmative vote by the
Holders of record present, in person or by proxy, holding Preferred Securities
representing at least a Majority in Liquidation Amount of the Preferred
Securities held by the Holders present, either in person or by proxy, at such
meeting shall constitute the action of the Holders of Preferred Securities,
unless this Trust Agreement requires a greater number of affirmative votes.
SECTION 6.4. Voting Rights.
Holders shall be entitled to one vote for each $25 of Liquidation
Amount represented by their Outstanding Trust Securities in respect of any
matter as to which such Holders are entitled to vote.
SECTION 6.5. Proxies, etc.
At any meeting of Holders, any Holder entitled to vote thereat may
vote by proxy, provided that no proxy shall be voted at any meeting unless it
shall have been placed on file with the Property Trustee, or with such other
officer or agent of the Issuer Trust as the Property Trustee may direct, for
verification prior to the time at which such vote shall be taken. Pursuant to a
resolution of the Property Trustee, proxies may be solicited in the name of the
Property Trustee or one or more officers of the Property Trustee. Only Holders
of record shall be entitled to vote. When Trust Securities are held jointly by
several persons, any one of them may vote at any meeting in person or by proxy
in respect of such Trust Securities, but if more than one of them shall be
present at such meeting in person or by proxy, and such joint owners or their
proxies so present disagree as to any vote to be cast, such vote shall not be
received in respect of such Trust Securities. A proxy purporting to be executed
by or on behalf of a Holder shall be deemed valid unless challenged at or prior
to its exercise, and the burden of proving invalidity shall rest on the
challenger. No proxy shall be valid more than three years after its date of
execution.
SECTION 6.6. Holder Action by Written Consent.
Any action which may be taken by Holders at a meeting may be taken
without a meeting if Holders holding at least a Majority in Liquidation Amount
of all Trust Securities entitled to vote in respect of such action (or such
larger proportion thereof as shall be required by any other provision of this
Trust Agreement) shall consent to the action in writing.
SECTION 6.7. Record Date for Voting and Other Purposes.
For the purposes of determining the Holders who are entitled to
notice of and to vote at any meeting or by written consent, or to participate in
any distribution on the Trust Securities in respect of which a record date is
not otherwise provided for in this Trust Agreement, or for the purpose of any
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other action, the Administrators or Property Trustee may from time to time fix a
date, not more than 90 days prior to the date of any meeting of Holders or the
payment of a distribution or other action, as the case may be, as a record date
for the determination of the identity of the Holders of record for such
purposes.
SECTION 6.8. Acts of Holders.
Any request, demand, authorization, direction, notice, consent,
waiver or other action provided or permitted by this Trust Agreement to be
given, made or taken by Holders may be embodied in and evidenced by one or more
instruments of substantially similar tenor signed by such Holders in person or
by an agent duly appointed in writing; and, except as otherwise expressly
provided herein, such action shall become effective when such instrument or
instruments are delivered to the Property Trustee. Such instrument or
instruments (and the action embodied therein and evidenced thereby) are herein
sometimes referred to as the "Act" of the Holders signing such instrument or
instruments. Proof of execution of any such instrument or of a writing
appointing any such agent shall be sufficient for any purpose of this Trust
Agreement and (subject to Section 8.1) conclusive in favor of the Issuer
Trustees, if made in the manner provided in this Section.
The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where such
execution is by a signer acting in a capacity other than his individual
capacity, such certificate or affidavit shall also constitute sufficient proof
of his authority. The fact and date of the execution of any such instrument or
writing, or the authority of the Person executing the same, may also be proved
in any other manner which any Issuer Trustee or Administrator receiving the same
deems sufficient.
The ownership of Trust Securities shall be proved by the Securities
Register.
Any request, demand, authorization, direction, notice, consent,
waiver or other Act of the Holder of any Trust Security shall bind every future
Holder of the same Trust Security and the Holder of every Trust Security issued
upon the registration of transfer thereof or in exchange therefor or in lieu
thereof in respect of anything done, omitted or suffered to be done by the
Issuer Trustees, the Administrators or the Issuer Trust in reliance thereon,
whether or not notation of such action is made upon such Trust Security.
Without limiting the foregoing, a Holder entitled hereunder to take
any action hereunder with regard to any particular Trust Security may do so with
regard to all or any part of the Liquidation Amount of such Trust Security or by
one or more duly appointed agents each of which may do so pursuant to such
appointment with regard to all or any part of such Liquidation Amount.
If any dispute shall arise among the Holders, the Administrators or
the Issuer Trustees with respect to the authenticity, validity or binding nature
of any request, demand, authorization, direction, consent, waiver or other Act
of such Holder or Issuer Trustee under this Article VI, then the determination
of such matter by the Property Trustee shall be conclusive with respect to such
matter.
A Holder may institute a legal proceeding directly against the
Depositor under the Guarantee Agreement to enforce its rights under the
Guarantee Agreement without first instituting a legal proceeding against the
Guarantee Trustee (as defined in the Guarantee Agreement), the Issuer Trust, any
Issuer Trustee, any Administrator or any person or entity.
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SECTION 6.9. Inspection of Records.
Upon reasonable notice to the Administrators and the Property
Trustee, the records of the Issuer Trust shall be open to inspection by Holders
during normal business hours for any purpose reasonably related to such Holder's
interest as a Holder.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
SECTION 7.1. Representations and Warranties of the Property Trustee
and the Delaware Trustee.
The Property Trustee and the Delaware Trustee, each severally on
behalf of and as to itself, hereby represents and warrants for the benefit of
the Depositor and the Holders that:
(a) The Property Trustee is a banking corporation with trust powers,
duly organized, validly existing and in good standing under the laws of New
York, with trust power and authority to execute and deliver, and to carry out
and perform its obligations under the terms of this Trust Agreement.
(b) The execution, delivery and performance by the Property Trustee
of this Trust Agreement has been duly authorized by all necessary corporate
action on the part of the Property Trustee; and this Trust Agreement has been
duly executed and delivered by the Property Trustee, and constitutes a legal,
valid and binding obligation of the Property Trustee, enforceable against it in
accordance with its terms, subject to applicable bankruptcy, reorganization,
moratorium, insolvency, and other similar laws affecting creditors' rights
generally and to general principles of equity and the discretion of the court
(regardless of whether the enforcement of such remedies is considered in a
proceeding in equity or at law).
(c) The execution, delivery and performance of this Trust Agreement
by the Property Trustee does not conflict with or constitute a breach of the
certificate of incorporation or by-laws of the Property Trustee.
(d) At the Time of Delivery, the Property Trustee has not knowingly
created any liens or encumbrances on the Trust Securities.
(e) No consent, approval or authorization of, or registration with or
notice to, any New York State or federal banking authority is required for the
execution, delivery or performance by the Property Trustee, of this Trust
Agreement.
(f) The Delaware Trustee is duly organized, validly existing and in
good standing under the laws of the State of Delaware, with trust power and
authority to execute and deliver, and to carry out and perform its obligations
under the terms of, the Trust Agreement.
(g) The execution, delivery and performance by the Delaware Trustee
of this Trust Agreement has been duly authorized by all necessary corporate
action on the part of the Delaware Trustee; and this Trust Agreement has been
duly executed and delivered by the Delaware Trustee, and constitutes a legal,
valid and binding obligation of the Delaware Trustee, enforceable against it in
accordance with its terms, subject to applicable bankruptcy, reorganization,
moratorium, insolvency, and other similar laws affecting creditors' right
generally and to general principles of equity and the discretion
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of the court (regardless of whether the enforcement of such remedies is
considered in a proceeding in equity or at law).
(h) The execution, delivery and performance of this Trust Agreement
by the Delaware Trustee does not conflict with or constitute a breach of the
certificate of incorporation or by-laws of the Delaware Trustee.
(i) No consent, approval or authorization of, or registration with or
notice to any state or Federal banking authority is required for the execution,
delivery or performance by the Delaware Trustee, of this Trust Agreement.
(j) The Delaware Trustee is an entity which has its principal place
of business in the State of Delaware.
SECTION 7.2. Representations and Warranties of Depositor.
The Depositor hereby represents and warrants for the benefit of the
Holders that:
(a) the Trust Securities Certificates issued at the Time of Delivery
on behalf of the Issuer Trust have been duly authorized and will have been duly
and validly executed, and, subject to payment therefor, issued and delivered by
the Issuer Trustees pursuant to the terms and provisions of, and in accordance
with the requirements of, this Trust Agreement, and the Holders will be, as of
each such date, entitled to the benefits of this Trust Agreement; and
(b) there are no taxes, fees or other governmental charges payable by
the Issuer Trust (or the Issuer Trustees on behalf of the Issuer Trust) under
the laws of the State of Delaware or any political subdivision thereof in
connection with the execution, delivery and performance by either the Property
Trustee or the Delaware Trustee, as the case may be, of this Trust Agreement.
ARTICLE VIII
THE ISSUER TRUSTEES; THE ADMINISTRATORS
SECTION 8.1. Certain Duties and Responsibilities.
(a) The duties and responsibilities of the Issuer Trustees and the
Administrators shall be as provided by this Trust Agreement and, in the case of
the Property Trustee, by the Trust Indenture Act. Notwithstanding the foregoing,
no provision of this Trust Agreement shall require the Issuer Trustees or the
Administrators to expend or risk their own funds or otherwise incur any
financial liability in the performance of any of their duties hereunder, or in
the exercise of any of their rights or powers, if they shall have reasonable
grounds for believing that repayment of such funds or adequate indemnity against
such risk or liability is not reasonably assured to it or them. Whether or not
therein expressly so provided, every provision of this Trust Agreement relating
to the conduct or affecting the liability of or affording protection to the
Issuer Trustees or the Administrators shall be subject to the provisions of this
Section. Nothing in this Trust Agreement shall be construed to release an
Administrator or the Issuer Trustees from liability for his or its own negligent
action, his or its own negligent failure to act, or his or its own willful
misconduct. To the extent that, at law or in equity, an Issuer Trustee or
Administrator has duties and liabilities relating to the Issuer Trust or to the
Holders, such Issuer Trustee or Administrator shall not be liable to the Issuer
Trust or to any Holder for such Issuer Trustee's or Administrator's good faith
reliance on the provisions of this Trust Agreement. The provisions of this Trust
Agreement, to the extent that they restrict the duties and liabilities of the
Issuer Trustees and
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Administrators otherwise existing at law or in equity, are agreed by the
Depositor and the Holders to replace his or such other duties and liabilities of
the Issuer Trustees and Administrators.
(b) All payments made by the Property Trustee or a Paying Agent in
respect of the Trust Securities shall be made only from the revenue and proceeds
from the Trust Property and only to the extent that there shall be sufficient
revenue or proceeds from the Trust Property to enable the Property Trustee or a
Paying Agent to make payments in accordance with the terms hereof. Each Holder,
by his or its acceptance of a Trust Security, agrees that he or it will look
solely to the revenue and proceeds from the Trust Property to the extent legally
available for distribution to it or him as herein provided and that neither the
Issuer Trustees nor the Administrators are personally liable to it or him for
any amount distributable in respect of any Trust Security or for any other
liability in respect of any Trust Security. This Section 8.1(b) does not limit
the liability of the Issuer Trustees expressly set forth elsewhere in this Trust
Agreement or, in the case of the Property Trustee, in the Trust Indenture Act.
(c) The Property Trustee, before the occurrence of any Event of
Default and after the curing of all Events of Default that may have occurred,
shall undertake to perform only such duties as are specifically set forth in
this Trust Agreement (including pursuant to Section 10.10), and no implied
covenants shall be read into this Trust Agreement against the Property Trustee.
If an Event of Default has occurred (that has not been cured or waived pursuant
to Section 5.13 of the Indenture), the Property Trustee shall enforce this Trust
Agreement for the benefit of the Holders and shall exercise such of the rights
and powers vested in it by this Trust Agreement, and use the same degree of care
and skill in its exercise thereof, as a prudent person would exercise or use
under the circumstances in the conduct of his or her own affairs.
(d) No provision of this Trust Agreement shall be construed to
relieve the Property Trustee from liability for its own negligent action, its
own negligent failure to act, or its own willful misconduct, except that:
(i) prior to the occurrence of any Event of Default and after
the curing or waiving of all such Events of Default that may have
occurred:
(A) the duties and obligations of the Property Trustee
shall be determined solely by the express provisions of this
Trust Agreement (including pursuant to Section 10.10), and the
Property Trustee shall not be liable except for the
performance of such duties and obligations as are specifically
set forth in this Trust Agreement (including pursuant to
Section 10.10); and
(B) in the absence of bad faith on the part of the
Property Trustee, the Property Trustee may conclusively rely,
as to the truth of the statements and the correctness of the
opinions expressed therein, upon any certificates or opinions
furnished to the Property Trustee and conforming to the
requirements of this Trust Agreement; but in the case of any
such certificates or opinions that by any provision hereof or
of the Trust Indenture Act are specifically required to be
furnished to the Property Trustee, the Property Trustee shall
be under a duty to examine the same to determine whether or
not they conform to the requirements of this Trust Agreement;
(ii) the Property Trustee shall not be liable for any
error of judgment made in good faith by an authorized officer
of the Property Trustee, unless it shall be proved that the
Property Trustee was negligent in ascertaining the pertinent
facts;
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(iii) the Property Trustee shall not be liable with
respect to any action taken or omitted to be taken by it in
good faith in accordance with the direction of the Holders of
at least a Majority in Liquidation Amount of the Preferred
Securities relating to the time, method and place of
conducting any proceeding for any remedy available to the
Property Trustee, or exercising any trust or power conferred
upon the Property Trustee under this Trust Agreement;
(iv) the Property Trustee's sole duty with respect to
the custody, safe keeping and physical preservation of the
Junior Subordinated Debentures and the Payment Account shall
be to deal with such Property in a similar manner as the
Property Trustee deals with similar property for its own
account, subject to the protections and limitations on
liability afforded to the Property Trustee under this Trust
Agreement and the Trust Indenture Act;
(v) the Property Trustee shall not be liable for any
interest on any money received by it except as it may
otherwise agree with the Depositor; and money held by the
Property Trustee need not be segregated from other funds held
by it except in relation to the Payment Account maintained by
the Property Trustee pursuant to Section 3.1 and except to the
extent otherwise required by law;
(vi) the Property Trustee shall not be responsible for
monitoring the compliance by the Administrators or the
Depositor with their respective duties under this Trust
Agreement, nor shall the Property Trustee be liable for the
default or misconduct of any other Issuer Trustee, the
Administrators or the Depositor; and
(vii) no provision of this Trust Agreement shall
require the Property Trustee to expend or risk its own funds
or otherwise incur personal financial liability in the
performance of any of its duties or in the exercise of any of
its rights or powers, if the Property Trustee shall have
reasonable grounds for believing that the repayment of such
funds or liability is not reasonably assured to it under the
terms of this Trust Agreement or adequate indemnity against
such risk or liability is not reasonably assured to it.
(e) The Administrators shall not be responsible for monitoring the
compliance by the Issuer Trustees or the Depositor with their respective duties
under this Trust Agreement, nor shall either Administrator be liable for the
default or misconduct of any other Administrator, the Issuer Trustees or the
Depositor.
SECTION 8.2. Certain Notices.
Within five Business Days after the occurrence of any Event of
Default actually known to a Responsible Officer of the Property Trustee, the
Property Trustee shall transmit, in the manner and to the extent provided in
Section 10.8, notice of such Event of Default to the Holders and the
Administrators, unless such Event of Default shall have been cured or waived.
Within five Business Days after the receipt of notice of the
Depositor's exercise of its right to defer the payment of interest on the Junior
Subordinated Debentures pursuant to the Indenture, the Property Trustee shall
transmit, in the manner and to the extent provided in Section 10.8, notice of
such exercise to the Holders and the Administrators, unless such exercise shall
have been revoked.
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SECTION 8.3. Certain Rights of Property Trustee.
Subject to the provisions of Section 8.1:
(a) the Property Trustee may rely and shall be fully protected in
acting or refraining from acting in good faith upon any resolution, Opinion of
Counsel, certificate, written representation of a Holder or transferee,
certificate of auditors or any other certificate, statement, instrument,
opinion, report, notice, request, consent, order, appraisal, bond, debenture,
note, other evidence of indebtedness or other paper or document believed by it
to be genuine and to have been signed or presented by the proper party or
parties;
(b) any direction or act of the Depositor contemplated by this
Trust Agreement shall be sufficiently evidenced by an Officers' Certificate;
(c) the Property Trustee shall have no duty to see to any recording,
filing or registration of any instrument (including any financing or
continuation statement or any filing under tax or securities laws) or any
re-recording, refiling or registration thereof;
(d) the Property Trustee may consult with counsel of its own choosing
(which counsel may be counsel to the Depositor or any of its Affiliates, and may
include any of its employees) and the advice of such counsel shall be full and
complete authorization and protection in respect of any action taken suffered or
omitted by it hereunder in good faith and in reliance thereon and in accordance
with such advice; the Property Trustee shall have the right at any time to seek
instructions concerning the administration of this Trust Agreement from any
court of competent jurisdiction;
(e) the Property Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Trust Agreement at the request or
direction of any of the Holders pursuant to this Trust Agreement, unless such
Holders shall have offered to the Property Trustee security or indemnity
satisfactory to it against the costs, expenses and liabilities which might be
incurred by it in compliance with such request or direction; provided that,
nothing contained in this Section 8.3(e) shall be taken to relieve the Property
Trustee, upon the occurrence of an Event of Default, of its obligation to
exercise the rights and powers vested in it by this Trust Agreement;
(f) the Property Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, approval, bond,
debenture, note or other evidence of indebtedness or other paper or document,
unless requested in writing to do so by one or more Holders, but the Property
Trustee may make such further inquiry or investigation into such facts or
matters as it may see fit;
(g) the Property Trustee may execute any of the trusts or powers
hereunder or perform any of its duties hereunder either directly or by or
through its agents or attorneys, provided that the Property Trustee shall not be
responsible for any misconduct or negligence on the part of any agent or
attorney appointed with due care by it hereunder;
(h) whenever in the administration of this Trust Agreement the
Property Trustee shall deem it desirable to receive instructions with respect to
enforcing any remedy or right or taking any other action hereunder, the Property
Trustee (i) may request instructions from the Holders (which instructions may
only be given by the Holders of the same proportion in Liquidation Amount of the
Trust Securities as would be entitled to direct the Property Trustee under the
terms of the Trust Securities in respect of such remedy, right or action), (ii)
may refrain from enforcing such remedy or right or taking such other
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action until such instructions are received, and (iii) shall be fully protected
in acting in accordance with such instructions; and
(i) except as otherwise expressly provided by this Trust Agreement,
the Property Trustee shall not be under any obligation to take any action that
is discretionary under the provisions of this Trust Agreement.
No provision of this Trust Agreement shall be deemed to impose any
duty or obligation on any Issuer Trustee or Administrator to perform any act or
acts or exercise any right, power, duty or obligation conferred or imposed on
it, in any jurisdiction in which it shall be illegal, or in which the Property
Trustee shall be unqualified or incompetent in accordance with applicable law,
to perform any such act or acts, or to exercise any such right, power, duty or
obligation. No permissive power or authority available to any Issuer Trustee or
Administrator shall be construed to be a duty.
SECTION 8.4. Not Responsible for Recitals or Issuance of Securities.
The recitals contained herein and in the Trust Securities
Certificates shall be taken as the statements of the Issuer Trust, and the
Issuer Trustees and the Administrators do not assume any responsibility for
their correctness. The Issuer Trustees and the Administrators shall not be
accountable for the use or application by the Depositor of the proceeds of the
Junior Subordinated Debentures.
SECTION 8.5. May Hold Securities.
Except as provided in the definition of the term "Outstanding" in
Article I, the Administrators, any Issuer Trustee or any other agent of any
Issuer Trustee or the Issuer Trust, in its individual or any other capacity, may
become the owner or pledgee of Trust Securities and, subject to Sections 8.8 and
8.13, may otherwise deal with the Issuer Trust with the same rights it would
have if it were not an Administrator, Issuer Trustee or such other agent.
SECTION 8.6. Compensation; Indemnity; Fees.
The Depositor agrees:
(a) to pay to the Issuer Trustees from time to time reasonable
compensation for all services rendered by them hereunder (which compensation
shall not be limited by any provision of law in regard to the compensation of a
trustee of an express trust);
(b) to reimburse the Issuer Trustees and the Administrators upon
request for all reasonable expenses, disbursements and advances incurred or made
by the Issuer Trustees in accordance with any provision of this Trust Agreement
(including the reasonable compensation, expenses and disbursements of its agents
and counsel), except any such expense, disbursement or advance as may be
attributable to their negligence or willful misconduct; and
(c) to the fullest extent permitted by applicable law, to indemnify
and hold harmless (i) each Issuer Trustee, (ii) each Administrator, (iii) any
Affiliate of any Issuer Trustee, (iv) any officer, director, shareholder,
employee, representative or agent of any Issuer Trustee, and (v) any employee or
agent of the Issuer Trust, (referred to herein as an "Indemnified Person") from
and against any loss, damage, liability, tax, penalty, expense or claim of any
kind or nature whatsoever incurred by such Indemnified Person arising out of or
in connection with the creation, operation or dissolution of the Issuer Trust or
any act or omission performed or omitted by such Indemnified Person in good
faith on behalf of the Issuer Trust and in a manner such Indemnified Person
reasonably believed to be within the scope of authority conferred on such
Indemnified Person by this Trust Agreement, except that no Indemnified
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Person shall be entitled to be indemnified in respect of any loss, damage or
claim incurred by such Indemnified Person by reason of negligence or willful
misconduct with respect to such acts or omissions.
The provisions of this Section 8.6 shall survive the termination of
this Trust Agreement.
No Issuer Trustee may claim any lien or charge on any Trust Property
as a result of any amount due pursuant to this Section 8.6.
The Depositor, any Administrator and any Issuer Trustee may engage in
or possess an interest in other business ventures of any nature or description,
independently or with others, similar or dissimilar to the business of the
Issuer Trust, and the Issuer Trust and the Holders of Trust Securities shall
have no rights by virtue of this Trust Agreement in and to such independent
ventures or the income or profits derived therefrom, and the pursuit of any such
venture, even if competitive with the business of the Issuer Trust, shall not be
deemed wrongful or improper. Neither the Depositor, any Administrator, nor any
Issuer Trustee shall be obligated to present any particular investment or other
opportunity to the Issuer Trust even if such opportunity is of a character that,
if presented to the Issuer Trust, could be taken by the Issuer Trust, and the
Depositor, any Administrator or any Issuer Trustee shall have the right to take
for its own account (individually or as a partner or fiduciary) or to recommend
to others any such particular investment or other opportunity. Any Issuer
Trustee may engage or be interested in any financial or other transaction with
the Depositor or any Affiliate of the Depositor, or may act as depository for,
trustee or agent for, or act on any committee or body of holders of, securities
or other obligations of the Depositor or its Affiliates.
SECTION 8.7. Corporate Property Trustee Required; Eligibility of
Trustees and Administrators.
(a) There shall at all times be a Property Trustee hereunder with
respect to the Trust Securities. The Property Trustee shall be a Person that is
a national or state chartered bank and eligible pursuant to the Trust Indenture
Act to act as such and has a combined capital and surplus of at least
$50,000,000. If any such Person publishes reports of condition at least
annually, pursuant to law or to the requirements of its supervising or examining
authority, then for the purposes of this Section, the combined capital and
surplus of such Person shall be deemed to be its combined capital and surplus as
set forth in its most recent report of condition so published. If at any time
the Property Trustee with respect to the Trust Securities shall cease to be
eligible in accordance with the provisions of this Section, it shall resign
immediately in the manner and with the effect hereinafter specified in this
Article. At the time of appointment, the Property Trustee must have securities
rated in one of the three highest rating categories by a nationally recognized
statistical rating organization.
(b) There shall at all times be one or more Administrators hereunder.
Each Administrator shall be either a natural person who is at least 21 years of
age or a legal entity that shall act through one or more persons authorized to
bind that entity. An employee, officer or Affiliate of the Depositor may serve
as an Administrator.
(c) There shall at all times be a Delaware Trustee. The Delaware
Trustee shall either be (i) a natural person who is at least 21 years of age and
a resident of the State of Delaware or (ii) a legal entity with its principal
place of business in the State of Delaware and that otherwise meets the
requirements of applicable Delaware law that shall act through one or more
persons authorized to bind such entity.
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SECTION 8.8. Conflicting Interests.
(a) If the Property Trustee has or shall acquire a conflicting
interest within the meaning of the Trust Indenture Act, the Property Trustee
shall either eliminate such interest or resign, to the extent and in the manner
provided by, and subject to the provisions of, the Trust Indenture Act and this
Trust Agreement.
(b) The Guarantee Agreement and the Indenture shall be deemed to be
specifically described in this Trust Agreement for the purposes of clause (i) of
the first proviso contained in Section 310(b) of the Trust Indenture Act.
SECTION 8.9. Co-Trustees and Separate Trustee.
Unless an Event of Default shall have occurred and be continuing, at
any time or times, for the purpose of meeting the legal requirements of the
Trust Indenture Act or of any jurisdiction in which any part of the Trust
Property may at the time be located, the Property Trustee shall have power to
appoint, and upon the written request of the Property Trustee, the Depositor and
the Administrators shall for such purpose join with the Property Trustee in the
execution, delivery, and performance of all instruments and agreements necessary
or proper to appoint, one or more Persons approved by the Property Trustee
either to act as co-trustee, jointly with the Property Trustee, of all or any
part of such Trust Property, or to the extent required by law to act as separate
trustee of any such property, in either case with such powers as may be provided
in the instrument of appointment, and to vest in such Person or Persons in the
capacity aforesaid, any property, title, right or power deemed necessary or
desirable, subject to the other provisions of this Section. Any co-trustee or
separate trustee appointed pursuant to this Section shall either be (i) a
natural person who is at least 21 years of age and a resident of the United
States or (ii) a legal entity with its principal place of business in the United
States that shall act through one or more persons authorized to bind such
entity.
Should any written instrument from the Depositor be required by any
co-trustee or separate trustee so appointed for more fully confirming to such
co-trustee or separate trustee such property, title, right, or power, any and
all such instruments shall, on request, be executed, acknowledged and delivered
by the Depositor.
Every co-trustee or separate trustee shall, to the extent permitted
by law, but to such extent only, be appointed subject to the following terms,
namely:
(a) The Trust Securities shall be executed by one or more
Administrators, and the Trust Securities shall be countersigned, registered and
delivered and all rights, powers, duties, and obligations hereunder in respect
of the custody of securities, cash and other personal property held by, or
required to be deposited or pledged with, the Property Trustees specified
hereunder, shall be exercised, solely by the Property Trustee and not by such
co-trustee or separate trustee.
(b) The rights, powers, duties, and obligations hereby conferred or
imposed upon the Property Trustee in respect of any property covered by such
appointment shall be conferred or imposed upon and exercised or performed by the
Property Trustee and such co-trustee or separate trustee jointly, as shall be
provided in the instrument appointing such co-trustee or separate trustee,
except to the extent that under any law of any jurisdiction in which any
particular act is to be performed, the Property Trustee shall be incompetent or
unqualified to perform such act, in which event such rights, powers, duties and
obligations shall be exercised and performed by such co-trustee or separate
trustee.
(c) The Property Trustee at any time, by an instrument in writing
executed by it, with the written concurrence of the Depositor, may accept the
resignation of or remove any co-trustee or separate trustee appointed under this
Section, and, in case a Debenture Event of Default has occurred and is
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continuing, the Property Trustee shall have power to accept the resignation of,
or remove, any such co-trustee or separate trustee without the concurrence of
the Depositor. Upon the written request of the Property Trustee, the Depositor
shall join with the Property Trustee in the execution, delivery and performance
of all instruments and agreements necessary or proper to effectuate such
resignation or removal. A successor to any co-trustee or separate trustee so
resigned or removed may be appointed in the manner provided in this Section.
(d) No co-trustee or separate trustee hereunder shall be personally
liable by reason of any act or omission of the Property Trustee or any other
trustee hereunder.
(e) The Property Trustee shall not be liable by reason of any act
of a co-trustee or separate trustee.
(f) Any Act of Holders delivered to the Property Trustee shall be
deemed to have been delivered to each such co-trustee and separate trustee.
SECTION 8.10. Resignation and Removal; Appointment of Successor.
No resignation or removal of any Issuer Trustee (the "Relevant
Trustee") and no appointment of a successor Trustee pursuant to this Article
shall become effective until the acceptance of appointment by the successor
Trustee in accordance with the applicable requirements of Section 8.11.
Subject to the immediately preceding paragraph, a Relevant Trustee
may resign at any time by giving written notice thereof to the Holders. The
Holders of the Common Securities shall appoint a successor by requesting from at
least three Persons meeting the eligibility requirements its expenses and
charges to serve as the successor Trustee on a form provided by the
Administrators, and selecting the Person who agrees to the lowest expenses and
charges. If the instrument of acceptance by the successor Trustee required by
Section 8.11 shall not have been delivered to the Relevant Trustee within 60
days after the giving of such notice of resignation, the Relevant Trustee may
petition, at the expense of the Issuer Trust, any court of competent
jurisdiction for the appointment of a successor Trustee.
The Property Trustee or the Delaware Trustee may be removed at any
time by Act of the Holders of at least a Majority in Liquidation Amount of the
Preferred Securities, delivered to the Relevant Trustee (in its individual
capacity and on behalf of the Issuer Trust) (i) for cause, or (ii) if a
Debenture Event of Default shall have occurred and be continuing at any time.
If a Relevant Trustee shall be removed or become incapable of acting
as Issuer Trustee, or if any vacancy shall occur in the office of any Issuer
Trustee for any cause, the Holders of the Common Securities shall promptly
appoint a successor Trustee or Trustees, and such successor Issuer Trustee shall
comply with the applicable requirements of Section 8.11. If no successor Trustee
shall have been so appointed by the Holders of the Common Securities and
accepted appointment in the manner required by Section 8.11, any Holder, on
behalf of himself and all others similarly situated, or any other Issuer
Trustee, may petition any court in the State of Delaware for the appointment of
a successor Trustee.
The Property Trustee shall give notice of each resignation and each
removal of a Relevant Trustee and each appointment of a successor Trustee to all
Holders in the manner provided in Section 10.8 and shall give notice to the
Depositor and to the Administrators. Each notice shall include the name of the
Relevant Trustee and the address of its Corporate Trust Office if it is the
Property Trustee.
Notwithstanding the foregoing or any other provision of this Trust
Agreement, in the event any Delaware Trustee who is a natural person dies or
becomes, in the opinion of the Holders of the
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Common Securities, incompetent or incapacitated, the vacancy created by such
death, incompetence or incapacity may be filled by the Property Trustee
following the procedures regarding expenses and charges set forth above (with
the successor in each case being a Person who satisfies the eligibility
requirement for Administrators or Delaware Trustee, as the case may be, set
forth in Section 8.7).
SECTION 8.11. Acceptance of Appointment by Successor.
In case of the appointment hereunder of a successor Trustee, the
retiring Relevant Trustee and each such successor Trustee with respect to the
Trust Securities shall execute, acknowledge and deliver an instrument wherein
each successor Trustee shall accept such appointment and which shall contain
such provisions as shall be necessary or desirable to transfer and confirm to,
and to vest in, each successor Trustee all the rights, powers, trusts and duties
of the retiring Trustee with respect to the Trust Securities and the Issuer
Trust, and upon the execution and delivery of such instrument the resignation or
removal of the retiring Relevant Trustee shall become effective to the extent
provided therein and each such successor Trustee, without any further act, deed
or conveyance, shall become vested with all the rights, powers, trusts and
duties of the Relevant Trustee; but, on request of the Issuer Trust or any
successor Trustee such Relevant Trustee shall duly assign, transfer and deliver
to such successor Trustee all Trust Property, all proceeds thereof and money
held by such Relevant Trustee hereunder with respect to the Trust Securities and
the Trust.
Upon request of any such successor Trustee, the Issuer Trust shall
execute any and all instruments for more fully and certainly vesting in and
confirming to such successor Trustee all such rights, powers and trusts referred
to in the first or second preceding paragraph, as the case may be.
No successor Trustee shall accept its appointment unless at the time
of such acceptance such successor Trustee shall be qualified and eligible under
this Article.
SECTION 8.12. Merger, Conversion, Consolidation or Succession to
Business.
Any Person into which the Property Trustee or the Delaware Trustee
may be merged or converted or with which it may be consolidated, or any Person
resulting from any merger, conversion or consolidation to which such Relevant
Trustee shall be a party, or any Person succeeding to all or substantially all
the corporate trust business of such Relevant Trustee, shall be the successor of
such Relevant Trustee hereunder, provided that such Person shall be otherwise
qualified and eligible under this Article, without the execution or filing of
any paper or any further act on the part of any of the parties hereto.
SECTION 8.13. Preferential Collection of Claims Against Depositor or
Issuer Trust.
If and when the Property Trustee shall be or become a creditor of the
Depositor (or any other obligor upon the Trust Securities), the Property Trustee
shall be subject to the provisions of the Trust Indenture Act regarding the
collection of claims against the Depositor (or any such other obligor) as is
required by the Trust Indenture Act.
SECTION 8.14. Trustee May File Proofs of Claim.
In case of any receivership, insolvency, liquidation, bankruptcy,
reorganization, arrangement, adjustment, composition or other similar judicial
proceeding relative to the Issuer Trust or any other obligor upon the Trust
Securities or the property of the Issuer Trust or of such other obligor, the
Property Trustee (irrespective of whether any Distributions on the Trust
Securities shall then be due and payable and irrespective of whether the
Property Trustee shall have made any demand on the Issuer Trust for the
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payment of any past due Distributions) shall be entitled and empowered, to the
fullest extent permitted by law, by intervention in such proceeding or
otherwise:
(a) to file and prove a claim for the whole amount of any
Distributions owing and unpaid in respect of the Trust Securities and to file
such other papers or documents as may be necessary or advisable in order to have
the claims of the Property Trustee (including any claim for the reasonable
compensation, expenses, disbursements and advances of the Property Trustee, its
agents and counsel) and of the Holders allowed in such judicial proceeding, and
(b) to collect and receive any monies or other property payable or
deliverable on any such claims and to distribute the same; and any custodian,
receiver, assignee, trustee, liquidator, sequestrator or other similar official
in any such judicial proceeding is hereby authorized by each Holder to make such
payments to the Property Trustee and, in the event the Property Trustee shall
consent to the making of such payments directly to the Holders, to pay to the
Property Trustee any amount due it for the reasonable compensation, expenses,
disbursements and advances of the Property Trustee, its agents and counsel, and
any other amounts due the Property Trustee.
Nothing herein contained shall be deemed to authorize the Property
Trustee to authorize or consent to or accept or adopt on behalf of any Holder
any plan of reorganization, arrangement, adjustment or compensation affecting
the Trust Securities or the rights of any Holder thereof or to authorize the
Property Trustee to vote in respect of the claim of any Holder in any such
proceeding.
SECTION 8.15. Reports by Property Trustee.
(a) Not later than January 31 of each year commencing with January
31, 1998, the Property Trustee shall transmit to all Holders in accordance with
Section 10.8, and to the Depositor, a brief report dated as of the immediately
preceding December 31 with respect to:
(i) its eligibility under Section 8.7 or, in lieu thereof, if
to the best of its knowledge it has continued to be eligible under
said Section, a written statement to such effect; and
(ii) any change in the property and funds in its possession as
Property Trustee since the date of its last report and any action
taken by the Property Trustee in the performance of its duties
hereunder which it has not previously reported and which in its
opinion materially affects the Trust Securities.
(b) In addition the Property Trustee shall transmit to Holders such
reports concerning the Property Trustee and its actions under this Trust
Agreement as may be required pursuant to the Trust Indenture Act at the times
and in the manner provided pursuant thereto as set forth in Section 10.10 of
this Trust Agreement.
(c) A copy of each such report shall, at the time of such
transmission to Holders, be filed by the Property Trustee with the Depositor.
SECTION 8.16. Reports to the Property Trustee.
The Depositor and the Administrators on behalf of the Issuer Trust
shall provide to the Property Trustee such documents, reports and information as
required by Section 314 of the Trust Indenture Act and the compliance
certificate required by Section 314(a) of the Trust Indenture Act in the form,
in the manner and at the times required by Section 314 of the Trust Indenture
Act, as set forth in Section 10.10 of this Trust Agreement. The Depositor and
the Administrators shall annually file with
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the Property Trustee a certificate specifying whether such Person is in
compliance with all the terms and covenants applicable to such Person hereunder.
SECTION 8.17. Evidence of Compliance with Conditions Precedent.
Each of the Depositor and the Administrators on behalf of the Issuer
Trust shall provide to the Property Trustee such evidence of compliance with any
conditions precedent, if any, provided for in this Trust Agreement that relate
to any of the matters set forth in Section 314(c) of the Trust Indenture Act as
set forth in Section 10.10 of this Trust Agreement. Any certificate or opinion
required to be given by an officer pursuant to Section 314(c)(1) of the Trust
Indenture Act shall be given in the form of an Officers' Certificate.
SECTION 8.18. Number of Issuer Trustees.
(a) The number of Issuer Trustees shall be two. The Property Trustee
and the Delaware Trustee may be the same Person.
(b) If an Issuer Trustee ceases to hold office for any reason, a
vacancy shall occur. The vacancy shall be filled with an Issuer Trustee
appointed in accordance with Section 8.10.
(c) The death, resignation, retirement, removal, bankruptcy,
incompetence or incapacity to perform the duties of an Issuer Trustee shall not
operate to annul the Issuer Trust.
SECTION 8.19. Delegation of Power.
(a) Any Administrator may, by power of attorney consistent with
applicable law, delegate to any other natural person over the age of 21 his or
her power for the purpose of executing any documents contemplated in Section
2.7(a) or making any governmental filing; and
(b) The Administrators shall have power to delegate from time to time
to such of their number the doing of such things and the execution of such
instruments either in the name of the Issuer Trust or the names of the
Administrators or otherwise as the Administrators may deem expedient, to the
extent such delegation is not prohibited by applicable law or contrary to the
provisions of this Trust Agreement.
SECTION 8.20. Appointment of Administrators.
(a) The Administrators (other than the initial Administrators) shall
be appointed by the Holders of a Majority in Liquidation Amount of the Common
Securities and all Administrators (including the initial Administrators) may be
removed by the Holders of a Majority in Liquidation Amount of the Common
Securities or may resign at any time. Each Administrator shall sign an agreement
agreeing to comply with the terms of this Trust Agreement. If at any time there
is no Administrator, the Property Trustee or any Holder who has been a Holder of
Trust Securities for at least six months may petition any court of competent
jurisdiction for the appointment of one or more Administrators.
(b) Whenever a vacancy in the number of Administrators shall occur,
until such vacancy is filled by the appointment of an Administrator in
accordance with this Section 8.20, the Administrators in office, regardless of
their number (and notwithstanding any other provision of this Trust Agreement),
shall have all the powers granted to the Administrators and shall discharge all
the duties imposed upon the Administrators by this Trust Agreement.
(c) Notwithstanding the foregoing, or any other provision of this
Trust Agreement, in the event any Administrator or a Delaware Trustee who is a
natural person dies or becomes, in the opinion
<PAGE>
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of the Holders of a Majority in Liquidation Amount of the Common Securities,
incompetent, or incapacitated, the vacancy created by such death, incompetence
or incapacity may be filled by the remaining Administrators, if there were at
least two of them prior to such vacancy, and by the Depositor, if there were not
two such Administrators immediately prior to such vacancy (with the successor in
each case being a Person who satisfies the eligibility requirement for
Administrators or Delaware Trustee, as the case may be, set forth in Section
8.7).
(d) Except as otherwise provided in this Trust Agreement, or by
applicable law, any one Administrator may execute any document or otherwise take
any action which the Administrators are authorized to take under this Trust
Agreement.
ARTICLE IX
DISSOLUTION, LIQUIDATION AND MERGER
SECTION 9.1. Dissolution Upon Expiration Date.
Unless earlier dissolved, the Issuer Trust shall automatically
dissolve on ____________, 2028 (the "Expiration Date"), following the
distribution of the Trust Property in accordance with Section 9.4.
SECTION 9.2. Early Termination.
The first to occur of any of the following events is an "Early
Termination Event":
(a) the occurrence of the appointment of a receiver or other similar
official in any liquidation, insolvency or similar proceeding with respect to
the Depositor or all or substantially all of its property, or a court or other
governmental agency shall enter a decree or order and such decree or order shall
remain unstayed and undischarged for a period of 60 days, unless the Depositor
shall transfer the Common Securities as provided by Section 5.11, in which case
this provision shall refer instead to any such successor Holder of the Common
Securities;
(b) the written direction to the Property Trustee from the Holder of
the Common Securities at any time to dissolve the Issuer Trust and to distribute
the Junior Subordinated Debentures to Holders in exchange for the Preferred
Securities (which direction, subject to Section 9.4(a), is optional and wholly
within the discretion of the Holders of the Common Securities);
(c) the redemption of all of the Preferred Securities in connection
with the redemption of all the Junior Subordinated Debentures; and
(d) the entry of an order for dissolution of the Issuer Trust by a
court of competent jurisdiction.
SECTION 9.3. Dissolution.
The respective obligations and responsibilities of the Issuer
Trustees, the Administrators and the Issuer Trust created and continued hereby
shall terminate upon the latest to occur of the following: (a) the distribution
by the Property Trustee to Holders of all amounts required to be distributed
hereunder upon the liquidation of the Issuer Trust pursuant to Section 9.4, or
upon the redemption of all of the Trust Securities pursuant to Section 4.2, (b)
the payment of any expenses owed by the Issuer Trust, (c) the discharge of all
administrative duties of the Administrators, including the performance of any
tax
<PAGE>
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reporting obligations with respect to the Issuer Trust or the Holders and (d)
the filing by the Issuer Trustees of a certificate of cancellation with the
Delaware Secretary of State.
SECTION 9.4. Liquidation.
(a) If an Early Termination Event specified in clause (a), (b) or (d)
of Section 9.2 occurs or upon the Expiration Date, the Issuer Trust shall be
liquidated by the Property Trustee as expeditiously as the Property Trustee
determines to be possible by distributing, after satisfaction of liabilities to
creditors of the Issuer Trust as provided by applicable law, to each Holder a
Like Amount of Junior Subordinated Debentures, subject to Section 9.4(d). Notice
of liquidation shall be given by the Property Trustee by first-class mail,
postage prepaid, mailed not later than 15 nor more than 45 days prior to the
Liquidation Date to each Holder of Trust Securities at such Holder's address
appearing in the Securities Register. All notices of liquidation shall:
(i) state the Liquidation Date;
(ii) state that, from and after the Liquidation Date, the
Trust Securities will no longer be deemed to be Outstanding and any Trust
Securities Certificates not surrendered for exchange will be deemed to represent
a Like Amount of Junior Subordinated Debentures; and
(iii) provide such information with respect to the mechanics
by which Holders may exchange Trust Securities Certificates for Junior
Subordinated Debentures, or if Section 9.4(d) applies receive a Liquidation
Distribution, as the Administrators or the Property Trustee shall deem
appropriate.
(b) Except where Section 9.2(c) or 9.4(d) applies, in order to effect
the liquidation of the Issuer Trust and distribution of the Junior Subordinated
Debentures to Holders, the Property Trustee shall establish a record date for
such distribution (which shall be not more than 30 days prior to the Liquidation
Date) and, either itself acting as exchange agent or through the appointment of
a separate exchange agent, shall establish such procedures as it shall deem
appropriate to effect the distribution of Junior Subordinated Debentures in
exchange for the Outstanding Trust Securities Certificates.
(c) Except where Section 9.2(c) or 9.4(d) applies, after the
Liquidation Date, (i) the Trust Securities will no longer be deemed to be
Outstanding, (ii) the Clearing Agency for the Preferred Securities or its
nominee, as the registered holder of the Global Preferred Securities
Certificate, shall receive a registered global certificate or certificates
representing the Junior Subordinated Debentures to be delivered upon such
distribution with respect to Preferred Securities held by the Clearing Agency or
its nominee, and, (iii) any Trust Securities Certificates not held by the
Clearing Agency for the Preferred Securities or its nominee as specified in
clause (ii) above will be deemed to represent Junior Subordinated Debentures
having a principal amount equal to the stated Liquidation Amount of the Trust
Securities represented thereby and bearing accrued and unpaid interest in an
amount equal to the accumulated and unpaid Distributions on such Trust
Securities until such certificates are presented to the Securities Registrar for
transfer or reissuance.
(d) If, notwithstanding the other provisions of this Section 9.4,
whether because of an order for dissolution entered by a court of competent
jurisdiction or otherwise, distribution of the Junior Subordinated Debentures is
not practical, or if any Early Termination Event specified in clause (c) of
Section 9 occurs, the Trust Property shall be liquidated, and the Issuer Trust
shall be dissolved by the Property Trustee in such manner as the Property
Trustee determines. In such event, on the date of the dissolution of the Issuer
Trust, Holders will be entitled to receive out of the assets of the Issuer Trust
available for distribution to Holders, after satisfaction of liabilities to
creditors of the Issuer Trust as provided by applicable law, an amount equal to
the aggregate of Liquidation Amount per Trust Security plus accumulated and
unpaid Distributions thereon to the date of payment (such amount being the
"Liquidation Distribution"). If, upon any such dissolution, the Liquidation
Distribution can be paid only
<PAGE>
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in part because the Issuer Trust has insufficient assets available to pay in
full the aggregate Liquidation Distribution, then, subject to the next
succeeding sentence, the amounts payable by the Issuer Trust on the Trust
Securities shall be paid on a pro rata basis (based upon Liquidation Amounts).
The Holders of the Common Securities will be entitled to receive Liquidation
Distributions upon any such dissolution pro rata (determined as aforesaid) with
Holders of Preferred Securities, except that, if a Debenture Event of Default
has occurred and is continuing, the Preferred Securities shall have a priority
over the Common Securities as provided in Section 4.3.
SECTION 9.5. Mergers, Consolidations, Amalgamations or Replacements
of the Issuer Trust.
The Issuer Trust may not merge with or into, consolidate, amalgamate,
or be replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to, any entity, except pursuant to this Section
9.5. At the request of the Holders of the Common Securities, and with the
consent of the Holders of at least a Majority in Liquidation Amount of the
Preferred Securities, the Issuer Trust may merge with or into, consolidate,
amalgamate, or be replaced by or convey, transfer or lease its properties and
assets substantially as an entirety to a trust organized as such under the laws
of any State; provided, however, that (i) such successor entity either (a)
expressly assumes all of the obligations of the Issuer Trust with respect to the
Preferred Securities or (b) substitutes for the Preferred Securities other
securities having substantially the same terms as the Preferred Securities (the
"Successor Securities") so long as the Successor Securities have the same
priority as the Preferred Securities with respect to distributions and payments
upon liquidation, redemption and otherwise, (ii) a trustee of such successor
entity possessing the same powers and duties as the Property Trustee is
appointed to hold the Junior Subordinated Debentures, (iii) such merger,
consolidation, amalgamation, replacement, conveyance, transfer or lease does not
cause the Preferred Securities (including any Successor Securities) to be
downgraded by any nationally recognized statistical rating organization if the
Preferred Securities were rated by any nationally recognized statistical rating
organization immediately prior to such merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease, (iv) such merger, consolidation,
amalgamation, replacement, conveyance, transfer or lease does not adversely
affect the rights, preferences and privileges of the holders of the Preferred
Securities (including any Successor Securities) in any material respect, (v)
such successor entity has a purpose substantially identical to that of the
Issuer Trust, (vi) prior to such merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease, the Issuer Trustee has received an
Opinion of Counsel from independent counsel experienced in such matters to the
effect that (a) such merger, consolidation, amalgamation, replacement,
conveyance, transfer or lease does not adversely affect the rights preferences
and privileges of the holders of the Preferred Securities (including any
Successor Securities) in any material respect, and (b) following such merger,
consolidation, amalgamation, replacement, conveyance, transfer or lease, neither
the Issuer Trust nor such successor entity will be required to register as an
"investment company" under the Investment Company Act and (vii) the Depositor or
any permitted transferee to whom it has transferred the Common Securities
hereunder own all of the Common Securities of such successor entity and
guarantees the obligations of such successor entity under the Successor
Securities at least to the extent provided by the Guarantee Agreement.
Notwithstanding the foregoing, the Issuer Trust shall not, except with the
consent of holders of 100% in Liquidation Amount of the Preferred Securities,
consolidate, amalgamate, merge with or into, or be replaced by or convey,
transfer or lease its properties and assets substantially as an entirety to any
other entity or permit any other entity to consolidate, amalgamate, merge with
or into, or replace it if such consolidation, amalgamation, merger, replacement,
conveyance, transfer or lease would cause the Issuer Trust or the successor
entity to be taxable as a corporation for United States federal income tax
purposes.
<PAGE>
- 44 -
ARTICLE X
MISCELLANEOUS PROVISIONS
SECTION 10.1. Limitation of Rights of Holders.
Except as set forth in Section 9.2, the death or incapacity of any
person having an interest, beneficial or otherwise, in Trust Securities shall
not operate to terminate this Trust Agreement, nor entitle the legal
representatives or heirs of such person or any Holder for such person, to claim
an accounting, take any action or bring any proceeding in any court for a
partition or winding-up of the arrangements contemplated hereby, nor otherwise
affect the rights, obligations and liabilities of the parties hereto or any of
them. Any merger or similar agreement shall be executed by the Administrators on
behalf of the Issuer Trust.
SECTION 10.2. Amendment.
(a) This Trust Agreement may be amended from time to time by the
Property Trustee and the Holders of a Majority in Liquidation Amount of the
Common Securities, without the consent of the Delaware Trustee or the
Administrators or any Holder of the Preferred Securities (i) to cure any
ambiguity, correct or supplement any provision herein which may be inconsistent
with any other provision herein, or to make any other provisions with respect to
matters or questions arising under this Trust Agreement, provided, however, that
such amendment shall not adversely affect in any material respect the interests
of any Holder or (ii) to modify, eliminate or add to any provisions of this
Trust Agreement to such extent as shall be necessary to ensure that the Issuer
Trust will not be taxable as a corporation for United States federal income tax
purposes at any time that any Trust Securities are Outstanding or to ensure that
the Issuer Trust will not be required to register as an investment company under
the Investment Company Act.
(b) Except as provided in Section 10.2(c) hereof, any provision of
this Trust Agreement may be amended by the Property Trustee and the Holders of a
Majority in Liquidation Amount of the Common Securities without the consent of
the Delaware Trustee or the Administrators but with (i) the consent of Holders
of at least a Majority in Liquidation Amount of the Preferred Securities and
(ii) receipt by the Issuer Trustees of an Opinion of Counsel to the effect that
such amendment or the exercise of any power granted to the Issuer Trustees in
accordance with such amendment will not cause the Issuer Trust to be taxable as
a corporation for United States federal income tax purposes or affect the Issuer
Trust's exemption from status of an "investment company" under the Investment
Company Act.
(c) In addition to and notwithstanding any other provision in this
Trust Agreement, without the consent of each affected Holder (such consent being
obtained in accordance with Section 6.3 or 6.6 hereof), this Trust Agreement may
not be amended to (i) change the amount or timing of any Distribution on the
Trust Securities or otherwise adversely affect the amount of any Distribution
required to be made in respect of the Trust Securities as of a specified date or
(ii) restrict the right of a Holder to institute suit for the enforcement of any
such payment on or after such date.
(d) Notwithstanding any other provisions of this Trust Agreement, no
Issuer Trustee shall enter into or consent to any amendment to this Trust
Agreement which would cause the Issuer Trust to fail or cease to qualify for the
exemption from status as an "investment company" under the Investment Company
Act or be taxable as a corporation for United States federal income tax
purposes.
(e) Notwithstanding anything in this Trust Agreement to the contrary,
without the consent of the Depositor and the Administrators, this Trust
Agreement may not be amended in a manner which imposes any additional obligation
on the Depositor or the Administrators.
<PAGE>
- 45 -
(f) In the event that any amendment to this Trust Agreement is made,
the Administrators or the Property Trustee shall promptly provide to the
Depositor a copy of such amendment.
(g) Neither the Property Trustee nor the Delaware Trustee shall be
required to enter into any amendment to this Trust Agreement which affects its
own rights, duties or immunities under this Trust Agreement. The Property
Trustee shall be entitled to receive an Opinion of Counsel and an Officers'
Certificate stating that any amendment to this Trust Agreement is in compliance
with this Trust Agreement.
(h) Any amendments to this Trust Agreement shall become effective
when notice of such amendment is given to the holders of the Trust Securities.
SECTION 10.3. Separability.
In case any provision in this Trust Agreement or in the Trust
Securities Certificates shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
SECTION 10.4. Governing Law.
THIS TRUST AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF EACH OF THE
HOLDERS, THE ISSUER TRUST, THE DEPOSITOR, THE ISSUER TRUSTEES AND THE
ADMINISTRATORS WITH RESPECT TO THIS TRUST AGREEMENT AND THE TRUST SECURITIES
SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF
DELAWARE.
SECTION 10.5. Payments Due on Non-Business Day.
If the date fixed for any payment on any Trust Security shall be a
day that is not a Business Day, then such payment need not be made on such date
but may be made on the next succeeding day that is a Business Day (except as
otherwise provided in Sections 4.2(d)), with the same force and effect as though
made on the date fixed for such payment, and no Distributions shall accumulate
on such unpaid amount for the period after such date.
SECTION 10.6. Successors.
This Trust Agreement shall be binding upon and shall inure to the
benefit of any successor to the Depositor, the Issuer Trust, the Administrators
and any Issuer Trustee, including any successor by operation of law. Except in
connection with a consolidation, merger or sale involving the Depositor that is
permitted under Article VIII of the Indenture and pursuant to which the assignee
agrees in writing to perform the Depositor's obligations hereunder, the
Depositor shall not assign its obligations hereunder.
SECTION 10.7. Headings.
The Article and Section headings are for convenience only and shall
not affect the construction of this Trust Agreement.
SECTION 10.8. Reports, Notices and Demands.
Any report, notice, demand or other communication that by any
provision of this Trust Agreement is required or permitted to be given or served
to or upon any Holder or the Depositor may
<PAGE>
- 46 -
be given or served in writing by deposit thereof, first class postage prepaid,
in the United States mail, hand delivery or facsimile transmission, in each
case, addressed, (a) in the case of a Holder of Preferred Securities, to such
Holder as such Holder's name and address may appear on the Securities Register;
and (b) in the case of the Holder of Common Securities or the Depositor, to
Premier Financial Bancorp, Inc., 120 N. Hamilton Street, Georgetown, Kentucky
40324 Attention: Office of the Secretary, facsimile no.: ( ) __________ or to
such other address as may be specified in a written notice by the Depositor to
the Property Trustee. Such notice, demand or other communication to or upon a
Holder shall be deemed to have been sufficiently given or made, for all
purposes, upon hand delivery, mailing or transmission. Such notice, demand or
other communication to or upon the Depositor shall be deemed to have been
sufficiently given or made only upon actual receipt of the writing by the
Depositor.
Any notice, demand or other communication which by any provision of
this Trust Agreement is required or permitted to be given or served to or upon
the Issuer Trust, the Property Trustee, the Delaware Trustee, the
Administrators, or the Issuer Trust shall be given in writing addressed (until
another address is published by the Issuer Trust) as follows: (a) with respect
to the Property Trustee to Bankers Trust Company, Four Albany Street, 4th Floor,
New York, NY 10006, Attention: Corporate Trust and Agency Group Corporate Market
Services; (b) with respect to the Delaware Trustee to Bankers Trust (Delaware),
1001 Jefferson Street, Suite 550, Wilmington, Delaware 19801, Attention: Lisa
Wilkins; and (c) with respect to the Administrators, to them at the address
above for notices to the Depositor, marked "Attention: Office of the Secretary".
Such notice, demand or other communication to or upon the Issuer Trust or the
Property Trustee shall be deemed to have been sufficiently given or made only
upon actual receipt of the writing by the Issuer Trust, the Property Trustee, or
such Administrator.
SECTION 10.9. Agreement Not to Petition.
Each of the Issuer Trustees, the Administrators and the Depositor
agree for the benefit of the Holders that, until at least one year and one day
after the Issuer Trust has been dissolved in accordance with Article IX, they
shall not file, or join in the filing of, a petition against the Issuer Trust
under any bankruptcy, insolvency, reorganization or other similar law
(including, without limitation, the United States Bankruptcy Code)
(collectively, "Bankruptcy Laws") or otherwise join in the commencement of any
proceeding against the Issuer Trust under any Bankruptcy Law. In the event the
Depositor takes action in violation of this Section 10.9, the Property Trustee
agrees, for the benefit of Holders, that at the expense of the Depositor, it
shall file an answer with the bankruptcy court or otherwise properly contest the
filing of such petition by the Depositor against the Issuer Trust or the
commencement of such action and raise the defense that the Depositor has agreed
in writing not to take such action and should be estopped and precluded
therefrom and such other defenses, if any, as counsel for the Issuer Trustee or
the Issuer Trust may assert. If any Issuer Trustee or Administrator takes action
in violation of this Section 10.9, the Depositor agrees, for the benefit of the
Holders, that at the expense of the Depositor, it shall file an answer with the
bankruptcy court or otherwise properly contest the filing of such petition by
such Person against the Depositor or the commencement of such action and raise
the defense that such Person has agreed in writing not to take such action and
should be estopped and precluded therefrom and such other defenses, if any, as
counsel for the Issuer Trustee or the Issuer Trust may assert. The provisions of
this Section 10.9 shall survive the termination of this Trust Agreement.
SECTION 10.10. Trust Indenture Act; Conflict with Trust Indenture Act.
(a) Trust Indenture Act; Application. (i) This Trust Agreement is
subject to the provisions of the Trust Indenture Act that are required to be a
part of this Trust Agreement and shall, to the extent applicable, be governed by
such provisions; (ii) if and to the extent that any provision of this Trust
Agreement limits, qualifies or conflicts with the duties imposed by Sections 310
to 317, inclusive, of the Trust Indenture Act, such imposed duties shall
control; (iii) for purposes of this Trust Agreement, the Property Trustee, to
the extent permitted by applicable law and/or the rules and regulations of the
<PAGE>
- 47 -
Commission, shall be the only Issuer Trustee which is a trustee for the purposes
of the Trust Indenture Act; and (iv) the application of the Trust Indenture Act
to this Trust Agreement shall not affect the nature of the Preferred Securities
and the Common Securities as equity securities representing undivided beneficial
interests in the assets of the Issuer Trust.
(b) Lists of Holders of Preferred Securities. (i) Each of the
Depositor and the Administrators on behalf of the Trust shall provide the
Property Trustee with such information as is required under Section 312(a) of
the Trust Indenture Act at the times and in the manner provided in Section
312(a) and (ii) the Property Trustee shall comply with its obligations under
Sections 310(b), 311 and 312(b) of the Trust Indenture Act.
(c) Reports by the Property Trustee. Within 60 days after May 15 of
each year, the Property Trustee shall provide to the Holders of the Trust
Securities such reports as are required by Section 313 of the Trust Indenture
Act, if any, in the form, in the manner and at the times provided by Section 313
of the Trust Indenture Act. The Property Trustee shall also comply with the
requirements of Section 313(d) of the Trust Indenture Act.
(d) Periodic Reports to Property Trustee. Each of the Depositor and
the Administrators on behalf of the Issuer Trust shall provide to the Property
Trustee, the Commission and the Holders of the Trust Securities, as applicable,
such documents, reports and information as required by Section 314(a)(1) -(3)
(if any) of the Trust Indenture Act and the compliance certificates required by
Section 314(a)(4) and (c) of the Trust Indenture Act (provided that any
certificate to be provided pursuant to Section 314(a)(4) of the Trust Indenture
Act shall be provided within 120 days of the end of each fiscal year of the
Issuer Trust).
(e) Evidence of Compliance with Conditions Precedent. Each of the
Depositor and the Administrators on behalf of the Issuer Trust shall provide to
the Property Trustee such evidence of compliance with any conditions precedent,
if any, provided for in this Trust Agreement which relate to any of the matters
set forth in Section 314(c) of the Trust Indenture Act. Any certificate or
opinion required to be given pursuant to Section 314(c) shall comply with
Section 314(e) of the Trust Indenture Act.
(f) Disclosure of Information. The disclosure of information as to
the names and addresses of the Holders of Trust Securities in accordance with
Section 312 of the Trust Indenture Act, regardless of the source from which such
information was derived, shall not be deemed to be a violation of any existing
law or any law hereafter enacted which does not specifically refer to Section
312 of the Trust Indenture Act, nor shall the Property Trustee be held
accountable by reason of mailing any material pursuant to a request made under
Section 312(b) of the Trust Indenture Act.
<PAGE>
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SECTION 10.11. Acceptance of Terms of Trust Agreement, Guarantee and
Indenture.
THE RECEIPT AND ACCEPTANCE OF A TRUST SECURITY OR ANY INTEREST
THEREIN BY OR ON BEHALF OF A HOLDER OR ANY BENEFICIAL OWNER, WITHOUT ANY
SIGNATURE OR FURTHER MANIFESTATION OF ASSENT, SHALL CONSTITUTE THE UNCONDITIONAL
ACCEPTANCE BY THE HOLDER AND ALL OTHERS HAVING A BENEFICIAL INTEREST IN SUCH
TRUST SECURITY OF ALL THE TERMS AND PROVISIONS OF THIS TRUST AGREEMENT, THE
GUARANTEE AGREEMENT AND THE INDENTURE, AND THE AGREEMENT TO THE SUBORDINATION
PROVISIONS AND OTHER TERMS OF THE GUARANTEE AGREEMENT AND THE INDENTURE, AND
SHALL CONSTITUTE THE AGREEMENT OF THE ISSUER TRUST, SUCH HOLDER AND SUCH OTHERS
THAT THE TERMS AND PROVISIONS OF THIS TRUST AGREEMENT SHALL BE BINDING,
OPERATIVE AND EFFECTIVE AS BETWEEN THE ISSUER TRUST AND SUCH HOLDER AND SUCH
OTHERS.
PREMIER FINANCIAL BANCORP, INC.
as Depositor
By:
-------------------------------
Name:
Title:
BANKERS TRUST COMPANY,
as Property Trustee
By:
-------------------------------
Name:
Title:
BANKERS TRUST (DELAWARE),
as Delaware Trustee and not
in its individual capacity
By:
-------------------------------
Name:
Title:
Subscribed to and Accepted by,
as the Initial Administrators:
- ------------------------
- -------------------------
<PAGE>
EXHIBIT A
[CERTIFICATE OF TRUST FILED WITH DELAWARE]
<PAGE>
EXHIBIT B
[FORM OF CERTIFICATE DEPOSITARY AGREEMENT]
<PAGE>
EXHIBIT C
THIS CERTIFICATE IS NOT TRANSFERABLE EXCEPT TO THE DEPOSITOR OR AN
AFFILIATE OF THE DEPOSITOR IN COMPLIANCE WITH APPLICABLE LAW AND
SECTION 5.11 OF THE TRUST AGREEMENT
Certificate Number Number of Common Securities
C-__
Certificate Evidencing Common Securities
of
PFBI Capital Trust
____% Common Securities
(liquidation amount $25 per Common Security)
PFBI Capital Trust, a statutory business trust formed under
the laws of the State of Delaware (the "Issuer Trust"), hereby certifies that
Premier Financial Bancorp, Inc. (the "Holder") is the registered owner of
_________ (_____) common securities of the Issuer Trust representing undivided
beneficial interests in the assets of the Issuer Trust and has designated the
____% Common Securities (liquidation amount $25 per Common Security) (the
"Common Securities"). Except in accordance with Section 5.11 of the Trust
Agreement (as defined below) the Common Securities are not transferable and any
attempted transfer hereof other than in accordance therewith shall be void. The
designations, rights, privileges, restrictions, preferences and other terms and
provisions of the Common Securities are set forth in, and this certificate and
the Common Securities represented hereby are issued and shall in all respects be
subject to the terms and provisions of, the Amended and Restated Trust Agreement
of the Issuer Trust, dated as of __________________, 1997, as the same may be
amended from time to time (the "Trust Agreement") among Premier Financial
Bancorp, Inc. as Depositor, Bankers Trust Company, as Property Trustee, Bankers
Trust (Delaware), as Delaware Trustee, and the Holders of Trust Securities,
including the designation of the terms of the Common Securities as set forth
therein. The Issuer Trust will furnish a copy of the Trust Agreement to the
Holder without charge upon written request to the Issuer Trust at its principal
place of business or registered office.
Upon receipt of this certificate, the Holder is bound by the
Trust Agreement and is entitled to the benefits thereunder.
Terms used but not defined herein have the meanings set forth
in the Trust Agreement.
IN WITNESS WHEREOF, one of the Administrators of the Issuer
Trust has executed this certificate this ___ day of ______________, ____.
PFBI CAPITAL TRUST
By:
-------------------------------
Name:
Administrator
<PAGE>
COUNTERSIGNED AND REGISTERED:
BANKERS TRUST COMPANY,
as Securities Registrar
By:
--------------------------------
Name:
Signatory Officer
<PAGE>
EXHIBIT D
[IF THE PREFERRED SECURITIES CERTIFICATE IS TO BE A GLOBAL
PREFERRED SECURITIES CERTIFICATE, INSERT -- This Preferred Securities
Certificate is a Global Preferred Securities Certificate within the meaning of
the Trust Agreement hereinafter referred to and is registered in the name of a
Depositary or a nominee of a Depositary. This Preferred Security Certificate is
exchangeable for Preferred Securities Certificates registered in the name of a
person other than the Depositary or its nominee only in the limited
circumstances described in the Trust Agreement and may not be transferred except
as a whole by the Depositary to a nominee of the Depositary or by a nominee of
the Depositary to the Depositary or another nominee of the Depositary, except in
the limited circumstances described in the Trust Agreement.
Unless this Preferred Security Certificate is presented by an
authorized representative of The Depository Trust Company, a New York
Corporation ("DTC"), to PFBI Capital Trust or its agent for registration of
transfer, exchange or payment, and any Preferred Security Certificate issued is
registered in the name of such nominee as is requested by an authorized
representative of DTC (and any payment is made to such entity as is requested by
an authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF
FOR VALUE OR OTHERWISE BY OR TO A PERSON IS WRONGFUL inasmuch as the registered
owner hereof, has an interest herein.]
NO EMPLOYEE BENEFIT OR OTHER PLAN OR INDIVIDUAL RETIREMENT
ACCOUNT SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF
1974, AS AMENDED ("ERISA"), OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF
1986, AS AMENDED (THE "CODE") (EACH, A "PLAN"), NO ENTITY WHOSE UNDERLYING
ASSETS INCLUDE "PLAN ASSETS" BY REASON OF ANY PLAN'S INVESTMENT IN THE ENTITY (A
"PLAN ASSET ENTITY"), AND NO PERSON INVESTING "PLAN ASSETS" OF ANY PLAN, MAY
ACQUIRE OR HOLD THIS PREFERRED SECURITIES CERTIFICATE OR ANY INTEREST HEREIN,
UNLESS SUCH PURCHASE OR HOLDING IS COVERED BY THE EXEMPTIVE RELIEF AVAILABLE
UNDER U.S. DEPARTMENT OF LABOR PROHIBITED TRANSACTION CLASS EXEMPTION ("PTCE")
96-23, 95-60, 91-38, 90-1 OR 84-14 OR ANOTHER APPLICABLE EXEMPTION WITH RESPECT
TO SUCH PURCHASE OR HOLDING AND, IN THE CASE OF ANY PURCHASER OR HOLDER RELYING
ON ANY EXEMPTION OTHER THAN PTCE 96-23, 95-60, 91-38, 90-1 OR 84-14, HAS
COMPLIED WITH ANY REQUEST BY THE DEPOSITOR OR THE ISSUER TRUST FOR AN OPINION OF
COUNSEL OR OTHER EVIDENCE WITH RESPECT TO THE APPLICABILITY OF SUCH EXEMPTION.
ANY PURCHASER OR HOLDER OF THIS PREFERRED SECURITIES CERTIFICATE OR ANY INTEREST
HEREIN WILL BE DEEMED TO HAVE REPRESENTED BY ITS PURCHASE AND HOLDING HEREOF
THAT EITHER (A) THE PURCHASER AND HOLDER ARE NOT A PLAN OR A PLAN ASSET ENTITY
AND IS NOT PURCHASING SUCH SECURITIES ON BEHALF OF OR WITH "PLAN ASSETS" OF ANY
PLAN, OR (B) THE PURCHASE AND HOLDING OF THE PREFERRED 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.
<PAGE>
CERTIFICATE NUMBER NUMBER OF PREFERRED SECURITIES
P-__
CUSIP NO. ________________________
CERTIFICATE EVIDENCING PREFERRED SECURITIES
OF
PFBI CAPITAL TRUST
____% PREFERRED SECURITIES
(LIQUIDATION AMOUNT $25 PER PREFERRED SECURITY)
PFBI Capital Trust, a statutory business trust formed under
the laws of the State of Delaware (the "Issuer Trust"), hereby certifies that
_______________ (the "Holder") is the registered owner of ( ) preferred
securities of the Issuer Trust representing a preferred undivided beneficial
interest in the assets of the Issuer Trust and has designated the PFBI Capital
Trust ____ % Preferred Securities (liquidation amount $25 per Preferred
Security) (the "Preferred Securities"). The Preferred Securities are
transferable on the books and records of the Issuer Trust, in person or by a
duly authorized attorney, upon surrender of this certificate duly endorsed and
in proper form for transfer as provided in Section 5.5 of the Trust Agreement
(as defined below). The designations, rights, privileges, restrictions,
preferences and other terms and provisions of the Preferred Securities are set
forth in, and this certificate and the Preferred Securities represented hereby
are issued and shall in all respects be subject to the terms and provisions of,
the Amended and Restated Trust Agreement of the Issuer Trust, dated as of
__________________, 1997, as the same may be amended from time to time (the
"Trust Agreement"), among Premier Financial Bancorp, Inc. as Depositor, Bankers
Trust Company, as Property Trustee, Bankers Trust (Delaware), as Delaware
Trustee, and the Holders of Trust Securities, including the designation of the
terms of the Preferred Securities as set forth therein. The Holder is entitled
to the benefits of the Guarantee Agreement entered into by Premier Financial
Bancorp, Inc., a Kentucky corporation, and Bankers Trust Company, as guarantee
trustee, dated as of __________________, 1997 (the "Guarantee Agreement"), to
the extent provided therein. The Issuer Trust will furnish a copy of the Issuer
Trust Agreement and the Guarantee Agreement to the Holder without charge upon
written request to the Issuer Trust at its principal place of business or
registered office.
Upon receipt of this certificate, the Holder is bound by the
Trust Agreement and is entitled to the benefits thereunder.
IN WITNESS WHEREOF, one of the Administrators of the Issuer
Trust has executed this certificate this _______ day of ____________, 19__.
PFBI CAPITAL TRUST
By:
-------------------------------
Name:
Administrator
<PAGE>
Name:
Administrator
COUNTERSIGNED AND REGISTERED:
BANKERS TRUST COMPANY,
as Securities Registrar
By:
------------------------------------
Name:
Authorized Signatory
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this
Preferred Security to:
- --------------------------------------------------------------------------------
(Insert assignee's social security or tax
identification number)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Insert address and zip code of assignee)
and irrevocably appoints
-------------------------------------------------------
- --------------------------------------------------------------------------------
agent to transfer this Preferred Security Certificate on the books of the Issuer
Trust. The agent may substitute another to act for him or her.
Date:
--------------------------
Signature:
---------------------------------------------
(Sign exactly as your name appears on
the other side of this Preferred Security
Certificate)
The signature(s) should be guaranteed by an eligible guarantor institution
(banks, stockbrokers, savings and loan associations and credit unions with
membership in an approved signature guarantee medallion program), pursuant to
S.E.C. Rule 17Ad-15.
Exhibit 4.5
<PAGE>
This Preferred Securities Certificate is a Global Preferred Securities
Certificate within the meaning of the Trust Agreement hereinafter referred to
and is registered in the name of a Depositary or a nominee of a Depositary. This
Preferred Security Certificate is exchangeable for Preferred Securities
Certificates registered in the name of a person other than the Depositary or its
nominee only in the limited circumstances described in the Trust Agreement and
may not be transferred except as a whole by the Depositary to a nominee of the
Depositary or by a nominee of the Depositary to the Depositary or another
nominee of the Depositary, except in the limited circumstances described in the
Trust Agreement.
Unless this Preferred Security Certificate is presented by an
authorized representative of The Depository Trust Company, a New York
Corporation ("DTC"), to PFBI Capital Trust or its agent for registration of
transfer, exchange or payment, and any Preferred Security Certificate issued is
registered in the name of such nominee as is requested by an authorized
representative of DTC (and any payment is made to such entity as is requested by
an authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF
FOR VALUE OR OTHERWISE BY OR TO A PERSON IS WRONGFUL inasmuch as the registered
owner hereof, has an interest herein.
<PAGE>
CERTIFICATE NUMBER NUMBER OF PREFERRED SECURITIES
P-
CUSIP NO.
CERTIFICATE EVIDENCING PREFERRED SECURITIES
OF
PFBI CAPITAL TRUST
_____% PREFERRED SECURITIES
(LIQUIDATION AMOUNT $25 PER PREFERRED SECURITY)
PFBI Capital Trust, a statutory business trust formed under the
laws of the State of Delaware (the "Issuer Trust"), hereby certifies that Cede &
Co. (the "Holder") is the registered owner of $__________________ aggregate
liquidation amount of preferred securities of the Issuer Trust representing a
preferred undivided beneficial interest in the assets of the Issuer Trust and
has designated the PFBI Capital Trust _____% Preferred Securities (liquidation
amount $25 per Preferred Security) (the "Preferred Securities"). The Preferred
Securities are transferable on the books and records of the Issuer Trust, in
person or by a duly authorized attorney, upon surrender of this certificate duly
endorsed and in proper form for transfer as provided in Section 5.5 of the Trust
Agreement (as defined below). The designations, rights, privileges,
restrictions, preferences and other terms and provisions of the Preferred
Securities are set forth in, and this certificate and the Preferred Securities
represented hereby are issued and shall in all respects be subject to the terms
and provisions of, the Amended and Restated Trust Agreement of the Issuer Trust,
dated as of __________ __, 1997, as the same may be amended from time to time
(the "Trust Agreement"), among Premier Financial Bancorp, Inc., as Depositor,
Bankers Trust Company, as Property Trustee, Bankers Trust (Delaware), as
Delaware Trustee, and the Holders of Trust Securities, including the designation
of the terms of the Preferred Securities as set forth therein. The Holder is
entitled to the benefits of the Guarantee Agreement entered into by Premier
Financial Bancorp, Inc., a Kentucky corporation, and Bankers Trust Company, as
guarantee trustee, dated as of __________ __, 1997, (the "Guarantee Agreement"),
to the extent provided therein. The Issuer Trust will furnish a copy of the
Trust Agreement and the Guarantee Agreement to the Holder without charge upon
written request to the Issuer Trust at its principal place of business or
registered office.
Upon receipt of this certificate, the Holder is bound by the
Trust Agreement and is entitled to the benefits thereunder.
<PAGE>
IN WITNESS WHEREOF, one of the Administrators of the Issuer Trust
has executed this certificate this ______ day of __________, 1997.
PFBI CAPITAL TRUST
By:
-----------------------------------------
Name: J. Howell Kelly
Administrator
COUNTERSIGNED AND REGISTERED:
BANKERS TRUST COMPANY,
as Securities Registrar
By:
--------------------------------
Name:
Authorized Signatory
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this
Preferred Security to:
- --------------------------------------------------------------------------------
(Insert assignee's social security or tax
identification number)
- --------------------------------------------------------------------------------
(Insert address and zip code of assignee)
and irrevocably appoints
-------------------------------------------------------
- --------------------------------------------------------------------------------
agent to transfer this Preferred Security Certificate on the books of the Issuer
Trust. The agent may substitute another to act for him or her.
Date:
----------------------
Signature:
--------------------------------------------------------
(Sign exactly as your name appears on
the other side of this Preferred Security
Certificate)
The signature(s) should be guaranteed by an eligible guarantor institution
(banks, stockbrokers, savings and loan associations and credit unions with
membership in an approved signature guarantee medallion program), pursuant to
S.E.C. Rule 17Ad-15.
Exhibit 4.6
<PAGE>
- --------------------------------------------------------------------------------
GUARANTEE AGREEMENT
Between
PREMIER FINANCIAL BANCORP, INC.
(as Guarantor)
and
BANKERS TRUST COMPANY
(as Trustee)
dated as of
__________ __, 1997
- --------------------------------------------------------------------------------
<PAGE>
PFBI CAPITAL TRUST
Certain Sections of this Guarantee Agreement relating to
Sections 310 through 318 of the
Trust Indenture Act of 1939:
<TABLE>
<CAPTION>
Trust Indenture Guarantee Agreement
Act Section Section
- --------------- -------------------
<S> <C> <C>
Section 310 (a) (1)........................ 4.1 (a)
(a) (2)........................ 4.1 (a)
(a) (3)........................ Not Applicable
(a) (4)........................ Not Applicable
(b)............................ 2.8, 4.1 (c)
Section 311 (a)............................ Not Applicable
(b)............................ Not Applicable
Section 312 (a)............................ 2.2 (a)
(b)............................ 2.2 (b)
(c)............................ Not Applicable
Section 313 (a)............................ 2.3
(a) (4)........................ 2.3
(b)............................ 2.3
(c)............................ 2.3
(d)............................ 2.3
Section 314 (a)............................ 2.4
(b)............................ 2.4
(c) (1)........................ 2.5
(c) (2)........................ 2.5
(c) (3)........................ 2.5
(e)............................ 1.1, 2.5, 3.2
Section 315 (a)............................ 3.1 (d)
(b)............................ 2.7
(c)............................ 3.1 (c)
(d)............................ 3.1 (d)
(e)............................ Not Applicable
Section 316 (a)............................ 1.1, 2.6, 5.4
(a) (1) (A).................... 5.4
(a) (1) (B).................... 5.4
(a) (2)........................ Not Applicable
(b)............................ 5.3
(c)............................ Not Applicable
Section 317 (a) (1)........................ Not Applicable
(a) (2)........................ Not Applicable
(b)............................ Not Applicable
Section 318 (a)............................ 2.1
</TABLE>
Note: This reconciliation and tie shall not, for any purpose, be deemed to be a
part of the Guarantee Agreement.
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
<S> <C> <C> <C>
ARTICLE I. DEFINITIONS
Section 1.1. Definitions.......................................... 1
ARTICLE II. TRUST INDENTURE ACT
Section 2.1. Trust Indenture Act; Application..................... 4
Section 2.2. List of Holders...................................... 5
Section 2.3. Reports by the Guarantee Trustee..................... 5
Section 2.4. Periodic Reports to Guarantee
Trustee.............................................. 5
Section 2.5. Evidence of Compliance with
Conditions Precedent................................. 5
Section 2.6. Events of Default; Waiver............................ 5
Section 2.7. Event of Default; Notice............................. 6
Section 2.8. Conflicting Interests................................ 6
ARTICLE III. POWERS, DUTIES AND RIGHTS OF THE GUARANTEE
TRUSTEE
Section 3.1. Powers and Duties of the Guarantee
Trustee.............................................. 6
Section 3.2. Certain Rights of Guarantee Trustee.................. 7
Section 3.3. Indemnity............................................ 9
Section 3.4. Expenses............................................. 9
ARTICLE IV. GUARANTEE TRUSTEE
Section 4.1. Guarantee Trustee; Eligibility....................... 9
Section 4.2. Appointment, Removal and Resignation
of the Guarantee Trustee............................. 10
ARTICLE V. GUARANTEE
Section 5.1. Guarantee............................................ 10
Section 5.2. Waiver of Notice and Demand.......................... 11
Section 5.3. Obligations Not Affected............................. 11
Section 5.4. Rights of Holders.................................... 12
Section 5.5. Guarantee of Payment................................. 12
Section 5.6. Subrogation.......................................... 12
Section 5.7. Independent Obligations.............................. 12
ARTICLE VI. COVENANTS AND SUBORDINATION
Section 6.1. Subordination........................................ 13
Section 6.2. Pari Passu Guarantees................................ 13
ARTICLE VII. TERMINATION
Section 7.1. Termination.......................................... 13
</TABLE>
- i -
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C> <C> <C>
ARTICLE VIII. MISCELLANEOUS
Section 8.1. Successors and Assigns............................... 13
Section 8.2. Amendments........................................... 13
Section 8.3. Notices.............................................. 14
Section 8.4. Benefit.............................................. 15
Section 8.5. Interpretation....................................... 15
Section 8.6. Governing Law........................................ 16
Section 8.7. Counterparts......................................... 16
</TABLE>
- ii -
<PAGE>
GUARANTEE AGREEMENT
-------------------
This GUARANTEE AGREEMENT, dated as of __________ __, 1997 is executed
and delivered by PREMIER FINANCIAL BANCORP, INC., a Kentucky corporation (the
"Guarantor"), having its principal office at 120 N. Hamilton Street, Georgetown,
Kentucky 40324, and BANKERS TRUST COMPANY, a New York banking corporation, as
trustee (the "Guarantee Trustee"), for the benefit of the Holders (as defined
herein) from time to time of the Preferred Securities (as defined herein) of
PFBI Capital Trust, a Delaware statutory business trust (the "Issuer Trust").
WHEREAS, pursuant to an Amended and Restated Trust Agreement (the
"Trust Agreement"), dated as of __________ __, 1997, among Premier Financial
Bancorp, Inc., as Depositor, Bankers Trust Company, as Property Trustee (the
"Property Trustee"), Bankers Trust (Delaware), as Delaware Trustee (the
"Delaware Trustee") (collectively, the "Issuer Trustees") and the Holders from
time to time of preferred undivided beneficial ownership interests in the assets
of the Issuer Trust, the Issuer Trust is issuing up to $28,750,000 aggregate
Liquidation Amount (as defined herein) of its _____% Preferred Securities,
Liquidation Amount $25 per preferred security (the "Preferred Securities"),
representing preferred undivided beneficial ownership interests in the assets of
the Issuer Trust and having the terms set forth in the Trust Agreement;
WHEREAS, the Preferred Securities will be issued by the Issuer Trust
and the proceeds thereof, together with the proceeds from the issuance of the
Issuer Trust's Common Securities (as defined herein), will be used to purchase
the Junior Subordinated Debentures due ________________, 2027 (as defined in the
Trust Agreement) (the "Junior Subordinated Debentures") of the Guarantor which
will be deposited with Bankers Trust Company, as Property Trustee under the
Trust Agreement, as trust assets; and
WHEREAS, as incentive for the Holders to purchase Preferred
Securities the Guarantor desires irrevocably and unconditionally to agree, to
the extent set forth herein, to pay to the Holders of the Preferred Securities
the Guarantee Payments (as defined herein) and to make certain other payments on
the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the purchase of Preferred
Securities by each Holder, which purchase the Guarantor hereby acknowledges
shall benefit the Guarantor, and intending to be legally bound hereby, the
Guarantor executes and delivers this Guarantee Agreement for the benefit of the
Holders from time to time of the Preferred Securities.
ARTICLE I. DEFINITIONS
SECTION 1.1. Definitions.
As used in this Guarantee Agreement, the terms set forth below shall,
unless the context otherwise requires, have the following meanings. Capitalized
terms used but not otherwise defined herein shall have the meanings assigned to
such terms in the Trust Agreement as in effect on the date hereof.
"Additional Amounts" has the meaning specified in the Trust
Agreement.
"Affiliate" of any specified Person means any other Person directly
or indirectly controlling or controlled by or under direct or indirect common
control with such specified Person.
<PAGE>
- 2 -
For the purposes of this definition, "control" when used with respect to any
specified Person means the power to direct the management and policies of such
Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Common Securities" means the securities representing common
undivided beneficial interests in the assets of the Issuer Trust.
"Distributions" means preferential cumulative cash distributions
accumulating from __________ __, 1997 and payable quarterly in arrears on March
31, June 30, September 30, and December 31 of each year, commencing __________
__, 1997, at the annual rate of _____% of the Liquidation Amount.
"Event of Default" means (i) a default by the Guarantor in any of its
payment obligations under this Guarantee Agreement, or (ii) a default by the
Guarantor in any other obligation hereunder that remains unremedied for 30 days.
"Guarantee Agreement" means this Guarantee Agreement, as modified,
amended or supplemented from time to time.
"Guarantee Payments" means the following payments or distributions,
without duplication, with respect to the Preferred Securities, to the extent not
paid or made by or on behalf of the Issuer Trust: (i) any accrued and unpaid
Distributions (as defined in the Trust Agreement) required to be paid on the
Preferred Securities, to the extent the Issuer Trust shall have funds on hand
available therefor at such time, (ii) the Redemption Price, with respect to the
Preferred Securities called for redemption by the Issuer Trust to the extent
that the Issuer Trust shall have funds on hand available therefor at such time,
and (iii) upon a voluntary or involuntary termination, winding-up or liquidation
of the Issuer Trust, unless Junior Subordinated Debentures are distributed to
the Holders, the lesser of (a) the aggregate of the Liquidation Amount and all
accumulated and unpaid Distributions to the date of payment to the extent the
Issuer Trust shall have funds on hand available to make such payment at such
time and (b) the amount of assets of the Issuer Trust remaining available for
distribution to Holders in liquidation of the Issuer Trust (in either case, the
"Liquidation Distribution").
"Guarantee Trustee" means Bankers Trust Company, until a Successor
Guarantee Trustee has been appointed and has accepted such appointment pursuant
to the terms of this Guarantee Agreement and thereafter means each such
Successor Guarantee Trustee.
"Guarantor" shall have the meaning specified in the first paragraph
of this Guarantee Agreement.
"Holder" means any holder, as registered on the books and records of
the Issuer Trust, of any Preferred Securities; provided, however, that, in
determining whether the holders of the requisite percentage of Preferred
Securities have given any request, notice, consent or waiver hereunder, "Holder"
shall not include the Guarantor, the Guarantee Trustee, or any Affiliate of the
Guarantor or the Guarantee Trustee.
<PAGE>
- 3 -
"Indenture" means the Junior Subordinated Indenture dated as of
__________ __, 1997, between Premier Financial Bancorp, Inc. and Bankers Trust
Company, as trustee, as may be modified, amended or supplemented from time to
time.
"Issuer Trust" shall have the meaning specified in the first
paragraph of this Guarantee Agreement.
"Liquidation Amount" means the stated amount of $25 per Preferred
Security.
"Majority in Liquidation Amount of the Preferred Securities" means,
except as provided by the Trust Indenture Act, Preferred Securities representing
more than 50% of the aggregate Liquidation Amount of all then outstanding
Preferred Securities issued by the Issuer Trust.
"Like Amount" means (a) with respect to a redemption of Preferred
Securities, Preferred Securities having a Liquidation Amount equal to the
principal amount of Junior Subordinated Debentures to be contemporaneously
redeemed in accordance with the Indenture, the proceeds of which will be used to
pay the Redemption Price of such Preferred Securities, (b) with respect to a
distribution of Junior Subordinated Debentures to Holders of Preferred
Securities in connection with a dissolution or liquidation of the Issuer Trust,
Junior Subordinated Debentures having a principal amount equal to the
Liquidation Amount of the Preferred Securities of the Holder to whom such Junior
Subordinated Debentures are distributed, and (c) with respect to any
distribution of Additional Amounts to Holders of Preferred Securities, Junior
Subordinated Debentures having a principal amount equal to the Liquidation
Amount of the Preferred Securities in respect of which such distribution is
made.
"Officers' Certificate" means, with respect to any Person, a
certificate signed by the Chairman and Chief Executive Officer, President or a
Vice President, and by the Treasurer, an Associate Treasurer, an Assistant
Treasurer, the Secretary or an Assistant Secretary of such Person, and delivered
to the Guarantee Trustee. Any Officers' Certificate delivered with respect to
compliance with a condition or covenant provided for in this Guarantee Agreement
shall include:
(a) a statement by each officer signing the Officers'
Certificate that such officer has read the covenant or condition and the
definitions relating thereto;
(b) a brief statement of the nature and scope of the
examination or investigation undertaken by such officer in rendering the
Officers' Certificate;
(c) a statement that such officer has made such examination or
investigation as, in such officer's opinion, is necessary to enable such officer
to express an informed opinion as to whether or not such covenant or condition
has been complied with; and
(d) a statement as to whether, in the opinion of such officer,
such condition or covenant has been complied with.
"Person" means a legal person, including any individual, corporation,
estate, partnership, joint venture, association, joint stock company, limited
liability company, trust, unincorporated
<PAGE>
- 4 -
association, or government or any agency or political subdivision thereof, or
any other entity of whatever nature.
"Preferred Securities" shall have the meaning specified in the first
recital of this Guarantee Agreement.
"Redemption Date" means, with respect to any Preferred Security to be
redeemed, the date fixed for such redemption by or pursuant to the Trust
Agreement; provided that each Junior Subordinated Debenture Redemption Date (as
such term is defined in the Indenture) and the stated maturity of the Junior
Subordinated Debentures shall be a Redemption Date for a Like Amount of
Preferred Securities.
"Redemption Price" shall have the meaning specified in the Trust
Agreement.
"Responsible Officer" means, when used with respect to the Guarantee
Trustee, any officer assigned to the Corporate Trust Office, including any
managing director, vice president, assistant vice president, assistant
treasurer, assistant secretary or any other officer of the Guarantee Trustee
customarily performing functions similar to those performed by any of the above
designated officers and having direct responsibility for the administration of
the Indenture, and also, with respect to a particular matter, any other officer
to whom such matter is referred because of such officer's knowledge of and
familiarity with the particular subject.
"Senior Indebtedness" shall have the meaning specified in the
Indenture.
"Successor Guarantee Trustee" means a successor Guarantee Trustee
possessing the qualifications to act as Guarantee Trustee under Section 4.1.
"Trust Agreement" means the Amended and Restated Trust Agreement,
dated __________ __, 1997, executed by Premier Financial Bancorp, Inc., as
Depositor, Bankers Trust (Delaware), as Delaware Trustee, and Bankers Trust
Company, as Property Trustee.
"Trust Indenture Act" means the Trust Indenture Act of 1939 (15
U.S.C. Sections
77aaa-77bbbb), as amended.
ARTICLE II. TRUST INDENTURE ACT
SECTION 2.1. Trust Indenture Act; Application.
If any provision hereof limits, qualifies or conflicts with a
provision of the Trust Indenture Act that is required under such Act to be a
part of and govern this Guarantee Agreement, the provision of the Trust
Indenture Act shall control. If any provision of this Guarantee Agreement
modifies or excludes any provision of the Trust Indenture Act that may be so
modified or excluded, the latter provision shall be deemed to apply to this
Guarantee Agreement as so modified or excluded, as the case may be.
<PAGE>
- 5 -
SECTION 2.2. List of Holders.
(a) The Guarantor will furnish or cause to be furnished to the
Guarantee Trustee:
(i) quarterly, not more than 15 days after March 15,
June 15, September 15 and December 15 in each year, a list, in such form as the
Guarantee Trustee may reasonably require, of the names and addresses of the
Holders as of such date; and
(ii) at such other times as the Guarantee Trustee may
request in writing, within 30 days after the receipt by the Guarantor of any
such request, a list of similar form and content as of a date not more than 15
days prior to the time such list is furnished.
(b) The Guarantee Trustee shall comply with the requirements
of Section 312(b) of the Trust Indenture Act.
SECTION 2.3. Reports by the Guarantee Trustee.
Not later than January 31 of each year, commencing January 31, 1998,
the Guarantee Trustee shall provide to the Holders such reports, if any, as are
required by Section 313 of the Trust Indenture Act in the form and in the manner
provided by Section 313 of the Trust Indenture Act. The Guarantee Trustee shall
also comply with the requirements of Section 313(d) of the Trust Indenture Act.
SECTION 2.4. Periodic Reports to the Guarantee Trustee.
The Guarantor shall provide to the Guarantee Trustee, and the Holders
such documents, reports and information, if any, as required by Section 314 of
the Trust Indenture Act and the compliance certificate required by Section 314
of the Trust Indenture Act, in the form, in the manner and at the times required
by Section 314 of the Trust Indenture Act.
SECTION 2.5. Evidence of Compliance with Conditions
Precedent.
The Guarantor shall provide to the Guarantee Trustee such evidence of
compliance with such conditions precedent, if any, provided for in this
Guarantee Agreement that relate to any of the matters set forth in Section
314(c) of the Trust Indenture Act. Any certificate or opinion required to be
given by an officer pursuant to Section 314(c)(1) may be given in the form of an
Officers' Certificate.
SECTION 2.6. Events of Default; Waiver.
The Holders of a Majority in Liquidation Amount of the Preferred
Securities may, by vote, on behalf of the Holders, waive any past Event of
Default and its consequences. Upon such waiver, any such Event of Default shall
cease to exist, and any Event of Default arising therefrom shall be deemed to
have been cured, for every purpose of this Guarantee Agreement, but no such
waiver shall extend to any subsequent or other default or Event of Default or
impair any right consequent therefrom.
<PAGE>
- 6 -
SECTION 2.7. Event of Default; Notice.
(a) The Guarantee Trustee shall, within 90 days after the
occurrence of an Event of Default, transmit by mail, first class postage
prepaid, to the Holders, notices of all Events of Default known to the Guarantee
Trustee, unless such Events of Default have been cured before the giving of such
notice; provided that, except in the case of a default in the payment of a
Guarantee Payment, the Guarantee Trustee shall be protected in withholding such
notice if and so long as the Board of Directors, the executive committee or a
trust committee of directors and/or Responsible Officers of the Guarantee
Trustee in good faith determines that the withholding of such notice is in the
interests of the Holders.
(b) The Guarantee Trustee shall not be deemed to have
knowledge of any Event of Default unless a Responsible Officer charged with the
administration of this Guarantee Agreement shall have received written notice of
such Event of Default.
SECTION 2.8. Conflicting Interests.
The Trust Agreement shall be deemed to be specifically described in
this Guarantee Agreement for the purposes of clause (i) of the first proviso
contained in Section 310(b) of the Trust Indenture Act.
ARTICLE III. POWERS, DUTIES AND RIGHTS OF THE
GUARANTEE TRUSTEE
SECTION 3.1. Powers and Duties of the Guarantee Trustee.
(a) This Guarantee Agreement shall be held by the Guarantee
Trustee for the benefit of the Holders, and the Guarantee Trustee shall not
transfer this Guarantee Agreement to any Person except a Holder exercising his
or her rights pursuant to Section 5.4(iv) or to a Successor Guarantee Trustee on
acceptance by such Successor Guarantee Trustee of its appointment to act as
Successor Guarantee Trustee hereunder. The right, title and interest of the
Guarantee Trustee, as such, hereunder shall automatically vest in any Successor
Guarantee Trustee, upon acceptance by such Successor Guarantee Trustee of its
appointment hereunder, and such vesting and cessation of title shall be
effective whether or not conveyancing documents have been executed and delivered
pursuant to the appointment of such Successor Guarantee Trustee.
(b) If an Event of Default has occurred and is continuing, the
Guarantee Trustee shall enforce this Guarantee Agreement for the benefit of the
Holders.
(c) The Guarantee Trustee, before the occurrence of any Event
of Default and after the curing of all Events of Default that may have occurred,
shall be obligated to perform only such duties as are specifically set forth in
this Guarantee Agreement (including pursuant to Section 2.1), and no implied
covenants shall be read into this Guarantee Agreement against the Guarantee
Trustee. If an Event of Default has occurred (that has not been cured or waived
pursuant to Section 2.6), the Guarantee Trustee shall exercise such of the
rights and powers vested in it by this Guarantee
<PAGE>
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Agreement, and use the same degree of care and skill in its exercise thereof, as
a prudent person would exercise or use under the circumstances in the conduct of
his or her own affairs.
(d) No provision of this Guarantee Agreement shall be
construed to relieve the Guarantee Trustee from liability for its own negligent
action, its own negligent failure to act or its own willful misconduct, except
that:
(i) Prior to the occurrence of any Event of Default and
after the curing or waiving of all such Events of Default that may have
occurred:
(A) the duties and obligations of the Guarantee
Trustee shall be determined solely by the express provisions of this Guarantee
Agreement (including pursuant to Section 2.1), and the Guarantee Trustee shall
not be liable except for the performance of such duties and obligations as are
specifically set forth in this Guarantee Agreement (including pursuant to
Section 2.1); and
(B) in the absence of bad faith on the part of
the Guarantee Trustee, the Guarantee Trustee may conclusively rely, as to the
truth of the statements and the correctness of the opinions expressed therein,
upon any certificates or opinions furnished to the Guarantee Trustee and
conforming to the requirements of this Guarantee Agreement; but in the case of
any such certificates or opinions that by any provision hereof or of the Trust
Indenture Act are specifically required to be furnished to the Guarantee
Trustee, the Guarantee Trustee shall be under a duty to examine the same to
determine whether or not they conform to the requirements of this Guarantee
Agreement;
(ii) The Guarantee Trustee shall not be liable for any
error of judgment made in good faith by a Responsible Officer of the Guarantee
Trustee, unless it shall be proved that the Guarantee Trustee was negligent in
ascertaining the pertinent facts upon which such judgment was made;
(iii) The Guarantee Trustee shall not be liable with
respect to any action taken or omitted to be taken by it in good faith in
accordance with the direction of the Holders of not less than a Majority in
Liquidation Amount of the Preferred Securities relating to the time, method and
place of conducting any proceeding for any remedy available to the Guarantee
Trustee, or exercising any trust or power conferred upon the Guarantee Trustee
under this Guarantee Agreement; and
(iv) No provision of this Guarantee Agreement shall
require the Guarantee Trustee to expend or risk its own funds or otherwise incur
personal financial liability in the performance of any of its duties or in the
exercise of any of its rights or powers if the Guarantee Trustee shall have
reasonable grounds for believing that the repayment of such funds or liability
is not assured to it under the terms of this Guarantee Agreement or adequate
indemnity against such risk or liability is not reasonably assured to it.
<PAGE>
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SECTION 3.2. Certain Rights of Guarantee Trustee.
(a) Subject to the provisions of Section 3.1:
(i) The Guarantee Trustee may conclusively rely and
shall be fully protected in acting or refraining from acting upon any
resolution, certificate, statement, instrument, opinion, report, notice,
request, direction, consent, order, bond, debenture, note, other evidence of
indebtedness or other paper or document reasonably believed by it to be genuine
and to have been signed, sent or presented by the proper party or parties.
(ii) Any direction or act of the Guarantor contemplated
by this Guarantee Agreement shall be sufficiently evidenced by an Officers'
Certificate unless otherwise prescribed herein.
(iii) Whenever, in the administration of this Guarantee
Agreement, the Guarantee Trustee shall deem it desirable that a matter be proved
or established before taking, suffering or omitting to take any action
hereunder, the Guarantee Trustee (unless other evidence is herein specifically
prescribed) may, in the absence of bad faith on its part, request and
conclusively rely upon an Officers' Certificate which, upon receipt of such
request from the Guarantee Trustee, shall be promptly delivered by the
Guarantor.
(iv) The Guarantee Trustee may consult with legal
counsel, and the advice or written opinion of such legal counsel with respect to
legal matters shall be full and complete authorization and protection in respect
of any action taken, suffered or omitted to be taken by it hereunder in good
faith and in accordance with such advice or opinion. Such legal counsel may be
legal counsel to the Guarantor or any of its Affiliates and may be one of its
employees. The Guarantee Trustee shall have the right at any time to seek
instructions concerning the administration of this Guarantee Agreement from any
court of competent jurisdiction.
(v) The Guarantee Trustee shall be under no obligation
to exercise any of the rights or powers vested in it by this Guarantee Agreement
at the request or direction of any Holder, unless such Holder shall have
provided to the Guarantee Trustee such security and indemnity as would satisfy a
reasonable person in the position of the Guarantee Trustee, against the costs,
expenses (including attorneys' fees and expenses) and liabilities that might be
incurred by it in complying with such request or direction, including such
reasonable advances as may be requested by the Guarantee Trustee.
(vi) The Guarantee Trustee shall not be bound to make
any investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture, note, other evidence of indebtedness or other
paper or document, but the Guarantee Trustee, in its discretion, may make such
further inquiry or investigation into such facts or matters as it may see fit.
(vii) The Guarantee Trustee may execute any of the
trusts or powers hereunder or perform any duties hereunder either directly or by
or through its agents or attorneys, and the Guarantee Trustee shall not be
responsible for any negligence or willful misconduct on the part of any such
agent or attorney appointed with due care by it hereunder.
<PAGE>
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(viii) Whenever in the administration of this Guarantee
Agreement the Guarantee Trustee shall deem it desirable to receive instructions
with respect to enforcing any remedy or right or taking any other action
hereunder, the Guarantee Trustee (A) may request instructions from the Holders,
(B) may refrain from enforcing such remedy or right or taking such other action
until such instructions are received and (C) shall be fully protected in acting
in accordance with such instructions.
(b) No provision of this Guarantee Agreement shall be deemed
to impose any duty or obligation on the Guarantee Trustee to perform any act or
acts or exercise any right, power, duty or obligation conferred or imposed on it
in any jurisdiction in which it shall be illegal, or in which the Guarantee
Trustee shall be unqualified or incompetent in accordance with applicable law,
to perform any such act or acts or to exercise any such right, power, duty or
obligation. No permissive power or authority available to the Guarantee Trustee
shall be construed to be a duty to act in accordance with such power and
authority.
SECTION 3.3. Indemnity.
The Guarantor agrees to indemnify the Guarantee Trustee, its
directors, officers, employees and agents for, and to hold them harmless
against, any loss, liability or expense incurred without negligence, willful
misconduct or bad faith on the part of the Guarantee Trustee, its directors,
officers, employees and agents, arising out of or in connection with the
acceptance or administration of this Guarantee Agreement, including the costs
and expenses of defending against any claim or liability in connection with the
exercise or performance of any of its powers or duties hereunder. The Guarantee
Trustee will not claim or exact any lien or charge on any Guarantee Payments as
a result of any amount due to it under this Guarantee Agreement.
SECTION 3.4. Expenses.
The Guarantor shall from time to time reimburse the Guarantee Trustee
for its reasonable expenses and costs (including reasonable attorneys' or
agents' fees) incurred in connection with the performance of its duties
hereunder.
ARTICLE IV. GUARANTEE TRUSTEE
SECTION 4.1. Guarantee Trustee; Eligibility.
(a) There shall at all times be a Guarantee Trustee which
shall:
(i) not be an Affiliate of the Guarantor; and
(ii) be a Person that is eligible pursuant to the Trust
Indenture Act to act as such and has a combined capital and surplus of at least
$50,000,000, and shall be a corporation meeting the requirements of Section
310(a) of the Trust Indenture Act. If such corporation publishes reports of
condition at least annually, pursuant to law or to the requirements of the
supervising or examining authority, then, for the purposes of this Section and
to the extent permitted by the Trust
<PAGE>
- 10 -
Indenture Act, the combined capital and surplus of such corporation shall be
deemed to be its combined capital and surplus as set forth in its most recent
report of condition so published.
(b) If at any time the Guarantee Trustee shall cease to be
eligible to so act under Section 4.1(a), the Guarantee Trustee shall immediately
resign in the manner and with the effect set out in Section 4.2(b).
(c) If the Guarantee Trustee has or shall acquire any
"conflicting interest" within the meaning of Section 310(b) of the Trust
Indenture Act, the Guarantee Trustee and Guarantor shall in all respects comply
with the provisions of Section 310(b) of the Trust Indenture Act.
SECTION 4.2. Appointment, Removal and Resignation of the
Guarantee Trustee.
(a) No resignation or removal of the Guarantee Trustee and no
appointment of a Successor Guarantee Trustee pursuant to this Article shall
become effective until the acceptance of appointment by the Successor Guarantee
Trustee by written instrument executed by the Successor Guarantee Trustee and
delivered to the Holders and the Guarantee Trustee.
(b) Subject to the immediately preceding paragraph, a
Guarantee Trustee may resign at any time by giving written notice thereof to the
Holders. The Guarantee Trustee shall appoint a successor by requesting from at
least three Persons meeting the eligibility requirements such Person's expenses
and charges to serve as the Guarantee Trustee, and selecting the Person who
agrees to the lowest expenses and charges. If the instrument of acceptance by
the Successor Guarantee Trustee shall not have been delivered to the Guarantee
Trustee within 60 days after the giving of such notice of resignation, the
Guarantee Trustee may petition, at the expense of the Guarantor, any court of
competent jurisdiction for the appointment of a Successor Guarantee Trustee.
(c) The Guarantee Trustee may be removed for cause at any time
by Act (within the meaning of Section 6.8 of the Trust Agreement) of the Holders
of at least a Majority in Liquidation Amount of the Preferred Securities,
delivered to the Guarantee Trustee.
(d) If a resigning Guarantee Trustee shall fail to appoint a
successor, or if a Guarantee Trustee shall be removed or become incapable of
acting as Guarantee Trustee, or if any vacancy shall occur in the office of any
Guarantee Trustee for any cause, the Holders of the Preferred Securities, by Act
of the Holders of record of not less than 25% in aggregate Liquidation Amount of
the Preferred Securities then outstanding delivered to such Guarantee Trustee,
shall promptly appoint a successor Guarantee Trustee. If no Successor Guarantee
Trustee shall have been so appointed by the Holders of the Preferred Securities
and such appointment accepted by the Successor Guarantee Trustee, any Holder, on
behalf of himself and all others similarly situated, may petition any court of
competent jurisdiction for the appointment of a Successor Guarantee Trustee.
<PAGE>
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ARTICLE V. GUARANTEE
SECTION 5.1. Guarantee.
The Guarantor irrevocably and unconditionally agrees to pay in full
on a subordinated basis as set forth in Section 6.1 hereof to the Holders the
Guarantee Payments (without duplication of amounts theretofore paid by or on
behalf of the Issuer Trust), as and when due, regardless of any defense, right
of set-off or counterclaim which the Issuer Trust may have or assert, except the
defense of payment. The Guarantor's obligation to make a Guarantee Payment may
be satisfied by direct payment of the required amounts by the Guarantor to the
Holders or by causing the Issuer Trust to pay such amounts to the Holders. The
Guarantor shall give prompt written notice to the Guarantee Trustee in the event
it makes any direct payment hereunder.
SECTION 5.2. Waiver of Notice and Demand.
The Guarantor hereby waives notice of acceptance of the Guarantee
Agreement and of any liability to which it applies or may apply, presentment,
demand for payment, any right to require a proceeding first against the
Guarantee Trustee, the Issuer Trust or any other Person before proceeding
against the Guarantor, protest, notice of nonpayment, notice of dishonor, notice
of redemption and all other notices and demands.
SECTION 5.3. Obligations Not Affected.
The obligations, covenants, agreements and duties of the Guarantor
under this Guarantee Agreement shall in no way be affected or impaired by reason
of the happening from time to time of any of the following:
(a) the release or waiver, by operation of law or otherwise,
of the performance or observance by the Issuer Trust of any express or implied
agreement, covenant, term or condition relating to the Preferred Securities to
be performed or observed by the Issuer Trust;
(b) the extension of time for the payment by the Issuer Trust
of all or any portion of the Distributions (other than an extension of time for
payment of Distributions that results from the extension of any interest payment
period on the Junior Subordinated Debentures as so provided in the Indenture),
Redemption Price, Liquidation Distribution or any other sums payable under the
terms of the Preferred Securities or the extension of time for the performance
of any other obligation under, arising out of, or in connection with, the
Preferred Securities;
(c) any failure, omission, delay or lack of diligence on the
part of the Holders to enforce, assert or exercise any right, privilege, power
or remedy conferred on the Holders pursuant to the terms of the Preferred
Securities, or any action on the part of the Issuer Trust granting indulgence or
extension of any kind;
(d) the voluntary or involuntary liquidation, dissolution,
sale of any collateral, receivership, insolvency, bankruptcy, assignment for the
benefit of creditors, reorganization, arrangement, composition or readjustment
of debt of, or other similar proceedings affecting, the Issuer Trust or any of
the assets of the Issuer Trust;
<PAGE>
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(e) any invalidity of, or defect or deficiency in, the
Preferred Securities;
(f) the settlement or compromise of any obligation guaranteed
hereby or hereby incurred; or
(g) any other circumstance whatsoever that might otherwise
constitute a legal or equitable discharge or defense of a guarantor (other than
payment of the underlying obligation), it being the intent of this Section 5.3
that the obligations of the Guarantor hereunder shall be absolute and
unconditional under any and all circumstances.
There shall be no obligation of the Holders to give notice to, or
obtain the consent of, the Guarantor with respect to the happening of any of the
foregoing.
SECTION 5.4. Rights of Holders.
The Guarantor expressly acknowledges that: (i) this Guarantee
Agreement will be deposited with the Guarantee Trustee to be held for the
benefit of the Holders; (ii) the Guarantee Trustee has the right to enforce this
Guarantee Agreement on behalf of the Holders; (iii) the Holders of a Majority in
Liquidation Amount of the Preferred Securities have the right to direct the
time, method and place of conducting any proceeding for any remedy available to
the Guarantee Trustee in respect of this Guarantee Agreement or exercising any
trust or power conferred upon the Guarantee Trustee under this Guarantee
Agreement; and (iv) any Holder may institute a legal proceeding directly against
the Guarantor to enforce its rights under this Guarantee Agreement, without
first instituting a legal proceeding against the Guarantee Trustee, the Issuer
Trust or any other Person.
SECTION 5.5. Guarantee of Payment.
This Guarantee Agreement creates a guarantee of payment and not of
collection. This Guarantee Agreement will not be discharged except by payment of
the Guarantee Payments in full (without duplication of amounts theretofore paid
by the Issuer Trust) or upon the distribution of Junior Subordinated Debentures
to Holders as provided in the Trust Agreement.
SECTION 5.6. Subrogation.
The Guarantor shall be subrogated to all rights (if any) of the
Holders against the Issuer Trust in respect of any amounts paid to the Holders
by the Guarantor under this Guarantee Agreement; provided, however, that the
Guarantor shall not (except to the extent required by mandatory provisions of
law) be entitled to enforce or exercise any rights which it may acquire by way
of subrogation or any indemnity, reimbursement or other agreement, in all cases
as a result of payment under this Guarantee Agreement, at the time of any such
payment, any amounts are due and unpaid under this Guarantee Agreement. If any
amount shall be paid to the Guarantor in violation of the preceding sentence,
the Guarantor agrees to hold such amount in trust for the Holders and to pay
over such amount to the Holders.
<PAGE>
- 13 -
SECTION 5.7. Independent Obligations.
The Guarantor acknowledges that its obligations hereunder are
independent of the obligations of the Issuer Trust with respect to the Preferred
Securities and that the Guarantor shall be liable as principal and as debtor
hereunder to make Guarantee Payments pursuant to the terms of this Guarantee
Agreement notwithstanding the occurrence of any event referred to in subsections
(a) through (g), inclusive, of Section 5.3 hereof.
ARTICLE VI. COVENANTS AND SUBORDINATION
SECTION 6.1. Subordination.
This Guarantee Agreement will constitute an unsecured obligation of
the Guarantor and will rank subordinate and junior in right of payment to all
Senior Indebtedness of the Guarantor to the extent and in the manner set forth
in the Indenture with respect to the Junior Subordinated Debentures, and the
provisions of Article XIII of the Indenture will apply, mutatis mutandis, to the
obligations of the Guarantor hereunder. The obligations of the Guarantor
hereunder do not constitute Senior Indebtedness of the Guarantor.
SECTION 6.2. Pari Passu Guarantees.
The obligations of the Guarantor under this Guarantee Agreement shall
rank pari passu with any similar guarantee agreements issued by the Guarantor on
behalf of the holders of preferred or capital securities issued by the Issuer
Trust and with any other security, guarantee or other obligation that is
expressly stated to rank pari passu with the obligations of the Guarantor under
this Guarantee Agreement.
ARTICLE VII. TERMINATION
SECTION 7.1. Termination.
This Guarantee Agreement shall terminate and be of no further force
and effect upon (i) full payment of the Redemption Price of all Preferred
Securities, (ii) the distribution of Junior Subordinated Debentures to the
Holders in exchange for all of the Preferred Securities or (iii) full payment of
the amounts payable in accordance with Article IX of the Trust Agreement upon
liquidation of the Issuer Trust. Notwithstanding the foregoing, this Guarantee
Agreement will continue to be effective or will be reinstated, as the case may
be, if at any time any Holder is required to repay any sums paid with respect to
Preferred Securities or this Guarantee Agreement.
ARTICLE VIII. MISCELLANEOUS
SECTION 8.1. Successors and Assigns.
All guarantees and agreements contained in this Guarantee Agreement
shall bind the successors, assigns, receivers, trustees and representatives of
the Guarantor and shall inure to the benefit of the Holders of the Preferred
Securities then outstanding. Except in connection with a consolidation, merger
or sale involving the Guarantor that is permitted under Article VIII of the
<PAGE>
- 14 -
Indenture and pursuant to which the assignee agrees in writing to perform the
Guarantor's obligations hereunder, the Guarantor shall not assign its
obligations hereunder, and any purported assignment that is not in accordance
with these provisions shall be void.
SECTION 8.2. Amendments.
Except with respect to any changes that do not materially adversely
affect the rights of the Holders (in which case no consent of the Holders will
be required), this Guarantee Agreement may only be amended with the prior
approval of the Holders of not less than a Majority in Liquidation Amount of the
Preferred Securities. The provisions of Article VI of the Trust Agreement
concerning meetings of the Holders shall apply to the giving of such approval.
SECTION 8.3. Notices.
Any notice, request or other communication required or permitted to
be given hereunder shall be in writing, duly signed by the party giving such
notice, and delivered, telecopied (confirmed by delivery of the original) or
mailed by first class mail as follows:
(a) if given to the Guarantor, to the address or telecopy
number set forth below or such other address or telecopy number or to the
attention of such other Person as the Guarantor may give notice to the Holders:
Premier Financial Bancorp, Inc.
120 N. Hamilton Street
Georgetown, Kentucky 40324
Facsimile No.: (502) 863-7503
Attention: Office of the Secretary
(b) if given to the Issuer Trust, in care of the Guarantee
Trustee, at the Issuer Trust's (and the Guarantee Trustee's) address set forth
below or such other address or telecopy number or to the attention of such other
Person as the Guarantee Trustee on behalf of the Issuer Trust may give notice to
the Holders:
c/o Premier Financial Bancorp, Inc.
120 N. Hamilton Street
Georgetown, Kentucky 40324
Facsimile No.: (502) 863-7503
Attention: Office of the Secretary
with a copy to:
Bankers Trust Company
Four Albany Street - 4th Floor
New York, New York 10006
Facsimile No.: (212) 250-6961
Attention: Corporate Trust and Agency Group;
Corporate Market Services
<PAGE>
- 15 -
(c) if given to the Guarantee Trustee:
Bankers Trust Company
Four Albany Street - 4th Floor
New York, New York 10006
Facsimile No.: (212) 250-6961
Attention: Corporate Trust and Agency Group
Corporate Market Services
(d) if given to any Holder, at the address set forth on the
books and records of the Issuer Trust.
All notices hereunder shall be deemed to have been given when
received in person, telecopied with receipt confirmed, or mailed by first class
mail, postage prepaid, except that if a notice or other document is refused
delivery or cannot be delivered because of a changed address of which no notice
was given, such notice or other document shall be deemed to have been delivered
on the date of such refusal or inability to deliver.
SECTION 8.4. Benefit.
This Guarantee Agreement is solely for the benefit of the Holders and
is not separately transferable from the Preferred Securities.
SECTION 8.5. Interpretation.
In this Guarantee Agreement, unless the context otherwise requires:
(a) capitalized terms used in this Guarantee Agreement but not
defined in the preamble hereto have the respective meanings assigned to them in
Section 1.1;
(b) a term defined anywhere in this Guarantee Agreement has
the same meaning throughout;
(c) all references to "the Guarantee Agreement" or "this
Guarantee Agreement" are to this Guarantee Agreement as modified, supplemented
or amended from time to time;
(d) all references in this Guarantee Agreement to Articles and
Sections are to Articles and Sections of this Guarantee Agreement unless
otherwise specified;
(e) a term defined in the Trust Indenture Act has the same
meaning when used in this Guarantee Agreement unless otherwise defined in this
Guarantee Agreement or unless the context otherwise requires;
(f) a reference to the singular includes the plural and vice
versa; and
(g) the masculine, feminine or neuter genders used herein
shall include the masculine, feminine and neuter genders.
<PAGE>
- 16 -
SECTION 8.6. Governing Law.
THIS GUARANTEE AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD
TO THE CONFLICT OF LAW PRINCIPLES THEREOF.
SECTION 8.7. Counterparts.
This instrument may be executed in any number of counterparts, each
of which so executed shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same instrument.
<PAGE>
- 17 -
THIS GUARANTEE AGREEMENT is executed as of the day and year first above written.
PREMIER FINANCIAL BANCORP, INC.
By:
-----------------------------
Name:
Title:
BANKERS TRUST COMPANY,
as Guarantee Trustee
and not in its individual
capacity
By:
-----------------------------
Name:
Title:
Exhibit 23.1
<PAGE>
[Eskew & Gresham Letterhead]
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
---------------------------------------------------
We consent to the use in this Registration Statement of Premier
Financial Bancorp, Inc. on Form S-1 of our report dated February 20, 1997 for
the years ended December 31, 1996 and 1995 and to the reference to us under the
heading "Experts" in the Prospectus, which is part of this Registration
Statement.
/s/Eskew & Gresham, PSC
- -----------------------
Eskew & Gresham, PSC
Certified Public Accountants
Lexington, Kentucky
May 28, 1997
Exhibit 23.2
<PAGE>
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
---------------------------------------------------
We consent to the use in this Registration Statement of Premier Financial
Bancorp, Inc. on Form S-1 of our report dated February 10, 1995 for the year
ended December 31, 1994 and to the reference to us under the heading "Experts"
in the Prospectus, which is part of this Registration Statement.
/s/McNeal, Williamson & Co.
- ---------------------------
McNeal, Williamson & Co.
Certified Public Accountants
Logan, West Virginia
May 28, 1997
